AMERICAN CENTURY GOVERNMENT INCOME TRUST, 497, 1997-01-16

AMERICAN CENTURY GOVERNMENT INCOME 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)

Government Agency
Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury
ARM Fund
GNMA Fund

[front cover]

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

AMERICAN CENTURY GOVERNMENT INCOME TRUST

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.
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.............................13
Valuation of Portfolio Securities..................14
Performance........................................15
Taxes..............................................16
About the Trust....................................17
Trustees and Officers..............................18
Investment Advisory Services.......................19
Transfer and Administrative Services...............21
Distribution of Fund Shares........................22
Direct Fund Expenses...............................22
Expense Limitation Agreement.......................22
Additional Purchase and Redemption
Information.....................................22
Other Information..................................23

NOTE: Throughout this document, Short-Term Treasury, Intermediate-Term Treasury,
Long-Term Treasury, ARM Fund, and GNMA 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 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.

REPURCHASE AGREEMENTS (ARM FUND AND GNMA FUND)

The Funds may engage in repurchase agreements collateralized by U.S. Treasury
bills, notes, and bonds, or by mortgage-backed GNMA certificates, which are
guaranteed by the Government National Mortgage Association and backed by the
full faith and credit of the U.S. government.

Repos may involve risks not associated with direct investments in U.S.
government debt securities. If the seller fails to complete the terms of the
agreement, the Fund may experience delays in recovering its cash or incur costs
in the disposal of securities it has purchased under the agreement. The Fund
could also suffer a loss if the securities decline in value before they can be
sold in the open market.

In a repurchase agreement (a "repo"), the Fund buys a security at one price and
simultaneously agrees to sell it back to the seller at an agreed upon price on a
specified date (usually within seven days from the date of purchase) or on
demand. The repurchase price exceeds the purchase price by an amount that
reflects an agreed upon rate of return and that is unrelated to the interest
rate on the underlying security. Delay or losses could result if the other party
to the agreement defaults or becomes bankrupt.

The advisor attempts to minimize the risks associated with repurchase agreements
by adhering to the following criteria:

(1) Limiting the securities acquired and held by a Fund under repurchase
agreements to U.S. government securities;

(2) Entering into repurchase agreements only with primary dealers in U.S.
government securities (including bank affiliates) that are deemed to be
creditworthy under guidelines established by a nationally recognized
statistical rating organization (a "rating agency") and approved by the
Funds' Board of Trustees;

(3) Monitoring the creditworthiness of all firms involved in repurchase
agreement transactions;

(4) Requiring the seller to establish and maintain collateral equal to 102% of
the agreed upon resale price, provided however that the Board of Trustees
may determine that a broker-dealer's credit standing is sufficient to allow
collateral to fall to as low as 101% of the agreed upon resale price before
the broker-dealer deposits additional securities with the Funds' custodian;

(5) Investing no more than 10% of a Fund's total assets in repurchase
agreements of more than seven days' duration (although the underlying
securities usually will have longer maturities);

(6) Taking delivery of securities subject to repurchase agreements and holding
them in a segregated account at the Funds' custodian bank.

The Funds have received permission from the SEC to participate in pooled
repurchase agreements collateralized by U.S. government securities with other
mutual funds advised by its investment advisor, Benham Management Corporation
(the "Manager"). Pooled repos are expected to increase the income a Fund can
earn from repo transactions without increasing the risks associated with these
transactions.

Under the Investment Company Act of 1940 (the "1940 Act"), repos are considered
to be loans.

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS (ALL FUNDS)

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. Although a Fund will make commitments to purchase or sell
securities with the intention of actually receiving or delivering them, it may
sell the securities before the settlement date if doing so is deemed advisable
as a matter of investment strategy.

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

2 American Century Investments

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 such
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, by
selling 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.

ROLL TRANSACTIONS

A Fund may sell a security and at the same time make a commitment to purchase
the same or a comparable security at a future date and specified price.
Conversely, a Fund may purchase a security and at the same time make a
commitment to sell the same or a comparable security at a future date and
specified price. These types of transactions are executed simultaneously in what
are known as "dollar-rolls", "cash-and-carry", or financing transactions. For
example, a broker-dealer may seek to purchase a particular security that a 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 Manager limits forward commitment
transactions (including roll transactions) to 35% of a Fund's total assets and
will not enter into when-issued or forward commitment transactions with
settlement dates that exceed 120 days.

In engaging in roll transactions, the Fund will maintain until the settlement
date a segregated account consisting of cash, cash equivalents, or high-quality
liquid securities in an amount sufficient to meet the purchase price, as
described above.

INTEREST RATE RESETS ON FLOATING-RATE U.S. GOVERNMENT AGENCY SECURITIES

Interest rate resets on floating-rate U.S. government agency securities
generally occur at intervals of one year or less in response to changes in a
predetermined interest rate index. There are two main categories of indexes,
those based on U.S. Treasury securities and those derived from a calculated
measure, such as a cost of funds index. Commonly used indexes include the
three-month, six-month, and one-year Treasury bill rate; the two-year Treasury
note yield; the Eleventh District Federal Home Loan Bank Cost of Funds Index
(EDCOFI); and the London Interbank Offered Rate (LIBOR). Fluctuations in the
prices of floating-rate U.S. government agency securities are typically
attributed to differences between the coupon rates on these securities and
prevailing market interest rates between interest rate reset dates.

MASTER DEMAND NOTES (GOVERNMENT AGENCY ONLY)

Government Agency may acquire variable-rate master demand notes issued by U.S.
government agencies such as the Student Loan Marketing Association. Master
demand notes allow the Fund to lend money at varying rates of interest under
direct agreements with borrowers. The Fund may adjust the amount of money loaned
under a master demand note daily or weekly up to the full amount specified in
the agreement, and the borrower may prepay up to the full amount of the loan
without penalty. Master demand notes may or may not be backed by bank letters of
credit. Although, as direct agreements between lenders and borrowers, there is
no secondary market for master demand notes, these instruments are redeemable
(immediately repayable by the borrower) at par plus accrued interest at any
time.

SECURITIES LENDING (ALL FUNDS EXCEPT INTERMEDIATE-TERM TREASURY)

The Manager may seek approval from the Board of Trustees to engage in securities
lending on behalf of the Funds. Such loans would be made with the intention of
allowing the Funds to earn additional income. If a borrower defaulted on a
securities loan, the lending Fund could experience delays in recovering the
securities it loaned; if the value of the loaned securities increased in the
meantime, the Fund could suffer a loss. To minimize the risk of default on
securities loans, the Manager adheres to the following guidelines prescribed by
the Board of Trustees:

(1) TYPE AND AMOUNT OF COLLATERAL. At the time a loan is made, the Fund must
receive, from or on

Statement of Additional Information 3

behalf of a borrower, collateral consisting of any combination of cash and
full faith and credit U.S. government securities equal to not less than
102% of the market value of the securities loaned. Cash collateral received
by a Fund in connection with loans of portfolio securities may be
commingled by the Funds' custodian with other cash and marketable
securities, provided that the loan agreement expressly allows such
commingling.

(2) ADDITIONS TO COLLATERAL. Collateral must be marked to market daily, and the
borrower must agree to add collateral to the extent necessary to maintain
the 102% level specified in guideline (1) above. The borrower must deposit
additional collateral no later than the business day following the business
day on which a collateral deficiency occurs or collateral appears to be
inadequate.

(3) TERMINATION OF LOAN. The Fund must have the option to terminate a loan of
portfolio securities at any time. The borrower must be obligated to
redeliver the borrowed securities within the normal settlement period
following receipt of the termination notice. The normal settlement period
for U.S. government securities is typically two trading days.

(4) REASONABLE RETURN ON LOAN. The borrower must agree that the Fund (a) will
receive all dividends, interest, or other distributions on loaned
securities and (b) will be paid a reasonable return on such loans either in
the form of a loan fee or premium or from the retention by the Fund of part
or all of the earnings and profits realized from the investment of cash
collateral in full faith and credit U.S. government securities.

(5) LIMITATIONS ON PERCENTAGE OF FUND ASSETS ON LOAN. A Fund's loans may not
exceed 331/3% of its total assets.

(6) CREDIT ANALYSIS. As part of the regular monitoring procedures set forth by
the Board of Trustees that the Manager follows to evaluate banks and
broker-dealers in connection with, for example, repurchase agreements and
municipal securities credit issues, the Manager will analyze and monitor
the creditworthiness of all borrowers with which portfolio lending
arrangements are contemplated or entered into.

MORTGAGE-BACKED SECURITIES (ARM FUND AND GNMA FUND)

Background. A mortgage-backed security represents an ownership interest in a
pool of mortgage loans. The loans are made by financial institutions to finance
home and other real estate purchases. As the loans are repaid, investors receive
payments of both interest and principal.

Like fixed-income securities such as U.S. Treasury bonds, mortgage-backed
securities pay a stated rate of interest over the life of the security. However,
unlike a bond, which returns principal to the investor in one lump sum at
maturity, mortgage-backed securities return principal to the investor in
increments over the life of the security.

Because the timing and speed of principal repayments vary, the cash flow on
mortgage securities is irregular. If mortgage holders sell their homes,
refinance their loans, prepay their mortgages, or default on their loans, the
principal is distributed pro rata to investors.

As with other fixed-income securities, the prices of mortgage securities
fluctuate in response to changing interest rates; when interest rates fall, the
prices of mortgage securities rise, and vice versa. Changing interest rates have
additional significance for mortgage-backed securities investors, however,
because they influence prepayment rates (the rates at which mortgage holders
prepay their mortgages), which in turn affect the yields on mortgage-backed
securities. When interest rates decline, prepayment rates generally increase.
Mortgage holders take advantage of the opportunity to refinance their mortgages
at lower rates with lower monthly payments. When interest rates rise, mortgage
holders are less inclined to refinance their mortgages. The effect of prepayment
activity on yield depends on whether the mortgage-backed security was purchased
at a premium or at a discount.

A Fund may get back principal sooner than it expected because of accelerated
prepayments. Under these circumstances, the Fund might have to reinvest returned
principal at rates lower than it would have earned if principal payments were
made on schedule. Conversely, a mortgage-backed security may exceed its
anticipated life if prepayment rates decelerate unexpectedly. Under these
circumstances, a Fund

4 American Century Investments

might miss an opportunity to earn interest at higher prevailing rates.

GINNIE MAE CERTIFICATES. The Government National Mortgage Association (GNMA or
Ginnie Mae) is a wholly owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The National Housing Act
of 1934 (Housing Act), as amended, authorizes Ginnie Mae to guarantee the timely
payment of interest and repayment of principal on certificates that are backed
by a pool of mortgage loans insured by the Federal Housing Administration under
the Housing Act, or by Title V of the Housing Act of 1949 (FHA Loans), or
guaranteed by the Veterans' Administration under the Servicemen's Readjustment
Act of 1944 (VA Loans), as amended, or by pools of other eligible mortgage
loans. The Housing Act provides that the full faith and credit of the U.S.
government is pledged to the payment of all amounts that may be required to be
paid under any guarantee. Ginnie Mae has unlimited authority to borrow from the
U.S. Treasury in order to meet its obligations under this guarantee.

Ginnie Mae certificates represent a pro rata interest in one or more pools of
the following types of mortgage loans: (a) fixed-rate level payment mortgage
loans; (b) fixed-rate graduated payment mortgage loans (GPMs); (c) fixed-rate
growing equity mortgage loans (GEMs); (d) fixed-rate mortgage loans secured by
manufactured (mobile) homes (MHs); (e) mortgage loans on multifamily residential
properties under construction (CLCs); (f) mortgage loans on completed
multifamily projects (PLCs); (g) fixed-rate mortgage loans that use escrowed
funds to reduce the borrower's monthly payments during the early years of the
mortgage loans (buydown mortgage loans); and (h) mortgage loans that provide for
payment adjustments based on periodic changes in interest rates or in other
payment terms of the mortgage loans.

FANNIE MAE CERTIFICATES. The Federal National Mortgage Association (FNMA or
Fannie Mae) is a federally chartered and privately owned corporation established
under the Federal National Mortgage Association Charter Act. Fannie Mae was
originally established in 1938 as a U.S. government agency designed to provide
supplemental liquidity to the mortgage market and was reorganized as a
stockholder-owned and privately managed corporation by legislation enacted in
1968. Fannie Mae acquires capital from investors who would not ordinarily invest
in mortgage loans directly and thereby expands the total amount of funds
available for housing. This money is used to buy home mortgage loans from local
lenders, replenishing the supply of capital available for mortgage lending.

Fannie Mae certificates represent a pro rata interest in one or more pools of
FHA Loans, VA Loans, or, most commonly, conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by a governmental agency) of
the following types: (a) fixed-rate level payment mortgage loans; (b) fixed-rate
growing equity mortgage loans; (c) fixed-rate graduated payment mortgage loans;
(d) adjustable-rate mortgage loans; and (e) fixed-rate mortgage loans secured by
multifamily projects.

Fannie Mae certificates entitle the registered holder to receive amounts
representing a pro rata interest in scheduled principal and interest payments
(at the certificate's pass-through rate, which is net of any servicing and
guarantee fees on the underlying mortgage loans), any principal prepayments, and
a proportionate interest in the full principal amount of any foreclosed or
otherwise liquidated mortgage loan. The full and timely payment of interest and
repayment of principal on each Fannie Mae certificate is guaranteed by Fannie
Mae; this guarantee is not backed by the full faith and credit of the U.S.
government.

FREDDIE MAC CERTIFICATES. The Federal Home Loan Mortgage Corporation (FHLMC or
Freddie Mac) is a corporate instrumentality of the United States created
pursuant to the Emergency Home Finance Act of 1970 (FHLMC Act), as amended.
Freddie Mac was established primarily for the purpose of increasing the
availability of mortgage credit. Its principal activity consists of purchasing
first-lien conventional residential mortgage loans (and participation interests
in such mortgage loans) and reselling these loans in the form of mortgage-backed
securities, primarily Freddie Mac certificates.

Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a Freddie Mac certificate group) purchased by Freddie Mac. The mortgage
loans underlying Freddie Mac certificates

Statement of Additional Information 5

consist of fixed- or adjustable-rate mortgage loans with original terms to
maturity of between ten and thirty years, substantially all of which are secured
by first-liens on one- to four-family residential properties or multifamily
projects. Each mortgage loan must meet standards set forth in the FHLMC Act. A
Freddie Mac certificate group may include whole loans, participation interests
in whole loans, undivided interests in whole loans, and participations composing
another Freddie Mac certificate group.

Freddie Mac guarantees to each registered holder of a Freddie Mac certificate
the timely payment of interest at the rate provided for by the certificate.
Freddie Mac also guarantees ultimate collection of all principal on the related
mortgage loans, without any offset or deduction, but generally does not
guarantee the timely repayment of principal. Freddie Mac may remit principal at
any time after default on an underlying mortgage loan, but no later than 30 days
following (a) foreclosure sale, (b) payment of a claim by any mortgage insurer,
or (c) the expiration of any right of redemption, whichever occurs later, and in
any event no later than one year after demand has been made upon the mortgager
for accelerated payment of principal. Obligations guaranteed by Freddie Mac are
not backed by the full faith and credit of the U.S. government.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A CMO is a multiclass bond backed by
a pool of mortgage pass-through certificates or mortgage loans. CMO's may be
collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-through
certificates, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs, (c)
unsecuritized conventional mortgages, or (d) any combination thereof.

In structuring a CMO, an issuer distributes cash flow from the underlying
collateral over a series of classes called "tranches." Each CMO is a set of two
or more tranches, with average lives and cash flow patterns designed to meet
specific investment objectives. The average life expectancies of the different
tranches in a four-part deal, for example, might be two, five, seven, and twenty
years.

As payments on the underlying mortgage loans are collected, the CMO issuer pays
the coupon rate of interest to the bondholders in each tranche. At the outset,
scheduled and unscheduled principal payments go to investors in the first
tranches. Investors in later tranches do not begin receiving principal payments
until the prior tranches are paid off. This basic type of CMO is known as a
"sequential pay" or "plain vanilla" CMO.

Some CMOs are structured so that the prepayment or market risks are transferred
from one tranche to another. Prepayment stability is improved in some tranches
if other tranches absorb more prepayment variability.

The final tranche of a CMO often takes the form of a Z-bond, also known as an
"accrual bond" or "accretion bond." Holders of these securities receive no cash
until the earlier tranches are paid in full. During the period that the other
tranches are outstanding, periodic interest payments are added to the initial
face amount of the Z-bond but are not paid to investors. When the prior tranches
are retired, the Z-bond receives coupon payments on its higher principal balance
plus any principal prepayments from the underlying mortgage loans. The existence
of a Z-bond tranche helps stabilize cash flow patterns in the other tranches. In
a changing interest rate environment, however, the value of the Z-bond tends to
be more volatile.

As CMOs have evolved, some classes of CMO bonds have become more prevalent. The
planned amortization class (PAC) and targeted amortization class (TAC), for
example, were designed to reduce prepayment risk by establishing a sinking-fund
structure. PAC and TAC bonds assure to varying degrees that investors will
receive payments over a predetermined period under various prepayment scenarios.
Although PAC and TAC bonds are similar, PAC bonds are better able to provide
stable cash flows under various prepayment scenarios than TAC bonds because of
the order in which these tranches are paid.

The existence of a PAC or TAC tranche can create higher levels of risk for other
tranches in the CMO because the stability of the PAC or TAC tranche is achieved
by creating at least one other tranche-known as a companion bond, support, or
non-PAC bond--that absorbs the variability of principal cash flows. Because
companion bonds have a high degree of average life variability, they generally
pay a higher

6 American Century Investments

yield. A TAC bond can have some of the prepayment variability of a companion
bond if there is also a PAC bond in the CMO issue.

Floating-rate CMO tranches (floaters) pay a variable rate of interest that is
usually tied to the London Interbank Offered Rate (LIBOR). Institutional
investors with short-term liabilities, such as commercial banks, often find
floating-rate CMOs attractive investments. "Super floaters" (which float a
certain percentage above LIBOR) and "inverse floaters" (which float inversely to
LIBOR) are variations on the floater structure that have highly variable cash
flows.

STRIPPED MORTGAGE-BACKED SECURITIES (ARM FUND ONLY). Stripped mortgage
securities are created by segregating the cash flows from underlying mortgage
loans or mortgage securities to create two or more new securities, each with a
specified percentage of the underlying security's principal or interest
payments. Mortgage securities may be partially stripped so that each investor
class receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type of
security, known as an interest-only security, or IO, and all of the principal is
distributed to holders of another type of security known as a principal-only
security, or PO. Strips can be created in a pass-through structure or as
tranches of a CMO.

The market values of IOs and POs are very sensitive to interest rate and
prepayment rate fluctuations. POs, for example, increase (or decrease) in value
as interest rates decline (or rise). The price behavior of these securities also
depends on whether the mortgage collateral was purchased at a premium or
discount to its par value. Prepayments on discount coupon POs generally are much
lower than prepayments on premium coupon POs. IOs may be used to hedge a Fund's
other investments because prepayments cause the value of an IO strip to move in
the opposite direction from other mortgage-backed securities.

ADJUSTABLE-RATE MORTGAGE LOANS (ARMS). ARMs eligible for inclusion in a mortgage
pool will generally provide for a fixed initial mortgage interest rate for a
specified period of time, generally for either the first three, six, twelve,
thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter, the
interest rates are subject to periodic adjustment based on changes in an index.

ARMs have minimum and maximum rates beyond which the mortgage interest rate may
not vary over the lifetime of the loan. Certain ARMs provide for additional
limitations on the maximum amount by which the mortgage interest rate may adjust
for any single adjustment period. Negatively amortizing ARMs may provide
limitations on changes in the required monthly payment. Limitations on monthly
payments can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.

There are two types of indexes that provide the basis for ARM rate adjustments:
those based on market rates and those based on a calculated measure, such as a
cost of funds index or a moving average of mortgage rates. Commonly utilized
indexes include the one-year, three-year, and five-year constant maturity U.S.
Treasury rates (as reported by the Federal Reserve Board); the three-month
Treasury bill rate; the 180-day Treasury bill rate; rates on longer-term
Treasury securities; the Eleventh District Federal Home Loan Bank Cost of Funds
Index (EDCOFI); the National Median Cost of Funds Index; the one-month,
three-month, six-month, or one-year London Interbank Offered Rate (LIBOR); or
six-month CD rates. Some indexes, such as the one-year constant maturity
Treasury rate or three-month LIBOR, are highly correlated with changes in market
interest rates. Other indexes, such as the EDCOFI, tend to lag behind changes in
market rates and be somewhat less volatile over short periods of time.

The EDCOFI reflects the monthly weighted average cost of funds of savings and
loan associations and savings banks whose home offices are located in Arizona,
California, and Nevada (the Federal Home Loan Bank Eleventh District) and who
are member institutions of the Federal Home Loan Bank of San Francisco (the FHLB
of San Francisco), as computed from statistics tabulated and published by the
FHLB of San Francisco. The FHLB of San Francisco normally announces the Cost of
Funds Index on the last working day of the month following the month in which
the cost of funds was incurred.

Statement of Additional Information 7

One-year and three-year Constant Maturity Treasury (CMT) rates are calculated by
the Federal Reserve Bank of New York, based on daily closing bid yields on
actively traded Treasury securities submitted by five leading broker-dealers.
The median bid yields are used to construct a daily yield curve.

The National Median Cost of Funds Index, similar to the EDCOFI, is calculated
monthly by the Federal Home Loan Bank Board (FHLBB) and represents the average
monthly interest expenses on liabilities of member institutions. A median,
rather than an arithmetic mean, is used to reduce the effect of extreme numbers.

The London Interbank Offered Rate Index (LIBOR) is the rate at which banks in
London offer Eurodollars in trades between banks. LIBOR has become a key rate in
the U.S. domestic money market because it is perceived to reflect the true
global cost of money.

The Manager may invest in ARMs whose periodic interest rate adjustments are
based on new indexes as these indexes become available.

ZERO-COUPON SECURITIES

Zero-coupon U.S. Treasury securities are the unmatured interest coupons and
underlying principal portions of U.S. Treasury notes and bonds. Originally,
these securities were created by broker-dealers who bought Treasury notes and
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the notes and bonds. Some examples of zero-coupon securities sold
through custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and generic TRs
(Treasury Receipts).

The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities (STRIPS). In this program,
eligible securities may be presented to the U.S. Treasury and exchanged for
their component parts, which are then traded in book-entry form. (Book-entry
trading eliminated the bank credit risks associated with broker-dealer sponsored
custodial receipt programs.) STRIPS are direct obligations of the U.S.
government and have the same credit risks as other U.S. Treasury securities.

Principal and interest on bonds issued by the Resolution Funding Corporation
(REFCORP) have also been separated and issued as stripped securities. The U.S.
government and its agencies may issue securities in zero-coupon form. These
securities are referred to as "original issue zero-coupon securities."

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 the
Fund, as determined in accordance with the Investment Company Act of 1940.

AMERICAN CENTURY--BENHAM GOVERNMENT AGENCY MONEY MARKET FUND MAY NOT:

(1) Borrow money in excess of 331/3% of the market value of its total assets.
The Fund may borrow from a bank as a temporary measure to satisfy
redemption requests or for extraordinary or emergency purposes, 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 pledge or hypothecate not 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. The Fund may
also 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.

(2) Act as an underwriter of securities issued by others.

(3) 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 U.S. government securities and other debt securities secured by
real estate or interests therein.

(4) Engage in any short-selling operations.

(5) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the Board of Trustees or for the

8 American Century Investments

purchase of debt securities in accordance with the Fund's investment
objective and policies.

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

(7) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads.

(8) Invest in securities which 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.

(9) 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.

(10) Purchase or retain securities of any issuer if, to the knowledge of the
Trust'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.

AMERICAN CENTURY--BENHAM SHORT-TERM TREASURY FUND MAY NOT:

(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 hold more than 10% of the outstanding voting
securities of that issuer.

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

(3) Borrow money, except for temporary or emergency purposes, and then only
from a bank. Such borrowings may not exceed 331/3% of the Fund's total
assets.

(4) Underwrite 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 disposing of restricted securities.

(5) 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, more than 25% of the Fund's total
assets would be invested in the securities of companies whose principal
business activities are in the same industry.

(6) Purchase or sell real estate unless acquired as result of ownership of
securities or other instruments, provided that this limitation will not
prohibit the Fund from purchasing U.S. government securities secured by
real estate or interests therein.

(7) Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, provided that this limitation
will not prohibit the Fund from purchasing and selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities.

(8) Make loans, other than loans of portfolio securities pursuant to guidelines
established by the Board of Trustees, provided that this restriction will
not prohibit the Fund from purchasing debt securities in accordance with
its investment objectives and policies. Loans, in the aggregate, will be
limited to 331/3% of the Fund's total assets.

AMERICAN CENTURY--BENHAM INTERMEDIATE-TERM TREASURY FUND MAY NOT:

(1) Purchase the securities of any issuer other than the U.S. Treasury. This
restriction shall not apply to repurchase agreements consisting of U.S.
government securities or to purchases by the Fund of shares of other
investment companies, provided that not more than 3% of such investment
company's outstanding shares would be held by the Fund, not more than 5% of
the value of the Fund's assets would be invested in shares of such company,
and not more than 10% of the

Statement of Additional Information 9

value of the Fund's assets would be invested in shares of investment
companies in the aggregate.

(2) Engage in any short-selling operations.

(3) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads.

(4) Purchase or sell real estate, commodities, or commodity contracts, or buy
and sell foreign exchange.

(5) Purchase securities for which the Fund might be liable for further payment
or liability.

(6) Invest in portfolio securities that the Fund may not be free to sell to the
public without registration under the Securities Act of 1933 or the taking
of similar actions under other securities laws relating to the sale of
securities.

(7) Issue or sell any class of senior security, except to the extent that notes
evidencing temporary borrowing might be deemed such.

(8) Lend money other than through the purchase of debt securities in accordance
with its investment policy (this restriction does not apply to repurchase
agreements).

(9) Borrow money except from a bank as a temporary measure to satisfy
redemption requests, or for extraordinary or emergency purposes and then
only in an amount not exceeding 331/3% of the market value of the Fund's
total assets, so 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 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.

AMERICAN CENTURY--BENHAM LONG-TERM TREASURY FUND MAY NOT:

(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 hold more than 10% of the outstanding voting
securities of that issuer.

(3) Borrow money, except for temporary or emergency purposes, and then only
from a bank. Such borrowings may not exceed 331/3% of the Fund's total
assets.

(4) Underwrite 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 disposing of restricted securities.

(6) Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments, provided that this limitation will not
prohibit the Fund from purchasing U.S. government securities secured by
real estate or interests therein.

AMERICAN CENTURY--BENHAM ADJUSTABLE RATE GOVERNMENT SECURITIES FUND MAY NOT:

(1) Borrow money in excess of 331/3% of the market value of its total assets,
and then only from a

10 American Century Investments

bank and as a temporary measure to satisfy redemption requests or 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 pledge
or hypothecate not 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) Act as an underwriter of securities issued by others.

(4) Engage in any short-selling operations.

(5) Make loans to others, except for the lending of portfolio securities
pursuant to guidelines established by the Board of Trustees or for the
purchase of debt securities in accordance with the Fund's investment
objective and policies.

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

(7) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads.

(8) 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.

(10) 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.

(11) Purchase or retain securities of any issuer if, to the knowledge of the
Trust'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.

AMERICAN CENTURY--BENHAM GNMA FUND MAY NOT:

(1) Borrow money in excess of 331/3% of the market value of its total assets,
and then only from a bank and as a temporary measure to satisfy redemption
requests or 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 pledge or hypothecate not 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) Act as an underwriter of securities issued by others.

(4) Engage in any short-selling operations.

(6) Purchase any equity securities in any companies, including warrants or
bonds with warrants

Statement of Additional Information 11

attached, or any preferred stocks, convertible bonds, or convertible
debentures.

(7) Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads.

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

Some of 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.

AMERICAN CENTURY--BENHAM GOVERNMENT AGENCY MONEY MARKET FUND MAY NOT:

(a) Invest in oil, gas, or other mineral leases.

AMERICAN CENTURY--BENHAM SHORT-TERM TREASURY FUND MAY NOT:

(a) Engage in any short-selling operations, provided that transactions in
futures and options will not constitute selling securities short.

(b) 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 will not constitute purchasing securities on
margin.

(d) Purchase restricted securities.

(e) 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.

(f) Purchase or sell futures contracts or put or call options, provided that
this restriction will not apply to options attached to, or acquired or
traded together with, their underlying securities; nor will it apply to
securities that incorporate features similar to options or futures
contracts.

(g) Purchase the securities of other investment companies except in the open
market where no commission except the ordinary broker's commission is paid
or purchase securities issued by other open-end investment companies,
provided that this restriction will not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.

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

(i) Invest in oil, gas, or other mineral exploration or development programs or
leases.

(j) Purchase securities of any issuer if, to the knowledge of the Fund's
investment advisor, those Trustees and officers of the Trust and those
Trustees and officers of the investment advisor who individually own more
than 0.5% of the outstanding securities of such issuer, together own
beneficially more than 5% of such issuer's securities.

(k) Invest more than 15% of the Fund's total assets in the securities of
issuers which together with any predecessors have a record of less than
three years continuous operation and securities of issuers which are
restricted as to disposition (including 144A securities).

12 American Century Investments

AMERICAN CENTURY--BENHAM LONG-TERM TREASURY FUND MAY NOT:

(a) Engage in any short-selling operations, provided that transactions in
futures and options will not constitute selling securities short.

(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 Fund's net assets would
be invested in illiquid securities.

(e) Purchase or sell futures contracts or put or call options, provided that
this restriction will not apply to options attached to, or acquired or
traded together with, their underlying securities; nor will it apply to
securities that incorporate features similar to options or futures
contracts.

(f) Purchase the securities of other investment companies except in the open
market where no commission except the ordinary broker's commission is paid
or purchase securities issued by other open-end investment companies,
provided that this restriction will not apply to securities received as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.

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

(h) Invest in oil, gas, or other mineral exploration or development programs or
leases.

(i) Purchase securities of any issuer if, to the knowledge of the Fund's
investment advisor, those Trustees and officers of the Trust, and those
Trustees and officers of the investment advisor who individually own more
than 0.5% of the outstanding securities of such issuer, together own
beneficially more than 5% of such issuer's securities.

(j) Invest more than 15% of the Fund's total assets in the securities of
issuers which together with any predecessors have a record of less than
three year's continuous operation and securities of issuers which are
restricted as to disposition (including 144A securities).

(k) Purchase restricted securities.

AMERICAN CENTURY--BENHAM ADJUSTABLE RATE GOVERNMENT SECURITIES FUND MAY NOT:

(a) Invest in oil, gas, or other mineral leases.

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 from the Board of Trustees that may be issued 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.

U.S. government securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank that makes
a market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.

On behalf of the Funds, the Manager transacts in round lots ($100,000 to $10
million or more) whenever possible. Since commissions are not charged for
round-lot transactions of U.S. Treasury securities, the Funds' transaction costs
consist solely of custodian charges and dealer mark-ups. Each Fund may hold its

Statement of Additional Information 13

portfolio securities to maturity or sell or swap them for others, depending upon
the level and slope of, and anticipated changes in, the yield curve. The Funds
paid no brokerage commissions during the fiscal year ended March 31, 1996.

The following table illustrates the portfolio turnover rates for each Fund
(except Government Agency) for the fiscal years ended March 31, 1996, and 1995.

Portfolio Turnover Rates
- ----------------------------------------------------------------
Fiscal Year Fiscal Year
Fund 1996 1995
- ----------------------------------------------------------------
Short-Term Treasury 224.03% 140.82%
Intermediate-Term Treasury 167.89% 92.35%
Long-Term Treasury 112.35% 146.81%
ARM Fund 221.35% 60.29%
GNMA Fund 63.54% 119.56%
- ----------------------------------------------------------------

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.

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 on portfolio securities
are accrued daily.

Securities held by GOVERNMENT AGENCY are valued on the basis of 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. Although 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 valuation method is permitted in accordance with Rule 2a-7
under the 1940 Act. Under the Rule, a fund such as Government Agency, holding
itself out as a money market fund, must adhere to certain quality and maturity
criteria which are described in the Prospectus.

The Board of Trustees has established procedures designed to stabilize the
Government Agency's NAV at $1.00 per share to the extent reasonably possible.
These procedures require the Fund'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 action, if any, should be taken. If such deviation exceeds
.50%, the Fund'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.

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.

Most securities held by the VARIABLE-PRICE FUNDS are valued at current market
value as provided by an independent pricing service. Other securities are priced
at fair value as determined in good faith pursuant to guidelines established by
the Funds' Board of Trustees.

14 American Century Investments

PERFORMANCE

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

For GOVERNMENT AGENCY, 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 March 31, 1996, Government Agency's yield was
4.73% and its effective yield was 4.84%.

For the VARIABLE-PRICE FUNDS, 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

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.

Each Variable-Price Fund's yield for the 30-day period ended March 31, 1996, is
indicated in the following table.

Fund 30-day Yield
- --------------------------------------------------
Short-Term Treasury 5.02%
Intermediate-Term Treasury 5.43
Long-Term Treasury 6.18
ARM Fund 5.43
GNMA Fund 6.86
- --------------------------------------------------

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 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
returns represent averaged figures as opposed to actual year-to-year
performance.

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

Average Annual Total Returns
- --------------------------------------------------------------------------------
Life-of-
Fund One-Year Five-Years Ten-Years Fund
- --------------------------------------------------------------------------------
Government Agency1 5.35% 4.17% N/A 4.98%
Short-Term Treasury2 6.71 N/A N/A 4.35
Intermediate-Term
Treasury3 8.42 7.14 6.85% 8.99
Long-Term Treasury2 13.46 N/A N/A 7.26
ARM Fund4 6.42 N/A N/A 4.62
GNMA Fund5 10.08 7.93 8.50 8.99
- --------------------------------------------------------------------------------

1 Commenced operations on December 5, 1989.
2 Commenced operations on September 8, 1992.
3 Commenced operations on May 16, 1980.
4 Commenced operations on September 3, 1991.
5 Commenced operations on September 23, 1985.

Statement of Additional Information 15

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) in order to
illustrate the relationship of these factors and their contributions to total
return. 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 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

Each Fund intends to qualify each year 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 as
dividends to shareholders.

Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, a Fund must distribute during each calendar year
an amount equal to the sum of (a) at least 98% if its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31 of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.

Under the Code, dividends derived from interest, and any short-term capital
gains, are federally taxable to shareholders as ordinary income, regardless of
whether such dividends are taken in cash or reinvested in additional shares.
Distributions made from a Fund's net realized long-term capital gains and
designated as capital gain dividends are taxable to shareholders as long-term
capital gains, regardless of the length of time shares are held. Corporate
investors are not eligible for the dividends-received deduction with respect to
distributions from the Funds. A distribution will be treated as paid on December
31st of a calendar year if it is declared by a Fund in October, November or
December of the year with a record date in such a month and paid by the Fund
during

16 American Century Investments

January of the following year. Such distributions will be taxable to
shareholders in the calendar year the distributions are declared, rather than
the calendar year in which the distributions are received.

Upon redeeming, selling, or exchanging shares of a Variable-Price Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares liquidated. The gain or loss generally will be long-term or
short-term depending on the length of time the shares were held. However, a loss
recognized by a shareholder in the disposition of shares on which capital gain
dividends were paid (or deemed paid) before the shareholder had held his or her
shares for more than six months would be treated as a long-term capital loss for
tax purposes to the extent of capital gain dividends paid (or deemed paid).

As of March 31, 1996, capital loss carryovers were as follows: $7,505,846
(Intermediate-Term Treasury), $857,191 (Long-Term Treasury), $69,205,630 (ARM
Fund), and $23,041,420 (GNMA Fund). All loss carryovers will expire during the
period March 31, 2000, through March 31, 2004. A Fund will not make capital gain
distributions to its shareholders until all of its capital loss carryovers have
been offset or expired.

The Funds may invest in obligations issued at a discount. In that case, a
portion of the discount element generally is included in the Fund's investment
company taxable income in each taxable period in which the obligation is held.
Such amounts are subject to the Fund's tax-related distribution requirements
even if not received by the Fund in cash in that period.

Dividends paid by Government Agency, Short-Term Treasury, Intermediate-Term
Treasury, and Long-Term Treasury are exempt from state personal income taxes in
all states to the extent these Funds derive their income from debt securities of
the U.S. government, whose interest payments are state tax-exempt.

The information above is only a summary of some of the tax considerations
generally affecting the Funds and their shareholders. No attempt has been made
to discuss individual tax consequences. The Funds' distributions may also be
subject to state, local, or foreign taxes. To determine whether a Fund is 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 Government Income Trust (the "Trust") (formerly known as Benham
Government Income Trust) is a registered open-end management investment company
that was organized as a Massachusetts business trust on July 24, 1985.
Currently, there are six series of the Trust as follows: American
Century--Benham Government Agency Money Market Fund (formerly known as Benham
Government Agency Fund), American Century--Benham Short-Term Treasury Fund
(formerly known as Benham Short-Term Treasury and Agency Fund), American
Century--Benham Intermediate-Term Treasury Fund (formerly known as Benham
Treasury Note Fund), American Century--Benham Long-Term Treasury Fund (formerly
known as Benham Long-Term Treasury and Agency Fund), American Century--Benham
Adjustable Rate Government Securities Fund (formerly known as Benham Adjustable
Rate Government Securities Fund), and American Century--Benham GNMA Fund
(formerly known as Benham GNMA Income Fund). The Board of Trustees may create
additional series from time to time.

The Declaration of Trust permits the 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 has instituted dollar-based voting, meaning that the number of votes
you are entitled to is based upon the dollar value of your investment. The
election of Trustees is determined by the votes received from all Trust
shareholders, without regard to whether a majority of shareholders of any one
series voted in favor of a particular nominee or all nominees as a group. Shares
of each series have equal rights as to dividends and distributions declared by
the series and in the net assets of such series upon its liquidation or
dissolution.

Statement of Additional Information 17

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 because of shareholder
liability is limited to circumstances in which both inadequate insurance exists
and the Trust is unable to meet its obligations.

CUSTODIAN BANK: Chase Manhattan Bank, Chase Metrotech Center, Brooklyn, New York
11245 and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64106, serve
as custodians of the Funds' 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 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, serves as the Trust's independent auditors and provides
services including (a) audit of annual financial statements and (b) preparation
of annual federal income tax returns filed on behalf of the Fund.

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. 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

18 American Century Investments

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 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 next page summarizes the compensation that the Trustees of the
Funds received for the Funds' fiscal year ended March 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 outstanding shares of each Fund.

INVESTMENT ADVISORY SERVICES

The Funds have an investment advisory agree-ment 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 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 family
of 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
shareholders or by vote of either a majority of the Trust'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 Fund's 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 each 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 assist the Trust's
officers in carrying out decisions made by the Board of Trustees.

Statement of Additional Information 19

TRUSTEE COMPENSATION FOR THE FISCAL YEAR ENDED MARCH 31, 1996

Aggregate Pension or Retirement Estimated Total Compensation
Name of Compensation Benefits Accrued As Part Annual Benefits From Each Fund and Fund
Trustee* From Each Fund of Fund Expenses Upon Retirement Complex** Paid to Trustees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert Eisenstat $267 (Government Agency) Not Applicable Not Applicable $29,500
20 (Short-Term)
165 (Intermediate-Term)
55 (Long-Term)
165 (ARM)
593 (GNMA)

Ronald J. Gilson $1,450 (Government Agency) Not Applicable Not Applicable $79,833
885 (Short-Term)
1,222 (Intermediate-Term)
929 (Long-Term)
1,252 (ARM)
2,178 (GNMA)

Myron S. Scholes $1,776 (Government Agency) Not Applicable Not Applicable $69,500
1,066 (Short-Term)
1,492 (Intermediate-Term)
1,110 (Long-Term)
1,549 (ARM)
2,683 (GNMA)

Kenneth E. Scott $2,032 (Government Agency) Not Applicable Not Applicable $75,773
1,084 (Short-Term)
1,649 (Intermediate-Term)
1,169 (Long-Term)
2,702 (ARM)
3,258 (GNMA)

Ezra Solomon $1,765 (Government Agency) Not Applicable Not Applicable $70,249
1,060 (Short-Term)
1,481 (Intermediate-Term)
1,118 (Long-Term)
1,523 (ARM)
2,661 (GNMA)

Isaac Stein $1,791 (Government Agency) Not Applicable Not Applicable $70,500
1,068 (Short-Term)
1,503 (Intermediate-Term)
1,120 (Long-Term)
1,557 (ARM)
2,727 (GNMA)

Jeanne D. Wohlers $1,825 (Government Agency) Not Applicable Not Applicable $71,250
1,069 (Short-Term)
1,521 (Intermediate-Term)
1,127 (Long-Term)
1,571 (ARM)
2,799 (GNMA)
- --------------------------------------------------------------------------------------------------------------------------
* Interested Trustees receive no compensation for their services as such.
** American Century family of funds includes nearly 70 no-load mutual funds.
</TABLE>

20 American Century Investments

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:

.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 each Fund to the Manager for the fiscal years
ended March 31, 1996, 1995 and 1994, are indicated in the following table. Fee
amounts are net of reimbursements as described below.

Investment Advisory Fees*
- -------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -------------------------------------------------------------------------------
Government Agency $1,104,214 $1,014,951 $1,073,248
Short-Term Treasury 118,721 60,440 11,846
Intermediate-Term
Treasury 867,876 875,087 1,020,441
Long-Term Treasury 174,665 33,915 7,598
ARM Fund 971,274 1,646,614 3,282,058
GNMA Fund 2,980,327 2,807,230 3,322,727
- -------------------------------------------------------------------------------
*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 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 a monthly fee of $1.3958 for
each shareholder account maintained and $1.35 for each shareholder transaction
executed during that month.

Administrative service and transfer agent fees paid by each Fund for the fiscal
years ended March 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
- -------------------------------------------------------------------
Government Agency $475,745 $478,410 $564,901
Short-Term Treasury 39,657 30,662 21,286
Intermediate-Term
Treasury 301,079 312,814 378,294
Long-Term Treasury 69,302 23,884 19,336
ARM Fund 423,862 595,079 1,215,816
GNMA Fund 1,149,339 1,003,636 1,232,514
- -------------------------------------------------------------------
*Net of Reimbursements

Transfer Agent Fees
- -------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- -------------------------------------------------------------------
Government Agency $591,421 $636,462 $863,944
Short-Term Treasury 44,415 36,254 29,973
Intermediate-Term
Treasury 283,949 317,653 356,584
Long-Term Treasury 120,818 37,365 26,909
ARM Fund 329,830 684,702 1,141,251
GNMA Fund 1,033,782 1,178,768 1,348,081
- -------------------------------------------------------------------
*Net of Reimbursements

Statement of Additional Information 21

DISTRIBUTION OF FUND SHARES

The Funds' shares are distributed by American Century Investment Services, Inc.
(ACIS), 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 ACIS 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, notices, confirmations, and reports to shareholders;
fees for registering the Funds' 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 has agreed to limit each Fund's expenses to a specified percentage
of its average daily net assets during the year ending May 31, 1997, as follows:

Government Agency .60%
Short-Term Treasury .60%
Intermediate-Term Treasury .60%
Long-Term Treasury .60%
ARM Fund .60%
GNMA Fund .60%

The Manager may recover amounts absorbed on behalf of the Funds during the
preceding 11 months if, and to the extent that, for any given month, a Fund's
expenses were less than the expense limit in effect at that time. Each Fund's
expense limit for the years ending May 31, 1996 and 1995, as a percentage of
average daily net assets, was as follows:

1996 1995
- -------------------------------------------------------------
Government Agency .50% .50%
Short-Term Treasury .65% .66%
Intermediate-Term
Treasury .65% .66%
Long-Term Treasury .65% .66%
ARM Fund .65% .60%
GNMA Fund .65% .66%
- -------------------------------------------------------------

Net amounts absorbed or recouped for the fiscal years ended March 31, 1996,
1995, and 1994, are indicated in the following table:

Net Expense Absorbed (Recouped)
- ----------------------------------------------------------------------
Fiscal Fiscal Fiscal
Fund 1996 1995 1994
- ----------------------------------------------------------------------
Government Agency $267,261 $323,152 $451,622
Short-Term Treasury (4,468) 25,537 45,651
Intermediate-Term
Treasury 0 0 0
Long-Term Treasury 25,358 33,125 44,468
ARM Fund (20,799) 11,331 0
GNMA Fund 0 0 0
- ----------------------------------------------------------------------

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

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

22 American Century Investments

FUND SHORT-TERM TREASURY
- --------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 603,137.117
% of Total Shares
Outstanding 17.6%
- --------------------------------------------------------
Shareholder Name and J. Harris Morgan
Address P.O. Box 556
Greenville, TX 75401
# of Shares Held 311,870.707
% of Total Shares
Outstanding 9.1%
- --------------------------------------------------------
Shareholder Name and Allied Clearings Co.
Address P.O. Box 94303
Pasadena, CA 91109
# of Shares Held 284,388.710
% of Total Shares
Outstanding 8.3%
- --------------------------------------------------------

FUND INTERMEDIATE-TERM TREASURY
- --------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 3,200,170.936
% of Total Shares
Outstanding 10.9%
- --------------------------------------------------------

FUND LONG-TERM TREASURY
- --------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 6,328,833.651
% of Total Shares
Outstanding 49.6%
- --------------------------------------------------------
Shareholder Name and National Financial Svcs. Corp.
Address P.O. Box 3908
New York, NY 10008-3908
# of Shares Held 1,236,573.553
% of Total Shares
Outstanding 9.7%
- --------------------------------------------------------

FUND ARM FUND
- --------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 1,705,107.859
% of Total Shares
Outstanding 6.1%
- --------------------------------------------------------

FUND GNMA FUND
- --------------------------------------------------------
Shareholder Name and Charles Schwab & Co.
Address 101 Montgomery Street
San Francisco, CA 94104
# of Shares Held 16,179,349.628
% of Total Shares
Outstanding 15.2%
- --------------------------------------------------------

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.

Share purchases and redemptions are governed by California law.

OTHER INFORMATION

The Manager 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 1940 Act with respect to the shares offered. Such registrations do
not imply approval or supervision of the Trust or the advisor by the SEC.

For further information, please refer to registration statement and exhibits on
file with the SEC 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.

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

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