TWENTIETH CENTURY
Premium Reserves
Funds
Semiannual Report
SEPTEMBER 30,
1996
PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
PREMIUM MANAGED BOND
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TWENTIETH CENTURY PREMIUM RESERVES, INC.
[front cover]
[blank page]
SEPTEMBER 30, 1996
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TABLE OF CONTENTS
Our Message to You ...........................................................2
Investment Philosophy .........................................................3
Period Overview ...............................................................4
Investment Review
Premium Government Reserve & Premium Capital Reserve .......................5
Premium Managed Bond .......................................................7
Schedules of Investments
Premium Government Reserve .................................................9
Premium Capital Reserve ....................................................9
Premium Managed Bond ......................................................11
Statements of Assets and Liabilities .........................................14
Statements of Operations .....................................................15
Statements of Changes in Net Assets ..........................................16
Notes to Financial Statements ................................................18
Financial Highlights .........................................................20
IMPORTANT NOTICE FOR ALL IRA AND 403(B) SHAREHOLDERS
Any distribution you receive from an ira and certain 403(b) distributions [those
not eligible for rollover to an ira or to another 403(b)] are subject to federal
income tax withholding at the rate of 10% of the total amount withdrawn, unless
you elect not to have withholding apply. If you don't want us to withhold this
amount, you may send us a written election not to have federal income tax
withheld. Your written election is valid for six months from the date of receipt
by Twentieth Century. Even if you plan to roll over the amount you withdraw to
another tax-deferred account, the withholding rate still applies to the
withdrawn amount, unless we have received a written election not to withhold
within six months prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
conversions/redemptions form or an irs form w-4p. Call Twentieth Century for
either form. Your written election is valid for only six months from the date of
receipt by twentieth century. You may revoke your election at any time by
sending a written notice to us.
Remember, even if you elect not to have income tax withheld, you are liable for
paying income tax on the taxable portion of your withdrawal. If you elect not to
have income tax withheld or you don't have enough income tax withheld, you may
be responsible for payment of estimated tax. You may incur penalties under the
estimated tax rules if your withholding and estimated tax payments are not
sufficient.
INDEX USED FOR PERFORMANCE COMPARISON
The index listed below is used in this report to serve as a comparison for the
performance of a fund.
THE LEHMAN AGGREGATE BOND INDEX is a combination of the Lehman
Government/Corporate Index and the Lehman Mortgage-Backed Securities Index. It
reflects the price fluctuations of Treasury issues, agency issues, corporate
bond issues and mortgage-backed securities. It is not an investment product
available for purchase.
1
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OUR MESSAGE TO YOU
During the six months ended September 30, 1996, the watchword in the U.S.
bond market was UNCERTAINTY. Mixed signals about the U.S. economy led to widely
varying expectations about the Federal Reserve's interest rate policy. The
ultimate result was sluggish bond performance.
[photo of James E. Stowers and James E. Stowers III]
In such uncertain conditions, individual investors can understandably be
concerned about making wise financial decisions. However, at Twentieth Century
we have long believed that investors are best served by adopting a sensible
long-term investment plan and remaining true to this blueprint.
The prevailing uncertain environment also underscores the importance of quality.
Higher-quality securities tend to provide more price stability than
lower-quality instruments with comparable maturities. This stability can be
reassuring when the market is gyrating on a daily basis. By emphasizing quality
investments and long-term results, the Premium Reserves Funds endeavor to meet
their goal of consistent performance.
Our commitment to quality securities is exemplified by the expansion of our
credit research team. The five members of this team carry out in-depth analysis
on all securities considered for purchase by Twentieth Century/Benham money
market and bond funds. Over the past year, the team established a new credit
management system that defines investment limits to cap our funds' exposure to
individual issuers, countries or industries. The team plays a crucial role in
the management of the Premium Reserves Funds, helping to identify quality
securities with undervalued credit ratings.
A milestone was reached in September with the completion of the operational
integration of Twentieth Century and The Benham Group. As a result, you now have
direct access to a broader spectrum of funds and services, including the Benham
family of U.S. Treasury, government and municipal money market and bond funds.
Another integration benefit is the Twentieth Century Web site. If you own or
have access to a personal computer, we've made it easier for you to get
information about the Twentieth Century and Benham funds and make transactions
in your fund accounts. The Web site address is:
http://www.twentieth-century.com. You can view account balances, exchange money
between existing accounts and make additional investments, all on a personal
computer. We are one of the first mutual fund companies to offer direct on-line
transactions via the Internet.
We will continue to work to provide you with useful, convenient information and
services. Thank you for investing with us.
Sincerely,
[signature of James E. Stowers]
James E. Stowers
CHAIRMAN OF THE BOARD AND FOUNDER
[signature of James E. Stowers III]
James E. Stowers III
PRESIDENT
2
SEPTEMBER 30, 1996
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INVESTMENT PHILOSOPHY
For investors with substantial investable assets, the Twentieth Century Premium
Reserves Funds provide conservatively managed fixed-income investment
opportunities. Each fund requires a minimum investment of $100,000 and has an
all-inclusive management fee of 0.45%.
The strengths of the Premium Reserves Funds are conservative investment policies
and quality securities. The funds' management team focuses on purchasing quality
securities and limits the funds' investments in leveraged derivatives or other
inherently speculative instruments.
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MONEY MARKET FUNDS
The Premium Reserves money market funds must meet strict credit and maturity
guidelines. At least 75% of the securities in each money market fund must be
rated P-1 by Moody's Investors Service, Inc. and A-1 by Standard & Poor's
Corporation. In addition, both funds must maintain a weighted average maturity
of 90 days or less.
PREMIUM GOVERNMENT RESERVE, a money market fund that invests in U.S. government
securities, seeks to protect an investor's principal and provide current income
by investing primarily in money market instruments backed by the federal
government and its agencies. These fixed-income securities, which mature in 13
months or less, are considered among the safest investments available.
PREMIUM CAPITAL RESERVE, a general money market fund, seeks to provide the
highest possible current income while preserving an investor's principal. The
fund invests in a wide variety of short-term notes, bonds or debentures,
including commercial paper, certificates of deposit and U.S. government and
agency securities.
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BOND FUND
PREMIUM MANAGED BOND, a diversified bond fund, is managed for investors who seek
a high level of current income and can accept a moderate degree of price
fluctuation. The fund may invest in corporate, government, agency and other
fixed-income securities rated Baa or above by Moody's and BBB or above by
Standard & Poor's. The fund may invest in bonds of any maturity, and its
weighted average duration is required to be 3.5 years or longer.
The fund management team regularly compares the fund's portfolio to a customized
index that approximates the historical average weightings of A-rated bond funds.
The index's largest weighting is investment-grade corporate bonds, but it also
includes Treasury bonds, mortgage-backed securities and cash. The index is
reviewed frequently to ensure its continued validity.
PORTFOLIO MANAGEMENT TEAM
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Bud Hoops, Senior Portfolio Manager
Bob Gahagan, Senior Portfolio Manager
Jeffrey Houston, Portfolio Manager
3
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PERIOD OVERVIEW
U.S. ECONOMY
U.S. economic growth picked up speed during the six months ended September 30,
1996. An improving retail sector, surging auto sales and a resilient housing
market helped the economy expand at an impressive 4.7% annual rate in the second
quarter of the year. The economy remained strong throughout the summer as
healthy employment growth sent the national unemployment rate to a six-year low
of 5.1%. However, signs of economic weakness began to appear late in the period,
leading to some uncertainty about the rate of growth going forward.
[line graph-data described below]
Despite accelerating economic growth, inflation remained tame during the period.
For the first nine months of 1996, inflation (as measured by the consumer price
index) rose at an annualized rate of 3.2%, slightly higher than the 2.7% rate
for the first nine months of 1995. As a result of this lack of inflationary
pressure, the Federal Reserve (the Fed) held short-term interest rates steady
throughout the six-month period.
U.S. BOND MARKET
Despite some occasional volatility, the U.S. bond market held relatively steady
during the six-month period. Uncertainty about the strength of the U.S. economy
and Fed interest rate policy led to constantly changing market expectations.
Overall, however, bond yields remained in a fairly narrow range throughout the
period; for example, the 30-year Treasury bond yield hovered between 6.75% and
7.25%.
As the accompanying chart illustrates, bond yields rose by 25-30 basis points (a
basis point equals 0.01%) across the maturity spectrum during the six-month
period. Most of this rise occurred in April and May, when evidence of strong
economic growth sent bond yields soaring. The 30-year Treasury bond yield, which
had fallen as low as 6% in January, rose above 7% in May. By the end of June,
bond yields reflected expectations of a short-term interest rate increase by the
Fed. During the latter half of the period, bonds traded listlessly, reflecting
the market's uncertainty about the economic outlook.
Mortgage-backed securities were the top-performing fixed-income sector during
the six-month period. In the relatively steady interest rate environment, the
higher yields of mortgage-backed securities proved to be an advantage over the
rest of the fixed-income market. Among other bond sectors, corporate bonds
outperformed Treasury and government securities. The strengthening economy led
to improving business conditions and better credit quality among corporate
securities, which in turn enhanced the price gains of corporate bonds.
[graph data]
TREASURY YIELD CURVE
Years 3/31/96 9/30/96
1 5% 6%
2 6% 6%
3 6% 6%
4 6% 6%
5 6% 6%
6 6% 7%
7 6% 7%
8 6% 7%
9 6% 7%
10 6% 7%
11 6% 7%
12 6% 7%
13 6% 7%
14 7% 7%
15 7% 7%
16 7% 7%
17 7% 7%
18 7% 7%
19 7% 7%
20 7% 7%
21 7% 7%
22 7% 7%
23 7% 7%
24 7% 7%
25 7% 7%
26 7% 7%
27 7% 7%
28 7% 7%
29 7% 7%
30 7% 7%
4
SEPTEMBER 30, 1996
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PREMIUM GOVERNMENT RESERVE & PREMIUM CAPITAL RESERVE
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MANAGEMENT Q & A
An interview with Bob Gahagan, a senior portfolio manager on the Premium
Reserves management team.
Q: HOW DID THE FUNDS PERFORM?
A: The funds produced returns competitive with their peer groups. Premium
Government Reserve posted a total return of 2.51% for the six months ended
September 30, 1996, compared to the 2.50% average return for the 79 "
Institutional Government Money Market Funds" tracked by Lipper Analytical
Services. Premium Capital Reserve produced a total return of 2.55% during
the six-month period, compared to the 2.54% average return for the 162 "
Institutional Money Market Funds" tracked by Lipper.
Q: HOW WERE THE FUNDS POSITIONED DURING THE PERIOD?
A: We positioned the funds defensively because of the widespread uncertainty
about short-term interest rate trends. For most of the period, we kept the
funds' average maturities in a range of 30-40 days, compared to a neutral
position of 40-45 days. With the market anticipating an eventual short-term
interest rate increase by the Federal Reserve, the funds were positioned to
respond quickly to a rise in interest rates.
To enhance the funds' responsiveness to interest rate changes, we increased
their holdings of corporate and government agency floating-rate notes
(known as "floaters"). Floaters reset their interest rates on a periodic
(usually monthly) basis, so their yields tend to quickly reflect rising
interest rates. At the start of the period, each fund
PREMIUM GOVERNMENT RESERVE
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AVERAGE ANNUAL TOTAL RETURNS (as of September 30, 1996)
PREMIUM 90-day
GOVERNMENT RESERVE Treasury Bill Index*
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6 Months(+) 2.51% 2.56%
1 Year 5.19% 5.20%
Inception 4.39% 4.59%
4/1/93 to 9/30/96
(+)Actual
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SEVEN-DAY CURRENT YIELD
(as of September 30, 1996)
Premium Government Reserve 4.88%
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ASSET ALLOCATION (as of September 30, 1996)
[pie chart]
Other U.S. Government Agency Securities 33%
U.S. Government Agency Discount Notes 67%
Percent of fund investments.
*Source: Lipper Analytical Services, Inc.
Investments in these funds are not insured, nor are they guaranteed by the U.S.
government. While each fund seeks to maintain a stable net asset value of $1.00
per share, there is no assurance that it will be able to do so.
QUICK
FUND FACTS
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PREMIUM GOVERNMENT RESERVE
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STRATEGY: High level of current income consistent with principal preservation.
INCEPTION DATE: April 1, 1993
SIZE: $29.3 million (AS OF SEPTEMBER 30, 1996)
WEIGHTED AVERAGE PORTFOLIO MATURITY: 34 days
5
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PREMIUM GOVERNMENT RESERVE & PREMIUM CAPITAL RESERVE
had less than 10% of assets invested in floaters; by the end of the period,
floaters made up about 15% of each fund's portfolio.
Q: LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR MONEY MARKET YIELDS OVER THE NEXT
SIX MONTHS?
A: The jury is still out on the U.S. economy. During the first half of 1996,
economic growth was strong, but inflation remained low. Now, however,
growth appears to be slowing, while inflation may be on the rise--for
example, recent government reports have shown evidence of increasing wages.
The overall market now appears less convinced that the Fed will raise
short-term rates before the end of 1996, but it's still a possibility if we
see additional inflationary pressures.
We anticipate upcoming economic data to continue to paint a mixed picture
of the economy, creating uncertainty about future Fed policy. Therefore, we
expect to see continued volatility in money market yields.
Q: GIVEN THIS OUTLOOK, WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
A: We intend to continue managing the funds' average maturities from a
short-to-neutral stance until the dust settles. However, we may
occasionally extend the funds' average maturities to take advantage of
temporary yield increases caused by shifting market sentiment. We will also
continue to invest a portion of the portfolios in floaters to enhance the
funds' responsiveness to changing interest rates.
PREMIUM CAPITAL RESERVE
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AVERAGE ANNUAL TOTAL RETURNS
(as of September 30, 1996)
PREMIUM 90-day
CAPITAL RESERVE Treasury Bill Index*
6 Months(+) 2.55% 2.56%
1 Year 5.27% 5.20%
Inception 4.46% 4.59%
4/1/93 to 9/30/96
(+)Actual
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SEVEN-DAY CURRENT YIELD
(as of September 30, 1996)
Premium Capital Reserve 5.06%
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ASSET ALLOCATION
(as of September 30, 1996)
[pie chart]
Certificates of Deposit 2%
Other Corporate Debt 6%
Commercial Paper 82%
U.S. Government Agency Securities 10%
Percent of fund investments.
*Source: Lipper Analytical Services, Inc.
Investments in these funds are not insured, nor are they guaranteed by the U.S.
government. While each fund seeks to maintain a stable net asset value of $1.00
per share, there is no assurance that it will be able to do so.
QUICK
FUND FACTS
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PREMIUM CAPITAL RESERVE
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STRATEGY: High level of current income consistent with principal preservation.
INCEPTION DATE: April 1, 1993
SIZE: $134.2 million (AS OF SEPTEMBER 30, 1996)
WEIGHTED AVERAGE PORTFOLIO MATURITY: 35 days
Premium Government Reserve and Premium Capital Reserve schedules of investments
begin on page 9.
6
SEPTEMBER 30, 1996
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PREMIUM MANAGED BOND
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MANAGEMENT Q & A
An interview with Bud Hoops, a senior portfolio manager on the Premium Reserves
management team.
Q: HOW DID THE FUND PERFORM?
A: Premium Managed Bond's return reflected the sluggish performance of the
overall bond market, but the fund continued to perform well relative to its
peer group. For the six-month period ended September 30, 1996, the fund
posted a total return of 2.04%, compared to the 1.95% average return of the
117 "A-Rated Debt Funds" tracked by Lipper Analytical Services.
Q: HOW WAS THE FUND POSITIONED DURING THE PERIOD?
A: We positioned the fund to make the most of the prevailing economic
conditions--strong economic growth accompanied by low levels of inflation.
The fund started the period in a neutral position, with a duration of 5.3
years. But as evidence of strong economic growth persisted and the market
began to expect a short-term interest rate hike by the Federal Reserve, we
shifted to a more defensive posture, shortening the fund's duration to 5.0
years.
We also selectively added BBB-rated corporate bonds to the fund's
portfolio. In addition to their relatively high yields, many BBB-rated
securities reaped significant price gains from credit rating upgrades as
corporate credit conditions improved. We worked closely with our corporate
credit research team to seek out the most likely candidates for upgrades.
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AVERAGE ANNUAL TOTAL RETURNS
(as of September 30, 1996)
PREMIUM Lehman
MANAGED BOND Aggregate*
6 Months(+) 2.04% 2.43%
1 Year 4.49% 4.90%
Inception 5.34% 5.84%
4/1/93 to 9/30/96
(+)Actual
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ASSET ALLOCATION
(as of September 30, 1996)
[pie chart]
Cash 2%
Sovereign Governments & Agencies 9%
Mortgage-Backed Securities 15%
U.S. Treasury Securities 31%
Corporate Bonds 43%
Percent of fund investments.
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$100,000 OVER LIFE OF FUND
[line graph]
Value on 9/30/96:
- ----------------
$119,980 PREMIUM MANAGED BOND
$121,960 LEHMAN AGGREGATE*
$100,000 investment made on 4/1/93
(Inception date)
PREMIUM LEHMAN AGG
MANAGED BOND BOND INDEX*
Apr 1, 93 $100000 $100000
Apr 30, 93 100740 100700
May 31, 93 100300 100820
Jun 30, 93 101870 102650
Jul 31, 93 102460 103230
Aug 31, 93 104460 105040
Sep 30, 93 104620 105330
Oct 31, 93 104890 105720
Nov 30, 93 104020 104820
Dec 31, 93 104530 105390
Jan 31, 94 105970 106820
Feb 28, 94 103370 104960
Mar 31, 94 100910 102370
Apr 30, 94 99910 101550
May 30, 94 99770 101540
Jun 30, 94 99530 101320
Jul 31, 94 101650 103330
Aug 31, 94 101540 103460
Sep 30, 94 100020 101930
Oct 31, 94 99810 101840
Nov 30, 94 99590 101620
Dec 31, 94 100250 102320
Jan 31, 95 102120 104340
Feb 28, 95 104630 106820
Mar 31, 95 105430 107480
Apr 30, 95 106990 108980
May 31, 95 111950 113200
Jun 30, 95 112630 114030
Jul 31, 95 112070 113770
Aug 31, 95 113680 115150
Sep 30, 95 114820 116270
Oct 31, 95 116560 117780
Nov 30, 95 118530 119540
Dec 31, 95 120400 121220
Jan 31, 96 121110 122030
Feb 29, 96 118510 119910
Mar 31, 96 117580 119070
Apr 30, 96 116750 118400
May 31, 96 116420 118160
Jun 30, 96 117860 119750
Jul 31, 96 118130 120080
Aug 31, 96 117910 119880
Sep 30, 96 119980 121960
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
*Source: Lipper Analytical Services, Inc.
QUICK
FUND FACTS
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PREMIUM MANAGED BOND
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STRATEGY:
High level of current income.
INCEPTION DATE:
April 1, 1993
SIZE:$20.0 million
(as of September 30, 1996)
7
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PREMIUM MANAGED BOND
Q: DESPITE THE INCREASE IN BBB-RATED CORPORATE BONDS, THE FUND'S OVERALL
HOLDING OF CORPORATE SECURITIES DECLINED. WHY?
A: In general, we believe that corporate bonds are becoming overvalued
compared to Treasury and government bonds. Corporate bonds typically offer
higher yields as compensation for increased credit risk, but improving
corporate credit quality has caused the "spreads" between corporate and
Treasury yields to narrow dramatically. In fact, corporate-Treasury spreads
are at their lowest levels since 1990, when the current economic recovery
began. We believe this has made corporate securities less attractive than
other fixed-income sectors.
Q: LOOKING AHEAD, WHAT IS YOUR OUTLOOK FOR THE BOND MARKET OVER THE NEXT SIX
MONTHS?
A: The uncertain economic picture has been muddied further by recent economic
data that seem to suggest a slowdown. Market participants now appear less
convinced that the Fed will raise rates before the end of 1996. We expect
the bond market to remain in its current trading range for the next few
months until a clearer economic picture emerges.
We're also keeping an eye on inflation, especially labor costs. Recent
government employment reports have shown strong increases in hourly
earnings. Wages are about two-thirds of the cost of doing business, so
rising labor costs could put upward pressure on consumer prices in 1997.
Q: THERE HAVE BEEN REPORTS OF RISING WAGES OVER THE PAST SEVERAL YEARS, BUT
THESE INCREASED COSTS NEVER MATERIALIZED IN THE CONSUMER PRICE INDEX. WHAT
MAKES YOU THINK IT WILL BE DIFFERENT THIS TIME?
A: Throughout the current economic recovery, now in its sixth year, the
inflation rate has remained steady or even declined despite evidence of
rising labor costs. Part of the reason is that it's been a slow, gradual
recovery without the sudden growth spurts that usually lead to shortages of
raw materials or labor. In addition, technological advances, improved
efficiency and corporate downsizing resulted in significant productivity
gains over the past five years. The cost savings from these productivity
improvements offset most of the wage increases.
However, we're skeptical that productivity gains will continue at the same
rate going forward. Without this advantage, businesses may finally be
forced to pass on rising labor costs to the consumer.
Q: GIVEN THIS OUTLOOK, WHAT ARE YOUR PLANS FOR THE FUND GOING FORWARD?
A: We intend to maintain the fund's defensive position, possibly shortening
its duration further over the next few months. We will continue to
underweight corporate bonds and look to expand our holdings of Treasury and
mortgage-backed securities. Mortgage-backed securities look especially
attractive to us--they are among the highest-yielding government securities
available and tend to outperform other fixed-income sectors when interest
rates are steady.
QUALITY DIVERSIFICATION (AS OF SEPTEMBER 30, 1996)
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(MOODY'S RATING) % OF FUND INVESTMENTS
AAA 49%
AA 12%
A 21%
BBB 18%
----------------
100%
================
WEIGHTED AVERAGE MATURITY (as of September 30, 1996)
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Years 8.94
Weighted average maturity indicates the average time until the principal on the
fund's bonds is expected to be repaid, weighted by dollar amount.
DURATION (as of September 30, 1996)
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Years 5.01
Duration is a measure of the sensitivity of a portfolio to changes in interest
rates. As the duration of a fund increases, the impact of a change in interest
rates on the value of its portfolio also increases.
Premium Managed Bond schedule of investments begins on page 11.
8
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SCHEDULES OF INVESTMENTS September 30, 1996 (Unaudited)
PREMIUM GOVERNMENT RESERVE
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PRINCIPAL AMOUNT VALUE
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U.S. GOVERNMENT AGENCY
DISCOUNT NOTES* -- 67.3%
$ 875,000 FFCB, 5.19%, 11-1-96 $ 871,052
1,700,000 FFCB, 5.19%, 11-15-96 1,688,568
500,000 FHLB, 5.19%, 10-15-96 498,995
1,000,000 FHLB, 5.19%, 10-15-96 997,916
1,050,000 FHLB, 5.19%, 10-28-96 1,045,858
1,000,000 FHLB, 5.19%, 10-30-96 995,674
850,000 FHLB, 5.19%, 11-12-96 844,774
500,000 FHLMC, 5.18%, 10-1-96 500,000
550,000 FHLMC, 5.18%, 10-7-96 549,510
779,000 FHLMC, 5.18%, 10-8-96 778,205
1,200,000 FHLMC, 5.18%, 10-10-96 1,198,416
655,000 FHLMC, 5.18%, 10-11-96 654,039
45,000 FHLMC, 5.18%, 10-15-96 44,908
1,409,000 FHLMC, 5.18%, 11-7-96 1,401,267
2,900,000 FNMA, 5.20%, 10-18-96 2,892,783
1,700,000 FNMA, 5.20%, 10-21-96 1,695,004
500,000 FNMA, 5.20%, 10-24-96 498,339
300,000 FNMA, 5.20%, 11-20-96 297,845
1,350,000 FNMA, 5.20%, 12-6-96 1,336,685
775,000 FNMA, 5.20%, 12-13-96 766,797
------------------------------------
19,556,635
------------------------------------
OTHER U.S. GOVERNMENT AGENCY SECURITIES* -- 32.7%
1,500,000 FFCB, 5.66%, 2-3-97 1,500,567
1,000,000 FFCB, VRN, 5.59%,
10-17-96, resets monthly
off the 1-month LIBOR
minus .20% with no caps,
final maturity 3-17-97 999,464
1,000,000 FFCB, VRN, 5.57%, 10-1-96,
resets weekly off the
6-month T-Bill rate plus
.05% with no caps,
final maturity 6-13-97 1,000,000
2,000,000 FHLB, 5.31%, 12-12-96 1,998,737
1,000,000 FHLB, VRN, 5.36%, 10-1-96,
resets daily off
the Fed Funds rate plus
.15% with no caps, final
maturity 8-1-97 1,000,000
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
$ 1,000,000 FNMA, 5.68%, 10-7-96 $ 1,000,029
500,000 FNMA, 7.60%, 1-10-97 502,756
1,500,000 FNMA, VRN, 5.52%, 10-1-96,
resets weekly off the
3-month T-Bill rate plus
.20%, final maturity 8-22-97 1,499,360
------------------------------------
9,500,913
------------------------------------
TOTAL INVESTMENT SECURITIES -- 100.0% $29,057,548
======================
PREMIUM CAPITAL RESERVE
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PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER*
AUTOMOBILES & AUTO PARTS -- 2.0%
$2,700,000 Daimler-Benz North
America Corp.,
5.29%, 10-11-96 $ 2,696,025
----------------
BANKING -- 14.0%
5,700,000 Bil North America, Inc.,
5.27%, 10-15-96 5,687,853
3,000,000 Caisse D'Amortissement,
5.32%, 1-15-97 2,951,063
2,100,000 Deutsche Bank A.G.,
5.26%, 10-21-96 2,093,700
3,000,000 Generale Bank, Inc.,
5.32%, 1-16-97 2,950,334
1,000,000 Morgan (J.P.) Delaware,
5.27%, 12-3-96 990,637
2,000,000 Nordbanken, 5.26%, 10-17-96 1,995,298
2,000,000 Pemex Capital, 5.26%, 10-21-96 1,993,967
----------------
18,662,852
----------------
CHEMICALS & RESINS -- 0.5%
657,000 Bayer AG, 5.30%, 10-8-96 656,320
----------------
COMMUNICATIONS SERVICES -- 1.9%
2,600,000 Ameritech Corp., 5.33%, 10-2-96 2,599,610
----------------
See Notes to Financial Statements
9
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SCHEDULES OF INVESTMENTS (CONTINUED) September 30, 1996 (Unaudited)
PREMIUM GOVERNMENT RESERVE (CONT.)
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
DIVERSIFIED COMPANIES -- 5.2%
$5,000,000 Mitsubishi International,
5.27%, 10-15-96 $ 4,989,344
2,000,000 Mitsui & Co. (USA) Inc.,
5.24%, 10-29-96 1,991,569
-------------
6,980,913
-------------
EDUCATION -- 0.8%
1,100,000 Leland Stanford,
5.28%-5.32%, 12-12-96
through 1-14-97 1,085,115
-------------
FINANCIAL SERVICES -- 31.1%
6,000,000 American Express Credit Corp.,
5.26%, 11-18-96 5,957,600
2,200,000 Associates Corp., NA,
5.25%, 10-23-96 2,192,847
6,330,000 BT Securities Corporation,
5.26%-5.27%, 10-16-96
through 12-6-96 6,302,755
2,100,000 Ford Motor Credit Co.,
5.25%, 11-8-96 2,088,030
5,000,000 General Electric Capital Corp.,
5.29%-5.32%, 10-10-96
through 1-21-97 4,948,967
6,200,000 Hitachi Credit Corp.,
5.24%-5.26%, 10-23-96
through 11-26-96 6,159,781
4,300,000 Merrill Lynch & Co., Inc.,
5.26%, 11-18-96
through 11-27-96 4,266,852
5,000,000 National Rural Utilities
Cooperative Finance Corp.,
5.26%, 11-19-96 4,963,795
4,700,000 Panasonic Finance, Inc.,
5.26%, 10-18-96
(Acquired 9-18-96,
Cost $4,679,046)(+) 4,688,126
------------
41,568,753
------------
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
INSURANCE -- 4.4%
$3,500,000 General Re Corp.,
5.28%, 12-16-96 $ 3,459,509
2,463,000 Metlife Funding Inc.,
5.26%, 10-21-96 2,455,679
------------
5,915,188
------------
MEDIA & BROADCASTING -- 0.5%
640,000 Disney (Walt) Co.,
5.34%, 10-1-96 640,000
------------
METALS & MINING -- 2.2%
3,000,000 U.S. Borax, Inc., 5.25%, 11-13-96 2,981,008
------------
PAPER & FOREST PRODUCTS -- 1.1%
1,500,000 Chevron U.K. Investment,
5.27%, 10-15-96 1,496,903
-----------
PHARMACEUTICALS -- 4.3%
3,800,000 Sandoz Corp.,
5.24%-5.25%, 10-24-96
through 11-1-96 3,785,690
2,000,000 Sandoz Corp., 5.24%, 11-1-96
(Acquired 9-10-96,
Cost $1,984,400)(+) 1,990,700
-----------
5,776,390
-----------
PUBLISHING -- 4.5%
6,000,000 Gannett Co., Inc.,
5.27%, 10-16-96
(Acquired 7-18-96,
Cost $5,917,950)(+) 5,986,325
-----------
RETAIL (SPECIALTY) -- 4.8%
6,400,000 Southland Corp.,
5.24%-5.30%, 10-8-96
through 11-5-96 6,386,728
-----------
SOVEREIGN GOVERNMENTS
& AGENCIES -- 4.8%
6,460,000 Sweden (Kingdom of),
5.26%-5.27%, 11-22-96
through 12-6-96 6,402,941
-----------
See Notes to Financial Statements
10
- --------------------------------------------------------------------------------
PREMIUM CAPITAL RESERVE (CONT.)
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER -- 82.1% $ 109,835,071
------------
CERTIFICATES OF DEPOSIT -- 2.2%
$3,000,000 ABN Amro Bank Chicago,
5.54%, 11-6-96 3,000,024
------------
OTHER CORPORATE DEBT -- 6.0%
1,000,000 Abbey National Treasury,
MTN, VRN, 5.39%, 10-21-96,
resets monthly off the
1-month LIBOR minus .10%
with no caps,
final maturity 2-21-97 999,773
2,000,000 Bayerische Landesbank, VRN,
5.27%, 10-1-96, resets monthly
off the 1-month LIBOR
minus .15% with no caps,
final maturity 3-3-97 1,999,102
5,000,000 Wachovia Bank of NC, VRN,
5.36%, 10-7-96, resets monthly
off the 1-month LIBOR
minus .125% with no caps,
final maturity 1-3-97 4,998,794
-----------
7,997,669
-----------
U.S. GOVERNMENT AGENCY SECURITIES* -- 9.7%
3,500,000 FFCB, VRN, 5.59%, 10-17-96,
resets monthly off the
1-month LIBOR minus .20%
with no caps, final maturity
3-17-97 3,498,128
2,000,000 FHLB, VRN, 5.36%, 10-1-96,
resets daily off the Fed
Funds rate plus .15% with
no caps, final maturity 8-1-97 2,000,000
3,500,000 FNMA, 5.30%, 12-26-96 3,503,380
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
$3,000,000 FNMA, VRN, 5.29%, 10-1-96,
resets daily off the Fed
Funds rate plus .01% with
no caps, final maturity 5-5-97 $ 2,998,455
1,000,000 SLMA, MTN, VRN, 5.57%,
10-4-96, resets quarterly
off the 3-month LIBOR plus
.01% with no caps, final
maturity 10-4-96 1,000,000
-----------
12,999,963
-----------
TOTAL INVESTMENT
SECURITIES -- 100.0% $ 133,832,727
==============
PREMIUM MANAGED BOND
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES* -- 30.8%
$1,000,000 U.S. Treasury Note,
4.375%, 11-15-96 $ 999,889
700,000 U.S. Treasury Note,
5.625%, 6-30-97 700,056
500,000 U.S. Treasury Note,
5.125%, 2-28-98 494,345
300,000 U.S. Treasury Note,
7.125%, 9-30-99 306,825
400,000 U.S. Treasury Note,
7.75%, 1-31-00 416,656
1,100,000 U.S. Treasury Note,
5.75%, 10-31-00 1,073,820
900,000 U.S. Treasury Note,
6.625%, 6-30-01 905,499
200,000 U.S. Treasury Note,
6.625%, 7-31-01 201,244
400,000 U.S. Treasury Bond,
7.125%, 2-15-23 403,044
300,000 U.S. Treasury Bond,
7.50%, 11-15-24 317,145
300,000 U.S. Treasury Bond,
6.00%, 2-15-26 263,799
------------
(Cost $6,086,965) 6,082,322
------------
See Notes to Financial Statements
11
SCHEDULES OF INVESTMENTS (CONTINUED) September 30, 1996 (Unaudited)
Premium Managed Bond (cont.)
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES** -- 14.9%
$1,568,987 FNMA Pool #272894,
6.00%, 10-25-01 $ 1,499,826
1,491,581 GNMA Pool #313107,
7.00%, 1-15-06 1,449,563
------------
(Cost $3,009,282) 2,949,389
------------
CORPORATE BONDS
AIRLINES -- 2.5%
500,000 Delta Air Lines, Inc.,
Equipment Trust Certificates,
7.541%, 10-11-11 489,375
------------
AUTOMOBILES & AUTO PARTS -- 1.8%
350,000 General Motors Co.,
7.00%, 6-15-03 349,562
------------
BANKING -- 7.1%
400,000 Chase Manhattan Corp.,
8.80%, 2-1-00 403,500
200,000 First Union Corp.,
8.77%, 11-15-04 209,750
500,000 National Bank of Canada,
8.125%, 8-15-04 522,500
300,000 Santander Financial
Issuances, Ltd.,
6.375%, 2-15-11 270,375
------------
1,406,125
------------
CHEMICALS & RESINS -- 1.9%
300,000 ARCO Chemical Co.,
10.25%, 11-1-10 376,875
-----------
ENERGY
(PRODUCTION & MARKETING) -- 1.8%
300,000 Coastal Corp. (The),
10.25%, 10-15-04 350,625
------------
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.4%
$500,000 Associates Corp., NA,
6.625%, 6-15-05 $ 480,625
200,000 Ford Motor Credit Co.,
6.75%, 5-15-05 192,500
300,000 Lehman Brothers Holdings Inc.,
6.625%, 11-15-00 294,750
300,000 Lehman Brothers Inc.,
7.25%, 4-15-03 298,125
300,000 Merrill Lynch & Co., Inc.,
7.00%, 3-15-06 293,625
300,000 Paine Webber Group Inc.,
7.875%, 2-15-03 307,500
------------
1,867,125
------------
INSURANCE -- 1.5%
300,000 Delphi Financial Group, Inc.,
8.00%, 10-1-03 288,375
------------
MEDIA & BROADCASTING -- 1.5%
300,000 Time Warner Inc.,
6.85%, 1-15-26,
put date 1-15-03 292,500
------------
PAPER & FOREST PRODUCTS -- 1.7%
200,000 Boise Cascade Corp.,
9.45%, 11-1-09 226,000
100,000 Georgia-Pacific Corp.,
9.50%, 12-1-11 115,000
-------------
341,000
-------------
PHARMACEUTICALS -- 2.7%
500,000 Lilly (Eli) & Co.,
8.375%, 2-7-05 541,250
-------------
REAL ESTATE -- 4.0%
300,000 Price REIT, Inc. (The),
7.25%, 11-1-00 298,875
500,000 Spieker Properties, Inc.,
6.80%, 12-15-01 488,125
-------------
787,000
-------------
See Notes to Financial Statements
12
PREMIUM MANAGED BOND (CONT.)
- --------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) -- 1.8%
$300,000 Sears, Roebuck & Co., Inc.,
9.375%, 11-1-11 $ 351,000
------------
STEEL -- 1.5%
300,000 USX Corp., MTN, 7.75%, 1-21-98 304,500
------------
UTILITIES -- 4.2%
500,000 Columbia Gas System, Inc. (The),
6.80%, 11-28-05 481,875
400,000 Duke Power Co., 6.875%, 8-1-23 360,000
------------
841,875
------------
TOTAL CORPORATE BONDS -- 43.4% 8,587,187
------------
(Cost $8,714,507)
SOVEREIGN GOVERNMENTS & AGENCIES -- 9.1%
500,000 Hydro-Quebec, 8.05%,
7-7-24, put date 7-7-06 533,750
500,000 Korea Electric Power,
6.375%, 12-1-03 478,125
400,000 Province of Ontario
Global Bonds, 7.625%, 6-22-04 414,000
400,000 Province of Quebec Bonds,
7.125%, 2-9-24 367,000
------------
(Cost $1,822,019) 1,792,875
------------
TEMPORARY
CASH INVESTMENTS -- 1.8%
Repurchase Agreement (Goldman Sachs &
Co., Inc.), 5.60%, due 10-1-96;
collateralized by $300,000 par value
U.S. Treasury Bonds, 10.75%, due 2-15-03
(Delivery value $359,056) 359,000
------------
(Cost $359,000)
TOTAL INVESTMENT
SECURITIES -- 100.0% $ 19,770,773
============
(Cost $19,991,773)
Notes to Schedules of Investments
- --------------------------------------------------------------------------------
FFCB = Federal Farm Credit Banks
FHLB = Federal Home Loan Banks
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
LIBOR = London Interbank Offered Rate
MTN = Medium Term Note
resets = The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. the more
frequently a security resets, the less risk the investor is taking that the
coupon will vary significantly from current market rates.
SLMA = Student Loan Marketing Association
VRN = Variable Rate Note; rates shown were effective at 9-30-96. interest reset
date is indicated and used in calculating the weighted average portfolio
maturity.
* The rates for U.S. Government Agency Discount Notes and commercial paper are
the yield to maturity at September 30, 1996. The rates for U.S. Government
Agency securities and U.S. Treasury securities are the stated coupon rates.
** Remaining expected life is indicated and used for calculating the average
weighted portfolio maturity.
(+)Purchased under Rule 144A of the Securities Act of 1933 and restricted for
sale to qualified institutional investors. The aggregate value of restricted
securities at September 30, 1996, was $12,665,151, which represented 9.43% of
the net assets of Premium Capital Reserve.
See Notes to Financial Statements
13
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
PREMIUM PREMIUM PREMIUM
GOVERNMENT CAPITAL MANAGED
RESERVE RESERVE BOND
<S> <C> <C> <C>
September 30, 1996 (Unaudited)
ASSETS
Investment securities, at value
(amortized cost for Government
Reserve and Capital Reserve;
identified cost of $19,991,773 for
Managed Bond)(NOTE 3) ..................................... $ 29,057,548 $ 133,832,727 $ 19,770,773
Cash ........................................................ 193,222 743,264 6,006
Interest receivable ......................................... 126,402 339,381 358,159
-------------- --------------- -------------
29,377,172 134,915,372 20,134,938
-------------- --------------- -------------
LIABILITIES
Disbursements in excess of
demand deposit cash ....................................... 2,556 304,302 526
Payable for capital shares redeemed ......................... 9,289 267,810 111,055
Accrued management fees (NOTE 2) ............................ 10,484 49,759 7,327
Dividends payable ........................................... 8,379 56,288 10,037
Other liabilities ........................................... 32 186 17
-------------- --------------- -------------
30,740 678,345 128,962
-------------- --------------- -------------
NET ASSETS APPLICABLE
TO OUTSTANDING SHARES ....................................... $ 29,346,432 $ 134,237,027 $ 20,005,976
============== =============== =============
CAPITAL SHARES, $.01 PAR VALUE
Authorized .................................................. 1,000,000,000 1,000,000,000 100,000,000
============== =============== =============
Outstanding ................................................. 29,346,432 134,237,948 2,037,061
============== =============== =============
NET ASSET VALUE PER SHARE ................................... $ 1.00 $ 1.00 $ 9.82
============== =============== =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .................... $ 29,346,432 $ 134,237,967 $ 20,291,623
Accumulated undistributed net realized
(loss) from investment transactions ....................... -- (940) (64,647)
Net unrealized (depreciation)
on investments (NOTE 3) ................................... -- -- (221,000)
-------------- --------------- -------------
$ 29,346,432 $ 134,237,027 $ 20,005,976
============== =============== =============
</TABLE>
See Notes To Financial Statements
14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
PREMIUM PREMIUM PREMIUM
GOVERNMENT CAPITAL MANAGED
RESERVE RESERVE BOND
<S> <C> <C> <C>
Six Months Ended
September 30, 1996 (Unaudited)
INVESTMENT INCOME
Interest income ............................................... $732,834 $ 3,634,943 $ 667,507
-------- ----------- ---------
Expenses:
Management fees (NOTE 2) .................................... 60,978 297,976 44,361
Directors' fees and expenses ................................ 117 582 85
-------- ----------- ---------
61,095 298,558 44,446
-------- ----------- ---------
NET INVESTMENT
INCOME ........................................................ 671,739 3,336,385 623,061
-------- ----------- ---------
REALIZED AND UNREALIZED (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized (loss) on investments ............................ -- (282) (44,044)
Change in net unrealized
(depreciation) on investments ............................... -- -- (181,144)
-------- ----------- ---------
NET REALIZED AND UNREALIZED
(LOSS) ON INVESTMENTS ......................................... -- (282) (225,188)
-------- ----------- ---------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS ............................................... $671,739 $ 3,336,103 $ 397,873
======== =========== =========
</TABLE>
See Notes To Financial Statements
15
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
GOVERNMENT
PREMIUM
RESERVE
Six Months Ended September 30, 1996
(Unaudited) And Year Ended March 31, 1996
September 30, 1996 March 31, 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 671,739 $ 1,129,713
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . -- --
Change in net unrealized appreciation (depreciation) on investments . . . . -- --
------------ ------------
Net increase in net assets resulting from operations . . . . . . . . . . . . 671,739 1,129,713
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income . . . . . . . . . . . . . . . . . . . . . . . . . (671,739) (1,129,713)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . 23,849,305 39,673,000
Proceeds from reinvestment of distributions . . . . . . . . . . . . . . . . 638,153 1,068,845
Payments for shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . (21,331,790) (30,931,876)
------------ ------------
Net increase (decrease) in net assets
from capital share transactions . . . . . . . . . . . . . . . . . . . . . . 3,155,668 9,809,969
------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,155,668 9,809,969
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,190,764 16,380,795
------------ ------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,346,432 $ 26,190,764
============ ============
TRANSACTIONS IN SHARES OF THE FUNDS:
Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,849,305 39,673,000
Issued in reinvestment of distributions . . . . . . . . . . . . . . . . . . 638,153 1,068,845
Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,331,790) (30,931,876)
------------ ------------
Net increase (decrease) . . . . . . . . . . . . . . . . . . . . . . . . . . 3,155,668 9,809,969
============ ============
</TABLE>
See Notes to Financial Statements
16
<TABLE>
<CAPTION>
PREMIUM PREMIUM
CAPITAL MANAGED
RESERVE BOND
- ---------------------------------------------------------------------------------------------------------
SEPTEMBER 30, 1996 MARCH 31, 1996 SEPTEMBER 30, 1996 MARCH 31, 1996
<S> <C> <C> <C>
$ 3,336,385 $ 7,677,131 $ 623,061 $ 968,146
(282) 1,221 (44,044) 164,018
-- -- (181,144) 261,690
------------ ------------- ------------ ------------
3,336,103 7,678,352 397,873 1,393,854
------------ ------------- ------------ ------------
(3,336,385) (7,677,131) (623,061) (968,146)
------------ ------------- ------------ ------------
106,544,803 299,774,625 2,975,057 14,360,300
3,161,075 7,350,635 611,776 949,722
(108,885,234) (312,138,031) (3,635,186) (5,790,446)
------------ ------------- ------------ ------------
820,644 (5,012,771) (48,353) 9,519,576
------------ ------------- ------------ ------------
820,362 (5,011,550) (273,541) 9,945,284
133,416,665 138,428,215 20,279,517 10,334,233
------------ ------------- ------------ ------------
$ 134,237,027 $ 133,416,665 $ 20,005,976 $ 20,279,517
============= ============= ============ ============
106,544,803 299,774,625 304,396 1,428,902
3,161,075 7,350,635 62,581 94,806
(108,885,234) (312,138,050) (371,330) (574,171)
------------ ------------- ------------ ------------
820,644 (5,012,790) (4,353) 949,537
============ ============= ============ ============
</TABLE>
17
NOTES TO FINANCIAL STATEMENTS September 30, 1996 (Unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization--
Twentieth Century Premium Reserves, Inc. (the Corporation) is registered under
the Investment Company Act of 1940 as an open-end diversified management
investment company. Three series of funds, investing primarily in fixed-income
securities, are currently issued as: Premium Government Reserve, Premium Capital
Reserve and Premium Managed Bond (the Funds). The investment objective of
Premium Government Reserve and Premium Capital Reserve is 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 in the
prospectus. The investment objective of Premium Managed Bond is to obtain 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.
The following significant accounting policies related to the Funds are in
accordance with accounting policies generally accepted in the investment company
industry.
Security Valuations--
Securities held by Premium Managed Bond are valued through valuations obtained
from a commercial pricing service or at the mean of the most recent bid and
asked prices. The securities held by Premium Capital Reserve and Premium
Government Reserve are valued at amortized cost, which approximates current
value. When valuations are not readily available, securities are valued at fair
value as determined in accordance with procedures adopted by the board of
directors.
Security Transactions--
Security transactions are accounted for on the date purchased or sold. Net
realized gains and losses are determined on the identified cost basis, which is
also used for federal income tax purposes.
Investment Income--
Interest income is recognized on the accrual basis and includes amortization of
discounts and premiums.
Repurchase Agreements--
The Funds may enter into repurchase agreements with institutions that the Funds'
investment manager has determined are creditworthy pursuant to criteria adopted
by the board of directors. Each repurchase agreement is recorded at cost. The
Funds require that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the Funds to
obtain those securities in the event of a default under the repurchase
agreement. The Funds' investment manager monitors, on a daily basis, the value
of the securities transferred to ensure that the value, including accrued
interest, of the securities under each repurchase agreement is equal to or
greater than amounts owed to the Funds under each such repurchase agreement.
Income Tax Status--
It is the policy of the Funds to distribute all taxable income and capital gains
to shareholders and to otherwise qualify as a regulated investment company under
provisions of the Internal Revenue Code. Accordingly, no provision has been made
for federal income taxes.
18
Distributions to Shareholders--
Distributions from net investment income are declared daily and distributed
monthly. 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. Net realized gains in excess of available capital
loss carryovers will be distributed each December to shareholders of Premium
Managed Bond. At March 31, 1996, Premium Managed Bond had an accumulated net
realized capital loss carryover of $11,160 (expiring in 2003), which may be used
to offset future taxable capital gains.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences are primarily due to differences
in the recognition of income and expense items for financial statement and tax
purposes.
Supplementary Information--
Certain officers and directors of the Corporation are also officers and/or
directors and, as a group, controlling stockholders of Twentieth Century
Companies, Inc., the parent of the Corporation's investment manager, Investors
Research Corporation (IRC).
Use of Estimates--
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
2. Management of Agreement
The Management Agreement with IRC provides for a monthly management fee computed
by multiplying the applicable fee for each Fund by the average daily closing
value of such Fund's net assets during the previous month. The Agreement further
provides that all expenses of the Funds, except brokerage commissions, taxes,
interest, expenses of those directors who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses, will be paid by IRC. The Agreement may be
terminated by either party upon 60 days' written notice. The current annual
management fee for each Fund is .45%.
3. Investment Transactions
For Premium Managed Bond, the aggregate cost of investment securities purchased
(excluding short-term investments) for the six months ended September 30, 1996,
totaled $2,702,489 for U.S. government obligations and $1,227,356 for corporate
obligations; proceeds from investment securities sold totaled $1,980,239 for
U.S. government obligations and $1,733,852 for corporate obligations. On
September 30, 1996, accumulated net unrealized depreciation on investments,
based on the aggregate cost of investments of $19,997,179 for federal income tax
purposes, was $226,406, consisting of unrealized appreciation of $121,501 and
unrealized depreciation of $347,907.
19
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For A Share Outstanding Throughout The Period)
<TABLE>
<CAPTION>
PREMIUM GOVERNMENT RESERVE
SIX MONTHS YEARS ENDED MARCH 31,
ENDED SEPTEMBER 30, ----------------------------------------------------
1996 (UNAUDITED) 1996 1995 1994
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income ............................ .025 .053 .045 .027
----------- ----------- ----------- ----------
DISTRIBUTIONS
From Net Investment Income ....................... (.025) (.053) (.045) (.027)
----------- ----------- ----------- ----------
NET ASSET VALUE, END OF PERIOD ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== ==========
TOTAL RETURN(1) ................................... 2.51% 5.49% 4.62% 2.75%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to Average Net Assets .......... .45%(2) .44% .45% .45%
Ratio of Net Investment
Income to Average Net Assets ...................... 4.95%(2) 5.30% 4.84% 2.72%
Net Assets, End of Period (in thousands) ......... $ 29,346 $ 26,191 $ 16,381 $ 5,459
- ------------------------------------------------------------------------------------------------------------------------------------
(1)TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS, IF ANY.
(2)ANNUALIZED.
</TABLE>
See Notes to Financial Statements
20
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PREMIUM CAPITAL RESERVE
SIX MONTHS YEARS ENDED MARCH 31,
ENDED SEPTEMBER 30, -------------------------------------------------
1996 (UNAUDITED) 1996 1995 1994
NET ASSET VALUE,
<S> <C> <C> <C> <C>
BEGINNING OF PERIOD ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income ............................. .025 .054 .046 .028
DISTRIBUTIONS
From Net Investment Income ....................... (.025) (.054) (.046) (.028)
NET ASSET VALUE,
END OF PERIOD ....................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ============ =========== =============
TOTAL RETURN(1) ..................................... 2.55% 5.58% 4.66% 2.81%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to
Average Net Assets ................................ .45%(2) .45% .45% .45%
Ratio of Net Investment
Income to Average Net Assets ...................... 5.04%(2) 5.50% 4.76% 2.83%
Net Assets, End of Period (in thousands) ........ $ 134,237 $ 133,417 $ 138,428 $ 38,823
- ------------------------------------------------------------------------------------------------------------------------------------
(1)TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS, IF ANY.
(2)ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
PREMIUM MANAGED BOND
SIX MONTHS YEARS ENDED MARCH 31,
ENDED SEPTEMBER 30,
1996 (UNAUDITED) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 9.93 $ 9.46 $ 9.64 $ 10.00
------------- -------------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income ....................................... .307 .607 .588 .462
Net Realized and Unrealized Gains (Losses) ................... (.110) .470 (.180) (.360)
-------------- -------------- ------------ -----------
Total from Investment Operations ............................. .197 1.077 .408 .102
-------------- -------------- ------------ -----------
DISTRIBUTIONS
From Net Investment Income .................................. (.307) (.607) (.588) (.462)
-------------- -------------- ------------ -----------
NET ASSET VALUE, END OF PERIOD .............................. $ 9.82 $ 9.93 $ 9.46 $ 9.64
============== ============== ============ ===========
TOTAL RETURN(1) .............................................. 2.04% 11.53% 4.48% .92%
RATIOS/SUPPLEMENTAL DATA
Ratio of Expenses to Average Net Assets ..................... .45%(2) .43% .45% .45%
Ratio of Net Investment Income to Average Net Assets ......... 6.26%(2) 6.08% 6.30% 4.65%
Portfolio Turnover Rate ...................................... 19% 92% 51% 144%
Net Assets, End of Period (in thousands) .................... $ 20,006 $ 20,280 $ 10,334 $ 8,080
- ------------------------------------------------------------------------------------------------------------------------------------
(1)TOTAL RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS, IF ANY.
(2)ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
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TWENTIETH CENTURY PREMIUM RESERVES, INC.
INVESTMENT MANAGER
INVESTORS RESEARCH CORPORATION
KANSAS CITY, MISSOURI
THIS REPORT AND THE FINANCIAL STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE
GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
TWENTIETH CENTURY MUTUAL FUNDS
and THE BENHAM GROUP
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P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200
- ------------------------------------------
PERSON-TO-PERSON ASSISTANCE:
1-800-345-2021 OR 816-531-5575
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1-800-345-8765
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1-800-634-4113 OR 816-753-1865
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Internet: http://www.twentieth-century.com
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SH-BKT-6002 RECYCLED
9611 [Recycled Logo]
Twentieth Century
Premium Reserves Funds
Semiannual Report
September 30, 1996
PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
PREMIUM MANAGED BOND
--------------------------
TWENTIETH CENTURY
PREMIUM RESERVES, INC.
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