AMERICAN CENTURY GOVERNMENT INCOME TRUST, N-30D, 1998-11-24

AMERICAN CENTURY GOVERNMENT INCOME TRUST
N-30D, 1998-11-24

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[front cover] September 30, 1998

SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY

[graphic of stairs]

BENHAM GROUP
- ------------------------------------
CAPITAL PRESERVATION
GOVERNMENT AGENCY

[american century logo(reg.sm)]
American
Century
[inside front cover]

A Note from the Founder
- --------------------------------------------------------------------------------

On our 40th anniversary, I would personally like to express my profound
appreciation for the confidence you have shown in American Century. We are
grateful for the opportunity to manage your money, and we will do our utmost to
continue to meet your expectations and justify your confidence in us.

I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.

Sincerely,
/s/James E. Stowers

About our New Report Design
- --------------------------------------------------------------------------------

Why We Changed

We're trying hard to be reader-friendly. Our reports contain a lot of very good
information, from fund statistics and financials to Q&A's with fund managers. We
hope the new design will make the reports more interesting and understandable
while helping you keep abreast of your fund's strategy and performance.

What's New

The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.

New features include:

* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.

THE BOTTOM LINE.

The new design actually costs slightly less than the old one. We reallocated
costs and eliminated a cover letter and the envelope that previously came with
your report enclosed. This not only saves money, but reduces the number of
mailing pieces you receive.

The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.

We believe we've come up with a more interesting, informative and user-friendly
publication.

We hope you enjoy it.

[left margin]

Benham Group
Capital Preservation
(CPFXX)

Benham Group
Government Agency
(BGAXX)

[40 Years logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

Our Message to You
- --------------------------------------------------------------------------------
/photo of James E. Stowers III and James E. Stowers, Jr./
James E. Stowers III, seated, with James E. Stowers, Jr.

Money market funds such as Benham Capital Preservation and Benham
Government Agency reaffirmed their value during the six months ended September
30, 1998, when global economic and financial conditions worsened. Stock markets
worldwide suffered sharp declines, while bonds produced positive returns and
money market funds continued to be a stable investment.

This volatile market environment illustrated the importance of a
diversified investment portfolio. Allocating your assets among stocks, bonds,
and money market funds can help weatherproof your portfolio against dramatic
changes in the economic or investment climate.

Amid the recent turbulence, Benham Capital Preservation and Benham
Government Agency continued to perform well. Both funds provided yields and
total returns that exceeded the averages of their respective peer groups.

In one respect, however, money market funds were affected by the market
turmoil. The volume of money pouring into money market securities drove down
yields. At the same time, the threat of global economic weakness caused interest
rates to decline. On September 29, 1998, the Federal Reserve acknowledged the
global slowdown and cut its bellwether federal funds rate for the first time in
almost three years. Two weeks later, the Fed cut the rate again, providing a
significant psychological boost to investors as well as to the U.S. economy.

The rate cuts by the Fed and declining interest rates in general make it
likely that money market fund yields will trend downward in the coming months.
However, money fund yields should still keep pace or remain ahead of inflation
because the threat of an economic downturn is likely to hold inflation in check.

On the corporate front, we have a substantial effort underway to prepare
American Century's computer systems for the year 2000 (Y2K). Our team of
technology professionals is working to address Y2K-related issues. Through the
rest of 1998 and 1999, we will be extensively testing our systems, including
those involved with dividend payments, to verify the accuracy of dividend
calculations and distributions.

Finally, we hope you like the new design of this report. It's intended to
make the important information you need about your fund easier to find and read.

We appreciate your investment with American Century.

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

[right margin]

Table of Contents
Report Highlights ....................................................... 2
Services Update ......................................................... 3
CAPITAL PRESERVATION
Performance Information ................................................. 4
Management Q&A .......................................................... 5
Portfolio Composition by
Security Type ........................................................... 5
Portfolio Composition by
Maturity ................................................................ 6
Schedule of Investments ................................................. 7
GOVERNMENT AGENCY
Performance Information ................................................. 8
Management Q&A .......................................................... 9
Portfolio Composition by
Security Type ........................................................... 9
Portfolio Composition by
Maturity ................................................................ 10
Schedule of Investments ................................................. 11
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities ............................................................. 12
Statements of Operations ................................................ 13
Statements of Changes
in Net Assets ........................................................... 14
Notes to Financial
Statements .............................................................. 15
Financial Highlights .................................................... 18
OTHER INFORMATION
Retirement Account
Information ............................................................. 20
Background Information
Investment Philosophy
and Policies ......................................................... 21
Comparative Indices .................................................. 21
Lipper Rankings ...................................................... 21
Investment Team
Leaders .............................................................. 21
Glossary ................................................................ 22

www.americancentury.com 1

Report Highlights
- --------------------------------------------------------------------------------

MARKET PERSPECTIVE

* Money market yields declined, reflecting heavy demand from investors moving
money out of stocks, as well as the belief that the Federal Reserve (the
U.S. central bank) would cut interest rates by at least 50 basis points
(0.50%) to stimulate the U.S. economy.

* The worldwide demand for U.S. government money market paper caused the
yields for those securities to drop below the federal funds rate, a key
short-term interest rate benchmark.

* On September 29, the Fed cut the federal funds rate for the first time since
1995. Two weeks later, the Fed cut the rate again. At least one or two more
interest rate cuts are priced into money market yields. Falling rates will
affect all U.S. money funds and cash instruments.

CAPITAL PRESERVATION

* Capital Preservation performed well, providing investors with a higher yield
and total return than the average U.S. Treasury money market fund, according
to Lipper Analytical Services.

* As the interest rate outlook changed, we repositioned the portfolio to lock
in relatively higher yields. We extended the fund's weighted average
maturity (WAM) by buying longer-maturity securities, including Treasury
notes. Notes didn't attract as much demand as Treasury bills, so their
yields were relatively high.

* We were also very effective in our use of a short-term strategy known as a
"dollar roll." We employed it when it gave us a higher yield than a
comparable Treasury security. Dollar rolls complemented our investments in
longer maturity securities.

* In anticipation of falling interest rates, we'll continue to keep the
portfolio's WAM on the long side. We'll do our best to maintain the fund's
yield, but we expect Capital Preservation's yield to decline as older,
higher-yielding securities mature.

GOVERNMENT AGENCY

* Government Agency performed well, providing investors with a higher yield
and total return than the average U.S. government money market fund,
according to Lipper Analytical Services.

* As the interest rate outlook changed, we repositioned the portfolio to try
to lock in relatively higher yields. We extended the fund's weighted average
maturity (WAM) by buying more securities with six-month maturities.

* Government Agency invested primarily in Federal Home Loan Bank (FHLB)
securities. The relatively large supply of FHLB paper helped keep its yields
attractive compared with other agency securities.

* In anticipation of falling interest rates, we'll continue to keep the
portfolio's WAM on the long side. We'll do our best to maintain the fund's
yield, but we expect Government Agency's yield to decline as older,
higher-yielding securities mature.

[left margin]

CAPITAL PRESERVATION
(CPFXX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 2.48%*
1 Year 5.05%
NET ASSETS: $3.2 billion
7-DAY CURRENT YIELD: 4.72%
INCEPTION DATE: 10/13/72

GOVERNMENT AGENCY
(BGAXX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 2.54%*
1 Year 5.17%
NET ASSETS: $499.3 million
7-DAY CURRENT YIELD: 4.98%
INCEPTION DATE: 12/5/89

* Not annualized.

See Total Returns on pages 4 and 8.
Investment terms are defined in the Glossary on page 22.

2 1-800-345-2021

Services Update
- --------------------------------------------------------------------------------

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

CAN I MAKE DIRECT DEPOSITS INTO MY MONEY MARKET FUND?

Yes. Give us a call, and we can send you the information you need to set up
direct deposit of your paycheck, Social Security check, Treasury Direct interest
payment, military allotment, or payments from other government agencies.

WHAT IS THE HOLDING PERIOD ON NEW DEPOSITS INTO MY ACCOUNT?

Generally there is an eight-business-day holding period for deposited funds
(initial investments in a new account are held for 15 calendar days). There is a
one-day holding period for U.S. Treasury checks, money orders, and travelers'
checks.

IS THERE AN EASY WAY TO MOVE MONEY FROM MY MONEY MARKET ACCOUNT INTO MY STOCK
AND BOND FUND ACCOUNTS ON A REGULAR BASIS, FOR DOLLAR-COST-AVERAGING PURPOSES?

Yes. Our "Automatic Exchange" plan allows regularly scheduled automatic
transfers from your American Century money market fund into any of your
variable-price American Century stock or bond funds. You can arrange for this
service with a phone call.

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

If you are exchanging from your money market fund into your bond or stock
fund, there is no limit. However, there is a limit of six exchanges per calendar
year out of your bond and stock funds.

Exchanges can be made by:

* calling an Investor Services Representative at 1-800-345-2021

* calling our Automated Information Line at 1-800-345-8765*

* writing us a letter

* visiting our Web site at
www.americancentury.com*

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

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

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).

[right margin]

ACCESSING YOUR MONEY. . .

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. WE CAN ALSO MAKE
AUTOMATIC DEPOSITS FROM YOUR MONEY MARKET FUND TO YOUR BANK ACCOUNT.

* Requires shareholder authorization.

www.americancentury.com 3

Capital Preservation--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 10/13/72)
CAPITAL 90-DAY U.S. U.S. TREASURY MONEY MARKET FUNDS(2)
PRESERVATION TREASURY BILL INDEX AVERAGE RETURN FUND'S RANKING
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ............. 2.48% 2.48% 2.38% --
1 YEAR .................. 5.05% 5.11% 4.85% 15 OUT OF 90
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................. 4.96% 5.15% 4.83% 17 OUT OF 80
5 YEARS ................. 4.64% 4.96% 4.53% 17 OUT OF 66
10 YEARS ................ 5.18% 5.41% 5.15% 7 OUT OF 19
</TABLE>

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

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

See pages 21-22 for more information about returns, the comparative index, and
Lipper fund rankings.

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 18 14
WEIGHTED AVERAGE
MATURITY 76 DAYS 48 DAYS
EXPENSE RATIO 0.48%* 0.49%

* Annualized.

YIELDS AS OF SEPTEMBER 30, 1998

7-DAY CURRENT YIELD 4.72%
7-DAY EFFECTIVE YIELD 4.84%

Past performance does not guarantee future results.

Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.

Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund.

4 1-800-345-2021

Capital Preservation--Q&A
- --------------------------------------------------------------------------------
/photo of Amy O'Donnell/

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

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Capital Preservation continued to perform well. Its total return was 2.48%,
compared with the 2.38% average return of the 96 "U.S. Treasury Money Market
Funds" tracked by Lipper Analytical Services. Capital Preservation's total
return was in the top 20% of its Lipper category. (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 September 30 was
4.84%, compared with the 4.82% yield of the average Treasury money market fund
as measured by Lipper.

INTEREST RATES AND YIELDS FOR MOST U.S. FIXED-INCOME SECURITIES FELL DURING THE
PERIOD. WHY?

Weaker economic conditions, declining corporate earnings, and the absence
of inflation sent interest rates lower, causing the yields of fixed-income
securities to fall. Continued bad economic and financial news from Asia, Russia,
and Latin America ignited investor interest in U.S. Treasury securities as a
safe haven from the problems facing stocks and corporate bonds. As the news from
Asia and emerging markets worsened, demand for Treasury bills surged because of
their perceived safety and liquidity. With demand far outstripping supply,
Treasury bill yields fell sharply.

Interest rate and yield declines were reinforced in September and October,
when the Federal Reserve (the U.S. central bank) lowered its benchmark federal
funds rate from 5.5% to 5.0%. The Fed cut rates to bolster a faltering financial
services industry hit hard by stock market losses and a U.S. economy that showed
signs of catching the "Asian flu."

GIVEN THIS ENVIRONMENT, WHAT STRATEGY DID YOU EMPLOY?

We increased Capital Preservation's weighted average maturity (WAM--the
average time until the securities in the portfolio mature) last summer, a
strategy that helped us maintain the fund's yield when interest rates fell. We
extended the fund's WAM from around 50 days, a relatively neutral position, in
March to 76 days by the end of September. We accomplished this by buying
higher-yielding, longer-maturity securities to lock in relatively high yields
until the end of the year. The longer WAM worked well--when short-term interest
rates fell during the summer in anticipation of a Fed rate cut, we had
relatively fewer securities maturing, which means we didn't have to buy as many
new, lower-yielding bills.

[right margin]

"CAPITAL PRESERVATION'S TOTAL RETURN WAS IN THE TOP 20% OF ITS LIPPER CATEGORY.

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

As of September 30, 1998
Treasury Notes 46%
Treasury Bills 54%

As of March 31, 1998
Treasury Notes 51%
Treasury Bills 49%

Security types are defined on page 22.

www.americancentury.com 5

Capital Preservation--Q&A
- --------------------------------------------------------------------------------
(Continued)

WHAT ELSE KEPT CAPITAL PRESERVATION'S TOTAL RETURN AND YIELD HIGHER THAN THE
AVERAGE TREASURY MONEY MARKET FUND?

Although we managed the fund conservatively, we actively sought
opportunities to buy securities with relatively high yields. This meant watching
the market closely for supply and demand inequalities that created yield
anomalies.

In addition, we were very effective in our use of a strategy known as
"dollar rolls." We bought Treasury bills and notes and agreed 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 prices gave us a higher
yield than a comparable Treasury security.

By September 30, the three-month Treasury bill yield was 4.36%, while the
federal funds rate, a short-term interest rate benchmark managed by the Fed, was
5.25%. Normally, three-month bills yield about the same as the federal funds
rate. The unusual disparity worked to our advantage because the dollar rolls
that we invest in are close in yield to the federal funds rate. This gave the
dollar-roll portion of Capital Preservation's portfolio a significant yield
advantage over the Treasury-bill portion. As of September 30, about 30% of the
portfolio was invested in dollar rolls, which complemented our investments in
longer-maturity securities.

A significant portion of the longer-maturity securities, about half of the
overall portfolio, consisted of Treasury notes. Because notes are less liquid
than bills, they didn't attract as much demand from investors, so their yields
were relatively high compared with bills.

DID THE STOCK MARKET'S VOLATILITY AFFECT THE PORTFOLIO?

Not much. Capital Preservation's size ($3.2 billion in assets as of
September 30) allows us to handle a great deal of cash inflow and outflow
without an impact on management. Treasury-bill yields tended to fall when the
stock market had a bad day. However, the portfolio's maturity structure and our
use of dollar rolls gave us the flexibility to avoid investing when yields
dipped.

WHAT'S YOUR INTEREST RATE OUTLOOK?

We expect short-term interest rates to fall further. It appears that the
U.S. economy could continue to weaken as a result of turmoil overseas. While we
don't expect the Fed to make drastic cuts in interest rates, we do believe the
central bank will move the federal funds rate under 5% to stimulate the U.S.
economy.

GIVEN THAT OUTLOOK, WHAT IS YOUR STRATEGY FOR THE NEXT SIX MONTHS?

We intend to keep the portfolio's WAM on the long side in anticipation of
lower interest rates. We will continue to manage assets very conservatively,
while at the same time doing our best to provide the highest yield possible for
our shareholders.

[left margin]

"WE EXTENDED THE FUND'S WAM. . .TO 76 DAYS BY THE END OF SEPTEMBER. WE
ACCOMPLISHED THIS BY BUYING HIGHER-YIELDING, LONGER- MATURITY SECURITIES. . ."

[pie charts - data below]

PORTFOLIO COMPOSITION BY MATURITY

As of September 30, 1998
1-30 days 29%
31-60 days 13%
61-90 days 8%
91-180 days 47%
181-397 days 3%

As of March 31, 1998
1-30 days 44%
31-60 days 17%
61-90 days 13%
91-180 days 26%

6 1-800-345-2021

Capital Preservation--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS(1)
$ 150,000,000 U.S. Treasury Bills, 4.93%-4.95%,
12/24/98 $ 148,270,416
150,000,000 U.S. Treasury Bills, 4.90%,
12/31/98 148,140,187
300,000,000 U.S. Treasury Bills, 4.66%-5.01%,
1/7/99 296,130,021
100,000,000 U.S. Treasury Bills, 4.38%-4.74%,
1/14/99 98,670,729
50,000,000 U.S. Treasury Bills, 4.75%,
1/28/99 49,214,931
200,000,000 U.S. Treasury Bills, 4.32%-4.44%,
2/4/99 196,898,125
37,000,000 U.S. Treasury Bills, 4.83%,
2/18/99 36,305,736
20,000,000 U.S. Treasury Bills, 4.70%-4.95%,
2/25/99 19,616,167
100,000,000 U.S. Treasury Bills, 4.83%,
3/4/99 98,100,667
100,000,000 U.S. Treasury Bills, 4.47%,
4/1/99 97,742,694
---------------
TOTAL U.S. TREASURY BILLS--53.7% 1,189,089,673
---------------

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES(1)
$100,000,000 U.S. Treasury Notes, 4.75%,
10/31/98 $ 99,934,525
150,000,000 U.S. Treasury Notes, 5.875%,
10/31/98 150,044,232
150,000,000 U.S. Treasury Notes, 5.50%,
11/15/98 150,017,594
100,000,000 U.S. Treasury Notes, 5.125%,
11/30/98 100,008,026
50,000,000 U.S. Treasury Notes, 5.00%,
1/31/99 49,985,869
150,000,000 U.S. Treasury Notes, 5.00%,
2/15/99 149,870,265
250,000,000 U.S. Treasury Notes, 5.50%,
2/28/99 250,145,077
75,000,000 U.S. Treasury Notes, 5.875%,
2/28/99 75,203,446
---------------
TOTAL U.S. TREASURY NOTES--46.3% 1,025,209,034
---------------
TOTAL INVESTMENT SECURITIES--100.0% $2,214,298,707
===============

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.

- --------------------------------------------------------------------------------
UNDERSTANDING THE SCHEDULE OF INVESTMENTS--This schedule tells you which
investments your fund owned on the last day of the reporting period.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the amortized cost of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 7

Government Agency--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 12/5/89)
GOVERNMENT 90-DAY U.S. U.S. GOVERNMENT MONEY MARKET FUNDS(2)
AGENCY TREASURY BILL INDEX AVERAGE RETURN FUND'S RANKING
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
6 MONTHS(1) ............ 2.54% 2.48% 2.46% --
1 YEAR ................. 5.17% 5.11% 5.01% 24 OUT OF 111
- ----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................ 5.06% 5.15% 4.94% 28 OUT OF 101
5 YEARS ................ 4.76% 4.96% 4.62% 22 OUT OF 82
LIFE OF FUND ........... 4.99% 5.00%(3) 4.71%(3) 4 OUT OF 50(3)
</TABLE>

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

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

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

See pages 21-22 for more information about returns, the comparative index, and
Lipper fund rankings.

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 23 28
WEIGHTED AVERAGE
MATURITY 59 DAYS 50 DAYS
EXPENSE RATIO 0.48%* 0.51%

* Annualized.

YIELDS AS OF SEPTEMBER 30, 1998

7-DAY CURRENT YIELD 4.98%
7-DAY EFFECTIVE YIELD 5.10%

Past performance does not guarantee future results.

Money market funds are neither insured nor guaranteed by the FDIC or any other
government agency.

Yields will fluctuate, and although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund.

8 1-800-345-2021

Government Agency--Q&A
- --------------------------------------------------------------------------------

An interview with Amy O'Donnell (pictured on page 5), a portfolio manager
on the Government Agency Money Market fund investment team.

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Government Agency continued to perform well. Its total return was 2.54%,
compared with the 2.46% average return of the 113 "U.S. Government Money Market
Funds" tracked by Lipper Analytical Services. Government Agency's total return
was in the top 25% of its Lipper category. (See the Total Returns table on the
previous page for other fund performance comparisons.)

Government Agency also produced more income than the average U.S.
government money market fund. The fund's 7-day effective yield as of September
30 was 5.10%, compared with the 4.95% yield of the average U.S. government money
market fund as measured by Lipper.

Furthermore, the fund continued to invest only in state income tax-exempt
U.S. government securities, which can be advantageous for investors in most
states. For many investors, particularly those in high income tax states such as
California and New York, the after-tax yield for Government Agency is higher
than for some money market funds that take on credit risk.

In addition, Government Agency's expenses remained below the average of its
peer group. Other things being equal, lower expenses translate into higher
returns and yields for shareholders.

INTEREST RATES AND YIELDS FOR MOST U.S. FIXED-INCOME SECURITIES FELL DURING THE
PERIOD. WHY?

Weaker economic conditions, declining corporate earnings, and the absence
of inflation sent interest rates lower, causing the yields of fixed-income
securities to fall. Continued bad economic and financial news from Asia, Russia,
and Latin America ignited investor interest in U.S. government securities as a
safe haven from the problems facing stocks and corporate bonds. As the news from
Asia and emerging markets worsened, demand for U.S. fixed-income securities
surged.

WHAT FUND STRATEGIES DID YOU EMPLOY?

We were also successful at locking in higher yields by purchasing long-term
securities when yields were relatively high.

[right margin]

". . .THE FUND CONTINUED TO INVEST ONLY IN STATE INCOME TAX-EXEMPT U.S.
GOVERNMENT SECURITIES, WHICH CAN BE ADVANTAGEOUS FOR INVESTORS IN MOST STATES."

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

As of September 30, 1998
Government Agency
Discount Notes 80%
Government Agency Notes 13%
Floating-Rate
Agency Notes 7%

As of March 31, 1998
Government Agency
Discount Notes 67%
Government Agency Notes 20%
Floating-Rate
Agency Notes 13%

Security types are defined on page 22.

www.americancentury.com 9

Government Agency--Q&A
- --------------------------------------------------------------------------------
(Continued)

For example, we extended Government Agency's weighted average maturity
(WAM--the average time until the securities in the portfolio mature) beyond that
of its peer group last summer, a strategy that helped us maintain the fund's
yield when interest rates fell.

CAN YOU ELABORATE ON THIS STRATEGY?

Back in March, the consensus was that the Fed would raise interest rates to
slow down the strong U.S. economy. At that time, we kept the WAM neutral to
Government Agency's peer group. However, as news about Russia and Asia's
potential negative impact on the global economy became more ominous in the
summer, we extended the WAM by buying more securities with six-month maturities.
The longer WAM worked well--when short-term interest rates fell in anticipation
of a Fed rate cut, we had relatively fewer securities maturing, which means we
didn't have to buy as much new, lower-yielding paper.

WHAT TYPES OF AGENCY SECURITIES WERE ATTRACTIVE?

The attractiveness of agency paper often depends on the financing needs of
the issuer, which determines how much paper it issues for investors. Generally,
the more paper issued, the less expensive it is to buy. There are only four
government agencies that issue state tax-exempt paper eligible for purchase by
Government Agency. They are the Student Loan Marketing Association ("Sallie Mae"
- --which issues student loans), the Federal Farm Credit Bank (agricultural
loans), the Federal Home Loan Bank (FHLB--home loans) , and the Tennessee Valley
Authority (the largest U.S. electric power producer).

We continued to focus on FHLB securities because the FHLB remained active,
while other agencies curtailed their issuance of short-term securities. The
relatively large supply of short-term FHLB paper helped keep its prices low and
yields attractive throughout the period.

WHAT'S YOUR INTEREST RATE OUTLOOK?

We expect short-term interest rates to fall further. It appears that the
U.S. economy could continue to weaken as a result of turmoil overseas. While we
don't expect the Fed to make drastic cuts in interest rates, we do believe it
will move the federal funds rate below 5% to stimulate the U.S. economy.

GIVEN THAT OUTLOOK, WHAT IS YOUR STRATEGY FOR THE NEXT SIX MONTHS?

[left margin]

". . .WE EXTENDED THE WAM BY BUYING MORE SECURITIES WITH SIX-MONTH MATURITIES.
THE LONGER WAM WORKED WELL WHEN. . .RATES FELL IN ANTICIPATION OF A FED RATE
CUT."

[pie charts - data below]

PORTFOLIO COMPOSITION BY MATURITY

As of September 30, 1998
0-30 days 30%
31-60 days 25%
61-90 days 32%
91-180 days 9%
181-397 days 4%

As of March 31, 1998
0-30 days 52%
31-60 days 11%
61-90 days 13%
91-180 days 24%

10 1-800-345-2021

Government Agency--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES(1)
$ 5,250,000 FFCB Discount Notes, 5.37%,
10/16/98 $ 5,238,255
9,000,000 FHLB Discount Notes, 5.43%,
10/9/98 8,989,140
10,000,000 FHLB Discount Notes, 5.54%,
10/16/98 9,976,917
30,000,000 FHLB Discount Notes, 5.41%,
10/30/98 29,869,258
35,000,000 FHLB Discount Notes,
5.39%-5.40%, 11/6/98 34,811,150
40,000,000 FHLB Discount Notes, 5.39%,
11/12/98 39,748,466
35,361,000 FHLB Discount Notes,
5.35%-5.36%, 11/25/98 35,071,974
45,025,000 FHLB Discount Notes,
5.28%-5.35%, 12/2/98 44,612,427
4,000,000 FHLB Discount Notes, 5.36%,
12/4/98 3,961,885
7,882,000 FHLB Discount Notes, 5.37%,
12/11/98 7,798,523
42,000,000 FHLB Discount Notes,
5.26%-5.33%, 12/16/98 41,531,101
26,084,000 FHLB Discount Notes,
5.25%-5.33%, 12/18/98 25,786,240
30,000,000 FHLB Discount Notes, 5.36%,
12/29/98 29,602,318

Principal Amount Value
- --------------------------------------------------------------------------------
$35,000,000 FHLB Discount Notes,
5.32%-5.36%, 12/30/98 $ 34,533,812
------------
TOTAL U.S. GOVERNMENT
AGENCY DISCOUNT NOTES--80.0% 351,531,466
------------
U.S. GOVERNMENT AGENCY SECURITIES(1)
15,000,000 FFCB, 5.50%, 11/2/98 15,000,000
5,100,000 FFCB, 5.48%, 12/1/98 5,102,033
5,400,000 FHLB, 5.79%, 10/23/98 5,400,657
1,400,000 FHLB, 5.39%, 1/22/99 1,398,827
8,000,000 FHLB, 5.44%, 2/2/99 7,994,810
4,000,000 FHLB, 5.625%, 3/2/99 3,997,507
20,000,000 SLMA MTN, 5.71%, 7/1/99 19,996,485
9,000,000 SLMA MTN, VRN, 5.03%,
10/6/98, resets weekly off the
3-month T-Bill rate plus 0.49%
with no caps 9,000,036
20,000,000 SLMA, VRN, 4.99%, 10/6/98,
resets weekly off the 3-month
T-Bill rate plus 0.45% with
no caps 20,000,000
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--20.0% 87,890,355
------------
TOTAL INVESTMENT SECURITIES--100.0% $439,421,821
============

NOTES TO SCHEDULE OF INVESTMENTS

FFCB = Federal Farm Credit Bank

FHLB = Federal Home Loan Bank

MTN = Medium Term Note

SLMA = Student Loan Marketing Association

VRN = Variable Rate Note. Interest reset date is indicated and used in
calculating the weighted average portfolio maturity. Rate shown is effective
September 30, 1998.

resets = The frequency with which a 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) The rates for U.S. Government Agency Discount Notes are the yield to
maturity at purchase. The rates for U.S. Government Agency Securities are
the stated coupon rates.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the amortized cost of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 11

Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

CAPITAL GOVERNMENT
PRESERVATION AGENCY
ASSETS
Investment securities, at value
(amortized cost and cost
for federal income tax purposes) ........ $2,214,298,707 $ 439,421,821
Cash ...................................... 63,243,312 427,921
Receivable for investments sold ........... 923,355,029 58,578,981
Interest receivable ....................... 32,505,278 2,215,498
-------------- --------------
3,233,402,326 500,644,221
-------------- --------------
LIABILITIES
Disbursements in excess of
demand deposit cash ..................... 2,598,084 1,120,630
Payable for investments
purchased ............................... 48,865,146 --
Payable for capital
shares redeemed ......................... 5,561,287 41,603
Accrued management
fees (Note 2) ........................... 1,235,169 193,737
Payable for trustees' fees
and expenses ............................ 3,601 1,357
Accrued expenses and
other liabilities ....................... 7,385 995
-------------- --------------
58,270,672 1,358,322
-------------- --------------
Net Assets ................................ $3,175,131,654 $ 499,285,899
============== ==============
CAPITAL SHARES
Outstanding (unlimited number
of shares authorized) ................... 3,174,615,349 499,305,345
============== ==============
Net Asset Value Per Share ................. $ 1.00 $ 1.00
============== ==============
NET ASSETS CONSIST OF:
Capital paid in ........................... $3,174,615,349 $ 499,305,345
Accumulated undistributed net
realized gain (loss) on
investment transactions ................. 516,305 (19,446)
-------------- --------------
$3,175,131,654 $ 499,285,899
============== ==============

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. The net assets divided by the total number
of fund shares outstanding gives you the price of an individual share, or the
net asset value per share.

NET ASSETS are also broken out by capital (money invested by shareholders); and
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses). This breakout tells you the
value of net assets that are performance-related, such as investment gains or
losses, and the value of net assets that are not related to performance, such as
shareholder investments and redemptions.

See Notes to Financial Statements

12 1-800-345-2021

Statements of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

CAPITAL GOVERNMENT
PRESERVATION AGENCY
INVESTMENT INCOME
Income:
Interest ..................................... $82,997,305 $13,277,116
----------- -----------
Expenses (Note 2):
Management fees .............................. 7,411,547 1,144,870
Trustees' fees and expenses .................. 20,691 7,954
----------- -----------
7,432,238 1,152,824
----------- -----------
Net investment income ........................ 75,565,067 12,124,292
----------- -----------
NET REALIZED GAIN
ON INVESTMENTS
Net realized gain on investments ............. 1,570,088 3,027
----------- -----------
Net Increase in Net Assets
Resulting from Operations .................. $77,135,155 $12,127,319
=========== ===========

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF OPERATIONS--This statement breaks out how each
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.

Fund OPERATIONS include:

* income earned from investments

* management fees and other expenses

* gains or losses from selling investments (known as realized gains or losses)

See Notes to Financial Statements

www.americancentury.com 13

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
CAPITAL PRESERVATION GOVERNMENT AGENCY
SEPTEMBER 30, MARCH 31, SEPTEMBER 30, MARCH 31,
Increase in Net Assets 1998 1998 1998 1998

OPERATIONS
<S> <C> <C> <C> <C>
Net investment income ............$ 75,565,067 $ 149,388,171 $ 12,124,292 $ 23,534,891
Net realized gain (loss)
on investments ................. 1,570,088 1,225,909 3,027 (22,473)
--------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations ...... 77,135,155 150,614,080 12,127,319 23,512,418
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income ....... (75,565,067) (149,514,002) (12,124,292) (23,534,891)
From net realized gains on
investment transactions ........ (997,000) (1,199,172) -- --
--------------- --------------- --------------- ---------------
Decrease in net assets from
distributions to shareholders .. (76,562,067) (150,713,174) (12,124,292) (23,534,891)
--------------- --------------- --------------- ---------------
CAPITAL SHARE
TRANSACTIONS
Proceeds from shares sold ........ 1,508,437,684 2,473,239,090 214,432,527 392,750,417
Proceeds from shares
issued in connection
with acquisition (Note 3) ...... -- 213,901,483 -- --
Proceeds from reinvestment
of distributions ............... 72,959,360 143,557,124 11,667,294 22,581,430
Payments for shares redeemed ..... (1,551,422,085) (2,664,029,704) (214,608,296) (398,276,839)
--------------- --------------- --------------- ---------------
Net increase in net assets from
capital share transactions ..... 29,974,959 166,667,993 11,491,525 17,055,008
--------------- --------------- --------------- ---------------
Net increase in net assets ....... 30,548,047 166,568,899 11,494,552 17,032,535
NET ASSETS
Beginning of period .............. 3,144,583,607 2,978,014,708 487,791,347 470,758,812
--------------- --------------- --------------- ---------------
End of period ....................$ 3,175,131,654 $ 3,144,583,607 $ 499,285,899 $ 487,791,347
=============== =============== =============== ===============
TRANSACTIONS IN
SHARES OF THE FUNDS
Sold ............................. 1,508,437,684 2,473,239,090 214,432,527 392,750,417
Issued in connection with
acquisition (Note 3) ........... -- 213,901,483 -- --
Issued in reinvestment
of distributions ............... 72,959,360 143,557,124 11,667,294 22,581,430
Redeemed ......................... (1,551,422,085) (2,664,029,704) (214,608,296) (398,276,839)
--------------- --------------- --------------- ---------------
Net increase ..................... 29,974,959 166,667,993 11,491,525 17,055,008
=============== =============== =============== ===============
</TABLE>

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
each fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:

* operations--a summary of the Statement of Operations from the previous page
for the most recent period

* distributions--income and gains distributed to shareholders

* share transactions--shareholders' purchases, reinvestments, and redemptions

Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.

See Notes to Financial Statements

14 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1998 (UNAUDITED)

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 are in accordance with generally accepted accounting principles.

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 as of the
trade date. 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 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 gains, and accordingly, do not expect to pay any long-term 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. These estimates and assumptions 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--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.

www.americancentury.com 15

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

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

The Trust has entered into a Management Agreement with American Century
Investment Management, Inc. (ACIM) that provides each 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 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 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 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.

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, and the
Trust's transfer agent, American Century Services Corporation.

16 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

- -----------------------------------------------------------------------------
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.

www.americancentury.com 17

Capital Preservation--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ------------- ------------- ------------- -------------
Income From
Investment Operations
Net Investment Income ......... 0.02 0.05 0.05 0.05 0.04 0.03
------------- ------------- ------------- ------------- ------------- -------------
Distributions
From Net Investment
Income ........................ (0.02) (0.05) (0.05) (0.05) (0.04) (0.03)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value,
End of Period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ============= ============= =============
Total Return(2) ............... 2.48% 5.06% 4.82% 5.21% 4.31% 2.63%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3) ........ 0.48%(4) 0.49% 0.49% 0.51% 0.50% 0.51%
Ratio of Net Investment Income
to Average Net Assets ........... 4.83%(4) 4.90% 4.66% 5.07% 4.24% 2.59%
Net Assets, End of Period
(in thousands) .................. $ 3,175,132 $ 3,144,584 $ 2,978,015 $ 3,077,558 $ 2,883,350 $ 2,786,614
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--This statement itemizes current period
activity and statistics and provide comparison data for the last five fiscal
years.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income

* income distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

See Notes to Financial Statements

18 1-800-345-2021

Government Agency--Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- ----------- -----------
Income From
Investment Operations
Net Investment Income ........... 0.03 0.05 0.05 0.05 0.04 0.03
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment
Income ......................... (0.03) (0.05) (0.05) (0.05) (0.04) (0.03)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== =========== ===========
Total Return(2) ................. 2.54% 5.14% 4.89% 5.35% 4.47% 2.69%
RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3) .......... 0.48%(4) 0.51% 0.57% 0.51% 0.50% 0.50%
Ratio of Net Investment Income
to Average Net Assets ............. 5.02%(4) 5.02% 4.76% 5.20% 4.35% 2.65%
Net Assets, End of Period
(in thousands) .................... $ 499,286 $ 487,791 $ 470,759 $ 503,328 $ 461,803 $ 561,766
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income

* income distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

See Notes to Financial Statements

www.americancentury.com 19

Retirement Account Information
- --------------------------------------------------------------------------------

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.

20 1-800-345-2021

Background Information
- --------------------------------------------------------------------------------

INVESTMENT PHILOSOPHY AND POLICIES

The Benham Group offers 38 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 FDIC or
any other government agency. Yields will fluctuate, and although the funds seek
to preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the funds.

COMPARATIVE INDICES

The following index is used in the report for fund performance comparisons.
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.

[right margin]

INVESTMENT TEAM LEADERS

SENIOR PORTFOLIO MANAGER
AMY O'DONNELL

www.americancentury.com 21

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.)

TYPES OF MONEY MARKET SECURITIES

* FLOATING-RATE AGENCY NOTES (FLOATERS)--debt securities issued by U.S.
government agencies (such as the Federal Home Loan Bank) 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 Home Loan Bank). 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 Home Loan Bank). 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.

22 1-800-345-2021

Notes
- --------------------------------------------------------------------------------

www.americancentury.com 23

Notes
- --------------------------------------------------------------------------------

24 1-800-345-2021

[inside back cover]

American Century Funds

Benham Group(reg.sm)
TAXABLE BOND FUNDS
U.S. Treasury & Government
Short-Term Treasury
Short-Term Government
GNMA
Intermediate-Term Treasury
Long-Term Treasury
Inflation-Adjusted Treasury
Target Maturities Trust: 2000
Target Maturities Trust: 2005
Target Maturities Trust: 2010
Target Maturities Trust: 2015
Target Maturities Trust: 2020
Target Maturities Trust: 2025
Corporate & Diversified
Limited-Term Bond
Intermediate-Term Bond
Bond
Premium Bond
High-Yield Bond
International
International Bond

TAX-FREE & MUNICIPAL BOND FUNDS
Multiple-State
Limited-Term Tax-Free
Intermediate-Term Tax-Free
Long-Term Tax-Free
High-Yield Municipal
Single-State
Arizona Intermediate-Term Municipal
California High-Yield Municipal
California Insured Tax-Free
California Intermediate-Term Tax-Free
California Limited-Term Tax-Free
California Long-Term Tax-Free
Florida Intermediate-Term Municipal

MONEY MARKET FUNDS
Taxable
Capital Preservation
Government Agency Money Market
Premium Capital Reserve
Premium Government Reserve
Prime Money Market
Tax-Free & Municipal
California Municipal Money Market
California Tax-Free Money Market
Florida Municipal Money Market
Tax-Free Money Market

AMERICAN CENTURY[reg.sm] GROUP
Asset Allocation Funds
Strategic Allocation: Conservative
Strategic Allocation: Moderate
Strategic Allocation: Aggressive
Balanced Fund
Balanced
Conservative Equity Funds
Income and Growth
Equity Income
Value
Equity Growth
Specialty Funds
Utilities
Real Estate
Global Natural Resources
Global Gold
Small Cap Funds
Small Cap Quantitative
Small Cap Value

TWENTIETH CENTURY GROUP
Growth Funds
Select
Heritage
Growth
Ultra
Aggressive Growth Funds
Vista
Giftrust
New Opportunities
International Growth Funds
International Growth
International Discovery
Emerging Markets

[right margin]

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

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.

[recycled logo]
Recycled

[back cover]

[40 Years]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES

9811 (c)1998 American Century Services Corporation
SH-BKT-14209 Funds Distributor, Inc.
<PAGE>
[front cover] September 30, 1998

SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY

[graphic of stairs]

BENHAM GROUP
- ------------------------------------
GNMA

[american century logo(reg.sm)]
American
Century
[inside front cover]

A Note from the Founder
- --------------------------------------------------------------------------------

I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.

Sincerely,
/s/James E. Stowers

About our New Report Design
- --------------------------------------------------------------------------------

Why We Changed

What's New

The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.

New features include:

* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.

THE BOTTOM LINE.

The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.

We believe we've come up with a more interesting, informative and user-friendly
publication.

We hope you enjoy it.

[left margin]

Benham Group
GNMA
(BGNMX)

[40 Years logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

During the six months ended September 30, 1998, interest rates fell
worldwide as investors reacted to worsening global economic and financial
conditions. Concerns about problems in Asia, Russia, and Latin America swept the
global financial community. To help stem the negative tide, the Federal Reserve
cut its federal funds rate in September for the first time in almost three
years. Two weeks later, it cut the rate again, providing a significant
psychological boost to investors as well as to the U.S. economy. But by the time
the Fed reacted, falling interest rates, combined with increased demand for the
relative safety of U.S. Treasury securities, had sparked an exciting rally in
the Treasury market, the biggest since the Federal Reserve last cut rates in
1995.

U.S. bonds, with the exception of earnings-sensitive corporate bonds,
generally outperformed U.S. stocks, which posted mostly negative returns for the
period. Money market securities continued to be a stable investment.

Benham GNMA, like most U.S. bond funds, had a positive return, but its
performance was modest compared with Treasury bond funds. GNMA securities
perform best when interest rates are relatively stable. Sharp interest rate
declines cause homeowners to refinance their mortgages, which shortens the
effective life of mortgage securities and forces investors to buy lower-yielding
ones. The GNMA fund investment team worked hard to maintain the fund's
disciplined approach in this turbulent environment.

On the corporate front, we have a substantial effort underway to prepare
American Century's computer systems for the year 2000. Through the rest of 1998
and 1999, our team of technology professionals will be extensively testing our
systems, including those involved with dividend payments, to verify the accuracy
of dividend calculations and distributions.

Finally, we hope you like the new design of this report. It's intended to
make the important information you need about your fund easier to find and read.

We appreciate your investment with American Century.

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

[right margin]

Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
GNMA
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Portfolio Composition
by Security Type ......................................................... 6
Portfolio Composition
by GNMA Coupon ........................................................... 7
Schedule of Investments .................................................. 8
FINANCIAL STATEMENTS
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
OTHER INFORMATION
Share Class and Retirement
Account Information ...................................................... 18
Background Information
Investment Philosophy
and Policies .......................................................... 19
Comparative Indices ................................................... 19
Lipper Rankings ....................................................... 19
Investment Team
Leaders ............................................................... 19
Glossary ................................................................ 20

www.americancentury.com 1

Report Highlights
- --------------------------------------------------------------------------------

MARKET PERSPECTIVE

* During the six months ended September 30, 1998, mortgage-backed securities
produced positive returns but took a back seat to U.S. Treasurys, which
benefitted from investor demand for a safe haven from global economic
uncertainty.

* In an attempt to add stability to worldwide markets and reduce the
possibility of a recession in the U.S., the Federal Reserve lowered
short-term interest rates in September and again in October.

* Unfortunately, the steady decline in interest rates proved detrimental to
the mortgage securities market, which endured the decade's third major
mortgage refinancing wave.

* As a result, GNMA investors were faced with reinvesting the proceeds from
refinanced mortgages in securities with lower yields, hampering their
returns for the six-month period.

MANAGEMENT Q&A

* Echoing the performance of the mortgage-backed securities market in general,
GNMA posted modest returns.

* Before operating expenses, GNMA's return for the six months roughly matched
the 4.24% return of its benchmark, the Salomon 30-Year GNMA Index.

* By the end of September, GNMA's duration (a measure of the portfolio's price
sensitivity to changes in interest rates) contracted to only 1.5 years,
having naturally shortened as as a result of refinancings.

* The ongoing wave of refinancing has caused the market to become more highly
concentrated in mortgage securities with coupons below 8% and before the
current wave is over that concentration could increase significantly.

* The last-minute surge in refinancing is also likely to create an
overabundance of securities that the market will have trouble digesting
since their yields will be among the lowest available.

* To mitigate the effects of this possibility, we will try to select GNMA
securities for the portfolio that seem less likely to be affected by this
final refinancing push, and then wait as long as possible for the market to
stabilize before adding new securities.

[left margin]

"ECHOING THE PERFORMANCE OF THE MORTGAGE-BACKED SECURITIES MARKET IN GENERAL,
GNMA POSTED MODEST RETURNS."

GNMA(1)
(BGNMX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 3.92%(2)
1 Year 7.63%
NET ASSETS: $1.4 billion
30-DAY SEC YIELD: 6.03%
INCEPTION DATE: 9/23/85

(1) Investor Class.
(2) Not annualized.

See Total Returns on page 4.
Investment terms are defined in the Glossary on page 20.

2 1-800-345-2021

Market Perspective from Randall W. Merk
- --------------------------------------------------------------------------------
/photo of Randall W. Merk/
Randall W. Merk, director of fixed-income investing at American Century

MODEST RETURNS

With global economies riddled with uncertainty during the six months ended
September 30, 1998, the allure of mortgage-backed securities took a back seat to
the safe-haven appeal of U.S. Treasury securities. Steadily declining U.S.
interest rates throughout 1998 caused Treasury bond prices to soar but weighed
heavily on the mortgage securities market by increasing refinancing activity.
This exacerbated the performance disparity between the two fixed-income security
types. For the six months ended September 30, the Salomon 30-Year GNMA Index
returned 4.24%, compared with the 12.27% return of a 10-year Treasury note.

WEAKENING ECONOMIC CONDITIONS...

A series of financial crises around the world threatened to apply the
brakes to global economic growth, providing the catalyst for the decline in
interest rates during 1998. Asia's financial problems came to light in late 1997
and mushroomed in 1998. By mid-1998, the contagion had spread to Russia and
Latin America.

In the U.S., investors' fears of inflation in early spring turned into
dismay over the prospects for recession by early summer. A flurry of profits
warnings issued by many of corporate America's bellwether companies lent
credence to that notion. Concerned that the global upheaval would take too heavy
a toll on the U.S. economy, the Federal Reserve took action.

...LED TO LOWER INTEREST RATES...

In an attempt to add stability to worldwide markets and reduce the
possibility of a recession in the U.S., the Federal Reserve lowered short-term
interest rates in September--the first such reduction in nearly three years--and
again in October. The rate cuts served to reinforce the lower interest rate
trend in the bond market that had picked up momentum since late July. With
global economic uncertainty foremost on investors' minds, the safety and
liquidity of U.S. Treasury securities took on added appeal. The resulting surge
in demand pushed the yield on the 30-year Treasury bond down to a record low of
4.97% by the end of September.

...AND A CONTINUING BARRAGE OF REFINANCINGS.

Although the drop in interest rates proved good news for the Treasury
market, the benefits garnered by mortgage-backed and other fixed-income
securities were far less pronounced. For GNMAs, the decline meant a continuance
of the third major refinancing wave this decade. (The first two took place in
1993-94 and 1995-96.)

Starting in late July, refinancing activity increased as homeowners rushed
to take advantage of record low interest rates. As a result, GNMA investors had
to reinvest the proceeds from refinanced mortgages in ones with lower yields,
hampering their returns for the six-month period.

[right margin]

"IN AN ATTEMPT TO ADD STABILITY TO WORLDWIDE MARKETS AND REDUCE THE POSSIBILITY
OF A RECESSION IN THE U.S., THE FEDERAL RESERVE LOWERED SHORT-TERM INTEREST
RATES IN SEPTEMBER--THE FIRST SUCH REDUCTION IN NEARLY THREE YEARS--AND AGAIN IN
OCTOBER."

[line chart - data below]

10-YEAR TREASURY NOTE YIELD VS. 30-YEAR FNMA MORTGAGE RATE

10-Year Treasury 30-Year FNMA
Note Yields Mortgage Yields
4/98 5.66% 7.08%
5/98 5.56% 6.98%
6/98 5.46% 7.00%
7/98 5.50% 6.97%
6/98 5.28% 6.78%
9/98 4.57% 6.48%

Source: Bloomberg Financial Markets

www.americancentury.com 3

GNMA--Performance
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

INVESTOR CLASS (INCEPTION 9/23/85) ADVISOR CLASS (INCEPTION 10/9/97)
SALOMON 30-YEAR GNMA FUNDS(2) SALOMON 30-YEAR
GNMA GNMA INDEX AVERAGE RETURN FUND'S RANKING GNMA GNMA INDEX
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) .......... 3.92% 4.24% 4.59% -- 3.88% 4.24%
1 YEAR ............... 7.63% 8.27% 8.46% 44 OUT OF 50 -- --
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS .............. 7.53% 8.11% 7.46% 19 OUT OF 44 -- --
5 YEARS .............. 6.79% 7.30% 6.45% 8 OUT OF 30 -- --
10 YEARS ............. 8.66% 9.21% 8.30% 4 OUT OF 23 -- --
LIFE OF FUND ......... 8.80% 9.70%(3) 8.41%(4) 4 OUT OF 14(4) 7.31% 7.19%(5)
</TABLE>

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

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

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

(4) Since 10/31/85, the date nearest the class's inception for which data are
available.

(5) Since 10/31/97, the date nearest the class's inception for which data are
available.

See pages 18-20 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER 10 YEARS

Value as of 9/30/98
GNMA $22,946
Salomon 30-Year GNMA Index $24,166

GNMA Salomon 30-Year GNMA Index
Date Value Value
9/30/88 $10,000 $10,000
9/30/89 $11,023 $11,133
9/30/90 $11,974 $12,211
9/30/91 $13,884 $14,240
9/30/92 $15,504 $15,890
9/30/93 $16,525 $16,977
9/30/94 $16,343 $16,791
9/30/95 $18,451 $19,122
9/30/96 $19,387 $20,266
9/30/97 $21,317 $22,320
9/30/98 $22,946 $24,166

$10,000 investment made 9/30/88

These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). The chart at left shows the growth of a $10,000 investment in the fund
over 10 years, while the chart below shows the fund's year-by-year performance.
The Salomon 30-Year GNMA Index is provided for comparison in each chart. GNMA's
total returns include operating expenses (such as transaction costs and
management fees) that reduce returns, while the total returns of the index do
not. 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.

[bar chart - data below]

ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED SEPTEMBER 30)

GNMA Salomon 30-Year GNMA Index
Date Return Return
9/30/89 10.23 11.33
9/30/90 8.63 9.68
9/30/91 15.95 16.62
9/30/92 11.67 11.58
9/30/93 6.58 6.84
9/30/94 -1.10 -1.09
9/30/95 12.90 13.88
9/30/96 5.07 5.98
9/30/97 9.96 10.14
9/30/98 7.63 8.27

4 1-800-345-2021

GNMA--Q&A
- --------------------------------------------------------------------------------
/photo of Casey Colton/

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

HOW DID GNMA PERFORM FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Echoing the performance of the mortgage-backed securities market in
general, the fund posted modest returns that were dampened by one of the
decade's heaviest refinancing waves. For the six months ended September 30, the
fund returned 3.92%, compared with the 4.59% average return of the 51 "GNMA
funds" tracked by Lipper Analytical Services. (See Total Returns on the previous
page for fund performance comparisons.)

WHY DID THE FUND UNDERPERFORM ITS PEERS?

The disciplined investment approach we use to pursue solid long-term
performance for GNMA can lead to short-term underperformance when the bond
market rallies sharply. Our top priority is to provide performance that equals
or exceeds the GNMA market over the long run. When interest rates are fairly
stable, the fund and the mortgage-backed securities market in general perform
well. However, when interest rates fall sharply, as they did during the six
months, the fund's returns can lag those of its competitors.

Remember that we're not trying to make interest rate bets that can lead to
unpleasant surprises. Our strategy is intended to help generate relatively
predictable returns by providing investors with a GNMA fund that emphasizes
price stability and competitive yields. As you can see by comparing GNMA's
three-, five- and 10-year returns against those of its Lipper peers, this
strategy has enabled us to beat the average GNMA fund's performance over the
longer haul.

IS YOUR DISCIPLINED APPROACH WHY GNMA CONSISTENTLY PERFORMS WELL VERSUS ITS
BENCHMARK?

Yes, and the six-month return is a good example. Before operating expenses,
GNMA's return for the six months nearly matched the 4.24% return of its
benchmark, the Salomon 30-Year GNMA Index. Remember that unlike the fund, the
index is not subject to fees (such as management fees and transaction costs), so
deducting from the returns of the benchmark provides a more accurate comparison
of GNMA's performance. If you compare those results with GNMA's returns, you'll
find that they are very close. Keeping the portfolio's duration (a measure of
the fund's price sensitivity to changes in interest rates) and holdings very
close to those of the benchmark helps us achieve these results.

[right margin]

"REMEMBER THAT WE'RE NOT TRYING TO MAKE INTEREST RATE BETS THAT CAN LEAD TO
UNPLEASANT SURPRISES. OUR STRATEGY IS INTENDED TO HELP GENERATE RELATIVELY
PREDICTABLE RETURNS BY PROVIDING INVESTORS WITH A GNMA FUND THAT EMPHASIZES
PRICE STABILITY AND COMPETITIVE YIELDS."

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 3,461 3,247
AVERAGE DURATION 1.5 YRS 2.6 YRS
AVERAGE LIFE 4.3 YRS 5.8 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59%* 0.58%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 6.03% 5.78%

Investment terms are defined in the Glossary on page 20.

www.americancentury.com 5

GNMA--Q&A
- --------------------------------------------------------------------------------
(Continued)

SPEAKING OF THE PORTFOLIO'S DURATION, WHY DID IT DROP SO SHARPLY (SEE THE TABLE
ON PAGE 5)?

The drop occurred because the durations of mortgage-backed securities tend
to shorten when interest rates decline as a result of greater refinancing
activity. So as rates fell, the duration of the portfolio naturally shortened.
By the end of the six months, GNMA's duration had fallen from 2.6 years to only
1.5 years, which roughly matched the change in the benchmark's duration.

WHAT NEW TRENDS DEVELOPED DURING THE SIX MONTHS?

As mentioned on page 3, the global economic crisis led investors to seek
the protection of U.S. Treasury securities. What ensued, during the third
quarter especially, was an "unwinding of risk." Investors bought Treasurys
because of their perceived safety over other types of assets, including stocks,
corporate bonds, and mortgage-backed securities such as GNMAs. Unfortunately,
this unwinding created an excess supply of GNMA securities when rates were
falling the fastest and refinancing activity was at its highest.

WHAT MARKET INDICATORS DO YOU MONITOR TO KEEP TRACK OF SUCH DEVELOPMENTS?

One way we track the marketplace is to monitor the interest rate difference
between the yield of the 10-year Treasury note and the average interest rate of
conforming mortgages. Conforming mortgages are those that meet the requirements
of major agencies such as the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation in order to receive their endorsement.
These are the types of mortgage loans taken out by the vast majority of
single-family home buyers in the U.S. We use the 10-year Treasury note for our
comparisons because it is a widely recognized benchmark for mortgage pricing,
while the average rate of conforming mortgages provides a good proxy for the
interest rate that homeowners are paying.

In late 1997 and early 1998, the average conforming mortgage rate was 1.4%
to 1.6% higher than the yield of the 10-year Treasury. Although that gap was
large by recent historical standards, it widened even further to over 2% by the
end of September. Comparing that gap with a peak difference of only 1.2% during
the 1995-96 refinancing wave should make it easier to see how the swift price
appreciation of Treasurys caused their returns to strongly outpace those offered
by GNMAs.

WHAT EFFECT HAS THE CURRENT REFINANCING WAVE HAD ON THE GNMA MARKET?

The ongoing wave has caused the market to become more highly concentrated
in mortgage securities with coupons below 8%. At the end of 1997, a bit less
than 50% of 30-year mortgage securities had coupons below 8%. By the end of
September, however, the number of mortgages with coupons under 8% had risen to
just under 63% of the market. The number of mortgage securities with coupons
less than 7% also rose during the year, increasing nearly 13%.

[left margin]

". . . THE GLOBAL ECONOMIC CRISIS LED INVESTORS TO SEEK THE PROTECTION OF U.S.
TREASURY SECURITIES. WHAT ENSUED, DURING THE THIRD QUARTER ESPECIALLY, WAS AN
'UNWINDING OF RISK.'"

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
GNMAs 88%
Repos 5%
U.S. Gov't. Agency
Securities 4%
U.S. Treasury Securities 3%

AS OF MARCH 31, 1998
GNMAs 90%
Repos 6%
U.S. Treasury Securities 4%

Security types are defined on page 20.

6 1-800-345-2021

GNMA--Q&A
- --------------------------------------------------------------------------------
(Continued)

DO YOU THINK THESE REFINANCINGS WILL CONTINUE?

Homeowners are savvier than ever about their refinancing options and have
been using the consistent drop in rates to prepay their older, higher-cost loans
by taking out new ones with lower rates. Overall, it's much easier now to
refinance a home loan than it was a decade ago, thanks to technological advances
such as the Internet. With many banks offering on-line refinancing applications,
more people than ever before are able to lower their mortgage rates.

As such, when rates eventually begin to stabilize or head higher, there may
be one last push before the latest refinancing wave grinds to a halt. It's
possible that the wave could even sweep up mortgage holders who have recently
refinanced but want to lock in even lower rates before the tide changes.

HOW COULD THIS AFFECT GNMA'S PERFORMANCE?

The bottom line is that the refinancing wave is causing GNMA's yield to
decline, but it takes time for that to be fully reflected. One of the key
factors unique to mortgage-backed securities is that underlying mortgages
provide regular payments of both principal and interest, and a monthly option to
prepay. Because there is typically about a month between when a loan is prepaid
and when the prepayment impacts a GNMA investor, GNMA yields tend to lag
prevailing mortgage rates.

In the case of mortgage-backed securities funds, there is an additional
factor to consider--the length of time before the drop in mortgage rates can be
fully reflected in a fund's 30-day SEC yield. Keep in mind that the SEC yield is
a rolling average of the interest a portfolio has received for the previous 30
days, so it takes a month for any change in rates to be fully reflected. Add
that to the month lag time that occurs because of the refinancing process, and
it equates to roughly two months before a fund's SEC yield reflects a change in
mortgage rates.

GIVEN THAT OUTLOOK, WHAT ARE YOUR PLANS FOR THE PORTFOLIO OVER THE NEXT SIX
MONTHS?

When the current refinancing wave finally ends, the number of mortgage
securities with coupons below 7% could quickly double, which would exert
downward pressure on GNMA's yield. The last-minute surge in refinancing is also
likely to create an overabundance of securities that the market will have
trouble digesting since their yields will be among the lowest available. To
mitigate the effects of this possibility, we will try to select GNMAs that seem
less likely to be affected by this final refinancing push, and then wait as long
as possible for the market to stabilize before adding new securities to the
portfolio.

[right margin]

". . . WHEN RATES EVENTUALLY BEGIN TO STABILIZE OR HEAD HIGHER, THERE MAY BE ONE
LAST PUSH BEFORE THE LATEST REFINANCING WAVE GRINDS TO A HALT."

[bar chart - data below]

PORTFOLIO COMPOSITION BY GNMA COUPON
Percentage of Portfolio
GNMA Coupons 9/30/98 3/31/98
Less than 7% 10% 8%
7%-8% 54% 47%
8%-9% 25% 31%
9%-10% 10% 12%
Greater than 10% 1% 2%

www.americancentury.com 7

GNMA--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES--2.9%
$ 40,359,600 U.S. Treasury Inflation Indexed
Notes, 3.625%, 4/15/28 $ 40,258,701
---------------
(Cost $39,643,807)

U.S. GOVERNMENT AGENCY SECURITIES--4.2%
61,801,800 TVA Inflation Indexed Notes,
3.375%, 1/15/07 59,096,735
---------------
(Cost $58,710,265)

GNMA SECURITIES(1)--88.1%
4,813,916 GNMA, 6.00%, due 7/20/16 to
7/20/26 4,813,480
110,631,399 GNMA, 6.50%, due 9/20/08 to
5/15/28 113,285,104
217,397,744 GNMA, 7.00%, due 9/15/08 to
8/15/28 224,811,043
12,708,976 GNMA, 7.25%, due 7/20/20 to
12/20/25 12,990,175
383,270,639 GNMA, 7.50%, due 1/15/06 to
1/15/28 397,841,117
6,962,729 GNMA, 7.65%, due 6/15/16 to
2/15/18 7,317,412
12,816,435 GNMA, 7.75%, due 9/20/17 to
1/20/26 13,308,956
5,723,282 GNMA, 7.77%, due 4/15/20 to
1/15/21 5,977,555
3,210,281 GNMA, 7.85%, due 11/20/20 to
10/20/22 3,330,353
1,603,675 GNMA, 7.89%, due 9/20/22 1,664,280
3,614,015 GNMA, 7.98%, due 6/15/19 3,807,050
138,974,766 GNMA, 8.00%, due 6/15/06 to
2/20/28 145,266,469
2,313,431 GNMA, 8.15%, due 11/15/19 to
2/15/21 2,445,258
24,841,829 GNMA, 8.25%, due 2/15/06 to
5/15/27 26,178,868
7,267,223 GNMA, 8.35%, due 1/15/19 to
12/15/20 7,691,831
102,937,262 GNMA, 8.50%, due 12/15/04 to
5/15/31 109,233,829
1,801,076 GNMA, 8.625%, due 1/15/32 1,927,760
16,025,118 GNMA, 8.75%, due 2/15/16 to
7/15/27 17,116,814
75,768,897 GNMA, 9.00%, due 11/15/04 to
7/20/26 81,289,216
13,193,235 GNMA, 9.25%, due 4/15/16 to
8/15/26 14,278,722
23,353,301 GNMA, 9.50%, due 6/15/09 to
7/20/25 25,130,145
3,516,519 GNMA, 9.75%, due 6/15/05 to
11/15/21 3,808,985

Principal Amount Value
- --------------------------------------------------------------------------------
$ 3,426,116 GNMA, 10.00%, due 11/15/09
to 2/20/22 $ 3,754,265
2,518,469 GNMA, 10.25%, due 5/15/12 to
2/15/21 2,802,085
962,511 GNMA, 10.50%, due 8/15/00 to
3/15/21 1,069,087
517,407 GNMA, 10.75%, due 12/15/09
to 8/15/19 575,143
2,152,035 GNMA, 11.00%, due 12/15/09
to 8/15/20 2,406,205
34,640 GNMA, 11.25%, due 10/20/15
to 2/20/16 38,574
544,799 GNMA, 11.50%, due 2/15/99 to
2/20/20 608,005
4,933 GNMA, 11.75%, due 2/15/99 5,042
461,583 GNMA, 12.00%, due 6/15/00 to
1/20/15 519,987
354,850 GNMA, 12.25%, due 8/15/13 to
7/15/15 412,215
612,952 GNMA, 12.50%, due 11/15/99
to 10/15/15 710,165
51,395 GNMA, 12.75%, due 11/15/13
to 6/15/15 60,393
1,272,397 GNMA, 13.00%, due 11/15/10
to 8/15/15 1,491,542
36,073 GNMA, 13.25%, due 1/20/15 42,645
526,596 GNMA, 13.50%, due 5/15/10
to 11/15/14 619,708
22,635 GNMA, 13.75%, due 8/15/14 27,002
22,317 GNMA, 14.00%, due 6/15/11
to 10/15/14 26,645
225,159 GNMA, 14.50%, due 9/15/12 to
12/15/12 270,292
520,370 GNMA, 15.00%, due 6/15/11 to
10/15/12 627,468
140,997 GNMA, 16.00%, due 8/15/10 to
4/15/12 171,603
---------------
TOTAL GNMA SECURITIES 1,239,752,493
---------------
(Cost $1,203,938,557)

TEMPORARY CASH INVESTMENTS--4.8%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.38%, dated 9/30/98,
due 10/1/98 (Delivery value
$67,795,130) 67,785,000
---------------
(Cost $67,785,000)

TOTAL INVESTMENT SECURITIES--100.0% $1,406,892,929
===============
(Cost $1,370,077,629)

See Notes to Financial Statements

8 1-800-345-2021

GNMA--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

NOTES TO SCHEDULE OF INVESTMENTS

GNMA = Government National Mortgage Association

TVA = Tennessee Valley Authority

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

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 9

Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

ASSETS
Investment securities, at value
(identified cost of
$1,370,077,629) (Note 3) ............................. $ 1,406,892,929
Cash ................................................... 2,035,615
Interest receivable .................................... 8,701,542
---------------
1,417,630,086
---------------
LIABILITIES
Disbursements in excess
of demand deposit cash ............................... 1,193,473
Payable for investments purchased ...................... 40,410,971
Payable for capital shares redeemed .................... 812,394
Accrued management fees (Note 2) ....................... 652,751
Distribution fees payable (Note 2) ..................... 625
Service fees payable (Note 2) .......................... 625
Dividends payable ...................................... 1,121,921
Payable for trustees' fees
and expenses ......................................... 2,087
Accrued expenses and
other liabilities .................................... 5,131
---------------
44,199,978
---------------
Net Assets ............................................. $ 1,373,430,108
===============
NET ASSETS CONSIST OF:
Capital paid in
$ 1,358,891,853
Accumulated net realized loss
on investment transactions ........................... (22,277,045)
Net unrealized appreciation
on investments (Note 3) .............................. 36,815,300
---------------
$ 1,373,430,108
===============
Investor Class
Net assets ............................................. $ 1,370,285,017
Shares outstanding ..................................... 127,291,152
Net asset value per share .............................. $ 10.76

Advisor Class
Net assets ............................................. $ 3,145,091
Shares outstanding ..................................... 292,159
Net asset value per share .............................. $ 10.76

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.

NET ASSETS are also broken out by capital (money invested by shareholders); net
gains earned on investments but not yet paid to shareholders or net losses on
investments (known as realized gains or losses); and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakout tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.

See Notes to Financial Statements

10 1-800-345-2021

Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

INVESTMENT INCOME
Income:
Interest ................................................... $43,346,927
-----------
Expenses (Note 2):
Management fees ............................................ 3,865,729
Distribution fees -- Advisor Class ......................... 2,396
Service fees -- Advisor Class .............................. 2,396
Trustees' fees and expenses ................................ 12,025
-----------
3,882,546
-----------
Net investment income ...................................... 39,464,381
-----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ........................... 1,713,565
Change in net unrealized
appreciation on investments .............................. 10,806,784
-----------
Net realized and unrealized
gain on investments ...................................... 12,520,349
-----------
Net Increase in Net Assets
Resulting from Operations ................................ $51,984,730
===========

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENT OF OPERATIONS--This statement breaks out how the
fund's net assets changed during the period as a result of the fund's
operations. It tells you how much money the fund made or lost after taking into
account income, fees and expenses, and investment gains or losses. It does not
include shareholder transactions and distributions.

Fund OPERATIONS include:

* income earned from investments

* management fees and other expenses

* gains or losses from selling investments (known as realized gains or losses)

* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)

See Notes to Financial Statements

www.americancentury.com 11

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MARCH 31, 1998

SEPTEMBER 30, MARCH 31,
Increase in Net Assets 1998 1998

OPERATIONS
Net investment income ...................... $ 39,464,381 $ 77,799,288
Net realized gain on investments ........... 1,713,565 1,450,246
Change in net unrealized
appreciation on investments .............. 10,806,784 35,274,054
--------------- ---------------
Net increase in net assets
resulting from operations ............... 51,984,730 114,523,588
--------------- ---------------
DISTRIBUTIONS TO
SHAREHOLDERS From net investment income:
Investor Class ........................... (39,481,413) (77,794,647)
Advisor Class ............................ (55,146) (4,641)
--------------- ---------------
Decrease in net assets
from distributions ....................... (39,536,559) (77,799,288)
--------------- ---------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase in net assets
from capital share transactions .......... 74,881,549 130,210,987
--------------- ---------------
Net increase in net assets ................. 87,329,720 166,935,287

NET ASSETS
Beginning of period ........................ 1,286,100,388 1,119,165,101
--------------- ---------------
End of period .............................. $ 1,373,430,108 $ 1,286,100,388
=============== ===============
Undistributed net investment income ........ -- $ 72,178
=============== ===============

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:

* operations--a summary of the Statement of Operations from the previous page
for the most recent period

* distributions--income and gains distributed to shareholders

* share transactions--shareholders' purchases, reinvestments, and redemptions

Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.

See Notes to Financial Statements

12 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

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. The following accounting policies are in accordance with generally
accepted accounting principles.

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.

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, received 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.

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

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.

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.

USE OF ESTIMATES-- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions 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--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.

www.americancentury.com 13

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

- --------------------------------------------------------------------------------
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. The Agreement provides that all
expenses of the Fund, except brokerage commissions, 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, will be paid by ACIM. 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 class 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 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 by
the Fund under the Plan during the six months ended September 30, 1998 were
$4,792.

14 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS

Purchases of U.S. Treasury and Agency obligations, excluding short-term
investments, totaled $937,960,152. Sales of U.S. Treasury and Agency
obligations, excluding short-term investments, totaled $873,976,769.

As of September 30, 1998, accumulated net unrealized appreciation was
$36,105,148, based on the aggregate cost of investments of $1,370,787,781 for
federal income tax purposes. Accumulated net unrealized appreciation consisted
of unrealized appreciation of $37,060,458 and unrealized depreciation of
$955,310.

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

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

SHARES AMOUNT
INVESTOR CLASS
Six months ended September 30, 1998
Sold ......................................... 25,085,896 $ 268,066,433
Issued in reinvestment of distributions ...... 2,943,316 31,469,260
Redeemed ..................................... (21,274,098) (227,316,073)
------------- -------------
Net increase ................................. 6,755,114 $ 72,219,620
============= =============
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
============= =============
ADVISOR CLASS
Six months ended September 30, 1998
Sold ......................................... 319,818 $ 3,418,076
Issued in reinvestment of distributions ...... 4,786 51,204
Redeemed ..................................... (75,516) (807,351)
------------- -------------
Net increase ................................. 249,088 $ 2,661,929
============= =============
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.

www.americancentury.com 15

GNMA--Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

Investor Class
1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ...............$ 10.67 $ 10.33 $ 10.45 $ 10.18 $ 10.35 $ 10.88
------------- ------------- ------------- ------------- ------------- -------------
Income From Investment
Operations
Net Investment Income ........... 0.32 0.69 0.71 0.74 0.72 0.66
Net Realized and
Unrealized Gain (Loss)
on Investment Transactions ...... 0.09 0.34 (0.12) 0.27 (0.18) (0.52)
------------- ------------- ------------- ------------- ------------- -------------
Total From
Investment Operations ............. 0.41 1.03 0.59 1.01 0.54 0.14
------------- ------------- ------------- ------------- ------------- -------------
Distributions
From Net Investment Income ...... (0.32) (0.69) (0.71) (0.74) (0.71) (0.66)
From Net Realized Gains ......... -- -- -- -- -- (0.01)
------------- ------------- ------------- ------------- ------------- -------------
Total Distributions ............. (0.32) (0.69) (0.71) (0.74) (0.71) (0.67)
------------- ------------- ------------- ------------- ------------- -------------
Net Asset Value,
End of Period .....................$ 10.76 $ 10.67 $ 10.33 $ 10.45 $ 10.18 $ 10.35
============= ============= ============= ============= ============= =============
Total Return(2) ................. 3.92% 10.21% 5.84% 10.08% 5.53% 1.30%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(3) .......... 0.59%(4) 0.58% 0.55% 0.58% 0.58% 0.54%
Ratio of Net Investment Income
to Average Net Assets ............. 5.99%(4) 6.49% 6.84% 6.98% 7.08% 6.12%
Portfolio Turnover Rate ........... 68% 133% 105% 64% 120% 49%
Net Assets, End of Period
(in thousands) ....................$ 1,370,285 $ 1,285,641 $ 1,119,165 $ 1,120,019 $ 979,670 $ 1,129,185
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These statements itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income and capital gains or losses

* income and capital gains distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

16 1-800-345-2021

GNMA--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED

Advisor Class
1998(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ............. $ 10.67 $ 10.63
--------- ---------
Income From Investment Operations
Net Investment Income .......................... 0.31 0.31
Net Realized and Unrealized
Gain on Investment Transactions ................ 0.09 0.04
--------- ---------
Total From Investment Operations ............... 0.40 0.35
--------- ---------
Distributions
From Net Investment Income ..................... (0.31) (0.31)
--------- ---------
Net Asset Value, End of Period ................... $ 10.76 $ 10.67
========= =========
Total Return(3) ................................ 3.88% 3.30%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets(4) ......................... 0.84% 0.84%
Ratio of Net Investment Income
to Average Net Assets(4) ......................... 5.74% 5.92%
Portfolio Turnover Rate .......................... 68% 133%
Net Assets, End of Period
(in thousands) ................................... $ 3,145 $ 460

(1) Six months ended September 30, 1998 (unaudited).

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

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

(4) Annualized.

See Notes to Financial Statements

www.americancentury.com 17

Share Class and Retirement Account Information
- --------------------------------------------------------------------------------

SHARE CLASSES

American Century offers two classes of shares for GNMA. One class is for
investors who buy directly from American Century, and the other is for investors
who buy through financial intermediaries.

The original class of GNMA 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 do not pay any 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, which is 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 the total expense ratio
of the Investor Class.

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

RETIREMENT ACCOUNT INFORMATION

18 1-800-345-2021

Background Information
- --------------------------------------------------------------------------------

INVESTMENT PHILOSOPHY AND 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.

[right margin]

INVESTMENT TEAM LEADERS

PORTFOLIO MANAGER
CASEY COLTON

www.americancentury.com 19

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 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).

* 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).

20 1-800-345-2021

[inside back cover]

American Century Funds

[right margin]

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

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

[recycled logo]
Recycled

[back cover]

[40 Years]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES

9811 (c)1998 American Century Services Corporation
SH-BKT-14211 Funds Distributor, Inc.
<PAGE>
[front cover] September 30, 1998

SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY

[graphic of stairs]

BENHAM GROUP
- ------------------------------------
SHORT-TERM GOVERNMENT

[american century logo(reg.sm)]
American
Century
[inside front cover]

A Note from the Founder
- --------------------------------------------------------------------------------

I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.

Sincerely,
/s/James E. Stowers

About our New Report Design
- --------------------------------------------------------------------------------

Why We Changed

What's New

The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.

New features include:

* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.

THE BOTTOM LINE.

The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.

We believe we've come up with a more interesting, informative and user-friendly
publication.

We hope you enjoy it.

[left margin]

Benham Group
Short-Term Government
(TWUSX)

[40 Years logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

During the six months ended September 30, 1998, interest rates fell
worldwide as investors reacted to worsening global economic and financial
conditions. Concerns about problems in Asia, Russia, and Latin America swept the
global financial community. To help stem the negative tide, the Federal Reserve
(the U.S. central bank) cut its bellwether federal funds rate in September for
the first time in almost three years. Two weeks later, it cut the rate again,
providing a significant psychological boost to investors as well as to the U.S.
economy. But by the time the Federal Reserve reacted, falling interest rates,
combined with increased demand for the relative safety of U.S. Treasury
securities, had sparked an exciting rally in the U.S. bond market, the biggest
since the Federal Reserve last cut rates in 1995.

U.S. bonds, with the exception of earnings-sensitive corporate bonds,
generally outperformed U.S. stocks, which posted mostly negative returns. Money
market securities continued to be a stable investment.

Benham Short-Term Government, like most U.S. bond funds, performed well,
providing the type of return you'd expect from a fund with a short average
maturity. (A short-term fund tends to be less volatile than a long-term bond
fund.) The Short-Term Government fund investment team concentrated on finding
the best relative values and highest yields in the short end of the government
bond market.

Finally, we hope you like the new design of this report. It's intended to
make the important information you need about your fund easier to find and read.

We appreciate your investment with American Century.

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

[right margin]

Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
SHORT-TERM GOVERNMENT
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Portfolio Composition
by Security Type ......................................................... 6
Schedule of Investments .................................................. 8
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities .............................................................. 12
Statement of Operations .................................................. 13
Statements of Changes
in Net Assets ............................................................ 14
Notes to Financial
Statements ............................................................... 15
Financial Highlights ..................................................... 18
OTHER INFORMATION
Share Class and Retirement
Account Information ...................................................... 20
Background Information
Investment Philosophy
and Policies .......................................................... 21
Comparative Indices ................................................... 21
Lipper Rankings ....................................................... 21
Investment Team
Leaders ............................................................... 21
Glossary ................................................................ 22

www.americancentury.com 1

Report Highlights
- --------------------------------------------------------------------------------

MARKET PERSPECTIVE

* Government bonds posted very good returns during the six months ended
September 30, 1998.

* Interest rates fell dramatically for several reasons:

* Global economic problems led to lower expectations for U.S. economic
growth and inflation.

* Investors worldwide flocked to U.S. Treasury bonds as a safe haven
from global turmoil.

* A federal budget surplus reduced supply in the Treasury market.

* The Federal Reserve cut its federal funds rate target from 5.5% to 5.0%
by early October.

* Strong demand for bonds maturing in 2-5 years caused their yields to fall
below the yields of one-year securities.

* Government agency and mortgage-backed securities produced solid returns, but
lagged Treasurys.

MANAGEMENT Q&A

* The portfolio performed very well, producing better returns and higher
yields than the average short government fund.

* Short-Term Government was upgraded by Morningstar from three to four stars
(see page 5 for a more complete discussion of the fund's rating).

* Keys to Short-Term Government's solid performance were its below-average
expenses, better-than-average yield, and slightly long duration.

* To enhance the yield, we focused on adding government-guaranteed
mortgage-backed securities to the portfolio.

* We think it's possible short-term interest rates could head lower--slower
economic growth has taken the starch out of inflation, so the Fed probably
has room to lower rates even further.

* We plan to maintain a slightly long duration--which should benefit returns
if rates decline--and focus on adding higher-yielding securities to the
portfolio.

[left margin]

SHORT-TERM GOVERNMENT(1)
(TWUSX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 4.41%(2)
1 Year 7.29%
NET ASSETS: $837.5 million
30-DAY SEC YIELD: 5.12%
INCEPTION DATE: 12/15/82

(1) Investor Class.
(2) Not annualized.

See Total Returns on page 4.

Investment terms are defined in the Glossary on page 22.

2 1-800-345-2021

SOLID RETURNS

Short-term government bonds posted healthy gains during the six months
ended September 30, 1998. Ongoing problems in Asia, Russia, and Latin America
incited a flight to quality as investors sold stocks and risky bonds in favor of
the safest U.S. government securities.

FALLING INTEREST RATES

The buying spree sent Treasury bond yields, which move in the opposite
direction of their prices, to record lows. The yield on the benchmark 30-year
bond dipped below 5% for the first time ever, ultimately reaching a record low
of 4.71% in early October. Meanwhile, strong demand for bonds maturing in 2-5
years caused their yields to fall below the yields of one-year securities (see
the Yield Curve graph at right).

There were several reasons for the precipitous decline in rates:

* GLOBAL ECONOMIC TURMOIL--a series of financial crises around the world
threatened to apply the brakes to global economic growth. Financial and
economic problems that first surfaced in Southeast Asia in late 1997
mushroomed in 1998, spreading to Russia and Latin America.

* FLIGHT TO QUALITY--global economic problems wreaked havoc on stock and bond
markets worldwide. The ensuing market volatility created greater demand for
the safety and liquidity of U.S. Treasury bonds.

* DORMANT INFLATION--falling energy and basic materials prices sent the
Commodity Research Bureau commodity price index down to levels not seen in
five and half years. Inflation in the U.S. reached its lowest level in a
decade.

* REDUCED SUPPLY--the first federal budget surplus in 30 years reduced the
amount of new Treasury bond issuance.

By August, it was clear that the world's economic engine was downshifting.
The tranquilizing effect on inflation and the U.S. economy was so pronounced
that the Federal Reserve lowered short-term interest rates in September and
again in October--its first rate cuts in three years. Those cuts brought the
federal funds rate down from 5.5% to 5.0%.

TREASURYS OUTPACE MORTGAGES, AGENCY SECURITIES

Although government agency and mortgage-backed securities posted solid
gains, they lagged returns on U.S. Treasury securities. That's largely because
neither market enjoyed the buying surge from international investors, who were
seeking safe haven in Treasurys. And while Treasury supply was decreasing,
government agencies issued new debt at a healthy pace.

A wave of home loan refinancings caused mortgage-backed securities to
underperform Treasurys as interest rates fell. Mortgage refinancings are
undesirable because they shorten the life of mortgage-backed securities and
potentially force bondholders to reinvest in lower-yielding securities.

[right margin]

"INVESTORS SOLD STOCKS AND RISKY BONDS IN FAVOR OF THE SAFEST U.S. GOVERNMENT
SECURITIES."

[line chart - data below]

TREASURY YIELD CURVES

Years 3/31/98 9/30/98
1 5.37% 4.39%
2 5.55% 4.26%
3 5.58% 4.38%
4 5.65% 4.35%
5 5.61% 4.21%
6 5.66% 4.29%
7 5.71% 4.36%
8 5.69% 4.38%
9 5.67% 4.39%
10 5.65% 4.41%
11 5.69% 4.48%
12 5.72% 4.55%
13 5.76% 4.63%
14 5.79% 4.70%
15 5.83% 4.77%
16 5.86% 4.84%
17 5.90% 4.91%
18 5.93% 4.99%
19 5.97% 5.06%
20 6.00% 5.13%
21 5.99% 5.11%
22 5.99% 5.10%
23 5.98% 5.08%
24 5.97% 5.07%
25 5.97% 5.05%
26 5.96% 5.03%
27 5.95% 5.02%
28 5.94% 5.00%
29 5.94% 4.99%
30 5.93% 4.97%

Source: Bloomberg Financial Markets

"TREASURY BOND YIELDS, WHICH MOVE IN THE OPPOSITE DIRECTION OF THEIR PRICES,
FELL TO RECORD LOWS."

www.americancentury.com 3

Short-Term Government--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 12/15/82) ADVISOR CLASS (INCEPTION 7/8/98)
SHORT-TERM SALOMON 1- TO 3-YEAR SHORT U.S. GOVERNMENT FUNDS(2) SHORT-TERM SALOMON 1- TO 3-YEAR
GOVERNMENT TREAS./AGENCY INDEX AVERAGE RETURN FUND'S RANKING GOVERNMENT TREAS./AGENCY INDEX
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ............ 4.41% 4.59% 4.02% -- -- --
1 YEAR ................. 7.29% 7.90% 6.79% 23 OUT OF 75 -- --
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................ 6.11% 6.81% 6.05% 27 OUT OF 57 -- --
5 YEARS ................ 5.15% 5.90% 5.03% 20 OUT OF 40 -- --
10 YEARS ............... 6.35% 7.38% 6.55% 7 OUT OF 11 -- --
LIFE OF FUND ........... 7.24% 8.37%(3) 7.47%(3) 2 OUT OF 3(3) 2.54% 2.52%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

(3) Since 12/31/82, the date nearest the class's inception for which data are
available.

(4) Since 7/31/98, the date nearest the class's inception for which data are
available.

See pages 20-22 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.

[line chart - data below]

GROWTH OF $10,000 OVER 10 YEARS

Value on 9/30/98
Short-Term Government $18,506
Salomon 1-to 3-Year
Treasury/Agency Index $20,371

Short-Term Salomon 1-to 3-Year
Government Treasury/Agency Index
Date Value Value
9/30/88 $10,000 $10,000
9/30/89 $10,778 $10,889
9/30/90 $11,506 $11,906
9/30/91 $12,760 $13,245
9/30/92 $13,921 $14,566
9/30/93 $14,395 $15,291
9/30/94 $14,377 $15,463
9/30/95 $15,488 $16,715
9/30/96 $16,242 $17,668
9/30/97 $17,248 $18,880
9/30/98 $18,506 $20,371

$10,000 investment made 9/30/88

These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). The chart at left shows the growth of a $10,000 investment in the fund
over 10 years, while the chart below shows the fund's year-by-year performance.
The Salomon 1- to 3-Year Treasury/Agency Index is provided for comparison in
each chart. Short-Term Government's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not. 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.

[bar chart - data below}

ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED SEPTEMBER 30)

Short-Term Salomon 1-to 3-Year
Government Treasury/Agency Index
Date Return Return
9/30/89 7.78% 8.89%
9/30/90 6.75% 9.34%
9/30/91 10.90% 11.25%
9/30/92 9.10% 9.97%
9/30/93 3.41% 4.98%
9/30/94 -0.13% 1.12%
9/30/95 7.73% 8.10%
9/30/96 4.87% 5.70%
9/30/97 6.19% 6.86%
9/30/98 7.29% 7.90%

4 1-800-345-2021

Short-Term Government--Q&A
- --------------------------------------------------------------------------------
/photo of Newlin Rankin/

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

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Short-Term Government performed well, reflecting the healthy gains posted
by the U.S. bond market. The fund also outperformed the average short-term
government bond fund. The portfolio returned 4.41% for the six months,
significantly better than the 4.02% average return of the 76 "Short U.S.
Government Funds" tracked by Lipper Analytical Services. (See the Total Returns
table on the previous page for additional fund performance comparisons.)

SHORT-TERM GOVERNMENT'S MORNINGSTAR RATING WAS RECENTLY UPGRADED FROM THREE TO
FOUR STARS. CONGRATULATIONS. WHY THE INCREASE?

We manage Short-Term Government to try to deliver good returns with low
share price volatility. When that strategy works, it has the potential to be
rewarded by Morningstar's rating system, which evaluates fund performance based
on relative risk and return. Specifically, they calculate a star rating based on
a fund's 3-, 5- and 10-year average annual returns above and beyond returns for
the 90-day Treasury bill. In addition, they make adjustments for fees and a risk
factor that reflects performance below 90-day T-bill returns. Only 10% of the
funds in a category receive five stars; 22.5% receive four stars, and 35% get
three.

Short-Term Government carries four-star ratings for the 3- and 5-year
periods, with a three-star rating for 10 years. The portfolio was rated against
1491, 940, and 346 taxable bond funds for the 3-, 5-, and 10-year periods ended
September 30, 1998, respectively. Of course, shareholders should keep in mind
that past performance can't guarantee future results.

WHAT HELPED SHORT-TERM GOVERNMENT TO SUCH SOLID PERFORMANCE?

Short-Term Government's strong relative returns can be attributed in part
to its below-average expenses, slightly long duration, and above-average yield.
Lower expenses mean higher yields and returns for our shareholders, other things
being equal.

Duration is a measure of a fund's sensitivity to changes in interest rates.
The longer a fund's duration, the more its share price tends to rise when
interest rates fall. Rates declined sharply over the last six months, so having
a longer duration was a positive for the fund. But we should point out that in
general we make only modest adjustments to duration, typically keeping it within
10% of the duration of our benchmark, the Salomon Brothers 1- to 3-Year
Treasury/Agency Index.

[right margin]

"SHORT-TERM GOVERNMENT'S STRONG RELATIVE RETURNS CAN BE ATTRIBUTED IN PART TO
ITS BELOW-AVERAGE EXPENSES, SLIGHTLY LONG DURATION, AND ABOVE-AVERAGE YIELD."

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 111 125
WEIGHTED AVERAGE
MATURITY 2.6 YRS 3.0 YRS
AVERAGE DURATION 1.7 YRS 1.9 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.59%* 0.59%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998

INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 5.12% 4.88%

Investment terms are defined in the Glossary on page 22.

www.americancentury.com 5

Short-Term Government--Q&A
- --------------------------------------------------------------------------------
(Continued)

YOU ALSO MENTIONED YIELD. HOW DOES HAVING A HIGHER YIELD CONTRIBUTE TO RETURNS?

In general, the shorter a bond fund's maturity, the larger part yield plays
in its returns. And the higher your yield, the less you have to worry about
trying to predict the direction of interest rates to try and boost returns.
That's why we make only modest adjustments to duration and concentrate instead
on adding yield. And so far we've been successful--the portfolio's yield on
September 30 placed in the top quarter of all short-term government funds,
according to Lipper.

WHAT STRATEGIES DID YOU PURSUE TO TRY AND ADD YIELD TO THE FUND?

We concentrated on finding the best relative values and highest yields in
the short end of the government bond market. The huge demand for the safety and
liquidity of Treasury bonds in recent months caused the "spread," or difference
in yield, between Treasurys and other government bond sectors to widen.

But we found yield disparities even among Treasury bonds--as global
investors converged on the U.S. Treasury market, they gravitated toward the most
liquid (easily traded), newly issued securities. Heavy demand pushed the yields
of newer, on-the-run bonds significantly lower than yields of older, off-the-run
securities. (The most recent Treasury bond issue of a given maturity is said to
be the "on-the-run" bond, as opposed to previously auctioned "off-the-run"
bonds.) As a result, we were able to purchase attractively priced off-the-run
short-term Treasurys with yields as much as 15 basis points higher than
on-the-run bonds (a basis point equals 0.01%).

WHAT CHOICES DID YOU MAKE OUTSIDE OF TREASURY SECURITIES?

We believed government-guaranteed mortgage-backed securities offered very
attractive yields compared with Treasurys. For example, we were able to purchase
mortgage-backed securities that offered between 50 and 70 basis points (0.50% to
0.70%) more yield than a Treasury bond of comparable maturity. That explains why
we increased the portfolio's position in mortgage-backeds while reducing its
Treasury holdings.

BUT WITH INTEREST RATES FALLING, AREN'T MORTGAGE-BACKED SECURITIES VULNERABLE TO
PREPAYMENTS BY HOMEOWNERS REFINANCING THEIR MORTGAGES?

Yes. We used a couple of strategies to try to guard against refinancing
activity. First, we emphasized "seasoned" mortgages. Seasoned mortgages are
those that have been outstanding for some time and have not been prepaid despite
the fact that the mortgage holder could refinance their loan at a lower interest
rate. Second, we bought mortgage-backed securities with interest coupons lower
than the current market rate or those with coupons lower than the rate of the
underlying mortgage. Mortgage holders obviously have less incentive to refinance
home loans with rates below the going mortgage rate.

[left margin]

"WE BELIEVED GOVERNMENT-GUARANTEED MORTGAGE-BACKED SECURITIES OFFERED VERY
ATTRACTIVE YIELDS COMPARED WITH TREASURYS."

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
Mortgage-Backed Securities 71%
U.S. Treasury Securities 25%
U.S. Gov't. Agency Securities 4%

AS OF MARCH 31, 1998
Mortgage-Backed Securities 61%
U.S. Treasury Securities 37%
U.S. Gov't. Agency Securities 2%

Security types are defined on page 22.

6 1-800-345-2021

Short-Term Government--Q&A
- --------------------------------------------------------------------------------
(Continued)

WHAT IS YOUR OUTLOOK FOR INTEREST RATES?

Continued problems out of Asia, Russia, and Latin America finally appear to
have taken a toll on U.S. economic growth, despite earlier predictions to the
contrary. The U.S. economy lost some steam in the third quarter of 1998, growing
at a 3.3% annual rate, compared to a 5.4% rate in the first quarter. In our
opinion, the slowdown has cooled off any inflationary pressures that were
brewing earlier in the year. That leaves some room for rates to move lower. In
addition, we believe that to prevent further economic weakness, the Fed will
continue to lower short-term interest rates, perhaps by as much as 50 basis
points (0.50%) over the next six months or so.

WITH THAT OUTLOOK IN MIND, WHAT'S YOUR STRATEGY GOING FORWARD?

Because we expect short-term rates to fall, we plan to maintain a slightly
long duration. If rates decline, this approach will help the fund participate
more fully in a bond market rally. However, we'll make adjustments if the
economic environment or our inflation outlook changes.

We also plan to maintain the portfolio's current asset allocation, with
about a quarter of assets in Treasurys and the remainder in higher-yielding
government agency and mortgage-backed securities. Certain mortgage-backed and
agency securities offer higher expected total returns than Treasurys,
particularly if the yield spread between short-term Treasurys and other
government securities narrows. And as long as we think rates are headed lower,
we'll continue to emphasize mortgage-backed securities that are less likely to
be refinanced.

[right margin]

"WE PLAN TO MAINTAIN THE FUND'S CURRENT ASSET ALLOCATION, WITH ABOUT A QUARTER
OF ASSETS IN TREASURYS AND THE REMAINDER IN HIGHER-YIELDING GOVERNMENT AGENCY
AND MORTGAGE-BACKED SECURITIES."

www.americancentury.com 7

Short-Term Government--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$63,000 U.S. Treasury Notes, 6.125%,
7/31/00 $ 64,899
78,000 U.S. Treasury Notes, 5.25%,
1/31/01 79,553
52,000 U.S. Treasury Notes, 5.625%,
5/15/08 56,950
------------
TOTAL U.S. TREASURY SECURITIES--24.4% 201,402
------------
(Cost $197,566)

U.S. GOVERNMENT AGENCY SECURITIES
10,000 FNMA MTN, 5.71%, 2/13/01 10,005
25,000 FNMA MTN, 6.40%, 5/2/01 26,010
------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--4.4% 36,015
------------
(Cost $35,352)

ADJUSTABLE-RATE MORTGAGE SECURITIES(1)
FHLMC--0.6%
162 FHLMC Pool #635104, 7.54%,
8/1/18 167
397 FHLMC Pool #606095, 7.43%,
11/1/18 411
2,506 FHLMC Pool #755188, 7.37%,
9/1/20 2,583
463 FHLMC Pool #390263, 6.375%,
1/1/21 469
54 FHLMC Pool #775473, 7.36%,
6/1/21 55
908 FHLMC Pool #876559, 7.91%,
3/1/24 948
------------
4,633
------------
FNMA--2.9%
48 FNMA Pool #066254, 6.13%,
2/1/99 48
330 FNMA Pool #020155, 7.49%,
8/1/14 340
59 FNMA Pool #009781, 7.07%,
10/1/14 61
236 FNMA Pool #025432, 7.00%,
4/1/16 244
237 FNMA Pool #036922, 7.375%,
8/1/16 248
407 FNMA Pool #105843, 7.74%,
1/1/17 425
1,733 FNMA Pool #061401, 7.80%,
5/1/17 1,825
1,140 FNMA Pool #066415, 7.25%,
7/1/17 1,178

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$ 365 FNMA Pool #061392, 7.62%,
7/1/17 $ 382
1,123 FNMA Pool #070030, 7.24%,
2/1/18 1,164
244 FNMA Pool #064708, 7.50%,
2/1/18 258
296 FNMA Pool #162880, 7.39%,
5/1/18 308
300 FNMA Pool #070186, 7.20%,
6/1/18 310
721 FNMA Pool #013786, 7.13%,
8/1/18 742
184 FNMA Pool #116473, 7.21%,
12/1/18 191
598 FNMA Pool #244477, 7.08%,
8/1/19 615
3,656 FNMA Pool #142402, 7.37%,
9/1/19 3,809
1,253 FNMA Pool #070595, 7.06%,
1/1/20 1,302
628 FNMA Pool #336479, 7.77%,
3/1/21 657
350 FNMA Pool #129482, 6.60%,
8/1/21 358
816 FNMA Pool #145556, 7.50%,
1/1/22 851
1,100 FNMA Pool #163993, 7.47%,
5/1/22 1,150
487 FNMA Pool #334441, 7.48%,
5/1/22 503
565 FNMA Pool #169868, 7.43%,
6/1/22 587
325 FNMA Pool #173165, 7.43%,
7/1/22 337
489 FNMA Pool #178295, 7.41%,
9/1/22 508
201 FNMA Pool #328733, 7.60%,
1/1/23 209
333 FNMA Pool #220498, 7.75%,
6/1/23 350
225 FNMA Pool #222649, 7.77%,
7/1/23 237
2,327 FNMA Pool #303336, 7.41%,
8/1/23 2,419
604 FNMA Pool #190647, 7.54%,
8/1/23 628
492 FNMA Pool #318767, 7.89%,
10/1/25 516
76 FNMA Pool #062836, 6.61%,
4/1/26 77
208 FNMA Pool #062835, 6.58%,
1/1/27 212
171 FNMA Pool #070184, 7.50%,
1/1/27 179
302 FNMA Pool #070716, 6.63%,
1/1/29 309

See Notes to Financial Statements

8 1-800-345-2021

Short-Term Government--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$ 292 FNMA Pool #091689, 7.29%,
2/1/29 $ 302
------------
23,839
------------
GNMA--0.1%
206 GNMA Pool #008230, 6.875%,
5/20/17 212
284 GNMA Pool #008763, 7.375%,
2/20/21 297
288 GNMA Pool #0008872, 7.50%,
11/20/21 301
9 GNMA Pool #008902, 6.875%,
1/20/22 10
284 GNMA Pool #008964, 7.50%,
8/20/26 292
------------
1,112
------------
TOTAL ADJUSTABLE-RATE
MORTGAGE SECURITIES--3.6% 29,584
------------
(Cost $29,426)

FIXED-RATE MORTGAGE SECURITIES(1)
FHLMC--3.9%
2,772 FHLMC Pool #200038, 8.50%,
6/1/01 2,851
9,270 FHLMC Pool #G40164, 6.50%,
11/1/02 9,428
5,589 FHLMC Pool #G10439, 6.50%,
1/1/11 5,715
8,877 FHLMC Pool #E64136, 6.50%,
5/1/11 9,079
5,415 FHLMC Pool #D91694, 7.00%,
7/1/16 5,565
------------
32,638
------------
FNMA--4.8%
4,710 FNMA Pool #124516, 7.00%,
10/1/99 4,768
10,389 FNMA Pool #356801, 6.00%,
12/1/08 10,518
6,241 FNMA Pool #332814, 6.00%,
7/1/09 6,318
8,311 FNMA Pool #426863, 8.50%,
5/1/22 8,735
8,909 FNMA Pool #190853, 9.00%,
6/1/24 9,416
------------
39,755
------------
GNMA--1.5%
5 GNMA Pool #113802, 12.50%,
6/15/99 5
5 GNMA Pool #127619, 12.50%,
6/15/00 5
17 GNMA Pool #126325, 11.50%,
8/15/00 17

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$ 207 GNMA Pool #001565, 5.50%,
1/20/09 $ 207
8,398 GNMA Pool #780489, 8.50%,
10/15/11 8,779
71 GNMA Pool #179457, 9.00%,
12/20/16 76
87 GNMA Pool #199973, 9.00%,
12/20/16 93
351 GNMA Pool #220128, 9.00%,
8/20/17 376
214 GNMA Pool #220134, 9.50%,
8/20/17 230
193 GNMA Pool #234860, 9.50%,
10/20/17 208
753 GNMA Pool #001291, 9.50%,
11/20/19 810
1,533 GNMA Pool #001376, 8.00%,
9/20/23 1,594
------------
12,400
------------
TOTAL FIXED-RATE MORTGAGE
SECURITIES--10.2% 84,793
------------
(Cost $139,295)

COLLATERALIZED MORTGAGE OBLIGATIONS(1)
FHLMC--28.6%
4,823 FHLMC REMIC, Series 1528,
Class A, 6.50%, 12/15/00 4,867
7,992 FHLMC REMIC, Series 1982,
Class BC SEQ, 6.50%,
9/15/04 8,059
23,759 FHLMC REMIC, Series 1451,
Class Z PAC-1, 6.75%,
7/15/05 23,915
10,000 FHLMC REMIC, Series 1678,
Class PE PAC, 5.60%,
7/15/07 10,070
8,629 FHLMC REMIC, Series 1805,
Class A SC, PT, 6.50%,
12/15/08 8,674
30,088 FHLMC REMIC, Series 2013,
Class VA SC, PT, 6.00%,
3/15/12 30,410
20,000 FHLMC REMIC, Series 2073,
Class PC PAC, 6.00%,
11/15/16 20,363
6,767 FHLMC REMIC, Series 1839,
Class A PAC, 6.50%, 7/15/17 6,852
9,982 FHLMC REMIC, Series 1861,
Class E SEQ, 6.50%, 8/15/20 10,119
21,417 FHLMC REMIC, Series 1289,
Class PL PAC-1, 7.50%,
2/15/21 21,832
12,353 FHLMC REMIC, Series 1934,
Class HB SEQ, 6.50%,
8/17/21 12,494

See Notes to Financial Statements

www.americancentury.com 9

Short-Term Government--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$14,104 FHLMC REMIC, Series 1861,
Class T SEQ, 6.50%,
11/15/21 $ 14,238
12,000 FHLMC REMIC, Series 1896,
Class C SEQ, 7.00%,
11/15/21 12,133
7,104 FHLMC REMIC, Series 1558,
Class A TAC, 6.00%, 5/15/22 7,166
18,815 FHLMC REMIC, Series 1983,
Class T SEQ, 6.75%, 9/17/22 18,917
25,000 FHLMC REMIC, Series 2072,
Class PG SC, PAC, 6.00%,
7/15/24 25,425
------------
235,534
------------
FNMA--27.9%
4,746 FNMA REMIC, Series 1997-70,
Class FB, Floater, 6.14%,
10/18/98, 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(2) 4,751
19,569 FNMA REMIC, Series 1998-39,
Class FB, Floater, 6.06%,
10/18/98, resets monthly off
the 1-month LIBOR plus 0.40%
with a 0.40% floor and a 8.50%
cap, final maturity 7/18/28(2) 19,525
13,702 FNMA REMIC, Series 1994-7,
Class PD PAC-1, 6.05%,
7/25/07 13,830
10,057 FNMA REMIC, Series 1997-24,
Class PD PAC-1, 6.75%,
7/18/17 10,355
4,882 FNMA REMIC, Series 1996-10,
Class A SEQ, 6.50%,
11/25/17 4,893
6,185 FNMA REMIC, Series 1996-12,
Class A SEQ, 6.50%,
12/25/17 6,248
3,275 FNMA REMIC, Series G93-29,
Class A SEQ, 6.65%,
10/25/18 3,301
10,000 FNMA REMIC, Series 1996-64,
Class PB PAC, 6.50%,
1/18/19 10,139
19,000 FNMA REMIC, Series 1993-120,
Class G PAC-1, 4.50%,
4/25/19 18,777

Principal Amount ($ in Thousands) Value
- --------------------------------------------------------------------------------
$17,125 FNMA REMIC, Series 1993-116,
Class D PAC, 5.75%, 8/25/19 $ 17,273
13,838 FNMA REMIC, Series 1997-20,
Class E SEQ, 7.00%, 6/17/20 14,089
13,836 FNMA REMIC, Series 1992-200,
Class H PAC, 7.00%,
11/25/21 14,377
16,000 FNMA REMIC, Series 1997-25,
Class E SEQ, 7.00%,
12/18/22 16,399
14,000 FNMA REMIC, Series 1998-29,
Class AB SEQ, 6.40%,
8/20/23 14,322
10,676 FNMA REMIC, Series 1993-162,
Class E PAC-2, 6.00%,
8/25/23 10,671
25,725 FNMA REMIC, Series 1996-39,
Class C SEQ, 6.00%,
12/25/24 25,814
25,000 FNMA REMIC, Series 1997-57,
Class PK PAC, 6.00%,
4/18/26 25,240
------------
230,004
------------
GNMA--0.9%
2,768 GNMA REMIC, Series 1996-15,
Class K SEQ, 7.00%, 9/16/06 2,799
4,603 GNMA REMIC, Series 1996-15,
Class J SEQ, 7.00%, 1/16/07 4,713
------------
7,512
------------
PRIVATE LABEL(3)
118 Dean Witter Trust I Floater, Series I,
Class A, Underlying Collateral
FHLMC, 6.19%, 10/20/98,
resets quarterly off the 3-month
LIBOR plus 0.50% with no floor
and a 13.00% cap, final maturity
4/20/18(2) 118
------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS--57.4% 473,168
------------
(Cost $411,160)

TOTAL INVESTMENT SECURITIES--100.0% $824,962
============
(Cost $812,799)

See Notes to Financial Statements

10 1-800-345-2021

Short-Term Government--Schedule of Investments
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

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

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

(2) Interest reset date is indicated. Rate shown is effective September 30,
1998.

(3) Investment in category is less than 0.05% of total investment securities.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 11

Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

ASSETS (In Thousands, Except Per-Share Amounts)
Investment securities, at value
(identified cost of $812,799)
(Note 3) ............................................... $ 824,962
Cash ..................................................... 3,707
Receivable for investments sold .......................... 5,647
Interest receivable ...................................... 6,498
-------------
840,814
-------------
LIABILITIES
Disbursements in excess
of demand deposit cash ................................. 776
Payable for capital shares
redeemed ............................................... 1,503
Accrued management fees
(Note 2) ............................................... 401
Accrued expenses and
other liabilities ...................................... 30
Dividends payable ........................................ 588
-------------
3,298
-------------
Net Assets ............................................... $ 837,516
=============
NET ASSETS CONSIST OF:
Capital (par value and
paid-in surplus) ....................................... $ 903,902
Accumulated net realized loss
from investment transactions ........................... (78,549)
Net unrealized appreciation
on investments (Note 3) ................................ 12,163
-------------
$ 837,516
=============
Investor Class
($ and shares in full)
Net assets ............................................... $ 837,496,289
Shares outstanding ....................................... 87,024,822
Net asset value per share ................................ $ 9.62

Advisor Class ($ and shares in full)
Net assets ............................................... $ 19,793
Shares outstanding ....................................... 2,057
Net asset value per share ................................ $ 9.62

See Notes to Financial Statements

12 1-800-345-2021

Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

INVESTMENT INCOME (In Thousands)
Income:
Interest ..................................................... $24,031
-------
Expenses (Note 2):
Management fees .............................................. 2,406
Trustees' fees and expenses .................................. 10
-------
2,416
-------
Net investment income ........................................ 21,615
-------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ............................. 1,575
Change in net unrealized
appreciation on investments ................................ 12,611
-------
Net realized and unrealized
gain on investments ........................................ 14,186
-------
Net Increase in Net Assets
Resulting from Operations .................................. $35,801
=======

Fund OPERATIONS include:

* income earned from investments

* management fees and other expenses

* gains or losses from selling investments (known as realized gains or losses)

* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)

See Notes to Financial Statements

www.americancentury.com 13

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------

SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND PERIOD ENDED MARCH 1, 1998
AND YEAR ENDED OCTOBER 31, 1997

Increase in Net Assets
SEPTEMBER 30, MARCH 31, OCTOBER 31,
1998 1998(1) 1997
OPERATIONS (In Thousands)
Net investment income ................... $ 21,615 $ 14,878 $ 20,109
Net realized gain on investments ........ 1,575 731 1,053
Change in net unrealized
appreciation (depreciation)
on investments ........................ 12,611 (4,232) 699
--------- --------- ---------
Net increase in net assets
resulting from operations ............. 35,801 11,377 21,861
--------- --------- ---------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income:
Investor Class ........................ (21,615) (14,878) (20,109)
Advisor Class ......................... -- -- --
--------- --------- ---------
Decrease in net assets
from distributions .................... (21,615) (14,878) (20,109)
--------- --------- ---------
CAPITAL SHARE
TRANSACTIONS (NOTE 5)
Net increase in net assets
from capital share transactions ....... 14,866 292,633 167,808
--------- --------- ---------
Net increase in net assets .............. 29,052 289,132 169,560
NET ASSETS
Beginning of period ..................... 808,464 519,332 349,772
--------- --------- ---------
End of period ........................... $ 837,516 $ 808,464 $ 519,332
========= ========= =========

(1) The fund's fiscal year end was changed from October 31 to March 31
resulting in a five month reporting period.

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past three reporting periods. It details
how much a fund grew or shrank as a result of:

* operations--a summary of the Statement of Operations from the previous page
for the most recent period

* distributions--income and gains distributed to shareholders

* share transactions--shareholders' purchases, reinvestments, and redemptions

Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.

See Notes to Financial Statements

14 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

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 commenced as of July 8, 1998. The
following significant accounting policies are in accordance with generally
accepted accounting principles.

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 realized 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 in 2001 through 2004), which may be used to
offset future taxable gains.

ADDITIONAL INFORMATION--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.

www.americancentury.com 15

Notes to Financial Statements
- --------------------------------------------------------------------------------

(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
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 class average daily closing 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. Fees incurred by
the Fund under the Plan during the six months ended September 30, 1998 were $15

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

Purchases of U.S. Government and Agency securities, excluding short-term
investments, totaled $654,397,295. Sales of U.S. Government and Agency
securities, excluding short-term investments, totaled $658,050,635.

As of September 30, 1998, accumulated net unrealized appreciation was
$11,712,455, based on the aggregate cost of investments for federal income tax
purposes of $813,249,250, which consisted of unrealized appreciation of
$12,459,677 and unrealized depreciation of $747,222.

16 1-800-345-2021

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.

- --------------------------------------------------------------------------------
5. CAPITAL SHARE TRANSACTIONS

There are an unlimited number of shares authorized for the Investor and
Advisor Classes. Transactions in shares of the Funds were as follows:

SHARES AMOUNT
INVESTOR CLASS (In Thousands)

Six months ended September 30, 1998
Sold ............................................... 12,134 $ 115,315
Issued in reinvestment of distributions ........... 2,111 20,061
Redeemed ........................................... (12,680) (120,530)
--------- ---------
Net increase ....................................... 1,565 $ 14,846
========= =========
Year ended
March 31, 1998(1)
Sold ............................................... 39,286 $ 373,778
Issued in reinvestment of distributions ........... 1,394 13,212
Redeemed ........................................... (9,950) (94,357)
--------- ---------
Net increase ....................................... 30,730 $ 292,633
========= =========
Year ended
October 31, 1997
Sold ............................................... 8,836 $ 83,471
Issued in connection with aquisition ............... 23,472 221,479
Issued in reinvestment of distributions ............ 2,004 18,929
Redeemed ........................................... (16,523) (156,071)
--------- ---------
Net increase ....................................... 17,789 $ 167,808
========= =========

ADVISOR CLASS (In Thousands)

July 8, 1998(2) through September 30, 1998
Sold ............................................... 2 $ 20
Issued in reinvestment of distributions ............ -- --
Redeemed ........................................... -- --
--------- ---------

Net increase ....................................... 2 $ 20
========= =========

(1) The Fund's fiscal year end was changed from October 31 to March 31
resulting in a five month reporting period.

(2) Commencement of sale of the Advisor Class.

www.americancentury.com 17

Short-Term Government--Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED OCTOBER 31 (EXCEPT AS NOTED)

Investor Class
1998(1) 1998(2) 1997 1996 1995 1994 1993(3)
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of Period ....... $ 9.46 $ 9.49 $ 9.47 $ 9.51 $ 9.27 $ 9.67 $ 9.61
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income From
Investment Operations
Net Investment
Income .................. 0.25 0.21 0.52 0.51 0.52 0.40 0.36
Net Realized and
Unrealized Gain
(Loss) on Investment
Transactions ............ 0.16 (0.03) 0.02 (0.04) 0.24 (0.40) 0.06
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations .............. 0.41 0.18 0.54 0.47 0.76 -- 0.42
----------- ----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment
Income .................. (0.25) (0.21) (0.52) (0.51) (0.52) (0.40) (0.36)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value,
End of Period ............. $ 9.62 $ 9.46 $ 9.49 $ 9.47 $ 9.51 $ 9.27 $ 9.67
=========== =========== =========== =========== =========== =========== ===========
Total Return(4) ......... 4.41% 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%(5) 0.59%(5) 0.68% 0.70% 0.70% 0.81% 1.00%
Ratio of Net Investment
Income to Average
Net Assets ................ 5.28%(5) 5.43%(5) 5.53% 5.39% 5.53% 4.17% 3.73%
Portfolio Turnover Rate ... 88% 54% 293% 246% 128% 470% 413%
Net Assets, End of
Period (in thousands) ..... $ 837,496 $ 808,464 $ 519,332 $ 349,772 $ 391,331 $ 396,753 $ 511,981
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(2) The Fund's fiscal year end was changed from October 31 to March 31
resulting in a five month reporting period.

(3) The data presented has been restated to give effect to a 10 to 1 stock
split in the form of a stock dividend that occured on November 13, 1993.

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

(5) Annualized.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income

* income distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

18 1-800-345-2021

Short-Term Government--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED

Advisor Class
1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period ....................... $ 9.49
------
Income From Investment Operations
Net Investment Income .................................... 0.10
Net Realized and Unrealized Gain
on Investment Transactions ............................... 0.13
------
Total From Investment Operations ......................... 0.23
------
Distributions
From Net Investment Income ............................... (0.10)
------
Net Asset Value, End of Period ............................. $ 9.62
======
Total Return(2) .......................................... 2.54%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ...................................... 0.84%(3)
Ratio of Net Investment Income
to Average Net Assets ...................................... 5.07%(3)
Portfolio Turnover Rate .................................... 88%
Net Assets, End of Period
(in thousands) ............................................. $ 20

(1) July 8, 1998 (commencement of sale) through September 30, 1998 (unaudited)

(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

www.americancentury.com 19

Share Class and Retirement Account Information
- --------------------------------------------------------------------------------

SHARE CLASSES

American Century offers two classes of shares for Short-Term Government.
One class is for investors who buy directly from American Century, and the other
is for investors who buy through financial intermediaries.

The original class of Short-Term Government 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 do not pay any 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.

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

RETIREMENT ACCOUNT INFORMATION

20 1-800-345-2021

Background Information
- --------------------------------------------------------------------------------

INVESTMENT PHILOSOPHY AND 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 index is used in the report for fund performance comparisons.
It is not an investment product 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.

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.

[right margin]

INVESTMENT TEAM LEADERS

PORTFOLIO MANAGER
NEWLIN RANKIN

www.americancentury.com 21

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

PORTFOLIO STATISTICS

* NUMBER OF SECURITIES--the number of different securities held by the 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 the portfolio increases, so does the impact of a change in interest
rates on the value of the portfolio.

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.

* 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.

22 1-800-345-2021

Notes
- --------------------------------------------------------------------------------

www.americancentury.com 23

Notes
- --------------------------------------------------------------------------------

24 1-800-345-2021

[inside back cover]

American Century Funds

[right margin]

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

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

[recycled logo]
Recycled

[back cover]

[40 Years]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES

9811 (c)1998 American Century Services Corporation
SH-BKT-14212 Funds Distributor, Inc.
<PAGE>
[front cover] September 30, 1998

SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY

[graphic of stairs]

BENHAM GROUP
- ------------------------------------
INFLATION-ADJUSTED TREASURY

[american century logo(reg.sm)]
American
Century
[inside front cover]

A Note from the Founder
- --------------------------------------------------------------------------------

I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.

Sincerely,
/s/James E. Stowers

About our New Report Design
- --------------------------------------------------------------------------------

Why We Changed

What's New

The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.

New features include:

* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.

THE BOTTOM LINE.

The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.

We believe we've come up with a more interesting, informative and user-friendly
publication.

We hope you enjoy it.

[left margin]

Benham Group
Inflation-Adjusted Treasury

[40 Years logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

During the six months ended September 30, 1998, interest rates fell
worldwide as investors reacted to worsening global economic and financial
conditions. To help stem the negative tide, the Federal Reserve (the U.S.
central bank), cut its bellwether federal funds rate in September, the first
rate cut in almost three years. Two weeks later, it lowered the rate again,
providing a significant psychological boost to investors as well as to the U.S.
economy. But by the time the Federal Reserve reacted, falling interest rates,
combined with increased demand for the relative safety of U.S. Treasury
securities, had sparked the biggest rally in the Treasury market since 1995.

U.S. bonds generally outperformed U.S. stocks, which posted mostly negative
returns for the period. Money market securities continued to be a stable
investment.

Benham Inflation-Adjusted Treasury, like most U.S. bond funds, had a
positive return, but its performance was modest compared with other Treasury
funds. Inflation-indexed securities perform best when inflation is rising or
perceived as a threat. Unfortunately, the good news for most bond funds was bad
news for Inflation-Adjusted Treasury--the threat of an economic downturn kept
consumer prices down and inflation expectations minimal. The Inflation-Adjusted
Treasury fund investment team worked hard to maximize the fund's return in this
low-inflation environment.

Finally, we hope you like the new design of this report. It's intended to
make the important information you need about your fund easier to find and read.

We appreciate your investment with American Century.

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

[right margin]

Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
INFLATION-ADJUSTED TREASURY
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio Composition
by Security Type ......................................................... 5
Portfolio Composition
by Maturity .............................................................. 6
Schedule of Investments .................................................. 7
FINANCIAL STATEMENTS
Statement of Assets and
Liabilities .............................................................. 8
Statement of Operations .................................................. 9
Statements of Changes
in Net Assets ............................................................ 10
Notes to Financial
Statements ............................................................... 11
Financial Highlights ..................................................... 14
OTHER INFORMATION
Share Class and Retirement
Account Information ...................................................... 16
Background Information
Investment Philosophy
and Policies .......................................................... 17
Comparative Indices ................................................... 17
Investment Team
Leaders ............................................................... 17
Glossary ................................................................. 18

www.americancentury.com 1

Report Highlights
- --------------------------------------------------------------------------------

MARKET PERSPECTIVE

* The U.S. interest rate outlook reversed in response to financial turmoil in
Asia, Russia, and Latin America. Earlier this year, the consensus view was
that rates would rise. By August, investors and analysts predicted interest
rates would fall because of weakening global economic conditions. On
September 29, the Federal Reserve (the Fed) lowered the federal funds rate
for the first time since early 1996. Two weeks later, the Fed cut the rate
again.

* Weaker economic conditions, declining corporate earnings, and the absence of
inflation depressed interest rates. Falling rates, combined with increased
demand for the relative safety and liquidity of U.S. Treasury securities,
sparked the biggest rally in the Treasury market since 1995.

* Minimal inflation and low demand limited the returns of inflation-indexed
bonds. The inflation rate has actually declined since these bonds were
introduced in January 1997.

* The supply of inflation-indexed securities increased significantly. The
Treasury auctioned about $16 billion of 30-year inflation-indexed bonds. The
large influx of 30-year bonds increased the average maturity and duration of
the market.

* Low demand and increasing supply kept the real yields of inflation-indexed
bonds relatively stable, while nominal bond yields plunged. The high real
yields of inflation-indexed bonds implied an improbably low sustained
inflation rate for the next 10 years.

* We believe inflation will likely remain below 3% in 1999. The good news is
that inflation above 1% could generate competitive returns for
inflation-indexed securities bought at the yield levels available at the end
of September.

FUND PERFORMANCE

* Because of low inflation, increased supply, and low demand,
Inflation-Adjusted Treasury continued to perform more like a Treasury bill
fund than a Treasury bond fund. This is to be expected in a low inflation,
falling interest rate environment.

* An underperforming 30% position
in a government agency security caused the fund to lag the return of its
Treasury-only benchmark. The good news is that this agency holding could
outperform Treasury holdings in the months ahead.

FUND STRATEGY

* By investing in the new 30-year bonds to match the market and the index, we
extended Inflation-Adjusted Treasury's weighted average maturity and
duration. The fund effectively became a longer-term bond fund that is more
sensitive to changes in real interest rates.

* We overweighted 10-year notes because they offered attractive yields. We'll
likely underweight these notes in the months ahead because their yields have
dropped.

* We'll hold on to the agency security because of its attractive yield, and
possibly add to that position with any new money that comes into the fund.

[left margin]

"LOW DEMAND AND INCREASING SUPPLY KEPT THE REAL YIELDS OF INFLATION-INDEXED
BONDS RELATIVELY STABLE, WHILE NOMINAL BOND YIELDS PLUNGED."

INFLATION-ADJUSTED TREASURY(1)
TOTAL RETURNS: AS OF 9/30/98
6 Months 3.44%(2)
1 Year 4.70%
NET ASSETS: $7.2 million
30-DAY SEC YIELD: 4.76%
INCEPTION DATE: 2/10/97

(1) Investor Class.
(2) Not annualized.

See Total Returns on page 4.
Investment terms are defined in the Glossary on page 18.

2 1-800-345-2021

TREASURY MARKET SURGES

Weaker economic conditions, declining corporate earnings, and the absence
of inflation depressed interest rates during the six months ended September 30,
1998, causing the prices of most fixed-income securities to rise and yields to
fall. Continued bad economic and financial news from Asia, Russia, and Latin
America ignited investor interest in U.S. Treasury securities as a safe haven
from the problems facing stocks and corporate bonds. The Salomon Brothers
Treasury Index, which broadly represents the performance of the Treasury market,
returned 12.93%.

TIIS WAIT FOR INFLATION, STRONGER DEMAND

Minimal inflation and low demand put pressure on the returns of
inflation-indexed bonds (also known as TIIS, for Treasury Inflation-Indexed
Securities). The Salomon Brothers U.S. Inflation-Linked Index returned 4.12%.

The rate of inflation has actually declined since TIIS were introduced in
January 1997. At that time, the consumer price index (CPI) was growing at about
a 3% annual rate. As of September 1998, CPI's annual rate was just 1.5%.

The principal value of TIIS is adjusted regularly for inflation, based on
the CPI. The principal adjustments for the six-month period totaled 0.99%.

INCREASING SUPPLY, CHANGING COMPOSITION

The performance pressure on TIIS was compounded by increasing supply. With
their low real rate coupons, TIIS have been a great financing tool for the
Treasury. Two auctions of 30-year TIIS were held during the period, increasing
the market value of outstanding inflation-indexed bonds from $38.6 billion to
$54.5 billion.

The addition of 30-year bonds also increased the average maturity and
duration of outstanding TIIS. Going forward, the TIIS market will contain more
longer-term bonds and will be correspondingly more sensitive to real interest
rate movements. The two 30-year auctions boosted the average maturity of the
Salomon Brothers Inflation-Linked Index from 7.2 years to 13.5 years and its
average duration from 6.2 years to 9.3 years. In addition, on September 29, the
Treasury announced that it will no longer auction five-year TIIS. Starting in
1999, the Treasury will issue 10-year TIIS in January and July, and 30-year TIIS
in April and October.

THE YIELD PICTURE

The combination of increasing supply and weak demand caused TIIS real
yields to remain relatively stable, while nominal Treasury yields plunged. The
accompanying graph shows that the real yield on 10-year TIIS stayed relatively
flat from February 1997 to September 1998, while the yield on the nominal
10-year Treasury note dove to a record low. The combination of the diving
nominal yield and the stable TIIS real yield caused the "breakeven inflation
rate" -- the annual rate of inflation that would make the yields equal --to drop
to less than 1%.

[right margin]

"MINIMAL INFLATION AND LOW DEMAND PUT PRESSURE ON THE RETURNS OF
INFLATION-INDEXED BONDS."

[line chart - data below]

10-YEAR TREASURY YIELD COMPARISON

10-Year Real 10-Year Nominal
TIIS Treasury
(left scale) (right scale)
2/28/97 3.33% 6.55%
3/31/97 3.58% 6.90%
4/30/97 3.57% 6.70%
5/30/97 3.57% 6.66%
6/30/97 3.65% 6.50%
7/31/97 3.58% 6.01%
8/29/97 3.60% 6.34%
9/30/97 3.62% 6.11%
10/31/97 3.55% 5.93%
11/28/97 3.54% 5.91%
12/31/97 3.72% 5.81%
1/30/98 3.66% 5.57%
2/27/98 3.70% 5.72%
3/31/98 3.79% 5.75%
4/30/98 3.80% 5.77%
5/29/98 3.77% 5.68%
6/30/98 3.81% 5.56%
7/31/98 3.83% 5.60%
8/31/98 3.82% 5.06%
9/30/98 3.59% 4.46%

Source: Bloomberg Financial Markets

www.americancentury.com 3

Inflation-Adjusted Treasury--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 2/10/97) ADVISOR CLASS (INCEPTION 6/15/98)
INFLATION- SALOMON SALOMON INFLATION- SALOMON SALOMON
ADJUSTED INFLATION- TREASURY ADJUSTED INFLATION- TREASURY
TREASURY LINKED INDEX INDEX TREASURY LINKED INDEX INDEX
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ......... 3.44% 4.12% 12.93% -- -- --
1 YEAR .............. 4.70% 5.70% 22.10% -- -- --
- -------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
LIFE OF FUND ........ 2.96% 4.19%(2) 19.66%(2) 2.10% 2.79%(3) 7.90%(3)
</TABLE>
(1) Returns for periods less than one year are not annualized.

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

(3) Since 6/30/98, the date nearest the class's inception for which data are
available.

See pages 16-18 for more information about share classes, returns, and the
comparative indices.

[mountain chart - data below]

GROWTH OF $10,000 OVER LIFE OF FUND

Value on 9/30/98
Salomon Treasury Index $13,288
Salomon Inflation-Linked Index $10,672
Inflation-Adjusted Treasury $10,549

Inflation-Adjusted Salomon Treasury Salomon Inflation-
Treasury Index Linked Index
Date Value Value Value
2/28/97 $10,000 $10,000 $10,000
3/31/97 $9,858 $9,756 $9,863
4/30/97 $9,920 $9,981 $9,932
5/31/97 $9,977 $10,099 $9,984
6/30/97 $9,943 $10,291 $9,953
7/31/97 $10,034 $10,896 $10,045
8/31/97 $10,061 $10,589 $10,077
9/30/97 $10,076 $10,884 $10,096
10/31/97 $10,173 $11,253 $10,206
11/30/97 $10,224 $11,400 $10,260
12/31/97 $10,161 $11,592 $10,213
1/31/98 $10,214 $11,826 $10,266
2/28/98 $10,207 $11,739 $10,256
3/31/98 $10,200 $11,767 $10,250
4/30/98 $10,225 $11,809 $10,287
5/31/98 $10,292 $12,033 $10,354
6/30/98 $10,316 $12,315 $10,382
7/31/98 $10,341 $12,261 $10,431
8/31/98 $10,337 $12,810 $10,448
9/30/98 $10,549 $13,288 $10,672

$10,000 investment made 2/28/97*

* 2/28/97 is the date nearest the class's inception for which index data are
available.

This chart is based on Investor Class shares only; performance for other classes
will vary due to differences in fee structures (see Total Returns table above).
The chart at left shows the growth of a $10,000 investment over the life of the
fund. The Salomon Treasury and Salomon Inflation-Linked indices are provided for
comparison. Inflation-Adjusted Treasury's total return includes operating
expenses (such as transaction costs and management fees) that reduce returns,
while the total returns of the indices do not. 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.

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 4 3
WEIGHTED AVERAGE
MATURITY 13.5 YRS 6.9 YRS
AVERAGE DURATION 9.2 YRS 5.9 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.51%* 0.50%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 4.76% 4.51%

4 1-800-345-2021

Inflation-Adjusted Treasury--Q&A
- --------------------------------------------------------------------------------
/photo of Dave Schroeder/

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

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Inflation-Adjusted Treasury fund (IATF) continued to produce almost
Treasury bill-like returns as inflation and demand for inflation-indexed
securities remained low, while supply increased (see page 3). Inflation-indexed
bonds generally produced lower returns than most Treasury securities. The total
return for IATF's Investor Class shares was 3.44%, compared to the 4.12% return
of the portfolio's benchmark, the Salomon Brothers Inflation-Linked Index. (See
the Total Returns table on the previous page for other fund performance
comparisons.)

We manage the portfolio to track the performance of its benchmark, which
holds 100% Treasury Inflation-Indexed Securities (TIIS). We typically expect the
six-month return of Investor Class shares to lag the benchmark due to fund
expenses that the benchmark doesn't incur.

The Investor Class lagged the benchmark by more than its expenses because
we held an inflation-indexed government agency issue that underperformed
comparable TIIS. Treasury securities generally outperformed agency securities as
investors demanded the highest available liquidity and credit quality. About 30%
of portfolio assets was invested in the agency issue, which we purchased when
its yield was about 20 basis points (0.20%--a basis point equals 0.01%) higher
than comparable TIIS. Unfortunately, that yield spread widened to about 40 basis
points during the period.

WHAT IMPACT DID THE NEARLY $16 BILLION IN NEW 30-YEAR TIIS ISSUANCE (SEE PAGE 3)
HAVE?

It changed the composition of the TIIS market, and it caused corresponding
adjustments in IATF's benchmark (see page 3) and the portfolio. By investing
about 30% of the fund's assets in 30-year TIIS to match the market and the
benchmark (see Portfolio Composition by Maturity on page 6), we extended IATF's
weighted average maturity to 13.5 years and the average duration to 9.2 years
(see Portfolio at a Glance on page 4).

Both average maturity and average duration measure a bond portfolio's
sensitivity to interest rate changes-- the longer the average maturity or
duration, the more the portfolio will increase or decrease in value when
interest rates rise and fall. The new issuance effectively changed IATF into a
longer-term bond fund that is more sensitive to changes in real interest rates.

[right margin]

"IATF CONTINUED TO PRODUCE ALMOST TREASURY BILL-LIKE RETURNS AS INFLATION AND
DEMAND FOR INFLATION-INDEXED SECURITIES REMAINED LOW, WHILE SUPPLY INCREASED.

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
U.S. Treasury Securities 70%
U.S. Government Agency
Securities 30%

AS OF MARCH 31, 1998
U.S. Treasury Securities 71%
U.S. Government Agency
Securities 29%

Security types are defined on page 18.

www.americancentury.com 5

Inflation-Adjusted Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

WHAT'S YOUR INFLATION OUTLOOK?

Actually, the market's outlook is more critical than mine, and investors
have not shown much concern about higher prices. Nominal bond yields indicated
that investors expected the Federal Reserve to cut short-term interest rates by
another 50 basis points to address weakening economic conditions. When investors
are expecting slower economic growth, they're usually not too concerned about
higher inflation.

Personally, I think inflation will be higher in 1999 than in 1998--about a
2.0-2.5% annual rate. Although inflation has remained low, labor markets are
still fairly tight, and price increases resulting from rising wages are still a
possibility. Furthermore, we benefited in most of 1998 from a strong dollar,
which kept the prices of U.S. imports low. I expect a weaker dollar and higher
import prices in 1999.

WHAT POSITIVE SIGNS DO YOU SEE FOR THE FUND?

Even though the inflation outlook isn't very encouraging, there are other
factors that could help boost returns. First, the agency holding that hurt us
earlier could help. We expect the yield spread between agency and Treasury
securities to narrow, which would add some additional price appreciation to that
part of the portfolio. The agency security certainly makes sense to hold on
to--right now it's generating an extra 40 basis points of yield, and it has some
appreciation potential. New money invested in the fund will likely be invested
in that issue.

We also think TIIS as a whole are undervalued and could attract investor
interest simply on a relative value basis. TIIS real yields are high in relation
to nominal yields, and as a result, the breakeven inflation rate fell to under
1% at the end of September. That meant TIIS were being priced as though
inflation would drop from current levels, not rise or remain stable. Now maybe
there are people who really think inflation will fall and stay below 1% for the
next 10 years, but I'm not one of them. If inflation stays at 1.5% or rises to
over 2%, TIIS bought at these real yield levels should provide very competitive
returns.

HOW DO YOU PLAN TO MANAGE IATF FOR THE NEXT SIX MONTHS?

My general strategy for this fund has been to find maturities where real
yields are attractive and park there. We haven't made duration bets. We
overweighted 10-year notes versus 30-year bonds for most of the recent period,
but now that 10-year yields have fallen, we expect to underweight those
securities going forward. As I mentioned earlier, we'll hold on to the agency
security and perhaps expand that position as new money comes in.

Our approach is conservative and disciplined. We believe this fund will
continue to function well as a long-term inflation hedge for investors who are
concerned about the possible impact of rising consumer prices on their
investment nest egg.

[left margin]

"WE ALSO THINK TIIS AS A WHOLE ARE UNDERVALUED AND COULD ATTRACT INVESTOR
INTEREST SIMPLY ON A RELATIVE VALUE BASIS."

[pie charts - data below]

PORTFOLIO COMPOSITION BY MATURITY

AS OF SEPTEMBER 30, 1998
10-Year Notes 40%
5-Year Notes 29%
30-Year Bonds 31%

AS OF MARCH 31, 1998
10-Year Notes 58%
5-Year Notes 42%

6 1-800-345-2021

Inflation-Adjusted Treasury--Sch. of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$2,037,940 U.S. Treasury Inflation Indexed
Notes, 3.625%, 7/15/02 $ 2,046,847
772,523 U.S. Treasury Inflation Indexed
Notes, 3.375%, 1/15/07 760,688
2,144,104 U.S. Treasury Inflation Indexed
Notes, 3.625%, 4/15/28 2,138,743
------------
TOTAL U.S. TREASURY SECURITIES--70.5% 4,946,278
------------
(Cost $4,907,681)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES--29.5%
$2,163,063 TVA Inflation Indexed Notes,
3.375%, 1/15/07 $2,068,386
------------
(Cost $2,085,438)

TOTAL INVESTMENT SECURITIES--100.0% $7,014,664
============
(Cost $6,993,119)

NOTES TO SCHEDULE OF INVESTMENTS

TVA = Tennessee Valley Authority

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 7

Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

ASSETS
Investment securities, at value
(identified cost of $6,993,119)
(Note 3) ................................................ $ 7,014,664
Investment in affiliated money
market fund (Note 2) .................................... 92,535
Cash ...................................................... 4,715
Interest receivable ....................................... 71,628
-----------
7,183,542
-----------
LIABILITIES
Disbursements in excess
of demand deposit cash .................................. 1,189
Payable for capital shares redeemed ....................... 71
Accrued management fees (Note 2) .......................... 2,757
Distribution and service
fees payable (Note 2) ................................... 4
Dividends payable ......................................... 3,522
Payable for trustees' fees
and expenses ............................................ 944
Accrued expenses and
other liabilities ....................................... 420
-----------
8,907
-----------
Net Assets ................................................ $ 7,174,635
===========
NET ASSETS CONSIST OF:
Capital paid in ........................................... $ 7,214,116
Accumulated net realized
loss on investments ..................................... (61,026)
Net unrealized appreciation
on investments (Note 3) ................................. 21,545
-----------
$ 7,174,635
===========
Investor Class
Net assets ................................................ $ 7,164,376
Shares outstanding ........................................ 737,508
Net asset value per share ................................. $ 9.71

Advisor Class
Net assets ................................................ $ 10,259
Shares outstanding ........................................ 1,056
Net asset value per share ................................. $ 9.71

See Notes to Financial Statements

8 1-800-345-2021

Statement of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

INVESTMENT INCOME

Income:
Interest .................................................... $ 165,821
---------
Expenses (Note 2):
Management fees ............................................. 14,460
Distribution fees -- Advisor Class .......................... 7
Service fees -- Advisor Class ............................... 7
Trustees' fees and expenses ................................. 3,779
---------
Total expenses ............................................ 18,253
Amount reimbursed ........................................... (3,626)
---------
Net expenses ................................................ 14,627
---------
Net investment income ....................................... 151,194
---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (NOTE 3)
Net realized loss on investments ............................ (10,453)
Change in net unrealized
depreciation on investments ............................... 73,767
---------
Net realized and unrealized
gain on investments ....................................... 63,314
---------
Net Increase in Net Assets
Resulting from Operations ................................. $ 214,508
=========

Fund OPERATIONS include:

* income earned from investments

* management fees and other expenses

* gains or losses from selling investments (known as realized gains or losses)

* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)

See Notes to Financial Statements

www.americancentury.com 9

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MARCH 31, 1998

SEPTEMBER 30, MARCH 31,
Increase in Net Assets 1998 1998

OPERATIONS
Net investment income ........................ $ 151,194 $ 183,628
Net realized loss on investments ............. (10,453) (50,573)
Change in net unrealized
depreciation on investments ................ 73,767 (6,914)
----------- -----------
Net increase in net assets
resulting from operations ................. 214,508 126,141
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................... (151,194) (183,628)
----------- -----------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Net increase in net assets
from capital share transactions ............ 1,831,943 3,059,489
----------- -----------
Net increase in net assets ................... 1,895,257 3,002,002
NET ASSETS
Beginning of period .......................... 5,279,378 2,277,376
----------- -----------
End of period ................................ $ 7,174,635 $ 5,279,378
=========== ===========

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF CHANGES IN NET ASSETS--These statements show how
the fund's net assets changed over the past two reporting periods. It details
how much a fund grew or shrank as a result of:

* operations--a summary of the Statement of Operations from the previous page
for the most recent period

* distributions--income and gains distributed to shareholders

* share transactions--shareholders' purchases, reinvestments, and redemptions

Net assets at the beginning of the period plus the sum of operations,
distributions and capital share transactions result in net assets at the end of
the period.

See Notes to Financial Statements

10 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

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
investments 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 commenced on June 15, 1998.
The following significant accounting policies are in accordance with generally
accepted accounting principles.

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.

Security Transactions--Security transactions are accounted for as of the
trade date. 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.

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, received 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.

Income Tax Status--It is the Fund's policy to distribute all net investment
income and net realized 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.

Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions 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--Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.

www.americancentury.com 11

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

- --------------------------------------------------------------------------------
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 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 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 class average daily closing net assets during the
previous month multiplied by the monthly management fee rate. ACIM waived
expenses which exceeded 0.50% of average daily net assets through May 31, 1998.

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. Fees incurred by
the Fund under the Plan during the six months ended September 30, 1998 were $14

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

As of September 30, 1998, the Fund had invested $92,535 in shares of
American Century-Benham Capital Preservation Money Market Fund (Money Market
Fund). The terms of the transaction were identical to those with non-related
entities except that, to avoid duplicate management fees, the Fund did not pay
ACIM management fees with respect to assets invested in the Money Market Fund.

12 1-800-345-2021

Purchases and sales of U.S. Treasury and Agency obligations, excluding
short-term investments, totaled $7,442,867 and $5,783,033, respectively.

As of September 30, 1998, accumulated net unrealized depreciation was
$15,267, based on the aggregate cost of investments for federal income tax
purposes of $7,029,931. Accumulated net unrealized depreciation consisted of
unrealized appreciation of $38,597 and unrealized depreciation of $53,864.

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

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

SHARES AMOUNT
INVESTOR CLASS
Six months ended September 30, 1998
Sold ........................................... 335,077 $ 3,224,106
Issued in reinvestment of distributions ........ 13,874 133,465
Redeemed ....................................... (159,775) (1,535,809)
----------- -----------
Net increase ................................... 189,176 $ 1,821,762
=========== ===========
Year ended March 31, 1998
Sold ........................................... 539,728 $ 5,246,272
Issued in reinvestment of distributions ........ 17,153 166,664
Redeemed ....................................... (242,312) (2,353,447)
----------- -----------
Net increase ................................... 314,569 $ 3,059,489
=========== ===========
ADVISOR CLASS
June 15, 1998(1)
through September 30, 1998
Sold ........................................... 1,042 $ 10,051
Issued in reinvestment of distributions ........ 14 130
Redeemed ....................................... -- --
----------- -----------
Net increase ................................... 1,056 $ 10,181
=========== ===========

(1) Commencement of sale of the Advisor Class.

www.americancentury.com 13

Inflation-Adjusted Treasury--Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

Investor Class
1998(1) 1998 1997(2)
PER-SHARE DATA
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 9.63 $ 9.74 $ 10.00
--------- --------- ---------
Income From Investment Operations
Net Investment Income ............... 0.25 0.44 0.06
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ... 0.08 (0.11) (0.26)
--------- --------- ---------
Total From Investment Operations .... 0.33 0.33 (0.20)
--------- --------- ---------
Distributions
From Net Investment Income .......... (0.25) (0.44) (0.06)
--------- --------- ---------
Net Asset Value, End of Period ........ $ 9.71 $ 9.63 $ 9.74
========= ========= =========
Total Return(3) ..................... 3.44% 3.45% (1.98)%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .................. 0.51%(4)(5) 0.50% 0.50%(4)
Ratio of Net Investment Income to
Average Net Assets .................. 5.30%(4)(5) 4.45% 5.03%(4)
Portfolio Turnover Rate ............... 101% 69% --
Net Assets, End of Period
(in thousands) ........................ $ 7,164 $ 5,279 $ 2,277
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

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

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

(4) Annualized.

(5) ACIM has voluntarily reimbursed a portion of its trustees' fees and
expenses from April 1, 1998 through September 30, 1998. In absence of the
reimbursement, the annualized ratio of operating expenses to average net
assets and annualized ratio of net investment income to average net assets
would have been 0.64% and 5.17%, respectively.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income and capital gains or losses

* income and capital gains distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

14 1-800-345-2021

Inflation-Adjusted Treasury--Financial Highlights
- --------------------------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED

Advisor Class
1998(1)
PER-SHARE DATA
Net Asset Value, Beginning of Period .................... $ 9.64
-------
Income From Investment Operations
Net Investment Income ................................. 0.13
Net Realized and Unrealized Gain
on Investment Transactions ............................ 0.07
-------
Total From Investment Operations ...................... 0.20
-------
Distributions
From Net Investment Income ............................ (0.13)
-------
Net Asset Value, End of Period .......................... $ 9.71
=======
Total Return(2) ....................................... 2.10%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets .................................... 0.77%(3)(4)
Ratio of Net Investment Income to
Average Net Assets .................................... 4.90%(3)(4)
Portfolio Turnover Rate ................................. 101%
Net Assets, End of Period
(in thousands) ........................................ $ 10

(1) June 15, 1998 (commencement of sale) through September 30, 1998
(unaudited).

(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) ACIM has voluntarily reimbursed a portion of its trustees' fees and
expenses from April 1, 1998 through September 30, 1998. In absence of the
reimbursement, the annualized ratio of operating expenses to average net
assets and annualized ratio of net investment income to average net assets
would have been 0.98% and 4.78%, respectively.

See Notes to Financial Statements

www.americancentury.com 15

Share Class and Retirement Account Information
- --------------------------------------------------------------------------------

SHARE CLASSES

American Century offers two classes of shares for Inflation-Adjusted
Treasury. One class is for investors who buy directly from American Century, and
the other is for investors who buy through financial intermediaries.

The original class of Inflation-Adjusted Treasury 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 do not pay any
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, which is 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 the total expense ratio
of the Investor Class.

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

RETIREMENT ACCOUNT INFORMATION

16 1-800-345-2021

Background Information
- --------------------------------------------------------------------------------

INVESTMENT PHILOSOPHY AND 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.

[right margin]

INVESTMENT TEAM LEADERS

PORTFOLIO MANAGER
DAVE SCHROEDER

www.americancentury.com 17

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 14-15.

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 the fund on a
given date.

INVESTMENT TERMS

* 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.

* U.S. GOVERNMENT AGENCY INFLATION-INDEXED SECURITIES--similar to the Treasury
securities, but issued by U.S. government agencies such as the Tennessee Valley
Authority.

18 1-800-345-2021

Notes
- --------------------------------------------------------------------------------

www.americancentury.com 19

Notes
- --------------------------------------------------------------------------------

20 1-800-345-2021

[inside back cover]

American Century Funds

[right margin]

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

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

[recycled logo]
Recycled

[back cover]

[40 Years]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES

9811 (c)1998 American Century Services Corporation
SH-BKT-14215 Funds Distributor, Inc.
<PAGE>
[front cover] September 30, 1998

SEMIANNUAL REPORT
- -----------------
AMERICAN CENTURY

[graphic of stairs]

BENHAM GROUP
- ------------------------------------
SHORT-TERM TREASURY
INTERMEDIATE-TERM TREASURY
LONG-TERM TREASURY

[american century logo(reg.sm)]
American
Century
[inside front cover]

A Note from the Founder
- --------------------------------------------------------------------------------

I founded American Century on the belief that if we can make you
successful, you, in turn, will make us successful. That is the principle that
will guide us in the future.

Sincerely,
/s/James E. Stowers

About our New Report Design
- --------------------------------------------------------------------------------

Why We Changed

What's New

The reports are designed to be attractive and easy to use whether you're reading
them in depth or just skimming.

New features include:

* Larger type size in many sections.
* Brief explanations of the financial statements.
* More prominent graphs and charts.
* Quotes in the margins to highlight report content.

THE BOTTOM LINE.

The new reports also use roughly the same amount of paper as the old ones.
Previously, paper was trimmed and thrown away to produce the smaller report
size.

We believe we've come up with a more interesting, informative and user-friendly
publication.

We hope you enjoy it.

[left margin]

Benham Group
Short-Term Treasury
(BSTAX)

Benham Group
Intermediate-Term Treasury
(CPTNX)

Benham Group
Long-Term Treasury
(BLAGX)

[40 Years logo]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

During the six months ended September 30, 1998, interest rates fell
worldwide as investors reacted to worsening global economic and financial
conditions. Concerns about problems in Asia, Russia, and Latin America swept the
global financial community. To help stem the negative tide, the Federal Reserve
(the U.S. central bank), cut its bellwether federal funds rate in September, the
first rate cut in almost three years. Two weeks later, it lowered the rate
again, providing a significant psychological boost to investors as well as to
the U.S. economy. But by the time the Federal Reserve reacted, falling interest
rates--combined with increased demand for the relative safety of U.S. Treasury
securities--had sparked the biggest rally in the Treasury market since the
Federal Reserve last cut rates in 1995.

The Benham Treasury funds performed well, providing the type of return
you'd expect in a market environment that prizes the safety and liquidity of
Treasury bonds. With Treasury prices soaring, the funds' investment team
concentrated on finding the best relative values and highest yields in the
government bond market.

Finally, we hope you like the new design of this report. It's intended to
make the important information you need about your fund easier to find and read.

We appreciate your investment with American Century.

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

[right margin]

Table of Contents
Report Highlights ........................................................ 2
Market Perspective ....................................................... 3
SHORT-TERM TREASURY
Performance Information .................................................. 4
Management Q&A ........................................................... 5
Portfolio at a Glance .................................................... 5
Schedule of Investments .................................................. 8
INTERMEDIATE-TERM TREASURY
Performance Information .................................................. 9
Management Q&A ........................................................... 10
Portfolio at a Glance .................................................... 10
Schedule of Investments .................................................. 13
LONG-TERM TREASURY
Performance Information .................................................. 14
Management Q&A ........................................................... 15
Portfolio at a Glance .................................................... 15
Schedule of Investments .................................................. 18
FINANCIAL STATEMENTS
Statements of Assets and
Liabilities .............................................................. 19
Statements of Operations ................................................. 20
Statements of Changes
in Net Assets ............................................................ 21
Notes to Financial
Statements ............................................................... 22
Financial Highlights ..................................................... 27
OTHER INFORMATION
Share Class and Retirement
Account Information ...................................................... 33
Background Information
Investment Philosophy
and Policies .......................................................... 34
Comparative Indices ................................................... 34
Lipper Rankings ....................................................... 34
Investment Team
Leaders ............................................................... 34
Glossary ................................................................. 35

www.americancentury.com 1

Report Highlights
- --------------------------------------------------------------------------------

MARKET PERSPECTIVE

* Treasury bonds produced excellent returns during the six months ended
September 30, 1998, as interest rates fell to record lows.

* Rates declined dramatically for several reasons:

* Global economic problems led to lower expectations for U.S. economic
growth and inflation.

* Investors worldwide flocked to U.S. Treasury bonds as a safe haven from
global turmoil.

* Hedge funds and international investors were forced to buy back Treasury
securities they'd used to hedge investments in risky emerging market
bonds.

* The Federal Reserve cut its federal funds rate from 5.5% to 5.0% by early
October.

* The yield difference between Treasurys and other government bonds widened,
resulting in better performance for Treasurys.

SHORT-TERM TREASURY

* Short-Term Treasury's return lagged the return of the average short Treasury
fund, according to Lipper Analytical Services.

* The fund has a shorter duration than its Lipper group, which means Short-
Term Treasury will tend to outperform when interest rates rise and
underperform when rates fall.

* We reduced our holdings of government agency bonds and increased our
exposure to Treasury securities.

* We think it's possible short-term interest rates could head lower--slower
economic growth has taken the starch out of inflation, so the Fed probably
has room to lower rates even further.

* We'll likely maintain a slightly long duration--which should benefit returns
if rates decline--and focus on adding higher-yielding securities.

INTERMEDIATE-TERM TREASURY

* Intermediate-Term Treasury produced solid returns, about in line with those
of the average intermediate Treasury fund, according to Lipper Analytical
Services.

* The portfolio had a slightly long duration, which helped boost returns as
rates declined.

* We reduced our exposure to government agency securities--which
underperformed Treasurys--from 30% to 12% of assets.

* We expect the yield curve to steepen, with short-term rates falling faster
than long-term rates.

* We're likely to maintain Intermediate-Term Treasury's current asset
allocation and duration going forward.

LONG-TERM TREASURY

* Long-Term Treasury continued to produce strong returns relative to its
Lipper category average.

* The fund has a longer duration than its Lipper group, which means Long-Term
Treasury will tend to outperform when interest rates fall.

* We held higher-yielding government agency and older Treasury securities.
These securities should perform well if yield spreads narrow.

* We think long-term interest rates will likely trade in a range between 4.75%
and 5.75% for the near term.

* We'll adjust duration as rates change, shortening duration to lock in gains
when rates approach the low end of the range and lengthening duration when
yields approach 5.75%.

[left margin]

SHORT-TERM TREASURY(1)
(BSTAX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 4.40%(2)
1 Year 7.48%
NET ASSETS: $54.7 million
30-DAY SEC YIELD: 4.36%
INCEPTION DATE: 9/8/92

INTERM.-TERM TREASURY(1)
(CPTNX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 7.99%(2)
1 Year 12.58%
NET ASSETS: $443.5 million
30-DAY SEC YIELD: 4.40%
INCEPTION DATE: 5/16/80

LONG-TERM TREASURY(1)
(BLAGX)
TOTAL RETURNS: AS OF 9/30/98
6 Months 11.85%(2)
1 Year 20.80%
NET ASSETS: $146.7 million
30-DAY SEC YIELD: 4.86%
INCEPTION DATE: 9/8/92

(1) Investor Class.
(2) Not annualized.

See Total Returns on pages 4, 9, and 14. Investment terms are defined in the
Glossary on page 35.

2 1-800-345-2021

EXCEPTIONAL PERFORMANCE

Treasury securities produced excellent returns during the six months ended
September 30, 1998. Bond prices, which move opposite yields, rose dramatically
thanks to a sharp decline in U.S. interest rates (see the Yield Curve graph at
right).

DECLINING INTEREST RATES

Key to the decline in rates was severe global economic turmoil--a series of
financial crises around the world threatened to apply the brakes to global
economic growth. Financial and economic problems that first surfaced in
Southeast Asia in late 1997 mushroomed in 1998, spreading to Russia and Latin
America.

These crises calmed fears that inflationary pressures were intensifying.
This was especially welcome in the U.S., where healthy economic growth, robust
consumer spending, and a 28-year low in unemployment had raised the possibility
of a short-term interest rate increase by the Federal Reserve.

By August, however, it was clear that the world's economic engine was
downshifting. The tranquilizing effect on inflation and the U.S. economy was so
pronounced that the Fed lowered short-term interest rates in September and again
in October-- its first rate cuts in three years. Those moves brought the federal
funds rate down from 5.5% to 5.0%

FLIGHT TO QUALITY

The global economic problems investing at American Century wreaked havoc on
stock and bond markets worldwide. Investors grew concerned about the outlook for
corporate profits, while a number of foreign debt markets suffered downgrades
and defaults. As a result, investors abandoned all but the safest and most
liquid investments--U.S. Treasury securities.

In addition, many international bond traders and hedge funds began buying
back Treasurys in August to unwind "short" positions. These investors had
profited from owning emerging-market and other higher-yielding debt securities
and hedging those investments with Treasury bonds (see the accompanying table
for comparative bond sector returns).

But those trades fell apart in the third quarter of 1998, when economies
and financial markets overseas collapsed, while Treasury prices rose sharply.
Hedge funds were forced to unwind those trades, selling their emerging market
debt and buying back Treasurys. That demand helped send the yield on the 30-year
Treasury bond below 5% for the first time ever, ultimately reaching a record low
of 4.71% in early October.

YIELD SPREADS WIDEN

In the past few months, the yield difference--or spread--between Treasurys
and government agencys widened. That's largely because agency securities didn't
see the same surge in demand from international investors that boosted
Treasurys. As a result, Treasurys outperformed agency securities over the past
six months.

[right margin]

"TREASURY SECURITIES PRODUCED EXCELLENT RETURNS DURING THE SIX MONTHS ENDED
SEPTEMBER 30, 1998."

TREASURY VS. EMERGING MARKET BOND RETURNS

3/31/98-9/30/98 1/1/97-12/31/97
TREASURYS 8.51% 9.65%
EMERGING MARKET BONDS -18.79% 16.85%

Source: Salomon Smith Barney

[line chart - data below]

TREASURY YIELD CURVES

Years to Maturity 3/31/98 9/30/98
1 5.37% 4.39%
2 5.55% 4.26%
3 5.58% 4.38%
4 5.65% 4.35%
5 5.61% 4.21%
6 5.66% 4.29%
7 5.71% 4.36%
8 5.69% 4.38%
9 5.67% 4.39%
10 5.65% 4.41%
11 5.69% 4.48%
12 5.72% 4.55%
13 5.76% 4.63%
14 5.79% 4.70%
15 5.83% 4.77%
16 5.86% 4.84%
17 5.90% 4.91%
18 5.93% 4.99%
19 5.97% 5.06%
20 6.00% 5.13%
21 5.99% 5.11%
22 5.99% 5.10%
23 5.98% 5.08%
24 5.97% 5.07%
25 5.97% 5.05%
26 5.96% 5.03%
27 5.95% 5.02%
28 5.94% 5.00%
29 5.94% 4.99%
30 5.93% 4.97%

Source: Bloomberg Financial Markets

www.americancentury.com 3

Short-Term Treasury--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 9/8/92) ADVISOR CLASS (INCEPTION 10/6/97)
SHORT-TERM LEHMAN 1- TO 3-YEAR SHORT U.S. TREASURY FUNDS(2) SHORT-TERM LEHMAN 1- TO 3-YEAR
TREASURY GOVERNMENT INDEX AVERAGE RETURN FUND'S RANKING TREASURY GOVERNMENT INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ............ 4.40% 4.65% 4.97% -- 4.27% 4.65%
1 YEAR ................. 7.48% 7.93% 8.08% 15 OUT OF 25 -- --
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................ 6.12% 6.81% 6.47% 13 OUT OF 18 -- --
5 YEARS ................ 5.26% 5.93% 5.50% 9 OUT OF 13 -- --
LIFE OF FUND ........... 5.18% 5.76%(3) 5.41%(3) 6 OUT OF 9(3) 6.90% 7.13%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

(3) Since 9/30/92, the date nearest the class's inception for which data are
available.

(4) Since 10/31/97, the date nearest the class's inception for which data are
available.

See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER LIFE OF FUND

Value on 9/30/98
Lehman 1- to 3-Year Govt. Index $13,995
Short-Term Treasury $13,542

Short-Term Lehman 1- to 3-Year
Treasury Govt. Index
DATE VALUE VALUE
9/30/92* $10,000 $10,000
12/31/92 $9,992 $10,021
3/31/93 $10,247 $10,238
6/30/93 $10,355 $10,352
9/30/93 $10,480 $10,494
12/31/93 $10,525 $10,561
3/31/94 $10,468 $10,508
6/30/94 $10,466 $10,509
9/30/94 $10,553 $10,614
12/31/94 $10,541 $10,614
3/31/95 $10,872 $10,965
6/30/95 $11,187 $11,313
9/30/95 $11,334 $11,482
12/31/95 $11,589 $11,763
3/31/96 $11,602 $11,809
6/30/96 $11,689 $11,933
9/30/96 $11,862 $12,133
12/31/96 $12,066 $12,364
3/31/97 $12,138 $12,443
6/30/97 $12,381 $12,720
9/30/97 $12,604 $12,969
12/31/97 $12,803 $13,186
3/31/98 $12,974 $13,374
6/30/98 $13,160 $13,578
9/30/98 $13,542 $13,995

$10,000 investment made 9/30/92

* From 9/30/92 (the date nearest the class's inception for which index data are
available).

These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). The chart at left shows the growth of a $10,000 investment over the life
of the fund, while the chart below shows the fund's year-by-year performance.
The Lehman 1- to 3-Year Government Index is provided for comparison in each
chart. Short-Term Treasury's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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.

[bar chart - data below]

ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)

Short-Term Lehman 1- to 3-Year
Treasury Govt. Index
DATE RETURN RETURN
9/30/93 4.77% 4.94%
9/30/94 0.69% 1.14%
9/30/95 7.40% 8.18%
9/30/96 4.65% 5.67%
9/30/97 6.26% 6.89%
9/30/98 7.48% 7.93%

4 1-800-345-2021

Short-Term Treasury--Q&A
- --------------------------------------------------------------------------------
/photo of Newlin Rankin/

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

HOW DID SHORT-TERM TREASURY PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30,
1998?

The fund's returns generally reflected the favorable performance of
Treasury bonds. However, the portfolio trailed the average short-term Treasury
fund. For the six-month period, Short-Term Treasury had a total return of 4.40%,
compared with the 4.97% average return of the 26 "Short U.S. Treasury Funds"
tracked by Lipper Analytical Services. (See the Total Returns table on the
previous page for additional fund performance comparisons.)

WHY DID THE FUND UNDERPERFORM ITS PEER GROUP?

Primarily because we had a more conservative duration position than the
average short Treasury fund. We manage the fund to deliver a pure play on the
short end of the government bond market, typically keeping its duration below
two years. That's shorter than the average duration of the short Treasury funds
in the Lipper category.

That approach means the fund will typically do better than its peers when
rates rise. But in the most recent six-month period, when interest rates fell
dramatically, our shorter duration limited price gains.

WHAT IS DURATION?

Duration is a measure of a bond portfolio's sensitivity to changes in
interest rates. You can use duration to estimate the approximate percentage
change in the share price of a bond portfolio given a 1% change in interest
rates. For example, the share price of a portfolio with a duration of two years
would rise approximately 2% in response to a one percentage point drop in
interest rates.

So, the longer a fund's duration, the more its price will rise when
interest rates fall, and the more it will fall when interest rates rise.
Conversely, a shorter duration means the share price fluctuates less when rates
change.

Accurately predicting the short-term direction of rates is extremely
difficult, so we prefer to avoid making aggressive duration bets. Over the last
six months, we increased duration only modestly (see the Portfolio at a Glance
table at right).

WHY DID SHORT-TERM TREASURY'S STAKE IN AGENCY SECURITIES DECLINE DURING THE PAST
SIX MONTHS?

Largely because many of our agency securities were called away from us.
When a bond is "called," it's refinanced by the issuer prior to maturity, much
like a homeowner refinancing a mortgage. Calls are undesirable because they
leave the bondholder to reinvest the money from the called bond at the new,
lower interest rate. Callable bonds also don't participate fully in market
rallies when interest rates fall. That's because the bond market tends to price

[right margin]

"THE FUND'S RETURNS GENERALLY REFLECTED THE FAVORABLE PERFORMANCE OF
TREASURY BONDS."

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 10 16
WEIGHTED AVERAGE
MATURITY 1.9 YRS 1.7 YRS
AVERAGE DURATION 1.6 YRS 1.5 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.51%* 0.55%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 4.36% 4.11%

Investment terms are defined in the Glossary on page 35.

www.americancentury.com 5

Short-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

callable bonds based on their call date. That effectively shortens the
security's duration, which is the opposite of what you want when interest rates
are falling.

During the past six months, we used the proceeds from our called agency
bonds to purchase Treasurys. That's because we expect lower interest rates to
prompt agencies to call more of their bonds in the months ahead. That
expectation also led us to hold non-callable agency bonds. Non-callable bonds
can't be redeemed prior to their original maturity date, so they maintain their
interest rate sensitivity when rates decline.

WHY DID TREASURY SECURITIES DO SO WELL RELATIVE TO OTHER FIXED-INCOME
INVESTMENTS DURING THE PAST SIX MONTHS?

It was mostly a simple case of stronger demand butting up against somewhat
weaker supply. The demand for U.S. Treasurys grew dramatically as investors fled
troubled markets across the globe and sought a safe haven in U.S. Treasurys.
Crumbling Asian, Russian, and Latin American equity and debt markets sent
investors scurrying for less risky investments. Later, news of hedge fund losses
incited a new rush to safety as investors sold mortgage-backed, high-yield, and
other types of riskier bonds (see page 3). U.S. stock investors also ran for
cover, worried that the widening global crisis would pull corporate earnings
down with it.

As for the supply side of the equation, the government curtailed its
issuance of Treasurys because it had less need to borrow, thanks to a federal
budget surplus. Favorable supply and demand conditions coupled with a Fed
interest rate cut in September helped Treasurys stage an impressive rally and
push the yield on the bellwether 30-year Treasury bond below 5%.

WHAT TREASURYS DID YOU EMPHASIZE?

The vast majority of the fund's Treasury holdings are securities known as
"off-the-run" bonds, as opposed to the current, or "on-the-run," issue. As
global investors converged on the U.S. Treasury market, they gravitated toward
the most liquid (easily traded) newly issued "on-the-run" securities. That
pushed the yields of on-the-run bonds significantly lower than yields of older,
off-the-run securities. As a result, we were able to purchase attractively
priced off-the-run short-term Treasurys with yields as much as 15 basis points
higher than on-the-run bonds (0.15%--a basis point equals 0.01%).

WHAT IS YOUR OUTLOOK FOR INTEREST RATES?

Continued problems out of Asia, Russia, and Latin America finally appear to
have taken a toll on U.S. economic growth. The U.S. economy lost some steam in
the third quarter of 1998, growing at a 3.3% annual rate, compared to a 5.4%
rate in the first quarter. In our opinion, the slowdown has cooled off any
inflationary pressures that were brewing earlier in the year. As a result, we
believe that to prevent further economic weakness, the Fed will continue to
lower short-term interest rates by as much as 50 basis points (0.50%) over the
next six months or so.

[left margin]

"ACCURATELY PREDICTING THE SHORT-TERM DIRECTION OF RATES IS EXTREMELY DIFFICULT,
SO WE PREFER TO AVOID MAKING AGGRESSIVE DURATION BETS."

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
Treasury Notes 74%
Agency Notes 22%
Repos 3%
STRIPS 1%

AS OF MARCH 31, 1998
Treasury Notes 64%
Agency Notes 33%
STRIPS 2%
Repos 1%

Security types are defined on page 35.

6 1-800-345-2021

Short-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

GIVEN THAT OUTLOOK, HOW WILL YOU MANAGE THE FUND GOING FORWARD?

We plan to maintain the portfolio's duration around one and a half years.
We also plan to continue the fund's current asset allocation, with a majority of
assets in Treasurys and the remainder in higher-yielding government agency
securities. That's because we think that going forward, agency securities offer
higher expected total returns than Treasurys, particularly if the yield spread
between short-term Treasurys and other government securities narrows. With
interest rates so low, agencies will be poised to call more of their debt, so
we're likely to continue to emphasize non-callable agency bonds.

[right margin]

"WE THINK THAT GOING FORWARD, AGENCY SECURITIES OFFER HIGHER EXPECTED TOTAL
RETURNS THAN TREASURYS."

[pie charts - data below]

PORTFOLIO COMPOSITION BY AGENCY HOLDINGS

AS OF SEPTEMBER 30, 1998
Federal Home Loan Bank 49%
Federal Farm Credit Bank 33%
Student Loan Marketing Assoc. 18%

AS OF MARCH 31, 1998
Federal Home Loan Bank 44%
Federal Farm Credit Bank 40%
Student Loan Marketing Assoc. 16%

www.americancentury.com 7

Short-Term Treasury--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$ 750,000 STRIPS -- PRINCIPAL, 6.03%,
5/15/99(1) $ 729,205
6,500,000 U.S. Treasury Notes, 5.875%,
7/31/99 6,565,845
16,000,000 U.S. Treasury Notes, 8.75%,
8/15/00 17,242,400
17,400,000 U.S. Treasury Notes, 5.625%,
2/28/01 17,894,509
--------------

TOTAL U.S. TREASURY SECURITIES--74.8% 42,431,959
--------------
(Cost $41,727,880)

U.S. GOVERNMENT AGENCY SECURITIES
1,000,000 FFCB, MTN, 6.125%, 10/22/99 1,010,910
3,000,000 FFCB, MTN, 8.90%, 6/6/00 3,205,500
2,100,000 FHLB, 6.06%, 7/28/00 2,150,883
4,000,000 FHLB, 5.97%, 12/11/00 4,104,440
2,265,000 SLMA, 5.88%, 2/6/01 2,266,336
--------------

TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--22.4% 12,738,069
--------------
(Cost $12,489,302)

Principal Amount Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS--2.8%

Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.38%, dated 9/30/98,
due 10/1/98 (Delivery value $1,571,235) $ 1,571,000
--------------
(Cost $1,571,000)

TOTAL INVESTMENT SECURITIES--100.0% $56,741,028
==============
(Cost $55,788,182)

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 or Principal of Securities

(1) Zero-coupon bond. The yield to maturity at purchase is indicated.
Zero-coupon bonds are purchased at a substantial discount from their value
at maturity.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

8 1-800-345-2021

Intermediate-Term Treasury--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 5/16/80) ADVISOR CLASS (INCEPTION 10/9/97)
INTERMEDIATE- SALOMON 3- TO 10- INTERMEDIATE U.S. TREASURY FUNDS(2) INTERMEDIATE- SALOMON 3- TO 10-
TERM TREASURY YEAR TREASURY INDEX AVERAGE RETURN FUND'S RANKING TERM TREASURY YEAR TREASURY INDEX
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ......... 7.99% 8.75% 8.08% -- 7.85% 8.75%
1 YEAR .............. 12.58% 13.66% 12.62% 8 OUT OF 13 -- --
- -------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ............. 8.49% 9.13% 7.88% 3 OUT OF 9 -- --
5 YEARS ............. 6.54% 7.21% 6.15% 4 OUT OF 8 -- --
10 YEARS ............ 8.19% 8.76% 8.20% 2 OUT OF 3 -- --
LIFE OF FUND ........ 9.02% 10.04%(3) 9.05%(3) 1 OUT OF 1(3) 12.06% 11.87%(4)
</TABLE>
(1) Returns for periods less than one year are not annualized.

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

(3) Since 5/31/80, the date nearest the class's inception for which data are
available.

(4) Since 10/31/97, the date nearest the class's inception for which data are
available.

See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER 10 YEARS

Value on 9/30/98
Salomon 3- to 10-Year Treasury Index $23,149
Intermediate-Term Treasury $21,966

Intermediate-Term Salomon 3- to 10-Year
Treasury Treasury Index
DATE VALUE VALUE
9/30/88 $10,000 $10,000
9/30/89 $10,863 $10,961
9/30/90 $11,744 $11,882
9/30/91 $13,267 $13,485
9/30/92 $14,923 $15,171
9/30/93 $16,006 $16,342
9/30/94 $15,693 $16,093
9/30/95 $17,202 $17,813
9/30/96 $18,031 $18,718
9/30/97 $19,514 $20,366
9/30/98 $21,966 $23,149

$10,000 investment made 9/30/88

These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). The chart at left shows the growth of a $10,000 investment in the fund
over 10 years, while the chart below shows the fund's year-by-year performance.
The Salomon 3- to 10-Year Treasury Index is provided for comparison in each
chart. Intermediate-Term Treasury's total returns include operating expenses
(such as transaction costs and management fees) that reduce returns, while the
total returns of the index do not. 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.

[bar chart - data below]

ONE-YEAR RETURNS OVER 10 YEARS (PERIODS ENDED SEPTEMBER 30)

Intermediate-Term Salomon 3- to 10-Year
Treasury Treasury Index
DATE RETURN RETURN
9/30/89 8.63% 9.61%
9/30/90 8.11% 8.40%
9/30/91 12.97% 13.49%
9/30/92 12.48% 12.51%
9/30/93 7.26% 7.72%
9/30/94 -1.96% -1.53%
9/30/95 9.62% 10.69%
9/30/96 4.82% 5.08%
9/30/97 8.22% 8.80%
9/30/98 12.58% 13.66%

www.americancentury.com 9

Intermediate-Term Treasury--Q&A
- --------------------------------------------------------------------------------
/photo of Bob Gahagan/

An interview with Bob Gahagan, a portfolio manager on the Intermediate-Term
Treasury fund investment team.

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Intermediate-Term Treasury posted solid returns, generally reflecting the
exceptional performance of Treasury bonds. For the six-month period, the fund
returned 7.99%, about in line with the average intermediate U.S. Treasury
fund--the 14 "Intermediate U.S. Treasury Funds" tracked by Lipper Analytical
Services had an average return of 8.08%. (See the Total Returns table on the
previous page for additional fund performance comparisons.)

HOW DID YOU POSITION INTERMEDIATE-TERM TREASURY?

We maintained a slightly long duration, which helped the fund capture extra
return as rates declined. Duration measures the approximate percentage change in
a bond portfolio's share price given a 1% change in interest rates. The fund had
a duration of 4.4 years as of September 30, so its share price would rise by
about 4.4% if interest rates declined a full percentage point. As this example
illustrates, the longer a fund's duration, the more its price will rise when
rates fall, and the more it will fall when rates rise.

We typically make only modest adjustments to duration, keeping it in a
relatively narrow range between four and five years. Instead, we focus on
changes to asset allocation and yield curve position.

WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET ALLOCATION?

We increased our stake in U.S. Treasury securities, bringing them to 88% of
the portfolio by the end of September (see the Portfolio Composition by Security
Type chart on page 11), while reducing our agency holdings from 30% to 12% of
total investments. We lowered our exposure to government agency securities by
taking advantage of selling opportunities in the third quarter. We did that
because it was unclear when the global economic turmoil that caused agency bonds
to underperform would subside.

WHY DID GLOBAL TURMOIL CAUSE GOVERNMENT AGENCY SECURITIES TO LAG TREASURYS?

One reason agency securities lagged comparable-maturity Treasurys is that
Treasurys benefited from huge investor demand for maximum credit safety and
liquidity (see the Market Perspective on page 3). Non-traditional Treasury
buyers seeking shelter from volatility in global financial markets gravitated to
Treasurys, driving prices sharply higher. Although agency securities have the
indirect backing of the U.S. government and a AAA credit rating, they didn't
experience the same surge in demand that Treasurys enjoyed.

Another important reason agency securities lagged Treasurys was that a
number of government agencies ramped up their issuance of new debt to take
advantage of the decline in rates. When interest rates fall, bond issuers

[left margin]

"INTERMEDIATE-TERM TREASURY POSTED SOLID RETURNS, GENERALLY REFLECTING THE
EXCEPTIONAL PERFORMANCE OF TREASURY BONDS."

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 18 18
WEIGHTED AVERAGE
MATURITY 6.9 YRS 6.1 YRS
AVERAGE DURATION 4.4 YRS 4.4 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.51%* 0.51%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 4.40% 4.14%

Investment terms are defined in the Glossary on page 35.

10 1-800-345-2021

Intermediate-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

often refinance, or "call," their older, higher-interest rate debt, much like
homeowners refinancing a mortgage. But before a bond can be called, there is
often a period of time when the newly issued bonds and the older, refinanced
securities are both still outstanding. That increases the supply of agency
securities, which can depress prices. Growing agency supply coupled with a
dramatic surge in demand for Treasurys caused government agency bonds to trail
Treasurys during the past six months.

ANY PREFERENCES AMONG THE TREASURYS YOU CHOSE?

We tend to hold only older Treasury securities, dubbed "off-the-run"
Treasurys, as opposed to the most recent, or "on-the-run," Treasury issue.
That's because off-the-run bonds typically have slightly higher yields than
on-the-runs. On-the-run securities yield less than off-the-run Treasurys because
the most-recently auctioned Treasury issue is typically more liquid (easier to
buy and sell) and in greater demand.

One way to measure the premium the market places on liquidity is to look at
the yield difference, or spread, between the current bond and the previously
issued security of the same maturity. For example, the spread between the
on-the-run 30-year bond and the previous issue widened dramatically from 9 basis
points in July to 40 basis points in October (0.40%--a basis point equals
0.01%).

As global events prompted more and more investors to buy Treasurys, they
typically flocked to the most liquid, on-the-run securities. In the process,
they drove prices of on-the-run bonds higher than older Treasurys. As a result,
the price gains of off-the-run Treasurys lagged those of on-the-run bonds.

We took advantage of these market irregularities by adding to our holdings
of off-the-run bonds as spreads widened. That meant we were able to buy some
very attractively priced, higher-yielding Treasurys.

WERE THERE ANY OTHER TREASURY SECTORS YOU LIKED?

Yes. We had about 10% of the portfolio in intermediate-term zero-coupon
Treasury bonds, or zeros. Zeros (shown as STRIPS in the accompanying charts)
don't make regular interest payments. Instead, they're sold at a deep discount
to their face value at maturity, and your return is the difference between what
you paid for the bond and its value when it matures. Zeros are more sensitive
than regular, coupon-bearing bonds to changes in interest rates (they have
longer durations). Holding a portion of assets in zeros aided returns as rates
declined and the yield curve steepened.

WHAT'S YOUR OUTLOOK?

Given low inflation and slowing worldwide economic growth, we believe that
the Federal Reserve has room to continue to cut rates. Where the Fed once was
intensely focused in keeping rates high enough to stave off inflation, it now
seems to have turned its focus to lowering rates to sustain economic growth and
settle financial markets. In our view, it's possible that yields on five-year
Treasury notes could fall to as low as 3.50% in the next six months or so.

We also expect the yield curve (see page 3) to steepen. By that we mean
that the difference in yield between shorter-maturity securities and longer-term
bonds will increase as short-term bond yields drop.

[right margin]

"GIVEN LOW INFLATION AND SLOWING WORLDWIDE ECONOMIC GROWTH, WE BELIEVE THAT THE
FEDERAL RESERVE HAS ROOM TO CONTINUE TO CUT RATES."

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
Treasury Notes 49%
Treasury Bonds 28%
Agency Notes 12%
STRIPS 11%

AS OF MARCH 31, 1998
Treasury Notes 46%
Treasury Bonds 12%
Agency Notes 30%
STRIPS 11%
Repos 1%

Security types are defined on page 35.

www.americancentury.com 11

Intermediate-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)
WHAT IS YOUR STRATEGY GOING FORWARD?

We're likely to "bullet," or concentrate, the portfolio in bonds with
maturities between five and seven years. That structure should perform well if
we're right that the yield curve will steepen.

In the near term, we'll likely maintain a slightly long duration. However,
we would probably shorten duration and lock in some of our gains if the yield on
the five-year Treasury note got down to as low as 3.50%; we would consider
lengthening duration if the yield were to rise to around 5%.

As for asset allocation, we'll continue to emphasize Treasury securities
until we feel comfortable that the global turmoil that caused the agency market
to underperform has subsided. We should point out that a risk to this
positioning is a flight from quality, or the flow of capital out of Treasurys
and back into stocks and higher-yielding bonds. That could result in a flatter,
rather than steeper, yield curve with higher yields and lower prices for bonds
generally.

[left margin]

"WE'RE LIKELY TO 'BULLET,' OR CONCENTRATE, THE PORTFOLIO IN BONDS WITH
MATURITIES BETWEEN FIVE AND SEVEN YEARS."

[pie charts - data below]

PORTFOLIO COMPOSITION BY AGENCY HOLDINGS

AS OF SEPTEMBER 30, 1998
Federal Home Loan Bank 59%
Federal Farm Credit Bank 41%

AS OF MARCH 31, 1998
Federal Farm Credit Bank 50%
Federal Home Loan Bank 26%
Tennessee Valley Authority 24%

12 1-800-345-2021

Intermediate-Term Treasury--Sch. of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$52,000,000 STRIPS -- PRINCIPAL, 4.79%,
11/15/01(1) $ 45,462,165
17,400,000 U.S. Treasury Bonds, 11.875%,
11/15/03 23,257,710
26,800,000 U.S. Treasury Bonds, 9.125%,
5/15/09 32,819,816
24,700,000 U.S. Treasury Bonds, 12.75%,
11/15/10 36,785,957
11,400,000 U.S. Treasury Bonds, 13.25%,
5/15/14 19,368,258
6,500,000 U.S. Treasury Bonds, 8.125%,
8/15/19 8,913,645
4,500,000 U.S. Treasury Notes, 6.25%,
10/31/01 4,738,590
18,300,000 U.S. Treasury Notes, 6.125%,
12/31/01 19,255,443
18,400,000 U.S. Treasury Notes, 6.375%,
8/15/02 19,693,336
25,500,000 U.S. Treasury Notes, 6.25%,
8/31/02 27,187,845
34,500,000 U.S. Treasury Notes, 5.75%,
8/15/03 36,613,815
10,500,000 U.S. Treasury Notes, 7.25%,
8/15/04 12,044,760

Principal Amount Value
- --------------------------------------------------------------------------------
$42,000,000 U.S. Treasury Notes, 7.875%,
11/15/04 $ 49,780,500
36,900,000 U.S. Treasury Notes, 7.50%,
2/15/05 43,216,542
--------------
TOTAL U.S. TREASURY SECURITIES--87.6% 379,138,382
--------------
(Cost $364,822,848)

U.S. GOVERNMENT AGENCY SECURITIES
20,000,000 FFCB, MTN, 6.14%, 11/22/04 21,475,400
15,000,000 FHLB, 6.14%, 12/23/04 16,115,700
14,740,000 FHLB, 6.40%, 5/26/05 15,027,135
--------------
TOTAL U.S. GOVERNMENT
AGENCY SECURITIES--12.2% 52,618,235
--------------
(Cost $49,929,849)

TEMPORARY CASH INVESTMENTS--0.2%
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.38%, dated 9/30/98,
due 10/1/98 (Delivery value $777,116) 777,000
--------------
(Cost $777,000)

TOTAL INVESTMENT SECURITIES--100.0% $432,533,617
==============
(Cost $415,529,697)

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

(1) Zero-coupon bond. The yield to maturity at purchase is indicated.
Zero-coupon bonds are purchased at a substantial discount from their value
at maturity.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

www.americancentury.com 13

Long-Term Treasury--Performance
- --------------------------------------------------------------------------------
TOTAL RETURNS AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
INVESTOR CLASS (INCEPTION 9/8/92) ADVISOR CLASS (INCEPTION 1/12/98)
LONG-TERM SALOMON LONG-TERM GENERAL U.S. TREASURY FUNDS(2) LONG-TERM SALOMON LONG-TERM
TREASURY TREAS./AGENCY INDEX AVERAGE RETURN FUND'S RANKING TREASURY TREAS./AGENCY INDEX
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 MONTHS(1) ............. 11.85% 12.93% 9.11% -- 11.71% 12.93%
1 YEAR .................. 20.80% 21.87% 15.72% 5 OUT OF 21 -- --
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS ................. 11.61% 12.29% 9.22% 3 OUT OF 18 -- --
5 YEARS ................. 8.18% 9.21% 7.64% 5 OUT OF 12 -- --
LIFE OF FUND ............ 9.93% 11.04%(3) 8.88%(3) 2 OUT OF 10(3) 10.21% 12.23%(4)

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

(2) According to Lipper Analytical Services, an independent mutual fund ranking
service.

(3) Since 9/30/92, the date nearest the class's inception for which data are
available.

(4) Since 1/31/98, the date nearest the class's inception for which data are
available.

See pages 33-35 for more information about share classes, returns, the
comparative index, and Lipper fund rankings.

[mountain chart - data below]

GROWTH OF $10,000 OVER LIFE OF FUND

Value on 9/30/98
Salomon Long-Term Treasury/Agency Index $18,733
Long-Term Treasury $17,946

Long-Term Salomon Long-Term
Treasury Treasury/Agency Index
DATE VALUE VALUE
9/30/92* $10,000 $10,000
12/31/92 $10,109 $10,108
3/31/93 $10,766 $10,775
6/30/93 $11,319 $11,354
9/30/93 $12,114 $12,059
12/31/93 $11,892 $11,870
3/31/94 $11,074 $11,143
6/30/94 $10,691 $10,827
9/30/94 $10,617 $10,760
12/31/94 $10,792 $10,953
3/31/95 $11,435 $11,659
6/30/95 $12,633 $12,929
9/30/95 $12,908 $13,247
12/31/95 $13,950 $14,338
3/31/96 $12,974 $13,369
6/30/96 $12,951 $13,358
9/30/96 $13,138 $13,565
12/31/96 $13,759 $14,216
3/31/97 $13,316 $13,775
6/30/97 $14,037 $14,534
9/30/97 $14,855 $15,371
12/31/97 $15,790 $16,362
3/31/98 $16,044 $16,620
6/30/98 $16,735 $17,398
9/30/98 $17,946 $18,733

$10,000 investment made 9/30/92

* From 9/30/92 (the date nearest the class's inception for which index data are
available).

These charts are based on Investor Class shares only; performance for other
classes will vary due to differences in fee structures (see Total Returns table
above). The chart at left shows the growth of a $10,000 investment over the life
of the fund, while the chart below shows the fund's year-by-year performance.
The Salomon Long-Term Treasury/Agency Index is provided for comparison in each
chart. Long-Term Treasury's total returns include operating expenses (such as
transaction costs and management fees) that reduce returns, while the total
returns of the index do not. 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.

[bar chart - data below]

ONE-YEAR RETURNS OVER LIFE OF FUND (PERIODS ENDED SEPTEMBER 30)

Long-Term Salomon Long-Term
Treasury Treasury/Agency Index
DATE RETURN RETURN
9/30/93 21.14% 20.71%
9/30/94 -12.35% -10.81%
9/30/95 21.57% 23.01%
9/30/96 1.78% 2.40%
9/30/97 13.08% 13.33%
9/30/98 20.80% 21.87%

14 1-800-345-2021

Long-Term Treasury--Q&A
- --------------------------------------------------------------------------------
/photo of Dave Schroeder/

An interview with Dave Schroeder, a portfolio manager on the Long-Term
Treasury fund investment team.

HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED SEPTEMBER 30, 1998?

Long-Term Treasury performed very well, producing a total return of 11.85%.
The portfolio significantly outperformed the 9.11% average return of the 22
"General U.S. Treasury Funds" tracked by Lipper Analytical Services. Long-Term
Treasury has produced consistently strong performance relative to the Lipper
group since its inception in 1992. The fund's benchmark, the Salomon Brothers
Long-Term Treasury/Agency Index, returned 12.93% for the six months. (See the
Total Returns table on the previous page for additional fund performance
comparisons.)

WHY DID THE FUND PERFORM SO WELL RELATIVE TO THE LIPPER GROUP?

Long-Term Treasury outperformed its Lipper category average because the
portfolio has a relatively long average maturity and duration. (Average maturity
and duration are measures of a bond portfolio's sensitivity to changes in
interest rates.) Having a long maturity and duration makes the fund very
sensitive to rate changes. When interest rates decline, Long-Term Treasury will
tend to perform well relative to the Lipper group. But when rates rise, the fund
typically lags the Lipper category. Interest rates fell dramatically over the
last six months, and Long-Term Treasury performed very well as a result.

Another reason for its solid relative performance is that Long-Term
Treasury carries below-average expenses. On September 30, the fund had an
annualized expense ratio of 51 basis points (a basis point equals 0.01%), while
the category average was 94 basis points. Having lower expenses means we start
out with a competitive advantage. Other things being equal, lower expenses
should translate into higher yields and returns for our shareholders.
Nevertheless, the portfolio's interest rate sensitivity will far outweigh its
expense ratio when comparing its performance with the Lipper group.

HOW DO YOU MANAGE THE FUND'S INTEREST RATE SENSITIVITY?

Our investment approach is benchmark based--we compare the portfolio
against the Salomon Long-Term Treasury/Agency benchmark index, keeping the
fund's duration within a year either way of the index. The benchmark's duration
is currently around 11 years, so our duration will vary from about 10-12 years.

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

We lengthened duration overall. However, we actually began to trim back
duration in August, when the yield on the long bond was 5.50%. We thought
economic fundamentals would keep rates above 5.50%, so we started to reduce the
portfolio's interest rate sensitivity relative to the benchmark.

[right margin]

"LONG-TERM TREASURY OUTPERFORMED ITS LIPPER CATEGORY AVERAGE BECAUSE THE
PORTFOLIO HAS A RELATIVELY LONG AVERAGE MATURITY AND DURATION."

PORTFOLIO AT A GLANCE
9/30/98 3/31/98
NUMBER OF SECURITIES 12 8
WEIGHTED AVERAGE
MATURITY 20.0 YRS 20.3 YRS
AVERAGE DURATION 11.3 YRS 10.5 YRS
EXPENSE RATIO (FOR
INVESTOR CLASS) 0.51%* 0.54%

* Annualized.

YIELD AS OF SEPTEMBER 30, 1998
INVESTOR ADVISOR
CLASS CLASS
30-DAY SEC YIELD 4.86% 4.62%

Investment terms are defined in the Glossary on page 35.

www.americancentury.com 15

Long-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

That move turned out to be premature--hedge funds began unwinding their
leveraged bets against Treasurys at about the same time, sending Treasury yields
to record lows in August and September (see the Market Perspective on page 3).
Had we not shortened the duration, the portfolio would have performed even
better. However, it's worth mentioning that our slightly more conservative
duration position paid off in October, when interest rates backed up.

YOU ADDED A VARIETY OF NEW SECURITIES TO THE PORTFOLIO (SEE THE PORTFOLIO
COMPOSITION BY SECURITY TYPE CHARTS AT LEFT). WHAT WAS THE ATTRACTION?

We added those securities because we felt their value was too compelling to
pass up. In general, we concentrate on finding the best relative values in the
long end of the government bond market. The huge demand for the safety and
liquidity of Treasury bonds in recent months caused the "spread," or difference
in yield, between Treasurys and other government bond sectors to widen (see the
Market Perspective on page 3).

LET'S LOOK AT THE GOVERNMENT AGENCY HOLDINGS FIRST. WHERE DID YOU FIND VALUE IN
THIS SECTOR?

We bought a Tennessee Valley Authority bond that was originally issued with
a yield that was 36 basis points (0.36%--a basis point equals 0.01%) higher than
the yield on a like-maturity Treasury security. But because of the market's
extreme aversion to risk, we were able to pick up this bond--with only slightly
more credit risk and slightly less liquidity than Treasurys--at a yield that was
more than 50 basis points (0.50%) over Treasury yields. We expect this security
to perform very well going forward, assuming yield spreads between agencys and
Treasurys narrow.

WHAT ABOUT THE DIFFERENT TYPES OF TREASURY SECURITIES?

We found yield disparities even among Treasury bonds--as global investors
converged on the U.S. Treasury market, they gravitated toward the most liquid,
or easily traded, newly issued securities. That pushed the yields of newer,
"on-the-run" bonds significantly lower than yields of older, "off-the-run"
securities. (The most recent Treasury bond issue of a given maturity is said to
be the on-the-run bond, as opposed to previously auctioned off-the-run bonds.)
For example, the on-the-run 30-year bond at the end of July yielded 5.72%, while
the previously issued, off-the-run 30-year Treasury had a yield of 5.81%. By
early October, the on-the-run 30-year yielded 5.00%, while the off-the-run issue
had a yield of 5.40%.

Another way of looking at it is that the spread between the on-the-run bond
and the previous issue widened dramatically from 9 basis points in July to 40
basis points in October, which gives you an idea of the premium the market was
placing on liquidity.

ASSETS GREW FROM ABOUT $100 MILLION TO ABOUT $147 MILLION OVER THE SIX MONTHS.
WHAT DID YOU DO WITH THAT NEW MONEY?

We used it to make some of the value plays we've been discussing. In
addition, we put about 10% of assets in long-term zero-coupon Treasury bonds, or
zeros. Zeros (shown as STRIPS in the chart at left) don't make regular interest
payments. Instead, they're are sold at a

[left margin]

"WE ADDED A GOVERNMENT AGENCY SECURITY TO THE PORTFOLIO BECAUSE ITS VALUE WAS
TOO COMPELLING TO PASS UP."

[pie charts - data below]

PORTFOLIO COMPOSITION BY SECURITY TYPE

AS OF SEPTEMBER 30, 1998
Treasury Bonds 57%
Agency Bonds 16%
STRIPS 12%
Repos 8%
Treasury Inflation-
Indexed Notes 7%

AS OF MARCH 31, 1998
Treasury Bonds 100%

Security types are defined on page 35.

16 1-800-345-2021

Long-Term Treasury--Q&A
- --------------------------------------------------------------------------------
(Continued)

deep discount to their face value at maturity, and your return is the difference
between what you paid for the bond and its value when it matures.

We used the zeros and some cash-equivalent investments to create a
"barbell" structure. A barbell overweights short- and long-term securities and
underweights intermediate-term bonds. When the yield curve flattens, a barbell
typically gives a better return than a structure that groups a port-folio's bond
maturities narrowly around a single maturity.

WHAT IS YOUR OUTLOOK FOR INTEREST RATES?

We doubt long-term rates can go much lower. The yield on the 30-year
Treasury bond has fallen about 200 basis points, or 2%, over the last few years,
reaching record lows in late September and early October. One reason for that
decline was that hedge funds were forced to buy back Treasurys they'd used to
hedge their bets on emerging-market bonds (see the Market Perspective on page
3), an event that's not likely to be repeated.

Another reason for the decline in rates is that inflation recently hit a
10-year low--commodity prices fell, a strong U.S. dollar made imports cheaper,
and big productivity gains allowed wages to rise without forcing prices higher.
But we don't think those optimum conditions for inflation can last. The dollar
has begun to weaken, productivity gains have slowed, and the service side of the
U.S. economy has actually seen some inflation. And if the world economy
improves, so will demand for commodities.

Barring a full-blown recession, we think we've probably already seen the
floor on long-term interest rates. As a result, we expect the yield on the
30-year Treasury bond to trade in a range between 4.75% and 5.75% for the
foreseeable future.

WITH THAT OUTLOOK IN MIND, WHAT'S YOUR STRATEGY GOING FORWARD?

We think we can add some value relative to our benchmark by slightly
shortening the fund's duration when the yield on the long bond gets down to the
bottom of the range, at around 4.75%, and lengthening when rates get near 5.75%.
We'll also continue to hold our off-the-run Treasury and government agency
bonds, which should perform well going forward if yield spreads narrow.

[right margin]

"BARRING A FULL-BLOWN RECESSION, WE THINK WE'VE PROBABLY ALREADY SEEN THE FLOOR
ON LONG-TERM INTEREST RATES."

[pie charts - data below]

PORTFOLIO COMPOSITION BY MATURITY

AS OF SEPTEMBER 30, 1998
1-5 Years 8%
10-20 Years 22%
20-25 Years 47%
25-30 Years 23%

AS OF MARCH 31, 1998
10-20 Years 53%
20-25 Years 47%

www.americancentury.com 17

Long-Term Treasury--Schedule of Investments
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

Principal Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY SECURITIES
$53,000,000 STRIPS--PRINCIPAL, 4.31%,
2/15/19(1) $ 17,740,543
6,250,000 U.S. Treasury Bonds, 13.25%,
5/15/14 10,618,563
3,100,000 U.S. Treasury Bonds, 11.25%,
2/15/15 5,273,224
13,300,000 U.S. Treasury Bonds, 7.25%,
5/15/16 16,526,181
7,500,000 U.S. Treasury Bonds, 8.875%,
2/15/19 10,961,625
8,000,000 U.S. Treasury Bonds, 8.125%,
8/15/19 10,970,640
20,000,000 U.S. Treasury Bonds, 8.75%,
8/15/20 29,243,600
10,089,900 U.S. Treasury Inflation Indexed
Notes, 3.625%, 4/15/28 10,064,675
--------------
TOTAL U.S. TREASURY SECURITIES--76.4% 111,399,051
--------------
(Cost $99,398,058)

U.S. GOVERNMENT AGENCY SECURITIES--15.8%
20,000,000 TVA, 6.75%, 11/1/25 23,114,780
--------------
(Cost $22,009,951)

Principal Amount Value
- --------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS
Repurchase Agreement, State Street Boston
Corp., (U.S. Treasury obligations), in a joint
trading account at 5.38%, dated 9/30/98,
due 10/1/98 (Delivery value $7,271,086) $ 7,270,000
Repurchase Agreement, Morgan Stanley Group, Inc.,
(U.S.Treasury obligations), in a joint trading
account at 5.30%, dated 9/30/98,
due 10/1/98 (Delivery value
$3,270,481) 3,270,000
Repurchase Agreement, Merrill Lynch & Co.,
Inc., (U.S.Treasury obligations), in a joint
trading account at 5.30%, dated 9/30/98,
due 10/1/98 (Delivery value $778,115) 778,000
--------------
TOTAL TEMPORARY CASH
INVESTMENTS--7.8% 11,318,000
--------------
(Cost $11,318,000)

TOTAL INVESTMENT SECURITIES--100.0% $145,831,831
==============
(Cost $132,726,009)

NOTES TO SCHEDULE OF INVESTMENTS

STRIPS = Separate Trading of Registered Interest and Principal of Securities

TVA = Tennessee Valley Authority

(1) Zero-coupon bond. The yield to maturity at purchase is indicated.
Zero-coupon bonds are purchased at a substantial discount from their value
at maturity.

The schedule includes:

* a list of each investment

* the principal amount of each investment

* the market value of each investment

* the percent and dollar breakdown of each investment category

See Notes to Financial Statements

18 1-800-345-2021

Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)
SHORT-TERM INTERMEDIATE-TERM LONG-TERM
TREASURY TREASURY TREASURY
ASSETS
<S> <C> <C> <C>
Investment securities, at value
(identified cost of $55,788,182,
$415,529,697, and
$132,726,009, respectively)
(Note 3) ........................... $ 56,741,028 $432,533,617 $145,831,831
Cash ................................. 119,963 6,103,221 658,779
Interest receivable .................. 523,080 7,191,735 1,844,529
------------- ------------ ------------
57,384,071 445,828,573 148,335,139
------------- ------------ ------------
LIABILITIES
Disbursements in excess
of demand deposit cash ............. 45,643 164,462 48,933
Payable for capital shares
redeemed ........................... 1,582 607,939 108,051
Accrued management fees
(Note 2) ........................... 21,978 178,512 58,358
Distribution fees payable
(Note 2) ........................... 510 207 237
Service fees payable
(Note 2) .......................... 510 207 237
Dividends payable .................... 36,262 298,859 100,098
Payable for trustees' fees
and expenses ....................... 985 1,305 1,060
Accrued expenses and
other liabilities .................. 720 1,180 1,040
------------- ------------ ------------
108,190 1,252,671 318,014
------------- ------------ ------------
Net Assets ........................... $ 57,275,881 $444,575,902 $148,017,125
============= ============ ============
NET ASSETS CONSIST OF:
Capital paid in ...................... $ 56,427,700 $421,885,525 $126,565,038
Accumulated undistributed
net realized gain (loss)
on investment transactions ......... (104,665) 5,686,457 8,346,265
Net unrealized appreciation
on investments (Note 3) ............ 952,846 17,003,920 13,105,822
------------- ------------ ------------
$ 57,275,881 $444,575,902 $148,017,125
============= ============ ============
Investor Class
Net assets ........................... $ 54,652,627 $443,469,216 $146,731,826
Shares outstanding ................... 5,483,112 39,963,379 12,751,421
Net asset value per share ............ $ 9.97 $ 11.10 $ 11.51

Advisor Class
Net assets ........................... $ 2,623,254 $ 1,106,686 $ 1,285,299
Shares outstanding ................... 263,181 99,726 111,702
Net asset value per share ............ $ 9.97 $ 11.10 $ 11.51
</TABLE>

- --------------------------------------------------------------------------------
UNDERSTANDING THE STATEMENTS OF ASSETS AND LIABILITIES--This statement details
what the fund owns (assets), what it owes (liabilities), and its net assets as
of the last day of the period. If you subtract what the fund owes from what it
owns, you get the fund's net assets. For each class of shares, the net assets
divided by the total number of shares outstanding gives you the price of an
individual share, or the net asset value per share.

NET ASSETS are also broken out by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses; net
gains earned on investments but not yet paid to shareholders or net losses on
investments (known as realized gains or losses); and finally, gains or losses on
securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakout tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.

See Notes to Financial Statements

www.americancentury.com 19

Statements of Operations
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)

SHORT-TERM INTERMEDIATE-TERM LONG-TERM
TREASURY TREASURY TREASURY
INVESTMENT INCOME

Income:
Interest .............................. $1,315,282 $11,602,912 $ 3,390,046
---------- ----------- -----------
Expenses (Note 2):
Management fees ....................... 114,219 994,004 282,500
Distribution fees -- Advisor Class .... 2,744 475 697
Service fees -- Advisor Class ......... 2,744 475 697
Trustees' fees and expenses ........... 1,791 7,543 4,356
---------- ----------- -----------
121,498 1,002,497 288,250
---------- ----------- -----------
Net investment income ................. 1,193,784 10,600,415 3,101,796
---------- ----------- -----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (NOTE 3)
Net realized gain on investments ...... 85,408 4,608,304 6,806,871
Change in net unrealized
appreciation on investments ......... 784,615 15,618,674 3,282,867
---------- ----------- -----------
Net realized and unrealized
gain on investments ................. 870,023 20,226,978 10,089,738
---------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations ........... $2,063,807 $30,827,393 $13,191,534
========== =========== ===========

Fund OPERATIONS include:

* income earned from investments

* management fees and other expenses

* gains or losses from selling investments (known as realized gains or losses)

* gains or losses on current fund holdings (known as unrealized appreciation or
depreciation)

See Notes to Financial Statements

20 1-800-345-2021

Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) AND YEAR ENDED MARCH 31, 1998

SHORT-TERM TREASURY INTERMEDIATE-TERM TREASURY LONG-TERM TREASURY

Increase (Decrease) SEPT. 30, MARCH 31, SEPT. 30, MARCH 31, SEPT. 30, MARCH 31,
in Net Assets 1998 1998 1998 1998 1998 1998

OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ........$ 1,193,784 $ 2,115,925 $ 10,600,415 $ 19,519,507 $ 3,101,796 $ 7,448,950
Net realized gain
on investments ............. 85,408 65,744 4,608,304 9,644,597 6,806,871 4,166,419
Change in net unrealized
appreciation on
investments ................ 784,615 378,595 15,618,674 6,630,430 3,282,867 12,123,302
------------- ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from operations .. 2,063,807 2,560,264 30,827,393 35,794,534 13,191,534 23,738,671
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS
From net investment income:
Investor Class ............. (1,139,583) (2,089,108) (10,590,832) (19,516,910) (3,087,305) (7,447,009)
Advisor Class .............. (54,201) (26,817) (9,583) (2,597) (14,491) (1,941)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in net assets
from distributions ......... (1,193,784) (2,115,925) (10,600,415) (19,519,507) (3,101,796) (7,448,950)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE
TRANSACTIONS (NOTE 4)
Net increase (decrease) in
net assets from capital
share transactions ......... 14,071,129 6,036,113 49,360,128 29,929,571 34,328,061 (39,260,238)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease)
in net assets ................ 14,941,152 6,480,452 69,587,106 46,204,598 44,417,799 (22,970,517)

NET ASSETS
Beginning of period .......... 42,334,729 35,854,277 374,988,796 328,784,198 103,599,326 126,569,843
------------- ------------- ------------- ------------- ------------- -------------
End of period ................$ 57,275,881 $ 42,334,729 $ 444,575,902 $ 374,988,796 $ 148,017,125 $ 103,599,326
============= ============= ============= ============= ============= =============
</TABLE>

* operations--a summary of the Statement of Operations from the previous page
for the most recent period

* distributions--income and gains distributed to shareholders

* share transactions--shareholders' purchases, reinvestments, and redemptions

Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.

See Notes to Financial Statements

www.americancentury.com 21

Notes to Financial Statements
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998 (UNAUDITED)

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. The
following significant accounting policies are in accordance with generally
accepted accounting principles.

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.

The character of distributions made during the year from net investment
income or net realized capital 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.

22 1-800-345-2021

Notes to Financial Statements
- --------------------------------------------------------------------------------
(Continued)
SEPTEMBER 30, 1998 (UNAUDITED)

ADDITIONAL INFORMATION-- Funds Distributor, Inc. (FDI) is the Trust's
distributor. Certain officers of FDI are also officers of the Trust.

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

The Trust has entered into a Management Agreement with ACIM that provides
the Funds with investment advisory and management services in exchange for a
single, unified management fee per class. The Agreement provides that all
expenses of the Funds, except brokerage commissions, 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, will be paid by ACIM. 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 class average daily closing 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:

www.americancentury.com 23

Investment transactions, excluding short-term investments, for the six months
ended September 30, 1998, were as follows:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM
TREASURY TREASURY TREASURY
PURCHASES
U.S. Treasury &
Agency Obligations ... $34,353,547 $362,770,572 $74,132,472

PROCEEDS FROM SALES
U.S. Treasury &
Agency Obligations ... $21,322,641 $316,634,505 $51,803,328

On September 30, 1998, the composition of unrealized appreciation and
depreciaton of investment securities based on the aggregate cost of investments
for federal income tax purposes was as follows:

SHORT-TERM INTERMEDIATE-TERM LONG-TERM
TREASURY TREASURY TREASURY
Appreciation ........... $952,846 $16,797,101 $12,443,259
Depreciation ........... -- -- --
--------------- ----------------- ----------------
Net .................... $952,846 $16,797,101 $12,443,259
=============== ================= ================
Federal Tax Cost ....... $55,788,182 $415,736,516 $133,388,572
=============== ================= ================

24 1-800-345-2021

<TABLE>
<CAPTION>
Transactions in shares of the Funds were as follows (unlimited number of
shares authorized):

SHORT-TERM TREASURY INTERMEDIATE-TERM TREASURY LONG-TERM TREASURY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
INVESTOR CLASS
Six months ended
September 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Sold .................... 1,937,715 $ 19,097,503 15,761,620 $ 168,820,028 8,683,375 $ 95,363,584
Issued in reinvestment
of distributions ...... 90,003 885,764 846,934 9,055,693 250,765 2,733,510
Redeemed ................ (715,870) (7,032,539) (12,130,644) (129,453,660) (5,957,588) (64,766,755)
------------- ------------- ------------- ------------- ------------- -------------
Net increase ............ 1,311,848 $ 12,950,728 4,477,910 $ 48,422,061 2,976,552 $ 33,330,339
============= ============= ============= ============= ============= =============
Year ended
March 31, 1998
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)
============= ============= ============= ============= ============= =============

ADVISOR CLASS
Six months ended
September 30, 1998
Sold .................... 147,380 $ 1,446,172 87,980 $ 941,796 114,793 $ 1,256,500
Issued in reinvestment
of distributions ...... 5,407 53,212 740 8,006 1,119 12,325
Redeemed ................ (38,639) (378,983) (1,099) (11,735) (24,833) (271,103)
------------- ------------- ------------- ------------- ------------- -------------
Net increase ............ 114,148 $ 1,120,401 87,621 $ 938,067 91,079 $ 997,722
============= ============= ============= ============= ============= =============
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.

www.americancentury.com 25

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
$110,718. These acquired capital loss carryforwards are subject to limitations
on their use under the Internal Revenue Code, as amended.

26 1-800-345-2021

Short-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

<TABLE>
<CAPTION>
Investor Class
1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................$ 9.80 $ 9.68 $ 9.84 $ 9.73 $ 9.86 $ 10.04
---------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net Investment Income ............ 0.25 0.53 0.52 0.53 0.50 0.36
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ..................... 0.17 0.12 (0.07) 0.11 (0.13) (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Total From Investment
Operations ....................... 0.42 0.65 0.45 0.64 0.37 0.22
---------- ---------- ---------- ---------- ---------- ----------
Distributions
From Net Investment Income ....... (0.25) (0.53) (0.52) (0.53) (0.50) (0.36)
From Net Realized Capital Gains .. -- -- (0.09) -- -- (0.03)
In Excess of Net Realized Gains .. -- -- -- -- -- (0.01)
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .............. (0.25) (0.53) (0.61) (0.53) (0.50) (0.40)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .....$ 9.97 $ 9.80 $ 9.68 $ 9.84 $ 9.73 $ 9.86
========== ========== ========== ========== ========== ==========
Total Return(2) .................. 4.40% 6.89% 4.62% 6.71% 3.85% 2.16%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .............. 0.51%(3) 0.55% 0.61% 0.67% 0.67% 0.58%
Ratio of Net Investment Income
to Average Net Assets .............. 5.19%(3) 5.45% 5.26% 5.39% 5.22% 3.53%
Portfolio Turnover Rate ............ 47% 140% 234% 224% 141% 262%
Net Assets, End of Period
(in thousands) .....................$ 54,653 $ 40,874 $ 35,854 $ 35,648 $ 56,090 $ 24,929
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

- --------------------------------------------------------------------------------
UNDERSTANDING THE FINANCIAL HIGHLIGHTS--These pages itemize current period
activity and statistics and provide comparison data for the last five fiscal
years (or less, if the class is not five years old).

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income and capital gains or losses

* income and capital gains distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming reinvestment
of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

www.americancentury.com 27

Short-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED

Advisor Class
1998(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ......... $ 9.80 $ 9.80
--------- ---------
Income From Investment Operations

Net Investment Income ...................... 0.24 0.25
Net Realized and Unrealized Gain on
Investment Transactions .................... 0.17 --
--------- ---------
Total From Investment Operations ........... 0.41 0.25
--------- ---------
Distributions
From Net Investment Income ................. (0.24) (0.25)
--------- ---------
Net Asset Value, End of Period ............... $ 9.97 $ 9.80
========= =========
Total Return(3) ............................ 4.27% 2.51%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(4) ........................ 0.76% 0.78%
Ratio of Net Investment Income to
Average Net Assets(4) ........................ 4.94% 5.20%
Portfolio Turnover Rate ...................... 47% 140%
Net Assets, End of Period
(in thousands) ............................... $ 2,623 $ 1,460

(1) Six months ended September 30, 1998 (unaudited).

(2) October 6, 1997 (commencement of sale) through March 31, 1998.

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

(4) Annualized.

See Notes to Financial Statements

28 1-800-345-2021

Intermediate-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

Investor Class
1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................ $ 10.56 $ 10.06 $ 10.24 $ 9.99 $ 10.18 $ 10.73
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ............ 0.29 0.59 0.58 0.58 0.53 0.48
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ..................... 0.54 0.50 (0.18) 0.25 (0.19) (0.27)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ....................... 0.83 1.09 0.40 0.83 0.34 0.21
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ....... (0.29) (0.59) (0.58) (0.58) (0.53) (0.48)
From Net Realized Capital Gains .. -- -- -- -- -- (0.06)
In Excess of Net
Realized Capital Gains ........... -- -- -- -- -- (0.22)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions .............. (0.29) (0.59) (0.58) (0.58) (0.53) (0.76)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ..... $ 11.10 $ 10.56 $ 10.06 $ 10.24 $ 9.99 $ 10.18
=========== =========== =========== =========== =========== ===========
Total Return(2) .................. 7.99% 11.04% 4.05% 8.42% 3.54% 1.85%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets .............. 0.51%(3) 0.51% 0.51% 0.53% 0.53% 0.51%
Ratio of Net Investment Income
to Average Net Assets .............. 5.41%(3) 5.63% 5.72% 5.65% 5.35% 4.50%
Portfolio Turnover Rate ............ 83% 194%(4) 110% 168% 92% 213%
Net Assets, End of Period
(in thousands) ..................... $ 443,469 $ 374,861 $ 328,784 $ 311,020 $ 305,353 $ 351,369
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income and capital gains or losses

* income and capital gains distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

www.americancentury.com 29

Intermediate-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED

Advisor Class

1998(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period .......... $ 10.56 $ 10.42
--------- ---------
Income From Investment Operations
Net Investment Income ....................... 0.27 0.26
Net Realized and Unrealized Gain
on Investment Transactions .................. 0.54 0.14
--------- ---------
Total From Investment Operations ............ 0.81 0.40
--------- ---------
Distributions
From Net Investment Income .................. (0.27) (0.26)
--------- ---------
Net Asset Value, End of Period ................ $ 11.10 $ 10.56
========= =========
Total Return(3) ............................. 7.85% 3.90%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(4) ......................... 0.76% 0.77%
Ratio of Net Investment Income to
Average Net Assets(4) ......................... 5.16% 5.28%
Portfolio Turnover Rate ....................... 83% 194%(5)
Net Assets, End of Period
(in thousands) ................................ $ 1,107 $ 128

(1) Six months ended September 30, 1998 (unaudited).

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

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

(4) Annualized.

(5) 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

30 1-800-345-2021

Long-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED MARCH 31 (EXCEPT AS NOTED)

Investor Class
1998(1) 1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C>
Beginning of Period ................. $ 10.58 $ 9.32 $ 9.67 $ 9.05 $ 9.38 $ 10.24
----------- ----------- ----------- ----------- ----------- -----------
Income From Investment
Operations
Net Investment Income ............. 0.30 0.61 0.60 0.60 0.60 0.63
Net Realized and Unrealized
Gain (Loss) on Investment
Transactions ...................... 0.93 1.26 (0.35) 0.62 (0.33) (0.27)
----------- ----------- ----------- ----------- ----------- -----------
Total From Investment
Operations ........................ 1.23 1.87 0.25 1.22 0.27 0.36
----------- ----------- ----------- ----------- ----------- -----------
Distributions
From Net Investment Income ........ (0.30) (0.61) (0.60) (0.60) (0.60) (0.63)
From Net Realized Capital Gains ... -- -- -- -- -- (0.45)
In Excess of Net Realized
Capital Gains ..................... -- -- -- -- -- (0.14)
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions ............... (0.30) (0.61) (0.60) (0.60) (0.60) (1.22)
----------- ----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period ...... $ 11.51 $ 10.58 $ 9.32 $ 9.67 $ 9.05 $ 9.38
=========== =========== =========== =========== =========== ===========
Total Return(2) ................... 11.85% 20.48% 2.65% 13.46% 3.25% 2.87%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses
to Average Net Assets ............... 0.51%(3) 0.54% 0.60% 0.67% 0.67% 0.57%
Ratio of Net Investment Income
to Average Net Assets ............... 5.56%(3) 6.00% 6.28% 5.93% 6.84% 5.89%
Portfolio Turnover Rate ............. 48% 57% 40% 112% 147% 200%
Net Assets, End of Period
(in thousands) ...................... $ 146,732 $ 103,381 $ 126,570 $ 110,741 $ 34,906 $ 18,003
</TABLE>

(1) Six months ended September 30, 1998 (unaudited).

(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.

On a per-share basis, it includes:

* share price at the beginning of the period

* investment income and capital gains or losses

* income and capital gains distributions paid to shareholders

* share price at the end of the period

It also includes some key statistics for the period:

* total return--the overall percentage return of the fund, assuming
reinvestment of all distributions

* expense ratio--operating expenses as a percentage of average net assets

* net income ratio--net investment income as a percentage of average net assets

* portfolio turnover--the percentage of the portfolio that was replaced during
the period

See Notes to Financial Statements

www.americancentury.com 31

Long-Term Treasury--Financial Highlights
- --------------------------------------------------------------------------------
(Continued)

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED

Advisor Class
1998(1) 1998(2)
PER-SHARE DATA
Net Asset Value, Beginning of Period ........... $ 10.58 $ 10.85
--------- ---------
Income From Investment Operations
Net Investment Income ........................ 0.29 0.12
Net Realized and Unrealized Gain
(Loss) on Investment Transactions ............ 0.93 (0.27)
--------- ---------
Total From Investment Operations ............. 1.22 (0.15)
--------- ---------
Distributions
From Net Investment Income ................... (0.29) (0.12)
--------- ---------
Net Asset Value, End of Period ................. $ 11.51 $ 10.58
========= =========
Total Return(3) .............................. 11.71% (1.34)%

RATIOS/SUPPLEMENTAL DATA
Ratio of Operating Expenses to
Average Net Assets(4) .......................... 0.76% 0.77%
Ratio of Net Investment Income to
Average Net Assets(4) .......................... 5.31% 5.42%
Portfolio Turnover Rate ........................ 48% 57%
Net Assets, End of Period
(in thousands) ................................. $ 1,285 $ 218

(1) Six months ended September 30, 1998 (unaudited).

(2) January 12, 1998 (commencement of sale) through March 31, 1998.

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

(4) Annualized.

See Notes to Financial Statements

32 1-800-345-2021

Share Class and Retirement Account Information
- --------------------------------------------------------------------------------

SHARE CLASSES

American Century offers two classes of shares for Short-Term,
Intermediate-Term, and Long-Term Treasury funds. One class is for investors who
buy directly from American Century, and the other is for investors who buy
through financial intermediaries.

The original class of Short-Term, Intermediate-Term, and Long-Term Treasury
fund 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 do not pay any 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.

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

RETIREMENT ACCOUNT INFORMATION

www.americancentury.com 33

Background Information
- --------------------------------------------------------------------------------

INVESTMENT PHILOSOPHY AND 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.

[left margin]

INVESTMENT TEAM LEADERS

PORTFOLIO MANAGERS
BOB GAHAGAN
NEWLIN RANKIN
DAVE SCHROEDER

34 1-800-345-2021

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

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

* 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.

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 (such as STRIPS).

www.americancentury.com 35

Notes
- --------------------------------------------------------------------------------

36 1-800-345-2021

[inside back cover]

American Century Funds

[right margin]

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

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

[recycled logo]
Recycled

[back cover]

[40 Years]
Four Decades of Serving Investors
40 Years
American Century
1958-1998

American Century Investments BULK RATE
P.O. Box 419200 U.S. POSTAGE PAID
Kansas City, MO 64141-6200 AMERICAN CENTURY
www.americancentury.com COMPANIES

9811 (c)1998 American Century Services Corporation
SH-BKT-14213 Funds Distributor, Inc.