SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
File No. 2-94608
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 44 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
File No. 811-4165
Amendment No. 46 [X]
(Check appropriate box or boxes.)
AMERICAN CENTURY TARGET MATURITIES TRUST
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(Exact Name of Registrant as Specified in Charter)
4500 MAIN STREET, KANSAS CITY, MO 64111
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (816) 531-5575
CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MO 64111
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(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: February 1, 2008
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on February 1, 2008 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on(date)pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
February 1, 2008
AMERICAN CENTURY INVESTMENTS
Prospectus
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
American Century Investment
Services, Inc., Distributor
[american century investments logo and text logo]
Table of Contents
AN OVERVIEW OF THE FUNDS . . . . . . . . . . . . . . . . . . 2
FUND PERFORMANCE HISTORY . . . . . . . . . . . . . . . . . . 3
FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . 7
OBJECTIVES, STRATEGIES AND RISKS . . . . . . . . . . . . . . 9
BASICS OF FIXED-INCOME INVESTING . . . . . . . . . . . . . . 12
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 14
INVESTING DIRECTLY WITH AMERICAN CENTURY . . . . . . . . . . 16
INVESTING THROUGH A FINANCIAL INTERMEDIARY . . . . . . . . . 18
ADDITIONAL POLICIES AFFECTING YOUR INVESTMENT . . . . . . . .19
SHARE PRICE AND DISTRIBUTIONS . . . . . . . . . . . . . . . .23
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
MULTIPLE CLASS INFORMATION . . . . . . . . . . . . . . . . . 27
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . 28
[GRAPHIC OF TRIANGLE]
THIS SYMBOL IS USED THROUGHOUT THE BOOK TO HIGHLIGHT
DEFINITIONS OF KEY INVESTMENT TERMS AND TO PROVIDE
OTHER HELPFUL INFORMATION.
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.
AN OVERVIEW OF THE FUNDS
WHAT IS THE FUNDS' INVESTMENT OBJECTIVE?
The funds seek the highest return consistent with investment in U.S. Treasury
securities.
WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
The funds invest primarily in zero-coupon U.S. Treasury securities and their
equivalents. Each fund invests in different maturities of these DEBT SECURITIES
and has different interest rate risks. The following chart shows the differences
among the funds' primary investments and principal risks. It is designed to help
you compare these funds with each other; it should not be used to compare these
funds with other mutual funds.
[GRAPHIC OF TRIANGLE]
DEBT SECURITIES INCLUDE FIXED-INCOME INVESTMENTS SUCH
AS NOTES, BONDS, COMMERCIAL PAPER AND U.S. TREASURY SECURITIES.
PRIMARY
FUND INVESTMENTS PRINCIPAL RISKS
------------------------------------------------------------------------------
Shorter Term Target 2010 Zero-coupon Lowest interest
Less Volatile U.S. Treasury rate risk
securities*
----------------------------------------------------------
Target 2015 Zero-coupon Medium interest
U.S. Treasury rate risk
securities*
----------------------------------------------------------
Target 2020 Zero-coupon High interest
U.S. Treasury rate risk
securities*
----------------------------------------------------------
Longer Term Target 2025 Zero-coupon Highest interest
More Volatile U.S. Treasury rate risk
securities*
------------------------------------------------------------------------------
*INCLUDING ZERO-COUPON U.S. TREASURY EQUIVALENTS.
Each fund is managed to mature in the year identified in its name; therefore
each fund's weighted average maturity is different. Funds with longer weighted
average maturities have the most volatile share prices.
Each fund will be liquidated near the end of its target maturity year.
Securities issued or guaranteed by the U.S. Treasury and certain U.S. government
agencies or instrumentalities, such as the Government National Mortgage
Association (Ginnie Mae), are supported by the full faith and credit of the U.S.
government. Securities issued or guaranteed by other U.S. government agencies or
instrumentalities, such as the Federal National Mortgage Association (Fannie
Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal
Home Loan Bank are not guaranteed by the U.S. Treasury or supported by the full
faith and credit of the U.S. government. However, these agencies or
instrumentalities are authorized to borrow from the U.S. Treasury to meet their
obligations.
At any given time your shares may be worth less than the price you paid for
them. In other words, it is possible to lose money by investing in the funds.
[GRAPHIC OF TRIANGLE]
AN INVESTMENT IN THE FUNDS IS NOT A BANK DEPOSIT, AND IT IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC) OR ANY OTHER GOVERNMENT AGENCY.
A more detailed description of the funds' investment strategies and risks may be
found under the heading OBJECTIVES, STRATEGIES AND RISKS, which begins on page
9.
------
2
FUND PERFORMANCE HISTORY
TARGET 2010 FUND, TARGET 2015 FUND,
TARGET 2020 FUND, TARGET 2025 FUND
Annual Total Returns
The following bar charts show the performance of the funds' Investor Class
shares for each of the last 10 calendar years. They indicate the volatility of
the funds' historical returns from year to year. Account fees are not reflected
in the charts below. If they had been included, returns would be lower than
those shown. The returns of the funds' other class of shares will differ from
those shown in the chart, depending on the expenses of that class.
TARGET 2010 FUND - INVESTOR CLASS
The highest and lowest quarterly returns for the periods reflected in the bar
chart are:
HIGHEST LOWEST
--------------------------------------------------------------------------------
Target 2010 11.97% (3Q 2002) -5.42% (1Q 1999)
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TARGET 2015 FUND - INVESTOR CLASS
The highest and lowest quarterly returns for the periods reflected in the bar
chart are:
HIGHEST LOWEST
--------------------------------------------------------------------------------
Target 2015 15.81% (3Q 2002) -6.67% (1Q 1999)
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------
3
TARGET 2020 FUND - INVESTOR CLASS
The highest and lowest quarterly returns for the periods reflected in the bar
chart are:
HIGHEST LOWEST
--------------------------------------------------------------------------------
Target 2020 17.75% (3Q 2002) -8.38% (1Q 1999)
--------------------------------------------------------------------------------
TARGET 2025 FUND - INVESTOR CLASS
The highest and lowest quarterly returns for the periods reflected in the bar
chart are:
HIGHEST LOWEST
--------------------------------------------------------------------------------
Target 2025 20.36% (3Q 2002) -9.68% (1Q 1999)
--------------------------------------------------------------------------------
Average Annual Total Returns
The following tables show the average annual total returns of the funds'
Investor Class shares calculated three different ways. Additional tables show
the average annual total returns of the funds' other share class calculated
before the impact of taxes.
Return Before Taxes shows the actual change in the value of fund shares over the
time periods shown, but does not reflect the impact of taxes on fund
distributions or the sale of fund shares. The two after-tax returns take into
account taxes that may be associated with owning fund shares. Return After Taxes
on Distributions is a fund's actual performance, adjusted by the effect of taxes
on distributions made by the fund during the periods shown. Return After Taxes
on Distributions and Sale of Fund Shares is further adjusted to reflect the tax
impact on any change in the value of fund shares as if they had been sold on the
last day of the period.
After-tax returns are calculated using the historical highest federal marginal
income tax rates and do not reflect the impact of state and local taxes. Actual
after-tax
------
4
returns depend on an investor's tax situation and may differ from those shown.
After-tax returns shown are not relevant to investors who hold fund shares
through tax-deferred arrangements such as 401(k) plans or IRAs. After-tax
returns are shown only for Investor Class shares. After-tax returns for the
other share class will vary.
The benchmarks are unmanaged indices (except as noted) that have no operating
costs and are included in the table for performance comparison.
INVESTOR CLASS
FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2007 1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Target 2010
Return Before Taxes 8.39% 3.95% 6.41%
Return After Taxes on Distributions 6.66% 1.98% 4.16%
Return After Taxes on Distributions 5.71% 2.33% 4.21%
and Sale of Fund Shares
11/15/2010 STRIPS Issue(1) 9.19% 4.20% 6.94%
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.16%
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
--------------------------------------------------------------------------------
Target 2015
Return Before Taxes 10.09% 5.99% 7.30%
Return After Taxes on Distributions 8.45% 4.04% 5.22%
Return After Taxes on Distributions 6.54% 4.05% 5.05%
and Sale of Fund Shares
11/15/2015 STRIPS Issue(1) 10.46% 6.06% 7.79%
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.16%
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
--------------------------------------------------------------------------------
Target 2020
Return Before Taxes 9.55% 7.10% 7.68%
Return After Taxes on Distributions 7.62% 5.02% 4.29%
Return After Taxes on Distributions 6.58% 5.00% 4.73%
and Sale of Fund Shares
11/15/2020 STRIPS Issue(1) 9.91% 7.12% 8.17%
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.16%
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
--------------------------------------------------------------------------------
Target 2025
Return Before Taxes 9.43% 8.00% 8.24%
Return After Taxes on Distributions 7.42% 5.59% 5.60%
Return After Taxes on Distributions 6.09% 5.71% 5.65%
and Sale of Fund Shares
Fund benchmark(1)(2) 9.72% 7.92% 8.55%
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.16%
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
--------------------------------------------------------------------------------
(1) EACH TARGET FUND IS DESIGNED TO PERFORM LIKE A ZERO-COUPON U.S.
TREASURY SECURITY WITH THE SAME TERM TO MATURITY AS THE FUND. THE STRIPS
ISSUES LISTED IN THIS TABLE ARE U.S. TREASURY ZERO-COUPON SECURITIES WITH
MATURITY DATES SIMILAR TO THE RESPECTIVE FUND. THE STRIPS ISSUES ARE NOT
INDICES, BUT ARE IMPORTANT BENCHMARKS OF THE TARGET FUNDS' PERFORMANCE.
(2) THE BENCHMARK WAS AN 8/15/2025 STRIPS ISSUE FROM INCEPTION THROUGH
JANUARY 1998, WHEN IT WAS CHANGED TO AN 11/15/2025 STRIPS ISSUE.
------
5
ADVISOR CLASS
LIFE OF
FOR THE CALENDAR YEAR ENDED DECEMBER 31, 2007 1 YEAR 5 YEARS CLASS(1)
------------------------------------------------------------------------------
Target 2010
Return Before Taxes 8.12% 3.69% 5.23%
11/15/2010 STRIPS Issue(2) 9.19% 4.20% 5.94%(3)
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 6.43%(3)
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
------------------------------------------------------------------------------
Target 2015
Return Before Taxes 9.82% 5.72% 8.10%
11/15/2015 STRIPS Issue(2) 10.46% 6.06% 9.04%(4)
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.87%(4)
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
------------------------------------------------------------------------------
Target 2020
Return Before Taxes 9.26% 6.83% 6.50%
11/15/2020 STRIPS Issue(2) 9.91% 7.12% 7.28%(3)
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 6.43%(3)
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
------------------------------------------------------------------------------
Target 2025
Return Before Taxes 9.16% 7.73% 7.61%
11/15/2025 STRIPS Issue(2) 9.72% 7.92% 8.33%(5)
(reflects no deduction
for fees, expenses or taxes)
Merrill Lynch 10+ Year 9.90% 5.64% 7.07%(5)
Treasury Total Return Index
(reflects no deduction
for fees, expenses or taxes)
------------------------------------------------------------------------------
(1) THE INCEPTION DATES FOR THE ADVISOR CLASS ARE: TARGET 2010: OCTOBER
20, 1998; TARGET 2015: JULY 23, 1999; TARGET 2020: OCTOBER 19, 1998; AND
TARGET 2025: JUNE 1, 1998. ONLY CLASSES WITH PERFORMANCE HISTORY FOR LESS
THAN 10 YEARS SHOW RETURNS FOR LIFE OF CLASS.
(2) EACH TARGET FUND IS DESIGNED TO PERFORM LIKE A ZERO-COUPON U.S.
TREASURY SECURITY WITH THE SAME TERM TO MATURITY AS THE FUND. THE STRIPS
ISSUES LISTED IN THIS TABLE ARE U.S. TREASURY ZERO-COUPON SECURITIES WITH
MATURITY DATES SIMILAR TO THE RESPECTIVE FUND. THE STRIPS ISSUES ARE NOT
INDICES, BUT ARE IMPORTANT BENCHMARKS OF THE TARGET FUNDS' PERFORMANCE.
(3) SINCE OCTOBER 31, 1998, THE DATE CLOSEST TO THE CLASS'S INCEPTION FOR
WHICH DATA IS AVAILABLE.
(4) SINCE JULY 31, 1999, THE DATE CLOSEST TO THE CLASS'S INCEPTION FOR
WHICH DATA IS AVAILABLE.
(5) SINCE MAY 31, 1998, THE DATE CLOSEST TO THE CLASS'S INCEPTION FOR
WHICH DATA IS AVAILABLE.
Performance information is designed to help you see how fund returns can vary.
Keep in mind that past performance (before and after taxes) does not predict how
a fund will perform in the future.
For current performance information, including yields, please call us or visit
americancentury.com.
------
6
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the same class of shares of other American Century funds
* to redeem your shares, other than a $10 fee to redeem by wire
The following tables describe the fees and expenses you may pay if you buy and
hold shares of the funds.
--------------------------------------------------------------------------------
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Investor Class (all funds)
--------------------------------------------------------------------------------
Maximum Account Maintenance Fee $25(1)
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
DISTRIBUTION TOTAL ANNUAL
MANAGEMENT AND SERVICE OTHER FUND OPERATING
FEE(2) (12B-1) FEES(3) EXPENSES(4) EXPENSES
--------------------------------------------------------------------------------
Target 2010
Investor Class 0.56% None 0.01% 0.57%
--------------------------------------------------------------------------------
Advisor Class 0.56%(5) 0.25%(6) 0.01% 0.82%
--------------------------------------------------------------------------------
Target 2015
Investor Class 0.56% None 0.01% 0.57%
--------------------------------------------------------------------------------
Advisor Class 0.56%(5) 0.25%(6) 0.01% 0.82%
--------------------------------------------------------------------------------
Target 2020
Investor Class 0.56% None 0.01% 0.57%
--------------------------------------------------------------------------------
Advisor Class 0.56%(5) 0.25%(6) 0.01% 0.82%
--------------------------------------------------------------------------------
Target 2025
Investor Class 0.56% None 0.01% 0.57%
--------------------------------------------------------------------------------
Advisor Class 0.56%(5) 0.25%(6) 0.01% 0.82%
--------------------------------------------------------------------------------
(1) APPLIES ONLY TO INVESTORS WHOSE TOTAL ELIGIBLE INVESTMENTS WITH
AMERICAN CENTURY ARE LESS THAN $10,000. SEE Account Maintenance Fee UNDER
Investing Directly with American Century FOR MORE DETAILS.
(2) THE FUNDS PAY THE ADVISOR A SINGLE UNIFIED MANAGEMENT FEE FOR
ARRANGING ALL SERVICES NECESSARY FOR THE FUNDS TO OPERATE. THE FEES SHOWN
ARE BASED ON ASSETS DURING THE FUNDS' MOST RECENT FISCAL YEAR. THE FUNDS
HAVE STEPPED FEE SCHEDULES. AS A RESULT, THE FUNDS' UNIFIED MANAGEMENT FEE
RATES GENERALLY DECREASE AS FUND ASSETS INCREASE AND INCREASE AS FUND
ASSETS DECREASE. FOR MORE INFORMATION ABOUT THE UNIFIED MANAGEMENT FEE, SEE
The Investment Advisor UNDER Management.
(3) THE 12B-1 FEE IS DESIGNED TO PERMIT INVESTORS TO PURCHASE SHARES
THROUGH BROKER-DEALERS, BANKS, INSURANCE COMPANIES AND OTHER FINANCIAL
INTERMEDIARIES. THE FEE MAY BE USED TO COMPENSATE SUCH FINANCIAL
INTERMEDIARIES FOR DISTRIBUTION AND OTHER SHAREHOLDER SERVICES. FOR MORE
INFORMATION, SEE Multiple Class Information AND Service, Distribution and
Administrative Fees, PAGE 27.
(4) OTHER EXPENSES INCLUDE THE FEES AND EXPENSES OF THE FUNDS' INDEPENDENT
TRUSTEES AND THEIR LEGAL COUNSEL, AS WELL AS INTEREST.
(5) THE UNIFIED MANAGEMENT FEE HAS BEEN RESTATED TO REFLECT THE INCREASE
IN THE FEE APPROVED BY THE FUNDS' SHAREHOLDERS EFFECTIVE DECEMBER 3, 2007.
(6) THE 12B-1 FEE HAS BEEN RESTATED TO REFLECT THE DECREASE IN THE FEE
EFFECTIVE DECEMBER 3, 2007.
------
7
EXAMPLE
The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Of
course, your actual costs may be higher or lower. Assuming you . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Target 2010
Investor Class $58 $183 $319 $714
--------------------------------------------------------------------------------
Advisor Class $84 $262 $456 $1,014
--------------------------------------------------------------------------------
Target 2015
Investor Class $58 $183 $319 $714
--------------------------------------------------------------------------------
Advisor Class $84 $262 $456 $1,014
--------------------------------------------------------------------------------
Target 2020
Investor Class $58 $183 $319 $714
--------------------------------------------------------------------------------
Advisor Class $84 $262 $456 $1,014
--------------------------------------------------------------------------------
Target 2025
Investor Class $58 $183 $319 $714
--------------------------------------------------------------------------------
Advisor Class $84 $262 $456 $1,014
--------------------------------------------------------------------------------
------
8
OBJECTIVES, STRATEGIES AND RISKS
TARGET 2010 FUND
TARGET 2015 FUND
TARGET 2020 FUND
TARGET 2025 FUND
WHAT IS THE FUNDS' INVESTMENT OBJECTIVE?
The funds seek the highest return consistent with investment in U.S. Treasury
securities.
HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?
Each fund invests primarily in zero-coupon U.S. Treasury securities and their
equivalents, and may invest up to 20% of its assets in AAA-rated zero-coupon
U.S. government agency securities. Each fund is designed to provide an
investment experience that is similar to a direct investment in a zero-coupon
U.S. Treasury security.
A description of the policies and procedures with respect to the disclosure of
the funds' portfolio securities is available in the statement of additional
information.
WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?
Each fund is managed to mature in the year identified in its name; therefore,
each fund's weighted average maturity is different. Funds with longer weighted
average maturities have the most volatile share prices. For example, Target 2025
has the longest weighted average maturity, and its share price will fluctuate
the most.
WHAT ARE ZERO-COUPON SECURITIES?
Zero-coupon securities make no periodic interest or principal payments. Instead,
they trade at a deep discount to their face value and all of the interest and
principal is paid when the securities mature. Some zero-coupon securities are
created by separating the interest and principal payment obligations of a
traditional coupon-bearing bond. Each payment obligation becomes a separate
zero-coupon security. Zero-coupon U.S. Treasury and U.S. government agency
securities are created by financial institutions (such as broker-dealers), the
U.S. Treasury and other agencies of the federal government. The U.S. Treasury
and other agencies of the federal government may also issue zero-coupon
securities directly.
Zero-coupon U.S. Treasury securities (Treasury zeros) are created by separating
a Treasury bond's interest and principal payment obligations. The important
characteristic of Treasury zeros is that payment of the final maturity value is
an obligation of the U.S. Treasury and is backed by the full faith and credit of
the U.S. government.
Zero-coupon U.S. government agency securities (agency zeros) operate in all
respects like Treasury zeros, except that they are created by separating the
interest and principal payment obligations of bonds issued by the agency. Unlike
Treasury zeros, payment of the final maturity value is the obligation of the
issuing agency. If the agency zeros are ultimately backed by securities or
payment obligations of the U.S. Treasury and are generally considered by the
market to be of comparable credit quality, the manager considers them Treasury
zero equivalents. Otherwise, the manager will limit purchases of such agency
zeros to those that receive the highest rating (AAA) by an independent rating
organization and will further limit such investments to 20% of a fund's assets.
------
9
Zero-coupon securities are beneficial for investors who wish to invest for a
fixed period of time at a selected rate. When an investor purchases a
traditional coupon-bearing bond, it is paid periodic interest at a predetermined
rate. This interest payment must be reinvested elsewhere. However, the investor
may not be able to reinvest this interest payment in an investment that has a
return similar to a traditional coupon-bearing bond. This is called reinvestment
risk. Because zero-coupon securities do not pay interest periodically, investors
in zero-coupon securities are not exposed to reinvestment risk.
HOW IS AN INVESTMENT IN THE FUNDS LIKE AN INVESTMENT IN ZERO-COUPON U.S.
TREASURY SECURITIES?
The investment performance of the funds is designed to be similar to an
investment in zero-coupon U.S. Treasury securities. If you invest in a fund,
reinvest all distributions and hold your shares until the fund is liquidated,
your investment experience should be similar to that of an investment in a
zero-coupon U.S. Treasury security with the same term to maturity as the fund.
Each fund is managed to provide an investment return that will not differ
substantially from the ANTICIPATED GROWTH RATE (AGR) calculated on the day the
shares were purchased. Each fund also is managed to provide maturity value that
will not differ substantially from the ANTICIPATED VALUE AT MATURITY (AVM)
calculated on the day the shares were purchased.
[GRAPHIC OF TRIANGLE]
A FUND'S ANTICIPATED GROWTH RATE IS AN ESTIMATE OF THE ANNUALIZED
RATE OF GROWTH OF THE FUND THAT AN INVESTOR MAY EXPECT FROM THE
PURCHASE DATE TO THE FUND'S WEIGHTED AVERAGE MATURITY DATE.
[GRAPHIC OF TRIANGLE]
THE ANTICIPATED VALUE AT MATURITY IS AN ESTIMATE OF A FUND'S NET
ASSET VALUE AS OF THE FUND'S WEIGHTED AVERAGE MATURITY DATE. IT IS BASED
ON THE MATURITY VALUES OF THE ZERO-COUPON SECURITIES HELD BY THE FUND.
The advisor calculates each fund's AGR and AVM every business day. AGR and AVM
calculations assume, among other factors, that the fund's operating expenses (as
a percentage of the fund's assets) and composition of securities held by each
fund remain constant for the life of the fund. While many factors can influence
each fund's daily AGR and AVM, they tend to fluctuate within narrow ranges. The
following table shows how each fund's AVM for the Investor Class has fluctuated
in the last five years. The AVM for the Advisor Class of each fund will differ
from that of the Investor Class, depending on the expenses of that class.
Anticipated Values at Maturity
--------------------------------------------------------------------------------
9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007
--------------------------------------------------------------------------------
Target 2010 $105.22 $105.59 $105.62 $105.22 $105.39
--------------------------------------------------------------------------------
Target 2015 $112.88 $113.35 $113.00 $113.48 $113.32
--------------------------------------------------------------------------------
Target 2020 $107.48 $108.07 $108.21 $108.21 $107.97
--------------------------------------------------------------------------------
Target 2025 $117.43 $118.37 $116.83 $116.72 $117.85
--------------------------------------------------------------------------------
[GRAPHIC OF TRIANGLE]
THIS TABLE IS DESIGNED TO SHOW THE NARROW RANGES IN WHICH EACH FUND'S
AVM VARIES OVER TIME. THERE IS NO GUARANTEE THAT A FUND'S AVM WILL
FLUCTUATE AS LITTLE IN THE FUTURE.
------
10
WHAT HAPPENS WHEN A FUND REACHES ITS MATURITY YEAR?
* The portfolio managers may begin buying traditional coupon-bearing
securities consistent with a fund's investment objective and strategy.
* As a fund's zero-coupon securities mature, the proceeds from the
retirement of these securities may be invested in zeros, traditional
coupon-bearing debt securities and cash equivalent securities.
* Each fund will be liquidated near the end of its maturity year.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
Because the funds have different weighted average maturities, each fund will
respond differently to changes in interest rates. Funds with longer weighted
average maturities are generally more sensitive to interest rate changes. When
interest rates rise, the funds' share values will decline, but the share values
of funds with longer weighted average maturities generally will decline further.
At any given time your shares may be worth less than the price you paid for
them. In other words, it is possible to lose money by investing in the funds.
While we recommend that shareholders hold their investment in a fund until the
fund is liquidated, we do not restrict your (or any other shareholders) ability
to redeem shares. When a fund's shareholders redeem their shares before the
target maturity year, unanticipated capital gains or losses may result. The fund
will distribute these capital gains and losses to all shareholders.
The portfolio managers adhere to investment policies that are designed to
provide an investment that is similar to investing in a zero-coupon U.S.
Treasury security that matures in the year identified in the fund's name.
However, an investment in the funds involves different risks. A precise forecast
of a fund's final maturity value and yield to maturity is not possible.
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11
BASICS OF FIXED-INCOME INVESTING
DEBT SECURITIES
When a fund buys a debt security, also called a fixed-income security, it is
essentially lending money to the security's issuer. Notes, bonds, commercial
paper and U.S. Treasury securities are examples of debt securities. After the
debt security is first sold by the issuer, it may be bought and sold by other
investors. The price of the debt security may rise or fall based on many
factors, including changes in interest rates, liquidity and credit quality.
The portfolio managers decide which debt securities to buy and sell by
* determining which debt securities help a fund meet its maturity
requirements
* identifying debt securities that satisfy a fund's credit quality standards
* evaluating current economic conditions and assessing the risk of inflation
* evaluating special features of the debt securities that may make them more
or less attractive
WEIGHTED AVERAGE MATURITY
Like most loans, debt securities eventually must be repaid or refinanced at some
date. This date is called the maturity date. The number of days left to a debt
security's maturity date is called the remaining maturity. The longer a debt
security's remaining maturity, generally the more sensitive its price is to
changes in interest rates.
Because a bond fund will own many debt securities, the portfolio managers
calculate the average of the remaining maturities of all the debt securities the
fund owns to evaluate the interest rate sensitivity of the entire portfolio.
This average is weighted according to the size of the fund's individual holdings
and is called the weighted average maturity. The following chart shows how
portfolio managers would calculate the weighted average maturity for a fund that
owned only two debt securities.
AMOUNT OF PERCENT OF REMAINING WEIGHTED
SECURITY OWNED PORTFOLIO MATURITY MATURITY
--------------------------------------------------------------------------------
Debt Security A $100,000 25% 4 years 1 year
--------------------------------------------------------------------------------
Debt Security B $300,000 75% 12 years 9 years
--------------------------------------------------------------------------------
Weighted Average Maturity 10 years
--------------------------------------------------------------------------------
TYPES OF RISK
The basic types of risk the funds face are described below.
Interest Rate Risk
Generally, interest rates and the prices of debt securities move in opposite
directions. When interest rates fall, the prices of most debt securities rise;
when interest rates rise, prices fall. Because the funds invest primarily in
debt securities, changes in interest rates will affect the funds' performance.
This sensitivity to interest rate changes is called interest rate risk.
The degree to which interest rate changes affect fund performance varies and is
related to the weighted average maturity of a particular fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true.
The following table shows the likely effect of a 1% (100 basis points) increase
in interest rates on the price of 7% coupon bonds of differing maturities:
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12
REMAINING MATURITY CURRENT PRICE PRICE AFTER 1% INCREASE CHANGE IN PRICE
--------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
--------------------------------------------------------------------------------
3 years $100.00 $97.38 -2.62%
--------------------------------------------------------------------------------
10 years $100.00 $93.20 -6.80%
--------------------------------------------------------------------------------
30 years $100.00 $88.69 -11.31%
--------------------------------------------------------------------------------
Credit Risk
Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions and make interest and principal payments on
time. Generally, a lower credit rating indicates a greater risk of non-payment.
A lower rating also may indicate that the issuer has a more senior series of
debt securities, which means that if the issuer has difficulties making its
payments, the more senior series of debt is first in line for payment.
Credit quality may be lower when the issuer has any of the following: a high
debt level, a short operating history, a difficult, competitive environment, or
a less stable cash flow.
The portfolio managers do not invest solely on the basis of a debt security's
credit rating; they also consider other factors, including potential returns.
Higher credit ratings usually mean lower interest rate payments, so the managers
often purchase debt securities that aren't the highest rated to increase return.
If a fund purchases lower-rated debt securities, it assumes additional credit
risk.
Strictly speaking, U.S. Treasury securities are not "rated." However, U.S.
Treasury securities are backed by the full faith and credit of the United
States, and are considered among the safest securities in the world. The rating
on U.S. Treasury securities is, therefore, considered to be equivalent to a AAA
rating.
Liquidity Risk
Debt securities can become difficult to sell, or less liquid, for a variety of
reasons, such as lack of an active trading market. The chance that a fund will
have difficulty selling its debt securities is called liquidity risk.
A COMPARISON OF BASIC RISK FACTORS
The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.
INTEREST RATE RISK CREDIT RISK(1) LIQUIDITY RISK(2)
--------------------------------------------------------------------------------
Target 2010 Lowest Low Low
--------------------------------------------------------------------------------
Target 2015 Medium Low Low
--------------------------------------------------------------------------------
Target 2020 High Low Low
--------------------------------------------------------------------------------
Target 2025 Highest Low Low
--------------------------------------------------------------------------------
(1) BECAUSE THE FUNDS ALL INVEST PRIMARILY IN ZERO-COUPON U.S. TREASURY
SECURITIES AND THEIR EQUIVALENTS, THERE IS NO DIFFERENCE IN CREDIT RISK.
U.S. TREASURY SECURITIES ARE CONSIDERED AMONG THE SAFEST SECURITIES IN THE
WORLD BECAUSE THEY ARE BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED
STATES.
(2) THE TREASURY MARKET IS CONSIDERED THE MOST LIQUID IN THE WORLD.
The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, please review the statement of additional information before making
an investment.
------
13
MANAGEMENT
WHO MANAGES THE FUNDS?
The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than three-fourths of the trustees are independent of the funds' advisor;
that is, they have never been employed by and have no financial interest in the
advisor or any of its affiliated companies (other than as shareholders of
American Century funds).
THE INVESTMENT ADVISOR
The funds' investment advisor is American Century Investment Management, Inc.
(the advisor). The advisor has been managing mutual funds since 1958 and is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.
The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.
For the services it provides to the funds, the advisor receives a unified
management fee based on a percentage of the daily net assets of each class of
shares of the funds. The management fee is calculated daily and paid monthly in
arrears. Out of each fund's fee, the advisor pays all expenses of managing and
operating that fund except brokerage expenses, taxes, interest, fees and
expenses of the independent trustees (including legal counsel fees), and
extraordinary expenses. A portion of each fund's management fee may be paid by
the fund's advisor to unaffiliated third parties who provide recordkeeping and
administrative services that would otherwise be performed by an affiliate of the
advisor.
The percentage rate used to calculate the management fee for each class of
shares of a fund is determined daily using a two-component formula that takes
into account (i) the daily net assets of the accounts managed by the advisor
that are in the same broad investment category as the funds (the "Category Fee")
and (ii) the assets of all funds in the American Century family of funds (the
"Complex Fee"). The statement of additional information contains detailed
information about the calculation of the management fee.
MANAGEMENT FEES PAID BY THE FUNDS
TO THE ADVISOR AS A PERCENTAGE OF AVERAGE
NET ASSETS FOR THE MOST RECENT FISCAL INVESTOR ADVISOR
YEAR ENDED SEPTEMBER 30, 2007 CLASS CLASS
--------------------------------------------------------------------------------
Target 2010 0.56% 0.31%
--------------------------------------------------------------------------------
Target 2015 0.56% 0.31%
--------------------------------------------------------------------------------
Target 2020 0.56% 0.31%
--------------------------------------------------------------------------------
Target 2025 0.56% 0.31%
--------------------------------------------------------------------------------
A discussion regarding the basis for the Board of Trustees' approval of the
funds' investment advisory contract with the advisor is available in the funds'
report to shareholders dated September 30, 2007.
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14
THE FUND MANAGEMENT TEAM
The advisor uses teams of portfolio managers and analysts, organized by broad
investment categories such as money markets, corporate bonds, government bonds
and municipal bonds, in its management of fixed-income funds. Representatives of
these teams serve on the firm's Macro Strategy Team, which is responsible for
periodically adjusting the funds' strategic investment parameters based on
economic and market conditions. The funds' lead portfolio managers are
responsible for security selection and portfolio construction for the funds
within these strategic parameters, as well as compliance with stated investment
objectives and cash flow monitoring. Other members of the investment team
provide research and analytical support but generally do not make day-to-day
investment decisions for the funds.
The individuals listed below are primarily responsible for the day-to-day
management of the funds described in this prospectus.
ROBERT V. GAHAGAN
(LEAD PORTFOLIO MANAGER AND MACRO STRATEGY TEAM REPRESENTATIVE)
Mr. Gahagan, Senior Vice President and Senior Portfolio Manager, has been a
member of the team that manages the funds since December 2001. He joined
American Century in February 1983 and became a portfolio manager in January
1991. He has a bachelor's degree in economics and an MBA from the University of
Missouri - Kansas City.
SETH B. PLUNKETT (LEAD PORTFOLIO MANAGER)
Mr. Plunkett, Portfolio Manager, has been a member of the team that manages the
funds since February 2007. He joined American Century in 1999, became a
portfolio trading associate in September 2000 and a fixed-income trader in
February 2003. He became a portfolio manager in March 2007. He has a bachelor of
science in biology from George Mason University.
The statement of additional information provides additional information about
the other accounts managed by the portfolio managers, if any, the structure of
their compensation, and their ownership of fund securities.
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the statement of additional
information and the investment objectives of the funds may not be changed
without shareholder approval. The Board of Trustees and/or the advisor may
change any other policies and investment strategies.
------
15
INVESTING DIRECTLY WITH AMERICAN CENTURY
SERVICES AUTOMATICALLY AVAILABLE TO YOU
Most accounts automatically will have access to the services listed under WAYS
TO MANAGE YOUR ACCOUNT when the account is opened. If you do not want these
services, see CONDUCTING BUSINESS IN WRITING. If you have questions about the
services that apply to your account type, please call us.
CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). By choosing this option, you are not eligible to enroll for
exclusive online account management to waive the account maintenance fee. See
ACCOUNT MAINTENANCE FEE in this section. If you want to add online and telephone
services later, you can complete a Full Services Option form.
ACCOUNT MAINTENANCE FEE
If you hold Investor Class shares of any American Century fund, or Institutional
Class shares of the American Century Diversified Bond fund, in an American
Century account (i.e., not a financial intermediary or retirement plan account),
we may charge you a $12.50 semiannual account maintenance fee if the value of
those shares is less than $10,000. We will determine the amount of your total
eligible investments twice per year, generally the last Friday in October and
April. If the value of those investments is less than $10,000 at that time, we
will automatically redeem shares in one of your accounts to pay the $12.50 fee.
Please note that you may incur tax liability as a result of the redemption. In
determining your total eligible investment amount, we will include your
investments in all PERSONAL ACCOUNTS (including American Century Brokerage
accounts) registered under your Social Security number. We will not charge the
fee as long as you choose to manage your accounts exclusively online. You may
enroll for exclusive online account management on our Web site. To find out more
about exclusive online account management, visit americancentury.com/info/demo.
[GRAPHIC OF TRIANGLE]
PERSONAL ACCOUNTS INCLUDE INDIVIDUAL ACCOUNTS, JOINT ACCOUNTS,
UGMA/UTMA ACCOUNTS, PERSONAL TRUSTS, COVERDELL EDUCATION SAVINGS
ACCOUNTS, IRAS (INCLUDING TRADITIONAL, ROTH, ROLLOVER, SEP-, SARSEP-
AND SIMPLE-IRAS), AND CERTAIN OTHER RETIREMENT ACCOUNTS. IF YOU HAVE
ONLY BUSINESS, BUSINESS RETIREMENT, EMPLOYER-SPONSORED OR AMERICAN
CENTURY BROKERAGE ACCOUNTS, YOU ARE CURRENTLY NOT SUBJECT TO THIS FEE,
BUT YOU MAY BE SUBJECT TO OTHER FEES.
WIRE PURCHASES
CURRENT INVESTORS: If you would like to make a wire purchase into an existing
account, your bank will need the following information. (To invest in a new
fund, please call us first to set up the new account.)
* American Century's bank information: Commerce Bank N.A., Routing No.
101000019, Account No. 2804918
* Your American Century account number and fund name
* Your name
* The contribution year (for IRAs only)
NEW INVESTORS: To make a wire purchase into a new account, please complete an
application prior to wiring money.
------
16
WAYS TO MANAGE YOUR ACCOUNT
ONLINE
--------------------------------------------------------------------------------
americancentury.com
OPEN AN ACCOUNT: If you are a current or new investor, you can open an account
by completing and submitting our online application. Current investors also can
open an account by exchanging shares from another American Century account.
EXCHANGE SHARES: Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS: Make an additional investment into an established
American Century account if you have authorized us to invest from your bank
account.
SELL SHARES*: Redeem shares and proceeds will be electronically transferred to
your authorized bank account.
* ONLINE REDEMPTIONS UP TO $25,000 PER DAY.
IN PERSON
--------------------------------------------------------------------------------
If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.
* 4500 Main Street, Kansas City, Missouri - 8 a.m. to 5 p.m., Monday - Friday
* 4917 Town Center Drive, Leawood, Kansas - 8 a.m. to 5 p.m., Monday - Friday,
8 a.m. to noon, Saturday
* 1665 Charleston Road, Mountain View, California - 8 a.m. to 5 p.m.,
Monday - Friday
BY TELEPHONE
--------------------------------------------------------------------------------
INVESTOR SERVICES REPRESENTATIVE: 1-800-345-2021
BUSINESS, NOT-FOR-PROFIT AND EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533
AUTOMATED INFORMATION LINE: 1-800-345-8765
OPEN AN ACCOUNT: If you are a current investor, you can open an account by
exchanging shares from another American Century account.
EXCHANGE SHARES: Call or use our Automated Information Line if you have
authorized us to accept telephone instructions. The Automated Information Line
is available only to Investor Class shareholders.
MAKE ADDITIONAL INVESTMENTS: Call or use our Automated Information Line if you
have authorized us to invest from your bank account. The Automated Information
Line is available only to Investor Class shareholders.
SELL SHARES: Call a Service Representative.
BY MAIL OR FAX
--------------------------------------------------------------------------------
P.O. Box 419200, Kansas City, MO 64141-6200 - Fax: 816-340-7962
OPEN AN ACCOUNT: Send a signed, completed application and check or money order
payable to American Century Investments.
EXCHANGE SHARES: Send written instructions to exchange your shares from one
American Century account to another.
MAKE ADDITIONAL INVESTMENTS: Send your check or money order for at least $50
with an investment slip or $250 without an investment slip. If you don't have an
investment slip, include your name, address and account number on your check or
money order.
SELL SHARES: Send written instructions or a redemption form to sell shares. Call
a Service Representative to request a form.
AUTOMATICALLY
--------------------------------------------------------------------------------
OPEN AN ACCOUNT: Not available.
EXCHANGE SHARES: Send written instructions to set up an automatic exchange of
your shares from one American Century account to another.
MAKE ADDITIONAL INVESTMENTS: With the automatic investment service, you can
purchase shares on a regular basis. You must invest at least $50 per month per
account.
SELL SHARES: You may sell shares automatically by establishing Check-A-Month or
Automatic Redemption plans.
SEE ADDITIONAL POLICIES AFFECTING YOUR INVESTMENT FOR MORE INFORMATION ABOUT
INVESTING WITH US.
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17
INVESTING THROUGH A FINANCIAL INTERMEDIARY
The funds' Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement plans and for persons purchasing shares through
FINANCIAL INTERMEDIARIES that provide various administrative and distribution
services. For more information regarding employer-sponsored retirement plan
types, please see BUYING AND SELLING FUND SHARES in the statement of additional
information.
[GRAPHIC OF TRIANGLE]
FINANCIAL INTERMEDIARIES INCLUDE BANKS, BROKER-DEALERS,
INSURANCE COMPANIES, PLAN SPONSORS AND FINANCIAL PROFESSIONALS.
Your ability to purchase, exchange, redeem and transfer shares will be affected
by the policies of the financial intermediary through which you do business.
Some policy differences may include
* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments
* trading restrictions
In addition, your financial intermediary may charge a transaction fee for the
purchase or sale of fund shares. Those charges are retained by the financial
intermediary and are not shared with American Century or the fund. Please
contact your financial intermediary or plan sponsor for a complete description
of its policies. Copies of the funds' annual report, semiannual report and
statement of additional information are available from your financial
intermediary or plan sponsor.
The funds have authorized certain financial intermediaries to accept orders on
each fund's behalf. American Century has selling agreements with these financial
intermediaries requiring them to track the time investment orders are received
and to comply with procedures relating to the transmission of orders. Orders
must be received by the financial intermediary on the fund's behalf before the
time the net asset value is determined in order to receive that day's share
price. If those orders are transmitted to American Century and paid for in
accordance with the selling agreement, they will be priced at the net asset
value next determined after your request is received in the form required by the
financial intermediary.
SEE ADDITIONAL POLICIES AFFECTING YOUR INVESTMENT FOR MORE INFORMATION ABOUT
INVESTING WITH US.
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18
ADDITIONAL POLICIES AFFECTING YOUR INVESTMENT
MINIMUM INITIAL INVESTMENT AMOUNTS
Unless otherwise specified below, the minimum initial investment amount to open
an account is $2,500. Financial intermediaries may open an account with $250,
but may require their clients to meet different investment minimums. See
INVESTING THROUGH A FINANCIAL INTERMEDIARY for more information.
--------------------------------------------------------------------------------
Broker-dealer sponsored wrap program accounts
and/or fee-based accounts No minimum
--------------------------------------------------------------------------------
Coverdell Education Savings Account (CESA) $2,000(1)
--------------------------------------------------------------------------------
Employer-sponsored retirement plans No minimum
--------------------------------------------------------------------------------
(1) THE MINIMUM INITIAL INVESTMENT FOR FINANCIAL INTERMEDIARIES IS $250.
FINANCIAL INTERMEDIARIES MAY HAVE DIFFERENT MINIMUMS FOR THEIR CLIENTS.
SUBSEQUENT PURCHASES
There is a $50 minimum for subsequent purchases. See WAYS TO MANAGE YOUR ACCOUNT
for more information about making additional investments directly with American
Century. However, there is no subsequent purchase minimum for financial
intermediaries or employer-sponsored retirement plans, but financial
intermediaries may require their clients to meet different subsequent purchase
requirements.
REDEMPTIONS
Your redemption proceeds will be calculated using the NET ASSET VALUE (NAV) next
determined after we receive your transaction request in good order.
[GRAPHIC OF TRIANGLE]
A FUND'S NET ASSET VALUE, OR NAV, IS THE PRICE OF THE FUND'S SHARES.
However, we reserve the right to delay delivery of redemption proceeds up to
seven days. For example, each time you make an investment with American Century,
there is a seven-day holding period before we will release redemption proceeds
from those shares, unless you provide us with satisfactory proof that your
purchase funds have cleared. Investments by wire generally require only a
one-day holding period. If you change your address, we may require that any
redemption request made within 15 days be submitted in writing and be signed by
all authorized signers with their signatures guaranteed. If you change your bank
information, we may impose a 15-day holding period before we will transfer or
wire redemption proceeds to your bank. Please remember, if you request
redemptions by wire, $10 will be deducted from the amount redeemed. Your bank
also may charge a fee.
In addition, we reserve the right to honor certain redemptions with securities,
rather than cash, as described in the next section.
SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the value of a fund's assets if that amount is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. The portfolio
managers would select these securities from the fund's portfolio.
------
19
We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, you may have to pay
brokerage or other transaction costs to convert the securities to cash.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on a fund and its remaining investors.
REDEMPTION OF SHARES IN ACCOUNTS BELOW MINIMUM
If your account balance falls below the minimum initial investment amount for
any reason other than as a result of market fluctuation, American Century
reserves the right to redeem the shares in the account and send the proceeds to
your address of record. Prior to doing so, we will notify you and give you 90
days to meet the minimum. Please note that you may incur tax liability as a
result of the redemption.
SIGNATURE GUARANTEES
A signature guarantee - which is different from a notarized signature - is a
warranty that the signature presented is genuine. We may require a signature
guarantee for the following transactions.
* You have chosen to conduct business in writing only and would like to
redeem over $100,000.
* Your redemption or distribution check, Check-A-Month or automatic
redemption is made payable to someone other than the account owners.
* Your redemption proceeds or distribution amount is sent by EFT (ACH or
wire) to a destination other than your personal bank account.
* You are transferring ownership of an account over $100,000.
* You change your address and request a redemption over $100,000 within 15
days.
* You change your bank information and request a redemption within 15 days.
We reserve the right to require a signature guarantee for other transactions, at
our discretion.
MODIFYING OR CANCELING AN INVESTMENT
Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time and to reject any specific investment (including a purchase by
exchange). Additionally, we may refuse a purchase if, in our judgment, it is of
a size that would disrupt the management of a fund.
ABUSIVE TRADING PRACTICES
Short-term trading and other so-called market timing practices are not defined
or explicitly prohibited by any federal or state law. However, short-term
trading and other abusive trading practices may disrupt portfolio management
strategies and harm fund performance. If the cumulative amount of short-term
trading activity is
------
20
significant relative to a fund's net assets, the fund may incur trading costs
that are higher than necessary as securities are first purchased then quickly
sold to meet the redemption request. In such case, the fund's performance could
be negatively impacted by the increased trading costs created by short-term
trading if the additional trading costs are significant.
Because of the potentially harmful effects of abusive trading practices, the
funds' Board of Trustees has approved American Century's abusive trading
policies and procedures, which are designed to reduce the frequency and effect
of these activities in our funds. These policies and procedures include
monitoring trading activity, imposing trading restrictions on certain accounts,
imposing redemption fees on certain funds, and using fair value pricing when
current market prices are not readily available. Although these efforts are
designed to discourage abusive trading practices, they cannot eliminate the
possibility that such activity will occur. American Century seeks to exercise
its judgment in implementing these tools to the best of its ability in a manner
that it believes is consistent with shareholder interests.
American Century uses a variety of techniques to monitor for and detect abusive
trading practices. These techniques may vary depending on the type of fund, the
class of shares or whether the shares are held directly or indirectly with
American Century. They may change from time to time as determined by American
Century in its sole discretion. To minimize harm to the funds and their
shareholders, we reserve the right to reject any purchase order (including
exchanges) from any shareholder we believe has a history of abusive trading or
whose trading, in our judgment, has been or may be disruptive to the funds. In
making this judgment, we may consider trading done in multiple accounts under
common ownership or control.
Currently, for shares held directly with American Century, we may deem the sale
of all or a substantial portion of a shareholder's purchase of fund shares to be
abusive if the sale is made
* within seven days of the purchase, or
* within 30 days of the purchase, if it happens more than once per year.
To the extent practicable, we try to use the same approach for defining abusive
trading for shares held through financial intermediaries. American Century
reserves the right, in its sole discretion, to identify other trading practices
as abusive and to modify its monitoring and other practices as necessary to deal
with novel or unique abusive trading practices.
In addition, American Century reserves the right to accept purchases and
exchanges in excess of the trading restrictions discussed above if it believes
that such transactions would not be inconsistent with the best interests of fund
shareholders or this policy.
American Century's policies do not permit us to enter into arrangements with
fund shareholders that permit such shareholders to engage in frequent purchases
and redemptions of fund shares. Due to the complexity and subjectivity involved
in identifying abusive trading activity and the volume of shareholder
transactions American Century handles, there can be no assurance that American
Century's efforts will identify all trades or trading practices that may be
considered abusive. American Century monitors aggregate trades placed in omnibus
accounts and works with financial intermediaries to identify shareholders
engaging in abusive trading practices and impose restrictions to discourage such
practices. Because American Century relies on financial intermediaries to
provide information and impose restrictions, our ability to monitor and
discourage abusive trading practices in omnibus accounts may be dependent upon
the intermediaries' timely performance of such duties.
------
21
YOUR RESPONSIBILITY FOR UNAUTHORIZED TRANSACTIONS
American Century and its affiliated companies use procedures reasonably designed
to confirm that telephone, electronic and other instructions are genuine. These
procedures include recording telephone calls, requesting personalized security
codes or other information, and sending confirmation of transactions. If we
follow these procedures, we are not responsible for any losses that may occur
due to unauthorized instructions. For transactions conducted over the Internet,
we recommend the use of a secure Internet browser. In addition, you should
verify the accuracy of your confirmation statements immediately after you
receive them.
A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce the amount of mail you receive from us, we may deliver a single copy
of certain investor documents (such as shareholder reports and prospectuses) to
investors who share an address, even if accounts are registered under different
names. If you prefer to receive multiple copies of these documents individually
addressed, please call us or your financial professional. For American Century
Brokerage accounts, please call 1-888-345-2071.
RIGHT TO CHANGE POLICIES
We reserve the right to change any stated investment requirement, including
those that relate to purchases, exchanges and redemptions. We also may alter,
add or discontinue any service or privilege. Changes may affect all investors or
only those in certain classes or groups. In addition, from time to time we may
waive a policy on a case-by-case basis, as the advisor deems appropriate.
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22
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
American Century will price the fund shares you purchase, exchange or redeem at
the net asset value (NAV) next determined after your order is received and
accepted by the fund's transfer agent, or other financial intermediary with the
authority to accept orders on the fund's behalf. We determine the NAV of each
fund as of the close of regular trading (usually 4 p.m. Eastern time) on the New
York Stock Exchange (NYSE) on each day the NYSE is open. On days when the NYSE
is closed (including certain U.S. national holidays), we do not calculate the
NAV. A fund's NAV is the current value of the fund's assets, minus any
liabilities, divided by the number of shares outstanding.
Each fund values portfolio securities for which market quotations are readily
available at their market price. The fund may use pricing services to assist in
the determination of market value. Unlisted securities for which market
quotations are readily available are valued at the last quoted sale price or the
last quoted ask price, as applicable, except that debt obligations with 60 days
or less remaining until maturity may be valued at amortized cost.
If the fund determines that the market price for a portfolio security is not
readily available or that the valuation methods mentioned above do not reflect
the security's fair value, such security is valued as determined in good faith
by the fund's board or its designee, in accordance with procedures adopted by
the fund's board. Circumstances that may cause the fund to use alternate
procedures to value a security include, but are not limited to, a debt security
has been declared in default or trading in a security has been halted during the
trading day.
If such circumstances occur, the fund will fair value the security if the fair
valuation would materially impact the fund's NAV. While fair value
determinations involve judgments that are inherently subjective, these
determinations are made in good faith in accordance with procedures adopted by
the fund's board.
The effect of using fair value determinations is that the fund's NAV will be
based, to some degree, on security valuations that the board or its designee
believes are fair rather than being solely determined by the market.
With respect to any portion of the fund's assets that are invested in one or
more open-end management investment companies that are registered with the SEC
(known as registered investment companies, or RICs), the fund's NAV will be
calculated based upon the NAVs of such RICs. These RICs are required by law to
explain the circumstances under which they will use fair value pricing and the
effects of using fair value pricing in their prospectuses.
DISTRIBUTIONS
Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a regulated investment company. Qualification as a regulated
investment company means a fund should not be subject to state or federal income
tax on amounts distributed. The distributions generally consist of dividends and
interest received by a fund, as well as CAPITAL GAINS realized by a fund on the
sale of its investment securities. Each fund generally pays distributions from
net income and capital gains, if any, once a year in December. The funds may
make more frequent distributions, if necessary, to comply with Internal Revenue
Code provisions.
[GRAPHIC OF TRIANGLE]
CAPITAL GAINS ARE INCREASES IN THE VALUES OF CAPITAL ASSETS,
SUCH AS STOCK, FROM THE TIME THE ASSETS ARE PURCHASED.
------
23
You will participate in fund distributions when they are declared, starting the
next business day after your purchase is effective. For example, if you purchase
shares on a day that a distribution is declared, you will not receive that
distribution. If you redeem shares, you will receive any distribution declared
on the day you redeem. If you redeem all shares, we will include any
distributions received with your redemption proceeds.
Participants in tax-deferred retirement plans must reinvest all distributions.
For investors investing through taxable accounts, we will reinvest distributions
unless you elect to have dividends and/or capital gains sent to another American
Century account, to your bank electronically, or to your home address or to
another person or address by check.
REVERSE SHARE SPLITS
When a fund pays its distributions, the board also declares a reverse share
split for that fund that exactly offsets the per-share amount of the
distribution. If you reinvest your dividends, this reverse share split means
that you will hold exactly the same number of shares after a dividend as you did
before. This reverse share split makes changes in the fund's share prices behave
like changes in the values of zero-coupon securities.
FUND LIQUIDATION
During a fund's target maturity year, the Board of Trustees will adopt a plan of
liquidation that specifies the last day investors can open a new account, the
last day the fund will accept new investments from existing investors, and the
liquidation date of the fund. During the fund's target maturity year, you will
be asked how you want to receive the proceeds from the liquidation of your
shares. You can choose one of the following
* cash
* shares of another American Century mutual fund
------
24
TAXES
The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also may result when investors sell fund shares
after the net asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.
Taxable Accounts
If you own fund shares through a taxable account, you may be taxed on your
investments if the fund makes distributions or if you sell your fund shares.
Taxability of Distributions
Fund distributions may consist of income, such as dividends and interest earned
by a fund from its investments, or capital gains generated by a fund from the
sale of its investment securities. Distributions of income are taxed as ordinary
income, unless they are designated as QUALIFIED DIVIDEND INCOME and you meet a
minimum required holding period with respect to your shares of the fund, in
which case distributions of income are taxed as long-term capital gains.
[GRAPHIC OF TRIANGLE]
QUALIFIED DIVIDEND INCOME IS A DIVIDEND RECEIVED BY A FUND FROM THE
STOCK OF A DOMESTIC OR QUALIFYING FOREIGN CORPORATION, PROVIDED THAT THE
FUND HAS HELD THE STOCK FOR A REQUIRED HOLDING PERIOD.
For capital gains and for income distributions designated as qualified dividend
income, the following rates apply:
TAX RATE FOR 10% AND TAX RATE FOR
TYPE OF DISTRIBUTION 15% BRACKETS ALL OTHER BRACKETS
--------------------------------------------------------------------------------
Short-term capital gains Ordinary Income Ordinary Income
--------------------------------------------------------------------------------
Long-term capital gains ( 1 year)
and Qualified Dividend Income 5% 15%
--------------------------------------------------------------------------------
If a fund's distributions exceed its taxable income and capital gains realized
during the tax year, all or a portion of the distributions made by the fund in
that tax year will be considered a return of capital. A return of capital
distribution is generally not subject to tax, but will reduce your cost basis in
the fund and result in higher realized capital gains (or lower realized capital
losses) upon the sale of fund shares.
------
25
The tax status of any distributions of capital gains is determined by how long a
fund held the underlying security that was sold, not by how long you have been
invested in the fund, or whether you reinvest your distributions in additional
shares or take them in cash. For taxable accounts, American Century or your
financial intermediary will inform you of the tax status of fund distributions
for each calendar year in an annual tax mailing.
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.
Taxes on Transactions
Your redemptions-including exchanges to other American Century funds-are subject
to capital gains tax. The table above can provide a general guide for your
potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or exchange of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to withholding, we
are required to withhold and pay to the IRS the applicable federal withholding
tax rate on taxable dividends, capital gains distributions and redemption
proceeds.
Buying a Dividend
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The fund distributes those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
------
26
MULTIPLE CLASS INFORMATION
American Century offers the following classes of shares of the funds: Investor
Class and Advisor Class.
The classes have different fees, expenses and/or minimum investment
requirements. The difference in the fee structures between the classes is the
result of their separate arrangements for shareholder and distribution services.
It is not the result of any difference in advisory or custodial fees or other
expenses related to the management of the funds' assets, which do not vary by
class. Different fees and expenses will affect performance.
Except as described below, all classes of shares of a fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges.
Service, Distribution and Administrative Fees
Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay certain expenses associated with the distribution of their shares out of
fund assets. The Advisor Class offered by this prospectus has a 12b-1 plan.
Under the Advisor Class Plan, the funds' Advisor Class pays the distributor an
annual fee of 0.25% of Advisor Class average net assets for distribution and
individual shareholder services, including past distribution services. The
distributor pays all or a portion of such fees to the financial intermediaries
that make Advisor Class shares available. Because these fees may be used to pay
for services that are not related to prospective sales of the funds, the Advisor
Class will continue to make payments under its plan even if it is closed to new
investors. Because these fees are paid out of the funds' assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales charges. For additional
information about the plan and its terms, see MULTIPLE CLASS STRUCTURE in the
statement of additional information.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, the advisor will pay such
service providers a fee for performing those services. Also, the advisor and the
funds' distributor may make payments to intermediaries for various additional
services, other expenses and/or the intermediaries' distribution of the funds
out of their profits or other available sources. Such payments may be made for
one or more of the following: (1) distribution, which may include expenses
incurred by intermediaries for their sales activities with respect to the funds,
such as preparing, printing and distributing sales literature and advertising
materials and compensating registered representatives or other employees of such
financial intermediaries for their sales activities, as well as the opportunity
for the funds to be made available by such intermediaries; (2) shareholder
services, such as providing individual and custom investment advisory services
to clients of the financial intermediaries; and (3) marketing and promotional
services, including business planning assistance, educating personnel about the
funds, and sponsorship of sales meetings, which may include covering costs of
providing speakers, meals and other entertainment. The distributor may sponsor
seminars and conferences designed to educate intermediaries about the funds and
may cover the expenses associated with attendance at such meetings, including
travel costs. These payments and activities are intended to provide an incentive
to intermediaries to sell the funds by educating them about the funds and
helping defray the costs associated with offering the funds. The amount of any
payments described by this paragraph is determined by the advisor or the
distributor, and all such amounts are paid out of the available assets of the
advisor and distributor, and not by you or the funds. As a result, the total
expense ratio of the funds will not be affected by any such payments.
------
27
FINANCIAL HIGHLIGHTS
UNDERSTANDING THE FINANCIAL HIGHLIGHTS
The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years.
On a per-share basis, each table includes as appropriate
* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* reverse share split
* share price at the end of the period
Each table also includes some key statistics for the period as appropriate
* TOTAL RETURN - the overall percentage of return of the fund, assuming the
reinvestment of all distributions
* EXPENSE RATIO - the operating expenses of the fund as a percentage of
average net assets
* NET INCOME RATIO - the net investment income of the fund as a percentage
of average net assets
* PORTFOLIO TURNOVER - the percentage of the fund's investment portfolio
that is replaced during the period
The Financial Highlights have been audited by PricewaterhouseCoopers LLP,
independent registered public accounting firm. Their Report of Independent
Registered Public Accounting Firm and the financial statements are included in
the funds' annual report, which is available upon request.
------
28
TARGET 2010 FUND
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
---------------------------------------------------------------------------------------
PER-SHARE DATA
---------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $90.10 $87.97 $86.70 $84.49 $81.12
------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 4.15 4.04 3.85 3.65 3.45
Net Realized and
Unrealized Gain (Loss) 0.98 (1.91) (2.58) (1.44) (0.08)
------------------------------------------------
Total From Investment Operations 5.13 2.13 1.27 2.21 3.37
------------------------------------------------
Distributions
From Net Investment Income (4.29) (3.85) (3.86) (3.94) (3.46)
From Net Realized Gains (0.24) (0.44) (1.58) (4.52) (2.20)
------------------------------------------------
Total Distributions (4.53) (4.29) (5.44) (8.46) (5.66)
------------------------------------------------
Reverse Share Split 4.53 4.29 5.44 8.46 5.66
------------------------------------------------
Net Asset Value, End of Period $95.23 $90.10 $87.97 $86.70 $84.49
================================================
TOTAL RETURN(2) 5.69% 2.42% 1.47% 2.62% 4.15%
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.57% 0.57% 0.58% 0.58% 0.59%
Ratio of Net Investment
Income to Average Net Assets 4.52% 4.60% 4.39% 4.32% 4.21%
Portfolio Turnover Rate 36% 23% 22% 15% 45%
Net Assets, End of Period
(in thousands) $250,527 $215,810 $211,088 $215,621 $262,825
---------------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. THE TOTAL RETURN OF THE CLASSES MAY NOT
PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT OF
CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET VALUES
WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN DIFFERENCES WOULD
MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE CALCULATION OF NET
ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE WITH SEC
GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE BETWEEN ONE
CLASS AND ANOTHER.
------
29
TARGET 2015 FUND
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
--------------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $77.69 $75.83 $72.10 $67.58 $64.60
------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 3.95 3.70 3.49 3.35 3.09
Net Realized and
Unrealized Gain (Loss) 0.15 (1.84) 0.24 1.17 (0.11)
------------------------------------------------
Total From Investment Operations 4.10 1.86 3.73 4.52 2.98
------------------------------------------------
Distributions
From Net Investment Income (3.82) (3.29) (3.21) (3.64) (2.84)
From Net Realized Gains - (0.65) (1.33) (2.19) (0.16)
------------------------------------------------
Total Distributions (3.82) (3.94) (4.54) (5.83) (3.00)
------------------------------------------------
Reverse Share Split 3.82 3.94 4.54 5.83 3.00
------------------------------------------------
Net Asset Value, End of Period $81.79 $77.69 $75.83 $72.10 $67.58
================================================
TOTAL RETURN(2) 5.28% 2.46% 5.18% 6.69% 4.61%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.57% 0.57% 0.58% 0.58% 0.59%
Ratio of Net Investment
Income to Average Net Assets 5.01% 4.94% 4.68% 4.92% 4.72%
Portfolio Turnover Rate 21% 15% 9% 12% 17%
Net Assets, End of Period
(in thousands) $227,923 $197,387 $199,692 $156,287 $149,266
--------------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. THE TOTAL RETURN OF THE CLASSES MAY NOT
PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT OF
CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET VALUES
WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN DIFFERENCES WOULD
MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE CALCULATION OF NET
ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE WITH SEC
GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE BETWEEN ONE
CLASS AND ANOTHER.
------
30
TARGET 2020 FUND
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
--------------------------------------------------------------------------------------
PER-SHARE DATA
--------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $59.03 $58.06 $52.32 $48.19 $46.23
------------------------------------------------
Income From Investment Operations
Net Investment Income(1) 2.78 2.64 2.46 2.34 2.19
Net Realized and
Unrealized Gain (Loss) (0.75) (1.67) 3.28 1.79 (0.23)
------------------------------------------------
Total From Investment Operations 2.03 0.97 5.74 4.13 1.96
------------------------------------------------
Distributions
From Net Investment Income (2.62) (2.49) (2.38) (2.47) (2.13)
From Net Realized Gains (0.29) (0.55) (0.97) (2.63) (3.37)
------------------------------------------------
Total Distributions (2.91) (3.04) (3.35) (5.10) (5.50)
------------------------------------------------
Reverse Share Split 2.91 3.04 3.35 5.10 5.50
------------------------------------------------
Net Asset Value, End of Period $61.06 $59.03 $58.06 $52.32 $48.19
================================================
TOTAL RETURN(2) 3.44% 1.66% 10.97% 8.57% 4.24%
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.57% 0.57% 0.58% 0.57% 0.59%
Ratio of Net Investment
Income to Average Net Assets 4.68% 4.65% 4.38% 4.83% 4.68%
Portfolio Turnover Rate 49% 15% 10% 26% 45%
Net Assets, End of Period
(in thousands) $199,658 $192,341 $179,410 $173,662 $180,656
--------------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. THE TOTAL RETURN OF THE CLASSES MAY NOT
PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT OF
CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET VALUES
WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN DIFFERENCES WOULD
MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE CALCULATION OF NET
ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE WITH SEC
GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE BETWEEN ONE
CLASS AND ANOTHER.
------
31
TARGET 2025 FUND
Investor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
-------------------------------------------------------------------------------------
PER-SHARE DATA
-------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $51.59 $51.07 $43.80 $39.67 $38.95
-----------------------------------------------
Income From Investment Operations
Net Investment Income(1) 2.28 2.16 1.99 1.90 1.79
Net Realized and
Unrealized Gain (Loss) (1.13) (1.64) 5.28 2.23 (1.07)
-----------------------------------------------
Total From Investment Operations 1.15 0.52 7.27 4.13 0.72
-----------------------------------------------
Distributions
From Net Investment Income (2.26) (1.34) (2.54) (2.08) (2.06)
From Net Realized Gains - (0.35) (6.03) (2.17) (2.36)
-----------------------------------------------
Total Distributions (2.26) (1.69) (8.57) (4.25) (4.42)
-----------------------------------------------
Reverse Share Split 2.26 1.69 8.57 4.25 4.42
-----------------------------------------------
Net Asset Value, End of Period $52.74 $51.59 $51.07 $43.80 $39.67
===============================================
TOTAL RETURN(2) 2.25% 1.02% 16.61% 10.41% 1.85%
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.57% 0.57% 0.58% 0.58% 0.59%
Ratio of Net Investment
Income to Average Net Assets 4.43% 4.40% 4.05% 4.74% 4.64%
Portfolio Turnover Rate 29% 13% 26% 24% 22%
Net Assets, End of Period
(in thousands) $226,358 $306,433 $191,326 $92,440 $151,701
-------------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. TOTAL RETURNS ARE CALCULATED BASED ON THE NET
ASSET VALUE ON THE LAST BUSINESS DAY. THE TOTAL RETURN OF THE CLASSES MAY
NOT PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT
OF CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET
VALUES WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN
DIFFERENCES WOULD MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE
CALCULATION OF NET ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE
WITH SEC GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE
BETWEEN ONE CLASS AND ANOTHER.
------
32
TARGET 2010 FUND
Advisor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
----------------------------------------------------------------------------
PER-SHARE DATA
----------------------------------------------------------------------------
Net Asset Value, Beginning of Period $88.41 $86.54 $85.50 $83.53 $80.41
--------------------------------------
Income From Investment Operations
Net Investment Income(1) 3.85 3.75 3.57 3.39 3.21
Net Realized and
Unrealized Gain (Loss) 0.95 (1.88) (2.53) (1.42) (0.09)
--------------------------------------
Total From Investment Operations 4.80 1.87 1.04 1.97 3.12
--------------------------------------
Distributions
From Net Investment Income (4.06) (3.63) (3.64) (3.72) (3.27)
From Net Realized Gains (0.24) (0.44) (1.58) (4.52) (2.20)
--------------------------------------
Total Distributions (4.30) (4.07) (5.22) (8.24) (5.47)
--------------------------------------
Reverse Share Split 4.30 4.07 5.22 8.24 5.47
--------------------------------------
Net Asset Value, End of Period $93.21 $88.41 $86.54 $85.50 $83.53
======================================
TOTAL RETURN(2) 5.43% 2.16% 1.21% 2.36% 3.88%
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.82% 0.82% 0.83% 0.83% 0.84%
Ratio of Net Investment
Income to Average Net Assets 4.27% 4.35% 4.14% 4.07% 3.96%
Portfolio Turnover Rate 36% 23% 22% 15% 45%
Net Assets, End of Period
(in thousands) $9,308 $5,830 $6,402 $5,096 $3,591
----------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. THE TOTAL RETURN OF THE CLASSES MAY NOT
PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT OF
CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET VALUES
WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN DIFFERENCES WOULD
MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE CALCULATION OF NET
ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE WITH SEC
GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE BETWEEN ONE
CLASS AND ANOTHER.
------
33
TARGET 2015 FUND
Advisor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
----------------------------------------------------------------------------
PER-SHARE DATA
----------------------------------------------------------------------------
Net Asset Value, Beginning of Period $76.33 $74.68 $71.19 $66.89 $64.10
--------------------------------------
Income From Investment Operations
Net Investment Income(1) 3.70 3.47 3.26 3.15 2.93
Net Realized and
Unrealized Gain (Loss) 0.13 (1.82) 0.23 1.15 (0.14)
--------------------------------------
Total From Investment Operations 3.83 1.65 3.49 4.30 2.79
--------------------------------------
Distributions
From Net Investment Income (3.63) (3.10) (3.02) (3.47) (2.69)
From Net Realized Gains - (0.65) (1.33) (2.19) (0.16)
--------------------------------------
Total Distributions (3.63) (3.75) (4.35) (5.66) (2.85)
--------------------------------------
Reverse Share Split 3.63 3.75 4.35 5.66 2.85
--------------------------------------
Net Asset Value, End of Period $80.16 $76.33 $74.68 $71.19 $66.89
======================================
TOTAL RETURN(2) 5.01% 2.21% 4.90% 6.43% 4.35%
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.82% 0.82% 0.83% 0.83% 0.84%
Ratio of Net Investment
Income to Average Net Assets 4.76% 4.69% 4.43% 4.67% 4.47%
Portfolio Turnover Rate 21% 15% 9% 12% 17%
Net Assets, End of Period
(in thousands) $9,506 $2,300 $1,295 $876 $498
----------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. TOTAL RETURNS ARE CALCULATED BASED ON THE NET
ASSET VALUE ON THE LAST BUSINESS DAY. THE TOTAL RETURN OF THE CLASSES MAY
NOT PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT
OF CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET
VALUES WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN
DIFFERENCES WOULD MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE
CALCULATION OF NET ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE
WITH SEC GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE
BETWEEN ONE CLASS AND ANOTHER.
------
34
TARGET 2020 FUND
Advisor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
------------------------------------------------------------------------------
PER-SHARE DATA
------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $57.93 $57.12 $51.60 $47.65 $45.83
----------------------------------------
Income From Investment Operations
Net Investment Income(1) 2.58 2.45 2.29 2.18 2.06
Net Realized and
Unrealized Gain (Loss) (0.74) (1.64) 3.23 1.77 (0.24)
----------------------------------------
Total From Investment Operations 1.84 0.81 5.52 3.95 1.82
----------------------------------------
Distributions
From Net Investment Income (2.47) (2.35) (2.25) (2.35) (2.02)
From Net Realized Gains (0.29) (0.55) (0.97) (2.63) (3.37)
----------------------------------------
Total Distributions (2.76) (2.90) (3.22) (4.98) (5.39)
----------------------------------------
Reverse Share Split 2.76 2.90 3.22 4.98 5.39
----------------------------------------
Net Asset Value, End of Period $59.77 $57.93 $57.12 $51.60 $47.65
========================================
TOTAL RETURN(2) 3.18% 1.42% 10.70% 8.29% 3.97%
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.82% 0.82% 0.83% 0.83% 0.84%
Ratio of Net Investment
Income to Average Net Assets 4.43% 4.40% 4.13% 4.57% 4.43%
Portfolio Turnover Rate 49% 15% 10% 26% 45%
Net Assets, End of Period
(in thousands) $10,823 $8,635 $10,417 $4,073 $3,048
------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. THE TOTAL RETURN OF THE CLASSES MAY NOT
PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT OF
CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET VALUES
WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN DIFFERENCES WOULD
MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE CALCULATION OF NET
ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE WITH SEC
GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE BETWEEN ONE
CLASS AND ANOTHER.
------
35
TARGET 2025 FUND
Advisor Class
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED SEPTEMBER 30
2007 2006 2005 2004 2003
------------------------------------------------------------------------------
PER-SHARE DATA
------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $50.57 $50.18 $43.14 $39.18 $38.56
----------------------------------------
Income From Investment Operations
Net Investment Income(1) 2.11 2.00 1.84 1.76 1.68
Net Realized and
Unrealized Gain (Loss) (1.11) (1.61) 5.20 2.20 (1.06)
----------------------------------------
Total From Investment Operations 1.00 0.39 7.04 3.96 0.62
----------------------------------------
Distributions
From Net Investment Income (2.13) (1.21) (2.43) (1.97) (1.97)
From Net Realized Gains - (0.35) (6.03) (2.17) (2.36)
----------------------------------------
Total Distributions (2.13) (1.56) (8.46) (4.14) (4.33)
----------------------------------------
Reverse Share Split 2.13 1.56 8.46 4.14 4.33
----------------------------------------
Net Asset Value, End of Period $51.57 $50.57 $50.18 $43.14 $39.18
========================================
TOTAL RETURN(2) 1.97% 0.77% 16.33% 10.11% 1.61%
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets 0.82% 0.82% 0.83% 0.83% 0.84%
Ratio of Net Investment
Income to Average Net Assets 4.18% 4.15% 3.80% 4.49% 4.39%
Portfolio Turnover Rate 29% 13% 26% 24% 22%
Net Assets, End of Period
(in thousands) $28,709 $21,428 $6,072 $578 $595
------------------------------------------------------------------------------
(1) COMPUTED USING AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD.
(2) TOTAL RETURN ASSUMES REINVESTMENT OF NET INVESTMENT INCOME AND CAPITAL
GAINS DISTRIBUTIONS, IF ANY. TOTAL RETURNS ARE CALCULATED BASED ON THE NET
ASSET VALUE ON THE LAST BUSINESS DAY. THE TOTAL RETURN OF THE CLASSES MAY
NOT PRECISELY REFLECT THE CLASS EXPENSE DIFFERENCES BECAUSE OF THE IMPACT
OF CALCULATING THE NET ASSET VALUES TO TWO DECIMAL PLACES. IF NET ASSET
VALUES WERE CALCULATED TO THREE DECIMAL PLACES, THE TOTAL RETURN
DIFFERENCES WOULD MORE CLOSELY REFLECT THE CLASS EXPENSE DIFFERENCES. THE
CALCULATION OF NET ASSET VALUES TO TWO DECIMAL PLACES IS MADE IN ACCORDANCE
WITH SEC GUIDELINES AND DOES NOT RESULT IN ANY GAIN OR LOSS OF VALUE
BETWEEN ONE CLASS AND ANOTHER.
------
36
NOTES
------
37
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
Statement of Additional Information (SAI)
The SAI contains a more detailed legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this prospectus. This means that it is legally part of this
prospectus, even if you don't request a copy.
You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, online at americancentury.com, by
contacting American Century at the addresses or telephone numbers listed below
or by contacting your financial intermediary.
You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.
IN PERSON SEC Public Reference Room, Washington, D.C.
Call 202-942-8090 for location and hours.
ON THE INTERNET * EDGAR database at sec.gov
* By email request at publicinfo@sec.gov
BY MAIL SEC Public Reference Section
Washington, D.C. 20549- 0102
This prospectus shall not constitute an offer to sell securities of a fund in
any state, territory, or other jurisdiction where the fund's shares have not
been registered or qualified for sale, unless such registration or qualification
is not required, or under any circumstances in which such offer or solicitation
would be unlawful.
FUND REFERENCE FUND CODE TICKER NEWSPAPER LISTING
--------------------------------------------------------------------------------
Target 2010 Fund
Investor Class 965 BTTNX Tg2010
--------------------------------------------------------------------------------
Advisor Class 765 ACTRX Tg2010
--------------------------------------------------------------------------------
Target 2015 Fund
Investor Class 966 BTFTX Tg2015
--------------------------------------------------------------------------------
Advisor Class 766 ACTTX Tg2015
--------------------------------------------------------------------------------
Target 2020 Fund
Investor Class 967 BTTTX Tg2020
--------------------------------------------------------------------------------
Advisor Class 767 ACTEX Tg2020
--------------------------------------------------------------------------------
Target 2025 Fund
Investor Class 968 BTTRX Tg2025
--------------------------------------------------------------------------------
Advisor Class 768 ACTVX Tg2025
--------------------------------------------------------------------------------
Investment Company Act File No. 811-4165
AMERICAN CENTURY INVESTMENTS
americancentury.com
Banks and Trust Companies, Broker-Dealers,
Self-Directed Retail Investors Financial Professionals, Insurance Companies
P.O. Box 419200 P.O. Box 419786
Kansas City, Missouri 64141-6200 Kansas City, Missouri 64141-6786
1-800-345-2021 or 816-531-5575 1-800-345-6488
0802
SH-PRS-57699
February 1, 2008
AMERICAN CENTURY INVESTMENTS
STATEMENT OF ADDITIONAL INFORMATION
American Century Target Maturities Trust
Target 2010 Fund
Target 2015 Fund
Target 2020 Fund
Target 2025 Fund
THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUS DATED FEBRUARY 1, 2008 BUT IS NOT A PROSPECTUS. THE STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' CURRENT
PROSPECTUS. IF YOU WOULD LIKE A COPY OF THE PROSPECTUS, PLEASE CONTACT US AT THE
ADDRESS OR TELEPHONE NUMBERS LISTED ON THE BACK COVER OR VISIT AMERICAN
CENTURY'S WEB SITE AT AMERICANCENTURY.COM.
THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT APPEARS IN THE FUNDS' ANNUAL AND SEMIANNUAL REPORTS, WHICH ARE
DELIVERED TO ALL INVESTORS. YOU MAY OBTAIN A FREE COPY OF THE FUNDS' ANNUAL OR
SEMIANNUAL REPORTS BY CALLING 1-800-345-2021.
American Century Investment Services, Inc., Distributor
[american century investments logo and text logo]
American Century Investment Services, Inc., Distributor
©2008 American Century Proprietary Holdings, Inc. All rights reserved.
The American Century Investments logo, American Century and American Century
Investments are service marks of American Century Proprietary Holdings, Inc.
Table of
Contents
The Funds' History. . . . . . . . . . . . . . . . . . . . . . . 2
Fund Investment Guidelines . . . . . . . . . . . . . . . . . . . 2
Fund Investments and Risks . . . . . . . . . . . . . . . . . . . 3
Investment Strategies and Risks . . . . . . . . . . . . . . . 3
Investment Policies . . . . . . . . . . . . . . . . . . . . . 7
Temporary Defensive Measures. . . . . . . . . . . . . . . . . 8
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . 9
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The Board of Trustees . . . . . . . . . . . . . . . . . . . . 11
Ownership of Fund Shares. . . . . . . . . . . . . . . . . . . 14
Code of Ethics. . . . . . . . . . . . . . . . . . . . . . . . 14
Proxy Voting Guidelines . . . . . . . . . . . . . . . . . . . 14
Disclosure of Portfolio Holdings. . . . . . . . . . . . . . . 15
The Funds' Principal Shareholders. . . . . . . . . . . . . . . . 20
Service Providers. . . . . . . . . . . . . . . . . . . . . . . . 21
Investment Advisor. . . . . . . . . . . . . . . . . . . . . . 21
Portfolio Managers. . . . . . . . . . . . . . . . . . . . . . 24
Transfer Agent and Administrator. . . . . . . . . . . . . . . 27
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . 27
Custodian Banks . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Registered Public Accounting Firm . . . . . . . . 28
Brokerage Allocation . . . . . . . . . . . . . . . . . . . . . . 28
Regular Broker-Dealers. . . . . . . . . . . . . . . . . . . . 28
Information About Fund Shares. . . . . . . . . . . . . . . . . . 29
Fund Liquidations . . . . . . . . . . . . . . . . . . . . . . 30
Multiple Class Structure. . . . . . . . . . . . . . . . . . . 30
Buying and Selling Fund Shares. . . . . . . . . . . . . . . . 34
Valuation of a Fund's Securities. . . . . . . . . . . . . . . 34
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Statements . . . . . . . . . . . . . . . . . . . . . . 36
Explanation of Fixed-Income Securities Ratings . . . . . . . . . 37
------
1
THE FUNDS' HISTORY
American Century Target Maturities Trust is a registered open-end management
investment company that was organized as a Massachusetts business trust on March
25, 1985. Until January 1997, it was known as Benham Target Maturities Trust.
Throughout this statement of additional information we refer to American Century
Target Maturities Trust as the trust.
Each fund described in this statement of additional information is a separate
series of the trust and operates for many purposes as if it were an independent
company. Each fund has its own investment objective, strategy, management team,
assets, and tax identification and stock registration number.
FUND TICKER SYMBOL INCEPTION DATE
--------------------------------------------------------------------------------
Target 2010 Fund
Investor Class BTTNX 03/25/1985
--------------------------------------------------------------------------------
Advisor Class ACTRX 10/20/1998
--------------------------------------------------------------------------------
Target 2015 Fund
Investor Class BTFTX 09/01/1986
--------------------------------------------------------------------------------
Advisor Class ACTTX 07/23/1999
--------------------------------------------------------------------------------
Target 2020 Fund
Investor Class BTTTX 12/29/1989
--------------------------------------------------------------------------------
Advisor Class ACTEX 10/19/1998
--------------------------------------------------------------------------------
Target 2025 Fund
Investor Class BTTRX 02/15/1996
--------------------------------------------------------------------------------
Advisor Class ACTVX 06/01/1998
--------------------------------------------------------------------------------
FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, INVESTMENT STRATEGIES AND RISKS,
which begins on the next page. In the case of the funds' principal investment
strategies, these descriptions elaborate upon the discussion contained in the
prospectus.
Each fund is diversified as defined in the Investment Company Act of 1940 (the
Investment Company Act). Diversified means that, with respect to 75% of its
total assets, each fund will not invest more than 5% of its total assets in the
securities of a single issuer or own more than 10% of the outstanding voting
securities of a single issuer (other than U.S. government securities and
securities of other investment companies).
To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year
(1) no more than 25% of its total assets are invested in the securities of
a single issuer (other than the U.S. government or a regulated investment
company), and
(2) with respect to at least 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer.
------
2
FUND INVESTMENTS AND RISKS
INVESTMENT STRATEGIES AND RISKS
This section describes investment vehicles and techniques the portfolio managers
can use in managing a fund's assets. It also details the risks associated with
each, because each investment vehicle and technique contributes to a fund's
overall risk profile.
Cash Management
Each fund may invest in U.S. government agency overnight discount notes or any
money market fund, including those managed by the advisor, provided that the
investment is consistent with the fund's investment policies and restrictions.
In order to meet anticipated redemptions, anticipated purchases of additional
securities for a fund's portfolio, or, in some cases, for temporary defensive
purposes, the funds may invest a portion of their assets in money market and
other short-term securities issued or guaranteed by the U.S. government and its
agencies and instrumentalities.
Coupon-Bearing U.S. Treasury Securities
U.S. Treasury bills, notes and bonds are direct obligations of the U.S.
Treasury. Historically, they have involved no risk of loss of principal if held
to maturity. Between issuance and maturity, however, the prices of these
securities change in response to changes in market interest rates.
Coupon-bearing securities generate current interest payments, and part of a
fund's return may come from reinvesting interest earned on these securities.
Loans of Portfolio Securities
Each fund may lend its portfolio securities to earn additional income. If a
borrower defaults on a securities loan, the lending fund could experience delays
in recovering the securities it loaned; if the value of the loaned securities
increased over the value of the collateral, the fund could suffer a loss. To
minimize the risk of default on securities loans, the advisor, American Century
Investment Management, Inc., adheres to the following guidelines prescribed by
the Board of Trustees governing lending of securities. These guidelines strictly
govern
(1) the type and amount of collateral that must be received by the fund;
(2) the circumstances under which additions to that collateral must be
made by borrowers;
(3) the return received by the fund on the loaned securities;
(4) the limitations on the percentage of fund assets on loan; and
(5) the credit standards applied in evaluating potential borrowers of
portfolio securities.
In addition, the guidelines require that the fund have the option to terminate
any loan of a portfolio security at any time and set requirements for recovery
of securities from borrowers.
Managing to the Target Year
Anticipated Value at Maturity
The maturity values of zero-coupon bonds are specified at the time the bonds are
issued, and this feature, combined with the ability to calculate yield to
maturity, has made these instruments popular investment vehicles for investors
seeking reliable investments to meet long-term financial goals.
------
3
To provide a comparable investment opportunity while allowing investors the
flexibility to purchase or redeem shares each day the funds are open for
business, each fund consists primarily of zero-coupon bonds but is actively
managed to accommodate shareholder activity and to take advantage of perceived
market opportunities. Because of this active management approach, the portfolio
managers do not guarantee that a certain price per share will be attained by the
time a fund is liquidated. Instead, the portfolio managers attempt to track the
price behavior of a directly held zero-coupon U.S. Treasury security by:
(1) Maintaining a weighted average maturity within the fund's target
maturity year;
(2) Investing at least 90% of assets in securities that mature within one
year of the fund's target maturity year;
(3) Investing a substantial portion of assets in Treasury STRIPS (the most
liquid Treasury zero and in their equivalents);
(4) Under normal conditions, maintaining a cash balance of less than 1%;
(5) Executing portfolio transactions necessary to accommodate net
shareholder purchases or redemptions on a daily basis; and
(6) Whenever feasible, contacting several U.S. government securities
dealers for each intended transaction in an effort to obtain the best
price on each transaction.
These measures enable the portfolio managers to calculate an anticipated value
at maturity (AVM) for each fund that approximates the price per share the fund
will achieve by its weighted average maturity date. The AVM calculation is as
follows:
AVM = NAV(1 + (AGR/2))^2T
where NAV = the fund's current price per share, T = the fund's weighted average
term to maturity in years, and AGR = the fund's anticipated growth rate.
This calculation assumes that the shareholder will reinvest all dividend and
capital gain distributions (if any). It also assumes an expense ratio and a
portfolio composition that remain constant for the life of the fund. Because
fund expenses and composition do not remain constant, the portfolio managers
calculate AVM for each fund each day the funds are open for business.
In addition to the measures described above, which the advisor believes are
adequate to ensure close correspondence between the price behavior of each fund
and the price behavior of directly held zero-coupon bonds with comparable
maturities, each fund has made an undertaking to the Securities and Exchange
Commission (SEC) that each fund will invest at least 90% of its net assets in
zero-coupon bonds until it is within four years of its target maturity year and
at least 80% of its net assets in zero-coupon securities while the fund is
within two to four years of its target maturity year. This undertaking may be
revoked if the market supply of zero-coupon securities diminishes unexpectedly,
although it will not be revoked without prior consultation with the SEC. In
addition, the advisor has undertaken that any coupon-bearing bond purchased on
behalf of a fund will have a duration that falls within the fund's target
maturity year.
Anticipated Growth Rate
The portfolio managers also calculate an anticipated growth rate (AGR) for each
fund each day the funds are open for business. AGR calculated on the date of
purchase is the annualized rate of growth an investor may expect from that
purchase date to the fund's target maturity date. As is the case with
calculations of AVM, the AGR calculation assumes that the investor will reinvest
all dividends and capital gain distributions (if any) and that the fund's
expense ratio and portfolio composition will remain constant. Each fund's AGR
changes from day to day primarily because of changes in interest rates and, to a
lesser extent, changes in portfolio composition and other factors that affect
the value of the fund's investments.
------
4
The advisor expects that shareholders who hold their shares until a fund's
weighted average maturity date and who reinvest all dividends and capital gain
distributions, if any, will realize an investment return and maturity value that
do not differ substantially from the AGR and AVM calculated on the day his or
her shares were purchased.
As a demonstration of how the funds have behaved over time, the following tables
show the AGR and AVM for the Investor Class of each fund as of September 30 for
each of the past five years.
The AVM for the Advisor Class of each fund will differ from that of the Investor
Class, depending on the expenses of that class.
The funds' share prices and growth rates are not guaranteed by the trust or any
of its affiliates. There is no guarantee that the funds' AVMs and AGRs will
fluctuate in the same manner in the future as they have in the past.
ANTICIPATED
GROWTH RATE 9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007
--------------------------------------------------------------------------------
Target 2010 3.15% 3.30% 3.68% 4.01% 3.48%
--------------------------------------------------------------------------------
Target 2015 4.30% 4.13% 4.02% 4.21% 4.10%
--------------------------------------------------------------------------------
Target 2020 4.82% 4.62% 4.23% 4.41% 4.47%
--------------------------------------------------------------------------------
Target 2025 5.01% 4.79% 4.22% 4.37% 4.54%
--------------------------------------------------------------------------------
ANTICIPATED
VALUE AT
MATURITY 9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007
--------------------------------------------------------------------------------
Target 2010 $105.22 $105.59 $105.62 $105.22 $105.39
--------------------------------------------------------------------------------
Target 2015 $112.88 $113.35 $113.00 $113.48 $113.32
--------------------------------------------------------------------------------
Target 2020 $107.48 $108.07 $108.21 $108.21 $107.97
--------------------------------------------------------------------------------
Target 2025 $117.43 $118.37 $116.83 $116.72 $117.85
--------------------------------------------------------------------------------
Other Investment Companies
Each of the funds may invest in other investment companies, such as mutual
funds, provided that the investment is consistent with the fund's investment
policies and restrictions. Under the Investment Company Act, a fund's investment
in such securities, subject to certain exceptions, currently is limited to
* 3% of the total voting stock of any one investment company;
* 5% of the fund's total assets with respect to any one investment company;
and
* 10% of a fund's total assets in the aggregate.
A fund's investments in other investment companies may include money market
funds managed by the advisor. Investments in money market funds are not subject
to the percentage limitations set forth above.
Such purchases will be made in the open market where no commission or profit to
a sponsor or dealer results from the purchase other than the customary brokers'
commissions. As a shareholder of another investment company, a fund would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the management fee that each fund bears directly in connection with its own
operations.
Each fund may invest in exchange traded funds (ETFs), such as Standard & Poor's
Depositary Receipts (SPDRs) and the Lehman Aggregate Bond ETF, with the same
percentage limitations as investments in registered investment companies. ETFs
are a type of fund bought and sold on a securities exchange. An ETF trades like
common stock and usually represents a fixed portfolio of securities designed to
track the performance and dividend yield of a particular domestic or foreign
market index. A fund may purchase an ETF to temporarily gain exposure to a
------
5
portion of the U.S. or a foreign market while awaiting purchase of underlying
securities. The risks of owning an ETF generally reflect the risks of owning the
underlying securities they are designed to track, although the lack of liquidity
on an ETF could result in it being more volatile. Additionally, ETFs have
management fees, which increase their cost.
Zero-Coupon Securities
Zero-coupon U.S. Treasury securities (or zeros) are the unmatured interest
coupons and underlying principal portions of U.S. Treasury bonds. Unlike
traditional U.S. Treasury securities, these securities are sold at a discount to
their face value and all of the interest and principal is paid when the
securities mature. Originally, these securities were created by broker-dealers
who bought Treasury bonds and deposited these securities with a custodian bank.
The broker-dealers then sold receipts representing ownership interests in the
coupons or principal portions of the bonds. Some examples of zero-coupon
securities sold through custodial receipt programs are CATS (Certificates of
Accrual on Treasury Securities), TIGRs (Treasury Investment Growth Receipts) and
generic TRs (Treasury Receipts).
The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities (STRIPS), through which it
exchanges eligible securities for their component parts and then allows the
component parts to trade in book-entry form. STRIPS are direct obligations of
the U.S. government and have the same credit risks as other U.S. Treasury
securities.
Zero-coupon Treasury equivalent securities are government agency debt securities
that are ultimately backed by obligations of the U.S. Treasury and are
considered by the marketplace to be backed by the full faith and credit of the
U.S. Treasury. These securities are created by financial institutions (like
broker-dealers) and by U.S. government agencies. For example, the Resolution
Funding Corporation (REFCORP) issues bonds whose interest payments are
guaranteed by the U.S. Treasury and whose principal amounts are secured by
zero-coupon U.S. Treasury securities held in a separate custodial account at the
Federal Reserve Bank of New York. The principal amount and maturity date of
REFCORP bonds are the same as the par amount and maturity date of the
corresponding zeros; upon maturity, REFCORP bonds are repaid from the proceeds
of the zeros. REFCORP zeros are the unmatured coupons and principal portions of
REFCORP bonds.
The U.S. government may issue securities in zero-coupon form. These securities
are referred to as original issue zero-coupon securities.
Zero-Coupon U.S. Government Agency Securities
A number of U.S. government agencies issue debt securities. These agencies
generally are created by Congress to fulfill a specific need, such as providing
credit to homebuyers or farmers. Among these agencies are the Farm Home Loan
Banks and the Federal Farm Credit Banks.
Zero-coupon U.S. government agency securities operate in all respects like
zero-coupon Treasury securities and their equivalents, except that they are
created by separating a U.S. government agency bond's interest and principal
payment obligations. The final maturity value of a zero-coupon U.S. government
agency security is a debt obligation of the issuing agency. Some agency
securities are backed by the full faith and credit of the U.S. government, while
others are guaranteed only by the issuing agency. Agency securities typically
offer somewhat higher yields than U.S. Treasury securities with similar
maturities. However, these securities may involve greater risk of default than
securities backed by the U.S. Treasury. The funds will limit their purchase of
zero-coupon U.S. government agency securities to those that receive the highest
rating (AAA) by an independent rating organization.
------
6
Securities issued by U.S. government agencies in zero-coupon form are referred
to as original issue zero-coupon securities.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the policies described below apply at the time a fund enters into a
transaction. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in a fund's assets will not be considered in
determining whether it has complied with its investment policies.
Fundamental Investment Policies
The funds' fundamental investment policies are set forth below. These investment
policies and the funds' investment objectives set forth in the prospectus may
not be changed without approval of a majority of the outstanding votes of
shareholders of a fund, as determined in accordance with the Investment Company
Act.
SUBJECT POLICY
--------------------------------------------------------------------------------
Senior Securities A fund may not issue senior securities, except
as permitted under the Investment Company
Act.
--------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except that a
fund may borrow for temporary or emergency
purposes (not for leveraging or investment) in an
amount not exceeding 33-1/3% of the fund's total
assets (including the amount borrowed) less
liabilities (other than borrowings).
--------------------------------------------------------------------------------
Lending A fund may not lend any security or make any
other loan if, as a result, more than 33-1/3% of
the fund's total assets would be lent to other
parties, except (i) through the purchase of debt
securities in accordance with its investment
objective, policies and limitations or (ii) by
engaging in repurchase agreements with
respect to portfolio securities.
--------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate
unless acquired as a result of ownership of
securities or other instruments. This policy shall
not prevent a fund from investing in securities
or other instruments backed by real estate or
securities of companies that deal in real estate
or are engaged in the real estate business.
--------------------------------------------------------------------------------
Concentration A fund may not concentrate its investments
in securities of issuers in a particular industry
(other than securities issued or guaranteed by
the U.S. government or any of its agencies or
instrumentalities).
--------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of
securities issued by others, except to the extent
that the fund may be considered an underwriter
within the meaning of the Securities Act of 1933
in the disposition of restricted securities.
--------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical
commodities unless acquired as a result of
ownership of securities or other instruments,
provided that this limitation shall not prohibit
the fund from purchasing or selling options and
futures contracts or from investing in securities
or other instruments backed by physical
commodities.
--------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising
control over management.
--------------------------------------------------------------------------------
For purposes of the investment policies relating to lending and borrowing, the
funds have received an exemptive order from the SEC regarding an interfund
lending program. Under the terms of the exemptive order, the funds may borrow
money from or lend money to other American Century-advised funds that permit
such transactions. All such transactions will be subject to the limits on
borrowing and lending set forth above. The funds will borrow money through the
program only when the costs are equal to or lower than the cost of short-term
bank loans. Interfund loans and borrowings normally extend only overnight, but
can have a maximum duration of seven days. The funds will lend through the
program only when the returns are
------
7
higher than those available from other short-term instruments (such as
repurchase agreements). The funds may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional borrowing costs.
For purposes of the investment policy relating to concentration, a fund shall
not purchase any securities that would cause 25% or more of the value of the
fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, provided that
(a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. government, any state, territory or possession of
the United States, the District of Columbia or any of their authorities,
agencies, instrumentalities or political subdivisions and repurchase
agreements secured by such obligations,
(b) wholly owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents,
(c) utilities will be divided according to their services, for example,
gas, gas transmission, electric and gas, electric, and telephone will each
be considered a separate industry, and
(d) personal credit and business credit businesses will be considered
separate industries.
Nonfundamental Investment Policies
In addition, the funds are subject to the following investment policies that are
not fundamental and may be changed by the Board of Trustees.
SUBJECT POLICY
--------------------------------------------------------------------------------
Leveraging A fund may not purchase additional investment
securities at any time during which outstanding
borrowings exceed 5% of the total assets of the
fund.
--------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter
into a repurchase agreement if, as a result, more
than 15% of its net assets would be invested
in illiquid securities. Illiquid securities include
repurchase agreements not entitling the holder
to payment of principal and interest within seven
days, and securities that are illiquid by virtue of
legal or contractual restrictions on resale or the
absence of a readily available market.
--------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns
or has the right to obtain securities equivalent in
kind and amount to the securities sold short, and
provided that transactions in futures contracts
and options are not deemed to constitute selling
securities short.
--------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin,
except to obtain such short-term credits as are
necessary for the clearance of transactions, and
provided that margin payments in connection with
futures contracts and options on futures contracts
shall not constitute purchasing securities on
margin.
--------------------------------------------------------------------------------
The Investment Company Act imposes certain additional restrictions upon the
funds' ability to acquire securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the SEC nor any other agency of the
federal or state government participates in or supervises the management of the
funds or their investment practices or policies.
TEMPORARY DEFENSIVE MEASURES
For temporary defensive purposes, a fund may invest in securities that may not
fit its investment objective or its stated market. During a temporary defensive
period, a fund may direct its assets to the following investment vehicles:
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8
* interest-bearing bank accounts or certificates of deposit;
* U.S. government securities and repurchase agreements collateralized by
U.S. government securities; and
* money market funds.
To the extent a fund assumes a defensive position, it will not be pursuing its
investment objective.
PORTFOLIO TURNOVER
Under normal conditions, the funds' annual portfolio turnover rates are not
expected to exceed 100%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, the portfolio managers carefully
weigh the potential benefits of short-term investing against these
considerations.
The funds' portfolio turnover rates are listed in the Financial Highlights
tables in the prospectus.
MANAGEMENT
The individuals listed below serve as trustees or officers of the funds. Each
trustee serves until his or her successor is duly elected and qualified or until
he or she retires. Effective March 2004, mandatory retirement age for
independent trustees is 73. However, the mandatory retirement age may be
extended for a period not to exceed two years with the approval of the remaining
independent trustees. Those listed as interested trustees are "interested"
primarily by virtue of their engagement as directors and/or officers of, or
ownership interest in, American Century Companies, Inc. (ACC) or its wholly
owned, direct or indirect, subsidiaries, including the funds' investment
advisor, American Century Investment Management, Inc. (ACIM or the advisor); the
funds' principal underwriter, American Century Investment Services, Inc. (ACIS);
and the funds' transfer agent, American Century Services, LLC (ACS).
The other trustees (more than three-fourths of the total number) are
independent; that is, they have never been employees, directors or officers of,
and have no financial interest in, ACC or any of its wholly owned, direct or
indirect, subsidiaries, including ACIM, ACIS and ACS. The trustees serve in this
capacity for eight registered investment companies in the American Century
family of funds.
All persons named as officers of the funds also serve in similar capacities for
the other 14 investment companies in the American Century family of funds
advised by ACIM or American Century Global Investment Management, Inc. (ACGIM),
a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with
policy-making functions are listed. No officer is compensated for his or her
service as an officer of the funds. The listed officers are interested persons
of the funds and are appointed or re-appointed on an annual basis.
Interested Trustee
--------------------------------------------------------------------------------
JONATHAN S. THOMAS, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1963
POSITION(S) HELD WITH FUNDS: Trustee and President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive
Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC
(February 2006 to February 2007); Executive Vice President, ACC (November 2005
to February 2007). Also serves as: President, Chief Executive Officer and
Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM, ACGIM,
ACIS and other ACC subsidiaries. Managing Director, MORGAN STANLEY (March 2000
to November 2005)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 105
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
------
9
Independent Trustees
--------------------------------------------------------------------------------
JOHN FREIDENRICH, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1937
POSITION(S) HELD WITH FUNDS: Trustee (since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member and Manager, REGIS
MANAGEMENT COMPANY, LLC (April 2004 to present); Partner and Founder, BAY
PARTNERS (Venture capital firm, 1976 to 2006)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
RONALD J. GILSON, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1946
POSITION(S) HELD WITH FUNDS: Trustee (since 1995) and Chairman of the Board
(since 2005)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Charles J. Meyers Professor of Law
and Business, STANFORD LAW SCHOOL (1979 to present); Marc and Eva Stern
Professor of Law and Business, COLUMBIA UNIVERSITY SCHOOL OF LAW (1992 to
present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
PETER F. PERVERE, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: Trustee (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Vice President
and Chief Financial Officer, COMMERCE ONE, INC. (software and services provider)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, INTRAWARE, INC.
--------------------------------------------------------------------------------
MYRON S. SCHOLES, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1941
POSITION(S) HELD WITH FUNDS: Trustee (since 1980)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman, PLATINUM GROVE ASSET
MANAGEMENT, L.P. and a Partner, OAK HILL CAPITAL MANAGEMENT (1999 to present);
Frank E. Buck Professor of Finance-Emeritus, STANFORD GRADUATE SCHOOL OF
BUSINESS (1996 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, DIMENSIONAL FUND ADVISORS
(investment advisor, 1982 to present); Director, CHICAGO MERCANTILE EXCHANGE
(2000 to present)
--------------------------------------------------------------------------------
JOHN B. SHOVEN, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1947
POSITION(S) HELD WITH FUNDS: Trustee (since 2002)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Professor of Economics, STANFORD
UNIVERSITY (1973 to present)
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: Director, CADENCE DESIGN SYSTEMS (1992 to
present)
--------------------------------------------------------------------------------
JEANNE D. WOHLERS, 1665 Charleston Road, Mountain View, CA 94043
YEAR OF BIRTH: 1945
POSITION(S) HELD WITH FUNDS: Trustee (since 1984)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired
NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY TRUSTEE: 39
OTHER DIRECTORSHIPS HELD BY TRUSTEE: None
--------------------------------------------------------------------------------
Officers
--------------------------------------------------------------------------------
BARRY FINK, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1955
POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and
Executive Vice President, ACC (September 2007 to present); President, ACS LLC
(October 2007 to present); Managing Director, MORGAN STANLEY (2000 to 2007);
Global General Counsel, MORGAN STANLEY (2000 to 2006). Also serves as: Director,
ACC, ACS, ACIS and other ACC subsidiaries
--------------------------------------------------------------------------------
------
10
MARYANNE ROEPKE, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1956
POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior
Vice President (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM,
ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995
to August 2006); and Treasurer and Chief Financial Officer, various American
Century funds (July 2000 to August 2006). Also serves as: Senior Vice President,
ACS
--------------------------------------------------------------------------------
CHARLES A. ETHERINGTON, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1957
POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice
President (since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Attorney, ACC (February 1994 to
present); Vice President, ACC (November 2005 to present); General Counsel, ACC
(March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS, ACIS
and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS
--------------------------------------------------------------------------------
ROBERT LEACH, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1966
POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial
Officer (all since 2006)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000
to present); and Controller, various American Century funds (1997 to September
2006)
--------------------------------------------------------------------------------
JON ZINDEL, 4500 Main Street, Kansas City, MO 64111
YEAR OF BIRTH: 1967
POSITION(S) HELD WITH FUNDS: Tax Officer (since 2000)
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief
Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October
2001 to present); Vice President, certain ACC subsidiaries (October 2001 to
August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006).
Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior
Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief
Accounting Officer and Senior Vice President, ACIS
--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so. The
trustees, in carrying out their fiduciary duty under the Investment Company Act
of 1940, are responsible for approving new and existing management contracts
with the funds' advisor.
The board has the authority to manage the business of the funds on behalf of
their investors, and it has all powers necessary or convenient to carry out that
responsibility. Consequently, the trustees may adopt bylaws providing for the
regulation and management of the affairs of the funds and may amend and repeal
them to the extent that such bylaws do not reserve that right to the funds'
investors. They may fill vacancies in or reduce the number of board members, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate. They may appoint from their own number and establish and
terminate one or more committees consisting of two or more trustees who may
exercise the powers and authority of the board to the extent that the trustees
determine. They may, in general, delegate such authority as they consider
desirable to any officer of the funds, to any committee of the board and to any
agent or employee of the funds or to any custodian, transfer or investor
servicing agent, or principal underwriter. Any determination as to what is in
the interests of the funds made by the trustees in good faith shall be
conclusive.
------
11
The Advisory Board
The funds also have an Advisory Board. Members of the Advisory Board, if any,
function like fund trustees in many respects, but do not possess voting power.
Advisory Board members attend all meetings of the Board of Trustees and the
independent trustees and receive any materials distributed in connection with
such meetings. Advisory Board members may be considered as candidates to fill
vacancies on the Board of Trustees.
Committees
The board has four standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The trustee first named serves as chairman of the committee.
--------------------------------------------------------------------------------
COMMITTEE: Audit and Compliance
MEMBERS: Peter F. Pervere, Jeanne D. Wohlers, Ronald J. Gilson
FUNCTION: The Audit and Compliance Committee approves the engagement of the
funds' independent registered public accounting firm, recommends approval of
such engagement to the independent trustees, and oversees the activities of the
funds' independent registered public accounting firm. The committee receives
reports from the advisor's Internal Audit Department, which is accountable to
the committee. The committee also receives reporting about compliance matters
affecting the funds.
NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 5
--------------------------------------------------------------------------------
COMMITTEE: Corporate Governance
MEMBERS: Ronald J. Gilson, John Freidenrich, John B. Shoven
FUNCTION: The Corporate Governance Committee reviews board procedures and
committee structures. It also considers and recommends individuals for
nomination as trustees. The names of potential trustee candidates may be drawn
from a number of sources, including recommendations from members of the board,
management (in the case of interested trustees only) and shareholders.
Shareholders may submit trustee nominations to the Corporate Secretary, American
Century Funds, P.O. Box 410141, Kansas City, MO 64141. All such nominations will
be forwarded to the committee for consideration. The committee also may
recommend the creation of new committees, evaluate the membership structure of
new and existing committees, consider the frequency and duration of board and
committee meetings and otherwise evaluate the responsibilities, processes,
resources, performance and compensation of the board.
NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 1
--------------------------------------------------------------------------------
COMMITTEE: Portfolio
MEMBERS: Myron S. Scholes, John Freidenrich
FUNCTION: The Portfolio Committee reviews quarterly the investment activities
and strategies used to manage fund assets. The committee regularly receives
reports from portfolio managers, credit analysts and other investment personnel
concerning the funds' investments.
NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 4
--------------------------------------------------------------------------------
COMMITTEE: Quality of Service
MEMBERS: John B. Shoven, Ronald J. Gilson, Peter F. Pervere
FUNCTION: The Quality of Service Committee reviews the level and quality of
transfer agent and administrative services provided to the funds and their
shareholders. It receives and reviews reports comparing those services to those
of fund competitors and seeks to improve such services where feasible and
appropriate.
NUMBER OF MEETINGS HELD DURING LAST FISCAL YEAR: 4
--------------------------------------------------------------------------------
Compensation of Trustees
The trustees serve as trustees for eight American Century investment companies.
Each trustee who is not an interested person as defined in the Investment
Company Act receives compensation for service as a member of the board of all
such companies based on a schedule that takes into account the number of
meetings attended and the assets of the funds for which the meetings are held.
These
------
12
fees and expenses are divided among these investment companies based, in part,
upon their relative net assets. Under the terms of the management agreement with
the advisor, the funds are responsible for paying such fees and expenses.
The following table shows the aggregate compensation paid by the funds for the
periods indicated and by the investment companies served by the board to each
trustee who is not an interested person as defined in the Investment Company
Act.
AGGREGATE TRUSTEE COMPENSATION FOR FISCAL YEAR ENDED SEPTEMBER 30, 2007
--------------------------------------------------------------------------------
TOTAL COMPENSATION
TOTAL FROM THE AMERICAN
COMPENSATION CENTURY FAMILY
NAME OF TRUSTEE FROM THE FUNDS(1) OF FUNDS(2)
--------------------------------------------------------------------------------
John Freidenrich $5,522 $116,500
--------------------------------------------------------------------------------
Ronald J. Gilson $8,768 $189,500
--------------------------------------------------------------------------------
Kathryn A. Hall(3) $5,156 $105,000
--------------------------------------------------------------------------------
Peter F. Pervere(4) $4,479 $105,161
--------------------------------------------------------------------------------
Myron S. Scholes $5,374 $111,833
--------------------------------------------------------------------------------
John B. Shoven $5,552 $117,333
--------------------------------------------------------------------------------
Jeanne D. Wohlers $5,423 $113,333
--------------------------------------------------------------------------------
(1) INCLUDES COMPENSATION PAID TO THE TRUSTEES FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2007, AND ALSO INCLUDES AMOUNTS DEFERRED AT THE ELECTION OF
THE TRUSTEES UNDER THE AMERICAN CENTURY MUTUAL FUNDS' INDEPENDENT
DIRECTORS' DEFERRED COMPENSATION PLAN.
(2) INCLUDES COMPENSATION PAID BY THE INVESTMENT COMPANIES OF THE AMERICAN
CENTURY FAMILY OF FUNDS SERVED BY THIS BOARD. THE TOTAL AMOUNT OF DEFERRED
COMPENSATION INCLUDED IN THE PRECEDING TABLE IS AS FOLLOWS: MR.
FREIDENRICH, $116,500; MR. GILSON, $189,500; MS. HALL, $24,250; MR.
PERVERE, $23,915; MR. SCHOLES, $111,833; MR. SHOVEN, $117,333; AND MS.
WOHLERS, $79,333.
(3) MS. HALL RETIRED FROM THE BOARD ON DECEMBER 6, 2007.
(4) MR. PERVERE JOINED THE TRUST'S ADVISORY BOARD ON DECEMBER 8, 2006 AND
WAS ELECTED TRUSTEE ON JULY 27, 2007.
The funds have adopted the American Century Mutual Funds' Independent Directors'
Deferred Compensation Plan. Under the plan, the independent trustees may defer
receipt of all or any part of the fees to be paid to them for serving as
trustees of the funds.
All deferred fees are credited to an account established in the name of the
trustees. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the trustee. The account balance continues to
fluctuate in accordance with the performance of the selected fund or funds until
final payment of all amounts credited to the account. Trustees are allowed to
change their designation of mutual funds from time to time.
No deferred fees are payable until such time as a trustee resigns, retires or
otherwise ceases to be a member of the Board of Trustees. Trustees may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a trustee, all remaining deferred fee account balances are paid to
the trustee's beneficiary or, if none, to the trustee's estate.
The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of trustees to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.
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13
OWNERSHIP OF FUND SHARES
The trustees owned shares in the funds as of December 31, 2007, as shown in the
table below:
NAME OF TRUSTEES
--------------------------------------------------------------------------------
JONATHAN S. JOHN RONALD J.
THOMAS FREIDENRICH GILSON
--------------------------------------------------------------------------------
Dollar Range of Equity
Securities in the Funds:
Target 2010 A A A
--------------------------------------------------------------------------------
Target 2015 A A A
--------------------------------------------------------------------------------
Target 2020 C A A
--------------------------------------------------------------------------------
Target 2025 A A A
--------------------------------------------------------------------------------
Aggregate Dollar Range
of Equity Securities in
all Registered Investment
Companies Overseen by
Trustees in Family of
Investment Companies E C E
--------------------------------------------------------------------------------
RANGES: A-NONE, B-$1-$10,000, C-$10,001-$50,000, D-$50,001-$100,000, E-MORE THAN
$100,000
NAME OF TRUSTEES
--------------------------------------------------------------------------------
PETER F. MYRON S. JOHN B. JEANNE D.
PERVERE SCHOLES SHOVEN WOHLERS
--------------------------------------------------------------------------------
Dollar Range of Equity
Securities in the Funds:
Target 2010 A A A A
--------------------------------------------------------------------------------
Target 2015 A A A A
--------------------------------------------------------------------------------
Target 2020 A A A A
--------------------------------------------------------------------------------
Target 2025 A A A A
--------------------------------------------------------------------------------
Aggregate Dollar Range
of Equity Securities in
all Registered Investment
Companies Overseen by
Trustees in Family of
Investment Companies A E E E
--------------------------------------------------------------------------------
RANGES: A-NONE, B-$1-$10,000, C-$10,001-$50,000, D-$50,001-$100,000, E-MORE THAN
$100,000
CODE OF ETHICS
The funds, their investment advisor and principal underwriter have adopted codes
of ethics under Rule 17j-1 of the Investment Company Act. They permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by the funds, provided that they first obtain approval from
the compliance department before making such investments.
PROXY VOTING GUIDELINES
The advisor is responsible for exercising the voting rights associated with the
securities purchased and/or held by the funds. In exercising its voting
obligations, the advisor is guided by general fiduciary principles. It must act
prudently, solely in the interest of the funds, and for the exclusive purpose of
providing benefits to them. The advisor attempts to consider all factors of its
vote that could affect the value of the investment. The funds' Board of Trustees
has approved the advisor's proxy voting guidelines to govern the advisor's proxy
voting activities.
The advisor and the board have agreed on certain significant contributors to
shareholder value with respect to a number of matters that are often the subject
of proxy solicitations for shareholder meetings. The proxy voting guidelines
specifically address these considerations and establish a framework for the
advisor's consideration of the vote that would be appropriate for the funds. In
particular, the proxy voting guidelines outline principles and factors to be
considered in the exercise of voting authority for proposals addressing:
------
14
* Election of Directors
* Ratification of Selection of Auditors
* Equity-Based Compensation Plans
* Anti-Takeover Proposals
* Cumulative Voting
* Staggered Boards
* "Blank Check" Preferred Stock
* Elimination of Preemptive Rights
* Non-targeted Share Repurchase
* Increase in Authorized Common Stock
* "Supermajority" Voting Provisions or Super Voting Share Classes
* "Fair Price" Amendments
* Limiting the Right to Call Special Shareholder Meetings
* Poison Pills or Shareholder Rights Plans
* Golden Parachutes
* Reincorporation
* Confidential Voting
* Opting In or Out of State Takeover Laws
* Shareholder Proposals Involving Social, Moral or Ethical Matters
* Anti-Greenmail Proposals
* Changes to Indemnification Provisions
* Non-Stock Incentive Plans
* Director Tenure
* Directors' Stock Options Plans
* Director Share Ownership
Finally, the proxy voting guidelines establish procedures for voting of proxies
in cases in which the advisor may have a potential conflict of interest.
Companies with which the advisor has direct business relationships could
theoretically use these relationships to attempt to unduly influence the manner
in which American Century votes on matters for the funds. To ensure that such a
conflict of interest does not affect proxy votes cast for the funds, all
discretionary (including case-by-case) voting for these companies will be voted
in direct consultation with a committee of the independent trustees of the
funds.
In addition, to avoid any potential conflict of interest that may arise when one
American Century fund owns shares of another American Century fund, the advisor
will "echo vote" such shares, if possible. That is, it will vote the shares in
the same proportion as the vote of all other holders of the shares. Shares of
American Century "NT" funds will be voted in the same proportion as the vote of
the shareholders of the corresponding American Century policy portfolio for
proposals common to both funds. For example, NT Growth Fund shares will be echo
voted in accordance with the votes of Growth Fund shareholders. In all other
cases, the shares will be voted in direct consultation with a committee of the
independent trustees of the voting fund.
A copy of the advisor's proxy voting guidelines and information regarding how
the advisor voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30 are available on the ABOUT US page at
americancentury.com. The advisor's proxy voting record also is available on the
SEC's website at sec.gov.
DISCLOSURE OF PORTFOLIO HOLDINGS
The advisor (ACIM) has adopted policies and procedures with respect to the
disclosure of fund portfolio holdings and characteristics, which are described
below.
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15
Distribution to the Public
Full portfolio holdings for each fund will be made available for distribution 30
days after the end of each calendar quarter, and will be posted on
americancentury.com at approximately the same time. This disclosure is in
addition to the portfolio disclosure in annual and semi-annual shareholder
reports, and on Form N-Q, which disclosures are filed with the Securities and
Exchange Commission within 60 days of each fiscal quarter end and also posted on
americancentury.com at the time the filings are made.
Top 10 holdings for each fund will be made available for distribution monthly 30
days after the end of each month, and will be posted on americancentury.com at
approximately the same time.
Certain portfolio characteristics determined to be sensitive and confidential
will be made available for distribution monthly 30 days after the end of each
month, and will be posted on americancentury.com at approximately the same time.
Characteristics not deemed confidential will be available for distribution at
any time. The advisor may make determinations of confidentiality on a
fund-by-fund basis, and may add or delete characteristics from those considered
confidential at any time.
So long as portfolio holdings are disclosed in accordance with the above
parameters, the advisor makes no distinction among different categories of
recipients, such as individual investors, institutional investors,
intermediaries that distribute the funds' shares, third-party service providers,
rating and ranking organizations, and fund affiliates. Because this information
is publicly available and widely disseminated, the advisor places no conditions
or restrictions on, and does not monitor, its use. Nor does the advisor require
special authorization for its disclosure.
Accelerated Disclosure
The advisor recognizes that certain parties, in addition to the advisor and its
affiliates, may have legitimate needs for information about portfolio holdings
and characteristics prior to the times prescribed above. Such accelerated
disclosure is permitted under the circumstances described below.
Ongoing Arrangements
Certain parties, such as investment consultants who provide regular analysis of
fund portfolios for their clients and intermediaries who pass through
information to fund shareholders, may have legitimate needs for accelerated
disclosure. These needs may include, for example, the preparation of reports for
customers who invest in the funds, the creation of analyses of fund
characteristics for intermediary or consultant clients, the reformatting of data
for distribution to the intermediary's or consultant's clients, and the review
of fund performance for ERISA fiduciary purposes.
In such cases, accelerated disclosure is permitted if the service provider
enters an appropriate non-disclosure agreement with the funds' distributor in
which it agrees to treat the information confidentially until the public
distribution date and represents that the information will be used only for the
legitimate services provided to its clients (i.e., not for trading).
Non-disclosure agreements require the approval of an attorney in the advisor's
legal department. The advisor's compliance department receives quarterly reports
detailing which clients received accelerated disclosure, what they received,
when they received it and the purposes of such disclosure. Compliance personnel
are required to confirm that an appropriate non-disclosure agreement has been
obtained from each recipient identified in the reports.
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16
Those parties who have entered into non-disclosure agreements as of December 26,
2007 are as follows:
* Aetna, Inc.
* American Fidelity Assurance Co.
* AUL/American United Life Insurance Company
* Ameritas Life Insurance Corporation
* Annuity Investors Life Insurance Company
* Asset Services Company L.L.C.
* Bell Globemedia Publishing
* Bellwether Consulting, LLC
* Bidart & Ross
* Callan Associates, Inc.
* Cambridge Financial Services, Inc.
* Capital Cities, LLC
* Charles Schwab & Co., Inc.
* Cleary Gull Inc.
* Commerce Bank, N.A.
* Connecticut General Life Insurance Company
* Consulting Services Group, LLC
* CRA RogersCasey, Inc.
* Defined Contribution Advisors, Inc.
* EquiTrust Life Insurance Company
* Evaluation Associates, LLC
* Evergreen Investments
* Farm Bureau Life Insurance Company
* First MetLife Investors Insurance Company
* Fund Evaluation Group, LLC
* The Guardian Life Insurance & Annuity Company, Inc.
* Hammond Associates, Inc.
* Hewitt Associates LLC
* ICMA Retirement Corporation
* ING Life Insurance Company & Annuity Co.
* Iron Capital Advisors
* J.P. Morgan Retirement Plan Services LLC
* Jefferson National Life Insurance Company
* Jefferson Pilot Financial
* Jeffrey Slocum & Associates, Inc.
* Kansas City Life Insurance Company
* Kmotion, Inc.
* Liberty Life Insurance Company
* The Lincoln National Life Insurance Company
* Lipper Inc.
* Manulife Financial
* Massachusetts Mutual Life Insurance Company
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17
* Merrill Lynch
* MetLife Investors Insurance Company
* MetLife Investors Insurance Company of California
* Midland National Life Insurance Company
* Minnesota Life Insurance Company
* Morgan Keegan & Co., Inc.
* Morgan Stanley & Co., Incorporated
* Morningstar Associates LLC
* Morningstar Investment Services, Inc.
* National Life Insurance Company
* Nationwide Financial
* New England Pension Consultants
* Northwestern Mutual Life Insurance Co.
* NT Global Advisors, Inc.
* NYLIFE Distributors, LLC
* Principal Life Insurance Company
* Prudential Financial
* Rocaton Investment Advisors, LLC
* S&P Financial Communications
* Scudder Distributors, Inc.
* Security Benefit Life Insurance Co.
* Smith Barney
* SunTrust Bank
* Symetra Life Insurance Company
* Trusco Capital Management
* Union Bank of California, N.A.
* The Union Central Life Insurance Company
* VALIC Financial Advisors
* VALIC Retirement Services Company
* Vestek Systems, Inc.
* Wachovia Bank, N.A.
* Wells Fargo Bank, N.A.
Once a party has executed a non-disclosure agreement, it may receive any or all
of the following data for funds in which its clients have investments or are
actively considering investment:
(1) Full holdings quarterly as soon as reasonably available;
(2) Full holdings monthly as soon as reasonably available;
(3) Top 10 holdings monthly as soon as reasonably available; and
(4) Portfolio characteristics monthly as soon as reasonably available.
The types, frequency and timing of disclosure to such parties vary. In most
situations, the information provided pursuant to a non-disclosure agreement is
limited to certain portfolio characteristics and/or top 10 holdings, which
information is provided on a monthly basis. In limited situations, and when
approved by a member of the legal department and responsible chief investment
officer, full holdings may be provided.
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18
Single Event Requests
In certain circumstances, the advisor may provide fund holding information on an
accelerated basis outside of an ongoing arrangement with manager-level or higher
authorization. For example, from time to time the advisor may receive requests
for proposals (RFPs) from consultants or potential clients that request
information about a fund's holdings on an accelerated basis. As long as such
requests are on a one-time basis, and do not result in continued receipt of
data, such information may be provided in the RFP as of the most recent month
end regardless of lag time. Such information will be provided with a
confidentiality legend and only in cases where the advisor has reason to believe
that the data will be used only for legitimate purposes and not for trading.
In addition, the advisor occasionally may work with a transition manager to move
a large account into or out of a fund. To reduce the impact to the fund, such
transactions may be conducted on an in-kind basis using shares of portfolio
securities rather than cash. The advisor may provide accelerated holdings
disclosure to the transition manager with little or no lag time to facilitate
such transactions, but only if the transition manager enters into an appropriate
non-disclosure agreement.
Service Providers
Various service providers to the funds and the funds' advisor must have access
to some or all of the funds' portfolio holdings information on an accelerated
basis from time to time in the ordinary course of providing services to the
funds. These service providers include the funds' custodian (daily, with no
lag), auditors (as needed) and brokers involved in the execution of fund trades
(as needed). Additional information about these service providers and their
relationships with the funds and the advisor are provided elsewhere in this
statement of additional information.
Additional Safeguards
The advisor's policies and procedures include a number of safeguards designed to
control disclosure of portfolio holdings and characteristics so that such
disclosure is consistent with the best interests of fund shareholders. First,
the frequency with which this information is disclosed to the public, and the
length of time between the date of the information and the date on which the
information is disclosed, are selected to minimize the possibility of a third
party improperly benefiting from fund investment decisions to the detriment of
fund shareholders. Second, distribution of portfolio holdings information,
including compliance with the advisor's policies and the resolution of any
potential conflicts that may arise, is monitored quarterly. Finally, the funds'
Board of Trustees exercises oversight of disclosure of the funds' portfolio
securities. The board has received and reviewed a summary of the advisor's
policy and is informed on a quarterly basis of any changes to or violations of
such policy detected during the prior quarter.
Neither the advisor nor the funds receive any compensation from any party for
the distribution of portfolio holdings information.
The advisor reserves the right to change its policies and procedures with
respect to the distribution of portfolio holdings information at any time. There
is no guarantee that these policies and procedures will protect the funds from
the potential misuse of holdings information by individuals or firms in
possession of such information.
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19
THE FUNDS' PRINCIPAL SHAREHOLDERS
As of January 2, 2008, the following shareholders, beneficial or of record,
owned more than 5% of the outstanding shares of any class of a fund.
PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Target 2010
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co. Inc. 15% 0%
San Francisco, CA
National Financial 10% 0%
Services Corp.
New York, NY
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co. Inc. 74% 0%
San Francisco, CA
--------------------------------------------------------------------------------
Target 2015
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co. Inc. 28% 0%
San Francisco, CA
National Financial 12% 0%
Services Corp.
New York, NY
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co. Inc. 84% 0%
San Francisco, CA
Counsel Trust Co. 6% 0%
FBO Brown & Dunn PC
401K Plan
Pittsburgh, PA
National Financial 5% 0%
Services LLC
New York, NY
--------------------------------------------------------------------------------
Target 2020
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co. Inc. 15% 0%
San Francisco, CA
National Financial 14% 0%
Services Corp.
New York, NY
SEI Private Trust Company 8% 0%
c/o State Street Bank
Oaks, PA
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co. Inc. 63% 0%
San Francisco, CA
MLPF&S 13% 0%
Jacksonville, FL
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED INDIVIDUAL, WE REPORT THOSE SHARES
AS BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
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20
PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING
FUND/ SHARES OWNED SHARES OWNED
CLASS SHAREHOLDER OF RECORD BENEFICIALLY(1)
--------------------------------------------------------------------------------
Target 2025
--------------------------------------------------------------------------------
Investor Class
Charles Schwab & Co. Inc. 20% 0%
San Francisco, CA
National Financial 16% 0%
Services Corp.
New York, NY
First National Bank in Pratt 6% 0%
Pratt, KS
--------------------------------------------------------------------------------
Advisor Class
Charles Schwab & Co. Inc. 44% 0%
San Francisco CA
National Financial 34% 0%
Services LLC
New York, NY
MG Trust Company 7% 0%
Agent for Frontier Trust Co
TR Pinehurst Surgical
Clinic PA Reti
Fargo, ND
Wilmington Trust Comp TTEE 5% 0%
FBO Fairmount
Minerals Ltd 401K Plan
Wilmington, DE
--------------------------------------------------------------------------------
(1) IF SHARES ARE REGISTERED IN AN INDIVIDUAL'S NAME OR IN THE NAME OF AN
INTERMEDIARY FOR THE BENEFIT OF A NAMED INDIVIDUAL, WE REPORT THOSE SHARES
AS BEING BENEFICIALLY OWNED. OTHERWISE, AMERICAN CENTURY HAS NO INFORMATION
CONCERNING BENEFICIAL OWNERSHIP OF FUND SHARES.
The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. The funds are
unaware of any shareholders, beneficial or of record, who own more than 25% of
the voting securities of the trust. A shareholder owning of record or
beneficially more than 25% of the trust's outstanding shares may be considered a
controlling person. The vote of any such person could have a more significant
effect on matters presented at a shareholders' meeting than votes of other
shareholders. As of January 2, 2008, the officers and trustees of the funds, as
a group, owned less than 1% of any class of a fund's outstanding shares.
SERVICE PROVIDERS
The funds have no employees. To conduct the funds' day-to-day activities, the
trust has hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds that is described below.
ACIM, ACS and ACIS are wholly owned, directly or indirectly, by ACC. James E.
Stowers, Jr. controls ACC by virtue of his ownership of a majority of its voting
stock.
INVESTMENT ADVISOR
American Century Investment Management, Inc. (ACIM) serves as the investment
advisor for each of the funds. A description of the responsibilities of the
advisor appears in the prospectus under the heading MANAGEMENT.
------
21
For the services provided to the funds, the advisor receives a unified
management fee based on a percentage of the net assets of a fund. For more
information about the unified management fee, see THE INVESTMENT ADVISOR under
the heading MANAGEMENT in the funds' prospectus. The annual rate at which this
fee is assessed is determined daily in a multi-step process. First, each of the
trust's funds is categorized according to the broad asset class in which it
invests (e.g., money market, bond or equity), and the assets of the funds in
each category are totaled (Fund Category Assets). Second, the assets are totaled
for certain other accounts managed by the advisor (Other Account Category
Assets). To be included, these accounts must have the same management team and
investment objective as a fund in the same category with the same Board of
Trustees as the trust. Together, the Fund Category Assets and the Other Account
Category Assets comprise the "Investment Category Assets." The Investment
Category Fee Rate is then calculated by applying a fund's Investment Category
Fee Schedule to the Investment Category Assets and dividing the result by the
Investment Category Assets.
Finally, a separate Complex Fee Schedule is applied to the assets of all of the
funds in the American Century family of funds (the Complex Assets), and the
Complex Fee Rate is calculated based on the resulting total. The Investment
Category Fee Rate and the Complex Fee Rate are then added to determine the
Management Fee Rate payable by a class of the fund to the advisor.
For purposes of determining the assets that comprise the Fund Category Assets,
Other Account Category Assets and Complex Assets, the assets of registered
investment companies managed by the advisor that invest primarily in the shares
of other registered investment companies shall not be included.
The schedules by which the unified management fee is determined are shown below.
INVESTMENT CATEGORY FEE SCHEDULE FOR TARGET 2010, TARGET 2015,
TARGET 2020 AND TARGET 2025
--------------------------------------------------------------------------------
CATEGORY ASSETS FEE RATE
--------------------------------------------------------------------------------
First $1 billion 0.3600%
--------------------------------------------------------------------------------
Next $1 billion 0.3080%
--------------------------------------------------------------------------------
Next $3 billion 0.2780%
--------------------------------------------------------------------------------
Next $5 billion 0.2580%
--------------------------------------------------------------------------------
Next $15 billion 0.2450%
--------------------------------------------------------------------------------
Next $25 billion 0.2430%
--------------------------------------------------------------------------------
Thereafter 0.2425%
--------------------------------------------------------------------------------
The Complex Fee is determined according to the schedule below.
COMPLEX FEE SCHEDULE
--------------------------------------------------------------------------------
FEE RATE
INVESTOR AND
COMPLEX ASSETS ADVISOR CLASSES
--------------------------------------------------------------------------------
First $2.5 billion 0.3100%
--------------------------------------------------------------------------------
Next $7.5 billion 0.3000%
--------------------------------------------------------------------------------
Next $15 billion 0.2985%
--------------------------------------------------------------------------------
Next $25 billion 0.2970%
--------------------------------------------------------------------------------
Next $25 billion 0.2870%
--------------------------------------------------------------------------------
Next $25 billion 0.2800%
--------------------------------------------------------------------------------
Next $25 billion 0.2700%
--------------------------------------------------------------------------------
Next $25 billion 0.2650%
--------------------------------------------------------------------------------
Next $25 billion 0.2600%
--------------------------------------------------------------------------------
Next $25 billion 0.2550%
--------------------------------------------------------------------------------
Thereafter 0.2500%
--------------------------------------------------------------------------------
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22
On each calendar day, each class of each fund accrues a management fee that is
equal to the class's Management Fee Rate times the net assets of the class
divided by 365 (366 in leap years). On the first business day of each month, the
funds pay a management fee to the advisor for the previous month. The fee for
the previous month is the sum of the calculated daily fees for each class of a
fund during the previous month.
The management agreement between the trust and the advisor shall continue in
effect until the earlier of the expiration of two years from the date of its
execution or until the first meeting of shareholders following such execution
and for as long thereafter as its continuance is specifically approved at least
annually by
* the funds' Board of Trustees, or a majority of outstanding shareholder
votes (as defined in the Investment Company Act) and
* the vote of a majority of the trustees of the funds who are not parties to
the agreement or interested persons of the advisor, cast in person at a
meeting called for the purpose of voting on such approval.
The management agreement states that the funds' Board of Trustees or a majority
of outstanding shareholder votes may terminate the management agreement at any
time without payment of any penalty on 60 days' written notice to the advisor.
The management agreement shall be automatically terminated if it is assigned.
The management agreement provides that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties. The
management agreement also provides that the advisor and its officers, trustees
and employees may engage in other business, devote time and attention to any
other business whether of a similar or dissimilar nature, and render services to
others.
Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. A
particular security may be bought for one client or fund on the same day it is
sold for another client or fund, and a client or fund may hold a short position
in a particular security at the same time another client or fund holds a long
position. In addition, purchases or sales of the same security may be made for
two or more clients or funds on the same date. The advisor has adopted
procedures designed to ensure such transactions will be allocated among clients
and funds in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.
The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Trustees has
approved the policy of the advisor with respect to the aggregation of portfolio
transactions. Fixed-income securities transactions are not executed through a
centralized trading desk. Instead, portfolio teams are responsible for executing
trades with broker-dealers in a predominantly dealer marketplace. Trade
allocation decisions are made by the portfolio manager at the time of trade
execution and orders entered on the fixed-income order management system. The
advisor will not aggregate portfolio transactions of the funds unless it
believes such aggregation is consistent with its duty to seek best execution on
behalf of the funds and the terms of the management agreement. The advisor
receives no additional compensation or remuneration as a result of such
aggregation.
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23
Unified management fees incurred by each fund for the fiscal periods ended
September 30, 2007, 2006, and 2005, are indicated in the following table.
UNIFIED MANAGEMENT FEES
FUND 2007 2006 2005
--------------------------------------------------------------------------------
Target 2010 $1,252,898 $1,224,150 $1,236,508
--------------------------------------------------------------------------------
Target 2015 $1,181,690 $1,115,157 $1,006,096
--------------------------------------------------------------------------------
Target 2020 $1,121,822 $1,013,162 $1,040,418
--------------------------------------------------------------------------------
Target 2025 $1,690,712 $1,505,374 $731,409
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS
Other Accounts Managed
The portfolio managers also may be responsible for the day-to-day management of
other accounts, as indicated by the following table. None of these accounts has
an advisory fee based on the performance of the account.
OTHER ACCOUNTS MANAGED (AS OF SEPTEMBER 30, 2007)
REGISTERED OTHER ACCOUNTS
INVESTMENT (E.G., SEPARATE
COMPANIES ACCOUNTS AND
(E.G., OTHER OTHER POOLED CORPORATE
AMERICAN INVESTMENT ACCOUNTS,
CENTURY FUNDS VEHICLES (E.G., INCLUDING
AND AMERICAN COMMINGLED INCUBATION
CENTURY - TRUSTS AND STRATEGIES AND
SUBADVISED 529 EDUCATION CORPORATE
FUNDS) SAVINGS PLANS) MONEY)
---------------------------------------------------------------------------------------
Target 2010 Fund
---------------------------------------------------------------------------------------
Robert V. Number of Other 16 1 0
Gahagan Accounts Managed
--------------------------------------------------------------------------
Assets in Other $6,848,418,612 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Seth B. Number of Other 15 1 0
Plunkett Accounts Managed
--------------------------------------------------------------------------
Assets in Other $5,591,249,200 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Target 2015 Fund
---------------------------------------------------------------------------------------
Robert V. Number of Other 16 1 0
Gahagan Accounts Managed
--------------------------------------------------------------------------
Assets in Other $6,869,078,464 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Seth B. Number of Other 15 1 0
Plunkett Accounts Managed
--------------------------------------------------------------------------
Assets in Other $5,611,909,052 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Target 2020 Fund
---------------------------------------------------------------------------------------
Robert V. Number of Other 16 1 0
Gahagan Accounts Managed
--------------------------------------------------------------------------
Assets in Other $6,895,482,995 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Seth B. Number of Other 15 1 0
Plunkett Accounts Managed
--------------------------------------------------------------------------
Assets in Other $5,638,313,584 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
------
24
OTHER ACCOUNTS MANAGED (AS OF SEPTEMBER 30, 2007)
REGISTERED OTHER ACCOUNTS
INVESTMENT (E.G., SEPARATE
COMPANIES ACCOUNTS AND
(E.G., OTHER OTHER POOLED CORPORATE
AMERICAN INVESTMENT ACCOUNTS,
CENTURY FUNDS VEHICLES (E.G., INCLUDING
AND AMERICAN COMMINGLED INCUBATION
CENTURY - TRUSTS AND STRATEGIES AND
SUBADVISED 529 EDUCATION CORPORATE
FUNDS) SAVINGS PLANS) MONEY)
---------------------------------------------------------------------------------------
Target 2025 Fund
---------------------------------------------------------------------------------------
Robert V. Number of Other 16 1 0
Gahagan Accounts Managed
--------------------------------------------------------------------------
Assets in Other $6,850,687,427 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Seth B. Number of Other 15 1 0
Plunkett Accounts Managed
--------------------------------------------------------------------------
Assets in Other $5,593,518,015 $51,911,186 N/A
Accounts Managed
---------------------------------------------------------------------------------------
Potential Conflicts of Interest
Certain conflicts of interest may arise in connection with the management of
multiple portfolios. Potential conflicts include, for example, conflicts among
investment strategies and conflicts in the allocation of investment
opportunities. American Century has adopted policies and procedures that are
designed to minimize the effects of these conflicts.
Responsibility for managing American Century client portfolios is organized
according to investment discipline. Investment disciplines include, for example,
core equity, small- and mid-cap growth, large-cap growth, value, international,
fixed income, asset allocation, and sector funds. Within each discipline are one
or more portfolio teams responsible for managing specific client portfolios.
Generally, client portfolios with similar strategies are managed by the same
team using the same objective, approach, and philosophy. Accordingly, portfolio
holdings, position sizes, and industry and sector exposures tend to be similar
across similar portfolios, which minimizes the potential for conflicts of
interest.
For each investment strategy, one portfolio is generally designated as the
"policy portfolio." Other portfolios with similar investment objectives,
guidelines and restrictions, if any, are referred to as "tracking portfolios."
When managing policy and tracking portfolios, a portfolio team typically
purchases and sells securities across all portfolios that the team manages.
American Century's trading systems include various order entry programs that
assist in the management of multiple portfolios, such as the ability to purchase
or sell the same relative amount of one security across several funds. In some
cases a tracking portfolio may have additional restrictions or limitations that
cause it to be managed separately from the policy portfolio. Portfolio managers
make purchase and sale decisions for such portfolios alongside the policy
portfolio to the extent the overlap is appropriate, and separately, if the
overlap is not.
American Century may aggregate orders to purchase or sell the same security for
multiple portfolios when it believes such aggregation is consistent with its
duty to seek best execution on behalf of its clients. Orders of certain client
portfolios may, by investment restriction or otherwise, be determined not
available for aggregation. American Century has adopted policies and procedures
to minimize the risk that a client portfolio could be systematically advantaged
or disadvantaged in connection with the aggregation of orders. To the extent
equity trades are aggregated, shares purchased or sold are generally allocated
to the participating portfolios pro rata based on order size. Because initial
public offerings (IPOs) are usually available in limited supply and in amounts
too small to permit across-the-board pro rata allocations, American Century has
adopted special procedures designed to promote
------
25
a fair and equitable allocation of IPO securities among clients over time. Fixed
income securities transactions are not executed through a centralized trading
desk. Instead, portfolio teams are responsible for executing trades with
broker-dealers in a predominantly dealer marketplace. Trade allocation decisions
are made by the portfolio manager at the time of trade execution and orders
entered on the fixed income order management system.
Finally, investment of American Century's corporate assets in proprietary
accounts may raise additional conflicts of interest. To mitigate these potential
conflicts of interest, American Century has adopted policies and procedures
intended to provide that trading in proprietary accounts is performed in a
manner that does not give improper advantage to American Century to the
detriment of client portfolios.
Compensation
American Century portfolio manager compensation is structured to align the
interests of portfolio managers with those of the shareholders whose assets they
manage. As of the fiscal year ended September 30, 2007, it included the
components described below, each of which is determined with reference to a
number of factors such as overall performance, market competition, and internal
equity. Compensation is not directly tied to the value of assets held in client
portfolios.
Base Salary
Portfolio managers receive base pay in the form of a fixed annual salary.
Bonus
A significant portion of portfolio manager compensation takes the form of an
annual incentive bonus tied to performance. Bonus payments may take into account
a number of factors. One factor is fund investment performance. For policy
portfolios, such as the funds described in this statement of additional
information, investment performance is measured by a combination of one- and
three-year pre-tax performance relative to a pre-established,
internally-customized peer group and/or market benchmark. Custom peer groups are
constructed using all the funds in appropriate Lipper or Morningstar categories
as a starting point. Funds are then eliminated from the peer group based on a
standardized methodology designed to result in a final peer group that more
closely represents the fund's true peers based on internal investment mandates
and that is more stable (i.e., has less peer turnover) over the long-term. In
cases where a portfolio manager has responsibility for more than one policy
portfolio, the performance of each is assigned a percentage weight commensurate
with the portfolio manager's level of responsibility.
With regard to tracking portfolios, investment performance may be measured in a
number of ways. The performance of the tracking portfolio may be measured
against a customized peer group and/or market benchmark as described above for
policy portfolios. Alternatively, the tracking portfolio may be evaluated
relative to the performance of its policy portfolio, with the goal of matching
the policy portfolio's performance as closely as possible. In some cases, the
performance of a tracking portfolio is not separately considered; rather, the
performance of the policy portfolio is the key metric.
A second factor in the bonus calculation relates to the performance of all
American Century funds managed according to one of the following investment
styles: U.S. growth, U.S. value, international and fixed-income. Performance is
measured for each product individually as described above and then combined to
create an overall composite for the product group. These composites may measure
one-year performance (equal weighted) or a combination of one- and three-year
performance
------
26
(equal or asset weighted) depending on the portfolio manager's responsibilities
and products managed. This feature is designed to encourage effective teamwork
among portfolio management teams in achieving long-term investment success for
similarly styled portfolios.
A portion of some portfolio managers' bonuses may be tied to individual
performance goals, such as research projects and the development of new
products.
Restricted Stock Plans
Portfolio managers are eligible for grants of restricted stock of ACC. These
grants are discretionary, and eligibility and availability can vary from year to
year. The size of an individual's grant is determined by individual and product
performance as well as other product-specific considerations. Grants can
appreciate/depreciate in value based on the performance of the ACC stock during
the restriction period (generally three years).
Deferred Compensation Plans
Portfolio managers are eligible for grants of deferred compensation. These
grants are used in very limited situations, primarily for retention purposes.
Grants are fixed and can appreciate/depreciate in value based on the performance
of the American Century mutual funds in which the portfolio manager chooses to
invest them.
Ownership of Securities
As of September 30, 2007, the fund's most recent fiscal year end, the funds'
portfolio managers did not beneficially own shares of the funds. These portfolio
managers serve on an investment team that oversees a number of funds in the same
broad investment category and are not expected to invest in each such fund.
TRANSFER AGENT AND ADMINISTRATOR
American Century Services, LLC (ACS), 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software, and personnel for
the day-to-day administration of the funds and the advisor. The advisor pays
ACS's costs for serving as transfer agent and dividend-paying agent for the
funds out of the advisor's unified management fee. For a description of this fee
and the terms of its payment, see the above discussion under the caption
INVESTMENT ADVISOR.
From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.
DISTRIBUTOR
The funds' shares are distributed by American Century Investment Services, Inc.
(ACIS), a registered broker-dealer. The distributor is a wholly owned subsidiary
of ACC and its principal business address is 4500 Main Street, Kansas City,
Missouri 64111.
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27
The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means the distributor has no liability for unsold shares. The advisor pays
ACIS's costs for serving as principal underwriter of the funds' shares out of
the advisor's unified management fee. For a description of this fee and the
terms of its payment, see the above discussion under the caption INVESTMENT
ADVISOR. ACIS does not earn commissions for distributing the funds' shares.
Certain financial intermediaries unaffiliated with the distributor or the funds
may perform various administrative and shareholder services for their clients
who are invested in the funds. These services may include assisting with fund
purchases, redemptions and exchanges, distributing information about the funds
and their performance, preparing and distributing client account statements, and
other administrative and shareholder services that would otherwise be provided
by the distributor or its affiliates. The distributor may pay fees out of its
own resources to such financial intermediaries for providing these services.
CUSTODIAN BANKS
JPMorgan Chase Bank, 4 Metro Tech Center, Brooklyn, New York, 11245, and
Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves as
custodian of the funds' assets. The custodians take no part in determining the
investment policies of the funds or in deciding which securities are purchased
or sold by the funds. The funds, however, may invest in certain obligations of
the custodians and may purchase or sell certain securities from or to the
custodians. JPMorgan Chase Bank is paid based on the monthly average of assets
held in custody plus a transaction fee.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP serves as the independent registered public
accounting firm of the funds. The address of PricewaterhouseCoopers LLP is 1055
Broadway, 10th Floor, Kansas City, Missouri 64105. As the independent registered
public accounting firm of the funds, PricewaterhouseCoopers LLP provides
services including:
(1) auditing the annual financial statements for each fund, and
(2) assisting and consulting in connection with SEC filings.
BROKERAGE ALLOCATION
The funds generally purchase and sell debt securities through principal
transactions, meaning the funds normally purchase securities on a net basis
directly from the issuer or a primary market-maker acting as principal for the
securities. The funds do not pay brokerage commissions on these transactions,
although the purchase price for debt securities usually includes an undisclosed
compensation. Purchases of securities from underwriters typically include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market-makers typically include a dealer's mark-up
(i.e., a spread between the bid and asked prices). During the fiscal years ended
September 30, 2007, 2006 and 2005, the funds did not pay any brokerage
commissions.
REGULAR BROKER-DEALERS
As of the end of the most recently completed fiscal year, the funds owned no
securities of its regular brokers or dealers (as defined by Rule 10b-1 under the
Investment Company Act of 1940) or of their parent companies.
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28
INFORMATION ABOUT FUND SHARES
The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in a series (or funds). Each of the funds named on the front
of this statement of additional information is a series of shares issued by the
trust. In addition, each series (or fund) may be divided into separate classes.
See MULTIPLE CLASS STRUCTURE, which follows. Additional funds and classes may be
added without a shareholder vote.
Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
trust's (all funds') outstanding shares may be able to elect a Board of
Trustees. The trust undertakes dollar-based voting, meaning that the number of
votes a shareholder is entitled to is based upon the dollar amount of the
shareholder's investment. The election of trustees is determined by the votes
received from all the trust's shareholders without regard to whether a majority
of shares of any one fund voted in favor of a particular nominee or all nominees
as a group.
Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
Shares of each fund have equal voting rights, although each fund votes
separately on matters affecting that fund exclusively.
The trust shall continue unless terminated by (1) approval of at least
two-thirds of the shares of each fund entitled to vote or (2) the trustees by
written notice to shareholders of each fund. Any fund may be terminated by (1)
approval of at least two-thirds of the shares of that fund or (2) the trustees
by written notice to shareholders of that fund.
Upon termination of the trust or a fund, as the case may be, the trust shall pay
or otherwise provide for all charges, taxes, expenses and liabilities belonging
to the trust or the fund. Thereafter, the trust shall reduce the remaining
assets belonging to each fund (or the particular fund) to cash, shares of other
securities or any combination thereof, and distribute the proceeds belonging to
each fund (or the particular fund) to the shareholders of that fund ratably
according to the number of shares of that fund held by each shareholder on the
termination date.
Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the trust. The Declaration of Trust provides that the
trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the trust, its shareholders, trustees,
officers, employees and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss as a result of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the trust is unable to meet its obligations.
The assets belonging to each series are held separately by the custodian and the
shares of each series represent a beneficial interest in the principal, earnings
and profit (or losses) of investments and other assets held for each series.
Your rights as a shareholder are the same for all series of securities unless
otherwise stated. Within their respective fund or class, all shares have equal
redemption rights. Each share, when issued, is fully paid and non-assessable.
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29
FUND LIQUIDATIONS
Near the end of each fund's target maturity year, its investments will be sold
or allowed to mature; its liabilities will be discharged or a provision will be
made for their discharge; and its accounts will be closed. A shareholder may
choose to redeem his or her shares in one of the following ways: (1) by
receiving redemption proceeds or (2) by exchanging shares for shares of another
American Century fund. The estimated expenses of terminating and liquidating a
fund's portfolio securities will be accrued ratably over its target maturity
year. These expenses, which are charged to income (as are all expenses), are not
expected to exceed significantly the ordinary annual expenses incurred by a fund
and, therefore, should have little or no effect on the maturity value of that
fund.
MULTIPLE CLASS STRUCTURE
The Board of Trustees has adopted a multiple class plan pursuant to Rule 18f-3
adopted by the SEC. The plan is described in the funds' prospectus. Pursuant to
such plan, the funds may issue up to two classes of shares: an Investor Class
and an Advisor Class.
The Investor Class is made available to investors directly from American Century
and/or through some financial intermediaries. Investor Class shares charge a
single unified management fee, without any load or commission payable to
American Century. Additional information regarding eligibility for Investor
Class shares may be found in the funds' prospectus. The Advisor Class is made
available through financial intermediaries, for purchase by individual investors
who receive advisory and personal services from the intermediary. The unified
management fee for the Advisor Class is the same as for the Investor Class, but
the Advisor Class shares are subject to a Master Distribution and Individual
Shareholder Services Plan (the Advisor Class Plan) described below. The Advisor
Class Plan has been adopted by the funds' Board of Trustees in accordance with
Rule 12b-1 adopted by the SEC under the Investment Company Act.
Rule 12b-1
Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by its Board of
Trustees and approved by its shareholders. Pursuant to such rule, the Board of
Trustees of the funds' Advisor Class have approved and entered into the Advisor
Class Plan. The plan is described below.
In adopting the plan, the Board of Trustees (including a majority of trustees
who are not interested persons of the funds [as defined in the Investment
Company Act], hereafter referred to as the independent trustees) determined that
there was a reasonable likelihood that the plan would benefit the funds and the
shareholders of the affected class. Some of the anticipated benefits include
improved name recognition of the funds generally; and growing assets in existing
funds, which helps retain and attract investment management talent, provides a
better environment for improving fund performance, and can lower the total
expense ratio for funds with stepped-fee schedules. Pursuant to Rule 12b-1,
information about revenues and expenses under the plan is presented to the Board
of Trustees quarterly for its consideration in continuing the plan. Continuance
of the plan must be approved by the Board of Trustees, including a majority of
the independent trustees, annually. The plan may be amended by a vote of the
Board of Trustees, including a majority of the independent trustees, except that
the plan may not be amended to materially increase the amount to be spent for
distribution without majority approval of the shareholders of the affected
class. The plan terminates automatically in the event of an assignment and may
be terminated upon a vote of a majority of the independent trustees or by vote
of a majority of outstanding shareholder votes of the affected class.
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30
All fees paid under the plan will be made in accordance with Section 2830 of the
Conduct Rules of the Financial Industry Regulatory Authority (FINRA).
Advisor Class Plan
As described in the prospectus, the funds' Advisor Class shares are made
available to participants in employer-sponsored retirement plans and to persons
purchasing through broker-dealers, banks, insurance companies and other
financial intermediaries that provide various administrative, shareholder and
distribution services. The funds' distributor enters into contracts with various
banks, broker-dealers, insurance companies and other financial intermediaries,
with respect to the sale of the funds' shares and/or the use of the funds'
shares in various investment products or in connection with various financial
services.
Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for shareholders in
the Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.
To make the funds' shares available through such plans and financial
intermediaries, and to compensate them for these services, the funds' Board of
Trustees has adopted the Advisor Class Plan. Prior to December 3, 2007, the
Advisor Class Plan required the Advisor Class to pay 0.50% annually of the
aggregate average daily net assets of the funds' Advisor Class shares, 0.25% for
certain ongoing shareholder and administrative services (as described below) and
0.25% for distribution services, including past distribution services (as
described below). However, at shareholder meetings on July 27, 2007 and August
24, 2007, the Advisor Class shareholders approved a decrease in the fee required
by the Advisor Class Plan of 0.25%, and a corresponding increase in the Advisor
Class management fee. This change was made because the administrative services
portion of the 12b-1 fee does not need to be made out of the 12b-1 plan, but may
properly be made out of the funds' unified fee, consistent with the other
classes of the funds. This change resulted in no difference in the overall fee
for the Advisor Class, but will lower the amount of the 12b-1 fee charged under
the Advisor Class Plan from and after December 3, 2007. After that date,
pursuant to the Advisor Class Plan, the Advisor Class pays the funds'
distributor 0.25% annually of the aggregate average daily net assets of the
funds' Advisor Class shares, which is paid for certain ongoing individual
shareholder services (as described below) and for distribution services,
including past distribution services (as described below). This payment is fixed
at 0.25%, and is not based on expenses incurred by the distributor. During the
fiscal year ended September 30, 2007, the aggregate amount of fees paid under
the Advisor Class Plan was:
Target 2010 $35,522
Target 2015 $28,982
Target 2020 $55,280
Target 2025 $128,840
The distributor then makes these payments to the financial intermediaries
(including underwriters and broker-dealers, who may use some of the proceeds to
compensate sales personnel) who offer the Advisor Class shares in payment for
provision of the services described below. No portion of these payments is used
by the distributor to pay for advertising, printing costs or interest expenses.
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31
Prior to December 3, 2007, 0.25% of the fee charged pursuant to the Advisor
Class Plan was for a variety of shareholder services, including, but not limited
to:
(a) receiving, aggregating and processing purchase, exchange and
redemption requests from beneficial owners (including contract owners of
insurance products that utilize the funds as underlying investment media)
of shares and placing purchase, exchange and redemption orders with the
funds' distributor;
(b) providing shareholders with a service that invests the assets of their
accounts in shares pursuant to specific or pre-authorized instructions;
(c) processing dividend payments from a fund on behalf of shareholders and
assisting shareholders in changing dividend options, account designations
and addresses;
(d) providing and maintaining elective services such as check writing and
wire transfer services;
(e) acting as shareholder of record and nominee for beneficial owners;
(f) maintaining account records for shareholders and/or other beneficial
owners;
(g) issuing confirmations of transactions;
(h) providing subaccounting with respect to shares beneficially owned by
customers of third parties or providing the information to a fund as
necessary for such subaccounting;
(i) preparing and forwarding investor communications from the funds (such
as proxies, shareholder reports, annual and semiannual financial statements
and dividend, distribution and tax notices) to shareholders and/or other
beneficial owners; and
(j) providing other similar administrative and sub-transfer agency
services.
Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
During the fiscal year ended September 30, 2007, the amount of fees paid under
the Advisor Class Plan for shareholder services was:
Target 2010 $17,761
Target 2015 $14,491
Target 2020 $27,640
Target 2025 $64,420
Although these services are still being provided by the financial
intermediaries, after December 3, 2007, they will be reimbursed by the funds'
advisor out of the unified management fee rather than out of a 12b-1 fee, as
described above.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to:
(a) paying of sales commissions, on-going commissions and other payments
to brokers, dealers, financial institutions or others who sell Advisor
Class shares pursuant to selling agreements;
(b) compensating registered representatives or other employees of the
distributor who engage in or support distribution of the funds' Advisor
Class shares;
(c) compensating and paying expenses (including overhead and telephone
expenses) of the distributor;
(d) printing prospectuses, statements of additional information and
reports for other-than-existing shareholders;
(e) preparing, printing and distributing sales literature and advertising
materials provided to the funds' shareholders and prospective shareholders;
(f) receiving and answering correspondence from prospective shareholders,
including distributing prospectuses, statements of additional information,
and shareholder reports;
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32
(g) providing facilities to answer questions from prospective shareholders
about fund shares;
(h) complying with federal and state securities laws pertaining to the
sale of fund shares;
(i) assisting shareholders in completing application forms and selecting
dividend and other account options;
(j) providing other reasonable assistance in connection with the
distribution of fund shares;
(k) organizing and conducting sales seminars and payments in the form of
transactional and compensation or promotional incentives;
(l) profit on the foregoing;
(m) paying service fees for providing personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the FINRA; and
(n) such other distribution and services activities as the advisor
determines may be paid for by the funds pursuant to the terms of the
agreement between the trust and the funds' distributor and in accordance
with Rule 12b-1 of the Investment Company Act.
During the fiscal year ended September 30, 2007, the amount of fees paid under
the Advisor Class Plan for distribution services was:
Target 2010 $17,761
Target 2015 $14,491
Target 2020 $27,640
Target 2025 $64,420
Beginning on December 3, 2007, a portion of the 12b-1 fee will be paid to the
distributor for certain individual shareholder services. These payments may be
made for a variety of individual shareholder services, including, but not
limited to:
(a) providing individualized and customized investment advisory services,
including the consideration of shareholder profiles and specific goals;
(b) creating investment models and asset allocation models for use by
shareholders in selecting appropriate funds;
(c) conducting proprietary research about investment choices and the
market in general;
(d) periodic rebalancing of shareholder accounts to ensure compliance with
the selected asset allocation;
(e) consolidating shareholder accounts in one place; and
(f) other individual services.
Individual shareholder services do not include those activities and expenses
that are primarily intended to result in the sale of additional shares of the
funds.
Payments to Dealers
From time to time, the distributor may provide additional payments to dealers,
including but not limited to payment assistance for conferences and seminars,
provision of sales or training programs for dealer employees and/or the public
(including, in some cases, payment for travel expenses for registered
representatives and other dealer employees who participate), advertising and
sales campaigns about a fund or funds, and assistance in financing
dealer-sponsored events. Other payments may be offered as well, and all such
payments will be consistent with applicable law, including the then-current
rules of the Financial Industry Regulatory Authority. Such payments will not
change the price paid by investors for shares of the funds.
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33
BUYING AND SELLING FUND SHARES
Information about buying, selling, exchanging and, if applicable, converting
fund shares is contained in the funds' prospectus. The prospectus is available
to investors without charge and may be obtained by calling us.
American Century considers employer-sponsored retirement plans to include the
following:
* 401(a) plans
* pension plans
* profit sharing plans
* 401(k) plans
* money purchase plans
* target benefit plans
* Taft-Hartley multi-employer pension plans
* SERP and "Top Hat" plans
* ERISA trusts
* employee benefit trusts
* 457 plans
* KEOGH plans
* employer-sponsored 403(b) plans (including self-directed)
* nonqualified deferred compensation plans
* nonqualified excess benefit plans
* nonqualified retirement plans
* SIMPLE IRAs
* SEP IRAs
* SARSEP
Traditional and Roth IRAs are not considered employer-sponsored retirement
plans. The following table indicates the types of shares that may be purchased
through employer-sponsored retirement plans, Traditional IRAs and Roth IRAs.
TRADITIONAL
EMPLOYER-SPONSORED AND
RETIREMENT PLANS ROTH IRAS
--------------------------------------------------------------------------------
Investor Class shares may be purchased Yes Yes
--------------------------------------------------------------------------------
Advisor Class shares may be purchased Yes Yes
--------------------------------------------------------------------------------
VALUATION OF A FUND'S SECURITIES
All classes of the funds are offered at their net asset value (NAV). Each fund's
NAV is calculated as of the close of business of the New York Stock Exchange
(NYSE) on each day the NYSE is open. The NYSE usually closes at 4 p.m. Eastern
time. The NYSE typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the NYSE may modify its holiday
schedule at any time.
A fund's NAV is the current value of a fund's assets, minus any liabilities,
divided by the number of shares outstanding. Expenses and interest earned on
portfolio securities are accrued daily.
Securities held by the funds normally are priced using data supplied by an
independent pricing service, provided that such prices are believed by the
advisor to reflect the fair market value of portfolio securities.
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34
Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the advisor, based on
guidelines and procedures established by the Board of Trustees for determining
the valuation of a security, determines that this would not result in fair
valuation of a given security. Other assets and securities for which quotations
are not readily available are valued in good faith using methods approved by the
Board of Trustees.
TAXES
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund should be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to shareholders. If a fund fails to qualify as a
regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions received from the funds in the same manner in which they
were realized by the funds.
Certain bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Although no cash is actually received by a fund until the maturity
of the bond, original issue discount is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the fund.
In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable or if the amount is considered
de minimis). Generally, if the fund elects to include the discount in income,
market discount accrues on a daily basis for each day the bond is held by a fund
on a constant yield to maturity basis. In the case of any debt security having a
fixed maturity date of not more than one year from date of issue, the gain
realized on disposition generally will be treated as a short-term capital gain.
If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, unless they are designated as qualified dividend income and you
meet a minimum required holding period with respect to your shares of the fund,
in which case they are taxed as long-term capital gains. Qualified dividend
income is a dividend received by the fund from the stock of a domestic or
qualifying foreign corporation, provided that the fund has held the stock for a
required holding period. Distributions from gains on assets held by a fund
longer than 12 months are taxable as long-term gains regardless of the length of
time you have held your shares in the fund. If you purchase shares in a fund and
sell them at a loss within six months, your loss on the sale of those shares
will be treated as a long-term capital loss to the extent of any long-term
capital gains dividend you received on those shares.
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35
As of September 30, 2007, the funds in the table below had the following capital
loss carryover, which expire in the years and amounts listed. When a fund has a
capital loss carryover, it does not make capital gains distributions until the
loss has been offset or expired.
CAPITAL LOSS CARRYOVER
--------------------------------------------------------------------------------
FUND 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------
Target - - - - - - - -
2010
--------------------------------------------------------------------------------
Target - - - - - - - $(706,117)
2015
--------------------------------------------------------------------------------
Target - - - - - - - -
2020
--------------------------------------------------------------------------------
Target - - - - - - $(103,458) $(1,842,034)
2025
--------------------------------------------------------------------------------
Under the Code, any distribution of a fund's net realized long-term capital
gains that is designated by the fund as a capital gains dividend is taxable to
you as long-term capital gains, regardless of the length of time you have held
your shares in the fund. If you purchase shares in the fund and sell them at a
loss within six months, your loss on the sale of those shares will be treated as
a long-term capital loss to the extent of any long-term capital gains dividend
you received on those shares.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, either American Century or your financial intermediary is
required by federal law to withhold and remit to the IRS the applicable federal
withholding rate on reportable payments (which may include taxable dividends,
capital gains distributions and redemption proceeds). Those regulations require
you to certify that the Social Security number or tax identification number you
provide is correct and that you are not subject to withholding for previous
under-reporting to the IRS. You will be asked to make the appropriate
certification on your account application. Payments reported by us to the IRS
that omit your Social Security number or tax identification number will subject
us to a non-refundable penalty of $50, which will be charged against your
account if you fail to provide the certification by the time the report is
filed.
A redemption of shares of a fund (including a redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
you generally will recognize gain or loss in an amount equal to the difference
between the basis of the shares and the amount received. If a loss is realized
on the redemption of fund shares, the reinvestment in additional fund shares
within 30 days before or after the redemption may be subject to the "wash sale"
rules of the Code, resulting in a postponement of the recognition of such loss
for federal income tax purposes.
The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisor or state or local tax authorities to determine whether the funds
are suitable investments.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended September 30, 2007 have been
audited by PricewaterhouseCoopers LLP, independent registered public accounting
firm. Their Report of Independent Registered Public Accounting Firm and the
financial statements included in the funds' Annual Report for the fiscal year
ended September 30, 2007 are incorporated herein by reference.
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EXPLANATION OF FIXED-INCOME
SECURITIES RATINGS
As described in the prospectus, the funds may invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the prospectus. The following is a summary of the rating categories
referenced in the prospectus disclosure.
RATINGS OF CORPORATE DEBT SECURITIES
--------------------------------------------------------------------------------
Standard & Poor's
--------------------------------------------------------------------------------
AAA This is the highest rating assigned by S&P to a debt
obligation. It indicates an extremely strong capacity
to pay interest and repay principal.
--------------------------------------------------------------------------------
AA Debt rated in this category is considered to have
a very strong capacity to pay interest and repay
principal. It differs from the highest-rated obligations
only in small degree.
--------------------------------------------------------------------------------
A Debt rated A has a strong capacity to pay interest
and repay principal, although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher-rated categories.
--------------------------------------------------------------------------------
BBB Debt rated in this category is regarded as having
an adequate capacity to pay interest and repay
principal. While it normally exhibits adequate
protection parameters, adverse economic conditions
or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay
principal for debt in this category than in higher-
rated categories. Debt rated below BBB is regarded
as having significant speculative characteristics.
--------------------------------------------------------------------------------
BB Debt rated in this category has less near-term
vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic
conditions that could lead to inadequate capacity to
meet timely interest and principal payments. The BB
rating also is used for debt subordinated to senior
debt that is assigned an actual or implied BBB
rating.
--------------------------------------------------------------------------------
B Debt rated in this category is more vulnerable to
nonpayment than obligations rated 'BB', but currently
has the capacity to pay interest and repay principal.
Adverse business, financial, or economic conditions
will likely impair the obligor's capacity or willingness
to pay interest and repay principal.
--------------------------------------------------------------------------------
CCC Debt rated in this category is currently vulnerable
to nonpayment and is dependent upon favorable
business, financial, and economic conditions to
meet timely payment of interest and repayment of
principal. In the event of adverse business, financial,
or economic conditions, it is not likely to have
the capacity to pay interest and repay principal.
The CCC rating category is also used for debt
subordinated to senior debt that is assigned an
actual or implied B or B- rating.
--------------------------------------------------------------------------------
CC Debt rated in this category is currently highly
vulnerable to nonpayment. This rating category is
also applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
--------------------------------------------------------------------------------
C The rating C typically is applied to debt subordinated
to senior debt, and is currently highly vulnerable
to nonpayment of interest and principal. This
rating may be used to cover a situation where
a bankruptcy petition has been filed or similar
action taken, but debt service payments are being
continued.
--------------------------------------------------------------------------------
D Debt rated in this category is in default. This
rating is used when interest payments or principal
repayments are not made on the date due even if
the applicable grace period has not expired, unless
S&P believes that such payments will be made
during such grace period. It also will be used upon
the filing of a bankruptcy petition or the taking
of a similar action if debt service payments are
jeopardized.
--------------------------------------------------------------------------------
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37
Moody's Investors Service, Inc.
--------------------------------------------------------------------------------
Aaa This is the highest rating assigned by Moody's to
a debt obligation. It indicates an extremely strong
capacity to pay interest and repay principal.
--------------------------------------------------------------------------------
Aa Debt rated in this category is considered to have
a very strong capacity to pay interest and repay
principal and differs from Aaa issues only in a small
degree. Together with Aaa debt, it comprises what
are generally known as high-grade bonds.
--------------------------------------------------------------------------------
A Debt rated in this category possesses many
favorable investment attributes and is to be
considered as upper-medium-grade debt. Although
capacity to pay interest and repay principal
are considered adequate, it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher-rated categories.
--------------------------------------------------------------------------------
Baa Debt rated in this category is considered as
medium-grade debt having an adequate capacity
to pay interest and repay principal. While it normally
exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category
than in higher-rated categories. Debt rated below
Baa is regarded as having significant speculative
characteristics.
--------------------------------------------------------------------------------
Ba Debt rated Ba has less near-term vulnerability to
default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions
that could lead to inadequate capacity to meet
timely interest and principal payments. Often the
protection of interest and principal payments may be
very moderate.
--------------------------------------------------------------------------------
B Debt rated B has a greater vulnerability to default,
but currently has the capacity to meet financial
commitments. Assurance of interest and principal
payments or of maintenance of other terms of
the contract over any long period of time may be
small. The B rating category is also used for debt
subordinated to senior debt that is assigned an
actual or implied Ba or Ba3 rating.
--------------------------------------------------------------------------------
Caa Debt rated Caa is of poor standing, has a currently
identifiable vulnerability to default, and is dependent
upon favorable business, financial and economic
conditions to meet timely payment of interest and
repayment of principal. In the event of adverse
business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay
principal. Such issues may be in default or there
may be present elements of danger with respect to
principal or interest. The Caa rating is also used for
debt subordinated to senior debt that is assigned an
actual or implied B or B3 rating.
--------------------------------------------------------------------------------
Ca Debt rated in this category represent obligations
that are speculative in a high degree. Such debt is
often in default or has other marked shortcomings.
--------------------------------------------------------------------------------
C This is the lowest rating assigned by Moody's, and
debt rated C can be regarded as having extremely
poor prospects of attaining investment standing.
--------------------------------------------------------------------------------
Fitch Investors Service, Inc.
--------------------------------------------------------------------------------
AAA Debt rated in this category has the lowest
expectation of credit risk. Capacity for timely
payment of financial commitments is exceptionally
strong and highly unlikely to be adversely affected
by foreseeable events.
--------------------------------------------------------------------------------
AA Debt rated in this category has a very low
expectation of credit risk. Capacity for timely
payment of financial commitments is very strong
and not significantly vulnerable to foreseeable
events.
--------------------------------------------------------------------------------
A Debt rated in this category has a low expectation of
credit risk. Capacity for timely payment of financial
commitments is strong, but may be more vulnerable
to changes in circumstances or in economic
conditions than debt rated in higher categories.
--------------------------------------------------------------------------------
BBB Debt rated in this category currently has a low
expectation of credit risk and an adequate capacity
for timely payment of financial commitments.
However, adverse changes in circumstances and
in economic conditions are more likely to impair
this capacity. This is the lowest investment grade
category.
--------------------------------------------------------------------------------
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38
Fitch Investors Service, Inc.
--------------------------------------------------------------------------------
BB Debt rated in this category has a possibility
of developing credit risk, particularly as the
result of adverse economic change over time.
However, business or financial alternatives may
be available to allow financial commitments to
be met. Securities rated in this category are not
investment grade.
--------------------------------------------------------------------------------
B Debt rated in this category has significant
credit risk, but a limited margin of safety
remains. Financial commitments currently
are being met, but capacity for continued
debt service payments is contingent upon a
sustained, favorable business and economic
environment.
--------------------------------------------------------------------------------
CCC, CC, C Debt rated in these categories has a real
possibility for default. Capacity for meeting
financial commitments depends solely upon
sustained, favorable business or economic
developments. A CC rating indicates that
default of some kind appears probable; a C
rating signals imminent default.
--------------------------------------------------------------------------------
DDD, DD, D The ratings of obligations in these categories
are based on their prospects for achieving
partial or full recovery in a reorganization
or liquidation of the obligor. While expected
recovery values are highly speculative and
cannot be estimated with any precision, the
following serve as general guidelines. DDD
obligations have the highest potential for
recovery, around 90%-100% of outstanding
amounts and accrued interest. DD indicates
potential recoveries in the range of 50%-90%
and D the lowest recovery potential, i.e., below
50%.
Entities rated in these categories have
defaulted on some or all of their obligations.
Entities rated DDD have the highest
prospect for resumption of performance or
continued operation with or without a formal
reorganization process. Entities rated DD
and D are generally undergoing a formal
reorganization or liquidation process; those
rated DD are likely to satisfy a higher portion
of their outstanding obligations, while entities
rated D have a poor prospect of repaying all
obligations.
--------------------------------------------------------------------------------
To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1, 2, 3) to designate relative standing within
its major bond rating categories. Fitch also rates bonds and uses a ratings
system that is substantially similar to that used by Standard & Poor's.
COMMERCIAL PAPER RATINGS
--------------------------------------------------------------------------------
S&P MOODY'S DESCRIPTION
--------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety
(P-1) regarding timely payment is strong.
Standard & Poor's rates those issues
determined to possess extremely
strong safety characteristics as A-1+.
--------------------------------------------------------------------------------
A-2 Prime-2 Capacity for timely payment on
(P-2) commercial paper is satisfactory, but
the relative degree of safety is not
as high as for issues designated A-1.
Earnings trends and coverage ratios,
while sound, will be more subject to
variation. Capitalization characteristics,
while still appropriated, may be more
affected by external conditions. Ample
alternate liquidity is maintained.
--------------------------------------------------------------------------------
A-3 Prime-3 Satisfactory capacity for timely
(P-3) repayment. Issues that carry this rating
are somewhat more vulnerable to the
adverse changes in circumstances
than obligations carrying the higher
designations.
--------------------------------------------------------------------------------
------
39
NOTE RATINGS
--------------------------------------------------------------------------------
S&P MOODY'S DESCRIPTION
--------------------------------------------------------------------------------
SP-1 MIG-1; Notes are of the highest quality enjoying
VMIG-1 strong protection from established cash
flows of funds for their servicing or from
established and broad-based access to
the market for refinancing, or both.
--------------------------------------------------------------------------------
SP-2 MIG-2; Notes are of high quality with margins of
VMIG-2 protection ample, although not so large
as in the preceding group.
--------------------------------------------------------------------------------
SP-3 MIG-3; Notes are of favorable quality with all
VMIG-3 security elements accounted for, but
lacking the undeniable strength of the
preceding grades. Market access for
refinancing, in particular, is likely to be
less well established.
--------------------------------------------------------------------------------
SP-4 MIG-4; Notes are of adequate quality, carrying
VMIG-4 specific risk but having protection
and not distinctly or predominantly
speculative.
--------------------------------------------------------------------------------
------
40
NOTES
------
41
MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS
Annual and Semiannual Reports
Annual and Semiannual Reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.
You can receive a free copy of the annual and semiannual reports, and ask
questions about the funds and your accounts, online at americancentury.com, by
contacting American Century at the addresses or telephone numbers listed below
or by contacting your financial intermediary.
If you own or are considering purchasing fund shares through
* an employer-sponsored retirement plan
* a bank
* a broker-dealer
* an insurance company
* another financial intermediary
you can receive the annual and semiannual reports directly from them.
You also can get information about the funds from the Securities and Exchange
Commission (SEC). The SEC charges a duplicating fee to provide copies of this
information.
IN PERSON SEC Public Reference Room
Washington, D.C.
Call 1-202-942-8090 for location and hours.
ON THE INTERNET * EDGAR database at sec.gov
* By email request at publicinfo@sec.gov
BY MAIL SEC Public Reference Section
Washington, D.C. 20549-0102
Investment Company Act File No. 811-4165
AMERICAN CENTURY INVESTMENTS
americancentury.com
Banks and Trust Companies, Broker-Dealers,
Self-Directed Retail Investors Financial Professionals, Insurance Companies
P.O. Box 419200 P.O. Box 419786
Kansas City, Missouri 64141-6200 Kansas City, Missouri 64141-6786
1-800-345-2021 or 816-531-5575 1-800-345-6488
SH-SAI-57700 0802
AMERICAN CENTURY TARGET MATURITIES TRUST
PART C OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Amended and Restated Agreement and Declaration of Trust, dated
March 26, 2004 (filed electronically as Exhibit a to Post-Effective Amendment
No. 40 to the Registration Statement of the Registrant on November 30, 2004,
File No. 2-94608, and incorporated herein by reference).
(2) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust, dated March 8, 2007, is included herein.
(3) Amendment No. 2 to the Amended and Restated Agreement and
Declaration of Trust, dated August 31, 2007, is included herein.
(b) Amended and Restated Bylaws, dated December 7, 2007, are included
herein.
(c) Registrant hereby incorporates by reference, as though set forth fully
herein, Article III, Article IV, Article V, Article VI and Article VIII of
Registrant's Amended and Restated Agreement and Declaration of Trust, appearing
as Exhibit (a) herein, and Article II, Article VII, Article VIII and Article IX
of Registrant's Amended and Restated Bylaws, incorporated by reference as
Exhibit (b) herein.
(d) Management Agreement with American Century Investment Management, Inc.,
dated August 1, 2007, is included herein.
(e) (1) Amended and Restated Distribution Agreement with American Century
Investment Services, Inc., dated August 1, 2007, is included herein.
(2) Form of Dealer/Agency Agreement (filed electronically as Exhibit
e2 to Pre-Effective Amendment No. 25 to the Registration Statement of American
Century International Bond Funds, on April 30, 2007, File No. 333-43321, and
incorporated herein by reference).
(f) Not applicable.
(g) (1) Master Agreement with Commerce Bank, N.A. dated January 22, 1997
(filed electronically as Exhibit b8e to Post-Effective Amendment No. 76 to the
Registration Statement of American Century Mutual Funds, Inc. on February 28,
1997, File No. 2-14213, and incorporated herein by reference).
(2) Global Custody Agreement with The Chase Manhattan Bank, dated
August 9, 1996 (filed electronically as Exhibit b8 to Post-Effective Amendment
No. 31 to the Registration Statement of American Century Government Income Trust
on February 7, 1997, File No. 2-99222, and incorporated herein by reference).
(3) Amendment to Global Custody Agreement with The Chase Manhattan
Bank, dated December 9, 2000 (filed electronically as Exhibit g2 to
Pre-Effective Amendment No. 2 to the Registration Statement of American Century
Variable Portfolios II, Inc. on January 9, 2001, File No. 333-46922, and
incorporated herein by reference).
(4) Amendment No. 2 to the Global Custody Agreement between American
Century Investments and the JPMorgan Chase Bank, dated as of May 1, 2004 (filed
electronically as Exhibit g4 to Post-Effective Amendment No. 35 to the
Registration Statement of American Century Quantitative Equity Funds, Inc. on
April 29, 2004, File No. 33-19589, and incorporated herein by reference).
(5) Chase Manhattan Bank Custody Fee Schedule, dated October 19, 2000
(filed electronically as Exhibit g5 to Post-Effective Amendment No. 35 to the
Registration Statement of American Century Quantitative Equity Funds, Inc. on
April 29, 2004, File No. 33-19589, and incorporated herein by reference).
(6) Amendment No. 3 to the Global Custody Agreement between American
Century Investments and the JPMorgan Chase Bank, dated as of May 31, 2006 (filed
electronically as Exhibit g6 to Pre-Effective Amendment No. 1 to the
Registration Statement of American Century Growth Funds, Inc. on May 30, 2006,
File No. 333-132114, and incorporated herein by reference).
(h) (1) Amended and Restated Transfer Agency Agreement with American
Century Services, LLC, dated August 1, 2007, is included herein.
(2) American Century Funds Credit Agreement dated December 12, 2007
with Bank of America, N.A., as Administrative Agent (filed electronically as
Exhibit h2 to Post-Effective Amendment No. 43 to the Registration Statement of
American Century California Tax-Free and Municipal Funds on December 28, 2007,
File No. 2-82734, and incorporated herein by reference).
(3) Customer Identification Program Reliance Agreement (filed
electronically as Exhibit h2 to Pre-Effective Amendment No. 1 to the
Registration Statement of American Century Growth Funds, Inc. on May 30, 2006,
File No. 333-132114, and incorporated herein by reference).
(i) Opinion and Consent of Counsel, dated January 28, 2005 (filed
electronically as Exhibit i to Post-Effective Amendment No. 41 to the
Registration Statement of the Registrant on January 28, 2005, File No. 2-94608,
and incorporated herein by reference).
(j) Consent of PricewaterhouseCoopers LLP, independent registered public
accounting firm, dated January 22, 2008, is included herein.
(k) Not applicable.
(l) Not applicable.
(m) Amended and Restated Master Distribution and Individual Shareholder
Services Plan (Advisor Class), dated January 1, 2008, is included herein.
(n) Amended and Restated Multiple Class Plan, dated January 1, 2008, is
included herein.
(o) Reserved.
(p) (1) American Century Investments Code of Ethics (filed electronically
as Exhibit p1 to Post-Effective Amendment No. 41 to the Registration Statement
of American Century California Tax-Free and Municipal Funds on December 28,
2006, File No. 2-82734, and incorporated herein by reference).
(2) Independent Directors' Code of Ethics amended February 28, 2000
(filed electronically as Exhibit p2 to Post-Effective Amendment No. 40 to the
Registration Statement of the Registrant on November 30, 2004, File No. 2-94608,
and incorporated herein by reference).
(q) (1) Power of Attorney, dated September 7, 2007 (filed electronically
as Exhibit q1 to Post-Effective Amendment No. 55 to the Registration Statement
of American Century Government Income Trust on September 26, 2007, File No.
2-99222, and incorporated herein by reference).
(2) Secretary's Certificate, dated September 7, 2007 (filed
electronically as Exhibit q2 to Post-Effective Amendment No. 55 to the
Registration Statement of American Century Government Income Trust on September
26, 2007, File No. 2-99222, and incorporated herein by reference).
Item 24. Persons Controlled by or Under Common Control with Fund
(a) The persons who serve as the trustees or directors of the Registrant
also serve, in substantially identical capacities, of the following investment
companies:
American Century California Tax-Free and Municipal Funds
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Quantitative Equity Funds, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios II, Inc.
Because the boards of each of the above-named investment companies are
identical, these companies may be deemed to be under common control.
Item 25. Indemnification.
As stated in Article VII, Section 3 of the Amended and Restated Declaration
of Trust, incorporated herein by reference to Exhibit (a) to the Registration
Statement, "The Trustees shall be entitled and empowered to the fullest extent
permitted by law to purchase insurance for and to provide by resolution or in
the Bylaws for indemnification out of Trust assets for liability and for all
expenses reasonably incurred or paid or expected to be paid by a Trustee or
officer in connection with any claim, action, suit, or proceeding in which he or
she becomes involved by virtue of his or her capacity or former capacity with
the Trust. The provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a resolution
adopted by the Board of Trustees."
Registrant hereby incorporates by reference, as though set forth fully
herein, Article VI of the Registrant's Amended and Restated Bylaws, appearing as
Exhibit (b) herein.
The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and trustees may incur
while acting in such capacities and providing reimbursement to the Registrant
for sums which it may be permitted or required to pay to its officers and
trustees by way of indemnification against such liabilities, subject in either
case to clauses respecting deductibility and participation.
Item 26. Business and Other Connections of the Investment Advisor
In addition to serving as the Registrant's investment advisor, American
Century Investment Management, Inc. provides portfolio management services for
other investment companies as well as for other business and institutional
clients. Business backgrounds of the directors and principal executive officers
of the advisor that also hold positions with the Registrant are included under
"Management" in the Statement of Additional Information included in this
registration statement. The remaining principal executive officers and directors
of the advisor and their principal occupations during at least the past 2 fiscal
years are as follows:
James E. Stowers, Jr. (Director). Founder, Co-Chairman, Director and
Controlling Shareholder, American Century Companies, Inc. (ACC);
Co-Vice Chairman, ACC (January 2005 to February 2007); Chairman, ACC
(January 1995 to December 2004); Director, American Century Global
Investment Management, Inc. (ACGIM), American Century Services, LLC
(ACS), American Century Investment Services, Inc. (ACIS) and other ACC
subsidiaries, as well as a number of American Century-advised
investment companies.
Enrique Chang (President, Chief Executive Officer and Chief Investment
Officer of ACIM and ACGIM). Served as President and Chief Executive
Officer, Munder Capital Management, 2002 to 2006.
The principal address for all American Century entities other than ACGIM is 4500
Main Street, Kansas City, MO 64111. The principal address for ACGIM is 666 Third
Avenue, 23rd Floor, New York, NY 10017.
Item 27. Principal Underwriters
I. (a) American Century Investment Services, Inc. (ACIS) acts as principal
underwriter for the following investment companies:
American Century Asset Allocation Portfolios, Inc.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century Growth Funds, Inc.
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Quantitative Equity Funds, Inc.
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century Variable Portfolios II, Inc.
American Century World Mutual Funds, Inc.
ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the Financial Industry Regulatory Authority.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.
(b) The following is a list of the directors, executive officers and
partners of ACIS:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
--------------------------------------------------------------------------
James E. Stowers, Jr. Director none
Jonathan S. Thomas Director President
and Trustee
Brian Jeter President and Chief none
Executive Officer
Jon W. Zindel Senior Vice President Tax Officer
and Chief Accounting Officer
David K. Anderson Chief Financial Officer none
Mark Killen Senior Vice President none
David Larrabee Senior Vice President none
Barry Mayhew Senior Vice President none
David C. Tucker Senior Vice President none
Joseph S. Reece Chief Compliance Officer none
* All addresses are 4500 Main Street, Kansas City, Missouri 64111
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder, are in the
possession of American Century Investment Management, Inc., 4500 Main Street,
Kansas City, MO 64111 and 1665 Charleston Road, Mountain View, CA; American
Century Services, LLC, 4500 Main Street, Kansas City, MO 64111; JPMorgan Chase
Bank, 4 Metro Tech Center, Brooklyn, NY 11245; and Commerce Bank, N.A., 1000
Walnut, Kansas City, MO 64105.
Item 29. Management Services - Not applicable.
Item 30. Undertakings - Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement amendment pursuant
to Rule 485(b) promulgated under the Securities Act of 1933, as amended, and has
duly caused this amendment to be signed on its behalf by the undersigned, duly
authorized, in the City of Kansas City, State of Missouri, on the 28th day of
January, 2008.
AMERICAN CENTURY TARGET MATURITIES TRUST
(Registrant)
By: *
-------------------------------------
Jonathan S. Thomas
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement amendment has been signed below by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* President and Trustee January 28, 2008
--------------------------
Jonathan S. Thomas
* Vice President, January 28, 2008
-------------------------- Treasurer and Chief
Robert J. Leach Financial Officer
* Trustee January 28, 2008
--------------------------
John Freidenrich
Chairman of the January 28, 2008
* Board and Trustee
--------------------------
Ronald J. Gilson
* Trustee January 28, 2008
------------------------
Peter F. Pervere
* Trustee January 28, 2008
--------------------------
Myron S. Scholes
* Trustee January 28, 2008
--------------------------
John B. Shoven
* Trustee January 28, 2008
--------------------------
Jeanne D. Wohlers
*By: /s/ Kathleen Gunja Nelson
---------------------------------------
Kathleen Gunja Nelson
Attorney in Fact
(pursuant to a Power of Attorney
dated September 7, 2007)
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF DOCUMENT
NUMBER
EXHIBIT (a)(2) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust, dated March 8, 2007.
EXHIBIT (a)(3) Amendment No. 2 to the Amended and Restated Agreement and
Declaration of Trust, dated August 31, 2007.
EXHIBIT (b) Amended and Restated Bylaws, dated December 7, 2007.
EXHIBIT (d) Management Agreement with American Century Investment
Management, Inc., dated August 1, 2007.
EXHIBIT (e)(1) Amended and Restated Distribution Agreement with American
Century Investment Services, Inc., dated August 1, 2007.
EXHIBIT (h)(1) Amended and Restated Transfer Agency Agreement with American
Century Services, LLC, dated August 1, 2007.
EXHIBIT (j) Consent of PricewaterhouseCoopers LLP, independent
registered public accounting firm, dated January 22, 2008.
EXHIBIT (m) Amended and Restated Master Distribution and Individual
Shareholder Services Plan (Advisor Class), dated January 1,
2008.
EXHIBIT (n) Amended and Restated Multiple Class Plan, dated January 1,
2008.
EXHIBIT (b)
AMERICAN CENTURY TARGET MATURITIES TRUST
BYLAWS
AS AMENDED AND RESTATED AS OF DECEMBER 7, 2007
TABLE OF CONTENTS
ARTICLE I OFFICES.................................................................1
Section 1. Principal Office.................................................1
Section 2. Other Offices....................................................1
ARTICLE II MEETINGS OF SHAREHOLDERS...............................................1
Section 1. Place of Meetings................................................1
Section 2. Call of Meeting..................................................1
Section 3. Notice of Shareholders' Meeting..................................1
Section 4. Manner of Giving Notice; Affidavit of Notice.....................2
Section 5. Adjourned Meeting; Notice........................................2
Section 6. Voting...........................................................2
Section 7. Waiver of Notice by Consent of Absent Shareholders...............3
Section 8. Shareholder Action by Written Consent without a Meeting..........3
Section 9. Record Date for Shareholder Notice, Voting and Giving Consents...3
Section 10. Proxies.........................................................4
Section 11. Inspectors of Election..........................................4
ARTICLE III TRUSTEES..............................................................5
Section 1. Powers...........................................................5
Section 2. Number and Qualification of Trustees.............................5
Section 3. Mandatory Retirement.............................................5
Section 4. Vacancies........................................................5
Section 5. Place of Meetings and Meetings by Telephone......................6
Section 6. Regular Meetings.................................................6
Section 7. Special Meetings.................................................6
Section 8. Quorum...........................................................6
Section 9. Waiver of Notice.................................................7
Section 10. Adjournment.....................................................7
Section 11. Notice of Adjournment...........................................7
Section 12. Action without a Meeting........................................7
Section 13. Fees and Compensation of Trustees...............................7
ARTICLE IV COMMITTEES.............................................................8
Section 1. Committees of Trustees...........................................8
Section 2. Meetings and Action of Committees................................8
ARTICLE V OFFICERS................................................................8
Section 1. Officers.........................................................8
Section 2. Election of Officers.............................................9
Section 3. Subordinate Officers.............................................9
Section 4. Removal and Resignation of Officers..............................9
Section 5. Vacancies In Offices.............................................9
Section 6. Chairman of the Board............................................9
Section 7. President........................................................9
Section 8. Vice Presidents.................................................10
Section 9. Secretary.......................................................10
Section 10. Chief Financial Officer........................................10
Section 11. Chief Compliance Officer.......................................11
ARTICLE VI INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS.....11
Section 1. Indemnification..................................................11
AMERICAN CENTURY TARGET MATURITIES TRUST BYLAWS
------------------------------------------------------------------------------------
TABLE OF CONTENTS, CONTINUED
Section 2. "Disabling Conduct"..............................................11
Section 3. Conditions for Indemnification...................................11
Section 4. Advance of Expenses..............................................12
Section 5. Rights Not Exclusive.............................................12
Section 6. Survival.........................................................12
Section 7. Definitions......................................................12
Section 8. Insurance........................................................13
Section 9. Fiduciaries of Employee Benefit Plan.............................13
ARTICLE VII RECORDS AND REPORTS..................................................13
Section 1. Maintenance and Inspection of Share Register....................13
Section 2. Maintenance and Inspection of Bylaws............................13
Section 3. Maintenance and Inspection of Other Records.....................14
Section 4. Inspection by Trustees..........................................14
Section 5. Financial Statements............................................14
ARTICLE VIII GENERAL MATTERS.....................................................14
Section 1. Checks, Drafts, Evidence of Indebtedness........................14
Section 2. Contracts and Instruments; How Executed.........................14
Section 3. Certificates for Shares.........................................15
Section 4. Lost Certificates...............................................15
Section 5. Uncertificated Shares...........................................15
Section 6. Representation of Shares of Other Entities......................16
ARTICLE IX AMENDMENTS............................................................16
Section 1. Amendment by Shareholders.......................................16
Section 2. Amendment by Trustees...........................................16
TABLE OF CONENTS-page 2
AMERICAN CENTURY TARGET MATURITIES TRUST
BYLAWS
AS AMENDED AND RESTATED AS OF DECEMBER 7, 2007
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE
The Board of Trustees shall fix the location of the principal executive office
of the Trust at any place within or outside The Commonwealth of Massachusetts.
SECTION 2. OTHER OFFICES
The Board of Trustees may at any time establish branch or subordinate offices at
any place or places where the trust intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside The
Commonwealth of Massachusetts designated by the Board of Trustees. In the
absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the Trust.
SECTION 2. CALL OF MEETING
A meeting of the shareholders shall be held whenever called by the Trustees and
whenever required by the provisions of the 1940 Act. A shareholder meeting may
be called at any time by the Board of Trustees or by the Chairman of the Board
or by the President. If a shareholder meeting is a meeting of the shareholders
of one or more series or classes of shares, but not a meeting of all
shareholders of the Trust, then only special meetings of the shareholders of
such one or more series or classes shall be called and only the shareholders of
such one or more series or classes shall be entitled to notice of and to vote at
such meeting.
SECTION 3. NOTICE OF SHAREHOLDERS' MEETING
All notices of meetings of shareholders shall be sent or otherwise given in
accordance with Section 4 of this Article II not less than ten (10) nor more
than seventy-five (75) days before the date of the meeting. The notice shall
specify (i) the place, date and hour of the meeting, and (ii) the general nature
of the business to be transacted. The notice of any meeting at which trustees
are to be elected also shall include the name of any nominee or nominees whom at
the time of the notice are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a contract
or transaction in which a trustee has a direct or indirect financial interest,
(ii) an amendment of the Declaration of
AMERICAN CENTURY TARGET MATURITIES TRUST BYLAWS
--------------------------------------------------------------------------------
Trust, (iii) a reorganization of the Trust, or (iv) a voluntary dissolution of
the Trust, the notice shall also state the general nature of that proposal.
SECTION 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Notice of any meeting of shareholders shall be given either personally or by
first-class mail or telegraphic or other written communication, charges prepaid,
addressed to the shareholder at the address of that shareholder appearing on the
books of the Trust or its transfer agent or given by the shareholder to the
Trust for the purpose of notice. If no such address appears on the Trust's books
or is given, notice shall be deemed to have been given if sent to that
shareholder by first-class mail or telegraphic or other written communication to
the Trust's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the Trust is returned to the Trust by the United
States Postal Service marked to indicate that the Postal Service is unable to
deliver the notice to the shareholder at the address, all future notices or
reports shall be deemed to have been duly given without further mailing if these
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the Secretary, an Assistant Secretary
or any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
SECTION 5. ADJOURNED MEETING; NOTICE
Any shareholder's meeting, whether or not a quorum is present, may be adjourned
from time to time by the vote of the majority of the shares represented at that
meeting, either in person or by proxy.
When any meeting of shareholders is adjourned to another time or place, notice
need not be given of the adjourned meeting at which the adjournment is taken,
unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Where
required, notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Section 3 and 4 of this Article II. At any adjourned
meeting, the Trust may transact any business which might have been transacted at
the original meeting.
SECTION 6. VOTING
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of the Declaration of Trust, as in
effect at such time. The shareholders' vote may be by voice vote or by ballot,
provided, however, that any election for trustees must be by ballot if demanded
by any shareholder before the voting has begun. On any matter other than
elections of trustees, any shareholder may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote them against
the proposal, but if
page 2
AMERICAN CENTURY TARGET MATURITIES TRUST BYLAWS
--------------------------------------------------------------------------------
the shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.
SECTION 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS
The transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of notice of
that meeting, except when the person objects at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not included in the notice of the meeting
if that objection is expressly made at the beginning of the meeting.
SECTION 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any meeting of shareholders may be taken
without a meeting and without prior notice if a consent in writing setting forth
the action so taken is signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take that action at a meeting at which all shares entitled to vote on that
action were present and voted. All such consents shall be filed with the
Secretary of the Trust and shall be maintained in the Trust's records. Any
shareholder giving a written consent or the shareholder's proxy holders or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders may revoke the consent by a writing received by
the Secretary of the Trust before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been solicited in
writing and if the unanimous written consent of all such shareholders shall not
have been received, the Secretary shall give prompt notice of the action
approved by the shareholders without a meeting. This notice shall be given in
the manner specified in Section 4 of this Article II. In the case of approval of
(i) contracts or transactions in which a trustee has a direct or indirect
financial interest, (ii) indemnification of agents of the Trust, and (iii) a
reorganization of the Trust, the notice shall be given at least ten (10) days
before the consummation of any action authorized by that approval.
SECTION 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any meeting
or to vote or entitled to give consent to action without a meeting, the Board of
Trustees may fix in advance a record date which shall not be more than
seventy-five (75) days nor less than ten (10) days before the date of any such
meeting as provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
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(a) The record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or if notice
is waived, at the close of business on the business day next preceding the
day on which the meeting is held.
(b) The record date for determining shareholders entitled to give consent to
action in writing without a meeting, (i) when no prior action by the Board
of Trustees has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board of Trustees has
been taken, shall be at the close of business on the day on which the Board
of Trustees adopt the resolution relating to that action or the
seventy-fifth day before the date of such other action, whichever is later.
SECTION 10. PROXIES
Every person entitled to vote for trustees or on any other matter shall have the
right to do so either in person or by one or more agents authorized by a written
proxy signed by the person and filed with the Secretary of the Trust. A proxy
shall be deemed signed if the shareholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, or by electronic,
telephonic, computerized or other alternative form of execution authorized by
the Trustees) by the shareholder or the shareholder's attorney-in-fact. A proxy
with respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives specific written notice to the contrary from any one of them. A proxy
purporting to be exercised by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it before the vote pursuant to that proxy by a
writing delivered to the Trust stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by the person executing that proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the Trust before the vote
pursuant to that proxy is counted; provided however, that no proxy shall be
valid after the expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of the
General Corporation Law of the Commonwealth of Massachusetts, as if the Trust
were a Massachusetts corporation.
SECTION 11. INSPECTORS OF ELECTION
Before any meeting of shareholders, the Board of Trustees may appoint any
persons other than nominees for office to act as inspectors of election at the
meeting or its adjournment. If no inspectors of election are so appointed, the
chairman of the meeting may and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting on the request of one or more shareholders or proxies,
the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
the chairman of the meeting may and on the request of any shareholder or a
shareholder's proxy, shall appoint a person to fill the vacancy.
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These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote with
fairness to all shareholders.
ARTICLE III
TRUSTEES
SECTION 1. POWERS
Subject to the applicable provisions of the Declaration of Trust, these Bylaws,
and applicable laws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and affairs of the Trust
shall be managed and all powers shall be exercised by or under the direction of
the Board of Trustees.
SECTION 2. NUMBER AND QUALIFICATION OF TRUSTEES
The authorized number of trustees shall be not less than three (3) nor more than
fifteen (15) until changed by a duly adopted amendment to the Declaration of
Trust and these Bylaws. The selection and nomination of disinterested trustees
is committed solely to the discretion of a Nominating Committee consisting of
all sitting disinterested trustees except where the remaining trustee or
trustees are interested persons.
SECTION 3. MANDATORY RETIREMENT
Disinterested trustees shall retire when they reach the age of seventy-three
(73) years; provided, however, the remaining disinterested trustees may waive
the mandatory retirement provision expressed herein for a period not to exceed
two years.
SECTION 4. VACANCIES
Vacancies in the Board of Trustees may be filled by a majority of the remaining
trustees, though less than a quorum, or by a sole remaining trustee, unless the
Board of Trustees calls a meeting of shareholders for the purposes of electing
trustees. In the event that at any time less than a majority of the trustees
holding office at that time were so elected by the holders of the outstanding
voting securities of the Trust, the Board of Trustees shall forthwith cause to
be held
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as promptly as possible, and in any event within sixty (60) days, a meeting of
such holders for the purpose of electing trustees to fill any existing vacancies
in the Board of Trustees, unless such period is extended by order of the United
States Securities and Exchange Commission.
SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE
All meetings of the Board of Trustees may be held at any place within or outside
The Commonwealth of Massachusetts that has been designated from time to time by
resolution of the Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Trust. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all trustees participating in the meeting can hear one
another and all such trustees shall be deemed to be present in person at the
meeting; PROVIDED THAT, in accordance with the provisions of the Investment
Company Act of 1940, the Board may not transact by such a meeting any business
which involves the entering into, or the approval, performance, or renewal of
any contract or agreement, whereby a person undertakes regularly to serve or act
as the Trust's investment advisor or principal underwriter.
SECTION 6. REGULAR MEETINGS
Regular meetings of the Board of Trustees shall be held without call at such
time as shall from time to time be fixed by the Board of Trustees. Such regular
meetings may be held without notice.
SECTION 7. SPECIAL MEETINGS
Special meetings of the Board of Trustees for any purpose or purposes may be
called at any time by the Chairman of the Board or the President or any Vice
President or the Secretary or any two (2) trustees.
Notice of the time and place of special meetings shall be delivered personally
or by telephone to each trustee or sent by first-class mail, by facsimile, or
electronic mail, charges prepaid, addressed to each trustee at that trustee's
address as it is shown on the records of the Trust. In case the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. In case the notice is delivered
personally, by telephone, by facsimile delivery, or by electronic mail, it shall
be given at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the trustee or to a person at the office of the trustee who the person
giving the notice has reason to believe will promptly communicate it to the
trustee. The notice need not specify the purpose of the meeting or the place if
the meeting is to be held at the principal executive office of the Trust.
SECTION 8. QUORUM
A majority of the number of trustees (as fixed in accordance with the provisions
of the Declaration of Trust) shall constitute a quorum for the transaction of
business, except to adjourn as provided in Section 10 of this Article III. Every
act or decision done or made by a majority of the trustees present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Trustees, subject to the provisions of the Declaration of Trust. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the
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withdrawal of trustees if any action taken is approved by at least a majority of
the required quorum for that meeting.
SECTION 9. WAIVER OF NOTICE
Notice of any meeting need not be given to any trustee who either before or
after the meeting signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice of consent need not
specify the purpose of the meeting. All such waivers, consents and approvals
shall be filed with the records of the Trust or made a part of the minutes of
the meeting. Notice of a meeting shall also be deemed given to any trustee who
attends the meeting without protesting before or at its commencement the lack of
notice to that trustee.
SECTION 10. ADJOURNMENT
A majority of the trustees present, whether or not constituting a quorum, may
adjourn any meeting to another time and place.
SECTION 11. NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be given
unless the meeting is adjourned for more than forty-eight (48) hours, in which
case notice of the time and place shall be given before the time of the
adjourned meeting in the manner specified in Section 6 of this Article III to
the trustees who were present at the time of the adjournment.
SECTION 12. ACTION WITHOUT A MEETING
Any action required or permitted to be taken by the Board of Trustees may be
taken without a meeting if a majority of the members of the Board of Trustees
shall individually or collectively consent in writing to that action; PROVIDED
THAT, in accordance with the Investment Company Act of 1940, such written
consent does not approve the entering into, or the renewal or performance of any
contract or agreement, whereby a person undertakes regularly to serve or act as
the Trust's investment advisor or principal underwriter. Any other action by
written consent shall have the same force and effect as a majority vote of the
Board of Trustees. Written consents shall be filed with the minutes of the
proceedings of the Board of Trustees.
SECTION 13. FEES AND COMPENSATION OF TRUSTEES
Trustees and members of committees may receive such compensation, if any, for
their services and such reimbursement of expenses as may be fixed or determined
by resolution of the Board of Trustees. This Section 12 shall not be construed
to preclude any trustee from serving the Trust in any other capacity as an
officer, agent, employee or otherwise and receiving compensation for those
services.
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ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF TRUSTEES
The Board of Trustees may by resolution adopted by a majority of the authorized
number of trustees designate one or more committees, each consisting of two (2)
or more trustees, to serve at the pleasure of the Board. The Board may designate
one or more trustees as alternate members of any committee who may replace any
absent member at any meeting of the committee. Any committee to the extent
provided in the resolution of the Board, shall have the authority of the Board,
except with respect to:
(a) the approval of any action which under applicable law also requires
shareholders' approval or approval of the outstanding shares, or requires
approval by a majority of the entire Board or certain members of said
Board;
(b) the filling of vacancies on the Board of Trustees or in any committee;
(c) the fixing of compensation of the trustees for serving on the Board of
Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the Bylaws or the
adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the Board of Trustees which by
its express terms is not so amendable or repealable; or
(f) the appointment of any other committees of the Board of Trustees or the
members of these committees.
SECTION 2. MEETINGS AND ACTION OF COMMITTEES
Meetings and action of committees shall be governed by and held and taken in
accordance with the provisions of Article III of these Bylaws, with such changes
in the context thereof as are necessary to substitute the committee and its
members for the Board of Trustees and its members, except that the time of
regular meetings of committees may be determined either by resolution of the
Board of Trustees or by resolution of the committee. Special meetings of
committees may also be called by resolution of the Board of Trustees, and notice
of special meetings of committees shall also be given to all alternate members
who shall have the right to attend all meetings of the committee. The Board of
Trustees may adopt rules for the government of any committee not inconsistent
with the provisions of these Bylaws.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS
The officers of the Trust shall be a President, a Secretary, a Chief Financial
Officer, a Chief Compliance Officer and a Treasurer. The Trust may also have, at
the discretion of the Board of Trustees, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant
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Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. Any number of offices may be held by
the same person.
SECTION 2. ELECTION OF OFFICERS
The officers of the Trust, except such officers as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this Article V,
shall be chosen by the Board of Trustees, and each shall serve at the pleasure
of the Board of Trustees, subject to the rights, if any, of an officer under any
contract of employment.
SECTION 3. SUBORDINATE OFFICERS
The Board of Trustees may appoint and may empower the President to appoint such
other officers as the business of the Trust may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in these Bylaws or as the Board of Trustees may from time to time
determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment,
any officer may be removed, either with or without cause, by the Board of
Trustees at any regular or special meeting of the Board of Trustees or except in
the case of an officer upon whom such power of removal may be conferred by the
Board of Trustees.
Any officer may resign at any time by giving written notice to the Trust. Any
resignation shall take effect at the date of the receipt of that notice or at
any later time specified in that notice; and unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
SECTION 5. VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal, disqualification
or other cause shall be filled in the manner prescribed in these Bylaws for
regular appointment to that office.
SECTION 6. CHAIRMAN OF THE BOARD
The Chairman of the Board shall, if present, preside at meetings of the Board of
Trustees and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Trustees or prescribed by the
Bylaws.
SECTION 7. PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board of
Trustees to the Chairman of the Board, the President shall be the principal
executive officer and the principal operating officer of the Trust and shall,
subject to control of the Board of Trustees, have general supervision, direction
and control of the business and the officers of the Trust. He shall preside at
all shareholder meetings and, in the absence of the Chairman of the Board or if
there be none, at all meetings of the Board of Trustees. He shall have the
general powers and duties of
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management usually vested in the office of President of a corporation and shall
have such other powers and duties as may be prescribed by the Board of Trustees
or these Bylaws.
SECTION 8. VICE PRESIDENTS
In the absence or disability of the President, the Vice Presidents, if any, in
order of their rank as fixed by the Board of Trustees or if not ranked, a Vice
President designated by the Board of Trustees, shall perform all the duties of
the President and when so acting shall have all powers of and be subject to all
the restrictions upon the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board of Trustees or by these Bylaws and the president
or the Chairman of the Board.
SECTION 9. SECRETARY
The Secretary shall keep or cause to be kept at the principal executive office
of the Trust or such other place as the Board of Trustees may direct a book of
minutes of all meetings and actions of trustees, committees of trustees and
shareholders with the time and place of holding, whether regular or special, and
if special, how authorized, the notice given, the names of those present at
trustees' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings and the proceedings.
The Secretary shall keep or cause to be kept at the principal executive office
of the Trust or at the office of the Trust's transfer agent or registrar, as
determined by resolution of the Board of Trustees, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of the
shareholders and the Board of Trustees required by these Bylaws or by applicable
law to be given and shall have such other powers and perform such other duties
as may be prescribed by the Board of Trustees or by these Bylaws.
SECTION 10. CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall be the principal financial and accounting
officer of the Trust and shall keep and maintain or cause to be kept and
maintained adequate and correct books and records of accounts of the properties
and business transactions of the Trust, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any trustee.
The Chief Financial Officer shall deposit all monies and other valuables in the
name and to the credit of the Trust with such depositories as may be designated
by the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and trustees,
whenever they request it, an account of all of his transactions as Chief
Financial Officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these Bylaws.
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SECTION 11. CHIEF COMPLIANCE OFFICER
The Chief Compliance Officer shall be the principal officer of the Trust
responsible for administering its compliance policies and procedures. The Chief
Compliance Officer shall have the power to develop and enforce policies and
procedures reasonably designed to prevent the Trust from violating the
securities laws applicable to its operations. The Chief Compliance Officer shall
serve at the pleasure of the Trustees and reports directly to the Trust. The
Chief Compliance Officer shall have such other powers and perform such other
duties as may be prescribed by the Trustees, these Bylaws, or the federal
securities laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS
SECTION 1. INDEMNIFICATION
The Trust shall indemnify any individual ("Indemnitee") who is a present or
former trustee, officer, employee, or agent of the Trust, or who, while a
trustee, officer, employee, or agent of the Trust, is or was serving at the
request of the Trust as a trustee, officer, partner, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan who, by reason of his position was,
is, or is threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter collectively referred to as a "Proceeding") against
any judgments, penalties, fines, amounts paid in settlement, and expenses
(including attorneys' fees) actually and reasonably incurred by such Indemnitee
in connection with any Proceeding, to the fullest extent that such
indemnification may be lawful under Massachusetts law. The Trust shall pay any
reasonable expenses so incurred by such Indemnitee in defending a Proceeding in
advance of the final disposition thereof to the fullest extent that such advance
payment may be lawful under Massachusetts law. Subject to any applicable
limitations and requirements set forth in the Trust's Declaration of Trust and
in these By-laws, any payment of indemnification or advance of expenses shall be
made in accordance with the procedures set forth in Massachusetts law.
SECTION 2. "DISABLING CONDUCT"
Anything in this Article to the contrary notwithstanding, nothing in this
Article shall protect or purport to protect any Indemnitee against any liability
to the Trust or its stockholders, whether or not there has been an adjudication
of liability, to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office ("Disabling Conduct").
SECTION 3. CONDITIONS FOR INDEMNIFICATION
Anything in this Article to the contrary notwithstanding, no indemnification
shall be made by the Trust to any Indemnitee unless:
(a) there is a final decision on the merits by a court or other body before
whom the Proceeding was brought that the Indemnitee was not liable by
reason of Disabling Conduct; or
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(b) in the absence of such decision, the Trustees, based upon a review of the
facts, forms a reasonable belief that the Indemnitee was not liable by
reason of Disabling Conduct, which reasonable belief may be formed:
(i) by the vote of a majority of a quorum of trustees who are neither
"interested persons" of the Trust as defined in Article 2(a)(19) of
the Investment Company Act, nor parties to the Proceeding; or
(ii) based on a written opinion of independent legal counsel.
SECTION 4. ADVANCE OF EXPENSES
Anything in this Article to the contrary notwithstanding, any advance of
expenses by the Trust to any Indemnitee shall be made only upon the undertaking
by such Indemnitee to repay the advance unless it is ultimately determined that
such Indemnitee is entitled to indemnification as above provided, and only if
the Trustees:
(a) obtains assurances that the advance will be repaid by (A) the Trust
receiving collateral from the Indemnitee for his undertaking or (B) the
Trust obtaining insurance against losses arising by reason of any lawful
advances; or
(b) has a reasonable belief that the Indemnitee has not engaged in Disabling
Conduct and will ultimately be found entitled to indemnification, which
reasonable belief may be formed:
(i) by a majority of a quorum of trustees who are neither "interested
persons" of the Trust as defined in Article 2(a)(19) of the Investment
Company Act, nor parties to the Proceeding; or
(ii) based upon a written opinion of an independent legal counsel that in
turn is based on counsel's review of readily available facts (which
review shall not require a full trial-type inquiry).
SECTION 5. RIGHTS NOT EXCLUSIVE
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any law, bylaw, agreement, vote of stockholders or disinterested trustees or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
SECTION 6. SURVIVAL
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article shall, unless otherwise provided when authorized or ratified,
continue as to an Indemnitee who has ceased to be a trustee, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such an Indemnitee.
SECTION 7. DEFINITIONS
For purposes of this Article, references to (i) the "Trust" shall include, in
addition to the resulting trust, any constituent trust (including any
constituent of a constituent) absorbed in a
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consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its trustees, officers, and employees
or agents so that any person who is or was a trustee, officer, employee or agent
of such constituent trust, or is or was serving at the request of such
constituent trust as a trustee, officer, employee or agent of another trust,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving trust as such person would have with respect to such constituent trust
if its separate existence had continued; (ii) "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and (iii)
"serving at the request of the "Trust" shall include any service as a trustee,
officer, employee or agent of the Trust which imposes duties on, or involves
service by, such trustee, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries.
SECTION 8. INSURANCE
To the fullest extent permitted by applicable Massachusetts law and by Sections
17(h) and 17(i) of the Investment Company Act, or any successor provisions
thereto or interpretations thereunder, the Trust may purchase and maintain
insurance on behalf of any person who is or was a trustee, officer, employee, or
agent of the Trust, or who is or was serving at the request of the Trust as a
trustee, officer, partner, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan, against any liability asserted against him and incurred by him in
any such capacity or arising out of his position, whether or not the Trust would
have the power to indemnify him against such liability.
SECTION 9. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN
This Article does not apply to any proceeding against any trustee, investment
manager or other fiduciary of an employee benefit plan in that person's capacity
as such, even though that person may also be an agent of this Trust as defined
in Section 1 of this Article. Nothing contained in this Article shall limit any
right to indemnification to which such a trustee, investment manager or other
fiduciary may be entitled by contract or otherwise which shall be enforceable to
the extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER
This Trust shall keep at its principal executive office or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the Board of Trustees, a record of its shareholders, giving the
names and addresses of all shareholders and the number and series of shares held
by each shareholder.
SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS
The Trust shall keep at is principal executive office the original or a copy of
these Bylaws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
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SECTION 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS
The accounting books and records and minutes of proceedings of the shareholders
and the Board of Trustees and any committee or committees of the Board of
Trustees shall be kept at such place or places designated by the Board of
Trustees or in the absence of such designation, at the principal executive
office of the Trust. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate at any reasonable
time during usual business hours for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney and
shall include the right to copy and make extracts.
SECTION 4. INSPECTION BY TRUSTEES
Every trustee shall have the absolute right at any reasonable time to inspect
all books, records, and documents of every kind and the physical properties of
the Trust. This inspection by a trustee may be made in person or by an agent or
attorney and the right of inspection includes the right to copy and make
extracts of documents.
SECTION 5. FINANCIAL STATEMENTS
A copy of any financial statements and any income statement of the Trust for
each quarterly period of each fiscal year and accompanying balance sheet of the
Trust as of the end of each such period that has been prepared by the Trust
shall be kept on file in the principal executive office of the Trust for at
least twelve (12) months and each such statement shall be exhibited at all
reasonable times to any shareholder demanding an examination of any such
statement or a copy shall be mailed to any such shareholder.
The quarterly income statements and balance sheets referred to in this section
shall be accompanied by the report, if any, of any independent accountants
engaged by the Trust or the certificate of an authorized officer of the Trust
that the financial statements were prepared without audit from the books and
records of the Trust.
ARTICLE VIII
GENERAL MATTERS
SECTION 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS
All checks, drafts, or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the Trust shall be
signed or endorsed by such person or persons and in such manner as from time to
time shall be determined by resolution of the Board of Trustees.
SECTION 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The Board of Trustees, except as otherwise provided in these Bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the Trust and this
authority may be general or confined to specific instances; and
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unless so authorized or ratified by the Board of Trustees or within the agency
power of an officer, no officer, agent, or employee shall have any power or
authority to bind the Trust by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
SECTION 3. CERTIFICATES FOR SHARES
At the discretion of the Trustees, a certificate or certificates for shares of
beneficial interest in any series of the trust may be issued to each shareholder
when any of these shares are fully paid. All certificates shall be signed in the
name of the Trust by the chairman of the board or the president or vice
president and by the chief financial officer or an assistant treasurer or the
secretary or any assistant secretary, certifying the number of shares and the
series of shares owned by the shareholders. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been place on a certificate
shall have ceased to be that officer, transfer agent, or registrar before that
certificate is issued, it may be issued by the Trust with the same effect as if
that person were an officer, transfer agent or registrar at the date of issue.
Notwithstanding the foregoing, the Trust may adopt and use a system of issuance,
recordation and transfer of its shares by electronic or other means.
SECTION 4. LOST CERTIFICATES
Except as provided in this Section 4, no new certificates for shares shall be
issued to replace an old certificate unless the latter is surrendered to the
Trust and cancelled at the same time. The Board of Trustees may in case any
share certificate or certificate for any other security is lost, stolen, or
destroyed, authorize the issuance of a replacement certificate on such terms and
conditions as the Board of Trustees may require, including a provision for
indemnification of the Trust secured by a bond or other adequate security
sufficient to protest the Trust against any claim that may be made against it,
including any expense or liability on account of the alleged loss, theft, or
destruction of the certificate or the issuance of the replacement certificate.
SECTION 5. UNCERTIFICATED SHARES
Unless determined otherwise by the Trustees, the Trust shall issue shares of any
or all series in uncertificated form; provided, however, the Trust may issue
certificates to the holders of shares of a series which was originally issued in
uncertificated form, and if it has issued shares of any series in certificated
form, they may at any time discontinue the issuance of share certificates for
such series and may, by written notice to such shareholders of such series
require the surrender of their shares certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership of
shares for such series.
For any series of shares for which the trustees issue shares without
certificates, the Trust, or any transfer agent selected by the Trust, may either
issue receipts therefore or may keep accounts upon the books of the Trust for
the record holders of such shares, who shall in either case be deemed, for all
purposes hereunder to be the holders of such shares as if they had received
certificates therefore and shall be held to have expressly assented and agreed
to the terms hereof and of the Declaration of Trust.
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SECTION 6. REPRESENTATION OF SHARES OF OTHER ENTITIES
The Chairman of the Board, the President or any Vice President or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote on behalf of the Trust any
and all shares of any corporation or corporations, partnerships, trusts, or
other entities, foreign or domestic, standing in the name of the Trust. The
authority granted to these officers to vote or represent on behalf of the Trust
any and all shares held by the Trust in any form of entity may be exercised by
any of these officers in person or by any person authorized to do so by a proxy
duly executed by these officers.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENT BY SHAREHOLDERS
These Bylaws may be amended or repealed, in whole or in part, at any time by the
affirmative vote or written consent of a majority of the outstanding shares
issued and entitled to vote, except as otherwise provided by applicable law or
by the Declaration of Trust or these Bylaws.
SECTION 2. AMENDMENT BY TRUSTEES
Subject to the right of shareholders as provided in Section 1 of this Article to
adopt, amend or repeal Bylaws, and except as otherwise provided by applicable
law or by the Declaration of Trust, these Bylaws may be adopted, amended, or
repealed, in whole or in part, at any time by the Board of Trustees.
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