AMERICAN CENTURY PREMIUM RESERVES INC, 485BPOS, 1998-07-29

AMERICAN CENTURY PREMIUM RESERVES INC
485BPOS, 1998-07-29

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As filed with the Securities and Exchange Commission on July 29, 1998

1933 Act File No. 33-57430; 1940 Act File No. 811-7446

- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. __7__ __X__

REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. __7__ __X__

(Check appropriate box or boxes.)

AMERICAN CENTURY PREMIUM RESERVES, INC.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

American Century Tower, 4500 Main Street, Kansas City, MO 64111
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(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (816) 531-5575

James E. Stowers III
American Century Tower, 4500 Main Street, Kansas City, MO 64111
-----------------------------------------------------------------
(Name and address of Agent for Service)

Approximate Date of Proposed Public Offering August 1, 1998

It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on August 1, 1998 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 notice for the
fiscal year ended March 31, 1998, was filed on June 11, 1998.

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<PAGE>
================================================================================
CROSS REFERENCE SHEET

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N-1A Item No. Location
------------- --------
PART A

Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Operating
Expense Table
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Investment Policies of
Registrant the Fund; Other Investment
Practices, Their Characteristics
and Risks; Performance
Advertising; Distribution
of Fund Shares;
Further Information About
American Century
Item 5. Management of the Management
Fund
Item 6. Capital Stock and Further Information About
Other Securities American Century
Item 7. Purchase of Securities How to Open An Account;
Being Offered How to Exchange From One
Account to Another;
Share Price; Distributions
Item 8. Redemption How to Redeem Shares;
Signature Guarantee
Item 9. Pending Legal N/A
Proceedings

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PART B
- --------------------------------------------------------------------------------

Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information N/A
Item 13. Investment Objectives Investment Objectives of
and Policies the Funds; Selection of
Investments; Additional
Investment Restrictions;
An Explanation of Fixed Income
Securities Ratings; Forward
Currency Exchange Contracts;
Interest Rate Futures Contracts and
Related Options; Portfolio Lending
Item 14. Management of the Officers and Directors;
Registrant Management;
Custodians
Item 15. Control Persons Capital Stock
and Principal
Holders of Securities
Item 16. Investment Advisory Management;
and Other Services Custodians
Item 17. Brokerage Allocation Brokerage;
Performance Advertising
Item 18. Capital Stock and Capital Stock
Other Securities
Item 19. Purchase, Redemption N/A
and Pricing of
Securities Being
Offered
Item 20. Tax Status N/A
Item 21. Underwriters N/A
Item 22. Calculation of Yield Performance Advertising
Quotations of Money
Market Funds
Item 23. Financial Statements Financial Statements
<PAGE>
PROSPECTUS

[american century logo(reg.sm)]
American
Century(reg.tm)

August 1, 1998

BENHAM
GROUP(reg.tm)

Premium Government Reserve
Premium Capital Reserve
Premium Bond

INVESTOR CLASS

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 investment 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 Twentieth Century
Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Premium Government
Reserve
Premium Capital Reserve
Premium Bond

PROSPECTUS

AUGUST 1, 1998

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 August 1, 1998, and filed with the Securities and Exchange
Commission (SEC). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:

AMERICAN CENTURY INVESTMENTS
4500 Main Street * P.O. Box 419200
Kansas City, Missouri 64141-6200 * 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 * In Missouri: 816-444-3485
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 fund 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

Investment Objectives of the Funds .......................................... 2
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 .................................................. 8
Premium Bond ............................................................. 9
Fundamentals of Fixed Income Investing ...................................... 10
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 Turnover ....................................................... 14
Rule 144A Securities ..................................................... 14
When-Issued Securities ................................................... 15
Investment Company Act Rule 2a-7 ......................................... 15
Investments in Companies With Limited
Operating Histories ................................................... 15
Performance Advertising ..................................................... 15

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 ............................................... 20
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 ....................................................................... 25
Tax-Deferred Accounts .................................................... 25
Taxable Accounts ......................................................... 25
Management .................................................................. 26
Investment Management .................................................... 26
Code of Ethics ........................................................... 27
Transfer and Administrative Services ..................................... 27
Year 2000 Issues ......................................................... 28
Distribution of Fund Shares ................................................. 28
Further Information About American Century .................................. 29

PROSPECTUS TABLE OF CONTENTS 3

<TABLE>
<CAPTION>
TRANSACTION AND OPERATING EXPENSE TABLE

Premium Premium Premium
Government Capital Bond
Reserve Reserve
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed
<S> <C> <C> <C>
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 1 year $ 5 $ 5 $ 5
on a $1,000 investment, assuming a 3 years 14 14 14
5% annual return and redemption at the 5 years 25 25 25
end of each time period: 10 years 57 57 57

(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.

</TABLE>

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

<TABLE>
FINANCIAL HIGHLIGHTS
PREMIUM GOVERNMENT RESERVE

The Financial Highlights for the fiscal year ended March 31, 1998, have been
audited by Deloitte & Touche 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 Financial Highlights for the periods ended on or before March 31,
1997, have been audited by other independent accountants. The information
presented is for a share outstanding throughout the years ended March 31.

1998 1997 1996 1995 1994
PER-SHARE DATA

<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations

Net Investment Income ................ 0.05 0.05 0.05 0.05 0.03
---------- ---------- ---------- ---------- ----------
Distributions

From Net Investment Income ........... (0.05) (0.05) (0.05) (0.05) (0.03)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total Return(1) ...................... 5.25% 5.07% 5.49% 4.62% 2.75%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets .................... 0.45% 0.45% 0.44% 0.45% 0.45%

Ratio of Net Investment Income
to Average Net Assets .................... 5.13% 4.96% 5.30% 4.84% 2.72%

Net Assets, End of Year (in thousands) ... $ 44,495 $ 38,838 $ 26,191 $ 16,381 $ 5,459

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
</TABLE>

PROSPECTUS FINANCIAL HIGHLIGHTS 5

<TABLE>
FINANCIAL HIGHLIGHTS
PREMIUM CAPITAL RESERVE

1998 1997 1996 1995 1994
PER-SHARE DATA

<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Income From Investment Operations

Net Investment Income ................. 0.05 0.05 0.05 0.05 0.03
----------- ----------- ----------- ----------- -----------
Distributions

From Net Investment Income ............ (0.05) (0.05) (0.05) (0.05) (0.03)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return(1) ....................... 5.38% 5.13% 5.58% 4.66% 2.81%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets .................... 0.45% 0.45% 0.45% 0.45% 0.45%

Ratio of Net Investment Income
to Average Net Assets .................... 5.26% 5.01% 5.50% 4.76% 2.83%

Net Assets, End of Year (in thousands) ... $ 182,487 $ 153,958 $ 133,417 $ 138,428 $ 38,823

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
</TABLE>

6 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

<TABLE>

FINANCIAL HIGHLIGHTS
PREMIUM BOND

1998 1997 1996 1995 1994
PER-SHARE DATA

<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ....... $ 9.76 $ 9.93 $ 9.46 $ 9.64 $ 10.00
---------- ---------- ---------- ---------- ----------
Income From Investment Operations

Net Investment Income ................ 0.61 0.61 0.61 0.59 0.46

Net Realized and Unrealized
Gain (Loss) on Investments ........... 0.45 (0.17) 0.47 (0.18) (0.36)
---------- ---------- ---------- ---------- ----------
Total From Investment Operations ..... 1.06 0.44 1.08 0.41 0.10
---------- ---------- ---------- ---------- ----------
Distributions

From Net Investment Income ........... (0.61) (0.61) (0.61) (0.59) (0.46)

From Net Realized Capital Gains ...... (0.06) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions .................. (0.67) (0.61) (0.61) (0.59) (0.46)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Year ............. $ 10.15 $ 9.76 $ 9.93 $ 9.46 $ 9.64
========== ========== ========== ========== ==========
Total Return(1) ...................... 11.14% 4.57% 11.53% 4.48% 0.92%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets .................... 0.45% 0.45% 0.43% 0.45% 0.45%

Ratio of Net Investment Income
to Average Net Assets .................... 6.06% 6.20% 6.08% 6.30% 4.65%

Portfolio Turnover ....................... 138% 63% 92% 51% 144%

Net Assets, End of Year
(in thousands) ........................... $ 65,171 $ 21,750 $ 20,280 $ 10,334 $ 8,080

(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.

</TABLE>

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.

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.

8 INFORMATION REGARDING THE FUNDS AMERICAN CENTURY INVESTMENTS

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 received a rating from two nationally recognized statistical ratings
organizations, or if rated by only one agency, from that one, in one of their
two highest short-term categories (including any subcategories or gradations
indicating relative standing), or if they have no short-term rating are of
comparable quality to such a rated security, as determined or ratified by the
fund's Board of Directors.

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 tax withholding,
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 those applicable to U.S. banks.
Although these factors are carefully considered when making investments, there
are no limits on the amount of fund assets that can be invested in any one type
of instrument or in any foreign country.

Because of the fund's strict credit and maturity requirements, the level of
current income it produces 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 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.

PROSPECTUS INFORMATION REGARDING THE FUNDS 9

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 payable in both U.S. and foreign
currencies. The fund may invest in securities that at the time of purchase are
rated by a nationally recognized statistical rating organization, such as
Moody's Investor Services (Moody's) and Standard & Poor's Corporation (S&P), as
follows:

Examples of
Minimum
Ratings
------------------------

Type of Security General Credit Limit Moody's S&P
- -------------------------------------------------------------------------------
Short-term notes two highest MIG-2 SP-2
categories

Corporate, sovereign five highest Ba BB
and municipal bonds categories

U.S. government and NONE n/a n/a
government agency
securities

Other types two highest P-2 A-2
categories
- --------------------------------------------------------------------------------

The fund also may invest in unrated securities if the manager determines
that they are of equivalent credit quality.

Corporate, sovereign and municipal bonds that the fund may buy include
securities known as "medium-grade securities." Medium-grade securities are those
rated in the fourth and fifth highest ratings categories. Medium-grade
securities are somewhat speculative. Adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal by issuers of fourth-category-rated securities (Moody's Baa, S&
P's BBB) than more highly rated securities. This sensitivity and exposure to
adverse or changing economic conditions is heightened in fifth-category-rated
(Moody's Ba, S&P's BB) securities. The fund may not invest more than 15% of its
total assets in securities rated Ba or BB (or their equivalent).

The fund may invest in U.S. government and government agency securities as
described under "Premium Government Reserve," page 8.

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

For the purpose of determining adjusted duration, the manager shall consider
the maturity of a security issued by the Government National Mortgage
Association (GNMA), 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.

[line graph]
FUNDAMENTALS OF FIXED INCOME INVESTING

HISTORICAL YIELDS

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

1/93 7% 6% 3%
2/93 7% 5% 3%
3/93 7% 6% 3%
4/93 7% 6% 3%
5/93 7% 6% 3%
6/93 7% 5% 3%
7/93 7% 5% 3%
8/93 6% 5% 3%
9/93 6% 5% 3%
10/93 6% 5% 3%
11/93 6% 5% 3%
12/93 6% 5% 3%
1/94 6% 5% 3%
2/94 7% 5% 3%
3/94 7% 6% 4%
4/94 7% 6% 4%
5/94 7% 6% 4%
6/94 8% 6% 4%
7/94 7% 6% 4%
8/94 7% 6% 5%
9/94 8% 6% 5%
10/94 8% 6% 5%
11/94 8% 7% 6%
12/94 8% 6% 6%
1/95 8% 6% 6%
2/95 7% 6% 6%
3/95 7% 6% 6%
4/95 7% 6% 6%
5/95 7% 6% 6%
6/95 7% 6% 6%
7/95 7% 6% 6%
8/95 7% 6% 5%
9/95 7% 6% 5%
10/95 6% 5% 6%
11/95 6% 5% 5%
12/95 6% 5% 5%
1/96 6% 5% 5%
2/96 6% 5% 5%
3/96 7% 6% 5%
4/96 7% 6% 5%
5/96 7% 6% 5%
6/96 7% 6% 5%
7/96 7% 6% 5%
8/96 7% 6% 5%
9/96 7% 6% 5%
10/96 7% 6% 5%
11/96 6% 6% 5%
12/96 7% 6% 5%
1/97 7% 6% 5%
2/97 7% 6% 5%
3/97 7% 6% 5%
4/97 7% 6% 5%
5/97 7% 6% 5%
6/97 7% 6% 5%
7/97 6% 5% 5%
8/97 7% 5% 5%
9/97 6% 5% 5%
10/97 6% 5% 5%
11/97 6% 5% 5%
12/97 6% 5% 5%

10 INFORMATION REGARDING THE FUNDS AMERICAN CENTURY INVESTMENTS

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 also would 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.

AUTHORIZED QUALITY RANGE

A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3

AAA AA A BBB BB B CCC CC C D
----------------------------------------------------------------
Premium Bond =============================

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 take into account these
relationships. The maturity and asset 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 "Additional 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.

Because 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.

The funds will limit repurchase agreement transactions to securities issued
by the U.S. government, its agencies and instrumentalities, and will enter into

PROSPECTUS INFORMATION REGARDING THE FUNDS 11

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. Neither Premium Government Reserve nor Premium Capital
Reserve will purchase a security or enter into a repurchase agreement if, as a
result, more than 10% of its net assets would be held in illiquid securities
(including repurchase agreements maturing in more than seven days), while
Premium Bond will not purchase a security or enter into a repurchase agreement
if, as a result, more than 15% of its net assets would be held in illiquid
securities.

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, clearance and settlement risk, reduced availability of
public information concerning issuers, and the lack of uniform accounting,
auditing and financial reporting standards and 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 U.S. 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 either denominated in, or whose value is tied
to, 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, or whose value is tied to, 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

12 INFORMATION REGARDING THE FUNDS AMERICAN CENTURY INVESTMENTS

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 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.

Because 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.

PROSPECTUS INFORMATION REGARDING THE FUNDS 13

There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes 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
because 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 is a range of risks associated with derivative investments, including
but not limited to:

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

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

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

* 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 TURNOVER

The portfolio turnover rate of Premium Bond is shown in the financial
information on page 7 of this Prospectus.

Decisions to purchase and sell securities are based on the anticipated
contribution of the securities in question to a fund's objectives. The manager
believes that the rate of portfolio turnover is irrelevant when it determines a
change is in order to achieve those objectives and, accordingly, the annual
portfolio turnover rate cannot be anticipated.

The portfolio turnover of a fund may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions that the funds pay directly. Higher portfolio
turnover also may increase the likelihood of realized capital gains, if any,
distributed by the fund. See "Taxes," page 25.

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. The staff also acknowledges that,
while the Board retains ultimate responsibility, it may delegate this function
to the manager. Accordingly, the Board has established guidelines and procedures
for determining the liquidity of Rule 144A securities and

14 INFORMATION REGARDING THE FUNDS AMERICAN CENTURY INVESTMENTS

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.

Because 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 fund's 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
when-issued securities. 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 operates
pursuant to Rule 2a-7 under the Investment Company Act of 1940. That rule
permits the 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.

INVESTMENTS IN COMPANIES WITH LIMITED OPERATING HISTORIES

The funds may invest in the securities of issuers with limited operating
histories. The manager considers an issuer to have a limited operating history
if that issuer has a record of less than three years of continuous operation.

Investments in securities of issuers with limited operating histories may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating histories and financial
information upon which the manager may base its investment decision on behalf of
the funds. In addition, financial and other information regarding such issuers,
when available, may be incomplete or inaccurate.

Premium Bond and Premium Capital Reserve will not invest more than 5% of
their respective total assets in the securities of issuers with less than
three-year operating histories. The manager will consider periods of capital
formation, incubation, consolidation, and research and development in
determining whether a particular issuer has a record of three years of
continuous operation.

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

PROSPECTUS INFORMATION REGARDING THE FUNDS 15

stated period 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 also may include in advertisements data comparing their
performance with the performance of non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations (such as Lipper Analytical Services, Inc. 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 also may be compared, on a relative basis, to other funds in our
fund family. This relative comparison, which may be based upon historical fund
performance or historical or expected volatility or other fund characteristics,
may be presented numerically, graphically or in text. Fund performance also may
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.

To reduce expenses and demonstrate respect for our environment, we have
initiated a project through which we will eliminate duplicate copies of most
financial reports and prospectuses to most households and deliver account
statements to most households in a single envelope, even if they have more than
one account. If you would like additional copies of financial reports and
prospectuses or separate mailing of account statements, please call us.

INVESTING IN AMERICAN CENTURY

The following sections explain 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 also must 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 an Investor Services
Representative 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 on the next page.

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

PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 17

o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):

* Taxpayer identification or Social Security number

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

* Current tax year, previous tax year or rollover designation if an IRA.
Specify whether traditional IRA, Roth IRA, Education IRA, SEP-IRA,
SARSEP-IRA, SIMPLE Employer or SIMPLE Employee.

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 Investor Centers, located at:

4500 Main Street
Kansas City, Missouri 64111

4917 Town Center Drive
Leawood, Kansas 66211

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 is $250 for checks submitted without the investment slip portion of
a previous statement or confirmation and $50 for all other types of subsequent
investments.

BY MAIL

When making subsequent investments, enclose your check with the investment
slip portion of a previous statement or confirmation. 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

Upon completion of your application and once your account is open, you may
make investments by telephone. You may call an Investor Services Representative
or use our Automated Information Line.

BY ONLINE ACCESS

Upon completion of your application and once your account is open, you may
make investments online.

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 Investor
Centers. The locations of our four Investor Centers are listed on this page.

AUTOMATIC INVESTMENT PLAN

When you complete the application and elect to make investments
automatically, we will 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 an Investor Services Representative.

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 per
account. 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 as of 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 funds issued by 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.

18 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS

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.

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) upon
completion and receipt of your application or by calling us at 1-800-345-2021 to
get the appropriate form.

BY ONLINE ACCESS

You can make exchanges online. This service is established upon completion
and receipt of 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

Upon completion of your application and once your account is open, 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 in 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 an Investor Services Representative.

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 usually will receive wired funds within 48 hours of transmission.
Funds transferred by ACH 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

PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 19

be sent advising you to bring the value of the shares held in the account up to
the minimum. 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. You can 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 services to make your account easier to manage. These are
listed on the account application. You will find more information about each of
these services 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 also may 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. 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 will have CheckWriting
upon completion and receipt by us of your application. CheckWriting is not
available for any account held in an IRA or 403(b) plan.

CheckWriting redemptions may be made only 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 daily share prices, receive updates on major
market indices and view historical performance of the funds. 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

20 HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS AMERICAN CENTURY INVESTMENTS

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:

* Individual Retirement Accounts (IRAs);

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

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

You also can 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 also may 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 manager will not be responsible for any loss due to
instructions they reasonably believe are genuine.

(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,

PROSPECTUS HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS 21

you may send your transaction instructions by mail, express mail or
courier service, or you may visit one of our Investor Centers. You also
may 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 an Institutional Services Representative 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 also is 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 funds issued by American
Century Target Maturities Trust, net asset value is determined as of the close
of regular trading on each day that the New York Stock Exchange is open, usually
3 p.m. Central time. Net asset values for Target Maturities funds are 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 our receipt of the investment, redemption or
exchange request. For example, investments and requests to redeem or exchange
shares received by us or one of our agents or designees before the time as of
which 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
as of, the close of the Exchange on the next day the Exchange is open.

Investments are considered received only when 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 time as of which the net asset value of
the fund 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 prior to the time as of which the net asset value of the fund 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 arrangements 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.

We have contractual relationships with certain financial intermediaries in
which such intermediaries represent that they have systems to track the time at
which investment orders are received and to segregate orders received at
different times. Based on these representations, the funds have authorized such
intermediaries and their designees to accept purchase and redemption orders on
the funds' behalf up to the applicable cut-off time. The funds will be deemed to
have received such orders upon acceptance by a duly authorized intermediary, and
such orders will be priced at the funds' net asset values next determined after
acceptance on the funds' behalf by such intermediary.

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 generally are 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

PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 23

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 exchanged to dollars at the prevailing foreign
exchange rate. 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 that 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 New York Stock
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 a 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

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 value and yield of each fund also may be obtained by
calling us or by accessing our Web site (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 is determined and declared
as a distribution. The distribution will be paid monthly on the last Friday of
each month except for year-end distributions, 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.

Participants in employer-sponsored retirement or savings plans must reinvest
all distributions. For shareholders investing through taxable accounts,
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 by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in

24 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS

certain IRAs and 403(b) plans paid in cash only if you are at least 59-1/2 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 because 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 distributions paid by the fund generally will 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. The dividends from net income of the fixed income funds do not
qualify for the 70% dividends-received deduction for corporations because they
are derived from interest income. Distributions from gains on assets held longer
than 12 months but no more than 18 months (28% rate gain) and/or assets held
longer than 18 months (20% rate gain) are taxable as long-term gains regardless
of the length of time you have held the shares. However, you should note that
any loss realized upon the sale or redemption of shares held for six months or
less will be treated as a long-term capital loss to the extent of any
distribution of long-term capital gain to you with respect to such shares (28%
or 20% rate gain).

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. In order for you to utilize the foreign tax credit, you must have held your
shares for 16 days or more during the 30-day period, beginning 15 days prior to
the ex-dividend date for the shares. The fund must meet a similar holding period
requirement with respect to foreign securities to which a dividend is
attributable. Any portion of the foreign tax credit that is ineligible as a
result of the fund not meeting the holding period requirement will be separately
disclosed and may be eligible as an itemized deduction.

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) will not be increased. 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 (28% and/or 20% rate gain).

In January of the year following the distribution, if you own shares in a
taxable account, you will receive

PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 25

a Form 1099-DIV notifying you of the status of your distributions for federal
income tax purposes.

Distributions also may 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
tax 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. This charge 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 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 generally will recognize a 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 generally will be considered long-term
subject to tax at a maximum rate of 28% if shareholders have held such shares
for a period of more than 12 months but no more than 18 months, and long-term
subject to tax at a maximum rate of 20% if shareholders have held such shares
for a period of more than 18 months. If a loss is realized on the redemption of
fund shares, the reinvestment in additional fund shares within 30 days before or
after the redemption may be subject to the "wash sale" rules of the Internal
Revenue Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.

In addition to the federal income tax consequences described above relating
to an investment in a fund, there may be other federal, state or local tax
considerations that depend upon the circumstances of each particular investor.
Prospective shareholders are therefore urged to consult their tax advisors with
respect to the effect of this investment on their own specific situations.

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 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.

The manager supervises and manages the investment portfolio of the funds and
directs the purchase and sale of their investment securities. It utilizes teams
of portfolio managers, assistant portfolio managers and analysts acting together
to manage the assets of the funds. The teams meet regularly to review portfolio
holdings and to discuss purchase and sale activity. The teams adjust holdings in
the funds' portfolios as they deem appropriate in pursuit of the funds'
investment objectives. Individual portfolio manager members of the teams also
may adjust

26 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS

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 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.

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 American Century in 1987, becoming
a member of its portfolio department in 1988. In 1992 she assumed her current
position as a Portfolio Manager. She is a member of the team that manages
Premium Government Reserve.

DENISE TABACCO, Portfolio Manager, joined American Century in 1988, becoming
a member of its portfolio department in 1991. In 1995 she assumed her current
position as a Portfolio Manager. She is a member of the teams that manage
Premium Capital Reserve and Premium Government Reserve.

JOHN F. WALSH, Portfolio Manager, joined American Century in February 1996
as an Investment Analyst, a position he held until May 1997. At that time he was
promoted to Portfolio Manager. Prior to joining American Century, Mr. Walsh
served as an Assistant Vice President and Analyst at First Interstate Bank, Los
Angeles, California. He is a member of the team that manages Premium Capital
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
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 an annual fee
of 0.45% of each fund's average net assets. On the first business day of each
month, each fund pays a management fee to the manager for the previous month at
the specified rate. The fee for the previous month is calculated by multiplying
the applicable fee for each fund by the aggregate average daily closing value of
each fund's net assets during the previous month, and further multiplying that
product 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 that 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

PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 27

the funds or the manager. You should be aware 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
or its affiliates.

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.

Pursuant to a Sub-Administration Agreement with the manager, Funds
Distributor, Inc. (FDI) serves as the co-administrator for the funds. FDI is
responsible for (i) providing certain officers of the funds and (ii) reviewing
and filing marketing and sales literature on behalf of the funds. The fees and
expenses of FDI are paid by the manager out of its unified fee.

YEAR 2000 ISSUES

Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. The
funds and the manager depend upon the computer systems of various service
providers, including the transfer agent, for their day-to-day operations.
Inadequate remediation of the Year 2000 problem by these service providers and
others with whom they interact could have an adverse effect on the funds'
operations, including pricing, securities trading and settlement, and the
provision of shareholder services.

The transfer agent, in cooperation with the manager, has assembled a team of
information technology professionals who are taking steps to address Year 2000
issues with respect to its own computers and to obtain satisfactory assurances
that comparable steps are being taken by the funds' and the manager's other
major service providers and vendors. The key phases of the remediation plan
include: an inventory of all internal systems, vendor products and services and
data providers (substantially completed in 1997); an assessment of all systems
for date reliance and the impact of the century rollover on each (substantially
completed with respect to critical systems in early 1998); and the renovation
and testing of affected systems (targeted for completion with respect to
critical systems by the end of 1998). The manager will pay for the remediation
effort with revenues from its management fee, so that the funds will not
directly bear any of the cost.

In light of these remediation efforts, the funds do not anticipate a
material adverse impact on their business or operations. However, there can be
no assurance that the remediation plan will be sufficient and timely or that
interaction with other noncomplying computer systems will not have a material
adverse effect on the funds' business, operations or financial condition.

In addition, the issuers of the securities in which the funds invest may
have Year 2000 computer problems. Although the media and various regulatory
agencies have focused a great deal of attention on the need for issuers to
assess and remediate these problems, their failure to do so could hurt the
funds' performance.

DISTRIBUTION OF FUND SHARES

The funds' shares are distributed by FDI, a registered broker-dealer. FDI is
a wholly owned, indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109. The Investor Class of shares does not pay any commissions or sales loads
to the distributor or to any other broker-dealers or financial intermediaries in
connection with the distribution of fund shares.

Investors may open accounts with American Century only through the
distributor. All purchase transactions in the fund are processed by the transfer
agent, which is authorized to accept any instructions relating to fund accounts.
All purchase orders must be accepted by the distributor. All fees and expenses
of FDI in acting as distributor for the fund are paid by the manager.

28 ADDITIONAL INFORMATION YOU SHOULD KNOW AMERICAN CENTURY INVESTMENTS

FURTHER INFORMATION ABOUT AMERICAN CENTURY

American Century Premium Reserves, Inc., the issuer of the funds, was
organized as a Maryland corporation in January 1993. The corporation is a
diversified, open-end management investment company whose shares were first
offered for sale on April 1, 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 at 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
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 that 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 shares representing 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.

PROSPECTUS ADDITIONAL INFORMATION YOU SHOULD KNOW 29

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

WWW.AMERICANCENTURY.COM

[american century logo(reg.sm)]
American
Century(reg.tm)

9808 [recycled logo]
SH-BKT-12817 Recycled

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

[american century logo(reg.sm)]
American
Century(reg.tm)

AUGUST 1, 1998

BENHAM
GROUP(reg.tm)

Premium Government Reserve
Premium Capital Reserve
Premium Bond

STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1998

AMERICAN CENTURY PREMIUM RESERVES, INC.

This Statement is not a prospectus but should be read in conjunction with the
current Prospectus of American Century Premium Reserves, Inc. dated August 1,
1998. Please retain this document for future reference. To obtain the
Prospectus, call American Century toll free at 1-800-345-2021 (international
calls: 816-531-5575), or write to P.O. Box 419200, Kansas City, Missouri
64141-6200, or access our Web site (www.americancentury.com).

TABLE OF CONTENTS

Investment Objectives of the Funds ......................................... 2
Selection of Investments ................................................... 2
Additional Investment Restrictions ......................................... 3
An Explanation of Fixed Income Securities Ratings .......................... 4
Forward Currency Exchange Contracts ........................................ 5
Interest Rate Futures Contracts and Related Options ........................ 6
Portfolio Lending .......................................................... 10
Officers and Directors ..................................................... 10
Management ................................................................. 12
Custodians ................................................................. 12
Independent Auditors ....................................................... 13
Capital Stock .............................................................. 13
Brokerage .................................................................. 14
Performance Advertising .................................................... 14
Redemptions in Kind ........................................................ 15
Holidays ................................................................... 16
Financial Statements ....................................................... 16

STATEMENT OF ADDITIONAL INFORMATION 1

INVESTMENT OBJECTIVES OF THE FUNDS

The investment objective of each fund comprising American Century Premium
Reserves, Inc. is described on page 2 of the Prospectus. In seeking to achieve
its objective, each fund must conform to certain policies, some of which are
designated in the Prospectus or in this Statement of Additional Information as
"fundamental" and cannot be changed without shareholder approval.

SELECTION OF INVESTMENTS

PREMIUM GOVERNMENT RESERVE

The manager will invest the Premium Government Reserve portfolio in debt
securities payable in U.S. currency. Such securities must be obligations issued
or guaranteed by the U.S. government or its agencies and instrumentalities,
including repurchase agreements for such securities. The manager intends to
purchase securities that have quality and maturity characteristics that will
allow Premium Government Reserve to be designated as a money market fund and
enable it to maintain a stable offering price per share.

The manager will invest the Premium Government Reserve portfolio in direct
obligations of the United States, such as Treasury bills, Treasury notes and
U.S. government bonds, that are supported by the full faith and credit of the
United States. The manager also may invest in agencies and instrumentalities of
the U.S. government. The securities of some of such agencies and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others are supported by the right of the issuer to borrow from the
Treasury; still others are supported only by the credit of the agency or
instrumentality. Such agencies and instrumentalities 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. Purchase of such securities may be made outright
or on a when-issued basis and may be made subject to repurchase agreements.

PREMIUM CAPITAL RESERVE

The manager will invest the Premium Capital Reserve portfolio in debt
securities payable in U.S. currency. Such securities may be obligations issued
or guaranteed by the U.S. government or its agencies and instrumentalities of
the same types as described under the heading "Premium Government Reserve." In
addition, Premium Capital Reserve may invest in obligations issued by
corporations and others. It also may invest in repurchase agreements for all of
such securities. The manager intends to purchase securities with quality and
maturity characteristics that will allow Premium Capital Reserve to be
designated as a money market fund and enable it to maintain a stable offering
price per share.

PREMIUM BOND

The manager will invest the Premium Bond portfolio in high- to medium-grade
debt securities payable in both U.S. and foreign currencies. The fund may invest
in securities that, at the time of purchase, are rated by a nationally
recognized statistical rating organization as follows:

Examples of
Minimum
Ratings
------------------
Type of Security General Credit Limit Moody's S&P
- ---------------------------------------------------------------------
Short-term notes two highest MIG-2 SP-2
categories

Corporate, sovereign five highest Ba BB
and municipal bonds categories

U.S. government and NONE n/a n/a
government agency
securities

Other types two highest P-2 A-2
categories
- ---------------------------------------------------------------------

The fund also may invest in unrated securities if the manager determines
that they are of equivalent credit quality. See "An Explanation of Fixed Income
Securities Ratings," page 4.

Premium Bond also may purchase securities under repurchase agreements as
described in the Prospectus and purchase and sell interest rate futures
contracts and related options. See "Interest Rate Futures Contracts and Related
Options," page 6.

2 AMERICAN CENTURY INVESTMENTS

contracts for the purpose of hedging against (i) declines or possible declines
in the market value of debt securities or (ii) inability to participate in
advances in the market values of debt securities at times when the fund is not
fully invested in long-term debt securities; provided that it may not purchase
or sell futures contracts or related options if immediately thereafter the sum
of the amount of margin deposits on its existing futures positions and premiums
paid for related options would exceed 5% of the fund's assets.

INVESTMENT COMPANY ACT RULE 2A-7

Premium Government Reserve and Premium Capital Reserve each operates
pursuant to Invest-ment Company Act Rule 2a-7, which permits valuation of
portfolio securities on the basis of amortized cost. As required by the Rule,
the Board of Directors has adopted procedures designed to stabilize, to the
extent reasonably possible, each fund's price per share as computed for the
purpose of sales and redemptions at $1.00. While the day-to-day operation of
each fund has been delegated to the manager, the quality requirements
established by the procedures limit investments to certain U.S.
dollar-denominated instruments that the Board of Directors has determined
present minimal credit risks and that have been rated in one of the two highest
rating categories as determined by a nationally recognized statistical rating
organization or, in the case of an unrated security, of comparable quality. The
procedures require review of each fund's portfolio holdings at such intervals as
are reasonable in light of current market conditions to determine whether the
fund's net asset value calculated by using available market quotations deviates
from the per-share value based on amortized cost. The procedures also prescribe
the action to be taken if such deviation should occur.

ADDITIONAL INVESTMENT RESTRICTIONS

Additional fundamental policies that may be changed only with shareholder
approval provide as follows:

(1) The funds shall not issue senior securities, except as permitted under
the Investment Company Act of 1940.

(2) The funds shall not borrow money, except that a fund may borrow money
for temporary or emergency purposes (not for leveraging or investment)
in an amount not exceeding 331/3% of that fund's total assets
(including the amount borrowed) less liabilities (other than
borrowings).

(3) The funds shall not lend any security or make any other loan if, as a
result, more than 331/3% of the funds' total assets would be lent to
other parties, except (i) through the purchase of debt securities in
accordance with its investment objective, policies and limitations, or
(ii) by engaging in repurchase agreements with respect to portfolio
securities.

(4) The funds shall not concentrate their investments in securities of
issuers in a particular industry (other than securities issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities).

(5) The funds shall not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments. This policy
shall not prevent the funds from investment in securities or other
instruments backed by real estate or securities of companies that deal
in real estate or are engaged in the real estate business.

(6) The funds shall not act as underwriters of securities issued by others,
except to the extent that the funds may be considered underwriters
within the meaning of the Securities Act of 1933 in the disposition of
restricted securities.

(7) The funds shall not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instruments;
provided that this limitation shall not prohibit the funds from
purchasing or selling options and futures contracts or from investing
in securities or other instruments backed by physical commodities.

(8) The funds shall not invest for purposes of exercising control over
management.

In addition, the funds have adopted the following non-fundamental investment
restrictions:

(1) As an operating policy, a fund shall not purchase additional investment
securities at any time during which outstanding borrowings exceed 5% of
the total assets of the fund.

(2) As an operating policy, a fund may not purchase any security or enter
into a repurchase

STATEMENT OF ADDITIONAL INFORMATION 3

agreement if, as a result, more than 15% of its net assets (10% for
money market funds) would be invested in repurchase agreements not
entitling the holder to payment of principal and interest within seven
days, nor may it invest in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market.

(3) As an operating policy, a fund shall not sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that transaction in
futures contracts and options are not deemed to constitute selling
securities short.

(4) As an operating policy, a fund shall not purchase securities on margin,
except that the fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.

The Investment Company Act imposes certain additional restrictions upon
acquisition by the funds of securities issued by insurance companies, brokers,
dealers, underwriters or investment advisers, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the Securities and Exchange Commission
nor any other federal or state agency participates in or supervises the
management of the funds or their investment practices or policies.

AN EXPLANATION OF FIXED INCOME SECURITIES RATINGS

As described in the Prospectus, the funds invest in fixed income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus. The following is a description of the rating
categories referenced in the Prospectus disclosure.

The following summarizes the highest four ratings used by Standard & Poor's
Corporation for bonds:

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only to a small
degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.

To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.

The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.

The following summarizes the highest four ratings used by Moody's Investors
Service, Inc. for bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective

4 AMERICAN CENTURY INVESTMENTS

elements may be of greater amplitude, or there may be other elements present
that make the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment sometime in the
future.

Baa - Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.

Moody's applies numerical modifiers 1, 2 and 3 with respect to bonds rated
Aa, A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of that generic
rating category.

The rating Prime-1 or P-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 or P-2 (or related supporting institutions)
are considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

The following summarizes the highest rating used by Moody's for short-term
notes and variable-rate demand obligations:

MIG-1; VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.

FORWARD CURRENCY EXCHANGE CONTRACTS

Premium Bond conducts its foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into forward currency exchange contracts to
purchase or sell foreign currencies.

The fund expects to use forward contracts under two circumstances:

(1) When the manager wishes to "lock in" the U.S. dollar price of a
security when the fund is purchasing or selling a security denominated
in a foreign currency, the fund would be able to enter into a forward
contract to do so; or

(2) When the manager believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, a
fund would be able to enter into a forward contract to sell foreign
currency for a fixed U.S. dollar amount approximating the value of some
or all of its portfolio securities either denominated in, or whose
value is tied to, such foreign currency.

As to the first circumstance, when the fund enters into a trade for the
purchase or sale of a security denominated in a foreign currency, it may be
desirable to establish (lock in) the U.S. dollar cost or proceeds. By entering
into forward contracts in U.S. dollars for the purchase or sale of a foreign
currency involved in an underlying security transaction, the fund will be able
to protect itself against a possible loss between trade and settlement dates
resulting from the adverse change in the relationship between the U.S. dollar
and the subject foreign currency.

Under the second circumstance, when the manager believes that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a forward contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will place cash or high-grade liquid securities
in a separate account with its custodian in an amount equal to the value of the
forward contracts entered into under the second circumstance. If the value of
the securities placed in the separate account declines,

STATEMENT OF ADDITIONAL INFORMATION 5

additional cash or securities will be placed in the account on a daily basis so
that the value of the account equals the amount of the fund's commitments with
respect to such contracts.

The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible since the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of short-term hedging strategy
is highly uncertain. The manager does not intend to enter into such contracts on
a regular basis. Normally, consideration of the prospect for currency parities
will be incorporated into the long-term investment decisions made with respect
to overall diversification strategies. However, the manager believes that it is
important to have flexibility to enter into such forward contracts when it
determines that the fund's best interests may be served.

Generally, the fund will not enter into a forward contract with a term of
greater than one year. At the maturity of the forward contract, the fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate the obligation to deliver the foreign
currency by purchasing an "offsetting" forward contract with the same currency
trader obligating the fund to purchase, on the same maturity date, the same
amount of the foreign currency.

It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for the fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency the fund is obligated to deliver.

INTEREST RATE FUTURES CONTRACTS AND

RELATED OPTIONS

The fund will not purchase or sell futures contracts and options thereon for
speculative purposes but rather 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 the manager may wish to include in the portfolio of the fund.
The fund may sell a future, write a call or purchase a put on a future if the
manager anticipates that a general market or market sector decline may adversely
affect the market value of any or all of the fund's holdings. The fund may buy a
future, purchase a call or sell a put on a future if the manager anticipates a
significant market advance in the type of securities it intends to purchase for
the fund's portfolio at a time when the fund is not invested in debt securities
to the extent permitted by its investment policies. The fund may purchase a
future or a call option thereon as a temporary substitute for the purchase of
individual securities that may then be purchased in an orderly fashion. As
securities are purchased, corresponding futures positions would be terminated by
offsetting sales.

The "sale" of a debt future means the acquisition by the fund of an
obligation to deliver the related debt securities (i.e., those called for by the
contract) at a specified price on a specified date. The "purchase" of a debt
future means the acquisition by the fund of an obligation to acquire the related
debt securities at a specified time on a specified date. The "sale" of a bond
index future means the acquisition by the fund of an obligation to deliver an
amount of cash equal to a specified dollar amount times the difference between
the index value at the close of the last trading day of the future and the price
at which the future is originally struck. No physical delivery of the bonds
making up the index is expected to be made. The "purchase" of a bond index
future means the acquisition by the fund of an obligation to take delivery of
such an amount of cash.

Unlike when the fund purchases or sells a bond, no price is paid or received
by the fund upon the purchase or sale of a futures contract. Initially, the fund
will be required to deposit an amount of cash or

6 AMERICAN CENTURY INVESTMENTS

securities equal to a varying specified percentage of the contract amount. This
amount is known as initial margin. Cash held in the margin account is not income
producing. Subsequent payments, called variation margin, to and from the broker,
will be made on a daily basis as the price of the underlying debt securities or
index fluctuates, making the futures contract more or less valuable, a process
known as marking to the market. Changes in variation margin are recorded by the
fund as unrealized net gains or losses. At any time prior to expiration of the
future, the fund may elect to close the position by taking an opposite position
that will operate to terminate its position in the future. A final determination
of variation margin is then made; additional cash is required to be paid by or
released to the fund and the fund realizes a loss or a gain.

When the fund writes an option on a futures contract it becomes obligated,
in return for the premium received, to assume a position in a specified futures
contract at a specified exercise price at any time during the term of the
option. If the fund has written a call, it becomes obligated to assume a "long"
position in a futures contract, which means that it is required to take delivery
of the underlying securities. If it has written a put, it is obligated to assume
a "short" position in a futures contract, which means that it is required to
deliver the underlying securities.

If the fund writes an option on a futures contract, it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an option
on a future are included in the initial margin deposit.

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 maturing in one year or less, 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.

Changes in variation margin are recorded by the fund as unrealized gains or
losses. Initial margin payments will be deposited in the fund's custodian bank
in an account registered in the broker's name; access to the assets in that
account may be made by the broker only under specified conditions. At any time
prior to expiration of a futures contract or an option thereon, the fund may
elect to close the position by taking an opposite position that will operate to
terminate its position in the futures contract or option. A final determination
of variation margin is made at that time; additional cash is required to be paid
by or released to it and it realizes a loss or gain.

Although futures contracts by their terms call for the actual delivery or
acquisition of the underlying securities or cash, in most cases the contractual
obligation is fulfilled without having to make or take delivery. The fund does
not intend to make or take delivery of the underlying obligation. All
transactions in futures contracts and options thereon are made, offset or
fulfilled through a clearinghouse associated with the exchange on which the
instruments are traded. Although the fund intends to buy and sell futures
contracts only on exchanges where there appears to be an active secondary
market, there is no assurance that a liquid secondary market will exist for any
particular futures contract at any particular time. In such event, it may not be
possible to close a futures contract position. Similar market liquidity risks
occur with respect to options.

The use of futures contracts and options thereon to attempt to protect
against the market risk of a decline in the value of portfolio securities is
referred to as having a "short futures position." The use of futures contracts
and options thereon to attempt to protect against the market risk that a fund
might not be fully invested at a time when the value of the securities in which
it invests is increasing is referred to as having a "long futures position." The
fund must operate within certain restrictions as to long and short positions in
futures contracts and options thereon under a rule adopted by the Commodity
Futures Trading Commission (CFTC) under the Commodity Exchange Act to be
eligible for the exclusion provided by the rule from registration by the fund
with the CFTC as a "commodity pool operator" (as defined under the Commodity
Exchange Act), and must represent to the CFTC that it will operate within such
restrictions. Under these restrictions, the fund will not, as to any positions,
whether long, short or a combination

STATEMENT OF ADDITIONAL INFORMATION 7

thereof, enter into futures contracts and options thereon for which the
aggregate initial margins and premiums exceed 5% of the fair market value of the
fund's assets after taking into account unrealized profits and losses on options
the fund has entered into; in the case of an option that is "in-the-money" (as
defined under the Commodity Exchange Act), the in-the-money amount may be
excluded in computing such 5%. (In general, a call option on a futures contract
is in-the-money if the value of the futures contract that is the subject of the
put is exceeded by the strike price of the put.) Under the restrictions, the
fund also must, as to short positions, use futures contracts and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions under the Commodity Exchange Act. As to its long positions
that are used as part of the fund's portfolio strategy and are incidental to the
fund's activities in the underlying cash market, the "underlying commodity
value" (see next page) of the fund's futures contracts and options thereon must
not exceed the sum of (i) cash set aside in an identifiable manner, or
short-term U.S. debt obligations or other U.S. dollar-denominated, high-quality,
short-term money market instruments so set aside, plus any funds deposited as
margin; (ii) cash proceeds from existing investments due in 30 days; and (iii)
accrued profits held at the futures commission merchant. (These are described
above the segregated accounts that a fund must maintain with its custodian bank
as to its options and futures contracts activities due to Securities and
Exchange Commission (SEC) requirements. The fund will, as to its long positions,
be required to abide by the more restrictive of these SEC and CFTC
requirements.) The underlying commodity value of a futures contract is computed
by multiplying the size (dollar amount) of the futures contract by the daily
settlement price of the futures contract. For an option on a futures contract,
that value is the underlying commodity value of the futures contract underlying
the option.

Because futures contracts and options thereon can replicate movements in the
cash markets for the securities in which the fund invests without the large cash
investments required for dealing in such markets, they may subject the fund to
greater and more volatile risks than might otherwise be the case. The principal
risks related to the use of such instruments are (i) the correlation between
movements in the market price of the portfolio investment (held or intended)
being hedged and in the price of the offsetting futures contract or option may
be imperfect; (ii) possible lack of a liquid secondary market for closing out
futures or options positions; (iii) the need for additional portfolio management
skills and techniques; (iv) losses due to unanticipated market price movements;
and (v) the bankruptcy or failure of a futures commission merchant holding
margin deposits made by the fund and the fund's inability to obtain repayment of
all or part of such deposits. For a hedge to be completely effective, the price
change of the hedging instrument should equal the price change of the security
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
the following factors, which may create distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meet additional margin deposit requirements, investors may close
futures contracts through offsetting transactions that could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures market depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct forecast of general interest trends by fund management
still may not result in a successful transaction. The manager may be incorrect
in its expectations as to the extent of various interest rate movements or the
time span within which the movements take place.

The risk of imperfect correlation between

8 AMERICAN CENTURY INVESTMENTS

movements in the price of a bond index future and movements in the price of the
securities that are the subject of the hedge increases as the composition of the
fund's portfolio diverges from the securities included in the applicable index.
The price of the bond index future may move more than or less than the price of
the securities being hedged. If the price of the bond index future moves less
than the price of the securities that are the subject of the hedge, the hedge
will not be fully effective, but if the price of the securities being hedged has
moved in an unfavorable direction, the fund would be in a better position than
if it had not hedged at all. If the price of the securities being hedged has
moved in a favorable direction, this advantage will be partially offset by the
futures contract. If the price of the futures contract moves more than the price
of the security, the fund will experience either a loss or a gain on the futures
contract that will not be completely offset by movements in the price of the
securities that are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of the bond index futures, the fund may buy or sell bond
index futures in a greater dollar amount than the dollar amount of securities
being hedged if the historical volatility of the prices of such securities being
hedged is less than the historical volatility of the bond index. It is also
possible that, where the fund has sold futures contracts to hedge its securities
against a decline in the market, the market may advance and the value of
securities held in the portfolio may decline. If this occurred, the fund would
lose money on the futures contract and also experience a decline in value in its
portfolio securities. However, while this could occur for a brief period or to a
very small degree, over time the value of a portfolio of debt securities will
tend to move in the same direction as the market indices upon which the futures
contracts are based.

Where bond index futures are purchased to hedge against a possible increase
in the price of bonds before the fund is able to invest in securities in an
orderly fashion, it is possible that the market may decline instead; if the fund
then concludes not to invest in securities at that time because of concern as to
possible further market decline or for other reasons, it will realize a loss on
the futures contract that is not offset by a reduction in the price of the
securities it had anticipated purchasing.

The risks of investment in options on bond indices may be greater than
options on securities. Because exercises of bond index options are settled in
cash, when the fund writes a call on a bond index it cannot provide in advance
for its potential settlement obligations by acquiring and holding the underlying
securities. The fund can offset some of the risk of its writing position by
holding a portfolio of bonds similar to those on which the underlying index is
based. However, the fund cannot, as a practical matter, acquire and hold a
portfolio containing exactly the same securities as the underlying index and, as
a result, bears a risk that the value of the securities held will vary from the
value of the index. Even if the fund could assemble a portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the fund, as the call writer, will
not learn that it has been assigned an option until the next business day at the
earliest. The time lag between exercise and notice of assignment poses no risk
for the writer of a covered call on a specific underlying security because
there, the writer's obligation is to deliver the underlying security, not to pay
its value as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligation by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising option holder. In contrast, even if the writer
of an index call holds securities that exactly match the composition of the
underlying index, it will not be able to satisfy its assignment obligation by
delivering those securities. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; by the time it
learns that it has been assigned, the index may have declined with a
corresponding decline in the value of its portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding securities positions.

If the fund has purchased an index option and

STATEMENT OF ADDITIONAL INFORMATION 9

exercises it before the closing index value for that day is available, it runs
the risk that the level of the underlying index may subsequently change. If such
a change causes the exercised option to fall out-of-the-money, the fund will be
required to pay the difference between the closing index value and the exercise
price of the option (times the applicable multiplier) to the assigned writer.

PORTFOLIO LENDING

In order to realize additional income, a fund may lend its portfolio
securities. Such loans may not exceed one-third of the fund's net assets valued
at market except (i) through the purchase of debt securities in accordance with
its investment objective, policies and limitations, or (ii) by engaging in
repurchase agreements with respect to portfolio securities.

OFFICERS AND DIRECTORS

The principal officers and directors of the corporation, their ages (listed
in parentheses), principal business experience during the past five years, and
their affiliations with the funds' investment manager, American Century
Investment Management, Inc., and its transfer agent, American Century Services
Corporation, are listed below. The address at which each director and officer
listed below may be contacted is American Century Tower, 4500 Main Street,
Kansas City, Missouri 64111. All persons named as officers of the Corporation
serve in similar capacities for other funds advised by the manager. Those
directors who are "interested persons" as defined in the Investment Company Act
of 1940 are indicated by an asterisk (*).

JAMES E. STOWERS JR. (74),* Chairman of the Board and Director; Chairman of
the Board, Director and controlling shareholder of American Century Companies,
Inc., parent corporation of American Century Investment Management, Inc. and
American Century Services Corporation; Chairman of the Board and Director of
American Century Investment Management, Inc. and American Century Services
Corporation; father of James E. Stowers III.

JAMES E. STOWERS III (39),* Director; Chief Executive Officer and Director,
American Century Companies, Inc., American Century Investment Management, Inc.
and American Century Services Corporation.

THOMAS A. BROWN (58), Director; Director of Plains States Development,
Applied Industrial Technologies, Inc., a corporation engaged in the sale of
bearings and power transmission products.

ROBERT W. DOERING, M.D. (66), Director; retired, formerly general surgeon.

ANDREA C. HALL, PH.D. (53), Director; Senior Vice President and Associate
Director, Midwest Research Institute.

D.D. (DEL) HOCK (63), Director; retired, formerly Chairman, Public Service
Company of Colorado; Director, Service Tech, Inc., Hathaway Corporation, and J.
D. Edwards & Company.

DONALD H. PRATT (60), Vice Chairman of the Board and Director; President and
Director, Butler Manufacturing Company.

LLOYD T. SILVER JR. (70), Director; Consultant; retired, formerly Chairman
of LSC, Inc., a manufacturer's representative.

M. JEANNINE STRANDJORD (52), Director; Senior Vice President and Treasurer,
Sprint Corporation; Director, DST Systems, Inc.

GEORGE A. RIO (43), President; Executive Vice President and Client Service
Director of Funds Distributor, Inc. (FDI). Prior to joining FDI, Mr. Rio served
as Senior Vice President and Senior Key Account Manager for Putnam Mutual Funds
(June 1995 to March 1998). Before that he served as Director of Business
Development for First Data Corporation (May 1994 to June 1995) and Senior Vice
President and Manager of Client Services and Director of Internal Audit at The
Boston Company Inc. (September 1983 to May 1994).

MARYANNE ROEPKE, CPA (42), Vice President, Treasurer, and Principal
Accounting Officer; Vice President, American Century Services Corporation.

PATRICK A. LOOBY (39), Vice President; Vice President, American Century
Services Corporation.

CHRISTOPHER J. KELLEY (33), Vice President; Vice President and Associate
General Counsel of FDI. Prior to joining FDI, Mr. Kelly served as Assistant
Counsel at Forum Financial Group (from April 1994 to July 1996) and before that
as a compliance officer for Putnam Investments (from 1992 to 1994).

MARY A. NELSON (34), Vice President; Vice President and Manager of Treasury
Services and Administration of FDI. Prior to joining FDI, Ms. Nelson was

10 AMERICAN CENTURY INVESTMENTS

Assistant Vice President and Client Manager for The Boston Company, Inc. (from
1989 to 1994).

C. JEAN WADE (34), CPA, Controller.

The Board of Directors has established four standing committees: the
Executive Committee, the Audit Committee, the Compliance Committee and the
Nominating Committee.

Messrs. Stowers Jr. (chairman), Stowers III, and Pratt constitute the
Executive Committee of the Board of Directors. The committee performs the
functions of the Board of Directors between meetings of the Board, subject to
the limitations on its power set out in the Maryland General Corporation Law,
and except for matters required by the Investment Company Act to be acted upon
by the full Board.

Ms. Strandjord (chairman), Dr. Doering and Mr. Hock constitute the Audit
Committee. The functions of the Audit Committee include recommending the
engagement of the funds' independent auditors, reviewing the arrangements for
and scope of the annual audit, reviewing comments made by the independent
auditors with respect to the internal controls and the considerations given or
the connective action taken by management, and reviewing nonaudit services
provided by the independent auditors.

Messrs. Brown (chairman), Pratt, Silver and Dr. Hall constitute the
Compliance Committee. The functions of the Compliance Committee include
reviewing the results of the funds' compliance testing program, reviewing
quarterly reports from the manager to the Board regarding various compliance
matters and monitoring the implementation of the funds' Code of Ethics,
including violations thereof.

The Nominating Committee has as its principal role consideration and
recommendation of individuals for nomination as directors. The names of
potential director candidates are drawn from a number of sources, including
recommendations from members of the Board, management and shareholders. This
committee also reviews and makes recommendations to the Board with respect to
the composition of Board committees and other Board-related matters, including
its organization, size, composition, responsibilities, functions and
compensation. The members of the nominating committee are Messrs. Pratt
(chairman), Hock and Stowers III.

The directors of the corporation also serve as directors for other funds
advised by the manager. Each director who is not an "interested person," as
defined in the Investment Company Act, receives for service as a member of the
Board of all six of such investment companies an annual director's fee of
$44,000, and an additional fee of $1,000 per regular Board meeting attended and
$500 per special Board and committee meeting attended. In addition, those
directors who are not "interested persons" who serve as chairman of a committee
of the Board of Directors receive an additional $2,000 for such services. These
fees and expenses are divided among the six investment companies based upon
their relative net assets. Under the terms of the management agreement with the
manager, the funds are responsible for paying such fees and expenses.

Set forth below is the aggregate compensation paid for the periods indicated
by the corporation and by the American Century family of funds as a whole to
each director who is not an "interested person" as defined in the Investment
Company Act.

Aggregate Total compensation from
compensation the American Century
Director from the corporation(1) family of funds(2)
- ---------------------------------------------------------------------------
Thomas A. Brown $322 $60,000
Robert W. Doering, M.D. 310 49,500
Andrea C. Hall(3) 133 8,833
D.D. (Del) Hock 310 49,500
Linsley L. Lundgaard(3) 184 42,333
Donald H. Pratt 322 60,000
Lloyd T. Silver Jr. 310 49,000
M. Jeannine Strandjord 315 48,833
- ---------------------------------------------------------------------------

(1)Includes compensation paid by the corporation for the fiscal year ended March
31, 1997.

(2)Includes compensation paid by the 13 investment company members of the
American Century family of funds for the calendar year ended December 31, 1997.

(3)Andrea C. Hall replaced Linsley L. Lundgaard as an independent director
effective November 1, 1997.

Those directors who are "interested persons," as defined in the Investment
Company Act, receive no fee as such for serving as a director. The salaries of
such individuals, who are also officers of the funds, are paid by the manager.

STATEMENT OF ADDITIONAL INFORMATION 11

MANAGEMENT

A description of the responsibilities and method of compensation of the
funds' manager, American Century Investment Management, Inc., appears in the
Prospectus under the heading "Management."

During the three most recent fiscal years, the total management fees earned
by the manager were as follows:

Year Ended Year Ended Year Ended
Fund March 31, 1998 March 31, 1997 March 31, 1996
- ----------------------------------------------------------------------------
PREMIUM GOVERNMENT RESERVE
Management Fees $763,533 $138,640 $93,671
Average Net Assets 45,220,737 30,981,550 21,173,072

PREMIUM CAPITAL RESERVE
Management Fees $203,339 $640,040 $626,948
Average Net Assets 169,548,194 142,439,917 140,458,302

PREMIUM BOND
Management Fees $258,139 $91,566 $68,907
Average Net Assets 57,316,369 20,468,595 15,955,006
- ----------------------------------------------------------------------------

The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (i) the funds'
Board of Directors or by the vote of a majority of outstanding votes (as defined
in the Investment Company Act) and (ii) by the vote of a majority of the
directors of the funds who are not parties to the agreement or interested
persons of the manager, cast in person at a meeting called for the purpose of
voting on such approval.

The management agreement provides that it may be terminated at any time
without payment of any penalty by the funds' Board of Directors, or by a vote of
a majority of the funds' shareholders, on 60 days' written notice to the manager
and that it shall be automatically terminated if it is assigned.

The management agreement provides that the manager shall not be liable to
the funds or its shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.

The management agreement also provides that the manager and its officers,
directors and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.

Certain investments may be appropriate for the funds and also for other
clients advised by the manager. Investment decisions for the funds and other
clients are made with a view to achieving their respective investment objectives
after consideration of such factors as their current holdings, availability of
cash for investment and the size of their investment generally. A particular
security may be bought or sold for only one client, or in different amounts and
at different times for more than one but less than all clients. In addition,
purchases or sales of the same security may be made for two or more clients on
the same date. Such transactions will be allocated among clients in a manner
believed by the manager to be equitable to each. In some cases this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a fund.

In addition to managing the funds, on May 29, 1998, the manager also was
acting as an investment advisor to 11 institutional accounts with an aggregate
value of $432,786,097. While each of these clients has unique investment
restrictions and guidelines, some have elected to have their portfolios managed
in a manner similar to the portfolio of an existing fund. Accordingly, any time
a security is being bought or sold for the fund, it also may be bought or sold
for any institutional accounts being managed in a similar manner with a similar
investment objective. The manager anticipates acquiring additional such accounts
in the future.

American Century Services Corporation provides physical facilities,
including computer hardware and software and personnel, for the day-to-day
administration of the funds and of the manager. The manager pays American
Century Services Corporation for such services.

As stated in the Prospectus, all of the stock of American Century Services
Corporation and American Century Investment Management, Inc. is owned by
American Century Companies, Inc.

CUSTODIANS

Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York
10003-9598 and Commerce

12 AMERICAN CENTURY INVESTMENTS

Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves as custodian
of the assets of the funds. The custodians take no part in determining the
investment policies of the funds or in deciding which securities are purchased
or sold by the funds. The funds, however, may invest in certain obligations of
the custodians and may purchase or sell certain securities from or to the
custodians.

INDEPENDENT AUDITORS

Deloitte & Touche LLP, 1010 Grand Avenue, Kansas City, Missouri 64106, was
appointed to serve as the independent auditors to examine the financial
statements of the funds commencing with the fiscal year ended March 31, 1998. As
the independent auditors of the funds, Deloitte & Touche will provide services
including (1) audit of the annual financial statements, (2) assistance and
consultation in connection with SEC filings, and (3) review of the annual
federal income tax return filed for each fund.

CAPITAL STOCK

The funds' capital stock is described in the Prospectus under the heading
"Further Information About American Century."

The corporation currently has three series of shares outstanding. The
corporation may in the future issue one or more additional series of shares
without a vote of the shareholders. The assets belonging to each series of
shares are held separately by the custodian and the shares of each series
represent a beneficial interest in the principal, earnings and profits (or
losses) of investments and other assets held for that series. Your rights as a
shareholder are the same for all series of securities unless otherwise stated.
Within their respective series, all shares have equal redemption rights. Each
share, when issued, is fully paid and non-assessable. Each share, irrespective
of series, is entitled to one vote for each dollar of net asset value
represented by such share on all questions.

In the event of complete liquidation or dissolution of the funds,
shareholders of each series of shares shall be entitled to receive, pro rata,
all of the assets less the liabilities of that series.

As of May 29, 1998, excess of 5% of the outstanding shares of the following
funds were owned of record by:

Name of Fund Shareholder and Percentage
- ---------------------------------------------------------------------------
Premium Capital Sally A. Von Waaden and
Reserve Dennis C. Von Waaden Trust
Austin, Texas - 8.5%

Premium Chase Manhattan Bank
Government Reserve as Trustee for Lorillard Inc.
Hourly Paid Employees
Profit Sharing Plan
New York, New York - 21.1%

Cornelia Small
New York, New York - 13.1%

Rancho San Antonio Retirement
Services Inc.
Cupertino, California - 8.5%

United Missouri Bank
as Trustee for The Insilco Corporation
Employee Thrift Plan Trust
Kansas City, Missouri - 7.2%

United Missouri Bank
as Trustee for Fish & Richardson PC
Profit Sharing Plan
Kansas City, Missouri - 5.9%

Chase Manhattan Bank
as Trustee for
Newport Service Corporation
Money Purchase
Pension Trust
New York, New York - 5.8%

Premium Bond Trustees of
Presbyterian Healthcare System
Retirement Plan and Trust
Kansas City, Missouri - 16.5%

United Missouri Bank as Trustee for
Harris Methodist Health System 403(b) Plan
Kansas City, Missouri - 12.1%

North Carolina Engineering Foundation Inc.
Kansas City, Missouri - 8.6%

Trustees of Harris Methodist Health
System Productivity Plan and Trust
Fort Worth, Texas - 8.1%

United Missouri Bank
as Custodian for Presbyterian
Healthcare System 403(b) Plan
Kansas City, Missouri - 7.5%
- ---------------------------------------------------------------------------

As of May 29, 1998, the shares of the corporation owned beneficially and of
record by the officers and

STATEMENT OF ADDITIONAL INFORMATION 13

directors of the corporation in the aggregate were less than 1% of the shares
offered by any fund.

BROKERAGE

Under the management agreement between the funds and the manager, the
manager has the responsibility of selecting brokers to execute portfolio
transactions. The funds' policy is to secure the most favorable prices and
execution of orders on its portfolio transactions. So long as that policy is
met, the manager may take into consideration the factors discussed under this
heading when selecting brokers.

The manager receives statistical and other information and services without
cost from brokers and dealers. The manager evaluates such information and
services, together with all other information that it may have, in supervising
and managing the investments of the funds. Because such information and services
may vary in amount, quality and reliability, their influence in selecting
brokers varies from none to very substantial. The manager proposes to continue
to place some of the funds' brokerage business with one or more brokers who
provide information and services. Such information and services provided to the
manager will be in addition to and not in lieu of services required to be
performed for the funds by the manager. The manager does not utilize brokers
that provide such information and services for the purpose of reducing the
expense of providing required services to the funds.

The brokerage commissions paid by the funds may exceed those that another
broker might have charged for effecting the same transactions, because of the
value of the brokerage and research services provided by the broker. Research
services furnished by brokers through whom the funds effect securities
transactions may be used by the manager in servicing all of its accounts, and
not all such services may be used by the manager in managing the portfolios of
the funds.

The staff of the SEC has expressed the view that the best price and
execution of over-the-counter transactions in portfolio securities may be
secured by dealing directly with principal market makers, thereby avoiding the
payment of compensation to another broker. In certain situations, the officers
of the funds and the manager believe that the facilities, expert personnel and
technological systems of a broker enable the funds to secure as good a net price
by dealing with a broker instead of a principal market maker, even after payment
of the compensation to the broker. The funds normally place their
over-the-counter transactions with principal market makers, but also may deal on
a brokerage basis when utilizing electronic trading networks or as circumstances
warrant.

PERFORMANCE ADVERTISING

FUND PERFORMANCE

Individual fund performance may be compared to various indices including the
Lehman Brothers Government Corporate Index, the Salomon Bond Index, Donoghue's
Money Fund Average and Bank Rate Monitor National Index of 2 1/2-year CD rates.

Average annual total return is calculated by determining each fund's
cumulative total return for the stated period and then computing the annual
compound return that would produce the cumulative total return if the fund's
performance had been constant over that period. Cumulative total return includes
all elements of return, including reinvestment of dividends and capital gains
distributions.

The funds also may advertise average annual total return over periods of
time other than one, five and 10 years and cumulative total return over various
time periods.

The yields of Premium Government Reserve and Premium Capital Reserve are
calculated by measuring the income generated by an investment in a 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 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.

Based upon these methods of calculation, the yield and effective yield for
Premium Government Reserve and Premium Capital Reserve for the seven days

14 AMERICAN CENTURY INVESTMENTS

ended March 31, 1998, the last seven days of the fiscal year, were as follows:

- ------------------------------------------------------
Effective
Fund Yield Yield
- ------------------------------------------------------
Premium Government Reserve 5.10% 5.23%
Premium Capital Reserve 5.22% 5.35%
- ------------------------------------------------------

The yield of Premium Bond 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. The yield of Premium Bond for the 30-day
period ended March 31, 1998, was 5.87%.

Premium Bond also may elect to advertise cumulative total return and average
annual total return, computed as described above. The cumulative total return
since inception is 36.65% and average annual total return of Premium Bond for
the year ended March 31, 1998, was 11.14%.

ADDITIONAL PERFORMANCE COMPARISONS

Investors may judge the performance of the funds by comparing their
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as the EAFE(reg.tm) Index and those prepared by Dow Jones
& Co., Inc., Standard & Poor's Corporation, Shearson Lehman Brothers, Inc. and
The Russell 2000 Index, and to data prepared by Lipper Analytical Services,
Inc., Morningstar, Inc. and the Consumer Price Index. Comparisons may also be
made to indices or data published in Money, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, Pensions and Investments, USA Today
and other similar publications or services. In addition to performance
information, general information about the funds that appears in a publication
such as those mentioned above or in the Prospectus under the heading
"Performance Advertising" may be included in advertisements and in reports to
shareholders.

PERMISSIBLE ADVERTISING INFORMATION

From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including, but not limited to, qualified retirement plans and
individual stocks and bonds), which may or may not include the funds; (7)
comparisons of investment products (including the funds) with relevant market or
industry indices or other appropriate benchmarks; (8) discussions of fund
rankings or ratings by recognized rating organizations; and (9) testimonials
describing the experience of persons who have invested in one or more of the
funds. The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results in such communications.
Such performance examples will be based on an express set of assumptions and are
not indicative of the performance of any of the funds.

REDEMPTIONS IN KIND

While the funds expect that, under normal conditions, all redemptions will
be paid in cash, if the manager determines that it would be detrimental to the
best interests of a fund's remaining shareholders to make payment in cash, that
fund may pay redemption proceeds in amounts in excess of $250,000 in whole or in
part by a distribution in kind of readily marketable securities.

In addition to the policy just mentioned, the funds have elected to be
governed by Rule 18f-1 under the Investment Company Act, pursuant to which the
funds are obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of a fund during any 90-day period for any one
shareholder. Should redemptions by any shareholder

STATEMENT OF ADDITIONAL INFORMATION 15

exceed such limitation, the fund will have the option, subject to the necessary
finding by the manager stated previously, of redeeming the excess in cash or in
kind. If shares are redeemed in kind, the redeeming shareholder might incur
brokerage costs in converting the assets to cash. The securities delivered will
be selected at the sole discretion of the manager. Such securities will not
necessarily be representative of the entire portfolio and may be securities that
the manager regards as least desirable. The method of valuing securities used to
make redemptions in kind will be the same as the method of valuing portfolio
securities described in the Prospectus under the heading "How Share Price Is
Determined," and such valuation will be made as of the same time the redemption
price is determined.

HOLIDAYS

The funds do not determine the net asset value of their shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays and on holidays, namely New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.

FINANCIAL STATEMENTS

The financial statements of the funds, including the Statements of Assets
and Liabilities and the Statements of Operations for the fiscal year ended March
31, 1998, and the Statements of Changes in Net Assets for the fiscal years ended
March 31, 1997, and 1998, are included in the Annual Reports to shareholders,
for the fiscal year ended March 31, 1998. The reports on the financial
highlights for the fiscal years 1994, 1995, 1996 and 1997 are included in the
Annual Reports to Shareholders for the fiscal year ended March 31, 1997. Each
such Annual Report is incorporated herein by reference. You may receive copies
of the reports without charge upon request to American Century at the address
and phone number shown on the first page of this Statement of Additional
Information

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

WWW.AMERICANCENTURY.COM

[american century logo(reg.sm)]
American
Century(reg.tm)

9808 [recycled logo]
SH-BKT-12818 Recycled
<PAGE>

PART C. OTHER INFORMATION.

ITEM 24. Financial Statements and Exhibits.

(a) Financial Statements

(i) Financial Statements filed in Part A of the Registration
Statement:

1. Financial Highlights.

(ii) Financial Statements filed in Part B of the Registration
Statement (each of the following financial statements is
contained in the Registrant's Annual Reports dated March 31,
1998, and which are incorporated by reference in Part B of this
Registration Statement):

1. Statements of Assets and Liabilities at March 31, 1998.

2. Statements of Operations for the year ended March 31, 1998.

3. Statements of Changes in Net Assets for the year ended March
31, 1998.

4. Notes to Financial Statements as of March 31, 1998.

5. Schedule of Investments at March 31, 1998.

6. Report of Independent Auditors dated April 30, 1998.

b) Exhibits (all exhibits not filed herein are being incorporated herein
by reference).

1. (a) Articles of Incorporation of Twentieth Century Premium
Reserves, Inc., dated January 7, 1993 (filed electronically
as an exhibit to Post-Effective Amendment No. 4 on Form N-1A
on July 31, 1996, File No. 33-57430).

(b) Articles Supplementary of Twentieth Century Premium
Reserves, Inc., dated April 24, 1995 (filed electronically
as an exhibit to Post-Effective Amendment No. 4 on Form N-1A
on July 31, 1996, File No. 33-57430).

(c) Articles of Amendment of Twentieth Century Premium
Reserves, Inc., dated December 2, 1996 (filed electronically
as an exhibit to Post-Effective Amendment No. 6 on Form N-1A
on July 30, 1997).

(d) Articles Supplementary of American Century Premium
Reserves, Inc., dated December 2, 1996 (filed electronically
as an exhibit to Post-Effective Amendment No. 6 on Form N-1A
on July 30, 1997).

2. (a) By-Laws of Twentieth Century Premium Reserves, Inc.
(filed electronically as an exhibit to Post-Effective
Amendment No. 4 on Form N-1A on July 31, 1996, File No.
33-57430).

(b) Amendment to By-Laws of American Century Premium
Reserves, Inc. (filed electronically as an exhibit to
Post-Effective Amendment No. 9 on Form N-1A of American
Century Capital Portfolios, Inc., File No. 33-64872).

3. Voting Trust Agreements - None.

4. Specimen copy of stock certificate-all series (filed
electronically as an exhibit to Post-Effective Amendment No.
6 on Form N-1A on July 30, 1997).

5. Management Agreement dated as of August 1, 1997, between
American Century Premium Reserves, Inc. and American Century
Investment Management, Inc. (filed electronically as an
exhibit to Post-Effective Amendment No. 6 on Form N-1A on
July 30, 1997).

6. (a) Distribution Agreement between American Century Premium
Reserves, Inc. and Funds Distributor, Inc. dated January 15,
1998 (filed eletronically as an exhibit to Post-Effective
Amendment No. 28 on Form N-1A of American Century Target
Maturities Trust, File No. 2-94608).

(b) Amendment No. 1 to Distribution Agreement between
American Century Premium Reserves, Inc. and Funds
Distributor, Inc. dated June 1, 1998 (filed electronically
as an exhibit to Post-Effective Amendment No. 11 on Form
N-1A of American Century Capital Portfolios, Inc., File No.
33-64872).

7. Bonus and Profit Sharing Plan, Etc. - None.

8. (a) Global Custody Agreement between The Chase Manhattan
Bank and the Twentieth Century and Benham funds, dated
August 9, 1996. (filed electronically as an exhibit to
Post-Effective Amendment No. 31 on Form N-1A of American
Century Government Income Trust, File No. 2-99222).

(b) Master Agreement between Commerce Bank, N.A. and
Twentieth Century Services, Inc. dated January 22, 1997
(filed electronically as an exhibit to Post-Effective
Amendment No. 76 on Form N-1A of American Century Mutual
Funds, Inc., File No. 2-14213).

9. Transfer Agency Agreement, dated as of March 16, 1993, by
and between Twentieth Century Premium Reserves, Inc. and
Twentieth Century Services, Inc. (filed electronically as an
exhibit to Post-Effective Amendment No. 4 on Form N-1A on
July 31, 1996, File No. 33-57430).

10. Opinion and Consent of Counsel (filed herein as EX-99.B10).

11. (a) Consent of Deloitte & Touche LLP (filed herein as
EX-99.B11a).

(b) Consent of Ernst & Young LLP (filed herein as
EX-99.B11b).

12. (a) Annual Reports of the Registrant dated March 31, 1998
(filed electronically on May 28, 1998).

(b) Annual Report of the Registrant dated March 31, 1997
(filed electronically on May 30, 1997).

13. Agreements of Initial Capital, Etc. - None.

14. Model Retirement Plans (filed as Exhibits 14a, 14b, 14c and
14d to Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A of Twentieth Century World Investors,
Inc., File No. 33-39242, filed May 6, 1991).

15. 12b-1 Plans - None.

16. Schedule of Computation of Performance Advertising
Quotations (filed herein as EX-99.B16).

17. Power of Attorney dated July 25, 1998 (filed herein as
EX-99.B17).

27. (a) Financial Data Schedule for Premium Capital Reserve
(EX-27.5.1).

(b) Financial Data Schedule for Premium Government Reserve
(EX-27.5.2).

ITEM 25. Persons Controlled by or Under Common Control with Registrant - None.

ITEM 26. Number of Holders of Securities.

Number of Record Holders
Title of Class as of June 30, 1998
----------------- ---------------------
Premium Government Reserve 148
Premium Capital Reserve 524
Premium Bond 108

ITEM 27. Indemnification.

The Registrant is a Maryland corporation. Section 2-418 of the
Maryland General Corporation Law allows a Maryland corporation to
indemnify its officers, directors, employees and agents to the extent
provided in such statute.

Article XIII of the Registrant's Articles of Incorporation, Exhibit 1,
requires the indemnification of the Registrant's directors and
officers to the extent permitted by Section 2-418 of the Maryland
General Corporation Law, the Investment Company Act of 1940 and all
other applicable laws.

The Registrant has purchased an insurance policy insuring its officers
and directors against certain liabilities which such officers and
directors may incur while acting in such capacities and providing
reimbursement to the Registrant for sums which it may be permitted or
required to pay to its officers and directors by way of
indemnification against such liabilities, subject in either case to
clauses respecting deductibility and participation.

ITEM 28. Business and Other Connections of Investment Advisor.

American Century Investment Management, Inc., the investment advisor,
is engaged in the business of managing investments for registered
investment companies, deferred compensation plans and other
institutional investors.

ITEM 29. Principal Underwriters.

(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

The Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Distributor is located at 60
State Street, Suite 1300, Boston, Massachusetts 02109. The Distributor
is an indirect wholly-owned subsidiary of Boston Institutional Group,
Inc., a holding company all of whose outstanding shares are owned by
key employees.

(b) The following is a list of the executive officers, directors and
partners of the Distributor:

<TABLE>
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
<S> <C> <C>
Marie E. Connolly Director, President and Chief None
Executive Officer

George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer

Donald R. Roberson Executive Vice President None

William S. Nichols Executive Vice President None

Margaret W. Chambers Senior Vice President, General None
Counsel, Chief Compliance
Officer, Secretary and Clerk
Michael S. Petrucelli Senior Vice President None

Joseph F. Tower, III Director, Senior Vice President, None
Treasurer and Chief Financial
Officer

Paula R. David Senior Vice President None

Allen B. Closser Senior Vice President None

Bernard A. Whalen Senior Vice President None

William J. Nutt Chairman and Director None
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
</TABLE>
(c) Not applicable.

ITEM 30. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, and the rules promulgated thereunder,
are in the possession of Registrant, American Century Services
Corporation and American Century Investment Management, Inc., all
located at 4500 Main Street, Kansas City, Missouri 64111.

ITEM 31. Management Services - None.

ITEM 32. Undertakings.

(a) Not Applicable.

(b) Not Applicable.

(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.

(d) The Registrant hereby undertakes that it will, if requested to
do so by the holders of at least 10% of the Registrant's
outstanding shares, call a meeting of shareholders for the
purpose of voting upon the question of the removal of a
director and to assist in communication with other
shareholders as required by Section 16(c).
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 7 to its
Registration Statement pursuant to Rule 485(b) promulgated under the Securities
Act of 1933, as amended and has duly caused this Post-Effective Amendment No. 7
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Kansas City, State of Missouri on the
29th day of July, 1998.

American Century Premium Reserves, Inc.
(Registrant)

By: /s/Patrick A. Looby
Patrick A. Looby
Vice President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----
<S> <C> <C>
/*/ George A. Rio President, Principal Executive July 29, 1998
- ------------------------- and Principal Financial
George A. Rio Officer

/*/ Maryanne Roepke Vice President, Treasurer and July 29, 1998
- ------------------------- Principal Accounting Officer
Maryanne Roepke

/*/ James E. Stowers Director July 29, 1998
- -------------------------
James E. Stowers, Jr.

/*/ James E. Stowers III Director July 29, 1998
- -------------------------
James E. Stowers, III

/*/ Thomas A. Brown Director July 29, 1998
- -------------------------
Thomas A. Brown

/*/ Robert W. Doering, M.D. Director July 29, 1998
- -------------------------
Robert W. Doering, M.D.

/*/ Andrea C. Hall, Ph.D. Director July 29, 1998
- -------------------------
Andrea C. Hall, Ph.D.

/*/ Donald H. Pratt Director July 29, 1998
- -------------------------
Donald H. Pratt

/*/ Lloyd T. Silver, Jr. Director July 29, 1998
- -------------------------
Lloyd T. Silver, Jr.

/*/ M. Jeannine Strandjord Director July 29, 1998
- -------------------------
M. Jeannine Strandjord

/*/ D. D. (Del) Hock Director July 29, 1998
- -------------------------
D. D. (Del) Hock

*By /s/Patrick A. Looby
Patrick A. Looby
Attorney-in-Fact
</TABLE>

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION OF DOCUMENT

EX-99B1a Articles of Incorporation of Twentieth Century Premium
Reserves, Inc., dated January 7, 1993 (filed electronically
as Exhibit 1a to Post-Effective Amendment No. 4 on Form N-1A,
filed on July 31, 1996, and incorporated herein by
reference).

EX-99.B1b Articles Supplementary of Twentieth Century Premium Reserves,
Inc., dated April 24, 1995 (filed electronically as Exhibit
1b to Post-Effective Amendment No. 4 on Form N-1A, filed on
July 31, 1996 and incorporated herein by reference).

EX-99.B1c Articles of Amendment of Twentieth Century Premium Reserves,
Inc., dated December 2, 1996 (filed electronically as Exhibit
1c to Post-Effective Amendment No. 6 on Form N-1A, filed on
July 30, 1997 and incorporated herein by reference.)

EX-99.B1d Articles Supplementary of American Century Premium Reserves,
Inc., dated December 2, 1996 (filed electronically as Exhibit
1d to Post-Effective Amendment No. 6 on Form N-1A, filed on
July 30, 1997 and incorporated herein by reference.)

EX-99.B2a By-Laws of Twentieth Century Premium Reserves, Inc. (filed
electronically as Exhibit 2 to Post-Effective Amendment No. 4
on Form N-1A, filed on July 31, 1996 and incorporated herein
by reference).

EX-99.B2b Amendment to By-Laws of American Century Premium Reserves,
Inc. (filed electronically as Exhibit 2b to Post-Effective
Amendment No. 9 on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872 and incorporated herein
by reference.)

EX-99.B4 Specimen copy of stock certificate-all series (filed
electronically as Exhibit 4 to Post-Effective Amendment No. 6
on Form N-1A, filed on July 30, 1997 and incorporated herein
by reference.)

EX-99.B5 Management Agreement dated as of August 1, 1997, between
American Century Premium Reserves, Inc. and American Century
Investment Management, Inc. (filed electronically as Exhibit
5 to Post-Effective Amendment No. 6 on Form N-1A, filed on
July 30, 1997 and incorporated herein by reference.)

EX-99.B6a Distribution Agreement between American Century Premium
Reserves, Inc. and Funds Distributor, Inc. dated January 15,
1998 (filed electronically as Exhibit 6 to Post-Effective
Amendment No. 28 on Form N-1A of American Century Target
Maturities Trust, File No. 2-94608 and incorporated herein by
reference).

EX-99.B6b Amendment No. 1 to Distribution Agreement between American
Century Premium Reserves, Inc. and Funds Distributor, Inc.
dated June 1, 1998 (filed electronically as Exhibit 6b to
Post-Effective Amendment No. 11 on Form N-1A of American
Century Capital Portfolios, Inc., File No. 33-64872 and
incorporated herein by reference).

EX-99.B8a Global Custody Agreement between The Chase Manhattan Bank and
the Twentieth Century and Benham funds, dated August 9, 1996.
(filed electronically as Exhibit 8 to Post-Effective
Amendment No. 31 on Form N-1A of American Century Government
Income Trust, File No. 2-99222 and incorporated herein by
reference).

EX-99.B8b Master Agreement between Commerce Bank, N.A. and Twentieth
Century Services, Inc. dated January 22, 1997 (filed
electronically as Exhibit 8e to Post-Effective Amendment No.
76 on Form N-1A of American Century Mutual Funds, Inc., File
No. 2-14213 and incorporated herein by reference).

EX-99.B9 Transfer Agency Agreement dated as of March 18, 1993, by and
between Twentieth Century Premium Reserves, Inc. and
Twentieth Century Services, Inc. (filed electronically as
Exhibit 9 to Post-Effective Amendment No. 4 on Form N-1A,
filed on July 31, 1996, and incorporated herein by
reference).

EX-99.B10 Opinion and Consent of Counsel.

EX-99.B11a Consent of Deloitte & Touche LLP.

EX-99.B11b Consent of Ernst & Young LLP.

EX-99.B12a Annual Reports dated March 31, 1998 (filed electronically on
May 28, 1998 and incorporated herein by reference).

EX-99.B12b Annual Report dated March 31, 1997 (filed electronically on
May 30, 1997 and incorporated herein by reference).

EX-99.B14 Model Retirement Plans (filed as Exhibits 14a, 14b, 14c and
14d to Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A of Twentieth Century World Investors,
Inc., File No. 33-39242, filed May 6, 1991 and incorporated
herein by reference).

EX-99.B16 Schedule of Computation of Performance Advertising
Quotations.

EX-99.B17 Power of Attorney dated July 25, 1998.

EX-27.5.1 Financial Data Schedule for Premium Capital Reserve.

EX-27.5.2 Financial Data Schedule for Premium Government Reserve.

EX-27.5.3 Financial Data Schedule for Premium Bond.

BRIAN L. BROGAN
Attorney at Law
4500 Main Street, P.O. Box 418210
Kansas City, Missouri 64141-9210
Telephone (816) 340-7276
Telecopier (816) 340-4964

July 29, 1998

American Century Premium Reserves, Inc.
American Century Tower
4500 Main Street
Kansas City, Missouri 64111

Ladies and Gentlemen:

As a counsel to American Century Premium Reserves, Inc., I am generally
familiar with its affairs. Based upon this familiarity, and upon the examination
of such documents as I have deemed relevant, it is my opinion that the shares of
the Corporation described in Post-Effective Amendment No. 7 to its Registration
Statement on Form N-1A, to be filed with the Securities and Exchange Commission
on July 29, 1998, will, when issued, be validly issued, fully paid and
nonassessable.

For the record, it should be stated that I am an employee of American
Century Services Corporation, an affiliated corporation of American Century
Investment Management, Inc., the investment adviser of American Century Premium
Reserves, Inc.

I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 7.

Very truly yours,

/s/Brian L. Brogan
Brian L. Brogan

Independent Auditors' Consent

We consent to the incorporation by reference in this Post-Effective Amendment
No. 7 to Registration Statement No. 33-57430 of American Century Premium
Reserves, Inc. on Form N-1A of our Independent Auditors' Reports dated April 30,
1998, appearing in the Annual Reports of the three funds comprising American
Century Premium Reserves, Inc. for the year ended March 31, 1998, and to the
reference to us under the heading "Financial Highlights" in the Prospectuses,
which are part of such Registration Statement.

/s/Deloitte & Touche, LLP

Kansas City, Missouri
July 25, 1998

Consent of Independent Auditors

We consent to use of our report dated April 25, 1997 on the Statement of Changes
in Net Assets for the year ended March 31, 1997, and Financial Highlights for
each of the periods ended on or before March 31, 1997 of American Century
Premium Reserves, Inc. in the Post-Effective Amendment No. 7 to the Registration
Statement (Form N-1A) and related Prospectus filed with the Securities and
Exchange Commission under the Securities Act of 1933 (Registration No.
33-57430).

/s/ Ernst & Young LLP
ERNST & YOUNG LLP

Kansas City, Missouri
July 29, 1998

SCHEDULE OF COMPUTATION OF PERFORMANCE
ADVERTISING QUOTATIONS

A. Total Return Calculations

Set forth below are calculations of each type of total return performance
quotation included in the Statement of Additional Information of American
Century Premium Reserves, Inc.

1. AVERAGE ANNUAL TOTAL RETURN. The average annual return of Premium
Bond, as quoted in the Statement of Additional Information, was
11.14%.

This return was calculated as follows:

n
P(1+T) = ERV

where,

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 payment
at the end of 1 year.

Applying the actual return figures of Premium Bond for the 1 year period
ended March 31, 1998:

1
1,000 (1 + 11.14%) = $1,111.4

^1/1
T = (1,111.4) - 1
1,000.0

T = 11.14%

2. CUMULATIVE TOTAL RETURN. The cumulative total return of Premium Bond
from April 1, 1993 to March 31, 1998, as quoted in the Statement of
Additional Information, was 36.65%.

This return was calculated as follows:

(ERV - P)
C = -------
P

where,

C = cumulative total return
P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of the hypothetical $1,000 payment at the
end of the 1 year period.

Applying the actual return figures for the 5 year period ended March 31,
1998:

(1,366.50 - 1,000)
C = ----------------
1,000

C = 36.65%

B. Yield Calculations

Set forth below are representative calculations of each type of yield
quotation included in the Statement of Additional Information of American
Century Premium Reserves, Inc.

1. PREMIUM GOVERNMENT RESERVE YIELD. The yield for Premium Government
Reserve for the seven days ended March 31, 1998, as quoted in the
Statement of Additional Information, was 5.10%.

The yield was computed as follows:

I 365
Y = --- X ---
B 7

where,

Y = yield
I = total income of hypothetical account of one share over seven day
period
B = beginning account value ($100)

Applying the actual figures of Premium Government Reserve for the seven day
period ended March 31, 1998:

Y = .097769 365
------- X ---
100 7

Y = 5.10%

Thirty-day yields are calculated similarly, with the appropriate
substitutions.

2. PREMIUM GOVERNMENT RESERVE EFFECTIVE YIELD. The effective yield for
Premium Government Reserve for the seven days ended March 31, 1998, as
quoted in the Statement of Additional Information, was 5.23%.

The effective yield was computed as follows:

( I ) ^365/7
EF = (1 + ---) - 1
( B )

where,

EF = effective yield
I = total income of hypothetical account of one share over seven day
period
B = beginning account value ($100)

Applying the actual figures of Premium Government Reserve for the seven day
period ended March 31, 1998:

EF = (1 + .097769)^365/7
(1 + -------) - 1
( 100 )

EF = 5.23%

3. PREMIUM BOND YIELD. The yield for Premium Bond for the thirty days
ended March 31, 1998, as quoted in the Statement of Additional
Information, was 5.87%.

The yield was calculated as follows:

[(a - b )^6 ]
Y = 2 * [(----- + 1) - 1]
[(c * d ) ]

where,

Y = yield
a = total income during thirty day period
b = expense accrued for the period
c = average daily number of shares outstanding during the period
d = maximum offering price per share on last day of period

Applying the actual figures of Premium Bond for the thirty day period ended
March 31, 1998:

[(330780.81 - 23585.64 )^6 ]
2 * [(-------------------- + 1) - 1]
[(6264845.130 * 10.15 ) ]

Y = 5.87%

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, American Century
Premium Reserves, Inc., hereinafter called the "Corporation", and certain
directors and officers of the Corporation, do hereby constitute and appoint
George A. Rio, Patrick A. Looby, Charles A. Etherington, David H. Reinmiller,
and Charles C.S. Park, and each of them individually, their true and lawful
attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable the Corporation to comply with the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and any rules, regulations, orders,
or other requirements of the United States Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended, including specifically,
but without limitation of the foregoing, power and authority to sign the name of
the Corporation in its behalf and to affix its corporate seal, and to sign the
names of each of such directors and officers in their capacities as indicated,
to any amendment or supplement to the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as a part of or in connection with such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
said attorneys and agents shall do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the Corporation has caused this Power to be
executed by its duly authorized officers on this the 25th day of July, 1998.

AMERICAN CENTURY PREMIUM RESERVES, INC.

By:/s/ George A. Rio
George A. Rio, President

SIGNATURE AND TITLE

/s/ George A. Rio /s/ Robert W. Doering, M.D.
George A. Rio Robert W. Doering, M.D.
President, Principal Executive Director
and Principal Financial Officer

/s/ Maryanne Roepke /s/ Andrea C. Hall
Maryanne Roepke Andrea C. Hall, Ph.D.
Vice President and Treasurer Director

/s/ James E. Stowers /s/ Donald H. Pratt
James E. Stowers, Jr. Donald H. Pratt
Director Director

/s/ James E. Stowers III /s/ Lloyd T. Silver
James E. Stowers III Lloyd T. Silver
Director Director

/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
Thomas A. Brown M. Jeannine Strandjord
Director Director

Attest: /s/ D. D. Hock
D.D. ("Del") Hock
By:/s/ Patrick A. Looby Director
Patrick A. Looby, Secretary

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT OF AMERICAN CENTURY MUTUAL FUNDS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000896308
<NAME> AMERICAN CENTURY PREMIUM RESERVES, INC.
<SERIES>
<NUMBER> 1
<NAME> BENHAM PREMIUM CAPITAL RESERVE

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 205,154,774
<INVESTMENTS-AT-VALUE> 205,154,774
<RECEIVABLES> 949,679
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
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<PAID-IN-CAPITAL-COMMON> 180,666,153
<SHARES-COMMON-STOCK> 182,491,064
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<REALIZED-GAINS-CURRENT> (3,329)
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</TABLE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 46,715,202
<INVESTMENTS-AT-VALUE> 46,715,202
<RECEIVABLES> 254,614
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<GROSS-EXPENSE> 203,762
<AVERAGE-NET-ASSETS> 45,221,548
<PER-SHARE-NAV-BEGIN> 1.00
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 66,270,265
<INVESTMENTS-AT-VALUE> 67,537,693
<RECEIVABLES> 1,784,716
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 69,323,325
<PAYABLE-FOR-SECURITIES> 4,084,042
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<OTHER-ITEMS-LIABILITIES> 68,143
<TOTAL-LIABILITIES> 4,152,185
<SENIOR-EQUITY> 64,189
<PAID-IN-CAPITAL-COMMON> 63,437,621
<SHARES-COMMON-STOCK> 6,418,885
<SHARES-COMMON-PRIOR> 2,229,409
<ACCUMULATED-NII-CURRENT> 21,897
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 380,005
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,267,428
<NET-ASSETS> 65,171,140
<DIVIDEND-INCOME> 0
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</TABLE>