AMERICAN CENTURY PREMIUM RESERVES, INC.
PROSPECTUS SUPPLEMENT
Premium Government Reserve
Premium Capital Reserve
Premium Bond
SUPPLEMENT DATED JUNE 30, 1998
Prospectus dated August 1, 1997
The following disclosure replaces the fifth paragraph under the heading "Premium
Bond," found on page 10 of the Prospectus.
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 NONE n/a n/a
and government
agency securities
Other types two highest P-2 A-2
categories
- --------------------------------------------------------------------------------
The fund may also 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.
The following chart is inserted after the fourth paragraph under the heading
"Fundamentals of Fixed Income Investing," found on pages 10-11 of the
Prospectus.
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 XXX XX X XXX XX
The following disclosure should be inserted after the section "Rule 144A
Securities," found on page 15 of the Prospectus.
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 history may
involve greater risks than investments in securities of more mature issuers. By
their nature, such issuers present limited operating history 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 total assets in the securities of issuers with less than a three-year
operating history. 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.
The following disclosure is added on page 23 of the Prospectus, following the
last paragraph under the heading "When Share Price is Determined."
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 the duly authorized intermediary,
and such orders will be priced at the funds' net asset value next determined
after acceptance on the funds' behalf by such intermediary.
The following disclosure is added on page 27 of the Prospectus, following the
last paragraph under the heading "Transfer and Administrative Services."
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 its business, operations or financial condition
relating to Year 2000 issues. 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, companies in which the funds invest may have Year 2000
computer problems. The value of their securities could go down if they do not
fix their problems in time or if fixing them is very expensive. Before making an
investment decision about a company, the manager asks it about its Year 2000
readiness. However, the manager cannot be sure that the information it receives
is complete and accurate, and there is no guarantee that portfolio companies'
Year 2000 problems will not hurt the funds' performance.
The following disclosure replaces the first sentence under the heading
"Distribution of Fund Shares" found on page 27 of the Prospectus.
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 following disclosure should be inserted as the last paragraph under the
heading "Distribution of Fund Shares" on page 27 of the Prospectus.
Investors may open accounts with American Century only through the
distributor. All purchase transactions in the funds offered by this Prospectus
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
funds are paid by the manager.
P.O. Box 419200 [american century logo(reg.sm)]
Kansas City, Missouri American
64141-6200 Century(reg.tm)
1-800-345-2021 or 816-531-5575
SH-SPL-13247 9806
<PAGE>
AMERICAN CENTURY PREMIUM RESERVES, INC.
Supplement to
Statement of Additional Information
SUPPLEMENT DATED JUNE 30, 1998 Statement of
Additional Information dated August 1, 1997
The following disclosure replaces the first paragraph under the heading "Premium
Bond," found on page 2 of the Statement of Additional Information.
The manager will invest the Premium Bond portfolio in 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 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 NONE n/a n/a
and government
agency securities
Other types two highest P-2 A-2
categories
- --------------------------------------------------------------------------------
The fund may also 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 may also 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.
The following disclosure replaces the first through twentieth paragraphs under
the heading "Officers and Directors," found on page 10 of the Statement of
Additional Information.
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 that 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; President, LSC, Inc., a manufacturer's
representative.
M. JEANNINE STRANDJORD (52), Director; Senior Vice President and Treasurer,
Sprint Corporation; Director, DST Systems, Inc.
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 (1998); 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 (1998); Vice President and Manager of
Treasury Services and Administration of FDI. Prior to joining FDI, Ms. Nelson
was Assistant Vice President and Client Manager for The Boston Company, Inc.
(from 1989 to 1994).
C. JEAN WADE, CPA (34), 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.
P.O. Box 419200 [american century logo(reg.sm)]
Kansas City, Missouri American
64141-6200 Century(reg.tm)
1-800-345-2021 or 816-531-5575
SH-SPL-13248 9806
