AMERICAN CENTURY MUNICIPAL TRUST, 497, 1997-01-16

AMERICAN CENTURY MUNICIPAL TRUST
497, 1997-01-16

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STATEMENT OF ADDITIONAL INFORMATION

[american century logo]
American
Century(sm)

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

BENHAM
GROUP(R)

ARIZONA INTERMEDIATE-TERM MUNICIPAL

[front cover]

STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

AMERICAN CENTURY MUNICIPAL TRUST

This is the Statement of Additional Information for the American Century --
Benham Arizona Intermediate-Term Municipal Fund. This Statement is not a
prospectus but should be read in conjunction with the Fund's current Prospectus,
dated September 3, 1996, revised January 1, 1997. The Fund's annual report for
the fiscal year ended May 31, 1996, is incorporated herein by reference. Please
retain this document for future reference.To obtain the Prospectus, call
American Century Investments toll-free at 1-800-345-2021 (international calls:
816-531-5575), or write P.O. Box 419200, Kansas City, Missouri 64141-6200.

TABLE OF CONTENTS

Investment Policies and Techniques...............................2
Special Considerations Regarding Arizona Municipal Securities....7
Investment Restrictions..........................................8
Portfolio Transactions..........................................10
Valuation of Portfolio Securities...............................10
Performance.....................................................11
Taxes...........................................................12
About the Trust.................................................15
Trustees and Officers...........................................15
Investment Advisory Services....................................17
Transfer and Administrative Services............................18
Distribution of Fund Shares.....................................18
Direct Fund Expenses............................................18
Expense Limitation Agreement....................................18
Additional Purchase and Redemption Information..................18
Other Information...............................................19

Statement of Additional Information 1

INVESTMENT POLICIES AND TECHNIQUES

The following pages provide a more detailed description of the securities and
investment practices identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Trustees.

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government entities
to provide short-term capital or to meet cash flow needs.

TAX ANTICIPATION NOTES (TANS) are issued in anticipation of seasonal tax
revenues, such as ad valorem property, income, sales, use, and business taxes,
and are payable from these future taxes. Tax anticipation notes usually are
general obligations of the issuer. General obligations are secured by the
issuer's pledge of its full faith and credit (i.e., taxing power) for the
payment of principal and interest.

REVENUE ANTICIPATION NOTES (RANS) are issued with the expectation that receipt
of future revenues, such as federal revenue sharing or state aid payments, will
be used to repay the notes. Typically, these notes also constitute general
obligations of the issuer.

BOND ANTICIPATION NOTES (BANS) are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds provide
the money for repayment of the notes.

TAX-EXEMPT COMMERCIAL PAPER is an obligation with a stated maturity of 365 days
or less issued to finance seasonal cash flow needs or to provide short-term
financing in anticipation of longer-term financing.

MUNICIPAL BONDS

Municipal bonds, which generally have maturities of more than one year when
issued, are designed to meet longer-term capital needs. These securities have
two principal classifications: general obligation bonds and revenue bonds.

GENERAL OBLIGATION (GO) BONDS are issued by states, counties, cities, towns, and
regional districts to fund a variety of public projects, including construction
of and improvements to schools, highways, and water and sewer systems. General
obligation bonds are backed by the issuer's full faith and credit based on its
ability to levy taxes for the timely payment of interest and repayment of
principal, although such levies may be constitutionally or statutorily limited
as to rate or amount.

REVENUE BONDS are not backed by an issuer's taxing authority; rather, interest
and principal are secured by the net revenues from a project or facility.
Revenue bonds are issued to finance a variety of capital projects, including
construction or refurbishment of utility and waste disposal systems, highways,
bridges, tunnels, air and sea port facilities, schools, and hospitals. Many
revenue bond issuers provide additional security in the form of a debt service
reserve fund that may be used to make payments of interest and repayments of
principal on the issuer's obligations. Some revenue bond financings are further
protected by a state's assurance (without obligation) that it will make up
deficiencies in the debt service reserve fund.

INDUSTRIAL DEVELOPMENT BONDS (IDBS), a type of revenue bond, are issued by or on
behalf of public authorities to finance privately operated facilities. These
bonds are used to finance business, manufacturing, housing, athletic, and
pollution control projects as well as public facilities, such as mass transit
systems, air and sea port facilities, and parking garages. Payment of interest
and repayment of principal on an IDB depends solely on the ability of the
facility's user to meet its financial obligations and on the pledge, if any, of
the real or personal property financed. The interest earned on IDBs may be
subject to the federal alternative minimum tax.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Fund may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or from financial
intermediaries. Floating-rate securities have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which
typically is based on an index. These rate formulas are designed to result in a
market value for the VRDO or FRDO that approximates par value.

2 American Century Investments

OBLIGATIONS WITH TERM PUTS ATTACHED

The Fund may invest in fixed-rate bonds subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
These bonds and participation interests have tender options or demand features
that permit the Fund to tender (or put) their bonds to an institution at
periodic intervals and to receive the principal amount thereof.

Benham Management Corporation (the "Manager"), the Fund's investment advisor,
expects that the Fund will pay more for securities with puts attached than for
securities without these liquidity features. The Manager may buy securities with
puts attached to keep the Fund fully invested in municipal securities while
maintaining sufficient portfolio liquidity to meet redemption requests or to
facilitate management of the Fund's investments. To ensure that the interest on
municipal securities subject to puts is tax-exempt to the Fund, the Manager
limits the Fund's use of puts in accordance with applicable interpretations and
rulings of the Internal Revenue Service (IRS).

Because it is difficult to evaluate the likelihood of exercise or the potential
benefit of a put, puts normally will be determined to have a value of zero,
regardless of whether any direct or indirect consideration is paid. Accordingly,
puts as separate securities are not expected to affect the Fund's weighted
average maturities. When the Fund has paid for a put, the cost will be reflected
as unrealized depreciation on the underlying security for the period the put is
held. Any gain on the sale of the underlying security will be reduced by the
cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when (or if) the Fund attempts to exercise the put. To
minimize such risks, the Fund will purchase obligations with puts attached only
from sellers deemed creditworthy by the Manager under the direction of the Board
of Trustees.

TENDER OPTION BONDS

Tender option bonds (TOBs) were created to increase the supply of high-quality,
short-term tax-exempt obligations. TOBs are created by municipal bond dealers
who purchase long-term tax-exempt bonds in the secondary market, place the
certificates in trusts, and sell interests in the trusts with puts or other
liquidity guarantees attached. The credit quality of the resulting synthetic
short-term instrument is based on the guarantor's short-term rating and the
underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, the
Manager monitors the credit quality of bonds underlying the Fund's TOB holdings
and intends to sell or put back any TOB if the rating on its underlying bond
falls below the second highest rating category designated by a rating agency.

The Manager also takes steps to minimize the risk that the Fund may realize
taxable income as a result of holding TOBs. These steps may include
consideration of (a) legal opinions relating to the tax-exempt status of the
underlying municipal bonds, (b) legal opinions relating to the tax ownership of
the underlying bonds, and (c) other elements of the structure that could result
in taxable income or other adverse tax consequences.

After purchase, the Manager monitors factors related to the tax-exempt status of
the Fund's TOB holdings in order to minimize the risk of generating taxable
income.

WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS

The Fund may engage in municipal securities transactions on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis, the
Fund assumes the rights and risks of ownership, including the risk of price and
yield fluctuations. While the Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
nevertheless sell the securities before the settlement date if deemed advisable
as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, the Fund
will establish and

Statement of Additional Information 3

maintain until the settlement date a segregated account consisting of cash, U.S.
government securities, or other high-quality liquid debt securities in an amount
sufficient to meet the purchase price. When the time comes to pay for
when-issued securities, the Fund will meet its obligations with available cash,
through the sale of securities, or, although it would not normally expect to do
so, through sales of when-issued securities themselves (which may have a market
value greater or less than the Fund's payment obligation). Selling securities to
meet when-issued or forward commitment obligations may generate taxable capital
gains or losses.

The Fund may sell a security and at the same time make a commitment to purchase
the same security at a future date and specified price. Conversely, the Fund may
purchase a security and at the same time make a commitment to sell the same
security at a future date and specified price. These types of transactions are
executed simultaneously in what are known as "dollar-roll" or "cash-and-carry"
transactions. For example, a broker-dealer may seek to purchase a particular
security that the Fund owns. The Fund will sell that security to the
broker-dealer and simultaneously enter into a forward commitment agreement to
buy it back at a future date. This type of transaction generates income for the
Fund if the dealer is willing to execute the transaction at a favorable price in
order to acquire a specific security.

As an operating policy, the Fund will not commit greater than 50% of its total
assets to when-issued or forward commitment agreements. If fluctuations in the
value of securities held cause more than 50% of the Fund's total assets to be
committed under when-issued or forward commitment agreements, the Manager need
not sell such agreements, but it will be restricted from entering into further
agreements on behalf of the Fund until the percentage of assets committed to
such agreements is below 50% of total assets.

MUNICIPAL LEASE OBLIGATIONS

The Fund may invest in municipal lease obligations. These obligations, which may
take the form of a lease, an installment purchase, or a conditional sale
contract, are issued by state and local governments and authorities to acquire
land and a wide variety of equipment and facilities. Generally, the Fund will
not hold such obligations directly as a lessor of the property but will purchase
a participation interest in a municipal lease obligation from a bank or other
third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, and conditional sale contracts (which normally
provide for title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt.

Many leases and contracts include nonappropriation clauses providing that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purposes by the appropriate
legislative body on a yearly or other periodic basis. Municipal lease
obligations also may be subject to abatement risk. For example, construction
delays or destruction of a facility as a result of an uninsurable disaster that
prevents occupancy could result in all or a portion of a lease payment not being
made.

INVERSE FLOATERS

The Fund may buy or sell inverse floaters. An inverse floater is a type of
derivative that bears an interest rate that moves inversely to market interest
rates. As market interest rates rise, the interest rate on an inverse floater
goes down, and vice versa. Generally, this is accomplished by expressing the
interest rate on the inverse floater as an above-market fixed rate of interest,
reduced by an amount determined by reference to a market-based or bond-specific
floating interest rate (as well as by any fees associated with administering the
inverse floater program).

4 American Century Investments

dealer who purchases fixed-rate bonds and places them in a trust or by an issuer
seeking to reduce interest expenses by using a floater/inverse floater structure
in lieu of fixed-rate bonds.

In the case of a broker-dealer structured offering (where underlying fixed-rate
bonds have been placed in a trust), distributions from the underlying bonds are
allocated to floater and inverse floater holders in the following manner:

(a) Floater holders receive interest based on rates set at a Dutch Auction,
which is typically held every 28 to 35 days. Current and prospective
floater holders bid the minimum interest rate that they are willing to
accept on the floaters, and the interest rate is set just high enough to
ensure that all of the floaters are sold.

(b) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

Procedures for determining the interest payment on floaters and inverse floaters
brought to market directly by the issuer are comparable, although the interest
paid on such inverse floaters is based on a presumed coupon rate that would have
been required to bring fixed-rate bonds to market at the time the floaters and
inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse floater
holders may be given the right to acquire the underlying security (or to create
a fixed-rate bond) by calling an equal amount of corresponding floaters. The
underlying security may then be held or sold. However, typically, there are time
constraints and other limitations associated with any right to combine interests
and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have the
right to "put back" their interests to the issuer or to a third party. If a
Dutch Auction fails, the floater holder may be required to hold its position
until the underlying bond matures, during which time interest on the floater is
capped at a predetermined rate.

The secondary market for floaters and inverse floaters may be limited. Changes
in the market value of inverse floaters tend to be significantly greater than
those of fixed-rate bonds because of the way interest payments are determined.
The interest rates on inverse floaters may be significantly reduced, even to
zero, if interest rates rise.

SHORT-TERM SECURITIES

Under certain circumstances, the Fund may invest in short-term municipal or U.S.
government securities, including money market instruments (short-term
securities). Except as otherwise required for temporary defensive purposes, the
Manager does not expect the Fund's investments in short-term securities to
exceed 35% of total assets. If the Fund invests in U.S. government securities, a
portion of dividends paid to shareholders will be taxable at the federal level,
and may be taxable at the state level, as ordinary income. The Manager intends
to minimize such investments, however, and may allow the Fund to hold cash to
avoid generating taxable dividends when suitable short-term municipal securities
are unavailable.

Pursuant to an exemptive order that the Manager received from the Securities and
Exchange Commission (SEC), for liquidity purposes, the Fund may invest up to 5%
of its total assets in shares of a money market fund advised by the Manager
provided that the investment is consistent with the Fund's investment policies
and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED
TO FINANCE SIMILAR PROJECTS OR FACILITIES

From time to time, a significant portion of the Fund's assets may be invested in
municipal obligations related to the extent that economic, business, or
political developments affecting one of these obligations could affect the other
obligations in a similar manner. For example, if the Fund invested a significant
portion of its assets in utility bonds and a state or federal government agency
or legislative body promulgated or enacted new environmental protection
requirements for utility providers, projects financed by utility bonds that the
Fund holds could suffer as a class. Additional financing might be required to
comply with the new environmental requirements, and outstanding debt might be
downgraded in the interim. Among other factors that could negatively affect
bonds issued to finance similar types of projects are state and federal
legislation regarding financing for municipal projects, pending court decisions

Statement of Additional Information 5

relating to the validity or means of financing municipal projects, material or
manpower shortages, and declining demand for the projects or facilities financed
by the municipal bonds.

FUTURES AND OPTIONS

The Fund may enter into futures contracts, options, or options on futures
contracts. Some futures and options strategies, such as selling futures, buying
puts, and writing calls, hedge the Fund's investments against price
fluctuations. Other strategies, such as buying futures, writing puts, and buying
calls, tend to increase market exposure. The Fund does not use futures and
options transactions for speculative purposes.

Although other techniques may be used to control the Fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency. The Fund may engage in
futures and options transactions based on securities indexes, such as the Bond
Buyer Index of Municipal Bonds, that are consistent with the Fund's investment
objectives. The Fund may also engage in futures and options transactions based
on specific securities, such as U.S. Treasury bonds or notes.

Bond Buyer Municipal Bond Index futures contracts differ from traditional
futures contracts in that when delivery takes place, no bonds change hands.
Instead, these contracts settle in cash at the spot market value of the
Municipal Bond Index. Although other types of futures contracts, by their terms,
call for actual delivery or acceptance of the underlying securities, in most
cases the contracts are closed out before the settlement date. A futures
position may be closed by taking an opposite position in an identical contract
(i.e., buying a contract that has previously been sold or selling a contract
that has previously been bought).

To initiate and maintain open positions in a futures contract, the Fund would be
required to make a good faith margin deposit in cash or government securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish margin deposit requirements that are higher than
the exchange minimums.

Once a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, the contract holder is
required to pay additional "variation" margin. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the broker for as long as the contract remains open and do not constitute
margin transactions for purposes of the Fund's investment restrictions.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS. Futures and options prices
can be volatile, and trading in these markets involves certain risks. If the
Manager applies a hedge at an inappropriate time or judges interest rate trends
incorrectly, futures and options strategies may lower the Fund's return. The
Fund could suffer losses if it were unable to close out its position because of
an illiquid secondary market.

6 American Century Investments

when the Manager would not otherwise elect to do so. In addition, the Fund may
be required to deliver or take delivery of instruments underlying futures
contracts it holds. The Manager will seek to minimize these risks by limiting
the contracts it enters into on behalf of the Fund to those traded on national
futures exchanges and for which there appears to be a liquid secondary market.

The Fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments or if securities underlying
futures contracts purchased by the Fund had different maturities than those of
the portfolio securities being hedged. Such imperfect correlation may give rise
to circumstances in which the Fund loses money on a futures contract at the same
time that it experiences a decline in the value of its hedged portfolio
securities. The Fund could also lose margin payments it has deposited with a
margin broker if, for example, the broker becomes bankrupt.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

OPTIONS ON FUTURES. By purchasing an option on a futures contract, the Fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed "strike" price. The
Fund can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the Fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require the Fund to make margin payments unless the
option is exercised.

Although it does not currently intend to do so, the Fund may write (or sell)
call options that obligate it to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the Fund would give up some
ability to participate in a price increase on the underlying security. If the
Fund were to engage in options transactions, it would own the futures contract
at the time a call were written and would keep the contract open until the
obligation to deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The Fund may enter
into futures contracts, options, or options on futures contracts, provided that
such obligations represent no more than 20% of the Fund's net assets. Under the
Commodity Exchange Act, a fund may enter into futures and options transactions
(a) for hedging purposes without regard to the percentage of assets committed to
initial margin and option premiums or (b) for other than hedging purposes,
provided that assets committed to initial margin and option premiums do not
exceed 5% of the fund's net assets. To the extent required by law, the Fund will
set aside cash and appropriate liquid assets in a segregated account to cover
its obligations related to futures contracts and options.

The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities and certain other instruments held less than three months constitute
less than 30% of the Fund's gross income for each fiscal year. Gains on some
futures contracts and options are included in this 30% calculation, which may
limit the Fund's investments in such instruments.

SPECIAL CONSIDERATIONS REGARDING ARIZONA MUNICIPAL SECURITIES

As briefly discussed in the Prospectus, the Fund is susceptible to political,
economic, and regulatory events that affect issuers of Arizona municipal
obligations. The following information about risk factors is provided in view of
the Fund's policy of concentrat-

Statment of Additional Information 7

ing its assets in Arizona municipal securities. This information is based on
certain official statements of the state of Arizona published in connection with
the issuance of specific Arizona municipal securities as well as from other
publicly available sources. It does not constitute a complete description of the
risk associated with investing in securities of these issuers. While the Manager
has not independently verified the information contained in the official
statements, it has no reason to believe the information is inaccurate.

Located in the country's sunbelt, Arizona has been, and is projected to continue
to be, one of the faster growing areas in the United States. Over the last
several decades, the state has outpaced most other regions of the country in
population and personal income growth, gross state product, and job creation.

Geographically, Arizona is the nation's sixth largest state in terms of area. It
is divided into three distinct topographic regions: the northern third which is
high plateau country traversed by deep canyons, such as Grand Canyon National
Park; central Arizona which is rugged, mountainous, and heavily forested; and
the southern third which encompasses desert areas and flat, fertile agricultural
lands in valleys between mountains rich in mineral deposits. These topographic
areas all have different climates, which have distinctively influenced
development in each region. Land ownership is vested largely in the federal and
state governments: 32% is owned by the federal government, 28% is held as
Federal Trust Land (Indian), 17% is in private ownership, and 13% is held by the
state, leaving approximately 10% held in other categories.

Over the last 25 years, the state's emphasis on the mining and agricultural
employment sectors has diminished, and significant job growth has occurred in
the areas of aerospace and high technology, construction, finance, insurance,
and real estate. Arizona's economy has continued to grow in recent years,
although at a slower rate of growth than was experienced in earlier periods.

Under its constitution, the state of Arizona is not permitted to issue general
obligation bonds secured by the full faith and credit of the state. However,
certain agencies and instrumentalities of the state are authorized to issue
bonds secured by revenues from specific projects and activities, and the state
and local governmental units may enter into lease transactions. The particular
source of payments and security for an Arizona municipal obligation is detailed
in the instruments themselves and in related offering materials.

The state and local governmental units are subject to limitations imposed by
Arizona law with respect to ad valorem taxation, bonded indebtedness, the amount
of annual increases in taxes, and other matters. These limitations may affect
the ability of the issuers to generate revenues to satisfy their debt
obligations. There are periodic attempts in the form of voter initiatives and
legislative proposals to further limit the amount of annual increases in taxes
that may be levied without voter approval. If such a proposal were enacted,
there might be an adverse impact on state or local government financing.

Arizona is required by law to maintain a balanced budget. In the past, the state
has used a combination of spending reductions and tax increases to avoid
potential budgetary shortfalls and may be required to do so again in the future.

INVESTMENT RESTRICTIONS

The Fund's investment restrictions set forth below are fundamental and may not
be changed without approval of a majority of the votes of shareholder of the
Fund, as defined in the Investment Company Act of 1940.

THE FUND MAY NOT:

(1) Borrow money, except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes and provided
that the Fund maintains asset coverage of at least 300% for all such
borrowings. The Fund may borrow money for temporary or emergency purposes
from other funds or portfolios for which Benham Management Corporation is
the investment advisor or from a joint account of such funds or portfolios
as permitted by federal regulatory agencies. Before such borrowing from
another fund would be permissible, the Fund would need to obtain exemptive
relief from the staff of the SEC. The Fund has no current intention to
obtain such relief.

(2) Act as an underwriter of securities issued by others, except to the extent
that the Fund may

8 American Century Investments

be considered an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities, and except to the extent
that the purchase of municipal securities or other permitted investments
directly from the issuer thereof or from an underwriter for an issuer and
the later disposition of such securities in accordance with the Fund's
investment policies and techniques may be deemed to be an underwriting.

(3) Purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund from
investing in securities or other instruments backed by real estate or
securities of issuers engaged in the real estate business); physical
commodities or contracts relating to physical commodities; or interests in
oil, gas and/or mineral exploration or development programs or leases. This
restriction shall not be deemed to prohibit the Fund from purchasing or
selling currencies; entering into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments; and purchasing and selling options on such futures
contracts.

(4) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(5) Issue senior securities, except as permitted under the Investment Company
Act of 1940.

The Fund is also subject to the following restrictions, which are not
fundamental and may therefore be changed by the board of trustees without
shareholder approval.

THE FUND MAY NOT:

(a) Purchase equity securities in any company, including warrants, or bonds
with warrants attached, or any preferred stocks, convertible bonds, or
convertible debentures.

(b) Sell securities short, unless it owns or has the right to obtain securities
equivalent in kind and amount to the securities sold short, and provided
that transactions in options and futures contracts are not deemed to
constitute short sales of securities.

(c) Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions, and
provided that margin payments in connection with futures contracts and
options on futures contracts shall not constitute the purchase of
securities on margin.

(d) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 15% of the Fund's net assets would
be invested in illiquid securities. The Fund may not invest more than 15%
of its net assets in repurchase agreements providing for settlement in more
than seven days, or options that are traded in the over-the-counter market
and investments hedged by such options.

(e) Acquire or retain the securities of any other investment company if, as a
result, more than 3% of such investment company's outstanding shares would
be held by the Fund, more than 5% of the value of the Fund's assets would
be invested in shares of such investment company, or more than 10% of the
value of the Fund's assets would be invested in shares of investment
companies in the aggregate, or except in connection with a merger,
consolidation, acquisition, or reorganization.

(f) Invest in securities of an issuer that, together with any predecessor or
unconditional guarantor, has been in operation for less than three years
if, as a result, more than 5% of the total assets of the Fund would then be
invested in such securities, except obligations issued or guaranteed by the
U.S. government or its agencies and municipal securities.

(g) Purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having
their principal business activities in the same industry. However, this
limitation does not apply to securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities or to municipal
securities of any type.

Statement of Additional Information 9

Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the restrictions apply at the time transactions are entered into.
Accordingly, any later increase or decrease beyond the specified limitation
resulting from a change in the Fund's net assets will not be considered in
determining whether it has complied with its investment restrictions.

For purposes of the Fund's investment restrictions, the party identified as the
"issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user is deemed the sole issuer. If, in either case, the creating government or
some other entity were to guarantee the security, the guarantee would be
considered a separate security and would be treated as an issue of the
guaranteeing entity.

PORTFOLIO TRANSACTIONS

The Fund's assets are invested by the Manager in a manner consistent with the
Fund's investment objectives, policies, and restrictions, and with any
instructions the board of trustees may issue from time to time. Within this
framework, the Manager is responsible for making all determinations as to the
purchase and sale of portfolio securities and for taking all steps necessary to
implement securities transactions on behalf of the Fund.

In placing orders for the purchase and sale of portfolio securities, the Manager
will use its best efforts to obtain the best possible price and execution and
will otherwise place orders with broker-dealers subject to and in accordance
with any instructions the board of trustees may issue from time to time. The
Manager will select broker-dealers to execute portfolio transactions on behalf
of the Fund solely on the basis of best price and execution.

The Fund's annual portfolio turnover rate is not expected to exceed 100%.
Because a higher turnover rate increases transaction costs and may increase
taxable capital gains, the Manager carefully weighs the potential benefits of
short-term investing against these considerations.

The Fund's portfolio turnover rate for the years ended May 31, 1995, and May 31,
1996, were 33.22% and 35.78% respectively.

Investment decisions are made for the Fund independently from those made for
other funds advised by the Manager. From time to time, however, two or more
funds advised by the Manager may hold the same security. When two or more funds
are simultaneously engaged in purchasing or selling a security, the prices and
amounts are allocated in a manner believed by the Manager to be equitable to
each of the funds involved. In some instances, simultaneous transactions could
have a detrimental effect on the price or value of a security as far as the
participating funds are concerned. In other instances, however, the ability to
participate in volume transactions will produce better prices and executions for
the funds.

VALUATION OF PORTFOLIO SECURITIES

The Fund's net asset value per share ("NAV") is calculated as of the close of
business of the New York Stock Exchange (the "Exchange") usually at 3:00 p.m.
Central time each day the Exchange is open for business. The Exchange has
designated the following holiday closings for 1997: New Year's Day (observed),
Presidents` Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas (observed). Although the Fund expects the same
holiday schedule to be observed in the future, the Exchange may modify its
holiday schedule at any time.

The Fund's share price is calculated by adding the value of all portfolio
securities and other assets, deducting liabilities, and dividing the result by
the number of shares outstanding. Expenses and interest earned on portfolio
securities are accrued daily.

Securities held by the Fund are normally priced by an independent pricing
service, provided that such prices are believed by the Manager to reflect the
fair market value of portfolio securities.

Because the majority of outstanding municipal issues do not trade daily, the
prices provided by pricing services are generally determined without regard to
bid or last sale prices. In valuing securities, the pricing services generally
take into account institu-

10 American Century Investments

tional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by the Manager under the
general supervision of the board of trustees. There are a number of pricing
services available, and the Manager, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.

Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers. The
municipal bond market is typically a "dealer market;" that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among dealers.

Securities maturing within 60 days of the valuation date may be valued at cost,
plus or minus any amortized discount or premium, unless the trustees determine
that this would not result in fair valuation of a given security. Other assets
and securities for which quotations are not readily available are valued in good
faith at their fair value using methods approved by the board of trustees. The
amortized cost method involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium paid at
the time of purchase. While this method provides certainty in valuation, it
generally disregards the effect of fluctuating interest rates on an instrument's
market value. Consequently, the instrument's amortized cost value may be higher
or lower than its market value, and this discrepancy may be reflected in the
Fund's yield. During periods of declining interest rates, for example, the daily
yield on Fund shares computed as described above may be higher than that of a
fund with identical investments priced at market value. The converse would apply
in a period of rising interest rates.

PERFORMANCE

The Fund's yields and total returns may be quoted in advertising and sales
literature. Yields and total return will vary, and past performance should not
be considered an indication of future results.

Yield quotations for the Fund are based on the investment income per share
earned during a particular 30-day period, less expenses accrued during the
period (net investment income), and are computed by dividing the Fund's net
investment income by its share price on the last day of the period according to
the following formula:

YIELD = 2 [(a - b + 1)6 - 1]
------
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of reimbursements), c = the average daily number of shares
outstanding during the period that were entitled to receive dividends, and d =
the maximum offering price per share on the last day of the period.

For the 30-day period ended May 31, 1996, the Fund's yield was 4.42%.

Total returns quoted in advertising and sales literature reflect all aspects of
the Fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would result in 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's performance is
not constant over time but changes from year-to-year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

Performance for the fiscal year ended May 31, 1996, is listed in the chart
below:

Arizona Fund
- ----------------------------------------------
One Year 4.65%
- ----------------------------------------------
Since Inception 6.65%
- ----------------------------------------------

Statement of Additional Information 11

In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Performance information may be quoted numerically or in a table, graph,
or similar illustration.

The Fund's performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for making such comparisons may include, but are
not limited to, U.S. Treasury bill, note, and bond yields, money market fund
yields, U.S. government debt and percentage held by foreigners, the U.S. money
supply, net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Fund may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.

The Fund's shares are sold without a sales charge (load). No-load funds offer an
advantage to investors when compared to load funds with comparable investment
objectives and strategies.

TAXES

FEDERAL INCOME TAX

The Fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, each Fund will not incur federal or state income taxes on its net
investment income and on net realized capital gains to the extent distributed to
shareholders.

It is intended that the Fund's assets will be sufficiently invested in municipal
securities to qualify to pay "exempt-interest dividends" (as defined in the
Code) to shareholders. The Fund's dividends payable from net tax-exempt interest
earned from municipal securities will qualify as exempt-interest dividends if,
at the close of each quarter of its taxable year, at least 50% of the value of
its total assets consists of municipal securities. Exempt-interest dividends
distributed to shareholders are not included in shareholders' gross income for
purposes of the regular federal income tax. The percentage of income that is
tax-exempt is applied uniformly to all distributions made during each calendar
year. This percentage may differ from the actual percentage of tax-exempt income
received during any particular month.

The Fund will determine periodically which distributions will be designated as
exempt-interest dividends. If the Fund earns income that is not eligible to be
designated as exempt-interest dividends, the Fund, nonetheless, intends to
distribute such income. Such distributions will be subject to federal, state,
and local taxes, as applicable, in the hands of shareholders.

Distributions of net investment income received by the Fund from investments in
debt securities other than municipal securities, of ordinary income realized
upon the disposition of market discount bonds (including tax-exempt market
discount bonds), and of any net realized short-term capital gains will be tax-

12 American Century Investments

able to shareholders as ordinary income. Because the Fund's investment income is
derived from interest rather than dividends, no portion of such distributions is
eligible for the dividends-received deduction available to corporations.

The timing of your investment could have undesirable tax consequences. If you
open an account or buy shares for your account before the day a dividend or
distribution is declared, you may receive a portion of your investment back as
taxable income if that dividend or distribution is not an exempt-interest
dividend.

Under the Code, any distribution from a fund's net realized long-term capital
gains is taxable to shareholders as long-term capital gains, regardless of the
length of time shares have been held.

The Fund intends to comply with tax rules applicable to regulated investment
companies, including a requirement that capital gains from the sale of
securities held less than three months constitute less than 30% of the Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the investments in such
instruments.

Upon the sale or exchange of shares, a shareholder generally will realize a
taxable gain or loss depending upon his/her basis in the shares. Such gain or
loss will be treated as a capital gain or loss if the shares are capital assets
in the shareholder's hands and will be long-term if the shareholder's holding
period for the shares is more than one year and, generally, will otherwise be
short-term. However, any loss realized upon a sale or redemption of shares
within six months of their purchase will be treated as long-term capital loss to
the extent of capital gain dividends received on such shares.

Any loss realized from a disposition of Fund shares held for six months or less
will be disallowed to the extent that dividends received from the Fund have been
designated as exempt-interest dividends. Any loss realized on a sale or exchange
of Fund shares also will be disallowed to the extent that the shares disposed of
are replaced (including replacement through reinvesting of dividends and capital
gain distributions in the Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.

Interest on certain types of industrial development bonds is not exempt from
federal income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of industrial development bonds. The Fund
may invest periodically in industrial development bonds and, therefore, may not
be an appropriate investment for entities that are substantial users of
facilities financed by industrial development bonds or "related persons" of
substantial users. Generally, an individual will not be a related person of a
substantial user under the Code unless he or his immediate family (spouse,
brothers, sisters, and lineal descendants) owns directly or indirectly in
aggregate more than 50% of the equity value of the substantial user.

Certain options, futures contracts, and forward contracts in which the Fund may
invest are "section 1256 contracts." Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses (60-40). Also, section 1256 contracts held by the Fund at the end of each
taxable year (and, in some cases, for purposes of the 4% excise tax, on October
31st of each year) are marked to market with the result that unrealized gains or
losses are treated as though they were realized.

The hedging transactions undertaken by the Fund may result in straddles for
federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by the Fund. In addition, losses realized by the Fund
on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been promulgated, the tax
consequences to the Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gains
realized by the Fund, which are taxed as ordinary income when distributed to
shareholders.

Statement of Additional Information 13

The Fund may make one or more of the elections available under the Code that are
applicable to straddles. If the Fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
elections made. The rules applicable under certain of the elections may operate
to accelerate the recognition of gains or losses from the affected straddle
positions.

Because application of the straddle rules may affect the character of gains or
losses, defer losses, and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount that must be distributed to
shareholders and that will be taxed to shareholders as ordinary income or as a
long-term capital gain may be substantially increased or decreased as compared
to a fund that did not engage in such hedging transactions.

Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. The Funds, the
investment manager, and the Fund's counsel do not review the proceedings
relating to the issuance of state or municipal securities on the basis of bond
counsel opinions.

From time to time, proposals have been introduced in Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities, and similar proposals may be introduced in the future. If
such a proposal were enacted, the availability of municipal securities for
investment by the Fund and the Fund's NAV would be adversely affected. Under
these circumstances, the Board of Trustees would reevaluate the Fund's
investment objectives and policies and would consider either changes in the
structure of the Trust or its dissolution.

ALTERNATIVE MINIMUM TAX

While the interest on bonds issued to finance essential state and local
government operations is generally tax-exempt, interest on certain nonessential
or private activity securities issued after August 7, 1986, while tax-exempt for
regular federal income tax purposes, constitutes a tax-preference item for
taxpayers in determining alternative minimum tax liability under the Code and
income tax provisions of several states. The interest on private activity
securities could subject a shareholder to, or increase liability under, the
federal alternative minimum tax, depending on the shareholder's tax situation.

All distributions derived from interest exempt from regular federal income tax
may subject corporate shareholders to, or increase their liability under, the
alternative minimum tax because these distributions are included in the
corporation's adjusted current earnings.

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

STATE AND LOCAL TAXES

Under a ruling by the Arizona Department of Revenue, shareholders who are
otherwise subject to Arizona income tax will not be subject to such tax on
dividends paid by the Fund to the extent that such dividends are attributable to
either (a) obligations of the State of Arizona or its political subdivisions
thereof or (b) obligations issued by the governments of Guam, Puerto Rico, or
the Virgin Islands. In addition, dividends paid by the Fund that are
attributable to interest payments on direct obligations of the United States
government will not be subject to Arizona income tax so long as the Fund
qualifies as a regulated investment company under Subchapter M of the Code.
Other distributions from the Fund, however, such as distributions of short-term
or long-term capital gains, will generally not be exempt from Arizona income
tax.

The Fund's dividends may not qualify for exemption under income or other tax
laws of state or local taxing authorities outside of Arizona. Shareholders
should consult their tax advisors or state or local tax authorities about the
status of distributions from the Fund in this regard.

The information above is only a summary of some of the tax considerations
affecting the Fund and its shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her tax situation, a prospective shareholder may wish
to consult a tax advisor.

14 American Century Investments

ABOUT THE TRUST

American Century Municipal Trust is a registered open-end management investment
company that was organized as a Massachusetts business trust on May 1, 1984 (the
Trust was formerly known as "Benham Municipal Trust" and "Benham National
Tax-Free Trust"). One of the Trust's eight series, American Century-Benham
Arizona Intermediate-Term Municipal Fund (formerly known as "Benham Arizona
Municipal Intermediate-Term Fund") is described in this Statement of Additional
Information. The board of trustees may create additional series from time to
time.

The Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest without par value,
which may be issued in series (funds). Shares issued are fully paid and
nonassessable and have no preemptive, conversion, or similar rights.

Each series votes separately on matters affecting that series exclusively.
Voting rights are not cumulative; so that investors holding more than 50% of the
Trust's (i.e., all series') outstanding shares may elect a board of trustees.
The Trust instituted dollar-based voting, meaning that the number of votes you
are entitled to is based upon the dollar amount of your investment. The election
of trustees is determined by the votes received from all Trust shareholders
without regard to whether a majority of shares of any one series voted in favor
of a particular nominee or all nominees as a group. Each shareholder has equal
rights to dividends and distributions declared by the Fund and to the net assets
of such Fund upon its liquidation or dissolution proportionate to his or her
share ownership interest in the Fund.

Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration of Trust contains an express disclaimer of shareholder liability for
acts or obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its obligations.

CUSTODIAN BANK: Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, New
York 11245 and Commere Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106
serve as custodians of the Trust's assets. Services provided by the custodian
bank include (a) settling portfolio purchases and sales, (b) reporting failed
trades, (c) identifying and collecting portfolio income, and (d) providing
safekeeping of securities. The custodian takes no part in determining the Fund's
investment policies or in determining which securities are sold or purchased by
the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600, Kansas
City, Missouri 64106, serves as the Trust's independent auditors. KPMG audits
the annual report and provides tax and other services.

TRUSTEES AND OFFICERS

The Trust's activities are overseen by a board of trustees, including six
independent trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation; the Trust's agent for transfer and administrative services,
American Century Services Corporation (ACS); the Trust's distribution agent,
American Century Investment Services, Inc. (ACIS); their parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; or other funds
advised by the Manager. The Trustees listed below serve as Trustees or Directors
of other funds advised by the Manager. Unless otherwise noted, a date in
parentheses indicates the date the Trustee or officer began his or her

Statement of Additional Information 15

service in a particular capacity. The Trustees' and officers' address with the
exception of Mr. Stowers III and Ms. Roepke is 1665 Charleston Road, Mountain
View, California 94043. The address of Mr. Stowers III and Ms. Roepke is 4500
Main Street, Kansas City, Missouri 64111.

TRUSTEES

*JAMES M. BENHAM, Chairman of the Board of Trustees (1985); President and Chief
Executive Officer (1996). Mr. Benham is also President and Chairman of the Board
of the Manager (1971); and a member of the Board of Governors of the Investment
Company Institute (1988). Mr. Benham has been in the securities business since
1963, and he frequently comments through the media on economic conditions,
investment strategies, and the securities markets.

ALBERT A. EISENSTAT, independent Trustee (1995). Mr. Eisenstat is an independent
Director of each of Commercial Metals Co. (1982), Sungard Data Systems (1991)
and Business Objects S/A (1994). Previously, he served as Vice President of
Corporate Development and Corporate Secretary of Apple Computer and served on
its Board of Directors (1985 to 1993).

RONALD J. GILSON, independent Trustee (1995); Charles J. Meyers Professor of Law
and Business at Stanford Law School (1979) and the Mark and Eva Stern Professor
of Law and Business at Columbia University School of Law (1992); Counsel to
Marron, Reid & Sheehy (a San Francisco law firm, 1984).

MYRON S. SCHOLES, independent Trustee (1985). Mr. Scholes is a principal of
Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a Director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a Managing Director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent Trustee (1985). Mr. Scott is Ralph M. Parsons
Professor of Law and Business at Stanford Law School (1972) and a Director of
RCM Capital Funds, Inc. (June 1994).

EZRA SOLOMON, independent Trustee (1985). Mr. Solomon is Dean Witter Professor
of Finance Emeritus at the Stanford Graduate School of Business, where he served
as Dean Witter Professor of Finance from 1965 to 1990, and a Director of
Encyclopedia Britannica.

ISAAC STEIN, independent Trustee (1992). Mr. Stein is former Chairman of the
Board (1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the Board of Raychem
Corporation (electrical equipment, 1993), President of Waverley Associates, Inc.
(private investment firm, 1983), and a Director of ALZA Corporation
(pharmaceuticals, 1987). He is also a Trustee of Stanford University (1994) and
Chairman of Stanford Health Services (hospital, 1994).

*JAMES E. STOWERS III, Trustee (1995). Mr. Stowers III is President, Chief
Executive Officer and Director of ACC, ACS and ACIS.

JEANNE D. WOHLERS, independent Trustee (1985). Ms. Wohlers is a private investor
and an independent Director and partner of Windy Hill Productions, LP.
Previously, she served as Vice President and Chief Financial Officer of Sybase,
Inc. (software company, 1988 to 1992).

OFFICERS

*JAMES M. BENHAM, President and Chief Executive Officer (1996).

*WILLIAM M. LYONS, Executive Vice President (1996); Executive Vice President,
Chief Operating Officer, General Counsel and Secretary of the Manager, ACS, and
ACIS.

*DOUGLAS A. PAUL, Secretary (1988), Vice President (1990), and General Counsel
(1990); Secretary and Vice President of the funds advised by the Manager.

*C. JEAN WADE, Controller (1996).

*MARYANNE ROEPKE, CPA, Chief Financial Officer and Treasurer (1995); Vice
President and Assistant Treasurer of ACS.

The table on the following page summarizes the compensation that the Trustees
received from the Fund for the Fund's fiscal year ended May 31, 1996, as well as
the compensation received for serving as a Director or Trustee of all other
funds advised by the Manager

As of July 31, 1996, the Trust's officers and Trustees, as a group, owned less
than 1% of the Fund's outstanding shares.

16 American Century Investments

INVESTMENT ADVISORY SERVICES

The Fund has an investment advisory agreement with Benham Management Corporation
dated June 1, 1995, that was approved by shareholders on May 31, 1995.

The Manager is a California corporation and became a wholly owned subsidiary of
ACC on June 1, 1995. The Manager has served as investment advisor to the Fund
since the Fund's inception. ACC is a holding company that owns all of the stock
of the operating companies that provide the investment management, transfer
agency, shareholder service, and other services for the American Century funds.
James E. Stowers, Jr. controls ACC by virtue of his ownership of a majority of
its common stock. The Manager has been a registered investment advisor since
1971.

The Fund's agreement with the Manager continues for an initial period of two
years and thereafter from year to year provided that, after the initial two year
period, it is approved at least annually by vote of a majority of the Fund's
outstanding shares or by vote of a majority of the Fund's Trustees, including a
majority of those Trustees who are neither parties to the agreement nor
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.

The agreement is terminable on sixty days' written notice, either by the Fund or
by the Manager, to the other party, and terminates automatically in the event of
its assignment.

Pursuant to the investment advisory agreement, the Manager provides the Fund
with investment advice and portfolio management services in accordance with the
Fund's investment objectives, policies, and restrictions. The Manager determines
what securities will be purchased and sold by the Fund and assists the Fund's
officers in carrying out decisions made by the board of Trustees.

For these services, the Fund pays the Manager a monthly investment advisory fee
based on its pro rata share of the dollar amount derived from applying the
Fund's average daily net assets to the following investment advisory fee rate
schedule:

.50% of the first $100 million;
.45% of the next $100 million;
.40% of the next $100 million;
.35% of the next $100 million;
.30% of the next $100 million;
.25% of the next $1 billion;
.24% of the next $1 billion;
.23% of the next $1 billion;
.22% of the next $1 billion;
.21% of the next $1 billion;
.20% of the next $1 billion; and
.19% of average daily net assets over $6.5 billion.

Investment advisory fees paid by the Fund to the Manager for the fiscal period
ended May 31, 1996, 1995 and 1994 are indicated in the following table. Fee
amounts are net of expense limitations/recoupments as described on the following
page.

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MAY 31, 1996

Aggregate Pension or Retirement Estimated Total Compensation
Name of Compensation Benefits Accrued As Part Annual Benefits From Fund and Fund
Trustee* From The Fund of Fund Expenses Upon Retirement Complex** Paid to Trustees
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ 22 Not Applicable Not Applicable $47,750
Ronald J. Gilson $369 Not Applicable Not Applicable $97,333
Myron S. Scholes $369 Not Applicable Not Applicable $69,750
Kenneth E. Scott $386 Not Applicable Not Applicable $78,273
Ezra Solomon $291 Not Applicable Not Applicable $68,499
Isaac Stein $372 Not Applicable Not Applicable $71,500
Jeanne D. Wohlers $376 Not Applicable Not Applicable $73,750
- -----------------------------------------------------------------------------------------------------------------

* Interested Trustees receive no compensation for their services as such.
** American Century family of funds includes nearly 70 no-load mutual funds.
</TABLE>

Statement of Additional Information 17

Fiscal Period Investment Advisory Fees*
- --------------------------------------------------------
Year ended 5/31/96 $0
Year ended 5/31/95 0
April 11, 1994-May 31, 1994 0
- --------------------------------------------------------
*Net of reimbursements

TRANSFER AND ADMINISTRATIVE SERVICES

American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, (ACS) acts as transfer, administrative services and dividend paying agent
for the Fund. ACS provides facilities, equipment and personnel to the Fund and
is paid for such services by the Fund. For administrative services, each Fund
pays ACS 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 advised by the
Manager to the following administrative fee rate schedule:

Group Assets Administrative Fee Rate
- --------------------------------------------------------
up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08
- --------------------------------------------------------

For transfer agent services, the Fund pays ACS monthly fees of $1.3958 for each
shareholder account maintained and $1.35 for each shareholder transaction
executed during that month.

Due to reimbursements, the Fund paid no administrative services or transfer
agent fees during the fiscal period from April 11, 1994 (commencement of
operations), through May 31, 1994, and for the years ended May 31, 1995 and
1996.

DISTRIBUTION OF FUND SHARES

The Fund's 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's shares
offered by this Prospectus. The Fund does 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.

DIRECT FUND EXPENSES

The Fund pays certain operating expenses that are not assumed by the Manager or
ACS. These include fees and expenses of the independent Trustees; custodian,
audit, and pricing fees; fees of outside counsel and counsel employed directly
by the Trust; costs of printing and mailing prospectuses, statements of
additional information, proxy statements, notices, confirmations, and reports to
shareholders; fees for registering the Fund's shares under federal and state
securities laws; brokerage fees and commissions; trade association dues; costs
of fidelity and liability insurance policies covering the Fund; costs for
incoming WATS lines maintained to receive and handle shareholder inquiries; and
organizational costs.

EXPENSE LIMITATION AGREEMENT

Under an Expense Limitation Agreement between the Fund and the Manager, the
Manager is obligated to limit the Fund's expenses to .67% of average daily net
assets through May 31, 1997.

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, the Fund's
expenses were less than the expense limit in effect at that time.

The expense limit is subject to annual renewal. The expense limits for the years
ended May 31, 1995, and May 31, 1996, were .66% and .69%, respectively, of
average daily net assets.

Net reimbursements paid by the Manager for the fiscal year ended May 31, 1995,
and May 31, 1996, were $139,257 and $157,428.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund's shares are available only to residents of Arizona, California,
Colorado, Nevada, Oregon, Washington, and Texas. The Fund's shares are
continuously offered at net asset value. Share certificates are issued (without
charge) only when requested in writing. Certificates are not issued for
fractional shares. Dividend and voting rights are not affected by the issuance
of certificates.

American Century may reject or limit the amount of an investment to prevent any
one shareholder or affiliated group from controlling the Trust or one of its

18 American Century Investments

series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest. The matrix
below shows the names, addresses, and holdings of all shareholders of record who
owned more than 5% of a Fund's outstanding shares.

Arizona Intermediate-Term
Fund Municipal Fund
- -------------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94101
- -------------------------------------------------------------
# of Shares Held 405,547.960

% of Total Shares
Outstanding 16.3%
- -------------------------------------------------------------

As of July 31, 1996, to the knowledge of the Trust, no other shareholder was the
beneficial shareholder or record shareholder of 5% or more of the Fund's total
shares outstanding.

ACS charges neither fees nor commissions on the purchase and sale of Fund
shares. However, ACS may charge fees for special services requested by a
shareholder or necessitated by acts or omissions of a shareholder. For example,
ACS may charge a fee for processing dishonored investment checks or stop-payment
requests. See the Investor Services Guide for more information.

OTHER INFORMATION

The Fund's investment advisor has been continuously registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940
since December 14, 1971. The Trust has filed a registration statement under the
Securities Act of 1933 and the Investment Company Act of 1940 with respect to
the shares offered. Such registrations do not imply approval or supervision of
the Trust or the advisor by the Securities and Exchange Commission.

For further information, refer to the registration statement and exhibits on
file with the Securities and Exchange Commission in Washington, D.C. These
documents are available upon payment of a reproduction fee. Statements in the
Prospectus and in this Statement of Additional Information concerning the
contents of contracts or other documents, copies of which are filed as exhibits
to the registration statement, are qualified by reference to such contracts or
documents.

MUNICIPAL SECURITIES RATINGS

Securities rating descriptions provided under this heading are excerpted from
publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S MUNICIPAL BOND RATINGS:

Aaa: Bonds that are rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds that are rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they constitute what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make long-term risks appear somewhat larger than in Aaa securities.

A: Bonds that are rated "A" possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds that are rated "Baa" are considered medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Statement of Additional Information 19

thereby not well safeguarded during both good and bad times in the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds that are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be limited.

Caa: Bonds that are rated "Caa" are of poor standing. Such issues may be in
default, or there may be elements of danger present with respect to principal or
interest.

Ca: Bonds that are rated "Ca" represent obligations that are speculative to a
high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds that are rated "C" are the lowest-rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Note: Moody's may apply the numerical modifier "1" for municipally backed bonds
and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking, and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF NOTES AND
VARIABLE-RATE DEMAND OBLIGATIONS:

Moody's ratings for state and municipal short-term obligations are designated
Moody's Investment Grade or MIG. Such ratings recognize the differences between
short-term credit and long-term risk. Short-term ratings on issues with demand
features (variable-rate demand obligations) are differentiated by the use of the
VMIG symbol to reflect such characteristics as payment upon periodic demand
rather than on fixed maturity dates and payments relying on external liquidity.

MIG 1/VMIG 1: This designation denotes best quality. There is strong protection
present through established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TAX-EXEMPT COMMERCIAL PAPER RATINGS:

Moody's commercial paper ratings are opinions of the ability of issuers to
punctually repay those promissory obligations that have an original maturity not
exceeding nine months. Moody's makes no representation that such obligations are
exempt from registration under the Securities Act of 1933, nor does it represent
that any specific note is a valid obligation of a rated issuer or issued in
conformity with any applicable law. The following designations, all judged to be
investment grade, indicate the relative repayment ability of rated issuers of
securities in which the Funds may invest.

PRIME 1: Issuers rated "Prime 1" (or supporting institutions) have a superior
ability for repayment of senior short-term promissory obligations.

PRIME 2: Issuers rated "Prime 2" (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR MUNICIPAL BONDS:

INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.

A: Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

20 American Century Investments

SPECULATIVE

BB, B, CCC, CC: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

BB: Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions that could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

B: Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.

CCC: Debt rated "CCC" has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

CC: The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" debt rating.

C: The "C" rating is typically applied to debt subordinated to senior debt that
is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The "CI" rating is reserved for income bonds on which no interest is being
paid.

D: Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR INVESTMENT GRADE
MUNICIPAL NOTES AND SHORT-TERM DEMAND OBLIGATIONS:

SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The two rating categories for securities in which the Funds may invest
are as follows:

A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

Statement of Additional Information 21

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

9701 [recycled logo]
SH-BKT-7193 Recycled

[american century logo]
American
Century(sm)

STATEMENT OF ADDITIONAL INFORMATION

[company logo]
American
Century(sm)

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

BENHAM
GROUP(R)

Florida Municipal Money Market
Florida Intermediate-Term Municipal

[front cover]

STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 3, 1996

AMERICAN CENTURY MUNICIPAL TRUST

This is the Statement of Additional Information for the American Century--Benham
Florida Municipal Money Market Fund and American Century--Benham Florida
Intermediate-Term Municipal Fund. This Statement is not a prospectus but should
be read in conjunction with the Funds' current Prospectus dated September 3,
1996, revised January 1, 1997. The Funds' annual report for the fiscal year
ended May 31, 1996, is incorporated herein by reference. Please retain this
document for future reference.To obtain the Prospectus, call American Century
Investments toll-free at 1-800-345-2021 (international calls: 816-531-5575), or
write P.O. Box 419200, Kansas City, Missouri 64141-6200.

TABLE OF CONTENTS

Investment Policies and Techniques...............................2
Special Considerations Regarding
Florida Municipal Securities...................................8
Investment Restrictions..........................................9
Portfolio Transactions..........................................10
Valuation of Portfolio Securities...............................11
Performance.....................................................12
Taxes...........................................................14
About the Trust.................................................16
Trustees and Officers...........................................17
Investment Advisory Services....................................18
Transfer and Administrative Services............................19
Distribution of Fund Shares.....................................20
Direct Fund Expenses............................................20
Expense Limitation Agreement....................................20
Additional Purchase and Redemption
Information...................................................20
Other Information...............................................21

STATEMENT OF ADDITIONAL INFORMATION 1

INVESTMENT POLICIES AND TECHNIQUES

The following pages provide a more detailed description of the securities
and investment practices identified in the Prospectus. Unless otherwise noted,
the policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Trustees.

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government
entities to provide short-term capital or to meet cash flow needs.

REVENUE ANTICIPATION NOTES (RANS) are issued with the expectation that
receipt of future revenues, such as federal revenue sharing or state aid
payments, will be used to repay the notes. Typically, these notes also
constitute general obligations of the issuer.

BOND ANTICIPATION NOTES (BANS) are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term bonds
provide the money for repayment of the notes.

TAX-EXEMPT COMMERCIAL PAPER is an obligation with a stated maturity of 365
days or less issued to finance seasonal cash flow needs or to provide short-term
financing in anticipation of longer-term financing.

MUNICIPAL BONDS

GENERAL OBLIGATION (GO) bonds are issued by states, counties, cities,
towns, and regional districts to fund a variety of public projects, including
construction of and improvements to schools, highways, and water and sewer
systems. General obligation bonds are backed by the issuer's full faith and
credit based on its ability to levy taxes for the timely payment of interest and
repayment of principal, although such levies may be constitutionally or
statutorily limited as to rate or amount.

REVENUE BONDS are not backed by an issuer's taxing authority; rather,
interest and principal are secured by the net revenues from a project or
facility. Revenue bonds are issued to finance a variety of capital projects,
including construction or refurbishment of utility and waste disposal systems,
highways, bridges, tunnels, air and sea port facilities, schools, and hospitals.
Many revenue bond issuers provide additional security in the form of a debt
service reserve fund that may be used to make payments of interest and
repayments of principal on the issuer's obligations. Some revenue bond
financings are further protected by a state's assurance (without obligation)
that it will make up deficiencies in the debt-service reserve fund.

INDUSTRIAL DEVELOPMENT BONDS (IDBS), a type of revenue bond, are issued by
or on behalf of public authorities to finance privately operated facilities.
These bonds are used to finance business, manufacturing, housing, athletic, and
pollution control projects as well as public facilities, such as mass transit
systems, air and sea port facilities, and parking garages. Payment of interest
and repayment of principal on an IDB depends solely on the ability of the
facility's user to meet its financial obligations and on the pledge, if any, of
the real or personal property financed. The interest earned on IDBs may be
subject to the federal alternative minimum tax.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Funds may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or from financial
intermediaries. Floating-rate securities have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which
typically is based on an index. These rate formulas are designed to result in a
market value for the VRDO or FRDO that approximates par value.

2 AMERICAN CENTURY INVESTMENTS

OBLIGATIONS WITH TERM PUTS ATTACHED

Each Fund may invest in fixed-rate bonds subject to third party puts and in
participation interests in such bonds held by a bank in trust or otherwise.
These bonds and participation interests have tender options or demand features
that permit the Funds to tender (or put) their bonds to an institution at
periodic intervals and to receive the principal amount thereof.

Benham Management Corporation (the "Manager"), the Funds' investment
advisor, expects that the Funds will pay more for securities with puts attached
than for securities without these liquidity features. The Manager may buy
securities with puts attached to keep a Fund fully invested in municipal
securities while maintaining sufficient portfolio liquidity to meet redemption
requests or to facilitate management of the Funds' investments. To ensure that
the interest on municipal securities subject to puts is tax-exempt to the Funds,
the Manager limits the Funds' use of puts in accordance with applicable
interpretations and rulings of the Internal Revenue Service (IRS).

Because it is difficult to evaluate the likelihood of exercise or the
potential benefit of a put, puts normally will be determined to have a value of
zero, regardless of whether any direct or indirect consideration is paid.
Accordingly, puts as separate securities are not expected to affect the Funds'
weighted average maturities. Where a Fund has paid for a put, the cost will be
reflected as unrealized depreciation on the underlying security for the period
the put is held. Any gain on the sale of the underlying security will be reduced
by the cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when, or if, a Fund attempts to exercise the put. To
minimize such risks, the Funds will purchase obligations with puts attached only
from sellers deemed creditworthy by the Manager under the direction of the board
of trustees.

TENDER OPTION BONDS

Tender option bonds (TOBs) were created to increase the supply of
high-quality, short-term tax-exempt obligations, and thus they are of particular
interest to the Money Market Fund. However, either Fund may purchase these
instruments.

TOBs are created by municipal bond dealers who purchase long-term
tax-exempt bonds in the secondary market, place the certificates in trusts, and
sell interests in the trusts with puts or other liquidity guarantees attached.
The credit quality of the resulting synthetic short-term instrument is based on
the guarantor's short-term rating and the underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, the
Manager monitors the credit quality of bonds underlying the Funds' TOB holdings
and intends to sell or put back any TOB if the rating on its underlying bond
falls below the second highest rating category designated by a nationally
recognized statistical rating agency (a "rating agency").

The Manager also takes steps to minimize the risk that a Fund may realize
taxable income as a result of holding TOBs. These steps may include
consideration of (a) legal opinions relating to the tax-exempt status of the
underlying municipal bonds, (b) legal opinions relating to the tax ownership of
the underlying bonds, and (c) other elements of the structure that could result
in taxable income or other adverse tax consequences.

After purchase, the Manager monitors factors related to the tax-exempt
status of the Fund's TOB holdings in order to minimize the risk of generating
taxable income.

WHEN-ISSUED AND FORWARD
COMMITMENT AGREEMENTS

The Funds may engage in securities transactions on a when-issued or forward
commitment basis in which the transaction price and yield are each fixed at the
time the commitment is made, but payment and delivery occur at a future date
(typically 15 to 45 days later).

When purchasing securities on a when-issued or forward commitment basis,
each Fund assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. While a Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it

STATEMENT OF ADDITIONAL INFORMATION 3

may nevertheless sell the securities before the settlement date if deemed
advisable as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, each
Fund will establish and maintain until the settlement date a segregated account
consisting of cash, U.S. government securities, or other high-quality liquid
debt securities in an amount sufficient to meet the purchase price. When the
time comes to pay for when-issued securities, the Fund will meet its obligations
with available cash, through the sale of securities, or, although it would not
normally expect to do so, through sales of when-issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation). Selling securities to meet when-issued or forward commitment
obligations may generate taxable capital gains or losses.

The Funds may sell a security and at the same time make a commitment to
purchase the same security at a future date and specified price. Conversely, the
Funds may purchase a security and at the same time make a commitment to sell the
same security at a future date and specified price. These types of transactions
are executed simultaneously in what are known as "dollar-roll" or
"cash-and-carry" transactions. For example, a broker-dealer may seek to purchase
a particular security that the Funds own. The Funds will sell that security to
the broker-dealer and simultaneously enter into a forward commitment agreement
to buy it back at a future date. This type of transaction generates income for
the Funds if the dealer is willing to execute the transaction at a favorable
price in order to acquire a specific security.

As an operating policy, a Fund will not commit greater than 50% of its
total assets to when-issued or forward commitment agreements. If fluctuations in
the value of securities held cause more than 50% of a Fund's total assets to be
committed under when-issued or forward commitment agreements, the Manager need
not sell such agreements, but it will be restricted from entering into further
agreements on behalf of the Fund until the percentage of assets committed to
such agreements is below 50% of total assets.

MUNICIPAL LEASE OBLIGATIONS

Each Fund may invest in municipal lease obligations. These obligations,
which may take the form of a lease, an installment purchase, or a conditional
sale contract, are issued by state and local governments and authorities to
acquire land and a wide variety of equipment and facilities. Generally, the
Funds will not hold such obligations directly as a lessor of the property but
will purchase a participation interest in a municipal lease obligation from a
bank or other third party.

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, and conditional sale contracts (which normally
provide for the title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt.

Many leases and contracts include nonappropriation clauses providing that
the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis. Municipal
lease obligations also may be subject to abatement risk. For example,
construction delays or destruction of a facility as a result of an uninsurable
disaster that prevents occupancy could result in all or a portion of a lease
payment not being made.

INVERSE FLOATERS (INTERMEDIATE-TERM FUND)

The Intermediate-Term Fund may buy or sell inverse floaters. An inverse
floater is a type of derivative that bears an interest rate that moves inversely
to market interest rates. As market interest rates rise, the interest rate on an
inverse floater goes down, and vice versa. Generally, this is accomplished by
expressing the interest rate on the inverse floater as an above-market fixed
rate of interest, reduced by an amount determined by reference to a market-based
or bond-specific floating interest rate (as well as by any fees

4 AMERICAN CENTURY INVESTMENTS

associated with administering the inverse floater program).

Inverse floaters may be issued in conjunction with an equal amount of Dutch
Auction floating-rate bonds (floaters), or a market-based index may be used to
set the interest rate on these securities. Floaters and inverse floaters may be
brought to market by a broker-dealer who purchases fixed-rate bonds and places
them in a trust or by an issuer seeking to reduce interest expenses by using a
floater/inverse floater structure in lieu of fixed-rate bonds.

In the case of a broker-dealer structured offering (where underlying
fixed-rate bonds have been placed in a trust), distributions from the underlying
bonds are allocated to floater and inverse floater holders in the following
manner:

(b) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

Procedures for determining the interest payment on floaters and inverse
floaters brought to market directly by the issuer are comparable, although the
interest paid on such inverse floaters is based on a presumed coupon rate that
would have been required to bring fixed-rate bonds to market at the time the
floaters and inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse
floater holders may be given the right to acquire the underlying security (or to
create a fixed-rate bond) by calling an equal amount of corresponding floaters.
The underlying security may then be held or sold. However, typically, there are
time constraints and other limitations associated with any right to combine
interests and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have
the right to "put back" their interests to the issuer or to a third party. If a
Dutch Auction fails, the floater holder may be required to hold its position
until the underlying bond matures, during which time interest on the floater is
capped at a predetermined rate.

The secondary market for floaters and inverse floaters may be limited.
Changes in the market value of inverse floaters tend to be significantly greater
than those of fixed-rate bonds because of the way interest payments are
determined. The interest rates on inverse floaters may be significantly reduced,
even to zero, if interest rates rise.

SHORT-TERM SECURITIES
(INTERMEDIATE-TERM FUND)

Under certain circumstances, the Intermediate-Term Fund may invest in
short-term municipal or U.S. government securities, including money market
instruments (short-term securities). Except as otherwise required for temporary
defensive purposes, the Manager does not expect the Funds' investments in
short-term securities to exceed 35% of total assets. If the Fund invests in U.S.
government securities, a portion of dividends paid to shareholders will be
taxable at the federal level and may be taxable at the state level as ordinary
income. The Manager intends to minimize such investments, however, and may allow
the Fund to hold cash to avoid generating taxable dividends when suitable
short-term municipal securities are unavailable.

Pursuant to an exemptive order that the Manager received from the
Securities and Exchange Commission (SEC), for liquidity purposes, the
Intermediate-Term Fund may invest up to 5% of its total assets in shares of a
money market fund advised by the Manager provided that the investment is
consistent with the Fund's investment policies and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED
TO FINANCE SIMILAR PROJECTS OR FACILITIES

STATEMENT OF ADDITIONAL INFORMATION 5

bonds that the Fund holds could suffer as a class. Additional financing might be
required to comply with the new environmental requirements, and outstanding debt
might be downgraded in the interim. Among other factors that could negatively
affect bonds issued to finance similar types of projects are state and federal
legislation regarding financing for municipal projects, pending court decisions
relating to the validity or means of financing municipal projects, material or
manpower shortages, and declining demand for the projects or facilities financed
by the municipal bonds.

FUTURES AND OPTIONS (INTERMEDIATE-TERM FUND)

The Intermediate-Term Fund may enter into futures contracts, options, or
options on futures contracts. Some futures and options strategies, such as
selling futures, buying puts, and writing calls, hedge the Fund's investments
against price fluctuations. Other strategies, such as buying futures, writing
puts, and buying calls, tend to increase market exposure. The Fund does not use
futures and options transactions for speculative purposes.

Although other techniques may be used to control the Fund's exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While a Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.

To initiate and maintain open positions in a futures contract, a Fund would
be required to make a good faith margin deposit in cash or government securities
with a broker or custodian. A margin deposit is intended to assure completion of
the contract (delivery or acceptance of the underlying security) if it is not
terminated prior to the specified delivery date. Minimum initial margin
requirements are established by the futures exchanges and may be revised. In
addition, brokers may establish margin deposit requirements that are higher than
the exchange minimums.

Once a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, the contract holder
is required to pay additional "variation" margin. Conversely, changes in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the broker for as long as the contract remains open and do not constitute
margin transactions for purposes of the Fund's investment restrictions.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS. Futures and options
prices can be volatile, and trading in these markets involves certain risks. If
the Manager applies a hedge at an inappropriate time or judges interest rate
trends incorrectly, futures and options strategies may lower a Fund's return. A
Fund could suffer losses if the prices of its futures and options positions were
poorly correlated with its other investments or if it were unable to close out
its position because of an illiquid secondary market.

6 AMERICAN CENTURY INVESTMENTS

Futures contracts may be closed out only on an exchange that provides a
secondary market for these contracts, and there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Consequently, it may not be possible to close a futures
position when the Manager considers it appropriate or desirable to do so. In the
event of adverse price movements, the Fund would be required to continue making
daily cash payments to maintain its required margin. If the Fund had
insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the Manager would not otherwise elect to do
so. In addition, the Fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The Manager will seek to
minimize these risks by limiting the contracts it enters into on behalf of the
Fund to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.

The Fund could suffer losses if the prices of its futures and options
positions were poorly correlated with its other investments or if securities
underlying futures contracts purchased by the Fund had different maturities than
those of the portfolio securities being hedged. Such imperfect correlation may
give rise to circumstances in which the Fund loses money on a futures contract
at the same time that it experiences a decline in the value of its hedged
portfolio securities. The Fund could also lose margin payments it has deposited
with a margin broker if, for example, the broker becomes bankrupt.

Although it does not currently intend to do so, the Fund may write (or
sell) call options that obligate them to sell (or deliver) the option's
underlying instrument upon exercise of the option. While the receipt of option
premiums would mitigate the effects of price declines, the Fund would give up
some ability to participate in a price increase on the underlying security. If
the Fund engages in options transactions, it would own the futures contract at
the time a call was written and would keep the contract open until the
obligation to deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. The
Intermediate-Term Fund may enter into futures contracts, options, or options on
futures contracts, provided that such obligations represent no more than 20% of
the Fund's net assets. Under the Commodity Exchange Act, a fund may enter into
futures and options transactions (a) for hedging purposes without regard to the
percentage of assets committed to initial margin and option premiums or (b) for
other than hedging purposes, provided that assets committed to initial margin
and option premiums do not exceed 5% of the fund's net assets. To the extent
required by law, the Fund will set aside cash and appropriate liquid assets in a
segregated account to cover its obligations related to futures contracts and
options.

STATEMENT OF ADDITIONAL INFORMATION 7

gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit the Fund's investments in
such instruments.

SPECIAL CONSIDERATIONS REGARDING FLORIDA
MUNICIPAL SECURITIES

As briefly discussed in the Prospectus, the Funds are susceptible to
political, economic, and regulatory events that affect issuers of Florida
municipal obligations. The following information about risk factors is provided
in view of the Funds' policies of concentrating their assets in Florida
municipal securities. This information is based on independent municipal credit
reports relating to securities offerings of Florida issuers and other publicly
available sources. It does not constitute a complete description of the risk
associated with investing in securities of these issuers. While the Manager has
not independently verified this information, it has no reason to believe the
information is inaccurate.

Because the Funds invest primarily in Florida municipal securities, they
will be affected by political and economic conditions and developments within
the state of Florida. In general, the credit quality and credit risk of any
issuer's debt depend on the state and local economy, the health of the issuer's
finances, the amount of the issuer's debt, the quality of management, and the
strength of legal provisions in debt documents that protect debt holders. Credit
risk is usually lower whenever the economy is strong, growing and diversified,
financial operations are sound, and the debt burden is reasonable.

The state of Florida's economy is characterized by a large service sector,
a dependence on the tourism and construction industries, and a large retirement
population. The management of rapid growth has been the major challenge facing
state and local governments. Florida's population has grown rapidly and is now
the fourth largest state; this growth is expected to continue, but at reduced
rates. The retiree component is expected to continue to be a major factor. As
this growth continues, particularly within the retirement population, the demand
for both public and private services will increase, which may strain the service
sector's capacity and impede the state's budget balancing efforts.

In recent years, the Florida economy has been transforming from a narrow
base of agriculture and seasonal tourism into a service and trade economy, with
substantial insurance, banking, and export participation as well as greater
year-round attraction. The outlook for the Florida economy is continued
expansion fueled by population growth but at a slower rate than that of the
1980s.

Debt levels in the state of Florida are moderate to high, reflecting the
tremendous capital demands associated with rapid population growth. Florida is
unusual among states in that all general obligation full faith and credit debt
issues of municipalities must be approved by public referendum and are,
therefore, relatively rare. Most debt instruments issued by local municipalities
and authorities have a narrower pledge of security, such as a sales tax stream,
special assessment revenue, user fees, utility taxes, or fuel taxes. Credit
quality of such debt instruments tends to be somewhat lower than that of general
obligation debt. The state of Florida issues general obligation debt for a
variety of purposes; however, the state constitution requires a specific revenue
stream to be pledged to state general obligation bonds as well.

The state of Florida is heavily dependent upon sales tax, which makes the
state's general fund vulnerable to recession and presents difficulties in
expanding the tax base in an economy increasingly geared to services. This
dependence upon sales tax, combined with economic recession, has resulted in
budgetary shortfalls in the past; Florida has reacted to preserve an adequate
financial position primarily through expenditure reductions. State officials,
however, still face tremendous capital and operating pressures due to the growth
that will continue to strain the state's narrow revenue base. Future budgets may
require a wider revenue base to meet such demands; the most likely candidate for
such revenue enhancement is a tax on consumer services. The creation of a
Florida personal income tax is a remote possibility because it would require an
amendment to the state's constitution. However, there can be no assurance that a
personal income tax will not be implemented in the future if such a tax were to
be imposed, there is no assurance that interest earned on Florida municipal
obligations would be exempt from this tax.

8 AMERICAN CENTURY INVESTMENTS

INVESTMENT RESTRICTIONS

Each of the Fund's investment restrictions set forth below are fundamental
and may not be changed without approval of a majority of the votes of
shareholders of each Fund as determined in accordance with the Investment
Company Act of 1940.

A FUND MAY NOT:

(1) Borrow money, except from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes and provided
that the Fund maintains asset coverage of at least 300% for all such
borrowings. A Fund may borrow money for temporary or emergency purposes
from other funds or portfolios for which the Benham Management Corporation
is the investment advisor or from a joint account of such funds or
portfolios as permitted by federal regulatory agencies. Before such
borrowing from another fund would be permissible, the Fund would need to
obtain exemptive relief from the staff of the SEC. The Fund has no current
intent of obtaining such relief.

(2) Act as an underwriter of securities issued by others, except to the extent
that the Fund may be considered an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities, and
except to the extent that the purchase of municipal securities or other
permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Fund's investment policies and techniques may be deemed
to be an underwriting.

(3) Purchase or sell real estate, unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent a Fund from
investing in securities or other instruments backed by real estate or
securities of issuers engaged in the real estate business); physical
commodities or contracts relating to physical commodities; or interests in
oil, gas and/or mineral exploration or development programs or leases. This
restriction shall not be deemed to prohibit a Fund from purchasing or
selling currencies; entering into futures contracts on securities,
currencies, or on indexes of such securities or currencies, or any other
financial instruments; and purchasing and selling options on such futures
contracts.

(4) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(5) Issue senior securities, except as permitted under the Investment Company
Act of 1940.

The Funds are also subject to the following restrictions, which are not
fundamental and may therefore be changed by the Board of Trustees without
shareholder approval.

A Fund may not:

(a) Purchase equity securities in any companies, including warrants or bonds
with warrants attached, or any preferred stocks, convertible bonds, or
convertible debentures.

(d) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 10% of the Florida Municipal Money
Market Fund's net assets or more than 15% of the Intermediate-Term Fund's
net assets would be invested in illiquid securities.

STATEMENT OF ADDITIONAL INFORMATION 9

ment companies in the aggregate, or except in connection with a merger,
consolidation, acquisition, or reorganization.

Unless otherwise indicated, with the exception of the percentage
limitations on borrowing, the restrictions apply at the time transactions are
entered into. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in the Fund's net assets will not be
considered in determining whether it has complied with its investment
restrictions.

For purposes of the Funds' investment restrictions, the party identified as
the "issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision, and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user would be deemed the sole issuer. If, in either case, the creating
government or some other entity were to guarantee the security, the guarantee
would be considered a separate security and would be treated as an issue of the
guaranteeing entity.

PORTFOLIO TRANSACTIONS

In placing orders for the purchase and sale of portfolio securities, the
Manager will use its best efforts to obtain the best possible price and
execution and will otherwise place orders with broker-dealers subject to and in
accordance with any instructions the Board of Trustees may issue from time to
time. The Manager will select broker-dealers to execute portfolio transactions
on behalf of the Funds solely on the basis of best price and execution.

Under normal conditions, the Intermediate-Term Fund's annual portfolio
turnover rate is not expected to exceed 100%. Because a higher turnover rate
increases transaction costs and may increase taxable capital gains, the Manager
carefully weighs the potential benefits of short-term investing against these
considerations.

The Intermediate-Term Fund's portfolio turnover rates for the fiscal years
ended May 31, 1996 and 1995 were 66.39% and 36.63%, respectively.

Investment decisions are made for each Fund independently from those made
for other funds advised by the Manager. From time to time, however, two or more
funds advised by the Manager may hold the same security. When two or more funds
are simultaneously engaged in purchasing or selling a security, the prices and
amounts are allocated in a manner believed by the Manager to be equitable to
each of the funds involved. In some instances, simultaneous transactions could
have a detrimental effect on the price or value of a security as far as the
participating funds are concerned. In other instances, however, the ability to
participate in volume transactions will produce better prices and executions for
the funds.

10 AMERICAN CENTURY INVESTMENTS

VALUATION OF PORTFOLIO SECURITIES

Each Fund's net asset value per share ("NAV") is calculated as of the close
of business of the New York Stock Exchange (the "Exchange") usually at 3:00 p.m.
Central time each day the Exchange is open for business. The Exchange has
designated the following holiday closings for 1997: New Year's Day (observed),
Presidents` Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas (observed). Although the Funds expect the same
holiday schedule to be observed in the future, the Exchange may modify its
holiday schedule at any time.

The Manager typically completes its trading on behalf of each Fund in
various markets before the Exchange closes for the day. Each Fund's share price
is calculated by adding the value of all portfolio securities and other assets,
deducting liabilities, and dividing the result by the number of shares
outstanding. Expenses and interest earned on portfolio securities are accrued
daily.

MONEY MARKET FUND. Securities held by the Money Market Fund are valued at
amortized cost. This method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium paid at the time of purchase. While this method provides certainty in
valuation, it generally disregards the effect of fluctuating interest rates on
an instrument's market value. Consequently, the instrument's amortized cost
value may be higher or lower than its market value, and this discrepancy may be
reflected in the Fund's yield. During periods of declining interest rates, for
example, the daily yield on Fund shares computed as described above may be
higher than that of a fund with identical investments priced at market value.
The converse would apply in a period of rising interest rates.

The amortized cost method of valuation is permitted in accordance with Rule
2a-7 under the Investment Company Act of 1940. Under the Rule, a fund holding
itself out as a money market fund must adhere to certain quality and maturity
criteria. In particular, such a fund must limit its investments to U.S.
dollar-denominated instruments determined by its Directors or Trustees to
present minimal credit risks and that are (a) high-grade obligations rated in
accordance with applicable rules in one of the two highest rating categories for
short-term obligations by at least two rating agencies (or by one if only one
has rated the obligation) or (b) unrated obligations judged by the advisor,
under the direction of the fund's Directors or Trustees, to be of comparable
quality. Further, pursuant to Rule 2a-7, a money market fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase
instruments with remaining maturities of 397 days or less.

The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, the Florida Municipal Money Market Fund's NAV at
$1.00 per share. These procedures require the Trust's chief financial officer to
notify the Trustees immediately if, at any time, a Fund's weighted average
maturity exceeds 90 days or its NAV, as determined by using available market
quotations, deviates from its amortized cost per share by .25% or more. If such
deviation exceeds .40%, a meeting of the Board of Trustees' audit committee will
be called to consider what actions, if any, should be taken. If such deviation
exceeds .50%, the Trust's chief financial officer is instructed to adjust daily
dividend distributions immediately to the extent necessary to reduce the
deviation to .50% or lower and to call a meeting of the Board of Trustees to
consider further action.

The Board of Trustees monitors the levels of illiquid securities, however
if the levels are exceeded, they will take action to rectify these levels.

Actions the Board of Trustees may consider under these circumstances
include: (a) selling portfolio securities prior to maturity, (b) withholding
dividends or distributions from capital, (c) authorizing a one-time dividend
adjustment, (d) discounting share purchases and initiating redemptions in kind,
or (e) valuing portfolio securities at market for purposes of calculating NAV.

INTERMEDIATE-TERM FUND. Securities held by the Intermediate-Term Fund are
normally priced by an independent pricing service, provided that such prices are
believed by the Manager to reflect the fair market value of portfolio
securities.

STATEMENT OF ADDITIONAL INFORMATION 11

Because there are hundreds of thousands of municipal issues outstanding,
and the majority of them do not trade daily, the prices provided by pricing
services are generally determined without regard to bid or last sale prices. In
valuing securities, the pricing services generally take into account
institutional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by the Manager under the
general supervision of the Board of Trustees. There are a number of pricing
services available, and the Manager, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.

Securities not priced by a pricing service are valued at the mean between
the most recently quoted bid and ask prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among dealers.

Securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the Trustees
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved by the Board of
Trustees.

The amortized cost method involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium paid at the time of purchase. While this method provides certainty in
valuation, it generally disregards the effect of fluctuating interest rates on
an instrument's market value. Consequently, the instrument's amortized cost
value may be higher or lower than its market value, and this discrepancy may be
reflected in the Fund's yield. During periods of declining interest rates, for
example, the daily yield on Fund shares computed as described above may be
higher than that of a fund with identical investments priced at market value.
The converse would apply in a period of rising interest rates.

PERFORMANCE

The Funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature and should not be
considered an indication of future results. The Funds' share price, yield, and
return will vary with changing market conditions.

For the MONEY MARKET FUND, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used
to calculate yield, but the return is then annualized to reflect weekly
compounding according to the following formula:

Effective Yield = [(Base-Period Return + 1)365/7] - 1

For the seven-day period ended May 31, 1996, the Money Market Fund's yield
was 3.80%, and its effective yield was 3.86%.

For the INTERMEDIATE-TERM FUND, yield quotations are based on the
investment income per share earned during a particular 30-day period, less
expenses accrued during the period (net investment income), and are computed by
dividing the Fund's net investment income by its share price on the last day of
the period according to the following formula:

YIELD = 2 [(a - b + 1)6 - 1]
-----
cd

12 AMERICAN CENTURY INVESTMENTS

For the 30-day period ended May 31, 1996, the Intermediate-Term Fund's
yield was 4.50%.

Total returns quoted in advertising and sales literature reflect all
aspects of a Fund's return, including the effect of reinvesting dividends and
capital gain distributions and any change in the Fund's NAV during the period.

Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a fund over a stated
period, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual total return of 7.18%, which is
the steady annual rate that would result in 100% growth on a compounded basis in
10 years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Funds' performance is
not constant over time but changes from year-to-year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

Performance for the fiscal year ended May 31, 1996, is listed in the chart
below:

Money Market Intermediate-Term
Fund Fund
- -----------------------------------------------------
One Year 3.86% 4.34%
- -----------------------------------------------------
Since Inception 3.73% 6.30%
- -----------------------------------------------------
*The inception date for the Funds is April 11, 1994.

In addition to average annual total returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as percentages or as a dollar amount and may be calculated for a
single investment, a series of investments, or a series of redemptions over any
time period. Performance information may be quoted numerically or in a table,
graph, or similar illustration.

The Funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for making such comparisons may include, but are
not limited to, U.S. Treasury bill, note, and bond yields, money market fund
yields, U.S. government debt and percentage held by foreigners, the U.S. money
supply, net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Fund may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.

The Funds' shares are sold without a sales charge (or "load"). No-load
funds offer an advantage to investors when compared to load funds with
comparable investment objectives and strategies.

The Manager may obtain fund ratings on the safety of Fund shares from one
or more rating agency and may publish these ratings in advertisements and sales
literature.

STATEMENT OF ADDITIONAL INFORMATION 13

TAXES

FEDERAL INCOME TAX

Each Fund intends to qualify annually as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By so qualifying, each Fund will not incur federal or state income
taxes on its net investment income and on net realized capital gains to the
extent distributed to shareholders.

It is intended that each Fund's assets will be sufficiently invested in
municipal securities to qualify to pay "exempt-interest dividends" (as defined
in the Code) to shareholders. Each Fund's dividends payable from net tax-exempt
interest earned from municipal securities will qualify as exempt-interest
dividends if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of municipal securities. Exempt-interest
dividends distributed to shareholders are not included in shareholders' gross
income for purposes of the regular federal income tax. The percentage of income
that is tax-exempt is applied uniformly to all distributions made during each
calendar year. This percentage may differ from the actual percentage of
tax-exempt income received during any particular month.

Each Fund will determine periodically which distributions will be
designated as exempt-interest dividends. If a Fund earns income that is not
eligible to be designated as exempt-interest dividends, the Fund, nonetheless,
intends to distribute such income. Such distributions will be subject to
federal, state, and local taxes, as applicable, in the hands of shareholders.

Distributions of net investment income received by each Fund from
investment in debt securities other than municipal securities, of ordinary
income realized upon the disposition of market discount bonds (including
tax-exempt market discount bonds), and of any net realized short-term capital
gains will be taxable to shareholders as ordinary income. Because the Funds'
investment income is derived from interest rather than dividends, no portion of
such distributions is eligible for the dividends-received deduction available to
corporations.

The timing of an investment could have undesirable tax consequences. If a
shareholder opens an account or buys shares for an account before the day a
dividend or distribution is declared, the shareholder may receive a portion of
the investment back as taxable income if that dividend or distribution is not an
exempt-interest dividend.

Under the Code, any distribution designated as being made from a fund's net
realized long-term capital gains is taxable to shareholders as long-term capital
gains, regardless of the length of time shares have been held.

The Funds intend to comply with tax rules applicable to regulated
investment companies, including a requirement that capital gains from the sale
of securities held less than three months constitute less than 30% of a Fund's
gross income for each fiscal year. Gains on some futures contracts and options
are included in this 30% calculation, which may limit a Fund's investments in
such instruments.

Upon the sale or exchange of shares, a shareholder generally will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain or
loss will be treated as a capital gain or loss if the shares are capital assets
in the shareholder's hands and will be long-term if the shareholder's holding
period for the shares is more than one year and, generally, will otherwise be
short-term. However, any loss realized upon a sale or redemption of shares
within six months of their purchase will be treated as long-term capital loss to
the extent of capital gain dividends received on such gains.

Any loss realized from a disposition of a Fund's shares held for six months
or less will be disallowed to the extent that dividends received from the Fund
have been designated as exempt-interest dividends. Any loss realized on a sale
or exchange of the Fund's shares also will be disallowed to the extent that the
shares disposed of are replaced (including replacement through reinvesting of
dividends and capital gain distributions in the Fund) within a period of 61
days, beginning 30 days before and ending 30 days after the disposition of the
shares. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss.

14 AMERICAN CENTURY INVESTMENTS

"substantial user" includes any "nonexempt person" who regularly uses in trade
or business part of a facility financed from the proceeds of industrial
development bonds. The Funds may invest periodically in industrial development
bonds and, therefore, may not be appropriate investments for entities that are
substantial users of facilities financed by industrial development bonds or
"related persons" of substantial users. Generally, an individual will not be a
related person of a substantial user under the Code unless he/she or his/her
immediate family (spouse, brothers, sisters, and lineal descendants) owns
directly or indirectly in aggregate more than 50% of the equity value of the
substantial user.

Certain options, futures contracts, and forward contracts in which the
Funds may invest are "section 1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses (60-40). Also, section 1256 contracts held by a Fund at the end
of each taxable year (and, in some cases, for purposes of the 4% excise tax, on
October 31st of each year) are marked to market with the result that unrealized
gains or losses are treated as though they were realized.

The hedging transactions undertaken by the Funds may result in straddles
for federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by a fund. In addition, losses realized by a fund on
positions that are part of a straddle may be deferred under the straddle rules,
rather than being taken into account in calculating the taxable income for the
taxable year in which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Funds of hedging transactions are not entirely clear. The hedging
transactions may increase the amount of short-term capital gains realized by the
Funds, which are taxed as ordinary income when distributed to shareholders.

Each Fund may make one or more of the elections available under the Code
that are applicable to straddles. If a Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the elections made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of gains
or losses, defer losses, and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount that must be distributed to
shareholders and that will be taxed to shareholders as ordinary income or as a
long-term capital gain may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.

Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. The Funds, the
investment manager, and the Funds' counsel do not review the proceedings
relating to the issuance of state or municipal securities on the basis of bond
counsel opinions.

From time to time, proposals have been introduced in Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities, and similar proposals may be introduced in the
future. If such a proposal were enacted, the availability of municipal
securities for investment by the Funds, and the Funds' NAVs would be adversely
affected. Under these circumstances, the Board of Trustees would reevaluate the
Funds' investment objectives and policies and would consider either changes in
the structure of the Trust or its dissolution.

ALTERNATIVE MINIMUM TAX

All distributions derived from interest exempt from regular federal income
tax may subject corporate shareholders to, or increase their liability under,
the alternative minimum tax because these distributions

STATEMENT OF ADDITIONAL INFORMATION 15

are included in the corporation's adjusted current earnings.

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

STATE AND LOCAL TAXES

Dividends and distributions paid by the Funds to individuals who are
Florida residents will not be subject to personal income taxation by Florida
because Florida does not have a personal income tax. Corporate shareholders that
are subject to the Florida corporate income tax should consult with their tax
advisor regarding the application of the Florida corporate income tax to
dividends and distributions paid by the Funds.

The Funds may apply for rulings from the Florida Department of Revenue
(FDR) to the effect that shares of a Fund will be exempt from the Florida
intangibles tax each year if the Fund's portfolio of investments on January 1 of
that year consists of investments exempt from the Florida intangibles tax.
Investments exempt from the Florida intangibles tax include, but are not limited
to, (a) notes, bonds and other obligations issued by the state of Florida or its
municipalities, counties, and other taxing districts and (b) notes, bonds, and
other obligations issued by the U.S. government and its agencies. Obligations
issued by the government of Puerto Rico are also exempt if permitted by ruling.
If a Fund's portfolio of investments on January 1 of each year includes
investments that are not exempt from the Florida intangibles tax, the Fund's
shares could be wholly or partially subject to the Florida intangibles tax. The
Funds intend that on January 1 of each year, each Fund's portfolio of
investments will consist solely of investments exempt from the Florida
intangibles tax.

The Funds' dividends may not qualify for exemption under income or other
tax laws of state or local taxing authorities outside of Florida. Shareholders
should consult their tax advisors or state or local tax authorities about the
status of distributions from the Funds in this regard.

The information above is only a summary of some of the tax considerations
affecting the Funds and their shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether the Funds are a suitable
investment based on his or her tax situation, a prospective investor may wish to
consult a tax advisor.

ABOUT THE TRUST

American Century Municipal Trust is a registered open-end management
investment company that was organized as a Massachusetts business trust on May
1, 1984 (the Trust was formerly known as "Benham Municipal Trust" and"Benham
National Tax-Free Trust"). Currently, there are eight series of the Trust.
American Century-Benham Florida Municipal Money Market Fund (formerly "Benham
Florida Municipal Money Market Fund") and American Century-Benham Florida
Intermediate-Term Municipal Fund (formerly known as "Benham Florida Municipal
Intermediate-Term Fund") are described in this State-ment of Additional
Information. The Board of Trustees may create additional series from time to
time.

The Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest without
par value, which may be issued in series (funds). Shares issued are fully paid
and nonassessable and have no preemptive, conversion, or similar rights.

Each series votes separately on matters affecting that series exclusively.
Voting rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all series') outstanding shares may elect a Board of Trustees.
The Trust instituted dollar-based voting, meaning that the number of votes you
are entitled to is based upon the dollar amount of your investment. The election
of Trustees is determined by the votes received from all Trust shareholders,
without regard to whether a majority of shares of any one series voted in favor
of a particular nominee or all nominees as a group. Each shareholder has equal
rights to dividends and distributions declared by their series and to the net
assets of such series upon its liquidation or dissolution proportionate to his
or her share ownership interest in the Fund. Shares of each series have equal
voting rights, although each series votes separately on matters affecting that
series exclusively.

Shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable for its obligations. However, the
Declaration

16 AMERICAN CENTURY INVESTMENTS

of Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust. The Declaration of Trust also provides for
indemnification and reimbursement of expenses of any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust provides that the
Trust will, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. The Declaration of Trust further provides that the Trust may maintain
appropriate insurance (for example, fidelity, bonding, and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees, and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance exists and the Trust itself is unable to meet its obligations.

CUSTODIAN BANK: Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn,
New York 11245 and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106
serve as custodians of the Trust's assets. Services provided by the custodian
bank include (a) settling portfolio purchases and sales, (b) reporting failed
trades, (c) identifying and collecting portfolio income, and (d) providing
safekeeping of securities. The custodian takes no part in determining the Fund's
investment policies or in determining which securities are sold or purchased by
the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600,
Kansas City, Missouri 64106, serves as the Trust's independent auditors. KPMG
audits the annual report and provides tax and other services.

TRUSTEES AND OFFICERS

The Trust's activities are overseen by a Board of Trustees, including six
independent Trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation; the Trust's agent for transfer and administrative services,
American Century Services Corporation (ACS); the Trust's distribution agent,
American Century Investment Services, Inc. (ACIS); their parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; or other funds
advised by the Manager. The Trustees listed below serve as Trustees or directors
of other funds advised by the Manager. Unless otherwise noted, a date in
parentheses indicates the date the Trustee or officer began his or her service
in a particular capacity. The Trustees' and officers' address with the exception
of Mr. Stowers and Ms. Roepke is 1665 Charleston Road, Mountain View, California
94043. The address of Mr. Stowers and Ms. Roepke is 4500 Main Street, Kansas
City, Missouri 64111.

TRUSTEES

*JAMES M. BENHAM, Chairman of the Board of Trustees (1985); President and
Chief Executive Officer (1996). Mr. Benham is also President and Chairman of
the Board of the Manager (1971); and a member of the Board of Governors of the
Investment Company Institute (1988). Mr. Benham has been in the securities
business since 1963, and he frequently comments through the media on economic
conditions, investment strategies, and the securities markets.

ALBERT A. EISENSTAT, independent Trustee (1995). Mr. Eisenstat is an
independent Director of each of Commercial Metals Co. (1982), Sungard Data
Systems (1991) and Business Objects S/A (1994). Previously, he served as Vice
President of Corporate Development and Corporate Secretary of Apple Computer
and served on its Board of Directors (1985 to 1993).

RONALD J. GILSON, independent Trustee (1995); Charles J. Meyers Professor
of Law and Business at Stanford Law School (1979) and the Mark and Eva Stern
Professor of Law and Business at Columbia University School of Law (1992);
Counsel to Marron, Reid & Sheehy (a San Francisco law firm, 1984).

MYRON S. SCHOLES, independent Trustee (1985). Mr. Scholes is a principal
of Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a Director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a Managing Director of Salomon
Brothers Inc. (securities brokerage).

STATEMENT OF ADDITIONAL INFORMATION 17

KENNETH E. SCOTT, independent Trustee (1985). Mr. Scott is Ralph M.
Parsons Professor of Law and Business at Stanford Law School (1972) and a
Director of RCM Capital Funds, Inc. (1994).

ISAAC STEIN, independent Trustee (1992). Mr. Stein is former Chairman of
the Board (1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit de
Corp. (clothing manufacturer). He is a member of the Board of Raychem
Corporation (electrical equipment, 1993), President of Waverley Associates, Inc.
(private investment firm, 1983), and a Director of ALZA Corporation
(pharmaceuticals, 1987). He is also a Trustee of Stanford University (1994) and
Chairman of Stanford Health Services (hospital, 1994).

*JAMES E. STOWERS , Trustee (1995). Mr. Stowers is President, Chief
Executive Officer and Director of ACC, ACS and ACIS.

JEANNE D. WOHLERS, independent Trustee (1985). Ms. Wohlers is a private
investor and an independent Director and Partner of Windy Hill Productions,
LP. Previously, she served as Vice President and Chief Financial Officer of
Sybase, Inc. (software company, 1988 to 1992).

OFFICERS

*JAMES M. BENHAM, President and Chief Executive Officer (1996).

*WILLIAM M. LYONS, Executive Vice President (1996); Executive Vice
President, Chief Operating Officer, General Counsel and Secretary of the
Manager, ACS, and ACIS.

*DOUGLAS A. PAUL, Secretary (1988), Vice President (1990), and General
Counsel (1990); Secretary and Vice President of the funds advised by the
Manager.

*C. JEAN WADE, Controller (1996).

*MARYANNE ROEPKE, CPA, Chief Financial Officer and Treasurer (1995); Vice
President and Assistant Treasurer of ACS.

The table on the next page summarizes the compensation that the Trustees
received from the Funds for the Funds' fiscal year ended May 31, 1996, as well
as the compensation received for serving as a Director or Trustee of all other
funds advised by the Manager.

As of July 31, 1996, the Trust's officers and Trustees, as a group, owned
less than 1% of the each Fund's outstanding shares.

INVESTMENT ADVISORY SERVICES

Each Fund has an investment advisory agreement with Benham Management
Corporation (the "Manager") dated June 1, 1995, that was approved by
shareholders on May 31, 1995.

The Manager is a California corporation and became a wholly owned
subsidiary of ACC on June 1, 1995. The Manager has served as investment advisor
to the Funds since each Fund's inception. ACC is a holding company that owns all
of the stock of the operating companies that provide the investment management,
transfer agency, shareholder service, and other services for the American
Century funds. James E. Stowers, Jr., controls ACC by virtue of his ownership of
a majority of its common stock. The Manager has been a registered investment
advisor since 1971.

Each Fund's agreement with the Manager continues for an initial period of
two years and thereafter from year to year provided that, after the initial
two-year period, it is approved at least annually by vote of a majority of the
Fund's outstanding shares or by vote of a majority of the Fund's Trustee,
including a majority of those Trustees who are neither parties to the agreement
nor interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.

Each Fund's agreement is terminable on sixty days' written notice, either
by the Fund or by the Manager, to the other party, and terminates automatically
in the event of its assignment.

Pursuant to the investment advisory agreement, the Manager provides the
Fund with investment advice and portfolio management services in accordance with
the Fund's investment objectives, policies, and restrictions. The Manager
determines what securities will be purchased and sold by the Funds and assists
the Funds' officers in carrying out decisions made by the Board of Trustees.

For these services, each Fund pays the Manager a monthly investment
advisory fee based on its pro rata share of the dollar amount derived from
applying the Fund's average daily net assets to the following investment
advisory fee rate schedule:

18 AMERICAN CENTURY INVESTMENTS

Due to reimbursements, the Funds paid no investment advisory fees to the
Manager during the fiscal period from April 11, 1994 (commencement of
operations), through May 31, 1994, or for the fiscal years ended May 31, 1995,
and May 31, 1996.

TRANSFER AND ADMINISTRATIVE SERVICES

American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri 64111, (ACS) acts as transfer, administrative services and dividend
paying agent for the Funds. ACS provides facilities, equipment and personnel to
the Funds and is paid for such services by the Funds. For administrative
services, each Fund pays ACS 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 advised by the Manager to the following administrative fee rate schedule:

Group Assets Administrative Fee Rate
- -----------------------------------------------------------------
up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08
- -----------------------------------------------------------------

For transfer agent services, each Fund pays ACS monthly fees of $1.3958 for
each shareholder account maintained and $1.35 for each shareholder transaction
executed during the month.

Due to reimbursements, the Funds paid no administrative services or
transfer agent fees during the fiscal period from April 11, 1994 (commencement
of operations), through May 31, 1994, and for the years ended May 31, 1995, and
May 31, 1996.
<TABLE>
<CAPTION>

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MAY 31, 1996

Ronald J. Gilson $453 (Money Market
$327 (Intermediate-Term) Not Applicable Not Applicable $97,333

Myron S. Scholes $455 (Money Market
$327 (Intermediate-Term) Not Applicable Not Applicable $69,750

Kenneth E. Scott $524 (Money Market
$336 (Intermediate-Term) Not Applicable Not Applicable $78,273

Ezra Solomon $563 (Money Market
$218 (Intermediate-Term) Not Applicable Not Applicable $68,499

Isaac Stein $467 (Money Market
$329 (Intermediate-Term) Not Applicable Not Applicable $71,500

Jeanne D. Wohlers $484 (Money Market
$331 (Intermediate-Term) Not Applicable Not Applicable $73,750
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Interested Trustees receive no compensation for their services as such.

** American Century family of funds includes nearly 70 no-load mutual funds.

STATEMENT OF ADDITIONAL INFORMATION 19

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 Funds'
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.

DIRECT FUND EXPENSES

Each Fund pays certain operating expenses that are not assumed by the
Manager or ACS. These include fees and expenses of the independent Trustees;
custodian, audit, and pricing fees; fees of outside counsel and counsel employed
directly by the Trust; costs of printing and mailing prospectuses, statements of
additional information, proxy statements, notices, confirmations, and reports to
shareholders; fees for registering the Fund's shares under federal and state
securities laws; brokerage fees and commissions; trade association dues; costs
of fidelity and liability insurance policies covering the Fund; costs for
incoming WATS lines maintained to receive and handle shareholder inquiries; and
organizational costs.

EXPENSE LIMITATION AGREEMENT

The Manager may recover amounts absorbed on behalf of a Fund during the
preceding 11 months if, and to the extent that, for any given month, the Fund's
expenses were less than the expense limit in effect at that time. The Manager
has agreed to limit each Fund's expenses to a specified percentage of average
daily net assets until May 31, 1997, as listed below:

Fund Expense Limit
- -------------------------------------------------------
Money Market Fund .61%
Intermediate-Term Fund .67%
- -------------------------------------------------------

The expense limit is subject to annual renewal. The expense limit for each
Fund for the year ended May 31, 1995, was .66% of average daily net assets. The
expense limits for the Money Market Fund and the Intermediate-Term Fund for the
year ended May 31, 1996, were .65% and .69%, respectively, of average daily net
assets.

Net reimbursements paid by the Manager for the year ended May 31, 1995,
were $201,445 and $70,638 for the Money Market Fund and Intermediate-Term Fund,
respectively.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Funds' shares are available only to residents of California, Florida,
Georgia, Illinois, Michigan, New Jersey, and Pennsylvania. The Funds' shares are
continuously offered at net asset value. Certificates are issued (without
charge) only when requested in writing. Certificates are not issued for
fractional shares. Dividend and voting rights are not affected by the issuance
of certificates.

American Century may reject or limit the amount of an investment to prevent
any one shareholder or affiliated group from controlling the Trust or one of its
series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest.

As of July 31, 1996, to the knowledge of the Trust, the shareholders listed
in the chart on the following page were the only holders of 5% or more of
outstanding shares of the individual Funds.

Fund Money Market Fund
- -------------------------------------------------------
Shareholder Name and G. Teichner
Address P.O. Box 369
Ft. Lauderdale, FL 33302

- -------------------------------------------------------
# of Shares Held 6,326,324.770
- -------------------------------------------------------
% of Total Shares
Outstanding 5.5%
- -------------------------------------------------------

Fund Intermediate-Term Fund
- -------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
- -------------------------------------------------------
# of Shares Held 128,975.425
- -------------------------------------------------------
% of Total Shares
Outstanding 12.9%
- -------------------------------------------------------

20 AMERICAN CENTURY INVESTMENTS

Share purchases and redemptions are governed by California law.

OTHER INFORMATION

The Fund's investment advisor, Benham Management Corporation, has been
continuously registered with the Securities and Exchange Commission under the
Investment Advisers Act of 1940 since December 14, 1971. The Trust has filed a
registration statement under the Securities Act of 1933 and the Investment
Company Act of 1940 with respect to the shares offered. Such registrations do
not imply approval or supervision of the Trust or the advisor by the Securities
and Exchange Commission.

For further information, refer to the registration statement and exhibits
on file with the Securities and Exchange Commission in Washington, D.C. These
documents are available upon payment of a reproduction fee. Statements in the
Prospectus and in this Statement of Additional Information concerning the
contents of contracts or other documents, copies of which are filed as exhibits
to the registration statement, are qualified by reference to such contracts or
documents.

MUNICIPAL SECURITIES RATINGS

Securities rating descriptions provided under this heading are excerpted
from publications of Moody's Investors Service, Inc. and Standard & Poor's
Corporation.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
MUNICIPAL BOND RATINGS:

Aaa: Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa: Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, they constitute what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make long-term risks appear somewhat larger than in Aaa securities.

A: Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds that are rated "Baa" are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Ba: Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.

Caa: Bonds that are rated "Caa" are of poor standing. Such issues may be
in default, or there may be elements of danger present with respect to
principal or interest.

Ca: Bonds that are rated "Ca" represent obligations that are speculative
to a high degree. Such issues are often in default or have other marked
shortcomings.

STATEMENT OF ADDITIONAL INFORMATION 21

C: Bonds that are rated "C" are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Note: Moody's may apply the numerical modifier "1" for municipally backed
bonds and modifiers "1," "2," and "3" for corporate-backed municipal bonds. The
modifier "1" indicates that the security ranks in the higher end of its generic
rating category; the modifier "2" indicates a mid-range ranking, and the
modifier "3" indicates that the issue ranks in the lower end of its generic
rating category.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S RATINGS OF NOTES AND
VARIABLE-RATE DEMAND OBLIGATIONS:

Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable-rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than on fixed maturity dates and payments
relying on external liquidity.

MIG 1/VMIG 1: This designation denotes best quality. There is strong
protection present through established cash flows, superior liquidity support,
or demonstrated broad-based access to the market for refinancing.

MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample,
although not as large as in the preceding group.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TAX-EXEMPT COMMERCIAL PAPER RATINGS:

PRIME 1: Issuers rated "Prime 1" (or supporting institutions) have a
superior ability for repayment of senior short-term promissory obligations.

PRIME 2: Issuers rated "Prime 2" (or supporting institutions) have a strong
ability for repayment of senior short-term promissory obligations.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS
FOR MUNICIPAL BONDS:

INVESTMENT GRADE

AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in a small degree.

A: Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

SPECULATIVE

22 AMERICAN CENTURY INVESTMENTS

B: Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.

CCC: Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.

CC: The rating "CC" typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" debt rating.

C: The "C" rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.

D: Debt rated "D" is in default, and payment of interest and/or repayment
of principal is in arrears.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS
FOR INVESTMENT GRADE MUNICIPAL NOTES AND SHORT-TERM
DEMAND OBLIGATIONS:

SP-1: Issues carrying this designation have a very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics will be given a plus (+) designation.

SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S RATINGS FOR DEMAND OBLIGATIONS
AND TAX-EXEMPT COMMERCIAL PAPER:

A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) designation.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."

STATEMENT OF ADDITIONAL INFORMATION 23

NOTES

24 Notes AMERICAN CENTURY INVESTMENTS

NOTES

STATEMENT OF ADDITIONAL INFORMATION Notes 25

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

9701 [recycled logo]
SH-BKT-7194 Recycled

[company logo]
American
Century(sm)

STATEMENT OF ADDITIONAL INFORMATION

[company logo]
American
Century(sm)

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

BENHAM
GROUP(R)

Tax-Free Money Market
Intermediate-Term Tax-Free
Long-Term Tax-Free

[front cover]

STATEMENT OF ADDITIONAL INFORMATION

SEPTEMBER 3, 1996
REVISED JANUARY 1, 1997

AMERICAN CENTURY MUNICIPAL TRUST

This is the Statement of Additional Information for the American Century--Benham
Tax-Free Money Market Fund, American Century--Benham Intermediate-Term Tax-Free
Fund and American Century--Benham Long-Term Tax-Free Fund. This Statement is not
a prospectus but should be read in conjunction with the Funds' current
Prospectus dated September 3, 1996, revised January 1, 1997. The Fund's annual
report for the fiscal year ended May 31, 1996, is incorporated herein by
reference. Please retain this document for future reference. To obtain the
Prospectus, call American Century Investments toll-free at 1-800-345-2021
(international calls: 816-531-5575), or write P.O. Box 419200, Kansas City,
Missouri 64141-6200.

TABLE OF CONTENTS

Investment Policies and Techniques .................2
Investment Restrictions ............................8
Portfolio Transactions ............................10
Valuation of Portfolio Securities .................10
Performance .......................................12
Taxes .............................................13
About the Trust ...................................15
Trustees and Officers .............................16
Investment Advisory Services ......................17
Transfer and Administrative Services ..............18
Distribution of Fund Shares .......................19
Direct Fund Expenses ..............................19
Expense Limitation Agreement ......................19
Additional Purchase and Redemption
Information ....................................19
Other Information .................................20

NOTE: Throughout this Statement of Additional Information, Tax-Free Money
Market Fund will be referred to as the Money Market Fund. Intermediate-Term
Tax-Free Fund (Intermediate-Term Fund) and Long-Term Tax-Free Fund (Long-Term
Fund) are referred to collectively as the Variable-Price Funds.

Statement of Additional Information 1

INVESTMENT POLICIES AND TECHNIQUES

The following pages provide a more detailed description of securities and
investment practices identified in the Prospectus. Unless otherwise noted, the
policies described in this Statement of Additional Information are not
fundamental and may be changed by the Board of Trustees.

MUNICIPAL NOTES

Municipal notes are issued by state and local governments or government
entities to provide short-term capital or to meet cash flow needs.

TAX ANTICIPATION NOTES (TANs) are issued in anticipation of seasonal tax
revenues, such as ad valorem property, income, sales, use, and business taxes,
and are payable from these future taxes. Tax anticipation notes usually are
general obligations of the issuer. General obligations are secured by the
issuer's pledge of its full faith and credit (i.e., taxing power) for the
payment of principal and interest.

REVENUE ANTICIPATION NOTES (RANs) are issued with the expectation that
receipt of future revenues, such as federal revenue sharing or state aid
payments, will be used to repay the notes. Typically, these notes also
constitute general obligations of the issuer.

BOND ANTICIPATION NOTES (BANs) are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term bonds
provide the money for repayment of the notes.

TAX-EXEMPT COMMERCIAL PAPER is an obligation with a stated maturity of 365
days or less issued to finance seasonal cash flow needs or to provide short-term
financing in anticipation of longer-term financing.

MUNICIPAL BONDS

GENERAL OBLIGATION (GO) BONDS are issued by states, counties, cities,
towns, and regional districts to fund a variety of public projects, including
construction of and improvements to schools, highways, and water and sewer
systems. General obligation bonds are backed by the issuer's full faith and
credit based on its ability to levy taxes for the timely payment of interest and
repayment of principal, although such levies may be constitutionally or
statutorily limited as to rate or amount.

REVENUE BONDS are not backed by an issuer's taxing authority; rather,
interest and principal are secured by the net revenues from a project or
facility. Revenue bonds are issued to finance a variety of capital projects,
including construction or refurbishment of utility and waste disposal systems,
highways, bridges, tunnels, air and sea port facilities, schools, and hospitals.
Many revenue bond issuers provide additional security in the form of a debt
service reserve fund that may be used to make payments of interest and
repayments of principal on the issuer's obligations. Some revenue bond
financings are further protected by a state's assurance (without obligation)
that it will make up deficiencies in the debt service reserve fund.

INDUSTRIAL DEVELOPMENT BONDS (IDBs), types of revenue bonds, are issued by
or on behalf of public authorities to finance privately operated facilities.
These bonds are used to finance business, manufacturing, housing, athletic, and
pollution control projects as well as public facilities, such as mass transit
systems, air and sea port facilities, and parking garages. Payment of interest
and repayment of principal on an IDB depends solely on the ability of the
facility's user to meet its financial obligations and on the pledge, if any, of
the real or personal property financed. The interest earned on IDBs may be
subject to the federal alternative minimum tax.

VARIABLE- AND FLOATING-RATE DEMAND OBLIGATIONS

The Funds may buy variable- and floating-rate demand obligations (VRDOs and
FRDOs). These obligations carry rights that permit holders to demand payment of
the unpaid principal, plus accrued interest, from the issuers or financial
intermediaries. Floating-rate instruments have interest rates that change
whenever there is a change in a designated base rate; variable-rate instruments
provide for a specified, periodic adjustment in the interest rate, which is
typically based on an index. These formulas are designed to result in a market
value for the VRDO or FRDO that approximates par value.

2 American Century Investments

The Board of Trustees has approved investments in VRDOs and FRDOs on the
following conditions:

(1) The Fund must have an unconditional right to demand a return of principal
plus accrued interest from the issuer on 30 days' notice or less;

(2) Under the direction of the Board of Trustees, Benham Management Corporation
(the "Manager") must determine that the issuer will be able to make payment
upon such demand, either from its own resources or through an unqualified
commitment (such as a letter of credit) from a third party; and

(3) The rate of interest payable on the VRDO or FRDO must be calculated to
ensure that its market value will approximate par value on interest rate
adjustment dates.

OBLIGATIONS WITH TERM PUTS ATTACHED

The Manager expects that the Funds will pay more for securities with puts
attached than for securities without these liquidity features. The Manager may
buy securities with puts attached to keep a Fund fully invested in municipal
securities while maintaining sufficient portfolio liquidity to meet redemption
requests or to facilitate management of the Funds' investments. To ensure that
the interest on municipal securities subject to puts is tax-exempt to the Funds,
the Manager limits the Funds' use of puts in accordance with applicable
interpretations and rulings of the Internal Revenue Service (IRS).

Because it is difficult to evaluate the likelihood of exercise or the
potential benefit of a put, puts normally will be determined to have a value of
zero, regardless of whether any direct or indirect consideration is paid.
Accordingly, puts as separate securities are not expected to affect the Funds'
weighted average maturities. Where a Fund has paid for a put, the cost will be
reflected as unrealized depreciation on the underlying security for the period
the put is held. Any gain on the sale of the underlying security will be reduced
by the cost of the put.

There is a risk that the seller of a put will not be able to repurchase the
underlying obligation when (or if) a Fund attempts to exercise the put. To
minimize such risks, the Funds will purchase obligations with puts attached only
from sellers deemed creditworthy by the Manager under the direction of the Board
of Trustees.

TENDER OPTION BONDS

Tender option bonds (TOBs) are created by municipal bond dealers who
purchase long-term tax-exempt bonds in the secondary market, place the
certificates in trusts, and sell interests in the trusts with puts or other
liquidity guarantees attached. The credit quality of the resulting synthetic
short-term instrument is based on the guarantor's short-term rating and the
underlying bond's long-term rating.

There is some risk that a remarketing agent will renege on a tender option
agreement if the underlying bond is downgraded or defaults. Because of this, the
Manager monitors the credit quality of bonds underlying the Funds' TOB holdings
and intends to sell or put back any TOB if the rating on its underlying bond
falls below the second highest rating category designated by a nationally
recognized statistical rating agency (a "rating agency").

After purchase, the Manager monitors factors related to the tax-exempt
status of the Fund's TOB holdings in order to minimize the risk of generating
taxable income.

TOBs were created to increase the supply of high-quality, short-term
tax-exempt obligations, and, thus, they are of particular interest to the Money
Market Fund. However, any of the Funds may purchase these instruments.

Statement of Additional Information 3

WHEN-ISSUED AND FORWARD
COMMITMENT AGREEMENTS

When purchasing securities on a when-issued or forward commitment basis,
each Fund assumes the rights and risks of ownership, including the risks of
price and yield fluctuations. While a Fund will make commitments to purchase or
sell securities with the intention of actually receiving or delivering them, it
may nevertheless sell the securities before the settlement date if deemed
advisable as a matter of investment strategy.

In purchasing securities on a when-issued or forward commitment basis, a
Fund will establish and maintain until the settlement date a segregated account
consisting of cash, U.S. government securities, or other high-quality liquid
debt securities in an amount sufficient to meet the purchase price. When the
time comes to pay for when-issued securities, the Fund will meet its obligations
with available cash, through sales of securities, or, although it would not
normally expect to do so, through the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation). Selling securities to meet when-issued or forward
commitment obligations may generate taxable capital gains or losses.

As an operating policy, each Fund will not commit greater than 50% of its
total assets to when-issued or forward commitment agreements. If fluctuations in
the value of securities held cause more than 50% of a Fund's total assets to be
committed under when-issued or forward commitment agreements, the Manager need
not sell such agreements, but it will be restricted from entering into further
agreements on behalf of the Fund until the percentage of assets committed to
such agreements is below 50% of total assets.

MUNICIPAL LEASE OBLIGATIONS

Municipal leases frequently carry risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states and municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the government issuer) have
evolved as a way for government issuers to acquire property and equipment
without meeting constitutional and statutory requirements for the issuance of
debt.

Many leases and contracts include nonappropriation clauses providing that
the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis. Municipal
lease obligations also may be subject to abatement risk. For example,
construction delays or destruction of a facility as a result of an uninsurable
disaster that prevents

4 American Century Investments

occupancy could result in all or a portion of a lease payment not being made.

INVERSE FLOATERS (VARIABLE-PRICE FUNDS)

An inverse floater is a type of derivative that bears an interest rate that
moves inversely to market interest rates. As market interest rates rise, the
interest rate on an inverse floater goes down, and vice versa. Generally this is
accomplished by expressing the interest rate on the inverse floater as an
above-market fixed rate of interest, reduced by an amount determined by
reference to a market-based or bond-specific floating interest rate (as well as
by any fees associated with administering the inverse floater program).

In the case of a broker-dealer structured offering (where underlying
fixed-rate bonds have been placed in a trust), distributions from the underlying
bonds are allocated to floater and inverse floater holders in the following
manner:

(b) Inverse floater holders receive all of the interest that remains on the
underlying bonds after floater interest and auction fees are paid.

Procedures for determining the interest payment on floaters and inverse
floaters brought to market directly by the issuer are comparable, although the
interest paid on such inverse floaters is based on a presumed coupon rate that
would have been required to bring fixed-rate bonds to market at the time the
floaters and inverse floaters were issued.

Where inverse floaters are issued in conjunction with floaters, inverse
floater holders may be given the right to acquire the underlying security (or to
create a fixed-rate bond) by calling an equal amount of corresponding floaters.
The underlying security may then be held or sold. However, typically there are
time constraints and other limitations associated with any right to combine
interests and claim the underlying security.

Floater holders subject to a Dutch Auction procedure generally do not have
the right to "put back" their interests to the issuer or to a third party. If a
Dutch Auction fails, the floater holder may be required to hold its position
until the underlying bond matures; during which time, interest on the floater is
capped at a predetermined rate.

The secondary market for floaters and inverse floaters may be limited. The
market value of inverse floaters tends to be significantly more volatile than
fixed-rate bonds. The interest rates on inverse floaters may be significantly
reduced, even to zero, if interest rates rise.

RESTRICTED SECURITIES

The Funds may buy securities that are subject to restrictions on resale.
These securities will be deemed illiquid unless (a) the Board of Trustees
establishes guidelines for determining the liquidity of restricted securities
and (b) the securities (on a case by case basis) are determined to be liquid in
accordance with Board-approved guidelines.

SHORT-TERM INVESTMENTS (VARIABLE-PRICE FUNDS)

Under certain circumstances, the Variable-Price Funds may invest in
short-term municipal or U.S. government securities, including money market
instruments (short-term securities). Except as otherwise required for temporary
defensive purposes, the Manager does not expect these Funds' investments in
short-term securities to exceed 35% of total assets. If a Fund invests in U.S.
government securities, a portion of dividends paid to shareholders will be
taxable at the federal level, and may be taxable at the state level, as ordinary
income. The Manager intends to minimize such investments, however, and may allow
the Funds to hold cash to avoid generating taxable dividends when suitable
short-term municipal securities are unavailable.

Pursuant to an exemptive order that the Manager received from the
Securities and Exchange Commission

Statement of Additional Information 5

(SEC), for liquidity purposes each Variable-Price Fund may invest up to 5% of
its total assets in shares of a money market fund advised by the Manager,
provided that the investment is consistent with the Fund's investment policies
and restrictions.

CONCENTRATION OF ASSETS IN OBLIGATIONS ISSUED TO FINANCE SIMILAR PROJECTS OR
FACILITIES

From time to time, a significant portion of a Fund's assets may be invested
in municipal obligations related to the extent that economic, business, or
political developments affecting one of these obligations could affect the other
obligations in a similar manner. For example, if a Fund invested a significant
portion of its assets in utility bonds and a state or federal government agency
or legislative body promulgated or enacted new environmental protection
requirements for utility providers, projects financed by utility bonds that a
Fund holds could suffer as a class. Additional financing might be required to
comply with the new environmental requirements, and outstanding debt might be
downgraded in the interim. Among other factors that could negatively affect
bonds issued to finance similar types of projects are state and federal
legislation regarding financing for municipal projects, pending court decisions
relating to the validity of or the means of financing municipal projects,
material or manpower shortages, and declining demand for the projects or
facilities financed by the municipal bonds.

FUTURES AND OPTIONS (VARIABLE-PRICE FUNDS)

Each Variable-Price Fund may enter into futures contracts, options, or
options on futures contracts. Some futures and options strategies, such as
selling futures, buying puts, and writing calls, hedge a Fund's investments
against price fluctuations. Other strategies, such as buying futures, writing
puts, and buying calls, tend to increase market exposure. The Funds do not use
futures and options transactions for speculative purposes.

Although other techniques may be used to control a Fund's exposure to
market fluctuations, the use of futures contracts can be a more effective means
of hedging this exposure. While a Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.

FUTURES CONTRACTS provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency. The Funds may engage in
futures and options transactions based on securities indexes, such as the Bond
Buyer Index of Municipal Bonds, that are consistent with the Funds' investment
objectives. The Funds may also engage in futures and options transactions based
on specific securities, such as U.S. Treasury bonds or notes.

To initiate and maintain an open position in a futures contract, a Fund
would be required to make a good-faith margin deposit in cash or government
securities with a broker or custodian. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums.

6 American Century Investments

contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to or
from the broker for as long as the contract remains open and do not constitute
margin transactions for purposes of the Funds' investment restrictions.

RISKS RELATED TO FUTURES AND OPTIONS TRANSACTIONS. Futures and options
prices can be volatile, and trading in these markets involves certain risks. If
the Manager applies a hedge at an inappropriate time or judges interest rate
trends incorrectly, futures and options strategies may lower a Fund's return. A
Fund could also suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if it were unable to close
out its position because of an illiquid secondary market.

Futures contracts may be closed out only on an exchange that provides a
secondary market for these contracts, and there is no assurance that a liquid
secondary market will exist for any particular futures contract at any
particular time. Consequently, it might not be possible to close a futures
position when the Manager considers it appropriate or desirable to do so. In the
event of adverse price movements, a Fund would be required to continue making
daily cash payments to maintain its required margin. If the Fund had
insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the Manager would not otherwise elect to do
so. In addition, a Fund may be required to deliver or take delivery of
instruments underlying the futures contracts it holds. The Manager will seek to
minimize these risks by limiting the contracts it enters into on behalf of the
Funds to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.

A Fund could suffer losses if the prices of its futures and options
positions were poorly correlated with its other investments or if securities
underlying futures contracts purchased by the Fund had different maturities than
those of the portfolio securities being hedged. Such imperfect correlation may
give rise to circumstances in which the Fund loses money on a futures contract
at the same time that it experiences a decline in the value of its hedged
portfolio securities. The Fund could also lose margin payments it has deposited
with a margin broker if, for example, the broker becomes bankrupt.

OPTIONS ON FUTURES. By purchasing an option on a futures contract, a Fund
obtains the right, but not the obligation, to sell the futures contract (a put
option) or to buy the contract (a call option) at a fixed "strike" price. A Fund
can terminate its position in a put option by allowing it to expire or by
exercising the option. If the option is exercised, the Fund completes the sale
of the underlying security at the strike price. Purchasing an option on a
futures contract does not require a Fund to make margin payments unless the
option is exercised.

Although they do not currently intend to do so, the Funds may write (or
sell) call options that obligate them to sell (or deliver) the option's
underlying instrument upon exercise of the option. While the receipt of option
premiums would mitigate the effects of price declines, the Funds would give up
some ability to participate in a price increase on the underlying security. If a
Fund engages in options transactions, it would own the futures contract at the
time a call was written and would keep the contract open until the obligation to
deliver it pursuant to the call expired.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. Each
Variable-Price Fund may enter into futures contracts, options, or options on
futures contracts, provided that such obligations represent no more than 20% of
the Fund's net assets. Under the

Statement of Additional Information 7

Commodity Exchange Act, a fund may enter into futures and options transaction
(a) for hedging purposes without regard to the percentage of assets committed to
initial margin and option premiums or (b) for other than hedging purposes,
provided that assets committed to initial margin and option premiums do not
exceed 5% of the fund's net assets. To the extent required by law, each Fund
will set aside cash and appropriate liquid assets in a segregated account to
cover its obligations related to futures contracts and options.

INVESTMENT RESTRICTIONS

The Funds' investment restrictions set forth below are fundamental and may
not be changed without approval of a majority of the votes of shareholders of
each Fund, as determined in accordance with the Investment Company Act of 1940.

NONE OF THE FUNDS MAY:

(1) With respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government
or any of its agencies or instrumentalities) if, as a result, (a) more than
5% of the Fund's total assets would be invested in the securities of that
issuer, or (b) the Fund would own more than 10% of the outstanding voting
securities of that issuer.

(2) Act as an underwriter of securities issued by others, except to the extent
that the purchase of municipal securities, or other permitted investments,
directly from the issuer thereof or from an underwriter for an issuer and
the later disposition of such securities in accordance with the Fund's
investment policies and techniques may be deemed to be an underwriting.

(3) Make loans to others, except in accordance with the Fund's investment
objective and policies.

(4) Purchase any equity securities in any companies, including warrants, or
bonds with warrants attached, or any preferred stocks, convertible bonds,
or convertible debentures.

(5) Invest in securities that are not readily marketable or the disposition of
which is restricted under federal securities laws (collectively, illiquid
securities) if, as a result, more than 10% of the Fund's net assets would
be invested in illiquid securities.

(6) Purchase or retain securities of any issuer if, to the knowledge of the
Fund's management, those officers and Trustees of the Trust and of its
investment advisor, who each own beneficially more than 0.5% of the
outstanding securities of such issuer, together own beneficially more than
5% of such securities. However, such restrictions shall not apply to
holdings of the issuers of industrial development bonds.

(7) Acquire securities for the purpose of exercising control over management of
the issuer.

(8) Purchase any security if, as a result, 25% or more of the value of the
Fund's total assets would be invested in the securities of issuers having
their principal business activity in the same industry. However, this
limitation does not apply to securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or to municipal
securities of any type.

THE MONEY MARKET FUND MAY NOT:

(1) Borrow money in excess of 33 1/3% of the market value of its total assets,
and then only from a bank and as a temporary measure to satisfy redemption
requests for extraordinary or emergency purposes, and provided that
immediately after any such borrowing there is an asset coverage of at least
300 per centum for all such borrowings. To secure any such borrowing, the
Fund may not mortgage, pledge, or hypothecate in excess of 331/3% of the
value of its total assets. The Fund will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding.

(2) Purchase, sell, or invest in real estate, commodities, commodity contracts,
foreign exchange, or interests in oil, gas, or other mineral exploration or
development programs, provided that this

8 American Century Investments

limitation shall not prohibit the purchase of municipal securities and
other debt securities secured by real estate or interests therein.

(3) Engage in any short-selling operations.

(4) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads, except that it may purchase and hold securities with
rights to put securities to the seller or "standby commitments" in
accordance with its investment techniques.

(5) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except to the extent that notes evidencing temporary
borrowings or the purchase of securities on a when-issued or
delayed-delivery basis might be deemed such.

(6) Acquire or retain the securities of any other investment company, except in
connection with a merger, consolidation, acquisition, or reorganization.

THE INTERMEDIATE-TERM FUND AND THE LONG-TERM FUND EACH MAY NOT:

(1) Borrow money in excess of 33 1/3% of the market value of its total assets,
and then only from a bank and as a temporary measure to satisfy redemption
requests for extraordinary or emergency purposes, and provided that
immediately after any such borrowing there is an asset coverage of at least
300 per centum for all such borrowings. To secure any such borrowing, the
Fund may not mortgage, pledge, or hypothecate in excess of 33 1/3% of the
value of its total assets. The Fund will not purchase any security while
borrowings representing more than 5% of its total assets are outstanding
(the deposit of assets in escrow in connection with the writing of covered
put and call options and collateral arrangements with respect to initial or
variation margin deposits for futures contracts will not be deemed a pledge
of the Fund's assets).

(2) Purchase, sell, or invest in real estate, commodities, commodity contracts,
foreign exchange, or interests in oil, gas, or other mineral exploration or
development programs, provided that this limitation shall not prohibit the
purchase of municipal securities and other debt securities secured by real
estate or interests therein, and shall not prohibit the Fund from
purchasing, selling, or entering into options on securities or indexes of
securities, futures contracts, options on futures contracts, or any other
interest rate hedging instrument, subject to the Fund's compliance with
applicable provisions of the federal securities or commodities laws.

(3) Engage in any short-selling operations, except that the Fund may purchase,
sell, or enter into short positions in options on securities or indexes of
securities, futures contracts, options on futures contracts, and any other
interest rate hedging instrument as may be permitted under the federal
securities or commodities laws.

(4) Engage in margin transactions, except that it may purchase, sell, or enter
into positions in options on securities or indexes of securities, futures
contracts, options on futures contracts, and other interest rate hedging
instruments, and may make margin deposits in connection therewith, and may
purchase and hold securities with rights to put securities to the seller
(standby commitments) in accordance with its investment techniques.

(5) Issue or sell any class of senior security as defined in the Investment
Company Act of 1940 except to the extent that transactions in options,
futures, options on futures, other interest rate hedging instruments, notes
evidencing temporary borrowings, or the purchase of securities on a
when-issued or delayed-delivery basis might be deemed such.

(6) Acquire or retain the securities of any other investment company, except
that the Fund may, for temporary purposes, purchase shares of the Money
Market Fund, subject to such restrictions as may be imposed by (i) the
Investment Company Act of 1940 and rules thereunder or (ii) any state in
which shares of the Fund are registered, and may acquire shares of any
investment company in connection with a merger, consolidation, acquisition,
or reorganization.

The Funds are also subject to the following restrictions that are not
fundamental and may therefore be changed by the Board of Trustees without
shareholder approval.

Statement of Additional Information 9

NONE OF THE FUNDS MAY:

(a) Purchase any security if, as a result, more than 5% of the value of the
Fund's total assets would be invested in the securities of issuers that at
the time of purchase had been in operation for less than three years,
except obligations issued or guaranteed by the U.S. government or its
agencies, and municipal securities (for this purpose, the period of
operation of any issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer); provided, however,
that for the purpose of this limitation, industrial development bonds
issued by nongovernmental users shall not be deemed municipal securities.

(b) Enter into when-issued or forward commitment transaction that settle in
more than 120 days.

Unless otherwise indicated, with the exception of the percentage limitation
on borrowing, percentage limitations included in the restrictions apply at the
time transactions are entered into. Accordingly, any later increase or decrease
beyond the specified limitation resulting from a change in the Fund's net assets
will not be considered in determining whether it has complied with its
investment restrictions.

For purposes of the Funds' investment restrictions, the party identified as
the "issuer" of a municipal security depends on the form and conditions of the
security. When the assets and revenues of a political subdivision are separate
from those of the government that created the subdivision and the security is
backed only by the assets and revenues of the subdivision, the subdivision is
deemed the sole issuer. Similarly, in the case of an IDB, if the bond is backed
only by the assets and revenues of a nongovernmental user, the nongovernmental
user would be deemed the sole issuer. If the creating government or some other
entity guarantees the security, the guarantee would be considered a separate
security and would be treated as an issue of the guaranteeing entity.

PORTFOLIO TRANSACTIONS

Each Fund's assets are invested by the Manager in a manner consistent with
the Fund's investment objectives, policies, and restrictions, and with any
instructions the Board of Trustees may issue from time to time. Within this
framework, the Manager is responsible for making all determinations as to the
purchase and sale of portfolio securities and for taking all steps necessary to
implement securities transactions on behalf of the Funds. In placing orders for
the purchase and sale of portfolio securities, the Manager will use its best
efforts to obtain the best possible price and execution and will otherwise place
orders with broker-dealers subject to and in accordance with any instructions
the Board of Trustees may issue from time to time. The Manager will select
broker-dealers to execute portfolio transactions on behalf of the Funds solely
on the basis of best price and execution.

The Intermediate-Term Fund's annual portfolio turnover rate is not expected
to exceed 100%, and the Long-Term Fund's annual portfolio turnover rate is not
expected to exceed 200%. Because a higher turnover rate increases transaction
costs and may increase taxable capital gains, the Manager carefully weighs the
potential benefits of short-term investing against these considerations.

The Variable-Price Funds' portfolio turnover rates for the fiscal years
ended May 31, 1996 and 1995, are indicated in the following table.

Portfolio Turnover Rates
- -----------------------------------------------------------------------------
Fiscal Fiscal
Fund 1996 1995
- -----------------------------------------------------------------------------
Intermediate-Term Fund 45.98% 47.48%
Long-Term Fund 49.17% 34.09%
- -----------------------------------------------------------------------------

VALUATION OF PORTFOLIO SECURITIES

10 American Century Investments

The Manager typically completes trading on behalf of each Fund in various
markets before the Exchange closes for the day. Each Fund's share price is
calculated by adding the value of all portfolio securities and other assets,
deducting liabilities, and dividing the result by the number of shares
outstanding. Expenses and interest earned on portfolio securities are accrued
daily.

The amortized cost valuation method is permitted in accordance with Rule
2a-7 under the Investment Company Act of 1940. Under the Rule, a fund holding
itself out as a money market fund must adhere to certain quality and maturity
criteria. In particular, such a fund must limit its investments to U.S.
dollar-denominated instruments that are determined by its directors or trustees
to present minimal credit risks and that are (a) high-grade obligations rated in
accordance with applicable rules in one of the two highest rating categories for
short-term obligations by at least two rating agencies (or by one if only one
has rated an obligation) or (b) unrated obligations judged by the advisor, under
the direction of the fund's directors or trustees, to be of comparable quality.
Further, pursuant to Rule 2a-7, a money market fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase
instruments with remaining maturities of 397 days or less. As an operating
policy, the Money Market Fund maintains a dollar-weighted average maturity of 60
days or less.

The Trustees have established procedures designed to stabilize, to the
extent reasonably possible, the Money Market Fund's NAV at $1.00 per share.
These procedures require the Trust's chief financial officer to notify the
Trustees immediately if, at any time, the Fund's weighted average maturity
exceeds 60 days, or its NAV, as determined by using available market quotations,
deviates from its amortized cost per share by .25% or more. If such deviation
exceeds .40%, a meeting of the Board of Trustees' audit committee will be called
to consider what actions, if any, should be taken. If such deviation exceeds
.50%, the Trust's chief financial officer is instructed to adjust daily dividend
distributions immediately to the extent necessary to reduce the deviation to
.50% or lower and to call a meeting of the Board of Trustees to consider further
action.

The Board of Trustees monitors the levels of illiquid securities, however
if the levels are exceeded, they will take action to rectify these levels.

VARIABLE-PRICE FUNDS. Securities held by the Variable-Price Funds normally
are priced by an independent pricing service, provided that such prices are
believed by the Manager to reflect the fair market value of portfolio
securities. Because there are hundreds of thousands of municipal issues
outstanding, and the majority of them do not trade daily, the prices provided by
pricing services are generally determined without regard to bid or last sale
prices. In valuing securities, the pricing services take into account
institutional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by the Manager under the
general supervision of the Board of Trustees. There are a number of pricing
services available, and the Manager, on the basis of ongoing evaluation of these
services, may use

Statement of Additional Information 11

other pricing services or discontinue the use of any pricing service in whole
or in part.

Securities not priced by a pricing service are valued at the mean between
the most recently quoted bid and asked prices provided by broker-dealers. The
municipal bond market is typically a "dealer market"; that is, dealers buy and
sell bonds for their own accounts rather than for customers. As a result, the
spread, or difference between bid and asked prices, for certain municipal bonds
may differ substantially among broker-dealers.

Securities maturing within 60 days of the valuation date may be valued at
amortized cost, which is plus or minus any amortized discount or premium, unless
the Trustees determine that this would not result in fair valuation of a given
security. Other assets and securities for which quotations are not readily
available are valued in good faith at their fair market value using methods
approved by the board of trustees.

PERFORMANCE

The Funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature and is not
indicative of future results. The Funds' share price, yield, and return will
vary with changing market conditions.

For the MONEY MARKET FUND, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying it by 365/7, with the resulting yield
figure carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used
to calculate yield, but the return is then annualized to reflect weekly
compounding according to the following formula:

Effective Yield = [(Base-Period Return + 1)365/7] - 1

For the seven-day period ended May 31, 1996, the Money Market Fund's yield
was 3.17%, and its effective yield was 3.22%.

For the VARIABLE-PRICE FUNDS, yield quotations are based on the investment
income per share earned during a given 30-day period, less expenses accrued
during the period (net investment income), and are computed by dividing a Fund's
net investment income by its share price on the last day of the period,
according to the following formula:

YIELD = 2 [(a - b + 1)6 - 1]
------
cd

For the 30-day period ended May 31, 1996, the Intermediate-Term Fund's
yield was 4.33%, and the Long-Term Fund's yield was 4.92%.

Average annual total returns are calculated by determining the growth or
decline in value of a hypothetical historical investment in a Fund over a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual total return of 7.18%, which is
the steady annual rate that would result in 100% growth on a compounded basis in
10 years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that a Fund's performance is
not constant over time but changes from year-to-year and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

The Funds' average annual total returns for the one-year, five-year,
ten-year and life-of-fund periods ended May 31, 1996, are indicated in the
following table.

12 American Century Investments

Fund One Year Five Year Ten Year Life of Fund*
- -----------------------------------------------------------------------------
Money Market Fund 3.19% 2.73% 3.88% 4.10%
Intermediate-Term Fund 4.38% 6.42% 6.87% 6.95%
Long-Term Fund 3.75% 7.62% 7.23% 8.69%
- -----------------------------------------------------------------------------
*Commencement of Operations July 31, 1984.

In addition to average annual total returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount and may be calculated for a
single investment, a series of investments, or a series of redemptions over any
time period. Total returns may be broken down into their components of income
and capital (including capital gains and changes in share price) to illustrate
the relationship of these factors and their contributions to total return.

The Funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike American
Century funds, are sold with a sales charge or deferred sales charge. Sources of
economic data that may be used for such comparisons may include, but are not
limited to, U.S. Treasury bill, note, and bond yields, money market fund yields,
U.S. government debt and percentage held by foreigners, the U.S. money supply,
net free reserves, and yields on current-coupon GNMAs (source: Board of
Governors of the Federal Reserve System); the federal funds and discount rates
(source: Federal Reserve Bank of New York); yield curves for U.S. Treasury
securities and AA/AAA-rated corporate securities (source: Bloomberg Financial
Markets); yield curves for AAA-rated tax-free municipal securities (source:
Telerate); yield curves for foreign government securities (sources: Bloomberg
Financial Markets and Data Resources, Inc.); total returns on foreign bonds
(source: J.P. Morgan Securities Inc.); various U.S. and foreign government
reports; the junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The Funds may also utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.

The Funds' shares are sold without a sales charge (or "load"). No-load
funds offer an advantage to investors when compared to load funds with
comparable investment objectives and strategies.

TAXES

FEDERAL INCOME TAX

The Fund intends to qualify annually as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By so qualifying, the Funds will not incur federal or state income
taxes on its net investment income and on net realized capital gains to the
extent distributed to shareholders.

It is intended that each Fund's assets will be sufficiently invested in
municipal securities to qualify to pay "exempt-interest dividends" (as defined
in the Code) to shareholders. A Fund's dividends payable from net tax-exempt
interest earned from municipal securities will qualify as exempt-interest
dividends if, at the close of each quarter of its taxable year, at least 50% of
the value of its total assets consists of municipal securities. Exempt-interest
dividends distributed to shareholders are not included in shareholders' gross
income for purposes of the regular federal income tax. The percentage of income
that is tax-exempt is applied uniformly to all distributions made during each
calendar year. This percentage may differ from the actual percentage of
tax-exempt income received during any particular month.

Each Fund will determine periodically which distributions will be
designated as exempt-interest dividends. If a Fund earns income which is not
eligible to be designated as exempt-interest dividends, the Fund, nonetheless,
intends to distribute such income.

Statement of Additional Information 13

Such distributions will be subject to federal, state, and local taxes, as
applicable, in the hands of shareholders.

Distributions of net investment income received by a Fund from investment
in debt securities other than municipal securities and any net realized
short-term capital gains distributed by the Fund will be taxable to shareholders
as ordinary income. Because the Funds' investment income is derived from
interest rather than dividends, no portion of such distributions is eligible for
the dividends-received deduction available to corporations.

The timing of your investment could have undesirable tax consequences. If
you open an account or buy shares for your account before the day a dividend or
distribution is declared, you may receive a portion of your investment back as
taxable income if that dividend or distribution is not an exempt-interest
dividend.

Under the Code, any distribution from a fund's net realized long-term
capital gains is taxable to shareholders as a long-term capital gain, regardless
of the length of time shares have been held.

As of May 31, 1996, the Intermediate-Term Fund and Long-Term Fund had
capital loss carryovers of $420,126 and $427,920, respectively. No future
capital gain distributions will be made by either Fund until the loss carryover
has been offset or has expired. For the Intermediate-Term Fund, the capital loss
carryovers of $382,614 and $37,512 expire May 31, 2003 and May 31, 2004,
respectively. For the Long-Term Fund, the capital loss carryovers of $330,926
and $96,994 expire May 31, 2003 and May 31, 2004, respectively.

Upon the sale or exchange of a Fund's shares, a shareholder generally will
realize a taxable gain or loss depending upon his/her basis in the shares. Such
gain or loss will be treated as a capital gain or loss if the shares are capital
assets in the shareholder's hands and will be long-term if the shareholder's
holding period for the shares is more than one year and, generally, will
otherwise be short-term.

Any loss realized from a disposition of Fund shares held for six months or
less will be disallowed to the extent that dividends from the Fund have been
designated as exempt-interest dividends. Any loss realized on a sale or exchange
of Fund shares also will be disallowed to the extent that the shares disposed of
are replaced (including replacement through reinvesting of dividends and capital
gain distributions in the Fund) within a period of 61 days beginning 30 days
before and ending 30 days after the disposition of the shares. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.

Interest on certain types of industrial development bonds is subject to
federal income tax when received by "substantial users" or persons related to
substantial users as defined in the Code. The term "substantial user" includes
any "nonexempt person" who regularly uses in trade or business part of a
facility financed from the proceeds of industrial development bonds. The Funds
may invest periodically in industrial development bonds and, therefore, may not
be appropriate investments for entities that are substantial users of facilities
financed by industrial development bonds or "related persons" of substantial
users. Generally, an individual will not be a related person of a substantial
user under the Code unless he/she or his/her immediate family (spouse, brothers,
sisters, and lineal descendants) owns directly or indirectly in aggregate more
than 50% of the equity value of the substantial user.

Opinions relating to the tax status of interest derived from individual
municipal securities are rendered by bond counsel to the issuer. The Funds, the
investment manager, and the Funds' counsel do not review the proceedings
relating to the issuance of state or municipal securities on the basis of bond
counsel opinions.

14 American Century Investments

NAVs would be adversely affected. Under these circumstances, the Board of
Trustees would re-evaluate the Funds' investment objectives and policies and
would consider either changes in the structure of the Trust or its dissolution.

The information above is only a summary of some of the tax considerations
affecting the Funds and their shareholders. No attempt has been made to discuss
individual tax consequences. To determine whether a Fund is a suitable
investment based on his or her situation, a prospective investor may wish to
consult a tax advisor.

ALTERNATIVE MINIMUM TAX

All distributions derived from interest exempt from regular federal income
tax may subject corporate shareholders to, or increase their liability under,
the alternative minimum tax because these distributions are included in the
corporation's adjusted current earnings.

The Trust will inform shareholders annually as to the dollar amount of
distributions derived from interest payments on private activity securities.

ABOUT THE TRUST

American Century Municipal Trust (the "Trust") is a registered open-end
management investment company that was organized as a Massachusetts business
trust on May 1, 1984 (the Trust was formerly known as "Benham Municipal Trust"
and "Benham National Tax-Free Trust"). Currently, there are eight series of the
Trust. American Century--Benham Tax-Free Money Market Fund (formerly known as
"Benham National Tax-Free Money Market Fund"), American Century--Benham
Intermediate-Term Tax-Free Fund (formerly known as "Benham National Tax-Free
Intermediate-Term Fund"), and American Century--Benham Long-Term Tax-Free Fund
(formerly known as "Benham National Tax-Free Long-Term Fund") are described in
this Statement of Additional Information. The Board of Trustees may create
additional series from time to time.

The Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest without
par value, which may be issued in series (funds). Shares issued are fully paid
and nonassessable and have no preemptive, conversion, or similar rights.

Each series votes separately on matters affecting that series exclusively.
Voting rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all series') outstanding shares may elect a Board of Trustees.
The Trust instituted dollar-based voting, meaning that the number of votes you
are entitled to is based upon the dollar amount of your investment. The election
of Trustees is determined by the votes received from all Trust shareholders
without regard to whether a majority of shares of any one series voted in favor
of a particular nominee or all nominees as a group. Each shareholder has equal
rights to dividends and distributions declared by the Fund and to the net assets
of such Fund upon its liquidation or dissolution proportionate to his or her
share ownership interest in the Fund. Shares of each series have equal voting
rights, although each series votes separately on matters affecting that series
exclusively.

Statement of Additional Information 15

Trustees, officers, employees, and agents to cover possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss as a
result of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Trust itself is unable to meet its
obligations.

CUSTODIAN BANK: Chase Manhattan Bank, 4 Chase Metrotech Center, Brooklyn,
New York 11245 and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106
serve as custodians of the Trust's assets. Services provided by the custodian
include (a) settling portfolio purchases and sales, (b) reporting failed trades,
(c) identifying and collecting portfolio income, and (d) providing safekeeping
of securities. The custodian takes no part in determining the Funds' investment
policies or in determining which securities are sold or purchased by the Fund.

INDEPENDENT AUDITORS: KPMG Peat Marwick LLP, 1000 Walnut, Suite 1600,
Kansas City, Missouri 64106, serve as the Trust's independent auditors. KPMG
audits the annual report and provides tax and other services.

TRUSTEES AND OFFICERS

The Trust's activities are overseen by a Board of Trustees, including six
independent Trustees. The individuals listed below whose names are marked by an
asterisk (*) are "interested persons" of the Trust (as defined in the Investment
Company Act of 1940) by virtue of, among other considerations, their affiliation
with either the Trust; the Trust's investment advisor, Benham Management
Corporation; the Trust's agent for transfer and administrative services,
American Century Services Corporation (ACS); the Trust's distribution agent,
American Century Investment Services, Inc. (ACIS); their parent corporation,
American Century Companies, Inc. (ACC) or ACC's subsidiaries; or other funds
advised by the Manager. Each Trustee listed below serves as Trustee or Director
of other funds advised by the Manager. Unless otherwise noted, a date in
parentheses indicates the date the Trustee or officer began his or her service
in a particular capacity. The Trustees' and officers' address, with the
exception of Mr. Stowers III and Ms. Roepke, is 1665 Charleston Road, Mountain
View, California 94043. The address of Mr. Stowers III and Ms. Ropeke is 4500
Main Street, Kansas City, Missouri 64111.

TRUSTEES

*JAMES M. BENHAM, Chairman of the Board of Trustees (1985), President and
Chief Executive Officer (1996). Mr. Benham is also President and Chairman of
the Board of the Manager (1971), and a member of the Board of Governors of the
Investment Company Institute (1988). Mr. Benham has been in the securities
business since 1963, and he frequently comments through the media on economic
conditions, investment strategies, and the securities markets.

ALBERT A. EISENSTAT, independent Trustee (1995). Mr. Eisenstat is an
independent Director of each of Commercial Metals Co. (1982), Sungard Data
Systems (1991) and Business Objects S/A (1994). Previously, he served as Vice
President of Corporate Development and Corporate Secretary of Apple Computer
and served on its Board of Directors (1985 to 1993).

RONALD J. GILSON, independent Trustee (1995); Charles J. Meyers Professor
of Law and Business at Stanford Law School (1979) and the Mark and Eva Stern
Professor of Law and Business at Columbia University School of Law (1992);
counsel to Marron, Reid & Sheehy (a San Francisco law firm, 1984).

MYRON S. SCHOLES, independent Trustee (1985). Mr. Scholes is a principal
of Long-Term Capital Management (1993). He is also Frank E. Buck Professor of
Finance at the Stanford Graduate School of Business (1983) and a Director of
Dimensional Fund Advisors (1982) and the Smith Breeden Family of Funds (1992).
From August 1991 to June 1993, Mr. Scholes was a Managing Director of Salomon
Brothers Inc. (securities brokerage).

KENNETH E. SCOTT, independent Trustee (1985). Mr. Scott is Ralph M.
Parsons Professor of Law and Business at Stanford Law School (1972) and a
Director of RCM Capital Funds, Inc. (1994).

ISAAC STEIN, independent Trustee (1992). Mr. Stein is former Chairman of
the Board (1990 to 1992) and Chief Executive Officer (1991 to 1992) of Esprit
de Corp. (clothing manufacturer). He is a member of the Board of Raychem
Corporation (electrical equipment, 1993), President of Waverley Associates,
Inc. (private investment firm, 1983), and a Director of ALZA Corporation
(pharmaceuticals, 1987). He is also a

16 American Century Investments

Trustee of Stanford University (1994) and Chairman of Stanford Health Services
(hospital, 1994).

*JAMES E. STOWERS III, Trustee (1995). Mr Stowers III is President, Chief
Executive Officer and Director of ACC, ACS and ACIS.

OFFICERS

*JAMES M. BENHAM, President and Chief Executive Officer (1996).

*WILLIAM M. LYONS, Executive Vice President (1996); Executive Vice
President, Chief Operating Officer, General Counsel and Secretary of the
Manager, ACS, and ACIS.

*DOUGLAS A. PAUL, Secretary (1988), Vice President (1990), and General
Counsel (1990); Secretary and Vice President of the funds advised by the
Manager.

*C. JEAN WADE, Controller (1996).

*MARYANNE ROEPKE, CPA, Chief Financial Officer and Treasurer (1995); Vice
President and Assistant Treasurer of ACS.

The table on the next page summarizes the compensation that the Trustees of
the Funds received for the Funds' fiscal year ended May 31, 1996, as well as the
compensation received for serving as a Director or Trustee of all other funds
advised by the Manager.

As of July 31, 1996, the Trust's Officer's and Trustees, as a group, owned
less than 1% of each Fund's total shares outstanding.

INVESTMENT ADVISORY SERVICES

Each Fund has an investment advisory agreement with Benham Management
Corporation (the "Manager") dated June 1, 1995, that was approved by
shareholders on May 31, 1995.

Each Fund's agreement with the Manager continues for an initial period of
two years and thereafter from year to year provided that, after the initial two
year period, it is approved at least annually by vote of either a majority of
the Fund's shareholders or by vote of a majority of the Fund's Trustees,
including a majority of those Trustees who are neither parties to the agreement
nor interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.

Each investment advisory agreement is terminable on sixty days' written
notice, either by the Fund or by the Manager, to the other party, and terminates
automatically in the event of its assignment.

Pursuant to the investment advisory agreement, the Manager provides the
Funds with investment advice and portfolio management services in accordance
with each Fund's investment objectives, policies, and restrictions. The Manager
determines what securities will be purchased and sold by the Funds and assist
the Trust's officers in carrying out decisions made by the Board of Trustees.

For these services, each Fund pays the Manager a monthly investment
advisory fee based on a percentage of the Trust's average daily net assets to
the following investment advisory fee schedule:

Investment advisory fees paid by each Fund to the Manager for the fiscal
periods ended May 31, 1996, 1995, and 1994 are indicated in the following table.

Statement of Additional Information 17

Fee amounts are net of amounts reimbursed or recouped as described under the
section titled "Expense Limitation Agreement."

Investment Advisory Fees (net of reimbursements)
- -----------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -----------------------------------------------------------------------------
Money Market Fund $331,599 $367,683 $397,311
Intermediate-Term Fund 262,048 234,926 275,656
Long-Term Fund 197,247 165,409 218,160
- -----------------------------------------------------------------------------

TRANSFER AND ADMINISTRATIVE SERVICES

American Century Services Corporation, 4500 Main Street, Kansas City,
Missouri, 64111, (ACS) acts as transfer, administrative services and dividend
paying agent for the Funds. ACS provides facilities, equipment and personnel to
the Funds and is paid for such services by the Funds. For administrative
services, each Fund pays ACS 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 advised by the Manager to the following administrative fee rate schedule:

Group Assets Administrative Fee Rate
- -----------------------------------------------------------------------------
up to $4.5 billion .11%
up to $6 billion .10
up to $9 billion .09
over $9 billion .08
- -----------------------------------------------------------------------------

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MAY 31, 1996

Ronald J. Gilson $473 (Money Market) Not Applicable Not Applicable $97,333
432 (Intermediate-Term)
412 (Long-Term)

Myron S. Scholes $479 (Money Market) Not Applicable Not Applicable $69,750
435 (Intermediate-Term)
414 (Long-Term)

Kenneth E. Scott $543 (Money Market) Not Applicable Not Applicable $78,273
480 (Intermediate-Term)
452 (Long-Term)

Ezra Solomon $575 (Money Market) Not Applicable Not Applicable $68,499
458 (Intermediate-Term)
414 (Long-Term)

Isaac Stein $486 (Money Market) Not Applicable Not Applicable $71,500
441 (Intermediate-Term)
420 (Long-Term)

Jeanne D. Wohlers $504 (Money Market) Not Applicable Not Applicable $73,750
453 (Intermediate-Term)
429 (Long-Term)
- --------------------------------------------------------------------------------------------------------------------------------
* Interested Trustees receive no compensation for their services as such.
** American Century family of funds includes nearly 70 no-load mutual funds.
</TABLE>

18 American Century Investments

For transfer agent services, each Fund pays ACS a monthly fee of $1.3958
for each shareholder account maintained and $1.35 for each shareholder
transaction executed during the month.

Administrative service and transfer agent fees paid by each Fund for the
fiscal years ended May 31, 1996, 1995, and 1994, are indicated in the following
tables. Fee amounts are net of reimbursements as described under the section
titled "Expense Limitation Agreement."

Administrative Fees
- -----------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -----------------------------------------------------------------------------
Money Market Fund $88,675 $103,791 $104,485
Intermediate-Term Fund 61,997 65,398 73,292
Long-Term Fund 49,774 49,352 59,711
- -----------------------------------------------------------------------------
Transfer Agent Fees
- -----------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -----------------------------------------------------------------------------
Money Market Fund $66,117 $65,409 $79,424
Intermediate-Term Fund 45,624 51,377 54,899
Long-Term Fund 41,782 43,687 46,314
- -----------------------------------------------------------------------------

DISTRIBUTION OF FUND SHARES

DIRECT FUND EXPENSES

Each Fund pays certain operating expenses that are not assumed by the
Manager or ACS. These include fees and expenses of the independent Trustees;
custodian, audit, tax preparation and pricing fees; fees of outside counsel and
counsel employed directly by the Trust; costs of printing and mailing
prospectuses, statements of additional information, proxy statements, notices,
confirmations, and reports to shareholders; fees for registering the Fund's
shares under federal and state securities laws; brokerage fees and commissions;
trade association dues; costs of fidelity and liability insurance policies
covering the Fund; costs for incoming WATS lines maintained to receive and
handle shareholder inquiries; and organizational costs.

EXPENSE LIMITATION AGREEMENT

The Manager may recover amounts (representing expenses in excess of the
contractual limit) reimbursed to the Funds during the preceding 11 months if,
and to the extent that, for any given month, a Funds' expenses were less than
the lower of the contractual or voluntary expense limit in effect at that time.
The expense limit is subject to annual renewal. The Manager has agreed to limit
each Fund's expenses to a specified percentage of average daily net assets until
May 31, 1997, as listed below.

1997 1996
Fund Expense Limit Expense Limit
- -----------------------------------------------------------------------------
Money Market Fund .67% .64%
Intermediate-Term Fund .67% .69%
Long-Term Fund .67% .69%
- -----------------------------------------------------------------------------

Net expense limitations/recoupments for the fiscal years ended May 31,
1996, 1995, and 1994 are indicated in the table that follows.

Net Expense Limitations (Recoupments)
- -----------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -----------------------------------------------------------------------------
Money Market
Fund $76,481 $88,328 $93,387

Intermediate-
Term Fund 23,199 69,263 68,582

Long-Term Fund 31,698 64,101 62,290
- -----------------------------------------------------------------------------

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Funds' shares are continuously offered at net asset value. Share
certificates are issued (without charge) only when requested in writing.
Certificates are not issued for fractional shares. Dividend and voting rights
are not affected by the issuance of certificates.

American Century may reject or limit the amount of an investment to prevent
any one shareholder or affiliated group from controlling the Trust or one of its

Statement of Additional Information 19

series; to avoid jeopardizing a series' tax status; or whenever, in management's
opinion, such rejection is in the Trust's or a series' best interest.

As of July 31, 1996, to the knowledge of the Trust, the shareholders listed
in the chart below were record holders of 5% or more of the outstanding shares
of the individual Funds.

FUND MONEY MARKET FUND
- -----------------------------------------------------------------------------
Ellen Haebler Skove
Shareholder Name and 48 Card Sound Road
Address Key Largo, FL 33037
- -----------------------------------------------------------------------------
# of Shares Held 4,727,046.750
- -----------------------------------------------------------------------------
% of Total Shares
Outstanding 5.0%
- -----------------------------------------------------------------------------

FUND INTERMEDIATE-TERM FUND
- -----------------------------------------------------------------------------
Charles Schwab & Co.
Shareholder Name and 101 Montgomery Street
Address San Francisco, CA 94101
- -----------------------------------------------------------------------------
# of Shares Held 741,943.009
- -----------------------------------------------------------------------------
% of Total Shares
Outstanding 12.7%
- -----------------------------------------------------------------------------

FUND LONG-TERM FUND
- -----------------------------------------------------------------------------
Charles Schwab & Co.
Shareholder Name and 101 Montgomery Street
Address San Francisco, CA 94101
- -----------------------------------------------------------------------------
# of Shares Held 671,485.453
- -----------------------------------------------------------------------------
% of Total Shares
Outstanding 14.8%

Pursuant to Rule 18f-1 under the Investment Company Act of 1940, the Trust
has elected to pay in cash all requests for redemption by any shareholder of
record, limited in amount with respect to each shareholder during any 90-day
period to the lesser of $250,000 or 1% of the net assets of the Fund in which
shares are held at the beginning of such period. This election is irrevocable
without the prior approval of the Securities and Exchange Commission. With
respect to redemption requests in excess of the above limit, it is the intention
of the Trust to make payments in cash, although the Trustees reserve the right
to make payments in whole or in part in securities under emergency circumstances
or when payment in cash would impair the liquidity of a Fund to the detriment of
shareholders. In this event, the securities would be valued in the same manner
applied in valuing the Funds' assets for purposes of calculating NAV. An
investor may incur brokerage costs upon the sale of such securities.

Share purchases and redemptions are governed by California law.

OTHER INFORMATION

The Funds' investment advisor has been continuously registered with the
Securities and Exchange Commission (SEC) under the Investment Advisers Act of
1940 since December 14, 1971. The Trust has filed a registration statement under
the Securities Act of 1933 and the Investment Company Act of 1940 with respect
to the shares offered. Such registrations do not imply approval or supervision
of the Trust or the advisor by the Securities Exchange Commission.

For further information, refer to registration statements and exhibits on
file with the SEC in Washington, DC. These documents are available upon payment
of a reproduction fee. Statements in the Prospectus and in this Statement of
Additional Information concerning the contents of contracts or other documents,
copies of which are filed as exhibits to the registration statement, are
qualified by reference to such contracts or documents.