CAPITAL PRESERVATION FUND INC, 497, 1996-12-23

CAPITAL PRESERVATION FUND INC
497, 1996-12-23

Previous: CANANDAIGUA WINE CO INC, 8-K, 1996-12-23

Next: AIM FUNDS GROUP/DE, DEFA14A, 1996-12-23

PROSPECTUS

[American Century logo]
American
Century(sm)

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

BENHAM
GROUP(R)

Capital Preservation
Capital Preservation II
Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund

[front cover]

AMERICAN CENTURY INVESTMENTS
FAMILY OF FUNDS

American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios. To
help you find the funds that may meet your needs, American Century funds have
been divided into three groups based on investment style and objectives. These
groups, which appear below, are designed to help simplify your fund decisions.

AMERICAN CENTURY INVESTMENTS

BENHAM GROUP AMERICAN CENTURY GROUP TWENTIETH CENTURY(R) GROUP

MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS

Capital Preservation
Capital Preservation II
Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund

PROSPECTUS
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

Capital Preservation * Capital Preservation II *
Government Agency * Short-Term Treasury
Intermediate-Term Treasury * Long-Term Treasury
ARM Fund * GNMA Fund

AMERICAN CENTURY CAPITAL PRESERVATION FUND, INC.
AMERICAN CENTURY CAPITAL PRESERVATION FUND II, INC.
AMERICAN CENTURY GOVERNMENT INCOME TRUST

American Century Capital Preservation Fund, Inc., American Century Capital
Preservation Fund II, Inc., and American Century Government Income Trust are a
part of American Century Investments, a family of funds that includes nearly 70
no-load mutual funds covering a variety of investment opportunities. Eight of
the funds from our Benham Group that invest in U.S. government securities (the
"Funds") are described in this Prospectus. Their investment objectives are
listed on page 2 of this Prospectus. The other funds are described in separate
prospectuses.

American Century offers investors a full line of no-load funds, investments
that have no sales charges or commissions.

This Prospectus gives you information about the Funds that you should know
before investing. Please read this Prospectus carefully and retain it for future
reference. Additional information is included in the Statement of Additional
Information dated September 3, 1996 and filed with the Securities and Exchange
Commission ("SEC"). It is incorporated into this Prospectus by reference. To
obtain a copy without charge, call or write:

AMERICAN CENTURY INVESTMENTS
4500 Main Street o P.O. Box 419200
Kansas City, Missouri 64141-6200 o 1-800-345-2021
International calls: 816-531-5575
Telecommunications Device for the Deaf:
1-800-634-4113 o In Missouri: 816-753-1865
Internet: www.americancentury.com

Additional information, including this Prospectus and the Statements of
Additional Information, may be obtained by accessing the Web site maintained by
the SEC (www.sec.gov).

INVESTMENTS IN THE FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER AGENCY. THERE IS NO ASSURANCE THAT THE MONEY MARKET
FUNDS WILL BE ABLE TO MAINTAIN A $1.00 SHARE PRICE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus 1

INVESTMENT OBJECTIVES OF THE FUNDS

AMERICAN CENTURY--BENHAM CAPITAL
PRESERVATION FUND

Capital Preservation is a money market fund which seeks maximum safety and
liquidity. Its secondary objective is to seek to pay shareholders the highest
rate of return on their investment in the Fund consistent with safety and
liquidity. The Fund intends to pursue its investment objectives by investing
exclusively in short-term U.S. Treasury securities guaranteed by the direct full
faith and credit pledge of the U.S. government and maintaining a dollar-weighted
average portfolio maturity of not more than 60 days.

AMERICAN CENTURY--BENHAM CAPITAL
PRESERVATION FUND II

Capital Preservation II is a money market fund which seeks maximum safety
and liquidity. Its secondary objective is to seek to pay its shareholders the
highest rate of return on their investment in the Fund consistent with safety
and liquidity. The Fund intends to pursue its investment objectives by investing
primarily in repurchase agreements collateralized by securities that are backed
by the full faith and credit of the U.S. government. Such collateral may include
U.S. Treasury bills, notes, and bonds or mortgage-backed Ginnie Mae
certificates.

AMERICAN CENTURY--BENHAM GOVERNMENT AGENCY
MONEY MARKET FUND

Government Agency is a money market fund which seeks to provide the highest
rate of current return on its investments, consistent with safety of principal
and maintenance of liquidity, by investing exclusively in short-term obligations
of the U.S. government and its agencies and instrumentalities, the income from
which is exempt from state taxes.

AMERICAN CENTURY--BENHAM SHORT-TERM
TREASURY FUND

Short-Term Treasury seeks to earn and distribute the highest level of
current income exempt from state income taxes as is consistent with preservation
of capital. The Fund intends to pursue its investment objectives by investing
exclusively in securities issued or guaranteed by the U.S. Treasury and
maintaining a weighted average portfolio maturity ranging from 13 months to 3
years.

AMERICAN CENTURY--BENHAM INTERMEDIATE-TERM
TREASURY FUND

AMERICAN CENTURY--BENHAM LONG-TERM
TREASURY FUND

Long-Term Treasury seeks to provide a consistent and high level of current
income exempt from state taxes. The Fund intends to pursue its investment
objective by investing exclusively in securities issued or guaranteed by the
U.S. Treasury and maintaining a weighted average portfolio maturity ranging from
20 to 30 years.

AMERICAN CENTURY--BENHAM ADJUSTABLE RATE
GOVERNMENT SECURITIES FUND

The ARM Fund seeks to provide investors with a high level of current
income, consistent with stability of principal. The Fund intends to pursue its
investment objective by investing at least 65% of the Fund's total assets in
adjustable rate mortgage securities (ARMs) and other securities collateralized
by or representing interests in mortgages (collectively, "mortgage-backed
securities").

AMERICAN CENTURY--BENHAM GNMA FUND

The GNMA Fund seeks to provide a high level of current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-backed Ginnie Mae certificates.

There is no assurance that the Funds will achieve their respective
investment objectives.

NO PERSON IS AUTHORIZED BY THE FUNDS TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR IN OTHER PRINTED
OR WRITTEN MATERIAL ISSUED BY OR ON BEHALF OF THE FUNDS, AND YOU SHOULD NOT RELY
ON ANY OTHER INFORMATION OR REPRESENTATION.

2 Investment Objectives American Century Investments

TABLE OF CONTENTS

Transaction and Operating Expense Table...............................4
Financial Highlights..................................................5

INFORMATION REGARDING THE FUNDS

Investment Policies of the Funds.....................................13
The Money Market Funds...............................................13
Capital Preservation............................................13
Capital Preservation ...........................................13
Government Agency ..............................................13
The U.S. Treasury Funds..............................................14
Short-Term Treasury.............................................14
Intermediate-Term Treasury......................................14
Long-Term Treasury..............................................14
The Mortgage Securities Funds........................................15
ARM Fund........................................................15
GNMA Fund ......................................................15
Risk Factors and Investment Techniques...............................15
U.S. Government Securities......................................16
Mortgage-Backed Securities......................................16
Adjustable-Rate Mortgage Securities.............................16
Collateralized Mortgage Obligations.............................17
Stripped Mortgage-Backed Securities.............................17
Repurchase Agreements...........................................17
Other Investment Practices, Their Characteristics
and Risks.......................................................18
Portfolio Turnover..............................................18
When-Issued and Forward Commitment
Agreements..................................................18
Cash Management.................................................18
Other Techniques................................................18
Performance Advertising..............................................18

HOW TO INVEST WITH AMERICAN CENTURY INVESTMENTS

American Century Investments.........................................20
Investing in American Century........................................20
How to Open an Account...............................................20
By Mail.....................................................20
By Wire.....................................................20
By Exchange.................................................20
In Person...................................................21
Subsequent Investments..........................................21
By Mail.....................................................21
By Telephone................................................21
By Online Access............................................21
By Wire.....................................................21
In Person...................................................21
Automatic Investment Plan.......................................21
How to Exchange from One Account to Another .........................21
By Mail ....................................................21
By Telephone................................................21
By Online Access............................................22
How to Redeem Shares.................................................22
By Mail.....................................................22
By Telephone................................................22
By Check-A-Month............................................22
Other Automatic Redemptions.................................22
Redemption Proceeds.............................................22
By Check....................................................22
By Wire and ACH.............................................22
Redemption of Shares in Low-Balance Accounts....................22
Signature Guarantee..................................................23
Special Shareholder Services.........................................23
Automated Information Line..................................23
Online Account Access.......................................23
CheckWriting................................................23
Open Order Service..........................................24
Tax-Qualified Retirement Plans..............................24
Important Policies Regarding Your Investments........................24
Reports to Shareholders..............................................25
Employer-Sponsored Retirement Plans and
Institutional Accounts............................................25

ADDITIONAL INFORMATION YOU SHOULD KNOW

Share Price..........................................................26
When Share Price Is Determined..................................26
How Share Price Is Determined...................................26
Where to Find Information About Share Price.....................27
Distributions........................................................27
Taxes ............................................................27
Tax-Deferred Accounts...........................................27
Taxable Accounts................................................28
Management...........................................................28
Investment Management...........................................28
Code of Ethics..................................................30
Transfer and Administrative Services............................30
Distribution of Fund Shares..........................................30
Expenses ............................................................31
Further Information About American Century...........................31

PROSPECTUS TABLE OF CONTENTS 3
<TABLE>
<CAPTION>

TRANSACTION AND OPERATING EXPENSE TABLE

Capital Intermediate-
Capital Preservation Government Short-Term Term Long-Term
Preservation II Agency Treasury Treasury Treasury ARM Fund GNMA Fund

SHAREHOLDER TRANSACTION
EXPENSES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load
Imposed on Purchases............... none none none none none none none none

Maximum Sales Load Imposed
on Reinvested Dividends............ none none none none none none none none

Deferred Sales Load................ none none none none none none none none

Redemption Fee(1).................. none none none none none none none none

Exchange Fee....................... none none none none none none none none

ANNUAL FUND OPERATING EXPENSES:(2)
(as a percentage of net assets)

Management Fees
(net of expense limitation)....... .27% .43% .22% .21% .28% .17% .29% .28%

12b-1 Fees......................... none none none none none none none none

Other Expenses.................... .24% .30% .29% .39% .25% .43% .31% .30%

Total Fund Operating
Expenses.......................... .51% .73% .51% .60% .53% .60% .60% .58%

EXAMPLE:

You would pay the 1 year $ 5 $ 7 $ 5 $ 6 $ 5 $ 6 $ 6 $ 6
following expenses 3 years 16 23 16 19 17 19 19 19
on a $1,000 investment, 5 years 29 41 29 33 30 33 33 32
investment, assuming 10 years 64 91 64 75 66 75 75 73
assuming a 5% annual
return and redemption at
theend of each time period:
</TABLE>
(1) Redemption proceeds sent by wire are subject to a $10 processing fee.

(2) Benham Management Corporation (the "Manager") has agreed to limit each
Fund's total operating expenses to specified percentages of each Fund's
average daily net assets. The agreement provides that the Manager may
recover amounts absorbed on behalf of the Fund during the preceding 11
months if, and to the extent that, for any given month, Fund expenses were
less than the expense limit in effect at that time. The current expense
limits for the Funds are as follows: Capital Preservation, .53%; Capital
Preservation II, .73%; and .60% for the remaining Funds. Amounts which are
paid by unaffiliated third parties do not apply to these expense
limitations. These expense limitations are subject to annual renewal in
June. If the expense limitations were not in effect, the Management Fee,
Other Expenses and Total Fund Operating Expenses for the following Funds
would be as follows, respectively: Capital Preservation II, .46%, .30% and
.76%; Government Agency, .27%, .29% and .56%; Short-Term Treasury, .27%,
.39% and .66%; and Long-Term Treasury, .27%, .43% and .70%.

Each Fund pays the Manager advisory fees equal to an annualized percentage
of each Fund's average daily net assets. Other expenses include administrative
and transfer agent fees paid to American Century Services Corporation.

The purpose of the above table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the shares of the Funds offered by this
Prospectus. The example set forth above assumes reinvestment of all dividends
and distributions and uses a 5% annual rate of return as required by SEC
regulations.

NEITHER THE 5% RATE OF RETURN NOR THE EXPENSES SHOWN ABOVE SHOULD BE
CONSIDERED INDICATIONS OF PAST OR FUTURE RETURNS AND EXPENSES. ACTUAL RETURNS
AND EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

4 TRANSACTION AND OPERATING EXPENSE TABLE AMERICAN CENTURY INVESTMENTS

FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION

The Financial Highlights for each of the periods presented have been
audited by KPMG Peat Marwick LLP, independent auditors. Their report thereon
appears in the Fund's annual report, which is incorporated by reference into the
Statement of Additional Information. The semiannual and annual reports contain
additional performance information and will be made available upon request and
without charge. The information presented is for a share outstanding throughout
the years ended March 31, except as noted.

<TABLE>

1996 1995 1994 1993(1) 1992 1991 1990 1989 1988 1987

PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

Income from Investment
Operations
Net Investment Income ...... .0521 .0424 .0259 .0134 .0382 .0603 .0750 .0800 .0608 .0531

Distributions

From Net Investment
Income......................(.0521) (.0424) (.0259) (.0134) (.0382) (.0603) (.0750) (.0800) (.0608) (.0531)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

TOTAL RETURN(2)............. 5.21% 4.31% 2.63% 1.35% 3.88% 6.27% 7.77% 8.27% 6.30% 5.48%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating
Expenses to Average
Net Assets(3)............... .51% .50% .51% .50%(4) .51% .52% .56% .57% .59% .63%

Ratio of Net Investment
Income to Average
Net Assets(3)............... 5.07% 4.24% 2.59% 2.68%(4) 3.82% 6.03% 7.50% 8.00% 6.08% 5.31%

Net Assets, End
of Period (in millions)..... $3,078 $2,883 $2,787 $2,943 $3,046 $3,376 $3,099 $2,737 $2,187 $1,793
</TABLE>

(1) The Fund's fiscal year-end was changed from September 30 to March 31
beginning with the period ended March 31, 1993, resulting in a six-month
period in 1993.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

Prospectus Financial Highlights 5

FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION II

PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

Income from Investment
Operations
Net Investment Income ........... .0515 .0406 .0237 .0120 .0341 .0591 .0764 .0834 .0626 .0553

Distributions
From Net
Investment Income................(.0515) (.0406) (.0237) (.0120) (.0341) (.0591) (.0764) (.0834) (.0626) (.0553)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period......................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

TOTAL RETURN(2).................. 5.15% 4.17% 2.40% 1.21% 3.42% 6.07% 7.91% 8.64% 6.46% 5.68%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating
Expenses to Average
Net Assets(3).................... .76% .75% .75% .75%(4) .74% .70% .69% .71% .73% .73%

Ratio of Net
Investment Income
to Average Net Assets(3)......... 5.03% 4.06% 2.37% 2.40%(4) 3.41% 5.91% 7.64% 8.34% 6.26% 5.53%

Net Assets, End
of Period (in millions).......... $246 $262 $283 $314 $340 $475 $618 $708 $538 $465
</TABLE>

(1) The Fund's fiscal year-end was changed from September 30 to March 31
beginning with the period ended March 31, 1993, resulting in a six-month
period in 1993.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

6 Financial Highlights American Century Investments

FINANCIAL HIGHLIGHTS
GOVERNMENT AGENCY

1996 1995 1994 1993 1992 1991 1990(1)
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

Income from Investment Operations
Net Investment Income ........................ .0535 .0435 .0265 .0304 .0517 .0742 .0264

Distributions
From Net Investment Income....................(.0535) (.0435) (.0265) (.0304) (.0517) (.0742) (.0264)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= =======
Total Return(2)............................... 5.35% 4.47% 2.69% 3.07% 5.29% 7.97% 2.65%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(3)...................... .51% .50% .50% .50% .30% 0 0

Ratio of Net Investment Income
to Average Net Assets(3)...................... 5.20% 4.35% 2.65% 3.04% 5.17% 7.42% 8.25%(4)

Net Assets, End
of Period (in millions)....................... $503 $462 $562 $646 $906 $1,074 $62
</TABLE>

(1) From December 5, 1989 (commencement of operations) through March 31, 1990.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

Prospectus Financial Highlights 7

FINANCIAL HIGHLIGHTS
SHORT-TERM TREASURY

1996 1995 1994 1993(1)
PER-SHARE DATA
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $9.73 $9.86 $10.04 $10.00

Income from Investment Operations
Net Investment Income ........................... .53 .50 .36 .25

Net Realized and Unrealized Gains

(Losses) on Investment Transactions.............. .11 (.13) (.14) .04
----- ----- ----- ------
Total from Investment Operations................. .64 .37 .22 .29
----- ----- ----- ------
Distributions

From Net Investment Income....................... (.53) (.50) (.36) (.25)

From Net Realized Gains
on Investment Transactions....................... 0 0 (.03) 0

In Excess of Net Realized Gains
on Investment Transactions....................... 0 0 (.01) 0
----- ----- ----- ------
Total Distributions.............................. (.53) (.50) (.40) (.25)
----- ----- ----- ------
Net Asset Value, End of Period........................ $9.84 $9.73 $9.86 $10.04
===== ===== ===== ======
Total Return(2).................................. 6.71% 3.85% 2.16% 2.79%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(3)......................... .67% .67% .58% 0%

Ratio of Net Investment Income
to Average Net Assets(3)......................... 5.39% 5.22% 3.53% 4.50%(4)

Portfolio Turnover Rate.......................... 224.03% 140.82% 261.61% 157.79%

Net Assets, End of Period (in millions).......... $36 $56 $25 $15
</TABLE>

(1) From September 8, 1992 (commencement of operations) through March 31, 1993.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

8 Financial Highlights American Century Investments

FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TREASURY

1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period................. $9.99 $10.18 $10.73 $10.52 $10.23 $9.87 $9.63 $10.11 $10.91 $11.97

Income from
Investment Operations

Net Investment Income ......... .58 .53 .48 .56 .69 .75 .77 .76 .75 .71

Net Realized and
Unrealized Gains
(Losses) on Investment
Transactions .................. 25 (.19) (.27) .69 .29 .36 .24 (.49) (.60) (.08)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations..................... .83 .34 .21 1.25 .98 1.11 1.01 .27 .15 .63
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions

From Net
Investment Income.............. (.58) (.53) (.48) (.56) (.69) (.75) (.77) (.75) (.92) (.89)

From Net Realized
Gains on Investment
Transactions................... 0 0 (.06) (.48) 0 0 0 0 (.03) (.80)

In Excess of Net Realized
Gains on Investment
Transactions................... 0 0 (.22) 0 0 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............ (.58) (.53) (.76) (1.04) (.69) (.75) (.77) (.75) (.95) (1.69)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period....................... $10.24 $9.99 $10.18 $10.73 $10.52 $10.23 $9.87 $9.63 $10.11 $10.91
====== ====== ====== ====== ====== ====== ====== ====== ====== ======

TOTAL RETURN(1)................ 8.42% 3.54% 1.85% 12.36% 9.92% 11.59% 10.61% 2.78% 1.60% 6.60%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating
Expenses to Average
Net Assets(2).................. .53% .53% .51% .53% .59% .73% .75% .75% .75% .93%

Ratio of Net Investment
Income to Average
Net Assets(2).................. 5.65% 5.35% 4.50% 5.18% 6.55% 7.49% 7.66% 7.67% 7.36% 6.26%

Portfolio Turnover Rate........ 167.89% 92.35% 212.91% 299.29% 148.75% 69.72% 216.84% 386.46% 465.35% 395.91%

Net Assets, End
of Period (in millions)........ $311 $305 $351 $392 $303 $159 $97 $72 $54 $43
</TABLE>
(1) Total return assumes reinvestment of dividends and capital gain
distributions, if any.

(2) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

Prospectus Financial Highlights 9

FINANCIAL HIGHLIGHTS
LONG-TERM TREASURY

<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $9.05 $9.38 $10.24 $10.00

Income from Investment Operations
Net Investment Income .......................... .60 .60 .63 .39

Net Realized and Unrealized Gains
(Losses) on Investment Transactions............. .62 (.33) (.27) .24
------ ------ ------ ------
Total from Investment Operations................ 1.22 .27 .36 .63
------ ------ ------ ------
Distributions

From Net Investment Income...................... (.60) (.60) (.63) (.39)

From Net Realized Gains
on Investment Transactions...................... 0 0 (.45) 0

In Excess of Net Realized Gains
on Investment Transactions...................... 0 0 (.14) 0
------ ------ ------ ------
Total Distributions............................. (.60) (.60) (1.22) (.39)
------ ------ ------ ------
Net Asset Value, End of Period....................... $9.67 $9.05 $9.38 $10.24
====== ====== ====== ======
TOTAL RETURN(2)................................. 13.46% 3.25% 2.87% 6.48%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(3)........................ .67% .67% .57% 0

Ratio of Net Investment Income
to Average Net Assets(3)........................ 5.93% 6.84% 5.89% 7.18%(4)

Portfolio Turnover Rate.........................112.35% 146.81% 200.34% 56.97%

Net Assets, End of Period (in millions)......... $111 $35 $18 $21
</TABLE>

(1) From September 8, 1992 (commencement of operations) through March 31, 1993.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

10 Financial Highlights American Century Investments

FINANCIAL HIGHLIGHTS
ARM FUND

<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $9.42 $9.75 $9.97 $10.04 $10.00

Income from Investment Operations
Net Investment Income ............................ .54 .49 .54 .57 .40

Net Realized and Unrealized Gains
(Losses) on Investment Transactions............... .05 (.33) (.22) (.07) .04
------ ------ ------ ------ ------
Total from Investment Operations.................. .59 .16 .32 .50 .44
------ ------ ------ ------ ------
Distributions
From Net Investment Income........................ (.54) (.49) (.54) (.57) (.40)
------ ------ ------ ------ ------
Total Distributions............................... (.54) (.49) (.54) (.57) (.40)
------ ------ ------ ------ ------
Net Asset Value, End of Period......................... $9.47 $9.42 $9.75 $9.97 $10.04
====== ====== ====== ====== ======
TOTAL RETURN(2)................................... 6.42% 1.75% 3.27% 5.13% 4.55%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(3).......................... .60% .57% .51% .45% 0%

Ratio of Net Investment Income
to Average Net Assets(3).......................... 5.70% 4.98% 5.47% 5.66% 7.02%(4)

Portfolio Turnover Rate........................... 221.35% 60.29% 91.87% 82.71% 81.84%

Net Assets, End of Period (in millions)........... $299 $397 $937 $1,495 $886
</TABLE>

(1) From September 3, 1991 (commencement of operations) through March 31, 1992.

(2) Total return assumes reinvestment of dividends and capital gain
distributions, if any, and are not annualized.

(3) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

(4) Annualized.

Prospectus Financial Highlights 11

FINANCIAL HIGHLIGHTS
GNMA FUND

1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
PER-SHARE DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period....................$10.18 $10.35 $10.88 $10.52 $10.21 $9.85 $9.56 $9.96 $10.42 $10.42

Income from
Investment Operations

Net Investment Income ............ .74 .72 .66 .79 .86 .88 .90 .89 .89 .91

Net Realized and Unrealized
Gains (Losses) on Investment
Transactions...................... .27 (.18) (.52) .36 .31 .36 .29 (.40) (.40) .02
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations........................ 1.01 .54 .14 1.15 1.17 1.24 1.19 .49 .49 .93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions

From Net Investment Income........(.74) (.71) (.66) (.79) (.86) (.88) (.90) (.89) (.95) (.93)

From Net Realized Gains
on Investment Transactions........ 0 0 (.01) 0 0 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions...............(.74) (.71) (.67) (.79) (.86) (.88) (.90) (.89) (.95) (.93)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period.........$10.45 $10.18 $10.35 $10.88 $10.52 $10.21 $9.85 $9.56 $9.96 $10.42
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN(1)...................10.08% 5.53% 1.30% 11.28% 11.85% 13.16% 12.73% 5.07% 5.23% 9.51%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating
Expenses to Average
Net Assets(2)..................... .58% .58% .54% .56% .62% .72% .75% .75% .73% .74%

Ratio of Net Investment
Income to Average
Net Assets(2).....................6.98% 7.08% 6.12% 7.31% 8.18% 8.85% 9.04% 9.11% 8.94% 8.79%

Portfolio Turnover Rate...........63.54% 119.56% 48.61% 70.57% 97.33% 206.60% 432.93% 496.52% 497.16 % 566.27%

Net Assets, End
of Period (in millions)...........$1,120 $980 $1,129 $1,160 $ 724 $409 $290 $253 $259 $393
</TABLE>

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

(2) The ratios for the year ended March 31, 1996 include expenses paid through
expense offset arrangements.

12 Financial Highlights American Century Investments

INFORMATION REGARDING THE FUNDS

INVESTMENT POLICIES OF THE FUNDS

The Funds have adopted certain investment restrictions that are set forth
in the Statement of Additional Information. Those restrictions, as well as the
investment objectives of the Funds identified on page 2 of this Prospectus and
any other investment policies which are designated as "fundamental" in this
Prospectus or in the Statement of Additional Information, cannot be changed
without shareholder approval. The Funds have implemented additional investment
policies and practices to guide their activities in the pursuit of their
respective investment objectives. These policies and practices, which are
described throughout this Prospectus, are not designated as fundamental policies
and may be changed without shareholder approval.

Each Fund (except Capital Preservation , ARM Fund and GNMA Fund) seeks
income exempt from state taxes by investing exclusively in U.S. government
securities whose interest payments are state tax-exempt. As a result, these
Funds' dividend distributions are expected to be exempt from state income tax.
See page 27 for more information on tax treatment of the Funds' distributions.

For an explanation of the securities ratings referred to in the following
discussion, see "Other Information" in the Statement of Additional Information.

THE MONEY MARKET FUNDS

Each of the Money Market Funds seeks to maintain a $1.00 share price,
although there is no guarantee they will be able to do so. Shares of the Money
Market Funds are neither insured nor guaranteed by the U.S. government.

CAPITAL PRESERVATION

Capital Preservation seeks maximum safety and liquidity. Its secondary
objective is to seek to pay its shareholders the highest rate of return on their
investment in Capital Preservation consistent with safety and liquidity. Capital
Preservation pursues its investment objectives by investing exclusively in
short-term U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government. Capital Preservation's dollar-weighted
average portfolio maturity will not exceed 60 days.

While the risks associated with investing in short-term U.S. Treasury
securities are very low, an investment in Capital Preservation is not risk-free.

CAPITAL PRESERVATION II

Capital Preservation II seeks maximum safety and liquidity. Its secondary
objective is to seek to pay its shareholders the highest rate of return on their
investment in the Fund consistent with safety and liquidity. Capital
Preservation II pursues its investment objectives by investing primarily in
repurchase agreements collateralized by securities that are backed by the full
faith and credit of the U.S. government. Such collateral may include U.S.
Treasury bills, notes, and bonds or mortgage-backed Ginnie Mae certificates.
Ginnie Mae certificates are guaranteed by the Government National Mortgage
Association (GNMA) and backed by the full faith and credit of the U.S.
government. Repurchase agreements held by the Fund normally have maturities of
seven days or less. The Fund may invest directly in U.S. Treasury securities
from time to time.

Capital Preservation II restricts its average portfolio maturity to seven
days or less. Because of this restriction, its yield responds more quickly to
interest rate increases or decreases than do yields on most other money market
funds and enhances portfolio liquidity. See page 17 for a discussion of the
market and credit risks associated with investing in repurchase agreements.

GOVERNMENT AGENCY

Government Agency seeks to provide the highest rate of current return on
its investments, consistent with safety of principal and maintenance of
liquidity, by investing exclusively in short-term obligations of the U.S.
government and its agencies and instrumentalities, the income from which is
exempt from state taxes. Under normal conditions, at least 65% of the Fund's
total assets are invested in securities issued by

Prospectus Information Regarding the Funds 13

agencies and instrumentalities of the U.S. government. Assets not invested in
these securities are invested in U.S. Treasury securities. For temporary
defensive purposes, the Fund may invest up to 100% of its assets in U.S.
Treasury securities. The Fund's weighted average portfolio maturity will not
exceed 60 days.

The U.S. government provides varying levels of financial support to its
agencies and instrumentalities.

THE U.S. TREASURY FUNDS

The U.S. Treasury Funds are quite similar to one another but can be
differentiated by their dollar-weighted average maturities. The longer a Fund's
dollar-weighted average maturity, the more its share price will fluctuate when
interest rates change.

This pattern is due, in part, to the time value of money. A bond's worth is
determined in part by the present value of its future cash flows. Consequently,
changing interest rates have a greater effect on the present value of a
long-term bond than a short-term bond. Because of this interplay between market
interest rates and share price, investors are encouraged to evaluate Fund
performance on the basis of total return.

SHORT-TERM TREASURY

Short-Term Treasury seeks to earn and distribute the highest level of
current income exempt from state income taxes as is consistent with preservation
of capital. Short-Term Treasury pursues this objective by investing exclusively
in securities issued or guaranteed by the U.S. Treasury.

Within this framework, Short-Term Treasury invests primarily in securities
with remaining maturities of 3 years or less, and, under normal conditions,
maintains a weighted average portfolio maturity ranging from 13 months to 3
years. Short-Term Treasury's portfolio may consist of any combination of these
securities consistent with investment strategies employed by the Manager.

Short-Term Treasury may be appropriate for investors who are seeking higher
current yields than those available from money market funds and who can tolerate
some share price volatility.

INTERMEDIATE-TERM TREASURY

Intermediate-Term Treasury seeks to earn and distribute the highest level
of current income consistent with the conservation of assets and the safety
provided by U.S. Treasury bills, notes, and bonds. Intermediate-Term Treasury
pursues this objective by investing primarily in U.S. Treasury notes, which
carry the direct full faith and credit pledge of the U.S. government.
Intermediate-Term Treasury may also invest in U.S. Treasury bills, bonds, and
zero-coupon securities, all of which are also backed by the direct full faith
and credit pledge of the U.S. government. Intermediate-Term Treasury's weighted
average portfolio maturity ranges from 13 months to 10 years, under normal
market conditions.

The Manager seeks a current yield for Intermediate-Term Treasury higher
than that of Short-Term Treasury, with correspondingly greater share price
volatility.

LONG-TERM TREASURY

Long-Term Treasury seeks to provide a consistent and high level of current
income exempt from state taxes. Long-Term Treasury pursues this objective by
investing exclusively in securities issued or guaranteed by the U.S. Treasury
and agencies or instrumentalities of the U.S. government. Long-Term Treasury's
portfolio may consist of any combination of these securities consistent with
investment strategies employed by the Manager. Within this framework, the Fund
invests primarily in securities with maturities of 10 or more years and, under
normal conditions, maintains a weighted average portfolio maturity ranging from
20 to 30 years.

By maintaining an average portfolio maturity of 20 to 30 years, Long-Term
Treasury offers investors the potential to earn higher current yields than those
typically available from bond funds (such as Short-Term Treasury and
Intermediate-Term Treasury) that maintain shorter average maturities. Long-Term
Treasury may also offer greater potential for capital appreciation. However,
maintaining a relatively long average maturity also means that the Fund's share
price generally will be more volatile than those of funds that maintain shorter
average maturities (such as Short-Term Treasury and Intermediate-Term Treasury).

14 Information Regarding the Funds American Century Investments

THE MORTGAGE SECURITIES FUNDS

ARM FUND

The ARM Fund seeks to provide investors with a high level of current
income, consistent with stability of principal. The ARM Fund pursues this
objective by investing primarily in adjustable rate securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. Under
normal conditions, the Manager invests at least 65% of the ARM Fund's total
assets in adjustable rate mortgage securities (ARMs) and other securities
collateralized by or representing interests in mortgages (collectively,
"mortgage-backed securities"). These securities have interest rates that are
reset periodically and that are issued or guaranteed by the U.S. government or
its agencies or instrumentalities.

ARMs are pass-through certificates representing ownership interests in
pools of adjustable rate mortgages and in the cash flows from those mortgages.
The ARMs in which the Fund may invest are issued or guaranteed by GNMA, FNMA or
FHLMC.

The Fund may also invest in collateralized mortgage obligations (CMOs),
including CMO floaters and inverse floaters; stripped mortgage-backed
securities, including interest-only (IO) and principal-only (PO) securities and
IO inverse floaters; and fixed-rate mortgage securities issued or guaranteed by
GNMA, FNMA or FHLMC. All CMOs purchased by the Fund are either issued by a U.S.
government agency or rated AAA by a nationally recognized statistical rating
organization commonly referred to as a rating agency.

Assets not invested in adjustable rate or mortgage-backed securities may be
invested in U.S. Treasury bills, notes, and bonds and in other securities issued
or guaranteed by the U.S. government or its agencies or instrumentalities. For
temporary defensive purposes, the Fund may invest up to 100% of its assets in
these securities.

By investing primarily in mortgage-backed securities that have variable
interest rates, the ARM Fund seeks to maintain a more stable net asset value
than is characteristic of funds that invest in mortgage securities paying a
fixed rate of interest (such as the GNMA Fund). ARM prices generally fluctuate
less than fixed-rate mortgage securities prices because their interest rates are
reset periodically to reflect current interest rates. There is always a lag
between market interest rate changes and ARM rate resets, however, and resets
may be limited by caps on the rates that can be charged to borrowers.

GNMA FUND

The GNMA Fund seeks to provide a high level of current income consistent
with safety of principal and maintenance of liquidity by investing primarily in
mortgage-backed Ginnie Mae certificates.

Ginnie Mae certificates represent interests in pools of mortgage loans and
in the cash flows from those loans. These certificates are guaranteed by GNMA
and backed by the full faith and credit of the U.S. government as to the timely
payment of interest and repayment of principal, which means that the Fund
receives its share of interest and principal payments owed on the underlying
pool of mortgage loans, regardless of whether borrowers make their scheduled
mortgage payments.

Assets not invested in Ginnie Mae certificates, directly or indirectly, are
invested in other U.S. government securities, such as U.S. Treasury bills,
notes, and bonds, or repurchase agreements collateralized by U.S. government
securities. For temporary defensive purposes, the Fund may invest 100% of its
assets in these securities.

A unique feature of mortgage-backed securities, such as Ginnie Mae
certificates, is that their principal is scheduled to be paid back gradually for
the duration of the loan rather than in one lump sum at maturity. Investors
(such as the GNMA Fund) receive scheduled monthly payments of principal and
interest, but they may also receive unscheduled prepayments of principal on the
underlying mortgages. See "Mortgage-Backed Securities" on page 16 for a
discussion of prepayment risk.

RISK FACTORS AND INVESTMENT TECHNIQUES

The obligations in which the Funds may invest differ from one another in
their interest rates, maturities, dates of issuance and interest payment
schedules. The pertinent features of the types of obligations in which the Funds
may invest are described in this section.

Prospectus Information Regarding the Funds 15

U.S. GOVERNMENT SECURITIES

U.S. Treasury bills, notes, zero-coupon bonds, and other bonds are direct
obligations of the U.S. Treasury, which has never failed to pay interest and
repay principal when due. Treasury bills have initial maturities of one year or
less, Treasury notes from two to ten years, and Treasury bonds more than 10
years. Although U.S. Treasury securities carry little principal risk if held to
maturity, the prices of these securities (like all debt securities) change
between issuance and maturity in response to fluctuating market interest rates.

A number of U.S. government agencies and government-sponsored organizations
issue debt securities. These agencies generally are created by Congress to
fulfill a specific need, such as providing credit to home buyers or farmers.
Among these agencies are the Federal Home Loan Banks, the Federal Farm Credit
Banks, the Student Loan Marketing Association and the Resolution Funding
Corporation.

Some agency securities are backed by the full faith and credit of the U.S.
government, and some are guaranteed only by the issuing agency. Agency
securities typically offer somewhat higher yields than U.S. Treasury securities
with similar maturities. However, these securities may involve greater risk of
default than securities backed by the U.S. Treasury.

Interest rates on agency securities may be fixed for the term of the
investment (fixed-rate agency securities) or tied to prevailing interest rates
(floating-rate agency securities). Interest rate resets on floating-rate agency
securities generally occur at intervals of one year or less, based on changes in
a predetermined interest rate index.

Floating-rate agency securities frequently have caps limiting the extent to
which coupon rates can be raised. The price of a floating-rate agency security
may decline if its capped coupon rate is lower than prevailing market interest
rates. Fixed- and floating-rate agency securities may be issued with a call date
(which permits redemption before the maturity date). The exercise of a call may
reduce an obligation's yield to maturity. Capital Preservation and Capital
Preservation II may not invest in floating-rate agency securities.

MORTGAGE-BACKED SECURITIES

The ARM and GNMA Funds may purchase mortgage pass-through securities. These
represent interests in "pools" of mortgages in which payments of both interest
and principal on the securities are generally made monthly. These monthly
mortgage payments are, in effect "passed-through" to the security holder, (minus
fees paid to the security's issuer or guarantor). Although fixed-rate mortgages
typically have stated maturities of 30 or more years, most mortgage holders pay
off their mortgages before they mature which may make these subject to
prepayment risk.

Also, mortgage-backed securities, like other fixed income securities,
generally decrease in value as a result of increases in interest rates, but
benefit less than other fixed-income securities from declining interest rates
because of the risk of prepayment resulting from homeowners' refinancing their
mortgages to take advantage of lower interest rates. On average, securities
backed by 30-year mortgages return principal within 7 to 10 years. As a result,
these securities have historically exhibited behavior comparable to 7- to
10-year Treasury notes, while offering higher yields.

The primary issuers of mortgage securities are FNMA, FHLMC and GNMA.
Payments of principal and interest on GNMA securities are guaranteed by GNMA and
backed by the full faith and credit of the U.S. government. FNMA and FHLMC have
a close relationship with the U.S. government so even though their securities
are not backed by the full faith and credit of the U.S. government, management
considers them to be high-quality securities with minimal credit risks.

ADJUSTABLE-RATE MORTGAGE SECURITIES

Adjustable-rate mortgage securities (ARMs) are pass-through securities
collateralized by mortgages with adjustable, rather than fixed, interest rates.
The interest rate payments and amortization of principal on the underlying
adjustable rate mortgages are tied to changes in predetermined interest rate
indexes. ARM rates are readjusted at intervals of one year or less, subject to
maximums (caps) and minimums (floors) on the rates that can be charged to
mortgage holders during a given period and during the life of a

16 Information Regarding the Funds American Century Investments

mortgage. These periodic rate adjustments allow the ARM Fund to participate in
market interest rate increases (to produce higher yields with less share price
volatility) but only to the extent that the current rate on the underlying
mortgages remain at or below their specified caps.

ARM interest rate resets should cause the ARM Fund's share price to
fluctuate less dramatically than it would if the Fund were substantially
invested in securities backed by long-term, fixed-rate mortgages. This means
that share price declines should be less than for funds investing in fixed-rate
mortgages when interest rates rise. This characteristic of ARMs should also
cause the potential for share price appreciation when interest rates decline to
be less than for funds investing in fixed-rate mortgages.

If ARMs are purchased at a premium, mortgage foreclosures and unscheduled
principal prepayments may result in a decline in share price. On the other hand,
if ARMs are purchased at a discount, both scheduled and unscheduled payments of
principal may accelerate the recognition of income and thereby increase the
Fund's yield and total return.

The mortgages that collateralize ARMs issued by GNMA are fully guaranteed
by the Federal Housing Administration or the Department of Veterans Affairs,
which are divisions of the U.S. government. The mortgages that collateralize
ARMs issued by FNMA or FHLMC typically are conventional residential mortgages
that conform to standards prescribed by FNMA or FHLMC and are guaranteed by
those instrumentalities.

COLLATERALIZED MORTGAGE OBLIGATIONS

Collateralized mortgage obligations (CMOs) are mortgage-backed securities
issued by government agencies; single-purpose, stand-alone financial
subsidiaries; trusts established by financial institutions; or similar
institutions. The ARM Fund may buy CMOs, provided that they:

o Are collateralized by pools of mortgages in which payment of principal and
interest of each mortgage is guaranteed by an agency or instrumentality of
the U.S. government;

o Are collateralized by pools of mortgages in which payment of principal and
interest are guaranteed by the issuer, and the guarantee is collateralized
by U.S. government securities; or

o Are securities in which the proceeds of the issue are invested in mortgage
securities and payments of principal and interest is supported by the
credit of an agency or instrumentality of the U.S. government.

The GNMA Fund may buy CMOs only if they are Ginnie-Mae-backed.

STRIPPED MORTGAGE-BACKED SECURITIES

Stripped mortgage-backed securities (which are permitted investments for
the ARM Fund only) are usually structured with two classes. One class will
receive all of the interest (the interest-only class, or "IO"), whereas the
other class will receive all of the principal (the principal-only class, or
"PO"). Stripped mortgage securities are likely to experience greater price
volatility than other types of mortgage securities in which the ARM Fund
invests. The yield to maturity on the IO class is extremely sensitive, not only
to changes in prevailing interest rates but also to the rate of principal
payments (including prepayments) on the underlying mortgage assets. If
prepayments accelerate, the ARM Fund may not fully recover its initial
investment in these securities. The ARM Fund's investments in stripped mortgage
securities together with investments in illiquid securities may not exceed 10%
of net assets.

REPURCHASE AGREEMENTS

Each Fund, with the exception of Capital Preservation, may invest in
repurchase agreements when such transactions present an attractive short-term
return on cash that is not otherwise committed to the purchase of securities
pursuant to the investment policies of that Fund.

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

Since the security purchase constitutes security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security

PROSPECTUS INFORMATION REGARDING THE FUNDS 17

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

Each of the Funds, with the exception of Capital Preservation, may invest
in repurchase agreements with respect to any security in which that Fund is
authorized to invest, even if the remaining maturity of the underlying security
would make that security ineligible for purchase by such Fund.

OTHER INVESTMENT PRACTICES, THEIR CHARACTERISTICS
AND RISKS

For additional information regarding the investment practices of any of the
Funds, see the Statement of Additional Information.

PORTFOLIO TURNOVER

The portfolio turnover rates of the U.S. Treasury Funds and the Mortgage
Securities Funds are shown in the Financial Highlights tables on pages 5-12 of
this Prospectus.

Investment decisions to purchase and sell securities are based on the
anticipated contribution of the security in question to a particular Fund's
objectives. The manager believes that the rate of portfolio turnover is
irrelevant when it determines a change is in order to achieve those objectives
and, accordingly, the annual portfolio turnover rate cannot be accurately
anticipated.

The portfolio turnover of each Fund may be higher than other mutual funds
with similar investment objectives. Higher turnover would generate
correspondingly greater brokerage commissions, which is a cost that the Funds
pay directly. Portfolio turnover may also affect the character of capital gains,
if any, realized and distributed by a Fund since short-term capital gains are
taxable as ordinary income.

WHEN-ISSUED AND FORWARD
COMMITMENT AGREEMENTS

Each of the Funds may purchase new issues of securities on a when-issued or
forward commitment basis when, in the opinion of the Manager, such purchases
will further the investment objectives of the Fund. The price of when-issued
securities is established at the time the commitment to purchase is made.
Delivery of and payment for these securities typically occurs 15 to 45 days
after the commitment to purchase. Market rates of interest on debt securities at
the time of delivery may be higher or lower than those contracted for on the
security. Accordingly, the value of each security may decline prior to delivery,
which could result in a loss to the Fund.

CASH MANAGEMENT

For cash management purposes, each of the Funds (except the Money Market
Funds) may invest up to an aggregate total of 5% of its total assets in any
money market fund advised by the Manager, provided that the investment is
consistent with the Fund's investment policies and restrictions.

OTHER TECHNIQUES

The Manager may buy other types of securities or employ other portfolio
management techniques on behalf of the Funds. When SEC guidelines require it to
do so, a Fund will set aside cash or appropriate liquid assets in a segregated
account to cover the Fund's obligations.

PERFORMANCE ADVERTISING

From time to time, the Funds may advertise performance data. Fund
performance may be shown by presenting one or more performance measurements,
including cumulative total return or average annual total return, yield,
effective yield and tax-equivalent yield (for tax-exempt funds).

Cumulative total return data is computed by considering all elements of
return, including reinvestment of dividends and capital gains distributions,
over a stated period of time. Average annual total return is determined by
computing the annual compound return over a stated period of time that would

18 Information Regarding the Funds American Century Investments

have produced the fund's cumulative total return over the same period if the
fund's performance had remained constant throughout.

A quotation of yield reflects a fund's income over a stated period
expressed as a percentage of the fund's share price. In the case of the Money
Market Funds, yield is calculated by measuring the income generated by an
investment in the Fund over a seven-day period (net of Fund expenses). This
income is then annualized, that is, the amount of income generated by the
investment over the seven-day period is assumed to be generated over each
similar period each week throughout a full year and is shown as a percentage of
the investment. The effective yield is calculated in a similar manner but, when
annualized, the income earned by the investment is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect on the assumed reinvestment.

With respect to the U.S. Treasury Funds and the Mortgage Securities Funds,
yield is calculated by adding over a 30-day (or one-month) period all interest
and dividend income (net of fund expenses) calculated on each day's market
values, dividing this sum by the average number of Fund shares outstanding
during the period, and expressing the result as a percentage of the Fund's share
price on the last day of the 30-day (or one month) period. The percentage is
then annualized. Capital gains and losses are not included in the calculation.

Yields are calculated according to accounting methods that are standardized
in accordance with SEC rules. 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.

A tax-equivalent yield demonstrates the taxable yield necessary to produce
after-tax yield equivalent to that of a mutual fund which invests in exempt
obligations. Each Fund (with the exception of Capital Preservation, Capital
Preservation , the ARM Fund and the GNMA Fund) may quote tax-equivalent yields,
which show the taxable yields an investor would have to earn before taxes to
equal the Fund's tax-free yields. As a prospective investor in these Funds, you
should determine whether your tax-equivalent yield is likely to be higher with a
taxable or with a tax-exempt fund. To determine this, you may use the formulas
depicted below.

You can calculate your tax-equivalent yield for a Fund (taking into account
only federal income taxes and not any applicable state taxes) using the
following equation:

Fund's State Tax-Free Yield
--------------------------- = Your Tax-
100% - State Tax Rate Equivalent Yield

The Funds may also include in advertisements data comparing performance
with the performance of non-related investment media, published editorial
comments and performance rankings compiled by independent organizations (such as
Lipper Analytical Services or Donoghue's Money Fund Report) and publications
that monitor the performance of mutual funds. Performance information may be
quoted numerically or may be presented in a table, graph or other illustration.
In addition, fund performance may be compared to well-known indices of market
performance including the Donoghue's Money Fund Average and Bank Rate Monitor
National Index of 21/2-year CD rates. Fund performance may also be compared, on
a relative basis, to the other funds in our fund family. This relative
comparison, which may be based upon historical or expected fund performance,
volatility or other fund characteristics, may be presented numerically,
graphically or in text. Fund performance may also be combined or blended with
other funds in our fund family, and that combined or blended performance may be
compared to the same indices to which individual funds may be compared.

All performance information advertised by the Funds is historical in nature
and is not intended to represent or guarantee future results. The value of Fund
shares when redeemed may be more or less than their original cost.

Prospectus Information Regarding the Funds 19

HOW TO INVEST WITH
AMERICAN CENTURY INVESTMENTS

AMERICAN CENTURY INVESTMENTS

The Funds offered by this Prospectus are a part of the American Century
Investments family of mutual funds. Our family provides a full range of
investment opportunities, from the aggressive equity growth funds in our
Twentieth Century Group, to the fixed income funds in our Benham Group, to the
moderate risk and specialty funds in our American Century Group. Please call
1-800-345-2021 for a brochure or prospectuses for the other funds in the
American Century Investments family.

INVESTING IN AMERICAN CENTURY

The following section explains how to invest in American Century funds,
including purchases, redemptions, exchanges and special services. You will find
more detail about doing business with us by referring to the Investor Services
Guide that you will receive when you open an account.

If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan or through a bank, broker-dealer or other
financial intermediary, the following sections, as well as the information
contained in our Investor Services Guide, may not apply to you. Please read
"Employer-Sponsored Retirement Plans and Institutional Accounts," page 25.

HOW TO OPEN AN ACCOUNT

To open an account, you must complete and sign an application, furnishing
your taxpayer identification number. (You must also certify whether you are
subject to withholding for failing to report income to the IRS.) Investments
received without a certified taxpayer identification number will be returned.

The minimum investment is $2,500 ($1,000 for IRA accounts).

The minimum investment requirements may be different for some types of
retirement accounts. Call one of our Investor Services Representatives for
information on our retirement plans, which are available for individual
investors or for those investing through their employers.

Please note: If you register your account as belonging to multiple owners
(e.g., as joint tenants) you must provide us with specific authorization on your
application in order for us to accept written or telephone instructions from a
single owner. Otherwise, all owners will have to agree to any transactions that
involve the account (whether the transaction request is in writing or over the
telephone).

You may invest in the following ways:

By Mail

Send a completed application and check or money order payable in U.S.
dollars to American Century Investments.

By Wire

You may make your initial investment by wiring funds. To do so, call us or
mail a completed application and provide your bank with the following
information:

o RECEIVING BANK AND ROUTING NUMBER:
Commerce Bank, N.A. (101000019)

o BENEFICIARY (BNF):
American Century Services Corporation
4500 Main St., Kansas City, Missouri 64111

o BENEFICIARY ACCOUNT NUMBER (BNF ACCT):
2804918

o REFERENCE FOR BENEFICIARY (RFB):
American Century account number into which you are investing. If more than
one, leave blank and see Bank to Bank Information below.

o ORIGINATOR TO BENEFICIARY (OBI):
Name and address of owner of account into which you are investing.

o BANK TO BANK INFORMATION
(BBI OR FREE FORM TEXT):

o Taxpayer identification or Social Security number

o If more than one account, account numbers and amount to be invested in
each account.

o Current tax year, previous tax year or rollover designation if an IRA.
Specify whether IRA, SEP-IRA or SARSEP-IRA.

By Exchange

Call 1-800-345-2021 from 7 a.m. to 7 p.m. Central time to get information
on opening an account by exchanging from another American Century account. See
page 21 for more information on exchanges.

20 How to Invest with American Century Investments American Century Investments

In Person

If you prefer to work with a representative in person, please visit one of
our Investors Centers, located at:

4500 Main Street
Kansas City, Missouri 64111

1665 Charleston Road
Mountain View, California 94043

2000 S. Colorado Blvd.
Denver, Colorado 80222

SUBSEQUENT INVESTMENTS

Subsequent investments may be made by an automatic bank, payroll or
government direct deposit (see "Automatic Investment Plan," this page) or by any
of the methods below. The minimum investment requirement for subsequent
investments: $250 for checks submitted without the remittance portion of a
previous statement or confirmation, $50 for all other types of subsequent
investments.

By Mail

When making subsequent investments, enclose your check with the remittance
portion of the confirmation of a previous investment. If the investment slip is
not available, indicate your name, address and account number on your check or a
separate piece of paper. (Please be aware that the investment minimum for
subsequent investments is higher without an investment slip.)

By Telephone

Once your account is open, you may make investments by telephone if you
have authorized us (by choosing "Full Services" on your application) to draw on
your bank account. You may call an Investor Services Representative or use our
Automated Information Line.

By Online Access

Once your account is open, you may make investments online if you have
authorized us (by choosing "Full Services" on your application) to draw on your
bank account.

By Wire

You may make subsequent investments by wire. Follow the wire transfer
instructions on page 20 and indicate your account number.

In Person

You may make subsequent investments in person at one of our Investors
Centers. The locations of our three Investors Centers are listed on this page.

AUTOMATIC INVESTMENT PLAN

You may elect on your application to make investments automatically by
authorizing us to draw on your bank account regularly. Such investments must be
at least the equivalent of $50 per month. You also may choose an automatic
payroll or government direct deposit. If you are establishing a new account,
check the appropriate box under "Automatic Investments" on your application to
receive more information. If you would like to add a direct deposit to an
existing account, please call one of our Investor Services Representatives.

HOW TO EXCHANGE FROM ONE
ACCOUNT TO ANOTHER

As long as you meet any minimum investment requirements, you may exchange
your Fund shares to our other funds up to six times per year per account. An
exchange request will be processed the same day it is received if it is received
before the fund's net asset values are calculated, which is one hour prior to
the close of the New York Stock Exchange for the funds in the American Century
Target Maturities Trust, and at the close of the Exchange for all of our other
funds. See "When Share Price is Determined," page 26.

For any single exchange, the shares of each fund being acquired must have a
value of at least $100. However, we will allow investors to set up an Automatic
Exchange Plan between any two funds in the amount of at least $50 per month. See
our Investor Services Guide for further information about exchanges.

By Mail

You may direct us in writing to exchange your shares from one American
Century account to another. For additional information, please see our Investor
Services Guide.

By Telephone

You can make exchanges over the telephone (either with an Investor Services
Representative or using our Automated Information Line--see page 23) if you

Prospectus How to Invest with American Century Investments 21

have authorized us to accept telephone instructions. You can authorize this by
selecting "Full Services" on your application or by calling us at 1-800-345-2021
to receive the appropriate form.

By Online Access

You can make exchanges online if you have authorized us to accept
instructions over the Internet. You can authorize this by selecting "Full
Services" on your application or by calling us at 1-800-345-2021 to get the
appropriate form.

HOW TO REDEEM SHARES

We will redeem or "buy back" your shares at any time. Redemptions will be
made at the next net asset value determined after a complete redemption request
is received.

Please note that a request to redeem shares in an IRA or 403(b) plan must
be accompanied by an executed IRS Form W4-P and a reason for withdrawal as
specified by the IRS.

By Mail

Your written instructions to redeem shares may be made either by a
redemption form, which we will send to you upon request, or by a letter to us.
Certain redemptions may require a signature guarantee. Please see "Signature
Guarantee," page 23.

By Telephone

If you have authorized us to accept telephone instructions, you may redeem
your shares by calling an Investor Services Representative.

By Check-A-Month

If you have at least a $10,000 balance in your U.S. Treasury Fund or
Mortgage Securities Fund account, or if you have a Money Market Fund account,
you may redeem shares by Check-A-Month. A Check-A-Month plan automatically
redeems enough shares each month to provide you with a check in an amount you
choose (minimum $50). To set up a Check-A-Month plan, please call and request
our Check-A-Month brochure.

Other Automatic Redemptions

If you have at least a $10,000 balance in your U.S. Treasury Fund or
Mortgage Securities Fund account, or if you have a Money Market Fund account,
you may elect to make redemptions automatically by authorizing us to send funds
directly to you or to your account at a bank or other financial institution. To
set up automatic redemptions, call one of our Investor Services Representatives.

REDEMPTION PROCEEDS

Please note that shortly after a purchase of shares is made by check or
electronic draft (also known as an ACH draft) from your bank, we may wait up to
15 days or longer to send redemption proceeds (to allow your purchase funds to
clear). No interest is paid on the redemption proceeds after the redemption is
processed but before your redemption proceeds are sent.

Redemption proceeds may be sent to you in one of the following ways:

By Check

Ordinarily, all redemption checks will be made payable to the registered
owner of the shares and will be mailed only to the address of record. For more
information, please refer to our Investor Services Guide.

By Wire and ACH

You may authorize us to transmit redemption proceeds by wire or ACH. These
services will be effective 15 days after we receive the authorization.

Your bank will usually receive wired funds within 48 hours of transmission.
Funds transferred by ACH may be received up to seven days after transmission.
Wired funds are subject to a $10 fee to cover bank wire charges, which is
deducted from redemption proceeds. Once the funds are transmitted, the time of
receipt and the funds' availability are not under our control.

REDEMPTION OF SHARES IN
LOW-BALANCE ACCOUNTS

Whenever the shares held in an account have a value of less than the
required minimum, a letter will be sent advising you of the necessity to bring
the value of the shares held in the account up to the minimum. If action is not
taken within 90 days of the letter's date, the shares held in the account will
be redeemed and proceeds from the redemption will be sent by check to your
address of record. We reserve the right to increase the investment minimums.

22 How to Invest with American Century Investments American Century Investments

SIGNATURE GUARANTEE

To protect your accounts from fraud, some transactions will require a
signature guarantee. Which transactions will require a signature guarantee will
depend on which service options you elect when you open your account. For
example, if you choose "In Writing Only," a signature guarantee will be required
when:

o redeeming more than $25,000; or

o establishing or increasing a Check-A-Month or automatic transfer on an
existing account.

You may obtain a signature guarantee from a bank or trust company, credit
union, broker-dealer, securities exchange or association, clearing agency or
savings association, as defined by federal law.

For a more in-depth explanation of our signature guarantee policy, or if
you live outside the United States and would like to know how to obtain a
signature guarantee, please consult our Investor Services Guide.

We reserve the right to require a signature guarantee on any transaction,
or to change this policy at any time.

SPECIAL SHAREHOLDER SERVICES

We offer several service options to make your account easier to manage.
These are listed on the account application. Please make note of these options
and elect the ones that are appropriate for you. Be aware that the "Full
Services" option offers you the most flexibility. You will find more information
about each of these service options in our Investor Services Guide.

Our special investor services include:

Automated Information Line

We offer an Automated Information Line, 24 hours a day, seven days a week,
at 1-800-345-8765. By calling the Automated Information Line, you may listen to
fund prices, yields and total return figures. You may also use the Automated
Information Line to make investments into your accounts (if we have your bank
information on file) and obtain your share balance, value and most recent
transactions. If you have authorized us to accept telephone instructions, you
also may exchange shares from one fund to another via the Automated Information
Line. Redemption instructions cannot be given via the Automated Information
Line.

Online Account Access

You may contact us 24 hours a day, seven days a week at
www.americancentury.com to access your funds' daily share prices, receive
updates on major market indexes and view historical performance of your funds.
If you select "Full Services" on your application, you can use your personal
access code and Social Security number to view your account balances and account
activity, make subsequent investments from your bank account or exchange shares
from one fund to another.

CheckWriting

We offer CheckWriting as a service option for your account in any of the
Money Market or Mortgage Securities Funds. CheckWriting allows you to redeem
shares in your account by writing a draft ("check") against your account
balance. (Shares held in certificate form may not be redeemed by check.) There
is no limit on the number of checks you can write, but each one must be for at
least $100.

When you write a check, you will continue to receive dividends on all
shares until your check is presented for payment to our clearing bank. If you
redeem all shares in your account by check, any accrued distributions on the
redeemed shares will be paid to you in cash on the next monthly distribution
date.

If you want to add CheckWriting to an existing account that offers
CheckWriting, contact us by phone or mail for an appropriate form. For a new
account, you may elect CheckWriting on your purchase application by choosing the
"Full Services" option. CheckWriting is not available for any account held in an
IRA or 403(b) plan.

CheckWriting redemptions may only be made on checks provided by us.
Currently, there is no charge for checks or for the CheckWriting service.

We will return checks drawn on insufficient funds or on funds from
investments made by means other than by wire within the previous 15 days.
Neither the company nor our clearing bank will be liable for any loss or
expenses associated with returned checks. Your account may be assessed a $15
service charge for checks drawn on insufficient funds.

Prospectus How to Invest with American Century Investments 23

A stop payment may be ordered on a check written against your account. We
will use reasonable efforts to stop a payment, but we cannot guarantee that we
will be able to do so. If we are successful in fulfilling a stop-payment order,
your account may be assessed a $15 fee.

Open Order Service

Through our open order service, you may designate a price at which to buy
shares of a variable-priced fund by exchange from one of our money market funds,
or a price at which to sell shares of a variable-priced fund by exchange to one
of our money market funds. The designated purchase price must be equal to or
lower, or the designated sale price equal to or higher, than the variable-priced
fund's net asset value at the time the order is placed. If the designated price
is met within 90 calendar days, we will execute your exchange order
automatically at that price (or better). Open orders not executed within 90 days
will be canceled.

If the fund you have selected deducts a distribution from its share price,
your order price will be adjusted accordingly so the distribution does not
inadvertently trigger an open order transaction on your behalf. If you close or
re-register the account from which the shares are to be redeemed, your open
order will be canceled.

Because of their time-sensitive nature, open order transactions are
accepted only by telephone or in person. These transactions are subject to
exchange limitations described in each fund's prospectus, except that orders and
cancellations received before 2 p.m. Central time are effective the same day,
and orders or cancellations received after 2 p.m. Central time are effective the
next business day.

Tax-Qualified Retirement Plans

Each Fund is available for your tax-deferred retirement plan. Call or write
us and request the appropriate forms for:

o Individual Retirement Accounts ("IRA"s);

o 403(b) plans for employees of public school systems and non-profit
organizations; or

o Profit sharing plans and pension plans for corporations and other
employers.

If your IRA and 403(b) accounts do not total $10,000, each account is
subject to an annual $10 fee, up to a total of $30 per year.

You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a Request to Transfer form.

IMPORTANT POLICIES REGARDING YOUR INVESTMENTS

Every account is subject to policies that could affect your investment.
Please refer to the Investor Services Guide for further information about the
policies discussed below, as well as further detail about the services we offer.

(1) We reserve the right for any reason to suspend the offering of shares for a
period of time, or to reject any specific purchase order (including
purchases by exchange). Additionally, purchases may be refused if, in the
opinion of the Manager, they are of a size that would disrupt the
management of the Fund.

(2) We reserve the right to make changes to any stated investment requirements,
including those that relate to purchases, transfers and redemptions. In
addition, we may also alter, add to or terminate any investor services and
privileges. Any changes may affect all shareholders or only certain series
or classes of shareholders.

(3) Shares being acquired must be qualified for sale in your state of
residence.

(4) Transactions requesting a specific price and date, other than open orders,
will be refused. Once you have mailed or otherwise transmitted your
transaction instructions to us, they may not be modified or canceled.

(5) If a transaction request is made by a corporation, partnership, trust,
fiduciary, agent or unincorporated association, we will require evidence
satisfactory to us of the authority of the individual making the request.

(6) We have established procedures designed to assure the authenticity of
instructions received by telephone. These procedures include requesting
personal identification from callers, recording telephone calls, and
providing written confirmations of telephone transactions. These procedures
are designed to protect shareholders from unauthorized or fraudulent
instructions. If we do not employ reasonable procedures to confirm the
genuineness of instructions, then we may be liable for losses due to
unauthorized or

24 How to Invest with American Century Investments American Century Investments

fraudulent instructions. The company, its transfer agent and investment
advisor will not be responsible for any loss due to instructions they
reasonably believe are genuine.

(7) All signatures should be exactly as the name appears in the registration.
If the owner's name appears in the registration as Mary Elizabeth Jones,
she should sign that way and not as Mary E. Jones.

(8) Unusual stock market conditions have in the past resulted in an increase in
the number of shareholder telephone calls. If you experience difficulty in
reaching us during such periods, you may send your transaction instructions
by mail, express mail or courier service, or you may visit one of our
Investors Centers. You may also use our Automated Information Line if you
have requested and received an access code and are not attempting to redeem
shares.

(9) If you fail to provide us with the correct certified taxpayer
identification number, we may reduce any redemption proceeds by $50 to
cover the penalty the IRS will impose on us for failure to report your
correct taxpayer identification number on information reports.

(10) We will perform special inquiries on shareholder accounts. A research fee
of $15 per hour may be applied.

REPORTS TO SHAREHOLDERS

At the end of each calendar quarter, we will send you a consolidated
statement that summarizes all of your American Century holdings, as well as an
individual statement for each fund you own that reflects all year-to-date
activity in your account. You may request a statement of your account activity
at any time.

With the exception of most automatic transactions and transactions by
CheckWriting, each time you invest, redeem, transfer or exchange shares, we will
send you a confirmation of the transactions. Transactions initiated by
CheckWriting will be confirmed on a monthly basis. See the Investor Services
Guide for more detail.

Carefully review all the information relating to transactions on your
statements and confirmations to ensure that your instructions were acted on
properly. Please notify us immediately in writing if there is an error. If you
fail to provide notification of an error with reasonable promptness, i.e.,
within 30 days of non-automatic transactions or within 30 days of the date of
your consolidated quarterly statement, in the case of automatic transactions, we
will deem you to have ratified the transaction.

No later than January 31st of each year, we will send you reports that you
may use in completing your U.S. income tax return. See the Investor Services
Guide for more information.

Each year, we will send you an annual and a semiannual report relating to
your fund, each of which is incorporated herein by reference. The annual report
includes audited financial statements and a list of portfolio securities as of
the fiscal year end. The semiannual report includes unaudited financial
statements for the first six months of the fiscal year, as well as a list of
portfolio securities at the end of the period. You also will receive an updated
prospectus at least once each year. Please read these materials carefully, as
they will help you understand your fund.

EMPLOYER-SPONSORED RETIREMENT PLANS AND
INSTITUTIONAL ACCOUNTS

Information contained in our Investor Services Guide pertains to
shareholders who invest directly with American Century rather than through an
employer-sponsored retirement plan or through a financial intermediary.

If you own or are considering purchasing Fund shares through an
employer-sponsored retirement plan, your ability to purchase shares of the
Funds, exchange them for shares of other American Century funds, and redeem them
will depend on the terms of your plan.

If you own or are considering purchasing Fund shares through a bank,
broker-dealer, insurance company or other financial intermediary, your ability
to purchase, exchange and redeem shares will depend on your agreement with, and
the policies of, such financial intermediary.

You may reach one of our Institutional Service Representatives by calling
1-800-345-3533 to request information about our funds and services, to obtain a
current prospectus or to get answers to any questions about our Funds that you
are unable to obtain through your plan administrator or financial intermediary.

Prospectus How to Invest with American Century Investments 25

ADDITIONAL INFORMATION YOU SHOULD KNOW

SHARE PRICE

WHEN SHARE PRICE IS DETERMINED

The price of your shares is also referred to as their net asset value. Net
asset value is determined by calculating the total value of a Fund's assets,
deducting total liabilities and dividing the result by the number of shares
outstanding. For all American Century funds except the American Century Target
Maturities Trust, net asset value is determined at the close of regular trading
on each day that the New York Stock Exchange is open, usually 3 p.m. Central
time. Net asset value for the Target Maturities is determined one hour prior to
the close of the Exchange.

Investments and requests to redeem or exchange shares will receive the
share price next determined after receipt by us of the investment or redemption
or exchange request. For example, investments and requests to redeem or exchange
shares of a fund received by us or one of our agents before the net asset value
of the fund is determined, are effective on, and will receive the price
determined, that day. Investment, redemption and exchange requests received
thereafter are effective on, and receive the price determined on, the next day
the Exchange is open.

Investments are considered received only when your check or wired funds are
received by us. Wired funds are considered received on the day they are
deposited in our bank account if they are deposited before the net asset value
is determined.

Investments by telephone pursuant to your prior authorization to us to draw
on your bank account are considered received at the time of your telephone call.

Investment and transaction instructions received by us on any business day
by mail before the net asset value is determined will receive that day's price.
Investments and instructions received after that time will receive the price
determined on the next business day.

If you invest in Fund shares through an employer-sponsored retirement plan
or other financial intermediary, it is the responsibility of your plan
recordkeeper or financial intermediary to transmit your purchase, exchange and
redemption requests to the Funds' transfer agent prior to the applicable cut-off
time for receiving orders and to make payment for any purchase transactions in
accordance with the Funds' procedures or any contractual arrangement with the
Funds or the Funds' distributor in order for you to receive that day's price.

HOW SHARE PRICE IS DETERMINED

The valuation of assets for determining net asset value may be summarized
as follows:

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

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

Pursuant to a determination by the Money Market Funds' Board of
Directors/Trustees and Rule 2a-7 under the Investment Company Act of 1940 (the
"the 1940 Act"), portfolio securities of the Funds are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amor-

26 Additional Information You Should Know American Century Investments

tization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.

WHERE TO FIND INFORMATION ABOUT SHARE PRICE

The net asset values of the Funds are published in leading newspapers
daily. The yields of the Money Market Funds are published weekly in leading
financial publications and daily in many local newspapers. The net asset values,
as well as yield information on all of the Funds and the other funds in the
American Century family of funds, may also be obtained by calling us or by
accessing our Web site at www.americancentury.com.

DISTRIBUTIONS

At the close of each day including Saturdays, Sundays and holidays, net
income of the U.S. Treasury Funds and the Mortgage Securities Funds is
determined and declared as a distribution. The distribution will be paid monthly
on the last Friday of each month, except for year-end distributions which will
be made on the last business day of the year. For the Money Market Funds,
dividends are declared and credited (i.e., available for redemption) daily and
distributed monthly on the last Friday of each month, except for year-end
distributions which will be made on the last business day of the year.

You will begin to participate in the distributions the day after your
purchase is effective. See "When Share Price is Determined," page 26. If you
redeem shares, you will receive the distribution declared for the day of the
redemption. If all shares are redeemed (other than by CheckWriting), the
distribution on the redeemed shares will be included with your redemption
proceeds.

Distributions from net realized capital gains, if any, generally are
declared and paid once a year, but the Funds may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code and its Regulations, in all events in a manner consistent with the
provisions of the 1940 Act. The Money Market Funds do not expect to realize any
long-term capital gains and, accordingly, do not expect to make any capital
gains distributions.

Participants in employer-sponsored retirement or savings plans must
reinvest all distributions. For shareholders investing through taxable accounts,
distributions will be reinvested unless you elect to receive them in cash.
Distributions of less than $10 generally will be reinvested. Distributions made
shortly after a purchase by check or ACH may be held up to 15 days. You may
elect to have distributions on shares held in Individual Retirement Accounts and
403(b) plans paid in cash only if you are at least 591/2 years old or
permanently and totally disabled. Distribution checks normally are mailed within
seven days after the record date. Please consult our Investor Services Guide for
further information regarding your distribution options.

A distribution of shares of a U.S. Treasury or Mortgage Securities Fund
does not increase the value of your shares of your total return. At any given
time the value of your shares includes the undistributed net gains, if any,
realized by the fund on the sale of portfolio securities, and undistributed
dividends and interest received, less fund expenses.

Because such gains and dividends are included in the value of your shares,
when they are distributed the value of your shares is reduced by the amount of
the distribution. If you buy your shares through a taxable account just before
the distribution, you will pay the full price for your shares, and then receive
a portion of the purchase price back as a taxable distribution.

TAXES

Each Fund has elected to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders, it pays no income taxes.

TAX-DEFERRED ACCOUNTS

If Fund shares are purchased through tax-deferred accounts, such as a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions paid by the Funds will generally not be subject to current
taxation, but will accumulate in your account under the plan on a tax-deferred
basis.

Employer-sponsored retirement and savings plans are governed by complex tax
rules. If you elect to participate in your employer's plan, consult your plan
administrator, your plan's summary plan description,

Prospectus Additional Information You Should Know 27

or a professional tax advisor regarding the tax consequences of participation in
the plan, contributions to, and withdrawals or distributions from the plan.

TAXABLE ACCOUNTS

If Fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income, except as described below. The dividends from net income of the
Funds do not qualify for the 70% dividends-received deduction for corporations
since they are derived from interest income. Dividends representing income
derived from tax-exempt bonds generally retain the bonds' tax-exempt character
in a shareholder's hands. Distributions from net long-term capital gains are
taxable as long-term capital gains regardless of the length of time you have
held the shares on which such distributions are paid. However, you should note
that any loss realized upon the sale or redemption of shares held for six months
or less will be treated as a long-term capital loss to the extent of any
distribution of long-term capital gain to you with respect to such shares.

Distributions are taxable to you regardless of whether they are taken in
cash or reinvested, even if the value of your shares is below your cost. If you
purchase shares shortly before a capital gain distribution, you must pay income
taxes on the distribution, even though the value of your investment (plus cash
received, if any) will not have increased. In addition, the share price at the
time you purchase shares may include unrealized gains in the securities held in
the investment portfolio of the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a distribution of capital gains and
will be taxable to you as short-term or long-term capital gains.

In January of the year following the distribution, if you own shares in a
taxable account, you will receive a Form 1099-DIV notifying you of the status of
your distributions for federal income tax purposes.

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

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

Redemption of shares of a Fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes and
shareholders will generally recognize a gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. Assuming
that shareholders hold such shares as a capital asset, the gain or loss will be
a capital gain or loss and will generally be long term if shareholders have held
such shares for a period of more than one year. If a loss is realized on the
redemption of Fund shares, the reinvestment in additional Fund shares within 30
days before or after the redemption may be subject to the "wash sale" rules of
the Internal Revenue Code, resulting in a postponement of the recognition of
such loss for federal income tax purposes.

MANAGEMENT

INVESTMENT MANAGEMENT

American Century Capital Preservation Fund, Inc. and American Century
Capital Preservation Fund II, Inc. (the "Companies") are the assumed names of
Capital Preservation Fund, Inc. and Capital Preservation Fund II, Inc.,
respectively, and are both California corporations. American Century-Benham

28 Additional Information You Should Know American Century Investments

Capital Preservation Fund is the sole series of American Century Capital
Preservation Fund, Inc. American Century-Benham Capital Preservation Fund II is
the sole series of American Century Capital Preservation Fund II, Inc. The
remaining Funds are series of the American Century Government Income Trust, a
Massachusetts business trust (the "Trust"). Under the laws of the Commonwealth
of Massachusetts, the Board of Trustees is responsible for managing the business
and affairs of the Trust. Under the laws of the State of California, the Board
of Directors is responsible for managing the business and affairs of the
Companies. The Board of Trustees of the Trust and the Boards of Directors of the
Companies are identical in composition.

Acting pursuant to an investment advisory agreement entered into with the
Trust, Benham Management Corporation (the "Manager") serves as the investment
advisor of the Funds. Its principal place of business is 1665 Charleston Road,
Mountain View, California 94043. The Manager has been providing investments
advisory services to investment companies and other clients since 1971.

In June 1995, American Century Companies, Inc. ("ACC") acquired Benham
Management International, Inc., the then-parent company of the Manager. ACC is
the parent company of American Century Investment Management ("ACIM"), which
provides investment management services to many of the funds in the American
Century family of funds. In the acquisition, the Manager became a wholly owned
subsidiary of ACC. Certain employees of the Manager will be providing investment
management services to the funds managed by ACIM, while certain ACIM employees
provide investment management services to funds managed by the Manager.

The Manager supervises and manages the investment portfolio of each Fund
and directs the purchase and sale of their investment securities. It utilizes a
team of portfolio managers, assistant portfolio managers and analysts acting
together to manage the assets of the Funds. The team meets regularly to review
portfolio holdings and to discuss purchase and sale activity. The team adjusts
holdings in the Funds' portfolios and the Funds' asset mix as it deems
appropriate in pursuit of the Funds' investment objectives. Individual portfolio
manager members of the team may also adjust portfolio holdings of the Funds or
of sectors of the Funds as necessary between team meetings.

The portfolio manager members of the teams managing the Funds described in
this Prospectus and their work experience for the last five years are listed as
follows:

ROBERT V. GAHAGAN has been primarily responsible for the day-to-day
operations of Short-Term Treasury since March, 1996. He is a Vice President
and Portfolio Manager with ACIM. Mr. Gahagan has a B.A. and M.B.A. from the
University of Missouri in Kansas City and has over 12 years of investment
experience. He joined American Century in 1983.

BRIAN HOWELL has been primarily responsible for the management of Capital
Preservation and Government Agency since May, 1995. Mr. Howell joined the
Manager in 1987 as a research analyst and was promoted to his current position
in January 1994.

DENISE TOBACCO has been primarily responsible for the day-to-day operations
of Capital Preservation since June, 1995, and has co-managed both Capital
Preservation and Government Agency since January, 1996. Ms. Tobacco joined the
Manager in 1988, the Portfolio Department in 1991 and was promoted to her
current position in 1995.

DAVID SCHROEDER joined the Manager in 1990 and has been primarily
responsible for the day-to-day operations of Intermediate-Term Treasury since
January, 1992, and Long-Term Treasury since September, 1992. Mr. Schroeder has
co-managed the GNMA Fund since January, 1996.

CASEY COLTON has co-managed the GNMA Fund since January, 1994, and
Intermediate-Term Treasury, and Long-Term Treasury since January, 1996. Mr.
Colton joined the Manager in 1990 as a Municipal Analyst and was promoted to
his current position in 1995. Mr. Colton is a Chartered Financial Analyst
(CFA).

NEWLIN RANKIN has been primarily responsible for the day-to-day operations
of the ARM Fund since January, 1995, and has co-managed Short-Term Treasury
since March, 1996. Mr. Rankin joined the Manager in 1994 and prior to that was
Assistant Vice-President at Wells Fargo Bank from 1991 to 1993.

Prospectus Additional Information You Should Know 29

The activities of the Manager are subject only to direction of the Trustees
or Directors, as the case may be. For the services provided to the Funds by the
Manager, Capital Preservation and Capital Preservation each pay the Manager a
monthly investment advisory fee equal to the dollar amount derived from applying
the Fund's average daily net assets to an investment advisory fee schedule. Each
series of the Trust pays the Manager a monthly investment advisory fee equal to
its pro rata share of the dollar amount derived from applying the Trust's
average daily net assets to an investment advisory fee schedule.

The investment advisory fee rate ranges from 0.50% to 0.19% of average
daily net assets, dropping as the Funds' respective assets increase.

CODE OF ETHICS

The Funds and the Manager have adopted a Code of Ethics, which restricts
personal investing practices by employees of the Manager and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Funds' portfolios
obtain preclearance before executing personal trades. With respect to Portfolio
Managers and other investment personnel, the Code of Ethics prohibits
acquisition of securities in an initial public offering, as well as profits
derived from the purchase and sale of the same security within 60 calendar days.
These provisions are designed to ensure that the interests of the Fund
shareholders come before the interests of the people who manage those Funds.

TRANSFER AND ADMINISTRATIVE SERVICES

American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111 (the "transfer agent"), acts as transfer agent and
dividend-paying agent for the Funds. The transfer agent provides facilities,
equipment and personnel to the Funds and is paid for such services by the Funds.
For administrative services, each Fund pays the transfer agent a monthly fee
equal to its pro rata share of the dollar amount derived from applying the
average daily net assets of all of the Funds managed by the Manager. The
administrative fee rate ranges from 0.11% to 0.08% of average daily net assets,
dropping as assets managed by the Manager increase. For transfer agent services,
each Fund pays the transfer agent a monthly fee for each shareholder account
maintained and for each shareholder transaction executed during that month.

The Funds charge no sales commissions, or "loads," of any kind. However,
investors who do not choose to purchase or sell Fund shares directly from the
transfer agent may purchase or sell Fund shares through registered
broker-dealers and other qualified service providers, who may charge investors
fees for their services. These broker-dealers and service providers generally
provide shareholder, administrative and/or accounting services which would
otherwise be provided by the transfer agent. To accommodate these investors, the
Manager and its affiliates have entered into agreements with some broker-dealers
and service providers to provide these services. Fees for such services are
borne normally by the Funds at the rates normally paid to the transfer agent,
which would otherwise provide the services. Any distribution expenses associated
with these arrangements are borne by the Manager.

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

The Manager and the transfer agent are both wholly owned by ACC. James E.
Stowers Jr., Chairman of the Board of Directors of ACC, controls ACC by virtue
of his ownership of a majority of its common stock.

DISTRIBUTION OF FUND SHARES

The Funds' shares are distributed by American Century Investment Services,
Inc. (the "Distributor"), a registered broker-dealer and an affiliate of the
Manager. The Manager pays all expenses for promoting and distributing the Fund
shares offered by this Prospectus. The Funds do not pay any commissions or other
fees to the Distributor or to any other broker-dealers or financial
intermediaries in connection with the distribution of Fund shares.

30 Additional Information You Should Know American Century Investments

EXPENSES

Each Fund pays certain operating expenses directly, including, but not
limited to: custodian, audit, and legal fees; fees of the independent directors
or trustees; costs of printing and mailing prospectuses, statements of
additional information, proxy statements, notices, and reports to shareholders;
insurance expenses; and costs of registering the Fund's shares for sale under
federal and state securities laws. See the Statements of Additional Information
for a more detailed discussion of independent director/trustee compensation.

FURTHER INFORMATION ABOUT AMERICAN CENTURY

American Century Capital Preservation, Inc. and American Century Capital
Preservation II, Inc. were organized as California corporations on October 28,
1971 and April 2, 1980, respectively. The American Century Government Income
Trust was organized as a Massachusetts business trust in May 1, 1984. Capital
Preservation, Capital Preservation II and the Trust are diversified, open-end
management investment companies. Their business and affairs are managed by its
officers under the direction of their respective boards.

The principal office of the Funds is American Century Tower, 4500 Main
Street, P.O. Box 419200, Kansas City, Missouri 64141-6200. All inquiries made by
mail should be directed to the address and phone numbers on the cover, or by
phone to 1-800-345-2021 (international calls: 816-531-5575).

Capital Preservation and Capital Preservation II issue shares with no par
value. The remaining Funds are individual series of the Trust which also issues
shares with no par value. The assets belonging to each series of shares are held
separately by the custodian and in effect each series is a separate fund.

Each share, irrespective of series, is entitled to one vote for each dollar
of net asset value applicable to such share on all questions, except, in the
case of the Trust, those matters which must be voted on separately by the series
of shares affected. Matters affecting only one Fund are voted upon only by that
Fund.

Shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the votes cast in an election of Trustees can elect
all of the Trustees if they choose to do so, and in such event the holders of
the remaining votes will not be able to elect any person or persons to the Board
of Trustees. Shares of the Companies have cumulative voting rights only to the
extent conferred upon them by California law, which gives shareholders of the
Companies the right to cumulate votes in the election (or removal) of the
Companies' respective directors.

Unless required by the 1940 Act, it will not be necessary for the Trust or
the Companies to hold annual meetings of shareholders. As a result, shareholders
may not vote each year on the election of members of their boards or the
appointment of auditors. However, pursuant to the Trust's and the Companies'
by-laws, the holders of shares representing at least 10% of the votes entitled
to be cast may request that the Trust or the Company, as the case may be, hold a
special meeting of shareholders. The Trust or the Companies will assist in the
communication with other shareholders.

WE RESERVE THE RIGHT TO CHANGE ANY OF ITS POLICIES, PRACTICES AND
PROCEDURES DESCRIBED IN THIS PROSPECTUS, INCLUDING THE STATEMENT OF ADDITIONAL
INFORMATION, WITHOUT SHAREHOLDER APPROVAL EXCEPT IN THOSE INSTANCES WHERE
SHAREHOLDER APPROVAL IS EXPRESSLY REQUIRED.

THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF A FUND ONLY IN
THOSE STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED OR OTHERWISE QUALIFIED
FOR SALE. A FUND WILL NOT ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES
WHERE THE FUND'S SHARES ARE NOT REGISTERED.

Prospectus Additional Information You Should Know 31

NOTES
32 Notes American Century Investments

NOTES
Prospectus Notes 33

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

Person-to-person assistance:
1-800-345-2021 or 816-531-5575

Automated Information Line:
1-800-345-8765

Telecommunications Device for the Deaf:
1-800-634-4113 or 816-753-1865

Fax: 816-340-7962

Internet: www.americancentury.com

[American Century logo]
American
Century (sm)

9701 [recycled logo]
SH-BKT-6157 Recycled