March 31, 2000
American Century
Annual Report
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American
Century(R)
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Our Message to You
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[PHOTO OMITTED]
James E. Stowers III, seated, with James E. Stowers, Jr.
The 12 months ended March 31, 2000, provided a difficult environment for
U.S. bond funds--a booming economy, inflation fears, and rising interest rates.
Trying to keep economic growth, inflation, and the U.S. stock market under
control, the Federal Reserve raised short-term interest rates five times between
June 1999 and March 2000, putting pressure on bond prices.
Despite these challenges, American Century Premium Bond continued to
provide an above-average yield and below-average expenses (according to Lipper
Inc., an independent mutual fund ranking service). These key factors helped the
fund place in the top third in its peer group for the last five years (see page
4 for more performance information).
We are proud of the fund's performance and the numerous ways we can help
investors like you meet your goals. We are equally proud of our dedication to
creating a positive, safe, and productive work environment for American Century
staff. This commitment was recognized and rewarded in 1999 when American Century
ranked in the top 40 of Fortune magazine's "100 Best Companies to Work For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This "intellectual capital" is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/ James E. Stowers
James E. Stowers, Jr.
Chairman of the Board and Founder
/s/ James E. Stowers III
James E. Stowers III
Vice Chairman of the Board and
Chief Executive Officer
Table of Contents
Report Highlights ....................................................... 2
Market Perspective ...................................................... 3
Premium Bond
Performance Information ................................................. 4
Management Q&A .......................................................... 5
Portfolio at a Glance ................................................... 5
Yield ................................................................... 5
Types of Investments .................................................... 6
Schedule of Investments ................................................. 7
Financial Statements
Statement of Assets and
Liabilities .......................................................... 11
Statement of Operations ................................................. 12
Statements of Changes
in Net Assets ........................................................ 13
Notes to Financial
Statements ........................................................... 14
Financial Highlights .................................................... 16
Independent Auditors'
Report ............................................................... 17
Other Information
Retirement Account
Information .......................................................... 18
Background Information
Investment Philosophy
and Policies ...................................................... 19
Comparative Indices .................................................. 19
Lipper Rankings ...................................................... 19
Credit Rating
Guidelines ........................................................ 19
Investment Team
Leaders ........................................................... 19
Glossary ................................................................ 20
www.americancentury.com 1
<PAGE>
Report Highlights
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Market Perspective
o U.S. bonds struggled, posting their lowest returns since 1994. The Lehman
Aggregate Bond Index -- a broad measure of U.S. bond performance --
returned 1.87%.
o Trying to keep the economy, inflation, and the U.S. stock market under
control, the Federal Reserve raised short-term interest rates five times
between June 1999 and March 2000.
o Inflation remained relatively subdued during the reporting period,
primarily because of higher productivity and the benefits of global
competition. Commodity prices, particularly for energy, were the one area
that caused concern.
o Despite the Fed rate hikes, the U.S. economy continued to power ahead at a
5% annual rate in the first quarter of 2000, and inflation fears
intensified.
o Treasury bonds rallied in the first quarter of 2000, benefiting from
reduced issuance and buybacks.
o As short-term Treasury yields rose and long-term yields fell, the Treasury
yield curve "inverted" -- the yield of the two-year note was higher than
that of the 30-year bond.
o Non-Treasury bonds didn't benefit from the same supply constraints as
Treasurys, so they underperformed.
o Aside from Treasurys, mortgage securities generally performed best and
corporate bonds performed worst. Refinancing activity tapered off, which
helped mortgages, but heavy issuance and weak demand hurt corporates.
Management Q&A
o Premium Bond beat the average return of its Lipper peer group and also
generated a higher-than-average yield. Lower-than-average expenses were a
key reason for the fund's favorable relative performance.
o Premium Bond also had less exposure to the underperforming corporate bond
sector than many of its peers, which boosted relative performance.
o The fund benefited from lower duration (less interest rate sensitivity),
which reduced the magnitude of bond price losses as interest rates rose.
But we increased the duration of the fund's Treasury holdings, which
helped when Treasury bonds rallied.
o In anticipation of possible weaker economic conditions later, we reduced
the portfolio's corporate exposure and also reduced the number of
lower-rated bonds.
o On the shorter-maturity end of the portfolio, we substituted higher-
yielding corporate bonds and asset-backed securities for Treasurys.
o We think the Fed will continue to raise short-term interest rates as long
as annual U.S. economic growth remains above 4%. We also think the
Treasury yield curve could remain inverted.
o We plan to continue overweighting non-Treasury investments -- keeping a
close eye on their liquidity and credit quality -- and maintaining a
longer duration with our Treasury holdings.
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Premium Bond
(ACBPX)
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Total Returns: AS OF 3/31/00
6 Months ........... 1.94%*
1 Year ............. 1.30%
30-Day SEC Yield: 6.93%
Inception Date: 4/1/93
Net Assets: $103.2 million
* Not annualized.
See Total Returns on page 4. Investment terms are defined in the Glossary on
pages 20-21.
2 1-800-345-2021
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Market Perspective from Randall W. Merk
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[PHOTO OMITTED]
Randall W. Merk, chief investment officer of fixed income at American Century
Performance Overview
U.S. bonds struggled during the 12 months ended March 31, 2000. Buffeted
by inflation fears and rising interest rates, they posted their lowest returns
since 1994. The Lehman Brothers Aggregate Bond Index--a broad measure of U.S.
bond performance--returned 1.87%.
Robust Economic Growth and Rumblings of Inflation
The current U.S. economic expansion reached its tenth year in February
2000 with no signs of letting up. After growing 4.2% in 1999, the economy
continued to expand at an estimated annual rate of over 5% in the first quarter
of 2000.
In response to this growth and historically tight labor markets, the
Federal Reserve embarked on a protracted program of interest rate hikes in an
attempt to keep inflationary pressures from boiling over. The Fed raised rates
five times from June 1999 to March 2000.
Inflation showed signs of moving higher, but price increases were gener-
ally limited to commodities, especially energy. Productivity improvements were
credited with preventing across-the-board increases in producer and consumer
prices.
Treasury Bonds Lead the Market
Despite strong economic growth and rising interest rates, Treasury bonds
rallied in the first quarter of 2000. The reason: the robust U.S. economy and
projected federal budget surpluses motivated the U.S. Treasury to announce that
it would reduce sales of its securities and buy back higher-yielding
longer-term bonds. The Treasury buyback program is similar to the stock buybacks
that have proliferated in the U.S. equity market.
The Treasury Department's plans helped Treasury bonds rally sharply. As
long-term bond yields plunged and the Fed raised short-term interest rates,
Treasury yields "inverted," with the yield of the 30-year bond falling below the
yield of the two-year note for the first time since 1990 (see the graph below).
Other Sectors Lag
The higher-yielding non-Treasury sectors--including corporate, government
agency, and mortgage-backed securities--were not as fortunate as Treasury bonds.
Corporate bonds were the worst-performing sector. Although corporate
earnings remained strong, a glut of new issuance (to finance stock buybacks) and
sharply reduced demand caused corporate yields to soar.
Agency bonds were hampered by heavy issuance and questions in Congress
about the future of the implicit government guarantee enjoyed by many agencies.
Mortgage-backed securities fared better than the rest because mortgages
tend to have somewhat less interest rate sensitivity, and rising rates reduced
refinancing activity.
"As long-term bond yields plunged and the Fed raised short-term interest rates,
Treasury yields inverted."
U.S. Bond Index Returns
For the year ended March 31, 2000
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Lehman Aggregate Bond Index 1.87%
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Lehman Treasury Bond Index 2.79%
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Lehman Fixed-Rate Mortgage-
Backed Securities Index 2.25%
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Lehman Agency Bond Index 1.52%
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Lehman Corporate Bond Index 0.16%
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Source: Bloomberg Financial Markets
Inverting Treasury Yield Curve
03/31/1999 12/31/1999 03/31/2000
1 4.72 5.96 6.24
4.99 6.24 6.48
5.03 6.28 6.42
5.07 6.32 6.37
5 5.10 6.35 6.32
5.13 6.37 6.25
5.16 6.39 6.19
5.19 6.41 6.13
5.22 6.43 6.07
10 5.24 6.44 6.01
5.26 6.44 6.00
5.28 6.44 5.99
5.30 6.44 5.98
5.32 6.44 5.97
15 5.34 6.45 5.96
5.36 6.45 5.95
5.38 6.45 5.94
5.40 6.45 5.93
5.42 6.45 5.92
20 5.44 6.46 5.91
5.46 6.46 5.90
5.48 6.46 5.89
5.50 6.46 5.88
5.52 6.46 5.87
25 5.54 6.47 5.86
5.56 6.47 5.85
5.58 6.47 5.84
5.60 6.47 5.83
5.62 6.47 5.83
30 5.63 6.48 5.83
Source: Bloomberg Financial Markets
www.americancentury.com 3
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Premium Bond--Performance
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Total Returns as of March 31, 2000
Fund's Ranking
<TABLE>
<CAPTION>
Premium Lehman Aggregate A-Rated Corporate
Bond Bond Index Debt Funds(2) Average Return
<S> <C> <C> <C> <C>
6 Months(1) .................... 1.94% 2.08% 1.63% --
1 Year ......................... 1.30% 1.87% 0.36% 36 out of 171
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AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------
3 Years ........................ 6.03% 6.70% 5.63% 45 out of 137
5 Years ........................ 6.81% 7.14% 6.29% 26 out of 110
Life of Fund ................... 5.61% 6.14% 5.47%(3) 24 out of 64(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 19-20 for more information about returns, the comparative index, and
Lipper fund rankings.
Growth of $100,000 Over Life of Fund
Lehman Aggregate Bond
Premium Bond $146,560 Index $151,761
04/01/1993 06/30/1993 100000.00
06/30/1993 09/30/1993 102650.00
09/30/1993 12/31/1993 105329.00
12/31/1993 03/31/1994 105392.00
03/31/1994 06/30/1994 102368.00
06/30/1994 09/30/1994 101313.00
09/30/1994 12/31/1994 101931.00
12/31/1994 03/31/1995 102319.00
03/31/1995 06/30/1995 107475.00
06/30/1995 09/30/1995 114021.00
09/30/1995 12/31/1995 116255.00
12/31/1995 03/31/1996 121208.00
03/31/1996 06/30/1996 119063.00
06/30/1996 09/30/1996 119741.00
09/30/1996 12/31/1996 121956.00
12/31/1996 03/31/1997 125615.00
03/31/1997 06/30/1997 124912.00
06/30/1997 09/30/1997 129496.00
09/30/1997 12/31/1997 133795.00
12/31/1997 03/31/1998 137729.00
03/31/1998 06/30/1998 139877.00
06/30/1998 09/30/1998 143151.00
09/30/1998 12/31/1998 149206.00
12/31/1998 03/31/1999 149713.00
03/31/1999 06/30/1999 148965.00
06/30/1999 09/30/1999 147654.00
09/30/1999 12/31/1999 148658.00
12/31/1999 03/31/2000 148479.00
03/31/2000 03/31/2000 151761.00
The graph at left shows the growth of a $100,000 investment over the life of the
fund, while the graph below shows the fund's year-by-year performance. The
Lehman Aggregate Bond Index is provided for comparison in each graph. Premium
Bond's total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the index do
not. Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.
One-Year Returns Over Life of Fund (Periods ended March 31)
Lehman Aggregate
Premium Bond Bond Index
Mar-94 0.92 2.37
Mar-95 4.48 4.99
Mar-96 11.53 10.79
Mar-97 4.57 4.91
Mar-98 11.14 11.99
Mar-99 5.88 6.49
Mar-00 1.30 1.87
4 1-800-345-2021
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Premium Bond--Q&A
--------------------------------------------------------------------------------
[PHOTO OMITTED]
An interview with Jeff Houston, a portfolio manager on the Premium Bond
fund investment team.
How did the fund perform during the fiscal year ended March 31, 2000?
U.S. bond funds in general struggled during this period, but Premium Bond
performed better than most of its peers and stayed pretty close to its
benchmark. The fund returned 1.30%, significantly higher than the 0.36% average
return of 171 funds in the "A-Rated Corporate Debt Funds" category tracked by
Lipper Inc. Based on those returns, the fund ranked in the top quartile of its
Lipper category.
Premium Bond also generated a higher yield than its peers. As of March 31,
2000, the fund's 30-day SEC yield was 6.93%, compared with the 6.42% average
yield of its Lipper category.
Why did Premium Bond do so well against its Lipper peers?
The fund beat its peer group average for three main reasons. First, it had
lower expenses. As of March 31, Premium Bond's annual expense ratio was 0.45%,
less than half the average expense ratio of its Lipper category. All other
things being equal, lower expenses mean higher yields and returns.
Second, Premium Bond had a smaller allocation to corporate bonds--33% of
the fund at the end of the fiscal year--than most of its peers. Corporate bonds
were the worst-performing major U.S. bond sector during the fiscal year.
Third, the fund's shorter duration relative to its peers worked in its
favor. Duration is a measure of a fund's sensitivity to interest rate changes.
The shorter a fund's duration, the less sensitive it is to interest rate moves.
With the Federal Reserve pushing interest rates steadily higher, a
short-duration posture helped performance.
How did Premium Bond's portfolio perform against its benchmark, the Lehman
Brothers Aggregate Bond Index?
The benchmark returned 1.87% during the fiscal year, which was 57 basis
points (0.57%) higher than the fund's return. Most of the difference was due to
Premium Bond's 0.45% expense ratio. It's important to remember that the fund's
return is reduced by management expenses and transaction costs, while the
benchmark's is not.
The rest of the difference can be explained by the fact that the fund
carried a heavier weighting in corporate bonds than the index (33% for the fund
versus 22% for the index, as of March 31) and a lighter weighting in Treasury
bonds (15% for the fund versus 32% for the index). Since Treasurys generally
outperformed corporates, we lost some ground to the index.
What moves of note did you make over the past six months?
The fund remained overweight in non-Treasury debt securities such as
corporate bonds, mortgage-backed securities, and asset-backed securities. These
areas of the market offered increasingly higher relative yields as Treasury
yields plummeted.
"Premium Bond performed better than most of its peers and stayed pretty close to
its benchmark."
Portfolio at a Glance
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3/31/00 3/31/99
--------------------------------------------------------------------------------
Number of Securities 133 138
Weighted Average
Maturity 8.5 yrs 8.2 yrs
Average Duration 4.9 yrs 4.7 yrs
Expense Ratio 0.45% 0.45%
Yield as of March 31, 2000
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30-Day SEC Yield 6.93%
Investment terms are defined in the Glossary on pages 20-21.
www.americancentury.com 5
<PAGE>
Premium Bond--Q&A
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(Continued)
At the same time, we adopted a slightly more conservative position for the
fund, reducing the number of lower-rated bonds in the corporate bond portfolio.
We kept the fund's overall duration neutral to the benchmark -- at around
five years -- but we extended the duration of the Treasury holdings. By doing
so, we enabled the fund to take advantage of yield declines that occurred on the
longer end of the Treasury yield curve.
On the shorter-maturity end of the portfolio, we substituted corporate
bonds and asset-backed securities -- bonds backed by credit card, auto loan and
other receivables -- for short-term Treasury securities. The asset-backed bonds
-- which made up about 9% of the fund at the end of the period, about a 5%
overweight relative to the fund's benchmark -- and the corporates offered more
attractive yields than comparable-maturity Treasuries, with reduced price risk
because of their short maturity.
What is your outlook for the U.S. bond market?
The three main influential factors that U.S. bond investors should track
over the coming months are interest rates, inflation, and the supply and demand
situation for bonds. Looking first at interest rates, we anticipate that the
Federal Reserve will continue to raise short-term rates as long as the U.S.
economy grows at an annual rate above 4%.
The inflation outlook is less clear. So far, increases in productivity
have held down prices. But the continued robust economic growth and tight labor
markets we've experienced since 1998 generally foreshadow price increases, so
market observers and the Fed will be especially sensitive to inflation
statistics.
As far as supply and demand are concerned, bond demand is weak --
investors are still smitten by stocks or are parking money in money market
instruments. Unless annual stock returns fall back to their historical averages
of about 10% (or lower), it will be difficult to convince investors to diversify
and buy more bonds.
Given this outlook, how do you plan to structure the portfolio?
Because of our expectation of further Fed rate hikes and a resulting
continuation of the inversion of the Treasury yield curve, we anticipate
maintaining a longer duration with the fund's Treasury investments. This should
help the fund take advantage of interest rate declines among longer-term
Treasuries.
As far as our non-Treasury investments are concerned, we intend to remain
overweight in areas such as corporate bonds, mortgage-backed securities, and
asset-backed securities due to their attractive valuations and higher yields.
However, we are also keeping a close eye on the liquidity and credit
quality of these non-Treasury holdings, cautiously investing in securities we
think can remain financially sound in an uncertain economic and market
environment.
Types of Investments in
the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
[THE FOLLOWING WAS DEPICTED BY A PIE CHART]
o Corporate Bonds 33%
o Mortgage-Backed Securities 31%
o U.S. Treasury Securities 15%
o Asset-Backed Securities 9%
o Govt. Agency Securities 7%
o Other 5%
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART.]
o Corporate Bonds 31%
o Mortgage-Backed Securities 29%
o U.S. Treasury Securities 21%
o Asset-Backed Securities 10%
o Govt. Agency Securities 7%
o Other 2%
Investment terms are defined in the Glossary on pages 20-21.
6 1-800-345-2021
<PAGE>
Premium Bond -- Schedule of Investments
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MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 15.3%
--------------------------------------------------------------------------------
$ 1,000,000 U.S. Treasury Notes, 4.875%,
3/31/01 $ 985,655
3,000,000 U.S. Treasury Notes, 6.625%,
7/31/01 3,006,219
1,000,000 U.S. Treasury Notes, 7.50%,
11/15/01(1) 1,015,149
2,000,000 U.S. Treasury Bonds, 9.25%,
2/15/16(1) 2,600,588
1,400,000 U.S. Treasury Bonds, 8.875%,
8/15/17 1,789,404
750,000 U.S. Treasury Bonds, 9.125%,
5/15/18 984,705
1,000,000 U.S. Treasury Bonds, 8.50%,
2/15/20 1,260,565
2,000,000 U.S. Treasury Bonds, 7.50%,
11/15/24 2,345,666
475,000 U.S. Treasury Bonds, 7.625%,
2/15/25 565,670
650,000 U.S. Treasury Bonds, 6.375%,
8/16/27 677,133
650,000 U.S. Treasury Bonds, 5.25%,
11/15/28 582,046
------------
TOTAL U.S. TREASURY SECURITIES 15,812,800
============
(Cost $15,638,215)
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 7.5%
--------------------------------------------------------------------------------
1,500,000 FHLB, 5.50%, 8/13/01 1,474,016
500,000 FHLMC, 7.09%, 11/24/06 486,609
1,000,000 FHLMC, 5.75%, 4/15/08 914,324
500,000 FNMA, 7.125%, 1/15/30 506,723
1,000,000 FNMA, Series B, 7.25%,
1/15/10 1,007,192
1,000,000 FNMA MTN, 5.83%, 2/2/04 958,223
1,000,000 FNMA MTN, 5.54%, 2/5/04 948,475
500,000 FNMA MTN, 7.00%, 2/20/07 487,248
1,000,000 FNMA MTN, 5.74%, 1/21/09 901,782
------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES 7,684,592
============
(Cost $7,996,764)
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES(2) -- 29.0%
--------------------------------------------------------------------------------
682,898 FHLMC Pool #E68523, 6.50%,
12/1/12 658,357
547,281 FHLMC Pool #E73566, 7.00%,
11/1/13 537,344
936,371 FHLMC Pool #E00724, 7.00%,
6/1/14 919,114
99,479 FHLMC Pool #D75034, 8.50%,
10/1/26 101,603
720,497 FHLMC Pool #C00553, 7.00%,
9/1/27 693,924
813,641 FHLMC Pool #C00578, 6.50%,
1/1/28 764,567
950,106 FHLMC Pool #C00731, 6.50%,
3/1/29 893,154
988,537 FHLMC Pool #C30257, 7.00%,
8/1/29 951,269
886,679 FHLMC Pool #C30060, 7.50%,
8/1/29 872,587
887,208 FNMA Pool #272894, 6.00%,
2/1/09 837,522
185,963 FNMA Pool #426130, 6.00%,
5/1/13 175,020
744,778 FNMA Pool #426773, 6.00%,
7/1/13 700,953
1,162,356 FNMA Pool #252213, 6.00%,
1/1/14 1,093,960
650,944 FNMA Pool #405425, 7.00%,
12/1/27 626,347
1,322,814 FNMA Pool #412562, 6.50%,
1/1/28 1,241,764
555,624 FNMA Pool #413812, 6.50%,
1/1/28 521,580
1,250,697 FNMA Pool #406904, 7.50%,
4/1/28 1,232,433
1,418,117 FNMA Pool #426069, 7.00%,
5/1/28 1,363,950
946,279 FNMA Pool #437421, 6.00%,
9/1/28 862,699
285,703 FNMA Pool #450619, 6.00%,
12/1/28 260,468
477,199 FNMA Pool #453956, 6.00%,
12/1/28 435,051
1,064,487 FNMA Pool #454947, 6.00%,
12/1/28 970,466
659,522 FNMA Pool #252211, 6.00%,
1/1/29 601,269
467,071 FNMA Pool #252212, 6.50%,
1/1/29 438,517
1,000,000 FNMA Pool #492315, 6.50%,
4/1/29 938,257
938,840 FNMA Pool #506995, 7.50%,
7/1/29 923,848
1,000,000 FNMA REMIC, Series 1997-58,
Class PB PAC, 6.50%,
6/18/24 945,835
411,380 GNMA Pool #230356, 7.50%,
8/20/17 407,984
907,973 GNMA Pool #313107, 7.00%,
11/15/22 886,918
30,948 GNMA Pool #407141, 9.25%,
2/15/25 32,180
218,894 GNMA Pool #408099, 8.75%,
3/15/25 225,342
35,663 GNMA Pool #407254, 9.25%,
3/15/25 37,082
456,263 GNMA Pool #780412, 7.50%,
8/15/26 453,297
448,924 GNMA Pool #423986, 8.00%,
8/15/26 454,864
85,127 GNMA Pool #432437, 7.50%,
4/15/27 84,527
See Notes to Financial Statements www.americancentury.com 7
<PAGE>
Premium Bond --Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
$ 538,293 GNMA Pool #447692, 7.50%,
5/15/27 $ 534,501
614,663 GNMA Pool #423061, 8.00%,
6/15/27 622,019
225,550 GNMA Pool #443782, 7.50%,
11/15/27 223,961
78,309 GNMA Pool #461011, 7.50%,
11/15/27 77,757
531,159 GNMA Pool #467626, 7.00%,
2/15/28 514,796
422,333 GNMA Pool #458862, 7.50%,
2/15/28 418,955
442,421 GNMA Pool #436277, 6.50%,
3/15/28 417,774
700,639 GNMA Pool #471859, 7.00%,
4/15/28 679,055
30,065 GNMA Pool #455126, 6.50%,
5/15/28 28,390
1,897,289 GNMA Pool #458887, 6.50%,
5/15/28 1,791,595
463,846 GNMA Pool #463891, 6.50%,
5/15/28 438,006
986,764 GNMA Pool #469811, 7.00%,
12/15/28 956,365
------------
TOTAL MORTGAGE-BACKED SECURITIES 29,847,226
============
(Cost $31,086,843)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(2) -- 8.8%
--------------------------------------------------------------------------------
1,000,000 BMW Vehicle Owner Trust,
Series 1999 A, Class A3 SEQ,
6.41%, 4/25/03 992,104
1,000,000 Case Equipment Loan Trust,
Series 1998 B, Class A4 SEQ,
5.92%, 10/15/05 980,745
1,000,000 CIT RV Trust, Series 1997 A,
Class A6, 6.35%, 4/15/11 987,975
750,000 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%,
2/15/12 729,761
1,000,000 Comed Transitional Funding Trust,
Series 1998-1, Class A6 SEQ,
5.63%, 6/25/09 917,215
902,218 First Union-Lehman Brothers
Commercial Mortgage, Series
1998 C2, Class A1 SEQ,
6.28%, 6/18/07 865,767
1,000,000 GMAC Commercial Mortgage
Securities Inc., Series
1999 C1, Class A2 SEQ,
6.18%, 5/15/33 911,880
487,186 Money Store (The) Home Equity
Trust, Series 1994 B,
Class A4 SEQ, 7.60%, 7/15/21 487,578
1,000,000 Money Store (The) Home Equity
Trust, Series 1997 C,
Class AF6 SEQ, 6.67%,
2/15/25 986,995
687,746 Nationslink Funding Corp.,
Series 1998-2, Class A1 SEQ,
6.00%, 11/20/07 651,435
69,469 Textron Financial Corp.
Receivables Trust, Series
1997 A, Class A, 6.05%,
3/16/09 (Acquired 9/18/97,
Cost $69,377)(3) 69,253
500,000 United Companies Financial Corp.,
Home Equity Loan, Series
1996 D1, Class A5, 6.92%,
10/15/18 496,778
------------
TOTAL ASSET-BACKED SECURITIES 9,077,486
============
(Cost $9,413,511)
--------------------------------------------------------------------------------
CORPORATE BONDS -- 32.6%
--------------------------------------------------------------------------------
AIRLINES -- 1.3%
700,000 Continental Airlines, Inc., 8.00%,
12/15/05 639,625
700,000 Delta Air Lines, Inc., 8.30%,
12/15/29 (Acquired
12/17/99, Cost $684,264)(3) 674,542
------------
1,314,167
------------
BANKS -- 3.0%
500,000 Bank of America Corp., 6.125%,
7/15/04 476,915
1,000,000 Bank of America Corp., 7.80%,
2/15/10 1,023,999
1,000,000 Citigroup Inc., 5.80%, 3/15/04 947,697
250,000 Corestates Capital Corp., 5.875%,
10/15/03 239,012
500,000 Fleet Boston Financial Corp.,
5.75%, 1/15/09 440,000
------------
3,127,623
------------
CHEMICALS -- 0.3%
300,000 ARCO Chemical Co., 10.25%,
11/1/10 303,418
------------
CONSTRUCTION & REAL PROPERTY -- 0.5%
500,000 Chelsea GCA Realty Partners,
7.25%, 10/21/07 460,985
------------
DEFENSE/AEROSPACE -- 1.7%
700,000 Alliant Energy Resources, 7.375%,
11/9/09 (Acquired 11/4/99,
Cost $696,150)(3) 694,017
1,000,000 Raytheon Co., 8.20%, 3/1/06
(Acquired 3/3/00, Cost
$1,008,160)(3) 1,008,680
------------
1,702,697
------------
DEPARTMENT STORES -- 0.3%
300,000 Sears, Roebuck & Co., Inc.,
9.375%, 11/1/11 334,581
------------
DIVERSIFIED COMPANIES -- 1.4%
1,500,000 Tyco International Group SA,
6.875%, 9/5/02 (Acquired
1/11/00, Cost $1,473,975)(3) 1,478,524
------------
8 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Premium Bond -- Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.9%
--------------------------------------------------------------------------------
$ 500,000 Hutchison Whampoa Financial,
Series B, 7.45%, 8/1/17
(Acquired 6/4/98-11/19/99,
Cost $456,855)(3) $ 461,656
500,000 Yorkshire Power Finance, Series B,
6.15%, 2/25/03 478,281
------------
939,937
------------
ELECTRICAL UTILITIES -- 1.0%
1,000,000 Cilcorp, Inc., 8.70%, 10/15/09 1,034,576
------------
ENERGY EQUIPMENT & SERVICES -- 0.9%
1,000,000 Petroleum Geo-Services ASA,
6.625%, 3/30/08 925,518
------------
ENERGY RESERVES & PRODUCTION -- 0.9%
1,000,000 EOG Resources Inc., 6.70%,
11/15/06 954,289
------------
FINANCIAL SERVICES -- 2.4%
500,000 Associates Corp., N.A., 6.625%,
6/15/05 481,803
1,000,000 Comdisco, Inc., 6.375%,
11/30/01 977,716
1,000,000 Ford Motor Credit Co., 6.125%,
4/28/03 967,399
------------
2,426,918
------------
GAS & WATER UTILITIES -- 1.3%
500,000 Columbia Energy Group, 6.80%,
11/28/05 478,756
400,000 Duke Energy Corp., 6.875%,
8/1/23 366,858
500,000 K N Energy, Inc., 6.45%,
11/30/01 491,916
------------
1,337,530
------------
GOLD -- 0.4%
450,000 Barrick Gold Corp., 7.50%,
5/1/07 451,181
------------
HEAVY ELECTRICAL EQUIPMENT -- 0.2%
200,000 Anixter International Inc., 8.00%,
9/15/03 198,042
------------
INDUSTRIAL PARTS -- 0.7%
750,000 Caterpillar Financial Services Corp.,
5.90%, 9/10/02 728,402
------------
INFORMATION SERVICES -- 0.7%
750,000 KPNQwest B.V., 8.125%,
6/1/09 719,062
------------
LIFE & HEALTH INSURANCE -- 0.9%
1,000,000 Conseco Inc., 6.40%, 6/15/01 974,378
------------
MEDIA -- 3.2%
250,000 British Sky Broadcasting, 6.875%,
2/23/09 229,799
500,000 CSC Holdings Inc., 7.625%,
7/15/18 462,276
1,000,000 CSC Holdings Inc., Series B,
8.125%, 7/15/09 996,912
500,000 Liberty Media Group, 8.25%,
2/1/30 (Acquired 1/26/00,
Cost $495,995)(3) 484,325
1,000,000 TCI Communications, Inc., 8.75%,
8/1/15 1,091,431
------------
3,264,743
------------
MINING & METALS -- 0.9%
1,000,000 Owens-Illinois Inc., 7.15%,
5/15/05 929,619
------------
MOTOR VEHICLES & PARTS -- 1.3%
350,000 General Motors Corp., 7.00%,
6/15/03 348,571
1,000,000 Lear Corp., Series B, 7.96%,
5/15/05 945,525
------------
1,294,096
------------
OIL SERVICES -- 1.1%
500,000 Gulf Canada Resources Ltd.,
8.35%, 8/1/06 488,692
750,000 Gulf Canada Resources Ltd.,
8.25%, 3/15/17 695,993
------------
1,184,685
------------
RAILROADS -- 1.0%
1,000,000 Norfolk Southern Corp., 6.95%,
5/1/02 991,233
------------
REAL ESTATE -- 0.5%
500,000 Spieker Properties, Inc., 6.80%,
12/15/01 493,366
------------
SECURITIES & ASSET MANAGEMENT -- 1.5%
500,000 Merrill Lynch & Co., Inc., 6.50%,
4/1/01 498,146
750,000 Morgan Stanley Dean Witter & Co.,
7.125%, 1/15/03 746,080
300,000 Paine Webber Group Inc., 7.875%,
2/15/03 300,446
------------
1,544,672
------------
TELEPHONE -- 2.4%
1,000,000 GTE North Inc., Series H, 5.65%,
11/15/08 882,929
300,000 MCI WorldCom, Inc., 7.55%,
4/1/04 302,860
650,000 MCI WorldCom, Inc., 6.95%,
8/15/28 598,212
750,000 U S West Communications,
7.20%, 11/1/04 (Acquired
10/26/99, Cost $748,575)(3) 744,209
------------
2,528,210
------------
WIRELESS TELECOMMUNICATIONS -- 1.9%
1,000,000 Vodafone AirTouch PLC, 7.125%,
7/15/01 996,785
See Notes to Financial Statements www.americancentury.com 9
<PAGE>
Premium Bond -- Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
$ 1,000,000 Vodafone AirTouch PLC, 7.75%,
2/15/10 (Acquired 2/7/00,
Cost $993,810)(3) $ 1,015,673
------------
2,012,458
------------
TOTAL CORPORATE BONDS 33,654,910
============
(Cost $34,471,558)
--------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS & AGENCIES -- 1.0%
--------------------------------------------------------------------------------
500,000 Hydro-Quebec, 8.05%, 7/7/24 528,110
500,000 Quebec Province, 7.50%,
9/15/29 500,557
------------
TOTAL SOVEREIGN
GOVERNMENTS & AGENCIES 1,028,667
============
(Cost $1,034,202)
--------------------------------------------------------------------------------
FORWARD COMMITMENTS -- 1.9%
--------------------------------------------------------------------------------
$ 2,000,000 FNMA Purchase, 8.00%,
settlement 4/13/00 $ 2,004,370
------------
(Cost $2,001,250)
--------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS -- 3.9%
--------------------------------------------------------------------------------
4,000,000 FHLB Discount Notes, 6.05%,
4/3/00 4,000,000
------------
(Cost $3,998,656)
TOTAL INVESTMENT SECURITIES -- 100.0% $103,110,051
============
(Cost $105,640,999)
Notes to Schedule of Investments
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
MTN = Medium Term Note
(1) Securities, or a portion thereof, have been segregated at the custodian
bank for Forward Commitments.
(2) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(3) Security was purchased under Rule 144A of the Securities Act of 1933 or is
a private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of these securities at March 31, 2000, was $6,630,879
which represented 6.4% of net assets.
10 www.americancentury.com
<PAGE>
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's assets (such as securities, cash, and
other receivables) and liabilities (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's net
assets. The net assets divided by shares outstanding is the share price, or net
asset value per share. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------------------------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment securities, at value (identified cost of $105,640,999) (Note 3) ........................... $ 103,110,051
Cash ................................................................................................. 890,621
Interest receivable .................................................................................. 1,235,990
-------------
105,236,662
-------------
----------------------------------------------------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................................................... 2,006,583
Accrued management fees (Note 2) ..................................................................... 38,499
Payable for directors' fees and expenses ............................................................. 60
-------------
2,045,142
-------------
Net Assets ........................................................................................... $ 103,191,520
=============
----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES, $0.01 PAR VALUE
----------------------------------------------------------------------------------------------------------------------
Authorized ........................................................................................... 100,000,000
=============
Outstanding .......................................................................................... 10,726,563
=============
Net Asset Value Per Share ............................................................................ $ 9.62
=============
----------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
----------------------------------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) .............................................................. $ 107,307,781
Accumulated net realized loss on investment transactions ............................................. (1,585,313)
Net unrealized depreciation on investments (Note 3) .................................................. (2,530,948)
-------------
$103,191,52
=============
</TABLE>
See Notes to Financial Statements www.americancentury.com 11
<PAGE>
Statement of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 2000
--------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Interest ............................................................................................. $ 6,673,806
-----------
Expenses (Note 2):
Management fees ...................................................................................... 456,300
Directors' fees and expenses ......................................................................... 773
-----------
457,073
-----------
Net investment income ................................................................................ 6,216,733
-----------
--------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 3)
--------------------------------------------------------------------------------------------------------------------
Net realized loss on investments ..................................................................... (1,581,988)
Change in net unrealized depreciation on investments.................................................. (3,286,409)
-----------
Net realized and unrealized loss on investments ...................................................... (4,868,397)
-----------
Net Increase in Net Assets Resulting from Operations.................................................. $ 1,348,336
===========
</TABLE>
12 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
<TABLE>
<CAPTION>
Increase (Decrease) in Net Assets 2000 1999
-----------------------------------------------------------------------------------------------------
OPERATIONS
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ............................................. $ 6,216,733 $ 5,443,871
Net realized gain (loss) on investments ........................... (1,581,988) 121,024
Change in net unrealized appreciation (depreciation) on investments (3,286,409) (511,967)
------------- -------------
Net increase in net assets resulting from operations .............. 1,348,336 5,052,928
------------- -------------
-----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------
From net investment income ........................................ (6,216,733) (5,465,768)
From net realized gains on investment transactions ................ -- (489,078)
In excess of net realized gains on investment transactions ........ (15,276) --
------------- -------------
Decrease in net assets from distributions ......................... (6,232,009) (5,954,846)
------------- -------------
-----------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
-----------------------------------------------------------------------------------------------------
Proceeds from shares sold ......................................... 55,889,212 78,926,913
Proceeds from reinvestment of distributions ....................... 5,850,307 5,886,692
Payments for shares redeemed ...................................... (58,948,248) (43,798,905)
------------- -------------
Net increase in net assets from capital share transactions ........ 2,791,271 41,014,700
------------- -------------
Net increase (decrease) in net assets ............................. (2,092,402) 40,112,782
------------- -------------
-----------------------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------------------
Beginning of period ............................................... 105,283,922 65,171,140
------------- -------------
End of period ..................................................... $ 103,191,520 $ 105,283,922
============= =============
-----------------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF THE FUND
-----------------------------------------------------------------------------------------------------
Sold .............................................................. 5,768,601 7,705,359
Issued in reinvestment of distributions ........................... 601,534 574,382
Redeemed .......................................................... (6,072,294) (4,269,904)
------------- -------------
Net increase ...................................................... 297,841 4,009,837
============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 13
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
MARCH 31, 2000
--------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization -- American Century Premium Reserves, Inc. (the corporation)
is registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Premium Bond Fund (the fund) is one of
the three funds issued by the corporation. The fund is diversified under the
1940 Act. The investment objective of the fund is to obtain a high level of
income from investments in a portfolio of longer-term bonds and other debt
obligations. The following significant accounting policies are in accordance
with generally accepted accounting principles; these policies may require the
use of estimates by fund management.
Security Valuations -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Directors.
Security Transactions -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
Investment Income -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
Forward Commitments -- The fund may purchase and sell U.S. government
securities on a firm commitment basis. Under these arrangements, the securities'
prices and yields are fixed on the date of the commitment, but payment and
delivery are scheduled for a future date. During this period, securities are
subject to market fluctuations. The fund maintains segregated accounts
consisting of cash or liquid securities in an amount sufficient to meet the
purchase price.
Repurchase Agreements -- The fund may enter into repurchase agreements
with institutions that the fund's investment manager, American Century
Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to
criteria adopted by the Board of Directors. Each repurchase agreement is
recorded at cost. The fund requires that the collateral, represented by
securities, received in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the fund to obtain those securities in the
event of a default under the repurchase agreement. ACIM monitors, on a daily
basis, the securities transferred to ensure the value including accrued
interest, of the securities under each repurchase agreement is equal to or
greater than amounts owed to the fund under each repurchase agreement.
Joint Trading Account -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account held at the fund's
custodian. These balances are invested in one or more repurchase agreements that
are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status -- It is the fund's policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
Distributions to Shareholders -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
At March 31, 2000, accumulated net ralized capital loss carryovers of
$476,407 (expiring 2008) may be used to offset future taxable realized gains.
For the five month period ended March 31, 2000, the fund incurred net
capital losses of $1,101,785. The fund has elected to treat such losses as
having been incurred in the following fiscal year.
Additional Information -- Funds Distributor, Inc. (FDI) is a distributor
of the corporation. Certain officers of FDI are also officers of the
corporation.
14 1-800-345-2021
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
--------------------------------------------------------------------------------
2. Transactions with Related Parties
The corporation has entered into a Management Agreement with ACIM, under
which ACIM provides the fund with investment advisory and management services in
exchange for a single, unified management fee. The Agreement provides that all
expenses of the fund, except brokerage commissions, taxes, interest, expenses of
those directors who are not considered "interested persons" as defined in the
1940 Act (including counsel fees) and extraordinary expenses, will be paid by
ACIM. The fee is computed daily and paid monthly based on the fund's average
daily closing net assets during the previous month. The annual management fee
for the fund is 0.45%.
Effective March 13, 2000, American Century Investment Services, Inc.
(ACIS), became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
--------------------------------------------------------------------------------
3. Investment Transactions
Purchases of investment securities, excluding short-term investments, for
the year ended March 31, 2000, totaled $64,737,458, of which $23,274,525,
represented U.S. Treasury and Agency obligations. Sales of investment
securities, excluding short-term investments, for the year ended March 31, 2000,
totaled $62,626,396, of which $32,104,078, represented U.S. Treasury and Agency
obligations.
As of March 31, 2000, accumulated net unrealized depreciation was
$2,538,231, based on the aggregate cost of investments for federal income tax
purposes of $105,648,282, which consisted of unrealized appreciation of
$505,383, and unrealized depreciation of $3,043,614.
--------------------------------------------------------------------------------
4. Bank Loans
The fund, along with certain other funds managed by ACIM, entered into an
unsecured $620,000,000 bank line of credit agreement with Chase Manhattan Bank.
The fund may borrow money for temporary or emergency purposes to fund
shareholder redemptions. Borrowings under the agreement bear interest at the
Federal Funds rate plus 0.50%. The fund did not borrow from the line during the
year ended March 31, 2000.
www.americancentury.com 15
<PAGE>
Premium Bond--Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years. It also
includes several key statistics for each reporting period, including total
return, income ratio (net income as a percentage of average net assets), expense
ratio (operating expenses as a percentage of average net assets), and portfolio
turnover (a gauge of the fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended March 31
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 10.10 $ 10.15 $ 9.76 $ 9.93 $ 9.46
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net Investment Income ................................ 0.61 0.59 0.61 0.61 0.61
Net Realized and Unrealized Gain (Loss) on Investments (0.48) -- 0.45 (0.17) 0.47
----------- ----------- ----------- ----------- -----------
Total From Investment Operations ..................... 0.13 0.59 1.06 0.44 1.08
----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ........................... (0.61) (0.59) (0.61) (0.61) (0.61)
From Net Realized Gains .............................. -- (0.05) (0.06) -- --
In Excess of Net Realized Gains ...................... --(1) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions .................................. (0.61) (0.64) (0.67) (0.61) (0.61)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ......................... $ 9.62 $ 10.10 $ 10.15 $ 9.76 $ 9.93
=========== =========== =========== =========== ===========
Total Return(2) ...................................... 1.30% 5.88% 11.14% 4.57% 11.53%
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ...... 0.45% 0.45% 0.45% 0.45% 0.43%
Ratio of Net Investment Income to Average Net Assets ... 6.15% 5.70% 6.06% 6.20% 6.08%
Portfolio Turnover ..................................... 64% 71% 138% 63% 92%
Net Assets, End of Period (in thousands) ............... $ 103,192 $ 105,284 $ 65,171 $ 21,750 $ 20,280
</TABLE>
(1) Per-share amount was less than $0.005.
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
16 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Independent Auditors' Report
--------------------------------------------------------------------------------
The Board of Directors and Shareholders,
American Century Premium Reserves, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Premium Bond Fund (the "Fund"), one of
the funds comprising American Century Premium Reserves, Inc., as of March 31,
2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at March 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Premium Bond Fund as of March 31, 2000, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
www.americancentury.com 17
<PAGE>
Retirement Account Information
--------------------------------------------------------------------------------
Retirement Account Information
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to with
hold federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are
liable for paying income tax on the taxable portion of your withdrawal. If you
elect not to have income tax withheld or you don't have enough income tax
withheld, you may be responsible for payment of estimated tax. You may incur
penalties under the estimated tax rules if your withholding and estimated tax
payments are not sufficient.
18 1-800-345-2021
<PAGE>
Background Information
--------------------------------------------------------------------------------
Investment Philosophy and Policies
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each is managed to provide a "pure play" on a specific sector of the
fixed-income market.
To ensure adherence to this principle, the basic structure of each
portfolio is tied to a specific market index. Fund managers attempt to add value
by making modest portfolio adjustments based on their analysis of prevailing
market conditions.
Investment decisions are made by management teams, which meet regularly to
discuss market analysis and investment strategies.
In addition to these principles, each fund has its own investment
policies:
Premium Bond seeks a high level of income from investment in longer-term
bonds and other debt instruments. It is designed for investors whose primary
goal is a level of income higher than is gener ally provided by money market or
short- and intermediate-term securities and who can accept the generally greater
price volatility associated with longer-term bonds.
Comparative Indices
The following index is used in the report for fund performance
comparisons. It is not an investment product available for purchase.
The Lehman Aggregate Bond Index is composed of the Lehman
Government/Corporate Index and the Lehman Mortgage-Backed Securities Index. It
reflects the price fluctuations of Treasury securities, U.S. government agency
securities, corporate bond issues, and mortgage-backed securities.
Lipper Rankings
Lipper Inc. is an independent mutual fund ranking service that groups
funds according to their investment objectives. Rankings are based on average
annual returns for each fund in a given category for the periods indicated.
Rankings are not included for periods less than one year.
The funds in Lipper's A-Rated Corporate Debt Funds category invest at
least 65% of their assets in government issues or corporate debt issues rated A
or better.
Credit Rating Guidelines
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. They are based on an issuer's financial strength
and ability to pay interest and principal in a timely manner.
Securities rated AAA, AA, A, or BBB are considered "investment-grade"
securities, meaning they are relatively safe from default. Here are the most
common credit ratings and their definitions:
AAA -- extremely strong ability to meet financial obligations.
AA -- very strong ability to meet financial obligations.
A -- strong ability to meet financial obligations.
BBB -- good ability to meet financial obligations.
BB -- securities that are less vulnerable to default than other
lower-quality issues but do not quite meet investment-grade standards.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
Investment Team Leaders
--------------------------------------------------------------------------------
Portfolio Managers
--------------------------------------------------------------------------------
Bud Hoops
Jeff Houston
--------------------------------------------------------------------------------
Credit Research Manager
--------------------------------------------------------------------------------
Greg Afiesh
www.americancentury.com 19
<PAGE>
Glossary
--------------------------------------------------------------------------------
Returns
o Total Return figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
o Average Annual Returns illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 16.
Yields
o 30-Day SEC Yield represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
Portfolio Statistics
o Number of Securities -- the number of different securities held by a fund on
a given date.
o Weighted Average Maturity (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
o Average Duration -- another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
o Expense Ratio -- the operating expenses of the fund, expressed as a percentage
of average net assets. Share holders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
Types of Fixed-Income Securities
o Asset-Backed Securities -- debt securities that represent ownership in a pool
of assets, such as credit card debt, auto loans, or home equity loans.
o Corporate Bonds -- debt securities or instruments issued by companies and
corporations.
o Mortgage-Backed Securities -- debt securities that represent ownership in
pools of mortgage loans.
o U.S. Government Agency Securities -- debt securities issued by U.S.
government agencies (such as the Federal Home Loan Bank and the Federal Farm
Credit Bank). Government agency securities include discount notes (maturing in
one year or less) and medium-term notes, debentures, and bonds (maturing in
three months to 50 years).
o U.S. Treasury Securities -- debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S. government.
Treasury securities include bills (maturing in one year or less), notes
(maturing in two to 10 years), and bonds (maturing in more than 10 years).
20 1-800-345-2021
<PAGE>
Glossary
--------------------------------------------------------------------------------
(Continued)
Fund Classifications
Please be aware that the fund's category may change over time. Therefore,
it is important that you read a fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies, and risk potential are
consistent with your needs.
Investment Objective
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
o Capital Preservation -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
o Income -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
o Growth & Income -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
o Growth -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
Risk
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
o Conservative -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
o Moderate -- these funds generally provide moderate return potential with
moderate price- fluctuation risk.
o Aggressive -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
www.americancentury.com 21
<PAGE>
--------------------------------------------------------------------------------
March 31, 2000
A M E R I C A N C E N T U R Y(R)
Annual Report
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Premium Government Reserve
Premium Capital Reserve
[LOGO]
AMERICAN
CENTURY(R)
<PAGE>
Premium Government Reserve
(TWPXX)
--------------------------------------------------------------------------------
Premium Capital Reserve
(TCRXX)
--------------------------------------------------------------------------------
Turn to the inside back cover of this report to see a list of American Century
funds classified by objective and risk.
Get Investment Insight with Fund Advisor*
--------------------------------------------------------------------------------
They say hindsight is 20/20. But what about insight? That's what you
really want when choosing mutual funds. Now you can get the insight you need
with Fund Advisor, an online tool that helps you select the right no-load funds
for your goals -- short-term and long-term. Fund Advisor helps you:
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Just tell Fund Advisor about your investing style, your current
investments and goals. It will analyze your investments and offer impartial
recommendations to help you get on track for your future.
To get Fund Advisor's unique perspective, go to www.americancentury.com
and select Fund Advisor at the top of the page. For the initial set-up, you will
need:
o Your OnePIN to log in to Fund Advisor
o Your latest tax return
o Your most recent investment account statements
To learn more about this new tool and how it can help you better manage
your financial future, select the "Online Demo" from the Fund Advisor
introduction page.
*Patent pending. Fund Advisor is guided by the portfolio management expertise of
leading investment professionals. It was developed for Acumation, Inc., a
registered investment advisor and wholly owned subsidiary of American Century.
American Century does not receive sales commissions or direct compensation for
recommending any fund, although it may receive management, service or other fees
from funds recommended through Fund Advisor. These agreements are described in
Acumation, Inc.'s Form ADV Part II.
Receive Your Annual Reports Online
--------------------------------------------------------------------------------
Now you can receive documents such as annual reports, prospectuses, and
newsletters online rather than regular mail. Your link to American Century
documents is a click away with the Electronic Communication option.
o Receive links to documents by email
o Download select documents and file electronically to save space in
your file cabinets
o Read documents at your convenience
To sign up for this option, visit www.americancentury.com and log in with
your secure OnePIN. Then simply select an account on your account list and
choose the Electronic Communication link. Questions? Call 1-800-345-2021. Log in
and take control today!
<PAGE>
Our Message to You
--------------------------------------------------------------------------------
[PHOTO OMITTED]
[Photo of James E. Stowers III, seated, with James E. Stowers, Jr.]
The 12 months ended March 31, 2000, provided a nearly ideal environment
for money market funds -- rising interest rates, historically low inflation, and
stock market volatility. Trying to keep U.S. economic growth and inflation under
control, the Federal Reserve raised short-term interest rates times five times
between June 1999 and March 2000, boosting money market yields. While rates
rose, inflation remained low by historical standards, which helped money market
instruments maintain their purchasing power. In addition, stock market
volatility made money market fund stability look attractive for investors with
near-term financial goals.
The American Century Premium Government Reserve and Premium Capital
Reserve funds continued to match the performance of their peers (according to
Lipper Inc., an independent mutual fund ranking service that evaluated 95 funds
in Premium Government Reserve's category and 199 funds in Premium Capital
Reserve's).
We are proud of our funds' performance and the numerous ways we can help
investors like you meet your goals. We are equally proud of our dedication to
creating a positive, safe, and productive work environment for American Century
staff. This commitment was recognized and rewarded in 1999, when American
Century ranked in the top 40 of Fortune magazine's "100 Best Companies to Work
For."
We do not take this recognition lightly; acknowledgements like this allow
us to recruit talented and dedicated people, from service representatives to
investment professionals. This "intellectual capital" is our most valuable
resource and an essential one in our efforts to provide you with excellent
investment management and service.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/ James E. Stowers, Jr.
James E. Stowers, Jr.
Chairman of the Board and Founder
/s/ James E. Stowers III
James E. Stowers III
Vice Chairman of the Board and
Chief Executive Officer
Table of Contents
Report Highlights ....................................................... 2
Frequently Asked Questions .............................................. 3
Premium Government Reserve
Performance Information ................................................. 4
Portfolio at a Glance ................................................... 4
Yields .................................................................. 4
Management Q&A .......................................................... 5
Types of Investments .................................................... 5
Schedule of Investments ................................................. 6
Premium Capital Reserve
Performance Information ................................................. 7
Portfolio at a Glance ................................................... 7
Yields .................................................................. 7
Management Q&A .......................................................... 8
Types of Investments .................................................... 8
Schedule of Investments ................................................. 9
Financial Statements
Statements of Assets and Liabilities .................................... 12
Statements of Operations ................................................ 13
Statements of Changes in Net Assets ..................................... 14
Notes to Financial Statements ........................................... 15
Financial Highlights .................................................... 16
Independent Auditors' Report ............................................ 18
Other Information
Retirement Account Information .......................................... 19
Background Information
Investment Philosophy and Policies ................................... 20
Comparative Indices .................................................. 20
Lipper Rankings ...................................................... 20
Investment Team Leaders .............................................. 20
Credit Rating Guidelines ............................................. 20
Glossary ................................................................ 21
www.americancentury.com 1
<PAGE>
Report Highlights
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premium Government Reserve
(TWPXX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months .......................... 2.66%*
1 Year ............................ 5.03%
7-Day Current Yield: 5.33%
Inception Date: 4/1/93
--------------------------------------------------------------------------------
Net Assets: $79.4 million
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Premium Capital Reserve
(TCRXX)
--------------------------------------------------------------------------------
Total Returns: AS OF 3/31/00
6 Months .......................... 2.74%*
1 Year ............................ 5.18%
7-Day Current Yield: 5.63%
Inception Date: 4/1/93
--------------------------------------------------------------------------------
Net Assets: $378.7 million
--------------------------------------------------------------------------------
* Annualized.
See Total Returns on pages 4 and 7.
Investment terms are defined in the Glossary on pages 21-22.
Premium Government Reserve
o Premium Government Reserve's one-year total return was in line with the
average return of the institutional U.S. government money market funds
tracked by Lipper Inc. (See page 4 for detailed performance comparisons.)
o Five short-term interest rate hikes by the Federal Reserve (the Fed) were
at the heart of Premium Government Reserve's higher seven-day current
yield, which rose from 4.43% to 5.33% during the year.
o The catalysts for the Fed's actions were continued robust U.S. economic
growth and tight labor markets, factors that often lead to inflation.
o In that environment, we added floating-rate agency notes late in 1999,
when they began offering very attractive yields due in part to the
market's Y2K concerns.
o We think that the Fed will likely continue to raise rates, especially if
the U.S. economy continues to grow at such a robust pace, and we're
positioning the portfolio for just such a backdrop.
Premium Capital Reserve
o Premium Capital Reserve's one-year total return exceeded the average
return of the institutional money market funds tracked by Lipper Inc. (See
page 7 for detailed performance comparisons.)
o Five short-term interest rate hikes by the Federal Reserve (the Fed) were
at the heart of Premium Capital Reserve's higher seven-day current yield,
which rose from 4.53% to 5.63% during the year.
o The catalysts for the Fed's actions were continued robust U.S. economic
growth and tight labor markets, factors that often lead to inflation.
o Given that environment, we employed a "barbell" strategy over the last six
months or so, focusing on short-term commercial paper on one end of the
barbell and one-year bank CDs on the other.
o We wouldn't be at all surprised to see the Fed continue to raise rates,
especially if the economy remains robust, so we are positioning Premium
Capital Reserve accordingly.
2 1-800-345-2021
<PAGE>
Money Market Funds -- Frequently Asked Questions
--------------------------------------------------------------------------------
Can I make direct deposits into my money market fund account?
Yes. You can arrange for direct deposit of your paycheck, Social Security
check, Treasury Direct interest payment, military allotment, or payments from
other government agencies. Give us a call, and we will send you the necessary
information to set it up.
What is the holding period on new deposits into my account?
There is a 10-business-day holding period for deposited funds -- including
your initial investment in a new account. There is a one-business-day holding
period for wire transfers.
Is there a cost for writing checks on my money market account?
As long as each check is for $100 or more, you can write as many checks as
you like at no charge.
How can I keep track of my money market fund transactions between account
statements?
You can access your investments any time through our automated telephone
line and the American Century Web site. These services provide fund yields,
returns, account information, and transaction services.
You can keep tabs on your investments by:
o visiting our Web site at www.americancentury.com*
o using our Automated Information Line (1-800-345-8765)*
o calling an Investor Relations Representative at 1-800-345-2021*
weekdays, 7 a.m.-7 p.m. Central time
Saturdays, 9 a.m.-2 p.m. Central time
Why does my money fund yield fluctuate?
Money market funds are managed to maintain a stable $1 share price, but
their yields will fluctuate with changes in market conditions. Common reasons
for changes in your fund's yield are adjustments to Federal Reserve interest
rate policy, the outlook for inflation, and supply and demand for money market
securities.
Keep in mind that no money market fund is guaranteed or insured by the
U.S. government. And although money market funds are intended to preserve the
value of your investment at $1 per share, there's no guarantee that they'll be
able to do so.
If you have any questions about our money market funds, call us toll free at
1-800-345-2021 or e-mail us at our Web site, www.americancentury.com.
A faster and easier way to deposit mutual fund distributions
If you prefer to have your fund dividend or capital gains distributions sent to
you instead of reinvesting them, there are a couple of ways to get access to
this money faster than waiting for a check in the mail:
o You can have distributions deposited directly into your money market
account. The money will be deposited the same day that the distributions
are paid.
o Distributions can be sent electronically to your bank account. The money
will be available in your bank account within three days.
Contact our Investor Relations Representatives to set up either of these
options.
* Before you can make an exchange by calling an Investor Relations
Representative, using our Automated Information Line, or visiting our Web
site, you first must have provided us with written authorization to do so.
www.americancentury.com 3
<PAGE>
Premium Government Reserve -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Premium 90-Day Inst. U.S. Govt. Money Market Funds(2)
Government Reserve Treasury Bill Index Average Return Fund's Ranking
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Months(1) ................ 2.66% 2.67% 2.65% --
1 Year ..................... 5.03% 5.03% 5.06% 56 out of 95
------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
------------------------------------------------------------------------------------------------------------------
3 Years .................... 5.09% 4.97% 5.15% 52 out of 77
5 Years .................... 5.16% 5.10% 5.23% 44 out of 61
Life of Fund ............... 4.74% 4.79% 4.83%(3) 32 out of 44(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 20-21 for more information about returns and Lipper fund rankings.
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 3/31/99
--------------------------------------------------------------------------------
Number of Securities 25 24
Weighted Average Maturity 72 days 51 days
Expense Ratio 0.45% 0.45%
Yields as of March 31, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7-Day Current Yield 5.33%
7-Day Effective Yield 5.47%
Investment terms are defined in the Glossary on pages 21-22.
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
4 1-800-345-2021
<PAGE>
Premium Government Reserve -- Q&A
--------------------------------------------------------------------------------
[PHOTO OMITTED]
An interview with Beth Bunnell Hunter, a portfolio manager on the Premium
Government Reserve fund investment team.
How did Premium Government Reserve perform for the fiscal year ended March 31,
2000?
Premium Government Reserve's one-year total return of 5.03% was in line
with the 5.06% average return of the 95 "Institutional U.S. Government Money
Market Funds" tracked by Lipper Inc. (See page 4 for other performance
comparisons.)
Premium Government Reserve's seven-day current yield rose from 4.43% to 5.33%
during the year. What sparked that increase?
Five short-term interest rate hikes by the Federal Reserve (the Fed) were
at the heart of Premium Government Reserve's higher yield. The Fed raised the
federal funds rate target (an influential overnight bank lending rate) from
4.75% to 6.00%. As Premium Government Reserve's investments matured, we replaced
them with higher-yielding securities.
What prompted the Fed to raise rates?
The catalysts for the Fed's actions were continued robust U.S. economic
growth and tight labor markets. These two factors can often lead to inflation.
And although consumer prices were surprisingly well behaved for most of the
period, recent evidence indicates that inflation may be on the rise.
Given that environment, what types of securities did you favor?
We added floating-rate agency notes late in 1999, when they began offering
very attractive yields. At that time, many investors hesitated to buy
floating-rate agency securities with interest rates tied to Treasury bills
because they expected Treasury yields to fall sharply in anticipation of Y2K. We
viewed this situation as an opportunity to lock in very attractive yields for
the fund.
What is your outlook for interest rates?
We think that the Fed will likely continue to raise rates, especially if
the U.S. economy continues to grow at such a robust pace. Our economy grew at a
7.3% annual rate in the fourth quarter of 1999, the fastest growth rate since
mid-1984. The initial estimate of growth during the first quarter of 2000 was
only slightly less vibrant, coming in at a 5.4% annual clip.
That growth has also resulted in signs of rising inflation -- the March
consumer inflation report revealed that retail prices jumped by 0.7%, propelled
by a nearly 5% rise in energy prices.
Given that outlook, what are your plans for the portfolio?
We're positioning the portfolio for higher rates. That means we will
probably keep the portfolio's weighted average maturity fairly neutral to its
Lipper peers for now. We also plan to continue monitoring the relative values of
agency securities, adding to or subtracting from the portfolio's positions as
conditions warrant.
[The following table was depicted as a pie chart in the printed material.]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o Floating-Rate Agency Notes 36%
o Government Agency Discount Notes 30%
o Government Agency Notes 23%
o Treasury Bills 11%
[The following table was depicted as a pie chart in the printed material.]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o Floating-Rate Agency Notes 32%
o Government Agency Discount Notes 50%
o Government Agency Notes 13%
o Temporary Cash Investments 5%
Investment terms are defined in the Glossary on pages 21-22.
www.americancentury.com 5
<PAGE>
Premium Government Reserve -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. TREASURY BILLS(1) -- 11.5%
--------------------------------------------------------------------------------
$10,000,000 U.S. Treasury Bills, 6.01%,
4/18/00 $ 9,971,636
-----------
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(1) -- 29.7%
--------------------------------------------------------------------------------
3,600,000 FHLB Discount Notes, 6.05%,
4/3/00 3,598,790
2,578,000 FHLB Discount Notes, 5.78%,
5/17/00 2,558,960
5,000,000 FHLMC Discount Notes, 5.83%,
5/25/00 4,956,313
3,000,000 FHLMC Discount Notes, 6.28%,
3/29/01 2,811,600
2,000,000 FNMA Discount Notes, 5.72%,
4/10/00 1,997,140
2,000,000 FNMA Discount Notes, 5.80%,
6/8/00 1,978,089
5,000,000 FNMA Discount Notes, 5.94%,
6/15/00 4,938,083
3,000,000 FNMA Discount Notes, 5.79%,
7/20/00 2,946,925
-----------
TOTAL U.S. GOVERNMENT
AGENCY DISCOUNT NOTES 25,785,900
-----------
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES(1) -- 58.8%
--------------------------------------------------------------------------------
2,000,000 FFCB MTN, VRN, 6.18%, 4/1/00,
resets monthly off the 3-month
T-Bill rate plus 0.36% with
no caps 1,999,984
2,000,000 FHLB, 5.05%, 4/26/00 1,999,940
4,000,000 FHLB, 5.08%, 4/28/00 3,999,956
3,000,000 FHLB, 5.56%, 7/14/00 2,995,815
2,000,000 FHLB, 6.375%, 1/24/01 1,999,722
4,000,000 FHLB, VRN, 6.35%, 4/5/00,
resets weekly off the 3-month
T-Bill rate plus 0.46% with
no caps 3,999,950
2,000,000 FHLMC MTN, 6.50%, 1/19/01 2,000,000
2,000,000 FNMA, 9.20%, 9/11/00 2,027,365
3,000,000 FNMA, 6.57%, 2/22/01 3,000,000
5,000,000 FNMA, VRN, 5.93%, 6/6/00,
resets quarterly off the 3-month
LIBOR minus 0.1875% with
no caps 5,000,000
2,100,000 FNMA MTN, Series B, 5.21%,
10/13/00 2,085,757
3,000,000 FNMA MTN, Series B, VRN,
5.74%, 4/3/00, resets monthly
off the 1-month LIBOR minus
0.1825% with no caps 2,999,109
4,000,000 SLMA, VRN, 6.34%, 4/4/00,
resets weekly off the 3-month
T-Bill rate plus 0.45% with
no caps 3,998,362
3,000,000 SLMA, VRN, 6.36%, 4/4/00,
resets quarterly off the 3-month
T-Bill rate plus 0.47% with
no caps 3,000,000
5,000,000 SLMA MTN, Series HC, VRN, 6.65%,
4/4/00, resets quarterly off the
3-month T-Bill rate plus 0.70%
with no caps 5,012,371
5,000,000 SLMA MTN, VRN, 6.39%,
4/4/00, resets weekly off the
3-month T-Bill rate plus 0.50%
with no caps 4,999,521
-----------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES 51,117,852
-----------
TOTAL INVESTMENT SECURITIES -- 100.0% $86,875,388
===========
Notes to Schedule of Investments
FFCB = Federal Farm Credit Bank
FHLB = Federal Home Loan Bank
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
LIBOR = London Interbank Offered Rate
MTN = Medium Term Note
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
SLMA = Student Loan Marketing Association
VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective March 31, 2000.
(1) The rates for U.S. Treasury Bills and the U.S. Government Agency Discount
Notes are the yield to maturity at purchase. The rates for U.S. Government
Agency Securities are the stated coupon rates.
6 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Premium Capital Reserve -- Performance
--------------------------------------------------------------------------------
Total Returns as of March 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Premium Capital 90-Day Institutional Money Market Funds(2)
Reserve Treasury Bill Index Average Return Fund's Ranking
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 Months(1) ............. 2.74% 2.67% 2.72% --
1 Year .................. 5.18% 5.03% 5.15% 103 out of 199
--------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
--------------------------------------------------------------------------------------------------------------
3 Years ................. 5.23% 4.97% 5.24% 91 out of 162
5 Years ................. 5.28% 5.10% 5.31% 70 out of 127
Life of Fund ............ 4.84% 4.79% 4.93%(3) 51 out of 80(3)
</TABLE>
The fund's inception date was 4/1/93.
(1) Returns for periods less than one year are not annualized.
(2) According to Lipper Inc., an independent mutual fund ranking service.
(3) Since 4/30/93, the date nearest the fund's inception for which return data
are available.
See pages 21-22 for more information about returns and Lipper fund rankings.
Portfolio at a Glance
--------------------------------------------------------------------------------
3/31/00 3/31/99
--------------------------------------------------------------------------------
Number of Securities 54 61
Weighted Average Maturity 59 days 72 days
Expense Ratio 0.45% 0.45%
Yields as of March 31, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
7-Day Current Yield 5.63%
7-Day Effective Yield 5.79%
Investment terms are defined in the Glossary on pages 21-22.
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
www.americancentury.com 7
<PAGE>
Premium Capital Reserve -- Q&A
--------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Types of Investments in the Portfolio
--------------------------------------------------------------------------------
As of March 31, 2000
--------------------------------------------------------------------------------
o Commercial Paper 80%
o Certificates of Deposit 8%
o Variable-Rate Notes 7%
o Other 5%
[The following table was depicted as a pie chart in the printed material.]
--------------------------------------------------------------------------------
As of September 30, 1999
--------------------------------------------------------------------------------
o Commercial Paper 71%
o Certificates of Deposit 11%
o Variable-Rate Notes 11%
o Bank Notes 3%
o Asset-Backed Securities 2%
o Other 2%
Investment terms are defined in the Glossary on pages 21-22.
[PHOTO OMITTED]
An interview with John Walsh, a portfolio manager on the Premium Capital
Reserve fund investment team.
How did Premium Capital Reserve perform for the fiscal year ended March 31,
2000?
Premium Capital Reserve's one-year total return of 5.18% exceeded the
5.15% average return of the 199 "Institutional Money Market Funds" tracked by
Lipper Inc. The fund's longer-term performance was also competitive. (See page 7
for other performance comparisons.)
Premium Capital Reserve's seven-day current yield rose from 4.53% to 5.63%
during the year. What sparked that increase?
Five short-term interest rate hikes by the Federal Reserve were at the
heart of Premium Capital Reserve's higher yield. The Fed raised the federal
funds rate target (an influential overnight bank lending rate) from 4.75% to
6.00%. As Premium Capital Reserve's investments matured, we replaced them with
higher-yielding securities.
What prompted the Fed to raise rates?
The catalysts for the Fed's actions were continued robust U.S. economic
growth and tight labor markets. These two factors can often lead to inflation.
And although prices were surprisingly well behaved for most of the period,
recent evidence indicates that inflation may finally be on the rise.
Given that environment, how did you position the portfolio?
Over the last six months or so, we employed a "barbell" strategy, focusing
on short-term commercial paper with maturities of 30 to 90 days on one end of
the barbell and one-year bank CDs on the other, with very little in between. We
kept a significant percentage of the portfolio invested in very short-term
investments to take advantage of increasing rates. This approach also shortened
the fund's weighted average maturity, which eased from 72 days when the period
began, to 59 days by the end of March.
On the long end, we bought CDs late in 1999 that offered yields that
factored in the rate increases we were anticipating. By adding those CDs to the
portfolio, we were able to slightly boost Premium Capital Reserve's yield.
What is your interest rate outlook, and what are your plans for the portfolio?
We wouldn't be at all surprised to see the Fed continue to raise rates,
especially if the economy continues to exhibit such surprising strength.
However, rates have already been raised five times, which could dampen economic
growth enough to preclude the need for the Fed to intervene strongly.
Along those lines, we're positioning the portfolio for higher rates. That
means we will continue to purchase short-term securities that allow us to
quickly capture any rate increases. We will also strategically purchase one-year
securities when we think their yields reflect our expectations for higher rates.
8 1-800-345-2021
<PAGE>
Premium Capital Reserve -- Schedule of Investments
--------------------------------------------------------------------------------
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMMERCIAL PAPER(1) -- 80.2%
--------------------------------------------------------------------------------
BANKS -- 13.0%
$13,980,000 BIL North America, Inc.,
5.90%-5.95%, 5/12/00 $ 13,885,750
11,300,000 Fortis Funding LLC,
5.95%-6.12%,
6/23/00-7/17/00 (Acquired
1/18/00-3/29/00, Cost $11,028,719)(2) 11,115,535
3,000,000 Garanti Funding Corp. II, 5.97%,
6/6/00 (LOC: Bayerische Hypo
Vereinsbank AG) (Acquired
10/22/99, Cost $2,888,063)(2) 2,967,165
2,300,000 Pemex Capital, Inc., 6.00%,
6/27/00 2,266,650
7,000,000 PNC Funding Corp., 5.86%,
4/3/00 6,997,721
7,000,000 Spintab-Swedmortgage AB,
5.92%-5.97%,
6/9/00-6/15/00 6,918,121
5,100,000 UBS Finance (Delaware) Inc.,
6.28%, 4/3/00 5,098,221
------------
49,249,163
------------
CHEMICALS -- 2.6%
10,000,000 Formosa Plastics Corp. USA,
5.85%-5.92%,
4/5/00-5/9/00 9,954,765
------------
CREDIT CARD & TRADE RECEIVABLES -- 7.7%
15,900,000 Dakota Certificates (Citibank),
5.87%-5.97%,
4/6/00-5/11/00 (Acquired
12/6/99-3/10/00, Cost $15,667,613)(2) 15,848,324
13,475,000 WCP Funding Inc., 5.84%-6.05%,
4/11/00-5/15/00 (Acquired
2/4/00-3/16/00, Cost $13,331,327)(2) 13,422,672
------------
29,270,996
------------
ELECTRICAL UTILITIES -- 5.0%
8,500,000 Enron Funding Corp., 6.09%,
5/22/00-5/30/00 (Acquired
3/27/00-3/28/00, Cost $8,415,332)(2) 8,421,929
10,940,000 National Rural Utilities Cooperative
Finance Corp., 6.10%-6.18%,
6/12/00-10/16/00 10,673,035
------------
19,094,964
------------
ENERGY RESERVES & PRODUCTION -- 5.5%
9,000,000 Chevron Transport Corp.,
5.90%-6.09%,
5/23/00-6/22/00 (Acquired
2/16/00-3/24/00, Cost $8,860,286)(2) 8,896,553
12,000,000 Sand Dollar Funding LLC,
5.85%-5.98%,
4/12/00-5/25/00 (Acquired
2/9/00-3/10/00, Cost $11,859,649)(2) 11,935,876
------------
20,832,429
------------
FINANCIAL SERVICES -- 20.9%
12,800,000 Corporate Receivables Corp.,
5.83%-5.85%,
4/5/00-4/18/00 (Acquired
1/21/00-2/10/00, Cost
$12,653,735)(2) 12,773,528
9,000,000 Countrywide Home Loans, Inc.,
5.90%-5.96%,
4/11/00-4/25/00 8,976,846
2,180,000 Falcon Asset Securities Corp.,
5.87%, 4/17/00 (Acquired
1/20/00, Cost $2,148,719)(2) 2,174,313
2,600,000 General Electric Capital Corp.,
6.04%, 5/19/00 2,579,061
5,000,000 General Electric Capital
International Funding, 5.90%,
5/2/00 4,974,597
4,500,000 GMAC Mortgage Corp., 5.91%,
4/3/00 4,498,522
13,228,000 Old Line Funding Corp.,
5.86%-5.92%,
4/12/00-5/8/00 (Acquired
2/7/00-3/3/00, Cost
$13,098,853)(2) 13,180,896
7,000,000 Quincy Capital Corp.,
5.85%-5.88%,
4/6/00-4/10/00 (Acquired
2/15/00-2/29/00, Cost
$6,946,760)(2) 6,992,340
6,700,000 Receivables Capital Corp.,
5.89%-5.96%,
4/11/00-4/19/00 (Acquired
3/10/00-3/13/00, Cost
$6,661,362)(2) 6,683,662
16,435,000 Windmill Funding Corp.,
5.85%-5.88%,
4/5/00-4/25/00 (Acquired
2/3/00-2/25/00, Cost
$16,275,347)(2) 16,405,743
------------
79,239,508
------------
FOOD & BEVERAGE -- 1.2%
4,600,000 Diageo plc, 5.80%, 4/19/00
(Acquired 1/19/00, Cost
$4,532,559)(2) 4,586,660
------------
LIFE & HEALTH INSURANCE -- 7.7%
13,700,000 Allianz of America Inc.,
5.85%-6.07%,
4/20/00-6/16/00 (Acquired
2/3/00-3/20/00, Cost
$13,512,161)(2) 13,579,245
See Notes to Financial Statements www.americancentury.com 9
<PAGE>
Premium Capital Reserve -- Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
$ 5,200,000 American Family Financial
Services, Inc., 5.94%,
8/7/00-8/25/00 $ 5,083,642
10,500,000 General Electric Financial
Assurance Holdings,
5.84%-5.87%,
4/10/00-4/14/00 (Acquired
2/16/00-3/1/00, Cost $10,411,731)(2) 10,479,924
--------------
29,142,811
--------------
OIL REFINING -- 3.3%
12,400,000 Motiva Enterprises LLC,
5.80%-6.04%,
4/13/00-5/24/00 12,337,584
--------------
PROPERTY & CASUALTY INSURANCE -- 1.7%
6,800,000 AEGON Funding Corp.,
6.23%-6.29%,
10/4/00-12/13/00 (Acquired
3/23/00-3/30/00, Cost $6,537,599)(2) 6,543,599
--------------
SECURITIES & ASSET MANAGEMENT -- 7.8%
10,000,000 Credit Suisse First Boston Inc.,
5.91%-6.07%,
5/17/00-9/5/00 (Acquired
2/8/00-3/9/00, Cost
$9,766,988)(2) 9,829,881
11,000,000 Merrill Lynch & Co., Inc.,
5.83%-5.87%,
4/4/00-4/18/00 10,983,069
9,000,000 Morgan Stanley Dean Witter &
Co., 5.84%-5.86%,
4/14/00-4/26/00 8,971,217
--------------
29,784,167
--------------
SEMICONDUCTOR -- 3.8%
14,341,000 Invensys plc, 5.90%-6.07%,
5/12/00-7/19/00 (Acquired
1/20/00-3/24/00, Cost $14,070,534)(2) 14,191,069
--------------
TOTAL COMMERCIAL PAPER 304,227,715
--------------
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 1.0%
--------------------------------------------------------------------------------
4,000,000 FHLMC MTN, 6.50%, 1/19/01 4,000,000
--------------
--------------------------------------------------------------------------------
CORPORATE DEBT -- 6.3%
--------------------------------------------------------------------------------
BANKS -- 0.7%
2,500,000 Bank One Corp. MTN, Series B,
VRN, 6.12%, 5/9/00, resets
quarterly off the 3-month
LIBOR plus 0.02% with no caps 2,500,000
--------------
FINANCIAL SERVICES -- 2.3%
3,000,000 Abbey National Treasury Services
PLC MTN, Series 1A, 5.97%,
8/14/00 2,999,576
1,750,000 General Electric Capital Corp.
MTN, Series A, 5.76%,
4/24/00 1,749,666
4,000,000 General Electric Capital Corp.
MTN, Series A, VRN, 5.98%,
4/13/00, resets quarterly off
the 3-month LIBOR minus
0.05% with no caps 4,000,000
--------------
8,749,242
--------------
LIFE & HEALTH INSURANCE -- 3.3%
3,000,000 Jackson National Life Insurance
Co., VRN, 6.16%, 4/10/00,
resets monthly off the 1-month
LIBOR plus 0.19% with no
caps (Acquired 6/8/99, Cost $3,000,000)(2) 3,000,000
5,000,000 Transamerica Asset Funding Corp.,
VRN, 6.16%, 5/1/00, resets
quarterly off the 3-month
LIBOR plus 0.11% with no
caps (Acquired 11/9/99, Cost
$5,000,000)(2) 5,000,000
4,600,000 Travelers Insurance Company
(The), VRN, 6.01%-6.16%,
4/10/00-4/24/00, resets
monthly off the 1-month
LIBOR plus 0.04% with no
caps (Acquired 5/19/99-6/4/99,
Cost $4,600,000)(2) 4,600,000
--------------
12,600,000
--------------
TOTAL CORPORATE DEBT 23,849,242
--------------
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES(3) -- 1.4%
--------------------------------------------------------------------------------
265,364 Americredit Automobile
Receivables Trust, Series
1999 C, Class A1A SEQ,
5.67%, 9/5/00 265,364
128,676 ANRC Auto Owner Trust, Series
1999 A, Class A1 SEQ, 6.17%,
10/16/00 128,676
821,761 New Holland Equipment
Receivables Trust, Series 1999 A,
Class A1 SEQ, 6.15%, 11/15/00
(Acquired 11/5/99, Cost $821,761)(2) 821,761
4,000,000 WFS Financial Owner Trust,
Series 2000 A, Class A1 SEQ,
6.28%, 3/20/01 4,000,000
--------------
TOTAL ASSET-BACKED SECURITIES 5,215,801
--------------
10 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Premium Capital Reserve -- Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
MARCH 31, 2000
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 8.3%
--------------------------------------------------------------------------------
$ 3,100,000 American Express Centurion
Bank, 5.87%, 4/6/00 $ 3,100,000
5,000,000 Canadian Imperial Bank of
Commerce (New York), 5.90%,
4/19/00 4,999,720
8,000,000 National Westminster Bank PLC
(New York), 6.79%-6.87%,
3/28/01-4/3/01 7,997,740
9,000,000 Royal Bank of Canada (New
York), 6.44%-6.48%,
1/5/01-1/10/01 8,996,696
6,500,000 UBS AG, 5.29%-5.46%,
5/19/00-6/5/00 6,499,555
------------
TOTAL CERTIFICATES OF DEPOSIT 31,593,711
------------
--------------------------------------------------------------------------------
BANK NOTES -- 2.8%
--------------------------------------------------------------------------------
4,000,000 Bank of America N.A., 5.99%,
5/16/00 4,000,000
4,000,000 U.S. Bank, NA Minnesota, VRN,
5.88%, 4/19/00, resets
monthly off the 1-month
LIBOR minus 0.12% with
no caps 3,999,868
2,500,000 U.S. Bank, NA Minnesota, VRN,
5.95%, 4/19/00, resets
monthly off the 1-month LIBOR
minus 0.05% with no caps 2,499,539
------------
TOTAL BANK NOTES 10,499,407
------------
TOTAL INVESTMENT SECURITIES -- 100.0% $379,385,876
============
Notes to Schedule of Investments
FHLMC = Federal Home Loan Mortgage Corporation
LIBOR = London Interbank Offered Rate
LOC = Letter of Credit
MTN = Medium Term Note
resets = The frequency with which a security's coupon changes, based on current
market conditions or an underlying index. The more frequently a
security resets, the less risk the investor is taking that the coupon
will vary significantly from current market rates.
VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is
effective March 31, 2000.
(1) The rates for commercial paper are the yield to maturity at purchase.
(2) Security was purchased under Rule 144A or Section 4(2) of the Securities
Act of 1933 or is a private placement and, unless registered under the Act
or exempted from registration, may only be sold to qualified institutional
investors. The aggregate value of restricted securities at March 31, 2000,
was $203,450,675, which represented 53.7% of net assets. Restricted
securities considered illiquid represent 3.3% of net assets.
(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average maturity.
See Notes to Financial Statements www.americancentury.com 11
<PAGE>
Statements of Assets and Liabilities
--------------------------------------------------------------------------------
This statement breaks down the fund's assets (such as securities, cash, and
other receivables) and liabilities (money owed for securities purchased,
management fees, and other liabilities) as of the last day of the reporting
period. Subtracting the liabilities from the assets results in the fund's net
assets. The net assets divided by shares outstanding is the share price, or net
asset value per share. This statement also breaks down the fund's net assets
into capital (shareholder investments) and performance (investment income and
gains/losses).
<TABLE>
<CAPTION>
PREMIUM PREMIUM
GOVERNMENT CAPITAL
MARCH 31, 2000 RESERVE RESERVE
-------------------------------------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment securities, at value (amortized cost and cost for federal income tax purposes) $ 86,875,388 $ 379,385,876
Cash .................................................................................... 2,097,663 1,446,152
Interest receivable ..................................................................... 626,752 1,028,673
--------------- ---------------
89,599,803 381,860,701
--------------- ---------------
-------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ....................................................... 2,811,600 2,999,147
Payable for capital shares redeemed ..................................................... 7,347,658 --
Accrued management fees (Note 2) ........................................................ 31,954 142,368
Payable for directors' fees and expenses ................................................ 50 224
Accrued expenses and other liabilities .................................................. 10 140
--------------- ---------------
10,191,272 3,141,879
--------------- ---------------
Net Assets .............................................................................. $ 79,408,531 $ 378,718,822
=============== ===============
-------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARES, $0.01 PAR VALUE
-------------------------------------------------------------------------------------------------------------------------------
Authorized .............................................................................. 1,000,000,000 1,000,000,000
=============== ===============
Outstanding ............................................................................. 79,411,225 378,718,833
=============== ===============
Net Asset Value Per Share ............................................................... $1.00 $1.00
=============== ===============
-------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------------------------------------------------------
Capital (par value and paid-in surplus) ................................................. $ 79,411,225 $ 378,718,834
Accumulated net realized loss on investment transactions ................................ (2,694) (12)
--------------- ---------------
$ 79,408,531 $ 378,718,822
=============== ===============
</TABLE>
12 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Statements of Operations
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed during the reporting
period as a result of the fund's operations. In other words, it shows how much
money the fund made or lost as a result of interest income, fees and expenses,
and investment gains or losses.
<TABLE>
<CAPTION>
PREMIUM PREMIUM
GOVERNMENT CAPITAL
YEAR ENDED MARCH 31, 2000 RESERVE RESERVE
---------------------------------------------------------------------------------
INVESTMENT INCOME
---------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ........................................... $ 4,788,220 $17,466,300
----------- -----------
Expenses (Note 2):
Management fees .................................... 404,059 1,420,009
Directors' fees and expenses ....................... 690 2,340
----------- -----------
404,749 1,422,349
----------- -----------
Net investment income .............................. 4,383,471 16,043,951
----------- -----------
Net realized gain (loss) on investments ............ (2,694) 7,716
----------- -----------
Net Increase in Net Assets Resulting from Operations $ 4,380,777 $16,051,667
=========== ===========
</TABLE>
See Notes to Financial Statements www.americancentury.com 13
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
This statement shows how the fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of
operations (as detailed on the previous page for the most recent period), income
and capital gain distributions, and shareholder investments and redemptions.
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
<TABLE>
<CAPTION>
------------------------------ ------------------------------
PREMIUM GOVERNMENT RESERVE PREMIUM CAPITAL RESERVE
------------------------------ ------------------------------
Increase (Decrease) in Net Assets 2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income ..................... $ 4,383,471 $ 3,379,825 $ 16,043,951 $ 10,460,773
Net realized gain (loss) on investments ... (2,694) 5,484 7,716 1,320
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations ......................... 4,380,777 3,385,309 16,051,667 10,462,093
------------- ------------- ------------- -------------
--------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
--------------------------------------------------------------------------------------------------------------
From net investment income ................ (4,383,471) (3,379,825) (16,043,951) (10,460,773)
From net realized gains on
investment transactions ................. -- (5,104) (4,674) --
------------- ------------- ------------- -------------
Decrease in net assets from distributions . (4,383,471) (3,384,929) (16,048,625) (10,460,773)
------------- ------------- ------------- -------------
--------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------------------------------------
Proceeds from shares sold ................. 385,615,932 483,425,779 576,548,075 533,120,417
Proceeds from reinvestment of distributions 4,334,708 3,241,460 15,425,655 9,901,509
Payments for shares redeemed .............. (431,832,940) (409,868,798) (489,306,402) (449,461,484)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
capital share transactions .............. (41,882,300) 76,798,441 102,667,328 93,560,442
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ..... (41,884,994) 76,798,821 102,670,370 93,561,762
--------------------------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------------------------------
Beginning of period ....................... 121,293,525 44,494,704 276,048,452 182,486,690
------------- ------------- ------------- -------------
End of period ............................. $ 79,408,531 $ 121,293,525 $ 378,718,822 $ 276,048,452
============= ============= ============= =============
--------------------------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF THE FUNDS
--------------------------------------------------------------------------------------------------------------
Sold ...................................... 385,615,932 483,425,779 576,548,075 533,120,417
Issued in reinvestment of distributions ... 4,334,708 3,241,460 15,425,654 9,901,509
Redeemed .................................. (431,832,940) (409,868,798) (489,306,402) (449,461,484)
------------- ------------- ------------- -------------
Net increase (decrease) ................... (41,882,300) 76,798,441 102,667,327 93,560,442
============= ============= ============= =============
</TABLE>
14 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
MARCH 31, 2000
--------------------------------------------------------------------------------
1. Organization and Summary of Significant Accounting Policies
Organization -- American Century Premium Reserves, Inc. (the corporation)
is registered under the Investment Company Act of 1940 (the 1940 Act) as an
open-end management investment company. Premium Government Reserve Fund
(Government Reserve) and Premium Capital Reserve Fund (Capital Reserve) (the
funds) are two of the three funds issued by the corporation. The funds are
diversified under the 1940 Act. The investment objective of Government Reserve
and Capital Reserve is to obtain as high a level of current income as is
consistent with preservation of capital and maintenance of liquidity. The
following significant accounting policies are in accordance with generally
accepted accounting principles; the policies may require the use of estimates by
fund management.
Security Valuations -- Securities are valued at amortized cost, which
approximates current value. When valuations are not readily available,
securities are valued at fair value as determined in accordance with procedures
adopted by the Board of Directors.
Security Transactions -- Security transactions are accounted for as of the
trade date. Net realized gains and losses are determined on the identified cost
basis, which is also used for federal income tax purposes.
Investment Income -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.
Repurchase Agreements -- The funds may enter into repurchase agreements
with institutions that the funds' investment manager, American Century
Investment Management, Inc. (ACIM), has determined are creditworthy pursuant to
criteria adopted by the Board of Directors. Each repurchase agreement is
recorded at cost. The funds require that the collateral, represented by
securities, received in a repurchase transaction be transferred to the custodian
in a manner sufficient to enable the funds to obtain those securities in the
event of a default under the repurchase agreement. ACIM monitors, on a daily
basis, the securities transferred to ensure the value, including accrued
interest, of the securities under each repurchase agreement is equal to or
greater than amounts owed to the funds under each repurchase agreement.
Joint Trading Account -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account held at the funds'
custodian. These balances are invested in one or more repurchase agreements that
are collateralized by U.S. Treasury or Agency obligations.
Income Tax Status -- It is the funds' policy to distribute all net
investment income and net realized gains to shareholders and to otherwise
qualify as a regulated investment company under the provisions of the Internal
Revenue Code. Accordingly, no provision has been made for federal or state
income taxes.
Distributions to Shareholders -- Distributions from net investment income
are declared daily and distributed monthly. The funds do not expect to realize
any long-term capital gains and, accordingly do not expect to pay any long-term
capital gains distributions.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net realized gains and losses for financial
statement and tax purposes and may result in reclassification among certain
capital accounts.
At March 31, 2000, accumulated net realized short-term capital loss
carryovers of $2,687 for Capital Reserve (expiring in 2008) may be used to
offset future taxable gains.
Additional Information -- Funds Distributor, Inc. (FDI) is the
corporation's distributor. Certain officers of FDI are also officers of the
corporation.
--------------------------------------------------------------------------------
2. Transactions with Related Parties
The corporation has entered into a Management Agreement with ACIM that
provides the funds with investment advisory and management services in exchange
for a single, unified fee. The Agreement provides that all expenses of the
funds, except brokerage commissions, taxes, interest, expenses of those
directors who are not considered "interested persons" as defined in the 1940 Act
(including counsel fees) and extraordinary expenses, will be paid by ACIM. The
fee is computed daily and paid monthly based on each fund's average daily
closing net assets during the previous month. The annual management fee for each
fund is 0.45%.
Effective March 13, 2000, American Century Investment Services, Inc.
(ACIS), became a distributor of the corporation.
Certain officers and directors of the corporation are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the corporation's investment manager, ACIM, a
distributor of the corporation, ACIS, and the corporation's transfer agent,
American Century Services Corporation.
www.americancentury.com 15
<PAGE>
Premium Government Reserve -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years. It also
includes several key statistics for each reporting period, including total
return, income ratio (net income as a percentage of average net assets), expense
ratio (operating expenses as a percentage of average net assets), and portfolio
turnover (a gauge of the fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended March 31
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $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 Period ....................... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======== ======= ======= =======
Total Return(1) .................................... 5.03% 4.98% 5.25% 5.07% 5.49%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets .... 0.45% 0.45% 0.45% 0.45% 0.44%
Ratio of Net Investment Income to Average Net Assets . 4.89% 4.82% 5.13% 4.96% 5.30%
Net Assets, End of Period (in thousands) ............. $79,409 $121,294 $44,495 $38,838 $26,191
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
16 1-800-345-2021 See Notes to Financial Statements
<PAGE>
Premium Capital Reserve -- Financial Highlights
--------------------------------------------------------------------------------
This table itemizes investment results and distributions on a per-share basis to
illustrate share price changes for each of the last five fiscal years. It also
includes several key statistics for each reporting period, including total
return, income ratio (net income as a percentage of average net assets), expense
ratio (operating expenses as a percentage of average net assets), and portfolio
turnover (a gauge of the fund's trading activity).
<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Years Ended March 31
2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $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 Period ........................ $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ========
Total Return(1) ..................................... 5.18% 5.14% 5.38% 5.13% 5.58%
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets ..... 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Investment Income to Average Net Assets .. 5.09% 4.99% 5.26% 5.01% 5.50%
Net Assets, End of Period (in thousands) .............. $378,719 $276,048 $182,487 $153,958 $133,417
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gains
distributions, if any.
See Notes to Financial Statements www.americancentury.com 17
<PAGE>
Independent Auditors' Report
--------------------------------------------------------------------------------
The Board of Directors and Shareholders,
American Century Premium Reserves, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Premium Government Reserve and
Premium Capital Reserve, (collectively the "Funds"), two of the funds comprising
American Century Premium Reserves, Inc., as of March 31, 2000, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and the financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at March 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
Premium Government Reserve and Premium Capital Reserve as of March 31, 2000, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
18 1-800-345-2021
<PAGE>
Retirement Account Information
--------------------------------------------------------------------------------
Retirement Account Information
As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)
account] are subject to federal income tax withholding at the rate of 10% of the
total amount withdrawn, unless you elect not to have withholding apply. If you
don't want us to withhold on this amount, you may send us a written notice not
to have the federal income tax withheld. Your written notice is valid from the
date of receipt at American Century. Even if you plan to roll over the amount
you withdraw to another tax-deferred account, the withholding rate still applies
to the withdrawn amount unless we have received a written notice not to withhold
federal income tax prior to the withdrawal.
When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid from the date of receipt at American
Century. You may revoke your election at any time by sending a written notice to
us.
Remember, even if you elect not to have income tax withheld, you are
liable for paying income tax on the taxable portion of your withdrawal. If you
elect not to have income tax withheld or you don't have enough income tax
withheld, you may be responsible for payment of estimated tax. You may incur
penalties under the estimated tax rules if your withholding and estimated tax
payments are not sufficient.
www.americancentury.com 19
<PAGE>
Background Information
--------------------------------------------------------------------------------
Investment Team Leaders
--------------------------------------------------------------------------------
Premium Government Reserve
--------------------------------------------------------------------------------
Beth Bunnell Hunter
--------------------------------------------------------------------------------
Premium Capital Reserve
--------------------------------------------------------------------------------
John Walsh
Credit Rating Guidelines
Credit ratings are issued by independent research companies such as
Standard & Poor's and Moody's. They are based on an issuer's financial strength
and ability to pay interest and principal in a timely manner.
A-1 (which includes A-1+) is Standard & Poor's highest credit rating for
short-term securities. Here are the most common short-term credit ratings and
their definitions:
o A-1+: extremely strong ability to meet financial obligations.
o A-1: strong ability to meet financial obligations.
o A-2: satisfactory ability to meet financial obligations.
It's important to note that credit ratings are subjective, reflecting the
opinions of the rating agencies; they are not absolute standards of quality.
Investment Philosophy and Policies
American Century offers 38 fixed-income funds, ranging from money market
portfolios to long-term bond funds and including both taxable and tax-exempt
funds. Each is managed to provide a "pure play" on a specific sector of the
fixed-income market.
To ensure adherence to this principle, the basic structure of each
portfolio is tied to a specific market index. Fund managers attempt to add value
by making modest portfolio adjustments based on their analysis of prevailing
market conditions.
Investment decisions are made by management teams, which meet regularly to
discuss market analysis and investment strategies.
In addition to these principles, each fund has its own investment
policies:
Premium Government Reserve and Premium Capital Reserve seek to provide
interest income while maintaining a stable share price. Premium Government
Reserve invests in U.S. government money market securities, while Premium
Capital Reserve invests in a diversified portfolio of money market securities.
An investment in the funds is neither insured nor guaranteed by the FDIC
or any other government agency. Yields will fluctuate, and although the funds
seek to preserve the value of your investment at $1 per share, it is possible to
lose money by investing in the funds.
Comparative Indices
The following index is used in the report for fund performance
comparisons. It is not an investment product available for purchase.
The 90-Day Treasury Bill Index is derived from secondary market interest
rates as published by the Federal Reserve Bank.
Lipper Rankings
Lipper Inc. is an independent mutual fund ranking service that groups
funds according to their investment objectives. Rankings are based on average
annual returns for each fund in a given category for the periods indicated.
Rankings are not included for periods less than one year.
The Lipper categories for the Premium Reserve Money Market funds are:
Institutional U.S. Government Money Market Funds (Premium Government
Reserve) -- funds with dollar-weighted average maturities of less than 90 days
that intend to maintain a stable net asset value and that invest principally in
financial instruments issued or guaranteed by the U.S. government, its agencies,
or instrumentalities.
Institutional Money Market Funds (Premium Capital Reserve) -- funds with
dollar-weighted average maturities of less than 90 days that intend to maintain
a stable net asset value and that invest in high-quality financial instruments
rated in the top two grades.
But unlike most of the funds in their Lipper categories, the Premium
Reserve Money Market funds are not really institutional funds. Instead, they are
intended for high-net-worth individual investors. Institutional funds typically
have higher minimum balance requirements (often $1 million or more) and, more
importantly, lower expenses. The Premium Reserve Money Market funds' higher
expenses give them a disadvantage compared with their Lipper group.
However, the Premium Reserve Money Market funds have lower expenses than
the average non-institutional money market fund (according to Lipper), so they
can offer attractive yields to individuals able to meet their $100,000
investment minimum.
20 1-800-345-2021
<PAGE>
Glossary
--------------------------------------------------------------------------------
Returns
o Total Return figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
o Average Annual Returns illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 16-17.
Yields
o 7-Day Current Yield is calculated based on the income generated by an
investment in the fund over a seven-day period and is expressed as an annual
percentage rate.
o 7-Day Effective Yield is calculated similarly, although this figure is
slightly higher than the fund's 7-Day Current Yield because of the effects of
compounding. The 7-Day Effective Yield assumes that income earned from the
fund's investments is reinvested and generating additional income.
Portfolio Statistics
o Number of Securities -- the number of different securities held by the fund on
a given date.
o Weighted Average Maturity (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
o Expense Ratio -- the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)
Types of Money Market Securities
o Asset-Backed Securities -- debt securities that represent ownership in a pool
of receivables, such as credit card debt, auto loans, or mortgages.
o Bank Notes-- promissory notes issued in the U.S. by domestic commercial banks.
o Certificates of Deposit (CDs) -- CDs represent a bank's obligation to repay
money deposited with it for a specified period of time.
o Commercial Paper (CP) -- short-term debt issued by large corporations to raise
cash and to cover current expenses in anticipation of future revenues.
o Repurchase Agreements (Repos) -- short-term debt agreements in which a fund
buys a security at one price and simultaneously agrees to sell it back to the
seller at a slightly higher price on a specified date (usually within seven
days). The fund does not own the security; instead, the security serves as
collateral for the agreement.
o U.S. Government Agency Notes -- intermediate-term debt securities issued by
U.S. government agencies (such as the Federal Home Loan Bank). These notes are
issued with maturities ranging from three months to 30 years, but the funds only
invest in those with remaining maturities of 397 days or less.
o U.S. Government Agency Discount Notes -- short-term debt securities issued by
U.S. government agencies (such as the Federal Home Loan Bank). These notes are
issued at a discount and achieve full value at maturity (typically one year or
less).
o Variable-Rate Notes (VRNs) -- debt securities whose interest rates change when
a designated base rate changes. The base rate is often the federal funds rate,
the 90-day Treasury bill rate, or the London Interbank Offered Rate.
www.americancentury.com 21
<PAGE>
Glossary
--------------------------------------------------------------------------------
(Continued)
Fund Classifications
Please be aware that the fund's category may change over time. Therefore,
it is important that you read a fund's prospectus or fund profile carefully
before investing to ensure its objectives, policies, and risk potential are
consistent with your needs.
Investment Objective
The investment objective may be based on the fund's objective as stated in
its prospectus or fund profile, or the fund's categorization by independent
rating organizations based on its management style.
o Capital Preservation -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
o Income -- offers funds that can provide current income and competitive yields,
as well as a strong and stable foundation and generally lower volatility levels
than stock funds.
o Growth & Income -- offers funds that emphasize both growth and income provided
by either dividend-paying equities or a combination of equity and fixed-income
securities.
o Growth -- offers funds with a focus on capital appreciation and long-term
growth, generally providing high return potential with corresponding high
price-fluctuation risk.
Risk
The classification of funds by risk category is based on quantitative
historical measures as well as qualitative prospective measures. It is not
intended to be a precise indicator of future risk or return levels. The degree
of risk within each category can vary significantly, and some fund returns have
historically been higher than more aggressive funds or lower than more
conservative funds.
o Conservative -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
o Moderate -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
o Aggressive -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
22 1-800-345-2021
<PAGE>
Notes
--------------------------------------------------------------------------------
www.americancentury.com 23
<PAGE>
Notes
--------------------------------------------------------------------------------
24 1-800-345-2021
<PAGE>
INVESTMENT OBJECTIVE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
RISK LEVEL CAPITAL PRESERVATION INCOME
Taxable Tax-Free Taxable Bonds Tax-Free Bonds
Money Markets Money Markets
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGGRESSIVE
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
---------------------------------------------------------------------------------------------------------
MODERATE Long-Term Treasury CA Long-Term
Tax-Free
Target 2005*
Long-Term Tax-Free
Bond
CA Insured Tax-Free
Premium Bond
---------------------------------------------------------------------------------------------------------
CONSERVATIVE Premium FL Municipal Intermediate-Term Bond CA Intermediate-Term
Capital Reserve Money Market Tax-Free
Intermediate-Term
Prime CA Municipal Treasury AZ Intermediate-Term
Money Market Money Market Municipal
GNMA
Premium CA Tax-Free FL Intermediate-Term
Government Reserve Money Market Inflation-Adjusted Municipal
Treasury
Government Agency Tax-Free Intermediate-Term
Money Market Money Market Limited-Term Bond Tax-Free
Capital Preservation Target 2000* CA Limited-Term
Tax-Free
Short-Term Government
Limited-Term
Short-Term Treasury Tax-Free
---------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
RISK LEVEL GROWTH AND INCOME GROWTH
Asset Allocation/ Domestic Equity Specialty Domestic Equity Specialty International
Balanced
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGGRESSIVE Veedot(2)
Small Cap Quantitative New Opportunities Global Gold Emerging Markets
Small Cap Value Giftrust(R) International
Discovery
Vista
International
Heritage Growth
Growth Global Growth
Ultra(R)
Select
------------------------------------------------------------------------------------------------------------------------------------
MODERATE Strategic Allocation: Equity Growth Utilities Global Natural
Aggressive Resources
Equity Index Real Estate
Balanced
Large Cap Value
Strategic Allocation:
Moderate Tax-Managed Value
Strategic Allocation: Income & Growth
Conservative
Value
Equity Income
------------------------------------------------------------------------------------------------------------------------------------
CONSERVATIVE
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The investment objective may be based on the fund's objective as stated in its
prospectus or fund profile, or the fund's categorization by independent rating
organizations based on its management style.
The classification of funds by risk category is based on quantitative historical
measures as well as qualitative prospective measures. It is not intended to be a
precise indicator of future risk or return levels. The degree of risk within
each category can vary significantly, and some fund returns have historically
been higher than more aggressive funds or lower than more conservative funds.
Please be aware that a fund's category may change over time. Therefore, it is
important that you read a fund's prospectus or fund profile carefully before
investing to ensure its objectives, policies and risk potential are consistent
with your needs. For a definition of fund categories, see the Glossary.
*While listed within the Income investment objective, the Target funds do not
pay current dividend income. Income dividends are distributed once a year in
December. The Target funds are listed in all three risk categories due to the
dramatic price volatility investors may experience during certain market
conditions. If held to their target dates, however, they can offer a
conservative, dependable way to invest for a specific time horizon.
Please call 1-800-345-2021 for a prospectus or profile on any American Century
fund. These documents contain important information including charges and
expenses, and you should read them carefully before you invest or send money.
<PAGE>
[LOGO]
AMERICAN
CENTURY(R)
P.O. Box 419200
Kansas City, Missouri 64141-6200
www.americancentury.com
Investor Relations
1-800-345-2021 or 816-531-5575
Automated Information Line
1-800-345-8765
Fax: 816-340-7962
Telecommunications Device for the Deaf
1-800-634-4113 or 816-444-3485
Business, Not-For-Profit, Employer-Sponsored
Retirement Plans
1-800-345-3533
Banks and Trust Companies, Broker-Dealers,
Financial Advisors, Insurance Companies
1-800-345-6488
American Century Premium Reserves, Inc.
Investment Manager
American Century Investment Management, Inc.
Kansas City, Missouri
This report and the statements it contains are submitted for the general
information of our shareholders. The report is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
--------------------------------------------------------------------------------
Who we are [GRAPHIC OMITTED]
American Century offers investors more than 70 mutual funds that span the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, with a range of services designed to
make investing easy and convenient.
For four decades, American Century has been a leader in performance, service and
innovation. From pioneering the use of computer technology in investing to
allowing investors to conduct transactions and receive financial advice over the
Internet, we have remained committed to building long-term relationships and to
helping investors achieve their dreams.
In a very real sense, investors put their future in our hands. With so much at
stake, our work continues to be guided by one central belief, shared by every
person at American Century: We succeed only if our investors succeed.
--------------------------------------------------------------------------------
American Century Investments -----------------
P.O. Box 419200 BULK RATE
Kansas City, MO 64141-6200 U.S. POSTAGE PAID
www.americancentury.com AMERICAN CENTURY
COMPANIES
-----------------
0005 American Century Investment Services, Inc.
SH-ANN-20578 (C)2000 American Century Services Corporation
