SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933             [X]


         File No. 2-99222

         Pre-Effective Amendment No. ____

         Post-Effective Amendment No._45_                           [X]

                                     and/or

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


         File No. 811-4363

         Amendment No._46_

                        (Check appropriate box or boxes.)


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


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


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


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

          Approximate Date of Proposed Public Offering: March 5, 2002


It is proposed that this filing become effective:

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

If appropriate, check the following box:

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




















Your
--------------------------------------------------------------------------------



                                American Century

--------------------------------------------------------------------------------
prospectus


                                                    Inflation-Adjusted Bond Fund

                                                             Institutional Class

                                                                   March 5, 2002

    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.



                                      American Century Investment Services, Inc.








   Dear Investor,



     American Century is committed to helping people make the most of their
financial opportunities. That's why we are focused on achieving superior results
and building long-term relationships with investors. We believe our relationship
with you begins with providing a prospectus that's easy to read, and more
importantly, that gives you the information you need to have confidence in the
investment decisions you have made or are soon to make.



     This year you'll find some new information in your Prospectus to take note
of. The Securities and Exchange Commission (SEC) has adopted a rule requiring
mutual funds to disclose standardized after-tax returns. We've added this
information to the Fund Performance History section. It is included to help you
understand the impact that taxes may have on mutual fund performance. Please
note that disclosure of after-tax returns is not required for money market funds
or funds offered only in tax-deferred accounts, such as variable annuities.

     Naturally, you may have questions about investing after you read through
the Prospectus. Please contact your investment professional with questions or
for more information about our funds.



Sincerely,



W. Gordon Snyder

President, Chief Marketing Officer

American Century Investment Services, Inc.





Table of Contents

An Overview of the Fund.......................................................X

Fund Performance History......................................................X

Fees and Expenses.............................................................X

Objectives, Strategies and Risks..............................................X

Basics of Fixed-Income Investing..............................................X

Management....................................................................X

Investing with American Century..............................................XX

Share Price and Distributions................................................XX

Taxes........................................................................XX

Multiple Class Information...................................................XX



Performance Information of Other Class.......................................XX

Callouts

Throughout this book you'll find definitions of 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.





An Overview of the Fund
What is the fund's investment objective?

The fund seeks to provide total return and inflation protection consistent with
investment in inflation-indexed securities.

What are the fund's primary investment strategies and principal risks?

Inflation-indexed securities offer a return linked to inflation. They are
designed to protect investors from a loss of value due to inflation. However,
inflation-indexed securities are still subject to the effects of changes in
market interest rates caused by factors other than inflation, or so-called real
interest rates. Because inflation-indexed securities trade at prevailing real,
or after-inflation, interest rates, changes in these rates affect the fund's
share value. Generally, when real interest rates rise, the fund's share value
will decline. The opposite is true when real interest rates decline. At any
given time your shares may be worth more or less than the price you paid for
them. In other words, it is possible to lose money by investing in the fund.

Who may want to invest in the funds?

The funds may be a good investment if you are
*   seeking current income
*   seeking diversification by investing in a fixed-income mutual fund
*   comfortable with the funds' other investment risks

Who may not want to invest in the funds?

The funds may not be a good investment if you are
*   investing for long-term growth
*   looking for the added security of FDIC insurance



Callouts

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





Fund Performance History

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

*   Annual Total Returns
*   Highest and Lowest Quarterly Returns
*   Average Annual Total Returns, including a comparison of these returns to a
    benchmark index for the Institutional Class of the fund

The performance of the fund's Investor Class shares for each full calendar year
in the life of the fund is shown below. It indicates the volatility of the
fund's historical returns from year to year.(1) bar chart data below]

Inflation-Adjusted Treasury Fund
---------------------------------------------
2001                  Numbers to come
2000                  12.11%
1999                   1.69%
1998                   3.45%


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

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

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




Fees and Expenses

There are no sales loads, fees or other charges

*   to buy fund shares directly from American Century
*   to reinvest dividends in additional shares
*   to exchange into the Institutional Class shares of other American Century funds
*   to redeem your shares other than a $10 fee to redeem by wire

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

Annual Operating Expenses (expenses that are deducted from fund assets)

                              Management       Distribution and         Other          Total Annual Fund
                              Fee(1)           Service (12b-1) Fees     Expenses(2)    Operating Expenses
----------------------------- ---------------- ------------------------ -------------- -----------------------
 Inflation-Adjusted Bond      0.31%            None                     0.00%          0.31%
----------------------------- ---------------- ------------------------ -------------- -----------------------

1 Based on expenses incurred by all classes of the fund during the fund's most
  recent fiscal year. The fund has a stepped fee schedule. As a result, the
  fund's management fee rate generally decreases as fund assets increase.


2 Other expenses, which include the fees and expenses of the fund's independent
  trustees and their legal counsel, as well as interest, are expected to be less
  than 0.005% for the current fiscal year. Example The examples in the table
  below are intended to help you compare the costs of investing in the fund with
  the costs of investing in other mutual funds. Assuming you . . .

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

 ...your cost of investing in the fund would be:
                            1 year        3 years      5 years      10 years
------------------------- ------------------------------------------------------
 Inflation-Adjusted Bond    $32           $100         $174         $393

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



Objectives, Strategies and Risks

Inflation-Adjusted Bond Fund

What are the fund's investment objectives?

The fund seeks to provide total return and inflation protection consistent with
investment in inflation-indexed securities.

How does the fund pursue its investment objectives?

The fund buys inflation-indexed U.S. Treasury securities guaranteed by the
direct full faith and credit pledge of the U.S. government. These
inflation-indexed securities are designed to protect the future purchasing power
of the money invested in them. The fund also may buy traditional U.S. Treasury
securities that are not inflation-indexed. In addition, the fund may invest up
to 35% of its total assets in inflation-indexed securities issued by U.S.
government agencies and instrumentalities.

The fund also may invest an unlimited percentage of its assets in
inflation-indexed securities issued by entities other than the U.S. Treasury or
the U.S. government and its agencies and instrumentalities. . The fund may
purchase securities in a number of different ways to seek higher rates of
return. For example, by using when-issued and forward commitment transactions,
the fund may purchase securities in advance to generate additional income.

What are the principal risks of investing in the fund?

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

Although an investment in inflation-indexed securities issued by entities other
than the U.S. Treasury or U.S. government and its agencies and instrumentalities
increases the potential credit risk associated with the fund, the fund will
attempt to mitigate this additional risk by limiting its investments to issuers
whose credit has been rated BBB or higher, or if unrated, determined to be of
equivalent credit quality by the advisor.

At any given time your shares may be worth more or less than the price you paid
for them. In other words, it is possible to lose money by investing in the fund.

CALLOUT
The real interest rate is the current market interest rate minus the market's
inflation expectations.




Basics of Fixed-Income Investing

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

*  determining which debt securities help a fund meet its maturity requirements
*  identifying debt securities that satisfy a fund's credit quality standards
*  evaluating the current economic conditions and assessing the risk of inflation
*  evaluating special features of the debt securities that may make them more or
   less attractive

Weighted Average Maturity

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

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


                            Amount of        Percent of   Remaining    Weighted
                            Security Owned   Portfolio    Maturity     Maturity
                            --------------   ---------    --------     --------

Debt Security A             $100,000         25%          4 years      1 year

Debt Security B             $300,000         75%          12 years     9 years

Weighted Average Maturity                                              10 years


Types of Risk

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


Interest Rate Risk

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

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

The following table shows the likely effect of a 1% (100 basis points) 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%

CALLOUTS
Weighted average maturity is a tool the fund managers use to approximate the
remaining term to maturity of a fund's investment portfolio.

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

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 make interest and principal payments on
time. Generally, a lower credit rating indicates a greater risk of non-payment.
A lower rating also may indicate that the issuer has a more senior series of
debt securities, which means that if the issuer has difficulties making its
payments, the more senior series of debt is first in line for payment.

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

Liquidity Risk

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

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

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








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 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 an investment advisor to do so.
More than two-thirds 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 and 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 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 provides to the fund, the advisor receives a unified
management fee based on a percentage of the average net assets of the
Institutional Class shares of the fund. The rate of the management fee for the
fund is determined daily on a class-by-class basis using a two-step formula that
takes into account the fund's strategy (money market, bond or equity) and the
total amount of mutual fund assets the advisor manages. The management fee is
paid monthly in arrears.

The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the advisor pays 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 fund's 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.

The fund was not in operation for the fiscal year ended March 31, 2001. The fund
will pay the advisor a unified management fee calculated by adding the
appropriate Investment Category and Complex Fees from the following schedules.

Investment Category Fee Schedule Complex Fee Schedule        (Institutional Class)

Category Assets   Fee Rate                               Complex Assets       Fee Rate

First $1 billion  0.2800%                                First $2.5 billion   0.1100%
Next $1 billion   0.2280%                                Next $7.5 billion    0.1000%
Next $3 billion   0.1980%                                Next $15 billion     0.0985%
Next $5 billion   0.1780%                                Next $25 billion     0.0970%
Next $15 billion  0.1650%                                Next $50 billion     0.0960%
Next $25 billion  0.1630%                                Next $100 billion    0.0950%
Thereafter        0.1625%                                Next $100 billion    0.0940%
                                                         Next $200 billion    0.0930%
                                                         Next $250 billion    0.0920%
                                                         Next $500 billion    0.0910%
                                                         Thereafter           0.0900%





The Fund Management Team

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

The portfolio managers on the Taxable Bond team are identified below.

G. David MacEwen
Mr. MacEwen, Chief Investment Officer - Fixed Income and Senior Vice President,
as been a member of the team since xx. He joined American Century in May 1991 as
a Municipal Portfolio Manager. He has a bachelor's degree in economics from
Boston University and an MBA in finance from the University of Delaware.

Robert V. Gahagan
Mr. Gahagan, Vice President and Senior Portfolio Manager, has been a member of
the team since xx. He joined American Century in 1983. He has a bachelor's
degree in economics and an MBA from the University of Missouri - Kansas City.

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

Jeremy Fletcher
Mr. Fletcher, Portfolio Manager, has been a member of the team since xx. He
joined American Century in October 1991 as an Investor Relations Representative.
He has bachelor's degrees in economics and mathematics from Claremont McKenna
College. He is a CFA charterholder.

Jeffrey L. Houston
Mr. Houston, Vice President and Senior Portfolio Manager, has been a member of
the team since xx. He joined American Century as an Investment Analyst in
November 1990 and was promoted to Portfolio Manager in 1994. He has a bachelor
of arts from the University of Delaware and an MPA from Syracuse University. He
is a CFA charterholder.

Brian Howell
Mr. Howell, Vice President and Portfolio Manager, as been a member of the team
since xx. He joined American Century in 1988. He was Portfolio Manager of the
Capital Preservation Fund from May 1995 to May 1997. He has a bachelor's degree
in mathematics/statistics and an MBA from the University of California -
Berkeley.

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


John F. Walsh
Mr. Walsh, Portfolio Manager, has been a member of the team since xx. He joined
American Century in February 1996 as an Investment Analyst. He has a bachelor's
degree in marketing from Loyola Marymount University and an MBA in finance from
Creighton University.



CALLOUT
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 fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or profiting from the purchase and sale of the same security within 60 calendar
days. In addition, the Code of Ethics requires portfolio managers and other
employees with access to information about the purchase or sale of securities by
the fund to obtain approval before executing permitted personal trades.

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
shareholder approval. The Board of Trustees may change any other policies and
investment strategies.




Investing with American Century
Eligibility for Institutional Class Shares

The Institutional Class shares are made available for purchase by large
institutional shareholders such as bank trust departments, corporations,
retirement plans, endowments, foundations and financial advisors that meet the
fund's minimum investment requirements. Institutional Class shares are not
available for purchase by insurance companies for variable annuity and variable
life products.

Minimum Initial Investment Amounts

The minimum investment is $5 million ($3 million for endowments and foundations)
per fund. If you invest with us through a financial intermediary, the minimum
investment requirement may be met by aggregating the investments of various
clients of your financial intermediary. The minimum investment requirement may
be waived if you or your financial intermediary, if applicable, has an aggregate
investment in our family of funds of $10 million or more ($5 million for
endowments and foundations). In addition, financial intermediaries or plan
recordkeepers may require retirement plans to meet certain other conditions,
such as plan size or a minimum level of assets per participant, in order to be
eligible to purchase Institutional Class shares.

Services Automatically Available to You

Most accounts automatically will have access to the services listed below when
the account is opened. If you do not want these services, see Conducting
Business in Writing. If you have questions about the services that apply to your
account type, please call us.

Conducting Business in Writing

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

Ways to Manage Your Account
---------------------------------- ---------------------------------------------- -----------------------------------------------
By telephone                       Open an account                                Make additional investments
Service Representative             If you are a current investor, you can open    Call if you have authorized us to invest from
1-800-345-3533                     an account by exchanging shares from another   your bank account.
                                   American Century account.
                                                                                  Sell shares
                                   Exchange shares                                Call a Service Representative.
                                   Call or use our Automated Information Line
                                   if you have authorized us to accept
                                   telephone instructions.
---------------------------------- ---------------------------------------------- -----------------------------------------------
By mail or fax                     Open an account                                Make additional investments
P.O. Box 419385                    Send a signed, completed application and       Send your check or money order for at least
Kansas City, MO 64141-6385         check or money order payable to American       $50 with an investment slip or $250 without
                                   Century Investments.                           an investment slip. If you don't have an
Fax                                                                               investment slip, include your name, address
816-340-4655                       Exchange shares                                and account number on your check or money
                                   Send written instructions to exchange your     order.
                                   shares from one American Century account to
                                   another.                                       Sell shares
                                                                                  Send written instructions or a redemption
                                                                                  form to sell shares. Call a Service
                                                                                  Representative to request a form.
---------------------------------- ---------------------------------------------- -----------------------------------------------
Automatically                      Open an account                                Make additional investments
                                   Not available.                                 With the automatic investment privilege, you
                                                                                  can purchase shares on a regular basis. You
                                   Exchange shares                                must invest at least $600 per year per
                                   Send written instructions to set up an         account.
                                   automatic exchange of your shares from one
                                   American Century account to another.           Sell shares
                                                                                  If you have at least $10,000 in your account,
                                                                                  you may sell shares automatically by
                                                                                  establishing Check-A-Month or Automatic
                                                                                  Redemption plans.

---------------------------------- ---------------------------------------------- -----------------------------------------------
By wire                            Open an account                                Make additional investments
                                   Call to set up your account or mail a          Follow the wire instructions provided in the
                                   completed application to the address           Open an account section.
                                   provided in the "By mail" section. Give your
                                   bank the following information to wire money.  Sell shares
                                   Our bank information                           You can receive redemption proceeds by wire
Please remember, if you request             Commerce Bank N.A.                    or electronic transfer.
redemptions by wire, $10 will be            Routing No. 101000019
deducted from the amount                    Account No. Please call for the
redeemed. Your bank also may                appropriate account number
charge a fee.                      The fund name
                                   Your American Century account number*          Exchange shares
                                   Your name                                      Not available.
                                   The contribution year (for IRAs only)
                                   *For additional investments only






Redemptions

Your redemption proceeds will be calculated using the net asset value (NAV) next
determined after we receive your transaction request in good order. Each time
you make an investment with American Century, there is a seven-day holding
period before you can redeem those shares, unless you provide us with
satisfactory proof that your purchase funds have cleared. This seven-day holding
period begins the day after your investment is processed. However, investments
by wire require only a one-day holding period.

In addition, we reserve the right to delay delivery of redemption proceeds-up to
seven days-or to honor certain redemptions with securities, rather than cash, as
described in the next section.

Special Requirements for Large Redemptions

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

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

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

Redemption of Shares in Low-Balance Accounts

If your balance or the balance of your financial intermediary, if applicable,
falls below the minimum investment requirements for any reason other than as a
result of market fluctuation, we reserve the right to convert your shares to
Investor Class shares of the same fund. The Investor Class shares have a unified
management fee that is 0.20% higher than the Institutional Class.

Modifying or Canceling an Investment

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

Abusive Trading Practices

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

Excessive, short-term (market timing) or other abusive trading practices may
disrupt portfolio management strategies and harm fund performance. To minimize
harm to the fund and their shareholders, we reserve the right to reject any
purchase order (including exchanges) from any investor we believe has a history
of abusive trading or whose trading, in our judgment, has been or may be
disruptive to a fund. In making this judgment, we may consider trading done in
multiple accounts under common ownership or control.

Your Responsibility for Unauthorized Transactions

American Century and its affiliated companies use procedures reasonably designed
to confirm that telephone, electronic and other instructions are genuine. These
procedures include recording telephone calls, requesting personalized security
codes or other information, and sending confirmation of transactions. If we
follow these procedures, we are not responsible for any losses that may occur
due to unauthorized instructions. For transactions conducted over the Internet,
we recommend the use of a secure Internet browser. In addition, you should
verify the accuracy of your confirmation statements immediately after you
receive them.

CALLOUT
A fund's net asset value, or NAV, is the price of the fund's shares.

A redemption is the sale of all or a portion of the shares in an account,
including those sold as a part of an exchange to another American Century
account.





Investing through Financial Intermediaries

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

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

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

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

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

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

CALLOUT

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





Share Price and Distributions

Share Price

American Century determines the NAV 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 closed (including certain
U.S. holidays), we do not calculate the NAV. A fund share's NAV is the current
value of the fund's assets, minus any liabilities, divided by the number of fund
shares outstanding.

If current market prices of securities owned by a 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.

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

Distributions

Federal tax laws require the fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means the fund will not be subject to state or
federal income tax on amounts distributed. The distributions generally consist
of dividends and interest received by the fund, as well as capital gains
realized by the fund on the sale of its investment securities. The fund pays
distributions from net income monthly. 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 participate in fund distributions when they are declared, starting the
next business day after your purchase is effective. For example, if you purchase
shares on a day a distribution is declared, you will not receive that
distribution. If you redeem shares, you will receive any distribution declared
on the day you redeem. If you redeem all shares, we will include any
distributions received with your redemption proceeds.

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

CALLOUTS

Good order means that your instructions have been received in the form required
by American Century. This may include, for example, providing the fund name and
account number, the amount of the transaction and all required signatures.

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




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 or capital gains they have generated through their investment
activities. Tax consequences also may result when investors sell fund shares
after the net asset value has increased or decreased.

Tax-Deferred Accounts

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

Taxable Accounts

If you own fund shares through a taxable account, you may be taxed on your
investments if the fund makes distributions or if you sell your fund shares.

Taxability of Distributions

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


Type of Distribution                  Tax Rate for 10% and 15% Brackets       Tax Rate for All Other Brackets
--------------------                  ---------------------------------       -------------------------------

Short-term capital gains              Ordinary income rate                    Ordinary income rate
Long-term capital gains (1-5 years)   10%                                     20%
Long-term capital gains (>5 years)    8%                                      20%(1)

1 The reduced rate for these gains will not begin until 2006 because the
  security holding period must start after December 31, 2000. Once the security
  has been held for more than 5 years, the rate will be 18%.

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

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

Taxes on Transactions

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

If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to withholding, we
are required to withhold and pay to the IRS the applicable federal withholding
tax rate on taxable dividends, capital gains distributions and redemption
proceeds.


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. The fund 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.





Multiple Class Information

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

The other classes have different fees, expenses and/or minimum investment
requirements from the Institutional Class. The difference in the fee structures
between the classes is the result of their separate arrangements for shareholder
and distribution services and not the result of any difference in amounts
charged by the advisor for core investment advisory services. Accordingly, the
core investment advisory expenses do not vary by class. Different fees and
expenses will affect performance. For additional information concerning the
other classes of shares not offered by this Prospectus, call us at

*  1-800-345-2021 for Investor Class shares
*  1-800-345-3533 for Advisor Class shares

You also can 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 between the classes are (a) each class may be
subject to different expenses specific to that class; (b) each class has a
different identifying designation or name; (c) each class has exclusive voting
rights with respect to matters solely affecting such class; (d) each class may
have different exchange privileges; and (e) the Institutional Class may provide
for automatic conversion from that class into shares of the Investor Class of
the same fund.




Performance Information of 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 0.20% higher than the Institutional Class. The
Institutional Class is made available to institutional shareholders or through
financial intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge this class a lower unified management fee.
If the Institutional Class had existed during the periods presented, its
performance would have been higher because of the lower expense.

The table on the next page itemizes what contributed to the changes in Investor
Class 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, or
less, if the share class is not five years old.

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

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

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

*  Total Return - the overall percentage of return of the fund, assuming the
   reinvestment of all distributions
*  Expense Ratio - the operating expenses of the fund as a percentage of average
   net assets
*  Net Income Ratio - the net investment income of the fund as a percentage of
   average net assets
*  Portfolio Turnover - the percentage of the fund's buying and selling activity







Financial Highlights
INFLATION-ADJUSTED TREASURY FUND

Investor Class

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

Per-Share Data
                                           2001          2000          1999         1998          1997(1)
----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period      $9.41         $9.48         $9.63         $9.74         $10.00
                                        ----------    ----------    ----------    ----------    ----------
Income From Investment Operations

  Net Investment Income                    0.67          0.58          0.47          0.44           0.06

  Net Realized and Unrealized Gain
  (Loss) on Investment Transactions        0.46         (0.07)        (0.15)        (0.11)         (0.26)
                                        ----------    ----------    ----------    ----------    ----------
  Total From Investment Operations         1.13          0.51          0.32          0.33          (0.20)
                                        ----------    ----------    ----------    ----------    ----------
Distributions

  From Net Investment Income              (0.67)        (0.58)        (0.47)        (0.44)         (0.06)
                                        ----------    ----------    ----------    ----------    ----------
Net Asset Value, End of Period            $9.87         $9.41         $9.48         $9.63          $9.74
                                        ==========    ==========    ==========    ==========    ==========
  Total Return(2)                         12.62%         5.52%         3.37%         3.45%         (1.98)%

Ratios/Supplemental Data

                                           2001          2000          1999         1998          1997(1)
----------------------------------------------------------------------------------------------------------
Ratio of Operating Expenses
to Average Net Assets                      0.51%         0.51%         0.49%         0.50%        0.50%(3)

Ratio of Net Investment Income
to Average Net Assets                      6.75%         6.06%         4.84%         4.45%        5.03%(3)

Portfolio Turnover Rate                      39%           52%          127%           69%              0%

Net Assets, End of Period
(in thousands)                           $57,577       $18,610        $8,980        $5,279          $2,277

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

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

(3)  Annualized.







More information about the fund is contained in these documents

Annual and Semiannual Reports

Annual and semiannual 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 (SAI)

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

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

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

On the Internet            *EDGAR database at www.sec.gov

                           *By email request at publicinfo@sec.gov

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


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

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



Investment Company Act File No. 811-4363
0203
SH-PRS-xxxxxx



















Capital Preservation Fund
Government Agency Money Market Fund
Government Bond Fund
Treasury Fund
Inflation-Adjusted Bond Fund
Short-Term Government Fund
Ginnie Mae Fund

                                                                   March 5, 2002

                                                                American Century
                                                         Government Income Trust



This Statement of Additional Information adds to the discussion in the funds'
Prospectus dated March 5, 2002, but is not a Prospectus. The Statement of
Additional Information should be read in conjunction with the funds' current
Prospectus. If you would like a copy of the Prospectus, please contact us at the
address or telephone numbers listed on the back cover or visit American
Century's Web site at www.americancentury.com. This Statement of Additional
Information incorporates by reference certain information that appears in the
funds' annual and semiannual reports, which are delivered to all shareholders.
You may obtain a free copy of the funds' annual or semiannual reports by calling
1-800-345-2021.



                                                     American Century Investment
                                                                  Services, Inc.




TABLE OF CONTENTS

The Funds' History............................................................2

Fund Investment Guidelines....................................................2
      The Money Market Funds..................................................3
      The U.S. Treasury Fund..................................................3
      The U.S. Government Funds...............................................5

Fund Investments and Risks....................................................6
      Investment Strategies and Risks.........................................6
      Investment Policies....................................................15
      Temporary Defensive Measures...........................................17
      Portfolio Turnover.....................................................17

Management...................................................................18
      The Board of Trustees..................................................18
      Officers...............................................................21
      Code of Ethics.........................................................23

The Funds' Principal Shareholders............................................24

Service Providers............................................................26
      Investment Advisor.....................................................26
      Transfer Agent and Administrator.......................................29
      Distributor............................................................29

Other Service Providers......................................................29
      Custodian Banks........................................................29
      Independent Accountant.................................................29

Brokerage Allocation.........................................................29

Information About Fund Shares................................................30
      Multiple Class Structure...............................................30
      Buying, Selling and Exchanging Fund Shares.............................35
      Valuation of a Fund's Securities.......................................35

Taxes 36
      Federal Income Tax.....................................................36
      State and Local Taxes..................................................37

How Fund Performance Information Is Calculted................................37
      Performance Comparisons................................................39
      Permissible Advertising Information....................................40
      Multiple Class Performance Advertising.................................40

Financial Statements.........................................................40

Explanation of Fixed-Income Securities Ratings...............................41

THE FUNDS' HISTORY

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

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

FUND INVESTMENT GUIDELINES

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

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

The money market funds operate pursuant to Rule 2a-7 under the Investment
Company Act of 1940 (the Investment Company Act), which permits the valuation of
portfolio securities on the basis of amortized cost. To rely on the rule, each
fund must be diversified with regard to 100% of its assets other than securities
issued or guaranteed by the U.S. government. For purposes of Rule 2a-7,
diversified means that each fund must not invest more than 5% of its total
assets in securities of a single issuer, or, with respect to 75% of assets, more
than 10% of assets in securities guaranteed by a single guarantor, other than
the U.S. government, although it may invest up to 25% of its total assets in
securities of a single issuer that are rated in the highest credit quality
category for a period of up to three business days after purchase. Each fund
also must not invest more than (a) the greater of 1% of its total assets or $1
million in securities issued by a single issuer that are rated in the second
highest credit quality category; and (b) 5% of its total assets in securities
rated in the second highest credit quality category. Each fund is considered
diversified under the Investment company Act provided that it complies with the
definition of diversified under Rule 2a-7.

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

Each fund (except Short-Term Government and Ginnie Mae) generally seeks to
purchase U.S. government securities whose interest payments are state tax
exempt. As a result, these funds' dividend distributions are expected to be
exempt from state income tax. See page 36 for more information on tax treatment
of the funds' distributions.





                                 Investor Class             Advisor Class
                                 --------------             -------------


                              Ticker    Inception        Ticker      Inception
Fund                          Symbol    Date             Symbol      Date

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


                                C Class                   Institutional Class
                                -------                   -------------------


                            Ticker   Inception           Ticker       Inception
Fund                        Symbol   Date                Symbol       Date

Capital Preservation        N/A      N/A                 N/A          N/A
Government Agency
    Money Market            N/A      N/A                 N/A          N/A
Government Bond             N/A      N/A                 N/A          N/A
Treasury                    N/A      N/A                 N/A          N/A
Inflation-Adjusted Bond     N/A      N/A                 N/A          N/A
Short-Term Government       N/A      N/A                 N/A          N/A
Ginnie Mae Fund             N/A      N/A                 N/A          N/A


The Money Market Funds

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

Capital Preservation

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

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

Government Agency Money Market

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

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

The U.S. Treasury Fund


Treasury

Treasury seeks to earn and distribute the highest level of current income exempt
from state income taxes as is consistent with an investment in U.S. treasury
bills, notes and bonds of all maturity ranges.

Treasury pursues its investment objective by investing primarily in securities
issued or guaranteed by the U.S. Treasury. As a result, it may invest in U.S.
Treasury bills, bonds, notes and zero-coupon securities, all of which are backed
by the direct full faith and credit pledge of the U.S. government. In addition,
the fund may invest up to 35% of its total assets in securities issued by
agencies and instrumentalities of the U.S. government other than the U.S.
Treasury.

Treasury's weighted average portfolio maturity varies as determined by the fund
managers, taking into consideration market conditions and other relevant
factors. Treasury invests in securities of all maturity ranges and is not
limited to a specific weighted average portfolio maturity range. Consequently,
changing interest rates may have a greater effect on the present value of the
fund's shares than shares of a fund with a shorter weighted average portfolio
maturity. Because of this interplay between market interest rates and share
price, investors are encouraged to evaluate fund performance on the basis of
total return.

The U.S. Government Funds


Inflation-Adjusted Bond

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

There are no maturity or duration restrictions for the securities in which
Inflation-Adjusted Bond may invest. The U.S. Treasury has issued
inflation-indexed Treasury securities with five-year, 10-year and 30-year
maturities. Inflation-Adjusted Bond may be appropriate for investors who are
seeking to protect all or a part of their investment portfolio from the effects
of inflation.

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

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

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

Short-Term Government

Short-Term Government seeks to provide investors with a high level of current
income consistent with stability of principal. Short-Term Government pursues
this objective by investing primarily in securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities. Under normal conditions,
the fund managers invest at least 65% of Short-Term Government's total assets in
securities of the U.S. government and its agencies and maintain a weighted
average maturity of three years or less. The fund managers may invest up to 20%
of the fund's total assets in investment-grade debt securities of U.S.
companies.

Ginnie Mae Fund

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

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

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

A unique feature of mortgage-backed securities, such as GNMA certificates, is
that their principal is scheduled to be paid back gradually for the duration of
the loan rather than in one lump sum at maturity. Investors (such as those
investing in the Ginnie Mae Fund) receive scheduled monthly payments of
principal and interest, but they also may receive unscheduled prepayments of
principal on the underlying mortgages. See Mortgage-Backed Securities on page 7
for a discussion of prepayment risk.

Government Bond

Government Bond seeks to provide a consistent and high level of current income.
Government Bond pursues its investment objective by investing in securities
issued by agencies and instrumentalities of the U.S. government, including
mortgage-backed securities. It may invest in U.S. Treasury bills, bonds, notes
and zero-coupon securities, all of which are backed by the direct full faith and
credit pledge of the U.S. government. It also may invest in securities issued by
agencies and instrumentalities of the U.S. government other than the U.S.
Treasury. The U.S. government provides varying levels of financial support to
these agencies. Government Bond invests primarily in securities with maturities
of 10 or more years and maintains a weighted average portfolio maturity ranging
from 10 to 30 years.

Fund INVESTMENTS AND RISKS

Investment Strategies and Risks

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

U.S. Government Securities

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

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

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

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

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

Interest Rate Resets on Floating-Rate U.S. Government Agency Securities

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

Master Demand Notes (Government Agency Money Market Only)

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

Zero-Coupon Securities

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

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

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

Mortgage-Backed Securities

Background

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

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

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

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

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

GNMA Certificates

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

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

Fannie Mae Certificates

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

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

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

Freddie Mac Certificates

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

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

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

Collateralized Mortgage Obligations (CMOs)

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

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

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

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

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

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

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

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

Ginnie Mae may buy only GNMA-backed CMOS.

Stripped Mortgage-Backed Securities (Short-Term Government only)

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

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

Adjustable-Rate Mortgage Loans (ARMs)

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

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

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

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

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

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

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

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

Inflation-Indexed Treasury Securities

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

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

Structure and Inflation Index

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

Semiannual coupon interest payments are made at a fixed percentage of the
inflation-indexed principal value. The coupon rate for the semiannual interest
rate of each issuance of inflation-indexed Treasury securities is determined at
the time the securities are sold to the public (i.e., by competitive bids in the
auction). The coupon rate will likely reflect real yields available in the
Treasury market; real yields are the prevailing yields on Treasury securities
with similar maturities, less then-prevailing inflation expectations. While a
reduction in inflation will cause a reduction in the interest payment made on
the securities, the repayment of principal at the maturity of the security is
guaranteed by the U.S. Treasury to be no less than the original face or par
amount of the security at the time of issuance.

Indexing Methodology

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

Taxation

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

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

Inflation-Adjusted Treasury, however, distributes all income on a monthly basis.
Investors in Inflation-Adjusted Treasury will receive dividends that represent
both the interest payments and the principal adjustments of the
inflation-indexed securities held in the fund's portfolio. An investment in
Inflation-Adjusted Treasury may, therefore, be a means to avoid the cash flow
mismatch associated with a direct investment in inflation-indexed securities.
For more information about taxes and their effect on you as an investor in the
fund, see Taxes, page 36.

U.S. Government Agencies

A number of U.S. government agencies and instrumentalities other than the U.S.
Treasury may issue inflation-indexed securities. Some U.S. government agencies
have issued inflation-indexed securities whose design mirrors that of the
inflation-indexed Treasury securities described above.

Share Price Volatility

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

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


Repurchase Agreements

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

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

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

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


When-Issued and Forward Commitment Agreements

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

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

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

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

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

Short-Term Securities

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

Examples of those securities include:

*  Securities issued or guaranteed by the U.S. government and its agencies
   and instrumentalities
*  Commercial Paper
*  Certificates of Deposit and Euro Dollar Certificates of Deposit
*  Bankers' Acceptances
*  Short-term notes, bonds, debentures or other debt instruments
*  Repurchase agreements

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


DEBT SECURITIES

Short-Term Government may invest in debt securities of U.S. companies when the
fund managers believe such securities represent an attractive investment for the
fund. The value of the debt securities in which the fund may invest will
fluctuate based upon changes in interest rates and the credit quality of the
issuer. Debt securities will be limited to investment-grade obligations.
Investment grade means that at the time of purchase, such obligations are rated
within the four highest categories by a nationally recognized statistical rating
organization (for example, at least Baa by Moody's Investors Service, Inc. or
BBB by Standard & Poor's Corporation), or, if not rated, are of equivalent
investment quality as determined by the fund's advisor. According to Moody's,
bonds rated Baa are medium-grade and possess some speculative characteristics. A
BBB rating by S&P indicates S&P's belief that a security exhibits a satisfactory
degree of safety and capacity for repayment, but is more vulnerable to adverse
economic conditions and changing circumstances.

In addition, the value of Short-Term Government's investments in debt securities
of U.S. companies will change as prevailing interest rates change. In general,
the prices of such securities vary inversely with interest rates. As prevailing
interest rates fall, the prices of bonds and other securities that trade on a
yield basis generally rise. When prevailing interest rates rise, bond prices
generally fall. Depending upon the particular amount and type of fixed-income
securities holdings of the fund, these changes may impact the net asset value of
the fund's shares.


Investment Policies

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

Fundamental Investment Policies

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

Subject             Policy
-------             ------

Senior Securities   A fund may not issue senior securities, except as permitted
                    under the Investment Company Act.

Borrowing           A fund may not borrow money, except for temporary or
                    emergency purposes (not for leveraging or investment), in an
                    amount exceeding 33-1/3% of the fund's total assets.

Lending             A 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 A fund may not purchase or sell real estate unless
                    acquired as a result of ownership of securities or other
                    instruments. This policy shall not prevent a fund from
                    investing in securities or other instruments backed by real
                    estate or securities of companies that deal in real estate
                    or are engaged in the real estate business.

Concentration       A fund may not concentrate its investments in securities of
                    issuers in a particular industry (other than securities
                    issued or guaranteed by the U.S. government or any of its
                    agencies or instrumentalities).

Underwriting        A fund may not serve as an underwriter of securities issued
                    by others, except to the extent that the fund may be
                    considered an underwriter within the meaning of the
                    Securities Act of 1933 in the disposition of restricted
                    securities.

Commodities         A fund may not purchase or sell physical commodities unless
                    acquired as a result of ownership of securities or other
                    instruments, provided that this limitation shall not
                    prohibit the fund from purchasing or selling options and
                    futures contracts or from investing in securities or other
                    instruments backed by physical commodities.

Control             A fund may not invest for purposes of exercising control
                    over management.

For purposes of the investment restrictions relating to lending and borrowing,
the funds have received an exemptive order from the SEC regarding an interfund
lending program. Under the terms of the exemptive order, the funds may borrow
money from or lend money to other ACIM-advised funds that permit such
transactions. All such transactions will be subject to the limits for borrowing
and lending set forth above. The funds will borrow money through the program
only when the costs are equal to or lower than the cost of short-term bank
loans. Interfund loans and borrowing normally extend only overnight, but can
have a maximum duration of seven days. The funds will lend through the program
only when the returns are higher than those available from other short-term
instruments (such as repurchase agreements). The funds may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to a lending fund could result in a lost investment
opportunity or additional borrowing costs.

For purposes of the investment restriction relating to concentration, a fund
shall not purchase any securities that would cause 25% or more of the value of
the fund's total assets at the time of purchase to be invested in the securities
of one or more issuers conducting their principal business activities in the
same industry, provided that

(a) there is no limitation with respect to obligations issued or guaranteed by
the U.S. government, any state, territory or possession of the United States,
the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and repurchase agreements secured by
such obligations,

(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 their parents,

(c) utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry, and

(d) personal credit and business credit businesses will be considered separate
industries.

Nonfundamental Investment Policies

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

Subject             Policy
-------             ------

Leveraging          A fund may not purchase additional investment securities at
                    any time during which outstanding borrowings exceed 5% of
                    the total assets of the fund.

Liquidity           A fund may not purchase any security or enter into a
                    repurchase agreement if, as a result, more than 15% (10% for
                    money market funds) of its net assets would be invested in
                    illiquid securities. Illiquid securities include repurchase
                    agreements not entitling the holder to payment of principal
                    and interest within seven days, and in securities that are
                    illiquid by virtue of legal or contractual restrictions on
                    resale or the absence of a readily available market.

Short               Sales A fund may not sell securities short, unless it owns
                    or has the right to obtain securities equivalent in kind and
                    amount to the securities sold short, and provided that
                    transactions in futures contracts and options are not deemed
                    to constitute selling securities short.

Margin              A fund may not purchase securities on margin, except to
                    obtain such short-term credits as are necessary for the
                    clearance of transactions, and provided that margin payments
                    in connection with futures contracts and options on futures
                    contracts shall not constitute purchasing securities on
                    margin.

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





Temporary Defensive Measures

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

*  interest-bearing bank accounts or certificates of deposit
*  U.S. government securities and repurchase agreements collateralized by U.S.
   government securities
*  money market funds

Portfolio Turnover

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

For Short-Term Government, the higher portfolio turnover rate for 2000 resulted
from decisions to shift asset allocations among mortgage-backed, Treasury and
government agency securities. In 2001, the portfolio turnover rate returned to
the normal range for American Century's taxable funds. In part, these changes
represented efforts to make the fund more closely reflect the composition of its
peer group of competing funds.

MANAGEMENT

The individuals listed in the table below serve as trustees or officers of the
funds. Trustees listed as interested persons of the funds (as defined in the
Investment Company Act) are "interested" primarily by virtue of their engagement
as officers of American Century Companies, Inc. (ACC) or its wholly-owned
subsidiaries, including the funds' investment advisor, American Century
Investment Management, Inc. (ACIM), and the funds' principal underwriter,
American Century Investment Services, Inc. (ACIS).

The remaining trustees, because they are not "interested" persons of the funds,
are viewed as independent trustees under the Investment Company Act provisions
and SEC rules referencing such trustees. More than two-thirds of the trustees
are independent; that is, they are not employees or officers of, and have no
financial interest in, ACC or any of its wholly-owned subsidiaries, including
ACIM and ACIS.

All persons named as officers of the funds also serve in similar capacities for
the investment companies advised by ACIM. Not all officers of the funds are
listed; only those officers with policy-making functions for the funds are
listed. No officer is compensated for his or her service as an officer of the
funds. The officers listed in the following table are interested persons of the
funds as described above.






                                                                                                        Number of
                                                                                                        Portfolios
                                                                                                        in Fund
                                                     Length                                             Complex        Other
                                 Position(s)         of Time                                            Overseen       Directorships
                                 Held with           Served           Principal Occupation(s)           by             Held by
Name, Address (Age)              Fund                (years)          During Past 5 Years               Trustee        Trustee

----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees

Interested Trustees
James E. Stowers III             Trustee,            6                Co-Chairman, ACC                  39             Director, ACC, ACIM, ACSC
4500 Main Street                 Chairman                             (September 2000 to present)                      and other ACC subsidiaries
Kansas City, MO 64111            of                                   Co-Chief Investment Officer,
(42)                             the Board                            U.S. Equities (September 2000
                                                                      to February 2001)
                                                                      Chief Executive Officer, ACC
                                                                      ACIM, ACSC and
                                                                      other ACC subsidiaries
                                                                      (June 1996 to September 2000)
                                                                      President, ACC (January 1995
                                                                      to June 1997)
                                                                      President, ACIM and ACSC
                                                                      (April 1993 to August 1997)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
William M. Lyons                 Trustee,            4                Chief Executive Officer, ACC      76             Director, ACIM, ACSC and other
4500 Main Street                 President                            and other ACC subsidiaries                       ACC subsidiaries
Kansas City, MO 64111                                                 (September 2000 to present)
(45)                                                                  President, ACC (June 1997
                                                                      to present)
                                                                      Chief Operating Officer,
                                                                      ACC (June 1996 to
                                                                      September 2000)
                                                                      General Counsel, ACC, ACIM,
                                                                      ACIS, ACSC and other ACC
                                                                      subsidiaries (June 1989 to
                                                                      June 1998)
                                                                      Executive Vice President,
                                                                      ACC (January 1995
                                                                      to June 1997)
                                                                      Also serves as: Executive
                                                                      Vice President and Chief
                                                                      Operating Officer, ACIM,
                                                                      ACSC and other ACC
                                                                      subsidiaries, and
                                                                      Executive Vice President
                                                                      of other ACC subsidiaries

----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees

Albert Eisenstat                 Trustee             6                General Partner,                  39              Independent Director,
1665 Charleston Road                                                  Discovery Ventures                                Sungard Data Systems (1991 to present)
Mountain View, CA 94043                                               (Venture capital firm,                            Independent Director, Business Objects S/A
(71)                                                                  1996 to 1998)                                     (1994 to present)

Ronald J. Gilson                 Trustee             6                Charles J. Meyers Professor       39              None
1665 Charleston Road                                                  of Law and Business,
Mountain View, CA 94043                                               Stanford Law School
(55)                                                                  (1979 to present)
                                                                      Mark and Eva Stern
                                                                      Professor of Law and
                                                                      Business, Columbia
                                                                      University School of Law
                                                                      (1992 to present)
                                                                      Counsel, Marron, Reid &
                                                                      Sheehy (a San Francisco
                                                                      law firm, 1984 to present)
Myron S. Scholes                 Trustee             21               Partner, Oak Hill Capital         39              Director, Dimensional Fund Advisors
1665 Charleston Road                                                  Management, (1999-present)                        (investment advisor, 1982 to present)
Mountain View, CA 94043                                               Principal, Long-Term                              Director, Smith Breeden Family of
(60)                                                                  Capital Management                                Funds (1992 to present)
                                                                      (investment advisor,
                                                                      1993 to January 1999)
                                                                      Frank E. Buck Professor
                                                                      of Finance, Stanford
                                                                      Graduate School of Business
                                                                      (1981 to present)

Kenneth E. Scott                 Trustee             30               Ralph M. Parsons Professor        39              Director, RCM Capital Funds, Inc.
1665 Charleston Road                                                  of Law and Business,                              (1994 to present)
Mountain View, CA 94043                                               Stanford Law School
(73)                                                                  (1972 to present)

Jeanne D. Wohlers                Trustee             17               Director and Partner,,            39              Director, Indus International
1665 Charleston Road                                                  Windy Hill Productions, LP                        (software solutions,
Mountain View, CA 94043                                               (educational software,                            January 1999 to present)
(56)                                                                  1994 to 1998)                                     Director, Quintus Corporation
                                                                                                                        (automation solutions,
                                                                                                                        1995 to present)


----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Officers

William M. Lyons                 President           1                See entry above under             76              See entry above under
4500 Main Street                                                      "Interested Trustees".                            "Interested Trustees".
Kansas City, MO 64111
(46)

Robert T. Jackson                Executive           1                Chief Administrative Officer      Not             Not applicable.
4500 Main St.                    Vice                                 and Chief Financial Officer,      applicable
Kansas City, MO 64111            President                            ACC (August 1997 to present)
(56)                             and                                  President, ACSC
                                 Chief                                (January 1999 to present)
                                 Financial                            Executive Vice President, ACC
                                 Officer                              (May 1995 to present)
                                                                      Also serves as: Executive Vice
                                                                      President and Chief Financial Officer,
                                                                      ACIM, ACIS and other ACC subsidiaries

Maryanne Roepke, CPA             Senior Vice         1                Senior Vice President and         Not             Not applicable
4500 Main St.                    President,                           Assistant Treasurer, ACSC         applicable
Kansas City, MO 64111            Treasurer
(45)                             and Chief
                                 Accounting
                                 Officer
David C. Tucker                  Senior Vice         1                Senior Vice President, ACIM,      Not             Not applicable
4500 Main St.                    President                            ACIS, ACSC and other ACC          applicable
Kansas City, MO 64111            and                                  subsidiaries
(43)                             General                              (June 1998 to present)
                                 Counsel                              General Counsel, ACC,
                                                                      ACIM, ACIS, ACSC and
                                                                      other ACC subsidiaries
                                                                      (June 1998 to present)
                                                                      Consultant to mutual
                                                                      fund industry
                                                                      (May 1997 to April 1998)

C. Jean Wade                     Controller,         1                Vice President, ACSC              Not             Not applicable
4500 Main St.                    Vice                                 (February 2000 to present)        applicable
Kansas City, MO 64111            President                            Controller-Fund Accounting,
(37)                                                                  ACSC
Jon Zindel                       Tax Officer         3                Vice President, Corporate Tax,    Not             Not applicable
4500 Main Street                                                      ACSC (April 1998 to present)      applicable
Kansas City, MO 64111                                                 Vice President, ACIM, ACIS
(34)                                                                  and other ACC subsidiaries
                                                                      (April 1999 to present)
                                                                      President, American Century
                                                                      Employee Benefit Services, Inc.
                                                                      (January 2000 to December 2000)
                                                                      Treasurer, American Century
                                                                      Ventures, Inc.
                                                                      (December 1999 to January 2001)
                                                                      Director of Taxation, ACSC
                                                                      (July 1996 to April 1998)








THE BOARD OF TRUSTEES

The Board of Trustees oversees the management of the funds and meets at least
quarterly to review reports about fund operations. Although the Board of
Trustees does not manage the funds, it has hired the advisor to do so. The
trustees, in carrying out their fiduciary duty under the Investment Company Act
of 1940, are responsible for approving new and existing management contracts
with the funds' advisor. In carrying out these responsibilities, the board
reviews material factors to evaluate such contracts, including (but not limited
to) assessment of information related to the advisor's performance and expense
ratios, estimates of income and indirect benefits (if any) accruing to the
advisor, the advisor's overall management and projected profitability, and
services provided to the funds and their investors.

The board has the authority to manage the business of the funds on behalf of
their investors, and it has all powers necessary or convenient to carry out that
responsibility. Consequently, the trustees may adopt Bylaws providing for the
regulation and management of the affairs of the funds and may amend and repeal
them to the extent that such Bylaws do not reserve that right to the funds'
investors. They may fill vacancies in or reduce the number of board members, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate. They may appoint from their own number and establish and
terminate one or more committees consisting of two or more trustees who may
exercise the powers and authority of the board to the extent that the trustees
determine. They may, in general, delegate such authority as they consider
desirable to any officer of the funds, to any committee of the board and to any
agent or employee of the funds or to any custodian, transfer or investor
servicing agent, or principal underwriter. Any determination as to what is in
the interests of the funds made by the trustees in good faith shall be
conclusive.


Committees

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




                                                                                                                 Meetings
Committee           Members                     Function                                                          Fiscal
Audit               Jeanne D. Wohlers           The Audit Committee recommends the engagement of the              5
                    Albert Eisenstat            funds' independent auditors and oversees its activities.
                    Kenneth E. Scott            The committee receives reports from the advisor's Internal
                                                Audit Department, which is accountable to the committee.
                                                The committee also receives reporting about compliance
                                                matters affecting the Trust.

Nominating          Kenneth E. Scott            The Nominating Committee primarily considers and                  5
                    Ronald J. Gilson            recommends individuals for nomination as trustees. The
                    Albert Eisenstat            names of potential trustee candidates are drawn from a
                    Myron S. Scholes            number of sources, including recommendations from members
                    Jeanne D. Wohlers           of the board, management and shareholders. This committee
                                                also reviews and makes recommendations to the board with
                                                respect to the composition of board committees and other
                                                board-related matters, including its organization, size,
                                                composition, responsibilities, functions and compensation.

Portfolio           Myron S. Scholes            The Portfolio Committee reviews quarterly the investment          5
                    Ronald J. Gilson            activities and strategies used to manage fund assets. The
                                                committee regularly receives reports from portfolio managers,
                                                credit analysts and other investment personnel concerning
                                                the funds' investments.

Quality             Ronald J. Gilson            The Quality of Service Committee reviews the level and quality    5
of                  Myron S. Scholes            of transfer agent and administrative services provided to the
Service             William M. Lyons            funds and their shareholders. It receives and reviews reports
                                                comparing those services to those of fund competitors and
                                                seeks to improve such services where feasible and appropriate.


Compensation of Trustees

The trustees serve as trustees for eight American Century investment companies.
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
eight companies based on a schedule that takes into account the number of
meetings attended and the assets of the funds for which the meetings are held.
These fees and expenses are divided among the eight 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 following table shows the aggregate compensation paid by the funds for the
periods indicated and by the eight investment companies served by the board to
each trustee who is not an interested person as defined in the Investment
Company Act.

Aggregate Trustee Compensation for Fiscal Year Ended September 30, 2001


                         Total Compensation       Total Compensation from the
Name of Trustee(1)       from the Funds(2)        American Century Family of Funds(3)
Albert Eisenstat         $8,257                   $79,750
Ronald J. Gilson         8,758                    87,750
Myron S. Scholes         7,969                    74,750
Kenneth E. Scott         8,422                    82,000
Jeanne D. Wohlers        8,042                    76,000

1    Mr. Isaac Stein retired from the Board on September 15, 2000. He received
     $318 from the funds during the fiscal year ended September 30, 2001.

2    Includes compensation paid to the trustees during the fiscal year ended
     September 30, 2001, and also includes amounts deferred at the election of
     the trustees under the Amended and Restated American Century Mutual Funds
     Deferred Compensation Plan for Non-Interested Directors and Trustees. The
     total amount of deferred compensation included in the preceding table is as
     follows: Mr. Eisenstat, $10,000; Mr. Gilson, $87,750; Mr. Scholes, $74,750;
     Mr. Scott, $41,000 and Ms. Wohlers, $43,560.

3    Includes compensation paid by the eight investment company members of the
     American Century family of funds served by this board.

The funds have adopted the Amended and Restated American Century Mutual Funds
Deferred Compensation Plan for Non-Interested Directors 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 of the funds.

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

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

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

No deferred fees were paid to any trustee under the plan during the fiscal year
ended September 30, 2001.


Ownership of Fund Shares

The trustees owned shares in the funds as of December 31, 2000, as shown in the
table below:


                                                                                Name of Directors
--------------------------------------------------------------------------------------------------------------------------------------------------

                                                        James E.             William M.                 Albert                     Ronald J.
                                                       Stowers III              Lyons                  Eisenstat                    Gilson
--------------------------------------------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:

Capital Preservation Fund
Government Agency Money Market Fund
Government Bond Fund
Treasury Fund                                                             (Info to be filed by amendment)
Inflation-Adjusted Bond Fund
Short-Term Government Fund
Ginnie Mae Fund

Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies
------------------------------------------------------------------------------------------------------------------------------------



                                                                            Name of Directors
------------------------------------------------------------------------------------------------------------------------------------

                                                                      Myron S.              Kenneth E.             Jeanne D.
                                                                       Scholes                 Scott                 Wohlers
------------------------------------------------------------------------------------------------------------------------------------
Dollar Range of Equity Securities in the Funds:

Capital Preservation Fund
Government Agency Money Market Fund
Government Bond Fund
Treasury Fund                                                             (Info to be filed by amendment)
Inflation-Adjusted Bond Fund
Short-Term Government Fund
Ginnie Mae Fund

Aggregate Dollar Range of Equity
Securities in all Registered Investment
Companies Overseen by Director in
Family of Investment Companies

Ranges: A-none, B-$1-$10,000, C-$10,001-$50,000, D-$50,001-$100,000, E-More than $100,000

Code of Ethics

The funds, their investment advisor and principal underwriters have adopted a
code of ethics under Rule 17j-1 of the Investment Company Act and this code of
ethics permits personnel subject to the code to invest in securities, including
securities that may be purchased or held by the funds, provided that they first
obtain approval from the compliance department before making such investments.

The Funds' Principal Shareholders

As of March 1, 2002, the following companies were the record owners of more than
5% of the outstanding shares of any class of a fund.

Fund     Shareholder                             Percentage of Outstanding Shares Owned

Ginnie Mae
Investor
         Charles Schwab & Company                                                    x%
         San Francisco, California
Advisor
         Saxon & Company                                                             x%
         Philadelphia, Pennsylvania
         Charles Schwab & Company                                                    x%
         San Francisco, California
         Fleet National Bank Alliance                                                x%
         Rochester, New York
C
         American Enterprise Investment Services                                     x%
         Minneapolis, Minnesota

Government Agency
Advisor
         Sterne Agee & Leach Inc.                                                    x%
         Birmingham, Alabama
         Sterne Agee & Leach Inc.                                                    x%
         TTEE FBO Alliant National Corp.
         Birmingham, Alabama
         Boone County National Bank                                                  x%
         Columbia, Missouri
         The Trust Company of Sterne Agee & Leach Inc.                               x%
         TTEE FBO Anesthesiology Consultants Pension Plan
         Birmingham, Alabama
         The Trust Company of Sterne Agee & Leach Inc.                               x%
         TTEE FBO The Orthopaedic Group PC Profit Sharing Plan
         Birmingham, Alabama
         The Trust Company of Sterne Agee & Leach Inc.                               x%
         TTEE FBO Florence Housing Authority Pension Plan
         Birmingham, Alabama
Inflation-Adjusted Bond
Investor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         National Financial Services Corporation                                     x%
         New York, New York
Advisor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         Nationwide Trust Company                                                    x%
         Columbus, Ohio
         National Financial Services LLC                                             x%
         New York, New York



Fund     Shareholder                            Percentage of Outstanding Shares Owned

Government Bond
Investor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         National Financial Services Corporation                                     x%
         New York, New York
Advisor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         Nationwide Trust Company                                                    x%
         Columbus, Ohio

Treasury
Investor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         National Financial Services Corporation                                     x%
         New York, New York
Advisor
         Charles Schwab & Company                                                    x%
         San Francisco, California
         Blush & Co.                                                                 x%
         New York, New York

Short-Term Government
Investor
         Stowers Institute for Medical Research                                      x%
         Kansas City, Missouri
         Nationwide Insurance Company QPVA                                           x%
         Columbus, Ohio
Advisor
         Circle Trust Company                                                        x%
         Custodian for Kansas Agencies & Investments Inc. Profit Sharing Plan
         Stamford, Connecticut
         Nationwide Trust Company FSB                                                x%
         Columbus, Ohio
         Painewebber FBO                                                             x%
         Bishop Institutional Advisors
         New York, New York
         Fiserv Securities Inc                                                       x%
         Trade House Account
         Philadelphia, Pennsylvania

The funds are unaware of any other shareholders, beneficial or of record, who
own more than 5% of any class of a fund's outstanding shares. As of March 1,
2002, the officers and trustees of the funds, as a group, owned less than 1% of
any class of a fund's outstanding shares.





Service Providers

The funds have no employees. To conduct their day-to-day activities, the funds
have hired a number of service providers. Each service provider has a specific
function to fill on behalf of the funds that is described below. ACIM, ACSC and
ACIS are wholly owned by ACC. James E. Stowers, Jr., Chairman of ACC, controls
ACC by virtue of his ownership of a majority of its voting stock.

Investment Advisor

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

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

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

Investment Category Fee Schedule for:
Capital Preservation, Government Agency Money Market

Category Assets                      Fee Rate
---------------                      --------
First $1 billion                     0.2500%
Next $1 billion                      0.2070%
Next $3 billion                      0.1660%
Next $5 billion                      0.1490%
Next $15 billion                     0.1380%
Next $25 billion                     0.1375%
Thereafter                           0.1370%

Investment Category Fee Schedule for:
Government Bond, Treasury, Inflation-Adjusted Bond

Category Assets                      Fee Rate
---------------                      --------
First $1 billion                     0.2800%
Next $1 billion                      0.2280%
Next $3 billion                      0.1980%
Next $5 billion                      0.1780%
Next $15 billion                     0.1650%
Next $25 billion                     0.1630%
Thereafter                           0.1625%

Investment Category Fee Schedule for:
Short-Term Government, Ginnie Mae

Category Assets                      Fee Rate
---------------                      --------
First $1 billion                     0.3600%
Next $1 billion                      0.3080%
Next $3 billion                      0.2780%
Next $5 billion                      0.2580%
Next $15 billion                     0.2450%
Next $25 billion                     0.2430%
Thereafter                           0.2425%

The Complex Fee is determined according to the schedule below.

Complex Fee Schedule

Complex Assets       Investor Class: Fee Rate   Advisor Class: Fee Rate    C Class: Fee Rate   Institutional Class: Fee Rate
--------------       ------------------------   -----------------------    -----------------   -----------------------------
First $2.5 billion   0.3100%                    0.0600%                    0.3100%             0.1100%
Next $7.5 billion    0.3000%                    0.0500%                    0.3000%             0.1000%
Next $15 billion     0.2985%                    0.0485%                    0.2985%             0.0985%
Next $25 billion     0.2970%                    0.0470%                    0.2970%             0.0970%
Next $50 billion     0.2960%                    0.0460%                    0.2960%             0.0960%
Next $100 billion    0.2950%                    0.0450%                    0.2950%             0.0950%
Next $100 billion    0.2940%                    0.0440%                    0.2940%             0.0940%
Next $200 billion    0.2930%                    0.0430%                    0.2930%             0.0930%
Next $250 billion    0.2920%                    0.0420%                    0.2920%             0.0920%
Next $500 billion    0.2910%                    0.0410%                    0.2910%             0.0910%
Thereafter           0.2900%                    0.0400%                    0.2900%             0.0900%

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. This number is then multiplied by a fraction, the numerator of which is
the number of days in the previous month and the denominator of which is 365
(366 in leap years).

The management agreement between the Trust and the advisor shall continue in
effect until the earlier of the expiration of two years from the date of its
execution or until the first meeting of fund 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 a majority of outstanding shareholder votes
(as defined in the Investment Company Act) and

(2) 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 states that the funds' Board of Trustees or a majority
of outstanding shareholder votes may terminate the management agreement at any
time without payment of any penalty on 60 days' written notice to the advisor.
The management agreement shall be automatically terminated if it is assigned.
The management agreement states that the advisor shall not be liable to the
funds or their shareholders for anything other than willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties.

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

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

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

Unified management fees paid by each fund for the fiscal periods ended March 31,
2001, 2000 and 1999, are indicated in the following tables. Because the
Institutional Class was not in operation at the end of the fiscal year,
information is not available.

Unified Management Fees (Investor Class)


Fund                                      2001              2000             1999 (1)
----                                      ----              ----             --------
Capital Preservation                      $15,739,134       $15,702,285      $15,124,623
Government Agency Money Market            2,669,339         $2,514,980       $2,378,090
Government Bond                           487,865           $540,905         $674,494
Treasury                                  1,715,396         $1,890,819       $2,110,741
Inflation-Adjusted Bond                   150,034           $73,520          $34,313
Short-Term Government                     4,471,193         $4,656,667       $4,822,297
Ginnie Mae Fund                           7,441,195         $7,854,963       $7,901,686




Unified Management Fees (Advisor Class)


Fund                                        2001              2000              1999
----                                        ----              ----              ----
Government Agency Money Market              $5,220            $4,279            N/A
Government Bond                             11,643            $11,647           $2,929
Treasury                                    26,131            $25,826           $4,242
Inflation-Adjusted Bond                     1,228             $191              $20
Short-Term Government                       9,403             $808              $75
Ginnie Mae Fund                             61,577            $32,158           $11,247


1  Net of reimbursements or waivers.

Transfer Agent and Administrator

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

DISTRIBUTOR

The funds' shares are distributed by ACIS, a registered broker-dealer. The
distributor is a wholly owned subsidiary of ACC and its principal business
address is 4500 Main Street, Kansas City, Missouri 64111. The distributor is the
principal underwriter of the funds' shares. The distributor makes a continuous,
best-efforts underwriting of the funds' shares. This means the distributor has
no liability for unsold shares.

Other Service Providers

Custodian Banks

J.P. Morgan Chase and Co., 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 funds' assets. 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 Accountant

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

(1)  auditing of the annual financial statements for each fund,
(2)  assisting and consulting in connection with SEC filings and
(3)  reviewing the annual federal income tax return filed for each fund.

Brokerage Allocation

The funds generally purchase and sell debt securities through principal
transactions, meaning they normally purchase securities on a net basis directly
from the issuer or a primary market-maker acting as principal for the
securities. The funds do not pay brokerage commissions on these transactions,
although the purchase price for debt securities usually includes a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market-makers typically include a dealer's mark-up (i.e., a spread
between the bid and asked prices). During the fiscal years ended March 31, 2001,
2000 and 1999, the funds did not have any brokerage commissions.

Information About Fund Shares

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

Each fund votes separately on matters affecting that fund exclusively. Voting
rights are not cumulative, so that investors holding more than 50% of the
Trust's (i.e., all funds') outstanding shares may be able to elect a Board of
Trustees. The Trust instituted dollar-based voting, meaning that the number of
votes a shareholder is entitled to is based upon the dollar amount of the
shareholder's 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
whose shares 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.

Multiple Class Structure

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

The Investor Class is made available to investors directly without any load or
commission, for a single unified management fee. The Advisor and Institutional
Classes are made available to institutional shareholders or through financial
intermediaries that do not require the same level of shareholder and
administrative services from the advisor as Investor Class shareholders. As a
result, the advisor is able to charge this class a lower unified management fee.
In addition to the management fee, however, the Advisor Class shares are subject
to a Master Distribution and Shareholder Services Plan (the Advisor Class Plan).
The C Class also is made available through financial intermediaries, for
purchase by individual investors using "wrap account" style advisory and
personal services from the intermediary. The total management fee is the same as
for Investor Class, but the C Class shares also are subject to a Master
Distribution and Individual Shareholder Services Plan (the C Class Plan)
described below. The Advisor Class Plan and the C Class Plan have been adopted
by the funds' Board of Trustees and initial shareholder in accordance with Rule
12b-1 adopted by the SEC under the Investment Company Act.


Rule 12b-1

Rule 12b-1 permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a plan adopted by its Board of
Trustees and approved by its shareholders. Pursuant to such rule, the Board of
Trustees and initial shareholder of the funds' Advisor and C Classes have
approved and entered into the Advisor Class Plan and the C Class Plan. The Plans
are described below.

In adopting the Plans, 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 Plans would benefit the funds and the
shareholders of the affected class. Pursuant to Rule 12b-1, information with
respect to revenues and expenses under the Plans is presented to the Board of
Trustees quarterly for its consideration in connection with its deliberations as
to the continuance of the Plans. Continuance of the Plans must be approved by
the Board of Trustees (including a majority of the independent trustees)
annually. The Plans may be amended by a vote of the Board of Trustees (including
a majority of the independent trustees), except that the Plans 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 Plans terminate
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 Plans will be made in accordance with Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers (NASD).


Master Distribution and Shareholder Services Plan (Advisor Class Plan)

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

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

To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
investment advisor has reduced its management fee by 0.25% per annum with
respect to the Advisor Class shares, and the funds' Board of Trustees has
adopted the Advisor Class Plan. Pursuant to the Advisor Class Plan, the Advisor
Class pays the Advisor, as paying agent of the fund, a fee equal to 0.50%
annually of the aggregate average daily asset value of the funds' Advisor Class
shares, 0.25% of which is paid for shareholder services (as described below) and
0.25% of which is paid for distribution services. During the fiscal year ended
March 31, 2001, the aggregate amount of fees paid under the Advisor Class Plan
were:

Short-Term Government                       $13, 906
Treasury                                    $50,590
Ginnie Mae                                  $91,014
Government Agency Money Market$11,809
Government Bond                             $22,546
Inflation-Adjusted Bond                     $2,379

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

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

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

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

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

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

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

(g)issuing confirmations of transactions;

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

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

(j)providing other similar administrative and sub-transfer agency services.
   Shareholder services do not include those activities and expenses that are
   primarily intended to result in the sale of additional shares of the funds.
   During the fiscal year ended March 31, 2001, the amount of fees paid by the
   funds under the Advisor Class Plan for shareholder services was:

Short-Term Government                       $6,953
Treasury                                    $25,295
Ginnie Mae                                  $45,507
Government Agency Money Market$5,904
Government Bond                             $11,273
Inflation-Adjusted Bond                     $1,189

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

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

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

(c)compensation to, and expenses (including overhead and telephone expenses) of
   the distributor;

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

(e)preparing, printing and distributing sales literature and advertising
   materials provided to the funds' shareholders and prospective shareholders;

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

(g)providing facilities to answer questions from prospective shareholders about
   fund shares;

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

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

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

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

(l)profit on the foregoing;

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

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

During the fiscal year ended March 31, 2001, the amount of fees paid by the
funds under the Advisor Class Plan for distribution services was:

Short-Term Government                       $6,953
Treasury                                    $25,295
Ginnie Mae                                  $45,507
Government Agency Money Market$5,904
Government Bond                             $11,273
Inflation-Adjusted Bond                     $1,189


Master Distribution and Individual Shareholder Services Plan (C Class Plan)

As described in the Prospectuses, the C Class shares of the funds are made
available to participants in employer-sponsored retirement or savings plans and
to persons purchasing through broker-dealers, banks, insurance companies and
other financial intermediaries that provide various administrative, shareholder
and distribution services. The funds' 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 funds' shares in various investment products or in connection with various
financial services.

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

To enable the funds' shares to be made available through such plans and
financial intermediaries, and to compensate them for such services, the funds'
Board of Trustees has adopted the C Class Plan. Pursuant to the C Class Plan,
the C Class pays the Advisor, as paying agent for the fund, a fee equal to .75%
annually of the average daily net asset value of the funds' C Class shares, .25%
of which is paid for individual shareholder services (as described below) and
 .50% of which is paid for distribution services (as described below). Because
this is a new class, no fees were paid under the C Class Plan for the most
recent fiscal year.

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

(a) providing individualized and customized investment advisory services,
   including the consideration of shareholder profiles and specific goals;

(b) creating investment models and asset allocation models for use by
   shareholders in selecting appropriate funds;

(c) conducting proprietary research about investment choices and the market in
   general;

(d) periodic rebalancing of shareholder accounts to ensure compliance with the
   selected asset allocation;

(e) consolidating shareholder accounts in one place; and

(f) other individual services.

Individual 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 C 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 C Class shares
   pursuant to selling agreements;

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

(c) compensation to, and expenses (including overhead and telephone expenses)
   of, the distributor;

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

(e) preparing, printing and distributing 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) providing facilities to answer questions from prospective shareholders about
   fund shares;

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

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

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

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

(l) profit on the foregoing;

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

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

Dealer Concessions

The funds' distributor expects to pay sales commissions to the financial
intermediaries who sell C Class shares of the funds at the time of such sales.
Payments will equal .75% of the purchase price of the C Class shares sold by the
intermediary. The distributor will retain the distribution fee paid by the funds
for the first 13 months after the shares are purchased. This fee is intended in
part to permit the distributor to recoup a portion of on-going sales commissions
to dealers plus financing costs, if any. After the first 13 months, the
distributor will make the distribution and individual shareholder services fee
payments described above to the financial intermediaries involved on a monthly
basis.


Buying, Selling AND EXCHANGING Fund Shares

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

Valuation of a Fund's Securities

Each fund's net asset value (NAV) per share is calculated as of the close of
business of the New York Stock Exchange (the Exchange) each day the Exchange is
open for business. The Exchange usually closes at 4 p.m. Eastern time. The
Exchange typically observes the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Although the funds expect
the same holidays to be observed in the future, the Exchange may modify its
holiday schedule at any time. The advisor typically completes its trading on
behalf of each fund in various markets before the Exchange closes for the day.
Each fund's NAV is calculated by adding the value of all portfolio securities
and other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.

Money Market Funds

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

The money market funds operate pursuant to Investment Company Act Rule 2a-7,
which permits valuation of portfolio securities on the basis of amortized cost.
As required by the Rule, the Board of Trustees has adopted procedures designed
to stabilize, to the extent reasonably possible, a money market fund's price per
share as computed for the purposes of sales and redemptions at $1.00. While the
day-to-day operation of the money market funds has been delegated to the fund
managers, the quality requirements established by the procedures limit
investments to certain instruments that the Board of Trustees has determined
present minimal credit risks and that have been rated in one of the two highest
rating categories as determined by a rating agency or, in the case of unrated
securities, of comparable quality. The procedures require review of the money
market funds' portfolio holdings at such intervals as are reasonable in light of
current market conditions to determine whether the money market funds' net asset
values calculated by using available market quotations deviate from the
per-share value based on amortized cost. The procedures also prescribe the
action to be taken by the advisor if such deviation should exceed 0.25%.

Actions the advisor and the Board of Trustees may consider under these
circumstances include (i) selling portfolio securities prior to maturity, (ii)
withholding dividends or distributions from capital, (iii) authorizing a
one-time dividend adjustment, (iv) discounting share purchases and initiating
redemptions in kind, or (v) valuing portfolio securities at market price for
purposes of calculating NAV.

Non-Money Market Funds

Securities held by the non-money market funds normally are priced using data
provided by an independent pricing service, provided that such prices are
believed by the advisor to reflect the fair market value of portfolio
securities.

In valuing securities, the pricing services generally take into account
institutional trading activity, trading in similar groups of securities, and any
developments related to specific securities. The methods used by the pricing
service and the valuations so established are reviewed by the advisor under the
general supervision of the Board of Trustees. There are a number of pricing
services available, and the advisor, on the basis of ongoing evaluation of these
services, may use other pricing services or discontinue the use of any pricing
service in whole or in part.

Securities not priced by a pricing service are valued at the mean between the
most recently quoted bid and ask prices provided by broker-dealers.

Debt securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the trustees
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved by the Board of
Trustees.

Taxes

Federal Income Tax

Each fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). By so
qualifying, a fund will be exempt from federal and state income taxes to the
extent that it distributes substantially all of its net investment income and
net realized capital gains (if any) to investors. If a fund fails to qualify as
a regulated investment company, it will be liable for taxes, significantly
reducing its distributions to investors and eliminating investors' ability to
treat distributions received from the funds in the same manner in which they
were realized by the funds.

Certain bonds purchased by the funds may be treated as bonds that were
originally issued at a discount. Original issue discount represents interest for
federal income tax purposes and generally can be defined as the difference
between the price at which a security was issued and its stated redemption price
at maturity. Although no cash is actually received by a fund until the maturity
of the bond, original issue discount is treated for federal income tax purposes
as income earned by a fund over the term of the bond, and therefore is subject
to the distribution requirements of the Code. The annual amount of income earned
on such a bond by a fund generally is determined on the basis of a constant
yield to maturity that takes into account the semiannual compounding of accrued
interest.

In addition, some of the bonds may be purchased by a fund at a discount that
exceeds the original issue discount on such bonds, if any. This additional
discount represents market discount for federal income tax purposes. The gain
realized on the disposition of any bond having market discount generally will be
treated as taxable ordinary income to the extent it does not exceed the accrued
market discount on such bond (unless a fund elects to include market discount in
income in tax years to which it is attributable). Generally, market discount
accrues on a daily basis for each day the bond is held by a fund. Market
discount is calculated 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 its date of issue, the gain realized on
disposition generally will be treated as short-term capital gain. In general,
any gain realized on disposition of a security held less than one year is
treated as short-term capital gain.

As of March 31, 2001, the funds in the table below had the following capital
loss carryovers. When a fund has a capital loss carryover, it does not make
capital gains distributions until the loss has been offset or expired.

Fund                                                             Capital Loss Carryover
----                                                             ----------------------
Government Agency Money Market                  $12,040 (expiring in 2004 through 2006)
Government Bond                                           $5,410,432 (expiring in 2008)
Treasury                                    $14,992,584 (expiring in 2008 through 2009)
Inflation-Adjusted Bond                        $137,676 (expiring in 2007 through 2008)
Ginnie Mae                                  $28,338,488 (expiring in 2003 through 2009)
Short-Term Government                        $94,983,851(expiring in 2002 through 2009)

Under the Code, any distribution of a fund's net realized long-term capital
gains that is designated by the fund as a capital gains dividend is taxable to
you as long-term capital gains, regardless of the length of time the investor
held the fund shares. If you purchase shares in the fund and sell them at a loss
within six months, your loss on the sale of those shares will be treated as a
long-term capital loss to the extent of any long-term capital gains dividend you
received on those shares. Any such loss will be disallowed to the extent of any
tax-exempt income dividend you received on those shares.

State and Local Taxes

Distributions also may be subject to state and local taxes, even if all or a
substantial part of these distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when a fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of these
distributions in your state.

The information above is only a summary of some of the tax considerations
affecting the funds and their shareholders. No attempt has been made to discuss
individual tax consequences. A prospective investor should consult with his or
her tax advisors or state or local tax authorities to determine whether the
funds are suitable investments.

How Fund Performance Information
is Calculated

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

For the money market funds, yield quotations are based on the change in the
value of a hypothetical investment (excluding realized gains and losses from the
sale of securities and unrealized appreciation and depreciation of securities)
over a seven-day period (base period) and stated as a percentage of the
investment at the start of the base period (base-period return). The base-period
return is then annualized by multiplying it by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent.

Calculations of effective yield begin with the same base-period return used to
calculate yield, but the return is then annualized to reflect weekly compounding
according to the following formula:

                     Effective Yield = [(Base-Period Return + 1)365/7] - 1

The SEC 30-day yield calculation for non-money market funds is as follows:
                                                (2 [(a - b + 1)6 - 1])
                                                          cd
--------------------------------------------------------------------------------

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



Money Market Fund Yields - Investor Class

(seven-day period ended March 31, 2001)

Fund                                        7-Day Yield                Effective Yield
----                                        -----------                ---------------
Capital Preservation                        4.65%                      4.76%
Government Agency Money Market              4.80%                      4.92%

Non-Money Market Fund Yields - Investor Class

(30-day period ended March 31, 2001)

Fund                                        30-Day Yield
----                                        ------------
Government Bond                             5.05%
Treasury                                    4.34%
Inflation-Adjusted Bond                     9.27%
Short-Term Government                       4.69%
Ginnie Mae Fund                             6.77%

Total returns quoted in advertising and sales literature reflect all aspects of
a fund's return, including the effect of reinvesting dividends and capital gains
distributions (if any) and any change in the fund's NAV during the period.

Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical historical investment in a fund during a stated
period and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual return of 7.18%, which is the
steady annual rate that would equal 100% growth on a compounded basis in 10
years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the funds' performances
are not constant over time, but change from year to year, and that average
annual total returns represent averaged figures as opposed to actual
year-to-year performance.

The following tables set forth the average annual total returns for the various
classes of the funds for the periods indicated as of March 31, 2001. As a new
fund, performance information for Ginnie Mae C Class is not available as of the
date of this Statement of Additional Information.

Average Annual Total Returns-Investor Class

Fiscal Year Ended March 31, 2001
                                          One         Five         Ten            Life of
Fund                                      Year        Years        Years          Fund          Inception Date
----                                      ----        -----        -----          ----          --------------
Capital Preservation                      5.75%       4.99%        4.51%          5.29%         10/13/1972
Government Agency Money Market            5.98%       5.18%        4.67%          5.06%         12/05/1989
Government Bond                           11.86%      8.64%        N/A            8.06%         09/08/1992
Treasury                                  13.17%      7.08%        7.11%          8.52%         05/16/1980
Inflation-Adjusted Bond                   12.62%      N/A          N/A            5.46%         02/10/1997
Short-Term Government                     9.25%       5.68%        5.63%          6.94%         12/15/1982
Ginnie Mae Fund                           11.70%      7.03%        7.48%          8.36%         09/23/1985



Average Annual Total Returns-Advisor Class

Fiscal Year Ended March 31, 2001

Fund                                      One Year           Life of Fund       Inception Date
----                                      --------           ------------       --------------
Government Agency Money Market            5.71%              5.23%              04/12/1999
Government Bond                           11.58%             5.78%              01/12/1998
Treasury                                  12.89%             6.80%              10/09/1997
Inflation-Adjusted Bond                   12.35%             6.92%              06/15/1998
Short-Term Government                     8.98%              5.32%              07/08/1998
Ginnie Mae Fund                           11.42%             6.25%              10/09/1997

In addition to average annual total returns, each fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as percentages or as dollar amounts and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) to illustrate the
relationship of these factors and their contributions to total return.

Performance comparisons

The funds' performance may be compared with the performance of other mutual
funds tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that are sold with a sales
charge or deferred sales charge. Sources of economic data that may be used for
such comparisons may include, but are not limited to: U.S. Treasury bill, note
and bond yields, money market fund yields, U.S. government debt and percentage
held by foreigners, the U.S. money supply, net free reserves, and yields on
current-coupon GNMAs (source: Board of Governors of the Federal Reserve System);
the federal funds and discount rates (source: Federal Reserve Bank of New York);
yield curves for U.S. Treasury securities and AA/AAA-rated corporate securities
(source: Bloomberg Financial Markets); yield curves for AAA-rated, tax-free
municipal securities (source: Telerate); yield curves for foreign government
securities (sources: Bloomberg Financial Markets and Data Resources, Inc.);
total returns on foreign bonds (source: J.P. Morgan Securities Inc.); various
U.S. and foreign government reports; the high-yield bond market (source: Data
Resources, Inc.); the CRB Futures Index (source: Commodity Index Report); the
price of gold (sources: London a.m./p.m. fixing and New York Comex Spot Price);
rankings of any mutual fund or mutual fund category tracked by Lipper, Inc. or
Morningstar, Inc.; mutual fund rankings published in major, nationally
distributed periodicals; data provided by the Investment Company Institute;
Ibbotson Associates, Stocks, Bonds, Bills, and Inflation; major indices of stock
market performance; and indices and historical data supplied by major securities
brokerage or investment advisory firms. The funds also may utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance or to provide general information about the funds.





Permissible Advertising Information

From time to time, the funds may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders:

(1) discussions of general economic or financial principles (such as the effects
    of compounding and the benefits of dollar-cost averaging);

(2) discussions of general economic trends;

(3) presentations of statistical data to supplement such discussions;

(4) descriptions of past or anticipated portfolio holdings for one or more of
    the funds;

(5) descriptions of investment strategies for one or more of the funds;

(6) descriptions or comparisons of various savings and investment products
    (including, but not limited to, qualified retirement plans and individual
    stocks and bonds), which may or may not include the funds;

(7) comparisons of investment products (including the funds) with relevant
    market or industry indices or other appropriate benchmarks;

(8) discussions of fund rankings or ratings by recognized rating organizations;
    and

(9) testimonials describing the experience of persons who have invested in one
    or more of the funds. The funds also may include calculations, such as
    hypothetical compounding examples, which describe hypothetical investment
    results. Such performance examples will be based on an express set of
    assumptions and are not indicative of the performance of any of the funds.

Multiple Class Performance Advertising

Pursuant to the MultiClass Plan, the funds may issue additional classes of
existing funds or introduce new funds with multiple classes available for
purchase. To the extent a new class is added to an existing fund, the advisor
may, in compliance with SEC and NASD rules, regulations and guidelines, market
the new class of shares using the historical performance information of the
original class of shares. When quoting performance information for the new class
of shares for periods prior to the first full quarter after inception, the
original class's performance will be restated to reflect the expenses of the new
class. For periods after the first full quarter after inception, actual
performance of the new class will be used.


Financial Statements

The financial statements for the fiscal years ended March 31, 2001, 2000, 1999
and 1998 have been audited by PricewaterhouseCoopers LLP, independent
accountants. Their Independent Accountants' Reports and the financial statements
included in the funds' Annual Reports for the fiscal year ended March 31, 2001
are incorporated herein by reference. The financial statements for the fiscal
year ended March 31, 1997 have been audited by other independent accountants.
Their Independent Accountants' Reports and the financial statements included in
the funds' Annual Reports for the fiscal year ended March 31, 1997 are
incorporated herein by reference.





Explanation of Fixed-Income Securities Ratings

As described in the Prospectus, the funds invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus and in this Statement of Additional Information. The
following is a summary of the rating categories referenced in the prospectus
disclosure.

Bond Ratings

S&P         Moody's     Description
---         -------     -----------
AAA         Aaa         These are the highest ratings assigned by S&P and Moody's to a debt obligation. They
                        indicate an extremely strong capacity to pay interest and repay principal.

AA          Aa          Debt rated in this category is considered to have a very strong capacity to pay interest and
                        repay principal. It differs from AAA/Aaa issues only in a small degree.

A           A           Debt rated A has a strong capacity to pay interest and repay principal, although it is
                        somewhat more susceptible to the adverse effects of changes in circumstances and economic
                        conditions than debt in higher-rated categories.

BBB         Baa         Debt rated BBB/Baa is regarded as having an adequate capacity to pay interest and repay
                        principal. Whereas it normally exhibits adequate protection parameters, adverse economic
                        conditions or changing circumstances are more likely to lead to a weakened capacity to pay
                        interest and repay principal for debt in this category than in higher-rated categories. Debt
                        rated below BBB/Baa is regarded as having significant speculative characteristics.

BB          Ba          Debt rated BB/Ba has less near-term vulnerability to default than other speculative issues.
                        However, it faces major ongoing uncertainties or exposure to adverse business, financial or
                        economic conditions that could lead to inadequate capacity to meet timely interest and
                        principal payments. The BB rating category also is used for debt subordinated to senior debt
                        that is assigned an actual or implied BBB- rating.

B           B           Debt rated B has a greater vulnerability to default but currently has the capacity to meet
                        interest payments and principal repayments. Adverse business, financial or economic
                        conditions will likely impair capacity or willingness to pay interest and repay principal.
                        The B rating category also is used for debt subordinated to senior debt that is assigned an
                        actual or implied BB/Ba or BB-/Ba3 rating.

CCC         Caa         Debt rated CCC/Caa has a currently identifiable vulnerability to default and is dependent
                        upon favorable business, financial and economic conditions to meet timely payment of
                        interest and repayment of principal. In the event of adverse business, financial or economic
                        conditions, it is not likely to have the capacity to pay interest and repay principal. The
                        CCC/Caa rating category also is used for debt subordinated to senior debt that is assigned
                        an actual or implied B or B-/B3 rating.

CC          Ca          The rating CC/Ca typically is applied to debt subordinated to senior debt that is assigned
                        an actual or implied CCC/Caa rating.

C           C           The rating C typically is applied to debt subordinated to senior debt, which is assigned an
                        actual or implied CCC-/Caa3 debt rating. The C rating may be used to cover a situation where
                        a bankruptcy petition has been filed, but debt service payments are continued.

CI          -           The rating CI is reserved for income bonds on which no interest is being paid.

D           D           Debt rated D is in payment default. The D rating category is used when interest payments or
                        principal payments are not made on the date due even if the applicable grace period has not
                        expired, unless S&P believes that such payments will be made during such grace period. The D
                        rating also is used upon the filing of a bankruptcy petition if debt service payments are
                        jeopardized.

To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories. Similarly,
Moody's adds numerical modifiers (1,2,3) to designate relative standing within
its major bond rating categories. Fitch Investors Service, Inc. also rates bonds
and uses a ratings system that is substantially similar to that used by Standard
& Poor's.

Commercial Paper Ratings


S&P            Moody's              Description
---            -------              -----------

A-1            Prime-1              This indicates that the degree of safety regarding timely
               (P-1)                payment is strong. Standard & Poor's rates those issues
                                    determined to possess extremely strong safety characteristics
                                    as A-1+.

A-2            Prime-2              Capacity for timely payment on commercial paper is
               (P-2)                satisfactory, but the relative degree of safety is not as high
                                    as for issues designated A-1. Earnings trends and coverage
                                    ratios, while sound, will be more subject to variation. Capital-
                                    ization characteristics, while still appropriated, may be
                                    more affected by external conditions. Ample alternate
                                    liquidity is maintained.
A-3            Prime-3              This indicates satisfactory capacity for timely repayment.
               (P-3)                Issues that carry this rating are somewhat more vulnerable
                                    to the adverse changes in circumstances than obligations
                                    carrying the higher designations.

Note Ratings


S&P            Moody's              Description
SP-1           MIG-1; VMIG-1        Notes are of the highest quality enjoying strong protection from established
                                    cash flows of funds for their servicing or from established and broad-based
                                    access to the market for refinancing, or both.
SP-2           MIG-2; VMIG-2        Notes are of high quality with margins of protection ample, although not so
                                    large as in the preceding group.
SP-3           MIG-3; VMIG-3        Notes are of favorable quality with all security elements accounted for, but
                                    lacking the undeniable strength of the preceding grades. Market access for
                                    refinancing, in particular, is likely to be less well-established.
SP-4           MIG-4; VMIG-4        Notes are of adequate quality, carrying specific risk but having protection and
                                    not distinctly or predominantly speculative.






More information about the funds is contained in the funds' annual and
semiannual reports


Annual and Semiannual Reports

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

You can receive free copies of the annual and semiannual reports and ask any
questions about the funds and your accounts by contacting American Century at
the address or or one of the telephone numbers listed below.

If you own or are considering purchasing fund shares through
   * an employer-sponsored retirement plan
   * a bank
   * a broker-dealer
   * an insurance company
   * another financial intermediary
you can receive the annual and semiannual reports directly from them.

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

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

On the Internet          * EDGAR database at
                             www.sec.gov
                         * By email request at
                             publicinfo@sec.gov

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



Investment Company Act File No. 811-4363
American Century Investments
P.O. Box 419200
Kansas City, Missouri 64141-6200

Automated Information Line
1-800-345-8765

www.americancentury.com

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

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

Banks and Trust Companies, Broker/Dealers,
Financial Advisors, Insurance Companies
1-800-345-6488

J.P. Morgan|American Century (registered mark)
Retirement Plan Services
1-800-345-2345

Fax
816-340-7962

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



SH-SAI-XXXXX   0203



























AMERICAN CENTURY GOVERNMENT INCOME TRUST


PART C    OTHER INFORMATION

Item 23   Exhibits (all  exhibits  not  filed  herewith  are being  incorporated
          herein by reference).

(a)       (1) Amended and Restated Agreement and Declaration of Trust, dated
          March 9, 1998 and amended March 1, 1999 (filed electronically as
          Exhibit a to Post-Effective Amendment No. 37 to the Registration
          Statement of the Registrant on May 7, 1999, File No. 2-99222).

          (2) Amendment No. 1 to the Amended and Restated Agreement and
          Declaration of Trust dated March 6, 2001 (filed electronically as
          Exhibit a2 to Post-Effective Amendment No. 42 to the Registration
          Statement of the Registrant on April 19, 2001, File No. 2-99222).

          (3) Amendment No. 2 to the Amended and Restated Agreement and
          Declaration of Trust dated August 1, 2001 (filed electronically as
          Exhibit a3 to Post-Effective Amendment No. 44 to the Registration
          Statement of the Registrant on July 31, 2001, File No. 2-99222).

(b)       Amended and Restated Bylaws, dated March 9, 1998 (filed electronically
          as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
          Statement of American Century Municipal Trust on March 26, 1998, File
          No. 2-91229).

(c)       Registrant hereby incorporates by reference, as though set forth fully
          herein, Article III, Article IV, Article V, Article VI and Article
          VIII of Registrant's Amended and Restated Agreement and Declaration of
          Trust, appearing as Exhibit (a) to Post-Effective Amendment No. 37 to
          the Registration Statement on Form N-1A of the Registrant; and Article
          II, Article III, Article IV and Article V of Registrant's Amended and
          Restated Bylaws, appearing as Exhibit (b) to Post-Effective Amendment
          No. 23 to the Registration Statement on Form N-1A of American Century
          Municipal Trust on March 26, 1998.

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

          (2) Amendment to the Management Agreement (Investor Class) between
          American Century Government Income Trust and American Century
          Investment Management, Inc., dated March 31, 1998 (filed
          electronically as Exhibit 5b to Post-Effective Amendment No. 23 to the
          Registration Statement of American Century Municipal Trust on March
          26, 1998, File No. 2-91229).

          (3) Amendment to the Management Agreement (Investor Class) between
          American Century Government Income Trust and American Century
          Investment Management, Inc., dated July 1, 1998 (filed electronically
          as Exhibit d3 to Post-Effective Amendment No 39 to the Registration
          Statement of the Registrant on July 28, 1999, File No. 2-99222).

          (4) Amendment No. 1 to the Management Agreement (Investor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc., dated September 16, 2000 (filed
          electronically as Exhibit d4 to Post-Effective Amendment No. 30 to the
          Registration Statement of American Century California Tax-Free and
          Municipal Funds on December 29, 2000, File No. 2-82734).

          (5) Amendment No. 2 to the Management Agreement (Investor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc. dated August 1, 2001 (filed electronically
          as Exhibit d5 to Post-Effective Amendment No. 44 to the Registration
          Statement of the Registrant on July 31, 2001, File No. 2-99222).

          (6) Amendment No. 3 to the Management Agreement (Investor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc. dated December 3, 2001 (filed
          electronically as Exhibit d6 to Post-Effective Amendment No. 16 to the
          Registration Statement of American Century Investment Trust on
          November 30, 2001, File No. 33-65170).

          (7) Management Agreement (Advisor Class) between American Century
          Government Income Trust and American Century Investment Management,
          Inc., dated August 1, 1997 and amended as of June 1, 1998 (filed
          electronically as Exhibit 5b to Post-Effective Amendment No. 9 to the
          Registration Statement of American Century Investment Trust on June
          30, 1999, File No. 33-65170).

          (8) Amendment No. 1 to the Management Agreement (Advisor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc. dated September 16, 2000 (filed
          electronically as Exhibit d6 to Post-Effective Amendment No. 36 to the
          Registration Statement of American Century Target Maturities Trust on
          April 18, 2001, File No. 2-94608).

          (9) Amendment No. 2 to the Management Agreement (Advisor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc. dated August 1, 2001 (filed electronically
          as Exhibit d8 to Post-Effective Amendment No. 44 to the Registration
          Statement of the Registrant on July 31, 2001, File No. 2-99222).

          (10) Amendment No. 3 to the Management Agreement (Advisor Class)
          between American Century Government Income Trust and American Century
          Investment Management, Inc., dated December 3, 2001 (filed
          electronically as Exhibit d10 to Post-Effective Amendment No. 16 to
          the Registration Statement of American Century Investment Trust on
          November 30, 2001, File No. 33-65170).

          (11) Management Agreement (C Class) between American Century
          Government Income Trust and American Century Investment Management
          Inc., dated September 16, 2000 (filed electronically as Exhibit d6 to
          Post-Effective Amendment No. 35 to the Registration Statement of
          American Century Target Maturities Trust on April 17, 2001, File No.
          2-94608).

          (12) Amendment No. 1 to the Management Agreement (C Class) between
          American Century Government Income Trust and American Century
          Investment Management, Inc. dated August 1, 2001 (filed electronically
          as Exhibit d10 to Post-Effective Amendment No. 44 to the Registration
          Statement of the Registrant, on July 31, 2001, File No. 2-99222).

          (13) Amendment No. 2 to the Management Agreement (C Class) between
          American Century Government Income Trust and American Century
          Investment Management, Inc., dated December 3, 2001 (filed
          electronically as Exhibit d13 to Post-Effective Amendment No. 16 to
          the Registration Statement of American Century Investment Trust on
          November 30, 2001, File No. 33-65170).

          (14) Management Agreement (Institutional Class) between American
          Century Quantitative Equity Funds and American Century Investment
          Management, Inc., dated August 1, 1997 (filed electronically as an
          Exhibit to Post-Effective Amendment No. 20 to the Registration
          Statement of American Century Quantitative Equity Funds on August 29,
          1997, File No. 33-19589).

          (15) Amendment to Management Agreement (Institutional Class) between
          American Century Quantitative Equity Funds and American Century
          Investment Management, Inc., dated July 1, 1998 (filed electronically
          as Exhibit d6 to Post-Effective Amendment No. 27 to the Registration
          Statement of American Century Quantitative Equity Funds on April 27,
          2000, File No. 33-19589).

          (16) Amendment No. 1 to the Management Agreement (Institutional Class)
          between American Century Quantitative Equity Funds, American Century
          Investment Trust and American Century Investment Management, Inc.,
          dated August 1, 2001, (filed electronically as Exhibit d13 to
          Post-Effective Amendment No. 15 to the Registration Statement of the
          Registrant on August 8, 2001, File No. 33-65170).

          (17) Amendment No. 2 to the Management Agreement (Institutional Class)
          between American Century Quantitative Equity Funds, American Century
          Investment Trust and American Century Investment Management, Inc. (to
          be filed by amendment).

(e)       (1) Distribution Agreement between American Century Government Income
          Trust and American Century Investment Services, Inc., dated March 13,
          2000 (filed electronically as Exhibit e7 to Post-Effective Amendment
          No. 17 to the Registration Statement of American Century World Mutual
          Funds, Inc. on March 30, 2000, File No. 33-39242).

          (2) Amendment No. 1 to the Distribution Agreement between American
          Century Investment Trust and American Century Investment Services,
          Inc., dated June 1, 2000 (filed electronically as Exhibit e9 to
          Post-Effective Amendment No. 19 to the Registration Statement of
          American Century World Mutual Funds, Inc. on May 24, 2000, File No.
          33-39242).

          (3) Amendment No. 2 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc., dated November 20, 2000 (filed electronically as
          Exhibit e10 to Post-Effective Amendment No. 29 to the Registration
          Statement of American Century Variable Portfolios, Inc. on December 1,
          2000, File No. 33-14567).

          (4) Amendment No. 3 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc., dated March 1, 2001 (filed electronically as Exhibit
          e4 to Post-Effective Amendment No. 35 to the Registration Statement of
          American Century Target Maturities Trust on April 17, 2001, File No.
          2-94608).

          (5) Amendment No. 4 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc., dated April 30, 2001 (filed electronically as Exhibit
          e5 to Post-Effective Amendment No. 35 to the Registration Statement of
          American Century Target Maturities Trust on April 17, 2001, File No.
          2-94608).

          (6) Amendment No. 5 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc. dated May 24, 2001 (filed electronically as Exhibit e6
          to Post-Effective Amendment No. 21 to the Registration Statement of
          American Century Capital Portfolios, Inc. on July 30, 2001, File No.
          33-64872).

          (7) Amendment No. 6 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc. dated August 1, 2001 (filed electronically as Exhibit
          e7 to Post-Effective Amendment No. 21 to the Registration Statement of
          American Century Capital Portfolios, Inc. on July 30, 2001, File No.
          33-64782).

          (8) Amendment No. 7 to the Distribution Agreement between American
          Century Government Income Trust and American Century Investment
          Services, Inc., dated August 1, 2001 (filed electronically as Exhibit
          d8 to Post-Effective Amendment No. 16 to the Registration Statement of
          American Century Investment Trust, on November 30, 2001, File No.
          33-65170).

(f)       Not applicable.

(g)       (1) Master Agreement by and between Commerce Bank N.A. and Twentieth
          Century Services, Inc., dated January 22, 1997 (filed electronically
          as Exhibit g2 to Post-Effective Amendment No. 76 to the Registration
          Statement of American Century Mutual Funds, Inc. on February 28, 1997,
          File No. 2-14213).

          (2) Global Custody Agreement between American Century Investments and
          The Chase Manhattan Bank, dated August 9, 1996 (filed electronically
          as Exhibit 8 to Post-Effective Amendment No. 31 to the Registration
          Statement of the Registrant on February 7, 1997, File No. 2-99222).

          (3) Amendment to the Global Custody Agreement between American Century
          Investments and The Chase Manhattan Bank dated December 9, 2000 (filed
          electronically as Exhibit g2 to Pre-Effective Amendment No. 2 to the
          Registration Statement of American Century Variable Portfolios II,
          Inc. on January 9, 2001, File No. 333-46922).

(h)       (1) Transfer Agency Agreement between American Century Government
          Income Trust and American Century Services Corporation, dated August
          1, 1997 (filed electronically as Exhibit 9 to Post-Effective Amendment
          No. 33 to the Registration Statement of the Registrant on July 31,
          1997, File No. 2-99222).

          (2) Amendment to the Transfer Agency Agreement between American
          Century Government Income Trust and American Century Services
          Corporation, dated March 9, 1998 (filed electronically as Exhibit 9b
          to Post-Effective Amendment No. 23 to the Registration Statement of
          American Century Municipal Trust on March 26, 1998, File No. 2-91229).

          (3) Amendment No. 1 to the Transfer Agency Agreement between American
          Century Government Income Trust 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).

          (4) Amendment No. 2 to the Transfer Agency Agreement between American
          Century Government Income Trust and American Century Services
          Corporation, dated November 20, 2000 (filed electronically as Exhibit
          h4 to Post-Effective Amendment No. 30 to the Registration Statement of
          American Century California Tax-Free and Municipal Funds on December
          29, 2000, File No. 2-82734).

          (5) Amendment No. 3 to the Transfer Agency Agreement between American
          Century Government Income Trust and American Century Services
          Corporation, dated August 1, 2001, (filed electronically as Exhibit h5
          to Post-Effective Amendment No. 44 to the Registration Statement of
          the Registrant on July 30, 2001, File No. 2-99222).

          (6) Amendment No. 4 to the Transfer Agency Agreement between American
          Century Government Income Trust and American Century Services
          Corporation, dated December 3, 2001 (filed electronically as Exhibit
          h6 to Post-Effective Amendment No. 16 to the Registration Statement of
          American Century Investment Trust, on November 30, 2001, File No.
          33-65170).

          (7) Credit Agreement between American Century Funds and The Chase
          Manhattan Bank, as Administrative Agent, dated as of December 18, 2001
          (filed electronically as Exhibit h7 to Post-Effective Amendment No. 33
          to the Registration Statement of American Century California Tax-Free
          and Municipal Funds on December 28, 2001, File No. 2-82734).


(i)       Opinion and Consent of Counsel (filed electronically as Exhibit i to
          Post-Effective Amendment No. 37 to the Registration Statement of the
          Registrant on May 7, 1999, File No. 2-99222).

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

          (2) Consent of KPMG Peat Marwick, LLP, independent auditors (filed
          electronically as Exhibit 11 to Post-Effective Amendment No. 33 to the
          Registration Statement of the Registrant on July 31, 1997, File No.
          2-99222).

          (3) Power of Attorney, dated September 16, 2000 (filed electronically
          as Exhibit j3 to Post-Effective Amendment No. 41 to the Registration
          Statement of the Registrant on February 22, 2001, File No. 2-99222).

(k)       Not applicable.

(l)       Not applicable.

(m)       (1) Master Distribution and Shareholder Services Plan of American
          Century Government Income Trust, American Century Investment 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
          m1 to Post-Effective Amendment No. 32 to the Registration Statement of
          American Century Target Maturities Trust on January 31, 2000, File No.
          2-94608).

          (2) Amendment to the Master Distribution and Shareholder Services Plan
          of American Century Government Income Trust, American Century
          Investment Trust, American Century International Bond Fund, American
          Century Target Maturities Trust and American Century Quantitative
          Equity Funds (Advisor Class), dated June 29, 1998 (filed
          electronically as Exhibit m2 to Post-Effective Amendment No. 23 to the
          Registration Statement of American Century Target Maturities Trust on
          January 31, 2000, File No. 33-19589).

          (3) Amendment No. 1 to the Master Distribution and Shareholder
          Services Plan of American Century Government Income Trust, American
          Century Investment Trust, American Century International Bond Fund,
          American Century Target Maturities Trust and American Century
          Quantitative Equity Funds (Advisor Class), dated August 1, 2001 (filed
          electronically as Exhibit m3 to Post-Effective Amendment No. 44 to the
          Registration Statement of the Registrant, on July 31, 2001, File No.
          2-99222).

          (4) Amendment No. 2 to the Master Distribution and Shareholder
          Services Plan of American Century Government Income Trust, American
          Century Investment Trust, American Century International Bond Fund,
          American Century Target Maturities Trust and American Century
          Quantitative Equity Funds (Advisor Class), dated December 3, 2001
          (filed electronically as Exhibit m4 to Post-Effective Amendment No. 16
          to the Registration Statement of American Century Investment Trust, on
          November 30, 2001, File No. 33-65170).

          (5) Master Distribution and Individual Shareholder Services Plan of
          American Century Government Income Trust, American Century Investment
          Trust, American Century California Tax-Free and Municipal Funds,
          American Century Municipal Trust, American Century Target Maturities
          Trust and American Century Quantitative Equity Funds (C Class), dated
          September 16, 2000 (filed electronically as Exhibit m3 to
          Post-Effective Amendment No. 35 to the Registration Statement of
          American Century Target Maturities Trust on April 17, 2001, File No.
          2-94608).

          (6) Amendment No. 1 to the Master Distribution and Individual
          Shareholder Services Plan of American Century Government Income Trust,
          American Century Investment Trust, American Century California
          Tax-Free and Municipal Funds, American Century Municipal Trust,
          American Century Target Maturities Trust and American Century
          Quantitative Equity Funds (C Class), dated August 1, 2001 (filed
          electronically as Exhibit m5 to Post-Effective Amendment No. 44 to the
          Registration Statement of the Registrant, on July 31, 2001, File No.
          2-99222).

          (7) Amendment No. 2 to the Master Distribution and Individual
          Shareholder Services Plan of American Century Government Income Trust,
          American Century Investment Trust, American Century California
          Tax-Free and Municipal Funds, American Century Municipal Trust,
          American Century Target Maturities Trust and American Century
          Quantitative Equity Funds (C Class), dated December 3, 2001 (filed
          electronically as Exhibit m7 to Post-Effective Amendment No. 16 to the
          Registration Statement of American Century Investment Trust, on
          November 30, 2001, File No. 33-65170).

(n)       (1) Amended and Restated Multiple Class Plan of American Century
          California Tax-Free and Municipal Funds, American Century Government
          Income Trust, American Century International Bond Fund, American
          Century Investment Trust, American Century Municipal Trust, American
          Century Target Maturities Trust and American Century Quantitative
          Equity Funds, dated November 20, 2000 (filed electronically as Exhibit
          n to Post-Effective Amendment No. 35 to the Registration Statement of
          American Century Target Maturities Trust on April 17, 2001, File No.
          2-94608).

          (2) Amendment No. 1 to the Amended and Restated Multiple Class Plan of
          American Century California Tax-Free and Municipal Funds, American
          Century Government Income Trust, American Century International Bond
          Fund, American Century Investment Trust, American Century Municipal
          Trust, American Century Target Maturities Trust and American Century
          Quantitative Equity Funds, dated August 1, 2001 (filed electronically
          as Exhibit n2 to Post-Effective Amendment No. 44 to the Registration
          Statement of the Registrant on July 30, 2001, File No. 2-99222).

          (3) Amendment No. 2 to the Amended and Restated Multiple Class Plan of
          American Century California Tax-Free and Municipal Funds, American
          Century Government Income Trust, American Century International Bond
          Fund, American Century Investment Trust, American Century Municipal
          Trust, American Century Target Maturities Trust and American Century
          Quantitative Equity Funds, dated December 3, 2001 (filed
          electronically as Exhibit n3 to Post-Effective Amendment No. 16 to the
          Registration Statement of American Century Investment Trust, on
          November 30, 2001, File No. 33-65170).

          (4) Amendment No. 3 to the Amended and Restated Multiple Class Plan of
          American Century California Tax-Free and Municipal Funds, American
          Century Government Income Trust, American Century International Bond
          Fund, American Century Investment Trust, American Century Municipal
          Trust, American Century Target Maturities Trust and American Century
          Quantitative Equity Funds (to be filed by amendment).

(o)       Not applicable.

(p)       American Century Investments Code of Ethics (filed electronically as
          Exhibit p to Post-Effective Amendment No. 30 to the Registration
          Statement of American Century California Tax-Free and Municipal Funds
          on December 29, 2000, File No. 2-82734).



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 Amended and Restated Agreement and
Declaration of Trust, incorporated herein by reference to Exhibit (a) to the
Registration Statement, "The Trustees shall be entitled and empowered to the
fullest extent permitted by law to purchase insurance for and to provide by
resolution or in the Bylaws for indemnification out of Trust assets for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee or officer in connection with any claim, action, suit, or
proceeding in which he or she becomes involved by virtue of his or her capacity
or former capacity with the Trust. The provisions, including any exceptions and
limitations concerning indemnification, may be set forth in detail in the Bylaws
or in a resolution adopted by the Board of Trustees."

Registrant hereby incorporates by reference, as though set forth fully herein,
Article VI of the Registrant's Amended and Restated Bylaws, dated March 9, 1998,
appearing as Exhibit 2b to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A of American Century Municipal Trust filed March 26, 1998.

The Registrant has purchased an insurance policy insuring its officers and
directors against certain liabilities which such officers and directors may
incur while acting in such capacities and providing reimbursement to the
Registrant for sums which it may be permitted or required to pay to its officers
and directors by way of indemnification against such liabilities, subject in
either case to clauses respecting deductibility and participation.


Item 26. Business and Other Connections of Investment Advisor.

None.

Item 27. Principal Underwriter.

I. (a) American Century Investment Services, Inc. (ACIS) 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 Variable Portfolios II, Inc.
American Century World Mutual Funds, Inc.

     ACIS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
ACIS is located at 4500 Main Street, Kansas City, Missouri 64111. ACIS is a
wholly-owned subsidiary of American Century Companies, Inc.

     (b) The following is a list of the directors, executive officers and
partners of ACIS:

Name and Principal         Positions and Offices       Positions and Offices
Business Address*           with Underwriter            with Registrant
---------------------------------------------------------------------------------

James E. Stowers, Jr.      Chairman and Director                    none

James E. Stowers III       Co-Chairman and Director               Chairman and
                                                                  Director

W. Gordon Snyder           President                                none

William M. Lyons           Chief Executive Officer,               President
                           Executive Vice President and Director

Robert T. Jackson          Executive Vice President,             Executive Vice
                           Chief Financial Officer               President and
                           and Chief Accounting Officer          Chief Financial
                                                                 Officer

Kevin Cuccias              Senior Vice President                    none

Joseph Greene              Senior Vice President                    none

Brian Jeter                Senior Vice President                    none

Mark Killen                Senior Vice President                    none

Tom Kmak                   Senior Vice President                    none

David C. Tucker            Senior Vice President             Senior Vice President
                           and General Counsel


* All addresses are 4500 Main Street, Kansas City, Missouri 64111

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


Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.




















                                   SIGNATURES

     Pursuant  to  the  requirements  of the  Securities  Act of  1933  and  the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this  Post-Effective  Amendment  No.  45/Amendment  No.  46 to its  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of Kansas  City,  State of  Missouri on the 4th day of
January, 2002.

                            AMERICAN CENTURY GOVERNMENT INCOME TRUST

                            By: /*/William M. Lyons
                                William M. Lyons
                                President and Principal Executive Officer


     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Post-Effective  Amendment No. 45 has been signed below by the following  persons
in the capacities and on the dates indicated.


Signature                               Title                         Date
---------                               -----                         ----

*William M. Lyons                    President and              January 3, 2002
---------------------------------    Principal Executive
William M. Lyons                     Officer

*Maryanne Roepke                     Senior Vice President,     January 3, 2002
---------------------------------    Treasurer and Chief
Maryanne Roepke                      Accounting Officer

*James E. Stowers III                Director and               January 3, 2002
---------------------------------    Chairman of the Board
James E. Stowers III

*Albert A. Eisenstat                 Director                   January 3, 2002
---------------------------------
Albert A. Eisenstat

*Ronald J. Gilson                    Director                   January 3, 2002
---------------------------------
Ronald J. Gilson

*Myron S. Scholes                    Director                   January 3, 2002
---------------------------------
Myron S. Scholes

*Kenneth E. Scott                    Director                   January 3, 2002
---------------------------------
Kenneth E. Scott

*Jeanne D. Wohlers                   Director                   January 3, 2002
---------------------------------
Jeanne D. Wohlers



/s/Janet A. Nash
*by Janet A. Nash,  Attorney in Fact