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: 07-31-2008 -------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS. [front cover] [american century investments logo and text logo] [livestrong(TM) portfolios text logo] ANNUAL REPORT JULY 31, 2008 LIVESTRONG(TM) PORTFOLIOS FROM AMERICAN CENTURY INVESTMENTS LIVESTRONG(TM) Income Portfolio LIVESTRONG(TM) 2015 Portfolio LIVESTRONG(TM) 2020 Portfolio LIVESTRONG(TM) 2025 Portfolio LIVESTRONG(TM) 2030 Portfolio LIVESTRONG(TM) 2035 Portfolio LIVESTRONG(TM) 2040 Portfolio LIVESTRONG(TM) 2045 Portfolio LIVESTRONG(TM) 2050 Portfolio PRESIDENT'S LETTER [photo of Jonathan Thomas] JONATHAN THOMAS Dear Investor, At American Century Investments®, we are committed to helping you reach your financial goals. Your success is the ultimate measure of our performance. That's why we focus on achieving superior investment results and building long-term relationships with investors like you. Part of that relationship is to clearly communicate investment results and what influenced them. To help you monitor your investment with us, we take pride in providing you with the annual report for LIVESTRONG(TM) Portfolios from American Century Investments for the 12 months ended July 31, 2008. We also recommend americancentury.com, where we provide company news, quarterly portfolio commentaries, investment views, and other useful information. As noted on the website, 2008 marks the 50th anniversary of American Century Investments. Since 1958, we've worked to make wise decisions with your interests as our guide. Fifty years also means that we've met the challenges of previous economic downturns. As we've crossed those hurdles and earned your trust, growth in our assets under management has positioned us in the top 5% of our industry. This growth has given us the resources to offer a wide array of financial products and services, including a well-diversified lineup of portfolios that provides you with many choices in these uncertain times. Though our offerings are diverse, they share several key qualities, including our disciplined investment approach and active, team-based management. Strict adherence to our processes and long-term strategies allows us to stay focused during volatile periods. Investors in our portfolios also benefit from the sum of our investment teams' expertise as they share research and information. We'll continue to work hard to earn your trust. Thank you for your continued support. Sincerely, /s/Jonathan Thomas Jonathan S. Thomas President and Chief Executive Officer American Century Investments TABLE OF CONTENTS LIVESTRONG(TM) PORTFOLIOS FROM AMERICAN CENTURY INVESTMENTS Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary . . . . . . . . . . . . . . . . . . . . . . . . 8 Market Index Total Returns. . . . . . . . . . . . . . . . . . . . . 8 Underlying Fund Allocations . . . . . . . . . . . . . . . . . . . . 9 Shareholder Fee Examples . . . . . . . . . . . . . . . . . . . . . . 12 FINANCIAL STATEMENTS Schedule of Investments. . . . . . . . . . . . . . . . . . . . . . . 18 Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . 23 Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . 26 Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . 29 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . 33 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . 53 Report of Independent Registered Public Accounting Firm. . . . . . . 89 OTHER INFORMATION Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Approval of Management Agreements for LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2035 Portfolio and LIVESTRONG 2045 Portfolio . . . . . . . . . . . . 93 Approval of Management Agreements for LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio and LIVESTRONG 2050 Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Additional Information . . . . . . . . . . . . . . . . . . . . . . . 100 Index Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 101 American Century Investment Services, Inc., has entered into an agreement with the Lance Armstrong Foundation for rights to use the LIVESTRONG name. 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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments 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 Investments by third party vendors. To the best of American Century Investments' knowledge, such information is accurate at the time of printing. PERFORMANCE LIVESTRONG Portfolios Total Returns as of July 31, 2008 Average Annual Returns 1 year Since Inception Inception Date LIVESTRONG INCOME PORTFOLIO INVESTOR CLASS 0.11% 5.47% 8/31/04 RUSSELL 3000 INDEX(1) -10.32% 6.38% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.25% -- Institutional Class 0.31% 5.68% 8/31/04 Advisor Class -0.05% 5.22% 8/31/04 R Class -0.40% 4.94% 8/31/04 LIVESTRONG 2015 PORTFOLIO INVESTOR CLASS -0.67% 6.87% 8/31/04 RUSSELL 3000 INDEX(1) -10.32% 6.38% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.25% -- Institutional Class -0.46% 7.09% 8/31/04 Advisor Class -0.93% 6.60% 8/31/04 R Class -1.19% 6.35% 8/31/04 LIVESTRONG 2020 PORTFOLIO INVESTOR CLASS -- -5.10%(2) 5/30/08 RUSSELL 3000 INDEX(1) -- -8.98%(2) -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX -- 0.03%(2) -- Institutional Class -- -5.00%(2) 5/30/08 Advisor Class -- -5.10%(2) 5/30/08 R Class -- -5.10%(2) 5/30/08 (1) Data provided by Lipper Inc. -- A Reuters Company. © 2008 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) Total returns for periods less than one year are not annualized. The Russell 3000 Index represents approximately 98% of the investable U.S. equity market and provides a broad measure of equity performance. The Citigroup US Broad Investment-Grade Bond Index represents 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, 2008.) 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 Investments 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, 2008 Average Annual Returns 1 year Since Inception Inception Date LIVESTRONG 2025 PORTFOLIO INVESTOR CLASS -2.39% 7.72% 8/31/04 RUSSELL 3000 INDEX(1) -10.32% 6.38% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.25% -- Institutional Class -2.27% 7.92% 8/31/04 Advisor Class -2.73% 7.44% 8/31/04 R Class -2.90% 7.19% 8/31/04 LIVESTRONG 2030 PORTFOLIO INVESTOR CLASS -- -6.10%(2) 5/30/08 RUSSELL 3000 INDEX(1) -- -8.98%(2) -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX -- 0.03%(2) -- Institutional Class -- -6.00%(2) 5/30/08 Advisor Class -- -6.10%(2) 5/30/08 R Class -- -6.10%(2) 5/30/08 LIVESTRONG 2035 PORTFOLIO INVESTOR CLASS -4.33% 8.51% 8/31/04 RUSSELL 3000 INDEX(1) -10.32% 6.38% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.25% -- Institutional Class -4.13% 8.74% 8/31/04 Advisor Class -4.58% 8.26% 8/31/04 R Class -4.84% 7.98% 8/31/04 (1) Data provided by Lipper Inc. -- A Reuters Company. © 2008 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) Total returns for periods less than one year are not annualized. The Russell 3000 Index represents approximately 98% of the investable U.S. equity market and provides a broad measure of equity performance. The Citigroup US Broad Investment-Grade Bond Index represents 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, 2008.) 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 Investments 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 Total Returns as of July 31, 2008 Average Annual Returns 1 year Since Inception Inception Date LIVESTRONG 2040 PORTFOLIO INVESTOR CLASS -- -7.10%(1) 5/30/08 RUSSELL 3000 INDEX(2) -- -8.98%(1) -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX -- 0.03%(1) -- Institutional Class -- -7.10%(1) 5/30/08 Advisor Class -- -7.10%(1) 5/30/08 R Class -- -7.20%(1) 5/30/08 LIVESTRONG 2045 PORTFOLIO INVESTOR CLASS -5.53% 8.84% 8/31/04 RUSSELL 3000 INDEX(2) -10.32% 6.38% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.25% -- Institutional Class -5.40% 9.04% 8/31/04 Advisor Class -5.78% 8.57% 8/31/04 R Class -5.96% 8.31% 8/31/04 LIVESTRONG 2050 PORTFOLIO INVESTOR CLASS -- -7.70%(1) 5/30/08 RUSSELL 3000 INDEX(2) -- -8.98%(1) -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX -- 0.03%(1) -- Institutional Class -- -7.70%(1) 5/30/08 Advisor Class -- -7.70%(1) 5/30/08 R Class -- -7.80%(1) 5/30/08 (1) Total returns for periods less than one year are not annualized. (2) Data provided by Lipper Inc. -- A Reuters Company. © 2008 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. The Russell 3000 Index represents approximately 98% of the investable U.S. equity market and provides a broad measure of equity performance. The Citigroup US Broad Investment-Grade Bond Index represents 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, 2008.) 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 Investments 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 Income Portfolio -- Investor Class $10,000 investment made August 31, 2004
![](https://capedge.com/proxy/N-CSR/0001293210-08-000037/growthlivestrongincome0809.gif)
*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/0001293210-08-000037/growthlivestrong20150809.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 Investments 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 2025 Portfolio -- Investor Class $10,000 investment made August 31, 2004
![](https://capedge.com/proxy/N-CSR/0001293210-08-000037/growthlivestrong20250809.gif)
*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/0001293210-08-000037/growthlivestrong20350809.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 Investments 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 LIVESTRONG Portfolios Growth of $10,000 Over Life of LIVESTRONG 2045 Portfolio -- Investor Class $10,000 investment made August 31, 2004
![](https://capedge.com/proxy/N-CSR/0001293210-08-000037/growthlivestrong20450809.gif)
*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 2008 LIVESTRONG Income Portfolio -- Investor Class 8.14% 2.99% 10.51% 0.11% LIVESTRONG 2015 Portfolio -- Investor Class 11.17% 4.46% 12.46% -0.67% LIVESTRONG 2025 Portfolio -- Investor Class 13.57% 5.48% 14.45% -2.39% LIVESTRONG 2035 Portfolio -- Investor Class 15.71% 6.45% 16.86% -4.33% LIVESTRONG 2045 Portfolio -- Investor Class 16.86% 6.76% 18.23% -5.53% Russell 3000 Index 16.43% 5.14% 16.08% -10.32% Citigroup US Broad Investment-Grade Bond Index 2.99% 1.47% 5.55% 6.72% *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 Investments 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. - ------ 7 PORTFOLIO COMMENTARY LIVESTRONG Portfolios Portfolio Managers: Jeff Tyler and Irina Torelli PERFORMANCE SUMMARY LIVESTRONG Portfolios produced mixed results for the 12 months ended July 31, 2008 reflecting the sharp decline in stock markets around the globe and solid gains in the bond market. For the five LIVESTRONG Portfolios in existence for the full reporting period, returns ranged from 0.11%* for LIVESTRONG Income Portfolio (which has the largest weighting in bond funds) to -5.53%* for LIVESTRONG 2045 Portfolio (which invests more than 80% of its assets in stock funds). See pages 2-7 for more detailed performance information. In addition to these five LIVESTRONG Portfolios, we introduced four new LIVESTRONG Portfolios on May 30, 2008 (discussed later in this report). 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 The broad U.S. equity indexes suffered double-digit declines for the 12-month period in an environment of exceptionally high market volatility. One of the main factors contributing to the stock market chaos was a meltdown in the subprime mortgage market, which led to a persistent liquidity crunch in the credit markets. The fallout included hundreds of billions of dollars in mortgage- and credit-related losses, hobbling the financial sector. The credit turmoil had a negative impact on the U.S. economy, which teetered on the brink of recession amid a deteriorating housing market, rising unemployment, and weaker consumer spending. The Federal Reserve (the Fed) attempted to provide some stability to the economy and financial system by cutting short-term interest rates aggressively and injecting liquidity into the credit markets. However, the Fed's game plan was complicated by surging energy and food prices, which led to the highest year-over-year inflation rate in 17 years. Other than uneven but noteworthy rallies in the fall of 2007 and the spring of 2008, the stock market sustained its downward trajectory throughout the 12-month period. Losses were most severe in the first three months of 2008, when the broad stock indexes suffered their worst quarterly performance in nearly six years. As the accompanying table shows, small-cap stocks held up the best overall, outpacing their large and mid-cap counterparts, while growth-oriented issues outperformed value shares by a wide margin across all market capitalizations. Market Index Total Returns For the 12 months ended July 31, 2008 U.S. STOCKS Russell 1000 (Large-Cap) -10.62% Russell Midcap -10.10% Russell 2000 (Small-Cap) -6.71% INTERNATIONAL STOCKS MSCI EAFE (Europe, Australasia, Far East) Index -12.19% MSCI EM (Emerging Markets) Index -4.09% U.S. FIXED INCOME Citigroup US Broad Investment-Grade Bond Index 6.72% 10-Year U.S. Treasury Note 10.11% 90-Day U.S. Treasury Bill 3.40% INTERNATIONAL BONDS Citigroup Non-US World Government Bond Index 15.10% *All fund returns referenced in this commentary are for Investor Class shares. Total returns for periods less than one year are not annualized. - ------ 8 LIVESTRONG Portfolios Mirroring the domestic equity market, foreign stocks also declined markedly amid a global economic slowdown, growing credit market woes, and rising inflation. Even rapidly growing economies such as China and India experienced a slowdown in economic activity, which put additional pressure on stocks worldwide as investors priced in an expected deceleration in corporate profit growth. Emerging markets were the best performers, led by strong returns in Latin America. Among developed markets, Pacific Rim countries (excluding Japan) held up the best, while Europe and Japan posted similar double-digit declines. Underlying Fund Allocations(1) as a % of net assets as of July 31, 2008 LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2020 2025 2030 Portfolio Portfolio Portfolio Portfolio Portfolio EQUITY NT Equity Growth Fund 12.6% 12.2% 12.2% 12.3% 13.0% NT Growth Fund 6.2% 7.7% 9.4% 11.0% 12.9% NT Large Company Value Fund 10.2% 10.6% 11.4% 11.6% 13.0% NT Mid Cap Value Fund 3.9% 4.9% 5.6% 5.2% 5.9% NT Small Company Fund 2.0% 2.0% 2.6% 3.5% 4.2% NT Vista Fund 2.4% 3.8% 4.5% 4.9% 5.6% Real Estate Fund 0.9% 1.3% 1.6% 1.8% 2.1% NT Emerging Markets Fund -- 1.5% 2.4% 2.7% 3.4% NT International Growth Fund 4.6% 5.9% 7.0% 8.3% 9.8% TOTAL EQUITY 42.8% 49.9% 56.7% 61.3% 69.9% FIXED INCOME High-Yield Fund 3.8% 3.6% 3.4% 3.1% 2.5% Inflation-Adjusted Bond Fund 7.9% 7.5% 6.8% 6.4% 5.2% NT Diversified Bond Fund 27.5% 26.1% 23.8% 22.2% 18.3% International Bond Fund 7.4% 5.9% 4.1% 1.6% -- TOTAL FIXED INCOME 46.6% 43.1% 38.1% 33.3% 26.0% PREMIUM MONEY MARKET FUND 10.4% 6.8% 5.1% 5.3% 4.0% OTHER ASSETS AND LIABILITIES 0.2% 0.2% 0.1% 0.1% 0.1% (1) Institutional Class, except Premium Money Market Fund Investor Class. - ------ 9 LIVESTRONG Portfolios BOND MARKET REVIEW While stocks languished, the U.S. bond market posted positive results for the 12-month period. The slowing economy, credit turmoil, and equity market volatility stoked demand for the relative safety of higher-quality bonds. The bond market also benefited from the Fed's seven short-term interest rate cuts between September 2007 and April 2008, which brought the federal funds rate down from 5.25% to 2.00% -- its lowest level since December 2004. However, bonds surrendered some of their gains toward the end of the period as inflation fears drove interest rates higher and bond prices lower. Nonetheless, the broad U.S. bond indexes advanced by more than 6% for the 12-month period. The biggest beneficiaries of the flight to quality were Treasury and government agency bonds, which generated the best returns. High-quality mortgage-backed securities also fared well. The economic slowdown and credit market turbulence weighed on corporate bond returns; in particular, high-yield corporate bonds declined modestly amid concerns about rising default rates. Foreign bonds continued to produce strong results as the U.S. dollar weakened further versus the world's major currencies. Underlying Fund Allocations(1) as a % of net assets as of July 31, 2008 LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG 2035 2040 2045 2050 Portfolio Portfolio Portfolio Portfolio EQUITY NT Equity Growth Fund 14.0% 14.8% 15.1% 15.4% NT Growth Fund 13.8% 14.7% 14.9% 15.1% NT Large Company Value Fund 13.5% 14.9% 14.8% 15.5% NT Mid Cap Value Fund 6.8% 7.5% 7.3% 7.6% NT Small Company Fund 4.0% 4.3% 4.8% 5.0% NT Vista Fund 6.6% 7.1% 7.2% 7.3% Real Estate Fund 2.3% 2.7% 2.8% 3.0% NT Emerging Markets Fund 4.1% 5.1% 5.7% 6.2% NT International Growth Fund 9.6% 9.8% 9.4% 9.3% TOTAL EQUITY 74.7% 80.9% 82.0% 84.4% FIXED INCOME High-Yield Fund 2.2% 1.9% 1.7% 1.5% Inflation-Adjusted Bond Fund 4.7% 3.8% 3.6% 3.1% NT Diversified Bond Fund 16.6% 13.4% 12.6% 10.9% TOTAL FIXED INCOME 23.5% 19.1% 17.9% 15.5% PREMIUM MONEY MARKET FUND 1.6% -- -- -- OTHER ASSETS AND LIABILITIES 0.2% --(2) 0.1% 0.1% (1) Institutional Class, except Premium Money Market Fund Investor Class. (2) Category is less than 0.05% of total net assets. - ------ 10 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 pages 9-10 for the specific underlying fund allocations for each LIVESTRONG Portfolio.) Every stock fund in LIVESTRONG Portfolios posted negative returns for the 12-month period. LIVESTRONG Portfolios' two value-oriented funds, NT Large Company Value and NT Midcap Value, were among the weakest performers, reflecting the general underperformance of value stocks. However, favorable stock selection helped NT Midcap Value outpace its benchmark index. NT Small Company and NT Emerging Markets also suffered double-digit declines during the period and underperformed their respective benchmark indexes. LIVESTRONG Portfolios' two domestic growth funds -- large-cap NT Growth and mid-cap NT Vista -- posted the smallest declines, outperforming their respective benchmarks by a wide margin thanks to strong stock selection. Real Estate also fared reasonably well as real estate investment trusts held up better than the broad stock indexes. LIVESTRONG Portfolios' largest international equity holding, NT International Growth, declined for the period, but favorable security selection boosted the fund's performance compared with its benchmark. NT Diversified Bond, LIVESTRONG Portfolios' main fixed-income component, outperformed the broad bond indexes, thanks primarily to an overweight position in Treasury bonds and an underweight position in corporate bonds. Each of LIVESTRONG Portfolios' other fixed-income funds also advanced, led by the double-digit gains of International Bond and Inflation-Adjusted Bond. High-Yield posted the smallest gain among the fixed-income funds. NEW PORTFOLIOS On May 30, 2008, we introduced four new LIVESTRONG Portfolios -- LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio, and LIVESTRONG 2050 Portfolio. For the period from their inception through July 31, 2008, returns ranged from -5.10%* for LIVESTRONG 2020 Portfolio to -7.70%* for LIVESTRONG 2050 Portfolio. This performance reflected a sharp decline in stocks over the last two months as the economic slowdown, inflation concerns, and housing market downturn weighed on equity markets worldwide. The bond market posted a flat return for the two-month period as investors wrestled with the weak economy and inflation concerns. OUTLOOK The economic storms and market turbulence that investors have weathered since last autumn show few signs of abating in the near future. Economic growth remains soft, energy prices are at record highs, and many financial institutions continue to struggle with unexpectedly large write-offs and the need for new capital. As a result, central banks like the Federal Reserve are caught between conflicting needs -- lowering rates for economic stimulus and liquidity, and raising rates to stave off an outbreak of inflation. In such an uncertain and volatile environment, diversified investments like LIVESTRONG Portfolios become increasingly valuable. - ------ 11 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 Investments 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, 2008 to July 31, 2008 (except as noted). 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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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. - ------ 12 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 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) LIVESTRONG Income Portfolio ACTUAL Investor Class $1,000 $982.80 $0.99 0.20% $3.75 0.76% Institutional Class $1,000 $983.80 $0.00 0.00%(3) $2.76 0.56% Advisor Class $1,000 $981.50 $2.22 0.45% $4.98 1.01% R Class $1,000 $980.20 $3.45 0.70% $6.20 1.26% HYPOTHETICAL Investor Class $1,000 $1,023.87 $1.01 0.20% $3.82 0.76% Institutional Class $1,000 $1,024.86 $0.00 0.00%(3) $2.82 0.56% Advisor Class $1,000 $1,022.63 $2.26 0.45% $5.07 1.01% R Class $1,000 $1,021.38 $3.52 0.70% $6.32 1.26% LIVESTRONG 2015 Portfolio ACTUAL Investor Class $1,000 $979.40 $0.98 0.20% $3.94 0.80% Institutional Class $1,000 $981.10 $0.00 0.00%(3) $2.96 0.60% Advisor Class $1,000 $977.60 $2.21 0.45% $5.16 1.05% R Class $1,000 $976.80 $3.44 0.70% $6.39 1.30% HYPOTHETICAL Investor Class $1,000 $1,023.87 $1.01 0.20% $4.02 0.80% Institutional Class $1,000 $1,024.86 $0.00 0.00%(3) $3.02 0.60% Advisor Class $1,000 $1,022.63 $2.26 0.45% $5.27 1.05% R Class $1,000 $1,021.38 $3.52 0.70% $6.52 1.30% (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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) LIVESTRONG 2020 Portfolio ACTUAL Investor Class $1,000 $949.00(3) $0.33(4) 0.20% $1.40(4) 0.85% Institutional Class $1,000 $950.00(3) $0.00(4) 0.00%(5) $1.07(4) 0.65% Advisor Class $1,000 $949.00(3) $0.74(4) 0.45% $1.82(4) 1.10% R Class $1,000 $949.00(3) $1.16(4) 0.70% $2.23(4) 1.35% HYPOTHETICAL Investor Class $1,000 $1,023.87(6) $1.01(6) 0.20% $4.27(6) 0.85% Institutional Class $1,000 $1,024.86(6) $0.00(6) 0.00%(5) $3.27(6) 0.65% Advisor Class $1,000 $1,022.63(6) $2.26(6) 0.45% $5.52(6) 1.10% R Class $1,000 $1,021.38(6) $3.52(6) 0.70% $6.77(6) 1.35% LIVESTRONG 2025 Portfolio ACTUAL Investor Class $1,000 $974.90 $0.98 0.20% $4.17 0.85% Institutional Class $1,000 $975.70 $0.00 0.00%(5) $3.19 0.65% Advisor Class $1,000 $973.20 $2.21 0.45% $5.40 1.10% R Class $1,000 $973.20 $3.43 0.70% $6.62 1.35% HYPOTHETICAL Investor Class $1,000 $1,023.87 $1.01 0.20% $4.27 0.85% Institutional Class $1,000 $1,024.86 $0.00 0.00%(5) $3.27 0.65% Advisor Class $1,000 $1,022.63 $2.26 0.45% $5.52 1.10% R Class $1,000 $1,021.38 $3.52 0.70% $6.77 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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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) Ending account value based on actual return from May 30, 2008 (fund inception) through July 31, 2008. (4) 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 62, the number of days in the period from May 30, 2008 (fund inception), through July 31, 2008, divided by 366, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (5) 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%. (6) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 14 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) LIVESTRONG 2030 Portfolio ACTUAL Investor Class $1,000 $939.00(3) $0.33(4) 0.20% $1.48(4) 0.90% Institutional Class $1,000 $940.00(3) $0.00(4) 0.00%(5) $1.15(4) 0.70% Advisor Class $1,000 $939.00(3) $0.74(4) 0.45% $1.89(4) 1.15% R Class $1,000 $939.00(3) $1.15(4) 0.70% $2.30(4) 1.40% HYPOTHETICAL Investor Class $1,000 $1,023.87(6) $1.01(6) 0.20% $4.52(6) 0.90% Institutional Class $1,000 $1,024.86(6) $0.00(6) 0.00%(5) $3.52(6) 0.70% Advisor Class $1,000 $1,022.63(6) $2.26(6) 0.45% $5.77(6) 1.15% R Class $1,000 $1,021.38(6) $3.52(6) 0.70% $7.02(6) 1.40% LIVESTRONG 2035 Portfolio ACTUAL Investor Class $1,000 $968.80 $0.98 0.20% $4.41 0.90% Institutional Class $1,000 $969.60 $0.00 0.00%(5) $3.43 0.70% Advisor Class $1,000 $968.00 $2.20 0.45% $5.63 1.15% R Class $1,000 $966.40 $3.42 0.70% $6.84 1.40% HYPOTHETICAL Investor Class $1,000 $1,023.87 $1.01 0.20% $4.52 0.90% Institutional Class $1,000 $1,024.86 $0.00 0.00%(5) $3.52 0.70% Advisor Class $1,000 $1,022.63 $2.26 0.45% $5.77 1.15% R Class $1,000 $1,021.38 $3.52 0.70% $7.02 1.40% (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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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) Ending account value based on actual return from May 30, 2008 (fund inception) through July 31, 2008. (4) 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 62, the number of days in the period from May 30, 2008 (fund inception), through July 31, 2008, divided by 366, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (5) 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%. (6) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 15 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) LIVESTRONG 2040 Portfolio ACTUAL Investor Class $1,000 $929.00(3) $0.33(4) 0.20% $1.54(4) 0.94% Institutional Class $1,000 $929.00(3) $0.00(4) 0.00%(5) $1.21(4) 0.74% Advisor Class $1,000 $929.00(3) $0.74(4) 0.45% $1.94(4) 1.19% R Class $1,000 $928.00(3) $1.14(4) 0.70% $2.35(4) 1.44% HYPOTHETICAL Investor Class $1,000 $1,023.87(6) $1.01(6) 0.20% $4.72(6) 0.94% Institutional Class $1,000 $1,024.86(6) $0.00(6) 0.00%(5) $3.72(6) 0.74% Advisor Class $1,000 $1,022.63(6) $2.26(6) 0.45% $5.97(6) 1.19% R Class $1,000 $1,021.38(6) $3.52(6) 0.70% $7.22(6) 1.44% LIVESTRONG 2045 Portfolio ACTUAL Investor Class $1,000 $965.30 $0.98 0.20% $4.59 0.94% Institutional Class $1,000 $965.30 $0.00 0.00%(5) $3.62 0.74% Advisor Class $1,000 $963.70 $2.20 0.45% $5.81 1.19% R Class $1,000 $962.90 $3.42 0.70% $7.03 1.44% HYPOTHETICAL Investor Class $1,000 $1,023.87 $1.01 0.20% $4.72 0.94% Institutional Class $1,000 $1,024.86 $0.00 0.00%(5) $3.72 0.74% Advisor Class $1,000 $1,022.63 $2.26 0.45% $5.97 1.19% R Class $1,000 $1,021.38 $3.52 0.70% $7.22 1.44% (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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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) Ending account value based on actual return from May 30, 2008 (fund inception) through July 31, 2008. (4) 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 62, the number of days in the period from May 30, 2008 (fund inception), through July 31, 2008, divided by 366, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (5) 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%. (6) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 16 Effective Expenses Expenses Paid Paid Beginning Ending During During Effective Account Account Period(1) Annualized Period(2) Annualized Value Value 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) LIVESTRONG 2050 Portfolio ACTUAL Investor Class $1,000 $923.00(3) $0.33(4) 0.20% $1.56(4) 0.96% Institutional Class $1,000 $923.00(3) $0.00(4) 0.00%(5) $1.24(4) 0.76% Advisor Class $1,000 $923.00(3) $0.73(4) 0.45% $1.97(4) 1.21% R Class $1,000 $922.00(3) $1.14(4) 0.70% $2.38(4) 1.46% HYPOTHETICAL Investor Class $1,000 $1,023.87(6) $1.01(6) 0.20% $4.82(6) 0.96% Institutional Class $1,000 $1,024.86(6) $0.00(6) 0.00%(5) $3.82(6) 0.76% Advisor Class $1,000 $1,022.63(6) $2.26(6) 0.45% $6.07(6) 1.21% R Class $1,000 $1,021.38(6) $3.52(6) 0.70% $7.32(6) 1.46% (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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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) Ending account value based on actual return from May 30, 2008 (fund inception) through July 31, 2008. (4) 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 62, the number of days in the period from May 30, 2008 (fund inception), through July 31, 2008, divided by 366, to reflect the period. Had the class been available for the full period, the expenses paid during the period would have been higher. (5) 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%. (6) Ending account value and expenses paid during period assumes the class had been available throughout the entire period and are calculated using the class's annualized expense ratio listed in the table above. - ------ 17 SCHEDULE OF INVESTMENTS LIVESTRONG Portfolios JULY 31, 2008 Shares Value LIVESTRONG Income Portfolio Mutual Funds(1) -- 99.8% DOMESTIC FIXED INCOME FUNDS -- 39.2% 439,813 High-Yield Fund Institutional Class $ 2,542,119 467,270 Inflation-Adjusted Bond Fund Institutional Class 5,340,896 1,817,937 NT Diversified Bond Fund Institutional Class 18,670,220 ------------ 26,553,235 ------------ DOMESTIC EQUITY FUNDS -- 38.2% 856,240 NT Equity Growth Fund Institutional Class 8,519,588 388,477 NT Growth Fund Institutional Class 4,214,975 769,386 NT Large Company Value Fund Institutional Class 6,932,168 292,448 NT Mid Cap Value Fund Institutional Class 2,620,334 153,329 NT Small Company Fund Institutional Class 1,320,163 142,931 NT Vista Fund Institutional Class 1,613,691 30,326 Real Estate Fund Institutional Class 637,149 ------------ 25,858,068 ------------ MONEY MARKET FUNDS -- 10.4% 7,041,280 Premium Money Market Fund Investor Class 7,041,280 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 7.4% 326,382 International Bond Fund Institutional Class 4,987,117 ------------ INTERNATIONAL EQUITY FUNDS -- 4.6% 297,235 NT International Growth Fund Institutional Class 3,144,746 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $67,531,054) 67,584,446 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 167,827 ------------ TOTAL NET ASSETS -- 100.0% $67,752,273 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. Shares Value LIVESTRONG 2015 Portfolio Mutual Funds(1) -- 99.8% DOMESTIC EQUITY FUNDS -- 42.5% 2,552,134 NT Equity Growth Fund Institutional Class $25,393,724 1,481,964 NT Growth Fund Institutional Class 16,079,309 2,441,771 NT Large Company Value Fund Institutional Class 22,000,358 1,133,888 NT Mid Cap Value Fund Institutional Class 10,159,636 475,348 NT Small Company Fund Institutional Class 4,092,746 708,665 NT Vista Fund Institutional Class 8,000,828 127,130 Real Estate Fund Institutional Class 2,671,001 ------------ 88,397,602 ------------ DOMESTIC FIXED INCOME FUNDS -- 37.2% 1,291,014 High-Yield Fund Institutional Class 7,462,061 1,370,511 Inflation-Adjusted Bond Fund Institutional Class 15,664,941 5,290,466 NT Diversified Bond Fund Institutional Class 54,333,085 ------------ 77,460,087 ------------ INTERNATIONAL EQUITY FUNDS -- 7.4% 306,469 NT Emerging Markets Fund Institutional Class 3,220,989 1,152,707 NT International Growth Fund Institutional Class 12,195,640 ------------ 15,416,629 ------------ MONEY MARKET FUNDS -- 6.8% 14,169,337 Premium Money Market Fund Investor Class 14,169,337 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 5.9% 808,465 International Bond Fund Institutional Class 12,353,345 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $208,340,664) 207,797,000 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 434,727 ------------ TOTAL NET ASSETS -- 100.0% $208,231,727 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. - ------ 18 LIVESTRONG Portfolios Shares Value LIVESTRONG 2020 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 47.3% 13,523 NT Equity Growth Fund Institutional Class $ 134,553 9,493 NT Growth Fund Institutional Class 102,999 13,966 NT Large Company Value Fund Institutional Class 125,834 6,894 NT Mid Cap Value Fund Institutional Class 61,770 3,331 NT Small Company Fund Institutional Class 28,680 4,392 NT Vista Fund Institutional Class 49,586 835 Real Estate Fund Institutional Class 17,543 ------------ 520,965 ------------ DOMESTIC FIXED INCOME FUNDS -- 34.0% 6,418 High-Yield Fund Institutional Class 37,096 6,564 Inflation-Adjusted Bond Fund Institutional Class 75,027 25,513 NT Diversified Bond Fund Institutional Class 262,018 ------------ 374,141 ------------ INTERNATIONAL EQUITY FUNDS -- 9.4% 2,495 NT Emerging Markets Fund Institutional Class 26,222 7,356 NT International Growth Fund Institutional Class 77,827 ------------ 104,049 ------------ MONEY MARKET FUNDS -- 5.1% 55,710 Premium Money Market Fund Investor Class 55,710 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 4.1% 2,934 International Bond Fund Institutional Class 44,832 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $1,111,763) 1,099,697 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 1,121 ------------ TOTAL NET ASSETS -- 100.0% $1,100,818 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. Shares Value LIVESTRONG 2025 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 50.3% 3,602,431 NT Equity Growth Fund Institutional Class $ 35,844,189 2,941,097 NT Growth Fund Institutional Class 31,910,902 3,752,460 NT Large Company Value Fund Institutional Class 33,809,679 1,680,943 NT Mid Cap Value Fund Institutional Class 15,061,249 1,174,267 NT Small Company Fund Institutional Class 10,110,439 1,249,163 NT Vista Fund Institutional Class 14,103,050 245,954 Real Estate Fund Institutional Class 5,167,494 ------------ 146,007,002 ------------ DOMESTIC FIXED INCOME FUNDS -- 31.7% 1,544,407 High-Yield Fund Institutional Class 8,926,672 1,639,867 Inflation-Adjusted Bond Fund Institutional Class 18,743,680 6,276,546 NT Diversified Bond Fund Institutional Class 64,460,128 ------------ 92,130,480 ------------ INTERNATIONAL EQUITY FUNDS -- 11.0% 740,611 NT Emerging Markets Fund Institutional Class 7,783,822 2,276,565 NT International Growth Fund Institutional Class 24,086,057 ------------ 31,869,879 ------------ MONEY MARKET FUNDS -- 5.3% 15,395,670 Premium Money Market Fund Investor Class 15,395,670 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 1.6% 305,876 International Bond Fund Institutional Class 4,673,785 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $293,243,076) 290,076,816 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 377,435 ------------ TOTAL NET ASSETS -- 100.0% $290,454,251 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. - ------ 19 LIVESTRONG Portfolios Shares Value LIVESTRONG 2030 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 56.7% 8,437 NT Equity Growth Fund Institutional Class $ 83,948 7,661 NT Growth Fund Institutional Class 83,122 9,291 NT Large Company Value Fund Institutional Class 83,712 4,234 NT Mid Cap Value Fund Institutional Class 37,937 3,119 NT Small Company Fund Institutional Class 26,855 3,204 NT Vista Fund Institutional Class 36,173 642 Real Estate Fund Institutional Class 13,488 ------------ 365,235 ------------ DOMESTIC FIXED INCOME FUNDS -- 26.0% 2,819 High-Yield Fund Institutional Class 16,294 2,949 Inflation-Adjusted Bond Fund Institutional Class 33,707 11,435 NT Diversified Bond Fund Institutional Class 117,437 ------------ 167,438 ------------ INTERNATIONAL EQUITY FUNDS -- 13.2% 2,059 NT Emerging Markets Fund Institutional Class 21,640 5,964 NT International Growth Fund Institutional Class 63,099 ------------ 84,739 ------------ MONEY MARKET FUNDS -- 4.0% 26,107 Premium Money Market Fund Investor Class 26,107 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $649,835) 643,519 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 471 ------------ TOTAL NET ASSETS -- 100.0% $643,990 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments family of funds, of which certain funds may be deemed to be under common control because of the same board of directors. Shares Value LIVESTRONG 2035 Portfolio Mutual Funds(1) -- 99.8% DOMESTIC EQUITY FUNDS -- 61.0% 2,449,303 NT Equity Growth Fund Institutional Class $24,370,566 2,222,291 NT Growth Fund Institutional Class 24,111,857 2,606,109 NT Large Company Value Fund Institutional Class 23,481,042 1,312,467 NT Mid Cap Value Fund Institutional Class 11,759,704 814,541 NT Small Company Fund Institutional Class 7,013,198 1,024,146 NT Vista Fund Institutional Class 11,562,608 189,899 Real Estate Fund Institutional Class 3,989,778 ------------ 106,288,753 ------------ DOMESTIC FIXED INCOME FUNDS -- 23.5% 675,627 High-Yield Fund Institutional Class 3,905,124 716,608 Inflation-Adjusted Bond Fund Institutional Class 8,190,829 2,815,854 NT Diversified Bond Fund Institutional Class 28,918,825 ------------ 41,014,778 ------------ INTERNATIONAL EQUITY FUNDS -- 13.7% 676,185 NT Emerging Markets Fund Institutional Class 7,106,704 1,580,696 NT International Growth Fund Institutional Class 16,723,764 ------------ 23,830,468 ------------ MONEY MARKET FUNDS -- 1.6% 2,798,043 Premium Money Market Fund Investor Class 2,798,043 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $177,942,887) 173,932,042 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 326,128 ------------ TOTAL NET ASSETS -- 100.0% $174,258,170 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. - ------ 20 LIVESTRONG Portfolios Shares Value LIVESTRONG 2040 Portfolio Mutual Funds(1) -- 100.0% DOMESTIC EQUITY FUNDS -- 66.0% 12,654 NT Equity Growth Fund Institutional Class $ 125,907 11,476 NT Growth Fund Institutional Class 124,515 14,033 NT Large Company Value Fund Institutional Class 126,438 7,065 NT Mid Cap Value Fund Institutional Class 63,302 4,216 NT Small Company Fund Institutional Class 36,300 5,346 NT Vista Fund Institutional Class 60,356 1,073 Real Estate Fund Institutional Class 22,544 ------------ 559,362 ------------ DOMESTIC FIXED INCOME FUNDS -- 19.1% 2,749 High-Yield Fund Institutional Class 15,889 2,805 Inflation-Adjusted Bond Fund Institutional Class 32,061 11,113 NT Diversified Bond Fund Institutional Class 114,131 ------------ 162,081 ------------ INTERNATIONAL EQUITY FUNDS -- 14.9% 4,109 NT Emerging Markets Fund Institutional Class 43,186 7,910 NT International Growth Fund Institutional Class 83,687 ------------ 126,873 ------------ TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $847,955) 848,316 ------------ OTHER ASSETS AND LIABILITIES(2) 349 ------------ TOTAL NET ASSETS -- 100.0% $848,665 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. Shares Value LIVESTRONG 2045 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 66.9% 1,767,703 NT Equity Growth Fund Institutional Class $ 17,588,646 1,603,749 NT Growth Fund Institutional Class 17,400,677 1,911,044 NT Large Company Value Fund Institutional Class 17,218,498 949,245 NT Mid Cap Value Fund Institutional Class 8,505,235 651,548 NT Small Company Fund Institutional Class 5,609,828 740,940 NT Vista Fund Institutional Class 8,365,213 155,018 Real Estate Fund Institutional Class 3,256,928 ------------ 77,945,025 ------------ DOMESTIC FIXED INCOME FUNDS -- 17.9% 341,459 High-Yield Fund Institutional Class 1,973,633 362,388 Inflation-Adjusted Bond Fund Institutional Class 4,142,095 1,428,483 NT Diversified Bond Fund Institutional Class 14,670,520 ------------ 20,786,248 ------------ INTERNATIONAL EQUITY FUNDS -- 15.1% 631,758 NT Emerging Markets Fund Institutional Class 6,639,777 1,037,672 NT International Growth Fund Institutional Class 10,978,569 ------------ 17,618,346 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $119,927,399) 116,349,619 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 168,105 ------------ TOTAL NET ASSETS -- 100.0% $116,517,724 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. - ------ 21 LIVESTRONG Portfolios Shares Value LIVESTRONG 2050 Portfolio Mutual Funds(1) -- 99.9% DOMESTIC EQUITY FUNDS -- 68.9% 7,438 NT Equity Growth Fund Institutional Class $ 74,008 6,726 NT Growth Fund Institutional Class 72,977 8,267 NT Large Company Value Fund Institutional Class 74,486 4,102 NT Mid Cap Value Fund Institutional Class 36,754 2,807 NT Small Company Fund Institutional Class 24,168 3,119 NT Vista Fund Institutional Class 35,214 681 Real Estate Fund Institutional Class 14,308 ------------ 331,915 ------------ DOMESTIC FIXED INCOME FUNDS -- 15.5% 1,255 High-Yield Fund Institutional Class 7,254 1,312 Inflation-Adjusted Bond Fund Institutional Class 14,996 5,134 NT Diversified Bond Fund Institutional Class 52,726 ------------ 74,976 ------------ INTERNATIONAL EQUITY FUNDS -- 15.5% 2,839 NT Emerging Markets Fund Institutional Class 29,838 4,230 NT International Growth Fund Institutional Class 44,753 ------------ 74,591 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $500,188) 481,482 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 276 ------------ TOTAL NET ASSETS -- 100.0% $481,758 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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. - ------ 22 STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2008 LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2020 Portfolio Portfolio Portfolio ASSETS Investment securities in affiliates, at value (cost of $67,531,054, $208,340,664 and $1,111,763, respectively) $67,584,446 $207,797,000 $1,099,697 Cash 12,286 40,604 217 Receivable for capital shares sold 62,147 141,261 -- Distributions receivable from affiliates 105,213 292,131 1,045 ------------ ------------ ------------ 67,764,092 208,270,996 1,100,959 ------------ ------------ ------------ LIABILITIES Accrued administrative fees 9,916 32,354 137 Distribution and service fees payable 1,903 6,915 4 ------------ ------------ ------------ 11,819 39,269 141 ------------ ------------ ------------ NET ASSETS $67,752,273 $208,231,727 $1,100,818 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $67,716,535 $205,063,325 $1,111,394 Undistributed net investment income 117,473 2,667,462 1,601 Accumulated undistributed net realized gain (loss) on investment transactions (135,127) 1,044,604 (111) Net unrealized appreciation (depreciation) on investments 53,392 (543,664) (12,066) ------------ ------------ ------------ $67,752,273 $208,231,727 $1,100,818 ============ ============ ============ INVESTOR CLASS, $0.01 PAR VALUE Net assets $49,378,431 $161,837,754 $1,072,938 Shares outstanding 4,640,750 14,209,505 113,022 Net asset value per share $10.64 $11.39 $9.49 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $9,737,445 $17,845,177 $16,020 Shares outstanding 915,045 1,564,647 1,687 Net asset value per share $10.64 $11.41 $9.50 ADVISOR CLASS, $0.01 PAR VALUE Net assets $8,285,098 $24,383,765 $5,931 Shares outstanding 778,975 2,144,262 625 Net asset value per share $10.64 $11.37 $9.49 R CLASS, $0.01 PAR VALUE Net assets $351,299 $4,165,031 $5,929 Shares outstanding 33,037 366,668 625 Net asset value per share $10.63 $11.36 $9.49 See Notes to Financial Statements. - ------ 23 JULY 31, 2008 LIVESTRONG LIVESTRONG 2025 LIVESTRONG 2035 Portfolio 2030 Portfolio Portfolio ASSETS Investment securities in affiliates, at value (cost of $293,243,076, $649,835 and $177,942,887, respectively) $290,076,816 $643,519 $173,932,042 Cash 51,081 141 31,222 Receivable for capital shares sold 27,536 -- 180,382 Distributions receivable from affiliates 348,267 401 144,709 ------------ ------------ ------------ 290,503,700 644,061 174,288,355 ------------ ------------ ------------ LIABILITIES Accrued administrative fees 42,443 67 25,275 Distribution and service fees payable 7,006 4 4,910 ------------ ------------ ------------ 49,449 71 30,185 ------------ ------------ ------------ NET ASSETS $290,454,251 $643,990 $174,258,170 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $288,322,909 $650,688 $175,173,625 Undistributed net investment income 3,274,706 635 1,485,029 Accumulated undistributed net realized gain (loss) on investment transactions 2,022,896 (1,017) 1,610,361 Net unrealized depreciation on investments (3,166,260) (6,316) (4,010,845) ------------ ------------ ------------ $290,454,251 $643,990 $174,258,170 ============ ============ ============ INVESTOR CLASS, $0.01 PAR VALUE Net assets $215,024,257 $626,382 $128,815,098 Shares outstanding 18,493,926 66,679 10,643,241 Net asset value per share $11.63 $9.39 $12.10 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $44,610,886 $5,873 $24,120,009 Shares outstanding 3,832,148 625 1,989,896 Net asset value per share $11.64 $9.40 $12.12 ADVISOR CLASS, $0.01 PAR VALUE Net assets $28,073,117 $5,869 $19,145,408 Shares outstanding 2,417,480 625 1,583,670 Net asset value per share $11.61 $9.39 $12.09 R CLASS, $0.01 PAR VALUE Net assets $2,745,991 $5,866 $2,177,655 Shares outstanding 236,824 625 180,354 Net asset value per share $11.60 $9.39 $12.07 See Notes to Financial Statements. - ------ 24 JULY 31, 2008 LIVESTRONG LIVESTRONG 2045 LIVESTRONG 2040 Portfolio Portfolio 2050 Portfolio ASSETS Investment securities in affiliates, at value (cost of $847,955, $119,927,399 and $500,188, respectively) $848,316 $116,349,619 $481,482 Cash 131 18,068 144 Receivable for capital shares sold -- 96,342 -- Distributions receivable from affiliates 295 71,163 196 ------------ ------------ ------------ 848,742 116,535,192 481,822 ------------ ------------ ------------ LIABILITIES Accrued administrative fees 73 14,501 60 Distribution and service fees payable 4 2,967 4 ------------ ------------ ------------ 77 17,468 64 ------------ ------------ ------------ NET ASSETS $848,665 $116,517,724 $481,758 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $848,023 $118,736,275 $500,624 Undistributed net investment income 499 899,532 547 Accumulated undistributed net realized gain (loss) on investment transactions (218) 459,697 (707) Net unrealized appreciation (depreciation) on investments 361 (3,577,780) (18,706) ------------ ------------ ------------ $848,665 $116,517,724 $481,758 ============ ============ ============ INVESTOR CLASS, $0.01 PAR VALUE Net assets $831,251 $72,649,333 $464,455 Shares outstanding 89,474 5,935,889 50,314 Net asset value per share $9.29 $12.24 $9.23 INSTITUTIONAL CLASS, $0.01 PAR VALUE Net assets $5,808 $31,053,958 $5,771 Shares outstanding 625 2,534,023 625 Net asset value per share $9.29 $12.25 $9.23 ADVISOR CLASS, $0.01 PAR VALUE Net assets $5,804 $11,411,095 $5,767 Shares outstanding 625 933,834 625 Net asset value per share $9.29 $12.22 $9.23 R CLASS, $0.01 PAR VALUE Net assets $5,802 $1,403,338 $5,765 Shares outstanding 625 114,979 625 Net asset value per share $9.28 $12.21 $9.22 See Notes to Financial Statements. - ------ 25 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008 (EXCEPT AS NOTED) LIVESTRONG LIVESTRONG Income LIVESTRONG 2020 Portfolio 2015 Portfolio Portfolio(1) INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds -- affiliates $ 2,499,480 $7,416,418 $ 1,777 ------------- ------------- ------------- EXPENSES: Administrative fees 112,659 356,146 168 Distribution and service fees: Advisor Class 19,534 48,137 2 R Class 990 20,971 5 Directors' fees and expenses 1,633 4,833 1 ------------- ------------- ------------- 134,816 430,087 176 ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) 2,364,664 6,986,331 1,601 ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (262,839) (50,420) (111) Capital gain distributions received from underlying funds 399,739 1,620,827 -- ------------- ------------- ------------- 136,900 1,570,407 (111) ------------- ------------- ------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS IN UNDERLYING FUNDS (2,516,968) (10,467,082) (12,066) ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES (2,380,068) (8,896,675) (12,177) ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(15,404) $(1,910,344) $(10,576) ============= ============= ============= (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 26 YEAR ENDED JULY 31, 2008 (EXCEPT AS NOTED) LIVESTRONG LIVESTRONG 2030 LIVESTRONG 2025 Portfolio Portfolio(1) 2035 Portfolio INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds -- affiliates $ 9,576,194 $ 726 $ 5,122,406 ------------- ------------- ------------- EXPENSES: Administrative fees 445,896 84 255,879 Distribution and service fees: Advisor Class 52,216 2 40,341 R Class 9,338 5 7,766 Directors' fees and expenses 6,406 -- 3,723 ------------- ------------- ------------- 513,856 91 307,709 ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) 9,062,338 635 4,814,697 ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (424,533) (1,017) (158,583) Capital gain distributions received from underlying funds 2,912,668 -- 2,030,033 ------------- ------------- ------------- 2,488,135 (1,017) 1,871,450 ------------- ------------- ------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS IN UNDERLYING FUNDS (19,833,288) (6,316) (14,197,827) ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES (17,345,153) (7,333) (12,326,377) ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (8,282,815) $(6,698) $ (7,511,680) ============= ============= ============= (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 27 YEAR ENDED JULY 31, 2008 (EXCEPT AS NOTED) LIVESTRONG LIVESTRONG 2040 LIVESTRONG 2050 Portfolio(1) 2045 Portfolio Portfolio(1) INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds -- affiliates $595 $ 3,536,367 $ 648 ------------- ------------- ------------- EXPENSES: Administrative fees 89 147,705 93 Distribution and service fees: Advisor Class 2 26,757 2 R Class 5 5,099 5 Directors' fees and expenses -- 2,567 1 ------------- ------------- ------------- 96 182,128 101 ------------- ------------- ------------- NET INVESTMENT INCOME (LOSS) 499 3,354,239 547 ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (218) (985,579) (707) Capital gain distributions received from underlying funds -- 1,644,965 -- ------------- ------------- ------------- (218) 659,386 (707) ------------- ------------- ------------- CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS IN UNDERLYING FUNDS 361 (11,088,022) (18,706) ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES 143 (10,428,636) (19,413) ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $642 $ (7,074,397) $(18,866) ============= ============= ============= (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 28 STATEMENT OF CHANGES IN NET ASSETS YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio Increase (Decrease) in Net Assets 2008 2007 2008 2007 OPERATIONS Net investment income (loss) $ 2,364,664 $ 1,450,147 $ 6,986,331 $ 3,968,852 Net realized gain (loss) 136,900 (9,450) 1,570,407 316,017 Change in net unrealized appreciation (depreciation) (2,516,968) 2,759,798 (10,467,082) 11,245,515 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (15,404) 4,200,495 (1,910,344) 15,530,384 ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (1,807,377) (1,047,364) (5,029,481) (2,492,556) Institutional Class (358,453) (174,881) (526,172) (296,721) Advisor Class (251,073) (147,969) (486,532) (318,604) R Class (5,401) (1,399) (120,545) (9,697) From net realized gains: Investor Class (100,501) (470,015) (582,593) (2,496,248) Institutional Class (18,324) (67,991) (57,480) (272,911) Advisor Class (12,887) (72,923) (60,961) (358,795) R Class (264) (648) (16,447) (12,472) ------------ ------------ ------------ ------------ Decrease in net assets from distributions (2,554,280) (1,983,190) (6,880,211) (6,258,004) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 9,686,579 23,632,442 39,105,101 58,866,551 ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 7,116,895 25,849,747 30,314,546 68,138,931 NET ASSETS Beginning of period 60,635,378 34,785,631 177,917,181 109,778,250 ------------ ------------ ------------ ------------ End of period $67,752,273 $60,635,378 $208,231,727 $177,917,181 ============ ============ ============ ============ Undistributed net investment income $117,473 $175,113 $2,667,462 $1,843,861 ============ ============ ============ ============ See Notes to Financial Statements. - ------ 29 YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 (EXCEPT AS NOTED) LIVESTRONG LIVESTRONG 2020 Portfolio LIVESTRONG 2025 Portfolio 2030 Portfolio Increase (Decrease) in Net Assets 2008(1) 2008 2007 2008(1) OPERATIONS Net investment income (loss) $ 1,601 $ 9,062,338 $ 4,725,147 $ 635 Net realized gain (loss) (111) 2,488,135 693,679 (1,017) Change in net unrealized appreciation (depreciation) (12,066) (19,833,288) 19,418,380 (6,316) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (10,576) (8,282,815) 24,837,206 (6,698) ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class -- (6,067,533) (2,728,920) -- Institutional Class -- (1,379,241) (782,731) -- Advisor Class -- (459,566) (222,178) -- R Class -- (45,611) (13,994) -- From net realized gains: Investor Class -- (763,010) (5,948,432) -- Institutional Class -- (162,933) (1,544,817) -- Advisor Class -- (62,855) (556,560) -- R Class -- (6,836) (41,251) -- ------------ ------------ ------------ ------------ Decrease in net assets from distributions -- (8,947,585) (11,838,883) -- ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 1,111,394 69,996,157 73,140,620 650,688 ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 1,100,818 52,765,757 86,138,943 643,990 NET ASSETS Beginning of period -- 237,688,494 151,549,551 -- ------------ ------------ ------------ ------------ End of period $1,100,818 $290,454,251 $237,688,494 $643,990 ============ ============ ============ ============ Undistributed net investment income $1,601 $3,274,706 $2,164,319 $635 ============ ============ ============ ============ (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 30 YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 (EXCEPT AS NOTED) LIVESTRONG 2040 LIVESTRONG 2035 Portfolio Portfolio Increase (Decrease) in Net Assets 2008 2007 2008(1) OPERATIONS Net investment income (loss) $ 4,814,697 $ 1,886,107 $ 499 Net realized gain (loss) 1,871,450 360,790 (218) Change in net unrealized appreciation (depreciation) (14,197,827) 11,667,564 361 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (7,511,680) 13,914,461 642 ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (3,073,496) (1,038,223) -- Institutional Class (715,004) (266,923) -- Advisor Class (352,833) (107,434) -- R Class (45,651) (5,618) -- From net realized gains: Investor Class (398,845) (2,806,849) -- Institutional Class (86,908) (635,902) -- Advisor Class (50,009) (349,261) -- R Class (7,128) (22,938) -- ------------ ------------ ------------ Decrease in net assets from distributions (4,729,874) (5,233,148) -- ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 58,612,954 50,376,625 848,023 ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 46,371,400 59,057,938 848,665 NET ASSETS Beginning of period 127,886,770 68,828,832 -- ------------ ------------ ------------ End of period $174,258,170 $127,886,770 $848,665 ============ ============ ============ Undistributed net investment income $1,485,029 $857,316 $499 ============ ============ ============ (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 31 YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 (EXCEPT AS NOTED) LIVESTRONG LIVESTRONG 2045 Portfolio 2050 Portfolio Increase (Decrease) in Net Assets 2008 2007 2008(1) OPERATIONS Net investment income (loss) $ 3,354,239 $ 1,088,643 $ 547 Net realized gain (loss) 659,386 225,057 (707) Change in net unrealized appreciation (depreciation) (11,088,022) 8,371,833 (18,706) ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations (7,074,397) 9,685,533 (18,866) ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Investor Class (1,730,903) (468,015) -- Institutional Class (914,356) (256,627) -- Advisor Class (270,802) (61,872) -- R Class (24,577) (2,066) -- From net realized gains: Investor Class (215,140) (1,476,282) -- Institutional Class (106,359) (698,729) -- Advisor Class (36,814) (242,944) -- R Class (3,687) (10,785) -- ------------ ------------ ------------ Decrease in net assets from distributions (3,302,638) (3,217,320) -- ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase (decrease) in net assets from capital share transactions 40,338,967 39,912,717 500,624 ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 29,961,932 46,380,930 481,758 NET ASSETS Beginning of period 86,555,792 40,174,862 -- ------------ ------------ ------------ End of period $116,517,724 $86,555,792 $481,758 ============ ============ ============ Undistributed net investment income $899,532 $485,931 $547 ============ ============ ============ (1) May 30, 2008 (fund inception) through July 31, 2008. See Notes to Financial Statements. - ------ 32 NOTES TO FINANCIAL STATEMENTS JULY 31, 2008 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 2020 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2035 Portfolio, LIVESTRONG 2040 Portfolio, LIVESTRONG 2045 Portfolio and LIVESTRONG 2050 Portfolio (collectively, the funds) are nine 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 Investments family of funds (the underlying funds). The funds are diversified under the 1940 Act. Additionally, 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 eight 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. All classes of LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio and LIVESTRONG 2050 Portfolio commenced sale on May 30, 2008, the funds' inception date, with a purchase of $6,250 by American Century Investment Management, Inc. 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 funds are not permitted to invest in securities issued 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. - ------ 33 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. 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 secondary objective, the fund seeks capital appreciation, but only when consistent with its primary objective of maximizing 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, very short-term debt securities issued by corporations, banks and governments. 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 the Board of Directors / Trustees or its designee, in accordance with procedures adopted by the Board of Directors / Trustees, 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 -- For financial reporting purposes, 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). - ------ 34 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 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. The funds have adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, "Accounting for Income Taxes" during the current fiscal year. All tax years for the funds remain subject to examination by tax authorities. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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 LIVESTRONG Income Portfolio. Distributions from net investment income, if any, are generally declared and paid annually for the eight 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 and R Class will each pay American Century Investment Services, Inc. (ACIS) an annual distribution and service fee of 0.25% and 0.50%, respectively. 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 financial intermediaries for distribution and individual shareholder services. Fees incurred under the plans during the period ended July 31, 2008, 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. - ------ 35 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended July 31, 2008 (except as noted), were as follows: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG Income 2015 2020 LIVESTRONG 2030 Portfolio Portfolio Portfolio(1) 2025 Portfolio Portfolio(1) Purchases $26,836,647 $78,630,969 $1,113,721 $120,497,709 $662,110 Proceeds from sales $16,977,026 $37,879,963 $1,847 $47,469,619 $11,258 LIVESTRONG LIVESTRONG LIVESTRONG 2035 2040 LIVESTRONG 2050 Portfolio Portfolio(1) 2045 Portfolio Portfolio(1) Purchases $83,984,106 $855,960 $60,265,391 $507,897 Proceeds from sales $23,447,537 $7,787 $18,328,551 $7,002 (1) May 30, 2008 (fund inception) through July 31, 2008. 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, 2008 Year ended July 31, 2007 Shares Amount Shares Amount LIVESTRONG Income Portfolio INVESTOR CLASS Sold 1,523,508 $ 16,847,911 2,462,543 $ 26,953,295 Issued in reinvestment of distributions 168,042 1,850,738 129,852 1,409,610 Redeemed (1,040,699) (11,448,990) (1,222,262) (13,344,056) ----------- ------------ ----------- ------------ 650,851 7,249,659 1,370,133 15,018,849 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 499,845 5,531,784 429,024 4,691,259 Issued in reinvestment of distributions 34,216 376,777 22,300 242,560 Redeemed (368,318) (4,091,466) (123,853) (1,333,750) ----------- ------------ ----------- ------------ 165,743 1,817,095 327,471 3,600,069 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 635,076 7,022,165 526,267 5,759,864 Issued in reinvestment of distributions 23,937 263,705 20,308 220,892 Redeemed (615,687) (6,916,439) (94,859) (1,039,319) ----------- ------------ ----------- ------------ 43,326 369,431 451,716 4,941,437 ----------- ------------ ----------- ------------ R CLASS Sold 36,733 404,679 8,006 87,439 Issued in reinvestment of distributions 517 5,665 188 2,047 Redeemed (14,376) (159,950) (1,605) (17,399) ----------- ------------ ----------- ------------ 22,874 250,394 6,589 72,087 ----------- ------------ ----------- ------------ Net increase (decrease) 882,794 $ 9,686,579 2,155,909 $ 23,632,442 =========== ============ =========== ============ - ------ 36 Year ended July 31, 2008 Year ended July 31, 2007 Shares Amount Shares Amount LIVESTRONG 2015 Portfolio INVESTOR CLASS Sold 4,935,566 $ 58,173,266 6,051,177 $ 70,849,640 Issued in reinvestment of distributions 471,644 5,574,831 430,453 4,928,684 Redeemed (2,930,959) (34,481,030) (2,813,749) (32,877,851) ----------- ------------ ----------- ------------ 2,476,251 29,267,067 3,667,881 42,900,473 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 653,459 7,690,482 573,261 6,672,802 Issued in reinvestment of distributions 49,378 583,652 48,962 561,103 Redeemed (457,705) (5,457,023) (242,895) (2,850,614) ----------- ------------ ----------- ------------ 245,132 2,817,111 379,328 4,383,291 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 1,442,194 16,986,326 949,444 11,088,609 Issued in reinvestment of distributions 46,319 547,493 59,162 677,399 Redeemed (965,001) (11,738,341) (251,099) (2,909,393) ----------- ------------ ----------- ------------ 523,512 5,795,478 757,507 8,856,615 ----------- ------------ ----------- ------------ R CLASS Sold 208,185 2,486,903 247,594 2,854,414 Issued in reinvestment of distributions 11,492 135,950 1,934 22,169 Redeemed (121,357) (1,397,408) (12,938) (150,411) ----------- ------------ ----------- ------------ 98,320 1,225,445 236,590 2,726,172 ----------- ------------ ----------- ------------ Net increase (decrease) 3,343,215 $ 39,105,101 5,041,306 $ 58,866,551 =========== ============ =========== ============ Period ended July 31, 2008(1) Shares Amount LIVESTRONG 2020 Portfolio INVESTOR CLASS Sold 114,155 $1,093,368 Redeemed (1,133) (10,810) -------- ----------- 113,022 1,082,558 -------- ----------- INSTITUTIONAL CLASS -------- ----------- Sold 1,687 16,336 -------- ----------- ADVISOR CLASS -------- ----------- Sold 625 6,250 -------- ----------- R CLASS -------- ----------- Sold 625 6,250 -------- ----------- Net increase (decrease) 115,959 $1,111,394 ======== =========== (1) May 30, 2008 (fund inception) through July 31, 2008. - ------ 37 Year ended July 31, 2008 Year ended July 31, 2007 Shares Amount Shares Amount LIVESTRONG 2025 Portfolio INVESTOR CLASS Sold 7,227,400 $ 87,956,265 6,934,370 $ 84,059,562 Issued in reinvestment of distributions 554,236 6,811,558 730,389 8,611,314 Redeemed (3,452,073) (41,430,297) (3,262,907) (39,307,539) ----------- ------------ ----------- ------------ 4,329,563 53,337,526 4,401,852 53,363,337 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 1,003,427 12,207,554 1,131,075 13,609,369 Issued in reinvestment of distributions 125,482 1,542,174 190,800 2,249,531 Redeemed (874,062) (10,878,957) (473,019) (5,782,282) ----------- ------------ ----------- ------------ 254,847 2,870,771 848,856 10,076,618 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 1,600,667 19,440,964 948,240 11,464,534 Issued in reinvestment of distributions 42,508 522,421 65,995 778,738 Redeemed (609,735) (7,683,302) (275,276) (3,302,202) ----------- ------------ ----------- ------------ 1,033,440 12,280,083 738,959 8,941,070 ----------- ------------ ----------- ------------ R CLASS Sold 173,823 2,090,704 92,621 1,106,787 Issued in reinvestment of distributions 4,062 49,926 4,682 55,245 Redeemed (52,910) (632,853) (33,004) (402,437) ----------- ------------ ----------- ------------ 124,975 1,507,777 64,299 759,595 ----------- ------------ ----------- ------------ Net increase (decrease) 5,742,825 $ 69,996,157 6,053,966 $ 73,140,620 =========== ============ =========== ============ Period ended July 31, 2008(1) Shares Amount LIVESTRONG 2030 Portfolio INVESTOR CLASS Sold 69,257 $655,977 Redeemed (2,578) (24,039) ------- --------- 66,679 631,938 ------- --------- INSTITUTIONAL CLASS ------- --------- Sold 625 6,250 ------- --------- ADVISOR CLASS ------- --------- Sold 625 6,250 ------- --------- R CLASS ------- --------- Sold 625 6,250 ------- --------- Net increase (decrease) 68,554 $650,688 ======= ========= (1) May 30, 2008 (fund inception) through July 31, 2008. - ------ 38 Year ended July 31, 2008 Year ended July 31, 2007 Shares Amount Shares Amount LIVESTRONG 2035 Portfolio INVESTOR CLASS Sold 5,273,716 $ 67,011,195 4,307,986 $ 55,031,500 Issued in reinvestment of distributions 265,648 3,469,367 306,847 3,801,836 Redeemed (1,862,588) (23,625,688) (2,053,913) (26,048,629) ----------- ------------ ----------- ------------ 3,676,776 46,854,874 2,560,920 32,784,707 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 542,257 6,886,635 983,032 12,436,788 Issued in reinvestment of distributions 61,402 801,912 67,322 834,796 Redeemed (315,217) (4,091,617) (284,507) (3,669,430) ----------- ------------ ----------- ------------ 288,442 3,596,930 765,847 9,602,154 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 1,057,731 13,387,446 709,861 8,993,384 Issued in reinvestment of distributions 30,822 402,842 36,830 456,695 Redeemed (527,772) (7,020,874) (165,199) (2,093,911) ----------- ------------ ----------- ------------ 560,781 6,769,414 581,492 7,356,168 ----------- ------------ ----------- ------------ R CLASS Sold 160,015 2,063,991 67,584 865,775 Issued in reinvestment of distributions 3,922 51,263 2,303 28,556 Redeemed (58,210) (723,518) (20,300) (260,735) ----------- ------------ ----------- ------------ 105,727 1,391,736 49,587 633,596 ----------- ------------ ----------- ------------ Net increase (decrease) 4,631,726 $ 58,612,954 3,957,846 $ 50,376,625 =========== ============ =========== ============ Period ended July 31, 2008(1) Shares Amount LIVESTRONG 2040 Portfolio INVESTOR CLASS Sold 90,295 $837,273 Redeemed (821) (8,000) ------- --------- 89,474 829,273 ------- --------- INSTITUTIONAL CLASS ------- --------- Sold 625 6,250 ------- --------- ADVISOR CLASS ------- --------- Sold 625 6,250 ------- --------- R CLASS ------- --------- Sold 625 6,250 ------- --------- Net increase (decrease) 91,349 $848,023 ======= ========= (1) May 30, 2008 (fund inception) through July 31, 2008. - ------ 39 Year ended July 31, 2008 Year ended July 31, 2007 Shares Amount Shares Amount LIVESTRONG 2045 Portfolio INVESTOR CLASS Sold 3,499,543 $ 45,795,739 3,075,123 $ 39,756,020 Issued in reinvestment of distributions 145,128 1,938,913 152,330 1,922,401 Redeemed (1,307,691) (16,851,978) (1,504,146) (19,352,541) ----------- ------------ ----------- ------------ 2,336,980 30,882,674 1,723,307 22,325,880 ----------- ------------ ----------- ------------ INSTITUTIONAL CLASS Sold 896,299 11,781,809 1,159,259 14,839,594 Issued in reinvestment of distributions 76,344 1,020,715 75,565 953,638 Redeemed (561,204) (7,352,345) (230,636) (3,028,804) ----------- ------------ ----------- ------------ 411,439 5,450,179 1,004,188 12,764,428 ----------- ------------ ----------- ------------ ADVISOR CLASS Sold 593,456 7,704,375 410,315 5,320,358 Issued in reinvestment of distributions 23,025 307,616 24,153 304,816 Redeemed (362,137) (4,775,098) (104,700) (1,345,029) ----------- ------------ ----------- ------------ 254,344 3,236,893 329,768 4,280,145 ----------- ------------ ----------- ------------ R CLASS Sold 86,662 1,132,673 51,269 654,681 Issued in reinvestment of distributions 1,521 20,338 1,018 12,851 Redeemed (29,548) (383,790) (9,741) (125,268) ----------- ------------ ----------- ------------ 58,635 769,221 42,546 542,264 ----------- ------------ ----------- ------------ Net increase (decrease) 3,061,398 $ 40,338,967 3,099,809 $ 39,912,717 =========== ============ =========== ============ Period ended July 31, 2008(1) Shares Amount LIVESTRONG 2050 Portfolio INVESTOR CLASS Sold 51,078 $488,874 Redeemed (764) (7,000) ------- --------- 50,314 481,874 ------- --------- INSTITUTIONAL CLASS ------- --------- Sold 625 6,250 ------- --------- ADVISOR CLASS ------- --------- Sold 625 6,250 ------- --------- R CLASS ------- --------- Sold 625 6,250 ------- --------- Net increase (decrease) 52,189 $500,624 ======= ========= (1) May 30, 2008 (fund inception) through July 31, 2008. - ------ 40 5. AFFILIATED COMPANY TRANSACTIONS Investments are funds within the American Century Investments 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 period ended July 31, 2008 follows: July 31, 2008 July 31, 2007 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 369,407 $ 922,930 $ 519,446 $ (26,078) $ 195,906 439,813 $ 2,542,119 Inflation-Adjusted Bond Fund Institutional Class 450,390 1,754,887 1,544,672 6,197 214,341 467,270 5,340,896 NT Diversified Bond Fund Institutional Class 1,647,816 6,492,347 4,721,645 (433) 983,604 1,817,937 18,670,220 NT Equity Growth Fund Institutional Class 682,400 3,623,966 1,893,945 (92,263) 153,054 856,240 8,519,588 NT Growth Fund Institutional Class 339,967 1,743,836 1,227,562 9,683 199,607 388,477 4,214,975 NT Large Company Value Fund Institutional Class 568,193 3,359,025 1,382,324 (127,869) 232,460 769,386 6,932,168 NT Mid Cap Value Fund Institutional Class 204,460 1,449,257 677,665 (81,001) 269,659 292,448 2,620,334 NT Small Company Fund Institutional Class 113,463 697,342 375,802 (30,233) 4,230 153,329 1,320,163 NT Vista Fund Institutional Class 128,983 776,396 614,645 49,112 3,599 142,931 1,613,691 Real Estate Fund Institutional Class 20,947 373,960 202,222 (40,865) 107,512 30,326 637,149 Premium Money Market Fund Investor Class 6,151,530 2,487,217 1,597,467 -- 244,386 7,041,280 7,041,280 International Bond Fund Institutional Class 313,676 1,525,945 1,309,286 8,184 186,326 326,382 4,987,117 NT International Growth Fund Institutional Class 255,233 1,629,539 1,173,184 62,727 104,535 297,235 3,144,746 ---------- ----------- ----------- ---------- ------------ ---------- ----------- $26,836,647 $17,239,865 $(262,839) $2,899,219 $67,584,446 =========== =========== ========== ============ =========== (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 41 July 31, 2008 July 31, 2007 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 1,931,325 $ 9,647,073 $ 3,337,234 $(197,714) $ 431,612 2,552,134 $ 25,393,724 NT Growth Fund Institutional Class 1,270,356 5,932,174 3,648,075 59,767 719,848 1,481,964 16,079,309 NT Large Company Value Fund Institutional Class 1,710,273 9,665,969 2,380,077 (268,488) 702,353 2,441,771 22,000,358 NT Mid Cap Value Fund Institutional Class 789,561 4,703,079 1,663,548 (227,094) 990,383 1,133,888 10,159,636 NT Small Company Fund Institutional Class 333,840 1,957,818 771,643 (67,260) 12,427 475,348 4,092,746 NT Vista Fund Institutional Class 607,646 3,443,297 2,246,326 227,900 16,876 708,665 8,000,828 Real Estate Fund Institutional Class 86,244 1,344,446 547,390 (114,754) 425,543 127,130 2,671,001 High-Yield Fund Institutional Class 1,015,434 2,609,840 988,944 (56,883) 548,277 1,291,014 7,462,061 Inflation-Adjusted Bond Fund Institutional Class 1,247,402 4,786,616 3,318,435 20,009 608,147 1,370,511 15,664,941 NT Diversified Bond Fund Institutional Class 4,558,835 17,723,354 10,087,623 27,709 2,735,809 5,290,466 54,333,085 NT Emerging Markets Fund Institutional Class 221,121 1,982,170 865,073 242,243 576,025 306,469 3,220,989 NT International Growth Fund Institutional Class 976,930 5,729,213 3,757,539 320,694 382,721 1,152,707 12,195,640 Premium Money Market Fund Investor Class 10,863,093 5,523,638 2,217,394 -- 453,369 14,169,337 14,169,337 International Bond Fund Institutional Class 712,586 3,582,282 2,101,082 (16,549) 433,855 808,465 12,353,345 ---------- ----------- ----------- ---------- ------------ ---------- ------------ $78,630,969 $37,930,383 $(50,420) $9,037,245 $207,797,000 =========== =========== ========== ============ ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 42 July 31, 2008 July 31, 2007 Realized Fund/ Share Purchase Sales Gain Distributions Share Market Underlying Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2020 Portfolio NT Equity Growth Fund Institutional Class -- $ 136,591 $ 236 $ (14) -- 13,523 $ 134,553 NT Growth Fund Institutional Class -- 105,843 190 (15) -- 9,493 102,999 NT Large Company Value Fund Institutional Class -- 128,219 231 (20) $ 132 13,966 125,834 NT Mid Cap Value Fund Institutional Class -- 61,247 106 (7) 56 6,894 61,770 NT Small Company Fund Institutional Class -- 28,869 56 (3) -- 3,331 28,680 NT Vista Fund Institutional Class -- 51,648 101 (9) -- 4,392 49,586 Real Estate Fund Institutional Class -- 17,495 46 (3) 8 835 17,543 High-Yield Fund Institutional Class -- 37,862 67 (3) 223 6,418 37,096 Inflation-Adjusted Bond Fund Institutional Class -- 75,142 128 (3) 275 6,564 75,027 NT Diversified Bond Fund Institutional Class -- 262,141 425 (7) 980 25,513 262,018 NT Emerging Markets Fund Institutional Class -- 27,707 63 (10) -- 2,495 26,222 NT International Growth Fund Institutional Class -- 80,772 143 (15) -- 7,356 77,827 Premium Money Market Fund Investor Class -- 55,798 88 -- 103 55,710 55,710 International Bond Fund Institutional Class -- 44,387 78 (2) -- 2,934 44,832 -------- ---------- ------- -------- -------- --------- ---------- $1,113,721 $1,958 $(111) $1,777 $1,099,697 ========== ======= ======== ======== ========== (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 43 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2025 Portfolio NT Equity Growth Fund Institutional Class 2,597,176 $ 13,865,449 $ 3,494,954 $(291,414) $ 587,681 3,602,431 $ 35,844,189 NT Growth Fund Institutional Class 2,433,050 11,660,927 6,046,468 14,725 1,381,376 2,941,097 31,910,902 NT Large Company Value Fund Institutional Class 2,504,489 15,383,948 2,838,522 (404,552) 1,047,701 3,752,460 33,809,679 NT Mid Cap Value Fund Institutional Class 1,061,868 7,530,343 1,841,415 (270,553) 1,413,867 1,680,943 15,061,249 NT Small Company Fund Institutional Class 864,264 4,192,749 1,599,482 (151,295) 30,315 1,174,267 10,110,439 NT Vista Fund Institutional Class 1,021,337 6,003,140 3,334,908 221,077 28,785 1,249,163 14,103,050 Real Estate Fund Institutional Class 157,448 2,635,454 822,851 (175,584) 792,359 245,954 5,167,494 High-Yield Fund Institutional Class 1,154,173 3,534,560 1,226,194 (74,211) 637,883 1,544,407 8,926,672 Inflation-Adjusted Bond Fund Institutional Class 1,384,426 6,677,344 3,691,656 (1,284) 716,035 1,639,867 18,743,680 NT Diversified Bond Fund Institutional Class 5,052,386 24,779,596 12,037,037 (25,121) 3,133,449 6,276,546 64,460,128 NT Emerging Markets Fund Institutional Class 509,743 4,749,782 1,767,000 418,422 1,351,797 740,611 7,783,822 NT International Growth Fund Institutional Class 1,819,108 11,097,235 5,975,830 331,122 731,563 2,276,565 24,086,057 Premium Money Market Fund Investor Class 12,175,305 5,747,056 2,526,691 -- 490,371 15,395,670 15,395,670 International Bond Fund Institutional Class 177,465 2,640,126 691,144 (15,865) 145,680 305,876 4,673,785 ---------- ------------ ----------- ---------- ------------ ---------- ------------ $120,497,709 $47,894,152 $(424,533) $12,488,862 $290,076,816 ============ =========== ========== ============ ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 44 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2030 Portfolio NT Equity Growth Fund Institutional Class -- $86,195 $ 1,606 $ (145) -- 8,437 $ 83,948 NT Growth Fund Institutional Class -- 86,190 1,620 (154) -- 7,661 83,122 NT Large Company Value Fund Institutional Class -- 86,179 1,686 (224) $ 77 9,291 83,712 NT Mid Cap Value Fund Institutional Class -- 38,072 730 (85) 30 4,234 37,937 NT Small Company Fund Institutional Class -- 27,434 517 (49) -- 3,119 26,855 NT Vista Fund Institutional Class -- 38,049 715 (70) -- 3,204 36,173 Real Estate Fund Institutional Class -- 13,619 276 (39) 5 642 13,488 High-Yield Fund Institutional Class -- 16,834 304 (15) 84 2,819 16,294 Inflation-Adjusted Bond Fund Institutional Class -- 34,340 594 (5) 110 2,949 33,707 NT Diversified Bond Fund Institutional Class -- 119,382 2,036 (14) 379 11,435 117,437 NT Emerging Markets Fund Institutional Class -- 23,015 465 (67) -- 2,059 21,640 NT International Growth Fund Institutional Class -- 66,242 1,277 (150) -- 5,964 63,099 Premium Money Market Fund Investor Class -- 26,559 449 -- 41 26,107 26,107 -------- --------- -------- -------- -------- ------- --------- $662,110 $12,275 $(1,017) $726 $643,519 ========= ======== ======== ======== ========= (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 45 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2035 Portfolio NT Equity Growth Fund Institutional Class 1,575,446 $10,765,581 $1,753,379 $(154,932) $ 366,791 2,449,303 $24,370,566 NT Growth Fund Institutional Class 1,569,905 10,115,268 2,891,204 (81,522) 954,365 2,222,291 24,111,857 NT Large Company Value Fund Institutional Class 1,550,388 12,132,783 1,549,505 (213,454) 674,401 2,606,109 23,481,042 NT Mid Cap Value Fund Institutional Class 766,999 6,085,036 1,091,547 (179,904) 1,010,551 1,312,467 11,759,704 NT Small Company Fund Institutional Class 486,423 3,658,451 858,074 (97,013) 18,601 814,541 7,013,198 NT Vista Fund Institutional Class 774,181 5,481,060 2,578,406 212,396 21,571 1,024,146 11,562,608 Real Estate Fund Institutional Class 107,785 2,216,904 490,083 (107,341) 556,793 189,899 3,989,778 High-Yield Fund Institutional Class 448,136 1,877,290 527,114 (30,621) 261,826 675,627 3,905,124 Inflation-Adjusted Bond Fund Institutional Class 546,547 3,518,792 1,538,360 8,574 298,019 716,608 8,190,829 NT Diversified Bond Fund Institutional Class 2,045,986 13,197,072 5,181,026 3,200 1,320,009 2,815,854 28,918,825 NT Emerging Markets Fund Institutional Class 436,927 4,690,208 1,651,560 453,482 1,133,270 676,185 7,106,704 NT International Growth Fund Institutional Class 1,094,619 8,382,195 3,111,352 28,552 464,425 1,580,696 16,723,764 Premium Money Market Fund Investor Class 1,319,087 1,863,466 384,510 -- 71,817 2,798,043 2,798,043 --------- ----------- ----------- ---------- ------------ --------- ------------ $83,984,106 $23,606,120 $(158,583) $7,152,439 $173,932,042 =========== =========== ========== ============ ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 46 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2040 Portfolio NT Equity Growth Fund Institutional Class -- $126,400 $1,167 $ (26) -- 12,654 $125,907 NT Growth Fund Institutional Class -- 126,360 1,159 (18) -- 11,476 124,515 NT Large Company Value Fund Institutional Class -- 126,409 1,204 (60) $ 96 14,033 126,438 NT Mid Cap Value Fund Institutional Class -- 62,079 586 (23) 42 7,065 63,302 NT Small Company Fund Institutional Class -- 36,327 342 (7) -- 4,216 36,300 NT Vista Fund Institutional Class -- 62,036 562 3 -- 5,346 60,356 Real Estate Fund Institutional Class -- 21,944 230 (12) 7 1,073 22,544 High-Yield Fund Institutional Class -- 16,223 152 (2) 66 2,749 15,889 Inflation-Adjusted Bond Fund Institutional Class -- 32,433 311 (8) 87 2,805 32,061 NT Diversified Bond Fund Institutional Class -- 115,239 1,053 (13) 297 11,113 114,131 NT Emerging Markets Fund Institutional Class -- 44,884 440 (25) -- 4,109 43,186 NT International Growth Fund Institutional Class -- 85,626 799 (27) -- 7,910 83,687 -------- --------- ------- ------- ------- ------- --------- $855,960 $8,005 $(218) $595 $848,316 ========= ======= ======= ======= ========= (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 47 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2045 Portfolio NT Equity Growth Fund Institutional Class 1,146,959 $ 8,328,773 $ 1,872,476 $(204,403) $ 276,784 1,767,703 $ 17,588,646 NT Growth Fund Institutional Class 1,142,994 7,765,485 2,585,513 (160,703) 723,270 1,603,749 17,400,677 NT Large Company Value Fund Institutional Class 1,147,523 9,581,861 1,900,437 (288,075) 512,219 1,911,044 17,218,498 NT Mid Cap Value Fund Institutional Class 558,336 4,619,422 1,016,484 (173,972) 758,924 949,245 8,505,235 NT Small Company Fund Institutional Class 392,443 3,090,493 863,830 (105,368) 15,641 651,548 5,609,828 NT Vista Fund Institutional Class 563,617 4,176,952 2,119,018 34,535 16,388 740,940 8,365,213 Real Estate Fund Institutional Class 88,467 1,900,853 504,036 (116,391) 472,817 155,018 3,256,928 High-Yield Fund Institutional Class 226,553 1,034,951 354,012 (21,594) 135,360 341,459 1,973,633 Inflation-Adjusted Bond Fund Institutional Class 276,330 1,949,377 956,795 2,496 155,057 362,388 4,142,095 NT Diversified Bond Fund Institutional Class 1,019,975 7,469,629 3,233,748 (6,077) 682,152 1,428,483 14,670,520 NT Emerging Markets Fund Institutional Class 390,776 4,578,141 1,565,101 125,084 1,112,379 631,758 6,639,777 NT International Growth Fund Institutional Class 725,229 5,769,454 2,342,680 (71,111) 320,341 1,037,672 10,978,569 --------- ----------- ----------- ---------- ----------- --------- ------------ $60,265,391 $19,314,130 $(985,579) $5,181,332 $116,349,619 =========== =========== ========== ========== ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 48 July 31, 2008 July 31, 2007 Realized Fund/Underlying Share Purchase Sales Gain Distributions Share Market Fund Balance Cost Cost (Loss) Received(1) Balance Value LIVESTRONG 2050 Portfolio NT Equity Growth Fund Institutional Class -- $77,598 $1,150 $ (89) -- 7,438 $ 74,008 NT Growth Fund Institutional Class -- 77,567 1,165 (107) -- 6,726 72,977 NT Large Company Value Fund Institutional Class -- 78,894 1,205 (127) $157 8,267 74,486 NT Mid Cap Value Fund Institutional Class -- 38,078 578 (54) 67 4,102 36,754 NT Small Company Fund Institutional Class -- 25,355 382 (35) -- 2,807 24,168 NT Vista Fund Institutional Class -- 38,030 592 (63) -- 3,119 35,214 Real Estate Fund Institutional Class -- 15,034 255 (29) 13 681 14,308 High-Yield Fund Institutional Class -- 7,576 109 (5) 55 1,255 7,254 Inflation-Adjusted Bond Fund Institutional Class -- 15,145 221 (4) 109 1,312 14,996 NT Diversified Bond Fund Institutional Class -- 53,398 747 (12) 247 5,134 52,726 NT Emerging Markets Fund Institutional Class -- 32,950 553 (98) -- 2,839 29,838 NT International Growth Fund Institutional Class -- 48,272 752 (84) -- 4,230 44,753 ------- --------- ------- -------- --------- ------- --------- $507,897 $7,709 $(707) $648 $481,482 ========= ======= ======== ========= ========= (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. 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, 2008, the following LIVESTRONG Portfolios owned 25% or more of the total outstanding shares of the underlying funds: LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG 2015 2025 2035 2045 Portfolio Portfolio Portfolio Portfolio NT Diversified Bond Fund 30% 35% -- -- NT Emerging Markets Fund -- 31% 29% 27% NT Equity Growth Fund -- 32% -- -- NT Growth Fund -- 34% 26% -- NT International Growth Fund -- 36% 25% -- NT Large Company Value Fund -- 33% -- -- NT Mid Cap Value Fund -- 31% -- -- NT Small Company Fund -- 36% 25% -- NT Vista Fund -- 32% 26% -- As of July 31, 2008, 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. - ------ 49 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. 8. FEDERAL TAX INFORMATION The tax character of distributions paid during the years ended July 31, 2008 and July 31, 2007 (except as noted), were as follows: LIVESTRONG LIVESTRONG Income LIVESTRONG 2015 2020 Portfolio Portfolio Portfolio 2008 2007 2008 2007 2008(1) DISTRIBUTIONS PAID FROM Ordinary income $2,484,675 $1,578,720 $6,519,958 $3,923,292 -- Long-term capital gains $69,605 $404,470 $360,253 $2,334,712 -- LIVESTRONG 2030 LIVESTRONG 2025 Portfolio Portfolio LIVESTRONG 2035 Portfolio 2008 2007 2008(1) 2008 2007 DISTRIBUTIONS PAID FROM Ordinary income $8,389,158 $5,667,867 -- $4,518,519 $2,698,108 Long-term capital gains $558,427 $6,171,016 -- $211,355 $2,535,040 LIVESTRONG LIVESTRONG 2040 LIVESTRONG 2045 2050 Portfolio Portfolio Portfolio 2008(1) 2008 2007 2008(1) DISTRIBUTIONS PAID FROM Ordinary income -- $3,160,271 $1,417,217 -- Long-term capital gains -- $142,367 $1,800,103 -- (1) May 30, 2008 (fund inception) through July 31, 2008. 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. - ------ 50 As of July 31, 2008, 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 2020 2025 2030 Portfolio Portfolio Portfolio Portfolio Portfolio Federal tax cost of investments $68,235,375 $209,919,734 $1,111,874 $295,644,063 $650,852 ============ ============ ============ ============ ============ Gross tax appreciation of investments $ 1,525,133 $ 4,914,626 $ 1,540 $ 5,767,269 $ 693 Gross tax depreciation of investments (2,176,062) (7,037,360) (13,717) (11,334,516) (8,026) ------------ ------------ ------------ ------------ ------------ Net tax appreciation (depreciation) of investments $ (650,929) $(2,122,734) $(12,177) $(5,567,247) $(7,333) ============ ============ ============ ============ ============ Undistributed ordinary income $179,082 $3,104,100 $1,601 $4,062,172 $635 Accumulated long-term gains $507,585 $2,187,036 -- $3,636,417 -- LIVESTRONG LIVESTRONG LIVESTRONG LIVESTRONG 2035 2040 2045 2050 Portfolio Portfolio Portfolio Portfolio Federal tax cost of investments $179,276,973 $848,173 $121,496,652 $500,895 ============ ============ ============ ============ Gross tax appreciation of investments $ 2,829,335 $ 4,736 $ 1,623,190 $ 130 Gross tax depreciation of investments (8,174,266) (4,593) (6,770,223) (19,543) ------------ ------------ ------------ ------------ Net tax appreciation (depreciation) of investments $(5,344,931) $ 143 $(5,147,033) $(19,413) ============ ============ ============ ============ Undistributed ordinary income $1,958,399 $499 $1,150,100 $547 Accumulated long-term gains $2,471,077 -- $1,778,382 -- 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. 9. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board (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. The adoption of FAS 157 will not materially impact the determination of fair value. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for fiscal years beginning after November 15, 2008. FAS 161 amends and expands disclosures about derivative instruments and hedging activities. FAS 161 requires qualitative disclosures about the objectives and strategies of derivative instruments, quantitative disclosures about the fair value amounts of and gains and losses on derivative instruments, and disclosures of credit-risk-related contingent features in hedging activities. Management is currently evaluating the impact that adopting FAS 161 will have on the financial statement disclosures. - ------ 51 10. OTHER TAX INFORMATION (UNAUDITED) The following information is provided pursuant to provisions of the Internal Revenue Code. The funds hereby designate up to the maximum amount allowable as qualified dividend income for the fiscal year ended July 31, 2008. For corporate taxpayers, the funds hereby designate the following ordinary income distributions, or up to the maximum amount allowable, as qualified for the corporate dividends received deduction for the fiscal year ended July 31, 2008. LIVESTRONG 2020 LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio Portfolio $2,274,635 $4,381,384 -- LIVESTRONG LIVESTRONG 2035 2025 Portfolio LIVESTRONG 2030 Portfolio Portfolio $5,787,921 -- $3,346,608 LIVESTRONG 2040 LIVESTRONG 2050 Portfolio LIVESTRONG 2045 Portfolio Portfolio -- $2,455,225 -- The funds hereby designate the following long-term capital gain distributions, or up to the maximum amount allowable, for the fiscal year ended July 31, 2008. LIVESTRONG 2020 LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio Portfolio $69,605 $360,253 -- LIVESTRONG 2025 LIVESTRONG 2035 Portfolio LIVESTRONG 2030 Portfolio Portfolio $558,427 -- $211,355 LIVESTRONG 2040 LIVESTRONG 2050 Portfolio LIVESTRONG 2045 Portfolio Portfolio -- $142,367 -- The funds hereby designate the following distributions as qualified short-term capital gains for purposes of Internal Revenue Code 871. LIVESTRONG 2020 LIVESTRONG Income Portfolio LIVESTRONG 2015 Portfolio Portfolio $62,371 $357,228 -- LIVESTRONG 2025 LIVESTRONG 2035 Portfolio LIVESTRONG 2030 Portfolio Portfolio $437,207 -- $331,535 LIVESTRONG 2040 LIVESTRONG 2050 Portfolio LIVESTRONG 2045 Portfolio Portfolio -- $219,633 -- - ------ 52 FINANCIAL HIGHLIGHTS LIVESTRONG Income Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.06 $10.45 $10.51 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.40 0.33 0.37 0.29 Net Realized and Unrealized Gain (Loss) (0.38) 0.75 (0.07) 0.52 -------- -------- -------- -------- Total From Investment Operations 0.02 1.08 0.30 0.81 -------- -------- -------- -------- Distributions From Net Investment Income (0.42) (0.32) (0.35) (0.30) From Net Realized Gains (0.02) (0.15) (0.01) -- -------- -------- -------- -------- Total Distributions (0.44) (0.47) (0.36) (0.30) -------- -------- -------- -------- Net Asset Value, End of Period $10.64 $11.06 $10.45 $10.51 ======== ======== ======== ======== TOTAL RETURN(3) 0.11% 10.51% 2.99% 8.14% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.61% 3.03% 3.51% 3.16%(5) Portfolio Turnover Rate 26% 22% 120% 6% Net Assets, End of Period (in thousands) $49,378 $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. - ------ 53 LIVESTRONG Income Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.06 $10.45 $10.51 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.42 0.35 0.37 0.34 Net Realized and Unrealized Gain (Loss) (0.38) 0.75 (0.05) 0.48 -------- -------- -------- -------- Total From Investment Operations 0.04 1.10 0.32 0.82 -------- -------- -------- -------- Distributions From Net Investment Income (0.44) (0.34) (0.37) (0.31) From Net Realized Gains (0.02) (0.15) (0.01) -- -------- -------- -------- -------- Total Distributions (0.46) (0.49) (0.38) (0.31) -------- -------- -------- -------- Net Asset Value, End of Period $10.64 $11.06 $10.45 $10.51 ======== ======== ======== ======== TOTAL RETURN(3) 0.31% 10.73% 3.20% 8.31% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.81% 3.23% 3.71% 3.36%(5) Portfolio Turnover Rate 26% 22% 120% 6% Net Assets, End of Period (in thousands) $9,737 $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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 54 LIVESTRONG Income Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.05 $10.45 $10.51 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.31 0.33 0.18 Net Realized and Unrealized Gain (Loss) (0.35) 0.74 (0.05) 0.61 -------- -------- -------- -------- Total From Investment Operations -- 1.05 0.28 0.79 -------- -------- -------- -------- Distributions From Net Investment Income (0.39) (0.30) (0.33) (0.28) From Net Realized Gains (0.02) (0.15) (0.01) -- -------- -------- -------- -------- Total Distributions (0.41) (0.45) (0.34) (0.28) -------- -------- -------- -------- Net Asset Value, End of Period $10.64 $11.05 $10.45 $10.51 ======== ======== ======== ======== TOTAL RETURN(3) (0.05)% 10.13% 2.83% 7.82% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.36% 2.78% 3.26% 2.91%(5) Portfolio Turnover Rate 26% 22% 120% 6% Net Assets, End of Period (in thousands) $8,285 $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. - ------ 55 LIVESTRONG Income Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.05 $10.44 $10.50 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.30 0.27 0.26 0.29 Net Realized and Unrealized Gain (Loss) (0.34) 0.76 (0.01) 0.46 -------- -------- -------- -------- Total From Investment Operations (0.04) 1.03 0.25 0.75 -------- -------- -------- -------- Distributions From Net Investment Income (0.36) (0.27) (0.30) (0.25) From Net Realized Gains (0.02) (0.15) (0.01) -- -------- -------- -------- -------- Total Distributions (0.38) (0.42) (0.31) (0.25) -------- -------- -------- -------- Net Asset Value, End of Period $10.63 $11.05 $10.44 $10.50 ======== ======== ======== ======== TOTAL RETURN(3) (0.40)% 9.97% 2.48% 7.61% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.11% 2.53% 3.01% 2.66%(5) Portfolio Turnover Rate 26% 22% 120% 6% Net Assets, End of Period (in thousands) $351 $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. See Notes to Financial Statements. - ------ 56 LIVESTRONG 2015 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.91 $11.09 $10.93 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.43 0.32 0.37 0.25 Net Realized and Unrealized Gain (Loss) (0.49) 1.04 0.11 0.86 -------- -------- -------- -------- Total From Investment Operations (0.06) 1.36 0.48 1.11 -------- -------- -------- -------- Distributions From Net Investment Income (0.41) (0.27) (0.31) (0.18) From Net Realized Gains (0.05) (0.27) (0.01) -- -------- -------- -------- -------- Total Distributions (0.46) (0.54) (0.32) (0.18) -------- -------- -------- -------- Net Asset Value, End of Period $11.39 $11.91 $11.09 $10.93 ======== ======== ======== ======== TOTAL RETURN(3) (0.67)% 12.46% 4.46% 11.17% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.62% 2.74% 3.27% 2.61%(5) Portfolio Turnover Rate 20% 18% 123% 2% Net Assets, End of Period (in thousands) $161,838 $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. - ------ 57 LIVESTRONG 2015 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.93 $11.10 $10.94 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.44 0.34 0.33 0.29 Net Realized and Unrealized Gain (Loss) (0.48) 1.05 0.17 0.84 -------- -------- -------- -------- Total From Investment Operations (0.04) 1.39 0.50 1.13 -------- -------- -------- -------- Distributions From Net Investment Income (0.43) (0.29) (0.33) (0.19) From Net Realized Gains (0.05) (0.27) (0.01) -- -------- -------- -------- -------- Total Distributions (0.48) (0.56) (0.34) (0.19) -------- -------- -------- -------- Net Asset Value, End of Period $11.41 $11.93 $11.10 $10.94 ======== ======== ======== ======== TOTAL RETURN(3) (0.46)% 12.77% 4.67% 11.32% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.82% 2.94% 3.47% 2.81%(5) Portfolio Turnover Rate 20% 18% 123% 2% Net Assets, End of Period (in thousands) $17,845 $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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 58 LIVESTRONG 2015 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.89 $11.07 $10.91 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.38 0.30 0.31 0.17 Net Realized and Unrealized Gain (Loss) (0.47) 1.03 0.14 0.91 -------- -------- -------- -------- Total From Investment Operations (0.09) 1.33 0.45 1.08 -------- -------- -------- -------- Distributions From Net Investment Income (0.38) (0.24) (0.28) (0.17) From Net Realized Gains (0.05) (0.27) (0.01) -- -------- -------- -------- -------- Total Distributions (0.43) (0.51) (0.29) (0.17) -------- -------- -------- -------- Net Asset Value, End of Period $11.37 $11.89 $11.07 $10.91 ======== ======== ======== ======== TOTAL RETURN(3) (0.93)% 12.20% 4.22% 10.88% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.37% 2.49% 3.02% 2.36%(5) Portfolio Turnover Rate 20% 18% 123% 2% Net Assets, End of Period (in thousands) $24,384 $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. - ------ 59 LIVESTRONG 2015 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.88 $11.06 $10.90 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.39 0.25 0.19 0.24 Net Realized and Unrealized Gain (Loss) (0.51) 1.05 0.23 0.82 -------- -------- -------- -------- Total From Investment Operations (0.12) 1.30 0.42 1.06 -------- -------- -------- -------- Distributions From Net Investment Income (0.35) (0.21) (0.25) (0.16) From Net Realized Gains (0.05) (0.27) (0.01) -- -------- -------- -------- -------- Total Distributions (0.40) (0.48) (0.26) (0.16) -------- -------- -------- -------- Net Asset Value, End of Period $11.36 $11.88 $11.06 $10.90 ======== ======== ======== ======== TOTAL RETURN(3) (1.19)% 11.92% 4.05% 10.59% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.12% 2.24% 2.77% 2.11%(5) Portfolio Turnover Rate 20% 18% 123% 2% Net Assets, End of Period (in thousands) $4,165 $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. - ------ 60 LIVESTRONG 2020 Portfolio Investor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 Net Realized and Unrealized Gain (Loss) (0.54) -------- Total From Investment Operations (0.51) -------- Net Asset Value, End of Period $9.49 ======== TOTAL RETURN(3) (5.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.89%(5) Portfolio Turnover Rate 0% Net Assets, End of Period (in thousands) $1,073 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 61 LIVESTRONG 2020 Portfolio Institutional Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.04 Net Realized and Unrealized Gain (Loss) (0.54) -------- Total From Investment Operations (0.50) -------- Net Asset Value, End of Period $9.50 ======== TOTAL RETURN(3) (5.00)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.09%(5) Portfolio Turnover Rate 0% Net Assets, End of Period (in thousands) $16 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 62 LIVESTRONG 2020 Portfolio Advisor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.04 Net Realized and Unrealized Gain (Loss) (0.55) -------- Total From Investment Operations (0.51) -------- Net Asset Value, End of Period $9.49 ======== TOTAL RETURN(3) (5.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.64%(5) Portfolio Turnover Rate 0% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 63 LIVESTRONG 2020 Portfolio R Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 Net Realized and Unrealized Gain (Loss) (0.54) -------- Total From Investment Operations (0.51) -------- Net Asset Value, End of Period $9.49 ======== TOTAL RETURN(3) (5.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.39%(5) Portfolio Turnover Rate 0% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 64 LIVESTRONG 2025 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.35 $11.49 $11.21 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.42 0.28 0.34 0.18 Net Realized and Unrealized Gain (Loss) (0.69) 1.34 0.27 1.17 -------- -------- -------- -------- Total From Investment Operations (0.27) 1.62 0.61 1.35 -------- -------- -------- -------- Distributions From Net Investment Income (0.40) (0.24) (0.31) (0.14) From Net Realized Gains (0.05) (0.52) (0.02) -- -------- -------- -------- -------- Total Distributions (0.45) (0.76) (0.33) (0.14) -------- -------- -------- -------- Net Asset Value, End of Period $11.63 $12.35 $11.49 $11.21 ======== ======== ======== ======== TOTAL RETURN(3) (2.39)% 14.45% 5.48% 13.57% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.40% 2.34% 2.98% 2.08%(5) Portfolio Turnover Rate 18% 18% 120% 2% Net Assets, End of Period (in thousands) $215,024 $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. - ------ 65 LIVESTRONG 2025 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.37 $11.51 $11.23 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.43 0.31 0.37 0.27 Net Realized and Unrealized Gain (Loss) (0.69) 1.34 0.26 1.11 -------- -------- -------- -------- Total From Investment Operations (0.26) 1.65 0.63 1.38 -------- -------- -------- -------- Distributions From Net Investment Income (0.42) (0.27) (0.33) (0.15) From Net Realized Gains (0.05) (0.52) (0.02) -- -------- -------- -------- -------- Total Distributions (0.47) (0.79) (0.35) (0.15) -------- -------- -------- -------- Net Asset Value, End of Period $11.64 $12.37 $11.51 $11.23 ======== ======== ======== ======== TOTAL RETURN(3) (2.27)% 14.67% 5.77% 13.74% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.60% 2.54% 3.18% 2.28%(5) Portfolio Turnover Rate 18% 18% 120% 2% Net Assets, End of Period (in thousands) $44,611 $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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 66 LIVESTRONG 2025 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.34 $11.48 $11.19 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.26 0.29 0.12 Net Realized and Unrealized Gain (Loss) (0.66) 1.33 0.30 1.20 -------- -------- -------- -------- Total From Investment Operations (0.31) 1.59 0.59 1.32 -------- -------- -------- -------- Distributions From Net Investment Income (0.37) (0.21) (0.28) (0.13) From Net Realized Gains (0.05) (0.52) (0.02) -- -------- -------- -------- -------- Total Distributions (0.42) (0.73) (0.30) (0.13) -------- -------- -------- -------- Net Asset Value, End of Period $11.61 $12.34 $11.48 $11.19 ======== ======== ======== ======== TOTAL RETURN(3) (2.73)% 14.17% 5.30% 13.28% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.15% 2.09% 2.73% 1.83%(5) Portfolio Turnover Rate 18% 18% 120% 2% Net Assets, End of Period (in thousands) $28,073 $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. - ------ 67 LIVESTRONG 2025 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.32 $11.46 $11.18 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.36 0.22 0.19 0.15 Net Realized and Unrealized Gain (Loss) (0.70) 1.34 0.36 1.15 -------- -------- -------- -------- Total From Investment Operations (0.34) 1.56 0.55 1.30 -------- -------- -------- -------- Distributions From Net Investment Income (0.33) (0.18) (0.25) (0.12) From Net Realized Gains (0.05) (0.52) (0.02) -- -------- -------- -------- -------- Total Distributions (0.38) (0.70) (0.27) (0.12) -------- -------- -------- -------- Net Asset Value, End of Period $11.60 $12.32 $11.46 $11.18 ======== ======== ======== ======== TOTAL RETURN(3) (2.90)% 13.90% 4.95% 13.10% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.90% 1.84% 2.48% 1.58%(5) Portfolio Turnover Rate 18% 18% 120% 2% Net Assets, End of Period (in thousands) $2,746 $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. - ------ 68 LIVESTRONG 2030 Portfolio Investor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.63) -------- Total From Investment Operations (0.61) -------- Net Asset Value, End of Period $9.39 ======== TOTAL RETURN(3) (6.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.49%(5) Portfolio Turnover Rate 4% Net Assets, End of Period (in thousands) $626 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 69 LIVESTRONG 2030 Portfolio Institutional Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.04 Net Realized and Unrealized Gain (Loss) (0.64) -------- Total From Investment Operations (0.60) -------- Net Asset Value, End of Period $9.40 ======== TOTAL RETURN(3) (6.00)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.69%(5) Portfolio Turnover Rate 4% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 70 LIVESTRONG 2030 Portfolio Advisor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 Net Realized and Unrealized Gain (Loss) (0.64) -------- Total From Investment Operations (0.61) -------- Net Asset Value, End of Period $9.39 ======== TOTAL RETURN(3) (6.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.24%(5) Portfolio Turnover Rate 4% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 71 LIVESTRONG 2030 Portfolio R Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.63) -------- Total From Investment Operations (0.61) -------- Net Asset Value, End of Period $9.39 ======== TOTAL RETURN(3) (6.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.99%(5) Portfolio Turnover Rate 4% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 72 LIVESTRONG 2035 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.09 $11.85 $11.43 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.41 0.24 0.31 0.17 Net Realized and Unrealized Gain (Loss) (0.95) 1.71 0.42 1.39 -------- -------- -------- -------- Total From Investment Operations (0.54) 1.95 0.73 1.56 -------- -------- -------- -------- Distributions From Net Investment Income (0.40) (0.19) (0.30) (0.13) From Net Realized Gains (0.05) (0.52) (0.01) -- -------- -------- -------- -------- Total Distributions (0.45) (0.71) (0.31) (0.13) -------- -------- -------- -------- Net Asset Value, End of Period $12.10 $13.09 $11.85 $11.43 ======== ======== ======== ======== TOTAL RETURN(3) (4.33)% 16.86% 6.45% 15.71% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.19% 1.87% 2.61% 1.62%(5) Portfolio Turnover Rate 16% 23% 141% 3% Net Assets, End of Period (in thousands) $128,815 $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. - ------ 73 LIVESTRONG 2035 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.11 $11.87 $11.45 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.44 0.26 0.30 0.16 Net Realized and Unrealized Gain (Loss) (0.95) 1.72 0.45 1.43 -------- -------- -------- -------- Total From Investment Operations (0.51) 1.98 0.75 1.59 -------- -------- -------- -------- Distributions From Net Investment Income (0.43) (0.22) (0.32) (0.14) From Net Realized Gains (0.05) (0.52) (0.01) -- -------- -------- -------- -------- Total Distributions (0.48) (0.74) (0.33) (0.14) -------- -------- -------- -------- Net Asset Value, End of Period $12.12 $13.11 $11.87 $11.45 ======== ======== ======== ======== TOTAL RETURN(3) (4.13)% 17.07% 6.66% 15.98% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.39% 2.07% 2.81% 1.82%(5) Portfolio Turnover Rate 16% 23% 141% 3% Net Assets, End of Period (in thousands) $24,120 $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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 74 LIVESTRONG 2035 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.08 $11.83 $11.42 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.35 0.21 0.26 0.11 Net Realized and Unrealized Gain (Loss) (0.92) 1.72 0.43 1.44 -------- -------- -------- -------- Total From Investment Operations (0.57) 1.93 0.69 1.55 -------- -------- -------- -------- Distributions From Net Investment Income (0.37) (0.16) (0.27) (0.13) From Net Realized Gains (0.05) (0.52) (0.01) -- -------- -------- -------- -------- Total Distributions (0.42) (0.68) (0.28) (0.13) -------- -------- -------- -------- Net Asset Value, End of Period $12.09 $13.08 $11.83 $11.42 ======== ======== ======== ======== TOTAL RETURN(3) (4.58)% 16.67% 6.10% 15.53% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.94% 1.62% 2.36% 1.37%(5) Portfolio Turnover Rate 16% 23% 141% 3% Net Assets, End of Period (in thousands) $19,145 $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. - ------ 75 LIVESTRONG 2035 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.06 $11.82 $11.40 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.43 0.18 0.16 0.22 Net Realized and Unrealized Gain (Loss) (1.03) 1.71 0.51 1.30 -------- -------- -------- -------- Total From Investment Operations (0.60) 1.89 0.67 1.52 -------- -------- -------- -------- Distributions From Net Investment Income (0.34) (0.13) (0.24) (0.12) From Net Realized Gains (0.05) (0.52) (0.01) -- -------- -------- -------- -------- Total Distributions (0.39) (0.65) (0.25) (0.12) -------- -------- -------- -------- Net Asset Value, End of Period $12.07 $13.06 $11.82 $11.40 ======== ======== ======== ======== TOTAL RETURN(3) (4.84)% 16.30% 5.93% 15.24% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.69% 1.37% 2.11% 1.12%(5) Portfolio Turnover Rate 16% 23% 141% 3% Net Assets, End of Period (in thousands) $2,178 $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. - ------ 76 LIVESTRONG 2040 Portfolio Investor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.01 Net Realized and Unrealized Gain (Loss) (0.72) -------- Total From Investment Operations (0.71) -------- Net Asset Value, End of Period $9.29 ======== TOTAL RETURN(3) (7.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.10%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $831 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 77 LIVESTRONG 2040 Portfolio Institutional Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 Net Realized and Unrealized Gain (Loss) (0.74) -------- Total From Investment Operations (0.71) -------- Net Asset Value, End of Period $9.29 ======== TOTAL RETURN(3) (7.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.30%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 78 LIVESTRONG 2040 Portfolio Advisor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.73) -------- Total From Investment Operations (0.71) -------- Net Asset Value, End of Period $9.29 ======== TOTAL RETURN(3) (7.10)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.85%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 79 LIVESTRONG 2040 Portfolio R Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.74) -------- Total From Investment Operations (0.72) -------- Net Asset Value, End of Period $9.28 ======== TOTAL RETURN(3) (7.20)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.60%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 80 LIVESTRONG 2045 Portfolio Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.40 $11.96 $11.54 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.42 0.22 0.31 0.12 Net Realized and Unrealized Gain (Loss) (1.12) 1.92 0.46 1.56 -------- -------- -------- -------- Total From Investment Operations (0.70) 2.14 0.77 1.68 -------- -------- -------- -------- Distributions From Net Investment Income (0.41) (0.17) (0.32) (0.14) From Net Realized Gains (0.05) (0.53) (0.03) -- -------- -------- -------- -------- Total Distributions (0.46) (0.70) (0.35) (0.14) -------- -------- -------- -------- Net Asset Value, End of Period $12.24 $13.40 $11.96 $11.54 ======== ======== ======== ======== TOTAL RETURN(3) (5.53)% 18.23% 6.76% 16.86% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20% 0.20% 0.20% 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.19% 1.62% 2.62% 1.83%(5) Portfolio Turnover Rate 18% 25% 137% 17% Net Assets, End of Period (in thousands) $72,649 $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. - ------ 81 LIVESTRONG 2045 Portfolio Institutional Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.42 $11.98 $11.56 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.44 0.23 0.35 0.25 Net Realized and Unrealized Gain (Loss) (1.12) 1.93 0.44 1.45 -------- -------- -------- -------- Total From Investment Operations (0.68) 2.16 0.79 1.70 -------- -------- -------- -------- Distributions From Net Investment Income (0.44) (0.19) (0.34) (0.14) From Net Realized Gains (0.05) (0.53) (0.03) -- -------- -------- -------- -------- Total Distributions (0.49) (0.72) (0.37) (0.14) -------- -------- -------- -------- Net Asset Value, End of Period $12.25 $13.42 $11.98 $11.56 ======== ======== ======== ======== TOTAL RETURN(3) (5.40)% 18.44% 6.96% 17.11% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.39% 1.82% 2.82% 2.03%(5) Portfolio Turnover Rate 18% 25% 137% 17% Net Assets, End of Period (in thousands) $31,054 $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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 82 LIVESTRONG 2045 Portfolio Advisor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.38 $11.94 $11.53 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.39 0.18 0.20 0.07 Net Realized and Unrealized Gain (Loss) (1.13) 1.92 0.53 1.59 -------- -------- -------- -------- Total From Investment Operations (0.74) 2.10 0.73 1.66 -------- -------- -------- -------- Distributions From Net Investment Income (0.37) (0.13) (0.29) (0.13) From Net Realized Gains (0.05) (0.53) (0.03) -- -------- -------- -------- -------- Total Distributions (0.42) (0.66) (0.32) (0.13) -------- -------- -------- -------- Net Asset Value, End of Period $12.22 $13.38 $11.94 $11.53 ======== ======== ======== ======== TOTAL RETURN(3) (5.78)% 17.96% 6.51% 16.57% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45% 0.45% 0.45% 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.94% 1.37% 2.37% 1.58%(5) Portfolio Turnover Rate 18% 25% 137% 17% Net Assets, End of Period (in thousands) $11,411 $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. - ------ 83 LIVESTRONG 2045 Portfolio R Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.36 $11.93 $11.51 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.38 0.12 0.12 0.18 Net Realized and Unrealized Gain (Loss) (1.14) 1.94 0.59 1.45 -------- -------- -------- -------- Total From Investment Operations (0.76) 2.06 0.71 1.63 -------- -------- -------- -------- Distributions From Net Investment Income (0.34) (0.10) (0.26) (0.12) From Net Realized Gains (0.05) (0.53) (0.03) -- -------- -------- -------- -------- Total Distributions (0.39) (0.63) (0.29) (0.12) -------- -------- -------- -------- Net Asset Value, End of Period $12.21 $13.36 $11.93 $11.51 ======== ======== ======== ======== TOTAL RETURN(3) (5.96)% 17.58% 6.24% 16.38% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70% 0.70% 0.70% 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.69% 1.12% 2.12% 1.33%(5) Portfolio Turnover Rate 18% 25% 137% 17% Net Assets, End of Period (in thousands) $1,403 $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. - ------ 84 LIVESTRONG 2050 Portfolio Investor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.79) -------- Total From Investment Operations (0.77) -------- Net Asset Value, End of Period $9.23 ======== TOTAL RETURN(3) (7.70)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.20%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.16%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $464 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 85 LIVESTRONG 2050 Portfolio Institutional Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.03 Net Realized and Unrealized Gain (Loss) (0.80) -------- Total From Investment Operations (0.77) -------- Net Asset Value, End of Period $9.23 ======== TOTAL RETURN(3) (7.70)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 1.36%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. 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%. (5) Annualized. See Notes to Financial Statements. - ------ 86 LIVESTRONG 2050 Portfolio Advisor Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.79) -------- Total From Investment Operations (0.77) -------- Net Asset Value, End of Period $9.23 ======== TOTAL RETURN(3) (7.70)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.45%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.91%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 87 LIVESTRONG 2050 Portfolio R Class For a Share Outstanding Throughout the Period Indicated 2008(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.00 -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.02 Net Realized and Unrealized Gain (Loss) (0.80) -------- Total From Investment Operations (0.78) -------- Net Asset Value, End of Period $9.22 ======== TOTAL RETURN(3) (7.80)% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.70%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 0.66%(5) Portfolio Turnover Rate 3% Net Assets, End of Period (in thousands) $6 (1) May 30, 2008 (fund inception) through July 31, 2008. (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. - ------ 88 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, five of the portfolios constituting American Century Asset Allocation Portfolios, Inc. (the "Corporation"), as of July 31, 2008, 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 each of the three years in the period then ended and for the period August 31, 2004 (commencement of operations) through July 31, 2005. We have also audited the accompanying statements of assets and liabilities, including the schedules of investments, of LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio and LIVESTRONG 2050 Portfolio, four of the portfolios constituting the Corporation, as of July 31, 2008, and the related statements of operations, statements of changes in net assets, and the financial highlights for the period May 30, 2008 (commencement of operations) through July 31, 2008. These financial statements and financial highlights are the responsibility of the Corporation's 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 Corporation is not required to have, nor were we engaged to perform, an audit of its 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 Corporation's 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, 2008, 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 respective financial positions of LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2020 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2035 Portfolio, LIVESTRONG 2040 Portfolio, LIVESTRONG 2045 Portfolio and LIVESTRONG 2050 Portfolio of American Century Asset Allocation Portfolios, Inc. as of July 31, 2008, the results of their operations for the periods presented, the changes in their net assets for the periods presented, 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 16, 2008 - ------ 89 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 or the advisor); 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 Investments family of funds. All persons named as officers of the funds also serve in similar capacities for the other 14 investment companies in the American Century Investments family of funds 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: 70 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 (since 2007) 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: 111 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - ------ 90 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 (bearings and power transmission company) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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 (not-for-profit, contract research organization) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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 (private equity fund manager); Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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. (real estate company); Retired Chairman of the Board, Butler Manufacturing Company (metal buildings producer) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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., (technology products and services provider) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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 (telecommunications company) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. - ------ 91 JOHN R. WHITTEN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUNDS: Director (since 2008) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Project Consultant, Celanese Corp. (industrial chemical company) (September 2004 to January 2005); Chief Financial Officer, Vice President and Treasurer, Applied Industrial Technologies, Inc. (bearings and power transmission company) (1995 to 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director and Chairman of the Audit Committee, Rudolph Technologies, Inc. OFFICERS BARRY FINK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and Executive Vice President, ACC (September 2007 to present); President, ACS (October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007); Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Director, ACC, ACS, ACIS and other ACC subsidiaries 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 Investments 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: Attorney, ACC (February 1994 to present); 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 Investments funds (1997 to September 2006) 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. - ------ 92 APPROVAL OF MANAGEMENT AGREEMENTS LIVESTRONG Income Portfolio, LIVESTRONG 2015 Portfolio, LIVESTRONG 2025 Portfolio, LIVESTRONG 2035 Portfolio and LIVESTRONG 2045 Portfolio 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 Investments, 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; * reports on the wide range of programs and services the advisor provides to the funds and their shareholders on a routine and non-routine basis; * information about the compliance policies, procedures, and regulatory experience of the advisor; * 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 in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period. - ------ 93 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. In connection with their review of the funds, 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 management 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 the services provided by the advisor 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 to the funds is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments 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 - ------ 94 to conduct their business. 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, LIVESTRONG 2035 Portfolio's and LIVESTRONG 2045 Portfolio's performance for both the one- and three-year periods was above the median for their peer groups. LIVESTRONG 2015 Portfolio's and LIVESTRONG 2025 Portfolio's performance was above the median for their peer groups for the one-year period and below the median for the three-year period. 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. 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. The board concluded that the advisor's profits were reasonable in light of the services provided to the funds. ETHICS. 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 fees of competitive funds not managed by the advisor. The Directors believe the advisor is appropriately sharing - ------ 95 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 Investments 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 and the Investor, Advisor, and R Classes pay the advisor a 0.20% administrative fee. Each of the underlying funds pays 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 fund's unified fee to the total expense ratio of other funds in the fund's peer group. The unified fee charged to shareholders of LIVESTRONG Income Portfolio was below the median 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. The board concluded that the management fee paid by the funds to the advisor was reasonable in light of the services provided to the funds. 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 - ------ 96 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. CONCLUSIONS OF THE DIRECTORS As a result of this process, the board, including all of 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. - ------ 97 APPROVAL OF MANAGEMENT AGREEMENTS LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio and LIVESTRONG 2050 Portfolio 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. At a meeting held March 5, 2008, the Directors unanimously approved the initial management agreement for LIVESTRONG 2020 Portfolio, LIVESTRONG 2030 Portfolio, LIVESTRONG 2040 Portfolio and LIVESTRONG 2050 Portfolio (the "funds"). In advance of the board's consideration, the advisor provided information concerning the funds. The materials circulated in advance of the meeting and the discussions held at the meeting detailed the investment objective and strategy proposed to be utilized by the advisor, the funds' characteristics and key attributes, the rationale for launching the funds, the experience of the staff designated to manage the funds, the proposed pricing, and the markets in which the funds would be sold. Because the funds do not feature tactical allocation advice, none of the share classes have a management fee. Instead the Investor, Advisor and R class shares have a 20 basis point administrative fee. The administrative fee, with the unified fees on investments in the underlying funds, compensates the advisor for the operating costs of the funds. Underlying fees and expenses will vary from time to time due to changes in the management fees of the underlying funds, as well as the weightings of the underlying funds hold in the portfolios. American Century Investments' funds utilize a unified management fee structure. 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 advisor and board believe 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. When considering the approval of the management agreements for the funds, the board considered the entrepreneurial risk that the advisor assumes in launching a new fund. In particular, they considered the effect of the unified management fee structure and the fact that the advisor will assume a substantial part of the start-up costs of the funds and the risk that the funds will grow to a level that will become profitable to the advisor. The board considered the position that the funds would take in the line up of the American Century Investments' family of funds and the benefits to shareholders of existing funds of the broadened product offering. Finally, while not specifically discussed, but important in the decision to approve the management agreement, is the directors' familiarity with the advisor. The board oversees and evaluates on a continuous basis the nature and quality of all services the advisor performs for other funds within the American Century Investments' complex. As such, the directors have confidence in the advisor's integrity and competence in providing services to funds. - ------ 98 In their deliberations, the board did not identify any particular information that was all-important or controlling, and each director attributed different weights to various factors. However, based on their evaluation of all material factors and assisted by the advice of independent legal counsel, the board, including the independent directors, concluded that the overall arrangements between the funds and the advisor, as provided in the management agreement, were fair and reasonable in light of the services to be performed and should be approved. - ------ 99 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 Investments' 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. - ------ 100 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-US 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. 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 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. - ------ 101 NOTES - ------ 102 NOTES - ------ 103 NOTES - ------ 104 [back cover] [american century investments logo and text logo] 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 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 ©2008 American Century Proprietary Holdings, Inc. All rights reserved. 0809 CL-ANN-61591N
[front cover] ANNUAL REPORT JULY 31, 2008 [american century investments logo and text logo ®] AMERICAN CENTURY INVESTMENTS ONE CHOICE PORTFOLIO®: VERY CONSERVATIVE ONE CHOICE PORTFOLIO®: CONSERVATIVE ONE CHOICE PORTFOLIO®: MODERATE ONE CHOICE PORTFOLIO®: AGGRESSIVE ONE CHOICE PORTFOLIO®: VERY AGGRESSIVE PRESIDENT'S LETTER [photo of Jonathan Thomas] JONATHAN THOMAS Dear Investor, At American Century Investments®, we are committed to helping you reach your financial goals. Your success is the ultimate measure of our performance. That's why we focus on achieving superior investment results and building long-term relationships with investors like you. Part of that relationship is to clearly communicate investment results and what influenced them. To help you monitor your investment with us, we take pride in providing you with the annual report for the American Century® One Choice Portfolios® for the 12 months ended July 31, 2008. We also recommend americancentury.com, where we provide company news, quarterly portfolio commentaries, investment views, and other useful information. As noted on the website, 2008 marks the 50th anniversary of American Century Investments. Since 1958, we've worked to make wise decisions with your interests as our guide. Fifty years also means that we've met the challenges of previous economic downturns. As we've crossed those hurdles and earned your trust, growth in our assets under management has positioned us in the top 5% of our industry. This growth has given us the resources to offer a wide array of financial products and services, including a well-diversified lineup of portfolios that provides you with many choices in these uncertain times. Though our offerings are diverse, they share several key qualities, including our disciplined investment approach and active, team-based management. Strict adherence to our processes and long-term strategies allows us to stay focused during volatile periods. Investors in our portfolios also benefit from the sum of our investment teams' expertise as they share research and information. We'll continue to work hard to earn your trust. Thank you for your continued support. Sincerely, /s/Jonathan S. Thomas Jonathan S. Thomas President and Chief Executive Officer American Century Investments TABLE OF CONTENTS ONE CHOICE PORTFOLIOS Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Portfolio Commentary. . . . . . . . . . . . . . . . . . . . . . . . . 6 Market Index Total Returns . . . . . . . . . . . . . . . . . . . . . 6 Underlying Fund Allocations. . . . . . . . . . . . . . . . . . . . . 7 Shareholder Fee Examples. . . . . . . . . . . . . . . . . . . . . . . 10 FINANCIAL STATEMENTS Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . 12 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 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Approval of Management Agreement for One Choice Portfolios. . . . . . 39 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . 43 Index Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 44 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 Investments or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments 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 Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments 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 Investments by third party vendors. To the best of American Century Investments' knowledge, such information is accurate at the time of printing. PERFORMANCE One Choice Portfolios Total Returns as of July 31, 2008 Average Annual Returns 1 year Since Inception Inception Date ONE CHOICE PORTFOLIO: VERY CONSERVATIVE - -- INVESTOR CLASS 2.91% 4.90% 9/30/04 ONE CHOICE PORTFOLIO: CONSERVATIVE -- INVESTOR CLASS 0.18% 5.96% 9/30/04 ONE CHOICE PORTFOLIO: MODERATE -- INVESTOR CLASS -2.37% 7.78% 9/30/04 ONE CHOICE PORTFOLIO: AGGRESSIVE -- INVESTOR CLASS -3.97% 9.12% 9/30/04 ONE CHOICE PORTFOLIO: VERY AGGRESSIVE -- INVESTOR CLASS -6.63% 9.90% 9/30/04 RUSSELL 3000 INDEX(1) -10.32% 6.11% -- CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX 6.72% 4.28% -- (1) Data provided by Lipper Inc. -- A Reuters Company. © 2008 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. The Russell 3000 Index represents approximately 98% of investable U.S. equity market and provides a broad measure of equity performance. The Citigroup US Broad Investment-Grade Bond Index represents 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. 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, 2008.) 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 Investments 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 funds' 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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$10,000 investment made September 30, 2004 *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 Investments 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 funds' 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 Investments 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 funds' 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 2008 One Choice Portfolio: Very Conservative -- Investor Class 5.43% 3.27% 7.23% 2.91% One Choice Portfolio: Conservative -- Investor Class 8.08% 4.45% 10.41% 0.18% One Choice Portfolio: Moderate -- Investor Class 11.71% 6.68% 14.56% -2.37% One Choice Portfolio: Aggressive -- Investor Class 13.61% 7.84% 18.78% -3.97% One Choice Portfolio: Very Aggressive -- Investor Class 15.81% 9.00% 21.87% -6.63% Russell 3000 Index 14.67% 5.14% 16.08% -10.32% Citigroup US Broad Investment-Grade Bond Index 2.72% 1.47% 5.55% 6.72% *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 Investments 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 funds' 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 The five One Choice Portfolios produced mixed results for the 12 months ended July 31, 2008, reflecting the sharp decline in stock markets around the globe and solid gains in the bond market. Returns ranged from 2.91% for One Choice Portfolio: Very Conservative (which has the largest weighting in bond funds) to -6.63% for One Choice Portfolio: Very Aggressive (which invests nearly all of its assets in stock funds). See pages 2-5 for more detailed performance information. 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 The broad U.S. equity indexes suffered double-digit declines for the 12-month period in an environment of exceptionally high market volatility. One of the main factors contributing to the stock market chaos was a meltdown in the subprime mortgage market, which led to a persistent liquidity crunch in the credit markets. The fallout included hundreds of billions of dollars in mortgage- and credit-related losses, hobbling the financial sector. The credit turmoil had a negative impact on the U.S. economy, which teetered on the brink of recession amid a deteriorating housing market, rising unemployment, and weaker consumer spending. The Federal Reserve (the Fed) attempted to provide some stability to the economy and financial system by cutting short-term interest rates aggressively and injecting liquidity into the credit markets. However, the Fed's game plan was complicated by surging energy and food prices, which led to the highest year-over-year inflation rate in 17 years. Other than uneven but noteworthy rallies in the fall of 2007 and the spring of 2008, the stock market sustained its downward trajectory throughout the 12-month period. Losses were most severe in the first three months of 2008, when the broad stock indexes suffered their worst quarterly performance in nearly six years. As the accompanying table shows, small-cap stocks held up the best overall, outpacing their large- and mid-cap counterparts, while growth-oriented issues outperformed value shares by a wide margin across all market capitalizations. Mirroring the domestic equity market, foreign stocks also declined markedly amid a global economic slowdown, growing credit market woes, and rising inflation. Even rapidly growing economies such as China and India experienced a slowdown in economic activity, which put additional pressure on stocks worldwide as investors priced in an expected deceleration in corporate profit growth. Emerging markets were the best performers, led by strong returns in Latin America. Among developed Market Index Total Returns For the 12 months ended July 31, 2008 U.S. STOCKS Russell 1000 (Large-Cap) -10.62% Russell Midcap -10.10% Russell 2000 (Small-Cap) -6.71% INTERNATIONAL STOCKS MSCI EAFE (Europe, Australasia, Far East) Index -12.19% MSCI EM (Emerging Markets) Index -4.09% U.S. FIXED INCOME Citigroup US Broad Investment-Grade Bond Index 6.72% 10-Year U.S. Treasury Note 10.11% 90-Day U.S. Treasury Bill 3.40% INTERNATIONAL BONDS Citigroup Non-US World Government Bond Index 15.10% - ------ 6 One Choice Portfolios markets, Pacific Rim countries (excluding Japan) held up the best, while Europe and Japan posted similar double-digit declines. BOND MARKET REVIEW While stocks languished, the U.S. bond market posted positive results for the 12-month period. The slowing economy, credit turmoil, and equity market volatility stoked demand for the relative safety of higher-quality bonds. The bond market also benefited from the Fed's seven short-term interest rate cuts between September 2007 and April 2008, which brought the federal funds rate down from 5.25% to 2.00%--its lowest level since December 2004. However, bonds surrendered some of their gains toward the end of the period as inflation fears drove interest rates higher and bond prices lower. Nonetheless, the broad U.S. bond indexes advanced by more than 6% for the 12-month period. The biggest beneficiaries of the flight to quality were Treasury and government agency bonds, which generated the best returns. High-quality mortgage-backed securities also fared well. The economic slowdown and credit market turbulence weighed on corporate bond returns; in particular, high-yield corporate bonds declined modestly amid concerns about rising default rates. Foreign bonds continued to produce strong results as the U.S. dollar weakened further versus the world's major currencies. Underlying Fund Allocations as a % of net assets as of July 31, 2008(1) Very Very Conservative Conservative Moderate Aggressive Aggressive EQUITY Equity Growth Fund 4.6% 8.6% 15.7% 14.2% 17.4% Growth Fund 3.0% 5.3% 8.5% 15.0% 18.3% Large Company Value Fund 7.7% 10.8% 9.2% 8.2% 10.2% Real Estate Fund 2.2% 2.1% 2.1% 2.1% 2.1% Small Company Fund 1.0% 1.5% 2.1% 2.3% 2.6% Value Fund 4.9% 6.7% 5.2% 4.4% 5.7% Vista Fund 1.5% 4.0% 6.9% 13.3% 16.2% Emerging Markets Fund -- -- 3.9% 6.3% 7.2% International Growth Fund -- 6.0% 9.9% 12.4% 15.4% TOTAL EQUITY 24.9% 45.0% 63.5% 78.2% 95.1% FIXED INCOME Diversified Bond Fund 40.5% 37.4% 25.6% 15.7% 2.9% High-Yield Fund -- -- 2.0% 4.0% -- International Bond Fund 9.8% 7.8% 2.9% -- -- TOTAL FIXED INCOME 50.3% 45.2% 30.5% 19.7% 2.9% PRIME MONEY MARKET FUND 24.6% 9.6% 5.9% 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 Investments 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.) Every stock fund in the One Choice Portfolios posted negative returns for the 12-month period. Growth, a large-cap growth fund, held up the best, declining fractionally for the period and outperforming its large-cap growth benchmark. Vista, a mid-cap growth fund, and Real Estate were also among the better-performing equity funds in the Portfolios. The weakest performers were the Portfolios' two value-oriented funds, Large Company Value and Value, reflecting the general underperformance of value stocks. Small Company and Emerging Markets also suffered double-digit declines during the period and underperformed their respective benchmark indexes. Each of the Portfolios' fixed-income funds advanced, led by International Bond's double-digit gain. Diversified Bond and High-Yield also generated positive returns for the 12-month period. PORTFOLIO STRATEGY Each Portfolio has a "neutral" asset mix that remains unchanged. However, we often make modest adjustments to each Portfolio's actual asset mix to add value and improve the Portfolios' ability to meet their investment objectives. We made no changes to the Portfolios' broad tactical allocation during the 12-month period, maintaining a modest overweight position in bond funds and a corresponding underweight position in stock funds. This represented a cautious, defensive posture for the Portfolios--a position that added value in an environment of greater uncertainty and heightened market volatility. An emphasis on large-cap and growth in the Portfolios' equity component produced mixed results for the 12 months. Our overweight position in large-cap stock funds hindered performance as large-cap shares lagged their mid- and small-cap counterparts. Toward the end of the period, though, we eliminated our large-cap overweight by shifting assets from Large Company Value to Value. Our tilt toward growth stocks proved favorable as growth outperformed value by a wide margin. In addition, stock selection among the Portfolios' growth holdings--Growth and Vista, as well as International Growth--added value to performance. The main fixed-income component in each of the Portfolios is Diversified Bond, where an overweight position in Treasury bonds and an underweight position in corporate bonds proved beneficial as Treasury securities comfortably outperformed corporate bonds. More recently, Diversified Bond pared back its overweight position in Treasury bonds while selectively increasing its holdings of corporate and mortgage-backed securities. In early 2008, we eliminated our overweight position in International Bond, taking profits in a fund that had performed very well and shifting the overweight into Diversified Bond. However, we remained underweight in High-Yield (only held in One Choice Portfolio: Moderate and One Choice Portfolio: Aggressive). - ------ 8 One Choice Portfolios OUTLOOK The economic storms and market turbulence that investors have weathered since last autumn show few signs of abating in the near future. Economic growth remains soft, energy prices are at record highs, and many financial institutions continue to struggle with unexpectedly large write-offs and the need for new capital. As a result, central banks like the Federal Reserve are caught between conflicting needs--lowering rates for economic stimulus and liquidity, and raising rates to stave off an outbreak of inflation. Given this environment, we expect to remain cautious and conservative with respect to our tactical allocation for the Portfolios. We intend to maintain our broad underweight position in stocks, as well as a slight tilt toward growth within our stock holdings, which should help if the current economic uncertainties are resolved sooner than we anticipate. In addition, we continue to hold an overweight position in high-quality domestic 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 Investments 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, 2008 to July 31, 2008. 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 Investments fund, or Institutional Class shares of the American Century Diversified Bond Fund, in an American Century Investments account (i.e., not a financial intermediary or retirement plan account), American Century Investments 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 Investments 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 Investments 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 2/1/08 - Expense 2/1/08 - Expense 2/1/08 7/31/08 7/31/08 Ratio(1) 7/31/08 Ratio(2) One Choice Portfolio: Very Conservative Actual $1,000 $991.60 $0.00 0.00%(3) $3.42 0.69% Hypothetical $1,000 $1,024.86 $0.00 0.00%(3) $3.47 0.69% One Choice Portfolio: Conservative Actual $1,000 $981.40 $0.00 0.00%(3) $3.79 0.77% Hypothetical $1,000 $1,024.86 $0.00 0.00%(3) $3.87 0.77% One Choice Portfolio: Moderate Actual $1,000 $975.60 $0.00 0.00%(3) $4.22 0.86% Hypothetical $1,000 $1,024.86 $0.00 0.00%(3) $4.32 0.86% One Choice Portfolio: Aggressive Actual $1,000 $971.50 $0.00 0.00%(3) $4.61 0.94% Hypothetical $1,000 $1,024.86 $0.00 0.00%(3) $4.72 0.94% One Choice Portfolio: Very Aggressive Actual $1,000 $963.30 $0.00 0.00%(3) $4.88 1.00% Hypothetical $1,000 $1,024.86 $0.00 0.00%(3) $5.02 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 182, the number of days in the most recent fiscal half-year, divided by 366, to reflect the one-half year period. The fees and expenses of the underlying American Century Investments 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 INVESTMENTS One Choice Portfolios JULY 31, 2008 Shares Value One Choice Portfolio: Very Conservative Mutual Funds(1) -- 99.8% DOMESTIC FIXED INCOME FUNDS -- 40.5% 3,366,876 Diversified Bond Fund Investor Class $34,241,129 ----------- DOMESTIC EQUITY FUNDS -- 24.9% 177,467 Equity Growth Fund Investor Class 3,863,457 108,101 Growth Fund Investor Class 2,553,346 1,083,408 Large Company Value Fund Investor Class 6,522,116 85,642 Real Estate Fund Investor Class 1,796,769 111,321 Small Company Fund Investor Class 864,964 764,986 Value Fund Investor Class 4,184,473 67,551 Vista Fund Investor Class 1,255,773 ----------- 21,040,898 ----------- MONEY MARKET FUNDS -- 24.6% 20,791,066 Prime Money Market Fund Investor Class 20,791,066 ----------- INTERNATIONAL FIXED INCOME FUNDS -- 9.8% 545,520 International Bond Fund Investor Class 8,324,635 ----------- TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $85,311,056) 84,397,728 ----------- OTHER ASSETS AND LIABILITIES -- 0.2% 203,636 ----------- TOTAL NET ASSETS -- 100.0% $84,601,364 =========== Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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 EQUITY FUNDS -- 39.0% 1,117,887 Equity Growth Fund Investor Class $ 24,336,400 630,845 Growth Fund Investor Class 14,900,559 5,059,222 Large Company Value Fund Investor Class 30,456,516 285,565 Real Estate Fund Investor Class 5,991,154 556,933 Small Company Fund Investor Class 4,327,369 3,490,382 Value Fund Investor Class 19,092,390 600,645 Vista Fund Investor Class 11,165,991 ------------ 110,270,379 ------------ DOMESTIC FIXED INCOME FUNDS -- 37.4% 10,405,102 Diversified Bond Fund Investor Class 105,819,887 ------------ MONEY MARKET FUNDS -- 9.6% 27,310,715 Prime Money Market Fund Investor Class 27,310,715 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 7.8% 1,455,057 International Bond Fund Investor Class 22,204,170 ------------ INTERNATIONAL EQUITY FUNDS -- 6.0% 1,404,203 International Growth Fund Investor Class 16,864,478 ------------ TOTAL INVESTMENT SECURITIES -- 99.8% (Cost $287,525,354) 282,469,629 ------------ OTHER ASSETS AND LIABILITIES -- 0.2% 605,981 ------------ TOTAL NET ASSETS -- 100.0% $283,075,610 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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 -- 49.7% 4,691,102 Equity Growth Fund Investor Class $ 102,125,292 2,350,836 Growth Fund Investor Class 55,526,746 9,973,669 Large Company Value Fund Investor Class 60,041,487 656,157 Real Estate Fund Investor Class 13,766,174 1,708,539 Small Company Fund Investor Class 13,275,348 6,177,671 Value Fund Investor Class 33,791,860 2,420,599 Vista Fund Investor Class 44,998,935 ------------ 323,525,842 ------------ FIXED INCOME FUNDS -- 27.6% 16,394,956 Diversified Bond Fund Investor Class 166,736,702 2,231,525 High-Yield Fund Investor Class 12,898,215 ------------ 179,634,917 ------------ INTERNATIONAL EQUITY FUNDS -- 13.8% 2,892,755 Emerging Markets Fund Investor Class 25,195,896 5,387,461 International Growth Fund Investor Class 64,703,407 ------------ 89,899,303 ------------ MONEY MARKET FUNDS -- 5.9% 38,694,460 Prime Money Market Fund Investor Class 38,694,460 ------------ INTERNATIONAL FIXED INCOME FUNDS -- 2.9% 1,256,612 International Bond Fund Investor Class 19,175,899 ------------ TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $667,706,208) 650,930,421 ------------ OTHER ASSETS AND LIABILITIES -- 0.1% 902,888 ------------ TOTAL NET ASSETS -- 100.0% $651,833,309 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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 -- 59.5% 2,770,430 Equity Growth Fund Investor Class $ 60,312,261 2,712,624 Growth Fund Investor Class 64,072,180 5,795,421 Large Company Value Fund Investor Class 34,888,434 428,808 Real Estate Fund Investor Class 8,996,392 1,256,722 Small Company Fund Investor Class 9,764,730 3,433,888 Value Fund Investor Class 18,783,367 3,052,797 Vista Fund Investor Class 56,751,496 ------------- 253,568,860 ------------- FIXED INCOME FUNDS -- 19.7% 6,598,190 Diversified Bond Fund Investor Class 67,103,593 2,918,653 High-Yield Fund Investor Class 16,869,814 ------------- 83,973,407 ------------- INTERNATIONAL EQUITY FUNDS -- 18.7% 3,073,841 Emerging Markets Fund Investor Class 26,773,155 4,403,715 International Growth Fund Investor Class 52,888,617 ------------- 79,661,772 ------------- MONEY MARKET FUNDS -- 2.0% 8,434,694 Prime Money Market Fund Investor Class 8,434,694 ------------- TOTAL INVESTMENT SECURITIES -- 99.9% (Cost $430,741,313) 425,638,733 ------------- OTHER ASSETS AND LIABILITIES -- 0.1% 447,849 ------------- TOTAL NET ASSETS -- 100.0% $426,086,582 ============= Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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 Shares Value One Choice Portfolio: Very Aggressive Mutual Funds(1) -- 100.0% DOMESTIC EQUITY FUNDS -- 72.5% 1,450,710 Equity Growth Fund Investor Class $ 31,581,957 1,402,637 Growth Fund Investor Class 33,130,286 3,078,875 Large Company Value Fund Investor Class 18,534,828 182,136 Real Estate Fund Investor Class 3,821,213 593,391 Small Company Fund Investor Class 4,610,648 1,887,777 Value Fund Investor Class 10,326,140 1,586,013 Vista Fund Investor Class 29,483,982 ------------ 131,489,054 ------------ INTERNATIONAL EQUITY FUNDS -- 22.6% 1,507,458 Emerging Markets Fund Investor Class 13,129,959 2,320,955 International Growth Fund Investor Class 27,874,670 ------------ 41,004,629 ------------ FIXED INCOME FUNDS -- 2.9% 525,838 Diversified Bond Fund Investor Class 5,347,772 ------------ MONEY MARKET FUNDS -- 2.0% 3,584,914 Prime Money Market Fund Investor Class 3,584,914 ------------ TOTAL INVESTMENT SECURITIES -- 100.0% (Cost $184,861,500) 181,426,369 ------------ OTHER ASSETS AND LIABILITIES(2) 32,268 ------------ TOTAL NET ASSETS -- 100.0% $181,458,637 ============ Notes to Schedule of Investments (1) Investments are funds within the American Century Investments 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, 2008 Very Conservative Conservative Moderate ASSETS Investment securities in affiliates, at value (cost of $85,311,056, $287,525,354 and $667,706,208, respectively) $84,397,728 $282,469,629 $650,930,421 Cash 43 68 66 Receivable for capital shares sold 33,521 135,020 85,645 Distributions receivable from affiliates 170,072 470,893 817,177 ------------ ------------ ------------ NET ASSETS $84,601,364 $283,075,610 $651,833,309 ============ ============ ============ INVESTOR CLASS CAPITAL SHARES, $0.01 PAR VALUE Outstanding 8,164,732 25,988,755 55,588,293 ============ ============ ============ NET ASSET VALUE PER SHARE $10.36 $10.89 $11.73 ============ ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $85,453,560 $284,416,468 $652,835,770 Undistributed net investment income 214,156 596,276 1,030,622 Accumulated undistributed net realized gain (loss) on investment transactions (153,024) 3,118,591 14,742,704 Net unrealized depreciation on investments (913,328) (5,055,725) (16,775,787) ------------ ------------ ------------ $84,601,364 $283,075,610 $651,833,309 ============ ============ ============ See Notes to Financial Statements. - ------ 15 JULY 31, 2008 Very Aggressive Aggressive ASSETS Investment securities in affiliates, at value (cost of $430,741,313 and $184,861,500, respectively) $425,638,733 $181,426,369 Cash 64 71 Receivable for capital shares sold 57,000 3,766 Distributions receivable from affiliates 390,785 28,431 ------------ ------------ NET ASSETS $426,086,582 $181,458,637 ============ ============ INVESTOR CLASS CAPITAL SHARES, $0.01 PAR VALUE Outstanding 33,774,842 13,838,393 ============ ============ NET ASSET VALUE PER SHARE $12.62 $13.11 ============ ============ NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $415,225,618 $178,658,452 Undistributed net investment income 3,653,169 585,321 Undistributed net realized gain on investment transactions 12,310,375 5,649,995 Net unrealized depreciation on investments (5,102,580) (3,435,131) ------------ ------------ $426,086,582 $181,458,637 ============ ============ See Notes to Financial Statements. - ------ 16 STATEMENT OF OPERATIONS YEAR ENDED JULY 31, 2008 Very Conservative Conservative Moderate INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $2,479,447 $10,159,134 $22,163,528 ------------ ------------ ------------ EXPENSES: Directors' fees and expenses 1,322 5,822 14,307 ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 2,478,125 10,153,312 22,149,221 ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (459,973) (1,374,536) (2,089,883) Capital gain distributions received from underlying funds 539,663 5,204,922 19,234,063 ------------ ------------ ------------ 79,690 3,830,386 17,144,180 ------------ ------------ ------------ CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS IN UNDERLYING FUNDS (1,636,979) (14,808,867) (57,887,670) ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES (1,557,289) (10,978,481) (40,743,490) ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $920,836 $(825,169) $(18,594,269) ============ ============ ============ See Notes to Financial Statements. - ------ 17 YEAR ENDED JULY 31, 2008 Aggressive Very Aggressive INVESTMENT INCOME (LOSS) INCOME: Income distributions from underlying funds - affiliates $13,202,059 $4,667,096 ------------ ------------ EXPENSES: Directors' fees and expenses 9,581 4,106 ------------ ------------ NET INVESTMENT INCOME (LOSS) 13,192,478 4,662,990 ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES NET REALIZED GAIN (LOSS) ON: Sale of investments in underlying funds (1,533,506) (1,789,422) Capital gain distributions received from underlying funds 15,528,325 8,163,783 ------------ ------------ 13,994,819 6,374,361 ------------ ------------ CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS IN UNDERLYING FUNDS (46,739,387) (24,701,859) ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON AFFILIATES (32,744,568) (18,327,498) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(19,552,090) $(13,664,508) See Notes to Financial Statements. - ------- 18 STATEMENT OF CHANGES IN NET ASSETS YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 Very Conservative Conservative Increase (Decrease) in Net Assets 2008 2007 2008 2007 OPERATIONS Net investment income (loss) $ 2,478,125 $ 1,237,837 $ 10,153,312 $ 5,551,796 Net realized gain (loss) 79,690 93,636 3,830,386 1,264,794 Change in net unrealized appreciation (depreciation) (1,636,979) 599,099 (14,808,867) 8,245,024 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 920,836 1,930,572 (825,169) 15,061,614 ------------ ------------ ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (2,410,671) (1,153,304) (10,130,613) (5,231,274) From net realized gains (190,807) (69,135) (1,699,068) (467,169) ------------ ------------ ------------ ------------ Decrease in net assets from distributions (2,601,478) (1,222,439) (11,829,681) (5,698,443) ------------ ------------ ------------ ------------ CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 61,070,373 29,687,745 124,622,410 138,628,869 Proceeds from reinvestment of distributions 2,523,121 1,174,189 11,587,346 5,503,221 Payments for shares redeemed (18,294,303) (10,439,388) (68,308,853) (36,050,020) ------------ ------------ ------------ ------------ Net increase (decrease) in net assets from capital share transactions 45,299,191 20,422,546 67,900,903 108,082,070 ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 43,618,549 21,130,679 55,246,053 117,445,241 NET ASSETS Beginning of period 40,982,815 19,852,136 227,829,557 110,384,316 ------------ ------------ ------------ ------------ End of period $84,601,364 $40,982,815 $283,075,610 $227,829,557 ============ ============ ============ ============ Undistributed net investment income $214,156 $146,702 $596,276 $574,402 ============ ============ ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 5,778,020 2,818,872 11,004,414 12,377,036 Issued in reinvestment of distributions 240,759 112,054 1,027,071 491,552 Redeemed (1,737,192) (988,497) (6,066,675) (3,195,492) ------------ ------------ ------------ ------------ Net increase (decrease) in shares of the fund 4,281,587 1,942,429 5,964,810 9,673,096 ============ ============ ============ ============ See Notes to Financial Statements. - ------ 19 YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 Moderate Aggressive Increase (Decrease) in Net Assets 2008 2007 2008 2007 OPERATIONS Net investment income (loss) $ 22,149,221 $ 12,589,264 $ 13,192,478 $ 7,522,680 Net realized gain (loss) 17,144,180 5,252,428 13,994,819 4,035,206 Change in net unrealized appreciation (depreciation) (57,887,670) 34,772,872 (46,739,387) 36,566,103 ------------ ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations (18,594,269) 52,614,564 (19,552,090) 48,123,989 ------------ ----------- ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (22,191,149) (11,946,777) (12,099,339) (6,046,156) From net realized gains (7,139,825) (1,486,925) (5,382,224) (1,127,285) ------------ ----------- ------------ ------------ Decrease in net assets from distributions (29,330,974) (13,433,702) (17,481,563) (7,173,441) ------------ ----------- ------------ ------------ CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 217,735,355 350,149,847 132,300,578 206,152,389 Proceeds from reinvestment of distributions 28,522,524 12,997,995 17,179,195 7,051,677 Payments for shares redeemed (132,875,879) (69,562,395) (83,381,419) (48,482,618) ------------ ----------- ------------ ------------ Net increase (decrease) in net assets from capital share transactions 113,382,000 293,585,447 66,098,354 164,721,448 ------------ ----------- ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 65,456,757 332,766,309 29,064,701 205,671,996 NET ASSETS Beginning of period 586,376,552 253,610,243 397,021,881 191,349,885 ------------ ----------- ------------ ------------ End of period $651,833,309 $586,376,552 $426,086,582 $397,021,881 ============ ============ ============ ============ Undistributed net investment income $1,030,622 $1,076,463 $3,653,169 $2,560,142 ============ ============ ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 17,467,088 28,824,439 9,774,368 15,967,469 Issued in reinvestment of distributions 2,286,713 1,067,879 1,248,488 552,206 Redeemed (10,763,714) (5,659,266) (6,239,855) (3,696,019) ------------ ----------- ------------ ------------ Net increase (decrease) in shares of the fund 8,990,087 24,233,052 4,783,001 12,823,656 ============ ============ ============ ============ See Notes to Financial Statements. - ------ 20 YEARS ENDED JULY 31, 2008 AND JULY 31, 2007 Very Aggressive Increase (Decrease) in Net Assets 2008 2007 OPERATIONS Net investment income (loss) $ 4,662,990 $ 2,336,864 Net realized gain (loss) 6,374,361 1,943,059 Change in net unrealized appreciation (depreciation) (24,701,859) 18,579,766 ------------ ------------ Net increase (decrease) in net assets resulting from operations (13,664,508) 22,859,689 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income (4,620,307) (1,998,188) From net realized gains (2,398,527) (491,017) ------------ ------------ Decrease in net assets from distributions (7,018,834) (2,489,205) ------------ ------------ CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 70,762,147 94,590,521 Proceeds from reinvestment of distributions 6,950,948 2,423,425 Payments for shares redeemed (44,414,955) (25,802,240) ------------ ------------ Net increase (decrease) in net assets from capital share transactions 33,298,140 71,211,706 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS 12,614,798 91,582,190 NET ASSETS Beginning of period 168,843,839 77,261,649 ------------ ------------ End of period $181,458,637 $168,843,839 ============ ============ Undistributed net investment income $585,321 $542,638 ============ ============ TRANSACTIONS IN SHARES OF THE FUND Sold 4,916,535 6,950,789 Issued in reinvestment of distributions 472,854 180,583 Redeemed (3,134,435) (1,866,727) ------------ ------------ Net increase (decrease) in shares of the fund 2,254,954 5,264,645 ============ ============ See Notes to Financial Statements. - ------ 21 NOTES TO FINANCIAL STATEMENTS JULY 31, 2008 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 Investments family of funds (the underlying funds). The funds are diversified under the 1940 Act. Additionally, 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. 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. - ------ 22 HIGH-YIELD seeks high current income by investing in a diversified portfolio of high-yield corporate bonds and other debt securities. As a secondary 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 issued 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, very short-term debt securities issued by corporations, banks and governments. 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 the Board of Directors/Trustees or its designee, in accordance with procedures adopted by the Board of Directors/Trustees, 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 -- For financial reporting purposes, 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. The funds have adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, "Accounting for Income Taxes" during the current fiscal year. All tax years for the funds remain subject to examination by tax authorities. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. 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. 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. - ------ 23 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., 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, 2008, were as follows: Very Very Conservative Conservative Moderate Aggressive Aggressive Purchases $55,957,081 $117,948,488 $243,626,610 $150,410,705 $67,500,214 Proceeds from sales $10,346,595 $46,734,909 $118,362,876 $73,186,245 $28,392,206 - ------ 24 4. AFFILIATED COMPANY TRANSACTIONS Investments are funds within the American Century Investments 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 for the year ended July 31, 2008 follows: July 31, 2008 July 31, Fund/Underlying 2007 Share Realized Distributions Share Fund Balance Purchase Cost Sales Cost Gain (Loss) Received(1) Balance Market Value One Choice Portfolio: Very Conservative Diversified Bond Fund Investor Class 1,672,271 $21,362,062 $3,933,138 $(74,487) $1,285,519 3,366,876 $34,241,129 Equity Growth Fund Investor Class 68,751 3,010,469 570,080 (53,854) 177,436 177,467 3,863,457 Growth Fund Investor Class 51,420 1,839,742 471,670 (736) 1,996 108,101 2,553,346 Large Company Value Fund Investor Class 412,204 5,033,007 588,971 (85,922) 214,761 1,083,408 6,522,116 Real Estate Fund Investor Class 28,932 1,527,147 378,965 (81,425) 170,890 85,642 1,796,769 Small Company Fund Investor Class 38,129 735,001 170,618 (25,699) 55,312 111,321 864,964 Value Fund Investor Class 217,015 3,571,752 427,290 (95,503) 323,777 764,986 4,184,473 Vista Fund Investor Class 29,213 1,030,798 319,328 (13,783) 69,206 67,551 1,255,773 Prime Money Market Fund Investor Class 10,152,022 12,721,038 2,081,994 -- 517,324 20,791,066 20,791,066 International Bond Fund Investor Class 329,535 5,126,065 1,864,514 (28,564) 202,889 545,520 8,324,635 ---------- ---------- ---------- ---------- ---------- ---------- ---------- $55,957,081 $10,806,568 $(459,973) $3,019,110 $84,397,728 =========== =========== =========== =========== =========== One Choice Portfolio: Conservative Equity Growth Fund Investor Class 725,342 $11,551,462 $2,543,623 $(247,377) $1,704,392 1,117,887 $24,336,400 Growth Fund Investor Class 502,880 5,738,018 2,693,074 9,023 17,895 630,845 14,900,559 Large Company Value Fund Investor Class 3,167,995 14,194,054 1,394,356 (255,003) 1,400,207 5,059,222 30,456,516 Real Estate Fund Investor Class 161,780 3,627,794 1,199,946 (283,891) 868,408 285,565 5,991,154 Small Company Fund Investor Class 319,768 2,559,289 669,069 (115,812) 425,139 556,933 4,327,369 Value Fund Investor Class 1,713,124 11,664,298 1,136,446 (289,717) 2,271,562 3,490,382 19,092,390 Vista Fund Investor Class 438,398 5,801,452 2,839,410 (52,488) 945,352 600,645 11,165,991 Diversified Bond Fund Investor Class 8,653,564 37,361,175 19,643,505 (193,841) 4,999,459 10,405,102 105,819,887 Prime Money Market Fund Investor Class 22,372,011 9,375,751 4,437,047 -- 927,505 27,310,715 27,310,715 International Bond Fund Investor Class 1,507,491 7,369,572 8,097,851 1,938 834,287 1,455,057 22,204,170 International Growth Fund Investor Class 988,506 8,705,623 3,455,118 52,632 969,850 1,404,203 16,864,478 ---------- ---------- ---------- ---------- ---------- ---------- ---------- $117,948,488 $48,109,445 $(1,374,536) $15,364,056 $282,469,629 =========== =========== =========== =========== =========== (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 25 July 31, 2008 July 31, Fund/Underlying 2007 Share Realized Distributions Share Fund Balance Purchase Cost Sales Cost Gain (Loss) Received(1) Balance Market Value One Choice Portfolio: Moderate Equity Growth Fund Investor Class 3,413,200 $36,755,430 $6,877,026 $(973,952) $7,767,638 4,691,102 $102,125,292 Growth Fund Investor Class 2,102,736 15,670,529 9,811,190 (35,025) 72,521 2,350,836 55,526,746 Large Company Value Fund Investor Class 7,069,404 23,136,690 2,962,281 (432,552) 2,995,781 9,973,669 60,041,487 Real Estate Fund Investor Class 417,609 7,243,124 2,672,710 (735,295) 2,176,914 656,157 13,766,174 Small Company Fund Investor Class 1,100,773 6,726,151 1,773,072 (338,516) 1,419,061 1,708,539 13,275,348 Value Fund Investor Class 3,318,289 18,577,905 1,439,042 (340,421) 4,254,569 6,177,671 33,791,860 Vista Fund Investor Class 1,982,955 18,310,103 10,406,024 (125,495) 4,141,208 2,420,599 44,998,935 Diversified Bond Fund Investor Class 15,108,434 55,094,832 42,334,750 (66,495) 8,269,213 16,394,956 166,736,702 High-Yield Fund Investor Class 1,870,879 4,002,099 1,857,902 (103,982) 983,738 2,231,525 12,898,215 Emerging Markets Fund Investor Class 2,195,578 12,893,599 5,710,489 738,081 3,058,382 2,892,755 25,195,896 International Growth Fund Investor Class 4,254,581 26,144,481 12,001,367 (17,101) 4,026,557 5,387,461 64,703,407 Prime Money Market Fund Investor Class 35,573,044 12,497,517 9,376,101 -- 1,409,063 38,694,460 38,694,460 International Bond Fund Investor Class 1,731,065 6,574,150 13,230,805 340,870 822,946 1,256,612 19,175,899 ---------- ----------- ----------- ----------- ----------- ----------- ----------- $243,626,610 $120,452,759 $(2,089,883) $41,397,591 $650,930,421 ============ ============ ============ ============ ============ One Choice Portfolio: Aggressive Equity Growth Fund Investor Class 2,088,338 $19,374,154 $3,067,646 $(514,391) $4,737,213 2,770,430 $60,312,261 Growth Fund Investor Class 2,513,849 15,225,671 10,521,479 (175,061) 86,512 2,712,624 64,072,180 Large Company Value Fund Investor Class 4,284,730 13,009,724 2,395,638 (377,120) 1,803,200 5,795,421 34,888,434 Real Estate Fund Investor Class 282,762 4,490,368 1,713,313 (533,632) 1,473,236 428,808 8,996,392 Small Company Fund Investor Class 838,718 4,629,984 1,163,605 (250,218) 1,079,013 1,256,722 9,764,730 Value Fund Investor Class 1,872,957 10,206,589 848,468 (219,585) 2,396,176 3,433,888 18,783,367 Vista Fund Investor Class 2,594,601 19,713,398 11,317,701 (179,541) 5,402,292 3,052,797 56,751,496 Diversified Bond Fund Investor Class 6,140,346 24,110,773 19,565,532 47,272 3,352,471 6,598,190 67,103,593 High-Yield Fund Investor Class 2,534,166 5,684,787 3,467,575 (215,507) 1,308,874 2,918,653 16,869,814 Emerging Markets Fund Investor Class 2,417,645 12,092,215 5,280,825 694,249 3,342,759 3,073,841 26,773,155 International Growth Fund Investor Class 3,602,665 18,184,959 8,111,930 (138,682) 3,394,666 4,403,715 52,888,617 Prime Money Market Fund Investor Class 8,031,973 2,956,376 2,553,655 -- 313,952 8,434,694 8,434,694 International Bond Fund Investor Class 293,166 731,707 4,712,384 328,710 40,020 -- -- ---------- ----------- ----------- ----------- ----------- ----------- ----------- $150,410,705 $74,719,751 $(1,533,506) $28,730,384 $425,638,733 ============ ============ ============ ============ ============ (1) Distributions received includes distributions from net investment income and from capital gains from the underlying funds. - ------ 26 July 31, 2008 July 31, 2007 Fund/Underlying Share Purchase Realized Distributions Share Fund Balance Cost Sales Cost Gain (Loss) Received(1) Balance Market Value One Choice Portfolio: Very Aggressive Equity Growth Fund Investor Class 1,097,999 $11,039,257 $2,646,650 $(422,375) $2,462,105 1,450,710 $31,581,957 Growth Fund Investor Class 1,304,700 8,954,403 6,566,511 (156,320) 46,342 1,402,637 33,130,286 Large Company Value Fund Investor Class 2,258,544 7,760,610 2,081,829 (315,983) 940,423 3,078,875 18,534,828 Real Estate Fund Investor Class 120,735 1,949,795 841,637 (259,301) 597,229 182,136 3,821,213 Small Company Fund Investor Class 397,812 2,218,863 613,486 (127,844) 487,388 593,391 4,610,648 Value Fund Investor Class 1,065,877 5,832,776 949,428 (204,394) 1,315,090 1,887,777 10,326,140 Vista Fund Investor Class 1,352,983 9,981,248 5,664,915 (352,324) 2,965,592 1,586,013 29,483,982 Emerging Markets Fund Investor Class 1,189,434 5,399,114 2,054,905 131,348 1,752,389 1,507,458 13,129,959 International Growth Fund Investor Class 1,906,138 8,942,649 3,598,817 (223,471) 1,868,577 2,320,955 27,874,670 Diversified Bond Fund Investor Class 349,452 3,432,562 1,632,922 7,550 244,235 525,838 5,347,772 Prime Money Market Fund Investor Class 3,427,061 1,562,361 1,404,508 -- 134,710 3,584,914 3,584,914 International Bond Fund Investor Class 125,026 426,576 2,126,020 133,692 16,799 -- -- --------- ----------- ----------- ------------ ----------- --------- ------------ $67,500,214 $30,181,628 $(1,789,422) $12,830,879 $181,426,369 =========== =========== ============ =========== ============ (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. 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 gains 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, 2008 and July 31, 2007 were as follows: Very Conservative Conservative 2008 2007 2008 2007 DISTRIBUTIONS PAID FROM Ordinary income $2,446,681 $1,168,860 $10,446,155 $5,250,076 Long-term capital gains $154,797 $53,579 $1,383,526 $448,367 Moderate Aggressive 2008 2007 2008 2007 DISTRIBUTIONS PAID FROM Ordinary income $23,263,119 $12,120,744 $12,769,831 $6,150,181 Long-term capital gains $6,067,855 $1,312,958 $4,711,732 $1,023,260 Very Aggressive 2008 2007 DISTRIBUTIONS PAID FROM Ordinary income $4,847,729 $2,023,155 Long-term capital gains $2,171,105 $466,050 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, 2008, 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 $86,003,188 $289,453,288 $672,216,825 $434,032,630 $187,079,529 ============ ============ ============ ============ ============ Gross tax depreciation of investments (2,203,687) (13,729,433) (39,095,502) (24,795,305) (12,539,906) Net tax appreciation (depreciation) of investments $(1,605,460) $(6,983,659) $(21,286,404) $(8,393,897) $(5,653,160) ============ ============ ============ ============ ============ Undistributed ordinary income $305,104 $596,276 $1,030,622 $3,653,169 $585,321 Accumulated long-term gains $448,160 $5,046,525 $19,253,321 $15,601,692 $7,868,024 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 The Financial Accounting Standards Board (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. The adoption of FAS 157 will not materially impact the determination of fair value. In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133" (FAS 161). FAS 161 is effective for fiscal years beginning after November 15, 2008. FAS 161 amends and expands disclosures about derivative instruments and hedging activities. FAS 161 requires qualitative disclosures about the objectives and strategies of derivative instruments, quantitative disclosures about the fair value amounts of and gains and losses on derivative instruments, and disclosures of credit-risk-related contingent features in hedging activities. Management is currently evaluating the impact that adopting FAS 161 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 up to the maximum amount allowable as qualified dividend income for the fiscal year ended July 31, 2008. For corporate taxpayers, the funds hereby designate the following ordinary income distributions, or up to the maximum amount allowable, as qualified for the corporate dividends received deduction for the fiscal year ended July 31, 2008. Very Conservative Conservative Moderate Aggressive Very Aggressive $2,278,275 $9,739,729 $21,790,238 $9,989,907 $4,202,581 The funds hereby designate the following long-term capital gain distributions, or up to the maximum amount allowable, for the fiscal year ended July 31, 2008. Very Conservative Conservative Moderate Aggressive Very Aggressive $154,797 $1,383,526 $6,067,855 $4,711,732 $2,171,105 The funds hereby designate the following distributions as qualified short-term capital gains for purposes of Internal Revenue Code Section 871. Very Conservative Conservative Moderate Aggressive Very Aggressive $36,010 $314,717 $1,068,057 $670,381 $227,422 - ------ 29 FINANCIAL HIGHLIGHTS One Choice Portfolio: Very Conservative Investor Class For a Share Outstanding Throughout the Years Ended July 31 (except as noted) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $10.55 $10.23 $10.27 $10.00 ------- ------- ------- ------- Income From Investment Operations Net Investment Income (Loss)(2) 0.43 0.40 0.37 0.25 Net Realized and Unrealized Gain (Loss) (0.12) 0.33 (0.04) 0.29 ------- ------- ------- ------- Total From Investment Operations 0.31 0.73 0.33 0.54 ------- ------- ------- ------- Distributions From Net Investment Income (0.46) (0.39) (0.36) (0.27) From Net Realized Gains (0.04) (0.02) (0.01) -- ------- ------- ------- ------- Total Distributions (0.50) (0.41) (0.37) (0.27) ------- ------- ------- ------- Net Asset Value, End of Period $10.36 $10.55 $10.23 $10.27 ======= ======= ======= ======== TOTAL RETURN(3) 2.91% 7.23% 3.27% 5.43% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 4.06% 3.83% 3.67% 3.00%(5) Portfolio Turnover Rate 17% 17% 34% 38% Net Assets, End of Period (in thousands) $84,601 $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. 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%. (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) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $11.38 $10.66 $10.54 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.44 0.35 0.34 0.22 Net Realized and Unrealized Gain (Loss) (0.40) 0.75 0.12 0.58 -------- -------- -------- -------- Total From Investment Operations 0.04 1.10 0.46 0.80 -------- -------- -------- -------- Distributions From Net Investment Income (0.45) (0.35) (0.33) (0.26) From Net Realized Gains (0.08) (0.03) (0.01) -- -------- -------- -------- -------- Total Distributions (0.53) (0.38) (0.34) (0.26) -------- -------- -------- -------- Net Asset Value, End of Period $10.89 $11.38 $10.66 $10.54 ======== ======== ======== ======== TOTAL RETURN(3) 0.18% 10.41% 4.45% 8.08% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.85% 3.14% 3.23% 2.63%(5) Portfolio Turnover Rate 18% 7% 8% 12% Net Assets, End of Period (in thousands) $283,076 $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. 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%. (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) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $12.58 $11.34 $10.97 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.43 0.35 0.34 0.17 Net Realized and Unrealized Gain (Loss) (0.70) 1.29 0.38 0.99 -------- -------- -------- -------- Total From Investment Operations (0.27) 1.64 0.72 1.16 -------- -------- -------- -------- Distributions From Net Investment Income (0.44) (0.35) (0.34) (0.19) From Net Realized Gains (0.14) (0.05) (0.01) -- -------- -------- -------- -------- Total Distributions (0.58) (0.40) (0.35) (0.19) -------- -------- -------- -------- Net Asset Value, End of Period $11.73 $12.58 $11.34 $10.97 ======== ======== ======== ======== TOTAL RETURN(3) (2.37)% 14.56% 6.68% 11.71% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.44% 2.85% 3.02% 1.98%(5) Portfolio Turnover Rate 18% 7% 7% 3% Net Assets, End of Period (in thousands) $651,833 $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. 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%. (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) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $13.69 $11.83 $11.26 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.41 0.32 0.31 0.14 Net Realized and Unrealized Gain (Loss) (0.90) 1.87 0.56 1.22 -------- -------- -------- -------- Total From Investment Operations (0.49) 2.19 0.87 1.36 -------- -------- -------- -------- Distributions From Net Investment Income (0.40) (0.28) (0.29) (0.10) From Net Realized Gains (0.18) (0.05) (0.01) -- -------- -------- -------- -------- Total Distributions (0.58) (0.33) (0.30) (0.10) -------- -------- -------- -------- Net Asset Value, End of Period $12.62 $13.69 $11.83 $11.26 ======== ======== ======== ======== TOTAL RETURN(3) (3.97)% 18.78% 7.84% 13.61% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 3.07% 2.46% 2.68% 1.52%(5) Portfolio Turnover Rate 17% 7% 6% 3% Net Assets, End of Period (in thousands) $426,087 $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. 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%. (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) 2008 2007 2006 2005(1) PER-SHARE DATA Net Asset Value, Beginning of Period $14.58 $12.23 $11.48 $10.00 -------- -------- -------- -------- Income From Investment Operations Net Investment Income (Loss)(2) 0.36 0.25 0.25 0.08 Net Realized and Unrealized Gain (Loss) (1.27) 2.40 0.78 1.49 -------- -------- -------- -------- Total From Investment Operations (0.91) 2.65 1.03 1.57 -------- -------- -------- -------- Distributions From Net Investment Income (0.37) (0.24) (0.27) (0.09) From Net Realized Gains (0.19) (0.06) (0.01) -- -------- -------- -------- -------- Total Distributions (0.56) (0.30) (0.28) (0.09) -------- -------- -------- -------- Net Asset Value, End of Period $13.11 $14.58 $12.23 $11.48 ======== ======= ======= ======== TOTAL RETURN(3) (6.63)% 21.87% 9.00% 15.81% RATIOS/SUPPLEMENTAL DATA Ratio of Operating Expenses to Average Net Assets(4) 0.00% 0.00% 0.00% 0.00%(5) Ratio of Net Investment Income (Loss) to Average Net Assets 2.53% 1.85% 2.08% 0.84%(5) Portfolio Turnover Rate 15% 8% 9% 8% Net Assets, End of Period (in thousands) $181,459 $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. 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%. (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, five of the portfolios constituting American Century Asset Allocation Portfolios, Inc. (the "Corporation"), as of July 31, 2008, 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 Corporation's 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 Corporation is not required to have, nor were we engaged to perform, an audit of its 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 Corporation's 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, 2008, 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 respective financial positions of One Choice Portfolio: Very Conservative, One Choice Portfolio: Conservative, One Choice Portfolio: Moderate, One Choice Portfolio: Aggressive and One Choice Portfolio: Very Aggressive, of American Century Asset Allocation Portfolios, Inc. as of July 31, 2008, 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 16, 2008 - ------ 35 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 or the advisor); 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 Investments family of funds. All persons named as officers of the funds also serve in similar capacities for the other 14 investment companies in the American Century Investments family of funds 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: 70 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 (since 2007) 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: 111 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None 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 (bearings and power transmission company) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 OTHER DIRECTORSHIPS HELD BY DIRECTOR: None - ------ 36 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 (not-for-profit, contract research organization) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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 (private equity fund manager); Chief Financial Officer, Plaza Belmont LLC (September 1999 to September 2006) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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. (real estate company); Retired Chairman of the Board, Butler Manufacturing Company (metal buildings producer) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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., (technology products and services provider) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 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 (telecommunications company) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director, DST Systems, Inc.; Director, Euronet Worldwide, Inc. JOHN R. WHITTEN, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1946 POSITION(S) HELD WITH FUNDS: Director (since 2008) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Project Consultant, Celanese Corp. (industrial chemical company) (September 2004 to January 2005); Chief Financial Officer, Vice President and Treasurer, Applied Industrial Technologies, Inc. (bearings and power transmission company) (1995 to 2003) NUMBER OF PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR: 70 OTHER DIRECTORSHIPS HELD BY DIRECTOR: Director and Chairman of the Audit Committee, Rudolph Technologies, Inc. - ------ 37 OFFICERS BARRY FINK, 4500 Main Street, Kansas City, MO 64111 YEAR OF BIRTH: 1955 POSITION(S) HELD WITH FUNDS: Executive Vice President (since 2007) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS: Chief Operating Officer and Executive Vice President, ACC (September 2007 to present); President, ACS (October 2007 to present); Managing Director, Morgan Stanley (2000 to 2007); Global General Counsel, Morgan Stanley (2000 to 2006). Also serves as: Director, ACC, ACS, ACIS and other ACC subsidiaries 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 Investments 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: Attorney, ACC (February 1994 to present); 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 Investments funds (1997 to September 2006) 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. - ------ 38 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 Investments, 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; * reports on the wide range of programs and services the advisor provides to the funds and their shareholders on a routine and non-routine basis; * information about the compliance policies, procedures, and regulatory experience of the advisor; * 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 in-person meetings and one telephonic meeting to review and discuss the information provided. The board also had the benefit of the advice of its independent counsel throughout the period. 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. In connection with their review of - ------ 39 the funds, 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 management 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 the services provided by the advisor 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 to the funds is quite complex and allows fund shareholders access to professional money management, instant diversification of their investments 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 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 - ------ 40 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 was above the median for its peer group for the one-year period and below the median for the three-year period. The other funds' performance for both the one- and three-year periods was above the median for their 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. 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. The board concluded that the advisor's profits were reasonable in light of the services provided to the funds. ETHICS. 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 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 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 Investment 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 pays 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 - ------ 41 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 fund's unified fee to the total expense ratio of other funds in the fund's peer group. The unified fees charged to shareholders of the funds were below the median of the total expense ratios of their peer groups. The board concluded that the management fee paid by the funds to the advisor was reasonable in light of the services provided to the funds. 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. CONCLUSIONS OF THE DIRECTORS As a result of this process, the board, including all of 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. - ------ 42 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 Investments' 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. - ------ 43 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-US 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. 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 gross 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 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. - ------ 44 [back cover] [american century logo and text logo] 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 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. 0809 CL-ANN-61590N American Century Investment Services, Inc., Distributor ©2008 American Century Proprietary Holdings, Inc. All rights reserved.
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) John R. Whitten, 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 2007: $67,340 FY 2008: $76,990 (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 2007: $0 FY 2008: $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 2007: $0 FY 2008: $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 2007: $8,791* FY 2008: $0 * This amount has been restated as certain prior year services related to review of federal and state income tax forms and federal excise tax forms that were paid in advance were refunded as management changed service providers. 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 2007: $0 FY 2008: $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 2007: $0 FY 2008: $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 2007: $0 FY 2008: $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 2007: $171,823* FY 2008: $75,493 *This amount has been restated as certain prior year services related to review of federal and state income tax forms and federal excise tax forms that were paid in advance were refunded as management changed service providers. (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. INVESTMENTS. (a) The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. (b) Not applicable. 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 29, 2008 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 29, 2008 By: /s/ Robert J. Leach --------------------------------------- Name: Robert J. Leach Title: Vice President, Treasurer, and Chief Financial Officer (principal financial officer) Date: September 29, 2008