[front cover]
MARCH 31, 1999
ANNUAL REPORT
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AMERICAN CENTURY
[graphic of stairs]
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PREMIUM BOND
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY KEEPS WITH TRADITION
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FOLLOWING BENHAM'S FOOTSTEPS
On March 1, we made it easier for you to do business with us. We simplified our
organizational structure by eliminating the venerable Benham and Twentieth
Century names, and putting all our funds under American Century. The name change
will not affect your funds' investment management--the proven Benham investment
philosophy, experienced portfolio management teams, and legacy of innovation and
high-quality performance remain.
CONSISTENT, SOLID PERFORMANCE--We'll continue to adhere to the investment
practices that have helped our fixed-income funds perform so well over the
years. In 1998, two-thirds of American Century bond funds beat their peer group
average, according to Lipper, Inc.
CONSISTENT INVESTMENT PHILOSOPHY--American Century fixed-income funds will
continue to offer a "pure play" on their sector of the market, as they did under
Benham.
CONTINUITY OF THE MANAGEMENT TEAM--The investment process is not all that
remains the same; we've retained our core team of experienced fixed-income
portfolio managers.
* Experience--The more than 35 fixed-income investment professionals at
American Century have an average of nine years of investment management
experience.
* Bigger and better--Since American Century was formed, we've doubled the
size of the original Benham management team in our Mountain View,
California office.
TRADITION OF INNOVATION--Like Benham before it, American Century is a leader in
fixed-income fund innovation. For example, we introduced a total of four new
fixed-income funds in the last three years, including the first no-load
inflation-adjusted bond fund.
We continue to run our fixed-income operation from our offices in Mountain View,
California, which is also home to our walk-in Investor Center.
We look forward to continuing to meet your fixed-income investment needs in the
Benham tradition.
WHAT'S NEW . . .
We now classify our funds in easy-to-remember categories based on objective
and risk. The four objective categories are: CAPITAL PRESERVATION, INCOME,
GROWTH AND INCOME, and GROWTH. The three risk categories are: CONSERVATIVE,
MODERATE, and AGGRESSIVE. This new classification system makes it easier for
investors to identify which funds are right for them.
Turn to the inside back cover of this report to see a list of the funds
classified by objective and risk. For definitions of the fund categories, see
the Glossary.
Past performance is no guarantee of future results.
[left margin]
PREMIUM BOND
(ACBPX)
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Our Message to You
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/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
During the year ended March 31, 1999, the U.S. bond market experienced a
remarkable reversal. When we last addressed you in the semiannual report for
Premium Bond, yields had just plunged as investors rushed to the relative safety
and liquidity of U.S. Treasury securities. Investors were spooked by global
economic and financial turmoil, which also motivated the Federal Reserve (the
U.S. central bank) to cut short-term interest rates to bolster a seemingly
vulnerable U.S. economy and help stabilize markets worldwide.
The Fed's actions helped turn things around. By January 1999, overseas
economies were stabilizing, the U.S. economy was posting strong growth, and
investor confidence had rebounded. As a result, investors moved out of Treasurys
into stocks and higher-yielding bonds. Yields rose, though they still remained
significantly lower than they were a year earlier.
Premium Bond's management team worked hard to produce healthy returns and
maintain the fund's yield in this difficult environment. We're proud to report
that Premium Bond had above-average returns (according to Lipper Inc.) during
the past year, as well as over longer time periods.
It was also an exciting period at American Century. In March, we
consolidated all our funds under the American Century name. Though we are proud
of the venerable Twentieth Century and Benham names, we believe the change makes
it simpler for you to identify your funds.
We also reclassified all 71 of our funds based on investment goals and risk
levels, so you can more easily choose the funds that are right for you. A
complete list of American Century funds, arranged by their new classifications,
is on the inside back cover of this report.
In addition, we've made some enhancements to our Web site (at
www.americancentury.com). Among the new features are daily fund information,
including return and price data, market and national news, and a Forms Center
with access to the most-requested investor forms and applications. You can also
sign up to receive fund prospectuses and shareholder reports electronically.
Finally, here's our latest Year 2000 Readiness Disclosure. Our critical
systems have been renovated, tested, and returned to production. We continue to
test these systems, as well as participate in industry-wide tests with our
business partners.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
PREMIUM BOND
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Portfolio Composition
by Security Type ...................................................... 6
Portfolio Composition
by Credit Rating ...................................................... 7
Schedule of Investments .................................................. 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ........................................................... 12
Statement of Operations .................................................. 13
Statements of Changes
in Net Assets ......................................................... 14
Notes to Financial
Statements ............................................................ 15
Financial Highlights ..................................................... 17
Independent Auditors'
Report ................................................................ 18
OTHER INFORMATION
Retirement Account
Information ........................................................... 19
Background Information
Investment Philosophy
and Policies ....................................................... 20
Comparative Indices ................................................... 20
Lipper Rankings ....................................................... 20
Credit Rating
Guidelines ......................................................... 20
Investment Team
Leaders ............................................................ 20
Glossary ................................................................. 21
www.americancentury.com 1
Report Highlights
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MARKET PERSPECTIVE
* Bonds produced positive returns despite sharp interest rate changes. For the
twelve months ended March 31, 1999, the Lehman Brothers Aggregate Bond Index
returned 6.49%.
* Bond yields fell in 1998 because financial crises overseas sent investors
scrambling for the relative safety and liquidity of U.S. Treasury
securities. In addition, the Federal Reserve lowered interest rates to boost
the economy and restore investor confidence in the financial markets.
* Though rapid U.S. economic growth and more stable markets and economies
overseas caused rates to rebound in late 1998 and early 1999, bond yields
finished the year lower overall.
* Treasury securities performed best during the flight to quality in 1998,
when yields fell to 30-year lows.
* Corporate and mortgage-backed securities outperformed Treasurys in the first
quarter of 1999 when the economic situation stabilized and investors began
to sell Treasury bonds and buy higher-yielding securities.
MANAGEMENT Q&A
* The portfolio performed relatively well, producing higher returns than the
average "A-Rated Corporate Debt Fund," according to Lipper Inc.
* We used a value-oriented approach to asset allocation, reducing our Treasury
position and adding higher-yielding corporate securities.
* These adjustments paid off in the first quarter of 1999, when Treasurys were
the worst-performing domestic bond sector, while higher-yielding securities
performed relatively well.
* Within our corporate bond holdings, we focused on securities issued by
cyclical companies--corporations that tend to do best when the economy is
growing rapidly.
* We increased the portfolio's exposure to asset-backed bonds because we
believe they offer attractive yields with relatively high credit quality.
* Because we expect less interest rate volatility going forward, we'll
continue to overweight higher-yielding corporate and asset-backed bonds--
securities that typically outperform Treasurys when rates are relatively
stable.
[left margin]
PREMIUM BOND
(ACBPX)
TOTAL RETURNS: AS OF 3/31/99
6 Months -0.40%*
1 Year 5.88%
30-DAY SEC YIELD: 5.80%
INCEPTION DATE: 4/1/93
NET ASSETS: $105.3 million
* Not annualized.
See Total Returns on page 4.
Investment terms are defined in the Glossary on pages 21-22.
2 1-800-345-2021
Market Perspective from Randall W. Merk
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/photo of Randall W. Merk/
Randall W. Merk, chief investment officer of fixed income
MODERATE PERFORMANCE
For the twelve months ended March 31, 1999, bonds produced positive returns
despite dramatic interest rate changes (see the graphs at right). However,
rising rates limited performance over the last six months. For the year, the
Lehman Brothers Aggregate Bond Index--a broad measure of bond performance--was
up 6.49%. For the six months, the index returned -0.16%.
INTEREST RATE VOLATILITY
Global capital markets were in a free fall from August through October
1998. That turmoil was caused by financial crises in Asia, Russia, and Latin
America that threatened U.S. economic growth. In addition, anxieties rippled
through the market when a number of highly leveraged hedge funds nearly
collapsed.
The Federal Reserve, the U.S. central bank, lowered interest rates three
times in late 1998 to prop up the economy and restore investor confidence in the
financial markets. Those moves helped ease a possible credit crunch, calming
fears that tight credit would spark a recession.
COOLER MARKET FOR TREASURYS
During the capital market crisis, Treasurys posted exceptionally strong
returns because they offered investors liquidity and a safe haven from global
economic turmoil. Huge demand sent Treasury yields to 30-year lows in early
October. In addition, Treasurys were an effective portfolio diversifier when
investor confidence and global equity values plummeted. But investors' appetite
for Treasurys diminished as calm returned to the markets, and yields rose in the
first quarter of 1999. Despite these yield changes, Treasury securities turned
in a solid performance.
CORPORATE AND MORTGAGE-BACKED BONDS REBOUND
The U.S. economy chugged along despite the markets' twists and turns,
growing at a 6% annual rate in the fourth quarter of 1998 and a 4.5% annual rate
in the first quarter of 1999. Continued economic strength helped re-invigorate
the corporate bond market, which lagged Treasurys during the flight to quality.
More importantly, the Fed's interest rate cuts helped ease credit and lower
corporate borrowing costs. This helped corporate bonds outperform Treasurys
during the first three months of 1999.
The mortgage-backed securities market was hit hard by lower interest rates
in the third quarter of 1998, when mortgage refinancings reached a record high.
Refinancings shorten the life of mortgage-backed securities and leave investors
excess cash to reinvest in lower-yielding securities. But prepayments slowed as
rates rose after October, while the attractive yields offered by mortgages
relative to Treasury bonds drew some buyers. Those factors have helped mortgages
outperform Treasurys so far in 1999.
[right margin]
"BONDS PRODUCED POSITIVE RETURNS DESPITE DRAMATIC INTEREST RATE CHANGES."
BOND INDEX RETURNS
FOR THE YEAR ENDED MARCH 31, 1999
SALOMON BROTHERS
TREASURY INDEX 7.09%
MERRILL LYNCH CORPORATE
BOND INDEX 6.22%
SALOMON BROTHERS 30-YEAR
GNMA INDEX 6.29%
Source: Russell/Mellon Analytical Services
[line graph - data below]
SHIFTING TREASURY YIELD CURVES
3/31/98 10/5/98 3/31/99
YEARS TO MATURITY
1 5.52% 4.35% 4.91%
2 5.57% 4.06% 5.04%
3 5.62% 4.13% 5.12%
4 5.64% 4.22% 5.21%
5 5.62% 4.07% 5.13%
6 5.67% 4.08% 5.27%
7 5.71% 4.09% 5.40%
8 5.69% 4.08% 5.33%
9 5.67% 4.07% 5.27%
10 5.65% 4.07% 5.21%
11 5.69% 4.18% 5.31%
12 5.73% 4.30% 5.41%
13 5.77% 4.42% 5.51%
14 5.84% 4.54% 5.62%
15 5.87% 4.65% 5.72%
16 5.89% 4.69% 5.76%
17 5.91% 4.74% 5.80%
18 5.93% 4.79% 5.84%
19 5.95% 4.84% 5.88%
20 5.99% 4.88% 5.91%
21 5.99% 4.89% 5.90%
22 5.99% 4.91% 5.89%
23 6.00% 4.93% 5.89%
24 6.00% 4.95% 5.88%
25 6.01% 4.97% 5.87%
26 6.00% 4.92% 5.84%
27 5.98% 4.87% 5.80%
28 5.97% 4.82% 5.76%
29 5.96% 4.77% 5.72%
30 5.94% 4.71% 5.68%
Source: Bloomberg Financial Markets
www.americancentury.com 3
Premium Bond--Performance
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<TABLE>
<CAPTION>
TOTAL RETURNS AS OF MARCH 31, 1999
PREMIUM LEHMAN AGGREGATE A-RATED CORPORATE DEBT FUNDS(2)
BOND BOND INDEX AVERAGE RETURN FUND'S RANKING
<S> <C> <C> <C> <C>
6 MONTHS(1) ........... -0.40% -0.16% -0.96% --
1 YEAR ................ 5.88% 6.49% 5.03% 41 OUT OF 154
====================================================================================
AVERAGE ANNUAL RETURNS
====================================================================================
3 YEARS ............... 7.16% 7.75% 6.97% 48 OUT OF 123
5 YEARS ............... 7.47% 7.79% 7.04% 16 OUT OF 82
LIFE OF FUND .......... 6.35% 6.87% 6.07%(3) 20 OUT OF 69(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 20-21 for more information about returns, the comparative index, and
Lipper fund rankings.
[mountain graph - data below]
GROWTH OF $10,000 OVER LIFE OF FUND
Value on 3/31/99
Lehman Aggregate Bond Index $14,896
Premium Bond $14,468
Lehman Aggregate
Premium Bond Bond Index
DATE VALUE VALUE
4/1/93 $10,000 $10,000
6/30/93 $10,187 $10,265
9/30/93 $10,462 $10,533
12/31/93 $10,454 $10,539
3/31/94 $10,091 $10,237
6/30/94 $9,954 $10,131
9/30/94 $10,002 $10,193
12/31/94 $10,024 $10,232
3/31/95 $10,543 $10,748
6/30/95 $11,262 $11,402
9/30/95 $11,481 $11,626
12/31/95 $12,038 $12,121
3/31/96 $11,757 $11,906
6/30/96 $11,785 $11,974
9/30/96 $11,997 $12,196
12/31/96 $12,368 $12,562
3/31/97 $12,295 $12,491
6/30/97 $12,703 $12,950
9/30/97 $13,117 $13,380
12/31/97 $13,464 $13,773
3/31/98 $13,666 $13,988
6/30/98 $13,964 $14,315
9/30/98 $14,527 $14,921
12/31/98 $14,521 $14,971
3/31/99 $14,468 $14,896
$10,000 investment made 4/1/93
The graph at left shows the growth of a $10,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Lehman Aggregate Bond Index is provided for comparison in each graph. Premium
Bond's total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the index do
not. Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED MARCH 31)
Lehman Aggregate
Premium Bond Bond Index
DATE RETURN RETURN
3/31/94 0.92% 2.37%
3/31/95 4.48% 4.99%
3/31/96 11.53% 10.79%
3/31/97 4.57% 4.91%
3/31/98 11.14% 11.99%
3/31/99 5.88% 6.49%
4 1-800-345-2021
Premium Bond--Q&A
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/photo of Jeff Houston/
An interview with Jeff Houston, a portfolio manager on the Premium Bond
fund investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED MARCH 31, 1999?
Premium Bond's returns were positive, despite the difficult climate in the
financial markets over the past year. In addition, the portfolio performed well
relative to the "A-Rated Corporate Debt Funds" category tracked by Lipper Inc.
For the fiscal year, the fund posted a return of 5.88%, while the Lipper
category average return was 5.03%.
Performance over the last six months was limited by rising interest rates.
For the six months ended March 31, 1999, Premium Bond returned -0.40%, while the
Lipper group returned -0.96%. The portfolio's benchmark, the Lehman Brothers
Aggregate Bond Index, returned -0.16% and 6.49% over the six and twelve months,
respectively. (See the Total Returns table on the previous page for additional
performance comparisons.)
WHAT STRATEGIES DID YOU PURSUE OVER THE PAST SIX MONTHS?
We emerged from a defensive position that we adopted during the turbulent
second half of 1998, adding more higher-yielding corporate securities. We
believed corporate bonds offered very attractive buying opportunities because
their prices had been beaten down significantly during the market upheaval in
the third quarter of 1998. Corporate bonds, for example, represented 26% of
assets six months ago, but comprised 32% at the end of March.
At the same time, we reduced the fund's exposure to Treasury securities
from 33% of assets at the end of September to 24% by the end of March. Our
high-quality government- and agency-backed mortgage holdings were little changed
at 25% of assets. (See the Portfolio Composition by Security Type charts on page
6.)
DID THESE ASSET ALLOCATION SHIFTS HELP THE FUND'S PERFORMANCE?
Yes. The change in positioning paid off in the first quarter of 1999, when
Treasurys were the worst-performing sector of the U.S. bond market. Corporates
and mortgage-backed securities, on the other hand, performed relatively well.
The Fed's rate cuts in late 1998 brightened the picture for corporations because
lower rates reduced borrowing costs. In addition, U.S. economic growth surged
despite turmoil overseas. Those factors gave investors renewed confidence that
corporate earnings would stay strong.
WHERE DID YOU FIND BUYING OPPORTUNITIES IN THE CORPORATE MARKET?
In 1998, our focus was on more defensive industries such as
telecommunications, energy, and utilities. Companies in those sectors tend to
derive most of their profits domestically and provide more stable returns during
periods of economic upheaval. That proved to be helpful during the market's
downdraft in 1998.
[right margin]
"THE PORTFOLIO PERFORMED WELL RELATIVE TO THE 'A-RATED CORPORATE DEBT FUNDS'
CATEGORY TRACKED BY LIPPER INC."
PORTFOLIO AT A GLANCE
3/31/99 3/31/98
NUMBER OF SECURITIES 138 98
WEIGHTED AVERAGE
MATURITY 8.2 YRS 10.7 YRS
AVERAGE DURATION 4.7 YRS 4.7 YRS
EXPENSE RATIO 0.45% 0.45%
YIELD AS OF MARCH 31, 1999
30-DAY SEC YIELD 5.80%
Investment terms are defined in the Glossary on pages 21-22.
www.americancentury.com 5
Premium Bond--Q&A
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(Continued)
More recently we started to favor bonds of cyclical companies, which tend
to benefit most during times of economic strength. When fears of recession
crippled the market in the third quarter of 1998, these bonds were severely
punished and experienced sharp price declines. Investors have become more
comfortable with the prospects of these companies because economic growth has
been consistently strong. Renewed interest in this sector helped performance in
recent months.
ASSET-BACKED SECURITIES NOW REPRESENT 10% OF ASSETS. WHAT WAS THE ATTRACTION?
We believed asset-backed bonds offered exceptional values relative to
Treasurys, so we increased our stake in these securities over the past six
months. Premium Bond's asset-backed holdings include commercial mortgage-backed
securities (CMBS), as well as receivables from automobile, credit card, and
equipment loans. CMBS are attractive because they offer strong credit quality
with less prepayment risk than typical mortgage-backed securities.
Within the asset-backed component, CMBS represent about 3-4% of total
assets. We may increase that segment because it appears our benchmark, the
Lehman Brothers Aggregate Bond Index, will include a CMBS component starting
this summer. This move will provide more investor interest and liquidity to that
segment of the market. We think it makes sense to take a position in these bonds
now while their prices are still comparatively low.
YOU MENTIONED THAT MORTGAGE-BACKED SECURITIES MAKE UP ABOUT A QUARTER OF ASSETS.
CAN YOU TALK A LITTLE MORE ABOUT THEM?
Our 25% position in high-quality government- and agency-backed mortgage
securities is roughly neutral to the mortgage weighting in the index. In 1998,
declining interest rates hurt mortgage-backeds--lower rates led to a record
number of mortgage prepayments. But higher rates since October have gradually
slowed refinancing activity. Unfortunately, higher rates also cause the duration
of mortgage-backed bonds to extend, which hurts performance when rates are
rising.
CAN YOU EXPLAIN A LITTLE MORE ABOUT DURATION AND WHY IT'S IMPORTANT?
Duration measures a bond's or bond portfolio's sensitivity to changes in
interest rates. The longer the duration, the more you gain in price when rates
fall, and the more you lose when rates rise. A shorter duration means a bond
portfolio's share price fluctuates less when rates change. So, ideally, you want
to lengthen duration when interest rates are falling and shorten duration when
rates are rising.
HOW DID YOU MANAGE THE PORTFOLIO'S DURATION?
We made few changes to duration over the past six months, keeping it about
in line with that of the Lehman Aggregate Bond Index at around 4.7 years. In
general, we make only modest adjustments to duration over time, typically
keeping it within about 10% or so of the benchmark's duration. Rather than make
big bets on the direction of interest rates, we try to enhance fund performance
through asset allocation decisions and careful credit analysis.
[left margin]
"WE BELIEVED ASSET-BACKED BONDS OFFERED EXCEPTIONAL VALUES RELATIVE TO
TREASURYS, SO WE INCREASED OUR STAKE IN THESE SECURITIES OVER THE PAST SIX
MONTHS."
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE
AS OF MARCH 31, 1999
U.S. Treasury Securities 24%
Corporate Bonds 32%
Mortgage-Backed Securities 25%
Asset-Backed Securities 10%
Gov't. Agency Securities 6%
Other 3%
AS OF SEPTEMBER 30, 1998
U.S. Treasury Securities 33%
Corporate Bonds 26%
Mortgage-Backed Securities 24%
Asset-Backed Securities 8%
Gov't. Agency Securities 4%
Other 5%
Security types are defined on pages 21-22.
6 1-800-345-2021
Premium Bond--Q&A
- --------------------------------------------------------------------------------
(Continued)
AS OF SEPTEMBER 1, 1998, PREMIUM BOND WAS ALLOWED TO INVEST IN SECURITIES RATED
BB. HAVE YOU BEEN VERY ACTIVE IN THAT AREA?
BB bonds accounted for around 5% of assets at the end of the fiscal year,
so we haven't been very aggressive yet in that segment of the market. We believe
the securities we purchased either offered substantial value or were candidates
for a credit upgrade. An example of a BB investment in Premium Bond at the end
of the year is Owens Illinois--a bond we think has a lot of upside potential.
Overall, we've maintained the portfolio's high average credit
quality--which was slightly better than AA--despite reducing the fund's Treasury
holdings.
WHAT'S YOUR INTEREST RATE OUTLOOK?
We are not as optimistic as many others in the market. If we look back at
the dramatic drop in interest rates in 1998, we can see that it was an
exaggerated move caused by abnormal occurrences, such as the rapid liquidation
of positions by highly leveraged hedge funds. We don't anticipate that kind of
steep decline in interest rates happening again anytime soon. Economic growth in
the U.S. remains very strong, and we are starting to see signs of recovery
around the globe. This underlying economic strength may be accompanied by modest
inflation. In that case, we could see rates increase slightly. On a positive
note, we anticipate less interest rate volatility than we saw over the past
year.
HOW WILL THIS OUTLOOK INFLUENCE PREMIUM BOND'S POSITIONING?
With the continued strength of the economy and interest rates trading in a
fairly narrow range or rising modestly, we expect the non-Treasury segments of
the bond market to perform best in the coming months. We'll likely underweight
Treasurys relative to our benchmark while maintaining a larger stake in
corporate bonds and asset-backed securities. We also anticipate keeping a
neutral weighting in higher-yielding mortgage-backed and government agency
securities.
[right margin]
"ON A POSITIVE NOTE, WE ANTICIPATE LESS INTEREST RATE VOLATILITY THAN WE SAW
OVER THE PAST YEAR."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
3/31/99 9/30/98
AAA 67% 75%
AA 4% 3%
A 9% 8%
BBB 15% 14%
BB 5% --
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 20
for more information.
"WE'VE MAINTAINED THE PORTFOLIO'S HIGH AVERAGE CREDIT QUALITY--WHICH WAS
SLIGHTLY BETTER THAN AA--DESPITE REDUCING THE FUND'S TREASURY HOLDINGS."
www.americancentury.com 7
Premium Bond--Schedule of Investments
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MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES--23.6%
$ 300,000 U.S. Treasury Notes, 7.125%,
9/30/99 $ 303,563
400,000 U.S. Treasury Notes, 7.75%,
1/31/00 409,299
4,000,000 U.S. Treasury Notes, 5.50%,
2/29/00 4,023,116
1,000,000 U.S. Treasury Notes, 6.375%,
5/15/00 1,015,618
1,000,000 U.S. Treasury Notes, 4.625%,
11/30/00 994,332
1,000,000 U.S. Treasury Notes, 5.50%,
12/31/00 1,008,355
3,700,000 U.S. Treasury Notes, 6.625%,
7/31/01 3,828,123
1,000,000 U.S. Treasury Notes, 7.50%,
11/15/01 1,058,618
1,200,000 U.S. Treasury Notes, 7.875%,
11/15/04 1,349,041
250,000 U.S. Treasury Notes, 7.00%,
7/15/06 273,658
1,000,000 U.S. Treasury Bonds, 12.00%,
8/15/08 1,456,228
1,200,000 U.S. Treasury Bonds, 9.25%,
2/15/16 1,632,125
1,400,000 U.S. Treasury Bonds, 8.875%,
8/15/17 1,865,167
750,000 U.S. Treasury Bonds, 9.125%,
5/15/18 1,025,010
400,000 U.S. Treasury Bonds, 7.125%,
2/15/23 462,291
1,600,000 U.S. Treasury Bonds, 7.50%,
11/15/24 1,938,359
475,000 U.S. Treasury Bonds, 7.625%,
2/15/25 584,449
300,000 U.S. Treasury Bonds, 6.00%,
2/15/26 305,216
650,000 U.S. Treasury Bonds, 6.375%,
8/16/27 695,976
400,000 U.S. Treasury Bonds, 5.25%,
11/15/28 373,829
--------------
TOTAL U.S. TREASURY SECURITIES 24,602,373
--------------
(Cost $23,972,520)
U.S. GOVERNMENT AGENCY SECURITIES--6.2%
1,500,000 FHLB, 5.50%, 8/13/01 1,507,809
500,000 FHLMC, 7.09%, 11/24/06 500,514
1,000,000 FHLMC, 5.75%, 4/15/08 993,027
1,000,000 FNMA MTN, 5.83%, 2/2/04 992,035
1,000,000 FNMA MTN, 5.54%, 2/5/04 984,935
Principal Amount Value
- --------------------------------------------------------------------------------
$ 500,000 FNMA MTN, 7.00%, 2/20/07 $ 515,960
1,000,000 FNMA MTN, 5.74%, 1/21/09 958,685
--------------
TOTAL U.S GOVERNMENT
AGENCY SECURITIES 6,452,965
--------------
(Cost $6,501,084)
MORTGAGE-BACKED SECURITIES(1)--25.2%
776,998 FHLMC Pool #E68523, 6.50%,
12/1/12 786,898
130,961 FHLMC Pool #D75034, 8.50%,
10/1/26 137,808
841,029 FHLMC Pool #C00553, 7.00%,
9/1/27 854,981
897,445 FHLMC Pool #C00578, 6.50%,
1/1/28 895,602
1,000,000 FHLMC Pool #C00731, 6.50%,
3/1/29 997,849
1,085,967 FNMA Pool #272894, 6.00%,
2/1/09 1,082,465
541,973 FNMA Pool #392607, 7.00%,
7/1/12 554,689
196,470 FNMA Pool #426130, 6.00%,
5/1/13 195,237
782,470 FNMA Pool #426773, 6.00%,
7/1/13 777,561
696,354 FNMA Pool #252211, 6.00%,
1/1/29 677,810
500,797 FNMA Pool #252212, 6.50%,
1/1/29 499,192
757,537 FNMA Pool #405425, 7.00%,
12/1/27 769,753
641,377 FNMA Pool #413812, 6.50%,
1/1/28 639,445
1,538,211 FNMA Pool #406904, 7.50%,
4/1/28 1,582,468
1,568,292 FNMA Pool #426069, 7.00%,
5/1/28 1,592,649
997,115 FNMA Pool #437421, 6.00%,
9/1/28 970,562
301,697 FNMA Pool #450619, 6.00%,
12/1/28 293,663
503,057 FNMA Pool #453956, 6.00%,
12/1/28 489,660
1,108,820 FNMA Pool #454947, 6.00%,
12/1/28 1,079,292
569,167 GNMA Pool #230356, 7.50%,
8/20/17 586,888
1,071,473 GNMA Pool #313107, 7.00%,
11/15/22 1,092,354
45,501 GNMA Pool #407141, 9.25%,
2/15/25 48,833
284,182 GNMA Pool #408099, 8.75%,
3/15/25 302,453
See Notes to Financial Statements
8 1-800-345-2021
Premium Bond--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
$ 41,779 GNMA Pool #407254, 9.25%,
3/15/25 $ 44,838
560,371 GNMA Pool #780412, 7.50%,
8/15/26 577,769
600,400 GNMA Pool #423986, 8.00%,
8/15/26 625,904
110,080 GNMA Pool #432437, 7.50%,
4/15/27 113,480
658,124 GNMA Pool #447692, 7.50%,
5/15/27 678,449
758,096 GNMA Pool #423061, 8.00%,
6/15/27 790,344
344,268 GNMA Pool #443782, 7.50%,
11/15/27 354,900
99,855 GNMA Pool #461011, 7.50%,
11/15/27 102,939
608,328 GNMA Pool #467626, 7.00%,
2/15/28 618,458
497,220 GNMA Pool #458862, 7.50%,
2/15/28 512,448
477,189 GNMA Pool #436277, 6.50%,
3/15/28 475,689
833,661 GNMA Pool #471859, 7.00%,
4/15/28 847,544
33,133 GNMA Pool #455126, 6.50%,
5/15/28 33,029
1,984,258 GNMA Pool #458887, 6.50%,
5/15/28 1,978,018
490,330 GNMA Pool #463891, 6.50%,
5/15/28 488,788
1,100,000 GNMA Pool #469811, 7.00%,
12/15/28 1,118,318
--------------
TOTAL MORTGAGE-BACKED SECURITIES 26,269,027
--------------
(Cost $26,152,815)
ASSET-BACKED SECURITIES(1)--9.6%
1,000,000 Case Equipment Loan Trust,
Series 1998 B, Class A4 SEQ,
5.92%, 10/15/05 1,000,125
1,000,000 CIT RV Trust, Series 1997 A,
Class A6, 6.35%, 4/15/11 1,014,845
750,000 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%,
2/15/12 757,376
1,000,000 Comed Transitional Funding Trust,
Series 1998-1, Class A6 SEQ,
5.63%, 6/25/09 974,905
957,104 First Union-Lehman Brothers
Commercial Mortgage,
Series 1998 C2, Class A1 SEQ,
6.28%, 6/18/07 966,154
1,000,000 GMAC Commercial Mortgage Securities
Inc., Series 1999 C1, Class A2
SEQ, 6.18%, 5/15/33 994,455
Principal Amount Value
- --------------------------------------------------------------------------------
$ 177,350 Green Tree Financial Corp.,
Series 1995-7, Class A3,
6.35%, 11/15/26 $ 177,767
700,000 Money Store (The) Home Equity
Trust, Series 1994 B, Class A4
SEQ, 7.60%, 7/15/21 720,318
1,000,000 Money Store (The) Home Equity
Trust, Series 1997 C,
Class AF6 SEQ, 6.67%,
2/15/25 1,015,095
734,252 Nationslink Funding Corp.,
Series 1998-2, Cl A1 SEQ,
6.00%, 11/20/07 731,833
204,117 Textron Financial Corp.
Receivables Trust,
Series 1997 A, Class A, 6.05%,
3/16/09 (Acquired 9/18/97,
Cost $203,847)(2) 204,886
500,000 United Companies Financial Corp.,
Home Equity Loan,
Series 1996 D1, Class A5,
6.92%, 10/15/18 510,028
500,000 United Companies Financial Corp.,
Home Equity Loan,
Series 1997 C, Class A7,
6.85%, 1/15/29 511,348
356,544 World Omni Automobile Lease
Securitization, Series 1996 B,
Class A2, 6.20%, 11/15/02 357,444
--------------
TOTAL ASSET-BACKED SECURITIES 9,936,579
--------------
(Cost $9,904,575)
CORPORATE BONDS--32.4%
AIRLINES--0.4%
442,948 Delta Air Lines, Inc., 7.54%,
10/11/11 459,135
--------------
AUTOMOBILES & AUTO PARTS--0.3%
350,000 General Motors Corp., 7.00%,
6/15/03 363,416
--------------
BANKING--2.2%
250,000 Corestates Capital Corp., 5.875%,
10/15/03 249,261
500,000 Fleet National Bank, 5.75%,
1/15/09 478,694
500,000 National Bank of Canada,
8.125%, 8/15/04 535,044
500,000 NationsBank Corporation, 6.125%,
7/15/04 504,982
500,000 U.S. Bank NA, 5.70%, 12/15/08 478,782
--------------
2,246,763
--------------
See Notes to Financial Statements
www.americancentury.com 9
Premium Bond--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
BROADCASTING & MEDIA--1.2%
$ 750,000 British Sky Broadcasting, 6.875%,
2/23/09 $ 742,263
500,000 CSC Holdings Inc., 7.625%,
7/15/18 503,183
--------------
1,245,446
--------------
BUSINESS SERVICES & SUPPLIES--0.6%
650,000 LCI International, Inc., 7.25%,
6/15/07 665,185
--------------
CHEMICALS & RESINS--1.0%
300,000 ARCO Chemical Co., 10.25%,
11/1/10 324,554
700,000 Monsanto Co., 6.60%, 12/1/28
(Acquired 12/4/98, Cost
$697,480)(2) 674,407
--------------
998,961
--------------
ELECTRICAL & ELECTRONIC
COMPONENTS--0.2%
200,000 Anixter International Inc., 8.00%,
9/15/03 206,895
--------------
ENERGY (PRODUCTION & MARKETING)--1.9%
750,000 Enron Corp., 6.625%, 11/15/05 756,905
500,000 K N Energy, Inc., 6.45%,
11/30/01 507,095
700,000 USX Corp., 6.85%, 3/1/08 686,278
--------------
1,950,278
--------------
ENERGY (SERVICES)--0.7%
750,000 Petroleum Geo-Services ASA,
7.125%, 3/30/28 705,182
--------------
FINANCIAL SERVICES--4.7%
500,000 Associates Corp., N.A., 6.625%,
6/15/05 514,866
1,000,000 Citigroup Inc., 5.80%, 3/15/04 995,723
1,000,000 Comdisco, Inc., 6.375%,
11/30/01 1,006,293
1,000,000 Ford Motor Credit Co., 6.125%,
4/28/03 1,008,690
500,000 Merrill Lynch & Co., Inc., 6.50%,
4/1/01 508,342
300,000 Paine Webber Group Inc., 7.875%,
2/15/03 314,569
500,000 Toyota Motor Credit Corp., 5.625%,
11/13/03 497,471
--------------
4,845,954
--------------
FOOD & BEVERAGE--0.9%
1,000,000 Pepsico, Inc., 5.625%, 2/17/09
(Acquired 2/3/99, Cost
$995,670)(2) 966,544
--------------
Principal Amount Value
- --------------------------------------------------------------------------------
INSURANCE--1.9%
$1,000,000 Conseco Financing Trust II, 8.70%,
11/15/26 $ 949,068
1,000,000 Conseco Inc., 6.40%, 6/15/01 987,673
--------------
1,936,741
--------------
MACHINERY & EQUIPMENT--0.7%
750,000 Caterpillar Financial Services Corp.,
5.90%, 9/10/02 751,110
--------------
METALS & MINING--0.5%
450,000 Barrick Gold Corp., 7.50%,
5/1/07 475,858
--------------
OFFICE EQUIPMENT & SUPPLIES--0.3%
350,000 Xerox Capital Trust, 8.00%,
2/1/27 (Acquired 7/17/97,
Cost $364,084)(2) 360,682
--------------
PACKAGING & CONTAINERS--0.9%
1,000,000 Owens-Illinois Inc., 7.15%,
5/15/05 987,780
--------------
PAPER & FOREST PRODUCTS--0.7%
750,000 Abitibi-Consolidated Inc., 7.40%,
4/1/18 709,209
--------------
RAILROAD--1.3%
1,000,000 Norfolk Southern Corp., 6.95%,
5/1/02 1,024,809
350,000 Norfolk Southern Corp., 7.90%,
5/15/97 392,111
--------------
1,416,920
--------------
REAL ESTATE--1.4%
500,000 Chelsea GCA Realty Partners,
7.25%, 10/21/07 470,039
450,000 Price REIT, Inc. (The), 7.25%,
11/1/00 458,076
500,000 Spieker Properties, Inc., 6.80%,
12/15/01 506,409
--------------
1,434,524
--------------
RETAIL (APPAREL)--1.0%
400,000 Saks Holdings, Inc., 7.25%,
12/1/04 407,531
600,000 Saks Inc., 8.25%, 11/15/08 646,099
--------------
1,053,630
--------------
RETAIL (FOOD & DRUG)--1.0%
1,000,000 Rite Aid Corp., 6.70%, 12/15/01 1,012,841
--------------
RETAIL (GENERAL MERCHANDISE)--1.0%
600,000 Fred Meyer Inc., 7.45%, 3/1/08 634,696
300,000 Sears, Roebuck & Co., Inc.,
9.375%, 11/1/11 374,466
--------------
1,009,162
--------------
See Notes to Financial Statements
10 1-800-345-2021
Premium Bond--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
TELEPHONE COMMUNICATIONS--3.7%
$ 750,000 Cable & Wireless Communications
plc, 6.625%, 3/6/05 $ 757,783
500,000 Cable & Wireless Communications
plc, 6.75%, 12/1/08 504,879
500,000 Cincinnati Bell Inc., 6.30%,
12/1/28 474,938
500,000 MCI WorldCom, Inc., 8.875%,
1/15/01 538,467
300,000 MCI WorldCom, Inc., 7.55%,
4/1/04 319,781
750,000 MCI WorldCom, Inc., 6.40%,
8/15/05 760,852
500,000 Sprint Capital Corp., 6.875%,
11/15/28 494,649
--------------
3,851,349
--------------
UTILITIES--1.7%
350,000 CalEnergy Co. Inc., 7.23%,
9/15/05 362,510
500,000 Columbia Energy Group, 6.80%,
11/28/05 511,446
400,000 Duke Energy Corp., 6.875%,
8/1/23 391,402
500,000 Yorkshire Power Finance, Series B,
6.15%, 2/25/03 (Acquired
2/19/98, Cost $500,000)(2) 500,369
--------------
1,765,727
--------------
Principal Amount Value
- --------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS--2.2%
$1,000,000 AirTouch Communications, Inc.,
7.125%, 7/15/01 $ 1,028,594
1,000,000 TCI Communications, Inc., 8.75%,
8/1/15 1,222,968
--------------
2,251,562
--------------
TOTAL CORPORATE BONDS 33,670,854
--------------
(Cost $33,662,299)
SOVEREIGN GOVERNMENTS & AGENCIES--1.1%
550,000 Province of British Columbia
5.375%, 10/29/08 525,617
500,000 Hydro-Quebec, 8.05%, 7/7/24 578,874
--------------
TOTAL SOVEREIGN GOVERNMENTS
& AGENCIES 1,104,491
--------------
(Cost $1,087,535)
TEMPORARY CASH INVESTMENTS--1.9%
2,033,000 Units of Participation in Chase Vista
Prime Money Market Fund (Institutional
Shares) 2,033,000
--------------
(Cost $2,033,000)
TOTAL INVESTMENT SECURITIES--100.0% $104,069,289
==============
(Cost $103,313,828)
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
MTN = Medium Term Note
(1) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of these securities at March 31, 1999, was $2,706,888,
which represented 2.6% of net assets.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the market value of each investment
* the percentage of investments in each industry, as applicable
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
www.americancentury.com 11
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
MARCH 31, 1999
ASSETS
Investment securities, at value
(identified cost of $103,313,828)
(Note 3) ................................................. $104,069,289
Cash ....................................................... 232,635
Interest receivable ........................................ 1,333,417
------------
105,635,341
------------
LIABILITIES
Disbursements in excess
of demand deposit cash ................................... 3,549
Payable for capital shares redeemed ........................ 219,279
Accrued management fees (Note 2) ........................... 39,953
Dividends payable .......................................... 88,638
------------
351,419
------------
Net Assets ................................................. $105,283,922
============
CAPITAL SHARES,
$0.01 PAR VALUE
Authorized ................................................. 100,000,000
============
Outstanding ................................................ 10,428,722
============
Net Asset Value Per Share .................................. $ 10.10
============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) .................... $104,516,510
Accumulated undistributed
net realized gain on investments ......................... 11,951
Net unrealized appreciation
on investments (Note 3) .................................. 755,461
------------
$105,283,922
============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of shares outstanding gives you the price of an individual share, or the net
asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
gains earned on investments but not yet paid to shareholders or net losses on
investments (known as realized gains or losses); and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
See Notes to Financial Statements
12 1-800-345-2021
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1999
INVESTMENT INCOME
Income:
Interest .................................................. $ 5,874,471
-----------
Expenses (Note 2):
Management fees ........................................... 429,782
Directors' fees and expenses .............................. 818
-----------
430,600
-----------
Net investment income ..................................... 5,443,871
-----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTE 3)
Net realized gain on investments .......................... 121,024
Change in net unrealized
appreciation on investments ............................. (511,967)
-----------
Net realized and unrealized
loss on investments ..................................... (390,943)
-----------
Net Increase in Net Assets
Resulting from Operations ............................... $ 5,052,928
===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks down how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* interest income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)
See Notes to Financial Statements
www.americancentury.com 13
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
Increase in Net Assets 1999 1998
OPERATIONS
Net investment income ......................... $ 5,443,871 $ 3,471,249
Net realized gain on investments .............. 121,024 817,782
Change in net unrealized appreciation
(depreciation) on investments ............... (511,967) 1,701,053
------------- ------------
Net increase in net assets
resulting from operations ................... 5,052,928 5,990,084
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .................... (5,465,768) (3,471,249)
From net realized gains
on investment transactions .................. (489,078) (387,844)
------------- ------------
Decrease in net assets
from distributions .......................... (5,954,846) (3,859,093)
------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ..................... 78,926,913 72,857,318
Proceeds from reinvestment
of distributions ............................ 5,886,692 3,796,289
Payments for shares redeemed .................. (43,798,905) (35,363,449)
------------- ------------
Net increase in net assets
from capital share transactions ............. 41,014,700 41,290,158
------------- ------------
Net increase in net assets .................... 40,112,782 43,421,149
NET ASSETS
Beginning of year ............................. 65,171,140 21,749,991
------------- ------------
End of year ................................... $ 105,283,922 $ 65,171,140
============= ============
Undistributed net investment income ........... -- $ 21,897
============= ============
TRANSACTIONS IN SHARES OF THE FUND
Sold .......................................... 7,705,359 7,303,108
Issued in reinvestment of distributions ....... 574,382 376,344
Redeemed ...................................... (4,269,904) (3,489,976)
------------- ------------
Net increase .................................. 4,009,837 4,189,476
============= ============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* share transactions--shareholders' purchases, reinvestments, and redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
14 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
MARCH 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Premium Reserves, Inc. (the corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Premium Bond Fund (the fund) is one
of the three funds issued by the corporation. The investment objective of the
fund is to obtain a high level of income from investments in a portfolio of
longer-term bonds and other debt obligations. The following significant
accounting policies are in accordance with generally accepted accounting
principles; these principles may require the use of estimates by fund
management.
SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
FORWARD COMMITMENTS -- The fund may purchase and sell U.S. government
securities on a firm commitment basis. Under these arrangements, the securities'
prices and yields are fixed on the date of the commitment, but payment and
delivery are scheduled for a future date. During this period, securities are
subject to market fluctuations. The fund maintains segregated accounts
consisting of cash or liquid securities in an amount sufficient to meet the
purchase price.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements with
institutions that the fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Directors. Each repurchase agreement is recorded at
cost. The fund requires that the collateral, represented by securities, received
in a repurchase transaction be transferred to the custodian in a manner
sufficient to enable the fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the fund under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account held at the fund's
custodian. These balances are invested in one or more repurchase agreements that
are collateralized by U.S. Treasury or Agency obligations.
INCOME TAX STATUS -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the
corporation's distributor. Certain officers of FDI are also officers of the
corporation.
www.americancentury.com 15
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM that
provides the fund with investment advisory and management services in exchange
for a single, unified management fee. The Agreement provides that all expenses
of the fund, except brokerage commissions, taxes, interest, expenses of those
directors who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on the fund's average daily closing net assets during the previous month. The
annual management fee for the fund is 0.45%.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, and
the corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments,
totaled $104,914,045, including U.S. Treasury and Agency obligations totaling
$65,219,450. Sales of investment securities, excluding short-term investments,
totaled $65,606,502, including U.S. Treasury and Agency obligations totaling
$45,516,932.
As of March 31, 1999, accumulated net unrealized appreciation was $753,555,
based on the aggregate cost of investments for federal income tax purposes of
$103,315,734, which consisted of unrealized appreciation of $1,365,787 and
unrealized depreciation of $612,232.
- --------------------------------------------------------------------------------
4. BANK LOANS
Effective December 18, 1998, the fund, along with certain other funds
managed by ACIM, entered into an unsecured $570,000,000 bank line of credit
agreement with Chase Manhattan Bank. Borrowings under the agreement bear
interest at the Federal Funds rate plus 0.40%. The fund may borrow money for
temporary or emergency purposes to fund shareholder redemptions. The fund did
not borrow from the line during the period December 18, 1998 through March 31,
1999.
- --------------------------------------------------------------------------------
5. FUND EVENTS
The following name change became effective March 1, 1999:
==================================================================
NEW NAME FORMER NAME
==================================================================
FUND: Premium Bond Fund American Century - Benham Premium
Bond Fund
16 1-800-345-2021
Premium Bond--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
1999 1998 1997 1996 1995
PER-SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ... $ 10.15 $ 9.76 $ 9.93 $ 9.46 $ 9.64
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income .............. 0.59 0.61 0.61 0.61 0.59
Net Realized and Unrealized
Gain (Loss) on Investments ......... -- 0.45 (0.17) 0.47 (0.18)
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ... 0.59 1.06 0.44 1.08 0.41
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ......... (0.59) (0.61) (0.61) (0.61) (0.59)
From Net Realized Gains
on Investments ..................... (0.05) (0.06) -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions ................ (0.64) (0.67) (0.61) (0.61) (0.59)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year ......... $ 10.10 $ 10.15 $ 9.76 $ 9.93 $ 9.46
=========== =========== =========== =========== ===========
Total Return(1) .................... 5.88% 11.14% 4.57% 11.53% 4.48%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets ................... 0.45% 0.45% 0.45% 0.43% 0.45%
Ratio of Net Investment Income to
Average Net Assets ................... 5.70% 6.06% 6.20% 6.08% 6.30%
Portfolio Turnover ................... 71% 138% 63% 92% 51%
Net Assets, End of Year
(in thousands) ....................... $ 105,284 $ 65,171 $ 21,750 $ 20,280 $ 10,334
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provides comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income and capital gains or losses
* income and capital gains distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
* portfolio turnover--the percentage of the portfolio that was replaced during
the period
See Notes to Financial Statements
www.americancentury.com 17
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
American Century Premium Reserves, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Premium Bond Fund (formerly American
Century - Benham Premium Bond Fund) (the "Fund"), one of the funds comprising
American Century Premium Reserves, Inc., as of March 31, 1999, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Premium Bond Fund as
of March 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then ended
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 7, 1999
18 1-800-345-2021
Retirement Account Information
- --------------------------------------------------------------------------------
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid from the date of
receipt at American Century. Even if you plan to rollover the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 19
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
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.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
It is not an investment product available for purchase.
The LEHMAN AGGREGATE BOND INDEX is composed of the Lehman
Government/Corporate Index and the Lehman Mortgage-Backed Securities Index. It
reflects the price fluctuations of Treasury securities, U.S. government agency
securities, corporate bond issues, and mortgage-backed securities.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The Lipper category for Premium Bond is:
CORPORATE DEBT FUNDS RATED A --funds that invest at least 65% of their
assets in government issues or corporate debt issues rated A or better.
CREDIT RATING GUIDELINES
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. They are based on an issuer's financial strength
and ability to pay interest and principal in a timely manner.
Securities rated AAA, AA, A, or BBB are considered "investment-grade"
securities, meaning they are relatively safe from default. Here are the most
common credit ratings and their definitions:
AAA -- extremely strong ability to meet financial obligations.
AA -- very strong ability to meet financial obligations.
A -- strong ability to meet financial obligations.
BBB -- good ability to meet financial obligations.
BB -- securities that are less vulnerable to default than other
lower-quality issues but do not quite meet investment-grade standards.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
[left margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
BUD HOOPS
JEFF HOUSTON
CREDIT RESEARCH MANAGER
GREG AFIESH
20 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on page 17.
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by a fund on a
given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* AVERAGE DURATION -- another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF FIXED-INCOME SECURITIES
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a pool
of assets, such as credit card debt, auto loans, or home equity loans.
* CORPORATE BONDS -- debt securities or instruments issued by companies and
corporations.
* MORTGAGE-BACKED SECURITIES -- debt securities that represent ownership in
pools of mortgage loans.
* U.S. GOVERNMENT AGENCY SECUR-ITIES -- debt securities issued by U.S.
government agencies (such as the Federal Home Loan Bank and the Federal Farm
Credit Bank). Government agency securities include discount notes (maturing in
one year or less) and medium-term notes, debentures, and bonds (maturing in
three months to 50 years).
www.americancentury.com 21
Glossary
- --------------------------------------------------------------------------------
(Continued)
* U.S. TREASURY SECURITIES -- debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S. government.
Treasury securities include bills (maturing in one year or less), notes
(maturing in two to 10 years), and bonds (maturing in more than 10 years).
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
* CAPITAL PRESERVATION -- Offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- Offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- Offers funds that emphasize both growth and income,
diversification, varying capitalization sizes, and different investment styles
and strategies.
* GROWTH -- Offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that the fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies, and risk potential are consistent
with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
22 1-800-345-2021
Notes
- --------------------------------------------------------------------------------
www.americancentury.com 23
Notes
- --------------------------------------------------------------------------------
24 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Equity Income
Conservative
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
AMERICAN CENTURY PREMIUM RESERVES, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9905 Funds Distributor, Inc.
SH-BKT-16275 (c)1999 American Century Services Corporation
<PAGE>
[front cover]
MARCH 31, 1999
ANNUAL REPORT
- -----------------
AMERICAN CENTURY
[graphic of stairs]
AMERICAN CENTURY
- --------------------
PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
[american century logo(reg.sm)]
American
Century
[inside front cover]
AMERICAN CENTURY KEEPS WITH TRADITION
- --------------------------------------------------------------------------------
FOLLOWING BENHAM'S FOOTSTEPS
On March 1, we made it easier for you to do business with us. We simplified our
organizational structure by eliminating the venerable Benham and Twentieth
Century names, and putting all our funds under American Century. The name change
will not affect your funds' investment management--the proven Benham investment
philosophy, experienced portfolio management teams, and legacy of innovation and
high-quality performance remain.
CONSISTENT, SOLID PERFORMANCE--We'll continue to adhere to the investment
practices that have helped our fixed-income funds perform so well over the
years. In 1998, two-thirds of American Century bond funds beat their peer group
average, according to Lipper, Inc.
CONSISTENT INVESTMENT PHILOSOPHY--American Century fixed-income funds will
continue to offer a "pure play" on their sector of the market, as they did under
Benham.
CONTINUITY OF THE MANAGEMENT TEAM--The investment process is not all that
remains the same; we've retained our core team of experienced fixed-income
portfolio managers.
* Experience--The more than 35 fixed-income investment professionals at
American Century have an average of nine years of investment management
experience.
* Bigger and better--Since American Century was formed, we've doubled the
size of the original Benham management team in our Mountain View,
California office.
TRADITION OF INNOVATION--Like Benham before it, American Century is a leader in
fixed-income fund innovation. For example, we introduced a total of four new
fixed-income funds in the last three years, including the first no-load
inflation-adjusted bond fund.
We continue to run our fixed-income operation from our offices in Mountain View,
California, which is also home to our walk-in Investor Center.
We look forward to continuing to meet your fixed-income investment needs in the
Benham tradition.
WHAT'S NEW . . .
We now classify our funds in easy-to-remember categories based on objective
and risk. The four objective categories are: CAPITAL PRESERVATION, INCOME,
GROWTH AND INCOME, and GROWTH. The three risk categories are: CONSERVATIVE,
MODERATE, and AGGRESSIVE. This new classification system makes it easier for
investors to identify which funds are right for them.
Turn to the inside back cover of this report to see a list of the funds
classified by objective and risk. For definitions of the fund categories, see
the Glossary.
Past performance is no guarantee of future results.
[left margin]
PREMIUM GOVERNMENT RESERVE
(TWPXX)
- --------------------------------------
PREMIUM CAPITAL RESERVE
(TCRXX)
- --------------------------------------
Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.
The U.S. money market experienced a remarkable reversal during the year
ended March 31, 1999. When we last addressed you in the semiannual report for
the Premium Government Reserve and Premium Capital Reserve funds, money market
yields had just plunged as investors rushed to the relative safety and liquidity
of short-term securities. Investors were spooked by global economic and
financial turmoil, which also motivated the Federal Reserve (the U.S. central
bank) to cut short-term interest rates to bolster a seemingly vulnerable U.S.
economy and help stabilize markets worldwide.
The Fed's actions helped turn things around. By January 1999, overseas
economies were stabilizing, the U.S. economy was posting strong growth, and
investor confidence had rebounded. As a result, investors moved out of money
market securities in favor of stocks and higher-yielding bonds. Money market
yields rose but remained significantly lower than they were a year earlier.
At American Century, our focus remained on making us easy to do business
with and on helping investors reach their financial goals. In March, we
consolidated all our funds under the American Century name. Though we are proud
of the venerable Twentieth Century and Benham names, we believe the change makes
it simpler for you to identify your funds.
We also reclassified all 71 of our funds based on investment goals and risk
levels, so you can more easily choose the funds that are right for you. A
complete list of American Century funds, arranged by their new classifications,
is on the inside back cover of this report.
In addition, we've made some enhancements to our Web site (at
www.americancentury.com). Among the new features are daily fund information,
including return and price data, market and national news, and a Forms Center
with access to the most-requested investor forms and applications. You can also
sign up to receive fund prospectuses and shareholder reports electronically.
Finally, here's our latest Year 2000 Readiness Disclosure. Our critical
systems have been renovated, tested, and returned to production. We continue to
test these systems, as well as participate in industry-wide tests with our
business partners.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer
[right margin]
Table of Contents
Report Highlights ........................................................ 2
Frequently Asked
Questions ............................................................. 3
PREMIUM GOVERNMENT RESERVE
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio Composition by
Security Type ......................................................... 5
Portfolio Composition by
Maturity .............................................................. 6
Schedule of Investments .................................................. 7
PREMIUM CAPITAL RESERVE
Performance Information .................................................. 9
Management Q&A ........................................................... 10
Portfolio Composition by
Security Type ......................................................... 10
Portfolio Composition by
Credit Rating ......................................................... 11
Schedule of Investments .................................................. 12
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ........................................................... 15
Statements of Operations ................................................. 16
Statements of Changes
in Net Assets ......................................................... 17
Notes to Financial
Statements ............................................................ 18
Financial Highlights ..................................................... 20
Independent Auditors'
Report ................................................................ 22
OTHER INFORMATION
Retirement Account
Information ........................................................... 23
Background Information
Investment Philosophy
and Policies ....................................................... 24
Comparative Indices ................................................... 24
Lipper Rankings ....................................................... 24
Investment Team
Leaders ............................................................ 24
Credit Rating
Guidelines ......................................................... 24
Glossary ................................................................. 25
www.americancentury.com 1
Report Highlights
- --------------------------------------------------------------------------------
MARKET PERSPECTIVE
* Money market yields fell during the year ended March 31, 1999, as the
Federal Reserve cut short-term interest rates.
* The Fed lowered rates three times in late 1998, adding stability to the
financial markets during a period of global economic turmoil.
* Money market yields rose modestly in early 1999 as economic conditions
improved.
* We expect short-term interest rates to be relatively stable in the coming
months, with the three-month Treasury bill yield remaining in a narrow
range.
PREMIUM GOVERNMENT RESERVE
* The fund's one-year return as of March 31 kept pace with the return of the
average institutional government money market fund.
* With interest rates falling, we maintained a longer average maturity for
much of the period to lock in higher rates.
* New investments caused the fund's assets to grow by 65% in March. We
invested the new money in very short-term government agency securities,
which caused the average maturity to shorten.
* We continued to focus on agency securities issued by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, which
had higher yields because they were in greater supply.
* We plan to maintain the fund's current neutral average maturity, but we will
seek out opportunities to extend the maturity when yields are at the top of
their recent range.
PREMIUM CAPITAL RESERVE
* The fund's one-year return as of March 31 kept pace with the return of the
average institutional money market fund.
* With interest rates falling, we maintained a longer average maturity for
much of the period to lock in higher rates.
* To extend the average maturity, we invested in one-year certificates of
deposit (CDs).
* New investments caused the fund's assets to grow by 25% in the first quarter
of 1999. We invested the new money in commercial paper because it is one of
the largest segments of the money market.
* Because we expect fairly stable interest rates, we plan to maintain a
longer-than-normal average maturity.
[left margin]
PREMIUM GOVERNMENT RESERVE
(TWPXX)
TOTAL RETURNS: AS OF 3/31/99
6 Months 2.33%*
1 Year 4.98%
7-DAY CURRENT YIELD: 4.43%
INCEPTION DATE: 4/1/93
NET ASSETS: $121.3 million
PREMIUM CAPITAL RESERVE
(TCRXX)
TOTAL RETURNS: AS OF 3/31/99
6 Months 2.43%*
1 Year 5.14%
7-DAY CURRENT YIELD: 4.53%
INCEPTION DATE: 4/1/93
NET ASSETS: $276.0 million
* Not annualized.
See Total Returns on pages 4 and 9.
Investment terms are defined in the Glossary on pages 25-26.
2 1-800-345-2021
Money Market Funds--Frequently Asked Questions
- --------------------------------------------------------------------------------
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND ACCOUNT?
Yes. You can arrange for direct deposit of your paycheck, Social Security
check, Treasury Direct interest payment, military allotment, or payments from
other government agencies. Give us a call, and we will send you the necessary
information to set it up.
WHAT IS THE HOLDING PERIOD ON NEW DEPOSITS INTO MY ACCOUNT?
Generally, there is an eight-business-day holding period for deposited
funds (initial investments in a new account are held for 15 calendar days).
There is a one-business-day holding period for U.S. Treasury checks, money
orders, and travelers' checks.
IS THERE A LIMIT ON THE NUMBER OF CHECKS I CAN WRITE ON MY MONEY MARKET ACCOUNT?
No. You can write as many checks as you like at no charge, as long as each
check is for $100 or more.
IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET FUND INTO A STOCK OR
BOND FUND?
Yes. Moving money between funds is called an exchange, and there is no
limit on the number of exchanges you can make out of a money market fund
account. However, there is a limit of six exchanges per calendar year out of
stock and bond fund accounts.
Exchanges can be made by:
* visiting our Web site at www.americancentury.com*
* using our Automated Information Line (1-800-345-8765)*
* calling an Investor Relations Representative at 1-800-345-2021*
* writing us a letter
HOW DO I DECIDE WHETHER A TAXABLE MONEY MARKET FUND OR A TAX-FREE MONEY MARKET
FUND IS RIGHT FOR ME?
The most important factor to consider is your tax bracket. Tax-free money
market funds typically offer lower yields than taxable funds, but you pay no
federal income taxes on the income from a tax-free fund.
If you are in one of the higher federal income tax brackets, taxes will eat
up a big part of your income from a taxable money market fund, so a tax-free
investment may be better for you. If you're in a lower tax bracket, then you can
usually earn more in a taxable fund even after taxes are deducted.
We can help you figure it out. If you give us a call and tell us what tax
bracket you're in, we can tell you whether you're likely to earn more after-tax
income in a tax-free or a taxable money market fund.
IF YOU HAVE ANY QUESTIONS ABOUT OUR MONEY MARKET FUNDS, CALL US TOLL FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE, WWW.AMERICANCENTURY.COM.
* Before an investor can make an exchange by calling an Investor Relations
Representative, using our Automated Information Line, or visiting our Web
site, the investor first must have provided us with written authorization to
do so.
[right margin]
A FASTER AND EASIER WAY TO DEPOSIT MUTUAL FUND DISTRIBUTIONS
If you prefer to get your fund dividend or capital gains distributions sent to
you instead of reinvesting them, there are a couple of ways that you can get
access to this money faster than waiting for a check in the mail:
* YOU CAN HAVE DISTRIBUTIONS DEPOSITED DIRECTLY INTO YOUR MONEY MARKET
ACCOUNT. The money will be deposited the same day that the distributions
are paid.
* DISTRIBUTIONS CAN BE SENT ELECTRONICALLY TO YOUR BANK ACCOUNT. The money
will be available in your bank account within three days.
Contact our Investor Relations Representatives to set up either of these
options.
www.americancentury.com 3
Premium Government Reserve--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF MARCH 31, 1999
PREMIUM 90-DAY TREASURY INST. U.S. GOV'T. MONEY MARKET FUNDS(2)
GOVERNMENT RESERVE BILL INDEX AVERAGE RETURN FUND'S RANKING
<S> <C> <C> <C> <C>
6 MONTHS(1) 2.33% 2.19% 2.35% --
1 YEAR 4.98% 4.72% 5.03% 56 OUT OF 92
==============================================================================================
AVERAGE ANNUAL RETURNS
==============================================================================================
3 YEARS 5.10% 5.01% 5.17% 50 OUT OF 75
5 YEARS 5.08% 5.09% 5.15% 36 OUT OF 54
LIFE OF FUND 4.69% 4.76% 4.79%(3) 32 OUT OF 46(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 24-25 for more information about returns, the comparative index, and
Lipper fund rankings.
PORTFOLIO AT A GLANCE
3/31/99 3/31/98
NUMBER OF SECURITIES 24 27
WEIGHTED AVERAGE
MATURITY 51 DAYS 49 DAYS
EXPENSE RATIO 0.45% 0.45%
YIELDS AS OF MARCH 31, 1999
7-DAY CURRENT YIELD 4.43%
7-DAY EFFECTIVE YIELD 4.53%
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
4 1-800-345-2021
Premium Government Reserve--Q&A
- --------------------------------------------------------------------------------
/photo of Amy O'Donnell/
An interview with Amy O'Donnell, a portfolio manager on the Premium
Government Reserve fund investment team.
HOW DID PREMIUM GOVERNMENT RESERVE PERFORM DURING THE YEAR ENDED MARCH 31, 1999?
The fund performed well, keeping pace with its peer group. For the fiscal
year, Premium Government Reserve returned 4.98%, compared with the 5.03% average
return of the 92 "Institutional U.S. Government Money Market Funds" tracked by
Lipper Inc. (See the previous page for other fund performance comparisons.)
The fund's performance relative to its Lipper peer group is especially
noteworthy because Premium Government Reserve is not truly an institutional
fund. As a result, it has a performance disadvantage when it comes to expenses
(see the Lipper Rankings section on page 24 for more details).
THE FUND'S 7-DAY CURRENT YIELD HAS COME DOWN QUITE A BIT IN THE PAST YEAR (5.10%
TO 4.43%). WHY?
The decline in the fund's yield reflects a general drop in short-term
interest rates in 1998. Economic and financial problems in various parts of the
world led to increased volatility in the global financial markets. In this
environment, many investors looked to U.S. government securities as a safe
haven. Strong demand sent yields down sharply.
In addition, the Federal Reserve (the U.S. central bank) cut short-term
interest rates three times in a six-week period to help stabilize the markets.
The Fed lowered its federal funds rate target--a widely watched barometer of
short-term interest rates--from 5.5% to 4.75% between late September and
mid-November.
Global economic conditions improved in early 1999, and government money
market rates stabilized, hovering in a narrow range around the federal funds
rate target.
HOW DID YOU POSITION THE FUND IN THIS ENVIRONMENT?
With rates falling, we spent much of the past year looking for
opportunities to extend the fund's average maturity. A longer average maturity
allows the portfolio to lock in higher yields for an extended period of time,
delaying the effects of lower rates on the fund's yield.
By August, Premium Government Reserve's average maturity was around 80
days, well above the fund's neutral position of 50-60 days. We also lengthened
the average maturity during the period when the Fed cut interest rates three
times.
BUT THE FUND'S AVERAGE MATURITY WAS CLOSER TO 50 DAYS BY THE END OF MARCH. WHY?
There were times when we allowed Premium Government Reserve's average
maturity to shorten back toward neutral. For example, the average maturity fell
from 80 days in late December to
[right margin]
"WITH RATES FALLING, WE SPENT MUCH OF THE PAST YEAR LOOKING FOR OPPORTUNITIES
TO EXTEND THE FUND'S AVERAGE MATURITY."
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE
AS OF MARCH 31, 1999
U.S. Gov't. Agency Discount Notes 82%
Repurchase Agreements 10%
U.S. Gov't. Agency Securities 8%
AS OF SEPTEMBER 30, 1998
U.S. Gov't. Agency Discount Notes 60%
Repurchase Agreements 12%
U.S. Gov't. Agency Securities 28%
Security types are defined on pages 25-26.
www.americancentury.com 5
Premium Government Reserve--Q&A
- --------------------------------------------------------------------------------
(Continued)
around 45 days in late January. The end of the year is a volatile period for
short-term interest rates, so we stayed out of the market for the most part,
letting the portfolio's average maturity drift in.
In March, cash flows had a big effect on the portfolio--the fund's assets
fluctuated widely during the month but grew by 65% overall. We invested most of
this new cash in very short-term government agency discount notes because they
tend to be more liquid (easier to buy and sell).
So, even though we had extended the average maturity at the beginning of
March, the discount notes brought the maturity back down to a more neutral
position. In addition, discount notes ballooned to more than 80% of the
portfolio (see the charts on page 5).
DID THESE NEW INVESTMENTS CHANGE THE FUND'S AGENCY WEIGHTINGS?
Not really. Fannie Mae (FNMA--Federal National Mortgage Association) and
Freddie Mac (FHLMC--Federal Home Loan Mortgage Corporation) remain the largest
issuers of short-term government agency securities, so their yields tend to be
the most attractive. As of March 31, 92% of Premium Government Reserve's agency
securities were issued by these two entities.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES?
We think short-term rates will be relatively stable in the coming months.
The Fed appears to be on hold for a while--the U.S. economy is healthy enough to
keep the Fed from cutting rates, while inflation is low enough to keep the Fed
from raising rates. We expect yields of short-term government agency securities
to remain in a narrow range around the federal funds rate target of 4.75% for
the foreseeable future.
WHAT ARE YOUR PLANS FOR PREMIUM GOVERNMENT RESERVE OVER THE NEXT SIX MONTHS?
For now, we plan to maintain a neutral average maturity. We'll try to do
some "range trading"--we'll look to extend the average maturity when agency
yields are at the top of their recent range, and we'll let it shorten when
yields are toward the bottom of the range.
[left margin]
"THE FED APPEARS TO BE ON HOLD FOR A WHILE--THE U.S. ECONOMY IS HEALTHY ENOUGH
TO KEEP THE FED FROM CUTTING RATES, WHILE INFLATION IS LOW ENOUGH TO KEEP THE
FED FROM RAISING RATES."
[pie charts - data below]
PORTFOLIO COMPOSITION BY MATURITY
AS OF MARCH 31, 1999
1-30 days 55%
31-60 days 13%
61-90 days 14%
91-180 days 18%
AS OF SEPTEMBER 30, 1998
1-30 days 44%
31-60 days 21%
61-90 days 32%
91-180 days 3%
6 1-800-345-2021
Premium Gov't. Reserve--Sched. of Investments
- --------------------------------------------------------------------------------
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(1)--81.8%
$ 490,000 FHLB Discount Notes, 4.80%,
5/14/99 $ 487,190
20,000,000 FHLMC Discount Notes, 4.77%,
4/14/99 19,965,550
1,300,000 FHLMC Discount Notes, 4.70%,
4/15/99 1,297,624
14,100,000 FHLMC Discount Notes, 4.77%,
4/23/99 14,058,898
5,000,000 FHLMC Discount Notes, 4.78%,
4/30/99 4,980,747
3,570,000 FHLMC Discount Notes, 4.79%,
5/14/99 3,549,575
1,300,000 FHLMC Discount Notes, 4.66%,
5/18/99 1,292,090
2,740,000 FHLMC Discount Notes, 4.79%,
5/18/99 2,722,865
5,000,000 FHLMC Discount Notes, 4.75%,
5/20/99 4,967,674
1,000,000 FHLMC Discount Notes, 4.66%,
5/25/99 993,010
8,000,000 FHLMC Discount Notes, 4.78%,
6/4/99 7,932,018
11,000,000 FHLMC Discount Notes,
4.67%-4.70%, 8/5/99 10,819,785
1,160,000 FNMA Discount Notes, 4.75%,
4/9/99 1,158,776
5,890,000 FNMA Discount Notes, 4.87%,
4/29/99 5,867,667
3,354,000 FNMA Discount Notes, 4.77%,
6/8/99 3,323,781
5,584,000 FNMA Discount Notes, 4.78%,
6/10/99 5,532,089
10,000,000 FNMA Discount Notes, 4.76%,
9/16/99 9,777,866
--------------
TOTAL U.S. GOVERNMENT
AGENCY DISCOUNT NOTES 98,727,205
--------------
Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES(1)--8.5%
$ 1,740,000 FHLB, 6.53%, 4/22/99 $ 1,741,533
1,500,000 FHLB, 5.72%, 5/5/99 1,501,282
5,000,000 FHLB, VRN, 4.77%, 4/1/99,
resets daily off the Fed
Funds rate with no caps 5,000,518
2,000,000 FNMA MTN, 5.48%, 7/9/99 2,002,663
--------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 10,245,996
--------------
TEMPORARY CASH INVESTMENTS--9.7%
Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.84%, dated 3/31/99,
due 4/1/99 (Delivery value $374,050) 374,000
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.90%, dated 3/31/99,
due 4/1/99 (Delivery value $5,668,771) 5,668,000
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 4.84%, dated 3/31/99,
due 4/1/99 (Delivery value $5,668,762) 5,668,000
--------------
TOTAL TEMPORARY CASH INVESTMENTS 11,710,000
--------------
TOTAL INVESTMENT SECURITIES--100.0% $120,683,201
==============
See Notes to Financial Statements
www.americancentury.com 7
Premium Gov't. Reserve--Sched. of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
MTN = Medium Term Note
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security
resets, the less risk the investor is taking that the coupon will vary
significantly from current market rates.
VRN= Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
March 31, 1999.
(1)The rates for U.S. Government Agency Discount Notes are the yield to
maturity at purchase. The rates for U.S. Government Agency Securities are the
stated coupon rates.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the amortized cost of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
8 1-800-345-2021
Premium Capital Reserve--Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF MARCH 31, 1999
PREMIUM CAPITAL 90-DAY TREASURY INSTITUTIONAL MONEY MARKET FUNDS(2)
RESERVE BILL INDEX AVERAGE RETURN FUND'S RANKING
<S> <C> <C> <C> <C>
6 MONTHS(1) 2.43% 2.19% 2.42% --
1 YEAR 5.14% 4.72% 5.15% 111 OUT OF 191
==========================================================================================
AVERAGE ANNUAL RETURNS
==========================================================================================
3 YEARS 5.21% 5.01% 5.26% 88 OUT OF 151
5 YEARS 5.18% 5.09% 5.23% 70 OUT OF 112
LIFE OF FUND 4.78% 4.76% 4.88%(3) 54 OUT OF 86(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 24-25 for more information about returns, the comparative index, and
Lipper fund rankings.
PORTFOLIO AT A GLANCE
3/31/99 3/31/98
NUMBER OF SECURITIES 61 59
WEIGHTED AVERAGE
MATURITY 72 DAYS 50 DAYS
EXPENSE RATIO 0.45% 0.45%
YIELDS AS OF MARCH 31, 1999
7-DAY CURRENT YIELD 4.53%
7-DAY EFFECTIVE YIELD 4.63%
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
www.americancentury.com 9
Premium Capital Reserve--Q&A
- --------------------------------------------------------------------------------
/photo of John Walsh and Denise Tabacco/
An interview with John Walsh and Denise Tabacco, portfolio managers on the
Premium Capital Reserve fund investment team.
HOW DID THE FUND PERFORM DURING THE FISCAL YEAR ENDED MARCH 31, 1999?
Premium Capital Reserve performed well, keeping pace with its peer group.
For the fiscal year, Premium Capital Reserve returned 5.14%, compared with the
5.15% average return of the 191 "Institutional Money Market Funds" tracked by
Lipper Inc. (See the previous page for other fund performance comparisons.)
The fund's performance relative to its Lipper peer group is especially
noteworthy because Premium Capital Reserve is not truly an institutional fund.
As a result, it has a performance disadvantage when it comes to expenses (see
the Lipper Rankings section on page 24 for more details).
PREMIUM CAPITAL RESERVE'S 7-DAY CURRENT YIELD DROPPED OVER THE PAST YEAR (5.22%
TO 4.53%). WHY?
An overall decline in interest rates provided the backdrop for the decline
in the fund's yield. In 1998, economic and financial problems in various parts
of the world led to increased volatility in the global financial markets. In an
effort to stabilize the markets, the Federal Reserve (the U.S. central bank)
lowered short-term interest rates three times between late September and
mid-November.
The Fed reduced short-term rates a total of 75 basis points (0.75%--a basis
point equals 0.01%). As a result, yields on money market securities headed
sharply lower.
IN LIGHT OF THE DECLINE IN INTEREST RATES, HOW DID YOU POSITION PREMIUM CAPITAL
RESERVE?
We lengthened the fund's average maturity whenever possible during the
year. For example, we extended from 55 days to around 70 days in August and then
again in October. The longer average maturity helped the fund maintain its
yield--generally speaking, longer-term securities yield more than short-term
ones, and the longer average maturity allowed us to lock in higher yields for an
extended period of time.
We lengthened Premium Capital Reserve's average maturity again in early
1999, but for different reasons. Global economic conditions had stabilized
somewhat, and with that stabilization came a change in the Fed's stance on
interest rates. In February, the Fed's chairman hinted in congressional
testimony that the U.S. central bank had officially shifted from a rate-lowering
bias to a neutral one.
This increased the likelihood that rates would remain unchanged for the
near future, so we extended Premium Capital Reserve's average maturity to more
than 80 days in mid-February.
[left margin]
"WE LENGTHENED THE FUND'S AVERAGE MATURITY WHENEVER POSSIBLE DURING THE YEAR."
[pie charts - data below]
PORTFOLIO COMPOSITION BY SECURITY TYPE
AS OF MARCH 31, 1999
Commercial Paper 76%
Variable-Rate Notes 8%
CDs 8%
Asset-Backed Securities 3%
Bank Notes 3%
Other 2%
AS OF SEPTEMBER 30, 1998
Commercial Paper 71%
Variable-Rate Notes 18%
Asset-Backed Securities 7%
CDs 3%
Other 1%
Security types are defined on pages 25-26.
10 1-800-345-2021
Premium Capital Reserve--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT STEPS DID YOU TAKE TO EXTEND THE FUND'S AVERAGE MATURITY?
Mainly, we increased the fund's exposure to certificates of deposit (CDs).
We invested in CDs at the long end of Premium Capital Reserve's investment
spectrum, maturing in about one year. By the end of March, CDs made up about 8%
of the portfolio, up from 3% six months earlier (see the charts on the previous
page).
WHAT OTHER CHANGES DID YOU MAKE TO PREMIUM CAPITAL RESERVE'S PORTFOLIO?
In the past few months, we've seen some significant asset growth. The
fund's assets increased by 25%--from $220 million to $276 million--in the first
quarter of 1999. We invested most of this new cash in commercial paper because
it's one of the largest, most-liquid segments of the money market. As a result,
the percentage of commercial paper in the portfolio grew.
The increase in commercial paper and CDs came at the expense of
variable-rate notes, which dropped from 18% to 8% of the portfolio in the past
six months. We cut back our holdings partly because interest rates were
falling--the yields of variable-rate notes were falling along with short-term
rates--and partly because there was little in the way of supply.
LOOKING AHEAD, WHAT'S YOUR OUTLOOK FOR INTEREST RATES AND THE U.S. ECONOMY?
The U.S. economy remains in excellent health thanks to strong consumer
confidence and spending. The economy grew at a 6% annualized rate during the
final quarter of 1998--the fastest quarterly expansion in over two years--and a
4.5% annual rate in the first quarter of 1999.
Despite the rapid pace of economic growth, inflation remains at its lowest
level in a dozen years. Labor cost increases have been modest because of greater
productivity. In addition, cheaper imports have prevented domestic companies
from raising prices.
In light of these somewhat mixed signals, we think that the Fed is likely
to maintain the same "wait-and-see" approach toward interest rates that it has
taken so far this year. That argues for interest rate stability over the near
term. But market expectations could lead to intermittent bouts of interest rate
volatility as investors attempt to gauge inflation prospects and future Fed
actions.
GIVEN THAT OUTLOOK, WHAT ARE YOUR IMMEDIATE PLANS FOR PREMIUM CAPITAL RESERVE?
Steady as she goes for now. Because we expect a stable Fed interest rate
policy for the foreseeable future, we will probably keep Premium Capital
Reserve's average maturity longer than its historical norm.
[right margin]
"WE THINK THAT THE FED IS LIKELY TO MAINTAIN THE SAME 'WAIT-AND-SEE' APPROACH
TOWARD INTEREST RATES THAT IT HAS TAKEN SO FAR THIS YEAR."
PORTFOLIO COMPOSITION BY CREDIT RATING
% OF FUND INVESTMENTS
AS OF AS OF
3/31/99 9/30/98
A-1+ 92% 54%
A-1 8% 46%
Ratings provided by Standard & Poor's. See Credit Rating Guidelines on page 24
for more information.
www.americancentury.com 11
Premium Capital Reserve--Sched. of Investments
- --------------------------------------------------------------------------------
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER(1)--75.0%
BANKING--9.5%
$ 3,000,000 Banque National de Paris, 4.85%,
4/16/99 $ 2,993,938
12,500,000 Generale Bank, Inc.,
4.80%-4.89%,
4/7/99-8/12/99 12,426,526
11,400,000 Spintab-Swedmortgage AB,
4.84%-5.06%,
4/12/99-9/10/99 11,291,806
--------------
26,712,270
--------------
CREDIT CARD & TRADE RECEIVABLES--7.3%
10,200,000 Corporate Receivables Corp.,
4.83%-4.85%,
5/5/99-6/3/99 (Acquired
2/11/99-3/22/99, Cost
$10,098,680)(2) 10,132,628
10,500,000 Dakota Certificates (Citibank),
4.84%-4.90%,
4/6/99-7/9/99 (Acquired
1/12/99-3/22/99, Cost
$10,384,837)(2) 10,452,394
--------------
20,585,022
--------------
EDUCATION--0.7%
2,000,000 Leland Stanford University, 4.72%,
4/20/99 1,995,017
--------------
ENERGY (PRODUCTION & MARKETING)--17.8%
7,000,000 Chevron Transport Corp.,
4.84%-5.02%,
4/23/99-5/20/99 6,964,445
4,000,000 Chevron Transport Corp., 4.84%,
5/10/99 (Acquired 3/17/99,
Cost $3,970,960)(2) 3,979,027
3,000,000 Chevron U.K. Investment PLC,
4.84%, 4/27/99 2,989,513
7,290,000 Equilon Enterprises LLC,
4.79%-4.80%,
4/13/99-4/28/99 7,272,347
5,600,000 Koch Industries, Inc., 5.02%,
4/1/99 (Acquired 3/31/99,
Cost $5,599,219)(2) 5,600,000
7,500,000 Motiva Enterprises LLC,
4.84%-4.86%,
4/29/99-6/15/99 7,446,938
3,000,000 Motiva Enterprises LLC, 5.08%,
4/1/99 (Acquired 3/31/99,
Cost $2,999,577)(2) 3,000,000
1,000,000 Petrobras International Finance
Co., 4.82%, 9/8/99 (LOC:
Barclays Bank PLC) 978,578
Principal Amount Value
- --------------------------------------------------------------------------------
$12,200,000 Sand Dollar Funding LLC,
4.83%-4.92%,
4/8/99-5/24/99 (Acquired
1/6/99-3/24/99, Cost
$12,056,654)(2) $ 12,157,809
--------------
50,388,657
--------------
FINANCIAL SERVICES--28.8%
2,400,000 Contifinancial Corp., 4.80%,
5/14/99 2,386,240
7,000,000 Countrywide Home Loans, Inc.,
4.87%-4.89%,
5/20/99-5/24/99 (Acquired
3/19/99-3/25/99, Cost
$6,942,457)(2) 6,952,096
3,000,000 Credit Suisse First Boston, Inc.,
4.88%, 4/5/99 2,998,374
6,000,000 Falcon Asset Securities Corp.,
4.84%-4.88%,
4/20/99-6/17/99
(Acquired 2/26/99-3/16/99,
Cost $5,935,618)(2) 5,953,440
3,000,000 Finans Funding Corp. II, 4.85%,
6/3/99 (LOC: Rabobank
Nederland) 2,974,538
5,000,000 Garanti Funding Corp., 4.79%,
7/29/99 (LOC: Bayerische
Landesbank Girozentrale) 4,920,832
4,000,000 Garanti Funding Corp. II, 4.87%,
4/30/99 (LOC: Bayerische
Landesbank Girozentrale) 3,984,308
7,000,000 General Electric Capital Corp.,
5.03%, 4/1/99 7,000,000
4,000,000 General Electric Financial
Assurance Holdings, 4.84%,
5/17/99 3,975,262
6,200,000 General Electric Financial
Assurance Holdings, 4.85%,
7/14/99 (Acquired
3/11/99-3/12/99, Cost
$6,095,860)(2) 6,113,131
7,000,000 Morgan Stanley Dean Witter,
Discover & Co., 4.84%-4.85%,
5/21/99-5/24/99 6,951,679
7,400,000 Transamerica Asset Funding Corp.,
4.86%-4.91%,
4/27/99-6/11/99 (Acquired
2/5/99-3/16/99, Cost
$7,317,071)(2) 7,356,781
7,400,000 WCP Funding Inc., 4.86%-4.88%,
5/10/99-5/19/99 (Acquired
3/3/99-3/24/99, Cost
$7,338,420)(2) 7,356,105
12,465,000 Windmill Funding Corp.,
4.81%-4.90%,
4/27/99-5/14/99 (Acquired
1/25/99-3/22/99, Cost
$12,356,398)(2) 12,402,884
--------------
81,325,670
--------------
See Notes to Financial Statements
12 1-800-345-2021
Premium Capital Reserve--Sched. of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
FOOD & BEVERAGE--1.7%
$ 5,000,000 Diageo plc, 4.80%, 9/30/99
(Acquired 3/31/99, Cost
$4,881,333)(2) $ 4,881,333
--------------
INDUSTRIAL--2.1%
6,000,000 BTR Siebe plc, 4.85%-4.88%,
5/6/99-6/14/99 (Acquired
3/2/99-3/16/99, Cost
$5,933,878)(2) 5,950,633
--------------
INSURANCE--3.9%
3,600,000 Prudential Funding Corp., 4.79%,
4/30/99 3,586,109
7,500,000 SAFECO Corp., 4.90%-4.91%,
4/19/99-5/7/99 (Acquired
1/5/99-3/8/99, Cost
$7,408,661)(2) 7,475,475
--------------
11,061,584
--------------
METALS & MINING--0.7%
2,000,000 Rio Tinto America Inc., 4.85%,
7/2/99 (Acquired 3/30/99,
Cost $1,974,672)(2) 1,975,211
--------------
RUBBER & PLASTICS--2.5%
7,000,000 Formosa Plastics Corp. USA,
4.84%-4.85%,
4/13/99-5/7/99 (LOC:
Bank of America N.T. & S.A.) 6,979,013
--------------
TOTAL COMMERCIAL PAPER 211,854,410
--------------
CORPORATE DEBT--8.8%
FINANCIAL SERVICES--2.2%
1,100,000 Ford Motor Credit Co. MTN,
7.45%, 7/12/99 1,107,946
3,000,000 General Motors Acceptance Corp.
MTN, VRN, 5.07%, 6/4/99,
resets quarterly off the 3-month
LIBOR plus 0.04% with no caps 3,000,139
2,000,000 Merrill Lynch & Co., Inc. MTN,
Series B, VRN, 5.21%, 4/5/99,
resets quarterly off the 3-month
LIBOR plus 0.15% with no caps 2,000,055
--------------
6,108,140
--------------
INSURANCE--6.6%
1,500,000 General American Life Insurance
Company, VRN, 5.14%, 4/1/99,
resets monthly off the 1-month
LIBOR plus 0.20% with no caps
(Acquired 7/7/97, Cost
$1,500,000)(2) 1,500,000
Principal Amount Value
- --------------------------------------------------------------------------------
$ 4,500,000 General American Life Insurance
Company, VRN, 5.14%, 4/1/99,
resets monthly off the 1-month
LIBOR plus 0.20% with no caps
(Acquired 1/3/97, Cost
$4,500,000)(2) $ 4,500,000
3,000,000 Jackson National Life Insurance Co.,
VRN, 5.14%, 4/12/99, resets monthly
off the 1-month LIBOR plus 0.19% with
no caps (Acquired 6/10/98, Cost
$3,000,000)(2) 3,000,000
5,000,000 Transamerica Life Insurance Co.,
VRN, 5.09%, 4/1/99, resets monthly
off the 1-month LIBOR plus 0.13%
with no caps (Acquired 11/5/98, Cost
$5,000,000)(2) 5,000,000
3,000,000 Travelers Insurance Company (The),
VRN, 4.97%, 4/22/99, resets monthly
off the 1-month LIBOR plus 0.04% with
no caps (Acquired 5/22/98, Cost
$3,000,000)(2) 3,000,000
1,600,000 Travelers Insurance Company (The),
VRN, 4.99%, 4/9/99, resets monthly
off the 1-month LIBOR plus 0.04% with
no caps (Acquired 6/8/98, Cost
$1,600,000)(2) 1,600,000
--------------
18,600,000
--------------
TOTAL CORPORATE DEBT 24,708,140
--------------
CERTIFICATES OF DEPOSIT--7.4%
3,500,000 Abbey National Treasury Services
PLC, 5.04%, 2/8/00 3,499,070
4,000,000 Commerzbank AG (New York),
5.08%, 9/28/99 4,000,688
8,000,000 National Westminster Bank PLC
(New York), 4.98%-5.06%,
1/10/00-2/9/00 7,998,348
4,000,000 Royal Bank of Canada (New York),
5.07%-5.12%,
2/10/00-2/18/00 3,998,822
1,400,000 Westdeutsche Landesbank (New
York), 5.13%, 9/15/99 1,400,863
--------------
TOTAL CERTIFICATES OF DEPOSIT 20,897,791
--------------
ASSET-BACKED SECURITIES(3)--3.1%
461,404 Americredit Automobile Receivables
Trust, Series
1998 C, Class A1 SEQ, 5.64%,
9/12/99 461,404
See Notes to Financial Statements
www.americancentury.com 13
Premium Capital Reserve--Sched. of Investments
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
Principal Amount Value
- --------------------------------------------------------------------------------
$ 1,480,855 Americredit Automobile
Receivables Trust, Series
1998 D, Class A1 SEQ, 5.20%,
11/12/99 $ 1,480,858
1,887,735 Americredit Automobile Receivables
Trust, Series 1999 A, Class A1
SEQ, 4.98%, 3/12/00 1,887,735
389,256 Caterpillar Financial Asset Trust,
Series 1998 A, Class A1 SEQ,
5.64%, 7/26/99 389,256
1,399,905 Ford Credit Auto Owner Trust,
Series 1999 A, Class A1 SEQ,
5.01%, 7/15/99 1,399,905
1,170,146 Household Automobile Revolving Trust I,
Series 1998-1, Class A1 SEQ,
5.33%, 12/17/99 1,170,146
2,000,000 WFS Financial Owner Trust, Series 1999 A,
Class A1 SEQ,
5.01%, 2/20/00 2,000,000
--------------
TOTAL ASSET-BACKED SECURITIES 8,789,304
--------------
BANK NOTES--4.1%
3,000,000 American Express Centurion Bank,
VRN, 4.88%, 4/16/99, resets monthly
off the 1-month LIBOR
minus 0.06% with no caps 3,000,000
1,500,000 KeyBank N.A., VRN, 4.89%,
4/23/99, resets monthly off the
1-month LIBOR minus 0.045%
with no caps 1,499,895
Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,000,000 U.S. Bank NA Minnesota, VRN,
4.91%, 4/8/99, resets monthly
off the 1-month LIBOR minus
0.06% with no caps $ 2,999,694
4,000,000 U.S. Bank NA Minnesota, VRN,
4.81%, 4/8/99, resets monthly
off the 1-month LIBOR minus
0.12% with no caps 3,997,190
--------------
TOTAL BANK NOTES 11,496,779
--------------
U.S. GOVERNMENT AGENCY SECURITIES--1.6%
1,460,000 FHLB, 8.375%, 10/25/99 1,489,518
3,000,000 FNMA MTN, 5.78%, 4/5/00 3,000,785
--------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 4,490,303
--------------
TEMPORARY CASH INVESTMENTS(4)
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 4.90%, dated 3/31/99,
due 4/1/99 (Delivery value, $122,017) 122,000
--------------
TOTAL INVESTMENT SECURITIES--100.0% $282,358,727
==============
NOTES TO SCHEDULE OF INVESTMENTS
FHLB = Federal Home Loan Bank
FNMA = Federal National Mortgage Association
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MTN = Medium Term Note
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a security
resets, the less risk the investor is taking that the coupon will vary
significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective March 31, 1999.
(1) The rates for commercial paper are the yield to maturity at purchase.
(2) Security was purchased under Rule 144A or section 4(2) of the Securities
Act of 1933 or is a private placement and, unless registered under the Act
or exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at March 31, 1999,
was $135,338,947 which represented 49.0% of net assets. Restricted
securities considered illiquid represent 4.6% of net assets.
(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average maturity.
(4) Investment in category is less than 0.05% of total investment securities.
- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.
The schedule includes:
* a list of each investment
* the principal amount of each investment
* the amortized cost of each investment
* the percent and dollar breakdown of each investment category
See Notes to Financial Statements
14 1-800-345-2021
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
PREMIUM PREMIUM
MARCH 31, 1999 GOVERNMENT RESERVE CAPITAL RESERVE
ASSETS
Investment securities, at value
(amortized cost and cost for federal
income tax purposes) ....................... $ 120,683,201 $ 282,358,727
Cash ......................................... 818,740 2,387,493
Interest receivable .......................... 167,089 702,115
-------------- ---------------
121,669,030 285,448,335
-------------- ---------------
LIABILITIES
Disbursements in excess of
demand deposit cash ........................ 255,747 --
Payable for capital shares redeemed .......... 5,118 253,981
Payable for investments purchased ............ -- 8,878,523
Accrued management fees (Note 2) ............. 36,989 100,569
Dividends payable ............................ 77,566 166,585
Payable for directors' fees and expenses ..... 85 225
-------------- ---------------
375,505 9,399,883
-------------- ---------------
Net Assets ................................... $ 121,293,525 $ 276,048,452
============== ===============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized ................................... 1,000,000,000 1,000,000,000
============== ===============
Outstanding .................................. 121,293,525 276,051,506
============== ===============
Net Asset Value Per Share .................... $ 1.00 $ 1.00
============== ===============
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ........................... $ 121,293,525 $ 276,051,506
Accumulated net realized
loss on investments ........................ -- (3,054)
-------------- ---------------
$ 121,293,525 $ 276,048,452
============== ===============
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of shares outstanding gives you the price of an individual share, or the net
asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); and
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses). This breakdown tells you the
value of net assets that are performance-related, such as investment gains or
losses, and the value of net assets that are not related to performance, such as
shareholder investments and redemptions.
See Notes to Financial Statements
www.americancentury.com 15
Statements of Operations
- --------------------------------------------------------------------------------
PREMIUM PREMIUM
YEAR ENDED MARCH 31, 1999 GOVERNMENT RESERVE CAPITAL RESERVE
INVESTMENT INCOME
Income:
Interest .................................... $3,696,134 $11,404,919
---------- -----------
Expenses (Note 2):
Management fees ............................. 315,756 942,501
Directors' fees and expenses ................ 553 1,645
---------- -----------
316,309 944,146
---------- -----------
Net investment income ....................... 3,379,825 10,460,773
---------- -----------
Net realized gain on investments ............ 5,484 1,320
---------- -----------
Net Increase in Net Assets
Resulting from Operations ................. $3,385,309 $10,462,093
========== ===========
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF OPERATIONS--This statement breaks down how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.
Fund OPERATIONS include:
* income earned from investments
* management fees and other expenses
* gains or losses from selling investments (known as realized gains or losses)
See Notes to Financial Statements
16 1-800-345-2021
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
PREMIUM GOVERNMENT RESERVE PREMIUM CAPITAL RESERVE
Increase in Net Assets 1999 1998 1999 1998
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income .........$ 3,379,825 $ 2,319,208 $ 10,460,773 $ 8,912,910
Net realized gain (loss)
on investments .............. 5,484 (380) 1,320 (3,329)
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations ... 3,385,309 2,318,828 10,462,093 8,909,581
------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income .... (3,379,825) (2,319,208) (10,460,773) (8,912,910)
From net realized gains on
investment transactions ..... (5,104) -- -- --
------------- ------------- ------------- -------------
Decrease in net assets
from distributions .......... (3,384,929) (2,319,208) (10,460,773) (8,912,910)
------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from shares sold ..... 483,425,779 115,269,165 533,120,417 380,763,052
Proceeds from reinvestment
of distributions ............ 3,241,460 2,261,393 9,901,509 8,514,911
Payments for shares redeemed .. (409,868,798) (111,873,462) (449,461,484) (360,745,777)
------------- ------------- ------------- -------------
Net increase in net assets
from capital share
transactions ................ 76,798,441 5,657,096 93,560,442 28,532,186
------------- ------------- ------------- -------------
Net increase in net assets .... 76,798,821 5,656,716 93,561,762 28,528,857
NET ASSETS
Beginning of year ............. 44,494,704 38,837,988 182,486,690 153,957,833
------------- ------------- ------------- -------------
End of year ...................$ 121,293,525 $ 44,494,704 $ 276,048,452 $ 182,486,690
============= ============= ============= =============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold .......................... 483,425,779 115,269,165 533,120,417 380,763,071
Issued in reinvestment
of distributions ............ 3,241,460 2,261,393 9,901,509 8,514,911
Redeemed ...................... (409,868,798) (111,873,462) (449,461,484) (360,745,777)
------------- ------------- ------------- -------------
Net increase .................. 76,798,441 5,657,096 93,560,442 28,532,205
============= ============= ============= =============
</TABLE>
- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
each fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:
* operations--a summary of the Statement of Operations from the previous page
for the most recent period
* distributions--income and gains distributed to shareholders
* share transactions--shareholders' purchases, reinvestments, and redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
See Notes to Financial Statements
www.americancentury.com 17
Notes to Financial Statements
- --------------------------------------------------------------------------------
MARCH 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- American Century Premium Reserves, Inc. (the corporation)
is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Premium Government Reserve Fund
(Government Reserve) and Premium Capital Reserve Fund (Capital Reserve) (the
funds) are two of the three funds issued by the corporation. The investment
objective of Government Reserve and Capital Reserve is to obtain as high a level
of current income as is consistent with preservation of capital and maintenance
of liquidity. The following significant accounting policies are in accordance
with generally accepted accounting principles; these principles may require the
use of estimates by fund management.
SECURITY VALUATIONS -- Securities are valued at amortized cost, which
approximates current value. When valuations are not readily available,
securities are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
SECURITY TRANSACTIONS -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
REPURCHASE AGREEMENTS -- The funds may enter into repurchase agreements
with institutions that the funds' investment manager, American Century
Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to
criteria adopted by the Board of Directors. Each repurchase agreement is
recorded at cost. The funds require that the collateral, represented by
securities, received in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the funds to obtain those securities in the
event of a default under the repurchase agreement. ACIM monitors, on a daily
basis, the securities transferred to ensure the value, including accrued
interest, of the securities under each repurchase agreement is equal to or
greater than amounts owed to the funds under each repurchase agreement.
JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account held at the funds'
custodian. These balances are invested in one or more repurchase agreements that
are collateralized by U.S. Treasury or Agency obligations.
INCOME TAX STATUS -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. The funds do not expect to realize
any long-term capital gains and, accordingly do not expect to pay any long-term
capital gains distributions.
At March 31, 1999, accumulated net realized short-term capital loss
carryovers of $3,052 for Capital Reserve (expiring 2004 through 2007) may be
used to offset future taxable gains.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
ADDITIONAL INFORMATION -- Funds Distributor, Inc. (FDI) is the
corporation's distributor. Certain officers of FDI are also officers of the
corporation.
18 1-800-345-2021
Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
MARCH 31, 1999
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES
The corporation has entered into a Management Agreement with ACIM that
provides the funds with investment advisory and management services in exchange
for a single, unified fee. The Agreement provides that all expenses of the
funds, except brokerage commissions, taxes, interest, expenses of those
directors who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses, will be paid by ACIM. The fee is computed daily and paid monthly based
on each fund's average daily closing net assets during the previous month. The
annual management fee for each fund is 0.45%.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, and
the corporation's transfer agent, American Century Services Corporation.
- --------------------------------------------------------------------------------
3. FUND EVENTS
The following name changes became effective March 1, 1999:
==================================================================
NEW NAME FORMER NAME
==================================================================
FUND: Premium Government American Century - Benham Premium
Reserve Fund Government Reserve
FUND: Premium Capital American Century - Benham Premium
Reserve Fund Capital Reserve
www.americancentury.com 19
Premium Gov't. Reserve--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
1999 1998 1997 1996 1995
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 0.05
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ......... (0.05) (0.05) (0.05) (0.05) (0.05)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return(1) .................... 4.98% 5.25% 5.07% 5.49% 4.62%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ................ 0.45% 0.45% 0.45% 0.44% 0.45%
Ratio of Net Investment Income
to Average Net Assets ................ 4.82% 5.13% 4.96% 5.30% 4.84%
Net Assets, End of Year
(in thousands) ....................... $ 121,294 $ 44,495 $ 38,838 $ 26,191 $ 16,381
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provide comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income
* income distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
See Notes to Financial Statements
20 1-800-345-2021
<TABLE>
<CAPTION>
Premium Capital Reserve--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31
1999 1998 1997 1996 1995
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 0.05
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ......... (0.05) (0.05) (0.05) (0.05) (0.05)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return(1) .................... 5.14% 5.38% 5.13% 5.58% 4.66%
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 ................ 4.99% 5.26% 5.01% 5.50% 4.76%
Net Assets, End of Year
(in thousands) ....................... $ 276,048 $ 182,487 $ 153,958 $ 133,417 $ 138,428
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provide comparison data for the last five fiscal
years.
On a per-share basis, it includes:
* share price at the beginning of the period
* investment income
* income distributions paid to shareholders
* share price at the end of the period
It also includes some key statistics for the period:
* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions
* expense ratio--operating expenses as a percentage of average net assets
* net income ratio--net investment income as a percentage of average net assets
See Notes to Financial Statements
www.americancentury.com 21
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
American Century Premium Reserves, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Premium Government Reserve Fund and
Premium Capital Reserve Fund (formerly American Century - Benham Premium
Government Reserve and American Century - Benham Premium Capital Reserve,
respectively) (the "Funds"), two of the funds comprising American Century
Premium Reserves, Inc., as of March 31, 1999, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
the financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Premium Government
Reserve Fund and Premium Capital Reserve as of March 31, 1999, the results of
their operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 7, 1999
22 1-800-345-2021
Retirement Account Information
- --------------------------------------------------------------------------------
RETIREMENT ACCOUNT INFORMATION
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid from the date of
receipt at American Century. Even if you plan to rollover the amount you
withdraw to another tax-deferred account, the withholding rate still applies to
the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
www.americancentury.com 23
Background Information
- --------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY AND POLICIES
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.
In addition to these principles, each fund has its own investment policies:
PREMIUM GOVERNMENT RESERVE and PREMIUM CAPITAL RESERVE seek to provide
interest income while maintaining a stable share price. Premium Government
Reserve invests in U.S. government money market securities, while Premium
Capital Reserve invests in a diversified portfolio of money market securities.
An investment in the funds is neither insured nor guaranteed by the FDIC or
any other government agency. Yields will fluctuate, and although the funds seek
to preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the funds.
COMPARATIVE INDICES
The following index is used in the report for a fund performance
comparison. It is not an investment product available for purchase.
The 90-DAY TREASURY BILL INDEX is derived from secondary market interest
rates as published by the Federal Reserve Bank.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The Lipper categories for the Premium Reserve Money Market funds are:
INSTITUTIONAL U.S. GOVERNMENT MONEY MARKET FUNDS (Premium Government
Reserve)--funds with dollar-weighted average maturities of less than 90 days
that intend to maintain a stable net asset value and that invest principally in
financial instruments issued or guaranteed by the U.S. government, its agencies,
or instrumentalities.
INSTITUTIONAL MONEY MARKET FUNDS (Premium Capital Reserve)--funds with
dollar-weighted average maturities of less than 90 days that intend to maintain
a stable net asset value and that invest in high-quality financial instruments
rated in the top two grades.
But unlike most of the funds in their Lipper categories, the Premium
Reserve Money Market funds are not really institutional funds. Instead, they are
intended for high-net-worth individual investors. Institutional funds typically
have higher minimum balance requirements (often $1 million or more) and, more
importantly, lower expenses. The Premium Reserve Money Market funds' higher
expenses give them a disadvantage compared with their Lipper group.
However, the Premium Reserve Money Market funds have lower expenses than
the average non-institutional money market fund (according to Lipper), so they
can offer attractive yields to individuals able to meet their $100,000
investment minimum.
[left margin]
INVESTMENT TEAM LEADERS
PORTFOLIO MANAGERS
AMY O'DONNELL
DENISE TABACCO
JOHN WALSH
CREDIT RATING GUIDELINES
CREDIT RATINGS ARE ISSUED BY INDEPENDENT RESEARCH COMPANIES SUCH AS
STANDARD & POOR'S AND MOODY'S. RATINGS ARE BASED ON AN ISSUER'S FINANCIAL
STRENGTH AND ABILITY TO PAY INTEREST AND PRINCIPAL IN A TIMELY MANNER.
A-1+ AND A-1 ARE STANDARD & POOR'S HIGHEST RATINGS FOR COMMERCIAL PAPER.
IT'S IMPORTANT TO NOTE THAT CREDIT RATINGS ARE SUBJECTIVE, REFLECTING THE
OPINIONS OF THE RATING AGENCIES; THEY ARE NOT ABSOLUTE STANDARDS OF QUALITY.
24 1-800-345-2021
Glossary
- --------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in the fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 20-21.
YIELDS
* 7-DAY CURRENT YIELD is calculated based on the income generated by an
investment in the fund over a seven-day period and is expressed as an annual
percentage rate.
* 7-DAY EFFECTIVE YIELD is calculated similarly, although this figure is
slightly higher than the fund's 7-Day Current Yield because of the effects of
compounding. The 7-Day Effective Yield assumes that income earned from the
fund's investments is reinvested and generating additional income.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by the fund on
a given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
TYPES OF MONEY MARKET SECURITIES
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a pool
of receivables, such as credit card debt, auto loans, or mortgages.
* BANK NOTES -- promissory notes issued in the U.S. by domestic commercial
banks.
* CERTIFICATES OF DEPOSIT (CDS) -- CDs represent a bank's obligation to repay
money deposited with it for a specified period of time.
* COMMERCIAL PAPER (CP) -- short-term debt issued by large corporations to raise
cash and to cover current expenses in anticipation of future revenues.
* REPURCHASE AGREEMENTS (REPOS) -- short-term debt agreements in which a fund
buys a security at one price and simultaneously agrees to sell it back to the
seller at a slightly higher price on a specified date (usually within seven
days). The fund does not own the security; instead, the security serves as
collateral for the agreement.
* U.S. GOVERNMENT AGENCY NOTES -- intermediate-term debt securities issued by
U.S. government agencies (such as the Federal Home Loan Bank). These notes are
issued with maturities ranging from three months to 30 years, but the funds only
invest in those with remaining maturities of 13 months or less.
www.americancentury.com 25
Glossary
- --------------------------------------------------------------------------------
(Continued)
* U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- short-term debt securities issued by
U.S. government agencies (such as the Federal Home Loan Bank). These notes are
issued at a discount and achieve full value at maturity (typically one year or
less).
* VARIABLE-RATE NOTES (VRNS) -- debt securities whose interest rates change when
a designated base rate changes. The base rate is often the federal funds rate,
the 90-day Treasury bill rate, or the London Interbank Offered Rate.
FUND CLASSIFICATIONS
INVESTMENT OBJECTIVE
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
* CAPITAL PRESERVATION -- Offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- Offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
* GROWTH & INCOME -- Offers funds that emphasize both growth and income,
diversification, varying capitalization sizes, and different investment styles
and strategies.
* GROWTH -- Offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high price
fluctuation risk.
RISK
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that the fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price fluctuation risk.
26 1-800-345-2021
Notes
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www.americancentury.com 27
Notes
- --------------------------------------------------------------------------------
28 1-800-345-2021
[inside back cover]
===============================================================================
INVESTMENT OBJECTIVE - CAPITAL PRESERVATION
===============================================================================
RISK LEVEL - CONSERVATIVE
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
===============================================================================
INVESTMENT OBJECTIVE - INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
RISK LEVEL - MODERATE
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
RISK LEVEL - CONSERVATIVE
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term Tax-Free
Intermediate-Term Treasury AZ Intermediate-Term Municipal
GNMA FL Intermediate-Term Municipal
Inflation-Adjusted Treasury Intermediate-Term Tax-Free
Limited-Term Bond CA Limited-Term Tax-Free
Target 2000* Limited-Term Tax-Free
Short-Term Government
Short-Term Treasury
===============================================================================
INVESTMENT OBJECTIVE - GROWTH AND INCOME
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
RISK LEVEL - MODERATE
ASSET ALLOCATION/BALANCED DOMESTIC EQUITY SPECIALTY
Strategic Allocation -- Equity Growth Utilities
Aggressive Equity Index Real Estate
Balanced Tax-Managed Value
Strategic Allocation -- Income & Growth
Moderate Value
Strategic Allocation -- Equity Income
Conservative
===============================================================================
INVESTMENT OBJECTIVE - GROWTH
===============================================================================
RISK LEVEL - AGGRESSIVE
DOMESTIC EQUITY SPECIALTY INTERNATIONAL
New Opportunities Global Gold Emerging Markets
Giftrust(reg.tm) International Discovery
Vista International Growth
Heritage Global Growth
Growth
Ultra
Select
RISK LEVEL - MODERATE
SPECIALTY
Global Natural Resources
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs.
For a definition of fund categories, see the Glossary.
* While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call for a prospectus or profile on any American Century fund. These
documents contain important information including charges and expenses, and you
should read them carefully before you invest or send money.
[back cover]
[american century logo(reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533
AMERICAN CENTURY PREMIUM RESERVES, INC.
INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI
THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
9905 Funds Distributor, Inc.
SH-BKT-16274 (c)1999 American Century Services Corporation
