AMERICAN CENTURY GOVERNMENT INCOME TRUST, 485BPOS, 2000-07-28

AMERICAN CENTURY GOVERNMENT INCOME TRUST
485BPOS, 2000-07-28

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

File No. 2-99222

Pre-Effective Amendment No. ____

Post-Effective Amendment No._40_ [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

File No. 811-4363

Amendment No._41_

(Check appropriate box or boxes.)

AMERICAN CENTURY GOVERNMENT INCOME TRUST
__________________________________________________
(Exact Name of Registrant as Specified in Charter)

American Century Tower
4500 Main Street, Kansas City, MO 64111
________________________________________
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (816) 531-5575

David C. Tucker, Esq., 4500 Main Street, Kansas City, MO 64111
_________________________________________________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: August 1, 2000

It is proposed that this filing become effective:

[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--------------------------------------------------------------------------------

Your
AMERICAN CENTURY
prospectus

Capital Preservation Fund
Government Agency Money Market Fund
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund
Inflation-Adjusted Treasury Fund
Short-Term Government Fund
GNMA Fund

INVESTOR CLASS
AUGUST 1, 2000

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME

Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors

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

Dear Investor,

Planning and maintaining your investment portfolio is a big job. However, an
easy-to-understand Prospectus can make your work a lot less daunting. We hope
you'll find this Prospectus easy to understand, and more importantly, that it
gives you confidence in the investment decisions you have made or are soon to
make.

As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.

An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.

Fund Performance History - See how the funds performed from year to year.

Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.

Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.

As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.

Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.

Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, an Investor Relations Representative will be
happy to help weekdays, 7 a.m. to 7 p.m. and Saturdays, 9 a.m. to 2 p.m. Central
time. Give us a call at 1-800-345-2021.

Sincerely,

/*/Mark Killen
Mark Killen
Senior Vice President
American Century Investment Services, Inc.

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

American Century
Investments

P.O. Box 419200
Kansas City, MO

64141-6200

TABLE OF CONTENTS

Government Agency Money Market Fund .................................. 10
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund .............................................. 11
Inflation-Adjusted Treasury Fund ..................................... 12
Short-Term Government Fund ........................................... 13
GNMA Fund ............................................................ 14
Basics of Fixed-Income Investing .......................................... 15
Management ................................................................ 18
Investing with American Century ........................................... 21
Share Price and Distributions ............................................. 25
Taxes ..................................................................... 26
Multiple Class Information ................................................ 27
Financial Highlights ...................................................... 28

[left sidebar]
Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in blue italics, look for its definition in
the left margin.

[graphic of pointing finger]
This symbol highlights special information and helpful tips.

American Century Investments

AN OVERVIEW OF THE FUNDS

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These funds seek income and investment returns by investing in various types of
U.S. government securities.

WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?

The funds invest most of their assets in DEBT SECURITIES issued by the U.S.
government or its agencies or instrumentalities. The following chart shows the
differences among the funds' primary investments and principal risks. It is
designed to help you compare these funds with each other; it should not be used
to compare these funds with other mutual funds. A more detailed description of
the funds' investment strategies and risks begins on page 10.

Fund Primary Investments Principal Risks
------------------------------------------------------------------------------------------
Capital Short-term U.S.Treasury securities Lowest credit risk
Preservation that mature in 397 days or less Lowest interest rate risk
------------------------------------------------------------------------------------------
Government Agency Short-term U.S. government securities Low credit risk
Money Market that mature in 397 days or less Lowest interest rate risk
------------------------------------------------------------------------------------------
Short-Term U.S. Treasury securities Very low credit risk
Treasury that mature in three years or less Low interest rate risk
------------------------------------------------------------------------------------------
Intermediate-Term U.S. Treasury securities Very low credit risk
Treasury that mature in three years or more Moderate interest rate risk
------------------------------------------------------------------------------------------
Long-Term U.S. Treasury securities that Very low credit risk
Treasury mature in 10 years or more High interest rate risk
------------------------------------------------------------------------------------------
Inflation-Adjusted Inflation-indexed Very low credit risk
Treasury U.S. Treasury securities Moderate interest rate risk
------------------------------------------------------------------------------------------
Short-Term U.S. government securities Low credit risk
Government that mature in three years or less Low interest rate risk
Prepayment risk
------------------------------------------------------------------------------------------
GNMA Ginnie Maes, which are Very low credit risk
mortgage-backed securities Moderate interest rate risk
issued by the Government Prepayment risk
National Mortgage Association

As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the funds. As money market funds, Capital Preservation and
Government Agency Money Market seek to maintain a stable asset value of $1.00
per share. However, neither these funds, nor any other money market funds, can
guarantee you won't lose money by investing in them.

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you

* are seeking current income

* prefer a relatively safe investment over one that may provide better
long-term investment returns

* are seeking diversification by investing in a fixed-income mutual fund

* are comfortable with the funds' other investment risks

WHO MAY NOT WANT TO INVEST IN THE FUNDS?

The funds may not be a good investment if you are

* investing for long-term growth

* looking for the added security of FDIC insurance

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DEBT SECURITIES include fixed-income investments such as notes, bonds,
commercial paper and U.S. Treasury bills.

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[graphic of pointing finger]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although the money market funds (Capital Preservation and
Government Agency Money Market) seek to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in them.

2 American Century Investments 1-800-345-2021

FUND PERFORMANCE HISTORY

CAPITAL PRESERVATION FUND GOVERNMENT AGENCY MONEY MARKET FUND

Annual Total Returns(1)

The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years. It indicates the volatility of
the funds' historical returns from year to year.

[data in bar chart]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
Capital Preservation 4.42% 4.92% 4.97% 4.85% 5.32% 3.63% 2.65% 3.31% 5.62% 7.64%
Government Agency Money Market 4.73% 5.07% 5.07% 4.93% 5.50% 3.75% 2.68% 3.39% 6.01% 8.34%

(1) As of June 30, 2000, the end of the most recent calendar quarter, the
funds' year-to-date returns were Capital Preservation, 5.00% and Government
Agency Money Market, 5.33%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Capital Preservation 1.89% (2Q 1990) 0.63% (2Q 1993)
--------------------------------------------------------------------------------
Government Agency Money Market 2.06% (1Q 1990) 0.65% (2Q 1993)

Average Annual Total Returns

The following table shows the average annual total returns of the funds'
Investor Class shares for the periods indicated. The benchmarks are unmanaged
indices that have no operating costs and are included in the table for
performance comparison.

For the calendar year ended December 31, 1999 1 year 5 years 10 years Life of Fund(1)
----------------------------------------------------------------------------------------------
Capital Preservation 4.42% 4.89% 4.72% 5.27%
90-Day Treasury Bill Index 4.74% 5.11% 4.95% 6.98%(2)
----------------------------------------------------------------------------------------------
Government Agency Money Market 4.73% 5.06% 4.93% 4.96%
90-Day Treasury Bill Index 4.74% 5.11% 4.95% 4.95%(3)

(1) The inception dates for the funds are: Capital Preservation, October 13,
1972, and Government Agency Money Market, December 5, 1989.

(2) Benchmark from October 31, 1972.

(3) Benchmark from December 31, 1989.

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[graphic of pointing finger]
The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 3

FUND PERFORMANCE HISTORY

SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUN

Annual Total Returns(1)

The following bar chart shows the performance of the funds' Investor Class
shares for each of the last 10 calendar years or for each full calendar year in
the life of a fund if less than 10 years. It indicates the volatility of the
funds' historical returns from year to year.

[data from bar chart]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
Short-Term Treasury 2.25% 6.44% 6.11% 4.12% 9.93% 0.15% 5.32% N/A N/A N/A
Intermediate-Term Treasury -2.05% 8.94% 8.38% 4.08% 13.70% -2.34% 7.91% 6.55% 13.75% 9.20%
Long-Term Treasury -8.70% 12.76% 14.76% -1.36% 29.25% -9.25% 17.64% N/A N/A N/A

(1) As of June 30, 2000, the end of the most recent calendar quarter, the
funds' year-to-date returns were Short-Term Treasury, 4.48%; Intermediate-
Term Treasury, 4.71% and Long-Term Treasury, 6.48%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Short-Term Treasury 3.14% (1Q 1995) -0.54% (1Q 1994)
--------------------------------------------------------------------------------
Intermediate-Term Treasury 5.83% (3Q 1998) -2.04% (1Q 1994)
--------------------------------------------------------------------------------
Long-Term Treasury 10.48% (2Q 1995) -7.00% (1Q 1996)

4 American Century Investments 1-800-345-2021

Average Annual Total Returns

For the calendar year December 31, 1999 1 year 5 years 10 years Life of Fund(1)
---------------------------------------------------------------------------------------------
Short-Term Treasury 2.25% 5.73% N/A 4.68%
Salomon 1- to 3-Year Treasury Index(2) 3.04% 6.47% N/A 5.36%(3)
Salomon 1- to 3-Year Treasury/Agency Index 3.10% 6.49% N/A 5.37%(3)
---------------------------------------------------------------------------------------------
Intermediate-Term Treasury -2.05% 6.47% 6.67% 8.27%
Salomon 3- to 10-Year Treasury Index -1.97% 7.08% 7.17% 9.24%(4)
---------------------------------------------------------------------------------------------
Long-Term Treasury -8.70% 8.53% N/A 6.71%
Salomon Long-Term Treasury Index(5) -8.71% 9.10% N/A 7.64%(3)
Salomon Long-Term Treasury/Agency Index -8.79% 9.09% N/A 7.65%(3)

(1) The inception dates for the funds are: Short-Term Treasury and Long-Term
Treasury, September 8, 1992; and Intermediate-Term Treasury, May 16, 1980.

(2) The fund's benchmark was changed from the Salomon 1- to 3-Year
Treasury/Agency Index to the Salomon 1- to 3-Year Treasury Index, which we
believe more accurately represents the fund's primarily Treasury focus.

(3) Since August 31, 1992, the date closest to the fund's inception for which
data are available.

(4) Since May 31, 1980, the date closest to the fund's inception for which data
are available.

(5) The fund's benchmark was changed from the Salomon Long-Term Treasury/Agency
Index to the Salomon Long-Term Treasury Index, which we believe more
accurately represents the fund's primarily Treasury focus.

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[graphic of pointing finger]

For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 5

FUND PERFORMANCE HISTORY

INFLATION-ADJUSTED TREASURY FUND

Annual Total Returns(1)

The following bar chart shows the performance of the fund's Investor Class
shares for each full calendar year in the life of the fund. It indicates the
volatility of the fund's historical returns from year to year.

[data in bar chart]
1999 1998
Inflation-Adjusted Treasury 1.69% 3.45%

(1) As of June 30, 2000, the end of the most recent calendar quarter,
Inflation-Adjusted Treasury's year-to-date return was 6.32%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 4.09% (1Q 2000) -0.37% (4Q 1998)

Average Annual Total Returns

The following table shows the average annual total returns of the fund's
Investor Class shares for the periods indicated. The benchmark is an unmanaged
index that has no operating costs and is included in the table for performance
comparison.

For the calendar year ended December 31, 1999 1 year Life of Fund(1)
----------------------------------------------------------------------------
Inflation-Adjusted Treasury 1.69% 2.13%
Salomon Inflation-Linked Index 2.39% 2.98%(2)

(1) The inception date for the fund is February 10, 1997.

(2) Since February 28, 1997, the date closest to the fund's inception for which
data are available.

[left margin]
[graphic of pointing finger]
The performance information on this page is designed to help you see how fund
returns can vary. Keep in mind that past performance does not predict how the
fund will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.

6 American Century Investments 1-800-345-2021

FUND PERFORMANCE HISTORY

SHORT-TERM GOVERNMENT FUND

Annual Total Returns(1)

The following bar chart shows the performance of the fund's Investor Class
shares for each of the last 10 calendar years. It indicates the volatility of
the fund's historical returns from year to year.

1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
Short-Term Government 1.87% 6.04% 6.02% 4.11% 10.51% -0.49% 4.17% 4.39% 11.64% 7.53%

(1) As of June 30, 2000, the end of the most recent calendar quarter,
Short-Term Government's year-to-date return was 4.74%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
-------------------------------------------------------------------------------
Short-Term Government 4.08% (4Q 1991) -1.03% (1Q 1994)

Average Annual Total Returns

For calendar year ended December 31, 1999 1 year 5 years 10 years Life of Fund(1)
----------------------------------------------------------------------------------------
Short-Term Government 1.87% 5.67% 5.52% 6.84%
Salomon 1- to 3-Year Treasury/Agency Index 3.10% 6.49% 6.58% N/A(2)

(1) The inception date for the fund is December 15, 1982.

(2) Benchmark began January 1989.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 7

FUND PERFORMANCE HISTORY

GNMA FUND

Annual Total Returns(1)

[data from bar chart]
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
GNMA 0.97% 6.33% 8.79% 5.21% 15.86% -1.67% 6.59% 7.67% 15.56% 10.15%

(1) As of June 30, 2000, the end of the most recent calendar quarter, GNMA's
year-to-date return was 3.93%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
GNMA 5.41% (3Q 1991) -2.39% (1Q 1994)

Average Annual Total Returns

(1) The inception date for the fund is September 23, 1985.

(2) Since September 30, 1985, the date closest to the fund's inception for
which data are available.

[left margin]
[graphic of pointing finger]

The performance information on this page is designed to help you see how fund
returns can vary. Keep in mind that past performance does not predict how the
fund will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-2021 or visit us at www.americancentury.com.

8 American Century Investments 1-800-345-2021

FEES AND EXPENSES

There are no sales loads, fees or other charges

* to buy fund shares directly from American Century

* to reinvest dividends in additional shares

* to exchange into the Investor Class shares of other American Century funds

* to redeem your shares

The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.

ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

Management Distribution and Other Total Annual Fund
Fee(1) Service (12b-1) Fees Expenses(2) Operating Expenses
---------------------------------------------------------------------------------------------------
Capital Preservation 0.48% None 0.00% 0.48%
---------------------------------------------------------------------------------------------------
Government Agency Money Market 0.48% None 0.00% 0.48%
---------------------------------------------------------------------------------------------------
Short-Term Treasury 0.51% None 0.00% 0.51%
---------------------------------------------------------------------------------------------------
Intermediate-Term Treasury 0.51% None 0.00% 0.51%
---------------------------------------------------------------------------------------------------
Long-Term Treasury 0.51% None 0.00% 0.51%
---------------------------------------------------------------------------------------------------
Inflation-Adjusted Treasury 0.51% None 0.00% 0.51%
---------------------------------------------------------------------------------------------------
Short-Term Government 0.59% None 0.00% 0.59%
---------------------------------------------------------------------------------------------------
GNMA 0.59% None 0.00% 0.59%

(1) Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped-fee schedules. As a result, the funds' management fee
rates generally decrease as fund assets increase.

(2) Other expenses, which include the fees and expenses of the funds'
independent trustees and their legal counsel, as well as interest, were
less than 0.005% for the most recent fiscal year.

EXAMPLE

The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .

* invest $10,000 in the fund

* redeem all of your shares at the end of the periods shown below

* earn a 5% return each year

* incur the same operating expenses as shown above

. . . your cost of investing in the fund would be:

1 year 3 years 5 years 10 years
-----------------------------------------------------------------------
Capital Preservation $49 $154 $268 $603
-----------------------------------------------------------------------
Government Agency Money Market $49 $154 $268 $603
-----------------------------------------------------------------------
Short-Term Treasury $52 $163 $285 $640
-----------------------------------------------------------------------
Intermediate-Term Treasury $52 $163 $285 $640
-----------------------------------------------------------------------
Long-Term Treasury $52 $163 $285 $640
-----------------------------------------------------------------------
Inflation-Adjusted Treasury $52 $163 $285 $640
-----------------------------------------------------------------------
Short-Term Government $60 $189 $329 $736
-----------------------------------------------------------------------
GNMA $60 $189 $329 $736

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[graphic of pointing finger]

Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.

www.americancentury.com American Century Investments 9

OBJECTIVES, STRATEGIES AND RISKS

CAPITAL PRESERVATION FUND
GOVERNMENT AGENCY MONEY MARKET FUND

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

The funds are money market funds that seek maximum safety and liquidity and seek
to pay shareholders the highest rate of return consistent with this objective.
In addition, Government Agency Money Market seeks to purchase only those
securities with income that will be exempt from state income tax.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

The funds buy short-term money market securities issued by the U.S.Treasury that
are guaranteed by the direct full faith and credit pledge of the U.S.
government.

Government Agency Money Market also buys other short-term money market
instruments issued by the U.S. government, its agencies and instrumentalities.
The U.S. government provides varying levels of financial support to these
agencies and instrumentalities.

The funds may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the funds may purchase securities in advance to generate
additional income.

Additional information about the funds' investments is available in their annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the most recent fiscal period. You may get these
reports at no cost by calling us.

WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?

The funds differ in the types of securities that they may buy, as shown in the
table below.

Type of Security Capital Preservation Government Agency Money Market
--------------------------------------------------------------------------------------
U.S. Treasury Yes Yes
--------------------------------------------------------------------------------------
U.S. government agency No Yes
--------------------------------------------------------------------------------------
U.S. government instrumentality No Yes

U.S. Treasury securities are believed to be the safest securities because they
are supported by the government's full faith and credit pledge (the highest
credit quality available) and because they are the most widely traded and most
liquid securities investors can buy. Other types of U.S. government securities
do not necessarily feature the full faith and credit nor the liquidity of market
that U.S. Treasury securities do. On the other hand, other U.S. government
securities generally have higher yields than U.S. Treasury securities.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?

Because short-term money market instruments are among the safest securities
available, the interest they pay is among the lowest for income-paying
securities. Accordingly, the yield on these funds will likely be lower than
funds that invest in longer-term or lower-quality securities.

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[graphic of pointing finger]
Money market instruments have less than 397 days remaining until maturity.

10 American Century Investments 1-800-345-2021

SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUN

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These funds seek the highest level of current income exempt from state income
tax. The Short-Term Treasury and Intermediate-Term Treasury funds also seek to
maintain safety of capital.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

The funds buy U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government.

The funds also may buy other securities issued by the U.S. government and its
agencies and instrumentalities. The U.S. government provides varying levels of
financial support to these agencies and instrumentalities. Each fund may invest
up to 35% of its total assets in these securities. In addition, the funds may
buy only U.S. government securities with income that is exempt from state income
tax.

WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?

The funds differ in the maturity of the debt securities they purchase. This
difference is shown in the chart below.

Expected Weighted Average Maturity Range
---------------------------------------------------------------------
Short-Term Treasury 397 days - 3 years
---------------------------------------------------------------------
Intermediate-Term Treasury 3 - 10 years
---------------------------------------------------------------------
Long-Term Treasury 10 - 30 years

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?

Because the funds have different weighted average maturities, each fund will
respond differently to changes in interest rates. Funds with longer weighted
average maturities are more sensitive to interest rate changes. When interest
rates rise, the funds' share values will decline, but the share values of funds
with longer weighted average maturities generally will decline further.

The funds' share values will fluctuate. As a result, it is possible to lose
money by investing in the funds. In general, funds that have a higher potential
gain have a higher potential loss.

Potential Income Potential Loss
--------------------------------------------------------------------------------
Short-Term Treasury Lower Lower
--------------------------------------------------------------------------------
Intermediate-Term Treasury Moderate Moderate
--------------------------------------------------------------------------------
Long-Term Treasury Higher Higher

www.americancentury.com American Century Investments 11

INFLATION-ADJUSTED TREASURY FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

Inflation-Adjusted Treasury seeks total return and inflation protection
consistent with investment in U.S. Treasury inflation-adjusted securities.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The fund buys inflation-indexed U.S. Treasury securities guaranteed by the
direct full faith and credit pledge of the U.S. government. These
inflation-indexed securities are designed to protect the future purchasing power
of the money invested in them.

The fund also may buy traditional U.S. Treasury securities that are not
inflation-indexed.

In addition, the fund may buy inflation-indexed securities issued by U.S.
government agencies and government-sponsored organizations. The fund may invest
up to 35% of its total assets in these securities.

The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, by using when-issued and forward commitment
transactions, the fund may purchase securities in advance to generate additional
income.

Additional information about the fund's investments is available in its annual
and semiannual reports. In these reports you will find a discussion of the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

Inflation-indexed securities offer a return linked to inflation. They are
designed to protect investors from a loss of value due to inflation. However,
inflation-indexed securities are still subject to the effects of changes in
market interest rates caused by factors other than inflation, or so-called REAL
INTEREST RATES. Because inflation-indexed securities trade at prevailing real,
or after-inflation, interest rates, changes in these rates affect the fund's
share value. Generally, when real interest rates rise, the fund's share value
will decline. The opposite is true when real interest rates decline.

As with all funds, your shares of Inflation-Adjusted Treasury may be worth more
or less at any given time than the price you paid for them. As a result, it is
possible to lose money by investing in the fund.

[left margin]

The REAL INTEREST RATE is the current market interest rate minus the market's
inflation expectations.

12 American Century Investments 1-800-345-2021

SHORT-TERM GOVERNMENT FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

Short-Term Government seeks high current income while maintaining safety of
principal.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The fund buys short-term securities issued by the U.S. government and its
agencies and instrumentalities, including mortgage-backed securities. The U.S.
government provides varying levels of financial support to these agencies and
instrumentalities. The fund also may buy short-term U.S. Treasury securities
guaranteed by the direct full faith and credit pledge of the U.S. government.

The weighted average maturity of the fund is expected to be three years or less.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

Interest rate changes affect the fund's share value. Generally, when interest
rates rise, the fund's share value will decline. The opposite is true when
interest rates decline. This interest rate risk is higher for Short-Term
Government than for funds that have shorter weighted average maturities, such as
money market funds.

Short-Term Government invests in mortgage-backed securities. When homeowners
refinance their mortgages to take advantage of declining interest rates, their
existing mortgages are prepaid. The mortgages, which back the securities
purchased by Short-Term Government, may be prepaid in this fashion. When this
happens, the fund will be required to purchase new securities at current market
rates, which will usually be lower. Because of this prepayment risk, the fund
may benefit less from declining interest rates than other short-term funds.

As with all funds, your shares of Short-Term Government may be worth more or
less at any given time than the price you paid for them. As a result, it is
possible to lose money by investing in the fund.

www.americancentury.com American Century Investments 13

GNMA FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

GNMA seeks high current income while maintaining liquidity and safety of
principal by investing primarily in GNMA certificates.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The fund primarily buys certificates issued by the Government National Mortgage
Association (GNMA). Unlike many other mortgage-backed securities, the timely
payment of principal and interest on these certificates is guaranteed by GNMA.
GNMA's payment guarantee is stronger than most other government agencies'
because it is backed by the full faith and credit of the U.S. government. This
means that the fund receives its share of payments regardless of whether the
ultimate borrowers make their payments.

The fund also may buy U.S. government securities. The U.S. government and its
agencies and instrumentalities issue these securities. These securities include
mortgage-backed securities. The U.S. government's financial support of these
agencies and instrumentalities varies.

The fund may purchase securities in a number of different ways to seek higher
rates of return. For example, the fund may purchase securities in advance
through when-issued and forward commitment transactions.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

When interest rates change, the fund's share value will be affected. Generally,
when interest rates rise, the fund's share value will decline. The opposite is
true when interest rates decline. This interest rate risk is higher for GNMA
than for funds that have shorter weighted average maturities, such as money
market funds.

GNMA invests in mortgage-backed securities. When homeowners refinance their
mortgages to take advantage of declining interest rates, their existing
mortgages are prepaid. The mortgages, which back the securities purchased by
GNMA, may be prepaid in this fashion. Because of this prepayment risk, the fund
may benefit less from declining interest rates than other short-term funds.

As with all funds, your shares of GNMA may be worth more or less at any given
time than the price you paid for them. As a result, it is possible to lose money
by investing in the fund.

14 American Century Investments 1-800-345-2021

BASICS OF FIXED-INCOME INVESTING

DEBT SECURITIES

When a fund buys a debt security, also called a fixed-income security, it is
essentially lending money to the security's issuer. Notes, bonds, commercial
paper and debentures are examples of debt securities. After the debt security is
first sold by the issuer, it may be bought and sold by other investors. The
price of the security may rise or fall based on many factors, including changes
in interest rates, liquidity and credit quality.

The fund managers decide which debt securities to buy and sell by

* determining which securities help a fund meet its maturity requirements

* identifying securities that satisfy a fund's credit quality standards

* evaluating the current economic conditions and assessing the risk of
inflation

* evaluating special features of the securities that may make them more or less
attractive

WEIGHTED AVERAGE MATURITY

Like most loans, debt securities eventually must be repaid, or refinanced, at
some date. This date is called the maturity date. The number of days left to a
debt security's maturity date is called the remaining maturity. The longer a
debt security's remaining maturity, generally the more sensitive its price is to
changes in interest rates.

Because a bond fund will own many debt securities, the fund managers calculate
the average of the remaining maturities of all the debt securities the fund owns
to evaluate the interest rate sensitivity of the entire portfolio. This average
is weighted according to the size of the fund's individual holdings and is
called WEIGHTED AVERAGE MATURITY. The following chart shows how fund managers
would calculate the weighted average maturity for a fund that owned only two
debt securities.

Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
-------------------------------------------------------------------------------
Debt Security A $100,000 25% 1,000 days 250 days
-------------------------------------------------------------------------------
Debt Security B $300,000 75% 10,000 days 7,500 days
-------------------------------------------------------------------------------
Weighted Average Maturity 7,750 days

TYPES OF RISK

The basic types of risk the funds face are described below.

INTEREST RATE RISK

Generally, interest rates and the prices of debt securities move in opposite
directions. When interest rates fall, the prices of most debt securities rise;
when interest rates rise, prices fall. Because the funds invest primarily in
debt securities, changes in interest rates will affect the funds' performance.
This sensitivity to interest rate changes is called interest rate risk.

The degree to which interest rate changes affect a fund's performance varies and
is related to the weighted average maturity of a particular fund. For example,
when interest rates rise, you can expect the share value of a long-term bond
fund to fall more than that of a short-term bond fund. When rates fall, the
opposite is true.

[left margin]

WEIGHTED AVERAGE MATURITY is a tool the fund managers use to approximate the
remaining term to maturity of a fund's investment portfolio.

[graphic of pointing finger]
The longer a fund's weighted average maturity, the more sensitive it is to
interest rate changes.

www.americancentury.com American Century Investments 15

When interest rates change, longer maturity bonds generally experience a greater
change in price. The following table shows the likely effect of a 1% increase in
interest rates on the price of 7% coupon bonds of differing maturities:

Remaining Maturity Current Price Price After 1% Increase Change in Price
--------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
--------------------------------------------------------------------------------
3 years $100.00 $97.38 -2.62%
--------------------------------------------------------------------------------
10 years $100.00 $93.20 -6.80%
--------------------------------------------------------------------------------
30 years $100.00 $88.69 -11.31%

CREDIT RISK

Credit risk is the risk that an obligation won't be paid and a loss will result.
A high credit rating indicates a high degree of confidence by the rating
organization that the issuer will be able to withstand adverse business,
financial or economic conditions, and be able to make interest and principal
payments on time. Generally, a lower credit rating indicates a greater risk of
non-payment. A lower rating also may indicate that the issuer has a more senior
series of debt securities, which means that if the issuer has difficulties
making its payments, the more senior series of debt is first in line for
payment.

The fund managers do not invest solely on the basis of a security's credit
rating; they also consider other factors, including potential returns. Higher
credit ratings usually mean lower interest rate payments, so investors often
purchase securities that aren't the highest rated to increase return. If a fund
purchases lower-rated securities, it assumes additional credit risk.

LIQUIDITY RISK

Debt securities can become difficult to sell, or less liquid, for a variety of
reasons, such as lack of an active trading market. The chance that a fund will
have liquidity issues is called liquidity risk.

[left margin]
[graphic of pointing finger]

Credit quality may be lower
when the issuer has any of the following

* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
* a less stable cash flow

16 American Century Investments 1-800-345-2021

A COMPARISON OF BASIC RISK FACTORS

The following chart depicts the basic risks of investing in the funds. It is
designed to help you compare these funds with each other; it shouldn't be used
to compare these funds with other mutual funds.

Interest Rate Risk Credit Risk Liquidity Risk
----------------------------------------------------------------------------------
Capital Preservation Lowest Lowest Very Low
----------------------------------------------------------------------------------
Government Agency Money Market Lowest Low Very Low
----------------------------------------------------------------------------------
Short-Term Treasury Low Very Low Very Low
----------------------------------------------------------------------------------
Intermediate-Term Treasury Moderate Very Low Very Low
----------------------------------------------------------------------------------
Long-Term Treasury High Very Low Very Low
----------------------------------------------------------------------------------
Inflation-Adjusted Treasury Moderate Very Low Very Low
----------------------------------------------------------------------------------
Short-Term Government Low Low Very Low
----------------------------------------------------------------------------------
GNMA Moderate Very Low Very Low

The funds engage in a variety of investment techniques as they pursue their
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the funds. If you would like to learn more about these
techniques, please review the Statement of Additional Information before making
an investment.

www.americancentury.com American Century Investments 17

MANAGEMENT

WHO MANAGES THE FUNDS?

The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.

THE BOARD OF TRUSTEES

The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired an investment advisor to do so.
More than two-thirds of the trustees are independent of the funds' advisor; that
is, they are not employed by and have no financial interest in the advisor.

THE INVESTMENT ADVISOR

The funds' investment advisor is American Century Investment Management, Inc.
The advisor has been managing mutual funds since 1958 and is headquartered at
4500 Main Street, Kansas City, Missouri 64111.

The advisor is responsible for managing the investment portfolios of the funds
and directing the purchase and sale of their investment securities. The advisor
also arranges for transfer agency, custody and all other services necessary for
the funds to operate.

For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Investor Class shares of the funds. The rate of the
management fee for each fund is determined monthly on a class-by-class basis
using a two-step formula that takes into account the fund's strategy (money
market, bond or equity) and the total amount of mutual fund assets the advisor
manages.

The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor paid all
expenses of managing and operating the funds except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees), and extraordinary expenses. A portion of the management fee may be paid
by the funds' advisor to unaffiliated third parties who provide recordkeeping
and administrative services that would otherwise be performed by an affiliate of
the advisor.

Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended March 31, 2000
--------------------------------------------------------------------------------
Capital Preservation 0.48%
--------------------------------------------------------------------------------
Government Agency Money Market 0.48%
--------------------------------------------------------------------------------
Short-Term Treasury 0.51%
--------------------------------------------------------------------------------
Intermediate-Term Treasury 0.51%
--------------------------------------------------------------------------------
Long-Term Treasury 0.51%
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 0.51%
--------------------------------------------------------------------------------
Short-Term Government 0.59%
--------------------------------------------------------------------------------
GNMA 0.59%

18 American Century Investments 1-800-345-2021

THE FUND MANAGEMENT TEAMS

The advisor uses a team of portfolio managers, assistant portfolio managers and
analysts to manage the funds. The teams meet regularly to review portfolio
holdings, and discuss purchase and sale activity. Team members buy and sell
securities for a fund as they see fit, guided by the fund's investment objective
and strategy.

The portfolio managers who lead each team are identified below.

Capital Preservation
Government Agency Money Market

BETH BUNNELL HUNTER

Ms. Hunter, Portfolio Manager, has been a member of the teams that manage
Capital Preservation and Government Agency Money Market since joining American
Century in July 1999. Before joining American Century, she worked for Calvert
Asset Management Company as a Portfolio Trading Analyst from 1994 to 1996 and as
a Portfolio Manager from 1996 to June 1999. She has a bachelor of arts from the
University of Washington.

DENISE TABACCO

Ms. Tabacco, Portfolio Manager, has been a member of the Capital Preservation
and Government Agency Money Market teams since May 1996. She joined American
Century in 1988, becoming a member of its portfolio department in 1991. She has
a bachelor's degree in accounting from San Diego State University and an MBA in
finance from Golden Gate University.

GNMA

CASEY COLTON

Mr. Colton, Vice President and Senior Portfolio Manager, has been a member of
the GNMA team since January 1994. Mr. Colton joined American Century in 1990. He
has a bachelor's degree in business administration from San Jose State
University and a master's degree from the University of Southern California. He
is a Chartered Financial Analyst and a Certified Public Accountant.

Short-Term Treasury
Intermediate-Term Treasury

ROBERT V. GAHAGAN

Mr. Gahagan, Vice President and Senior Portfolio Manager, has been a member of
the Intermediate-Term Treasury team since January 1998 and the Short-Term
Treasury team since 1996. He joined American Century in 1983. He has a
bachelor's degree in economics and an MBA from the University of Missouri -
Kansas City.

[left margin]
[graphic of pointing finger]

CODE OF ETHICS

American Century has a Code of Ethics designed to ensure that the interests of
fund shareholders come before the interests of the people who manage the funds.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the funds to obtain approval before executing permitted personal trades.

www.americancentury.com American Century Investments 19

Short-Term Government

DAVID W. SCHROEDER

Mr. Schroeder, Senior Vice President and Senior Portfolio Manager, supervises
the American Century Government Income Trust team and has been a member of the
Short-Term Government team since 1995. He also is a member of the
Intermediate-Term Treasury, Long-Term Treasury and Inflation-Adjusted Treasury
teams. He joined American Century in 1990. He holds a bachelor of arts from
Pomona College.

MICHAEL J. SHEARER

Dr. Shearer, Vice President and Director-Fixed-Income Quantitative Strategies,
has been a member of the Short-Term Government team since January 2000. He also
is responsible for the development and implementation of all fixed-income
quantitative strategies. He joined American Century in February 1998. Before
joining American Century, he was Vice President, Quantitative Research at
Capital Management Sciences from November 1995 to February 1998. Prior to that
he was pursuing and received a doctorate in applied mathematics from the
University of California - Los Angeles. He also holds a bachelor's degree and a
master's degree in applied mathematics from UCLA.

Long-Term Treasury
Inflation-Adjusted Treasury

DAVID W. SCHROEDER

Mr. Schroeder, Senior Vice President and Senior Portfolio Manager, supervises
the American Century Government Income Trust team and has been a member of the
Long-Term Treasury team since September 1992 and the Inflation-Adjusted Treasury
team since its inception in February 1997. He joined American Century in July
1990. He has a bachelor of arts from Pomona College.

FUNDAMENTAL INVESTMENT POLICIES

Fundamental investment policies contained in the Statement of Additional
Information and the investment objectives of the funds may not be changed
without a shareholder vote. The Board of Trustees may change any other policies
and investment strategies.

20 American Century Investments 1-800-345-2021

INVESTING WITH AMERICAN CENTURY

SERVICES AUTOMATICALLY AVAILABLE TO YOU

You automatically will have access to the services listed below when you open
your account. If you do not want these services, see Conducting Business in
Writing.

CONDUCTING BUSINESS IN WRITING

If you prefer to conduct business in writing only, you can indicate this on the
account application. If you choose this option, you must provide written
instructions to invest, exchange and redeem. All account owners must sign
transaction instructions (with signatures guaranteed for redemptions in excess
of $100,000). If you want to add services later, you can complete an Investor
Service Options form.

WAYS TO MANAGE YOUR ACCOUNT
--------------------------------------------------------------------------------
BY TELEPHONE

Investor Relations 1-800-345-2021

Business, Not-For-Profit
and Employer-Sponsored
Retirement Plans 1-800-345-3533

Automated Information Line

1-800-345-8765

[graphic of telephone]

OPEN AN ACCOUNT

If you are a current investor, you can open an account by exchanging shares from
another American Century account.

EXCHANGE SHARES

Call or use our Automated Information Line if you have authorized us to accept
telephone instructions.

MAKE ADDITIONAL INVESTMENTS

Call or use our Automated Information Line if you have authorized us to invest
from your bank account.

SELL SHARES

Call a Service Representative.

--------------------------------------------------------------------------------
ONLINE

www.americancentury.com

[graphic of computer]

OPEN AN ACCOUNT

If you are a current investor, you can open an account by exchanging shares from
another American Century account.

EXCHANGE SHARES

Exchange shares from another American Century account.

MAKE ADDITIONAL INVESTMENTS

Make an additional investment into an established American Century account if
you have authorized us to invest from your bank account.

SELL SHARES

Not available.

--------------------------------------------------------------------------------
BY MAIL OR FAX

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

Fax

816-340-7962

[graphic of envelope]

OPEN AN ACCOUNT

Send a signed, completed application and check or money order payable to
American Century Investments.

EXCHANGE SHARES

Send written instructions to exchange your shares from one American Century
account to another.

MAKE ADDITIONAL INVESTMENTS

Send your check or money order for at least $50 with an investment slip or $250
without an investment slip. If you don't have an investment slip, include your
name, address and account number on your check or money order.

SELL SHARES

Send written instructions or a redemption form to sell shares. Call a Service
Representative to request a form.

www.americancentury.com American Century Investments 21

A NOTE ABOUT MAILINGS TO SHAREHOLDERS

To reduce expenses and demonstrate respect for our environment, we will deliver
a single copy of most financial reports and prospectuses to investors who share
an address, even if the accounts are registered under different names. If you
would like to receive separate mailings, please call us and we will begin
individual delivery within 30 days. If you'd like to reduce mailbox clutter even
more, visit www.americancentury.com and sign up to receive these documents by
email. In most cases, we also will deliver account statements for all the
investors in a household in a single envelope.

YOUR GUIDE TO SERVICES AND POLICIES

When you open an account, you will receive a services guide, which explains the
services available to you and the policies of the funds and the transfer agent.

--------------------------------------------------------------------------------
AUTOMATICALLY

[graphic of revolving arrows]

OPEN AN ACCOUNT

Not available.

EXCHANGE SHARES

Send written instructions to set up an automatic exchange of your shares from
one American Century account to another.

MAKE ADDITIONAL INVESTMENTS

With the automatic investment privilege, you can purchase shares on a regular
basis. You must invest at least $600 per year per account.

SELL SHARES

If you have at least $10,000 in your account, you may sell shares automatically
by establishing Check-A-Month or Automatic Redemption plans.

--------------------------------------------------------------------------------
BY WIRE

[graphic of pointing finger]
Please remember, if you request redemptions by wire, $10 will be deducted from
the amount redeemed. Your bank also may charge a fee.

[graphic of wire machine]

OPEN AN ACCOUNT

Call to set up your account or mail a completed application to the address
provided in the "By mail" section. Give your bank the following
information to wire money.

* Our bank information
Commerce Bank N.A.
Routing No. 101000019
Account No. 2804918
* The fund name

* Your American Century account number* * Your name * The contribution year (for
IRAs only) *For additional investments only

MAKE ADDITIONAL INVESTMENTS

Follow the wire instructions.

SELL SHARES

You can receive redemption proceeds by wire or electronic transfer.

EXCHANGE SHARES

Not available.

--------------------------------------------------------------------------------
IN PERSON

[graphic of person]

If you prefer to handle your transactions in person, visit one of our Investor
Centers and a representative can help you open an account, make additional
investments, and sell or exchange shares.

4500 Main St. 4917 Town Center Drive
Kansas City, Missouri Leawood, Kansas
8 a.m. to 5:30 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday

1665 Charleston Road 9445 East County Line Road, Suite A
Mountain View, California Englewood, Colorado
8 a.m. to 5 p.m., Monday - Friday 8 a.m. to 6 p.m., Monday - Friday
8 a.m. to noon, Saturday

22 American Century Investments 1-800-345-2021

MINIMUM INITIAL INVESTMENT AMOUNTS

To open an account, the minimum investments are:

-------------------------------------------------------------------------------
Individual or Joint $2,500
-------------------------------------------------------------------------------
Traditional IRA $1,000
-------------------------------------------------------------------------------
Roth IRA $1,000
-------------------------------------------------------------------------------
Education IRA $500
-------------------------------------------------------------------------------
UGMA/UTMA $2,500
-------------------------------------------------------------------------------
403(b) $1,000(1)
-------------------------------------------------------------------------------
Qualified Retirement Plans $2,500((2))

(1) American Century will waive the minimum if: (a) you contribute at least $50
a month in each fund you select or, (b) your plan contribution is less than
$50 a month and is invested in one fund.

(2) The minimum investment requirements may be different for some types of
retirement accounts.

REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS

If your redemption activity causes your account balance to fall below the
minimum initial investment amount, we will notify you and give you 90 days to
meet the minimum. If you do not meet the deadline, American Century will redeem
the shares in the account and send the proceeds to your address of record.

MODIFYING OR CANCELING AN INVESTMENT

Investment instructions are irrevocable. That means that once you have mailed or
otherwise transmitted your investment instruction, you may not modify or cancel
it. Each fund reserves the right to suspend the offering of shares for a period
of time, and each fund reserves the right to reject any specific purchase order
(including purchases by exchange or conversion). Additionally, we may refuse a
purchase if, in our judgment, it is of a size that would disrupt the management
of a fund.

ABUSIVE TRADING PRACTICES

We do not permit market timing or other abusive trading practices in our funds.

Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the funds and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control. We also reserve the right
to delay delivery of your redemption proceeds--up to seven days--or to honor
certain redemptions with securities, rather than cash, as described in the next
section.

www.americancentury.com American Century Investments 23

SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS

If, during any 90-day period, you redeem fund shares worth more than $250,000
(or 1% of the assets of the fund if that percentage is less than $250,000), we
reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of in cash. These
securities would be selected from the fund's portfolio by the fund managers. A
payment in securities can help the fund's remaining shareholders avoid tax
liabilities that they might otherwise have incurred had the fund sold securities
prematurely to pay the entire redemption amount in cash.

We will value these securities in the same manner as we do in computing the
fund's net asset value. We may provide these securities in lieu of cash without
prior notice. Also, if payment is made in securities, a shareholder may have to
pay brokerage or other transaction costs to convert the securities to cash.

If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the fund and its remaining shareholders.

INVESTING THROUGH FINANCIAL INTERMEDIARIES

If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include

* minimum investment requirements * exchange policies * fund choices * cutoff
time for investments

Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the funds' annual reports, semiannual
reports and Statement of Additional Information are available from your
intermediary or plan sponsor.

Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by American
Century's transfer agent. In some circumstances, American Century will pay the
service provider a fee for performing those services.

Although fund share transactions may be made directly with American Century at
no charge, you also may purchase, redeem and exchange fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared with
American Century or the funds.

American Century has contracts with certain financial intermediaries requiring
them to track the time investment orders are received and to comply with
procedures relating to the transmission of orders. The funds have authorized
these intermediaries to accept orders on each fund's behalf up to the time at
which the net asset value is determined. If those orders are transmitted to
American Century and paid for in accordance with the contract, they will be
priced at the net asset value next determined after your request is received in
the form required by the intermediary on a fund's behalf.

[left margin]
[graphic of pointing finger]

Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.

24 American Century Investments 1-800-345-2021

SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

American Century determines the NET ASSET VALUE (NAV) of each fund as of the
close of regular trading on the New York Stock Exchange (usually 4 p.m. Eastern
time) on each day the Exchange is open. On days when the Exchange is closed
(including certain U.S. holidays), we do not calculate the NAV. A fund share's
NAV is the current value of the fund's assets, minus any liabilities, divided by
the number of fund shares outstanding.

If current market prices of securities owned by non-money market funds are not
readily available, the advisor may determine their fair value in accordance with
procedures adopted by the funds' board. The portfolio securities of the money
market funds are valued at amortized cost. This means that the securities are
initially valued at their cost when purchased. After the initial purchase, the
difference between the purchase price and the known value at maturity will be
reduced at a constant rate until maturity. This valuation will be used
regardless of the impact of interest rates on the market value of the security.
The board has adopted procedures to ensure that this type of pricing is fair to
the funds' shareholders.

We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.

DISTRIBUTIONS

Federal tax laws require each fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as
a regulated investment company means that the fund will not be subject to state
or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as CAPITAL GAINS realized on
the sale of investment securities.

Each money market fund declares and reinvests distributions from net income
daily. Each of the other funds declares distributions from net income daily and
pays these distributions monthly. Each fund (except the money market funds)
generally pays distributions of capital gains, if any, once a year usually in
December. A fund may make more frequent distributions, if necessary, to comply
with Internal Revenue Code provisions. Distributions are reinvested
automatically in additional shares unless you choose another option.

You will participate in fund distributions, when they are declared, starting the
day after your purchase is effective. For example, if you purchase shares on a
day a distribution is declared, you will not receive that distribution. If you
redeem shares, you will receive any distribution declared on the day you redeem.
If you redeem all shares, we will include any distributions received with your
redemption proceeds.

Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For investors investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information about distributions and your options
for receiving them.

[left margin]

A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.

CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.

www.americancentury.com American Century Investments 25

TAXES

The tax consequences of owning shares of the funds will vary depending on
whether you own them through a taxable or tax-deferred account. Tax consequences
result from distributions by the funds of dividend and interest income they have
received or capital gains they have generated through their investment
activities. Tax consequences also result from sales of fund shares by investors
after the net asset value has increased or decreased.

Tax-Deferred Accounts

If you purchase fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through a tax-deferred account,
please consult your plan administrator, your summary plan description or a tax
advisor.

Taxable Accounts

If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.

Taxability of Distributions

Fund distributions may consist of income earned by the fund from sources such as
dividends and interest, or capital gains generated from the sale of fund
investments. Distributions of income are taxed as ordinary income. Distributions
of capital gains are classified either as short term or long term and are taxed
as follows:

Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
---------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
---------------------------------------------------------------------------------------
Long-term capital gains 10% 20%

The tax status of any distributions of capital gains is determined by how long
the fund held the underlying security that was sold, not by how long you have
been invested in the fund, or whether you reinvest your distributions in
additional shares or take them in cash. For taxable accounts, American Century
will inform you of the tax status of fund distributions for each calendar year
in an annual tax mailing (Form 1099-DIV).

Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.

Taxes on Transactions

Your redemptions--including exchanges to other American Century funds--are
subject to capital gains tax. The table above can provide a general guide for
your potential tax liability when selling or exchanging fund shares. Short-term
capital gains are gains on fund shares you held for 12 months or less. Long-term
capital gains are gains on fund shares you held for more than 12 months. If your
shares decrease in value, their sale or exchange will result in a long-term or
short-term capital loss. However, you should note that loss realized upon the
sale or exchange of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to you with respect to those shares. If a loss is realized on the
redemption of fund shares, the reinvestment in additional fund shares within 30
days before or after the redemption may be subject to the wash sale rules of the
Internal Revenue Code. This may result in a postponement of the recognition of
such loss for federal income tax purposes.

If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and pay 31% of dividends, capital gains
distributions and redemptions to the IRS.

[left margin]
[graphic of pointing finger]

BUYING A DIVIDEND

Purchasing fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the fund shares.

The risk in buying a dividend is that a fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. The funds distribute those gains to you, after subtracting any losses,
even if you did not own the shares when the gains occurred.

If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.

26 American Century Investments 1-800-345-2021

MULTIPLE CLASS INFORMATION

American Century offers two classes of the funds: Investor Class and Advisor
Class. The shares offered by this Prospectus are Investor Class shares and have
no up-front or deferred charges, commissions, or 12b-1 fees. Capital
Preservation offers only an Investor Class of shares.

American Century offers the Advisor class of shares primarily through
employer-sponsored retirement plans or through institutions like banks,
broker-dealers and insurance companies. It has different fees, expenses and/or
minimum investment requirements from the Investor Class. The difference in the
fee structures between the classes is the result of their separate arrangements
for shareholder and distribution services and not the result of any difference
in amounts charged by the advisor for core investment advisory services.
Accordingly, the core investment advisory expenses do not vary by class.
Different fees and expenses will affect performance. For additional information
concerning the Advisor Class shares, call us at 1-800-345-3533. You also can
contact a sales representative or financial intermediary who offers that class
of shares.

Except as described below, all classes of shares of the funds have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; and (d) each class
may have different exchange privileges.

www.americancentury.com American Century Investments 27

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

The tables on the next few pages itemize what contributed to the changes in
share price during the most recently ended fiscal year. They also show the
changes in share price for this period in comparison to changes over the last
five fiscal years.

On a per-share basis, each table includes as appropriate

* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period

Each table also includes some key statistics for the period as appropriate

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

* EXPENSE RATIO - the operating expenses as a percentage of average net assets

* NET INCOME RATIO - the net investment income as a percentage of average net
assets

* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling activit

The Financial Highlights for the fiscal years ended March 31, 2000, 1999 and
1998, have been audited by PricewaterhouseCoopers LLP, independent accountants.
Their report is included in the funds' annual reports, which are incorporated by
reference into the Statement of Additional Information, and are available upon
request. Prior years' information was audited by other independent auditors,
whose report also is incorporated by reference into the Statement of Additional
Information.

28 American Century Investments 1-800-345-2021

CAPITAL PRESERVATION FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
------- --------- -------- ---------- -----------
Income From Investment Operations

Net Investment Income 0.05 0.05 0.05 0.05 0.05
------- --------- -------- ---------- -----------
Distributions

From Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.05)
------- --------- -------- ---------- -----------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======= ========== ========= ========== ===========
Total Return(1) 4.63% 4.72% 5.06% 4.82% 5.21%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(2) 0.48% 0.48% 0.49% 0.49% 0.51%
Ratio of Net Investment Income to Average Net Assets 4.51% 4.53% 4.90% 4.66% 5.07%
Net Assets, End of Period (in thousands) $3,350,237 $3,324,805 $3,144,584 $2,978,015 $3,077,558

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

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

www.americancentury.com American Century Investments 29

GOVERNMENT AGENCY MONEY MARKET FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- --------- --------- ---------
Income From Investment Operations

Net Investment Income 0.05 0.05 0.05 0.05 0.05
-------- -------- --------- --------- ---------
Distributions

From Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.05)
-------- -------- --------- --------- ---------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ========= ========= =========
Total Return(1) 4.98% 4.91% 5.14% 4.89% 5.35%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(2) 0.48% 0.48% 0.51% 0.57% 0.51%
Ratio of Net Investment Income to Average Net Assets 4.88% 4.79% 5.02% 4.76% 5.20%
Net Assets, End of Period (in thousands) $555,374 $527,842 $487,791 $470,759 $503,328

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

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

30 American Century Investments 1-800-345-2021

SHORT-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
--------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.85 $9.80 $9.68 $9.84 $9.73
-------- -------- --------- --------- ---------
Income From Investment Operations

Net Investment Income 0.49 0.49 0.53 0.52 0.53
Net Realized and Unrealized Gain (Loss)
on Investments (0.21) 0.05 0.12 (0.07) 0.11
-------- -------- --------- --------- ---------
Total From Investment Operations 0.28 0.54 0.65 0.45 0.64
-------- -------- --------- --------- ---------
Distributions

Total Distributions (0.49) (0.49) (0.53) (0.61) (0.53)
-------- -------- --------- --------- ---------
Net Asset Value, End of Period $9.64 $9.85 $9.80 $9.68 $9.84
======== ======== ========= ========= =========
Total Return(2) 2.86% 5.60% 6.89% 4.62% 6.71%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.55% 0.61% 0.67%
Ratio of Net Investment Income to Average Net Assets 4.94% 4.92% 5.45% 5.26% 5.39%
Portfolio Turnover Rate 179% 138% 140% 234% 224%
Net Assets, End of Period (in thousands) $59,671 $61,783 $40,874 $35,854 $35,648

(1) Per-share amount was less than $0.005.

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

www.americancentury.com American Century Investments 31

INTERMEDIATE-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.45 $10.56 $10.06 $10.24 $9.99
------- ------- ------- -------- --------
Income From Investment Operations

Net Investment Income 0.53 0.54 0.59 0.58 0.58
Net Realized and Unrealized Gain (Loss)
on Investments (0.37) 0.10 0.50 (0.18) 0.25
------- ------- ------- -------- --------
Total From Investment Operations 0.16 0.64 1.09 0.40 0.83
------- ------- ------- -------- --------
Distributions

From Net Investment Income (0.53) (0.54) (0.59) (0.58) (0.58)
From Net Realized Gains -- (0.21) -- -- --
In Excess of Net Realized Gains (0.05) -- -- -- --
------- ------- ------- -------- --------
Total Distributions (0.58) (0.75) (0.59) (0.58) (0.58)
------- ------- ------- -------- --------
Net Asset Value, End of Period $10.03 $10.45 $10.56 $10.06 $10.24
======= ======== ======== ======== ========
Total Return(1) 1.51% 6.09% 11.04% 4.05% 8.42%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.51% 0.51% 0.53%
Ratio of Net Investment Income to Average Net Assets 5.11% 5.01% 5.63% 5.72% 5.65%
Portfolio Turnover Rate 171% 221% 194% 110% 168%
Net Assets, End of Period (in thousands) $329,995 $435,494 $374,861 $328,784 $311,020

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

32 American Century Investments 1-800-345-2021

LONG-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.12 $10.58 $9.32 $9.67 $9.05
-------- ------- ------- -------- -------
Income From Investment Operations

Net Investment Income 0.57 0.58 0.61 0.60 0.60
Net Realized and Unrealized Gain (Loss)
on Investments (0.30) 0.11 1.26 (0.35) 0.62
-------- ------- ------- -------- -------
Total From Investment Operations 0.27 0.69 1.87 0.25 1.22
-------- ------- ------- -------- -------
Distributions

From Net Investment Income (0.57) (0.58) (0.61) (0.60) (0.60)
From Net Realized Gains -- (0.52) -- -- --
In Excess of Net Realized Gains -- (0.05) -- -- --
-------- ------- ------- -------- -------
Total Distributions (0.57) (1.15) (0.61) (0.60) (0.60)
-------- ------- ------- -------- -------
Net Asset Value, End of Period $9.82 $10.12 $10.58 $9.32 $9.67
======== ======= ======== ======== =======
Total Return(1) 2.86% 6.33% 20.48% 2.65% 13.46%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.54% 0.60% 0.67%
Ratio of Net Investment Income to Average Net Assets 5.84% 5.37% 6.00% 6.28% 5.93%
Portfolio Turnover Rate 182% 105% 57% 40% 112%
Net Assets, End of Period (in thousands) $85,886 $137,552 $103,381 $126,570 $110,741

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

www.americancentury.com American Century Investments 33

INFLATION-ADJUSTED TREASURY FUND
Investor Class

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

Per-Share Data

2000 1999 1998 1997(1)
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.48 $9.63 $9.74 $10.00
------- ------- ------- --------
Income From Investment Operations

Net Investment Income 0.58 0.47 0.44 0.06
Net Realized and Unrealized Loss on Investment Transactions (0.07) (0.15) (0.11) (0.26)
------- ------- ------- --------
Total From Investment Operations 0.51 0.32 0.33 (0.20)
------- ------- ------- --------
Distributions

From Net Investment Income (0.58) (0.47) (0.44) (0.06)
------- ------- ------- --------
Net Asset Value, End of Period $9.41 $9.48 $9.63 $9.74
======= ======= ======= ========
Total Return(2) 5.52% 3.37% 3.45% (1.98)%

Ratios/Supplemental Data

2000 1999 1998 1997(1)
--------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.49% 0.50% 0.50%(3)
Ratio of Net Investment Income to Average Net Assets 6.06% 4.84% 4.45% 5.03%(3)
Portfolio Turnover Rate 52% 127% 69% --
Net Assets, End of Period (in thousands) $18,610 $8,980 $5,279 $2,277

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

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

(3) Annualized.

34 American Century Investments 1-800-345-2021

SHORT-TERM GOVERNMENT FUND
Investor Class

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

Per-Share Data

2000 1999 1998(1) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.47 $9.46 $9.49 $9.47 $9.51 $9.27
-------- ------ ------ ------- ------ ------
Income From Investment Operations

Net Investment Income 0.52 0.49 0.21 0.52 0.51 0.52
Net Realized and Unrealized Gain (Loss) on
Investments (0.28) 0.01 (0.03) 0.02 (0.04) 0.24
-------- ------ ------ ------- ------ ------
Total From Investment Operations 0.24 0.50 0.18 0.54 0.47 0.76
-------- ------ ------ ------- ------ ------
Distributions

From Net Investment Income (0.52) (0.49) (0.21) (0.52) (0.51) (0.52)
-------- ------ ------ ------- ------- ------
Net Asset Value, End of Period $9.19 $9.47 $9.46 $9.49 $9.47 $9.51
======== ====== ====== ======= ======= =======
Total Return(2) 2.51% 5.39% 1.95% 5.86% 5.09% 8.42%

Ratios/Supplemental Data

2000 1999 1998(1) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to

Average Net Assets 0.59% 0.59% 0.59%(3) 0.68% 0.70% 0.70%

Ratio of Net Investment Income to

Average Net Assets 5.48% 5.15% 5.43%(3) 5.53% 5.39% 5.53%

Portfolio Turnover Rate 323% 196% 54% 293% 246% 128%

Net Assets, End of Period (in thousands) $762,363 $832,344 $808,464 $519,332 $349,772 $391,331

(1) The fund's fiscal year end was changed from October 31 to March 31
resulting in a five-month reporting period. For years ended prior to 1998,
the fund's fiscal year end was October 31.

(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.

www.americancentury.com American Century Investments 35

GNMA FUND

Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.62 $10.67 $10.33 $10.45 $10.18
--------- -------- -------- -------- --------
Income From Investment Operations

Net Investment Income 0.67 0.64 0.69 0.71 0.74
Net Realized and Unrealized Gain (Loss) on
Investment Transactions (0.46) (0.05) 0.34 (0.12) 0.27
--------- -------- -------- -------- --------
Total From Investment Operations 0.21 0.59 1.03 0.59 1.01
--------- -------- -------- -------- --------
Distributions

From Net Investment Income (0.67) (0.64) (0.69) (0.71) (0.74)
--------- --------- -------- -------- --------
Net Asset Value, End of Period $10.16 $10.62 $10.67 $10.33 $10.45
========= ========= ======== ======== =========
Total Return(1) 2.01% 5.66% 10.21% 5.84% 10.08%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(2) 0.59% 0.59% 0.58% 0.55% 0.58%
Ratio of Net Investment Income to Average Net Assets 6.42% 5.98% 6.49% 6.84% 6.98%
Portfolio Turnover Rate 133% 119% 133% 105% 64%
Net Assets, End of Period (in thousands) $1,240,003 $1,415,607 $1,285,641 $1,119,165 $1,120,019

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

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

36 American Century Investments 1-800-345-2021

NOTES

www.americancentury.com American Century Investments 37

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS

Annual and Semiannual Reports

Annual and semiannual reports contain more information about the funds'
investments and the market conditions and investment strategies that
significantly affected the funds' performance during the most recent fiscal
period.

Statement of Additional Information (SAI)

The SAI contains a more detailed, legal description of the funds' operations,
investment restrictions, policies and practices. The SAI is incorporated by
reference into this Prospectus. This means that it is legally part of this
Prospectus, even if you don't request a copy.

You may obtain a free copy of the SAI or annual and semiannual reports, and ask
questions about the funds or your accounts, by contacting American Century at
the address or telephone numbers listed below.

You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.

In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.

On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]

By mail SEC Public Reference Section
Washington, D.C. 20549-0102

Investment Company Act File No. 811-4363

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

American Century Investments

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

1-800-345-2021 or 816-531-5575

0008
SH-PRS-20946

Your
AMERICAN CENTURY
prospectus

Government Agency Money Market Fund
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund
Inflation-Adjusted Treasury Fund
Short-Term Government Fund
GNMA Fund

ADVISOR CLASS
AUGUST 1, 2000

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.

Funds Distributor, Inc. and
American Century Investment

Services, Inc., Distributors

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

Dear Investor,

As you begin to read through this Prospectus, take a look at the table of
contents to understand how it is organized. The first four sections take a
close-up look at the funds.

An Overview of the Funds - Learn about fund goals, strategies and risks, and who
may or may not want to invest.

Fund Performance History - See how the funds performed from year to year.

Fees and Expenses - Find out about fund management fees and other expenses
associated with investing.

Objectives, Strategies and Risks - Take a more detailed look at the principal
investment objectives, strategies and risks presented in the Overview of the
Funds section.

As you continue to read, the Management section will acquaint you with the fund
management team, and Investing with American Century gives an overview about how
to invest and manage your account.

Share Price and Distributions, Taxes, and Financial Highlights wrap up the
Prospectus with important financial information you'll need to make an informed
decision.

Naturally, you may have questions about investing after you read through the
Prospectus. Our Web site, www.americancentury.com, offers information that could
answer many of your questions. Or, a Service Representative will be happy to
help weekdays, 8 a.m. to 5:30 p.m. Central time. Give us a call at
1-800-345-3533.

Sincerely,

[signature Mark Killen]
Mark Killen
Senior Vice President
American Century Investment Services, Inc.

[left margin]

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

American Century
Investments

P.O. Box 419385
Kansas City, MO

64141-6385

TABLE OF CONTENTS

An Overview of the Funds .................................................. 2
Fund Performance History .................................................. 3
Fees and Expenses ......................................................... 8
Objectives, Strategies and Risks .......................................... 9
Government Agency Money Market Fund .................................. 9
Short-Term Treasury Fund
Intermediate-Term Treasury Fund
Long-Term Treasury Fund .............................................. 10
Inflation-Adjusted Treasury Fund ..................................... 11
Short-Term Government Fund ........................................... 12
GNMA Fund ............................................................ 13
Basics of Fixed-Income Investing .......................................... 14
Management ................................................................ 17
Investing with American Century ........................................... 20
Share Price and Distributions ............................................. 22
Taxes ..................................................................... 23
Multiple Class Information ................................................ 24
Financial Highlights ...................................................... 25
Performance Information of Other Class .................................... 33

[left margin]

Throughout this book you'll find definitions of key investment terms and
phrases. When you see a word printed in BLUE ITALICS, look for its definition in
the left margin.

[graphic of pointing finger]
This symbol highlights special information and helpful tips.

American Century Investments

AN OVERVIEW OF THE FUNDS

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These funds seek income and investment returns by investing in various types of
U.S. government securities.

WHAT ARE THE FUNDS' PRIMARY INVESTMENT STRATEGIES AND PRINCIPAL RISKS?

Fund Primary Investments Principal Risks
-----------------------------------------------------------------------------------------
Government Agency Short-term U.S. government securities Low credit risk
Money Market that mature in 397 days or less Lowest interest rate risk
-----------------------------------------------------------------------------------------
Short-Term U.S. Treasury securities Very low credit risk
Treasury that mature in three years or less Low interest rate risk
-----------------------------------------------------------------------------------------
Intermediate-Term U.S. Treasury securities Very low credit risk
Treasury that mature in three years or more Moderate interest rate risk
-----------------------------------------------------------------------------------------
Long-Term U.S. Treasury securities that Very low credit risk
Treasury mature in 10 years or more High interest rate risk
-----------------------------------------------------------------------------------------
Inflation-Adjusted Inflation-indexed Very low credit risk
Treasury U.S. Treasury securities Moderate interest rate risk
-----------------------------------------------------------------------------------------
Short-Term U.S. government securities Low credit risk
Government that mature in three years or less Low interest rate risk
Prepayment risk
-----------------------------------------------------------------------------------------
GNMA Ginnie Maes, which are Very low credit risk
mortgage-backed securities Moderate interest rate risk
issued by the Government Prepayment risk
National Mortgage Association

As with all funds, at any given time your shares may be worth more or less than
the price you paid for them. As a result, it is possible to lose money by
investing in the funds. As a money market fund, Government Agency Money Market
seeks to maintain a stable asset value of $1.00 per share. However, neither this
fund, nor any other money market fund, can guarantee you won't lose money by
investing in it.

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you

* are seeking current income

* prefer a relatively safe investment over one that may provide better
long-term investment returns

* are seeking diversification by investing in a fixed-income mutual fund

* are comfortable with the funds' other investment risks

WHO MAY NOT WANT TO INVEST IN THE FUNDS?

The funds may not be a good investment if you are

* investing for long-term growth

* looking for the added security of FDIC insurance

[left margin]

DEBT SECURITIES include fixed-income investments such as notes, bonds,
commercial paper and debentures.

[graphic of pointing finger]
An investment in the funds is not a bank deposit, and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Although a money market fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
it.

2 American Century Investments 1-800-345-3533

FUND PERFORMANCE HISTORY

GOVERNMENT AGENCY MONEY MARKET FUND

When the Advisor Class of a fund has investment results for a full calendar
year, this section will feature charts that show

* Annual Total Returns

* Highest and Lowest Quarterly Returns

* Average Annual Returns, including a comparison of these returns to a
benchmark index for the Advisor Class of the fund

The performance of the fund's Investor Class shares for each full calendar year
in the life of the fund is shown below.(1)(2)

[data shown in bar chart]

1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
Government Agency
Money Market Fund 4.73% 5.07% 5.07% 4.93% 5.50% 3.755 2.68% 3.39% 6.01% 8.34%

(1) As of June 30, 2000, the end of the most recent calendar quarter, the
fund's year-to-date returns were 5.33%

(2) If the Advisor Class had existed during the periods presented, its
performance would have been substantially similar to that of the Investor
Class because each represents an investment in the same portfolio of
securities. However, performance of the Advisor Class would have been lower
because of its higher expense ratio.

[left margin]
[graphic of pointing finger]

All past performance information is designed to help show you how fund returns
can vary. Keep in mind that past performance does not predict how the fund will
perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 3

FUND PERFORMANCE HISTORY

SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUN

Annual Total Returns(1)

The following bar chart shows the performance of the funds' Advisor Class shares
for each full calendar year in the life of the class. It indicates the
volatility of the funds' historical returns from year to year.

[data shown in bar chart]
1999 1998
Short-Term Treasury 1.99% 8.17%
Intermediate-Term Treasury -2.30% 8.67%
Long-Term Treasury -8.93% N/A

(1) As of June 30, 2000, the end of the most recent calendar quarter, the
funds' year-to-date returns were Short-Term Treasury, 2.64%; Intermediate-
Term Treasury, 4.19%; and Long-Term Treasury, 8.97%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Short-Term Treasury 2.87% (3Q 1998) -0.03% (2Q 1999)
--------------------------------------------------------------------------------
Intermediate-Term Treasury 5.76% (3Q 1998) -1.29% (1Q 1999)
--------------------------------------------------------------------------------
Long-Term Treasury 7.89% (1Q 2000) -4.24% (1Q 1999)

Average Annual Total Returns

The following table shows the average annual total returns of the funds' Advisor
Class shares for the periods indicated. The benchmarks are unmanaged indices
that have no operating costs and are included in the table for performance
comparison.

For the calendar year December 31, 1999 1 year Life of Fund(1)
------------------------------------------------------------------------------
Short-Term Treasury 1.99% 4.19%
Salomon 1- to 3-Year Treasury Index(2) 3.04% 5.21(3)
Salomon 1- to 3-Year Treasury/Agency Index(2) 3.10% 5.22(3)
------------------------------------------------------------------------------
Intermediate-Term Treasury -2.30% 3.87%
Salomon 3- to 10-Year Treasury Index -1.97% 4.22%(4)
------------------------------------------------------------------------------
Long-Term Treasury -8.93% -0.24%
Salomon Long-Term Treasury Index(5) -8.71% 1.79%(6)
Salomon Long-Term Treasury/Agency Index(5) -8.79% 1.69%(6)

(1) The inception dates for the funds are: Short-Term Treasury, October 6,
1997; Intermediate-Term Treasury, October 9, 1997; and Long-Term Treasury,
January 12, 1998.

(2) The fund's benchmark was changed from the Salomon 1- to 3-Year
Treasury/Agency Index to the Salomon 1- to 3- Year Treasury Index, which we
believe more accurately represents the fund's primarily Treasury focus.

(3) Since September 30, 1997, the date closest to the class's inception for
which data are available.

(4) Since October 31, 1997, the date closest to the class's inception for which
data are available.

(5) The fund's benchmark was changed from the Salomon Long-Term Treasury/Agency
Index to the Salomon Long-Term Treasury Index, which we believe more
Accurately represents the fund's primarily Treasury focus.

(6) Since December 31, 1997, the date closest to the class's inception for
which data are available.

Performance Information of Other Class

The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 33.

[left margin]
[graphic of pointing finger]

The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.

4 American Century Investments 1-800-345-3533

FUND PERFORMANCE HISTORY

INFLATION-ADJUSTED TREASURY FUND

Annual Total Returns(1)

The following bar chart shows the performance of the fund's Advisor Class shares
for each full calendar year in the life of the class. It indicates the
volatility of the fund's historical returns from year to year.

[data shown in bar chart]
1999
------------------------------------------
Inflation-Adjusted Treasury Fund 1.45%

(1) As of June 30, 2000, the end of the most recent calendar quarter,
Inflation-Adjusted Treasury's year-to-date return was 6.19%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 4.02%(1Q 2000) -0.24% (4Q 1999)

Average Annual Total Returns

The following table shows the average annual total returns of the fund's Advisor
Class shares for the periods indicated. The benchmark is an unmanaged index that
has no operating costs and is included in the table for performance comparison

For the calendar year December 31, 1999 1 year Life of Fund(1)
-------------------------------------------------------------------------------
Inflation-Adjusted Treasury 1.45% 2.03%
Salomon Inflation-Linked Index 2.39% 3.09%(2)

(1) The inception date for the class is June 15, 1998.

(2) Since June 30, 1998, the date closest to the class's inception for which
data are available.

Performance Information of Other Class

The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 33.

[left margin]
[graphic of pointing finger]

The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 5

FUND PERFORMANCE HISTORY

SHORT-TERM GOVERNMENT FUND

Annual Total Returns(1)

[data shown in bar chart]

1999
------------------------------------------
Short-Term Government Fund 1.62%

(1) As of June 30, 2000, the end of the most recent calendar quarter,
Short-Term Government's year-to-date return was 2.64%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
Short-Term Government 1.57% (1Q 2000) -0.59% (2Q 1999)

Average Annual Total Returns

For the calendar year December 31, 1999 1 year Life of Fund(1)
--------------------------------------------------------------------------------
Short-Term Government 1.62% 3.08%
Salomon 1- to 3-Year Treasury/Agency Index 3.10% 4.56%(2)

(1) The inception date for the class is July 8, 1998.

(2) Since July 31, 1998, the date nearest the class's inception for which data
are available.

Performance Information of Other Class

The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 33.

[left margin]
[graphic of pointing finger]

The performance information on this page is designed to help you see how the
funds' returns can vary. Keep in mind that past performance does not predict how
the funds will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.

6 American Century Investments 1-800-345-3533

FUND PERFORMANCE HISTORY

GNMA FUND

Annual Total Returns(1)

[data shown in bar chart]
1999 1998
GNMA 0.72% 6.06%

(1) As of June 30, 2000, the end of the most recent calendar quarter, GNMA's
year-to-date return was 3.80%.

The highest and lowest quarterly returns for the period reflected in the bar
chart are:

Highest Lowest
--------------------------------------------------------------------------------
GNMA 2.31% (3Q 1998) -0.90% (2Q 1999)

Average Annual Total Returns

For the calendar year December 31, 1999 1 year Life of Fund(1)
--------------------------------------------------------------------------------
GNMA 0.72% 3.87%
Salomon 30-Year GNMA Index 2.01% 4.63%(2)

(1) The inception date for the fund is October 9, 1997.

(2) Since October 31, 1997, the date closest to the class's inception for which
data are available.

Performance Information of Other Class

The original class of shares of the funds was the Investor Class. For
information about the historical performance of the original class of shares,
see page 33.

[left margin]
[graphic of pointing finger]

The performance information on this page is designed to help you see how fund
returns can vary. Keep in mind that past performance does not predict how the
fund will perform in the future.

[graphic of pointing finger]
For current performance information, including yields, please call us at
1-800-345-3533 or visit us at www.americancentury.com.

www.americancentury.com American Century Investments 7

FEES AND EXPENSES

There are no sales loads, fees or other charges

* to buy fund shares directly from American Century
* to reinvest dividends in additional shares
* to exchange into the Advisor Class shares of other American Century funds * to
redeem your shares

The following table describes the fees and expenses you will pay if you buy and
hold shares of the funds.

ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)

Management Distribution and Other Total Annual Fund
Fee(1) Services (12b-1) Fees(2) Expenses(3) Operating Expenses
-----------------------------------------------------------------------------------------------------------
Government Agency Money Market 0.23% 0.50% 0.00% 0.73%
-----------------------------------------------------------------------------------------------------------
Short-Term Treasury 0.26% 0.50% 0.00% 0.76%
-----------------------------------------------------------------------------------------------------------
Intermediate-Term Treasury 0.26% 0.50% 0.00% 0.76%
-----------------------------------------------------------------------------------------------------------
Long-Term Treasury 0.26% 0.50% 0.00% 0.76%
-----------------------------------------------------------------------------------------------------------
Inflation-Adjusted Treasury 0.26% 0.50% 0.00% 0.76%
-----------------------------------------------------------------------------------------------------------
Short-Term Government 0.34% 0.50% 0.00% 0.84%
-----------------------------------------------------------------------------------------------------------
GNMA 0.34% 0.50% 0.00% 0.84%

(1) Based on expenses incurred during the funds' most recent fiscal year. The
funds have stepped-fee schedules. As a result, the funds' management fee
rate generally decreases as fund assets increase.

(2) The 12b-1 fee is designed to permit investors to purchase Advisor Class
shares through broker-dealers, banks, insurance companies and other
financial intermediaries. A portion of the fee is used to compensate them
for ongoing recordkeeping and administrative services that would otherwise
be performed by an affiliate of the advisor, and a portion is used to
compensate them for distribution and other shareholder services. For more
information, see Service and Distribution Fees, page 24

(3) Other expenses, which include the fees and expenses of the funds'
independent trustees and their legal counsel, as well as interest, were
less than 0.005% for the most recent fiscal year.

EXAMPLE

The examples in the table below are intended to help you compare the costs of
investing in a fund with the costs of investing in other mutual funds. Assuming
you . . .

* invest $10,000 in the fund
* redeem all of your shares at the end of the periods shown below * earn a 5%
return each year * incur the same operating expenses as shown above

. . . your cost of investing in the fund would be:

1 year 3 years 5 years 10 years
------------------------------------------------------------------------
Government Agency Money Market $74 $233 $405 $904
------------------------------------------------------------------------
Short-Term Treasury $78 $242 $422 $939
------------------------------------------------------------------------
Intermediate-Term Treasury $78 $242 $422 $939
------------------------------------------------------------------------
Long-Term Treasury $78 $242 $422 $939
------------------------------------------------------------------------
Inflation-Adjusted Treasury $78 $242 $422 $939
------------------------------------------------------------------------
Short-Term Government $86 $268 $465 $1,034
------------------------------------------------------------------------
GNMA $86 $268 $465 $1,034

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[graphic of pointing finger]

Use this example to compare the costs of investing in other funds. Of course,
your actual costs may be higher or lower.

8 American Century Investments 1-800-345-3533

OBJECTIVES, STRATEGIES AND RISKS

GOVERNMENT AGENCY MONEY MARKET FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

The fund is a money market fund that seeks maximum safety and liquidity and
seeks to pay shareholders the highest rate of return consistent with this
objective. In addition, Government Agency Money Market seeks to purchase only
those securities with income that will be exempt from state income tax.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The fund buys short-term money market securities issued by the U.S. Treasury
that are guaranteed by the direct full faith and credit pledge of the U.S.
government.

Government Agency Money Market also buys other short-term money market
instruments issued by the U.S. government and its agencies and
instrumentalities. The U.S. government provides varying levels of financial
support to these agencies and instrumentalities.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

Because short-term money market instruments are among the safest securities
available, the interest they pay is among the lowest for income-paying
securities. Accordingly, the yield on this fund will likely be lower than funds
that invest in longer-term or lower-quality securities.

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[graphic of pointing finger]

Money market instruments have less than 397 days remaining until maturity.

www.americancentury.com American Century Investments 9

SHORT-TERM TREASURY FUND
INTERMEDIATE-TERM TREASURY FUND
LONG-TERM TREASURY FUN

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

These funds seek the highest level of current income exempt from state income
tax. The Short-Term Treasury and Intermediate-Term Treasury funds also seek to
maintain safety of capital.

HOW DO THE FUNDS PURSUE THEIR INVESTMENT OBJECTIVES?

The funds buy U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government.

WHAT ARE THE DIFFERENCES BETWEEN THE FUNDS?

The funds differ in the maturity of the debt securities they purchase. This
difference is shown in the chart below.

Expected Weighted Average Maturity Range
-------------------------------------------------------------------------------
Short-Term Treasury 397 days - 3 years
-------------------------------------------------------------------------------
Intermediate-Term Treasury 3 - 10 years
-------------------------------------------------------------------------------
Long-Term Treasury 10 - 30 years

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?

The funds' share values will fluctuate. As a result, it is possible to lose
money by investing in the funds. In general, funds that have a higher potential
gain have a higher potential loss.

Potential Income Potential Loss
-------------------------------------------------------------------------------
Short-Term Treasury Lower Lower
-------------------------------------------------------------------------------
Intermediate-Term Treasury Moderate Moderate
-------------------------------------------------------------------------------
Long-Term Treasury Higher Higher

10 American Century Investments 1-800-345-3533

INFLATION-ADJUSTED TREASURY FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

Inflation-Adjusted Treasury seeks total return and inflation protection
consistent with investment in U.S. Treasury inflation-adjusted securities.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The fund also may buy traditional U.S. Treasury securities that are not
inflation-indexed.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

[left margin]

The REAL INTEREST RATE is the current market interest rate minus the market's
inflation expectations.

www.americancentury.com American Century Investments 11

SHORT-TERM GOVERNMENT FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

Short-Term Government seeks high current income while maintaining safety of
principal.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

The weighted average maturity of the fund is expected to be three years or less

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

12 American Century Investments 1-800-345-3533

GNMA FUND

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

GNMA seeks high current income while maintaining liquidity and safety of
principal by investing primarily in GNMA certificates.

HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

As with all funds, your shares of GNMA may be worth more or less at any given
time than the price you paid for them. As a result, it is possible to lose money
by investing in the fund.

www.americancentury.com American Century Investments 13

BASICS OF FIXED-INCOME INVESTING

DEBT SECURITIES

The fund managers decide which debt securities to buy and sell by

* determining which securities help a fund meet its maturity requirements

* identifying securities that satisfy a fund's credit quality standards

* evaluating the current economic conditions and assessing the risk of
inflation

* evaluating special features of the securities that may make them more or less
attractive

WEIGHTED AVERAGE MATURITY

Amount of Percent of Remaining Weighted
Security Owned Portfolio Maturity Maturity
----------------------------------------------------------------------------------
Debt Security A $100,000 25% 1,000 days 250 days
----------------------------------------------------------------------------------
Debt Security B $300,000 75% 10,000 days 7,500 days
----------------------------------------------------------------------------------
Weighted Average Maturity 7,750 days

TYPES OF RISK

The basic types of risk the funds face are described below.

INTEREST RATE RISK

[left margin]

WEIGHTED AVERAGE MATURITY is a tool the fund
managers use to approximate the remaining term to maturity of a fund's
investment portfolio.

[graphic of pointing finger]

The longer a fund's weighted average maturity, the more sensitive it is to
interest rate changes.

14 American Century Investments 1-800-345-3533

Remaining Maturity Current Price Price After 1% Increase Change in Price
-------------------------------------------------------------------------------
1 year $100.00 $99.06 -0.94%
-------------------------------------------------------------------------------
3 years $100.00 $97.38 -2.62%
-------------------------------------------------------------------------------
10 years $100.00 $93.20 -6.80%
-------------------------------------------------------------------------------
30 years $100.00 $88.69 -11.31%

Credit Risk

Liquidity Risk

[left margin]
[graphic of pointing finger]

Credit quality may be lower when the issuer has any of the following

* a high debt level
* a short operating history
* a senior level of debt
* a difficult, competitive environment
* a less stable cash flow

www.americancentury.com American Century Investments 15

A COMPARISON OF BASIC RISK FACTORS

Interest Rate Risk Credit Risk Liquidity Risk

--------------------------------------------------------------------------------
Government Agency Money Market Lowest Low Very Low
--------------------------------------------------------------------------------
Short-Term Treasury Low Very Low Very Low
--------------------------------------------------------------------------------
Intermediate-Term Treasury Moderate Very Low Very Low
--------------------------------------------------------------------------------
Long-Term Treasury High Very Low Very Low
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury Moderate Very Low Very Low
--------------------------------------------------------------------------------
Short-Term Government Low Low Very Low
--------------------------------------------------------------------------------
GNMA Moderate Very Low Very Low

16 American Century Investments 1-800-345-3533

MANAGEMENT

WHO MANAGES THE FUNDS?

The Board of Trustees, investment advisor and fund management team play key
roles in the management of the funds.

THE BOARD OF TRUSTEES

THE INVESTMENT ADVISOR

For the services it provided to the funds during the most recent fiscal year,
the advisor received a unified management fee based on a percentage of the
average net assets of the Advisor Class shares of the funds. The rate of the
management fee for each fund is determined monthly on a class-by-class basis
using a two-step formula that takes into account the fund's strategy (money
market, bond or equity) and the total amount of mutual fund assets the advisor
manages.

Management Fees Paid by the Funds to the Advisor as a Percentage of Average Net
Assets for the Most Recent Fiscal Year Ended March 31, 2000
--------------------------------------------------------------------------------
Government Agency Money Market N/A(1)
--------------------------------------------------------------------------------
Short-Term Treasury 0.26%
--------------------------------------------------------------------------------
Intermediate-Term Treasury 0.26%
--------------------------------------------------------------------------------
Long-Term Treasury 0.26%
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 0.26%
--------------------------------------------------------------------------------
Short-Term Government 0.34%
--------------------------------------------------------------------------------
GNMA 0.34%

(1) The fund was not in operation for the full fiscal year ended March 31,
2000. The fund will pay the advisor a unified management fee calculated by
adding the appropriate Investment Category and Complex Fees from the
following schedules.

Investment Category Fee Schedule Complex Fee Schedule (Advisor Class)
--------------------------------------------------------------------------------
Category Assets Fee Rate Complex Assets Fee Rate
First $1 billion 0.2500% First $2.5 billion 0.0600%
Next $1 billion 0.2070% Next $7.5 billion 0.0500%
Next $3 billion 0.1660% Next $15 billion 0.0485%
Next $5 billion 0.1490% Next $25 billion 0.0470%
Next $15 billion 0.1380% Next $50 billion 0.0460%
Next $25 billion 0.1375% Next $100 billion 0.0450%
Thereafter 0.1370% Next $100 billion 0.0440%
Next $200 billion 0.0430%
Next $250 billion 0.0420%
Next $500 billion 0.0410%
Thereafter 0.0400%

www.americancentury.com American Century Investments 17

THE FUND MANAGEMENT TEAMS

The portfolio managers who lead each team are identified below.

Government Agency Money Market

BETH BUNNELL HUNTER

Ms. Hunter, Portfolio Manager, has been a member of the team that manages
Government Agency Money Market since joining American Century in July 1999.
Before joining American Century, she worked for Calvert Asset Management Company
as a Portfolio Trading Analyst from 1994 to 1996 and as a Portfolio Manager from
1996 to June 1999. She has a bachelor of arts from the University of Washington.

DENISE TABACCO

Ms. Tabacco, Portfolio Manager, has been a member of the Government Agency Money
Market team since May 1996. She joined American Century in 1988, becoming a
member of its portfolio department in 1991. She has a bachelor's degree in
accounting from San Diego State University and an MBA in finance from Golden
Gate University.

GNMA

CASEY COLTON

Short-Term Treasury

Intermediate-Term Treasury

ROBERT V. GAHAGAN

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[graphic of pointing finger]

CODE OF ETHICS

18 American Century Investments 1-800-345-3533

Short-Term Government

DAVID W. SCHROEDER

MICHAEL J. SHEARER

Long-Term Treasury
Inflation-Adjusted Treasury

DAVID W. SCHROEDER

FUNDAMENTAL INVESTMENT POLICIES

www.americancentury.com American Century Investments 19

INVESTING WITH AMERICAN CENTURY

ELIGIBILITY FOR ADVISOR CLASS SHARES

The Advisor Class shares are intended for purchase by participants in
employer-sponsored retirement or savings plans and for persons purchasing shares
through broker-dealers, banks, insurance companies and other financial
intermediaries that provide various administrative and distribution services.

INVESTING THROUGH FINANCIAL INTERMEDIARIES

* minimum investment requirements
* exchange policies
* fund choices
* cutoff time for investments

MODIFYING OR CANCELING AN INVESTMENT

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[graphic of pointing finger]

Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisors.

20 American Century Investments 1-800-345-3533

ABUSIVE TRADING PRACTICES

We do not permit market timing or other abusive trading practices in our funds.

SPECIAL REQUIREMENTS FOR LARGE REDEMPTIONS

www.americancentury.com American Century Investments 21

SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.

DISTRIBUTIONS

[left margin]

A fund's NET ASSET VALUE, or NAV, is the price of the fund's shares.

CAPITAL GAINS are increases in the values of capital assets, such as stock, from
the time the assets are purchased.

22 American Century Investments 1-800-345-3533

TAXES

Tax-Deferred Accounts

Taxable Accounts

If you own fund shares through a taxable account, distributions by the fund and
your sales of fund shares may cause you to be taxed on your investment.

Taxability of Distributions

Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or Above
----------------------------------------------------------------------------------------
Short-term capital gains Ordinary income rate Ordinary income rate
----------------------------------------------------------------------------------------
Long-term capital gains 10% 20%

Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, you may want to consult your tax professional about
federal, state and local tax consequences.

Taxes on Transactions

[left margin]
[graphic of pointing finger]

BUYING A DIVIDEND

If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
fund's portfolio.

www.americancentury.com American Century Investments 23

MULTIPLE CLASS INFORMATION

American Century offers two classes of the funds: Investor Class and Advisor
Class. The shares offered by this Prospectus are Advisor Class shares and are
offered primarily through employer-sponsored retirement plans or through
institutions like banks, broker-dealers and insurance companies.

The Investor class of shares has no up-front or deferred charges, commissions,
or 12b-1 fees. It also has different fees, expenses and/or minimum investment
requirements from the Advisor Class. The difference in the fee structures
between the classes is the result of their separate arrangements for shareholder
and distribution services and not the result of any difference in amounts
charged by the advisor for core investment advisory services. Accordingly, the
core investment advisory expenses do not vary by class. Different fees and
expenses will affect performance. For additional information concerning the
Investor Class shares, call us at 1-800-345-2021. You also can contact a sales
representative or financial intermediary who offers that class of shares.

Service and Distribution Fees

Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay certain expenses associated with the distribution of their shares out of
fund assets. The funds' Advisor Class shares have a 12b-1 Plan. Under the Plan,
the funds' Advisor Class pays an annual fee of 0.50% of Advisor Class average
net assets, half for certain shareholder and administrative services and half
for distribution services. The advisor, as paying agent for the funds, pays all
or a portion of such fees to the banks, broker-dealers and insurance companies
that make such shares available. Because these fees are paid out of the funds'
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. For
additional information about the Plan and its terms, see Multiple Class
Structure - Master Distribution and Shareholder Services Plan in the Statement
of Additional Information.

24 American Century Investments 1-800-345-3533

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

On a per-share basis, each table includes as appropriate

* share price at the beginning of the period
* investment income and capital gains or losses
* distributions of income and capital gains paid to investors
* share price at the end of the period

Each table also includes some key statistics for the period as appropriate

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

* EXPENSE RATIO - the operating expenses as a percentage of average net assets

* NET INCOME RATIO - the net investment income as a percentage of average net
assets

* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling activit

www.americancentury.com American Century Investments 25

GOVERNMENT AGENCY MONEY MARKET FUND
Advisor Class

For a Share Outstanding Throughout the Period Indicated

Per-Share Data

2000(1)

-------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00
--------
Income From Investment Operations

Net Investment Income 0.04
--------
Distributions

From Net Investment Income (0.04)
--------
Net Asset Value, End of Period $1.00
========
Total Return(2) 4.58%

Ratios/Supplemental Data

2000(1)

-------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.73% (3)
Ratio of Net Investment Income to Average Net Assets 4.66% (3)
Net Assets, End of Period (in thousands) $2,584

(1) April 12, 1999 (commencement of sale) through March 31, 2000.

(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.

26 American Century Investments 1-800-345-3533

SHORT-TERM TREASURY FUND
Advisor Class

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

Per-Share Data

2000 1999 1998(1)
-------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.85 $9.80 $9.80
------- ------- --------
Income From Investment Operations

Net Investment Income 0.46 0.46 0.25
Net Realized and Unrealized Gain (Loss) on Investments (0.21) 0.05 --
------- ------- --------
Total From Investment Operations 0.25 0.51 0.25
------- ------- --------
Distributions

From Net Investment Income (0.46) (0.46) (0.25)
In Excess of Net Realized Gains --(2) -- --
------- ------- --------
Total Distributions (0.46) (0.46) (0.25)
------- ------- --------
Net Asset Value, End of Period $9.64 $9.85 $9.80
======= ======= ========
Total Return(3) 2.60% 5.34% 2.51%

Ratios/Supplemental Data

2000 1999 1998(1)
-------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76% 0.76% 0.78%(4)
Ratio of Net Investment Income to Average Net Assets 4.69% 4.67% 5.20%(4)
Portfolio Turnover Rate 179% 138% 140%
Net Assets, End of Period (in thousands) $1,634 $3,102 $1,460

(1) October 6, 1997 (commencement of sale) through March 31, 1998.

(2) Per-share amount was less than $0.005.

(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.

www.americancentury.com American Century Investments 27

INTERMEDIATE-TERM TREASURY FUND
Advisor Class

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

Per-Share Data

2000 1999 1998(1)
-------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.45 $10.56 $10.42
------- -------- ---------
Income From Investment Operations

Net Investment Income 0.50 0.51 0.26
Net Realized and Unrealized Gain (Loss) on Investments (0.37) 0.10 0.14
------- -------- ---------
Total From Investment Operations 0.13 0.61 0.40
------- -------- ---------
Distributions

From Net Investment Income (0.50) (0.51) (0.26)
From Net Realized Gains -- (0.21) --
In Excess of Net Realized Gains (0.05) -- --
------- -------- ---------
Total Distributions (0.55) (0.72) (0.26)
------- -------- ---------
Net Asset Value, End of Period $10.03 $10.45 $10.56
======= ======== =========
Total Return(2) 1.25% 5.83% 3.90%

Ratios/Supplemental Data

2000 1999 1998(1)
-------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76% 0.76% 0.77%(3)
Ratio of Net Investment Income to Average Net Assets 4.86% 4.76% 5.28%(3)
Portfolio Turnover Rate 171% 221% 194%
Net Assets, End of Period (in thousands) $11,689 $6,117 $128

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

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

(3) Annualized.

28 American Century Investments 1-800-345-3533

LONG-TERM TREASURY FUND
Advisor Class

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

Per-Share Data

2000 1999 1998(1)
--------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.12 $10.58 $10.85
------- -------- ---------
Income From Investment Operations

Net Investment Income 0.55 0.56 0.12
Net Realized and Unrealized Gain (Loss) on Investments (0.30) 0.11 (0.27)
------- -------- ---------
Total From Investment Operations 0.25 0.67 (0.15)
------- -------- ---------
Distributions

From Net Investment Income (0.55) (0.56) (0.12)
From Net Realized Gains -- (0.52) --
In Excess of Net Realized Gains -- (0.05) .--
------- -------- ---------
Total Distributions (0.55) (1.13) (0.12)
------- -------- ---------
Net Asset Value, End of Period $9.82 $10.12 $10.58
======= ======== =========
Total Return(2) 2.61% 6.07% (1.34)%

Ratios/Supplemental Data

2000 1999 1998(1)
--------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76% 0.76% 0.77%(3)
Ratio of Net Investment Income to Average Net Assets 5.59% 5.12% 5.42%(3)
Portfolio Turnover Rate 182% 105% 57%
Net Assets, End of Period (in thousands) $4,708 $2,587 $218

(1) January 12, 1998 (commencement of sale) through March 31, 1998.

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

(3) Annualized.

www.americancentury.com American Century Investments 29

INFLATION-ADJUSTED TREASURY FUND
Advisor Class

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

Per-Share Data

2000 1999(1)
----------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.48 $9.64
--------- ---------
Income From Investment Operations

Net Investment Income 0.56 0.34
Net Realized and Unrealized Loss on Investment Transactions (0.07) (0.16)
--------- ---------
Total From Investment Operations 0.49 0.18
--------- ---------
Distributions

From Net Investment Income (0.56) (0.34)
--------- ---------
Net Asset Value, End of Period $9.41 $9.48
========= ==========
Total Return(2) 5.26% 1.94%

Ratios/Supplemental Data

2000 1999(1)
----------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.76% 0.74%(3)
Ratio of Net Investment Income to Average Net Assets 5.81% 4.56%(3)
Portfolio Turnover Rate 52% 127%
Net Assets, End of Period (in thousands) $178 $10

(1) June 15, 1998 (commencement of sale) through March 31, 1999.

(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.

30 American Century Investments 1-800-345-3533

SHORT-TERM GOVERNMENT FUND
Advisor Class

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

Per-Share Data

2000 1999(1)
-------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.47 $9.49
--------- ---------
Income From Investment Operations

Net Investment Income 0.49 0.33
Net Realized and Unrealized Loss on Investment Transactions (0.28) (0.02)
--------- ---------
Total From Investment Operations 0.21 0.31
--------- ---------
Distributions

From Net Investment Income (0.49) (0.33)
--------- ---------
Net Asset Value, End of Period $9.19 $9.47
========= =========
Total Return(2) 2.26% 3.37%

Ratios/Supplemental Data

2000 1999(1)
-------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.84% 0.84%(3)
Ratio of Net Investment Income to Average Net Assets 5.23% 4.77%(3)
Portfolio Turnover Rate 323% 196%
Net Assets, End of Period (in thousands) $461 $94

(1) July 8, 1998 (commencement of sale) through March 31, 1999.

(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.

www.americancentury.com American Century Investments 31

GNMA FUND

Advisor Class

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

Per-Share Data

2000 1999 1998(1)
-----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.62 $10.67 $10.63
-------- ------- -------

Income From Investment Operations

Net Investment Income 0.64 0.61 0.31
Net Realized and Unrealized Gain (Loss) on Investment Transactions (0.46) (0.05) 0.04
-------- ------- -------
Total From Investment Operations 0.18 0.56 0.35
-------- ------- -------
Distributions

From Net Investment Income (0.64) (0.61) (0.31)
-------- ------- -------
Net Asset Value, End of Period $10.16 $10.62 $10.67
======== ======= ========
Total Return(2) 1.76% 5.40% 3.30%

Ratios/Supplemental Data

2000 1999 1998(1)
-----------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.84% 0.84% 0.84%(3)
Ratio of Net Investment Income to Average Net Assets 6.17% 5.73% 5.92%(3)
Portfolio Turnover Rate 133% 119% 133%
Net Assets, End of Period (in thousands) $13,080 $6,910 $460

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

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

(3) Annualized.

32 American Century Investments 1-800-345-3533

PERFORMANCE INFORMATION OF OTHER CLASS

The following financial information is provided to show the performance of the
funds' original class of shares. This class, the Investor Class, has a total
expense ratio that is 0.25% lower than the Advisor Class. If the Advisor Class
had existed during the periods presented, its performance would have been lower
because of the additional expense.

On a per-share basis, each table includes as appropriate

* share price at the beginning of the period

* investment income and capital gains or losses

* distributions of income and capital gains paid to investors

* share price at the end of the period

Each table also includes some key statistics for the period as appropriate

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

* EXPENSE RATIO - the operating expenses as a percentage of average net assets

* NET INCOME RATIO - the net investment income as a percentage of average net
assets

* PORTFOLIO TURNOVER - the percentage of the fund's buying and selling activit

www.americancentury.com American Century Investments 33

GOVERNMENT AGENCY MONEY MARKET FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- ------- -------- --------
Income From Investment Operations

Net Investment Income 0.05 0.05 0.05 0.05 0.05
-------- -------- ------- -------- --------
Distributions

From Net Investment Income (0.05) (0.05) (0.05) (0.05) (0.05)
-------- -------- ------- -------- --------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======= ======= ========
Total Return(1) 4.98% 4.91% 5.14% 4.89% 5.35%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets(2) 0.48% 0.48% 0.51% 0.57% 0.51%
Ratio of Net Investment Income to Average Net Assets 4.88% 4.79% 5.02% 4.76% 5.20%
Net Assets, End of Period (in thousands) $555,374 $527,842 $487,791 $470,759 $503,328

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

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

26 American Century Investments 1-800-345-3533

SHORT-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.85 $9.80 $9.68 $9.84 $9.73
-------- ------- ------- ------- ------
Income From Investment Operations

Net Investment Income 0.49 0.49 0.53 0.52 0.53
Net Realized and Unrealized Gain (Loss)
on Investments (0.21) 0.05 0.12 (0.07) 0.11
-------- ------- ------- ------- ------
Total From Investment Operations 0.28 0.54 0.65 0.45 0.64
-------- ------- ------- ------- ------
Distributions

From Net Investment Income (0.49) (0.49) (0.53) (0.52) (0.53)
From Net Realized Gains -- -- -- (0.09) --
In Excess of Net Realized Gains --(1) -- -- -- --
-------- ------- ------- ------- ------
Total Distributions (0.49) (0.49) (0.53) (0.61) (0.53)
-------- ------- ------- ------- ------
Net Asset Value, End of Period $9.64 $9.85 $9.80 $9.68 $9.84
======== ======= ======== ======= ======
Total Return(2) 2.86% 5.60% 6.89% 4.62% 6.71%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.55% 0.61% 0.67%
Ratio of Net Investment Income to Average Net Assets 4.94% 4.92% 5.45% 5.26% 5.39%
Portfolio Turnover Rate 179% 138% 140% 234% 224%
Net Assets, End of Period (in thousands) $59,671 $61,783 $40,874 $35,854 $35,648

(1) Per-share amount was less than $0.005.

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

www.americancentury.com American Century Investments 27

INTERMEDIATE-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.45 $10.56 $10.06 $10.24 $9.99
-------- -------- --------- --------- --------
Income From Investment Operations

Net Investment Income 0.53 0.54 0.59 0.58 0.58
Net Realized and Unrealized Gain (Loss)
on Investments (0.37) 0.10 0.50 (0.18) 0.25
-------- -------- --------- --------- --------
Total From Investment Operations 0.16 0.64 1.09 0.40 0.83
-------- -------- --------- --------- --------
Distributions

From Net Investment Income (0.53) (0.54) (0.59) (0.58) (0.58)
From Net Realized Gains -- (0.21) -- -- --
In Excess of Net Realized Gains (0.05) -- -- -- --
-------- -------- --------- --------- --------
Total Distributions (0.58) (0.75) (0.59) (0.58) (0.58)
-------- -------- --------- --------- --------
Net Asset Value, End of Period $10.03 $10.45 $10.56 $10.06 $10.24
======== ======== ========== ========= ========
Total Return(1) 1.51% 6.09% 11.04% 4.05% 8.42%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.51% 0.51% 0.53%
Ratio of Net Investment Income to Average Net Assets 5.11% 5.01% 5.63% 5.72% 5.65%
Portfolio Turnover Rate 171% 221% 194% 110% 168%
Net Assets, End of Period (in thousands) $329,995 $435,494 $374,861 $328,784 $311,020

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

28 American Century Investments 1-800-345-3533

LONG-TERM TREASURY FUND
Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.12 $10.58 $9.32 $9.67 $9.05
-------- -------- --------- -------- --------
Income From Investment Operations

Net Investment Income 0.57 0.58 0.61 0.60 0.60
Net Realized and Unrealized Gain (Loss)
on Investments (0.30) 0.11 1.26 (0.35) 0.62
-------- -------- --------- -------- --------
Total From Investment Operations 0.27 0.69 1.87 0.25 1.22
-------- -------- --------- -------- --------
Distributions

From Net Investment Income (0.57) (0.58) (0.61) (0.60) (0.60)
From Net Realized Gains .-- (0.52) .-- .-- .--
In Excess of Net Realized Gains .-- (0.05) .-- .-- .--
-------- -------- --------- -------- --------
Total Distributions (0.57) (1.15) (0.61) (0.60) (0.60)
-------- -------- --------- -------- --------
Net Asset Value, End of Period $9.82 $10.12 $10.58 $9.32 $9.67
========= ======== ========= ======== ========
Total Return(1) 2.86% 6.33% 20.48% 2.65% 13.46%

Ratios/Supplemental Data

2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.51% 0.54% 0.60% 0.67%
Ratio of Net Investment Income to Average Net Assets 5.84% 5.37% 6.00% 6.28% 5.93%
Portfolio Turnover Rate 182% 105% 57% 40% 112%
Net Assets, End of Period (in thousands) $85,886 $137,552 $103,381 $126,570 $110,741

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

www.americancentury.com American Century Investments 29

INFLATION-ADJUSTED TREASURY FUND
Investor Class

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

Per-Share Data

2000 1999 1998 1997(1)
----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $9.48 $9.63 $9.74 $10.00
-------- -------- -------- --------
Income From Investment Operations

Net Investment Income 0.58 0.47 0.44 0.06
Net Realized and Unrealized Loss on Investment Transactions (0.07) (0.15) (0.11) (0.26)
-------- -------- -------- --------
Total From Investment Operations 0.51 0.32 0.33 (0.20)
-------- -------- -------- --------
Distributions

From Net Investment Income (0.58) (0.47) (0.44) (0.06)
-------- -------- -------- --------
Net Asset Value, End of Period $9.41 $9.48 $9.63 $9.74
======== ======== ======== ========
Total Return(2) 5.52% 3.37% 3.45% (1.98)%

Ratios/Supplemental Data

2000 1999 1998 1997(1)
----------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to Average Net Assets 0.51% 0.49% 0.50% 0.50%(3)
Ratio of Net Investment Income to Average Net Assets 6.06% 4.84% 4.45% 5.03%(3)
Portfolio Turnover Rate 52% 127% 69% --
Net Assets, End of Period (in thousands) $18,610 $8,980 $5,279 $2,277

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

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

(3) Annualized.

30 American Century Investments 1-800-345-3533

SHORT-TERM GOVERNMENT FUND
Investor Class

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

Per-Share Data

Ratios/Supplemental Data

2000 1999 1998(1) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses to

Average Net Assets 0.59% 0.59% 0.59%(3) 0.68% 0.70% 0.70%

Ratio of Net Investment Income to

Average Net Assets 5.48% 5.15% 5.43%(3) 5.53% 5.39% 5.53%

Portfolio Turnover Rate 323% 196% 54% 293% 246% 128%

Net Assets, End of Period (in thousands) $762,363 $832,344 $808,464 $519,332 $349,772 $391,331

(1) The fund's fiscal year end was changed from October 31 to March 31
resulting in a five-month reporting period. For years ended prior to 1998,
the fund's fiscal year end was October 31.

(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.

www.americancentury.com American Century Investments 39

GNMA FUND

Investor Class

For a Share Outstanding Throughout the Years Ended March 31

Per-Share Data

Ratios/Supplemental Data

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

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

40 American Century Investments 1-800-345-3533

NOTES

www.americancentury.com American Century Investments 41

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THESE DOCUMENTS

Annual and Semiannual Reports

Statement of Additional Information (SAI)

You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC). The SEC charges a duplicating fee to
provide copies of this information.

In person SEC Public Reference Room
Washington, D.C.
Call 202-942-8090 for
location and hours.

On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]

By mail SEC Public Reference Section
Washington, D.C. 20549-0102

Investment Company Act File No. 811-4363

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

American Century Investments

P.O. Box 419385
Kansas City, Missouri 64141-6385

1-800-345-3533 or 816-531-5575

0008
SH-PRS-20947

AMERICAN CENTURY
statement of
additional information

AUGUST 1, 2000

American Century
Government Income Trust

THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUNDS'
PROSPECTUS, DATED AUGUST 1, 2000, BUT IS NOT A PROSPECTUS. THE STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' CURRENT
PROSPECTUS. IF YOU WOULD LIKE A COPY OF THE PROSPECTUS, PLEASE CONTACT US AT THE
ADDRESS OR TELEPHONE NUMBERS LISTED ON THE BACK COVER
OR VISIT AMERICAN CENTURY'S WEB SITE AT
WWW.AMERICANCENTURY.COM.

THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY REFERENCE CERTAIN
INFORMATION THAT APPEARS IN THE FUNDS' ANNUAL AND SEMIANNUAL REPORTS, WHICH ARE
DELIVERED TO ALL SHAREHOLDERS. YOU MAY OBTAIN A FREE COPY OF THE FUNDS' ANNUAL
OR SEMIANNUAL REPORTS BY CALLING 1-800-345-2021.

Funds Distributor, Inc. and
American Century Investment
Services, Inc., Distributors

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

TABLE OF CONTENTS

The Funds' History ........................................................ 2
Fund Investment Guidelines ................................................ 2
The Money Market Funds ............................................... 3
The U.S. Treasury Funds .............................................. 3
The U.S. Government Funds ............................................ 5
Fund Investments and Risks ................................................ 6
Investment Strategies and Risks ...................................... 6
Investment Policies .................................................. 15
Temporary Defensive Measures ......................................... 17
Portfolio Turnover ................................................... 17
Management ................................................................ 17
The Board of Trustees ................................................ 17
Officers ............................................................. 20
Code of Ethics ....................................................... 21
The Funds' Principal Shareholders ......................................... 22
Service Providers ......................................................... 24
Investment Advisor ................................................... 23
Transfer Agent and Administrator ..................................... 27
Distributors ......................................................... 28
Other Service Providers ................................................... 28
Custodian Banks ...................................................... 28
Independent Accountants .............................................. 29
Brokerage Allocation ...................................................... 28
Information About Fund Shares ............................................. 29
Multiple Class Structure ............................................. 30
Buying, Selling and Exchanging Fund Shares ........................... 33
Valuation of a Fund's Securities ..................................... 33
Taxes ..................................................................... 34
Federal Income Tax ................................................... 34
State and Local Taxes ................................................ 35
How Fund Performance Information Is Calculated ............................ 35
Performance Comparisons .............................................. 37
Permissible Advertising Information .................................. 38
Multiple class Performance Advertising ............................... 38
Financial Statements ...................................................... 39
Explanation of Fixed-Income Securities Ratings ............................ 39

www.americancentury.com American Century Investments 1

THE FUNDS' HISTORY

American Century Government Income Trust is a registered, open-end management
investment company that was organized as a Massachusetts business trust on July
24, 1985. From then until January 1997, it was known as Benham Government Income
Trust. Throughout this Statement of Additional Information we refer to American
Century Government Income Trust as the Trust.

Each fund described in this Statement of Additional Information is a separate
series of the Trust and operates for many purposes as if it were an independent
company. Each fund has its own investment objective, strategy, management team,
assets, and tax identification and stock registration numbers.

FUND INVESTMENT GUIDELINES

This section explains the extent to which the funds' advisor, American Century
Investment Management, Inc., can use various investment vehicles and strategies
in managing a fund's assets. Descriptions of the investment techniques and risks
associated with each appear in the section, Investment Strategies and Risks,
page 6. In the case of the funds' principal investment strategies, these
descriptions elaborate upon discussion contained in the Prospectus.

Each fund is a diversified, open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act). Diversified means
that, with respect to 75% of its total assets, each fund will not invest more
than 5% of its total assets in the securities of a single issuer or own more
than 10% of the outstanding voting securities of a single issuer (other than
U.S. government securities).

The money market funds operate pursuant to Rule 2a-7 under the Investment
Company Act. That rule permits the valuation of portfolio securities on the
basis of amortized cost. To rely on the rule, each fund must be diversified with
regard to 100% of its assets other than U.S. government securities. This
operating policy is more restrictive than the Investment Company Act, which
requires a diversified investment company to be diversified with regard to only
75% of its assets.

To meet federal tax requirements for qualification as a regulated investment
company, each fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.

Each fund (except Short-Term Government and the GNMA Fund) seeks income exempt
from state taxes by investing in U.S. government securities whose interest
payments are state tax-exempt. As a result, these funds' dividend distributions
are expected to be exempt from state income tax. See page 34 for more
information on tax treatment of the funds' distributions.

2 American Century Investments 1-800-345-2021

INVESTOR CLASS ADVISOR CLASS
------------------------------------------------------------------------------
Ticker Inception Ticker Inception

Fund Symbol Date Symbol Date
------------------------------------------------------------------------------
Capital Preservation CPFXX 10/13/1972 N/A N/A
Government Agency Money Market BGAXX 12/05/1989 N/A 04/12/1999
Short-Term Treasury BSTAX 09/08/1992 BSTTX 10/06/1997
Intermediate-Term Treasury CPTNX 05/16/1980 ABTAX 10/09/1997
Long-Term Treasury BLAGX 09/08/1992 AMLAX 01/12/1998
Inflation-Adjusted Treasury N/A 02/10/1997 N/A 06/15/1998
Short-Term Government TWUSX 12/15/1982 N/A 07/08/1998
GNMA Fund BGNMX 09/23/1985 BGNAX 10/09/1997
------------------------------------------------------------------------------

THE MONEY MARKET FUNDS

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

Capital Preservation

Capital Preservation seeks maximum safety and liquidity. Its secondary objective
is to seek to pay its shareholders the highest rate of return on their
investment in Capital Preservation consistent with safety and liquidity. Capital
Preservation pursues its investment objectives by investing exclusively in
short-term U.S. Treasury securities guaranteed by the direct full faith and
credit pledge of the U.S. government. Capital Preservation's dollar-weighted
average portfolio maturity will not exceed 90 days.

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

Government Agency Money Market

Government Agency Money Market seeks to provide the highest rate of current
return on its investments, consistent with safety of principal and maintenance
of liquidity, by investing exclusively in short-term obligations of the U.S.
government and its agencies and instrumentalities, the income from which is
exempt from state taxes. Under normal conditions, at least 65% of the fund's
total assets are invested in securities issued by agencies and instrumentalities
of the U.S. government. Assets not invested in these securities are invested in
U.S. Treasury securities. For temporary defensive purposes, the fund may invest
up to 100% of its assets in U.S. Treasury securities. The fund's weighted
average portfolio maturity will not exceed 90 days.

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

THE U.S. TREASURY FUNDS

Short-Term Treasury, Intermediate-Term Treasury, Long-Term Treasury

Short-Term Treasury, Intermediate-Term Treasury and Long-Term Treasury are quite
similar to one another but can be differentiated by their dollar-weighted
average maturities. Among these funds, the longer a fund's dollar-weighted
average maturity, the more its share price will fluctuate when interest rates
change.

www.americancentury.com American Century Investments 3

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

The investment objectives of the funds are as follows: Short-Term Treasury seeks
to earn and distribute the highest level of current income exempt from state
income taxes as is consistent with preservation of capital. Intermediate-Term
Treasury seeks to earn and distribute the highest level of current income exempt
from state taxes as is consistent with the conservation of assets and the safety
provided by U.S. Treasury bills, notes and bonds. Long-Term Treasury seeks to
provide a consistent and high level of current income exempt from state taxes.

Short-Term, Intermediate-Term and Long-Term Treasury pursue their investment
objectives by investing primarily in securities issued or guaranteed by the U.S.
Treasury. As a result, each fund may invest in U.S. Treasury bills, bonds, notes
and zero-coupon securities, all of which also are backed by the direct full
faith and credit pledge of the U.S. government. In addition, the funds may
invest up to 35% of their total assets in securities issued by agencies and
instrumentalities of the U.S. government.

Within this framework, the funds differ in the remaining maturities of their
portfolio securities and the dollar-weighted average maturities of their overall
portfolio. Under normal conditions, the funds' maturity characteristics are as
follows: Short-Term Treasury invests primarily in securities with remaining
maturities of three years or less, and maintains a weighted average portfolio
maturity ranging from 13 months to three years. Intermediate-Term Treasury's
weighted average portfolio maturity ranges from three to 10 years. Long-Term
Treasury invests primarily in securities with maturities of 10 or more years and
maintains a weighted average portfolio maturity ranging from 10 to 30 years.

Each of the funds is designed to allow investors to seek competitive yields
within their tolerance for share price fluctuations. Thus, Short-Term Treasury
may be appropriate for investors who can tolerate some share price volatility
and are seeking higher current yields than those available from money market
funds. Similarly, the current yield for Intermediate-Term Treasury will likely
be higher than that of Short-Term Treasury, but the share price volatility will
be greater. By maintaining an average portfolio maturity of 10 to 30 years,
Long-Term Treasury offers investors the potential to earn higher current yields
than those typically available from Short-Term Treasury and Intermediate-Term
Treasury. Long-Term Treasury also may offer greater potential for capital
appreciation. However, maintaining a relatively long average maturity also means
that Long-Term Treasury's share price generally will be the most volatile of the
three funds.

Inflation-Adjusted Treasury

Inflation-Adjusted Treasury pursues its investment objective by investing, under
normal market conditions, at least 65% of its total assets in inflation-indexed
Treasury securities that are backed by the full faith and credit of the U.S.
government and indexed or otherwise structured by the U.S. Treasury to provide
protection against inflation. Inflation-indexed Treasury securities may be
issued by the U.S. Treasury in the form of notes or bonds. Up to 35% of the
fund's total assets may be invested in inflation-indexed securities issued by
U.S. government agencies and government-sponsored organizations.
Inflation-Adjusted Treasury also may invest in U.S. Treasury securities that are
not indexed to inflation for liquidity and total return, or if at any time the
fund managers believe there is an inadequate supply of appropriate
inflation-indexed securities in which to invest or when such investments are
required as a temporary defensive measure. Inflation-Adjusted Treasury's
portfolio may consist of any combination of these securities consistent with
investment strategies employed by the advisor. While Inflation-Adjusted Treasury
seeks to provide a measure of inflation protection to its investors, there is no
assurance that the fund will provide less risk than a fund investing in
conventional fixed-principal securities.

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There are no maturity or duration restrictions for the securities in which
Inflation-Adjusted Treasury may invest. The U.S. Treasury has issued
inflation-indexed Treasury securities with five-year, 10-year and 30-year
maturities.

Inflation-Adjusted Treasury may be appropriate for investors who are seeking to
protect all or a part of their investment portfolio from the effects of
inflation.

Traditional U.S. Treasury fixed-principal notes and bonds pay a stated return or
rate of interest in dollars and are redeemed at their par amount. Inflation
during the period that the securities are outstanding will diminish the future
purchasing power of these dollars. Inflation-Adjusted Treasury is designed to
serve as a vehicle to protect against this diminishing effect.

Inflation-Adjusted Treasury is designed to provide total return consistent with
an investment in inflation-indexed Treasury securities. Inflation-Adjusted
Treasury's yield will reflect both the inflation-adjusted interest income and
the inflation adjustment to principal, which are features of inflation-indexed
Treasury securities. The current income generated by Inflation-Adjusted Treasury
will vary with month-to-month changes in the Consumer Price Index and may be
substantially more or substantially less than traditional fixed-principal
securities.

There are special investment risks, particularly share price volatility and
potential adverse tax consequences, associated with investment in
inflation-indexed securities. These risks are described in the section titled
Investment Strategies and Risks, page 6. You should read that section carefully
to make sure you understand the nature of Inflation-Adjusted Treasury before you
invest in it.

THE U.S. GOVERNMENT FUNDS

Short-Term Government

Short-Term Government seeks to provide investors with a high level of current
income consistent with stability of principal. Short-Term Government pursues
this objective by investing primarily in securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Under normal conditions,
the fund managers invest at least 65% of Short-Term Government's total assets in
securities of the U.S. government and its agencies and maintain a weighted
average maturity of three years or less.

GNMA Fund

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

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

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

A unique feature of mortgage-backed securities, such as Ginnie Mae certificates,
is that their principal is scheduled to be paid back gradually for the duration
of the loan rather

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than in one lump sum at maturity. Investors (such as those investing in the GNMA
Fund) receive scheduled monthly payments of principal and interest, but they
also may receive unscheduled prepayments of principal on the underlying
mortgages. See Mortgage-Backed Securities on page 7 for a discussion of
prepayment risk.

FUND INVESTMENTS AND RISKS

INVESTMENT STRATEGIES AND RISKS

This section describes investment vehicles and strategies that the fund managers
can use in managing a fund's assets. It also details the risks associated with
each, because each technique contributes to a fund's overall risk profile.

U.S. Government Securities

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

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

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

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

Floating-rate agency securities frequently have caps limiting the extent to
which coupon rates can be raised. The price of a floating-rate agency security
may decline if its capped coupon rate is lower than prevailing market interest
rates. Fixed- and floating-rate agency securities may be issued with a call date
(which permits redemption before the maturity date). The exercise of a call may
reduce an obligation's yield to maturity.

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

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

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Master Demand Notes (Government Agency Money Market Only)

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

Zero-Coupon Securities

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

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

Zero-Coupon U.S. government securities are the unmatured interest coupons and
underlying principal portions of securities issued by U.S. government agencies
and government-sponsored enterprises. The U.S. government and its agencies may
issue securities in zero-coupon form. These securities are referred to as
original-issue, zero-coupon securities.

Mortgage-Backed Securities

BACKGROUND

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

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

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

As with other fixed-income securities, the prices of mortgage securities
fluctuate in response to changing interest rates; when interest rates fall, the
prices of mortgage securities rise, and vice versa. Changing interest rates have
additional significance for mortgage-backed securities investors, however,
because they influence prepayment rates (the rates at which mortgage holders
prepay their mortgages), which in turn affect the yields on mortgage-backed
securities. When interest rates decline, prepayment rates

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generally increase. Mortgage holders take advantage of the opportunity to
refinance their mortgages at lower rates with lower monthly payments. When
interest rates rise, mortgage holders are less inclined to refinance their
mortgages. The effect of prepayment activity on yield depends on whether the
mortgage-backed security was purchased at a premium or at a discount.

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

GINNIE MAE CERTIFICATES

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

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

FANNIE MAE CERTIFICATES

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

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

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

FREDDIE MAC CERTIFICATES

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

Freddie Mac certificates represent a pro rata interest in a group of mortgage
loans (a Freddie Mac certificate group) purchased by Freddie Mac. The mortgage
loans underlying Freddie Mac certificates consist of fixed- or adjustable-rate
mortgage loans with original terms to maturity of between 10 and 30 years,
substantially all of which are secured by first-liens on one- to four-family
residential properties or multifamily projects. Each mortgage loan must meet
standards set forth in the FHLMC Act. A Freddie Mac certificate group may
include whole loans, participation interests in whole loans, undivided interests
in whole loans, and participations composing another Freddie Mac certificate
group.

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

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) (SHORT-TERM GOVERNMENT AND GNMA FUNDS
ONLY)

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

In structuring a CMO, an issuer distributes cash flow from the underlying
collateral over a series of classes called tranches. Each CMO is a set of two or
more tranches, with average lives and cash flow patterns designed to meet
specific investment objectives. The average life expectancies of the different
tranches in a four-part deal, for example, might be two, five, seven and 20
years.

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

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

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

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

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

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

GNMA may buy only Ginnie-Mae backed CMOS.

STRIPPED MORTGAGE-BACKED SECURITIES (SHORT-TERM GOVERNMENT ONLY)

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

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

ADJUSTABLE-RATE MORTGAGE LOANS (ARMS)

ARMs eligible for inclusion in a mortgage pool generally will provide for a
fixed initial mortgage interest rate for a specified period of time, generally
for either the first three, six, 12, 24, 36, 60 or 84 scheduled monthly
payments. Thereafter, the interest rates are subject to periodic adjustment
based on changes in an index.

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

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

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

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

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

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

The fund managers may invest in ARMs whose periodic interest rate adjustments
are based on new indices as these indices become available.

Inflation-Indexed Treasury Securities

Inflation-indexed Treasury securities are Treasury securities with a final value
and interest payment stream linked to the inflation rate. Inflation-indexed
Treasury securities may be issued in either note or bond form. Inflation-indexed
Treasury notes have maturities of at least one year, but not more than 10 years.
Inflation-indexed Treasury bonds have maturities of more than 10 years.

Inflation-indexed Treasury securities may be attractive to investors seeking an
investment backed by the full faith and credit of the U.S. government that
provides a return in excess of the rate of inflation. These securities were
first sold in the U.S. market in January 1997. Inflation-indexed Treasury
securities are auctioned and issued on a quarterly basis.

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STRUCTURE AND INFLATION INDEX

The principal value of inflation-indexed Treasury securities will be adjusted to
reflect changes in the level of inflation. The index for measuring the inflation
rate for inflation-indexed Treasury securities is the non-seasonally adjusted
U.S. City Average All Items Consumer Price Index for All Urban Consumers
published monthly by the U.S. Department of Labor's Bureau of Labor Statistics.

Semiannual coupon interest payments are made at a fixed percentage of the
inflation-indexed principal value. The coupon rate for the semiannual interest
rate of each issuance of inflation-indexed Treasury securities is determined at
the time the securities are sold to the public (i.e., by competitive bids in the
auction). The coupon rate will likely reflect real yields available in the
Treasury market; real yields are the prevailing yields on similar maturity
Treasury securities less then-prevailing inflation expectations. While a
reduction in inflation will cause a reduction in the interest payment made on
the securities, the repayment of principal at the maturity of the security is
guaranteed by the Treasury to be not less than the original face or par amount
of the security at issuance.

INDEXING METHODOLOGY

The principal value of inflation-indexed Treasury securities will be indexed, or
adjusted, to account for changes in the Consumer Price Index. Semiannual coupon
interest payment amounts will be determined by multiplying the inflation-indexed
principal amount by one-half the stated rate of interest on each interest
payment date.

TAXATION

Taxation applicable to inflation-indexed Treasury securities is similar to
taxation of conventional bonds. Both interest payments and the difference
between original principal and the inflation-adjusted principal will be treated
as interest income subject to taxation. Interest payments are taxable when
received or accrued. The inflation adjustment to the principal is subject to tax
in the year the adjustment is made, not at maturity of the security when the
cash from the repayment of principal is received. If an upward adjustment has
been made (which typically should happen), investors in non-tax-deferred
accounts will pay taxes on this amount currently. Decreases in the indexed
principal can be deducted only from current or previous interest payments
reported as income.

Inflation-indexed Treasury securities therefore have a potential cash flow
mismatch to an investor, because investors must pay taxes on the
inflation-adjusted principal before the repayment of principal is received. It
is possible that, particularly for high income tax bracket investors,
inflation-indexed Treasury securities would not generate enough income in a
given year to cover the tax liability it could create. This is similar to the
current tax treatment for zero-coupon bonds and other discount securities. If
inflation-indexed Treasury securities are sold prior to maturity, capital losses
or gains are realized in the same manner as traditional bonds.

Inflation-Adjusted Treasury, however, distributes all income on a monthly basis.
Investors in Inflation-Adjusted Treasury will receive dividends that represent
both the interest payments and the principal adjustments of the
inflation-indexed securities held in its portfolio. An investment in
Inflation-Adjusted Treasury may therefore be a means to avoid the cash flow
mismatch associated with a direct investment in inflation-indexed securities.
For more information about taxes and their effect on you as an investor in the
fund, see Taxes, page 34.

U.S. GOVERNMENT AGENCIES

A number of U.S. government agencies and government-sponsored organizations may
issue inflation-indexed securities. Some U.S. government agencies have issued
inflation-indexed securities whose design mirrors that of the inflation-indexed
Treasury securities described on the previous page.

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SHARE PRICE VOLATILITY

Inflation-indexed securities are designed to offer a return linked to inflation,
thereby protecting future purchasing power of the money invested in them.
However, inflation-indexed securities provide this protected return only if held
to maturity. In addition, inflation-indexed securities may not trade at par
value. Real interest rates (the market rate of interest less the anticipated
rate of inflation) change over time as a result of many factors, such as what
investors are demanding as a true value for money. When real rates do change,
inflation-indexed securities prices will be more sensitive to these changes than
conventional bonds, because these securities were sold originally based upon a
real interest rate that is no longer prevailing. Should market expectations for
real interest rates rise, the price of inflation-indexed securities and the
share price of Inflation-Adjusted Treasury will fall. Investors in the fund
should be prepared to accept not only this share price volatility but also the
possible adverse tax consequences it may cause.

An investment in securities featuring inflation-adjusted principal and/or
interest involves factors not associated with more traditional fixed-principal
securities. Such factors include the possibility that the inflation index may be
subject to significant changes, that changes in the index may or may not
correlate to changes in interest rates generally or changes in other indices, or
that the resulting interest may be greater or less than that payable on other
securities of similar maturities. In the event of sustained deflation, it is
possible that the amount of semiannual interest payments, the inflation-adjusted
principal of the security and the value of the stripped components, will
decrease. If any of these possibilities are realized, Inflation-Adjusted
Treasury's net asset value could be negatively affected.

Repurchase Agreements

Each fund, with the exception of Capital Preservation and Government Agency
Money Market, may invest in repurchase agreements when they present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of that fund.

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

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

Each of the funds, with the exception of Capital Preservation and Government
Agency Money Market, may invest in repurchase agreements with respect to any
security in which that fund is authorized to invest, even if the remaining
maturity of the underlying security would make that security ineligible for
purchase by such fund.

www.americancentury.com American Century Investments 13

When-Issued and Forward Commitment Agreements

The funds may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later, but not more than 120 days later).

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

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

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

As an operating policy, no fund will commit more than 35% of its total assets to
when-issued or forward commitment agreements (including dollar rolls). If
fluctuations in the value of securities held cause more than 35% of a fund's
total assets to be committed under such agreements, the fund managers need not
sell such agreements, but they will be restricted from entering into further
agreements on behalf of the fund until the percentage of assets committed to
such agreements is below 35% of total assets.

Short-Term Securities

In order to meet anticipated redemptions, to hold pending the purchase of
additional securities for a fund's portfolio, or, in some cases, for temporary
defensive purposes, the non-money market funds may invest a portion of their
assets in money market and other short-term securities.

Examples of those securities include:

* Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities

* Commercial Paper

* Certificates of Deposit and Euro Dollar Certificates of Deposit

* Bankers' Acceptances

* Short-term notes, bonds, debentures or other debt instruments

* Repurchase agreements

14 American Century Investments 1-800-345-2021

Under the Investment Company Act, a fund's investment in other investment
companies (including money market funds) currently is limited to (a) 3% of the
total voting stock of any one investment company; (b) 5% of the fund's total
assets with respect to any one investment company; and (c) 10% of a fund's total
assets in the aggregate. For the non-money market funds, these investments may
include investments in money market funds managed by the advisor. Any
investments in money market funds must be consistent with the investment
policies and restrictions of the fund making the investment.

INVESTMENT POLICIES

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

Fundamental Investment Policies

The funds' fundamental investment restrictions are set forth below. These
investment restrictions may not be changed without approval of a majority of the
outstanding votes of shareholders of a fund, as determined in accordance with
the Investment Company Act.

Subject Policy
--------------------------------------------------------------------------------
Senior A fund may not issue senior securities, except as permitted
Securities under the Investment Company Act.
--------------------------------------------------------------------------------
Borrowing A fund may not borrow money, except for temporary or emergency
purposes (not for leveraging or investment) in an amount not
exceeding 331U3% of the fund's total assets (including the
amount borrowed) less liabilities (other than borrowings).
--------------------------------------------------------------------------------
Lending A fund may not lend any security or make any other loan if, as
a result, more than 331U3% of the fund's total assets would be
lent to other parties, except (i) through the purchase of debt
securities in accordance with its investment objective,
policies and limitations, or (ii) by engaging in repurchase
agreements with respect to portfolio securities.
--------------------------------------------------------------------------------
Real Estate A fund may not purchase or sell real estate unless
acquired as a result of ownership of securities or other
instruments. This policy shall not prevent a fund from
investing in securities or other instruments backed by real
estate or securities of companies that deal in real estate or
are engaged in the real estate business.
--------------------------------------------------------------------------------
Concentration A fund may not concentrate its investments in securities of
issuers in a particular industry (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities).
--------------------------------------------------------------------------------
Underwriting A fund may not serve as an underwriter of securities issued by
others, except to the extent that the fund may be considered
an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities.
--------------------------------------------------------------------------------
Commodities A fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other
instruments, provided that this limitation shall not prohibit
the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments
backed by physical commodities.
--------------------------------------------------------------------------------
Control A fund may not invest for purposes of exercising control over
management.
--------------------------------------------------------------------------------

For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding interfund
lending. Under the terms of the exemptive order, the funds may borrow money from
or lend money to other funds, advised by American Century Investment Management,
Inc. (ACIM), that permit such transactions. All such transactions will be
subject to the limits set above for borrowing and lending. The funds will borrow
money through the program only when the costs are equal to or lower than the
cost of short-term bank loans. Interfund loans and

www.americancentury.com American Century Investments 15

borrowing normally extend only overnight, but can have a maximum duration of
seven days. The funds will lend through the program only when the returns are
higher than those available from other short-term instruments (such as
repurchase agreements). The funds may have to borrow from a bank at a higher
interest rate if an interfund loan is called or not renewed. Any delay in
repayment to a lending fund could result in a lost investment opportunity or
additional borrowing costs.

For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions and
repurchase agreements secured by such instruments, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of the parents, (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry, and (d) personal credit and business credit businesses will
be considered separate industries.

Nonfundamental Investment Policies

In addition, the funds are subject to the following investment restrictions that
are not fundamental and may be changed by the Board of Trustees.

Subject Policy
--------------------------------------------------------------------------------
Leveraging A fund may not purchase additional investment securities at
any time during which outstanding borrowings exceed 5% of the
total assets of the fund.
--------------------------------------------------------------------------------
Liquidity A fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% (10% for
money market funds) of its net assets would be invested in
illiquid securities. Illiquid securities include repurchase
agreements not entitling the holder to payment of principal
and interest within seven days, and in securities that are
illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market.
--------------------------------------------------------------------------------
Short Sales A fund may not sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and
amount to the securities sold short, and provided that
transactions in futures contracts and options are not deemed
to constitute selling securities short.
--------------------------------------------------------------------------------
Margin A fund may not purchase securities on margin, except to obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin.
--------------------------------------------------------------------------------

The Investment Company Act imposes certain additional restrictions upon
acquisition by the funds of securities issued by insurance companies,
broker-dealers, underwriters or investment advisors, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross- and circular-ownership. Neither the SEC nor any other agency of the
federal or state government participates in or supervises the management of the
funds or their investment practices or policies.

16 American Century Investments 1-800-345-2021

TEMPORARY DEFENSIVE MEASURES

For temporary defensive purposes, a fund may invest in securities that may not
fit its investment objective or its stated market. During a temporary defensive
period, a fund may direct its assets to the following investment vehicles:

* interest-bearing bank accounts or certificates of deposit

* U.S. government securities and repurchase agreements collateralized by U.S.
government securities

* money market funds

PORTFOLIO TURNOVER

The funds' portfolio turnover rates (except those of the money market funds) are
listed in the Financial Highlights table in the Prospectus. Because of the
short-term nature of the money market funds' investments, portfolio turnover
rates generally are not used to evaluate their trading activities.

For Short-Term Government, the higher portfolio turnover rates for 1999 and 2000
resulted from decisions to shift asset allocations among mortgage-backed,
Treasury and Agency securities. In part, these changes reflected efforts to make
the fund more closely reflect the composition of its peer group of competing
funds.

MANAGEMENT

THE BOARD OF TRUSTEES

The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so.
Two-thirds of the trustees are independent of the funds' advisor; that is, they
are not employed by and have no financial interest in the advisor.

The individuals listed in the following table whose names are marked by an
asterisk (*) are interested persons of the funds (as defined in the Investment
Company Act) by virtue of, among other considerations, their affiliation with
either the funds; the advisor, American Century Investment Management, Inc.; the
funds' agent for transfer and administrative services, American Century Services
Corporation (ACSC); the parent corporation, American Century Companies, Inc.
(ACC) or ACC's subsidiaries; the funds' distribution agent and co-administrator,
Funds Distributor, Inc. (FDI); the funds' other distribution agent, American
Century Investment Services, Inc. (ACIS) or other funds advised by the advisor.
Each trustee (except James E. Stowers III) listed below serves as a trustee or
director of six other registered investment companies in the American Century
family of funds, which are also advised by the advisor. James E. Stowers III
serves as a trustee or director of 12 other registered investment companies in
the American Century family of funds.

www.americancentury.com American Century Investments 17

Position)s)
Name (Age) Held Principal Occupation(s)
Address With Funds During Past Five Years
----------------------------------------------------------------------------------------
Albert A. Eisenstat (70) Trustee General Partner, Discovery Ventures
1665 Charleston Road (venture capital firm, 1996 to present
Mountain View, CA 94043 Independent Director, Sungard Data
Systems (1991 to present)
Independent Director, Business Objects S/A
(software & programming,1994 to present)
Independent Director, Commercial
Metals Co. (1982 to present)
----------------------------------------------------------------------------------------
Ronald J. Gilson (53) Trustee Charles J. Meyers Professor of Law
1665 Charleston Road and Business, Stanford Law School
Mountain View, CA 94043 (1979 to present)
Marc and Eva Stern Professor of Law
and Business, Columbia University

School of Law (1992 to present)
Counsel, Marron, Reid & Sheehy

(a San Francisco law firm, 1984 to
present)
----------------------------------------------------------------------------------------
William M. Lyons* (44) Trustee President, Chief Operating Officer and Assistant
4500 Main Street Secretary, ACC;
Kansas City, MO 64111 Executive Vice President, Chief Operating Officer,
ACIM, ACSC, ACIS and 14 other ACC
subsidiaries Secretary, ACIM, ACSC,
ACIS and five other ACC subsidiaries

----------------------------------------------------------------------------------------
Myron S. Scholes (59) Trustee Limited Partner, Long-Term Capital Management
1665 Charleston Road (February 1999 to present)
Mountain View, CA 94043 Principal, Long-Term Capital Managemen
(investment advisor, 1993 to January 1999)
Frank E. Buck Professor of Finance,
Stanford Graduate School of Business
(1981 to present) Director, Dimensional
Fund Advisors (investment advisor, 1982
to present) Director, Smith Breeden
Family of Funds (1992 to present)

----------------------------------------------------------------------------------------
Kenneth E. Scott (71) Trustee Ralph M. Parsons Professor of Law and
1665 Charleston Road Business, Stanford Law School
Mountain View, CA 94043 (1972 to present)
Director, RCM Capital Funds, Inc.
(1994 to present)
----------------------------------------------------------------------------------------
Isaac Stein (53) Trustee Director, Raychem Corporation
1665 Charleston Road (electrical equipment, 1993 to present
Mountain View, CA 94043 President, Waverley Associates, Inc.
(private investment firm, 1983 to present)
Director, ALZA Corporation
(pharmaceuticals, 1987 to present)
Chairman of the Board of Trustees,
Stanford University (1994 to present)
Chairman, Stanford Health Services
(1994 to present)
----------------------------------------------------------------------------------------
James E. Stowers III* (41) Trustee, Chief Executive Officer and Director, ACC
4500 Main Street Chairman of Chief Executive Officer, ACIM, ACSC, ACIS and
Kansas City, MO 64111 the Board six other ACC subsidiaries
Director, ACIM, ACSC, ACIS and 11 other
ACC subsidiaries
----------------------------------------------------------------------------------------
Jeanne D. Wohlers (55) Trustee Director, Indus International
1665 Charleston Road (software solutions, January 1999 to present)
Mountain View, CA 94043 Director, Quintus Corporation,
(automation solutions, 1995 to present
Director and Partner, Windy Hill
Productions, LP (edutainment software,
1994 to 1998)
----------------------------------------------------------------------------------------

18 American Century Investments 1-800-345-2021

Committees

The Board has four committees to oversee specific functions of the funds'
operations. Information about these committees appears in the table below. The
trustee first named serves as chairman of the committee:

Committee Members Function of Committee
------------------------------------------------------------------------------------
Audit Kenneth E. Scott The Audit Committee selects and oversees the
Albert A. Eisenstat activities of the Trust's independent auditor. The
Jeanne D. Wohlers committee receives reports from the advisor's
Internal Audit Department, which is
accountable solely to the committee. The
committee also receives reporting about
compliance matters affecting the Trust.
------------------------------------------------------------------------------------
Nominating Kenneth E. Scott The Nominating Committee primarily considers and
Myron S. Scholes recommends individuals for nomination as trustees.
Albert A. Eisenstat The names of potential trustee candidates are
Ronald J. Gilson drawn from a number of sources, including
Isaac Stein recommendations from board members,
Jeanne D. Wohlers management and shareholders. This committee also
reviews and makes recommendations to the board
with respect to the composition of
boardcommittees and other board-related
matters, including its organization, size,
composition, responsibilities, functions and
compensation.
------------------------------------------------------------------------------------
Portfolio Myron S. Scholes The Portfolio Committee reviews quarterly the
Ronald J. Gilson investment activities and strategies used to
Isaac Stein manage fund assets. The committee regularly
receives reports from portfolio managers,
credit analysts and other investment personnel
concerning the funds' investments.
------------------------------------------------------------------------------------
Quality of William Lyons The Quality of Service Committee review
Service Ronald J. Gilson the level and quality of transfer agent and
Myron S. Scholes administrative services provided to the
Isaac Stein funds and their shareholders. It receives and
reviews reports comparing those services to
fund competitors' services and seeks to
improve such services where feasible and
appropriate.
------------------------------------------------------------------------------------

Compensation of Trustees

The trustees also serve as trustees or directors for six American Century
investment companies other than American Century Government Income Trust. Each
trustee who is not an interested person as defined in the Investment Company Act
receives compensation for service as a member of the Board of all seven such
companies based on a schedule that takes into account the number of meetings
attended and the assets of the funds for which the meetings are held. These fees
and expenses are divided among the seven investment companies based, in part,
upon their relative net assets. Under the terms of the management agreement with
the advisor, the funds are responsible for paying such fees and expenses.

The table presented shows the aggregate compensation paid by the Trust for the
periods indicated and by the seven investment companies served by this Board to
each trustee who is not an interested person as defined in the Investment
Company Act.

www.americancentury.com American Century Investments 19

AGGREGATE DIRECTOR COMPENSATION FOR FISCAL YEAR ENDED MARCH 31, 2000
--------------------------------------------------------------------------------
Total Compensation Total Compensation from the
Name of Trustee from the Funds (1) American Century Family of Funds(2)
--------------------------------------------------------------------------------
Albert A. Eisenstat $19,736 $75,750
Ronald J. Gilson $21,351 $81,750
Myron S. Scholes $18,964 $73,000
Kenneth E. Scott $21,270 $81,500
Isaac Stein $20,349 $75,750
Jeanne D. Wohlers $19,710 $78,000
--------------------------------------------------------------------------------

(1) Includes compensation paid to the trustees during the fiscal year ended
March 31, 2000, and also includes amounts deferred at the election of the
trustees under the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors. The total amount
of deferred compensation included in the preceding table is as follows: Mr.
Eisenstat, $75,750; Mr. Gilson, $81,750; Mr. Scholes, $73,000, and Mr.
Scott, $40,750.

(2) Includes compensation paid by the seven investment company members of the
American Century family of funds served by this Board.

The funds have adopted the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors. Under the plan, the
independent trustees may defer receipt of all or any part of the fees to be paid
to them for serving as trustees of the funds.

All deferred fees are credited to an account established in the name of the
trustees. The amounts credited to the account then increase or decrease, as the
case may be, in accordance with the performance of one or more of the American
Century funds that are selected by the trustee. The account balance continues to
fluctuate in accordance with the performance of the selected fund or funds until
final payment of all amounts is credited to the account. Trustees are allowed to
change their designation of mutual funds from time to time.

No deferred fees are payable until such time as a trustee resigns, retires or
otherwise ceases to be a member of the Board of Trustees. Trustees may receive
deferred fee account balances either in a lump sum payment or in substantially
equal installment payments to be made over a period not to exceed 10 years. Upon
the death of a trustee, all remaining deferred fee account balances are paid to
the trustee's beneficiary or, if none, to the trustee's estate.

The plan is an unfunded plan and, accordingly, the funds have no obligation to
segregate assets to secure or fund the deferred fees. To date, the funds have
voluntarily funded their obligations. The rights of trustees to receive their
deferred fee account balances are the same as the rights of a general unsecured
creditor of the funds. The plan may be terminated at any time by the
administrative committee of the plan. If terminated, all deferred fee account
balances will be paid in a lump sum.

No deferred fees were paid to any trustee under the plan during the fiscal year
ended March 31, 2000.

OFFICERS

Background information about the officers of the funds is provided in the
following table. All persons named as officers of the Trust also serve in
similar capacities for the 12 other investment companies advised by ACIM. Not
all officers of the Trust are listed; only those officers with policy-making
functions for the funds are listed. No officer is compensated for his or her
service as an officer of the funds. The individuals listed in the table are
interested persons of the funds (as defined in the Investment Company Act) by
virtue of, among other considerations, their affiliation with either the funds,
ACC, ACC's subsidiaries (including ACIM and ACSC) or the funds' distributors
(ACIS and FDI).

20 American Century Investments 1-800-345-2021

Position(s)
Name (Age) Held With Principal Occupation(s)
Address Funds During Past Five Years
--------------------------------------------------------------------------------
George A. Rio (45) President Executive Vice President and
4500 Main Street Director of Client Services, FDI
Kansas City, Missouri 64111 (March 1998 to present)
Senior Vice President and
Senior Key Account Manager,
Putnam Mutual Funds
(June 1995 to March 1998)
--------------------------------------------------------------------------------
Christopher J. Kelley (35) Vice President Vice President and Associate
4500 Main Street General Counsel, FDI
Kansas City, MO 64111 (July 1996 to present)
Assistant Counsel, Forum Financial
Group (April 1994 to July 1996)
--------------------------------------------------------------------------------
Mary A. Nelson (36) Vice President Vice President and Manager
4500 Main Street of Treasury Services and
Kansas City, Missouri 64111 Administration, FDI
(1994 to present)
--------------------------------------------------------------------------------
David C. Tucker (42) Vice President Senior Vice President and General
4500 Main Street Counsel, ACSC and ACIM
Kansas City, MO 64111 (June 1998 to present)
General Counsel, ACC
(June 1998 to present)
Consultant to Mutual Fund Industry
(May 1997 to April 1998)
Vice President and General
Counsel, Janus Companies
(1990 to May 1997)
--------------------------------------------------------------------------------
Maryanne Roepke, CPA (44) Vice President Senior Vice President and Assistant
4500 Main Street and Treasurer Treasurer, ACSC
Kansas City, Missouri 64111
--------------------------------------------------------------------------------
Paul Carrigan Jr. (50) Secretary Secretary, ACC
4500 Main Street (February 1998 to present)
Kansas City, MO 64111 Director of Legal Operations
(February 1996 to present)
Board Communications Manager,
The Benham Company
(April 1994 to January 1996)
--------------------------------------------------------------------------------
C. Jean Wade (36) Controller Vice President and Controller--
4500 Main Street Fund Accounting, ACSC
Kansas City, MO 64111
--------------------------------------------------------------------------------
Jon Zindel (33) Tax Officer Vice President of Taxation, ACSC
4500 Main Street (1996 to present)
Kansas City, MO 64111 Vice President, ACIM and 15 other
ACC subsidiaries
(April 1999 to present)
Treasurer, American Century
Ventures, Inc.
(December 1999 to present)
Tax Manager, Price Waterhouse LLP
(1989 to 1996)
--------------------------------------------------------------------------------

CODE OF ETHICS

The funds, their investment advisor and principal underwriters have adopted
codes of ethics under Rule 17j-1 of the Investment Company Act and these codes
of ethics permit access persons (personnel who have access to portfolio
transaction information) to invest in securities, including securities that may
be purchased or held by the funds, provided that they first obtain approval from
their appropriate compliance department before making such investments.

www.americancentury.com American Century Investments 21

THE FUNDS' PRINCIPAL SHAREHOLDERS

As of July 3, 2000, the following companies were the record owners of more than
5% of the outstanding shares of any class of a fund.

Fund Shareholder Percentage of Shares Outstanding
--------------------------------------------------------------------------------
GNMA
Investor
Charles Schwab & Company
San Francisco, California 27.1%
Advisor
Charles Schwab & Company
San Francisco, California 7.5%
Fleet National Bank Alliance
Rochester, New York 15.8%
Saxon & Company
Philadelphia, Pennsylvania 38.0%
Union Bank TR Nominee
FBO Select Benefit Omnibus
San Diego, California 6.4%
--------------------------------------------------------------------------------
Government Agency
Advisor
Boone County National Bank
Columbia, Missouri 18.7%
The Trust Company of Sterne Agee & Leach Inc.
TTEE FBO Anesthesiology Consultants Pension Plan
Birmingham, Alabama 8.1%
Sterne Agee & Leach Inc.
TTEE FBO Alliant National Corp
Birmingham, Alabama 21.8%
The Trust Company of Sterne Agee & Leach Inc.
TTEE FBO The Orthopaedic Group PC Profit Sharing Plan
Birmingham, Alabama 5.6%
Sterne Agee & Leach Inc.
Birmingham, Alabama 39.9%
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury
Investor
Charles Schwab & Company
San Francisco, California 28.3%
National Financial Services Corporation
New York, New York 18.9%
Advisor
Charles Schwab & Company
San Francisco, California 20.3%
Donaldson Lufkin Jenrette Securities Corporation Inc.
Jersey City, New Jersey 70.8%
--------------------------------------------------------------------------------
Intermediate-Term Treasury
Investor
Chase Manhattan Bank NA Trustee
Lorillard Inc. Hourly Paid Employees Profit Sharing Plan and Trust
New York, New York 6.0%
Charles Schwab & Company
San Francisco, California 15.1%
--------------------------------------------------------------------------------

22 American Century Investments 1-800-345-2021

Fund Shareholder Percentage of Shares Outstanding
--------------------------------------------------------------------------------
Intermediate-Term Treasury
Advisor
North Carolina Trust Co. TTEE
The Employees Pension Plan of Carolina Kidney Associates PA
Greensboro, North Carolina 11.8%
North Carolina Trust Co. TTEE
Greensboro Orthopedic Center Inc. Employee Savings Plan & PS Plan
Greensboro, North Carolina 19.5%
Donaldson Lufkin Jenrette Securities Corporation Inc.
Jersey City, New Jersey 11.0%
Fiserv Securities Inc
Trade House Account
Philadelphia, Pennsylvania 11.0%
--------------------------------------------------------------------------------
Long-Term Treasury
Investor
Charles Schwab & Company
San Francisco, California 25.0%
National Financial Services Corporation
New York, New York 16.6%
Advisor
Charles Schwab & Company
San Francisco, California 14.3%
Donaldson Lufkin Jenrette Securities Corporation Inc.
Jersey City, New Jersey 21.9%
--------------------------------------------------------------------------------
Short-Term Government
Investor
Stowers Institute for Medical Research
Kansas City, Missouri 38.1%
Nationwide Insurance Company QPVA
Columbus, Ohio 6.1%
Advisor
Nationwide Trust Company FSB
Columbus, Ohio 57.9%
Fiserv Securities Inc
Trade House Account
Philadelphia, Pennsylvania 21.1%
--------------------------------------------------------------------------------
Short-Term Treasury
Investor
J Harris Morgan Trustee F Mitchell Testmntry Trust
FBO Elizabeth Lura Turner et al
Greenville, Texas 5.4%
Charles Schwab & Company
San Francisco, California 20.0%
Advisor
Donaldson Lufkin Jenrette Securities Corporation Inc.
Jersey City, New Jersey 20.4%
--------------------------------------------------------------------------------

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. As of July 3,
2000, the officers and trustees of the funds, as a group, owned less than 1% of
any class of a fund's outstanding shares.

www.americancentury.com American Century Investments 23

SERVICE PROVIDERS

The funds have no employees. To conduct their day-to-day activities, the funds
have hired a number of service providers. Each service provider has a specific
function to fill on behalf of the funds and is described below.

ACIM, ACSC and ACIS are wholly owned by ACC. James E. Stowers, Jr., Chairman of
ACC, controls ACC by virtue of his ownership of a majority of its voting stock.

INVESTMENT ADVISOR

A description of the responsibilities of the advisor appears in the Prospectus
under the caption Management.

For the services provided to the funds, the advisor receives a monthly fee based
on a percentage of the average net assets of the fund. 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 assets of all of the funds of its investment
category managed by the advisor (the Investment Category Fee). For example, when
calculating the fee for a money market fund, all of the assets of the money
market funds managed by the advisor are aggregated. The three investment
categories are money market funds, bond funds and equity funds. Second, a
separate fee rate schedule is applied to the assets of all of the funds managed
by the advisor (the Complex Fee). The Investment Category Fee and the Complex
Fee are then added to determine the unified management fee payable by the fund
to the advisor.

The schedules by which the unified management fee is determined are shown below.
The Investment Category Fees are determined according to the schedule below.

INVESTMENT CATEGORY FEE SCHEDULE FOR:
CAPITAL PRESERVATION, GOVERNMENT AGENCY
MONEY MARKET
-------------------------------------------
Category Assets Fee Rate
-------------------------------------------
First $1 billion 0.2500%
-------------------------------------------
Next $1 billion 0.2070%
-------------------------------------------
Next $3 billion 0.1660%
-------------------------------------------
Next $5 billion 0.1490%
-------------------------------------------
Next $15 billion 0.1380%
-------------------------------------------
Next $25 billion 0.1375%
-------------------------------------------
Thereafter 0.1370%
===========================================

INVESTMENT CATEGORY FEE SCHEDULE FOR:
SHORT-TERM TREASURY, INTERMEDIATE-TERM TREASURY,
LONG-TERM TREASURY, INFLATION-ADJUSTED TREASURY
-------------------------------------------
Category Assets Fee Rate
-------------------------------------------
First $1 billion 0.2800%
-------------------------------------------
Next $1 billion 0.2280%
-------------------------------------------
Next $3 billion 0.1980%
-------------------------------------------
Next $5 billion 0.1780%
-------------------------------------------
Next $15 billion 0.1650%
-------------------------------------------
Next $25 billion 0.1630%
-------------------------------------------
Thereafter 0.1625%
===========================================

24 American Century Investments 1-800-345-2021

INVESTMENT CATEGORY FEE SCHEDULE FOR:
SHORT-TERM GOVERNMENT, GNMA
-------------------------------------------
Category Assets Fee Rate
-------------------------------------------
First $1 billion 0.3600%
-------------------------------------------
Next $1 billion 0.3080%
-------------------------------------------
Next $3 billion 0.2780%
-------------------------------------------
Next $5 billion 0.2580%
-------------------------------------------
Next $15 billion 0.2450%
-------------------------------------------
Next $25 billion 0.2430%
-------------------------------------------
Thereafter 0.2425%
-------------------------------------------

The Complex Fee is determined according to the schedule below.

COMPLEX FEE SCHEDULE
--------------------------------------------------------------------------------
Complex Assets Investor Class: Fee Rate Advisor Class: Fee Rate
--------------------------------------------------------------------------------
First $2.5 billion 0.3100% 0.0600%
--------------------------------------------------------------------------------
Next $7.5 billion 0.3000% 0.0500%
--------------------------------------------------------------------------------
Next $15 billion 0.2985% 0.0485%
--------------------------------------------------------------------------------
Next $25 billion 0.2970% 0.0470%
--------------------------------------------------------------------------------
Next $50 billion 0.2960% 0.0460%
--------------------------------------------------------------------------------
Next $100 billion 0.2950% 0.0450%
--------------------------------------------------------------------------------
Next $100 billion 0.2940% 0.0440%
--------------------------------------------------------------------------------
Next $200 billion 0.2930% 0.0430%
--------------------------------------------------------------------------------
Next $250 billion 0.2920% 0.0420%
--------------------------------------------------------------------------------
Next $500 billion 0.2910% 0.0410%
--------------------------------------------------------------------------------
Thereafter 0.2900% 0.0400%
--------------------------------------------------------------------------------

On the first business day of each month, the funds pay a management fee to the
advisor for the previous month at the specified rate. The fee for the previous
month is calculated by multiplying the applicable fee for the fund by the
aggregate average daily closing value of a fund's net assets during the previous
month by a fraction, the numerator of which is the number of days in the
previous month and the denominator of which is 365 (366 in leap years).

The management agreement between the Trust and the advisor shall continue in
effect until the earlier of the expiration of two years from the date of its
execution or until the first meeting of shareholders following such execution
and for as long thereafter as its continuance is specifically approved at least
annually by (1) the funds' Board of Trustees, or by the vote of a majority of
outstanding votes (as defined in the Investment Company Act) and (2) by the vote
of a majority of the trustees of the funds who are not parties to the agreement
or interested persons of the advisor, cast in person at a meeting called for the
purpose of voting on such approval.

The management agreement provides that it may be terminated at any time without
payment of any penalty by the funds' Board of Trustees, or by a vote of a
majority of outstanding votes, on 60 days' written notice to the advisor, and
that it shall be automatically terminated if it is assigned.

The management agreement states the advisor shall not be liable to the funds or
their shareholders for anything other than willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.

www.americancentury.com American Century Investments 25

The management agreement also provides that the advisor and its officers,
trustees and employees may engage in other business, devote time and attention
to any other business whether of a similar or dissimilar nature, and render
services to others.

Certain investments may be appropriate for the funds and also for other clients
advised by the advisor. Investment decisions for the funds and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or fund, or in different amounts and
at different times for more than one but less than all clients or funds. In
addition, purchases or sales of the same security may be made for two or more
clients or funds on the same date. Such transactions will be allocated among
clients in a manner believed by the advisor to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a fund.

The advisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the advisor believes that such
aggregation provides the best execution for the funds. The Board of Trustees has
approved the policy of the advisor with respect to the aggregation of portfolio
transactions. Where portfolio transactions have been aggregated, the funds
participate at the average share price for all transactions in that security on
a given day and share transaction costs on a pro rata basis. The advisor will
not aggregate portfolio transactions of the funds unless it believes such
aggregation is consistent with its duty to seek best execution on behalf of the
funds and the terms of the management agreement. The advisor receives no
additional compensation or remuneration as a result of such aggregation.

Prior to August 1, 1997, Benham Management Corporation served as the investment
advisor to the funds. Benham Management Corporation was merged into the advisor
in late 1997.

Unified management fees paid by each fund for the fiscal periods ended March 31,
2000, 1999 and 1998, are indicated in the following tables. Fee amounts are net
of amounts reimbursed or recouped under the funds' previous investment advisory
agreement with Benham Management Corporation.

UNIFIED MANAGEMENT FEES (INVESTOR CLASS)
--------------------------------------------------------------------------------
Fund 2000 1999 (1) 1998 (2)
--------------------------------------------------------------------------------
Capital Preservation $15,702,285 $15,124,623 $8,807,865
--------------------------------------------------------------------------------
Government Agency Money Market $2,514,980 $2,378,090 $1,507,123
--------------------------------------------------------------------------------
Short-Term Treasury $326,329 $253,445 $134,030
--------------------------------------------------------------------------------
Intermediate-Term Treasury $1,890,819 $2,110,741 $1,222,541
--------------------------------------------------------------------------------
Long-Term Treasury $540,905 $674,494 $406,234
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury $73,520 $34,313 $10,682
--------------------------------------------------------------------------------
Short-Term Government $4,656,667 $4,822,297 $1,623,040(3)
--------------------------------------------------------------------------------
GNMA Fund $7,854,963 $7,901,686 $4,819,669
--------------------------------------------------------------------------------

26 American Century Investments 1-800-345-2021

UNIFIED MANAGEMENT FEES (ADVISOR CLASS)
---------------------------------------------------------------------------------
Fund 2000 1999 1998
---------------------------------------------------------------------------------
Government Agency Money Market $4,279 N/A N/A
---------------------------------------------------------------------------------
Short-Term Treasury $7,190 $6,318 $1,354
---------------------------------------------------------------------------------
Intermediate-Term Treasury $25,826 $4,242 $129
---------------------------------------------------------------------------------
Long-Term Treasury $11,647 $2,929 $93
---------------------------------------------------------------------------------
Inflation-Adjusted Treasury $191 $20 0
---------------------------------------------------------------------------------
Short-Term Government $808 $75 0
---------------------------------------------------------------------------------
GNMA Fund $32,158 $11,247 $265
---------------------------------------------------------------------------------

INVESTMENT ADVISORY FEES

Fund 1998 (1) (4)
--------------------------------------------------------------------------------
Capital Preservation $3,186,164
--------------------------------------------------------------------------------
Government Agency Money Market $421,950
--------------------------------------------------------------------------------
Short-Term Treasury $33,673
--------------------------------------------------------------------------------
Intermediate-Term Treasury $297,794
--------------------------------------------------------------------------------
Long-Term Treasury $122,690
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury $7,212
--------------------------------------------------------------------------------
Short-Term Government 0
--------------------------------------------------------------------------------
GNMA Fund $1,078,109
--------------------------------------------------------------------------------

(1) Net of reimbursements or waivers.

(2) For the period August 1, 1997, to March 31, 1998. Fees paid during this
period were paid under the Management Agreement with American Century
Investment Management, Inc.

(3) Short-Term Government's fiscal year end was changed from October 31 to
March 31 resulting in a five month annual reporting period.

(4) For the period April 1, 1997, to July 31, 1997. Fees paid during this
period were paid under the Investment Advisory Agreement with Benham
Management Corporation.

TRANSFER AGENT AND ADMINISTRATOR

American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, serves as transfer agent and dividend-paying agent for the funds. It
provides physical facilities, computer hardware and software, and personnel for
the day-to-day administration of the funds and the advisor. The advisor pays
American Century Services Corporation for these services.

Prior to August 1, 1997, the funds paid American Century Services Corporation
directly for its services as transfer agent and administrative services agent.

Administrative service and transfer agent fees paid by each fund for the fiscal
year ended March 31, 1998, are indicated in the table below. Fee amounts are net
of expense limitations.

www.americancentury.com American Century Investments 27

ADMINISTRATIVE FEES
--------------------------------------------------------------------------------
Fund 1998
--------------------------------------------------------------------------------
Capital Preservation $1,146,326
--------------------------------------------------------------------------------
Government Agency Money Market $144,980
--------------------------------------------------------------------------------
Short-Term Treasury $11,573
--------------------------------------------------------------------------------
Intermediate-Term Treasury $101,989
--------------------------------------------------------------------------------
Long-Term Treasury $41,622
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 0
--------------------------------------------------------------------------------
Short-Term Government N/A
--------------------------------------------------------------------------------
GNMA Fund $359,302
--------------------------------------------------------------------------------

TRANSFER AGENT FEES
--------------------------------------------------------------------------------
Fund 1998
--------------------------------------------------------------------------------
Capital Preservation $933,109
--------------------------------------------------------------------------------
Government Agency Money Market $163,368
--------------------------------------------------------------------------------
Short-Term Treasury $11,510
--------------------------------------------------------------------------------
Intermediate-Term Treasury $77,150
--------------------------------------------------------------------------------
Long-Term Treasury $66,019
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury $646
--------------------------------------------------------------------------------
Short-Term Government N/A
--------------------------------------------------------------------------------
GNMA Fund $381,757
--------------------------------------------------------------------------------

DISTRIBUTORS

The funds' shares are distributed by FDI and ACIS, both registered
broker-dealers. FDI is a wholly owned, indirect subsidiary of Boston
Institutional Group, Inc. and its principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109. ACIS is a wholly owned subsidiary of
ACC, and is located at 4500 Main Street, Kansas City, Missouri 64111.

The distributors are the principal underwriters of the funds' shares. The
distributors make a continuous, best-efforts underwriting of the funds' shares.
This means the distributors have no liability for unsold shares.

OTHER SERVICE PROVIDERS

CUSTODIAN BANKS

Chase Manhattan Bank, 770 Broadway, 10th Floor, New York, New York 10003-9598,
and Commerce Bank, N.A., 1000 Walnut, Kansas City, Missouri 64105, each serves
as custodian of the assets of the funds. The custodians take no part in
determining the investment policies of the funds or in deciding which securities
are purchased or sold by the funds. The funds, however, may invest in certain
obligations of the custodians and may purchase or sell certain securities from
or to the custodians.

28 American Century Investments 1-800-345-2021

INDEPENDENT ACCOUNTANT

PricewaterhouseCoopers LLP serves as the independent accountants of the funds.
The address of PricewaterhouseCoopers LLP is 1055 Broadway, 10th floor, Kansas
City, Missouri 64105. As the independent accountants of the funds,
PricewaterhouseCoopers provides services including

(1) audit of the annual financial statements for each fund,

(2) assistance and consultation in connection with SEC filings and

(3) review of the annual federal income tax return filed for each fund.

BROKERAGE ALLOCATION

The funds generally purchase and sell debt securities through principal
transactions, meaning they normally purchase securities directly from the issuer
or a primary market-maker acting as principal for the securities on a net basis.
The funds do not pay brokerage commissions on these transactions, although the
purchase price for debt securities usually includes a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market-makers typically include a dealer's mark-up (i.e., a spread between the
bid and asked prices). During the fiscal years ended March 31, 2000, 1999 and
1998, the funds did not have any brokerage commissions.

INFORMATION ABOUT FUND SHARES

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

Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all funds') outstanding shares may be able to elect a Board of
Trustees. The Trust instituted dollar-based voting, meaning that the number of
votes you are entitled to is based upon the dollar amount of your investment.
The election of trustees is determined by the votes received from all Trust
shareholders without regard to whether a majority of shares of any one fund
voted in favor of a particular nominee or all nominees as a group.

Each shareholder has rights to dividends and distributions declared by the fund
he or she owns and to the net assets of such fund upon its liquidation or
dissolution proportionate to his or her share ownership interest in the fund.
Shares of each fund have equal voting rights, although each fund votes
separately on matters affecting that fund exclusively.

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

www.americancentury.com American Century Investments 29

MULTIPLE CLASS STRUCTURE

The funds' Board of Trustees has adopted a multiple class plan (the Multiclass
Plan) pursuant to Rule 18f-3 adopted by the SEC. Pursuant to such plan, the
funds may issue up to three classes of funds: an Investor Class, an
Institutional Class and an Advisor Class. Not all funds offer all three classes

The Investor Class is made available to investors directly without any load or
commission, for a single unified management fee. The Institutional and Advisor
Classes are made available to institutional shareholders or through financial
intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge these classes a lower unified management
fee. In addition to the management fee, however, the Advisor Class shares are
subject to a Master Distribution and Shareholder Services Plan. The plan has
been adopted by the funds' Board of Trustees and initial shareholder in
accordance with Rule 12b-1 adopted by the SEC under the Investment Company Act.

Rule 12b-1

Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by the investment
company's Board of Trustees and approved by its shareholders. Pursuant to such
rule, the Board of Trustees and initial shareholder of the funds' Advisor Class
have approved and entered into a Master Distribution and Shareholder Services
Plan (the Plan).

In adopting the Plan, the Board of Trustees [including a majority who are not
interested persons of the funds (as defined in the Investment Company Act),
hereafter referred to as the independent trustees] determined that there was a
reasonable likelihood that the Plan would benefit the funds and the shareholders
of the affected class. Pursuant to Rule 12b-1, information with respect to
revenues and expenses under the Plan is presented to the Board of Trustees
quarterly for its consideration in connection with its deliberations as to the
continuance of the Plan. Continuance of the Plan must be approved by the Board
of Trustees (including a majority of the independent trustees) annually. The
Plan may be amended by a vote of the Board of Trustees (including a majority of
the independent trustees), except that the Plan may not be amended to materially
increase the amount to be spent for distribution without majority approval of
the shareholders of the affected class. The Plan terminates automatically in the
event of an assignment and may be terminated upon a vote of a majority of the
independent trustees or by vote of a majority of the outstanding voting
securities of the affected class.

All fees paid under the Plan will be made in accordance with Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers (NASD).

Master Distribution and Shareholder Services Plan

As described in the Prospectus, the funds' Advisor Class shares are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through financial intermediaries, such as banks,
broker-dealers and insurance companies. The distributors enter into contracts
with various banks, broker-dealers, insurance companies and other financial
intermediaries with respect to the sale of the funds' shares and/or the use of
the funds' shares in various investment products or in connection with various
financial services.

Certain recordkeeping and administrative services that are provided by the
funds' transfer agent for the Investor Class shareholders may be performed by a
plan sponsor (or its agents) or by a financial intermediary for investors in the
Advisor Class. In addition to such services, the financial intermediaries
provide various distribution services.

30 American Century Investments 1-800-345-2021

To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment advisor has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares, and the funds' Board of Trustees has
adopted a Master Distribution and Shareholder Services Plan (the Distribution
Plan). Pursuant to such Plan, the Advisor Class shares pay the distributors a
fee of 0.50% annually of the aggregate average daily assets of the funds'
Advisor Class shares, 0.25% of which is paid for shareholder services (as
described below) and 0.25% of which is paid for distribution services. During
the fiscal year ended March 31, 2000, the aggregate amount of fees paid under
the Plan were:

Short-Term Government $1,204
Intermediate-Term Treasury $50,594
GNMA $47,932
Government Agency Money Market $9,654
Short-Term Treasury $14,114
Long-Term Treasury $22,814
Inflation-Adjusted Treasury $374

Payments may be made for a variety of shareholder services, including, but not
limited to,

(a) receiving, aggregating and processing purchase, exchange and redemption
requests from beneficial owners (including contract owners of insurance
products that utilize the funds as underlying investment media) of shares
and placing purchase, exchange and redemption orders with the distributor;

(b) providing investors with a service that invests the assets of their accounts
in shares pursuant to specific or pre-authorized instructions;

(c) processing dividend payments from a fund on behalf of investors and
assisting investors in changing dividend options, account designations and
addresses;

(d) providing and maintaining elective services such as check writing and wire
transfer services;

(e) acting as shareholder of record and nominee for beneficial owners;

(f) maintaining account records for investors and/or other beneficial owners;

(g) issuing confirmations of transactions;

(h) providing subaccounting with respect to shares beneficially owned by
customers of third parties or providing the information to a fund as
necessary for such subaccounting;

(i) preparing and forwarding investor communications from the funds (such as
proxies, shareholder reports, annual and semiannual financial statements and
dividend, distribution and tax notices) to investors and/or other beneficial
owners;

(j) providing other similar administrative and sub-transfer agency services; and

(k) paying service fees for the provision of personal, continuing services to
investors, as contemplated by the Rules of Fair Practice of the NASD
(collectively referred to as shareholder services).

Shareholder services do not include those activities and expenses that are
primarily intended to result in the sale of additional shares of the funds.
During the fiscal year ended March 31, 2000, the amount of fees paid by the
funds under the plan for shareholder services was:

Short-Term Government $602
Intermediate-Term Treasury $25,297
GNMA $23,966
Government Agency Money Market $4,827
Short-Term Treasury $7,057
Long-Term Treasury $11,407
Inflation-Adjusted Treasury $187

www.americancentury.com American Century Investments 31

Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of Advisor Class shares, which
services may include but are not limited to,

(a) the payment of sales commissions, ongoing commissions and other payments to
brokers, dealers, financial institutions or others who sell Advisor Class
shares pursuant to selling agreements;

(b) compensation to registered representatives or other employees of the
distributors who engage in or support distribution of the funds' Advisor
Class shares;

(d) the printing of prospectuses, statements of additional information and
reports for other-than-existing investors;

(e) the preparation, printing and distribution of sales literature and
advertising materials provided to the funds' investors and prospective
investors;

(f) receiving and answering correspondence from prospective investors, including
distributing prospectuses, statements of additional information and
shareholder reports;

(g) the providing of facilities to answer questions from prospective investors
about fund shares;

(h) complying with federal and state securities laws pertaining to the sale of
fund shares;

(i) assisting investors in completing application forms and selecting dividend
and other account options;

(j) the providing of other reasonable assistance in connection with the
distribution of fund shares;

(k) the organizing and conducting of sales seminars and payments in the form of
transactional compensation or promotional incentives;

(l) profit on the foregoing;

(m) the payment of "service fees" for the provision of personal,
continuing services to investors, as contemplated by the Rules of Fair
Practice of the NASD; and

(n) such other distribution and services activities as the advisor determines
may be paid for by the funds pursuant to the terms of this Agreement and in
accordance with Rule 12b-1 of the Investment Company Act.

During the fiscal year ended March 31, 2000, the amount of fees paid by the
funds under the Plan for distribution services was:

Short-Term Government $602
Intermediate-Term Treasury $25,297
GNMA $23,966
Government Agency Money Market $4,827
Short-Term Treasury $7,057
Long-Term Treasury $11,407
Inflation-Adjusted Treasury $187

32 American Century Investments 1-800-345-2021

BUYING, SELLING AND EXCHANGING FUND SHARES

Information about buying, selling and exchanging fund shares is contained in the
funds' prospectus and in Your Guide to American Century Services. The Prospectus
and guide are available to investors without charge and may be obtained by
calling us.

VALUATION OF A FUND'S SECURITIES

Each fund's net asset value (NAV) per share is calculated as of the close of
business of the New York Stock Exchange (the Exchange) each day the Exchange is
open for business. The Exchange usually closes at 4 p.m. Eastern time. The
Exchange typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the Exchange may modify its
holiday schedule at any time.

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

Money Market Funds

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

The money market funds operate pursuant to Investment Company Act Rule 2a-7,
which permits valuation of portfolio securities on the basis of amortized cost.
As required by the Rule, the Board of Trustees has adopted procedures designed
to stabilize, to the extent reasonably possible, a money market fund's price per
share as computed for the purposes of sales and redemptions at $1.00. While the
day-to-day operation of the money market funds has been delegated to the fund
managers, the quality requirements established by the procedures limit
investments to certain instruments that the Board of Trustees has determined
present minimal credit risks and that have been rated in one of the two highest
rating categories as determined by a rating agency or, in the case of unrated
securities, of comparable quality. The procedures require review of the money
market funds' portfolio holdings at such intervals as are reasonable in light of
current market conditions to determine whether the money market funds' net asset
values calculated by using available market quotations deviate from the
per-share value based on amortized cost. The procedures also prescribe the
action to be taken if such deviation should occur.

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

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

www.americancentury.com American Century Investments 33

Non-Money Market Funds

Securities held by the non-money market funds normally are priced using data
provided by an independent pricing service, provided that such prices are
believed by the advisor to reflect the fair market value of portfolio
securities.

In valuing securities, the pricing services generally take into account
institutional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by the advisor under the
general supervision of the Board of Trustees. There are a number of pricing
services available, and the advisor, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.

Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers.

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

TAXES

FEDERAL INCOME TAX

Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal and state income taxes to the
extent that it distributes substantially all of its net investment income and
net realized capital gains (if any) to shareholders. If a fund fails to qualify
as a regulated investment company, it will be liable for taxes, significantly
reducing its distributions to investors and eliminating investors' ability to
treat distributions of the funds in the manner they were realized by the funds.

Certain bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and generally can be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Although no cash is actually received by a fund until the maturity
of the bond, original issue discount is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest.

In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable). Generally, market discount
accrues on a daily basis for each day the bond is held by a fund on a
straight-line basis over the time remaining to the bond's maturity. In the case
of any debt

34 American Century Investments 1-800-345-2021

security having a fixed maturity date of not more than one year from its date of
issue, the gain realized on disposition generally will be treated as short-term
capital gain. In general, any gain realized on disposition of a security held
less than one year is treated as short-term capital gain.

Under the Code, any distribution of a fund's net realized long-term capital
gains that is designated by the fund as a capital gains dividend is taxable to
investors as long-term capital gains, regardless of the length of time shares
are held. If a capital gains dividend is paid with respect to any shares of a
fund sold at a loss after being held for six months or less, the loss will be
treated as a long-term capital loss to the extent of any distribution of
long-term capital gain.

STATE AND LOCAL TAXES

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

The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisors or state or local tax authorities to determine whether the
funds are suitable investments.

HOW FUND PERFORMANCE INFORMATION IS CALCULATED

The funds may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.

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

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

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

The SEC 30-day yield calculation for non-money market funds is as follows:

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

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

www.americancentury.com American Century Investments 35

MONEY MARKET FUND YIELDS - INVESTOR CLASS
--------------------------------------------------------------------------------
(seven-day period ended March 31, 2000)
Fund 7-Day Yield Effective Yield
--------------------------------------------------------------------------------
Capital Preservation 5.28% 5.41%
--------------------------------------------------------------------------------
Government Agency Money Market 5.50% 5.65%
--------------------------------------------------------------------------------

NON-MONEY MARKET FUND YIELDS - INVESTOR CLASS
--------------------------------------------------------------------------------
(30-day period ended March 31, 2000)

Fund 30-Day Yield
--------------------------------------------------------------------------------
Short-Term Treasury 6.04%
--------------------------------------------------------------------------------
Intermediate-Term Treasury 6.07%
--------------------------------------------------------------------------------
Long-Term Treasury 5.85%
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 5.67%
--------------------------------------------------------------------------------
Short-Term Government 6.09%
--------------------------------------------------------------------------------
GNMA Fund 6.64%
--------------------------------------------------------------------------------

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

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

The following tables set forth the average annual total return for the various
classes of the funds for the periods indicated as of March 31, 2000.

AVERAGE ANNUAL TOTAL RETURNS--INVESTOR CLASS
--------------------------------------------------------------------------------
Fiscal Year Ended March 31, 2000

One Five Ten Life of Inception
Fund Year Years Years Fund Date
--------------------------------------------------------------------------------
Capital Preservation 4.63% 4.88% 4.66% 5.27% 10/13/1972
--------------------------------------------------------------------------------
Government Agency Money Market 4.98% 5.05% 4.86% 4.97% 12/05/1989
--------------------------------------------------------------------------------
Short-Term Treasury 2.86% 5.33% N/A 4.68% 09/08/1992
--------------------------------------------------------------------------------
Intermediate-Term Treasury 1.51% 6.17% 6.96% 8.29% 05/16/1980
--------------------------------------------------------------------------------
Long-Term Treasury 2.86% 8.95% N/A 7.57% 09/08/1992
--------------------------------------------------------------------------------
Inflation-Adjusted Treasury 5.52% N/A N/A 3.27% 02/10/1997
--------------------------------------------------------------------------------
Short-Term Government 2.51% 5.25% 5.67% 6.81% 12/15/1982
--------------------------------------------------------------------------------
GNMA Fund 2.01% 6.72% 7.62% 8.13% 09/23/1985
--------------------------------------------------------------------------------

36 American Century Investments 1-800-345-2021

AVERAGE ANNUAL TOTAL RETURNS--ADVISOR CLASS
--------------------------------------------------------------------------------
Fiscal Year Ended March 31, 2000

Fund One Year Life of Fund Inception Date
-------------------------------------------------------------------------------
Government Agency Money Market N/A 4.73% 04/12/1999
-------------------------------------------------------------------------------
Short-Term Treasury 2.60% 4.30% 10/06/1997
-------------------------------------------------------------------------------
Intermediate-Term Treasury 1.25% 4.43% 10/09/1997
-------------------------------------------------------------------------------
Long-Term Treasury 2.61% 3.27% 01/12/1998
-------------------------------------------------------------------------------
Inflation-Adjusted Treasury 5.26% 4.01% 06/15/1998
-------------------------------------------------------------------------------
Short-Term Government 2.26% 3.26% 07/08/1998
-------------------------------------------------------------------------------
GNMA Fund 1.76% 4.23% 10/09/1997
-------------------------------------------------------------------------------

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

PERFORMANCE COMPARISONS

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

www.americancentury.com American Century Investments 37

PERMISSIBLE ADVERTISING INFORMATION

From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for one or more of
the funds; (5) descriptions of investment strategies for one or more of the
funds; (6) descriptions or comparisons of various savings and investment
products (including, but not limited to, qualified retirement plans and
individual stocks and bonds), which may or may not include the funds; (7)
comparisons of investment products (including the funds) with relevant market or
industry indices or other appropriate benchmarks; (8) discussions of fund
rankings or ratings by recognized rating organizations; and (9) testimonials
describing the experience of persons who have invested in one or more of the
funds. The funds also may include calculations, such as hypothetical compounding
examples, which describe hypothetical investment results. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any of the funds.

MULTIPLE CLASS PERFORMANCE ADVERTISING

Pursuant to the Multiple Class Plan, the funds may issue additional classes of
existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the advisor
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class's performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.

FINANCIAL STATEMENTS

The financial statements of the funds are included in the annual reports to
shareholders for the fiscal year ended March 31, 2000. The annual reports are
incorporated herein by reference. You may receive copies of the reports without
charge upon request to American Century at the address and telephone numbers
shown on the back cover of the Statement of Additional Information.

38 American Century Investments 1-800-345-2021

EXPLANATION OF FIXED-INCOME SECURITIES RATINGS

As described in the Prospectus, the funds invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus and in this Statement of Additional Information. The
following is a summary of the rating categories referenced in the prospectus
disclosure.

BOND RATINGS
--------------------------------------------------------------------------------
S&P MOODY'S DESCRIPTION
--------------------------------------------------------------------------------
AAA Aaa These are the highest ratings assigned by S&P and
Moody's to a debt obligation. They indicate an extremely
strong capacity to pay interest and repay principal.
--------------------------------------------------------------------------------
AA Aa Debt rated in this category is considered to have a very
strong capacity to pay interest and repay principal. It
differs from AAA/Aaa issues only in a small degree.
--------------------------------------------------------------------------------
A A Debt rated A has a strong capacity to pay interest and
repay principal, although it is somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than debt in higher-rated categories.
--------------------------------------------------------------------------------
BBB Baa Debt rated BBB/Baa is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in
higher-rated categories.
--------------------------------------------------------------------------------
BB Ba Debt rated BB/Ba has less near-term vulnerability to
default than other
speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions that could lead to inadequate capacity
to meet timely interest and principal payments. The BB
rating category also is used for debt subordinated to
senior debt that is assigned an actual or implied BBB-
rating.
--------------------------------------------------------------------------------
B B Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category also is used for debt subordinated to
senior debt that is assigned an actual or implied BB/Ba or
BB-/Ba3 rating.
--------------------------------------------------------------------------------
CCC Caa Debt rated CCC/Caa has a currently identifiable
vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely
payment of interest and repayment of principal. In the
event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC/Caa rating category
also is used for debt subordinated to senior debt that is
assigned an actual or implied B or B-/B3 rating.
--------------------------------------------------------------------------------
CC Ca The rating CC/Ca typically is applied to debt
subordinated to senior debt that is assigned an actual or
implied CCC/Caa rating.
--------------------------------------------------------------------------------
C C The rating C typically is applied to debt subordinated to
senior debt, which is assigned an actual or implied
CCC-/Caa3 debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but
debt service payments are continued.
--------------------------------------------------------------------------------
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
--------------------------------------------------------------------------------
D D Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are
not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such
payments will be made during such grace period. The D
rating also is used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
--------------------------------------------------------------------------------

www.americancentury.com American Century Investments 39

To provide more detailed indications of credit quality, the Standard &
Poor's ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.

COMMERCIAL PAPER RATINGS
--------------------------------------------------------------------------------
S&P Moody's Description

--------------------------------------------------------------------------------
A-1 Prime-1 This indicates that the degree of safety regarding timely
(P-1) payment is strong. Standard & Poor's rates those issues
determined to possess extremely strong safety characteristics
as A-1+.
--------------------------------------------------------------------------------
A-2 Prime-2 Capacity for timely payment on commercial paper is
(P-2) satisfactory, but the relative degree of safety is not as high
as for issues designated A-1. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriated, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
--------------------------------------------------------------------------------
A-3 Prime-3 This indicates satisfactory capacity for timely repayment.
(P-3) Issues that carry this rating are somewhat more vulnerable
to the adverse changes in circumstances than obligations
carrying the higher designations.
--------------------------------------------------------------------------------

NOTE RATINGS
--------------------------------------------------------------------------------
S&P MOODY'S DESCRIPTION
--------------------------------------------------------------------------------
SP-1 MIG-1; VMIG-1 Notes are of the highest quality
enjoying strong protection from established cash
flows of funds for their servicing or from
established and broad-based access to the market
for refinancing, or both.
--------------------------------------------------------------------------------
SP-2 MIG-2; VMIG-2 Notes are of high quality with
margins of protection ample, although not so
large as in the preceding group.
--------------------------------------------------------------------------------
SP-3 MIG-3; VMIG-3 Notes are of favorable quality
with all security elements accounted for, but
lacking the undeniable strength of the preceding
grades. Market access for refinancing, in
particular, is likely to be less
well-established.
--------------------------------------------------------------------------------
SP-4 MIG-4; VMIG-4 Notes are of adequate quality,
carrying specific risk but having protection and
not distinctly or predominantly speculative.
--------------------------------------------------------------------------------

40 American Century Investments 1-800-345-2021

MORE INFORMATION ABOUT THE FUNDS IS CONTAINED IN THE FUNDS' ANNUAL AND
SEMIANNUAL REPORTS

Annual and Semiannual Reports

These contain more information about the funds' investments and the market
conditions and investment strategies that significantly affected the funds'
performance during the most recent fiscal period. The annual and semiannual
reports are incorporated by reference into this SAI. This means that these are
legally part of this SAI.

You can receive free copies of the annual and semiannual reports and ask any
questions about the funds and your accounts by contacting American Century at
the address or or one of the telephone numbers listed below.

If you own or are considering purchasing fund shares through

* an employer-sponsored retirement plan
* a bank
* a broker-dealer
* an insurance company
* another financial intermediary

you can receive the annual and semiannual reports directly from them.

You also can get information about the funds from the Securities and Exchange
Commission (SEC). The SEC charges a duplicating fee to provide copies of this
information.

In person SEC Public
Reference Room

Washington, D.C.
Call 202-942-8090 for
location and hours.

On the Internet * EDGAR database at www.sec.gov
* By email request at [email protected]

By mail SEC Public Reference Section
Washington, D.C. 20549-0102

Investment Company Act File No. 811-4363

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

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

AUTOMATED INFORMATION LINE
1-800-345-8765

WWW.AMERICANCENTURY.COM

INVESTOR RELATIONS
1-800-345-2021 or 816-531-5575

BUSINESS, NOT-FOR-PROFIT AND
EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-345-3533

BANKS AND TRUST COMPANIES, BROKER/DEALERS,
FINANCIAL ADVISORS, INSURANCE
COMPANIES 1-800-345-6488

J.P. MORGAN|AMERICAN CENTURY(reg.tm)
RETIREMENT PLAN SERVICES 1-800-345-2345

FAX
816-340-7962

TELECOMMUNICATIONS DEVICE FOR THE DEAF
1-800-634-4113 or 816-444-3485

SH-SAI-20909 0008

AMERICAN CENTURY GOVERNMENT INCOME TRUST

PART C OTHER INFORMATION

Item 23 Exhibits (all exhibits not filed herewith are being incorporated
herein by reference).

(a) Amended and Restated Agreement and Declaration of Trust dated
March 9, 1998 and amended March 1, 1999 (filed electronically as
Exhibit a to Post-Effective Amendment No. 37 to the Registration
Statement on Form N-1A, filed May 7, 1999, File No. 2-99222).

(b) Amended and Restated Bylaws, dated March 9, 1998 (filed
electronically as Exhibit 2b to Post-Effective Amendment No. 23
to the Registration Statement on Form N-1A of American Century
Municipal Trust, filed March 26, 1998, File No. 2-91229).

(c) Registrant hereby incorporates by reference, as though set forth
fully herein, Article III, Article IV, Article V, Article VI and
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust, appearing as Exhibit (a) to this
Post-Effective Amendment No. 37 to the Registration Statement on
Form N-1A of the Registrant; and Article II, Article III, Article
IV and Article V of Registrant's Amended and Restated Bylaws,
appearing as Exhibit (b) to Post-Effective Amendment No. 23 to
the Registration Statement on Form N-1A of American Century
Municipal Trust on March 26, 1998.

(d) (1) Investor Class Management Agreement between American Century
Government Income Trust and American Century Investment
Management, Inc. dated August 1, 1997 (filed electronically as
Exhibit 5 to Post-Effective Amendment No. 33 to the Registration
Statement on Form N-1A, filed July 31, 1997, File No. 2-99222).

(2) Amendment No. 1 to the Investor Class Management Agreement
between American Century Government Income Trust and American
Century Investment Management, Inc. dated March 31, 1998 (filed
electronically as Exhibit 5b to Post-Effective Amendment No. 23
on Form N-1A of American Century Municipal Trust, File No.
2-91229).

(3) Amendment No. 2 to the Investor Class Management Agreement
between American Century Government Income Trust and American
Century Investment Management, Inc. dated July 1, 1998 (filed
electronically as Exhibit d3 of Post-Effective Amendment No 39 to
the Registration Statement on Form N-1A of the Registrant, filed
on July 28, 1999, File No. 2-99222).

(4) Advisor Class Investment Management Agreement between
American Century Government Income Trust and American Century
Investment Management, Inc., dated August 1, 1997 and amended as
of June 1, 1998 (filed electronically as Exhibit 5b to
Post-Effective Amendment No. 9 to the Registration Statement on
Form N-1A of American Century Investment Trust, filed June 30,
1999, File No. 33-65170).

(e) (1) Distribution Agreement between American Century Government
Income Trust and Funds Distributor, Inc., dated January 15, 1998
(filed electronically as Exhibit 6 to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-1A of American
Century Target Maturities Trust, filed January 30, 1998, File No.
2-94608).

(2) Amendment No. 1 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc., dated June 1, 1998 (filed electronically as Exhibit B6b to
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A of American Century Quantitative Equity Funds on June
29, 1998, File No. 33-19589).

(3) Amendment No. 2 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc., dated December 1, 1998 (filed electronically as Exhibit B6c
to Post-Effective Amendment No. 12 to the Registration Statement
on Form N-1A of American Century World Mutual Funds, Inc. on
November 13, 1998, File No. 33-39242).

(4) Amendment No. 3 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc., dated January 29, 1999 (filed electronically as Exhibit e4
to Post-Effective Amendment No. 24 to the Registration Statement
on Form N-1A of American Century Variable Portfolios, Inc. on
January 15, 1999, File No. 33-14567).

(5) Amendment No. 4 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc. dated July 30, 1999 (filed electronically as Exhibit e5 to
Post-Effective Amendment No. 16 to the Registration Statement of
American Century Capital Portfolios, Inc. on July 29, 1999, File
No. 33-64872).

(6) Amendment No. 5 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc. dated November 19, 1999 (filed electronically as Exhibit e6
to Post-Effective Amendment No. 87 to the Registration Statement
of American Century Mutual Funds, Inc. on November 29, 1999, File
No. 2-14213).

(7) Amendment No. 6 to the Distribution Agreement between
American Century Government Income Trust and Funds Distributor,
Inc. dated June 1, 2000 (filed electronically as Exhibit e7 to
Post-Effective Amendment No. 19 to the Registration Statement of
American Century World Mutual Funds, Inc. on May 24, 1999, File
No. 33-39242).

(8) Distribution Agreement between American Century Government
Income Trust and American Century Investment Services, Inc. dated
March 13, 2000 (filed electronically as Exhibit e7 to
Post-Effective Amendment No. 17 to the Registration Statement of
American Century World Mutual Funds, Inc. on March 30, 2000, File
No. 33-39242).

(9) Amendment No. 1 to the Distribution Agreement between
American Century Government Income Trust and American Century
Investment Services, Inc. dated June 1, 2000 (filed
electronically as Exhibit e9 to Post-Effective Amendment No. 19
to the Registration Statement on Form N-1A of American Century
World Mutual Funds, Inc. on May 24, 2000, File No. 33-39242).

(f) Not applicable.

(g) (1) Master Agreement by and between Commerce Bank N.A. and
Twentieth Century Services, Inc. dated January 22, 1997 (filed
electronically as Exhibit g2 to Post-Effective Amendment No. 76
on Form N-1A of American Century Mutual Funds, Inc., File No.
2-14213).

(2) Global Custody Agreement between American Century Government
Income Trust and The Chase Manhattan Bank, dated August 9, 1996
(filed electronically as Exhibit 8 to Post-Effective Amendment
No. 31 to the Registration Statement on Form N-1A filed on
February 7, 1997, File No. 2-99222).

(h) (1) Transfer Agency Agreement between American Century Government
Income Trust and American Century Services Corporation, dated
August 1, 1997 (filed electronically as an Exhibit to
Post-Effective Amendment No. 33 to the Registration Statement of
the American Century Government Income Trust, File No. 2-99222,
on July 31, 1997).

(2) Amendment dated March 9, 1998 to the Transfer Agency
Agreement between American Century Government Income Trust and
American Century Services Corporation, dated August 1, 1997
(filed electronically as Exhibit 9b to Post-Effective Amendment
No. 23 of American Century Municipal Trust on March 26, 1998,
File No. 2-91229).

(3) Amendment to Transfer Agency Agreement between American
Century Government Income Trust and American Century Services
Corporation, dated June 29, 1998 (filed electronically as an
Exhibit to Post-Effective Amendment No. 23 to the Registration
Statement of American Century Quantitative Equity Funds, File No.
33-19589, on June 29, 1998).

(4) Credit Agreement between American Century Funds and The Chase
Manhattan Bank, as Administrative Agent dated as of December 18,
1998 (filed electronically as Exhibit h2 to Post-Effective
Amendment No. 37 to the Registration Statement on Form N-1A,
filed May 7, 1999, File No. 2-99222).

(i) Opinion and Consent of counsel (filed electronically as Exhibit i
to Post-Effective Amendment No. 37 to the Registration Statement
on Form N-1A, filed May 7, 1999, File No. 2-99222).

(j) (1) Consent of PricewaterhouseCoopers LLP, independent
accountants is included herein.

(2) Consent of KPMG Peat Marwick, LLP, independent auditors
(filed electronically as Exhibit 11 to Post-Effective Amendment
No. 33 to the Registration Statement on Form N-1A of Registrant,
filed July 31, 1997, File No. 2-99222).

(3) Power of Attorney dated December 18, 1998 (filed
electronically as Exhibit j3 to Post-Effective Amendment No. 37
to the Registration Statement on Form N-1A, filed May 7, 1999,
File No. 2-99222).

(k) Not applicable.

(l) Not applicable.

(m) (1) Master Distribution and Shareholder Services Plan of American
Century Government Income Trust, American Century International
Bond Fund, American Century Target Maturities Trust and American
Century Quantitative Equity Funds (Advisor Class) dated August 1,
1997 (filed electronically as Exhibit 15 of Post-Effective
Amendment No. 27 to the Registration Statement on Form N-1A for
American Century Target Maturities Trust, filed August 29, 1997,
File No. 2-94608).

(2) Amendment No. 1 to Master Distribution and Shareholder
Services Plan of American Century Government Income Trust
(Advisor Class) dated June 29, 1998 (filed electronically as
Exhibit 15b to Post-Effective Amendment No. 23 of the
Registration Statement on Form N-1A of American Century
Quantitative Equity Funds filed on June 29, 1998, File No.
33-19589).

(n) Not applicable.

(o) (1) Multiple Class Plan of American Century California Tax-Free
and Municipal Funds, American Century Government Income Trust,
American Century International Bond Funds, American Century
Investment Trust, American Century Municipal Trust, American
Century Target Maturities Trust and American Century Quantitative
Equity Funds dated August 1, 1997 (filed electronically as
Exhibit 15 to Post-Effective Amendment No. 27 to the Registration
Statement on Form N-1A of American Century Target Maturities
Trust, filed August 29, 1997, File No. 2-94608).

(2) Amendment to Multiple Class Plan of American Century
California Tax-Free and Municipal Funds, American Century
Government Income Trust, American Century International Bond
Funds, American Century Investment Trust, American Century
Municipal Trust, American Century Target Maturities Trust and
American Century Quantitative Equity Funds dated August 1, 1997
(filed electronically as Exhibit o2 to Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A of American
Century Quantitative Equity Funds, filed June 29, 1998, File No.
33-19589).

(p) (1) American Century Investments Code of Ethics (filed
electronically as Exhibit p1 to Post-Effective Amendment No. 16
to the Registration Statement on Form N-1A of American Century
World Mutual Funds, Inc. on March 10, 2000, File No. 33-39242).

(2) Funds Distributor, Inc. Code of Ethics (filed electronically
as Exhibit p2 to Post-Effective Amendment No. 16 to the
Registration Statement on Form N-1A of American Century World
Mutual Funds, Inc. on March 10, 2000, File No. 33-39242).

Item 24. Persons Controlled by or Under Common Control with Registrant.

Not applicable.

Item 25. Indemnification.

As stated in Article VII, Section 3 of the Declaration of Trust, incorporated
herein by reference to Exhibit 1 to the Registration Statement, "The Trustees
shall be entitled and empowered to the fullest extent permitted by law to
purchase insurance for and to provide by resolution or in the Bylaws for
indemnification out of Trust assets for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit, or proceeding in which he or she
becomes involved by virtue of his or her capacity or former capacity with the
Trust. The provisions, including any exceptions and limitations concerning
indemnification, may be set forth in detail in the Bylaws or in a resolution
adopted by the Board of Trustees."

Registrant hereby incorporates by reference, as though set forth fully herein,
Article VI of the Registrant's Amended and Restated Bylaws, dated March 9, 1998,
appearing as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A of American Century Municipal Trust filed March 26, 1998.

The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
Registrant for sums which it may be permitted or required to pay to its officers
and directors by way of indemnification against such liabilities, subject in
either case to clauses respecting deductibility and participation.

Item 26. Business and Other Connections of Investment Advisor.

None.

Item 27. Principal Underwriters.

I. (a) Funds Distributor, Inc. (FDI) acts as principal
underwriter for the following investment companies.

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
CDC MPT+ Funds
Dresdner RCM Capital Funds, Inc.
Dresdner Global Funds, Inc.
Dresdner RCM Investment Funds, Inc.
GMO Trust
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
The Saratoga Advantage Trust
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
TD Waterhouse Family of Funds, Inc.
TD Waterhouse Trust

FDI is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. FDI is located at 60
State Street, Suite 1300, Boston, Massachusetts 02109. FDI
is an indirect wholly-owned subsidiary of Boston Institutional Group,
Inc., a holding company all of whose outstanding shares are owned by
key employees.

(b) The following is a list of the executive officers, directors and
partners of FDI:

Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant

Marie E. Connolly Director, President and Chief none
Executive Officer

George A. Rio Executive Vice President President,
Principal Executive
and Principal Financial Officer

Gary S. MacDonald Executive Vice President none
and Chief Administrative Officer

Charles W. Carr Executive Vice President none

Donald R. Roberson Executive Vice President none

William S. Nichols Executive Vice President none

Margaret W. Chambers Senior Vice President, none
General Counsel, Chief
Compliance Officer,
Secretary and Clerk

Joseph F. Tower, III Senior Vice President, none
Treasurer

Judith K. Benson Senior Vice President none

William J. Nutt Chairman and Director none

William J. Stetter Senior Vice President and none
Chief Financial Officer
Christopher J. Kelley Senior Vice President and Vice President
Deputy General Counsel

John Lehning Senior Vice President none

John Prosperi Senior Vice President none
--------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109

II. (a) American Century Investment Services, Inc. (ACIS) acts as
principal underwriter for the following investment companies:

ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly owned subsidiary of American Century Companies, Inc.

(b) The following is a list of the executive officers and
partners of ACIS:

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
--------------------------------------------------------------------------------
James E. Stowers, Jr. Chairman and Director none

W. Gordon Snyder President none

James E. Stowers III Chief Executive Officer Chairman and
and Director Director

William M. Lyons Chief Operating Officer, Executive Director
Vice President, Secretary
and Director

Robert T. Jackson Executive Vice President none
and Chief Financial Officer

Kevin Cuccias Senior Vice President none

Brian Jeter Senior Vice President none

Mark Killen Senior Vice President none

Tom Kmak Senior Vice President none

David C. Tucker Senior Vice President Vice President
and General Counsel

* All addresses are 4500 Main Street, Kansas City, Missouri 64111

Item 28. Location of Accounts and Records.

All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act, and the rules promulgated thereunder, are in the
possession of the Registrant, American Century Services Corporation and American
Century Investment Management, Inc., all located at American Century Tower, 4500
Main Street, Kansas City, Missouri 64111.

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 40 to its
Registration Statement pursuant to Rule 485(b) promulgated under the Securities
Act of 1933, as amended, and has duly caused this Post-Effective Amendment No.
40/Amendment No. 41 to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Kansas City, State of
Missouri on the 28th day of July, 2000.

AMERICAN CENTURY GOVERNMENT INCOME TRUST

By: /*/George A. Rio
George A. Rio
President and Principal Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 40 has been signed below by the following persons
in the capacities and on the dates indicated.

Date
*George A. Rio President, Principal July 28, 2000
--------------------------------- Executive and Principal
George A. Rio Financial Officer

*Maryanne Roepke Vice President, Treasurer July 28, 2000
--------------------------------- and Principal Accounting
Maryanne Roepke Officer

*Albert A. Eisenstat Director July 28, 2000
---------------------------------
Albert A. Eisenstat

*Ronald J. Gilson Director July 28, 2000
---------------------------------
Ronald J. Gilson

*William M. Lyons Director July 28, 2000
---------------------------------
William M. Lyons

*Myron S. Scholes Director July 28, 2000
---------------------------------
Myron S. Scholes

*Kenneth E. Scott Director July 28, 2000
---------------------------------
Kenneth E. Scott

*Isaac Stein Director July 28, 2000
---------------------------------
Isaac Stein

*James E. Stowers III Director July 28, 2000
---------------------------------
James E. Stowers III

*Jeanne D. Wohlers Director July 28, 2000
---------------------------------
Jeanne D. Wohlers

/s/Charles C.S. Park
*by Charles C.S. Park, Attorney in Fact
(pursuant to a Power of Attorney dated December 18, 1998).