AMERICAN CENTURY GOVERNMENT INCOME TRUST, N-30D, 1998-05-26

AMERICAN CENTURY GOVERNMENT INCOME TRUST
N-30D, 1998-05-26

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ANNUAL
REPORT

[american century logo(reg.sm)]
American
Century(reg.tm)

MARCH 31, 1998

BENHAM
GROUP

Capital Preservation
Government Agency

TABLE OF CONTENTS

Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Services Update ........................................................... 3
Capital Preservation
Performance & Portfolio Information ............................ 4
Management Q & A ............................................... 5
Schedule of Investments ........................................ 7
Financial Highlights ........................................... 18
Government Agency
Performance & Portfolio Information ............................ 8
Management Q & A ............................................... 9
Schedule of Investments ........................................ 11
Financial Highlights ........................................... 19
Statements of Assets and Liabilities ...................................... 12
Statements of Operations .................................................. 13
Statements of Changes in Net Assets ....................................... 14
Notes to Financial Statements ............................................. 15
Report of Independent Accountants ......................................... 20
Retirement Account Information ............................................ 21
Background Information
Investment Philosophy & Policies ............................... 24
Comparative Indices ............................................ 24
Lipper Rankings ................................................ 24
Investment Team Leaders ........................................ 24
Glossary .................................................................. 25

American Century Investments offers you nearly 70 fund choices covering
stocks, bonds, money markets, specialty investments and blended portfolios.
We've organized our funds into three distinct groups, based on investment style
and objectives, to help simplify your fund decisions. These groups appear below.

AMERICAN CENTURY INVESTMENTS--FAMILY OF FUNDS
- -------------------------------------------------------------------------------
Benham American Century Twentieth Century
Group Group Group
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS ASSET ALLOCATION & GROWTH FUNDS
GOVERNMENT BOND FUNDS BALANCED FUNDS INTERNATIONAL FUNDS
DIVERSIFIED BOND FUNDS CONSERVATIVE EQUITY FUNDS
MUNICIPAL BOND FUNDS SPECIALTY FUNDS
- -------------------------------------------------------------------------------
Capital Preservation
Government Agency

We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.

American Century and Benham Group are registered marks of American Century
Services Corporation.

AMERICAN CENTURY INVESTMENTS

REPORT HIGHLIGHTS

CAPITAL PRESERVATION

* The fund's 5.06% return for the fiscal year ended March 31, 1998, beat the
4.86% return of the average Treasury money market fund.

* Money market yields remained in a narrow range for much of the fiscal year,
so we employed several strategies to enhance the fund's yield, including:

- Dollar rolls, which involved buying Treasury bills and selling them back
at a prearranged price and date (usually the next day or week).

- Range trading, which involved buying Treasurys when yields were at the top
end of the range and selling them when yields were at the bottom of the
range.

* Starting from a neutral position, we adjusted the fund's average maturity
throughout the fiscal year:

- We lengthened the maturity in mid-1997 to lock in higher yields before
interest rates fell.

- We shortened the maturity back to neutral in early 1998 because we weren't
getting much extra yield for longer-maturity securities.

* It's likely that the Federal Reserve will keep interest rates steady in the
coming months, but if the Fed moves, we expect it to be an interest rate
hike.

* We plan to maintain the fund's current neutral positioning until there is a
clearer direction for interest rates.

GOVERNMENT AGENCY

* The fund's 5.14% return for the fiscal year ended March 31, 1998, beat the
4.99% return of the average government money market fund.

* Money market yields remained in a narrow range for much of the fiscal year,
so we employed several strategies to enhance the fund's yield, including:

- Dollar rolls, which involved buying Treasury bills and selling them back
at a prearranged price and date (usually the next day or week).

- Range trading, which involved buying Treasurys when yields were at the top
end of the range and selling them when yields were at the bottom of the
range.

* We maintained a fairly neutral average maturity for the fund throughout the
fiscal year.

* We cut back on government discount notes because we found more attractive
investments, including floating-rate government notes and dollar rolls.

* It's likely that the Federal Reserve will keep interest rates steady in the
coming months, but if the Fed does make a move, we expect it to be an
interest rate hike.

* We plan to maintain the fund's current neutral positioning until there is a
clearer direction for interest rates.

CAPITAL PRESERVATION

TOTAL RETURNS: AS OF 3/31/98
6 Months 2.50%*
1 Year 5.06%

7-DAY CURRENT YIELD: 4.94%

NET ASSETS: $3.1 billion
(AS OF 3/31/98)

INCEPTION DATE: 10/13/72

TICKER SYMBOL: CPFXX

GOVERNMENT AGENCY

TOTAL RETURNS: AS OF 3/31/98
6 Months 2.56%*
1 Year 5.14%

7-DAY CURRENT YIELD: 5.05%

NET ASSETS: $487.8 million
(AS OF 3/31/98)

INCEPTION DATE: 12/5/89

TICKER SYMBOL: BGAXX

* Not annualized.

Money market funds are neither insured nor guaranteed by the U.S. government.

Yields will fluctuate, and there can be no assurance that the funds will be able
to maintain a stable $1.00 share price.

Many of the investment terms in this report are defined in the Glossary on page
25.

ANNUAL REPORT REPORT HIGHLIGHTS 1

OUR MESSAGE TO YOU

[photo of James E. Stowers, Jr. and James E. Stowers III]

During the 12 months ended March 31, 1998, the Federal Reserve held
short-term interest rates steady against a backdrop of low inflation, an
improving federal budget and a healthy economy. As a result, money market yields
were relatively stable. Shareholders in Capital Preservation and Government
Agency funds enjoyed competitive money market returns combined with the safety
of Treasury and government agency securities.

The past year has been eventful for American Century. We gained a powerful
business partner in January, when J.P. Morgan became a substantial minority
shareholder. The new business partnership will allow both companies to offer
investors a highly diverse menu of investment options and services.

Another significant event was the retirement of Jim Benham, founder of the
Benham Group, in December. With the integration of Benham and Twentieth Century
successfully completed, Jim felt it was time to step back from the business.
Much of the Benham culture has become a part of American Century, including the
educational investor seminar program Jim created. Two of his sons, Jim A. Benham
and Tim Benham, remain with the company to carry on the Benham tradition.

We're also working hard to prepare our computer systems for year 2000 (Y2K),
which has been widely publicized in the financial press. Y2K refers to the
possible inability of computer systems to distinguish between the years 1900 and
2000. Like other financial companies, a significant percentage of our computer
operations involves some type of date comparison or date calculation. Although
much of our system is already Y2K compliant, we anticipate the rest will be in
compliance by the end of this year.

In closing, we are proud to note that 1998 marks the 40th year since
American Century launched its first mutual funds. Not many fund companies can
claim a 40-year track record, or a fund family that includes nearly 70 stock,
bond, money market and blended (stock and bond) funds that provide investors
with such a wide range of choice and flexibility. We believe American Century
has an outstanding lineup of funds to help you reach your financial goals.

Thank you for your investment.

/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer

2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS

SERVICES UPDATE

We get many questions from money market investors about our services. Here
are answers to several frequently asked questions.

IS THERE A FEE FOR WRITING CHECKS AGAINST MY MONEY MARKET FUND?

No. You can write as many checks as you want at no charge, as long as each
one is for $100 or more.

BESIDES WRITING A CHECK, HOW ELSE CAN I ACCESS MY MONEY?

There are a couple of easy ways. First, we can send a check directly to you
at your address of record. All you need to do is give us a call or write us a
letter requesting the check, and we'll send it right out to you.

We can also make automatic deposits from your money market fund to your bank
account. Just make sure we have all of your bank information on file, and then
give us a call to request a direct transfer to your bank account.

IS THERE A LIMIT TO THE NUMBER OF EXCHANGES I CAN MAKE OUT OF MY MONEY MARKET
FUND?

No. Exchanges involve moving money from one American Century fund to
another. Although there is a limit of six exchanges per calendar year out of our
bond and stock funds, there is no limit for money market funds.

Exchanges can be made by:

* calling an Investor Services representative
(1-800-345-2021)

* dialing into our Automated Information Line
(1-800-345-8765)

* writing us a letter

* connecting to our Web site
(www.americancentury.com)

You can also make exchanges through our Automatic Exchange plan or Open
Order service.

HOW DO OPEN ORDERS WORK?

Open Orders enable you to buy or sell shares in a mutual fund automatically
at a price you designate. Here's how it works:

* TO BUY--select a fund in which you wish to invest and specify a price at
which you'd like to buy shares. Because the object is to buy low, the price
you specify must be at or below the fund's last closing price. If the fund's
price closes at or below your specified price, we will automatically move
the amount you designated from your money market fund into an account in the
fund you selected.

* TO SELL--select a fund in which you own shares and specify a price at which
you'd like to sell them. Because the object is to sell high, the price you
specify must be at or above the fund's last closing price (we can't place
stop-loss orders). If the fund's price closes at or above your specified
price, we'll sell the number of shares you designated and move the proceeds
into your money market fund.

Some other notes about Open Orders:

* Open Orders last for a maximum of 90 days and may be canceled or extended
whenever you choose.

* Once you've placed, canceled, or modified your Open Order, we'll send a
letter confirming your decision to your address of record.

IF YOU HAVE ANY QUESTIONS ABOUT OUR SERVICES, CALL US TOLL-FREE AT
1-800-345-2021 OR E-MAIL US AT OUR WEB SITE (WWW.AMERICANCENTURY.COM).

ANNUAL REPORT SERVICES UPDATE 3

<TABLE>
<CAPTION>
CAPITAL PRESERVATION

AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(1)

<S> <C> <C> <C> <C> <C>
Capital Preservation .................. 2.50% 5.06% 5.02% 4.40% 5.24%

90-Day Treasury Bill Index ............ 2.14% 4.74% 5.10% 4.67% 5.45%

Average U.S. Treasury
Money Market Fund(2) .................. 2.41% 4.86% 4.91% 4.30% 5.23%

Fund's Ranking Among U.S. Treasury
Money Market Funds(2) ................. -- 21 out of 97 24 out of 83 17 out of 64 7 out of 17

(1) Returns for periods less than one year are not annualized.

(2) According to Lipper Analytical Services.
</TABLE>

See pages 24-25 for more information about returns, the comparative index and
Lipper fund rankings.

YIELDS AS OF MARCH 31, 1998
7-DAY 7-DAY
CURRENT EFFECTIVE
YIELD YIELD
Capital Preservation 4.94% 5.06%

Yields are defined in the Glossary on page 25.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 14 19
Weighted Average Maturity 48 days 49 days
Expense Ratio 0.49% 0.49%

Past performance does not guarantee future results.

Money market funds are neither insured nor guaranteed by the U.S. government.

Yields will fluctuate, and there can be no assurance that the fund will be able
to maintain a stable $1.00 share price.

4 CAPITAL PRESERVATION AMERICAN CENTURY INVESTMENTS

CAPITAL PRESERVATION

MANAGEMENT Q & A

An interview with Amy O'Donnell, a portfolio manager on the Capital
Preservation fund investment team.

HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

Capital Preservation performed well relative to the average Treasury money
market fund. For the fiscal year ended March 31, 1998, the fund returned 5.06%,
compared with the 4.86% average return of the 97 "U.S. Treasury Money Market
Funds" tracked by Lipper Analytical Services. (See the Total Returns table on
the previous page for other fund performance comparisons.)

Capital Preservation also produced more income than the average Treasury
money market fund. The fund's 7-day effective yield as of March 31, 1998, was
5.06%, compared with the 4.90% yield of the average Treasury money market fund
(according to Lipper).

WHAT HELPED CAPITAL PRESERVATION OUTPACE THE AVERAGE TREASURY MONEY MARKET FUND

It was mainly our effective use of strategies known as "dollar rolls" and
"range trading." With a dollar roll, we buy Treasury bills and agree to sell
them back at a specific price and date--typically the next day or week. We
employed this strategy when the difference between our buy and sell price gave
us a higher yield than an equivalent Treasury bill.

Range trading refers to a strategy we rely on when money market rates remain
in a very narrow range, as they did during much of the past six months. When
market forces--such as supply and demand imbalances or unexpected economic
news--pushed yields to the high end of this range, we tended to do more buying;
when yields dipped to the low end of the range, we did more selling. By actively
exploiting these opportunities, we were able to add to the fund's total return.

The fund's below-average expenses also helped enhance performance. Other
things being equal, lower expenses mean higher returns and yields for our
shareholders.

YOU SHORTENED THE FUND'S AVERAGE MATURITY DURING THE PAST SIX MONTHS. WHY?

In the first quarter of 1998, many market participants began to expect the
Federal Reserve to lower interest rates. As a result, investors pushed the
yields on longer-term money market securities lower. We sold many longer-term
securities at a profit and invested in shorter-term paper without giving up much
yield.

Our shift toward shorter-term securities caused the fund's average maturity
to drop from 60 days in September to a more neutral level of about 45 days by
the end of the period. We keep the average maturity around this neutral position
when we feel that interest rates are likely to remain steady.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Treasury Notes 51%
Treasury Bills 49%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
Treasury Bills 61%
Treasury Notes 39%

ANNUAL REPORT CAPITAL PRESERVATION 5

CAPITAL PRESERVATION

WHY DID YOU REDUCE CAPITAL PRESERVATION'S HOLDINGS IN TREASURY BILLS WHILE
INCREASING ITS STAKE IN TREASURY NOTES OVER THE PAST SIX MONTHS (SEE THE CHART
ON THE PREVIOUS PAGE)?

Diminishing supply and strong demand for Treasury bills made them less
attractive than Treasury notes. Thanks to the federal budget surplus, the
government's borrowing needs have shrunk, so it has curtailed its issuance of
T-bills. In addition, the demand for T-bills picked up because investors were
looking for "safe havens" from currency and economic problems in Asia and
interest rate uncertainty here at home. Strong demand and low supply combined to
drive Treasury bill yields down, so we were able to find better values among
Treasury notes.

WHAT'S YOUR OUTLOOK FOR INTEREST RATES GOING FORWARD?

The answer hinges in large part on the economic health of Asia. When
problems in that region first surfaced last year, many observers argued that the
U.S. economy would slow in response and inflationary threats would cool.
However, recent evidence indicates that the effects of Asia's turmoil on the
U.S. economy have been fairly mild. Unless the Asian crisis has a more dramatic
slowing effect on U.S. economic growth in the months to come, there could be
upward pressure on interest rates.

We believe there's about an even chance that the Fed will hold rates steady
over the near term. But if the Fed chooses to act, we think that it is more
likely to raise rates to stave off potential inflation than cut rates to
stimulate the economy.

WITH THAT OUTLOOK IN MIND, WHAT IS YOUR STRATEGY FOR THE NEXT SIX MONTHS?

Until we have a better feel for where interest rates are headed, we plan to
keep the fund's average maturity in a neutral range. That way, we'll be able to
reinvest assets quickly to capture rising yields if the Fed raises interest
rates.

[pie charts]

PORTFOLIO COMPOSITION BY MATURITY (as of 3/31/98)
1-30 days 44%
31-60 days 17%
61-90 days 13%
91-180 days 26%

PORTFOLIO COMPOSITION BY MATURITY (as of 9/30/97)
1-30 days 18%
31-60 days 35%
61-90 days 17%
91-180 days 30%

6 CAPITAL PRESERVATION AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS
CAPITAL PRESERVATION

MARCH 31, 1998

Principal Amount Value
- ------------------------------------------------------------------------------

U.S. TREASURY BILLS(1)

$255,000,000 U.S. Treasury Bills, 5.37%,
4/16/98 $ 254,429,443

406,000,000 U.S. Treasury Bills, 5.29%-5.38%,
4/23/98 404,677,523

100,000,000 U.S. Treasury Bills, 5.30%-5.36%,
4/30/98 99,570,840

25,000,000 U.S. Treasury Bills, 5.11%,
5/7/98 24,872,418

50,000,000 U.S. Treasury Bills, 5.08%,
5/21/98 49,647,569

211,500,000 U.S. Treasury Bills, 4.98%-5.05%,
6/18/98 209,203,217

105,000,000 U.S. Treasury Bills, 5.06%, 7/2/98 103,658,100

150,000,000 U.S. Treasury Bills, 5.09%-5.10%,
8/20/98 147,009,625
-------------------

TOTAL U.S. TREASURY BILLS--49.1% 1,293,068,735
-------------------

U.S. TREASURY NOTES(1)

50,000,000 U.S. Treasury Notes, 5.125%,
4/30/98 49,980,376

350,000,000 U.S. Treasury Notes, 5.875%,
4/30/98 350,109,994

365,000,000 U.S. Treasury Notes, 6.125%,
5/15/98 365,272,282

125,000,000 U.S. Treasury Notes, 6.00%,
5/31/98 125,074,777

350,000,000 U.S. Treasury Notes, 6.25%,
6/30/98 350,735,876

100,000,000 U.S. Treasury Notes, 5.875%,
8/15/98 100,139,406
-------------------

TOTAL U.S. TREASURY NOTES--50.9% 1,341,312,711
-------------------

TOTAL INVESTMENT SECURITIES--100.0% $2,634,381,446
===================

NOTES TO SCHEDULE OF INVESTMENTS

(1) The rates for U.S. Treasury Bills are the yield to maturity at purchase.
The rates for U.S. Treasury Notes are the stated coupon rates.

See Notes to Financial Statements

ANNUAL REPORT CAPITAL PRESERVATION 7

<TABLE>
<CAPTION>
GOVERNMENT AGENCY

AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND(2)
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(1)

<S> <C> <C> <C> <C> <C>
Government Agency ..................... 2.56% 5.14% 5.13% 4.50% 4.98%

90-Day Treasury Bill Index ............ 2.14% 4.74% 5.10% 4.67% 4.94%(3)

Average U.S. Government
Money Market Fund(4) .................. 2.48% 4.99% 5.00% 4.37% 4.69%(3)

Fund's Ranking Among U.S.
Government Money Market Funds(4) ...... -- 25 out of 112 25 out of 101 20 out of 81 4 out of 53(3)

(1) Returns for periods less than one year are not annualized.

(2) Inception date was December 5, 1989.

(3) Since 12/31/89, the date nearest the fund's inception for which data are
available.

(4) According to Lipper Analytical Services.
</TABLE>

See pages 24-25 for more information about returns, the comparative index and
Lipper fund rankings.

YIELDS AS OF MARCH 31, 1998
7-DAY 7-DAY
CURRENT EFFECTIVE
YIELD YIELD
Government Agency 5.05% 5.18%

Yields are defined in the Glossary on page 25.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 28 49
Weighted Average Maturity 50 days 42 days
Expense Ratio 0.51% 0.57%

Past performance does not guarantee future results.

Money market funds are neither insured nor guaranteed by the U.S. government.

Yields will fluctuate, and there can be no assurance that the fund will be able
to maintain a stable $1.00 share price.

8 GOVERNMENT AGENCY AMERICAN CENTURY INVESTMENTS

GOVERNMENT AGENCY

MANAGEMENT Q & A

An interview with Amy O'Donnell, a portfolio manager on the Government
Agency Money Market fund investment team.

HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

Government Agency performed well. For the fiscal year ended March 31, 1998,
the fund returned 5.14%, compared with the 4.99% average return of the 112 "U.S.
Government Money Market Funds" tracked by Lipper Analytical Services. (See the
Total Returns table on the previous page for other fund performance
comparisons.)

Government Agency also produced more income than the average government
money market fund. The fund's 7-day effective yield as of March 31, 1998, was
5.18%, compared with the 5.00% yield of the average government money market fund
(according to Lipper).

HOW DID GOVERNMENT AGENCY MANAGE TO PRODUCE GREATER RETURNS AND INCOME THAN ITS
PEERS?

There were three major factors. First was our use of dollar rolls, which
involve buying Treasury bills and agreeing to sell them back at a specific price
and date--typically the next day or week. We employed this strategy when the
difference between our buy and sell price gave us a higher yield than other
short-term government securities.

Second, we took advantage of inefficiencies in the market by "range
trading." Because the Federal Reserve didn't change short-term interest rates
during the period, agency security yields remained within a relatively narrow
range. When market forces--such as supply and demand imbalances or unexpected
economic news--pushed yields to the high end of this range, we tended to buy
agency securities; when yields dipped to the low end of the range, we invested
in dollar rolls. By actively exploiting these opportunities, we were able to add
to the fund's total return.

Finally, Government Agency's expenses were below those of the average U.S.
government agency money market fund. Other things being equal, lower expenses
mean higher returns and yields for our shareholders.

HOW DID YOU POSITION THE FUND DURING THE PAST SIX MONTHS?

We were pretty neutral. We consider an average maturity of 40-60 days to be
a neutral position for the fund. We take a neutral position when we're unsure
about the future direction of interest rates. With the economic turmoil in Asia
calling into question future U.S. economic growth, we didn't feel that there was
an iron-clad case for believing that short-term interest rates would rise or
fall. As a result, we kept the average maturity within that neutral range.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Government Agency
Discount Notes 67%
Government
Agency Notes 20%
Floating-Rate
Agency Notes 13%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
Government Agency
Discount Notes 90%
Floating-Rate
Agency Notes 5%
Government
Agency Notes 5%

ANNUAL REPORT GOVERNMENT AGENCY 9

GOVERNMENT AGENCY

WHY DID YOU REDUCE THE PERCENTAGE OF FUND ASSETS IN GOVERNMENT AGENCY DISCOUNT
NOTES (SEE THE CHART ON THE PREVIOUS PAGE)?

It was a matter of finding more attractive securities in other segments of
the market. For example, we added some agency notes issued by the Federal Farm
Credit Bank (FFCB) in December when they offered better yields than many
discount notes. Likewise, our increased holdings in Treasury dollar rolls
enabled us to put short-term cash positions to work in securities with higher
yields than those offered by overnight discount notes.

WHAT OTHER AGENCY SECURITIES DID YOU FAVOR?

We gravitated toward securities issued by the Federal Home Loan Bank (FHLB);
they made up about 58% of the fund's investments at the end of the period. While
many other agencies were curtailing their issuance of short-term securities,
FHLB remained an active issuer of state tax-free government agency securities.
The relatively large supply helped keep their yields attractive throughout the
period.

YOU INCREASED HOLDINGS IN FLOATING-RATE NOTES (FLOATERS) DURING THE PAST SIX
MONTHS. WHY?

Floaters reset their interest rates periodically, so they can be a good way
to capture higher yields when rates rise. But in this case, we bought them
because they were a better value--they tended to yield about 40-50 basis points
(0.40%- 0.50%) more than Treasury bills.

WHAT'S YOUR OUTLOOK FOR INTEREST RATES GOING FORWARD?

There's no clear-cut trend right now. On one hand, the U.S. economy is
posting healthy growth evidenced by low unemployment, increased housing activity
and strong retail sales. On the other hand, economic problems in Asia could have
an adverse effect on U.S. economic growth. So far, the effects of the "Asian
flu" have been much milder than originally expected. That's not to say the U.S.
is out of the woods yet; it may be that the full brunt of the crisis won't be
felt in this country until summer.

Against that backdrop, we believe there's about a 50% chance the Federal
Reserve will stand pat. Should the Fed decide to make a move, we think that it
is more likely to raise rates to stave off inflation than cut rates to stimulate
the economy.

WITH THAT OUTLOOK IN MIND, WHAT IS YOUR STRATEGY FOR THE NEXT SIX MONTHS?

We plan to keep Government Agency's average maturity in a neutral range
until there is more clear-cut and sustained evidence about the direction of U.S.
economic growth and inflation. In the meantime, we'll continue to rely on range
trading in an effort to add to total return. We'll also keep an eye out for
opportunities to diversify holdings more broadly across various agencies.

[pie charts]

PORTFOLIO COMPOSITION BY MATURITY (as of 3/31/98)
1-30 days 52%
31-60 days 11%
61-90 days 13%
91-180 days 24%

PORTFOLIO COMPOSITION BY MATURITY (as of 9/30/97)
1-30 days 43%
31-60 days 23%
61-90 days 23%
91-180 days 9%
181-397 days 2%

10 GOVERNMENT AGENCY AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS
GOVERNMENT AGENCY

MARCH 31, 1998

Principal Amount Value
- -------------------------------------------------------------------------------

U.S. GOVERNMENT AGENCY DISCOUNT NOTES(1)

$15,000,000 FFCB Discount Note, 5.33%,
4/16/98 $ 14,966,687

17,500,000 FHLB Discount Note, 5.90%,
4/1/98 17,500,000

10,000,000 FHLB Discount Note, 5.45%,
4/8/98 9,989,403

15,000,000 FHLB Discount Note, 5.35%,
4/15/98 14,968,792

13,320,000 FHLB Discount Note, 5.44%,
4/16/98 13,289,808

12,000,000 FHLB Discount Note, 5.56%,
4/23/98 11,959,226

9,175,000 FHLB Discount Note, 5.35%,
5/8/98 9,124,550

25,000,000 FHLB Discount Note, 5.36%,
5/15/98 24,836,222

21,000,000 FHLB Discount Notes, 5.40% -
5.54%, 5/27/98 20,821,422

4,115,000 FHLB Discount Note, 5.54%,
6/3/98 4,075,105

23,887,000 FHLB Discount Notes, 5.53% -
5.54%, 6/5/98 23,648,425

15,000,000 FHLB Discount Note, 5.40%,
6/9/98 14,844,750

20,000,000 FHLB Discount Note, 5.41%,
6/12/98 19,783,600

25,000,000 FHLB Discount Note, 5.28%,
6/30/98 24,670,000

5,333,000 FHLB Discount Note, 5.27%,
7/24/98 5,244,001

40,000,000 FHLB Discount Note, 5.27%,
8/14/98 39,210,250

20,000,000 FHLB Discount Note, 5.37%,
9/25/98 19,471,950

40,000,000 TVA Discount Note, 5.33%,
4/21/98 39,881,556
-------------------

TOTAL U.S. GOVERNMENT
AGENCY DISCOUNT NOTES--67.2% 328,285,747
-------------------

Principal Amount Value
- -------------------------------------------------------------------------------

U.S. GOVERNMENT AGENCY SECURITIES

$ 4,400,000 FFCB, 5.47%, 4/1/98 $ 4,400,000

55,000,000 FFCB, 5.62%, 4/1/98 55,000,000

3,000,000 FFCB, 5.65%, 7/1/98 2,999,948

15,000,000 FFCB MTN, VRN, 5.28%, 4/7/98,
resets weekly off the 6-month
T-Bill rate with no caps 14,999,547

10,000,000 FHLB, 5.91%, 4/2/98 10,000,078

10,000,000 SLMA MTN, 6.25%, 6/30/98 10,015,962

13,675,000 SLMA MTN, 5.79%, 9/16/98 13,682,856

9,000,000 SLMA MTN, VRN, 5.68%, 4/7/98,
resets weekly off the
3-month T-Bill rate plus 0.49% with no
caps 9,000,228

10,000,000 SLMA, VRN, 5.59%, 4/7/98,
resets weekly off the 3-month
T-Bill rate plus 0.40% with no
caps 9,999,331

30,000,000 SLMA, VRN, 5.54%, 4/7/98,
resets weekly off the 3-month
T-Bill rate plus 0.35% with no
caps 29,997,600
-------------------

TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--32.8% 160,095,550
-------------------

TOTAL INVESTMENT SECURITIES--100.0% $488,381,297
===================

NOTES TO SCHEDULE OF INVESTMENTS

FFCB = Federal Farm Credit Bank

FHLB = Federal Home Loan Bank

MTN = Medium Term Note

SLMA = Student Loan Marketing Association

TVA = Tennessee Valley Authority

VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Coupon rate indicated
is effective March 31, 1998.

resets= The frequency with which a fixed-income security's coupon changes,
based on current market conditions or an underlying index. The more
frequently a security resets, the less risk the investor is taking that
the coupon will vary significantly from current market rates.

(1) Rates disclosed are the yield to maturity at purchase.

See Notes to Financial Statements

ANNUAL REPORT GOVERNMENT AGENCY 11

STATEMENTS OF ASSETS AND LIABILITIES

CAPITAL GOVERNMENT
MARCH 31, 1998 PRESERVATION AGENCY

ASSETS

Investment securities, at value
(amortized cost and cost for
federal income tax purposes)
(Note 1) ........................... $ 2,634,381,446 $ 488,381,297

Cash ................................. 5,604,878 760,463

Receivable for investments sold ...... 650,007,058 --

Interest receivable .................. 33,997,561 2,822,080

Other assets ......................... 9,616 1,452
--------------- ---------------
3,324,000,559 491,965,292
--------------- ---------------
LIABILITIES

Disbursements in excess of
demand deposit cash ................ 24,466,988 3,758,676

Payable for investments
purchased .......................... 152,659,350 --

Payable for capital shares
redeemed ........................... 1,021,549 218,884

Accrued management fees
(Note 2) ........................... 1,260,765 195,259

Payable for trustees' fees
and expenses ....................... 6,812 953

Accrued expenses and
other liabilities .................. 1,488 173
--------------- ---------------
179,416,952 4,173,945
--------------- ---------------
Net Assets ........................... $ 3,144,583,607 $ 487,791,347
=============== ===============

CAPITAL SHARES

Outstanding (Unlimited number
of shares authorized) .............. 3,144,640,390 487,813,820
=============== ===============
Net Asset Value Per Share ............ $ 1.00 $ 1.00
=============== ===============

NET ASSETS CONSIST OF:

Capital paid in ...................... $ 3,144,640,390 $ 487,813,820

Accumulated net realized
loss on investment
transactions ....................... (56,783) (22,473)
--------------- ---------------
$ 3,144,583,607 $ 487,791,347
=============== ===============

See Notes to Financial Statements

12 STATEMENTS OF ASSETS AND LIABILITIES AMERICAN CENTURY INVESTMENTS

STATEMENTS OF OPERATIONS

CAPITAL GOVERNMENT
YEAR ENDED MARCH 31, 1998 PRESERVATION AGENCY

INVESTMENT INCOME

Income:

Interest ................................ $164,225,471 $ 25,911,849
------------ ------------
Expenses (Note 2):

Investment advisory fees ................ 11,994,029 1,929,073

Administrative fees ..................... 1,146,326 144,980

Transfer agency fees .................... 933,109 163,368

Printing and postage .................... 275,226 55,182

Custodian fees .......................... 243,820 39,262

Trustees' fees and expenses ............. 100,834 13,445

Telephone expenses ...................... 51,150 7,168

Auditing and legal fees ................. 35,910 8,663

Registration and filing fees ............ 30,858 10,232

Other operating expenses ................ 26,038 5,585
------------ ------------
Total expenses ........................ 14,837,300 2,376,958
------------ ------------
Net investment income ................... 149,388,171 23,534,891
------------ ------------
Net realized gain (loss) on
investments ........................... 1,225,909 (22,473)
------------ ------------
Net Increase in Net Assets
Resulting from Operations ............. $150,614,080 $ 23,512,418
============ ============

See Notes to Financial Statements

ANNUAL REPORT STATEMENTS OF OPERATIONS 13

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED MARCH 31, 1998 CAPITAL GOVERNMENT
AND MARCH 31, 1997 PRESERVATION AGENCY

Increase (Decrease) in Net Assets 1998 1997 1998 1997

OPERATIONS

<S> <C> <C> <C> <C>
Net investment income ........... $ 149,388,171 $ 141,191,337 $ 23,534,891 $ 23,085,479

Net realized gain (loss)
on investments ................ 1,225,909 752,673 (22,473) 10,130
--------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ..... 150,614,080 141,944,010 23,512,418 23,095,609
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS

From net investment income ...... (149,514,002) (141,065,506) (23,534,891) (23,085,479)

From net realized gains on
investment transactions ....... (1,199,172) (752,673) -- (10,130)

In excess of net realized gains
on investment transactions .... -- (83,520) -- --
--------------- --------------- --------------- ---------------
Decrease in net assets from
distributions to shareholders (150,713,174) (141,901,699) (23,534,891) (23,095,609)
--------------- --------------- --------------- ---------------
CAPITAL SHARE
TRANSACTIONS

Proceeds from shares sold ....... 2,473,239,090 2,258,573,530 392,750,417 409,848,791

Proceeds from shares issued
in connection
with acquisition (Note 3) ..... 213,901,483 -- -- --

Proceeds from reinvestment
of distributions .............. 143,557,124 136,153,282 22,581,430 22,319,108

Payments for shares redeemed .... (2,664,029,704) (2,494,312,912) (398,276,839) (464,737,370)
--------------- --------------- --------------- ---------------
Net increase (decrease) in
net assets from
capital share transactions .... 166,667,993 (99,586,100) 17,055,008 (32,569,471)
--------------- --------------- --------------- ---------------
Net increase (decrease)
in net assets ................. 166,568,899 (99,543,789) 17,032,535 (32,569,471)

NET ASSETS

Beginning of year ............... 2,978,014,708 3,077,558,497 470,758,812 503,328,283
--------------- --------------- --------------- ---------------
End of year ..................... $ 3,144,583,607 $ 2,978,014,708 $ 487,791,347 $ 470,758,812
=============== =============== =============== ===============
Undistributed net
investment income ............. -- $ 125,831 -- --
=============== =============== =============== ===============
TRANSACTIONS IN
SHARES OF THE FUNDS

Sold ............................ 2,473,239,090 2,258,573,530 392,750,417 409,848,791

Issued in connection
with acquisition (Note 3) ..... 213,901,483 -- -- --

Issued in reinvestment
of distributions ................ 143,557,124 136,153,282 22,581,430
22,319,108

Redeemed ........................ (2,664,029,704) (2,494,312,912) (398,276,839) (464,737,370)
--------------- --------------- --------------- ---------------
Net increase (decrease) ......... 166,667,993 (99,586,100) 17,055,008 (32,569,471)
=============== =============== =============== ===============
</TABLE>

See Notes to Financial Statements

14 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- American Century Government Income Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end management
investment company. American Century - Benham Capital Preservation Fund (Capital
Preservation) and American Century - Benham Government Agency Money Market Fund
(Government Agency) (the Funds) are two of the eight funds issued by the Trust.
Capital Preservation seeks maximum safety and liquidity and intends to pursue
its investment objectives by investing exclusively in short-term U.S. Treasury
securities guaranteed by the direct full faith and credit pledge of the U.S.
government. Government Agency seeks to provide the highest rate of current
return on its investments, consistent with safety of principal and maintenance
of liquidity by investing exclusively in short-term obligations of the U.S.
government and its agencies and instrumentalities. The Funds are authorized to
issue two classes of shares: the Investor Class and the Advisor Class. The two
classes of shares differ principally in their respective shareholder servicing
and distribution expenses and arrangements. All shares of the Funds represent an
equal pro rata interest in the assets of the class to which such shares belong,
and have identical voting, dividend, liquidation and other rights and the same
terms and conditions, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes. Sale of the Advisor Class had
not commenced as of the report date. The following significant accounting
policies, related to both classes of the Funds, are in accordance with
accounting policies generally accepted in the investment company industry.

SECURITY VALUATIONS -- Securities are valued at amortized cost, which
approximates current market value. When valuations are not readily available,
securities are valued at fair value as determined in accordance with procedures
adopted by the Board of Trustees.

SECURITY TRANSACTIONS -- Security transactions are accounted for on the date
purchased or sold. Net realized gains and losses are determined on the
identified cost basis, which is also used for federal income tax purposes.

INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.

FORWARD COMMITMENTs -- Periodically, the Funds enter into purchase or sale
transactions on a forward commitment basis. In these transactions, the Funds
sell a security and at the same time make a commitment to purchase the same
security at a future date at a 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 at a specified price. These types of transactions are
executed simultaneously in what are known as forward commitments or "roll"
transactions. The Funds take possession of any security they purchase in these
transactions. The Funds maintain segregated accounts consisting of cash or
liquid securities in an amount sufficient to meet the purchase price.

INCOME TAX STATUS -- It is the Funds' policy to distribute all net
investment income and net realized capital gains to shareholders and to
otherwise qualify as a regulated investment company under the provisions of the
Internal Revenue Code. Accordingly, no provision has been made for federal or
state income taxes.

DISTRIBUTIONS -- Distributions from net investment income are declared and
credited daily and distributed monthly. The Funds do not expect to realize any
long-term capital gains, and accordingly, do not expect to pay any long-term
capital gains distributions.

At March 31, 1998, Government Agency had accumulated net realized capital
loss carryovers of approximately $43,000 (expiring 2003 through 2006) which may
be used to offset future capital gains. The Fund has elected to treat $13,369 of
net capital losses incurred in the five month period ended March 31, 1998, as
having been incurred in the following fiscal year.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the period. Actual results could differ from
these estimates.

ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 15

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES

The shareholders of Capital Preservation and Government Agency approved a
new management agreement with American Century Investment Management, Inc.
(ACIM) on July 30, 1997, which replaced the previously existing contracts
between the Funds and Benham Management Corporation and American Century
Services Corporation (ACSC) for advisory, administrative and transfer agency
services. The new agreement was effective August 1, 1997 and August 30, 1997 for
Government Agency and Capital Preservation, respectively. (See Note 3 in Notes
to Financial Statements.) Under the agreement, ACIM provides all services
required by the Funds in exchange for a single, unified management fee per
class. Expenses excluded from this agreement are brokerage, taxes, portfolio
insurance, interest, fees and expenses of the Trustees who are not considered
"interested persons" as defined in the Investment Company Act of 1940 (including
counsel fees) and extraordinary expenses. The annual rate at which this fee is
assessed is determined monthly in a two-step process: First, a fee rate schedule
is applied to the net assets of all of the funds in the Fund's investment
category which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of each Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category and the Equity Fund Category. The Funds are included in the Money
Market Fund Category. Second, a separate fee rate schedule is applied to the net
assets of all of the funds managed by ACIM (the "Complex Fee"). The Investment
Category Fee and the Complex Fee are then added to determine the unified
management fee rate. The management fee is paid monthly by each Fund based on
each Fund's aggregate average daily net assets during the previous month
multiplied by the monthly management fee rate. The annualized Investment
Category Fee schedule for the Funds is as follows:

0.2500% of the first $1 billion
0.2070% of the next $1 billion
0.1660% of the next $3 billion
0.1490% of the next $5 billion
0.1380% of the next $15 billion
0.1375% of the next $25 billion
0.1370% of the average daily net assets over $50 billion

The annualized Complex Fee schedule (Investor Class) is as follows:

0.3100% of the first $2.5 billion
0.3000% of the next $7.5 billion
0.2985% of the next $15 billion
0.2970% of the next $25 billion
0.2960% of the next $50 billion
0.2950% of the next $100 billion
0.2940% of the next $100 billion
0.2930% of the next $200 billion
0.2920% of the next $250 billion
0.2910% of the next $500 billion
0.2900% of the average daily net assets over $1,250 billion

The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plan provides that the Funds will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the Funds. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers.

Total expenses of $8,878,897 for the seven months ended March 31, 1998 for
Capital Preservation and total expenses of $1,517,071 for the eight months ended
March 31, 1998 for Government Agency were incurred under the new management
agreement and included in Investment Advisory Fees in the Statements of
Operations. Total expenses, under the previous agreement, for the five months
ended August 29, 1997 were $5,958,403 for Capital Preservation. Total expenses,
under the

16 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

previous agreement, for the four months ended July 31, 1997 were $859,887 for
Government Agency. The annualized ratio of operating expenses to average net
assets for the respective periods was 0.49% and 0.55% for Capital Preservation
and Government Agency, respectively.

Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent, ACSC, and the registered broker-dealer, American Century
Investment Services, Inc.

- --------------------------------------------------------------------------------
3. REORGANIZATION PLAN

On August 29, 1997, Capital Preservation acquired all of the net assets of
American Century - Benham Capital Preservation Fund (Old CP Fund) and American
Century - Benham Capital Preservation Fund II (Capital Preservation II),
pursuant to a plan of reorganization approved by the acquired funds'
shareholders on July 30, 1997.

The acquisition was accomplished by a tax-free exchange of 213,901,483
shares of Capital Preservation, the surviving fund in terms of maintaining the
financial statements and performance history in the post-reorganization fund,
for 213,901,483 shares of Capital Preservation II, outstanding on August 29,
1997. The net assets of Capital Preservation and Capital Preservation II
immediately before the acquisition were $2,937,910,603 and $213,901,483,
respectively. Immediately after the acquisition, the combined net assets of
Capital Preservation were $3,151,812,086.

At the same time, Capital Preservation was reorganized as a series issued by
American Century Government Income Trust. Capital Preservation was formerly
issued under American Century Capital Preservation Fund, Inc.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 17

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CAPITAL PRESERVATION

For a Share Outstanding Throughout the Years Ended March 31

1998 1997 1996 1995 1994
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ------------- ------------- -------------
Income From Investment
Operations

Net Investment Income .... 0.05 0.05 0.05 0.04 0.03
------------- ------------- ------------- ------------- -------------
Distributions

From Net Investment
Income ................... (0.05) (0.05) (0.05) (0.04) (0.03)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= =============
Total Return(1) .......... 5.06% 4.82% 5.21% 4.31% 2.63%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(2) ... 0.49% 0.49% 0.51% 0.50% 0.51%

Ratio of Net Investment
Income to Average
Net Assets ............... 4.90% 4.66% 5.07% 4.24% 2.59%

Net Assets, End
of Year (in thousands) ..... $ 3,144,584 $ 2,978,015 $ 3,077,558 $ 2,883,350 $ 2,786,614
</TABLE>

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

(2) The ratios for years ended March 31, 1997 and March 31, 1996 include
expenses paid through expense offset arrangements.

See Notes to Financial Statements

18 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
GOVERNMENT AGENCY

For a Share Outstanding Throughout the Years Ended March 31

1998 1997 1996 1995 1994
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C>
Beginning of Year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
Income From Investment
Operations

Net Investment Income .... 0.05 0.05 0.05 0.04 0.03
----------- ----------- ----------- ----------- -----------
Distributions

From Net Investment
Income ................... (0.05) (0.05) (0.05) (0.04) (0.03)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return(1) .......... 5.14% 4.89% 5.35% 4.47% 2.69%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(2) ... 0.51% 0.57% 0.51% 0.50% 0.50%

Ratio of Net Investment
Income to Average
Net Assets ............... 5.02% 4.76% 5.20% 4.35% 2.65%

Net Assets, End
of Year (in thousands) ..... $ 487,791 $ 470,759 $ 503,328 $ 461,803 $ 561,766
</TABLE>

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

(2) The ratios for years ended March 31, 1997 and March 31, 1996 include
expenses paid through expense offset arrangements.

See Notes to Financial Statements

ANNUAL REPORT FINANCIAL HIGHLIGHTS 19

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of American Century Government Income Trust and Shareholders of
the American Century - Benham Capital Preservation Fund and the American
Century - Benham Government Agency Money Market Fund:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of American Century - Benham Capital Preservation
Fund and American Century - Benham Government Agency Money Market Fund (two of
the Funds comprising American Century Government Income Trust) (the Funds) as of
March 31, 1998, and the related statements of operations, statements of changes
in net assets, and the financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets as of March 31, 1997 and the financial
highlights for each of the four years in the period ended March 31, 1997, were
audited by other auditors, whose report, dated May 2, 1997, expressed an
unqualified opinion on those statements.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Funds as of March 31, 1998, the results of their operations, the changes
in their net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Kansas City, Missouri
May 8, 1998

20 REPORT OF INDEPENDENT ACCOUNTANTS AMERICAN CENTURY INVESTMENTS

RETIREMENT ACCOUNT INFORMATION

As required by law, any distributions you receive from an IRA and certain
403(b) distributions [not eligible for rollover to an IRA or to another 403(b)]
are subject to federal income tax withholding at the rate of 10% of the total
amount withdrawn, unless you elect not to have withholding apply. If you don't
want us to withhold on this amount, you may send us a written notice not to have
the federal income tax withheld. Your written notice is valid for six months
from the date of receipt at American Century. Even if you plan to roll over the
amount you withdraw to another tax-deferred account, the withholding rate still
applies to the withdrawn amount unless we have received a written notice not to
withhold federal income tax within six months prior to the withdrawal.

When you plan to withdraw, you may make your election by completing our
Exchange/ Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.

Remember, even if you elect not to have income tax withheld, you are liable
for paying income tax on the taxable portion of your withdrawal. If you elect
not to have income tax withheld or you don't have enough income tax withheld,
you may be responsible for payment of estimated tax. You may incur penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.

ANNUAL REPORT RETIREMENT ACCOUNT INFORMATION 21

NOTES

22 NOTES AMERICAN CENTURY INVESTMENTS

NOTES

ANNUAL REPORT NOTES 23

BACKGROUND INFORMATION

INVESTMENT PHILOSOPHY & POLICIES

The Benham Group offers 39 fixed-income funds, ranging from money market
funds to long-term bond funds and including both taxable and tax-exempt funds.
Each fund is managed to provide a "pure play" on a specific sector of the
fixed-income market. To ensure adherence to this principle, the basic structure
of each fund's portfolio is tied to a specific market index. Fund managers
attempt to add value by making modest portfolio adjustments based on their
analysis of prevailing market conditions. Investment decisions are made by
management teams, which meet regularly to discuss market analysis and investment
strategies.

In addition to these principles, each fund has its own investment policies:

CAPITAL PRESERVATION seeks to provide interest income exempt from state
taxes while maintaining a stable share price by investing in U.S. Treasury money
market securities.

GOVERNMENT AGENCY seeks to provide interest income exempt from state taxes
while maintaining a stable share price by investing in U.S. government money
market securities.

An investment in the funds is neither insured nor guaranteed by the U.S.
government, and there can be no assurance that the funds will be able to
maintain a stable net asset value of $1 per share.

COMPARATIVE INDICES

The following index is used in the report to serve as a fund performance
comparison. It is not an investment product available for purchase.

The 90-DAY TREASURY BILL INDEX is derived from secondary market interest
rates published by the Federal Reserve Bank.

LIPPER RANKINGS

LIPPER ANALYTICAL SERVICES, INC. is an independent mutual fund ranking
service that groups funds according to their investment objectives. Rankings are
based on average annual returns for each fund in a given category for the
periods indicated. Rankings are not included for periods less than one year.

The Lipper categories for the U.S. Treasury and government money market
funds are:

U.S. TREASURY MONEY MARKET FUNDS (Capital Preservation)--funds with
dollar-weighted average maturities of less than 90 days that intend to maintain
a stable net asset value and that invest principally in U.S. Treasury
obligations.

U.S. GOVERNMENT MONEY MARKET FUNDS (Government Agency)--funds with
dollar-weighted average maturities of less than 90 days that intend to maintain
a stable net asset value and that invest principally in financial instruments
issued or guaranteed by the U.S. government, its agencies or instrumentalities.

- --------------------------------------------------------------------------------
INVESTMENT TEAM LEADERS
- --------------------------------------------------------------------------------
Portfolio Manager Amy O'Donnell
- --------------------------------------------------------------------------------

24 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS

GLOSSARY

RETURNS

* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.

* AVERAGE ANNUAL RETURNS illustrate the annually compounded returns that would
have produced the fund's cumulative total returns if the fund's performance had
been constant over the entire period. Average annual returns smooth out
variations in a fund's return; they are not the same as fiscal year-by-year
results. For fiscal year-by-year returns, please refer to the "Financial
Highlights" on pages 18-19.

YIELDS

* 7-DAY CURRENT YIELD is calculated based on the income generated by an
investment in the fund over a seven-day period and is expressed as an annual
percentage rate.

* 7-DAY EFFECTIVE YIELD is calculated similarly, although this figure is
slightly higher than the fund's 7-Day Current Yield because of the effects of
compounding. The 7-Day Effective Yield assumes that income earned from the
fund's investments is reinvested and generating additional income.

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.

* WEIGHTED AVERAGE MATURITY (WAM)--a measure of the sensitivity of a
fixed-income portfolio to interest rate changes. WAM indicates the average time
until the securities in the portfolio mature, weighted by dollar amount. The
longer the WAM, the more interest rate exposure and sensitivity the portfolio
has.

* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets. Shareholders pay an annual fee to the investment manager
for investment advisory and management services. The expenses and fees are
deducted from fund income, not from each shareholder account. (See Note 2 in the
Notes to Financial Statements.)

SECURITY TYPES

* FLOATING-RATE NOTES (FLOATERS)--debt securities whose interest rates change
when a designated base rate changes. The base rate is often the federal funds
rate, the 90-day Treasury bill rate or the London Interbank Offered Rate
(LIBOR).

* U.S. GOVERNMENT AGENCY NOTES--intermediate-term debt securities issued by U.S.
government agencies (such as the Federal Farm Credit Bank and the Federal Home
Loan Bank). Some agency notes are backed by the full faith and credit of the
U.S. government, while most are guaranteed only by the issuing agency. These
notes are issued with maturities ranging from three months to 30 years, but the
funds only invest in those with remaining maturities of 13 months or less.

* U.S. GOVERNMENT AGENCY DISCOUNT NOTES--short-term debt securities issued by
U.S. government agencies (such as the Federal Farm Credit Bank and the Federal
Home Loan Bank). Some agency discount notes are backed by the full faith and
credit of the U.S. government, while most are guaranteed only by the issuing
agency. These notes are issued at a discount and achieve full value at maturity
(typically one year or less).

* U.S. TREASURY BILLS (T-BILLS)--short-term debt securities issued by the U.S.
Treasury and backed by the direct "full faith and credit" pledge of the U.S.
government. T-bills are issued with maturities ranging from three months to one
year.

* U.S. TREASURY NOTES (T-NOTES)--intermediate-term debt securities issued by the
U.S. Treasury and backed by the direct "full faith and credit" pledge of the
U.S. government. T-notes are issued with maturities ranging from two to 10
years, but the funds only invest in those with remaining maturities of 13 months
or less.

ANNUAL REPORT GLOSSARY 25

[american century logo(reg.sm)]
American
Century(reg.tm)

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

INTERNET: WWW.AMERICANCENTURY.COM

AMERICAN CENTURY GOVERNMENT INCOME TRUST

INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI

THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL
INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.

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<PAGE>
ANNUAL
REPORT

[american century logo(reg.sm)]
American
Century(reg.tm)

MARCH 31, 1998

BENHAM
GROUP

Inflation-Adjusted Treasury

TABLE OF CONTENTS
Report Highlights .......................................................... 1
Our Message to You ......................................................... 2
Market Perspective ......................................................... 3
Performance & Portfolio Information ........................................ 4
Management Q & A ........................................................... 5
Schedule of Investments .................................................... 7
Statement of Assets and Liabilities ........................................ 8
Statement of Operations .................................................... 9
Statements of Changes in Net Assets ........................................ 10
Notes to Financial Statements .............................................. 11
Financial Highlights ....................................................... 13
Report of Independent Accountants .......................................... 14
Retirement Account Information ............................................. 15
Background Information
Investment Philosophy & Policies ................................ 16
Comparative Indices ............................................. 16
Investment Team Leaders ......................................... 16
Glossary ................................................................... 17

We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.

American Century and Benham Group are registered marks of American Century
Services Corporation.

AMERICAN CENTURY INVESTMENTS

REPORT HIGHLIGHTS

MARKET PERSPECTIVE

* Declining inflation and subdued demand led to lackluster performance by
inflation-indexed Treasury securities.

* After one increase to the federal funds rate in March 1997, the Fed made no
further adjustments to short-term rates as prices trended lower.

* The lack of inflation was especially surprising because it was accompanied
by solid U.S. economic growth and low unemployment.

* For the 12 months, the consumer price index rose only 1.4%, down
significantly from early 1997.

* Low inflation translated into only minor adjustments to the principal value
of inflation-indexed securities.

* Nominal 10-year Treasury yields fell from just over 6.9% on March 31, 1997,
to around 5.6% on March 31, 1998, while inflation-indexed yields moved up
from roughly 3.5% to 3.8%.

* Subdued demand for inflation-indexed securities was the main reason for the
shrinking gap between nominal and inflation-indexed yields. The market's
expectation for low inflation going forward was a contributing factor.

INFLATION-ADJUSTED TREASURY

* The fund's modest performance reflected the declining rate of inflation and
higher real bond yields. (See Total Returns on page 4.)

* The adjustments we made to the portfolio were aimed at keeping the fund's
holdings in line with its benchmark, the Salomon Brothers U.S.
Inflation-Linked Index.

* We shortened duration (a measure of the fund's sensitivity to changes in
interest rates) to roughly 5.9 years after buying some attractively priced
five-year inflation-indexed securities in October 1997. We kept duration
close to that level through the end of the period.

* Although the rate of inflation has declined over the past year,
inflation-indexed bonds offer an effective hedge against higher inflation
for long-term investors.

* While it's possible that nominal interest rates could go lower, we believe
the majority of the decline is already behind us.

* We plan on adding some 30-year inflation-indexed Treasury bonds to the fund
when these securities are auctioned in April.

* Currently, we feel that five-year inflation-indexed securities are
attractively priced, so we may increase the portfolio's position in these
securities.

INFLATION-ADJUSTED
TREASURY

TOTAL RETURNS: AS OF 3/31/98
6 Months 1.22%*
1 Year 3.45%

30-DAY SEC YIELD: 5.51%

NET ASSETS: $5.3 million
(AS OF 3/31/98)

INCEPTION DATE: 2/10/97

* Not annualized.

Many of the investment terms in this report are defined in the Glossary on page
17.

ANNUAL REPORT REPORT HIGHLIGHTS 1

OUR MESSAGE TO YOU

[photo of James E. Stowers, Jr. and James E. Stowers III]

The U.S. Treasury market rallied during the 12 months ended March 31, 1998.
The financial crisis in Asia boosted demand for Treasurys as global investors
looked for a safe place to put their money. In the U.S., low inflation, an
improving federal budget and a healthy economy created an ideal environment for
bonds. But while low inflation was good for bonds in general, it hurt demand for
inflation-indexed Treasury securities, causing them to significantly
underperform traditional Treasurys.

We're also working hard to prepare our computer systems for the year 2000
(Y2K). The Y2K problem, which has been widely publicized in the financial press,
refers to the possible inability of computer systems to distinguish between the
years 1900 and 2000. Like other financial companies, a significant percentage of
our computer operations involves some type of date comparison or date
calculation. Although much of our system is already Y2K compliant, we anticipate
the rest will be in compliance by the end of this year.

Thank you for your investment.

Sincerely,

/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer

2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS

MARKET PERSPECTIVE

[line graph - data below]

10-YEAR TREASURY YIELD COMPARISONS
March '97 through March '98

10-Year Nominal 10-Year Inflation-Indexed
Treasury Treasury
Mar-97 6.95% 3.58%
Apr-97 6.75% 3.58%
May-97 6.68% 3.58%
Jun-97 6.55% 3.66%
Jul-97 6.06% 3.58%
Aug-97 6.41% 3.60%
Sep-97 6.18% 3.62%
Oct-97 5.93% 3.55%
Nov-97 5.94% 3.54%
Dec-97 5.80% 3.72%
Jan-98 5.56% 3.66%
Feb-98 5.72% 3.70%
Mar-98 5.76% 3.79%

Source: Bloomberg Financial Markets

LAGGING RETURNS

Declining inflation and subdued demand led to lackluster performance by
inflation-indexed Treasury securities during the 12 months ended March 31, 1998.
However, these same factors contributed to solid returns for nominal
(traditional) fixed-coupon, fixed-maturity bonds. This performance disparity is
illustrated by the 3.92% return of the Salomon brothers U.S. Inflation-Linked
Index compared with the 20.63% return of the Salomon Brothers Treasury Index,
which broadly represents the performance of the entire Treasury market.

DECLINING INFLATION AND SOLID ECONOMIC GROWTH

During the first quarter of 1997, the U.S. economy grew at a whopping 4.9%
annual pace. As measured by the consumer price index (CPI), inflation was on
track to grow 2.8% for the year. These factors led to market expectations that
the Federal Reserve (the Fed) would embark upon a series of short-term interest
rate increases to pre-empt inflation. However, after only one increase to the
federal funds rate in March 1997, the Fed made no further adjustments as prices
trended lower.

The lack of inflation was especially surprising because it was accompanied
by solid U.S. economic growth and low unemployment. The U.S. economy grew 3.8%
in 1997, marking the highest annual growth rate in nine years. Accompanying that
growth was a 4.9% unemployment rate--the lowest annual rate since 1969.

During the 12 months ended March 1998, CPI grew by only 1.4% (the
second-smallest increase in 33 years). Behind the low inflation was a backdrop
of improved worker productivity brought about by technological advancements.
Health care and benefits cost savings, fueled by the increasing use of health
maintenance organizations, also helped. The combination allowed companies to pay
employees more without raising prices.

Low inflation translated into only minor adjustments to the principal value
of inflation-indexed securities. The principal value of inflation-indexed bonds
is adjusted regularly for inflation, based on the non-seasonally adjusted
consumer price index (CPI-NSA), but with a three-month lag. The principal
adjustments for the year ended March 31, 1998, totaled 1.56%.

A NARROWING GAP

The accompanying graph illustrates the convergence between 10-year nominal
Treasury yields and 10-year inflation-indexed yields. Nominal yields fell from
just over 6.9% on March 31, 1997, to around 5.6% on March 31, 1998, while
inflation-indexed yields moved up from roughly 3.5% to 3.8%.

Subdued demand for inflation-indexed securities caused their yields to rise
and was the main reason for the shrinking gap between nominal and
inflation-indexed yields. The market's expectation for low inflation going
forward was another important factor. The declining gap in yields caused the
after-inflation income of nominal-yielding securities to fall to levels just
above those offered by inflation-indexed securities. During the 12 months, the
"breakeven inflation rate"--the annual rate that inflation would have to grow
for yields to be equal--between 10-year nominal and inflation-indexed yields
fell from 3.3% to only 2%.

ANNUAL REPORT MARKET PERSPECTIVE 3

PERFORMANCE & PORTFOLIO INFORMATION

AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR LIFE OF FUND(2)
- -------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(1)

Inflation-Adjusted Treasury .............. 1.22% 3.45% 1.24%

Salomon Brothers Treasury Index .......... 8.12% 20.63% 16.20%(3)

Salomon Brothers U.S.
Inflation-Linked Index ................ 1.53% 3.92% 2.30%(3)

(1) Returns for periods less than one year are not annualized.

(2) Inception date was February 10, 1997.

(3) Since 2/28/97, the date nearest the fund's inception for which data are
available.

See pages 16-17 for more information about returns and the comparative indices.

[line graph - data below]

GROWTH OF $10,000 OVER LIFE OF FUND
$10,000 investment made 2/28/97*

Value on 3/31/98
Inflation Adjusted Salomon Salomon
Treasury Inflation-Linked Index Treasury Index
Feb-97 $10,000 $10,000 $10,000
Mar-97 $9,858 $9,863 $9,756
Apr-97 $9,921 $9,932 $9,981
May-97 $9,977 $9,984 $10,099
Jun-97 $9,942 $9,953 $10,291
Jul-97 $10,034 $10,045 $10,896
Aug-97 $10,061 $10,077 $10,589
Sep-97 $10,076 $10,096 $10,884
Oct-97 $10,173 $10,206 $11,253
Nov-97 $10,224 $10,260 $11,400
Dec-97 $10,160 $10,213 $11,593
Jan-98 $10,214 $10,265 $11,828
Feb-98 $10,206 $10,256 $11,740
Mar-98 $10,199 $10,250 $11,769

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the
indices' total return lines do not.

* 2/28/97 is the date nearest the fund's inception for which comparable
performance data exist. The fund's actual inception date is 2/10/97.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 3 1
Weighted Average Maturity 6.9 years 9.8 years
Average Duration 5.9 years 8.0 years
Expense Ratio 0.50% 0.50%*

* Annualized.

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Inflation-Adjusted Treasury 5.51%

Yield is defined in the Glossary on page 17.

4 PERFORMANCE & PORTFOLIO INFORMATION AMERICAN CENTURY INVESTMENTS

MANAGEMENT Q & A

An interview with Dave Schroeder, a portfolio manager on the
Inflation-Adjusted fund investment team.

HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

The fund's modest performance reflected the declining rate of inflation and
subdued demand for inflation-indexed securities. For the twelve months ended
March 31, 1998, the fund returned 3.45%, compared with the 3.92% return of the
Salomon Brothers U.S. Inflation-Linked Index. (See the Total Returns table on
page 4 for other fund performance comparisons.) Keep in mind that the benchmark
is an index of securities, without the transaction costs of a mutual fund.

WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO OVER THE LAST SIX MONTHS?

The fund's duration (a measure of sensitivity to changes in interest rates)
was 6.6 years six months ago, but shortened to roughly 5.9 years after we bought
some five-year inflation-indexed notes following the October 1997 auction.
Duration remained close to this level through the end of March.

From a security standpoint, we made adjustments aimed at keeping the fund's
holdings representative of the inflation-indexed market in general.

WHY DO YOU HOLD A MUCH SMALLER PORTION OF GOVERNMENT AGENCY SECURITIES THAN
TREASURYS?

There are two main reasons. The first is that the fund cannot hold more than
35% of its assets in inflation-indexed securities issued by government agencies.
The second is that attractively priced agency issues that meet the fund's
objectives are tough to find. The yields of newly issued inflation-indexed
agency securities are generally only slightly higher than like-maturity
Treasurys. The agency issues also tend to become comparably priced with
like-maturity Treasury securities shortly after they are issued. That means the
returns of the securities should be roughly the same over a given time horizon.

When purchasing agency securities for the portfolio, we feel that we should
be compensated in the form of a higher yield and higher return than
like-maturity Treasurys, for two reasons. One, there is slightly more credit
risk and two, the agency securities take more time to be resold at appropriate
prices.

As mentioned in the fund's last report, we were able to find an attractively
valued 10-year inflation-indexed agency issue during the first half of the
period. The security was issued by the Tennessee Valley Authority and offered a
yield that was roughly 20 basis points (a basis point equals 0.01%) higher than
a comparable-maturity Treasury security. Keeping the portfolio's 35% agency
limit in mind, we will likely add such securities as opportunities present
themselves.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Treasury Notes 71%
U.S. Government
Agency Notes 29%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
Treasury Notes 75%
U.S. Government
Agency Notes 25%

ANNUAL REPORT MANAGEMENT Q & A 5

MANAGEMENT Q & A

WITH INFLATION SO LOW, DOES IT MAKE SENSE TO INVEST IN AN INFLATION-PROTECTED
FUND?

Yes, and for a very fundamental reason. Currently, nominal 10-year Treasury
bonds yield roughly 200 basis points (2%) more than 10-year inflation-indexed
Treasurys. That means that if inflation rises more than 2%, the
inflation-indexed security should provide better returns if held to maturity.

Although the rate of inflation has declined over the past year,
inflation-indexed bonds offer an effective hedge against higher inflation for
long-term investors. That's why an inflation-indexed fund remains such an
important diversification tool. In the long run, including this type of fund in
your investment portfolio can help protect you against an unexpected increase in
inflation. And since the after-inflation income of nominal-yielding securities
has fallen to levels just above those offered by inflation-indexed securities
(see page 3), it makes more sense than ever to include the fund in a
well-balanced portfolio.

WHAT IS YOUR OUTLOOK FOR INFLATION GOING FORWARD?

Inflation remained surprisingly low during the last twelve months, but it's
difficult to say whether that will continue. When problems in Asia surfaced in
October 1997, many observers argued that the U.S. economy would slow in response
and inflationary threats would cool. However, recent evidence indicates that the
effects of Asia's turmoil on the U.S. economy have been fairly mild-according to
the government's initial estimate, the U.S. economy grew at a 4.2% annual pace
during the first quarter of 1998. In addition, the unemployment rate remains at
record low levels. This combination could eventually translate into inflation
because companies may be forced to raise prices to support higher salaries.

On the other hand, technological advancements and savings on health care and
benefits costs are currently helping to keep inflation in check. Commodity
prices, which fell in the wake of slackening demand from Asia, are also helping
to keep a lid on inflation.

THE U.S. TREASURY DEPARTMENT IS SCHEDULED TO AUCTION $8 BILLION OF 30-YEAR
INFLATION-INDEXED BONDS IN APRIL. DO YOU EXPECT TO BUY SOME OF THESE SECURITIES

Yes. We plan on adding some of these bonds to the portfolio because yields
on inflation-indexed Treasurys are near recent highs. The addition of these
bonds should change the allocation of inflation-indexed holdings to roughly 35%
five-year securities, 45%-50% ten-year securities, with the remaining 15%-20% in
the new 30-year issues.

WHAT OTHER PLANS DO YOU HAVE GOING FORWARD?

We will continue to hold the majority of the portfolio in Treasury
inflation-indexed securities, with the remaining 30%-35% in agencies. We will
also focus on the difference in the yields of shorter- and longer-maturity
securities as adjusted for inflation. Currently, we feel that five-year notes
are attractively priced relative to longer-term securities, so we may increase
the portfolio's holdings of these securities.

[pie charts]

PORTFOLIO COMPOSITION BY MATURITY (as of 3/31/98)
10-Year Notes 58%
5-Year Notes 42%

PORTFOLIO COMPOSITION BY MATURITY (as of 9/30/97)
10-Year Notes 67%
5-Year Notes 33%

6 MANAGEMENT Q & A AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount Value
- -------------------------------------------------------------------------------

U.S. TREASURY SECURITIES

$2,209,622 U.S. Treasury Inflation Indexed
Notes, 3.625%, 7/15/02 $2,188,212

1,580,861 U.S. Treasury Inflation Indexed
Notes, 3.375%, 1/15/07 1,533,435
---------------

TOTAL U.S. TREASURY SECURITIES--71.1% 3,721,647
---------------
(Cost $3,754,342)

U.S. GOVERNMENT AGENCY SECURITIES--28.9%

1,580,861 TVA Inflation Indexed Notes,
3.375%, 1/15/07 1,509,343
---------------
(Cost $1,528,870)

TOTAL INVESTMENT SECURITIES--100.0% $5,230,990
===============
(Cost $5,283,212)

NOTES TO SCHEDULE OF INVESTMENTS

TVA = Tennessee Valley Authority

See Notes to Financial Statements

ANNUAL REPORT SCHEDULE OF INVESTMENTS 7

STATEMENT OF ASSETS AND LIABILITIES

MARCH 31, 1998

ASSETS

Investment securities, at value
(identified cost of $5,283,212)
(Note 3) .............................................. $ 5,230,990

Cash ..................................................... 34,632

Interest receivable ...................................... 38,666
-----------
5,304,288
-----------
LIABILITIES

Disbursements in excess
of demand deposit cash ................................. 815

Payable for capital
shares redeemed ........................................ 18,855

Accrued management
fee (Note 2) ........................................... 2,148

Dividends payable ........................................ 3,082

Accrued expenses
and other liabilities .................................. 10
-----------
24,910
-----------
Net Assets ............................................... $ 5,279,378
===========
CAPITAL SHARES

Outstanding (Unlimited
number of shares authorized) ........................... 548,332
===========
Net Asset Value Per Share ................................ $ 9.63
===========
NET ASSETS CONSIST OF:

Capital paid in .......................................... $ 5,382,173

Accumulated net realized
loss on investments .................................... (50,573)

Net unrealized depreciation
on investments (Note 3) ................................ (52,222)
-----------
$ 5,279,378
===========

See Notes to Financial Statements

8 STATEMENT OF ASSETS AND LIABILITIES AMERICAN CENTURY INVESTMENTS

STATEMENT OF OPERATIONS

YEAR ENDED MARCH 31, 1998

INVESTMENT INCOME

Income:

Interest .................................................. $ 203,892
---------
Expenses (Note 2):

Investment advisory fees .................................. 17,894

Printing and postage ...................................... 9,646

Trustees' fees and expenses ............................... 5,209

Registration and filing fees .............................. 3,673

Transfer agency fees ...................................... 2,106

Administrative fees ....................................... 1,149

Custodian Fees ............................................ 554

Other operating expenses .................................. 536
---------
Total expenses .......................................... 40,767

Amount reimbursed ......................................... (20,503)
---------
Net expenses ............................................ 20,264
---------
Net investment income ..................................... 183,628
---------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (NOTE 3)

Net realized loss on investments .......................... (50,573)

Change in net unrealized
depreciation on investments ............................. (6,914)
---------
Net realized and unrealized
loss on investments ..................................... (57,487)
---------
Net Increase in Net Assets
Resulting from Operations ............................... $ 126,141
=========

See Notes to Financial Statements

ANNUAL REPORT STATEMENT OF OPERATIONS 9

STATEMENTS OF CHANGES IN NET ASSETS

YEAR ENDED MARCH 31, 1998 AND
PERIOD ENDED MARCH 31, 1997

Increase in Net Assets 1998 1997(1)

OPERATIONS

Net investment income ...................... $ 183,628 $ 10,540

Net realized loss on
investments .............................. (50,573) --

Change in net unrealized
depreciation on investments .............. (6,914) (45,308)
----------- -----------
Net increase (decrease) in
net assets resulting
from operations .......................... 126,141 (34,768)
----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS

From net investment income ................. (183,628) (10,540)
----------- -----------
CAPITAL SHARE
TRANSACTIONS

Proceeds from shares sold .................. 5,246,272 2,627,000

Proceeds from reinvestment
of distributions ......................... 166,664 8,426

Payments for shares redeemed ............... (2,353,447) (312,742)
----------- -----------
Net increase in net assets
from capital share transactions .......... 3,059,489 2,322,684
----------- -----------
Net increase in net assets ................. 3,002,002 2,277,376

NET ASSETS

Beginning of period ........................ 2,277,376 --
----------- -----------
End of period .............................. $ 5,279,378 $ 2,277,376
=========== ===========
TRANSACTIONS IN
SHARES OF THE FUND

Sold ....................................... 539,728 264,716

Issued in reinvestment
of distributions ......................... 17,153 861

Redeemed ................................... (242,312) (31,814)
----------- -----------
Net increase ............................... 314,569 233,763
=========== ===========

(1) February 10, 1997 (inception) through March 31, 1997.

See Notes to Financial Statements

10 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- American Century Government Income Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. American Century - Benham Inflation-Adjusted
Treasury Fund (the Fund) is one of the eight funds issued by the Trust. The
Fund's investment objective is to provide a total return consistent with
investment in U.S. Treasury inflation-adjusted securities. The Fund may also
invest in U.S. Treasury securities which are not indexed to inflation for
liquidity and total return, or if at any time the manager believes there is an
inadequate supply of appropriate Treasury inflation-adjusted securities in which
to invest. The Fund is authorized to issue two classes of shares: the Investor
Class and the Advisor Class. The two classes of shares differ principally in
their respective shareholder servicing and distribution expenses and
arrangements. All shares of the Fund represent an equal pro rata interest in the
assets of the class to which such shares belong, and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
for class specific expenses and exclusive rights to vote on matters affecting
only individual classes. Sale of the Advisor Class had not commenced as of the
report date. The following significant accounting policies, related to both
classes of the Fund, are in accordance with accounting policies generally
accepted in the investment company industry.

SECURITY VALUATIONS -- Securities are valued through a commercial pricing
service or at the mean of the most recent bid and asked prices. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Board of Trustees.

INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.

INCOME TAX STATUS -- It is the Fund's policy to distribute all net
investment income and net realized capital gains to shareholders and to
otherwise qualify as a regulated investment company under the provisions of the
Internal Revenue Code. Accordingly, no provision has been made for federal or
state income taxes.

DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.

At March 31, 1998, accumulated net realized capital loss carryovers of
approximately $12,700 (expiring 2006) may be used to offset future taxable
gains.

The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate characterization for
federal income tax purposes. These differences reflect the differing character
of certain income items and net capital gains and losses for financial statement
and tax purposes and may result in reclassification among certain capital
accounts.

ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.

- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES

The shareholders of the Fund approved a new management agreement with
American Century Investment Management, Inc. (ACIM) on July 30, 1997, effective
August 1, 1997, which replaced the previously existing contracts between the
Fund and Benham Management Corporation and American Century Services Corporation
(ACSC) for advisory, administrative and transfer agency services. Under the
agreement, ACIM provides all services required by the Fund in exchange for a
single, unified management fee per class. Expenses excluded from this agreement
are brokerage, taxes, portfolio insurance, interest, fees and expenses of those
Trustees who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses. The annual rate at which this fee is assessed is determined monthly in
a two-step process: First, a fee rate schedule is applied to the net assets of
all of the funds in the Fund's investment category

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 11

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of the Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category and the Equity Fund Category. The Fund is in the Bond Fund Category.
Second, a separate fee rate schedule is applied to the net assets of all of the
funds managed by ACIM (the "Complex Fee"). The Investment Category Fee and the
Complex Fee are then added to determine the unified management fee rate. The
management fee is paid monthly by the Fund based on the Fund's aggregate average
daily net assets during the previous month multiplied by the monthly management
fee rate. The annualized Investment Category fee for the Fund is as follows:

0.2800% of the first $1 billion
0.2280% of the next $1 billion
0.1980% of the next $3 billion
0.1780% of the next $5 billion
0.1650% of the next $15 billion
0.1630% of the next $25 billion
0.1625% of the average daily net assets over $50 billion

The annualized Complex Category fee schedule (Investor Class) is as follows

The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plan provides that the Fund will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the Fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers.

ACIM has agreed to continue to waive expenses which exceed 0.50% of average
daily net assets through May 31, 1998. Total expenses of $17,977, of which
$3,808 were waived by ACIM, were incurred under the new management agreement and
are included in Investment Advisory Fees and Trustees' Fees and Expenses in the
Statement of Operations. Total expenses, under the previous agreement, for the
four months ended July 31, 1997 were $22,790, of which $16,695 were waived by
Benham Management Corporation. The annualized ratio of operating expenses to
average net assets, net of the amount waived, for the same period was 0.50%.

- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS

Purchases and sales of U.S. Treasury and Agency obligations, excluding
short-term investments, totaled $5,881,336 and $2,709,119, respectively.

As of March 31, 1998, the aggregate cost of investments for federal income
taxes was $5,320,024. Accumulated net unrealized depreciation based on the cost
for federal tax purposes was $89,034, consisting entirely of unrealized
depreciation.

12 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout the Years Ended March 31 (except as noted)

1998 1997(1)
PER-SHARE DATA

Net Asset Value,
Beginning of Period ....................... $ 9.74 $ 10.00
--------- ---------
Income From Investment
Operations

Net Investment Income ................... 0.44 0.06

Net Realized and Unrealized
Loss on Investment Transactions ......... (0.11) (0.26)
--------- ---------
Total From Investment
Operations .............................. 0.33 (0.20)
--------- ---------
Distributions

From Net Investment
Income .................................. (0.44) (0.06)
--------- ---------
Net Asset Value,
End of Period ........................... $ 9.63 $ 9.74
========= =========
Total Return(2) ......................... 3.45% (1.98)%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating
Expenses to Average
Net Assets .............................. 0.50% 0.50%(3)

Ratio of Net Investment
Income to Average
Net Assets .............................. 4.45% 5.03%(3)

Portfolio Turnover Rate ................... 69% --

Net Assets,
End of Period (in thousands) .............. $ 5,279 $ 2,277

(1) February 10, 1997 (inception) through March 31, 1997.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.

(3) Annualized.

See Notes to Financial Statements

ANNUAL REPORT FINANCIAL HIGHLIGHTS 13

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of the American Century Government Income Trust and the
Shareholders of the American Century - Benham Inflation-Adjusted Treasury Fund:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the American Century - Benham Inflation-Adjusted
Treasury Fund (one of the Funds comprising American Century Government Income
Trust) as of March 31, 1998, and the related statement of operations, statement
of changes in net assets, and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets as of March 31, 1997 and the financial highlights for
the period ended March 31, 1997, were audited by other auditors, whose report,
dated May 2, 1997, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1998, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Century - Benham Inflation-Adjusted Treasury Fund as of March 31, 1998,
the results of its operations, the changes in its net assets and the financial
highlights for the year then ended, in conformity with generally accepted
accounting principles.

Coopers & Lybrand L.L.P.

Kansas City, Missouri
May 8, 1998

14 REPORT OF INDEPENDENT ACCOUNTANTS AMERICAN CENTURY INVESTMENTS

RETIREMENT ACCOUNT INFORMATION

ANNUAL REPORT RETIREMENT ACCOUNT INFORMATION 15

BACKGROUND INFORMATION

INVESTMENT PHILOSOPHY & POLICIES

In addition to these principles, each fund has its own investment policies:

INFLATION-ADJUSTED TREASURY seeks to provide a total return and inflation
protection consistent with an investment in inflation-indexed securities issued
by the U.S. Treasury. The fund has no average maturity limitations. Fund shares
are not guaranteed by the U.S. government.

COMPARATIVE INDICES

The indices listed below are used in the report for fund performance
comparisons. They are not investment products available for purchase.

The SALOMON BROTHERS TREASURY INDEX is an index of U.S. Treasury securities
with maturities greater than 10 years.

The SALOMON BROTHERS U.S. INFLATION-LINKED INDEX is an index of
inflation-linked U.S. Treasury securities.

- ------------------------------------------
INVESTMENT TEAM LEADERS
- ------------------------------------------
Portfolio Manager Dave Schroeder
- ------------------------------------------

16 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS

GLOSSARY

RETURNS

* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.

YIELDS

* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The fund's net investment income includes
both interest and the principal adjustment on inflation-indexed securities. The
SEC yield should be regarded as an estimate of the fund's rate of investment
income, and it may not equal the fund's actual income distribution rate, the
income paid to a shareholder's account, or the income reported in the fund's
financial statements.

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.

INVESTMENT TERMS

* BASIS POINT--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%). Basis points are used to clearly
describe interest rate changes. For example, if a news report indicates that
interest rates rose by 1%, does that mean 1% of the previous rate or one
percentage point? It is more accurate to state that interest rates rose by 100
basis points.

* COUPON--the stated interest rate of a security.

SECURITY TYPES

* U.S. TREASURY INFLATION-INDEXED SECURITIES--debt securities issued by the U.S.
Treasury and backed by the direct "full faith and credit" pledge of the U.S.
government. Inflation-indexed bonds have lower interest rates than normal
Treasury bonds with similar maturities. But unlike ordinary bonds,
inflation-indexed bonds' principal value is adjusted regularly for inflation
based on the consumer price index. As a result, the amount of interest paid out
changes with the principal adjustments.

ANNUAL REPORT GLOSSARY 17

[american century logo(reg.sm)]
American
Century(reg.tm)

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

INTERNET: WWW.AMERICANCENTURY.COM

AMERICAN CENTURY GOVERNMENT INCOME TRUST

INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI

9805 [recycled logo]
SH-BKT-12406 Recycled
<PAGE>
ANNUAL
REPORT

[american century logo(reg.sm)]
American
Century(reg.tm)

MARCH 31, 1998

BENHAM
GROUP

GNMA

TABLE OF CONTENTS
Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Market Perspective ........................................................ 3
Performance & Portfolio Information ....................................... 4
Management Q & A .......................................................... 5
Schedule of Investments ................................................... 8
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Report of Independent Accountants ......................................... 17
Share Class and Retirement
Account Information ....................................................... 18
Background Information
Investment Philosophy & Policies ............................... 20
Comparative Indices ............................................ 20
Lipper Rankings ................................................ 20
Investment Team Leaders ........................................ 20
Glossary .................................................................. 21

We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.

American Century and Benham Group are registered marks of American Century
Services Corporation.

AMERICAN CENTURY INVESTMENTS

REPORT HIGHLIGHTS

MARKET PERSPECTIVE

* Favorable economic conditions continued during the 12 months ended March 31,
1998. Low inflation and healthy growth provided an excellent backdrop for
investors in U.S. financial markets.

* Low inflation--and low inflation expectations--caused interest rates to
fall.The U.S. bond market rallied, with intermediate- and long-term
securities producing double-digit returns.

* Falling long-term rates and relatively stable short-term rates created a
flat Treasury yield curve. In other words, long-term bonds didn't yield much
more than short-term securities. Bond investors lost some incentive for
taking on the risk of longer-maturity securities.

* Treasury securities outperformed other sectors such as corporates, agencies
and mortgage-backeds during the period. Treasurys typically outperform other
bond sectors when interest rates fall sharply.

* GNMA certificates produced double-digit returns despite prepayment fears and
a big refinancing wave. The spike in refinancings caused the GNMA market to
become more concentrated in securities with lower coupons.

GNMA

* GNMA posted its highest fiscal-year total return since 1993, reflecting the
generally strong performance of the U.S. bond market and GNMAs (see the
Total Returns table on page 4).

* Similar to its benchmark (which reflects the GNMA market in general), the
portfolio became more concentrated in GNMAs with coupons below 8%. In
general, we kept the portfolio's duration and asset mix very close to the
benchmark's.

* In preparation for the impact of the refinancing wave, we worked to minimize
the premium expense we would incur if GNMAs with coupons above 8% were
prepaid, and we increased the cash position a bit to improve liquidity.

* We believe GNMA should continue to offer a higher yield than comparable
intermediate-term Treasury funds, but its yield could continue to decline,
even for a short period after interest rates begin rising. There's a time
lag between when mortgage holders refinance and when GNMA investors receive
prepayments.

GNMA
INVESTOR CLASS(1)

TOTAL RETURNS: AS OF 3/31/98
6 Months 3.58%(2)
1 Year 10.21%

30-DAY SEC YIELD: 6.19%

NET ASSETS: $1.3 billion
(AS OF 3/31/98)

INCEPTION DATE: 9/23/85

TICKER SYMBOL: BGNMX

(1) See Share Classes, page 18.
(2) Not annualized.

Many of the investment terms in this report are defined in the Glossary on page
21.

ANNUAL REPORT REPORT HIGHLIGHTS 1

OUR MESSAGE TO YOU

[hoto of James E. Stowers, Jr. and James E. Stowers III]

Benham GNMA performed well during the 12 months ended March 31, 1998.
Inflation remained low, interest rates fell, the U.S. bond market rallied, and
GNMAs produced double-digit returns in spite of a wave of mortgage refinancing.
Against a global backdrop of stock market volatility and overseas financial
crises, investors in Benham GNMA could feel relatively secure.

The past year has been eventful for American Century. We gained a powerful
business partner in January, when J.P. Morgan, one of the oldest, largest and
most respected financial service institutions in the U.S., became a substantial
minority shareholder. The new business partnership will allow both companies to
offer investors a highly diverse menu of investment options and services.

We're also working hard to prepare our computer systems for the year 2000
(Y2K). The Y2K problem, which has been widely publicized in the financial press,
refers to the possible inability of computer systems to distinguish between the
years 1900 and 2000 when the new millennium arrives. Like other financial
companies, a significant percentage of our computer operations involves some
type of date comparison or date calculation. Although much of our system is
already Y2K compliant, we anticipate the rest will be in compliance by the end
of this year.

Thank you for your investment.

Sincerely,

/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer

2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS

MARKET PERSPECTIVE

[line graph - data below]

MORTGAGE REFINANCING WAVE
April '97 through March '98

Index of Refinancing 10-Year Treasury
Applications Note Yields
(right scale) (left scale)
4/4/97 292.3 6.905%
4/11/97 285.1 6.968%
4/18/97 282.3 6.825%
4/25/97 273.2 6.938%
5/2/97 289.8 6.643%
5/9/97 303.4 6.668%
5/16/97 332.5 6.719%
5/23/97 325.1 6.740%
5/30/97 236.5 6.659%
6/6/97 322.4 6.486%
6/13/97 375.7 6.425%
6/20/97 396.5 6.374%
6/27/97 422.4 6.451%
7/4/97 331.7 6.307%
7/11/97 497.3 6.220%
7/18/97 542.8 6.242%
7/25/97 595.9 6.179%
8/1/97 689.3 6.180%
8/8/97 718.8 6.366%
8/15/97 577.2 6.235%
8/22/97 552.9 6.358%
8/29/97 477.8 6.339%
9/5/97 413.0 6.350%
9/12/97 498.5 6.282%
9/19/97 699.6 6.092%
9/26/97 691.5 6.081%
10/3/97 728.2 5.988%
10/10/97 845.5 6.143%
10/17/97 632.7 6.158%
10/24/97 683.1 5.981%
10/31/97 1013.4 5.831%
11/7/97 805.0 5.902%
11/14/97 758.2 5.879%
11/21/97 779.4 5.811%
11/28/97 580.1 5.874%
12/5/97 785.1 5.914%
12/12/97 827.3 5.728%
12/19/97 850.0 5.736%
12/26/97 447.0 5.738%
1/2/98 583.6 5.647%
1/9/98 1842.5 5.413%
1/16/98 3115.8 5.531%
1/23/98 2474.6 5.687%
1/30/98 2038.6 5.505%
2/6/98 2028.7 5.617%
2/13/98 1686.4 5.484%
2/20/98 1604.5 5.543%
2/27/98 1526.1 5.622%
3/6/98 1363.1 5.714%
3/13/98 1337.9 5.580%
3/20/98 1421.4 5.563%
3/27/98 1297.1 5.683%

Source: Bloomberg Financial Markets

DOUBLE-DIGIT RETURNS

While U.S. stocks grabbed most of the attention, U.S. bonds quietly posted
double-digit returns for the 12 months ended March 31, 1998. Inflation--and
inflation expectations--remained low, and interest rates generally fell,
boosting bond prices. The consumer price index, viewed as the broadest gauge of
costs for U.S. goods and services, rose at an annual rate of just 1.4% for the
period.

The Federal Reserve, not seeing any convincing signs of inflation, left its
short-term interest rate target unchanged at 5.5%, while yields on long-term
Treasury bonds fell more than a full percentage point, from 7.10% to 5.94%. This
resulted in a "flat" yield curve--the yield difference between a six-month
Treasury bill and a 30-year Treasury bond was just 68 basis points on March 31,
1998, compared with 182 basis points at the start of the period. (A basis point
equals 0.01%.)

Long-term bonds, which are most sensitive to interest rate changes,
outperformed intermediate- and short-term securities. For example, a 30-year
Treasury bond produced a total return of 22.6%, a 10-year Treasury note returned
15.4% and a two-year Treasury note returned 7.5%.

TREASURYS OUTPERFORMED GNMAS

Most U.S. bond sectors performed well. Treasury securities finished on top,
despite strong demand for higher-yielding securities such as GNMA certificates.
Treasurys typically outperform GNMAs when interest rates fall sharply because
lower interest rates cause mortgage borrowers to refinance. When borrowers
prepay their loans, GNMA investors usually have to reinvest the proceeds in
securities with lower yields. The prospect of increased refinancing also drives
down the value of GNMAs.

GNMAs produced double-digit returns despite a big refinancing wave and fears
about prepayments. The Salomon Brothers 30-Year GNMA Index returned 10.87% even
though the 10-year Treasury note yield, a mortgage benchmark, dropped below 5.4%
in the first quarter of 1998, triggering one of the highest mortgage refinancing
waves ever (see the accompanying graph). The last similar prepayment spike was
in 1996. The 1998 refinancing wave could continue to reduce GNMA fund yields in
the second quarter (see the Management Q&A beginning on page 5).

GNMA COMPOSITION CHANGED

The recent refinancing wave also caused the GNMA market to become more
concentrated in securities with 6% to 8% coupons as many higher coupon GNMAs
were prepaid. The increased concentration of lower-coupon GNMAs has interesting
ramifications for the market. Lower-coupon GNMAs tend to behave more like
long-term Treasurys; their total returns, relative to higher-coupon GNMAs, are
more responsive to interest rate changes. Should the bond rally end, the lower
coupon securities will make the GNMA market more susceptible to price declines
than it was a year ago. Investors with higher-coupon GNMAs that survive the
refinancing wave should be rewarded with less volatility.

ANNUAL REPORT MARKET PERSPECTIVE 3

<TABLE>
<CAPTION>
PERFORMANCE & PORTFOLIO INFORMATION

TOTAL RETURNS AS OF MARCH 31, 1998(1)
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS LIFE OF FUND
- --------------------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS (inception 9/23/85)

<S> <C> <C> <C> <C> <C> <C>
GNMA .............................. 3.58% 10.21% 8.70% 6.55% 8.64% 8.84%

Salomon 30-Year GNMA Index ........ 3.87% 10.87% 9.21% 7.00% 9.18% 9.74%(2)

Average GNMA Fund(3) .............. 3.69% 10.69% 8.39% 6.17% 8.17% 8.42%(2)

Fund's Ranking Among
GNMA Funds(3) ..................... -- 38 out of 52 14 out of 46 7 out of 30 4 out of 24 5 out of 14(2)

ADVISOR CLASS (inception 10/9/97)

GNMA .............................................................................................................. 3.30%

Salomon 30-Year GNMA Index ........................................................................................ 3.87%

(1) Returns for periods less than one year are not annualized.

(2) Since 9/30/85, the date nearest the class' inception for which data are
available.

(3) According to Lipper Analytical Services.
</TABLE>

See pages 20-21 for more information about returns, the comparative index and
Lipper fund rankings.

[mountain graph - data below]

GROWTH OF $10,000 OVER TEN YEARS (Investor Class) $10,000 investment made
3/31/88

Value on 3/31/98
Salomon 30-Year GNMA Index GNMA
Mar-88 $10,000 $10,000
Apr-88 $9,925 $9,979
May-88 $9,917 $9,934
Jun-88 $10,178 $10,160
Jul-88 $10,137 $10,151
Aug-88 $10,147 $10,140
Sep-88 $10,400 $10,372
Oct-88 $10,645 $10,567
Nov-88 $10,489 $10,455
Dec-88 $10,431 $10,403
Jan-89 $10,623 $10,550
Feb-89 $10,540 $10,501
Mar-89 $10,545 $10,507
Apr-89 $10,733 $10,717
May-89 $11,100 $11,006
Jun-89 $11,420 $11,314
Jul-89 $11,676 $11,502
Aug-89 $11,507 $11,384
Sep-89 $11,578 $11,433
Oct-89 $11,849 $11,661
Nov-89 $11,986 $11,781
Dec-89 $12,062 $11,849
Jan-90 $11,953 $11,754
Feb-90 $11,997 $11,806
Mar-90 $12,049 $11,844
Apr-90 $11,910 $11,731
May-90 $12,299 $12,074
Jun-90 $12,504 $12,259
Jul-90 $12,723 $12,452
Aug-90 $12,593 $12,333
Sep-90 $12,699 $12,420
Oct-90 $12,840 $12,570
Nov-90 $13,158 $12,842
Dec-90 $13,379 $13,052
Jan-91 $13,568 $13,236
Feb-91 $13,649 $13,328
Mar-91 $13,756 $13,403
Apr-91 $13,899 $13,542
May-91 $14,009 $13,651
Jun-91 $14,040 $13,660
Jul-91 $14,278 $13,897
Aug-91 $14,538 $14,150
Sep-91 $14,810 $14,400
Oct-91 $15,034 $14,622
Nov-91 $15,131 $14,717
Dec-91 $15,513 $15,084
Jan-92 $15,340 $14,891
Feb-92 $15,479 $15,045
Mar-92 $15,424 $14,991
Apr-92 $15,557 $15,128
May-92 $15,831 $15,375
Jun-92 $16,048 $15,581
Jul-92 $16,171 $15,722
Aug-92 $16,394 $15,937
Sep-92 $16,526 $16,081
Oct-92 $16,410 $15,939
Nov-92 $16,502 $16,039
Dec-92 $16,690 $16,241
Jan-93 $16,925 $16,466
Feb-93 $17,071 $16,621
Mar-93 $17,182 $16,681
Apr-93 $17,268 $16,744
May-93 $17,366 $16,825
Jun-93 $17,543 $17,002
Jul-93 $17,615 $17,087
Aug-93 $17,645 $17,161
Sep-93 $17,656 $17,140
Oct-93 $17,693 $17,222
Nov-93 $17,668 $17,156
Dec-93 $17,802 $17,312
Jan-94 $17,950 $17,444
Feb-94 $17,869 $17,349
Mar-94 $17,415 $16,897
Apr-94 $17,313 $16,787
May-94 $17,373 $16,843
Jun-94 $17,335 $16,824
Jul-94 $17,659 $17,114
Aug-94 $17,675 $17,153
Sep-94 $17,463 $16,951
Oct-94 $17,442 $16,899
Nov-94 $17,384 $16,851
Dec-94 $17,577 $17,023
Jan-95 $17,952 $17,372
Feb-95 $18,431 $17,773
Mar-95 $18,507 $17,831
Apr-95 $18,762 $18,058
May-95 $19,346 $18,583
Jun-95 $19,471 $18,714
Jul-95 $19,524 $18,772
Aug-95 $19,698 $18,956
Sep-95 $19,887 $19,138
Oct-95 $20,056 $19,307
Nov-95 $20,292 $19,508
Dec-95 $20,550 $19,722
Jan-96 $20,706 $19,845
Feb-96 $20,564 $19,694
Mar-96 $20,517 $19,628
Apr-96 $20,423 $19,556
May-96 $20,389 $19,478
Jun-96 $20,644 $19,718
Jul-96 $20,728 $19,800
Aug-96 $20,737 $19,797
Sep-96 $21,076 $20,109
Oct-96 $21,501 $20,499
Nov-96 $21,807 $20,868
Dec-96 $21,702 $20,749
Jan-97 $21,897 $20,905
Feb-97 $21,935 $20,982
Mar-97 $21,747 $20,779
Apr-97 $22,075 $21,082
May-97 $22,292 $21,264
Jun-97 $22,553 $21,508
Jul-97 $22,949 $21,869
Aug-97 $22,913 $21,845
Sep-97 $23,213 $22,112
Oct-97 $23,447 $22,313
Nov-97 $23,513 $22,369
Dec-97 $23,732 $22,572
Jan-98 $23,933 $22,753
Feb-98 $24,012 $22,808
Mar-98 $24,111 $22,903

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 3,247 3,270
Average Duration 2.6 years 4.5 years
Average Life 5.8 years 7.6 years
Expense Ratio (Investor Class) 0.58% 0.55%

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Investor Class 6.19%
Advisor Class 5.90%

Yield is defined in the Glossary on page 21.

4 PERFORMANCE & PORTFOLIO INFORMATION AMERICAN CENTURY INVESTMENTS

MANAGEMENT Q&A

An interview with Casey Colton, a portfolio manager on the GNMA fund
investment team.

HOW DID THE FUND PERFORM AGAINST ITS BENCHMARK, THE SALOMON BROTHERS 30-YEAR
GNMA INDEX?

Our disciplined approach helped the fund provide an index-like return,
representing the mainstream performance of mortgage-backed securities. The
returns of the fund and the benchmark reflected the generally strong performance
of the U.S. bond market and GNMAs for the period. For the year ended March 31,
1998, the fund's Investor Class shares returned 10.21%, which includes fund
operating expenses. Before expenses, the investment portfolio returned 10.86%,
almost exactly matching the performance of its benchmark, which returned 10.87%.
Comparing the performance of the fund's portfolio before expenses to the
benchmark is more of an "apples to apples" comparison because the benchmark's
returns aren't subject to expenses.

THE SALOMON BROTHERS INDEX IS MORE THAN JUST A PERFORMANCE BENCHMARK; IT ALSO
SERVES AS A MODEL FOR THE FUND'S PORTFOLIO, CORRECT?

That's correct. We manage the fund to deliver a "pure play" on
mortgage-backed securities. We do that by trying to mimic the Salomon Brothers
index, which tracks an entire universe of outstanding mortgages. The index has
historically outperformed most GNMA funds, so using it as a benchmark has helped
the fund produce solid long-term returns. (See the Total Returns table on the
previous page for fund performance comparisons.) Our approach is similar in some
ways to the index approach used by many popular stock funds.

WHAT HAS MADE THE INDEX, AND AN INDEX APPROACH, SUCCESSFUL WITH GNMAS?

GNMAs are income vehicles; their higher yields are one of their key
attractions over other bond types. The index approach lets a GNMA portfolio

[bar chart - data below]

GNMA'S ONE-YEAR RETURNS FOR THE PAST TEN YEARS* (Periods ended March 31)

Salomon 30-Year
GNMA GNMA Index
3/89 5.07% 5.45%
3/90 12.73% 14.27%
3/91 13.16% 14.17%
3/92 11.84% 12.13%
3/93 11.28% 11.39%
3/94 1.30% 1.36%
3/95 5.53% 6.27%
3/96 10.08% 10.86%
3/97 5.87% 5.99%
3/98 10.21% 10.87%

This graph illustrates the fund's returns over the past 10 years and compares
them with the index's returns. The fund's total returns include operating
expenses, while the index's do not. See page 20 for a definition of the index.

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

* Investor Class.

ANNUAL REPORT MANAGEMENT Q & A 5

MANAGEMENT Q&A

"do its thing." When you're trying to track the GNMA market as a whole, you're
less likely to make short-term bets on price appreciation, and the portfolio has
a better opportunity to earn and compound its high yield without interference
from unnecessary price fluctuations.

We manage this fund to be an income fund. That's what we believe our
investors want and expect --relatively predictable, competitive yields with as
much price stability as possible. Our approach has worked well over the years
because income is such a significant component of GNMA total returns, and
becomes more so over time, smoothing out price variations. The fund's
longer-term returns reflect that.

HOW DID GNMA FUNDS IN GENERAL PERFORM AGAINST THE INDEX DURING THE PERIOD?

The 52 "GNMA Funds" tracked by Lipper Analytical Services returned an
average of 10.69%, underperforming the index. However, when you take into
account fund expenses and add them to the Lipper average, the average GNMA fund
actually beat the index.

WHAT DID OTHER FUNDS DO TO BEAT THE INDEX?

We suspect the index's duration (sensitivity to interest rate changes) was
lower than the average duration of actively managed GNMA funds when rates were
falling. Funds with more interest-rate sensitivity benefited more from price
appreciation in the bond rally than the index did.

Some GNMA fund managers focus on increasing their portfolios' interest-rate
sensitivity in a bond rally to capture more return, but in doing so they also
expose their portfolios to more downside risk. We don't play that game. Instead,
we keep the fund's duration close to the benchmark's. Our main goal is to
provide investors with a fund that offers relative price stability and
competitive yields. This strategy is intended to help generate relatively
predictable returns over the long run without interest rate bets or unpleasant
surprises.

BESIDES THE DOUBLE-DIGIT RETURNS, HOW DID THE FUND'S PORTFOLIO RESPOND TO
FALLING INTEREST RATES DURING THE PERIOD?

When interest rates fall, mortgage prepayments rise. As a result, the
average life and duration of mortgage-backed securities tend to decrease during
bond market rallies. The fund's duration and average life naturally shortened as
rates declined (see the Portfolio at a Glance table on page 4).

You'll notice too (in the charts on page 7) that the falling interest rates
and resulting refinancing activity caused the fund's holdings of GNMAs with
coupons higher than 8% to decrease (many of those GNMAs were prepaid) while the
percentage of below-8% coupons increased (they became a larger percentage of the
overall market, as we discussed on page 3).

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
GNMAs 90%
Cash 6%
Treasury Securities 4%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
GNMAs 90%
Treasury Securities 8%
Cash 2%

6 MANAGEMENT Q & A AMERICAN CENTURY INVESTMENTS

MANAGEMENT Q&A

HOW WAS THE FUND POSITIONED DURING THE PERIOD? HOW DID YOU RESPOND TO THE
REFINANCING WAVE (ILLUSTRATED ON PAGE 3)?

In general, we like to maintain a consistent investment approach. The fund
invested primarily in GNMAs, with a small percentage of Treasury securities, and
we kept the fund's duration and general investment mix very close to that of its
benchmark index.

However, we also recognized the need to prepare for the impact of the
refinancing wave. One of the key factors that makes mortgage-backed securities
funds unique is that the underlying securities provide regular payments of both
interest and principal. In addition, the entire principal amount can be
"prepaid" when a mortgage holder refinances.

In preparation for anticipated prepayments of the fund's higher-coupon
"premium" GNMAs (primarily those with coupons of 8% or higher), we worked during
the period to minimize the premium expense we would incur if those securities
were prepaid. We swapped high-coupon GNMAs with higher premiums for those with
lower premiums.

I'll illustrate with an example. In a low interest rate environment, where
new mortgages offer a 7% rate, we're willing to pay extra money, a premium, for
a GNMA with an 8.5% coupon. If the GNMA's principal value is $100, we might be
willing to pay $105 for that additional income. The extra $5 is the premium.

Now, let's say our 8.5% GNMA is prepaid. We get our $100 of principal back,
but we lose our 8.5% coupon (we might only get a 7% coupon when we reinvest the
$100) and we lose our $5 premium, which we have to book as a loss against
income. That's why prepayments can have such a big impact on a GNMA fund's
yield, and it's why we reduced our premium expenses. Rather than holding
high-coupon GNMAs for which we'd paid $105, we swapped for GNMAs for which the
cost was $104 or $103.

We also increased the fund's cash position. We anticipated that falling
yields and concerns about prepayments might cause some investors to sell fund
shares, so we increased the fund's liquidity.

WHAT IS YOUR OUTLOOK FOR THE FUND?

As the example illustrated, our biggest concern is a declining yield due to
prepayments. We believe the fund should still have a yield advantage over a
comparable intermediate-term Treasury fund, but prepayments will reduce some of
that advantage. Furthermore, it's important to point out that the fund's yield
could continue to fall for a short time after interest rates begin to rise
because of the time lag between when mortgage holders refinance and when GNMA
investors receive the prepayment. Borrowers will continue to refinance until
interest rates rise. For up to a few months after that, the effects of their
prepayments will continue to be felt by GNMA investors.

We're doing everything we can to reduce the effects of prepayments and still
remain true to our benchmark. The fund's yield may continue to fall in the
coming months, but we believe our long-term investment approach should continue
to produce competitive total returns over the long run.

[bar graph - data below]

PORTFOLIO COMPOSITION BY GNMA COUPON

3/31/98 9/30/97
Less than 7% 8% 7%
7%-8% 47% 38%
8%-9% 31% 35%
9%-10% 12% 18%
Greater than 10% 2% 2%

ANNUAL REPORT MANAGEMENT Q & A 7

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount Value
- --------------------------------------------------------------------------------

ZERO-COUPON U.S. TREASURY SECURITIES(1)

$ 38,000,000 STRIPS -- COUPON, 5.68%,
5/15/03 $ 28,537,944

35,000,000 STRIPS -- COUPON, 5.98%,
5/15/09 18,273,071

27,000,000 STRIPS -- COUPON, 6.12%,
11/15/21 6,507,930
-------------------

TOTAL ZERO-COUPON U.S.
TREASURY SECURITIES--4.0% 53,318,945
-------------------
(Cost $53,211,122)

GNMA CERTIFICATES(2)

4,969,938 GNMA, 6.00%, due 7/20/16 to
10/20/26 4,782,699

72,502,973 GNMA, 6.50%, due 9/20/08 to
11/20/26(3) 71,950,045

99,525,349 GNMA, 7.00%, due 9/15/08 to
9/20/27(3) 100,803,160

14,509,339 GNMA, 7.25%, due 9/15/22 to
12/20/25 14,683,385

357,485,139 GNMA, 7.50%, due 1/15/06 to
1/15/28(3) 367,248,093

8,074,547 GNMA, 7.65%, due 6/15/16 to
2/15/18 8,420,366

18,575,951 GNMA, 7.75%, due 9/20/17 to
1/20/26 19,141,014

5,968,771 GNMA, 7.77%, due 4/15/20 to
1/15/21 6,181,261

3,774,469 GNMA, 7.85%, due 11/20/20 to
10/20/22 3,882,995

1,802,464 GNMA, 7.89%, due 9/20/22(3) 1,855,653

3,750,557 GNMA, 7.98%, due 6/15/19(3) 3,924,916

150,004,726 GNMA, 8.00%, due 6/15/06 to
6/15/34(3) 155,616,792

2,961,411 GNMA, 8.15%, due 11/15/19 to
2/15/21 3,106,159

32,133,584 GNMA, 8.25%, due 2/15/06 to
5/15/27(3) 33,622,859

8,720,160 GNMA, 8.35%, due 1/15/19 to
12/15/20 9,208,207

137,863,568 GNMA, 8.50%, due 12/15/04 to
5/15/31(3) 144,990,137

1,805,389 GNMA, 8.625%, due 1/15/32(3) 1,935,791

20,699,091 GNMA, 8.75%, due 2/15/16 to
7/15/27(3) 22,156,586

Principal Amount Value
- --------------------------------------------------------------------------------

$ 84,154,911 GNMA, 9.00%, due 11/15/04 to
7/20/26(3) $ 90,609,036

16,389,719 GNMA, 9.25%, due 4/15/16 to
8/15/26(3) 17,772,498

30,711,520 GNMA, 9.50%, due 6/15/09 to
7/20/25(3) 33,224,428

4,801,902 GNMA, 9.75%, due 6/15/05 to
11/20/21 5,172,247

4,056,323 GNMA, 10.00%, due 11/15/09
to 2/20/22(3) 4,452,431

3,270,010 GNMA, 10.25%, due 5/15/12 to
2/15/21(3) 3,606,809

1,126,646 GNMA, 10.50%, due 8/15/98 to
3/15/21 1,253,348

606,050 GNMA, 10.75%, due 12/15/09
to 8/15/19 673,331

2,679,443 GNMA, 11.00%, due 12/15/09
to 8/15/20 2,997,366

36,270 GNMA, 11.25%, due 10/20/15
to 2/20/16 40,841

685,453 GNMA, 11.50%, due 6/15/98 to
2/20/20 775,633

15,929 GNMA, 11.75%, due 2/15/99 16,392

517,916 GNMA, 12.00%, due 6/15/00 to
1/20/15 589,806

404,883 GNMA, 12.25%, due 8/15/13 to
7/15/15 463,427

776,387 GNMA, 12.50%, due 11/15/99
to 10/15/15 892,403

72,421 GNMA, 12.75%, due 11/15/13
to 6/15/15 84,088

1,517,980 GNMA, 13.00%, due 11/15/10
to 8/15/15 1,773,624

36,361 GNMA, 13.25%, due 1/20/15 42,579

613,059 GNMA, 13.50%, due 5/15/10 to
12/15/14 720,631

45,246 GNMA, 13.75%, due 8/15/14 53,488

27,817 GNMA, 14.00%, due 6/15/11 to
10/15/14 33,253

272,806 GNMA, 14.50%, due 9/15/12 to
12/15/12 329,145

567,576 GNMA, 15.00%, due 6/15/11 to
10/15/12 691,197

159,762 GNMA, 16.00%, due 10/15/11 to
4/15/12 196,791
-------------------

TOTAL GNMA CERTIFICATES--84.4% 1,139,974,910
-------------------
(Cost $1,114,143,355)

See Notes to Financial Statements

8 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount Value
- --------------------------------------------------------------------------------

FORWARD COMMITMENTS

$ 11,000,000 GNMA Purchase, 7.00%,
settlement 4/20/98 $ 11,120,328

40,000,000 GNMA Purchase, 7.50%,
settlement 4/20/98 41,062,480

20,000,000 GNMA Purchase, 6.50%,
settlement 5/20/98 19,812,580
--------------------

TOTAL FORWARD COMMITMENTS--5.3% 71,995,388
--------------------
(Cost $71,926,250)

TEMPORARY CASH INVESTMENTS

25,000,000 FNMA Discount Note, 5.90%,
4/1/98(4) 25,000,000

Repurchase Agreement, Goldman Sachs & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.65%, dated 3/31/98,
due 4/1/98 (Delivery value $20,022,142) 20,019,000

Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 5.90%, dated 3/31/98, due
4/1/98 (Delivery value $40,684,667) 40,678,000
--------------------

TOTAL TEMPORARY
CASH INVESTMENTS--6.3% 85,697,000
--------------------
(Cost $85,697,000)

TOTAL INVESTMENT SECURITIES--100.0% $1,350,986,243
====================
(Cost $1,324,977,727)

NOTES TO SCHEDULE OF INVESTMENTS

FNMA = Federal National Mortgage Association

GNMA = Government National Mortgage Association

STRIPS = Separate Trading of Registered Interest and Principal of Securities

(1) Rates indicated are the weighted average yield to maturity at purchase.
These securities are purchased at a substantial discount from their value
at maturity.

(2) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.

(3) Securities, or a portion thereof, have been segregated at the custodian
bank for Forward Commitments.

(4) Rate disclosed is the yield to maturity at purchase.

See Notes to Financial Statements

ANNUAL REPORT SCHEDULE OF INVESTMENTS 9

STATEMENT OF ASSETS AND LIABILITIES

MARCH 31, 1998

ASSETS

Investment securities, at value
(identified cost of
$1,324,977,727) (Note 3) ............................ $ 1,350,986,243

Cash .................................................. 4,056,029

Receivable for
investments sold .................................... 95,625

Interest receivable ................................... 7,514,804
---------------
1,362,652,701
---------------
LIABILITIES

Disbursements in excess of
demand deposit cash ................................. 1,627,281

Payable for investments
purchased ........................................... 72,492,271

Payable for capital
shares redeemed ..................................... 969,530

Accrued management
fees (Note 2) ....................................... 639,916

Distribution fees payable (Note 2) .................... 75

Service fees payable (Note 2) ......................... 75

Dividends payable ..................................... 820,757

Payable for trustees' fees
and expenses ........................................ 1,807

Accrued expenses and
other liabilities ................................... 601
---------------
76,552,313
---------------
Net Assets ............................................ $ 1,286,100,388

NET ASSETS CONSIST OF:

Capital paid in
$ 1,284,010,304

Undistributed net
investment income ................................... 72,178

Accumulated net realized loss
on investment transactions .......................... (23,990,610)

Net unrealized appreciation
on investments (Note 3) ............................. 26,008,516
---------------
$ 1,286,100,388
===============
Investor Class

Net assets
$ 1,285,640,826

Shares outstanding .................................... 120,536,03

Net asset value per share ............................. $ 10.67

Advisor Class

Net assets ............................................ $ 459,562

Shares outstanding .................................... 43,071

Net asset value per share ............................. $ 10.67

See Notes to Financial Statements

10 STATEMENT OF ASSETS AND LIABILITIES AMERICAN CENTURY INVESTMENTS

STATEMENT OF OPERATIONS

YEAR ENDED MARCH 31, 1998

INVESTMENT INCOME

Income:

Interest ................................................ $ 84,778,235
------------

Expenses (Note 2):

Investment advisory fees ................................ 5,898,043

Transfer agency fees .................................... 381,757

Administrative fees ..................................... 359,302

Printing and postage .................................... 123,233

Custodian fees .......................................... 97,412

Trustees' fees and expenses ............................. 26,310

Registration and filing fees ............................ 21,350

Auditing and legal fees ................................. 20,142

Telephone expenses ...................................... 14,316

Other operating expenses ................................ 36,692

Distribution fees - Advisor Class ....................... 195

Service fees - Advisor Class ............................ 195
------------
6,978,947
------------
Net investment income ................................... 77,799,288
------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)

Net realized gain on investments ........................ 1,450,246

Change in net unrealized
appreciation on investments ........................... 35,274,054
------------
Net realized and unrealized
gain on investments ................................... 36,724,300
------------
Net Increase in Net Assets
Resulting from Operations ............................. $114,523,588
============
See Notes to Financial Statements

ANNUAL REPORT STATEMENT OF OPERATIONS 11

STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED MARCH 31, 1998
AND MARCH 31, 1997

Increase (Decrease) in Net Assets 1998 1997

OPERATIONS

Net investment income ................ $ 77,799,288 $ 76,450,742

Net realized gain (loss)
on investments ..................... 1,450,246 (1,660,256)

Change in net unrealized
appreciation (depreciation)
on investments ..................... 35,274,054 (10,865,815)
--------------- ---------------
Net increase in net assets
resulting from operations .......... 114,523,588 63,924,671
--------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS

From net investment income:

Investor Class ..................... (77,794,647) (76,433,695)

Advisor Class ...................... (4,641) --
--------------- ---------------
Decrease in net assets
from distributions ................. (77,799,288) (76,433,695)
--------------- ---------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)

Net increase in net assets
from capital share transactions .... 130,210,987 11,654,889
--------------- ---------------
Net increase (decrease)
in net assets ...................... 166,935,287 (854,135)

NET ASSETS

Beginning of year .................... 1,119,165,101 1,120,019,236
--------------- ---------------
End of Year .......................... $ 1,286,100,388 $1,119,165,10
=============== ===============

See Notes to Financial Statements

12 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- American Century Government Income Trust (the Trust), is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. American Century - Benham GNMA Fund (the Fund) is
one of the eight funds issued by the Trust. The Fund seeks to provide a high
level of current income consistent with safety of principal and maintenance of
liquidity by investing primarily in mortgage-backed Ginnie Mae certificates. The
Fund is authorized to issue two classes of shares: the Investor Class and the
Advisor Class. The two classes of shares differ principally in their respective
shareholder servicing and distribution expenses and arrangements. All shares of
the Fund represent an equal pro rata interest in the assets of the class to
which such shares belong, and have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except for class specific
expenses and exclusive rights to vote on matters affecting only individual
classes. Sale of the Advisor Class commenced on October 9, 1997. The following
accounting policies, related to both classes of the Fund, are in accordance with
accounting policies generally accepted in the investment company industry.

INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.

REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
institutions that the Fund's investment advisor, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The Fund requires that the collateral, represented by securities, purchased in a
repurchase transaction be transferred to the Fund's custodian in a manner
sufficient to enable the Fund to obtain those securities in the event of a
default under the repurchase agreement. ACIM monitors, on a daily basis, the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to the
Fund under each repurchase agreement.

JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.

FORWARD COMMITMENTS -- The Fund may purchase and sell U.S. government
securities on a firm commitment basis. Under these arrangements, the securities'
prices and yields are fixed on the date of the commitment, but payment and
delivery are scheduled for a future date. During this period, securities are
subject to market fluctuations. The Fund maintains segregated accounts
consisting of cash or liquid securities in an amount sufficient to meet the
purchase price.

DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and paid monthly. Distributions from net realized gains are
declared and paid annually.

At March 31, 1998, accumulated net realized capital loss carryovers of
approximately $23,280,300 (expiring 2003 through 2005) may be used to offset
future taxable gains.

ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 13

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES

The shareholders of the Fund approved a new management agreement with ACIM
on July 30, 1997, effective August 1, 1997, which replaced the previously
existing contracts between the Fund and Benham Management Corporation and
American Century Services Corporation (ACSC) for advisory, administrative and
transfer agency services. Under the agreement, ACIM provides all services
required by the Fund in exchange for a single, unified management fee per class.
Expenses excluded from this agreement are brokerage, taxes, portfolio insurance,
interest, fees and expenses of the Trustees who are not considered "interested
persons" as defined in the Investment Company Act of 1940 (including counsel
fees) and extraordinary expenses. The annual rate at which this fee is assessed
is determined monthly in a two-step process: First, a fee rate schedule is
applied to the net assets of all of the funds in the Fund's investment category
which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of each Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category and the Equity Fund Category. The Fund is included in the Bond Fund
Category. Second, a separate fee rate schedule is applied to the net assets of
all of the funds managed by ACIM (the "Complex Fee"). The Investment Category
Fee and the Complex Fee are then added to determine the unified management fee
rate. The management fee is paid monthly by the Fund based on the Fund's
aggregate average daily net assets during the previous month multiplied by the
monthly management fee rate. The annualized Investment Category Fee schedule for
the Fund is as follows:

0.3600% of the first $1 billion
0.3080% of the next $1 billion
0.2780% of the next $3 billion
0.2580% of the next $5 billion
0.2450% of the next $15 billion
0.2430% of the next $25 billion
0.2425% of the average daily net assets over $50 billion

The annualized Complex Fee schedule (Investor Class) is as follows:

The Complex Fee schedule for the Advisor Class is lower by 0.2500% at each
graduated step. For example, if the Investor Class Complex Fee is 0.3100% for
the first $2.5 billion, the Advisor Class Complex Fee is 0.0600% (0.3100% minus
0.2500%) for the first $2.5 billion. The annualized unified management fee for
the period ended March 31, 1998 was 0.59%.

The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plan provides that the Fund will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the Fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers. Fees incurred
under the Plan during the year ended March 31, 1998 were $390.

Total expenses of $4,840,261 were incurred under the new management
agreement and were included in Investment Advisory Fees and Trustees' Fees and
Expenses in the Statement of Operations. Total expenses and the annualized ratio
of operating expenses to average net assets for the four months ended July 31,
1997 were $2,138,296 and 0.56%, respectively.

14 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS

Purchases of U.S. Treasury and Agency obligations, excluding short-term
investments, totaled $1,667,862,633. Sales of U.S. Treasury and Agency
obligations, excluding short-term investments, totaled $1,547,380,184.

As of March 31, 1998, accumulated net unrealized appreciation was
$25,298,364, based on the aggregate cost of investments of $1,325,687,879 for
federal income tax purposes. Accumulated net unrealized appreciation consisted
of unrealized appreciation of $27,576,757 and unrealized depreciation of
$2,278,393.

- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS

Transactions in shares of the Fund were as follows (unlimited number of shares
authorized):

SHARES AMOUNT

INVESTOR CLASS

Year ended March 31, 1998

Sold ....................................... 46,751,528 $ 496,021,137

Issued in reinvestment of distributions .... 5,789,350 61,339,524

Redeemed ................................... (40,343,016) (427,609,050)
------------- -------------
Net increase ............................... 12,197,862 $ 129,751,611
============= =============

Year ended March 31, 1997

Sold ....................................... 41,003,499 $ 428,072,730

Issued in reinvestment of distributions .... 5,649,816 58,737,337

Redeemed ................................... (45,535,917) (475,155,178)
------------- -------------
Net increase ............................... 1,117,398 $ 11,654,889
============= =============

ADVISOR CLASS

Period ended March 31, 1998(1)

Sold ....................................... 81,176 $ 866,914

Issued in reinvestment of distributions .... 408 4,352

Redeemed ................................... (38,513) (411,890)
------------- -------------
Net increase ............................... 43,071 $ 459,376
============= =============

(1) October 9, 1997 (commencement of sale) through March 31, 1998.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 15

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout the Years Ended March 31 (except as noted)

Investor Advisor
Class Class
1998 1997 1996 1995 1994 1998(1)
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ......... $ 10.33 $ 10.45 $ 10.18 $ 10.35 $ 10.88 $ 10.63
------------- ------------- ------------- ------------- ------------- -------------
Income From Investment
Operations

Net Investment Income ..... 0.69 0.71 0.74 0.72 0.66 0.31

Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .............. 0.34 (0.12) 0.27 (0.18) (0.52) 0.04
------------- ------------- ------------- ------------- ------------- -------------
Total From Investment
Operations ................ 1.03 0.59 1.01 0.54 0.14 0.35
------------- ------------- ------------- ------------- ------------- -------------
Distributions

From Net Investment
Income .................... (0.69) (0.71) (0.74) (0.71) (0.66) (0.31)

From Net Realized
Capital Gains ............. -- -- -- -- (0.01) --
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions ....... (0.69) (0.71) (0.74) (0.71) (0.67) (0.31)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value,
End of Period ............. $ 10.67 $ 10.33 $ 10.45 $ 10.18 $ 10.35 $ 10.67
============= ============= ============= ============= ============= =============
Total Return(2) ........... 10.21% 5.84% 10.08% 5.53% 1.30% 3.30%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets(3) .... 0.58% 0.55% 0.58% 0.58% 0.54% 0.84%(4)

Ratio of Net Investment
Income to Average
Net Assets ................ 6.49% 6.84% 6.98% 7.08% 6.12% 5.92%(4)

Portfolio Turnover Rate ..... 133% 105% 64% 120% 49% 133%

Net Assets, End
of Period (in thousands) .... $ 1,285,641 $ 1,119,165 $ 1,120,019 $ 979,670 $ 1,129,185 $ 460

(1) October 9, 1997 (commencement of sale) through March 31, 1998.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.

(3) The ratios for years ended March 31, 1997 and March 31, 1996, include
expenses paid through expense offset arrangements.

(4) Annualized.
</TABLE>

See Notes to Financial Statements

16 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of the American Century Government Income Trust and the
Shareholders of the American Century - Benham GNMA Fund:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the American Century - Benham GNMA Fund (one of
the Funds comprising American Century Government Income Trust) as of March 31,
1998, and the related statement of operations, statement of changes in net
assets, and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets as of March 31, 1997 and the financial highlights for each of the
four years in the period ended March 31, 1997, were audited by other auditors,
whose report, dated May 2, 1997, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 1998, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Century - Benham GNMA Fund as of March 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Kansas City, Missouri
May 8, 1998

ANNUAL REPORT REPORT OF INDEPENDENT ACCOUNTANTS 17

SHARE CLASS AND RETIREMENT ACCOUNT
INFORMATION

SHARE CLASSES

Until September 2, 1997, the GNMA fund issued one class of fund shares,
reflecting the fact that most investors bought their shares directly from
American Century. All investors paid the same annual unified management fee and
did not pay any commissions or other fees.

Now more shares are purchased through financial intermediaries (who
ordinarily are compensated for the services they provide). In September 1997,
American Century began to offer two classes of shares for GNMA. One class is for
investors buying directly from American Century, the other is for investors
buying through financial intermediaries.

The original class of shares is called the INVESTOR CLASS. All shares issued
and outstanding before September 2, 1997, have been designated as Investor Class
shares. Investor Class shares may also be purchased after September 2, 1997.
Investor Class shareholders pay no commissions or other fees for purchase of
fund shares directly from American Century. Investors who buy Investor Class
shares through a broker-dealer may be required to pay the broker-dealer a
transaction fee. THE PRICE AND PERFORMANCE OF THE INVESTOR CLASS SHARES ARE
LISTED IN NEWSPAPERS. NO OTHER CLASS IS CURRENTLY LISTED.

In addition, there is an ADVISOR CLASS, sold through banks, broker-dealers,
insurance companies and financial advisors. Advisor Class shares are subject to
a 0.50% Rule 12b-1 service and distribution fee. Half of that fee is available
to pay for recordkeeping and administrative services, and half is available to
pay for distribution services provided by the financial intermediary through
which the Advisor Class shares are purchased. The total expense ratio of the
Advisor Class is 0.25% higher than that of the Investor Class.

Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.

RETIREMENT ACCOUNT INFORMATION

When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.

18 SHARE CLASS AND RETIREMENT
ACCOUNT INFORMATION AMERICAN CENTURY INVESTMENTS

NOTES

ANNUAL REPORT NOTES 19

BACKGROUND INFORMATION

INVESTMENT PHILOSOPHY & POLICIES

In addition to these principles, each fund has its own investment policies:

GNMA seeks to provide a high level of current income, consistent with safety
of principal, by investing primarily in mortgage-backed GNMA certificates. Fund
shares are not guaranteed by the U.S. government.

COMPARATIVE INDICES

The following index is used in the report for fund performance comparisons.
It is not an investment product available for purchase.

The SALOMON BROTHERS 30-YEAR GNMA INDEX is a market-capitalization weighted
index of 30-year GNMA single-family mortgages.

LIPPER RANKINGS

The Lipper category for GNMA is:

GNMA FUNDS--funds that invest at least 65% of their assets in Government
National Mortgage Association (Ginnie Mae) securities.

- -------------------------------------
INVESTMENT TEAM LEADERS
- -------------------------------------
Portfolio Manager Casey Colton
- -------------------------------------

20 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS

GLOSSARY

RETURNS

* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.

YIELDS

* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.

INVESTMENT TERMS

* BASIS POINT--one one-hundredth of a percentage point (or 0.01%). 100 basis
points equal one percentage point (or 1%).

* COUPON--the stated interest rate of a security.

* DURATION EXTENSION--a lengthening of a mortgage-backed security's duration,
typically because of rising interest rates. When interest rates rise sharply,
higher interest rates reduce prepayments (which is good for investors), but the
lower level of prepayments causes GNMA durations to extend, which makes price
declines more severe.

* PREPAYMENT--paying off a mortgage early, often by selling or refinancing.
Prepayments occur most frequently when homeowners refinance their mortgages to
take advantage of falling interest rates. Prepayments shorten the lives of
mortgage portfolios and force GNMA investors to reinvest in lower-yielding
mortgage pools. Therefore, when prepayment levels climb, mortgage analysts
increase the prepayment assumptions used to price mortgage-backed securities. As
a result, mortgage-backed security durations shorten, limiting the price gains
from falling interest rates.

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.

* AVERAGE DURATION-- a time-weighted average of the interest and principal
payments of the securities in a portfolio. As the duration of a portfolio
increases, so does the impact of a change in interest rates on the value of the
portfolio.

* AVERAGE LIFE--a measure of the sensitivity of a mortgage-backed securities
portfolio to interest rate changes. Although it is similar to weighted average
maturity, average life takes into account the gradual payments of principal that
occur with mortgage-backed securities. As a result, average life is a better
measure of interest rate sensitivity for mortgage-backed securities.

* EXPENSE RATIO--the operating expenses of the fund, expressed as a percentage
of average net assets.

TYPES OF SECURITIES

* GOVERNMENT NATIONAL MORTGAGE ASSOCIATION SECURITIES (GNMAS)--mortgage-backed
securities issued by the Government National Mortgage Association, a U.S.
government agency. A GNMA is backed by a pool of fixed-rate mortgages. A GNMA is
also backed by the full faith and credit of the U.S. government as to the timely
payment of interest and principal. This means GNMA investors will receive their
share of interest and principal payments whether or not borrowers make their
scheduled mortgage payments.

* REPURCHASE AGREEMENTS (REPOS)--short-term debt agreements in which a fund buys
a security at one price and simultaneously agrees to sell it back to the seller
at a slightly higher price on a specified date (usually within seven days).

* U.S. GOVERNMENT AGENCY DISCOUNT NOTES--short-term debt securities issued by
U.S. government agencies. Some agency discount notes are backed by the full
faith and credit of the U.S. government, while most are guaranteed only by the
issuing agency. These notes are issued at a discount and achieve full value at
maturity (typically one year or less).

* U.S. TREASURY SECURITIES--debt securities issued by the U.S. Treasury and
backed by the direct "full faith and credit" pledge of the U.S. government.
Treasury securities include bills (maturing in one year or less), notes
(maturing in two to 10 years) and bonds (maturing in more than 10 years).

ANNUAL REPORT GLOSSARY 21

[american century logo(reg.sm)]
American
Century(reg.tm)

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

INTERNET: WWW.AMERICANCENTURY.COM

AMERICAN CENTURY GOVERNMENT INCOME TRUST

INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI

9805 [recycled logo]
SH-BKT-12402 Recycled
<PAGE>
ANNUAL
REPORT

[american century logo(reg.sm)]
American
Century(reg.tm)

MARCH 31, 1998

BENHAM
GROUP

Short-Term Government

TABLE OF CONTENTS
Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Market Perspective ........................................................ 3
Performance & Portfolio Information ....................................... 4
Management Q & A .......................................................... 5
Schedule of Investments ................................................... 8
Statement of Assets and Liabilities ....................................... 12
Statements of Operations .................................................. 13
Statements of Changes in Net Assets ....................................... 14
Notes to Financial Statements ............................................. 15
Financial Highlights ...................................................... 18
Report of Independent Accountants ......................................... 19
Retirement Account Information ............................................ 20
Background Information
Investment Philosophy & Policies ............................... 24
Comparative Indices ............................................ 24
Lipper Rankings ................................................ 24
Investment Team Leaders ........................................ 24
Glossary .................................................................. 25

We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.

American Century and Benham Group are registered marks of American Century
Services Corporation.

AMERICAN CENTURY INVESTMENTS

REPORT HIGHLIGHTS

MARKET PERSPECTIVE

* Favorable economic conditions continued during the 12 months ended March 31,
1998. Low inflation and moderate growth provided an excellent backdrop for
investors in U.S. financial markets.

* Low inflation--and low inflation expectations--caused interest rates to
fall.The U.S. bond market rallied, with intermediate- and long-term
securities producing double-digit returns.

* Supply and demand factors were favorable during the 12 months, and are
expected to continue that way. The Federal budget surplus should result in
less Treasury issuance, and overseas financial woes make U.S. bonds
attractive to foreign investors.

SHORT-TERM GOVERNMENT

* According to Lipper Analytical Services, the fund outperformed the average
return for 72 "Short U.S. Government Funds" for the period. (See the Total
Returns table on page 4.)

* Assets grew dramatically as a result of the merger with Benham Adjustable
Rate Government Securities fund and a large investment from the Stowers
family.Short-Term Government is now one of the five largest funds in its
category.

* The investment portfolio was overweighted in mortgage-backed securities,
particularly after the merger. During the last half of the period, we sold
mortgage-backeds and bought Treasurys as we moved closer to a "neutral"
asset mix of approximately 45% Treasurys, 45% mortgage-backeds and 10%
agencies.

* NOTE: The fund changed its fiscal year end from October 31 to March 31 after
it merged last year with Benham Adjustable Rate Government Securities fund.
As a result, you've received back-to-back annual reports reflecting the
fund's old and new fiscal year ends. From now on, all annual reports will be
dated March 31.

SHORT-TERM
GOVERNMENT

TOTAL RETURNS: AS OF 3/31/98
5 Months 1.95%*
1 Year 6.66%

NET ASSETS: $808.5 million
(AS OF 3/31/98)

INCEPTION DATE: 12/15/82

TICKER SYMBOL: TWUSX

* Not annualized.

Many of the investment terms in this report are defined in the Glossary on page
25.

ANNUAL REPORT REPORT HIGHLIGHTS 1

OUR MESSAGE TO YOU

[photo of James E. Stowers, Jr. and James E. Stowers III]

The U.S. bond market rallied during the 12 months ended March 31, 1998. Low
inflation, a strong U.S. dollar, an improving federal budget and moderate
economic growth created an ideal environment for bonds. Short-Term Government's
returns reflected this environment and the hard work of our government bond
team.

Short-Term Government changed its fiscal year end from October 31 to March
31 after the merger last year with Benham Adjustable Rate Government Securities
fund. As a result, you've received back-to-back annual reports reflecting the
fund's old and new fiscal year ends. We regret any confusion or inconvenience
this may have caused. From now on, all of your annual reports will be dated
March 31.

We've had a very exciting year on the corporate front. We gained a powerful
business partner in January, when J.P. Morgan, one of the oldest, largest and
most respected financial service institutions in the U.S., became a substantial
minority shareholder. The new business partnership will allow both companies to
offer investors a highly diverse menu of investment options and services.

We're also working hard to prepare our computer systems for the year 2000
(Y2K). The Y2K problem, which has been widely publicized in the financial press,
refers to the possible inability of computer systems to distinguish between the
years 1900 and 2000 when the new millennium begins. Like other financial
companies, a significant percentage of our computer operations involves some
type of date comparison or date calculation. Although much of our system is
already Y2K compliant, we anticipate the rest will be in compliance by the end
of this year.

Thank you for your investment.

Sincerely,

/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer

2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS

MARKET PERSPECTIVE

[line chart - data below]

FALLING AND FLATTENING TREASURY YIELD CURVE

3/31/97 3/31/98
YEARS TO
MATURITY
1 5.997% 5.380%
2 6.411% 5.559%
3 6.562% 5.581%
4 6.655% 5.597%
5 6.748% 5.612%
6 6.779% 5.620%
7 6.811% 5.628%
8 6.842% 5.635%
9 6.874% 5.643%
10 6.905% 5.651%
11 6.915% 5.665%
12 6.924% 5.679%
13 6.934% 5.693%
14 6.943% 5.707%
15 6.953% 5.721%
16 6.962% 5.735%
17 6.972% 5.749%
18 6.981% 5.763%
19 6.991% 5.777%
20 7.000% 5.792%
21 7.010% 5.806%
22 7.019% 5.820%
23 7.029% 5.834%
24 7.038% 5.848%
25 7.048% 5.862%
26 7.057% 5.876%
27 7.067% 5.890%
28 7.076% 5.904%
29 7.086% 5.918%
30 7.095% 5.932%

Source: Bloomberg Financial Markets

DOUBLE-DIGIT RETURNS

While U.S. stocks grabbed most of the attention, U.S. bonds quietly posted
double-digit total returns for the 12 months ended March 31, 1998. Inflation --
and inflation expectations -- remained low and interest rates generally fell,
boosting bond prices across the board. Longer-term bonds, which are most
sensitive to interest rate changes, outperformed intermediate- and short-term
securities. For example, a 30-year Treasury bond produced a total return of
22.6%, a 10-year Treasury note returned 15.4% and a 2-year Treasury note
returned 7.5%.

SECTOR RETURNS STRONG BUT VARIED

All U.S. bond sectors performed well for the period, but some were stronger
than others. Treasury securities finished on top, despite strong demand for
higher-yielding securities such as mortgage-backeds. These securities suffered
short-term setbacks that reduced their returns compared with Treasurys. For
example, mortgage-backeds were hit with prepayment fears in the first quarter of
1998 when the 10-year Treasury note yield dropped below 5.4%, triggering a wave
of mortgage refinancing. Mortgage refinancings shorten the life of
mortgage-backed securities and force investors to reinvest in lower-yielding
securities. But despite the volatility, mortgage-backeds also produced
double-digit returns--the Lehman Brothers Fixed-Rate Mortgage-Backed Securities
Index returned 11.14%.

ECONOMIC STORY UNCHANGED

Moderate-to-strong economic growth and low inflation continued to prevail
during the 12 months. U.S. economic growth remained at a 4% annual rate, powered
by strong consumer spending, and unemployment remained below 5%.

Long-term interest rates trended downward as investors became convinced that
inflation would not return anytime soon. Asia's economic problems, which
translated into lower commodity and export prices, exerted downward pressure on
U.S. prices. The consumer price index, viewed as the broadest gauge of costs for
U.S. goods and services, rose at an annual rate of just 1.4% for the period.

FLATTENING YIELD CURVE

The Federal Reserve, not seeing any convincing signs of inflation, left its
short-term interest rate target unchanged at 5.5%, while yields on long-term
Treasury bonds fell more than a full percentage point. This resulted in the
"flat" yield curve shown in the accompanying graph. The yield difference between
a 6-month Treasury bill and a 30-year Treasury bond was just 68 basis points on
March 31, 1998, compared with 182 basis points at the start of the period. (A
basis point equals 0.01%.)

DIMINISHING SUPPLY, STRONG DEMAND

For the fiscal year beginning October 1, 1997, the U.S. government is
projected to generate a budget surplus, the first in 30 years. As a result, the
Treasury is reducing the amount of new securities it issues. At the same time,
demand remains strong. Global investors are attracted to U.S. Treasury bonds,
particularly in times of political or financial stress. This "flight to quality"
was illustrated during the Asian economic crisis in late October, when stock
markets throughout the world fell sharply and U.S. bonds rallied. These
favorable supply and demand factors should continue in 1998.

ANNUAL REPORT MARKET PERSPECTIVE 3

<TABLE>
<CAPTION>
PERFORMANCE & PORTFOLIO INFORMATION

AVERAGE ANNUAL RETURNS
5 MONTHS(1) 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURNS AS OF MARCH 31, 1998(2)

<S> <C> <C> <C> <C> <C>
Short-Term Government .................. 1.95% 6.66% 6.13% 4.64% 6.13%

Salomon 1- to 3-Year
Treasury/Agency Index(+) ............... 2.60% 7.52% 6.29% 5.55% 7.25%

Average Short U.S.
Government Fund(3) ..................... 1.97% 6.50% 6.12% 4.85% 6.40%

Fund's Ranking Among
Short U.S. Government Funds(3) ......... -- 38 out of 72 31 out of 57 24 out of 33 7 out of 10

(1) The fund's fiscal year end was changed from October 31 to March 31;
therefore some data in this report cover the five month period from the
fund's October 31, 1997 annual report to March 31, 1998.

(2) Returns for periods less than one year are not annualized.

(3) According to Lipper Analytical Services.
</TABLE>

See pages 24-25 for more information about returns, the comparative index and
Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER TEN YEARS
$10,000 investment made 3/31/88

Value on 3/31/98
Short-Term Merrill Lynch 1- to Salomon 1- to 3-Year
Government 3-Year Govt. Index Treasury/Agency Index+
Mar-88 $10,000 $10,000 $10,000
Jun-88 $10,092 $10,104 $10,106
Sep-88 $10,232 $10,251 $10,252
Dec-88 $10,291 $10,349 $10,370
Mar-89 $10,392 $10,478 $10,495
Jun-89 $10,926 $10,999 $11,015
Sep-89 $11,028 $11,159 $11,191
Dec-89 $11,319 $11,475 $11,519
Mar-90 $11,283 $11,577 $11,646
Jun-90 $11,557 $11,901 $11,977
Sep-90 $11,774 $12,185 $12,264
Dec-90 $12,173 $12,590 $12,667
Mar-91 $12,374 $12,867 $12,963
Jun-91 $12,585 $13,121 $13,217
Sep-91 $13,057 $13,562 $13,665
Dec-91 $13,590 $14,061 $14,157
Mar-92 $13,476 $14,083 $14,186
Jun-92 $13,844 $14,488 $14,593
Sep-92 $14,245 $14,920 $15,013
Dec-92 $14,187 $14,947 $15,031
Mar-93 $14,456 $15,277 $15,379
Jun-93 $14,579 $15,442 $15,548
Sep-93 $14,732 $15,663 $15,766
Dec-93 $14,779 $15,756 $15,863
Mar-94 $14,627 $15,677 $15,785
Jun-94 $14,590 $15,690 $15,787
Sep-94 $14,713 $15,845 $15,935
Dec-94 $14,706 $15,845 $15,923
Mar-95 $15,173 $16,377 $16,460
Jun-95 $15,635 $16,902 $16,965
Sep-95 $15,850 $17,156 $17,245
Dec-95 $16,251 $17,588 $17,644
Mar-96 $16,243 $17,647 $17,740
Jun-96 $16,394 $17,825 $17,928
Sep-96 $16,622 $18,119 $18,232
Dec-96 $16,920 $18,464 $18,586
Mar-97 $17,004 $18,586 $18,743
Jun-97 $17,353 $18,996 $19,145
Sep-97 $17,650 $19,368 $19,513
Dec-97 $17,937 $19,693 $19,826
Mar-98 $18,136 $19,982 $20,152

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the
indices' total return lines do not.

PORTFOLIO AT A GLANCE
3/31/98 10/31/97
Number of Securities 125 125
Weighted Average Maturity 3.0 years 3.0 years
Average Duration 1.9 years 1.5 years
Expense Ratio 0.59%* 0.68%

* Annualized.

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Short-Term Government 5.41%

30-Day SEC Yield is defined in the Glossary on page 25.

(+) NOTE: The fund's benchmark has changed from the Merrill Lynch 1- to 3-Year
Government Index to the Salomon Brothers 1- to 3-Year Treasury/Agency Index. In
future reports, only the Salomon Brothers Index will be used for fund
performance comparisons.

4 PERFORMANCE & PORTFOLIO INFORMATION AMERICAN CENTURY INVESTMENTS

MANAGEMENT Q&A

An interview with Newlin Rankin, a portfolio manager on the Short-Term
Government fund investment team.

HOW DID THE FUND PERFORM DURING THE 12 MONTHS ENDED MARCH 31, 1998?

Short-Term Government performed well against other funds in its category and
well in general, reflecting the generally strong performance of the U.S. bond
market. The fund returned 6.66%, beating the 6.50% average return of the 72
"Short U.S. Government Funds" tracked by Lipper Analytical Services. The fund's
new benchmark, the Salomon Brothers 1- to 3-Year Treasury/Agency Index, returned
7.52%. (See the Total Returns table and the Note on the previous page for other
fund performance comparisons and more information about the benchmark.)

WHAT CAUSED THE RETURN DISPARITY BETWEEN THE FUND AND ITS BENCHMARK?

Short-Term Government's position in mortgage-backed securities, which
underperformed other bond sectors when interest rates fell sharply, hurt
relative performance. The fund held a significant percentage of mortgage-backed
securities during the period, while the index (which is 91% Treasurys and 9%
government agency securities) didn't contain any. Also, unlike the fund, the
benchmark's return does not include fees and expenses, so the index enjoys a
return advantage of approximately 60 basis points. (A basis point equals 0.01%.)

[bar graph - data below]

SHORT-TERM GOVERNMENT'S ONE-YEAR RETURNS FOR THE PAST TEN YEARS
(Periods ended March 31)

Short-Term Merrill Lynch 1- to
Government 3-Year Gov't. Index+
3/89 3.94% 4.78%
3/90 8.56% 10.48%
3/91 9.66% 11.15%
3/92 8.91% 9.45%
3/93 7.27% 8.48%
3/94 1.18% 2.62%
3/95 3.74% 4.47%
3/96 7.05% 7.75%
3/97 4.69% 5.32%
3/98 6.66% 7.51%

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

(+) In future reports, the fund's new benchmark--the Salomon Brothers 1- to
3-Year Government Index--will be used for fund performance comparisons. (See
Note on page 4.)

ANNUAL REPORT MANAGEMENT Q & A 5

MANAGEMENT Q&A

WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO DURING THE PERIOD?

The merger with Benham Adjustable Rate Government Securities, an
adjustable-rate mortgage (ARM) fund, boosted assets from approximately $314
million on August 29, 1997, to $536 million on August 30, 1997, and increased
the fund's holdings of mortgage-backed securities. We sold the majority of our
ARMs before long-term interest rates fell in the fourth quarter of 1997. Lower
long-term interest rates made it very attractive for ARM holders paying 8% to
refinance into 7% fixed-rate mortgages. As a result, ARM paper lost value. We
also sold mortgage-backed securities and purchased Treasury bonds late in the
fiscal year. Treasury securities outperformed mortgages in the fourth quarter of
1997 and January of 1998, so the trade helped the fund's performance.

In January 1998, the fund received a $320 million cash infusion from a major
investor, which was used to purchase Treasury securities. By March 31, 1998,
assets totaled $808.5 million, of which 39% was invested in U.S. Treasury and
government agency bonds, while 61% was invested in mortgage-backed securities.
We consider a neutral asset mix to be approximately 45% Treasurys, 45%
mortgage-backed securities and 10% government agency securities.

WHO PROVIDED THE $320 MILLION CASH INFUSION? WHY WAS IT INVESTED IN TREASURY
SECURITIES?

On January 16, 1998, the Stowers family, which owns the controlling interest
in American Century Companies, placed the money in the fund to endow a cancer
research institute. By purchasing 1- to 3-year Treasury notes, the easiest bonds
to buy and sell, we gained more investment flexibility for the fund, while
moving it closer to its neutral asset mix.

WHAT INVESTMENT STRATEGIES WORKED WELL DURING THE PERIOD?

Holding mortgage-backed securities with extra refinancing protection helped
the fund when prepayments rose dramatically in January. For our mortgage
portfolio, we typically look for securities that are backed by mortgages that we
think are much less likely to be refinanced. For example, we believe "seasoned"
mortgages that have been outstanding for at least a few years are less likely to
be prepaid. Another option is to buy mortgages with short effective maturities,
such as Planned Amortization Class securities, which are protected from
excessive prepayment risk and produce the majority of their cash flows within a
few years.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Mortgage-Backed
Securities 61%
U.S. Treasury Securities 37%
U.S. Government Agency
Securities 2%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 10/31/97)
Mortgage-Backed
Securities 84%
U.S. Treasury Securities 10%
U.S. Government Agency
Securities 6%

6 MANAGEMENT Q & A AMERICAN CENTURY INVESTMENTS

MANAGEMENT Q&A

We also purchased mortgage-backed securities issued by the Federal National
Mortgage Association (FNMA or Fannie Mae) that offered 106 basis points more
yield than a Treasury bond of comparable maturity. The Fannie Maes offer some
prepayment protection if interest rates decline. The most we can lose if these
bonds are held to maturity is 0.25% of the security's value. For that to happen,
every one of the 1,233 homeowners represented by the bond would have to pay off
their mortgages.

WHY DO YOU THINK INFLATION HAS REMAINED SO TAME?

Certainly, the computer revolution has increased corporate efficiency. A
multitude of business tasks, from manufacturing airplanes to administrative
chores such as letter writing and bookkeeping can be done much faster and with
far fewer people than in the past. As a simple example, think how efficient it
has become to return a rental car; you drive into the rental return area where
somebody with a personal computer meets you. Within a few seconds, your bill is
printed out so you don't have to wait in a long line, and off you go.

In addition, barriers to trade have been coming down around the world,
making price competition much more fierce. Energy prices have fallen sharply,
because the supply of oil has expanded beyond the Middle East. And now, the
Asian economic slowdown, which is constraining global growth, is exerting
downward pressures on prices.

WHAT IS THE OUTLOOK FOR INTEREST RATES?

While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us, so investors shouldn't expect a repeat
of the last year. In our opinion, economic growth would have to slow
significantly to get bond prices moving higher again, and a slowdown of that
magnitude doesn't seem likely in the near future. Analysts thought slower demand
from Asia would put the brakes on the economy, but a robust consumer sector has
kept growth strong. Continued economic strength helps establish a floor on how
low interest rates can go--the Federal Reserve is reluctant to lower short-term
interest rates as long as the economy remains robust and there's also the threat
of inflation from higher wages.

WHAT IS YOUR STRATEGY GIVEN THAT OUTLOOK?

With low interest rates and the yield curve as flat as it is (see the graph
on page 3), we'll aim to increase the fund's yield by selectively purchasing
undervalued or typically higher-yielding securities such as mortgage-backeds,
rather than by buying securities with longer maturities. There isn't much
incentive to invest in bonds with longer maturities. A 30-year Treasury bond
offers less than 50 basis points extra yield compared with a two-year note but
significantly more price risk. Buying a 10-year Treasury note offers just 10
basis points extra yield compared with a 2-year note, but four times the price
risk.

ANNUAL REPORT MANAGEMENT Q & A 7

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

U.S. TREASURY SECURITIES

$ 8,000 U.S. Treasury Notes, 5.00%,
1/31/99 $ 7,967

33,000 U.S. Treasury Notes, 5.875%,
7/31/99 33,120

62,000 U.S. Treasury Notes, 7.75%,
1/31/00 64,285

73,000 U.S. Treasury Notes, 6.125%,
7/31/00 73,804

83,000 U.S. Treasury Notes, 5.25%,
1/31/01 82,177

40,000 U.S. Treasury Notes, 6.125%,
8/15/07(1) 41,130
--------------------

TOTAL U.S. TREASURY SECURITIES--36.7% 302,483
--------------------
(Cost $304,445)

U.S. GOVERNMENT AGENCY SECURITIES

5,600 FHLMC Discount Note, 5.90%,
4/1/98(2) 5,600

10,000 FNMA, MTN, 5.71%, 2/13/01 9,921
--------------------

TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--1.9% 15,521
--------------------
(Cost $15,446)

ADJUSTABLE-RATE MORTGAGE SECURITIES(3)

FHLMC--0.7%

183 FHLMC Pool #635104, 7.65%,
8/1/18 190

460 FHLMC Pool #606095, 7.68%,
11/1/18 474

2,850 FHLMC Pool #755188, 7.26%,
9/1/20 2,934

468 FHLMC Pool #390263, 6.50%,
1/1/21 473

54 FHLMC Pool #775473, 7.11%,
6/1/21 55

1,630 FHLMC Pool #876559, 7.99%,
3/1/24 1,695
--------------------

5,821
--------------------

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

FNMA--5.3%

$ 48 FNMA Pool #066254, 6.20%,
2/1/99 $ 48

223 FNMA Pool #066376, 8.00%,
2/1/01 227

359 FNMA Pool #020155, 7.49%,
8/1/14 367

60 FNMA Pool #009781, 7.07%,
10/1/14 61

110 FNMA Pool #020635, 7.21%,
8/1/15 114

329 FNMA Pool #025432, 7.25%,
4/1/16 340

87 FNMA Pool #009883, 7.625%,
7/1/16 90

421 FNMA Pool #036922, 7.75%,
8/1/16 438

465 FNMA Pool #105843, 8.04%,
1/1/17 487

325 FNMA Pool #120560, 7.17%,
4/1/17 333

1,853 FNMA Pool #061401, 7.91%,
5/1/17 1,952

387 FNMA Pool #061392, 7.65%,
7/1/17 405

1,327 FNMA Pool #066415, 7.31%,
7/1/17 1,371

318 FNMA Pool #070088, 7.34%,
12/1/17 329

4,377 FNMA Pool #099782, 7.17%,
1/1/18 4,479

293 FNMA Pool #064708, 7.625%,
2/1/18 308

1,304 FNMA Pool #070030, 7.42%,
2/1/18 1,352

1,452 FNMA Pool #086885, 7.34%,
3/1/18 1,502

473 FNMA Pool #070224, 7.55%,
4/1/18 492

299 FNMA Pool #162880, 7.77%,
5/1/18 307

368 FNMA Pool #070186, 7.25%,
6/1/18 381

856 FNMA Pool #013786, 7.13%,
8/1/18 870

186 FNMA Pool #116473, 7.58%,
12/1/18 192

See Notes to Financial Statements

8 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

$ 164 FNMA Pool #075462, 7.70%,
5/1/19 $ 171

665 FNMA Pool #244477, 7.14%,
8/1/19 684

4,243 FNMA Pool #142402, 7.59%,
9/1/19 4,402

1,452 FNMA Pool #070595, 7.09%,
1/1/20 1,504

704 FNMA Pool #336479, 7.90%,
3/1/21 735

353 FNMA Pool #129482, 6.67%,
8/1/21 359

822 FNMA Pool #145556, 7.50%,
1/1/22 855

1,282 FNMA Pool #163993, 7.72%,
5/1/22 1,326

582 FNMA Pool #334441, 7.63%,
5/1/22 597

942 FNMA Pool #169868, 7.56%,
6/1/22 975

460 FNMA Pool #173165, 7.52%,
7/1/22 474

671 FNMA Pool #178295, 7.66%,
9/1/22 695

396 FNMA Pool #328733, 7.71%,
1/1/23 410

420 FNMA Pool #220498, 8.50%,
6/1/23 442

313 FNMA Pool #222649, 8.48%,
7/1/23 329

849 FNMA Pool #190647, 7.85%,
8/1/23 878

3,226 FNMA Pool #303336, 7.70%,
8/1/23 3,327

545 FNMA Pool #318767, 7.99%,
10/1/25 570

263 FNMA Pool #325305, 8.125%,
11/1/25 275

81 FNMA Pool #062836, 6.45%,
4/1/26 82

215 FNMA Pool #062835, 6.58%,
1/1/27 218

197 FNMA Pool #070184, 7.51%,
1/1/27 205

32 FNMA Pool #091688, 7.25%,
2/1/27 33

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

$ 3,054 FNMA Pool #062688, 6.20%,
5/1/28 $ 3,077

317 FNMA Pool #070716, 6.64%,
1/1/29 323

293 FNMA Pool #091689, 7.29%,
2/1/29 304

4,196 FNMA Pool #316518, 6.52%,
10/1/30 4,258
--------------------

43,953
--------------------

GNMA--0.2%

293 GNMA Pool #008230, 7.375%,
5/20/17 302

331 GNMA Pool #008763, 7.50%,
2/20/21 346

358 GNMA Pool #0008872, 7.50%,
11/20/21 374

11 GNMA Pool #008902, 7.00%,
1/20/22 11

384 GNMA Pool #008964, 7.50%,
8/20/26 400
--------------------

1,433
--------------------

TOTAL ADJUSTABLE-RATE
MORTGAGE SECURITIES--6.2% 51,207
--------------------
(Cost $51,199)

FIXED-RATE MORTGAGE SECURITIES(3)

FHLMC--7.7%

11,239 FHLMC Pool #G40164, 6.50%,
11/1/02 11,352

12,995 FHLMC Pool #G40218, 6.50%,
9/1/03 13,109

16,608 FHLMC Pool #G10325, 7.00%,
9/1/08 16,926

6,255 FHLMC Pool #G10439, 6.50%,
1/1/11 6,289

9,636 FHLMC Pool #E64136, 6.50%,
5/1/11 9,687

5,914 FHLMC Pool #D91694, 7.00%,
7/1/16 6,024
--------------------

63,387
--------------------

FNMA--4.6%

6,879 FNMA Pool #124516, 7.00%,
10/1/99 6,967

11,485 FNMA Pool #356801, 6.00%,
12/1/08 11,382

See Notes to Financial Statements

ANNUAL REPORT SCHEDULE OF INVESTMENTS 9

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

$ 6,942 FNMA Pool #332814, 6.00%,
7/1/09 $ 6,880

11,488 FNMA Pool #190853, 9.00%,
6/1/24 12,309
-------------------

37,538
-------------------

GNMA--1.9%

8 GNMA Pool #113802, 12.50%,
6/15/99 9

6 GNMA Pool #127619, 12.50%,
6/15/00 6

21 GNMA Pool #126325, 11.50%,
8/15/00 22

214 GNMA Pool #001565, 5.50%,
1/20/09 207

10,556 GNMA Pool #780489, 8.50%,
10/15/11 11,051

83 GNMA Pool #187019, 9.00%,
11/20/16 90

144 GNMA Pool #179457, 9.00%,
12/20/16 155

88 GNMA Pool #199973, 9.00%,
12/20/16 94

354 GNMA Pool #220128, 9.00%,
8/20/17 381

216 GNMA Pool #220134, 9.50%,
8/20/17 235

299 GNMA Pool #234860, 9.50%,
10/20/17 325

881 GNMA Pool #001291, 9.50%,
11/20/19 958

1,892 GNMA Pool #001376, 8.00%,
9/20/23 1,955
-------------------

15,488
-------------------

TOTAL FIXED-RATE
MORTGAGE SECURITIES--14.2% 116,413
-------------------
(Cost $116,325)

COLLATERALIZED MORTGAGE OBLIGATIONS(3)

FHLMC--23.0%

6,480 FHLMC REMIC, Series 1528,
Class A, 6.50%, 12/15/00 6,516

20,000 FHLMC REMIC, Series 1697,
Class PE PAC-1, 5.65%, 7/15/03 19,985

15,493 FHLMC REMIC, Series 1982,
Class BC SEQ, 6.50%, 9/15/04 15,562

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

$ 6,000 FHLMC REMIC, Series 1512,
Class EA PAC-1, 5.85%, 6/15/05 $ 5,993

7,241 FHLMC REMIC, Series 1344,
Class B TAC, 6.00%, 10/15/05 7,242

10,000 FHLMC REMIC, Series 1598,
Class E PAC, 5.60%, 11/15/05 9,953

5,000 FHLMC REMIC, Series 1612,
Class PD PAC-1, 5.75%,
5/15/06 4,985

10,000 FHLMC REMIC, Series 1678,
Class PE PAC, 5.60%, 7/15/07 9,925

10,048 FHLMC REMIC, Series 1805,
Class A, 6.50%, 12/15/08 9,987

7,779 FHLMC REMIC, Series 1839,
Class A PAC, 6.50%, 7/15/17 7,828

7,750 FHLMC REMIC, Series 1650,
Class E PAC-1, 5.75%,
11/15/17 7,724

11,764 FHLMC REMIC, Series 1861,
Class E SEQ, 6.50%, 8/15/20 11,796

12,998 FHLMC REMIC, Series 1934,
Class HB SEQ, 6.50%, 8/17/21 13,029

10,000 FHLMC REMIC, Series 1395,
Class E TAC, 6.00%, 11/15/21 9,886

16,198 FHLMC REMIC, Series 1861,
Class T SEQ, 6.50%, 11/15/21 16,246

8,527 FHLMC REMIC, Series 1558,
Class A TAC, 6.00%, 5/15/22 8,473

23,882 FHLMC REMIC, Series 1983,
Class T SEQ, 6.75%, 9/17/22 23,794
-------------------

188,924
-------------------

FNMA--16.9%

16,111 FNMA REMIC, Series 1994-33,
Class D PAC-1, 5.50%, 4/25/05 16,063

13,702 FNMA REMIC, Series 1994-7,
Class PD PAC-1, 6.05%,
7/25/07 13,690

6,500 FNMA REMIC, Series 1993-56,
Class PD PAC-1, 6.00%, 8/25/15 6,494

13,000 FNMA REMIC, Series 1993-38,
Class H PAC, 6.15%, 7/25/16 12,988

14,650 FNMA REMIC, Series 1993-139,
Class E PAC-1, 5.85%, 1/25/17 14,587

10,057 FNMA REMIC, Series 1997-24,
Class PD PAC-1, 6.75%,
7/18/17 10,236

6,331 FNMA REMIC, Series 1996-10,
Class A SEQ, 6.50%, 11/25/17 6,343

See Notes to Financial Statements

10 SCHEDULE OF INVESTMENTS AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS

MARCH 31, 1998

Principal Amount ($ in Thousands) Value
- -----------------------------------------------------------------------------

$ 7,706 FNMA REMIC, Series 1996-12,
Class A SEQ, 6.50%, 12/25/17 $ 7,716

4,920 FNMA REMIC, Series G93-29,
Class A SEQ, 6.65%, 10/25/18 4,938

10,000 FNMA REMIC, Series 1996-64,
Class PB PAC, 6.50%, 1/18/19 10,082

13,838 FNMA REMIC, Series 1997-20,
Class E SEQ, 7.00%, 6/17/20 13,952

8,314 FNMA REMIC, Series 1997-70,
Class FB, 6.20%, 4/20/98,
resets monthly off the 1-month
LIBOR plus 0.45% with a
0.45% floor and a 8.50% cap, final
maturity 3/18/24(4) 8,327

14,000 FNMA REMIC, Series 1998-29,
Class AB, 6.48%, 3/23/04(5) 13,899
-------------------

139,315
-------------------

GNMA--1.1%

3,420 GNMA REMIC, Series 1996-15,
Class K SEQ, 7.00%, 9/16/06 3,448

5,595 GNMA REMIC, Series 1996-15,
Class J SEQ, 7.00%, 1/16/07 5,666
-------------------

9,114
-------------------

PRIVATE LABEL(6)

135 Dean Witter Trust I Floater, Series I,
Class A, Underlying Collateral
FHLMC, 6.25%, 4/20/98,
resets quarterly off the 1-month
LIBOR plus 0.50% with no floor
and a 13.00% cap, final maturity
4/20/18(4) 135
-------------------

TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS--41.0% 337,488
-------------------
(Cost $336,145)

TOTAL INVESTMENT SECURITIES--100.0% $823,112
===================
(Cost $823,560)

NOTES TO SCHEDULE OF INVESTMENTS

FHLMC = Federal Home Loan Mortgage Corporation

FNMA = Federal National Mortgage Association

GNMA = Government National Mortgage Association

LIBOR = London Interbank Offered Rate

MTN = Medium Term Note

resets= The frequency with which a fixed income security's coupon changes,
based on current market conditions or an underlying index. The more
frequently a security resets, the less risk the investor is taking that
the coupon will vary significantly from current market rates.

(1) Security, or portion thereof, has been segregated for a when-issued
security.

(2) Yield to maturity at purchase is indicated.

(3) Final maturity indicated. Expected remaining maturity used for purposes of
calculating the weighted average portfolio maturity.

(4) Interest reset date is indicated. Rate shown is effective March 31, 1998.

(5) When-issued security.

(6) Investment in category is less than 0.05% of total investment securities.

See Notes to Financial Statements

ANNUAL REPORT SCHEDULE OF INVESTMENTS 11

STATEMENT OF ASSETS AND LIABILITIES

MARCH 31, 1998

ASSETS (In Thousands, Except Per-Share Amounts)

Investment securities, at value
(identified cost of $823,560) (Note 3) ..................... $ 823,112

Cash ....................................................... 1,848

Receivable for investments sold ............................ 348

Interest receivable ........................................ 5,847
---------
831,155
---------
LIABILITIES

Disbursements in excess of
demand deposit cash ...................................... 968

Payable for capital
shares redeemed .......................................... 799

Payable for investments
purchased ................................................ 20,064

Accrued management fees
(Note 2) ................................................. 405

Dividends payable and
other accrued expenses ................................... 455
---------
22,691
---------
Net Assets ................................................. $ 808,464
=========
CAPITAL SHARES

Outstanding (Unlimited number
of shares authorized) .................................... 85,460
=========
Net Asset Value Per Share .................................. $ 9.46
=========
NET ASSETS CONSIST OF:

Capital (par value and
paid-in surplus) ........................................ $ 889,036

Accumulated net realized loss
from investment transactions ............................. (80,124)

Net unrealized depreciation
on investments (Note 3) .................................. (448)
---------
$ 808,464
=========

See Notes to Financial Statements

12 STATEMENT OF ASSETS AND LIABILITIES AMERICAN CENTURY INVESTMENTS

STATEMENTS OF OPERATIONS

FOR THE PERIOD ENDED MARCH 31, 1998(1) AND
YEAR ENDED OCTOBER 31, 1997 1998 1997

INVESTMENT INCOME (In Thousands)

Income:

Interest ...................................... $ 16,508 $ 22,577
-------- --------
Expenses (Note 2):

Management fees ............................... 1,623 2,461

Trustees' fees and expenses ................... 7 7
-------- --------
1,630 2,468
-------- --------
Net investment income ......................... 14,878 20,109
-------- --------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
(NOTE 3)

Net realized gain on investments .............. 731 1,053

Change in net unrealized
appreciation (depreciation)
on investments .............................. (4,232) 699
-------- --------
Net realized and unrealized
gain (loss) on investments .................. (3,501) 1,752
-------- --------
Net Increase in Net Assets
Resulting from Operations ................... $ 11,377 $ 21,861
======== ========

(1) The Fund's fiscal year was changed from October 31 to March 31 resulting
in a five month annual reporting period.

See Notes to Financial Statements

ANNUAL REPORT STATEMENTS OF OPERATIONS 13

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE PERIOD ENDED MARCH 31, 1998(1) AND
YEARS ENDED OCTOBER 31, 1997 AND OCTOBER 31, 1996

Increase (Decrease) in Net Assets 1998 1997 1996

OPERATIONS (In Thousands)

Net investment income ................ $ 14,878 $ 20,109 $ 19,940

Net realized gain (loss)
on investments ..................... 731 1,053 (339)

Change in net unrealized
appreciation (depreciation)
on investments ..................... (4,232) 699 (1,269)
--------- --------- ---------
Net increase in net assets
resulting from operations .......... 11,377 21,861 18,332
--------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS

From net investment income ........... (14,878) (20,109) (19,940)
--------- --------- ---------
CAPITAL SHARE
TRANSACTIONS

Proceeds from shares sold ............ 373,778 83,471 78,893

Proceeds from shares issued
in connection with acquisition
(Note 4) ........................... -- 221,479 --

Proceeds from reinvestment
of distributions ................... 13,212 18,929 18,705

Payments for shares redeemed ......... (94,357) (156,071) (137,549)
--------- --------- ---------
Net increase (decrease) in
net assets from capital
share transactions ................. 292,633 167,808 (39,951)
--------- --------- ---------
Net increase (decrease)
in net assets ...................... 289,132 169,560 (41,559)

NET ASSETS

Beginning of period .................. 519,332 349,772 391,331
--------- --------- ---------
End of period ........................ $ 808,464 $ 519,332 $ 349,772
========= ========= =========
TRANSACTIONS IN SHARES
OF THE FUNDS

Sold ................................. 39,286 8,836 8,327

Shares issued in connection
with acquisition (Note 4) .......... -- 23,472 --

Issued in reinvestment
of distributions ................... 1,394 2,004 1,977

Redeemed ............................. (9,950) (16,523) (14,531)
--------- --------- ---------
Net increase ......................... 30,730 17,789 (4,227)
========= ========= =========

See Notes to Financial Statements

14 STATEMENTS OF CHANGES IN NET ASSETS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- American Century Government Income Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. American Century - Benham Short-Term Government
Fund (the Fund) is one of the eight funds issued by the Trust. The investment
objective of the Fund is to provide investors with a high level of current
income, consistent with stability of principal. The Fund intends to pursue this
objective by investing in securities of the U.S. government and its agencies.
The Fund is authorized to issue two classes of shares: the Investor Class and
the Advisor Class. The two classes of shares differ principally in their
respective shareholder servicing and distribution expenses and arrangements. All
shares of the Fund represent an equal pro rata interest in the assets of the
class to which such shares belong, and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except for class
specific expenses and exclusive rights to vote on matters affecting only
individual classes. Sale of the Advisor Class had not commenced as of the report
date. The following significant accounting policies, related to both classes of
the Fund, are in accordance with accounting policies generally accepted in the
investment company industry.

INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.

REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
institutions that the Fund's investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The Fund requires that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable the Fund to obtain those securities in the event of a default under the
repurchase agreement. ACIM monitors, on a daily basis, the securities
transferred to ensure the value, including interest, of the securities under
each repurchase agreement is equal to or greater than amounts owed to the Fund
under each repurchase agreement.

INCOME TAX STATUS -- It is the Fund's policy to distribute all taxable
income and capital gains to shareholders and to otherwise qualify as a regulated
investment company under provisions of the Internal Revenue Code. Accordingly,
no provision has been made for federal or state income taxes.

DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains in excess of available capital loss carryovers are declared and paid
annually. As of March 31, 1998, the Fund had an accumulated net realized capital
loss carryover of $79,672,846 (expiring 2001 through 2004), which may be used to
offset future taxable gains.

ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 15

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES

The Trust has entered into a Management Agreement with ACIM that provides
the Fund with investment advisory and management services in exchange for a
single, unified management fee per class. Expenses excluded from this agreement
are brokerage, taxes, portfolio insurance, interest, fees and expenses of the
Trustees who are not considered "interested persons" as defined in the
Investment Company Act of 1940 (including counsel fees) and extraordinary
expenses. The annual rate at which this fee is assessed is determined monthly in
a two-step process: First, a fee rate schedule is applied to the net assets of
all of the funds in the Fund's investment category which are managed by ACIM
(the "Investment Category Fee"). The overall investment objective of each Fund
determines its Investment Category. The three investment categories are: the
Money Market Fund Category, the Bond Fund Category and the Equity Fund Category.
The Fund is included in the Bond Fund Category. Second, a separate fee rate
schedule is applied to the net assets of all of the funds managed by ACIM (the
"Complex Fee"). The Investment Category Fee and the Complex Fee are then added
to determine the unified management fee rate. The management fee is paid monthly
by the Fund based on its aggregate average daily net assets during the previous
month multiplied by the monthly management fee rate. The annualized Investment
Category Fee schedule for the Fund is as follows:

The annualized Complex Fee schedule (Investor Class) is as follows:

The Board of Trustees has adopted the Advisor Class Master Distribution and
Shareholder Services Plan (the Plan), pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Plan provides that the Fund will pay ACIM an annual
distribution fee equal to 0.25% and service fee equal to 0.25%. The fees are
computed daily and paid monthly based on the Advisor Class's average daily
closing net assets during the previous month. The distribution fee provides
compensation for distribution expenses incurred by financial intermediaries in
connection with distributing shares of the Advisor Class including, but not
limited to, payments to brokers, dealers, and financial institutions that have
entered into sales agreements with respect to shares of the Fund. The service
fee provides compensation for shareholder and administrative services rendered
by ACIM, its affiliates or independent third party providers.

Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent, American Century Services Corporation, and the registered
broker-dealer, American Century Investment Services, Inc.

16 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS

Purchases of U.S. Government and Agency securities, excluding short-term
investments, totaled $651,486,568. Sales of U.S. Government and Agency
securities, excluding short-term investments, totaled $298,376,326.

As of March 31, 1998, accumulated net unrealized depreciation was $898,046,
based on the aggregate cost of investments for federal income tax purposes of
$824,010,326, which consisted of unrealized appreciation of $2,191,414 and
unrealized depreciation of $3,089,460.

- --------------------------------------------------------------------------------
4. REORGANIZATION PLAN

On August 29, 1997 American Century - Benham Adjustable Rate Government
Securities Fund (ARM) acquired all of the net assets of the American Century -
Benham Short-Term Government Fund (Short-Term), pursuant to a plan of
reorganization approved by the acquired fund's shareholders on July 30, 1997.
Short-Term is the surviving fund for the purposes of maintaining the financial
statements and performance history in the post-reorganization, but was
reorganized as a fund issued by American Century Government Income Trust.

The acquisition was accomplished by a tax-free exchange of 23,128,551 shares
of ARM for 23,471,559 shares of Short-Term, outstanding on August 29, 1997. The
net assets of ARM and Short-Term immediately before the acquisitions were
$221,479,030 and $313,992,998, respectively. ARM unrealized appreciation of
$672,533 was combined with that of Short-Term. Immediately after the
acquisition, the combined net assets were $535,472,028.

ARM capital loss carryforwards of approximately $68,398,906, are included in
Short-Term's financials. These capital loss carryforwards are subject to
limitations on their use under the Internal Revenue Code, as amended.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 17

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS

For a Share Outstanding Throughout the Years Ended October 31 (except as noted)

1998(1) 1997 1996 1995 1994 1993(2)
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ......... $ 9.49 $ 9.47 $ 9.51 $ 9.27 $ 9.67 $ 9.61
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations

Net Investment Income ..... 0.21 0.52 0.51 0.52 0.40 0.36

Net Realized and Unrealized
Gain (Loss) on Investment
Transactions .............. (0.03) 0.02 (0.04) 0.24 (0.40) 0.06
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ................ 0.18 0.54 0.47 0.76 -- 0.42
----------- ----------- ----------- ----------- ----------- -----------
Distributions

From Net Investment
Income .................... (0.21) (0.52) (0.51) (0.52) (0.40) (0.36)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ............... $ 9.46 $ 9.49 $ 9.47 $ 9.51 $ 9.27 $ 9.67
=========== =========== =========== =========== =========== ===========
Total Return(3) ............. 1.95% 5.86% 5.09% 8.42% 0.07% 4.45%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets ....... 0.59%(4) 0.68% 0.70% 0.70% 0.81% 1.00%

Ratio of Net Investment
Income to Average
Net Assets ................ 5.43%(4) 5.53% 5.39% 5.53% 4.17% 3.73%

Portfolio Turnover Rate ..... 54% 293% 246% 128% 470% 413%

Net Assets, End
of Period (in thousands) .... $ 808,464 $ 519,332 $ 349,772 $ 391,331 $ 396,753 $ 511,981
</TABLE>

(1) The Fund's fiscal year end was changed from October 31 to March 31 resulting
in a five month annual reporting period.

(2) The data presented has been restated to give effect to a 10 for 1 stock
split in the form of a stock dividend that occurred on November 13, 1993.

(3) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for less than one year are not
annualized.

(4) Annualized.

See Notes to Financial Statements

18 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of the American Century Government Income Trust and the
Shareholders of American Century -Benham Short-Term Government Fund:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the American Century - Benham Short-Term
Government Fund (one of the Funds comprising American Century Government Income
Trust) (the Fund) as of March 31, 1998, and the related statements of
operations, statements of changes in net assets and the financial highlights for
the five months then ended and the year ended October 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the four years in the period ended October 31, 1996, were
audited by other auditors, whose report, dated November 20, 1996, expressed an
unqualified opinion on those statements.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
American Century - Benham Short-Term Government Fund as of March 31, 1998, and
the results of its operations, the changes in its net assets and the financial
highlights for the five months then ended and the year ended October 31, 1997,
in conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Kansas City, Missouri
May 8, 1998

ANNUAL REPORT REPORT OF INDEPENDENT ACCOUNTANTS 19

RETIREMENT ACCOUNT INFORMATION

20 RETIREMENT ACCOUNT INFORMATION AMERICAN CENTURY INVESTMENTS

NOTES

ANNUAL REPORT NOTES 21

NOTES

22 NOTES AMERICAN CENTURY INVESTMENTS

NOTES

ANNUAL REPORT NOTES 23

BACKGROUND INFORMATION

INVESTMENT PHILOSOPHY & POLICIES

In addition to these principles, each fund has its own investment policies:

SHORT-TERM GOVERNMENT is a variable-price bond fund that seeks to provide
interest income by investing in U.S. government and agency securities. The fund
maintains a weighted average maturity of three years or less. Fund shares are
not guaranteed by the U.S. government.

COMPARATIVE INDICES

The following indices are used in the report for fund performance
comparisons. They are not investment products available for purchase.

The SALOMON BROTHERS 1- TO 3-YEAR TREASURY/ AGENCY INDEX is based on the
price fluctuations of U.S. Treasury and government agency notes with maturities
of 1-3 years.

The MERRILL LYNCH 1- TO 3-YEAR GOVERNMENT INDEX is based on the price
fluctuations of U.S. Treasury notes with remaining maturities of 1-3 years.

LIPPER RANKINGS

The Lipper category for Short-Term Government is:

SHORT U.S. GOVERNMENT FUNDS --funds that invest at least 65% of assets in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities, with dollar-weighted average maturities of less than three
years.

- --------------------------------------------------------------------------------
INVESTMENT TEAM LEADERS
- --------------------------------------------------------------------------------
Portfolio Manager Newlin Rankin
- --------------------------------------------------------------------------------

24 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS

GLOSSARY

RETURNS

* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.

YIELDS

* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.

* AVERAGE DURATION--another measure of the sensitivity of a fixed-income
portfolio to interest rate changes. Duration is a time-weighted average of the
interest and principal payments of the securities in a portfolio. As the
duration of a portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.

INVESTMENT TERMS

* COUPON--the stated interest rate of a security.

* YIELD CURVE--a graphic representation of the relationship between maturity and
yield for fixed-income securities. Yield curve graphs plot lengthening
maturities along the horizontal axis and rising yields along the vertical axis.
Most "normal" yield curves start in the lower left corner of the graph and rise
to the upper right corner, indicating that yields rise as maturities lengthen.
This upward sloping yield curve illustrates a normal risk/return
relationship--more return (yield) for more risk (a longer maturity). Conversely,
a "flat" yield curve provides little or no extra return for taking on more risk.

SECURITY TYPES

* MORTGAGE-BACKED SECURITIES--debt securities that represent ownership in pools
of mortgage loans. Most mortgage-backed securities are structured as
"pass-throughs"--the monthly payments of principal and interest on the mortgages
in the pool are collected by the bank that is servicing the mortgages and are
"passed through" to investors. While the payments of principal and interest are
considered secure (many are backed by government agency guarantees), the cash
flow is less certain than in other fixed-income investments. Mortgages that are
paid off early reduce future interest payments from the pool.

* U.S. GOVERNMENT AGENCY SECURITIES--debt securities issued by U.S. government
agencies (such as the Federal Home Loan Bank and the Federal Farm Credit Bank).
Some agency securities are backed by the full faith and credit of the U.S.
government, while others are guaranteed only by the issuing agency. Government
agency securities include discount notes (maturing in one year or less) and
medium-term notes, debentures and bonds (maturing in three months to 50 years).

ANNUAL REPORT GLOSSARY 25

[american century logo(reg.sm)]
American
Century(reg.tm)

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

INTERNET: WWW.AMERICANCENTURY.COM

AMERICAN CENTURY GOVERNMENT INCOME TRUST

INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI

9805 [recycled logo]
SH-BKT-12401 Recycled
<PAGE>
ANNUAL
REPORT

[american century logo(reg.sm)]
American
Century(reg.tm)

MARCH 31, 1998

BENHAM
GROUP

Short-Term Treasury
Intermediate-Term Treasury
Long-Term Treasury

TABLE OF CONTENTS
Report Highlights ......................................................... 1
Our Message to You ........................................................ 2
Market Perspective ........................................................ 3
Short-Term Treasury
Performance & Portfolio Information ............................ 4
Management Q & A ............................................... 5
Schedule of Investments ........................................ 8
Financial Highlights ........................................... 26
Intermediate-Term Treasury
Performance & Portfolio Information ............................ 9
Management Q & A ............................................... 10
Schedule of Investments ........................................ 13
Financial Highlights ........................................... 27
Long-Term Treasury
Performance & Portfolio Information ............................ 14
Management Q & A ............................................... 15
Schedule of Investments ........................................ 18
Financial Highlights ........................................... 28
Statements of Assets and Liabilities ...................................... 19
Statements of Operations .................................................. 20
Statements of Changes in Net Assets ....................................... 21
Notes to Financial Statements ............................................. 22
Report of Independent Accountants ......................................... 29
Share Class and Retirement
Account Information ....................................................... 30
Background Information
Investment Philosophy & Policies ............................... 32
Comparative Indices ............................................ 32
Lipper Rankings ................................................ 32
Investment Team Leaders ........................................ 32
Glossary .................................................................. 33

We welcome your comments or questions about this report. See the back cover for
ways to contact us by mail, phone or e-mail.

American Century and Benham Group are registered marks of American Century
Services Corporation.

AMERICAN CENTURY INVESTMENTS

REPORT HIGHLIGHTS

MARKET PERSPECTIVE

* Declining inflation, stable monetary policy by the Federal Reserve (the Fed)
and a shrinking federal budget deficit were key factors behind the solid
performances of fixed-income securities.

* After only one increase to the fed funds rate in March 1997, the Fed made no
further adjustments to short-term rates as inflation rose at an annual rate
of only 1.4%.

* For the first time since the early 1960s, the U.S. government is on track
to have a budget surplus in 1998.

SHORT-TERM TREASURY

* The bond-friendly environment allowed the fund to produce positive returns.
The fund's more conservative average maturity caused returns to lag those of
the average short U.S. Treasury fund. (See Total Returns on page 4.)

* On September 1, 1997, Newlin Rankin assumed primary management of Short-Term
Treasury.

* We made only incremental adjustments to average maturity throughout the
year, keeping in a fairly narrow range around the benchmark.

* Going forward, we will probably keep the average maturity roughly in line
with to slightly longer than the benchmark and reevaluate the percentage of
agency securities in the portfolio.

INTERMEDIATE-TERM TREASURY

* Intermediate-Term Treasury continued to provide solid returns, outperforming
the average intermediate U.S. Treasury fund. (See Total Returns on page 9.)

* On September 1, 1997, Bob Gahagan assumed primary management of
Intermediate-Term Treasury.

* We increased exposure to government agency securities to nearly 30% of
assets because a flood of issuance made agencies a better value.

* Currently, we are keeping Intermediate-Term Treasury's duration (a measure
of the portfolio's price sensitivity to changes in interest rates) roughly
in line with its benchmark, yet positioned so that the fund should benefit
the most if the difference between short- and long-term interest rates
continues to narrow.

LONG-TERM TREASURY

* The fund continued to outperform the average general U.S. Treasury fund, but
slightly underperformed its benchmark. (See Total Returns on page 14.)

* From a security selection standpoint, the portfolio remained basically
unchanged during the fiscal year.

* We will likely lengthen duration (a measure of the portfolio's price
sensitivity to changes in interest rates) if yields rise to 6.25% and
shorten duration if yields fall to around 5.75% or lower.

SHORT-TERM TREASURY
INVESTOR CLASS(1)

TOTAL RETURNS: AS OF 3/31/98
6 Months 2.94%(2)
1 Year 6.89%

NET ASSETS: $40.9 million
(AS OF 3/31/98)

INCEPTION DATE: 9/8/92

TICKER SYMBOL: BSTAX

INTERMEDIATE TREASURY
INVESTOR CLASS(1)

TOTAL RETURNS: AS OF 3/31/98
6 Months 4.25%(2)
1 Year 11.04%

NET ASSETS: $374.9 million
(AS OF 3/31/98)

INCEPTION DATE: 5/16/80

TICKER SYMBOL: CPTNX

LONG-TERM TREASURY
INVESTOR CLASS(1)

TOTAL RETURNS: AS OF 3/31/98
6 Months 8.00%(2)
1 Year 20.48%

NET ASSETS: $103.4 million
(AS OF 3/31/98)

INCEPTION DATE: 9/8/92

TICKER SYMBOL: BLAGX

(1) See Share Classes, page 30.

(2) Not annualized.

ANNUAL REPORT REPORT HIGHLIGHTS 1

OUR MESSAGE TO YOU

[photo of James E. Stowers, Jr. and James E. Stowers III]

The U.S. Treasury market rallied during the 12 months ended March 31, 1998.
Low inflation, an improving federal budget, and moderate economic growth created
an ideal environment for bonds. The financial crisis in Asia also boosted demand
for Treasurys as global investors looked for a safe place to put their money.
Against a backdrop of stock market volatility and overseas financial crises,
shareholders in American Century Short-, Intermediate- and Long-Term Treasury
funds enjoyed competitive bond market returns combined with the safety of U.S.
Treasury securities.

We're also working hard to prepare our computer systems for the year 2000
(Y2K). The Y2K problem, which has been widely publicized in the financial press,
refers to the possible inability of computer systems to distinguish between the
years 1900 and 2000 when the new millennium begins. Like other financial
companies, many of our computer operations involve some type of date comparison
or date calculation. Although much of our system is already year 2000 compliant,
we anticipate the rest will be in compliance by the end of this year.

Thank you for your investment.

Sincerely,

/s/James E. Stowers, Jr. /s/James E. Stowers III
James E. Stowers, Jr. James E. Stowers III
Chairman of the Board and Founder Chief Executive Officer

2 OUR MESSAGE TO YOU AMERICAN CENTURY INVESTMENTS

MARKET PERSPECTIVE

[line chart - data below]

FALLING AND FLATTENING TREASURY YIELD CURVE

Source: Bloomberg Financial Markets

SOLID RETURNS

Tame inflation levels and falling interest rates led to solid returns for
government securities during the 12 months ended March 31, 1998. Thanks to their
greater sensitivity to interest rate changes, longer-term securities
outperformed shorter-maturity issues. For example, the Salomon Brothers
Long-Term Treasury/Agency Index returned 20.7%, compared with the 7.5% return of
the Lehman 1- to 3-Year Government Securities Index.

INFLATION REMAINED BENIGN

Low inflation was the biggest factor behind the impressive bond gains,
helping to drive yields lower throughout most of the 12 months. After peaking in
early April 1997, yields fell to record lows by January 1998 and remained close
to those levels through the end of March.

As represented by the consumer price index, inflation was a mere 1.4% for
the twelve months ended March 31, 1998, marking the second-smallest increase in
33 years. Behind the low inflation was a backdrop of savings on health care and
benefits costs and improved worker productivity that allowed companies to pay
employees more without raising prices.

AN UNEXPECTED COMBINATION

The lack of inflation was especially surprising because it was accompanied
by impressive U.S. economic growth and low unemployment levels. For all of 1997,
the U.S. economy grew 3.8%, marking the fastest annual growth in nine years.
Accompanying that expansion was a 4.9% unemployment rate--the lowest annual rate
since 1969.

Solid economic growth has continued in 1998. According to the government's
initial estimate, the U.S. economy grew at a 4.2% annual pace during the first
quarter of this year. Early tax refunds, unseasonably warm weather and a
flourishing housing market were some of the reasons behind the continued
economic strength.

THE BUDGET DEFICIT NARROWS

The shrinking U.S. budget deficit also played a pivotal role in supporting
the value of Treasurys, by limiting supply. The economic prosperity of the last
several years has been good news for the U.S. government in the form of
increased tax revenues.

Higher tax revenues helped decrease the amount of new securities the
Treasury department had to issue to finance government expenditures. For
example, in 1997, six 10-year note auctions were scheduled, while only four are
slated for 1998. The Treasury Department also plans only three auctions of
30-year Treasury bonds this year, compared with four auctions in 1997. The
amount of short-term Treasurys issued has also been decreasing.

With the supply of Treasurys decreasing, the value of existing securities
has risen. This favorable supply and demand scenario has been fueled by a
situation that has not occurred since the early 1960's-the U.S. government is on
track to have a budget surplus, meaning less will be spent than borrowed, by the
end of 1998.

Periodic volatility in the stock market and economic turmoil in Southeast
Asia (discussed in more detail on pages 6, 11 and 16) also increased the allure
of U.S. Treasurys as a safe haven.

Many of the investment terms in this report are defined in the Glossary on page
33.

ANNUAL REPORT MARKET PERSPECTIVE 3

<TABLE>
<CAPTION>
SHORT-TERM TREASURY

TOTAL RETURNS AS OF MARCH 31, 1998(1)
AVERAGE ANNUAL RETURNS
6 MONTHS 1 YEAR 3 YEARS 5 YEARS LIFE OF FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTOR CLASS (inception 9/8/92)

<S> <C> <C> <C> <C> <C>
Short-Term Treasury .................. 2.94% 6.89% 6.07% 4.83% 4.85%

Lehman 1- to 3-Year Government
Securities Index ..................... 3.13% 7.49% 6.84% 5.49% 5.43%(2)

Average Short U.S. Treasury Fund(3) .. 2.90% 7.41% 6.41% 5.01% 5.00%(2)

Fund's Ranking Among
Short U.S. Treasury Funds(3) ......... -- 14 out of 24 13 out of 17 9 out of 12 7 out of 9(2)
- --------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS (inception 10/6/97)

Short-Term Treasury .................................................................................. 2.51%

Lehman 1- to 3-Year Government Securities Index ...................................................... 3.13%(4)
</TABLE>

(1) Returns for periods less than one year are not annualized.

(2) Since 9/30/92, the date nearest the class' inception for which data are
available.

(3) According to Lipper Analytical Services.

(4) Since 9/30/97, the date nearest the class' inception for which data are
available.

See pages 32-33 for more information about returns, the comparative index and
Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER LIFE OF FUND (Investor Class) $10,000 investment made
9/30/92*

Value on 3/31/98
Short-Term Lehman 1- to 3-Year
Treasury Gov't. Index
Sep-92 $10,000 $10,000
Oct-92 $9,930 $9,943
Nov-92 $9,895 $9,928
Dec-92 $9,992 $10,021
Jan-93 $10,109 $10,126
Feb-93 $10,205 $10,206
Mar-93 $10,246 $10,238
Apr-93 $10,311 $10,300
May-93 $10,279 $10,275
Jun-93 $10,355 $10,352
Jul-93 $10,364 $10,374
Aug-93 $10,449 $10,460
Sep-93 $10,479 $10,494
Oct-93 $10,485 $10,517
Nov-93 $10,485 $10,519
Dec-93 $10,524 $10,561
Jan-94 $10,586 $10,626
Feb-94 $10,519 $10,561
Mar-94 $10,467 $10,508
Apr-94 $10,424 $10,468
May-94 $10,444 $10,482
Jun-94 $10,465 $10,509
Jul-94 $10,548 $10,603
Aug-94 $10,573 $10,638
Sep-94 $10,552 $10,614
Oct-94 $10,574 $10,638
Nov-94 $10,523 $10,593
Dec-94 $10,540 $10,614
Jan-95 $10,670 $10,758
Feb-95 $10,816 $10,904
Mar-95 $10,870 $10,965
Apr-95 $10,953 $11,063
May-95 $11,122 $11,252
Jun-95 $11,185 $11,313
Jul-95 $11,217 $11,358
Aug-95 $11,282 $11,426
Sep-95 $11,332 $11,482
Oct-95 $11,421 $11,577
Nov-95 $11,506 $11,676
Dec-95 $11,587 $11,763
Jan-96 $11,663 $11,863
Feb-96 $11,626 $11,817
Mar-96 $11,599 $11,809
Apr-96 $11,601 $11,821
May-96 $11,616 $11,847
Jun-96 $11,686 $11,933
Jul-96 $11,730 $11,980
Aug-96 $11,745 $12,024
Sep-96 $11,859 $12,133
Oct-96 $11,986 $12,271
Nov-96 $12,088 $12,361
Dec-96 $12,064 $12,364
Jan-97 $12,118 $12,423
Feb-97 $12,142 $12,453
Mar-97 $12,135 $12,443
Apr-97 $12,227 $12,545
May-97 $12,297 $12,633
Jun-97 $12,378 $12,720
Jul-97 $12,498 $12,859
Aug-97 $12,506 $12,872
Sep-97 $12,601 $12,969
Oct-97 $12,698 $13,065
Nov-97 $12,716 $13,098
Dec-97 $12,801 $13,186
Jan-98 $12,912 $13,311
Feb-98 $12,926 $13,323
Mar-98 $12,970 $13,375

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.

* 9/30/92 is the date nearest the class' inception for which comparable
performance data exist. The fund's actual inception date is 9/8/92.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 16 15
Weighted Average Maturity 1.7 years 1.9 years
Average Duration 1.5 years 1.7 years
Expense Ratio (Investor Class) 0.55% 0.61%

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Investor Class 5.17%
Advisor Class 4.92%

Yield is defined in the Glossary on page 33.

4 SHORT-TERM TREASURY AMERICAN CENTURY INVESTMENTS

SHORT-TERM TREASURY

MANAGEMENT Q & A

An interview with Newlin Rankin, a portfolio manager on the Benham Treasury
funds investment team. Newlin joined the team on September 1, 1997, replacing
Bob Gahagan as primary manager of Short-Term Treasury. Although Bob continues to
be involved with fund decisions, his efforts are now concentrated on other
funds, including Intermediate-Term Treasury.

HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

The fund produced positive returns, but its conservative average maturity
caused returns to lag behind those of the average short U.S. Treasury fund. For
the fiscal year ended March 31, 1998, the fund returned 6.89%, compared with the
7.41% average return of the 24 "Short U.S. Treasury Funds" tracked by Lipper
Analytical Services. (See the Total Returns table on the previous page for other
fund performance comparisons.)

WHAT CHANGES DID YOU MAKE TO SHORT-TERM TREASURY'S PORTFOLIO?

We purchased callable securities and cut back on the portfolio's
non-callable ones. This change was made partially because the majority of new
government agency securities being issued are callable, but also because of the
yield advantage these securities typically offer.

[bar graph - data below]

SHORT-TERM TREASURY'S ONE-YEAR RETURNS SINCE INCEPTION*
(Periods ended March 31)

Short-Term Lehman 1- to 3-Year
Treasury Govt. Index
3/93 2.45% 2.38%
3/94 2.16% 2.64%
3/95 3.85% 4.35%
3/96 6.71% 7.69%
3/97 4.62% 5.37%
3/98 6.89% 7.49%

This graph illustrates the fund's returns since its inception and compares them
with the index's returns. The fund's total returns include operating expenses,
while the index's do not. See page 32 for a definition of the index.

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

* Investor Class.

ANNUAL REPORT SHORT-TERM TREASURY 5

SHORT-TERM TREASURY

Callable securities can be redeemed by the issuer before the bond's
scheduled maturity date. Because of this added feature, these securities
typically offer a yield advantage over non-callable bonds, which cannot be
redeemed by the issuer before maturity.

From an average maturity standpoint, we made only incremental adjustments
throughout the year and kept maturities in a fairly narrow range around 1.9
years.

WHAT IMPACT HAS ASIAN ECONOMIC TURMOIL HAD ON U.S. ECONOMIC GROWTH AND
INFLATION?

The effect on goods the U.S. sells to other countries has been fairly
pronounced, but since exports account for only 13% of total U.S. economic
growth, the overall effect was limited. According to the government's initial
estimate, exported goods during the first quarter of this year fell by $12
billion, the largest quarterly amount since the third quarter of 1982.

Slower overseas growth curtails business for U.S. exporters and dampens U.S.
economic growth. And a strong U.S. dollar and weak Asian currencies mean
imported goods are cheaper, helping to keep U.S. producers from raising prices,
which keeps inflation in check.

IF EXPORTS DROPPED BY SUCH A LARGE AMOUNT, WHY DID ECONOMIC GROWTH REMAIN
ROBUST?

Keep in mind that approximately two-thirds of U.S. economic growth is
created by consumer spending. Consumer spending increased by $68 billion during
the first quarter and was at its strongest pace in six years. So, the net result
was that the problems overseas made only a minor dent in the U.S. economy.

DOES THAT MEAN IT'S SAFE TO DISCOUNT THE IMPACT OF ASIAN ECONOMIC TURMOIL?

Not really. For now, the situation is a minor help in keeping U.S. inflation
in check. However, if Asian economic problems worsened, further hampering
Japan's ailing economy, that could spell bad news for the U.S. Treasury market.

Foreign holdings, as a percent of total privately held U.S. government debt,
have doubled over the last five years. As of November 1997, $1.3 trillion, or
nearly 38% of all privately held U.S. government debt was held by investors
overseas. Japan holds $318 billion in U.S. government debt and is the largest
foreign holder. Japan recently sold some of its Treasury holdings in an effort
to stabilize its currency. These sales increase Treasury supply, as well as take
away a significant potential buyer.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Treasury Securities 67%
Agency Securities 33%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
Treasury Securities 60%
Agency Securities 40%

6 SHORT-TERM TREASURY AMERICAN CENTURY INVESTMENTS

SHORT-TERM TREASURY

WHAT IS THE OUTLOOK FOR INTEREST RATES?

HOW DO YOU PLAN ON MANAGING THE PORTFOLIO GOING FORWARD?

We will probably keep the average maturity roughly in line with to slightly
long compared with the benchmark. We also plan on reevaluating the percentage of
agency securities in the portfolio, possibly increasing our allotment due to the
higher yield they tend to offer over comparable-maturity Treasury securities.

In addition, the fund's callable securities should perform well if interest
rates remain fairly stable since they typically offer higher yields. If that
scenario holds true, it means that the callable securities are not likely to be
recalled by the issuers. That could boost returns because in a short-term fund
like this one yield normally comprises the majority of returns.

[pie charts]

COMPOSITION OF AGENCY HOLDINGS (as of 3/31/98)
Federal Home Loan
Bank 44%
Federal Farm Credit
Bank 40%
Student Loan Marketing
Association 16%

COMPOSITION OF AGENCY HOLDINGS (as of 9/30/97)
Federal Home Loan
Bank 46%
Federal Farm Credit
Bank 26%
Student Loan Marketing
Association 23%
Other 5%

ANNUAL REPORT SHORT-TERM TREASURY 7

SCHEDULE OF INVESTMENTS
SHORT-TERM TREASURY

MARCH 31, 1998

Principal Amount Value
- --------------------------------------------------------------------------------

U.S. TREASURY SECURITIES

$1,200,000 U.S. Treasury Notes, 5.875%,
10/31/98 $ 1,202,472

3,650,000 U.S. Treasury Notes, 5.50%,
11/15/98 3,649,963

1,200,000 U.S. Treasury Notes, 5.875%,
1/31/99 1,203,408

2,615,000 U.S. Treasury Notes, 5.00%,
2/15/99 2,603,181

1,000,000 U.S. Treasury Notes, 6.25%,
3/31/99 1,007,200

6,160,000 U.S. Treasury Notes, 6.375%,
4/30/99 6,212,853

4,155,000 U.S. Treasury Notes, 6.75%,
5/31/99 4,209,680

6,750,000 U.S. Treasury Notes, 5.625%,
2/28/01 6,746,895

750,000 U.S. Treasury STRIPS, 6.03%,
5/15/99(1) 704,914
--------------------

TOTAL U.S. TREASURY SECURITIES-65.9% 27,540,566
--------------------
(Cost $27,434,666)

U.S. GOVERNMENT AGENCY SECURITIES

1,250,000 FFCB, 5.875%, 1/22/99 1,247,388

1,000,000 FFCB, MTN, 6.125%, 10/22/99 1,005,910

3,000,000 FFCB, MTN, 8.90%, 6/6/00 3,189,390

2,100,000 FHLB, 6.06%, 7/28/00 2,112,642

4,000,000 FHLB, 5.97%, 12/11/00 4,021,240

2,265,000 SLMA, 5.88%, 2/6/01 2,253,086
--------------------

TOTAL U.S. GOVERNMENT
AGENCY SECURITIES-33.1% 13,829,656
--------------------
(Cost $13,767,325)

TEMPORARY CASH INVESTMENTS--1.0%

Repurchase Agreement, Merrill Lynch & Co.,
Inc., (U.S. Treasury obligations), in a joint
trading account at 5.90%, dated 3/31/98,
due 4/1/98 (Delivery value $400,066) 400,000
--------------------
(Cost $400,000)

TOTAL INVESTMENT SECURITIES-100.0% $41,770,222
====================
(Cost $41,601,991)

NOTES TO SCHEDULE OF INVESTMENTS

FFCB = Federal Farm Credit Bank

FHLB = Federal Home Loan Bank

MTN = Medium Term Note

SLMA = Student Loan Marketing Association

STRIPS = Separate Trading of Registered Interest and Principal of Securities

(1) Zero-coupon bond. The effective yield to maturity at purchase is indicated.
Zero coupon bonds are purchased at a substantial discount from their value
at maturity.

See Notes to Financial Statements

8 SHORT-TERM TREASURY AMERICAN CENTURY INVESTMENTS

<TABLE>
<CAPTION>
INTERMEDIATE-TERM TREASURY

<S> <C> <C> <C> <C> <C> <C>
Intermediate-Term Treasury ........ 4.25% 11.04% 7.80% 5.72% 7.54% 8.81%

Fund Benchmark(+) ................. 4.32% 11.55% 8.32% 6.30% 8.12% 9.89%(2)

Average
Intermediate
U.S. Treasury Fund(3) ............. 4.20% 10.89% 7.79% 5.76% 7.54% 8.81%(2)

Fund's Ranking Among
Intermediate U.S. Treasury
Funds(3) .......................... -- 6 out of 12 3 out of 7 3 out of 6 1 out of 1 1 out of 1(2)
- --------------------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS (inception 10/9/97)

Intermediate-Term Treasury ........................................................................................ 3.90%

Salomon 3- to 10-Year Treasury Index .............................................................................. 4.32%(4)
</TABLE>

(1) Returns for periods less than one year are not annualized.

(2) Since 5/31/80, the date nearest the class' inception for which data are
available.

(3) According to Lipper Analytical Services.

(4) Since 9/30/97, the date nearest the class' inception for which data are
available.

See pages 32-33 for more information about returns, the comparative index and
Lipper fund rankings.

[mountain graph - data below]

GROWTH OF $10,000 OVER TEN YEARS (Investor Class) $10,000 investment made
3/31/88

Value on 3/31/98
Intermediate-Term
Treasury Fund Benchmark+
Mar-88 $10,000 $10,000
Apr-88 $9,938 $9,987
May-88 $9,863 $9,932
Jun-88 $10,054 $10,093
Jul-88 $9,992 $10,069
Aug-88 $9,989 $10,076
Sep-88 $10,174 $10,251
Oct-88 $10,320 $10,390
Nov-88 $10,198 $10,300
Dec-88 $10,190 $10,309
Jan-89 $10,291 $10,411
Feb-89 $10,228 $10,368
Mar-89 $10,278 $10,419
Apr-89 $10,450 $10,611
May-89 $10,677 $10,835
Jun-89 $10,964 $11,111
Jul-89 $11,199 $11,338
Aug-89 $11,007 $11,180
Sep-89 $11,051 $11,236
Oct-89 $11,280 $11,467
Nov-89 $11,372 $11,579
Dec-89 $11,406 $11,608
Jan-90 $11,336 $11,542
Feb-90 $11,367 $11,571
Mar-90 $11,369 $11,594
Apr-90 $11,316 $11,553
May-90 $11,565 $11,797
Jun-90 $11,716 $11,951
Jul-90 $11,887 $12,122
Aug-90 $11,832 $12,070
Sep-90 $11,947 $12,180
Oct-90 $12,111 $12,350
Nov-90 $12,294 $12,534
Dec-90 $12,456 $12,711
Jan-91 $12,569 $12,840
Feb-91 $12,626 $12,908
Mar-91 $12,687 $12,978
Apr-91 $12,819 $13,112
May-91 $12,886 $13,186
Jun-91 $12,882 $13,200
Jul-91 $13,016 $13,342
Aug-91 $13,281 $13,592
Sep-91 $13,497 $13,823
Oct-91 $13,662 $13,979
Nov-91 $13,821 $14,143
Dec-91 $14,168 $14,489
Jan-92 $14,005 $14,343
Feb-92 $14,031 $14,397
Mar-92 $13,946 $14,338
Apr-92 $14,094 $14,469
May-92 $14,306 $14,676
Jun-92 $14,513 $14,888
Jul-92 $14,796 $15,165
Aug-92 $14,955 $15,340
Sep-92 $15,181 $15,552
Oct-92 $14,982 $15,361
Nov-92 $14,894 $15,293
Dec-92 $15,097 $15,494
Jan-93 $15,388 $15,784
Feb-93 $15,604 $16,020
Mar-93 $15,670 $16,080
Apr-93 $15,788 $16,207
May-93 $15,726 $16,159
Jun-93 $15,969 $16,395
Jul-93 $15,985 $16,429
Aug-93 $16,226 $16,680
Sep-93 $16,285 $16,752
Oct-93 $16,311 $16,781
Nov-93 $16,223 $16,701
Dec-93 $16,292 $16,766
Jan-94 $16,461 $16,933
Feb-94 $16,205 $16,692
Mar-94 $15,959 $16,458
Apr-94 $15,833 $16,347
May-94 $15,839 $16,364
Jun-94 $15,841 $16,375
Jul-94 $16,031 $16,578
Aug-94 $16,089 $16,630
Sep-94 $15,966 $16,497
Oct-94 $15,959 $16,500
Nov-94 $15,869 $16,418
Dec-94 $15,910 $16,480
Jan-95 $16,153 $16,754
Feb-95 $16,441 $17,074
Mar-95 $16,524 $17,168
Apr-95 $16,700 $17,365
May-95 $17,140 $17,861
Jun-95 $17,253 $17,978
Jul-95 $17,252 $17,990
Aug-95 $17,404 $18,137
Sep-95 $17,502 $18,260
Oct-95 $17,707 $18,464
Nov-95 $17,908 $18,695
Dec-95 $18,090 $18,885
Jan-96 $18,229 $19,047
Feb-96 $18,029 $18,834
Mar-96 $17,915 $18,743
Apr-96 $17,860 $18,684
May-96 $17,838 $18,674
Jun-96 $18,039 $18,857
Jul-96 $18,097 $18,894
Aug-96 $18,041 $18,871
Sep-96 $18,346 $19,188
Oct-96 $18,742 $19,615
Nov-96 $19,029 $19,935
Dec-96 $18,831 $19,713
Jan-97 $18,850 $19,777
Feb-97 $18,878 $19,768
Mar-97 $18,642 $19,561
Apr-97 $18,922 $19,834
May-97 $19,092 $20,008
Jun-97 $19,277 $20,219
Jul-97 $19,763 $20,771
Aug-97 $19,575 $20,575
Sep-97 $19,857 $20,877
Oct-97 $20,163 $21,213
Nov-97 $20,199 $21,261
Dec-97 $20,411 $21,476
Jan-98 $20,717 $21,851
Feb-98 $20,666 $21,764
Mar-98 $20,694 $21,821

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.

(+) NOTE: The fund's benchmark was the Merrill Lynch 1- to 10-Year Treasury
Index from inception through July 1996, when the benchmark was changed to the
Salomon Brothers 3- to 10-Year Treasury Index.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 18 13
Weighted Average Maturity 6.1 years 5.8 years
Average Duration 4.4 years 4.4 years
Expense Ratio (Investor Class) 0.51% 0.51%

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Investor Class 5.29%
Advisor Class 5.04%

Yield is defined in the Glossary on page 33.

ANNUAL REPORT INTERMEDIATE-TERM TREASURY 9

INTERMEDIATE-TERM TREASURY

MANAGEMENT Q & A

An interview with Bob Gahagan, a portfolio manager on the Benham Treasury
funds investment team. On September 1, 1997, Bob replaced Dave Schroeder as
primary manager of Intermediate-Term Treasury. Although Dave continues to be
involved with fund decisions, his efforts are now concentrated on other funds,
including Long-Term Treasury.

HOW DID THE FUND PERFORM DURING THE FISCAL YEAR?

Intermediate-Term Treasury continued to provide solid returns, outperforming
the average intermediate U.S. Treasury fund. For the fiscal year ended March 31,
1998, the fund returned 11.04%, compared with the 10.89% average return of the
12 "Intermediate U.S. Treasury Funds" tracked by Lipper Analytical Services and
the 11.55% return of its benchmark, the Salomon Brothers 3- to 10-Year Treasury
Index. (See the Total Returns table on the previous page for other fund
performance comparisons.)

WHAT CHANGES DID YOU MAKE TO INTERMEDIATE-TERM TREASURY'S PORTFOLIO?

The most significant change was a sector allocation. During the first
quarter this year, we increased holdings of government agency securities to
nearly 30% of assets. At that time, a flood of issuance made agencies attractive
versus comparable-maturity Treasurys. We also added some high-coupon callable
Treasurys when their yields became competitive with agencies.

[bar graph - data below]

INTERMEDIATE-TERM TREASURY'S ONE-YEAR RETURNS FOR THE PAST TEN YEARS(1) (Periods
ended March 31)

Intermediate-Term
Treasury Fund Benchmark(2)
3/89 2.78% 4.19%
3/90 10.61% 11.27%
3/91 11.59% 11.94%
3/92 9.92% 10.49%
3/93 12.35% 12.15%
3/94 1.84% 2.35%
3/95 3.54% 4.31%
3/96 8.42% 9.18%
3/97 4.05% 7.14%
3/98 11.04% 11.55%

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

(1) Investor Class.

(2) The fund's benchmark was the Merrill Lynch 1- to 10-Year Treasury Index from
inception through July 1996, when the benchmark was changed to the Salomon
Brothers 3- to 10-Year Treasury Index.

10 INTERMEDIATE-TERM TREASURY AMERICAN CENTURY INVESTMENTS

INTERMEDIATE-TERM TREASURY

WHAT WAS BEHIND THE UNUSUALLY LARGE AGENCY ISSUANCE?

Several government agencies instituted "Benchmark Note" or "Reference Note"
programs during the first quarter. Unlike the Treasury Department, securities
sold by the Federal Home Loan Bank and other government agencies have been
auctioned sporadically. The basic idea behind Reference Note programs is to have
regularly scheduled auctions like the Treasury Department. Ideally, this will
provide a steady stream of funding for the agencies, making agency securities
more liquid (easier to buy and sell), because larger amounts are available. The
programs should also benefit market participants by providing a reasonably
predictable stream of new securities for comparison with existing ones, which is
why they are called "Benchmark" or "Reference note" programs. Overall, the
programs have been well-received.

IN BASIC TERMS, WHAT IS DURATION AND HOW DID YOU MANAGE IT DURING THE FISCAL
YEAR?

Simply stated, duration is one of the more important tools we have at our
disposal to add value. Duration measures the approximate percentage price change
of a bond portfolio given a 1% change in interest rates. So when we say that we
manage a fund's duration, that means we are managing how a fund's price changes
as interest rates change.

For example, the longer a fund's duration, the more the fund's price will
rise when rates fall, and the more it will fall when rates rise. Conversely, a
shorter duration means a bond portfolio's price fluctuates less when rates
change. So, ideally you want to have a longer duration when interest rates are
falling and a shorter duration when rates are rising.

However, it is very difficult to accurately predict the long-term direction
of interest rates. That's why we maintain a fairly conservative stance, making
small adjustments when we feel market conditions are right. We generally keep
the fund's duration within 10% of its benchmark. This stance prevents unwanted
volatility in returns compared with the underlying portion of the market we are
trying to match.

In line with this policy and the conflicting economic environment, the
changes we made to duration were minor adjustments, allowing us to capture a bit
of extra return here and there.

WHAT IMPACT HAS ASIAN ECONOMIC TURMOIL HAD ON U.S. ECONOMIC GROWTH AND
INFLATION?

Though evidence suggests that negative effects on U.S. economic growth have
been limited, we have seen fewer U.S. exports and cheaper foreign goods. In the
face of increased competition from foreign goods, U.S. companies have kept
prices static in order to remain competitive.

According to the government's initial estimate, exported goods during the
first quarter of this year fell by the largest amount since the third quarter of
1982. However, consumer spending was at its strongest pace in six years. So to
date, the problems overseas have made only a minor dent in the U.S. economy.

[pie charts]

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 3/31/98)
Treasury Securities 70%
Agency Securities 30%

PORTFOLIO COMPOSITION BY SECURITY TYPE (as of 9/30/97)
Treasury Notes 78%
Treasury Bonds 22%

ANNUAL REPORT INTERMEDIATE-TERM TREASURY 11

INTERMEDIATE-TERM TREASURY

WHAT IS THE OUTLOOK FOR INTEREST RATES?

While it's possible rates could go lower, we think the majority of the
decline in yields is already behind us. We think economic growth would have to
slow significantly to get bond prices moving higher again, and a slowdown of
that magnitude doesn't seem likely in the near future.

Given the pace of growth and tight labor markets, we believe the Federal
Reserve (the Fed) is more likely to raise interest rates than to lower them.
With this in mind, and because inflation is so low, we believe short-term
interest rates are likely to rise more than long-term interest rates.

WHAT IS YOUR PORTFOLIO STRATEGY GOING FORWARD?

Currently, we are keeping the Intermediate-Term Treasury's duration roughly
in line with its benchmark, yet positioned so that the fund should benefit the
most if the difference between short- and long-term interest rates continues to
narrow. We will likely shorten duration if five-year Treasury yields fall close
to 5.40% and lengthen if yields rise close to 5.90%.

We also plan on reevaluating the agency securities in the portfolio due to
the higher yields they tend to offer over comparable-maturity Treasury
securities. We will also examine the amount of callable versus non-callable
securities in the portfolio and may increase our callable holdings if interest
rates stabilize further.

[pie chart]

COMPOSITION OF AGENCY HOLDINGS (as of 3/31/98)
Federal Farm Credit
Bank 50%
Federal Home Loan
Bank 26%
Tennessee Valley
Authority 24%

12 INTERMEDIATE-TERM TREASURY AMERICAN CENTURY INVESTMENTS

SCHEDULE OF INVESTMENTS
INTERMEDIATE-TERM TREASURY

MARCH 31, 1998

Principal Amount Value
- --------------------------------------------------------------------------------

U.S. TREASURY SECURITIES

$27,500,000 U.S. Treasury Notes, 6.625%,
7/31/01 $ 28,293,100

24,600,000 U.S. Treasury Notes, 7.875%,
8/15/01 26,241,312

29,000,000 U.S. Treasury Notes, 6.375%,
9/30/01 29,640,320

7,500,000 U.S. Treasury Notes, 6.25%,
10/31/01 7,638,825

11,000,000 U.S. Treasury Notes, 6.125%,
12/31/01 11,162,030

25,500,000 U.S. Treasury Notes, 6.25%,
8/31/02 26,049,270

23,000,000 U.S. Treasury Notes, 5.75%,
8/15/03 23,071,760

17,000,000 U.S. Treasury Notes, 5.50%,
2/15/08 16,795,150

7,000,000 U.S. Treasury Bonds, 7.625%,
2/15/02 7,431,690

22,900,000 U.S. Treasury Bonds, 13.25%,
5/15/14 36,456,571

52,000,000 U.S. Treasury STRIPS, 5.43%,
11/15/01(1) 42,475,819
--------------------

TOTAL U.S. TREASURY SECURITIES-68.9% 255,255,847
--------------------
(Cost $254,740,793)

U.S. GOVERNMENT AGENCY SECURITIES

20,000,000 FFCB, MTN, 6.10%, 11/4/04 20,279,801

20,000,000 FFCB, MTN, 6.14%, 11/22/04 20,324,600

15,000,000 FFCB, MTN, 5.90%, 1/10/05 14,914,950

13,750,000 FHLB, 6.03%, 11/26/02 13,876,088

15,000,000 FHLB, MTN, 6.14%, 12/23/04 15,208,350

25,000,000 TVA, 6.375%, 6/15/05 25,612,000
--------------------

TOTAL U.S. GOVERNMENT
AGENCY SECURITIES-29.7% 110,215,789
--------------------
(Cost $109,345,597)

Principal Amount Value
- --------------------------------------------------------------------------------

TEMPORARY CASH INVESTMENTS-1.4%

Repurchase Agreement, Merrill Lynch & Co., Inc.,
(U.S. Treasury obligations), in a joint trading
account at 5.90%, dated 3/31/98, due
4/1/98 (Delivery value $5,300,869) $ 5,300,000
--------------------
(Cost $5,300,000)

TOTAL INVESTMENT SECURITIES-100.0% $370,771,636
====================
(Cost $369,386,390)

NOTES TO SCHEDULE OF INVESTMENTS

FFCB = Federal Farm Credit Bank

FHLB = Federal Home Loan Bank

MTN = Medium Term Note

STRIPS = Separate Trading of Registered Interest and Principal of Securities

TVA = Tennessee Valley Authority

(1) Zero-coupon bond. The effective yield to maturity at purchase is indicated.
Zero-coupon bonds are purchased at a substantial discount from their value
at maturity.

See Notes to Financial Statements

ANNUAL REPORT INTERMEDIATE-TERM TREASURY 13

<TABLE>
<CAPTION>
LONG-TERM TREASURY

<S> <C> <C> <C> <C> <C>
Long-Term Treasury .................. 8.00% 20.48% 11.96% 8.31% 8.66%

Fund Benchmark(+) ................... 8.12% 20.65% 12.55% 9.05% 9.68%(2)

Average General U.S.
Treasury Fund(3) .................... 6.14% 14.82% 9.41% 7.39% 7.77%(2)

Fund's Ranking Among
General U.S. Treasury Funds(3) ...... -- 3 out of 18 1 out of 16 3 out of 11 2 out of 9(2)
- -------------------------------------------------------------------------------------------------------------------
ADVISOR CLASS (inception 1/12/98)

Long-Term Treasury .................................................................................. -1.34%

Salomon Long-Term Treasury/Agency Index ............................................................. -0.42%(4)
</TABLE>

(1) Returns for periods less than one year are not annualized.

(2) Since 9/30/92, the date nearest the class' inception for which data are
available.

(3) According to Lipper Analytical Services.

(4) Since 1/31/98, the date nearest the class' inception for which data are
available.

See pages 32-33 for more information about returns, the comparative index and
Lipper fund rankings.

[mountain graph - data below]

GROWTH OF $10,000 OVER LIFE OF FUND (Investor Class) $10,000 investment made
9/30/92*

Value on 3/31/98
Long-Term Treasury Fund Benchmark+
Sep-92 $10,000 $10,000
Oct-92 $9,774 $9,790
Nov-92 $9,854 $9,835
Dec-92 $10,110 $10,108
Jan-93 $10,385 $10,396
Feb-93 $10,773 $10,749
Mar-93 $10,767 $10,775
Apr-93 $10,828 $10,855
May-93 $10,852 $10,891
Jun-93 $11,320 $11,354
Jul-93 $11,538 $11,544
Aug-93 $12,080 $12,020
Sep-93 $12,114 $12,059
Oct-93 $12,221 $12,148
Nov-93 $11,877 $11,834
Dec-93 $11,893 $11,870
Jan-94 $12,182 $12,154
Feb-94 $11,604 $11,656
Mar-94 $11,075 $11,143
Apr-94 $10,894 $11,010
May-94 $10,789 $10,934
Jun-94 $10,692 $10,827
Jul-94 $11,013 $11,198
Aug-94 $10,970 $11,111
Sep-94 $10,618 $10,760
Oct-94 $10,584 $10,720
Nov-94 $10,645 $10,788
Dec-94 $10,793 $10,953
Jan-95 $11,046 $11,237
Feb-95 $11,342 $11,558
Mar-95 $11,434 $11,659
Apr-95 $11,621 $11,865
May-95 $12,479 $12,780
Jun-95 $12,633 $12,929
Jul-95 $12,404 $12,720
Aug-95 $12,665 $13,005
Sep-95 $12,908 $13,247
Oct-95 $13,260 $13,616
Nov-95 $13,586 $13,965
Dec-95 $13,950 $14,338
Jan-96 $13,927 $14,333
Feb-96 $13,244 $13,638
Mar-96 $12,973 $13,369
Apr-96 $12,735 $13,145
May-96 $12,697 $13,077
Jun-96 $12,951 $13,358
Jul-96 $12,959 $13,358
Aug-96 $12,793 $13,191
Sep-96 $13,139 $13,565
Oct-96 $13,667 $14,119
Nov-96 $14,125 $14,571
Dec-96 $13,762 $14,216
Jan-97 $13,664 $14,131
Feb-97 $13,672 $14,118
Mar-97 $13,319 $13,775
Apr-97 $13,622 $14,096
May-97 $13,782 $14,262
Jun-97 $14,042 $14,534
Jul-97 $14,856 $15,388
Aug-97 $14,479 $14,956
Sep-97 $14,859 $15,371
Oct-97 $15,348 $15,891
Nov-97 $15,511 $16,099
Dec-97 $15,795 $16,362
Jan-98 $16,125 $16,691
Feb-98 $15,985 $16,566
Mar-98 $16,044 $16,620

Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

The line representing the fund's total return includes operating expenses (such
as transaction costs and management fees) that reduce returns, while the index's
total return line does not.

* 9/30/92 is the date nearest the class' inception for which comparable
performance data exist. The fund's actual inception date is 9/8/92.

PORTFOLIO AT A GLANCE
3/31/98 3/31/97
Number of Securities 8 8
Weighted Average Maturity 20.3 years 20.9 years
Average Duration 10.5 years 10.1 years
Expense Ratio (Investor Class) 0.54% 0.60%

YIELD AS OF MARCH 31, 1998
30-DAY
SEC
YIELD
Investor Class 5.55%
Advisor Class 5.30%

Yield is defined in the Glossary on page 33.

(+) NOTE: The fund's benchmark was the Lehman Long-Term Government Securities
Index from inception through July 1996, when the benchmark was changed to the
Salomon Brothers Long-Term Treasury/Agency Index.

14 LONG-TERM TREASURY AMERICAN CENTURY INVESTMENTS

LONG-TERM TREASURY

MANAGEMENT Q & A

An interview with Dave Schroeder, a portfolio manager on the Benham Treasury
funds investment team.

HOW DID THE FUND PERFORM FOR THE FISCAL YEAR?

Long-Term Treasury continued to outperform the average general U.S. Treasury
fund, but slightly underperformed its benchmark. For the twelve months ended
March 31, 1998, Long-Term Treasury returned 20.48%, compared with the 14.82%
average return of the 18 "General U.S. Treasury Funds" tracked by Lipper
Analytical Services and the 20.65% return of its benchmark, the Salomon Brothers
Long-Term Treasury/Agency Index. Fund returns are reduced by management expenses
and transaction costs, while the benchmark returns are not. (See the Total
Returns table on the previous page for other fund performance comparisons.)

WHAT CHANGES DID YOU MAKE TO THE FUND'S PORTFOLIO?

From a security selection standpoint, the portfolio remained basically
unchanged. Agency securities comprise 12% of Long-Term Treasury's benchmark and
we are allowed to invest up to 35% of the portfolio in agencies. However, as we
have discussed in previous reports, there are few available agency securities
that we feel offer attractive values and are appropriate choices given Long-Term
Treasury's objectives. So 100% of assets remained in Treasurys.

[bar graph - data below]

LONG-TERM TREASURY'S ONE-YEAR RETURNS SINCE INCEPTION(1)
(Periods ended March 31)

Long-Term
Treasury Fund Benchmark(2)
3/93 7.66% 7.75%
3/94 2.86% 3.41%
3/95 3.25% 4.63%
3/96 13.46% 14.68%
3/97 2.65% 3.04%
3/98 20.48% 20.65%

Past performance is no guarantee of future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost.

(1) Investor Class.

(2) The fund's benchmark was the Lehman Long-Term Government Securities Index
from inception through July 1996, when the benchmark was changed to the
Salomon Brothers Long-Term Treasury/Agency Index.

ANNUAL REPORT LONG-TERM TREASURY 15

LONG-TERM TREASURY

IN BASIC TERMS, WHAT IS DURATION?

Simply stated, duration is one of the more important tools we have at our
disposal to add value. Duration measures the approximate percentage price change
of a bond portfolio for a 1% change in interest rates. So when we say that we
manage a fund's duration, that means we are managing how a fund's price changes
as interest rates change.

However, it is very difficult to accurately predict the long-term direction
of interest rates. That's why we maintain a fairly conservative stance, making
small adjustments when we feel market conditions are right. We generally keep
the fund's duration within 1% of its benchmark. This stance prevents unwanted
volatility in returns compared with the underlying portion of the market we are
trying to match.

HOW DID YOU MANAGE DURATION DURING THE TWELVE MONTHS?

We lengthened duration to 10.5 years in mid-November when the yield on the
30-year Treasury bond was around 6.2%. At that time, the market believed that
Asian economic turmoil would dampen U.S. economic growth, allowing long-term
interest rates to fall to around 5.5%.

By mid-January, the yield on the 30-year Treasury bond had fallen to 5.63%
as market participants began to believe that interest rates could go even lower.
At that time we shortened duration to 9.8 years because we felt the market was
too optimistic.

WHAT IMPACT HAS ASIAN ECONOMIC TURMOIL HAD ON U.S. ECONOMIC GROWTH AND
INFLATION?

IF EXPORTS DROPPED BY SUCH A LARGE AMOUNT, WHY DID ECONOMIC GROWTH REMAIN
ROBUST?

[pie charts]

PORTFOLIO COMPOSITION BY MATURITY (as of 3/31/98)
10-20 Years 53%
20-25 Years 47%

PORTFOLIO COMPOSITION BY MATURITY (as of 9/30/97)
10-20 Years 40%
20-25 Years 35%
25-30 Years 25%

16 LONG-TERM TREASURY AMERICAN CENTURY INVESTMENTS

LONG-TERM TREASURY

DOES THAT MEAN IT'S SAFE TO DISCOUNT THE IMPACT OF ASIAN ECONOMIC TURMOIL?

WHAT IS THE OUTLOOK FOR INTEREST RATES?

While it's possible rates could go lower, we believe the majority of the
decline in yields is already behind us. We think economic growth would have to
slow significantly to get bond prices moving higher again, and a slowdown of
that magnitude doesn't seem likely in the near future. Continued economic
strength helps establish a floor on how low interest rates can go-the Federal
reserve is reluctant to lower short-term interest rates as long as there's at
least a threat of inflation from higher wages and robust economic growth.

On the other hand, the shrinking budget deficit should help support
fixed-income securities. The Treasury recently announced the elimination of
quarterly three-year note auctions and will auction nominal five-year notes only
once a quarter, rather than each month as they have in the past.

In addition, "real" yields on Treasurys (nominal yields minus the current
rate of inflation) now exceed 4%, compared with a historical average of around
2%. High real yields, a healthy economy and strong dollar attract large global
capital flows to the U.S. bond market.

WHAT IS YOUR PORTFOLIO STRATEGY GOING FORWARD?

We believe long-term Treasury yields will range between 5.75% and 6.25% in
the coming months. We will likely lengthen the fund's duration from its current
stance at 10.5 years if yields rise to 6.25% and shorten duration if yields fall
to around 5.75% or lower.

In addition, we will continue to monitor the Treasury yield curve (a graphic
representation of the difference in yields among short-, intermediate- and
long-term fixed-income securities), looking for areas that should offer higher
expected returns in our most likely scenarios and adding these securities to the
portfolio. We will also likely continue to underweight long-term government
agency securities.

ANNUAL REPORT LONG-TERM TREASURY 17

SCHEDULE OF INVESTMENTS
LONG-TERM TREASURY

MARCH 31, 1998

Principal Amount Value
- --------------------------------------------------------------------------------

U.S. TREASURY SECURITIES

$ 6,250,000 U.S. Treasury Bonds, 13.25%,
5/15/14 $ 9,949,938

4,600,000 U.S. Treasury Bonds, 11.25%,
2/15/15 7,193,158

6,500,000 U.S. Treasury Bonds, 7.25%,
5/15/16 7,405,256

22,500,000 U.S. Treasury Bonds, 8.75%,
5/15/17 29,479,950

7,500,000 U.S. Treasury Bonds, 8.875%,
2/15/19 10,024,500

8,000,000 U.S. Treasury Bonds, 8.125%,
8/15/19 10,008,960

10,000,000 U.S. Treasury Bonds, 8.75%,
8/15/20 13,330,500

13,000,000 U.S. Treasury Bonds, 7.125%,
2/15/23 14,839,110
--------------------

TOTAL INVESTMENT SECURITIES-100.0% $102,231,372
====================
(Cost $92,408,417)

See Notes to Financial Statements

18 LONG-TERM TREASURY AMERICAN CENTURY INVESTMENTS

<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES

SHORT-TERM INTERMEDIATE- TERM LONG-TERM
MARCH 31, 1998 TREASURY TREASURY TREASURY

ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $41,601,991,
$369,386,390, and $92,408,417,
respectively) (Note 3) ......... $ 41,770,222 $ 370,771,636 $ 102,231,372

Cash .............................. 189,480 689,369 225,700

Interest receivable ............... 633,923 4,706,534 1,688,619
------------- ------------- -------------
42,593,625 376,167,539 104,145,691
------------- ------------- -------------
LIABILITIES

Disbursements in excess
of demand deposit cash .......... 69,805 311,155 238,854

Payable for capital
shares redeemed ................. 145,647 483,846 197,420

Accrued management fee
(Note 2) ........................ 17,882 161,120 44,876

Distribution fees payable
(Note 2) ........................ 287 27 46

Service fees payable
(Note 2) ........................ 287 27 46

Dividends payable ................. 24,465 221,694 64,556

Payable for trustees'
fees and expenses ............... 474 707 540

Accrued expenses and
other liabilities ............... 49 167 27
------------- ------------- -------------
258,896 1,178,743 546,365
------------- ------------- -------------
Net Assets ........................ $ 42,334,729 $ 374,988,796 $ 103,599,326
============= ============= =============
NET ASSETS CONSIST OF:

Capital paid in ................... $ 42,356,571 $ 372,525,397 $ 92,236,977

Accumulated undistributed
net realized gain (loss)
on investment transactions ...... (190,073) 1,078,153 1,539,394

Net unrealized appreciation on
investments (Note 3) ............ 168,231 1,385,246 9,822,955
------------- ------------- -------------
$ 42,334,729 $ 374,988,796 $ 103,599,326
============= ============= =============
Investor Class

Net assets ........................ $ 40,874,340 $ 374,860,910 $ 103,381,216

Shares outstanding ................ 4,171,264 35,485,469 9,774,869

Net asset value per share ......... $ 9.80 $ 10.56 $ 10.58

Advisor Class

Net assets ........................ $ 1,460,389 $ 127,886 $ 218,110

Shares outstanding ................ 149,033 12,105 20,623

Net asset value per share ......... $ 9.80 $ 10.56 $ 10.58
</TABLE>

See Notes to Financial Statements

ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES 19

<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS

SHORT-TERM INTERMEDIATE- TERM LONG-TERM
YEAR ENDED MARCH 31, 1998 TREASURY TREASURY TREASURY

INVESTMENT INCOME

Income:

<S> <C> <C> <C>
Interest ........................ $ 2,330,971 $ 21,299,336 $ 8,125,299
------------ ------------ ------------
Expenses (Note 2):

Investment advisory fees ........ 169,057 1,520,464 529,017

Administrative fees ............. 11,573 101,989 41,622

Transfer agency fees ............ 11,510 77,150 66,019

Printing and postage ............ 6,811 34,620 13,674

Trustees' fees and expenses ..... 5,822 11,700 7,334

Custodian fees .................. 8,451 11,267 5,355

Registration and filing fees .... 9,613 11,088 13,035

Auditing and legal fees ......... 2,234 6,260 2,857

Other operating expenses ........ 1,166 5,043 2,288

Organization costs .............. 1,454 -- 1,454

Distribution fees - Advisor Class 1,300 124 90

Service fees - Advisor Class .... 1,300 124 90
------------ ------------ ------------
Total expenses ................ 230,291 1,779,829 682,835

Amount waived ................... (15,245) -- (6,486)
------------ ------------ ------------
Net expenses .................. 215,046 1,779,829 676,349
------------ ------------ ------------
Net investment income ........... 2,115,925 19,519,507 7,448,950
------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)

Net realized gain on investments 65,744 9,644,597 4,166,419

Change in net unrealized
appreciation on investments ... 378,595 6,630,430 12,123,302
------------ ------------ ------------
Net realized and unrealized
gain on investments ........... 444,339 16,275,027 16,289,721
------------ ------------ ------------
Net Increase in Net Assets
Resulting from Operations ....... $ 2,560,264 $ 35,794,534 $ 23,738,671
============ ============ ============
</TABLE>

See Notes to Financial Statements

20 STATEMENTS OF OPERATIONS AMERICAN CENTURY INVESTMENTS

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS

YEARS ENDED MARCH 31, 1998 SHORT-TERM INTERMEDIATE- TERM LONG-TERM
AND MARCH 31, 1997 TREASURY TREASURY TREASURY

Increase (Decrease) in Net Assets 1998 1997 1998 1997 1998 1997

OPERATIONS

<S> <C> <C> <C> <C> <C> <C>
Net investment income ....... $ 2,115,925 $ 1,857,387 $ 19,519,507 $ 18,171,895 $ 7,448,950 $ 7,541,443

Net realized gain (loss)
on investments ............ 65,744 (250,752) 9,644,597 (924,136) 4,166,419 (1,648,291)

Change in net unrealized
appreciation (depreciation)
on investments ............ 378,595 (25,367) 6,630,430 (5,211,554) 12,123,302 (2,530,525)
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations . 2,560,264 1,581,268 35,794,534 12,036,205 23,738,671 3,362,627
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS

From net investment income:

Investor Class ............ (2,089,108) (1,857,387) (19,516,910) (18,170,832) (7,447,009) (7,541,443)

Advisor Class ............. (26,817) -- (2,597) -- (1,941) --

From net realized gains from
investment transactions:

Investor Class ............ -- (314,362) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions ........ (2,115,925) (2,171,749) (19,519,507) (18,170,832) (7,448,950) (7,541,443)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (Note 4)

Net increase (decrease) in
net assets from capital
share transactions ........ 6,036,113 796,586 29,929,571 23,898,911 (39,260,238) 20,007,751
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ............. 6,480,452 206,105 46,204,598 17,764,284 (22,970,517) 15,828,935

NET ASSETS

Beginning of year ........... 35,854,277 35,648,172 328,784,198 311,019,914 126,569,843 110,740,908
------------- ------------- ------------- ------------- ------------- -------------
End of year ................. $ 42,334,729 $ 35,854,277 $ 374,988,796 $ 328,784,198 $ 103,599,326 $ 126,569,843
============= ============= ============= ============= ============= =============
</TABLE>

See Notes to Financial Statements

ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS 21

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION -- American Century Government Income Trust (the Trust) is
registered under the Investment Company Act of 1940 as an open-end diversified
management investment company. American Century -Benham Short-Term Treasury Fund
(Short-Term), American Century - Benham Intermediate-Term Treasury Fund
(Intermediate-Term), and American Century - Benham Long-Term Treasury Fund
(Long-Term) (the Funds) are three of the eight funds issued by the Trust.
Short-Term seeks to earn and distribute the highest level of current income
exempt from state income taxes as is consistent with the preservation of
capital. The Fund intends to pursue its investment objectives by investing
exclusively in securities issued or guaranteed by the U.S. Government.
Intermediate-Term seeks to earn and distribute the highest level of current
income consistent with the conservation of assets and the safety provided by
U.S. Treasury bills, notes, and bonds. The Fund intends to pursue its investment
objectives by investing primarily in U.S. Treasury notes, which carry the direct
full faith and credit pledge of the U.S. government. Long-Term seeks to provide
a consistent and high level of current income exempt from state taxes. The Fund
intends to pursue its investment objectives by investing exclusively in
securities issued or guaranteed by the U.S. Treasury. The Funds are authorized
to issue two classes of shares: the Investor Class and the Advisor Class. The
two classes of shares differ principally in their respective shareholder
servicing and distribution expenses and arrangements. All shares of the Funds
represent an equal pro rata interest in the assets of the class to which such
shares belong, and have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except for class specific expenses and
exclusive rights to vote on matters affecting only individual classes. Sale of
the Advisor Class commenced on October 6, 1997 for Short-Term, October 9, 1997
for Intermediate-Term, and January 12, 1998 for Long-Term. The following
significant accounting policies, related to both classes of Funds, are in
accordance with accounting policies generally accepted in the investment company
industry.

INVESTMENT INCOME -- Interest income is recorded on the accrual basis and
includes accretion of discounts and amortization of premiums.

REPURCHASE AGREEMENTS -- The Funds may enter into repurchase agreements with
institutions that the Funds' investment manager, American Century Investment
Management, Inc. (ACIM), has determined are creditworthy pursuant to criteria
adopted by the Board of Trustees. Each repurchase agreement is recorded at cost.
The Funds require that the collateral, represented by securities, received in a
repurchase transaction be transferred to the custodian in a manner sufficient to
enable the Funds to obtain those securities in the event of a default under the
repurchase agreement. ACIM monitors, on a daily basis, the value of the
securities transferred to ensure the value, including accrued interest, of the
securities under each repurchase agreement is equal to or greater than amounts
owed to the Funds under each repurchase agreement.

JOINT TRADING ACCOUNT -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having management agreements with ACIM, may transfer
uninvested cash balances into a joint trading account. These balances are
invested in one or more repurchase agreements that are collateralized by U.S.
Treasury or Agency obligations.

DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared daily and distributed monthly. Distributions from net realized
gains are declared and paid annually.

At March 31, 1998, accumulated net realized capital loss carryovers of
$185,007 for Short-Term (expiring 2005) may be used to offset future taxable
gains.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and

22 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the period. Actual results could differ from these
estimates.

ADDITIONAL INFORMATION -- Effective January 15, 1998, Funds Distributor,
Inc. (FDI) became the Trust's distributor. Certain officers of FDI are also
officers of the Trust.

- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH RELATED PARTIES

The shareholders of the Funds approved a new management agreement with ACIM
on July 30, 1997, effective August 1, 1997, which replaced the previously
existing contracts between the Funds and Benham Management Corporation and
American Century Services Corporation (ACSC) for advisory, administrative and
transfer agency services. Under the agreement, ACIM provides all services
required by the Funds in exchange for a single, unified management fee per
class. Expenses excluded from this agreement are brokerage, taxes, portfolio
insurance, interest, fees and expenses of the Trustees who are not considered
"interested persons" as defined in the Investment Company Act of 1940 (including
counsel fees) and extraordinary expenses. The annual rate at which this fee is
assessed is determined monthly in a two-step process: First, a fee rate schedule
is applied to the net assets of all of the funds in the Fund's investment
category which are managed by ACIM (the "Investment Category Fee"). The overall
investment objective of each Fund determines its Investment Category. The three
investment categories are: the Money Market Fund Category, the Bond Fund
Category and the Equity Fund Category. The Funds are included in the Bond Fund
Category. Second, a separate fee rate schedule is applied to the net assets of
all of the funds managed by ACIM (the "Complex Fee"). The Investment Category
Fee and the Complex Fee are then added to determine the unified management fee
rate. The management fee is paid monthly by each Fund based on each Fund's
aggregate average daily net assets during the previous month multiplied by the
monthly management fee rate. The annualized Investment Category Fee schedule for
the Funds is as follows:

The annualized Complex Fee schedule (Investor Class) is as follows:

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 23

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

The following expenses, incurred under the new management agreement, were
included in Investment Advisory Fees in the Statements of Operations:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM

Management fees ........... $139,356 $1,230,987 $411,468

Total expenses and the annualized ratio of operating expenses to average net
assets, under the previous agreement, for the four months ended July 31, 1997,
were as follows:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM
Total expenses (net of
amount waived) .......... $73,090 $548,594 $264,701

Ratio of operating expenses
to average net assets ... 0.59% 0.50% 0.59%

Certain officers and trustees of the Trust are also officers and/or
directors, and, as a group, controlling stockholders of American Century
Companies, Inc., the parent of the Trust's investment manager, ACIM, the Trust's
transfer agent,ACSC, and the registered broker-dealer, American Century
Investment Services, Inc.

- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS

Investment transactions, excluding short-term investments, were as follows:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM
PURCHASES
U.S. Treasury and
Agency Obligations ...... $57,680,641 $668,355,595 $68,463,968

PROCEEDS FROM SALES
U.S. Treasury and
Agency Obligations ...... $51,951,708 $659,766,353 $106,848,336

On March 31, 1998, the composition of unrealized appreciation and depreciation
of investment securities based on the aggregate cost of investments for federal
income tax purposes was as follows:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM

Appreciation .............. $168,357 $2,343,586 $9,177,926

Depreciation .............. (126) (1,165,159) (17,534)
------------- -------------- ------------
Net ....................... $168,231 $1,178,427 $9,160,392
============= ============== ============

Federal Tax Cost .......... $41,601,991 $369,593,209 $93,070,980
============= ============== ============

24 NOTES TO FINANCIAL STATEMENTS AMERICAN CENTURY INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS

Transactions in shares of the Funds were as follows (unlimited number of
shares authorized):

<TABLE>
SHORT-TERM INTERMEDIATE-TERM LONG-TERM
Shares Amount Shares Amount Shares Amount
INVESTOR CLASS

Year ended March 31, 1998

<S> <C> <C> <C> <C> <C> <C>
Sold ......................... 2,567,149 $ 25,097,075 14,443,950 $ 151,080,905 9,608,865 $ 98,249,389

Proceeds from shares issued in
connection with acquisition
(Note 5) ................... -- -- 2,112,963 21,794,449 -- --

Issued in reinvestment of
distributions .............. 164,358 1,606,171 1,613,842 16,808,219 663,519 6,690,790

Redeemed ..................... (2,264,205) (22,130,095) (15,351,681) (159,880,431) (14,077,909) (144,419,652)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) ...... 467,302 $ 4,573,151 2,819,074 $ 29,803,142 (3,805,525) $ (39,479,473)
============= ============= ============= ============= ============= =============
Year ended March 31, 1997

Sold ......................... 2,110,951 $ 20,702,093 13,222,087 $ 135,941,496 12,640,532 $ 121,731,884

Issued in reinvestment of
distributions .............. 173,971 1,701,032 1,484,213 15,158,997 703,288 6,721,638

Redeemed ..................... (2,205,268) (21,606,539) (12,410,526) (127,201,582) (11,213,547) (108,445,771)
------------- ------------- ------------- ------------- ------------- -------------
Net increase ................. 79,654 $ 796,586 2,295,774 $ 23,898,911 2,130,273 $ 20,007,751
============= ============= ============= ============= ============= =============
ADVISOR CLASS

Period ended March 31, 1998(1)

Sold ......................... 225,866 $ 2,214,832 11,866 $ 123,904 20,452 $ 217,424

Issued in reinvestment of
distributions .............. 2,637 25,863 239 2,525 171 1,811

Redeemed ..................... (79,470) (777,733) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase ................. 149,033 $ 1,462,962 12,105 $ 126,429 20,623 $ 219,235
============= ============= ============= ============= ============= =============
</TABLE>

(1) Period from October 6, 1997, October 9, 1997, and January 12, 1998
(commencement of sale) to March 31, 1998 for Short-Term, Intermediate-
Term,and Long-Term, respectively.

- --------------------------------------------------------------------------------
5. REORGANIZATION PLAN

On August 29, 1997, Intermediate-Term acquired all of the net assets of the
American Century - Benham Intermediate-Term Government Fund (Intermediate-Term
Government), pursuant to a plan of reorganization approved by the acquired
fund's shareholders on July 30, 1997.

The acquisition was accomplished by a tax-free exchange of 2,112,963 shares
of Intermediate-Term for 2,245,781 shares of Intermediate-Term Government,
outstanding on August 29, 1997. The net assets of Intermediate-Term and
Intermediate-Term Government immediately before the acquisitions were
$325,428,315 and $21,794,449, respectively. Intermediate-Term Government's
unrealized depreciation of $59,574 was combined with that of Intermediate-Term.
Immediately after the acquisition, the combined net assets of Intermediate-Term
(the surviving fund for purposes of maintaining the financial statements and
performance history in the post-reorganization fund) were $347,222,764.

Intermediate-Term acquired capital loss carryforwards of approximately
$119,591. These acquired capital loss carryforwards are subject to limitations
on their use under the Internal Revenue Code, as amended.

ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS 25

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SHORT-TERM TREASURY

For a Share Outstanding Throughout the Years Ended March 31 (except as noted)

Investor Advisor
Class Class
1998 1997 1996 1995 1994 1998(1)
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 9.68 $ 9.84 $ 9.73 $ 9.86 $ 10.04 $ 9.80
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations

Net Investment Income ...... 0.53 0.52 0.53 0.50 0.36 0.25

Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.12 (0.07) 0.11 (0.13) (0.14) --
---------- ---------- ---------- ---------- ---------- ----------
Total From Investment
Operations ................. 0.65 0.45 0.64 0.37 0.22 0.25
---------- ---------- ---------- ---------- ---------- ----------
Distributions

From Net Investment
Income ..................... (0.53) (0.52) (0.53) (0.50) (0.36) (0.25)

From Net Realized
Capital Gains .............. -- (0.09) -- -- (0.03) --

In Excess of Net
Realized Gains ............. -- -- -- -- (0.01) --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ........ (0.53) (0.61) (0.53) (0.50) (0.40) (0.25)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value,

End of Period ................ $ 9.80 $ 9.68 $ 9.84 $ 9.73 $ 9.86 $ 9.80
========== ========== ========== ========== ========== ==========
Total Return(2) ............ 6.89% 4.62% 6.71% 3.85% 2.16% 2.51%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets ........ 0.55% 0.61% 0.67% 0.67% 0.58% 0.78%(3)

Ratio of Net Investment Income
to Average Net Assets ........ 5.45% 5.26% 5.39% 5.22% 3.53% 5.20%(3)

Portfolio Turnover Rate ...... 140% 234% 224% 141% 262% 140%

Net Assets, End
of Period (in thousands) ..... $ 40,874 $ 35,854 $ 35,648 $ 56,090 $ 24,929 $ 1,460
</TABLE>

(1) October 6, 1997 (commencement of sale) through March 31, 1998.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.

(3) Annualized.

See Notes to Financial Statements

26 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE-TERM TREASURY

For a Share Outstanding Throughout the Years Ended March 31 (except as noted)

Investor Advisor
Class Class
1998 1997 1996 1995 1994 1998(1)
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 10.06 $ 10.24 $ 9.99 $ 10.18 $ 10.73 $ 10.42
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations

Net Investment Income ...... 0.59 0.58 0.58 0.53 0.48 0.26

Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 0.50 (0.18) 0.25 (0.19) (0.27) 0.14
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ................. 1.09 0.40 0.83 0.34 0.21 0.40
----------- ----------- ----------- ----------- ----------- -----------
Distributions

From Net Investment
Income ..................... (0.59) (0.58) (0.58) (0.53) (0.48) (0.26)

From Net Realized
Capital Gains .............. -- -- -- -- (0.06) --

In Excess of Net Realized
Capital Gains .............. -- -- -- -- (0.22) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........ (0.59) (0.58) (0.58) (0.53) (0.76) (0.26)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,

End of Period ................ $ 10.56 $ 10.06 $ 10.24 $ 9.99 $ 10.18 $ 10.56
=========== =========== =========== =========== =========== ===========
Total Return(2) ............ 11.04% 4.05% 8.42% 3.54% 1.85% 3.90%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets ........ 0.51% 0.51% 0.53% 0.53% 0.51% 0.77%(3)

Ratio of Net Investment Income
to Average Net Assets ........ 5.63% 5.72% 5.65% 5.35% 4.50% 5.28%(3)

Portfolio Turnover Rate ...... 194%(4) 110% 168% 92% 213% 194%(4)

Net Assets, End
of Period (in thousands) ..... $ 374,861 $ 328,784 $ 311,020 $ 305,353 $ 351,369 $ 128
</TABLE>

(1) October 9, 1997 (commencement of sale) through March 31, 1998.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.

(3) Annualized.

(4) Purchases, sales and market value amounts for Benham Intermediate-Term
Government prior to the merger were excluded from the portfolio turnover
calculation. See Note 5 in notes to financial statements.

See Notes to Financial Statements

ANNUAL REPORT FINANCIAL HIGHLIGHTS 27

<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
LONG-TERM TREASURY

For a Share Outstanding Throughout the Years Ended March 31 (except as noted)

Investor Advisor
Class Class
1998 1997 1996 1995 1994 1998(1)
PER-SHARE DATA

Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period .......... $ 9.32 $ 9.67 $ 9.05 $ 9.38 $ 10.24 $ 10.85
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations

Net Investment Income ...... 0.61 0.60 0.60 0.60 0.63 0.12

Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ............... 1.26 (0.35) 0.62 (0.33) (0.27) (0.27)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ................. 1.87 0.25 1.22 0.27 0.36 (0.15)
----------- ----------- ----------- ----------- ----------- -----------
Distributions

From Net Investment
Income ..................... (0.61) (0.60) (0.60) (0.60) (0.63) (0.12)

From Net Realized
Capital Gains .............. -- -- -- -- (0.45) --

In Excess of Net Realized
Capital Gains .............. -- -- -- -- (0.14) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ........ (0.61) (0.60) (0.60) (0.60) (1.22) (0.12)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,

End of Period ................ $ 10.58 $ 9.32 $ 9.67 $ 9.05 $ 9.38 $ 10.58
=========== =========== =========== =========== =========== ===========
Total Return(2) ............ 20.48% 2.65% 13.46% 3.25% 2.87% (1.34)%

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses
to Average Net Assets ........ 0.54% 0.60% 0.67% 0.67% 0.57% 0.77%(3)

Ratio of Net Investment Income
to Average Net Assets ........ 6.00% 6.28% 5.93% 6.84% 5.89% 5.42%(3)

Portfolio Turnover Rate ...... 57% 40% 112% 147% 200% 57%

Net Assets, End
of Period (in thousands) ..... $ 103,381 $ 126,570 $ 110,741 $ 34,906 $ 18,003 $ 218
</TABLE>

(1) January 12, 1998 (commencement of sale) through March 31, 1998.

(2) Total return assumes reinvestment of dividends and capital gains
distributions, if any. Total returns for periods less than one year are not
annualized.

(3) Annualized.

See Notes to Financial Statements

28 FINANCIAL HIGHLIGHTS AMERICAN CENTURY INVESTMENTS

REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of the American Century Government Income Trust and the
Shareholders of the American Century - Benham Short-Term Treasury Fund, American
Century - Benham Intermediate-Term Treasury Fund, and American Century - Benham
Long-Term Treasury Fund:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the American Century - Benham Short-Term
Treasury Fund, American Century - Benham Intermediate-Term Treasury Fund, and
American Century - Benham Long-Term Treasury Fund (three of the Funds comprising
American Century Government Income Trust) (the Funds) as of March 31, 1998, and
the related statements of operations, statements of changes in net assets, and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The statements of changes in net
assets as of March 31, 1997 and the financial highlights for each of the four
years in the period ended March 31, 1997, were audited by other auditors, whose
report, dated May 2, 1997, expressed an unqualified opinion on those statements

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

Coopers & Lybrand L.L.P.

Kansas City, Missouri
May 12, 1998

ANNUAL REPORT REPORT OF INDEPENDENT ACCOUNTS 29

SHARE CLASS AND RETIREMENT ACCOUNT
INFORMATION

SHARE CLASSES

Until September 2, 1997, the Short-Term, Intermediate-Term and Long-Term
Treasury funds issued one class of fund shares, reflecting the fact that most
investors bought their shares directly from American Century. All investors paid
the same annual unified management fee and did not pay any commissions or other
fees.

Now more shares are purchased through financial intermediaries (who
ordinarily are compensated for the services they provide). In September 1997,
American Century began to offer two classes of shares for Short-, Intermediate-
and Long-Term Treasury funds. One class is for investors buying directly from
American Century, the other is for investors buying through financial
intermediaries.

Both classes of shares represent a pro rata interest in the funds and
generally have the same rights and preferences.

RETIREMENT ACCOUNT INFORMATION

When you plan to withdraw, you may make your election by completing our
Exchange/Redemption form or an IRS Form W-4P. Call American Century for either
form. Your written election is valid for only six months from the date of
receipt at American Century. You may revoke your election at any time by sending
a written notice to us.

30 SHARE CLASS AND RETIREMENT
ACCOUNT INFORMATION AMERICAN CENTURY INVESTMENTS

NOTES

ANNUAL REPORT NOTES 31

BACKGROUND INFORMATION

INVESTMENT PHILOSOPHY & POLICIES

In addition to these principles, each fund has its own investment policies:

SHORT-TERM TREASURY seeks current income by investing primarily in
securities issued by the U.S. Treasury. The fund may also invest up to 35% of
its assets in securities issued by U.S. government agencies. The fund typically
maintains an average maturity of 1-3 years.

INTERMEDIATE-TERM TREASURY seeks current income by investing primarily in
securities issued by the U.S. Treasury. The fund may also invest up to 35% of
its assets in securities issued by U.S. government agencies. The fund typically
maintains an average maturity of 3-10 years.

LONG-TERM TREASURY seeks current income by investing primarily in securities
issued by the U.S. Treasury. The fund may also invest up to 35% of its assets in
securities issued by U.S. government agencies. The fund typically maintains an
average maturity of 20-30 years.

Fund shares are not guaranteed by the U.S. government.

COMPARATIVE INDICES

The indices listed below are used in the report for fund performance
comparisons. They are not investment products available for purchase.

The LEHMAN 1- TO 3-YEAR GOVERNMENT SECURITIES INDEX is an index of U.S.
Treasury and government agency securities with remaining maturities between 1
and 3 years.

The SALOMON BROTHERS 3- TO 10-YEAR TREASURY INDEX is an index of U.S.
Treasury securities with remaining maturities between 3 and 10 years.

The SALOMON BROTHERS LONG-TERM TREASURY/ AGENCY INDEX is an index of U.S.
Treasury and agency securities with remaining maturities greater than 10 years.

LIPPER RANKINGS

LIPPER ANALYTICAL SERVICES, INC. is an independent mutual fund ranking
service that groups funds according to their investment objective. Rankings are
based on average annual returns for each fund in a given category for the
periods indicated. Rankings are not included for periods less than one year.

The Lipper categories for the U.S. Treasury funds are:

SHORT U.S. TREASURY FUNDS (Short-Term Treasury) --funds that invest at least
65% of assets in U.S. Treasury bills, notes and bonds with average maturities of
less than three years.

INTERMEDIATE U.S. TREASURY FUNDS (Intermediate-Term Treasury)--funds that
invest at least 65% of assets in U.S. Treasury bills, notes and bonds with
average maturities of 5-10 years.

GENERAL U.S. TREASURY FUNDS (Long-Term Treasury)--funds that invest at least
65% of assets in U.S. Treasury bills, notes and bonds.

- --------------------------------------------------------------------------------
INVESTMENT TEAM LEADERS
- --------------------------------------------------------------------------------
Portfolio Managers Newlin Rankin, Bob Gahagan,
Dave Schroeder
- --------------------------------------------------------------------------------

32 BACKGROUND INFORMATION AMERICAN CENTURY INVESTMENTS

GLOSSARY

RETURNS

* TOTAL RETURN figures show the overall percentage change in the value of a
hypothetical investment in the fund and assume that all of the fund's
distributions are reinvested.

YIELDS

* 30-DAY SEC YIELD represents net investment income earned by the fund over a
30-day period, expressed as an annual percentage rate based on the fund's share
price at the end of the 30-day period. The SEC yield should be regarded as an
estimate of the fund's rate of investment income, and it may not equal the
fund's actual income distribution rate, the income paid to a shareholder's
account, or the income reported in the fund's financial statements.

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by a fund on a
given date.

INVESTMENT TERMS

* COUPON--the stated interest rate of a security.

SECURITY TYPES

* ZERO-COUPON BONDS (ZEROS)--bonds that make no periodic interest payments.
Instead, they are sold at a deep discount and then redeemed for their full face
value at maturity. When held to maturity, a zero's entire return comes from the
difference between its purchase price and its value at maturity. The funds
typically only invest in zeros issued by the U.S. Treasury.

ANNUAL REPORT GLOSSARY 33

[american century logo(reg.sm)]
American
Century(reg.tm)

P.O. BOX 419200
KANSAS CITY, MISSOURI
64141-6200

INVESTOR SERVICES:
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 816-444-3485

FAX: 816-340-7962

INTERNET: WWW.AMERICANCENTURY.COM

AMERICAN CENTURY GOVERNMENT INCOME TRUST

INVESTMENT MANAGER
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
KANSAS CITY, MISSOURI

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