TWENTIETH CENTURY PREMIUM RESERVES INC, 497, 1996-12-23

TWENTIETH CENTURY PREMIUM RESERVES INC
497, 1996-12-23

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PROSPECTUS

[american century logo]

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

BENHAM
GROUP(R)

Premium Government Reserve
Premium Capital Reserve
Premium Bond

[cover page]

AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS

American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to simplify your fund decisions.

AMERICAN CENTURY INVESTMENTS

BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP

MONEY MARKET FUNDS ASSET ALLOCATION &
GOVERNMENT BOND FUNDS BALANCED FUNDS GROWTH FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS INTERNATIONAL FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS

Premium Government Reserve
Premium Capital Reserve
Premium Bond

PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

Premium Government Reserve
Premium Capital Reserve
Premium Bond

AMERICAN CENTURY PREMIUM RESERVES, INC.

American Century Premium Reserves, Inc. is a part of American Century
Investments, a family of funds that includes nearly 70 no-load mutual funds
covering a variety of investment opportunities. Three of the funds from our
Benham Group that invest primarily in fixed income securities are described in
this Prospectus. Their investment objectives are listed on page 2 of this
Prospectus. The other funds are described in separate prospectuses.

The minimum initial investment for each of the funds is $100,000.

This Prospectus gives you information about the funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996, and filed with the Securities and Exchange
Commission. It is incorporated into this Prospectus by reference.
To obtain a copy without charge, call or write:

AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com

Additional information, including this Prospectus and the Statement of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus 1

INVESTMENT OBJECTIVES OF THE FUNDS

AMERICAN CENTURY - BENHAM
PREMIUM GOVERNMENT RESERVE FUND

AMERICAN CENTURY - BENHAM
PREMIUM CAPITAL RESERVE FUND

The objective of each of these money market funds is to obtain as high a
level of current income as is consistent with the preservation of principal and
liquidity within the guidelines established for each fund. While Premium
Government Reserve and Premium Capital Reserve seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able to
do so. Investments in the funds are not insured, nor are they guaranteed by the
U.S. government or any other agency.

AMERICAN CENTURY - BENHAM
PREMIUM BOND FUND

This fund seeks a high level of income from investments in a portfolio of
bonds and other debt obligations having a weighted average adjusted duration of
3.5 years or greater. Investments in the funds are not insured, nor are they
guaranteed by the U.S. government or any other agency.

There is no assurance that the funds will achieve their respective investment
objectives.

NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.

2 Investment Objectives American Century Investments

TABLE OF CONTENTS

Transaction and Operating Expense Table.......................4
Financial Highlights..........................................5

INFORMATION REGARDING THE FUNDS

Investment Policies of the Funds..............................8
Premium Government Reserve.................................8
Premium Capital Reserve....................................9
Premium Bond...............................................10
Fundamentals of Fixed Income Investing........................11
Other Investment Practices, Their
Characteristics and Risks..................................11
Repurchase Agreements......................................11
Foreign Securities.........................................12
Forward Currency Exchange Contracts........................12
Interest Rate Futures Contracts
and Options Thereon.....................................13
Derivative Securities......................................13
Portfolio Lending..........................................14
Portfolio Turnover.........................................14
Rule 144A Securities.......................................15
When-Issued Securities.....................................15
Investment Company Act Rule 2a-7...........................15
Performance Advertising.......................................16

HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS

American Century Investments..................................17
Investing in American Century.................................17
How to Open an Account........................................17
By Mail..................................................17
By Wire..................................................17
By Exchange..............................................18
In Person................................................18
Subsequent Investments.....................................18
By Mail..................................................18
By Telephone.............................................18
By Online Access.........................................18
By Wire..................................................18
In Person................................................18
Automatic Investment Plan..................................18
How to Exchange from One Account to Another ..................18
By Mail .................................................19
By Telephone.............................................19
By Online Access.........................................19
How to Redeem Shares..........................................19
By Mail..................................................19
By Telephone ............................................19
By Check-A-Month.........................................19
Other Automatic Redemptions..............................19
Redemption Proceeds........................................19
By Check.................................................19
By Wire and ACH..........................................19
Redemption of Shares in Low-Balance Accounts...............19
Signature Guarantee...........................................20
Special Shareholder Services..................................20
Automated Information Line...............................20
CheckWriting.............................................20
Online Account Access....................................20
Open Order Service.......................................21
Tax-Qualified Retirement Plans...........................21
Important Policies Regarding Your Investments.................21
Reports to Shareholders.......................................22
Employer-Sponsored Retirement Plans and
Institutional Accounts.....................................22

ADDITIONAL INFORMATION YOU SHOULD KNOW

Share Price...................................................23
When Share Price is Determined.............................23
How Share Price is Determined..............................23
Where to Find Information About Share Price................24
Distributions.................................................24
Taxes.........................................................24
Tax-Deferred Accounts......................................24
Taxable Accounts...........................................25
Management....................................................26
Investment Management......................................26
Code of Ethics.............................................27
Transfer and Administrative Services.......................27
Distribution of Fund Shares...................................27
Further Information About American Century....................27

Prospectus Table of Contents 3

<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE

Premium Government Premium Capital Premium
Reserve Reserve Bond

SHAREHOLDER TRANSACTION EXPENSES:

<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases..................... none none none
Maximum Sales Load Imposed on Reinvested Dividends.......... none none none
Deferred Sales Load......................................... none none none
Redemption Fee(1)........................................... none none none
Exchange Fee................................................ none none none

ANNUAL FUND OPERATING EXPENSES:
(AS A PERCENTAGE OF NET ASSETS)

Management Fees............................................. 0.45% 0.45% 0.45%
12b-1 Fees.................................................. none none none
Other Expenses(2).......................................... 0.00% 0.00% 0.00%
Total Fund Operating Expenses.............................. 0.45% 0.45% 0.45%

EXAMPLE

You would pay the following expenses on a 1 year $ 5 $ 5 $ 5
$1,000 investment, assuming a 5% annual return and 3 years 14 14 14
redemption at the end of each time period: 5 years 25 25 25
10 years 57 57 57
</TABLE>

(1) Redemption proceeds sent by wire transfer are subject to a $10 processing
fee.

(2) Other expenses, which include the fees and expenses (including legal
counsel fees) of those directors who are not "interested persons" as
defined in the Investment Company Act, were 0.0013 of 1% of average net
assets for the most recent fiscal year.

The purpose of this table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in shares of the funds offered by this Prospectus.
The example set forth above assumes reinvestment of all dividends and
distributions and uses a 5% annual rate of return as required by Securities and
Exchange Commission regulations.

NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

4 Transaction and Operating Expense Table American Century Investments

FINANCIAL HIGHLIGHTS
PREMIUM GOVERNMENT RESERVE

The Financial Highlights for the periods presented have been audited by
Ernst & Young LLP, independent auditors, whose report thereon appears in the
fund's annual report, which is incorporated by reference into the Statement of
Additional Information. The annual report contains additional performance
information and will be made available upon request and without charge. The
information presented is for a share outstanding throughout the years ended
March 31.
<TABLE>

1996 1995 1994

PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ................................ $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income ............................................ .053 .045 .027
Net Realized and Unrealized Gain (Loss) on Investment Transactions -- -- --
Total from Investment Operations ................................. .053 .045 .027
Distributions
From Net Investment Income ....................................... (.053) (.045) (.027)
Net Asset Value, End of Period ...................................... $1.00 $1.00 $1.00
Total Return(1) .................................................. 5.49% 4.62% 2.75%

RATIOS/SUPPLEMENTAL DATA

Ratio of Expenses to Average Net Assets .......................... .44% .45% .45%
Ratio of Net Investment Income to Average Net Assets ............. 5.30% 4.84% 2.72%
Portfolio Turnover Rate .......................................... -- -- --
Net Assets, End of Period (in thousands) .........................$26,191 $16,381 $5,459
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

Prospectus Financial Highlights 5

FINANCIAL HIGHLIGHTS
PREMIUM CAPITAL RESERVE

PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment Income ........................................... .054 .046 .028
Net Realized and Unrealized Gain (Loss) on Investment Transactions -- -- --
Total from Investment Operations ................................ .054 .046 .028
Distributions
From Net Investment Income ...................................... (.054) (.046) (.028)
Net Asset Value, End of Period ..................................... $1.00 $1.00 $1.00
Total Return(1) ................................................. 5.58% 4.66% 2.81%

RATIOS/SUPPLEMENTAL DATA

Ratio of Expenses to Average Net Assets ......................... .45% .45% .45%
Ratio of Net Investment Income to Average Net Assets ............ 5.50% 4.76% 2.83%
Portfolio Turnover Rate ......................................... -- -- --
Net Assets, End of Period (in thousands) ........................ $133,417 $138,428 $38,823
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

6 Financial Highlights American Century Investments

FINANCIAL HIGHLIGHTS
PREMIUM BOND

PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................... $9.46 $9.64 $10.00
Income from Investment Operations
Net Investment Income ........................................... .607 .588 .462
Net Realized and Unrealized Gain (Loss) on Investment Transactions .470 (.180) (.360)
Total from Investment Operations ................................ 1.077 .408 .102
Distributions
From Net Investment Income ...................................... (.607) (.588) (.462)
Net Asset Value, End of Period ..................................... $9.93 $9.46 $9.64
Total Return(1) ................................................. 11.53% 4.48% .92%

RATIOS/SUPPLEMENTAL DATA

Ratio of Expenses to Average Net Assets ......................... .43% .45% .45%
Ratio of Net Investment Income to Average Net Assets ............ 6.08% 6.30% 4.65%
Portfolio Turnover Rate ......................................... 92% 51% 144%
Net Assets, End of Period (in thousands) ........................ $20,280 $10,334 $8,080
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

Prospectus Financial Highlights 7

INFORMATION REGARDING THE FUNDS

INVESTMENT POLICIES OF THE FUNDS

The funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives identified on page 2 of this Prospectus and any other
investment policies designated as "fundamental" in this Prospectus or in the
Statement of Additional Information, cannot be changed without shareholder
approval. The funds have implemented additional investment policies and
practices to guide their activities in the pursuit of their respective
investment objectives. These policies and practices, which are described
throughout this Prospectus, are not designated as fundamental policies and may
be changed without shareholder approval.

For an explanation of the securities ratings referred to in the fund
descriptions below, see "An Explanation of Fixed Income Securities Ratings" in
the Statement of Additional Information.

PREMIUM GOVERNMENT RESERVE

Premium Government Reserve seeks to obtain as high a level of current
income as is consistent with preservation of capital and maintenance of
liquidity within the standards of investment prescribed for such fund. Premium
Government Reserve expects, but cannot guarantee, that it will maintain a
constant share price of $1.00 by purchasing only securities having remaining
maturities of not more than 13 months and by maintaining a weighted average
portfolio maturity of not more than 90 days.

Premium Government Reserve will invest substantially all of its assets in a
portfolio of U.S. dollar denominated securities issued or guaranteed by the U.S.
government and its agencies and instrumentalities. Specifically, it may invest
in (1) direct obligations of the United States, such as Treasury bills, notes
and bonds, which are supported by the full faith and credit of the United
States, and (2) obligations (including mortgage-related securities) issued or
guaranteed by agencies and instrumentalities of the U.S. government. These
agencies and instrumentalities may include, but are not limited to, the
Government National Mortgage Association, Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, Student Loan Marketing Association,
Federal Farm Credit Banks, Federal Home Loan Banks, and Resolution Funding
Corporation. The securities of some of these agencies and instrumentalities,
such as the Government National Mortgage Association, are guaranteed as to
principal and interest by the U.S. Treasury, and other securities are supported
by the right of the issuer, such as the Federal Home Loan Banks, to borrow from
the Treasury. Other obligations, including those issued by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, are
supported only by the credit of the instrumentality.

Mortgage-related securities that may be purchased are mortgage pass-through
certificates and collateralized mortgage obligations ("CMOs") issued by a U.S.
agency or instrumentality. A mortgage pass-through certificate is a debt
security generally collateralized by a pool of mortgages, while a CMO is a debt
security that is generally collateralized by a portfolio or pool of mortgages or
mortgage-backed securities. With both types of securities, the issuer's
obligation to make interest and principal payments is secured by the underlying
pool or portfolio of mortgages or securities.

The market value of mortgage-related securities, even those in which the
underlying pool of mortgage loans is guaranteed as to the payment of principal
and interest by the U. S. government, is not insured. When interest rates rise,
the market value of those securities may decrease in the same manner as other
debt, but when interest rates decline, their market value may not increase as
much as other debt instruments because of the prepayment feature inherent in the
underlying mortgages. If such securities are purchased at a premium, a fund will
suffer a loss if the obligation is prepaid. Prepayments will be reinvested

8 Information Regarding the Funds American Century Investments

at prevailing rates, which may be less than the rate paid by the prepaid
obligation.

For the purpose of determining the weighted average portfolio maturity of a
fund, the manager shall consider the maturity of a mortgage-related security to
be the remaining expected average life of the security. The average life of such
securities is likely to be substantially less than the original maturity as a
result of prepayments of principal on the underlying mortgages, especially in a
declining interest rate environment. In determining the remaining expected
average life, the manager makes assumptions regarding prepayments on underlying
mortgages. In a rising interest rate environment, those prepayments generally
decrease, and may decrease below the rate of prepayment assumed by the manager
when purchasing those securities. Such slowdown may cause the remaining maturity
of those securities to lengthen, which will increase the relative volatility of
those securities and, hence, the fund holding the securities. See "Fundamentals
of Fixed Income Investing," page 11.

Premium Government Reserve will invest only in mortgage-related securities
that have a stated final maturity of 397 days or less.

Because of its strict credit and maturity requirements, the level of
current income produced by the fund may not be as high as that produced by funds
that invest in riskier and more speculative securities with longer maturities.
See "Investment Company Act Rule 2a-7," page 15.

PREMIUM CAPITAL RESERVE

Premium Capital Reserve seeks to obtain as high a level of current income
as is consistent with preservation of capital and maintenance of liquidity
within the standards of investment prescribed for such fund. Premium Capital
Reserve expects, but cannot guarantee, that it will maintain a constant share
price of $1.00 by purchasing only securities having remaining maturities of not
more than 13 months and by maintaining a weighted average portfolio maturity of
not more than 90 days.

Premium Capital Reserve will invest substantially all of its assets in a
diversified portfolio of U.S. dollar denominated money market instruments.
Specifically, it may invest in the following:

(1) Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities, as described under "Premium Government Reserve."

(2) Commercial paper.

(3) Short-term notes, bonds, debentures, or other debt instruments.

(4) Certificates of deposit, bankers acceptances and time deposit obligations
of U.S. banks, foreign branches of U.S. banks (Eurodollars), U.S. branches
and agencies of foreign banks (Yankee dollars) and foreign branches of
foreign banks.

With the exception of the obligations of foreign branches of U.S. banks and
U.S. branches of foreign banks, which are limited to 25% of net assets, these
classes of securities may be held in any proportion, and such proportion may
vary as market conditions change.

All portfolio holdings are limited to those that at the time of purchase
have a short-term rating of A-1 by Standard & Poor's Corporation, or P-1 by
Moody's Investors Service, Inc., or if they have no short-term rating are issued
or guaranteed by an entity having a long-term rating of at least AA by S&P or Aa
by Moody's.

Eurodollar and Yankee dollar investments involve risks that are different
from investments in securities of U.S. banks. These risks may include future
unfavorable political and economic developments, possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations or other
governmental restrictions that might affect payment of principal or interest.
Additionally, there may be less public information available about foreign banks
and their branches. Foreign branches of foreign banks are not regulated by U.S.
banking authorities, and generally are not bound by accounting, auditing and
financial reporting standards comparable to U.S. banks. Although these factors
are carefully considered when making investments, there are no limits on the
amount of fund assets which can be invested in any one type of instrument or in
any foreign country.

Because of its strict credit and maturity requirements, the level of
current income produced by the fund may not be as high as that produced by funds

Prospectus Information Regarding the Funds 9

that invest in riskier and more speculative securities with longer maturities.
See "Investment Company Act Rule 2a-7," page 15.

PREMIUM BOND

Premium Bond seeks a high level of income from investment in longer-term
bonds and other debt instruments. It is designed for investors whose primary
goal is a level of income higher than is generally provided by money market or
short- and intermediate-term securities and who can accept the generally greater
price volatility associated with longer-term bonds. Under normal market
conditions, at least 65% of Premium Bond's assets will be invested in bonds. The
balance of the fund's assets will be invested in shorter-term debt securities.

There are no maturity restrictions on the individual securities in which
Premium Bond may invest, but the weighted average adjusted duration of the
fund's securities portfolio must be 3.5 years or greater. Adjusted duration,
which is an indication of the relative sensitivity of a security's market value
to changes in interest rates, is based upon the aggregate of the present value
of all principal and interest payments to be received, discounted at the current
market rate of interest, and expressed in years.

Adjusted duration is different from dollar-weighted average portfolio
maturity in that it attempts to measure the interest rate sensitivity of a
security, as opposed to its expected final maturity. Further, the adjusted
duration of a portfolio will change in response to a change in interest rates,
whereas average maturity may not. Duration is generally shorter than remaining
time to final maturity because it gives weight to periodic interest payments, as
well as the payment of principal at maturity. The longer the duration of a
portfolio, the more sensitive its market value is to interest rate fluctuation.
However, due to factors other than interest rate changes that affect the price
of a specific security, there generally is not an exact correlation between the
price volatility of a security indicated by adjusted duration and the actual
price volatility of a security.

Subject to the aggregate portfolio duration minimum, the manager will
actively manage the portfolio, adjusting the weighted average portfolio maturity
in response to expected changes in interest rates. During periods of rising
interest rates, a shorter weighted average maturity may be adopted in order to
reduce the effect of bond price declines on the fund's net asset value. When
interest rates are falling and bond prices rising, a longer weighted average
portfolio maturity may be adopted.

To achieve its objective, Premium Bond may invest in a diversified
portfolio of high- and medium-grade debt securities. The fund may invest in
securities which, at the time of purchase, are rated by a nationally recognized
statistical rating organization or, if not rated, are of equivalent investment
quality as determined by management, as follows: short-term notes within the two
highest categories (for example, at least MIG-2 by Moody's or SP-2 by S&P);
corporate, sovereign government, and municipal bonds within the four highest
categories (for example, at least Baa by Moody's or BBB by S&P), although the
fund expects to invest in tax-exempt municipal bonds only when the expected
return on such securities is equal to or greater than other eligible
investments; securities of the U.S. government and its agencies and
instrumentalities (as described under "Premium Government Reserve," page 8); and
other types of securities rated at least P-2 by Moody's or A-2 by S&P. There is
no limit on the amount of investments that can be made in securities rated in a
particular rating category. According to Moody's, bonds rated Baa are
medium-grade and possess some speculative characteristics. A BBB rating by S&P
indicates S&P's belief that a security exhibits a satisfactory degree of safety
and capacity for repayment, but is more vulnerable to adverse economic
conditions or changing circumstances.

For the purpose of determining adjusted duration, the manager shall
consider the maturity of a security issued by the Government National Mortgage
Association, or other mortgage-related security, to be the remaining expected
average life of the security. The average life of such securities is likely to
be substantially less than the original maturity as a result of prepayments of
principal of the underlying mortgages.

10 Information Regarding the Funds American Century Investments

FUNDAMENTALS OF FIXED INCOME INVESTING

HISTORICAL YIELDS
[line graph - graph data]

30-YEAR 20-YEAR 3-MONTH
TREASURY TAX-EXEMPT TREASURY
BONDS BONDS BILLS

1/91 8.19% 7.14% 6.38%
2/91 8.20 7.00 6.26
3/91 8.25 6.84 5.93
4/91 8.18 6.67 5.69
5/91 8.26 6.65 5.69
6/91 8.4 6.72 5.69
7/91 8.34 6.61 5.68
8/91 8.06 6.6 5.48
9/91 7.81 6.43 5.25
10/91 7.91 6.4 4.97
11/91 7.94 6.5 4.46
12/91 7.4 6.25 3.96
1/92 7.76 6.33 3.94
2/92 7.79 6.35 4.02
3/92 7.96 6.4 4.14
4/92 8.04 6.43 3.77
5/92 7.84 6.25 3.77
6/92 7.78 6.13 3.65
7/92 7.46 5.78 3.24
8/92 7.41 6.01 3.22
9/92 7.38 6.04 2.74
10/92 7.62 6.34 3.01
11/92 7.6 6.08 3.34
12/92 7.4 6.04 3.14
1/93 7.2 5.9 2.97
2/93 6.9 5.45 3
3/93 6.92 5.61 2.96
4/93 6.93 5.52 2.96
5/93 6.98 5.54 3.11
6/93 6.67 5.32 3.08
7/93 6.56 5.38 3.1
8/93 6.09 5.15 3.07
9/93 6.02 4.99 2.98
10/93 5.97 5 3.1
11/93 6.3 5.24 3.2
12/93 6.35 5.1 3.06
1/94 6.24 4.97 3.03
2/94 6.66 5.26 3.43
3/94 7.09 5.87 3.55
4/94 7.31 6.04 3.95
5/94 7.43 5.99 4.24
6/94 7.61 6.05 4.22
7/94 7.39 5.91 4.36
8/94 7.45 5.96 4.66
9/94 7.82 6.17 4.77
10/94 7.97 6.36 5.15
11/94 8 6.64 5.71
12/94 7.88 6.45 5.69
1/95 7.7 6.12 6
2/95 7.44 5.78 5.94
3/95 7.43 5.77 5.87
4/95 7.34 5.81 5.86
5/95 6.65 5.55 5.8
6/95 6.62 5.77 5.57
7/95 6.85 5.77 5.58
8/95 6.65 5.73 5.45
9/95 6.5 5.67 5.41
10/95 6.33 5.49 5.51
11/95 6.13 5.31 5.49
12/95 5.95 5.18 5.08

BOND PRICE VOLATILITY

For a given change in interest rates, longer maturity bonds experience a greater
change in price, as shown below:

Price of a 7% Price of same
coupon bond bond if its Percent
Years to now trading yield increases change
Maturity to yield 7% to 8% 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%

Over time, the level of interest rates available in the marketplace
changes. As prevailing rates fall, the prices of bonds and other securities that
trade on a yield basis rise. On the other hand, when prevailing interest rates
rise, bond prices fall.

Generally, the longer the maturity of a debt security, the higher its yield
and the greater its price volatility. Conversely, the shorter the maturity, the
lower the yield but the greater the price stability.

These factors operating in the marketplace have a similar impact on bond
portfolios. A change in the level of interest rates causes the net asset value
per share of any bond fund, except money market funds, to change. If sustained
over time, it would also have the impact of raising or lowering the yield of the
fund.

In addition to the risk arising from fluctuating interest rate levels, debt
securities are subject to credit risk. When a security is purchased, its
anticipated yield is dependent on the timely payment by the borrower of each
interest and principal installment. Credit analysis and resultant bond ratings
take into account the relative likelihood that such timely payment will occur.
As a result, lower-rated bonds tend to sell at higher yield levels than
top-rated bonds of similar maturity. In addition, as economic, political and
business developments unfold, lower-quality bonds, which possess lower levels of
protection with regard to timely payment, usually exhibit more price fluctuation
than do higher-quality bonds of like maturity.

The investment practices of all fixed income funds involve these
relationships. The maturity and credit quality of each fund have implications
for the degree of price volatility and the yield level to be expected from each.

OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS

For additional information, see "Investment Restrictions" in the Statement
of Additional Information.

REPURCHASE AGREEMENTS

Each fund may invest in repurchase agreements when such transactions
present an attractive short-term return on cash that is not otherwise committed
to the purchase of securities pursuant to the investment policies of that fund.

A repurchase agreement occurs when, at the time the fund purchases an
interest-bearing obligation, the seller (a bank or a broker-dealer registered
under the Securities Exchange Act of 1934) agrees to repurchase it on a
specified date in the future at an agreed-upon price. The repurchase price
reflects an agreed-upon interest rate during the time the fund's money is
invested in the security.

Since the security purchased constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the fund could experience a loss.

Prospectus Information Regarding the Funds 11

The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the funds' Board of Directors.

Each of the funds may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund. No fund will invest more than 10% of its assets in
repurchase agreements maturing in more than seven days.

FOREIGN SECURITIES

Premium Capital Reserve and Premium Bond may each invest an unlimited
amount of their assets in the debt securities of those foreign issuers whose
principal business activities are in developed countries when these securities
meet their respective standards of selection, including credit quality.
Securities of foreign issuers may trade in the U.S. or foreign securities
markets.

Investments in foreign securities may present certain risks, including
those resulting from fluctuations in currency exchange rates, future political
and economic developments, reduced availability of public information concerning
issuers, and the fact that foreign issuers are not generally subject to uniform
accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic issuers.

FORWARD CURRENCY EXCHANGE CONTRACTS

Some of the securities held by Premium Bond may be denominated in foreign
currencies. As a result, the value of the fund's portfolio may be affected by
changes in the exchange rate between foreign currencies and the U.S. dollar, as
well as by changes in the market value of the securities themselves. The
performance of foreign currencies relative to the U.S. dollar may be an
important factor in the fund's overall performance.

To protect against adverse movements in exchange rates between currencies,
the fund may, for hedging purposes only, enter into forward currency exchange
contracts. A forward currency exchange contract obligates the fund to purchase
or sell a specific currency at a future date at a specific price.

The fund may elect to enter into a forward currency exchange contract with
respect to a specific purchase or sale of a security, or with respect to the
fund's portfolio positions generally.

By entering into a forward currency exchange contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
fund can "lock in" an exchange rate between the trade and settlement dates for
that purchase or sale. This practice is sometimes referred to as "transaction
hedging." The fund may enter into transaction hedging contracts with respect to
all or a substantial portion of its foreign securities trades.

When the manager believes that a particular currency may decline in value
compared to the dollar, the fund may enter into a forward currency exchange
contract to sell an amount of foreign currency equal to the value of some or all
of the fund's portfolio securities denominated in that currency. This practice
is sometimes referred to as "portfolio hedging." The fund may not enter into a
portfolio hedging transaction where the fund would be obligated to deliver an
amount of foreign currency in excess of the aggregate value of the fund's
portfolio securities or other assets denominated in that currency.

The fund will make use of portfolio hedging to the extent deemed
appropriate by the manager. However, it is anticipated that the fund will enter
into portfolio hedges much less frequently than transaction hedges.

If the fund enters into a forward currency exchange contract, the fund,
when required, will instruct its custodian bank to segregate cash or liquid
high-grade securities in a separate account in an amount sufficient to cover its
obligation under the contract. Those assets will be valued at market daily, and
if the value of the segregated securities declines, additional cash or
securities will be added so that the value of the account is not less than the
amount of the fund's commitment.

Predicting the relative future values of currencies is very difficult, and
there is no assurance that any attempt to protect the fund against adverse
currency movements through the use of forward currency exchange contracts will
be successful. In addition, the

12 Information Regarding the Funds American Century Investments

use of forward currency exchange contracts tends to limit the potential gains
that might result from a positive change in the relationship between the foreign
currency and the U.S. dollar.

INTEREST RATE FUTURES CONTRACTS
AND OPTIONS THEREON

Premium Bond may buy and sell interest rate futures contracts relating to
debt securities ("debt futures," i.e., futures relating to debt securities, and
"bond index futures," i.e., futures relating to indices on types or groups of
bonds) and write and buy put and call options relating to interest rate futures
contracts.

For options sold, the fund will segregate cash or high-quality debt
securities equal to the value of securities underlying the option unless the
option is otherwise covered.

The fund will deposit in a segregated account with its custodian bank
high-quality debt obligations or cash in an amount equal to the fluctuating
market value of long futures contracts it has purchased, less any margin
deposited on its long position. It may hold cash or acquire such debt
obligations for the purpose of making these deposits.

The fund will purchase or sell futures contracts and options thereon only
for the purpose of hedging against changes in the market value of its portfolio
securities or changes in the market value of securities that it may wish to
include in its portfolio. The fund will enter into futures and option
transactions only to the extent that the sum of the amount of margin deposits on
its existing futures positions and premiums paid for related options does not
exceed 5% of its assets.

Since futures contracts and options thereon can replicate movements in the
cash markets for the securities in which a fund invests without the large cash
investments required for dealing in such markets, they may subject a fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are: (1) the correlation between
movements in the market price of the portfolio investments (held or intended)
being hedged and in the price of the offsetting futures contract or option may
be imperfect; (2) the possible lack of a liquid secondary market for closing out
futures or option positions; (3) the need for additional portfolio management
skills and techniques; and (4) losses due to unanticipated market price
movements. For a hedge to be completely effective, the price change of the
hedging instrument should equal the price change of the securities being hedged.
Such equal price changes are not always possible because the investment
underlying the hedging instrument may not be the same investment that is being
hedged.

The manager will attempt to create a closely correlated hedge but hedging
activity may not be completely successful in eliminating market value
fluctuation. The ordinary spreads between prices in the cash and futures
markets, due to the differences in the natures of those markets, are subject to
distortion. Due to the possibility of distortion, a correct forecast of general
interest rate trends by the manager may still not result in a successful
transaction. The manager may be incorrect in its expectations as to the extent
of interest rate movements or the time span within which the movements take
place.

See the Statement of Additional Information for further information about
these instruments and their risks.

DERIVATIVE SECURITIES

To the extent permitted by its investment objectives and policies, each of
the funds may invest in securities that are commonly referred to as "derivative"
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Certain derivative securities are more accurately described as
"index/structured" securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts or S&P 500 futures), currencies, interest rates, indices
or other financial indicators ("reference indices").

Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities.

There are many different types of derivatives and many different ways to
use them. Futures and options are commonly used for traditional hedging purposes

Prospectus Information Regarding the Funds 13

to attempt to protect a fund from exposure to changing interest rates,
securities prices, or currency exchange rates and for cash management purposes
as a low-cost method of gaining exposure to a particular securities market
without investing directly in those securities.

No fund may invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the fund. For
example, a bond whose interest rate is indexed to the return on two year
treasury securities would be a permissible investment (assuming it otherwise
meets the other requirements for the funds), while a security whose underlying
value is linked to the price of oil would not be a permissible investment since
the funds may not invest in oil and gas leases or futures.

The return on a derivative security may increase or decrease, depending
upon changes in the reference index or instrument to which it relates.

There are a range of risks associated with derivative investments,
including:

o the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the portfolio manager
anticipates;

o the possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired;

o the risk that adverse price movements in an instrument can result in a loss
substantially greater than a fund's initial investment; and

o the risk that the counterparty will fail to perform its obligations.

The Board of Directors has approved the manager's policy regarding
investments in derivative securities. That policy specifies factors that must be
considered in connection with a purchase of derivative securities. The policy
also establishes a committee that must review certain proposed purchases before
the purchases can be made. The manager will report on fund activity in
derivative securities to the Board of Directors as necessary. In addition, the
Board will review the manager's policy for investments in derivative securities
annually.

PORTFOLIO LENDING

In order to realize additional income, each fund may lend its portfolio
securities to persons not affiliated with it and who are deemed to be
creditworthy. Such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, the fund must continue to receive the equivalent of the interest
and dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral. The fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the fund to vote the securities. Such loans may
not exceed one-third of the fund's net assets valued at market.

PORTFOLIO TURNOVER

The portfolio turnover rate of Premium Bond is shown in the Financial
Highlights table on page 7 of this Prospectus.

In order to achieve the investment objectives of the funds, the manager
will purchase and sell securities for the funds without regard to the length of
time the security has been held and, accordingly, it can be expected that the
rate of portfolio turnover for each fund may be substantial.

Each fund intends to purchase a given security whenever the manager
believes it will contribute to the stated objective of the fund, even if the
same security has only recently been sold. In selling a given security, the
manager keeps in mind that (1) profits from sales of securities held less than
three months must be limited in order to meet the requirements of Subchapter M
of the Internal Revenue Code, and (2) profits from sales of securities may be
taxed to shareholders as ordinary income. Subject to those considerations, a
fund will sell a given security, no matter for how long or for how short a
period it has been held in the portfolio and no matter whether the sale is at a
gain or at a loss, if the manager believes that such security is not fulfilling
its purpose.

Investment decisions are based on the anticipated contribution of the
security in question to a fund's objectives. The manager believes that the
rate of port-

14 Information Regarding the Funds American Century Investments

folio turnover is irrelevant when it determines a change is in order to achieve
those objectives. Accordingly, a fund's annual portfolio turnover rate cannot be
anticipated and may be comparatively high.

Since the manager does not take portfolio turnover rate into account in
making investment decisions, (1) the manager has no intention of accomplishing
any particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates should not be considered as a representation of the
rates that will be attained in the future.

The portfolio turnover of each of the funds may be higher than some other
mutual funds with similar investment objectives. Higher turnover would generate
correspondingly greater trading expenses, which is a cost that the funds pay
directly.

RULE 144A SECURITIES

The funds may, from time to time, purchase Rule 144A securities when they
present attractive investment opportunities that otherwise meet the funds'
criteria for selection. Rule 144A securities are securities that are privately
placed with and traded among qualified institutional investors rather than the
general public. Although Rule 144A securities are considered "restricted
securities," they are not necessarily illiquid.

With respect to securities eligible for resale under Rule 144A, the staff
of the Securities and Exchange Commission has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Directors to determine, such
determination to be based upon a consideration of the readily available trading
markets and the review of any contractual restrictions. Accordingly, the Board
of Directors is responsible for developing and establishing the guidelines and
procedures for determining the liquidity of Rule 144A securities. As allowed by
Rule 144A, the Board of Directors of the funds has delegated the day-to-day
function of determining the liquidity of Rule 144A securities to the manager.
The Board retains the responsibility to monitor the implementation of the
guidelines and procedures it has adopted.

Since the secondary market for such securities is limited to certain
qualified institutional buyers, the liquidity of such securities may be limited
accordingly and a fund may, from time to time, hold a Rule 144A security that is
illiquid. In such an event, the funds' manager will consider appropriate
remedies to minimize the effect on such fund's liquidity. Premium Government
Reserve and Premium Capital Reserve may invest up to 10% of their respective
assets in illiquid securities (securities that may not be sold within seven days
at approximately the price used in determining the net asset value of fund
shares), while Premium Bond may invest up to 15% of its assets in such
securities.

WHEN-ISSUED SECURITIES

Each of the funds may sometimes purchase new issues of securities on a
when-issued basis without limit when, in the opinion of the manager, such
purchases will further the investment objectives of the funds. The price of
when-issued securities is established at the time the commitment to purchase is
made. Delivery of and payment for these securities typically occur 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
when-issued security. Accordingly, the value of each security may decline prior
to delivery, which could result in a loss to a fund. A separate account for each
fund consisting of cash or high-quality liquid debt securities in an amount at
least equal to the when-issued commitments will be established and maintained
with the custodian. No income will accrue to the fund prior to delivery.

INVESTMENT COMPANY ACT RULE 2A-7

Premium Government Reserve and Premium Capital Reserve each operate
pursuant to Rule 2a-7 under the Investment Company Act of 1940. That Rule
permits valuation of portfolio securities on the basis of amortized cost. To
rely on the Rule, each fund must be diversified with regard to 100% of its
assets other than U.S. government securities. This operating policy is more
restrictive than the Investment Company Act, which requires a diversified
investment company to be diversified with regard to only 75% of its assets. A
fundamental policy, changeable only by shareholder vote, applicable to each fund
would require only 75% of each fund's assets to be diversified. However, because
of the restriction contained in Rule 2a-7, the fundamental policy would

Prospectus Information Regarding the Funds 15

give each fund the ability to invest, with respect to 25% of each fund's assets,
more than 5% of its assets in any one issuer only in the event that Rule 2a-7 is
amended in the future.

PERFORMANCE ADVERTISING

From time to time, the funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield and
effective yield.

Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would
have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.

A quotation of yield reflects a fund's income over a stated period of time,
expressed as a percentage of the fund's share price. In the case of Premium
Government Reserve and Premium Capital Reserve, yield is calculated by measuring
the income generated by an investment in the fund over a seven-day period (net
of fund expenses). This income is then "annualized." That is, the amount of
income generated by the investment over the seven-day period is assumed to be
generated over each similar period each week throughout a full year and is shown
as a percentage of the investment. The "effective yield" is calculated in a
similar manner but, when annualized, the income earned by the investment is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment.

With respect to Premium Bond, yield is calculated by adding over a 30-day
(or one-month) period all interest and dividend income (net of fund expenses)
calculated on each day's market values, dividing this sum by the average number
of fund shares outstanding during the period, and expressing the result as a
percentage of the fund's share price on the last day of the 30-day (or
one-month) period. The percentage is then annualized. Capital gains and losses
are not included in the calculation.

Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules for all stock and bond funds. Because yield
accounting methods differ from the methods used for other accounting purposes, a
fund's yield may not equal the income paid on your shares or the income reported
in a fund's financial statements.

The funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Lehman Brothers Government Corporate Index, Salomon
Bond Index, Donoghue's Money Fund Average and the Bank Rate Monitor National
Index of 21/2 -year CD rates. Fund performance may also be compared, on a
relative basis, to other funds in our fund family. This relative comparison,
which may be based upon historical or expected fund performance, volatility or
other fund characteristics, may be presented numerically, graphically or in
text. Fund performance may also be combined or blended with other funds in our
fund family, and that combined or blended performance may be compared to the
same indices to which individual funds may be compared.

All performance information advertised by the funds is historical in nature
and is not intended to represent or guarantee future results. The value of the
fund shares when redeemed may be more or less than their original cost.

16 Information Regarding the Funds American Century Investments

HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS

AMERICAN CENTURY INVESTMENTS

The funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.

INVESTING IN AMERICAN CENTURY

The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.

If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 22.

HOW TO OPEN AN ACCOUNT

To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.

The minimum investment is $100,000. The minimum investment requirements may
be different for some types of retirement accounts. Call one of our Investor
Services Representatives for information on our retirement plans, which are
available for individual investors or for those investing through their
employers.

Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants), you must provide us with specific authorization on
your application in order for us to accept written or telephone instructions
from a single owner. Otherwise, all owners will have to agree to any
transactions that involve the account (whether the transaction request is in
writing or over the telephone).

You may invest in the following ways:

BY MAIL

Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.

BY WIRE

You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:

o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)

o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111

o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918

o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.

o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.

o BANK TO BANK INFORMATION
(BBI or Free Form Text):

o Taxpayer identification or Social Security number

o If more than one account, account numbers and amount to be invested in
each account.

o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.

Prospectus How To Invest With American Century Investments 17

BY EXCHANGE

Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
this page for more information on exchanges.

IN PERSON

If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:

4500 Main Street
Kansas City, Missouri 64111

1665 Charleston Road
Mountain View, California 94043

2000 S. Colorado Blvd.
Denver, Colorado 80222

SUBSEQUENT INVESTMENTS

Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.

BY MAIL

When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)

BY TELEPHONE

Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.

BY ONLINE ACCESS

Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.

BY WIRE

You may make subsequent investments by wire. Follow the wire transfer
instructions on page 17 and indicate your account number.

IN PERSON

You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.

AUTOMATIC INVESTMENT PLAN

You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.

HOW TO EXCHANGE FROM ONE ACCOUNT TO ANOTHER

As long as you meet any minimum investment requirements, you may exchange
your Premium Bond shares to our other funds up to six times per year. There is
no limit on the number of exchanges you may make from Premium Capital Reserve
and Premium Government Reserve. An exchange request will be processed the same
day it is received, if it is received before the funds' net asset values are
calculated, which is one hour prior to the close of the New York Stock Exchange
for the American Century Target Maturities Trust, and at the close of the
Exchange for all of our other funds. See "When Share Price is Determined," page
23.

For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.

18 How To Invest With American Century Investments American Century Investments

BY MAIL

You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.

BY TELEPHONE

You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line -- see page 20) if you
have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to get the appropriate form.

BY ONLINE ACCESS

You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.

HOW TO REDEEM SHARES

We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.

Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.

BY MAIL

Your written instructions to redeem shares may be made either by a
redemption form, which we will send you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 20.

BY TELEPHONE

If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.

BY CHECK-A-MONTH

You may redeem shares by a Check-A-Month plan, which automatically redeems
enough shares each month to provide you with a check for an amount you choose
(minimum $50). To set up a Check-A-Month plan, please call and request our
Check-A-Month brochure.

OTHER AUTOMATIC REDEMPTIONS

You may elect to make redemptions automatically by authorizing us to send
funds to you or your account at a bank or other financial institution. To set up
automatic redemptions, call one of our Investor Services Representatives.

REDEMPTION PROCEEDS

Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.

Redemption proceeds may be sent to you in one of the following ways:

BY CHECK

Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.

BY WIRE AND ACH

You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.

Your bank will usually receive wired funds within 48 hours of transmission.
Electronically transferred funds may be received up to seven days after
transmission. Wired funds are subject to a $10 fee to cover bank wire charges,
which is deducted from redemption proceeds. Once the funds are transmitted, the
time of receipt and the funds' availability are not under our control.

REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS

Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum.

Prospectus How To Invest With American Century Investments 19

If action is not taken within 90 days of the letter's date, the shares held in
the account will be redeemed and the proceeds from the redemption will be sent
by check to your address of record. We reserve the right to increase the
investment minimums.

SIGNATURE GUARANTEE

To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee would be
required when:

o redeeming more than $25,000; or

o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.

You may obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.

For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.

We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.

SPECIAL SHAREHOLDER SERVICES

We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.

Our special shareholder services include:

AUTOMATED INFORMATION LINE

We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.

CHECKWRITING

We offer CheckWriting as a service option for shareholders of the funds.
CheckWriting allows you to redeem shares in your account by writing a draft
("check") against your account balance. (Shares held in certificate form may not
be redeemed by check.) There is no limit on the number of checks you can write,
but each one must be for at least $100.

When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.

If you want to add CheckWriting to an existing account, contact us by phone
or mail for an appropriate form. For a new account, you may elect CheckWriting
on your purchase application by choosing the "Full Services" option.
CheckWriting is not available for any account held in an IRA or 403(b) plan.

CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.

We will return checks drawn on insufficient funds or on funds from
investments made by any means other than by wire within the previous 15 days.
Neither we nor our clearing bank will be liable for any loss or expenses
associated with returned checks. Your account may be assessed a $15 service
charge for checks drawn on insufficient funds.

A stop payment may be ordered on a check written against your account. We
will use reasonable efforts to stop a payment, but we cannot guarantee that we
will be able to do so. If we are successful in fulfilling a stop-payment order,
your account may be assessed a $15 fee.

ONLINE ACCOUNT ACCESS

You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your fund's daily share price, receive updates
on major market indexes and view historical performance of

20 How To Invest With American Century Investments American Century Investments

your fund. If you select "Full Services" on your application, you can use your
personal access code and Social Security number to view your account balance and
account activity, make subsequent investments from your bank account or exchange
shares from one fund to another.

OPEN ORDER SERVICE

Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.

If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.

Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.

TAX-QUALIFIED RETIREMENT PLANS

The fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:

o Individual Retirement Accounts (IRAs);

o 403(b) plans for employees of public school systems and non-profit
organizations; or

o Profit sharing plans and pension plans for corporations and other
employers.

You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.

IMPORTANT POLICIES REGARDING YOUR INVESTMENTS

Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.

(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the
management of the fund.

(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.

(3) Shares being acquired must be qualified for sale in your state of
residence.

(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.

(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.

(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or fraudulent instructions. The company, its transfer agent
and investment advisor will not be responsible for any loss due to
instructions they reasonably believe are genuine.

Prospectus How To Invest With American Century Investments 21

(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.

(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.

(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.

(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.

REPORTS TO SHAREHOLDERS

At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.

With the exception of most automatic transactions and CheckWriting
activity, each time you invest, redeem, transfer or exchange shares, we will
send you a confirmation of the transaction. CheckWriting activity will be
confirmed monthly. See the Investor Services Guide for more detail.

Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.

No later than January 31 of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.

Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.

EMPLOYER-SPONSORED RETIREMENT PLANS
AND INSTITUTIONAL ACCOUNTS

Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.

If you own or are considering purchasing fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.

If you own or are considering purchasing fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.

You may reach one of our Investor Services Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our funds that you
are unable to obtain through your plan administrator or financial intermediary.

22 How To Invest With American Century Investments American Century Investments

ADDITIONAL INFORMATION YOU SHOULD KNOW

SHARE PRICE

WHEN SHARE PRICE IS DETERMINED

The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for Target Maturities is determined one hour prior to the
close of the Exchange.

Investments and requests to redeem or exchange shares will receive the
share price next determined after we receive your investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the net asset value
of the fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.

Investments are considered received only when your payment is received by
us. Wired funds are considered received on the day they are deposited in our
bank account if they are deposited before the net asset value is determined.

Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.

Investment and transaction instructions received by us on any business day
by mail before the net asset value is determined will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.

If you invest in fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the funds' procedures or any contractual arrangement with the
funds or the funds' distributor in order for you to receive that day's price.

Redemption requests made by CheckWriting are considered received by us when
the CheckWriting check is presented to our clearing bank for payment.

HOW SHARE PRICE IS DETERMINED

The valuation of assets for determining net asset value may be summarized
as follows:

Portfolio securities of Premium Bond, except as otherwise noted, listed or
traded on a domestic securities exchange are valued at the last sale price on
that exchange. Portfolio securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on the exchange where primarily traded. If no sale is reported, or if
local convention or regulation so provides, the mean of the latest bid and asked
prices is used. Depending on local convention or regulation, securities traded
over-the-counter are priced at the mean of the latest bid and asked prices, or
at the last sale price. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in accordance
with procedures adopted by the Board of Directors.

Debt securities not traded on a principal securities exchange are valued
through valuations obtained from a commercial pricing service or at the most
recent mean of the bid and asked prices provided by investment dealers in
accordance with procedures established by the Board of Directors.

The value of an exchange-traded foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the close of business on the New York Stock Exchange, if that
is earlier. That value is then converted to dollars at the prevailing foreign
exchange rate.

Prospectus Additional Information You Should Know 23

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day that the New York Stock Exchange is open. If an event
were to occur after the value of a security was established but before the net
asset value per share was determined, which was likely to materially change the
net asset value, then that security would be valued at fair value as determined
in accordance with procedures adopted by the Board of Directors.

Trading of these securities in foreign markets may not take place on every
New York Stock Exchange business day. In addition, trading may take place in
various foreign markets on Saturdays or on other days when the Exchange is not
open and on which a fund's net asset value is not calculated. Therefore, such
calculation does not take place contemporaneously with the determination of the
prices of many of the portfolio securities used in such calculation and the
value of the fund's portfolio may be affected on days when shares of the fund
may not be purchased or redeemed.

The securities held in the portfolios of Premium Capital Reserve and
Premium Government Reserve are valued at amortized cost. When a security is
valued at amortized cost, it is valued at its cost when purchased and thereafter
by assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the investment.

WHERE TO FIND INFORMATION ABOUT SHARE PRICE

Upon satisfaction of the National Association of Securities Dealers, Inc.
publication requirements, the net asset value of Premium Bond will be published
in leading newspapers daily. The yields of Premium Capital Reserve and Premium
Government Reserve will be published weekly in leading financial publications
and daily in many local newspapers. The net asset values also may be obtained by
calling us or by accessing our Web site at www.americancentury.com.

DISTRIBUTIONS

At the close of each day, including Saturdays, Sundays and holidays, net
income and, with regard to Premium Capital Reserve and Premium Government
Reserve, net realized gains on portfolio securities, of the funds is determined
and declared as a distribution. The distribution will be paid monthly on the
last Friday of each month, except for year-end distribution, which will be paid
on the last business day of the year.

You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 23. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.

Distributions from net realized securities gains on Premium Bond, if any,
generally are declared and paid once a year, but the funds may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code and Regulations, in all events in a
manner consistent with the provisions of the Investment Company Act. Premium
Capital Reserve and Premium Government Reserve do not expect to realize any
long-term capital gains, and accordingly, do not expect to pay any capital gains
distributions.

Distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase made by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.

TAXES

Each fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that since each fund distributes all of its income, it
pays no income taxes.

TAX-DEFERRED ACCOUNTS

If fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains

24 Additional Information You Should Know American Century Investments

distributions paid by the fund will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.

Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description, or a professional tax
advisor regarding the tax consequences of participation in the plan,
contributions to, and withdrawals or distributions from the plan.

TAXABLE ACCOUNTS

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, except as described below. The dividends from net income of the
fund do not qualify for the 70% dividends-received deduction for corporations
since they are derived from interest income. Distributions from net long-term
capital gains are taxable as long-term capital gains regardless of the length of
time the shares on which such distributions are paid have been held by the
shareholder.

Dividends and interest received by Premium Bond on foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Foreign countries generally do not impose taxes on capital
gains in respect of investments by non-resident investors. The foreign taxes
paid by the fund will reduce its dividends.

Although it is not anticipated that it will happen, if more than 50% of the
value of Premium Bond's total assets at the end of any fiscal year consists of
securities of foreign corporations, the fund may qualify for and make an
election with the Internal Revenue Service with respect to such fiscal year so
that fund shareholders may be able to claim a foreign tax credit in lieu of a
deduction for foreign income taxes paid by the fund. If such an election is
made, the foreign taxes paid by the fund will be treated as income received by
you.

Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a distribution, you must pay income taxes on the
distribution, even though the value of your investment (plus cash received, if
any) remains the same. In addition, the share price at the time you purchase
shares may include unrealized gains in the securities held in the investment
portfolio of the fund. If these portfolio securities are subsequently sold and
the gains are realized, they will, to the extent not offset by capital losses,
be paid to you as a distribution of capital gains and will be taxable to you as
short-term or long-term capital gains.

In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.

Distributions may also be subject to state and local taxes, even if all or
a substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.

If you have not complied with certain provisions of the Internal Revenue
Code and Regulations, we are required by federal law to withhold and remit to
the IRS 31% of reportable payments (which may include dividends, capital gains
distributions and redemptions). 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 31% withholding for previous under-reporting to
the IRS. You will be asked to make the appropriate certification on your
application. Payments reported by us that omit your Social Security number or
taxpayer identification number will subject American Century to a penalty of
$50, which will be charged against your account if you fail to provide the
certification by the time the report is filed and is not refundable.

Premium Bond may adjust its dividends to take currency fluctuations into
account, which may cause the dividends to vary. If the fund's dividends exceed
its taxable income in any year, which is sometimes the result of
currency-related losses, all or a portion of the fund's dividends may be treated
as a return of capital

Prospectus Additional Information You Should Know 25

to shareholders for tax purposes. Any return of capital will reduce the cost
basis of your shares, which will result in a higher reported capital gain or a
lower reported capital loss when you sell your shares. The Form 1099-DIV you
receive in January will specify if any distributions included a return of
capital.

Redemption of shares of Premium Bond (including redemptions made in an
exchange transaction) will be a taxable transaction for federal income tax
purposes and shareholders will generally recognize gain or loss in an amount
equal to the difference between the basis of the shares and the amount received.
Assuming that shareholders hold such shares as a capital asset, the gain or loss
will be a capital gain or loss and will generally be long term if shareholders
have held such shares for a period of more than one year. 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.

MANAGEMENT

INVESTMENT MANAGEMENT

Under the laws of the State of Maryland, the Board of Directors is
responsible for managing the business and affairs of the funds. Acting pursuant
to an investment management agreement entered into with the funds, American
Century Investment Management, Inc. serves as the investment manager of the
funds. Its principal place of business is American Century Tower, 4500 Main
Street, Kansas City, Missouri 64111. The manager has been providing investment
advisory services to investment companies and institutional clients since it was
founded in 1958.

In June 1995, American Century Companies, Inc. ("ACC"), the parent
corporation of the manager, acquired Benham Management International, Inc. In
the acquisition, Benham Management Corporation ("BMC"), the investment advisor
to the Benham Group of mutual funds, became a wholly owned subsidiary of ACC.
Certain employees of BMC provide investment management services to funds managed
by the manager, while certain employees of the manager provide investment
management services to funds managed by BMC.

The manager supervises and manages the investment portfolio of each fund
and directs the purchase and sale of its investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the funds' portfolios as they deem appropriate in pursuit of the
funds' investment objectives. Individual portfolio manager members of the team
may also adjust portfolio holdings of the funds as necessary between team
meetings.

The portfolio manager members of the teams managing the funds described in
this Prospectus and their work experience for the last five years are as
follows:

NORMAN E. HOOPS, Senior Vice President and Fixed Income Portfolio
Manager, joined American Century as Vice President and Portfolio Manager in
November 1989. In April 1993, he became Senior Vice President. He is a member
of the team that manages Premium Bond.

ROBERT V. GAHAGAN, Vice President and Portfolio Manager, has worked for
American Century since May 1983. He became a Portfolio Manager in December 1991.
Prior to that he served as Assistant Portfolio Manager. He is a member of the
teams that manage Premium Capital Reserve and Premium Government Reserve.

JEFFREY L. HOUSTON, Portfolio Manager, joined American Century as an
Investment Analyst in 1990. He became a Portfolio Manager in 1994. He is a
member of the team that manages Premium Bond.

AMY O'DONNELL, Portfolio Manager, joined Benham in 1987, becoming a member
of its portfolio department in 1988. In 1992 she assumed her current position as
a Portfolio Manager of three Benham funds. She is a member of the team that
manages Premium Capital Reserve.

BRIAN HOWELL, Portfolio Manager, joined Benham in 1987 as a research
assistant, and assumed his current position as a Portfolio Manager in January
1994. He is a member of the team that manages Premium Government Reserve.

The activities of the manager are subject only to directions of the
funds' Board of Directors. The manager pays all the expenses of the funds
except

26 Additional Information You Should Know American Century Investments

brokerage, taxes, interest, fees and expenses of the non-interested person
directors (including counsel fees) and extraordinary expenses.

For the services provided to the funds, the manager receives a fee of 0.45%
of each fund's average net assets during the year. The fee is paid and computed
each month by multiplying 0.45% of the aggregate average daily closing value of
each fund's net assets during the previous month by a fraction, the numerator of
which is the number of days in the previous month, and the denominator of which
is 365 (366 in leap years).

CODE OF ETHICS

The funds and the manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of fund shareholders
come before the interests of the people who manage those funds.

TRANSFER AND ADMINISTRATIVE SERVICES

American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, acts as transfer agent and dividend-paying agent for the funds.
It provides facilities, equipment and personnel to the funds and is paid for
such services by the manager.
Certain recordkeeping and administrative services that would otherwise be
performed by the transfer agent may be performed by an insurance company or
other entity providing similar services for various retirement plans using
shares of the funds as a funding medium, by broker-dealers and financial
advisors for their customers investing in shares of American Century or by
sponsors of multi mutual fund no- or low-transaction fee programs. The manager
or an affiliate may enter into contracts to pay them for such recordkeeping and
administrative services out of its unified management fee.

Although there is no sales charge levied by the funds, transactions in
shares of the funds may be executed by brokers or investment advisors who charge
a transaction-based fee or other fee for their services. Such charges may vary
among broker-dealers or financial advisors, but in all cases will be retained by
the broker-dealer or financial advisor and not remitted to the funds or the
manger. You should be aware of the fact that these transactions may be made
directly with American Century without incurring such fees.

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 manager.

The manager and the transfer agent are both wholly owned by American
Century Companies, Inc. James E. Stowers Jr., Chairman of the funds' Board of
Directors, controls American Century Companies by virtue of his ownership of a
majority of its common stock.

DISTRIBUTION OF FUND SHARES

The funds' shares are distributed by American Century Investment Services,
Inc., a registered broker-dealer and an affiliate of the funds' investment
manager. The manager pays all expenses for promoting and distributing the funds.

FURTHER INFORMATION ABOUT AMERICAN CENTURY

American Century Premium Reserves, Inc., the issuer of the funds, was
organized as a Maryland corporation in January 1993. Its business and affairs
are managed by its officers under the direction of its Board of Directors.

The principal office of the funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries may
be made by mail to that address, or by telephone to 1-800-345-2021
(international calls: 816-531-5575).

American Century Premium Reserves, Inc. issues three series of $.01 par
value shares. Each series is commonly referred to as a fund. The assets

Prospectus Additional Information You Should Know 27

belonging to each series of shares are held separately by the custodian.

Each share, irrespective of series, is entitled to one vote for each dollar
of net asset value applicable to such share on all questions, except those
matters which must be voted on separately by the series of shares affected.
Matters affecting only one series are voted upon only by that series.

Shares have non-cumulative voting rights, which means that the holders of
more than 50% of the votes cast in an election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining votes will not be able to elect any person or persons to the Board of
Directors.

Unless required by the Investment Company Act, it will not be necessary for
the funds to hold annual meetings of shareholders. As a result, shareholders may
not vote each year on the election of directors or the appointment of auditors.
However, pursuant to the funds' bylaws, the holders of at least 10% of the votes
entitled to be cast may request the funds to hold a special meeting of
shareholders. We will assist in the communication with other shareholders.

WE RESERVE THE RIGHT TO CHANGE ANY OF OUR POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.

28 Additional Information You Should Know American Century Investments

NOTES

Prospectus Notes 29

P.O. Box 419200
Kansas City, Missouri
64141-6200

Person-to-person assistance:
1-800-345-2021 or 816-531-5575

Automated Information Line:
1-800-345-8765

Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865

Fax: 816-340-7962

Internet: www.americancentury.com

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