UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21591 --------------------------------------------- AMERICAN CENTURY ASSET ALLOCATION PORTFOLIOS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) CHARLES A. ETHERINGTON, 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 816-531-5575 ---------------------------- Date of fiscal year end: 07-31 ----------------------------------------------------- Date of reporting period: 07-31-2007 -----------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS. [front cover] [american century investments logo and text logo] [livestrong(TM) portfolios text logo] LIVESTRONG(TM) PORTFOLIOS FROM AMERICAN CENTURY INVESTMENTS Annual Report LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio LIVESTRONG 2025 Portfolio LIVESTRONG 2035 Portfolio LIVESTRONG 2045 Portfolio [photo of man] July 31, 2007 OUR MESSAGE TO YOU We have the privilege of providing you with the annual report for LIVESTRONG(TM) Portfolios from American Century Investments® for the 12 months ended July 31, 2007, to help you monitor your investment. 2007 has been an eventful year for the financial markets and for us. While the markets experienced subprime-related turbulence, we've been working to secure a smooth executive leadership transition. In our semiannual report, we announced the promotion of former international equity chief investment officer (CIO) Enrique Chang to overall CIO. One of Enrique's immediate challenges was to hire a new international equity CIO, which he accomplished in May when Mark On joined us from AXA Rosenberg. Enrique also hired Steve Lurito from MUUS Asset Management LLC in July to fill our vacant U.S. growth equity CIO position. We also announced the promotion of Jonathan Thomas to chief executive officer, effective March 1. In June, Jonathan hired Barry Fink, who came to us from Morgan Stanley, as chief operating officer. This completed our leadership transition, and helped make it possible for my son, Jim Stowers III, to step down from the American Century Companies, Inc. (ACC) board of directors at the end of July to focus on his new business ventures. I remain co-chair of the ACC board with Richard Brown, who has been on the board since 1998 and also co-chairs the Stowers Institute for Medical Research board. Jim's recent departure, after he relinquished his executive leadership and investment management responsibilities in early 2005, reflects his comfort with the firm's direction and new leadership. As with Jim before them, we've been energized by the skills and experience brought to the leadership team by Jonathan, Enrique, Barry, Mark, and Steve. They've already had a positive impact on the development and management of the products and services we take pride in delivering to you. [photo of James E. Stowers, Jr.] /s/James E. Stowers, Jr. James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS LIVESTRONG(TM) PORTFOLIOS FROM AMERICAN CENTURY INVESTMENTS Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 7 Market Index Total Returns . . . . . . . . . . . . . . . . . . . . . 7 Underlying Fund Allocations. . . . . . . . . . . . . . . . . . . . . 8 Types of Investments in LIVESTRONG Portfolios. . . . . . . . . . . . 9 Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 11 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 15 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 18 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 20 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 22 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 25 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 39 Report of Independent Registered Public Accounting Firm . . . . . . . 59 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 60 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Approval of Management Agreements for LIVESTRONG Portfolios . . . . . 64 Share Class Information . . . . . . . . . . . . . . . . . . . . . . . 69 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 70 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 71 American Century Investment Services, Inc., has entered into an agreement with the Lance Armstrong Foundation for rights to use the LIVESTRONG name. LIVESTRONG is a trademark of the Lance Armstrong Foundation. For more information about the foundation, visit livestrong.org. The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. PERFORMANCE LIVESTRONG Portfolios Total Returns as of July 31, 2007 Average Annual Returns Since Inception 1 year Inception Date LIVESTRONG INCOME PORTFOLIO INVESTOR CLASS 10.51% 7.38% 8/31/04 Institutional Class 10.73% 7.59% 8/31/04 Advisor Class 10.13% 7.09% 8/31/04 R Class 9.97% 6.84% 8/31/04 LIVESTRONG 2015 PORTFOLIO INVESTOR CLASS 12.46% 9.59% 8/31/04 Institutional Class 12.77% 9.82% 8/31/04 Advisor Class 12.20% 9.32% 8/31/04 R Class 11.92% 9.07% 8/31/04 LIVESTRONG 2025 PORTFOLIO INVESTOR CLASS 14.45% 11.43% 8/31/04 Institutional Class 14.67% 11.67% 8/31/04 Advisor Class 14.17% 11.17% 8/31/04 R Class 13.90% 10.90% 8/31/04 RUSSELL 3000 INDEX(1) 16.08% 12.80% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX(1)(2) 5.55% 3.42% -- LEHMAN BROTHERS U.S. AGGREGATE INDEX(1) 5.58% 3.37% -- (1) Data provided by Lipper Inc. -- A Reuters Company. © 2007 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) In September of 2006, LIVESTRONG Portfolios changed their fixed income benchmark from the Lehman Brothers U.S. Aggregate Index to the Citigroup US Broad Investment-Grade Bond Index. The fund's investment advisor believes this index better represents the fixed income portion of the fund's portfolio composition. The Russell 3000 Index represents approximately 98% of the investable U.S. equity market and provides a broad measure of equity performance. The Lehman Brothers U.S. Aggregate Index and the Citigroup US Broad Investment-Grade Bond Index represent the U.S. investment-grade fixed-rate bond market and provides a broad measure of bond market performance. Performance for these indices is provided for reference only. Neither index is intended to represent the composition of the portfolio, which invests in a mix of equity and fixed-income securities. (See the Schedule of Investments for each LIVESTRONG Portfolio's asset allocations as of July 31, 2007.) Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of LIVESTRONG Portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each LIVESTRONG Portfolio's asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as administrative fees) that reduce returns, while the total returns of the indices do not. - ------ 2 LIVESTRONG Portfolios Total Returns as of July 31, 2007 Average Annual Returns Since Inception 1 year Inception Date LIVESTRONG 2035 PORTFOLIO INVESTOR CLASS 16.86% 13.31% 8/31/04 Institutional Class 17.07% 13.54% 8/31/04 Advisor Class 16.67% 13.06% 8/31/04 R Class 16.30% 12.77% 8/31/04 LIVESTRONG 2045 PORTFOLIO INVESTOR CLASS 18.23% 14.26% 8/31/04 Institutional Class 18.44% 14.49% 8/31/04 Advisor Class 17.96% 13.98% 8/31/04 R Class 17.58% 13.70% 8/31/04 RUSSELL 3000 INDEX(1) 16.08% 12.80% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX(1)(2) 5.55% 3.42% -- LEHMAN BROTHERS U.S. AGGREGATE INDEX(1) 5.58% 3.37% -- (1) Data provided by Lipper Inc. -- A Reuters Company. © 2007 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) In September of 2006, LIVESTRONG Portfolios changed their fixed income benchmark from the Lehman Brothers U.S. Aggregate Index to the Citigroup US Broad Investment-Grade Bond Index. The fund's investment advisor believes this index better represents the fixed income portion of the fund's portfolio composition. The Russell 3000 Index represents approximately 98% of the investable U.S. equity market and provides a broad measure of equity performance. The Lehman Brothers U.S. Aggregate Index and the Citigroup US Broad Investment-Grade Bond Index represent the U.S. investment-grade fixed-rate bond market and provides a broad measure of bond market performance. Performance for these indices is provided for reference only. Neither index is intended to represent the composition of the portfolio, which invests in a mix of equity and fixed-income securities. (See the Schedule of Investments for each LIVESTRONG Portfolio's asset allocations as of July 31, 2007.) Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of LIVESTRONG Portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each LIVESTRONG Portfolio's asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as administrative fees) that reduce returns, while the total returns of the indices do not. - ------ 3 LIVESTRONG Portfolios Growth of $10,000 Over Life of LIVESTRONG Income Portfolio -- Investor Class $10,000 investment made August 31, 2004
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*From 8/31/04, the Investor Class's inception date. Not annualized. Growth of $10,000 Over Life of LIVESTRONG 2015 Portfolio -- Investor Class $10,000 investment made August 31, 2004
![](https://capedge.com/proxy/N-CSR/0001293210-07-000041/growth2015portfolio1007.gif)
*From 8/31/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of LIVESTRONG Portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each LIVESTRONG Portfolio's asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as administrative fees) that reduce returns, while the total returns of the indices do not. - ------ 4 LIVESTRONG Portfolios Growth of $10,000 Over Life of LIVESTRONG 2025 Portfolio -- Investor Class $10,000 investment made August 31, 2004
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*From 8/31/04, the Investor Class's inception date. Not annualized. Growth of $10,000 Over Life of LIVESTRONG 2035 Portfolio -- Investor Class $10,000 investment made August 31, 2004
![](https://capedge.com/proxy/N-CSR/0001293210-07-000041/growth2035portfolio1007.gif)
*From 8/31/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of LIVESTRONG Portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each LIVESTRONG Portfolio's asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as administrative fees) that reduce returns, while the total returns of the indices do not. - ------ 5 LIVESTRONG Portfolios Growth of $10,000 Over Life of LIVESTRONG 2045 Portfolio -- Investor Class $10,000 investment made August 31, 2004
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*From 8/31/04, the Investor Class's inception date. Not annualized. One-Year Returns Over Life of Class Periods ended July 31 2005* 2006 2007 LIVESTRONG Income Portfolio -- Investor Class 8.14% 2.99% 10.51% LIVESTRONG 2015 Portfolio -- Investor Class 11.17% 4.46% 12.46% LIVESTRONG 2025 Portfolio -- Investor Class 13.57% 5.48% 14.45% LIVESTRONG 2035 Portfolio -- Investor Class 15.71% 6.45% 16.86% LIVESTRONG 2045 Portfolio -- Investor Class 16.86% 6.76% 18.23% Russell 3000 Index 16.43% 5.14% 16.08% Citigroup US Broad Investment-Grade Bond Index 2.99% 1.47% 5.55% Lehman Brothers U.S. Aggregate Index 2.83% 1.46% 5.58% *From 8/31/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of LIVESTRONG Portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each LIVESTRONG Portfolio's asset allocation, and a fund with a later target date is expected to be more volatile than one with an earlier target date. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Unless otherwise indicated, performance reflects Investor Class shares; performance for other share classes will vary due to differences in fee structure. For information about other share classes available, please consult the prospectus. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses (such as administrative fees) that reduce returns, while the total returns of the indices do not. - ------ 6 PORTFOLIO COMMENTARY LIVESTRONG Portfolios Portfolio Managers: Jeff Tyler and Irina Torelli PERFORMANCE SUMMARY All five LIVESTRONG Portfolios enjoyed strong results for the year ended July 31, 2007. Returns ranged from 10.51%* for LIVESTRONG Income Portfolio to 18.23% for LIVESTRONG 2045 Portfolio (see pages 2-6 for more detailed performance information). LIVESTRONG Portfolios' performance reflected double-digit gains for stocks, both in the U.S. and overseas, as well as solid gains in the bond market. Because of LIVESTRONG Portfolios' strategic exposure to the various asset classes, a review of the financial markets helps explain much of their performance. STOCK MARKET REVIEW U.S. stocks produced robust returns during the past year despite an economic slowdown brought on by a sharp decline in the housing market. Corporate earnings growth decelerated -- ending a streak of double-digit quarterly earnings growth for the S&P 500 Index that began in 2002 -- but continued to outshine expectations. In addition, heavy merger activity provided support for stocks thanks to a deluge of leveraged buy-outs from private equity firms. Although the broad stock indexes returned more than 15% for the one-year period, the market hit a couple of speed bumps over the last six months. Stocks stumbled in late February, mirroring a drop in the Chinese stock market, but rebounded quickly in early March. The market grew choppy in the last two months and ended the period with a sharp decline as higher energy prices and deteriorating credit conditions -- sparked by problems in the subprime lending industry -- weighed on investor confidence. Mid-cap stocks led the market's advance, followed by large-cap shares, while small-cap issues lagged. After trailing value stocks for six consecutive years, growth-oriented issues outperformed by a wide margin over the past 12 months. Market Index Total Returns For the year ended July 31, 2007 U.S. STOCKS Russell 1000 (Large-Cap)(1) 16.45% Russell Midcap(1) 18.93% Russell 2000 (Small-Cap)(1) 12.12% INTERNATIONAL STOCKS MSCI EAFE 23.91% MSCI EM 50.94% U.S. FIXED INCOME Lehman Brothers U.S. Aggregate(1) 5.58% 10-year U.S. Treasury Note 5.87% 90-Day U.S. Treasury Bill(1) 5.21% INTERNATIONAL BONDS Citigroup Non-U.S. World Government Bond 4.86% (1) Data provided by Lipper Inc. -- A Reuters Company. © 2007 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. *All fund returns referenced in this commentary are for Investor Class shares. - ------ 7 LIVESTRONG Portfolios International stocks outperformed the domestic market as improving global economic conditions and a declining U.S. dollar boosted foreign markets. The top performers were emerging markets, with Latin America generating the largest gains. Among developed markets, European bourses posted the best returns, while Japanese shares lagged as a burgeoning economic recovery in the country appeared to stall. BOND MARKET REVIEW The U.S. bond market delivered solid gains during the period as interest rates declined overall. The Federal Reserve (the Fed) held short-term interest rates steady throughout the one-year period as economic activity decelerated while inflation remained above the Fed's comfort level, largely because of stubbornly high energy prices. Although bond yields fluctuated in response to economic data, energy price volatility, and subprime lending woes, yields were little changed overall between July 2006 and June 2007. In July 2007, however, a "flight to quality" resulting from a worsening credit environment led to a sizable decline in yields, producing higher bond prices. Underlying Fund Allocations -- Institutional Class as a % of net assets as of July 31, 2007 LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2025 2035 2045 Portfolio Portfolio Portfolio Portfolio Portfolio NT Equity Growth Fund 12.5% 12.1% 12.2% 13.7% 14.8% NT Growth Fund 6.4% 8.2% 11.7% 14.0% 15.1% NT Large Company Value Fund 10.5% 10.8% 11.8% 13.6% 14.9% NT Mid Cap Value Fund 3.8% 5.0% 5.0% 6.7% 7.2% NT Small Company Fund 1.9% 1.9% 3.6% 3.8% 4.5% NT Vista Fund 2.5% 4.0% 5.0% 7.1% 7.6% Real Estate Fund 0.9% 1.2% 1.7% 2.2% 2.7% NT Emerging Markets Fund -- 1.8% 3.1% 4.9% 6.5% NT International Growth Fund 4.9% 6.4% 9.0% 10.1% 9.8% High-Yield Fund 3.8% 3.5% 3.0% 2.2% 1.6% Inflation-Adjusted Bond Fund 7.9% 7.4% 6.2% 4.5% 3.4% NT Diversified Bond Fund 27.3% 25.8% 21.3% 16.1% 11.8% International Bond Fund 7.3% 5.6% 1.1% -- -- Premium Money Market Fund* 10.1% 6.1% 5.1% 1.0% -- Other Assets and Liabilities 0.2% 0.2% 0.2% 0.1% 0.1% *Investor Class - ------ 8 LIVESTRONG Portfolios High-yield corporate bonds were the best performers for the one-year period, though they underperformed in the flight to quality late in the period. In contrast, Treasury bonds benefited the most from the flight to quality, and as a result they generated the best returns among investment-grade bond sectors. Foreign bonds also produced positive results as the U.S. dollar fell against most major currencies (with the notable exception of the Japanese yen). Overseas bond returns were positive despite stronger economic growth that led central banks in many countries to raise interest rates. Types of Investments in LIVESTRONG Portfolios as a % of net assets as of July 31, 2007 LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2025 2035 2045 Portfolio Portfolio Portfolio Portfolio Portfolio EQUITY Large Cap Blend 12.5% 12.1% 12.2% 13.7% 14.8% Large Cap Value 10.5% 10.8% 11.8% 13.6% 14.9% Large Cap Growth 6.4% 8.2% 11.7% 14.0% 15.1% Large Cap Blend -- International 4.9% 6.4% 9.0% 10.1% 9.8% Large Cap Growth -- International -- 1.8% 3.1% 4.9% 6.5% Mid Cap Growth 2.5% 4.0% 5.0% 7.1% 7.6% Mid Cap Value 3.8% 5.0% 5.0% 6.7% 7.2% Small Cap Value 1.9% 1.9% 3.6% 3.8% 4.5% Real Estate 0.9% 1.2% 1.7% 2.2% 2.7% TOTAL EQUITY 43.4% 51.4% 63.1% 76.1% 83.1% FIXED INCOME Investment Grade 35.2% 33.2% 27.5% 20.6% 15.2% High-Yield 3.8% 3.5% 3.0% 2.2% 1.6% International 7.3% 5.6% 1.1% -- -- TOTAL FIXED INCOME 46.3% 42.3% 31.6% 22.8% 16.8% MONEY MARKET 10.1% 6.1% 5.1% 1.0% -- OTHER ASSETS AND LIABILITIES 0.2% 0.2% 0.2% 0.1% 0.1% - ------ 9 LIVESTRONG Portfolios PORTFOLIO PERFORMANCE Each LIVESTRONG Portfolio is a "fund of funds" that invests in other American Century mutual funds to achieve its investment objective and target asset allocation. (See page 8 for the specific underlying fund allocations for each LIVESTRONG Portfolio.) Most of the equity funds in LIVESTRONG Portfolios registered double-digit gains for the one-year period. NT Emerging Markets was the top performer, advancing sharply thanks to surging markets in developing countries. NT International Growth also produced a healthy gain for the period. Among domestic holdings, NT Vista was the best performer, reflecting the outperformance of mid-cap stocks. The LIVESTRONG Portfolios' large-cap growth component, which includes NT Growth and NT Equity Growth, also fared well. The weakest performer was Real Estate, which posted a fractionally positive return overall in the wake of a double-digit decline in the last few months of the period. Real Estate stocks fell as the worsening environment for debt financing reduced the likelihood of private equity buyouts in the sector. The performance of LIVESTRONG Portfolios' fixed-income funds were in line with the broad returns of the bond market. International Bond was the best performer, followed by NT Diversified Bond and High Yield. Inflation-Adjusted Bond posted the lowest returns among the LIVESTRONG Portfolios' fixed-income holdings, but it outperformed over the last three months of the period as energy prices rose. Premium Money Market provided principal protection and a return that outpaced the three-month U.S. Treasury bill. STARTING POINT FOR NEXT REPORTING PERIOD Although corporate earnings have held up better than expected, the dollar's decline has played a key role -- 49% of the sales for the companies in the S&P 500 come from foreign operations, and a weaker dollar makes those overseas revenues worth more at home. Going forward, however, we expect the economic slowdown of the past year to take its toll on corporate profits as consumer spending succumbs to higher gas prices and declining mortgage equity withdrawals. Market volatility has increased considerably in recent months, and we expect that to continue going forward. This environment reinforces the need for diversified investments like LIVESTRONG Portfolios. - ------ 10 SHAREHOLDER FEE EXAMPLES (UNAUDITED) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. As a shareholder in the underlying American Century funds, your fund will indirectly bear its pro rata share of the expenses incurred by the underlying funds. These expenses are not included in the fund's annualized expense ratio or the expenses paid during the period. These expenses are, however, included in the effective expenses paid during the period. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from February 1, 2007 to July 31, 2007. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. - ------ 11 Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/07 - Expense 2/1/07 - Expense 2/1/07 7/31/07 7/31/07 Ratio(1) 7/31/07 Ratio(2) LIVESTRONG Income Portfolio ACTUAL Investor Class $1,000 $1,026.60 $1.00 0.20% $3.77 0.75% Institutional Class $1,000 $1,027.70 $0.00 0.00%(3) $2.77 0.55% Advisor Class $1,000 $1,025.40 $2.26 0.45% $5.02 1.00% R Class $1,000 $1,024.10 $3.51 0.70% $6.27 1.25% HYPOTHETICAL Investor Class $1,000 $1,023.80 $1.00 0.20% $3.76 0.75% Institutional Class $1,000 $1,024.79 $0.00 0.00%(3) $2.76 0.55% Advisor Class $1,000 $1,022.56 $2.26 0.45% $5.01 1.00% R Class $1,000 $1,021.32 $3.51 0.70% $6.26 1.25% (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. The fees and expenses of the underlying American Century funds in which the fund invests are not included in the class's annualized expense ratio. (2) Effective expenses reflect the sum of expenses borne directly by the class plus the fund's pro rata share of the weighted average expense ratio of the underlying funds in which it invests. The effective annualized expense ratio combines the class's annualized expense ratio and the annualized weighted average expense ratio of the underlying funds. The annualized weighted average expense ratio of the underlying funds for the one-half year period reflects the actual expense ratio of each underlying fund from its most recent shareholder report, annualized and weighted for the fund's relative average investment therein during the period. (3) Other expenses, which include the fees and expenses of the fund's independent directors and its legal counsel, as well as interest, did not exceed 0.005%. - ------ 12 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/07 - Expense 2/1/07 - Expense 2/1/07 7/31/07 7/31/07 Ratio(1) 7/31/07 Ratio(2) LIVESTRONG 2015 Portfolio ACTUAL Investor Class $1,000 $1,033.00 $1.01 0.20% $4.03 0.80% Institutional Class $1,000 $1,034.70 $0.00 0.00%(3) $3.03 0.60% Advisor Class $1,000 $1,032.10 $2.27 0.45% $5.29 1.05% R Class $1,000 $1,031.30 $3.53 0.70% $6.55 1.30% HYPOTHETICAL Investor Class $1,000 $1,023.80 $1.00 0.20% $4.01 0.80% Institutional Class $1,000 $1,024.79 $0.00 0.00%(3) $3.01 0.60% Advisor Class $1,000 $1,022.56 $2.26 0.45% $5.26 1.05% R Class $1,000 $1,021.32 $3.51 0.70% $6.51 1.30% LIVESTRONG 2025 Portfolio ACTUAL Investor Class $1,000 $1,036.90 $1.01 0.20% $4.29 0.85% Institutional Class $1,000 $1,038.60 $0.00 0.00%(3) $3.29 0.65% Advisor Class $1,000 $1,036.10 $2.27 0.45% $5.55 1.10% R Class $1,000 $1,034.40 $3.53 0.70% $6.81 1.35% HYPOTHETICAL Investor Class $1,000 $1,023.80 $1.00 0.20% $4.26 0.85% Institutional Class $1,000 $1,024.79 $0.00 0.00%(3) $3.26 0.65% Advisor Class $1,000 $1,022.56 $2.26 0.45% $5.51 1.10% R Class $1,000 $1,021.32 $3.51 0.70% $6.76 1.35% (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. The fees and expenses of the underlying American Century funds in which the fund invests are not included in the class's annualized expense ratio. (2) Effective expenses reflect the sum of expenses borne directly by the class plus the fund's pro rata share of the weighted average expense ratio of the underlying funds in which it invests. The effective annualized expense ratio combines the class's annualized expense ratio and the annualized weighted average expense ratio of the underlying funds. The annualized weighted average expense ratio of the underlying funds for the one-half year period reflects the actual expense ratio of each underlying fund from its most recent shareholder report, annualized and weighted for the fund's relative average investment therein during the period. (3) Other expenses, which include the fees and expenses of the fund's independent directors and its legal counsel, as well as interest, did not exceed 0.005%. - ------ 13 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/07 - Expense 2/1/07 - Expense 2/1/07 7/31/07 7/31/07 Ratio(1) 7/31/07 Ratio(2) LIVESTRONG 2035 Portfolio ACTUAL Investor Class $1,000 $1,043.00 $1.01 0.20% $4.61 0.91% Institutional Class $1,000 $1,043.80 $0.00 0.00%(3) $3.60 0.71% Advisor Class $1,000 $1,042.20 $2.28 0.45% $5.87 1.16% R Class $1,000 $1,040.60 $3.54 0.70% $7.13 1.41% HYPOTHETICAL Investor Class $1,000 $1,023.80 $1.00 0.20% $4.56 0.91% Institutional Class $1,000 $1,024.79 $0.00 0.00%(3) $3.56 0.71% Advisor Class $1,000 $1,022.56 $2.26 0.45% $5.81 1.16% R Class $1,000 $1,021.32 $3.51 0.70% $7.05 1.41% LIVESTRONG 2045 Portfolio ACTUAL Investor Class $1,000 $1,046.90 $1.02 0.20% $4.72 0.93% Institutional Class $1,000 $1,048.40 $0.00 0.00%(3) $3.71 0.73% Advisor Class $1,000 $1,045.30 $2.28 0.45% $5.98 1.18% R Class $1,000 $1,044.60 $3.55 0.70% $7.25 1.43% HYPOTHETICAL Investor Class $1,000 $1,023.80 $1.00 0.20% $4.66 0.93% Institutional Class $1,000 $1,024.79 $0.00 0.00%(3) $3.66 0.73% Advisor Class $1,000 $1,022.56 $2.26 0.45% $5.91 1.18% R Class $1,000 $1,021.32 $3.51 0.70% $7.15 1.43% (1) Expenses are equal to the class's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. The fees and expenses of the underlying American Century funds in which the fund invests are not included in the class's annualized expense ratio. (2) Effective expenses reflect the sum of expenses borne directly by the class plus the fund's pro rata share of the weighted average expense ratio of the underlying funds in which it invests. The effective annualized expense ratio combines the class's annualized expense ratio and the annualized weighted average expense ratio of the underlying funds. The annualized weighted average expense ratio of the underlying funds for the one-half year period reflects the actual expense ratio of each underlying fund from its most recent shareholder report, annualized and weighted for the fund's relative average investment therein during the period. (3) Other expenses, which include the fees and expenses of the fund's independent directors and its legal counsel, as well as interest, did not exceed 0.005%. - ------ 14 SCHEDULE OF INVESTMENTS LIVESTRONG Portfolios JULY 31, 2007 Shares Value LIVESTRONG Income Portfolio Mutual Funds(1) -- 99.8% DOMESTIC FIXED INCOME FUNDS -- 39.0% 369,407 High-Yield Fund Institutional Class $ 2,268,159 450,390 Inflation-Adjusted Bond Fund Institutional Class 4,778,638 1,647,816 NT Diversified Bond Fund Institutional Class 16,560,557 ------------ 23,607,354 ------------ DOMESTIC EQUITY FUNDS -- 38.5% 682,400 NT Equity Growth Fund Institutional Class 7,595,113 339,967 NT Growth Fund Institutional Class 3,892,622 568,193 NT Large Company Value Fund Institutional Class 6,375,126 204,460 NT Mid Cap Value Fund Institutional Class 2,287,907 113,463 NT Small Company Fund Institutional Class 1,133,495 128,983 NT Vista Fund Institutional Class(2) 1,502,652 20,947 Real Estate Fund Institutional Class 548,392 ------------ 23,335,307 ------------ MONEY MARKET FUNDS -- 10.1% 6,151,530 Premium Money Market Fund Investor Class 6,151,530 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 7.3% 313,676 International Bond Fund Institutional Class 4,416,558 ------------ INTERNATIONAL EQUITY FUNDS -- 4.9% 255,233 NT International Growth Fund Institutional Class 2,993,883 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $57,934,272) 60,504,632 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 130,746 ------------ TOTAL NET ASSETS -- 100.0% $60,635,378 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Non-income producing. Shares Value LIVESTRONG 2015 Portfolio Mutual Funds(1) -- 99.8% DOMESTIC EQUITY FUNDS -- 43.2% 1,931,325 NT Equity Growth Fund Institutional Class $ 21,495,646 1,270,356 NT Growth Fund Institutional Class 14,545,576 1,710,273 NT Large Company Value Fund Institutional Class 19,189,263 789,561 NT Mid Cap Value Fund Institutional Class 8,835,188 333,840 NT Small Company Fund Institutional Class 3,335,062 607,646 NT Vista Fund Institutional Class(2) 7,079,076 86,244 Real Estate Fund Institutional Class 2,257,868 ------------ 76,737,679 ------------ DOMESTIC FIXED INCOME FUNDS -- 36.7% 1,015,434 High-Yield Fund Institutional Class 6,234,765 1,247,402 Inflation-Adjusted Bond Fund Institutional Class 13,234,935 4,558,835 NT Diversified Bond Fund Institutional Class 45,816,282 ------------ 65,285,982 ------------ INTERNATIONAL EQUITY FUNDS -- 8.2% 221,121 NT Emerging Markets Fund Institutional Class 3,184,142 976,930 NT International Growth Fund Institutional Class 11,459,389 ------------ 14,643,531 ------------ MONEY MARKET FUNDS -- 6.1% 10,863,093 Premium Money Market Fund Investor Class 10,863,093 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 5.6% 712,586 International Bond Fund Institutional Class 10,033,211 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $167,640,078) 177,563,496 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 353,685 ------------ TOTAL NET ASSETS -- 100.0% $177,917,181 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Non-income producing. See Notes to Financial Statements. - ------ 15 LIVESTRONG PORTFOLIOS Shares Value LIVESTRONG 2025 Portfolio Mutual Funds(1) -- 99.8% DOMESTIC EQUITY FUNDS -- 51.0% 2,597,176 NT Equity Growth Fund Institutional Class $ 28,906,569 2,433,050 NT Growth Fund Institutional Class 27,858,423 2,504,489 NT Large Company Value Fund Institutional Class 28,100,367 1,061,868 NT Mid Cap Value Fund Institutional Class 11,882,303 864,264 NT Small Company Fund Institutional Class 8,633,997 1,021,337 NT Vista Fund Institutional Class(2) 11,898,576 157,448 Real Estate Fund Institutional Class 4,121,989 ------------ 121,402,224 ------------ DOMESTIC FIXED INCOME FUNDS -- 30.5% 1,154,173 High-Yield Fund Institutional Class 7,086,622 1,384,426 Inflation-Adjusted Bond Fund Institutional Class 14,688,760 5,052,386 NT Diversified Bond Fund Institutional Class 50,776,493 ------------ 72,551,875 ------------ INTERNATIONAL EQUITY FUNDS -- 12.1% 509,743 NT Emerging Markets Fund Institutional Class 7,340,299 1,819,108 NT International Growth Fund Institutional Class 21,338,137 ------------ 28,678,436 ------------ MONEY MARKET FUNDS -- 5.1% 12,175,305 Premium Money Market Fund Investor Class 12,175,305 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 1.1% 177,465 International Bond Fund Institutional Class 2,498,707 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $220,639,519) 237,306,547 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 381,947 ------------ TOTAL NET ASSETS -- 100.0% $237,688,494 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Non-income producing. Shares Value LIVESTRONG 2035 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 61.1% 1,575,446 NT Equity Growth Fund Institutional Class $ 17,534,714 1,569,905 NT Growth Fund Institutional Class 17,975,412 1,550,388 NT Large Company Value Fund Institutional Class 17,395,353 766,999 NT Mid Cap Value Fund Institutional Class 8,582,719 486,423 NT Small Company Fund Institutional Class 4,859,366 774,181 NT Vista Fund Institutional Class(2) 9,019,209 107,785 Real Estate Fund Institutional Class 2,821,811 ------------ 78,188,584 ------------ DOMESTIC FIXED INCOME FUNDS -- 22.8% 448,136 High-Yield Fund Institutional Class 2,751,555 546,547 Inflation-Adjusted Bond Fund Institutional Class 5,798,864 2,045,986 NT Diversified Bond Fund Institutional Class 20,562,163 ------------ 29,112,582 ------------ INTERNATIONAL EQUITY FUNDS -- 15.0% 436,927 NT Emerging Markets Fund Institutional Class 6,291,749 1,094,619 NT International Growth Fund Institutional Class 12,839,881 ------------ 19,131,630 ------------ MONEY MARKET FUNDS -- 1.0% 1,319,087 Premium Money Market Fund Investor Class 1,319,087 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $117,564,901) 127,751,883 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 134,887 ------------ TOTAL NET ASSETS -- 100.0% $127,886,770 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Non-income producing. See Notes to Financial Statements. - ------ 16 LIVESTRONG PORTFOLIOS Shares Value LIVESTRONG 2045 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 66.8% 1,146,959 NT Equity Growth Fund Institutional Class $12,765,645 1,142,994 NT Growth Fund Institutional Class 13,087,281 1,147,523 NT Large Company Value Fund Institutional Class 12,875,208 558,336 NT Mid Cap Value Fund Institutional Class 6,247,780 392,443 NT Small Company Fund Institutional Class 3,920,506 563,617 NT Vista Fund Institutional Class(2) 6,566,138 88,467 Real Estate Fund Institutional Class 2,316,066 ------------ 57,778,624 ------------ DOMESTIC FIXED INCOME FUNDS -- 16.8% 226,553 High-Yield Fund Institutional Class 1,391,035 276,330 Inflation-Adjusted Bond Fund Institutional Class 2,931,861 1,019,975 NT Diversified Bond Fund Institutional Class 10,250,749 ------------ 14,573,645 ------------ INTERNATIONAL EQUITY FUNDS -- 16.3% 390,776 NT Emerging Markets Fund Institutional Class 5,627,174 725,229 NT International Growth Fund Institutional Class 8,506,937 ------------ 14,134,111 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $78,976,138) 86,486,380 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 69,412 ------------ TOTAL NET ASSETS -- 100.0% $86,555,792 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Non-income producing. See Notes to Financial Statements. - ------ 17 STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 LIVESTRONG LIVESTRONG Income 2015 LIVESTRONG Portfolio Portfolio 2025 Portfolio ASSETS Investment securities in affiliates, at value (cost of $57,934,272, $167,640,078 and $220,639,519, respectively) $60,504,632 $177,563,496 $237,306,547 Cash 11,019 34,714 41,238 Receivable for capital shares sold -- 11,157 888 Distributions receivable from affiliates 130,356 341,371 377,621 ------------ ------------ ------------ 60,646,007 177,950,738 237,726,294 ------------ ------------ ------------ LIABILITIES Accrued administrative fees 8,869 28,058 33,512 Distribution and service fees payable 1,760 5,499 4,288 ------------ ------------ ------------ 10,629 33,557 37,800 ------------ ------------ ------------ NET ASSETS $60,635,378 $177,917,181 $237,688,494 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $58,029,956 $165,958,224 $218,326,752 Undistributed net investment income 175,113 1,843,861 2,164,319 Accumulated undistributed net realized gain (loss) on investment transactions (140,051) 191,678 530,395 Net unrealized appreciation on investments 2,570,360 9,923,418 16,667,028 ------------ ------------ ------------ $60,635,378 $177,917,181 $237,688,494 ============ ============ ============ INVESTOR CLASS, $0.01 PAR VALUE Net assets $44,108,615 $139,725,011 $174,983,751 Shares outstanding 3,989,899 11,733,254 14,164,363 Net asset value per share $11.06 $11.91 $12.35 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $8,284,994 $15,735,527 $44,250,466 Shares outstanding 749,302 1,319,515 3,577,301 Net asset value per share $11.06 $11.93 $12.37 ADVISOR CLASS, $0.01 PAR VALUE Net assets $8,129,494 $19,269,895 $17,076,431 Shares outstanding 735,649 1,620,750 1,384,040 Net asset value per share $11.05 $11.89 $12.34 R CLASS, $0.01 PAR VALUE Net assets $112,275 $3,186,748 $1,377,846 Shares outstanding 10,163 268,348 111,849 Net asset value per share $11.05 $11.88 $12.32 See Notes to Financial Statements. - ------ 18 JULY 31, 2007 LIVESTRONG 2035 LIVESTRONG Portfolio 2045 Portfolio ASSETS Investment securities in affiliates, at value (cost of $117,564,901 and $78,976,138, respectively) $127,751,883 $86,486,380 Cash 20,130 12,863 Receivable for capital shares sold 597 3,296 Distributions receivable from affiliates 135,700 65,666 ------------ ------------ 127,908,310 86,568,205 ------------ ------------ LIABILITIES Accrued administrative fees 18,240 10,107 Distribution and service fees payable 3,300 2,306 ------------ ------------ 21,540 12,413 ------------ ------------ NET ASSETS $127,886,770 $86,555,792 ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $116,560,671 $78,397,308 Undistributed net investment income 857,316 485,931 Undistributed net realized gain on investment transactions 281,801 162,311 Net unrealized appreciation on investments 10,186,982 7,510,242 ------------ ------------ $127,886,770 $86,555,792 ============ ============ INVESTOR CLASS, $0.01 PAR VALUE Net assets $91,220,387 $48,229,392 Shares outstanding 6,966,465 3,598,909 Net asset value per share $13.09 $13.40 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $22,313,884 $28,482,515 Shares outstanding 1,701,454 2,122,584 Net asset value per share $13.11 $13.42 ADVISOR CLASS, $0.01 PAR VALUE Net assets $13,377,786 $9,091,029 Shares outstanding 1,022,889 679,490 Net asset value per share $13.08 $13.38 R CLASS, $0.01 PAR VALUE Net assets $974,713 $752,856 Shares outstanding 74,627 56,344 Net asset value per share $13.06 $13.36 See Notes to Financial Statements. - ------ 19 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2025 Portfolio Portfolio Portfolio INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $1,549,901 $ 4,283,284 $ 5,089,312 ----------- ----------- ----------- EXPENSES: Administrative fees 84,039 265,347 322,360 Distribution and service fees: Advisor Class 14,531 38,471 32,800 R Class 317 7,977 5,519 Directors' fees and expenses 867 2,637 3,486 ----------- ----------- ----------- 99,754 314,432 364,165 ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 1,450,147 3,968,852 4,725,147 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (26,392) 242,383 554,700 Capital gain distributions received from underlying funds 16,942 73,634 138,979 ----------- ----------- ----------- (9,450) 316,017 693,679 ----------- ----------- ----------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 2,759,798 11,245,515 19,418,380 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) 2,750,348 11,561,532 20,112,059 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,200,495 $15,530,384 $24,837,206 =========== =========== =========== See Notes to Financial Statements. - ------ 20 YEAR ENDED JULY 31, 2007 LIVESTRONG LIVESTRONG 2045 2035 Portfolio Portfolio INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $ 2,081,277 $1,197,437 ----------- ----------- EXPENSES: Administrative fees 166,312 88,946 Distribution and service fees: Advisor Class 24,015 16,388 R Class 3,063 2,297 Directors' fees and expenses 1,780 1,163 ----------- ----------- 195,170 108,794 ----------- ----------- NET INVESTMENT INCOME (LOSS) 1,886,107 1,088,643 ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds 274,695 158,432 Capital gain distributions received from underlying funds 86,095 66,625 ----------- ----------- 360,790 225,057 ----------- ----------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 11,667,564 8,371,833 ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) 12,028,354 8,596,890 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $13,914,461 $9,685,533 =========== =========== See Notes to Financial Statements. - ------ 21 STATEMENT OF CHANGES IN NET ASSETS YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio Increase (Decrease) in Net Assets 2007 2006 2007 2006 OPERATIONS Net investment income (loss) $ 1,450,147 $ 963,734 $ 3,968,852 $ 2,355,575 Net realized gain (loss) (9,450) 491,794 316,017 3,025,866 Change in net unrealized appreciation (depreciation) 2,759,798 (550,729) 11,245,515 (2,621,574) ----------- ---------- ----------- ------------ Net increase (decrease) in net assets resulting from operations 4,200,495 904,799 15,530,384 2,759,867 ----------- ---------- ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (1,047,364) (740,215) (2,492,556) (1,494,047) Institutional Class (174,881) (123,487) (296,721) (101,538) Advisor Class (147,969) (48,341) (318,604) (73,173) R Class (1,399) (437) (9,697) (461) From net realized gains: Investor Class (470,015) (26,989) (2,496,248) (57,984) Institutional Class (67,991) (4,013) (272,911) (3,679) Advisor Class (72,923) (1,746) (358,795) (3,112) R Class (648) (14) (12,472) (22) ----------- ----------- ------------ ------------ Decrease in net assets from distributions (1,983,190) (945,242) (6,258,004) (1,734,016) ----------- ----------- ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 23,632,442 15,136,327 58,866,551 64,687,101 ----------- ----------- ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 25,849,747 15,095,884 68,138,931 65,712,952 NET ASSETS Beginning of period 34,785,631 19,689,747 109,778,250 44,065,298 ----------- ----------- ------------ ------------ End of period $60,635,378 $34,785,631 $177,917,181 $109,778,250 =========== =========== ============ ============ Undistributed net investment income $175,113 $96,579 $1,843,861 $992,587 =========== =========== ============ ============ See Notes to Financial Statements. - ------ 22 YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 LIVESTRONG 2025 Portfolio LIVESTRONG 2035 Portfolio Increase (Decrease) in Net Assets 2007 2006 2007 2006 OPERATIONS Net investment income (loss) $ 4,725,147 $ 3,376,289 $ 1,886,107 $ 1,187,047 Net realized gain (loss) 693,679 7,946,235 360,790 3,744,415 Change in net unrealized appreciation (depreciation) 19,418,380 (6,077,343) 11,667,564 (2,785,173) ------------ ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations 24,837,206 5,245,181 13,914,461 2,146,289 ------------ ------------ ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (2,728,920) (1,904,998) (1,038,223) (741,605) Institutional Class (782,731) (702,282) (266,923) (121,935) Advisor Class (222,178) (63,954) (107,434) (33,882) R Class (13,994) (1,781) (5,618) (801) From net realized gains: Investor Class (5,948,432) (100,651) (2,806,849) (29,595) Institutional Class (1,544,817) (34,639) (635,902) (4,508) Advisor Class (556,560) (3,737) (349,261) (1,501) R Class (41,251) (116) (22,938) (40) ------------ ------------ ------------ ----------- Decrease in net assets from distributions (11,838,883) (2,812,158) (5,233,148) (933,867) ------------ ------------ ------------ ----------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 73,140,620 73,921,053 50,376,625 42,524,951 ------------ ------------ ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS 86,138,943 76,354,076 59,057,938 43,737,373 NET ASSETS Beginning of period 151,549,551 75,195,475 68,828,832 25,091,459 ------------ ------------ ------------ ----------- End of period $237,688,494 $151,549,551 $127,886,770 $68,828,832 ============ ============ ============ =========== Undistributed net investment income $2,164,319 $1,186,995 $857,316 $389,407 ============ ============ ============ =========== See Notes to Financial Statements. - ------ 23 YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 LIVESTRONG 2045 Portfolio Increase (Decrease) in Net Assets 2007 2006 OPERATIONS Net investment income (loss) $ 1,088,643 $ 692,802 Net realized gain (loss) 225,057 2,435,830 Change in net unrealized appreciation (depreciation) 8,371,833 (1,825,720) ----------- ----------- Net increase (decrease) in net assets resulting from operations 9,685,533 1,302,912 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (468,015) (322,350) Institutional Class (256,627) (240,707) Advisor Class (61,872) (15,750) R Class (2,066) (228) From net realized gains: Investor Class (1,476,282) (32,689) Institutional Class (698,729) (22,737) Advisor Class (242,944) (1,761) R Class (10,785) (29) ----------- ----------- Decrease in net assets from distributions (3,217,320) (636,251) ----------- ----------- CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 39,912,717 24,476,051 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS 46,380,930 25,142,712 NET ASSETS Beginning of period 40,174,862 15,032,150 ----------- ----------- End of period $86,555,792 $40,174,862 =========== =========== Undistributed net investment income $485,931 $185,868 =========== =========== See Notes to Financial Statements. - ------ 24 NOTES TO FINANCIAL STATEMENTS JULY 31, 2007 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Asset Allocation Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act), as amended, as an open-end management investment company. LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2035 Portfolio and LIVESTRONG 2045 Portfolio (collectively, the funds) are five funds in a series issued by the corporation. The funds operate as "fund of funds," meaning substantially all of the funds' assets will be invested in other funds in the American Century family of funds (the underlying funds). Because the funds directly invest in a relatively small number of underlying funds, they are not diversified as defined by the 1940 Act. However, the underlying funds are generally diversified and so indirectly provide broad exposure to a large number of securities. The investment objective of LIVESTRONG Income Portfolio is to seek current income. Capital appreciation is a secondary objective. The investment objectives of the four target-year LIVESTRONG Portfolios are to seek the highest total return consistent with their respective asset mix. The funds pursue their objectives by investing in underlying funds that represent a variety of asset classes and investment styles. For each fund with a target year, the target asset mix will be adjusted annually in a step-like fashion. In general, as the target year approaches, the allocation to stocks will decrease and the allocation to bonds and money market instruments will increase. When a fund reaches its most conservative planned target asset allocation, which is expected to occur on approximately November 30 of the year before the target year, its target asset mix will become fixed and will match that of LIVESTRONG Income Portfolio. The following is a summary of the funds' significant accounting policies. MULTIPLE CLASS -- The funds are authorized to issue the Investor Class, Institutional Class, Advisor Class and R Class. The share classes differ principally in their respective distribution and shareholder servicing expenses and arrangements. All shares of each fund represent an equal pro rata interest in the net assets of the class to which such shares belong, and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes. Income, non-class specific expenses, and realized and unrealized capital gains and losses of the funds are allocated to each class of shares based on their relative net assets. UNDERLYING FUNDS -- Each fund's assets are allocated among underlying funds that represent major asset classes, including equity securities (stocks), fixed-income securities (bonds) and cash-equivalent instruments (money markets). The underlying NT Diversified Bond, NT Emerging Markets, NT Equity Growth, NT Growth, NT International Growth, NT Large Company Value, NT Mid Cap Value, NT Small Company and NT Vista funds are not permitted to invest in securities issues by companies assigned the Global Industry Classification Standard (GICS) for the tobacco industry. A brief description of each of the underlying funds follows. DOMESTIC EQUITY FUNDS NT EQUITY GROWTH seeks long-term capital growth. It uses a quantitative investment strategy to construct an optimized portfolio drawn primarily from the 1,500 largest publicly traded U.S. companies without regard to dividend yield. NT GROWTH seeks long-term capital growth. It uses a growth investment strategy and generally invests in larger U.S. companies. NT LARGE COMPANY VALUE seeks long-term capital growth with income as a secondary objective. It uses a value investment strategy and invests primarily in larger U.S. companies. NT MID CAP VALUE seeks long-term capital growth with income as a secondary objective. It uses a value investment strategy and invests primarily in mid-sized U.S. companies. NT SMALL COMPANY seeks long-term capital growth. It uses a quantitative investment strategy and invests primarily in smaller U.S. companies. NT VISTA seeks long-term capital growth. It uses a growth investment strategy and generally invests in medium-sized and smaller U.S. companies. REAL ESTATE seeks high total investment return through a combination of capital appreciation and current income. It invests primarily in equity securities issued by real estate investment trusts and companies engaged in the real estate industry. - ------ 25 INTERNATIONAL EQUITY FUNDS NT EMERGING MARKETS seeks capital growth. It uses a growth investment strategy and invests primarily in securities of companies located in emerging market countries and companies that derive a significant portion of their business from emerging market countries. NT INTERNATIONAL GROWTH seeks capital growth. It uses a growth investment strategy and invests primarily in securities of companies located in developed countries other than the United States. DOMESTIC FIXED INCOME FUNDS HIGH-YIELD seeks high current income by investing in a diversified portfolio of high-yield corporate bonds and other debt securities. As a second objective, the fund seeks capital appreciation, but only when consistent with its primary objective of managing current income. INFLATION-ADJUSTED BOND seeks to provide total return and inflation protection consistent with investment in inflation-indexed securities. NT DIVERSIFIED BOND seeks a high level of income by investing primarily in high- and medium-grade non-money market debt securities. These securities, which may be payable in U.S. or foreign currencies, may include corporate bonds and notes, government securities and securities backed by mortgages or other assets. INTERNATIONAL FIXED INCOME FUNDS INTERNATIONAL BOND seeks high total return by investing in high-quality, non-dollar-denominated government and corporate debt securities outside the United States. MONEY MARKET FUNDS PREMIUM MONEY MARKET seeks to earn the highest level of current income while preserving the value of shareholder investments by investing in high-quality, cash-equivalent securities. SECURITY VALUATIONS -- Investments in the underlying funds are valued at their reported net asset value. The underlying funds have specific valuation policies. If an event occurs after the value of a security was established but before the net asset value per share of an underlying fund was determined that was likely to materially change the net asset value of the underlying fund, that security would be valued as determined in accordance with procedures adopted by the Board of Directors/Trustees. If the underlying fund determines that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued as determined by, or in accordance with procedures adopted by, the Board of Directors/Trustees or its designee if such determination would materially impact an underlying fund's net asset value. Certain other circumstances may cause the underlying fund to use alternative procedures to value a security such as: a security has been declared in default; trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Income and capital gain distributions, if any, from the underlying funds are recorded as of the ex-dividend date. Long-term capital gain distributions, if any, from the underlying funds are a component of net realized gain (loss). EXPENSES -- The expenses included in the accompanying financial statements reflect the expenses of each fund and do not include any expenses associated with the underlying funds. INCOME TAX STATUS -- It is the fund's policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. - ------ 26 DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income, if any, are generally declared and paid quarterly for LIVESTRONG Income Portfolios. Distributions from net investment income, if any, are generally declared and paid annually for the four target-date LIVESTRONG Portfolios. Distributions from net realized gains, if any, are generally declared and paid annually for all funds. INDEMNIFICATIONS -- Under the corporation's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES ADMINISTRATIVE FEES -- The corporation has entered into a Management Agreement with American Century Investment Management, Inc. (ACIM), under which ACIM provides the funds with shareholder services in exchange for an administrative fee (the fee). The fee is computed and accrued daily based on the daily net assets of each specific class of shares of each fund and paid monthly in arrears. The rate of the fee for the Investor Class, Advisor Class and R Class of the funds is 0.20%. There is no administrative fee for the Institutional Class. DISTRIBUTION FEES -- The Board of Directors has adopted a separate Master Distribution and Individual Shareholder Services Plan for the Advisor Class and R Class (collectively, the plans), pursuant to Rule 12b-1 of the 1940 Act. The plans provide that the Advisor Class will pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25%. The plans provide that the R Class will pay ACIS an annual distribution and service fee of 0.50%. The fees are computed and accrued daily based on each class's daily net assets and paid monthly in arrears. These fees are used to pay for distribution services and shareholder services. Fees incurred under the plans during the year ended July 31, 2007, are detailed in the Statement of Operations. MANAGEMENT FEES -- Each fund will indirectly realize its pro rata share of the fees and expenses of the underlying funds in which it invests. These fees and expenses are already reflected in the valuation of the underlying funds. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment advisor, ACIM, the distributor of the corporation, ACIS, and the corporation's transfer agent, American Century Services, LLC. The directors of the corporation are also directors of some underlying funds and therefore those underlying funds may be deemed to be under common control with the corporation. The officers of the corporation are also officers of all the underlying funds. ACIM or American Century Global Investment Management, Inc., a wholly-owned subsidiary of ACIM, serves as the investment advisor for the underlying funds. 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended July 31, 2007, were as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2025 2035 2045 Portfolio Portfolio Portfolio Portfolio Portfolio Purchases $33,714,863 $83,255,516 $102,220,299 $70,535,517 $54,262,070 Proceeds from sales $10,660,815 $26,773,236 $36,215,964 $23,490,133 $16,468,740 - ------ 27 4. CAPITAL SHARE TRANSACTIONS The corporation is authorized to issue 3,000,000,000 shares. Transactions in shares of the funds were as follows: Year ended July 31, 2007 Year ended July 31, 2006 Shares Amount Shares Amount LIVESTRONG Income Portfolio INVESTOR CLASS Sold 2,462,543 $ 26,953,295 1,865,285 $ 19,417,311 Issued in reinvestment of distributions 129,852 1,409,610 65,833 680,610 Redeemed (1,222,262) (13,344,056) (793,132) (8,273,388) ----------- ------------ ----------- ------------ 1,370,133 15,018,849 1,137,986 11,824,533 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 429,024 4,691,259 197,184 2,062,635 Issued in reinvestment of distributions 22,300 242,560 12,315 127,282 Redeemed (123,853) (1,333,750) (89,121) (934,968) ----------- ------------ ----------- ------------ 327,471 3,600,069 120,378 1,254,949 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 526,267 5,759,864 289,089 3,021,063 Issued in reinvestment of distributions 20,308 220,892 4,853 50,087 Redeemed (94,859) (1,039,319) (99,509) (1,043,161) 451,716 4,941,437 194,433 2,027,989 R CLASS Sold 8,006 87,439 3,442 35,859 Issued in reinvestment of distributions 188 2,047 44 451 Redeemed (1,605) (17,399) (724) (7,454) ----------- ------------ ----------- ------------ 6,589 72,087 2,762 28,856 ----------- ------------ ----------- ------------ Net increase (decrease) 2,155,909 $ 23,632,442 1,455,559 $ 15,136,327 =========== ============ =========== ============ LIVESTRONG 2015 Portfolio INVESTOR CLASS Sold 6,051,177 $ 70,849,640 5,549,139 $ 61,147,153 Issued in reinvestment of distributions 430,453 4,928,684 140,409 1,524,842 Redeemed (2,813,749) (32,877,851) (1,350,088) (14,856,888) ----------- ------------ ----------- ------------ 3,667,881 42,900,473 4,339,460 47,815,107 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 573,261 6,672,802 758,066 8,404,619 Issued in reinvestment of distributions 48,962 561,103 9,680 105,217 Redeemed (242,895) (2,850,614) (102,771) (1,134,102) ----------- ------------ ----------- ------------ 379,328 4,383,291 664,975 7,375,734 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 949,444 11,088,609 891,334 9,793,874 Issued in reinvestment of distributions 59,162 677,399 7,024 76,285 Redeemed (251,099) (2,909,393) (64,749) (710,437) ----------- ------------ ----------- ------------ 757,507 8,856,615 833,609 9,159,722 ----------- ------------ ----------- ------------ R CLASS Sold 247,594 2,854,414 33,377 368,054 Issued in reinvestment of distributions 1,934 22,169 44 483 Redeemed (12,938) (150,411) (2,932) (31,999) ----------- ------------ ----------- ------------ 236,590 2,726,172 30,489 336,538 ----------- ------------ ----------- ------------ Net increase (decrease) 5,041,306 $ 58,866,551 5,868,533 $ 64,687,101 =========== ============ =========== ============ - ------ 28 Year ended July 31, 2007 Year ended July 31, 2006 Shares Amount Shares Amount LIVESTRONG 2025 Portfolio INVESTOR CLASS Sold 6,934,370 $ 84,059,562 6,131,308 $ 69,967,543 Issued in reinvestment of distributions 730,389 8,611,314 176,795 1,988,938 Redeemed (3,262,907) (39,307,539) (1,298,238) (14,798,332) ----------- ------------ ----------- ------------ 4,401,852 53,363,337 5,009,865 57,158,149 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 1,131,075 13,609,369 986,172 11,275,206 Issued in reinvestment of distributions 190,800 2,249,531 65,504 736,921 Redeemed (473,019) (5,782,282) (234,870) (2,674,891) ----------- ------------ ----------- ------------ 848,856 10,076,618 816,806 9,337,236 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 948,240 11,464,534 665,010 7,572,377 Issued in reinvestment of distributions 65,995 778,738 6,012 67,691 Redeemed (275,276) (3,302,202) (60,570) (694,686) ----------- ------------ ----------- ------------ 738,959 8,941,070 610,452 6,945,382 ----------- ------------ ----------- ------------ R CLASS Sold 92,621 1,106,787 55,608 638,412 Issued in reinvestment of distributions 4,682 55,245 169 1,897 Redeemed (33,004) (402,437) (14,043) (160,023) ----------- ------------ ----------- ------------ 64,299 759,595 41,734 480,286 ----------- ------------ ----------- ------------ Net increase (decrease) 6,053,966 $ 73,140,620 6,478,857 $ 73,921,053 =========== ============ =========== ============ LIVESTRONG 2035 Portfolio INVESTOR CLASS Sold 4,307,986 $ 55,031,500 3,133,987 $ 36,820,309 Issued in reinvestment of distributions 306,847 3,801,836 65,522 758,749 Redeemed (2,053,913) (26,048,629) (677,940) (7,960,207) ----------- ------------ ----------- ------------ 2,560,920 32,784,707 2,521,569 29,618,851 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 983,032 12,436,788 694,353 8,252,385 Issued in reinvestment of distributions 67,322 834,796 10,919 126,443 Redeemed (284,507) (3,669,430) (69,706) (818,529) ----------- ------------ ----------- ------------ 765,847 9,602,154 635,566 7,560,299 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 709,861 8,993,384 507,513 5,948,743 Issued in reinvestment of distributions 36,830 456,695 3,055 35,383 Redeemed (165,199) (2,093,911) (79,097) (925,996) ----------- ------------ ----------- ------------ 581,492 7,356,168 431,471 5,058,130 ----------- ------------ ----------- ------------ R CLASS Sold 67,584 865,775 25,918 304,212 Issued in reinvestment of distributions 2,303 28,556 73 841 Redeemed (20,300) (260,735) (1,493) (17,382) ----------- ------------ ----------- ------------ 49,587 633,596 24,498 287,671 ----------- ------------ ----------- ------------ Net increase (decrease) 3,957,846 $ 50,376,625 3,613,104 $ 42,524,951 =========== ============ =========== ============ - ------ 29 Year ended July 31, 2007 Year ended July 31, 2006 Shares Amount Shares Amount LIVESTRONG 2045 Portfolio INVESTOR CLASS Sold 3,075,123 $ 39,756,020 1,513,147 $17,989,677 Issued in reinvestment of distributions 152,330 1,922,401 29,951 349,831 Redeemed (1,504,146) (19,352,541) (314,171) (3,729,359) ----------- ------------ ----------- ----------- 1,723,307 22,325,880 1,228,927 14,610,149 ----------- ------------ ----------- ----------- INSTITUTIONAL CLASS Sold 1,159,259 14,839,594 583,552 6,945,344 Issued in reinvestment of distributions 75,565 953,638 22,555 263,444 Redeemed (230,636) (3,028,804) (108,965) (1,293,059) ----------- ------------ ----------- ----------- 1,004,188 12,764,428 497,142 5,915,729 ----------- ------------ ----------- ----------- ADVISOR CLASS Sold 410,315 5,320,358 348,190 4,162,541 Issued in reinvestment of distributions 24,153 304,816 1,501 17,511 Redeemed (104,700) (1,345,029) (32,947) (387,544) ----------- ------------ ----------- ----------- 329,768 4,280,145 316,744 3,792,508 ----------- ------------ ----------- ----------- R CLASS Sold 51,269 654,681 14,010 166,299 Issued in reinvestment of distributions 1,018 12,851 22 257 Redeemed (9,741) (125,268) (765) (8,891) ----------- ------------ ----------- ----------- 42,546 542,264 13,267 157,665 ----------- ------------ ----------- ----------- Net increase (decrease) 3,099,809 $ 39,912,717 2,056,080 $24,476,051 =========== ============ =========== =========== - ------ 30 5. AFFILIATED COMPANY TRANSACTIONS Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. A summary of the transactions for each underlying fund during the year ended July 31, 2007 follows: July 31, 2007 July 31, 2006 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG Income Portfolio High-Yield Fund Institutional Class 205,631 $ 1,361,839 $ 315,779 $ (3,446) $ 121,107 369,407 $ 2,268,159 Inflation-Adjusted Bond Fund Institutional Class 243,667 2,826,585 649,383 (24,795) 174,414 450,390 4,778,638 NT Diversified Bond Fund Institutional Class 901,183 9,755,482 2,208,011 (22,675) 665,218 1,647,816 16,560,557 NT Equity Growth Fund Institutional Class 466,081 3,942,462 1,603,261 (2,078) 68,113 682,400 7,595,113 NT Growth Fund Institutional Class 235,532 1,970,721 855,612 490 8,617 339,967 3,892,622 NT Large Company Value Fund Institutional Class 388,517 3,335,755 1,347,691 (5,054) 107,123 568,193 6,375,126 NT Mid Cap Value Fund Institutional Class 141,077 1,212,278 517,665 351 52,550 204,460 2,287,907 NT Small Company Fund Institutional Class 75,409 616,821 247,663 (3,491) 2,870 113,463 1,133,495 NT Vista Fund Institutional Class(2) 100,680 757,338 497,454 32,442 -- 128,983 1,502,652 Real Estate Fund Institutional Class 12,122 395,114 129,668 976 51,157 20,947 548,392 Premium Money Market Fund Investor Class 3,405,795 3,567,202 821,467 -- 233,843 6,151,530 6,151,530 International Bond Fund Institutional Class 177,722 2,457,629 590,071 (14,695) 74,795 313,676 4,416,558 NT International Growth Fund Institutional Class 196,623 1,515,637 903,482 15,583 7,036 255,233 2,993,883 --------- ----------- ----------- --------- ---------- --------- ----------- $33,714,863 $10,687,207 $(26,392) $1,566,843 $60,504,632 =========== =========== ========= ========== =========== (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. (2) Non-income producing. - ------ 31 July 31, 2007 July 31, 2006 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2015 Portfolio NT Equity Growth Fund Institutional Class 1,380,570 $ 8,937,739 $ 2,972,058 $(8,542) $ 198,057 1,931,325 $ 21,495,646 NT Growth Fund Institutional Class 1,024,610 6,076,971 3,416,461 32,240 33,804 1,270,356 14,545,576 NT Large Company Value Fund Institutional Class 1,248,519 8,087,676 2,963,327 (20,235) 332,086 1,710,273 19,189,263 NT Mid Cap Value Fund Institutional Class 581,803 3,773,599 1,491,548 (1,889) 211,873 789,561 8,835,188 NT Small Company Fund Institutional Class 266,651 1,485,720 837,899 (10,555) 8,787 333,840 3,335,062 NT Vista Fund Institutional Class(2) 537,679 2,923,828 2,316,072 152,762 -- 607,646 7,079,076 Real Estate Fund Institutional Class 55,301 1,428,330 499,252 12,993 222,029 86,244 2,257,868 High-Yield Fund Institutional Class 595,761 3,248,600 571,014 (13,392) 340,639 1,015,434 6,234,765 Inflation-Adjusted Bond Fund Institutional Class 706,080 6,884,246 1,174,344 (51,604) 487,473 1,247,402 13,234,935 NT Diversified Bond Fund Institutional Class 2,622,086 23,552,303 3,993,348 (67,355) 1,883,373 4,558,835 45,816,282 NT Emerging Markets Fund Institutional Class 253,841 1,305,706 1,615,830 189,450 19,522 221,121 3,184,142 NT International Growth Fund Institutional Class 802,143 4,672,435 2,854,584 65,992 28,248 976,930 11,459,389 Premium Money Market Fund Investor Class 5,894,217 5,908,936 940,060 -- 413,711 10,863,093 10,863,093 International Bond Fund Institutional Class 415,182 4,969,427 885,056 (37,482) 177,316 712,586 10,033,211 --------- ----------- ----------- -------- ---------- ---------- ------------ $83,255,516 $26,530,853 $242,383 $4,356,918 $177,563,496 =========== =========== ======== ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. (2) Non-income producing. - ------ 32 July 31, 2007 July 31, 2006 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2025 Portfolio NT Equity Growth Fund Institutional Class 1,937,538 $ 10,870,170 $ 3,733,255 $(14,116) $ 270,460 2,597,176 $ 28,906,569 NT Growth Fund Institutional Class 1,917,716 10,347,432 4,840,699 (7,499) 66,968 2,433,050 27,858,423 NT Large Company Value Fund Institutional Class 1,869,552 10,652,719 3,615,658 (28,507) 492,483 2,504,489 28,100,367 NT Mid Cap Value Fund Institutional Class 799,340 4,564,648 1,693,604 (3,274) 291,965 1,061,868 11,882,303 NT Small Company Fund Institutional Class 651,704 3,386,130 1,319,138 (7,144) 23,018 864,264 8,633,997 NT Vista Fund Institutional Class(2) 913,828 4,412,186 3,497,797 241,693 -- 1,021,337 11,898,576 Real Estate Fund Institutional Class 102,308 2,503,066 853,496 20,095 417,110 157,448 4,121,989 High-Yield Fund Institutional Class 677,982 3,689,011 657,633 (15,437) 389,784 1,154,173 7,086,622 Inflation-Adjusted Bond Fund Institutional Class 796,775 7,506,851 1,319,888 (56,827) 539,504 1,384,426 14,688,760 NT Diversified Bond Fund Institutional Class 2,928,445 25,917,429 4,481,008 (71,426) 2,110,150 5,052,386 50,776,493 NT Emerging Markets Fund Institutional Class 550,499 2,646,693 3,023,994 386,032 46,524 509,743 7,340,299 NT International Growth Fund Institutional Class 1,571,037 7,890,909 5,331,741 120,689 54,386 1,819,108 21,338,137 Premium Money Market Fund Investor Class 7,362,225 5,883,661 1,070,581 -- 480,756 12,175,305 12,175,305 International Bond Fund Institutional Class 54,841 1,949,394 222,772 (9,579) 45,183 177,465 2,498,707 --------- ------------ ----------- -------- ---------- ---------- ------------ $102,220,299 $35,661,264 $554,700 $5,228,291 $237,306,547 ============ =========== ======== ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. (2) Non-income producing. - ------ 33 July 31, 2007 July 31, 2006 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2035 Portfolio NT Equity Growth Fund Institutional Class 998,380 $ 8,982,907 $ 2,671,974 $(10,931) $ 151,583 1,575,446 $ 17,534,714 NT Growth Fund Institutional Class 1,008,391 8,982,821 2,910,176 (21,374) 39,354 1,569,905 17,975,412 NT Large Company Value Fund Institutional Class 1,000,250 9,149,457 2,989,861 (16,446) 282,173 1,550,388 17,395,353 NT Mid Cap Value Fund Institutional Class 481,782 4,468,195 1,305,695 1,372 192,066 766,999 8,582,719 NT Small Company Fund Institutional Class 294,609 2,688,582 795,459 (5,595) 12,070 486,423 4,859,366 NT Vista Fund Institutional Class(2) 550,757 4,500,589 2,407,732 132,856 -- 774,181 9,019,209 Real Estate Fund Institutional Class 58,093 2,131,428 637,780 2,990 259,217 107,785 2,821,811 High-Yield Fund Institutional Class 216,648 1,848,057 370,092 (2,622) 139,024 448,136 2,751,555 Inflation-Adjusted Bond Fund Institutional Class 259,945 3,777,517 755,120 (19,790) 199,488 546,547 5,798,864 NT Diversified Bond Fund Institutional Class 982,924 13,391,823 2,669,500 (36,379) 784,719 2,045,986 20,562,163 NT Emerging Markets Fund Institutional Class 394,918 3,076,821 2,597,728 208,550 36,320 436,927 6,291,749 NT International Growth Fund Institutional Class 767,610 6,383,640 2,936,938 42,064 29,795 1,094,619 12,839,881 Premium Money Market Fund Investor Class 332,790 1,153,680 167,383 -- 41,563 1,319,087 1,319,087 -------- ----------- ----------- -------- ---------- --------- ------------ $70,535,517 $23,215,438 $274,695 $2,167,372 $127,751,883 =========== =========== ======== ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. (2) Non-income producing. - ------ 34 July 31, 2007 July 31, 2006 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2045 Portfolio NT Equity Growth Fund Institutional Class 622,511 $ 7,719,068 $ 2,050,630 $(17,455) $ 105,967 1,146,959 $12,765,645 NT Growth Fund Institutional Class 628,776 7,610,025 2,120,885 (19,519) 26,983 1,142,994 13,087,281 NT Large Company Value Fund Institutional Class 623,017 7,941,509 2,136,955 (18,775) 199,745 1,147,523 12,875,208 NT Mid Cap Value Fund Institutional Class 300,760 3,803,024 970,049 3,735 132,811 558,336 6,247,780 NT Small Company Fund Institutional Class 203,767 2,506,892 662,329 (6,761) 9,335 392,443 3,920,506 NT Vista Fund Institutional Class(2) 343,690 3,833,082 1,787,159 78,391 -- 563,617 6,566,138 Real Estate Fund Institutional Class 40,745 1,964,209 526,200 2,434 201,356 88,467 2,316,066 High-Yield Fund Institutional Class 92,365 1,062,856 206,801 (1,958) 67,026 226,553 1,391,035 Inflation-Adjusted Bond Fund Institutional Class 109,499 2,186,220 418,371 (8,715) 98,416 276,330 2,931,861 NT Diversified Bond Fund Institutional Class 416,572 7,559,595 1,464,150 (16,574) 373,254 1,019,975 10,250,749 NT Emerging Markets Fund Institutional Class 299,005 3,192,312 2,215,553 150,747 30,580 390,776 5,627,174 NT International Growth Fund Institutional Class 424,763 4,883,278 1,751,226 12,882 18,589 725,229 8,506,937 -------- ----------- ----------- -------- ---------- --------- ----------- $54,262,070 $16,310,308 $158,432 $1,264,062 $86,486,380 =========== =========== ======== ========== =========== (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. (2) Non-income producing. - ------ 35 6. INVESTMENTS IN UNDERLYING FUNDS The funds do not invest in the underlying funds for the purpose of exercising management or control; however, investments by the funds within their investment strategies may represent a significant portion of the underlying funds' net assets. As of July 31, 2007, the following LIVESTRONG Portfolios owned 25% or more of the total outstanding shares of the underlying funds: LIVESTRONG LIVESTRONG LIVESTRONG 2025 LIVESTRONG 2045 2015 Portfolio Portfolio 2035 Portfolio Portfolio NT Diversified Bond Fund 32% 35% -- -- NT Emerging Markets Fund -- 33% 28% 25% NT Equity Growth Fund -- 33% -- -- NT Growth Fund -- 36% -- -- NT International Growth Fund -- 37% -- -- NT Large Company Value Fund -- 33% -- -- NT Mid Cap Value Fund -- 31% -- -- NT Small Company Fund -- 39% -- -- NT Vista Fund -- 33% 25% -- As of July 31, 2007, the funds, in aggregate, owned 100% of the total outstanding shares of the underlying NT Diversified Bond, NT Emerging Markets, NT Equity Growth, NT Growth, NT International Growth, NT Large Company Value, NT Mid Cap Value, NT Small Company and NT Vista funds. 7. RISK FACTORS Some of the underlying funds invest in foreign securities, which are generally riskier than U.S. securities. As a result, the funds are subject to foreign risk, meaning that political events (such as civil unrest, national elections and imposition of exchange controls), social, and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the funds invest could cause the funds' investments in that country to experience gains or losses. Investing in emerging markets may accentuate these risks. - ------ 36 8. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended July 31, 2007 and July 31, 2006 were as follows: LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio 2007 2006 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $1,578,720 $912,480 $3,923,292 $1,669,219 Long-term capital gains $404,470 $32,762 $2,334,712 $64,797 LIVESTRONG 2025 Portfolio LIVESTRONG 2035 Portfolio 2007 2006 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $5,667,867 $2,673,015 $2,698,108 $898,223 Long-term capital gains $6,171,016 $139,143 $2,535,040 $35,644 LIVESTRONG 2045 Portfolio 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $1,417,217 $579,035 Long-term capital gains $1,800,103 $57,216 The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of July 31, 2007, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2025 2035 2045 Portfolio Portfolio Portfolio Portfolio Portfolio Federal tax cost of investments $58,162,301 $168,037,383 $221,102,110 $117,808,083 $79,174,606 =========== ============ ============ ============ =========== Gross tax appreciation of investments $2,584,459 $10,174,332 $16,955,591 $10,341,323 $7,616,871 Gross tax depreciation of investments (242,128) (648,219) (751,154) (397,523) (305,097) ----------- ------------ ------------ ------------ ----------- Net tax appreciation (depreciation) of investments $2,342,331 $ 9,526,113 $16,204,437 $ 9,943,800 $7,311,774 =========== ============ ============ ============ =========== Undistributed ordinary income $210,039 $2,138,574 $2,601,238 $1,171,914 $705,047 Accumulated long-term gains $53,052 $294,270 $556,067 $210,385 $141,663 The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. - ------ 37 9. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact that adopting FAS 157 will have on the financial statement disclosures. 10. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The funds hereby designate capital gain distributions for the fiscal year ended July 31, 2007, as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income Portfolio 2015 Portfolio 2025 Portfolio 2035 Portfolio 2045 Portfolio $404,470 $2,334,712 $6,171,016 $2,535,040 $1,800,103 For corporate taxpayers, the following ordinary income distributions paid during the fiscal year ended July 31, 2007, qualify for the corporate dividends received deduction. LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income Portfolio 2015 Portfolio 2025 Portfolio 2035 Portfolio 2045 Portfolio $211,274 $673,031 $991,263 $578,899 $407,229 The funds hereby designate qualified dividend income for the fiscal year ended July 31, 2007, as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income Portfolio 2015 Portfolio 2025 Portfolio 2035 Portfolio 2045 Portfolio $212,853 $700,392 $1,056,842 $622,313 $444,246 The funds hereby designate qualified short-term capital gain distributions for purposes of Internal Revenue Code 871 for the fiscal year ended July 31, 2007, as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income Portfolio 2015 Portfolio 2025 Portfolio 2035 Portfolio 2045 Portfolio $207,107 $805,714 $1,920,044 $1,279,910 $628,637 - ------ 38 FINANCIAL HIGHLIGHTS LIVESTRONG Income Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.45 $10.51 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.33 0.37 0.29 Net Realized and Unrealized Gain (Loss) 0.75 (0.07) 0.52 ------- ------- ------- Total From Investment Operations 1.08 0.30 0.81 ------- ------- ------- Distributions From Net Investment Income (0.32) (0.35) (0.30) From Net Realized Gains (0.15) (0.01) -- ------- ------- ------- Total Distributions (0.47) (0.36) (0.30) ------- ------- ------- Net Asset Value, End of Period $11.06 $10.45 $10.51 ======= ======= ======= TOTAL RETURN(3) 10.51% 2.99% 8.14% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.03% 3.51% 3.16%(5) Portfolio Turnover Rate 22% 120% 6% Net Assets, End of Period (in thousands) $44,109 $27,374 $15,572 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 39 LIVESTRONG Income Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.45 $10.51 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.37 0.34 Net Realized and Unrealized Gain (Loss) 0.75 (0.05) 0.48 ------- ------- ------- Total From Investment Operations 1.10 0.32 0.82 ------- ------- ------- Distributions From Net Investment Income (0.34) (0.37) (0.31) From Net Realized Gains (0.15) (0.01) -- ------- ------- ------- Total Distributions (0.49) (0.38) (0.31) ------- ------- ------- Net Asset Value, End of Period $11.06 $10.45 $10.51 ======= ======= ------- TOTAL RETURN(3) 10.73% 3.20% 8.31% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.23% 3.71% 3.36%(5) Portfolio Turnover Rate 22% 120% 6% Net Assets, End of Period (in thousands) $8,285 $4,409 $3,169 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 40 LIVESTRONG Income Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.45 $10.51 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.31 0.33 0.18 Net Realized and Unrealized Gain (Loss) 0.74 (0.05) 0.61 ------- ------- ------- Total From Investment Operations 1.05 0.28 0.79 ------- ------- ------- Distributions From Net Investment Income (0.30) (0.33) (0.28) From Net Realized Gains (0.15) (0.01) -- ------- ------- ------- Total Distributions (0.45) (0.34) (0.28) ------- ------- ------- Net Asset Value, End of Period $11.05 $10.45 $10.51 ======= ======= ======= TOTAL RETURN(3) 10.13% 2.83% 7.82% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.78% 3.26% 2.91%(5) Portfolio Turnover Rate 22% 120% 6% Net Assets, End of Period (in thousands) $8,129 $2,966 $940 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 41 LIVESTRONG Income Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.44 $10.50 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.27 0.26 0.29 Net Realized and Unrealized Gain (Loss) 0.76 (0.01) 0.46 ------- ------- ------- Total From Investment Operations 1.03 0.25 0.75 ------- ------- ------- Distributions From Net Investment Income (0.27) (0.30) (0.25) From Net Realized Gains (0.15) (0.01) -- ------- ------- ------- Total Distributions (0.42) (0.31) (0.25) ------- ------- ------- Net Asset Value, End of Period $11.05 $10.44 $10.50 ======= ======= ======= TOTAL RETURN(3) 9.97% 2.48% 7.61% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.53% 3.01% 2.66%(5) Portfolio Turnover Rate 22% 120% 6% Net Assets, End of Period (in thousands) $112 $37 $9 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. - ------ 42 See Notes to Financial Statements. LIVESTRONG 2015 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.09 $10.93 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.32 0.37 0.25 Net Realized and Unrealized Gain (Loss) 1.04 0.11 0.86 ------- ------- ------- Total From Investment Operations 1.36 0.48 1.11 ------- ------- ------- Distributions From Net Investment Income (0.27) (0.31) (0.18) From Net Realized Gains (0.27) (0.01) -- ------- ------- ------- Total Distributions (0.54) (0.32) (0.18) ------- ------- ------- Net Asset Value, End of Period $11.91 $11.09 $10.93 ======= ======= ======= TOTAL RETURN(3) 12.46% 4.46% 11.17% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.74% 3.27% 2.61%(5) Portfolio Turnover Rate 18% 123% 2% Net Assets, End of Period (in thousands) $139,725 $89,431 $40,717 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 43 LIVESTRONG 2015 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.10 $10.94 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.34 0.33 0.29 Net Realized and Unrealized Gain (Loss) 1.05 0.17 0.84 ------- ------- ------- Total From Investment Operations 1.39 0.50 1.13 ------- ------- ------- Distributions From Net Investment Income (0.29) (0.33) (0.19) From Net Realized Gains (0.27) (0.01) -- ------- ------- ------- Total Distributions (0.56) (0.34) (0.19) ------- ------- ------- Net Asset Value, End of Period $11.93 $11.10 $10.94 ======= ======= ======= TOTAL RETURN(3) 12.77% 4.67% 11.32% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.94% 3.47% 2.81%(5) Portfolio Turnover Rate 18% 123% 2% Net Assets, End of Period (in thousands) $15,736 $10,439 $3,011 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 44 LIVESTRONG 2015 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.07 $10.91 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.30 0.31 0.17 Net Realized and Unrealized Gain (Loss) 1.03 0.14 0.91 ------- ------- ------- Total From Investment Operations 1.33 0.45 1.08 ------- ------- ------- Distributions From Net Investment Income (0.24) (0.28) (0.17) From Net Realized Gains (0.27) (0.01) -- ------- ------- ------- Total Distributions (0.51) (0.29) (0.17) ------- ------- ------- Net Asset Value, End of Period $11.89 $11.07 $10.91 ======= ======= ======= TOTAL RETURN(3) 12.20% 4.22% 10.88% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.49% 3.02% 2.36%(5) Portfolio Turnover Rate 18% 123% 2% Net Assets, End of Period (in thousands) $19,270 $9,556 $323 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 45 LIVESTRONG 2015 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.06 $10.90 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.25 0.19 0.24 Net Realized and Unrealized Gain (Loss) 1.05 0.23 0.82 ------- ------- ------- Total From Investment Operations 1.30 0.42 1.06 ------- ------- ------- Distributions From Net Investment Income (0.21) (0.25) (0.16) From Net Realized Gains (0.27) (0.01) -- ------- ------- ------- Total Distributions (0.48) (0.26) (0.16) ------- ------- ------- Net Asset Value, End of Period $11.88 $11.06 $10.90 ======= ======= ======= TOTAL RETURN(3) 11.92% 4.05% 10.59% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.24% 2.77% 2.11%(5) Portfolio Turnover Rate 18% 123% 2% Net Assets, End of Period (in thousands) $3,187 $351 $14 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 46 LIVESTRONG 2025 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.49 $11.21 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.28 0.34 0.18 Net Realized and Unrealized Gain (Loss) 1.34 0.27 1.17 ------- ------- ------- Total From Investment Operations 1.62 0.61 1.35 ------- ------- ------- Distributions From Net Investment Income (0.24) (0.31) (0.14) From Net Realized Gains (0.52) (0.02) -- ------- ------- ------- Total Distributions (0.76) (0.33) (0.14) ------- ------- ------- Net Asset Value, End of Period $12.35 $11.49 $11.21 ======= ======= ======= TOTAL RETURN(3) 14.45% 5.48% 13.57% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.34% 2.98% 2.08%(5) Portfolio Turnover Rate 18% 120% 2% Net Assets, End of Period (in thousands) $174,984 $112,202 $53,285 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 47 LIVESTRONG 2025 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.51 $11.23 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.31 0.37 0.27 Net Realized and Unrealized Gain (Loss) 1.34 0.26 1.11 ------- ------- ------- Total From Investment Operations 1.65 0.63 1.38 ------- ------- ------- Distributions From Net Investment Income (0.27) (0.33) (0.15) From Net Realized Gains (0.52) (0.02) -- ------- ------- ------- Total Distributions (0.79) (0.35) (0.15) ------- ------- ------- Net Asset Value, End of Period $12.37 $11.51 $11.23 ======= ======= ======= TOTAL RETURN(3) 14.67% 5.77% 13.74% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.54% 3.18% 2.28%(5) Portfolio Turnover Rate 18% 120% 2% Net Assets, End of Period (in thousands) $44,250 $31,399 $21,458 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 48 LIVESTRONG 2025 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.48 $11.19 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.26 0.29 0.12 Net Realized and Unrealized Gain (Loss) 1.33 0.30 1.20 ------- ------- ------- Total From Investment Operations 1.59 0.59 1.32 ------- ------- ------- Distributions From Net Investment Income (0.21) (0.28) (0.13) From Net Realized Gains (0.52) (0.02) -- ------- ------- ------- Total Distributions (0.73) (0.30) (0.13) ------- ------- ------- Net Asset Value, End of Period $12.34 $11.48 $11.19 ======= ======= ======= TOTAL RETURN(3) 14.17% 5.30% 13.28% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.09% 2.73% 1.83%(5) Portfolio Turnover Rate 18% 120% 2% Net Assets, End of Period (in thousands) $17,076 $7,404 $388 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 49 LIVESTRONG 2025 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.46 $11.18 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.22 0.19 0.15 Net Realized and Unrealized Gain (Loss) 1.34 0.36 1.15 ------- ------- ------- Total From Investment Operations 1.56 0.55 1.30 ------- ------- ------- Distributions From Net Investment Income (0.18) (0.25) (0.12) From Net Realized Gains (0.52) (0.02) -- ------- ------- ------- Total Distributions (0.70) (0.27) (0.12) ------- ------- ------- Net Asset Value, End of Period $12.32 $11.46 $11.18 ======= ======= ======= TOTAL RETURN(3) 13.90% 4.95% 13.10% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.84% 2.48% 1.58%(5) Portfolio Turnover Rate 18% 120% 2% Net Assets, End of Period (in thousands) $1,378 $545 $65 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 50 LIVESTRONG 2035 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.85 $11.43 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.24 0.31 0.17 Net Realized and Unrealized Gain (Loss) 1.71 0.42 1.39 ------- ------- ------- Total From Investment Operations 1.95 0.73 1.56 ------- ------- ------- Distributions From Net Investment Income (0.19) (0.30) (0.13) From Net Realized Gains (0.52) (0.01) -- ------- ------- ------- Total Distributions (0.71) (0.31) (0.13) ------- ------- ------- Net Asset Value, End of Period $13.09 $11.85 $11.43 ======= ======= ======= TOTAL RETURN(3) 16.86% 6.45% 15.71% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.87% 2.61% 1.62%(5) Portfolio Turnover Rate 23% 141% 3% Net Assets, End of Period (in thousands) $91,220 $52,206 $21,537 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 51 LIVESTRONG 2035 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.87 $11.45 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.26 0.30 0.16 Net Realized and Unrealized Gain (Loss) 1.72 0.45 1.43 ------- ------- ------- Total From Investment Operations 1.98 0.75 1.59 ------- ------- ------- Distributions From Net Investment Income (0.22) (0.32) (0.14) From Net Realized Gains (0.52) (0.01) -- ------- ------- ------- Total Distributions (0.74) (0.33) (0.14) ------- ------- ------- Net Asset Value, End of Period $13.11 $11.87 $11.45 ======= ======= ======= TOTAL RETURN(3) 17.07% 6.66% 15.98% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.07% 2.81% 1.82%(5) Portfolio Turnover Rate 23% 141% 3% Net Assets, End of Period (in thousands) $22,314 $11,104 $3,435 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 52 LIVESTRONG 2035 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.83 $11.42 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.21 0.26 0.11 Net Realized and Unrealized Gain (Loss) 1.72 0.43 1.44 ------- ------- ------- Total From Investment Operations 1.93 0.69 1.55 ------- ------- ------- Distributions From Net Investment Income (0.16) (0.27) (0.13) From Net Realized Gains (0.52) (0.01) -- ------- ------- ------- Total Distributions (0.68) (0.28) (0.13) ------- ------- ------- Net Asset Value, End of Period $13.08 $11.83 $11.42 ======= ======= ======= TOTAL RETURN(3) 16.67% 6.10% 15.53% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.62% 2.36% 1.37%(5) Portfolio Turnover Rate 23% 141% 3% Net Assets, End of Period (in thousands) $13,378 $5,224 $113 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 53 LIVESTRONG 2035 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.82 $11.40 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.18 0.16 0.22 Net Realized and Unrealized Gain (Loss) 1.71 0.51 1.30 ------- ------- ------- Total From Investment Operations 1.89 0.67 1.52 ------- ------- ------- Distributions From Net Investment Income (0.13) (0.24) (0.12) From Net Realized Gains (0.52) (0.01) -- ------- ------- ------- Total Distributions (0.65) (0.25) (0.12) ------- ------- ------- Net Asset Value, End of Period $13.06 $11.82 $11.40 ======= ======= ======= TOTAL RETURN(3) 16.30% 5.93% 15.24% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.37% 2.11% 1.12%(5) Portfolio Turnover Rate 23% 141% 3% Net Assets, End of Period (in thousands) $975 $296 $6 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 54 LIVESTRONG 2045 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.96 $11.54 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.22 0.31 0.12 Net Realized and Unrealized Gain (Loss) 1.92 0.46 1.56 ------- ------- ------- Total From Investment Operations 2.14 0.77 1.68 ------- ------- ------- Distributions From Net Investment Income (0.17) (0.32) (0.14) From Net Realized Gains (0.53) (0.03) -- ------- ------- ------- Total Distributions (0.70) (0.35) (0.14) ------- ------- ------- Net Asset Value, End of Period $13.40 $11.96 $11.54 ======= ======= ======= TOTAL RETURN(3) 18.23% 6.76% 16.86% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.62% 2.62% 1.83%(5) Portfolio Turnover Rate 25% 137% 17% Net Assets, End of Period (in thousands) $48,229 $22,437 $7,465 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 55 LIVESTRONG 2045 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.98 $11.56 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.23 0.35 0.25 Net Realized and Unrealized Gain (Loss) 1.93 0.44 1.45 ------- ------- ------- Total From Investment Operations 2.16 0.79 1.70 ------- ------- ------- Distributions From Net Investment Income (0.19) (0.34) (0.14) From Net Realized Gains (0.53) (0.03) -- ------- ------- ------- Total Distributions (0.72) (0.37) (0.14) ------- ------- ------- Net Asset Value, End of Period $13.42 $11.98 $11.56 ======= ======= ======= TOTAL RETURN(3) 18.44% 6.96% 17.11% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.82% 2.82% 2.03%(5) Portfolio Turnover Rate 25% 137% 17% Net Assets, End of Period (in thousands) $28,483 $13,397 $7,181 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 56 LIVESTRONG 2045 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.94 $11.53 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.18 0.20 0.07 Net Realized and Unrealized Gain (Loss) 1.92 0.53 1.59 ------- ------- ------- Total From Investment Operations 2.10 0.73 1.66 ------- ------- ------- Distributions From Net Investment Income (0.13) (0.29) (0.13) From Net Realized Gains (0.53) (0.03) -- ------- ------- ------- Total Distributions (0.66) (0.32) (0.13) ------- ------- ------- Net Asset Value, End of Period $13.38 $11.94 $11.53 ======= ======= ======= TOTAL RETURN(3) 17.96% 6.51% 16.57% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.37% 2.37% 1.58%(5) Portfolio Turnover Rate 25% 137% 17% Net Assets, End of Period (in thousands) $9,091 $4,177 $380 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 57 LIVESTRONG 2045 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.93 $11.51 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.12 0.12 0.18 Net Realized and Unrealized Gain (Loss) 1.94 0.59 1.45 ------- ------- ------- Total From Investment Operations 2.06 0.71 1.63 ------- ------- ------- Distributions From Net Investment Income (0.10) (0.26) (0.12) From Net Realized Gains (0.53) (0.03) -- ------- ------- ------- Total Distributions (0.63) (0.29) (0.12) ------- ------- ------- Net Asset Value, End of Period $13.36 $11.93 $11.51 ======= ======= ======= TOTAL RETURN(3) 17.58% 6.24% 16.38% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.12% 2.12% 1.33%(5) Portfolio Turnover Rate 25% 137% 17% Net Assets, End of Period (in thousands) $753 $165 $6 (1) August 31, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. The total return of the classes may not precisely reflect the class expense differences because of the impact of calculating the net asset values to two decimal places. If net asset values were calculated to three decimal places, the total return differences would more closely reflect the class expense differences. The calculation of net asset values to two decimal places is made in accordance with SEC guidelines and does not result in any gain or loss of value between one class and another. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 58 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders, American Century Asset Allocation Portfolios, Inc.: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2035 Portfolio, and LIVESTRONG 2045 Portfolio (collectively the "Funds"), five of the mutual funds comprising American Century Asset Allocation Portfolios, Inc. as of July 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds comprising American Century Asset Allocation Portfolios, Inc. as of July 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri September 14, 2007 - ------ 59 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposal. The proposal received the required number of votes of the American Century Asset Allocation Portfolios, Inc. and was adopted. A summary of voting results is listed below the proposal. PROPOSAL: To elect nine Directors to the Board of Directors of American Century Asset Allocation Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Asset Allocation Portfolios, Inc.): James E. Stowers, Jr. For: 1,416,441,649 Withhold: 10,836,309 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 1,417,375,725 Withhold: 9,902,233 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 1,417,853,110 Withhold: 9,424,849 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 1,417,179,388 Withhold: 10,098,571 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 1,417,931,210 Withhold: 9,346,748 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 1,417,345,399 Withhold: 9,932,560 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 1,417,193,268 Withhold: 10,084,690 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 1,416,594,224 Withhold: 10,683,734 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 1,417,239,775 Withhold: 10,038,183 Abstain: 0 Broker Non-Vote: 0 - ------ 60 MANAGEMENT The individuals listed below serve as directors or officers of the funds. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as directors and/or officers of, or ownership interest in, American Century Companies, Inc. (ACC) or its wholly owned, direct or indirect, subsidiaries, including the funds' investment advisor, American Century Investment Management, Inc. (ACIM); the funds' principal underwriter, American Century Investment Services, Inc. (ACIS); and the funds' transfer agent, American Century Services, LLC (ACS). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered investment companies in the American Century family of funds. All persons named as officers of the funds also serve in similar capacities for the other 14 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. INTERESTED DIRECTORS JAMES E. STOWERS, JR. 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None JONATHAN S. THOMAS 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1963 POSITION(S) HELD WITH FUNDS: Director and President (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: President, Chief Executive Officer and Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM, ACGIM, ACIS and other ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November 2005) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 109 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - ------ 61 INDEPENDENT DIRECTORS THOMAS A. BROWN 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUNDS: Director (since 1980) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated Investments, LLC (real estate investment company); Managing Member, Brown Cascade Properties, LLC (real estate investment company); Retired, Area Vice President, Applied Industrial Technologies NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None ANDREA C. HALL, PH.D. 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUNDS: Director (since 1997) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None JAMES A. OLSON 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1942 POSITION(S) HELD WITH FUNDS: Director (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment Properties Trust DONALD H. PRATT 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board (since 2005) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None GALE E. SAYERS 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUNDS: Director (since 2000) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer and Founder, Sayers40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None M. JEANNINE STRANDJORD 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUNDS: Director (since 1994) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice President, Sprint Corporation NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc. - ------ 62 TIMOTHY S. WEBSTER 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUNDS: Director (since 2001) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Director, TDB Acquisition Group LLC (September 2006 to present); President and Chief Executive Officer, American Italian Pasta Company (2001 to December 2005) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None OFFICERS MARYANNE ROEPKE 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior Vice President (since 2000) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM, ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial Officer, various American Century funds (July 2000 to August 2006). Also serves as: Senior Vice President, ACS CHARLES A. ETHERINGTON 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1957 POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice President (since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (November 2005 to present); General Counsel, ACC (March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS ROBERT LEACH 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial Officer (all since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000 to present); and Controller, various American Century funds (1997 to September 2006) C. JEAN WADE 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1964 POSITION(S) HELD WITH FUNDS: Controller (since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000 to present) JON ZINDEL 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October 2001 to present); Vice President, certain ACC subsidiaries (October 2001 to August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006). Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief Accounting Officer and Senior Vice President, ACIS The SAI has additional information about the funds' directors and is available without charge, upon request, by calling 1-800-345-2021. - ------ 63 APPROVAL OF MANAGEMENT AGREEMENTS LIVESTRONG Portfolios Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2035 Portfolio and LIVESTRONG 2045 Portfolio (the "funds") and the services provided to the funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and their shareholders on a routine and non-routine basis; * data comparing the cost of owning the funds to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the funds to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 64 FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES -- GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with their investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. - ------ 65 At each quarterly meeting the Directors review investment performance information for the funds, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the funds. The Directors also review detailed performance information during the 15(c) Process comparing the funds' performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. LIVESTRONG Income Portfolio's performance for both the one- and three-year periods was above the median for its peer group. LIVESTRONG 2015 Portfolio's and LIVESTRONG 2035 Portfolio's performance fell below the median for both the one- and three-year periods during part of the past year. LIVESTRONG 2025 Portfolio's performance fell below the median for the one-year period and was equal to the median for the three-year period. LIVESTRONG 2045 Portfolio's performance was slightly below the median for the one-year period and above the median for the three-year period. The board discussed the funds' performance with the advisor and was satisfied with the efforts being undertaken by the advisor. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing various functions to the funds, and the breakpoint fees of competitive funds - ------ 66 not managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the funds increase in size, and through reinvestment in its business to provide shareholders additional content and services. COMPARISON TO OTHER FUNDS' FEES. The funds invest their non-cash assets entirely in other American Century funds. The funds do not pay an investment advisor fee to the advisor. Rather, each fund indirectly bears its pro rata share of the expenses incurred by the underlying funds. Each of the underlying funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the funds and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the portion of the expenses incurred by the underlying funds to the total expense ratio of other funds in the funds' peer group. The expenses of LIVESTRONG Income Portfolio were in the lowest quartile of the total expense ratios of its peer group. All other funds' expenses were above the median of the total expense ratios of their respective peer groups. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker-dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the funds to determine breakpoints in the funds' fee schedule, provided they are managed using the same investment team and strategy. - ------ 67 CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the funds and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 68 SHARE CLASS INFORMATION Four classes of shares are authorized for sale by the funds: Investor Class, Institutional Class, Advisor Class and R Class. The total expense ratio of Institutional Class shares is lower than that of Investor Class shares; the total expense ratios of the Advisor Class and R Class shares is higher than that of Investor Class shares. INVESTOR CLASS shares are available for purchase in two ways: 1) directly from American Century without any commissions or other fees; or 2) through certain financial intermediaries (such as banks, broker-dealers, insurance companies and investment advisors), which may require payment of a transaction fee to the financial intermediary. INSTITUTIONAL CLASS shares are available to large investors such as endowments, foundations, and retirement plans, and to financial intermediaries serving these investors. This class recognizes the relatively lower cost of serving institutional customers and others who invest at least $5 million ($3 million for endowments and foundations) in an American Century fund or at least $10 million in multiple funds. In recognition of the larger investments and account balances and comparatively lower transaction costs, the total expense ratio of Institutional Class shares is 0.20% less than the total expense ratio of Investor Class shares. ADVISOR CLASS shares are sold primarily through institutions such as investment advisors, banks, broker-dealers, insurance companies, and financial advisors. Advisor Class shares are subject to a 0.25% annual Rule 12b-1 distribution and service fee. The total expense ratio of Advisor Class shares is 0.25% higher than the total expense ratio of Investor Class shares. R CLASS shares are sold primarily through employer-sponsored retirement plans and through institutions such as investment advisors, banks, broker-dealers, and insurance companies. R Class shares are subject to a 0.50% annual Rule 12b-1 distribution and service fee. The total expense ration of R Class shares is 0.50% higher than the total expense ration of Investor Class shares. All classes of shares represent a pro rata interest in the funds and generally have the same rights and preferences. - ------ 69 ADDITIONAL INFORMATION RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b), 457 and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the funds' investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the funds. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's website at americancentury.com and on the Securities and Exchange Commission's website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's website at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their website at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 70 INDEX DEFINITIONS The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The CITIGROUP NON-U.S. WORLD GOVERNMENT BOND INDEX is based on the Citigroup World Bond Index, and excludes issues denominated in U.S. dollars. The index measures the total return of government securities in major sectors of the international bond market. The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market- capitalization-weighted index that includes fixed-rate Treasury, government- sponsored, mortgage, asset-backed, and investment-grade issues with a maturity of one year or longer. The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are taxable, registered with the Securities and Exchange Commission, and U.S. dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Morgan Stanley Capital International (MSCI) has developed several indices that measure the performance of foreign stock markets. The MSCI EAFE® (Europe, Australasia, Far East) INDEX is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI EM® (Emerging Markets) INDEX represents the performance of stocks in global emerging market countries. The RUSSELL 1000® INDEX is a market-capitalization weighted, large-cap index created by Frank Russell Company to measure the performance of the 1,000 largest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies, based on total market capitalization). The RUSSELL 2000® INDEX is a market-capitalization weighted index created by Frank Russell Company to measure the performance of the 2,000 smallest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL 3000® INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 71 NOTES - ------ 72 [back cover] CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL PROFESSIONALS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY ASSET ALLOCATION PORTFOLIOS, INC. INVESTMENT ADVISOR: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. American Century Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0709 SH-ANN-56322N
[front cover AMERICAN CENTURY INVESTMENTS Annual Report July 31, 2007 [photo of summer] One Choice Portfolio(SM): Very Conservative One Choice Portfolio(SM): Conservative One Choice Portfolio(SM): Moderate One Choice Portfolio(SM): Aggressive One Choice Portfolio(SM): Very Aggressive [american century investments logo and text logo] OUR MESSAGE TO YOU We have the privilege of providing you with the annual report for the American Century® One Choice Portfolios for the 12 months ended July 31, 2007, to help you monitor your investment. 2007 has been an eventful year for the financial markets and for us. While the markets experienced subprime-related turbulence, we've been working to secure a smooth executive leadership transition. In our semiannual report, we announced the promotion of former international equity chief investment officer (CIO) Enrique Chang to overall CIO. One of Enrique's immediate challenges was to hire a new international equity CIO, which he accomplished in May when Mark On joined us from AXA Rosenberg. Enrique also hired Steve Lurito from MUUS Asset Management LLC in July to fill our vacant U.S. growth equity CIO position. We also announced the promotion of Jonathan Thomas to chief executive officer, effective March 1. In June, Jonathan hired Barry Fink, who came to us from Morgan Stanley, as chief operating officer. This completed our leadership transition, and helped make it possible for my son, Jim Stowers III, to step down from the American Century Companies, Inc. (ACC) board of directors at the end of July to focus on his new business ventures. I remain co-chair of the ACC board with Richard Brown, who has been on the board since 1998 and also co-chairs the Stowers Institute for Medical Research board. Jim's recent departure, after he relinquished his executive leadership and investment management responsibilities in early 2005, reflects his comfort with the firm's direction and new leadership. As with Jim before them, we've been energized by the skills and experience brought to the leadership team by Jonathan, Enrique, Barry, Mark, and Steve. They've already had a positive impact on the development and management of the products and services we take pride in delivering to you. [photo of James E. Stowers, Jr.] /s/James E. Stowers, Jr. FOUNDER AND CO-CHAIRMAN OF THE BOARD AMERICAN CENTURY COMPANIES, INC. TABLE OF CONTENTS ONE CHOICE PORTFOLIOS Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 6 Market Index Total Returns . . . . . . . . . . . . . . . . . . . . . 6 Underlying Fund Allocations. . . . . . . . . . . . . . . . . . . . . 7 Types of Investments in Portfolios . . . . . . . . . . . . . . . . . 8 Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 10 Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 12 FINANCIAL STATEMENTS Statement of Assets and Liabilities . . . . . . . . . . . . . . . . . 15 Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . 17 Statement of Changes in Net Assets. . . . . . . . . . . . . . . . . . 19 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 22 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . 30 Report of Independent Registered Public Accounting Firm . . . . . . . 35 OTHER INFORMATION Proxy Voting Results. . . . . . . . . . . . . . . . . . . . . . . . . 36 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Approval of Management Agreement for One Choice Portfolios. . . . . . 40 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 45 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 46 The opinions expressed in the Portfolio Commentary reflect those of the portfolio management team as of the date of the report, and do not necessarily represent the opinions of American Century or any other person in the American Century organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century by third party vendors. To the best of American Century's knowledge, such information is accurate at the time of printing. PERFORMANCE One Choice Portfolios Total Returns as of July 31, 2007 Average Annual Returns Inception 1 year Since Inception Date ONE CHOICE PORTFOLIO: VERY CONSERVATIVE -- INVESTOR CLASS 7.23% 5.62% 9/30/04 ONE CHOICE PORTFOLIO: CONSERVATIVE -- INVESTOR CLASS 10.41% 8.08% 9/30/04 ONE CHOICE PORTFOLIO: MODERATE -- INVESTOR CLASS 14.56% 11.61% 9/30/04 ONE CHOICE PORTFOLIO: AGGRESSIVE -- INVESTOR CLASS 18.78% 14.16% 9/30/04 ONE CHOICE PORTFOLIO: VERY AGGRESSIVE -- INVESTOR CLASS 21.87% 16.42% 9/30/04 RUSSELL 3000 INDEX(1) 16.08% 12.60% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX(1)(2) 5.55% 3.43% -- LEHMAN BROTHERS U.S. AGGREGATE INDEX(1) 5.58% 3.37% -- (1) Data provided by Lipper Inc. - A Reuters Company. © 2007 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. (2) In September of 2006, the portfolios changed their fixed income index from the Lehman Brothers U.S. Aggregate Index to the Citigroup US Broad Investment-Grade Bond Index. The fund's investment advisor believes this index better represents the fixed income portion of the fund's portfolio composition. The Russell 3000 Index represents approximately 98% of investable U.S. equity market and provides a broad measure of equity performance. The Lehman Brothers U.S. Aggregate Index and the Citigroup US Broad Investment-Grade Bond Index represent the U.S. investment-grade fixed-rate bond market and provide a broad measure of bond market performance. Performance for these indices is provided for reference only. None of the indices are intended to represent the composition of the portfolio, which invests in a mix of equity and fixed-income securities. (See the Schedule of Investments for the portfolio's asset allocations as of July 31, 2007.) Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of the portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each portfolio's asset allocation, and the risk level assigned to each portfolio is intended to reflect the relative short-term price volatility among the funds in each. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses that reduce returns, while the total returns of the indices do not. - ------ 2 One Choice Portfolios Growth of $10,000 Over Life of One Choice Portfolio: Very Conservative $10,000 investment made September 30, 2004
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*From 9/30/04, the Investor Class's inception date. Not annualized. Growth of $10,000 Over Life of One Choice Portfolio: Conservative $10,000 investment made September 30, 2004
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*From 9/30/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of the portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each portfolio's asset allocation, and the risk level assigned to each portfolio is intended to reflect the relative short-term price volatility among the funds in each. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses that reduce returns, while the total returns of the indices do not. - ------ 3 One Choice Portfolios Growth of $10,000 Over Life of One Choice Portfolio: Moderate $10,000 investment made September 30, 2004
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*From 9/30/04, the Investor Class's inception date. Not annualized. Growth of $10,000 Over Life of One Choice Portfolio: Aggressive $10,000 investment made September 30, 2004
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*From 9/30/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of the portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each portfolio's asset allocation, and the risk level assigned to each portfolio is intended to reflect the relative short-term price volatility among the funds in each. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses that reduce returns, while the total returns of the indices do not. - ------ 4 One Choice Portfolios Growth of $10,000 Over Life of One Choice Portfolio: Very Aggressive $10,000 investment made September 30, 2004
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*From 9/30/04, the Investor Class's inception date. Not annualized. One-Year Returns Over Life of Class Periods ended July 31 2005* 2006 2007 One Choice Portfolio: Very Conservative -- Investor Class 5.43% 3.27% 7.23% One Choice Portfolio: Conservative -- Investor Class 8.08% 4.45% 10.41% One Choice Portfolio: Moderate -- Investor Class 11.71% 6.68% 14.56% One Choice Portfolio: Agressive -- Investor Class 13.61% 7.84% 18.78% One Choice Portfolio: Very Aggressive -- Investor Class 15.81% 9.00% 21.87% Russell 3000 Index 14.67% 5.14% 16.08% Citigroup US Broad Investment-Grade Bond Index 2.72% 1.47% 5.55% Lehman Brothers U.S. Aggregate Index 2.55% 1.46% 5.58% *From 9/30/04, the Investor Class's inception date. Not annualized. Data presented reflect past performance. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, and redemption value may be more or less than original cost. To obtain performance data current to the most recent month end, please call 1-800-345-2021 or visit americancentury.com. The performance of the portfolios is dependent on the performance of their underlying American Century funds, and will assume the risks associated with these funds. The risks will vary according to each portfolio's asset allocation, and the risk level assigned to each portfolio is intended to reflect the relative short-term price volatility among the funds in each. International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks. Data assumes reinvestment of dividends and capital gains, and none of the charts reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Returns for the indices are provided for comparison. The fund's total returns include operating expenses that reduce returns, while the total returns of the indices do not. - ------ 5 PORTFOLIO COMMENTARY One Choice Portfolios Portfolio Managers: Jeff Tyler and Irina Torelli PERFORMANCE SUMMARY All five of the One Choice Portfolios enjoyed strong results for the year ended July 31, 2007. Returns ranged from 7.23% for One Choice: Very Conservative to 21.87% for One Choice: Very Aggressive (see pages 2-5 for more detailed performance information). The Portfolios' performance reflected double-digit gains for stocks, both in the U.S. and overseas, as well as solid gains in the bond market. Because of the Portfolios' strategic exposure to the various asset classes, a review of the financial markets helps explain much of their performance. STOCK MARKET REVIEW U.S. stocks produced robust returns during the past year despite an economic slowdown brought on by a sharp decline in the housing market. Corporate earnings growth decelerated -- ending a streak of double-digit quarterly earnings growth for the S&P 500 Index that began in 2002 -- but continued to outshine expectations. In addition, heavy merger activity provided support for stocks thanks to a deluge of leveraged buy-outs from private equity firms. Although the broad stock indexes returned more than 15% for the one-year period, the market hit a couple of speed bumps over the last six months. Stocks stumbled in late February, mirroring a drop in the Chinese stock market, but rebounded quickly in early March. The market grew choppy in the last two months and ended the period with a sharp decline as higher energy prices and deteriorating credit conditions -- sparked by problems in the subprime lending industry -- weighed on investor confidence. Mid-cap stocks led the market's advance, followed by large-cap shares, while small-cap issues lagged. After trailing value stocks for six consecutive years, growth-oriented issues outperformed by a wide margin over the past 12 months. International stocks outperformed the domestic market as improving global economic conditions and a declining U.S. dollar boosted foreign markets. The top performers were emerging markets, with Latin America generating the largest gains. Among developed markets, European bourses posted the best returns, while Japanese shares lagged as a burgeoning economic recovery in the country appeared to stall. Market Index Total Returns For the 12 months ended July 31, 2007 U.S. STOCKS Russell 1000 (Large-Cap)(1) 16.45% Russell Midcap(1) 18.93% Russell 2000 (Small-Cap)(1) 12.12% INTERNATIONAL STOCKS MSCI EAFE 23.91% MSCI EM 50.94% U.S. FIXED INCOME Lehman Brothers U.S. Aggregate(1) 5.58% 10-Year U.S. Treasury Note 5.87% 90-Day U.S. Treasury Bill(1) 5.21% INTERNATIONAL BONDS Citigroup Non-U.S. World Government Bond 4.86% (1) Data provided by Lipper Inc. -- A Reuters Company. © 2007 Reuters. All rights reserved. Any copying, republication or redistribution of Lipper content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. The data contained herein has been obtained from company reports, financial reporting services, periodicals and other resources believed to be reliable. Although carefully verified, data on compilations is not guaranteed by Lipper and may be incomplete. No offer or solicitations to buy or sell any of the securities herein is being made by Lipper. - ------ 6 One Choice Portfolios BOND MARKET REVIEW The U.S. bond market delivered solid gains during the period as interest rates declined overall. The Federal Reserve (the Fed) held short-term interest rates steady throughout the one-year period as economic activity decelerated while inflation remained above the Fed's comfort level, largely because of stubbornly high energy prices. Although bond yields fluctuated in response to economic data, energy price volatility, and subprime lending woes, yields were little changed overall between July 2006 and June 2007. In July 2007, however, a "flight to quality" resulting from a worsening credit environment led to a sizable decline in yields, producing higher bond prices. High-yield corporate bonds were the best performers for the one-year period, though they underperformed in the flight to quality late in the period. In contrast, Treasury bonds benefited the most from the flight to quality, and as a result they generated the best returns among investment-grade bond sectors. Foreign bonds also produced positive results as the U.S. dollar fell against most major currencies (with the notable exception of the Japanese yen). Overseas bond returns were positive despite stronger economic growth that led central banks in many countries to raise interest rates. Underlying Fund Allocations as a % of net assets as of July 31, 2007(1) Very Very Conservative Conservative Moderate Aggressive Aggressive Equity Growth Fund 4.4% 8.3% 15.1% 13.7% 16.9% Growth Fund 3.0% 5.3% 8.5% 15.1% 18.4% Large Company Value Fund 7.7% 10.6% 9.2% 8.2% 10.2% Real Estate Fund 1.8% 1.9% 1.9% 1.9% 1.9% Small Company Fund 0.9% 1.4% 1.9% 2.1% 2.4% Value Fund 4.0% 5.7% 4.3% 3.6% 4.8% Vista Fund 1.5% 4.0% 7.1% 13.8% 16.9% Emerging Markets Fund -- -- 4.2% 6.8% 7.9% International Growth Fund -- 6.0% 10.0% 12.5% 15.6% Diversified Bond Fund 40.4% 37.5% 25.5% 15.3% 2.0% High-Yield Fund -- -- 1.9% 3.9% -- International Bond Fund 11.3% 9.3% 4.2% 1.0% 1.0% Prime Money Market Fund 24.8% 9.8% 6.1% 2.0% 2.0% Other Assets and Liabilities 0.2% 0.2% 0.1% 0.1% --(2) (1) Underlying fund investments represent Investor Class. (2) Category is less than 0.05% of total net assets. - ------ 7 One Choice Portfolios PORTFOLIO PERFORMANCE Each One Choice Portfolio is a "fund of funds" that invests in other American Century mutual funds to achieve its investment objective and target asset allocation. (See page 7 for the specific underlying fund allocations for each One Choice Portfolio.) With one exception, the equity funds in the One Choice Portfolios registered double-digit gains for the one-year period. Emerging Markets was the top performer, advancing sharply thanks to surging markets in developing countries. International Growth also produced a healthy gain for the period. Among domestic holdings, Vista was the best performer, reflecting the outperformance of mid-cap stocks. The Portfolios' large-cap growth component, which includes Growth and Equity Growth, also fared well. The exception was Real Estate, which posted a fractionally positive return overall in the wake of a double-digit decline in the last few months of the period. Real Estate stocks fell as the worsening environment for debt financing reduced the likelihood of private equity buyouts in the sector. The performance of the Portfolios' fixed-income funds were in line with the broad returns of the bond market. International Bond was the best performer, followed by Diversified Bond and High-Yield. Prime Money Market provided principal protection and a return that outpaced the three-month U.S. Treasury bill. Types of Investments in Portfolios as a % of net assets as of July 31, 2007 Very Very Conservative Conservative Moderate Aggressive Aggressive EQUITY Large Cap Value 11.7% 16.3% 13.5% 11.8% 15.0% Large Cap Blend 4.4% 8.3% 15.1% 13.7% 16.9% Large Cap Blend -- International -- 6.0% 10.0% 12.5% 15.6% Large Cap Growth 3.0% 5.3% 8.5% 15.1% 18.4% Large Cap Growth -- International -- -- 4.2% 6.8% 7.9% Mid Cap Growth 1.5% 4.0% 7.1% 13.8% 16.9% Small Cap Value 0.9% 1.4% 1.9% 2.1% 2.4% Real Estate 1.8% 1.9% 1.9% 1.9% 1.9% TOTAL EQUITY 23.3% 43.2% 62.2% 77.7% 95.0% FIXED INCOME Investment Grade 40.4% 37.5% 25.5% 15.3% 2.0% High-Yield -- -- 1.9% 3.9% -- International 11.3% 9.3% 4.2% 1.0% 1.0% TOTAL FIXED-INCOME 51.7% 46.8% 31.6% 20.2% 3.0% MONEY MARKET 24.8% 9.8% 6.1% 2.0% 2.0% OTHER ASSETS AND LIABILITIES 0.2% 0.2% 0.1% 0.1% --(1) (1) Category is less than 0.05% of total net assets. - ------ 8 One Choice Portfolios PORTFOLIO STRATEGY Each Portfolio has a "neutral" asset mix that remains constant, but we typically make modest adjustments to each Portfolio's actual asset mix to add value and improve the Portfolios' ability to meet their investment objectives. Over the past year, we shifted to a slight overweight position in bonds and a matching underweight position in stocks. This defensive posture reflected our expectations for a softer economy, weaker corporate earnings, and a declining U.S. dollar. In general, this positioning detracted modestly from overall performance as stocks continued to outperform. Within the equity component of the Portfolios, we remained overweight in large-cap stocks, which tend to hold up better in a weaker economic environment because of their relatively consistent cash flows, and underweight in mid- and smaller-company issues. Results from this positioning were generally positive -- our large-cap overweight helped as large-cap stocks posted strong gains, and although our mid-cap underweight hurt as mid-cap shares outperformed, we benefited from strong stock selection in this segment of the market. We also moved back to a neutral position in mid-cap issues toward the end of the period. The overweight in fixed-income securities consisted entirely of a modest position in international bonds, which was based on our expectations for a declining dollar given weaker economic activity in the U.S. and expanding economies overseas. Domestically, we held an underweight in corporate bonds, a defensive position designed to protect against "event risk"-- the risk of a leveraged buyout, share buyback, or special dividend that benefits stockholders at the expense of bondholders. For the Portfolios that have exposure to High-Yield, we moved to an underweight position in the last half of the period as the yield gap between Treasury and high-yield bonds reached historically narrow levels. STARTING POINT FOR NEXT REPORTING PERIOD Although corporate earnings have held up better than expected, the dollar's decline has played a key role -- 49% of the sales for the companies in the S&P 500 come from foreign operations, and a weaker dollar makes those overseas revenues worth more at home. Going forward, however, we expect the economic slowdown of the past year to take its toll on corporate profits as consumer spending succumbs to higher gas prices and declining mortgage equity withdrawals. Market volatility has increased considerably in recent months, and we expect that to continue going forward. This environment reinforces our conservative tactical positioning for the Portfolios -- slightly underweight in stocks and a modest overweight in bonds. - ------ 9 SHAREHOLDER FEE EXAMPLES (UNAUDITED) Fund shareholders may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption/exchange fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other mutual funds. As a shareholder in the underlying American Century funds, your fund will indirectly bear its pro rata share of the expenses incurred by the underlying funds. These expenses are not included in the fund's annualized expense ratio or the expenses paid during the period. These expenses are, however, included in the effective expenses paid during the period. The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from February 1, 2007 to July 31, 2007. ACTUAL EXPENSES The table provides information about actual account values and actual expenses for each class. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the share class you own. Then simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If you hold Investor Class shares of any American Century fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century account (i.e., not a financial intermediary or retirement plan account), American Century may charge you a $12.50 semiannual account maintenance fee if the value of those shares is less than $10,000. We will redeem shares automatically in one of your accounts to pay the $12.50 fee. In determining your total eligible investment amount, we will include your investments in all PERSONAL ACCOUNTS (including American Century Brokerage accounts) registered under your Social Security number. PERSONAL ACCOUNTS include individual accounts, joint accounts, UGMA/UTMA accounts, personal trusts, Coverdell Education Savings Accounts and IRAs (including traditional, Roth, Rollover, SEP-, SARSEP- and SIMPLE-IRAs), and certain other retirement accounts. If you have only business, business retirement, employer-sponsored or American Century Brokerage accounts, you are currently not subject to this fee. We will not charge the fee as long as you choose to manage your accounts exclusively online. If you are subject to the Account Maintenance Fee, your account value could be reduced by the fee amount. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of each class of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund's share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption/exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. - ------ 10 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/07 - Expense 2/1/07 - Expense 2/1/07 7/31/07 7/31/07 Ratio(1) 7/31/07 Ratio(2) One Choice Portfolio: Very Conservative Actual $1,000 $1,017.30 $0.00 0.00%(3) $3.45 0.69% Hypothetical $1,000 $1,024.79 $0.00 0.00%(3) $3.46 0.69% One Choice Portfolio: Conservative Actual $1,000 $1,024.80 $0.00 0.00%(3) $3.87 0.77% Hypothetical $1,000 $1,024.79 $0.00 0.00%(3) $3.86 0.77% One Choice Portfolio: Moderate Actual $1,000 $1,038.70 $0.00 0.00%(3) $4.35 0.86% Hypothetical $1,000 $1,024.79 $0.00 0.00%(3) $4.31 0.86% One Choice Portfolio: Aggressive Actual $1,000 $1,056.30 $0.00 0.00%(3) $4.79 0.94% Hypothetical $1,000 $1,024.79 $0.00 0.00%(3) $4.71 0.94% One Choice Portfolio: Very Aggressive Actual $1,000 $1,067.30 $0.00 0.00%(3) $5.13 1.00% Hypothetical $1,000 $1,024.79 $0.00 0.00%(3) $5.01 1.00% (1) Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. The fees and expenses of the underlying American Century funds in which the fund invests are not included in the fund's annualized expense ratio. (2) Effective expenses reflect the sum of expenses borne directly by the fund plus the fund's pro rata share of the weighted average expense ratio of the underlying funds in which it invests. The effective annualized expense ratio combines the fund's annualized expense ratio and the annualized weighted average expense ratio of the underlying funds. The annualized weighted average expense ratio of the underlying funds for the one-half year period reflects the actual expense ratio of each underlying fund from its most recent shareholder report, annualized and weighted for the fund's relative average investment therein during the period. (3) Other expenses, which include the fees and expenses of the fund's independent directors and its legal counsel, as well as interest, did not exceed 0.005%. - ------ 11 SCHEDULE OF INVESTMENT One Choice Portfolios JULY 31, 2007 Shares Value One Choice Portfolio: Very Conservative Mutual Funds(1) -- 99.8% DOMESTIC FIXED INCOME FUNDS -- 40.4% 1,672,271 Diversified Bond Fund Investor Class $16,538,761 ------------ MONEY MARKET FUNDS -- 24.8% 10,152,022 Prime Money Market Fund Investor Class 10,152,022 ------------ DOMESTIC EQUITY FUNDS -- 23.3% 68,751 Equity Growth Fund Investor Class 1,784,088 51,420 Growth Fund Investor Class 1,225,339 412,204 Large Company Value Fund Investor Class 3,136,872 28,932 Real Estate Fund Investor Class 756,572 38,129 Small Company Fund Investor Class 385,103 217,015 Value Fund Investor Class 1,653,654 29,213 Vista Fund Investor Class 615,226 ------------ 9,556,854 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 11.3% 329,535 International Bond Fund Investor Class 4,636,557 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $40,160,543) 40,884,194 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 98,621 ------------ TOTAL NET ASSETS -- 100.0% $40,982,815 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. Shares Value One Choice Portfolio: Conservative Mutual Funds(1) -- 99.8% DOMESTIC FIXED INCOME FUNDS -- 37.5% 8,653,564 Diversified Bond Fund Investor Class $ 85,583,748 ------------ DOMESTIC EQUITY FUNDS -- 37.2% 725,342 Equity Growth Fund Investor Class 18,822,625 502,880 Growth Fund Investor Class 11,983,630 3,167,995 Large Company Value Fund Investor Class 24,108,442 161,780 Real Estate Fund Investor Class 4,230,547 319,768 Small Company Fund Investor Class 3,229,657 1,713,124 Value Fund Investor Class 13,054,005 438,398 Vista Fund Investor Class 9,232,662 ------------ 84,661,568 ------------ MONEY MARKET FUNDS -- 9.8% 22,372,011 Prime Money Market Fund Investor Class 22,372,011 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 9.3% 1,507,491 International Bond Fund Investor Class 21,210,398 ------------ INTERNATIONAL EQUITY FUNDS -- 6.0% 988,506 International Growth Fund Investor Class 13,611,728 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $217,686,311) 227,439,453 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 390,104 ------------ TOTAL NET ASSETS -- 100.0% $227,829,557 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. See Notes to Financial Statements. - ------ 12 One Choice Portfolios Shares Value One Choice Portfolio: Moderate Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 48.0% 3,413,200 Equity Growth Fund Investor Class $ 88,572,541 2,102,736 Growth Fund Investor Class 50,108,199 7,069,404 Large Company Value Fund Investor Class 53,798,165 417,609 Real Estate Fund Investor Class 10,920,475 1,100,773 Small Company Fund Investor Class 11,117,807 3,318,289 Value Fund Investor Class 25,285,362 1,982,955 Vista Fund Investor Class 41,761,032 ------------ 281,563,581 ------------ DOMESTIC FIXED INCOME FUNDS -- 27.4% 15,108,434 Diversified Bond Fund Investor Class 149,422,412 1,870,879 High-Yield Fund Investor Class 11,487,197 ------------ 160,909,609 ------------ INTERNATIONAL EQUITY FUNDS -- 14.2% 2,195,578 Emerging Markets Fund Investor Class 24,656,341 4,254,581 International Growth Fund Investor Class 58,585,580 ------------ 83,241,921 ------------ MONEY MARKET FUNDS -- 6.1% 35,573,044 Prime Money Market Fund Investor Class 35,573,044 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 4.2% 1,731,065 International Bond Fund Investor Class 24,356,085 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $544,532,357) 585,644,240 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 732,312 ------------ TOTAL NET ASSETS -- 100.0% $586,376,552 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. Shares Value One Choice Portfolio: Aggressive Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 58.4% 2,088,338 Equity Growth Fund Investor Class $ 54,192,371 2,513,849 Growth Fund Investor Class 59,905,023 4,284,730 Large Company Value Fund Investor Class 32,606,795 282,762 Real Estate Fund Investor Class 7,394,226 838,718 Small Company Fund Investor Class 8,471,052 1,872,957 Value Fund Investor Class 14,271,932 2,594,601 Vista Fund Investor Class 54,642,297 ------------ 231,483,696 ------------ INTERNATIONAL EQUITY FUNDS -- 19.3% 2,417,645 Emerging Markets Fund Investor Class 27,150,153 3,602,665 International Growth Fund Investor Class 49,608,697 ------------ 76,758,850 ------------ DOMESTIC FIXED INCOME FUNDS -- 19.2% 6,140,346 Diversified Bond Fund Investor Class 60,728,022 2,534,166 High-Yield Fund Investor Class 15,559,779 ------------ 76,287,801 ------------ MONEY MARKET FUNDS -- 2.0% 8,031,973 Prime Money Market Fund Investor Class 8,031,973 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 1.0% 293,166 International Bond Fund Investor Class 4,124,846 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $355,050,359) 396,687,166 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 334,715 ------------ TOTAL NET ASSETS -- 100.0% $397,021,881 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. See Notes to Financial Statements. - ------ 13 One Choice Portfolios Shares Value One Choice Portfolio: Very Aggressive Mutual Funds(1) -- 100.0% DOMESTIC EQUITY FUNDS -- 71.5% 1,097,999 Equity Growth Fund Investor Class $ 28,493,074 1,304,700 Growth Fund Investor Class 31,091,001 2,258,544 Large Company Value Fund Investor Class 17,187,520 120,735 Real Estate Fund Investor Class 3,157,220 397,812 Small Company Fund Investor Class 4,017,901 1,065,877 Value Fund Investor Class 8,121,983 1,352,983 Vista Fund Investor Class 28,493,822 ------------ 120,562,521 ------------ INTERNATIONAL EQUITY FUNDS -- 23.5% 1,189,434 Emerging Markets Fund Investor Class 13,357,344 1,906,138 International Growth Fund Investor Class 26,247,520 ------------ 39,604,864 ------------ DOMESTIC FIXED INCOME FUNDS -- 2.0% 349,452 Diversified Bond Fund Investor Class 3,456,080 ------------ MONEY MARKET FUNDS -- 2.0% 3,427,061 Prime Money Market Fund Investor Class 3,427,061 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 1.0% 125,026 International Bond Fund Investor Class 1,759,116 ------------ TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $147,542,914) 168,809,642 ------------ OTHER ASSETS AND LIABILITIES(2) 34,197 ------------ TOTAL NET ASSETS -- 100.0% $168,843,839 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. (2) Category is less than 0.05% of total net assets.. See Notes to Financial Statements. - ------ 14 STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2007 Very Conservative Conservative Moderate ASSETS Investment securities in affiliates, at value (cost of $40,160,543, $217,686,311 and $544,532,357, respectively) $40,884,194 $227,439,453 $585,644,240 Cash 91 55 74 Distributions receivable from affiliates 98,530 390,049 732,238 ------------ ------------ ------------ NET ASSETS $40,982,815 $227,829,557 $586,376,552 ============ ============ ============ INVESTOR CLASS CAPITAL SHARES, $0.01 PAR VALUE Outstanding 3,883,145 20,023,945 46,598,206 ============ ============ ============ NET ASSET VALUE PER SHARE $10.55 $11.38 $12.58 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $40,154,369 $216,515,565 $539,453,770 Undistributed net investment income 146,702 574,402 1,076,463 Accumulated undistributed net realized gain (loss) on investment transactions (41,907) 986,448 4,734,436 Net unrealized appreciation on investments 723,651 9,753,142 41,111,883 ------------ ------------ ------------ $40,982,815 $227,829,557 $586,376,552 ============ ============ ============ See Notes to Financial Statements. - ------ 15 JULY 31, 2007 Very Aggressive Aggressive ASSETS Investment securities in affiliates, at value (cost of $355,050,359 and $147,542,914, respectively) $396,687,166 $168,809,642 Cash 99 83 Receivable for capital shares sold -- 8,870 Distributions receivable from affiliates 334,616 25,244 ------------ ------------ NET ASSETS $397,021,881 $168,843,839 ============ ============ INVESTOR CLASS CAPITAL SHARES, $0.01 PAR VALUE Outstanding 28,991,841 11,583,439 ============ ============ NET ASSET VALUE PER SHARE $13.69 $14.58 ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $349,127,264 $145,360,312 Undistributed net investment income 2,560,142 542,638 Undistributed net realized gain on investment transactions 3,697,668 1,674,161 Net unrealized appreciation on investments 41,636,807 21,266,728 ------------ ------------ $397,021,881 $168,843,839 ============ ============ See Notes to Financial Statements. - ------ 16 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2007 Very Conservative Conservative Moderate INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $1,238,354 $ 5,554,626 $12,596,277 ----------- ----------- ----------- EXPENSES: Directors' fees and expenses 517 2,830 7,013 ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 1,237,837 5,551,796 12,589,264 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (57,829) 15,943 183,753 Capital gain distributions received from underlying funds 151,465 1,248,851 5,068,675 ----------- ----------- ----------- 93,636 1,264,794 5,252,428 ----------- ----------- ----------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 599,099 8,245,024 34,772,872 ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) 692,735 9,509,818 40,025,300 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,930,572 $15,061,614 $52,614,564 =========== =========== =========== See Notes to Financial Statements. - ------ 17 YEAR ENDED JULY 31, 2007 Very Aggressive Aggressive INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $ 7,527,567 $ 2,338,902 ----------- ----------- EXPENSES: Directors' fees and expenses 4,887 2,038 ----------- ----------- NET INVESTMENT INCOME (LOSS) 7,522,680 2,336,864 ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds 248,953 107,976 Capital gain distributions received from underlying funds 3,786,253 1,835,083 ----------- ----------- 4,035,206 1,943,059 ----------- ----------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS 36,566,103 18,579,766 ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) 40,601,309 20,522,825 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $48,123,989 $22,859,689 =========== =========== See Notes to Financial Statements. - ------ 18 STATEMENT OF CHANGES IN NET ASSETS YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 Very Conservative Conservative Increase (Decrease) in Net Assets 2007 2006 2007 2006 OPERATIONS Net investment income (loss) $1,237,837 $ 482,566 $ 5,551,796 $ 2,293,357 Net realized gain (loss) 93,636 (32,553) 1,264,794 241,594 Change in net unrealized appreciation (depreciation) 599,099 10,991 8,245,024 639,449 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,930,572 461,004 15,061,614 3,174,400 ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (1,153,304) (445,170) (5,231,274) (2,121,359) From net realized gains (69,135) (12,349) (467,169) (54,085) ------------ ------------ ------------ ------------ Decrease in net assets from distributions (1,222,439) (457,519) (5,698,443) (2,175,444) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 29,687,745 15,527,335 138,628,869 85,607,594 Proceeds from reinvestment of distributions 1,174,189 438,945 5,503,221 2,099,406 Payments for shares redeemed (10,439,388) (6,249,815) (36,050,020) (21,504,844) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from capital share transactions 20,422,546 9,716,465 108,082,070 66,202,156 ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 21,130,679 9,719,950 117,445,241 67,201,112 NET ASSETS Beginning of period 19,852,136 10,132,186 110,384,316 43,183,204 ------------ ------------ ------------ ------------ End of period $40,982,815 $19,852,136 $227,829,557 $110,384,316 ============ ============ ============ ============ Undistributed net investment income $146,702 $62,169 $574,402 $253,880 ============ ============ ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 2,818,872 1,524,331 12,377,036 8,083,889 Issued in reinvestment of distributions 112,054 43,390 491,552 200,128 Redeemed (988,497) (613,143) (3,195,492) (2,030,348) ------------ ------------ ------------ ------------ Net increase (decrease) in shares of the fund 1,942,429 954,578 9,673,096 6,253,669 ============ ============ ============ ============ See Notes to Financial Statements. - ------ 19 YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 Moderate Aggressive Increase (Decrease) in Net Assets 2007 2006 2007 2006 OPERATIONS Net investment income (loss) $ 12,589,264 $ 4,955,123 $ 7,522,680 $ 3,222,238 Net realized gain (loss) 5,252,428 1,015,983 4,035,206 821,545 Change in net unrealized appreciation (depreciation) 34,772,872 3,109,672 36,566,103 2,197,038 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 52,614,564 9,080,778 48,123,989 6,240,821 ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (11,946,777) (4,656,349) (6,046,156) (2,399,441) From net realized gains (1,486,925) (85,464) (1,127,285) (60,490) ------------ ------------ ------------ ------------ Decrease in net assets from distributions (13,433,702) (4,741,813) (7,173,441) (2,459,931) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 350,149,847 184,059,502 206,152,389 145,803,669 Proceeds from reinvestment of distributions 12,997,995 4,577,903 7,051,677 2,416,686 Payments for shares redeemed (69,562,395) (36,678,759) (48,482,618) (25,274,500) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from capital share transactions 293,585,447 151,958,646 164,721,448 122,945,855 ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 332,766,309 156,297,611 205,671,996 126,726,745 NET ASSETS Beginning of period 253,610,243 97,312,632 191,349,885 64,623,140 ------------ ------------ ------------ ------------ End of period $586,376,552 $253,610,243 $397,021,881 $191,349,885 ============ ============ ============ ============ Undistributed net investment income $1,076,463 $433,976 $2,560,142 $1,083,618 ============ ============ ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 28,824,439 16,339,558 15,967,469 12,363,087 Issued in reinvestment of distributions 1,067,879 413,171 552,206 210,696 Redeemed (5,659,266) (3,261,353) (3,696,019) (2,147,138) ------------ ------------ ------------ ------------ Net increase (decrease) in shares of the fund 24,233,052 13,491,376 12,823,656 10,426,645 ============ ============ ============ ============ See Notes to Financial Statements. - ------ 20 YEARS ENDED JULY 31, 2007 AND JULY 31, 2006 Very Aggressive Increase (Decrease) in Net Assets 2007 2006 OPERATIONS Net investment income (loss) $ 2,336,864 $ 1,031,204 Net realized gain (loss) 1,943,059 253,117 Change in net unrealized appreciation (depreciation) 18,579,766 1,333,630 ------------ ------------ Net increase (decrease) in net assets resulting from operations 22,859,689 2,617,951 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (1,998,188) (877,225) From net realized gains (491,017) (26,412) ------------ ------------ Decrease in net assets from distributions (2,489,205) (903,637) CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 94,590,521 62,885,135 Proceeds from reinvestment of distributions 2,423,425 882,423 Payments for shares redeemed (25,802,240) (13,869,437) ------------ ------------ Net increase (decrease) in net assets from capital share transactions 71,211,706 49,898,121 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 91,582,190 51,612,435 NET ASSETS Beginning of period 77,261,649 25,649,214 ------------ ------------ End of period $168,843,839 $77,261,649 ============ ============ Undistributed net investment income $542,638 $203,962 ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 6,950,789 5,154,430 Issued in reinvestment of distributions 180,583 74,592 Redeemed (1,866,727) (1,143,694) ------------ ------------ Net increase (decrease) in shares of the fund 5,264,645 4,085,328 ============ ============ See Notes to Financial Statements. - ------ 21 NOTES TO FINANCIAL STATEMENTS JULY 31, 2007 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION -- American Century Asset Allocation Portfolios, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act), as amended, as an open-end management investment company. One Choice Portfolio: Very Conservative (Very Conservative), One Choice Portfolio: Conservative (Conservative), One Choice Portfolio: Moderate (Moderate), One Choice Portfolio: Aggressive (Aggressive), and One Choice Portfolio: Very Aggressive (Very Aggressive) (collectively, the funds) are five funds in a series issued by the corporation. The funds operate as "fund of funds," meaning that substantially all of the funds' assets will be invested in other funds in the American Century family of funds (the underlying funds). Because the funds directly invest in a relatively small number of underlying funds, they are not diversified as defined by the 1940 Act. However, the underlying funds are generally diversified and so indirectly provide broad exposure to a large number of securities. The funds' investment objectives are to seek the highest total return consistent with their respective asset mix. The funds pursue their objectives by investing in underlying funds that represent a variety of asset classes and investment styles. Generally, more conservative funds emphasize investments in bonds and cash equivalents while more aggressive funds emphasize investments in stocks. The corporation is authorized to issue 3,000,000,000 shares. The following is a summary of the funds' significant accounting policies. UNDERLYING FUNDS -- Each fund's assets are allocated among underlying funds that represent major asset classes, including equity securities (stocks), fixed-income securities (bonds) and cash-equivalent instruments (money markets). A brief description of each of the underlying funds follows. DOMESTIC EQUITY FUNDS EQUITY GROWTH seeks long-term capital growth. It uses a quantitative investment strategy to construct an optimized portfolio drawn primarily from the 1,500 largest publicly traded U.S. companies without regard to dividend yield. GROWTH seeks long-term capital growth. It uses a growth investment strategy and generally invests in larger U.S. companies. LARGE COMPANY VALUE seeks long-term capital growth with income as a secondary objective. It uses a value investment strategy and invests primarily in larger U.S. companies. REAL ESTATE seeks high total investment return through a combination of capital appreciation and current income. It invests primarily in equity securities issued by real estate investment trusts and companies engaged in the real estate industry. SMALL COMPANY seeks long-term capital growth. It uses a quantitative investment strategy and invests primarily in smaller U.S. companies. VALUE seeks long-term capital growth with income as a secondary objective. It uses a value investment strategy and invests primarily in U.S. companies of all sizes. VISTA seeks long-term capital growth. It uses a growth investment strategy and generally invests in medium-sized and smaller U.S. companies. INTERNATIONAL EQUITY FUNDS EMERGING MARKETS seeks capital growth. It uses a growth investment strategy and invests primarily in securities of companies located in emerging market countries and companies that derive a significant portion of their business from emerging market countries. INTERNATIONAL GROWTH seeks capital growth. It uses a growth investment strategy and invests primarily in securities of companies located in developed countries other than the United States. - ------ 22 DOMESTIC FIXED INCOME FUNDS DIVERSIFIED BOND seeks a high level of income by investing primarily in high- and medium-grade, non-money market debt securities. These securities, which may be payable in U.S. or foreign currencies, may include corporate bonds and notes, government securities and securities backed by mortgages or other assets. HIGH-YIELD seeks high current income by investing in a diversified portfolio of high-yield corporate bonds and other debt securities. As a second objective, the fund seeks capital appreciation, but only when consistent with its primary objective of maximizing current income. INTERNATIONAL FIXED INCOME FUNDS INTERNATIONAL BOND seeks high total return by investing in high-quality, non-dollar-denominated government and corporate debt securities outside the United States. MONEY MARKET FUNDS PRIME MONEY MARKET seeks to earn the highest level of current income while preserving the value of shareholder investments by investing in high-quality, cash-equivalent securities. SECURITY VALUATIONS -- Investments in the underlying funds are valued at their reported net asset value. The underlying funds have specific valuation policies. If an event occurs after the value of a security was established but before the net asset value per share of an underlying fund was determined that was likely to materially change the net asset value of the underlying fund, that security would be valued as determined in accordance with procedures adopted by the Board of Directors/ Trustees. If the underlying fund determines that the market price of a portfolio security is not readily available, or that the valuation methods mentioned above do not reflect the security's fair value, such security is valued as determined by, or in accordance with procedures adopted by, the Board of Directors/ Trustees or its designee if such determination would materially impact an underlying fund's net asset value. Certain other circumstances may cause the underlying fund to use alternative procedures to value a security such as: a security has been declared in default; trading in a security has been halted during the trading day; or there is a foreign market holiday and no trading will commence. SECURITY TRANSACTIONS -- Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes. INVESTMENT INCOME -- Income and capital gain distributions, if any, from the underlying funds are recorded as of the ex-dividend date. Long-term capital gain distributions, if any, from the underlying funds are a component of net realized gain (loss). INCOME TAX STATUS -- It is each fund's policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. At this time, management has not identified any uncertain tax positions that would materially impact the financial statements. Accordingly, no provision has been made for federal or state income taxes. Interest and penalties associated with any federal or state income tax obligations, if any, are recorded as interest expense. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to shareholders are recorded on the ex-dividend date. Distributions from net investment income, if any, are generally declared and paid quarterly for Very Conservative, Conservative, and Moderate. Distributions from net investment income, if any, are generally declared and paid annually for Aggressive and Very Aggressive. Distributions from net realized gains, if any, are generally declared and paid annually for all funds. INDEMNIFICATIONS -- Under the corporation's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the funds. The risk of material loss from such claims is considered by management to be remote. - ------ 23 USE OF ESTIMATES -- The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. 2. FEES AND TRANSACTIONS WITH RELATED PARTIES MANAGEMENT FEES -- The corporation's investment advisor, American Century Investment Management, Inc. (ACIM), does not receive an administrative fee for services provided to the funds. Each fund will indirectly realize its pro rata share of the fees and expenses of the underlying funds in which it invests. These fees and expenses are already reflected in the valuation of the underlying funds. RELATED PARTIES -- Certain officers and directors of the corporation are also officers and/or directors, and, as a group, controlling stockholders of American Century Companies, Inc. (ACC), the parent of the corporation's investment advisor, ACIM, the distributor of the corporation, American Century Investment Services, Inc., and the corporation's transfer agent, American Century Services, LLC. The directors of the corporation are also directors of some underlying funds and therefore those underlying funds may be deemed to be under common control with the corporation. The officers of the corporation are also officers of all the underlying funds. ACIM or American Century Global Investment Management, Inc., a wholly-owned subsidiary of ACIM, serves as the investment advisor for the underlying funds. 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended July 31, 2007, were as follows: Very Very Conservative Conservative Moderate Aggressive Aggressive Purchases $26,086,261 $121,090,175 $327,127,614 $189,036,615 $82,406,603 Proceeds from sales $5,553,104 $12,123,808 $29,766,496 $20,371,918 $9,537,699 - ------ 24 4. AFFILIATED COMPANY TRANSACTIONS Investments are funds within the American Century family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. A summary of transactions for each underlying fund during the year ended July 31, 2007 follows: July 31, 2007 July 31, 2006 Fund/ Share Purchase Sales Realized Distributions Share Market Underlying Fund Balance Cost Cost Gain (Loss) Received(1) Balance Value One Choice Portfolio: Very Conservative Diversified Bond Fund Investor Class 788,890 $10,520,301 $1,737,175 $(42,353) $584,034 1,672,271 $16,538,761 Prime Money Market Fund Investor Class 4,928,595 6,500,158 1,276,731 -- 386,737 10,152,022 10,152,022 Equity Growth Fund Investor Class 40,991 1,199,620 499,145 5,136 79,855 68,751 1,784,088 Growth Fund Investor Class 28,952 722,110 227,698 799 630 51,420 1,225,339 Large Company Value Fund Investor Class 218,520 1,988,897 556,402 (524) 68,008 412,204 3,136,872 Real Estate Fund Investor Class 13,617 578,768 110,990 (8,621) 74,301 28,932 756,572 Small Company Fund Investor Class 19,521 256,004 71,878 (1,209) 15,311 38,129 385,103 Value Fund Investor Class 124,597 1,031,218 322,048 (3,075) 104,439 217,015 1,653,654 Vista Fund Investor Class 23,366 503,001 328,301 5,632 1,874 29,213 615,226 International Bond Fund Investor Class 161,605 2,786,184 480,565 (13,614) 74,630 329,535 4,636,557 ---------- ----------- ---------- --------- ---------- ---------- ----------- $26,086,261 $5,610,933 $(57,829) $1,389,819 $40,884,194 =========== ========== ========= ========== =========== One Choice Portfolio: Conservative Diversified Bond Fund Investor Class 4,061,092 $46,757,800 $990,740 $(30,066) $2,939,165 8,653,564 $85,583,748 Equity Growth Fund Investor Class 410,926 9,921,317 1,900,554 10,362 773,352 725,342 18,822,625 Growth Fund Investor Class 268,644 5,995,213 801,783 1,821 5,858 502,880 11,983,630 Large Company Value Fund Investor Class 1,703,728 12,415,389 1,483,203 5,038 501,413 3,167,995 24,108,442 Real Estate Fund Investor Class 75,911 2,805,749 150,757 (6,369) 393,460 161,780 4,230,547 Small Company Fund Investor Class 162,944 1,788,558 223,556 (6,637) 122,055 319,768 3,229,657 Value Fund Investor Class 963,764 6,663,914 878,871 (1,320) 780,676 1,713,124 13,054,005 Vista Fund Investor Class 276,338 4,902,103 1,872,679 8,316 43,202 438,398 9,232,662 Prime Money Market Fund Investor Class 10,993,126 12,296,751 917,866 -- 840,813 22,372,011 22,372,011 International Bond Fund Investor Class 737,059 10,854,566 243,806 (9,766) 326,052 1,507,491 21,210,398 International Growth Fund Investor Class 653,301 6,688,815 2,644,050 44,564 77,431 988,506 13,611,728 ---------- ------------ ----------- --------- ---------- ------------ $121,090,175 $12,107,865 $15,943 $6,803,477 $227,439,453 ============ =========== ========= ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 25 July 31, 2007 July 31, 2006 Fund/ Share Purchase Sales Realized Distributions Share Market Underlying Fund Balance Cost Cost Gain (Loss) Received(1) Balance Value One Choice Portfolio: Moderate Equity Growth Fund Investor Class 1,687,245 $46,486,294 $1,919,162 $(10,837) $3,290,591 3,413,200 $88,572,541 Growth Fund Investor Class 1,055,431 24,998,873 1,598,752 1,711 23,003 2,102,736 50,108,199 Large Company Value Fund Investor Class 3,373,572 31,417,430 3,939,075 8,103 1,112,905 7,069,404 53,798,165 Real Estate Fund Investor Class 175,411 7,738,792 235,791 (5,085) 955,780 417,609 10,920,475 Small Company Fund Investor Class 501,537 6,368,612 341,240 (13,656) 394,676 1,100,773 11,117,807 Value Fund Investor Class 1,781,053 13,924,259 1,996,704 8,890 1,425,127 3,318,289 25,285,362 Vista Fund Investor Class 1,126,585 21,957,885 6,521,587 (70,571) 193,399 1,982,955 41,761,032 Diversified Bond Fund Investor Class 6,125,114 89,921,177 400,691 (13,072) 4,891,362 15,108,434 149,422,412 High-Yield Fund Investor Class 1,015,623 7,971,651 2,521,151 (59,502) 696,971 1,870,879 11,487,197 Emerging Markets Fund Investor Class 1,068,723 12,851,277 2,499,158 191,766 2,757,809 2,195,578 24,656,341 International Growth Fund Investor Class 2,434,874 29,580,572 7,450,022 149,977 313,049 4,254,581 58,585,580 Prime Money Market Fund Investor Class 15,237,051 20,429,216 93,223 -- 1,254,119 35,573,044 35,573,044 International Bond Fund Investor Class 757,510 13,481,576 66,187 (3,971) 356,161 1,731,065 24,356,085 ---------- ------------ ----------- --------- ----------- ---------- ------------ $327,127,614 $29,582,743 $183,753 $17,664,952 $585,644,240 ============ =========== ========= =========== ============ One Choice Portfolio: Aggressive Equity Growth Fund Investor Class 1,161,627 $25,484,516 $1,479,756 $(3,189) $2,017,657 2,088,338 $54,192,371 Growth Fund Investor Class 1,414,558 25,545,884 911,898 (5,824) 27,614 2,513,849 59,905,023 Large Company Value Fund Investor Class 2,279,282 16,618,052 1,691,137 7,681 685,887 4,284,730 32,606,795 Real Estate Fund Investor Class 133,370 4,840,352 229,254 (5,031) 652,677 282,762 7,394,226 Small Company Fund Investor Class 428,074 4,243,130 101,869 (5,104) 302,248 838,718 8,471,052 Value Fund Investor Class 1,150,600 7,118,337 1,497,262 6,928 812,450 1,872,957 14,271,932 Vista Fund Investor Class 1,594,954 22,741,987 5,316,620 64,442 274,257 2,594,601 54,642,297 Emerging Markets Fund Investor Class 1,391,260 11,536,962 2,116,430 182,623 3,048,020 2,417,645 27,150,153 International Growth Fund Investor Class 2,288,519 21,107,117 5,050,839 54,101 266,288 3,602,665 49,608,697 Diversified Bond Fund Investor Class 2,675,997 34,832,489 303,316 (10,755) 2,007,060 6,140,346 60,728,022 High-Yield Fund Investor Class 1,390,222 8,685,909 1,362,195 (36,131) 871,320 2,534,166 15,559,779 Prime Money Market Fund Investor Class 3,862,210 4,209,474 39,711 -- 287,391 8,031,973 8,031,973 International Bond Fund Investor Class 144,708 2,072,406 22,678 (788) 60,951 293,166 4,124,846 --------- ------------ ----------- --------- ----------- --------- $189,036,615 $20,122,965 $248,953 $11,313,820 $396,687,166 ============ =========== ========= =========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 26 July 31, 2007 July 31, 2006 Fund/ Share Purchase Sales Realized Distributions Share Market Underlying Fund Balance Cost Cost Gain (Loss) Received(1) Balance Value One Choice Portfolio: Very Aggressive Equity Growth Fund Investor Class 576,860 $14,443,643 $910,060 $(4,786) $1,011,821 1,097,999 $28,493,074 Growth Fund Investor Class 697,982 14,402,002 733,606 (5,309) 13,608 1,304,700 31,091,001 Large Company Value Fund Investor Class 1,156,008 8,958,285 696,845 (5,922) 343,768 2,258,544 17,187,520 Real Estate Fund Investor Class 54,124 2,171,260 127,135 (4,567) 264,466 120,735 3,157,220 Small Company Fund Investor Class 192,812 2,131,066 56,390 (2,610) 136,012 397,812 4,017,901 Value Fund Investor Class 604,033 4,331,845 743,806 (1,521) 438,219 1,065,877 8,121,983 Vista Fund Investor Class 784,706 12,234,021 2,231,748 65,858 137,735 1,352,983 28,493,822 Emerging Markets Fund Investor Class 658,305 5,905,698 996,831 64,290 1,425,257 1,189,434 13,357,344 International Growth Fund Investor Class 1,142,021 11,574,245 2,136,392 18,050 133,743 1,906,138 26,247,520 Diversified Bond Fund Investor Class 80,339 3,411,010 728,368 (14,591) 126,307 349,452 3,456,080 Prime Money Market Fund Investor Class 1,567,786 1,902,215 42,940 -- 118,238 3,427,061 3,427,061 International Bond Fund Investor Class 58,738 941,313 25,602 (916) 24,811 125,026 1,759,116 --------- ----------- ---------- --------- ---------- --------- ------------ $82,406,603 $9,429,723 $107,976 $4,173,985 $168,809,642 =========== ========== ========= ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. 5. INVESTMENTS IN UNDERLYING FUNDS The funds do not invest in the underlying funds for the purpose of exercising management or control; however, investments by the funds within their investment strategies may represent a significant portion of the underlying funds' net assets. As of July 31, 2007, Moderate owned 25% of the total outstanding shares of Diversified Bond Fund. As of July 31, 2007, the funds, in aggregate, owned 53% of Diversified Bond Fund. 6. RISK FACTORS Some of the underlying funds invest in foreign securities, which are generally riskier than U.S. securities. As a result, the funds are subject to foreign risk, meaning that political events (such as civil unrest, national elections and imposition of exchange controls), social and economic events (such as labor strikes and rising inflation), and natural disasters occurring in a country where the funds invest could cause the funds' investments in that country to experience gain or losses. Investing in emerging markets may accentuate these risks. - ------ 27 7. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended July 31, 2007 and July 31, 2006 were as follows: Very Conservative Conservative 2007 2006 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $1,168,860 $445,170 $5,250,076 $2,121,359 Long-term capital gains $53,579 $12,349 $448,367 $54,085 Moderate Aggressive 2007 2006 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $12,120,744 $4,656,349 $6,150,181 $2,399,441 Long-term capital gains $1,312,958 $85,464 $1,023,260 $60,490 Very Aggressive 2007 2006 DISTRIBUTIONS PAID FROM Ordinary income $2,023,155 $877,225 Long-term capital gains $466,050 $26,412 The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements. As of July 31, 2007, the components of distributable earnings on a tax-basis and the federal tax cost of investments were as follows: Very Very Conservative Conservative Moderate Aggressive Aggressive Federal tax cost of investments $40,370,908 $218,091,741 $545,463,577 $355,615,643 $147,887,184 =========== ============ ============ ============ ============ Gross tax appreciation of investments $816,427 $10,749,292 $43,500,683 $43,240,872 $21,325,617 Gross tax depreciation of investments (303,141) (1,401,580) (3,320,020) (2,169,349) (403,159) ----------- ------------ ------------ ------------ ------------ Net tax appreciation (depreciation) of investments $513,286 $9,347,712 $40,180,663 $41,071,523 $20,922,458 =========== ============ ============ ============ ============ Undistributed ordinary income $168,405 $706,426 $1,472,882 $2,779,922 $645,148 Accumulated long-term gains $146,755 $1,259,854 $5,269,237 $4,043,172 $1,915,921 The difference between book-basis and tax-basis cost and unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. - ------ 28 8. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 establishes a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. Management has concluded that the adoption of FIN 48 will not materially impact the financial statements. The FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157), in September 2006, which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands the required financial statement disclosures about fair value measurements. Management is currently evaluating the impact that adopting FAS 157 will have on the financial statement disclosures. 9. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The funds hereby designate capital gain distributions for the fiscal year ended July 31, 2007, as follows: Very Conservative Conservative Moderate Aggressive Very Aggressive $53,579 $448,367 $1,312,958 $1,023,260 $466,050 The funds hereby designate qualified dividend income for the year ended July 31, 2007, as follows: Very Conservative Conservative Moderate Aggressive Very Aggressive $95,129 $825,960 $2,454,240 $1,708,239 $855,122 For corporate taxpayers, the following ordinary income distributions paid during the fiscal year ended July 31, 2007, qualify for the corporate dividends received deduction. Very Conservative Conservative Moderate Aggressive Very Aggressive $96,392 $759,944 $1,926,014 $1,191,914 $608,412 The funds hereby designate qualified short-term capital gain distributions for purposes of Internal Revenue Code 871 for the fiscal year ended July 31, 2007, as follows: Very Conservative Conservative Moderate Aggressive Very Aggressive $15,556 $18,802 $173,967 $104,025 $24,967 - ------ 29 FINANCIAL HIGHLIGHTS One Choice Portfolio: Very Conservative Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.23 $10.27 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.40 0.37 0.25 Net Realized and Unrealized Gain (Loss) 0.33 (0.04) 0.29 ------- ------- ------- Total From Investment Operations 0.73 0.33 0.54 ------- ------- ------- Distributions From Net Investment Income (0.39) (0.36) (0.27) From Net Realized Gains (0.02) (0.01) -- ------- ------- ------- Total Distributions (0.41) (0.37) (0.27) ------- ------- ------- Net Asset Value, End of Period $10.55 $10.23 $10.27 ======= ======= ======= TOTAL RETURN(3) 7.23% 3.27% 5.43% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.83% 3.67% 3.00%(5) Portfolio Turnover Rate 17% 34% 38% Net Assets, End of Period (in thousands) $40,983 $19,852 $10,132 (1) September 30, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 30 One Choice Portfolio: Conservative Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.66 $10.54 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.34 0.22 Net Realized and Unrealized Gain (Loss) 0.75 0.12 0.58 ------- ------- ------- Total From Investment Operations 1.10 0.46 0.80 ------- ------- ------- Distributions From Net Investment Income (0.35) (0.33) (0.26) From Net Realized Gains (0.03) (0.01) -- ------- ------- ------- Total Distributions (0.38) (0.34) (0.26) ------- ------- ------- Net Asset Value, End of Period $11.38 $10.66 $10.54 ======= ======= ======= TOTAL RETURN(3) 10.41% 4.45% 8.08% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.14% 3.23% 2.63%(5) Portfolio Turnover Rate 7% 8% 12% Net Assets, End of Period (in thousands) $227,830 $110,384 $43,183 (1) September 30, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 31 One Choice Portfolio: Moderate Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.34 $10.97 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.34 0.17 Net Realized and Unrealized Gain (Loss) 1.29 0.38 0.99 ------- ------- ------- Total From Investment Operations 1.64 0.72 1.16 ------- ------- ------- Distributions From Net Investment Income (0.35) (0.34) (0.19) From Net Realized Gains (0.05) (0.01) -- ------- ------- ------- Total Distributions (0.40) (0.35) (0.19) ------- ------- ------- Net Asset Value, End of Period $12.58 $11.34 $10.97 ======= ======= ======= TOTAL RETURN(3) 14.56% 6.68% 11.71% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.85% 3.02% 1.98%(5) Portfolio Turnover Rate 7% 7% 3% Net Assets, End of Period (in thousands) $586,377 $253,610 $97,313 (1) September 30, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 32 One Choice Portfolio: Aggressive Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.83 $11.26 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.32 0.31 0.14 Net Realized and Unrealized Gain (Loss) 1.87 0.56 1.22 ------- ------- ------- Total From Investment Operations 2.19 0.87 1.36 ------- ------- ------- Distributions From Net Investment Income (0.28) (0.29) (0.10) From Net Realized Gains (0.05) (0.01) -- ------- ------- ------- Total Distributions (0.33) (0.30) (0.10) ------- ------- ------- Net Asset Value, End of Period $13.69 $11.83 $11.26 ======= ======= ======= TOTAL RETURN(3) 18.78% 7.84% 13.61% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.46% 2.68% 1.52%(5) Portfolio Turnover Rate 7% 6% 3% Net Assets, End of Period (in thousands) $397,022 $191,350 $64,623 (1) September 30, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 33 One Choice Portfolio: Very Aggressive Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.23 $11.48 $10.00 ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.25 0.25 0.08 Net Realized and Unrealized Gain (Loss) 2.40 0.78 1.49 ------- ------- ------- Total From Investment Operations 2.65 1.03 1.57 ------- ------- ------- Distributions From Net Investment Income (0.24) (0.27) (0.09) From Net Realized Gains (0.06) (0.01) -- ------- ------- ------- Total Distributions (0.30) (0.28) (0.09) ------- ------- ------- Net Asset Value, End of Period $14.58 $12.23 $11.48 ======= ======= ======= TOTAL RETURN(3) 21.87% 9.00% 15.81% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.85% 2.08% 0.84%(5) Portfolio Turnover Rate 8% 9% 8% Net Assets, End of Period (in thousands) $168,844 $77,262 $25,649 (1) September 30, 2004 (fund inception) through July 31, 2005. (2) Computed using average shares outstanding throughout the period. (3) Total return assumes reinvestment of net investment income and capital gains distributions, if any. Total returns for periods less than one year are not annualized. (4) Ratio of operating expenses to average net assets does not include any expenses of the underlying funds. (5) Annualized. See Notes to Financial Statements. - ------ 34 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders, American Century Asset Allocation Portfolios, Inc.: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of One Choice Portfolio: Very Conservative, One Choice Portfolio: Conservative, One Choice Portfolio: Moderate, One Choice Portfolio: Aggressive, and One Choice Portfolio: Very Aggressive (collectively the "Funds"), five of the mutual funds comprising American Century Asset Allocation Portfolios, Inc. as of July 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2007, by correspondence with the transfer agent. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds comprising American Century Asset Allocation Portfolios, Inc. as of July 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Kansas City, Missouri September 14, 2007 - ------ 35 PROXY VOTING RESULTS A special meeting of shareholders was held on July 27, 2007, to vote on the following proposal. The proposal received the required number of votes of the American Century Asset Allocation Portfolios, Inc., and was adopted. A summary of voting results is listed below the proposal. PROPOSAL: To elect nine Directors to the Board of Directors of American Century Asset Allocation Portfolios, Inc. (the proposal was voted on by all shareholders of funds issued by American Century Asset Allocation Portfolios, Inc.): James E. Stowers, Jr. For: 1,416,441,649 Withhold: 10,836,309 Abstain: 0 Broker Non-Vote: 0 Jonathan S. Thomas For: 1,417,375,725 Withhold: 9,902,233 Abstain: 0 Broker Non-Vote: 0 Thomas A. Brown For: 1,417,853,110 Withhold: 9,424,849 Abstain: 0 Broker Non-Vote: 0 Andrea C. Hall For: 1,417,179,388 Withhold: 10,098,571 Abstain: 0 Broker Non-Vote: 0 James A. Olson For: 1,417,931,210 Withhold: 9,346,748 Abstain: 0 Broker Non-Vote: 0 Donald H. Pratt For: 1,417,345,399 Withhold: 9,932,560 Abstain: 0 Broker Non-Vote: 0 Gale E. Sayers For: 1,417,193,268 Withhold: 10,084,690 Abstain: 0 Broker Non-Vote: 0 M. Jeannine Strandjord For: 1,416,594,224 Withhold: 10,683,724 Abstain: 0 Broker Non-Vote: 0 Timothy S. Webster For: 1,417,239,775 Withhold: 10,038,183 Abstain: 0 Broker Non-Vote: 0 - ------ 36 MANAGEMENT The individuals listed below serve as directors or officers of the funds. Each director serves until his or her successor is duly elected and qualified or until he or she retires. Mandatory retirement age for independent directors is 72. Those listed as interested directors are "interested" primarily by virtue of their engagement as directors and/or officers of, or ownership interest in, American Century Companies, Inc. (ACC) or its wholly owned, direct or indirect, subsidiaries, including the funds' investment advisor, American Century Investment Management, Inc. (ACIM); the funds' principal underwriter, American Century Investment Services, Inc. (ACIS); and the funds' transfer agent, American Century Services, LLC (ACS). The other directors (more than three-fourths of the total number) are independent; that is, they have never been employees, directors or officers of, and have no financial interest in, ACC or any of its wholly owned, direct or indirect, subsidiaries, including ACIM, ACIS, and ACS. The directors serve in this capacity for seven registered investment companies in the American Century family of funds. All persons named as officers of the funds also serve in similar capacities for the other 14 investment companies advised by ACIM or American Century Global Investment Management, Inc. (ACGIM), a wholly owned subsidiary of ACIM, unless otherwise noted. Only officers with policy-making functions are listed. No officer is compensated for his or her service as an officer of the funds. The listed officers are interested persons of the funds and are appointed or re-appointed on an annual basis. INTERESTED DIRECTORS JAMES E. STOWERS, JR. 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1924 POSITION(S) HELD WITH FUNDS: Director (since 1958) and Vice Chairman (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Founder, Co-Chairman, Director and Controlling Shareholder, ACC; Co-Vice Chairman, ACC (January 2005 to February 2007); Chairman, ACC (January 1995 to December 2004); Director, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None JONATHAN S. THOMAS 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1963 POSITION(S) HELD WITH FUNDS: Director and President (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President and Chief Executive Officer, ACC (March 2007 to present); Chief Administrative Officer, ACC (February 2006 to February 2007); Executive Vice President, ACC (November 2005 to February 2007). Also serves as: President, Chief Executive Officer and Director, ACS; Executive Vice President, ACIM and ACGIM; Director, ACIM, ACGIM, ACIS and other ACC subsidiaries; Managing Director, Morgan Stanley (March 2000 to November 2005) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 109 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - ------ 37 INDEPENDENT DIRECTORS THOMAS A. BROWN 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1940 POSITION(S) HELD WITH FUNDS: Director (since 1980) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Member, Associated Investments, LLC (real estate investment company); Managing Member, Brown Cascade Properties, LLC (real estate investment company); Retired, Area Vice President, Applied Industrial Technologies NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None ANDREA C. HALL, PH.D. 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUNDS: Director (since 1997) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, Advisor to the President, Midwest Research Institute NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None JAMES A. OLSON 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1942 POSITION(S) HELD WITH FUNDS: Director (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Member, Plaza Belmont LLC; Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, Saia, Inc. and Entertainment Properties Trust DONALD H. PRATT 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1937 POSITION(S) HELD WITH FUNDS: Director (since 1995) and Chairman of the Board (since 2005) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chairman and Chief Executive Officer, Western Investments, Inc.; Retired Chairman of the Board, Butler Manufacturing Company NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None GALE E. SAYERS 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1943 POSITION(S) HELD WITH FUNDS: Director (since 2000) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: President, Chief Executive Officer and Founder, Sayers40, Inc., a technology products and service provider NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None M. JEANNINE STRANDJORD 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1945 POSITION(S) HELD WITH FUNDS: Director (since 1994) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Retired, formerly Senior Vice President, Sprint Corporation NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc.; Director, Charming Shoppes, Inc. - ------ 38 TIMOTHY S. WEBSTER 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1961 POSITION(S) HELD WITH FUNDS: Director (since 2001) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Managing Director, TDB Acquisition Group LLC (September 2006 to present); President and Chief Executive Officer, American Italian Pasta Company (2001 to December 2005) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 66 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None OFFICERS MARYANNE ROEPKE 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1956 POSITION(S) HELD WITH FUNDS: Chief Compliance Officer (since 2006) and Senior Vice President (since 2000) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Compliance Officer, ACIM, ACGIM and ACS (August 2006 to present); Assistant Treasurer, ACC (January 1995 to August 2006); and Treasurer and Chief Financial Officer, various American Century funds (July 2000 to August 2006). Also serves as: Senior Vice President, ACS CHARLES A. ETHERINGTON 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1957 POSITION(S) HELD WITH FUNDS: General Counsel (since 2007) and Senior Vice President (since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACC (November 2005 to present); General Counsel, ACC (March 2007 to present). Also serves as: General Counsel, ACIM, ACGIM, ACS, ACIS and other ACC subsidiaries; and Senior Vice President, ACIM, ACGIM and ACS ROBERT LEACH 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1966 POSITION(S) HELD WITH FUNDS: Vice President, Treasurer and Chief Financial Officer (all since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000 to present); and Controller, various American Century funds (1997 to September 2006) C. JEAN WADE 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1964 POSITION(S) HELD WITH FUNDS: Controller (since 2006) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Vice President, ACS (February 2000 to present) JON ZINDEL 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1967 POSITION(S) HELD WITH FUNDS: Tax Officer (since 1998) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Financial Officer and Chief Accounting Officer, ACC (March 2007 to present); Vice President, ACC (October 2001 to present); Vice President, certain ACC subsidiaries (October 2001 to August 2006); Vice President, Corporate Tax, ACS (April 1998 to August 2006). Also serves as: Chief Financial Officer, Chief Accounting Officer and Senior Vice President, ACIM, ACGIM, ACS and other ACC subsidiaries; and Chief Accounting Officer and Senior Vice President, ACIS The SAI has additional information about the funds' directors and is available without charge, upon request, by calling 1-800-345-2021. - ------ 39 APPROVAL OF MANAGEMENT AGREEMENT One Choice Portfolios Under Section 15(c) of the Investment Company Act, contracts for investment advisory services are required to be reviewed, evaluated and approved by a majority of a fund's independent directors or trustees (the "Directors") each year. At American Century, this process is referred to as the "15(c) Process." As a part of this process, the board reviews fund performance, shareholder services, audit and compliance information, and a variety of other reports from the advisor concerning fund operations. In addition to this annual review, the board of directors oversees and evaluates on a continuous basis at its quarterly meetings the nature and quality of significant services performed by the advisor, fund performance, audit and compliance information, and a variety of other reports relating to fund operations. The board, or committees of the board, also holds special meetings as needed. Under a Securities and Exchange Commission rule, each fund is required to disclose in its annual or semiannual report, as appropriate, the material factors and conclusions that formed the basis for the board's approval or renewal of any advisory agreements within the fund's most recently completed fiscal half-year period. ANNUAL CONTRACT REVIEW PROCESS As part of the annual 15(c) Process undertaken during the most recent fiscal half-year period, the Directors reviewed extensive data and information compiled by the advisor and certain independent providers of evaluative data (the "15(c) Providers") concerning One Choice Portfolio: Very Aggressive, One Choice Portfolio: Aggressive, One Choice Portfolio: Moderate, One Choice Portfolio: Conservative and One Choice Portfolio: Very Conservative (the "funds") and the services provided to the funds under the management agreement. The information considered and the discussions held at the meetings included, but were not limited to: * the nature, extent and quality of investment management, shareholder services and other services provided to the funds under the management agreement; * reports on the advisor's activities relating to the wide range of programs and services the advisor provides to the funds and its shareholders on a routine and non-routine basis; * data comparing the cost of owning the fund to the cost of owning similar funds; * data comparing the funds' performance to appropriate benchmarks and/or a peer group of other mutual funds with similar investment objectives and strategies; * financial data showing the profitability of the fund to the advisor and the overall profitability of the advisor; and * data comparing services provided and charges to other investment management clients of the advisor. In keeping with its practice, the funds' board of directors held two regularly scheduled meetings and one special meeting to review and discuss the information provided by the advisor and to complete its negotiations with the advisor regarding the renewal of the management agreement. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 40 FACTORS CONSIDERED The Directors considered all of the information provided by the advisor, the 15(c) Providers, and the board's independent counsel, and evaluated such information for each fund for which the board has responsibility. The Directors did not identify any single factor as being all-important or controlling, and each Director may have attributed different levels of importance to different factors. In deciding to renew the agreement under the terms ultimately determined by the board to be appropriate, the Directors' decision was based on the following factors. NATURE, EXTENT AND QUALITY OF SERVICES - GENERALLY. Under the management agreement, the advisor is responsible for providing or arranging for all services necessary for the operation of the funds. The board noted that under the management agreement, the advisor provides or arranges at its own expense a wide variety of services including: * fund construction and design * portfolio security selection * initial capitalization/funding * securities trading * custody of fund assets * daily valuation of the funds' portfolio * shareholder servicing and transfer agency, including shareholder confirmations, recordkeeping and communications * legal services * regulatory and portfolio compliance * financial reporting * marketing and distribution The Directors noted that many of these services have expanded over time both in terms of quantity and complexity in response to shareholder demands, competition in the industry and the changing regulatory environment. In performing their evaluation, the Directors considered information received in connection with the annual review, as well as information provided on an ongoing basis at their regularly scheduled board and committee meetings. INVESTMENT MANAGEMENT SERVICES. The nature of the investment management services provided is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments within an asset class, the opportunity to easily diversify among asset classes, and liquidity. In evaluating investment performance, the board expects the advisor to manage the funds in accordance with its investment objectives and approved strategies. In providing these services, the advisor utilizes teams of investment professionals (portfolio managers, analysts, research assistants, and securities traders) who require extensive information technology, research, training, compliance and other systems to conduct their business. At each quarterly meeting the Directors review investment performance information - ------ 41 for the funds, together with comparative information for appropriate benchmarks and peer groups of funds managed similarly to the funds. The Directors also review detailed performance information during the 15(c) Process comparing the funds' performance with that of similar funds not managed by the advisor. If performance concerns are identified, the Directors discuss with the advisor the reasons for such results (e.g., market conditions, security selection) and any efforts being undertaken to improve performance. One Choice Portfolio: Very Conservative's performance fell below the median for both the one and three year periods during part of the past year. The board discussed the fund's performance with the advisor and was satisfied with the efforts being undertaken by the advisor. Each other funds' performance for both the one and three year periods was above the median for its respective peer groups. SHAREHOLDER AND OTHER SERVICES. The advisor provides the funds with a comprehensive package of transfer agency, shareholder, and other services. The Directors review reports and evaluations of such services at their regular quarterly meetings, including the annual meeting concerning contract review, and reports to the board. These reports include, but are not limited to, information regarding the operational efficiency and accuracy of the shareholder and transfer agency services provided, staffing levels, shareholder satisfaction (as measured by external as well as internal sources), technology support, new products and services offered to fund shareholders, securities trading activities, portfolio valuation services, auditing services, and legal and operational compliance activities. Certain aspects of shareholder and transfer agency service level efficiency and the quality of securities trading activities are measured by independent third party providers and are presented in comparison to other fund groups not managed by the advisor. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO THE ADVISOR. The advisor provides detailed information concerning its cost of providing various services to the funds, its profitability in managing the funds, its overall profitability, and its financial condition. The Directors have reviewed with the advisor the methodology used to prepare this financial information. This financial information regarding the advisor is considered in order to evaluate the advisor's financial condition, its ability to continue to provide services under the management agreement, and the reasonableness of the current management fee. ETHICS OF THE ADVISOR. The Directors generally consider the advisor's commitment to providing quality services to shareholders and to conducting its business ethically. They noted that the advisor's practices generally meet or exceed industry best practices. ECONOMIES OF SCALE. The Directors review reports provided by the advisor on economies of scale for the complex as a whole and the year-over-year changes in revenue, costs, and profitability. The Directors concluded that economies of scale are difficult to measure and predict with precision, especially on a fund-by-fund basis. This analysis is also complicated by the additional services and content provided by the advisor and its reinvestment in its ability to provide and expand those services. Accordingly, the Directors also seek to evaluate economies of scale by reviewing other information, such as year-over-year profitability of the advisor generally, the profitability of its management of the funds specifically, the expenses incurred by the advisor in providing various functions to the funds, and the breakpoint fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing economies of scale through its competitive fee structure, fee breakpoints as the fund increases in size, and through reinvestment in its business to provide shareholders additional content and services. - ------ 42 COMPARISON TO OTHER FUNDS' FEES. The funds invest their non-cash assets entirely in other American Century funds. The funds do not pay an investment advisor fee to the advisor. Rather, each fund indirectly bears its pro rata share of the expenses incurred by the underlying funds. Each of the underlying funds pay the advisor a single, all-inclusive (or unified) management fee for providing all services necessary for the management and operation of the funds, other than brokerage expenses, taxes, interest, extraordinary expenses, and the fees and expenses of the funds' independent directors (including their independent legal counsel). Under the unified fee structure, the advisor is responsible for providing all investment advisory, custody, audit, administrative, compliance, recordkeeping, marketing and shareholder services, or arranging and supervising third parties to provide such services. By contrast, most other funds are charged a variety of fees, including an investment advisory fee, a transfer agency fee, an administrative fee, distribution charges and other expenses. Other than their investment advisory fees and Rule 12b-1 distribution fees, all other components of the total fees charged by these other funds may be increased without shareholder approval. The board believes the unified fee structure is a benefit to fund shareholders because it clearly discloses to shareholders the cost of owning fund shares, and, since the unified fee cannot be increased without a vote of fund shareholders, it shifts to the advisor the risk of increased costs of operating the funds and provides a direct incentive to minimize administrative inefficiencies. Part of the Directors' analysis of fee levels involves reviewing certain evaluative data compiled by a 15(c) Provider comparing the portion of the expenses incurred by the underlying funds to the total expense ratio of other funds in the funds' peer group. The expenses of One Choice Portfolio: Very Aggressive, One Choice Portfolio: Conservative and One Choice Portfolio: Very Conservative were in the lowest quartile of the total expense ratios of their peer groups. The expenses of One Choice Portfolio: Aggressive and One Choice Portfolio: Moderate were below the median of the total expense ratios of their peer groups. COMPARISON TO FEES AND SERVICES PROVIDED TO OTHER CLIENTS OF THE ADVISOR. The Directors also requested and received information from the advisor concerning the nature of the services, fees, and profitability of its advisory services to advisory clients other than the funds. They observed that these varying types of client accounts require different services and involve different regulatory and entrepreneurial risks than the management of the funds. The Directors analyzed this information and concluded that the fees charged and services provided to the funds were reasonable by comparison. COLLATERAL BENEFITS DERIVED BY THE ADVISOR. The Directors reviewed information from the advisor concerning collateral benefits it receives as a result of its relationship with the funds. They concluded that the advisor's primary business is managing mutual funds and it generally does not use the fund or shareholder information to generate profits in other lines of business, and therefore does not derive any significant collateral benefits from them. The Directors noted that the advisor receives proprietary research from broker dealers that execute fund portfolio transactions and concluded that this research is likely to benefit fund shareholders. The Directors also determined that the advisor is able to provide investment management services to certain clients other than the funds, at least in part, due to its existing infrastructure built to serve the fund complex. The Directors concluded, however, that the assets of those other clients are not material to the analysis and, in any event, are included with the assets of the funds to determine breakpoints in the funds' fee schedule, provided they are managed using the same investment team and strategy. - ------ 43 CONCLUSIONS OF THE DIRECTORS As a result of this process, the independent directors, in the absence of particular circumstances and assisted by the advice of legal counsel that is independent of the advisor, taking into account all of the factors discussed above and the information provided by the advisor concluded that the investment management agreement between the funds and the advisor is fair and reasonable in light of the services provided and should be renewed. - ------ 44 ADDITIONAL INFORMATION RETIREMENT ACCOUNT INFORMATION As required by law, any distributions you receive from an IRA or certain 403(b), 457 and qualified plans [those not eligible for rollover to an IRA or to another qualified plan] are subject to federal income tax withholding, unless you elect not to have withholding apply. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld. If you don't want us to withhold on this amount, you must notify us to not withhold the federal income tax. Even if you plan to roll over the amount you withdraw to another tax-deferred account, the withholding rate still applies to the withdrawn amount unless we have received notice not to withhold federal income tax prior to the withdrawal. You may notify us in writing or in certain situations by telephone or through other electronic means. You have the right to revoke your withholding election at any time and any election you make may remain in effect until revoked by filing a new election. Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don't have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld. State taxes will be withheld from your distribution in accordance with the respective state rules. PROXY VOTING GUIDELINES American Century Investment Management, Inc., the funds' investment advisor, is responsible for exercising the voting rights associated with the securities purchased and/or held by the funds. A description of the policies and procedures the advisor uses in fulfilling this responsibility is available without charge, upon request, by calling 1-800-345-2021. It is also available on American Century's website at americancentury.com and on the Securities and Exchange Commission's website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov. QUARTERLY PORTFOLIO DISCLOSURE The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's website at sec.gov, and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their website at americancentury.com and, upon request, by calling 1-800-345-2021. - ------ 45 INDEX DEFINITIONS The following indices are used to illustrate investment market, sector, or style performance or to serve as fund performance comparisons. They are not investment products available for purchase. The CITIGROUP US BROAD INVESTMENT-GRADE (BIG) BOND INDEX is a market-capitalization-weighted index that includes fixed-rate Treasury, government-sponsored, mortgage, asset-backed, and investment-grade issues with a maturity of one year or longer. The CITIGROUP NON-U.S. WORLD GOVERNMENT BOND INDEX is based on the Citigroup World Bond Index, and excludes issues denominated in U.S. dollars. The index measures the total return of government securities in major sectors of the international bond market. The LEHMAN BROTHERS U.S. AGGREGATE INDEX represents securities that are taxable, registered with the Securities and Exchange Commission, and U.S. dollar-denominated. The index covers the U.S. investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Morgan Stanley Capital International (MSCI) has developed several indices that measure the performance of foreign stock markets. The MSCI EAFE® (EUROPE, AUSTRALASIA, FAR EAST) INDEX is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI EM (EMERGING MARKETS) INDEX represents the performance of stocks in global emerging market countries. The RUSSELL 1000® INDEX is a market-capitalization weighted, large-cap index created by Frank Russell Company to measure the performance of the 1,000 largest companies in the Russell 3000 Index (the 3,000 largest publicly traded U.S. companies, based on total market capitalization). The RUSSELL 2000® INDEX is a market-capitalization weighted index created by Frank Russell Company to measure the performance of the 2,000 smallest of the 3,000 largest publicly traded U.S. companies, based on total market capitalization. The RUSSELL 3000® INDEX measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The RUSSELL MIDCAP® INDEX measures the performance of the 800 smallest of the 1,000 largest publicly traded U.S. companies, based on total market capitalization. The S&P 500 INDEX is a market value-weighted index of the stocks of 500 publicly traded U.S. companies chosen for market size, liquidity, and industry group representation that are considered to be leading firms in dominant industries. Each stock's weight in the index is proportionate to its market value. Created by Standard & Poor's, it is considered to be a broad measure of U.S. stock market performance. - ------ 46 NOTES - ------ 47 NOTES - ------ 48 [back cover] CONTACT US AMERICANCENTURY.COM AUTOMATED INFORMATION LINE: 1-800-345-8765 INVESTOR SERVICES REPRESENTATIVE: 1-800-345-2021 or 816-531-5575 BUSINESS, NOT-FOR-PROFIT, EMPLOYER-SPONSORED RETIREMENT PLANS: 1-800-345-3533 BANKS AND TRUST COMPANIES, BROKER-DEALERS, FINANCIAL PROFESSIONALS, INSURANCE COMPANIES: 1-800-345-6488 TELECOMMUNICATIONS DEVICE FOR THE DEAF: 1-800-634-4113 or 816-444-3485 AMERICAN CENTURY ASSET ALLOCATION PORTFOLIOS, INC. INVESTMENT ADVISOR: American Century Investment Management, Inc. Kansas City, Missouri THIS REPORT AND THE STATEMENTS IT CONTAINS ARE SUBMITTED FOR THE GENERAL INFORMATION OF OUR SHAREHOLDERS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. American Century Investment Services, Inc., Distributor ©2007 American Century Proprietary Holdings, Inc. All rights reserved. The American Century Investments logo, American Century and American Century Investments are service marks of American Century Proprietary Holdings, Inc. 0709 SH-ANN-56323N
ITEM 2. CODE OF ETHICS. a. The registrant has adopted a Code of Ethics for Senior Financial Officers that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. b. No response required. c. None. d. None. e. Not applicable. f. The registrant's Code of Ethics for Senior Financial Officers was filed as Exhibit 12 (a)(1) to American Century Asset Allocation Portfolios, Inc.'s Annual Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005, and is incorporated herein by reference. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant's board has determined that the registrant has at least one audit committee financial expert serving on its audit committee. (a)(2) Donald H. Pratt, Thomas A. Brown and Gale E. Sayers are the registrant's designated audit committee financial experts. They are "independent" as defined in Item 3 of Form N-CSR. (a)(3) Not applicable. (b) No response required. (c) No response required. (d) No response required. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees. The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were as follows: FY 2006: $69,670 FY 2007: $67,340 (b) Audit-Related Fees. The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were as follows: For services rendered to the registrant: FY 2006: $0 FY 2007: $0 Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2006: $0 FY 2007: $0 (c) Tax Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were as follows: For services rendered to the registrant: FY 2006: $15,000 FY 2007: $0 These services included review of federal and state income tax forms for 2006. Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2006: $0 FY 2007: $0 (d) All Other Fees. The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were as follows: For services rendered to the registrant: FY 2006: $0 FY 2007: $0 Fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X (relating to certain engagements for non-audit services with the registrant's investment adviser and its affiliates): FY 2006: $0 FY 2007: $0 (e)(1) In accordance with paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X, before the accountant is engaged by the registrant to render audit or non-audit services, the engagement is approved by the registrant's audit committee. Pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, the registrant's audit committee also pre-approves its accountant's engagements for non-audit services with the registrant's investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant. (e)(2) All services described in each of paragraphs (b) through (d) of this Item were pre-approved before the engagement by the registrant's audit committee pursuant to paragraph (c)(7)(i)(A) of Rule 2-01 of Regulation S-X. Consequently, none of such services were required to be approved by the audit committee pursuant to paragraph (c)(7)(i)(C). (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than 50%. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant were as follows: FY 2006: $179,156 FY 2007: $178,992 (h) The registrant's investment adviser and accountant have notified the registrant's audit committee of all non-audit services that were rendered by the registrant's accountant to the registrant's investment adviser, its parent company, and any entity controlled by, or under common control with the investment adviser that provides services to the registrant, which services were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The notification provided to the registrant's audit committee included sufficient details regarding such services to allow the registrant's audit committee to consider the continuing independence of its principal accountant. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant's board. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Registrant's Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 12(a)(1) to American Century Asset Allocation Portfolios, Inc.'s Certified Shareholder Report on Form N-CSR, File No. 811-21591, on September 29, 2005. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as Exhibit 99.302CERT. (a)(3) Not applicable. (b) A certification by the registrant's chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as Exhibit 99.906CERT.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: AMERICAN CENTURY ASSET ALLOCATION PORTFOLIOS, INC. By: /s/ Jonathan S. Thomas --------------------------------------------- Name: Jonathan S. Thomas Title: President Date: September 28, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Jonathan S. Thomas --------------------------------------------- Name: Jonathan S. Thomas Title: President (principal executive officer) Date: September 28, 2007 By: /s/ Robert J. Leach --------------------------------------------- Name: Robert J. Leach Title: Vice President, Treasurer, and Chief Financial Officer (principal financial officer) Date: September 28, 2007