[front cover]
September 30, 2000
AMERICAN CENTURY
Semiannual Report
Premium Bond
[american century logo and text logo (reg.sm)]
American
Century
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Review the day's market activity at www.americancentury.com
Now you can find more perspective on daily stock and bond market activity on
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events that influenced the U.S. stock and bond markets. In addition, these
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[left margin]
PREMIUM BOND
(ACBPX)
--------------------------
TURN TO THE INSIDE BACK COVER TO SEE A LIST OF AMERICAN CENTURY FUNDS CLASSIFIED
BY OBJECTIVE AND RISK.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers, Jr. and James E. Stowers III]
James E. Stowers, Jr., standing, with James E. Stowers III
American Century Premium Bond posted a solid return for the six months
ended September 30, 2000. Reflecting conditions that were better for bonds than
for stocks, the fund outperformed the U.S. stock market as represented by the
Wilshire 5000 stock index. For risk-averse investors or those with short
investment horizons, this demonstrated the value of maintaining at least a
modest fixed-income position to cushion against stock price swings.
Similar to how the Wilshire 5000 mirrors the U.S. stock market, Premium
Bond and its benchmark index mirror the taxable U.S. bond market. The fund's
investment team reviews the market and fund performance beginning on page 3.
Turning to corporate matters, Chase Manhattan Corp. recently announced
plans to acquire J.P. Morgan & Co., a substantial minority shareholder in
American Century Companies, Inc. since 1998. If the transaction is completed as
expected, J.P. Morgan Chase, the new enterprise, will own the shares of American
Century currently held by Morgan. Corporate control of American Century is not
affected by this transaction. We will be exploring ways to partner with J.P.
Morgan Chase for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we have chosen to share the
chairman of the board position and named American Century President William M.
Lyons chief executive officer, giving him ultimate management responsibility for
the entire company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for the Ultra and Veedot funds.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Co-Chairman of the Board
[right margin]
Table of Contents
Report Highlights ...................................................... 2
Market Perspective ..................................................... 3
PREMIUM BOND
Performance Information ................................................ 5
Management Q&A ......................................................... 6
Portfolio at a Glance .................................................. 6
Yield .................................................................. 6
Types of Investments ................................................... 7
Schedule of Investments ................................................ 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities ......................................................... 12
Statement of Operations ................................................ 13
Statement of Changes
in Net Assets ....................................................... 14
Notes to Financial
Statements .......................................................... 15
Financial Highlights ................................................... 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
Report Highlights
--------------------------------------------------------------------------------
MARKET PERSPECTIVE
* U.S. bonds posted generally solid returns for the six months ended September
30, 2000.
* Broad U.S. bond indices generally outperformed the broadest U.S. stock
indices.
* Stock market volatility was one key factor that helped bonds.
* Other factors that favored bonds included signs of an economic slowdown and
just one interest rate hike from the Federal Reserve during the period,
compared with five during the previous nine months.
* As interest rates stabilized, mortgage-backed securities were the leading
taxable bond sector in terms of return, followed by government agency and
asset-backed bonds.
* After outperforming earlier in the year, Treasury securities trailed.
Corporate bonds also lagged the other non-Treasury sectors.
MANAGEMENT Q&A
* Premium Bond performed quite well for the six months, beating the average
return of its Lipper peer group but trailing the benchmark index.
* The fund's good performance against its peer group was due in part to
lower-than-average expenses and a higher-than-average yield.
* Another factor that helped Premium Bond beat the average return of its
Lipper category was the fund's lower-than-average exposure to corporate
bonds, one of the lagging sectors of the market.
* However, Premium Bond's corporate holdings were larger than those of the
benchmark, the Lehman Aggregate Bond Index. That was one reason why the
fund trailed the index.
* Another reason was Premium Bond's performance in the second quarter. The
fund lagged the index significantly during that quarter because the
portfolio's duration and Treasury exposure were lower than the benchmark's
when bonds rallied and Treasurys performed best of all.
* Premium Bond regained some ground against the index in the third quarter.
Its underweight Treasury position paid off when Treasurys lagged all other
sectors.
* As the investment team searched for relative value and higher yields, it
trimmed the Treasury holdings and bolstered the mortgage sector.
* Premium Bond is still overweight in corporates compared with the benchmark,
which should work out well as long as the economy doesn't suffer a hard
landing. But if the economy slows sharply, the investment team would have
to re-evaluate the mortgage and corporate positions, and turn more to
Treasurys.
[left margin]
PREMIUM BOND
(ACBPX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 4.34%*
1 Year 6.37%
30-DAY SEC YIELD: 6.71%
INCEPTION DATE: 4/1/93
NET ASSETS: $107.1 million
* Not annualized.
See Total Returns on page 5.
Investment terms are defined in the Glossary on pages 20-21.
2 1-800-345-2021
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
[photo of Randall W. Merk]
Randall W. Merk, chief investment officer of fixed income at American Century
U.S. ECONOMIC AND BOND MARKET OVERVIEW
An economic slowdown, an extended pause in the Federal Reserve's program of
interest rate hikes, and stock market volatility helped U.S. bonds post
generally solid returns during the six months ended September 30, 2000. The
Lehman Brothers Aggregate Bond Index--which reflects the price fluctuations of
over 6,000 mortgage-backed, Treasury, corporate, government agency, and
asset-backed bonds in the U.S.--gained 4.81% during the period. By comparison,
the U.S. stock market, represented by the Wilshire 5000 index, posted a -4.78%
return.
After withstanding six increases in short-term interest rates by the
Federal Reserve since June 1999, the manufacturing sector and consumer demand in
the U.S. finally slowed. As the threat of higher inflation faded in late May and
June, the Fed stood pat after raising rates in mid-May.
By late summer, rising oil prices and a declining euro (the European
currency) further threatened global economic growth, as well as demand for U.S.
goods and services. With corporate profits coming under pressure, stocks
staggered and bonds were boosted by the combination of increased demand and a
more stable interest rate environment.
SPREAD SECTORS OUTPERFORM TREASURYS
Not all bond sectors benefited equally. In the taxable bond arena (the
sectors encompassed by the Lehman Brothers Aggregate Bond Index),
mortgage-backed, agency, and asset-backed bonds performed best. Investors sought
value and higher yields in those sectors after Treasury yields dropped
dramatically during the first half of this year. In addition, mortgage- and
asset-backed securities tend to perform best when interest rates are relatively
stable.
As a result, Treasury notes and bonds generally underperformed non-Treasury
(spread sector) notes and bonds during the six-month period, with the 30-year
T-bond lagging furthest behind. With declining Treasury buybacks and higher oil
prices taking their toll, the long end of the Treasury yield curve "disinverted"
(the 30-year T-bond yielded more than the 10-year T-note) for the first time
since mid-January. This disinversion gave another boost to spread-sector
bonds--inverted yield curves are typically unfavorable for those securities.
MORTGAGE AND AGENCY SECTORS REBOUND FROM GSE DEBATE
Increased demand for mortgage-backed and government agency securities
caused the spread, or difference in yield, between Treasurys and these bond
sectors to narrow. For example, the spread between a 30-year Fannie Mae
(FNMA--the Federal National Mortgage Association) security and a 30-year
Treasury bond narrowed from 120 basis points (1.20%--a basis point equals 0.01%)
[right margin]
"THE LEHMAN BROTHERS AGGREGATE BOND INDEX--WHICH REFLECTS THE PRICE FLUCTUATIONS
OF OVER 6,000 TAXABLE BONDS IN THE U.S.--GAINED 4.81%."
[line graph - data below]
"DISINVERTING" TREASURY YIELD CURVE
YEARS TO
MATURITY 3/31/00 9/30/00
1 6.24% 6.10%
2 6.48% 5.98%
3 6.42% 5.93%
4 6.37% 5.89%
5 6.32% 5.85%
6 6.25% 5.84%
7 6.19% 5.83%
8 6.13% 5.82%
9 6.07% 5.81%
10 6.01% 5.80%
11 6.00% 5.80%
12 5.99% 5.80%
13 5.98% 5.80%
14 5.97% 5.80%
15 5.96% 5.80%
16 5.95% 5.80%
17 5.94% 5.80%
18 5.93% 5.80%
19 5.92% 5.80%
20 5.91% 5.80%
21 5.90% 5.80%
22 5.89% 5.81%
23 5.88% 5.82%
24 5.87% 5.83%
25 5.86% 5.84%
26 5.85% 5.85%
27 5.84% 5.86%
28 5.83% 5.87%
29 5.83% 5.88%
30 5.83% 5.89%
Source: Bloomberg Financial Markets
"WITH DECLINING TREASURY BUYBACKS AND HIGHER OIL PRICES TAKING THEIR TOLL, THE
LONG END OF THE TREASURY YIELD CURVE 'DISINVERTED'."
www.americancentury.com 3
Market Perspective from Randall W. Merk
--------------------------------------------------------------------------------
(Continued)
on March 31, 2000 to 97 basis points on September 30. When spreads narrow,
mortgage and agency securities tend to outperform Treasurys.
Mortgage and agency securities were also helped when congressional action
was delayed on the Baker Bill--HR 3703--which seeks to change the oversight and
regulation of government-sponsored enterprises (GSEs) such as Fannie Mae and
eliminate their government backing.
Representative Richard Baker, the bill's sponsor, believes that the size
and level of indebtedness of GSEs are causes for concern, though he does not
believe that they pose an immediate risk to the financial markets because of the
GSEs' current health. The bill didn't win much support because many of Baker's
House colleagues didn't share his view of the threat and were unwilling to risk
disrupting the GSEs' business and the bond market by legislating a problem of
questionable proportions.
INTERMEDIATE-TERM TREASURYS AND TIIS PERFORM WELL
With the long end of the Treasury yield curve "disinverting" and the short
end stabilizing as the Fed stopped raising interest rates, the place to be in
the Treasury market was in the two-to-ten-year maturity range. That's where
yields fell (and prices rose) the most as economic and stock market conditions
became more favorable for bonds. (See the Treasury yield curve graph on page 3.)
The five-year note performed best, returning 4.85% as its yield fell 47
basis points. It was followed by the two-year note (3.71% total return, yield
down 50 basis points) and the benchmark 10-year note (3.45% total return,
yield down 21 basis points). By comparison, the 30-year bond returned just 2.42%
as its yield rose six basis points.
Treasury inflation-indexed securities (TIIS) drew increasing attention.
Investors believed that TIIS, whose principal values are adjusted for changes in
inflation, were attractive relative to the spread sectors and nominal
(traditional) Treasury bonds. The second and third quarters of 2000 provided a
good environment for TIIS--inflation, though mild, ticked up slightly, and real
(inflation-adjusted) yields fell.
Higher energy prices and some upward revisions to the government's measure
of inflation meant the annualized yield for TIIS should become increasingly
attractive for investors who established positions in those bonds during the
six-month period.
CORPORATE SUPPLY CONSTRAINS RETURNS
Like other spread sectors of the taxable bond market, corporate bonds
posted some decent returns, but they lagged the other non-Treasury sectors.
Supply and demand issues were a big part of the story. Record issuance of
corporate bonds during the second quarter, as companies tried to go to market
before the Fed raised interest rates further, put pressure on prices. Demand
also weakened as investors feared that higher interest rates would damage the
financial health of corporate bond issuers.
Later, the market's anticipation of a large wave of new corporate issuance
during the third quarter continued to stifle demand. For example, many investors
expected European telecommunications firms to rush to the market for financing
to help them build out networks and compete for new licenses. However, as
financial conditions weakened, some firms chose not to come to market, leading
to less issuance than expected.
[left margin]
"TREASURY NOTES AND BONDS GENERALLY UNDERPERFORMED NON-TREASURY NOTES AND BONDS
DURING THE SIX-MONTH PERIOD."
TAXABLE U.S. BOND SECTOR RETURNS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
LEHMAN FIXED-RATE MORTGAGE-
BACKED SECURITIES INDEX 5.55%
LEHMAN AGENCY BOND INDEX 4.98%
LEHMAN CORPORATE BOND INDEX 4.31%
LEHMAN TREASURY BOND INDEX 4.15%
Source: Bloomberg Financial Markets
4 1-800-345-2021
Premium Bond--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
PREMIUM LEHMAN AGGREGATE A-RATED CORPORATE DEBT FUNDS(2)
BOND BOND INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 4.34% 4.81% 3.60% --
1 YEAR 6.37% 6.99% 5.34% 33 OUT OF 179
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 5.25% 5.93% 4.42% 17 OUT OF 143
5 YEARS 5.90% 6.47% 5.39% 25 OUT OF 115
LIFE OF FUND 5.83% 6.38% 5.61%(3) 23 OUT OF 65(3)
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 information about returns, the comparative index, and Lipper
fund rankings.
[mountain graph - data below]
GROWTH OF $100,000 OVER LIFE OF FUND
Value on 9/30/00
Lehman Aggregate
Bond Index $159,049
Premium Bond $152,920
Lehman Aggregate
Premium Bond Bond Index
DATE VALUE VALUE
4/1/1993 $100,000 $100,000
6/30/1993 $101,870 $102,650
9/30/1993 $104,620 $105,329
12/31/1993 $104,537 $105,392
3/31/1994 $100,909 $102,368
6/30/1994 $99,537 $101,313
9/30/1994 $100,025 $101,931
12/31/1994 $100,245 $102,319
3/31/1995 $105,427 $107,475
6/30/1995 $112,618 $114,021
9/30/1995 $114,814 $116,255
12/31/1995 $120,382 $121,208
3/31/1996 $117,565 $119,063
6/30/1996 $117,847 $119,741
9/30/1996 $119,969 $121,956
12/31/1996 $123,676 $125,615
3/31/1997 $122,946 $124,912
6/30/1997 $127,028 $129,496
9/30/1997 $131,169 $133,795
12/31/1997 $134,645 $137,729
3/31/1998 $136,664 $139,877
6/30/1998 $139,644 $143,151
9/30/1998 $145,271 $149,206
12/31/1998 $145,213 $149,713
3/31/1999 $144,691 $148,965
6/30/1999 $142,925 $147,654
9/30/1999 $143,783 $148,658
12/31/1999 $143,510 $148,479
3/31/2000 $146,566 $151,761
6/30/2000 $148,149 $154,401
9/30/2000 $152,920 $159,049
$100,000 investment made 4/1/93
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.
[bar graph - data below]
ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)
Lehman Aggregate
Premium Bond Bond Index
DATE RETURN RETURN
9/30/1993* 4.62% 5.33%
9/30/1994 -4.39% -3.22%
9/30/1995 14.80% 14.06%
9/30/1996 4.49% 4.90%
9/30/1997 9.32% 9.71%
9/30/1998 10.75% 11.51%
9/30/1999 -1.03% -0.37%
9/30/2000 6.37% 6.99%
* From 4/1/93 (the fund's inception date) to 9/30/93.
www.americancentury.com 5
Premium Bond--Q&A
--------------------------------------------------------------------------------
[photo of Jeff Houston]
An interview with Jeff Houston, a portfolio manager on the Premium Bond
fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 2000?
During a period when U.S. bond funds generally posted solid returns,
Premium Bond outperformed most of its peers but trailed its benchmark. The fund
returned 4.34%, significantly better than the 3.60% average return of 183 funds
in the "A-Rated Corporate Debt Funds" category tracked by Lipper Inc.
Premium Bond also generated a higher yield than its peers. As of September
30, 2000, the fund's 30-day SEC yield was 6.71%, compared with the 6.23% average
yield of its Lipper category.
WHAT FACTORS HELPED THE FUND PERFORM BETTER THAN ITS LIPPER PEERS?
Premium Bond beat its peer group averages for two reasons. First, it had
lower expenses. As of September 30, Premium Bond's annualized expense ratio was
0.45%, less than half the 1.03% average expense ratio of its Lipper category. If
everything else is equal, lower expenses translate into higher yields and better
returns.
In addition, Premium Bond had fewer corporate bonds (33-34% of the
portfolio) and more government mortgage securities (as much as 35%) than most of
its peers. This paid off because the corporate sector continued to lag most
other sectors of the taxable bond market while mortgage securities performed
best (see pages 3 and 4).
WHAT FACTORS AFFECTED PREMIUM BOND'S PERFORMANCE AGAINST ITS BENCHMARK, THE
LEHMAN BROTHERS AGGREGATE BOND INDEX?
The benchmark returned 4.81% during the six-month period, 47 basis points
(0.47%--a basis point equals 0.01%) more than the fund. Premium Bond's 45 basis
point expense ratio (about 22.5 basis points over six months) explains about
half of the difference. The other half was due to underperformance in the second
quarter of 2000.
Premium Bond lagged the index during the second quarter for two main
reasons. First, the portfolio's duration--a measure of sensitivity to changes in
interest rates--was more conservative than the index's during a period when
rates generally fell and bonds rallied. Second, Premium Bond held more corporate
bonds (over 30% of the portfolio) than the index (about 20% of the benchmark)
during a period when corporate securities struggled. We saw attractive yields in
the corporate sector, but weak demand and burgeoning supply caused corporate
fundamentals to deteriorate.
During the third quarter of 2000, Premium Bond fared better against the
index because Treasury returns lagged and the fund was significantly
underweighted in Treasurys (less than 15% for the fund, compared with 28% for
the index). In addition, we extended the portfolio's duration until it was more
in line with the benchmark's.
[left margin]
"AS OF SEPTEMBER 30, PREMIUM BOND'S ANNUALIZED EXPENSE RATIO WAS 0.45%, LESS
THAN HALF THE 1.03% AVERAGE EXPENSE RATIO OF ITS LIPPER CATEGORY."
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NUMBER OF SECURITIES 123 133
WEIGHTED AVERAGE
MATURITY 7.8 YRS 8.5 YRS
AVERAGE DURATION 4.8 YRS 4.9 YRS
EXPENSE RATIO 0.45%* 0.45%
* Annualized.
YIELD AS OF SEPTEMBER 30, 2000
30-DAY SEC YIELD 6.71%
Investment terms are defined in the Glossary on pages 20-21.
6 1-800-345-2021
Premium Bond--Q&A
--------------------------------------------------------------------------------
(Continued)
WHAT WERE THE BIGGEST MOVES YOU MADE WITH THE FUND DURING THE PAST SIX MONTHS?
Our general approach is to look for relative value among the different
sectors of the taxable bond market. To that end, we moved more of Premium Bond's
assets into mortgage securities, including those issued by government-sponsored
home loan programs (Ginnie Mae, Fannie Mae, and Freddie Mac) and commercial
mortgage-backed securities (listed in this report under asset-backed securities)
issued by banks and other commercial financial institutions.
The yields on mortgage-backed securities (MBS) looked attractive after
Treasury yields declined, plus MBS appeared poised to benefit from a stabilizing
interest rate environment. We also trimmed the fund's Treasury position
further, believing that other bond sectors, such as mortgages, had more upside
potential going forward.
WHAT IS YOUR OUTLOOK FOR THE U.S. BOND MARKET?
We expect a "soft landing" for the U.S. economy, and believe that the
Federal Reserve will refrain from further interest rate moves in the near term.
That should favor our mortgage-backed holdings.
The Treasury market seems to be taking a more extreme view. With the
two-year note yielding less than the overnight federal funds rate, the market
seems to be pricing in a harder landing and interest rate cuts by the Fed. We
think that's premature. Treasury yields appear to be too low, given the data
we've seen so far about the economy.
GIVEN THIS OUTLOOK, WHAT ARE YOUR PLANS?
We haven't made any significant changes to the portfolio since September
30. However, compelling evidence that the economy might experience a
significantly harder landing than originally expected would motivate us to
change our asset allocation and our outlook. In that case, we would have to
re-evaluate our corporate and mortgage holdings and consider rebuilding our
Treasury position.
We wouldn't want to be overweight in corporate bonds in a recessionary
environment because credit conditions would likely deteriorate. Similarly, we
wouldn't want to be overweight in MBS if interest rates were to fall sharply.
MBS underperform when homeowners take advantage of lower rates to refinance
their loans, causing the MBS' underlying mortgage pools to make their final
payouts to investors earlier than expected.
Given that, we will continue to monitor inflation, the economy, and
interest rates closely, taking advantage of relative value opportunities as they
arise and responding as we believe necessary to changing market conditions.
[right margin]
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
MORTGAGE-BACKED SECURITIES 35%
CORPORATE BONDS 34%
U.S. TREASURY SECURITIES 11%
ASSET-BACKED SECURITIES 11%
GOVT. AGENCY SECURITIES 7%
OTHER 2%
AS OF MARCH 31, 2000
CORPORATE BONDS 33%
MORTGAGE-BACKED SECURITIES 31%
U.S. TREASURY SECURITIES 15%
ASSET-BACKED SECURITIES 9%
GOVT. AGENCY SECURITIES 7%
OTHER 5%
Investment terms are defined in the Glossary on pages 20-21.
www.americancentury.com 7
Premium Bond--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES(1) -- 35.2%
$ 678,546 FHLMC Pool #C00553, 7.00%,
9/1/27 $ 666,643
771,452 FHLMC Pool #C00578, 6.50%,
1/1/28 743,347
910,809 FHLMC Pool #C00731, 6.50%,
3/1/29 876,595
4,200,001 FHLMC Pool #C038971, 6.50%,
6/1/29 4,040,328
819,601 FHLMC Pool #C30060, 7.50%,
8/1/29 819,737
961,196 FHLMC Pool #C30257, 7.00%,
8/1/29 943,755
98,827 FHLMC Pool #D75034, 8.50%,
10/1/26 101,723
866,090 FHLMC Pool #E00724, 7.00%,
6/1/14 862,904
634,899 FHLMC Pool #E68523, 6.50%,
12/1/12 624,954
496,502 FHLMC Pool #E73566, 7.00%,
11/1/13 495,020
633,776 FNMA Pool #252211, 6.00%,
1/1/29 593,943
446,223 FNMA Pool #252212, 6.50%,
1/1/29 428,930
1,093,929 FNMA Pool #252213, 6.00%,
1/1/14 1,053,898
804,211 FNMA Pool #272894, 6.00%,
2/1/09 784,633
1,471,278 FNMA Pool #323980, 6.00%,
4/1/14 1,417,438
620,259 FNMA Pool #405425, 7.00%,
12/1/27 609,336
1,216,813 FNMA Pool #406904, 7.50%,
4/1/28 1,217,602
1,222,616 FNMA Pool #412562, 6.50%,
1/1/28 1,177,187
517,183 FNMA Pool #413812, 6.50%,
1/1/28 497,966
1,386,715 FNMA Pool #426069, 7.00%,
5/1/28 1,360,601
180,617 FNMA Pool #426130, 6.00%,
5/1/13 174,008
670,269 FNMA Pool #426773, 6.00%,
7/1/13 645,741
909,513 FNMA Pool #437421, 6.00%,
9/1/28 852,351
273,354 FNMA Pool #450619, 6.00%,
12/1/28 256,174
472,946 FNMA Pool #453956, 6.00%,
12/1/28 443,222
1,009,794 FNMA Pool #454947, 6.00%,
12/1/28 946,330
951,052 FNMA Pool #492315, 6.50%,
4/1/29 914,095
Principal Amount Value
--------------------------------------------------------------------------------
$ 877,591 FNMA Pool #506995, 7.50%,
7/1/29 $ 876,894
995,943 FNMA Pool #537234, 7.00%,
5/1/30 976,480
2,900,000 FNMA Pool #542599, 7.50%,
8/1/30 2,896,224
1,000,000 FNMA REMIC, Series 1997-58,
Class PB PAC, 6.50%,
6/18/24 966,455
336,763 GNMA Pool #230356, 7.50%,
8/20/17 338,330
838,493 GNMA Pool #313107, 7.00%,
11/15/22 829,890
30,786 GNMA Pool #407141, 9.25%,
2/15/25 31,778
35,466 GNMA Pool #407254, 9.25%,
3/15/25 36,610
124,012 GNMA Pool #408099, 8.75%,
3/15/25 127,600
595,918 GNMA Pool #423061, 8.00%,
6/15/27 607,810
404,631 GNMA Pool #423986, 8.00%,
8/15/26 413,009
75,562 GNMA Pool #432437, 7.50%,
4/15/27 75,909
438,980 GNMA Pool #436277, 6.50%,
3/15/28 423,293
201,324 GNMA Pool #443782, 7.50%,
11/15/27 202,250
489,214 GNMA Pool #447692, 7.50%,
5/15/27 491,464
29,183 GNMA Pool #455126, 6.50%,
5/15/28 28,140
412,061 GNMA Pool #458862, 7.50%,
2/15/28 413,846
1,842,470 GNMA Pool #458887, 6.50%,
5/15/28 1,776,628
74,752 GNMA Pool #461011, 7.50%,
11/15/27 75,096
436,428 GNMA Pool #463891, 6.50%,
5/15/28 420,832
512,156 GNMA Pool #467626, 7.00%,
2/15/28 505,060
964,867 GNMA Pool #469811, 7.00%,
12/15/28 951,499
689,524 GNMA Pool #471859, 7.00%,
4/15/28 679,970
423,994 GNMA Pool #780412, 7.50%,
8/15/26 426,095
------------
TOTAL MORTGAGE-BACKED SECURITIES 38,119,623
------------
(Cost $38,624,568)
8 1-800-345-2021 See Notes to Financial Statements
Premium Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
CORPORATE BONDS -- 33.8%
BANKS -- 2.3%
$ 500,000 Bank of America Corp., 6.125%,
7/15/04 $ 484,757
500,000 Fleet Boston Financial Corp.,
5.75%, 1/15/09 447,597
1,500,000 Wells Fargo & Company, 7.25%,
8/24/05 1,519,639
------------
2,451,993
------------
DEFENSE/AEROSPACE -- 1.6%
700,000 Alliant Energy Resources Inc.,
7.375%, 11/9/09 686,379
1,000,000 Raytheon Co., 8.20%, 3/1/06
(Acquired 3/3/00,
Cost $1,008,160)(2) 1,038,921
------------
1,725,300
------------
DEPARTMENT STORES -- 0.3%
300,000 Sears, Roebuck & Co., Inc.,
9.375%, 11/1/11 326,100
------------
ELECTRICAL EQUIPMENT -- 0.6%
200,000 Anixter International Inc., 8.00%,
9/15/03 198,024
500,000 Yorkshire Power Finance, Series B,
6.15%, 2/25/03 481,171
------------
679,195
------------
ELECTRICAL UTILITY -- 1.0%
1,000,000 Cilcorp, Inc., 8.70%, 10/15/09 1,037,639
------------
ENERGY RESERVES & PRODUCTION -- 3.1%
1,500,000 Duke Energy Field Services,
7.875%, 8/16/10 1,527,639
1,000,000 EOG Resources Inc., 6.70%,
11/15/06 971,427
1,000,000 Kerr-McGee Corp., 7.125%,
10/15/27 893,414
------------
3,392,480
------------
FINANCIAL SERVICES -- 4.2%
500,000 Associates Corp., N.A., 6.625%,
6/15/05 491,906
1,000,000 Associates Corp., N.A., 6.00%,
7/15/05 958,469
1,000,000 Ford Motor Credit Co., 6.125%,
4/28/03 978,423
1,000,000 Ford Motor Credit Co., 7.50%,
3/15/05 1,006,310
1,000,000 General Motors Acceptance Corp.
MTN, VRN, 6.81%, 12/11/00,
resets quarterly off the 3-month
LIBOR plus 0.15% with no caps 999,439
------------
4,434,547
------------
Principal Amount Value
--------------------------------------------------------------------------------
FOOD & BEVERAGE -- 0.5%
$ 600,000 Pepsi Bottling Group Inc., Series B,
7.00%, 3/1/29 (Acquired
6/9/00, Cost $536,952)(2) $ 551,533
------------
FOREST PRODUCTS & PAPER -- 0.9%
1,000,000 Abitibi-Consolidated Inc., 8.55%,
8/1/10 1,019,465
------------
GAS & WATER UTILITIES -- 0.4%
500,000 Columbia Energy Group, 6.80%,
11/28/05 481,813
------------
GOLD -- 0.4%
450,000 Barrick Gold Corp., 7.50%,
5/1/07 448,864
------------
HOTELS -- 0.7%
750,000 MGM Mirage, 8.50%, 3/15/10 751,961
------------
INDUSTRIAL PARTS -- 0.7%
750,000 Caterpillar Financial Services Corp.,
5.90%, 9/10/02 738,800
------------
INFORMATION SERVICES -- 0.6%
750,000 KPNQwest B.V., 8.125%, 6/1/09 693,750
------------
MEDIA -- 4.2%
400,000 British SKY Broadcasting, 8.20%,
7/15/09 375,620
1,100,000 Clear Channel Communications,
7.65%, 9/15/10 1,094,249
500,000 CSC Holdings Inc., 7.625%,
7/15/18 452,648
1,000,000 CSC Holdings Inc., Series B,
8.125%, 7/15/09 994,701
500,000 Liberty Media Group, 8.25%,
2/1/30 471,868
1,000,000 Viacom Inc., 7.70%, 7/30/10 1,022,039
------------
4,411,125
------------
MOTOR VEHICLES & PARTS -- 0.3%
350,000 General Motors Corp., 7.00%,
6/15/03 352,109
------------
MULTI-INDUSTRY -- 1.4%
1,500,000 Tyco International Group SA,
6.875%, 9/5/02 1,496,888
------------
OIL REFINING -- 1.4%
1,500,000 Valero Energy Corp., 8.375%,
6/15/05 1,557,110
------------
OIL SERVICES -- 0.9%
1,000,000 Gulf Canada Resources Ltd.,
8.35%, 8/1/06 995,000
------------
RAILROADS -- 0.9%
1,000,000 Norfolk Southern Corp., 6.95%,
5/1/02 996,651
------------
See Notes to Financial Statements www.americancentury.com 9
Premium Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 1.3%
$1,000,000 EOP Operating LP, 6.75%,
2/15/08 $ 934,821
500,000 Spieker Properties, Inc., 6.80%,
12/15/01 496,039
------------
1,430,860
------------
SECURITIES & ASSET MANAGEMENT -- 3.9%
1,000,000 AXA Financial Inc., 7.75%,
8/1/10 1,019,000
1,000,000 Lehman Brothers Holdings Inc.,
8.25%, 6/15/07 1,036,506
2,000,000 Merrill Lynch & Co., Inc., 7.25%,
7/26/02 2,013,110
------------
4,068,616
------------
TELEPHONE -- 2.2%
1,000,000 GTE North Inc., Series H, 5.65%,
11/15/08 897,336
1,500,000 Qwest Capital Funding Inc.,
7.75%, 8/15/06 (Acquired
8/17/00, Cost $1,498,545)(2) 1,529,636
------------
2,426,972
------------
TOTAL CORPORATE BONDS 36,468,771
------------
(Cost $36,396,525)
ASSET-BACKED SECURITIES(1) -- 11.2%
800,000 AmeriCredit Automobile
Receivables Trust, Series
1999 D, Class A3 SEQ, 7.02%,
12/5/05 802,708
1,000,000 BMW Vehicle Owner Trust, Series
1999 A, Class A3 SEQ, 6.41%,
4/25/03 998,035
1,000,000 Case Equipment Loan Trust,
Series 1998 B, Class A4 SEQ,
5.92%, 10/15/05 991,165
1,250,000 Chase Commercial Mortgage
Securities Corp., Series 1999 2,
Class A2 SEQ, 7.20%,
11/15/09 1,256,908
1,000,000 CIT RV Trust, Series 1997 A,
Class A6 SEQ, 6.35%,
4/15/11 992,299
750,000 CIT RV Trust, Series 1998 A,
Class A4 SEQ, 6.09%,
2/15/12 739,106
871,647 First Union-Lehman Brothers
Commercial Mortgage, Series
1998 C2, Class A1 SEQ,
6.28%, 6/18/07 854,344
1,000,000 GMAC Commercial Mortgage
Securities Inc., Series 1999 C1,
Class A2 SEQ, 6.18%,
5/15/33 938,415
Principal Amount Value
--------------------------------------------------------------------------------
$ 356,446 Money Store (The) Home Equity
Trust, Series 1994 B, Class A4
SEQ, 7.60%, 7/15/21 $ 356,787
1,000,000 Money Store (The) Home Equity
Trust, Series 1997 C, Class AF6
SEQ, 6.67%, 2/15/25 994,045
663,605 Nationslink Funding Corp., Series
1998-2, Class A1 SEQ, 6.00%,
11/20/07 642,875
2,000,000 Residential Asset Securities Corp.
Series 1999-KS3, Cl AI2,
7.08%, 9/25/20 1,996,069
33,108 Textron Financial Corp. Receivables
Trust, Series 1997 A, Class A,
6.05%, 3/16/09 (Acquired
9/18/97, Cost $33,064)(2) 33,086
500,000 United Companies Financial Corp.,
Home Equity Loan, Series
1996 D1, Class A5, 6.92%,
10/15/18 498,773
------------
TOTAL ASSET-BACKED SECURITIES 12,094,615
------------
(Cost $12,211,975)
U.S. TREASURY SECURITIES -- 10.6%
4,700,000 STRIPS - PRINCIPAL, 5.99%,
11/15/27(3) 947,087
750,000 U.S. Treasury Bonds, 9.125%,
5/15/18 989,297
650,000 U.S. Treasury Bonds, 8.50%,
2/15/20 823,469
3,800,000 U.S. Treasury Bonds, 6.375%,
8/16/27 3,956,750
4,700,000 U.S. Treasury Notes, 6.375%,
3/31/01 4,701,471
------------
TOTAL U.S. TREASURY SECURITIES 11,418,074
------------
(Cost $11,414,386)
U.S. GOVERNMENT AGENCY SECURITIES -- 7.4%
500,000 FHLMC, 7.09%, 11/24/06 493,156
1,000,000 FHLMC, 5.75%, 4/15/08 943,202
3,000,000 FNMA, 7.125%, 2/15/05 3,067,152
500,000 FNMA, 7.125%, 1/15/30 517,679
1,000,000 FNMA MTN, 5.83%, 2/2/04 976,071
500,000 FNMA MTN, 7.00%, 2/20/07 495,399
1,000,000 FNMA MTN, 5.74%, 1/21/09 926,823
500,000 FNMA, Series B, 7.25%,
1/15/10 516,487
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 7,935,969
------------
(Cost $8,011,238)
10 1-800-345-2021 See Notes to Financial Statements
Premium Bond--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
SOVEREIGN GOVERNMENTS AND AGENCIES -- 1.0%
$ 500,000 Hydro Quebec, 8.05%, 7/7/24 $ 531,990
500,000 United Mexican States, 9.875%,
2/1/10 532,750
------------
TOTAL SOVEREIGN GOVERNMENTS
AND AGENCIES 1,064,740
------------
(Cost $1,064,976)
TEMPORARY CASH INVESTMENTS -- 0.8%
Repurchase Agreement, Morgan Stanley Group,
Inc., (U.S. Treasury obligations), in a joint
trading account at 6.45%, dated 9/29/00,
due 10/2/00 (Delivery value $829,446) 829,000
------------
(Cost $829,000)
TOTAL INVESTMENT SECURITIES -- 100.0% $107,930,792
============
(Cost $108,552,668)
NOTES TO SCHEDULE OF INVESTMENTS
FHLMC = Federal Home Loan Mortgage Corporation
FNMA = Federal National Mortgage Association
GNMA = Government National Mortgage Association
LIBOR = London Interbank Offered Rate
MTN = Medium Term Note
STRIPS = Separate Trading of Registered Interest & Principal of Securities.
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
September 30, 2000.
(1) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.
(2) Security was purchased under Rule 144A of the Securities Act of 1933 or is a
private placement and, unless registered under the Act or exempted from
registration, may only be sold to qualified institutional investors. The
aggregate value of restricted securities at September 30, 2000, was
$3,153,176, which represented 2.9% of net assets.
(3) Security is a zero-coupon bond. The yield to maturity at purchase is
indicated. Zero coupon securities are purchased at a substantial discount
from their value at maturity.
See Notes to Financial Statements www.americancentury.com 11
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 payables) 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).
SEPTEMBER 30, 2000 (UNAUDITED)
ASSETS
Investment securities, at value
(identified cost of $108,552,668)
(Note 3) ............................................... $ 107,930,792
Receivable for investments sold .......................... 2,006,600
Interest receivable ...................................... 1,216,322
-------------
111,153,714
-------------
LIABILITIES
Disbursements in excess
of demand deposit cash ................................. 521,461
Payable for investments purchased ........................ 3,497,633
Accrued management fees (Note 2) ......................... 39,364
Dividends payable ........................................ 27,065
Payable for directors' fees and expenses ................. 33
-------------
4,085,556
-------------
Net Assets ............................................... $ 107,068,158
=============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized ............................................... 100,000,000
=============
Outstanding .............................................. 11,016,573
=============
Net Asset Value Per Share ................................ $ 9.72
=============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .................. $ 110,140,809
Accumulated net realized loss
on investment transactions ............................. (2,450,775)
Net unrealized depreciation
on investments (Note 3) ................................ (621,876)
-------------
$ 107,068,158
=============
12 1-800-345-2021 See Notes to Financial Statements
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.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
INVESTMENT INCOME
Income:
Interest ................................................ $ 3,549,866
-----------
Expenses (Note 2):
Management fees ......................................... 231,228
Directors' fees and expenses ............................ 340
-----------
231,568
-----------
Net investment income ................................... 3,318,298
-----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments ........................ (865,462)
Change in net unrealized
depreciation on investments ........................... 1,909,072
-----------
Net realized and unrealized
gain on investments ................................... 1,043,610
-----------
Net Increase in Net Assets
Resulting from Operations ............................. $ 4,361,908
===========
See Notes to Financial Statements www.americancentury.com 13
Statement 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.
SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND YEAR ENDED MARCH 31, 2000
SEPTEMBER 30, MARCH 31,
Increase (Decrease) in Net Assets 2000 2000
OPERATIONS
Net investment income ...................... $ 3,318,298 $ 6,216,733
Net realized loss on investments ........... (865,462) (1,581,988)
Change in net unrealized
appreciation (depreciation)
on investments ........................... 1,909,072 (3,286,409)
------------- -------------
Net increase in net assets
resulting from operations ................ 4,361,908 1,348,336
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................. (3,318,298) (6,216,733)
In excess of net realized gains
on investment transactions ............... -- (15,276)
------------- -------------
Decrease in net assets
from distributions ....................... (3,318,298) (6,232,009)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................. 24,820,466 55,889,212
Proceeds from reinvestment
of distributions ......................... 3,054,798 5,850,307
Payments for shares redeemed ............... (25,042,236) (58,948,248)
------------- -------------
Net increase in net assets from
capital share transactions ............... 2,833,028 2,791,271
------------- -------------
Net increase (decrease) in net assets ...... 3,876,638 (2,092,402)
NET ASSETS
Beginning of period ........................ 103,191,520 105,283,922
------------- -------------
End of period .............................. $ 107,068,158 $ 103,191,520
============= =============
TRANSACTIONS IN SHARES OF THE FUND
Sold ....................................... 2,587,148 5,768,601
Issued in reinvestment of distributions .... 318,450 601,534
Redeemed ................................... (2,615,588) (6,072,294)
------------- -------------
Net increase ............................... 290,010 297,841
============= =============
14 1-800-345-2021 See Notes to Financial Statements
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
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 realized 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.
www.americancentury.com 15
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
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%.
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, the
distributor of the corporation, American Century Services, Inc., and the
corporation's transfer agent, American Century Services Corporation.
--------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Purchases of investment securities, excluding short-term investments, for
the six month period ended September 30, 2000, totaled $80,615,336, of which
$44,063,413 represented U.S. Treasury and Agency obligations. Sales of
investment securities, excluding short-term investments, for the six month
period ended September 30, 2000, totaled $78,633,639, of which $47,609,406
represented U.S. Treasury and Agency obligations.
As of September 30, 2000, accumulated net unrealized depreciation was
$629,159, based on the aggregate cost of investments for federal income tax
purposes of $108,559,951, which consisted of unrealized appreciation of
$778,445, and unrealized depreciation of $1,407,604.
--------------------------------------------------------------------------------
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
six month period ended September 30, 2000.
16 1-800-345-2021
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 investment 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>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
2000(1) 2000 1999 1998 1997 1996
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ........... $ 9.62 $ 10.10 $ 10.15 $ 9.76 $ 9.93 $ 9.46
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ......... 0.31 0.61 0.59 0.61 0.61 0.61
Net Realized and Unrealized
Gain (Loss) on Investments .... 0.10 (0.48) -- 0.45 (0.17) 0.47
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations .................... 0.41 0.13 0.59 1.06 0.44 1.08
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income .... (0.31) (0.61) (0.59) (0.61) (0.61) (0.61)
From Net Realized Gains on
Investment Transactions ....... -- -- (0.05) (0.06) -- --
In Excess of Net Realized Gains -- --(2) -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........... (0.31) (0.61) (0.64) (0.67) (0.61) (0.61)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .. $ 9.72 $ 9.62 $ 10.10 $ 10.15 $ 9.76 $ 9.93
=========== =========== =========== =========== =========== ===========
Total Return(3) ............... 4.34% 1.30% 5.88% 11.14% 4.57% 11.53%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ......... 0.45%(4) 0.45% 0.45% 0.45% 0.45% 0.43%
Ratio of Net Investment Income
to Average Net Assets ......... 6.44%(4) 6.15% 5.70% 6.06% 6.20% 6.08%
Portfolio Turnover Rate ......... 81% 64% 71% 138% 63% 92%
Net Assets, End of Period
(in thousands) ................ $ 107,068 $ 103,192 $ 105,284 $ 65,171 $ 21,750 $ 20,280
</TABLE>
(1) Six months ended September 30, 2000 (unaudited).
(2) Per share amount was less than $0.005.
(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one
year are not annualized.
(4) Annualized.
See Notes to Financial Statements www.americancentury.com 17
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. Visit our Web site
(www.americancentury.com) or call us 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
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 generally provided by money market or
short- and intermediate-term securities and who can accept the generally greater
price volatility associated with longer-term bonds.
COMPARATIVE INDICES
The following index is used in the report for fund performance comparisons.
It is not an investment product available for purchase.
The LEHMAN AGGREGATE BOND INDEX is composed of the Lehman Government/
Corporate Index and the Lehman Mortgage-Backed Securities Index. It reflects
the price fluctuations of Treasury securities, U.S. government agency
securities, corporate bond issues, and mortgage-backed securities.
LIPPER RANKINGS
LIPPER INC. is an independent mutual fund ranking service that groups funds
according to their investment objectives. Rankings are based on average annual
returns for each fund in a given category for the periods indicated. Rankings
are not included for periods less than one year.
The 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.
[right margin]
INVESTMENT TEAM LEADERS
Portfolio Manager
JEFF HOUSTON
Credit Research Manager
GREG AFIESH
www.americancentury.com 19
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on page 17.
YIELDS
* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by a fund on
a given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* AVERAGE DURATION -- another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a
percentage of average net assets. Shareholders pay an annual fee to the
investment manager for investment advisory and management services. The expenses
and fees are deducted from fund income, not from each shareholder account. (See
Note 2 in the Notes to Financial Statements.)
TYPES OF FIXED-INCOME SECURITIES
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a
pool of assets, such as credit card debt, auto loans, or home equity loans.
* CORPORATE BONDS -- debt securities or instruments issued by companies and
corporations.
* MORTGAGE-BACKED SECURITIES -- debt securities that represent ownership in
pools of mortgage loans.
* U.S. GOVERNMENT AGENCY 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).
* 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
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.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* 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.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
www.americancentury.com 21
Notes
--------------------------------------------------------------------------------
22 1-800-345-2021
Notes
--------------------------------------------------------------------------------
www.americancentury.com 23
Notes
--------------------------------------------------------------------------------
24 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
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. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
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.
[back cover]
Who We Are
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, and offer 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 been committed to building long-term relationships and
to helping investors achieve their dreams.
In a very real sense, investors put their futures 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.
[left margin]
[american century logo and text logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
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.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-SAN-22595 (c)2000 American Century Services Corporation
<PAGE>
[front cover]
September 30, 2000
AMERICAN CENTURY
Semiannual Report
Premium Government Reserve
Premium Capital Reserve
[american century logo and text logo (reg.sm)]
American
Century
[inside front cover]
Review the day's market activity at www.americancentury.com
Now you can find more perspective on daily stock and bond market activity on
American Century's Web site.
Information and advance notice
Our Daily Market Wraps provide at-a-glance descriptions of daily news and
events that influenced the U.S. stock and bond markets. In addition, these
write-ups provide advance notice of key economic reports or figures that are
likely to affect market activity.
Review the week
To put the week in perspective, look no further than our Weekly Market Wrap.
This commentary discusses the week's economic and market news, providing a
succinct review of what happened and what to look for in the week ahead.
Easy to find
The Daily and Weekly Market Wraps are easy to find on our Web site. Just go
to www.americancentury.com, click on "News" in the tool bar, and locate the
Wrap you're looking for in the left column.
[Dalbar Seal]
American Century' s fund performance reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
[left margin]
PREMIUM GOVERNMENT RESERVE
(TWPXX)
--------------------------
PREMIUM CAPITAL RESERVE
(TCRXX)
--------------------------
TURN TO THE INSIDE BACK COVER TO SEE A LIST OF AMERICAN CENTURY FUNDS CLASSIFIED
BY OBJECTIVE AND RISK.
Our Message to You
--------------------------------------------------------------------------------
[photo of James E. Stowers, Jr. and James E. Stowers III]
James E. Stowers, Jr., standing, with James E. Stowers III
The six-month period ended September 30, 2000, provided a nearly ideal
environment for money market funds--rising yields, modest inflation, and stock
volatility. It also demonstrated the benefits of maintaining at least a modest
fixed-income holding for investors who are sensitive to extreme short-term
equity market swings--particularly those with shorter-term investment horizons.
The Premium Government Reserve and Premium Capital Reserve funds continued
to perform well, providing higher yields and total returns than the majority of
their peers (according to Lipper Inc., an independent mutual fund ranking
service--see pages 4 and 7). Our investment professionals review fund
performance on pages 5 and 8.
On the corporate front, Chase Manhattan Corp. recently announced plans to
acquire J.P. Morgan & Co., a substantial minority shareholder in American
Century Companies, Inc. since 1998. If the transaction is completed as expected,
J.P. Morgan Chase, the new enterprise, will own the shares of American Century
currently held by Morgan. Corporate control of American Century is not affected
by this transaction. We will be exploring ways to partner with J.P. Morgan Chase
for the benefit of fund shareholders.
In other corporate news, some American Century executives have assumed
important new responsibilities. For example, we have chosen to share the
chairman of the board position and named American Century President William M.
Lyons chief executive officer, giving him ultimate management responsibility for
the entire company.
These changes, plus the promotion of some key investment professionals,
strengthen the leadership of our investment management area and allow us to
pursue additional worthwhile endeavors. For example, Jim Stowers III will focus
more on product innovation (in particular, leveraging our earnings-acceleration
screening system to build the next generation of portfolio management
technologies). However, his first priority will be continuing involvement on the
investment teams responsible for the Ultra and Veedot funds.
As always, we appreciate your continued confidence in American Century.
Sincerely,
/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Co-Chairman of the Board
[right margin]
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
Statement of Assets and
Liabilities ......................................................... 11
Statement of Operations ................................................ 12
Statement of Changes
in Net Assets ....................................................... 13
Notes to Financial
Statements .......................................................... 14
Financial Highlights ................................................... 15
OTHER INFORMATION
Retirement Account
Information ......................................................... 17
Background Information
Investment Philosophy
and Policies ..................................................... 18
Comparative Indices ................................................. 18
Lipper Rankings ..................................................... 18
Investment Team
Leaders .......................................................... 18
Credit Rating
Guidelines ....................................................... 18
Glossary ............................................................... 19
www.americancentury.com 1
Report Highlights
--------------------------------------------------------------------------------
PREMIUM GOVERNMENT RESERVE
* For the six months ended September 30, the fund outperformed over 85% of the
134 U.S. government money market funds tracked by Lipper Inc.
* The portfolio's yield increased during the period, in part because the
Federal Reserve (the Fed) raised interest rates in May of 2000.
* Active management of the portfolio helped Premium Government beat its
peers--we correctly anticipated interest rate changes and locked in higher
yields in May and June.
* We think the Fed is done raising rates in the near-term, but the longer-term
picture remains unclear.
PREMIUM CAPITAL RESERVE
* For the six months ended September 30, the fund outpaced over 90% of the 371
money market funds tracked by Lipper Inc.
* The portfolio's yield increased during the period, in part because the
Federal Reserve (the Fed) raised interest rates in May of 2000.
* Active management of the portfolio helped Premium Capital Reserve beat its
peers--we correctly anticipated interest rate changes and locked in higher
yields in May and June.
* We think the Fed is done raising rates for the rest of this year. As a
result, money market yields may have peaked.
[left margin]
PREMIUM GOVERNMENT RESERVE
(TWPXX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 3.03%*
1 Year 5.76%
7-DAY CURRENT YIELD: 6.14%
INCEPTION DATE: 4/1/93
NET ASSETS: $112.7 million
PREMIUM CAPITAL RESERVE
(TCRXX)
TOTAL RETURNS: AS OF 9/30/00
6 Months 3.10%*
1 Year 5.93%
7-DAY CURRENT YIELD: 6.32%
INCEPTION DATE: 4/1/93
NET ASSETS: $420.6 million
* Not annualized.
See Total Returns on pages 4 and 7.
Investment terms are defined in the Glossary on pages 19-20.
2 1-800-345-2021
Money Market Funds--Frequently Asked Questions
--------------------------------------------------------------------------------
WHAT IS THE NEW DATE FOR DIVIDEND PAYMENTS?
Beginning in November, dividends will be paid on the last business day of
the month, rather than the last Friday of the month. We hope this change will
make your dividend payment date easier to remember.
CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND ACCOUNT?
Yes. You can arrange for direct deposit of your paycheck, Social Security
check, military allotment, or payments from other government agencies. Visit
our Web site or give us a call to obtain the necessary information to set it up
WHAT IS THE HOLDING PERIOD ON NEW DEPOSITS INTO MY ACCOUNT?
There is a 7-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:
* visiting our Web site at
www.americancentury.com*
* using our Automated Information Line (1-800-345-8765)*
* calling an Investor Relations Representative at 1-800-345-2021* 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. 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.
* We must have your written authorization on file if you wish to make exchanges
by phone, on our Automated Information Line, or through our Web site.
[right margin]
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:
* YOU CAN HAVE DISTRIBUTIONS DEPOSITED DIRECTLY INTO YOUR MONEY MARKET
ACCOUNT. The money will be deposited the same day that the distributions
are paid.
* DISTRIBUTIONS CAN BE SENT ELECTRONICALLY TO YOUR BANK ACCOUNT. The money
will be available in your bank account within three to five days.
Contact our Investor Relations Representatives to set up either of these
options.
www.americancentury.com 3
Premium Government Reserve--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
PREMIUM
GOVERNMENT 90-DAY TREASURY U.S. GOVERNMENT MONEY MARKET FUNDS(2)
RESERVE BILL INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 3.03% 2.98% 2.87% --
1 YEAR 5.76% 5.73% 5.42% 12 OUT OF 131
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 5.23% 5.12% 4.98% 16 OUT OF 109
5 YEARS 5.21% 5.14% 4.97% 12 OUT OF 97
LIFE OF FUND 4.83% 4.88% 4.61%(3) 11 OUT OF 77(3)
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 18-19 for information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NUMBER OF SECURITIES 33 25
WEIGHTED AVERAGE
MATURITY 60 DAYS 72 DAYS
EXPENSE RATIO 0.45%* 0.45%
* Annualized.
YIELDS AS OF SEPTEMBER 30, 2000
7-DAY CURRENT YIELD 6.14%
7-DAY EFFECTIVE YIELD 6.32%
Investment terms are defined in the Glossary on pages 19-20.
Past performance does not guarantee future results.
Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.
Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund. The 7-day yield more closely reflects earnings of the fund than the total
return.
4 1-800-345-2021
Premium Government Reserve--Q&A
--------------------------------------------------------------------------------
[photo of Beth Bunnell Hunter]
An interview with Beth Bunnell Hunter, a portfolio manager on the Premium
Government Reserve fund investment team.
HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 2000?
Premium Government Reserve continued to perform well--it returned 3.03%,
outpacing the 2.87% average return of the 134 "U.S. Government Money Market
Funds" tracked by Lipper Inc. A consistently solid performer, the fund ranked in
the top 15% of its Lipper group for the one-, three-, and five-year periods
ended September 30.
HOW DID THE FUND'S YIELD COMPARE?
Premium Government Reserve's 7-day current yield rose from 5.33% on March
31 to 6.14% on September 30. The 7-day effective yield, which includes
reinvested dividends, was 6.32% on September 30. That was higher than the 5.94%
average effective yield of its Lipper peers.
WHY DID THE PORTFOLIO'S YIELD RISE DURING THE PERIOD?
The Federal Reserve (the Fed) raised short-term interest rates in May 2000
for the sixth time since June 1999. That meant higher financing costs for
borrowers and better yields for lenders. We benefited from higher interest
rates because Premium Government Reserve is essentially a short-term lender to
the various government agencies.
In addition, several government agencies increased their short-term debt
issuance. As a result, yields had to rise to attract investors.
HOW DID YOU OUTPERFORM YOUR PEERS?
We saw a window of opportunity between May and June to lock in some
attractive yields for shareholders. At that time, the market expected the Fed to
continue raising interest rates. In other words, investors wanted to be paid the
current rate of interest, plus additional compensation for the rate increases
they expected to occur in the future.
We thought the market was expecting too much, so we invested a portion of
the portfolio in longer-term money market securities to lock in those higher
yields while they were still available. As we anticipated, the Fed didn't raise
interest rates in August. Our strategy was well rewarded because we earned the
going rate of interest, plus a premium for the rate increases the market was
expecting but never received. Our decision translated into better income and
performance for shareholders.
WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES AND HOW DO YOU PLAN TO
POSITION THE FUND?
We think the Fed is done raising rates in the near term, though the
longer-term picture is unclear. We don't plan on making any significant changes
until we see more economic data, which should provide clues to the Fed's next
step. Our team will continue to assess opportunities to add yield, paying close
attention to supply and demand.
[right margin]
"WE SAW A WINDOW OF OPPORTUNITY BETWEEN MAY AND JUNE TO LOCK IN SOME ATTRACTIVE
YIELDS FOR SHAREHOLDERS."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
GOVERNMENT AGENCY NOTES 37%
FLOATING-RATE AGENCY NOTES 32%
GOVERNMENT AGENCY
DISCOUNT NOTES 31%
AS OF MARCH 31, 2000
FLOATING-RATE AGENCY NOTES 36%
GOVERNMENT AGENCY
DISCOUNT NOTES 30%
GOVERNMENT AGENCY NOTES 23%
TREASURY BILLS 11%
Investment terms are defined in the Glossary on pages 19-20.
www.americancentury.com 5
Premium Government Reserve--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES(1) -- 69.2%
$1,113,000 FFCB, 6.28%, 1/22/01 $ 1,111,545
3,000,000 FHLB, 5.39%, 10/6/00 2,999,262
3,500,000 FHLB, 4.38%, 10/23/00 3,495,254
5,000,000 FHLB, 5.97%, 12/1/00 4,993,934
2,000,000 FHLB, 6.375%, 1/24/01 1,999,893
3,000,000 FHLB, 0.00%, 10/16/01 3,000,000
2,000,000 FHLB, VRN, 6.48%, 10/4/00,
resets weekly off the 3-month
T-Bill rate plus 0.30% with
no caps 2,000,000
5,000,000 FHLB, VRN, 6.67%, 10/4/00,
resets weekly off the 3-month
T-Bill rate plus 0.49% with
no caps 4,999,575
5,000,000 FHLB, VRN, 6.68%, 10/4/00,
resets weekly off the 3-month
T-Bill rate plus 0.50% with
no caps 5,000,000
2,000,000 FHLMC MTN, 6.50%, 1/19/01 2,000,000
3,000,000 FNMA, 5.97%, 10/2/00 2,999,931
3,000,000 FNMA, 6.57%, 2/22/01 3,000,000
2,000,000 FNMA, 7.25%, 5/25/01 2,000,000
2,500,000 FNMA MTN, 4.75%, 11/2/00 2,495,448
4,000,000 FNMA MTN, 5.86%, 11/7/00 3,995,808
2,000,000 FNMA MTN, 6.47%, 2/16/01 1,995,455
2,100,000 FNMA MTN, Series B, 5.21%,
10/13/00 2,099,119
1,250,000 SLMA MTN, 4.80%, 12/18/00 1,245,048
5,000,000 SLMA MTN, Series HC, VRN,
6.84%, 10/3/00, resets
quarterly off the 3-month T-Bill
rate plus 0.70% with no caps 5,000,199
5,000,000 SLMA MTN, VRN, 6.61%,
10/3/00, resets quarterly off
the 3-month T-Bill plus 0.43%
with no caps 4,996,414
5,000,000 SLMA MTN, VRN, 6.57%,
10/5/00, resets quarterly off
the 3-month T-Bill plus 0.43%
with no caps 5,000,000
5,000,000 SLMA, VRN, 6.55%, 10/3/00,
resets weekly off the 3-month
T-Bill rate plus 0.41% with
no caps 5,000,000
4,000,000 SLMA, VRN, 6.63%, 10/3/00,
resets weekly off the 3-month
T-Bill rate plus 0.45% with
no caps 3,999,342
1,019,000 TVA, 6.00%, 11/1/00 1,018,248
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES 76,444,475
------------
Principal Amount Value
--------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(1) -- 30.8%
$3,000,000 FHLB Discount Notes, 6.40%,
11/15/00 $ 2,976,000
3,000,000 FHLB Discount Notes, 6.40%,
2/7/01 2,931,200
3,000,000 FHLB Discount Notes, 6.40%,
2/28/01 2,920,063
4,000,000 FHLMC Discount Notes, 6.43%,
10/19/00 3,987,140
5,000,000 FHLMC Discount Notes, 6.39%,
12/7/00 4,940,537
4,500,000 FHLMC Discount Notes, 6.39%,
12/7/00 4,446,484
5,000,000 FHLMC Discount Notes, 6.41%,
12/15/00 4,933,229
3,000,000 FHLMC Reference Bills, 6.50%,
3/29/01 2,903,042
4,000,000 FNMA Discount Notes, 6.43%,
10/19/00 3,987,150
------------
TOTAL U.S. GOVERNMENT AGENCY
DISCOUNT NOTES 34,024,845
------------
TOTAL INVESTMENT SECURITIES -- 100.0% $110,469,320
============
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
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
TVA = Tennessee Valley Authority
VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
September 30,2000.
(1) The rates for U.S. Government Agency Discount Notes are the yield to
maturity at purchase. The rates for U.S. Government Agency Securities are
the stated coupon rates.
6 1-800-345-2021 See Notes to Financial Statements
Premium Capital Reserve--Performance
--------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 2000
PREMIUM
CAPITAL 90-DAY TREASURY MONEY MARKET INSTRUMENT FUNDS(2)
RESERVE BILL INDEX AVERAGE RETURN FUND'S RANKING
================================================================================
6 MONTHS(1) 3.10% 2.98% 2.86% --
1 YEAR 5.93% 5.73% 5.43% 21 OUT OF 362
================================================================================
AVERAGE ANNUAL RETURNS
3 YEARS 5.39% 5.12% 4.94% 28 OUT OF 289
5 YEARS 5.33% 5.14% 4.95% 28 OUT OF 249
LIFE OF FUND 4.93% 4.88% 4.69%(3) 25 OUT OF 176(3)
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 18-19 for information about returns and Lipper fund rankings.
PORTFOLIO AT A GLANCE
9/30/00 3/31/00
NUMBER OF SECURITIES 84 54
WEIGHTED AVERAGE
MATURITY 68 DAYS 59 DAYS
EXPENSE RATIO 0.45%* 0.45%
* Annualized.
YIELDS AS OF SEPTEMBER 30, 2000
7-DAY CURRENT YIELD 6.32%
7-DAY EFFECTIVE YIELD 6.52%
Investment terms are defined in the Glossary on pages 19-20.
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
Premium Capital Reserve--Q&A
--------------------------------------------------------------------------------
[photo of John Walsh]
An interview with John Walsh, a portfolio manager on the Premium Capital
Reserve fund investment team.
HOW DID PREMIUM CAPITAL RESERVE PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER
30, 2000?
The portfolio performed well, providing stability during a volatile period
in U.S. financial markets. Premium Capital Reserve's total return was 3.10%,
which beat the 2.86% average return of the 371 "Money Market Instrument Funds"
tracked by Lipper Inc. In addition, Premium Capital Reserve's longer-term
performance ranks in the top 15% of the Lipper group (see the previous page).
Premium Capital Reserve also provided shareholders with more income than
the average money market fund. Premium Capital Reserve's 7-day current yield
rose from 5.63% on March 31 to 6.32% on September 30. The 7-day effective yield,
which includes reinvested dividends, was 6.52% at the end of September. That was
higher than the 5.96% average effective yield of its Lipper peers.
WHY DID PREMIUM CAPITAL RESERVE'S YIELD RISE?
There are two key reasons for the increase in yield. First, the Federal
Reserve (the Fed) raised short-term interest rates to cool the economy and keep
a lid on inflation. Second, we added some higher-yielding one-year securities in
the second quarter of the year.
LET'S FOCUS ON FED RATE POLICY. HOW DOES IT RELATE TO MONEY MARKET YIELDS?
By raising interest rates, the Fed increases borrowing costs for consumers
and corporations. That means companies and other borrowers have to pay more
interest on the short-term debt they issue. Because this debt makes up the pool
of money market securities we invest in (see page 19 for examples and
definitions of money market securities), higher rates help boost money market
fund yields.
The Fed raised interest rates pretty aggressively in mid-May. That increase
accounted for much of the gain in Premium Capital Reserve's yield.
WHAT CHANGES DID YOU MAKE TO ADD YIELD TO THE FUND?
We bought some one-year securities with very attractive yields in May and
June--after the Fed was done raising rates. Yields on one-year securities rose
sharply in the second quarter because investors expected even more rate
increases. But we thought market expectations for interest rates had gone too
far and that the yields available on these securities were just too good to pass
up.
WHAT'S YOUR OUTLOOK FOR THE FUND'S YIELD?
We think money market yields have peaked for now. Economic growth slowed
significantly in the third quarter, so we believe it's highly unlikely that the
Fed will raise short-term interest rates again in the coming months.
[left margin]
"PREMIUM CAPITAL RESERVE ALSO PROVIDED SHAREHOLDERS WITH MORE INCOME THAN THE
AVERAGE MONEY MARKET FUND."
[pie charts - data below]
TYPES OF INVESTMENTS IN
THE PORTFOLIO
AS OF SEPTEMBER 30, 2000
COMMERCIAL PAPER 82%
CERTIFICATES OF DEPOSIT 9%
VARIABLE-RATE NOTES 4%
OTHER 5%
AS OF MARCH 31, 2000
COMMERCIAL PAPER 80%
CERTIFICATES OF DEPOSIT 8%
VARIABLE-RATE NOTES 7%
OTHER 5%
Investment terms are defined in the Glossary on pages 19-20.
8 1-800-345-2021
Premium Capital Reserve--Schedule of Investments
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
COMMERCIAL PAPER(1) -- 81.5%
$ 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) $ 6,760,109
17,500,000 Allianz of America Inc.,
6.48%-6.54%,
10/10/00-12/14/00
(Acquired 7/7/00-9/14/00,
Cost $17,203,608)(2) 17,347,616
2,900,000 American Family Financial
Services, 6.53%, 3/1/01 2,820,570
5,000,000 Banco Hipotecario S.A., 6.52%,
11/15/00 4,959,250
9,000,000 Corporate Receivables Corp.,
6.50%-6.53%,
10/5/00-12/7/00 (Acquired
7/13/00-8/9/00, Cost
$8,830,720)(2) 8,936,612
14,500,000 Countrywide Home Loans, Inc.,
6.75%, 10/2/00 14,497,283
19,000,000 Credit Suisse First Boston Inc.,
6.48%-6.75%,
10/6/00-3/12/01 (Acquired
5/17/00-9/11/00, Cost
$18,468,983)(2) 18,744,695
3,000,000 DaimlerChrysler AG, 6.59%,
10/11/00 2,994,509
16,000,000 Dakota Certificates (Citibank),
6.51%-6.58%,
10/5/00-10/13/00 (Acquired
7/6/00-9/5/00, Cost
$15,804,973)(2) 15,973,364
14,500,000 Emerald Certificates,
6.53%-6.55%,
10/10/00-11/20/00
(Acquired 8/17/00-9/25/00,
Cost $14,363,899)(2) 14,421,976
5,000,000 Enron Funding Corp., 6.48%,
11/17/00 (Acquired 9/15/00,
Cost $4,943,300)(2) 4,957,700
14,500,000 Falcon Asset Securities Corp.,
6.50%-6.55%,
11/7/00-1/19/01
(Acquired 8/21/00-9/21/00,
Cost $14,244,039)(2) 14,309,799
15,000,000 Formosa Plastics Corp. USA,
6.52%-6.70%,
11/6/00-11/15/00 14,890,184
18,127,000 Fortis Funding LLC,
6.52%-6.53%,
10/11/00-2/5/01 (Acquired
7/11/00-8/8/00, Cost
$17,754,461)(2) 17,988,169
2,400,000 Fuji Photo Film Finance USA,
6.54%, 10/26/00 2,389,100
12,500,000 General Electric Capital Corp.,
6.48%-6.56%,
2/14/01-3/1/01 12,178,822
Principal Amount Value
--------------------------------------------------------------------------------
$10,000,000 General Electric Financial
Assurance Holdings, 6.53%,
10/13/00-1/18/01
(Acquired 8/2/00-9/15/00,
Cost $9,821,332)(2) $ 9,890,259
4,500,000 GMAC Mortgage Corp., 6.62%,
10/2/00 4,499,172
5,000,000 Halogen Capital Co., 6.52%,
10/17/00 (Acquired 9/18/00,
Cost $4,973,739)(2) 4,985,511
17,310,000 National Rural Utilities
Cooperative Finance Corp.,
6.18%-6.46%,
10/16/00-3/27/01 16,944,930
18,000,000 Newcastle Certificates,
6.55%-6.62%,
10/12/00-11/16/00
(Acquired 7/14/00-9/1/00,
Cost $17,732,843)(2) 17,885,634
13,500,000 Old Line Funding Corp., 6.51%,
10/20/00-10/24/00
(Acquired 9/7/00-9/8/00,
Cost $13,389,782)(2) 13,447,469
7,159,000 Receivables Capital Corp., 6.50%,
10/4/00-11/17/00
(Acquired 8/18/00-9/12/00,
Cost $7,080,968)(2) 7,115,106
10,500,000 Reed Elsevier Inc., 6.50%,
10/17/00-10/19/00
(Acquired 8/16/00-8/29/00,
Cost $10,393,382)(2) 10,467,681
18,540,000 Rio Tinto America Inc.,
6.51%-6.53%,
10/23/00-11/14/00
(Acquired 8/2/00-8/21/00,
Cost $18,268,199)(2) 18,425,737
15,000,000 Sand Dollar Funding LLC,
6.49%-6.51%,
11/29/00-12/20/00
(Acquired 8/24/00-9/25/00,
Cost $14,759,928)(2) 14,810,511
7,200,000 Sempra Energy, 6.52%,
10/27/00 (Acquired 9/26/00,
Cost $7,159,576)(2) 7,166,095
12,700,000 Spintab-Swedmortgage AB,
6.47%, 12/4/00 12,553,844
5,000,000 Tannehill Capital Company LLC,
6.60%, 10/10/00 (Acquired
7/18/00, Cost $4,923,000)(2) 4,991,750
9,300,000 Transamerica Asset Funding Corp.,
6.51%, 10/19/00-10/23/00
(Acquired 8/29/00-9/15/00,
Cost $9,224,340)(2) 9,266,618
5,000,000 WCP Funding Inc., 6.50%,
10/31/00 (Acquired 9/8/00,
Cost $4,952,153)(2) 4,972,917
10,000,000 Windmill Funding Corp.,
6.50%-6.54%,
10/3/00-10/6/00 (Acquired
7/7/00-8/7/00, Cost
$9,865,900)(2) 9,993,669
------------
TOTAL COMMERCIAL PAPER 341,586,661
------------
See Notes to Financial Statements www.americancentury.com 9
Premium Capital Reserve--Schedule of Investments
--------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 2000 (UNAUDITED)
Principal Amount Value
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 8.8%
$ 5,000,000 Abbey National Treasury Services
PLC, 7.33%, 5/16/01 $ 5,000,293
8,000,000 National Westminster Bank PLC
(New York), 6.79%-6.87%,
3/28/01-4/3/01 7,998,878
9,000,000 Royal Bank of Canada (New York),
6.44%-6.48%,
1/5/01-1/10/01 8,998,841
10,000,000 UBS AG/Stamford Branch,
6.89%-6.97%,
8/2/01-8/20/01 9,997,490
5,000,000 Westdeutsche Landesbank,
7.10%, 5/3/01 5,000,000
------------
TOTAL CERTIFICATES OF DEPOSIT 36,995,502
------------
CORPORATE BONDS -- 4.5%
3,000,000 Jackson National Life Insurance
Co., VRN, 6.77%, 10/9/00,
resets monthly off the 1-month
LIBOR plus 0.15% with no caps
(Acquired 6/9/00, Cost
$3,000,000)(2) 3,000,000
5,000,000 Transamerica Asset Funding Corp.,
VRN, 6.82%, 11/1/00, 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
6,000,000 Travelers Insurance Company (The),
VRN, 6.65%, 10/23/00, resets
monthly off the 1-month LIBOR
plus 0.03% with no caps
(Acquired 5/22/00, Cost
$6,000,000)(2) 6,000,000
5,000,000 U.S. Bank NA Minnesota, VRN,
6.69%, 10/18/00, resets
monthly off the 1-month LIBOR
plus 0.07% with no caps 5,003,426
------------
TOTAL CORPORATE BONDS 19,003,426
------------
ASSET-BACKED SECURITIES(3) -- 3.2%
3,236,936 AmeriCredit Automobile
Receivables Trust, Series
2000 B, Class A1 SEQ, 6.89%,
6/5/01 3,236,936
3,439,900 Associates Automobile
Receivables Trust, Series
2000-1, Class A1 SEQ, 6.85%,
6/15/01 3,439,900
Principal Amount Value
--------------------------------------------------------------------------------
$ 5,000,000 Ford Credit Auto Owner Trust,
Series 2000 E, Class A1 SEQ,
6.58%, 1/16/01 $ 5,000,000
1,274,309 Household Automotive Trust,
Series 2000-2, Class A1 SEQ,
6.81%, 7/16/01 1,274,309
387,146 WFS Financial Owner Trust,
Series 2000 A, Class A1 SEQ,
6.28%, 3/20/01 387,146
------------
TOTAL ASSET-BACKED SECURITIES 13,338,291
------------
BANK NOTES -- 1.0%
4,000,000 Bank of America N.A., 7.20%,
5/4/01 4,000,000
------------
U.S. GOVERNMENT AGENCY SECURITIES - 1.0%
4,000,000 FHLMC, MTN, 6.50%, 1/19/01 4,000,000
------------
TOTAL INVESTMENT SECURITIES -- 100.0% $418,923,880
============
NOTES TO SCHEDULE OF INVESTMENTS
FHLMC = Federal Home Loan Mortgage Corporation
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.
VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
September 30, 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 September 30,
2000, was $266,858,997 which represented 63.5% of net assets. Restricted
securities considered illiquid represent 3.3% of net assets.
(3) Final maturity indicated. Expected maturity used for purposes of calculating
the weighted average maturity.
10 1-800-345-2021 See Notes to Financial Statements
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 payables) 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).
PREMIUM PREMIUM
GOVERNMENT CAPITAL
SEPTEMBER 30, 2000 (UNAUDITED) RESERVE RESERVE
ASSETS
Investment securities, at value
(amortized cost and cost for
federal income tax purposes) ........... $ 110,469,320 $ 418,923,880
Cash ..................................... 3,896,512 275,767
Interest receivable ...................... 1,420,139 1,579,866
--------------- ---------------
115,785,971 420,779,513
--------------- ---------------
LIABILITIES
Payable for investments purchased ........ 3,000,000 --
Accrued management fees (Note 2) ......... 42,166 151,496
Dividends payable ........................ 21,239 71,275
Payable for directors' fees and expenses . 127 35
--------------- ---------------
3,063,532 222,806
--------------- ---------------
Net Assets ............................... $ 112,722,439 $ 420,556,707
=============== ===============
CAPITAL SHARES, $0.01 PAR VALUE
Authorized ............................... 1,000,000,000 1,000,000,000
=============== ===============
Outstanding .............................. 112,722,627 420,557,764
=============== ===============
Net Asset Value Per Share ................ $ 1.00 $ 1.00
=============== ===============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .. $ 112,722,627 $ 420,557,764
Accumulated net realized loss
on investment transactions ............. (188) (1,057)
--------------- ---------------
$ 112,722,439 $ 420,556,707
=============== ===============
See Notes to Financial Statements www.americancentury.com 11
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.
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
PREMIUM PREMIUM
GOVERNMENT CAPITAL
RESERVE RESERVE
INVESTMENT INCOME
Income:
Interest ................................ $ 2,920,002 $ 12,834,881
------------ ------------
Expenses (Note 2):
Management fees ......................... 203,986 878,316
Directors' fees and expenses ............ 209 905
------------ ------------
204,195 879,221
------------ ------------
Net investment income ................... 2,715,807 11,955,660
------------ ------------
Net realized gain (loss)
on investments ........................ 2,506 (1,045)
------------ ------------
Net Increase in Net Assets
Resulting from Operations ............. $ 2,718,313 $ 11,954,615
============ ============
12 1-800-345-2021 See Notes to Financial Statements
Statement 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.
<TABLE>
SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND YEAR ENDED MARCH 31, 2000
Increase (Decrease) PREMIUM GOVERNMENT RESERVE PREMIUM CAPITAL RESERVE
in Net Assets SEPT. 30, 2000 MARCH 31, 2000 SEPT. 30, 2000 MARCH 31, 2000
OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ...... $ 2,715,807 $ 4,383,471 $ 11,955,660 $ 16,043,951
Net realized gain (loss)
on investments ........... 2,506 (2,694) (1,045) 7,716
------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations 2,718,313 4,380,777 11,954,615 16,051,667
------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income . (2,715,807) (4,383,471) (11,955,660) (16,043,951)
From net realized gains on
investment transactions .. -- -- -- (4,674)
------------- ------------- ------------- -------------
Decrease in net assets
from distributions ....... (2,715,807) (4,383,471) (11,955,660) (16,048,625)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .. 161,320,137 385,615,932 241,544,380 576,548,075
Proceeds from reinvestment
of distributions ......... 2,633,001 4,334,708 11,400,353 15,425,655
Payments for shares redeemed (130,641,736) (431,832,940) (211,105,803) (489,306,402)
------------- ------------- ------------- -------------
Net increase (decrease) in
net assets from capital
share transactions ....... 33,311,402 (41,882,300) 41,838,930 102,667,328
------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ............ 33,313,908 (41,884,994) 41,837,885 102,670,370
NET ASSETS
Beginning of period ........ 79,408,531 121,293,525 378,718,822 276,048,452
------------- ------------- ------------- -------------
End of period .............. $ 112,722,439 $ 79,408,531 $ 420,556,707 $ 378,718,822
============= ============= ============= =============
TRANSACTIONS IN SHARES
OF THE FUNDS
Sold ....................... 161,320,137 385,615,932 241,544,380 576,548,075
Issued in reinvestment
of distributions ......... 2,633,001 4,334,708 11,400,353 15,425,654
Redeemed ................... (130,641,736) (431,832,940) (211,105,802) (489,306,402)
------------- ------------- ------------- -------------
Net increase ............... 33,311,402 (41,882,300) 41,838,931 102,667,327
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements www.americancentury.com 13
Notes to Financial Statements
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
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; these 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.
--------------------------------------------------------------------------------
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%.
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, the
distributor of the corporation, American Century Investment Services, Inc., and
the corporation's transfer agent, American Century Services Corporation.
14 1-800-345-2021
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 investment 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>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
2000(1) 2000 1999 1998 1997 1996
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ...... 0.03 0.05 0.05 0.05 0.05 0.05
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income . (0.03) (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 $ 1.00
=========== =========== =========== =========== =========== ===========
Total Return(2) ............ 3.03% 5.03% 4.98% 5.25% 5.07% 5.49%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...... 0.45%(3) 0.45% 0.45% 0.45% 0.45% 0.44%
Ratio of Net Investment Income
to Average Net Assets ...... 5.97%(3) 4.89% 4.82% 5.13% 4.96% 5.30%
Net Assets, End of Period
(in thousands) ............. $ 112,722 $ 79,409 $ 121,294 $ 44,495 $ 38,838 $ 26,191
</TABLE>
(1) Six months ended September 30, 2000 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.
(3) Annualized.
See Notes to Financial Statements www.americancentury.com 15
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 investment 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>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)
2000(1) 2000 1999 1998 1997 1996
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------- --------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net Investment Income ........... 0.03 0.05 0.05 0.05 0.05 0.05
----------- --------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ...... (0.03) (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 $1.00
=========== ========= ========== ========== ========== ==========
Total Return(2) ................. 3.10% 5.18% 5.14% 5.38% 5.13% 5.58%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ........... 0.45%(3) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of Net Investment Income
to Average Net Assets ........... 6.11%(3) 5.09% 4.99% 5.26% 5.01% 5.50%
Net Assets, End of Period
(in thousands) .................. $420,557 $378,719 $276,048 $182,487 $153,958 $133,417
</TABLE>
(1) Six months ended September 30, 2000 (unaudited).
(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one
year are not annualized.
(3) Annualized.
16 1-800-345-2021 See Notes to Financial Statements
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. Visit our Web site
(www.americancentury.com) or call us 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 17
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 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:
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.
MONEY MARKET INSTRUMENT FUNDS (Premium Capital Reserve) -- funds that
intend to maintain a stable net asset value and invest in high-quality financial
instruments rated in the top two grades with dollar-weighted average maturities
of less than 90 days.
But unlike most of the funds in their Lipper categories, the Premium
Reserve Money Market funds are intended for high-net-worth individual investors
(minimum balance requirement is $100,000). In addition to higher minimums, the
Premium Reserve Money Market funds have lower expenses, giving them an advantage
compared with their Lipper peer group. All else being equal, lower expenses
translate into higher yields and returns.
[left margin]
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:
* A-1+: EXTREMELY STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* A-1: STRONG ABILITY TO MEET FINANCIAL OBLIGATIONS.
* 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.
18 1-800-345-2021
Glossary
--------------------------------------------------------------------------------
RETURNS
* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.
* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year total returns, please refer to the "Financial
Highlights" on pages 15-16.
YIELDS
* 7-DAY CURRENT YIELD is calculated based on the income generated by an
investment in the fund over a seven-day period and is expressed as an annual
percentage rate.
* 7-DAY EFFECTIVE YIELD is calculated similarly, although this figure is
slightly higher than the fund's 7-Day Current Yield because of the effects of
compounding. The 7-Day Effective Yield assumes that income earned from the
fund's investments is reinvested and generating additional income.
PORTFOLIO STATISTICS
* NUMBER OF SECURITIES -- the number of different securities held by the fund
on a given date.
* WEIGHTED AVERAGE MATURITY (WAM) -- a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.
* EXPENSE RATIO -- the operating expenses of the fund, expressed as a
percentage of average net assets. Shareholders pay an annual fee to the
investment manager for investment advisory and management services. The expenses
and fees are deducted from fund income, not from each shareholder account. (See
Note 2 in the Notes to Financial Statements.)
TYPES OF MONEY MARKET SECURITIES
* ASSET-BACKED SECURITIES -- debt securities that represent ownership in a
pool of receivables, such as credit card debt, auto loans, or mortgages.
* BANK NOTES -- promissory notes issued in the U.S. by domestic commercial
banks.
* CERTIFICATES OF DEPOSIT (CDS) -- CDs represent a bank's obligation to repay
money deposited with it for a specified period of time.
* COMMERCIAL PAPER (CP) -- short-term debt issued by large corporations to
raise cash and to cover current expenses in anticipation of future revenues.
* REPURCHASE AGREEMENTS (REPOS) -- short-term debt agreements in which a fund
buys a security at one price and simultaneously agrees to sell it back to the
seller at a slightly higher price on a specified date (usually within seven
days). The fund does not own the security; instead, the security serves as
collateral for the agreement.
* U.S. GOVERNMENT AGENCY NOTES -- intermediate-term debt securities issued by
U.S. government agencies (such as the Federal Home Loan Bank). These notes are
issued with maturities ranging from three months to 30 years, but the funds only
invest in those with remaining maturities of 397 days or less.
* U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- short-term debt securities issued
by U.S. government agencies (such as the Federal Home Loan Bank). These notes
are issued at a discount and achieve full value at maturity (typically one year
or less).
* VARIABLE-RATE NOTES (VRNS) -- debt securities whose interest rates change
when a designated base rate changes. The base rate is often the federal funds
rate, the 90-day Treasury bill rate, or the London Interbank Offered Rate.
www.americancentury.com 19
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.
* CAPITAL PRESERVATION -- offers taxable and tax-free money market funds for
relative stability of principal and liquidity.
* INCOME -- offers funds that can provide current income and competitive
yields, as well as a strong and stable foundation and generally lower volatility
levels than stock funds.
* GROWTH & INCOME -- offers funds that emphasize both growth and income
provided by either dividend-paying equities or a combination of equity and
fixed-income securities.
* 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.
* CONSERVATIVE -- these funds generally provide lower return potential with
either low or minimal price-fluctuation risk.
* MODERATE -- these funds generally provide moderate return potential with
moderate price-fluctuation risk.
* AGGRESSIVE -- these funds generally provide high return potential with
corresponding high price-fluctuation risk.
20 1-800-345-2021
[inside back cover]
AMERICAN CENTURY FUNDS
===============================================================================
GROWTH
===============================================================================
MODERATE RISK
SPECIALTY
Global Natural Resources
AGGRESSIVE RISK
DOMESTIC EQUITY INTERNATIONAL
Veedot(reg.sm) Emerging Markets
New Opportunities International Discovery
Giftrust(reg.tm) International Growth
Vista Global Growth
Heritage
Growth SPECIALTY
Ultra(reg.tm) Global Gold
Select Technology
Life Sciences
===============================================================================
GROWTH AND INCOME
===============================================================================
MODERATE RISK
ASSET ALLOCATION DOMESTIC EQUITY
Balanced Equity Growth
Strategic Allocation: Equity Index
Aggressive Large Cap Value
Strategic Allocation: Tax-Managed Value
Moderate Income & Growth
Strategic Allocation: Value
Conservative Equity Income
SPECIALTY
Utilities
Real Estate
AGGRESSIVE RISK
DOMESTIC EQUITY
Small Cap Quantitative
Small Cap Value
===============================================================================
INCOME
===============================================================================
CONSERVATIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Intermediate-Term Bond CA Intermediate-Term
Intermediate-Term Treasury Tax-Free
GNMA AZ Intermediate-Term
Inflation-Adjusted Treasury Municipal
Limited-Term Bond FL Intermediate-Term
Target 2000* Municipal
Short-Term Government Intermediate-Term Tax-Free
Short-Term Treasury CA Limited-Term Tax-Free
Limited-Term Tax-Free
MODERATE RISK
TAXABLE BONDS TAX-FREE BONDS
Long-Term Treasury CA Long-Term Tax-Free
Target 2005* Long-Term Tax-Free
Bond CA Insured Tax-Free
Premium Bond
AGGRESSIVE RISK
TAXABLE BONDS TAX-FREE BONDS
Target 2025* CA High-Yield Municipal
Target 2020* High-Yield Municipal
Target 2015*
Target 2010*
High-Yield
International Bond
===============================================================================
CAPITAL PRESERVATION
===============================================================================
CONSERVATIVE RISK
TAXABLE MONEY MARKETS TAX-FREE MONEY MARKETS
Premium Capital Reserve FL Municipal Money Market
Prime Money Market CA Municipal Money Market
Premium Government Reserve CA Tax-Free Money Market
Government Agency Tax-Free Money Market
Money Market
Capital Preservation
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. Target
2000 will close on December 15, 2000. The fund closed to new investors on
10/1/2000, and will no longer accept investments from current shareholders
beginning 11/01/2000.
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.
[back cover]
Who We Are
American Century offers investors more than 70 mutual funds spanning the
investment spectrum. We currently manage $100 billion for roughly 2 million
individuals, institutions and corporations, and offer 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 been committed to building long-term relationships and
to helping investors achieve their dreams.
In a very real sense, investors put their futures 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.
[left margin]
[american century logo and text logo (reg.sm)]
American
Century
P.O. BOX 419200
KANSAS CITY, MISSOURI 64141-6200
WWW.AMERICANCENTURY.COM
INVESTOR RELATIONS
1-800-345-2021 OR 816-531-5575
AUTOMATED INFORMATION LINE
1-800-345-8765
FAX: 816-340-7962
TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 OR 816-444-3485
BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED
RETIREMENT PLANS
1-800-345-3533
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.
--------------------------------------------------------------------------------
American Century Investments PRSRT STD
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES
0011 American Century Investment Services, Inc.
SH-SAN-22594 (c)2000 American Century Services Corporation
