N-CSR 1 ncsr1005.txt AMBEACON FUNDS N-CSR FOR 10/31/2005 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: 811-4984 AMERICAN BEACON FUNDS (Exact name of registrant as specified in charter) 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Address of principal executive offices)-(Zip code) WILLIAM F. QUINN, PRESIDENT 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Name and address of agent for service) Registrant's telephone number, including area code: (817) 967-3509 Date of fiscal year end: October 31, 2005 Date of reporting period: October 31, 2005 ITEM 1. REPORT TO STOCKHOLDERS. G U I D A N C E | V I S I O N | E X P E R I E N C E [AMERICAN BEACON FUNDS LOGO] ANNUAL REPORT [PHOTO] OCTOBER 31, 2005 EQUITY FUNDS Balanced Fund Large Cap Value Fund Large Cap Growth Fund Mid-Cap Value Fund Emerging Markets Fund BOND FUNDS High Yield Bond Fund Enhanced Income Fund Intermediate Bond Fund Short-Term Bond Fund Formerly known as the American AAdvantage Funds About American Beacon Advisors -------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
Contents ----------------------------------------------- President's Message........... 1 American Beacon Funds' Performance ............... 2 Market and Performance Overviews.................. 3-28 American Beacon Schedules of Investments Balanced Fund.............. 30 Large Cap Value Fund....... 39 Large Cap Growth Fund...... 43 Mid-Cap Value Fund......... 48 Emerging Markets Fund...... 51 High Yield Bond Fund....... 58 Enhanced Income Fund....... 66 Intermediate Bond Fund..... 72 Short-Term Bond Fund....... 78 Additional Information........ Back Cover
Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability and differences in accounting standards. American Beacon Funds October 31, 2005 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Iam pleased to present you with the Annual Report for the American Beacon Funds for the year ended October 31, 2005. As investors faced increasing oil prices, rising interest rates and devastating hurricane damage, most financial markets experienced modest growth. The Dow Jones Industrial Average posted gains of 6.5%, the S&P 500 Index increased by 8.7% and the MSCI EAFE Index returned 18.1%. As of October 31, 2005, the 10-Year Treasury interest rate was 4.6%, resulting in a 1.13% total return for the bond market, as defined by the Lehman Brothers Aggregate Index. Additionally, the Federal Reserve increased the Fed Funds Rate to 3.75%, up 200 basis points (2.0%) from a year ago. The American Beacon equity funds posted strong returns in both absolute and relative terms for the fiscal year as many funds reported positive double digit returns. The Balanced and Large Cap Value Funds posted gains of 10.5% and 16.6%, respectively, for the period and surpassed their respective Lipper benchmarks for the one-year period ended October 31, 2005. Our Mid-Cap Value Fund-Institutional Class outperformed its respective Lipper peer group with a return of 14.6% for the year. The Institutional Class of the Emerging Markets Fund posted a positive return of 30.1% for the twelve months. On the fixed-income front, we saw rising rates offset our coupons to some extent resulting in modest but positive returns. The Enhanced Income, High Yield Bond, Intermediate Bond and Short-Term Bond Funds all posted positive returns for the twelve month period. Please review the enclosed market overviews, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or access your account information, please visit our web site at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Funds. Sincerely, /s/ WILLIAM F. QUINN William F. Quinn President, American Beacon Funds Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. 1 AMERICAN BEACON FUNDS October 31, 2005 (Unaudited) --------------------------------------------------------------------------------
AVERAGE ANNUALIZED TOTAL RETURN AS OF OCTOBER 31, 2005 --------------------------------------- INCEPTION TICKER 10 YEAR/ DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEP. --------- ------ ------ ------ ------ ------------ Balanced Fund -- Institutional 7/17/87 AADBX 10.53% 14.32% 8.09% 9.04% Balanced Fund -- PlanAhead 8/1/94 AABPX 10.12% 13.91% 7.79% 8.74% Balanced Fund -- Service 5/31/05 ABLSX 9.81% 13.80% 7.73% 8.70% Balanced Fund -- AMR 8/1/94 AABNX 10.63% 14.54% 8.37% 9.33% Lipper Balanced Funds Index 7.16% 10.45% 2.58% 7.72% Large Cap Value Fund -- Institutional 7/17/87 AADEX 16.64% 20.76% 8.96% 10.64% Large Cap Value Fund -- PlanAhead 8/1/94 AAGPX 16.33% 20.44% 8.65% 10.32% Large Cap Value Fund -- Service 5/31/05 AVASX 16.16% 20.38% 8.62% 10.30% Large Cap Value Fund -- AMR 8/1/94 AAGAX 16.95% 21.07% 9.23% 10.92% Lipper Multi-Cap Value Funds Index 11.13% 16.90% 5.78% 10.08% Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 7.06% 11.44% -8.04% -8.49% Large Cap Growth Fund -- AMR 7/31/00 ALFIX 7.22% 11.54% -7.93% -8.37% Lipper Large-Cap Growth Funds Index 12.09% 10.88% -7.90% -8.43% Mid-Cap Value Fund -- Institutional 6/30/04 AMDIX 14.63% N/A N/A 13.01% Lipper Mid-Cap Value Funds Index 13.73% N/A N/A 10.60% Emerging Markets Fund -- Institutional 7/31/00 AEMFX 30.11% 32.22% 15.64% 10.50% Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 29.95% 31.92% 15.45% 10.34% Emerging Markets Fund -- AMR 7/31/00 AAMRX 30.43% 32.56% 15.92% 10.79% Lipper Emerging Markets Funds Index 32.97% 33.86% 14.86% 10.51% High Yield Bond Fund -- Institutional 12/29/00 AYBFX 3.03% 10.89% N/A 9.13% High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 2.69% 10.52% N/A 8.71% High Yield Bond Fund -- Service 5/1/03 AAHSX 2.33% 9.97% N/A 8.37% Lipper High Current Yield Funds Index 4.12% 14.62% N/A 6.60% Enhanced Income Fund -- PlanAhead 7/1/03 AANPX 1.32% N/A N/A 2.71% Lipper Interm. Investment Grade Index 1.40% N/A N/A 2.47% Intermediate Bond Fund -- Institutional 9/15/97 AABDX 1.26% 3.74% 5.99% 5.78% Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX 0.54% 3.20% 5.44% 5.34% Lipper Interm. Investment Grade Index 1.40% 4.40% 6.16% 5.85% Short-Term Bond Fund -- Institutional 12/3/87 AASBX 1.00% 2.40% 4.32% 4.93% Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 0.46% 1.89% 3.85% 4.43% Lipper Short Investment Grade Index 1.12% 2.13% 3.79% 4.61%
Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Performance shown for the PlanAhead and AMR Classes prior to their inception dates is that of the Institutional Class. Performance shown for the Service Class prior to its inception date is that of the Institutional and PlanAhead Classes since their inception dates. Fund performance does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 DOMESTIC EQUITY MARKET OVERVIEW October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- Toward the end of 2004, the U.S. equity markets rallied, posting particularly strong results. The broad market surged in the final quarter of 2004, as many indicators pointed to a respectable expansion and election uncertainty was removed. Strong Gross Domestic Product (GDP) growth, a gradually improving labor market and easing of oil prices from prior highs were all factors that contributed to the rally. Stocks got off to a weak start in the first quarter of 2005. Though productivity and economic growth remained strong, equities faced dual headwinds of rising oil prices and interest rates. While both styles struggled, value stocks in the Russell indices outperformed their growth counterparts in the first quarter. With regard to size, mid-cap stocks held up the best, followed by large caps. Small cap issues trailed in the quarter, likely on pressure from profit taking after several quarters of outperformance. Sector performance varied widely in the S&P 500 Index, with more than 25 percentage points separating the top performer from the bottom. Four of the ten sectors advanced in the first quarter. Energy was by far the strongest performer in the quarter, posting a total return of +17.58%. Telecommunication Services, Information Technology, Financials and Consumer Discretionary were the worst-performing sectors in the first quarter, all declining more than 5%. Despite record oil prices and decelerating growth in U.S. operating earnings, most major domestic equity indices managed to reverse course from the prior quarter and eke out low single-digit gains in the second quarter of 2005. Overall, growth stocks in the Russell indices outperformed their value counterparts in the second quarter. With regard to size, small cap stocks performed the best, followed by midcaps, with large cap issues bringing up the rear. Sector performance varied widely in the S&P 500 Index, with more than 18 percentage points separating the leader from the laggard, and six of the ten sectors advanced. The defensive Utilities sector was the strongest performer, rising 9.31%. Materials was the worst-performing sector, posting a total return of -9.46%. During the third quarter of 2005, stocks posted solid gains across the board. Overall, growth stocks in the Russell indices outperformed their value counterparts in the third quarter. With regard to size, midcap stocks performed the best, followed by small caps, with large cap issues bringing up the rear. Sector performance again varied widely in the S&P 500 Index, with more than 19 percentage points separating the leader from the laggard, with all but two of the ten sectors advancing during the quarter. Sky-rocketing oil prices made Energy the big winner, rising 18.25%. The Telecommunication Services and Consumer Discretionary sectors were both in negative territory, posting total returns of -1.05% and -0.88%, respectively. Some investors were disappointed that the Fed didn't decide to hold off on its rate hike in the wake of Hurricane Katrina. While both Katrina and Rita were tragic events with significant human as well as economic loss, the Federal Open Market Committee (FOMC) stated that it believes the impact on the economy will be transitory. As largely expected, the FOMC raised the Federal Funds target 25 basis points (.25%) at both its August and September meetings to stand at 3.75%. The U.S. stock market pulled back slightly in October, with the major equity indices posting low-single digit losses. Contrary to recent trends, growth stocks outperformed their value counterparts for the month. With respect to size, large cap issues led, followed by mid-caps, with small cap stocks trailing the pack. Most international equity markets reported low- to mid-single digit loses for the month. Only two of the ten sectors in the S&P 500 Index posted gains in October. The best-performing sectors were Financials and Materials, returning 3.16% and 0.51%, respectively. Energy was the worst-performing sector with a return of -9.35%. 3 PERFORMANCE OVERVIEW AMERICAN BEACON BALANCED FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Balanced Fund's Institutional Class returned 10.53% for the twelve months ended October 31, 2005, outperforming the 60% S&P 500 Barra Value/40% Lehman Brothers Aggregate Index benchmark return of 6.58% and the Lipper Balanced Funds Index return of 7.16%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/95 THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER S&P 500 / INSTITUTIONAL BALANCED S&P 500 BARRA VALUE LEHMAN BROS CLASS FUNDS INDEX INDEX INDEX AGG INDEX ------------- ----------- ------- ----------- ----------- 10/95 10000 10000 10000 10000 10000 10/96 11646 11450 12409 12461 10583 10/97 13980 13769 16394 16162 11527 10/98 15244 15250 19998 18059 12601 10/99 15324 17167 25132 21492 12668 10/00 16111 18525 26663 23573 13593 10/01 16766 16904 20024 19231 15572 10/02 15904 15616 16998 16196 16489 10/03 19049 18147 20534 20216 17299 10/04 21500 19635 22468 23139 18255 10/05 23764 21041 24427 25493 18462 BALANCED COMPOSITE INDEX --------- 10/95 10000 10/96 11684 10/97 14162 10/98 15791 10/99 17605 10/00 19191 10/01 18021 10/02 16763 10/03 19598 10/04 21720 10/05 23149
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/05 $10,000 --------------------------- 10/31/95- 1 YEAR 5 YEARS 10 YEARS 10/31/05 ------ ------- -------- --------- Institutional Class(1).... 10.53% 8.09% 9.04% $23,764 PlanAhead Class(1)........ 10.12% 7.79% 8.74% $23,104 Service Class(1).......... 9.81% 7.73% 8.70% $23,038 AMR Class(1).............. 10.63% 8.37% 9.33% $24,401 Lipper Balanced Funds Index.................... 7.16% 2.58% 7.72% $21,041 S&P 500 Index(2).......... 8.72% -1.74% 9.34% $24,427 S&P 500/Barra Value Index(2)................. 10.17% 1.58% 9.81% $25,493 Lehman Bros. Aggregate Index(2)................. 1.13% 6.31% 6.32% $18,462 Balanced Composite Index(3)................. 6.58% 3.82% 8.76% $23,149
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The S&P 500 Index is an unmanaged index of common stocks publicly traded in the United States. The S&P 500/ Barra Value Index is a market value weighted index of stocks with book-to-price ratios in the top 50% of the S&P 500 Index. The Lehman Brothers Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. 3. 60% S&P 500/Barra Value, 40% LB Aggregate Index During the twelve-month period, the Fund's assets on average were invested 66% in equities (including equitized cash) and 34% in fixed-income securities, ending the period with 65% in equities/equitized cash and 35% in fixed-income securities. The equity portion of the Fund excluding equitized cash returned 18.8%, outperforming the S&P 500/Barra Value Index ("Barra Value Index") return of 10.2%. The Fund's stock holdings added value relative to the Barra Value Index mostly through stock selection although sector allocation also was positive. Stock selection in the Consumer Discretionary and Financials sectors contributed most to the Fund's excess performance. In the Consumer Discretionary sector, the Fund's positions in Sears Holdings Corp. (up 44.2%), Centex Corp. (up 24.3%) and MGM Mirage, Inc. (up 38.9%) had the largest impact, while MetLife, Inc. (up 30.4%), Prudential Financial Inc. (up 58.7%) and The St. Paul Travelers Companies, Inc. (up 35.7%) were the largest contributors to the positive performance of the Financials sector. Selection in the Consumers Staples and Industrials sectors was also a source of significant added value. Strong performers included Altria Group (up 62.0%) and Dean Foods Co. (up 42.6%) in the Consumer Staples sector and Boeing Co. (up 31.7%) and Burlington Northern Santa Fe Corp. (up 50.5%) in the Industrials sector. Equity sector allocation also had an impact on the Fund's relative returns during the twelve-month period. The Fund was underweight in the Energy sector in November 2004 but benefited from an overweight in this best performing sector of the Barra Value Index over the rest of the twelve months. Underweighting the Telecommunications Services and Consumer Discretionary sectors, the two poorest performing sectors of the Barra Value Index, also added value. 4 PERFORMANCE OVERVIEW AMERICAN BEACON BALANCED FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The fixed-income portion of the Fund returned 0.5% for the twelve-month period, lagging the Lehman Brothers Aggregate Index ("Lehman Index") return of 1.1%. The Fund's fixed-income underperformance was due mostly to its significantly longer duration relative to the Lehman Index during February and the early part of March as interest rates were rising. The Fund's duration has been significantly shorter than the Lehman Index since the latter part of March, which has generally been positive for the Fund's performance during the last few months of the Fund's fiscal year. The sub-advisors continue to focus on the disciplined selection of attractive securities with a goal of long-term added value. TOP TEN EQUITY HOLDINGS
% OF EQUITIES -------- ConocoPhillips 3.4% Citigroup, Incorporated 2.5% Altria Group, Incorporated 2.5% Tyco International Limited 1.9% Bank of American Corporation 1.9% MetLife, Incorporated 1.8% The St. Paul Travelers Companies, Incorporated 1.8% Electronic Data Systems Corporation 1.8% Washington Mutual, Incorporated 1.7% Computer Associates International, Incorporated 1.6% ----- Total 20.9% Top Ten Equity Holdings as % of Total Net Assets 12.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Financials 30.4% Industrials 12.2% Energy 10.9% Consumer Staples 9.3% Consumer Discretionary 8.5% Health Care 7.8% Information Technology 7.1% Utilities 5.6% Materials 5.5% Telecommunication Services 2.8%
FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ U.S. Treasury 30.2% Mortgage-Backed 29.3% Corporates 23.4% Agency 16.5% Asset-Backed 0.6%
5 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP VALUE FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Value Fund returned 16.64% for the twelve months ended October 31, 2005, well ahead of the S&P 500/Barra Value Index ("Index") return of 10.17% and the Lipper Multi-Cap Value Funds Index return of 11.13%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/95 THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER MULTI-CAP S&P 500/BARRA INSTITUTIONAL CLASS VALUE FUNDS INDEX S&P 500 INDEX VALUE INDEX ------------------- ----------------- ------------- ------------- 10/95 10000 10000 10000 10000 10/96 12337 12055 12409 12461 10/97 15798 15583 16394 16162 10/98 16790 16333 19998 18059 10/99 17078 17948 25132 21492 10/00 17900 19718 26663 23573 10/01 17504 18470 20024 19231 10/02 15609 16350 16998 16196 10/03 19870 20810 20534 20216 10/04 23563 23500 22468 23139 10/05 27484 26116 24427 25493
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/05 $10,000 --------------------------- 10/31/95- 1 YEAR 5 YEARS 10 YEARS 10/31/05 ------ ------- -------- --------- Institutional Class(1).............. 16.64% 8.96% 10.64% $27,484 PlanAhead Class(1)..... 16.33% 8.65% 10.32% $26,701 Service Class(1)....... 16.16% 8.62% 10.30% $26,662 AMR Class(1)........... 16.95% 9.23% 10.92% $28,188 Lipper Multi-Cap Value Funds Index........... 11.13% 5.78% 10.08% $26,116 S&P 500 Index(2)....... 8.72% -1.74% 9.34% $24,427 S&P 500/Barra Value Index(2).............. 10.17% 1.58% 9.81% $25,493
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The S&P 500 Index is an unmanaged index of common stocks publicly traded in the United States. The S&P 500/Barra Value Index is a market value weighted index of stocks with book-to-price ratios in the top 50% of the S&P 500 Index. The Fund outperformed the Index primarily through strong stock selection, although sector allocation also added to the excess performance. From a stock selection standpoint, the largest contributors were in the Consumer Discretionary and Financials sectors. The companies with the most impact in the Consumer Discretionary sector were Sears Holdings Corp. (up 44.2%), J.C. Penney Company, Inc. (up 49.6%) and Centex Corp. (up 24.3%). In the Financials sector, MetLife, Inc. (up 30.4%) and Prudential Financial, Inc. (up 58.7%) were the largest contributors. Positive stock selection in Consumer Staples, mostly through Altria Group (up 62.0%) and in Industrials, primarily through Boeing (up 31.7%) also added meaningful value versus the Index. Sector weightings also added value during the period. For most of its fiscal year, the Fund overweighted Energy, the best performing sector of the Index. An underweight in the Telecommunications Services and Consumer Discretionary sectors, which were the only sectors of the Index that produced negative returns, also contributed to the Fund's added value. The sub-advisors continue to invest in a broadly diversified portfolio of companies that they believe have attractive valuations and above average earnings growth potential. This approach should allow the Fund to benefit over the long-term. TOP TEN HOLDINGS
% OF NET ASSETS ---------- ConocoPhillips 3.0% Tyco International Limited 1.9% Altria Group, Incorporated 1.7% JP Morgan Chase & Company 1.6% Citigroup, Incorporated 1.6% Washington Mutual, Incorporated 1.3% Electronic Data Systems Corporation 1.2% MetLife, Incorporated 1.2% Bank of America Corporation 1.2% The St. Paul Travelers Companies, Incorporated 1.2%
6 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP VALUE FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- SECTOR ALLOCATION
% OF EQUITIES -------- Financials 29.7% Industrials 12.1% Energy 10.2% Consumer Discretionary 9.6% Consumer Staples 9.5% Information Technology 8.4% Health Care 7.1% Materials 5.0% Utilities 4.2% Telecommunication Services 4.2%
7 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP GROWTH FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Growth Fund returned 7.06% for the twelve months ended October 31, 2005, compared to the Russell 1000 Growth Index ("Index") return of 8.81% and the Lipper Large-Cap Growth Funds Index return of 12.09%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/05 (LINE GRAPH)
LIPPER LARGE-CAP RUSSELL 1000 GROWTH INSTITUTIONAL CLASS GROWTH FUNDS INDEX INDEX ------------------- ------------------ ------------------- 7/00 10000 10000 10000 10/00 9540 9505 9407 10/01 5665 5678 5649 10/02 4534 4620 4541 10/03 5493 5476 5531 10/04 5862 5620 5718 10/05 6276 6299 6222
* Inception of Fund
ANNUALIZED TOTAL RETURNS ------------------------------- VALUE OF PERIODS ENDED 10/31/05 $10,000 ------------------------------- 7/31/00- 1 YEAR 5 YEARS SINCE INCEP. 10/31/05 ------ ------- ------------ -------- Institutional Class(1)............ 7.06% -8.04% -8.49% $6,276 AMR Class(1)......... 7.22% -7.93% -8.37% $6,319 Lipper Large-Cap Growth Funds Index............... 12.09% -7.90% -8.43% $6,299 Russell 1000 Growth Index(2)............ 8.81% -7.93% -8.64% $6,222
Russell 1000(R) Growth Index is a service mark of the Frank Russell Company. 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Russell 1000(R) Growth Index is a service mark of the Frank Russell Company. The Russell 1000 Growth Index is an unmanaged index of those stocks in the Russell 1000 Index with above-average price-to-book ratios and above-average forecasted growth values. This has been a positive period for U.S. growth stocks overall. During the Fund's fiscal year, nine out of ten sectors in the Index posted positive returns. While sector weighting decisions were additive in six out of ten sectors and mildly beneficial overall for the Fund, stock selection hurt relative performance during the period. The largest value-added sectors for the Fund relative to the Index were Consumer Staples and Financials. Positions in Altria Group, Inc., 7-Eleven, Inc., and Gillette Company contributed most to the Consumer Staples sector's relative performance. In Financials, positions in Loews Corp., Prudential Financial, Inc. and Moody's Corp. were the largest contributors relative to the Index. The sectors which detracted most from relative performance were the Consumer Discretionary and Health Care sectors. The Fund was hurt by Harman International Industries, Inc., Gannett Co., Inc., and Ebay, Inc. in the Consumer Discretionary sector while positions in Biogen Idec, Inc., UnitedHealth Group, Inc., OSI Pharmaceuticals, Inc., and Genentech, Inc. in the Health Care sector hurt relative performance most. Looking forward, the Fund's sub-advisors will continue to maintain a disciplined, long-term approach to equity investing in larger stocks with above average growth potential. TOP TEN HOLDINGS
% OF NET ASSETS ---------- General Electric Company 4.7% Johnson & Johnson 3.3% Microsoft Corporation 3.0% Amgen, Incorporated 2.7% Altria Group, Incorporated 2.6% Intel Corporation 2.4% The Boeing Company 2.2% Procter & Gamble Company 2.0% Google, Incorporated 1.9% Qualcomm, Incorporated 1.7%
8 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP GROWTH FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- SECTOR ALLOCATION
% OF EQUITIES -------- Information Technology 23.8% Health Care 19.6% Consumer Discretionary 16.1% Industrials 14.4% Financials 9.3% Consumer Staples 9.0% Energy 3.4% Materials 2.3% Utilities 1.5% Telecommunication Services 0.6%
9 PERFORMANCE OVERVIEW AMERICAN BEACON MID-CAP VALUE FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Mid-Cap Value Fund returned 14.63% for the twelve month period ended October 31, 2005. The Fund trailed the Russell Midcap Value Index ("Index") return of 19.50% but outperformed the Lipper Mid-Cap Value Funds Index return of 13.73%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 6/30/04* THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER MID-CAP VALUE RUSSELL MIDCAP VALUE INSTITUTIONAL CLASS FUNDS INDEX INDEX ------------------- -------------------- -------------------- 6/04 10000 10000 10000 10/04 10270 10058 10409 10/05 11773 11439 12439
TOTAL RETURNS --------------------- PERIODS ENDED VALUE OF 10/31/05 $10,000 --------------------- 6/30/04- 1 YEAR SINCE INCEP. 10/31/05 ------ ------------ ---------- Institutional Class(1)............. 14.63% 13.01% $11,773 Lipper Mid-Cap Value Funds Index.......... 13.73% 10.60% $11,439 Russell Midcap Value Index(2)............. 19.50% 17.78% $12,439
Russell Midcap(TM) Value Index is a trademark of the Frank Russell Company. 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Russell Midcap(TM) Value Index is a trademark of the Frank Russell Company. The Russell Midcap Value Index is an unmanaged index of those stocks in the Russell Midcap Index with below-average price-to-book ratios and below-average forecasted growth values. The Fund underperformed the Index due to stock selection, as sector allocation added value. The Fund's investments in the Financials and Consumer Discretionary sectors detracted most from performance. In the Financials sector, large positions in XL Capital Ltd. (down 9.2%) and IPC Holdings Ltd. (down 33.4%) accounted for the bulk of the underperformance. In the Consumer Discretionary sector, the Fund's investment in Lear Corp. (down 42.3%) and Rent-A-Center, Inc. (down 24.9%) detracted most from performance. Stock selection in the Health Care sector also hurt the Fund's performance, where Valeant Pharmaceuticals Intl. (down 27.7%) and Hillenbrand Industries, Inc. (down 5.5%) were the largest detractors. Sector weightings added to the Fund's performance relative to the Index. A large overweight in Health Care, which was the second best performing sector of the Index was responsible for most of the excess performance attributable to sector allocation, but was partially offset by overweighting Consumer Discretionary (one of the poorer performing sectors of the Index) and underweighting Energy which was the best performing sector of the Index. The sub-advisors' philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer-term. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Whirlpool Corporation 3.6% Loews Corporation 3.3% AmerisourceBergen Corporation 2.5% Torchmark, Incorporated 2.2% XL Capital Limited 2.2% Johnson Controls, Incorporated 2.0% The TJX Companies, Incorporated 2.0% WellChoice, Incorporated + 2.0% Sempra Energy 2.0% Marathon Oil Corporation 2.0%
10 PERFORMANCE OVERVIEW AMERICAN BEACON MID-CAP VALUE FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- SECTOR ALLOCATION
% OF EQUITIES -------- Financials 32.1% Consumer Discretionary 27.6% Industrials 15.6% Utilities 8.4% Health Care 6.2% Consumer Staples 4.6% Energy 2.1% Information Technology 1.9% Materials 1.6%
11 EMERGING MARKETS OVERVIEW October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- During the twelve months ending October 31, 2005, the Emerging Markets as measured by the MSCI Emerging Markets index gained 33.8%. Emerging Markets continued to shine despite the prospects of a global slowdown and rising interest rates. Favorable valuations relative to the developed world and stronger underlying economies continued to entice investors. Latin America (+61.2%) was the best performing region, with Mexico and Brazil outperforming major markets. Mexico rallied on the back of positive domestic demand data and reduced political concerns. In Brazil, investors ignored political concerns and instead focused on the country's strong economic fundamentals including an improved balance of payments position. Emerging Europe, the Middle East and South Africa (EMEA), led by a surge in Middle East markets, followed returning 39.3%. Asia despite returning a solid 23.6% lagged other regions given the poor performance from index heavy-weight Taiwan. Latin America (+61.2%) outperformed given the strong economic outlook for the region as higher commodity prices, low interest rates and emerging local consumer continued to fuel growth. Brazil was particularly strong as country and company fundamentals remained supportive. Investors continued to expect prudent policies and solid economic fundamentals to support the equity market and help the country weather any external shocks. In addition, monetary easing is expected to continue and for local investor participation to increase as rates decline. Mexico followed returning 52.6% given positive domestic demand trends in the country and attractive valuations. The operating environment for Mexican consumer companies remained solid as domestic consumption remains healthy with select companies increasing market share and generating strong free cash flow. In Mexico, the increased reliance on domestic financing, high oil prices, and overall orthodox monetary and fiscal policies proved to be supportive of the market as political noise increased during the year. Egypt was the best performing market in EMEA region returning +160%. The country benefited from increased foreign inflows as attractive valuations, prospects for continued reform-led growth and stable political outlook enticed investors. Turkey was the second best performer in the region returning 53.2%. The country entered 2005 with the best prospects in its history for political and economic stability. Recent structural and political reforms, a new $10 billion IMF agreement and lower political risk improved the outlook that tight fiscal policy continues in the coming years, and allay concerns regarding the current account. Asia, despite solid returns from South Korea (+47.0%) and India (+34.7%) underperformed given weakness in Taiwan (+6.0%) and South East Asian markets. South Korea was the top regional performer once again. Local investors continued to increase their equity holdings, preferring equities to property in light of government attempts to curb property price gains. News that North Korea would halt its nuclear program provided another boost for Korean equities. In Taiwan, the underperforming technology sector hampered the market's performance for much of the year. Thailand (+5.4%) and Indonesia (+3.7%), two of the largest South East Asian markets, were the worst performing markets in Asia. Economic growth for both countries continued to disappoint while rising oil prices raised investor concern over the outlook for inflation and current account positions. The long-term outlook for Emerging Markets remains positive given attractive valuations, a much improved structural backdrop and enhanced corporate profitability. Near-term, we will continue to monitor developments regarding global economic growth, US interest rates, events in China and political developments in Mexico, Brazil, Russia, Turkey, Poland and Asia. Sentiment towards the asset class has been relatively high this year and any change in risk appetite continues to leave it vulnerable to near-term corrections. However, given structural improvements in Emerging Markets we believe any selling pressure will be short lived. 12 PERFORMANCE OVERVIEW AMERICAN BEACON EMERGING MARKETS FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Emerging Markets Fund returned 30.11% for the twelve months ended October 31, 2005. The Fund underperformed the MSCI Emerging Markets Index ("Index") return of 33.80% and the Lipper Emerging Market Funds Index return of 32.97%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/05 (PERFORMANCE GRAPH)
MSCI EMG MKTS FREE LIPPER EMG MKT FUNDS INSTITUTIONAL CLASS INDEX INDEX ------------------- ------------------ -------------------- 7/00 10000 10000 10000 10/00 8170 8499 8455 10/01 6657 6488 6578 10/02 7309 7023 7047 10/03 10851 10417 10456 10/04 12983 12398 12713 10/05 16892 16589 16904
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 10/31/05 VALUE OF --------------------------- $10,000 SINCE 7/31/00- 1 YEAR 5 YEARS INCEP. 10/31/05 ------ ------- ------ --------- Institutional Class(1)... 30.11% 15.64% 10.50% $16,892 PlanAhead Class(1,2)..... 29.95% 15.45% 10.34% $16,760 AMR Class(1)............. 30.43% 15.92% 10.79% $17,120 Lipper Funds Index....... 32.97% 14.86% 10.51% $16,904 MSCI Emg Mkts Index(3)... 33.80% 14.31% 10.12% $16,589
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the five-year and since inception periods represents the total returns achieved by the Institutional Class from 7/31/00 up to 10/1/02, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 7/31/00. 3. The MSCI Emerging Markets Index is a market capitalization weighted index composed of companies that are representative of the market structure of developing countries in Latin America, Asia, Eastern Europe, the Middle East and Africa. The Fund returned less than the Index over the twelve-month time period due to Fund expenses, unfavorable stock selection and lower than Index returns in the cash equitization account. These factors more than offset favorable country allocation achieved by the Fund during the period. Despite very strong relative stock selection in South Korea, poor selections in Mexico, Egypt and China negatively impacted the Fund's performance during its fiscal year. In South Korea, Korea Electric Power Corporation gained 64.6%, while Orion Corporation returned nearly 150%. In Mexico, despite Telefonos de Mexico and Kimberly-Clark de Mexico gaining 22.0% and 17.1%, respectively, these stocks underperformed the country return of 53%. In addition, although the Fund's Egyptian holdings returned 110%, they were unable to keep pace with the 158% gains of the Egyptian stocks in the Index. However in China, an investment in Huadian Power detracted from the Fund's performance as the stock dropped 21.0%. Country allocation added value as the Fund overweighted Egypt, which was the top-performing market for the twelve-month period with a return of nearly 158%, and overweighted Mexico, which climbed over 52%. Additionally, the Fund generated value by underweighting the four worst performing markets during the period which were Venezuela (down 34.0%), Taiwan (up 4.7%), Malaysia (up 9.2%) and the Philippines (up 10.6%). The Fund's basic philosophy remains focused on investing in undervalued companies with above-average earnings growth expectations. 13 PERFORMANCE OVERVIEW AMERICAN BEACON EMERGING MARKETS FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- LUKOIL Oil Company, ADR 3.4% Samsung Electronics Company Limited 2.1% Petroleo Brasileiro S.A., ADR 2.1% America Movil, S.A. de C.V., ADR 1.5% Wal-Mart de Mexico, S.A. de C.V. 1.4% Grupo Televisa, S.A., ADR 1.4% Telefonos de Mexico, S.A. de C.V., ADR 1.2% United Microelectronics Corporation 1.1% Companhia Vale do Rio Doce, ADR 1.1% Petroleo Brasileiro S.A., ADR 1.0%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 16.6% Consumer Discretionary 14.0% Telecommunications Services 13.4% Energy 11.7% Information Technology 11.0% Industrials 10.5% Materials 8.3% Consumer Staples 7.8% Utilities 4.7% Health Care 2.0%
COUNTRY ALLOCATION (PIE CHART)
OTHER EUROPE, MIDDLE OTHER SOUTH EAST, SOUTH OTHER LATIN KOREA AFRICA BRAZIL AFRICA TAIWAN MEXICO INDIA CHINA ASIA MALAYSIA AMERICA ISRAEL ----- ------- ------ ------ ------ ------ ----- ----- ----- -------- ------- ------ 16 14.40 13.10 11.80 11.60 9.40 8.00 7.60 4.20 3.00 0.50 0.40
Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability and differences in accounting standards. The risks of investing in foreign equities are heightened when investing in emerging markets. 14 DOMESTIC BOND MARKET OVERVIEW October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT GRADE For the twelve-month period ended October 31, 2005, the investment grade fixed income market, as defined by the Lehman Aggregate Index (the "Index"), produced a 1.13% total return, which was an accomplishment considering that the Federal Reserve Bank raised short-term interest rates 2.00% during this same period. The market's performance was also impressive given that oil prices, which began period at a high $45/barrel, rose to $60/barrel by period end. Fortunately, energy price inflation did not manifest itself in the bond market and fixed income returns were salvaged. See total returns from each of the asset class below:
TOTAL RETURNS ---------------------- PERIODS ENDED 10/31/05 ---------------------- 6 MONTH 12 MONTH ------- -------- Lehman Aggregate 0.15% 1.13% Lehman Gov/Credit 0.07% 0.83% ----------------------------------------------------- SECTOR U.S. Treasury -0.09% 0.88% U.S. Agency 0.46% 1.07% Mortgage-Backed 0.30% 1.75% Commercial MBS -0.09% 0.34% Asset-Backed 0.65% 1.08% U.S. Credit 0.08% 0.65% ----------------------------------------------------- CREDIT RATING Aaa 0.18% 1.23% Aa -0.03% 0.69% A -0.22% 0.87% Baa 0.31% 0.33%
(source: Lehman Brothers) The highest total returns in twelve month period came from the mortgage sector where a combination of reduced issuance, flat refinancing activity, and low relative duration helped this sector outperform. The reduction in mortgage issuance resulted from Fannie Mae and Freddie Mac remaining on the sidelines as they repaired their financial statements and rebuilt capital reserves. With fewer new bonds hitting the market, the outstanding mortgages benefited from relative scarcity. The moderation in prepayment activity reflected the flattening yield curve as short rates rose and long rates remained range bound. Mortgages also benefited from their relatively low duration, which further helped this sector as short rates rose. See changes in yield curve below: (PERFORMANCE GRAPH) 1.89 3.88 2.12 4.21 2.19 4.24 2.26 4.27 2.33 4.29 2.41 4.32 2.48 4.35 2.55 4.37 2 Yr. 2.61 4.38 2.67 4.39 2.73 4.39 2.79 4.40 2.85 4.40 2.92 4.41 2.98 4.41 3.04 4.42 3.10 4.42 3.16 4.43 3.22 4.44 5 Yr. 3.28 4.44 3.32 4.45 3.36 4.45 3.39 4.46 3.43 4.46 3.47 4.47 3.50 4.47 3.54 4.48 3.58 4.49 3.62 4.49 3.65 4.50 3.69 4.50 3.73 4.51 3.76 4.51 3.80 4.52 3.84 4.52 3.87 4.53 3.91 4.53 3.95 4.54 3.99 4.55 10 Yr. 4.02 4.55 4.03 4.55 4.04 4.56 4.05 4.56 4.06 4.56 4.07 4.56 4.08 4.57 4.09 4.57 4.10 4.57 4.11 4.57 4.12 4.58 4.13 4.58 4.14 4.58 4.15 4.58 4.16 4.59 4.17 4.59 4.18 4.59 4.19 4.59 4.20 4.60 4.20 4.60 4.21 4.60 4.22 4.60 4.23 4.61 4.24 4.61 4.25 4.61 4.26 4.61 4.27 4.62 4.28 4.62 4.29 4.62 4.30 4.62 4.31 4.63 4.32 4.63 4.33 4.63 4.34 4.63 4.35 4.64 4.36 4.64 4.37 4.64 4.38 4.64 4.39 4.65 4.40 4.65 4.41 4.65 4.42 4.66 4.43 4.66 4.43 4.66 4.44 4.66 4.45 4.67 4.46 4.67 4.47 4.67 4.48 4.67 4.49 4.68 4.50 4.68 4.51 4.68 4.52 4.68 4.53 4.69 4.54 4.69 4.55 4.69 4.56 4.69 4.57 4.70 4.58 4.70 4.59 4.70 4.60 4.70 4.61 4.71 4.62 4.71 4.63 4.71 4.64 4.71 4.65 4.72 4.65 4.72 4.66 4.72 4.67 4.72 4.68 4.73 4.69 4.73 4.70 4.73 4.71 4.73 4.72 4.74 4.73 4.74 4.74 4.74 4.75 4.74 4.76 4.75 4.77 4.75 4.78 4.75 30 Yr. 4.79 4.75
15 BOND MARKET OVERVIEW October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The U.S. credit sector produced relatively low returns during the twelve month period as credit market volatility increased and issuer-specific risk increased. The primary driver of credit sector returns was the auto manufacturers, Ford and GM. In the first quarter of 2005, the financial condition of these two companies began to deteriorate dramatically as incentive-driven sales took their toll on profitability and as they lost market share to overseas manufacturers. Credit spreads widened and ratings downgrades followed. Since these were two of the largest issuers in the credit markets, their impact was widely felt. (See credit spread chart below.) Ultimately, GM was removed from the investment grade index following its downgrade to junk-bond rating status, and Ford was left at the precipice. Any further deterioration in Ford's credit metrics will pull it out of the investment grade index as well. These two issuers were largely responsible for the negative total returns in the Industrial sector during the period. (PERFORMANCE GRAPH)
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT ----- ---------- --------- -------- ---------- Oct-03 115.00 48.00 57.00 89.00 167.00 114.00 44.00 57.00 90.00 165.00 109.00 44.00 56.00 85.00 157.00 112.00 47.00 56.00 86.00 164.00 108.00 45.00 54.00 83.00 156.00 109.00 47.00 55.00 84.00 158.00 102.00 41.00 49.00 78.00 149.00 103.00 41.00 50.00 80.00 151.00 100.00 39.00 48.00 79.00 146.00 101.00 40.00 49.00 80.00 144.00 100.00 39.00 48.00 81.00 143.00 99.00 39.00 50.00 80.00 141.00 98.00 38.00 49.00 79.00 139.00 Jan-04 97.00 39.00 50.00 79.00 136.00 95.00 38.00 49.00 78.00 134.00 95.00 38.00 49.00 78.00 134.00 96.00 40.00 49.00 79.00 134.00 97.00 40.00 49.00 79.00 136.00 100.00 41.00 53.00 82.00 141.00 95.00 36.00 48.00 77.00 135.00 96.00 35.00 48.00 79.00 136.00 96.00 37.00 49.00 78.00 137.00 97.00 38.00 48.00 78.00 138.00 99.00 38.00 48.00 78.00 143.00 99.00 39.00 48.00 79.00 142.00 99.00 39.00 48.00 79.00 142.00 Apr-04 98.00 40.00 48.00 80.00 140.00 97.00 40.00 48.00 80.00 137.00 98.00 40.00 50.00 80.00 138.00 96.00 41.00 50.00 80.00 133.00 97.00 40.00 51.00 80.00 137.00 103.00 45.00 55.00 86.00 144.00 103.00 42.00 53.00 85.00 147.00 103.00 42.00 53.00 86.00 145.00 102.00 40.00 54.00 85.00 144.00 103.00 41.00 56.00 85.00 145.00 102.00 42.00 56.00 86.00 144.00 102.00 42.00 56.00 86.00 143.00 101.00 41.00 55.00 85.00 141.00 Jul-04 103.00 42.00 57.00 87.00 145.00 103.00 42.00 56.00 87.00 145.00 102.00 41.00 56.00 87.00 142.00 101.00 42.00 56.00 86.00 141.00 99.00 41.00 54.00 85.00 137.00 101.00 42.00 54.00 87.00 141.00 99.00 38.00 52.00 84.00 140.00 99.00 39.00 53.00 85.00 138.00 97.00 38.00 53.00 83.00 136.00 96.00 38.00 53.00 82.00 134.00 96.00 39.00 52.00 82.00 135.00 94.00 40.00 51.00 81.00 132.00 94.00 38.00 51.00 79.00 132.00 Oct-04 94.00 40.00 54.00 80.00 131.00 93.00 40.00 53.00 79.00 130.00 93.00 39.00 52.00 79.00 131.00 95.00 39.00 52.00 78.00 135.00 93.00 38.00 51.00 77.00 131.00 89.00 37.00 48.00 75.00 127.00 87.00 35.00 48.00 73.00 124.00 87.00 35.00 48.00 73.00 122.00 85.00 34.00 45.00 70.00 122.00 86.00 35.00 47.00 71.00 123.00 83.00 32.00 46.00 68.00 120.00 84.00 34.00 48.00 69.00 120.00 83.00 34.00 47.00 68.00 118.00 83.00 34.00 48.00 69.00 119.00 Jan-05 82.00 34.00 46.00 68.00 118.00 84.00 34.00 46.00 68.00 121.00 84.00 34.00 46.00 68.00 123.00 81.00 33.00 44.00 65.00 119.00 80.00 32.00 45.00 66.00 117.00 79.00 30.00 43.00 64.00 116.00 79.00 31.00 43.00 64.00 115.00 77.00 31.00 42.00 63.00 113.00 78.00 32.00 44.00 64.00 113.00 77.00 32.00 42.00 63.00 112.00 84.00 34.00 46.00 67.00 124.00 86.00 36.00 47.00 67.00 129.00 Apr-05 94.00 38.00 50.00 74.00 141.00 94.00 38.00 51.00 73.00 142.00 106.00 40.00 54.00 79.00 167.00 99.00 39.00 53.00 75.00 153.00 102.00 39.00 53.00 77.00 158.00 85.00 39.00 52.00 76.00 120.00 90.00 39.00 54.00 82.00 127.00 88.00 38.00 53.00 79.00 125.00 85.00 36.00 52.00 77.00 120.00 91.00 36.00 60.00 80.00 136.00 91.00 37.00 60.00 80.00 136.00 91.00 37.00 60.00 81.00 136.00 92.00 37.00 59.00 80.00 141.00 Jul-05 90.00 35.00 58.00 79.00 136.00 89.00 36.00 57.00 78.00 136.00 87.00 35.00 56.00 77.00 131.00 85.00 34.00 56.00 75.00 129.00 83.00 35.00 54.00 74.00 124.00 84.00 36.00 56.00 75.00 126.00 84.00 36.00 56.00 73.00 126.00 85.00 36.00 57.00 74.00 126.00 82.00 35.00 56.00 72.00 120.00 87.00 38.00 59.00 77.00 129.00 85.00 37.00 58.00 76.00 126.00 87.00 37.00 59.00 78.00 127.00 86.00 37.00 58.00 77.00 128.00 Oct-05 86.00 36.00 58.00 78.00 127.00
Excluding the auto sector, the credit markets suffered from issuer-specific risk. Issuers essentially became the victims of their own success. Over the past few years, companies have produced very healthy balance sheets reflecting their strong earnings, low capital expenditures, and growing cash balances. While this was an ideal environment for bond holders, equity holders were not impressed. With stock prices relatively flat for many of these companies, equity investors demanded greater returns. As a result, dividend payments have been increasing, stock buy-backs have been enlarged, and companies are beginning to lever up their balance sheets again. The risks have been issuer-specific because some companies responded more aggressively to equity investors than others did. In addition, certain companies attracted the attention of (in)famous corporate raiders who accumulated large equity positions and demanded substantial equity-friendly initiatives. As a result, while the corporate bond market in general is still healthy (strong earnings, low issuance, high cash balances) certain issuers' balance sheets may be a little too healthy. Within the non-corporate sector, the unusually strong performance came from two issuers, Pemex (Mexico's state oil producer) and United Mexican States (Mexico's government bonds). During this period, these bonds rallied along with emerging markets in general, which performed very well. High oil prices also helped Pemex bonds. Utilities and Financials, also performed well during the period. The utility sector benefited from the natural gas distributors as gas prices rose. Additionally, utilities benefited from their relatively long maturities, which helped since the longest end of the treasury curve was essentially flat during the period. The Finance sector returns reflected their strong credit quality. In particular, the insurance sector performed well due to its strong pricing power and diminishing regulatory headline risk (i.e. AIG and Marsh & McLennan). The REIT sector performed well due to the healthy real estate markets. Offsetting some of the Finance sectors returns was its position on the yield curve, primarily 5 to 10 year maturities, which were the most adversely affected among the curve segments. Given the nature of the credit markets during this period, credit quality played a mixed role in relative total returns. In general, credit spreads widened during the twelve month period, which led to outperformance from the highest-rated issuers. Within the government sectors, Agencies outperformed Treasuries due to a combination of spread improvement in the agencies and a slightly 16 BOND MARKET OVERVIEW -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- shorter duration than treasuries. The spread improvement in agencies continued despite the saga surrounding Fannie Mae's accounting problems and the more stringent operating rules imposed by Congress. In general, the new operating mandate is more bond-holder friendly since it increases reserve capital requirements and moderates the allowable growth rate. Equity holders were much more adversely affected by the changes. Additionally, investors appear to have grown accustom to the accounting revisions to Fannie Mae's financial statements and are patiently awaiting completion of the review process. Finally, the asset-backed and commercial mortgage-backed sectors produced returns that were in line with their credit quality and yield curve placement. Both are very highly rated sectors and performed well as the credit markets became volatile. The asset-backed sector has a relatively short average maturity and performed reasonably well as interest rates rose. The commercial mortgage-backed sector has a longer average maturity, closer to the five-year treasury, and produced lower total returns as this was the hardest hit segment of the treasury curve. In total, the fixed income markets continued to offer relatively attractive total returns given the rising interest rates and flattening yield curve. 17 HIGH YIELD BOND MARKET OVERVIEW October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The last twelve months have been a 'real world' example of the dynamics that can exist in the high yield market. With global issues (e.g., the war in Iraq and the tsunami), skyrocketing oil prices, domestic troubles (two hurricanes, two major airline bankruptcies and the auto industry's woes, among other things) and rising interest rates to deal with, the high yield market seems to have taken everything in stride. By the end of October, the Lehman Brothers Corporate High Yield Index spread over Treasuries had shrunk to +373 basis points, the tightest since July 1998. BB rated bonds had contracted to +219 basis points and BB-B spread was 122 basis points, the tightest since the first half of 1998. The overall index spread would have been lower were it not for CCC's, which were averaging 306 basis points over B's, still above the 242 basis points spread reached in January 2004. In that environment, several BB's were trading as tight as 150 basis points, which hardly met the traditional standard for high yield. For example, the $2 billion Nextel 7 3/8% 2015, which traded at 261 basis points as recently as September 1, was 150 basis points over based on speculation that their credit rating might have risen to investment grade. At 12/31/2004, the Lehman Brothers Index was down to 319 basis points over the Treasuries. These spreads touched levels not reached since 1997 and 1986. Due to investors' thirst for yield, quality spreads compressed. The most striking was the difference between B's and BB's. In July 2002 it was 402 basis points. A year ago it was 147 basis points. At this year-end, it was at an all-time low of 103 basis points. Part of the reason was a low occurrence of company distress, creating a better chance that today's B could be tomorrow's BB and today's BB could reach investment grade. These possibilities were mirrored in rating agency upgrades and downgrades, which reached their best ratio in seven years. For only the second time since 1990, the high yield market had a negative January total return, albeit a slim -0.13% for the Lehman Brothers U.S. Corporate High Yield Index. One possible cause of the market's performance was a $1.1 billion January outflow from mutual funds, the largest since May 2004. (While mutual funds aren't really as big a market factor as they once were, they still account for the trades of market timers). The best explanation for January's return was that "it happened in December". While there were worries that rising gasoline prices and higher interest rates would cause pressure on the auto and housing sectors, the overall credit environment remained fairly benign in the first quarter of 2005. The supply of new issues was low. March issuance was an anemic $9.5 billion, the lowest total since last August and only slightly more than one half versus a year ago. During the March decline, it was not easy to buy decent quantity. When the high yield index outperforms Treasuries by approximately 4% in one month, as in July, that can only mean that spreads tightened. Indeed, the Lehman index aggregate spread dipped to 337 basis points from 395 basis points the month before. With higher yielding GM bonds rated BB, the BB-to-B spread hit an all-time record low of only 74 basis points. Exactly three years before (think corporate scandals, heavy downgrades, bankruptcies) the BB-to-B differential was 402 basis points. While B's tightened last month versus BB's, there was still some caution in the distressed end of the market where a 337 basis points spread between B and CCC remained well above this year's low. Tight spreads have been the result of good market technicals (supply/demand) and positive event risk. Market size (supply) shrank slightly as a modest $8 billion of new issues was not enough to offset maturities and tenders. Many would-be issuers found terms in the second lien bank market more attractive. Event risk was positive: a) zero defaults for the second month in a row, b) an excellent ratio of upgrades to downgrades of 1.38 to 1 (in July 2002, the ratio was .28 to 1), and c) occasional tender offers to refinance high coupon but not-yet-callable debt. Neither $70 oil, hurricanes nor automobile industry downgrades were able to rattle the high yield market during August. The above factors have led many to forecast that the Federal Reserve may stop 18 HIGH YIELD BOND MARKET OVERVIEW -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- tightening, resulting in lower U.S. Treasury yields (26 basis points on 5 year and 10 year). While the high yield market did not follow suit, it was able to hold its own. Yield spreads widened modestly from 337 basis points at 7/31 to 376 basis points at 8/31 (source: Lehman Brothers High Yield Index). On August 24, Moody's downgraded General Motors (Ba2), GMAC (Ba1), Ford Motor (Ba1) and Ford Motor Credit (Baa3). The ratings actions had surprisingly little market impact as most of the damage to GM took place in July and most of Ford debt is still investment grade. Though the Fund had taken positions in GM and Delphi for a time, our sell discipline took effect as we exited these positions well before Delphi's bankruptcy and the precipitous slide that preceded it. Some negative factors that caused the Lehman Brothers High Yield Index to fall 1% in September were a 31 basis point increase in long-term Treasury yields (as the Fed kept tightening), the worst month of mutual fund outflows since April, the twin bankruptcies of Delta Air Lines and Northwest Airlines and the looming potential bankruptcy of Delphi Corporation. Whether the October 17 change in the bankruptcy law causes more companies to file sooner rather than later remains to be seen. Despite the disparate treatment of GM/GMAC and Ford/Ford Motor Credit in the major indices, the spread between the five major High Yield indexes for the quarter ending September 30 was a mere .03%! (That is something that won't last.) For the quarter, the Lehman Brothers High Yield Index outperformed the Lehman Brothers U.S. Treasury Index by 2.05% and the Lehman U.S. Corporate Index (high grade bonds) by 2.02%, both very respectable showings. 19 PERFORMANCE OVERVIEW AMERICAN BEACON HIGH YIELD BOND FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the High Yield Bond Fund returned 3.03% for the twelve months ended October 31, 2005. The Fund trailed its main indices for the period as the Lipper High Current Yield Funds Index returned 4.12%, the Citigroup High Yield Market Index gained 3.55% and the Lehman Brothers Corporate High Yield Index ("Lehman Index") posted a return of 4.09% for the twelve-month period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/29/00* THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER HIGH LEHMAN BROS CORP CITIGROUP HIGH CURRENT YIELD INSTITUTIONAL CLASS HIGH YIELD INDEX YIELD MARKET INDEX FUNDS INDEX ------------------- ---------------- ------------------ ------------- 12/00 10000 10000 10000 10000 10/01 10533 10199 10224 9618 10/02 11194 9640 9531 9045 10/03 13446 12896 13042 11773 10/04 14816 14484 14664 13081 10/05 15265 15077 15163 13620
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS -------------------------- PERIODS ENDED 10/31/05 VALUE OF -------------------------- $10,000 SINCE 12/29/00- 1 YEARS 3 YEARS INCEP. 10/31/05 ------- ------- ------ --------- Institutional Class(1).............. 3.03% 10.89% 9.13% $15,265 PlanAhead Class(1,2).... 2.69% 10.52% 8.71% $14,982 Service Class(1,3)...... 2.33% 9.97% 8.37% $14,758 Lehman Bros. High Yield Index(4).............. 4.09% 16.08% 8.87% $15,077 Citigroup High Yield Market Index.......... 3.55% 16.74% 9.00% $15,163 Lipper High Current Yield Funds Index..... 4.12% 14.62% 6.60% $13,620
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 12/29/00 up to 3/1/02, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 12/29/00. 3. Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 12/29/00 up to 3/1/02, the returns of the PlanAhead Class from 3/1/02 up to 5/1/03 (the inception date of the Service Class), and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the Institutional and PlanAhead Classes. As a result, total returns shown may be higher than they would have been had the Service Class been in existence since 12/29/00. 4. The Lehman Brothers U.S. Corporate High Yield Index is an unmanaged index of fixed income securities with a maximum credit rating of Ba1, a minimum amount outstanding of $100 million, and at least on year to maturity. 5. The Citigroup High Yield Market Index is an unmanaged index of fixed income securities with a maximum credit rating of BB+, a minimum amount outstanding of $100 million, and at least 1 year to maturity. The Fund, relative to the Lehman Index, was underweighted in three (Communications, Energy and Transportation) of the four best performing sectors. While underweightings in Energy and Transportation were minor, the underweighting in Communications, over 7%, had a more significant impact on the performance of the Fund as the Communications sector gained 5.9%. The Fund was also impacted by an overweighting in the Consumer Cyclical sector, the worst and only sector to post a negative return, as it dropped 0.1%. The Fund overweighted the Financial (the best sector for the period with a return of 7.2%), Technology (up 3.7%) and Consumer Non-Cyclical (up 3.4%) sectors which outperformed the Lehman Index and benefited the Fund. The sub-advisor's "bottom up," security-by-security investment process, with a focus on companies with strong cash flow and fundamental credit strength, began to come back into favor as the period came to a close. It is important to note that any sector over or underweighting is a residual of the investment process and not an active part of the strategy. Higher-rated securities reversed course from 2004 and outperformed lower-rated securities in the first ten months of 2005. The sub-advisor believes 20 PERFORMANCE OVERVIEW AMERICAN BEACON HIGH YIELD BOND FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- that its comprehensive research approach, which has generated outperformance for the Fund in the past, will continue to deliver strong performance over the long term. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Echostar DBS Corporation, 6.625%, Due 10/1/2014(+) 1.4% UNOVA, Incorporated, 7.00%, Due 3/15/2008 1.3% Kabel Deutschland GMBH, 10.625%, Due 7/1/2014, 144A (Note A)(+) 1.2% Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A (Note A) 1.1% Alpharma, Incorporated, 8.625%, Due 5/1/2011 1.1% NDCHealth Corporation, 10.50%, Due 12/1/2012 1.1% MCI, Incorporated, 7.688%, Due 5/1/2009 1.1% The Interpublic Group of Companies, Incorporated, 6.25%, Due 11/15/2014 1.0% Transdigm, Incorporated, 8.375%, Due 7/15/2011 1.0% PetroQuest Energy, Incorporated, 10.375%, Due 5/15/2012 0.9%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 100.0%
Investing in high yield securities involves additional risks when compared to investing in investment grade securities. These include a greater risk of default or bankruptcy and an increased sensitivity to financial difficulties or changes in interest rates. 21 PERFORMANCE OVERVIEW AMERICAN BEACON ENHANCED INCOME FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The PlanAhead Class of the Enhanced Income Fund returned 1.55% for the twelve months ended October 31, 2005. Its benchmark, a blend of 75% Lehman Brothers Gov/Credit Intermediate Index and 25% Merrill Lynch All U.S. Convertibles Index ("Benchmark"), returned 1.38%. The Fund's peer group, the Lipper Intermediate Investment Grade Index, returned 1.40% over the period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/1/03* THROUGH 10/31/05 (LINE GRAPH)
LIPPER INTERMEDIATE ENHANCED INCOME PLANAHEAD CLASS INVESTMENT GRADE INDEX COMPOSITE INDEX --------------- ---------------------- --------------- 7/03 10000 10000 10000 10/03 10032 9924 10088 10/04 10504 10440 10622 10/05 10642 10586 10768
* Inception of Fund
ANNUALIZED TOTAL RETURNS ------------------- PERIODS ENDED 10/31/05 VALUE OF ------------------- $10,000 SINCE 7/01/03- 1 YEAR INCEPTION 10/31/05 ------ --------- -------- PlanAhead Class(1)........... 1.32% 2.71% $10,642 Lipper Intermediate Investment Grade Index..... 1.40% 2.47% $10,586 Enhanced Income Composite Index(2)................... 1.55% 2.80% $10,768
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance shown in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. 75% Lehman Bros. Gov/Credit Intermediate Index, 25% Merrill Lynch All U.S. Convertibles Index. The Lehman Bros. Gov./Credit Intermediate Index is an unmanaged index of investment grade corporate and government debt issues with maturities between one and ten years. The Merrill Lynch All U.S. Convertibles Index is an unmanaged index of domestic securities convertible into U.S. dollar-denominated common stock, ADRs or cash equivalents with greater than $50 million aggregate market value at issuance. The Merrill Lynch Index includes securities of all quality grades. The Fund's assets have been allocated approximately 75% to American Beacon Advisors, Inc. (the "Manager") which invests primarily in income producing, short- and intermediate-term investment grade bonds and 25% to a sub-advisor that invests in securities including convertible bonds, convertible preferreds, high yield bonds and equities in order to try to enhance the return of the overall Fund. For the twelve-month period, the investment grade bond portion of the Fund returned 1.1% on a gross basis compared to a 0.3% return for its portion of the Benchmark. The Manager's security selection within Corporates added the most relative value during the year, followed by security selection in the Mortgage Pass-through sector. The remaining portion of the Fund managed by the Fund's sub-advisor generated a gross return of 5.5%. These results not only beat the 4.5% return of its portion of the Benchmark but also enhanced the Fund's overall return. As issues with greater equity sensitivity (low conversion premiums) performed well for the period, reflecting the positive performance of equities, this portion of the Fund benefited from maintaining greater equity sensitivity relative to its portion of the Benchmark. The Manager and the Fund's sub-advisor remain focused on the Fund's investment objectives of generating income and capital appreciation. TOP TEN HOLDINGS
% OF NET ASSETS ---------- U.S. Treasury Notes, 4.75%, Due 5/15/2014 4.8% U.S. Treasury Notes, 4.00%, Due 2/15/2014 4.3% U.S. Treasury Notes, 5.00%, Due 8/15/2011 3.7% U.S. Treasury Notes, 5.00%, Due 2/15/2011 3.1% Prudential Insurance Company of America, 6.375%, Due 7/23/2006 1.8% General Electric Capital Corporation, 4.125%, Due 3/4/2008 1.8% U.S. Treasury Notes, 3.875%, Due 5/15/2010(+) 1.7% Household Finance Corporation, 5.75%, Due 1/30/2007 1.6% Wachovia Corporation, 6.40%, Due 4/1/2008 1.4% Credit Suisse First Boston, Incorporated, 5.875%, Due 8/1/2006 1.3%
22 PERFORMANCE OVERVIEW AMERICAN BEACON ENHANCED INCOME FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporates 50.1% U.S. Treasury 21.1% Corporate Convertibles 15.7% Mortgage-Backed 9.2% Asset-Backed 2.9% U.S. Agency 1.0%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Financials 52.1% Energy 16.2% Information Technology 13.7% Telecommunication Services 7.5% Industrials 5.5% Consumer Discretionary 5.0%
23 PERFORMANCE OVERVIEW AMERICAN BEACON INTERMEDIATE BOND FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Intermediate Bond Fund returned 1.26% for the twelve months ended October 31, 2005, ahead of the Lehman Brothers Aggregate Index ("Index") return of 1.13% but below the Lipper Intermediate Investment Grade Index return of 1.40%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 9/15/97* THROUGH 10/31/05 (LINE GRAPH)
LIPPER INTERMEDIATE LEHMAN BROS. INSTITUTIONAL CLASS INVESTMENT GRADE INDEX AGGREGATE INDEX ------------------- ---------------------- --------------- 9/97 10000 10000 10000 10/97 10241 10211 10295 10/98 11215 11045 11254 10/99 11097 11074 11314 10/00 11806 11775 12140 10/01 13528 13462 13908 10/02 14146 13952 14727 10/03 14799 14884 15450 10/04 15596 15658 16304 10/05 15792 15878 16489
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ------------------------- PERIODS ENDED 10/31/05 VALUE OF ------------------------- $10,000 SINCE 9/15/97- 1 YEAR 5 YEARS INCEP. 10/31/05 ------ ------- ------ -------- Institutional Class(1)... 1.26% 5.99% 5.78% $15,792 PlanAhead Class(1,2)..... 0.54% 5.44% 5.34% $15,265 Lipper Intermediate Inv. Grade Index............ 1.40% 6.16% 5.85% $15,878 Lehman Bros. Agg. Index(3)............... 1.13% 6.31% 7.72% $16,489
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 9/15/97 up to 3/2/98, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 9/15/97. 3. Since inception return is from 8/31/97. The Lehman Brothers Aggre gate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Fund added value relative to the Index due to security selection primarily in the Corporate and U.S. Treasury sectors. Within the Corporate sector, Industrials accounted for the bulk of the excess performance. However, the Fund's overweight in Corporates, which was the poorest performing sector within the Index, offset some of the gains achieved through security selection. In the U.S. Treasury sector, outperformance was primarily the result of underweighting shorter duration Treasury securities that underperformed. Overall, the Fund's duration was somewhat longer than the Index early in the period, which was beneficial, but became generally neutral in the second half of the period. The Fund's investment managers remain focused on a conservative approach toward investing in the bond market, focusing on issuer-specific opportunities. TOP TEN HOLDINGS
% OF NET ASSETS ---------- U.S. Treasury Note, 4.75%, Due 5/15/2014 2.4% Federal National Mortgage Association, Pool #255364, 6.00%, Due 9/1/2034 2.1% Federal Home Loan Mortgage Corporation, 4.25%, Due 7/15/2009 2.1% United States Treasury Bond, 5.375%, Due 2/15/2031 2.0% United States Treasury Bond, 9.125%, Due 5/15/2018 1.8% Federal National Mortgage Association, Pool #735224, 5.50%, Due 2/1/2035 1.8% Countrywide Alternative Loan Trust, Incorporated, 6.00%, Due 11/25/2035 1.6% United States Treasury Note, 2.00%, Due 1/15/2014 1.5% Federal National Mortgage Association, Pool #254545, 5.00%, Due 12/1/2017 1.5% Federal National Mortgage Association, Pool #555880, 5.50%, Due 11/1/2033 1.4%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Mortgage-Backed 42.4% Corporates 31.9% U.S. Treasury 19.2% U.S. Agency 3.8% Asset-Backed 2.7%
24 PERFORMANCE OVERVIEW AMERICAN BEACON SHORT-TERM BOND FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Short-Term Bond Fund returned 1.00% for the twelve months ended October 31, 2005, ahead of the Merrill Lynch 1-3 Year Gov/Corp Index (the "Index") return of 0.82% but slightly below the Lipper Short Investment Grade Bond Funds Index ("Lipper") return of 1.12%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/95 THROUGH 10/31/05 (LINE GRAPH)
LIPPER SHORT INV. GRADE BOND FUNDS LINKED LIPPER INV. ML 1-3 YR. INSTITUTIONAL CLASS INDEX GRADE AVERAGE GOV./CORP. INDEX ------------------- ----------------- ------------------ ---------------- 10/95 10000 10000 10000 10000 10/96 10538 10552 10454 10600 10/97 11230 11245 11086 11294 10/98 12009 11912 11744 12152 10/99 12348 12303 12087 12544 10/00 13100 13026 12775 13318 10/01 14551 14342 14042 14824 10/02 15075 14725 14417 15542 10/03 15650 15192 14851 16027 10/04 16024 15511 15137 19376 10/05 16185 15684 15283 19535
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/05 $10,000 --------------------------- 10/31/95- 1 YEAR 5 YEARS 10 YEARS 10/31/05 ------ ------- -------- --------- Institutional Class(1).............. 1.00% 4.32% 4.93% $16,185 PlanAhead Class(1)...... 0.46% 3.85% 4.43% $15,422 Lipper Short Inv. Grade Index................. 1.12% 3.79% 4.61% $15,684 Linked Lipper Inv. Grade Average............... 0.96% 3.65% 4.33% $15,283 Merrill Lynch 1-3 Yr. Gov./Corp. Index...... 0.82% 4.37% 1.21% $19,535
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Merrill Lynch 1-3 Yr. Gov./Corp. Index is a market value weighted performance benchmark for government and corporate fixed-rate debt securities with maturities between one and three years. The Fund's total returns reflect its overweight positions in the spread sectors, including corporates, asset-backeds and mortgages -- all of which outperformed treasuries and agencies during the period. Additionally, the Fund's duration was slightly short of the Index during the period, which led to outperformance as interest rates rose. The Fund's largest position during the period was in the corporate sector, which was the best performing sector in the Index. While the broader corporate market underperformed government securities during this period due to spread widening, the shortest maturity corporates (0 to 3 years) outperformed due to their incremental yield to maturity. The Fund also held an overweight position in the asset-backed sector (autos and credit cards), which outperformed their government equivalents during the period due to their incremental yield to maturity. Finally, the Fund also held a small position in the mortgage sector, which contributed to the outperformance relative to the Index as this sector outperformed all of the Index sectors. (Note: the Merrill Lynch 1-3 Gov/Corp Index does not include mortgages.) Mortgages benefited from their relatively short duration in a rising interest rate environment and from a decline in prepayment activity during the period. The Fund's position, however, was underweight relative to Lipper and accounted for some of the Fund's underperformance relative to Lipper. 25 PERFORMANCE OVERVIEW AMERICAN BEACON SHORT-TERM BOND FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A) 3.4% General Electric Capital Corporation, 4.125%, Due 3/4/2008 3.4% Banc of America Securities Auto Trust 2005-WF1 A4, 4.08%, Due 4/18/2010 3.3% MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note A) 3.3% Citibank Credit Card Issuance Trust 2004-A4 A4, 3.20%, Due 8/24/2009 3.3% DaimlerChrysler Auto Trust 2004-C A4, 3.28%, Due 12/8/2009 3.3% Wachovia Corporation, 6.40%, Due 4/1/2008 2.9% Wells Fargo Financial Auto Owner Trust 2004-A A4, 2.67%, Due 8/16/2010 2.9% Synovus Financial Corporation, 7.25%, Due 12/15/2005 2.8% FleetBoston Financial Corporation, 3.85%, Due 2/15/2008 2.8%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporates 69.8% Asset-Backed 22.5% Mortgage-Backed 3.7% Treasury 2.3% Agency 1.7%
26 FUND EXPENSES October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- FUND EXPENSE EXAMPLE As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2005 through October 31, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. 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 in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher.
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD INTERMEDIATE SHORT-TERM INSTITUTIONAL CLASS BALANCED VALUE GROWTH VALUE MARKETS BOND BOND BOND ------------------- ---------- ---------- ---------- --------- ---------- ---------- ------------ ---------- Beginning Account Value 5/1/05.................... $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05.................. $1,040.94 $1,072.52 $1,067.36 $1,075.23 $1,163.20 $1,033.29 $1,001.56 $1,009.05 Expenses Paid During Period* 5/1/05-10/31/05........... $ 3.03 $ 3.09 $ 4.70 $ 5.25 $ 8.17 $ 4.24 $ 1.51 $ 1.70 Annualized Expense Ratio.... 0.59% 0.59% 0.90% 1.00% 1.50% 0.83% 0.30% 0.34%
LARGE CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM PLANAHEAD CLASS BALANCED VALUE MARKETS BOND INCOME BOND BOND --------------- ---------- ---------- ---------- ---------- ---------- ------------ ---------- Beginning Account Value 5/1/05... $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05.... $1,039.53 $1,071.20 $1,162.92 $1,032.05 $1,013.93 $ 998.47 $1,006.45 Expenses Paid During Period* 5/1/05-10/31/05................ $ 4.41 $ 4.47 $ 8.78 $ 5.47 $ 4.30 $ 4.75 $ 4.32 Annualized Expense Ratio......... 0.86% 0.86% 1.61% 1.07% 0.85% 0.94% 0.85%
LARGE CAP HIGH YIELD SERVICE CLASS BALANCED VALUE BOND ------------- ---------- ---------- ---------- Beginning Account Value 5/1/05....................... $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05.. $1,036.60 $1,069.61 $1,030.09 Expenses Paid During Period* 5/1/05-10/31/05.............. $ 5.59 $ 5.29 $ 7.39 Annualized Expense Ratio....... 1.30% 1.21% 1.45%
LARGE CAP LARGE CAP EMERGING AMR CLASS BALANCED VALUE GROWTH MARKETS --------- ---------- ---------- ---------- --------- Beginning Account Value 5/1/05....................... $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05.. $1,041.70 $1,073.90 $1,068.85 $1,165.00 Expenses Paid During Period* 5/1/05-10/31/05.............. $ 1.67 $ 1.78 $ 3.14 $ 6.72 Annualized Expense Ratio....... 0.33% 0.34% 0.60% 1.23%
--------------- * Expenses are equal to the Fund's annualized expense ratios for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 27 FUND EXPENSES October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD INTERMEDIATE SHORT-TERM INSTITUTIONAL CLASS BALANCED VALUE GROWTH VALUE MARKETS BOND BOND BOND ------------------- --------- ---------- ---------- --------- ---------- ---------- ------------ ---------- Beginning Account Value 5/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05 $1,022.24 $1,022.22 $1,020.66 $1,020.15 $1,017.65 $1,021.03 $1,023.69 $1,023.51 Expenses Paid During Period* 5/1/05-10/31/05 $ 3.00 $ 3.02 $ 4.60 $ 5.11 $ 7.62 $ 4.22 $ 1.53 $ 1.71 Annualized Expense Ratio 0.59% 0.59% 0.90% 1.00% 1.50% 0.83% 0.30% 0.34%
LARGE CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM PLANAHEAD CLASS BALANCED VALUE MARKETS BOND INCOME BOND BOND --------------- ---------- ---------- ---------- ---------- ---------- ------------ ---------- Beginning Account Value 5/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05 $1,020.88 $1,020.89 $1,017.09 $1,019.82 $1,020.93 $1,020.45 $1,020.90 Expenses Paid During Period* 5/1/05-10/31/05 $ 4.37 $ 4.36 $ 8.19 $ 5.43 $ 4.32 $ 4.80 $ 4.35 Annualized Expense Ratio 0.86% 0.86% 1.61% 1.07% 0.85% 0.94% 0.85%
LARGE CAP HIGH YIELD SERVICE CLASS BALANCED VALUE BOND ------------- ---------- ---------- ---------- Beginning Account Value 5/1/05 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05 $1,015.61 $1,015.99 $1,017.92 Expenses Paid During Period* 5/1/05-10/31/05 $ 5.53 $ 5.15 $ 7.35 Annualized Expense Ratio 1.30% 1.21% 1.45%
LARGE CAP LARGE CAP EMERGING AMR CLASS BALANCED VALUE GROWTH MARKETS --------- ---------- ---------- ---------- --------- Beginning Account Value 5/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 10/31/05 $1,023.57 $1,023.49 $1,022.17 $1,019.00 Expenses Paid During Period* 5/1/05-10/31/05 $ 1.66 $ 1.74 $ 3.07 $ 6.27 Annualized Expense Ratio 0.33% 0.34% 0.60% 1.23%
--------------- * Expenses are equal to the Fund's annualized expense ratios for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 28 AMERICAN BEACON FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of American Beacon Funds: We have audited the accompanying statements of assets and liabilities of American Beacon Funds (formerly known as the American AAdvantage Funds), comprised of the American Beacon Balanced Fund, American Beacon Large Cap Value Fund, American Beacon Large Cap Growth Fund, American Beacon Mid-Cap Value Fund, American Beacon Emerging Markets Fund, American Beacon High Yield Bond Fund, American Beacon Enhanced Income Fund, American Beacon Intermediate Bond Fund, and American Beacon Short-Term Bond Fund (each a "Fund" and collectively the "Funds") (formerly known as the American AAdvantage Balanced Fund, American AAdvantage Large Cap Value Fund, American AAdvantage Large Cap Growth Fund, American AAdvantage Mid-Cap Value Fund, American AAdvantage Emerging Markets Fund, American AAdvantage High Yield Bond Fund, American AAdvantage Enhanced Income Fund, American AAdvantage Intermediate Bond Fund, and American AAdvantage Short-Term Bond Fund, respectfully), including the schedules of investments, as of October 31, 2005, and the related statements of operations and the statements of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's 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 each Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Funds at October 31, 2005, the results of their operations for the year then ended and the changes in their net assets and financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) Chicago, Illinois December 21, 2005 -------------------------------------------------------------------------------- 29 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 8.43% U.S. TREASURY BONDS - 1.71% 7.50%, Due 11/15/2016(+)..... $ 1,100 $ 1,365 9.125%, Due 5/15/2018........ 2,750 3,884 7.875%, Due 2/15/2021(+)..... 500 665 6.875%, Due 8/15/2025(+)..... 1,580 1,986 6.25%, Due 5/15/2030(+)...... 2,210 2,670 5.375%, Due 2/15/2031(+)..... 3,025 3,299 --------- TOTAL U.S. TREASURY BONDS.................. 13,869 --------- U.S. TREASURY NOTES - 6.72% 1.50%, Due 3/31/2006(+)...... 19,420 19,212 4.00%, Due 9/30/2007(+)...... 395 392 3.375%, Due 2/15/2008(+)..... 1,645 1,608 3.375%, Due 11/15/2008(+).... 6,000 5,820 3.875%, Due 5/15/2009........ 500 491 3.375%, Due 9/15/2009(+)..... 4,115 3,960 3.50%, Due 11/15/2009........ 850 820 3.875%, Due 5/15/2010(+)..... 2,000 1,951 5.75%, Due 8/15/2010(+)...... 900 876 3.875%, Due 9/15/2010(+)..... 1,700 1,793 4.25%, Due 10/15/2010(+)..... 925 917 5.00%, Due 2/15/2011(+)...... 2,350 2,408 4.375%, Due 8/15/2012(+)..... 2,000 1,984 2.00%, Due 1/15/2014......... 3,002 3,011 4.75%, Due 5/15/2014(+)...... 2,900 2,936 4.125%, Due 5/15/2015(+)..... 6,730 6,495 --------- TOTAL U.S. TREASURY NOTES.................. 54,674 --------- TOTAL U.S. TREASURY OBLIGATIONS............ 68,543 --------- U.S. AGENCY OBLIGATIONS - 5.60% FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.69% 3.625%, Due 9/15/2006........ 15,000 14,884 5.875%, Due 3/21/2011(+)..... 495 515 4.50%, Due 1/15/2015(+)...... 15,080 14,601 --------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION... 30,000 --------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.91% 4.375%, Due 9/7/2007......... 15,000 14,900 5.125%, Due 1/2/2014......... 595 591 --------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 15,491 --------- TOTAL U.S. AGENCY OBLIGATIONS............ 45,491 ---------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.67% FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.08% Pool #G10084, 6.50%, Due 3/1/2008............... $ 528 $ 536 Pool #E90777, 5.50%, Due 8/1/2017............... 94 95 Pool #G11295, 5.50%, Due 9/1/2017............... 497 501 Pool #E96536, 5.00%, Due 3/1/2018............... 1,112 1,098 Pool #E01386, 5.00%, Due 6/1/2018............... 604 596 Pool #E97381, 5.50%, Due 6/1/2018............... 208 210 Pool #E01492, 5.50%, Due 10/1/2018.............. 894 900 Pool #B12563, 5.00%, Due 2/1/2019............... 607 600 Pool #E01602, 4.50%, Due 3/1/2019............... 1,235 1,197 Pool #C26472, 6.50%, Due 5/1/2029............... 109 112 Pool #C27089, 6.50%, Due 6/1/2029............... 16 16 Pool #C00835, 6.50%, Due 7/1/2029............... 315 324 Pool #G01457, 6.00%, Due 8/1/2029............... 158 160 Pool #G01533, 6.00%, Due 3/1/2033............... 844 853 Pool #C01598, 5.00%, Due 8/1/2033............... 1,357 1,311 Pool #A12149, 6.00%, Due 8/1/2033............... 723 730 Pool #C01786, 5.50%, Due 2/1/2034............... 2,595 2,563 Pool #C01796, 5.00%, Due 3/1/2034............... 1,679 1,619 Pool #C01848, 6.00%, Due 6/1/2034............... 1,420 1,434 Pool #G08006, 6.00%, Due 8/1/2034............... 1,256 1,269 Pool #A28109, 5.50%, Due 10/1/2034.............. 1,226 1,211 Pool #A27483, 6.00%, Due 10/1/2034.............. 997 1,008 Pool #A30948, 5.50%, Due 1/1/2035............... 1,072 1,059 Pool #A45500, 5.50%, Due 6/1/2035............... 4,319 4,266 Pool #G08072, 5.00%, Due 8/1/2035............... 1,394 1,341 --------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION... 25,009 ---------
See accompanying notes -------------------------------------------------------------------------------- 30 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.26% Pool #488099, 5.50%, Due 2/1/2014............... $ 329 $ 332 Pool #323789, 6.00%, Due 6/1/2014............... 260 266 Pool #535846, 6.00%, Due 4/1/2016............... 629 644 Pool #254545, 5.00%, Due 12/1/2017.............. 1,394 1,377 Pool #555549, 5.00%, Due 6/1/2018............... 1,693 1,671 Pool #254865, 4.50%, Due 9/1/2018............... 2,076 2,011 Pool #100292, 10.00%, Due 9/1/2018............... 168 187 Pool #747844, 5.50%, Due 12/1/2018.............. 123 124 Pool #761337, 5.00%, Due 4/1/2019............... 341 336 Pool #811328, 5.00%, Due 2/1/2020............... 4,049 3,995 Pool #252211, 6.00%, Due 1/1/2029............... 785 794 Pool #725706, 6.00%, Due 8/1/2032............... 353 360 Pool #555531, 5.50%, Due 6/1/2033............... 655 648 Pool #713999, 5.50%, Due 7/1/2033............... 724 715 Pool #727223, 5.50%, Due 9/1/2033............... 1,242 1,227 Pool #749219, 5.50%, Due 10/1/2033.............. 718 710 Pool #555880, 5.50%, Due 11/1/2033.............. 1,720 1,699 Pool #758322, 5.50%, Due 12/1/2033.............. 1,571 1,553 Pool #725238, 5.00%, Due 3/1/2034............... 1,627 1,572 Pool #765304, 5.50%, Due 3/1/2034............... 624 616 Pool #255225, 5.50%, Due 6/1/2034............... 759 750 Pool #725866, 4.50%, Due 9/1/2034............... 1,194 1,117 Pool #255364, 6.00%, Due 9/1/2034............... 2,796 2,821 Pool #796229, 6.00%, Due 11/1/2034.............. 806 813 Pool #781822, 6.00%, Due 12/1/2034.............. 1,503 1,516 Pool #815762, 6.50%, Due 3/1/2035............... 441 452 Pool #828377, 5.50%, Due 6/1/2035............... 2,133 2,105
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Pool #834769, 6.00%, Due 7/1/2035............... $ 2,110 $ 2,128 Pool #830989, 6.00%, Due 8/1/2035............... 2,107 2,126 --------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 34,665 --------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.33% Pool #780085, 11.50%, Due 8/15/2018.............. 129 142 Pool #781200, 8.00%, Due 12/15/2025............. 146 156 Pool #780509, 6.50%, Due 2/15/2027.............. 211 219 Pool #780615, 6.50%, Due 8/15/2027.............. 249 259 Pool #780651, 7.00%, Due 10/15/2027............. 278 293 Pool #780680, 6.50%, Due 11/15/2027............. 640 666 Pool #780747, 6.50%, Due 3/15/2028.............. 238 247 Pool #780788, 6.50%, Due 4/15/2028.............. 239 249 Pool #780842, 8.50%, Due 8/20/2028.............. 119 128 Pool #780936, 7.50%, Due 12/15/2028............. 289 306 Pool #781035, 6.50%, Due 5/15/2029.............. 232 241 Pool #781273, 6.00%, Due 4/15/2031.............. 369 376 Pool #781288, 6.50%, Due 5/15/2031.............. 415 430 Pool #781564, 6.00%, Due 2/15/2033.............. 722 735 Pool #781589, 5.50%, Due 4/15/2033.............. 1,926 1,925 Pool #781603, 5.00%, Due 5/15/2033.............. 858 838 Pool #781636, 5.50%, Due 7/15/2033.............. 1,634 1,633 Pool #781690, 6.00%, Due 12/15/2033............. 825 840 Pool #003515, 5.50%, Due 2/20/2034.............. 1,098 1,095 --------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION............ 10,778 --------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS............ 70,452 ---------
See accompanying notes -------------------------------------------------------------------------------- 31 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) ASSET-BACKED SECURITIES - 0.21% Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009....... $ 1,300 $ 1,286 TXU Electric Delivery Transition, LLC 2004-1 A2, 4.81%, Due 11/15/2012...... 390 385 --------- TOTAL ASSET-BACKED SECURITIES............. 1,671 --------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.28% Banc of America Commercial Mortgage, Incorporated 2003-2 A3, 4.342%, Due 3/11/2041...... 560 544 Banc of America Mortgage Securities, Incorporated 2004-8 3A1, 5.25%, Due 10/25/2019...... 1,217 1,200 Bear Stearns Commercial Mortgage Securities, Incorporated, 2004-PWR5 A4, 4.831%, Due 7/11/2042.... 870 846 2005-T20 A2, 5.217%, Due 10/12/2042... 630 630 Chase Mortgage Finance Corporation 2004-S1 A3, 5.50%, Due 2/25/2019....... 93 93 Citigroup Commercial Mortgage Trust 2004-C2 A3, 4.38%, Due 10/15/2041...... 760 729 Countrywide Alternative Loan Trust, Incorporated 2005-53T2 2A1, 6.00%, Due 11/25/2035...... 1,438 1,453 Countrywide Home Loan, Incorporated 2004-18 A1, 6.00%, Due 10/25/2034...... 543 547 General Electric Capital Commercial Mortgage Corporation 2003-C2 A2, 4.17%, Due 7/10/2037....... 430 420 J P Morgan Chase Commercial Mortgage Securities Corporation, 2004-CBX A4, 4.529%, Due 11/12/2039... 555 537 2005-LDP3 A1, 4.655%, Due 8/15/2042.... 440 437 2005-LDP1 A2, 4.625%, Due 3/15/2046.... 845 830 Prime Mortgage Trust 2005-2 1A3, 5.25%, Due 7/25/2020.............. 2,165 2,153 --------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 10,419 ---------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) CORPORATE BONDS - 7.97% BANKS - 0.76% Banco Popular North America, Incorporated, 4.25%, Due 4/1/2008........ $ 500 $ 491 Bank One Corporation, 5.90%, Due 11/15/2011...... 700 725 4.90%, Due 4/30/2015....... 300 288 Capital One Bank, 6.875%, Due 2/1/2006....... 800 804 6.70%, Due 5/15/2008....... 450 467 4.80%, Due 2/21/2012....... 360 344 5.125%, Due 2/15/2014...... 450 436 Credit Suisse First Boston, 6.50%, Due 5/1/2008........ 750 777 Fleet Norstar Financial Group, Incorporated, 8.625%, Due 1/15/2007...... 600 625 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A).............. 450 444 Synovus Financial Corporation, 4.875%, Due 2/15/2013...... 300 292 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011...... 425 461 --------- TOTAL BANKS.............. 6,154 --------- FINANCE - 2.40% AEGON, NV, 8.00%, Due 8/15/2006....... 300 307 American General Finance Corporation, 5.375%, Due 9/1/2009(+).... 325 328 4.875%, Due 5/15/2010...... 500 494 The Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008....... 800 760 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013....... 300 294 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012...... 400 456 The Chubb Corporation, 4.934%, Due 11/16/2007..... 775 775 Equity Residential, 5.125%, Due 3/15/2016...... 385 373 General Electric Capital Corporation, 6.875%, Due 11/15/2010..... 635 685 The Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013....... 400 384 Household Finance Corporation, 5.75%, Due 1/30/2007....... 1,500 1,517 HSBC Finance Corporation, 4.75%, Due 4/15/2010(+).... 470 464
See accompanying notes -------------------------------------------------------------------------------- 32 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) International Lease Finance Corporation, 6.375%, Due 3/15/2009(+)... $ 1,025 $ 1,064 Liberty Mutual Corporation, 7.875%, Due 10/15/2026, 144A (Note A)(+)........... 1,500 1,641 Lincoln National Corporation, 4.75%, Due 2/15/2014....... 200 192 Merrill Lynch & Company, Incorporated, 6.00%, Due 2/17/2009....... 1,000 1,032 4.25%, Due 2/8/2010(+)..... 615 595 MetLife, Incorporated, 5.00%, Due 6/15/2015....... 385 374 MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note A)................... 650 632 PHH Corporation, 6.00%, Due 3/1/2008........ 500 507 PNC Funding Corporation, 4.20%, Due 3/10/2008....... 545 537 Prudential Financial, Incorporated, 3.75%, Due 5/1/2008(+)..... 185 182 4.50%, Due 7/15/2013(+).... 400 382 5.10%, Due 9/20/2014....... 315 310 Regions Financial Corporation, 4.50%, Due 8/8/2008(+)..... 775 765 Simon Property Group LP, 6.375%, Due 11/15/2007..... 400 410 SLM Corporation, 4.00%, Due 1/15/2009....... 1,500 1,456 4.00%, Due 1/15/2010....... 515 496 4.50%, Due 7/26/2010....... 520 507 Washington Mutual Financial Corporation, 4.625%, Due 4/1/2014....... 850 799 WellPoint, Incorporated, 3.75%, Due 12/14/2007...... 380 371 5.00%, Due 12/15/2014...... 430 419 --------- TOTAL FINANCE............ 19,508 --------- FOREIGN - 0.35% America Movil S.A. de C.V., 6.375%, Due 3/1/2035(+).... 1,020 957 Deutsche Telekom AG, 8.50%, Due 6/15/2010(+).... 280 312 France Telecom SA, 8.50%, Due 3/1/2011........ 550 613 Telecom Italia S.p.A., 4.00%, Due 11/15/2008...... 470 455 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015....... 500 482 --------- TOTAL FOREIGN............ 2,819 ---------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 2.77% Amgen, Incorporated, 4.00%, Due 11/18/2009...... $ 415 $ 402 Anheuser-Busch Companies, Incorporated, 6.50%, Due 1/1/2028........ 872 967 Atlantic Richfield Company, 9.125%, Due 3/1/2011....... 480 570 8.50%, Due 4/1/2012........ 90 107 Baxter International, Incorporated, 5.25%, Due 5/1/2007(+)..... 455 460 Carnival Corporation, 3.75%, Due 11/15/2007(+)... 715 699 Cendant Corporation, 6.875%, Due 8/15/2006...... 990 1,003 Comcast Cable Communications, 7.625%, Due 2/15/2008(+)... 300 315 5.30%, Due 1/15/2014(+).... 710 690 ConAgra Foods, Incorporated, 7.00%, Due 10/1/2028....... 600 642 DaimlerChrysler North America, 4.75%, Due 1/15/2008....... 820 812 7.75%, Due 1/18/2011(+).... 1,000 1,093 John Deere Capital Corporation, 3.375%, Due 10/1/2007...... 650 634 4.375%, Due 3/14/2008...... 355 351 4.40%, Due 7/15/2009....... 275 270 Dell Computer Corporation, 6.55%, Due 4/15/2008....... 400 414 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A)................... 425 409 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014....... 350 331 Hewlett-Packard Company, 5.75%, Due 12/15/2006(+)... 570 576 Kinder Morgan, Incorporated, 6.50%, Due 9/1/2012(+)..... 290 307 Lockheed Martin Corporation, 7.20%, Due 5/1/2036........ 700 828 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007....... 200 206 Nissan Motor Company Limited, 4.625%, Due 3/8/2010....... 410 399 Northrop Grumman Corporation, 4.079%, Due 11/16/2006..... 850 843 7.125%, Due 2/15/2011...... 505 551 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012....... 400 439
See accompanying notes -------------------------------------------------------------------------------- 33 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) The Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029........ $ 650 $ 766 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009...... 300 294 5.25%, Due 1/15/2014....... 275 258 Quest Diagnostics, Incorporated, 5.125%, Due 11/1/2010...... 335 334 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006....... 765 770 Sprint Capital Corporation, 6.00%, Due 1/15/2007....... 800 810 8.375%, Due 3/15/2012...... 175 202 Time Warner, Incorporated, 6.75%, Due 4/15/2011....... 450 475 7.625%, Due 4/15/2031...... 340 383 Unilever Capital Corporation, 7.125%, Due 11/1/2010...... 2,000 2,188 Univision Communications, Incorporated, 3.875%, Due 10/15/2008..... 555 532 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030....... 650 809 Weyerhaeuser Company, 5.95%, Due 11/1/2008.............. 340 348 --------- TOTAL INDUSTRIALS........ 22,487 --------- PHARMACEUTICAL - 0.11% Schering-Plough Corporation, 6.75%, Due 12/1/2033....... 400 450 Wyeth, 5.50%, Due 2/1/2014........ 465 469 --------- TOTAL PHARMACEUTICAL..... 919 --------- TELECOMMUNICATION - 0.69% Alltel Corporation, 4.656%, Due 5/17/2007.............. 520 518 AT&T Broadband Corporation, 8.375%, Due 3/15/2013...... 848 977 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006........ 855 862 8.125%, Due 5/1/2012....... 900 1,035 8.75%, Due 3/1/2031........ 340 443 Motorola, Incorporated, 8.00%, Due 11/1/2011(+).... 480 554 Nextel Communications, Incorporated, 6.875%, Due 10/31/2013(+).............. 615 643 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006..... 570 573 --------- TOTAL TELECOMMUNICATION.. 5,605 ---------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) TRANSPORTATION - 0.31% CNF Transportation, Incorporated, 8.875%, Due 5/1/2010....... $ 1,850 $ 2,068 Union Pacific Corporation, 6.50%, Due 4/15/2012....... 450 481 --------- TOTAL TRANSPORTATION..... 2,549 --------- UTILITY - 0.58% Consolidated Natural Gas Company, 6.875%, Due 10/15/2026..... 695 751 FPL Group, Incorporated, 4.086%, Due 2/16/2007...... 310 307 Georgia Power Company, 4.875%, Due 7/15/2007...... 450 450 Marathon Oil Corporation, 5.375%, Due 6/1/2007....... 460 463 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008....... 495 476 5.875%, Due 10/1/2012...... 405 415 Public Service Enterprise Group, Incorporated, 6.95%, Due 6/1/2012(+)..... 800 859 Southern Company Capital Funding, Incorporated, 5.30%, Due 2/1/2007........ 325 326 Union Oil Company of California, 7.90%, Due 4/18/2008....... 100 106 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010....... 500 538 --------- TOTAL UTILITY............ 4,691 --------- TOTAL CORPORATE BONDS.... 64,732 ---------
SHARES ----------- COMMON STOCK - 58.51% CONSUMER DISCRETIONARY - 4.95% AUTO COMPONENTS - 0.19% Magna International, Incorporated............... 22,000 1,534 --------- TOTAL AUTO COMPONENTS.... 1,534 --------- HOTELS, RESTAURANTS & LEISURE - 0.97% Carnival Corporation......... 26,300 1,306 McDonald's Corporation....... 36,200 1,144 MGM MIRAGE+.................. 105,000 3,924 Yum! Brands, Incorporated.... 30,000 1,526 --------- TOTAL HOTELS, RESTAURANTS & LEISURE.............. 7,900 ---------
See accompanying notes -------------------------------------------------------------------------------- 34 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) HOUSEHOLD DURABLES - 1.96% Centex Corporation(+)........ 100,700 $ 6,480 Fortune Brands, Incorporated............... 25,800 1,960 Koninklijke (Royal) Philips Electronics NV............. 140,031 3,663 Newell Rubbermaid, Incorporated(+)............ 68,800 1,582 Pulte Homes, Incorporated.... 60,500 2,286 --------- TOTAL HOUSEHOLD DURABLES............... 15,971 --------- LEISURE EQUIPMENT & PRODUCTS - 0.52% Eastman Kodak Company(+)..... 98,000 2,146 Mattel, Incorporated......... 142,400 2,101 --------- TOTAL LEISURE EQUIPMENT & PRODUCTS............... 4,247 --------- MEDIA - 0.32% The Walt Disney Company...... 53,900 1,314 The Interpublic Group Companies, Incorporated+... 127,700 1,319 --------- TOTAL MEDIA.............. 2,633 --------- MULTILINE RETAIL - 0.80% Federated Department Stores, Incorporated............... 76,377 4,688 Target Corporation........... 33,100 1,843 --------- TOTAL MULTILINE RETAIL... 6,531 --------- TEXTILES & APPAREL - 0.19% Liz Claiborne, Incorporated............... 43,400 1,528 --------- TOTAL TEXTILES & APPAREL................ 1,528 --------- TOTAL CONSUMER DISCRETIONARY.......... 40,344 --------- CONSUMER STAPLES - 5.42% FOOD & DRUG RETAILING - 0.48% Albertson's, Incorporated(+)............ 78,900 1,981 Safeway, Incorporated........ 81,000 1,884 --------- TOTAL FOOD & DRUG RETAILING.............. 3,865 --------- FOOD PRODUCTS - 2.03% Anheuser-Busch Companies, Incorporated............... 34,300 1,415 ConAgra Foods, Incorporated.. 148,500 3,455 Dean Foods Company+.......... 42,400 1,533 General Mills, Incorporated............... 33,300 1,607 Kraft Foods, Incorporated.... 101,400 2,870 Sara Lee Corporation......... 143,374 2,559 Unilever plc, ADR(+)......... 76,000 3,086 --------- TOTAL FOOD PRODUCTS...... 16,525 --------- TOBACCO - 2.91% Altria Group, Incorporated... 156,000 11,708 Gallaher Group plc, ADR...... 41,600 2,580
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Imperial Tobacco Group plc, ADR........................ 94,800 $ 5,472 UST, Incorporated............ 94,500 3,911 --------- TOTAL TOBACCO............ 23,671 --------- TOTAL CONSUMER STAPLES... 44,061 --------- ENERGY - 6.38% ENERGY EQUIPMENT & SERVICES - 0.21% American Power Conversion Corporation................ 81,400 1,741 --------- TOTAL ENERGY EQUIPMENT & SERVICES............... 1,741 --------- OIL & GAS - 6.17% Anadarko Petroleum Corporation................ 17,500 1,588 BP plc, ADR.................. 80,380 5,337 Chevron Corporation.......... 118,828 6,782 ConocoPhillips............... 247,376 16,173 Devon Energy Corporation..... 88,000 5,313 Duke Energy Corporation...... 169,900 4,499 Kerr-McGee Corporation(+).... 20,476 1,741 Occidental Petroleum Corporation................ 93,300 7,360 Petro-Canada................. 40,200 1,397 --------- TOTAL OIL & GAS.......... 50,190 --------- TOTAL ENERGY............. 51,931 --------- FINANCIALS - 17.82% BANKS - 4.19% Bank of America Corporation................ 209,296 9,155 Comerica, Incorporated....... 26,900 1,554 KeyCorp Limited.............. 92,800 2,992 PNC Financial Services Group, Incorporated............... 9,600 583 U.S. Bancorp................. 111,260 3,291 UnionBanCal Corporation(+)... 11,700 801 Wachovia Corporation......... 66,900 3,380 Washington Mutual, Incorporated............... 202,700 8,027 Wells Fargo & Company........ 71,600 4,310 --------- TOTAL BANKS.............. 34,093 --------- DIVERSIFIED FINANCIALS - 6.90% The Bear Stearns Companies, Incorporated............... 26,300 2,783 Capital One Financial Corporation................ 30,900 2,359 CIT Group, Incorporated...... 17,600 805 Citigroup, Incorporated...... 259,642 11,886 Federal Home Loan Mortgage Corporation................ 86,300 5,294 Federal National Mortgage Association................ 42,300 2,010 The Goldman Sachs Group, Incorporated............... 24,300 3,071 MBNA Corporation............. 280,300 7,167
See accompanying notes -------------------------------------------------------------------------------- 35 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Merrill Lynch & Company, Incorporated............... 43,500 $ 2,816 J P Morgan Chase & Company... 186,534 6,831 Morgan Stanley & Company, Incorporated............... 58,400 3,178 Principal Financial Group, Incorporated............... 54,700 2,715 SLM Corporation.............. 92,500 5,137 --------- TOTAL DIVERSIFIED FINANCIALS............. 56,052 --------- INSURANCE - 6.04% Ace Limited.................. 73,700 3,840 The Allstate Corporation..... 110,400 5,828 American International Group, Incorporated............... 33,600 2,177 AON Corporation.............. 46,800 1,584 Assurant, Incorporated(+).... 42,200 1,612 Conseco, Incorporated+(+).... 71,400 1,449 Genworth Financial, Incorporated............... 100,900 3,198 The Hartford Financial Services Group, Incorporated............... 19,600 1,563 Loews Corporation............ 30,600 2,845 MetLife, Incorporated........ 172,180 8,507 MGIC Investments Corporation................ 42,600 2,524 Prudential Financial, Incorporated............... 48,300 3,516 The St. Paul Travelers Companies, Incorporated.... 187,000 8,421 XL Capital Limited........... 31,800 2,037 --------- TOTAL INSURANCE.......... 49,101 --------- REAL ESTATE - 0.69% Equity Office Properties Trust...................... 143,500 4,420 The St. Joe Company.......... 17,900 1,180 --------- TOTAL REAL ESTATE........ 5,600 --------- TOTAL FINANCIALS......... 144,846 --------- HEALTH CARE - 4.54% HEALTH CARE EQUIPMENT & SUPPLIES - 0.41% Baxter International, Incorporated............... 88,200 3,372 --------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES... 3,372 --------- HEALTH CARE PROVIDERS & SERVICES - 1.57.% Cigna Corporation............ 30,400 3,522 HCA, Incorporated............ 59,200 2,853 WellPoint, Incorporated+..... 68,200 5,093 Tenet Healthcare Corporation+............... 157,600 1,327 --------- TOTAL HEALTH CARE PROVIDERS & SERVICES... 12,795 --------- PHARMACEUTICALS - 2.56% Bristol-Myers Squibb Company.................... 243,100 5,146 Merck & Company, Incorporated............... 144,100 4,067
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Pfizer, Incorporated......... 270,200 $ 5,874 Schering-Plough Corporation................ 164,000 3,336 Wyeth........................ 54,100 2,411 --------- TOTAL PHARMACEUTICALS.... 20,834 --------- TOTAL HEALTH CARE........ 37,001 --------- INDUSTRIALS - 7.12% AEROSPACE & DEFENSE - 2.63% The Boeing Company........... 59,400 3,840 Honeywell International, Incorporated............... 78,800 2,695 Lockheed Martin Corporation.. 65,300 3,955 Northrop Grumman Corporation................ 28,900 1,550 Raytheon Company............. 109,100 4,031 Textron, Incorporated........ 41,800 3,011 United Technologies Corporation................ 45,400 2,328 --------- TOTAL AEROSPACE & DEFENSE................ 21,410 --------- AIR FREIGHT & COURIERS - 0.07% FedEx Corporation............ 5,900 542 --------- TOTAL AIR FREIGHT & COURIERS............... 542 --------- COMMERCIAL SERVICES & SUPPLIES - 0.70% Cendant Corporation.......... 183,300 3,193 PHH Corporation+............. 6,675 188 Waste Management, Incorporated............... 77,407 2,284 --------- TOTAL COMMERCIAL SERVICES & SUPPLIES............. 5,665 --------- ELECTRICAL EQUIPMENT - 0.53% Emerson Electric Company..... 62,500 4,347 --------- TOTAL ELECTRICAL EQUIPMENT.............. 4,347 --------- INDUSTRIAL CONGLOMERATES - 1.45% General Electric Company..... 77,500 2,628 Tyco International Limited... 347,901 9,181 --------- TOTAL INDUSTRIAL CONGLOMERATES.......... 11,809 --------- MACHINERY - 0.70% Caterpillar, Incorporated.... 52,800 2,777 ITT Industries, Incorporated............... 28,400 2,885 --------- TOTAL MACHINERY.......... 5,662 --------- TRANSPORTATION - 1.04% Burlington Northern Santa Fe Corporation................ 59,200 3,674 CSX Corporation.............. 103,300 4,732 --------- TOTAL TRANSPORTATION..... 8,406 --------- TOTAL INDUSTRIALS........ 57,841 ---------
See accompanying notes -------------------------------------------------------------------------------- 36 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) INFORMATION TECHNOLOGY - 4.15% COMPUTERS & PERIPHERALS - 1.39% Hewlett-Packard Company...... 205,600 $ 5,765 International Business Machines Corporation....... 67,700 5,543 --------- TOTAL COMPUTERS & PERIPHERALS............ 11,308 --------- IT CONSULTING & SERVICES - 1.28% Computer Sciences Corporation+............... 39,700 2,035 Electronic Data Systems Corporation................ 357,700 8,338 --------- TOTAL IT CONSULTING & SERVICES............... 10,373 --------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.29% Freescale Semiconductor, Incorporated+(+)........... 85,500 2,026 Intel Corporation............ 15,800 371 --------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS... 2,397 --------- SOFTWARE - 1.19% Computer Associates International, Incorporated............... 272,003 7,608 Microsoft Corporation........ 81,900 2,105 --------- TOTAL SOFTWARE........... 9,713 --------- TOTAL INFORMATION TECHNOLOGY............. 33,791 --------- MATERIALS - 3.23% CHEMICALS - 1.70% Air Products & Chemicals, Incorporated............... 26,300 1,505 E. I. du Pont de Nemours & Company.................... 58,800 2,451 Eastman Chemical Company..... 30,000 1,583 Hercules, Incorporated+(+)... 63,600 709 Lyondell Chemical Company.... 132,500 3,551 The Mosaic Company+(+)....... 168,700 2,227 PPG Industries, Incorporated............... 30,400 1,823 --------- TOTAL CHEMICALS.......... 13,849 --------- METALS & MINING - 0.89% Alcan, Incorporated.......... 53,200 1,686 Alcoa, Incorporated.......... 229,596 5,577 --------- TOTAL METALS & MINING.... 7,263 --------- PAPER & FOREST PRODUCTS - 0.64% International Paper Company.. 40,800 1,191 Sappi Limited, ADR(+)........ 201,900 1,975 Weyerhaeuser Company......... 31,900 2,020 --------- TOTAL PAPER & FOREST PRODUCTS............... 5,186 --------- TOTAL MATERIALS.......... 26,298 ---------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) TELECOMMUNICATION SERVICES - 1.64% DIVERSIFIED TELECOMMUNICATION - 0.98% Alltel Corporation........... 12,700 $ 786 BellSouth Corporation........ 52,000 1,353 SBC Communications, Incorporated............... 97,000 2,313 Verizon Communications, Incorporated............... 112,428 3,543 --------- TOTAL DIVERSIFIED TELECOMMUNICATION...... 7,995 --------- WIRELESS TELECOMMUNICATION - 0.66% Nokia Corporation, ADR....... 318,700 5,361 --------- TOTAL WIRELESS TELECOMMUNICATION...... 5,361 --------- TOTAL TELECOMMUNICATION SERVICES............... 13,356 --------- UTILITIES - 3.26% American Electric Power Company, Incorporated...... 116,200 4,411 CenterPoint Energy, Incorporated(+)............ 132,600 1,756 DTE Energy Company........... 44,600 1,927 Entergy Corporation.......... 74,500 5,268 Exelon Corporation........... 78,300 4,074 FirstEnergy Corporation...... 32,800 1,558 FPL Group, Incorporated(+)... 105,600 4,547 Public Service Enterprise Group, Incorporated(+)..... 39,400 2,478 TECO Energy, Incorporated(+)............ 28,800 498 --------- TOTAL UTILITIES.......... 26,517 --------- TOTAL COMMON STOCK....... 475,986 ---------
PAR AMOUNT ------- SHORT-TERM INVESTMENTS - 23.98% UNITED STATES TREASURY BILLS - 1.84% (Note B) Discount Note, Due 11/17/2005(+)..................... $9,500 9,487 Discount Note, Due 12/8/2005...... 5,490 5,471 ------ TOTAL UNITED STATES TREASURY BILLS......................... 14,958 ------
See accompanying notes -------------------------------------------------------------------------------- 37 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) OTHER SHORT-TERM INVESTMENTS - 22.14% American Beacon Enhanced Cash Trust (Notes C and D)........ 90,322,100 $ 90,322 American Beacon Money Market Select Fund (Notes C and D).. 89,605,513 89,606 --------- TOTAL OTHER SHORT-TERM INVESTMENTS.............. 179,928 --------- TOTAL SHORT-TERM INVESTMENTS.............. 194,886 --------- TOTAL INVESTMENTS - 114.65% (COST $832,277).............. 932,180 --------- LIABILITIES, NET OF OTHER ASSETS - (14.65%)............ (119,109) --------- TOTAL NET ASSETS - 100%........ $ 813,071 =========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At period end, the value of these securities amounted to $3,126 or 0.38% of net assets. (B) At October 31, 2005, security held as collateral for open futures contracts. (C) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (D) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NO. OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------- -------------- Emini S&P 500 Index......................................... 1,096 Dec-05 $66,297 $(964) ------- ----- $66,297 $(964) ======= =====
See accompanying notes -------------------------------------------------------------------------------- 38 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCK - 87.71% CONSUMER DISCRETIONARY - 8.44% AUTO COMPONENTS - 0.23% Magna International, Incorporated............... 51,800 $ 3,611 ---------- TOTAL AUTO COMPONENTS.... 3,611 ---------- HOTELS, RESTAURANTS & LEISURE - 1.23% Carnival Corporation......... 84,600 4,202 McDonald's Corporation....... 81,600 2,578 MGM MIRAGE+(+)............... 239,200 8,939 Yum! Brands, Incorporated.... 73,300 3,729 ---------- TOTAL HOTELS, RESTAURANTS & LEISURE..................... 19,448 ---------- HOUSEHOLD DURABLES - 2.69% Centex Corporation(+)........ 238,500 15,347 Fortune Brands, Incorporated................ 50,700 3,852 Koninklijke (Royal) Philips Electronics NV.............. 270,166 7,067 Matsushita Electric Industrial Company Limited, ADR......................... 432,000 7,949 Newell Rubbermaid, Incorporated(+)............. 135,700 3,120 Pulte Homes, Incorporated.... 142,900 5,400 ---------- TOTAL HOUSEHOLD DURABLES.... 42,735 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.59% Eastman Kodak Company(+)..... 213,400 4,674 Mattel, Incorporated......... 317,300 4,680 ---------- TOTAL LEISURE EQUIPMENT & PRODUCTS.................... 9,354 ---------- MEDIA - 2.05% Clear Channel Communications, Incorporated................ 262,000 7,970 The Walt Disney Company Limited..................... 454,100 11,066 The Interpublic Group of Companies, Incorporated+.... 316,800 3,273 Liberty Global, Incorporated+............... 153,000 3,629 Warner Music Group Corporation(+).............. 423,000 6,552 ---------- TOTAL MEDIA................. 32,490 ---------- MULTILINE RETAIL - 1.46% Federated Department Stores, Incorporated................ 139,956 8,589 J.C. Penney Company, Incorporated................ 212,000 10,855 Target Corporation........... 66,100 3,681 ---------- TOTAL MULTILINE RETAIL...... 23,125 ---------- TEXTILES & APPAREL - 0.19% Liz Claiborne, Incorporated.. 85,200 2,999 ---------- TOTAL TEXTILES & APPAREL.... 2,999 ---------- TOTAL CONSUMER DISCRETIONARY............... 133,762 ---------- CONSUMER STAPLES - 8.37% FOOD & DRUG RETAILING - 0.54% Albertson's, Incorporated(+)............ 173,000 4,344 Safeway, Incorporated........ 179,500 4,175 ---------- TOTAL FOOD & DRUG RETAILING.............. 8,519 ---------- FOOD PRODUCTS - 4.04% Anheuser-Busch Companies, Incorporated............... 70,700 2,917 Archer-Daniels-Midland Company.................... 425,000 10,357
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) ConAgra Foods, Incorporated(+)............ 332,300 $ 7,733 Dean Foods Company+.......... 92,900 3,358 Diageo plc, ADR(+)........... 144,000 8,558 General Mills, Incorporated.. 78,000 3,764 Kellogg Company.............. 199,000 8,790 Kraft Foods, Incorporated.... 234,900 6,648 Sara Lee Corporation......... 287,028 5,123 Unilever plc, ADR(+)......... 167,600 6,805 ---------- TOTAL FOOD PRODUCTS......... 64,053 ---------- HOUSEHOLD PRODUCTS - 0.52% The Clorox Company........... 153,000 8,280 ---------- TOTAL HOUSEHOLD PRODUCTS.... 8,280 ---------- TOBACCO - 3.27% Altria Group, Incorporated... 359,200 26,958 Gallaher Group plc, ADR...... 82,600 5,123 Imperial Tobacco Group plc, ADR(+)...................... 206,200 11,902 UST, Incorporated(+)......... 191,300 7,918 ---------- TOTAL TOBACCO............... 51,901 ---------- TOTAL CONSUMER STAPLES...... 132,753 ---------- ENERGY - 8.95% ENERGY EQUIPMENT & SERVICES - 0.88% American Power Conversion Corporation(+)............. 185,300 3,964 Weatherford International Limited+................... 160,000 10,016 ---------- TOTAL ENERGY EQUIPMENT & SERVICES............... 13,980 ---------- OIL & GAS - 8.07% Anadarko Petroleum Corporation................ 63,000 5,715 BP plc, ADR.................. 179,536 11,921 Chevron Corporation.......... 309,362 17,655 ConocoPhillips............... 728,996 47,662 Devon Energy Corporation..... 181,200 10,941 Duke Energy Corporation...... 427,400 11,318
See accompanying notes -------------------------------------------------------------------------------- 39 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Kerr-McGee Corporation....... 46,089 $ 3,919 Occidental Petroleum Corporation................. 199,100 15,705 Petro-Canada................. 96,000 3,336 ---------- TOTAL OIL & GAS............. 128,172 ---------- TOTAL ENERGY................ 142,152 ---------- FINANCIALS - 26.06% BANKS - 5.73% Bank of America Corporation.. 430,836 18,845 Comerica, Incorporated....... 62,300 3,599 East West Bancorp, Incorporated(+)............. 203,000 7,773 KeyCorp...................... 204,000 6,577 PNC Financial Services Group, Incorporated................ 22,200 1,348 TCF Financial Corporation(+).............. 195,000 5,284 U.S. Bancorp................. 221,260 6,545 UnionBanCal Corporation...... 25,900 1,774 Wachovia Corporation......... 132,700 6,704 Washington Mutual, Incorporated................ 524,900 20,786 Wells Fargo & Company........ 194,100 11,685 ---------- TOTAL BANKS................. 90,920 ---------- DIVERSIFIED FINANCIALS - 10.89% The Bear Stearns Companies, Incorporated................ 53,900 5,703 Capital One Financial Corporation................. 70,400 5,375 The Charles Schwab Corporation................. 758,000 11,522 CIT Group, Incorporated...... 40,100 1,834 Citigroup, Incorporated...... 544,838 24,943 Federal Home Loan Mortgage Corporation................. 190,000 11,656 Federal National Mortgage Association................. 86,900 4,129 The Goldman Sachs Group, Incorporated................ 46,200 5,838 ING Groep NV, ADR............ 329,000 9,495 MBNA Corporation............. 567,700 14,516 Merrill Lynch & Company, Incorporated................ 101,000 6,539 Mitsubishi UFJ Financial Group, Incorporated, ADR(+)...................... 921,000 11,687 JP Morgan Chase & Company.... 693,598 25,399 Morgan Stanley & Company, Incorporated................ 302,700 16,470 Principal Financial Group, Incorporated................ 124,800 6,194 SLM Corporation.............. 208,300 11,567 ---------- TOTAL DIVERSIFIED FINANCIALS.................. 172,867 ---------- INSURANCE - 8.73% Ace Limited.................. 150,300 7,831 The Allstate Corporation..... 251,528 13,278 American International Group, Incorporated................ 205,800 13,336 AON Corporation.............. 90,700 3,070 Assurant, Incorporated....... 96,400 3,682 The Chubb Corporation........ 116,000 10,785 Conseco, Incorporated+(+).... 174,700 3,546 Genworth Financial, Incorporated................ 226,100 7,165 The Hartford Financial Services Group, Incorporated................ 46,000 3,668 Loews Corporation............ 62,600 5,821 MetLife, Incorporated........ 381,600 18,855 MGIC Investment Corporation.. 76,500 4,532 Prudential Financial, Incorporated................ 107,100 7,796 The St. Paul Travelers Companies, Incorporated..... 416,200 18,741 WellPoint, Incorporated+..... 161,000 12,023 XL Capital Limited........... 69,600 4,459 ---------- TOTAL INSURANCE............. 138,588 ---------- REAL ESTATE - 0.71% Equity Office Properties Trust....................... 276,300 8,510 The St. Joe Company.......... 40,900 2,697 ---------- TOTAL REAL ESTATE........... 11,207 ---------- TOTAL FINANCIALS............ 413,582 ---------- HEALTH CARE - 6.22% HEALTH CARE EQUIPMENT & SUPPLIES - 1.61% C. R. Bard, Incorporated..... 141,000 8,796 Baxter International, Incorporated............... 437,700 16,733 ---------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES... 25,529 ---------- HEALTH CARE PROVIDERS & SERVICES - 1.10% Cigna Corporation............ 61,900 7,172 HCA, Incorporated(+)......... 137,200 6,612 Tenet Healthcare Corporation+(+)............ 441,700 3,719 ---------- TOTAL HEALTH CARE PROVIDERS & SERVICES... 17,503 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) PHARMACEUTICALS - 3.51% Astrazeneca plc, ADR......... 203,000 $ 9,115 Bristol-Myers Squibb Company..................... 576,800 12,211 Merck & Company, Incorporated................ 319,700 9,022 Pfizer, Incorporated......... 588,200 12,787 Schering-Plough Corporation.. 361,500 7,353 Wyeth........................ 118,600 5,285 ---------- TOTAL PHARMACEUTICALS....... 55,773 ---------- TOTAL HEALTH CARE........... 98,805 ---------- INDUSTRIALS - 10.61% AEROSPACE & DEFENSE - 4.04% The Boeing Company........... 273,600 17,685 Honeywell International, Incorporated............... 137,800 4,713 L-3 Communications Holding Corporation................ 130,000 10,117 Lockheed Martin Corporation.. 146,900 8,896
See accompanying notes -------------------------------------------------------------------------------- 40 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Northrop Grumman Corporation................ 65,300 $ 3,503 Raytheon Company............. 227,000 8,388 Textron, Incorporated........ 83,200 5,994 United Technologies Corporation................ 92,800 4,759 ---------- TOTAL AEROSPACE & DEFENSE................ 64,055 ---------- AIR FREIGHT & COURIERS - 0.07% FedEx Corporation............ 11,600 1,066 ---------- TOTAL AIR FREIGHT & COURIERS............... 1,066 ---------- COMMERCIAL SERVICES & SUPPLIES - 0.87% Cendant Corporation.......... 479,400 8,351 PHH Corporation+............. 8,300 233 Waste Management, Incorporated............... 176,265 5,202 ---------- TOTAL COMMERCIAL SERVICES & SUPPLIES............. 13,786 ---------- ELECTRICAL EQUIPMENT - 1.00% Emerson Electric Company..... 147,200 10,238 Molex, Incorporated.......... 238,800 5,705 ---------- TOTAL ELECTRICAL EQUIPMENT.............. 15,943 ---------- INDUSTRIAL CONGLOMERATES - 2.22% General Electric Company..... 156,200 5,297 Tyco International Limited... 1,133,400 29,910 ---------- TOTAL INDUSTRIAL CONGLOMERATES.......... 35,207 ---------- MACHINERY - 1.25% Caterpillar, Incorporated.... 109,200 5,743 Deere & Company.............. 122,000 7,403 ITT Industries, Incorporated............... 65,600 6,665 ---------- TOTAL MACHINERY.......... 19,811 ---------- TRANSPORTATION - 1.16% Burlington Northern Santa Fe Corporation................ 122,100 7,577 CSX Corporation.............. 241,600 11,068 ---------- TOTAL TRANSPORTATION..... 18,645 ---------- TOTAL INDUSTRIALS........ 168,513 ---------- INFORMATION TECHNOLOGY - 7.34% COMPUTERS & PERIPHERALS - 2.84% Apple Computer, Incorporated+.............. 233,000 13,418 Hewlett-Packard Company...... 417,500 11,707 International Business Machines Corporation....... 228,600 18,718 NCR Corporation+............. 40,000 1,209 ---------- TOTAL COMPUTERS & PERIPHERALS............ 45,052 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.10% Molex, Incorporated.......... 65,200 $ 1,650 ---------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS............ 1,650 ---------- IT CONSULTING & SERVICES - 1.45% Computer Sciences Corporation+(+)............ 78,500 4,023 Electronic Data Systems Corporation................ 814,200 18,979 ---------- TOTAL IT CONSULTING & SERVICES............... 23,002 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.90% Freescale Semiconductor, Incorporated+(+)........... 194,800 4,615 Intel Corporation............ 31,100 731 Texas Instruments, Incorporated............... 316,000 9,022 ---------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS... 14,368 ---------- SOFTWARE - 2.05% Autodesk, Incorporated+...... 230,000 10,380 Computer Associates International, Incorporated(+)............ 619,660 17,332 Microsoft Corporation........ 185,200 4,760 ---------- TOTAL SOFTWARE........... 32,472 ---------- TOTAL INFORMATION TECHNOLOGY............. 116,544 ---------- MATERIALS - 4.38% CHEMICALS - 2.13% Air Products & Chemicals, Incorporated............... 202,700 11,603 E. I. du Pont de Nemours & Company.................... 116,100 4,840 Hercules, Incorporated+(+)... 121,200 1,350 Lyondell Chemical Company(+)................. 270,900 7,260 The Mosaic Company+(+)....... 392,500 5,181 PPG Industries, Incorporated............... 60,400 3,622 ---------- TOTAL CHEMICALS.......... 33,856 ---------- METALS & MINING - 1.02% Alcan, Incorporated.......... 118,200 3,746 Alcoa, Incorporated.......... 513,368 12,469 ---------- TOTAL METALS & MINING.... 16,215 ---------- PAPER & FOREST PRODUCTS - 1.23% International Paper Company.. 97,000 2,831 Sappi Limited, ADR(+)........ 325,300 3,182 Weyerhaeuser Company......... 214,200 13,567 ---------- TOTAL PAPER & FOREST PRODUCTS............... 19,580 ---------- TOTAL MATERIALS.......... 69,651 ----------
See accompanying notes -------------------------------------------------------------------------------- 41 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) TELECOMMUNICATION SERVICES - 3.64% DIVERSIFIED TELECOMMUNICATION - 1.91% Alltel Corporation........... 29,100 $ 1,800 AT&T Corporation............. 439,000 8,683 BellSouth Corporation........ 109,100 2,839 Liberty Global, Incorporated+.............. 210,000 5,202 SBC Communications, Incorporated............... 190,600 4,546 Verizon Communications, Incorporated............... 229,546 7,233 ---------- TOTAL DIVERSIFIED TELECOMMUNICATION...... 30,303 ---------- WIRELESS TELECOMMUNICATION - 1.73% Lucent Technologies, Incorporated+(+)........... 2,239,000 6,381 Nokia Corporation, ADR....... 707,200 11,895 Vodafone Group plc, ADR(+)... 348,000 9,139 ---------- TOTAL WIRELESS TELECOMMUNICATION...... 27,415 ---------- TOTAL TELECOMMUNICATION SERVICES............... 57,718 ---------- UTILITIES - 3.70% American Electric Power Company, Incorporated...... 247,800 9,407 CenterPoint Energy, Incorporated(+)............ 310,000 4,104 DTE Energy Company........... 87,600 3,784 Entergy Corporation.......... 165,800 11,725 Exelon Corporation........... 185,200 9,636 FirstEnergy Corporation...... 74,700 3,548 FPL Group, Incorporated...... 238,400 10,266 Public Service Enterprise Group, Incorporated........ 82,100 5,163 TECO Energy, Incorporated.... 60,400 1,045 ---------- TOTAL UTILITIES.......... 58,678 ---------- TOTAL COMMON STOCK....... 1,392,158 ----------
PAR AMOUNT VALUE ----------- ---------- SHORT-TERM INVESTMENTS - 18.18% U.S. TREASURY BILLS - 0.58% 3.454%, Due 12/8/2005 (Note A)......................... $ 9,320 $ 9,288 ---------- TOTAL U.S. TREASURY BILLS.................. 9,288 ----------
SHARES ----------- OTHER SHORT-TERM INVESTMENTS - 17.60% American Beacon Enhanced Cash Trust (Notes B and C)...... 84,891,584 84,892 American Beacon Money Market Select Fund (Notes B and C)......................... 194,502,129 194,502 ---------- TOTAL OTHER SHORT-TERM INVESTMENTS............ 279,394 ---------- TOTAL SHORT-TERM INVESTMENTS............ 288,682 ---------- TOTAL INVESTMENTS - 105.89% (COST $1,468,590).......... 1,680,840 ---------- LIABILITIES, NET OF OTHER ASSETS - (5.89%)........... (93,549) ---------- TOTAL NET ASSETS - 100%...... $1,587,291 ==========
FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NO. OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- -------- -------------- Emini S&P 500 Index......................................... 2,890 Dec 2005 $174,816 $(1,171) -------- ------- $174,816 $(1,171) ======== =======
--------------- (A) At October 31, 2005, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. See accompanying notes -------------------------------------------------------------------------------- 42 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 94.12% CONSUMER DISCRETIONARY - 15.19% AUTO COMPONENTS - 0.20% Johnson Controls, Incorporated... 1,600 $ 109 Lear Corporation................. 600 18 -------- TOTAL AUTO COMPONENTS........ 127 -------- AUTOMOBILES - 0.12% Harley-Davidson, Incorporated.... 1,500 74 -------- TOTAL AUTOMOBILES............ 74 -------- HOTELS, RESTAURANTS & LEISURE - 1.67% Carnival Corporation............. 2,800 139 Choice Hotels International, Incorporated................... 5,000 166 Hilton Hotels Corporation........ 1,600 31 International Game Technology, Incorporated................... 3,800 101 Marriott International, Incorporated................... 3,000 179 McDonald's Corporation........... 4,900 155 MGM MIRAGE+...................... 2,500 93 Starwood Hotels & Resorts Worldwide, Incorporated........ 1,600 93 Yum! Brands, Incorporated........ 2,000 102 -------- TOTAL HOTELS, RESTAURANTS & LEISURE.................... 1,059 -------- HOUSEHOLD DURABLES - 0.44% Centex Corporation(+)............ 600 39 Lennar Corporation............... 2,500 139 NVR, Incorporated+............... 150 103 -------- TOTAL HOUSEHOLD DURABLES..... 281 -------- INTERNET & CATALOG RETAIL - 0.56% eBay, Incorporated+.............. 9,000 356 -------- TOTAL INTERNET & CATALOG RETAIL..................... 356 -------- LEISURE EQUIPMENT & PRODUCTS - 0.02% Mattel, Incorporated............. 700 10 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................... 10 -------- MEDIA - 5.28% Comcast Corporation+............. 13,000 362 EchoStar Communications Corporation+................... 2,000 54 Gannett Company, Incorporated.... 5,000 313 Liberty Media Corporation+....... 79,300 632 The McGraw-Hill Companies, Incorporated................... 1,500 73 News Corporation................. 18,500 264 Regal Entertainment Group(+)..... 3,500 65 The E. W. Scripps Company........ 6,500 298 Time Warner, Incorporated........ 37,400 667
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Viacom, Incorporated............. 16,388 $ 508 John Wiley & Sons, Incorporated.. 2,700 106 -------- TOTAL MEDIA.................. 3,342 -------- MULTILINE RETAIL - 2.02% Dollar General Corporation....... 2,800 54 J. C. Penney Company, Incorporated................... 1,400 72 Kohl's Corporation+.............. 4,300 207 Nordstrom, Incorporated.......... 5,000 173 Target Corporation............... 7,200 401 Wal-Mart Stores, Incorporated.... 7,900 374 -------- TOTAL MULTILINE RETAIL....... 1,281 -------- SPECIALTY RETAIL - 2.93% Abercrombie and Fitch Company.... 2,800 146 Bed Bath & Beyond, Incorporated+.................. 300 12 Circuit City Stores, Incorporated................... 35,160 625 The Home Depot, Incorporated..... 13,100 538 Lowe's Companies, Incorporated... 6,500 395 The Men's Wearhouse, Incorporated+.................. 4,300 106 Ross Stores, Incorporated........ 1,100 30 -------- TOTAL SPECIALTY RETAIL....... 1,852 -------- TEXTILES & APPAREL - 1.95% Coach, Incorporated+............. 24,800 798 Nike, Incorporated............... 5,200 437 -------- TOTAL TEXTILES & APPAREL..... 1,235 -------- TOTAL CONSUMER DISCRETIONARY.............. 9,617 -------- CONSUMER STAPLES - 8.51% BEVERAGES - 1.41% The Coca-Cola Company............ 15,600 667 Coca-Cola Enterprises, Incorporated................... 3,100 59 PepsiCo, Incorporated............ 2,800 165 -------- TOTAL BEVERAGES.............. 891 -------- FOOD & DRUG RETAILING - 1.23% 7-Eleven, Incorporated+.......... 6,400 240 SUPERVALU, Incorporated.......... 1,500 47 Sysco Corporation................ 6,400 204 Walgreen Company................. 6,300 286 -------- TOTAL FOOD & DRUG RETAILING.................. 777 -------- FOOD PRODUCTS - 1.18% Archer-Daniels-Midland Company... 13,300 324 Campbell Soup Company............ 300 9 Hershey Foods Corporation........ 5,300 301 Kellogg Company.................. 2,500 110 -------- TOTAL FOOD PRODUCTS.......... 744 --------
See accompanying notes -------------------------------------------------------------------------------- 43 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) HOUSEHOLD PRODUCTS - 2.13% Colgate-Palmolive Company........ 1,800 $ 95 The Procter & Gamble Company..... 22,372 1,253 -------- TOTAL HOUSEHOLD PRODUCTS..... 1,348 -------- TOBACCO - 2.56% Altria Group, Incorporated....... 21,600 1,621 -------- TOTAL TOBACCO................ 1,621 -------- TOTAL CONSUMER STAPLES....... 5,381 -------- ENERGY - 3.20% ENERGY EQUIPMENT & SERVICES - 0.69% Baker Hughes, Incorporated....... 1,900 105 Halliburton Company.............. 2,600 154 Rowan Companies, Incorporated+... 2,400 79 TransOcean, Incorporated+........ 1,600 92 Weatherford International, Limited+....................... 100 6 -------- TOTAL ENERGY EQUIPMENT & SERVICES................... 436 -------- OIL & GAS - 2.51% Anadarko Petroleum Corporation... 100 9 Burlington Resources, Incorporated................... 4,400 318 EOG Resources, Incorporated...... 3,500 237 Occidental Petroleum Corporation.................... 2,500 197 Sunoco, Incorporated............. 9,800 730 XTO Energy, Incorporated......... 2,200 96 -------- TOTAL OIL & GAS.............. 1,587 -------- TOTAL ENERGY................. 2,023 -------- FINANCIALS - 8.75% BANKS - 1.72% Bank of America Corporation...... 17,300 757 Bank of Hawaii Corporation....... 600 31 U.S. Bancorp..................... 10,100 299 -------- TOTAL BANKS.................. 1,087 -------- DIVERSIFIED FINANCIALS - 2.84% AmeriCredit Corporation+......... 5,600 125 Ameritrade Holding Corporation+(+)................ 4,700 99 The Charles Schwab Corporation... 400 6 CIT Group, Incorporated.......... 1,700 78 Citigroup, Incorporated.......... 4,900 224 Countrywide Financial Corporation.................... 3,800 121 The Goldman Sachs Group, Incorporated................... 2,100 265 MBNA Corporation................. 5,000 128 Moody's Corporation.............. 12,400 660 State Street Corporation......... 1,700 94 -------- TOTAL DIVERSIFIED FINANCIALS................. 1,800 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) INSURANCE - 3.93% Alleghany Corporation+........... 156 $ 47 Ambac Financial Group, Incorporated................... 3,000 213 Assurant, Incorporated........... 800 31 W. R. Berkley Corporation........ 2,400 105 Fremont General Corporation(+)... 2,200 48 Genworth Financial, Incorporated................... 4,100 130 The Hartford Financial Services Group, Incorporated............ 1,100 88 Lincoln National Corporation..... 1,000 51 Loews Corporation................ 6,900 642 MBIA, Incorporated............... 11,100 647 The Progressive Corporation...... 600 69 WellPoint, Incorporated+......... 5,600 418 -------- TOTAL INSURANCE.............. 2,489 -------- REAL ESTATE - 0.26% Host Marriott Corporation........ 3,500 59 Mack-Cali Realty Corporation..... 300 13 ProLogis......................... 2,200 95 -------- TOTAL REAL ESTATE............ 167 -------- TOTAL FINANCIALS............. 5,543 -------- HEALTH CARE - 18.49% BIOTECHNOLOGY - 4.49% Amgen, Incorporated+............. 22,300 1,690 Genentech, Incorporated+......... 4,100 371 Genzyme Corporation+............. 3,200 231 Gilead Sciences, Incorporated+... 3,600 170 Kos Pharmaceuticals, Incorporated+.................. 4,800 288 MedImmune, Incorporated+......... 2,600 91 -------- TOTAL BIOTECHNOLOGY.......... 2,841 -------- HEALTH CARE EQUIPMENT & SUPPLIES - 3.23% Bausch & Lomb, Incorporated...... 3,100 230 Baxter International, Incorporated................... 13,400 511 The Cooper Companies, Incorporated................... 1,000 69 St. Jude Medical, Incorporated+.................. 12,100 582 Boston Scientific Corporation+... 1,900 48 Guidant Corporation.............. 1,600 101 Medtronic, Incorporated.......... 4,200 238 Zimmer Holdings, Incorporated+... 4,200 268 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES................... 2,047 -------- HEALTH CARE PROVIDERS & SERVICES - 3.32% Aetna, Incorporated.............. 4,500 399 AmerisourceBergen Corporation.... 8,300 633 Becton, Dickinson and Company.... 2,000 102 HCA, Incorporated................ 3,600 173
See accompanying notes -------------------------------------------------------------------------------- 44 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Humana, Incorporated+............ 10,800 $ 479 UnitedHealth Group, Incorporated+.................. 5,400 313 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................... 2,099 -------- PHARMACEUTICALS - 7.45% Allergan, Incorporated........... 5,300 473 Bristol-Myers Squibb Company..... 23,800 504 Johnson & Johnson................ 33,800 2,116 Eli Lilly & Company.............. 8,500 423 McKesson Corporation............. 100 5 Medco Health Solutions, Incorporated+.................. 800 45 Sepracor, Incorporated+.......... 8,700 489 Wyeth............................ 14,800 660 -------- TOTAL PHARMACEUTICALS........ 4,715 -------- TOTAL HEALTH CARE............ 11,702 -------- INDUSTRIALS - 13.51% AEROSPACE & DEFENSE - 3.62% The Boeing Company............... 21,200 1,370 Lockheed Martin Corporation...... 11,100 672 Northrop Grumman Corporation..... 1,600 86 United Technologies Corporation.. 3,200 164 -------- TOTAL AEROSPACE & DEFENSE.... 2,292 -------- COMMERCIAL SERVICES & SUPPLIES - 2.22% Automatic Data Processing, Incorporated................... 800 37 CheckFree Corporation+........... 5,400 229 FedEx Corporation................ 3,000 276 Global Payments, Incorporated.... 2,400 103 Herman Miller, Incorporated...... 12,700 348 Republic Services, Incorporated................... 2,400 85 Staples, Incorporated............ 13,100 298 West Corporation+................ 800 32 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES................... 1,408 -------- CONSTRUCTION & ENGINEERING - 0.07% USG Corporation+................. 700 41 -------- TOTAL CONSTRUCTION & ENGINEERING................ 41 -------- ELECTRICAL EQUIPMENT - 0.85% Energizer Holdings, Incorporated+.................. 10,600 535 -------- TOTAL ELECTRICAL EQUIPMENT... 535 -------- INDUSTRIAL CONGLOMERATES - 5.43% 3M Company....................... 2,400 182 General Electric Company......... 87,800 2,978 Tyco International Limited....... 10,500 277 -------- TOTAL INDUSTRIAL CONGLOMERATES.............. 3,437 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) MACHINERY - 0.75% Deere & Company.................. 2,000 $ 121 Eaton Corporation................ 4,000 236 Kennametal, Incorporated......... 1,000 51 PACCAR, Incorporated............. 1,000 70 -------- TOTAL MACHINERY.............. 478 -------- TRANSPORTATION - 0.57% CSX Corporation.................. 7,900 362 -------- TOTAL TRANSPORTATION......... 362 -------- TOTAL INDUSTRIALS............ 8,553 -------- INFORMATION TECHNOLOGY - 22.40% COMMUNICATIONS EQUIPMENT - 4.28% Cisco Systems, Incorporated+..... 22,800 398 Corning, Incorporated+........... 25,100 504 Juniper Networks, Incorporated+.................. 11,800 275 Motorola, Incorporated........... 17,600 390 QUALCOMM, Incorporated........... 27,400 1,089 Tellabs, Incorporated+........... 5,100 49 -------- TOTAL COMMUNICATIONS EQUIPMENT.................. 2,705 -------- COMPUTERS & PERIPHERALS - 3.46% Apple Computer, Incorporated+.... 2,600 150 Dell, Incorporated+.............. 8,800 281 EMC Corporation+................. 11,400 159 Hewlett-Packard Company.......... 22,600 634 International Business Machines Corporation.................... 6,600 540 NCR Corporation+................. 1,800 54 Western Digital Corporation+..... 30,900 374 -------- TOTAL COMPUTERS & PERIPHERALS................ 2,192 -------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.49% Agilent Technologies, Incorporated+.................. 4,900 157 Avnet, Incorporated+............. 6,000 138 Broadcom Corporation+............ 4,000 170 Ingram Micro, Incorporated+...... 26,400 478 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS................ 943 -------- INTERNET SOFTWARE & SERVICES - 2.21% Electronic Arts, Incorporated+... 1,500 85 Google, Incorporated+............ 3,250 1,210 Mercury Interactive Corporation+................... 400 14 Symantec Corporation+............ 3,700 88 -------- TOTAL INTERNET SOFTWARE & SERVICES................... 1,397 -------- IT CONSULTING & SERVICES - 0.58% Affiliated Computer Services, Incorporated+.................. 3,700 200 Computer Sciences Corporation+... 3,200 164 -------- TOTAL IT CONSULTING & SERVICES................... 364 --------
See accompanying notes -------------------------------------------------------------------------------- 45 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) SEMICONDUCTOR EQUIPMENT & PRODUCTS - 4.99% Altera Corporation+.............. 8,300 $ 138 Analog Devices, Incorporated..... 2,800 97 Freescale Semiconductor, Incorporated, B Shares+........ 18,681 446 Intel Corporation................ 64,100 1,507 KLA-Tencor Corporation........... 1,800 83 Linear Technology Corporation.... 5,300 176 Maxim Integrated Products, Incorporated................... 2,000 69 Novellus Systems, Incorporated+.................. 3,800 83 Texas Instruments, Incorporated................... 16,900 482 Xilinx, Incorporated............. 3,200 77 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................. 3,158 -------- SOFTWARE - 5.39% Autodesk, Incorporated+.......... 14,800 668 Cadence Design Systems, Incorporated+.................. 3,800 61 Microsoft Corporation............ 73,900 1,898 Oracle Corporation+.............. 43,700 554 Synopsys, Incorporated+.......... 11,900 226 -------- TOTAL SOFTWARE............... 3,407 -------- TOTAL INFORMATION TECHNOLOGY................. 14,166 -------- MATERIALS - 2.12% CHEMICALS - 1.85% Air Products and Chemicals, Incorporated................... 2,400 137 Monsanto Company................. 11,600 731 Praxair, Incorporated............ 5,200 257 Rohm and Haas Company............ 1,100 48 -------- TOTAL CHEMICALS.............. 1,173 -------- METALS & MINING - 0.27% Alcoa, Incorporated.............. 3,200 78 United States Steel Corporation.................... 2,500 91 -------- TOTAL METALS & MINING........ 169 -------- TOTAL MATERIALS.............. 1,342 -------- TELECOMMUNICATION SERVICES - 0.54% DIVERSIFIED TELECOMMUNICATION - 0.14% Verizon Communications, Incorporated................... 2,900 91 -------- TOTAL DIVERSIFIED TELECOMMUNICATION.......... 91 -------- WIRELESS TELECOMMUNICATION SERVICE - 0.40% American Tower Corporation+...... 6,300 150 Sprint Nextel Corporation........ 4,354 101 -------- TOTAL WIRELESS TELECOMMUNICATION SERVICE.................... 251 -------- TOTAL TELECOMMUNICATION SERVICES................... 342 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) UTILITIES - 1.41% ELECTRIC UTILITIES - 1.31% The AES Corporation+............. 8,100 $ 129 CMS Energy Corporation+.......... 4,000 60 Dominion Resources, Incorporated................... 300 23 Constellation Energy Group, Incorporated................... 700 38 PG&E Corporation................. 13,800 501 TXU Corporation.................. 800 81 -------- TOTAL ELECTRIC UTILITIES..... 832 -------- WATER UTILITIES - 0.10% Nalco Holding Company+........... 3,900 66 -------- TOTAL WATER UTILITIES........ 66 -------- TOTAL UTILITIES.............. 898 -------- TOTAL COMMON STOCK........... 59,567 -------- PAR AMOUNT ---------- SHORT-TERM INVESTMENTS - 5.81% U.S. TREASURY - 0.35% US Treasury Bill, 3.38%, Due 12/8/2005 (Note A)............. $ 215 214 US Treasury Note, 1.625%, Due 2/28/2006 (Note A)............. 10 10 -------- TOTAL U.S. TREASURY.......... 224 -------- SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 5.46% American Beacon Enhanced Cash Trust (Notes B and C).......... 184,668 185 American Beacon Money Market Select Fund (Notes B and C).... 3,264,745 3,264 -------- TOTAL OTHER SHORT-TERM INVESTMENTS................ 3,449 -------- TOTAL SHORT-TERM INVESTMENTS................ 3,673 -------- TOTAL INVESTMENTS - 99.93% (COST $59,766)....................... 63,240 -------- OTHER ASSETS, NET OF LIABILITIES - 0.07%............ 48 -------- TOTAL NET ASSETS - 100%.......... $ 63,288 ========
See accompanying notes -------------------------------------------------------------------------------- 46 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NO. OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P 500 Index......................................... 56 Dec 2005 $3,387 $(39) ------ ---- $3,387 $(39) ====== ====
--------------- (A) At October 31, 2005, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. See accompanying notes -------------------------------------------------------------------------------- 47 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 95.05% CONSUMER DISCRETIONARY - 26.19% AUTO COMPONENTS - 5.99% Genuine Parts Company........... 9,300 $ 413 Goodrich Corporation............ 15,800 570 Johnson Controls, Incorporated.................. 13,125 893 Lear Corporation(+)............. 25,625 781 -------- TOTAL AUTO COMPONENTS....... 2,657 -------- AUTOMOBILES - 0.62% Winnebago Industries, Incorporated(+)............... 9,400 276 -------- TOTAL AUTOMOBILES........... 276 -------- HOTELS RESTAURANTS & LEISURE - 4.87% GTECH Holdings Corporation...... 20,400 650 Hasbro, Incorporated............ 31,950 602 Mattel, Incorporated............ 16,600 245 Royal Caribbean Cruises, Limited(+).................... 16,000 663 -------- TOTAL HOTELS RESTAURANTS & LEISURE................... 2,160 -------- HOUSEHOLD DURABLES - 5.05% The Stanley Works............... 13,700 657 Whirlpool Corporation........... 20,175 1,584 -------- TOTAL HOUSEHOLD DURABLES.... 2,241 -------- LEISURE EQUIPMENT & PRODUCTS - 0.57% Brunswick Corporation........... 6,600 252 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS.................. 252 -------- MEDIA - 0.24% Dex Media, Incorporated......... 3,950 107 -------- TOTAL MEDIA................. 107 -------- MULTILINE RETAIL - 2.40% Dollar General Corporation...... 29,000 564 Family Dollar Stores, Incorporated(+)............... 22,600 500 -------- TOTAL MULTILINE RETAIL...... 1,064 -------- SPECIALTY RETAIL - 6.45% AutoZone, Incorporated+......... 5,325 431 RadioShack Corporation(+)....... 28,925 639 Rent-A-Center, Incorporated+.... 34,650 624 The Sherwin-Williams Company.... 6,400 272 The TJX Companies, Incorporated.................. 41,450 892 -------- TOTAL SPECIALTY RETAIL...... 2,858 -------- TOTAL CONSUMER DISCRETIONARY............. 11,615 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) CONSUMER STAPLES - 4.36% FOOD PRODUCTS - 1.55% Del Monte Foods Company+(+)..... 65,000 $ 688 -------- TOTAL FOOD PRODUCTS......... 688 -------- PERSONAL PRODUCTS - 1.61% NBTY, Incorporated+(+).......... 35,725 715 -------- TOTAL PERSONAL PRODUCTS..... 715 -------- TOBACCO - 1.20% UST, Incorporated............... 12,800 530 -------- TOTAL TOBACCO............... 530 -------- TOTAL CONSUMER STAPLES...... 1,933 -------- ENERGY - 1.95% Marathon Oil Corporation........ 14,400 866 -------- TOTAL ENERGY................ 866 -------- FINANCIALS - 30.54% BANKS - 5.81% Comerica, Incorporated.......... 7,975 461 New York Community Bancorp, Incorporated(+)............... 37,900 613 People's Bank(+)................ 20,450 658 The South Financial Group, Incorporated.................. 13,600 375 TCF Financial Corporation(+).... 17,300 469 -------- TOTAL BANKS................. 2,576 -------- DIVERSIFIED FINANCIALS - 2.01% CIT Group, Incorporated......... 7,025 321 Janus Capital Group, Incorporated.................. 32,425 569 -------- TOTAL DIVERSIFIED FINANCIALS................ 890 -------- INSURANCE - 20.49% AON Corporation................. 17,275 585 Axis Capital Holdings Limited... 15,100 392 First American Corporation...... 16,625 729 IPC Holdings Limited(+)......... 12,800 337 Loews Corporation(+)............ 35,175 1,447 Old Republic International Corporation................... 18,550 481 Protective Life Corporation..... 11,175 490 Radian Group, Incorporated...... 12,500 651 RenaissanceRe Holdings Limited.. 12,250 464 Torchmark, Incorporated......... 18,650 985 WellChoice, Incorporated+....... 11,600 878 Willis Group Holdings Limited(+).................... 18,200 676 XL Capital Limited.............. 15,175 972 -------- TOTAL INSURANCE............. 9,087 --------
See accompanying notes -------------------------------------------------------------------------------- 48 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) REAL ESTATE - 2.23% American Financial Realty Trust(+)...................... 41,700 $ 513 Equity Office Properties Trust......................... 15,500 477 -------- TOTAL REAL ESTATE........... 990 -------- TOTAL FINANCIALS............ 13,543 -------- HEALTH CARE - 5.93% HEALTH CARE PROVIDERS & SERVICES - 5.23% AmerisourceBergen Corporation... 14,675 1,119 Health Net, Incorporated+....... 4,925 231 HealthSouth Corporation+........ 24,800 101 Triad Hospitals, Incorporated+................. 11,900 489 Universal Health Services, Incorporated(+)............... 8,000 377 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................ 2,317 -------- PHARMACEUTICALS - 0.70% McKesson Corporation............ 4,475 203 Valeant Pharmaceuticals International(+).............. 6,100 105 -------- TOTAL PHARMACEUTICALS....... 308 -------- TOTAL HEALTH CARE........... 2,625 -------- INDUSTRIALS - 14.81% BUILDING PRODUCTS - 0.54% York International Corporation................... 4,225 237 -------- TOTAL BUILDING PRODUCTS..... 237 -------- COMMERCIAL SERVICES & SUPPLIES - 6.20% Hillenbrand Industries, Incorporated.................. 8,300 382 MoneyGram International, Incorporated.................. 25,325 615 United Stationers, Incorporated+................. 12,700 576 Valassis Communications, Incorporated+(+).............. 18,475 577 Weight Watchers International, Incorporated+(+).............. 11,400 599 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................. 2,749 -------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.48% American Power Conversion Corporation................... 27,400 586 Tech Data Corporation+.......... 14,835 514 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS............... 1,100 -------- INDUSTRIAL CONGLOMERATES - 1.53% Reynolds American, Incorporated(+)............... 8,000 680 -------- TOTAL INDUSTRIAL CONGLOMERATES............. 680 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) MACHINERY - 2.62% ITT Industries, Incorporated.... 3,800 $ 386 Kennametal, Incorporated........ 15,175 776 -------- TOTAL MACHINERY............. 1,162 -------- TRANSPORTATION - 1.44% Ryder Systems, Incorporated..... 16,100 639 -------- TOTAL TRANSPORTATION........ 639 -------- TOTAL INDUSTRIALS........... 6,567 -------- INFORMATION TECHNOLOGY - 1.84% Computer Sciences Corporation+.. 15,950 817 -------- TOTAL INFORMATION TECHNOLOGY................ 817 -------- MATERIALS - 1.48% Ashland, Incorporated........... 4,075 218 FMC Corporation+................ 8,050 438 -------- TOTAL MATERIALS............. 656 -------- UTILITIES - 7.95% ELECTRIC UTILITIES - 5.42% CenterPoint Energy, Incorporated(+)............... 20,800 275 FirstEnergy Corporation......... 9,900 470 Pinnacle West Capital Corporation................... 14,100 589 Wisconsin Energy Corporation.... 16,875 638 Xcel Energy, Incorporated(+).... 23,500 431 -------- TOTAL ELECTRIC UTILITIES.... 2,403 -------- GAS UTILITIES - 2.53% MDU Resources Group, Incorporated.................. 7,500 247 Sempra Energy................... 19,750 875 -------- TOTAL GAS UTILITIES......... 1,122 -------- TOTAL UTILITIES............. 3,525 -------- TOTAL COMMON STOCK.......... 42,147 --------
PAR AMOUNT ---------- SHORT-TERM INVESTMENTS - 27.26% U.S. TREASURY BILLS - 0.47% 3.375%, Due 12/8/2005 (Note A).......................... $ 210 209 -------- TOTAL U.S. TREASURY BILLS... 209 --------
SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 26.79% American Beacon Enhanced Cash Trust (Notes B and C)......... 6,900,714 6,901
See accompanying notes -------------------------------------------------------------------------------- 49 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) American Beacon Money Market Select Fund (Notes B and C)... 4,979,750 $ 4,980 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............... 11,881 -------- TOTAL SHORT-TERM INVESTMENTS............... 12,090 -------- TOTAL INVESTMENTS - 122.31% (COST $54,877)................ 54,237 -------- LIABILITIES, NET OF OTHER ASSETS - (22.31%)............. (9,895) -------- TOTAL NET ASSETS - 100%......... $ 44,342 ========
FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NO. OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P MidCap 400 Index.................................. 39 Dec 05 $2,742 $78 ------ --- $2,742 $78 ====== ===
--------------- (A) At October 31, 2005, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. See accompanying notes -------------------------------------------------------------------------------- 50 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) STOCKS - 95.25% AUSTRIA COMMON STOCK - 0.21% Raiffeisen International Bank-Holding AG+............. 3,521 $ 222 -------- TOTAL AUSTRIA COMMON STOCK.................... 222 -------- BRAZIL - 12.50% BRAZIL PREFERRED STOCK - 8.57% All America Latina Logistica S.A. ........................ 5,180 200 Banco Itau Holding Financeira S.A. ........................ 15,000 359 Banco Itau Holding Financeira S.A., ADR+(+)................ 35,950 861 Brasil Telecom Participacoes S.A., ADR+(+)................ 9,000 374 Companhia Brasileira de Distribuicao Grupo Pao de Acucar, ADR+(+).............. 6,000 165 Companhia de Tecidos Norte de Minas+....................... 3,631,700 371 Companhia Energetica de Minas Gerais+...................... 12,020,370 438 Companhia Paranaense de Energia+..................... 51,233,300 375 Companhia Paranaense de Energia, ADR+(+)............. 22,300 165 Companhia Vale do Rio Doce+.... 1,876 69 Companhia Vale do Rio Doce, ADR+(+)...................... 31,064 1,146 Centrais Eletricas Brasileiras S.A.+........................ 18,805,530 325 Duratex S.A.+.................. 15,908 177 Embratel Participacoes S.A.+... 118,091,670 284 Empresa Brasileira de Aeronautica S.A. (Embraer), ADR+(+)...................... 26,270 1,019 Gerdau S.A.+................... 14,100 191 Itausa - Investimentos Itau S.A.+........................ 40,460 121 Klabin S.A.+................... 57,600 110 Petrol Brasileiro S.A.,+....... 3,460 49 Petroleo Brasileiro S.A., ADR+......................... 18,016 1,034 Tele Norte Leste Participacoes S.A.+(+)..................... 6,800 120 Telecomunicacoes Brasileiras S.A., ADR+................... 7,610 254 Telemar Norte Leste S.A.+...... 6,200 168 Telemig Celular Participacoes S.A.+........................ 141,861,789 233 Telesp Celular Participacoes S.A.+........................ 35,668 127 Telesp - Telecommunicacoes de Sao Paulo S.A.+.............. 16,792 334
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Unibanco - Uniao de Bancos Brasileiros S.A.+............ 7,689 $ 80 -------- TOTAL BRAZIL PREFERRED STOCK.................... 9,149 -------- BRAZIL COMMON STOCK - 3.93% Centrais Eletricas Brasileiras S.A.+........................ 3,576,500 63 Companhia de Saneamento Basico do Estado de Sao Paulo+...... 4,879,400 312 Companhia de Saneamento Basico do Estado de Sao Paulo, ADR+(+)...................... 8,600 138 Companhia Energetica de Minas Gerais, ADR+(+).............. 800 29 CPFL Energia S.A. ............. 20,100 210 Gerdau S.A., ADR+(+)........... 7,150 97 Grendene S.A. ................. 31,300 246 Petroleo Brasileiro S.A., ADR+......................... 35,292 2,255 Telesp Celular Participacoes S.A.+........................ 1,923 6 Unibanco - Uniao de Bancos Brasileiros S.A.+............ 15,075 788 Votorantim Celulose e Papel S.A.+........................ 4,400 53 -------- TOTAL BRAZIL COMMON STOCK.................... 4,197 -------- TOTAL BRAZIL............... 13,346 -------- CHILE COMMON STOCK - 0.50% Banco Santander-Chile S.A., ADR+......................... 4,000 156 Grupo Enersis S.A., ADR+(+).... 34,200 374 -------- TOTAL CHILE COMMON STOCK... 530 -------- CHINA COMMON STOCK - 4.98% Beijing Capital International Airport Company Limited+..... 700 -- Brilliance China Automotive Holdings Limited............. 646,000 86 BYD Company Limited............ 53,000 75 China Life Insurance Company Limited+..................... 260,000 192 China Mobile (Hong Kong) Limited...................... 196,600 880 China Petroleum & Chemical Corporation.................. 891,200 358 China Petroleum & Chemical Corporation, ADR+(+)......... 1,250 50 China Ping'an Insurance Company Limited...................... 112,000 180 China Resources Enterprises Limited...................... 191,900 284
See accompanying notes -------------------------------------------------------------------------------- 51 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) China Shenhua Energy Company Limited+..................... 213,000 $ 234 China Telecom Corporation Limited...................... 1,376,600 449 China Unicom Limited........... 200,000 154 CNOOC Limited.................. 354,000 230 Denway Motors Limited.......... 1,348,600 406 Hainan Meilan Airport Company Limited+..................... 89,000 43 Hopewell Highway Infrastructure Limited...................... 169,000 109 Huandian Power International Corporation.................. 1,659,800 415 Huaneng Power International, Incorporated................. 239,900 161 Lianhua Supermarket Holdings Company Limited+............. 80,000 87 Shanghai Industrial Holdings Limited...................... 168,500 300 Sinopec Shanghai Petrochemical Company Limited.............. 118,000 36 Sinopec Yizheng Chemical Fibre Company Limited.............. 1,067,500 161 Sinotrans Limited+............. 620,000 216 Weiqiao Textile Company Limited...................... 113,000 137 Wumart Stores, Incorporated.... 37,000 77 -------- TOTAL CHINA COMMON STOCK... 5,320 -------- EGYPT COMMON STOCK - 0.27% Eastern Tobacco Company........ 7,226 288 -------- TOTAL EGYPT COMMON STOCK... 288 -------- HONG KONG COMMON STOCK - 2.27% Asia Aluminum Holdings Limited+..................... 978,000 80 China Construction Bank+....... 954,000 289 China Resource Power Holdings Company Limited.............. 266,000 160 Fountain Set (Holdings) Limited...................... 183,000 71 Global Bio-chem Technology Group Company Limited........ 763,000 303 Gome Electrical Appliances Holdings Limited............. 487,000 283 Kingboard Chemical Holdings Limited...................... 66,000 140 Moulin Global Eyecare Holdings Limited*..................... 96,000 -- Panva Gas Holdings Limited+.... 110,000 51 PetroChina Company Limited+.... 912,000 698 Shougang Concord Century Holdings Limited............. 537,000 27
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) The Grande Holdings Limited.... 91,000 $ 72 TPV Technology Limited......... 272,000 208 Victory City International Holdings Limited............. 169,000 43 -------- TOTAL HONG KONG COMMON STOCK.................... 2,425 -------- HUNGARY COMMON STOCK - 1.05% Gedeon Richter Rt.............. 3,587 593 Magyar Tavkozlesi Rt........... 110,400 526 -------- TOTAL HUNGARY COMMON STOCK... 1,119 -------- INDIA COMMON STOCK - 7.59% ABB Limited.................... 5,500 209 Aventis Pharma Limited......... 4,000 124 Bharat Electronics Limited+.... 21,000 536 Bharat Petroleum Corporation Limited...................... 52,533 426 CIPLA.......................... 17,750 142 Container Corporation.......... 5,900 172 Doctor Reddy's Laboratories Limited...................... 7,100 128 Doctor Reddy's Laboratories Limited, ADR+(+)............. 23,100 434 GAIL (India) Limited........... 21,900 114 GAIL (India) Limited, GDR, 144A (Note A)+.................... 7,600 236 Glenmark Pharmaceuticals Limited...................... 17,000 105 Gujarat Ambuja Cements Limited...................... 22,500 34 Gujarat Ambuja Cements Limited, GDR+......................... 79,750 121 HDFC Bank Limited.............. 13,000 177 Hero Honda Motors Limited...... 14,200 224 Hindalco Industries Limited.... 40,000 102 Hindalco Industries Limited, GDR, 144A (Note A)+.......... 177,000 446 Hindustan Lever Limited........ 38,500 138 Hindustan Petroleum Corporation Limited...................... 73,800 485 Housing Development Finance Corporation Limited.......... 8,700 188 Infosys Technologies Limited... 7,700 432 ITC Limited.................... 39,000 104 ITC Limited, GDR+.............. 22,500 58 Mahanagar Telephone Nigam Limited...................... 252,570 617 Mahindra & Mahindra Limited.... 21,500 169 Oil and Natural Gas Corporation Limited...................... 14,224 292 Punjab National Bank Limited... 15,000 133 Reliance Industries Limited.... 56,400 958 Siemens India Limited.......... 1,800 95
See accompanying notes -------------------------------------------------------------------------------- 52 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) State Bank of India, GDR, 144A (Note A)+.................... 10,400 $ 449 UTI Bank Limited............... 10,000 53 UTI Bank Limited, GDR, 144A (Note A)+.................... 14,000 72 Wipro Limited.................. 16,500 134 -------- TOTAL INDIA COMMON STOCK... 8,107 -------- INDONESIA COMMON STOCK - 0.91% PT Bank Mandiri................ 951,000 124 PT Gudang Garam Tbk............ 249,000 251 PT Indofood Sukses Makmur Tbk.......................... 2,725,700 221 PT Telekomunikasi Indonesia Tbk.......................... 742,000 372 -------- TOTAL INDONESIA COMMON STOCK.................... 968 -------- ISRAEL COMMON STOCK - 0.41% Bank Hapoalim Limited.......... 35,580 136 Bank Leumi le-Israel B.M....... 39,500 129 Supersol Limited............... 68,500 174 -------- TOTAL ISRAEL COMMON STOCK.................... 439 -------- MALAYSIA COMMON STOCK - 2.86% AMMB Holdings Berhad........... 146,100 92 Bandar Raya Developments Berhad....................... 77,000 20 Commerce Asset-Holding Berhad....................... 262,900 383 Gamuda Berhad.................. 298,500 302 Genting Berhad................. 81,100 443 IOI Corporation Berhad......... 28,000 97 Kuala Lumpur Kepong Berhad..... 84,700 176 Magnum Corporation Berhad...... 139,000 73 MK Land Holdings Berhad........ 295,300 58 Resorts World Berhad........... 157,300 437 Road Builder(M) Holdings Berhad....................... 64,000 32 Sime Darby Berhad.............. 351,700 578 Tenaga Nasional Berhad......... 82,000 217 YTL Corporation Berhad......... 104,600 151 -------- TOTAL MALAYSIA COMMON STOCK.................... 3,059 -------- MEXICO COMMON STOCK - 8.98% America Movil, S.A. de C.V., ADR+......................... 61,165 1,605 Cemex, S.A. de C.V. ........... 42,336 220 Coca-Cola Femsa, S.A. de C.V., ADR+(+)...................... 28,335 728 Controladora Commercial Mexicana, S.A. de C.V.+...... 349,300 524 Desc, S.A. de C.V. ............ 505,000 125
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Embotelladoras Arca S.A. ...... 35,000 $ 77 Empresas ICA Sociedad Controladora, S.A. de C.V.+........................ 189,500 73 Empresas ICA Sociedad Controladora, S.A. de C.V., ADR+......................... 10,800 25 Fomento Economico Mexicano, S.A. de C.V., ADR+........... 8,280 563 Grupo Aeroportuario del Sureste S.A. de C.V., ADR+........... 3,600 117 Grupo Continential, S.A. ...... 161,450 266 Grupo Financiero Banorte, S.A. de C.V. ..................... 29,300 250 Grupo Televisa, S.A., ADR+..... 19,800 1,447 Kimberly-Clark de Mexico, S.A. de C.V. ..................... 178,720 592 Telefonos de Mexico, S.A. de C.V., ADR+................... 63,580 1,283 Wal-Mart de Mexico, S.A. de C.V.+........................ 307,029 1,495 Wal-Mart de Mexico, S.A. de C.V., ADR+(+)................ 4,126 201 -------- TOTAL MEXICO COMMON STOCK.................... 9,591 -------- MOROCCO COMMON STOCK - 0.48% Attijariwafa Bank+............. 399 52 Banque Marocaine du Commerce Exterieur+................... 2,300 185 Maroc Telecom+................. 3,100 33 ONA (Omnium Nord Africain)+.... 2,300 248 -------- TOTAL MOROCCO COMMON STOCK.................... 518 -------- PHILIPPINES COMMON STOCK - 0.47% ABS-CBN Broadcasting Corporation+................. 261,800 64 Bank of the Philippine Islands...................... 244,936 232 Manila Electric Company+....... 279,400 102 SM Prime Holdings.............. 695,000 100 -------- TOTAL PHILIPPINES COMMON STOCK.................... 498 -------- POLAND COMMON STOCK - 2.35% Agora SA....................... 11,286 214 Bank Pekao SA.................. 5,961 282 Central European Distribution Corporation+(+).............. 5,700 227 Polski Koncern Naftowy Orlen S.A. ........................ 7,343 130 Powszechna Kasa Oszczednosci Bank Polski.................. 66,621 560 Telekomunikacja Polska SA...... 68,473 492 Telekomunikacja Polska SA, GDR+......................... 35,900 257
See accompanying notes -------------------------------------------------------------------------------- 53 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) TVN SA+........................ 20,412 $ 348 -------- TOTAL POLAND COMMON STOCK.................... 2,510 -------- RUSSIA - 6.51% RUSSIA PREFERRED STOCK - 0.14% Vimpel Communications, ADR+.... 3,800 152 -------- TOTAL RUSSIA PREFERRED STOCK.................... 152 -------- RUSSIA COMMON STOCK - 6.37% Efes Breweries International NV, GDR+..................... 7,582 240 Highland Gold Mining Limited... 59,700 237 LUKOIL Oil Company, ADR+....... 66,388 3,661 Mobile Telesystems, ADR+....... 21,500 795 Mobile Telesystems, GDR, 144A (Note A)+.................... 7,200 266 NovaTek OAO, GDR, 144A (Note A)+.......................... 3,480 77 Pyaterochka Holding NV, GDR+... 5,504 108 Pyaterochka Holding NV, GDR, 144A (Note A)+*.............. 14,799 290 RAO Gazprom+................... 3,500 207 RAO Gazprom, ADR+(+)........... 11,500 680 Wimm-Bill-Dann Foods, ADR+(+)...................... 13,500 244 -------- TOTAL RUSSIA COMMON STOCK.................... 6,805 -------- TOTAL RUSSIA............... 6,957 -------- SOUTH AFRICA COMMON STOCK - 11.20% African Bank Investments Limited...................... 138,000 412 Alexander Forbes Limited....... 100,787 213 Aveng Limited.................. 326,700 821 Barloworld Limited............. 17,900 280 Bidvest Group Limited.......... 29,504 395 Edgars Consolidated Stores Limited...................... 81,500 362 Harmony Gold Mining Company Limited+..................... 22,329 235 Harmony Gold Mining Company Limited, ADR+................ 15,087 158 Illovo Sugar Limited........... 121,100 188 Impala Platinum Holdings Limited...................... 7,357 803 JD Group Limited............... 19,740 211 Massmart Holdings Limited...... 51,900 401 MTN Group Limited.............. 103,540 771 Murray & Roberts............... 3,100 9 Nampak Limited................. 200,700 465 Naspers Limited................ 40,500 584 Nedcor Limited................. 70,367 896
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Network Healthcare Holdings Limited...................... 165,600 $ 159 Old Mutual..................... 180,275 421 Pretoria Portland Cement Company Limited.............. 6,300 282 Sanlam Limited................. 237,960 438 Sappi Limited.................. 66,700 647 Sasol Limited.................. 20,000 638 Shoprite Holdings Limited...... 135,000 316 Standard Bank Group Limited.... 81,191 837 Steinhoff International Holdings Limited............. 238,179 624 Tiger Brands Limited........... 19,987 399 -------- TOTAL SOUTH AFRICA COMMON STOCK.................... 11,965 -------- SOUTH KOREA - 15.19% SOUTH KOREA PREFERRED STOCK - 0.50% Hyundai Motor Company.......... 3,150 160 Samsung Electronics Company Limited+..................... 920 377 -------- TOTAL SOUTH KOREA PREFERRED STOCK.................... 537 -------- SOUTH KOREA COMMON STOCK - 14.69% Cheil Industries, Incorporated................. 9,840 240 CJ Corporation................. 3,650 259 Daelim Industrial Company Limited...................... 5,490 321 Daewoo Heavy Industries and Machinery Limited............ 7,630 95 Doosan Heavy Industries and Construction Limited......... 12,550 273 Hankook Tire Company Limited... 22,190 267 Hanmi Pharmaceutical Company Limited...................... 950 97 Hyundai Department Store Company Limited.............. 1,560 104 Hyundai Mobis.................. 4,230 338 Hyundai Motor Company Limited...................... 10,650 786 Industrial Bank of Korea....... 21,310 255 Kangwon Land Incorporated...... 24,021 404 Kia Motors Corporation......... 21,910 396 Kookmin Bank................... 11,771 675 Kookmin Bank, ADR+(+).......... 6,000 351 Korea Electric Power Corporation.................. 25,530 833 Korea Electric Power Corporation, ADR+(+)......... 4,400 72 Korea Zinc Company Limited..... 3,450 118 KT Corporation, ADR+........... 36,100 778 KT&G Corporation............... 8,330 341 Kumho Tire Company, Incorporated................. 3,300 49
See accompanying notes -------------------------------------------------------------------------------- 54 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Kumho Tire Company, Incorporated, GDR+, 144A (Note A)+.................... 9,900 $ 80 LG Chemical.................... 10,930 482 LG Construction Company........ 7,040 302 LG Electronics, Incorporated... 10,550 690 NCsoft Corporation+............ 570 53 NHN Corporation+............... 300 50 Orion Corporation.............. 2,095 408 POSCO.......................... 2,780 567 POSCO, ADR+.................... 1,100 56 Pusan Bank..................... 9,950 104 Samsung Electro Mechanics Company Limited.............. 15,570 391 Samsung Electronics Company Limited...................... 4,280 2,282 Samsung Fire & Marine Insurance Company Limited.............. 4,354 415 Samsung SDI Company Limited.... 6,280 622 Shinhan Financial Group Company Limited...................... 12,100 404 SK Corporation................. 10,830 557 SK Telecom Company Limited..... 1,668 300 SK Telecom Company Limited, ADR+(+)...................... 29,100 588 S-Oil Corporation.............. 1,700 127 Woori Finance Holdings Company Limited...................... 10,320 160 -------- TOTAL SOUTH KOREA COMMON STOCK.................... 15,690 -------- TOTAL SOUTH KOREA.......... 16,227 -------- TAIWAN COMMON STOCK - 11.08% Accton Technology Corporation+................. 275,396 84 Acer, Incorporated............. 78,000 159 Advanced Semiconductor Engineering, Incorporated.... 516,119 316 Asia Optical Company, Incorporated................. 25,469 147 Asustek Computer, Incorporated................. 60,110 158 AU Optronics Corp.............. 486,630 619 Benq Corporation............... 368,550 338 Cathay Financial Holding Company Limited.............. 147,000 259 Cheng Shin Industries.......... 82,694 60 China Motor Company............ 366,860 343 China Steel Corporation........ 292,000 231 Chinatrust Financial Holding Company Limited.............. 580,572 452 Chunghwa Telecom Company Limited, ADR+................ 17,200 298 Compal Electronics, Incorporated................. 1,097,346 978
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) CTCI Corporation............... 79,197 $ 30 CyberLink Corporation.......... 20,709 45 Delta Electronics Group........ 317,682 537 Elan Microelectronics Corporation.................. 193,873 72 Far EasTone Telecommunication Company Limited.............. 87,000 101 First Financial Holding Company Limited...................... 549,250 369 High Tech Computer Corporation.................. 15,000 162 Hon Hai Precision Industry Company Limited.............. 74,172 322 Infortrend Technology, Incorporated................. 70,079 110 Kaulin Manufacturing Company Limited...................... 51,397 49 Largan Precision Company Limited...................... 14,158 129 Media Tek, Incorporated........ 34,878 303 Nien Hsing Textile Company Limited...................... 235,000 145 Optimax Technology Corporation.................. 219,090 281 Phoenixtec Power Company Limited...................... 81,355 73 Polaris Securities Company Limited...................... 145,234 48 Powerchip Semiconductor Corporation.................. 414,000 199 Quanta Computer, Incorporated.. 446,712 620 Radiant Opto-Electronics Corporation.................. 33,178 73 Shin Kong Financial Holding Company Limited.............. 497,743 359 SinoPac Holdings............... 1,231,987 486 Springsoft Systems Limited..... 68,017 100 Sunplus Technology Company Limited+..................... 235,007 206 Taishin Financial Holdings Company Limited.............. 310,976 159 Taiwan Cellular Corporation.... 537,635 449 Tsann Keun Enterprise Company Limited...................... 95,720 157 Uni-President Enterprises Corporation.................. 144,000 55 United Microelectronics Corporation.................. 2,130,366 1,149 United Microelectronics Corporation, ADR+............ 3,200 9 Vanguard International Semiconductor Corporation.... 197,788 130 Yaego Corporation+............. 1,438,000 439
See accompanying notes -------------------------------------------------------------------------------- 55 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Yang Ming Marine Transport..... 50,000 $ 29 -------- TOTAL TAIWAN COMMON STOCK.................... 11,837 -------- THAILAND COMMON STOCK - 2.57% Advanced Info Services PCL*.... 84,400 205 Asian Property Development Company Limited*............. 541,600 45 Bangkok Bank PCL............... 81,500 202 CH. Karnchang Public Company Limited+*.................... 188,900 56 Charoen Pokphand Foods PCL*.... 1,194,900 148 CP Seven Eleven PCL+*.......... 1,010,300 147 Delta Electronics PCL+*........ 118,000 40 Italian-Thai Development PCL... 627,500 128 Kasikornbank PCL............... 249,300 367 Krung Thai Bank PCL*........... 1,554,700 374 Lalin Property PCL+*........... 148,400 20 Land & Houses PCL.............. 378,700 77 MBK Public Company Limited+*... 29,000 31 PTT Public Company Limited+*... 43,600 224 Siam Commercial Bank PCL....... 281,600 311 Siam Makro PCL+*............... 88,200 114 Sino Thai Engineering & Construction PCL+*........... 136,900 38 Sino Thai Engineering & Construction PCL, rights+*... 22,816 4 Thai Oil PCL*.................. 40,700 68 Total Access Communications+... 45,000 142 -------- TOTAL THAILAND COMMON STOCK.................... 2,741 -------- TURKEY COMMON STOCK - 2.87% Akcansa Cimento A.S............ 48,610 229 BIM Birlesik Magazalar A.S.+... 12,680 307 Dogan Yayin Holding+........... 93,729 237 Enka Insaat ve Sanayi A.S...... 71,408 788 Haci Omer Sabanci Holding A.S.. 45,000 210
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Hurriyet Gazetecilik ve Matbaacilik A.S.............. 92,663 $ 261 Tupras-Turkiye Petrol Rafinerileri A.S............. 18,203 311 Turkiye Garanti Bankasi A.S.+........................ 120,892 360 Yapi ve Kredi Bankasi A.S.+.... 96,473 361 -------- TOTAL TURKEY COMMON STOCK.................... 3,064 -------- TOTAL STOCKS............... 101,731 -------- PAR AMOUNT ----------- SHORT TERM INVESTMENTS - 10.20% U.S. TREASURY BILLS - 0.28% 3.405%, Due 12/8/2005 (Note C)........................... $ 300 299 -------- TOTAL U.S. TREASURY BILLS.................... 299 -------- SHARES ----------- OTHER SHORT TERM INVESTMENTS - 9.92% American Beacon Enhanced Cash Trust (Notes B and D)........ 5,062,985 5,063 American Beacon Money Market Select Fund (Notes B and D).. 5,527,852 5,528 -------- TOTAL OTHER SHORT TERM INVESTMENTS.............. 10,591 -------- TOTAL SHORT TERM INVESTMENTS.............. 10,890 -------- TOTAL INVESTMENTS - 105.45% (COST $91,191)............... 112,621 -------- LIABILITIES, NET OF OTHER ASSETS - (5.45%)............. (5,817) -------- TOTAL NET ASSETS - 100%........ $106,804 ========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At period end, the value of these securities amounted to $1,916 or 1.79% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) At October 31, 2005, security held as collateral for open futures contracts. (D) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. *- Valued at fair value pursuant to procedures approved by the Board of Trustees. See accompanying notes -------------------------------------------------------------------------------- 56 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- FUTURES CONTRACTS (dollars in thousands)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P 500 Index........................................ 80 Dec-05 $4,839 $77 ------ --- $4,839 $77 ====== ===
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS CONTRACTS TO DELIVER SETTLEMENT MARKET UNREALIZED (amounts in thousands) DATE VALUE GAIN/(LOSS) ---------- ------ ---- 1,357 Euro Currency............................................... 11/14/2005 $1,628 $138 22,183 South African Rand.......................................... 11/14/2005 3,303 170 ------ ---- TOTAL CONTRACTS TO DELIVER (RECEIVABLE AMOUNT $5,239).................. $4,931 $308 ====== ====
CONTRACTS TO RECEIVE SETTLEMENT MARKET UNREALIZED (amounts in thousands) DATE VALUE GAIN/(LOSS) -------- ------ ----- 1,350 Euro Currency............................................... 11/14/2005 $1,619 $(119) 11,092 South African Rand.......................................... 11/14/2005 1,651 (114) ------ ----- TOTAL CONTRACTS TO RECEIVE (PAYABLE AMOUNT $3,503)..................... $3,270 $(233) ====== ===== NET CURRENCY FLUX...................................................... $ 75 =====
SECTOR DIVERSIFICATION PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 13.32% Consumer Staples............................................ 7.46% Energy...................................................... 11.13% Financials.................................................. 15.81% Health Care................................................. 1.95% Industrials................................................. 10.03% Information Technology...................................... 10.44% Materials................................................... 7.95% Short-Term Investments...................................... 10.20% Telecommunications Services................................. 12.79% Utilities................................................... 4.45% Liabilities, Net of Other Assets............................ (5.53%) ---------- 100.00% ==========
See accompanying notes -------------------------------------------------------------------------------- 57 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) CORPORATE BONDS - 95.32% CONSUMER DISCRETIONARY - 28.75% AUTO COMPONENTS - 4.97% ArvinMeritor, Incorporated, 8.75%, Due 3/1/2012(+).......... $ 1,000 $ 938 Asbury Automotive Group, Incorporated, 9.00%, Due 6/15/2012...................................... 1,575 1,555 8.00%, Due 3/15/2014...................................... 800 736 GenCorp, Incorporated, 9.50%, Due 8/15/2013................. 1,174 1,282 General Motors Corporation, 7.70%, Due 4/15/2016............ 1,850 1,309 The Goodyear Tire & Rubber Company, 12.50%, Due 3/1/2011.... 2,050 2,265 Navistar International Transportation Corporation, 7.50%, Due 6/15/2011(+)................................... 1,650 1,567 6.25%, Due 3/1/2012....................................... 775 696 Stanadyne Corporation, 10.00%, Due 8/15/2014................ 1,000 975 Tenneco Automotive, Incorporated, 8.625%, Due 11/15/2014(+)............................................. 1,000 955 TriMas Corporation, 9.875%, Due 6/15/2012................... 2,750 2,228 United Components, Incorporated, 9.375%, Due 6/15/2013...... 2,250 2,250 -------- TOTAL AUTO COMPONENTS................................... 16,756 -------- HOTELS, RESTAURANTS & LEISURE - 4.53% AMC Entertainment, Incorporated, 9.875%, Due 2/1/2012....... 1,000 955 AMF Bowling Worldwide Incorporated, 10.00%, Due 3/1/2010.... 2,950 2,943 Chumash Casino & Resort Enterprises, 9.52%, Due 7/15/2010... 1,250 1,328 Landry's Restaurants, Incorporated, 7.50%, Due 12/15/2014... 825 759 Mandalay Resort Group, 6.50%, Due 7/31/2009................. 1,550 1,546 San Pasqual Casino Development Group, 8.00%, Due 9/15/2013, 144A (Note A)............................................. 1,800 1,791 Station Casinos, Incorporated, 6.875%, Due 3/1/2016(+)...... 1,000 1,008 Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A (Note A).................................................. 3,710 3,821 Warner Music Group, 7.375%, Due 4/15/2014................... 1,145 1,116 -------- TOTAL HOTELS, RESTAURANTS & LEISURE..................... 15,267 -------- MEDIA - 10.06% Advanstar Communications, Incorporated, 10.75%, Due 8/15/2010..................................... 1,500 1,661 12.00%, Due 2/15/2011..................................... 1,375 1,459 Allbritton Communications Company, 7.75%, Due 12/15/2012.... 2,590 2,558 American Media Operations, Incorporated, 10.25%, Due 5/1/2009.................................................. 2,415 2,294 Charter Communications Holdings, 10.25%, Due 9/15/2010..................................... 1,925 1,930 11.00%, Due 10/1/2015, 144A (Note A)...................... 518 469 Charter Communications Operations, 8.375%, Due 4/30/2014, 144A (Note A)............................................. 1,150 1,153 CSC Holdings, Incorporated, 7.25%, Due 7/15/2008............ 2,750 2,778 Dex Media, Incorporated, 9.875%, Due 8/15/2013..................................... 500 551 0.00%, Due 11/15/2013+.................................... 700 543 0.00%, Due 11/15/2013+.................................... 1,000 775 Echostar DBS Corporation, 6.625%, Due 10/1/2014(+).......... 4,700 4,559 Houghton Mifflin Company, 8.25%, Due 2/1/2011............... 1,350 1,380
See accompanying notes -------------------------------------------------------------------------------- 58 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) The Interpublic Group of Companies, Incorporated, 6.25%, Due 11/15/2014................................................ $ 4,000 $ 3,535 Kabel Deutschland GMBH, 10.625%, Due 7/1/2014, 144A (Note A)(+)..................................................... 3,825 4,117 LBI Media, Incorporated, 10.125%, Due 7/15/2012............. 1,000 1,062 Movie Gallery, Incorporated, 11.00%, Due 5/1/2012, 144A (Note A)(+)............................................... 1,200 960 WDAC Subsidiary Corporation, 8.375%, Due 12/1/2014, 144A (Note A)(+)............................................... 900 848 WMG Holdings Corporation, 0.00%, Due 12/15/2014+............ 1,800 1,237 -------- TOTAL MEDIA............................................. 33,869 -------- RETAIL - 6.52% CSK Auto Corporation, 7.00%, Due 1/15/2014.................. 2,045 1,912 FTD, Incorporated, 7.75%, Due 2/15/2014..................... 923 914 Group 1 Automotive, Incorporated, 8.25%, Due 8/15/2013...... 1,000 962 Jostens, Incorporated, 7.625%, Due 10/1/2012..................................... 950 936 0.00%, Due 12/1/2013+..................................... 1,900 1,373 NBTY, Incorporated, 7.1250%, Due 10/1/2015, 144A (Note A)... 1,800 1,755 Pep Boys, Incorporated, 7.50%, Due 12/15/2014(+)............ 2,650 2,478 Rite Aid Corporation, 8.125%, Due 5/1/2010...................................... 2,000 2,000 9.50%, Due 2/15/2011...................................... 710 745 Samsonite Corporation, 8.875%, Due 6/1/2011................. 2,500 2,575 Toys R Us, Incorporated, 7.625%, Due 8/1/2011............... 1,400 1,155 United Rentals North America, Incorporated, 6.50%, Due 2/15/2012(+).............................................. 2,500 2,397 Woolworth Corporation, 8.50%, Due 1/15/2022................. 2,550 2,757 -------- TOTAL RETAIL............................................ 21,959 -------- SERVICES - 0.83% Knowledge Learning Corporation, 7.75%, Due 2/1/2015, 144A (Note A).................................................. 3,000 2,790 -------- TOTAL SERVICES.......................................... 2,790 -------- TEXTILES & APPAREL - 1.84% Day International Group, Incorporated, 9.50%, Due 3/15/2008................................................. 1,555 1,555 Rafaella Apparel Group, Incorporated, 11.25%, Due 6/15/2011, 144A (Note A)............................................. 1,000 950 Phillips-Van Heusen Corporation, 8.125%, Due 5/1/2013...................................... 1,250 1,309 7.75%, Due 11/15/2023..................................... 2,300 2,404 -------- TOTAL TEXTILES & APPAREL................................ 6,218 -------- TOTAL CONSUMER DISCRETIONARY............................ 96,859 -------- CONSUMER STAPLES - 1.61% FOOD/RESTAURANT - 1.12% Borden, Incorporated, 9.20%, Due 3/15/2021.................. 1,715 1,526 Cott Beverages, Incorporated, 8.00%, Due 12/15/2011......... 1,000 1,023 Pilgrims Pride Corporation, 9.625%, Due 9/15/2011........... 1,148 1,228 -------- TOTAL FOOD/RESTAURANT................................... 3,777 -------- HOUSEHOLD DURABLES - 0.09% H.H. Gregg Appliances, Incorporated, 9.00%, Due 2/1/2013.... 350 315 -------- TOTAL HOUSEHOLD DURABLES................................ 315 --------
See accompanying notes -------------------------------------------------------------------------------- 59 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) TOBACCO - 0.40% R J Reynolds Tobacco Holdings, Incorporated, 7.30%, Due 7/15/2015, 144A (Note A)(+)............................... $ 1,350 $ 1,343 -------- TOTAL TOBACCO........................................... 1,343 -------- TOTAL CONSUMER STAPLES.................................. 5,435 -------- ENERGY - 9.67% Alpha Natural Resources, LLC, 10.25%, Due 6/1/2012.......... 2,725 2,998 AmeriGas Partners, L.P., 7.25%, Due 5/20/2015, 144A (Note A)........................................................ 1,500 1,552 CITGO Petroleum Corporation, 6.00%, Due 10/15/2011, 144A (Note A).................................................. 1,000 1,050 Delta Petroleum Corporation, 7.00%, Due 4/1/2015............ 1,000 945 El Paso Corporation, 7.625%, Due 8/16/2007(+)............... 1,400 1,421 Energy Partners Limited, 8.75%, Due 8/1/2010................ 2,000 2,080 Ferrellgas Partners, L.P., 6.75%, Due 5/1/2014.............. 500 480 Holly Energy Partners, L.P., 6.25%, 3/1/2015................ 1,450 1,407 Inergy L.P./Inergy Finance Corporation, 6.875%, Due 12/15/2014................................................ 1,000 948 Key Energy Service, Incorporated, 8.375%, Due 3/1/2008...... 2,450 2,554 Newfield Exploration Company, 8.375%, Due 8/15/2012......... 1,425 1,528 Paramount Resources Limited, 8.50%, Due 1/31/2013........... 2,374 2,433 PetroQuest Energy, Incorporated, 10.375%, Due 5/15/2012..... 3,000 3,173 Reliant Energy, Incorporated, 6.75%, Due 12/15/2014......... 1,680 1,562 Swift Energy Company, 7.625%, Due 7/15/2011..................................... 900 916 9.375%, Due 5/1/2012...................................... 1,000 1,070 Tenaska, Incorporated, 6.528%, Due 12/30/2014, 144A (Note A)........................................................ 1,433 1,404 Tenaska Alabama Partners, L.P., 7.00%, Due 6/30/2021, 144A (Note A).................................................. 747 759 Terex Corporation, 9.25%, Due 7/15/2011...................................... 1,250 1,334 7.375%, Due 1/15/2014..................................... 2,260 2,249 Clayton Williams Energy, Incorporated, 7.75%, Due 8/1/2013, 144A (Note A)............................................. 750 724 -------- TOTAL ENERGY............................................ 32,587 -------- FINANCIALS - 4.96% DIVERSIFIED FINANCIALS - 4.53% Borden US Financial Corporation, 8.90%, Due 7/15/2010, 144A (Note A).................................................. 250 248 E*Trade Financial Corporation, 8.00%, Due 6/15/2011, 144A (Note A)....................... 700 710 8.00%, Due 6/15/2011...................................... 2,375 2,411 General Motors Acceptance Corporation, 6.875%, Due 9/15/2011..................................... 1,500 1,454 6.75%, Due 12/1/2014(+)................................... 1,100 1,052 Glencore Funding, LLC, 6.00%, Due 4/15/2014, 144A (Note A)........................................................ 1,400 1,290 Nell AF SARL, 8.375%, Due 8/15/2015, 144A (Note A)(+)....... 2,250 2,160 Noble Group Limited, 6.625%, Due 3/17/2015, 144A (Note A)(+)..................................................... 3,500 3,169
See accompanying notes -------------------------------------------------------------------------------- 60 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Thornburg Mortgage, Incorporated, 8.00%, Due 5/15/2013...... $ 2,850 $ 2,772 -------- TOTAL DIVERSIFIED FINANCIALS............................ 15,266 -------- REAL ESTATE - 0.43% American Real Estate Partners, L.P. 7.125%, Due 2/15/2013, 144A (Note A)............................................. 1,500 1,459 -------- TOTAL REAL ESTATE....................................... 1,459 -------- TOTAL FINANCIALS........................................ 16,725 -------- HEALTH CARE - 8.81% EQUIPMENT & SUPPLIES - 0.31% Sybron Dental Specialties, Incorporated, 8.125%, Due 6/15/2012................................................. 1,000 1,053 -------- TOTAL EQUIPMENT & SUPPLIES.............................. 1,053 -------- HEALTHCARE PROVIDERS & SERVICES - 7.84% ACIH, Incorporated, 0.00%, Due 12/15/2012, 144A (Note A)+... 3,575 2,431 DaVita, Incorporated, 7.25%, Due 3/15/2015.................. 2,750 2,778 HCA, Incorporated, 6.30%, Due 10/1/2012...................................... 2,000 1,968 8.36%, Due 4/15/2024...................................... 1,935 2,029 Interactive Health, LLC, 8.00%, Due 4/1/2011, 144A (Note A)........................................................ 1,800 1,512 National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,021 NDCHealth Corporation, 10.50%, Due 12/1/2012................ 3,250 3,701 Pacificare Health Systems, Incorporated, 10.75%, Due 6/1/2009.................................................. 2,625 2,828 Quintiles Transnational Corporation, 10.00%, Due 10/1/2013................................................. 1,600 1,766 Select Medical Corporation, 7.625%, Due 2/1/2015............ 2,725 2,527 Service Corporation International, 7.00%, Due 6/15/2017, 144A (Note A)............................................. 1,180 1,171 US Oncology, Incorporated 9.00%, Due 8/15/2012...................................... 1,500 1,583 10.75%, Due 8/15/2014..................................... 1,000 1,103 -------- TOTAL HEALTHCARE PROVIDERS & SERVICES................... 26,418 -------- PHARMACEUTICALS - 0.66% Athena Neurosciences Financial LLC, 7.25%, Due 2/21/2008(+).............................................. 2,300 2,219 -------- TOTAL PHARMACEUTICALS................................... 2,219 -------- TOTAL HEALTH CARE....................................... 29,690 -------- INFORMATION TECHNOLOGY - 2.27% SEMICONDUCTOR EQUIPMENT & PRODUCTS - 1.42% Amkor Technology, Incorporated, 9.25%, Due 2/15/2008........ 2,000 1,910 Flextronics International Limited, 6.50%, Due 5/15/2013(+).............................................. 1,000 1,003 MagnaChip Semiconductor Limited, 6.875%, Due 12/15/2011..... 2,000 1,880 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................ 4,793 -------- SOFTWARE - 0.85% Peregrine Systems, Incorporated, 6.50%, Due 8/15/2007....... 87 91 SunGard Data Systems, Incorporated, 10.25%, Due 8/15/2015, 144A (Note A)(+).......................................... 2,800 2,775 -------- TOTAL SOFTWARE.......................................... 2,866 -------- TOTAL INFORMATION TECHNOLOGY............................ 7,659 --------
See accompanying notes -------------------------------------------------------------------------------- 61 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 24.10% AEROSPACE & ENGINEERING - 1.43% L3 Communications Corporation, 6.375%, Due 10/15/2015, 144A (Note A).................................................. $ 1,500 $ 1,481 Transdigm, Incorporated, 8.375%, Due 7/15/2011.............. 3,250 3,380 -------- TOTAL AEROSPACE & ENGINEERING........................... 4,861 -------- CONSTRUCTION & ENGINEERING - 4.30% AMH Holdings, Incorporated, 0.00%, Due 3/1/2014+............ 3,000 1,410 Beazer Homes USA, Incorporated, 8.375%, Due 4/15/2012....... 2,000 2,042 Dycom Industries, Incorporated, 8.125%, Due 10/15/2015, 144A (Note A).................................................. 1,500 1,504 Interline Brands, Incorporated, 11.50%, Due 5/15/2011....... 2,275 2,525 KB Home, 7.75%, Due 2/1/2010................................ 1,000 1,024 K. Hovnanian Enterprises, Incorporated, 8.875%, Due 4/1/2012(+)............................................... 2,700 2,808 Technical Olympic USA, Incorporated, 9.00%, Due 7/1/2010.... 1,250 1,244 Wolverine Tube, Incorporated, 7.375%, Due 8/1/2008, 144A (Note A).................................................. 2,250 1,935 -------- TOTAL CONSTRUCTION & ENGINEERING........................ 14,492 -------- COMMERCIAL SERVICES & SUPPLIES - 17.90% Allied Waste North American, Incorporated, 8.50%, Due 12/1/2008................................................. 2,500 2,600 Alpharma, Incorporated, 8.625%, Due 5/1/2011................ 3,550 3,799 Altra Industrial Motion, Incorporated, 9.50%, Due 12/1/2011, 144A (Note A)............................................. 1,575 1,528 Asia Aluminum Holdings Limited, 8.00%, Due 12/23/2011, 144A (Note A).................................................. 3,000 2,933 Browning-Ferris Industries, Incorporated, 9.25%, Due 5/1/2021.................................................. 1,500 1,509 Cadmus Communications Corporation, 8.375%, Due 6/15/2014.... 1,700 1,738 Celestica, Incorporated, 7.875%, Due 7/1/2011(+)............ 2,500 2,475 CHC Helicopter Corporation, 7.375%, Due 5/1/2014...................................... 1,860 1,865 7.375%, Due 5/1/2014, 144A (Note A)....................... 750 752 Clean Harbors, Incorporated, 11.25%, Due 7/15/2012, 144A (Note A).................................................. 1,000 1,120 Columbus McKinnon Corporation, 10.00%, Due 8/1/2010......... 2,000 2,200 Communications and Power Industries, Incorporated, 8.00%, Due 2/1/2012.............................................. 1,250 1,272 Compass Minerals Group, Incorporated, 10.00%, Due 8/15/2011................................................. 1,000 1,078 Compass Minerals International, Incorporated, 0.00%, Due 6/1/2013+................................................. 1,825 1,551 Corrections Corporation of America, 7.50%, Due 5/1/2011(+).................................... 1,000 1,034 6.25%, Due 3/15/2013...................................... 1,000 984 Da-Lite Screen Company, Incorporated, 9.50%, Due 5/15/2011................................................. 750 791 Freeport-McMoRan Copper & Gold, Incorporated, 6.875%, Due 2/1/2014(+)............................................... 1,500 1,477 The Greenbrier Companies, Incorporated, 8.375%, Due 5/15/2015................................................. 1,200 1,233 HMH Properties, Incorporated, 7.875%, Due 8/1/2008.......... 1,000 1,011 Invensys, plc, 9.875%, Due 3/15/2011, 144A (Note A)(+)...... 1,050 1,008 Iron Mountain, Incorporated, 6.625%, Due 1/1/2016........... 2,000 1,840 Earle M. Jorgensen Company, 9.75%, Due 6/1/2012............. 1,000 1,070 Medical Device Manufacturing, Incorporated, 10.00%, Due 7/15/2012................................................. 2,000 2,340 NationsRent Companies, Incorporated, 9.50%, Due 5/1/2015.... 2,600 2,697 Phibro Animal Health Corporation, 13.00%, Due 12/1/2007..... 500 525 J.B. Poindexter, Incorporated, 8.75%, Due 3/15/2014......... 2,000 1,770 Polypore, Incorporated, 8.75%, Due 5/15/2012................ 1,450 1,276
See accompanying notes -------------------------------------------------------------------------------- 62 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Polypore International, Incorporated, 0.00%, Due 10/1/2012+................................................ $ 1,500 $ 772 Sea Containers, Limited, 10.75%, Due 10/15/2006............. 1,000 997 Sheridan Group, Incorporated, 10.25%, Due 8/15/2011......... 2,125 2,210 Solectron Corporation, 7.97%, Due 11/15/2006................ 1,500 1,530 Superior Essex Communications, 9.00%, Due 4/15/2012......... 2,400 2,364 UAP Holding Corporation, 0.00%, Due 7/15/2012+.............. 2,000 1,740 UNOVA, Incorporated, 7.00%, Due 3/15/2008................... 4,250 4,229 WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011... 950 1,031 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................... 60,349 -------- MACHINERY - 0.47% Case New Holland, Incorporated, 9.25%, Due 8/1/2011......... 1,500 1,579 -------- TOTAL MACHINERY......................................... 1,579 -------- TOTAL INDUSTRIALS....................................... 81,281 -------- MATERIALS - 10.79% CHEMICALS - 5.76% Casella Waste System, Incorporated, 9.75%, Due 2/1/2013..... 2,020 2,169 CPI Holding Company, Incorporated, 9.672%, Due 2/1/2015..... 1,750 1,716 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due 10/1/2014, Series A+...................................... 3,990 2,763 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due 10/1/2014, Series B+...................................... 1,463 1,028 Hercules, Incorporated, 6.75%, Due 10/15/2029............... 1,750 1,689 Lyondell Chemical Company, 10.875%, Due 5/1/2009............ 2,500 2,584 Nalco Company, 8.875%, Due 11/15/2013....................... 1,000 1,021 OM Group, Incorporated, 9.25%, Due 12/15/2011............... 1,750 1,684 Rhodia, 10.25%, Due 6/1/2010(+)............................. 2,000 2,130 Resolution Performance Products, 8.00%, Due 12/15/2009...... 500 509 Westlake Chemical Corporation, 8.75%, Due 7/15/2011......... 2,000 2,140 -------- TOTAL CHEMICALS......................................... 19,433 -------- CONTAINERS & PACKAGING - 3.27% Crown Holdings, Incorporated, 9.50%, Due 3/1/2011........... 2,000 2,200 Intertape Polymer, Incorporated, 8.50%, Due 8/1/2014........ 1,300 1,248 Jefferson Smurfit Corporation, 8.25%, Due 10/1/2012...................................... 2,250 2,121 7.50%, Due 6/1/2013....................................... 500 450 Owens-Brockway Glass Containers, Incorporated, 8.875%, Due 2/15/2009..................................... 1,500 1,567 8.75%, Due 11/15/2012..................................... 2,250 2,413 8.25%, Due 5/15/2013...................................... 1,000 1,020 -------- TOTAL CONTAINERS & PACKAGING............................ 11,019 -------- PAPER & FOREST PRODUCTS - 1.76% Abitibi Consolidated Company, 8.375%, Due 4/1/2015(+)....... 1,000 920 Ainsworth Lumber Company Limited, 6.75%, Due 3/15/2014...... 1,000 855
See accompanying notes -------------------------------------------------------------------------------- 63 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Neenah Paper, Incorporated, 7.375%, Due 11/15/2014.......... $ 2,450 $ 2,279 The Newark Group, Incorporated, 9.75%, Due 3/15/2014........ 2,200 1,892 -------- TOTAL PAPER & FOREST PRODUCTS........................... 5,946 -------- TOTAL MATERIALS......................................... 36,398 -------- TELECOMMUNICATION SERVICES - 4.36% Insight Communications, Incorporated, 0.00%, Due 2/15/2011+................................................ 2,375 2,440 GST Equipment Funding, Incorporated, 13.25%, Due 5/1/2007+*................................................ 2,500 -- Intelsat, Limited, 5.25%, Due 11/1/2008...................................... 1,900 1,738 7.625%, Due 4/15/2012(+).................................. 1,900 1,530 8.625%, Due 1/15/2015, 144A (Note A)...................... 500 506 MCI, Incorporated, 7.688%, Due 5/1/2009..................... 3,500 3,627 PanAmSat Holding Corporation, 0.00%, Due 11/1/2014+......... 1,850 1,263 Qwest Communications International, Incorporated, 13.50%, Due 12/15/2010.................................... 2,250 2,571 US Unwired, Incorporated, 7.26%, Due 6/15/2010.............. 1,000 1,020 -------- TOTAL TELECOMMUNICATION SERVICES........................ 14,695 -------- TOTAL CORPORATE BONDS................................... 321,329 -------- SHARES ----------- SHORT TERM INVESTMENTS - 13.16% AIM Short-Term Investment Company Liquid Asset Fund (Note E)........................................................ 1,101,259 1,101 American Beacon Money Market Select Fund (Note B)........... 8,266,990 8,267 PAR AMOUNT ----------- Altius I Funding Corporation, Due 11/1/2005 (Note E)........ $ 7,000 7,000 Merrill Lynch Pierce Fenner & Smith, Inc. Tri Party Repo, 4.113%, Due 11/1/2005 (Notes C and E)..................... 15,000 15,000 Morgan Stanley & Co., Inc. Tri Party Repo, 4.113%, Due 11/1/2005 (Notes D and E)................................. 13,000 13,000 -------- TOTAL SHORT TERM INVESTMENTS............................ 44,368 -------- TOTAL INVESTMENTS - 108.48% (COST $371,513)................. 365,697 -------- LIABILITIES, NET OF OTHER ASSETS - (8.48%).................. (28,592) -------- TOTAL NET ASSETS - 100%..................................... $337,105 ========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $55,178 or 16.37% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) Collateral held at J.P. Morgan Chase consists of the following: Telephone and Data Systems, Incorporated, 7.00%, Due 8/1/2006, Market Value - $2,230, BorgWarner, Incorporated, 7.00%, Due 11/1/2006, Market Value - $9,213, DaimlerChrysler AG, 7.45%, Due 3/1/2027, Market Value - $637, R.R. Donnelley & Sons Company, 6.625%, Due 4/15/2029, Market Value - $551, Coloumbus Southern Power Company, 6.60%, Due 3/1/2033, Market Value - $770, Ohio Power Company, 6.375%, Due 7/15/2033, Market Value - $7, Zurich Capital Trust I, 8.376%, Due 6/1/2037, Market Value - $1,894 (D) Collateral held at the Bank of New York consists of the following: Conoco Funding Company, 5.45%, Due 10/15/2006, Market Value - $10,936, Rockwell International Corporation, 6.15%, Due 1/15/2008, Market Value - $2,113, UFJ Fi- See accompanying notes -------------------------------------------------------------------------------- 64 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- nance Aruba AE, 6.75%, Due 7/15/2013, Market Value - $286, Clorox Company, 5.00%, Due 1/15/2015, Market Value - $60 (E) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan October 31, 2005. See note 5. +- Non-income producing security. *- Valued at fair value pursuant to procedures approved by the Board of Trustees. See accompanying notes -------------------------------------------------------------------------------- 65 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 19.13% U.S. TREASURY BONDS - 0.94% 8.75%, Due 8/15/2020(+)..................................... $ 750 $ 1,061 -------- TOTAL U.S. TREASURY BONDS............................... 1,061 -------- U.S. TREASURY NOTES - 18.19% 3.50%, Due 11/15/2009....................................... 700 675 3.875%, Due 5/15/2010(+).................................... 2,000 1,951 5.00%, Due 2/15/2011(+)..................................... 3,350 3,433 5.00%, Due 8/15/2011(+)..................................... 4,100 4,206 4.00%, Due 2/15/2014(+)..................................... 5,000 4,805 4.75%, Due 5/15/2014(+)..................................... 5,300 5,367 -------- TOTAL U.S. TREASURY NOTES............................... 20,437 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 21,498 -------- U.S. AGENCY OBLIGATIONS - 0.93% FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.45% Federal Home Loan Mortgage Corporation, 5.125%, Due 10/15/2008................................................ 500 506 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 506 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.48% Federal National Mortgage Association, 6.625%, Due 11/15/2010(+)............................................. 500 539 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 539 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 1,045 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.13% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.45% Pool #E01492, 5.50%, Due 10/1/2018.......................... 894 900 Pool #C01598, 5.00%, Due 8/1/2033........................... 776 749 Pool #C01786, 5.50%, Due 2/1/2034........................... 1,112 1,099 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 2,748 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.25% Pool #555549, 5.00%, Due 6/1/2018........................... 1,167 1,152 Pool #545759, 6.50%, Due 7/1/2032........................... 757 778 Pool #725238, 5.00%, Due 3/1/2034........................... 620 599 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 2,529 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.43% Pool #780921, 7.00%, Due 11/15/2013......................... 298 312 Pool #780454, 7.00%, Due 10/15/2026......................... 283 298 Pool #002379, 8.00%, Due 2/20/2027.......................... 186 198 Pool #781564, 6.00%, Due 2/15/2033.......................... 387 394 Pool #781690, 6.00%, Due 12/15/2033......................... 565 575 Pool #003515, 5.50%, Due 2/20/2034.......................... 952 949 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 2,726 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 8,003 -------- ASSET-BACKED SECURITIES - 2.63% Bank of America Securities Auto Trust 2005-WF1 A4, 4.08%, Due 4/18/2010............................................. 1,000 982 Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009................................................. 1,000 989 HSBC Automotive Trust 2005-1 A4, 4.35%, Due 6/18/2012....... 1,000 982 -------- TOTAL ASSET-BACKED SECURITIES........................... 2,953 --------
See accompanying notes -------------------------------------------------------------------------------- 66 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 1.18% JP Morgan Chase Commercial Mortgage Securities Corp 2005-LDP3 A1, 4.655%, Due 8/15/2042....................... $ 342 $ 340 2005-LDP4 A1, 4.613%, Due 10/15/2042...................... 990 981 -------- TOTAL COMMERCIAL MORTGAGE-BACKED OBLIGATIONS............ 1,321 -------- CORPORATE BONDS - 45.37% BANKS - 3.43% Banco Popular North America, Incorporated, 6.125%, Due 10/15/2006.................................... 500 504 4.25%, Due 4/1/2008....................................... 300 295 Bank One Corporation, 4.90%, Due 4/30/2015(+)............... 500 480 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 500 518 FleetBoston Financial Corporation, 8.625%, Due 1/15/2007.... 200 208 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 300 296 Wachovia Corporation, 6.40%, Due 4/1/2008................... 1,500 1,553 -------- TOTAL BANKS............................................. 3,854 -------- FINANCE - 22.90% AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 230 American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)....................... 650 645 4.875%, Due 5/15/2010..................................... 300 297 The Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008.................................................. 800 760 Capital One Bank, 4.25%, Due 12/1/2008...................................... 1,000 975 5.125%, Due 2/15/2014..................................... 330 320 Caterpillar Financial Services, 4.15%, Due 1/15/2010(+)..... 1,000 971 Citigroup, Incorporated, 4.125%, Due 2/22/2010.............. 1,000 966 Countrywide Home Loans, Incorporated, 3.25%, Due 5/21/2008................................................. 1,000 958 Credit Suisse First Boston, Incorporated, 5.875%, Due 8/1/2006.................................................. 1,500 1,513 E*Trade Financial Federal Corporation, 7.375%, Due 9/15/2013, 144A (Note A).................................. 150 148 Ford Motor Credit, 8.625%, Due 11/1/2010.................... 285 279 General Electric Capital Corporation, 4.125%, Due 3/4/2008.................................................. 2,000 1,969 The Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013................................................. 350 336 John Hancock Global Funding, 5.625%, Due 6/27/2006..................................... 1,400 1,408 3.75%, Due 9/30/2008...................................... 1,000 968 Household Finance Corporation, 5.75%, Due 1/30/2007......... 1,750 1,770 Lehman Brothers Holdings, Incorporated, 3.50%, Due 8/7/2008.................................................. 1,000 964 Lincoln National Corporation, 4.75%, Due 2/15/2014(+)....... 200 192 MassMutual Global Funding II, 3.80%, Due 4/15/2009, 144A (Note A).................................................. 1,000 966 Merrill Lynch & Company, Incorporated, 6.00%, Due 2/17/2009................................................. 1,000 1,031 PHH Corporation, 6.00%, Due 3/1/2008........................ 300 304 Prudential Financial, Incorporated, 4.50%, Due 7/15/2013(+).............................................. 375 358 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 2,000 2,022 Simon Property Group LP, 6.375%, Due 11/15/2007............. 400 410 SLM Corporation, 4.00%, Due 1/15/2009....................... 1,300 1,262 Synovus Financial Corporation, 7.25%, Due 12/15/2005..................................... 1,500 1,504 4.875%, Due 2/15/2013..................................... 500 486 Transamerica Corporation, 6.75%, Due 11/15/2006............. 1,000 1,008 Washington Mutual Financial Corporation, 4.625%, Due 4/1/2014.................................................. 750 705 -------- TOTAL FINANCE........................................... 25,725 --------
See accompanying notes -------------------------------------------------------------------------------- 67 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 13.37% Accuride Corporation, 8.50%, Due 2/1/2015................... $ 150 $ 142 AmeriPath, Incorporated, 10.50%, Due 4/1/2013............... 400 416 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013(+).......... 550 539 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012..................................... 200 228 5.35%, Due 4/15/2014...................................... 500 492 Celestica, Incorporated, 7.875%, Due 7/1/2011............... 260 257 Cendant Corporation, 6.875%, Due 8/15/2006.................. 1,100 1,115 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 700 693 John Deere Capital Corporation, 4.125%, Due 1/15/2010....... 1,000 970 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 200 207 Dole Food Company, Incorporated, 8.875%, Due 3/15/2011...... 142 147 DST Systems, Incorporated, 3.625%, Due 8/15/2023............ 485 600 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A).................................................. 350 336 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 330 Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 436 First Data Corporation, 3.375%, Due 8/1/2008................ 1,000 962 Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due 2/1/2010(+)............................................... 400 440 Gardner Denver, Incorporated, 8.00%, Due 5/1/2013........... 300 312 International Lease Finance Corporation, 6.375%, Due 3/15/2009................................................. 725 753 Kroger Company, 8.15%, Due 7/15/2006........................ 1,000 1,022 Leucadia National Corporation, 7.00%, Due 8/15/2013......... 400 402 Liberty Media Corporation, 0.75%, Due 3/30/2023(+).......... 150 164 NBTY, Incorporated, 7.125%, Due 10/1/2015, 144A (Note A).... 150 146 Nissan Motor Company Limited, 4.625%, Due 3/8/2010.......... 400 389 Northrop Grumman Corporation, 4.079%, Due 11/16/2006.................................... 700 694 7.125%, Due 2/15/2011..................................... 510 557 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 450 494 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009..................................... 100 98 5.25%, Due 1/15/2014...................................... 125 117 SunGard Data Systems, Incorporated, 9.125%, Due 8/15/2013, 144A (Note A)............................................. 150 152 Tenent Healthcare Corporation, 9.25%, Due 2/1/2015, 144A (Note A).................................................. 275 261 Time Warner, Incorporated, 6.75%, Due 4/15/2011............. 350 370 Union Pacific Corporation, 6.50%, Due 4/15/2012............. 350 374 Wesco Distributing, Incorporated, 7.50%, Due 10/15/2017, 144A (Note A)............................................. 150 150 WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011... 240 260 -------- TOTAL INDUSTRIALS....................................... 15,025 -------- TELECOMMUNICATION - 5.26% AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 700 806 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006....................................... 900 908 8.125%, Due 5/1/2012...................................... 250 288 Deutsche Telekom International, 3.875%, Due 7/22/2008....... 500 487 France Telecom SA, 8.00%, Due 3/1/2011...................... 680 757 Sprint Capital Corporation, 6.00%, Due 1/15/2007...................................... 1,200 1,214 8.375%, Due 3/15/2012..................................... 675 779 SyniverseTechnologies, Incorporated, 7.75%, Due 8/15/2013, 144A (Note A)............................................. 200 202
See accompanying notes -------------------------------------------------------------------------------- 68 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Telcordia Technologies, Incorporated, 10.00%, Due 3/15/2013, 144A (Note A)............................................. $ 200 $ 176 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015..... 300 289 -------- TOTAL TELECOMMUNICATION................................. 5,906 -------- UTILITY - 0.41% SEACOR Holdings, Incorporated, 2.875%, Due 12/15/2024....... 400 461 -------- TOTAL UTILITY........................................... 461 -------- TOTAL CORPORATE BONDS................................... 50,971 -------- CONVERTIBLE BONDS - 14.00% AEROSPACE & DEFENSE - 1.10% Armor Holdings, Incorporated, 2.00%, Due 11/1/2024.......... 275 282 L3 Communications Holdings, Incorporated, 3.00%, Due 8/1/2035, 144A (Note A)................................... 415 417 Lockheed Martin Corporation, 3.54%, Due 8/15/2033........... 515 541 -------- TOTAL AEROSPACE & DEFENSE............................... 1,240 -------- CONSUMER DISCRETIONARY - 1.37% Best Buy, Incorporated, 2.25%, Due 1/15/2022................ 120 133 Caesars Entertainment, Incorporated, 4.15%, Due 4/15/2024... 110 128 Carnival Corporation, 0.00%, Due 10/24/2021+................ 715 589 Flextronics International Limited, 1.00%, Due 8/1/2010(+)... 250 217 Goodyear Tire and Rubber Company, 2.25%, Due 6/15/2034, 144A (Note A).................................................. 225 324 Lowe's Companies, Incorporated, 0.861%, Due 10/19/2021...... 135 146 -------- TOTAL CONSUMER DISCRETIONARY............................ 1,537 -------- ENERGY - 0.96% CenterPoint Energy, Incorporated, 3.75%, Due 5/15/2023...... 390 474 Grey Wolf, Incorporated, 4.04%, Due 4/1/2024................ 215 291 Nabors Industries Limited, 0.00%, Due 6/15/2023+............ 280 310 -------- TOTAL ENERGY............................................ 1,075 -------- FINANCIALS - 1.48% American Financial Group, Incorporated, 1.486%, Due 6/2/2033.................................................. 625 270 Bank America Corporation, 0.25%, Due 1/26/2010.............. 265 265 Financial Federal Corporation, 2.00%, Due 4/15/2034, 144A (Note A).................................................. 285 282 LandAmerica Financial Group, Incorporated, 3.125%, Due 11/15/2033................................................ 265 289 Morgan Stanley and Company, Incorporated, 0.25%, Due 12/30/2011................................................ 150 196 Silicon Valley Bancshares, 0.00%, Due 6/15/2008+............ 240 356 -------- TOTAL FINANCIALS........................................ 1,658 -------- HEALTH CARE - 0.98% Cephalon, Incorporated, 0.00%, Due 6/15/2033+............... 320 292 Invitrogen Corporation, 3.25%, Due 6/15/2025, 144A (Note A)........................................................ 265 249 Medtronic, Incorporated, 1.25%, Due 9/15/2021............... 555 564 -------- TOTAL HEALTH CARE....................................... 1,105 -------- INDUSTRIALS - 5.50% Advanced Micro Devices, Incorporated, 4.75%, Due 2/1/2015... 265 290 Amgen, Incorporated, 0.00%, Due 3/1/2032+................... 900 697 Cadence Design Systems, Incorporated, 0.00%, Due 8/15/2023+................................................ 260 284 Commscope, Incorporated, 1.00%, Due 3/15/2024............... 140 142 CSX Corporation, 0.00%, Due 10/30/2021+..................... 315 285 Fisher Scientific International, Incorporated, 3.25%, Due 3/1/2024(+)............................................... 560 543 Halliburton Company, 3.125%, Due 7/15/2023, 144A (Note A)... 210 347 Juniper Networks, Incorporated, 0.00%, Due 6/15/2008, 144A (Note A)+................................................. 215 265 Liberty Media Corporation, 0.75%, Due 3/30/2023, 144A (Note A)........................................................ 355 389
See accompanying notes -------------------------------------------------------------------------------- 69 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) NCI Building Systems, Incorporated, 2.125%, Due 11/15/2024, 144A (Note A)............................................. $ 285 $ 324 NII Holdings, Incorporated, 2.75%, Due 8/15/2025, 144A (Note A)........................................................ 700 740 Omnicom Group, Incorporated, 0.00%, Due 6/15/2033+.......... 520 510 Powerwave Technologies, Incorporated, 1.875%, Due 11/15/2024................................................ 240 280 Quanta Services, Incorporated, 4.50%, Due 10/1/2023......... 255 306 Regal-Beloit Corporation, 2.75%, Due 3/15/2024.............. 210 271 Schlumberger Limited, 2.125%, Due 6/1/2023(+)............... 400 502 -------- TOTAL INDUSTRIALS....................................... 6,175 -------- INFORMATION TECHNOLOGY - 1.03% CSG Systems International, Incorporated, 2.50%, Due 6/15/2024................................................. 275 288 Electronics for Imaging, Incorporated, 1.50%, Due 6/1/2023.................................................. 235 251 The Fair Issac Corporation, 1.50%, Due 8/15/2023............ 325 351 WebMD Health Corporation, 3.125%, Due 9/1/2025, 144A (Note A)........................................................ 300 263 -------- TOTAL INFORMATION TECHNOLOGY............................ 1,153 -------- PHARMACEUTICAL - 1.58% Genzyme Corporation, 1.25%, Due 12/1/2023................... 550 637 Teva Pharmaceuticals, 0.25%, Due 2/1/2024....................................... 120 135 0.50%, Due 2/1/2024(+).................................... 170 186 Watson Pharmaceuticals, Incorporated, 1.75%, Due 3/15/2023................................................. 285 283 Wyeth, 3.32%, Due 1/15/2024................................. 525 538 -------- TOTAL PHARMACEUTICAL.................................... 1,779 -------- TOTAL CONVERTIBLE BONDS................................. 15,722 -------- CONVERTIBLE PREFERRED BONDS - 0.27% Fortis Insurance NV, 7.75%, Due 1/26/2008, 144A (Note A).... 275 304 -------- TOTAL CONVERTIBLE PREFERRED BONDS....................... 304 -------- SHARES ----------- CONVERTIBLE PREFERRED STOCK - 3.44% ENERGY - 0.46% Amerada Hess Corporation.................................... 4,900 522 -------- TOTAL ENERGY............................................ 522 -------- FINANCIALS - 2.61% Genworth Financial, Incorporated(+)......................... 9,300 326 Hartford Financial Services Group, Incorporated(+).......... 4,000 286 Lazard, Limited(+).......................................... 10,250 261 Lehman Brothers Holdings, Incorporated...................... 15,300 400 MetLife, Incorporated....................................... 16,000 438 Morgan Stanley.............................................. 11,500 431 Travelers Property and Casualty Corporation(+).............. 17,250 430 Washington Mutual, Incorporated(+).......................... 7,200 364 -------- TOTAL FINANCIALS........................................ 2,936 -------- TELECOMMUNICATION SERVICES - 0.37% Nokia Corporation, ADR...................................... 25,000 421 -------- TOTAL TELECOMMUNICATION SERVICES........................ 421 -------- TOTAL CONVERTIBLE PREFERRED STOCK....................... 3,879 --------
See accompanying notes -------------------------------------------------------------------------------- 70 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) COMMON STOCK - 1.56% CONSUMER DISCRETIONARY - 0.25% Starbucks Corporation+...................................... 10,000 $ 283 -------- TOTAL CONSUMER DISCRETIONARY............................ 283 -------- ENERGY - 0.34% Devon Energy Corporation.................................... 6,406 387 -------- TOTAL ENERGY............................................ 387 -------- INFORMATION TECHNOLOGY - 0.69% AutoDesk, Incorporated+..................................... 7,900 357 Infosys Technologies Limited, ADR........................... 6,100 414 -------- TOTAL INFORMATION TECHNOLOGY............................ 771 -------- TRANSPORTATION - 0.28% Burlington Northern Santa Fe Corporation.................... 5,000 310 -------- TOTAL TRANSPORTATION.................................... 310 -------- TOTAL COMMON STOCK...................................... 1,751 -------- SHORT-TERM INVESTMENTS - 28.78% American Beacon Enhanced Cash Trust (Notes B and C)......... 20,670,297 20,671 American Beacon Money Market Select Fund (Notes B and C).... 11,652,257 11,652 -------- TOTAL OTHER SHORT-TERM INVESTMENTS...................... 32,323 -------- TOTAL SHORT-TERM INVESTMENTS............................ 32,323 -------- TOTAL INVESTMENTS - 124.42% (COST $139,911)................. 139,770 -------- LIABILITIES, NET OF OTHER ASSETS - (24.42%)................. (27,429) -------- TOTAL NET ASSETS - 100%..................................... $112,341 ========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of the securities amounted to $9,404 or 8.37% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of the security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. See accompanying notes -------------------------------------------------------------------------------- 71 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 18.26% U.S. TREASURY BONDS - 7.59% 7.50%, Due 11/15/2016(+).................................... $ 655 $ 813 9.125%, Due 5/15/2018(+).................................... 1,200 1,695 7.875%, Due 2/15/2021(+).................................... 750 997 6.875%, Due 8/15/2025(+).................................... 370 465 6.25%, Due 5/15/2030(+)..................................... 1,090 1,317 5.375%, Due 2/15/2031(+).................................... 1,720 1,876 -------- TOTAL U.S. TREASURY BONDS............................... 7,163 -------- U.S. TREASURY NOTES - 10.67% 4.00%, Due 9/30/2007(+)..................................... 230 228 3.375%, Due 2/15/2008(+).................................... 890 870 3.50%, Due 11/15/2009....................................... 450 434 3.875%, Due 5/15/2010(+).................................... 1,000 976 3.875%, Due 9/15/2010(+).................................... 500 487 4.25%, Due 10/15/2010(+).................................... 540 535 5.00%, Due 2/15/2011(+)..................................... 1,000 1,025 5.00%, Due 8/15/2011(+)..................................... 700 718 2.00%, Due 1/15/2014........................................ 1,403 1,407 4.75%, Due 5/15/2014(+)..................................... 2,200 2,228 4.125%, Due 5/15/2015(+).................................... 1,200 1,158 -------- TOTAL U.S. TREASURY NOTES............................... 10,066 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 17,229 -------- U.S. AGENCY OBLIGATIONS - 3.62% FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.05% 4.25%, Due 7/15/2009(+)..................................... 2,000 1,966 5.625%, Due 3/15/2011....................................... 500 519 5.875%, Due 3/21/2011(+).................................... 380 395 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 2,880 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.57% 5.125%, Due 1/2/2014(+)..................................... 545 542 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 542 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 3,422 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 34.50% FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.39% Pool #G11295, 5.50%, Due 9/1/2017........................... 331 334 Pool #E96536, 5.00%, Due 3/1/2018........................... 695 686 Pool #B12563, 5.00%, Due 2/1/2019........................... 549 542 Pool #E01602, 4.50%, Due 3/1/2019........................... 823 798 Pool #G00738, 8.00%, Due 7/1/2027........................... 184 197 Pool #C00647, 6.50%, Due 9/1/2028........................... 134 137 Pool #G01457, 6.00%, Due 8/1/2029........................... 452 458 Pool #G01533, 6.00%, Due 3/1/2033........................... 499 505 Pool #C01598, 5.00%, Due 8/1/2033........................... 970 936 Pool #A12149, 6.00%, Due 8/1/2033........................... 628 635 Pool #G08006, 6.00%, Due 8/1/2034........................... 739 746 Pool #A30948, 5.50%, Due 1/1/2035........................... 1,158 1,144 Pool #G01824, 6.50%, Due 4/1/2035........................... 84 86
See accompanying notes -------------------------------------------------------------------------------- 72 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Pool #A45500, 5.50%, Due 6/1/2035........................... $ 1,092 $ 1,078 Pool #G08072, 5.00%, Due 8/1/2035........................... 597 575 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 8,857 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.19% Pool #323309, 6.00%, Due 9/1/2013........................... 178 182 Pool #488099, 5.50%, Due 2/1/2014........................... 455 459 Pool #323789, 6.00%, Due 6/1/2014........................... 195 199 Pool #545449, 6.50%, Due 2/1/2017........................... 477 492 Pool #545823, 5.50%, Due 8/1/2017........................... 573 577 Pool #254545, 5.00%, Due 12/1/2017.......................... 1,394 1,377 Pool #254865, 4.50%, Due 9/1/2018........................... 890 862 Pool #747844, 5.50%, Due 12/1/2018.......................... 212 213 Pool #761337, 5.00%, Due 4/1/2019........................... 404 399 Pool #811499, 5.00%, Due 9/1/2020........................... 402 397 Pool #100293, 9.50%, Due 8/1/2029........................... 164 181 Pool #555531, 5.50%, Due 6/1/2033........................... 765 756 Pool #727223, 5.50%, Due 9/1/2033........................... 582 575 Pool #749219, 5.50%, Due 10/1/2033.......................... 115 114 Pool #555880, 5.50%, Due 11/1/2033.......................... 1,351 1,335 Pool #758322, 5.50%, Due 12/1/2033.......................... 715 707 Pool #725238, 5.00%, Due 3/1/2034........................... 1,240 1,197 Pool #765304, 5.50%, Due 3/1/2034........................... 251 248 Pool #725866, 4.50%, Due 9/1/2034........................... 643 602 Pool #255364, 6.00%, Due 9/1/2034........................... 1,983 2,000 Pool #255412, 6.00%, Due 10/1/2034.......................... 34 34 Pool #796229, 6.00%, Due 11/1/2034.......................... 836 843 Pool #781822, 6.00%, Due 12/1/2034.......................... 1,051 1,061 Pool #735224, 5.50%, Due 2/1/2035........................... 1,667 1,647 Pool #828377, 5.50%, Due 6/1/2035........................... 541 533 Pool #834769, 6.00%, Due 7/1/2035........................... 1,004 1,013 Pool #830989, 6.00%, Due 8/1/2035........................... 1,029 1,038 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 19,041 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.92% Pool #780400, 7.00%, Due 12/15/2025......................... 514 542 Pool #780615, 6.50%, Due 8/15/2027.......................... 400 416 Pool #780747, 6.50%, Due 3/15/2028.......................... 554 577 Pool #780936, 7.50%, Due 12/15/2028......................... 240 255 Pool #781273, 6.00%, Due 4/15/2031.......................... 543 553 Pool #781564, 6.00%, Due 2/15/2033.......................... 568 578 Pool #781603, 5.00%, Due 5/15/2033.......................... 413 404 Pool #781690, 6.00%, Due 12/15/2033......................... 434 442 Pool #003515, 5.50%, Due 2/20/2034.......................... 879 876 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 4,643 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 32,541 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.97% Banc of America Commercial Mortgage, Incorporated, 2005-1 1CBL, 5.25%, Due 10/25/2019........................ 1,300 1,283 2003-2 A2, 4.342%, Due 3/11/2041.......................... 265 258
See accompanying notes -------------------------------------------------------------------------------- 73 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Bear Stearns Commercial Mortgage Securities, Incorporated, 2004-PWR5 A4, 4.831%, Due 7/11/2042....................... $ 535 $ 520 2005-SD2, 5.127%, Due 10/12/2042.......................... 430 430 Chase Mortgage Financial Trust, 2004-S1 A3, 5.50%, Due 2/25/2019................................................. 343 343 Countrywide Alternative Loan Trust, Incorporated, 2005-53T2 2A1, 6.00%, Due 11/25/2035................................ 1,488 1,503 Countrywide Home Loan, Incorporated 2004-18 A1, 6.00%, Due 10/25/2034................................................ 442 445 General Electric Capital Commercial Mortgage Corporation 2003-C2 A2, 4.17%, Due 7/10/2037.......................... 312 305 Prime Mortgage Trust, 2005-2 1A3, 5.25%, Due 7/25/2020...... 549 545 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 5,632 -------- CORPORATE OBLIGATIONS - 30.46% FINANCIAL - 11.48% AEGON, NV, 8.00%, Due 8/15/2006............................. 300 307 American General Finance Corporation, 5.375%, Due 9/1/2009(+)................................... 180 181 4.875%, Due 5/15/2010..................................... 200 198 Banco Popular North America, Incorporated, 4.25%, Due 4/1/2008.................................................. 200 197 Bank One Corporation, 5.90%, Due 11/15/2011..................................... 440 456 4.90%, Due 4/30/2015(+)................................... 200 192 The Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008.................................................. 400 380 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013(+).......... 150 147 Capital One Bank, 6.70%, Due 5/15/2008...................................... 350 363 4.80%, Due 2/21/2012...................................... 235 225 5.125%, Due 2/15/2014..................................... 220 213 The Chubb Corporation, 4.934%, Due 11/16/2007............... 355 355 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 350 362 Equity Residential, 5.125%, Due 3/15/2016................... 185 179 Fleet Boston Financial Group, Incorporated, 8.625%, Due 1/15/2007..................................... 200 208 General Electric Capital Corporation, 6.875%, Due 11/15/2010................................................ 380 410 The Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013................................................. 250 240 HSBC Finance Corporation, 4.75%, Due 4/15/2010.............. 250 247 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 250 247 International Lease Finance Corporation, 6.375%, Due 3/15/2009................................................. 250 260 Lincoln National Corporation, 4.75%, Due 2/15/2014(+)....... 100 96 Merrill Lynch & Company, Incorporated, 6.00%, Due 2/17/2009...................................... 500 516 4.25%, Due 2/8/2010....................................... 345 334 MetLife, Incorporated, 5.00%, Due 6/15/2015................. 170 165 MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note A)........................................................ 350 341 PHH Corporation, 6.00%, Due 3/1/2008........................ 200 203 PNC Funding Corporation, 4.20%, Due 3/10/2008............... 355 350 Prudential Financial, Incorporated, 3.75%, Due 5/1/2008(+).................................... 130 128 4.50%, Due 7/15/2013(+)................................... 225 215 5.10%, Due 9/20/2014...................................... 210 206 Regions Financial Corporation, 4.50%, Due 8/8/2008.......... 355 351 Simon Property Group LP, 6.375%, Due 11/15/2007............. 200 205
See accompanying notes -------------------------------------------------------------------------------- 74 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) SLM Corporation, 4.00%, Due 1/15/2009...................................... $ 700 $ 679 4.00%, Due 1/15/2010...................................... 235 226 4.50%, Due 7/26/2010...................................... 240 234 Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 200 194 Washington Mutual Corporation, 4.625%, Due 4/1/2014......... 400 376 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011................................................. 190 206 WellPoint, Incorporated, 3.75%, Due 12/14/2007..................................... 235 229 5.00%, Due 12/15/2014..................................... 210 204 -------- TOTAL FINANCIAL......................................... 10,825 -------- INDUSTRIALS - 12.20% Amgen, Incorporated, 4.00%, Due 11/18/2009.................. 210 203 Anheuser-Busch Companies, Incorporated, 6.50%, Due 1/1/2028.................................................. 350 388 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 448 516 Atlantic Richfield Company, 8.50%, Due 4/1/2012............. 255 302 Baxter International, Incorporated, 5.25%, Due 5/1/2007..... 315 318 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012.... 150 171 Carnival Corporation, 3.75%, Due 11/15/2007................. 380 372 Cendant Corporation, 6.875%, Due 8/15/2006.................. 450 456 Comcast Cable Communications, 7.625%, Due 2/15/2008(+)...... 230 242 Comcast Corporation, 5.30%, Due 1/15/2014................... 220 214 ConAgra Foods, Incorporated, 7.00%, Due 10/1/2028(+)........ 400 428 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 390 386 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 400 414 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A).................................................. 225 216 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 300 283 John Deere Capital Corporation, 3.375%, Due 10/1/2007..................................... 350 341 4.375%, Due 3/14/2008..................................... 170 168 4.40%, Due 7/15/2009...................................... 130 128 Hewlett-Packard Company, 5.75%, Due 12/15/2006(+)........... 325 328 Kinder Morgan, Incorporated, 6.50%, Due 9/1/2012............ 130 138 Lockheed Martin Corporation, 7.20%, Due 5/1/2036............ 470 556 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007................................................. 300 309 Motorola, Incorporated, 8.00%, Due 11/1/2011(+)............. 245 283 Nissan Motor Company Limited, 4.625%, Due 3/8/2010.......... 190 185 Northrop Grumman Corporation, 4.079%, Due 11/16/2006.................................... 450 446 7.125%, Due 2/15/2011..................................... 250 273 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 150 165 The Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029.................................................. 350 412 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009..................................... 100 98 5.25%, Due 1/15/2014...................................... 100 94 Quest Diagnostics, Incorporated, 5.125%, Due 11/1/2010...... 155 155 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006... 500 503 Schering-Plough Corporation, 6.75%, Due 12/1/2033........... 200 225 Time Warner, Incorporated, 6.75%, Due 4/15/2011...................................... 200 211 7.90%, Due 4/15/2031...................................... 100 106
See accompanying notes -------------------------------------------------------------------------------- 75 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Union Pacific Corporation, 6.50%, Due 4/15/2012............. $ 200 $ 214 Univision Communications, Incorporated, 3.875%, Due 10/15/2008................................................ 390 374 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 350 436 Weyerhaeuser Company, 5.95%, Due 11/1/2008.................. 210 215 Wyeth Corporation, 5.50%, Due 2/1/2014...................... 230 232 -------- TOTAL INDUSTRIALS....................................... 11,504 -------- TELECOMMUNICATIONS - 4.02% Alltel Corporation, 4.656%, Due 5/17/2007................... 245 244 America Movil S.A. de C.V., 6.375%, Due 3/1/2035............ 540 506 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006....................................... 500 504 8.125%, Due 5/1/2012...................................... 390 448 8.75%, Due 3/1/2031....................................... 170 222 Deutsche Telekom AG, 8.50%, Due 6/15/2010................... 150 167 France Telecom SA, 8.00%, Due 3/1/2011...................... 270 301 Nextel Communications, Incorporated, 6.875%, Due 10/31/2013................................................ 290 303 Sprint Capital Corporation, 6.00%, Due 1/15/2007...................................... 200 203 8.375%, Due 3/15/2012..................................... 150 173 Telecom Italia S.p.A., 4.00%, Due 11/15/2008................ 220 213 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015..... 200 193 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 310 312 -------- TOTAL TELECOMMUNICATIONS................................ 3,789 -------- UTILITIES - 2.76% Consolidated Natural Gas Company, 6.875%, Due 10/15/2026.... 335 362 FPL Group, Incorporated, 4.086%, Due 2/16/2007.............. 210 208 Georgia Power Company, 4.875%, Due 7/15/2007................ 270 270 Marathon Oil Corporation, 5.375%, Due 6/1/2007.............. 255 257 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008...................................... 270 259 5.875%, Due 10/1/2012..................................... 200 205 Public Service Enterprise Group, Incorporated, 6.95%, Due 6/1/2012(+)............................................... 355 381 Southern Company Capital Funding, Incorporated, 7.625%, Due 2/1/2007.................................................. 155 175 Union Oil Company of California, 5.30%, Due 4/18/2008....... 220 221 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010............. 250 269 -------- TOTAL UTILITIES......................................... 2,607 -------- TOTAL CORPORATE OBLIGATIONS............................. 28,725 -------- ASSET-BACKED SECURITIES - 2.57% Citigroup Commercial Mortgage Trust 2004-C2 A3, 4.38%, Due 10/15/2041................................................ 470 451 Household Automotive Trust 2004-1 A3, 4.625%, Due 5/18/2009................................................. 505 496 JP Morgan Chase Commercial Mortgage Securities Corp, 2004-CBX A4, 4.529%, Due 11/12/2039....................... 255 247 2005-LDP3 A1, 4.655%, Due 8/15/2042....................... 195 194 2005-LDP1 A2, 3.33%, Due 3/15/2046........................ 700 692 Residential Asset Mortgage Products, Incorporated 2004-RS12 AI2, 3.767%, Due 2/25/2027................................ 110 108 TXU Electric Delivery Transition, LLC 2004-1 A2, 4.81%, Due 11/15/2012................................................ 243 240 -------- TOTAL ASSET-BACKED SECURITIES........................... 2,428 --------
See accompanying notes -------------------------------------------------------------------------------- 76 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ---------- -------- SHORT-TERM INVESTMENTS - 24.66% American Beacon Enhanced Cash Trust (Notes B and C)......... 14,649,300 $ 14,649 American Beacon Money Market Select Fund (Notes B and C).... 8,601,456 8,602 -------- TOTAL SHORT-TERM INVESTMENTS............................ 23,251 -------- TOTAL INVESTMENTS - 120.04% (COST $114,862)................. 113,228 -------- LIABILITIES, NET OF OTHER ASSETS - (20.04%)................. (18,904) -------- TOTAL NET ASSETS - 100%..................................... $ 94,324 ========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $804 or 0.85% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. See accompanying notes -------------------------------------------------------------------------------- 77 AMERICAN BEACON SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY NOTE - 2.24% 3.375%, Due 2/28/2007(+).................................... $ 2,000 $ 1,974 -------- TOTAL U.S. TREASURY NOTE................................ 1,974 -------- U.S. AGENCY OBLIGATIONS - 1.65% Federal National Mortgage Association, 3.625%, Due 9/15/2008................................................. 1,500 1,457 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 1,457 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 3.58% FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.21% Pool #E00228, 6.50%, Due 7/1/2008........................... 183 187 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 187 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.53% Pool #050952, 6.50%, Due 12/1/2008.......................... 223 228 Pool #252448, 5.50%, Due 4/1/2009........................... 206 207 Pool #313430, 6.50%, Due 3/1/2012........................... 248 256 Pool #313522, 7.00%, Due 5/1/2012........................... 464 486 Pool #323223, 6.50%, Due 7/1/2013........................... 204 211 Pool #323980, 6.00%, Due 4/1/2014........................... 447 457 Pool #545038, 6.00%, Due 9/1/2014........................... 382 391 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 2,236 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.84% Pool #780286, 7.00%, Due 6/15/2008.......................... 214 218 Pool #351992, 6.00%, Due 12/15/2008......................... 512 522 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 740 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 3,163 -------- CORPORATE OBLIGATIONS - 67.50% FINANCE - 44.97% American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)............................................. 1,150 1,142 Bank One Corporation, 6.00%, Due 8/1/2008................... 2,000 2,056 The Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008.................................................. 2,000 1,899 Boeing Capital Corporation, 5.65%, Due 5/15/2006(+)......... 626 630 Capital One Bank, 6.875%, Due 2/1/2006...................................... 200 201 6.70%, Due 5/15/2008...................................... 1,100 1,141 Caterpillar Financial Services, 2.35%, Due 9/15/2006(+)................................... 1,500 1,469 4.15%, Due 1/15/2010(+)................................... 1,000 971 Comerica Bank, 6.00%, Due 10/1/2008......................... 2,200 2,258 Countrywide Home Loans, Incorporated, 3.25%, Due 5/21/2008................................................. 2,000 1,916 Credit Suisse First Boston, Incorporated, 5.875%, Due 8/1/2006.................................................. 2,000 2,017 FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 2,500 2,454 General Electric Capital Corporation, 4.125%, Due 3/4/2008.................................................. 3,000 2,953 John Hancock Global Funding, 5.625%, Due 6/27/2006.......... 1,000 1,006 Household Finance Corporation, 5.75%, Due 1/30/2007......... 2,250 2,275 MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note A)........................................................ 3,000 2,919 Monumental Global Funding, 5.20%, Due 1/30/2007, 144A (Note A)........................................................ 1,200 1,202 Morgan Stanley Group, Incorporated, 6.10%, Due 4/15/2006.... 1,000 1,006 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 3,000 3,033 Simon Property Group LP, 6.375%, Due 11/15/2007............. 2,000 2,050 Synovus Financial Corporation, 7.25%, Due 12/15/2005........ 2,500 2,508
See accompanying notes -------------------------------------------------------------------------------- 78 AMERICAN BEACON SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Wachovia Corporation, 6.40%, Due 4/1/2008................... $ 2,500 $ 2,589 -------- TOTAL FINANCE........................................... 39,695 -------- INDUSTRIALS - 22.53% AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... 1,400 1,412 Bunge Limited, 4.375%, Due 12/15/2008....................... 1,000 981 Cendant Corporation, 6.875%, Due 8/15/2006.................. 2,140 2,168 Comcast Cable Communications, 6.20%, Due 11/15/2008......... 2,000 2,059 ConAgra Foods, Incorporated, 9.875%, Due 11/15/2005......... 1,000 1,002 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 1,500 1,484 John Deere Capital Corporation, 3.375%, Due 10/1/2007....... 2,000 1,949 International Lease Finance Corporation, 2.95%, Due 5/23/2006(+).............................................. 2,000 1,982 Northrop Grumman Corporation, 7.00%, Due 3/1/2006........... 2,000 2,017 Sprint Capital Corporation, 6.00%, Due 1/15/2007............ 1,800 1,823 Unilever Capital Corporation, 6.875%, Due 11/1/2005......... 1,000 1,000 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 2,000 2,011 -------- TOTAL INDUSTRIALS....................................... 19,888 -------- TOTAL CORPORATE OBLIGATIONS............................. 59,583 -------- ASSET-BACKED SECURITIES - 21.73% Banc of America Securities Auto Trust 2005-WF1 A4, 4.08%, Due 4/18/2010............................................. 3,000 2,945 Chase Manhattan Auto Owner Trust 2004-A A4, 2.83%, Due 9/15/2010................................................. 2,000 1,933 Citibank Credit Card Issuance Trust 2004-A4 A4, 3.20%, Due 8/24/2009................................................. 3,000 2,918 DaimlerChrysler Auto Trust 2004-C A4, 3.28%, Due 12/8/2009................................................. 3,000 2,911 Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009................................................. 1,600 1,582 HSBC Automotive Trust 2005-1 A4, 4.35%, Due 6/18/2012....... 2,000 1,964 Nissan Auto Receivables Owner Trust 2004-A A3, 2.01%, Due 11/15/2007................................................ 884 874 USAA Auto Owner Trust 2004-1 A3, 2.06%, Due 4/15/2008....... 1,547 1,528 Wells Fargo Financial Auto Owner Trust 2004-A A4, 2.67%, Due 8/16/2010................................................. 2,600 2,529 -------- TOTAL ASSET-BACKED SECURITIES........................... 19,184 -------- SHARES ----------- SHORT-TERM INVESTMENTS - 7.60% American Beacon Enhanced Cash Trust (Notes B and C)......... 3,390,792 3,391 American Beacon Money Market Select Fund (Notes B and C).... 3,305,372 3,305 -------- TOTAL SHORT-TERM INVESTMENTS............................ 6,696 -------- TOTAL INVESTMENTS - 104.30% (COST $93,494).................. 92,057 -------- LIABILITIES, NET OF OTHER ASSETS - (4.30%).................. (3,792) -------- TOTAL NET ASSETS - 100%..................................... $ 88,265 ========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $8,296 or 9.40% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. See accompanying notes -------------------------------------------------------------------------------- 79 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES October 31, 2005 (in thousands except share and per share amounts) --------------------------------------------------------------------------------
LARGE CAP LARGE CAP MID-CAP BALANCED VALUE GROWTH VALUE ----------- ----------- ---------- ---------- ASSETS: Investments in unaffiliated securities, at value(A D)... $ 752,252 $ 1,401,446 $ 59,791 $ 42,356 Investments in affiliated securities, at value(B)....... 179,928 279,394 3,449 11,881 Foreign currency, at value(C)........................... -- -- -- -- Cash.................................................... -- -- 6 4 Net unrealized appreciation on foreign currency contracts............................................. -- -- -- -- Receivable for investments sold......................... 2,676 5,420 68 -- Dividends and interest receivable....................... 3,268 2,191 30 40 Receivable for fund shares sold......................... 1,034 20,837 347 145 Receivable for tax reclaims............................. -- -- -- -- Receivable for expense reimbursement.................... -- 1 -- -- Receivable for variation margin on open futures contracts............................................. 556 1,414 28 51 Other assets............................................ -- -- -- -- ----------- ----------- ---------- ---------- TOTAL ASSETS........................................ 939,714 1,710,703 63,719 54,477 ----------- ----------- ---------- ---------- LIABILITIES: Payable for investments purchased....................... 2,750 6,003 66 79 Payable upon return of securities loaned................ 122,937 115,545 251 9,393 Payable for fund shares redeemed........................ 274 418 -- 484 Dividends payable....................................... -- -- -- -- Management and investment advisory fees payable (Note 2).................................................... 568 1,017 102 158 Administrative service and service fees payable......... 40 240 -- 9 Other liabilities....................................... 74 189 12 12 ----------- ----------- ---------- ---------- TOTAL LIABILITIES................................... 126,643 123,412 431 10,135 ----------- ----------- ---------- ---------- NET ASSETS.................................................. $ 813,071 $ 1,587,291 $ 63,288 $ 44,342 =========== =========== ========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 662,190 1,303,440 67,315 35,975 Undistributed net investment income..................... 15,755 14,208 231 336 Accumulated net realized gain (loss).................... 36,187 58,564 (7,695) 8,593 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................ 98,939 211,079 3,437 (562) ----------- ----------- ---------- ---------- NET ASSETS.................................................. $ 813,071 $ 1,587,291 $ 63,288 $ 44,342 =========== =========== ========== ========== Shares outstanding (no par value): Institutional Class..................................... 941,655 9,578,448 16,964 3,782,090 =========== =========== ========== ========== PlanAhead Class......................................... 6,117,229 26,109,291 N/A N/A =========== =========== ========== ========== Service Class........................................... 77 576,363 N/A N/A =========== =========== ========== ========== AMR Class............................................... 49,129,419 40,814,156 10,177,995 N/A =========== =========== ========== ========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 15.00 $ 21.00 $ 6.18 $ 11.72 =========== =========== ========== ========== PlanAhead Class......................................... $ 14.20 $ 20.16 N/A N/A =========== =========== ========== ========== Service Class........................................... $ 14.16 $ 20.13 N/A N/A =========== =========== ========== ========== AMR Class............................................... $ 14.49 $ 20.78 $ 6.21 N/A =========== =========== ========== ========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 652,349 $ 1,189,196 $ 56,317 $ 42,996 (B) Cost of investments in affiliated securities............ $ 179,928 $ 279,394 $ 3,449 $ 11,881 (C) Cost of foreign currency................................ $ -- $ -- $ -- $ -- (D) Market value of securities on loan...................... $ 120,757 $ 113,406 $ 250 $ 9,237
See accompanying notes -------------------------------------------------------------------------------- 80 --------------------------------------------------------------------------------
EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM MARKETS BOND INCOME BOND BOND ---------- ----------- ----------- ------------ ----------- $ 102,030 $ 357,430 $ 107,447 $ 89,977 $ 85,361 10,591 8,267 32,323 23,251 6,696 854 -- -- -- -- -- 3 -- -- -- 75 -- -- -- -- 27 712 236 251 -- 180 7,426 1,145 927 941 292 511 61 132 18 6 -- -- -- -- -- -- -- -- -- 41 -- -- -- -- -- -- -- -- 3 ---------- ----------- ----------- ----------- ----------- 114,096 374,349 141,212 114,538 93,019 ---------- ----------- ----------- ----------- ----------- 49 -- 568 246 -- 6,891 36,110 28,134 19,939 4,615 -- 196 -- 1 110 -- 261 -- -- 7 303 537 103 21 20 3 88 45 1 2 46 52 21 6 -- ---------- ----------- ----------- ----------- ----------- 7,292 37,244 28,871 20,214 4,754 ---------- ----------- ----------- ----------- ----------- $ 106,804 $ 337,105 $ 112,341 $ 94,324 $ 88,265 ========== =========== =========== =========== =========== 68,754 339,688 112,937 103,973 98,516 1,524 -- (470) 1 (1,843) 14,946 3,233 14 (8,016) (6,778) 21,580 (5,816) (140) (1,634) (1,630) ---------- ----------- ----------- ----------- ----------- $ 106,804 $ 337,105 $ 112,341 $ 94,324 $ 88,265 ========== =========== =========== =========== =========== 619,134 21,214,011 N/A 9,320,730 9,101,890 ========== =========== =========== =========== =========== 173,037 11,774,542 11,256,246 104,527 978,397 ========== =========== =========== =========== =========== N/A 120 N/A N/A N/A ========== =========== =========== =========== =========== 6,255,050 N/A N/A N/A N/A ========== =========== =========== =========== =========== $ 15.10 $ 10.22 N/A $ 10.01 $ 8.75 ========== =========== =========== =========== =========== $ 14.98 $ 10.22 $ 9.98 $ 10.08 $ 8.77 ========== =========== =========== =========== =========== N/A $ 10.41 N/A N/A N/A ========== =========== =========== =========== =========== $ 15.17 N/A N/A $ N/A $ N/A ========== =========== =========== =========== =========== $ 80,600 $ 363,246 $ 107,588 $ 91,611 $ 86,798 $ 10,591 $ 8,267 $ 32,323 $ 23,251 $ 6,696 $ 861 $ -- $ -- $ -- $ -- $ 6,769 $ 35,253 $ 27,603 $ 19,548 $ 4,521
-------------------------------------------------------------------------------- 81 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS Year Ended October 31, 2005 (in thousands) --------------------------------------------------------------------------------
LARGE CAP LARGE CAP MID-CAP BALANCED VALUE GROWTH VALUE -------- --------- --------- ------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)(A)..................................... $10,557 $ 23,009 $ 910 $ 664 Dividend income from affiliated securities.............. 1,380 2,598 54 214 Interest income......................................... 11,039 191 6 21 Income derived from securities lending, net............. 173 125 1 3 ------- -------- ------- ------ TOTAL INVESTMENT INCOME............................. 23,149 25,923 971 902 ------- -------- ------- ------ EXPENSES: Management and investment advisory fees (Note 2)........ 2,162 3,466 347 318 Administrative service fees (Note 2): Institutional Class................................... 26 275 -- 117 PlanAhead Class....................................... 132 597 -- -- Service Class......................................... -- 1 -- -- Transfer agent fees: Institutional Class................................... -- 11 -- 9 PlanAhead Class....................................... 23 41 -- -- Service Class......................................... 2 2 -- -- AMR Class............................................. 13 19 3 -- Fund accounting fees.................................... 159 281 16 15 Professional fees....................................... 34 59 5 5 Registration fees and expenses.......................... 45 97 1 4 Service fees: PlanAhead Class (Note 2).............................. 132 597 -- -- Service Class (Note 2)................................ -- 1 -- -- Distribution plan -- Service Class (Note 2)............. -- 1 -- -- Prospectus and shareholder reports...................... 110 156 10 10 Other expenses.......................................... 13 20 1 -- ------- -------- ------- ------ TOTAL EXPENSES...................................... 2,851 5,624 383 478 ------- -------- ------- ------ Less fees waived (Note 2)............................... 2 2 -- 7 ------- -------- ------- ------ NET EXPENSES........................................ 2,849 5,622 383 471 ------- -------- ------- ------ NET INVESTMENT INCOME....................................... 20,300 20,301 588 431 ------- -------- ------- ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from:(B) Investments........................................... 39,420 70,407 3,592 5,598 Commission recapture.................................. 32 154 6 105 Foreign currency transactions......................... -- -- -- -- Futures contracts..................................... 4,894 2,933 108 2,913 Change in net unrealized appreciation or depreciation of:(C) Investments........................................... 10,890 62,940 (165) (1,156) Foreign currency translations......................... -- -- -- -- Futures contracts..................................... (1,337) (1,509) (42) 32 ------- -------- ------- ------ NET GAIN (LOSS) ON INVESTMENTS...................... 53,899 134,925 3,499 7,492 ------- -------- ------- ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $74,199 $155,226 $ 4,087 $7,923 ======= ======== ======= ====== (A) Foreign taxes....................................... $ 100 $ 293 $ -- $ -- (B) Net of foreign withholding taxes on capital gains... $ -- $ -- $ -- $ -- (C) Net of unrealized appreciation of foreign withholding taxes on capital gains.................. $ -- $ -- $ -- $ --
See accompanying notes -------------------------------------------------------------------------------- 82 --------------------------------------------------------------------------------
EMERGING HIGH YIELD ENHANCED MARKETS BOND INCOME -------- ---------- -------- $ 2,885 $ -- $ 251 63 428 107 109 30,083 3,798 20 164 39 -------- ------- ------ 3,077 30,675 4,195 -------- ------- ------ 912 1,960 387 20 586 -- 5 364 283 -- -- -- 2 43 -- 6 15 17 -- -- -- 4 -- -- 374 70 20 10 25 8 30 37 19 5 364 283 -- -- -- -- -- -- 21 66 21 3 4 1 -------- ------- ------ 1,392 3,534 1,039 -------- ------- ------ 5 1 -- -------- ------- ------ 1,387 3,533 1,039 -------- ------- ------ 1,690 27,142 3,156 -------- ------- ------ 14,122 3,293 570 -- -- -- 1,620 -- -- 438 -- -- 8,617 (19,461) (2,306) (17) -- -- 792 -- -- -------- ------- ------ 25,572 (16,168) (1,736) -------- ------- ------ $ 27,262 $10,974 $1,420 ======== ======= ====== $ 339 $ -- $ -- $ 67 $ -- $ -- $ 84 $ -- $ --
-------------------------------------------------------------------------------- 83 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS -- CONTINUED Year Ended October 31, 2005 --------------------------------------------------------------------------------
INTERMEDIATE SHORT-TERM BOND BOND ------------ ---------- (IN THOUSANDS) INVESTMENT INCOME: Dividend income from affiliated securities.............. $ 115 $ 63 Interest income......................................... 4,115 2,899 Income derived from securities lending, net............. 24 3 ------ ------ TOTAL INVESTMENT INCOME............................. 4,254 2,965 ------ ------ EXPENSES: Management and investment advisory fees (Note 2)........ 240 221 Administrative service fees (Note 2): Institutional Class (terminated 3/1/05) (Note 1)...... 1 2 PlanAhead Class....................................... 3 19 Transfer agent fees: Institutional Class (terminated 3/1/05) (Note 1)...... (1) 1 PlanAhead Class....................................... 4 9 Institutional Class (known as AMR Class prior to 3/1/05) (Note 1)..................................... 5 4 Fund accounting fees.................................... 17 15 Professional fees....................................... 2 5 Registration fees and expenses.......................... 24 26 Service fees -- PlanAhead Class (Note 2)................ 2 19 Prospectus and shareholder reports...................... 7 18 Other expenses.......................................... 3 2 ------ ------ TOTAL EXPENSES...................................... 307 341 ------ ------ Less fees waived (Note 2)............................... 3 5 ------ ------ NET EXPENSES........................................ 304 336 ------ ------ NET INVESTMENT INCOME....................................... 3,950 2,629 ------ ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on: Investments........................................... 61 (140) Change in net unrealized appreciation or depreciation of: Investments........................................... (2,958) (1,625) ------ ------ NET GAIN (LOSS) ON INVESTMENTS...................... (2,897) (1,765) ------ ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $1,053 $ 864 ====== ====== * Foreign taxes......................................... -- --
See accompanying notes -------------------------------------------------------------------------------- 84 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 85 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
BALANCED LARGE CAP VALUE LARGE CAP GROWTH MID-CAP VALUE(1) -------------------- ---------------------- ------------------- ------------------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, YEAR ENDED JUNE 30 TO -------------------- ---------------------- ------------------- OCTOBER 31, OCTOBER 31, 2005 2004 2005 2004 2005 2004 2005 2004 --------- -------- ---------- --------- -------- -------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income....... $ 20,300 $ 15,049 $ 20,301 $ 12,568 $ 588 $ 184 $ 431 $ 43 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions..... 44,346 27,633 73,494 39,844 3,706 4,414 8,616 (43) Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations..... 9,553 33,329 61,431 69,573 (207) (1,298) (1,124) 562 --------- -------- ---------- --------- -------- -------- --------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 74,199 76,011 155,226 121,985 4,087 3,300 7,923 562 --------- -------- ---------- --------- -------- -------- --------- ------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class....... (183) (211) (909) (414) -- -- (115) -- PlanAhead Class........... (584) (354) (1,111) (344) -- -- -- -- AMR Class................. (16,172) (15,797) (11,555) (11,675) (474) (151) -- -- Net realized gain on investments: Institutional Class....... (277) -- -- -- -- -- (3) -- PlanAhead Class........... (930) -- -- -- -- -- -- -- AMR Class................. (21,970) -- -- -- -- -- -- -- --------- -------- ---------- --------- -------- -------- --------- ------- NET DISTRIBUTIONS TO SHAREHOLDERS.......... (40,116) (16,362) (13,575) (12,433) (474) (151) (118) -- --------- -------- ---------- --------- -------- -------- --------- ------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares.................... 247,623 71,533 936,214 148,293 39,712 25,454 164,231 26,544 Reinvestment of dividends and distributions......... 40,085 16,359 13,156 12,206 474 151 118 -- Cost of shares redeemed..... (175,089) (61,146) (299,876) (117,617) (35,633) (22,559) (153,362) (1,560) Redemption fees............. -- -- -- -- -- -- 4 -- --------- -------- ---------- --------- -------- -------- --------- ------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.......... 112,619 26,746 649,494 42,882 4,553 3,046 10,991 24,984 --------- -------- ---------- --------- -------- -------- --------- ------- NET INCREASE (DECREASE) IN NET ASSETS........................ 146,702 86,395 791,145 152,434 8,166 6,195 18,796 25,546 --------- -------- ---------- --------- -------- -------- --------- ------- NET ASSETS: Beginning of period......... 666,369 579,974 796,146 643,712 55,122 48,927 25,546 -- --------- -------- ---------- --------- -------- -------- --------- ------- END OF PERIOD*.............. $ 813,071 $666,369 $1,587,291 $ 796,146 $ 63,288 $ 55,122 $ 44,342 $25,546 ========= ======== ========== ========= ======== ======== ========= ======= * Includes undistributed net investment income (loss) of........................ $ 14,888 $ 11,527 $ 14,341 $ 7,615 $ 234 $ 120 $ 359 $ 43 ========= ======== ========== ========= ======== ======== ========= =======
--------------- (1) Commencement of Operations See accompanying notes -------------------------------------------------------------------------------- 86 --------------------------------------------------------------------------------
EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME ------------------- --------------------- ------------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------- --------------------- ------------------- 2005 2004 2005 2004 2005 2004 -------- -------- --------- --------- -------- -------- $ 1,690 $ 676 $ 27,142 $ 22,814 $ 3,156 $ 2,525 16,180 10,395 3,293 6,934 570 320 9,392 (243) (19,461) 2,292 (2,306) 1,851 -------- -------- --------- --------- -------- -------- 27,262 10,828 10,974 32,040 1,420 4,696 -------- -------- --------- --------- -------- -------- (39) (20) (16,952) (13,226) -- -- (3) (3) (10,190) (9,588) (3,495) (2,672) (577) (415) -- -- -- -- (673) -- (4,274) (2,082) -- -- (86) -- (2,693) (1,646) -- -- (6,885) -- -- -- -- -- -------- -------- --------- --------- -------- -------- (8,263) (438) (34,109) (26,542) (3,495) (2,672) -------- -------- --------- --------- -------- -------- 41,933 43,769 164,045 214,560 31,229 21,940 8,256 438 30,574 21,423 3,496 2,192 (45,081) (27,453) (224,426) (138,469) (24,206) (23,331) 2 4 -- -- -- -- -------- -------- --------- --------- -------- -------- 5,110 16,758 (29,807) 97,514 10,519 801 -------- -------- --------- --------- -------- -------- 24,109 27,148 (52,942) 103,012 8,444 2,825 -------- -------- --------- --------- -------- -------- 82,695 55,547 390,047 287,035 103,897 101,072 -------- -------- --------- --------- -------- -------- $106,804 $ 82,695 $ 337,105 $ 390,047 $112,341 $103,897 ======== ======== ========= ========= ======== ======== $ 1,557 $ 486 $ -- $ -- $ (483) $ (144) ======== ======== ========= ========= ======== ========
-------------------------------------------------------------------------------- 87 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) -- CONTINUED --------------------------------------------------------------------------------
INTERMEDIATE BOND SHORT-TERM BOND ----------------------- ----------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 3,950 $ 4,681 $ 2,629 $ 2,816 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions.......... 61 1,148 (140) 432 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations.......................................... (2,958) (67) (1,625) (991) -------- -------- -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................ 1,053 5,762 864 2,257 -------- -------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class (terminated 3/1/05) (Note 1)...... (13) (36) (48) (162) PlanAhead Class....................................... (39) (43) (304) (345) Institutional Class (known as AMR Class prior to 3/1/05) (Note 1).................................... (4,163) (5,071) (3,662) (4,192) -------- -------- -------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (4,215) (5,150) (4,014) (4,699) -------- -------- -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 47,062 31,565 32,831 19,631 Reinvestment of dividends and distributions............. 4,212 5,146 3,994 4,626 Cost of shares redeemed................................. (52,033) (73,424) (37,019) (31,645) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS................................ (759) (36,713) (194) (7,388) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS....................... (3,921) (36,101) (3,344) (9,830) -------- -------- -------- -------- NET ASSETS: Beginning of period..................................... 98,245 134,346 91,609 101,439 -------- -------- -------- -------- END OF PERIOD*.......................................... $ 94,324 $ 98,245 $ 88,265 $ 91,609 ======== ======== ======== ======== * Includes undistributed net investment income (loss) of.................................................... $ (265) $ -- $ (2,961) $ (1,576) ======== ======== ======== ========
-------------------------------------------------------------------------------- 88 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS October 31, 2005 -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Balanced Fund, the American Beacon Large Cap Value Fund, the American Beacon Large Cap Growth Fund, the American Beacon Mid-Cap Value Fund, the American Beacon Emerging Markets Fund, the American Beacon High Yield Bond Fund, the American Beacon Enhanced Income Fund, the American Beacon Intermediate Bond Fund and the American Beacon Short-Term Bond Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. On March 1, 2005, the American AAdvantage Funds were renamed American Beacon Funds. The chart below depicts the new names of each Fund and its former name prior to March 1, 2005.
FUND NAMES EFFECTIVE MARCH 1, 2005 ABBREVIATED NAME FORMERLY KNOWN AS: ---------------------------------- ---------------- ------------------ American Beacon Balanced Fund Balanced Fund American AAdvantage Balanced Fund American Beacon Large Cap Value Fund Large Cap Value Fund American AAdvantage Large Cap Value Fund American Beacon Large Cap Growth Fund Large Cap Growth Fund American AAdvantage Large Cap Growth Fund American Beacon Mid-Cap Value Fund Mid-Cap Value Fund American AAdvantage Mid-Cap Value Fund American Beacon Emerging Markets Fund Emerging Markets Fund American AAdvantage Emerging Markets Fund American Beacon High Yield Bond Fund High Yield Bond Fund American AAdvantage High Yield Bond Fund American Beacon Enhanced Income Fund Enhanced Income Fund American AAdvantage Enhanced Income Fund American Beacon Intermediate Bond Fund Intermediate Bond American AAdvantage Intermediate Bond Fund Fund American Beacon Short-Term Bond Fund Short-Term Bond Fund American AAdvantage Short-Term Bond Fund
American Beacon Advisors, Inc. (the "Manager"), formerly known as AMR Investment Services, Inc., is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Class Disclosure Each Fund, except the Mid-Cap Value and Enhanced Income Fund, has multiple classes of shares designed to meet the needs of different groups of investors. Please note that not all Funds offer all classes. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES: ------ ----------- ------------------------------ INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.25% Fee -- PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25% intermediary Fee -- 0.25% Service Fee -- SERVICE CLASS Investors investing through an intermediary Administrative Service 0.25% Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A AMR Corporation and its affiliates
-------------------------------------------------------------------------------- 89 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Investment income, net capital gains (losses) and all expenses incurred by the Funds are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. Reorganization Intermediate Bond and Short-Term Bond Funds Effective March 1, 2005, the existing Institutional Class of the Intermediate Bond and Short-Term Bond Funds was terminated, and Institutional Class shares were exchanged for AMR Class shares of each Fund. Following the exchange, the former AMR Class of shares for these Funds was renamed Institutional Class. Security Valuation Investments are valued at the close of the New York Stock Exchange (the "Exchange"), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, the prices of debt securities may be determined using quotes obtained from brokers. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method which approximates market value. Securities for which the market prices are not readily available or are not reflective of the fair value of the security, the security will be priced at a fair value following procedures approved by the Board of Trustees (the "Board"). In light of the judgement involved in fair value decisions, there can be no assurance that a fair value assigned to a particular security is accurate. Most foreign markets close before the Exchange. Developments that could affect the values of securities that occur between the close of a foreign market and the close of the Exchange normally will not be reflected in security valuations. If such developments are so significant such that they will, in the judgement of the pricing committee of the Funds, clearly and materially affect the value of securities, the previous closing prices may be adjusted to reflect the fair value of the securities as of the close of the Exchange, as determined in good faith and pursuant to procedures approved by the Board. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. -------------------------------------------------------------------------------- 90 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Forward Foreign Currency Contracts The Emerging Markets Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of fund securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. Repurchase Agreements Under the terms of a repurchase agreement, securities are acquired by a Fund from a securities dealer or a bank which are subject to resale at a later date. Repurchase agreements are fully collateralized. The collateral is monitored daily by each Fund so that the collateral's market value equals or exceeds the carrying value of the repurchase agreement, including accrued interest. Futures Contracts Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Balanced, Large Cap Value, Large Cap Growth, Mid-Cap Value, Emerging Markets, High Yield Bond and Enhanced Income Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations. Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The Funds reflect this amount on the Schedules of Investments as a U.S. Treasury Bill held as collateral for futures contracts. Payments to and from the broker, known as variation margin, are -------------------------------------------------------------------------------- 91 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded. Dividends to Shareholders Dividends from net investment income of the Balanced, Large Cap Value, Large Cap Growth, Mid-Cap Value, and Emerging Markets Funds normally will be declared and paid annually. The High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds generally declare dividends from net investment income daily, payable monthly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Commission Recapture The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund's investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Redemption Fees The Institutional, PlanAhead and AMR Classes of the Emerging Markets Fund and the Mid-Cap Value Fund imposes a 2% redemption fee on certain shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact and other costs associated with short-term trading activity in the Fund. The "first-in, first-out" method is used to determine the holding period. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is -------------------------------------------------------------------------------- 92 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory, fund management and securities lending services. Investment assets of the Balanced, Large Cap Value, Large Cap Growth, Mid-Cap Value, Emerging Markets, High Yield Bond, Enhanced Income and Intermediate Bond Funds are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Balanced Fund, Large Cap Value Fund, Large Cap Growth Fund, Mid-Cap Value Fund, Emerging Markets Fund, High Yield Bond Fund and Enhanced Income Fund an annualized fee equal to .10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Funds. The Manager receives an annualized fee of .25% of the average daily net assets of the Intermediate Bond Fund and pays a portion of their fee to an investment advisor hired by the Manager to direct investment activities of a portion of the Fund. The Manager serves as the sole investment advisor to the Short-Term Bond Fund. Pursuant to the Management Agreement, the Manager receives from the Fund an annualized fee equal to .25% of the average daily net assets of the Short-Term Bond Fund. Management fees paid during the year ended October 31, 2005 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ----------- ---------- --------------- ----------- Balanced Fund...................................... .225%-.70% $2,162 $1,397 $ 765 Large Cap Value Fund............................... .225%-.70% 3,466 2,293 1,173 Large Cap Growth Fund.............................. .35%-.55% 347 287 60 Mid-Cap Value Fund................................. .40%-.90% 318 271 47 Emerging Markets Fund.............................. .80%-1.20% 912 804 108 High Yield Bond Fund............................... .52% 1,960 1,580 380 Enhanced Income Fund............................... .25%-.85% 387 274 113 Intermediate Bond Fund............................. .25% 240 89 151
As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers when a borrower posts collateral other than cash, a fee up to 25% of such loan fees. This fee is netted against securities lending income in -------------------------------------------------------------------------------- 93 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- the Statement of Operations. During the year ended October 31, 2005, securities lending fees paid to the Manager were as follows (in thousands): Balanced Fund............................................... $29 Large Cap Value Fund........................................ 20 Emerging Markets Fund....................................... 3 High Yield Bond Fund........................................ 23 Enhanced Income Fund........................................ 6 Intermediate Bond Fund...................................... 4
Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of .25% of the average daily net assets of the Institutional, PlanAhead and Service Classes of each of the Funds. Distribution Plans The Trust, except for the Service Class of the Funds, has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. A separate Distribution Plan (the "Distribution Plan") has been adopted pursuant to Rule 12b-1 under the Act for the Service Class of the Funds. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Service Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance. Service Plans The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the PlanAhead and Service Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.25% of the average daily net assets of the PlanAhead and Service Classes of each Fund. Brokerage Commissions Affiliated entities of a subadvisor to the Large Cap Growth Fund and the Emerging Markets Fund received net commissions on purchases and sales of the Fund's portfolio securities totaling $1,827 and $610, respectively for the year ended October 31, 2005. -------------------------------------------------------------------------------- 94 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Investment in Affiliated Funds The Funds are permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and approved procedures by the Board, to invest up to 25% of its total assets in the American Beacon Money Market Select Fund (the "Select Fund"), an affiliated fund. The Funds and the Select Fund have the same investment advisor and therefore, are considered to be affiliated. Cash collateral received by certain Funds in connection with securities lending may be invested in the Select Fund and the American Beacon Enhanced Cash Trust (the "Business Trust") (collectively, the "Affiliated Funds"). The Manager serves as Trustee and investment advisor to the Affiliated Funds and receives from the Affiliated Funds an annualized fee equal to 0.10% of the average daily net assets. During the period, fees earned by the Manager from the Affiliated Funds were as follows:
SECURITIES LENDING DIRECT INVESTMENT COLLATERAL INVESTED IN FUNDS IN FUNDS TOTAL ----------------- ------------------- -------- Balanced.................................................... $48,510 $115,322 $163,832 Large Cap Value............................................. 90,583 73,463 164,046 Large Cap Growth............................................ 927 129 1,056 Mid-Cap Value............................................... 7,246 3,849 11,095 Emerging Markets............................................ 6,308 4,525 10,833 High Yield Bond............................................. 15,816 -- 15,816 Enhanced Income............................................. 3,666 22,629 26,295 Intermediate Bond........................................... 3,971 17,184 21,155 Short-Term Bond............................................. 2,047 2,248 4,295
Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. This Trustee receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. At October 31, 2005, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Funds, 98% of the Institutional Class of the Mid-Cap Value Fund, 18% of the Institutional Class of the High Yield Bond Fund, 99% of the Institutional Class of the Intermediate Bond Fund and 94% of the Institutional Class of the Short-Term Bond Fund. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Funds to -------------------------------------------------------------------------------- 95 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- borrow from, or lend money to, other participating Funds. For the period ended October 31, 2005, the following Funds had borrowings:
WEIGHTED AVERAGE AVERAGE DAYS INTEREST DEBT INTEREST OUTSTANDING CHARGES UTILIZED RATE ---------------- -------- ---------- -------- Large Cap Growth............................................ 12 $1,201 $1,542,803 2.37% Mid-Cap Value............................................... 8 2,164 2,989,329 3.30% Emerging Markets............................................ 9 1,349 1,461,092 3.75% High Yield Bond............................................. 10 1,236 1,252,924 3.60%
Reimbursement of Expenses The Manager contractually agreed to reimburse the following Funds for other expenses through February 28, 2006 to the extent that total annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP ---- ----- ----------- Large Cap Growth............................................ Institutional 0.90% Mid-Cap Value............................................... Institutional 1.14% Emerging Markets............................................ PlanAhead 2.00% High Yield Bond............................................. Service 1.50% Intermediate................................................ PlanAhead 0.95%
During the year ended October 31, 2005, the Manager contractually waived or reimbursed expenses as follows:
FUND CLASS AMOUNT ---- ----- ------ Large Cap Growth............................................ Institutional $ 184 Mid-Cap Value............................................... Institutional 7,258 Emerging Markets............................................ PlanAhead 5,148 High Yield Bond............................................. Service 127 Intermediate Bond........................................... PlanAhead 2,541
During the year ended October 31, 2005, the Manager voluntarily waived or reimbursed expenses as follows in order to maintain expense ratios at or below the levels noted below:
EXPENSE FUND CLASS RATIO LIMIT AMOUNT ---- ----- ----------- ------ Balanced.................................................... Service 1.09% $1,650 Large Cap Value............................................. Service 1.14% 1,600 High Yield Bond............................................. Institutional 1.46% 507 Short-Term Bond............................................. PlanAhead 0.87% 5,000
Expense Reimbursement Plan The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class' average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously -------------------------------------------------------------------------------- 96 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- agreed upon contractual expense limit. The following waived fees or reimbursed expenses are subject to potential recovery expiring in:
YEAR MID-CAP VALUE EMERGING MARKETS ---- ------------- ---------------- 2008........................................................ $7,258 $2,831
3. FEDERAL INCOME AND EXCISE TAXES It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. Dividends are determined in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions during the years ended October 31, 2005 and October 31, 2004 were as follows (in thousands):
BALANCED LARGE CAP VALUE LARGE-CAP GROWTH MID CAP VALUE ------------------------- ------------------------- ------------------------- ------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 2005 2004 2005 2004 2005 2004 2005 ----------- ----------- ----------- ----------- ----------- ----------- ------------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class..... $ 207 $ 211 $ 909 $ 414 $ -- $ -- $118 PlanAhead Class......... 665 354 1,111 344 -- -- -- AMR Class............... 18,088 15,797 11,555 11,675 474 151 -- LONG-TERM CAPITAL GAIN Institutional Class..... 253 -- -- -- -- -- -- PlanAhead Class......... 849 -- -- -- -- -- -- AMR Class............... 20,054 -- -- -- -- -- -- ------- ------- ------- ------- ---- ---- ---- TOTAL DISTRIBUTIONS PAID.............. $40,116 $16,362 $13,575 $12,433 $474 $151 $118 ------- ------- ------- ------- ---- ---- ----
EMERGING MARKETS HIGH-YIELD BOND ENHANCED INCOME ------------------------- ------------------------- ------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 2005 2004 2005 2004 2005 2004 ----------- ----------- ----------- ----------- ----------- ----------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class.................. $ 39 $ 20 $17,772 $14,823 $ -- $ -- PlanAhead Class...................... 3 3 10,707 10,851 3,495 2,672 Service Class........................ -- -- -- -- -- -- AMR Class............................ 577 415 -- -- -- -- LONG-TERM CAPITAL GAIN Institutional Class.................. 673 -- 3,454 485 -- -- PlanAhead Class...................... 86 -- 2,176 383 -- -- Service Class........................ -- -- -- -- -- -- AMR Class............................ 6,885 -- -- -- -- -- ------ ---- ------- ------- ------ ------ TOTAL DISTRIBUTIONS PAID......... $8,263 $438 $34,109 $26,542 $3,495 $2,672 ------ ---- ------- ------- ------ ------
-------------------------------------------------------------------------------- 97 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
INTERMEDIATE BOND SHORT-TERM BOND ------------------------- ------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Institutional Class (terminated 3/1/05)..................... $ 13 $ 36 $ 48 $ 162 PlanAhead Class............................................. 39 43 304 345 Institutional Class (formerly known as AMR Class prior to 3/1/05).................................................... 4,163 5,071 3,662 4,192 ------ ------ ------ ------ $4,215 $5,150 $4,014 $4,699 ------ ------ ------ ------
As of October 31, 2005, the components of distributable earnings were as follows (in thousands):
BALANCED LARGE CAP LARGE CAP MID-CAP FUND VALUE FUND GROWTH FUND VALUE FUND -------- ---------- ------------- ---------- Cost basis of investments for federal income tax purposes... $838,716 $1,480,256 $60,956 $55,466 Unrealized appreciation..................................... 113,583 236,363 4,723 1,811 Unrealized depreciation..................................... (20,119) (35,779) (2,439) (3,040) -------- ---------- ------- ------- Net unrealized appreciation/(depreciation).................. 93,464 200,584 2,284 (1,229) Undistributed ordinary income............................... 19,535 20,025 231 7,508 Undistributed long-term gain/(loss)......................... 37,770 63,115 (6,541) 2,088 -------- ---------- ------- ------- Distributable earnings...................................... $150,769 $ 283,724 $(4,026) $ 8,367 ======== ========== ======= =======
ENHANCED EMERGING HIGH YIELD INCOME INTERMEDIATE SHORT-TERM MARKETS FUND BOND FUND FUND BOND FUND BOND FUND ------------ ---------- ------------- ------------- ---------- Cost basis of investments for federal income tax purposes........................................... $92,298 $371,622 $139,911 $114,865 $95,640 Unrealized appreciation............................. 24,300 4,068 2,279 238 5 Unrealized depreciation............................. (3,977) (9,993) (2,420) (1,875) (3,588) ------- -------- -------- -------- ------- Net unrealized appreciation/(depreciation).......... 20,323 (5,925) (141) (1,637) (3,583) Undistributed ordinary income....................... 3,968 794 231 500 543 Undistributed long-term gain/(loss)................. 13,704 3,347 13 (8,013) (6,776) ------- -------- -------- -------- ------- Distributable earnings.............................. $37,995 $ (1,784) $ 103 $ (9,150) $(9,816) ======= ======== ======== ======== =======
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments, book amortization for premiums, and the realization for tax purposes of unrealized gains/(losses) on investments in passive foreign investment companies. Due to inherent differences in the recognition of income, expenses and realized gains/losses under U.S. generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- 98 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Accordingly, the following amounts represent current year permanent differences that have been reclassified as of October 31, 2005 (in thousands):
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD ENHANCED BALANCED VALUE GROWTH VALUE MARKETS BOND INCOME FUND FUND FUND FUND FUND FUND FUND -------- --------- --------- ------- -------- ---------- -------- Paid-in-capital....................... $(763) $ 15 $-- $ -- $ -- $ (5) $ 204 Undistributed net investment income... 867 (133) (3) (23) (33) -- 13 Accumulated net realized gain (loss)............................... (104) 118 3 23 33 5 (217) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency..................... -- -- -- -- -- -- -- INTERMEDIATE SHORT-TERM BOND BOND FUND FUND ------------ ---------- Paid-in-capital....................... $ -- $ (432) Undistributed net investment income... 266 1,116 Accumulated net realized gain (loss)............................... (266) (684) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency..................... -- --
At October 31, 2005, capital loss carryforward positions for federal income tax purposes were as follows (in thousands):
FUND 2006 2007 2008 2009 2010 2011 2012 2013 TOTAL ---- ---- ----- ----- ---- ----- ---- ---- ----- ----- Large Cap Growth...................................... -- -- -- -- 5,867 674 -- -- 6,541 Intermediate Bond..................................... -- -- 7,367 -- 328 -- -- 318 8,013 Short-Term Bond....................................... 437 1,991 1,218 -- 913 161 800 1,256 6,776
Net capital loss carryovers utilized for the year ended October 31, 2005 are as follows: Large Cap Value Fund $4,106, Large Cap Growth Fund $3,296, and Enhanced Income Fund $340. The Short-Term Bond Fund had $433 of expired capital loss carryovers. 4. INVESTMENT TRANSACTIONS The cost of purchases and proceeds from sales and maturities of long-term investments during the year ended October 31, 2005 were as follows (in thousands):
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM BALANCED VALUE GROWTH VALUE MKT BOND INCOME BOND BOND -------- --------- --------- -------- -------- ---------- -------- ------------ ---------- Purchases (excluding U.S. government securities)........ $354,979 $773,472 $94,944 $124,462 $69,379 $454,865 $40,918 $75,745 $28,775 Sales and maturities (excluding U.S. government securities)........ 303,036 269,075 94,284 106,916 62,389 473,533 44,119 84,423 33,148 Purchases of U.S. government securities......... 159,388 -- -- -- -- -- 11,502 35,681 3,965 Sales and maturities of U.S. government securities......... 110,237 -- -- -- -- -- 501 29,893 --
-------------------------------------------------------------------------------- 99 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- A summary of the Funds' direct transactions in Affiliated Funds for the year ended October 31, 2005 is set forth below (in thousands):
OCTOBER 31, 2004 OCTOBER 31, 2005 FUND AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE ---- ----------- ------------------- ---------- ---------- ------------------- Balanced....................... Select Fund $45,118 $ 522,992 $ 511,120 $ 56,990 Large Cap Value................ Select Fund 37,721 1,364,599 1,238,472 163,848 Large Cap Growth............... Select Fund 4,309 42,238 43,348 3,199 Mid-Cap Value.................. Select Fund 5,810 302,839 306,162 2,487 Emerging Markets............... Select Fund 11,076 74,200 81,577 3,699 High Yield Bond................ Select Fund 23,672 253,931 269,336 8,267 Enhanced Income................ Select Fund 442 57,705 53,959 4,188 Intermediate Bond.............. Select Fund 2,767 78,390 77,845 3,312 Short Term Bond................ Select Fund 1,683 41,267 40,870 2,080
5. SECURITIES LENDING Each Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and or 105% of the fair value of international securities loaned. Collateral is marked to market and monitored daily. To the extent that a loan is collateralized by cash, such collateral shall be invested by the securities lending agent (the "Agent") in short-term instruments, money market mutual funds, and such other short-term investments, provided the investments meet certain quality and diversification requirements. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Fund and the Agent and is recorded as income for the Fund. To the extent that a loan is secured by non-cash collateral, brokers pay the Fund negotiated lenders' fees, which are divided between the Fund and the Agent and are recorded as securities lending income for the Fund. The Fund also continues to receive income on the securities loaned, and any gain or loss in the market price of securities loaned that may occur during the term of the loan. Risks to the Fund in securities lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. -------------------------------------------------------------------------------- 100 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- At October 31, 2005, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
MARKET VALUE OF FUND SECURITIES ON LOAN CASH COLLATERAL ---- ------------------ --------------- Balanced.................................................... $120,757 $122,937 Large Cap Value............................................. 113,406 115,545 Large Cap Growth............................................ 250 251 Mid-Cap Value............................................... 9,237 9,393 Emerging Markets............................................ 6,769 6,891 High Yield Bond............................................. 35,253 36,110 Enhanced Income............................................. 27,603 28,134 Intermediate Bond........................................... 19,548 19,939 Short Term Bond............................................. 4,521 4,615
Cash collateral for each Fund, other than High Yield Bond, was invested in the Business Trust and the Select Fund. These amounts have been included as investments in each Fund's Schedule of Investments and Statements of Assets and Liabilities. Income earned on these investments is reported as Income derived from securities lending in the Statements of Operations. Non-Cash collateral received by the Funds may not be sold or repledged; therefore, non-cash collateral is not included on the Funds' Schedule of Investments or Statement of Assets and Liabilities. 6. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands): Period Ended October 31, 2005
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- ------------------ ------------------- BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- -------- -------- ------ --------- ------ --------- ------- --------- Shares sold.............. 404 $6,028 5,096 $ 71,560 -- $ 1 11,920 $ 170,034 Reinvestment of dividends.............. 32 459 108 1,484 -- -- 2,736 38,142 Shares redeemed.......... (80) (1,192) (671) (9,463) -- -- (11,427) (164,434) ------ ------ ------ --------- ------ --------- ------- --------- Net increase in shares outstanding............ 356 $5,295 4,533 $ 63,581 -- $ 1 3,229 $ 43,742 ====== ====== ====== ========= ====== ========= ======= =========
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------ ------------------- ------------------- LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- --------- ------ -------- ------ --------- ------- --------- Shares sold.............. 8,194 $167,141 25,447 $500,989 589 $ 11,617 12,849 $ 256,467 Reinvestment of dividends.............. 25 496 58 1,105 -- -- 592 11,555 Shares redeemed.......... (1,299) (26,180) (2,332) (45,952) (13) (261) (11,251) (227,483) ------ -------- ------ -------- ------ --------- ------- --------- Net increase in shares outstanding............ 6,920 $141,457 23,173 $456,142 576 11,356 2,190 $ 40,539 ====== ======== ====== ======== ====== ========= ======= =========
-------------------------------------------------------------------------------- 101 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
INSTITUTIONAL CLASS AMR CLASS -------------------- ------------------ LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT --------------------- ------- --------- ------ -------- Shares sold.................................... 17 $ 102 6,502 $ 39,610 Reinvestment of dividends...................... -- -- 76 474 Shares redeemed................................ -- -- (5,843) (35,633) ------- --------- ------ -------- Net decrease in shares outstanding............. 17 $ 102 735 $ 4,451 ======= ========= ====== ========
INSTITUTIONAL CLASS -------------------- MID CAP VALUE FUND SHARES AMOUNT ------------------ ------- --------- Shares sold.................................... 14,157 $ 164,231 Reinvestment of dividends...................... 11 118 Shares redeemed*............................... (12,873) (153,358) ------- --------- Net increase (decrease) in shares outstanding.................................. 1,295 $ 10,991 ======= =========
* Net of redemption fees
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------- ------------------ EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------------------- ------- --------- ------ ------ ------- -------- Shares sold.................................... 164 $ 2,342 187 $2,602 2,688 $ 36,989 Reinvestment of dividends...................... 54 706 7 88 575 7,462 Shares redeemed*............................... (176) (2,291) (118) (1,644) (2,858) (41,144) ------- --------- ------ ------ ------- -------- Net increase (decrease) in shares outstanding.................................. 42 $ 757 76 $1,046 405 $ 3,307 ======= ========= ====== ====== ======= ========
* Net of redemption fees
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS -------------------- ------------------ ---------------- HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- --------- ------ -------- ------- ------ Shares sold.................................... 9,936 $ 104,727 5,626 $ 59,314 -- $ 4 Reinvestment of dividends...................... 1,682 17,740 1,216 12,834 -- -- Shares redeemed................................ (12,669) (133,918) (8,714) (90,501) (1) (7) ------- --------- ------ -------- ------- ------ Net increase (decrease) in shares outstanding.................................. (1,051) $ (11,451) (1,872) $(18,353) (1) $ (3) ======= ========= ====== ======== ======= ======
PLANAHEAD CLASS -------------------- ENHANCED INCOME FUND SHARES AMOUNT -------------------- ------- --------- Shares sold.................................... 3,082 $ 31,229 Reinvestment of dividends...................... 346 3,496 Shares redeemed................................ (2,400) (24,206) ------- --------- Net increase in shares outstanding............. 1,028 $ 10,519 ======= =========
INSTITUTIONAL INSTITUTIONAL CLASS CLASS (FORMERLY (TERMINATED AMR CLASS 3/1/05)* PLANAHEAD CLASS THROUGH 3/1/05) -------------------- ---------------- ------------------ INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------------------- ------- --------- ------ ------ ------- -------- Shares sold.................................... -- $ -- 18 $ 181 4,580 $ 46,881 Reinvestment of dividends...................... 1 11 4 38 408 4,163 Shares redeemed................................ (88) (912) (22) (222) (4,980) (50,899) ------- --------- ------ ------ ------- -------- Net increase (decrease) in shares outstanding.................................. (87) $ (901) -- $ (3) 8 $ 145 ======= ========= ====== ====== ======= ========
* Activity is for the period from November 1, 2004 through February 28, 2005 -------------------------------------------------------------------------------- 102 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
INSTITUTIONAL INSTITUTIONAL CLASS CLASS (FORMERLY (TERMINATED AMR CLASS 3/1/05)* PLANAHEAD CLASS THROUGH 3/1/05) ------------------- ----------------- ------------------ SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- -------- ------ ------- ------- -------- Shares sold....................................... 110 $ 982 581 $ 5,167 3,008 $ 26,682 Reinvestment of dividends......................... 5 46 32 288 412 3,660 Shares redeemed................................... (481) (4,291) (491) (4,384) (3,193) (28,344) ------ ------- ------ ------- ------- -------- Net increase (decrease) in shares outstanding..... (366) $(3,263) 122 $ 1,071 227 $ 1,998 ====== ======= ====== ======= ======= ========
* Activity is for the period from November 1, 2004 through February 28, 2005 Period Ended October 31, 2004
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- ------------------- ------------------ BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- ------- -------- ------ --------- ------- -------- Shares sold....................................... 120 $ 1,646 943 $ 12,438 4,313 $ 57,449 Reinvestment of dividends......................... 16 211 28 351 1,225 15,797 Shares redeemed................................... (246) (3,383) (461) (6,099) (3,888) (51,664) ------ ------- ------ --------- ------- -------- Net increase (decrease) in shares outstanding..... (110) $(1,526) 510 $ 6,690 1,650 $ 21,582 ====== ======= ====== ========= ======= ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- ------------------- ------------------ LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- -------- ------ --------- ------- -------- Shares sold...................................... 1,678 $29,357 2,166 $ 36,511 4,775 $ 82,425 Reinvestment of dividends........................ 12 190 21 341 717 11,675 Shares redeemed.................................. (537) (9,282) (669) (11,207) (5,644) (97,128) ------ ------- ------ --------- ------- -------- Net increase (decrease) in shares outstanding.... 1,153 $20,265 1,518 $ 25,645 (152) $ (3,028) ====== ======= ====== ========= ======= ========
INSTITUTIONAL CLASS AMR CLASS -------------------- ------------------ LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT --------------------- -------- -------- ------ -------- Shares sold..................................... -- $ -- 4,375 $ 25,454 Reinvestment of dividends....................... -- -- 27 151 Shares redeemed................................. -- -- (3,880) (22,559) ------ ------ ------ -------- Net increase in shares outstanding.............. -- $ -- 522 $ 3,046 ====== ====== ====== ========
INSTITUTIONAL CLASS ------------------- MID-CAP VALUE FUND SHARES AMOUNT ------------------ ------- -------- Shares sold..................................... 2,646 $26,544 Reinvestment of dividends....................... -- -- Shares redeemed................................. (158) (1,560) ------ ------- Net increase in shares outstanding.............. 2,488 $24,984 ====== =======
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ----------------- ----------------- EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------------------- -------- -------- ------ ------- ------- ------- Shares sold....................................... 254 $3,097 158 $ 1,907 3,200 $38,765 Reinvestment of dividends......................... 2 20 -- 3 37 415 Shares redeemed*.................................. (15) (170) (108) (1,304) (2,219) (25,975) ------ ------ ------ ------- ------- ------- Net increase in shares outstanding................ 241 $2,947 50 $ 606 1,018 $13,205 ====== ====== ====== ======= ======= =======
* Net of Redemption Fees -------------------------------------------------------------------------------- 103 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS -------------------- ------------------ ---------------- HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- --------- ------ -------- ------- ------ Shares sold....................................... 13,551 $144,793 6,516 $ 69,764 --* $ 3 Reinvestment of dividends......................... 1,211 12,997 786 8,426 -- -- Shares redeemed................................... (7,537) (80,955) (5,361) (57,514) -- -- ------ -------- ------ -------- ------- ------ Net increase in shares outstanding................ 7,225 $ 76,835 1,941 $ 20,676 -- $ 3 ====== ======== ====== ======== ======= ======
* Rounded shares less than 1,000
PLANAHEAD CLASS ------------------ ENHANCED INCOME FUND SHARES AMOUNT -------------------- ------ -------- Shares sold...................................... 2,177 $ 21,940 Reinvestment of dividends........................ 217 2,192 Shares redeemed.................................. (2,316) (23,331) ------ -------- Net increase in shares outstanding............... 78 $ 801 ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------- ------------------ INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---------------------- -------- -------- ------ ------ ------- -------- Shares sold....................................... 1 $ 13 13 $ 134 3,058 $ 31,418 Reinvestment of dividends......................... 3 33 4 42 494 5,071 Shares redeemed................................... (16) (168) (48) (491) (7,119) (72,765) ------ ------ ------ ------ ------- -------- Net decrease in shares outstanding................ (12) $ (122) (31) $ (315) (3,567) $(36,276) ====== ====== ====== ====== ======= ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ----------------- ------------------ SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- -------- -------- ------ ------- ------- -------- Shares sold....................................... 31 $ 282 1,029 $ 9,534 1,071 $ 9,815 Reinvestment of dividends......................... 15 140 32 293 456 4,193 Shares redeemed................................... (82) (755) (825) (7,622) (2,527) (23,268) ------ ------ ------ ------- ------- -------- Net increase (decrease) in shares outstanding..... (36) $ (333) 236 $ 2,205 (1,000) $ (9,260) ====== ====== ====== ======= ======= ========
-------------------------------------------------------------------------------- 104 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 105 AMERICAN BEACON BALANCED FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------- 2005 2004 2003 2002 2001(C D F) ------- ------- ------- ------ ----------- Net asset value, beginning of period........................ $ 14.31 $ 12.99 $ 10.97 $12.07 $ 12.27 ------- ------- ------- ------ -------- Income from investment operations: Net investment income(A) (B)............................ 0.36 0.29 0.31(G) 0.11 0.51 Net gains (losses) on securities (both realized and unrealized)(B)........................................ 1.11 1.36 1.84(G) (0.69) (0.03) ------- ------- ------- ------ -------- Total income (loss) from investment operations.............. 1.47 1.65 2.15 (0.58) 0.48 ------- ------- ------- ------ -------- Less distributions: Dividends from net investment income.................... (0.31) (0.33) (0.13) (0.44) (0.68) Distributions from net realized gains on securities..... (0.47) -- -- (0.08) -- ------- ------- ------- ------ -------- Total distributions......................................... (0.78) (0.33) (0.13) (0.52) (0.68) ------- ------- ------- ------ -------- Net asset value, end of period.............................. $ 15.00 $ 14.31 $ 12.99 $10.97 $ 12.07 ======= ======= ======= ====== ======== Total return................................................ 10.53% 10.53% 19.77% (5.14)% 4.07% ======= ======= ======= ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $14,122 $ 8,378 $ 9,041 $8,994 $157,775 Ratios to average net assets (annualized): Expenses, net of waivers(B)........................... 0.56% 0.63% 0.63% 0.62% 0.62% Expenses before waivers(B)............................ 0.56% 0.63% 0.63% 0.62% 0.62% Net investment income, net of waivers(B).............. 2.45% 2.15% 2.74% 3.12% 3.56% Net investment income (loss), before waivers(B)....... 2.45% 2.15% 2.74% 3.12% 3.56% Portfolio turnover rate(E).............................. 58% 62% 69% 84% 122%
--------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Balanced Portfolio through February 28, 2002. (C) On September 7, 2001, American Beacon Advisors, Inc. assumed management of the fixed income portion of the Balanced Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (D) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the equity portion of the Balanced Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (E) The Balanced Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (F) Independence Investment LLC was removed as an investment advisor to the Balanced Fund on November 30, 2000. (G) For the year ended October 31, 2003, the net investment income and net gains (losses) on securities (both realized and unrealized) has been restated from 0.30 and 1.85, respectively for Institutional Class and 0.36 and 1.66, respectively for PlanAhead Class. (H) Not annualized. (I) Annualized. (J) Portfolio turnover rate is for the period from November 1, 2004 through October 31, 2005. -------------------------------------------------------------------------------- 106 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS --------------------------------------------------------------- ------------- ------------------------- YEAR ENDED OCTOBER 31, MAY 31 TO YEAR ENDED OCTOBER 31, --------------------------------------------------------------- OCTOBER 31, ------------------------- 2005 2004 2003 2002 2001(C D F) 2005 2005 2004 ------- ------- ------- ------- ----------- ------------- -------- -------- $ 13.62 $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 13.96 $ 13.87 $ 12.60 ------- ------- ------- ------- ------- ------------- -------- -------- 0.34 0.27 0.28(G) 0.41 0.51 0.09 0. 39 0.32 1.01 1.25 1.74(G) (0.99) (0.06) 0.11 1.05 1.31 ------- ------- ------- ------- ------- ------------- -------- -------- 1.35 1.52 2.02 (0.58) 0.45 0.20 1.44 1.63 ------- ------- ------- ------- ------- ------------- -------- -------- (0.30) (0.30) (0.43) (0.41) (0.65) -- (0.35) (0.36) (0.47) -- -- (0.08) -- -- (0.47) -- ------- ------- ------- ------- ------- ------------- -------- -------- (0.77) (0.30) (0.43) (0.49) (0.65) -- (0.82) (0.36) ------- ------- ------- ------- ------- ------------- -------- -------- $ 14.20 $ 13.62 $ 12.40 $ 10.81 11.88 $ 14.16 $ 14.49 $ 13.87 ======= ======= ======= ======= ======= ============= ======== ======== 10.12% 12.44% 19.36% (5.18)% 3.84% 1.43%(H) 10.63% 13.13% ======= ======= ======= ======= ======= ============= ======== ======== $86,875 $21,571 $13,321 $10,561 $12,176 $ 1 $712,073 $636,420 0.86% 0.93% 0.94% 0.90% 0.84% 1.09%(I) 0.33% 0.37% 0.86% 0.93% 0.94% 0.90% 0.84% 360.24%(I) 0.33% 0.37% 2.14% 1.84% 2.40% 2.83% 3.29% 1.52%(I) 2.70% 2.40% 2.14% 1.84% 2.40% 2.83% 3.29% (357.63)%(I) 2.70% 2.40% 58% 62% 69% 84% 122% 58%(J) 58% 62% AMR CLASS --------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------- 2003 2002 2001(C D F) -------- -------- ----------- $ 10.98 $ 12.06 $ 12.27 -------- -------- -------- 0.34 0.48 0.56 1.78 (1.01) (0.05) -------- -------- -------- 2.12 (0.53) 0.51 -------- -------- -------- (0.50) (0.47) (0.72) -- (0.08) -- -------- -------- -------- (0.50) (0.55) (0.72) -------- -------- -------- $ 12.60 $ 10.98 $ 12.06 ======== ======== ======== 20.06% (4.71)% 4.38% ======== ======== ======== $557,612 $487,526 $526,405 0.38% 0.35% 0.36% 0.38% 0.35% 0.36% 2.98% 3.39% 3.77% 2.98% 3.39% 3.77% 69% 84% 122%
-------------------------------------------------------------------------------- 107 AMERICAN BEACON LARGE CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------- 2005 2004 2003 2002 2001(B D) -------- ------- ------- ------- --------- Net asset value, beginning of period.............. $ 18.23 $ 15.62 $ 12.55 $ 14.51 $ 15.83 -------- ------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A C)............. 0.28 0.26 0.25(F) 0.27 0.28 Net gains (losses) on securities (both realized and unrealized)(C)................. 2.74 2.62 3.11(F) (1.76) (0.61) -------- ------- ------- ------- ------- Total income (loss) from investment operations.... 3.02 2.88 3.36 (1.49) (0.33) -------- ------- ------- ------- ------- Less distributions: Dividends from net investment income.......... (0.25) (0.27) (0.29) (0.30) (0.50) Distributions from net realized gains on securities.................................. -- -- -- (0.17) (0.49) -------- ------- ------- ------- ------- Total distributions............................... (0.25) (0.27) (0.29) (0.47) (0.99) -------- ------- ------- ------- ------- Net asset value, end of period.................... $ 21.00 $ 18.23 $ 15.62 $ 12.55 $ 14.51 ======== ======= ======= ======= ======= Total return...................................... 16.64% 18.59% 27.30% (10.83)% (2.21)% ======== ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)...... $201,111 $48,451 $23,512 $21,589 $10,081 Ratios to average net assets (annualized): Expenses, net of waivers(C)................. 0.60% 0.66% 0.66% 0.61% 0.64% Expenses, before waivers(C)................. 0.60% 0.66% 0.66% 0.61% 0.64% Net investment income, net of waivers(C).... 1.58% 1.49% 1.88% 1.82% 1.76% Net investment income, before waivers(C).... 1.58% 1.49% 1.88% 1.82% 1.76% Portfolio turnover rate(E).................... 25% 29% 27% 34% 60%
--------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the Large Cap Value Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (C) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Large Cap Value Portfolio through February 28, 2002. (D) Metropolitan West Capital Management, LLC replaced Independence Investment LLC as investment advisor to the Large Cap Value Fund on December 1, 2000. (E) The Large Cap Value Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (F) For the year ended October 31, 2003, the net investment income and net gains (losses) on securities (both realized and unrealized) has been restated from 0.20 and 3.16, respectively for Institutional Class and 0.10 and 3.11, respectively for PlanAhead Class. (G) Not annualized. (H) Annualized. (I) Portfolio turnover rate is for the period from November 1, 2004 through October 31, 2005. -------------------------------------------------------------------------------- 108 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS -------------------------------------------------- -------------- YEAR ENDED OCTOBER 31, MAY 31 TO ------------------------------------------------------ OCTOBER 31, 2005 2004 2003 2002 2001(B D) 2005 -------- ------- ------- ------- --------- -------------- $ 17.54 $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 19.33 -------- ------- ------- ------- -------- -------- 0.27 0.23 0.22(F) 0.25 0.26 0.01 2.58 2.49 2.99(F) (1.74) (0.62) 0.79 -------- ------- ------- ------- -------- -------- 2.85 2.72 3.21 (1.49) (0.36) 0.80 -------- ------- ------- ------- -------- -------- (0.23) (0.23) (0.25) (0.25) (0.55) -- -- -- -- (0.17) (0.49) -- -------- ------- ------- ------- -------- -------- (0.23) (0.23) (0.25) (0.42) (1.04) -- -------- ------- ------- ------- -------- -------- $ 20.16 $ 17.54 $ 15.05 $ 12.09 $ 14.00 $ 20.13 ======== ======= ======= ======= ======== ======== 16.33% 18.26% 26.99% (11.13)% (2.47)% 4.14%(G) ======== ======= ======= ======= ======== ======== $526,357 $51,489 $21,331 $15,941 $ 12,280 $ 11,604 0.86% 0.94% 0.95% 0.93% 0.89% 1.14%(H) 0.86% 0.94% 0.95% 0.93% 0.89% 1.77%(H) 1.30% 1.21% 1.57% 1.53% 1.54% 1.72%(H) 1.30% 1.21% 1.57% 1.53% 1.54% 1.09%(H) 25% 29% 27% 34% 60% 25%(I) AMR CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, --- ----------------------------------------------------- 2005 2004 2003 2002 2001(B D) -------- -------- -------- -------- --------- $ 18.02 $ 15.44 $ 12.40 $ 14.34 $ 15.75 -------- -------- -------- -------- -------- 0.31 0.30 0.29 0.31 0.34 2.73 2.58 3.06 (1.75) (0.63) -------- -------- -------- -------- -------- 3.04 2.88 3.35 (1.44) (0.29) -------- -------- -------- -------- -------- (0.28) (0.30) (0.31) (0.33) (0.63) -- -- -- (0.17) (0.49) -------- -------- -------- -------- -------- (0.28) (0.30) (0.31) (0.50) (1.12) -------- -------- -------- -------- -------- $ 20.78 $ 18.02 $ 15.44 $ 12.40 $ 14.34 ======== ======== ======== ======== ======== 16.95% 18.89% 27.64% (10.62)% (1.98)% ======== ======== ======== ======== ======== $848,219 $696,206 $598,869 $511,287 $654,239 0.35% 0.39% 0.36% 0.36% 0.36% 0.35% 0.39% 0.36% 0.36% 0.36% 1.87% 1.79% 2.13% 2.06% 2.09% 1.87% 1.79% 2.13% 2.06% 2.09% 25% 29% 27% 34% 60%
-------------------------------------------------------------------------------- 109 AMERICAN BEACON LARGE CAP GROWTH FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------ 2005 2004 2003 2002 2001 -------- --------- ------- -------- -------- Net asset value, beginning of period.................. $ 5.82 $ 5.47 $ 4.53 $ 5.66 $ 9.54 -------- --------- ------- -------- -------- Income from investment operations: Net investment income (loss)(A)................... 0.04 0.02 0.02 0.03 (0.01) Net gains (losses) on securities (both realized and unrealized)(A).............................. 0.37 0.35 0.94 (1.16) (3.86) -------- --------- ------- -------- -------- Total income (loss) from investment operations........ 0.41 0.37 0.96 (1.13) (3.87) -------- --------- ------- -------- -------- Less distributions: Dividends from net investment income.............. (0.05) (0.02) (0.02) -- (0.01) -------- --------- ------- -------- -------- Total distributions................................... (0.05) (0.02) (0.02) -- (0.01) -------- --------- ------- -------- -------- Net asset value, end of period........................ $ 6.18 $ 5.82 $ 5.47 $ 4.53 $ 5.66 ======== ========= ======= ======== ======== Total return.......................................... 7.06% 6.71% 21.15% (19.96)% (40.62)% ======== ========= ======= ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands).......... $ 105 $ 1 $ 1 $ 1 $ 1 Ratios to average net assets (annualized)(A): Expenses, net of waivers........................ 0.89% 0.84% 0.87% 0.87% 0.99% Expenses, before waivers........................ 4.64% 13.22% 0.87% 0.87% 101% Net investment income (loss), net of waivers.... (0.18)% 0.18% 0.18% 0.06% (0.26)% Net investment income (loss), before waivers.... (3.93)% (12.20)% 0.18% 0.06% (0.28)% Portfolio turnover rate(B)........................ 164% 131% 138% 135% 85%
--------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Large Cap Growth Portfolio through February 28, 2001. (B) The Large Cap Growth Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2001. Portfolio turnover rate through February 28, 2001 was that of the Portfolio. -------------------------------------------------------------------------------- 110 --------------------------------------------------------------------------------
AMR CLASS --------------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------------- 2005 2004 2003 2002 2001 ------- ------- ------- ------- ------- $ 5.84 $ 5.48 $ 4.54 $ 5.67 $ 9.55 ------- ------- ------- ------- ------- 0.06 0.02 0.02 0.02 0.01 0.36 0.36 0.93 (1.14) (3.87) ------- ------- ------- ------- ------- 0.42 0.38 0.95 (1.12) (3.86) ------- ------- ------- ------- ------- (0.05) (0.02) (0.01) (0.01) (0.02) ------- ------- ------- ------- ------- (0.05) (0.02) (0.01) (0.01) (0.02) ------- ------- ------- ------- ------- $ 6.21 $ 5.84 $ 5.48 $ 4.54 $ 5.67 ======= ======= ======= ======= ======= 7.22% 6.88% 21.09% (19.85)% (40.51)% ======= ======= ======= ======= ======= $63,183 $55,121 $48,926 $28,017 $23,804 0.64% 0.71% 0.68% 0.67% 0.70% 0.64% 0.71% 0.68% 0.67% 0.72% 0.98% 0.34% 0.40% 0.30% 0.08% 0.98% 0.34% 0.40% 0.30% 0.06% 164% 131% 138% 135% 85%
-------------------------------------------------------------------------------- 111 AMERICAN BEACON MID-CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------- YEAR ENDED JUNE 30 TO OCTOBER 31, OCTOBER 31, 2005 2004 ----------- ----------- Net asset value, beginning of period........................ $ 10.27 $ 10.00 ------- ------- Income from investment operations: Net investment income................................... 0.13 0.02(B) Net gains on securities (both realized and unrealized)............................................ 1.37 0.25 ------- ------- Total income from investment operations..................... 1.50 0.27 ------- ------- Less distributions: Dividends from net investment income.................... (0.05) -- Distributions from net realized gains on securities..... -- -- ------- ------- Total distributions......................................... (0.05) -- ------- ------- Net asset value, end of period.............................. $ 11.72 $ 10.27 ======= ======= Total return................................................ 14.63% 2.70%(A) ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $44,342 $25,546 Ratios to average net assets (annualized): Expenses, net of waivers.............................. 1.01% 1.14%(C) Expenses, before waivers.............................. 1.02% 1.34%(C) Net investment income, net of waivers................. 0.92% 0.73%(C) Net investment income, before waivers................. 0.91% 0.53%(C) Portfolio turnover rate................................. 298% 6%(A)
--------------- (A) Not annualized. (B) Based on average shares outstanding. (C) Annualized. -------------------------------------------------------------------------------- 112 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 113 AMERICAN BEACON EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------- 2005 2004 2003 2002 2001 ------- ------- ------- ------ -------- Net asset value, beginning of period........................ $ 12.64 $ 10.62 $ 7.20 $ 6.64 $ 8.17 ------- ------- ------- ------ -------- Income from investment operations: Net investment income(A)................................ 0.15 0.07 0.04 0.09 0.11 Net gains (losses) on securities (both realized and unrealized)(A)........................................ 3.45 2.01 3.43 0.56 (1.62) ------- ------- ------- ------ -------- Total income (loss) from investment operations.............. 3.60 2.08 3.47 0.65 (1.51) ------- ------- ------- ------ -------- Less distributions: Dividends from net investment income.................... (0.06) (0.06) (0.05) (0.09) (0.01) Distributions from net realized gains on securities..... (1.08) -- -- -- (0.01) ------- ------- ------- ------ -------- Total distributions......................................... (1.14) (0.06) (0.05) (0.09) (0.02) ------- ------- ------- ------ -------- Redemption fees added to beneficial interests --(E) --(E) -- -- -- ------- ------- ------- ------ -------- Net asset value, end of period.............................. $ 15.10 $ 12.64 $ 10.62 $ 7.20 $ 6.64 ======= ======= ======= ====== ======== Total return................................................ 30.11% 19.65% 48.45% 9.80% (18.52)% ======= ======= ======= ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 9,348 $ 7,282 $ 3,557 $1,769 $ 1,495 Ratios to average net assets (annualized): Expenses, net of waivers(A)........................... 1.52% 1.85% 1.76% 1.51% 1.43% Expenses, before waivers(A)........................... 1.52% 1.85% 1.76% 1.51% 1.43% Net investment income (loss), net of waivers(A)....... 1.22% 0.74% 0.62% 1.11% 2.07% Net investment income (loss), before waivers(A)....... 1.22% 0.74% 0.62% 1.11% 2.07% Portfolio turnover rate(B).............................. 63% 76% 80% 94% 95%
--------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Emerging Markets Portfolio through February 28, 2002. (B) The Emerging Markets Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) Not annualized. (D) Portfolio turnover rate is for the period from November 1, 2001 through October 31, 2002. (E) Amounts represent less than $0.01 per share. (F) Annualized. -------------------------------------------------------------------------------- 114 --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS ----------------------------------------------- --------------------------------------------------- YEAR ENDED OCTOBER 31, OCTOBER 1 TO YEAR ENDED OCTOBER 31, --------------------------- OCTOBER 31, --------------------------------------------------- 2005 2004 2003 2002 2005 2004 2003 2002 2001 ------- ------- ------- ------------ ----------- ------- ------- ------- ------- $ 12.53 $ 10.55 $ 7.19 $ 6.86 $ 12.68 $ 10.66 $ 7.22 $ 6.65 $ 8.18 ------- ------- ------- -------- ------- ------- ------- ------- ------- 0.15 0.04 0.09 -- 0.24 0.10 0.07 0.09 0.13 3.41 1.99 3.34 0.33 3.42 2.00 3.44 0.59 (1.63) ------- ------- ------- -------- ------- ------- ------- ------- ------- 3.56 2.03 3.43 0.33 3.66 2.10 3.51 0.68 (1.50) ------- ------- ------- -------- ------- ------- ------- ------- ------- (0.03) (0.05) (0.07) -- (0.09) (0.08) (0.07) (0.11) (0.02) (1.08) -- -- -- (1.08) -- -- -- (0.01) ------- ------- ------- -------- ------- ------- ------- ------- ------- (1.11) (0.05) (0.07) -- (1.17) (0.08) (0.07) (0.11) (0.03) ------- ------- ------- -------- ------- ------- ------- ------- ------- --(E) --(E) --(E) -- -- -- -- -- -- ------- ------- ------- -------- ------- ------- ------- ------- ------- $ 14.98 $ 12.53 $ 10.55 $ 7.19 $ 15.17 $ 12.68 $ 10.66 $ 7.22 $ 6.65 ======= ======= ======= ======== ======= ======= ======= ======= ======= 29.95% 19.33% 48.07% 4.81%(C) 30.43% 20.00% 48.84% 10.10% (18.40)% ======= ======= ======= ======== ======= ======= ======= ======= ======= $ 2,592 $ 1,214 $ 492 $ 1 $94,864 $74,199 $51,498 $32,731 $20,660 1.75% 2.14% 2.08% 1.87%(F) 1.25% 1.59% 1.50% 1.26% 1.30% 2.01% 2.20% 2.08% 1.87%(F) 1.25% 1.59% 1.50% 1.26% 1.30% 1.16% 0.37% 0.57% (0.25)%(F) 1.60% 1.01% 0.92% 1.35% 1.76% 0.90% 0.31% 0.57% (0.25)%(F) 1.60% 1.01% 0.92% 1.35% 1.76% 63% 76% 80% 94%(D) 63% 76% 80%(C) 94% 95%
-------------------------------------------------------------------------------- 115 AMERICAN BEACON HIGH YIELD BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------------------- YEAR ENDED OCTOBER 31, DECEMBER 29, 2000 ------------------------------------------ TO OCTOBER 31, 2005 2004 2003 2002 2001 -------- -------- -------- -------- ----------------- Net asset value, beginning of period................. $ 10.86 $ 10.73 $ 9.63 $ 9.82 $ 10.00 -------- -------- -------- -------- ------- Income from investment operations: Net investment income............................ 0.76 0.78 0.78 0.80 0.71 Net gains (losses) on securities (both realized and unrealized)................................ (0.84) 0.27 1.10 (0.19) (0.18) -------- -------- -------- -------- ------- Total income from investment operations.............. (0.08) 1.05 1.88 0.61 0.53 -------- -------- -------- -------- ------- Less distributions: Dividends from net investment income............. (0.76) (0.78) (0.78) (0.80) (0.71) Distributions from net realized gains on securities..................................... 0.20 (0.14) -- -- -- -------- -------- -------- -------- ------- Total distributions.................................. (0.56) (0.92) (0.78) (0.80) (0.71) -------- -------- -------- -------- ------- Net asset value, end of period....................... $ 10.22 $ 10.86 $ 10.73 $ 9.63 $ 9.82 ======== ======== ======== ======== ======= Total return......................................... 3.03%(A) 10.19% 20.11% 6.28% 5.33%(A) ======== ======== ======== ======== ======= Ratios and supplemental data: Net assets, end of period (in thousands)......... $216,744 $241,777 $161,380 $104,813 $53,275 Ratios to average net assets (annualized): Expenses, net of waivers....................... 0.84% 0.88% 0.90% 0.90% 0.90%(D) Expenses, before waivers....................... 0.84% 0.92% 1.00% 0.98% 1.07%(D) Net investment income, net of waivers.......... 7.24% 7.27% 7.51% 8.02% 8.48%(D) Net investment income (loss), before waivers... 7.24% 7.23% 7.41% 7.94% 8.31%(D) Portfolio turnover rate.......................... 128% 138% 114% 163% 145%(A)
--------------- (A) Not annualized. (B) Portfolio turnover rate is for the period from November 1, 2001 through October 31, 2002. (C) Portfolio turnover rate is for the period from November 1, 2002 through October 31, 2003. (D) Annualized. -------------------------------------------------------------------------------- 116 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS ------------------------------------------------ --------------------------------------- YEAR ENDED OCTOBER 31, MARCH 1 TO YEAR ENDED OCTOBER 31, MAY 1 TO ---------------------------------- OCTOBER 31, ------------------------- OCTOBER 31, 2005 2004 2003 2002 2005 2004 2003 ----------- -------- -------- ----------- ----------- ----------- ----------- $ 10.87 $ 10.73 $ 9.63 $10.10 $ 10.87 $ 10.73 $ 10.47 -------- -------- -------- ------ ------- ---------- --------- 0.74 0.74 0.75 0.50 0.70 0.71 0.29 (0.85) 0.28 1.10 (0.47) (0.45) 0.27 0.26 -------- -------- -------- ------ ------- ---------- --------- (0.11) 1.02 1.85 0.03 0.25 0.98 0.55 -------- -------- -------- ------ ------- ---------- --------- (0.74) (0.74) (0.75) (0.50) (0.71) (0.70) (0.29) 0.20 (0.14) -- -- -- (0.14) -- -------- -------- -------- ------ ------- ---------- --------- (0.54) (0.88) (0.75) (0.50) (0.71) (0.84) (0.29) -------- -------- -------- ------ ------- ---------- --------- $ 10.22 $ 10.87 $ 10.73 $ 9.63 $ 10.41 $ 10.87 $ 10.73 ======== ======== ======== ====== ======= ========== ========= 2.69% 9.94% 19.57% (0.26)%(A) 2.33% 9.41% 5.46%(A) ======== ======== ======== ====== ======= ========== ========= $120,360 $148,266 $125,654 $4,029 $ 1 $ 4 $ 1 1.08% 1.20% 1.24% 1.27%(D) 1.46% 1.57% 1.71%(D) 1.08% 1.20% 1.24% 1.27%(D) 4.01% 440.81% 806.83%(D) 7.00% 6.95% 7.11% 7.20%(D) 6.59% 6.57% 6.51%(D) 7.00% 6.95% 7.11% 7.20%(D) 4.04% (432.67)% (798.61)%(D) 128% 138% 114% 163%(B) 128% 138% 114%(C)
-------------------------------------------------------------------------------- 117 AMERICAN BEACON ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
PLANAHEAD CLASS --------------------------------------- YEAR ENDED OCTOBER 31, JUNE 30 TO ------------------------- OCTOBER 31, 2005 2004 2003 ----------- ----------- ----------- Net asset value, beginning of period........................ $ 10.16 $ 9.96 $ 10.00 -------- -------- -------- Income from investment operations: Net investment income................................... 0.29 0.26 0.07(B) Net gains (losses) on securities (both realized and unrealized)........................................... (0.16) 0.20 (0.04) -------- -------- -------- Total income from investment operations..................... 0.13 0.46 0.03 -------- -------- -------- Less distributions: Dividends from net investment income.................... (0.31) (0.26) (0.07) Distributions from net realized gains on securities..... -- -- -- -------- -------- -------- Total distributions......................................... (0.31) (0.26) (0.07) -------- -------- -------- Net asset value, end of period.............................. $ 9.98 $ 10.16 $ 9.96 ======== ======== ======== Total return................................................ 1.32% 4.70% 0.32%(A) ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $112,341 $103,897 $101,072 Ratios to average net assets (annualized): Expenses.............................................. 0.92% 1.00% 0.93%(C) Net investment income................................. 2.79% 2.54% 2.20%(C) Portfolio turnover rate................................. 41% 72% 57%(A)
--------------- (A) Not annualized. (B) Based on average shares outstanding. (C) Annualized. -------------------------------------------------------------------------------- 118 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 119 AMERICAN BEACON INTERMEDIATE BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS (TERMINATED 3/1/05) ---------------------------------------------------- FROM NOVEMBER 1, 2004 TO YEAR ENDED OCTOBER 31, FEBRUARY 28, ------------------------------------- 2005(D) 2004 2003 2002 2001 ------------ ------- ------- ------- ------- Net asset value, beginning of period........................ $ 10.54 $ 10.45 $ 10.42 $ 10.51 $ 9.72 ------- ------- ------- ------- ------- Income from investment operations: Net investment income(A)................................ 0.13 0.37 0.41 0.51 0.57 Net gains (losses) on securities (both realized and unrealized)(A)........................................ (0.11) 0.14 0.03 (0.09) 0.79 ------- ------- ------- ------- ------- Total income from investment operations..................... 0.02 0.51 0.44 0.42 1.36 ------- ------- ------- ------- ------- Less distributions: Dividends from net investment income.................... (0.15) (0.42) (0.41) (0.51) (0.57) Distributions from net realized gains on securities..... -- -- -- -- -- ------- ------- ------- ------- ------- Total distributions......................................... (0.15) (0.42) (0.41) (0.51) (0.57) ------- ------- ------- ------- ------- Net asset value, end of period.............................. $ 10.41 $ 10.54 $ 10.45 $ 10.42 $ 10.51 ======= ======= ======= ======= ======= Total return................................................ 0.17%(C) 4.90% 4.31% 4.21% 14.36% ======= ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ N/A $ 912 $ 1,024 $74,919 $60,842 Ratios to average net assets (annualized): Expenses, net of waivers(A)........................... 0.37% 0.80% 0.58% 0.56% 0.54% Expenses, before waivers(A)........................... 0.37% 0.80% 0.58% 0.56% 0.54% Net investment income, net of waivers(A).............. 3.82% 3.51% 4.02% 4.99% 5.55% Net investment income, before waivers(A).............. 3.82% 3.51% 4.02% 4.99% 5.55% Portfolio turnover rate(B).............................. 119%(E) 106% 187% 185% 164%
--------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Intermediate Bond Portfolio through February 28, 2002. (B) The Intermediate Bond Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) Not annualized. (D) On March 1, 2005, the existing Institutional Class shares were terminated and exchanged for AMR Class shares at a conversion rate of 1.0202. Following this exchange, the former AMR Class Shares were re-named Institutional Class. (E) Portfolio turnover rate is for the period November 1, 2004 through October 31, 2005. -------------------------------------------------------------------------------- 120 --------------------------------------------------------------------------------
PLAN AHEAD CLASS INSTITUTIONAL CLASS (FORMERLY AMR CLASS PRIOR TO 3/1/05) -------------------------------------------- -------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, -------------------------------------------- -------------------------------------------------------- 2005 2004 2003 2002 2001 2005(D) 2004 2003 2002 2001 ------ ------- ------ ------ ------- --------- --------- --------- --------- -------- $10.41 $ 10.31 $10.27 $10.34 $ 9.57 $ 10.33 $ 10.24 $ 10.22 $ 10.30 $ 9.53 ------ ------- ------ ------ ------- -------- -------- -------- -------- ------- 0.36 0.35 0.39 0.48 0.53 0.42 0.40 0.45 0.53 0.58 (0.30) 0.14 0.04 (0.07) 0.77 (0.29) 0.14 0.02 (0.08) 0.77 ------ ------- ------ ------ ------- -------- -------- -------- -------- ------- 0.06 0.49 0.43 0.41 1.30 0.13 0.54 0.47 0.45 1.35 ------ ------- ------ ------ ------- -------- -------- -------- -------- ------- (0.39) (0.39) (0.39) (0.48) (0.53) (0.45) (0.45) (0.45) (0.53) (0.58) -- -- -- -- -- -- -- -- -- -- ------ ------- ------ ------ ------- -------- -------- -------- -------- ------- (0.39) (0.39) (0.39) (0.48) (0.53) (0.45) (0.45) (0.45) (0.53) (0.58) ------ ------- ------ ------ ------- -------- -------- -------- -------- ------- $10.08 $ 10.41 $10.31 $10.27 $ 10.34 $ 10.01 $ 10.33 $ 10.24 $ 10.22 $ 10.30 ====== ======= ====== ====== ======= ======== ======== ======== ======== ======= 0.54% 4.86% 4.25% 4.10% 13.91% 1.26% 5.38% 4.62% 4.57% 14.58% ====== ======= ====== ====== ======= ======== ======== ======== ======== ======= $1,054 $ 1,091 $1,395 $1,691 $ 300 $ 93,270 $ 96,242 $131,927 $144,098 $95,820 0.95% 0.92% 0.86% 0.86% 0.83% 0.31% 0.34% 0.32% 0.30% 0.30% 1.19% 0.93% 0.86% 0.86% 0.83% 0.31% 0.34% 0.32% 0.30% 0.30% 3.48% 3.39% 3.70% 4.60% 5.04% 4.12% 3.97% 4.32% 5.23% 5.84% 3.24% 3.38% 3.70% 4.60% 5.04% 4.12% 3.97% 4.32% 5.23% 5.84% 119% 106% 187% 185% 164% 119% 106% 187% 185% 164%
-------------------------------------------------------------------------------- 121 AMERICAN BEACON SHORT-TERM BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS (TERMINATED 3/1/05) ---------------------------------------------------------------------- FROM NOVEMBER 1, 2004 YEAR ENDED OCTOBER 31, TO FEBRUARY 28, ------------------------------------------- 2005(D) 2004 2003 2002 2001 ---------------- ------ ------ ------ ------- Net asset value, beginning of period........... $ 9.09 $ 9.32 $ 9.45 $ 9.62 $ 9.21 ------ ------ ------ ------ ------- Income from investment operations: Net investment income(B)................... 0.11 0.24 0.37 0.42 0.57 Net gains (losses) on securities (both realized and unrealized)(B).............. (0.15) (0.03) (0.04) (0.11) 0.41 ------ ------ ------ ------ ------- Total income from investment operations........ (0.04) 0.21 0.33 0.31 0.98 ------ ------ ------ ------ ------- Less distributions: Dividends from net investment income....... (0.13) (0.44) (0.46) (0.48) (0.57) ------ ------ ------ ------ ------- Total distributions............................ (0.13) (0.44) (0.46) (0.48) (0.57) ------ ------ ------ ------ ------- Net asset value, end of period................. $ 8.92 $ 9.09 $ 9.32 $ 9.45 $ 9.62 ====== ====== ====== ====== ======= Total return................................... (0.44)%(C) 2.21% 3.58% 3.37% 10.98% ====== ====== ====== ====== ======= Ratios and supplemental data: Net assets, end of period (in thousands)... N/A $3,324 $3,745 $8,396 $ 4,226 Ratios to average net assets (annualized): Expenses, net of waivers(B).............. 0.61% 0.62% 0.54% 0.44% 0.51% Expenses, before waivers(B).............. 0.61% 0.62% 0.54% 0.44% 0.51% Net investment income, net of waivers (B).................................... 1.82% 2.72% 4.30% 4.47% 6.06% Net investment income, before waivers(B)............................. 1.82% 2.72% 4.30% 4.47% 6.06% Portfolio turnover rate(A)................. 38%(E) 41% 81% 63% 104%
--------------- (A) The Short-Term Bond Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (B) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Short-Term Bond Portfolio through February 28, 2002. (C) Not annualized. (D) On March 1, 2005, the existing Institutional Class shares were terminated and exchanged for AMR Class shares at a conversion rate of 1.0014. Following this exchange, the former AMR Class Shares were re-named Institutional Class. (E) Portfolio turnover rate is for the period November 1, 2004 through October 31, 2005. -------------------------------------------------------------------------------- 122 --------------------------------------------------------------------------------
PLANAHEAD CLASS INSTITUTIONAL (FORMERLY AMR CLASS PRIOR TO 3/1/05) --------------------------------------------------- --------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, --------------------------------------------------- --------------------------------------------------------- 2005 2004 2003 2002 2001 2005 2004 2003 2002 2001 ------ ------- ------ ------ ------- ------- ----------- ------- ------- ------- $ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.07 $ 9.31 $ 9.44 $ 9.60 $ 9.20 ------ ------- ------ ------ ------- ------- ------- ------- ------- ------- 0.28 0.25 0.39 0.43 0.55 0.29 0.27 0.42 0.44 0.59 (0.24) (0.07) (0.08) (0.14) 0.41 (0.20) (0.05) (0.07) (0.11) 0.40 ------ ------- ------ ------ ------- ------- ------- ------- ------- ------- 0.04 0.18 0.31 0.29 0.96 0.09 0.22 0.35 0.33 0.99 ------ ------- ------ ------ ------- ------- ------- ------- ------- ------- (0.36) (0.42) (0.43) (0.46) (0.55) (0.41) (0.46) (0.48) (0.49) (0.59) ------ ------- ------ ------ ------- ------- ------- ------- ------- ------- (0.36) (0.42) (0.43) (0.46) (0.55) (0.41) (0.46) (0.48) (0.49) (0.59) ------ ------- ------ ------ ------- ------- ------- ------- ------- ------- $ 8.77 $ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 8.75 $ 9.07 $ 9.31 $ 9.44 $ 9.60 ====== ======= ====== ====== ======= ======= ======= ======= ======= ======= 0.46% 1.84% 3.38% 3.16% 10.69% 1.00% 2.39% 3.82% 3.60% 11.07% ====== ======= ====== ====== ======= ======= ======= ======= ======= ======= $8,582 $ 7,781 $5,783 $3,520 $ 1,257 $79,683 $80,504 $91,911 $89,932 $81,370 0.87% 0.87% 0.86% 0.73% 0.75% 0.33% 0.33% 0.33% 0.30% 0.33% 0.94% 0.87% 0.86% 0.77% 0.75% 0.33% 0.33% 0.33% 0.30% 0.33% 2.59% 2.44% 4.00% 4.16% 5.76% 3.15% 3.00% 4.54% 4.63% 6.26% 2.52% 2.44% 4.00% 4.12% 5.76% 3.15% 3.00% 4.54% 4.63% 6.26% 38% 41% 81% 63% 104% 38% 41% 81% 63% 104%
-------------------------------------------------------------------------------- 123 AMERICAN BEACON FUNDS FEDERAL TAX INFORMATION (UNAUDITED) -------------------------------------------------------------------------------- For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended October 31, 2005, which is designated as qualifying for the dividends-received deduction, is as follows (unaudited): Balanced Fund 41.7% Large Cap Value Fund 82.1% Large Cap Growth Fund 94.2% Mid-Cap Value Fund 69.1% Emerging Markets Fund 0.1% Enhanced Income Fund 6.5%
For shareholders in the Funds, the percentage of dividend income distributed for the year ended October 31, 2005, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is as follows (unaudited): Balanced Fund 41.3% Large Cap Value Fund 100.0% Large Cap Growth Fund 100.0% Mid-Cap Value Fund 97.0% Emerging Markets Fund 100.0%
-------------------------------------------------------------------------------- 124 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (Unaudited) -------------------------------------------------------------------------------- The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* William F. Quinn** (57) Trustee and President, American Beacon Advisors, Inc. (1986-Present); President of Chairman (1989-2003) and Director (1979-1986, 2003-Present), Trust since 1987 American Airlines Federal Credit Union; Director, Crescent Real Estate Equities, Inc. (1994-Present); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present); Advisory Director, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002); Chairman, Committee for the Investment of Employee Benefits Defined Benefit Sub-Committee (1982-Present); Director, United Way of Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). Alan D. Feld** (68) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present). NON-INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (61) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).
-------------------------------------------------------------------------------- 125 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (44) Trustee since 2004 Vice President, Chief Financial Officer, Treasurer and 301 Commerce Street Secretary, Kimbell Art Foundation (1993-Present); Trustee, Suite 2240 Texas Christian University (1999-Present); Trustee, W.I. Fort Worth, Texas 76102 Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Richard A. Massman (62) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in energy, real estate, farming, ranching and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Stephen D. O'Sullivan (70) Trustee of Trust Consultant (1994-Present); Trustee, American Beacon Mileage since 1987 Funds (1995- Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). R. Gerald Turner (59) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Federal Dallas, Texas 75275 Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-Present); Member, United Way of Dallas Board of Directors; Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Member, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present). Kneeland Youngblood (49) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private 100 Crescent Court equity firm) (1998- Present); Trustee, The Hockaday School Suite 1740 (1997-Present); Director, Starwood Hotels and Resorts Dallas, Texas 75201 (2001-Present); Member, Council on Foreign Relations (1995- Present); Director, Just For the Kids (1995-2001); Director, L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of Texas (1993-1999); Director, Starwood Financial Trust (1998-2001); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).
-------------------------------------------------------------------------------- 126 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- OFFICERS TERM ------------------ One Year Brian E. Brett (45) VP since 2004 Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Nancy A. Eckl (43) VP of Trust since Vice President, Trust Investments, American Beacon Advisors, 1990 Inc. (1990-Present). Michael W. Fields (51) VP of Trust since Vice President, Fixed Income Investments, American Beacon 1989 Advisors, Inc. (1988- Present). Rebecca L. Harris (38) Treasurer since Vice President, Finance, American Beacon Advisors, Inc. 1995 (1995-Present). John B. Roberson (47) VP of Trust since Vice President, Client Relations & Special Projects, 1989 American Beacon Advisors, Inc. (2004-Present); Vice President, Director of Sales, American Beacon Advisors, Inc. (1991-2004); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present). Christina E. Sears (34) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. Officer since (2004-Present); Senior Compliance Analyst, American Beacon 2004 and Advisors, Inc. (1998-2004). Secretary since 2005
--------------- * The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 70, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn and Feld are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is President of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's investment advisors. -------------------------------------------------------------------------------- 127 AMERICAN BEACON FUNDS PRIVACY POLICY (Unaudited) -------------------------------------------------------------------------------- The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. -------------------------------------------------------------------------------- 128 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 129 (AMERICAN BEACON FUNDS LOGO) -------------------------------------------------------------------------------- DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Funds through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUNDS: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: american-beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
-------------------------------------------------------------------------------- (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450 AMR Class(SM) Fort Worth, TX 76155 Call (800) 345-2345 PlanAhead Class(R) and Service Class Call (800) 388-3344
-------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009. schedule of each Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES REGISTERED PUBLIC FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ACCOUNTING FIRM Portland, Maine ERNST & YOUNG LLP Chicago, Illinois
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. -------------------------------------------------------------------------------- American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Balanced Fund, American Beacon Large Cap Value Fund, American Beacon Large Cap Growth Fund, American Beacon Mid-Cap Value Fund, American Beacon Emerging Markets Fund, American Beacon High Yield Bond Fund, American Beacon Enhanced Income Fund, American Beacon Intermediate Bond Fund and American Beacon Short-Term Bond Fund are service marks of American Beacon Advisors, Inc. AR 10/05 535724 G U I D A N C E | V I S I O N | E X P E R I E N C E [AMERICAN BEACON FUNDS LOGO] ANNUAL REPORT [PHOTO] OCTOBER 31, 2005 INTERNATIONAL EQUITY FUND Formerly known as the American AAdvantage Funds About American Beacon Advisors -------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
Contents ----------------------------------------------- President's Message........... 1 Market and Performance Overview................... 2 Schedule of Investments....... 20 Additional Information...............Back Cover
Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability and differences in accounting standards. American Beacon Funds October 31, 2005 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, I am pleased to present you with the Annual Report for the American Beacon International Equity Fund for the twelve months ended October 31, 2005. As investors faced increasing oil prices, rising interest rates and devastating natural disasters internationally, most financial markets experienced modest growth. The exception to this rule was the strong performance of international markets. The Dow Jones Industrial Average posted gains of 6.5%, the S&P 500 Index increased by 8.7% and the MSCI EAFE Index returned 18.1%. The American Beacon International Equity Fund posted strong performance as the Institutional Class recorded a gain of 15.0% for the year. Please review the enclosed market overviews, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or access your account information, please visit our web site at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon International Equity Fund. Sincerely, /s/ WILLIAM F. QUINN William F. Quinn President, American Beacon Funds Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. 1 INTERNATIONAL EQUITY MARKET OVERVIEW -------------------------------------------------------------------------------- International equities continued to outperform U.S. equities in the twelve-months ending October 31, 2005 with the MSCI EAFE index up +18.1 percent in U.S. dollar terms vs. +8.7 percent for the S&P 500. Returns were even greater for international equities in local currency terms as the dollar appreciated considerably against most major currencies during this period. The dollar gained approximately 9.1 percent vs. the Japanese Yen, 6.3 percent vs. the Euro and 3.7 percent vs. the British Pound. The main driver for the dollar's performance was the widening interest rate differential between the U.S. and other regions as the Federal Reserve continued to raise the short-term Fed Funds rate to 4 percent, while the European Central Bank kept short-term rates at a six-decade low of 2 percent. Japan kept rates at essentially zero and the Bank of England actually lowered rates once. Stocks rose sharply at the end of 2004 as oil prices eased, alleviating concerns that higher energy costs would restrain earnings and economic growth. The rally started right after the U.S. presidential election, as uncertainty over the election's outcome was lifted. On a regional basis, markets in the 12- country euro region, were among the index's best performers for the quarter, led by Austria, France, and Germany. U.K. stocks trailed other euro regions due to declines in energy shares, as oil prices fell, and to losses experienced by drug makers after Merck & Co. recalled its Vioxx painkiller. Japanese stocks also lagged, as Japan's economy stalled and the yen reached a four-year high late in 2004. After concerns regarding global growth emerged in the first half of 2005, international stocks later rebounded as investors became more confident that companies' profit forecasts could withstand record energy prices. Energy stocks outpaced the market as the price of oil briefly topped $70 per barrel after hurricanes Katrina and Rita devastated the Gulf shores, crippling U.S. oil production and refining in the area. Growth in the European economies appeared to be improving. In Germany, business confidence rose to a new high in September. Unemployment in Italy reached a new low, and consumer spending in France was strong. European multi-national corporations have benefited from a weak euro in 2005, making their goods more attractive abroad. Japanese stocks were among the best performers, as investors cheered the reelection of Prime Minister Koizumi and the reshuffling of his cabinet. Many feel that Koizumi's strong showing in the polls has given him a clear mandate to continue the restructuring of the Japanese economy, including privatization of the postal savings system. There is also increasing optimism that deflation is near an end with land prices in Tokyo rising for the first time in fifteen years and speculation that the Bank of Japan will soon end its zero interest rate policy. Japanese banks would be one of the biggest beneficiaries of higher interest rates, as well as lower delinquencies and greater loan volumes as a result of the improving economy. Investors have also been encouraged that consumer and capital spending are fueling an economic rebound in Japan, rather than exports and government outlays. The combination of a global economic recovery and extremely accommodative monetary policy around the world has led to significant outperformance of the riskier parts of the global equity markets, such as small stocks, deeply cyclical companies, and emerging markets stocks. As the economic recovery matures, and central banks in many parts of the world tighten monetary policy, we will watch for investors to rotate into larger, more consistently profitable companies. The outperformance of smaller stocks has already begun to moderate in the United States and this trend may spread internationally going forward. 2 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the International Equity Fund returned 15.04% for the twelve months ended October 31, 2005. The Fund underperformed the MSCI EAFE Index (the "Index") return of 18.09% and the Lipper International Funds Index return of 18.91%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/95 THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER INTERNATIONAL INSTITUTIONAL CLASS FUNDS INDEX MSCI EAFE INDEX ------------------- -------------------- --------------- 10/95 10000 10000 10000 10/96 11727 11262 11047 10/97 13965 12768 11558 10/98 14550 13360 12674 10/99 17457 16438 15593 10/00 17869 17005 15140 10/01 14913 12907 11366 10/02 13346 11582 9865 10/03 17564 14655 12532 10/04 21515 17082 14893 10/05 24750 20313 17587
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/05 $10,000 --------------------------- 10/31/95- 1 YEAR 5 YEARS 10 YEARS 10/31/05 ------ ------- -------- --------- Institutional Class(1).... 15.04% 6.73% 9.49% $24,750 PlanAhead Class(1)........ 14.73% 6.54% 9.24% $24,200 AMR Class(1).............. 15.32% 6.98% 9.77% $24,024 Service Class(1,2)........ 14.45% 6.38% 9.16% $25,403 Lipper Int'l. Funds Index.................... 18.91% 3.62% 7.37% $20,313 MSCI EAFE Index........... 18.09% 3.04% 5.81% $17,587
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the five-year and ten-year periods represents the total returns achieved by the PlanAhead Class from 4/30/95 up to 5/1/03, the inception date of the Service Class, and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the PlanAhead Class. As a result, total returns shown may be higher than they would have been had the Service Class been in existence since 4/30/95. The Fund underperformed the Index over the past fiscal year primarily due to unfavorable country allocation and stock selection. However, timing differences in currency pricing between the Fund (4 p.m. Eastern time) and the Index (4 p.m. London time), and Fund expenses also negatively impacted the Fund relative to the Index. From a country perspective, poor stock selections, particularly in Finland and Japan, more than offset strong selections in countries including the United Kingdom. In Finland, Stora Enso dropped 6.5% while UPM-Kymmene only gained 2.5% for the time period. Investments in Seiko Epson Corporation (down 40.1%), Konica Minolta Holdings (down 37.4%) and Sony Corporation (down 6.8%) hampered the Fund's performance in Japan. The poor stock selection was somewhat offset by owning UK stocks British American Tobacco Industries (up 52.9%), BAE Systems (up 38.8%) and GlaxoSmithKline (up 27.9%). In addition, underweighting Australia (up 25.0%) and overweighting the two worst performing EAFE markets, Portugal (down 0.3%) and Ireland (up 2.3%), detracted value during the time period. Unlike country attribution, all of the value detracted from a sector perspective was due to stock selection as sector allocation was slightly positive. Stock selection was particularly weak in Materials, Financials and Information Technology. Within the Materials sector, in addition to weak performance by Stora Enso and Upm-Kymmene, Alcan also performed poorly. Financial firms Royal Bank of Scotland Group and HSBC Holdings detracted from results while investments in Konica Minolta Holdings and Celestica hurt performance in the Information Technology sector. On a more positive note, the Fund did add value by underweighting Information Technology, the worst sector for the period, which gained just 3.5%. Although economic and market conditions vary from period to period, the Fund's primary strategy remains consistent as it focuses on investing in undervalued companies with above-average earnings growth expectations. 3 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- GlaxoSmithKline plc 2.4% Royal Bank of Scotland Group plc 2.1% Sanofi-Synthelabo 1.9% Total S.A. 1.8% Vodafone Group plc 1.6% BAE Systems plc 1.4% BNP Paribas S.A. 1.4% France Telecom S.A. 1.4% Koninklijke (Royal) Philips Electronics N.V. 1.3% Nestle SA 1.3%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 26.0% Consumer Discretionary 12.9% Industrials 11.7% Telecommunication Services 9.6% Health Care 8.7% Energy 8.4% Consumer Staples 8.2% Information Technology 5.5% Materials 5.4% Utilities 3.7%
REGIONAL ALLOCATION* (PIE CHART)
EUROPE PACIFIC RIM NORTH AMERICA CENTRAL AMERICA ------ ----------- ------------- --------------- 71 27.1 1.7 0.2
* Allocation based upon gross investments in American Beacon Master Services International Equity Portfolio. FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2005 through October 31, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. 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 in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values 4 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD* VALUE VALUE 5/1/05- 5/1/05 10/31/05 10/31/05 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,066.57 $3.58 Hypothetical $1,000.00 $1,021.74 $3.50 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,065.06 $4.92 Hypothetical $1,000.00 $1,020.44 $4.81 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,067.21 $2.22 Hypothetical $1,000.00 $1,023.06 $2.17 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,063.47 $6.18 Hypothetical $1,000.00 $1,019.21 $6.05 (5% return before expenses)
* Expense amounts are inclusive of the Fund's proportionate share of expenses of the American Beacon Master Trust International Equity Portfolio. Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.69%, 0.94%, 0.43%, 1.19%, for the Institutional, PlanAhead, AMR, and Service Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 5 AMERICAN BEACON INTERNATIONAL EQUITY FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM October 31, 2005 -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of American Beacon International Equity Fund: We have audited the accompanying statement of assets and liabilities of American Beacon International Equity Fund (the "Fund"), a fund comprising the American Beacon Funds (formerly known as the American AAdvantage International Equity Fund and the American AAdvantage Funds, respectively) as of October 31, 2005, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund'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. We were not engaged to perform an audit of the Fund's 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 Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon International Equity Fund at October 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) Chicago, Illinois December 21, 2005 -------------------------------------------------------------------------------- 6 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 (in thousands, except share and per share amounts) -------------------------------------------------------------------------------- ASSETS: Investments in Portfolio, at value...................... $ 2,296,913 Receivable for fund shares sold......................... 2,819 ----------- TOTAL ASSETS........................................ 2,299,732 ----------- LIABILITIES: Payable for fund shares redeemed........................ 691 Administrative service and service fees payable......... 388 Other liabilities....................................... 359 ----------- TOTAL LIABILITIES................................... 1,438 ----------- NET ASSETS.................................................. $ 2,298,294 =========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... $ 1,775,769 Undistributed net investment income..................... 38,005 Accumulated net realized gain (loss).................... 132,556 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................. 351,964 ----------- NET ASSETS.................................................. $ 2,298,294 =========== Shares outstanding (no par value): Institutional Class..................................... 61,305,014 =========== PlanAhead Class......................................... 26,977,017 =========== Service Class........................................... 144,951 =========== AMR Class............................................... 21,214,486 =========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 20.98 =========== PlanAhead Class......................................... $ 20.79 =========== Service Class........................................... $ 20.61 =========== AMR Class............................................... $ 21.12 ===========
See accompanying notes -------------------------------------------------------------------------------- 7 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF OPERATIONS Year Ended October 31, 2005 (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO: Investment income (net of foreign taxes of $8,849)...... $ 62,469 Expenses................................................ (8,756) -------- NET INVESTMENT INCOME ALLOCATED FROM THE PORTFOLIO........................................... 53,713 -------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class................................... 2,960 PlanAhead Class....................................... 1,163 Service Class......................................... 6 Transfer agent fees: Institutional Class................................... 186 PlanAhead Class....................................... 97 Service Class......................................... 1 AMR Class............................................. 14 Professional fees....................................... 47 Registration fees and expenses.......................... 120 Service fees: PlanAhead Class (Note 2).............................. 1,163 Service Class (Note 2)................................ 6 Distribution fees -- Service Class (Note 2)............. 6 Prospectus and shareholder reports...................... 405 Other expenses.......................................... 16 -------- TOTAL FUND EXPENSES................................. 6,190 -------- NET INVESTMENT INCOME....................................... 47,523 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE PORTFOLIO: Net increase from payments by affiliates (Note 2)....... 902 Net realized gain....................................... 185,926 Change in net unrealized gain........................... 44,556 -------- NET GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM THE PORTFOLIO........................................... 231,384 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $278,907 ========
See accompanying notes -------------------------------------------------------------------------------- 8 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ---------------------------- 2005 2004 -------------- ---------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 47,523 $ 25,715 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions........... 186,828** 111,748 Change in unrealized gain allocated from the Portfolio.............................................. 44,556 153,263 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 278,907 290,726 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class................................... (13,529) (19,224) PlanAhead Class....................................... (4,004) (4,201) Service Class......................................... (22) -- AMR Class............................................. (7,644) (9,135) ---------- ---------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (25,199) (32,560) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 766,799 670,346 Reinvestment of dividends and distributions............. 22,373 28,865 Cost of shares redeemed................................. (545,309) (379,293) Redemption fees......................................... 58 21 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................................. 243,921 319,939 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS....................... 497,629 578,105 ---------- ---------- NET ASSETS: Beginning of period..................................... 1,800,665 1,222,560 ---------- ---------- END OF PERIOD*.......................................... $2,298,294 $1,800,665 ========== ========== * Includes undistributed net investment income (loss) of..................................................... $ 33,121 $ 10,007 ========== ========== ** Includes $902 payment by affiliate (Note 2).
See accompanying notes -------------------------------------------------------------------------------- 9 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS October 31, 2005 -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon International Equity Fund, a series of the Trust. American Beacon Advisors, Inc. (the "Manager"), formerly known as AMR Investment Services, Inc., is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. The American Beacon International Equity Fund (the "Fund"), formerly known as the American AAdvantage International Equity Fund, invests all of its investable assets in the International Equity Portfolio (the "Portfolio") of the American Beacon Master Trust, formerly known as the AMR Investment Services Trust International Equity Portfolio, which has the same investment objectives as the Fund. The Portfolio is an open-end management investment company registered under the Act. The value of the investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio. At October 31, 2005 the Fund's investment was 96.0% of the Portfolio. The financial statements of the Portfolio, including Notes to Financial Statements, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Notes to Financial Statements of the Portfolio include a discussion of investment valuation, security transactions and investment income, the management agreement and securities lending. Class Disclosure The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES: ------ ----------- ------------------------------ INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.25% Fee -- PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25% intermediary Fee -- 0.25% Service Fee -- SERVICE CLASS Investors investing through an intermediary Administrative Service 0.25% Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A AMR Corporation and its affiliates
Investment income, net capital gains (losses) and all expenses incurred by the Fund are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. Security Valuation The Fund records its investment in the Portfolio at fair value. Valuation of securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. -------------------------------------------------------------------------------- 10 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Redemption Fees The Fund imposes a 2% redemption fee on certain Institutional, PlanAhead and Service Class shares held for less than 30 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact and other costs associated with short-term trading activity in the Fund. The "first-in, first-out" method is used to determine the holding period. Investment Income The Fund records its share of net investment income and realized and unrealized gain (loss) in the Portfolio each day. All net investment income and realized and unrealized gain (loss) of the Portfolio is allocated pro rata among the Fund and other investors in the Portfolio at the time of such determination. Dividends to Shareholders Dividends from net investment income of the Fund normally will be declared and paid annually. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement that obligates the Manager to provide or oversee administrative and management services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager -------------------------------------------------------------------------------- 11 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- receives an annualized fee of .25% of the average daily net assets of the Institutional, PlanAhead and Service Classes of the Fund. Distribution Plans The Trust, except for the Service Class of the Funds, has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. A separate Distribution Plan (the "Distribution Plan") has been adopted pursuant to Rule 12b-1 under the Act for the Service Class of the Fund. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Service Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance. Service Plans The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the PlanAhead and Service Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.25% of the average daily net assets of the PlanAhead and Service Classes of the Fund. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free air transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. Mr. O'Sullivan receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. At October 31, 2005, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Fund. During the period ended October 31, 2005, subadvisors voluntarily reimbursed the Portfolio for certain losses totaling $941,000. A $383,000 reimbursement was made to compensate the Portfolio for a loss associated with a rights offering that expired. The shares that would have been acquired through a full exercise of the rights were subsequently purchased on the open market. The subadvisor reimbursed the Portfolio for the appreciation of the shares over the exercise price, transaction costs and foreign exchange costs incurred in making this purchase in the open market. A $558,000 reimbursement was made to compensate the Portfolio for a loss associated with a security -------------------------------------------------------------------------------- 12 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- that violated investment restrictions. The reimbursement amount allocated to the Fund totaled $902,000 for the period and is reflected in the gain/loss section of the Statement of Operations. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating Funds. At October 31, 2005, the Fund had not utilized the credit facility. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. Dividends are determined in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions during the fiscal years ended October 31, 2005 and October 31, 2004 were as follows (in thousands):
YEAR ENDED YEAR ENDED OCTOBER 31, 2005 OCTOBER 31, 2004 ---------------- ---------------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class..................................... $13,529 $19,224 PlanAhead Class......................................... 4,004 4,201 Service Class........................................... 22 -- AMR Class............................................... 7,644 9,135 LONG-TERM CAPITAL GAIN Institutional Class..................................... -- -- PlanAhead Class......................................... -- -- Service Class........................................... -- -- AMR Class............................................... -- -- ------- ------- TOTAL DISTRIBUTIONS PAID............................ $25,199 $32,560 ------- -------
-------------------------------------------------------------------------------- 13 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- As of October 31, 2005, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes... $2,100,685 Unrealized appreciation..................................... 382,401 Unrealized depreciation..................................... (38,421) ---------- Net unrealized appreciation/(depreciation).................. 343,980 Undistributed ordinary income............................... 70,438 Undistributed long-term gain/(loss)......................... 116,200 ---------- Distributable earnings...................................... $ 530,618 ==========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments, book amortization for premiums, and the realization for tax purposes of unrealized gains/(losses) on investments in passive foreign investment companies. Due to inherent differences in the recognition of income, expenses and realized gains/losses under U.S. generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences that have been reclassified as of October 31, 2005 (in thousands): Paid-in-capital............................................. $ -- Undistributed net investment income......................... 4,884 Accumulated net realized gain (loss)........................ (4,884) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.................... --
The Fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. During the year ended October 31, 2005, the fund utilized $33,901,000 of capital loss carryforwards. -------------------------------------------------------------------------------- 14 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Fund (shares and dollars in thousands): Year Ended October 31, 2005
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- ---------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------ --------- ------ ------ ------- --------- Shares sold............ 16,308 $ 330,188 14,933 $ 299,953 162 $3,261 6,624 $ 133,397 Reinvestment of dividends............ 543 10,788 199 3,920 1 22 383 7,643 Shares redeemed*....... (11,284) (228,220) (5,111) (103,087) (59) (1,188) (10,557) (212,756) ------- --------- ------ --------- ------ ------ ------- --------- Net increase in shares outstanding.......... 5,567 $ 112,756 10,021 $ 200,786 104 $2,095 (3,550) $ (71,716) ======= ========= ====== ========= ====== ====== ======= =========
* Net of Redemption Fees Year Ended October 31, 2004
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS ------------------- ------------------- ---------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------ --------- ------ ------ ------- --------- Shares sold............. 15,750 $ 270,812 12,974 $ 218,345 43 $ 744 10,345 $ 180,445 Reinvestment of dividends............. 975 15,613 258 4,117 -- -- 568 9,135 Shares redeemed*........ (7,712) (131,052) (7,839) (128,653) (3) (54) (6,917) (119,513) ------ --------- ------ --------- ------ ------ ------- --------- Net increase in shares outstanding........... 9,013 $ 155,373 5,393 $ 93,809 40 $ 690 3,996 $ 70,067 ====== ========= ====== ========= ====== ====== ======= =========
* Net of Redemption Fees -------------------------------------------------------------------------------- 15 AMERICAN BEACON INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------------ 2005 2004(B) 2003(F) 2002 2001(E) ---------- ---------- -------- -------- -------- Net asset value, beginning of period........................ $ 18.47 $ 15.46 $ 12.10 $ 13.77 $ 17.95 ---------- ---------- -------- -------- -------- Income from investment operations: Net investment income(A D).................................. 0.44 0.30 0.25 0.21 0.24 Net gains (losses) on securities (both realized and unrealized)(D).......................................... 2.31 3.12 3.47 (1.62) (2.96) ---------- ---------- -------- -------- -------- Total income (loss) from investment operations.............. 2.75 3.42 3.72 (1.41) (2.72) ---------- ---------- -------- -------- -------- Less distributions: Dividends from net investment income...................... (0.24) (0.41) (0.36) (0.26) (0.22) Distributions from net realized gains on securities....... -- -- -- -- (1.24) ---------- ---------- -------- -------- -------- Total distributions......................................... (0.24) (0.41) (0.36) (0.26) (1.46) ---------- ---------- -------- -------- -------- Redemption fees added to beneficial interest................ --(I) --(I) --(I) -- -- ---------- ---------- -------- -------- -------- Net asset value, end of period.............................. $ 20.98 $ 18.47 $ 15.46 $ 12.10 $ 13.77 ========== ========== ======== ======== ======== Total return................................................ 15.04% 22.49% 31.61% (10.51)% (16.54)% ========== ========== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands).................. $1,286,441 $1,029,272 $722,333 $537,476 $519,151 Ratios to average net assets (annualized): Expenses, net of waivers(D)............................. 0.70% 0.76% 0.79% 0.75% 0.78% Expenses, before waivers(D)............................. 0.70% 0.76% 0.79% 0.75% 0.78% Net investment income, net of waivers(D)................ 2.17% 1.69% 1.97% 1.56% 1.54% Net investment income (losses), before waivers(D)....... 2.17% 1.69% 1.97% 1.56% 1.54% Portfolio turnover rate(C)................................ 37% 36% 44% 43% 36%
--------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) The Boston Company was added as an investment advisor to the International Equity Fund on September 27, 2004. (C) The International Equity Fund invests all of its investable assets in its corresponding Portfolio. Portfolio turnover rate is that of the Portfolio. (D) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Trust International Equity Portfolio. (E) Causeway Capital Management, LLC replaced Merrill Lynch Investment Managers, L.P. as investment advisor to the International Equity Fund on August 31, 2001. (F) Independence Investment LLC was removed as an investment advisor to the International Equity Fund on October 24, 2003. (G) Not annualized (H) Portfolio turnover rate is for the period November 1, 2002 through October 31, 2003. (I) Amounts represent less than $0.01 per share. (J) Annualized. -------------------------------------------------------------------------------- 16 --------------------------------------------------------------------------------
SERVICE CLASS PLANAHEAD CLASS ------------------------------ ------------------------------------------------------ YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, MAY 1 TO ------------------------------------------------------ ---------------- OCTOBER 31, 2005 2004(B) 2003(F) 2002 2001(E) 2005 2004(B) 2003(F) -------- -------- -------- ------- ------- ------ ------- ----------- $ 18.31 $ 15.34 $ 11.95 $ 13.58 $ 17.72 $18.24 $15.31 $ 12.18 -------- -------- -------- ------- ------- ------ ------ ---------- 0.41 0.26 0.22 0.15 0.19 0.37 0.30 0.09 2.29 3.08 3.46 (1.56) (2.92) 2.26 2.99 3.04 -------- -------- -------- ------- ------- ------ ------ ---------- 2.70 3.34 3.68 (1.41) (2.73) 2.63 3.29 3.13 -------- -------- -------- ------- ------- ------ ------ ---------- (0.22) (0.37) (0.29) (0.22) (0.17) (0.26) (0.36) -- -- -- -- -- (1.24) -- -- -- -------- -------- -------- ------- ------- ------ ------ ---------- (0.22) (0.37) (0.29) (0.22) (1.41) (0.26) (0.36) -- -------- -------- -------- ------- ------- ------ ------ ---------- --(I) --(I) --(I) -- -- --(I) --(I) --(I) -------- -------- -------- ------- ------- ------ ------ ---------- $ 20.79 $ 18.31 $ 15.34 $ 11.95 $ 13.58 $20.61 $18.24 $ 15.31 ======== ======== ======== ======= ======= ====== ====== ========== 14.73% 22.16% 31.62% (10.57)% (16.79)% 14.45% 21.88% 25.70%(G) ======== ======== ======== ======= ======= ====== ====== ========== $560,770 $310,540 $177,425 $99,636 $113,948 $2,987 $ 739 $ 1 0.95% 1.02% 1.10% 1.04% 1.10% 1.21% 1.27% 1.50%(J) 0.95% 1.02% 1.10% 1.04% 1.10% 1.21% 6.26% 1,139.08%(J) 1.96% 1.46% 1.68% 1.35% 1.22% 1.70% 0.81% 1.33%(J) 1.96% 1.46% 1.68% 1.35% 1.22% 1.70% (4.18)% (1,136.25)%(J) 37% 36% 44% 43% 36% 37% 36% 44%(H) AMR CLASS ---------------------------------------------------- --- YEAR ENDED OCTOBER 31, --- ---------------------------------------------------- 2005 2004(B) 2003(F) 2002 2001(E) -------- -------- -------- -------- -------- $ 18.58 $ 15.54 $ 12.18 $ 13.86 $ 18.07 -------- -------- -------- -------- -------- 0.50 0.34 0.29 0.24 0.28 2.33 3.14 3.46 (1.62) (2.98) -------- -------- -------- -------- -------- 2.83 3.48 3.75 (1.38) (2.70) -------- -------- -------- -------- -------- (0.29) (0.44) (0.39) (0.30) (0.27) -- -- -- -- (1.24) -------- -------- -------- -------- -------- (0.29) (0.44) (0.39) (0.30) (1.51) -------- -------- -------- -------- -------- --(I) --(I) --(I) -- -- -------- -------- -------- -------- -------- $ 21.12 $ 18.58 $ 15.54 $ 12.18 $ 13.86 ======== ======== ======== ======== ======== 15.32% 22.84% 31.77% (10.26)% (16.35)% ======== ======== ======== ======== ======== $448,096 $460,114 $322,801 $264,579 $301,762 0.44% 0.49% 0.52% 0.49% 0.52% 0.44% 0.49% 0.52% 0.49% 0.52% 2.49% 1.97% 2.22% 1.81% 1.78% 2.49% 1.97% 2.22% 1.81% 1.78% 37% 36% 44% 43% 36%
-------------------------------------------------------------------------------- 17 AMERICAN BEACON INTERNATIONAL EQUITY FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM October 31, 2005 -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of American Beacon Master Trust International Equity Portfolio: We have audited the accompanying statement of assets and liabilities of American Beacon Master Trust International Equity Portfolio (the "Portfolio"), a portfolio of the American Beacon Master Trust (formerly known as the AMR Investment Services International Equity Portfolio and the AMR Investment Services Trust, respectively), including the schedule of investments, as of October 31, 2005, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio'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. We were not engaged to perform an audit of the Portfolio's 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 Portfolio'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Master Trust International Equity Portfolio at October 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) Chicago, Illinois December 21, 2005 -------------------------------------------------------------------------------- 18 AMERICAN BEACON INTERNATIONAL EQUITY FUND FEDERAL TAX INFORMATION October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- For corporate shareholders in the Fund, the percentage of ordinary dividend income distributed for the year ended October 31, 2005, which is designated as qualifying for the dividends-received deduction, is 0.3%. For shareholders in the Fund, the percentage of dividend income distributed for the year ended October 31, 2005, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is 55.5%. The Fund designates a foreign tax credit of $6,171,000 and recognizes foreign source income of $67,784,000. -------------------------------------------------------------------------------- 19 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) STOCKS - 94.07% AUSTRALIA - 1.86% AUSTRALIA PREFERRED STOCK - 0.16% AMP Limited.................. 697,790 $ 3,814 ---------- TOTAL AUSTRALIA PREFERRED STOCK.................. 3,814 ---------- AUSTRALIA COMMON STOCK - 1.70% Alumina Limited.............. 1,946,800 8,436 Commonwealth Bank of Australia.................. 216,840 6,313 Macquarie Airports Management Limited+................... 2,332,513 5,249 Macquarie Infrastructure Group+..................... 1,991,299 5,120 Multiplex Group+............. 1,580,886 3,919 National Australia Bank...... 356,430 8,818 The News Corporation Limited+................... 189,580 2,701 ---------- TOTAL AUSTRALIA COMMON STOCK.................. 40,556 ---------- TOTAL AUSTRALIA.......... 44,370 ---------- BELGIUM COMMON STOCK - 0.23% Belgacom SA.................. 166,900 5,596 ---------- TOTAL BELGIUM COMMON STOCK.................. 5,596 ---------- CANADA COMMON STOCK - 1.56% Alcan, Incorporated.......... 138,171 4,353 BCE, Incorporated............ 318,360 7,860 Celestica, Incorporated+..... 757,200 7,187 Husky Energy, Incorporated(+)............ 141,880 6,547 Manulife Financial Corporation................ 219,028 11,414 ---------- TOTAL CANADA COMMON STOCK.................. 37,361 ---------- DENMARK COMMON STOCK - 0.13% Vestas Wind Systems+......... 147,226 3,188 ---------- TOTAL DENMARK COMMON STOCK.................. 3,188 ---------- FINLAND COMMON STOCK - 1.28% KCI Konecranes Oyj(+)........ 112,450 4,884 M-real Oyj................... 459,670 2,187 Nokia Oyj.................... 329,500 5,529 Stora Enso Oyj............... 241,700 3,094 UPM-Kymmene Oyj.............. 775,600 14,977 ---------- TOTAL FINLAND COMMON STOCK.................. 30,671 ---------- FRANCE COMMON STOCK - 11.03% Accor S.A.................... 109,880 5,484 AXA.......................... 951,681 27,553 BNP Paribas S.A. ............ 444,278 33,677
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Carrefour S.A. .............. 368,137 $ 16,357 Compagnie Generale des Etablissements Michelin.... 103,230 5,570 France Telecom S.A.+......... 1,240,630 32,244 Lafarge S.A. ................ 68,700 5,650 Lagardere S.C.A. ............ 122,500 8,416 Sanofi-Synthelabo............ 555,517 44,470 Schneider Electric S.A. ..... 150,370 12,347 Suez S.A. ................... 596,573 16,146 Total S.A. .................. 173,850 43,774 Vinci S.A. .................. 155,072 12,105 ---------- TOTAL FRANCE COMMON STOCK.................. 263,793 ---------- GERMANY - 6.24% GERMANY PREFERRED STOCK - 1.14% Depfa Bank plc............... 571,319 8,895 Deutsche Bank AG............. 140,800 13,187 Heidelberger Druck(+)........ 146,000 4,636 Schering AG.................. 9,100 562 ---------- TOTAL GERMANY PREFERRED STOCK.................. 27,280 ---------- GERMANY COMMON STOCK - 5.10% BASF AG+(+).................. 60,610 4,369 Bayer AG(+).................. 118,010 4,097 Bayerische Motoren Werke (BMW) AG................... 261,882 11,360 Celesio AG(+)................ 135,245 11,689 Deutsche Post AG............. 1,249,012 27,832 E.ON AG+(+).................. 150,032 13,593 Merck KGaA(+)................ 44,840 3,710 Muenchener Rueckversicherung- Gesellschaft AG+(+)........ 23,787 2,794 Siemens AG................... 287,750 21,399 Volkswagen AG(+)............. 389,300 21,209 ---------- TOTAL GERMANY COMMON STOCK........... 122,052 ---------- TOTAL GERMANY............ 149,332 ---------- HONG KONG COMMON STOCK - 2.16% Cheung Kong Holdings Limited.................... 869,000 9,072 Denway Motors Limited........ 6,500,000 1,956 HBSC Holdings plc+........... 297,600 4,662 Henderson Land Development Company Limited............ 2,045,000 9,135 Hutchison Whampoa Limited.... 207,000 1,965 PetroChina Company Limited+................... 20,910,000 16,000 Swire Pacific Limited+....... 995,500 8,934 ---------- TOTAL HONG KONG COMMON STOCK.................. 51,724 ----------
See accompanying notes -------------------------------------------------------------------------------- 20 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) IRELAND COMMON STOCK - 1.53% Allied Irish Banks plc....... 280,490 $ 5,870 Bank of Ireland.............. 1,012,300 15,377 CRH plc...................... 616,495 15,409 ---------- TOTAL IRELAND COMMON STOCK.................. 36,656 ---------- ITALY COMMON STOCK - 2.58% Banco Popolare di Verona e Novara Scrl................ 326,908 6,033 Eni S.p.A.(+)................ 829,291 22,181 Finmeccanica SpA............. 228,260 4,151 Telecom Italia S.p.A. ....... 5,317,389 15,383 UniCredito Italiano S.p.A.(+).................. 2,514,353 14,040 ---------- TOTAL ITALY COMMON STOCK.................. 61,788 ---------- JAPAN COMMON STOCK - 17.12% Acom Company Limited......... 125,550 8,176 Alps Electric Company Limited(+)................. 186,300 2,959 Canon, Incorporated.......... 224,300 11,870 DENSO Corporation............ 105,500 3,011 East Japan Railway Company... 2,282 13,603 Fujitsu Limited.............. 1,138,000 7,543 Hitachi Limited+............. 713,000 4,384 Honda Motor Company Limited.................... 245,700 13,647 Hoya Corporation+(+)......... 334,800 11,635 Fuji Photo Film Company Limited.................... 119,000 3,800 Japan Tobacco, Incorporated.. 250 3,957 The Joyo Bank Limited........ 583,000 3,910 Kao Corporation.............. 270,000 6,448 KDDI Corporation............. 1,782 10,171 Konica Minolta Holdings, Inc. ...................... 1,291,840 10,690 Mabuchi Motor Company Limited(+)................. 71,800 3,494 Minebea Company Limited...... 1,098,000 4,286 Mitsubishi Tokyo Financial Group, Incorporated........ 1,642 20,705 Murata Manufacturing Company Limited.................... 265,600 13,329 NEC Corporation.............. 434,000 2,158 Nidec Corporation............ 106,100 6,210 Nintendo Company Limited..... 53,200 5,972 Nippon Express Company....... 1,845,500 10,135 Nippon Telegraph & Telephone Corporation+............... 1,294 6,166 Nomura Holdings, Incorporated............... 1,193,100 18,372 NTT DoCoMo, Incorporated..... 3,725 6,448 Promise Company Limited...... 197,050 12,522 Ricoh Company Limited........ 328,000 5,196
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) ROHM Company Limited......... 103,000 $ 8,351 Sekisui House Limited........ 560,000 6,969 Seiko Epson Corporation...... 143,200 3,529 Shinsei Bank, Limited(+)..... 984,000 5,736 Shin-Etsu Chemical Company Limited.................... 267,800 12,889 Sompo Japan Insurance, Incorporated............... 628,000 9,444 Sony Corporation............. 391,300 12,760 Sumitomo Chemical Company Limited.................... 1,169,600 6,905 Sumitomo Mitsui Financial Group, Incorporated+....... 1,086 10,113 Sumitomo Trust and Banking Company Limited............ 863,000 7,332 Takeda Chemical Industries Limited.................... 475,800 26,163 Takefuji Corporation......... 343,370 24,131 Tokyo Gas Company Limited(+)................. 2,408,000 9,486 Toyoda Gosei Company Limited(+)................. 225,988 4,234 Toyota Motor Corporation..... 432,400 20,075 Yamanouchi Pharmaceutical Company Limited............ 296,100 10,588 ---------- TOTAL JAPAN COMMON STOCK.................. 409,502 ---------- MEXICO COMMON STOCK - 0.19% Telefonos de Mexico, S.A. de C.V., ADR+................. 223,400 4,508 ---------- TOTAL MEXICO COMMON STOCK.................. 4,508 ---------- NETHERLANDS COMMON STOCK - 7.08% ABN AMRO Holding N.V. ....... 368,276 8,701 Heineken N.V. ............... 179,600 5,688 IHC Caland N.V. ............. 78,300 6,052 ING Groep N.V. .............. 859,014 24,766 Koninklijke (Royal) Philips Electronics N.V. .......... 1,184,167 30,952 Reed Elsevier N.V. .......... 200,230 2,695 Royal Dutch Shell plc, A shares..................... 893,330 27,543 Royal Dutch Shell plc, A shares, ADR+............... 13,600 844 Royal Dutch Shell plc, B shares..................... 801,629 26,155 TPG N.V.+.................... 791,081 18,667 Unilever N.V. ............... 78,447 5,518 VNU N.V. .................... 196,600 6,250 Wolters Kluwer N.V. ......... 300,910 5,581 ---------- TOTAL NETHERLANDS COMMON STOCK.................. 169,412 ----------
See accompanying notes -------------------------------------------------------------------------------- 21 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) NEW ZEALAND COMMON STOCK - 0.34% Telecom Corporation of New Zealand Limited(+)......... 1,985,869 $ 8,126 ---------- TOTAL NEW ZEALAND COMMON STOCK.................. 8,126 ---------- NORWAY COMMON STOCK - 1.60% Frontline Limited+(+)........ 220,200 8,770 DnB Nor ASA.................. 287,500 2,940 Statoil ASA.................. 392,200 8,708 Telenor ASA.................. 1,828,790 17,874 ---------- TOTAL NORWAY COMMON STOCK........... 38,292 ---------- PORTUGAL COMMON STOCK - 0.97% Energias de Portugal, S.A. ...................... 2,433,100 6,884 Portugal Telecom, SGPS, S.A. ...................... 1,795,103 16,217 ---------- TOTAL PORTUGAL COMMON STOCK.................. 23,101 ---------- SINGAPORE COMMON STOCK - 1.24% Creative Technology Limited.. 659,320 4,836 Development Bank of Singapore Group Holdings Limited..... 1,652,095 14,950 Oversea-Chinese Banking Corporation Limited........ 2,655,960 9,895 ---------- TOTAL SINGAPORE COMMON STOCK.................. 29,681 ---------- SOUTH KOREA COMMON STOCK - 2.75% Kookmin Bank, ADR+(+)........ 262,210 15,318 Korea Electric Power Corporation................ 86,860 2,833 KT Corporation+.............. 134,110 5,414 LG Electronics, Incorporated............... 76,760 5,019 POSCO........................ 26,221 5,364 Samsung Electronics Company Limited.................... 36,645 19,609 Samsung Electronics Company Limited, GDR, 144A (Note A)+........................ 22,500 6,008 SK Telecom Company Limited... 34,976 6,325 ---------- TOTAL SOUTH KOREA COMMON STOCK.................. 65,890 ---------- SPAIN COMMON STOCK - 2.17% Banco Popular Espanol SA..... 526,400 6,392 Banco Santander Central Hispano SA................. 36,150 461
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Banco Santander Central Hispano SA GDR............. 583,044 $ 7,390 Iberdrola S.A. .............. 227,197 6,080 Repsol YPF S.A.+............. 284,340 8,475 Telefonica S.A.+............. 1,440,047 22,968 ---------- TOTAL SPAIN COMMON STOCK.................. 51,766 ---------- SWEDEN COMMON STOCK - 2.24% Atlas Copco AB(+)............ 491,430 8,975 Autoliv, Incorporated+(+).... 156,650 6,729 Electrolux AB(+)............. 256,480 5,973 ForeningsSparbanken AB(+).... 144,600 3,567 Nordea AB+................... 641,720 6,291 Securitas AB(+).............. 397,230 6,037 Stora Enso Oyj, Series A..... 70,802 912 Stora Enso Oyj, Series R(+)....................... 222,142 2,846 TDC A/S+..................... 116,000 6,494 Volvo AB(+).................. 140,410 5,776 ---------- TOTAL SWEDEN COMMON STOCK.................. 53,600 ---------- SWITZERLAND COMMON STOCK - 6.98% Adecco SA.................... 143,820 6,133 Ciba Specialty Chemicals Holding, Incorporated...... 143,000 8,215 Compagnie Financiere Richemont AG............... 191,300 7,280 Credit Suisse Group.......... 589,085 26,043 Geberit AG................... 7,131 4,931 Lonza Group AG............... 132,493 7,632 Nestle SA+................... 101,010 30,066 Novartis AG.................. 552,530 29,708 Swiss Reinsurance............ 232,040 15,668 Syngenta AG.................. 71,951 7,702 UBS AG....................... 68,050 5,776 Zurich Financial Services AG+........................ 104,100 17,741 ---------- TOTAL SWITZERLAND COMMON STOCK.................. 166,895 ---------- UNITED KINGDOM COMMON STOCK - 22.79% Alliance Unichem plc......... 409,450 5,586 AMVESCAP plc................. 353,530 2,223 Anglo American plc........... 221,595 6,546 Aviva plc.................... 902,640 10,659 BAA plc...................... 950,007 10,318 BAE Systems plc+............. 5,886,740 34,422 Barclays plc................. 1,461,500 14,480 Barratt Development plc...... 567,300 7,593 Boots Group plc.............. 589,500 6,423 BP plc....................... 2,700,520 29,890 British American Tobacco Industries plc............. 783,545 17,246
See accompanying notes -------------------------------------------------------------------------------- 22 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) British Sky Broadcasting Group plc.................. 786,860 $ 7,104 BT Group plc+................ 1,602,643 6,050 Cadbury Schweppes plc........ 1,838,870 18,099 Centrica plc................. 3,788,395 16,004 Cobham plc................... 922,800 2,514 Compass Group plc............ 3,539,535 11,906 Diageo plc................... 1,475,147 21,805 GKN plc...................... 1,597,018 7,867 GlaxoSmithKline plc+......... 2,228,806 57,987 HBOS plc..................... 438,600 6,476 HSBC Holdings plc............ 575,500 9,056 Imperial Tobacco Group plc... 344,340 9,875 Kingfisher plc............... 2,189,968 8,215 Marks and Spencer Group plc+....................... 1,358,500 10,035 National Grid plc............ 1,356,178 12,400 Pearson plc.................. 476,710 5,300 Prudential plc............... 1,036,550 8,698 Reed Elsevier plc+........... 887,360 8,101 Rentokil Initial plc......... 1,495,670 4,064 Reuters Group plc+........... 1,421,272 9,034 Rolls-Royce plc.............. 1,128,050 7,289 Rolls-Royce Group plc+....... 37,676,870 67 Royal Bank of Scotland Group plc........................ 1,770,732 49,026 J. Sainsbury plc............. 1,368,008 6,756 Shire Pharmaceuticals Group plc........................ 378,040 4,466
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Smiths Group plc............. 455,630 $ 7,356 Standard Chartered plc....... 184,450 3,873 Tate & Lyle plc.............. 967,877 7,938 TI Automotive+*.............. 681,500 -- Unilever plc................. 2,804,221 28,432 Vodafone Group plc........... 14,260,347 37,427 Yell Group plc............... 843,830 6,606 ---------- TOTAL UNITED KINGDOM COMMON STOCK........... 545,212 ---------- TOTAL STOCKS............. 2,250,464 ---------- SHORT TERM INVESTMENTS - 12.37% American Beacon Enhanced Cash Trust (Notes B and C)...... 107,179,722 107,180 American Beacon Money Market Select Fund (Notes B and C)......................... 188,616,031 188,616 ---------- TOTAL SHORT TERM INVESTMENTS............ 295,796 ---------- TOTAL INVESTMENTS - 106.44% (COST $2,174,367).......... 2,546,260 ---------- LIABILITIES, NET OF OTHER ASSETS - (6.44%)........... (154,013) ---------- TOTAL NET ASSETS - 100%...... $2,392,247 ==========
--------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At period end, the value of these securities amounted to $6,008 or 0.25% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+) - All or a portion of the security is on loan at October 31, 2005. See Note 5. + - Non-income producing security. * - Valued at fair value pursuant to procedures approved by the Board of Trustees. See accompanying notes -------------------------------------------------------------------------------- 23 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NO. OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- -------- -------------- France CAC 40 Index............................... 281 Dec 2005 $ 14,935 $ (223) Germany DAX Index................................. 73 Dec 2005 10,770 (235) UK FTSE 100 Index................................. 423 Dec 2005 39,856 (470) Hang Seng Index................................... 28 Nov 2005 2,598 (1) Italy MIB 30 Index................................ 30 Dec 2005 5,887 (234) Tokyo FE TOPIX Index.............................. 309 Dec 2005 38,491 3,171 Spain IBEX 35 Index............................... 50 Nov 2005 6,271 41 Sweden OMX Index.................................. 335 Nov 2005 3,715 38 Canada S&PCDA 60 Index............................ 118 Dec 2005 11,726 (471) Australia SPI Index............................... 100 Dec 2005 8,327 (83) Netherlands 200 AEX Index......................... 55 Nov 2005 5,188 78 -------- ------ $147,764 $1,611 ======== ======
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (DOLLARS IN THOUSANDS)
SETTLEMENT MARKET UNREALIZED CONTRACTS TO RECEIVE DATE VALUE GAIN/(LOSS) -------------------- ---------- -------- ----------- 7,849 Australian Dollar..................................... 12/16/2005 $ 5,859 $ (187) 9,376 Canadian Dollar....................................... 12/16/2005 7,949 (33) 24,854 Euro Currency........................................ 12/16/2005 29,861 (1,099) 2,700,730 Japanese Yen...................................... 12/16/2005 23,326 (1,516) 16,881 Pound Sterling....................................... 12/16/2005 29,866 (1,123) 18,531 Swedish Krona........................................ 11/16/2005 2,335 (149) 11,140 Swiss Franc.......................................... 12/16/2005 8,677 (354) -------- ------- TOTAL CONTRACTS TO RECEIVE (PAYABLE AMOUNT $112,334)................................. $107,873 $(4,461) ======== ======= NET CURRENCY FLUX........................................... $(4,461) =======
INDUSTRY DIVERSIFICATION
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 12.12% Consumer Staples............................................ 7.72% Energy...................................................... 7.95% Financials.................................................. 24.42% Health Care................................................. 8.15% Industrials................................................. 10.96% Information Technology...................................... 5.18% Materials................................................... 5.08% Short-Term Investments...................................... 12.37% Telecommunications Services................................. 9.00% Utilities................................................... 3.49% Liabilities, Net of Other Assets............................ (6.44)% ------- 100.00% =======
See accompanying notes -------------------------------------------------------------------------------- 24 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 (in thousands) -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $2,250,464 Investments in affiliated securities, at value(B)....... 295,796 Cash denominated in foreign currency (cost $5,006)...... 5,010 Deposit with broker for futures contracts............... 20,087 Dividends and interest receivable....................... 3,943 Reclaims receivable..................................... 150 Receivable for investments sold......................... 41 Receivable for variation margin on open futures contracts.............................................. 2,619 ---------- TOTAL ASSETS........................................ 2,578,110 ---------- LIABILITIES: Payable for investments purchased....................... 2,687 Payable upon return of securities loaned................ 176,304 Management and investment advisory fees payable (Note 2)..................................................... 2,222 Unrealized depreciation on foreign currency contracts... 4,461 Other liabilities....................................... 189 ---------- TOTAL LIABILITIES................................... 185,863 ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $2,392,247 ========== --------------- (A) Cost of unaffiliated securities......................... $1,878,571 (B) Cost of affiliated securities........................... $ 295,796 (C) Market value of securities on loan...................... $ 167,603
STATEMENT OF OPERATIONS Year ended October 31, 2005 (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest income......................................... $ 212 Dividend income from unaffiliated securities (net of foreign taxes of $9,235)............................... 58,505 Dividend income from affiliated securities.............. 3,350 Income derived from securities lending, net (Note 4).... 3,130 -------- TOTAL INVESTMENT INCOME............................. 65,197 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 7,905 Custodian fees.......................................... 1,034 Professional fees....................................... 105 Other expenses.......................................... 98 -------- TOTAL EXPENSES...................................... 9,142 -------- NET INVESTMENT INCOME....................................... 56,055 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments........................................... 121,488 Commission recapture (Note 5)......................... 363 Foreign currency transactions......................... 45,711 Futures contracts..................................... 26,614 Change in net unrealized appreciation or depreciation of: Investments........................................... 155,367 Foreign currency contracts and translations........... 1,799 Futures contracts..................................... (109,826) Net increase from payments by affiliates................ 941 -------- NET GAIN ON INVESTMENTS............................. 242,457 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $298,512 ========
See accompanying notes -------------------------------------------------------------------------------- 25 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ----------------------- 2005 2004 ---------- ---------- INCREASE IN NET ASSETS: OPERATIONS: Net investment income................................... $ 56,055 $ 31,238 Net realized gain (loss) on investments, futures contracts and foreign currency transactions............ 194,176 117,757 Net increase from payments by affiliates (Note 2)....... 941 -- Change in net unrealized appreciation or depreciation of investments, futures contracts and foreign currency translations........................................... 47,340 162,138 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 298,512 311,133 ---------- ---------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions........................................... 770,101 676,161 Withdrawals............................................. (559,367) (387,228) ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS..... 210,734 288,933 ---------- ---------- NET INCREASE IN NET ASSETS.................................. 509,246 600,066 ---------- ---------- NET ASSETS: Beginning of period..................................... 1,883,001 1,282,935 ---------- ---------- END OF PERIOD........................................... $2,392,247 $1,883,001 ========== ========== ------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS: -------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ------------------------------------------------------- 2005 2004 2003 2002 2001 2000 ----------- ------ ------ ------- ----- ----- TOTAL RETURN........................................... 15.38%(A) 22.85% 31.97% (10.25%) N/A N/A RATIOS TO AVERAGE NET ASSETS: Expenses........................................... 0.41% 0.46% 0.49% 0.47% 0.49% 0.44% Net investment income.............................. 2.49% 1.99% 2.26% 1.86% 1.82% 1.93% PORTFOLIO TURNOVER RATE................................ 37% 36% 44% 43% 36% 45%
--------------- (A) Total return prior to reimbursements by subadvisors was 15.34% (Note 2) See accompanying notes -------------------------------------------------------------------------------- 26 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS October 31, 2005 -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Master Trust (the "Trust"), formerly known as AMR Investment Services Trust, is registered under the Investment Company Act of 1940, as amended, as a no-load, open-end management investment company that was organized as a trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust under the laws of the State of New York. The American Beacon Master Trust International Equity Portfolio (the "Portfolio") is one of the portfolios of the Trust. The Portfolio commenced active operations on November 1, 1995. The Declaration of Trust permits the Board of Trustees (the "Board") to issue beneficial interests in the Portfolio. American Beacon Advisors, Inc. (the "Manager"), formerly known as AMR Investment Services, Inc., is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services. The following is a summary of the significant accounting policies followed by the Portfolio. Security Valuation Investments are valued at the close of the New York Stock Exchange (the "Exchange"), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, the prices of debt securities may be determined using quotes obtained from brokers. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method which approximates market value. Securities for which the market prices are not readily available or are not reflective of the fair value of the security, the security will be priced at a fair value following procedures approved by the Board. In light of the judgement involved in fair value decisions, there can be no assurance that a fair value assigned to a particular security is accurate. Most foreign markets close before the Exchange. Developments that could affect the values of securities that occur between the close of a foreign market and the close of the Exchange normally will not be reflected in security valuations. If such developments are so significant such that they will, in the judgement of the pricing committee of the Portfolio, clearly and materially affect the value of securities, the previous closing prices may be adjusted to reflect the fair value of the securities as of the close of the Exchange, as determined in good faith and pursuant to procedures -------------------------------------------------------------------------------- 27 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- approved by the Board. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. The Portfolio may purchase securities with delivery or payment to occur at a later date. At the time the Portfolio enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Portfolio. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. There is uncertainty regarding the collectibility of tax reclaims by the Portfolio due to its partnership status for federal income tax purposes. As such, the Portfolio did not accrue tax reclaims totaling $897,336 during the period. Upon determination of the Portfolio's entitlement to benefits under foreign tax treaties, if any, tax reclaim income will be accrued. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Portfolio's Statement of Operations. Forward Foreign Currency Contracts The Portfolio may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of portfolio securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Portfolio bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Portfolio also bears the credit risk if the counterparty fails to perform under the contract. Futures Contracts The Portfolio may enter into financial futures contracts which are contracts to buy a standard quantity of securities at a specified price on a future date. The Portfolio may purchase or sell futures contracts and options on futures contracts as a method for keeping assets readily convertible to cash -------------------------------------------------------------------------------- 28 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock market. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations. Upon entering into a futures contract, the Portfolio is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The initial margin amount is reflected as Deposit with broker for futures contracts on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded. Federal Income and Excise Taxes The Portfolio will be treated as a partnership for federal income tax purposes. As such, each investor will be taxed on its share of the Portfolio's ordinary income and capital gains. It is intended that the Portfolio's assets will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of subchapter M of the Internal Revenue Code. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory, portfolio management and securities lending services. Investment assets of the Portfolio are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Portfolio an annualized fee equal to .10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct -------------------------------------------------------------------------------- 29 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- investment activities of the Portfolio. Management fees paid during the period were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ---------- ---------- --------------- ----------- .25%-.60% $7,905 $5,652 $2,253
As compensation for services provided by the Manager in connection with securities lending activities, the Portfolio pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers when a borrower posts collateral other than cash, a fee up to 25% of such loan fees. During the year ended October 31, 2005, the Portfolio paid securities lending fees of $431,846 to the Manager. This fee is netted against securities lending income in the Statement of Operations. Investment in Affiliated Funds The Portfolio is permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and approved procedures by the Board, to invest up to 25% of its total assets in the American Beacon Money Market Select Fund (the "Select Fund"), an affiliated fund. The Portfolio and the Select Fund have the same investment advisor and therefore, are considered to be affiliated. Cash collateral received by the Portfolio in connection with securities lending may be invested in the Select Fund and the American Beacon Enhanced Cash Trust (collectively, the "Affiliated Funds"). The Manager serves as Trustee and investment advisor to the Affiliated Funds and receives an annualized fee equal to 0.10% of the average daily net assets of the Affiliated Funds. During the period, the Manager earned fees from the Affiliated Funds totaling $121,825 on the Portfolio's direct investment in the Affiliated Funds, and $440,321 from securities lending collateral invested in the Affiliated Funds. During the period, the Fund had purchases of $1,089,485,000 and sales of $1,100,723,000, for an ending balance of $119,493,000, excluding balances held in the securities lending collateral account. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Portfolio, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Portfolio to borrow from, or lend money to, other participating series managed by the Manager. At October 31, 2005, the Portfolio had not utilized the credit facility. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free air transportation -------------------------------------------------------------------------------- 30 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. Mr. O'Sullivan receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. During the year ended October 31, 2005, subadvisors voluntarily reimbursed the Portfolio for certain losses totaling $941,000. A $383,000 reimbursement was made to compensate the Portfolio for a loss associated with a rights offering that expired. The shares that would have been acquired through a full exercise of the rights were subsequently purchased on the open markets. The subadvisor reimbursed the Portfolio for the appreciation of the shares over the exercise price, transaction costs and foreign exchange costs incurred in making this purchase in the open market. A $558,000 reimbursement was made to compensate the Portfolio for a loss associated with a security that violated investment restrictions. These reimbursements are reflected in the gain/loss section of the Statement of Operations. 3. INVESTMENT TRANSACTIONS The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, (in thousands), for the year ended October 31, 2005 were $1,087,075 and $778,783, respectively. 4. SECURITIES LENDING The Portfolio may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is marked to market and monitored daily. To the extent that a loan is collateralized by cash, such collateral shall be invested by the securities lending agent (the "Agent") in short-term instruments, money market mutual funds, and such other short-term investments, provided the investments meet certain quality and diversification requirements. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Portfolio and the Agent and is recorded as income for the Portfolio. To the extent that a loan is secured by non-cash collateral, brokers pay the Portfolio negotiated lenders' fees, which are divided between the Portfolio and the Agent and are recorded as securities lending income for the Portfolio. The Portfolio also continues to receive income on the securities loaned, and any gain or loss in the market prices of securities loaned that may occur during the term of the loan. Risks to the Portfolio in securities lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. At October 31, 2005, securities with a market value of approximately $167,603,000 were loaned by the Portfolio. Cash collateral held by the custodian for the Portfolio in an investment in the Affiliated Funds totaled $176,304,000. -------------------------------------------------------------------------------- 31 AMERICAN BEACON MASTER TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- 5. COMMISSION RECAPTURE The Portfolio has established brokerage commission recapture arrangements with certain brokers or dealers. If a Portfolio investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Portfolio. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Portfolio. -------------------------------------------------------------------------------- 32 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS AND THE AMERICAN BEACON MASTER TRUST (Unaudited) -------------------------------------------------------------------------------- The Trustees and officers of the American Beacon Funds (the "Trust") and the American Beacon Master Trust (the "Master Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* William F. Quinn** (57) Trustee and President, American Beacon Advisors, Inc. (1986-Present); President of Chairman (1989-2003) and Director (1979-1986, 2003-Present), Trust since 1987 American Airlines Federal Credit Union; Director, Crescent and AMR Trust Real Estate Equities, Inc. (1994-Present); Director, since 1995 Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present); Advisory Director, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002); Chairman, Committee for the Investment of Employee Benefits Defined Benefit Sub-Committee (1982-Present); Director, United Way of Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present). Alan D. Feld** (68) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present). NON-INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (61) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present).
-------------------------------------------------------------------------------- 33 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS AND THE AMERICAN BEACON MASTER TRUST -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (44) Trustee since 2004 Vice President, Chief Financial Officer, Treasurer and 301 Commerce Street Secretary, Kimbell Art Foundation (1993-Present); Trustee, Suite 2240 Texas Christian University (1999-Present); Trustee, W.I. Fort Worth, Texas 76102 Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present). Richard A. Massman (62) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in energy, real estate, farming, ranching and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present). Stephen D. O'Sullivan (70) Trustee of Trust Consultant (1994-Present); Trustee, American Beacon Mileage since 1987 and Funds (1995-Present); Trustee, American Beacon Select Funds AMR Trust since (1999- Present). 1995 R. Gerald Turner (59) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996- Present); Director, California Federal Dallas, Texas 75275 Preferred Capital Corp. (2001- 2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-Present); Member, United Way of Dallas Board of Directors; Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Member, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present). Kneeland Youngblood (49) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private 100 Crescent Court equity firm) (1998-Present); Trustee, The Hockaday School Suite 1740 (1997-Present); Director, Starwood Hotels and Resorts Dallas, Texas 75201 (2001-Present); Member, Council on Foreign Relations (1995-Present); Director, Just For the Kids (1995-2001); Director, L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of Texas (1993-1999); Director, Starwood Financial Trust (1998-2001); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999- Present). OFFICERS TERM ------------------ One Year Brian E. Brett (45) VP since 2004 Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Nancy A. Eckl (43) VP of Trust since Vice President, Trust Investments, American Beacon Advisors, 1990 and AMR Inc. (1990-Present). Trust since 1995
-------------------------------------------------------------------------------- 34 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS AND THE AMERICAN BEACON MASTER TRUST -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- OFFICERS (CONT.) Michael W. Fields (51) VP of Trust since Vice President, Fixed Income Investments, American Beacon 1989 and AMR Advisors, Inc. (1988-Present). Trust since 1995 Rebecca L. Harris (38) Treasurer since Vice President, Finance, American Beacon Advisors, Inc. 1995 (1995- Present). John B. Roberson (47) VP of Trust since Vice President, Client Relations & Special Projects, 1989 and AMR American Beacon Advisors, Inc. (2004-Present); Vice Trust since 1995 President, Director of Sales, American Beacon Advisors, Inc. (1991-2004); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present). Christina E. Sears (34) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. Officer since (2004- Present); Senior Compliance Analyst, American Beacon 2004 and Advisors, Inc. (1998-2004). Secretary since 2005
--------------- * The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 70, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn and Feld are deemed to be "interested persons" of the Trust and AMR Trust, as defined by the 1940 Act. Mr. Quinn is President of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's and AMR Trust's investment advisors. -------------------------------------------------------------------------------- 35 AMERICAN BEACON FUNDS PRIVACY POLICY (Unaudited) -------------------------------------------------------------------------------- The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. -------------------------------------------------------------------------------- 36 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 37 (AMERICAN BEACON FUNDS LOGO) -------------------------------------------------------------------------------- DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: American-Beacon.Funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
-------------------------------------------------------------------------------- (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450 AMR Class(SM) Fort Worth, TX 76155 Call (800) 345-2345 PlanAhead Class(R) and Service Class Call (800) 388-3344
-------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009. schedule of each Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES REGISTERED PUBLIC FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ACCOUNTING FIRM Portland, Maine ERNST & YOUNG LLP Chicago, Illinois
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. -------------------------------------------------------------------------------- American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon International Equity Fund is a service mark of American Beacon Advisors, Inc. AR 10/05 535723 G U I D A N C E | V I S I O N | E X P E R I E N C E [AMERICAN BEACON FUNDS LOGO] ANNUAL REPORT [PHOTO] OCTOBER 31, 2005 SMALL CAP VALUE FUND Formerly known as the American AAdvantage Funds About American Beacon -------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
Contents ---------------------------------------------- President's Message........... 1 Market and Performance Overview... 2 Schedule of Investments....... 7 Additional Information..............Back Cover
Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each advisor's strategies and the Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. American Beacon Funds October 31, 2005 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, I am pleased to present you with the Annual Report for the American Beacon Small Cap Value Fund for the twelve months ended October 31, 2005. As investors faced increasing oil prices, rising interest rates and devastating hurricane damage, most financial markets experienced modest growth. The Dow Jones Industrial Average posted gains of 6.5%, the S&P 500 Index increased by 8.7% and the Russell 2000 Index returned 12.1%. The American Beacon Small Cap Value Fund-Institutional Class posted strong returns of 12.9% for the fiscal year. Earlier in 2005, the Fund was closed to new investors in an effort to protect the interests of existing shareholders. Despite this, the Fund grew to $2.9 billion at October 31, 2005. Additionally, as of August 31, 2005, Dreman Value Management, LLC, Metropolitan West Capital Management, LLC and SSgA Funds Management, Inc. joined the fund's five existing sub-advisors, bringing the total number to eight. These managers were added to ensure existing shareholders could continue to invest in the Fund. Our greatest priority is striving to deliver exceptional investment results to shareholders; we believe these steps allow us to preserve the integrity of our successful investment philosophy. Please review the enclosed market overviews, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or access your account information, please visit our web site at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Small Cap Value Fund. Sincerely, /s/ WILLIAM F. QUINN William F. Quinn President, American Beacon Funds Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. 1 DOMESTIC EQUITY MARKET OVERVIEW -------------------------------------------------------------------------------- Toward the end of 2004, the U.S. equity markets rallied, posting particularly strong results. The broad market surged in the final quarter of 2004, as many indicators pointed to a respectable expansion and election uncertainty was removed. Strong Gross Domestic Product (GDP) growth, a gradually improving labor market and easing of oil prices from prior highs were all factors that contributed to the rally. Stocks got off to a weak start in the first quarter of 2005. Though productivity and economic growth remained strong, equities faced dual headwinds of rising oil prices and interest rates. While both styles struggled, value stocks in the Russell indices outperformed their growth counterparts in the first quarter. With regard to size, midcap stocks held up the best, followed by large caps. Small cap issues trailed in the quarter, likely on pressure from profit taking after several quarters of outperformance. Sector performance varied widely in the S&P 500 Index, with more than 25 percentage points separating the top performer from the bottom. Four of the ten sectors advanced in the first quarter. Energy was by far the strongest performer in the quarter, posting a total return of +17.58%. Telecommunication Services, Information Technology, Financials and Consumer Discretionary were the worst-performing sectors in the first quarter, all declining more than 5%. Despite record oil prices and decelerating growth in U.S. operating earnings, most major domestic equity indices managed to reverse course from the prior quarter and eke out low single-digit gains in the second quarter of 2005. Overall, growth stocks in the Russell indices outperformed their value counterparts in the second quarter. With regard to size, small cap stocks performed the best, followed by midcaps, with large cap issues bringing up the rear. Sector performance varied widely in the S&P 500 Index, with more than 18 percentage points separating the leader from the laggard, and six of the ten sectors advanced. The defensive Utilities sector was the strongest performer, rising 9.31%. Materials was the worst-performing sector, posting a total return of -9.46%. During the third quarter of 2005, stocks posted solid gains across the board. Overall, growth stocks in the Russell indices outperformed their value counterparts in the third quarter. With regard to size, midcap stocks performed the best, followed by small caps, with large cap issues bringing up the rear. Sector performance again varied widely in the S&P 500 Index, with more than 19 percentage points separating the leader from the laggard, with all but two of the ten sectors advancing during the quarter. Sky-rocketing oil prices made Energy the big winner, rising 18.25%. The Telecommunication Services and Consumer Discretionary sectors were both in negative territory, posting total returns of -1.05% and -0.88%, respectively. Some investors were disappointed that the Fed didn't decide to hold off on its rate hike in the wake of Hurricane Katrina. While both Katrina and Rita were tragic events with significant human as well as economic loss, the Federal Open Market Committee (FOMC) stated that it believes the impact on the economy will be transitory. As largely expected, the FOMC raised the Federal Funds target 25 basis points at both its August and September meetings to stand at 3.75%. The U.S. stock market pulled back slightly in October, with the major equity indices posting low-single digit losses. Contrary to recent trends, growth stocks outperformed their value counterparts for the month. With respect to size, large cap issues led, followed by mid caps, with small cap stocks trailing the pack. Most international equity markets reported low- to mid-single digit loses for the month. Only two of the ten sectors in the S&P 500 Index posted gains in October. The best-performing sectors were Financials and Materials, returning 3.16% and 0.51%, respectively. Energy was the worst-performing sector with a return of -9.35%. 2 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP VALUE FUND(SM) October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Small Cap Value Fund returned 12.90% for the twelve months ended October 31, 2005, lagging the Russell 2000 Value Index ("Index") return of 13.04% and the Lipper Small-Cap Value Funds Index return of 14.74% for the same period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/31/98* THROUGH 10/31/05 (PERFORMANCE GRAPH)
LIPPER SMALL-CAP VALUE RUSSELL 2000 VALUE INSTITUTIONAL CLASS FUNDS INDEX INDEX ------------------- ---------------------- ------------------ 12/98 10000.00 10000.00 10000.00 10/99 9070.00 9513.00 9508.00 10/00 10320.00 11261.00 11153.00 10/01 12400.00 12151.00 12129.00 10/02 12808.00 11799.00 11822.00 10/03 18886.00 16693.00 16584.00 10/04 22637.00 19551.00 19567.00 10/05 25557.00 22433.00 22119.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 10/31/05 VALUE OF --------------------------- $10,000 SINCE 12/31/98- 1 YEAR 5 YEARS INCEP. 10/31/05 ------ ------- -------- --------- Institutional Class(1)..... 12.90% 19.89% 14.72% $22,557 PlanAhead Class(1,2)....... 12.63% 19.53% 14.43% $25,119 AMR Class(1,2)............. 13.23% 20.21% 15.03% $26,032 Service Class(1,3)......... 12.32% 19.36% 14.31% $24,935 Lipper Small-Cap Value Funds Index............... 14.74% 14.78% 12.55% $22,433 Russell 2000 Value Index... 13.04% 14.68% 12.32% $22,119
Russell 2000 (R) Value Index is a service mark of the Frank Russell Company. The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with below-average price-to-book ratios and below-average forecasted growth values. 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 12/31/98 up to 3/1/99, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 12/31/98. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 12/31/98. 3. Fund performance for the five-year and since inception periods represents the total returns achieved by the Institutional Class from 12/31/98 up to 3/1/99, the returns of the PlanAhead Class from 3/1/99 up to 5/1/03 (the inception date of the Service Class), and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the Institutional and PlanAhead Classes. As a result, total returns shown may be higher than they would have been had the Service Class been in existence since 12/31/98. Prior to the deduction of expenses, the Fund outperformed the Index. Unfortunately, the Fund did not generate enough excess performance to offset its expenses. The Fund added value relative to the Index through sector allocation and, to a lesser extent stock selection. Strong stock selection in the Health Care and Information Technology sectors had the greatest positive impact, but was largely offset by poor selection in the Industrials and Utilities sectors. Positions in Health Net, Inc. (up 95.1%) and Sola International, Inc. (up 45.9%) were the major contributors to the Health Care sector's positive impact on the Fund's performance. Holdings such as MEMC Electronic Materials, Inc. (up 90.9%) and Western Digital Corp. (up 45.3%) in the Information Technology sector contributed significantly. The Industrials sector detracted from performance, mostly due to the Fund's investments in AGCO Corp. (which declined in value for the partial period it was owned by the Fund), Insituform Technologies, Inc. (down 9.4%) and Deluxe Corp. (down 8.9%). Utilities holding Northeast Utilities (down 2.6%) was also a drag on Fund performance. The Fund's large underweighting in the Financials sector, which was one of the poorer performing sectors of the Index, contributed to the Fund's excess performance relative to the Index. However, its impact was somewhat muted by the Fund's large overweighting in the Consumer Discretionary sector, which was also a poor performing sector of the Index. The sub-advisors continue to focus on stock selection, to uncover investment opportunities that should benefit the Fund's performance over the longer term. 3 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP VALUE FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- American Financial Group, Incorporated 1.1% Protective Life Corporation 0.9% Reinsurance Group of America, Incorporated 0.9% Flowserve Corporation 0.8% Ingram Micro, Incorporated 0.8% Arrow Electronics, Incorporated 0.8% Del Monte Foods Company 0.8% Avnet, Incorporated 0.8% Lear Corporation 0.7% Worthington Industries, Incorporated 0.7%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 24.2% Industrials 19.1% Consumer Discretionary 18.7% Information Technology 11.0% Utilities 8.6% Materials 6.5% Energy 4.4% Health Care 4.0% Consumer Staples 3.4% Telecommunication Services 0.1%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2005 through October 31, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. 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 in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP VALUE FUND(SM) -- CONTINUED October 31, 2005 (Unaudited) --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/05 10/31/05 5/1/05-10/31/05 --------- -------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,090.18 $4.65 Hypothetical $1,000.00 $1,020.75 $4.50 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,088.54 $5.87 Hypothetical $1,000.00 $1,019.58 $5.68 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,090.59 $3.14 Hypothetical $1,000.00 $1,022.20 $3.04 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,087.24 $7.57 Hypothetical $1,000.00 $1,017.95 $7.32 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.88%, 1.12%, 0.60%, 1.44%, for the Institutional, PlanAhead, AMR, and Service Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 5 AMERICAN BEACON SMALL CAP VALUE FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM October 31, 2005 -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of American Beacon Small Cap Value Fund: We have audited the accompanying statement of assets and liabilities of American Beacon Small Cap Value Fund (the "Fund"), a fund comprising the American Beacon Funds (formerly known as the American AAdvantage Small Cap Value Fund and the American AAdvantage Funds, respectively), including the schedule of investments, as of October 31, 2005, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund'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. We were not engaged to perform an audit of the Fund's 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 Fund'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 and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Small Cap Value Fund at October 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) Chicago, Illinois December 21, 2005 -------------------------------------------------------------------------------- 6 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCK - 95.69% CONSUMER DISCRETIONARY - 17.87% AUTO COMPONENTS - 2.83% American Axle & Manufacturing Holdings, Incorporated(+)... 468,100 $ 10,204 ArvinMeritor, Incorporated(+).............. 566,100 9,075 Bandag, Incorporated(+)....... 85,100 3,617 Bandag, Incorporated, A Shares....................... 3,600 131 BorgWarner, Incorporated(+)... 250,300 14,515 Cooper Tire & Rubber Company(+)................... 143,400 1,959 Group 1 Automotive, Incorporated+(+)............. 253,600 7,009 Hayes Lemmerz International, Incorporated+(+)............. 93,000 364 Keystone Automotive Industries, Incorporated+(+)............. 79,500 2,274 Lear Corporation(+)........... 704,400 21,456 Sonic Automotive, Incorporated................. 236,600 5,231 Superior Industries International, Incorporated(+).............. 22,200 452 TRW Automotive Holdings Corporation+................. 88,400 2,391 Westinghouse Air Brake Technologies Corporation..... 88,700 2,413 ---------- TOTAL AUTO COMPONENTS........ 81,091 ---------- AUTOMOBILES - 0.15% Winnebago Industries, Incorporated(+).............. 145,800 4,275 ---------- TOTAL AUTOMOBILES............ 4,275 ---------- DISTRIBUTORS - 0.09% Spectrum Brands, Incorporated+(+)............. 124,700 2,581 ---------- TOTAL DISTRIBUTORS........... 2,581 ---------- HOTELS RESTAURANTS & LEISURE - 2.04% Aztar Corporation+(+)......... 184,500 5,548 CBRL Group, Incorporated(+)... 48,900 1,697
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) CEC Entertainment, Incorporated+................ 215,000 $ 7,269 Intrawest Corporation......... 330,200 8,034 Jack in the Box, Incorporated+(+)............. 121,400 3,606 Jameson Inns, Incorporated(+).............. 787,100 1,637 Kerzner International Limited+(+).................. 182,700 10,660 Landry's Restaurants, Incorporated(+).............. 103,300 2,841 Lodgian, Incorporated+........ 357,700 3,641 Magna Entertainment Corporation+(+).............. 411,200 2,747 Papa John's International, Incorporated+(+)............. 15,400 800 Ruby Tuesday, Incorporated(+).............. 77,500 1,698 Ryans Restaurant Group, Incorporated+................ 30,700 327 Steiner Leisure Limited+...... 163,700 5,581 Sunterra Corporation+(+)...... 195,600 2,349 ---------- TOTAL HOTELS RESTAURANTS & LEISURE...................... 58,435 ---------- HOUSEHOLD DURABLES - 4.60% American Greetings Corporation(+)............... 533,900 13,481 Beazer Homes USA, Incorporated(+).............. 217,600 12,610 Champion Enterprises, Incorporated+(+)............. 259,300 3,599 Ethan Allen Interiors, Incorporated(+).............. 329,600 11,147 Furniture Brands International, Incorporated(+).............. 763,500 13,857 Helen of Troy Limited+(+)..... 289,800 5,202 HNI Corporation............... 30,700 1,501 La-Z-Boy, Incorporated(+)..... 311,000 3,682 M.D.C. Holdings, Incorporated(+).............. 153,873 10,556 Matthews International Corporation.................. 56,000 2,013 Standard Pacific Corporation.. 337,800 13,032 Tempur-Pedic International, Incorporated+(+)............. 222,300 2,459 The Toro Company.............. 87,400 3,191 Tupperware Corporation(+)..... 810,900 18,594 WCI Communities, Incorporated+(+)............. 675,400 16,899 ---------- TOTAL HOUSEHOLD DURABLES..... 131,823 ---------- INTERNET & CATALOG RETAIL - 0.01% School Specialty, Incorporated+................ 8,418 285 ---------- TOTAL INTERNET & CATALOG RETAIL....................... 285 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.53% Brunswick Corporation(+)...... 277,800 10,593 Callaway Golf Company......... 240,300 3,424 Hasbro, Incorporated.......... 36,200 682 Polaris Industries, Incorporated................. 13,200 595 ---------- TOTAL LEISURE EQUIPMENT & PRODUCTS..................... 15,294 ---------- MEDIA - 0.97% Courier Corporation(+)........ 69,899 2,289 R.H. Donnelley Corporation+... 45,000 2,778
See accompanying notes -------------------------------------------------------------------------------- 7 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Dow Jones & Company, Incorporated(+).............. 34,300 $ 1,163 Entercom Communications Corporation+................. 51,300 1,481 Gemstar TV-Guide International, Incorporated+................ 1,384,300 3,599 Gray Television, Incorporated................. 309,900 2,789 Hearst-Argyle Television, Incorporated................. 67,400 1,615 Journal Communications, Incorporated................. 54,700 774 Journal Register Company(+)... 274,150 4,395 The Reader's Digest Association, Incorporated.... 262,700 4,024 Source Interlink Companies, Incorporated+(+)............. 281,300 2,864 ---------- TOTAL MEDIA.................. 27,771 ---------- MULTILINE RETAIL - 0.78% BJ's Wholesale Club, Incorporated+................ 356,800 10,162 Burlington Coat Factory Warehouse Corporation(+)..... 195,200 7,527 Dollar Tree Stores, Incorporated+(+)............. 92,900 2,003 Tuesday Morning Corporation(+)............... 69,000 1,655 ShopKo Stores, Incorporated+(+)............. 32,800 940 ---------- TOTAL MULTILINE RETAIL....... 22,287 ---------- SPECIALTY RETAIL - 4.67% Aeropostale, Incorporated+.... 52,200 1,020 Big 5 Sporting Goods Corporation(+)............... 158,000 3,505 Borders Group, Incorporated(+).............. 602,500 11,828 Cash America International, Incorporated................. 223,800 4,892 Charming Shoppes, Incorporated+(+)............. 417,900 4,680 Claire's Stores, Incorporated................. 656,900 17,112 Cost Plus, Incorporated+(+)... 324,400 4,983 Foot Locker, Incorporated..... 131,400 2,554 Genesco, Incorporated+(+)..... 16,700 615 Global Imaging Systems, Incorporated+(+)............. 94,900 3,379 The Men's Wearhouse, Incorporated+................ 687,300 16,976 OfficeMax, Incorporated....... 67,800 1,900 PETCO Animal Supplies, Incorporated+(+)............. 199,700 3,796 Regis Corporation(+).......... 303,600 11,647 Rent-A-Center, Incorporated+(+)............. 320,650 5,778 Stage Stores, Incorporated(+).............. 221,680 6,145 Too, Inc.+(+)................. 132,500 3,764 United Auto Group, Incorporated(+).............. 29,900 1,009 United Rentals, Incorporated+(+)............. 427,400 8,364 Wabash National Corporation(+)............... 238,900 4,398 Zale Corporation+............. 551,100 15,447 ---------- TOTAL SPECIALTY RETAIL....... 133,792 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) TEXTILES & APPAREL - 1.20% Brown Shoe Company, Incorporated................. 4,300 $ 140 Columbia Sportswear Company+(+).................. 33,700 1,430 Tommy Hilfiger Corporation+(+).............. 78,200 1,259 Jones Apparel Group, Incorporated................. 94,000 2,564 Kellwood Company(+)........... 198,800 4,356 K-Swiss, Incorporated(+)...... 72,300 2,202 Steven Madden Limited+........ 93,100 2,387 Reebok International Limited(+)................... 47,900 2,733 The Timberland Company+....... 173,800 4,892 The Warnaco Group, Incorporated+................ 549,800 12,469 ---------- TOTAL TEXTILES & APPAREL..... 34,432 ---------- TOTAL CONSUMER DISCRETIONARY................ 512,066 ---------- CONSUMER STAPLES - 3.28% BEVERAGES - 0.07% The Boston Beer Company, Incorporated+(+)............. 75,500 1,933 ---------- TOTAL BEVERAGES.............. 1,933 ---------- FOOD & DRUG RETAILING - 0.41% Pathmark Stores, Incorporated+(+)............. 298,400 2,909 Performance Food Group Company+(+).................. 139,100 3,838 Ruddick Corporation(+)........ 231,600 5,098 ---------- TOTAL FOOD & DRUG RETAILING.. 11,845 ---------- FOOD PRODUCTS - 2.07% Chiquita Brands International, Incorporated(+).............. 227,600 6,284 Del Monte Foods Company+(+)... 2,157,700 22,829 J&J Snack Foods Corporation... 26,900 1,517 Lance, Incorporated(+)........ 100,110 1,755 Ralcorp Holdings, Incorporated+(+)............. 223,400 8,690
See accompanying notes -------------------------------------------------------------------------------- 8 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Sensient Technologies Corporation(+)............... 435,850 $ 7,710 Smithfield Foods, Incorporated+(+)............. 357,100 10,563 ---------- TOTAL FOOD PRODUCTS.......... 59,348 ---------- HOUSEHOLD PRODUCTS - 0.21% Blyth, Incorporated(+)........ 326,300 5,952 ---------- TOTAL HOUSEHOLD PRODUCTS..... 5,952 ---------- PERSONAL PRODUCTS - 0.21% NBTY, Incorporated+(+)........ 304,000 6,083 ---------- TOTAL PERSONAL PRODUCTS...... 6,083 ---------- TOBACCO - 0.31% Universal Corporation(+)...... 236,800 8,866 ---------- TOTAL TOBACCO................ 8,866 ---------- TOTAL CONSUMER STAPLES....... 94,027 ---------- ENERGY - 4.19% ENERGY EQUIPMENT & SERVICES - 2.54% Cooper Cameron Corporation+... 20,700 1,526 Dril-Quip, Incorporated+(+)... 48,200 1,971 FMC Technologies, Incorporated+................ 152,100 5,546 MDU Resources Group, Incorporated(+).............. 215,500 7,105 Offshore Logistics, Incorporated+................ 40,300 1,370 Oil States International, Incorporated+(+)............. 343,200 11,360 TETRA Technologies, Incorporated+(+)............. 186,550 5,218 Tidewater, Incorporated(+).... 315,500 14,501 Unit Corporation+............. 281,800 14,766 Universal Compression Holdings, Incorporated+...... 126,800 4,520 Veritas DGC, Incorporated+.... 154,900 4,989 ---------- TOTAL ENERGY EQUIPMENT & SERVICES..................... 72,872 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) OIL & GAS - 1.65% Berry Petroleum Company....... 2,900 $ 174 Cimarex Energy Company+....... 117,400 4,609 Encore Acquisition Company+(+).................. 406,549 13,949 Forest Oil Corporation+(+).... 9,300 406 Giant Industries, Incorporated+(+)............. 77,100 4,409 The Houston Exploration Company+(+).................. 141,800 7,310 Pogo Producing Company(+)..... 126,000 6,363 Stone Energy Corporation+(+).. 221,500 10,167 ---------- TOTAL OIL & GAS.............. 47,387 ---------- TOTAL ENERGY................. 120,259 ---------- FINANCIALS - 23.15% BANKS - 6.38% Ace Cash Express, Incorporated+(+)............. 197,900 4,059 Alabama National BanCorporation(+)............ 32,700 2,115 Amegy Bancorporation, Incorporated................. 25,510 590 AmeriCredit Corporation+...... 70,300 1,571 Anchor BanCorp Wisconsin, Incorporated(+).............. 51,138 1,619 Astoria Financial Corporation.................. 107,900 3,016 BancorpSouth, Incorporated(+).............. 354,200 7,853 Bank of Hawaii Corporation.... 193,600 9,947 BankAtlantic Bancorp, Incorporated................. 200,900 2,791 Chemical Financial Corporation(+)............... 165,531 5,328 Chittenden Corporation(+)..... 214,125 6,160 City National Corporation..... 30,700 2,253 The Colonial BancGroup, Incorporated................. 454,700 11,072 Community Bank System, Incorporated(+).............. 225,800 5,363 Corus Bankshares, Incorporated(+).............. 6,787 373 Cullen/Frost Bankers, Incorporated(+).............. 208,200 10,997 Downey Financial Corporation(+)............... 43,800 2,670 First Commonwealth Financial Corporation(+)............... 156,600 2,062 First Republic Bank........... 87,100 3,302 FirstFed Financial Corporation+(+).............. 13,000 695 F.N.B. Corporation(+)......... 201,800 3,616 Frontier Financial Corporation(+)............... 5,003 161 Fulton Financial Corporation(+)............... 87,499 1,471 Great American Financial Resources, Incorporated(+)... 80,800 1,650 Greater Bay Bancorp........... 79,000 1,982 Hudson United Bancorp(+)...... 298,200 12,366 Independence Community Bank Corporation.................. 26,400 1,044 International Bancshares Corporation.................. 231,128 6,920 Investors Financial Services Corporation(+)............... 86,800 3,314 Irwin Financial Corporation(+)............... 176,800 3,690 MAF Bancorp, Incorporated(+).. 12,200 507 NBT Bancorp, Incorporated..... 130,369 3,095
See accompanying notes -------------------------------------------------------------------------------- 9 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pacific Capital Bancorp(+).... 22,900 $ 826 PFF Bancorp, Incorporated..... 8,400 252 Provident Bankshares Corporation(+)............... 113,720 3,964 Republic Bancorp, Incorporated(+).............. 333,817 4,557 S&T Bancorp, Incorporated(+).. 9,364 348 Santander BanCorp(+).......... 56,100 1,428 Sky Financial Group, Incorporated(+).............. 215,194 6,043 Sterling Bancshares, Incorporated(+).............. 170,900 2,528 Sterling Financial Corporation.................. 79,499 1,991 Susquehanna Bancshares, Incorporated................. 215,000 4,964 Timberland Bancorp, Incorporated................. 14,800 343 Trustmark Corporation(+)...... 340,960 9,561 United Bankshares, Incorporated(+).............. 77,571 2,831 Washington Federal, Incorporated(+).............. 356,994 8,207 Webster Financial Corporation.................. 242,000 11,173 Westcorp, Incorporated........ 3,500 221 ---------- TOTAL BANKS.................. 182,889 ---------- DIVERSIFIED FINANCIALS - 2.60% Affiliated Managers Group, Incorporated+(+)............. 88,000 6,754 American Capital Strategies Limited(+)................... 194,100 7,290 Asset Acceptance Capital Corporation+(+).............. 175,200 4,641 Assured Guaranty Limited...... 166,900 3,735 Asta Funding, Incorporated(+).............. 169,500 4,599 CapitalSource, Incorporated+.. 35,100 772 Financial Federal Corporation(+)............... 157,200 6,002 First Cash Financial Services, Incorporated+(+)............. 244,200 6,405 IndyMac Bancorp, Incorporated(+).............. 68,300 2,550 Raymond James Financial, Incorporated................. 418,000 14,225 Knight Capital Group, Incorporated+(+)............. 944,100 9,035 Metris Companies, Incorporated+(+)............. 259,400 3,811 Piper Jaffray Companies+...... 139,600 4,795 ---------- TOTAL DIVERSIFIED FINANCIALS................... 74,614 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) INSURANCE - 10.98% 21st Century Insurance Group.. 321,600 $ 5,130 Alfa Corporation(+)........... 78,403 1,316 Allmerica Financial Corporation.................. 459,700 17,514 American Financial Group, Incorporated(+).............. 907,500 31,018 American National Insurance Company...................... 24,717 2,915 AmerUs Group Company(+)....... 244,800 14,472 Arch Capital Group Limited+... 139,000 6,881 Argonaut Group, Incorporated+................ 15,007 438 Aspen Insurance Holdings Limited...................... 257,400 6,227 Bristol West Holdings, Incorporated(+).............. 334,500 6,449 The Commerce Group, Incorporated................. 76,100 4,324 Conseco, Incorporated+(+)..... 673,800 13,678 Delphi Financial Group, Incorporated(+).............. 225,200 10,548 FBL Financial Group, Incorporated(+).............. 235,600 7,346 The First American Corporation.................. 178,000 7,800 Fremont General Corporation(+)............... 31,700 688 Arthur J. Gallagher & Company(+)................... 582,600 17,140 HCC Insurance Holdings, Incorporated(+).............. 248,800 7,464 Hilb Rogal & Hobbs Company(+)................... 191,300 7,164 Horace Mann Educators Corporation.................. 174,800 3,393 Infinity Property and Casualty Corporation(+)............... 156,098 5,810 KMG America Corporation+...... 267,200 2,298 LandAmerica Financial Group, Incorporated(+).............. 30,500 1,926 Max Re Capital Limited(+)..... 288,200 6,891 Mercury General Corporation(+)............... 91,800 5,549 National Western Life Insurance Company+........... 2,500 506 The Navigators Group, Incorporated+................ 179,700 6,972 Odyssey Re Holdings Corporation(+)............... 364,800 9,368 Ohio Casualty Corporation(+).. 360,840 9,844 PartnerRe Limited(+).......... 87,600 5,582 The Phoenix Companies, Incorporated(+).............. 233,600 3,025 Platinum Underwriters Holdings Limited...................... 170,900 4,869 PMA Capital Corporation+(+)... 20,200 179 Protective Life Corporation... 564,800 24,761 Reinsurance Group of America, Incorporated(+).............. 541,000 24,751 Scottish Re Group Limited(+).. 137,400 3,373
See accompanying notes -------------------------------------------------------------------------------- 10 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) StanCorp Financial Group, Incorporated(+).............. 110,400 $ 10,168 Stewart Information Services Corporation(+)............... 12,900 657 Triad Guaranty, Incorporated+(+)............. 202,800 8,530 UICI.......................... 56,700 2,048 United America Indemnity Limited+(+).................. 300,997 5,788 ---------- TOTAL INSURANCE.............. 314,800 ---------- REAL ESTATE - 3.19% Aames Investment Corporation(+)............... 480,800 2,880 Alexandria Real Estate Equities, Incorporated....... 65,500 5,296 American Financial Realty Trust........................ 226,500 2,788 Bluegreen Corporation+(+)..... 172,400 2,615 Brookfield Homes Corporation(+)............... 61,000 3,055 Capital Automotive REIT....... 143,100 5,527 Capital Lease Funding, Incorporated(+).............. 134,900 1,325 Capital Trust, Incorporated(+).............. 87,900 2,691 Equity Inns, Incorporated(+).. 521,300 6,798 First Potomac Realty Trust.... 100,500 2,547 Fieldstone Investment Corporation(+)............... 408,900 4,175 Government Properties Trust, Incorporated(+).............. 22,900 208 Health Care Property Investors, Incorporated...... 28,500 725 Health Care Real Estate Investment Trust, Incorporated(+).............. 46,700 1,646 Innkeepers USA Trust.......... 230,000 3,588 Jones Lang LaSalle, Incorporated................. 116,900 5,878 LaSalle Hotel Properties(+)... 278,500 9,856 Lexington Corporate Properties Trust(+)..................... 212,900 4,637 MI Developments, Incorporated................. 401,800 12,532 MortgageIT Holdings, Incorporated(+).............. 165,800 2,102 Mission West Properties, Incorporated(+).............. 222,200 2,271 Redwood Trust, Incorporated(+).............. 46,400 2,160 Strategic Hotel Capital, Incorporated................. 185,300 3,148 Thomas Properties Group, Incorporated................. 108,500 1,304 Ventas, Incorporated.......... 59,800 1,832 ---------- TOTAL REAL ESTATE............ 91,584 ---------- TOTAL FINANCIALS............. 663,887 ---------- HEALTH CARE - 3.80% HEALTH CARE EQUIPMENT & SUPPLIES - 0.24% CONMED Corporation+........... 34,728 833 Cooper Companies, Incorporated................. 23,600 1,624 Haemonetics Corporation+(+)... 91,600 4,438 ---------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES..................... 6,895 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) HEALTH CARE PROVIDERS & SERVICES - 2.46% Amedisys, Incorporated+(+).... 181,700 $ 6,943 AMERIGROUP Corporation+....... 68,000 1,137 Apria Healthcare Group, Incorporated+................ 321,400 7,415 Hooper Holmes, Incorporated... 85,450 247 Kindred Healthcare, Incorporated+(+)............. 367,900 10,301 LifePoint Hospitals, Incorporated+................ 29,100 1,138 Magellan Health Services, Incorporated+................ 391,700 11,645 Omnicell, Incorporated+(+).... 186,400 1,976 Option Care, Incorporated(+).. 271,600 3,387 Orchid Cellmark, Incorporated+(+)............. 214,800 1,263 Pediatrix Medical Group, Incorporated+(+)............. 75,200 5,795 Res-Care, Incorporated+(+).... 233,400 3,767 Sierra Health Services, Incorporated+(+)............. 54,500 4,087 Triad Hospitals, Incorporated+................ 159,400 6,556 Universal Health Services, Incorporated(+).............. 104,700 4,936 ---------- TOTAL HEALTH CARE PROVIDERS & SERVICES..................... 70,593 ---------- PHARMACEUTICALS - 1.10% Andrx Corporation+(+)......... 265,700 4,110 Endo Pharmaceuticals Holdings, Incorporated+(+)............. 54,000 1,454 ISTA Pharmaceuticals, Incorporated+(+)............. 333,200 2,059 King Pharmaceuticals, Incorporated+................ 695,700 10,735 Watson Pharmaceuticals, Incorporated+(+)............. 384,000 13,271 ---------- TOTAL PHARMACEUTICALS........ 31,629 ---------- TOTAL HEALTH CARE............ 109,117 ----------
See accompanying notes -------------------------------------------------------------------------------- 11 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 18.32% AEROSPACE & DEFENSE - 0.49% Alliant Techsystems, Incorporated+................ 28,200 $ 1,980 Armor Holdings, Incorporated+................ 142,200 6,358 EDO Corporation(+)............ 94,200 2,722 Herley Industries, Incorporated+(+)............. 180,800 3,057 ---------- TOTAL AEROSPACE & DEFENSE.... 14,117 ---------- AIR FREIGHT & COURIERS - 0.44% Covenant Transportation, Incorporated+(+)............. 182,300 1,941 Ryder System, Incorporated.... 266,400 10,568 ---------- TOTAL AIR FREIGHT & COURIERS..................... 12,509 ---------- BUILDING PRODUCTS - 0.49% The Genlyte Group, Incorporated+(+)............. 75,900 3,869 Lennox International, Incorporated(+).............. 194,800 5,433 NCI Building Systems, Incorporated+(+)............. 72,200 2,969 Universal Forest Products, Incorporated(+).............. 31,500 1,743 ---------- TOTAL BUILDING PRODUCTS...... 14,014 ---------- COMMERCIAL SERVICES & SUPPLIES - 7.01% Allied Waste Industries, Incorporated+(+)............. 134,400 1,094 AptarGroup, Incorporated(+)... 140,100 7,172 Benchmark Electronics, Incorporated+(+)............. 240,100 6,744 Bowne & Company, Incorporated(+).............. 758,000 10,779 The Brinks Company............ 339,500 13,332 Casella Waste Systems, Incorporated+(+)............. 179,300 2,281 Central Parking Corporation(+)............... 144,300 2,162 Ceridian Corporation+......... 125,000 2,739 Consolidated Graphics, Incorporated+................ 57,500 2,242 Convergys Corporation+........ 841,300 13,671 Corinthian Colleges, Incorporated+(+)............. 507,300 6,311 CSG Systems International, Incorporated+(+)............. 263,300 6,190 Deluxe Corporation(+)......... 430,100 14,335 Duratek, Incorporated+(+)..... 195,250 2,786 Global Cash Access, Incorporated+................ 19,800 278 The Greenbrier Companies, Incorporated(+).............. 201,500 5,551
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) John H. Harland Company(+).... 112,500 $ 4,679 IDEX Corporation.............. 243,800 9,757 Kelly Services, Incorporated.. 293,200 8,116 Labor Ready, Incorporated+(+)............. 150,100 3,505 LECG Corporation+(+).......... 134,700 2,975 McGrath Rentcorp(+)........... 127,700 3,646 Maverick Tube Corporation+(+).............. 225,800 6,991 NCO Group, Incorporated+(+)... 227,542 4,089 PHH Corporation+.............. 372,300 10,473 Pope & Talbot, Incorporated(+).............. 236,500 2,067 Sabre Holdings Corporation(+)............... 834,498 16,298 Spherion Corporation+......... 915,500 8,148 Valassis Communications, Incorporated+(+)............. 500,800 15,650 Waste Connections, Incorporated+................ 207,100 6,911 ---------- TOTAL COMMERCIAL SERVICES & SUPPLIES..................... 200,972 ---------- CONSTRUCTION & ENGINEERING - 1.25% Comfort Systems USA, Incorporated+(+)............. 213,000 1,811 Granite Construction, Incorporated................. 141,800 4,837 Hovnanian Enterprises, Incorporated+(+)............. 154,000 6,928 Meritage Homes Corporation+(+).............. 94,900 5,909 Orleans Homebuilders, Incorporated(+).............. 130,500 2,600 The Shaw Group, Incorporated+(+)............. 321,900 8,627 Technical Olympic USA, Incorporated(+).............. 248,800 5,260 ---------- TOTAL CONSTRUCTION & ENGINEERING.................. 35,972 ---------- ELECTRICAL EQUIPMENT - 0.38% Brady Corporation(+).......... 314,900 9,060 Thomas & Betts Corporation+... 45,900 1,786 ---------- TOTAL ELECTRICAL EQUIPMENT... 10,846 ---------- INDUSTRIAL CONGLOMERATES - 0.13% Pioneer Companies, Incorporated+(+)............. 155,500 3,653 ---------- TOTAL INDUSTRIAL CONGLOMERATES................ 3,653 ---------- MACHINERY - 5.13% AGCO Corporation+............. 1,079,480 17,261 Briggs & Stratton Corporation.................. 523,600 16,745 CIRCOR International, Incorporated(+).............. 94,200 2,654
See accompanying notes -------------------------------------------------------------------------------- 12 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Esterline Technologies Corporation+(+).............. 168,100 $ 6,329 Flowserve Corporation+(+)..... 680,300 23,811 GSI Group, Incorporated+...... 385,400 3,330 Harsco Corporation............ 163,300 10,492 Hughes Supply, Incorporated(+).............. 236,000 7,894 Kaydon Corporation(+)......... 326,400 9,645 Kennametal, Incorporated(+)... 36,700 1,876 MSC Industrial Direct Company, Incorporated................. 120,500 4,601 Navistar International Corporation+................. 310,400 8,542 Reliance Steel & Aluminum Company(+)................... 105,400 6,010 SPX Corporation(+)............ 45,900 1,975 Tennant Company(+)............ 58,800 2,561 Terex Corporation+(+)......... 241,700 13,286 The Timken Company(+)......... 358,500 10,167 ---------- TOTAL MACHINERY.............. 147,179 ---------- MARINE - 1.35% Alexander & Baldwin, Incorporated................. 175,000 8,565 Kirby Corporation+(+)......... 258,900 13,377 OMI Corporation(+)............ 387,000 6,997 Overseas Shipholding Group, Incorporated................. 79,300 3,775 Tsakos Energy Navigation Limited(+)................... 172,400 5,918 ---------- TOTAL MARINE................. 38,632 ---------- TRANSPORTATION - 1.65% Arkansas Best Corporation(+).. 162,900 6,314 Central Freight Lines, Incorporated+(+)............. 263,400 561 CNF, Incorporated............. 203,000 11,423 Laidlaw International, Incorporated................. 417,600 9,496 SCS Transportation, Incorporated+(+)............. 379,600 7,584 Swift Transportation Company, Incorporated+(+)............. 202,253 3,691 Werner Enterprises, Incorporated(+).............. 63,000 1,129 Yellow Roadway Corporation+(+).............. 157,900 7,177 ---------- TOTAL TRANSPORTATION......... 47,375 ---------- TOTAL INDUSTRIALS............ 525,269 ---------- INFORMATION TECHNOLOGY - 10.49% COMMUNICATIONS EQUIPMENT - 0.91% Andrew Corporation+........... 120,200 1,277 Carrier Access Corporation+(+).............. 328,300 1,415
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Digi International, Incorporated+(+)............. 275,000 $ 2,918 Foundry Networks, Incorporated+(+)............. 345,500 4,122 Kanbay International, Incorporated+(+)............. 89,500 1,305 McDATA Corporation+(+)........ 473,800 2,279 MEMC Electronic Materials, Incorporated+(+)............. 511,400 9,175 Plantronics, Incorporated..... 18,700 558 Symmetricom, Incorporated+(+)............. 386,600 3,081 ---------- TOTAL COMMUNICATIONS EQUIPMENT.................... 26,130 ---------- COMPUTERS & PERIPHERALS - 0.84% Avid Technology, Incorporated+................ 111,500 5,489 Electronics for Imaging, Incorporated+(+)............. 253,900 6,375 Western Digital Corporation+(+).............. 1,012,600 12,252 ---------- TOTAL COMPUTERS & PERIPHERALS.................. 24,116 ---------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.35% Arrow Electronics, Incorporated+(+)............. 796,200 23,496 Avnet, Incorporated+(+)....... 955,200 22,017 CyberOptics Corporation+...... 100,000 1,324 IKON Office Solutions, Incorporated(+).............. 739,100 7,376 Ingram Micro, Incorporated+(+)............. 1,302,500 23,575 Littlefuse, Incorporated+(+).. 337,200 8,265 Mettler-Toledo International, Incorporated+................ 35,200 1,816 Newport Corporation+.......... 20,800 271 PerkinElmer, Incorporated..... 86,800 1,916 Photon Dynamics, Incorporated+(+)............. 116,500 2,028 Plexus Corporation+(+)........ 541,100 9,561 Tech Data Corporation+(+)..... 302,794 10,489 Tektronix, Incorporated....... 75,900 1,744 Vishay Intertechnology, Incorporated+................ 955,600 10,837 ---------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS.................. 124,715 ---------- INTERNET SOFTWARE & SERVICES - 0.81% EarthLink, Incorporated+(+)... 1,171,200 12,895 InfoSpace, Incorporated+(+)... 124,600 3,130 NIC, Inc+(+).................. 435,700 2,636 United Online, Incorporated(+).............. 329,900 4,424 ---------- TOTAL INTERNET SOFTWARE & SERVICES..................... 23,085 ----------
See accompanying notes -------------------------------------------------------------------------------- 13 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) IT CONSULTING & SERVICES - 0.99% Anteon International Corporation+(+).............. 25,100 $ 1,135 BearingPoint, Incorporated+(+)............. 812,200 5,702 Perot Systems Corporation+(+).............. 321,300 4,453 Phase Forward Incorporated+(+)............. 357,600 3,905 The Reynolds and Reynolds Company(+)................... 432,200 11,471 SI International, Incorporated+(+)............. 60,900 1,758 ---------- TOTAL IT CONSULTING & SERVICES..................... 28,424 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 1.07% Adaptec, Incorporated+........ 528,100 2,170 Axcelis Technologies, Incorporated+(+)............. 595,552 2,591 Cabot Microelectronics Corporation+(+).............. 122,900 3,613 FEI Company+(+)............... 201,700 3,812 Integrated Device Technology+.................. 427,300 4,222 OmniVision Technologies, Incorporated+(+)............. 517,785 6,674 MKS Instruments, Incorporated+................ 100,000 1,887 QLogic Corporation+........... 48,000 1,448 SigmaTel, Incorporated+(+).... 201,700 2,745 Teradyne, Incorporated+....... 117,700 1,594 ---------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................... 30,756 ---------- SOFTWARE - 1.52% Epicor Software Corporation+(+).............. 287,700 3,533 EPIQ Systems, Incorporated+(+)............. 134,000 2,553 Mentor Graphics Corporation+(+).............. 1,048,700 8,673 Novell, Incorporated+(+)...... 469,200 3,575 PLATO Learning, Incorporated+(+)............. 262,714 1,860 Progress Software Corporation+(+).............. 164,000 5,107 RSA Security, Incorporated+... 253,300 2,888 SafeNet, Incorporated+(+)..... 131,400 4,358 SERENA Software, Incorporated+(+)............. 306,729 6,714 Sybase, Incorporated+(+)...... 190,200 4,232 ---------- TOTAL SOFTWARE............... 43,493 ---------- TOTAL INFORMATION TECHNOLOGY................... 300,719 ---------- MATERIALS - 6.20% CHEMICALS - 2.94% Agrium, Incorporated.......... 638,100 13,534 Cabot Corporation(+).......... 49,500 1,688
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) CF Industries Holdings, Incorporated(+).............. 530,000 $ 7,325 Cytec Industries, Incorporated(+).............. 57,800 2,387 Engelhard Corporation......... 95,300 2,592 FMC Corporation+.............. 120,600 6,565 H.B. Fuller Company(+)........ 336,600 10,088 Hercules, Incorporated+....... 791,600 8,818 International Flavors & Fragrances, Incorporated..... 47,900 1,580 LESCO, Incorporated+(+)....... 66,000 1,082 Lubrizol Corporation.......... 410,300 17,064 Olin Corporation(+)........... 224,600 4,016 OM Group, Incorporated+....... 21,700 347 PolyOne Corporation+(+)....... 1,234,000 7,120 ---------- TOTAL CHEMICALS.............. 84,206 ---------- CONSTRUCTION MATERIALS - 0.33% Insituform Technologies, Incorporated+(+)............. 532,200 9,558 ---------- TOTAL CONSTRUCTION MATERIALS.................... 9,558 ---------- CONTAINERS & PACKAGING - 0.43% Longview Fibre Company........ 596,500 11,214 Silgan Holdings, Incorporated................. 38,958 1,253 ---------- TOTAL CONTAINERS & PACKAGING.................... 12,467 ---------- METALS & MINING - 2.23% Allegheny Technologies, Incorporated................. 70,500 2,024 Arch Coal, Incorporated(+).... 26,700 2,058 Century Aluminum Company+(+).. 420,200 7,639 Compass Minerals International, Incorporated.. 103,200 2,311 Foundation Coal Holdings, Incorporated(+).............. 339,600 12,735 Gibraltar Industries, Incorporated(+).............. 167,000 3,382 NN, Incorporated(+)........... 163,900 1,719 Quanex Corporation(+)......... 120,200 6,961 RTI International Metals, Incorporated+................ 120,900 4,053 Worthington Industries, Incorporated(+).............. 1,052,900 21,184 ---------- TOTAL METALS & MINING........ 64,066 ----------
See accompanying notes -------------------------------------------------------------------------------- 14 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) PAPER & FOREST PRODUCTS - 0.27% Chesapeake Corporation(+)..... 294,600 $ 5,933 Glatfelter.................... 100,400 1,364 Wausau Paper Corporation...... 29,800 326 ---------- TOTAL PAPER & FOREST PRODUCTS..................... 7,623 ---------- TOTAL MATERIALS.............. 177,920 ---------- TELECOMMUNICATION SERVICES - 0.11% Commonwealth Telephone Enterprises, Incorporated(+).............. 90,103 3,234 ---------- TOTAL TELECOMMUNICATION SERVICES..................... 3,234 ---------- UTILITIES - 8.28% ELECTRIC UTILITIES - 4.87% Alliant Energy Corporation.... 265,800 7,030 Black Hills Corporation(+).... 37,700 1,567 Cleco Corporation............. 236,900 5,022 DPL Inc.(+)................... 349,100 8,996 Duquesne Light Holdings, Incorporated(+).............. 711,300 11,872 Great Plains Energy, Incorporated(+).............. 614,300 17,637 Hawaiian Electric Industries, Incorporated(+).............. 188,000 4,954 IDACORP, Incorporated(+)...... 130,800 3,776 Northeast Utilities........... 1,113,500 20,255 NSTAR(+)...................... 571,600 15,548 OGE Energy Corporation(+)..... 437,800 11,278 PNM Resources, Incorporated... 232,500 5,894 Puget Energy, Incorporated.... 342,800 7,350 WPS Resources Corporation(+).. 336,500 18,359 ---------- TOTAL ELECTRIC UTILITIES..... 139,538 ---------- GAS UTILITIES - 3.41% AGL Resources, Incorporated... 406,600 14,308 Atmos Energy Corporation(+)... 384,500 10,112 Edge Petroleum Corporation+(+).............. 245,900 5,958 Energen Corporation(+)........ 28,900 1,087 Energy Partners Limited+(+)... 244,200 6,195 National Fuel Gas Company(+).. 522,800 15,757 New Jersey Resources Corporation(+)............... 128,500 5,546 Nicor, Incorporated(+)........ 26,500 1,039 ONEOK, Incorporated........... 279,800 8,041 Peoples Energy Corporation(+)............... 157,800 5,870 Remington Oil and Gas Corporation+(+).............. 126,000 4,410 Southern Union Company+....... 224,548 5,281 South Jersey Industries, Incorporated(+).............. 26,000 727 UGI Corporation............... 207,200 4,890 Vectren Corporation(+)........ 59,000 1,602 WGL Holdings, Incorporated(+).............. 225,200 6,999 ---------- TOTAL GAS UTILITIES.......... 97,822 ---------- TOTAL UTILITIES.............. 237,360 ---------- TOTAL COMMON STOCK........... 2,743,858 ---------- PAR AMOUNT ----------- SHORT-TERM INVESTMENTS - 26.42% U.S. TREASURY BILLS - 0.49% 3.38%, Due 12/8/2005 (Note A)........................... $ 14,055 14,006 ---------- TOTAL U.S. TREASURY BILLS.... 14,006 ---------- SHARES ----------- OTHER SHORT-TERM INVESTMENTS - 25.93% American Beacon Enhanced Cash Trust (Notes B and C)........ 454,790,683 454,791 American Beacon Money Market Select Fund (Notes B and C).. 288,853,036 288,853 ---------- TOTAL OTHER SHORT-TERM INVESTMENTS.................. 743,644 ---------- TOTAL SHORT-TERM INVESTMENTS.................. 757,650 ---------- TOTAL INVESTMENTS - 122.11% (COST $3,316,064)............ 3,501,508 ---------- LIABILITIES, NET OF OTHER ASSETS - (22.11%)............ (634,072) ---------- TOTAL NET ASSETS - 100%....... $2,867,436 ==========
--------------- (A) At October 31, 2005, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. (+)-All or a portion of this security is on loan at October 31, 2005. See Note 5. +- Non-income producing security. See accompanying notes -------------------------------------------------------------------------------- 15 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- FUTURES CONTRACTS (dollars in thousands)
UNREALIZED NO. OF MARKET APPRECIATION/ CONTRACTS EXPIRATION DATE VALUE (DEPRECIATION) --------- --------------- -------- -------------- Emini Mini Russell..................................... 2,185 December 2005 $141,850 $(4,317) -------- ------- $141,850 $(4,317) ======== =======
See accompanying notes -------------------------------------------------------------------------------- 16 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2005 (in thousands, except share and per share amounts) -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $ 2,757,864 Investments in affiliated securities, at value(B)....... 743,644 Cash.................................................... 28 Receivable for investments sold......................... 4,175 Dividends and interest receivable....................... 2,150 Receivable for fund shares sold......................... 2,967 Receivable for variation margin on open futures contracts.............................................. 3,041 ----------- TOTAL ASSETS........................................ 3,513,869 ----------- LIABILITIES: Payable for investments purchased....................... 18,345 Payable upon return of securities loaned................ 619,012 Payable for fund shares redeemed........................ 3,294 Management and investment advisory fees payable (Note 2)..................................................... 4,381 Administrative service and service fees payable......... 799 Other liabilities....................................... 602 ----------- TOTAL LIABILITIES................................... 646,433 ----------- NET ASSETS.................................................. $ 2,867,436 =========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 2,546,908 Undistributed net investment income..................... 12,280 Accumulated net realized gain (loss).................... 127,121 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................. 181,127 ----------- NET ASSETS.................................................. $ 2,867,436 =========== Shares outstanding (no par value): Institutional Class..................................... 52,712,353 =========== PlanAhead Class......................................... 65,910,831 =========== Service Class........................................... 2,242,566 =========== AMR Class............................................... 20,851,753 =========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 20.43 =========== PlanAhead Class......................................... $ 20.04 =========== Service Class........................................... $ 19.94 =========== AMR Class............................................... $ 20.38 =========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 2,572,420 (B) Cost of investments in affiliated securities............ 743,644 (C) Market value of securities on loan...................... 612,572
See accompanying notes -------------------------------------------------------------------------------- 17 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF OPERATIONS Year Ended October 31, 2005 (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)*........................................ $ 30,480 Dividend income from affiliated securities.............. 5,335 Interest income......................................... 476 Income derived from securities lending, net............. 668 -------- TOTAL INVESTMENT INCOME............................. 36,959 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 12,268 Administrative service fees (Note 2): Institutional Class................................... 2,085 PlanAhead Class....................................... 2,717 Service Class......................................... 81 Transfer agent fees: Institutional Class................................... 270 PlanAhead Class....................................... 205 Service Class......................................... 24 AMR Class............................................. 15 Fund accounting fees.................................... 498 Professional fees....................................... 157 Registration fees and expenses.......................... 336 Service fees: PlanAhead Class (Note 2).............................. 2,717 Service Class (Note 2)................................ 81 Distribution fees -- Service Class (Note 2)............. 81 Prospectus and shareholder reports...................... 875 Other expenses.......................................... 8 -------- TOTAL EXPENSES...................................... 22,418 -------- NET INVESTMENT INCOME....................................... 14,541 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments........................................... 108,028 Commission recapture.................................. 313 Futures contracts..................................... 19,697 Change in net unrealized appreciation or depreciation of: Investments........................................... 72,999 Futures contracts..................................... (4,356) -------- NET GAIN (LOSS) ON INVESTMENTS...................... 196,681 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $211,222 ======== * Foreign taxes......................................... $ 63
See accompanying notes -------------------------------------------------------------------------------- 18 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ---------------------- 2005 2004 ---------- --------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 14,541 $ 5,180 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions........... 128,038 69,211 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations........................................... 68,643 50,600 ---------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 211,222 124,991 ---------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class................................... (1,734) (522) PlanAhead Class....................................... (1,962) (156) Service Class......................................... (37) -- AMR Class............................................. (2,456) (1,911) Net realized gain on investments: Institutional Class................................... (20,489) (3,082) PlanAhead Class....................................... (27,260) (2,162) Service Class......................................... (632) -- AMR Class............................................. (20,024) (9,583) ---------- --------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (74,594) (17,416) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 2,144,506 969,153 Reinvestment of dividends and distributions............. 70,239 16,178 Cost of shares redeemed................................. (830,022) (230,849) ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................................. 1,384,723 754,482 ---------- --------- NET INCREASE (DECREASE) IN NET ASSETS....................... 1,521,351 862,057 ---------- --------- NET ASSETS: Beginning of period..................................... 1,346,085 484,028 ---------- --------- END OF PERIOD*.......................................... $2,867,436 $1,346,085 ========== ========== * Includes undistributed net investment income (loss) of..................................................... $ 12,628 $ 4,276 ========== ==========
See accompanying notes -------------------------------------------------------------------------------- 19 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 2005 -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Small Cap Value Fund (the "Fund"), formerly known as the American AAdvantage Small Cap Value Fund, a series of the Trust. American Beacon Advisors, Inc. (the "Manager"), formerly known as AMR Investment Services, Inc., is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Class Disclosure The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES: ------ ----------- ------------------------------ INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.25% Fee -- PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25% intermediary Fee -- 0.25% Service Fee -- SERVICE CLASS Investors investing through an intermediary Administrative Service 0.25% Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- AMR CLASS Investors in the tax-exempt retirement and benefit N/A plans of AMR Corporation and its affiliates
Security Valuation Investments are valued at the close of the New York Stock Exchange (the "Exchange"), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities for which market quotations are available are valued at the last sale price or official price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, the prices of debt securities may be determined using quotes obtained from brokers. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates market value. Securities for which the market prices are not readily available or are not reflective of the fair value of the security, the security will be priced at a fair value following procedures approved by the -------------------------------------------------------------------------------- 20 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Board of Trustees (the "Board"). In light of the judgement involved in fair value decisions, there can be no assurance that a fair value assigned to a particular security is accurate. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Futures Contracts Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations. Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The Fund reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded. Dividends to Shareholders Dividends from net investment income of the Fund normally will be declared and paid annually. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Commission Recapture The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund's investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. -------------------------------------------------------------------------------- 21 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory, fund management and securities lending services. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to .10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Funds. Management fees paid during the year ended October 31, 2005 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ----------- ---------- --------------- ----------- .35%-.60% $12,268 $9,834 $2,434
As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers when a borrower posts collateral other than cash, a fee up to 25% of such loan fees. During the year ended October 31, 2005, securities lending fees totaling $133,000 were paid to the Manager by the Fund. This fee is netted against securities lending income in the Statement of Operations. -------------------------------------------------------------------------------- 22 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of .25% of the average daily net assets of the Institutional, PlanAhead and Service Classes of the Fund. Distribution Plans The Trust, except for the Service Class of the Funds, has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. A separate Distribution Plan (the "Distribution Plan") has been adopted pursuant to Rule 12b-1 under the Act for the Service Class of the Fund. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Service Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance. Service Plans The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the PlanAhead and Service Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.25% of the average daily net assets of the PlanAhead and Service Classes of the Fund. Brokerage Commissions Affiliated entities of the Fund received net commissions on purchases and sales of the Fund's portfolio securities for the year ended October 31, 2005 of $22,000. Investment in Affiliated Funds The Fund is permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and approved procedures by the Board, to invest up to 25% of its total assets in the American Beacon Money Market Select Fund (the "Select Fund"), an affiliated fund. The Fund and the Select Fund have the same investment advisor and therefore, are considered to be affiliated. Cash collateral received by the Fund in connection with securities lending may be invested in the Select Fund and the American Beacon Enhanced Cash Trust (the "Cash Trust") (collectively, the "Affiliated Funds"). The Manager serves as Trustee and investment advisor to the Affiliated Funds and receives from the Affiliated Funds an annualized fee equal to 0.10% of the -------------------------------------------------------------------------------- 23 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- average daily net assets. During the year ended October 31, 2005, fees earned by the Manager from the Affiliated Funds were as follows:
SECURITIES LENDING DIRECT INVESTMENT COLLATERAL INVESTED IN FUNDS IN FUNDS TOTAL ----------------- ------------------- -------- $188,595 $395,967 $584,562
Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free air transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. Mr. O'Sullivan receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. At October 31, 2005, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Fund. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating Funds. At October 31, 2005, the Fund had not utilized the credit facility. Reimbursement of Expenses The Manager reimbursed expenses of the Service Class totaling $121 for the Fund during the year ended October 31, 2005. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. Dividends are determined in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. -------------------------------------------------------------------------------- 24 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- The tax character of distributions during the fiscal years ended October 31, 2005 and October 31, 2004 were as follows (in thousands):
YEAR ENDED OCTOBER 31, --------------------------- 2005 2004 ----------- ----------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class................................... $12,463 $ 2,878 PlanAhead Class....................................... 16,237 1,809 Service Class......................................... 368 -- AMR Class............................................. 12,942 9,236 LONG-TERM CAPITAL GAIN Institutional Class................................... 9,760 726 PlanAhead Class....................................... 12,985 509 Service Class......................................... 301 -- AMR Class............................................. 9,538 2,258 ------- ------- TOTAL DISTRIBUTIONS PAID.......................... $74,594 $17,416 ------- -------
As of October 31, 2005, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes... $3,318,120 Unrealized appreciation..................................... 310,005 Unrealized depreciation..................................... (126,617) ---------- Net unrealized appreciation/(depreciation).................. 183,388 Undistributed ordinary income............................... 49,140 Undistributed long-term gain/(loss)......................... 87,999 ---------- Distributable earnings...................................... $ 320,527 ==========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments, book amortization for premiums, and the realization for tax purposes of unrealized gains/(losses) on investments in passive foreign investment companies. Due to inherent differences in the recognition of income, expenses and realized gains/losses under U.S. generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences that have been reclassified as of October 31, 2005 (in thousands): Paid-in-capital............................................. $ -- Undistributed net investment income......................... (348) Accumulated net realized gain (loss)........................ 348 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.................... --
-------------------------------------------------------------------------------- 25 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- 4. INVESTMENT TRANSACTIONS Investment transactions for the year ended October 31, 2005 (excluding short-term investments) are as follows (in thousands): Purchases................................................... $2,387,648 Proceeds from sales......................................... $1,031,967
A summary of the Fund's direct transactions in Affiliated Funds for the year ended October 31, 2005 is set forth below (in thousands):
OCTOBER 31, 2004 OCTOBER 31, 2005 AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE --------- ------------------- ---------- ---------- ------------------- Select Fund........................... $139,782 $2,906,368 $2,921,518 $124,632
5. SECURITIES LENDING The Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is marked to market and monitored daily. To the extent that a loan is collateralized by cash, such collateral shall be invested by the securities lending agent (the "Agent") in short-term instruments, money market mutual funds, and such other short-term investments, provided the investments meet certain quality and diversification requirements. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Fund and the Agent and is recorded as income for the Fund. To the extent that a loan is secured by non-cash collateral, brokers pay the Fund negotiated lenders' fees, which are divided between the Fund and the Agent and are recorded as securities lending income for the Fund. The Fund also continues to receive income on the securities loaned, and any gain or loss in the market price of securities loaned that may occur during the term of the loan. Risks to the Fund in securities lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. At October 31, 2005, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
MARKET VALUE OF SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL ------------------ ------------------- --------------- $612,572 $ -- $619,012
Cash collateral is invested in the Cash Trust and the Select Fund. These amounts have been included as investments in the Schedule of Investments and Statement of Assets and Liabilities. Income earned on these investments is reported as Income derived from securities lending in the Statement of Operations. -------------------------------------------------------------------------------- 26 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2005 -------------------------------------------------------------------------------- Non-Cash collateral received by the Fund may not be sold or repledged; therefore, non-cash collateral is not included on the Fund's Schedule of Investments or Statement of Assets and Liabilities. 6. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands): Year Ended October 31, 2005 ---------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS ------------------- --------------------- ----------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------- ---------- ------ ------- ------- --------- Shares sold........... 38,008 $ 759,658 52,534 $1,035,304 2,036 $40,048 15,182 $ 309,496 Reinvestment of dividends........... 923 18,570 1,443 28,520 34 669 1,123 22,480 Shares redeemed....... (9,004) (182,580) (13,220) (262,130) (467) (9,230) (18,790) (376,082) ------ --------- ------- ---------- ------ ------- ------- --------- Net increase (decrease) in shares outstanding......... 29,927 $ 595,648 40,757 $ 801,694 1,603 $31,487 (2,485) $ (44,106) ====== ========= ======= ========== ====== ======= ======= =========
Year Ended October 31, 2004 ---------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------ ----------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------ -------- ------ ------- ------- --------- Shares sold............... 21,166 $380,848 23,536 $422,446 685 $12,179 8,593 $ 153,680 Reinvestment of dividends............... 143 2,425 136 2,259 -- -- 683 11,494 Shares redeemed........... (4,049) (72,693) (2,711) (47,684) (46) (819) (6,247) (109,653) ------ -------- ------ -------- ------ ------- ------- --------- Net increase in shares outstanding............. 17,260 $310,580 20,961 $377,021 639 $11,360 3,029 $ 55,521 ====== ======== ====== ======== ====== ======= ======= =========
-------------------------------------------------------------------------------- 27 AMERICAN BEACON SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS ---------------------------------------------------- ------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ---------------------------------------------------- ------------------------------- 2005(H) 2004(G) 2003(D) 2002 2001(C) 2005(H) 2004(G) 2003(D) ---------- -------- -------- ------- ------- ---------- -------- ------- Net asset value, beginning of period..... $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 18.54 $ 15.95 $ 11.22 ---------- -------- -------- ------- ------- ---------- -------- ------- Income from investment operations: Net investment income (loss)(A)....... 0.11 0.07 (0.01) (0.01) 0.16 0.09 0.08 0.05 Net gains on securities (both realized and unrealized)(A).................. 2.31 3.09 5.24 0.47 1.81 2.24 2.98 5.08 ---------- -------- -------- ------- ------- ---------- -------- ------- Total income from investment operations.............................. 2.42 3.16 5.23 0.46 1.97 2.33 3.06 5.13 ---------- -------- -------- ------- ------- ---------- -------- ------- Less distributions: Dividends from net investment income.............................. (0.07) (0.08) (0.02) (0.11) (0.19) (0.06) (0.03) (0.12) Distributions from net realized gains on securities....................... (0.77) (0.44) (0.28) (0.76) (0.17) (0.77) (0.44) (0.28) ---------- -------- -------- ------- ------- ---------- -------- ------- Total distributions...................... (0.84) (0.52) (0.30) (0.87) (0.36) (0.83) (0.47) (0.40) ---------- -------- -------- ------- ------- ---------- -------- ------- Net asset value, end of period........... $ 20.43 $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 20.04 $ 18.54 $ 15.95 ========== ======== ======== ======= ======= ========== ======== ======= Total return............................. 12.90% 19.86% 47.45% 3.29% 20.16% 12.63% 19.56% 47.12% ========== ======== ======== ======= ======= ========== ======== ======= Ratios and supplemental data: Net assets, end of period (in thousands).......................... $1,076,909 $429,540 $ 89,579 $21,936 $ 2,364 $1,320,853 $466,364 $66,906 Ratios to average net assets (annualized): Expenses net of waivers(A).......... 0.87% 0.89% 0.89% 0.82% 0.89% 1.10% 1.15% 1.16% Expenses before waivers(A).......... 0.87% 0.89% 0.89% 0.82% 0.89% 1.10% 1.15% 1.16% Net investment income (loss) net of waivers(A)........................ 0.66% 0.57% 0.60% 0.81% 1.38% 0.42% 0.33% 0.39% Net investment income (loss) before waivers(A)........................ 0.66% 0.57% 0.60% 0.81% 1.38% 0.42% 0.33% 0.39% Portfolio turnover rate(B)............ 47% 35% 75% 81% 93% 47% 35% 75%
--------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the AMR Investment Services Small Cap Value Portfolio through February 28, 2002. (B) The Small Cap Value Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the Small Cap Value Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (D) Barrow, Hanley, Mewhinney & Strauss, Inc. was added as an investment advisor to the Small Cap Value Fund on September 18, 2003. (E) Not annualized. (F) Portfolio turnover rate is for the period November 1, 2002 through October 31, 2003. (G) The Boston Company was added as an investment advisor to the Small Cap Value Fund on September 27, 2004. (H) Opus Capital Management, Inc. was added as an investment advisor on February 1, 2005 and Metropolitan West Capital Management, LLC, SSgA Funds Management, Inc. and Dreman Value Management, LLC were added as investment advisors on August 12, 2005. (I) Annualized. -------------------------------------------------------------------------------- 28 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS ----------------- -------------------------------- ---------------------------------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, MAY 1 TO YEAR ENDED OCTOBER 31, ----------------- ------------------ OCTOBER 31, ---------------------------------------------------- 2002 2001(C) 2005(H) 2004(G) 2003(D) 2005(H) 2004(G) 2003(D) 2002 2001(C) ------- ------- ------- -------- ----------- -------- -------- -------- -------- -------- $ 11.64 $ 10.08 $ 18.49 $ 15.92 $ 11.88 $ 18.78 $ 16.13 $ 11.30 $ 11.71 $ 10.10 ------- ------- ------- -------- --------- -------- -------- -------- -------- -------- 0.06 0.15 0.04 0.01 -- 0.21 0.14 0.10 0.15 0.15 0.36 1.76 2.23 3.00 4.04 2.26 3.04 5.15 0.34 1.85 ------- ------- ------- -------- --------- -------- -------- -------- -------- -------- 0.42 1.91 2.27 3.01 4.04 2.47 3.18 5.25 0.49 2.00 ------- ------- ------- -------- --------- -------- -------- -------- -------- -------- (0.08) (0.18) (0.05) -- -- (0.10) (0.09) (0.14) (0.14) (0.22) (0.76) (0.17) (0.77) (0.44) -- (0.77) (0.44) (0.28) (0.76) (0.17) ------- ------- ------- -------- --------- -------- -------- -------- -------- -------- (0.84) (0.35) (0.82) (0.44) -- (0.87) (0.53) (0.42) (0.90) (0.39) ------- ------- ------- -------- --------- -------- -------- -------- -------- -------- $ 11.22 $ 11.64 $ 19.94 $ 18.49 $ 15.92 $ 20.38 $ 18.78 $ 16.13 $ 11.30 $ 11.71 ======= ======= ======= ======== ========= ======== ======== ======== ======== ======== 2.99% 19.58% 12.32% 19.24% 34.01%(E) 13.23% 20.12% 47.93% 3.54% 20.52% ======= ======= ======= ======== ========= ======== ======== ======== ======== ======== $16,190 $ 1,197 $44,709 $ 11,828 $ 1 $424,965 $438,353 $327,542 $181,180 $137,811 1.11% 1.17% 1.40% 1.38% 1.49%(I) 0.58% 0.60% 0.61% 0.56% 0.64% 1.11% 1.17% 1.40% 1.69% 1,089.04%(I) 0.58% 0.60% 0.61% 0.56% 0.64% 0.52% 1.06% 0.12% 0.17% (0.05)%(I) 0.94% 0.84% 0.95% 1.09% 1.55% 0.52% 1.06% 0.12% (0.14)% (1,087.60)%(I) 0.94% 0.84% 0.95% 1.09% 1.55% 81% 93% 47% 35% 75%(F) 47% 35% 75% 81% 93%
-------------------------------------------------------------------------------- 29 AMERICAN BEACON SMALL CAP VALUE FUND FEDERAL TAX INFORMATION October 31, 2005 (Unaudited) -------------------------------------------------------------------------------- For corporate shareholders in the Fund, the percentage of ordinary dividend income distributed for the year ended October 31, 2005, which is designated as qualifying for the dividend-received deduction, is 78.8%. For shareholders in the Fund, the percentage of dividend income distributed for the year ended October 31, 2005, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is 19.4%. -------------------------------------------------------------------------------- 30 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT OF THE FUND (Unaudited) -------------------------------------------------------------------------------- Approval of Investment Advisory Agreements with Dreman Value Management, LLC, Metropolitan West Capital Management, LLC and SSgA Funds Management, Inc. At their August 12, 2005 meeting, the Trustees considered the approval of Investment Advisory Agreements between the Manager and Dreman Value Management, LLC ("Dreman"), Metropolitan West Capital Management, LLC ("MetWest Capital") and SSgA to add each firm as a sub-advisor to the Small Cap Value Fund. As part of the approval process, legal counsel to the Trusts and the independent Trustees sent an information request letter to Dreman, MetWest Capital and SSgA seeking certain relevant information. Each sub-advisor's response was provided to the Trustees for their review prior to their meeting, and the Trustees were provided with the opportunity to request any additional materials. The Trustees considered, among other materials, responses by the sub-advisors to inquiries requesting: - a description of the advisory and related services proposed to be provided to the Fund; - identification of the professional personnel to perform services for the Fund and their education, experience and responsibilities; - a comparison of the performance of accounts similar to the Fund managed by the sub-advisor with the performance of applicable indices; - an analysis of the proposed advisory fee, a comparison to the fees charged to other comparable clients and an explanation of any differences between the fee schedules; - whether the sub-advisor charges a lower advisory fee to other clients for which it provides services comparable to the services proposed for the Fund and if so, an explanation of the rationale for charging the other client(s) a lower fee; - a description of the portfolio managers' compensation, including any incentive arrangements, and if compensation is tied to performance, a description of the oversight mechanisms to prevent a manager with lagging performance from taking undue risks; - a description of the sub-advisor's proposed trading activities on behalf of the Fund - a summary of the sub-advisor's compliance program, a certification regarding the program, a discussion of material compliance issues, and a discussion of the chief compliance officer's experience; - a copy of the sub-advisor's code of ethics, report on any material violations and the required certification; - a description of conflicts of interest in managing the Fund; and - any other information the sub-advisor believed would be material to the Trustees' consideration of the agreement. -------------------------------------------------------------------------------- 31 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- In addition, representatives from each sub-advisor met with the Board's Investment Committee to provide an overview of the sub-advisor's operations, investment team, investment philosophy, investment process and performance. In considering the approval of each Investment Advisory Agreement with the applicable sub-advisor, the Trustees considered the following factors. First, the Trustees considered that the Manager had screened the universe of available small capitalization equity managers to identify those that would have added value to the Fund's performance over the short-term. In this regard, the Trustees considered that SSgA's small cap value accounts outperformed the Russell 2000 Value Index for the most recent quarter and for the 2004 and 2002 calendar years, with the 2003 calendar year being slightly behind the index but having absolute returns of 43.26%. In addition, the Trustees considered that Dreman's small cap value accounts and another investment company managed by Dreman outperformed the Russell 2000 Value Index for the most recent quarter and one-year and three-year periods. The Trustees also considered that MetWest Capital's small cap value accounts outperformed the Russell 2000 Value Index for the most recent quarter and for the 2004 and 2003 calendar years. Second, the Trustees considered that the proposed fee to be charged by each sub-advisor to the Fund was highly competitive with fees of comparable advisers and represented a discount from the sub-advisor's standard fee schedule for such services. With respect to potential economies of scale and potential profits to be earned by the sub-advisors, the Trustees considered the start-up nature of the Fund's relationship with each sub-advisor (except for MetWest Capital) and the fact that the sub-advisors' fee schedules are highly competitive and discounted from their standard fee schedules. Third, the Trustees considered the experience and knowledge of the investment team identified by each sub-advisor that would make investment decisions for the Fund. They also considered each sub-advisor's investment strategy and process. Fourth, the Trustees considered that each sub-advisor was prepared to reserve a material amount of investment capacity for the benefit of the Fund. Fifth, the Trustees considered that each sub-advisor represented that it would not engage in soft dollar arrangements in connection with executing Fund transactions. Finally, the Trustees considered the Manager's strong recommendation to retain each sub-advisor. Based on these considerations, the Trustees (1) concluded that the fees proposed to be paid to each sub-advisor under the applicable Investment Advisory Agreements are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from each sub-advisor's addition as a sub-advisor to the Fund and (3) approved the Investment Advisory Agreement with each sub- advisor. -------------------------------------------------------------------------------- 32 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (Unaudited) -------------------------------------------------------------------------------- The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* William F. Quinn** (57) Trustee and President, American Beacon Advisors, Inc. (1986-Present); President of Chairman (1989-2003) and Director (1979-1986, 2003-Present), Trust since 1987 American Airlines Federal Credit Union; Director, Crescent Real Estate Equities, Inc. (1994-Present); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present); Advisory Director, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002); Chairman, Committee for the Investment of Employee Benefits Defined Benefit Sub-Committee (1982-Present); Director, United Way of Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). Alan D. Feld** (68) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present). NON-INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (61) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).
-------------------------------------------------------------------------------- 33 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (44) Trustee since 2004 Vice President, Chief Financial Officer, Treasurer and 301 Commerce Street Secretary, Kimbell Art Foundation (1993-Present); Trustee, Suite 2240 Texas Christian University (1999-Present); Trustee, W.I. Fort Worth, Texas 76102 Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Richard A. Massman (62) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in energy, real estate, farming, ranching and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Stephen D. O'Sullivan (70) Trustee of Trust Consultant (1994-Present); Trustee, American Beacon Mileage since 1987 Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). R. Gerald Turner (59) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996- Present); Director, California Federal Dallas, Texas 75275 Preferred Capital Corp. (2001- 2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-Present); Member, United Way of Dallas Board of Directors; Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Member, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present). Kneeland Youngblood (49) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private 100 Crescent Court Suite equity firm) (1998-Present); Trustee, The Hockaday School 1740 Dallas, Texas 75201 (1997-Present); Director, Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign Relations (1995-Present); Director, Just For the Kids (1995-2001); Director, L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of Texas (1993-1999); Director, Starwood Financial Trust (1998-2001); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999- Present); Trustee, American Beacon Master Trust (1996-Present). OFFICERS TERM ------------------ One Year Brian E. Brett (45) VP since 2004 Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Nancy A. Eckl (43) VP of Trust since Vice President, Trust Investments, American Beacon Advisors, 1990 Inc. (1990-Present). Michael W. Fields (51) VP of Trust since Vice President, Fixed Income Investments, American Beacon 1989 Advisors, Inc. (1988-Present).
-------------------------------------------------------------------------------- 34 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS -- CONTINUED (Unaudited) --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ----------------- ------------------------------------------- OFFICERS (CONT.) Rebecca L. Harris (38) Treasurer since Vice President, Finance, American Beacon Advisors, Inc. 1995 (1995- Present). John B. Roberson (47) VP of Trust since Vice President, Client Relations & Special Projects, 1989 American Beacon Advisors, Inc. (2004-Present); Vice President, Director of Sales, American Beacon Advisors, Inc. (1991-2004); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-Present). Christina E. Sears (34) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. Officer since (2004- Present); Senior Compliance Analyst, American Beacon 2004 and Advisors, Inc. (1998-2004). Secretary since 2005
--------------- * The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 70, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn and Feld are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is President of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's investment advisors. -------------------------------------------------------------------------------- 35 AMERICAN BEACON FUNDS PRIVACY POLICY (Unaudited) -------------------------------------------------------------------------------- The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. -------------------------------------------------------------------------------- 36 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 37 (AMERICAN AADVANTAGE FUNDS LOGO) -------------------------------------------------------------------------------- DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts, if you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
-------------------------------------------------------------------------------- (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds ------------------- 4151 Amon Carter Blvd., MD 2450 Call (800) 658-5811 Fort Worth, TX 76155 AMR Class(SM) ------------- Call (800) 345-2345 PlanAhead Class(R) and Service Class ------------------------------------ Call (800) 388-3344
-------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments provided in each A description of the policies and procedures the Fund uses semi-annual and annual report, the Fund files a complete to determine how to vote proxies relating to portfolio schedule of its portfolio holdings with the Securities and securities is available in the Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge third fiscal quarters. The Fund's Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. The Fund's proxy voting record for the most reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Fund's Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference Room website at www.sec.gov. The Fund's proxy voting record may may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009. schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ERNST & YOUNG LLP FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri Chicago, Illinois Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. -------------------------------------------------------------------------------- American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Small Cap Value Fund is a service mark of American Beacon Advisors, Inc. AR 10/05 535726 ITEM 2. CODE OF ETHICS. The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the "Code"). The Trust did not amend the Code nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Trust's Board of Trustees has determined that Stephen O'Sullivan, a member of the Trust's Audit and Compliance Committee, is an "audit committee financial expert" as defined in Form N-CSR. Mr. O'Sullivan is "independent" as defined in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)
Audit Fees Fiscal Year Ended ---------- ----------------- $19,903 12/31/2003 $178,109* 10/31/2004 $41,994* 12/31/2004 $212,628 10/31/2005
* Revised to include additional audit fees assessed in 2005 relating to 2004 audit (b)
Audit-Related Fees Fiscal Year Ended ------------------ ----------------- $0 12/31/2003 $0 10/31/2004 $0 12/31/2004 $26,460* 10/31/2005
* Attestation services related to Interfund Lending Program (c)
Tax Fees Fiscal Year Ended -------- ----------------- $4,500* 12/31/2003 $0 10/31/2004 $0 12/31/2004 $28,847** 10/31/2005
* For review of 2002 tax returns ** For review of 2003 and 2004 tax returns (d)
All Other Fees Fiscal Year Ended -------------- ----------------- $0 12/31/2003 $0 10/31/2004 $0 12/31/2004 $0 10/31/2005
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust's principal accountant: - to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts' financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors; - to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser ("adviser affiliate") that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; - to consider whether the non-audit services provided by a Trust's auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor's independence; - to review the arrangements for and scope of the annual audit and any special audits; and - to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service. The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting. (e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g)
Aggregate Non-Audit Fees for Services Rendered to the: ------------------------------------------------------ Adviser's Affiliates Providing Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended ---------- ------- ------------------------------ ----------------- $4,500 $0 N/A 12/31/2003 $0 $0 N/A 10/31/2004 $0 $0 N/A 12/31/2004 $55,307 $0 N/A 10/31/2005
(h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. 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. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Filed herewith as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (a)(3) Not applicable. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-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 Beacon Funds By /s/ William F. Quinn -------------------- William F. Quinn President Date: January 6, 2006 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/ William F. Quinn -------------------- William F. Quinn President Date: January 6, 2006 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: January 6, 2006