AMERICAN CENTURY
Prospectus
Premium Government Reserve Fund
Premium Capital Reserve Fund
Premium Bond Fund
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American
Century
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AUGUST 1, 1999
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:
* The funds' primary investments and risks
* A description of who may or may not want to invest in the funds
* Fund performance, including returns for each year, best and worst quarters,
and average annual returns compared to the funds' benchmarks
* An overview of services available and ways to manage your accounts
* 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,
/s/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.
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American
Century
American Century
Investments
P.O. Box 419200
Kansas City, MO
64141-6200
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 .......................................... 7
Management ................................................................ 10
Investing with American Century ........................................... 13
Share Price and Distributions ............................................. 17
Taxes ..................................................................... 18
Financial Highlights ...................................................... 19
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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.
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This symbol highlights special information and helpful tips.
American Century Investments
AN OVERVIEW OF THE FUNDS
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.
WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?
A more detailed description of the funds' investment strategies and risks begins
on page 5.
Fund Primary Investments Principal Risks
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Premium Very short-term U.S. government Lower yield than
Government securities longer-term or lower-
Reserve quality securities
Premium High-quality cash-equivalent Lower yield than
Capital securities of banks, governments longer-term or lower-
Reserve and corporations quality securities
Premium Bond High- and medium-grade non-money Interest rate, credit and
market debt securities prepayment risk
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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. Although Premium Government
Reserve and Premium Capital Reserve seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
them.
WHO MAY WANT TO INVEST IN THE FUNDS?
The funds may be a good investment if you are
* seeking current income
* in the case of the money market funds, more concerned with preservation of
capital than long-term investment performance
* seeking diversification by investing in a fixed-income mutual fund
* 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
* investing for long-term growth
* looking for the added security of FDIC insurance
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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.
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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.
2 American Century Investments 1-800-345-2021
FUND PERFORMANCE HISTORY
PREMIUM GOVERNMENT RESERVE FUND
PREMIUM CAPITAL RESERVE FUND
PREMIUM BOND FUND
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.
[chart data shown below]
1994 1995 1996 1997 1998
Premium Government Reserve 3.90 5.63 5.10 5.20 5.15
Premium Capital Reserve 3.97 5.70 5.16 5.31 5.29
Premium Bond -4.10 20.10 2.73 8.85 7.85
(1) As of June 30, 1999, the end of the most recent calendar quarter, Premium
Government Reserve's year-to-date return was 2.23%; Premium Capital Reserve's
year-to-date return was 2.30%; and Premium Bond's year-to-date return was
- -1.58%.
The highest and lowest quarterly returns for the period reflected in the bar
chart are:
Highest Lowest
Premium Government Reserve 1.42% (2Q 1995) 0.69% (1Q 1994)
Premium Capital Reserve 1.43% (2Q 1995) 0.72% (1Q 1994)
Premium Bond 6.82% (2Q 1995) -3.47% (1Q 1994)
Average Annual Returns
The following table shows the average annual total returns of the funds'
Investor Class shares for the periods indicated. The benchmarks are unmanaged
indices that have no operating costs and are included in the table for
performance comparison.
For the calendar year ended December 31, 1998
1 year 5 years Life of Fund(1)
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Premium Government Reserve 5.15% 4.99% 4.69%
90 - Day Treasury Bill Index 4.50% 4.95% 4.70%
Premium Capital Reserve 5.29% 5.09% 4.78%
90 - Day Treasury Bill Index 4.50% 4.95% 4.70%
Premium Bond 7.85% 6.79% 6.70%
Lehman Aggregate Bond Index 8.69% 7.27% 7.27%
(1) The inception date for the funds is April 1, 1993.
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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.
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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.
www.americancentury.com American Century Investments 3
FEES AND EXPENSES
There are no sales loads, fees or other charges
* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Investor Class shares of other American Century funds
* 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 Distribution and Other Total Annual Fund
Fee Service (12b-1) Fees Expenses(1) 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 . . .
* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below
* earn a 5% return each year
* incur the same operating expenses as shown above
. . . your cost of investing in the fund would be:
1 year 3 years 5 years 10 years
Premium Government Reserve $46 $144 $252 $566
Premium Capital Reserve $46 $144 $252 $566
Premium Bond $46 $144 $252 $566
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Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.
4 American Century Investments 1-800-345-2021
INFORMATION ABOUT THE FUNDS
PREMIUM GOVERNMENT RESERVE FUND
PREMIUM CAPITAL RESERVE FUND
PREMIUM BOND FUND
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 7.
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.
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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."
www.americancentury.com American Century Investments 5
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 even more vulnerable to adverse business,
financial or economic conditions that could lead to difficulties in making
timely payments of principal and interest.
The fund may invest in debt securities backed by mortgages or assets such as
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 mortgage- and 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.
6 American Century Investments 1-800-345-2021
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, liquidity and credit quality.
The fund managers decide which debt securities to buy and sell by
* determining which securities help a fund meet its maturity requirements
* eliminating securities that do not satisfy a fund's credit quality standards
* evaluating the current economic conditions and assessing the risk of
inflation
* 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 fund managers
would calculate the weighted average maturity for a fund that owned only two
debt securities.
Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
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
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. When interest rates fall, the prices of most debt securities rise;
when interest rates rise, prices fall. Because the funds invest primarily in
debt securities, changes in interest rates will affect the funds' performance.
The degree to which interest rate changes affect a fund's performance varies and
is related to the weighted average maturity of a particular 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.
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The longer a fund's weighted average maturity, the more sensitive it is to
changes in interest rates.
WEIGHTED AVERAGE MATURITY is a tool that the fund managers use to approximate
the remaining maturity of a fund's investment portfolio.
www.americancentury.com American Century Investments 7
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:
Remaining Current Price After Change
Maturity Price 1% Increase in Price
1 year $100.00 $99.06 -0.94%
3 years $100.00 $97.38 -2.62%
10 years $100.00 $93.20 -6.80%
30 years $100.00 $88.69 -11.31%
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 provides a general illustration of the authorized credit
quality ranges for the funds offered by this Prospectus. Although the chart only
reflects securities ratings provided by Moody's and Standard & Poor's, the funds
may also rely on comparable ratings provided by other nationally recognized
securities rating organizations.
[chart data shown below]
INVESTMENT GRADE NON-INVESTMENT GRADE
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
Securities rated in one of the highest two categories by a nationally recognized
securities rating organization are considered "high quality." Although they are
considered high quality, an investment in these securities still involves some
credit risk because a AAA rating is not a guarantee of payment. For a complete
description of the ratings system and an explanation of certain exceptions to
the guidelines reflected in the chart, see the Statement of Additional
Information. The funds' credit quality restrictions apply at the time of
purchase; the funds will not necessarily sell securities if they are downgraded
by a rating agency.
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Credit quality may be lower when the issuer has
* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
* less stable cash flow
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The Statement of Additional Information provides a detailed description of these
securities ratings.
8 American Century Investments 1-800-345-2021
Liquidity Risk
Debt securities can become difficult to sell, or less liquid, for a variety of
reasons, such as lack of an active trading market. 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.
However, returns from these investments 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.
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.
www.americancentury.com American Century Investments 9
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 shares of each fund. The amount of the
management fee is calculated on a class-by-class basis daily and paid monthly.
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 funds' 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
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Premium Government Reserve 0.45%
Premium Capital Reserve 0.45%
Premium Bond 0.45%
10 American Century Investments 1-800-345-2021
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
BETH BUNNELL HUNTER
Ms. Hunter, Portfolio Manager, has been a member of the team that manages
Premium Government Reserve since joining American Century in July 1999. Prior to
joining American Century, she worked for Calvert Asset Management Company as a
Portfolio Trading Analyst from 1994 to 1996 and as a Portfolio Manager from 1996
to June 1999. She has a bachelor of arts from the University of
Washington-Seattle.
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 an 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 MPA from Syracuse
University. He is a Chartered Financial Analyst.
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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.
www.americancentury.com American Century Investments 11
FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives 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.
12 American Century Investments 1-800-345-2021
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.
WAYS TO MANAGE YOUR ACCOUNT
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BY TELEPHONE
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Investor Relations
1-800-345-2021
Business, Not-For-Profit and
Employer-Sponsored Retirement Plans
1-800-345-3533
Automated Information Line
1-800-345-8765
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Call us or use our Automated Information Line if you have authorized us to
accept telephone instructions.
MAKE ADDITIONAL INVESTMENTS
Call us or use our Automated Information Line if you have authorized us to
invest from your bank account.
SELL SHARES
Call an Investor Relations Representative.
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BY MAIL OR FAX
[envelope icon]
P.O. Box 419200
Kansas City, MO 64141-6200
Fax
816-340-7962
OPEN AN ACCOUNT
Send a signed, completed application and check or money order payable to
American Century Investments.
EXCHANGE SHARES
Send us written instructions to exchange your shares from one American Century
account to another.
MAKE ADDITIONAL INVESTMENTS
Send us your check or money order for at least $50 with an investment slip or
$250 without an investment slip. If you don't have an investment slip, include
your name, address and account number on your check or money order.
SELL SHARES
Send us written instructions to sell shares or send us a redemption form. Call
an Investor Relations Representative to request a form.
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ONLINE
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www.americancentury.com
OPEN AN ACCOUNT
If you are a current investor, you can open an account by exchanging shares from
another American Century account.
EXCHANGE SHARES
Exchange shares from another American Century account.
MAKE ADDITIONAL INVESTMENTS
Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.
SELL SHARES
Not available.
www.americancentury.com American Century Investments 13
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.
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BY WIRE
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Please remember that if you request redemptions by wire, $10 will be deducted
from the amount redeemed. Your bank also may charge a fee.
OPEN AN ACCOUNT
Call us to set up your account or mail a completed application to the address
provided in the "By mail" section and give your bank the following information
* Our bank information:
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name
* Your American Century account number+
* Your name
* The contribution year (for IRAs only)
+ For additional investments only
MAKE ADDITIONAL INVESTMENTS
Follow the wire instructions provided in the "Open an account" section.
SELL SHARES
You can receive redemption proceeds by wire or electronic transfer.
EXCHANGE SHARES
Not applicable.
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AUTOMATICALLY
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OPEN AN ACCOUNT
Not available.
EXCHANGE SHARES
Send us written instructions to set up an automatic exchange of shares from one
American Century account to another.
MAKE ADDITIONAL INVESTMENTS
With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.
SELL SHARES
You may sell shares automatically by establishing Check-A-Month or Automatic
Redemption plans.
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IN PERSON
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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.
Kansas City, Missouri
8 a.m. to 5:30 p.m., Monday - Friday
1665 Charleston Road
Mountain View, California
8 a.m. to 5 p.m., Monday - Friday
4917 Town Center Drive
Leawood, Kansas
8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
9445 East County Line Road, Suite A
Englewood, Colorado
8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday
14 American Century Investments 1-800-345-2021
MINIMUM INITIAL INVESTMENT AMOUNTS
To open an account, the minimum investments are:
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Individual or Joint $100,000
Traditional IRA $100,000
Roth IRA $100,000
UGMA/UTMA $100,000
403(b) $100,000
Qualified Retirement Plan $100,000
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 managers 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.
www.americancentury.com American Century Investments 15
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 Statement 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 have 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.
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Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.
16 American Century Investments 1-800-345-2021
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.
The portfolio securities of the money market funds are valued at amortized cost.
This means that the securities are initially valued at their cost when
purchased. After the initial purchase, the difference between the purchase price
and the known value at maturity will be reduced at a constant rate until
maturity. This valuation will be used regardless of the impact of interest rates
on the market value of the security. The Board has adopted procedures to ensure
that this type of pricing is fair to the funds' shareholders.
If current market prices of securities owned by Premium Bond 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 funds 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 as well as CAPITAL GAINS realized on
the sale of investment securities. The funds declare distributions from net
income daily and pay these distributions monthly. Premium Government Reserve and
Premium Capital Reserve declare and pay distributions of net realized capital
gains, if any, in the same manner as income distributions. Premium Bond
generally pays distributions of capital gains, if any, once a year in December.
A fund may make more frequent distributions if necessary to comply with Internal
Revenue Code provisions.
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.
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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.
www.americancentury.com American Century Investments 17
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 funds 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:
Type of Tax Rate for Tax Rate for
Distribution 15% Bracket 28% Bracket or above
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Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
The tax status of any distributions 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-DIV) from the funds.
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
gains 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. This may result in a postponement of the recognition of
such loss for federal income tax purposes. If you have not certified to us that
your Social Security number or tax identification number is correct and that you
are not subject to 31% withholding, we are required to withhold and remit 31% of
dividends, capital gains distributions and redemptions to the IRS.
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BUYING A DIVIDEND
Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.
The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.
18 American Century Investments 1-800-345-2021
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 Independent Auditors' Reports are included in the funds' annual
reports for the fiscal year ended March 31, 1999, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request.
www.americancentury.com American Century Investments 19
<TABLE>
<CAPTION>
PREMIUM GOVERNMENT RESERVE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
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1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ....... $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------
Income From Investment Operations
Net Investment Income ................ 0.05 0.05 0.05 0.05 0.05
----------------------------------------------
Distributions
From Net Investment Income ........... (0.05) (0.05) (0.05) (0.05) (0.05)
----------------------------------------------
Net Asset Value, End of Year ............. $1.00 $1.00 $1.00 $1.00 $1.00
==============================================
Total Return(1) ...................... 4.98% 5.25% 5.07% 5.49% 4.62%
Ratios/Supplemental Data
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1999 1998 1997 1996 1995
Ratio of Operating Expenses
to Average Net Assets ................ 0.45% 0.45% 0.45% 0.44% 0.45%
Ratio of Net Investment Income
to Average Net Assets ................ 4.82% 5.13% 4.96% 5.30% 4.84%
Net Assets, End of Year (in thousands) ..$121,294 $44,495 $38,838 $26,191 $16,381
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
20 American Century Investments 1-800-345-2021
PREMIUM CAPITAL RESERVE FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
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1999 1998 1997 1996 1995
Net Asset Value, Beginning of Year ...... $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------
Income From Investment Operations
Net Investment Income ............... 0.05 0.05 0.05 0.05 0.05
-----------------------------------------------
Distributions
From Net Investment Income .......... (0.05) (0.05) (0.05) (0.05) (0.05)
-----------------------------------------------
Net Asset Value, End of Year ............ $1.00 $1.00 $1.00 $1.00 $1.00
===============================================
Total Return(1) ..................... 5.14% 5.38% 5.13% 5.58% 4.66%
Ratios/Supplemental Data
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1999 1998 1997 1996 1995
Ratio of Operating Expenses
to Average Net Assets ............... 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Investment Income
to Average Net Assets ............... 4.99% 5.26% 5.01% 5.50% 4.76%
Net Assets, End of Year (in thousands) .$276,048 $182,487 $153,958 $133,417 $138,428
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
www.americancentury.com American Century Investments 21
PREMIUM BOND FUND
Investor Class
For a Share Outstanding Throughout the Years Ended March 31
Per-Share Data
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1999 1998 1997 1996 1995
Net Asset Value, Beginning of Year ..... $10.15 $ 9.76 $9.93 $9.46 $9.64
-----------------------------------------------
Income From Investment Operations
Net Investment Income .............. 0.59 0.61 0.61 0.61 0.59
Net Realized and Unrealized Gain (Loss)
on Investments ..................... -- 0.45 (0.17) 0.47 (0.18)
-----------------------------------------------
Total From Investment Operations ... 0.59 1.06 0.44 1.08 0.41
-----------------------------------------------
Distributions
From Net Investment Income ......... (0.59) (0.61) (0.61) (0.61) (0.59)
From Net Realized Gains
on Investments ................... (0.05) (0.06) -- -- --
-----------------------------------------------
Total Distributions ................ (0.64) (0.67) (0.61) (0.61) (0.59)
-----------------------------------------------
Net Asset Value, End of Year ........... $10.10 $10.15 $9.76 $9.93 $9.46
===============================================
Total Return(1) ...................... 5.88% 11.14% 4.57% 11.53% 4.48%
Ratios/Supplemental Data
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1999 1998 1997 1996 1995
Ratio of Operating Expenses
to Average Net Assets .............. 0.45% 0.45% 0.45% 0.43% 0.45%
Ratio of Net Investment Income
to Average Net Assets .............. 5.70% 6.06% 6.20% 6.08% 6.30%
Portfolio Turnover ..................... 71% 138% 63% 92% 51%
Net Assets, End of Year
(in thousands) ....................$105,284 $65,171 $21,750 $20,280 $10,334
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
</TABLE>
22 American Century Investments 1-800-345-2021
NOTES
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NOTES
24 American Century Investments 1-800-345-2021
NOTES
www.americancentury.com American Century Investments 25
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 (SAI)
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
[american century logo (reg.sm)]
American
Century
AMERICAN CENTURY INVESTMENTS
P.O. Box 419200
Kansas City, Missouri 64141-6200
1-800-345-2021 or 816-531-5575
9908
SH-PRS-16641
