--------------------------------------------------------------------------------
March 31, 2000
A M E R I C A N C E N T U R Y
SemiAnnual Report
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Target Maturities Trust:
2000
2005
2010
2015
2020
2025
[LOGO]
AMERICAN
CENTURY(R)
<PAGE>
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)
--------------------------------------------------------------------------------
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funds classified by objective and risk.
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<PAGE>
Our Message to You
--------------------------------------------------------------------------------
[PHOTO OMITTED]
[Photos of James E. Stowers III, seated, with James E. Stowers, Jr.]
Six months ago, the Federal Reserve had just raised short-term interest
rates twice, and we were preparing for more rate increases, higher yields, and
lower bond prices. In fact, that's how the fourth quarter of 1999 played out.
But the first quarter of 2000 stood conventional bond wisdom on its head.
Despite two more Fed interest rate hikes and strong economic growth during the
quarter, zero-coupon Treasury bonds and the American Century Target funds posted
strong returns through March 31, 2000. In this report, our Target investment
management team will tell you how declining issuance and buy-backs of existing
bonds helped Treasury securities overcome what normally would have been a
hostile bond environment.
Within the next year, the Target: 2000 fund will mature. It will be the
third Target fund to reach maturity, following in the footsteps of the 1990 and
1995 portfolios. Target: 2000 shareholders will receive a reminder and further
details about the liquidation later this year, including instructions for
handling fund proceeds.
Besides serving the nearly two million investors who look to American
Century for investment management, we also have an obligation to the 3,000
people who work on your behalf -- to create a positive, safe, and productive
work environment for American Century staff. This commitment to our belief that
"we're only as good as the way we treat our most junior team members" was
recognized and rewarded in 1999 when American Century ranked in the top 40 of
Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly -- acknowledgements like this
allow us to recruit talented and dedicated people, from service representatives
to investment professionals. This intellectual capital is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/ James E. Stowers, Jr.
James E. Stowers, Jr.
Chairman of the Board and Founder
/s/ James E. Stowers III
James E. Stowers III
Vice Chairman of the Board and
Chief Executive Officer
Table of Contents
Report Highlights ....................................................... 2
Market Perspective ...................................................... 4
Target: 2000
Performance Information ................................................. 5
Management Q&A .......................................................... 6
Schedule of Investments ................................................. 8
Target: 2005
Performance Information ................................................. 9
Management Q&A .......................................................... 10
Schedule of Investments ................................................. 12
Target: 2010
Performance Information ................................................. 13
Management Q&A .......................................................... 14
Schedule of Investments ................................................. 16
Target: 2015
Performance Information ................................................. 17
Management Q&A .......................................................... 18
Schedule of Investments ................................................. 20
Target: 2020
Performance Information ................................................. 21
Management Q&A .......................................................... 22
Schedule of Investments ................................................. 24
Target: 2025
Performance Information ................................................. 25
Management Q&A .......................................................... 26
Schedule of Investments ................................................. 28
Financial Statements
Statements of Assets and
Liabilities .......................................................... 29
Statements of Operations ................................................ 31
Statements of Changes
in Net Assets ........................................................ 33
Notes to Financial
Statements ........................................................... 35
Financial Highlights .................................................... 40
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
<PAGE>
Report Highlights
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Target: 2000(1)
(BTMTX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ...................... 2.13(2)
1 Year ........................ 3.79%
Inception Date: 3/25/85
--------------------------------------------------------------------------------
Net Assets: $184.5 million(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Target: 2005(1)
(BTFIX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ...................... 1.24%(2)
1 Year ........................ -0.41%
Inception Date: 3/25/85
--------------------------------------------------------------------------------
Net Assets: $293.4 million(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Target: 2010(1)
(BTTNX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ...................... 2.98%(2)
1 Year ........................ -1.20%
Inception Date: 3/25/85
--------------------------------------------------------------------------------
Net Assets: $217.3 million(3)
--------------------------------------------------------------------------------
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 5, 9, and 13. Investment terms are defined in the
Glossary on pages 54-55.
Market Perspective
o Zero-coupon Treasury bonds produced solid returns during the six months
ended March 31, 2000.
o Short-term yields rose after strong economic growth led the Federal
Reserve to raise interest rates three times during the six-month period.
o Longer-term yields fell on expectations of reduced supply -- the U.S.
Treasury cut back issuance of new bonds and began a program to buy back
existing bonds.
o The end result was an unusual situation -- an inverted yield curve,
meaning short-term Treasury bond yields were higher than long-term yields.
o Going forward, we expect more interest rate increases by the Fed, which
will likely push bond yields higher across the board.
o We think the Treasury buy-back will have less of an impact on the bond
market later in the year.
Target: 2000
o The fund produced a positive return during the six-month period.
o About 20% of the fund's zero-coupon bonds matured in the past six months.
The proceeds were invested primarily in STRIPS maturing in November 2000.
o The portfolio will be liquidated within the next year; further details
will be forthcoming in a mailing to shareholders.
o The fund now owns a Treasury note, its first non-zero-coupon bond. The
note, which matures in December, offered a very attractive yield.
o About 40% of the fund's holdings mature in 2001, and we'll look to sell
those to meet cash outflows in the coming months.
Target: 2005
o The fund produced a modestly positive return during the six-month period.
o Shareholders withdrew about a third of the fund's assets, and we sold
STRIPS to meet these withdrawals.
o The portfolio's weighted average maturity date lengthened during the past
six months because many of the STRIPS sold to meet withdrawals matured in
mid-2005.
o Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
Target: 2010
o The fund produced a solid gain during the six-month period.
o However, the fund underperformed its STRIPS benchmark because of a heavy
weighting in REFCORPs, which severely lagged STRIPS.
o Although REFCORPs are backed by the Treasury, they are technically
government agency bonds, so their lagging performance mirrored that of
other agency bonds.
o We added some receipt zeros maturing in 2009 to the portfolio, which
shortened the fund's weighted average maturity date.
o Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
2 1-800-345-2021
<PAGE>
Report Highlights
--------------------------------------------------------------------------------
(Continued)
Target: 2015
o The fund produced a solid gain during the six-month period.
o However, the fund underperformed its STRIPS benchmark because of a heavy
weighting in REFCORPs, which severely lagged STRIPS.
o Although REFCORPs are backed by the Treasury, they are technically
government agency bonds, so their lagging performance mirrored that of
other agency bonds.
o Shareholders withdrew about a third of the fund's assets, and we sold
STRIPS to meet these withdrawals.
o Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
Target: 2020
o The fund produced strong gains during the six-month period.
o However, the fund underperformed its STRIPS benchmark because of a heavy
weighting in REFCORPs, which severely lagged STRIPS.
o Although REFCORPs are backed by the Treasury, they are technically
government agency bonds, so their lagging performance mirrored that of
other agency bonds.
o Shareholders withdrew about $30 million from the portfolio, and we sold
STRIPS to meet these withdrawals.
o Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
Target: 2025
o The fund produced strong gains during the six-month period.
o However, the fund underperformed its STRIPS benchmark because of a small
weighting in REFCORPs, which severely lagged STRIPS.
o Although REFCORPs are backed by the Treasury, they are technically
government agency bonds, so their lagging performance mirrored that of
other agency bonds.
o We added a few REFCORPs to the portfolio to take advantage of their higher
yields, but supply is limited in this maturity sector.
o We made some adjustments within our STRIPS holdings that added yield
without changing the fund's weighted average maturity date.
o Looking ahead, we will look for opportunities to add value through
adjustments to the mix of zeros in the portfolio.
--------------------------------------------------------------------------------
Target: 2015(1)
(BTFTX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ..................... 6.39%(2)
1 Year ....................... 0.66%
Inception Date: 9/1/86
--------------------------------------------------------------------------------
Net Assets: $131.5 million(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Target: 2020(1)
(BTTTX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ..................... 10.16%(2)
1 Year ....................... 2.18%
Inception Date: 12/29/89
--------------------------------------------------------------------------------
Net Assets: $262.5 million(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Target: 2025(1)
(BTTRX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months ..................... 11.78%(2)
1 Year ....................... 4.31%
Inception Date: 2/15/96
--------------------------------------------------------------------------------
Net Assets: $720.9 million(3)
--------------------------------------------------------------------------------
(1) Investor Class.
(2) Not annualized.
(3) Includes Investor and Advisor classes.
See Total Returns on pages 17, 21, and 25. Investment terms are defined in the
Glossary on pages 54-55.
www.americancentury.com 3
<PAGE>
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
"Divergent yield movements created an unusual situation in the bond market known
as an inverted yield curve."
Yield Curve for Treasury Zeros
09/30/1999 03/31/2000
'1 5.34 6.09
5.496 6.23
5.652 6.31
5.808 6.35
'5 5.964 6.38
6.12 6.36
6.182 6.34
6.244 6.33
6.306 6.32
'10 6.368 6.31
6.43 6.3
6.462 6.28
6.494 6.27
6.526 6.25
'15 6.558 6.23
6.59 6.21
6.605 6.17
6.6 6.15
6.59 6.13
'20 6.59 6.1
6.59 6.08
6.536 6.05
6.482 6
6.428 5.99
'25 6.374 5.95
6.32 5.9
6.293 5.87
6.265 5.81
6.238 5.77
'30 6.21 5.73
Zero-Coupon Treasury Bond
Returns (for the six months ended 3/31/00)*
Coupon STRIPS maturing 11/15/00 ............................. 2.37%
Coupon STRIPS maturing 11/15/05 ............................. 1.71%
Coupon STRIPS maturing 11/15/10 ............................. 4.46%
Coupon STRIPS maturing 11/15/15 ............................. 9.18%
Coupon STRIPS maturing 11/15/20 ............................. 14.40%
Coupon STRIPS maturing 11/15/25 ............................. 13.39%
* Not annualized.
Source: Bloomberg Financial Markets
[PHOTO OMITTED]
[Photo of Randall W. Merk, chief investment officer of fixed income at American
Century]
Performance Overview
Zero-coupon Treasury bonds (zeros) produced solid returns during the six
months ended March 31, 2000. Short-term zeros posted modest gains despite higher
short-term interest rates; in contrast, the yields of longer-term zeros fell,
resulting in returns ranging from 5-15% (see the table at left).
Inversion Layer
These divergent yield movements created an unusual situation in the bond
market known as an "inverted yield curve." Ordinarily, longer-term bonds have
higher yields than short-term bonds to compensate for the longer time
commitment. But by the end of March, the yield on a 30-year Treasury zero was
lower than the yields of two-year, five-year, and 10-year zeros (see the graph
at left).
What caused this yield inversion? It usually happens when the Federal
Reserve is trying to keep the economy and inflation under control by
aggressively raising short-term interest rates, pushing them higher than
long-term rates.
These elements were present in the past six months. The U.S. economy grew
at an annual rate of more than 7% in the fourth quarter of 1999 -- the strongest
quarter in nearly 16 years -- and growth in the first quarter of 2000 was also
healthy. On top of that, inflation increased to a 3.8% annual rate during the
six-month period, primarily because of soaring oil prices.
In response, the Fed raised short-term rates three times. These rate hikes
caused the yields of short-term zeros -- those maturing in five years or less --
to rise 40-60 basis points (0.40-0.60%).
Buying Back Bonds
Despite the Fed's efforts, longer-term zero yields also had to come down
to produce the yield inversion.
Long-term zero yields fell because of expectations of reduced supply in
the Treasury market. The federal budget surplus has given the Treasury the
opportunity to reduce the public debt. One way to do this was to cut back new
issuance of Treasury bonds, especially longer-term ones like the 30-year
Treasury bond.
In addition, the Treasury began a bond buy-back program in March. The
Treasury will periodically buy back its own bonds, mainly those with longer
maturities, at market prices. The amounts will depend on the budget surplus and
tax receipts, but the Treasury has projected $30 billion in buy-backs for 2000.
As a result, long-term bond investors ignored concerns about inflation and
the economy and instead focused exclusively on the expected supply shortage.
When the supply of any product shrinks, prices tend to go up, and when bond
prices go up, bond yields fall. By the end of March, the yields on zeros
maturing in 15 years or more had fallen 35-50 basis points (see the graph).
4 1-800-345-2021
<PAGE>
Target: 2000 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Investor Class (inception 3/25/85) Advisor Class (inception 8/20/98)
--------------------------------------------------------------------------------------------------------------------
Target Maturities 11/15/00 Maturity Merrill Lynch Long- Target Maturities 11/15/00 Maturity Merrill Lynch Long-
Trust: 2000 STRIPS Issue Term Treasury Index Trust: 2000 STRIPS Issue Term Treasury Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) ..... 2.13% 2.37% 5.71% 2.00% 2.37% 5.71%
1 Year .......... 3.79% 4.29% 3.00% 3.52% 4.29% 3.00%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------------------------
3 Years ......... 6.36% 6.88% 9.94% -- -- --
5 Years ......... 6.85% 7.33% 9.41% -- -- --
10 Years ........ 8.71% 9.18% 9.87% -- -- --
Life of Fund .... 11.36% 12.61%(2) 11.33%(2) 4.26% 4.50%(3) 0.80%(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 more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over 10 Years [Mountain Graph Omitted]
Value on 3/31/00
Target: 2000 $23,053
Merrill Lynch Long-Term Treasury Index $25,634
11/15/00 STRIPS Issue $24,073
Merrill Lynch
Long-Term 11/15/00
Target: 2000 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
03/31/1990 $10,000 $10,000 $10,000
03/31/1991 $11,298 $11,305 $11,381
03/31/1992 $12,762 $12,666 $12,880
03/31/1993 $15,609 $15,133 $15,836
03/31/1994 $15,964 $15,659 $16,208
03/31/1995 $16,546 $16,351 $16,899
03/31/1996 $18,481 $18,762 $18,952
03/31/1997 $19,152 $19,292 $19,717
03/31/1998 $20,906 $23,244 $21,622
03/31/1999 $22,204 $24,888 $23,082
03/31/2000 $23,053 $25,634 $24,073
$10,000 investment made 3/31/90
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.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Target: 2000
Anticipated Value
Actual Share Price at Maturity (Estimated
(Historical) $98.16 Share Price) $101.95
'85 26.77 100.00
35.44 100.00
33.33 98.69
37.16 97.43
44.52 96.21
'90 47.33 97.59
57.11 98.91
61.947 101.16
71.526 100.708
66.598 100.829
'95 80.408 100.992
79.947 101.102
86.06 101.13
93.78 101.78
94.58 101.71
'00 96.11 101.51
98.16 101.95
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 5
<PAGE>
Target: 2000 -- Q&A
--------------------------------------------------------------------------------
"The fund's zero-coupon bonds have started to mature."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 35 56
Anticipated Growth Rate 5.71% 5.08%
Weighted Average Maturity Date 12/3/00 11/3/00
Anticipated Value at Maturity (AVM)(1) $101.95 $101.51
Expense Ratio (for Investor Class) 0.59%(2) 0.59%
(1) See graph on page 5.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
[PHOTOS OMITTED]
An interview with Jeremy Fletcher and Dave Schroeder, portfolio managers
on the Target Maturities Trust investment team.
How did the fund perform?
Target: 2000 posted a positive return. For the six months ended March 31,
2000, the portfolio returned 2.13%, compared with the 2.37% 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 is now in its "target" year. What does that mean for the portfolio?
It means that the fund's zero-coupon bonds (zeros) have started to mature.
We had a small amount of zeros mature in November 1999 and January 2000, and a
larger amount -- around 15% of the portfolio -- in February 2000.
We've been investing most of the proceeds from these maturing bonds in
principal STRIPS maturing in November 2000. The principal zeros offered anywhere
from 20 to 40 basis points (0.20-0.40%) more yield than coupon STRIPS with
identical maturities.
We chose a November maturity because it's close to the expected
liquidation date of the portfolio.
When will the Target: 2000 portfolio be liquidated?
The liquidation will occur around the end of the year. We'll be sending
out further details about the closure of the fund -- including the specific date
of liquidation -- to shareholders in the coming months.
Is the impending liquidation the reason that the portfolio's weighted average
maturity (WAM) date is now in December?
Partly. But the main reason that the WAM date extended from November 3 to
December 3, 2000, is the fund's maturing zeros. As they disappear from the
portfolio, the WAM date naturally lengthens.
To counteract this, we've been selling some of the fund's zeros that
mature in 2001 to meet modest cash outflows over the past six months. That's
helped balance out the maturities and keep the WAM date from extending further.
In the last report, you mentioned the possibility of investing in Treasury
securities other than zeros. Have you done that?
We bought a Treasury note recently that matures at the end of the year. It
had a very attractive yield and a maturity date that was close to the fund's WAM
date. We also like this investment because it gives us more flexibility.
Treasury notes are very liquid, so we can sell it easily if we need to adjust
the WAM date or meet shareholder redemptions.
* All fund returns referenced in this interview are for Investor Class shares.
6 1-800-345-2021
<PAGE>
Target: 2000 -- Q&A
--------------------------------------------------------------------------------
(Continued)
Looking ahead, what's your outlook for short-term U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in supply.
Because the supply reductions are expected to occur among longer-term
Treasurys, short-term Treasury yields have been more responsive to economic
conditions, and those conditions suggest higher short-term rates going forward.
In the last six months, the economy grew at an annual rate of more than
6%. That's about twice as fast as the Federal Reserve would like to see. In
addition, inflation is rising at a faster rate than it has in the past several
years. Even though that's mainly due to the high price of oil, we're seeing
prices increase more rapidly in other areas as well, especially the service
sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What are your plans for Target: 2000 going forward?
We'll continue to focus on the upcoming liquidation of the portfolio. That
means keeping the fund's WAM date in December and reinvesting the proceeds from
maturing zeros in Treasury securities maturing in late 2000.
The fund still has about 40% of its assets invested in zeros that mature
in 2001. As investors inevitably begin to cash out of the fund during the rest
of this year, we intend to sell these zeros to meet the outflows. As we get
closer to the liquidation date, we'll look to sell any 2001-maturity zeros that
are left in the portfolio and shift the proceeds into Treasury securities
maturing in late 2000.
We'll also continue to explore Treasury bills and other short-term
Treasury securities as possible fund investments. We're more likely to use these
investments as we approach the liquidation date.
"The Fed will probably raise short-term interest rates again in the coming
months."
[The following table was depicted as a pie chart in the printed material]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o TRs 40%
o STRIPS 31%
o REFCORPs 17%
o Other 12%
[The following table was depicted as a pie chart in the printed material]
As of September 30, 1999
--------------------------------------------------------------------------------
o TRs 49%
o STRIPS 25%
o REFCORPs 14%
o Other 8%
o BECCs 4%
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 7
<PAGE>
Target: 2000 -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amout Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 77.6%
--------------------------------------------------------------------------------
$11,600,000 STRIPS -- PRINCIPAL, 4.88%,
5/15/00 $ 11,523,546
645,525 TBR, 8.62%, 5/15/00 640,907
849,000 TBR, 8.72%, 5/15/00 842,926
13,000 TIGR, 5.05%, 5/15/00 12,908
5,000,000 CUBES, 5.50%, 8/15/00 4,892,388
4,300,000 STRIPS -- PRINCIPAL, 7.86%,
8/15/00 4,210,790
894,045 TBR, 8.72%, 8/15/00 874,519
15,427,980 TR, 4.89%, 8/15/00 15,095,389
570,000 STRIPS -- COUPON, 4.36%,
11/15/00 549,078
33,391,000 STRIPS -- PRINCIPAL, 6.89%,
11/15/00 32,165,392
289,250 TBR, 5.63%, 11/15/00 278,118
250,000 TR, 5.98%, 11/15/00 240,494
29,600 TR, 8.49%, 11/15/00 28,474
843 TR, 9.43%, 11/15/00 811
75,000 CATS, 5.34%, 2/15/01 71,044
1,700,000 STRIPS -- PRINCIPAL, 5.57%,
2/15/01 1,610,133
87,280 TBR, 5.63%, 2/15/01 82,614
1,658,000 TIGR, 5.52%, 2/15/01 1,570,023
1,631,000 TIGR, 5.52%, 2/15/01 1,544,456
1,745,000 TIGR, 5.64%, 2/15/01 1,652,407
2,790,000 TR, 5.52%, 2/15/01 2,642,624
1,143,650 TR, 5.52%, 2/15/01 1,083,239
1,952,980 TR, 5.81%, 2/15/01 1,849,818
2,343,928 TR, 5.86%, 2/15/01 2,220,115
9,464,850 TR, 6.33%, 2/15/01 8,964,888
30,177,000 TR, 6.52%, 2/15/01 28,582,959
44,000 TIGR, 5.39%, 5/15/01 40,952
8,235,000 STRIPS -- PRINCIPAL, 7.44%,
8/15/01 7,546,456
6,320,000 TR, 4.84%, 8/15/01 5,784,288
7,060,020 TR, 5.38%, 8/15/01 6,461,581
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 143,063,337
------------
(Cost $143,188,067)
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 17.0%
--------------------------------------------------------------------------------
9,442,000 REFCORP STRIPS -- COUPON,
5.57%, 4/15/00 9,423,508
138,000 REFCORP STRIPS -- COUPON,
5.82%, 7/15/00 135,736
20,509,000 REFCORP STRIPS -- COUPON,
5.96%, 10/15/00 19,830,009
2,000,000 REFCORP STRIPS -- COUPON,
6.46%, 1/15/01 1,905,044
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 31,294,297
------------
(Cost $31,331,872)
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 5.4%
--------------------------------------------------------------------------------
10,000,000 U.S. Treasury Notes, 4.625%,
12/31/00 9,875,301
------------
(Cost $9,879,529)
TOTAL INVESTMENT SECURITIES -- 100.0% $184,232,935
============
(Cost $184,399,468)
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.
8 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2005 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Investor Class (inception 3/25/85) Advisor Class (inception 8/3/98)
-----------------------------------------------------------------------------------------------------------------------
Target Maturities 11/15/05 Maturity Merrill Lynch Long- Target Maturities 11/15/05 Maturity Merrill Lynch Long-
Trust: 2005 STRIPS Issue Term Treasury Index Trust: 2005 STRIPS Issue Term Treasury Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) .... 1.24% 1.71% 5.71% 1.12% 1.71% 5.71%
1 Year ......... -0.41% -0.08% 3.00% -0.62% -0.08% 3.00%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------------------------
3 Years ........ 7.85% 8.43% 9.94% -- -- --
5 Years ........ 8.27% 8.84% 9.41% -- -- --
10 Years ....... 10.17% 10.52% 9.87% -- -- --
Life of Fund ... 12.90% 14.40%(2) 11.33%(2) 1.89% 3.06% 3.49%
</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.
See pages 52-54 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over 10 Years [Mountain Graph Omitted]
Value on 3/31/00
Target: 2005 $26,355
Merrill Lynch Long-Term Treasury Index $25,634
11/15/05 STRIPS Issue $27,190
Merrill Lynch
Long-Term 11/15/05
Target: 2005 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
03/31/1990 $10,000 $10,000 $10,000
03/31/1991 $11,371 $11,305 $11,402
03/31/1992 $12,866 $12,666 $12,916
03/31/1993 $16,185 $15,133 $16,318
03/31/1994 $16,816 $15,659 $16,856
03/31/1995 $17,709 $16,351 $17,801
03/31/1996 $20,531 $18,762 $20,785
03/31/1997 $21,002 $19,292 $21,329
03/31/1998 $24,582 $23,244 $25,066
03/31/1999 $26,455 $24,888 $27,212
03/31/2000 $26,355 $25,634 $27,190
$10,000 investment made 3/31/90
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.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Target: 2005
Anticipated Value
Actual Share Price at Maturity (Estimated
(Historical) $73.45 Share Price) $102.03
'85 16.69 98.00
23.74 97.00
21.28 94.59
24.36 93.66
30.18 93.14
'90 31.26 97.25
37.97 99.29
41.597 99.625
50.575 100.087
46.066 100.516
'95 61.108 100.34
57.829 100.707
64.54 100.85
76.72 101.53
73.75 101.07
'00 72.55 101.28
73.45 102.03
'05
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 9
<PAGE>
Target: 2005 -- Q&A
--------------------------------------------------------------------------------
"Cash outflows were the big story. Investors pulled out more than a third of the
fund's assets."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 38 45
Anticipated Growth
Rate 5.99% 5.64%
Weighted Average
Maturity Date 10/25/05 9/30/05
Anticipated Value at
Maturity (AVM)(1) $102.03 $101.28
Expense Ratio (for
Investor Class) 0.59%(2) 0.59%
(1) See graph on page 9.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
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: 2005 posted a modestly positive return. For the six months ended
March 31, 2000, the portfolio returned 1.24%, compared with the 1.71% 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.
What changes did you make to the portfolio over the past six months?
Cash outflows were the big story. Investors pulled out more than a third
of the fund's assets -- around $200 million.
To meet these shareholder redemptions, we sold STRIPS, which are the
easiest zero-coupon Treasury bonds (zeros) to buy and sell. This cut the fund's
STRIPS position in half, from 54% of fund assets six months ago to 28% by the
end of March (see the chart on page 11).
Did those cash outflows have any adverse effect on the fund's performance?
Not at all. The withdrawals didn't occur all at the same time, so we were
able to sell the fund's holdings gradually. That helped prevent any
disadvantages that might have cropped up if we had to sell the whole amount at
once.
However, the fund has a little less liquidity than it did six months ago.
The most liquid (easiest to buy and sell) Treasury zeros are STRIPS and
REFCORPs, and they currently make up about a third of the portfolio, down from
almost two-thirds six months ago.
How did these changes affect the portfolio's weighted average maturity (WAM)
date?
We tried to balance our STRIPS sales so that they had as little impact on
the WAM date as possible. Nonetheless, the WAM date lengthened from September 30
to October 25, 2005.
We mainly sold from the fund's largest holdings, which included STRIPS
maturing in May 2005, August 2005, and February 2006. Because most of them
matured in mid-2005, the WAM date naturally lengthened as these zeros
disappeared from the portfolio.
Looking ahead, what's your outlook for U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in the supply of Treasury securities.
Because the supply reductions are expected to occur among longer-term
Treasurys, short-term Treasury yields have been more responsive to economic
conditions, and those conditions suggest higher short-term rates going forward.
In the last six months, the economy grew at an annual rate of more than
6%. That's about twice as fast as the Federal Reserve would like to see. In
addition, inflation is rising at a faster rate than it has in the past several
years. Even
* All fund returns referenced in this interview are for Investor Class shares.
10 1-800-345-2021
<PAGE>
Target: 2005 --Q&A
--------------------------------------------------------------------------------
(Continued)
though that's mainly due to the high price of oil, we're seeing prices increase
more rapidly in other areas as well, especially the service sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What about the supply reduction?
The Treasury plans to buy back longer-term Treasury bonds on several
occasions in the next few months. By July, the Treasury will probably be close
to completing the $30 billion in buy-backs projected for this year.
For the most part, though, these changes have already been priced into the
market. Once the buy-backs actually happen, we expect the longer-term part of
the Treasury market to shift its attention away from supply and focus more on
the economic situation.
As a result, we think that longer-term Treasury yields will rise even more
than short-term yields over the next six months. We wouldn't be surprised to see
the Treasury yield curve still inverted six months from now, but we expect it to
be less inverted than it is currently.
What are your plans for Target: 2005 going forward?
As always, we'll position the fund to closely track the performance of its
benchmark. That means keeping the portfolio's WAM date near the November 15,
2005 maturity date of the benchmark.
We'll also look to adjust the mix of zeros in the portfolio whenever we
see opportunities to add value and increase the fund's anticipated value at
maturity. In the near future, "adding value" may also include improving the
liquidity of the portfolio.
"The Fed will probably raise short-term interest rates again in the coming
months."
[The following table was depicted as a pie chart in the printed material]
Types of Investments in
the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o BECCs 41%
o STRIPS 28%
o TRs 22%
o REFCORPs 6%
o Other 3%
[The following table was depicted as a pie chart in the printed material]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o BECCs 23%
o STRIPS 54%
o TRs 13%
o REFCORPs 7%
o Other 3%
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 11
<PAGE>
Target: 2005--Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 94.5%
--------------------------------------------------------------------------------
$15,200,000 BECC, 6.11%, 5/15/04 $ 11,596,228
258,000 ETR, 5.70%, 5/15/04 196,283
3,000,000 BECC, 5.12%, 11/15/04 2,214,703
693,750 CUBES, 6.56%, 11/15/04 513,754
87,000 ETR, 5.96%, 11/15/04 64,026
2,517,000 TIGR, 4.75%, 11/15/04 1,857,306
27,000 TIGR, 5.90%, 11/15/04 19,923
16,000,000 TR, 4.75%, 11/15/04 11,822,304
50,000 TR, 6.24%, 11/15/04 36,945
7,200,000 BECC, 6.95%, 2/15/05 5,223,984
500,000 STRIPS -- COUPON, 6.37%,
2/15/05 367,770
3,456,420 TR, 5.45%, 2/15/05 2,510,181
49,000,000 BECC, 5.83%, 5/15/05 34,986,164
4,615,672 CUBES, 8.59%, 5/15/05 3,307,046
1,000,000 ETR, 6.67%, 5/15/05 711,534
25,059,000 STRIPS -- PRINCIPAL, 7.00%,
5/15/05 18,088,214
428,750 TBR, 9.37%, 5/15/05 305,372
6,450,000 TR, 8.38%, 5/15/05 4,591,667
37,420,000 STRIPS -- PRINCIPAL, 6.90%,
8/15/05 26,586,053
7,000,020 TR, 4.58%, 8/15/05 4,920,646
30,100,000 BECC, 6.15%, 11/15/05 20,823,645
1,200,000 LION, 6.41%, 11/15/05 826,129
14,600,000 STRIPS -- COUPON, 6.35%,
11/15/05 10,261,054
2,247,000 TBR, 8.45%, 11/15/05 1,550,292
32,056,000 STRIPS -- COUPON, 7.38%,
2/15/06 22,168,241
1,003,875 TR, 5.54%, 2/15/06 683,656
23,678,120 TR, 7.75%, 2/15/06 16,125,211
45,420,000 BECC, 5.44%, 5/15/06 30,408,147
5,098,000 STRIPS -- COUPON, 7.46%,
5/15/06 3,472,173
410,000 TBR, 8.46%, 5/15/06 273,679
36,264,000 TR, 5.29%, 5/15/06 24,192,271
1,299,780 TR, 8.86%, 8/15/06 857,195
24,125,000 BECC, 5.50%, 11/15/06 15,635,137
100,000 U.S. Treasury Corpus, 5.38%,
11/15/06 64,437
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 277,261,370
------------
(Cost $283,137,389)
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 5.5%
--------------------------------------------------------------------------------
1,000,000 REFCORP STRIPS -- COUPON,
6.37%, 10/15/04 747,320
2,000,000 REFCORP STRIPS -- COUPON,
5.84%, 4/15/05 1,435,096
661,000 REFCORP STRIPS -- COUPON,
6.43%, 10/15/05 459,529
20,319,000 REFCORP STRIPS -- COUPON,
6.18%, 7/15/06 13,450,482
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 16,092,427
------------
(Cost $16,612,424)
TOTAL INVESTMENT SECURITIES -- 100.0% $293,353,797
============
(Cost $299,749,813)
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.
12 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2010 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Investor Class (inception 3/25/85) Advisor Class (inception 10/20/98)
---------------------------------------------------------------------------------------------------------------------
Target Maturities 11/15/10 Maturity Merrill Lynch Long- Target Maturities 11/15/10 Maturity Merrill Lynch Long-
Trust: 2010 STRIPS Issue Term Treasury Index Trust: 2010 STRIPS Issue Term Treasury Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) ..... 2.98% 4.46% 5.71% 2.89% 4.46% 5.71%
1 Year .......... -1.20% 0.60% 3.00% -1.43% 0.60% 3.00%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------------------------
3 Years ......... 9.64% 10.77% 9.94% -- -- --
5 Years ......... 9.88% 10.88% 9.41% -- -- --
10 Years ........ 11.13% 11.65% 9.87% -- -- --
Life of Fund .... 14.09% 15.56%(2) 11.33%(2) -4.15% -3.02%(3) -0.52%(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 more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over 10 Years [Mountain Graph Omitted]
Value on 3/31/00
Target: 2010 $28,729
Merrill Lynch Long-Term Treasury Index $25,634
11/15/10 STRIPS Issue $30,111
Merrill Lynch
Long-Term 11/15/10
Target: 2010 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
03/31/1990 $10,000 $10,000 $10,000
03/31/1991 $11,437 $11,305 $11,286
03/31/1992 $12,847 $12,666 $12,771
03/31/1993 $16,223 $15,133 $16,141
03/31/1994 $17,164 $15,659 $17,127
03/31/1995 $17,928 $16,351 $17,968
03/31/1996 $21,354 $18,762 $21,640
03/31/1997 $21,790 $19,292 $22,153
03/31/1998 $27,070 $23,244 $27,677
03/31/1999 $29,070 $24,888 $29,930
03/31/2000 $28,729 $25,634 $30,111
$10,000 investment made 3/31/90
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.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Target: 2010
Anticipated Value
Actual Share Price at Maturity (Estimated
(Historical) $56.74 Share Price) $105.47
'85 11.43 97.00
17.65 97.00
14.96 95.27
17.31 97.13
22.16 96.66
'90 22.22 97.52
26.9 98.97
29.534 100.179
37.292 100.874
32.981 101.78
'95 46.864 101.788
42.474 102.529
49.16 103.4
61.98 104.85
57.43 105.5
'00 55.1 105.56
56.74 105.47
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 13
<PAGE>
Target: 2010 -- Q&A
--------------------------------------------------------------------------------
"REFCORPs, like other agency bonds, underperformed Treasury securities."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 19 18
Anticipated Growth Rate 5.97% 5.95%
Weighted Average Maturity Date 10/14/10 11/1/10
Anticipated Value at Maturity (AVM)(1) $105.47 $105.56
Expense Ratio (for Investor Class) 0.59%(2) 0.59%
(1) See graph on page 13.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
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 solid gains. For the six months ended March 31, 2000,
the portfolio returned 2.98%, compared with the 4.46% 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.
Even after taking expenses into account, the fund still underperformed its
benchmark by a wide margin. What happened?
It's a function of the fund's REFCORPs, which make up more than 60% of the
portfolio. REFCORPs severely underperformed STRIPS over the past six months.
The existing supply of longer-term Treasury bonds is expected to shrink
going forward, so demand for these securities -- including both ordinary bonds
and zero-coupon bonds (zeros) -- has been huge in recent months. That's pushed
longer-term Treasury yields lower.
In contrast, the yields of longer-term government agency bonds have been
relatively steady. As a result, the yield gap between Treasury and agency bonds
widened substantially, and Treasurys outperformed agency bonds by a healthy
margin.
Aren't REFCORPs essentially the same as STRIPS and other Treasury zeros?
We view them that way, but technically they're agency bonds. REFCORPs were
issued by the Resolution Funding Corporation, a government agency that issued
bonds between 1989 and 1992 to help the federal government liquidate the assets
of failed savings and loans. REFCORPs are secured and guaranteed by the
Treasury, and that's why they're appropriate investments for the Target funds.
But even though the Resolution Funding Corporation has the Treasury's
backing, the bond market tarred all agency bonds with the same broad brush. That
means REFCORPs, like other agency bonds, underperformed Treasury securities.
Six months ago, we found REFCORPs to be attractive when they offered
yields that were 20 basis points (0.20%) higher than STRIPS yields. By the end
of March, that yield spread stood at 40 basis points.
The good news is that this underperformance is just a short-term bump in
the road. It's a pay-me-now-or-pay-me-later proposition -- you may get lagging
returns now, but that also means you're getting higher yields. Over the long
term, we expect the higher yields of REFCORPs to boost the fund's overall
return.
* All fund returns referenced in this interview are for Investor Class shares.
14 1-800-345-2021
<PAGE>
Target: 2010 -- Q&A
--------------------------------------------------------------------------------
(Continued)
You added some receipt zeros to the Target: 2010 portfolio (see the charts at
right). What was the attraction?
Receipt zeros are Treasury zeros issued by various brokerage companies in
the 1980s. The longest-maturity receipt zeros mature in 2009, and they don't
trade very often in this part of the market. However, when they do, they usually
offer very attractive yields, so we're always on the lookout for opportunities
to buy receipt zeros.
In the last six months, we bought some CATS, which were originally issued
by Salomon Brothers, and added to our ETRs, which were originally issued by Dean
Witter.
These bonds provided a great yield pick-up for the fund, but because they
all mature in 2009, they caused the portfolio's weighted average maturity (WAM)
date to shorten from early November to mid-October 2010.
Looking ahead, what's your outlook for U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in the supply of Treasury securities.
Economic conditions are not favorable for bonds. In the last six months,
the economy grew at an annual rate of more than 6%. That's about twice as fast
as the Federal Reserve would like to see. In addition, inflation is rising at a
faster rate than it has in the past several years. Even though that's mainly due
to the high price of oil, we're seeing prices increase more rapidly in other
areas as well, especially the service sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What about longer-term Treasury yields?
This part of the market has been affected primarily by the supply
reduction. In addition to cutting back issuance of long-term bonds, the Treasury
plans to buy back longer-term Treasury bonds on several occasions in the next
few months. By July, the Treasury will probably be close to completing the $30
billion in buy-backs projected for this year.
For the most part, though, these changes have already been priced into the
market. Once the buy-backs actually happen, we expect the longer-term part of
the Treasury market to shift its attention away from supply and focus more on
the economic situation.
As a result, we think that longer-term Treasury yields will rise even more
than short-term yields over the next six months. We wouldn't be surprised to see
the Treasury yield curve still inverted six months from now, but we expect it to
be less inverted than it is currently.
What are your plans for Target: 2010 going forward?
As always, we'll position the fund to closely track the performance of its
benchmark. That means keeping the portfolio's WAM date near the November 15,
2010 maturity date of the benchmark.
We'll also look to adjust the mix of zeros in the portfolio whenever we
see opportunities to add value and increase the fund's anticipated value at
maturity.
"We think that longer-term Treasury yields will rise even more than short-term
yields over the next six months."
[The following table was depicted as a pie chart in the printed material]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o REFCORPs 62%
o STRIPS 25%
o ETRs 11%
o CATS 2%
[The following table was depicted as a pie chart in the printed material]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o REFCORPs 60%
o STRIPS 34%
o ETRs 6%
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 15
<PAGE>
Target: 2010 -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 38.0%
--------------------------------------------------------------------------------
$42,520,000 ETR, 7.12%, 5/15/09 $ 23,256,970
6,000,000 CATS, 6.78%, 8/15/09 3,244,945
1,000,000 CATS, 6.79%, 11/15/09 532,121
11,500,000 STRIPS -- PRINCIPAL, 7.18%,
11/15/09 6,222,799
2,500,000 STRIPS -- COUPON, 6.27%,
2/15/10 1,350,349
587,000 STRIPS -- COUPON, 8.67%,
5/15/10 312,206
9,577,000 STRIPS -- COUPON, 7.38%,
8/15/10 5,013,973
7,839,000 STRIPS -- COUPON, 8.28%,
11/15/10 4,045,366
22,360,000 STRIPS -- COUPON, 8.90%,
2/15/11 11,364,678
13,000,000 STRIPS -- COUPON, 6.35%,
5/15/11 6,506,419
41,715,000 STRIPS -- COUPON, 6.72%,
8/15/11 20,563,404
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 82,413,230
------------
(Cost $76,400,378)
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 62.0%
--------------------------------------------------------------------------------
2,000,000 REFCORP STRIPS -- COUPON,
7.98%, 10/15/09 1,066,085
2,772,000 REFCORP STRIPS -- COUPON,
7.85%, 1/15/10 1,453,397
25,728,000 REFCORP STRIPS -- COUPON,
7.38%, 4/15/10 13,268,946
112,053,000 REFCORP STRIPS -- COUPON,
6.20%, 10/15/10 55,971,248
72,361,000 REFCORP STRIPS -- COUPON,
5.67%, 1/15/11 35,572,324
28,850,000 REFCORP STRIPS -- COUPON,
7.21%, 4/15/11 13,951,107
7,000,000 REFCORP STRIPS -- COUPON,
4.98%, 7/15/11 3,412,556
20,000,000 REFCORP STRIPS -- COUPON,
6.00%, 10/15/11 9,601,648
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 134,297,311
------------
(Cost $140,839,093)
TOTAL INVESTMENT SECURITIES -- 100.0% $216,710,541
============
(Cost $217,239,471)
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.
16 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2015 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Investor Class (inception 9/1/86) Advisor Class (inception 7/23/99)
---------------------------------------------------------------------------------------------------------------------
Target Maturities 11/15/15 Maturity Merrill Lynch Long- Target Maturities 11/15/15 Maturity Merrill Lynch Long-
Trust: 2015 STRIPS Issue Term Treasury Index Trust: 2015 STRIPS Issue Term Treasury Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) ..... 6.39% 9.18% 5.71% 6.28% 9.18% 5.71%
1 Year .......... 0.66% 3.73% 3.00% -- -- --
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------------------------
3 Years ......... 12.37% 13.84% 9.94% -- -- --
5 Years ......... 11.85% 12.99% 9.41% -- -- --
10 Years ........ 12.06% 12.77% 9.87% -- -- --
Life of Fund .... 9.99% 10.44%(2) 9.06%(2) 4.74%(1) 8.99%(1)(3) 6.08%(1)(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.
(2) Since 9/30/86, the date nearest the class's inception for which data are
available.
(3) Since 7/31/99, the date nearest the class's inception for which data are
available.
See pages 52-54 for more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over 10 Years [Mountain Graph Omitted]
Value on 3/31/00
Target: 2015 $31,235
Merrill Lynch Long-Term Treasury Index $25,634
11/15/15 STRIPS Issue $33,272
Merrill Lynch
Long-Term 11/15/15
Target: 2015 Treasury Index STRIPS Issue
DATE VALUE VALUE VALUE
03/31/1990 $10,000 $10,000 $10,000
03/31/1991 $11,259 $11,305 $11,323
03/31/1992 $12,745 $12,666 $12,734
03/31/1993 $15,882 $15,133 $15,979
03/31/1994 $17,259 $15,659 $17,420
03/31/1995 $17,839 $16,351 $18,068
03/31/1996 $21,636 $18,762 $22,123
03/31/1997 $22,004 $19,292 $22,549
03/31/1998 $29,369 $23,244 $30,311
03/31/1999 $31,020 $24,888 $32,075
03/31/2000 $31,235 $25,634 $33,272
$10,000 investment made 3/31/90
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.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Target: 2015
Anticipated Value
Actual Share Price at Maturity (Estimated
(Historical) $45.79 Share Price) $113.41
'86 14.24 101.00
11.37 102.86
12.63 102.75
16.86 101.77
'90 16.29 102.24
19.95 106.05
21.502 107.792
28.064 106.952
24.11 108.832
'95 36.819 109.462
31.962 110.109
38.34 110.52
49.87 112.63
45.49 112.52
'00 43.04 112.62
45.79 113.41
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 17
<PAGE>
Target: 2015 -- Q&A
--------------------------------------------------------------------------------
"REFCORPs, like other agency bonds, underperformed Treasury securities."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 13 13
Anticipated Growth Rate 5.89% 6.06%
Weighted Average Maturity Date 11/15/15 11/14/15
Anticipated Value at Maturity (AVM)(1) $113.41 $112.62
Expense Ratio (for Investor Class) 0.59%(2) 0.59%
(1) See graph on page 17.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
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 solid gains. For the six months ended March 31, 2000,
the portfolio returned 6.39%, compared with the 9.18% 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.
Even after taking expenses into account, the fund still underperformed its
benchmark by a wide margin. What happened?
It's a function of the fund's REFCORPs, which now make up more than 70% of
the portfolio. REFCORPs severely underperformed STRIPS over the past six months.
The existing supply of longer-term Treasury bonds is expected to shrink
going forward, so demand for these securities -- including both ordinary bonds
and zero-coupon bonds (zeros) -- has been huge in recent months. That's pushed
longer-term Treasury yields lower.
In contrast, the yields of longer-term government agency bonds have been
relatively steady. As a result, the yield gap between Treasury and agency bonds
widened substantially, and Treasurys outperformed agency bonds by a healthy
margin.
Aren't REFCORPs essentially the same as STRIPS and other Treasury zeros?
We view them that way, but technically they're agency bonds. REFCORPs were
issued by the Resolution Funding Corporation, a government agency that issued
bonds between 1989 and 1992 to help the federal government liquidate the assets
of failed savings and loans. REFCORPs are secured and guaranteed by the
Treasury, and that's why they're appropriate investments for the Target funds.
But even though the Resolution Funding Corporation has the Treasury's
backing, the bond market tarred all agency bonds with the same broad brush. That
means REFCORPs, like other agency bonds, underperformed Treasury securities.
Six months ago, we found REFCORPs to be attractive when they offered
yields that were 20 basis points (0.20%) higher than STRIPS yields. By the end
of March, that yield spread stood at 40 basis points.
The good news is that this underperformance is just a short-term bump in
the road. It's a pay-me-now-or-pay-me-later proposition -- you may get lagging
returns now, but that also means you're getting higher yields. Over the long
term, we expect the higher yields of REFCORPs to boost the fund's overall
return.
* All fund returns referenced in this interview are for Investor Class shares.
18 1-800-345-2021
<PAGE>
Target: 2015 -- Q&A
--------------------------------------------------------------------------------
(Continued)
Did REFCORPs grow to such a large percentage of the portfolio because you bought
more of them?
Not exactly. The real reason was that we sold STRIPS to meet heavy cash
outflows from the fund.
Investors pulled out more than a third of the fund's assets -- over $80
million -- in the past six months. To meet these shareholder redemptions, we
sold STRIPS, which are the easiest zeros to buy and sell. This cut the fund's
STRIPS position in half, from 60% of fund assets six months ago to 29% by the
end of March. The fund's percentage of REFCORPs rose accordingly.
Looking ahead, what's your outlook for U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in the supply of Treasury securities.
Economic conditions are not favorable for bonds. In the last six months,
the economy grew at an annual rate of more than 6%. That's about twice as fast
as the Federal Reserve would like to see. In addition, inflation is rising at a
faster rate than it has in the past several years. Even though that's mainly due
to the high price of oil, we're seeing prices increase more rapidly in other
areas as well, especially the service sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What about longer-term Treasury yields?
This part of the market has been affected primarily by the supply
reduction. In addition to cutting back issuance of long-term bonds, the Treasury
plans to buy back longer-term Treasury bonds on several occasions in the next
few months. By July, the Treasury will probably be close to completing the $30
billion in buy-backs projected for this year.
For the most part, though, these changes have already been priced into the
market. Once the buy-backs actually happen, we expect the longer-term part of
the Treasury market to shift its attention away from supply and focus more on
the economic situation.
As a result, we think that longer-term Treasury yields will rise even more
than short-term yields over the next six months. We wouldn't be surprised to see
the Treasury yield curve still inverted six months from now, but we expect it to
be less inverted than it is currently.
What are your plans for Target: 2015 going forward?
As always, we'll position the fund to closely track the performance of its
benchmark. That means keeping the portfolio's WAM date near the November 15,
2015 maturity date of the benchmark.
We'll also look to adjust the mix of zeros in the portfolio whenever we
see opportunities to add value and increase the fund's anticipated value at
maturity.
"We think that longer-term Treasury yields will rise even more than short-term
yields over the next six months."
[The following table was depicted as a pie chart in the printed material]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o REFCORPs 71%
o STRIPS 29%
[The following table was depicted as a pie chart in the printed material]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o REFCORPs 40%
o STRIPS 60%
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 19
<PAGE>
Target: 2015 -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 29.1%
--------------------------------------------------------------------------------
$12,350,000 STRIPS -- COUPON, 7.57%,
2/15/15 $ 4,935,526
14,408,000 STRIPS -- COUPON, 9.17%,
5/15/15 5,679,140
24,603,000 STRIPS -- COUPON, 8.33%,
8/15/15 9,554,981
12,481,000 STRIPS -- COUPON, 8.79%,
11/15/15 4,777,618
16,300,000 STRIPS -- COUPON, 8.49%,
2/15/16 6,157,465
17,700,000 STRIPS -- COUPON, 8.39%,
5/15/16 6,595,970
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 37,700,700
------------
(Cost $27,319,581)
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 70.9%
--------------------------------------------------------------------------------
39,310,000 REFCORP STRIPS -- COUPON,
6.92%, 1/15/15 14,956,067
28,560,000 REFCORP STRIPS -- COUPON,
8.45%, 4/15/15 10,705,627
42,568,000 REFCORP STRIPS -- COUPON,
7.74%, 7/15/15 15,709,643
36,151,000 REFCORP STRIPS -- COUPON,
8.24%, 10/15/15 13,135,701
3,447,000 REFCORP STRIPS -- COUPON,
6.75%, 1/15/16 1,235,060
47,591,000 REFCORP STRIPS -- COUPON,
7.51%, 7/15/16 16,532,354
57,742,000 REFCORP STRIPS -- COUPON,
6.81%, 10/15/16 19,751,685
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 92,026,137
------------
(Cost $81,643,070)
TOTAL INVESTMENT SECURITIES -- 100.0% $129,726,837
============
(Cost $108,962,651)
Notes to Schedule of Investments
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities are
purchased at a substantial discount from their value at maturity.
20 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2020 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Investor Class (inception 12/29/89) Advisor Class (inception 10/19/98)
-------------------------------------------------------------------------------------------------------------------
Target Maturities Benchmark(2) Merrill Lynch Long- Target Maturities 11/15/20 Maturity Merrill Lynch Long-
Trust: 2020 Term Treasury Index Trust: 2020 STRIPS Issue Term Treasury Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) ....... 10.16% 14.40% 5.71% 10.08% 14.40% 5.71%
1 Year ............ 2.18% 6.54% 3.00% 1.97% 6.54% 3.00%
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------------------------
3 Years ........... 15.11% 17.16% 9.94% -- -- --
5 Years ........... 13.73% 15.27% 9.41% -- -- --
10 Years .......... 12.49% 12.92% 9.87% -- -- --
Life of Fund ...... 10.60% 10.70% 9.18% -3.67% -0.42%(3) -0.52%(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 more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over 10 Years [Mountain Graph Omitted]
<TABLE>
<CAPTION>
Value on 3/31/00
Target: 2020 $32,454
Merrill Lynch Long-Term Treasury Index $25,634
Fund Benchmark $33,707
Target: 2020 Merrill Lynch Long-Term Treasury Index Fund Benchmark
DATE VALUE VALUE VALUE
<S> <C> <C> <C>
3/31/1990 $10,000 $10,000 $10,000
3/31/1991 $11,222 $11,305 $11,011
3/31/1992 $12,233 $12,666 $11,859
3/31/1993 $15,428 $15,133 $15,024
3/31/1994 $16,757 $15,659 $16,262
3/31/1995 $17,055 $16,351 $16,563
3/31/1996 $21,068 $18,762 $20,670
3/31/1997 $21,281 $19,292 $20,958
3/31/1998 $30,146 $23,244 $29,888
3/31/1999 $31,762 $24,888 $31,638
3/31/2000 $32,454 $25,634 $33,707
$10,000 investment made 3/31/90
</TABLE>
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.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Target: 2020
Actual Share Price Anticipated Value at Maturity
(Historical) $33.72 (Estimated Share Price) $107.95
'90 11.46 92.6
13.45 97.77
14.575 102.184
19.765 101.274
16.273 102.175
'95 26.245 102.54
22 103.598
27.17 104.84
36.95 106.96
33 106.76
'00 30.61 107.3
33.72 107.95
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 21
<PAGE>
Target: 2020 -- Q&A
--------------------------------------------------------------------------------
"REFCORPs, like other agency bonds, underperformed Treasury securities."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 16 16
Anticipated Growth Rate 5.77% 6.10%
Weighted Average Maturity Date 9/14/20 8/21/20
Anticipated Value at Maturity (AVM)(1) $107.95 $107.30
Expense Ratio (for Investor Class) 0.59%(2) 0.59%
(1) See graph on page 21.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
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 strong gains. For the six months ended March 31, 2000,
the portfolio returned 10.16%, compared with the 14.40% 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.
Even after taking expenses into account, the fund still underperformed its
benchmark by a wide margin. What happened?
It's a function of the fund's REFCORPs, which now make up more than 70% of
the portfolio. REFCORPs severely underperformed STRIPS over the past six months.
The existing supply of longer-term Treasury bonds is expected to shrink
going forward, so demand for these securities -- including both ordinary bonds
and zero-coupon bonds (zeros) -- has been huge in recent months. That's pushed
longer-term Treasury yields lower.
In contrast, the yields of longer-term government agency bonds have been
relatively steady. As a result, the yield gap between Treasury and agency bonds
widened substantially, and Treasurys outperformed agency bonds by a healthy
margin.
Aren't REFCORPs essentially the same as STRIPS and other Treasury zeros?
We view them that way, but technically they're agency bonds. REFCORPs were
issued by the Resolution Funding Corporation, a government agency that issued
bonds between 1989 and 1992 to help the federal government liquidate the assets
of failed savings and loans. REFCORPs are secured and guaranteed by the
Treasury, and that's why they're appropriate investments for the Target funds.
But even though the Resolution Funding Corporation has the Treasury's
backing, the bond market tarred all agency bonds with the same broad brush. That
means REFCORPs, like other agency bonds, underperformed Treasury securities.
Six months ago, we found REFCORPs to be attractive when they offered
yields that were 20 basis points (0.20%) higher than STRIPS yields. By the end
of March, that yield spread stood at 40 basis points.
The good news is that this underperformance is just a short-term bump in
the road. It's a pay-me-now-or-pay-me-later proposition -- you may get lagging
returns now, but that also means you're getting higher yields. Over the long
term, we expect the higher yields of REFCORPs to boost the fund's overall
return.
* All fund returns referenced in this interview are for Investor Class shares.
22 1-800-345-2021
<PAGE>
Target: 2020 -- Q&A
--------------------------------------------------------------------------------
(Continued)
The percentage of REFCORPs in the portfolio grew in the last six months. Is that
because you bought more of them?
Not exactly. The real reason was that we sold STRIPS to meet cash outflows
from the fund.
Investors pulled about $30 million out of the portfolio in the past six
months. To meet these shareholder redemptions, we sold STRIPS, which are the
easiest zeros to buy and sell. This reduced the fund's STRIPS position from 35%
of fund assets six months ago to 26% by the end of March. The fund's percentage
of REFCORPs rose accordingly.
Looking ahead, what's your outlook for U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in the supply of Treasury securities.
Economic conditions are not favorable for bonds. In the last six months,
the economy grew at an annual rate of more than 6%. That's about twice as fast
as the Federal Reserve would like to see. In addition, inflation is rising at a
faster rate than it has in the past several years. Even though that's mainly due
to the high price of oil, we're seeing prices increase more rapidly in other
areas as well, especially the service sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What about longer-term Treasury yields?
This part of the market has been affected primarily by the supply
reduction. In addition to cutting back issuance of long-term bonds, the Treasury
plans to buy back longer-term Treasury bonds on several occasions in the next
few months. By July, the Treasury will probably be close to completing the $30
billion in buy-backs projected for this year.
For the most part, though, these changes have already been priced into the
market. Once the buy-backs actually happen, we expect the longer-term part of
the Treasury market to shift its attention away from supply and focus more on
the economic situation.
As a result, we think that longer-term Treasury yields will rise even more
than short-term yields over the next six months. We wouldn't be surprised to see
the Treasury yield curve still inverted six months from now, but we expect it to
be less inverted than it is currently.
What are your plans for Target: 2020 going forward?
As always, we'll position the fund to closely track the performance of its
benchmark. That means keeping the portfolio's WAM date near the November 15,
2020 maturity date of the benchmark.
We'll also look to adjust the mix of zeros in the portfolio whenever we
see opportunities to add value and increase the fund's anticipated value at
maturity.
"We think that longer-term Treasury yields will rise even more than short-term
yields over the next six months."
[The following table was depicted as a pie chart in the printed material]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o REFCORPs 74%
o STRIPS 26%
[The following table was depicted as a pie chart in the printed material]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o REFCORPs 65%
o STRIPS 35%
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 23
<PAGE>
Target 2020 -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 26.0%
--------------------------------------------------------------------------------
$ 30,000,000 STRIPS -- COUPON, 8.41%,
2/15/20 $ 9,065,394
41,688,000 STRIPS -- COUPON, 8.41%,
5/15/20 12,411,051
500,000 STRIPS -- PRINCIPAL, 6.65%,
5/15/20 149,293
6,135,000 STRIPS -- COUPON, 8.23%,
8/15/20 1,798,873
147,407,000 STRIPS -- COUPON, 7.85%,
11/15/20(2) 42,710,946
2,750,000 STRIPS -- COUPON, 8.32%,
2/15/21 784,004
5,500,000 STRIPS -- COUPON, 8.18%,
5/15/21 1,546,450
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 68,466,011
(Cost $48,565,184) ------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 74.0%
--------------------------------------------------------------------------------
258,000 REFCORP STRIPS -- COUPON,
6.21%, 4/15/19 75,663
79,274,000 REFCORP STRIPS -- COUPON,
7.87%, 1/15/20 22,343,001
15,156,000 REFCORP STRIPS -- COUPON,
6.04%, 4/15/20 4,203,877
52,793,000 REFCORP STRIPS -- COUPON,
8.06%, 7/15/20 14,410,747
196,094,000 REFCORP STRIPS -- PRINCIPAL,
8.44%, 7/15/20 53,737,914
35,406,000 REFCORP STRIPS -- COUPON,
6.46%, 10/15/20 9,539,756
32,000,000 REFCORP STRIPS -- PRINCIPAL,
6.62%, 10/15/20 8,630,624
25,482,000 REFCORP STRIPS -- COUPON,
7.98%, 1/15/21 6,750,210
284,945,000 REFCORP STRIPS -- PRINCIPAL,
7.33%, 1/15/21 75,634,343
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 195,326,135
(Cost $154,839,890) ------------
TOTAL INVESTMENT SECURITIES -- 100.0% $263,792,146
(Cost $203,405,074) ============
Notes to Schedule of Investments
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities
are purchased at a substantial discount from their value at maturity.
(2) Security position, or a portion thereof, has been loaned. (See Note 5 in
the Notes to Financial Statements).
24 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2025 -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Investor Class (inception 2/15/96) Advisor Class (inception 6/1/98)
-------------------------------------------------------------------------
Merrill Merrill
Target Lynch Target 11/15/25 Lynch
Maturities Long-Term Maturities Maturity Long-Term
Trust: Treasury Trust: STRIPS Treasury
2025 Benchmark(2) Index 2025 Issue Index
<S> <C> <C> <C> <C> <C> <C>
6 Months(1) ... 11.78% 13.39% 5.71% 11.75% 13.39% 5.71%
1 Year ........ 4.31% 5.64% 3.00% 4.14% 5.64% 3.00%
<CAPTION>
----------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 Years ....... 18.46% 19.07% 9.94% -- -- --
Life of Fund .. 9.92% 11.02%(3) 7.44%(3) 3.81% 5.65% 4.22%
</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 more information about share classes, returns, the
comparative index, and the fund's benchmark.
Growth of $10,000 Over Life of Fund [Mountain Graph Omitted]
<TABLE>
<CAPTION>
Value on 3/31/00
Target: 2025 $15,475
Merrill Lynch Long-Term Treasury Index $13,403
Fund Benchmark $15,323
Target: 2025 Merrill Lynch Long-Term Treasury Index Fund Benchmark
DATE VALUE VALUE VALUE
<S> <C> <C> <C>
2/29/1996 $10,000 $10,000 $10,000
3/31/1996 $ 9,562 $ 9,810 $ 9,632
6/30/1996 $ 9,414 $ 9,794 $ 9,361
9/30/1996 $ 9,456 $ 9,940 $ 9,343
12/31/1996 $10,364 $10,414 $10,158
3/31/1997 $ 9,308 $10,086 $ 9,077
6/30/1997 $10,443 $10,639 $10,133
9/30/1997 $11,758 $11,247 $11,358
12/31/1997 $13,484 $11,969 $13,127
3/31/1998 $13,696 $12,152 $13,356
6/30/1998 $15,085 $12,710 $14,642
9/30/1998 $16,722 $13,719 $16,319
12/31/1998 $16,426 $13,590 $16,103
3/31/1999 $14,836 $13,011 $14,506
6/30/1999 $14,043 $12,710 $13,718
9/30/1999 $13,843 $12,679 $13,513
12/31/1999 $13,024 $12,420 $12,685
3/31/2000 $15,475 $13,403 $15,323
$10,000 investment made 2/29/96
</TABLE>
The graph at left shows the growth of a $10,000 investment over the life of the
fund.* The Merrill Lynch Long-Term Treasury Index and the fund's benchmark are
provided for comparison. The Target: 2025 portfolio's total return includes
operating expenses (such as transaction costs and management fees) that reduce
returns, while the total returns of the index and the benchmark do not.
* 2/29/96 is the date nearest the fund's inception for which index data are
available.
Share Price vs. Anticipated Value at Maturity [Mountain Graph Omitted]
Actual Share Price Anticipated Value at Maturity
(Historical) $29.31 (Estimated Share Price) $112.37
'96 17.91 109.24
22.27 110.88
31.67 112.23
28.1 111.42
'00 26.22 111.81
29.31 112.37
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 expected maturity date. The bottom line represents the fund's historical
share price, which is managed to grow over time to reach the fund's AVM. While
this graph demonstrates the fund's expected long-term growth pattern, please
keep in mind that the fund may experience significant share-price volatility
over the short term. Even if fund shares are held to maturity, there is no
guarantee that the fund's share price will reach its AVM. There is also no
guarantee that the AVM will fluctuate as little in the future as it has in the
past.
Both graphs are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see the Total Returns
table above). Past performance is no guarantee of future results. Investment
return and principal value will fluctuate, and redemption value may be more or
less than original cost.
www.americancentury.com 25
<PAGE>
Target: 2025 -- Q&A
--------------------------------------------------------------------------------
"We picked up a couple of REFCORPs with attractive yields, but not as many as we
would have liked. The supply of REFCORPs in this maturity area is pretty
limited."
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 9/30/99
--------------------------------------------------------------------------------
Number of Securities 25 23
Anticipated Growth
Rate 5.40% 5.73%
Weighted Average
Maturity Date 6/14/25 6/9/25
Anticipated Value at
Maturity (AVM)(1) $ 112.37 $ 111.81
Expense Ratio (for
Investor Class) 0.59%(2) 0.59%
(1) See graph on page 25.
(2) Annualized.
Past performance is no guarantee of future results. Even if fund shares are held
to maturity, there is no guarantee that the fund's share price will reach its
AVM. There is also no guarantee that the AVM will fluctuate as little in the
future as it has in the past. For more information, please consult the
prospectus.
Investment terms are defined in the Glossary on pages 54-55.
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 strong gains. For the six months ended March 31, 2000,
the portfolio returned 11.78%, compared with the 13.39% 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.
Even after taking expenses into account, the fund still underperformed its
benchmark by a wide margin. What happened?
It's a function of the fund's REFCORPs, which severely underperformed
STRIPS over the past six months. Even though REFCORPs only made up 15-20% of the
portfolio, they still held back the fund's performance.
The existing supply of longer-term Treasury bonds is expected to shrink
going forward, so demand for these securities -- including both ordinary bonds
and zero-coupon bonds (zeros) -- has been huge in recent months. That's pushed
longer-term Treasury yields lower.
In contrast, the yields of longer-term government agency bonds have been
relatively steady. As a result, the yield gap between Treasury and agency bonds
widened substantially, and Treasurys outperformed agency bonds by a healthy
margin.
Aren't REFCORPs essentially the same as STRIPS and other Treasury zeros?
We view them that way, but technically they're agency bonds. REFCORPs were
issued by the Resolution Funding Corporation, a government agency that issued
bonds between 1989 and 1992 to help the federal government liquidate the assets
of failed savings and loans. REFCORPs are secured and guaranteed by the
Treasury, and that's why they're appropriate investments for the Target funds.
But even though the Resolution Funding Corporation has the Treasury's
backing, the bond market tarred all agency bonds with the same broad brush. That
means REFCORPs, like other agency bonds, underperformed Treasury securities.
Six months ago, we found REFCORPs to be attractive when they offered
yields that were 20 basis points (0.20%) higher than STRIPS yields. By the end
of March, that yield spread stood at 40 basis points.
The good news is that this underperformance is just a short-term bump in
the road. It's a pay-me-now-or-pay-me-later proposition -- you may get lagging
returns now, but that also means you're getting higher yields. Over the long
term, we expect the higher yields of REFCORPs to boost the fund's overall
return.
* All fund returns referenced in this interview are for Investor Class shares.
26 1-800-345-2021
<PAGE>
Target: 2025 -- Q&A
--------------------------------------------------------------------------------
(Continued)
Did you add any REFCORPs to the portfolio in the last six months?
We picked up a couple of REFCORPs with attractive yields, but not as many
as we would have liked. The supply of REFCORPs in this maturity area -- between
2024 and 2026 -- is pretty limited, so they're not as readily available as
STRIPS. That's why STRIPS make up such a large portion of the portfolio.
With few REFCORPs to be had, we tried to enhance performance by making
some adjustments within our STRIPS holdings. We sold some of our February 2025
STRIPS -- when they were trading at unusually high prices -- and bought STRIPS
maturing in November 2024 and August 2025. This trade picked up more yield for
the fund while keeping its weighted average maturity (WAM) date about the same
(see the table on page 26).
Looking ahead, what's your outlook for U.S. interest rates?
Treasury yields are responding to two separate factors -- the economic
environment and the expected reduction in the supply of Treasury securities.
Economic conditions are not favorable for bonds. In the last six months,
the economy grew at an annual rate of more than 6%. That's about twice as fast
as the Federal Reserve would like to see. In addition, inflation is rising at a
faster rate than it has in the past several years. Even though that's mainly due
to the high price of oil, we're seeing prices increase more rapidly in other
areas as well, especially the service sector.
Add it all up, and it means the Fed will probably raise short-term
interest rates again in the coming months. We expect short-term Treasury yields
to follow suit.
What about longer-term Treasury yields?
This part of the market has been affected primarily by the supply
reduction. In addition to cutting back issuance of long-term bonds, the Treasury
plans to buy back longer-term Treasury bonds on several occasions in the next
few months. By July, the Treasury will probably be close to completing the $30
billion in buy-backs projected for this year.
For the most part, though, these changes have already been priced into the
market. Once the buy-backs actually happen, we expect the longer-term part of
the Treasury market to shift its attention away from supply and focus more on
the economic situation.
As a result, we think that longer-term Treasury yields will rise even more
than short-term yields over the next six months. We wouldn't be surprised to see
the Treasury yield curve still inverted six months from now, but we expect it to
be less inverted than it is currently.
What are your plans for Target: 2025 going forward?
As always, we'll position the fund to closely track the performance of its
benchmark. That means keeping the portfolio's WAM date within the target year,
though it will probably remain shorter than the November 15, 2025 maturity date
of the benchmark because shorter-term yields are higher in this maturity sector.
We'll also look to adjust the mix of zeros in the portfolio whenever we
see opportunities to add value and increase the fund's anticipated value at
maturity. That includes seeking out REFCORPs if we can find them with attractive
yields.
"We think that longer-term Treasury yields will rise even more than short-term
yields over the next six months."
Types of Investments in
the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
STRIPS 82%
REFCORPs 18%
[PIE CHART OMITTED]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
STRIPS 86%
REFCORPs 14%
[PIE CHART OMITTED]
Investment terms are defined in the Glossary on pages 54-55.
www.americancentury.com 27
<PAGE>
Target: 2025 -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. TREASURY SECURITIES(1) -- 82.1%
--------------------------------------------------------------------------------
$ 15,000,000 STRIPS -- COUPON, 6.50%,
8/15/24 $ 3,577,137
184,500,000 STRIPS -- COUPON, 5.86%,
11/15/24(2) 43,415,306
399,100,000 STRIPS -- PRINCIPAL, 6.61%,
11/15/24 93,913,543
390,900,000 STRIPS -- COUPON, 6.13%,
2/15/25 90,737,058
122,300,000 STRIPS -- PRINCIPAL, 6.64%,
2/15/25 28,457,337
134,500,000 STRIPS -- COUPON, 5.83%,
5/15/25(2) 30,808,073
303,000,000 STRIPS -- COUPON, 5.90%,
8/15/25(2) 68,466,580
706,100,000 STRIPS -- PRINCIPAL, 6.34%,
8/15/25 159,945,542
99,499,000 STRIPS -- COUPON, 5.94%,
11/15/25(2) 22,187,018
85,000,000 STRIPS -- COUPON, 6.31%,
2/15/26 18,698,817
40,000,000 STRIPS -- COUPON, 6.10%,
5/15/26 8,684,012
72,000,000 STRIPS -- COUPON, 6.34%,
8/15/26 15,421,590
40,000,000 STRIPS -- PRINCIPAL, 6.41%,
8/15/26 8,655,772
------------
TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES 592,967,785
(Cost $555,497,986) ------------
--------------------------------------------------------------------------------
ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES(1) -- 17.9%
--------------------------------------------------------------------------------
19,650,000 REFCORP STRIPS -- COUPON,
6.37%, 1/15/24$ 4,412,419
25,998,000 REFCORP STRIPS -- COUPON,
6.42%, 4/15/24 5,753,684
3,926,000 REFCORP STRIPS -- COUPON,
7.10%, 7/15/24 856,345
89,170,000 REFCORP STRIPS -- COUPON,
6.75%, 10/15/24 19,170,362
57,005,000 REFCORP STRIPS -- COUPON,
6.82%, 1/15/25 12,079,199
33,899,000 REFCORP STRIPS -- COUPON,
6.75%, 4/15/25 7,080,208
30,142,000 REFCORP STRIPS -- COUPON,
6.53%, 7/15/25 6,205,345
108,778,000 REFCORP STRIPS -- COUPON,
6.74%, 10/15/25 22,074,454
71,435,000 REFCORP STRIPS -- COUPON,
6.69%, 1/15/26 14,289,458
50,559,000 REFCORP STRIPS -- COUPON,
6.58%, 4/15/26 9,969,635
52,000,000 REFCORP STRIPS -- COUPON,
7.05%, 7/15/26 10,107,902
90,139,000 REFCORP STRIPS -- COUPON,
6.95%, 10/15/26 17,272,992
------------
TOTAL ZERO-COUPON U.S. GOVERNMENT
AGENCY SECURITIES 129,272,003
(Cost $117,658,841) ------------
TOTAL INVESTMENT SECURITIES -- 100.0% $722,239,788
(Cost $673,156,827) ============
Notes to Schedule of Investments
REFCORP = Resolution Funding Corporation
STRIPS = Separate Trading of Registered Interest and Principal of Securities
(1) Rates indicated are the yield to maturity at purchase. These securities
are purchased at a substantial discount from their value at maturity.
(2) Security position, or a portion thereof, has been loaned. (See Note 5 in
the Notes to Financial Statements).
28 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's assets (such as securities, cash, and
other receivables) and liabilities (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's net
assets. For each class of shares, the net assets divided by shares outstanding
is the share price, or net asset value per share. This statement also breaks
down the fund's net assets into capital (shareholder investments) and
performance (investment income and gains/losses).
<TABLE>
<CAPTION>
MARCH 31, 2000 (UNAUDITED) 2000 2005 2010
-------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $184,399,468,
$299,749,813, and $217,239,471,
respectively) (Note 3) .......... $ 184,232,935 $ 293,353,797 $ 216,710,541
Cash ............................. 282,019 -- --
Investment in affiliated money
market fund (Note 2) ............ 3,164 351,486 1,001,172
Interest receivable .............. 116,896 -- --
------------- ------------- -------------
184,635,014 293,705,283 217,711,713
============= ============= =============
<CAPTION>
-------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Disbursements in excess of
demand deposit cash ............. -- 118,038 316,580
Accrued management fees (Note 2) . 91,468 146,172 106,472
Distribution fees payable (Note 2) 303 573 264
Service fees payable (Note 2) .... 303 573 264
Accrued trustees' fees
and expenses .................... 1,016 1,620 1,180
Accrued expenses and other
liabilities ..................... 224 406 173
------------- ------------- -------------
93,314 267,382 424,933
------------- ------------- -------------
Net Assets ....................... $ 184,541,700 $ 293,437,901 $ 217,286,780
============= ============= =============
<CAPTION>
-------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid in .................. $ 182,284,198 $ 305,052,167 $ 217,622,098
Accumulated undistributed
net investment income ........... 2,557,291 5,321,688 3,207,059
Accumulated net realized loss
on investment transactions ...... (133,256) (10,539,938) (3,013,447)
Net unrealized depreciation
on investments (Note 3) ......... (166,533) (6,396,016) (528,930)
------------- ------------- -------------
$ 184,541,700 $ 293,437,901 $ 217,286,780
============= ============= =============
Investor Class
Net assets ....................... $ 183,135,291 $ 290,595,200 $ 216,017,650
Shares outstanding ............... 1,865,675 3,956,418 3,807,172
Net asset value per share ........ $ 98.16 $ 73.45 $ 56.74
Advisor Class
Net assets ....................... $ 1,406,409 $ 2,842,701 $ 1,269,130
Shares outstanding ............... 14,385 38,860 22,444
Net asset value per share ........ $ 97.77 $ 73.15 $ 56.55
</TABLE>
See Notes to Financial Statements www.americancentury.com 29
<PAGE>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
MARCH 31, 2000 (UNAUDITED) 2015 2020 2025
-------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $108,962,651,
$203,405,074, and $673,156,827,
respectively) (Note 3) ........... $ 129,726,837 $ 263,792,146 $ 722,239,788
Cash .............................. 943,732 -- --
Investment in affiliated money
market fund (Note 2) ............. 860,164 1,115 309,219
Securities lending fee receivable . -- 5,504 26,101
------------- ------------- -------------
131,530,733 263,798,765 722,575,108
------------- ------------- -------------
<CAPTION>
-------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Disbursements in excess of
demand deposit cash .............. -- 1,186,406 1,319,644
Accrued management fees (Note 2) .. 63,512 132,224 348,528
Distribution fees payable (Note 2) 5 117 178
Service fees payable (Note 2) ..... 5 117 178
Accrued trustees' fees and expenses 703 1,461 3,848
Accrued expenses and other
liabilities ...................... 158 378 317
------------- ------------- -------------
64,383 1,320,703 1,672,693
------------- ------------- -------------
Net Assets ........................ $ 131,466,350 $ 262,478,062 $ 720,902,415
============= ============= =============
<CAPTION>
-------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital paid in ................... $ 110,860,245 $ 187,887,352 $ 686,357,917
Accumulated undistributed net
investment income ................ 2,348,531 3,700,028 9,940,361
Accumulated undistributed net
realized gain (loss) on
investment transactions .......... (2,506,612) 10,503,610 (24,478,824)
Net unrealized appreciation
on investments (Note 3) .......... 20,764,186 60,387,072 49,082,961
------------- ------------- -------------
$ 131,466,350 $ 262,478,062 $ 720,902,415
============= ============= =============
Investor Class
Net assets ........................ $ 131,441,341 $ 261,965,946 $ 720,071,845
Shares outstanding ................ 2,870,350 7,767,732 24,566,000
Net asset value per share ......... $ 45.79 $ 33.72 $ 29.31
Advisor Class
Net assets ........................ $ 25,009 $ 512,116 $ 830,570
Shares outstanding ................ 547 15,227 28,442
Net asset value per share ......... $ 45.72 $ 33.63 $ 29.20
</TABLE>
30 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED) 2000 2005 2010
----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Interest ........................................... $ 5,864,670 $ 13,187,193 $ 7,335,165
Income from securities lending ..................... 12,312 -- --
------------ ------------ ------------
5,876,982 13,187,193 7,335,165
------------ ------------ ------------
Expenses (Note 2):
Management fees .................................... 567,360 1,252,918 651,769
Distribution fees -- Advisor Class ................. 1,598 3,309 1,601
Service fees -- Advisor Class ...................... 1,598 3,309 1,601
Trustees' fees and expenses ........................ 3,577 7,578 4,108
------------ ------------ ------------
574,133 1,267,114 659,079
------------ ------------ ------------
Net investment income .............................. 5,302,849 11,920,079 6,676,086
============ ============ ============
<CAPTION>
----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 3)
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net realized loss on investments ................... (132,263) (9,573,157) (2,370,219)
Change in net unrealized appreciation
(depreciation) on investments ..................... (1,117,989) (184,546) 1,482,169
------------ ------------ ------------
Net realized and unrealized
loss on investments ............................... (1,250,252) (9,757,703) (888,050)
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ......................... $ 4,052,597 $ 2,162,376 $ 5,788,036
============ ============ ============
</TABLE>
See Notes to Financial Statements www.americancentury.com 31
<PAGE>
Statements of Operations
--------------------------------------------------------------------------------
(Continued)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED) 2015 2020 2025
----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Interest .................................................. $ 6,107,688 $ 8,880,964 $ 23,398,403
Income from securities lending ............................ -- 58,669 232,663
------------ ------------ ------------
6,107,688 8,939,633 23,631,066
------------ ------------ ------------
Expenses (Note 2):
Management fees ........................................... 548,501 836,382 2,145,059
Distribution fees -- Advisor Class ........................ 13 792 1,246
Service fees -- Advisor Class ............................. 13 792 1,246
Trustees' fees and expenses ............................... 3,318 5,219 13,415
------------ ------------ ------------
551,845 843,185 2,160,966
------------ ------------ ------------
Net investment income ..................................... 5,555,843 8,096,448 21,470,100
------------ ------------ ------------
<CAPTION>
----------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net realized gain (loss) on investments ................... (1,155,697) 10,837,120 (13,531,415)
Change in net unrealized appreciation (depreciation)
on investments ........................................... 3,823,980 6,724,021 72,235,802
------------ ------------ ------------
Net realized and unrealized
gain on investments ...................................... 2,668,283 17,561,141 58,704,387
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ................................ $ 8,224,126 $ 25,657,589 $ 80,174,487
============ ============ ============
</TABLE>
32 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous pages for the most recent period),
income and capital gain distributions, and shareholder investments and
redemptions.
SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
------------------------------ ------------------------------
2000 2005
------------------------------ ------------------------------
Decrease in Net Assets 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income ..................................... $ 5,302,849 $ 11,532,670 $ 11,920,079 $ 26,995,720
Net realized gain (loss)
on investments ......................................... (132,263) 882,851 (9,573,157) 9,503,624
Change in net unrealized
appreciation (depreciation)
on investments .......................................... (1,117,989) (7,272,041) (184,546) (67,594,700)
------------- ------------- ------------- -------------
Net increase (decrease) in
net assets resulting
from operations ......................................... 4,052,597 5,143,480 2,162,376 (31,095,356)
------------- ------------- ------------- -------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From net investment income:
Investor Class .......................................... (11,158,242) (13,127,657) (25,001,055) (23,463,873)
Advisor Class ........................................... (63,922) (3,731) (138,502) (5,103)
From net realized gains on
investment transactions:
Investor Class .......................................... (509,907) (3,117,167) (10,024,151) (7,397,428)
Advisor Class ........................................... (3,072) (897) (58,263) (1,643)
In excess of net realized gains on investment transactions:
Investor Class .......................................... -- -- -- --
Advisor Class ........................................... -- -- -- --
------------- ------------- ------------- -------------
Decrease in net assets from
distributions ........................................... (11,735,143) (16,249,452) (35,221,971) (30,868,047)
------------- ------------- ------------- -------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase (decrease) in net
assets from capital share
transactions ............................................ (10,678,434) (23,579,846) (166,284,066) 20,658,855
------------- ------------- ------------- -------------
Net decrease in net assets ................................ (18,360,980) (34,685,818) (199,343,661) (41,304,548)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning of period ....................................... 202,902,680 237,588,498 492,781,562 534,086,110
------------- ------------- ------------- -------------
End of period ............................................. $ 184,541,700 $ 202,902,680 $ 293,437,901 $ 492,781,562
============= ============= ============= =============
Undistributed net investment
income .................................................. $ 2,557,291 $ 8,476,606 $ 5,321,688 $ 18,541,166
============= ============= ============= =============
<CAPTION>
------------------------------
2010
------------------------------
Decrease in Net Assets 2000 1999
--------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................................... $ 6,676,086 $ 13,093,509
Net realized gain (loss)
on investments ......................................... (2,370,219) 3,303,613
Change in net unrealized
appreciation (depreciation)
on investments .......................................... 1,482,169 (47,947,788)
------------- -------------
Net increase (decrease) in
net assets resulting
from operations ......................................... 5,788,036 (31,550,666)
------------- -------------
<CAPTION>
--------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------------------
<S> <C> <C>
From net investment income:
Investor Class .......................................... (13,287,016) (11,224,267)
Advisor Class ........................................... (73,905) (872)
From net realized gains on
investment transactions:
Investor Class .......................................... -- (5,371,126)
Advisor Class ........................................... -- (420)
In excess of net realized gains on investment transactions:
Investor Class .......................................... -- (643,178)
Advisor Class ........................................... -- (50)
------------- -------------
Decrease in net assets from
distributions ........................................... (13,360,921) (17,239,913)
------------- -------------
<CAPTION>
--------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase (decrease) in net
assets from capital share
transactions ............................................ (16,940,651) 6,762,551
------------- -------------
Net decrease in net assets ................................ (24,513,536) (42,028,028)
--------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------------
Beginning of period ....................................... 241,800,316 283,828,344
------------- -------------
End of period ............................................. $ 217,286,780 $ 241,800,316
============= =============
Undistributed net investment
income .................................................. $ 3,207,059 $ 9,891,894
============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 33
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
(Continued)
SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
------------------------------ ------------------------------
2015 2020
------------------------------ ------------------------------
Increase (Decrease) in Net Assets 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income ..................................... $ 5,555,843 $ 11,029,490 $ 8,096,448 $ 18,152,315
Net realized gain (loss)
on investments .......................................... (1,155,697) (1,189,705) 10,837,120 40,557,105
Change in net unrealized
appreciation (depreciation)
on investments .......................................... 3,823,980 (42,858,822) 6,724,021 (132,226,209)
------------- ------------- ------------- -------------
Net increase (decrease) in
net assets resulting
from operations ......................................... 8,224,126 (33,019,037) 25,657,589 (73,516,789)
------------- ------------- ------------- -------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From net investment income:
Investor Class .......................................... (12,201,171) (7,536,221) (17,675,576) (24,377,620)
Advisor Class ........................................... (361) -- (38,610) (988)
From net realized gains on investment transactions:
Investor Class .......................................... (136,592) -- (31,488,441) (61,543,905)
Advisor Class ........................................... (4) -- (70,913) (2,511)
In excess of net realized gains on investment transactions:
Investor Class .......................................... -- (295,396) -- --
Advisor Class ........................................... -- -- -- --
------------- ------------- ------------- -------------
Decrease in net assets
from distributions ...................................... (12,338,128) (7,831,617) (49,273,540) (85,925,024)
------------- ------------- ------------- -------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net increase (decrease) in net
assets from capital share
transactions ............................................ (82,620,158) 88,969,917 (31,186,806) (9,329,139)
------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ........................................... (86,734,160) 48,119,263 (54,802,757) (168,770,952)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning of period ....................................... 218,200,510 170,081,247 317,280,819 486,051,771
------------- ------------- ------------- -------------
End of period ............................................. $ 131,466,350 $ 218,200,510 $ 262,478,062 $ 317,280,819
============= ============= ============= =============
Undistributed net investment
income .................................................. $ 2,348,531 $ 8,994,220 $ 3,700,028 $ 13,317,766
============= ============= ============= =============
<CAPTION>
------------------------------
2010
------------------------------
Increase (Decrease) in Net Assets 2000 1999
--------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................................... $ 21,470,100 $ 24,410,129
Net realized gain (loss)
on investments .......................................... (13,531,415) (9,083,532)
Change in net unrealized
appreciation (depreciation)
on investments .......................................... 72,235,802 (93,055,873)
------------- -------------
Net increase (decrease) in
net assets resulting
from operations ......................................... 80,174,487 (77,729,276)
------------- -------------
<CAPTION>
--------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------------------
<S> <C> <C>
From net investment income:
Investor Class .......................................... (32,236,400) (12,412,051)
Advisor Class ........................................... (44,653) (9,148)
From net realized gains on investment transactions:
Investor Class .......................................... -- --
Advisor Class ........................................... -- --
In excess of net realized gains on investment transactions:
Investor Class .......................................... -- (3,038,701)
Advisor Class ........................................... -- (2,318)
------------- -------------
Decrease in net assets
from distributions ...................................... (32,281,053) (15,462,218)
------------- -------------
<CAPTION>
--------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase (decrease) in net
assets from capital share
transactions ............................................ (82,344,391) 492,333,318
------------- -------------
Net increase (decrease)
in net assets ........................................... (34,450,957) 399,141,824
<CAPTION>
--------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning of period ....................................... 755,353,372 356,211,548
------------- -------------
End of period ............................................. $ 720,902,415 $ 755,353,372
============= =============
Undistributed net investment
income .................................................. $ 9,940,361 $ 20,751,314
============= =============
</TABLE>
34 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization -- American Century Target Maturities Trust (the trust) is
registered under the Investment Company Act of 1940 (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.
For the eleven month period ended September 30, 1999, 2010, and 2025
incurred net capital losses of $437,880 and $3,643,967, respectively. The funds,
2010 and 2025, 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 six months ended March 31, 2000, the effective annual Investor
Class management fee was 0.59% for each of the funds.
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 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
www.americancentury.com 35
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000 (UNAUDITED)
shareholder and administrative services rendered by ACIM, its affiliates or
independent third party providers. Fees incurred under the plan for the six
months ended March 31, 2000, were $3,196, $6,618, $3,202, $26, $1,584, and
$2,492 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 March 31, 2000, 2000, 2005, 2010, 2015, 2020, and 2025 had invested
$3,164, $351,486, $1,001,172, $860,164, $1,115, and $309,219, respectively, in
shares of the Capital Preservation Fund (CPF). CPF is a money market fund
managed by ACIM. The terms of these transactions were identical to those with
non-related entities except that, to avoid duplicative management fees, the
funds did not pay ACIM management fees with respect to assets invested in CPF.
--------------------------------------------------------------------------------
3. Investment Transactions
Investment transactions in U.S. government securities, excluding
short-term investments, for the six months ended March 31, 2000, were as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
2000 2005 2010 2015 2020 2025
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases .............. $ 17,894,554 $ 42,339,343 $ 21,010,250 $ 29,576,622 $ 5,135,825 $214,521,555
Proceeds from Sales .... $ 72,001,618 $ 244,981,490 $ 51,264,750 $ 126,948,840 $ 84,255,650 $321,842,912
<CAPTION>
On March 31, 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
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Appreciation ........... $ 307,397 $ 3,486,645 $ 7,510,226 $ 19,462,606 $ 60,804,051 $ 48,140,414
Depreciation ........... (473,930) (10,842,136) (8,243,650) -- (505,201) (6,359,690)
------------- ------------- ------------- ------------- ------------- -------------
Net .................... $ (166,533) $ (7,355,491) $ (733,424) $ 19,462,606 $ 60,298,850 $ 41,780,724
============= ============= ============= ============= ============= =============
Federal Tax Cost ....... $ 184,399,468 $ 300,709,288 $ 217,443,965 $ 110,264,231 $ 203,493,296 $ 680,459,064
============= ============= ============= ============= ============= =============
</TABLE>
36 1-800-345-2021
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. Capital Share Transactions
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
<TABLE>
<CAPTION>
------------------------------ ------------------------------ -------------------------------
2000 2005 2010
------------------------------ ------------------------------ -------------------------------
Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31, 2000
Sold .......................... 568,039 $ 54,904,854 1,318,133 $ 95,325,278 1,582,535 $ 86,911,514
Issued in reinvestment
of distributions ............ 124,776 11,363,356 513,722 34,506,728 250,010 12,968,012
Redeemed ...................... (800,629) (77,462,015) (4,111,625) (296,590,135) (2,136,398) (116,932,729)
Reverse share split ........... (127,923) -- (520,863) -- (255,802) --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease .................. (235,737) $ (11,193,805) (2,800,633) $(166,758,129) (559,655) $ (17,053,203)
============= ============= ============= ============= ============= =============
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
------------------------------------------------------------------------------------------------------------------------------------
Six months ended March 31, 2000
Sold .......................... 6,609 $ 637,202 10,735 $ 770,934 5,091 $ 276,580
Issued in reinvestment
of distributions ............ 593 53,918 2,288 153,492 1,107 57,359
Redeemed ...................... (1,812) (175,749) (6,299) (450,363) (4,076) (221,387)
Reverse share split ........... (728) -- (2,886) -- (1,408) --
------------- ------------- ------------- ------------- ------------- -------------
Net increase .................. 4,662 $ 515,371 3,838 $ 474,063 714 $ 112,552
============= ============= ============= ============= ============= =============
Year ended Septemer 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.
www.americancentury.com 37
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
4. Capital Share Transactions (continued)
Transactions in shares of the funds were as follows (unlimited number of
shares authorized):
<TABLE>
<CAPTION>
------------------------------ ------------------------------ -------------------------------
2015 2020 2025
------------------------------ ------------------------------ -------------------------------
Shares Amount Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six months ended March 31, 2000
Sold ........................... 1,702,278 $ 73,321,134 5,728,760 $ 176,302,522 21,596,222 $ 561,294,106
Issued in reinvestment
of distributions ............. 297,512 12,087,909 1,839,250 47,323,884 1,176,606 29,462,244
Redeemed ....................... (3,895,471) (168,046,455) (8,248,964) (254,795,221) (25,689,655)
(672,868,810)
Reverse share split ............ (303,308) -- (1,898,863) -- (1,282,713) --
----------- -------------- ------------ -------------- ------------ --------------
Net decrease ................... (2,198,989) $ (82,637,412) (2,579,817) $ (31,168,815) (4,199,540) $ (82,112,460)
=========== ============== ============ ============== ============ ==============
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
------------------------------------------------------------------------------------------------------------------------------------
Six months ended March 31, 2000
Sold ........................... 468 $ 20,889 9,259 $ 277,351 11,212 $ 282,024
Issued in reinvestment
of distributions ............. 9 365 3,015 77,529 1,477 36,919
Redeemed ....................... (93) (4,000) (11,763) (372,871) (20,643) (550,874)
Reverse share split ............ (9) -- (4,054) -- (1,774) --
----------- -------------- ------------ -------------- ------------ --------------
Net increase (decrease) ........ 375 $ 17,254 (3,543) $ (17,991) (9,728) $ (231,931)
=========== ============== ============ ============== ============ ==============
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.
38 1-800-345-2021
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
5. Securities Lending
At March 31, 2000, securities valued at $14,487,421 for 2020 and
$37,756,689 for 2025 were on loan to brokers. Securities received as collateral,
at this date, were valued at $14,795,159 and $39,093,228. The fund's risks in
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
--------------------------------------------------------------------------------
6. Bank Loans
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
six months ended March 31, 2000.
www.americancentury.com 39
<PAGE>
Target: 2000 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
----------------------------------------------------------------------------
Investor Class
----------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....... $96.11 $93.78 $86.05 $79.95 $76.86 $66.93
----------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) ................. 2.65 5.06 5.13 5.10 4.75 4.37
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .................. (0.60) (2.73) 2.60 1.00 (1.66) 5.56
----------------------------------------------------------------------------
Total From Investment Operations ......... 2.05 2.33 7.73 6.10 3.09 9.93
----------------------------------------------------------------------------
Distributions(3)
From Net Investment Income ............... (5.52) (5.57) (5.64) (5.20) (3.94) (3.42)
From Net Realized Gains .................. (0.25) (1.32) -- -- -- --
----------------------------------------------------------------------------
Total Distributions ...................... (5.77) (6.89) (5.64) (5.20) (3.94) (3.42)
----------------------------------------------------------------------------
Reverse Share Split ........................ 5.77 6.89 5.64 5.20 3.94 3.42
----------------------------------------------------------------------------
Net Asset Value, End of Period ............. $98.16 $96.11 $93.78 $86.05 $79.95 $76.86
============================================================================
Total Return(4) .......................... 2.13% 2.48% 8.97% 7.64% 4.01% 14.84%
---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ................................. 0.59%(5) 0.59% 0.59% 0.56% 0.53% 0.63%
Ratio of Net Investment Income to Average
Net Assets ................................. 5.46%(5) 5.34% 5.75% 6.14% 5.99% 6.13%
Portfolio Turnover Rate .................... 12% 31% 82% 10% 29% 53%
Net Assets, End of Period (in thousands) ... $183,135 $201,971 $237,525 $248,377 $267,757 $294,736
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
40 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2000 -- Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
--------------------------------
Advisor Class
--------------------------------
2000(1) 1999 1998(2)
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $95.85 $93.76 $91.41
--------------------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 2.52 4.88 0.54
Net Realized and Unrealized Gain (Loss) on Investment Transactions (0.60) (2.79) 1.81
--------------------------------
Total From Investment Operations ................................. 1.92 2.09 2.35
--------------------------------
Distributions
From Net Investment Income ....................................... (5.25) (5.50) --
From Net Realized Gains .......................................... (0.25) (1.32) --
--------------------------------
Total Distributions .............................................. (5.50) (6.82) --
--------------------------------
Reverse Share Split ................................................ 5.50 6.82 --
--------------------------------
Net Asset Value, End of Period ..................................... $97.77 $95.85 $93.76
================================
Total Return(4) .................................................. 2.00% 2.23% 2.57%
-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84% 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.21%(5) 5.09% 5.06%(5)
Portfolio Turnover Rate ............................................ 12% 31% 82%
Net Assets, End of Period (in thousands) ........................... $1,406 $ 932 $ 64
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) August 20, 1998 (commencement of sale) through September 30, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 41
<PAGE>
Target: 2005 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
----------------------------------------------------------------------------------
Investor Class
----------------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....... $72.55 $76.72 $64.54 $57.83 $56.61 $45.22
----------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) ................. 2.01 3.77 3.84 3.74 3.50 3.33
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .................. (1.11) (7.94) 8.34 2.97 (2.28) 8.06
----------------------------------------------------------------------------------
Total From Investment Operations ......... 0.90 (4.17) 12.18 6.71 1.22 11.39
----------------------------------------------------------------------------------
Distributions(3)
From Net Investment Income ............... (3.89) (3.39) (3.61) (3.61) (2.06) (2.41)
From Net Realized Gains .................. (1.56) (1.07) (0.27) (0.44) (0.58) (0.67)
----------------------------------------------------------------------------------
Total Distributions ...................... (5.45) (4.46) (3.88) (4.05) (2.64) (3.08)
----------------------------------------------------------------------------------
Reverse Share Split ........................ 5.45 4.46 3.88 4.05 2.64 3.08
----------------------------------------------------------------------------------
Net Asset Value, End of Period ............. $73.45 $72.55 $76.72 $64.54 $57.83 $56.61
==================================================================================
Total Return(4) .......................... 1.24% (5.44)% 18.87% 11.60% 2.15% 25.16%
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ................................. 0.59%(5) 0.59% 0.59% 0.57% 0.58% 0.71%
Ratio of Net Investment Income to Average
Net Assets ................................. 5.56%(5) 5.10% 5.53% 6.15% 6.05% 6.58%
Portfolio Turnover Rate .................... 10% 81% 35% 15% 31% 34%
Net Assets, End of Period (in thousands) ... $290,595 $490,248 $533,986 $281,677 $238,864 $183,452
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
42 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2005 -- Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
-------------------------------------
Advisor Class
-------------------------------------
2000(1) 1999 1998(2)
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
---------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $72.34 $76.69 $70.91
-------------------------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 1.91 3.60 0.58
Net Realized and Unrealized Gain (Loss) on Investment Transactions (1.10) (7.95) 5.20
-------------------------------------
Total From Investment Operations ................................. 0.81 (4.35) 5.78
-------------------------------------
Distributions
From Net Investment Income ....................................... (3.70) (3.32) --
From Net Realized Gains .......................................... (1.56) (1.07) --
-------------------------------------
Total Distributions .............................................. (5.26) (4.39) --
-------------------------------------
Reverse Share Split ................................................ 5.26 4.39 --
-------------------------------------
Net Asset Value, End of Period ..................................... $73.15 $72.34 $76.69
=====================================
Total Return(4) .................................................. 1.12% (5.67)% 8.15%
---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84% 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.31%(5) 4.85% 4.87%(5)
Portfolio Turnover Rate ............................................ 10% 81% 35%
Net Assets, End of Period (in thousands) ........................... $2,843 $2,533 $100
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) August 3, 1998 (commencement of sale) through September 30, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 43
<PAGE>
Target: 2010 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
-----------------------------------------------------------------------------------
Investor Class
-----------------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....... $55.10 $61.98 $49.16 $42.47 $42.14 $31.67
-----------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) ................. 1.63 3.07 2.94 2.79 2.58 2.41
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .................. 0.01 (9.95) 9.88 3.90 (2.25) 8.06
-----------------------------------------------------------------------------------
Total From Investment Operations ......... 1.64 (6.88) 12.82 6.69 0.33 10.47
-----------------------------------------------------------------------------------
Distributions(3)
From Net Investment Income ............... (3.21) (2.78) (2.46) (2.82) (1.57) (1.48)
From Net Realized Gains .................. -- (1.33) (0.29) (1.17) -- (0.48)
In Excess of Net Realized Gains .......... -- (0.16) -- -- -- --
-----------------------------------------------------------------------------------
Total Distributions ...................... (3.21) (4.27) (2.75) (3.99) (1.57) (1.96)
-----------------------------------------------------------------------------------
Reverse Share Split ........................ 3.21 4.27 2.75 3.99 1.57 1.96
-----------------------------------------------------------------------------------
Net Asset Value, End of Period ............. $56.74 $55.10 $61.98 $49.16 $42.47 $42.14
===================================================================================
Total Return(4) .......................... 2.98% (11.10)% 26.08% 15.75% 0.78% 33.06%
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ................................. 0.59%(5) 0.59% 0.59% 0.62% 0.67% 0.71%
Ratio of Net Investment Income to Average
Net Assets ................................. 5.98%(5) 5.31% 5.39% 6.15% 5.98% 6.56%
Portfolio Turnover Rate .................... 9% 49% 34% 26% 24% 26%
Net Assets, End of Period (in thousands) ... $216,018 $240,606 $283,828 $124,812 $111,117 $95,057
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
44 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2010 -- Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Periods Indicated
Advisor Class
------------------------
2000(1) 1999(2)
------------------------
<S> <C> <C>
--------------------------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $54.96 $60.12
------------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 1.56 2.81
Net Realized and Unrealized Gain (Loss) on Investment Transactions 0.03 (7.97)
------------------------
Total From Investment Operations ................................. 1.59 (5.16)
------------------------
Distributions
From Net Investment Income ....................................... (3.07) (2.76)
From Net Realized Gains .......................................... -- (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 ..................................... $56.55 $54.96
========================
Total Return(4) .................................................. 2.89% (8.58)%
--------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.73%(5) 5.06%(5)
Portfolio Turnover Rate ............................................ 9% 49%
Net Assets, End of Period (in thousands) ........................... $1,269 $1,194
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) October 20, 1998 (commencement of sale) through September 30, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 45
<PAGE>
Target: 2015 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
-----------------------------------------------------------------------------------
Investor Class
-----------------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....... $43.04 $49.87 $38.34 $31.96 $32.20 $22.79
-----------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) ................. 1.27 2.39 2.17 2.00 1.85 1.71
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .................. 1.48 (9.22) 9.36 4.38 (2.09) 7.70
-----------------------------------------------------------------------------------
Total From Investment Operations ......... 2.75 (6.83) 11.53 6.38 (0.24) 9.41
-----------------------------------------------------------------------------------
Distributions(3)
From Net Investment Income ............... (2.46) (2.10) (2.11) (2.05) (1.28) (0.87)
From Net Realized Gain ................... (0.03) (0.06) (1.40) (0.34) (1.61) --
In Excess of Net Realized Gains .......... -- (0.02) -- -- -- --
-----------------------------------------------------------------------------------
Total Distributions ...................... (2.49) (2.18) (3.51) (2.39) (2.89) (0.87)
-----------------------------------------------------------------------------------
Reverse Share Split ........................ 2.49 2.18 3.51 2.39 2.89 0.87
-----------------------------------------------------------------------------------
Net Asset Value, End of Period ............. $45.79 $43.04 $49.87 $38.34 $31.96 $32.20
===================================================================================
Total Return(4) .......................... 6.39% (13.70)% 30.07% 19.96% (0.74)% 41.29%
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ................................. 0.59%(5) 0.59% 0.59% 0.61% 0.65% 0.71%
Ratio of Net Investment Income to Average
Net Assets ................................. 5.93%(5) 5.25% 4.96% 5.79% 5.63% 6.40%
Portfolio Turnover Rate .................... 16% 55% 31% 21% 17% 70%
Net Assets, End of Period (in thousands) ... $131,441 $218,193 $170,081 $114,900 $115,654 $114,647
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
46 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2015 -- Financial Highlights
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Periods Indicated
---------------------
Advisor Class
---------------------
2000(1) 1999(2)
<S> <C> <C>
--------------------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $43.02 $43.65
---------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 1.21 0.44
Net Realized and Unrealized Gain (Loss) on Investment Transactions 1.49 (1.07)
---------------------
Total From Investment Operations ................................. 2.70 (0.63)
---------------------
Distributions
From Net Investment Income ....................................... (2.42) --
From Net Realized Gains .......................................... (0.03) --
---------------------
Total Distributions .............................................. (2.45) --
---------------------
Reverse Share Split ................................................ 2.45 --
---------------------
Net Asset Value, End of Period ..................................... $45.72 $43.02
=====================
Total Return(4) .................................................. 6.28% (1.44)%
--------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.68%(5) 5.01%(5)
Portfolio Turnover Rate ............................................ 16% 55%
Net Assets, End of Period (in thousands) ........................... $25 $7
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) July 23, 1999 (commencement of sale) through September 30, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 47
<PAGE>
Target: 2020 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
-----------------------------------------------------------------------------------
Investor Class
-----------------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ....... $30.61 $36.95 $27.17 $22.00 $22.47 $15.28
-----------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(2) ................. 0.88 1.62 1.53 1.51 1.41 1.19
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .................. 2.23 (7.96) 8.25 3.66 (1.88) 6.00
-----------------------------------------------------------------------------------
Total From Investment Operations ......... 3.11 (6.34) 9.78 5.17 (0.47) 7.19
-----------------------------------------------------------------------------------
Distributions(3)
From Net Investment Income ............... (1.85) (2.06) (2.35) (1.45) (0.40) (0.21)
From Net Realized Gains .................. (3.30) (5.20) (2.19) -- (0.04) --
-----------------------------------------------------------------------------------
Total Distributions ...................... (5.15) (7.26) (4.54) (1.45) (0.44) (0.21)
-----------------------------------------------------------------------------------
Reverse Share Split ........................ 5.15 7.26 4.54 1.45 0.44 0.21
-----------------------------------------------------------------------------------
Net Asset Value, End of Period ............. $33.72 $30.61 $36.95 $27.17 $22.00 $22.47
===================================================================================
Total Return(4) .......................... 10.16% (17.16)% 36.00% 23.50% (2.09)% 47.05%
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average
Net Assets ................................. 0.59%(5) 0.59% 0.59% 0.53% 0.61% 0.72%
Ratio of Net Investment Income to Average
Net Assets ................................. 5.67%(5) 4.82% 4.83% 6.29% 6.25% 6.24%
Portfolio Turnover Rate .................... 2% 31% 18% 14% 47% 78%
Net Assets, End of Period (in thousands) ... $261,966 $316,707 $486,052 $553,551 $926,319 $574,702
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) Computed using average shares outstanding throughout the period.
(3) For years ended prior to September 30, 1997, distributions were calculated
using average shares outstanding during the year. Distributions indicated
for those years will be different than the actual per-share distributions
to shareholders.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
48 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2020 -- Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Periods Indicated
----------------------
Advisor Class
----------------------
2000(1) 1999(2)
<S> <C> <C>
----------------------------------------------------------------------------------------------
PER-SHARE DATA
----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $30.55 $35.50
----------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 0.84 1.50
Net Realized and Unrealized Gain (Loss) on Investment Transactions 2.24 (6.45)
----------------------
Total From Investment Operations ................................. 3.08 (4.95)
----------------------
Distributions
From Net Investment Income ....................................... (1.79) (2.05)
From Net Realized Gains .......................................... (3.30) (5.20)
----------------------
Total Distributions .............................................. (5.09) (7.25)
----------------------
Reverse Share Split ................................................ 5.09 7.25
----------------------
Net Asset Value, End of Period ..................................... $33.63 $30.55
======================
Total Return(4) .................................................. 10.08% (13.94)%
----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.42%(5) 4.57%(5)
Portfolio Turnover Rate ............................................ 2% 31%
Net Assets, End of Period (in thousands) ........................... $512 $574
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) October 19, 1998 (commencement of sale) through September 30, 1999.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 49
<PAGE>
Target: 2025 -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years (or less,
if the share class is not five years old). It also includes several key
statistics for each reporting period, including total return, income ratio (net
income as a percentage of average net assets), expense ratio (operating expenses
as a percentage of average net assets), and portfolio turnover (a gauge of the
fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
---------------------------------------------------------------------------
Investor Class
---------------------------------------------------------------------------
2000(1) 1999 1998 1997 1996(2)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............... $26.22 $31.67 $22.27 $17.91 $19.85
---------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income(3) ......................... 0.76 1.46 1.33 1.21 0.72
Net Realized and Unrealized Gain (Loss) on
Investment Transactions .......................... 2.33 (6.91) 8.07 3.15 (2.66)
---------------------------------------------------------------------------
Total From Investment Operations ................. 3.09 (5.45) 9.40 4.36 (1.94)
---------------------------------------------------------------------------
Distributions
From Net Investment Income ....................... (1.11) (1.28) (0.70) (0.72) --
From Net Realized Gains .......................... -- -- (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 ..................... $29.31 $26.22 $31.67 $22.27 $17.91
===========================================================================
Total Return(4) .................................. 11.78% (17.21)% 42.21% 24.34% (9.77)%
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .. 0.59%(5) 0.59% 0.59% 0.62% 0.67%(5)
Ratio of Net Investment Income to Average Net Assets 5.86%(5) 5.25% 4.94% 6.14% 6.57%(5)
Portfolio Turnover Rate ............................ 29% 54% 52% 58% 61%
Net Assets, End of Period (in thousands) ........... $720,072 $754,356 $356,122 $73,821 $35,661
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) February 15, 1996 (inception) through September 30, 1996.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
50 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Target: 2025 -- Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended September 30 (except as noted)
-----------------------------------
Advisor Class
-----------------------------------
2000(1) 1999 1998(2)
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period ............................... $26.13 $31.64 $27.27
-----------------------------------
Income From Investment Operations
Net Investment Income(3) ......................................... 0.73 1.39 0.41
Net Realized and Unrealized Gain (Loss) on Investment Transactions 2.34 (6.90) 3.96
-----------------------------------
Total From Investment Operations ................................. 3.07 (5.51) 4.37
-----------------------------------
Distributions
From Net Investment Income ....................................... (1.05) (1.23) --
From Net Realized Gains .......................................... -- (0.25) --
In Excess of Net Realized Gains .................................. -- (0.06) --
-----------------------------------
Total Distributions .............................................. (1.05) (1.54) --
-----------------------------------
Reverse Share Split ................................................ 1.05 1.54 --
-----------------------------------
Net Asset Value, End of Period ..................................... $29.20 $26.13 $31.64
===================================
Total Return(4) .................................................. 11.75% (17.41)% 16.02%
-----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .................. 0.84%(5) 0.84% 0.84%(5)
Ratio of Net Investment Income to Average Net Assets ............... 5.61%(5) 5.00% 4.37%(5)
Portfolio Turnover Rate ............................................ 29% 54% 52%
Net Assets, End of Period (in thousands) ........................... $831 $997 $89
</TABLE>
(1) Six months ended March 31, 2000 (unaudited).
(2) June 1, 1998 (commencement of sale) through September 30, 1998.
(3) Computed using average shares outstanding throughout the period.
(4) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are
not annualized.
(5) Annualized.
See Notes to Financial Statements www.americancentury.com 51
<PAGE>
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. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are
liable for paying income tax on the taxable portion of your withdrawal. If you
elect not to have income tax withheld or you don't have enough income tax
withheld, you may be responsible for payment of estimated tax. You may incur
penalties under the estimated tax rules if your withholding and estimated tax
payments are not sufficient.
52 1-800-345-2021
<PAGE>
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.
Investment Team Leaders
--------------------------
Portfolio Managers
--------------------------
Jeremy Fletcher
Dave Schroeder
www.americancentury.com 53
<PAGE>
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 40-51.
Statistical Terminology
> Number of Securities -- the number of different securities held by a fund on a
given date.
> Anticipated Growth Rate (AGR) -- an approximation of the annualized rate of
return that an investor may expect from his purchase date to the fund's WAM
date, assuming all dividends and capital gains distributions are reinvested. It
assumes that the AVM is reached on the WAM date.
> Weighted Average Maturity (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount.
> Weighted Average Maturity (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
<PAGE>
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
<PAGE>
INVESTMENT OBJECTIVE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CAPITAL PRESERVATION INCOME
Taxable Tax-Free Taxable Bonds Tax-Free Bonds
Money Markets Money Markets
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
RISK LEVEL: AGGRESSIVE
----------------------------------------------------------------------------------------------
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
----------------------------------------------------------------------------------------------
RISK LEVEL: MODERATE
----------------------------------------------------------------------------------------------
Long-Term Treasury CA Long-Term
Target 2005* Tax-Free
Bond Long-Term Tax-Free
Premium Bond CA Insured Tax-Free
----------------------------------------------------------------------------------------------
RISK LEVEL: CONSERVATIVE
----------------------------------------------------------------------------------------------
Premium FL Municipal Intermediate-Term Bond CA Intermediate-Term
Capital Reserve Money Market Intermediate-Term Tax-Free
Prime CA Municipal Treasury AZ Intermediate-Term
Money Market Money Market GNMA Municipal
Premium CA Tax-Free Inflation-Adjusted FL Intermediate-Term
Government Reserve Money Market Treasury Municipal
Government Agency Tax-Free Limited-Term Bond Intermediate-Term
Money Market Money Market Target 2000* Tax-Free
Capital Preservation Short-Term Government CA Limited-Term
Short-Term Treasury Tax-Free
Limited-Term
Tax-Free
----------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME GROWTH
Asset Allocation/ Domestic Equity Specialty Domestic Equity Specialty International
Balanced
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------
RISK LEVEL: AGGRESSIVE
-------------------------------------------------------------------------------------------------------------------------
Small Cap Quantitative Veedot(2) Emerging Markets
Small Cap Value New Opportunities Global Gold International Discovery
Giftrust(R) International Growth
Vista Global Growth
Heritage
Growth
Ultra(R)
Select
-------------------------------------------------------------------------------------------------------------------------
RISK LEVEL: MODERATE
-------------------------------------------------------------------------------------------------------------------------
Strategic Allocation: Equity Growth Utilities Global Natural
Aggressive Equity Index Real Estate Resources
Balanced Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
-------------------------------------------------------------------------------------------------------------------------
RISK LEVEL: CONSERVATIVE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
<PAGE>
[LOGO]
AMERICAN
CENTURY(R)
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.
--------------------------------------------------------------------------------
Who we are [GRAPHIC OMITTED]
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with 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 remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future 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.
--------------------------------------------------------------------------------
American Century Investments -----------------
P.O. Box 419200 BULK RATE
Kansas City, MO 64141-6200 U.S. POSTAGE PAID
www.americancentury.com AMERICAN CENTURY
COMPANIES
-----------------
0005 American Century Investment Services, Inc.
SH-SAN-20577 (C)2000 American Century Services Corporation
