AMERICAN CENTURY PREMIUM RESERVES INC, 485APOS, 1999-05-07

AMERICAN CENTURY PREMIUM RESERVES INC
485APOS, 1999-05-07

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

File No. 33-57430

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 8 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

File No. 811-7446

Amendment No. 8 [X]

(Check appropriate box or boxes)

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

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

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

David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________
(Name and address of Agent for Service)

Approximate Date of Proposed Public Offering July 6, 1999

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
AMERICAN CENTURY

PROSPECTUS

JULY 6, 1999
- --------------------------------------------------------------------------------

PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
PREMIUM BOND

INVESTOR CLASS

The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete. Anyone who
tells you otherwise is committing a crime.

Distributed by Funds Distributor, Inc.

Dear Investor,

Reading a prospectus doesn't have to be a chore. We've done the hard work so you
can focus on what's important--learning about the funds and tracking your
investments. Take a look inside, and you'll see this prospectus is different. It
takes a clear-cut approach to fund information.

Here's what you'll find:

o The funds' primary investments and risks
o A description of who may or may not want to invest in the funds
o Fund performance, including returns for each year, best and worst quarters,
and average annual returns compared to the funds' benchmarks
o An overview of services available and ways to manage your accounts
o Helpful tips and definitions of key investment terms

Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Investor Relations Representatives are available weekdays, 7
a.m. to 7 p.m., and Saturdays, 9 a.m. to 2 p.m., Central time. Our toll-free
number is 1-800-345-2021. We look forward to helping you achieve your financial
goals.

Sincerely,

Mark Killen
Senior Vice President
American Century Investment Services, Inc.

TABLE OF CONTENTS

An Overview of the Funds......................................................2

Fund Performance History......................................................3

Fees and Expenses.............................................................4

Information about the Funds...................................................5
Premium Government Reserve Fund
Premium Capital Reserve Fund
Premium Bond Fund

Basics of Fixed-Income Investing..............................................X

Management....................................................................X

Investing with American Century..............................................XX

Share Price and Distributions................................................XX

Taxes........................................................................XX

Financial Highlights.........................................................XX

**********LEFT MARGIN CALLOUTS

Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in GREEN ITALICS, look for its definition
in the left margin.

o........This symbol highlights special information and helpful tips.

**********END LEFT MARGIN CALLOUTS

AN OVERVIEW OF THE FUNDS

WHAT ARE THE FUNDS' INVESTMENT GOALS?

Premium Government Reserve and Premium Capital Reserve are money market funds
that seek to earn the highest level of current income while preserving the value
of your investment.

Premium Bond seeks a high level of income by investing primarily in non-money
market debt securities.

WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?

A more detailed description of the funds' investment strategies and risks begins
on page XX.

<TABLE>
Fund Primary Investments Principal Risks
- --------------------------- ---------------------------------------------- -------------------------------
<S> <C> <C>
Premium Government Reserve Very short-term U.S. government securities Lower yield than longer-term
or lower-quality securities

Premium Capital Reserve High-quality cash-equivalent securities of Lower yield than longer-term
banks, governments and corporations or lower-quality securities

Premium Bond High- and medium-grade non-money market debt Interest rate and credit risk
securities
- --------------------------- ---------------------------------------------- -------------------------------
</TABLE>

As with all funds, at any given time, the value of your shares may be worth more
or less than the price you paid. If you sell your shares when the value is less
than the price you paid, you will lose money.

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you are

|X| seeking current income

|X| in the case of the money market funds, more concerned with preservation of
capital than long-term investment performance

|X| comfortable with the funds' other investment risks

WHO MAY NOT WANT TO INVEST IN THE FUNDS?

The funds may not be a good investment if you are

|X| investing for long-term growth

|X| looking for the added security of FDIC insurance

**********LEFT MARGIN CALLOUTS

DEBT SECURITIES include fixed-income investments such as notes, bonds,
commercial paper and Treasury bills. Very short-term debt securities (those with
maturities shorter than one year) are called money market instruments.

o An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the money market funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose money
by investing in them.

**********END LEFT MARGIN CALLOUTS

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS (1)
The following bar chart shows the performance of the funds' Investor Class
shares for each full calendar year in the life of the fund. It indicates the
volatility of the funds' historical returns from year to year.

<TABLE>
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Premium Government Reserve 5.15 5.20 5.10 5.63 3.90
Premium Capital Reserve 5.29 5.31 5.16 5.70 3.97
Premium Bond 7.85 8.85 2.73 20.10 -4.10
</TABLE>

1 As of June 30, 1999, the end of the most recent calendar quarter, Premium
Government Reserve's year-to-date return was _.__%; Premium Capital
Reserve's year-to-date return was _.__%; and Premium Bond's year-to-date
return was __.__%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
Premium Government Reserve _.__% (_Q 199_) _.__% (_Q 199_)
Premium Capital Reserve _.__% (_Q 199_) _.__% (_Q 199_)
Premium Bond _.__% (_Q 199_) _.__% (_Q 199_)

AVERAGE ANNUAL RETURNS

The following table shows the average annual returns of the funds' Investor
Class shares for the periods indicated. The benchmark is an unmanaged index that
has no operating costs and is included in the table for performance comparison.

1 year 5 years Life of
Fund(1)
- --------------------------------------------------------------------------------
Premium Government Reserve 4.98% 5.08% 4.69%
90 - Day Treasury Bill Index 4.72% 5.09% 4.76%
Premium Capital Reserve 5.14% 5.18% 4.78%
90 - Day Treasury Bill Index 4.72% 5.09% 4.76%
Premium Bond 5.88% 7.47% 6.35%
Lehman Aggregate Bond Index 6.49% 7.79% 6.87%

1 The inception date for the funds is April 1, 1993.

**********LEFT MARGIN CALLOUTS

o The performance information on this page is designed to help you see how
fund returns can vary. Keep in mind that past performance does not predict
how the funds will perform in the future.

o For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com.

**********END LEFT MARGIN CALLOUTS

FEES AND EXPENSES

There are no sales loads, fees or other charges

o to buy fund shares directly from American Century
o to reinvest dividends in additional shares
o to exchange into the Investor Class shares of other American Century funds
o to redeem your shares

The following table describes the fees and expenses that you will pay if you buy
and hold shares of the funds.

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fee Distribution and Other Total Annual Fund
Service (12b-1) Fees Expenses1 Operating Expenses
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
<S> <C> <C> <C>
Premium Government Reserve 0.45% None 0.00% 0.45%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Premium Capital Reserve 0.45% None 0.00% 0.45%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
Premium Bond 0.45% None 0.00% 0.45%
</TABLE>

1 Other expenses, which include the fees and expenses of the funds'
independent directors, their legal counsel and interest, were less than
0.005% for the most recent fiscal year.

EXAMPLE

The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you ...

o invest $10,000 in the fund
o redeem all of your shares at the end of the periods shown below
o earn a 5% return each year
o incur the same operating expenses as shown above

... your cost of investing in the fund would be:
<TABLE>
1 year 3 years 5 years 10 years

**********LEFT MARGIN CALLOUTS

o Use this example to compare the costs of investing in other funds. Of
course, your actual costs may be higher or lower.

**********END LEFT MARGIN CALLOUTS

INFORMATION ABOUT THE FUNDS

PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
PREMIUM BOND

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

Premium Government Reserve and Premium Capital Reserve are money market funds
that seek to earn the highest level of current income while preserving the value
of your investment.

Premium Bond seeks a high level of income by investing primarily in non-money
market debt securities.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

PREMIUM GOVERNMENT RESERVE
Premium Government Reserve invests in very short-term U.S. government
securities. These securities may include direct obligations of the United
States, such as Treasury bills, notes and bonds. They may also include
obligations, such as mortgage-related securities, issued or guaranteed by
agencies and instrumentalities of the U.S. government.

PREMIUM CAPITAL RESERVE
Premium Capital Reserve invests in HIGH-QUALITY, cash-equivalent securities.
These securities include the kinds of U.S. government securities in which
Premium Government Reserve may invest as well as short-term bank and corporate
obligations that are payable in U.S. dollars.

PREMIUM BOND
Premium Bond invests primarily in high- and medium-grade, non-money market debt
securities. These securities, which may be payable in U.S. or foreign
currencies, may include corporate bonds and notes, government securities and
securities backed by mortgages or other assets. Shorter-term debt securities
round out the portfolio.

The fund invests most of its assets in QUALITY debt securities. However, up to
15% of the fund's assets may be invested in securities rated in the fifth
highest category by an independent rating agency, or determined to be of
comparable quality by the advisor. Corporations usually issue these securities
to finance existing operations or expand their businesses.

The WEIGHTED AVERAGE MATURITY of the fund's portfolio must be three and one-half
years or longer. During periods of rising interest rates, the fund managers may
adopt a shorter portfolio maturity in order to reduce the effect of bond price
declines on the fund's value. When interest rates are falling and bond prices
are rising, they may adopt a longer portfolio maturity.

For more information about the funds' credit quality standards and about credit
risk, please see "Basics of Fixed-Income Investing" beginning on page XX.

Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.

**********LEFT MARGIN CALLOUTS

A HIGH-QUALITY debt security is one that has been determined to be in the top
two credit quality categories. A QUALITY, or investment-grade, security is one
that has been determined to be in the top four credit quality categories. This
can be established in a number of ways. For example, independent rating agencies
may rate the security in their higher rating categories. The funds' advisor also
can analyze an unrated security to determine if its credit quality is high
enough for investment. The details of the funds' credit quality standards are
described in the Statement of Additional Information.

WEIGHTED AVERAGE MATURITY is described in more detail under "Basics of
Fixed-Income Investing."

**********END LEFT MARGIN CALLOUTS

WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?

PREMIUM GOVERNMENT RESERVE
PREMIUM CAPITAL RESERVE
Because very short-term U.S. government securities and other cash-equivalent
securities are among the safest securities available, the interest they pay is
among the lowest for income-paying securities. Accordingly, the yield on these
funds will likely be lower than funds that invest in longer-term or
lower-quality securities.

PREMIUM BOND
When interest rates change, Premium Bond's share value will be affected.
Generally, when interest rates rise, the fund's share value will decline. The
opposite is true when interest rates decline. This interest rate risk is higher
for Premium Bond than for funds that have shorter weighted average maturities,
such as money market and short-term bond funds.

Although most of the securities purchased by the fund are quality debt
securities at the time of purchase, the fund may invest part of its assets in
securities rated in the lowest investment-grade category (e.g., BBB) and up to
15% of its assets in securities rated in the fifth category (e.g., BB). As a
result, the fund has some credit risk. Although they are considered investment
grade, issuers of BBB-rated securities (and securities of similar quality) are
more likely to have problems making interest and principal payments than issuers
of higher-rated securities. Issuers of BB-rated securities (and securities of
similar quality) are considered to face major uncertainties or exposure to
adverse business, financial or economic conditions that could lead to
difficulties in make timely payments of principal and interest.

The fund may invest in debt securities backed by assets such as mortgages and
credit card receivables. These underlying obligations may be prepaid, as when a
homeowner refinances a mortgage to take advantage of declining interest rates.
If so, the fund must reinvest prepayments at current rates, which may be less
than the rate of the prepaid mortgage. Because of this prepayment risk, the fund
may benefit less from declining interest rates than funds of similar maturity
that invest less heavily in asset-backed securities.

The fund's share value will fluctuate. In general, the funds that have higher
potential income have higher potential loss. If you sell your shares when their
value is less than the price you paid, you will lose money.

BASICS OF FIXED-INCOME INVESTING

DEBT SECURITIES

When a fund buys a debt security, which is also called a fixed-income security,
it is essentially lending money to the issuer of the security. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
debt security is first sold by the issuer, it may be bought and sold by other
investors. The price of the security may rise or fall based on many factors,
including changes in interest rates, inflation and liquidity.

The fund managers decide which debt securities to buy and sell by

|X| determining which securities help a fund meet its maturity requirements

|X| eliminating securities that do not satisfy a fund's credit quality
standards

|X| evaluating the current economic conditions and assessing the risk of
inflation

|X| evaluating special features of the securities that may make them more or
less attractive

WEIGHTED AVERAGE MATURITY

Like most loans, debt securities eventually must be repaid (or refinanced) at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, the more sensitive it is to changes in
interest rates.

Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all of the debt securities the fund
owns to evaluate the interest rate sensitivity of the entire portfolio. This
average is weighted according to the size of the fund's individual holdings and
is called WEIGHTED AVERAGE MATURITY. The following chart shows how a fund
manager would calculate the weighted average maturity for a fund that owned only
two debt securities.

<TABLE>
Amount of Security Owned Percent of Portfolio Remaining Maturity Weighted Maturity
- ---------------------- ------------------------------ ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Debt Security A $100,000 25% 1,000 days 250 days
Debt Security B $300,000 75% 10,000 days 7,500 days
WEIGHTED AVERAGE MATURITY 7,750 DAYS
</TABLE>

TYPES OF RISK

The basic types of risk that the funds face are described below.

INTEREST RATE RISK

Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the funds invests primarily
in debt securities, changes in interest rates will affect the funds'
performance.

The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each fund. For example, when
interest rates rise, you can expect the share value of a long-term bond fund to
fall more than that of a short-term bond fund. When rates fall, the opposite is
true. This sensitivity to interest rate changes is called interest rate risk.

When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the effect of a 1% increase in interest rates
on the price of 7% coupon bonds of differing maturities:

<TABLE>
Remaining Maturity Current Price Price after 1% increase Change in price
- ---------------------- --------------------- --------------------------- ------------------------
<S> <C> <C> <C>
1 year $100.00 $99.06 -0.94%
3 years $100.00 $97.38 -2.62%
10 years $100.00 $93.20 -6.80%
30 years $100.00 $88.69 -11.31%
</TABLE>

***********LEFT MARGIN CALLOUTS

Very short-term debt securities (those with maturities shorter than one year)
are called money market instruments.

WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.

o The longer a fund's weighted average maturity, the more sensitive it is to
changes in interest rates.

***********END LEFT MARGIN CALLOUTS

CREDIT RISK

Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
non-payment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.

It's not as simple as buying the highest rated debt securities. Higher credit
ratings usually mean lower interest rates, so investors often purchase
securities that aren't the highest rated to increase return. If a fund purchases
lower rated securities, it has assumed additional credit risk.

The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.

<TABLE>
- -------------------------------------------------- -----------------------------------------------------------------------
INVESTMENT GRADE NON-INVESTMENT GRADE
- -------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
- -------------------------- --------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
Premium Government *******
Reserve ******************
- -------------------------- --------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
Premium Capital Reserve***
- -------------------------- --------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
Premium Bond************************************************
- -------------------------- --------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
</TABLE>

Securities rated in one of the highest two categories by a nationally recognized
securities rating organization (e.g., Moody's or Standard & Poor's) are
considered "high quality." Although they are considered high quality, an
investment in these securities still involves some credit risk since a AAA
rating is not a guarantee of payment. For a complete description of the ratings
system, see "Explanation of Fixed-Income Securities Ratings" in the Statement of
Additional Information. The funds' credit quality restrictions apply at the time
of purchase; the fund will not necessarily sell securities if they are
downgraded by a rating agency.

LIQUIDITY RISK

Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.

INFLATION RISK

The safest investments usually have the lowest potential income and performance.
There is a risk, then, that returns from the investment may fail to
significantly outpace inflation. Even if the value of your investment has not
gone down, your money will not be worth as much as if there had been no
inflation. Your after-inflation return may be quite small. This risk is called
inflation risk.

**********LEFT MARGIN CALLOUTS

o Credit quality may be lower when the issuer has
o a high debt level
o a short operating history
o a senior level of debt
o a difficult, competitive environment

o The Statement of Additional Information provides a detailed description of
these securities ratings.

**********END LEFT MARGIN CALLOUTS

The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.

MANAGEMENT

WHO MANAGES THE FUNDS?

The Board of Directors, investment advisor and fund management team play key
roles in the management of the funds.

THE BOARD OF DIRECTORS

The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired an investment advisor to do
so. More than two-thirds of the directors are independent of the funds' advisor;
that is, they are not employed by and have no financial interest in the advisor.

THE INVESTMENT ADVISOR

The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958. American Century is
headquartered at 4500 Main Street, Kansas City, Missouri 64111.

The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.

For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class of shares of the funds. The rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (money market,
bond or equity) and the total amount of mutual fund assets the advisor manages.

The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent directors (including legal
counsel fees) and extraordinary expenses. A portion of the management fee may be
paid by the fund's advisor to unaffiliated third parties who provide
recordkeeping and administrative services that would otherwise be performed by
an affiliate of the advisor.

MANAGEMENT FEES PAID BY THE FUND TO THE ADVISOR
AS A PERCENTAGE OF AVERAGE NET ASSETS
FOR THE MOST RECENT FISCAL YEAR ENDED MARCH 31, 1999
- ------------------------------------------------------------------------
- -------------------------------------------------------- ---------------
Premium Government Reserve 0.45%
- -------------------------------------------------------- ---------------
Premium Capital Reserve 0.45%
- -------------------------------------------------------- ---------------
Premium Bond 0.45%

THE FUND MANAGEMENT TEAMS

The advisor uses teams of portfolio managers, assistant portfolio managers and
analysts to manage the funds. Teams meet regularly to review portfolio holdings
and to discuss purchase and sale activity. Team members buy and sell securities
for a fund as they see fit, guided by the fund's investment objective and
strategy.

The portfolio manager who leads each team is identified below:

PREMIUM GOVERNMENT RESERVE
DENISE TABACCO
Ms. Tabacco, Portfolio Manager, has been a member of the team that manages
Premium Government Reserve since November 1995. She joined American Century in
1988, becoming a member of its portfolio department in 1991. She has a
bachelor's degree in accounting from San Diego State University and an MBA in
finance from Golden Gate University.

PREMIUM CAPITAL RESERVE
JOHN T. WALSH
Mr. Walsh, Portfolio Manager, has been a member of the team that manages Premium
Capital Reserve since May 1997.He joined American Century in 1996 as an
Investment Analyst. Prior to joining American Century, he served as an Assistant
Vice President and and Analyst at First Interstate Bank, Los Angeles,
California, from July 1993 to January 1996. He has a bachelor's degree in
marketing from Loyola Marymount and an MBA in finance from Creighton University.

PREMIUM BOND
JEFFREY L. HOUSTON
Mr. Houston, Portfolio Manager, has been a member of the team that manages
Premium Bond since June 1995. He joined American Century in 1990 as an
Investment Analyst and was promoted in 1994 to Portfolio Manager. He has a
bachelor of arts from the University of Delaware and an MBA from Syracruse
University. He is a Chartered Financial Analyst.

**********LEFT MARGIN CALLOUTS

o CODE OF ETHICS
American Century has a Code of Ethics designed to ensure that the interests
of fund shareholders come before the interests of the people who manage the
funds. Among other provisions, the Code of Ethics prohibits portfolio
managers and other investment personnel from buying securities in an
initial public offering or from profiting from the purchase and sale of the
same security within 60 calendar days. In addition, the Code of Ethics
requires portfolio managers and other employees with access to information
about the purchase or sale of securities by the funds to obtain approval
before executing permitted personal trades.

**********END LEFT MARGIN CALLOUTS

FUNDAMENTAL INVESTMENT POLICIES

Fundamental investment policies contained in the Statement of Additional
Information and the investment objective of the funds may not be changed without
a shareholder vote. The Board of Directors may change any other policies and
investment strategies.

YEAR 2000 ISSUES

Many of the world's computer systems were originally programmed in a way that
prevented them from properly recognizing or processing date-sensitive
information relating to the Year 2000 and beyond. Because this may impact the
computer systems of various American Century-affiliated and external service
providers for the funds, American Century formally initiated a Year 2000
readiness project in July 1997. It involves a team of information technology
professionals assisted by outside consultants and guided by a senior-level
steering committee. The team's goal is to assess the impact of the Year 2000 on
American Century's systems, renovate or replace noncompliant critical systems
and test those systems. In addition, the team has been working to gather
information about the Year 2000 efforts of the funds' other major service
providers.

Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the funds' business,
particularly the provision of shareholder services, may be hampered.

In addition, the issuers of securities the funds own could have Year 2000
computer problems. Foreign issuers, especially those in emerging markets, may be
more susceptible to such problems than U.S. issuers. These problems could
negatively affect the value of the issuers' securities, which, in turn, could
impact the funds' performance. The advisor has established a process to gather
publicly available information about the Year 2000 readiness of these issuers.
However, this process may not uncover all relevant information, and the
information gathered may not be complete and accurate. Moreover, an issuer's
Year 2000 readiness is only one of many factors the fund managers may consider
when making investment decisions, and other factors may receive greater weight.

INVESTING WITH AMERICAN CENTURY

SERVICES AUTOMATICALLY AVAILABLE TO YOU
You automatically will have access to the services listed below when you open
your account. If you do not want these services, see "Conducting Business in
Writing" below.

CONDUCTING BUSINESS IN WRITING
If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.

<TABLE>
<CAPTION>
Ways to Manage Your Account
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
<S> <C> <C>
By telephone Open an account Make additional investments
Investor Relations If you are a current investor, you can open Call us or use our Automated Information Line
1-800-345-2021 an account by exchanging shares from another if you have authorized us to invest from your
American Century account. bank account.
Business, Not-For-Profit
And Employer-Sponsored Exchange shares Sell shares
Retirement Plans Call us or use our Automated Information Call an Investor Relations Representative.
1-800-345-3533 Line if you have authorized us to accept
telephone instructions.
Automated Information Line
1-800-345-8765
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
By mail or fax Open an account Make additional investments
P.O. Box 419200 Send a signed and completed application and Send us your check or money order for at
Kansas City, MO 64141-6200 check or money order payable to American least $50 with an investment slip or $250
Century Investments. without an investment slip. If you don't have
Fax 816-340-7962 an investment slip, include your name,
Exchange shares address and account number on your check or
Send us written instructions to exchange money order.
your shares from one American Century
account to another. Sell shares
Send us written instructions or a redemption
form to sell shares. Call an Investor
Relations Representative to request a form.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
Online Open an account Make additional investments
Www.americancentury.com If you are a current investor, you can open Make an additional investment into an
an account by exchanging shares from another established American Century account if you
American Century account. have authorized us to invest from your bank
account.
Exchange shares
Exchange shares from another American Sell shares
Century account. Not available.

A NOTE ABOUT MAILINGS TO SHAREHOLDERS
To reduce expenses and demonstrate respect for our environment, we will deliver
most financial reports, prospectuses and account statements to households in a
single envelope, even if the accounts are registered under different names. If
you would like additional copies of financial reports and prospectuses or
separate mailing of account statements, please call us.

YOUR GUIDE TO SERVICES AND POLICIES
When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.

- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------ -----------------------------------------------
By wire Open an account Make additional investments
Call us to set up your account or mail a Follow the wire instructions provided in the
completed application to the address provided "Open an account" section
in the "By Mail" section and give your bank
the following information Sell shares
Our bank information: You can receive redemption proceeds by wire
Please remember that if you * Commerce Bank N.A. or electronic transfer.
request redemptions by wire, * Routing No. 101000019
$10 will be deducted from the * Account No. 2804918
amount wired. Your bank also The fund name
may charge a fee. Your American Century account number*
Your name Exchange shares The contribution year
(for IRAs only) Not available.

*For additional investments only
- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------ -----------------------------------------------
Automatically Open an account Make additional investments
Not available. With the automatic investment privilege, you
can purchase shares on a regular basis. You
Exchange shares must invest at least $600 per
year per Send us written instructions to set up
an account.
automatic exchange of your shares from one
American Century account to another. Sell shares
If you have at least $10,000 in your
account, you may sell shares
automatically by establishing
Check-A-Month or Automatic Redemption
plans.
- -------------------------------- ------------------------------------------------ -----------------------------------------------
- -------------------------------- ------------------------------------------------------------------------------------------------
In person If you prefer to handle your transactions in person, visit
one of our Investor Centers and a representative can help
you open an account, make additional investments and sell or
exchange shares.

4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday

1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday
- -------------------------------- ------------------------------------------------------------------------------------------------
- -------------------------------- ------------------------------------------------------------------------------------------------
</TABLE>

MINIMUM INITIAL INVESTMENT AMOUNTS

To open an account, the minimum investments are:
- -------------------------------------------------
Individual or Joint $100,000
Traditional IRA $100,000
Roth IRA $100,000
UGMA/UTMA $100,000
403(b) $100,000
Qualified Retirement Plan $XXXXXX*

*The minimum investment requirements may be different for some types of
retirement accounts.

REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS
If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.

ABUSIVE TRADING PRACTICES
We do not permit market timing or other abusive trading practices in our funds.

Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds - up to seven days - or to honor
certain redemptions with securities, rather than cash, as described in the next
section.

SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS
If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make payment
in securities, we will value the securities, selected by the fund, in the same
manner as we do in computing the fund's net asset value. We may provide these
securities in lieu of cash without prior notice.

If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.

INVESTING THROUGH FINANCIAL INTERMEDIARIES
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include

minimum investment requirements
exchange policies
fund choices
cutoff time for investments

Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statements of Additional Information are available from your
intermediary or plan sponsor.

Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.

Although transactions in fund shares may be made directly with American Century
at no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.

American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds has authorized
those intermediaries to accept orders on their behalf up to the time at which
the net asset value is determined. If those orders are transmitted to American
Century and paid for in accordance with the contract, they will be priced at the
net asset value next determined after your request is received in the form
required by the intermediary on a fund's behalf.

**********LEFT MARGIN CALLOUTS

o Financial intermediaries include banks, broker-dealers, insurance companies
and investment advisors.

**********END LEFT MARGIN CALLOUTS

SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

American Century determines the NET ASSET VALUE (NAV) of the funds as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), we do not calculate the NAV. The NAV of a
fund share is the current value of the fund's assets, minus any liabilities,
divided by the number of fund shares outstanding.

If current market prices of securities owned by a fund are not readily available
from an independent pricing service, the advisor may determine their fair value
in accordance with procedures adopted by the fund's Board of Directors.

We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.

DISTRIBUTIONS

Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the funds will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received.
The fund's dividends are declared and available for redemption daily.

You will participate in fund distributions, when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares on
a day that a distribution is declared, you will not receive that distribution.
If you redeem shares, you will receive any distribution declared on the day you
redeem. If you redeem all shares, we will include any distributions received
with your redemption proceeds.

Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.

**********LEFT MARGIN CALLOUTS

The NET ASSET VALUE of a fund is the price of the fund's shares.

CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased. Tax becomes due on capital gains once an
asset is sold.

**********END LEFT MARGIN CALLOUTS

TAXES

The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.

TAX-DEFERRED ACCOUNTS
If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.

TAXABLE ACCOUNTS
If you own fund shares through a taxable account, distributions by the fund and
sales by you of fund shares may cause you to be taxed.

TAXABILITY OF DISTRIBUTIONS

Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:

<TABLE>
- ---------------------------- --------------------------- ------------------------------------
<S> <C> <C>
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or above
- ---------------------------- --------------------------- ------------------------------------
- ---------------------------- --------------------------- ------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
- ---------------------------- --------------------------- ------------------------------------
- ---------------------------- --------------------------- ------------------------------------
Long-term capital gains 10% 20%
- ---------------------------- --------------------------- ------------------------------------
</TABLE>

The tax status of any distribution of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund or whether you reinvest your distribution in
additional shares or take them in cash. American Century will send you the tax
status of fund distributions for each calendar year in an annual tax mailing
(Form 1099) from the fund.

Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.

TAXES ON TRANSACTIONS
Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that any loss realized upon
the sale or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to such shares. If a loss is realized on the redemption
of fund shares, the reinvestment in additional fund shares within 30 days before
or after the redemption may be subject to the wash sale rules of the Internal
Revenue Code, resulting in a postponement of the recognition of such loss for
federal income tax purposes.

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

The tables on the next few pages itemize what contributed to the changes in
share price during the period. They also show the changes in share price for
this period in comparison to changes over the last five fiscal years.

On a per-share basis, each table includes as appropriate

share price at the beginning of the period
investment income and capital gains or losses
distributions of income and capital gains paid to shareholders
share price at the end of the period

Each table also includes some key statistics for the period as appropriate

Total Return--the overall percentage of return of the fund, assuming the
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
fund's buying and selling activity

The Financial Highlights have been audited by Deloitte & Touche LLP, independent
auditors. Their report is included in the funds' annual reports for the year
ended March 31, 1999, which are incorporated by reference into the Statement of
Additional Information and are available upon request.

<TABLE>
<CAPTION>
Premium Government Reserve
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31

<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------

PER-SHARE DATA

Net Asset Value,
Beginning of Year Audited $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
Numbers
Income From Not Yet
Investment Operations Available

Net Investment Income 0.05 0.05 0.05 0.05
-------------------------------------------------------------------------------

Distributions

From Net
Investment Income (0.05) (0.05) (0.05) (0.05)
-------------------------------------------------------------------------------

Net Asset Value,
End of Year $1.00 $1.00 $1.00 $1.00
===============================================================================

TOTAL RETURN(1) % 5.25% 5.07% 5.49% 4.62%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
To Average Net Assets % 0.45% 0.45% 0.44% 0.45%

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

Net Assets, End
Of Year (in thousands) $44,495 $38,838 $26,191 $16,381

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

Premium Capital Reserve
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31

1999 1998 1997 1996 1995
---------------------------------------------------------------------------------

PER-SHARE DATA

Net Asset Value,
Beginning of Year Audited $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------------------
Numbers
Income From Not Yet
Investment Operations Available

Net Investment Income 0.05 0.05 0.05 0.05
---------------------------------------------------------------------------------

Distributions

From Net
Investment Income (0.05) (0.05) (0.05) (0.05)
---------------------------------------------------------------------------------

Net Asset Value,
End of Year $1.00 $1.00 $1.00 $1.00
=================================================================================

TOTAL RETURN(1) % 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%

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

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

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

Premium Bond
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Years Ended March 31

1999 1998 1997 1996 1995
-------------------------------------------------------------

PER-SHARE DATA

Net Asset Value,
Beginning of Year Audited $9.76 $9.93 $9.46 $9.64
-------------------------------------------------------------
Numbers
Income From Not Yet
Investment Operations Available

Net Investment Income 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 1.06 0.44 1.08 0.41
-------------------------------------------------------------

Distributions

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

From Net Realized
Gains on Investments (0.06) - - -
-------------------------------------------------------------

Total Distributions (0.67) (0.61) (0.61) (0.59)
-------------------------------------------------------------

Net Asset Value,
End of Year $10.15 $9.76 $9.93 $9.46
=============================================================

TOTAL RETURN(1) % 11.14% 4.57% 11.53% 4.48%

RATIOS/SUPPLEMENTAL DATA

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

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

Portfolio Turnover % 138% 63% 92% 51%

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

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

More information about the funds is contained in these documents

Annual and Semiannual Reports. These reports contain more information about the
funds' investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.

Statement of Additional Information. The SAI contains a more detailed, legal
description of the funds' operations, investment restrictions, policies and
practices. The SAI is incorporated by reference into this Prospectus. This means
that it is legally part of this Prospectus, even if you don't request a copy.

You may obtain a free copy of the SAI or annual and semiannual reports, and ask
any questions about the funds or your accounts, by contacting American Century
at the address or one of the telephone numbers listed below.

You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).

In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
On the internet www.sec.gov.
By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the
documents.)

Investment Company Act File No. 811-7446
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
July 6,1999
Premium Government Reserve Fund
Premium Capital Reserve Fund
Premium Bond Fund

AMERICAN CENTURY PREMIUM RESERVES, INC.
This Statement of Additional Information adds to the discussion in the funds'
Prospectus, dated July 6, 1999, but is not a prospectus. The Statement of
Additional Information should be read in conjunction with the funds' current
Prospectus. If you would like a copy of a Prospectus, please contact us at the
address or telephone numbers listed on the back cover or visit American
Century's Web site at www.americancentury.com.

This Statement of Additional Information incorporates by reference certain
information that appears in the funds' annual and semiannual reports, which are
delivered to all shareholders. You may obtain a free copy of the funds' annual
or semiannual reports by calling 1-800-345-2021. Distributed by Funds
Distributor, Inc.

STATEMENT OF ADDITIONAL INFORMATION
JULY 6, 1999

TABLE OF CONTENTS
The Funds' History X
Fund Investment Guidelines X
Premium Government Reserve X
Premium Capital Reserve X
Premium Bond X
Detailed Information about the Funds X
Investment Strategies and Risks X
Investment Policies XX
Portfolio Turnover XX
Management XX
The Board of Directors XX
Officers XX
The Funds' Principal Shareholders XX
Service Providers XX
Investment Advisor XX
Transfer Agent and Administrator XX
Distributor XX
Other Service Providers XX
Custodian Banks XX
Independent Auditors XX
Brokerage Allocation XX
Information about Fund Shares XXX
Buying and Selling Fund Shares XX
Valuation of a Fund's Securities XX
Taxes XX
Federal Income Tax XX
State and Local Income Tax XX
How Fund Performance Information Is Calculated XX
Performance Comparisons XX
Permissible Advertising Information XX
Financial Statements XX
Explanation of Fixed-Income Securities Ratings XX

THE FUNDS' HISTORY
American Century Premium Reserves, Inc. is a registered open-end management
investment company that was organized as a Maryland corporation in January 1993.
Throughout this Statement of Additional Information we refer to American Century
Premium Reserves, Inc. as the corporation.

Each fund described in this Statement of Additional Information is a separate
series of the corporation and operates for many purposes as if it were an
independent company. Each fund has its own investment objective, strategy,
management team, assets, tax identification and stock registration numbers.

Fund Inception Date Ticker Symbol
Premium Government Reserve 04/01/1993 XXXXXXX
Premium Capital Reserve 04/01/1993 XXXXXXX
Premium Bond 04/01/1993 XXXXXXX

FUND INVESTMENT GUIDELINES
This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, "Investment Strategies and Risks,"
which begins on page XX. In the case of the funds' principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectus.

Each fund is a diversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Diversified means
that, with respect to 75% of its total assets, each fund will not invest more
than 5% of its total assets in the securities of a single issuer.

Premium Government Reserve and Premium Capital Reserve each operates pursuant to
Rule 2a-7 under the Investment Company Act. That rule permits the valuation of
portfolio securities on the basis of amortized cost. To rely on the rule, each
fund must be diversified with regard to 100% of its assets other than U.S.
government securities. This operating policy is more restrictive than the
Investment Company Act, which requires a diversified investment company to be
diversified with regard to only 75% of its assets.

To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.

In general, within the restrictions outlined here and in the funds' Prospectus,
the fund managers have broad powers to decide how to invest fund assets,
including the power to hold them uninvested.

Investments are varied according to what is judged advantageous under changing
economic conditions. It is the advisor's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described below. Subject to the specific limitations applicable to a fund, the
funds' management teams may invest the assets of each fund in varying amounts in
other instruments, such as those reflected in Table 1 on page XX, when such a
course is deemed appropriate in order to attempt to attain a fund's investment
objective.

PREMIUM GOVERNMENT RESERVE

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

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

PREMIUM CAPITAL RESERVE

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

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

(2) Commercial paper.

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

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

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

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

PREMIUM BOND

Premium Bond seeks a high level of income from investment in debt securities.
Under normal market conditions, at least 65% of Premium Bond's assets will be
invested in non-money market debt securities. The balance of the fund's assets
will be invested in shorter-term debt securities.

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

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

Subject to the aggregate portfolio maturity and duration minimums, the manager
will actively manage the portfolio, adjusting the weighted average portfolio
maturity in response to expected changes in interest rates.

During periods of rising interest rates, a shorter weighted average maturity may
be adopted in order to reduce the effect of bond price declines on the fund's
net asset value. When interest rates are falling and bond prices rising, a
longer weighted average portfolio maturity may be adopted.

To achieve its objective, Premium Bond may invest in a diversified portfolio of
high- and medium-grade debt securities payable in both U.S. and foreign
currencies. The fund may invest in securities that at the time of purchase are
rated by a nationally recognized statistical rating organization, such as
Moody's Investor Services (Moody's) and Standard & Poor's Corporation (S&P), as
follows:

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

Corporate, sovereign five highest Ba BB
and municipal bonds categories

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

Other types two highest P-2 A-2
categories

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

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

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

Mortgage-related securities in which the funds may invest include collateralized
mortgage obligations (CMOs) issued by a U.S. agency or instrumentality. A CMO is
a debt security that is collateralized by a portfolio or pool of mortgages or
mortgage-backed securities. The issuer's obligation to make interest and
principal payments is secured by the underlying pool or portfolio of mortgages
or securities.

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

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

The following table identifies some of the investments and techniques the funds'
managers may use. A percentage is listed for those investments and techniques
that have a limitation on the amount of a fund's assets that can be invested in
that way.

<TABLE>
<CAPTION>
TABLE 1

Premium Government Premium Capital Premium
Reserve Reserve Bond
<S> <C> <C> <C>
Foreign Securities X X
Short Sales X X X
Portfolio Lending 33-1/3% 33-1/3% 33-1/3%
Derivative Securities X X X
Investments in Companies with
Limited Operating Histories 5% 5%
Repurchase Agreements X X X
When-Issued and Forward Commitment Agreements X X X
Restricted and Illiquid Securities 10% 10% 15%
Futures & Options X X
Forward Currency Exchange Contracts X
</TABLE>

DETAILED INFORMATION ABOUT THE FUNDS

INVESTMENT STRATEGIES AND RISKS
This section describes various investment vehicles and techniques that the fund
managers can use in managing a fund's assets. It also details the risks
associated with each, because each technique contributes to a fund's overall
risk profile. To determine whether a fund may invest in a particular investment
vehicle, consult Table 1, page XX.

Foreign Securities
Some funds may invest in the securities of foreign issuers, including foreign
governments, when these securities meet their standards of selection. Securities
of foreign issuers may trade in the U.S. or foreign securities markets.

Investments in foreign securities may present certain risks, including:

Currency Risk. The value of the foreign investments held by the funds may be
significantly affected by changes in currency exchange rates. The dollar value
of a foreign security generally decreases when the value of the dollar rises
against the foreign currency in which the security is denominated and tends to
increase when the value of the dollar falls against such currency. In addition,
the value of fund assets may be affected by losses and other expenses incurred
in converting between various currencies in order to purchase and sell foreign
securities and by currency restrictions, exchange control regulation, currency
devaluations and political developments.

Political and Economic Risk. The economies of many of the countries in which the
funds invest are not as developed as the economy of the United States and may be
subject to significantly different forces. Political or social instability,
expropriation, nationalization, or confiscatory taxation, and limitations on the
removal of funds or other assets, could also adversely affect the value of
investments. Further, the funds may encounter difficulties or be unable to
enforce ownership rights, pursue legal remedies or obtain judgments in foreign
courts.

Regulatory Risk. Foreign companies generally are not subject to the regulatory
controls imposed on U.S. issuers and, in general, there is less publicly
available information about foreign securities than is available about domestic
securities. Many foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the funds may be reduced by a withholding tax at the source,
which would reduce dividend income payable to shareholders.

Market and Trading Risk. Brokerage commission rates in foreign countries, which
are generally fixed rather than subject to negotiation as in the United States,
are likely to be higher. The securities markets in many of the countries in
which the funds invest will have substantially less trading volume than the
principal U.S. markets. As a result, the securities of some companies in these
countries may be less liquid and more volatile than comparable U.S. securities.
Furthermore, one securities broker may represent all or a significant part of
the trading volume in a particular country, resulting in higher trading costs
and decreased liquidity due to a lack of alternative trading partners. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers, which may make it difficult to enforce contractual
obligations.

Clearance and Settlement Risk. Foreign securities markets also have different
clearance and settlement procedures, and in certain markets there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in clearance and settlement could result in temporary periods when assets
of the funds are uninvested and no return is earned thereon. The inability of
the funds to make intended security purchases due to clearance and settlement
problems could cause the funds to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to clearance and settlement
problems could result either in losses to the funds due to subsequent declines
in the value of the portfolio security or, if the fund has entered into a
contract to sell the security, liability to the purchaser.

Ownership Risk. Evidence of securities ownership may be uncertain in many
foreign countries. In many of these countries, the most notable of which is the
Russian Federation, the ultimate evidence of securities ownership is the share
register held by the issuing company or its registrar. While some companies may
issue share certificates or provide extracts of the company's share register,
these are not negotiable instruments and are not effective evidence of
securities ownership. In an ownership dispute, the company's share register is
controlling. As a result, there is a risk that a fund's trade details could be
incorrectly or fraudulently entered on the issuer's share register at the time
of the transaction, or that a fund's ownership position could thereafter be
altered or deleted entirely, resulting in a loss to the fund. While the funds
intend to invest directly in Russian companies that utilize an independent
registrar, there can be no assurance that such investments will not result in a
loss to the funds.

Short Sales
A fund may engage in short sales if, at the time of the short sale, the fund
owns or has the right to acquire securities equivalent in kind and amount to the
securities being sold short.

In a short sale, the seller does not immediately deliver the securities sold and
is said to have a short position in those securities until delivery occurs. To
make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If a fund engages in a short sale, the collateral account will be
maintained by the fund's custodian. While the short sale is open, the fund will
maintain in a segregated custodial account an amount of securities convertible
into, or exchangeable for, such equivalent securities at no additional cost.
These securities would constitute the fund's long position.

A fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. There will be
certain additional transaction costs associated with short sales, but the fund
will endeavor to offset these costs with income from the investment of the cash
proceeds of short sales.

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

Derivative Securities
Some funds may invest in securities that are commonly referred to as derivative
securities. Generally, a derivative is a financial arrangement the value of
which is based on, or derived from, a traditional security, asset or market
index. Certain derivative securities are described more accurately as
index/structured securities. Index/structured securities are derivative
securities whose value or performance is linked to other equity securities (such
as depositary receipts), currencies, interest rates, indices or other financial
indicators (reference indices).

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

There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices or currency exchange rates and for cash management purposes as a low-cost
method of gaining exposure to a particular securities market without investing
directly in those securities.

No fund may invest in a derivative security unless the reference index or the
instrument to which it relates is an eligible investment for the fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the funds may not invest in oil and gas
leases or futures.

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

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

* the risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the fund managers anticipate;

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

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

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

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

Investment in Companies with Limited Operating Histories
Some funds may invest a portion of their assets in the securities of issuers
with limited operating histories. The fund managers consider an issuer to have a
limited operating history if that issuer has a record of less than three years
of continuous operation. The managers will consider periods of capital
formation, incubation, consolidations, and research and development in
determining whether a particular issuer has a record of three years of
continuous operation.

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

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

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

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

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

When-Issued and Forward Commitment Agreements
Some funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis, a fund
assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of such security may decline prior to delivery,
which could result in a loss to the fund. While the fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, a fund
will establish and maintain until the settlement date a segregated account
consisting of cash, cash equivalents or other appropriate liquid securities in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, a fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.

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

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

Because the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and a fund may, from time to time, hold a Rule 144A or other
security that is illiquid. In such an event, the fund managers will consider
appropriate remedies to minimize the effect on such fund's liquidity.

Futures and Options
Some funds may enter into futures contracts, options or options on futures
contracts. The funds may not, however, enter into a futures transaction for
speculative purposes. Generally, futures transactions will be used to:

protect against a decline in market value of the fund's securities (taking a
short futures position), or

protect against the risk of an increase in market value for securities in which
the fund generally invests at a time when the fund is not fully invested (taking
a long futures position), or

provide a temporary substitute for the purchase of an individual security that
may be purchased in an orderly fashion.

Some futures and options strategies, such as selling futures, buying puts and
writing calls, hedge a fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.

Although other techniques may be used to control a fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While a fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

For example, the sale of a future by a fund means the fund becomes obligated to
deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The purchase of a future means the fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. Futures contracts provide for the sale by one party and purchase
by another party of a specific security at a specified future time and price.
The fund managers may engage in futures and options transactions based on
securities indices that are consistent with the fund's investment objective.
Examples of indices that may be used include the Bond Buyer Index of Municipal
Bonds for fixed-income funds, or the S&P 500 Index for equity funds. The
managers also may engage in futures and options transactions based on specific
securities, such as U.S. Treasury bonds or notes. Futures contracts are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC), a
U.S. government agency.

Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).

Unlike when the fund purchases or sells a bond, no price is paid or received by
the fund upon the purchase or sale of the future. Initially, the fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to assure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute margin
transactions for purposes of the fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin account generally is not
income-producing. Subsequent payments, called variation margin, to and from the
broker, will be made on a daily basis as the price of the underlying debt
securities or index fluctuates, making the future more or less valuable , a
process known as marking the contract to market. Changes in variation margin are
recorded by the fund as unrealized gains or losses. At any time prior to
expiration of the future, the fund may elect to close the position by taking an
opposite position that will operate to terminate its position in the future. A
final determination of variation margin is then made; additional cash is
required to be paid by or released to the fund and the fund realizes a loss or
gain.

Risks Related to Futures and Options Transactions
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the fund managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower a fund's return.

A fund could suffer losses if it is unable to close out its position because of
an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the fund managers consider it appropriate or desirable to
do so. In the event of adverse price movements, a fund would be required to
continue making daily cash payments to maintain its required margin. If the fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the fund managers would not otherwise elect
to do so. In addition, a fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The fund managers will seek
to minimize these risks by limiting the contracts entered into on behalf of the
funds to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.

A fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by a fund had different maturities than those of the
portfolio securities being hedged. Such imperfect correlation may give rise to
circumstances in which a fund loses money on a futures contract at the same time
that it experiences a decline in the value of its hedged portfolio securities. A
fund also could lose margin payments it has deposited with a margin broker, if,
for example, the broker became bankrupt.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

Options on Futures
By purchasing an option on a futures contract, a fund obtains the right, but not
the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. A fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require a fund to make margin payments unless the option is exercised.

Although they do not currently intend to do so, some funds may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the funds would give up some
ability to participate in a price increase on the underlying security. If a fund
were to engage in options transactions, it would own the futures contract at the
time a call were written and would keep the contract open until the obligation
to deliver it pursuant to the call expired.

Restrictions on the Use of Futures Contracts and Options
Under the Commodity Exchange Act, a fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the fund's total assets. To the extent required by law, each
fund will segregate cash or securities on its records in an amount sufficient to
cover its obligations under the futures contracts and options.

Forward Currency Exchange Contracts
Some funds may purchase and sell foreign currency on a spot (i.e., cash) basis
and may engage in forward currency contracts, currency options and futures
transactions for hedging or any other lawful purpose. See "Derivative
Securities," page XX.

Forward contracts may be used under two circumstances:

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

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

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

Under the second circumstance, when the fund managers believe that the currency
of a particular country may suffer a substantial decline relative to the U.S.
dollar, a fund could enter into a foreign contract to sell for a fixed dollar
amount the amount in foreign currencies approximating the value of some or all
of its portfolio securities either denominated in, or whose value is tied to,
such foreign currency. The fund will segregate on its records cash or securities
in an amount sufficient to cover its obligations under the contract.

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

At the maturity of the forward contract, the fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate the obligation to deliver the foreign currency by
purchasing an offsetting forward contract with the same currency trader
obligating the fund to purchase, on the same maturity date, the same amount of
the foreign currency.

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

INVESTMENT POLICIES

Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in a fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.

Fundamental Investment Policies
The funds' investment restrictions are set forth below. These investment
restrictions are fundamental and may not be changed without approval of a
majority of the outstanding votes of shareholders of a fund, as determined in
accordance with the Investment Company Act.

For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents; (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be considered a
separate industry; and (d) personal credit and business credit businesses will
be considered separate industries.

<TABLE>
- ----------------------------- -------------------------------------------------------------------------------------------
<S> <C>
Senior Securities A fund may not issue senior securities, except as permitted under the Investment Company
Act.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except for temporary or emergency purposes (not for
leveraging or investment) in an amount not exceeding 33-1/3% of the fund's total assets
(including the amount borrowed) less liabilities (other than borrowings).
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if, as a result, more than
33-1/3% of the fund's total assets would be lent to other parties, except, (i) through
the purchase of debt securities in accordance with its investment objective, policies and
limitations or (ii) by engaging in repurchase agreements with respect to portfolio
securities.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments. This policy shall not prevent a fund from investing in
securities or other instruments backed by real estate or securities of companies that
deal in real estate or are engaged in the real estate business.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Concentration A fund may not concentrate its investments in securities of issuers in a particular
industry (other than securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities).
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Underwriting A fund may not act as an underwriter of securities issued by others, except to the extent
that the fund may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of restricted securities.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, provided that this limitation shall not
prohibit the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over management.
- ----------------------------- -------------------------------------------------------------------------------------------

Nonfundamental Investment Policies
In addition, the funds are subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Directors.

Subject Policy
- ----------------------------- -------------------------------------------------------------------------------------------
Diversification A fund may not purchase additional investment securities at any time during which
outstanding borrowings exceed 5% of the total assets of the fund.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a repurchase agreement if, as a
result, more than 15% (10% for money market funds) of its net assets would be invested in
repurchase agreements not entitling the holder to payment of principal and interest
within seven days and in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed to constitute selling
securities short.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to obtain such short-term credits as
are necessary for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Futures & Options A fund may enter into futures contracts, options or options on futures contracts. Futures
transactions may be used to (1) protect against a decline in market value of the fund's
[PremiumCapital Reserve and securities, (2) protect against the risk of an increase in market value for securities in
Premium Bond] which the fund generally invests at a time when the fund is not fully-invested, or (3)
provide a temporary substitute for the purchase of an individual security that may be
purchased in an orderly fashion. A fund may not, however, enter into leveraged futures
transactions.
- ----------------------------- -------------------------------------------------------------------------------------------
- ----------------------------- -------------------------------------------------------------------------------------------
Issuers with Limited A fund may invest up to 5% of its assets in the securities of issuers with limited
Operating Histories operating histories. An issuer is considered to have a limited operating history if that
issuer has a record of less than three years of continuous operation. Periods of capital
[Premium Capital Reserve and formation, incubation, consolidations, and research and development may be considered in
Premium Bond] determining whether a particular issuer has a record of three years of continuous
operation.
- ----------------------------- -------------------------------------------------------------------------------------------
</TABLE>

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

The Investment Company Act also provides that the funds may not invest more than
25% of their assets in the securities of issuers engaged in a single industry.
In determining industry groups for purposes of this restriction, the SEC
ordinarily uses the Standard Industry Classification codes developed by the
United States Office of Management and Budget. In the interest of ensuring
adequate diversification, the funds monitor industry concentration using a more
restrictive list of industry groups than that recommended by the SEC. The funds
believe that these classifications are reasonable and are not so broad that the
primary economic characteristics of the companies in a single class are
materially different. The use of these restrictive industry classifications may,
however, cause the funds to forego investment possibilities that may otherwise
be available to them under the Investment Company Act.

PORTFOLIO TURNOVER

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

The fund managers will purchase and sell securities without regard to the length
of time the security has been held. Accordingly, the fund's rate of portfolio
turnover may be substantial.

The fund managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of the fund. In order to achieve each
fund's investment objective, the managers may sell a given security, no matter
how long or how short a period it has been held in the portfolio, and no matter
whether the sale is at a gain or at a loss, if the managers believe that the
security is not fulfilling its purpose, either because, among other things, it
did not live up to the managers' expectations, or because it may be replaced
with another security holding greater promise, or because it has reached its
optimum potential, or because of a change in the circumstances of a particular
company or industry or in general economic conditions, or because of some
combination of such reasons.

When a general decline in security prices is anticipated, the equity funds may
decrease or eliminate entirely their equity positions and increase their cash
positions, and when a rise in price levels is anticipated, the equity funds may
increase their equity positions and decrease their cash positions. However, it
should be expected that the funds will, under most circumstances, be essentially
fully invested in equity securities.

Because investment decisions are based on the anticipated contribution of the
security in question to a fund's objective, the managers believe that the rate
of portfolio turnover is irrelevant when they believe a change is in order to
achieve the objective. As a result, a fund's annual portfolio turnover rate
cannot be anticipated and may be higher than other mutual funds with similar
investment objectives. Higher turnover would generate correspondingly greater
brokerage commissions, which is a cost the funds pay directly. Portfolio
turnover also may affect the character of capital gains realized and distributed
by the fund, if any, since short-term capital gains are taxable as ordinary
income. This disclosure regarding portfolio turnover is a statement of
fundamental policy and may be changed only by a vote of the shareholders.

Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of accomplishing any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.

MANAGEMENT

THE BOARD OF DIRECTORS
The Board of Directors oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Directors does not manage the funds, it has hired the advisor to do so.
Two-thirds of the directors are independent of the funds' advisor, that is, they
are not employed by and have no financial interest in the advisor.

The individuals listed in the following table on the next page whose names are
marked by an asterisk (*) are interested persons of the funds (as defined in the
Investment Company Act) by virtue of, among other considerations, their
affiliation with either the funds; the advisor, American Century Investment
Management, Inc. (ACIM); the funds' agent for transfer and administrative
services, American Century Services Corporation (ACSC); the parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; the funds'
distribution agent and co-administrator, Funds Distributor, Inc. (FDI); or other
funds advised by the advisor. Each director listed serves as a director of six
registered investment companies in the American Century family of funds, which
are also advised by the advisor.

<TABLE>
Name (Age) Position(s) Held Principal Occupation(s)
Address With Fund During Past Five Years

<S> <C> <C>
James E. Stowers, Jr.* (75) Director, Chairman, Director and controlling shareholder, ACC
4500 Main Street Chairman of the Board Chairman and Director, ACIM, ACSC and ACIS
Kansas City, MO 64111 Father of James E. Stowers III

James E. Stowers III* (40) Director Director and Chief Executive Officer, ACC, ACIM,
4500 Main Street ACSC and ACIS
Kansas City, MO 64111 Son of James E. Stowers, Jr.

Thomas A. Brown (59) Director Director of Plains States Development, Applied
4500 Main Street Industrial Technologies, Inc., a corporation engaged
in Kansas City, MO 64111 the sale of bearings and power transmission products

Robert W. Doering, M.D. (66) Director Retired, formerly a general surgeon
4500 Main Street
Kansas City, MO 64111

Andrea C. Hall, Ph.D. (54) Director Senior Vice President and Associate Director, Midwest
4500 Main Street Research Institute
Kansas City, MO 64111

D.D. (Del) Hock (64) Director Retired, formerly Chairman, Public Service Company
4500 Main Street of Colorado
Kansas City, MO 64111 Director, Service Tech, Inc., Hathaway
Corporation, and J.D. Edwards & Company

Donald H. Pratt (61) Director, President and Director, Butler Manufacturing Company
4500 Main Street Vice Chairman of the Board
Kansas City, MO 64111

Lloyd T. Silver, Jr. (71) Director President, LSC, Inc., manufacturer's representative
4500 Main Street
Kansas City, MO 64111

M. Jeannine Strandjord (53) Director Senior Vice President, Finance, Sprint Corporation
4500 Main Street Director, DST Systems, Inc.
Kansas City, MO 64111

Committees
The Board has four standing committees to oversee specific functions of the
funds' operations. Information about these committees appears in the table
below. The director first named acts as chairman of the committee.

Committee Members Function of Committee

Executive James E. Stowers, Jr. The Executive Committee performs the functions of the Board of
James E. Stowers III Directors between Board meetings, subject to the limitations on it
Donald H. Pratt power set out in the Maryland General Corporation Law, and except for
matters required by the Investment Company Act to be acted upon by the
whole Board.

Compliance Thomas A. Brown The Compliance Committee reviews the results of the funds'
Donald H. Pratt compliance testing program, reviews quarterly reports from the
Lloyd T. Silver, Jr. advisor to the Board regarding various compliance matters and
Andrea C. Hall, Ph.D monitors the implementation of the funds' Code of Ethics, including any
violations thereof.

Audit M. Jeannine Strandjord The Audit Committee recommends the engagement of the funds'
Robert W. Doering, M.D. independent auditors and oversees its activities. The Committee
D.D. (Del) Hock receives reports from the advisor's Internal Audit Department, which is
accountable to the Committee. The Committee also receives reporting
about compliance matters affecting the funds.

Nominating Donald H. Pratt The Nominating Committee primarily considers and recommends
D.D. (Del) Hock individuals for nomination as directors. The names of potential
James E. Stowers III director candidates are drawn from a number of sources, including
recommendations from Board members, management and
shareholders. This committee also reviews and makes recommendations
to the Board with respect to the composition of Board committees and
other Board-related matters, including its organization, size,
composition, responsibilities, functions and compensation.
</TABLE>

Compensation of Directors
The directors also serve as directors for five American Century investment
companies other than the corporation. Each director who is not an interested
person as defined in the Investment Company Act receives compensation for
service as a member of the Board of all six such companies based on a schedule
that takes into account the number of meetings attended and the assets of the
funds for which the meetings are held. These fees and expenses are divided among
the six investment companies based, in part, upon their relative net assets.
Under the terms of the management agreement with the advisor, the funds are
responsible for paying such fees and expenses.

The following table shows the aggregate compensation paid by the corporation for
the periods indicated and by the six investment companies served by this Board
to each director who is not an interested person as defined in the Investment
Company Act.

Aggregate Director Compensation for Fiscal Year Ended March 31, 1999
Total Total Compensation
Compensation from the
from the American Century
Name of Director Funds (1) Family of Funds (2)
Thomas A. Brown $XX $XX
Robert W. Doering, M.D. XXX XXX
Andrea C. Hall, Ph.D. XXX XXX
D.D. (Del) Hock XXX XXX
Donald H. Pratt XXX XXX
Lloyd T. Silver, Jr. XXX XXX
M. Jeannine Strandjord XXX XXX

(1) Includes compensation paid to the directors during the fiscal year ended
March 31, 1999, and also includes amounts deferred at the election of the
directors under the American Century Mutual Funds Deferred Compensation
Plan for Non-Interested Directors and Trustees. The total amount of
deferred compensation included in the preceding table is as follows: Mr.
Brown, $XX; Dr. Hall, $XXX; Mr. Hock, $XXX; Mr. Pratt, $XXX and Ms.
Strandjord, $XXX

(2) Includes compensation paid by the six investment company members of the
American Century family of funds served by this Board.

The funds have adopted the American Century Deferred Compensation Plan for
Non-Interested Directors and Trustees. Under the plan, the independent directors
may defer receipt of all or any part of the fees to be paid to them for serving
as directors of the funds.

All deferred fees are credited to an account established in the name of the
directors. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the director. The account balance continues
to fluctuate in accordance with the performance of the selected fund or funds
until final payment of all amounts credited to the account. Directors are
allowed to change their designation of mutual funds from time to time.

No deferred fees are payable until such time as a director resigns, retires or
otherwise ceases to be a member of the Board of Directors. Directors may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a director, all remaining deferred fee account balances are paid to
the director's beneficiary or, if none, to the director's estate.

The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. The rights of directors to
receive their deferred fee account balances are the same as the rights of a
general unsecured creditor of the funds. The plan may be terminated at any time
by the administrative committee of the plan. If terminated, all deferred fee
account balances will be paid in a lump sum.

No deferred fees were paid to any director under the plan during the fiscal year
ended October 31, 1998.

OFFICERS
Background information for the officers of the corporation is provided in the
following table. All persons named as officers of the corporation also serve in
similar capacities for the 12 other investment companies advised by ACIM. Not
all officers of the corporation are listed; only those officers with
policy-making functions for the corporation are listed. No officer is
compensated for his or her service as an officer of the corporation. The
individuals listed in the table are interested persons of the funds (as defined
in the Investment Company Act) by virtue of, among other considerations, their
affiliation with either the funds, ACC, ACC's subsidiaries (including ACIM and
ACSC), or the funds' distributor (FDI), as specified in the following table.

<TABLE>
Name (Age) Positions Held With Principal Occupation(s)
Address Fund During Past Five Years

<S> <C> <C>
George A. Rio (44) President Executive Vice President and Director of Client Services, FDI
60 State St. (March 1998 to present)
Boston, MA 02109 Senior Vice President and Senior Key Account Manager, Putnam
Mutual Funds (June 1995 to March 1998)
Director Business Development, First Data Corporation (May
1994 to June 1995)
Senior Vice President and
Manager of Client Services
and Director of Internal
Audit, The Boston Company,
Inc.
(September 1983 to May 1994)

Christopher J. Kelley (34) Vice President Vice President and Associate General Counsel, FDI (July
60 State St. 1996 to present)
Boston, MA 02109 Assistant Counsel, Forum Financial Group (April 1994 to
July 1996)
Compliance Officer, Putnam Investments (1992 to April 1994)

Mary A. Nelson (35) Vice President Vice President and Manager of Treasury Services and
60 State St. Administration, FDI (1994 to present)
Boston, MA 02109 Assistant Vice President and Client Manager, The Boston
Company, Inc. (1989 to 1994)

Maryanne Roepke, CPA (43) Vice President
4500 Main St. and Treasurer Senior Vice President, Treasurer and Principal Accounting
Kansas City, MO 64111 Officer, ACSC

David C. Tucker (41) Vice President Senior Vice President and General Counsel, ACSC and ACIM 4500
Main St. (June 1998 to present)
Kansas City, MO 64111 General Counsel, ACC (June 1998 to present)
Consultant to mutual fund industry (May 1997 to April
1998) Vice President and General Counsel, Janus
Companies (1990 to 1997)

Paul J. Carrigan Jr. (49) Secretary Secretary, ACC (December 1998 to present)
4500 Main St. Director of Legal Operations, ACSC (February 1996 to present)
Kansas City, MO 64111 Board Communications Manager, The Benham Company (April
1994 to January 1996)
Legal Coordinator, State of California Health & Welfare Agency
(February 1992 to March 1994)

C. Jean Wade (35) Controller Controller-Fund Accounting, ACSC
4500 Main St.
Kansas City, MO 64111

Jon Zindel (32) Tax Officer Director of Taxation, ACSC (1996 to present)
4500 Main St. Tax Manager, Price Waterhouse LLP (1989-1996)
Kansas City, MO 64111
</TABLE>

THE FUNDS' PRINCIPAL SHAREHOLDERS

As of XXXXX, 1999, the following companies were the record owners of more than
5% of a fund's outstanding shares:

Fund Shareholder Percentage of Outstanding Shares

Premium Government Reserve XXXXXXXX XXX%
XXXXXXXX

Premium Capital Reserve XXXXXXXX XXX%
XXXXXXXX

Premium Bond XXXXXXXX XXX%
XXXXXXXX

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of a fund's outstanding shares. As of XXXXX, 1999, the officers
and directors of the funds, as a group, own less than 1% of any fund's
outstanding shares.

SERVICE PROVIDERS

The funds have no employees. To conduct the funds' day-to-day activities, the
funds have hired a number of service providers. Each service provider has a
specific function to fill on behalf of the funds and is described below.

ACIM and ACSC are both wholly owned by ACC. James E. Stowers Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.

INVESTMENT ADVISOR
The corporation has an investment management agreement with the advisor dated
August 1, 1997. This agreement was approved by the shareholders of each of the
funds on July 30, 1997.

A description of the responsibilities of the advisor appears in the Prospectus
under the heading "Management."

For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of the fund.

On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).

The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution or until the first
meeting of shareholders following such execution and for as long thereafter as
its continuance is specifically approved at least annually by (1) the funds'
Board of Directors, or by the vote of a majority of outstanding votes (as
defined in the Investment Company Act) and (2) the vote of a majority of the
directors of the funds who are not parties to the agreement or interested
persons of the advisor, cast in person at a meeting called for the purpose of
voting on such approval.

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

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

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

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

The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The corporation's Board
of Directors has approved the policy of the advisor with respect to the
aggregation of portfolio transactions. Where portfolio transactions have been
aggregated, the funds participate at the average share price for all
transactions in that security on a given day and share transaction costs on a
pro rata basis. The advisor will not aggregate portfolio transactions of the
funds unless it believes such aggregation is consistent with its duty to seek
best execution on behalf of the funds and the terms of the management agreement.
The advisor receives no additional compensation or remuneration as a result of
such aggregation.

Unified management fees incurred by each fund by class for the fiscal periods
ended March 31, 1999, 1998 and 1997, are indicated in the tables on the
following page.

UNIFIED MANAGEMENT FEES
Fund 1999 1998 1997
Premium Government Reserve XXX XXX XXX
Premium Capital Reserve XXX XXX XXX
Premium Bond XXX XXX XXX

Other Advisory Relationships
In addition to managing the funds, the advisor also serves as an investment
advisor to nine institutional accounts and to the following registered
investment companies:
American Century World Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Variable Portfolios, Inc.
American Century Capital Portfolios, Inc.
American Century Strategic Asset Allocations, Inc.
American Century Municipal Trust
American Century Government Income Trust
American Century Investment Trust
American Century Target Maturities Trust
American Century Quantitative Equity Funds
American Century International Bond Funds.
American Century California Tax-Free and Municipal Funds

TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software and personnel, for
the day-to-day administration of the funds and of the advisor. The advisor pays
ACSC for such services.

From time to time, special services may be offered to shareholders who maintain
higher share balances in our family of funds. These services may include the
waiver of minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the advisor.

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

DISTRIBUTOR
The funds' shares are distributed by FDI, a registered broker-dealer. The
distributor is a wholly owned, indirect subsidiary of Boston Institutional
Group, Inc. The distributor's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.

The distributor is the principal underwriter of the funds' shares. The
distributor makes a continuous, best-efforts underwriting of the funds' shares.
This means that the distributor has no liability for unsold shares.

OTHER SERVICE PROVIDERS

CUSTODIAN BANKS
Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598,
and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves
as custodian of the assets of the funds. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.

INDEPENDENT AUDITORS
Deloitte & Touche LLP is the independent auditors of the funds. The address of
Deloitte & Touche LLP is 1010 Grand Boulevard, Kansas City, Missouri 64106. As
the independent auditors of the funds, Deloitte & Touche LLP provides services
including (1) audit of the annual financial statements for each fund, (2)
assistance and consultation in connection with SEC filings and (3) review of the
annual federal income tax return filed for each fund.

BROKERAGE ALLOCATION

Under the management agreement between the funds and the advisor, the advisor
has the responsibility of selecting brokers and dealers to execute portfolio
transactions. In many transactions, the selection of the broker or dealer is
determined by the availability of the desired security and its offering price.
In other transactions, the selection of broker or dealer is a function of the
selection of market and the negotiation of price, as well as the broker's
general execution and operational and financial capabilities in the type of
transaction involved. The advisor will seek to obtain prompt execution of orders
at the most favorable prices or yields. The advisor may choose to purchase and
sell portfolio securities to and from dealers who provide services or research,
statistical and other information to the funds and to the advisor. Such
information or services will be in addition to and not in lieu of the services
required to be performed by the advisor, and the expenses of the advisor will
not necessarily be reduced as a result of the receipt of such supplemental
information.

INFORMATION ABOUT FUND SHARES

Each of the three funds named on the front of this Statement of Additional
Information is a series of shares issued by the corporation, and shares of each
fund have equal voting rights. In addition, each series (or fund) may be divided
into separate classes. Additional funds and classes may be added without a
shareholder vote.

Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
corporation's (i.e., all funds') outstanding shares may be able to elect a Board
of Directors. The corporation undertakes dollar-based voting, meaning that the
number of votes a shareholder is entitled to is based upon the dollar amount of
the shareholder's investment. The election of directors is determined by the
votes received from all the corporation's shareholders without regard to whether
a majority of shares of any one fund voted in favor of a particular nominee or
all nominees as a group.

The assets belonging to each series or class of shares are held separately by
the custodian and the shares of each series or class represent a beneficial
interest in the principal, earnings and profit (or losses) of investments and
other assets held for each series or class. Your rights as a shareholder are the
same for all series or class of securities unless otherwise stated. Within their
respective series or class, all shares have equal redemption rights. Each share,
when issued, is fully paid and non-assessable.

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

Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.

BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in the
American Century Investor Services Guide. The guide is available to investors
without charge and may be obtained by calling us.

VALUATION OF A FUND'S SECURITIES
Each fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), usually at 4 p.m.
Eastern time on each day the Exchange is open for business. The Exchange
typically observes the following holidays: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Although the funds expect the same
holidays to be observed in the future, the Exchange may modify its holiday
schedule at any time.

The advisor typically completes its trading on behalf of each fund in various
markets before the Exchange closes for the day. Each fund's NAV is calculated by
adding the value of all portfolio securities and other assets, deducting
liabilities and dividing the result by the number of shares outstanding.
Expenses and interest earned on portfolio securities are accrued daily.

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

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

Because there are hundreds of thousands of municipal issues outstanding, and the
majority of them do not trade daily, the prices provided by pricing services for
these types of securities are generally determined without regard to bid or last
sale prices. In valuing securities, the pricing services generally take into
account institutional trading activity, trading in similar groups of securities,
and any developments related to specific securities. The methods used by the
pricing service and the valuations so established are reviewed by the advisor
under the general supervision of the Board of Directors. There are a number of
pricing services available, and the advisor, on the basis of ongoing evaluation
of these services, may use other pricing services or discontinue the use of any
pricing service in whole or in part.

Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the directors determine
that this would not result in fair valuation of a given security. Other assets
and securities for which quotations are not readily available are valued in good
faith at their fair value using methods approved by the Board of Directors.

The value of an exchange-traded foreign security is determined in its national
currency as of the close of trading on the foreign exchange on which it is
traded or as of the close of business on the New York Stock Exchange, if that is
earlier. That value is then translated to dollars at the prevailing foreign
exchange rate. Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed at various times
before the close of business on each day that the New York Stock Exchange is
open.

If an event were to occur after the value of a security was established, but
before the net asset value per share was determined, that was likely to
materially change the net asset value, then that security would be valued at
fair value as determined in accordance with procedures adopted by the Board of
Directors.

Trading of these securities in foreign markets may not take place on every
exchange business day. In addition, trading may take place in various foreign
markets on Saturdays or on other days when the exchange is not open and on which
the funds' net asset value is not calculated. Therefore, such calculations do
not take place contemporaneously with the determination of the prices of many of
the portfolio securities used in such calculation and the value of the funds'
portfolios may be affected on days when shares of the funds may not be purchased
or redeemed.

Each of the money market funds operates pursuant to Investment Company Act Rule
2a-7, which permits valuation of portfolio securities on the basis of amortized
cost. When a security is valued at amortized cost, it is valued at its cost when
purchased and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the investment.

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

TAXES

FEDERAL INCOME TAX
Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal income taxes to the extent that
it distributes substantially all of its net investment income and net realized
capital gains (if any) to shareholders. If a fund fails to qualify as a
regulated investment company, it will be liable for taxes, significantly
reducing its distributions to shareholders and eliminating shareholders' ability
to treat distributions of the funds in the manner they were realized by the
funds.

If fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. The dividends from net income may qualify for the 70% dividends
received deduction for corporations to the extent that the fund held shares
receiving the dividend for more than 45 days.

Distributions from gains on assets held longer than 12 months are taxable as
long-term gains regardless of the length of time you have held the shares.
However, you should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distributions of long-term capital gain to you with respect
to such shares.

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

If more than 50% of the value of a fund's total assets at the end of each
quarter of its fiscal year consists of securities of foreign corporations, the
fund may qualify for and make an election with the Internal Revenue Service with
respect to such fiscal year so that you may be able to claim a foreign tax
credit in lieu of a deduction for foreign income taxes paid by the fund. If such
an election is made, the foreign taxes paid by the fund will be treated as
income received by you. In order for you to utilize the foreign tax credit, you
must have held your shares for 16 days or more during the 30-day period,
beginning 15 days prior to the ex-dividend date for the shares. The fund must
meet a similar holding period requirement with respect to foreign securities to
which a dividend is attributable. Any portion of the foreign tax credit that is
ineligible as a result of the fund not meeting the holding period requirement
will be separately disclosed and may be eligible as an itemized deduction.

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

Redemption of shares of a fund (including redemption made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. If a loss is
realized on the redemption of fund shares, the reinvestment in additional fund
shares within 30 days before or after the redemption may be subject to the "wash
sale" rules of the Code, resulting in a postponement of the recognition of such
loss for federal income tax purposes.

Premium Bond may adjust its dividends to take currency fluctuations into
account, which may cause the dividends to vary. If the fund's dividends exceed
its taxable income in any year, which is sometimes the result of
currency-related losses, all or a portion of the fund's dividends may be treated
as a return of capital to shareholders for tax purposes. Any return of capital
will reduce the cost basis of your shares, which will result in a higher
reported capital gain or a lower reported capital loss when you sell your
shares. The Form 1099-DIV you receive in January will specify if any
distributions included a return of capital.

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

HOW FUND PERFORMANCE INFORMATION IS CALCULATED

The funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.

For the money market funds, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:

Effective Yield = [(Base-Period Return + 1)365/7] - 1

For the non-money market funds, yield quotations are based on the investment
income per share earned during a particular 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing the
fund's net investment income by its share price on the last day of the period
according to the following formula:

YIELD = (2 [(a - b + 1)6 - 1])/cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.

Money Market Fund Yields

(seven-day period ended March 31, 1999)

Fund 7-Day Yield Effective Yield

Premium Government Reserve XX XX

Premium Capital Reserve XX XX

Non-Money Market Fund Yields

(30-day period ended March 31, 1999)

Fund 30-Day Yield

Premium Bond XX

Fund Cumulative Total Return Average Annual Inception
Since Inception Total Return Date

Premium Government Reserve XX XX 04/01/1993

Premium Capital Reserve XX XX 04/01/1993

Premium Bond XX XX 04/01/1993

Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gain
distributions (if any) and any change in the fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performance is
not constant over time, but changes from year-to-year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as dollar amounts and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) to illustrate the
relationship of these factors and their contributions to total return.

PERFORMANCE COMPARISONS
The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated, tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper, Inc. or Morningstar, Inc.; mutual fund
rankings published in major, nationally distributed periodicals; data provided
by the Investment Company Institute; Ibbotson Associates, Stocks, Bonds, Bills,
and Inflation; major indices of stock market performance; and indices and
historical data supplied by major securities brokerage or investment advisory
firms. The funds also may utilize reprints from newspapers and magazines
furnished by third parties to illustrate historical performance or to provide
general information about the funds.

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

FINANCIAL STATEMENTS

The financial statements of the funds are included in the Annual Reports to
shareholders for the fiscal year ended March 31, 1999. Each Annual Report is
incorporated herein by reference. You may receive copies of the reports without
charge upon request to American Century at the address and telephone number
shown on the back cover of this Statement of Additional Information.

EXPLANATION OF FIXED-INCOME SECURITIES RATINGS

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

BOND RATINGS
S&P Moody's Description
AAA Aaa These are the highest ratings assigned by S&P and
Moody's to a debt obligation. These ratings
indicate an extremely strong capacity to pay
interest and repay principal.

AA Aa Debt rated in this category is considered to have
a very strong capacity to pay interest and repay
principal. It differs from AAA/Aaa issues only in
a small degree.

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

BBB Baa Debt rated BBB/Baa is regarded as having an
adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions
or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay
principal for debt in this category than in
higher-rated categories.

BB Ba Debt rated BB/Ba has less near-term vulnerability
to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure
to adverse business, financial or economic
conditions that could lead to inadequate capacity
to meet timely interest and principal payments.
The BB rating category also is used for debt
subordinated to senior debt that is assigned an
actual or implied BBB- rating.

B B Debt rated B has a greater vulnerability to
default but Currently has the capacity to meet
interest payments and principal repayments.
Adverse business, financial or economic conditions
will likely impair capacity or willingness to pay
interest and repay principal. The B rating
category also is used for debt subordinated to
senior debt that is assigned an actual or implied
BB/Ba or BB-/Ba3 rating.

CCC Caa Debt rated CCC/Caa has a currently identifiable
vulnerability to default and is dependent upon
favorable business, financial and economic
conditions to meet timely payment of interest and
repayment of principal. In the event of adverse
business, financial or economic conditions, it is
not likely to have the capacity to pay interest
and repay principal. The CCC/Caa rating category
also is used for debt subordinated to senior debt
that is assigned an actual or implied B or B-/B3
rating.

CC Ca The rating CC/Ca typically is applied to debt
subordinated to senior debt that is assigned an
actual or implied CCC/Caa rating.

C C The rating C typically is applied to debt
subordinated to senior debt, which is assigned an
actual or implied CCC-/Caa3 debt rating. The C
rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt
service payments are continued.

CI - The rating CI is reserved for income bonds on which
no interest is being paid.

D D Debt rated D is in payment default. The D rating
category is used when interest payments or
principal payments are not made on the date due
even if the applicable grace period has not
expired, unless S&P believes that such payments
will be made during such grace period. The D
rating also is used upon the filing of a
bankruptcy petition if debt service payments are
jeopardized.

To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.

COMMERCIAL PAPER RATINGS
S&P Moody's Description

A-1 Prime-1 This indicates that the degree of safety regarding timely
(P-1) payment is strong. Standard & Poor's rates those issues
determined to possess extremely strong safety
characteristics as A-1+.

A-2 Prime-2 Capacity for timely payment on commercial paper is
(P-2) satisfactory, but the relative degree of safety is not as
high as for issues designated A-1. Earnings trends and
coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriated, may be more affected by external conditions.
Ample alternate liquidity is maintained.

A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that
(P-3) carry this rating are somewhat more vulnerable to the
adverse changes in circumstances than obligations carrying
the higher designations.

<TABLE>
NOTE RATINGS
S&P Moody's Description

<S> <C> <C>
SP-1 MIG-1; VMIG-1 Notes are of the highest quality enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both.

SP-2 MIG-2; VMIG-2 Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.

SP-3 MIG-3; VMIG-3 Notes are of favorable quality, with all security elements accounted
for, but lacking the undeniable strength of the preceding grades. Market access
for refinancing, in particular, is likely to be less well-established.

SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying specific risk but having
protection and not distinctly or predominantly speculative.
</TABLE>

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS

ANNUAL AND SEMIANNUAL REPORTS

These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this SAI. This means that these are
legally part of this SAI.

You can receive free copies of the annual and semiannual reports, and ask any
questions about the funds and your accounts, by contacting American Century at
the address or telephone numbers listed below.

If you own or are considering purchasing fund shares through
* an employer-sponsored retirement plan
* a bank
* a broker-dealer
* an insurance company
* another financial intermediary

you can receive the annual and semiannual reports directly from them.

You also can get information about the funds from the Securities and Exchange
Commission (SEC).

* In person SEC Public Reference Room Washington, D.C. Call 1-800-SEC-0330 for
location and hours.

* On the Internet www.sec.gov

* By mail SEC Public Reference Section Washington, D.C. 20549-6009 (The SEC will
charge a fee for copying the documents.)

Investment Company Act File No. 811-7446

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

INVESTOR RELATIONS
1-800-345-2021 or 816-531-5575

AUTOMATED INFORMATION LINE 1-800-345-8765

WWW.AMERICANCENTURY.COM

FAX 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 or 816-444-3485

BUSINESS; NOT-FOR-PROFIT
AND EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-353

SH-PRS-XXXXX 9908
<PAGE>
PART C. OTHER INFORMATION.

Item 23 Exhibits (all exhibits not filed herein are being incorporated herein
by reference).

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

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

(3) Articles of Amendment of Twentieth Century Premium Reserves,
Inc., dated December 2, 1996 (filed electronically as Exhibit 1c
to Post-Effective Amendment No. 6 on Form N-1A on July 30, 1997,
File No. 33-57430).

(4) Articles Supplementary of American Century Premium Reserves,
Inc., dated December 2, 1996 (filed electronically as Exhibit 1d
to Post-Effective Amendment No. 6 on Form N-1A on July 30, 1997,
File No. 33-57430).

(5) Articles Supplementary of American Century Premium Reserves,
Inc., dated February 16, 1999 (filed herewith as EX-99.a5).

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

(2) Amendment to By-Laws of American Century Premium Reserves,
Inc. (filed electronically as Exhibit b2 to Post-Effective
Amendment No. 9 on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872).

(c) Registrant hereby incorporates by reference, as though set forth
fully herein, Article Fifth, Article Seventh, Eighth and Article
Nine of Registrant's Articles of Incorporation, appearing as
Exhibit a1 to Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A of the Registration; and Sections 3, 4, 5,
7, 8, 9, 10, 11, 22, 25, 30, 31, 33, 39, 40 and 45 of
Registrant's Bylaws appearing as Exhibit b1 to Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A and
Sections 25, 30 and 31 of Registrant's By-laws appearing as
Exhibit b2 to Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A of American Century Capital Portfolios,
Inc., File No. 33-64872.

(d) Management Agreement dated as of August 1, 1997, between American
Century Premium Reserves, Inc. and American Century Investment
Management, Inc. (filed electronically as Exhibit 5 to
Post-Effective Amendment No. 6 on Form N-1A on July 30, 1997,
File No. 33-57430).

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

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

(3) Amendment No. 2 to the Distribution Agreement between
American Century Premium Reserves, Inc. and Funds Distributor,
Inc. dated November 13, 1998 (filed electronically as Exhibit 6c
to Post Effective Amendment No. 12 to the Registration Statement
on Form N-1A of American Century World Mutual Funds, on November
13, 1998, File No. 33-39343).

(4) Amendment No.3 to the Distribution Agreement between American
Century Premium Reserves, Inc. and Funds Distributor, Inc. dated
January 29, 1999, (filed electronically as Exhibit e4 to Post
Effective Amendment No. 28 to the Registration Statement on Form
N-1A of American Century California Tax-Free and Municipal Funds,
on December 28, 1998, File No. 2-82734).

(f) Not applicable.

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

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

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

(2) Credit Agreement between American Century Funds and The Chase
Manhattan Bank as Administrative Agent dated December 18, 1998
(filed electronically as Exhibit h2 to Post-Effective Amendment
No. 37 of American Century Government Income Trust on May 7,
1999, File No. 2-99222).

(i) Opinion and Consent of Counsel is included herein.

(j) (1) Consent of Deloitte & Touche LLP to be filed by amendment.

(2) Power of Attorney is included herein.

(k) Not applicable.

(l) Not applicable.

(m) Not applicable.

(n) (1) Financial Data Schedule for Premium Capital Reserve is
included herein.

(2) Financial Data Schedule for Premium Government Reserve is
included herein.

(3) Financial Data Schedule for Premium Bond is included herein.

(o) Not applicable.

ITEM 24. Persons Controlled by or Under Common Control with Registrant.

None.

ITEM 25. Indemnification.

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

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

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

ITEM 26. Business and Other Connections of Investment Advisor.

None.

ITEM 27. Principal Underwriters.

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

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

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

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

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

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

Donald R. Roberson Executive Vice President None

William S. Nichols Executive Vice President None

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

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

Paula R. David Senior Vice President None

Gary S. MacDonald Senior Vice President None

Judith K. Benson Senior Vice President None

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

ITEM 28. Location of Accounts and Records.

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

ITEM 29. Management Services.

Not Applicable.

ITEM 30. Undertakings.

Not Applicable.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 8 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Kansas City, State of Missouri on the 7th day of May, 1999.

American Century Premium Reserves, Inc.
(Registrant)

By: /s/George A. Rio
George A. Rio
President, Principal Executive and
Principal Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 has been signed below by the following persons in
the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----
<S> <C> <C>
/*/ George A. Rio President, Principal Executive May 7, 1999
- ------------------------- and Principal Financial
George A. Rio Officer

/*/ Maryanne Roepke Vice President, Treasurer and May 7, 1999
- ------------------------- Principal Accounting Officer
Maryanne Roepke

/*/ James E. Stowers, Jr. Director May 7, 1999
- -------------------------
James E. Stowers, Jr.

/*/ James E. Stowers III Director May 7, 1999
- -------------------------
James E. Stowers, III

/*/ Thomas A. Brown Director May 7, 1999
- -------------------------
Thomas A. Brown

/*/ Robert W. Doering, M.D. Director May 7, 1999
- -------------------------
Robert W. Doering, M.D.

/*/ Andrea C. Hall, Ph.D. Director May 7, 1999
- -------------------------
Andrea C. Hall, Ph.D.

/*/ Donald H. Pratt Director May 7, 1999
- -------------------------
Donald H. Pratt

/*/ Lloyd T. Silver, Jr. Director May 7, 1999
- -------------------------
Lloyd T. Silver, Jr.

/*/ M. Jeannine Strandjord Director May 7, 1999
- -------------------------
M. Jeannine Strandjord

/*/ D. D. (Del) Hock Director May 7, 1999
- -------------------------
D. D. (Del) Hock

*By /s/Charles A. Etherington
Charles A. Etherington
Attorney-in-Fact
</TABLE>

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION OF DOCUMENT

EX-99.a1 Articles of Incorporation of Twentieth Century Premium
Reserves, Inc., dated January 7, 1993 (filed as Exhibit 1a to
Post-Effective Amendment No. 4 on Form N-1A, filed on July 31,
1996, File No. 33-57430, and incorporated herein by
reference).

EX-99.a2 Articles Supplementary of Twentieth Century Premium Reserves,
Inc., dated April 24, 1995 (filed as Exhibit 1b to
Post-Effective Amendment No. 4 on Form N-1A, filed on July 31,
1996, File No. 33-57430, and incorporated herein by
reference).

EX-99.a3 Articles of Amendment of Twentieth Century Premium Reserves,
Inc., dated December 2, 1996 (filed as Exhibit 1c to
Post-Effective Amendment No. 6 on Form N-1A, filed on July 30,
1997, File No. 33-57430, and incorporated herein by
reference.)

EX-99.a4 Articles Supplementary of American Century Premium Reserves,
Inc., dated December 2, 1996 (filed as Exhibit 1d to
Post-Effective Amendment No. 6 on Form N-1A, filed on July 30,
1997, File No. 33-57430, and incorporated herein by
reference.)

EX-99.a5 Articles Supplementary of American Century Premium Reserves,
Inc. dated February 16, 1999 filed herewith.

EX-99.b1 By-Laws of Twentieth Century Premium Reserves, Inc. (filed as
Exhibit 2 to Post-Effective Amendment No. 4 on Form N-1A,
filed on July 31, 1996, File No. 33-57430, and incorporated
herein by reference).

EX-99.b2 Amendment to By-Laws of American Century Premium Reserves,
Inc. (filed as Exhibit 2b to Post-Effective Amendment No. 9 on
Form N-1A of American Century Capital Portfolios, Inc., File
No. 33-64872, and incorporated herein by reference.)

EX-99.d Management Agreement dated as of August 1, 1997, between
American Century Premium Reserves, Inc. and American Century
Investment Management, Inc. (filed as Exhibit 5 to
Post-Effective Amendment No. 6 on Form N-1A, filed on July 30,
1997, File No. 33-57430, and incorporated herein by
reference.)

EX-99.e1 Distribution Agreement between American Century Premium
Reserves, Inc. and Funds Distributor, Inc. dated January 15,
1998 (filed as Exhibit 6 to Post-Effective Amendment No. 28 on
Form N-1A of American Century Target Maturities Trust, File
No. 2-94608, and incorporated herein by reference).

EX-99.e2 Amendment No. 1 to Distribution Agreement between American
Century Premium Reserves, Inc. and Funds Distributor, Inc.
dated June 1, 1998 (filed as Exhibit 6b to Post-Effective
Amendment No. 11 on Form N-1A of American Century Capital
Portfolios, Inc., File No. 33-64872, and incorporated herein
by reference).

EX-99.e3 Amendment No. 2 to Distribution Agreement between American
Century Premium Reserves, Inc. and Funds Distributor, Inc.
dated November 13, 1998 (filed as Exhibit 6c to Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242,
filed November 13, 1998, and incorporated herein by
reference).

EX-99.e4 Amendment No. 3 to Distribution Agreement between American
Century Premium Reserves, Inc. and Funds Distributor, Inc.
dated January 29, 1999 (filed as Exhibit e4 to Post-Effective
Amendment No. 28 to the Registration Statement on Form N-1A of
American Century California Tax-Free and Municipal Funds, File
No. 2-82734, filed December 28, 1998, and incorporated herein
by reference).

EX-99.g1 Global Custody Agreement between The Chase Manhattan Bank and
the Twentieth Century and Benham funds, dated August 9, 1996.
(filed as Exhibit 8 to Post-Effective Amendment No. 31 on Form
N-1A of American Century Government Income Trust, File No.
2-99222, and incorporated herein by reference).

EX-99.g2 Master Agreement between Commerce Bank, N.A. and Twentieth
Century Services, Inc. dated January 22, 1997 (filed as
Exhibit 8e to Post-Effective Amendment No. 76 on Form N-1A of
American Century Mutual Funds, Inc., File No. 2-14213, and
incorporated herein by reference).

EX-99.h1 Transfer Agency Agreement dated as of March 18, 1993, by and
between Twentieth Century Premium Reserves, Inc. and Twentieth
Century Services, Inc. (filed as Exhibit 9 to Post-Effective
Amendment No. 4 on Form N-1A, filed on July 31, 1996, File No.
33-57430, and incorporated herein by reference).

EX-99.h2 Credit Agreement between American Century Funds and The Chase
Manhattan Bank dated December 18, 1998 (filed as Exhibit h2 to
Post-Effective Amendment No. 37 of American Century Government
Income Trust, on May 7 1999, Filed No. 2-99222, and
incorporated herein by reference).

EX-99.i Opinion and Consent of Counsel filed herewith.

EX-99.j1 Consent of Deloitte & Touche LLP to be filed by amendment.

EX-99.j2 Power of Attorney dated February 19, 1999 filed herewith.

EX-27.5.1 Financial Data Schedule for Premium Capital Reserve.

EX-27.5.2 Financial Data Schedule for Premium Government Reserve.

EX-27.5.3 Financial Data Schedule for Premium Bond.

AMERICAN CENTURY PREMIUM RESERVES, INC.

ARTICLES SUPPLEMENTARY

AMERICAN CENTURY PREMIUM RESERVES, INC., a Maryland corporation whose
principal Maryland office is located in Baltimore, Maryland (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:

FIRST: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.

SECOND: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Section 2-605(a)(4) of the Maryland General
Corporation Law, the Board of Directors of the Corporation has renamed the duly
established and allocated series of the Corporation's stock as follows:

Prior Series Name New Series Name
----------------- ---------------
American Century - Benham Premium Bond Fund Premium Bond Fund
American Century - Benham Premium Government Premium Government Reserve Fund
Reserve Fund
American Century - Benham Premium Capital Premium Capital Reserve Fund
Reserve Fund

The name changes shall be effective on March 1, 1999.

THIRD: Except as otherwise provided by the express provisions of these
Articles Supplementary, nothing herein shall limit, by inference or otherwise,
the discretionary right of the Board of Directors to serialize, classify or
reclassify and issue any unissued shares of any Series or Class or any unissued
shares that have not been allocated to a Series or Class, and to fix or alter
all terms thereof, to the full extent provided by the Articles of Incorporation
of the Corporation.

FOURTH: A description of the series and classes of shares, including
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions for
redemption is set forth in the Articles of Incorporation of the Corporation and
is not changed by these Articles Supplementary, except with respect to the
creation and/or designation of the various Series.

FIFTH: The Board of Directors of the Corporation duly adopted
resolutions renaming the Series, as set forth in Article SECOND.

IN WITNESS WHEREOF, AMERICAN CENTURY PREMIUM RESERVES, INC. has caused
these Articles Supplementary to be signed and acknowledged in its name and on
its behalf by its Vice President and its corporate seal to be hereunto affixed
and attested to by its Assistant Secretary on this 16th day of February, 1999.

AMERICAN CENTURY PREMIUM
ATTEST: RESERVES, INC.

/s/ Brian L. Brogan /s/ David C. Tucker
Name: Brian L. Brogan Name: David C. Tucker
Title: Assistant Secretary Title: Vice President

THE UNDERSIGNED Executive Vice President of AMERICAN CENTURY PREMIUM
RESERVES, INC., who executed on behalf of said Corporation the foregoing
Articles Supplementary to the Charter, of which this certificate is made a part,
hereby acknowledges, in the name of and on behalf of said Corporation, the
foregoing Articles Supplementary to the Charter to be the corporate act of said
Corporation, and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects under the penalties of
perjury.

Dated: February 16, 1999 /s/ David C. Tucker
David C. Tucker, Vice President

Charles A. Etherington
Attorney at Law
4500 Main Street, P.O. Box 418210
Kansas City, Missouri 64141-9210
Telephone (816) 340-4051
Telecopier (816) 340-4964

May 7, 1999

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

Ladies and Gentlemen:

As a counsel to American Century Premium Reserves, Inc., I am generally
familiar with its affairs. Based upon this familiarity, and upon the examination
of such documents as I have deemed relevant, it is my opinion that the shares of
the Corporation described in Post-Effective Amendment No. 8 to its Registration
Statement on Form N-1A, to be filed with the Securities and Exchange Commission
on May 7, 1999, will, when issued, be validly issued, fully paid and
nonassessable.

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

I hereby consent to the use of this opinion as an exhibit to Post-Effective
Amendment No. 8.

Very truly yours,

/s/Charles A. Etherington
Charles A. Etherington

POWER OF ATTORNEY

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

IN WITNESS WHEREOF, the Corporation has caused this Power to be
executed by its duly authorized officers on this the 19th day of February, 1999.

AMERICAN CENTURY PREMIUM RESERVES, INC.

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

SIGNATURE AND TITLE

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

/s/ Maryanne Roepke /s/ Andrea C. Hall
MARYANNE ROEPKE ANDREA C. HALL, PH.D.
Vice President and Treasurer Director

/s/ James E. Stowers, Jr. /s/ Donald H. Pratt
JAMES E. STOWERS, JR. DONALD H. PRATT
Director Director

/s/ James E. Stowers III /s/ Lloyd T. Silver
JAMES E. STOWERS III LLOYD T. SILVER
Director Director

/s/ Thomas A. Brown /s/ M. Jeannine Strandjord
THOMAS A. BROWN M. JEANNINE STRANDJORD
Director Director

Attest: /s/ D. D. Hock
D.D. ("DEL") HOCK
By:/s/ Paul Carrigan, Jr. Director
Paul Carrigan, Jr., Secretary

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

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 282,358,727
<INVESTMENTS-AT-VALUE> 282,358,727
<RECEIVABLES> 702,115
<ASSETS-OTHER> 2,387,493
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 285,448,335
<PAYABLE-FOR-SECURITIES> 8,878,523
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 521,360
<TOTAL-LIABILITIES> 9,399,883
<SENIOR-EQUITY> 2,760,515
<PAID-IN-CAPITAL-COMMON> 273,290,991
<SHARES-COMMON-STOCK> 276,051,506
<SHARES-COMMON-PRIOR> 182,491,064
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,054)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 276,048,452
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,404,919
<OTHER-INCOME> 0
<EXPENSES-NET> 944,146
<NET-INVESTMENT-INCOME> 10,460,773
<REALIZED-GAINS-CURRENT> 1,320
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,462,093
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,460,773
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 533,120,417
<NUMBER-OF-SHARES-REDEEMED> 449,461,484
<SHARES-REINVESTED> 9,901,509
<NET-CHANGE-IN-ASSETS> 93,561,762
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4,374)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 942,501
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 944,146
<AVERAGE-NET-ASSETS> 209,444,619
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 120,683,201
<INVESTMENTS-AT-VALUE> 120,683,201
<RECEIVABLES> 167,089
<ASSETS-OTHER> 818,740
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 121,669,303
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 375,505
<TOTAL-LIABILITIES> 375,505
<SENIOR-EQUITY> 12,129,353
<PAID-IN-CAPITAL-COMMON> 109,164,172
<SHARES-COMMON-STOCK> 121,293,525
<SHARES-COMMON-PRIOR> 44,495,084
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 121,293,525
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,696,514
<OTHER-INCOME> 0
<EXPENSES-NET> 316,309
<NET-INVESTMENT-INCOME> 3,380,205
<REALIZED-GAINS-CURRENT> 5,104
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,385,309
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,379,825
<DISTRIBUTIONS-OF-GAINS> 5,104
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 483,425,779
<NUMBER-OF-SHARES-REDEEMED> 409,868,798
<SHARES-REINVESTED> 3,241,460
<NET-CHANGE-IN-ASSETS> 76,798,821
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (380)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 315,756
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 316,309
<AVERAGE-NET-ASSETS> 70,168,031
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<INVESTMENTS-AT-COST> 103,313,828
<INVESTMENTS-AT-VALUE> 104,069,289
<RECEIVABLES> 1,333,417
<ASSETS-OTHER> 232,635
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105,635,341
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 351,419
<TOTAL-LIABILITIES> 351,419
<SENIOR-EQUITY> 104,287
<PAID-IN-CAPITAL-COMMON> 104,412,223
<SHARES-COMMON-STOCK> 10,428,722
<SHARES-COMMON-PRIOR> 6,418,885
<ACCUMULATED-NII-CURRENT> 11,951
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 755,461
<NET-ASSETS> 105,283,922
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,874,471
<OTHER-INCOME> 0
<EXPENSES-NET> 430,600
<NET-INVESTMENT-INCOME> 5,443,871
<REALIZED-GAINS-CURRENT> 121,024
<APPREC-INCREASE-CURRENT> (511,967)
<NET-CHANGE-FROM-OPS> 5,052,928
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,465,768
<DISTRIBUTIONS-OF-GAINS> 489,078
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,705,359
<NUMBER-OF-SHARES-REDEEMED> 4,269,904
<SHARES-REINVESTED> 574,382
<NET-CHANGE-IN-ASSETS> 40,112,782
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 21,897
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 429,782
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 430,600
<AVERAGE-NET-ASSETS> 95,507,016
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.10
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>