INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Century Premium Reserves, Inc.:
In planning and performing our audits of the financial statements of
Premium Bond Fund, Premium Government Reserve Fund and Premium Capital Reserve
Fund, the three funds comprising American Century Premium Reserves, Inc. (the
"Company") for the year ended March 31, 2000 (on which we have issued our
reports dated May 5, 2000), we considered its internal control, including
control activities for safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our opinion on the financial
statements and to comply with the requirements of Form N-SAR, and not to provide
assurance on the Company's internal control.
The management of the Company is responsible for establishing and
maintaining internal control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related
costs of controls. Generally, controls that are relevant to an audit pertain to
the entity's objective of preparing financial statements for external purposes
that are fairly presented in conformity with accounting principles generally
accepted in the United States of America. Those controls include the
safeguarding of assets against unauthorized acquisition, use, or disposition.
Because of inherent limitations in any internal control, misstatements due to
error or fraud may occur and not
be detected. Also, projections of any evaluation of internal control to
future periods are subject to the risk that the internal control may become
inadequate because of changes in conditions or that the degree of compliance
with policies or procedures deteriorate. Our consideration of the Company's
internal control would not necessarily disclose all matters in internal control
that might be material weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness is a condition in
which the design or operation of one or more of the internal control components
does not reduce to a relatively low level the risk that misstatements due to
error or fraud in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. However,
we noted no matters involving the Company's internal control and its operation,
including controls for safeguarding securities, that we consider to be material
weaknesses as defined above as of March 31, 2000.
May 5, 2000
