[front cover]
September 30, 2000
AMERICAN CENTURY
ANNUAL REPORT
Target Maturities Trust:
2000
2005
2010
2015
2020
2025
[american century logo and text logo (reg.sm)]
American
Century
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Dalbar rated for Communication - 2000
American Century' s fund performance reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
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[left margin]
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)
----------------------------------
TURN TO THE INSIDE BACK COVER TO SEE A LIST OF AMERICAN CENTURY FUNDS CLASSIFIED
BY OBJECTIVE AND RISK.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers, Jr. and James E. Stowers III]
James E. Stowers, Jr., standing, with James E. Stowers III
The American Century Target funds produced strong returns during the year
ended September 30, 2000. A slowdown in economic growth, a continuation of
modest inflation, and a bond buyback program by the federal government created a
favorable environment for Treasury bonds. Our investment management team
provides further details starting on page 4.
The Target funds will reach another milestone on December 15, when the
Target: 2000 portfolio matures. Target: 2000 shareholders have already been
notified and given instructions on how to close their accounts.
In keeping with our past history of introducing a new Target fund every
five years, the Target: 2030 portfolio is currently in the planning stages. Look
for an announcement and more detailed information in the first quarter of 2001.
Turning to corporate matters, Chase Manhattan Corp. recently announced
plans to acquire J.P. Morgan & Co., a substantial minority shareholder in
American Century Companies, Inc. since 1998. If the transaction is completed as
expected, J.P. Morgan Chase, the new enterprise, will own the shares of American
Century currently held by Morgan. Corporate control of American Century is not
affected by this transaction. We will be exploring ways to partner with J.P.
Morgan Chase for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we have chosen to share the
chairman of the board position and named American Century President William M.
Lyons chief executive officer, giving him ultimate management responsibility for
the entire company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for the Ultra and Veedot funds.
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 Co-Chairman of the Board
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 4
TARGET: 2000
Performance Information ................................................ 5
Management Q&A ......................................................... 6
Schedule of Investments ................................................ 7
TARGET: 2005
Performance Information ................................................ 8
Management Q&A ......................................................... 9
Schedule of Investments ................................................ 11
TARGET: 2010
Performance Information ................................................ 12
Management Q&A ......................................................... 13
Schedule of Investments ................................................ 15
TARGET: 2015
Performance Information ................................................ 16
Management Q&A ......................................................... 17
Schedule of Investments ................................................ 19
TARGET: 2020
Performance Information ................................................ 20
Management Q&A ......................................................... 21
Schedule of Investments ................................................ 23
TARGET: 2025
Performance Information ................................................ 24
Management Q&A ......................................................... 25
Schedule of Investments ................................................ 27
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 28
Statement of Operations ................................................ 30
Statement of Changes
in Net Assets ....................................................... 32
Notes to Financial
Statements .......................................................... 34
Financial Highlights ................................................... 39
Report of Independent
Accountants ......................................................... 51
OTHER INFORMATION
Share Class and Retirement
Account Information ................................................. 52
Background Information
Investment Philosophy
and Policies ..................................................... 53
Comparative Indices ................................................. 53
Fund Benchmarks ..................................................... 53
Investment Team
Leaders .......................................................... 53
Glossary ............................................................... 54
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Zero-coupon Treasury bonds (zeros) produced healthy returns during the year
ended September 30, 2000.
* During the first half of the year, short-term yields rose as the Federal
Reserve raised interest rates, while longer-term yields fell on
expectations of reduced supply.
* As a result, the yield curve inverted, meaning short-term zero yields were
higher than long-term yields.
* The yield inversion unwound during the latter part of the period--short-term
yields fell after slowing economic growth convinced investors that the Fed
was done raising rates, while longer-term yields were steady to slightly
higher.
* The Treasury market has priced in a Fed rate cut, which we think is overly
aggressive based on the economic environment.
TARGET: 2000
* The fund posted a solid return in its last full fiscal year.
* The portfolio will be liquidated on December 15.
* As the portfolio's zeros mature, we've been investing in zeros and Treasury
notes maturing in November and December.
* The fund still holds a number of zeros that mature in 2001; we'll look to
sell those to meet shareholder withdrawals as the liquidation date
approaches.
TARGET: 2005
* The fund posted a solid return during its fiscal year.
* Shareholders withdrew about 40% of the fund's assets, most of which was by
a large institutional investor. We sold STRIPS to meet these withdrawals.
* We also increased our holdings of non-STRIPS zeros because they had
unusually high yields relative to STRIPS. This lowered the percentage of
STRIPS in the portfolio to 25%, the minimum the fund can hold.
* However, STRIPS outperformed other types of zeros, so this positioning
caused the fund to underperform its STRIPS benchmark for the year.
* Looking ahead, we will continue to emphasize non-STRIPS zeros in the
portfolio; their higher yields should add to the fund's long-term returns.
TARGET: 2010
* The fund posted healthy gains during its fiscal year.
* About two-thirds of the portfolio was invested in REFCORPs and receipt zeros
because they had unusually high yields relative to STRIPS.
* However, STRIPS outperformed other types of zeros, so this positioning
caused the fund to underperform its STRIPS benchmark for the year.
* Looking ahead, we will continue to emphasize non-STRIPS zeros in the
portfolio; their higher yields should add to the fund's long-term returns.
[left margin]
TARGET: 2000(1)
(BTMTX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 2.81%(2)
1 Year 5.00%
INCEPTION DATE: 3/25/85
NET ASSETS: $158.3 million(3)
TARGET: 2005(1)
(BTFIX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 4.96%(2)
1 Year 6.26%
INCEPTION DATE: 3/25/85
NET ASSETS: $277.9 million(3)
TARGET: 2010(1)
(BTTNX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 5.60%(2)
1 Year 8.75%
INCEPTION DATE: 3/25/85
NET ASSETS: $232.8 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 5, 8, and 12.
Investment terms are defined in the Glossary on pages 54-55.
2 1-800-345-2021
Report Highlights
--------------------------------------------------------------------------------
(Continued)
TARGET: 2015
* The fund posted strong gains during its fiscal year.
* Shareholders withdrew about 40% of the fund's assets, most of which was by
a large institutional investor. We sold STRIPS to meet these withdrawals.
* We also increased our holdings of REFCORPs in the past year because they had
unusually high yields relative to STRIPS. This lowered the percentage of
STRIPS in the portfolio to 28%, just above the 25% minimum the fund can
hold.
* STRIPS outperformed REFCORPs, so this positioning caused the fund to
underperform its STRIPS benchmark for the year. However, the fund's REFCORP
holdings enabled it to beat its benchmark over the past six months.
* Looking ahead, we will continue to emphasize REFCORPs in the portfolio;
their higher yields should add to the fund's long-term returns.
TARGET: 2020
* The fund posted very strong gains during its fiscal year.
* About three-quarters of the portfolio was invested in REFCORPs because they
had unusually high yields relative to STRIPS.
* STRIPS outperformed REFCORPs, so this positioning caused the fund to
underperform its STRIPS benchmark for the year. However, the fund's REFCORP
holdings enabled it to beat its benchmark by a wide margin over the past
six months.
* Looking ahead, we will continue to emphasize REFCORPs in the portfolio;
their higher yields should add to the fund's long-term returns.
TARGET: 2025
* The fund posted strong gains during its fiscal year.
* Shareholders withdrew about 40% of the fund's assets after a financial
advisor recommended that his clients sell some of their shares. We sold
STRIPS to meet these withdrawals.
* We also increased our holdings of REFCORPs, bringing their weighting up to
nearly 30% of the portfolio, because they had unusually high yields
relative to STRIPS.
* STRIPS outperformed REFCORPs, so this positioning caused the fund to
underperform its STRIPS benchmark for the year. However, the fund's REFCORP
holdings enabled it to beat its benchmark over the past six months.
* Looking ahead, we will maintain the portfolio's 30% position in REFCORPs;
their higher yields should add to the fund's long-term returns.
[right margin]
TARGET: 2015(1)
(BTFTX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 4.85%(2)
1 Year 11.55%
INCEPTION DATE: 9/1/86
NET ASSETS: $134.7 million(3)
TARGET: 2020(1)
(BTTTX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 3.17%(2)
1 Year 13.66%
INCEPTION DATE: 12/29/89
NET ASSETS: $245.0 million(3)
TARGET: 2025(1)
(BTTRX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 0.03%(2)
1 Year 11.82%
INCEPTION DATE: 2/15/96
NET ASSETS: $515.7 million(3)
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 16, 20, and 24. Investment terms are defined in the
Glossary on pages 54-55.
www.americancentury.com 3
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
PERFORMANCE OVERVIEW
The year ended September 30, 2000, provided a favorable environment for
zero-coupon Treasury bonds (zeros). Despite some interest rate volatility, zeros
performed well across the board, with returns ranging from 5-20% (see the table
at left).
THE CURVE TWISTS
Although it was a generally positive year for bonds, changing economic
expectations and supply considerations put some unusual twists into the Treasury
zero yield curve (see the graph at left).
In late 1999 and early 2000, short-term zero yields rose substantially in
anticipation of several interest rate increases by the Federal Reserve. Strong
economic growth led the Fed to raise short-term rates six times between mid-1999
and mid-2000 to keep a lid on inflation.
At the same time, longer-term zero yields were falling as a result of
reduced supply. The federal budget surplus enabled the government to cut back
new issuance of Treasury bonds and even buy back some existing bonds to lower
the public debt. The government bought back about $20 billion in longer-term
Treasury bonds during the first nine months of 2000.
These divergent yield movements caused the zero yield curve to invert,
which means short-term zeros had higher yields than long-term zeros (see the
3/31/00 yield curve in the graph at left). Ordinarily, the opposite is
true--long-term bonds have higher yields to compensate for the longer time
commitment.
THE ECONOMY TURNS
By mid-2000, the bond market's expectations for the U.S. economy began to
change. Evidence that the Fed's six rate hikes were taking hold and slowing the
economy began to appear. That, in turn, gave bond investors confidence that the
Fed was finished raising rates for the time being. As a result, short-term zero
yields reversed course and moved lower.
In contrast, long-term bond yields were steady to slightly higher during
the last few months of the period. Although the Treasury buybacks continued, the
effects had already been factored into the market. In addition, soaring oil
prices raised the possibility of higher inflation. The price of oil was up more
than 20% during the first nine months of 2000 and reached a 10-year high in
September.
By the end of the period, the zero yield curve had unwound nearly all of
its inversion and became relatively flat, with little difference between yields
across the maturity spectrum.
[left margin]
"CHANGING ECONOMIC EXPECTATIONS AND SUPPLY CONSIDERATIONS PUT SOME UNUSUAL
TWISTS INTO THE TREASURY ZERO YIELD CURVE."
[line graph - data below]
YIELD CURVE FOR TREASURY ZEROS
Years
to Maturity 9/30/99 3/31/00 9/30/00
1 5.340% 6.090% 5.940%
2 5.496% 6.230% 5.925%
3 5.652% 6.310% 5.910%
4 5.808% 6.350% 5.895%
5 5.964% 6.380% 5.880%
6 6.120% 6.360% 5.920%
7 6.182% 6.340% 5.940%
8 6.244% 6.330% 5.970%
9 6.306% 6.320% 6.010%
10 6.368% 6.310% 6.040%
11 6.430% 6.300% 6.068%
12 6.462% 6.280% 6.096%
13 6.494% 6.270% 6.124%
14 6.526% 6.250% 6.152%
15 6.558% 6.230% 6.180%
16 6.590% 6.210% 6.180%
17 6.605% 6.170% 6.170%
18 6.600% 6.150% 6.170%
19 6.590% 6.130% 6.160%
20 6.590% 6.100% 6.140%
21 6.590% 6.080% 6.126%
22 6.536% 6.050% 6.112%
23 6.482% 6.000% 6.098%
24 6.428% 5.990% 6.084%
25 6.374% 5.950% 6.070%
26 6.320% 5.900% 6.056%
27 6.293% 5.870% 6.042%
28 6.265% 5.810% 6.028%
29 6.238% 5.770% 6.014%
30 6.210% 5.730% 6.000%
ZERO-COUPON TREASURY BOND
RETURNS (FOR THE YEAR ENDED 9/30/00)
Coupon STRIPS maturing 11/15/00 5.54%
Coupon STRIPS maturing 11/15/05 7.28%
Coupon STRIPS maturing 11/15/10 10.45%
Coupon STRIPS maturing 11/15/15 13.93%
Coupon STRIPS maturing 11/15/20 16.64%
Coupon STRIPS maturing 11/15/25 12.85%
Source: Bloomberg Financial Markets
4 1-800-345-2021
Target: 2000--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
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) 2.81% 3.10% 3.80% 2.68% 3.10% 3.80%
1 YEAR 5.00% 5.54% 9.72% 4.74% 5.54% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 5.46% 6.00% 7.34% -- -- --
5 YEARS 5.60% 6.15% 7.46% -- -- --
10 YEARS 8.88% 9.33% 10.05% -- -- --
LIFE OF FUND 11.17% 12.40%(2) 11.21%(2) 4.54% 4.93%(3) 2.42%(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 52-54 for 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 9/30/00
Merrill Lynch Long-Term
Treasury Index $26,056
11/15/00 STRIPS Issue $24,405
Target: 2000 $23,410
Merrill Lynch
Long-Term 11/15/00
Target: 2000 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
9/30/90 $10,000 $10,000 $10,000
9/30/91 $12,218 $12,050 $12,295
9/30/92 $14,420 $13,767 $14,542
9/30/93 $16,793 $16,563 $16,974
9/30/94 $15,527 $14,804 $15,713
9/30/95 $17,831 $18,188 $18,107
9/30/96 $18,548 $18,618 $18,947
9/30/97 $19,965 $21,070 $20,490
9/30/98 $21,756 $25,699 $22,435
9/30/99 $22,295 $23,748 $23,124
9/30/00 $23,410 $26,056 $24,405
$10,000 investment made 9/30/90
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
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
$98.16 $101.95
$100.92 $102.00
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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?
Target: 2000 produced a solid return in its last full year of existence.
For the fiscal year ended September 30, 2000, the portfolio returned 5.00%,
compared with the 5.54% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND HAS REACHED ITS TARGET YEAR AND IS QUICKLY APPROACHING THE END OF ITS
LIFE SPAN. WHAT HAPPENS NEXT?
The portfolio will be liquidated on December 15. Shareholders should
already have received a letter notifying them about the liquidation and their
options for closing their accounts.
Target: 2000 will be the third Target fund--following the 1990 and 1995
portfolios--to reach maturity. When we opened the portfolio in 1985, we targeted
a final share price of $100; we currently expect the share price to be around
$102 at liquidation.
The Target portfolios are designed to give investors a dependable way to
reach their long-term financial goals, and we hope that Target: 2000 has
successfully achieved that goal for its shareholders.
EVEN THOUGH TARGET: 2000'S LIQUIDATION DATE IS IN DECEMBER, THE PORTFOLIO STILL
OWNS ZERO-COUPON BONDS (ZEROS) MATURING IN 2001. HOW COME?
Throughout the portfolio's existence, we've been able to buy zeros that
mature within a year of the target year--that is, from 1999 to 2001. Many of
the 2001-maturity zeros in the portfolio have been there for years, and we
originally bought them for higher yields and diversification outside of the
target year.
We started selling these zeros over the past few months, and we plan to
continue doing so as we approach the liquidation date. It's likely that many
investors will take their money out of the portfolio before December 15, and
this may give us the opportunity to sell our 2001-maturity zeros.
HOW WILL YOU MANAGE THE FUND BETWEEN NOW AND ITS LIQUIDATION DATE?
As the fund's zero-coupon bonds mature, we'll continue to invest the
proceeds in zeros maturing on November 15, as well as Treasury notes maturing on
November 30 and December 31. We'll also be looking at Treasury bills and other
short-term securities maturing in December as possible fund investments.
* All fund returns referenced in this interview are for Investor Class shares.
[left margin]
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 23 56
ANTICIPATED GROWTH
RATE 5.62% 5.08%
WEIGHTED AVERAGE
MATURITY DATE 12/10/00 11/3/00
ANTICIPATED VALUE AT
MATURITY (AVM)* $102.00 $101.51
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.
[pie chart - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
STRIPS 28%
REFCORPS 27%
TRS 24%
U.S. TREASURY NOTES 15%
OTHER 6%
Investment terms are defined in the Glossary on pages 54-55.
6 1-800-345-2021
Target: 2000--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 58.2%
$ 22,570,000 STRIPS -- COUPON, 6.36%,
11/15/00 $ 22,406,444
21,891,000 STRIPS -- PRINCIPAL, 7.42%,
11/15/00 21,732,365
289,250 TBR, 5.63%, 11/15/00 286,977
250,000 TR, 5.98%, 11/15/00 248,074
200,000 TR, 6.67%, 11/15/00 198,459
29,600 TR, 8.49%, 11/15/00 29,372
843 TR, 9.43%, 11/15/00 837
75,000 CATS, 5.34%, 2/15/01 73,315
1,349,000 CATS, 6.98%, 2/15/01 1,318,687
2,778,750 CUBES, 6.93%, 2/15/01 2,716,212
87,280 TBR, 5.63%, 2/15/01 85,279
1,631,000 TIGR, 5.52%, 2/15/01 1,594,178
1,658,000 TIGR, 5.52%, 2/15/01 1,620,568
1,745,000 TIGR, 5.64%, 2/15/01 1,705,604
1,143,650 TR, 5.52%, 2/15/01 1,117,952
2,790,000 TR, 5.52%, 2/15/01 2,727,308
4,130,428 TR, 6.32%, 2/15/01 4,037,616
30,177,000 TR, 6.52%, 2/15/01 29,498,908
44,000 TIGR, 5.39%, 5/15/01 42,289
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 91,440,444
------------
(Cost $91,380,325)
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 26.6%
$ 39,473,000 REFCORP STRIPS -- COUPON,
6.33%, 10/15/00 $ 39,384,101
2,497,000 REFCORP STRIPS -- COUPON,
6.54%, 1/15/01 2,455,282
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 41,839,383
------------
(Cost $41,831,646)
U.S. TREASURY SECURITIES -- 15.2%
11,000,000 U.S. Treasury Notes, 4.625%,
11/30/00 10,969,069
13,000,000 U.S. Treasury Notes, 4.625%,
12/31/00 12,939,069
------------
TOTAL U.S. TREASURY SECURITIES 23,908,138
------------
(Cost $23,907,220)
TOTAL INVESTMENT SECURITIES -- 100.0% $157,187,965
============
(Cost $157,119,191)
NOTES TO SCHEDULE OF INVESTMENTS
CATS = Certificates of Accrual of Treasury Securities
CUBES = Coupons Under Book Entry Safekeeping
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
TBR = Treasury Bond Receipts
TIGR = Treasury Investment Growth Receipts
TR = Treasury Receipts
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements www.americancentury.com 7
Target: 2005--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
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) 4.96% 5.48% 3.80% 4.85% 5.48% 3.80%
1 YEAR 6.26% 7.28% 9.72% 6.03% 7.28% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.11% 6.76% 7.34% -- -- --
5 YEARS 6.37% 6.97% 7.46% -- -- --
10 YEARS 10.76% 11.18% 10.05% -- -- --
LIFE OF FUND 12.81% 14.30%(2) 11.21%(2) 3.71% 4.89%(3) 4.45%(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 52-54 for 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 9/30/00
11/15/05 STRIPS Issue $28,851
Target: 2005 $27,790
Merrill Lynch Long-Term
Treasury Index $26,056
Merrill Lynch
Long-Term 11/15/05
Target: 2005 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
9/30/90 $10,000 $10,000 $10,000
9/30/91 $12,664 $12,050 $12,755
9/30/92 $14,845 $13,767 $14,912
9/30/93 $18,688 $16,563 $18,995
9/30/94 $16,305 $14,804 $16,333
9/30/95 $20,408 $18,188 $20,605
9/30/96 $20,849 $18,618 $21,121
9/30/97 $23,267 $21,070 $23,714
9/30/98 $27,657 $25,699 $28,301
9/30/99 $26,153 $23,748 $26,894
9/30/00 $27,790 $26,056 $28,851
$10,000 investment made 9/30/90
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
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
$73.45 $102.03
$77.09 $101.94
2005
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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.
8 1-800-345-2021
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?
For the fiscal year ended September 30, 2000, Target: 2005 returned 6.26%,
compared with the 7.28% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND TRAILED ITS BENCHMARK BY A WIDER MARGIN THAN ITS EXPENSES. WHY?
It was primarily because of cash outflows and the outperformance of STRIPS
over other Treasury zero-coupon bonds (zeros).
With regard to cash flows, shareholders withdrew about 40% of the fund's
assets over the past year. Most of these assets were withdrawn by a large
institutional investor.
For the most part, we sold STRIPS to meet these redemptions because they
are the easiest Treasury zeros to buy and sell.
IS THAT WHY TARGET: 2005'S STRIPS HOLDINGS FELL FROM ABOUT 50% OF THE PORTFOLIO
TO 25% OVER THE PAST YEAR?
That's part of it. But we also shifted some of the fund's assets out of
STRIPS and into other types of Treasury zeros to pick up extra yield.
STRIPS, because of their liquidity (ease of trading), typically yield less
than other Treasury zeros with comparable maturities. But this yield
differential--or spread--grew unusually wide in the past year, mirroring the
widening spreads in the broader bond market between Treasurys and other types of
bonds (such as corporate, government agency, and mortgage-backed securities).
When spreads between STRIPS and other zeros widen, STRIPS outperform.
Yield spreads widened in the broader market because of the perception that
Treasury bonds will become increasingly scarce as the federal budget surplus
grows. Zero spreads widened in sympathy with the broader market.
BUT IN THE ZERO MARKET, THEY'RE ALL TREASURY BONDS, RIGHT?
Exactly. There really shouldn't be any yield difference at all among
Treasury zeros with the same maturity, except maybe a small premium for
liquidity. They're the same basic cash flows, just with a different form of
delivery.
Take BECCs, for example. They are physical Treasury zeros created in the
1980s that were converted into wirable securities so they could be traded
electronically. Although BECCs and STRIPS are both Treasury zeros, BECCs
maturing in 2005 are currently yielding over 40 basis points (0.40%) more than
STRIPS with the same maturity. That's at least twice the usual spread.
We're seeing the same thing between STRIPS and TRs, which are generic
Treasury receipt zeros created before the Treasury introduced STRIPS. Again, no
difference in the underlying security, but a big difference in yield.
We've tried to take advantage of this disparity by investing about
three-quarters of the Target: 2005 portfolio in BECCs and TRs. The other 25% is
in STRIPS--the minimum amount the portfolio is allowed to hold. The extra
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"WE SHIFTED SOME OF THE FUND'S ASSETS OUT OF STRIPS AND INTO OTHER TYPES OF
TREASURY ZEROS TO PICK UP EXTRA YIELD."
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 37 45
ANTICIPATED GROWTH
RATE 5.61% 5.64%
WEIGHTED AVERAGE
MATURITY DATE 10/17/05 9/30/05
ANTICIPATED VALUE AT
MATURITY (AVM)* $101.94 $101.28
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 8.
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 54-55.
www.americancentury.com 9
Target: 2005--Q&A
--------------------------------------------------------------------------------
(Continued)
yield we're getting should boost the fund's long-term returns and add to its
anticipated value at maturity.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
The economic environment suggests that short-term Treasury yields should
probably be higher than they are now. With two-year Treasury yields around 6%
and the overnight federal funds rate at 6.5%, the bond market appears to be
anticipating a reversal in the Federal Reserve's policy--that is, an interest
rate cut.
This seems a little aggressive to us given current economic conditions.
Although the U.S. economy has shown signs of slowing--especially in recent
reports on consumer spending, hiring, and the housing market--the changes are
occurring at a gradual pace. To justify current bond yields, we would need to
see the economy come to a severe, crashing halt.
The good news is that, except for energy prices, inflation hasn't increased
very much. Nonetheless, it's hard to make a case for lower or even stable
short-term yields unless economic conditions change drastically.
WHAT ABOUT LONG-TERM RATES?
Long-term Treasury yields appear to underestimate the inflation outlook,
but supply considerations are exerting a bigger influence over this part of the
market. The U.S. Treasury's efforts to reduce the public debt have brought
long-term yields down lower than they would normally be based on inflation
expectations.
The Treasury bought back about $20 billion in long-term bonds during the
first nine months of this year, and it intends to buy back another $5-10 billion
before year-end. We expect the buyback program to continue in 2001, and that
could put additional downward pressure on long-term Treasury yields.
However, the major presidential candidates have made proposals that would
either reduce federal tax revenues or increase spending, both of which could
decrease or eliminate the federal budget surplus. If that were to happen, we
would expect fewer buybacks, higher long-term Treasury yields, and a narrower
spread between STRIPS and other types of Treasury zeros.
But we know better than to rely on pre-election promises, so we expect the
tug-of-war between Treasury buybacks and the inflation outlook to keep long-term
Treasury yields relatively stable in the coming months.
WHAT ARE YOUR PLANS FOR TARGET: 2005 GOING FORWARD?
We expect to maintain the portfolio's current positioning, with an emphasis
on non-STRIPS zeros until we see spreads narrow substantially. We also intend to
keep the portfolio's weighted average maturity (WAM) date within about a month
of the November 15, 2005 maturity date of its benchmark. This should help the
portfolio more closely track the performance of the benchmark.
[left margin]
"IT'S HARD TO MAKE A CASE FOR LOWER OR EVEN STABLE SHORT-TERM YIELDS UNLESS
ECONOMIC CONDITIONS CHANGE DRASTICALLY."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
BECCS 46%
STRIPS 25%
TRS 25%
OTHER 4%
AS OF MARCH 31, 2000
BECCS 41%
STRIPS 28%
TRS 22%
REFCORPS 6%
OTHER 3%
Investment terms are defined in the Glossary on pages 54-55.
10 1-800-345-2021
Target: 2005--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 99.6%
$ 15,200,000 BECC, 6.11%, 5/15/04 $ 12,139,077
258,000 ETR, 5.70%, 5/15/04 205,612
3,000,000 BECC, 5.12%, 11/15/04 2,324,449
693,750 CUBES, 6.56%, 11/15/04 539,249
87,000 ETR, 5.96%, 11/15/04 67,248
2,517,000 TIGR, 4.75%, 11/15/04 1,954,892
27,000 TIGR, 5.90%, 11/15/04 20,970
16,000,000 TR, 4.75%, 11/15/04 12,431,773
50,000 TR, 6.24%, 11/15/04 38,849
7,200,000 BECC, 6.95%, 2/15/05 5,488,317
500,000 STRIPS -- COUPON, 6.37%,
2/15/05 388,146
3,456,420 TR, 5.45%, 2/15/05 2,642,537
49,000,000 BECC, 5.83%, 5/15/05 36,775,414
4,615,672 CUBES, 8.59%, 5/15/05 3,476,584
1,000,000 ETR, 6.67%, 5/15/05 748,505
11,059,000 STRIPS -- PRINCIPAL, 7.39%,
5/15/05 8,427,436
428,750 TBR, 9.37%, 5/15/05 320,922
6,450,000 TR, 8.38%, 5/15/05 4,840,846
39,420,000 STRIPS -- PRINCIPAL, 6.86%,
8/15/05 29,594,195
7,000,020 TR, 4.58%, 8/15/05 5,195,935
30,100,000 BECC, 6.15%, 11/15/05 21,834,572
1,200,000 LION, 6.41%, 11/15/05 867,894
14,600,000 STRIPS -- COUPON, 6.35%,
11/15/05 10,819,476
2,247,000 TBR, 8.45%, 11/15/05 1,625,132
Principal Amount Value
--------------------------------------------------------------------------------
$ 23,056,000 STRIPS -- COUPON, 7.56%,
2/15/06 $ 16,850,845
1,003,875 TR, 5.54%, 2/15/06 720,064
23,678,120 TR, 7.75%, 2/15/06 16,983,942
45,420,000 BECC, 5.44%, 5/15/06 31,956,817
5,098,000 STRIPS -- COUPON, 7.46%,
5/15/06 3,671,961
410,000 TBR, 8.46%, 5/15/06 287,529
36,264,000 TR, 5.29%, 5/15/06 25,514,797
500,000 STRIPS -- COUPON, 6.36%,
8/15/06 354,110
1,299,780 TR, 8.86%, 8/15/06 901,851
24,125,000 BECC, 5.50%, 11/15/06 16,407,398
100,000 U.S. Treasury Corpus, 5.38%,
11/15/06 68,091
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 276,485,435
------------
(Cost $277,171,200)
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 0.4%
661,000 REFCORP STRIPS -- COUPON,
6.43%, 10/15/05 485,567
800,000 REFCORP STRIPS -- COUPON,
7.54%, 7/15/06 560,508
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 1,046,075
------------
(Cost $1,001,799)
TOTAL INVESTMENT SECURITIES -- 100.0% $277,531,510
============
(Cost $278,172,999)
NOTES TO SCHEDULE OF INVESTMENTS
BECC = Book Entry Callable Corpus
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.
See Notes to Financial Statements www.americancentury.com 11
Target: 2010--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
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) 5.60% 5.74% 3.80% 5.52% 5.74% 3.80%
1 YEAR 8.75% 10.45% 9.72% 8.57% 10.45% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 6.83% 7.81% 7.34% -- -- --
5 YEARS 7.29% 8.12% 7.46% -- -- --
10 YEARS 12.06% 12.56% 10.05% -- -- --
LIFE OF FUND 14.01% 15.43%(2) 11.21%(2) -0.39% 0.64%(3) 1.57%(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 52-54 for 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 9/30/00
11/15/10 STRIPS Issue $32,631
Target: 2010 $31,241
Merrill Lynch Long-Term
Treasury Index $26,056
Merrill Lynch
Long-Term 11/15/10
Target: 2010 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
9/30/90 $10,000 $10,000 $10,000
9/30/91 $13,076 $12,050 $12,961
9/30/92 $14,875 $13,767 $14,642
9/30/93 $19,875 $16,563 $19,714
9/30/94 $16,512 $14,804 $16,324
9/30/95 $21,971 $18,188 $22,083
9/30/96 $22,142 $18,618 $22,398
9/30/97 $25,630 $21,070 $26,043
9/30/98 $32,314 $25,699 $33,055
9/30/99 $28,727 $23,748 $29,544
9/30/00 $31,241 $26,056 $32,631
$10,000 investment made 9/30/90
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
Actual Share Price Anticipated Value at Maturity
(Historical) (Estimated Share Price)
1985 $11.43 $97.00
$17.65 $97.00
$14.96 $95.27
$17.31 $97.13
$22.16 $96.66
1990 $22.22 $97.52
$26.90 $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 $103.40
$61.98 $104.85
$57.43 $105.50
2000 $55.10 $105.56
$56.74 $105.47
$59.92 $105.14
2005
2010
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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.
12 1-800-345-2021
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?
Target: 2010 posted a healthy return. For the fiscal year ended September
30, 2000, the fund returned 8.75%, compared with the 10.45% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND TRAILED ITS BENCHMARK BY A WIDER MARGIN THAN ITS EXPENSES. WHY?
It was primarily because of the outperformance of STRIPS relative to other
Treasury zero-coupon bonds (zeros). For most of the past year, REFCORPs and
non-STRIPS Treasury zeros made up nearly two-thirds of the Target: 2010
portfolio, and as a result the fund underperformed its STRIPS benchmark.
WHY DID STRIPS OUTPERFORM OTHER TYPES OF ZEROS?
STRIPS, because of their liquidity (ease of trading), typically yield less
than REFCORPs and other Treasury zeros with comparable maturities. But this
yield differential--or spread--grew unusually wide in the past year, mirroring
the widening spreads in the broader bond market between Treasurys and other
types of bonds (such as corporate, government agency, and mortgage-backed
securities). When spreads between STRIPS and other zeros widen, STRIPS
outperform.
Yield spreads widened in the broader market because of the perception that
Treasury bonds will become increasingly scarce as the federal budget surplus
grows. Zero spreads widened in sympathy with the broader market.
BUT IN THE ZERO MARKET, THEY'RE ALL TREASURY BONDS, RIGHT?
REFCORPs are technically government agency bonds, although they have a
Treasury-backed guarantee that makes them virtually the same as Treasury zeros.
But you're right--the rest of the market is all Treasurys.
Among Treasury zeros with the same maturity, there really shouldn't be any
yield difference at all, except maybe a small premium for liquidity. They're the
same basic cash flows, just with a different form of delivery.
Take ETRs and CATS, for example, which are Treasury receipt zeros created
before the Treasury introduced STRIPS. Although there is no difference in the
underlying security, there is a big difference in yield--ETRs and CATS maturing
in 2009 are currently yielding over 40 basis points (0.40%) more than STRIPS
with the same maturity. That's at least twice the usual spread.
The spread between REFCORPs and STRIPS also widened out beyond 40 basis
points, but in the past few months it's fallen back to about 30 basis points.
Still, even at 30 basis points, the spread remains attractive.
That's why we've devoted such a high percentage of the Target: 2010
portfolio to non-STRIPS zeros--to take advantage of this unusual yield
disparity. The extra yield we're getting should boost the fund's long-term
returns and add to its anticipated value at maturity.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"WE'VE DEVOTED A HIGH PERCENTAGE OF THE PORTFOLIO TO NON-STRIPS ZEROS TO TAKE
ADVANTAGE OF HIGHER YIELDS."
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 19 18
ANTICIPATED GROWTH
RATE 5.68% 5.95%
WEIGHTED AVERAGE
MATURITY DATE 10/15/10 11/1/10
ANTICIPATED VALUE AT
MATURITY (AVM)* $105.14 $105.56
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 12.
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 54-55.
www.americancentury.com 13
Target: 2010--Q&A
--------------------------------------------------------------------------------
(Continued)
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
The economic environment suggests that short-term Treasury yields should
probably be higher than they are now. With two-year Treasury yields around 6%
and the overnight federal funds rate at 6.5%, the bond market appears to be
anticipating a reversal in the Federal Reserve's policy--that is, an interest
rate cut.
This seems a little aggressive to us given current economic conditions.
Although the U.S. economy has shown signs of slowing--especially in recent
reports on consumer spending, hiring, and the housing market--the changes are
occurring at a gradual pace. To justify current bond yields, we would need to
see the economy come to a severe, crashing halt.
The good news is that, except for energy prices, inflation hasn't increased
very much. Nonetheless, it's hard to make a case for lower or even stable
short-term yields unless economic conditions change drastically.
WHAT ABOUT LONG-TERM RATES?
Long-term Treasury yields appear to underestimate the inflation outlook,
but supply considerations are exerting a bigger influence over this part of the
market. The U.S. Treasury's efforts to reduce the public debt have brought
long-term yields down lower than they would normally be based on inflation
expectations.
The Treasury bought back about $20 billion in long-term bonds during the
first nine months of this year, and it intends to buy back another $5-10 billion
before year-end. We expect the buyback program to continue in 2001, and that
could put additional downward pressure on long-term Treasury yields.
However, the major presidential candidates have made proposals that would
either reduce federal tax revenues or increase spending, both of which could
decrease or eliminate the federal budget surplus. If that were to happen, we
would expect fewer buybacks, higher long-term Treasury yields, and a narrower
spread between STRIPS and other types of Treasury zeros.
But we know better than to rely on pre-election promises, so we expect the
tug-of-war between Treasury buybacks and the inflation outlook to keep long-term
Treasury yields relatively stable in the coming months.
WHAT ARE YOUR PLANS FOR TARGET: 2010 GOING FORWARD?
We expect to maintain the portfolio's current positioning, with an emphasis
on non-STRIPS zeros until we see spreads narrow substantially. We also intend to
keep the portfolio's weighted average maturity (WAM) date within a month of the
November 15, 2010 maturity date of its benchmark. This should help the portfolio
more closely track the performance of the benchmark.
[left margin]
"WE EXPECT THE TUG-OF-WAR BETWEEN TREASURY BUYBACKS AND THE INFLATION OUTLOOK TO
KEEP LONG-TERM TREASURY YIELDS RELATIVELY STABLE IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
REFCORPS 51%
STRIPS 36%
ETRS 11%
CATS 2%
AS OF MARCH 31, 2000
REFCORPS 62%
STRIPS 25%
ETRS 11%
CATS 2%
Investment terms are defined in the Glossary on pages 54-55.
14 1-800-345-2021
Target: 2010--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 51.2%
$ 2,000,000 REFCORP STRIPS -- COUPON,
7.98%, 10/15/09 $ 1,136,907
1,772,000 REFCORP STRIPS -- COUPON,
7.85%, 1/15/10 989,463
25,728,000 REFCORP STRIPS -- COUPON,
7.38%, 4/15/10 14,122,816
87,053,000 REFCORP STRIPS -- COUPON,
6.43%, 10/15/10 46,261,321
72,361,000 REFCORP STRIPS -- COUPON,
5.67%, 1/15/11 37,796,800
20,850,000 REFCORP STRIPS -- COUPON,
7.67%, 4/15/11 10,714,550
7,000,000 REFCORP STRIPS -- COUPON,
4.98%, 7/15/11 3,600,597
7,000,000 REFCORP STRIPS -- COUPON,
6.53%, 10/15/11 3,556,895
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 118,179,349
------------
(Cost $118,714,150)
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 48.8%
$42,520,000 ETR, 7.12%, 5/15/09 $ 24,457,700
6,000,000 CATS, 6.78%, 8/15/09 3,418,266
1,000,000 CATS, 6.79%, 11/15/09 560,995
11,500,000 STRIPS -- PRINCIPAL, 7.18%,
11/15/09 6,589,786
4,500,000 STRIPS -- COUPON, 6.38%,
2/15/10 2,573,247
587,000 STRIPS -- COUPON, 8.67%,
5/15/10 330,234
22,077,000 STRIPS -- COUPON, 6.64%,
8/15/10 12,235,786
7,839,000 STRIPS -- COUPON, 8.28%,
11/15/10 4,275,959
34,860,000 STRIPS -- COUPON, 7.89%,
2/15/11 18,704,315
21,000,000 STRIPS -- COUPON, 6.24%,
5/15/11 11,094,078
54,715,000 STRIPS -- COUPON, 6.56%,
8/15/11 28,444,365
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 112,684,731
------------
(Cost $104,959,500)
TOTAL INVESTMENT SECURITIES -- 100.0% $230,864,080
============
(Cost $223,673,650)
NOTES TO SCHEDULE OF INVESTMENTS
CATS = Certificates of Accrual of Treasury Securities
ETR = Easy Growth Treasury Receipts
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements www.americancentury.com 15
Target: 2015--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
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) 4.85% 4.35% 3.80% 4.70% 4.35% 3.80%
1 YEAR 11.55% 13.93% 9.72% 11.27% 13.93% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 7.79% 8.88% 7.34% -- -- --
5 YEARS 8.32% 9.19% 7.46% -- -- --
10 YEARS 13.31% 13.98% 10.05% -- -- --
LIFE OF FUND 9.99% 10.38%(2) 9.01%(2) 8.09% 11.66%(3) 10.11%(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 52-54 for 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 9/30/00
11/15/15 STRIPS Issue $37,006
Target: 2015 $34,916
Merrill Lynch Long-Term
Treasury Index $26,056
Merrill Lynch
Long-Term 11/15/15
Target: 2015 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
9/30/90 $10,000 $10,000 $10,000
9/30/91 $13,411 $12,050 $13,461
9/30/92 $14,829 $13,767 $14,879
9/30/93 $21,119 $16,563 $21,318
9/30/94 $16,574 $14,804 $16,717
9/30/95 $23,417 $18,188 $23,848
9/30/96 $23,242 $18,618 $23,834
9/30/97 $27,881 $21,070 $28,673
9/30/98 $36,265 $25,699 $37,470
9/30/99 $31,296 $23,748 $32,482
9/30/00 $34,916 $26,056 $37,006
$10,000 investment made 9/30/90
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
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
1900 $43.04 $112.62
$45.79 $113.41
$48.01 $113.36
2005
2010
2015
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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.
16 1-800-345-2021
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?
Target: 2015 posted a strong return. For the fiscal year ended September
30, 2000, the fund returned 11.55%, compared with the 13.93% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND TRAILED ITS BENCHMARK BY A WIDER MARGIN THAN ITS EXPENSES. WHY?
It was primarily because of cash outflows and the outperformance of STRIPS
over REFCORPs.
With regard to cash flows, shareholders withdrew about 40% of the fund's
assets over the past year. Most of these assets were withdrawn by a large
institutional investor.
For the most part, we sold STRIPS to meet these redemptions because they
are the easiest Treasury zeros to buy and sell.
IS THAT WHY TARGET: 2015'S STRIPS HOLDINGS FELL FROM 60% A YEAR AGO TO LESS
THAN 30%?
That's part of it. But we also shifted some of the fund's assets out of
STRIPS and into REFCORPs to pick up some extra yield.
STRIPS, because of their liquidity (ease of trading), typically yield less
than REFCORPs with comparable maturities. But this yield differential--or
spread--grew unusually wide in the past year, mirroring the widening spreads in
the broader bond market between Treasurys and other types of bonds (such as
corporate, government agency, and mortgage-backed securities). When spreads
between STRIPS and REFCORPs widen, STRIPS outperform.
WHY DID THAT HAPPEN?
Yield spreads widened in the broader market because of the perception that
Treasury bonds will become increasingly scarce as the federal budget surplus
grows. Since REFCORPs are technically government agency bonds (although they
have a Treasury-backed guarantee), spreads between STRIPS and REFCORPs widened
in sympathy with the broader market.
At their widest levels, REFCORPs maturing in 2015 were yielding over 40
basis points (0.40%) more than STRIPS with the same maturity. That's about twice
the usual spread. In recent months, though, this spread has fallen back to about
30 basis points, helping Target: 2015 outperform its benchmark during the past
six months (see the previous page).
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
The economic environment suggests that short-term Treasury yields should
probably be higher than they are now. With two-year Treasury yields around 6%
and the overnight federal funds rate at 6.5%, the bond market appears to be
anticipating a reversal in the Federal Reserve's policy--that is, an interest
rate cut.
This seems a little aggressive to us given current economic conditions.
Although the U.S. economy has shown signs of slowing--especially in recent
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"WE SHIFTED SOME OF THE FUND'S ASSETS OUT OF STRIPS AND INTO REFCORPS TO PICK
UP EXTRA YIELD."
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 14 13
ANTICIPATED GROWTH
RATE 5.77% 6.06%
WEIGHTED AVERAGE
MATURITY DATE 11/12/15 11/14/15
ANTICIPATED VALUE AT
MATURITY (AVM)* $113.36 $112.62
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 16.
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 54-55.
www.americancentury.com 17
Target: 2015--Q&A
--------------------------------------------------------------------------------
(Continued)
reports on consumer spending, hiring, and the housing market--the changes are
occurring at a gradual pace. To justify current bond yields, we would need to
see the economy come to a severe, crashing halt.
The good news is that, except for energy prices, inflation hasn't increased
very much. Nonetheless, it's hard to make a case for lower or even stable
short-term yields unless economic conditions change drastically.
WHAT ABOUT LONG-TERM RATES?
Long-term Treasury yields appear to underestimate the inflation outlook,
but supply considerations are exerting a bigger influence over this part of the
market. The U.S. Treasury's efforts to reduce the public debt have brought
long-term yields down lower than they would normally be based on inflation
expectations.
The Treasury bought back about $20 billion in long-term bonds during the
first nine months of this year, and it intends to buy back another $5-10 billion
before year-end. We expect the buyback program to continue in 2001, and that
could put additional downward pressure on long-term Treasury yields.
However, the major presidential candidates have made proposals that would
either reduce federal tax revenues or increase spending, both of which could
decrease or eliminate the federal budget surplus. If that were to happen, we
would expect fewer buybacks, higher long-term Treasury yields, and a narrower
spread between STRIPS and REFCORPs.
But we know better than to rely on pre-election promises, so we expect the
tug-of-war between Treasury buybacks and the inflation outlook to keep long-term
Treasury yields relatively stable in the coming months.
WHAT ARE YOUR PLANS FOR TARGET: 2015 GOING FORWARD?
We expect to maintain the portfolio's current positioning, with an emphasis
on REFCORPs. REFCORP yields still offer an attractive premium over STRIPS, so
we'll hang onto them until we see spreads narrow substantially. In the meantime,
the extra yield we're getting should boost the fund's long-term returns and add
to its anticipated value at maturity, which was up almost 75 cents over the past
year (see the table on page 17).
We also intend to keep the portfolio's weighted average maturity (WAM) date
very close to the November 15, 2015 maturity date of its benchmark. This should
help the portfolio more closely track the performance of the benchmark.
[left margin]
"WE EXPECT THE TUG-OF-WAR BETWEEN TREASURY BUYBACKS AND THE INFLATION OUTLOOK TO
KEEP LONG-TERM TREASURY YIELDS RELATIVELY STABLE IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
REFCORPS 72%
STRIPS 28%
AS OF MARCH 31, 2000
REFCORPS 71%
STRIPS 29%
Investment terms are defined in the Glossary on pages 54-55.
18 1-800-345-2021
Target: 2015--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 71.7%
$ 39,310,000 REFCORP STRIPS -- COUPON,
6.92%, 1/15/15 $ 15,829,155
28,560,000 REFCORP STRIPS -- COUPON,
8.45%, 4/15/15 11,318,635
42,568,000 REFCORP STRIPS -- COUPON,
7.74%, 7/15/15 16,603,932
36,151,000 REFCORP STRIPS -- COUPON,
8.24%, 10/15/15 13,888,184
3,447,000 REFCORP STRIPS -- COUPON,
6.75%, 1/15/16 1,301,429
47,591,000 REFCORP STRIPS -- COUPON,
7.51%, 7/15/16 17,418,013
55,742,000 REFCORP STRIPS -- COUPON,
6.85%, 10/15/16 20,094,391
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 96,453,739
------------
(Cost $83,776,450)
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 28.3%
$ 14,350,000 STRIPS -- COUPON, 7.40%,
2/15/15 $ 5,992,740
1,000,000 STRIPS -- PRINCIPAL, 6.27%,
2/15/15 416,740
14,408,000 STRIPS -- COUPON, 9.17%,
5/15/15 5,926,243
18,603,000 STRIPS -- COUPON, 8.93%,
8/15/15 7,536,350
12,481,000 STRIPS -- COUPON, 8.79%,
11/15/15 4,983,657
16,300,000 STRIPS -- COUPON, 8.49%,
2/15/16 6,400,979
17,700,000 STRIPS -- COUPON, 8.39%,
5/15/16 6,851,065
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 38,107,774
------------
(Cost $27,403,393)
TOTAL INVESTMENT SECURITIES -- 100.0% $134,561,513
============
(Cost $111,179,843)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements www.americancentury.com 19
Target: 2020--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS (INCEPTION 12/29/89) ADVISOR CLASS (INCEPTION 10/19/98)
TARGET MERRILL LYNCH TARGET 11/15/20 MERRILL LYNCH
MATURITIES 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) 3.17% 1.96% 3.80% 3.06% 1.96% 3.80%
1 YEAR 13.66% 16.64% 9.72% 13.45% 16.64% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 8.60% 9.93% 7.34% -- -- --
5 YEARS 9.14% 10.15% 7.46% -- -- --
10 YEARS 13.70% 13.74% 10.05% -- -- --
LIFE OF FUND 10.41% 10.37% 9.11% -1.22% 0.70%(3) 1.57%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) From December 1989 through April 1990, the Investor Class 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 10/31/98, the date nearest the class's inception for which data
are available.
See pages 52-54 for 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 9/30/00
Fund Benchmark $36,224
Target: 2020 $36,127
Merrill Lynch Long-Term
Treasury Index $26,056
Merrill Lynch
Long-Term Fund
Target: 2020 Treasury Index Benchmark
DATE VALUE VALUE VALUE
9/30/90 $10,000 $10,000 $10,000
9/30/91 $13,022 $12,050 $12,553
9/30/92 $14,154 $13,767 $13,402
9/30/93 $21,516 $16,563 $20,588
9/30/94 $15,868 $14,804 $15,012
9/30/95 $23,334 $18,188 $22,336
9/30/96 $22,847 $18,618 $22,012
9/30/97 $28,216 $21,070 $27,271
9/30/98 $38,373 $25,699 $37,337
9/30/99 $31,788 $23,748 $31,056
9/30/00 $36,127 $26,056 $36,224
$10,000 investment made 9/30/90
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: 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.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2020
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
$22.00 $103.598
$27.17 $104.84
$36.95 $106.96
$33.00 $106.76
2000 $30.61 $107.30
$33.72 $107.95
$34.79 $108.05
2005
2010
2015
2020
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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.
20 1-800-345-2021
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?
Target: 2020 posted a very strong return. For the fiscal year ended
September 30, 2000, the fund returned 13.66%, compared with the 16.64% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND TRAILED ITS BENCHMARK BY A WIDER MARGIN THAN ITS EXPENSES. WHY?
It was primarily because of the outperformance of STRIPS over REFCORPs. For
most of the past year, REFCORPs made up nearly three-quarters of the Target:
2020 portfolio, while the remaining 25% was in STRIPS--the minimum amount the
portfolio is allowed to hold. As a result, the fund underperformed its STRIPS
benchmark.
WHY DID STRIPS OUTPERFORM REFCORPS?
STRIPS, because of their liquidity (ease of trading), typically yield less
than REFCORPs with comparable maturities. But this yield differential--or
spread--grew unusually wide in the past year, mirroring the widening spreads in
the broader bond market between Treasurys and other types of bonds (such as
corporate, government agency, and mortgage-backed securities). When spreads
between STRIPS and REFCORPs widen, STRIPS outperform.
Yield spreads widened in the broader market because of the perception that
Treasury bonds will become increasingly scarce as the federal budget surplus
grows. Since REFCORPs are technically government agency bonds (although they
have a Treasury-backed guarantee), spreads between STRIPS and REFCORPs widened
in sympathy with the broader market.
At their widest levels, REFCORPs maturing in 2020 were yielding over 50
basis points (0.50%) more than STRIPS with the same maturity. That's well over
twice the usual spread. In recent months, though, this spread has fallen back to
about 30 basis points, helping Target: 2020 outperform its benchmark by a
substantial margin during the past six months (see the previous page).
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
The economic environment suggests that short-term Treasury yields should
probably be higher than they are now. With two-year Treasury yields around 6%
and the overnight federal funds rate at 6.5%, the bond market appears to be
anticipating a reversal in the Federal Reserve's policy--that is, an interest
rate cut.
This seems a little aggressive to us given current economic conditions.
Although the U.S. economy has shown signs of slowing--especially in recent
reports on consumer spending, hiring, and the housing market--the changes are
occurring at a gradual pace. To justify current bond yields, we would need to
see the economy come to a severe, crashing halt.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"TARGET: 2020 OUTPERFORMED ITS BENCHMARK BY A SUBSTANTIAL MARGIN DURING THE
PAST SIX MONTHS."
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 16 16
ANTICIPATED GROWTH
RATE 5.76% 6.10%
WEIGHTED AVERAGE
MATURITY DATE 9/19/20 8/21/20
ANTICIPATED VALUE AT
MATURITY (AVM)* $108.05 $107.30
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 20.
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 54-55.
www.americancentury.com 21
Target: 2020--Q&A
--------------------------------------------------------------------------------
(Continued)
The good news is that, except for energy prices, inflation hasn't increased
very much. Nonetheless, it's hard to make a case for lower or even stable
short-term yields unless economic conditions change drastically.
WHAT ABOUT LONG-TERM RATES?
Long-term Treasury yields appear to underestimate the inflation outlook,
but supply considerations are exerting a bigger influence over this part of the
market. The U.S. Treasury's efforts to reduce the public debt have brought
long-term yields down lower than they would normally be based on inflation
expectations.
The Treasury bought back about $20 billion in long-term bonds during the
first nine months of this year, and it intends to buy back another $5-10 billion
before year-end. We expect the buyback program to continue in 2001, and that
could put additional downward pressure on long-term Treasury yields.
However, the major presidential candidates have made proposals that would
either reduce federal tax revenues or increase spending, both of which could
decrease or eliminate the federal budget surplus. If that were to happen, we
would expect fewer buybacks, higher long-term Treasury yields, and a narrower
spread between STRIPS and REFCORPs.
But we know better than to rely on pre-election promises, so we expect the
tug-of-war between Treasury buybacks and the inflation outlook to keep long-term
Treasury yields relatively stable in the coming months.
WHAT ARE YOUR PLANS FOR TARGET: 2020 GOING FORWARD?
We expect to maintain the portfolio's current positioning, with an emphasis
on REFCORPs. REFCORP yields still offer an attractive premium over STRIPS, so
we'll hang onto them until we see spreads narrow substantially. In the meantime,
the extra yield we're getting should boost the fund's long-term returns and add
to its anticipated value at maturity, which was up 75 cents over the past year
(see the table on page 21).
We also intend to keep the portfolio's weighted average maturity (WAM)
date within a couple months of the November 15, 2020 maturity date of its
benchmark. This should help the portfolio more closely track the performance of
the benchmark.
[left margin]
"WE EXPECT THE TUG-OF-WAR BETWEEN TREASURY BUYBACKS AND THE INFLATION OUTLOOK TO
KEEP LONG-TERM TREASURY YIELDS RELATIVELY STABLE IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
REFCORPS 74%
STRIPS 26%
AS OF MARCH 31, 2000
REFCORPS 74%
STRIPS 26%
Investment terms are defined in the Glossary on pages 54-55.
22 1-800-345-2021
Target: 2020--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 74.5%
$ 21,000,000 REFCORP STRIPS --
COUPON,
6.36%, 1/15/19 $ 6,572,221
258,000 REFCORP STRIPS -- COUPON,
6.21%, 4/15/19 79,471
52,374,000 REFCORP STRIPS -- COUPON,
8.45%, 1/15/20 15,382,177
10,756,000 REFCORP STRIPS -- COUPON,
6.23%, 4/15/20 3,109,208
55,293,000 REFCORP STRIPS -- COUPON,
7.62%, 7/15/20 15,731,741
104,894,000 REFCORP STRIPS -- PRINCIPAL,
8.52%, 7/15/20 29,872,633
35,406,000 REFCORP STRIPS -- COUPON,
6.46%, 10/15/20 9,914,721
53,500,000 REFCORP STRIPS -- PRINCIPAL,
6.50%, 10/15/20 14,996,119
25,482,000 REFCORP STRIPS -- COUPON,
7.98%, 1/15/21 7,030,261
284,945,000 REFCORP STRIPS -- PRINCIPAL,
7.33%, 1/15/21 78,613,838
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 181,302,390
------------
(Cost $149,902,231)
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 25.5%
$ 19,000,000 STRIPS -- COUPON, 8.41%,
2/15/20 $ 5,872,141
29,688,000 STRIPS -- COUPON, 8.43%,
5/15/20 9,037,366
4,135,000 STRIPS -- COUPON, 8.23%,
8/15/20 1,239,808
147,407,000 STRIPS -- COUPON, 7.85%,
11/15/20 43,532,655
2,750,000 STRIPS -- COUPON, 8.32%,
2/15/21 800,713
5,500,000 STRIPS -- COUPON, 8.18%,
5/15/21 1,582,098
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 62,064,781
------------
(Cost $43,454,208)
TOTAL INVESTMENT SECURITIES -- 100.0% $243,367,171
============
(Cost $193,356,439)
NOTES TO SCHEDULE OF INVESTMENTS
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
See Notes to Financial Statements www.americancentury.com 23
Target: 2025--Performance
--------------------------------------------------------------------------------
<TABLE>
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
INVESTOR CLASS (INCEPTION 2/15/96) ADVISOR CLASS (INCEPTION 6/1/98)
TARGET MERRILL LYNCH TARGET 11/15/25 MERRILL LYNCH
MATURITIES 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) 0.03% -0.48% 3.80% -0.10% -0.48% 3.80%
1 YEAR 11.82% 12.85% 9.72% 11.63% 12.85% 9.72%
================================================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 9.61% 10.32% 7.34% -- -- --
LIFE OF FUND 8.81% 9.64%(3) 7.47%(3) 2.93% 4.20% 4.97%
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) The Investor Class benchmark was an 8/15/25 STRIPS issue from inception
through January 1998, when it 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.
See pages 52-54 for 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 9/30/00
Fund Benchmark $15,250
Target: 2025 $14,771
Merrill Lynch Long-Term
Treasury Index $13,912
Merrill Lynch
Long-Term Fund
Target: 2025 Treasury Index Benchmark
DATE VALUE VALUE VALUE
2/15/96 $10,000 $10,000 $10,000
3/31/96 $9,123 $9,810 $9,632
6/30/96 $8,982 $9,794 $9,361
9/30/96 $9,022 $9,940 $9,343
12/31/96 $9,888 $10,414 $10,158
3/31/97 $8,881 $10,086 $9,077
6/30/97 $9,964 $10,639 $10,133
9/30/97 $11,218 $11,247 $11,358
12/31/97 $12,865 $11,969 $13,127
3/31/98 $13,067 $12,152 $13,356
6/30/98 $14,392 $12,710 $14,642
9/30/98 $15,954 $13,719 $16,319
12/31/98 $15,671 $13,590 $16,103
3/31/99 $14,154 $13,011 $14,506
6/30/99 $13,399 $12,710 $13,718
9/30/99 $13,207 $12,679 $13,513
12/31/99 $12,426 $12,420 $12,685
3/31/00 $14,764 $13,403 $15,323
6/30/00 $14,486 $13,553 $15,040
9/30/00 $14,771 $13,912 $15,250
$10,000 investment made 2/15/96
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.
* Index data from 2/29/96, the date nearest the fund's inception for which data
are available.
[line graph - data below]
SHARE PRICE VS. ANTICIPATED VALUE AT MATURITY
TARGET: 2025
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
$29.31 $112.37
$29.32 $113.99
2005
2010
2015
2020
2025
The top line in the graph represents the fund's Anticipated Value at Maturity
(AVM--defined on page 54), which fluctuates from day to day based on the fund's
weighted average 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.
24 1-800-345-2021
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?
Target: 2025 posted a strong return. For the fiscal year ended September
30, 2000, the fund returned 11.82%, compared with the 12.85% 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 remember that the fund's return is reduced by management
expenses and transaction costs, while the benchmark's is not.
THE FUND TRAILED ITS BENCHMARK BY A WIDER MARGIN THAN ITS EXPENSES. WHY?
It was primarily because of cash outflows and the outperformance of STRIPS
over REFCORPs.
With regard to cash flows, shareholders withdrew about 40% of the fund's
assets--totaling more than $275 million--over the past year. Most of this
occurred in the last six months after an influential financial newsletter
writer--who recommends the Target: 2025 fund to his readers from time to
time--suggested that his clients sell some of their shares.
For the most part, we sold STRIPS to meet these redemptions because they
are the easiest Treasury zeros to buy and sell. These sales, combined with our
independent efforts to add more REFCORPs to the portfolio, boosted the REFCORP
portion from less than 15% of the portfolio a year ago to nearly 30%. That led
to Target: 2025's underperformance relative to its STRIPS benchmark.
WHY DID STRIPS OUTPERFORM REFCORPS?
STRIPS, because of their liquidity (ease of trading), typically yield less
than REFCORPs with comparable maturities. But this yield differential--or
spread--grew unusually wide in the past year, mirroring the widening spreads in
the broader bond market between Treasurys and other types of bonds (such as
corporate, government agency, and mortgage-backed securities). When spreads
between STRIPS and REFCORPs widen, STRIPS outperform.
Yield spreads widened in the broader market because of the perception that
Treasury bonds will become increasingly scarce as the federal budget surplus
grows. Since REFCORPs are technically government agency bonds (although they
have a Treasury-backed guarantee), spreads between STRIPS and REFCORPs widened
in sympathy with the broader market.
At their widest levels, REFCORPs maturing in 2025 were yielding over 40
basis points (0.40%) more than STRIPS with the same maturity. That's about twice
the usual spread. In recent months, though, this spread has fallen back to about
30 basis points, helping Target: 2025 outperform its benchmark during the past
six months (see the previous page).
DID YOU MAKE ANY OTHER CHANGES TO THE PORTFOLIO?
We extended the fund's weighted average maturity (WAM) date from June 9,
2025, to July 15, 2025. The WAM date lengthened because most of the STRIPS we
sold to meet redemptions matured in 2024 and early 2025. We also added
longer-maturity STRIPS when we could find them with more attractive yields.
* All fund returns referenced in this interview are for Investor Class shares.
[right margin]
"SHAREHOLDERS WITHDREW ABOUT 40% OF THE FUND'S ASSETS--TOTALING MORE THAN $275
MILLION--AFTER AN INFLUENTIAL FINANCIAL NEWSLETTER WRITER SUGGESTED THAT HIS
CLIENTS SELL SOME OF THEIR SHARES."
PORTFOLIO AT A GLANCE
9/30/00 9/30/99
NUMBER OF SECURITIES 26 23
ANTICIPATED GROWTH
RATE 5.55% 5.73%
WEIGHTED AVERAGE
MATURITY DATE 7/15/25 6/9/25
ANTICIPATED VALUE AT
MATURITY (AVM)* $113.99 $111.81
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59% 0.59%
* See graph on page 24.
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 54-55.
www.americancentury.com 25
Target: 2025--Q&A
--------------------------------------------------------------------------------
(Continued)
This is the longest WAM date the Target: 2025 portfolio has had in its
four-year history, and it's the main reason why the fund's anticipated value at
maturity rose by more than $2 to $114 a share.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR U.S. INTEREST RATES?
The economic environment suggests that short-term Treasury yields should
probably be higher than they are now. With two-year Treasury yields around 6%
and the overnight federal funds rate at 6.5%, the bond market appears to be
anticipating a reversal in the Federal Reserve's policy--that is, an interest
rate cut.
This seems a little aggressive to us given current economic conditions.
Although the U.S. economy has shown signs of slowing--especially in recent
reports on consumer spending, hiring, and the housing market--the changes are
occurring at a gradual pace. To justify current bond yields, we would need to
see the economy come to a severe, crashing halt.
The good news is that, except for energy prices, inflation hasn't increased
very much. Nonetheless, it's hard to make a case for lower or even stable
short-term yields unless economic conditions change drastically.
WHAT ABOUT LONG-TERM RATES?
Long-term Treasury yields appear to underestimate the inflation outlook,
but supply considerations are exerting a bigger influence over this part of the
market. The U.S. Treasury's efforts to reduce the public debt have brought
long-term yields down lower than they would normally be based on inflation
expectations.
The Treasury bought back about $20 billion in long-term bonds during the
first nine months of this year, and it intends to buy back another $5-10 billion
before year-end. We expect the buyback program to continue in 2001, and that
could put additional downward pressure on long-term Treasury yields.
However, the major presidential candidates have made proposals that would
either reduce federal tax revenues or increase spending, both of which could
decrease or eliminate the federal budget surplus. If that were to happen, we
would expect fewer buybacks, higher long-term Treasury yields, and a narrower
spread between STRIPS and REFCORPs.
But we know better than to rely on pre-election promises, so we expect the
tug-of-war between Treasury buybacks and the inflation outlook to keep long-term
Treasury yields relatively stable in the coming months.
WHAT ARE YOUR PLANS FOR TARGET: 2025 GOING FORWARD?
We expect to maintain the portfolio's current positioning, with about a 30%
position in REFCORPs. REFCORP yields still offer an attractive premium over
STRIPS, so we'll hang onto them until we see spreads narrow substantially. In
the meantime, the extra yield we're getting should boost the fund's long-term
returns and add to its anticipated value at maturity.
We also intend to keep the portfolio's WAM date within six months of the
November 15, 2025 maturity date of its benchmark. This should help the portfolio
more closely track the performance of the benchmark.
[left margin]
"WE EXPECT THE TUG-OF-WAR BETWEEN TREASURY BUYBACKS AND THE INFLATION OUTLOOK TO
KEEP LONG-TERM TREASURY YIELDS RELATIVELY STABLE IN THE COMING MONTHS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
STRIPS 72%
REFCORPS 28%
AS OF MARCH 31, 2000
STRIPS 82%
REFCORPS 18%
Investment terms are defined in the Glossary on pages 54-55.
26 1-800-345-2021
Target: 2025--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 72.0%
$ 35,000,000 STRIPS -- COUPON, 6.33%,
8/15/24 $ 8,320,743
178,500,000 STRIPS -- COUPON, 5.88%,
11/15/24 41,851,015
34,100,000 STRIPS -- PRINCIPAL, 7.26%,
11/15/24 8,060,836
396,900,000 STRIPS -- COUPON, 6.24%,
2/15/25 91,776,845
44,000,000 STRIPS -- PRINCIPAL, 6.19%,
2/15/25 10,246,747
114,500,000 STRIPS -- COUPON, 5.89%,
5/15/25(2) 26,112,731
343,000,000 STRIPS -- COUPON, 5.91%,
8/15/25(2) 77,151,836
109,100,000 STRIPS -- PRINCIPAL, 6.50%,
8/15/25 24,569,764
129,570,000 STRIPS -- COUPON, 6.00%,
11/15/25(2) 28,745,674
115,299,000 STRIPS -- COUPON, 6.25%,
2/15/26 25,230,161
41,500,000 STRIPS -- COUPON, 6.10%,
5/15/26 8,957,350
77,000,000 STRIPS -- COUPON, 6.33%,
8/15/26 16,393,426
2,000,000 STRIPS -- PRINCIPAL, 6.44%,
8/15/26 431,183
15,000,000 STRIPS -- COUPON, 6.00%,
11/15/26 3,150,129
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 370,998,440
------------
(Cost $369,786,748)
Principal Amount Value
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 28.0%
$ 19,650,000 REFCORP STRIPS -- COUPON,
6.37%, 1/15/24 $ 4,547,367
28,560,000 REFCORP STRIPS -- COUPON,
6.43%, 4/15/24 6,506,184
3,926,000 REFCORP STRIPS -- COUPON,
6.88%, 7/15/24 880,440
91,732,000 REFCORP STRIPS -- COUPON,
6.74%, 10/15/24 20,250,740
57,005,000 REFCORP STRIPS -- COUPON,
6.82%, 1/15/25 12,402,956
35,475,000 REFCORP STRIPS -- COUPON,
6.73%, 4/15/25 7,580,154
30,142,000 REFCORP STRIPS -- COUPON,
6.53%, 7/15/25 6,332,600
110,340,000 REFCORP STRIPS -- COUPON,
6.73%, 10/15/25 22,874,770
71,435,000 REFCORP STRIPS -- COUPON,
6.69%, 1/15/26 14,614,373
54,396,000 REFCORP STRIPS -- COUPON,
6.55%, 4/15/26 10,955,124
95,850,000 REFCORP STRIPS -- COUPON,
6.80%, 7/15/26 19,027,284
92,539,000 REFCORP STRIPS -- COUPON,
6.94%, 10/15/26 18,106,890
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 144,078,882
------------
(Cost $132,979,302)
TOTAL INVESTMENT SECURITIES --100.0% $515,077,322
============
(Cost $502,766,050)
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).
See Notes to Financial Statements www.americancentury.com 27
Statement 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 payables) 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, 2000 2000 2005 2010
ASSETS
Investment securities, at value
(identified cost of $157,119,191,
$278,172,999, and $223,673,650,
respectively) (Note 3) .......... $ 157,187,965 $ 277,531,510 $ 230,864,080
Cash .............................. -- 495,164 211,093
Investment in affiliated money
market fund (Note 2) ............ 1,333,495 187,799 1,966,497
Receivable for capital shares sold -- 32,046 65,384
Interest receivable ............... 322,919 -- --
------------- ------------- -------------
158,844,379 278,246,519 233,107,054
------------- ------------- -------------
LIABILITIES
Disbursements in excess of
demand deposit cash ............. 65,823 -- --
Payable for capital shares redeemed 377,428 227,914 162,015
Accrued management fees (Note 2) .. 77,899 133,768 111,040
Distribution fees payable (Note 2) 341 736 323
Service fees payable (Note 2) ..... 341 736 323
Payable for trustees' fees
and expenses .................... 589 1,012 842
Accrued expenses and
other liabilities ............... 125 131 80
------------- ------------- -------------
522,546 364,297 274,623
------------- ------------- -------------
Net Assets ........................ $ 158,321,833 $ 277,882,222 $ 232,832,431
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ................... $ 153,034,363 $ 275,833,073 $ 220,981,394
Undistributed net investment income 5,606,267 13,177,777 9,674,183
Accumulated net realized loss
on investment transactions ...... (387,571) (10,487,139) (5,013,576)
Net unrealized appreciation
(depreciation)
on investments (Note 3) ......... 68,774 (641,489) 7,190,430
------------- ------------- -------------
$ 158,321,833 $ 277,882,222 $ 232,832,431
============= ============= =============
Investor Class
Net assets ........................ $ 156,666,027 $ 274,117,031 $ 231,201,556
Shares outstanding ................ 1,552,448 3,555,810 3,858,296
Net asset value per share ......... $ 100.92 $ 77.09 $ 59.92
Advisor Class
Net assets ........................ $ 1,655,806 $ 3,765,191 $ 1,630,875
Shares outstanding ................ 16,493 49,087 27,331
Net asset value per share ......... $ 100.39 $ 76.70 $ 59.67
28 1-800-345-2021 See Notes to Financial Statements
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 2015 2020 2025
ASSETS
Investment securities, at value
(identified cost of $111,179,843,
$193,356,439, and $502,766,050,
respectively) (Note 3) ............ $ 134,561,513 $ 243,367,171 $ 515,077,322
Cash ................................ 2,134 157,125 553,742
Investment in affiliated money
market fund (Note 2) .............. 233,424 1,552,626 167,460
Receivable for capital shares sold .. 5,010 156,276 424,408
Securities lending fee receivable ... -- -- 17,949
------------- ------------- -------------
134,802,081 245,233,198 516,240,881
------------- ------------- -------------
LIABILITIES
Payable for capital shares redeemed . 9,391 136,346 260,931
Accrued management fees (Note 2) .... 65,820 119,317 256,548
Distribution fees payable (Note 2) .. 5 160 192
Service fees payable (Note 2) ....... 5 160 192
Payable for trustees' fees
and expenses ...................... 495 899 1,930
Accrued expenses and
other liabilities ................. 73 44 --
------------- ------------- -------------
75,789 256,926 519,793
------------- ------------- -------------
Net Assets .......................... $ 134,726,292 $ 244,976,272 $ 515,721,088
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ..................... $ 107,601,836 $ 162,287,705 $ 474,269,844
Undistributed net investment income . 6,151,007 10,334,113 27,312,242
Accumulated undistributed net
realized gain (loss) on
investment transactions ........... (2,408,221) 22,343,722 1,827,730
Net unrealized appreciation
on investments (Note 3) ........... 23,381,670 50,010,732 12,311,272
------------- ------------- -------------
$ 134,726,292 $ 244,976,272 $ 515,721,088
============= ============= =============
Investor Class
Net assets .......................... $ 134,703,898 $ 244,202,752 $ 514,662,932
Shares outstanding .................. 2,805,861 7,019,477 17,556,285
Net asset value per share ........... $ 48.01 $ 34.79 $ 29.32
Advisor Class
Net assets .......................... $ 22,394 $ 773,520 $ 1,058,156
Shares outstanding .................. 468 22,317 36,274
Net asset value per share ........... $ 47.87 $ 34.66 $ 29.17
See Notes to Financial Statements www.americancentury.com 29
Statement 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 interest income, fees and expenses,
and investment gains or losses.
YEAR ENDED SEPTEMBER 30, 2000 2000 2005 2010
INVESTMENT INCOME
Income:
Interest ............................. $ 11,298,549 $ 21,878,551 $ 14,459,791
Income from securities lending ....... 12,312 -- --
------------ ------------ ------------
11,310,861 21,878,551 14,459,791
------------ ------------ ------------
Expenses (Note 2):
Management fees ...................... 1,082,998 2,073,601 1,300,709
Distribution fees -- Advisor Class ... 3,696 7,240 3,341
Service fees -- Advisor Class ........ 3,696 7,240 3,341
Trustees' fees and expenses .......... 7,672 14,056 9,218
------------ ------------ ------------
1,098,062 2,102,137 1,316,609
------------ ------------ ------------
Net investment income ................ 10,212,799 19,776,414 13,143,182
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments ..... (387,572) (9,523,702) (4,370,319)
Change in net unrealized
appreciation (depreciation)
on investments ..................... (882,682) 5,569,981 9,201,529
------------ ------------ ------------
Net realized and unrealized gain
(loss) on investments .............. (1,270,254) (3,953,721) 4,831,210
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations .......... $ 8,942,545 $ 15,822,693 $ 17,974,392
============ ============ ============
30 1-800-345-2021 See Notes to Financial Statements
Statement of Operations
--------------------------------------------------------------------------------
(Continued)
YEAR ENDED SEPTEMBER 30, 2000 2015 2020 2025
INVESTMENT INCOME
Income:
Interest .............................. $ 10,305,032 $ 16,246,613 $ 42,549,750
Income from securities lending ........ 1,784 69,879 363,308
------------ ------------ ------------
10,306,816 16,316,492 42,913,058
------------ ------------ ------------
Expenses (Note 2):
Management fees ....................... 942,005 1,571,764 4,038,344
Distribution fees -- Advisor Class .... 43 1,603 2,269
Service fees -- Advisor Class ......... 43 1,603 2,269
Trustees' fees and expenses ........... 6,404 10,990 28,317
------------ ------------ ------------
948,495 1,585,960 4,071,199
------------ ------------ ------------
Net investment income ................. 9,358,321 14,730,532 38,841,859
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized gain (loss)
on investments ...................... (1,059,434) 22,677,232 12,775,139
Change in net unrealized
appreciation (depreciation)
on investments ...................... 6,441,464 (3,652,319) 35,464,113
------------ ------------ ------------
Net realized and unrealized
gain on investments ................. 5,382,030 19,024,913 48,239,252
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ........... $ 14,740,351 $ 33,755,445 $ 87,081,111
============ ============ ============
See Notes to Financial Statements www.americancentury.com 31
<TABLE>
<CAPTION>
Statement 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, 2000 AND SEPTEMBER 30, 1999
2000 2005 2010
Decrease in Net Assets 2000 1999 2000 1999 2000 1999
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ..... $ 10,212,799 $ 11,532,670 $ 19,776,414 $ 26,995,720 $ 13,143,182 $ 13,093,509
Net realized gain (loss)
on investments .......... (387,572) 882,851 (9,523,702) 9,503,624 (4,370,319) 3,303,613
Change in net unrealized
appreciation
(depreciation)
on investments .......... (882,682) (7,272,041) 5,569,981 (67,594,700) 9,201,529 (47,947,788)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets resulting
from operations ......... 8,942,545 5,143,480 15,822,693 (31,095,356) 17,974,392 (31,550,666)
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income:
Investor Class .......... (11,158,241) (13,127,657) (25,001,301) (23,463,873) (13,287,017) (11,224,267)
Advisor Class ........... (63,922) (3,731) (138,502) (5,103) (73,905) (872)
From net realized gains on
investment transactions:
Investor Class .......... (123,669) (3,117,167) -- (7,397,428) -- (5,371,126)
Advisor Class ........... (745) (897) -- (1,643) -- (420)
In excess of net realized
gains on investment
transactions:
Investor Class .......... (386,239) -- (10,024,250) -- -- (643,178)
Advisor Class ........... (2,327) -- (58,263) -- -- (50)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions ...... (11,735,143) (16,249,452) (35,222,316) (30,868,047) (13,360,922) (17,239,913)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets from
capital share
transactions ............ (41,788,249) (23,579,846) (195,499,717) 20,658,855 (13,581,355) 6,762,551
------------- ------------- ------------- ------------- ------------- -------------
Net decrease in
net assets .............. (44,580,847) (34,685,818) (214,899,340) (41,304,548) (8,967,885) (42,028,028)
NET ASSETS
Beginning of period ....... 202,902,680 237,588,498 492,781,562 534,086,110 241,800,316 283,828,344
------------- ------------- ------------- ------------- ------------- -------------
End of period ............. $ 158,321,833 $ 202,902,680 $ 277,882,222 $ 492,781,562 $ 232,832,431 $ 241,800,316
============= ============= ============= ============= ============= =============
Undistributed net
investment income ....... $ 5,606,267 $ 8,476,606 $ 13,177,777 $ 18,541,166 $ 9,674,183 $ 9,891,894
============= ============= ============= ============= ============= =============
</TABLE>
32 1-800-345-2021 See Notes to Financial Statements
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
(Continued)
YEARS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
Increase (Decrease) in 2015 2020 2025
Net Assets 2000 1999 2000 1999 2000 1999
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ..... $ 9,358,321 $ 11,029,490 $ 14,730,532 $ 18,152,315 $ 38,841,859 $ 24,410,129
Net realized gain (loss)
on investments .......... (1,059,434) (1,189,705) 22,677,232 40,557,105 12,775,139 (9,083,532)
Change in net unrealized
appreciation
(depreciation)
on investments .......... 6,441,464 (42,858,822) (3,652,319) (132,226,209) 35,464,113 (93,055,873)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets resulting
from operations ......... 14,740,351 (33,019,037) 33,755,445 (73,516,789) 87,081,111 (77,729,276)
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income:
Investor Class .......... (12,201,171) (7,536,221) (17,675,575) (24,377,620) (32,236,278) (12,412,051)
Advisor Class ........... (361) -- (38,610) (988) (44,653) (9,148)
From net realized gains on
investment transactions:
Investor Class .......... -- -- (31,488,441) (61,543,905) -- --
Advisor Class ........... -- -- (70,913) (2,511) -- --
In excess of net realized
gains on investment
transactions:
Investor Class .......... (136,591) (295,396) -- -- -- (3,038,701)
Advisor Class ........... (4) -- -- -- -- (2,318)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions ...... (12,338,127) (7,831,617) (49,273,539) (85,925,024) (32,280,931) (15,462,218)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease)
in net assets from
capital share
transactions ............ (85,876,442) 88,969,917 (56,786,453) (9,329,139) (294,432,464) 492,333,318
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ........... (83,474,218) 48,119,263 (72,304,547) (168,770,952) (239,632,284) 399,141,824
NET ASSETS
Beginning of period ....... 218,200,510 170,081,247 317,280,819 486,051,771 755,353,372 356,211,548
------------- ------------- ------------- ------------- ------------- -------------
End of period ............. $ 134,726,292 $ 218,200,510 $ 244,976,272 $ 317,280,819 $ 515,721,088 $ 755,353,372
============= ============= ============= ============= ============= =============
Undistributed net
investment income ....... $ 6,151,007 $ 8,994,220 $ 10,334,113 $ 13,317,766 $ 27,312,242 $ 20,751,314
============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 33
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
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 (the 1940 Act) as an
open-end 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). The funds are diversified under the 1940 Act. 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 in December of its target maturity
year. The following significant accounting policies are in accordance with
generally accepted accounting principles; these policies may require the use of
estimates by fund management.
MULTIPLE CLASS -- 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.
SECURITY VALUATIONS -- Securities are valued based on data obtained through
a commercial pricing service or at the most recent bid price. 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.
At September 30, 2000, the funds, 2000, 2005, 2010, and 2015 had accumulated
net realized capital loss carryovers for federal income tax purposes of $72,734,
$182,279, $906,265, and $120,223, respectively, (expiring in 2008) which may be
used to offset future taxable gains.
For the year ended September 30, 2000, the funds, 2000, 2005, 2010, and 2015
incurred net capital losses of $306,984, $9,769,224, $3,675,932, and $2,211,136,
respectively. The funds, 2000, 2005, 2010, and 2015, have 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 a distributor of
the trust. 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 1940 Act
(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 (Investor Class) 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, 2000, 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 1940 Act.
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
34 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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 year ended September 30, 2000, were $7,392, $14,480, $6,682, $86,
$3,206, and $4,538 for 2000, 2005, 2010, 2015, 2020, and 2025, respectively.
Effective March 13, 2000, American Century Investment Services, Inc. (ACIS),
became a distributor of the trust.
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, a
distributor of the trust, ACIS, and the trust's transfer agent, American Century
Services Corporation.
As of September 30, 2000, the funds, 2000, 2005, 2010, 2015, 2020, and 2025,
had invested $1,333,495, $187,799, $1,966,497, $233,424, $1,552,626, and
$167,460, 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
<TABLE>
Investment transactions in U.S. Treasury securities, excluding short-term
investments, for the year ended September 30, 2000, were as follows:
2000 2005 2010 2015 2020 2025
<S> <C> <C> <C> <C> <C> <C>
Purchases ............. $22,490,454 $58,847,963 $48,729,145 $42,481,992 $28,400,966 $358,991,166
Proceeds from Sales ... $160,736,545 $291,787,594 $77,640,050 $141,915,490 $136,753,756 $682,116,244
On September 30, 2000, 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 .......... $87,201 $5,608,831 $10,214,054 $23,305,200 $50,295,349 $16,113,928
Depreciation .......... (26,281) (6,785,954) (3,454,120) -- (284,617) (8,168,870)
------------ ------------ ------------ ------------ ------------ ------------
Net ................... $60,920 $(1,177,123) $6,759,934 $23,305,200 $50,010,732 $7,945,058
============ ============ ============ ============ ============ ============
Federal Tax Cost ...... $157,127,045 $278,708,633 $224,104,146 $111,256,313 $193,356,439 $507,132,264
============ ============ ============ ============ ============ ============
</TABLE>
www.americancentury.com 35
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
<TABLE>
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
2000 2005 2010
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Year ended
September 30, 2000
<S> <C> <C> <C> <C> <C> <C>
Sold .................. 720,930 $ 67,734,099 1,708,458 $ 121,971,368 2,152,314 $ 119,003,325
Issued in reinvestment
of distributions .... 124,776 11,363,356 513,722 34,507,072 250,010 12,968,013
Redeemed .............. (1,266,747) (121,605,777) (4,902,558) (353,219,814) (2,655,053) (145,950,251)
Reverse share split ... (127,923) -- (520,863) -- (255,802) --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease .......... (548,964) $ (42,508,322) (3,201,241) $(196,741,374) (508,531) $ (13,978,913)
============= ============= ============= ============= ============= =============
Year ended
September 30, 1999
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
============= ============= ============= ============= ============= =============
ADVISOR CLASS
Year ended
September 30, 2000
Sold .................. 13,340 $ 1,299,366 44,139 $ 3,272,626 11,814 $ 666,392
Issued in reinvestment
of distributions .... 593 53,918 2,288 153,492 1,107 57,359
Redeemed .............. (6,435) (633,211) (29,476) (2,184,461) (5,912) (326,193)
Reverse share split ... (728) -- (2,886) -- (1,408) --
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) 6,770 $ 720,073 14,065 $ 1,241,657 5,601 $ 397,558
============= ============= ============= ============= ============= =============
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
============= ============= ============= ============= ============= =============
</TABLE>
(1) October 20, 1998 (commencement of sale) through September 30, 1999 for 2010.
36 1-800-345-2021
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in shares of the funds were as follows (unlimited number of
<TABLE>
shares authorized):
2015 2020 2025
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Year ended
September 30, 2000
<S> <C> <C> <C> <C> <C> <C>
Sold .................. 2,213,952 $ 95,365,822 6,968,069 $ 213,622,783 27,197,630 $ 678,458,390
Issued in reinvestment
of distributions .... 297,512 12,087,909 1,839,250 47,323,884 1,176,606 29,462,121
Redeemed .............. (4,471,634) (193,343,793) (10,236,528) (317,954,222) (38,300,778) (1,002,350,762)
Reverse share split ... (303,308) -- (1,898,863) -- (1,282,713) --
--------------- --------------- --------------- --------------- --------------- ---------------
Net decrease .......... (2,263,478) $ (85,890,062) (3,328,072) $ (57,007,555) (11,209,255) $ (294,430,251)
=============== =============== =============== =============== =============== ===============
Year ended
September 30, 1999
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
=============== =============== =============== =============== =============== ===============
ADVISOR CLASS
Year ended
September 30, 2000
Sold .................. 468 $ 20,891 16,890 $ 537,058 25,217 $ 691,081
Issued in reinvestment
of distributions .... 9 365 3,015 77,529 1,477 36,919
Redeemed .............. (172) (7,636) (12,304) (393,485) (26,816) (730,213)
Reverse share split ... (9) -- (4,054) -- (1,774) --
--------------- --------------- --------------- --------------- --------------- ---------------
Net increase (decrease) 296 $ 13,620 3,547 $ 221,102 (1,896) $ (2,213)
=============== =============== =============== =============== =============== ===============
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
=============== =============== =============== =============== =============== ===============
</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
www.americancentury.com 37
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
5. SECURITIES LENDING
At September 30, 2000, securities valued at $25,869,405 for 2025 were on
loan to brokers. Securities received as collateral, at this date, were valued at
$27,969,501. The funds' risks in securities lending are that the borrower may
not provide additional collateral when required or return the securities when
due.
--------------------------------------------------------------------------------
6. BANK LOANS
The funds, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The funds did not borrow from the line during the
year ended September 30, 2000.
38 1-800-345-2021
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 96.11 $ 93.78 $ 86.05 $ 79.95 $ 76.86
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) .............. 5.41 5.06 5.13 5.10 4.75
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............ (0.60) (2.73) 2.60 1.00 (1.66)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ...... 4.81 2.33 7.73 6.10 3.09
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ............ (5.52) (5.57) (5.64) (5.20) (3.94)
From Net Realized Gains on
Investment Transactions ............... (0.06) (1.32) -- -- --
In Excess of Net Realized Gains ....... (0.19) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ................... (5.77) (6.89) (5.64) (5.20) (3.94)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ..................... 5.77 6.89 5.64 5.20 3.94
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .......... $ 100.92 $ 96.11 $ 93.78 $ 86.05 $ 79.95
=========== =========== =========== =========== ===========
Total Return(3) ....................... 5.00% 2.48% 8.97% 7.64% 4.01%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 0.59% 0.59% 0.59% 0.56% 0.53%
Ratio of Net Investment Income
to Average Net Assets ................... 5.51% 5.34% 5.75% 6.14% 5.99%
Portfolio Turnover Rate ................. 16% 31% 82% 10% 29%
Net Assets, End of Period
(in thousands) .......................... $ 156,666 $ 201,971 $ 237,525 $ 248,377 $ 267,757
</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.
See Notes to Financial Statements www.americancentury.com 39
Target 2000--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........ $95.85 $93.76 $91.41
--------- -------- --------
Income From Investment Operations
Net Investment Income(2) .................. 5.17 4.88 0.54
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................ (0.63) (2.79) 1.81
--------- -------- --------
Total From Investment Operations .......... 4.54 2.09 2.35
--------- -------- --------
Distributions
From Net Investment Income ................ (5.25) (5.50) --
From Net Realized Gains on
Investment Transactions ................... (0.06) (1.32) --
In Excess of Net Realized Gains ........... (0.19) -- --
--------- -------- --------
Total Distributions ....................... (5.50) (6.82) --
--------- -------- --------
Reverse Share Split ......................... 5.50 6.82 --
--------- -------- --------
Net Asset Value, End of Period ..............$100.39 $95.85 $93.76
========= ======== ========
Total Return(3) ........................... 4.74% 2.23% 2.57%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ....................... 0.84% 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ....................... 5.26% 5.09% 5.06%(4)
Portfolio Turnover Rate ..................... 16% 31% 82%
Net Assets, End of Period
(in thousands) .............................. $1,656 $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.
40 1-800-345-2021 See Notes to Financial Statements
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 72.55 $ 76.72 $ 64.54 $ 57.83 $ 56.61
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) .............. 4.09 3.77 3.84 3.74 3.50
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............ 0.45 (7.94) 8.34 2.97 (2.28)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ...... 4.54 (4.17) 12.18 6.71 1.22
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ............ (3.89) (3.39) (3.61) (3.61) (2.06)
From Net Realized Gains on
Investment Transactions ............... -- (1.07) (0.27) (0.44) (0.58)
In Excess of Net Realized Gains ....... (1.56) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ................... (5.45) (4.46) (3.88) (4.05) (2.64)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ..................... 5.45 4.46 3.88 4.05 2.64
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .......... $ 77.09 $ 72.55 $ 76.72 $ 64.54 $ 57.83
=========== =========== =========== =========== ===========
Total Return(3) ....................... 6.26% (5.44)% 18.87% 11.60% 2.15%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 0.59% 0.59% 0.59% 0.57% 0.58%
Ratio of Net Investment Income
to Average Net Assets ................... 5.58% 5.10% 5.53% 6.15% 6.05%
Portfolio Turnover Rate ................. 17% 81% 35% 15% 31%
Net Assets, End of Period
(in thousands) .......................... $ 274,117 $ 490,248 $ 533,986 $ 281,677 $ 238,864
</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.
See Notes to Financial Statements www.americancentury.com 41
Target: 2005--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ...... $72.34 $76.69 $70.91
-------- --------- --------
Income From Investment Operations
Net Investment Income(2) ................ 3.91 3.60 0.58
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 0.45 (7.95) 5.20
-------- --------- --------
Total From Investment Operations ........ 4.36 (4.35) 5.78
-------- --------- --------
Distributions
From Net Investment Income .............. (3.70) (3.32) --
From Net Realized Gains on
Investment Transactions ................. -- (1.07) --
In Excess of Net Realized Gains ......... (1.56) -- --
-------- --------- --------
Total Distributions ..................... (5.26) (4.39) --
-------- --------- --------
Reverse Share Split ....................... 5.26 4.39 --
-------- --------- --------
Net Asset Value, End of Period ............ $76.70 $72.34 $76.69
======== ========= ========
Total Return(3) ......................... 6.03% (5.67)% 8.15%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.84% 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ..................... 5.33% 4.85% 4.87%(4)
Portfolio Turnover Rate ................... 17% 81% 35%
Net Assets, End of Period
(in thousands) ............................ $3,765 $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.
42 1-800-345-2021 See Notes to Financial Statements
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 55.10 $ 61.98 $ 49.16 $ 42.47 $ 42.14
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income(1) .............. 3.32 3.07 2.94 2.79 2.58
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ............ 1.50 (9.95) 9.88 3.90 (2.25)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ...... 4.82 (6.88) 12.82 6.69 0.33
----------- ----------- ----------- ----------- -----------
Distributions(2)
From Net Investment Income ............ (3.21) (2.78) (2.46) (2.82) (1.57)
From Net Realized Gains on
Investment Transactions ............... -- (1.33) (0.29) (1.17) --
In Excess of Net Realized Gains ....... -- (0.16) -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ................... (3.21) (4.27) (2.75) (3.99) (1.57)
----------- ----------- ----------- ----------- -----------
Reverse Share Split ..................... 3.21 4.27 2.75 3.99 1.57
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .......... $ 59.92 $ 55.10 $ 61.98 $ 49.16 $ 42.47
=========== =========== =========== =========== ===========
Total Return(3) ....................... 8.75% (11.10)% 26.08% 15.75% 0.78%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................... 0.59% 0.59% 0.59% 0.62% 0.67%
Ratio of Net Investment Income
to Average Net Assets ................... 5.90% 5.31% 5.39% 6.15% 5.98%
Portfolio Turnover Rate ................. 22% 49% 34% 26% 24%
Net Assets, End of Period
(in thousands) .......................... $ 231,202 $ 240,606 $ 283,828 $ 124,812 $ 111,117
</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.
See Notes to Financial Statements www.americancentury.com 43
Target: 2010--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........ $54.96 $60.12
--------- --------
Income From Investment Operations
Net Investment Income(2) .................. 3.17 2.81
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................ 1.54 (7.97)
--------- --------
Total From Investment Operations .......... 4.71 (5.16)
--------- --------
Distributions
From Net Investment Income ................ (3.07) (2.76)
From Net Realized Gains on
Investment Transactions ................... -- (1.33)
In Excess of Net Realized Gains ........... -- (0.16)
--------- --------
Total Distributions ....................... (3.07) (4.25)
--------- --------
Reverse Share Split ......................... 3.07 4.25
--------- --------
Net Asset Value, End of Period .............. $59.67 $54.96
========= ========
Total Return(3) ........................... 8.57% (8.58)%
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 ....................... 5.65% 5.06%(4)
Portfolio Turnover Rate ..................... 22% 49%
Net Assets, End of Period
(in thousands) .............................. $1,631 $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.
44 1-800-345-2021 See Notes to Financial Statements
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $43.04 $49.87 $38.34 $31.96 $32.20
-------- --------- -------- -------- ---------
Income From Investment Operations
Net Investment Income(1) ................ 2.58 2.39 2.17 2.00 1.85
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 2.39 (9.22) 9.36 4.38 (2.09)
-------- --------- -------- -------- ---------
Total From Investment Operations ........ 4.97 (6.83) 11.53 6.38 (0.24)
-------- --------- -------- -------- ---------
Distributions(2)
From Net Investment Income .............. (2.46) (2.10) (2.11) (2.05) (1.28)
From Net Realized Gains on
Investment Transactions ................. -- -- (1.40) (0.34) (1.61)
In Excess of Net Realized Gains ......... (0.03) (0.08) -- -- --
-------- --------- -------- -------- ---------
Total Distributions ..................... (2.49) (2.18) (3.51) (2.39) (2.89)
-------- --------- -------- -------- ---------
Reverse Share Split ....................... 2.49 2.18 3.51 2.39 2.89
-------- --------- -------- -------- ---------
Net Asset Value, End of Period ............ $48.01 $43.04 $49.87 $38.34 $31.96
======== ========= ======== ======== =========
Total Return(3) ......................... 11.55% (13.70)% 30.07% 19.96% (0.74)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.59% 0.59% 0.59% 0.61% 0.65%
Ratio of Net Investment Income
to Average Net Assets ..................... 5.82% 5.25% 4.96% 5.79% 5.63%
Portfolio Turnover Rate ................... 26% 55% 31% 21% 17%
Net Assets, End of Period
(in thousands) ............................$134,704 $218,193 $170,081 $114,900 $115,654
</TABLE>
(1) Computed using average shares outstanding throughout the perio
(2) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements www.americancentury.com 45
Target: 2015--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ...... $43.02 $43.65
--------- --------
Income From Investment Operations
Net Investment Income(2) ................ 2.49 0.46
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 2.36 (1.09)
--------- --------
Total From Investment Operations ........ 4.85 (0.63)
--------- --------
Distributions
From Net Investment Income .............. (2.42) --
From Net Realized Gains on
Investment Transactions ................. -- --
In Excess of Net Realized Gains ......... (0.03) --
--------- --------
Total Distributions ..................... (2.45) --
--------- --------
Reverse Share Split ....................... 2.45 --
--------- --------
Net Asset Value, End of Period ............ $47.87 $43.02
========= ========
Total Return(3) ......................... 11.27% (1.44)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.84% 0.83%(4)
Ratio of Net Investment Income
to Average Net Assets ..................... 5.57% 5.01%(4)
Portfolio Turnover Rate ................... 26% 55%
Net Assets, End of Period
(in thousands) ............................ $22 $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.
46 1-800-345-2021 See Notes to Financial Statements
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
Investor Class
2000 1999 1998 1997 1996
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $30.61 $36.95 $27.17 $22.00 $22.47
--------- -------- -------- --------- --------
Income From Investment Operations
Net Investment Income(1) ................ 1.77 1.62 1.53 1.51 1.41
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 2.41 (7.96) 8.25 3.66 (1.88)
--------- -------- -------- --------- --------
Total From Investment Operations ........ 4.18 (6.34) 9.78 5.17 (0.47)
--------- -------- -------- --------- --------
Distributions(2)
From Net Investment Income .............. (1.85) (2.06) (2.35) (1.45) (0.40)
From Net Realized Gains on
Investment Transactions ................. (3.30) (5.20) (2.19) -- (0.04)
--------- -------- -------- --------- --------
Total Distributions ..................... (5.15) (7.26) (4.54) (1.45) (0.44)
--------- -------- -------- --------- --------
Reverse Share Split ....................... 5.15 7.26 4.54 1.45 0.44
--------- -------- -------- --------- --------
Net Asset Value, End of Period ............ $34.79 $30.61 $36.95 $27.17 $22.00
========= ======== ======== ========= ========
Total Return(3) ......................... 13.66% (17.16)% 36.00% 23.50% (2.09)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.59% 0.59% 0.59% 0.53% 0.61%
Ratio of Net Investment Income
to Average Net Assets ..................... 5.49% 4.82% 4.83% 6.29% 6.25%
Portfolio Turnover Rate ................... 11% 31% 18% 14% 47%
Net Assets, End of Period
(in thousands) ............................ $244,203 $316,707 $486,052 $553,551 $926,319
</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.
See Notes to Financial Statements www.americancentury.com 47
Target: 2020--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ......... $30.55 $35.50
-------- --------
Income From Investment Operations
Net Investment Income(2) ................... 1.69 1.50
Net Realized and Unrealized Gain (Loss)
on Investment Transactions ................. 2.42 (6.45)
-------- --------
Total From Investment Operations ........... 4.11 (4.95)
-------- --------
Distributions
From Net Investment Income ................. (1.79) (2.05)
From Net Realized Gains on
Investment Transactions .................... (3.30) (5.20)
-------- --------
Total Distributions ........................ (5.09) (7.25)
-------- --------
Reverse Share Split .......................... 5.09 7.25
-------- --------
Net Asset Value, End of Period ............... $34.66 $30.55
======== ========
Total Return(3) ............................ 13.45% (13.94)%
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 ........................ 5.24% 4.57%(4)
Portfolio Turnover Rate ...................... 11% 31%
Net Assets, End of Period
(in thousands) ............................... $773 $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.
48 1-800-345-2021 See Notes to Financial Statements
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
investment 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).
<TABLE>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Investor Class
2000 1999 1998 1997 1996(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $26.22 $31.67 $22.27 $17.91 $19.85
-------- --------- -------- -------- --------
Income From Investment Operations
Net Investment Income(2) ................ 1.54 1.46 1.33 1.21 0.72
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 1.56 (6.91) 8.07 3.15 (2.66)
-------- --------- -------- -------- --------
Total From Investment Operations ........ 3.10 (5.45) 9.40 4.36 (1.94)
-------- --------- -------- -------- --------
Distributions(2)
From Net Investment Income .............. (1.11) (1.28) (0.70) (0.72) --
From Net Realized Gains on
Investment Transactions ................. -- -- (0.05) -- --
In Excess of Net Realized Gains ......... -- (0.31) -- -- --
-------- --------- -------- -------- --------
Total Distributions ..................... (1.11) (1.59) (0.75) (0.72) --
-------- --------- -------- -------- --------
Reverse Share Split ....................... 1.11 1.59 0.75 0.72 --
-------- --------- -------- -------- --------
Net Asset Value, End of Period ............ $29.32 $26.22 $31.67 $22.27 $17.91
======== ========= ======== ======== ========
Total Return(3) ......................... 11.82% (17.21)% 42.21% 24.34% (9.77)%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.59% 0.59% 0.59% 0.62% 0.67%(4)
Ratio of Net Investment Income
to Average Net Assets ..................... 5.64% 5.25% 4.94% 6.14% 6.57%(4)
Portfolio Turnover Rate ................... 52% 54% 52% 58% 61%
Net Assets, End of Period
(in thousands) ............................$514,663 $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.
See Notes to Financial Statements www.americancentury.com 49
Target: 2025--Financial Highlights
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
(EXCEPT AS NOTED)
Advisor Class
2000 1999 1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ...... $26.13 $31.64 $27.27
--------- -------- --------
Income From Investment Operations
Net Investment Income(2) ................ 1.47 1.39 0.41
Net Realized and Unrealized Gain (Loss)
on Investment Transactions .............. 1.57 (6.90) 3.96
--------- -------- --------
Total From Investment Operations ........ 3.04 (5.51) 4.37
--------- -------- --------
Distributions
From Net Investment Income .............. (1.05) (1.23) --
From Net Realized Gains on
Investment Transactions ................. -- -- --
In Excess of Net Realized Gains ......... -- (0.31) --
--------- -------- --------
Total Distributions ..................... (1.05) (1.54) --
--------- -------- --------
Reverse Share Split ....................... 1.05 1.54 --
--------- -------- --------
Net Asset Value, End of Period ............ $29.17 $26.13 $31.64
========= ======== ========
Total Return(3) ......................... 11.63% (17.41)% 16.02%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ..................... 0.84% 0.84% 0.84%(4)
Ratio of Net Investment Income
to Average Net Assets ..................... 5.39% 5.00% 4.37%(4)
Portfolio Turnover Rate ................... 52% 54% 52%
Net Assets, End of Period
(in thousands) ............................ $1,058 $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.
50 1-800-345-2021 See Notes to Financial Statements
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Shareholders and Trustees 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 Target Maturities Trust 2000
Fund, the Target Maturities Trust 2005 Fund, the Target Maturities Trust 2010
Fund, the Target Maturities Trust 2015 Fund, the Target Maturities Trust 2020
Fund, and the Target Maturities Trust 2025 Fund (the "Funds") at September 30,
2000, and the results of their operations for the year then ended, the changes
in net assets for the two years in the period then ended, and the financial
highlights for the three years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. The
financial highlights for each of the two years in the period ended September 30,
1997, for the 2000, 2005, 2010, 2015 and 2020 Funds, and for the two years in
the period ended September 30, 1997, for 2025 Fund, were audited by other
auditors, whose report, dated November 3, 1997, expressed an unqualified opinion
on those statements. 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. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Kansas City, Missouri
November 8, 2000
www.americancentury.com 51
Share Class and Retirement Account Information
--------------------------------------------------------------------------------
SHARE CLASSES
Two classes of shares are authorized for sale by the funds: 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 tax 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. Visit our Web site
(www.americancentury.com) or call us 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.
52 1-800-345-2021
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 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
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.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Managers
JEREMY FLETCHER
DAVE SCHROEDER
www.americancentury.com 53
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 total returns, please refer to the "Financial
Highlights" on pages 39-51.
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 (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.
54 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
(Continued)
* 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.
CATS (CERTIFICATES OF ACCRUAL OF TREASURY SECURITIES) -- issued by Salomon
Brothers.
* BECCS -- principal zeros that have been converted from physical delivery to
wirable (i.e., able to be transferred electronically) form.
FUND CLASSIFICATIONS
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.
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.
* 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.
www.americancentury.com 55
Notes
--------------------------------------------------------------------------------
56 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
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
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
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
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. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
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]
Who We Are
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, and offer a range of services
designed to make investing easy and convenient.
For four decades, American Century has been a leader in performance, service
and innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over
the Internet, we have been committed to building long-term relationships and
to helping investors achieve their dreams.
In a very real sense, investors put their futures in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: WE SUCCEED ONLY IF OUR INVESTORS SUCCEED.
[left margin]
[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 PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-ANN-22593 (c)2000 American Century Services Corporation
