AMERICAN CENTURY INTERNATIONAL BOND FUNDS, 485APOS, 1999-01-26

AMERICAN CENTURY INTERNATIONAL BOND FUNDS
485APOS, 1999-01-26

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As filed with the Securities and Exchange Commission on January 26, 1999

1933 Act File No. 33-43321; 1940 Act File No. 811-6441
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 __X__

Pre-Effective Amendment No.____ _____

Post-Effective Amendment No._12_ __X__

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 __X__

Amendment No._13_

AMERICAN CENTURY INTERNATIONAL BOND FUNDS
---------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

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

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

William M. Lyons
American Century Tower, 4500 Main Street, Kansas City, MO 64111
-----------------------------------------------------------------
(Name and address of Agent for service)

Approximate Date of Proposed Public Offering: February 28, 1999

It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
__X__ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on (date) pursuant to paragraph (a) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on (date) pursuant to paragraph (a)(2) of Rule 485

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Form 24F-2 Notice for the
fiscal year ending December 31, 1997, was filed on February 24, 1998.
================================================================================
<PAGE>
[american century logo(reg.sm)]
American
Century

PROSPECTUS

MARCH 29, 1999
- --------------------------------------------------------------------------------

INTERNATIONAL BOND

INVESTOR CLASS

The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this Prospectus is accurate or complete.

Distributed by Funds Distributor, Inc.

Dear Investor,

Reading a prospectus doesn't have to be a chore. We've done the hard work so you
can focus on what's important--learning about the fund. Take a look inside and
you'll see this prospectus is different from others. It takes a clear-cut
approach to fund information.

Here's what you'll find

o The fund's primary investments and risks
o A description of who may or may not want to invest in the fund
o Fund performance, including returns for each year, best and worst quarters
and average annual returns compared to the funds' benchmarks
o An overview of ways to best manage your accounts
o Helpful tips and definitions of key investment terms

Whether you're a current investor or investing in mutual funds for the first
time, this prospectus will give you a clear understanding of the funds. If you
have questions, our Investor Services Representatives are available weekdays, 7
a.m. to 7 p.m., and Saturdays, 9 a.m. to 2 p.m., Central time. Our toll-free
number is 1-800-345-2021. We look forward to helping you achieve your financial
goals.

Sincerely,

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

TABLE OF CONTENTS

An Overview of the Fund............................................2

Fees and Expenses..................................................3

Information about the Fund.........................................4

Basics of Fixed Income Investing..................................12

Management........................................................15

Investing with American Century...................................18

Share Price and Distributions.....................................21

Taxes.............................................................22

Multiple Class Information........................................22

Financial Highlights..............................................23

At Your Service...................................................22

**********LEFT MARGIN CALLOUTS

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

*........This symbol highlights special information and helpful tips.

**********END LEFT MARGIN CALLOUTS

AN OVERVIEW OF THE FUND

WHAT IS THE FUND'S INVESTMENT GOAL?

The fund seeks high total return by investing in high-quality,
nondollar-denominated government and corporate debt securities outside the
United States.

WHAT ARE THE FUND'S PRIMARY INVESTMENTS AND RISKS?

The fund invests most of its assets in high-quality DEBT SECURITIES issued by
foreign corporations and governments. The advisor expects the fund's
dollar-weighted average maturity to range from two to ten years.

The fund's primary investment risks include

o interest rate risk
o currency risk
o political and economic risk
o market and trading risk

Additional important information about the funds' investment strategies and
risks begins on page 4.

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you

>> Want to diversify your investments beyond United States-dollar denominated
securities and interest rate exposure

>> Want to protect your income against a decline in the purchasing power of the
U.S. dollar relative to foreign currencies

>> 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

>> Looking exclusively for current income

>> Unable to tolerate the risk of investing in foreign securities

>> Unable to tolerate rapid fluctuations in the value of your investment

>> Looking for the added security of FDIC insurance

**********LEFT MARGIN CALLOUTS

DEBT SECURITIES means bonds, notes and debentures. Debt securities also are
sometimes called fixed income securities.

* An investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.

**********END LEFT MARGIN CALLOUTS

FEES AND EXPENSES

There are no sales loads or 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

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

ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
Management Fee Distribution and Other Total Annual Fund
Service (12b-1) Fees Expenses Operating Expenses
- ------------------------- ---------------- ------------------------ -------------- -----------------------
<S> <C> <C> <C> <C>
International Bond 0.84% None 0.03% 0.87%
- ------------------------- ---------------- ------------------------ -------------- -----------------------

EXAMPLE

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

o invest $10,000 in the fund

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

o earn a 5% return each year and

o incur the same operating expenses shown above,

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

1 year 3 years 5 years 10 years
- --------------------- ------------------ ------------------- ------------------- -------------------
International Bond $89 $277 $481 $1069
- --------------------- ------------------ ------------------- ------------------- -------------------
</TABLE>

**********LEFT MARGIN CALLOUTS

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

**********END LEFT MARGIN CALLOUTS

INFORMATION ABOUT THE FUND

INTERNATIONAL BOND

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The fund seeks high total return by investing in high-quality,
nondollar-denominated government and corporate debt securities outside the
United States.

HOW DOES THE FUND IMPLEMENT ITS INVESTMENT OBJECTIVE?

The fund buys HIGH-QUALITY, nondollar-denominated foreign government and foreign
corporate DEBT SECURITIES.

The subadvisor selects the fund's investments by using a combination of
fundamental research and bond and currency valuation models.

o Economic/Political Fundamentals. The subadvisor evaluates each country's
economic climate and political discipline for controlling deficits and
inflation.

o Expected Return. Using economic forecasts, the subadvisor projects the
expected return for each country.

o Relative Value. By contrasting expected risks and returns for investments in
each country, the subadvisor selects those countries expected to produce the
best return at reasonable risk.

Normally, the fund will only purchase bonds denominated in foreign currencies.
The fund will not hedge back to the dollar.

The weighted average maturity of the fund is expected to be between two and 10
years.

Additional information about International Bond'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 six-month period. You may get
these reports at no cost by calling us.

**********LEFT MARGIN CALLOUTS

A HIGH QUALITY DEBT SECURITY is one that has been determined to be among the top
half of investment grade. This can be established in a number of ways. For
example, independent rating agencies may rate the security in one of their two
highest rating categories. The funds' advisor also can analyze an unrated
security to determine if its credit quality is high enough for investment.

**********END LEFT MARGIN CALLOUTS

WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?

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. The interest rate risk for International Bond
is higher than for funds that have shorter weighted average maturities, such as
short-term and limited-term funds.

As with all funds, at any given time the value of your shares of International
Bond may be worth more or less than the price you paid. If you sell your shares
when the value is less than the price you paid, you will lose money.

International Bond invests primarily in foreign securities, which involves
greater risks than investing in U.S. securities. These risks are summarized
below.

o Currency Risk. In addition to changes in the value of the fund's
investments, changes in the value of foreign currencies against the U.S.
dollar also could result in gains or losses to the fund. The value of a
share of International Bond is determined in U.S. dollars. The fund's
investments, however, generally are held in the foreign currency of the
country here investments are made. As a result, the fund could recognize a
gain or loss based solely upon a change in the exchange rate between the
foreign currency and the U.S. dollar.

o Political and Economic Risk. Many countries where the fund invests are not
as politically or economically developed as the United States. As a result,
the economies and political and social structures of these countries could
be unstable. This could cause the value of the fund's investments to
decrease. The fund also could be unable to enforce its ownership rights or
pursue legal remedies in countries where it invests.

o Market and Trading Risk. The trading markets for many foreign securities are
not as active as U.S. markets and may have less governmental regulation and
oversight. Foreign markets also may have procedures that make it difficult
for the fund to buy and sell securities. These factors could result in a
loss to the fund.

o Availability of Information. Foreign companies generally are not subject to
the regulatory controls or uniform accounting, auditing and financial
reporting standards imposed on U.S. issuers. As a result, there may be less
publicly available information about foreign issuers than is available
regarding U.S. issuers.

In summary, International Bond is intended for investors who find foreign
securities an appropriate investment and who are willing to accept the increased
risk associated with the fund's investment strategy. An investment in the fund
should not be considered a complete investment program and is not appropriate
for investors who are unable to tolerate rapid fluctuations in the value of
their investment.

FUND PERFORMANCE HISTORY

ANNUAL TOTAL RETURNS

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.

1998 17.87
1997 - 5.88
1996 6.38
1995 24.40
1994 1.52
1993 11.79

HIGHEST AND LOWEST QUARTERLY RETURNS

The highest and lowest returns of the fund's Investor Class shares for a
calendar quarter during the period reflected by the preceding bar chart are
provided in the following chart to indicate the fund's historical short-term
volatility.

Highest 4.77 2Q1995
Lowest - 1.38 1Q1996

AVERAGE ANNUAL RETURNS

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

<TABLE>
For the calendar year ended December 31, 1998 1 year 5 years Life of Fund*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Bond 17.87% 8.37% 8.65%
J.P. Morgan Global Traded Government Bond Index** 18.49% 9.61% 9.31%
</TABLE>

* The inception date for the fund is January 7, 1992.
** Without U.S. and 15% weighting in Japan.

**********LEFT MARGIN CALLOUTS

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

* For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com

**********END LEFT MARGIN CALLOUTS

BASICS OF FIXED INCOME INVESTING

DEBT SECURITIES

When a fund buys a debt security, which is also called a fixed-income security,
it is essentially lending money to the issuer of the security. Notes, bonds,
commercial paper and Treasury bills are examples of debt securities. After the
issuer first sells the debt security, 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, inflation and liquidity.

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 requirements

>> 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, the more sensitive it 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 of 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 a fund
manager would calculate the weighted average maturity for a fund that owned only
two debt securities.

<TABLE>
Amount of Security Owned Percent of Portfolio Remaining Maturity Weighted Maturity
- ------------------------- ------------------------------ ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Debt Security A $100,000 25% 1,000 days 250 days
Debt Security B $300,000 75% 10,000 days 7500 days
WEIGHTED AVERAGE MATURITY 7750 DAYS
</TABLE>

TYPES OF RISK

The basic types of risk that the fund faces are described below.

INTEREST RATE RISK

Generally, interest rates and the prices of debt securities move in opposite
directions. So when interest rates fall, the prices of most debt securities
rise; when interest rates rise, prices fall. Because the fund invests primarily
in debt securities, changes in interest rates will affect the fund's
performance.

The degree to which interest rate changes affect the fund's performance varies
and is related to the weighted average maturity of the 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. This sensitivity to interest rate changes is called interest rate risk.

***********LEFT MARGIN CALLOUTS

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

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

***********END LEFT MARGIN CALLOUTS

When interest rates change, longer maturity bonds experience a greater change in
price. The following table shows the 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.

It's not as simple as buying the highest-rated debt securities, though. Higher
credit ratings usually mean lower interest rates, 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.

The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.

<TABLE>
- -------------------------------------------------- -----------------------------------------------------------------------
INVESTMENT GRADE NON-INVESTMENT GRADE
- -------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
- -------------- ----------- --------------------------------- ------------- ----------- ----------- ----------- -----------
****International Bond****
- -------------------------- --------------------------------- ------------- ----------- ----------- ----------- -----------
</TABLE>

Securities rated in one of the highest four categories by a nationally
recognized securities rating organization (e.g., Moody's or Standard & Poor's)
are considered "investment grade." For a complete description of the ratings
system, see "Explanation of Fixed Income Securities Ratings" in the Statement of
Additional Information. The fund's credit quality restrictions apply at the time
of purchase; the fund will not necessarily sell securities if they are
downgraded by a rating agency.

LIQUIDITY RISK

Debt securities can become difficult to sell for a variety of reasons, such as
lack of an active trading market. When a fund's investments become difficult to
sell, it is said to have a problem with liquidity. The chance that a fund will
have liquidity issues is called liquidity risk.

INFLATION RISK

The safest investments usually have the lowest potential income and performance.
There is a risk, then, that returns from the investment may fail to
significantly outpace inflation. Even if the value of your investment has not
gone down, your money will not be worth as much as if there had been no
inflation. Your after-inflation return may be quite small. This risk is called
inflation risk.

**********LEFT MARGIN CALLOUTS

* Credit quality may be lower when the issuer has

o a high debt level
o a short operating history
o a senior level of debt
o a difficult, competitive environment

* The Statement of Additional Information provides a detailed description of
these securities ratings.

**********END LEFT MARGIN CALLOUTS

The fund engages in a variety of investment techniques as it pursues its
investment objectives. Each technique has its own characteristics, and may pose
some level of risk to the fund. If you would like to learn more about these
techniques, you should review the Statement of Additional Information before
making an investment.

MANAGEMENT

WHO MANAGES THE FUND?

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

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 fund, it has hired an investment advisor to do so.
More than half of the trustees are independent of the fund's advisor, that is,
they are not employed by and have no financial interest in the advisor.

THE INVESTMENT ADVISOR

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

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

For the services it provided to the fund 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 of shares of the fund. The rate of the
management fee for a fund is determined on a class-by-class basis monthly 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 fund 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 fund's 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 FUND TO THE ADVISOR AS A PERCENTAGE
OF AVERAGE NET ASSETS FOR THE MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------
- ---------------------------------------------------------- ------------------
International Bond 0.87%

THE FUND MANAGEMENT TEAM

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

The advisor and the Board of Trustees have hired and supervise J.P. Morgan
Investment Management Inc., a subadvisor, to make investment decisions for the
fund.

The portfolio managers on the investment team are identified below:

DAVID SCHROEDER
Mr. Schroeder, Vice President and Senior Portfolio Manager, supervises the
American Century International Bond Funds team. He has been a member of the
International Bond team since June 1997. Mr. Schroeder joined American Century
in 1990 as a portfolio manager. He has a bachelor of arts from Pomona College.

DETLER SCHLICHTER
Mr. Schlichter, Vice President, JPMIM, is a fixed income Senior Portfolio
Manager. He joined J.P. Morgan & Co., Frankfurt, in 1990 and has worked at JPMIM
London as a Portfolio Manager since April 1996He has a bachelor's degree and an
MBA from the University of Bochum.

DOMINIC PEGLER
Mr. Pegler, Vice President, JPMIM, is a fixed income Portfolio Manager. He
joined JPMIM London in 1996 after seven years at the Bank of England, serving as
an economist and in the Reserves Management Department, managing the UK's
foreign exchange reserves. He has a bachelor's degree and an MBA in economics
from the London School of Economics.

**********LEFT MARGIN CALLOUTS

* 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 from 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.

**********END LEFT MARGIN CALLOUTS

FUNDAMENTAL INVESTMENT POLICIES

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

YEAR 2000 ISSUES

Many of the world's computer systems currently cannot properly recognize or
process date-sensitive information relating to the Year 2000 and beyond. Because
this may impact the computer systems of various American Century-affiliated and
external service providers for the fund, American Century formally initiated a
Year 2000 readiness project in July 1997. It involves a team of information
technology professionals assisted by outside consultants and guided by a
senior-level steering committee. The team's goal is to assess the impact of the
Year 2000 on American Century's systems, renovate or replace noncompliant
critical systems and test those systems. In addition, the team has been working
to gather information about the Year 2000 efforts of the fund's other major
service providers.

Although American Century believes its critical systems will function properly
in the Year 2000, this is not guaranteed. If the efforts of American Century or
its external service providers are not successful, the fund's business,
particularly the provision of shareholder services, may be hampered.

In addition, the issuers of securities the fund owns could have Year 2000
computer problems. These problems could negatively affect the value of their
securities, which, in turn, could impact the fund's performance. The advisor has
established a process to gather publicly available information about the Year
2000 readiness of these issuers. However, this process may not uncover all
relevant information, and the information gathered may not be complete and
accurate. Moreover, an issuer's Year 2000 readiness is only one of many factors
the fund managers may consider when making investment decisions, and other
factors may receive greater weight.

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" below.

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.

<TABLE>
WAYS TO MANAGE YOUR ACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
<S> <C> <C>
BY TELEPHONE OPEN AN ACCOUNT MAKE ADDITIONAL INVESTMENTS
Investor Services If you are a current investor, you Call us or use our Automated Information Line
1-800-345-2021 can open an account by exchanging if you have authorized us to invest from your
shares from another American Century bank account.
Corporate; Not-For-Profit; account. (This service is not
Foundations; Endowments; SEP-, available if you have chosen to do SELL SHARES
SARSEP- and SIMPLE-IRA; and business in writing only.) Call an Investor Services Representative.
403(b) Services
1-800-345-3533 EXCHANGE SHARES
Call us or use our Automated
Automated Information Line Information Line if you have
1-800-345-8765 authorized us to accept telephone
instructions.

- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
BY MAIL OR FAX OPEN AN ACCOUNT MAKE ADDITIONAL INVESTMENTS
PO Box 419200 Send a signed and completed Send us your check or money order for at
Kansas City, MO 64141-6200 application and check or money order least $50 with an investment slip or $250
payable to American Century without an investment slip. If you don't have
Fax 816-340-7962 Investments. an investment slip, include your name,
address and account number on your check or
EXCHANGE SHARES money order.
Send us written instructions to
exchange your shares from one SELL SHARES
American Century account to another. Send us written instructions to sell shares
or send us a redemption form. Call an
Investor Services Representative to request a
form.
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
- ---------------------------------- ---------------------------------------------- -----------------------------------------------
ONLINE OPEN AN ACCOUNT MAKE ADDITIONAL INVESTMENTS
www.americancentury.com If you are a current investor, you Make an additional investment into an
can open an account by exchanging established American Century account if you
shares from another American Century have authorized us to invest from your bank
account. (This service is not account.
available if you have chosen to do
business in writing only.) SELL SHARES
Not available.
EXCHANGE SHARES
Exchange shares from another American Century
account.

A NOTE ABOUT MAILINGS TO SHAREHOLDERS

To reduce expenses and show respect for our environment, we will deliver most
financial reports, prospectuses and account statements to households in a single
envelope, even if the accounts are registered under different names. If you
would like additional copies of financial reports and prospectuses or separate
mailing of account statements, please call us.

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 fund and the transfer agent.

4500 Main Street 4917 Town Center Dr.
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 80112
8 a.m. to 5 p.m., Monday-Friday 8 a.m. to 6 p.m., Monday-Friday
8 a.m. to noon, Saturday

MINIMUM INITIAL INVESTMENT AMOUNTS

To open an account the minimum investments are as follows:
- -------------------------------------------------------------------------------
Individual or Joint $2,500
Traditional IRA $1,000
Roth IRA $1,000
Education IRA $500
UGMA/UTMA $2,500
403(b) No minimum

REDEMPTION OF SHARES IN LOW-BALANCE ACCOUNTS

If 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.

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

o minimum investment requirements
o exchange policies
o fund choices
o cut-off time for investments

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

Certain financial intermediaries perform for their clients recordkeeping and
administrative services 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 transactions in fund shares 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 fund.

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 fund has authorized those
intermediaries to accept orders on its 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 good order by
the intermediary on a fund's behalf.

**********LEFT MARGIN CALLOUTS

* FINANCIAL INTERMEDIARIES include banks, broker-dealers, insurance companies
and investment advisors.

**********END LEFT MARGIN CALLOUTS

SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

American Century determines the NET ASSET VALUE of the 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 not open, we do not
calculate the net asset value. The net asset value of a fund share is the
current value of the fund's assets, minus any liabilities, divided by the number
of fund shares outstanding.

If current prices of securities owned by the fund are not readily available from
an independent pricing service, the advisor may determine their fair value in
accordance with procedures adopted by the fund's Board of Trustees. Trading of
securities in foreign markets may not take place on every day the Exchange is
open. Also, trading in some foreign markets may take place on weekends or
holidays when the fund's net asset value is not calculated. So, the value of the
fund's portfolio may be affected on days when you can't purchase or redeem
shares of the fund.

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

DISTRIBUTIONS

Federal tax laws require the 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. The fund pays distributions from net income
quarterly, although it may elect to not pay a distribution in a given quarter.
The fund may decide not to pay a distribution if, for example, net currency
losses exceed net investment income. The fund generally pays distributions of
capital gains, if any, once a year in December. The fund may make more frequent
distributions if necessary to comply with Internal Revenue Code provisions.

You will begin to participate in fund distributions the day after your purchase
is effective. If you redeem shares, you will receive the distribution declared
for the day you redeem. If you redeem all shares, we will include the
distribution on the redeemed with your redemption proceeds.

Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
our Investor Services Guide for further information regarding distributions and
your distribution options.

**********LEFT MARGIN CALLOUTS

The NET ASSET VALUE of a fund 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. Tax becomes due on capital gains once an
asset is sold.

Distributions discussed in this Prospectus means income and realized securities
gain distributions. The fund does not expect to make return of capital
distributions.

**********END LEFT MARGIN CALLOUTS

TAXES

The tax consequences of owning shares of the fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the fund of dividend and interest income they have
received and capital gains they have generated through their investment
activities, and by 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 an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.

TAXABLE ACCOUNTS

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

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. Distribution
of capital gains are classified either as short-term or long-term and are taxed
as follows:

<TABLE>
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket or above
- -------------------------- ---------------------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>

The tax status of any distribution 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 as income. American Century will detail the tax
status of fund distributions for each calendar year in an annual tax statement
from the fund.

Distributions may also be subject to state and local taxes. Because everyone's
tax situation is unique, always 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 held for 12 months or less. Long-term
capital gains are gains on fund shares 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.

**********LEFT MARGIN CALLOUTS

* 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 the fund's portfolio may build up taxable gains throughout
the period covered by a distribution, as securities are sold at a profit.
We 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.

**********END LEFT MARGIN CALLOUTS

MULTIPLE CLASS INFORMATION

American Century offers two classes of the fund: 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.

American Century offers the other class of shares primarily to institutional
investors, through institutional distribution channels, such as
employer-sponsored retirement plans, or through banks, broker-dealers and
insurance companies. The other class has different fees, expenses, and/or
minimum investment requirements than the Investor Class. The difference in the
fee structures among 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 other classes of shares not offered by this Prospectus, call us
at 1-800-345-3533 or contact a sales representative or financial intermediary
who offers those classes of shares.

Except as described below, all classes of shares of the fund have identical
voting, dividend, liquidation and other rights, preferences, terms and
conditions. The only differences among the various 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.

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows the changes in share price for this
period in comparison to changes over the last five fiscal years.

On a per-share basis, the table includes

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

The table also includes some key statistics for the period

o Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions

o Expense Ratio--operating expenses as a percentage of average net assets

o Net Income Ratio--net investment income as a percentage of average net assets

o Portfolio Turnover--the percentage of the fund's buying and selling activity

The Financial Highlights for the fiscal years ended December 31, 1997 and 1998
have been audited by PricewaterhouseCoopers LLP, independent accountants. Their
report is included in the fund's annual report, which is incorporated by
reference into the Statement of Additional Information, and is 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.

<TABLE>
<CAPTION>
INTERNATIONAL BOND

FOR A SHARE OUTSTANDING THROUGHOUT THEYEARS ENDED DECEMBER 31
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value, Beginning of Year.........
------------- -------------- ------------- ------------- --------------
Income from Investment Operations
Net Investment Income (dividends).......
Net Realized and Unrealized Gain (Loss) on
Investment Transactions.................
------------- -------------- ------------- ------------- --------------
Total From Investment Operations........
------------- -------------- ------------- ------------- --------------
Less Distributions
From Net Investment Income (dividends)..
In Excess of Net Realized Gains.........
------------- -------------- ------------- ------------- --------------
------------- -------------- ------------- ------------- --------------
Total Distributions.....................
------------- -------------- ------------- ------------- --------------
Net Asset Value, End of Year...............
------------- -------------- ------------- ------------- --------------
TOTAL RETURN(1)............................

RATIOS/SUPPLEMENTAL DATA

Ratio of Operating Expenses to Average
Net Assets.................................
Ratio of Net Investment Income to Average
Net Assets.................................
Portfolio Turnover Rate....................
Net Assets, End of Year (in thousands).....

(1) Total return assumes reinvestment of dividends and capital gains, if any.
</TABLE>

AT YOUR SERVICE

MAKE TRANSACTIONS ONLINE ANYTIME

The next time you're surfing the Net, stop by American Century's Web site at
www.americancentury.com. Current shareholders can open new accounts by
exchanging shares (provided the account registration does not change). In
addition, you can view transactions and check your account balances. You can
also sign up to receive annual updates to your prospectuses and financial
reports via the Net instead of through the mail.

EXPAND YOUR INVESTMENT OPTIONS WITH AMERICAN CENTURY BROKERAGE

If you're looking for a wide range of investment options - from trading
individual securities to purchasing mutual funds offered by hundreds of
companies - look to American Century Brokerage. With this new investment
service, you can take advantage of 24-hour trading on our Web site or TeleSelect
automated telephone service. Or, if you prefer, you can do business directly
with a Brokerage Associate.

With service features including a Gold MasterCard(R) ATM/Debit Card, unlimited
CheckWriting and cost basis reporting (all available with the American Century
Brokerage Access AccountSM), our brokerage service can simplify your life now
while you prepare financially for the years to come. For information about
opening a brokerage account, please call an American Century Brokerage Associate
at 1-888-345-2071.

SEND YOUR DISTRIBUTIONS STRAIGHT TO THE BANK

It will save you time and a trip to the bank. If you opt to have your dividend
and capital gain distributions paid to you in cash rather than reinvesting them
into your account, consider an electronic transfer to your bank account. Call an
Investor Services Representative for more information.

CHECK OUT OUR LIBRARY

Are you looking for additional information on bond basics? Or, are you trying to
decide if municipal bonds have a place in your portfolio? Perhaps you would like
to test your knowledge of bonds and how they work. These are subjects covered in
our Financial FYIs, a series of one-page resources that clearly and quickly
explains a variety of financial subjects.
To request one of these articles, call an Investor Services Representative.

FUND REFERENCE
Fund Code Ticker Newspaper Listing
- ----------------------------------------------------------------------------
International Bond 992 BEGBX IntlBnd

More information about the fund is contained in these documents:

Annual and Semiannual Reports. These reports contain more information about the
fund's investments and the market conditions and investment strategies that
significantly affected the fund's performance during the most recent fiscal
period.

Statement of Additional Information. The SAI contains a more detailed, legal
description of the fund's 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 also can get information about the fund (including the SAI) from the
Securities and Exchange Commission (SEC).

o In person SEC Public Reference Room
Washington, D.C.
Call 1-800-SEC-0330 for location and hours.
o On the internet www.sec.gov.
o By mail SEC Public Reference Section
Washington, D.C. 20549-6009
(The SEC will charge a fee for copying the documents
you request.)

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

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

Automated Information Line
1-800-345-8765

www.americancentury.com

Fax
816-340-7962

Telecommunications Device for the Deaf
1-800-634-4113 or 816-444-3485

Corporate; Not-For-Profit; Foundations; Endowments; Keogh;
SEP-, SARSEP- and SIMPLE-IRA; and 403(b) Services
1-800-345-3533

Investment Company Act File No. 811-6441
<PAGE>
[american century logo(reg.sm)]
American
Century

PROSPECTUS

MARCH 29, 1999
- --------------------------------------------------------------------------------

INTERNATIONAL BOND

ADVISOR CLASS

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.

Distributed by Funds Distributor, Inc.

Dear Investor,

Reading a prospectus doesn't have to be a chore. We've done the hard work so you
can focus on what's important--learning about the funds. Take a look inside and
you'll see this prospectus is different from others. It takes a clear-cut
approach to fund information.

Here's what you'll find

o The fund's primary investments and risks
o A description of who may or may not want to invest in the fund
o Fund performance, including returns for each year, best and worst quarters
and average annual returns compared to the fund's benchmarks
o An overview of ways to best manage your accounts
o Helpful tips and definitions of key investment terms

Sincerely,

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

TABLE OF CONTENTS

An Overview of the Fund....................................................2

Fees and Expenses..........................................................3

Information about the Fund.................................................4

Basics of Fixed Income Investing..........................................12

Management................................................................15

Investing with American Century...........................................18

Share Price and Distributions.............................................21

Taxes.....................................................................22

Multiple Class Information................................................22

Financial Highlights......................................................23

Performance Information of Other Class....................................22

**********LEFT MARGIN CALLOUTS

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

*........This symbol highlights special information and helpful tips.

**********END LEFT MARGIN CALLOUTS

AN OVERVIEW OF THE FUND

WHAT IS THE FUND'S INVESTMENT GOAL?

The fund seeks high total return by investing in high-quality,
nondollar-denominated government and corporate debt securities outside the
United States.

WHAT ARE THE FUND'S PRIMARY INVESTMENTS AND RISKS?

The fund's primary investment risks include

o interest rate risk
o currency risk
o political and economic risk
o market and trading risk

Additional important information about the funds' investment strategies and
risks begins on page 4.

WHO MAY WANT TO INVEST IN THE FUNDS?

The funds may be a good investment if you

>> Want to diversify your investments beyond United States-dollar denominated
securities and interest rate exposure

>> Want to protect your income against a decline in the purchasing power of the
U.S. dollar relative to foreign currencies

>> 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

>> Looking exclusively for current income

>> Unable to tolerate the risk of investing in foreign securities

>> Unable to tolerate rapid fluctuations in the value of your investment

>> Looking for the added security of FDIC insurance

**********LEFT MARGIN CALLOUTS

DEBT SECURITIES means bonds, notes and debentures. Debt securities also are
sometimes called fixed income securities.

* An investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.

**********END LEFT MARGIN CALLOUTS

FEES AND EXPENSES

There are no sales loads or 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

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

<TABLE>
ANNUAL OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fee Distribution and Other Total Annual Fund
Service (12b-1) Fees1 Expenses Operating Expenses
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
<S> <C> <C> <C> <C>
International Bond 0.59% 0.50% 0.03% 1.12%
- ------------------------------------------- ---------------- ------------------------ -------------- -----------------------
</TABLE>
1 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. See
"Service and Distribution Fees," page xx.

EXAMPLE

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

o invest $10,000 in the fund

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

o earn a 5% return each year and

o incur the same operating expenses shown above,

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

<TABLE>
1 year 3 years 5 years 10 years
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
International Bond $114 $355 $615 $1,356
- -------------------------------------------- ------------------ ------------------- ------------------- -------------------
</TABLE>

**********LEFT MARGIN CALLOUTS

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

**********END LEFT MARGIN CALLOUTS

INFORMATION ABOUT THE FUND

INTERNATIONAL BOND

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?

The fund seeks high total return by investing in high-quality,
nondollar-denominated government and corporate debt securities outside the
United States.

HOW DO THE FUNDS IMPLEMENT THEIR INVESTMENT OBJECTIVES?

The fund buys HIGH-QUALITY, nondollar-denominated foreign government and foreign
corporate DEBT SECURITIES.

The subadvisor selects the fund's investments by using a combination of
fundamental research and bond and currency valuation models.

o Economic/Political Fundamentals. The subadvisor evaluates each country's
economic climate and political discipline for controlling deficits and
inflation.

o Expected Return. Using economic forecasts, the subadvisor projects the
expected return for each country.

o Relative Value. By contrasting expected risks and returns for investments in
each country, the subadvisor selects those countries expected to produce the
best return at reasonable risk.

Normally, the fund will only purchase bonds denominated in foreign currencies.
The fund will not hedge back to the dollar.

The weighted average maturity of the fund is expected to be between two and 10
years.

Additional information about International Bond'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.

**********LEFT MARGIN CALLOUTS

**********END LEFT MARGIN CALLOUTS

WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUNDS?

An investment in the fund is not a bank deposit and it is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

International Bond invests primarily in foreign securities, which involves
greater risks than investing in U.S. securities. These risks are summarized
below.

o Currency Risk. In addition to changes in the value of the fund's
investments, changes in the value of foreign currencies against the U.S.
dollar also could result in gains or losses to the fund. The value of a
share of International Bond is determined in U.S. dollars. The fund's
investments, however, generally are held in the foreign currency of the
country where investments are made. As a result, the fund could recognize a
gain or loss based solely upon a change in the exchange rate between the
foreign currency and the U.S. dollar.

o Market and Trading Risk. The trading markets for many foreign securities
are not as active as U.S. markets and may have less governmental regulation
and oversight. Foreign markets also may have procedures that make it
difficult for the fund to buy and sell securities. These factors could
result in a loss to the fund.

FUND PERFORMANCE HISTORY

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

o Annual Total Returns

o Highest and Lowest Quarterly Returns

o Average Annual Returns, including a comparison of these returns to a
benchmark index

for the Advisor Class of each of the funds.

In addition, investors can examine the performance of the funds' Investor Class
of shares. This Class has a total expense ratio that is 0.25% lower than the
Advisor Class. If the Advisor Class existed during the periods presented, its
performance would have been lower because of the additional expense.

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 funds will
perform in the future.

**********LEFT MARGIN CALLOUTS

* For current performance information, including yields, please call us at
1-800-345-2021 or visit American Century's Web site at
www.americancentury.com

**********END LEFT MARGIN CALLOUTS

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 requirements

>> 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

<TABLE>
Amount of Security Owned Percent of Portfolio Remaining Maturity Weighted Maturity
- ---------------------- ------------------------------ ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Debt Security A $100,000 25% 1,000 days 250 days
Debt Security B $300,000 75% 10,000 days 7500 days
WEIGHTED AVERAGE MATURITY 7750 DAYS
</TABLE>

TYPES OF RISK

The basic types of risk that the fund faces are described below.

INTEREST RATE RISK

Generally, interest rates and the prices of debt securities move in opposite
directions. So 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.

The degree to which interest rate changes affect the funds' performance varies
and is related to the weighted average maturity of each 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. This sensitivity to interest rate changes is called interest rate risk.

***********LEFT MARGIN CALLOUTS

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

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

***********END LEFT MARGIN CALLOUTS

<TABLE>
Remaining Maturity Current Price Price after 1% increase Change in price
- ----------------------- --------------------------- -------------------------------- ------------------------
<S> <C> <C> <C>
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%
</TABLE>

CREDIT RISK

The following chart shows the authorized credit quality ranges for the funds
offered by this Prospectus.

<TABLE>
- -------------------------------------------------- -----------------------------------------------------------------------
INVESTMENT GRADE NON-INVESTMENT GRADE
- -------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 A-2 A-3
P-1 P-2 P-3
MIG-1 MIG-2 MIG-3
SP-1 SP-2 SP-3
AAA AA A BBB BB B CCC CC C D
- -------------- ----------- --------------------------------- ------------- ----------- ----------- ----------- -----------
****International Bond****
- -------------------------- --------------------------------- ------------- ----------- ----------- ----------- -----------
</TABLE>

Securities rated in one of the highest four categories by a nationally
recognized securities rating organization (e.g., Moody's or Standard & Poor's)
are considered "investment grade." For a complete description of the ratings
system, see "Explanation of Fixed Income Securities Ratings" in the Statement of
Additional Information. The funds' credit quality restrictions apply at the time
of purchase; the fund will not necessarily sell securities if they are
downgraded by a rating agency.

LIQUIDITY RISK

INFLATION RISK

**********LEFT MARGIN CALLOUTS

* Credit quality may be lower when the issuer has

o a high debt level
o a short operating history
o a senior level of debt
o a difficult, competitive environment

* The Statement of Additional Information provides a detailed description of
these securities ratings.

**********END LEFT MARGIN CALLOUTS

MANAGEMENT

WHO MANAGES THE FUND?

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

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 Trustee
does not manage the fund, it has hired an investment advisor to do so. More than
half of the trustees are independent of the fund's advisor, that is, they are
not employed by and have no financial interest in the advisor.

THE INVESTMENT ADVISOR

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 fund 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 Advisor Class of shares of the fund. the rate of the
management fee for a fund is determined on a class-by-class basis monthly using
a two-step formula that takes into account the fund's strategy (moneymarket,
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 fund except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees) and extraordinary expenses.

MANAGEMENT FEES PAID BY THE FUND TO THE ADVISOR AS A PERCENTAGE OF
AVERAGE NET ASSETS FOR THE MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------- ---------
International Bond 1.12%

THE FUND MANAGEMENT TEAM

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

The advisor and the Board of Directors have hired and supervise J.P. Morgan
Investment Management Inc., a subadvisor, to make investment decisions for the
fund.

The portfolio managers of on the investment team are identified below:

DAVID SCHROEDER
David Schroeder, Vice President and Senior Portfolio Manager, supervises the
American Century International Bond Funds team. He has been a member of the
International Bond team since June 1997. Mr. Schroeder joined American Century
in 1990 as a portfolio manager. He has a bachelor of arts from Pomona College.

DETLER SCHLICHTER
Detler Schlichter, Vice President, JPMIM, is a fixed income Senior Portfolio
Manager. He joined J.P. Morgan & Co., Frankfurt, in 1990 and has worked at JPMIM
London as a Portfolio Manager since April 1996. He has a bachelor's degree and
an MBA from the University of Bochum.

DOMINIC PEGLER
Dominic Pegler, Vice President, JPMIM, is a fixed income Portfolio Manager. He
joined JPMIM London in 1996 after seven years at the Bank of England, serving as
an economist and in the Reserves Management Department, managing the UK's
foreign exchange reserves. He has a bachelors degree and an MBA in economics
from the London School of Economics.

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FUNDAMENTAL INVESTMENT POLICIES

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

YEAR 2000 ISSUES

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

o minimum investment requirements
o exchange policies
o fund choices
o cut-off 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 Statements of Additional Information are available from your
intermediary or plan sponsor.

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 fund has authorized those
intermediaries to accept orders on its 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 good order by the
intermediary on a fund's behalf.

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* FINANCIAL INTERMEDIARIES include banks, broker-dealers, insurance companies
and investment advisors.

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SHARE PRICE AND DISTRIBUTIONS

SHARE PRICE

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

It is the responsibility of your plan recordkeeper or financial intermediary to
transmit your purchase, exchange and redemption requests to the funds transfer
agent prior to the applicable cut-off time for receiving orders and to make
payment for any purchase transactions in accordance with the fund's procedures
or any contractual arrangements with the fund or the fund's distributor in order
for you to receive that day's price.

DISTRIBUTIONS

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The NET ASSET VALUE of a fund 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. Tax becomes due on capital gains once an
asset is sold.

Distributions discussed in this Prospectus means income and realized securities
gain distributions. The fund does not expect to make return of capital
distributions.

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TAXES

TAX-DEFERRED ACCOUNTS

TAXABLE ACCOUNTS

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

TAXABILITY OF DISTRIBUTIONS

<TABLE>
Type of distribution Tax rate for 15% bracket Tax rate for 28% bracket or above
- ------------------------------------------ ---------------------------------------- -----------------------------------------
<S> <C> <C>
Short-term capital gains Ordinary income rate Ordinary income rate
Long-term capital gains 10% 20%
</TABLE>

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

TAXES ON TRANSACTIONS

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MULTIPLE CLASS INFORMATION

American Century offers classes of the fund: Investor Class and Advisor Class.
The shares offered by this Prospectus are Advisor Class shares and are offered
primarily to institutional investors, through institutional distribution
channels, such as employer-sponsored retirement plans, or through banks,
broker-dealers and insurance companies.

American Century offers another class of shares that has no up-front or deferred
charges, commissions or 12b-1 fees. The other class has different fees,
expenses, and/or minimum investment requirements than the Advisor Class. The
difference in the fee structures among 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 other classes of shares not offered by
this Prospectus, call us at 1-800-345-3533 or contact a sales representative or
financial intermediary who offers those classes of shares.

SERVICE AND DISTRIBUTION FEES

Investment Company Act Rule 12b-1 permits mutual funds that adopt a written plan
to pay out of fund assets certain expenses associated with the distribution of
their shares. The fund's Advisor Class shares have a 12b-1 Plan. Under the Plan,
the fund pays an annual fee of 0.50% of fund assets, half for certain
shareholder and administrative services and half for distribution services. The
advisor, as paying agent for the fund, 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 fund's assets on an on-going 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.

FINANCIAL HIGHLIGHTS

UNDERSTANDING THE FINANCIAL HIGHLIGHTS

On a per-share basis, the table includes

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

The table also includes some key statistics for the period

o Total Return--the overall percentage of return of the fund, assuming the
reinvestment of all distributions

o Expense Ratio--operating expenses as a percentage of average net assets

o Net Income Ratio--net investment income as a percentage of average net assets

o Portfolio Turnover--the percentage of the fund's buying and selling activity

<TABLE>
<CAPTION>
INTERNATIONAL BOND

FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31
<S> <C> <C>
1998 1997
PER-SHARE DATA
Net Asset Value, Beginning of Year.........
---------------------- -------------------- --- -- ---
Income from Investment Operations
Net Investment Income (dividends).......
Net Realized and Unrealized Gain (Loss)
on Investment Transactions............
---------------------- -------------------- --- -- ---
Total From Investment Operations........
---------------------- -------------------- --- -- ---
Less Distributions
From Net Investment Income (dividends)..
In Excess of Net Realized Gains.........
---------------------- -------------------- --- -- ---
---------------------- -------------------- --- -- ---
Total Distributions.....................
---------------------- -------------------- --- -- ---
Net Asset Value, End of Year...............
---------------------- -------------------- --- -- ---
TOTAL RETURN(1)............................

RATIOS/SUPPLEMENTAL DATA

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

PERFORMANCE INFORMATION OF THE OTHER CLASS

The following financial information is provided to show the performance of the
fund's 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
existed during the periods presented, its performance would have been lower
because of the additional expense.

The table on the next page itemizes what contributed to the changes in share
price during the period. It also shows changes in share price for this period in
comparison to changes over the last five fiscal years.

On a per-share basis, the table includes

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

The table also includes some key statistics for the period

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

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

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

o portfolio turnover--the percentage of the fund's buying and selling activity

The Financial Highlights for the fiscal years ended December 31, 1998 have been
audited by PricewaterhouseCoopers, LLP, independent accountants. Their report is
included in the funds' annual report, which is incorporated by reference into
the Statement of Additional Information, and is 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.

INTERNATIONAL BOND

FOR A SHARE OUTSTANDING THROUGHOUT THE YEARS ENDED DECEMBER 31

1998 1997 1996 1995 1994
PER-SHARE DATA
Net Asset Value, Beginning of Year.........
------------- -------------- ------------- ------------- --------------
Income from Investment Operations
Net Investment Income (dividends).......
Net Realized and Unrealized Gain (Loss) on
Investment Transactions.................
------------- -------------- ------------- ------------- --------------
Total From Investment Operations........
------------- -------------- ------------- ------------- --------------
Less Distributions
From Net Investment Income (dividends)..
In Excess of Net Realized Gains.........
------------- -------------- ------------- ------------- --------------
------------- -------------- ------------- ------------- --------------
Total Distributions.....................
------------- -------------- ------------- ------------- --------------
Net Asset Value, End of Year...............
------------- -------------- ------------- ------------- --------------
TOTAL RETURN(1)............................

RATIOS/SUPPLEMENTAL DATA

(1) Total return assumes reinvestment of dividends and capital gains, if any.
</TABLE>

FUND REFERENCE
Fund Code Ticker Newspaper Listing
- ------------------------------------------------------------------------------
International Bond 992 BEGBX IntlBnd

More information about the fund is contained in these documents:

You also can get information about the funds (including the SAI) from the
Securities and Exchange Commission (SEC).

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

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

Automated Information Line
1-800-345-8765

www.americancentury.com

Fax
816-340-7962

Telecommunications Device for the Deaf
1-800-634-4113 or 816-444-3485

Corporate; Not-For-Profit; Foundations; Endowments; Keogh;
SEP-, SARSEP-, SIMPLE-IRA; and 403(b) Services
1-800-345-3533

Investment Company Act File No. 811-6441
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

- --------------------------------------------------------------------------------

MARCH 29, 1999

AMERICAN CENTURY
INTERNATIONAL BOND FUNDS

INTERNATIONAL BOND FUND

This Statement of Additional Information adds to the discussion in the funds'
Prospectus, dated ______, 1999, but is not a prospectus. If you would like a
copy of the Prospectus, please contact us at one of the addresses or phone
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 fund's annual and semiannual reports, which are
delivered to all shareholders. You may obtain a free copy of the fund's annual
or semiannual report by calling 1-800-345-2021.

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

Distributed by Funds Distributor, Inc.

TABLE OF CONTENTS
================================================================================

THE FUND'S HISTORY.................................................1

FUND INVESTMENT OUTLINE............................................1
Diversification.................................................1
Portfolio Composition...........................................1
Currency Management.............................................2

DETAILED INFORMATION ABOUT THE FUND................................2
Investment Strategies and Risks.................................2
Investment Policies.............................................8
Temporary Defensive Measures...................................10
Portfolio Turnover.............................................10
Transactions with Subadvisor Affiliates........................10

MANAGEMENT........................................................11
The Board of Trustees..........................................11
Officers.......................................................13

THE FUND'S BIGGEST SHAREHOLDERS...................................14

SERVICE PROVIDERS.................................................14
Investment Advisor.............................................14
Distributor....................................................17
Transfer Agent and Administrator...............................17
Other Service Providers........................................17

BROKERAGE ALLOCATION..............................................17

INFORMATION ABOUT FUND SHARES.....................................18

BUYING AND SELLING FUND SHARES....................................20

VALUATION OF PORTFOLIO SECURITIES.................................20

TAXES.............................................................20

HOW FUND PERFORMANCE INFORMATION IS CALCULATED....................23

FINANCIAL STATEMENTS..............................................23

EXPLANATION OF FIXED INCOME SECURITIES RATINGS....................24
Bond Ratings...................................................24
Commercial Paper Ratings.......................................25
Note Ratings...................................................25

THE FUND'S HISTORY
American Century International Bond Funds (the "Trust") is a registered open-end
management investment company that was organized as a Massachusetts business
trust on August 28, 1991. The Trust was known as "Benham International Funds"
until January 1997.

The fund is a separate series of the Trust. The Trust may issue other series;
the fund would operate for many purposes as if it were an independent company
from any such future series.

- ------------------------------------------------------------------ -----------
Inception
Fund-Class (Ticker Symbol) Date
- ------------------------------------------------------------------ -----------
American Century International Bond Fund--Investor Class (BEGBX) 1/7/1992
American Century International Bond Fund--Advisor Class
- ------------------------------------------------------------------ -----------

FUND INVESTMENT OUTLINE
This section explains the extent to which American Century Investment
Management, Inc. (the "advisor") 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," which begins on page 2. In the case of the fund's
principal investment strategies, these descriptions elaborate upon discussion
contained in the Prospectus.

DIVERSIFICATION
The fund is a nondiversified open-end investment company as defined in the
Investment Company Act of 1940 (the Investment Company Act) This means that the
fund may take larger positions in individual issuer's securities; for example,
the fund may invest more than 5% of its assets in the securities of a single
issuer. This can increase the amount of risk in the portfolio, since it may
become concentrated fewer issuers than diversified funds.

To meet federal tax requirements for qualification as a regulated investment
company, the 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.

PORTFOLIO COMPOSITION
The fund intends to remain fully invested in foreign debt securities. Under
normal market conditions, the fund will invest at least 65% of its total assets
in bonds issued or guaranteed by foreign governments or their agencies and by
foreign authorities, provinces and municipalities. The fund may invest up to 35%
of its total assets in high-quality (i.e., rated "AA" or higher) foreign
corporate debt securities.

The fund's investments may include but shall not be limited to: (1) Debt
obligations issued or guaranteed by (a) a foreign sovereign government or one of
its agencies, authorities, instrumentalities or political subdivisions including
a foreign state, province or municipality, and (b) supranational organizations
such as the World Bank, Asian Development Bank, European Investment Bank, and
European Economic Community; (2) Debt obligations of (a) foreign banks and bank
holding companies, and (b) domestic banks and corporations issued in foreign
currencies; and (3) Foreign corporate debt securities and commercial paper. All
of these investments must satisfy the credit quality standards (i.e., "AA" or
higher) established by the Trustees of the fund.

The fund's credit quality requirements effectively limit the countries in which
the fund may invest. As of the date of this Prospectus, the fund expects to
invest in the securities of issuers located in and governments of the following
countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Japan, Liechtenstein, Luxembourg, Netherlands, New Zealand,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan, and United
Kingdom. To limit the possibility that the fund will become unduly concentrated
in Japan, the fund currently limits its investment in issuers located in Japan
to no more than 15% of total assets.

For an explanation of the securities ratings referred to in the Prospectus and
this Statement of Additional Information, see "Explanation of Fixed Income
Securities Ratings" beginning on page 24.

CURRENCY MANAGEMENT
The rate of exchange between U.S. dollars and foreign currencies fluctuates,
which results in gains and losses to the fund. Even if the fund's foreign
security holdings perform well, an increase in the value of the dollar relative
to the currencies in which portfolio securities are denominated can offset net
investment income.

Because the fund is designed for U.S. investors seeking currency and interest
rate diversification, the subadvisor limits its use of hedging strategies
intended to minimize the effect of currency fluctuations. Although hedging
strategies (if they are successful) reduce exchange rate risk, they also reduce
the potential for share price appreciation when foreign currencies increase in
value relative to the U.S. dollar.

When the subadvisor considers the U.S. dollar to be attractive relative to
foreign currencies, as much as 25% of the fund's total assets may be hedged into
dollars. For temporary defensive purposes and under extraordinary circumstances
(such as significant political events), more than 25% of the fund's total assets
may be hedged in this manner.

In managing the fund's currency exposure, the subadvisor will buy and sell
foreign currencies regularly, either in the spot (i.e., cash) market or the
forward market. Forward foreign currency exchange contracts ("forward
contracts") are individually negotiated and privately traded between currency
traders (usually large commercial banks) and their customers. In most cases, no
deposit requirements exist, and these contracts are traded at a net price
without commission. Forward contracts involve an obligation to purchase or sell
a specific currency at an agreed-upon price on a future date. Most contracts
expire in less than one year. The fund may also use futures and options for
currency management purposes. For more information on futures and options,
please see "Interest Rate Futures Contracts and Options Thereon" on page 10.

DETAILED INFORMATION ABOUT THE FUND

INVESTMENT STRATEGIES AND RISKS
This section describes each of the investment vehicles and strategies that the
advisor 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. government securities include bills, notes, and bonds issued by the U.S.
Treasury and securities issued or guaranteed by agencies or instrumentalities of
the U.S. government.

Some U.S. government securities are supported by the direct full faith and
credit pledge of the U.S. government; others are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as securities issued by
the Federal National Mortgage Association (FNMA), are supported by the
discretionary authority of the U.S. government to purchase the agencies'
obligations; and others are supported only by the credit of the issuing or
guaranteeing instrumentality. There is no assurance that the U.S. government
will provide financial support to an instrumentality it sponsors when it is not
obligated by law to do so.

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

American Century Investment Management, Inc. (the "manager") attempts to
minimize the risks associated with repurchase agreements by adhering to written
guidelines which govern repurchase agreements. These guidelines strictly govern
(1) the type of securities which may be acquired and held under repurchase
agreements; (2) collateral requirements for sellers under repurchase agreements;
(3) the amount of the fund's net assets that may be committed to repurchase
agreements that mature in more than seven days; and (4) the manner in which the
fund must take delivery of securities subject to repurchase agreements.
Moreover, the Board of Trustees reviews and approves, on a quarterly basis, the
creditworthiness of brokers, dealers and banks with whom the fund may enter into
repurchase agreements. The fund may enter into a repurchase agreement only with
an entity that appears on a list of those which have been approved by the Board
as sufficiently creditworthy.

The fund has received permission from the Securities and Exchange Commission
(SEC) to participate in joint repurchase agreements collateralized by U.S.
government securities with other mutual funds advised by the manager or its
affiliates. Joint repos are expected to increase the income the fund can earn
from repo transactions without increasing the risks associated with these
transactions.

Under the Investment Company Act of 1940 (the "Investment Company Act"),
repurchase agreements are considered loans.

Securities Lending
The fund may lend its portfolio securities to earn additional income. If a
borrower defaulted on a securities loan, the fund could experience delays in
recovering the securities it loaned; if the value of the loaned securities
increased over the value of the collateral, the fund could suffer a loss.

To minimize the risk of default on securities loans, the manager adheres to
guidelines prescribed by the Board of Trustees governing lending of securities.
These guidelines strictly govern (1) the type and amount of collateral that must
be received by the fund; (2) the circumstances under which additions to that
collateral must be made by borrowers; (3) the return received by the fund on the
loaned securities; (4) the limitations on the percentage of fund assets on loan;
and (5) the credit standards applied in evaluating potential borrowers of
portfolio securities. In addition, the guidelines require that the fund have the
option to terminate any loan of a portfolio security at any time and set
requirements for recovery of securities from borrowers.

Foreign Currency Exchange Transactions
The fund expects to exchange dollars for the fund's underlying currencies, and
vice versa, in the normal course of managing the fund's underlying investments.
J.P. Morgan Investment Management Inc. (JPMIM), the fund's subadvisor, does not
expect that the fund will hold currency that is not earning income on a regular
basis, although the fund may do so temporarily when suitable investments are not
available. The fund may exchange currencies on a "spot" basis (i.e., for prompt
delivery and settlement), or by entering into forward currency exchange
contracts (also called forward contracts) or other contracts to purchase and
sell currencies for settlement at a future date. The fund will incur costs in
converting assets from one currency to another. Foreign exchange dealers may
charge a fee for conversion; in addition, they also realize a profit based on
the difference (i.e., the spread) between the prices at which they buy and sell
various currencies in the spot and forward markets. Thus, a dealer may offer to
sell a foreign currency to the fund at one rate, and repurchase it at a lesser
rate should the fund desire to resell the currency to the dealer.

Forward contracts are agreements to exchange a specific amount of one currency
for a specified amount of another at a future date. The date may be any agreed
fixed number of days in the future. The amount of currency to be exchanged, the
price at which the exchange will take place, and the date of the exchange are
negotiated when the fund enters into the contract and are fixed for the term of
the contract. Forward contracts are traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement and is
consummated without payment of any commission. However, the fund may enter into
forward contracts with deposit requirements or commissions.

At the maturity of a forward contract, the fund may complete the contract by
paying for and receiving the underlying currency, may seek to roll forward its
contractual obligation by entering into an "offsetting" transaction with the
same currency trader and paying or receiving the difference between the
contractual exchange rate and the current exchange rate. The fund may also be
able to enter into an offsetting contract prior to the maturity of the
underlying contract. This practice is sometimes referred to as "cross hedging"
and may be employed if, for example, JPMIM believes that one foreign currency
(in which a portion of the fund's foreign currency holdings are denominated)
will change in value relative to the U.S. dollar differently than another
foreign currency. There is no assurance that offsetting transactions, or new
forward contracts, will always be available to the fund.

Investors should realize that the use of forward contracts does not eliminate
fluctuations in the underlying prices of the securities. Such contracts simply
establish a rate of exchange that the fund can achieve at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to fluctuations in the value of the hedged currency when used as a hedge
against foreign currency declines, at the same time they tend to limit any
potential gain which might result from the change in the value of such currency.

Because investments in, and redemptions from, the fund will be in U.S. dollars,
JPMIM expects that the fund's normal investment activity will involve a
significant amount of currency exchange. For example, the fund may exchange
dollars for its underlying foreign currencies for dollars in order to meet
shareholder redemption requests or to pay expenses. These transactions may be
executed in the spot or forward markets.

In addition, the fund may combine forward transactions in its underlying
currency with investments in U.S. dollar-denominated instruments, in an attempt
to construct an investment position whose overall performance will be similar to
that of a security denominated in its underlying currency. If the amount of
dollars to be exchanged is properly matched with the anticipated value of the
dollar-denominated securities, the fund should be able to "lock in" the foreign
currency value of the securities, and the fund's overall investment return from
the combined position should be similar to the return from purchasing a foreign
currency-denominated instrument. This is sometimes referred to as a "synthetic"
investment position or a "position hedge."

The execution of a synthetic investment position may not be successful. It is
impossible to forecast with absolute precision what the dollar value of a
particular security will be at any given time. If the value of a
dollar-denominated security is not exactly matched with the fund's obligation
under the forward contract on the contract's maturity date, the fund may be
exposed to some risk of loss from fluctuation of the dollar. Although JPMIM will
attempt to hold such mismatchings to a minimum, there can be no assurance that
JPMIM will be successful in doing so.

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

When purchasing securities on a when-issued or forward commitment basis, 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 50% of its total assets to
when-issued or forward commitment agreements. If fluctuations in the value of
securities held cause more than 50% of a fund's total assets to be committed
under when-issued or forward commitment agreements, the advisor need not sell
such agreements, but it will be restricted from entering into further agreements
on behalf of the fund until the percentage of assets committed to such
agreements is below 50% of total assets.

Short-Term Securities
Under certain circumstances, the fund may invest in short-term U.S. government
securities, including money market instruments (short-term securities).

Except as otherwise required for temporary defensive purposes, the advisor does
not expect the fund to invest more than 35% of total assets in short-term
securities.

Pursuant to an exemptive order from the Securities and Exchange Commission
(SEC), the fund may invest in shares of money market funds, including American
Century's money market funds, to facilitate cash management provided that the
investment is consistent with the fund's investment policies and restrictions.
The fund may invest up to 5% of its total assets in shares of money market
funds.

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

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

Futures contracts provide for the sale by one party and purchase by another
party of a specific security at a specified future time and price. Futures
contracts are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. government agency.

Although futures contracts, by their terms, call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date. A futures position may be closed by taking an
opposite position in an identical contract (i.e., buying a contract that has
previously been sold or selling a contract that has previously been bought).

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

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

+ Purchasing Put and Call Options
By purchasing a put option, the fund obtains the right (but not the obligation)
to sell the option's underlying instrument at a fixed strike price. In return
for this right, the fund pays the current market price for the option (known as
the option premium). Options have various types of underlying instruments,
including specific securities, indices of securities prices, and futures
contracts. The fund may terminate its position in a put option it has purchased
by allowing it to expire or by exercising the option. If the option is allowed
to expire, the fund will lose the entire premium it paid. If the fund exercises
the option, it completes the sale of the underlying instrument at the strike
price. The fund may also terminate a put option position by closing it out in
the secondary market at its current price if a liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).

The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the underlying instrument at the option's strike price. A call buyer
typically attempts to participate in potential price increases of the underlying
instrument with risk limited to the cost of the option if security prices fall.
At the same time, the buyer can expect to suffer a loss if security prices do
not rise sufficiently to offset the cost of the option.

+ Writing Put and Call Options
If the fund writes a put option, it takes the opposite side of the transaction
from the option's purchaser. In return for receipt of the premium, the fund
assumes the obligation to pay the strike price for the option's underlying
instrument if the other party chooses to exercise the option. When writing an
option on a futures contract, the fund will be required to make margin payments
to a broker or custodian as described above for futures contracts. The fund may
seek to terminate its position in a put option it writes before exercise by
closing out the option in the secondary market at its current price. However, if
the secondary market is not liquid for a put option the fund has written, the
fund must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside assets
to cover its position.

If security prices rise, a put writer would generally expect to profit, although
the gain would be limited to the amount of the premium received. If security
prices remain the same over time, the writer would likely also profit by being
able to close out the option at a lower price. If security prices fall, the put
writer would expect to suffer a loss. This loss should be less than the loss
from purchasing the underlying instrument directly, however, because the premium
received for writing the option should mitigate the effects of the decline.

Writing a call option obligates the fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price even if its current value is greater,
a call writer gives up some ability to participate in security price increases.

+ Combined Positions
The fund may purchase and write options in combination with one another, or in
combination with futures or forward contracts, to adjust the risk and return
characteristics of the overall position. For example, the fund may purchase a
put option and write a call option on the same underlying instrument to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Another possible combined position would involve
writing a call option at one strike price and buying a call option at a lower
price to reduce the risk of the written call option in the event of a
substantial price increase. Because combined options positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.

+ Over-the-Counter Options
Unlike exchange-traded options, which are standardized with respect to the
underlying instrument, expiration date, contract size, and strike price, the
terms of over-the-counter ("OTC") options (options not traded on exchanges)
generally are established through negotiation with the other party to the option
contract. While this type of arrangement allows the fund greater flexibility to
tailor an option to its needs, OTC options generally involve greater credit risk
than exchange-traded options, which are guaranteed by the clearing organizations
of the exchanges where they are traded. The risk of illiquidity is also greater
with OTC options because these options generally can be closed out only by
negotiation with the other party to the option.

+ Risks Related to Futures and Options Transactions
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the advisor applies a hedge at an inappropriate time
or judges interest rate trends incorrectly, futures and options strategies may
lower a fund's return.

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

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

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

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

+ Correlation Of Price Changes
Because there are a limited number of types of exchange-traded futures and
options contracts, it is likely that the standardized contracts available will
not match the fund's current or anticipated investments exactly. The fund may
invest in futures and options contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests (for example, by hedging intermediate-term securities with a
futures contract based on an index of long-term bond prices); this involves a
risk that the futures position will not track the performance of the fund's
other investments.

Options and futures prices can diverge from the prices of their underlying
instruments even if the underlying instruments correlate well with the fund's
investments. Options and futures prices are affected by factors such as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and securities markets, from structural differences in how options and futures
and securities are traded, or from the imposition of daily price fluctuation
limits or trading halts. The fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in an effort to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases. If price changes in the fund's options or futures positions are
poorly correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.

+ Futures and Options Contracts Relating to Foreign Currencies
The fund may purchase and sell currency futures and purchase and write currency
options to increase or decrease its exposure to different foreign currencies. A
fund may also purchase and write currency options in connection with currency
futures or forward contracts.

Currency futures contracts are similar to forward currency exchange contracts,
except that they are traded on exchanges and have standard contract sizes and
delivery dates. Most currency futures contracts call for payment or delivery in
U.S. dollars.

The uses and risks of currency futures are similar to those of futures relating
to securities or indices, as described above. Currency futures values can be
expected to correlate with exchange rates, but may not reflect other factors
that affect the value of the fund's investments. A currency hedge, for example,
should protect a German-mark-denominated security from a decline in the German
mark, but it will not protect the fund against a price decline resulting from a
deterioration in the issuer's creditworthiness.

+ Liquidity of Futures Contracts and Options
There is no assurance that a liquid secondary market will exist for any
particular futures contract or option at any particular time. Options may have
relatively low trading volume and liquidity if their strike prices are not close
to the underlying instrument's current price. In addition, exchanges may
establish daily price fluctuation limits for futures contracts and options and
may halt trading if a contract's price moves upward or downward more than the
limit on a given day. On volatile trading days when the price fluctuation limit
is reached or a trading halt is imposed, it may be impossible for the fund to
enter into new positions or close out existing positions. If the secondary
market for a contract was not liquid, because of price fluctuation limits or
otherwise, prompt liquidation of unfavorable positions could be difficult or
impossible, and the fund could be required to continue holding a position until
delivery or expiration regardless of changes in its value. Under these
circumstances, the fund's access to assets held to cover its future positions
could also be impaired.

Futures and options trading on foreign exchanges may not be regulated as
effectively as similar transactions in the U.S. and may not involve clearing
mechanisms or guarantees similar to those available in the U.S. The value of a
futures contract or option traded on a foreign exchange may be adversely
affected by the imposition of different exercise and settlement terms, trading
procedures, and margin requirements, and lesser trading volume.

* Restrictions on the Use of Futures Contracts and Options
The fund may enter into futures contracts, options or options on futures
contracts.

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

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

Financial futures or options purchased or sold by the fund will be standardized
and traded through the facilities of a U.S. or foreign securities association or
listed on a U.S. or foreign securities or commodities exchange, board of trade,
or similar entity, or quoted on an automatic quotation system, except that the
fund may effect transactions in over-the-counter options with primary U.S.
government securities dealers recognized by the Federal Reserve Bank of New
York. In addition, the fund has undertaken to limit aggregate premiums paid on
all options purchased by the fund to no more than 20% of the fund's total
assets.

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

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

Fundamental Investment Policies
The fund's investment restrictions are set forth below. These investment
restrictions are fundamental and 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 Policies
- ----------------- --------------------------------------------------------------
Senior The fund may not issue senior securities, except as permitted
Securities under the Investment Company Act.

Borrowing The fund may not borrow money, except that the fund may borrow
money for temporary or emergency purposes (not for leveraging
or investment) in an amount not exceeding 33-1/3% of the
fund's total assets (including the amount borrowed) less
liabilities (other than borrowings).

Lending The fund may not lend any security or make any other loan if,
as a result, more than 33-1/3% 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 The 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 the fund from investment 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 The 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 The fund may not act as an underwriter of securities issued by
others, except to the extent that the fund may be considered
an underwriter within the meaning of the Securities Act of
1933 in the disposition of restricted securities.

Commodities The 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 The fund may not invest for purposes of exercising control
over management.
- ----------------- --------------------------------------------------------------

For purposes of the investment restriction relating to concentration, the 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 fund is subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Trustees.

- ----------------- --------------------------------------------------------------
Subject Policies
- ----------------- --------------------------------------------------------------
Diversification The fund, to meet federal tax requirements for qualification
as a "regulated investment company," limits its investment so
that at the close of each quarter of its taxable year: (i)
with regard to at least 50% of total assets, no more than 5%
of total assets are invested in the securities of a single
issuer, and (ii) no more than 25% of total assets are invested
in the securities of a single issuer. Limitations (i) and (ii)
do not apply to "Government securities" as defined for federal
tax purposes. The fund does not, with respect to 75% of its
total assets, currently intend to purchase the securities of
any issuer (other than securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities)
if, as a result thereof, the fund would own more than 10% of
the outstanding voting securities of such issuer.

Liquidity The fund may not purchase any security or enter into a
repurchase agreement if, as a result, more than 15% of its net
assets would be invested in 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 The 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 The fund may not purchase securities on margin, except that
the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on
futures contracts shall not constitute purchasing securities
on margin.
- ----------------- --------------------------------------------------------------

TEMPORARY DEFENSIVE MEASURES
For temporary defensive purposes, the fund may invest in securities that may not
fit its investment objective or its stated market. During a temporary defensive
period, the 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
Under normal conditions, the fund's annual portfolio turnover rates may exceed
150%. Because a higher turnover rate increases transaction costs and may
increase taxable capital gains, the advisor carefully weighs the potential
benefits of short-term investing against these considerations.

The fund's portfolio turnover rates 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 are not generally used to evaluate their
trading activities.

TRANSACTIONS WITH SUBADVISOR AFFILIATES
As described in further detail under the section titled "MANAGEMENT," J.P.
Morgan Investment Management, Inc. (JPMIM) is subadvisor to the fund pursuant to
an agreement with American Century Investment Management, Inc.

JPMIM, Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), J.P.
Morgan Securities Inc., and J.P. Morgan Securities Limited are wholly owned
subsidiaries of J.P. Morgan & Co. Incorporated, hereafter referred to
collectively as "Morgan affiliates."

J. P. Morgan Securities Inc. is a broker-dealer registered with the SEC and is a
member of the National Association of Securities Dealers. It is active as a
dealer in U.S. government securities and an underwriter of and dealer in U.S.
government agency securities and money market instruments.

J.P. Morgan Securities Limited underwrites, distributes, and trades
international securities, including Eurobonds, commercial paper, and foreign
government bonds. J.P. Morgan & Co. Incorporated issues commercial paper and
long-term debt securities. Morgan Guaranty and some of its affiliates issue
certificates of deposit and create bankers' acceptances.

To the extent that the fund invests a portion of its assets in such obligations,
it will not invest in securities issued or created by Morgan affiliates.

Certain activities of Morgan affiliates may affect the fund's portfolio or the
markets for securities in which the fund invests. In particular, activities of
Morgan affiliates may affect the prices of securities held by the fund and the
supply of issues available for purchase by the fund. Where a Morgan affiliate
holds a large portion of a given issue, the price at which that issue is traded
may influence the price of similar securities the fund holds or is considering
purchasing.

The fund will not purchase securities directly from Morgan affiliates, and the
size of Morgan affiliates' holdings may limit the selection of available
securities in a particular maturity, yield, or price range. The fund will not
execute any transactions with Morgan affiliates and will use only unaffiliated
broker-dealers. In addition, the fund will not purchase any securities of U.S.
government agencies during the existence of an underwriting or selling group of
which a Morgan affiliate is a member, except to the extent permitted by law.

The fund's ability to engage in transactions with Morgan affiliates is
restricted by the SEC and the Federal Reserve Board. In JPMIM's opinion, these
limitations should not significantly impair the fund's ability to pursue its
investment objectives. However, there may be circumstances in which the fund is
disadvantaged by these limitations compared to other funds with similar
investment objectives that are not subject to these limitations.

In acting for its fiduciary accounts, including the fund, JPMIM will not discuss
its investment decisions or positions with the personnel of any Morgan
affiliate. JPMIM has informed the fund that, in making investment decisions, it
will not obtain or use material, non-public information in the possession of any
division or department of JPMIM or other Morgan affiliates.

The commercial banking divisions of Morgan Guaranty and its affiliates may have
deposit, loan, and other commercial banking relationships with issuers of
securities the fund purchases, including loans that may be repaid in whole or in
part with the proceeds of securities purchased by the fund. Except as may be
permitted by applicable law, the fund will not purchase securities in any
primary public offering when the prospectus discloses that the proceeds will be
used to repay a loan from Morgan Guaranty. JPMIM will not cause the fund to make
investments for the direct purpose of benefitting other commercial interests of
Morgan affiliates at the fund's expense.

MANAGEMENT

THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the fund and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the fund, it has hired the advisor to do so. More than
half of the trustees are "independent" of the fund' advisor, that is, they are
not employed by and have no financial interest in the advisor.

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

<TABLE>
- --------------------------- ---------- --------------------------------------------------------------------------
Position(s)
Name (Age) Held Principal Occupation(s)
Address With Fund During Past 5 Years
- --------------------------- ---------- --------------------------------------------------------------------------
<S> <C> <C>
Albert A. Eisenstat (68) trustee General Partner, Discovery Venturers (venture capital firm, 1996 to
1665 Charleston Road present)
Mountain View, CA 94043 Independent Director, Commercial Metals Co. (1982 to present)
Independent Director, Sungard Data Systems (1991 to present)
Independent Director, Business Objects S/A (software & programming, 1994
to present)
Ronald J. Gilson (52) trustee Charles J. Meyers Professor of Law and Business, Stanford Law School
1665 Charleston Road (since 1979)
Mountain View, CA 94043 Marc and Eva Stern Professor of Law and Business, Columbia University
School of Law (since 1992);
Counsel, Marron, Reid & Sheehy (a San Francisco law firm, since 1984)
William M. Lyons* (42) trustee President, Chief Operating Officer and Assistant Secretary, ACC
4500 Main Street Executive Vice President, Chief Operating Officer and Secretary, ACSC
Kansas City, MO 64111 and ACIS
Myron S. Scholes (57) trustee Principal, Long-Term Capital Management (investment advisor, since 1993)
1665 Charleston Road Frank E. Buck Professor of Finance, Stanford Graduate School of Business
Mountain View, CA 94043 (since 1983)
Director, Dimensional Fund Advisors (investment advisor, since 1982)
Director, Smith Breeden Family of Funds (since 1992)
Managing Director, Salomon Brothers Inc. (securities brokerage, 1991 to
1993)
Kenneth E. Scott (69) trustee Ralph M. Parsons Professor of Law and Business, Stanford Law School
1665 Charleston Road (since 1972)
Mountain View, CA 94043 Director, RCM Capital Funds, Inc. (since 1994)
Isaac Stein (51) trustee Director, Raychem Corporation (electrical equipment, since 1993)
1665 Charleston Road President, Waverley Associates, Inc. (private investment firm, since
Mountain View, CA 94043 1983)
Director, ALZA Corporation (pharmaceuticals, since 1987).
Trustee, Stanford University (since 1994)
Chairman, Stanford Health Services (since 1994)
James E. Stowers III* (39) trustee, Chief Executive Officer and Director, ACC
4500 Main Street Chairman President, Chief Executive Officer and Director, ACSC and ACIS
Kansas City, MO 64111 of the
Board
Jeanne D. Wohlers (53) trustee Director and Partner, Windy Hill Productions, LP (edutainment software,
1665 Charleston Road 1994-present)
Mountain View, CA Director, Quintus Corporation, (automation solutions, 1995-present)
94043 Vice President and Chief Financial Officer, Sybase, Inc. (software
company, 1988 to 1992)
- --------------------------- ---------- --------------------------------------------------------------------------

Committees
The Board has three committees to oversee specific functions of the Trust's
operations. Only independent trustees serve on these committees. Information
about these committees appears in the table below:

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

Compensation of Trustees
The trustees also serve as trustees for six (6) American Century investment
companies other than American Century California Tax-Free and Municipal Funds.
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 is based on the number of meetings
held and the assets of the fund 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 for the periods
indicated by the Trust and by the American Century family of funds as a whole to
each trustee who is not an "interested person" as defined in the Investment
Company Act.

<TABLE>
<CAPTION>
AGGREGATE TRUSTEE COMPENSATION FOR FISCAL YEAR ENDED DECEMBER 31, 1998
- --------------------- ---------------------- ------------------- ------------------ ---------------------
Total Compensation
Pension or Estimated Annual from the
Total Compensation Retirement Benefits Upon American Century
Name of Trustee from Benefits Accrued Retirement Family of Funds
the Funds as Part of Fund
Expenses
- --------------------- ---------------------- ------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Albert A. Eisenstat $ N/A N/A $
Ronald J. Gilson $ N/A N/A $
Myron S. Scholes $ N/A N/A $
Kenneth E. Scott $ N/A N/A $
Isaac Stein $ N/A N/A $
Jeanne D. Wohlers $ N/A N/A $
- --------------------- ---------------------- ------------------- ------------------ ---------------------
</TABLE>

The Trust has adopted the American Century Deferred Compensation Plan for
Non-Interested Directors and trustees. 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.

Under the plan, 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 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 Trust has no obligation to
segregate assets to secure or fund the deferred fees. The rights of trustees to
receive their deferred fee account balances are the same as the rights of a
general unsecured creditor of the Trust. 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 August 31, 1998.

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

<TABLE>
- --------------------------- ---------- ---------------------------------------------------------------------------
Position(s)
Name (Age) Held Principal Occupation(s)
Address With Fund During Past 5 Years
- --------------------------- ---------- ---------------------------------------------------------------------------
<S> <C> <C>
George A. Rio (43) President Executive Vice President and Director of Client Services, FDI (March 1998
4500 Main Street to present).
Kansas City, Missouri Senior Vice President and Senior Key Account Manager, Putnam Mutual Funds
64111 (June 1995 to March 1998)
Director Business Development, First Data Corporation (May 1994 to June 1995)
Senior Vice President and Manager of Client Services and Director of Internal
Audit, The Boston Company, Inc. (September 1983 to May 1994)

Mary A. Nelson (33) Vice Vice President and Manager of Treasury Services and Administration, FDI,
4500 Main Street President (1994 to present) Kansas City,
Missouri Assistant Vice President and Client Manager, The Boston Company, Inc.
64111 (1989 to 1994)

Maryanne Roepke, CPA (42) Vice Vice President, Treasurer and Principal Accounting Officer, ACSC
4500 Main Street President
Kansas City, Missouri and
64111 Treasurer

Patrick A. Looby (39) Vice Vice President and Assistant General Counsel, ACSC
4500 Main Street President
Kansas City, MO 64111

Christopher J. Kelley (33) Vice Vice President and Associate General Counsel, FDI (since July 1996)
4500 Main Street President Assistant Counsel, Forum Financial Group (April 1994 to July 1996)
Kansas City, MO 64111 Compliance Officer, Putnam Investments (1992 to April 1994)

Douglas A. Paul (51) Secretary Vice President and Associate General Counsel, ACSC
1665 Charleston Road and Vice
Mountain View, CA 94043 President

C. Jean Wade (34) Controller Controller--Fund Accounting, ACSC
4500 Main Street
Kansas City, MO 64111
- --------------------------- ---------- ---------------------------------------------------------------------------
</TABLE>

THE FUND'S BIGGEST SHAREHOLDERS
As of Decmber 31, 1998, the following companies were the record owners of more
than 5% of a fund's outstanding shares:

- --------------- ------------------------------ ---------------- -----------
% of
Shares
Fund Shareholder # of Shares Out-standing
Held
- --------------- ------------------------------ ---------------- -----------
Charles Schwab & Co. ???? ???%
101 Montgomery Street
San Francisco, CA 94101
- --------------- ------------------------------ ---------------- -----------

The fund is unaware of any other shareholders, beneficial or of record, who own
more than 5% of the fund's outstanding shares. As of December 31, 1998, the
officers and trustees of the fund, as a group, own less than 1% of the fund's
outstanding shares.

SERVICE PROVIDERS
The fund has no employees. To conduct its day-to-day activities, the Trust has
hired a number of service providers. Each service provider has a specific
function to fill on behalf of the Trust and is described below.

The advisor and ACSC are both wholly owned by ACC. James E. Stowers Jr.,
Chairman of ACC, controls ACC by virtue of his ownership of a majority of its
common stock.

INVESTMENT ADVISOR
The fund has an investment management agreement with the advisor, American
Century Investment Management, Inc., dated August 1, 1997. This agreement was
approved by the shareholders of the fund on July 30, 1997.

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 Investment Category Fees are determined are as
follows:

-------------------- -------------------
INVESTMENT CATEGORY FEE SCHEDULE FOR Category Assets Fee Rate
-------------------- -------------------
>> International Bond First $1 billion 0.6100%
Next $1 billion 0.5580%
Next $3 billion 0.5280%
Next $5 billion 0.5080%
Next $15 billion 0.4950%
Next $25 billion 0.4930%
Thereafter 0.4925%
-------------------- -------------------

The Complex Fee is determined according to the schedule on the right.

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

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 fund. In
addition, purchases or sales of the same security may be made for two or more
clients or fund 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 subadvisor may aggregate purchase and sale orders of the funds with purchase
and sale orders of its other clients when the subadvisor believes that such
aggregation provides the best execution for the fund. The fund's Board of
Trustees has approved the policy of the advisor and subadvisor with respect to
the aggregation of portfolio transactions. Where portfolio transactions have
been aggregated, the fund participates 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 subadvisor will not aggregate portfolio transactions of the
fund unless it believes such aggregation is consistent with its duty to seek
best execution on behalf of the fund and the terms of the management agreement.
The subadvisor 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 fund. Benham Management Corporation was merged into the advisor
in late 1997.

Investment management fees paid by the fund for the fiscal periods ended August
31, 1998, 1997 and 1996, are indicated in the following table. Fee amounts are
net of amounts reimbursed or recouped under the funds' previous investment
advisory agreement with Benham Management Corporation.

MANAGEMENT FEES
<TABLE>
- ---------------------------------- --------------------- --------------------- ----------------------
<S> <C> <C> <C>
Fund 1998 1997 1996
- ---------------------------------- --------------------- --------------------- ----------------------
California High-Yield Municipal
- ---------------------------------- --------------------- --------------------- ----------------------
</TABLE>

The investment management agreement provides that the manager may delegate
certain responsibilities under the agreement to a subadvisor. Currently, JPMIM
serves as subadvisor to the fund under a subadvisory agreement between the
manager and JPMIM dated August 1, 1997, that was approved by shareholders on
July 30, 1997. This superseded subadvisory agreements dated June 1, 1995,
December 31, 1991, and June 1, 1994. The subadvisory agreement continues for an
initial period of two years and thereafter so long as continuance is
specifically approved by vote of a majority of the fund's outstanding voting
securities or by vote of a majority of the fund's Trustees, including a majority
of those Trustees who are neither parties to the agreement nor interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The subadvisory agreement is subject to termination
without penalty on 60 days' written notice by the manager, the Board of
Trustees, or a majority of the fund's outstanding shares or 12 months' written
notice by JPMIM and will terminate automatically in the event of (i) its
assignment or (ii) termination of the investment advisory agreement between the
fund and the manager.

The subadvisory agreement provides that JPMIM will make investment decisions for
the fund in accordance with the fund's investment objective, policies, and
restrictions, and whatever additional written guidelines it may receive from the
manager from time to time. For these services, the manager pays JPMIM a monthly
fee at an annual rate of .20% of the fund's average daily net assets up to $200
million; and .15% of average daily net assets over $200 million. Under the 1991
subadvisory agreement, the manager paid JPMIM a monthly fee at an annual rate of
.25% of average daily net assets up to $200 million, and .05% of average daily
net assets in excess of $200 million, with a minimum annual fee of $250,000.

For the fiscal years ended December 31, 1998, 1997 and 1996, the manager paid
JPMIM subadvisory fees as listed in the following table:

JPMIM Subadvisory Fees

1998 $???????

1997 $315,813

1996 $470,287

Other Advisory Relationships
In addition to managing the funds, the advisor also acts as an investment
advisor to 12 institutional accounts and to the following registered investment
companies:

>> American Century Mutual Funds, Inc.
>> American Century World Mutual Funds, Inc.
>> American Century Premium Reserves, Inc.
>> American Century Variable Portfolios, Inc.
>> American Century Capital Portfolios, Inc.
>> American Century Strategic Asset Allocations, Inc.
>> American Century Municipal Trust
>> American Century Government Income Trust
>> American Century Investment Trust
>> American Century Target Maturities Trust
>> American Century Quantitative Equity Funds
>> American Century California Tax-Free and Municipal Funds.

DISTRIBUTOR
The fund's shares are distributed by Funds Distributors, Inc., a registered
broker-dealer. The distributor is a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The distributor's principal business address is 60
State Street, Suite 1300, Boston, Massachusetts 02109.

The distributor is the principal underwriter of the fund's shares. The
distributor makes a continuous, best efforts underwriting of the fund's shares.
This means that the distributor has no liability for unsold shares.

TRANSFER AGENT AND ADMINISTRATOR
American Century Services Corporation, 4500 Main Street, Kansas City, Missouri
64111, acts as transfer agent and dividend paying agent for the fund. It
provides physical facilities, computer hardware and software and personnel, for
the day-to-day administration of the funds and of the advisor. The advisor pays
American Century Services Corporation for such 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 the fund for the fiscal
years ended August 31, 1997 and 1996, are indicated in the table below. Fee
amounts are net of expense limitations.

ADMINISTRATIVE FEES
- ------------------------------------------- ----------------- ------------------
Fund Fiscal 1997 Fiscal 1996
- ------------------------------------------- ----------------- ------------------
International Bond
- ------------------------------------------- ----------------- ------------------
TRANSFER AGENT FEES
- ------------------------------------------- ----------------- ------------------
Fund Fiscal 1997 Fiscal 1996
- ------------------------------------------- ----------------- ------------------
International Bond
- ------------------------------------------- ----------------- ------------------

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.

Independent Auditors
PricewaterhouseCoopers LLP is the independent auditor of the funds. The address
of PricewaterhouseCoopers LLP is City Center Square, 1100 Main Street, Suite
900, Kansas City, Missouri 64105-2140. As the independent auditor of the funds,
PricewaterhouseCoopers provides services including (1) audit of the annual
financial statements, (2) assistance and consultation in connection with SEC
filings and (3) review of the annual federal income tax return filed for the
fund.

BROKERAGE ALLOCATION
Under the management agreement between the funds and the advisor and under the
Subadvisory Agreement between the advisor and the subadvisor, the subadvisor has
the responsibility of selecting brokers and dealers to execute portfolio
transactions. In many transactions, the selection of the broker or dealer is
determined by the availability of the desired security and its offering price.
In other transactions, the selection of broker or dealer is a function of the
selection of market and the negotiation of price, as well as the broker's
general execution and operational and financial capabilities in the type of
transaction involved. The subadvisor will seek to obtain prompt execution of
orders at the most favorable prices or yields. The subadvisor may choose to
purchase and sell portfolio securities to and from dealers who provide services
or research, statistical and other information to the funds and to the
subadvisor. Such information or services will be in addition to and not in lieu
of the services required to be performed by the subadvisor, and the expenses of
the subadvisor will not necessarily be reduced as a result of the receipt of
such supplemental information.

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 preemptive, 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.

The assets belonging to each fund or class of shares are held separately by the
custodian and the shares of each fund or class represent a beneficial interest
in the principal, earnings and profit (or losses) of investment and other assets
held for each fund or class. Your rights as a shareholder are the same for all
funds or class of securities unless otherwise stated. Within their respective
fund or class, all shares have equal redemption rights. Each share, when issued,
is fully paid and non-assessable.

In the event of complete liquidation or dissolution of the funds, shareholders
of each series or class of shares shall be entitled to receive, pro rata, all of
the assets less the liabilities of that series or class.

MULTIPLE CLASS STRUCTURE
The fund's 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
fund may issue up to three classes of shares: an Investor Class, an
Institutional Class and an Advisor Class. Not all American Century 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 manager as Investor Class shareholders. As a
result, the manager is able to charge these classes a lower management fee. In
addition to the management fee, however, Advisor Class shares are subject to a
Master Distribution and Shareholder Services Plan (described beginning on page
___). Both plans have been adopted by the 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 12-1 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 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 of trustees
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 fund 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.

MASTER DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
As described in the Prospectus, the fund's Advisor Class of shares are also 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 Distributor enters 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 fund's shares in various investment products or in connection with various
financial services.

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

To enable the fund's shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the fund's
manager has reduced its management fee by 0.25% per annum with respect to the
Advisor Class shares and the fund's Board of Trustees has adopted a Master
Distribution and Shareholder Services Plan (the "Distribution Plan"). Pursuant
to such Plan, the Advisor Class shares pay a fee of 0.50% annually of the
aggregate average daily assets of the fund's Advisor Class shares, 0.25% of
which is paid for Shareholder Services (defined below) and 0.25% of which is
paid for distribution services.

Payments may be made for a variety of shareholder services, including, but are
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 shareholders 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 shareholders and
assisting shareholders 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 shareholders and/or other
beneficial owners; (g) issuing confirmations of transactions; (h) providing
subaccoutning 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 shareholder communications from the
funds (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to shareholders 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.

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, on going 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 Distributor who engage in or support distribution of the funds'
Advisor Class shares; (c) compensation to, and expenses (including overhead and
telephone expenses) of, Distributor; (d) the printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; (e) the preparation, printing and distribution of sales literature
and advertising materials provided to the funds' shareholders and prospective
shareholders; (f) receiving and answering correspondence from prospective
shareholders, 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 and
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 manager 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.

BUYING AND SELLING FUND SHARES
Information about buying, selling and exchanging fund shares is contained in the
American Century Investor Services Guide. The guide is available to investors
without charge and may be obtained by calling us.

VALUATION OF PORTFOLIO SECURITIES
The fund's net asset value per share (NAV) is calculated as of the close of
business of the New York Stock Exchange (the Exchange), usually at 3 p.m.
Central time each day the Exchange is open for business. The Exchange has
designated the following holiday closings for 1999: New Year's Day (observed),
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day (observed).
Although the funds expect the same holiday schedule to be observed in the
future, the Exchange may modify its holiday schedule at any time.

The subadvisor typically completes its trading on behalf of the fund in various
markets before the Exchange closes for the day. Foreign currency exchange rates
are also determined prior to the close of the Exchange. However, if
extraordinary events occur that are expected to affect the value of a portfolio
security after the close of the primary exchange on which it is traded, the
security will be valued at fair market value as determined in good faith under
the direction of the Board of Trustees. The fund's share price is calculated by
adding the value of all portfolio securities and other assets, deducting
liabilities and dividing the result by the number of shares outstanding.
Expenses and interest earned on portfolio securities are accrued daily.

TAXES

Federal Income Tax
The fund intends to qualify annually as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, a fund will be exempt from federal and California 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 shareholders and eliminating
shareholders' ability to treat distributions of the funds in the manner they
were realized by the funds.

The fund may be subject to a 4% excise tax on a portion of its undistributed
income. To avoid the tax, the fund must distribute annually at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year and at least 98% of its capital gain net income and foreign
currency income for the 12-month period ending on October 31st of the calendar
year. Any dividend declared by the fund in October, November, or December of any
year and payable to shareholders of record on a specified date in such a month
shall be deemed to have been received by each shareholder on December 31st of
such year and to have been paid by the fund not later than December 31st of such
year, provided that such dividend is actually paid by the fund during January of
the following year.

The fund's transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the fund, defer fund losses, and affect the
determination of whether capital gains and losses are characterized as long-term
or short-term capital gains or losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also may require the fund to mark to market certain types of the positions in
its portfolio (i.e., treat them as if they were sold), which may cause the fund
to recognize income without receiving cash with which to make distributions in
amounts necessary to satisfy the 90% and 98% distribution requirements for
relief from income and excise taxes, respectively. The fund will monitor its
transactions and may make such tax elections as fund management deems
appropriate with respect to foreign currency, options, futures contracts or
forward contracts. The fund's status as a regulated investment company may limit
its transactions involving foreign currency, futures, options and forward
contracts.

Under the Code, gains or losses attributable to fluctuations in exchange rates
that occur between the time the fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Similarly, in disposing of
debt securities denominated in foreign currencies, certain forward currency
contracts, or other instruments, gains or losses attributable to fluctuations in
the value of a foreign currency between the date the security, contract, or
other instrument is acquired and the date it is disposed of are also usually
treated as ordinary income or loss. Under Section 988 of the Code, these gains
or losses may increase or decrease the amount of the fund's investment company
taxable income distributed to shareholders as ordinary income.

Earnings derived by the fund from sources outside the U.S. may be subject to
non-U.S. withholding and possibly other taxes. Such taxes may be reduced or
eliminated under the terms of a U.S. income tax treaty, and the fund intends to
undertake any procedural steps required to claim the benefits of such a treaty.
With respect to any non-U.S. taxes actually paid by the fund, if more than 50%
in value of the fund's total assets at the close of any taxable year consists of
securities of foreign corporations, the fund may elect to treat any non-U.S.
income and similar taxes it pays as though the taxes were paid by its
shareholders.

Certain of the 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 can generally be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Original issue discount, although no cash is actually received by a
fund until the maturity of the bond, 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. Original issue discount on an obligation with interest exempt from
federal income tax will constitute tax-exempt interest income to the fund.

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 security having a fixed maturity date of not more than one year from date
of issue, the gain realized on disposition generally will be treated as
short-term capital gain. In general, gain realized on disposition of a security
held less than one year is treated as short-term capital gain.

Taxation of Non-U.S. Shareholders
U.S. taxation of a shareholder who is a non-resident alien or a non-U.S.
corporation, partnership, trust, or estate depends on whether the payments
received from a fund are "effectively connected" with a U.S. trade or business
carried on by such a shareholder. Ordinarily, income from the fund will not be
treated as "effectively connected."

If the payments received from the fund are effectively connected with a U.S.
trade or business of the shareholder, then all distributions of net investment
income and net capital gains of the fund and gains realized upon the redemption,
exchange, or other taxable disposition of shares will be subject to U.S. federal
income tax at the graduated rates applicable to U.S. citizens, residents, or
domestic entities, although the tax may be eliminated under the terms of an
applicable U.S. income tax treaty. Non-U.S. corporate shareholders also may be
subject to a branch profits tax with respect to payments from the fund.

If the shareholder is not engaged in a U.S. trade or business, or the payments
received from the fund are not effectively connected with the conduct of such a
trade or business, the shareholder will generally be subject to U.S. tax
withholding at the rate of 30% (or a lower rate under an applicable U.S. income
tax treaty) on distributions of net investment income and net realized
short-term capital received. Non-U.S. shareholders not engaged in a U.S. trade
or business, or having no effectively connected income, may also be subject to
U.S. tax at the rate of 30% (or a lower treaty rate) on additional distributions
resulting from the fund's election to treat any non-U.S. taxes it pays as though
the taxes were paid by its shareholders.

Distributions of net realized long-term capital gains to non-U.S. shareholders
and any capital gains realized by them upon the redemption or other taxable
disposition of shares generally will not be subject to U.S. tax. In the case of
individuals and other non-exempt, non-U.S. shareholders who fail to furnish the
fund with required certifications regarding their foreign status on IRS Form W-8
or an appropriate substitute, the fund may be required to impose backup
withholding of U.S. tax at the rate of 31% on distributions of net realized
capital gains and proceeds of redemptions and exchanges.

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 or foreign tax authorities to determine
whether the funds are suitable investments.

HOW FUND PERFORMANCE INFORMATION IS CALCULATED

Yields
(30-day period ended August 31, 1998)
- -------------------------------------
Fund 30-Day Yield
- -------------------------------------
International Bond X.XX%
- -------------------------------------

The fund may quote performance in various ways. Historical performance
information will be used in advertising and sales literature.

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

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

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

Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gain
distributions (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' performance is
not constant over time, but changes from year-to-year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.

In addition to average annual total returns, the fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as 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.

The fund's performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indexes of market
performance. This may include comparisons with funds that, unlike 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 junk bond market (source: Data Resources, Inc.); the CRB Futures
Index (source: Commodity Index Report); the price of gold (sources: London
a.m./p.m. fixing and New York Comex Spot Price); rankings of any mutual fund or
mutual fund category tracked by Lipper Analytical Services, Inc. or Morningstar,
Inc.; mutual fund rankings published in major, nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indexes of stock market
performance; and indexes and historical data supplied by major securities
brokerage or investment advisory firms. The fund also may utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance.

MULTIPLE CLASS PERFORMANCE ADVERTISING
Pursuant to the Multiple Class Plan, the Trust may issue additional classes of
its existing fund or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the manager
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' performance will be restated to reflect the expenses of the new
class and 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 fund, including the Statements of Assets and
Liabilities and the Statements of Operations for the fiscal year ended December
31, 1998, and the Statements of Changes in Net Assets for the fiscal years ended
December 31, 1997 and 1998, are included in the Annual Reports to shareholders
for the fiscal year ended December 31, 1998. The report on the financial
highlights for the fiscal years 1993, 1994, 1995 and 1996 are included in the
Annual Reports to shareholders for the fiscal year ended December 31, 1996, Each
such Annual Report is incorporated herein by reference. You may receive copies
of the reports without charge upon request to American Century at the address
and phone number shown on the back cover of this Statement of Additional
Information.

EXPLANATION OF FIXED INCOME SECURITIES RATINGS
As described in the Prospectus, the fund invests 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 and indicates 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 and
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 is also 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 is also 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 will be
used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
- ---------- -------- ------------------------------------------------------------

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
payment is strong. Standard & Poor's (P-1) 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
satisfactory, but the relative degree of safety (P-2) 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 Satisfactory capacity for timely repayment. Issues that
carry this rating are somewhat more (P-3) vulnerable to the
adverse changes in circumstances than obligations carrying
the higher designations.

- ---------- -------- ------------------------------------------------------------

NOTE RATINGS
- ---------- -------- ------------------------------------------------------------
S&P Moody's Description
- ---------- -------- ------------------------------------------------------------
SP-1 MIG-1; Notes are of the highest quality enjoying strong protection
VMIG-1 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; Notes are of high quality, with margins of protection ample,
VMIG-2 although not so large as in the preceding group.

SP-3 MIG-3; Notes are of favorable quality, with all security elements
VMIG-3 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; Notes are of adequate quality, carrying specific risk but
VMIG-4 having protection and not distinctly or predominantly
speculative.
- ---------- -------- ------------------------------------------------------------

More information about the fund is contained in the fund's annual and semiannual
reports. These contain more information about the fund's investments and the
market conditions and investment strategies that significantly affected the
fund's performance during the most recent six-month fiscal period. The annual
and semiannual reports are incorporated by reference into this SAI. This means
that it is legally part of this SAI.

>> You can get the annual and semiannual reports for free and ask any
questions about the fund by contacting us at one of the addresses or phone
numbers listed below.
------------------------------------ --------------------------------------
American Century Investments Institutional, Corporate, Keogh,
P.O. Box 419200 SEP/SARSEP, SIMPLE and 403(b) Services
Kansas City, Missouri 64141-6200 1-800-345-3533

www.americancentury.com Telecommunications Device for Deaf
1-800-634-4113 or 816-444-3485
Investor Services
1-800-345-2021 or 816-531-5575 Fax
816-340-7962
Automated Information Line
1-800-345-8765
------------------------------------ --------------------------------------

>> If you own or are considering purchasing fund shares through

o an employer-sponsored retirement plan

o a bank

o a broker-dealer

o an insurance company

o another financial intermediary

you can get the annual and semiannual reports directly from them.

>> You can also get information about the fund from the SEC.

o In person. Go to the SEC's Public Reference Room in Washington, D.C. Call
1-800-SEC-0330 for information about location and hours of operation.

o On the internet. Go to www.sec.gov.

o By mail. Write to Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549-6009. The SEC will charge a fee for
copying the documents you request.

Investment Company Act File No. 811-6441
<PAGE>
AMERICAN CENTURY INTERNATIONAL BOND FUNDS

1933 Act Post-Effective Amendment No. 12
1940 Act Amendment No. 13
- --------------------------------------------------------------------------------

PART C OTHER INFORMATION

Item 23 EXHIBITS.

(a) (1)Amended and Restated Declaration of Trust, dated May 31, 1995, is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 7 filed on April 22, 1996 (Accession
#0000880268-96-000010).

(2) Amendment to the Declaration of Trust dated October 21, 1996 is
incorporated herein be reference to Exhibit 1 of Post-Effective
Amendment No. 9 filed April 30, 1997 (Accession # 880268-97-000006).

(b) Amended and Restated Bylaws dated March 9, 1998 are incorporated by
reference to Exhibit 2(b) of Post-Effective Amendment No. 23 to the
Registration Statement of American Century Municipal Trust, filed on
March 26, 1998 (Accession # 0000746458-98-000007).

(c) Registrant hereby incorporates by reference, as though set forth
fully herein, Article III, Article VIII, Article X, Article XI and
Article XII of Registrant's Declaration of Trust, appearing as
Exhibit (1) to Post-Effective Amendment No. 7 and Exhibit (1) to
Post-Effective Amendment No. 9 to the Registration Statements on
Form N-1A of the Registrant; and Article II, Article VII and Article
VIII 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.

(d) (1) Investor Class Investment Management Agreement between American
Century International Bond Funds and American Century Investment
Management, Inc., dated August 1, 1997 (filed electronically as
Exhibit 5 of Post-Effective Amendment No. 33 to the Registration
Statement of American Century Government Income Trust on July 31,
1997, File No. 2-99222).

(2) Advisor Class Investment Management Agreement between American
Century International Bond Funds, American Century Government Income
Trust, American Century Target Maturities Trust, American Century
Quantitative Equity Funds and American Century Investment
Management, Inc., dated August 1, 1997 (filed electronically as
Exhibit 5 of Post-Effective Amendment No. 27 to the Registration
Statement of American Century Target Maturities Trust on August 28,
1997, File No. 2-94608).

(e) (1) Distribution Agreement between American Century International
Bond Funds and Funds Distributor, Inc., dated January 15, 1998
(filed electronically as Exhibit 6 to Post-Effective Amendment No.
28 to the Registration Statement of American Century Target
Maturities Trust on January 30, 1998, File No. 2-94608).

(2) Amendment No. 1 to the Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc., dated
June 1, 1998 (filed electronically as Exhibit 6b to Post-Effective
Amendment No. 11 to the Registration Statement of American Century
Capital Portfolios, Inc. on June 26, 1998, File No. 33-64872).

(3) Amendment No. 2 to Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc., dated
December 1, 1998 (filed electronically as Exhibit (e)(3) to
Post-Effective Amendment No. 12 to the Registration Statement of
American Century World Mutual Funds, Inc., on November 13, 1998,
File No. 33-39242).

(4) Amendment No. 3 to Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc., dated
January 29, 1999 (filed electronically as Exhibit (e)(4) to
Post-Effective Amendment No. 28 to the Registration Statement of
American Century California Tax-Free and Municipal Funds, on
December 28, 1998, File No. 2-82734).

(f) Not Applicable.

(g) (1) Custodian Agreement between American Century International Bond
Funds and State Street Bank and Trust Company dated August 10, 1993
is incorporated herein by reference to Exhibit 8(a) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession #
0000880268-96-000010).

(2) Amendment No. 1 dated December 1, 1994 to the Custodian
Agreement between American Century International Bond Funds and
State Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(b) of Post-Effective
Amendment No. 7 filed on April 22, 1996 (Accession #
0000880268-96-000010).

(3) Amendment No. 2 dated March 4, 1996 to the Custodian Agreement
between American Century International Bond Funds and State Street
Bank and Trust Company dated August 10, 1993 is incorporated herein
by reference to Exhibit 8(c) of Post-Effective Amendment No. 7 filed
on April 22, 1996 (Accession # 0000880268-96-000010).

(h) (1) Transfer Agency Agreement between American Century International
Bond Funds and American Century Services Corporation dated as of
August 1, 1997, is incorporated herein by reference to Exhibit 9 of
Post-Effective Amendment No. 33 to the Registration Statement of the
American Century Government Income Trust filed on July 31, 1997
(Accession # 773674-97-000014).

(2) Amendment to Transfer Agency Agreement between American Century
International Bond Funds and American Century Services Corporation,
dated June 29, 1998 (filed electronically as Exhibit 9b to
Post-Effective Amendment No. 23 to the Registration Statement of
American Century Quantitative Equity Funds on June 29, 1998, File
No. 33-19589).

(i) Opinion and consent of counsel, to be filed by amendment.

(j) (1) Consent of PricewaterhouseCoopers, LLP, independent auditors, to
be filed by amendment.

(2) Consent of KPMG Peat Marwick, LLP, independent auditors, to be
filed by amendment.

(3) Power of Attorney dated December 18, 1998 (filed electronically
as Exhibit (j)(3) to Post-Effective Amendment No. 30 to the
Registration Statement of American Century Target Maturities Trust
filed on January 8, 1999, File No. 2-94608).

(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 to Post-Effective Amendment No.
27 to the Registration Statement of American Century Target
Maturities Trust filed on August 28, 1997, File No. 2-94608).

(2) Amendment No. 1 to Master Distribution and Shareholder Services
Plan of American Century International Bond Funds (Advisor Class)
dated June 29, 1998 (filed electronically as Exhibit 15b to
Post-Effective Amendment No. 23 of American Century Quantitative
Equity Funds filed on June 29, 1998, File No. 33-19589).

(n) Financial Data Schedule of American Century International Bond Funds
is included herein.

(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 18 of Post-Effective Amendment
No. 27 to the Registration Statement of American Century Target
Maturities Trust on August 28, 1997, File No. 2-94608).

(2) Amendment to Multiple Class Plan of American Century
International Bond Funds dated June 29, 1998 (filed electronically
as Exhibit (o)(2) to Post-Effective Amendment No. 23 to the
Registration Statement of American Century Quantitative Equity Funds
on June 29, 1998, File No. 33-19589).

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 Bylaws, amended on May 17, 1995
(filed electronically as Exhibit 2(b) of Post-Effective Amendment No. 6 to
the Registration Statement on February 29, 1996, File No. 33-43321).

Item 26. Business and other Connections of Investment Advisor.

American Century Investment Management, Inc., the investment manager to each
of the Registrant's Funds, is engaged in the business of managing
investments for deferred compensation plans and other institutional
investors.

Item 27. Principal Underwriters.

(a) Funds Distributor, Inc. (the "Distributor") 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.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick - Cendant Investment Trust
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.
Orbitex Group of Funds
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
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

The Distributor is registered with the Securities and Exchange Commission as
a broker-dealer and is a member of the National Association of Securities
Dealers. The Distributor is located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109. The Distributor 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 the Distributor:
<TABLE>
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
<S> <C> <C>
Marie E. Connolly Director, President and Chief None
Executive Officer

George A. Rio Executive Vice President President, Principal Executive
and Principal Financial Officer

Donald R. Roberson Executive Vice President None

William S. Nichols Executive Vice President None

Margaret W. Chambers Senior Vice President, General None
Counsel, Chief Compliance
Officer, Secretary and Clerk
Michael S. Petrucelli Senior Vice President None

Joseph F. Tower, III Director, Senior Vice President, None
Treasurer and Chief Financial
Officer

Paula R. David Senior Vice President None

Allen B. Closser Senior Vice President None

Bernard A. Whalen Senior Vice President None

William J. Nutt Chairman and Director None
- --------------------
* All addresses are 60 State Street, Suite 1300, Boston, Massachusetts 02109
</TABLE>
(c) Not applicable.

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 Registrant, American Century Services Corporation and American
Century Investment Management, Inc., all located at 4500 Main Street, Kansas
City, Missouri 64111.

Item 29. Management Services.

Not Applicable.

Item 30. Undertakings.

Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 12/Amendment No. 13 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Kansas City, and State of Missouri, on
the 26th day of January, 1999.

AMERICAN CENTURY INTERNATIONAL BOND FUNDS

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. 12/Amendment No. 13 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date
<S> <C> <C>
* President and January 26, 1999
- --------------------------------- Chief Executive Officer
William M. Lyons

* Trustee January 26, 1999
- ---------------------------------
Albert A. Eisenstat

* Trustee January 26, 1999
- ---------------------------------
Ronald J. Gilson

* Trustee January 26, 1999
- ---------------------------------
Myron S. Scholes

* Trustee January 26, 1999
- ---------------------------------
Kenneth E. Scott

* Trustee January 26, 1999
- ---------------------------------
Isaac Stein

* Trustee, Chairman of the Board January 26, 1999
- ---------------------------------
James E. Stowers III

* Trustee January 26, 1999
- ---------------------------------
Jeanne D. Wohlers

* Treasurer January 26, 1999
- ---------------------------------
Maryanne Roepke
</TABLE>
/s/ Charles C.S. Park
*by Charles C.S. Park, Attorney in Fact (pursuant to a Power of Attorney dated
January 15, 1998).

EXHIBIT DESCRIPTION

EX-99.a1 Amended and Restated Declaration of Trust, dated May 31, 1995, is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 7 filed on April 22, 1996 (Accession
#0000880268-96-000010).

EX-99.a2 Amendment to the Declaration of Trust dated October 21, 1996 is
incorporated herein by reference to Exhibit 1 of Post-Effective
Amendment No. 9 filed April 30, 1997 (Accession
#880268-97-000006).

EX-99.b Amended and Restated Bylaws dated March 9, 1998 are incorporated
by reference to Exhibit 2(b) of Post-Effective Amendment No. 23
to the Registration Statement of American Century Municipal
Trust, filed on March 26, 1998 (Accession #0000746458-98-000007).

EX-99.d1 Investor Class Investment Management Agreement between American
Century International Bond Funds and American Century Investment
Management, Inc., dated August 1, 1997 (filed as a part of
Post-Effective Amendment No. 33 to the Registration Statement on
Form N-1A of American Century Government Income Trust, File No.
2-99222, filed July 31, 1997 and incorporated herein by
reference).

EX-99.d2 Advisor Class Investment Management Agreement between American
Century International Bond Funds, American Century Government
Income Trust, American Century Target Maturities Trust, and
American Century Quantitative Equity Funds, dated August 1, 1997
(filed as a part of Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A of American Century Target
Maturities Trust, File No. 2-94608, filed on August 28, 1997 and
incorporated herein by reference).

EX-99.e1 Distribution Agreement between American Century International
Bond Funds and Funds Distributor, Inc., dated January 15, 1998
(filed as a part of Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A of American Century Target
Maturities Trust, File No. 2-94608, filed on January 30, 1998 and
incorporated herein by reference).

EX-99.e2 Amendment No. 1 to the Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc.,
dated June 1, 1998 (filed as a part of Post-Effective Amendment
No. 11 to the Registration Statement on Form N-1A of American
Century Capital Portfolios, Inc., File No. 33-64872, filed on
June 26, 1998 and incorporated herein by reference).

EX-99.e3 Amendment No. 2 to Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc.,
dated as of December 1, 1998 (filed as a part of Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
American Century World Mutual Funds, Inc., File No. 33-39242,
filed on November 13, 1998, and incorporated herein by
reference).

EX-99.e4 Amendment No. 3 to Distribution Agreement between American
Century International Bond Funds and Funds Distributor, Inc.,
dated as of January 29, 1999 (filed as a part of Post-Effective
Amendment No. 28 to the Registration Statement on Form N-1A of
American Century California Tax-Free and Municipal Funds, File
No. 2-82734, filed on December 28, 1998, and incorporated herein
by reference).

EX-99.g1 Custodian Agreement between American Century International Bond
Funds and State Street Bank and Trust Company dated August 10,
1993 is incorporated herein by reference to Exhibit 8(a) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).

EX-99.g2 Amendment No. 1 dated December 1, 1994 to the Custodian Agreement
between American Century International Bond Funds and State
Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(b) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).

EX-99.g3 Amendment No. 2 dated March 4, 1996 to the Custodian Agreement
between American Century International Bond Funds and State
Street Bank and Trust Company dated August 10, 1993 is
incorporated herein by reference to Exhibit 8(c) of
Post-Effective Amendment No. 7 filed on April 22, 1996 (Accession
# 0000880268-96-000010).

EX-99.h1 Transfer Agency Agreement between American Century International
Bond Funds and American Century Services Corporation dated as of
August 1, 1997, is incorporated herein by reference to Exhibit 9
of Post-Effective Amendment No. 33 to the Registration Statement
of the American Century Government Income Trust filed on July 31,
1997 (Accession # 773674-97-000014).

EX-99.h2 Amendment to Transfer Agency Agreement between American Century
International Bond Funds and American Century Services
Corporation dated June 29, 1998 (filed as a part of
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A of American Century Quantitative Equity Funds, File No.
33-19589, filed on June 29, 1998, and incorporated herein by
reference).

EX-99.i Opinion and consent of counsel, to be filed by amendment.

EX-99.j1 Consent of PricewaterhouseCoopers, LLP, independent auditors, to
be filed by amendment.

EX-99.j2 Consent of KPMG Peat Marwick, LLP, independent auditors, to be
filed by amendment.

EX-99.j3 Power of Attorney dated December 18, 1998 (filed electronically
as Exhibit (j)(3) to Post-Effective Amendment No. 30 to the
Registration Statement of American Century Target Maturities
Trust, filed on January 8, 1999, File No. 2-94608).

EX-99.m1 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 to Post-Effective
Amendment No. 27 to the Registration Statement of American
Century Target Maturities Trust filed on August 28, 1997, File
No. 2-94608).

EX-99.m2 Amendment No. 1 to Master Distribution and Shareholder Services
Plan of American Century International Bond Funds (Advisor Class)
dated June 29, 1998 (filed as a part of Post-Effective Amendment
No. 23 to the Registration Statement on Form N-1A of American
Century Quantitative Equity Funds, File No. 33-19589, filed on
June 29, 1998 and incorporated herein by reference).

EX-99.o1 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 as a part of
Post-Effective Amendment No. 27 of the Registration Statement on
Form N-1A of American Century Target Maturities Trust, File No.
2-94608, filed on August 28, 1997 and incorporated herein by
reference).

EX-99.o2 Amendment to Multiple Class Plan of American Century
International Bond Funds dated June 29, 1998 (filed as a part of
Post-Effective Amendment No. 23 to the Registration Statement on
Form N-1A of American Century Quantitative Equity Funds, File No.
33-19589, filed on June 29, 1998 and incorporated herein by
reference).

EX-27.1 Financial Data Schedule.

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEMI-ANNUAL REPORT OF AMERICAN CENTURY INTERNATIONAL BOND FUNDS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000880268
<NAME> AMERICAN CENTURY INTERNATIONAL BOND FUND
<SERIES>
<NUMBER> 1
<NAME> AMERICAN CENTURY-BENHAM INTERNATIONAL BOND FUND

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 127,308,285
<INVESTMENTS-AT-VALUE> 126,301,949
<RECEIVABLES> 12,361,475
<ASSETS-OTHER> 9,114,574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 147,777,998
<PAYABLE-FOR-SECURITIES> 2,632,031
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,648,542
<TOTAL-LIABILITIES> 5,280,573
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 143,621,834
<SHARES-COMMON-STOCK> 12,765,728
<SHARES-COMMON-PRIOR> 15,176,256
<ACCUMULATED-NII-CURRENT> 1,181,038
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,036,389)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,269,058)
<NET-ASSETS> 142,497,425
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,327,117
<OTHER-INCOME> 0
<EXPENSES-NET> 664,614
<NET-INVESTMENT-INCOME> 2,662,503
<REALIZED-GAINS-CURRENT> (1,046,839)
<APPREC-INCREASE-CURRENT> 2,940,092
<NET-CHANGE-FROM-OPS> 4,555,756
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,237,801
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,966,117
<NUMBER-OF-SHARES-REDEEMED> 4,480,534
<SHARES-REINVESTED> 103,889
<NET-CHANGE-IN-ASSETS> (23,233,731)
<ACCUMULATED-NII-PRIOR> (1,481,465)
<ACCUMULATED-GAINS-PRIOR> 1,248,251
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 630,134
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 664,614
<AVERAGE-NET-ASSETS> 152,444,030
<PER-SHARE-NAV-BEGIN> 10.92
<PER-SHARE-NII> 0.19
<PER-SHARE-GAIN-APPREC> 0.14
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00

</TABLE>