N-CSRS 1 ncsr0406.txt AMBEACON N-CSR APRIL 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS 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, 2006 Date of reporting period: April 30, 2006 ITEM 1. REPORTS 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] SEMI-ANNUAL REPORT [PHOTO] APRIL 30, 2006 INTERNATIONAL EQUITY FUND 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....... 6 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 April 30, 2006 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, I am pleased to present you with the Semi-Annual Report for the American Beacon International Equity Fund for the six months ended April 30, 2006. During this time, the Dow Jones Industrial Average posted gains of 10.22%, the S&P 500 Index increased by 9.64%, and the MSCI EAFE Index returned 22.89%. The Institutional Class of the International Equity Fund posted gains of 22.79% for the six-month period, and 30.96%, 29.70%, 11.30%, and 10.37% for the one-year, three-year, five-year, and ten-year time periods, respectively. I hope that the enclosed market overviews, portfolio listings, and detailed financial data are helpful to you. 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 current performance may be lower or higher than the performance data quoted. 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 -------------------------------------------------------------------------------- Global economic growth remained strong during the six-month period ended April 30, 2006. In spite of this economic strength and volatile food and energy prices, inflation was relatively subdued worldwide. Yet, in this environment the world's two largest central banks tightened monetary policy. The U.S. Federal Reserve Board increased the federal funds target rate in four quarter-point increments to 4.75%. The European Central Bank raised short-term rates twice to 2.50%, after keeping them unchanged since June 2003. In March 2006, the Bank of Japan ended its deflation-fighting policy, which could allow short-term rates to increase from their effective zero percent rate. Even after these changes, interest rates remained at levels considered supportive of further economic growth. The possibility of future rate increases remained. Robust economic growth sustained strong demand for oil and other commodities, which kept prices high during most of the reporting period. In particular, many industrial metals prices continued to rise at double-digit rates, led by zinc, whose contract price rose 107% over the six month period. This contributed to economic growth in countries that are tied to mining and industrial commodities, such as Australia and Canada and emerging markets in Asia and Latin America. Notably, availability of cash and historically low interest rates fueled mergers and acquisitions, as well as leveraged buyouts and other corporate activity, which intensified during the period. In just the first quarter of 2006, the total value of global deals announced was $923 billion, almost 38% more than in the comparable period in 2005. About $416 billion (45%) was attributed to European companies, which have been the most active worldwide. In this environment, global equity markets performed strongly, particularly outside the U.S. As of April 30, 2006, the six-month total return for the MSCI EAFE Index was 23.10%, calculated in U.S. dollars. By comparison, the total return for the MSCI USA Index was 9.85%. 2 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the International Equity Fund returned 22.79% for the six months ended April 30, 2006. The Fund underperformed the MSCI EAFE Index ("Index") return of 22.89% and the Lipper International Funds Index return of 24.13% for the period.
ANNUALIZED TOTAL RETURNS --------------------------------------- PERIODS ENDED 4/30/06 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1)...... 22.79% 30.96% 11.30% 10.37% PlanAhead Class(1).......... 22.67% 30.65% 11.11% 10.13% AMR Class(1)................ 23.04% 31.31% 11.58% 10.66% Service Class(1,2).......... 22.49% 30.27% 10.91% 10.03% Lipper Int'l. Funds Index... 24.13% 36.65% 10.10% 8.45% MSCI EAFE Index............. 22.89% 33.49% 9.18% 6.68%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 4/30/96 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 4/30/96. The Fund underperformed the Index by 0.10% over the six-month period primarily due to Fund expenses. Although stock selection was negative, it was more than offset by positive country allocation. Country allocation added value as the Fund had an overweight in Norway, which was the best-performing EAFE market for the period with a gain of nearly 40%. Additional value was added by investing in South Korea, a non-EAFE market, which returned over 36%. Although stock selection in the Netherlands and Switzerland had a significantly positive impact, it was more than offset by negative stock selections in Norway, France and the United Kingdom. Frontline (down 12.8%), was the biggest disappointment in Norway, while two telecommunications companies, France Telecom (down 10.2%) and Vodafone Group (down 8.7%) contributed to the Fund's underperformance in France and the United Kingdom. In the Netherlands, significant positions in TNT and ING Groep added value, as each gained over 40% for the period. In Switzerland, two financial holdings led the way, as Credit Suisse Group and Zurich Financial Services each gained over 40% for the six months. Although economic and market conditions vary from period to period, the Fund's primary strategy of investing in undervalued companies with above-average earnings growth expectations remains consistent. 3 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Sanofi-Synthelabo 2.0% Total S.A. 1.9% Royal Bank of Scotland Group plc 1.8% France Telecom S.A. 1.7% GlaxoSmithKline plc 1.7% BNP Paribas 1.5% BAE Systems plc 1.4% Koninklijke (Royal) Philips Electronics N.V. 1.4% Vodafone Group plc 1.3% Deutsche Post AG 1.3%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 27.8% Consumer Discretionary 14.3% Industrials 10.9% Energy 8.4% Consumer Staples 8.0% Health Care 7.9% Telecommunication Services 7.7% Information Technology 6.5% Materials 5.0% Utilities 3.6%
REGIONAL ALLOCATION*
PACIFIC RIM NORTH AMERICA CENTRAL AMERICA EUROPE ----------- ------------- --------------- ------ 25.1% 2.2% 0.2% 72.5%
(PIE CHART) 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 November 1, 2005 through April 30, 2006. 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 4 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 11/1/05- 11/1/05 4/30/06 4/30/06 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,227.87 $4.12 Hypothetical $1,000.00 $1,021.10 $3.73 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,226.66 $5.51 Hypothetical $1,000.00 $1,019.84 $5.00 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,224.95 $6.36 Hypothetical $1,000.00 $1,019.08 $5.77 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,230.43 $2.68 Hypothetical $1,000.00 $1,022.39 $2.43 (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 through February 28, 2006. Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.75%, 1.00%, 1.15%, 0.48%, for the Institutional, PlanAhead, Service, and AMR 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 (181) by days in the year (365) to reflect the half-year period. 5 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) AUSTRALIA - 1.44% COMMON STOCKS Alumina Ltd. ................. 732,248 $ 3,983 BlueScope Steel Ltd. ......... 932,935 5,444 Commonwealth Bank of Australia................... 208,440 7,443 Macquarie Airports Management Ltd. ....................... 2,475,943 6,170 Macquarie Infrastructure Group....................... 766,305 2,078 Multiplex Group............... 1,181,442 2,747 National Australia Bank....... 342,730 9,793 News Corp. ................... 182,280 3,128 ---------- TOTAL AUSTRALIA........... 40,786 ---------- CANADA - 2.00% COMMON STOCKS Alcan, Inc.(+)................ 78,471 4,097 BCE, Inc. .................... 306,060 7,542 Celestica, Inc.(+)............ 728,000 8,185 Husky Energy, Inc.+........... 113,480 6,679 Jean Coutu Group, Inc.(+)+.... 371,200 3,947 Manulife Financial Corp. ..... 218,098 14,240 Rogers Communications, Inc.(+)..................... 283,582 12,020 ---------- TOTAL CANADA.............. 56,710 ---------- CHINA - 0.65% COMMON STOCKS PetroChina Company Ltd. ...... 16,846,100 18,577 ---------- TOTAL CHINA............... 18,577 ---------- DENMARK - 0.14% COMMON STOCKS Vestas Wind Systems(+)........ 141,526 3,841 ---------- TOTAL DENMARK............. 3,841 ---------- FINLAND - 1.49% COMMON STOCKS KCI Konecranes Oyj(+)......... 432,600 8,017 Nokia Oyj(+).................. 293,400 6,681 Stora Enso Oyj, R Shares...... 232,400 3,641 Stora Enso Oyj, A Shares...... 68,102 1,078 Stora Enso Oyj................ 213,542 3,352 UPM-Kymmene Oyj............... 835,200 19,599 ---------- TOTAL FINLAND............. 42,368 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) FRANCE - 12.61% COMMON STOCKS Accor S.A. ................... 105,680 $ 6,652 AXA........................... 930,921 34,165 BNP Paribas................... 442,478 41,812 BNP Paribas(+)................ 28,697 2,619 Carrefour S.A. ............... 405,886 23,545 Compagnie Generale des Etablissements Michelin+.... 116,670 8,419 France Telecom S.A.+.......... 2,062,872 48,173 Lafarge S.A. ................. 71,862 8,840 Lagardere S.C.A. ............. 117,800 9,734 Publicis Groupe SA(+)......... 173,692 7,220 Sanofi-Synthelabo............. 615,287 58,024 Schneider Electric S.A. ...... 91,500 10,360 Suez S.A.+.................... 367,235 14,450 Thomson S.A.(+)............... 132,825 2,748 Total S.A. ................... 189,771 52,480 Vinci S.A. ................... 140,982 14,007 Vivendi SA(+)................. 389,500 14,221 ---------- TOTAL FRANCE.............. 357,469 ---------- GERMANY - 7.62% COMMON STOCKS Allianz AG(+)+................ 42,802 7,166 BASF AG+...................... 58,310 4,999 Bayer AG+..................... 113,510 5,243 Bayerische Motoren Werke Akitengesellshaft........... 478,244 26,011 Celesio AG+................... 130,045 12,239 Deutsche Bank AG.............. 141,300 17,349 Deutsche Post AG.............. 1,412,630 37,657 Deutsche Telekom(+)+.......... 479,200 8,657 E.ON AG+...................... 175,654 21,392 Fresenius Medical Care AG(+).. 44,222 5,306 Infineon Technologies AG(+)... 491,500 6,009 Muenchener Rueckversicherung- Gesellschaft AG+............ 47,997 6,801 Siemens AG.................... 350,426 33,157 Volkswagen AG+................ 311,400 24,047 ---------- TOTAL GERMANY............. 216,033 ----------
See accompanying notes -------------------------------------------------------------------------------- 6 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) HONG KONG - 1.37% COMMON STOCKS Cheung Kong Holdings Ltd. .... 835,500 $ 9,418 Hang Lung Group Ltd.(+)....... 2,451,000 5,817 Henderson Land Development Company Ltd.(+)............. 2,036,200 11,963 Hutchison Whampoa Ltd. ....... 199,000 1,958 Hutchison Whampoa Ltd., Right(+).................... 10 -- Swire Pacific Ltd. ........... 957,100 9,826 ---------- TOTAL HONG KONG........... 38,982 ---------- IRELAND - 2.20% COMMON STOCKS Allied Irish Banks............ 379,890 9,164 Bank of Ireland............... 621,900 11,683 Bank of Ireland(+)............ 591,400 11,087 CRH plc....................... 343,570 12,613 CRH plc....................... 178,925 6,580 Depfa Bank plc................ 594,921 11,168 ---------- TOTAL IRELAND............. 62,295 ---------- ITALY - 3.92% COMMON STOCKS Assicurazioni Generali S.p.A.(+)................... 184,400 6,912 Banco Popolare di Verona e Novara Scrl+................ 314,308 8,847 Enel S.p.A.(+)................ 1,175,700 10,160 Eni S.p.A. ................... 797,391 24,345 Mediaset SpA(+)............... 1,400,056 17,716 Telecom Italia S.p.A.+........ 3,653,489 10,232 UniCredito Italiano S.p.A. ... 4,366,833 32,890 ---------- TOTAL ITALY............... 111,102 ---------- JAPAN - 15.88% COMMON STOCKS Acom Company Ltd. ............ 125,030 7,291 Canon, Inc. .................. 191,400 14,641 East Japan Railway Co.(+)..... 1,429 11,157 Fuji Photo Film Company Ltd.(+)..................... 114,400 3,888 Hitachi Ltd. ................. 685,500 5,099 Honda Motor Company Ltd. ..... 244,600 17,379 Hoya Corp. ................... 231,700 9,381 Japan Tobacco, Inc.(+)........ 2,542 10,225 Kao Corp. .................... 285,600 7,675 KDDI Corp. ................... 678 4,180 Konica Minolta Holdings, Inc. ....................... 945,440 12,455
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Kuraray Company Ltd.(+)....... 225,000 $ 2,776 Mabuchi Motor Company Ltd.+... 69,000 3,890 Minebea Company Ltd. ......... 1,055,700 6,833 Mitsubishi Tokyo Financial Group, Inc. ................ 1,342 21,097 Murata Manufacturing Company Ltd.(+)..................... 105,600 7,688 NEC Corp. .................... 417,300 2,921 Nidec Corp.(+)................ 102,000 7,865 Nintendo Company Ltd. ........ 24,100 3,598 Nippon Express Co.+........... 2,023,700 10,681 Nissan Motor Company Ltd. .... 2,306,900 30,329 Nomura Holdings, Inc. ........ 848,000 19,177 Promise Company Ltd. ......... 196,150 12,093 Ricoh Company Ltd.(+)......... 528,800 10,496 ROHM Company Ltd. ............ 107,200 11,411 Sankyo Company Ltd. .......... 77,200 5,478 Sekisui House Ltd. ........... 583,600 9,036 SFCG Co Ltd.(+)+.............. 23,135 5,297 Shin-Etsu Chemical Company Ltd. ....................... 82,600 4,773 Sompo Japan Insurance, Inc. ....................... 376,900 5,462 Sony Corp. ................... 319,002 16,025 Sumitomo Mitsui Financial Group, Inc. ................ 2,077 22,801 Sumitomo Trust and Banking Company Ltd. ............... 829,700 8,832 Takeda Chemical Industries Ltd. ....................... 514,000 31,418 Takefuji Corp. ............... 393,370 25,565 TDK Corp.(+).................. 110,500 9,248 THK Co Ltd.(+)................ 214,900 7,021 Tokyo Gas Company Ltd.(+)..... 2,315,200 11,203 Toyoda Gosei Company Ltd. .... 200,888 5,540 Toyota Motor Corp. ........... 83,100 4,861 Yamanouchi Pharmaceutical Company Ltd. ............... 294,800 12,298 Yamato Holdings Corp. ........ 565,300 11,270 ---------- TOTAL JAPAN............... 450,354 ---------- LUXEMBOURG - 0.18% COMMON STOCKS Stolt-Nielsen SA(+)........... 179,260 5,103 ---------- TOTAL LUXEMBOURG.......... 5,103 ---------- MEXICO - 0.17% COMMON STOCKS Telefonos de Mexico, S.A. de C.V., ADR................... 214,800 4,724 ---------- TOTAL MEXICO.............. 4,724 ----------
See accompanying notes -------------------------------------------------------------------------------- 7 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) NETHERLANDS - 5.67% COMMON STOCKS ABN AMRO Holding N.V.+........ 398,828 $ 11,920 Heineken N.V. ................ 291,500 11,809 IHC Caland N.V.(+)............ 75,300 8,079 ING Groep N.V. ............... 840,944 34,226 Koninklijke (Royal) Philips Electronics N.V.(+)......... 1,146,567 39,562 TNT N.V. ..................... 749,434 26,984 Unilever N.V. ................ 195,517 14,121 VNU N.V. ..................... 189,000 6,488 Wolters Kluwer N.V.+.......... 287,180 7,482 ---------- TOTAL NETHERLANDS......... 160,671 ---------- NORWAY - 1.60% COMMON STOCKS DnB Nor ASA+.................. 540,800 7,500 Frontline Ltd.+............... 259,600 8,400 Statoil ASA................... 266,900 8,788 Telenor ASA................... 1,796,490 20,835 ---------- TOTAL NORWAY.............. 45,523 ---------- PORTUGAL - 0.36% COMMON STOCKS Portugal Telecom, SGPS, S.A. ....................... 792,250 10,085 ---------- TOTAL PORTUGAL............ 10,085 ---------- SINGAPORE - 1.26% COMMON STOCKS Creative Technology Ltd. ..... 633,920 4,130 Development Bank of Singapore Group Holdings Ltd. ........ 1,889,455 21,274 Flextronics International Ltd.(+)..................... 899,000 10,213 ---------- TOTAL SINGAPORE........... 35,617 ---------- SOUTH KOREA - 3.20% COMMON STOCKS Kookmin Bank, ADR............. 252,110 22,450 Korea Electric Power Corp. ... 86,860 3,859 LG Electronics, Inc. ......... 76,760 6,356 POSCO......................... 44,432 12,389 Samsung Electronics Company Ltd.++...................... 37,943 25,907 Samsung Electronics Company Ltd., GDR#.................. 21,600 7,366 Shinhan Financial Group Company Ltd. ............... 82,320 4,102 SK Telecom Company Ltd. ...... 34,976 8,214 ---------- TOTAL SOUTH KOREA......... 90,643 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) SPAIN - 2.77% COMMON STOCKS Banco Bilbao Vizcaya Argentaria, S.A.(+)......... 525,080 $ 11,599 Banco Popular Espanol SA...... 506,100 7,643 Banco Santander Central Hispano SA.................. 34,750 539 Banco Santander Central Hispano SA, GDR............. 560,544 8,648 Enagas S.A.(+)................ 159,919 3,519 Iberdrola S.A. ............... 218,397 7,114 Repsol YPF S.A. .............. 276,340 8,255 Repsol YPF SA, ADR(+)......... 189,300 5,652 Telefonica S.A. .............. 1,592,630 25,518 ---------- TOTAL SPAIN............... 78,487 ---------- SWEDEN - 1.98% COMMON STOCKS Atlas Copco AB................ 472,530 13,966 Autoliv, Inc. ................ 150,650 8,393 Electrolux AB+................ 98,580 2,954 ForeningsSparbanken AB+....... 139,000 3,825 Nordea AB..................... 617,020 7,963 Securitas AB.................. 381,930 7,966 Telefonaktiebolaget LM Ericsson(+)+................ 2,006,000 7,142 Volvo AB...................... 78,140 3,929 ---------- TOTAL SWEDEN.............. 56,138 ---------- SWITZERLAND - 6.58% COMMON STOCKS Adecco SA..................... 138,320 8,577 Ciba Specialty Chemicals Holding, Inc. .............. 178,450 10,950 Compagnie Financiere Richemont AG.......................... 183,900 9,527 Credit Suisse Group+.......... 530,239 33,306 Geberit AG.................... 974 1,136 Lonza Group AG................ 53,670 3,808 Nestle SA..................... 68,027 20,748 Novartis AG................... 577,939 33,156 Swiss Reinsurance+............ 282,900 20,644 Swiss Reinsurance, Right(+)... 282,900 -- Syngenta AG................... 80,851 11,278 UBS AG........................ 72,170 8,554 Zurich Financial Services AG.......................... 102,513 24,942 ---------- TOTAL SWITZERLAND......... 186,626 ----------
See accompanying notes -------------------------------------------------------------------------------- 8 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) UNITED KINGDOM - 21.71% COMMON STOCKS Alliance Unichem plc.......... 393,650 $ 6,378 AMVESCAP plc.................. 339,930 3,716 Anglo American plc............ 176,995 7,536 Aviva plc..................... 898,640 13,126 BAE Systems plc............... 5,248,375 39,958 Barclays Bank plc............. 1,204,100 15,041 Barratt Development plc....... 396,343 7,170 Boots Group PLC(+)............ 806,625 10,311 BP plc........................ 2,145,328 26,465 British American Tobacco Industries plc.............. 916,252 23,425 British Sky Broadcasting Group plc......................... 914,390 8,762 BT Group plc.................. 1,595,443 6,379 Cadbury Schweppes plc......... 827,350 8,207 Centrica plc.................. 2,136,810 11,641 Compass Group plc............. 4,029,135 17,376 Diageo plc.................... 1,219,343 20,123 Gallaher Group plc(+)......... 503,903 8,004 GKN plc....................... 1,659,018 9,484 GlaxoSmithKline plc........... 1,679,844 47,665 HBOS plc...................... 625,351 10,976 HSBC Holdings plc............. 617,749 10,674 HSBC Holdings plc(+).......... 457,700 7,804 Imperial Tobacco Group plc(+)...................... 331,040 10,287 J. Sainsbury plc.............. 1,454,634 8,866 Kingfisher plc................ 3,292,698 13,525 Marks and Spencer Group plc... 1,034,718 11,048 National Grid plc............. 1,303,978 13,685 NETeller plc(+)............... 7,681 109 Pearson plc(+)................ 512,020 7,096 Reckitt Benckiser plc(+)...... 193,300 7,046
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Rentokil Initial plc.......... 1,438,070 $ 4,189 Reuters Group plc............. 1,147,272 8,138 Rolls-Royce plc............... 1,084,550 9,424 Rolls-Royce plc(+)............ 58,348,790 106 Royal Bank of Scotland Group plc......................... 1,586,559 51,817 Royal Dutch Shell plc, ADR.... 31,660 2,157 Royal Dutch Shell plc, B Shares...................... 648,129 23,177 Royal Dutch Shell plc, A Shares...................... 911,809 31,266 Shire plc(+).................. 363,440 5,667 Smiths Group plc.............. 438,030 8,143 Standard Chartered plc........ 177,350 4,709 Tate & Lyle plc............... 990,077 10,020 TI Automotive(+)h............. 655,200 -- Unilever plc.................. 1,844,521 19,593 Vodafone Group plc............ 16,028,944 37,852 Yell Group plc................ 811,330 7,605 ---------- TOTAL UNITED KINGDOM...... 615,746 ---------- SHORT TERM INVESTMENTS - 14.15% American Beacon Enhanced Cash Trust*P..................... 196,978,229 196,978 American Beacon Money Market Select Fund*P............... 204,369,205 204,369 ---------- TOTAL SHORT TERM INVESTMENTS............. 401,347 ---------- TOTAL INVESTMENTS - 108.95% (COST $2,368,749)........... 3,089,227 ---------- LIABILITIES, NET OF OTHER ASSETS - (8.95%)............ (253,656) ---------- TOTAL NET ASSETS - 100.00%.... $2,835,571 ==========
--------------- GDR - Global Depository Receipt ADR - American Depository Receipt (+) Non-income producing security. + All or a portion of this security is on loan at April 30, 2006. See Note 5. # 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 $7,366 or 0.26% of net assets. h Valued at fair value pursuant to procedures approved by the Board of Trustees. * The Fund/Trust is affiliated by having the same investment advisor. See Note 2. P All or a portion of this security is purchased with cash collateral for securities loaned. See accompanying notes -------------------------------------------------------------------------------- 9 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- -------- -------------- Australia SPI Index.............................. 79 Jun 2006 $ 7,872 $ 285 Canada S&PCDA 60 Index........................... 90 Jun 2006 11,034 140 France CAC 40 Index.............................. 227 Jun 2006 14,539 92 Germany DAX Index................................ 56 Jun 2006 10,630 90 Hang Seng Index.................................. 22 May 2006 2,345 0 Italy MIB 30 Index............................... 24 Jun 2006 5,650 (34) Netherlands 200 AEX Index........................ 43 May 2006 5,055 66 Spain IBEX 35 Index.............................. 38 May 2006 5,665 72 Sweden OMX Index................................. 256 May 2006 3,591 (27) Tokyo FE TOPIX Index............................. 253 Jun 2006 38,194 1,448 UK FTSE 100 Index................................ 324 Jun 2006 35,476 78 -------- ------ $140,051 $2,210 ======== ======
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (DOLLARS IN THOUSANDS)
SETTLEMENT MARKET UNREALIZED CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS) -------------------- ---------- -------- ----------- 3,253 Australian Dollar..................................... 6/16/2006 $ 2,469 $ (128) 4,123 Canadian Dollar....................................... 6/16/2006 3,693 (136) 10,609 Euro Currency........................................ 6/16/2006 13,427 (507) 1,269,657 Japanese Yen...................................... 6/16/2006 11,228 (369) 6,533 Pound Sterling........................................ 6/16/2006 11,921 (545) 9,653 Swedish Krona......................................... 6/16/2006 1,317 (66) 3,609 Swiss Franc........................................... 6/16/2006 2,925 (135) -------- ------- TOTAL CONTRACTS TO DELIVER (RECEIVABLE AMOUNT $45,094)............................... $ 46,980 $(1,886) -------- ------- CONTRACTS TO RECEIVE 12,395 Australian Dollar.................................... 6/16/2006 $ 9,409 $ 258 15,460 Canadian Dollar...................................... 6/16/2006 13,846 459 39,737 Euro Currency........................................ 6/16/2006 50,293 2,382 24,448 Japanese Yen......................................... 6/16/2006 44,612 1,956 5,265,974 Pound Sterling.................................... 6/16/2006 46,569 1,328 33,766 Swedish Krona........................................ 6/16/2006 4,607 269 15,626 Swiss Franc.......................................... 6/16/2006 12,666 636 -------- ------- TOTAL CONTRACTS TO RECEIVE (PAYABLE AMOUNT $174,714)................................. $182,002 $ 7,288 ======== ======= NET CURRENCY FLUCTUATION.................................... $ 5,402 =======
See accompanying notes -------------------------------------------------------------------------------- 10 AMERICAN BEACON INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- SECTOR DIVERSIFICATION
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 13.96% Consumer Staples............................................ 7.69% Energy...................................................... 7.33% Financials.................................................. 26.37% Health Care................................................. 7.48% Industrials................................................. 10.94% Information Technology...................................... 5.71% Materials................................................... 4.69% Telecommunication Services.................................. 7.21% Utilities................................................... 3.42% Short Term Investments...................................... 14.15% Liabilities, Net of Other Assets............................ (8.95)% ------- 100.00% =======
See accompanying notes -------------------------------------------------------------------------------- 11 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES April 30, 2006 (Unaudited) (in thousands, except share and per share amounts) -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $ 2,687,880 Investments in affiliated securities, at value(B)....... 401,347 Foreign currency, at value(D)........................... 8,241 Deposit with brokers for futures contracts.............. 6,591 Receivable for investments sold......................... 9,869 Dividends and interest receivable....................... 11,358 Receivable for fund shares sold......................... 4,036 Receivable for tax reclaims............................. 524 Unrealized appreciation on foreign currency contracts... 5,402 ----------- TOTAL ASSETS........................................ 3,135,248 ----------- LIABILITIES: Payable for investments purchased....................... 13,617 Payable upon return of securities loaned................ 279,983 Payable for fund shares redeemed........................ 1,776 Payable for variation margin on open futures contracts.............................................. 939 Management and investment advisory fees payable (Note 2)..................................................... 2,354 Administrative service and service fees payable......... 592 Other liabilities....................................... 416 ----------- TOTAL LIABILITIES................................... 299,677 ----------- NET ASSETS.................................................. $ 2,835,571 =========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 1,983,226 Undistributed net investment income..................... 10,385 Accumulated net realized gain (loss).................... 111,583 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................. 730,377 ----------- NET ASSETS.................................................. $ 2,835,571 =========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class..................................... 66,138,823 =========== PlanAhead Class......................................... 30,281,383 =========== Service Class........................................... 184,862 =========== AMR Class............................................... 22,814,418 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class..................................... $ 23.77 =========== PlanAhead Class......................................... $ 23.55 =========== Service Class........................................... $ 23.43 =========== AMR Class............................................... $ 23.92 =========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 1,967,402 (B) Cost of investments in affiliated securities............ 401,347 (C) Market value of securities on loan...................... 266,413 (D) Cost of foreign currency................................ 8,017
See accompanying notes -------------------------------------------------------------------------------- 12 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF OPERATIONS Six Months Ended April 30, 2006 (Unaudited) (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)*........................................ $ 18,326 Dividend income from affiliated securities.............. 975 Interest income......................................... 76 Income derived from securities lending, net............. 236 Investment income allocated from the Portfolio.......... 15,160 Expenses allocated from the Portfolio................... (4,050) Other income............................................ 1 -------- TOTAL INVESTMENT INCOME............................. 30,724 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 1,551 Administrative service fees (Note 2): Institutional Class................................... 1,759 PlanAhead Class....................................... 784 Service Class......................................... 4 Transfer agent fees: Institutional Class................................... 99 PlanAhead Class....................................... 57 Service Class......................................... -- AMR Class............................................. 8 Fund accounting fees.................................... 225 Professional fees....................................... 27 Registration fees and expenses.......................... 65 Service fees: PlanAhead Class (Note 2).............................. 784 Service Class (Note 2)................................ 4 Distribution fees -- Service Class (Note 2)............. 4 Prospectus and shareholder reports...................... 151 Other expenses.......................................... 11 -------- TOTAL EXPENSES...................................... 5,533 -------- Net (fees waived and expenses reimbursed)/recouped by Manager (Note 2)....................................... (1) -------- NET EXPENSES........................................ 5,532 -------- NET INVESTMENT INCOME....................................... 25,192 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments........................................... 55,412 Commission recapture.................................. 53 Foreign currency translations......................... 7,790 Futures contracts..................................... (4,757) Net realized gain (loss) allocated from Portfolio..... 62,091 Change in net unrealized appreciation or depreciation of: Investments........................................... 18,855 Futures contracts..................................... (2,057) Foreign currency translations......................... 102,232 Net change in unrealized gain/loss allocated from Portfolio............................................ 259,383 -------- NET GAIN (LOSS) ON INVESTMENTS...................... 499,002 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $524,194 ======== * Foreign taxes......................................... $ 1,531
See accompanying notes -------------------------------------------------------------------------------- 13 AMERICAN BEACON INTERNATIONAL EQUITY FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, OCTOBER 31, 2006 2005 -------------- ----------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 25,192 $ 47,523 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions........... 120,589 186,828** Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations........................................... 378,413 44,556 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 524,194 278,907 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class................................... (25,843) (13,529) PlanAhead Class....................................... (10,419) (4,004) Service Class......................................... (39) (22) AMR Class............................................. (10,085) (7,644) Net realized gain on investments: Institutional Class................................... (80,744) -- PlanAhead Class....................................... (36,241) -- Service Class......................................... (195) -- AMR Class............................................. (28,011) -- ---------- ---------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (191,577) (25,199) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 277,246 766,799 Reinvestment of dividends and distributions............. 176,178 22,373 Cost of shares redeemed................................. (248,892) (545,309) Redemption fees......................................... 128 58 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................................. 204,660 243,921 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS....................... 537,277 497,629 ---------- ---------- NET ASSETS: Beginning of period..................................... 2,298,294 1,800,665 ---------- ---------- END OF PERIOD*.......................................... $2,835,571 $2,298,294 ========== ========== * Includes undistributed net investment income (loss) of..................................................... $ 10,385 $ 38,005 ========== ========== ** Includes $902 payment by affiliate (Note 2).
See accompanying notes -------------------------------------------------------------------------------- 14 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS April 30, 2006 (unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") 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") 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. Reorganization Prior to March 1, 2006, the American Beacon International Equity Fund (the "Fund") invested all of its investable assets in the International Equity Portfolio (the "Portfolio") of the American Beacon Master Trust. At the close of business on February 28, 2006, the American Beacon Master Trust International Equity Portfolio redeemed for cash and securities the investment of the American Independence Funds Trust International Equity Multi-Manager Stock Fund (the "Redeeming Fund") as follows (in thousands): Cash........................................................ $ 9.583 Securities at market value.................................. $94.585
Upon completion of the Redeeming Fund transaction, the American Beacon International Equity Fund was the sole shareholder in the American Beacon Master Trust International Equity Portfolio ("the Terminating Portfolio"). Accordingly, on February 28, 2006 the American Beacon International Equity Fund withdrew its interest in the Terminating Portfolio. The Fund received a distribution of cash and securities from the Terminating Portfolio with a market value equal to the Fund's investment in the Terminating Portfolio in the amount of $2,598,672 at the close of business. The Terminating Portfolio then ceased operations. The following is a summary of the significant accounting policies followed by the Funds. -------------------------------------------------------------------------------- 15 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (unaudited) -------------------------------------------------------------------------------- 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 Fee -- 0.25% PLANAHEAD CLASS General public and investors investing through an Administrative Service intermediary Fee -- 0.25% Service Fee -- 0.25% SERVICE CLASS Investors investing through an intermediary Administrative Service Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- 0.25% 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. Redemption Fees The Fund imposes a 2% redemption fee on certain Institutional, PlanAhead Service and AMR Class 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. The fee is retained by the class that imposes the fee. Effective May 1, 2006, the fee will be allocated to all classes of the Fund based on their respective net assets. 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. -------------------------------------------------------------------------------- 16 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (unaudited) -------------------------------------------------------------------------------- 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 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 .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. -------------------------------------------------------------------------------- 17 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (unaudited) -------------------------------------------------------------------------------- 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 .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 plus a fee for each Board meeting attended. At April 30, 2006, 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 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 April 30, 2006, 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 charac- -------------------------------------------------------------------------------- 18 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (unaudited) -------------------------------------------------------------------------------- ter 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 six months ended April 30, 2006 and fiscal year ended October 31, 2005 (in thousands):
SIX MONTHS ENDED YEAR ENDED APRIL 30, 2006 OCTOBER 31, 2005 ---------------- ---------------- (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class..................................... $ 41,982 $13,529 PlanAhead Class......................................... 18,822 4,004 Service Class........................................... 101 22 AMR Class............................................... 14,547 7,644 LONG-TERM CAPITAL GAIN Institutional Class..................................... 64,611 -- PlanAhead Class......................................... 28,968 -- Service Class........................................... 156 -- AMR Class............................................... 22,390 -- -------- ------- TOTAL DISTRIBUTIONS PAID............................ $191,577 $25,199 -------- -------
As of April 30, 2006, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes... $2,400,188 Unrealized appreciation..................................... 708,494 Unrealized depreciation..................................... (19,455) ---------- Net unrealized appreciation/(depreciation).................. 689,039 Undistributed ordinary income............................... 61,471 Undistributed long-term gain/(loss)......................... 84,875 ---------- Distributable earnings...................................... $ 835,385 ==========
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. -------------------------------------------------------------------------------- 19 AMERICAN BEACON INTERNATIONAL EQUITY FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (unaudited) -------------------------------------------------------------------------------- Accordingly, the following amounts represent current year permanent differences that have been reclassified as of April 30, 2006 (in thousands): Paid-in-capital............................................. $ 2,797 Undistributed net investment income......................... (6,426) Accumulated net realized gain (loss)........................ 3,629 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.................... --
4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Fund (shares and dollars in thousands): Six Months Ended April 30, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- ----------------- ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------ --------- ------ ------- ------- --------- Shares sold............ 7,223 $ 157,350 4,633 $ 100,930 43 $ 925 816 $ 18,041 Reinvestment of dividends............ 4,440 92,342 2,207 45,506 11 234 1,823 38,096 Shares redeemed*....... (6,829) (148,797) (3,536) (76,813) (15) (317) (1,039) (22,837) ------- --------- ------ --------- ------ ------- ------- --------- Net increase in shares outstanding.......... 4,834 $ 100,895 3,304 $ 69,623 39 $ 842 1,600 $ 33,300 ======= ========= ====== ========= ====== ======= ======= =========
* Net of Redemption Fees 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 -------------------------------------------------------------------------------- 20 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 21 AMERICAN BEACON INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------------------------------------------- 2006 2005 2004(B) 2003(F) 2002 2001(E) ---------- ---------- ---------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 20.98 $ 18.47 $ 15.46 $ 12.10 $ 13.77 $ 17.95 ---------- ---------- ---------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A D).......... 0.22 0.44 0.30 0.25 0.21 0.24 Net gains (losses) on securities (both realized and unrealized)(D).................. 4.32 2.31 3.12 3.47 (1.62) (2.96) ---------- ---------- ---------- -------- -------- -------- Total income (loss) from investment operations......................... 4.54 2.75 3.42 3.72 (1.41) (2.72) ---------- ---------- ---------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income.......................... (0.42) (0.24) (0.41) (0.36) (0.26) (0.22) Distributions from net realized gains on securities............. (1.33) -- -- -- -- (1.24) ---------- ---------- ---------- -------- -------- -------- Total distributions................. (1.75) (0.24) (0.41) (0.36) (0.26) (1.46) ---------- ---------- ---------- -------- -------- -------- Redemption fees added to beneficial interest........................... --(I) --(I) --(I) --(I) -- -- ---------- ---------- ---------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD...... $ 23.77 $ 20.98 $ 18.47 $ 15.46 $ 12.10 $ 13.77 ========== ========== ========== ======== ======== ======== TOTAL RETURN........................ 22.79%(G) 15.04% 22.49% 31.61% (10.51)% (16.54)% ========== ========== ========== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)...................... $1,572,394 $1,286,441 $1,029,272 $722,333 $537,476 $519,151 Ratios to average net assets (annualized): Expenses, net of waivers(D)..... 0.75% 0.70% 0.76% 0.79% 0.75% 0.78% Expenses, before waivers(D)..... 0.75% 0.70% 0.76% 0.79% 0.75% 0.78% Net investment income, net of waivers(D).................... 2.01% 2.17% 1.69% 1.97% 1.56% 1.54% Net investment income (losses), before waivers(D)............. 2.01% 2.17% 1.69% 1.97% 1.56% 1.54% Portfolio turnover rate(C)....... 21%(G) 37% 36% 44% 43% 36% PLANAHEAD CLASS -------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ---------------------------------------------------------------- 2006 2005 2004(B) 2003(F) 2002 2001(E) ---------- -------- -------- -------- ------- -------- NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 20.79 $ 18.31 $ 15.34 $ 11.95 $ 13.58 $ 17.72 -------- -------- -------- -------- ------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A D).......... 0.20 0.41 0.26 0.22 0.15 0.19 Net gains (losses) on securities (both realized and unrealized)(D).................. 4.27 2.29 3.08 3.46 (1.56) (2.92) -------- -------- -------- -------- ------- -------- Total income (loss) from investment operations......................... 4.47 2.70 3.34 3.68 (1.41) (2.73) -------- -------- -------- -------- ------- -------- LESS DISTRIBUTIONS: Dividends from net investment income.......................... (0.38) (0.22) (0.37) (0.29) (0.22) (0.17) Distributions from net realized gains on securities............. (1.33) -- -- -- -- (1.24) -------- -------- -------- -------- ------- -------- Total distributions................. (1.71) (0.22) (0.37) (0.29) (0.22) (1.41) -------- -------- -------- -------- ------- -------- Redemption fees added to beneficial interest........................... --(I) --(I) --(I) --(I) -- -- -------- -------- -------- -------- ------- -------- NET ASSET VALUE, END OF PERIOD...... $ 23.55 $ 20.79 $ 18.31 $ 15.34 $ 11.95 $ 13.58 ======== ======== ======== ======== ======= ======== TOTAL RETURN........................ 22.67%(G) 14.73% 22.16% 31.62% (10.57)% (16.79)% ======== ======== ======== ======== ======= ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)...................... $713,177 $560,770 $310,540 $177,425 $99,636 $113,948 Ratios to average net assets (annualized): Expenses, net of waivers(D)..... 1.00% 0.95% 1.02% 1.10% 1.04% 1.10% Expenses, before waivers(D)..... 1.00% 0.95% 1.02% 1.10% 1.04% 1.10% Net investment income, net of waivers(D).................... 1.76% 1.96% 1.46% 1.68% 1.35% 1.22% Net investment income (losses), before waivers(D)............. 1.76% 1.96% 1.46% 1.68% 1.35% 1.22% Portfolio turnover rate(C)....... 21%(G) 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 invested all of its investable assets in its corresponding Portfolio through February 28, 2006. Portfolio turnover rate through February 28, 2006 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 through February 28, 2006. (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. -------------------------------------------------------------------------------- 22 --------------------------------------------------------------------------------
SERVICE CLASS AMR CLASS ---------------------------------------------------- ----------------------------------------- SIX MONTHS YEAR ENDED SIX MONTHS ENDED OCTOBER 31, MAY 1 TO ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------- OCTOBER 31, APRIL 30, ---------------------- 2006 2005 2004(B) 2003(F) 2006 2005 2004(B) ------------- ------ ------- ----------- ------------- -------- -------- $20.61 $18.24 $15.31 $ 12.18 $ 21.12 $ 18.58 $ 15.54 ------ ------ ------ ---------- -------- -------- -------- 0.18 0.37 0.30 0.09 0.25 0.50 0.34 4.23 2.26 2.99 3.04 4.36 2.33 3.14 ------ ------ ------ ---------- -------- -------- -------- 4.41 2.63 3.29 3.13 4.61 2.83 3.48 ------ ------ ------ ---------- -------- -------- -------- (0.26) (0.26) (0.36) -- (0.48) (0.29) (0.44) (1.33) -- -- -- (1.33) -- -- ------ ------ ------ ---------- -------- -------- -------- (1.59) (0.26) (0.36) -- (1.81) (0.29) (0.44) ------ ------ ------ ---------- -------- -------- -------- --(I) --(I) --(I) --(I) --(I) --(I) --(I) ------ ------ ------ ---------- -------- -------- -------- $23,43 $20.61 $18.24 $ 15.31 $ 23.92 $ 21.12 $ 18.58 ====== ====== ====== ========== ======== ======== ======== 22.49%(G) 14.45% 21.88% 25.70%(G) 23.04%(G) 15.32% 22.84% ====== ====== ====== ========== ======== ======== ======== $4,332 $2,987 $ 739 $ 1 $545,668 $448,096 $460,114 1.15% 1.21% 1.27% 1.50%(J) 0.48% 0.44% 0.49% 1.23% 1.21% 6.26% 1,139.08%(J) 0.48% 0.44% 0.49% 1.62% 1.70% 0.81% 1.33%(J) 2.26% 2.49% 1.97% 1.55% 1.70% (4.18)% (1,136.25)%(J) 2.26% 2.49% 1.97% 21%(G) 37% 36% 44%(H) 21%(G) 37% 36% AMR CLASS ------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------ 2003(F) 2002 2001(E) -------- -------- -------- $ 12.18 $ 13.86 $ 18.07 -------- -------- -------- 0.29 0.24 0.28 3.46 (1.62) (2.98) -------- -------- -------- 3.75 (1.38) (2.70) -------- -------- -------- (0.39) (0.30) (0.27) -- -- (1.24) -------- -------- -------- (0.39) (0.30) (1.51) -------- -------- -------- --(I) -- -- -------- -------- -------- $ 15.54 $ 12.18 $ 13.86 ======== ======== ======== 31.77% (10.26)% (16.35)% ======== ======== ======== $322,801 $264,579 $301,762 0.52% 0.49% 0.52% 0.52% 0.49% 0.52% 2.22% 1.81% 1.78% 2.22% 1.81% 1.78% 44% 43% 36%
-------------------------------------------------------------------------------- 23 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (Unaudited) -------------------------------------------------------------------------------- RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS At its February 17, 2006 meeting, the Board of Trustees ("Board") considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and the subadvisors, on behalf of the Funds. In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a cost/profitability analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; -------------------------------------------------------------------------------- 24 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and whether (and if so, why) such subadvisor should have its contract renewed; - a comparison of advisory fees and expense ratios for comparable mutual funds; - a table detailing the Manager's profitability with respect to each Fund; -------------------------------------------------------------------------------- 25 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a Fund; - a discussion of whether the Manager receives, with respect to trade execution for the Funds, other special compensation, including any payment for order flow; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the class with the longest performance history, which in most cases is the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management and Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost for providing the services and the profitability of the advisory business to the Manager or subadvisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. -------------------------------------------------------------------------------- 26 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- Nature, Extent and Quality of Services With respect to the renewal of the Management Agreement, the Board considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new series so as to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to the International Equity Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the International Equity Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board noted that the Manager proposed to continue most of the expense waivers and reimbursements that were in place for each applicable Fund's 2005 fiscal year. The Board also noted that each sub-advised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various Funds. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arms-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. -------------------------------------------------------------------------------- 27 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- A discussion regarding the Board's considerations with respect to the International Equity Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to the International Equity Fund." Economies of Scale In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board noted that, in many cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The Board also noted, where applicable, for purposes of determining the investment advisory fee charged to the Funds, the fee schedule to each Investment Advisory Agreement specifies that all other assets managed by a subadvisor on behalf of AMR Corporation and its pension plans shall be considered. Thus, the Funds are able to receive additional breakpoint benefits resulting from the subadvisor's management of a larger pool of assets. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board noted that the Manager and the subadvisors may not direct the Funds' brokerage transactions to certain brokers to obtain research and other services and that the Funds participate in a brokerage recapture program. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL EQUITY FUND The benchmark index referred to below is the International Equity Fund's broad-based market index included in the Historical Performance section of the Prospectuses. The Lipper International Multi-Cap Value Fund Index includes up to the 30 largest funds in the Lipper International Multi-Cap Value category, where the Fund is classified by Lipper. In considering the renewal of the Management Agreement and each Investment Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 2nd quintile for the ten-year period, 3rd quintile for the two-, three-, four- and five-year periods and the 4th quintile for the one-year period compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective -------------------------------------------------------------------------------- 28 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- similar to the Fund; (2) the Fund's total return performance exceeded the Lipper International Multi-Cap Value Fund Index for the ten-year period but underperformed for the other periods tracked by Lipper; (3) the portion of Fund assets allocated to Causeway Capital Management, LLC ("Causeway") outperformed the Fund's benchmark index for the three-, five- and ten-year periods but underperformed for the one-year period; (4) Causeway's explanation that the underperformance for the one-year period was due primarily to underweight positions in certain momentum cyclical sectors; (5) the portion of Fund assets allocated to Lazard Asset Management LLC ("Lazard") underperformed the Fund's benchmark index for all relevant periods; (6) the Manager's explanation that Lazard underperformed due to its emphasis on large cap, higher quality securities; (7) the Manager's recommendation to continue to retain Lazard due to its improved relative performance among the Fund's subadvisors; (8) the portion of Fund assets allocated to Templeton Investment Counsel, LLC ("Templeton") outperformed the Fund's benchmark index for the three-, five- and ten-year periods but underperformed for the one-year period; and (9) the portion of Fund assets allocated to The Boston Company Asset Management, LLC ("TBCAM") outperformed the Fund's benchmark index for all relevant periods. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper, where the 1st quintile represents the lowest fees or expenses among the group; (2) Causeway and Templeton represented that they do not charge a lower fee rate for comparable client services, while TBCAM represented that it does not provide similar services to any comparable accounts; and (3) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. -------------------------------------------------------------------------------- 29 (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. SAR 04/06 537386 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] SEMI-ANNUAL REPORT [PHOTO] APRIL 30, 2006 LARGE CAP VALUE FUND 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....... 6
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. American Beacon Funds April 30, 2006 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Iam pleased to present you with the Semi-Annual Report for the American Beacon Large Cap Value Fund for the six months ended April 30, 2006. During this time, the Dow Jones Industrial Average posted gains of 10.22%, the S&P 500 Index increased by 9.64%, while the Russell 2000 Index returned 18.91%. The Institutional Class of the Large Cap Value Fund produced returns of 12.1% for the period and continued to surpass its respective Lipper benchmark for all periods ended April 30, 2006. I hope that the enclosed market overviews, portfolio listings, and detailed financial data are helpful to you. 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 Large 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 current performance may be lower or higher than the performance data quoted. 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 -------------------------------------------------------------------------------- Stocks continued their healthy climb despite high energy prices. Following a lackluster finish in 2005, U.S. stock prices climbed steadily during the first four months of 2006, ending near a five-year high. Despite continuing worries over rising energy costs and the possibility of inflation, investors' confidence remained firm. Small-cap stocks in the U.S. continued to outperform their large-cap counterparts, as has been the general trend since the bear market ended in 2002. Value outperformed growth for the period, also continuing a multi-year trend. International stocks continued to produce outstanding gains most notably in Japan and emerging markets. All eyes remained on the Federal Reserve Board ("the Fed") as its measured pace of raising short-term rates continued. On March 28, the Fed raised its target for the federal funds rate to 4.75%, continuing its gradual tightening of monetary policy to defuse the threat of inflation. This was the Fed's 15th consecutive rate increase since June 2004. (Shortly after the close of the fiscal period, the Fed extended its streak of rate increases to 16, raising its target to 5.00%.) Because the Fed's actions affect the economy with a lag, investors are watching economic measures more closely -- either for evidence that higher rates are slowing the economy, or for evidence that the economy can continue to grow with modest inflation while absorbing higher rates (the so-called "goldilocks" scenario). Heightened focus on the Fed and the economy has led to increased volatility of equity returns, as daily market swings of 1% or more have become more common. While the ultimate effect of the Fed tightening cycle remains to be seen, its effect on stock market returns will be reflected in the earnings growth and valuation of the overall market. At the most basic level, market returns are comprised of three components: earnings growth, the valuation of those earnings (i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield. The current environment for each component of return warrants some discussion. EARNINGS: Earnings growth for the six months ended April 30 (and the past several years) has been robust and well above the long-term average. While there has been some deceleration over the six months, double-digit growth has continued longer than most expected. Looking forward, earnings growth from the financial sector may slow as higher short-term borrowing costs crimp earnings. Additionally, the energy sector has been the largest contributor to earnings growth and could see an earnings slowdown if energy prices pause or decline. VALUATION: While P/E ratios (the price of a stock divided by its anticipated earnings per share) have compressed significantly this decade, the P/E of the S&P 500, based on reported earnings, remains at 17 times earnings. This compares with a long-term average (since 1926) of 15 times earnings. Higher interest rates typically reduce the multiple that investors are willing to pay for stocks. Most importantly, however, the contribution of P/E expansion to market returns over long periods is small and is dwarfed in importance by earnings growth and dividend yield. DIVIDENDS: Returning capital to shareholders via dividends continues to grow in popularity. Favorable tax treatment, demographic trends, and investor pressure have all been supportive of higher dividend payouts. However, because earnings growth has been more robust, the percentage of earnings paid out in dividends is near an all-time low. This should be supportive of higher dividend payouts over time. Dividends will continue to be a critical component of overall return. Overall, the outlook for stock returns appears mixed. On the bullish side, the economy remains resilient, corporate earnings are strong and profit margins remain high. Investor concerns include a slowing economy, perhaps induced by higher interest rates hurting the housing sector and consumer spending. Additionally, we have enjoyed the longest bull market since 1982 and the second longest period ever without a 10% correction, recent market weakness and volatility notwithstanding. Regardless of future trends in the economy or markets, stock selection will remain the key driver of performance going forward. This is especially true in the current environment where, thanks to multi-year performance advantages of small-cap over large-cap and value over growth, the lines between various styles are less defined. So, stock selection may be more important than style or market cap going forward. 2 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP VALUE FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Value Fund returned 12.10% for the six months ended April 30, 2006, lagging the Linked S&P 500/Citigroup Value Index ("Index") return of 13.57% but ahead of the Lipper Multi-Cap Value Funds Index return of 11.88%.
ANNUALIZED TOTAL RETURNS --------------------------------------- PERIODS ENDED 4/30/06 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1).... 12.10% 20.23% 9.64% 10.32% PlanAhead Class(1)........ 11.98% 19.95% 22.93% 10.01% Service Class(1,2)........ 11.86% 19.65% 9.28% 9.98% AMR Class(1).............. 12.25% 20.55% 9.92% 10.60% Lipper Multi-Cap Value Funds Index.............. 11.88% 18.03% 6.97% 9.89% S&P 500 Index(3).......... 9.64% 15.42% 2.70% 8.94% Linked S&P 500/Citigroup Value Index(3)........... 13.57% 20.87% 4.28% 9.55%
* Not Annualized 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 current performance may be higher or lower than the performance data quoted. 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 one-year, five-year and ten-year periods represents the total returns achieved by the PlanAhead Class from 4/30/96 up to 6/1/05, 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. Therefore, total returns shown may be higher than they would have been had the Service Class been in existence since 4/30/96. 3. The S&P 500 Index is an unmanaged index of common stocks publicly traded in the United States. The Linked S&P 500/ Citigroup Value Index represents returns of the S&P 500/Barra Value Index ("Barra Index") up to October 31, 2005 and the S&P 500/Citigroup Value Style Index ("Citigroup Index") thereafter. The Barra 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 Citigroup Index is a market value weighted index of stocks in the S&P 500 that score highest based on an average of book-to-price ratio, cash flow-to-price ratio, sales-to-price ratio, and dividend yield, representing 50% of the total market value of the S&P 500. The Fund underperformed the Index both through stock selection and sector allocation. From a stock selection standpoint, the Fund had good stock selection in the Health Care, Consumer Staples and Industrials sectors. Companies with the greatest positive impact in the Health Care sector were Bristol-Myers Squibb (up 22.8%) and Pfizer (up 18.6%). In the Consumer Staples sector, Archer-Daniels-Midland (up 50.1%) was by far the largest contributor. CSX (up 50.3%) and Boeing (up 30.1%) in the Industrials sector also added meaningful value versus the Index. This excess performance versus the Index, however, was offset by poor stock selection in the Financials, Energy, Information Technology, and Telecommunications Services sectors. In the Financials sector, the largest detractors were St. Paul Travelers (down 1.2%), SLM (down 4.0%), and American International Group (up 1.1%), while ConocoPhillips (up 2.9%) detracted from the Fund's Energy sector returns. Strong results from Information Technology holdings Apple Computer (up 22.2%) and Oracle Systems (up 16.1%) were insufficient to offset poor returns in Computer Associates International (down 9.1%), Autodesk (down 6.8%), and International Business Machines (up 1.1%). Finally, the Fund's position in Vodafone Group (down 8.2%) hurt performance most in the Telecommunications Services sector. Sector weightings also detracted value during the period, as overweights in the Health Care sector, the second worst performing sector of the Index, and in Consumer Staples, another one of the poorer performing sectors of the Index, hurt the Fund's relative performance. 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 longer-term. 3 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP VALUE FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- ConocoPhillips 2.8% JP Morgan Chase & Co. 2.2% Bank of America Corp. 2.1% Tyco International Ltd. 1.7% Citigroup, Inc. 1.7% Altria Group, Inc. 1.6% Washington Mutual, Inc. 1.4% The Boeing Co. 1.4% International Business Machines Corp. 1.3% Nokia Corp. 1.2%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 26.3% Industrials 13.6% Consumer Staples 10.6% Information Technology 10.6% Consumer Discretionary 9.4% Health Care 8.0% Energy 7.9% Materials 5.1% Utilities 4.9% Telecommunication Services 3.6%
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 November 1, 2005 through April 30, 2006. 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 4 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP VALUE FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 11/1/05 4/30/06 11/01/05-4/30/06 --------- ------- ---------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,121.01 $3.18 Hypothetical $1,000.00 $1,021.80 $3.03 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,119.78 $4.48 Hypothetical $1,000.00 $1,020.57 $4.27 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,118.59 $5.75 Hypothetical $1,000.00 $1,019.37 $5.48 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,122.54 $1.79 Hypothetical $1,000.00 $1,023.11 $1.71 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.60%, 0.85%, 1.09%, 0.34%, for the Institutional, PlanAhead, Service, and AMR 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 (181) by days in the year (365) to reflect the half-year period. 5 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 91.73% CONSUMER DISCRETIONARY - 8.58% AUTO COMPONENTS - 0.22% Magna International, Inc.+.... 79,900 $ 6,268 ---------- HOTELS, RESTAURANTS & LEISURE - 0.95% Carnival Corp. ............... 133,900 6,269 Harrahs Entertainment, Inc. ....................... 141,100 11,519 McDonald's Corp. ............. 84,400 2,918 Yum Brands, Inc. ............. 123,300 6,372 ---------- 27,078 ---------- HOUSEHOLD DURABLES - 2.48% Centex Corp. ................. 401,100 22,301 Fortune Brands, Inc. ......... 94,900 7,621 Koninklijke (Royal) Philips Electronics NV.............. 196,666 6,781 Matsushita Electric Industrial Company Ltd., ADR........... 720,000 17,431 Newell Rubbermaid, Inc.+...... 161,600 4,431 Pulte Homes, Inc. ............ 321,000 11,989 ---------- 70,554 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.51% Eastman Kodak Co.+............ 285,400 7,694 Mattel, Inc. ................. 413,400 6,689 ---------- 14,383 ---------- MEDIA - 2.35% CBS Corp. .................... 116,500 2,967 Clear Channel Communications, Inc. ....................... 496,000 14,151 The Interpublic Group of Companies, Inc.(+)+......... 583,300 5,588 The Walt Disney Company Ltd. ....................... 969,500 27,107 Warner Music Group Corp.+..... 642,000 16,988 ---------- 66,801 ---------- MULTILINE RETAIL - 1.55% Federated Department Stores, Inc. ....................... 203,656 15,855 J.C. Penney Company, Inc. .... 316,000 20,685 Target Corp. ................. 140,100 7,439 ---------- 43,979 ---------- SPECIALTY RETAIL - 0.28% The Home Depot, Inc. ......... 202,400 8,082 ---------- TEXTILES & APPAREL - 0.24% Liz Claiborne, Inc. .......... 177,300 6,924 ---------- TOTAL CONSUMER DISCRETIONARY........... 244,069 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) CONSUMER STAPLES - 9.76% BEVERAGES - 1.32% Anheuser-Busch Companies, Inc. ....................... 138,900 $ 6,192 Diageo plc, ADR............... 471,500 31,237 ---------- 37,429 ---------- FOOD & DRUG RETAILING - 0.46% Albertson's, Inc. ............ 24,400 618 Safeway, Inc. ................ 495,300 12,447 ---------- 13,065 ---------- FOOD PRODUCTS - 3.30% Archer-Daniels-Midland Co. ... 642,000 23,330 ConAgra Foods, Inc. .......... 654,700 14,849 General Mills, Inc. .......... 139,500 6,883 Kellogg Co. .................. 370,000 17,135 Kraft Foods, Inc.+............ 393,900 12,305 Sara Lee Co. ................. 411,028 7,345 Unilever plc, ADR............. 282,500 12,071 ---------- 93,918 ---------- HOUSEHOLD PRODUCTS - 0.61% The Clorox Co. ............... 269,000 17,265 ---------- PERSONAL PRODUCTS - 0.35% L'Oreal SA, ADR(+)+........... 547,000 10,092 ---------- TOBACCO - 3.72% Altria Group, Inc. ........... 623,400 45,608 Gallaher Group plc, ADR....... 97,400 6,190 Imperial Tobacco Group plc, ADR+........................ 420,500 26,357 UST, Inc.+.................... 628,000 27,588 ---------- 105,743 ---------- TOTAL CONSUMER STAPLES.... 277,512 ---------- ENERGY - 7.25% DIVERSIFIED FINANCIALS - 0.22% Petro-Canada.................. 124,700 6,133 ---------- ENERGY EQUIPMENT & SERVICES - 0.83% Weatherford International Ltd.(+)..................... 445,000 23,554 ---------- OIL & GAS - 6.20% BP plc, ADR................... 180,136 13,280 Chevron Corp. ................ 397,062 24,229 ConocoPhillips................ 1,208,796 80,868 Devon Energy Corp. ........... 328,400 19,740 Kerr-McGee Corp. ............. 86,589 8,647 Occidental Petroleum Corp. ... 289,200 29,712 ---------- 176,476 ---------- TOTAL ENERGY.............. 206,163 ----------
See accompanying notes -------------------------------------------------------------------------------- 6 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) FINANCIALS - 24.10% BANKS - 6.61% Bank of America Corp. ........ 1,204,578 $ 60,132 Comerica, Inc. ............... 109,000 6,199 First Horizon National Corp.(+)+.................... 74,500 3,160 KeyCorp....................... 317,800 12,146 TCF Financial Corp.+.......... 367,000 9,858 U.S. Bancorp.................. 383,160 12,047 UnionBanCal Corp. ............ 44,000 3,084 Wachovia Corp. ............... 226,900 13,580 Washington Mutual, Inc.+...... 869,700 39,189 Wells Fargo & Co. ............ 415,200 28,520 ---------- 187,915 ---------- DIVERSIFIED FINANCIALS - 9.76% The Bear Stearns Cos, Inc. ... 86,300 12,299 Capital One Financial Corp. ....................... 194,000 16,808 The Charles Schwab Corp. ..... 1,254,000 22,446 Citigroup, Inc. .............. 965,038 48,204 Federal Home Loan Mortgage Corp. ....................... 314,600 19,209 Federal National Mortgage Association.................. 158,100 8,000 The Goldman Sachs Group, Inc. ........................ 70,300 11,268 JP Morgan Chase & Co. ........ 1,358,198 61,635 Merrill Lynch & Company, Inc. ........................ 158,500 12,087 Mitsubishi UFJ Financial Group, Inc., ADR+............ 1,339,000 20,969 Morgan Stanley Dean Witter & Co. ......................... 484,800 31,173 SLM Corp. .................... 255,200 13,495 ---------- 277,593 ---------- INSURANCE - 7.48% Ace Ltd. ..................... 235,200 13,063 The Allstate Corp. ........... 368,328 20,807 American International Group, Inc. ........................ 376,000 24,534 AON Corp. .................... 95,000 3,981 Assurant, Inc. ............... 130,100 6,267 The Chubb Corp. .............. 396,000 20,410 Conseco, Inc.(+).............. 239,600 6,050 Genworth Financial, Inc. ..... 541,700 17,984 The Hartford Financial Services Group, Inc. ........ 64,500 5,930 MetLife, Inc. ................ 551,700 28,744 MGIC Investments Corp. ....... 154,900 10,951 Prudential Financial, Inc. ... 98,100 7,665 The St. Paul Travelers Companies, Inc. ............. 621,800 27,378 XL Capital Ltd. .............. 286,600 18,884 ---------- 212,648 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) REAL ESTATE - 0.25% The St. Joe Co.+.............. 128,600 $ 7,222 ---------- TOTAL FINANCIALS........... 685,378 ---------- HEALTH CARE - 7.38% HEALTH CARE EQUIPMENT & SUPPLIES - 1.68% Baxter International, Inc. ... 786,700 29,658 C.R. Bard, Inc. .............. 245,000 18,243 ---------- 47,901 ---------- HEALTH CARE PROVIDERS & SERVICES - 1.53% Cigna Corp. .................. 103,900 11,117 HCA, Inc. .................... 282,400 12,395 Tenet Healthcare Corp.(+)+.... 678,700 5,647 WellPoint, Inc.(+)............ 202,400 14,370 ---------- 43,529 ---------- PHARMACEUTICALS - 4.17% AstraZeneca PLC, ADR.......... 335,000 18,469 Bristol-Myers Squibb Co. ..... 1,162,900 29,514 Merck & Company, Inc. ........ 452,200 15,565 Pfizer, Inc. ................. 1,255,800 31,809 Schering-Plough Corp. ........ 662,600 12,802 Wyeth......................... 211,900 10,313 ---------- 118,472 ---------- TOTAL HEALTH CARE.......... 209,902 ---------- INDUSTRIALS - 12.48% AEROSPACE & DEFENSE - 3.77% The Boeing Co. ............... 469,100 39,146 L-3 Communications Holdings, Inc. ........................ 224,000 18,301 Lockheed Martin Corp. ........ 221,600 16,819 Northrop Grumman Corp. ....... 95,300 6,376 Raytheon Co. ................. 366,100 16,207 United Technologies Corp. .... 166,000 10,427 ---------- 107,276 ---------- AIR FREIGHT & COURIERS - 0.07% FedEx Corp. .................. 18,400 2,118 ---------- COMMERCIAL SERVICES & SUPPLIES - 0.93% Cendant Corp.(+).............. 944,000 16,454 PHH Corp.(+).................. 8,300 232 Waste Management, Inc. ....... 257,665 9,652 ---------- 26,338 ---------- ELECTRICAL EQUIPMENT - 0.63% American Power Conversion Corp.+....................... 579,400 12,886 Emerson Electrical Co. ....... 60,000 5,097 ---------- 17,983 ----------
See accompanying notes -------------------------------------------------------------------------------- 7 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) INDUSTRIAL CONGLOMERATES - 3.90% 3M Co. ....................... 162,400 $ 13,874 General Electric Co. ......... 684,800 23,687 Honeywell International, Inc. ........................ 281,700 11,972 Textron, Inc. ................ 143,300 12,890 Tyco International Ltd. ...... 1,838,400 48,442 ---------- 110,865 ---------- MACHINERY - 2.63% Caterpillar, Inc. ............ 179,800 13,618 Deere & Co. .................. 189,000 16,590 Flowserve Corp.(+)+........... 144,100 8,289 Illinois Tool Works, Inc.(+)...................... 221,100 22,707 ITT Industries, Inc. ......... 240,300 13,512 ---------- 74,716 ---------- TRANSPORTATION INFRASTRUCTURE - 0.55% Burlington Northern Santa Fe Corp. ....................... 198,100 15,755 ---------- TOTAL INDUSTRIALS.......... 355,051 ---------- INFORMATION TECHNOLOGY - 9.73% COMMUNICATIONS EQUIPMENT - 1.54% Lucent Technologies, Inc.(+)+..................... 3,920,000 10,937 Nokia Corp., ADR.............. 1,450,800 32,875 ---------- 43,812 ---------- COMPUTERS & PERIPHERALS - 3.13% Apple Computer, Inc.(+)....... 386,000 27,171 Hewlett-Packard Co. .......... 728,500 23,654 International Business Machines Corp. .............. 462,400 38,074 ---------- 88,899 ---------- ELECTRICAL EQUIPMENT - 0.59% Molex, Inc.+.................. 139,000 5,160 Molex, Inc., Class A Shares... 361,000 11,606 ---------- 16,766 ---------- IT CONSULTING & SERVICES - 1.27% Computer Sciences Corp.(+).... 106,300 6,224 Electronic Data Systems Corp. ....................... 1,106,100 29,953 ---------- 36,177 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.90% Intel Corp. .................. 302,200 6,038 Texas Instruments, Inc. ...... 563,000 19,541 ---------- 25,579 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) SOFTWARE - 2.30% Autodesk, Inc.(+)............. 174,000 $ 7,315 Computer Associates International, Inc. ......... 1,096,460 27,806 Microsoft Corp. .............. 494,700 11,947 Oracle Corp.(+)............... 1,259,000 18,369 ---------- 65,437 ---------- TOTAL INFORMATION TECHNOLOGY............... 276,670 ---------- MATERIALS - 4.63% CHEMICALS - 2.54% Air Products & Chemicals, Inc. ........................ 352,600 24,160 Dow Chemical Co. ............. 105,900 4,301 E. I. du Pont de Nemours & Co.+......................... 163,600 7,215 Hercules, Inc.(+)............. 119,400 1,697 Lyondell Chemical Co.+........ 555,600 13,390 The Mosaic Co.(+)+............ 877,900 13,168 PPG Industries, Inc. ......... 118,000 7,920 Tronox, Inc.(+)+.............. 16,572 287 ---------- 72,138 ---------- METALS & MINING - 0.90% Alcoa, Inc.+.................. 763,068 25,776 ---------- PAPER & FOREST PRODUCTS - 1.19% International Paper Co. ...... 134,500 4,889 Sappi Ltd., ADR+.............. 357,100 5,014 Weyerhaeuser Co. ............. 338,900 23,882 ---------- 33,785 ---------- TOTAL MATERIALS............ 131,699 ---------- TELECOMMUNICATION SERVICES - 3.34% DIVERSIFIED TELECOMMUNICATION - 2.83% Alltel Corp. ................. 50,000 3,219 AT&T, Inc. ................... 1,039,800 27,253 BellSouth Corp. .............. 569,900 19,251 Verizon Communications, Inc. ........................ 928,646 30,673 ---------- 80,396 ---------- WIRELESS TELECOMMUNICATION SERVICES - 0.51% Vodafone Group plc, ADR+...... 612,000 14,504 ---------- TOTAL TELECOMMUNICATION SERVICES................. 94,900 ----------
See accompanying notes -------------------------------------------------------------------------------- 8 AMERICAN BEACON LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) UTILITIES - 4.48% ELECTRIC UTILITIES - 3.66% American Electric Power Company, Inc. .............. 213,300 $ 7,137 CenterPoint Energy, Inc.+..... 534,300 6,422 Dominion Resources, Inc. ..... 83,600 6,259 DTE Energy Co. ............... 209,000 8,523 Duke Energy Corp.(+).......... 800,300 23,305 Entergy Corp. ................ 323,300 22,612 Exelon Corp. ................. 339,600 18,338 FPL Group, Inc. .............. 460,500 18,236 Public Service Enterprise Group, Inc. ................ 263,200 16,503 ---------- TOTAL UTILITIES........... 127,335 ---------- TOTAL COMMON STOCKS....... 2,608,679 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) SHORT TERM INVESTMENTS - 14.39% American Beacon Enhanced Cash Trust++#.................... 119,199,913 $ 119,200 American Beacon Money Market Select Fund++#.............. 273,271,527 273,272
PAR AMOUNT ----------- U.S. Treasury Bill, 4.455%, Due 6/8/2006P......... $ 16,820 16,740 ---------- TOTAL SHORT TERM INVESTMENTS............. 409,212 ---------- TOTAL INVESTMENTS - 106.12% (COST $2,657,399)........... 3,017,891 ---------- LIABILITIES, NET OF OTHER ASSETS - (6.12%)............ (174,007) ---------- TOTAL NET ASSETS - 100%....... $2,843,884 ==========
--------------- ADR - American Depository Receipt (+) Non-income producing security. + All or a portion of this security is on loan at April 30, 2006. See Note 5. ++ The Fund/Trust is affiliated by having the same investment advisor. See Note 2. # All or a portion of this security is purchased with cash collateral for securities loaned. P At April 30, 2006, security pledged as collateral for open futures contracts. FUTURES CONTRACTS (dollars in thousands)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- -------- -------------- Emini S&P 500 Index......................................... 3,440 Jun 2006 $226,335 $1,062
See accompanying notes -------------------------------------------------------------------------------- 9 AMERICAN BEACON LARGE CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES April 30, 2006 (Unaudited) (in thousands, except share and per share amounts) -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $ 2,625,419 Investments in affiliated securities, at value(B)....... 392,472 Receivable for investments sold......................... 7,449 Dividends and interest receivable....................... 4,637 Receivable for fund shares sold......................... 13,408 Receivable for variation margin on open futures contracts.............................................. 140 ----------- TOTAL ASSETS........................................ 3,043,525 ----------- LIABILITIES: Payable for investments purchased....................... 12,587 Payable upon return of securities loaned................ 183,405 Payable for fund shares redeemed........................ 1,021 Management and investment advisory fees payable (Note 2)..................................................... 1,719 Administrative service and service fees payable......... 678 Other liabilities....................................... 231 ----------- TOTAL LIABILITIES................................... 199,641 ----------- NET ASSETS.................................................. $ 2,843,884 =========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 2,402,167 Undistributed net investment income..................... 10,783 Accumulated net realized gain (loss).................... 69,380 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................. 361,554 ----------- NET ASSETS.................................................. $ 2,843,884 =========== Shares outstanding (no par value): Institutional Class..................................... 24,431,833 =========== PlanAhead Class......................................... 66,956,803 =========== Service Class........................................... 1,145,041 =========== AMR Class............................................... 37,446,687 =========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 22.45 =========== PlanAhead Class......................................... $ 21.50 =========== Service Class........................................... $ 21.43 =========== AMR Class............................................... $ 22.20 =========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 2,264,927 (B) Cost of investments in affiliated securities............ 392,472 (C) Market value of securities on loan...................... 178,867
See accompanying notes -------------------------------------------------------------------------------- 10 AMERICAN BEACON LARGE CAP VALUE FUND STATEMENT OF OPERATIONS Six Months Ended April 30, 2006 (Unaudited) (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)*........................................ $ 23,504 Dividend income from affiliated securities.............. 3,985 Interest income......................................... 298 Income derived from securities lending, net............. 53 -------- TOTAL INVESTMENT INCOME............................. 27,840 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 3,188 Administrative service fees (Note 2): Institutional Class................................... 440 PlanAhead Class....................................... 1,265 Service Class......................................... 21 Transfer agent fees: Institutional Class................................... 20 PlanAhead Class....................................... 39 Service Class......................................... 1 AMR Class............................................. 12 Fund accounting fees.................................... 237 Professional fees....................................... 52 Registration fees and expenses.......................... 136 Service fees: PlanAhead Class (Note 2).............................. 1,266 Service Class (Note 2)................................ 21 Distribution fees -- Service Class (Note 2)............. 21 Prospectus and shareholder reports...................... 128 Other expenses.......................................... 11 -------- TOTAL EXPENSES...................................... 6,858 -------- NET INVESTMENT INCOME....................................... 20,982 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments........................................... 67,596 Commission recapture.................................. 199 Futures contracts..................................... 11,855 Change in net unrealized appreciation or depreciation of: Investments........................................... 148,243 Futures contracts..................................... 2,232 -------- NET GAIN (LOSS) ON INVESTMENTS...................... 230,125 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $251,107 ======== * Foreign taxes......................................... $ 135
See accompanying notes -------------------------------------------------------------------------------- 11 AMERICAN BEACON LARGE CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, OCTOBER 31, 2006 2005 ----------- ----------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 20,982 $ 20,301 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions........... 79,650 73,494 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations........................................... 150,475 61,431 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 251,107 155,226 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class................................... (2,811) (909) PlanAhead Class....................................... (9,026) (1,111) Service Class......................................... (183) -- AMR Class............................................. (12,220) (11,555) Net realized gain on investments: Institutional Class................................... (8,283) -- PlanAhead Class....................................... (28,149) -- Service Class......................................... (544) -- AMR Class............................................. (32,018) -- ---------- ---------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (93,234) (13,575) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 1,342,064 936,214 Reinvestment of dividends and distributions............. 88,860 13,156 Cost of shares redeemed................................. (332,204) (299,876) ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................................. 1,098,720 649,494 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS....................... 1,256,593 791,145 ---------- ---------- NET ASSETS: Beginning of period..................................... 1,587,291 796,146 ---------- ---------- END OF PERIOD*.......................................... $2,843,884 $1,587,291 ========== ========== * Includes undistributed net investment income (loss) of..................................................... $ 10,783 $ 14,208 ========== ==========
See accompanying notes -------------------------------------------------------------------------------- 12 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") 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 Large Cap Value Fund (the "Fund"), a series of the Trust. American Beacon Advisors, Inc. (the "Manager") 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 Fee -- .25% PLANAHEAD CLASS General public and investors investing through an Administrative Service intermediary Fee -- .25% Service Fee -- .25% SERVICE CLASS Investors investing through an intermediary Administrative Service Fee -- .25% Service Fee -- .25% Distribution Fee -- .25% AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A 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 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. -------------------------------------------------------------------------------- 13 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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. 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. -------------------------------------------------------------------------------- 14 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 six months ended April 30, 2006 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ----------- ---------- --------------- ----------- .225%-.70% $3,188 $2,071 $1,117
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 six months ended April 30, 2006, securities lending fees totaling $16,000 were paid to the Manager by the Fund. This fee is netted against securities lending income in the Statement of Operations. 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 -------------------------------------------------------------------------------- 15 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 .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 .25% of the average daily net assets of the PlanAhead and Service Classes of the Fund. 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 .10% of the average daily net assets. During the six months ended April 30, 2006, fees earned by the Manager from the Affiliated Funds were as follows:
SECURITIES LENDING DIRECT INVESTMENT COLLATERAL INVESTED IN FUNDS IN FUNDS TOTAL ----------------- ------------------- -------- $91,832 $72,062 $163,894
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- -------------------------------------------------------------------------------- 16 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 plus a fee for each Board meeting attended. At April 30, 2006, 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 April 30, 2006, the Fund had not utilized the credit facility. Reimbursement of Expenses The Manager reimbursed expenses of the Service Class totaling $17 for the Fund during the six months ended April 30, 2006. 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. -------------------------------------------------------------------------------- 17 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The tax character of distributions during the six months ended April 30, 2006 and the fiscal year ended October 31, 2005 were as follows (in thousands):
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2006 OCTOBER 31, 2005 -------------- ---------------- (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class..................................... $ 3,518 $ 909 PlanAhead Class......................................... 11,426 1,111 Service Class........................................... 230 -- AMR Class............................................... 14,950 11,555 LONG-TERM CAPITAL GAIN Institutional Class..................................... 7,576 -- PlanAhead Class......................................... 25,749 -- Service Class........................................... 497 -- AMR Class............................................... 29,288 -- ------- ------- TOTAL DISTRIBUTIONS PAID............................ $93,234 $13,575 ------- -------
As of April 30, 2006, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes... $2,668,611 Unrealized appreciation..................................... 373,305 Unrealized depreciation..................................... (24,025) ---------- Net unrealized appreciation/(depreciation).................. 349,280 Undistributed ordinary income............................... 28,884 Undistributed long-term gain/(loss)......................... 63,464 ---------- Distributable earnings...................................... $ 441,628 ==========
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 April 30, 2006 (in thousands): Paid-in-capital............................................. $ 7 Undistributed net investment income......................... (167) Accumulated net realized gain (loss)........................ 160 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.................... --
-------------------------------------------------------------------------------- 18 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 4. INVESTMENT TRANSACTIONS Investment transactions for the six months ended April 30, 2006 (excluding short-term investments) are as follows (in thousands): Purchases................................................... $1,280,245 Proceeds from sales......................................... $ 279,555
A summary of the Fund's direct transactions in Affiliated Funds for the six months ended April 30, 2006 is set forth below (in thousands):
OCTOBER 31, 2005 APRIL 30, 2006 AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE --------- ------------------- ---------- ---------- ------------------- Select Fund.............................. $163,848 $1,906,590 $1,861,372 $209,066
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 April 30, 2006, 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 ------------------ ------------------- --------------- $178,867 $ -- $183,405
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. -------------------------------------------------------------------------------- 19 AMERICAN BEACON LARGE CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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): Six Months Ended April 30, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- ----------------- -------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------- --------- ------ --------- ------ ------- ------- --------- Shares sold.............. 16,729 $358,320 45,338 $ 934,752 666 $13,719 1,656 $ 35,273 Reinvestment of dividends.............. 439 9,253 1,715 34,642 36 727 2,125 44,238 Shares redeemed.......... (2,315) (49,783) (6,206) (128,680) (133) (2,739) (7,148) (151,002) ------ -------- ------ --------- ------ ------- ------- --------- Net increase (decrease) in shares outstanding............ 14,853 $317,790 40,847 $ 840,714 569 $11,707 (3,367) $ (71,491) ====== ======== ====== ========= ====== ======= ======= =========
Year Ended October 31, 2005
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- ----------------- -------------------- 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 ====== ======== ====== ========= ====== ======= ======= =========
-------------------------------------------------------------------------------- 20 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 21 AMERICAN BEACON LARGE CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, -------------------------------------------------- 2006 2005 2004 2003 2002 2001(B D) ----------- -------- ------- ------- ------- --------- (UNAUDITED) Net asset value, beginning of period.............. $ 21.00 $ 18.23 $ 15.62 $ 12.55 $ 14.51 $ 15.83 -------- -------- ------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A C).............. 0.17 0.28 0.26 0.25(F) 0.27 0.28 Net gains (losses) on securities (both realized and unrealized)(C)............................ 2.30 2.74 2.62 3.11(F) (1.76) (0.61) -------- -------- ------- ------- ------- ------- Total income (loss) from investment operations.... 2.47 3.02 2.88 3.36 (1.49) (0.33) -------- -------- ------- ------- ------- ------- Less distributions: Dividends from net investment income........... (0.26) (0.25) (0.27) (0.29) (0.30) (0.50) Distributions from net realized gains on securities.................................... (0.76) -- -- -- (0.17) (0.49) -------- -------- ------- ------- ------- ------- Total distributions............................... (1.02) (0.25) (0.27) (0.29) (0.47) (0.99) -------- -------- ------- ------- ------- ------- Net asset value, end of period.................... $ 22.45 $ 21.00 $ 18.23 $ 15.62 $ 12.55 $ 14.51 ======== ======== ======= ======= ======= ======= Total return...................................... 12.10%(G) 16.64% 18.59% 27.30% (10.83)% (2.21)% ======== ======== ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)....... $548,403 $201,111 $48,451 $23,512 $21,589 $10,081 Ratios to average net assets (annualized): Expenses, net of waivers(C)................... 0.60% 0.60% 0.66% 0.66% 0.61% 0.64% Expenses, before waivers(C)................... 0.60% 0.60% 0.66% 0.66% 0.61% 0.64% Net investment income, net of waivers(C)...... 1.87% 1.58% 1.49% 1.88% 1.82% 1.76% Net investment income, before waivers(C)...... 1.87% 1.58% 1.49% 1.88% 1.82% 1.76% Portfolio turnover rate(E)..................... 14%(G) 25% 29% 27% 34% 60% PLANAHEAD CLASS ------------------------------------------ SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ---------------------------- 2006 2005 2004 2003 ----------- -------- ------- ------- (UNAUDITED) Net asset value, beginning of period.............. $ 20.16 $ 17.54 $ 15.05 $ 12.09 ---------- -------- ------- ------- Income from investment operations: Net investment income (loss)(A C).............. 0.16 0.27 0.23 0.22(F) Net gains (losses) on securities (both realized and unrealized)(C)............................ 2.19 2.58 2.49 2.99(F) ---------- -------- ------- ------- Total income (loss) from investment operations.... 2.35 2.85 2.72 3.21 ---------- -------- ------- ------- Less distributions: Dividends from net investment income........... (0.25) (0.23) (0.23) (0.25) Distributions from net realized gains on securities.................................... (0.76) -- -- -- ---------- -------- ------- ------- Total distributions............................... (1.01) (0.23) (0.23) (0.25) ---------- -------- ------- ------- Net asset value, end of period.................... $ 21.50 $ 20.16 $ 17.54 $ 15.05 ========== ======== ======= ======= Total return...................................... 11.98%(G) 16.33% 18.26% 26.99% ========== ======== ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)....... $1,439,537 $526,357 $51,489 $21,331 Ratios to average net assets (annualized): Expenses, net of waivers(C)................... 0.85% 0.86% 0.94% 0.95% Expenses, before waivers(C)................... 0.85% 0.86% 0.94% 0.95% Net investment income, net of waivers(C)...... 1.63% 1.30% 1.21% 1.57% Net investment income, before waivers(C)...... 1.63% 1.30% 1.21% 1.57% Portfolio turnover rate(E)..................... 14%(G) 25% 29% 27%
--------------- (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 for the Institutional, PlanAhead and AMR Classes. (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. -------------------------------------------------------------------------------- 22 --------------------------------------------------------------------------------
SERVICE CLASS AMR CLASS PLANAHEAD CLASS ------------------------ ----------- ----------------------- SIX MONTHS SIX MONTHS YEAR ENDED OCTOBER 31, ENDED MAY 31 TO ENDED ----------------------- APRIL 30, OCTOBER 31, APRIL 30, 2002 2001(B D) 2006 2005 2006 -------- ------------ ---------- ----------- ----------- (UNAUDITED) (UNAUDITED) $ 14.00 $ 15.40 $ 20.13 $ 19.33 $ 20.78 ------- ------- ------- ------- -------- 0.25 0.26 0.20 0.01 0.19 (1.74) (0.62) 2.12 0.79 2.28 ------- ------- ------- ------- -------- (1.49) (0.36) 2.32 0.80 2.47 ------- ------- ------- ------- -------- (0.25) (0.55) (0.26) -- (0.29) (0.17) (0.49) (0.76) -- (0.76) ------- ------- ------- ------- -------- (0.42) (1.04) (1.02) -- (1.05) ------- ------- ------- ------- -------- $ 12.09 $ 14.00 $ 21.43 $ 20.13 $ 22.20 ======= ======= ======= ======= ======== (11.13)% (2.47)% 11.86%(G) 4.14%(G) 12.25%(G) ======= ======= ======= ======= ======== $15,941 $12,280 $24,537 $11,604 $831,407 0.93% 0.89% 1.09% 1.14%(H) 0.34% 0.93% 0.89% 1.10% 1.77%(H) 0.34% 1.53% 1.54% 1.42% 1.72%(H) 2.23% 1.53% 1.54% 1.42% 1.09%(H) 2.23% 34% 60% 14%(G) 25%(I) 14%(G) 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%
-------------------------------------------------------------------------------- 23 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (Unaudited) -------------------------------------------------------------------------------- RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS At its February 17, 2006 meeting, the Board of Trustees ("Board") considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and the subadvisors, on behalf of the Funds. In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a cost/profitability analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; -------------------------------------------------------------------------------- 24 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and whether (and if so, why) such subadvisor should have its contract renewed; - a comparison of advisory fees and expense ratios for comparable mutual funds; - a table detailing the Manager's profitability with respect to each Fund; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a Fund; -------------------------------------------------------------------------------- 25 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a discussion of whether the Manager receives, with respect to trade execution for the Funds, other special compensation, including any payment for order flow; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the class with the longest performance history, which in most cases is the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management and Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost for providing the services and the profitability of the advisory business to the Manager or subadvisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. Nature, Extent and Quality of Services With respect to the renewal of the Management Agreement, the Board considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new series so as to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote -------------------------------------------------------------------------------- 26 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to the Large Cap Value Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the Large Cap Value Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board noted that the Manager proposed to continue most of the expense waivers and reimbursements that were in place for each applicable Fund's 2005 fiscal year. The Board also noted that each sub-advised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various Funds. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arms-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. A discussion regarding the Board's considerations with respect to the Large Cap Value Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to the Large Cap Value Fund." Economies of Scale In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board noted that, in many cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The Board also noted, where applicable, for purposes of determining the investment advisory fee charged to -------------------------------------------------------------------------------- 27 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- the Funds, the fee schedule to each Investment Advisory Agreement specifies that all other assets managed by a subadvisor on behalf of AMR Corporation and its pension plans shall be considered. Thus, the Funds are able to receive additional breakpoint benefits resulting from the subadvisor's management of a larger pool of assets. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board noted that the Manager and the subadvisors may not direct the Funds' brokerage transactions to certain brokers to obtain research and other services and that the Funds participate in a brokerage recapture program. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE LARGE CAP VALUE FUND In considering the renewal of the Management Agreement and each Investment Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for the one-, two-, three-, four- and five-year periods and the 2nd quintile for the ten-year period compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund; (2) the Fund's total return performance exceeded the Lipper Multi-Cap Value Fund Index for all relevant periods tracked by Lipper; and (3) the portion of Fund assets allocated to Barrow, Hanley, Mewhinney & Strauss, Inc., Brandywine Asset Management, LLC ("Brandywine"), Hotchkis and Wiley Capital Management, LLC ("Hotchkis"),and Metropolitan West Capital Management, LLC ("MetWest Capital") outperformed the Fund's benchmark index for all relevant periods. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper, where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's Service Class; (3) Brandywine and MetWest Capital represented that they do not charge a lower fee rate for comparable client services, while Hotchkis represented that it does not provide similar services to any comparable accounts; and (4) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase. -------------------------------------------------------------------------------- 28 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. -------------------------------------------------------------------------------- 29 (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 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 Large Cap Value Fund is a service mark of American Beacon Advisors, Inc. SAR 04/06 537387 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] SEMI-ANNUAL REPORT [PHOTO] APRIL 30, 2006 SMALL CAP VALUE FUND 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....... 6
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 April 30, 2006 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Iam pleased to present you with the Semi-Annual Report for the American Beacon Small Cap Value Fund for the six months ended April 30, 2006. During this time, the Dow Jones Industrial Average posted gains of 10.22%, the S&P 500 Index increased by 9.64%, while the Russell 2000 Index returned 18.91%. The Institutional Class of the Small Cap Value Fund produced returns of 15.85% during the six months and 26.30%, 28.24%, 18.63% for the one-year, three-year, and five-year time periods, respectively. I hope that the enclosed market overviews, portfolio listings, and detailed financial data are helpful to you. 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 current performance may be lower or higher than the performance data quoted. 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 -------------------------------------------------------------------------------- Stocks continued their healthy climb despite high energy prices. Following a lackluster finish in 2005, U.S. stock prices climbed steadily during the first four months of 2006, ending near a five-year high. Despite continuing worries over rising energy costs and the possibility of inflation, investors' confidence remained firm. Small-cap stocks in the U.S. continued to outperform their large-cap counterparts, as has been the general trend since the bear market ended in 2002. Value outperformed growth for the period, also continuing a multi-year trend. International stocks continued to produce outstanding gains most notably in Japan and emerging markets. All eyes remained on the Federal Reserve Board ("the Fed") as its measured pace of raising short-term rates continued. On March 28, the Fed raised its target for the federal funds rate to 4.75%, continuing its gradual tightening of monetary policy to defuse the threat of inflation. This was the Fed's 15th consecutive rate increase since June 2004. (Shortly after the close of the fiscal period, the Fed extended its streak of rate increases to 16, raising its target to 5.00%.) Because the Fed's actions affect the economy with a lag, investors are watching economic measures more closely -- either for evidence that higher rates are slowing the economy, or for evidence that the economy can continue to grow with modest inflation while absorbing higher rates (the so-called "goldilocks" scenario). Heightened focus on the Fed and the economy has led to increased volatility of equity returns, as daily market swings of 1% or more have become more common. While the ultimate effect of the Fed tightening cycle remains to be seen, its effect on stock market returns will be reflected in the earnings growth and valuation of the overall market. At the most basic level, market returns are comprised of three components: earnings growth, the valuation of those earnings (i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield. The current environment for each component of return warrants some discussion. EARNINGS: Earnings growth for the six months ended April 30 (and the past several years) has been robust and well above the long-term average. While there has been some deceleration over the six months, double-digit growth has continued longer than most expected. Looking forward, earnings growth from the financial sector may slow as higher short-term borrowing costs crimp earnings. Additionally, the energy sector has been the largest contributor to earnings growth and could see an earnings slowdown if energy prices pause or decline. VALUATION: While P/E ratios (the price of a stock divided by its anticipated earnings per share) have compressed significantly this decade, the P/E of the S&P 500, based on reported earnings, remains at 17 times earnings. This compares with a long-term average (since 1926) of 15 times earnings. Higher interest rates typically reduce the multiple that investors are willing to pay for stocks. Most importantly, however, the contribution of P/E expansion to market returns over long periods is small and is dwarfed in importance by earnings growth and dividend yield. DIVIDENDS: Returning capital to shareholders via dividends continues to grow in popularity. Favorable tax treatment, demographic trends, and investor pressure have all been supportive of higher dividend payouts. However, because earnings growth has been more robust, the percentage of earnings paid out in dividends is near an all-time low. This should be supportive of higher dividend payouts over time. Dividends will continue to be a critical component of overall return. Overall, the outlook for stock returns appears mixed. On the bullish side, the economy remains resilient, corporate earnings are strong, and profit margins remain high. Investor concerns include a slowing economy, perhaps induced by higher interest rates hurting the housing sector and consumer spending. Additionally, we have enjoyed the longest bull market since 1982 and the second longest period ever without a 10% correction, recent market weakness and volatility notwithstanding. Regardless of future trends in the economy or markets, stock selection will remain the key driver of performance going forward. This is especially true in the current environment where, thanks to multi-year performance advantages of small-cap over large-cap and value over growth, the lines between various styles are less defined. So, stock selection may be more important than style or market cap going forward. 2 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP VALUE FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Small Cap Value Fund returned 15.85% for the six months ended April 30, 2006, lagging the Russell 2000 Value Index ("Index") return of 17.52% and the Lipper Small-Cap Value Funds Index return of 17.44% for the same period.
ANNUALIZED TOTAL RETURNS ------------------------------------- PERIODS ENDED 4/30/06 ------------------------------------- SINCE 6 MONTHS* 1 YEAR 5 YEARS INCEP. --------- ------ ------- ------ Institutional Class(1).... 15.85% 26.30% 18.63% 15.95% PlanAhead Class(1,2)...... 15.72% 25.96% 18.26% 15.66% AMR Class(1,2)............ 16.02% 26.65% 18.94% 16.27% Service Class(1,3)........ 15.55% 25.63% 18.06% 15.53% Lipper Small-Cap Value Funds Index.............. 17.44% 30.09% 15.77% 14.12% Russell 2000 Value Index.................... 17.52% 30.85% 15.25% 13.91%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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. The Fund lagged the Index due to stock selection, as sector allocation added slightly to the Fund's relative performance. Holdings in the Financials sector were a significant source of excess performance, but not enough to offset negative stock selection in the Materials, Consumer Discretionary, and Industrials sectors. Top contributors in Financials included American Financial Group (up 30.4%), Hanover Insurance Group (up 39.7%), and Piper Jaffray (up 103.5%). In the Materials sector, positions in Worthington Industries (down 0.2%) and Lubrizol (up 6.2%) were the major detractors. Lear (down 21.0%) in the Consumer Discretionary sector and Deluxe (down 26.5%) in Industrials were responsible for a large portion of the underperformance in those sectors. The Fund's only significant underweighting was in the Financials sector, one of the poorer performing sectors of the Index. The underweighting generated positive relative performance, but was somewhat offset by the negative impact of an overweight in the Utilities sector, the worst 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 April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- American Financial Group, Inc. 1.2% Flowserve Corp. 1.0% Protective Life Corp. 0.9% AGCO Corp. 0.8% Reinsurance Group of America, Inc. 0.8% Ingram Micro, Inc. 0.8% Lear Corp. 0.8% Valassis Communications, Inc. 0.8% The Men's Wearhouse, Inc. 0.7% The Hanover Insurance Group, Inc. 0.7%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 23.8% Consumer Discretionary 20.6% Industrials 18.4% Information Technology 10.9% Utilities 8.0% Materials 6.7% Energy 4.5% Consumer Staples 3.9% Health Care 3.1% 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 November 1, 2005 through April 30, 2006. 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 April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 11/1/05 4/30/06 11/01/05-4/30/06 --------- ------- ---------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,158.53 $4.42 Hypothetical $1,000.00 $1,020.70 $4.14 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,157.16 $5.72 Hypothetical $1,000.00 $1,019.49 $5.35 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,155.50 $7.22 Hypothetical $1,000.00 $1,018.09 $6.76 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,160.21 $2.98 Hypothetical $1,000.00 $1,022.04 $2.79 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.83%, 1.07%, 1.35%, 0.56%, for the Institutional, PlanAhead, Service, and AMR 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 (181) by days in the year (365) to reflect the half-year period. 5 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 94.06% CONSUMER DISCRETIONARY - 19.40% AUTO COMPONENTS - 2.77% American Axle & Manufacturing Holdings, Inc.+............. 534,300 $ 9,409 ArvinMeritor, Inc. ........... 686,300 11,413 Bandag, Inc.+................. 85,100 3,414 Bandag, Inc., A Shares........ 3,600 123 BorgWarner, Inc. ............. 256,600 15,583 Commercial Vehicle Group, Inc.(+)+.................... 240,300 4,869 Gentex Corp.(+)............... 235,000 3,445 Keystone Automotive Industries, Inc.(+)+........ 79,500 3,284 Lear Corp.+................... 1,095,000 25,820 Modine Manufacturing Co.(+)... 142,400 4,131 Tenneco, Inc.(+)+............. 125,500 3,018 TRW Automotive Holdings Corp.(+).................... 88,400 1,961 Westinghouse Air Brake Technologies Corp.+......... 106,900 3,905 ---------- 90,375 ---------- AUTOMOBILES - 0.13% Winnebago Industries, Inc.+... 146,900 4,326 ---------- DISTRIBUTORS - 0.10% Spectrum Brands, Inc.(+)+..... 194,500 3,219 ---------- HOTELS, RESTAURANTS & LEISURE - 1.94% CBRL Group, Inc.+............. 150,900 6,143 CEC Entertainment, Inc.(+)+... 215,000 7,547 Jack in the Box, Inc.(+)+..... 121,400 5,075 Kerzner International Ltd.(+)+.................... 113,400 8,861 Landry's Restaurants, Inc.+... 316,200 11,216 Live Nation, Inc.(+).......... 170,700 3,243 Lodgian, Inc.(+).............. 567,100 7,565 Magna Entertainment Corp.(+)+................... 754,100 4,645 Ruby Tuesday, Inc.+........... 187,500 5,582 Sunterra Corp.(+)+............ 252,000 3,359 ---------- 63,236 ---------- HOUSEHOLD DURABLES - 5.34% American Greeting Corp.+...... 622,400 14,016 Beazer Homes USA, Inc.+....... 217,600 12,540 Blyth, Inc. .................. 407,500 8,374 Ethan Allen Interiors, Inc.+....................... 329,600 14,796 Furniture Brands International, Inc.+........ 716,500 16,479 Helen of Troy Ltd.(+)+........ 289,800 5,987 HNI Corp. .................... 30,700 1,623 Hovnanian Enterprises, Inc.(+)+.................... 154,000 6,125 M.D.C. Holdings, Inc.+........ 153,873 8,891
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Matthews International Corp. ...................... 68,000 $ 2,366 Meritage Homes Corp.(+)+...... 94,900 6,224 Standard Pacific Corp.+....... 337,800 10,712 Steiner Leisure Ltd.(+)+...... 259,300 3,957 Technical Olympic USA, Inc.+.. 248,800 5,225 Tempur-Pedic International, Inc.(+)+.................... 526,700 8,317 The Toro Co. ................. 95,800 4,737 Tupperware Corp.+............. 895,300 18,891 WCI Communities, Inc.(+)+..... 776,300 19,897 William Lyon Homes, Inc.(+)+.. 17,600 1,761 The Yankee Candle Company, Inc.+....................... 106,900 3,222 ---------- 174,140 ---------- INTERNET & CATALOG RETAIL - 0.27% Insight Enterprises, Inc.(+)+.................... 301,200 5,955 School Specialty, Inc.(+)+.... 75,600 2,749 ---------- 8,704 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.38% Brunswick Corp. .............. 277,800 10,895 Polaris Industries, Inc.+..... 33,800 1,619 ---------- 12,514 ---------- MEDIA - 1.01% Courier Corp.+................ 70,999 3,063 Dow Jones & Company, Inc.+.... 44,000 1,627 Entercom Communications Corp.+...................... 181,000 4,791 Gray Television, Inc.+........ 67,400 512 Hearst-Argyle Television, Inc.+....................... 67,400 1,552 Journal Communications, Inc.+....................... 144,500 1,695 Journal Register Co. ......... 274,150 3,065 Lin TV Corp.(+)............... 102,428 905 Meredith Corp.(+)............. 29,100 1,443 R.H. Donnelley Corp.+......... 45,000 2,526 Scholastic Corp.(+)+.......... 150,500 3,994 Source Interlink Companies, Inc.(+)+.................... 424,300 4,595 Triple Crown Media, Inc.(+)... 11,460 61 Westwood One, Inc.(+)......... 320,700 3,095 ---------- 32,924 ---------- MULTILINE RETAIL - 0.96% Big Lots, Inc.(+)+............ 45,375 656 BJ's Wholesale Club, Inc.(+)+.................... 491,900 15,062 Fred's, Inc.(+)+.............. 519,900 7,377 The Reader's Digest Association, Inc.(+)........ 92,900 2,422 Tuesday Morning Corp.+........ 309,600 5,867 ---------- 31,384 ---------- SPECIALTY RETAIL - 5.16% Big 5 Sporting Goods Corp.+... 209,700 3,886 Borders Group, Inc. .......... 602,500 14,219
See accompanying notes -------------------------------------------------------------------------------- 6 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Charming Shoppes, Inc.(+)+.... 417,900 $ 5,746 Claire's Stores, Inc. ........ 291,100 10,252 Foot Locker, Inc. ............ 183,200 4,247 Genesco, Inc.(+)+............. 16,700 690 Group 1 Automotive, Inc.+..... 203,000 11,080 HOT Topic, Inc.(+)+........... 256,200 3,799 The Men's Wearhouse, Inc.+.... 687,300 24,358 OfficeMax, Inc. .............. 220,200 8,522 Pacific Sunwear of California(+)............... 19,500 454 PETCO Animal Supplies, Inc.(+)+.................... 199,700 4,373 RadioShack Corp. ............. 250,400 4,257 Regis Corp.+.................. 377,100 13,225 Rent-A-Center, Inc.(+)........ 377,850 10,436 Sonic Automotive, Inc., A Shares+..................... 501,300 13,545 Stage Stores, Inc.+........... 318,580 9,959 United Auto Group, Inc.+...... 29,900 1,265 United Rentals, Inc.(+)+...... 263,500 9,399 Zale Corp.(+)+................ 593,700 14,635 ---------- 168,347 ---------- TEXTILES & APPAREL - 1.34% Brown Shoe Company, Inc. ..... 6,450 245 Columbia Sportswear Co.(+)+... 89,368 4,548 Jones Apparel Group, Inc. .... 154,700 5,314 Kellwood Co.+................. 180,400 5,780 Kenneth Cole Productions, Inc.+....................... 122,800 3,133 K-Swiss, Inc. ................ 72,300 2,073 New York & Co, Inc.(+)+....... 129,400 2,015 The Timberland Co.(+)......... 201,700 6,868 Tommy Hilfiger Corp.(+)+...... 78,200 1,302 The Warnaco Group, Inc.(+)+... 560,500 12,488 ---------- 43,766 ---------- TOTAL CONSUMER DISCRETIONARY........... 632,935 ---------- CONSUMER STAPLES - 3.61% BEVERAGES - 0.08% The Boston Beer Company, Inc.(+)+.................... 93,600 2,525 ---------- COMMERCIAL SERVICES - 0.11% Steiner Leisure Ltd.(+)+...... 81,800 3,527 ---------- FOOD & DRUG RETAILING - 0.76% Agrium, Inc. ................. 638,100 16,476 Pathmark Stores, Inc.(+)+..... 298,400 3,089 Ruddick Corp. ................ 231,600 5,375 ---------- 24,940 ---------- FOOD PRODUCTS - 1.85% Chiquita Brands International, Inc.+....................... 227,600 3,692 Del Monte Foods Co. .......... 1,452,500 16,936
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) J&J Snack Foods Corp. ........ 53,800 $ 1,843 The JM Smucker Co.(+)......... 44,200 1,735 Lance, Inc.+.................. 100,110 2,554 Pilgrim's Pride Corporation(+)+............. 32,200 841 Ralcorp Holdings, Inc.(+)+.... 277,900 10,360 Sanderson Farms, Inc.(+)+..... 70,023 1,856 Sensient Technologies Corp.+.. 494,350 10,159 Smithfield Foods, Inc.(+)..... 389,400 10,475 ---------- 60,451 ---------- PERSONAL PRODUCTS - 0.30% Chattem, Inc.(+).............. 73,100 2,634 NBTY, Inc.(+)+................ 318,000 7,203 ---------- 9,837 ---------- RETAIL-DRUG STORE - 0.18% Longs Drug Stores Corp.(+).... 120,700 5,722 ---------- TOBACCO - 0.33% Schweitzer Mauduit International, Inc. ........ 77,900 1,886 Universal Corp.+.............. 236,800 9,015 ---------- 10,901 ---------- TOTAL CONSUMER STAPLES.... 117,903 ---------- ENERGY - 4.19% ENERGY - 0.22% Pioneer Drilling Co.(+)....... 437,900 7,098 ---------- ENERGY EQUIPMENT & SERVICES - 2.18% Dril-Quip, Inc.(+)+........... 41,300 2,973 FMC Technologies, Inc.(+)..... 37,500 2,047 Global Industries Ltd.(+)..... 562,000 8,919 Maverick Tube Corp.(+)+....... 166,400 9,056 Oil States International, Inc.(+)+.................... 325,600 13,144 Tetra Technologies, Inc.(+)+.. 139,350 6,856 Unit Corp.(+)+................ 217,500 12,561 Universal Compression Holdings, Inc.(+)+.......... 149,900 8,379 Veritas DGC, Inc.(+)+......... 152,200 7,293 ---------- 71,228 ---------- OIL & GAS - 1.79% Berry Petroleum Co.+.......... 2,900 214 Cimarex Energy Co.+........... 117,400 5,042 Edge Petroleum Corp.(+)+...... 103,700 2,396 Encore Acquisition Co.(+)+.... 406,549 12,457 Energy Partners Ltd.(+)+...... 159,700 4,119 Forest Oil Corp.(+)........... 9,300 340 The Houston Exploration Co.(+)+..................... 186,700 10,440
See accompanying notes -------------------------------------------------------------------------------- 7 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pogo Producing Co.+........... 126,000 $ 6,261 Stone Energy Corp.(+)+........ 221,500 10,433 Tsakos Energy Navigation Ltd.+....................... 172,400 6,617 ---------- 58,319 ---------- TOTAL ENERGY.............. 136,645 ---------- FINANCIALS - 22.36% BANKS - 5.61% Alabama National Bancorp+..... 32,700 2,252 Anchor BanCorp Wisconsin, Inc.+....................... 51,138 1,492 Astoria Financial Corp. ...... 115,200 3,608 BancorpSouth, Inc.+........... 354,200 9,078 Bank of Hawaii Corp. ......... 193,600 10,514 BankAtlantic Bancorp, Inc.+... 482,300 7,196 Chemical Financial Corp.+..... 165,531 4,819 Chittenden Corp.+............. 214,125 5,901 Citizens Banking Corp.+....... 141,500 3,700 City National Corp. .......... 30,700 2,240 The Colonial BancGroup, Inc. ....................... 338,000 8,764 Community Bank System, Inc.+.. 225,800 4,636 Corus Bankshares, Inc.+....... 6,787 454 Cullen/Frost Bankers, Inc. ... 215,200 12,456 Downey Financial Corp.+....... 107,500 7,716 F.N.B. Corp.+................. 236,400 3,967 First Commonwealth Financial Corp.+...................... 156,600 2,095 First Republic Bank+.......... 87,100 3,791 FirstFed Financial Corp.(+)+................... 13,000 818 Flushing Financial Corp.(+)+.. 87,700 1,485 Fulton Financial Corp.+....... 111,599 1,836 Greater Bay Bancorp+.......... 79,000 2,182 Independence Community Bank Corp. ...................... 26,400 1,109 International Bancshares Corp.+...................... 231,128 6,613 Investors Financial Services Corp.+...................... 28,200 1,350 Irwin Financial Corp.+........ 3,800 70 MAF Bancorp, Inc.+............ 112,500 4,993 NBT Bancorp, Inc.+............ 154,406 3,368 Pacific Capital Bancorp+...... 22,900 768 PFF Bancorp, Inc.+............ 8,400 288 Provident Bankshares Corp.+... 113,720 3,953 Republic Bancorp, Inc.+....... 565,298 6,484 S&T Bancorp, Inc.+............ 9,364 332 Sky Financial Group, Inc. .... 215,194 5,563 Sterling Bancshares, Inc. .... 146,200 2,421 Sterling Financial Corp. ..... 84,799 2,726 Susquehanna Bancshares, Inc.+....................... 215,000 5,132 Timberland Bancorp, Inc.+..... 14,800 429 Trustmark Corp.+.............. 340,960 10,709 United Bankshares, Inc.+...... 77,571 2,830
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Washington Federal, Inc. ..... 356,994 $ 8,539 Webster Financial Corp. ...... 258,800 12,151 Westamerica Bancorporation(+)........... 15,800 808 Wilmington Trust Corp.(+)..... 28,400 1,258 ---------- 182,894 ---------- DIVERSIFIED FINANCIALS - 2.56% Ace Cash Express, Inc.(+)+.... 197,900 5,343 Affiliated Managers Group, Inc.(+)+.................... 88,000 8,914 AmeriCredit Corp.(+).......... 33,200 1,005 Asset Acceptance Capital Corp.(+)+................... 496,100 10,364 Assured Guaranty Ltd. ........ 166,900 4,148 Asta Funding, Inc.+........... 197,500 7,175 CapitalSource, Inc.+.......... 70,030 1,646 Cash America International, Inc. ....................... 271,300 8,920 Financial Federal Corp.+...... 235,800 6,697 IndyMac Bancorp, Inc.+........ 163,100 7,881 Knight Capital Group, Inc.(+)..................... 314,800 5,276 MortgageIT Holdings, Inc.+.... 280,500 3,220 Piper Jaffray Co.(+).......... 139,600 9,758 Raymond James Financial, Inc. ....................... 105,300 3,196 ---------- 83,543 ---------- INSURANCE - 10.39% 21st Century Insurance Group+...................... 353,400 5,676 Alfa Corp.+................... 78,403 1,320 American Equity Investment Life Holding Co.+........... 85,800 1,163 American Financial Group, Inc.+....................... 907,500 40,184 American National Insurance Co.+........................ 24,717 2,947 AmerUs Group Co.+............. 244,800 14,358 Arch Capital Group Ltd.(+).... 139,000 8,444 Argonaut Group, Inc.(+)+...... 15,007 524 Arthur J Gallagher & Co.+..... 553,900 15,199 Aspen Insurance Holdings Ltd. ....................... 235,800 5,742 The Commerce Group, Inc. ..... 76,100 4,415 Conseco, Inc.(+)+............. 552,900 13,961 Delphi Financial Group, Inc.+....................... 336,400 17,624 FBL Financial Group, Inc. .... 235,600 7,928 The First American Corp. ..... 112,700 4,801 Fremont General Corp.+........ 31,700 705 Great American Financial Resources, Inc.+............ 80,800 1,726 The Hanover Insurance Group, Inc. ....................... 459,700 24,318 Harleysville Group, Inc. ..... 7,971 239 HCC Insurance Holdings, Inc.+....................... 248,800 8,332 Hilb Rogal & Hobbs Co.+....... 53,100 2,171 Horace Mann Educators Corp. .. 387,000 6,738
See accompanying notes -------------------------------------------------------------------------------- 8 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Infinity Property and Casualty Corp.+...................... 157,798 $ 7,076 KMG America Corp.(+)+......... 366,591 3,321 LandAmerica Financial Group, Inc.+....................... 30,500 2,116 Max Re Capital Ltd. .......... 288,200 7,061 Mercury General Corp.+........ 156,100 8,331 National Western Life Insurance Co.+.............. 2,500 580 The Navigators Group, Inc.(+)..................... 179,700 8,502 Odyssey Re Holdings Corp.+.... 394,200 9,480 Ohio Casualty Corp.+.......... 360,840 10,699 The Phoenix Companies, Inc. .. 91,400 1,388 PMA Capital Corp.(+)+......... 110,200 1,078 Protective Life Corp. ........ 577,300 29,096 Quanta Capital Holdings Ltd.(+)+.................... 265,200 689 Reinsurance Group of America, Inc.+....................... 541,000 26,022 Scottish Re Group Ltd.+....... 137,400 3,192 StanCorp Financial Group, Inc. ....................... 220,800 10,894 Stewart Information Services Corp.+...................... 12,900 557 Triad Guaranty, Inc.(+)+...... 241,000 13,139 United America Indemnity Ltd.(+)+.................... 300,997 7,146 ---------- 338,882 ---------- INVESTMENT COMPANIES - 0.21% American Capital Strategies Ltd. ....................... 194,100 6,759 ---------- REAL ESTATE - 3.59% Aames Investment Corp.+....... 480,800 2,548 Alexandria Real Estate Equities, Inc. ............. 17,400 1,576 American Financial Realty Trust....................... 385,400 4,386 Annaly Mortgage Management, Inc.(+)+.................... 436,500 5,880 Bluegreen Corp.(+)............ 321,300 3,962 Brookfield Homes Corp.+....... 73,070 3,405 Capital Lease Funding, Inc.+....................... 194,400 2,076 Capital Trust, Inc.+.......... 108,000 3,359 Comstock Homebuilding Companies, Inc.(+)+......... 147,700 1,376 Corrections Corp of America(+).................. 54,506 2,446 Eagle Hospitality Properties Trust, Inc.(+)+............. 196,000 1,762 Education Realty Trust, Inc.+....................... 170,600 2,545 Equity Inns, Inc.+............ 521,300 8,445 Fieldstone Investment Corp.+.. 408,900 4,702 First Potomac Realty Trust.... 100,500 2,773 Government Properties Trust, Inc.+....................... 22,900 198
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Health Care Real Estate Investment Trust, Inc. +.... 46,700 $ 1,625 Innkeepers USA Trust.......... 230,000 3,685 Jameson Inns, Inc.(+)+........ 945,600 2,307 Jones Lang LaSalle, Inc.+..... 91,600 7,764 LaSalle Hotel Properties...... 278,500 12,179 Lexington Corporate Properties Trust+...................... 464,200 10,008 MI Developments, Inc. ........ 401,800 13,991 Mission West Properties, Inc. ....................... 222,200 2,644 Redwood Trust, Inc. .......... 86,000 3,652 Strategic Hotel Capital, Inc. ....................... 195,400 4,432 Thomas Properties Group, Inc. ....................... 108,500 1,426 Ventas, Inc. ................. 59,800 1,954 ---------- 117,106 ---------- TOTAL FINANCIALS.......... 729,184 ---------- HEALTH CARE - 2.86% HEALTH CARE EQUIPMENT & SUPPLIES - 0.17% CONMED Corp.(+)+.............. 34,728 758 The Cooper Companies, Inc.+... 28,800 1,579 Encore Medical Corp.(+)+...... 329,600 1,806 Medical Action Industries, Inc.(+)+.................... 52,900 1,265 ---------- 5,408 ---------- HEALTH CARE PROVIDERS & SERVICES - 2.32% Amedisys, Inc.(+)+............ 132,100 4,380 AMERIGROUP Corp.(+)........... 8,700 225 Amsurg Corp.(+)+.............. 191,200 4,883 Apria Healthcare Group, Inc.(+)..................... 427,500 9,362 Kindred Healthcare, Inc.(+)+.. 327,600 7,948 Magellan Health Services, Inc.(+)+.................... 419,900 17,069 Option Care, Inc.+............ 531,363 7,604 Orchid Cellmark, Inc.(+)+..... 237,449 1,107 Pediatrix Medical Group, Inc.(+)+.................... 150,400 7,613 RehabCare Group, Inc.(+)+..... 106,900 1,756 Res-Care, Inc.(+)............. 233,400 4,792 Triad Hospitals, Inc.(+)+..... 159,400 6,567 Universal Health Services, Inc.+....................... 46,000 2,336 ---------- 75,642 ---------- PHARMACEUTICALS - 0.37% Endo Pharmaceuticals Holdings, Inc.(+)..................... 54,000 1,698 King Pharmaceuticals, Inc.(+)..................... 488,700 8,499 Watson Pharmaceuticals, Inc.(+)..................... 65,100 1,851 ---------- 12,048 ---------- TOTAL HEALTH CARE......... 93,098 ----------
See accompanying notes -------------------------------------------------------------------------------- 9 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 17.34% AEROSPACE & DEFENSE - 0.88% Alliant Techsystems, Inc.(+)...................... 28,200 $ 2,256 Armor Holdings, Inc.(+)+...... 171,500 10,473 EDO Corp.+.................... 115,800 3,026 Esterline Technologies Corp.(+)+.................... 209,500 9,285 Herley Industries, Inc.(+)+... 180,800 3,829 ---------- 28,869 ---------- AIR FREIGHT & COURIERS - 0.43% Ryder Systems, Inc. .......... 266,400 13,893 ---------- BUILDING PRODUCTS - 0.72% ElkCorp+...................... 189,700 5,776 Insituform Technologies, Inc.(+)+..................... 401,000 10,218 Lennox International Inc. .... 194,800 6,356 Universal Forest Products, Inc.+........................ 13,500 1,010 ---------- 23,360 ---------- CHEMICALS - 0.18% Pioneer Companies, Inc.(+)+... 187,400 6,001 ---------- COMMERCIAL SERVICES & SUPPLIES - 5.95% Adesa, Inc.+.................. 175,200 4,469 Allied Waste Industries, Inc.(+)...................... 156,700 2,219 Bowne & Company, Inc.+........ 750,500 11,790 The Brinks Co. ............... 195,330 9,923 Casella Waste Systems, Inc.(+)...................... 119,100 1,852 Central Parking Corp.+........ 213,800 3,260 Ceridian Corp.(+)............. 102,000 2,472 Clean Harbors, Inc.(+)+....... 121,800 3,505 Consolidated Graphics, Inc.(+)...................... 57,500 3,007 Convergys Corp.(+)............ 841,300 16,380 Con-way, Inc.(+).............. 214,700 11,963 CSG Systems International, Inc.(+)+..................... 234,000 5,916 Deluxe Corp.+................. 430,100 10,254 Electro Rent Corp.(+)+........ 100,600 1,622 John H. Harland Co.+.......... 112,500 4,663 Kelly Services, Inc.+......... 397,300 10,993 Labor Ready, Inc.(+)+......... 150,100 3,967 LECG Corp.(+)+................ 443,500 8,200 McGrath Rentcorp+............. 108,038 2,905 Navigant Consulting, Inc.(+)+..................... 350,900 7,397 NCO Group, Inc.(+)+........... 227,542 4,881 PHH Corp.(+).................. 277,000 7,723 Sabre Holdings Corp.+......... 837,598 19,340 Sotheby's Holdings(+)......... 42,500 1,275 Spherion Corp.(+)+............ 366,600 3,879 Steelcase, Inc., A Shares(+).................... 48,400 906 Valassis Communications, Inc.(+)...................... 836,700 24,490 Waste Connections, Inc.(+)+... 129,700 4,993 ---------- 194,244 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) CONSTRUCTION & ENGINEERING - 0.63% Comfort Systems USA, Inc. .... 213,000 $ 3,250 Granite Construction, Inc. ... 141,800 6,574 Infrasource Services, Inc.(+)+..................... 114,100 2,155 The Shaw Group, Inc.(+)+...... 282,500 8,645 ---------- 20,624 ---------- ELECTRICAL EQUIPMENT - 1.08% Brady Corp. .................. 314,900 11,327 The Genlyte Group, Inc.(+)+... 75,900 5,230 II-VI, Inc.(+)+............... 212,100 4,594 Regal-Beloit Corp.+........... 247,400 11,544 Thomas & Betts Corp.(+)....... 45,900 2,614 ---------- 35,309 ---------- MACHINERY - 5.34% AGCO Corp.(+)+................ 1,143,480 27,066 Briggs & Stratton Corp.+...... 394,200 13,300 Circor International, Inc.+... 109,600 3,321 Flowserve Corp.(+)+........... 554,600 31,901 The Greenbrier Companies, Inc.+........................ 100,700 4,043 Harsco Corp.+................. 163,300 13,611 IDEX Corp. ................... 243,800 12,385 Kaydon Corp.+................. 326,400 14,016 Kennametal, Inc. ............. 36,700 2,270 Navistar International Corp.(+)+.................... 331,700 8,750 Reliance Steel & Aluminum Co. ......................... 86,900 7,730 Terex Corp.(+)................ 217,900 18,859 The Timken Co. ............... 358,500 12,512 Wabash National Corp.+........ 238,900 4,324 ---------- 174,088 ---------- MARINE - 0.95% Alexander & Baldwin, Inc. .... 175,000 8,727 Kirby Corp.(+)................ 218,300 16,089 Overseas Shipholding Group, Inc. ........................ 123,500 6,030 ---------- 30,846 ---------- ROAD & RAIL - 0.97% Arkansas Best Corp.+.......... 162,900 6,992 Covenant Transportation, Inc.(+)+..................... 182,300 2,523 Laidlaw International, Inc. ........................ 326,200 8,073 Swift Transportation Company, Inc.(+)+..................... 202,253 6,058 Werner Enterprises, Inc.+..... 63,000 1,208 YRC Worldwide, Inc.(+)+....... 157,900 6,632 ---------- 31,486 ---------- SEMICONDUCTOR EQUIPMENT - 0.09% GSI Group, Inc.(+)............ 310,200 3,105 ----------
See accompanying notes -------------------------------------------------------------------------------- 10 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) TRADING COMPANIES & DISTRIBUTORS - 0.06% MSC Industrial Direct Company, Inc. ........................ 36,100 $ 1,872 ---------- TRANSPORT-SERVICES - 0.06% Bristow Group, Inc.(+)+....... 51,200 1,837 ---------- TOTAL INDUSTRIALS.......... 565,534 ---------- INFORMATION TECHNOLOGY - 10.39% COMMUNICATIONS EQUIPMENT - 0.74% Andrew Corp.(+)............... 174,900 1,850 Carrier Access Corp.(+)....... 328,300 2,557 Comtech Telecommunications Corp.(+)+.................... 146,800 4,177 Emulex Corp.(+)............... 329,300 5,977 Foundry Networks, Inc.(+)..... 256,000 3,638 PC-Tel, Inc.(+)............... 78,700 831 Plantronics, Inc. ............ 18,700 701 Symmetricom, Inc.(+)+......... 332,100 2,690 Tekelec(+).................... 114,600 1,607 ---------- 24,028 ---------- COMPUTERS & PERIPHERALS - 0.70% Avid Technology, Inc.(+)+..... 86,600 3,338 Electronics for Imaging, Inc.(+)+..................... 173,200 4,756 Mercury Computer Systems, Inc.(+)+..................... 284,400 5,421 Western Digital Corp.(+)...... 449,600 9,460 ---------- 22,975 ---------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.84% Arrow Electronics, Inc.(+).... 439,000 15,892 Avnet, Inc.(+)................ 887,300 23,203 Benchmark Electronics, Inc.(+)+..................... 413,400 11,286 CyberOptics Corp.(+)+......... 100,000 1,528 Global Imaging Systems, Inc.(+)+..................... 94,900 3,544 Ingram Micro, Inc.(+)......... 1,414,200 26,007 Littlefuse, Inc.(+)+.......... 337,200 10,888 Mettler-Toledo International, Inc.(+)...................... 35,200 2,281 PerkinElmer, Inc. ............ 102,300 2,193 Plexus Corp.(+)............... 312,600 13,617 Vishay Intertechnology, Inc.(+)...................... 948,900 14,822 ---------- 125,261 ---------- INTERNET SOFTWARE & SERVICES - 1.00% EarthLink, Inc.(+)+........... 1,325,500 12,049 InfoSpace, Inc.(+)+........... 124,600 3,181 Netgear, Inc.(+)+............. 215,200 4,831 NIC, Inc(+)................... 435,700 2,680 United Online, Inc.+.......... 329,900 4,252 WebEx Communications, Inc.(+)+..................... 157,500 5,568 ---------- 32,561 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) IT CONSULTING & SERVICES - 0.53% BearingPoint, Inc.(+)+........ 543,000 $ 5,039 Perot Systems Corp.(+)........ 360,700 5,439 Phase Forward Inc.(+)......... 357,600 4,899 SI International, Inc.(+)+.... 60,900 2,075 ---------- 17,452 ---------- OFFICE ELECTRONICS - 0.41% IKON Office Solutions, Inc.+........................ 1,002,800 13,237 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.92% Actel Corp.(+)................ 170,200 2,735 Cabot Microelectronics Corp.(+)+.................... 132,600 4,337 Cirrus Logic, Inc.(+)......... 249,800 2,361 FEI Co.(+)+................... 201,700 4,385 Integrated Device Technology(+)+............... 379,500 5,776 MKS Instruments, Inc.(+)...... 111,000 2,649 Omnivision Technologies, Inc.(+)+..................... 135,785 3,949 QLogic Corp.(+)............... 96,000 1,998 Teradyne, Inc.(+)............. 117,700 1,984 ---------- 30,174 ---------- SOFTWARE - 2.25% Agile Software Corp.(+)+...... 66,200 461 Entrust, Inc.(+).............. 627,000 2,088 Epicor Software Corp.(+)+..... 416,400 5,051 EPIQ Systems, Inc.(+)+........ 134,000 2,333 Mentor Graphics Corp.(+)...... 1,185,500 15,565 Mercury Interactive Corp.(+)..................... 153,000 5,508 Novell, Inc.(+)............... 168,600 1,386 Omnicell, Inc.(+)+............ 253,000 3,370 PLATO Learning, Inc.(+)....... 262,714 2,627 Progress Software Corp.(+).... 164,000 4,525 The Reynolds and Reynolds Co. ......................... 432,200 12,854 RSA Security, Inc.(+)......... 419,200 8,778 SafeNet, Inc.(+)+............. 232,900 4,679 Sybase, Inc.(+)+.............. 190,200 4,141 ---------- 73,366 ---------- TOTAL INFORMATION TECHNOLOGY............... 339,054 ---------- MATERIALS - 6.28% CHEMICALS - 2.99% CF Industries Holdings, Inc.+........................ 714,300 12,357 Cytec Industries, Inc. ....... 103,700 6,271 FMC Corp. .................... 120,600 7,665 Georgia Gulf Corp.+........... 314,600 9,331 H.B. Fuller Co.+.............. 145,800 7,625 Hercules, Inc.(+)............. 964,500 13,706 International Flavors & Fragrances, Inc. ............ 72,400 2,558
See accompanying notes -------------------------------------------------------------------------------- 11 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Lubrizol Corp. ............... 416,600 $ 18,168 Olin Corp.+................... 379,800 7,805 PolyOne Corp.(+)+............. 1,234,000 10,958 Tronox, Inc.+................. 67,400 1,173 ---------- 97,617 ---------- CONTAINERS & PACKAGING - 0.34% AptarGroup, Inc. ............. 140,100 7,342 Longview Fibre Co. ........... 78,900 2,056 Silgan Holdings, Inc. ........ 38,958 1,513 ---------- 10,911 ---------- METALS & MINING - 2.68% Alpha Natural Resources, Inc.(+)+..................... 202,400 5,082 Century Aluminum Co.(+)+...... 420,200 20,006 Compass Minerals International, Inc.+......... 103,200 2,717 Foundation Coal Holdings, Inc.+........................ 400,700 20,316 Gibraltar Industries, Inc.+... 289,900 8,056 Metal Management, Inc.(+)..... 46,800 1,519 Quanex Corp.+................. 90,150 3,855 RTI International Metals, Inc.(+)+..................... 100,000 6,014 Worthington Industries, Inc.+........................ 1,011,100 19,969 ---------- 87,534 ---------- PAPER & FOREST PRODUCTS - 0.27% Glatfelter.................... 198,700 3,720 Neenah Paper, Inc.(+)+........ 70,300 2,256 Wausau Paper Corp.+........... 189,800 2,729 ---------- 8,705 ---------- TOTAL MATERIALS............ 204,767 ---------- TELECOMMUNICATION SERVICES - 0.10% DIVERSIFIED TELECOMMUNICATION - 0.10% Commonwealth Telephone Enterprises, Inc.+........... 102,700 3,408 ---------- TOTAL TELECOMMUNICATION SERVICES................. 3,408 ---------- UTILITIES - 7.53% ELECTRIC UTILITIES - 4.17% Alliant Energy Corp. ......... 265,800 8,495 Black Hills Corp.+............ 37,700 1,372 Cleco Corp.+.................. 175,800 3,955 Duquesne Light Holdings, Inc.+........................ 813,300 13,802 El Paso Electric Co.(+)....... 193,900 3,829 Great Plains Energy, Inc.+.... 614,300 17,354 Hawaiian Electric Industries, Inc.+........................ 63,200 1,698 Northeast Utilities........... 1,113,500 22,437
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) NSTAR......................... 571,600 $ 15,805 OGE Energy Corp. ............. 437,800 13,204 Pike Electric Corp.(+)........ 143,500 2,745 PNM Resources, Inc.+.......... 232,500 5,885 Puget Energy, Inc.+........... 412,900 8,576 WPS Resources Corp.+.......... 336,500 16,822 ---------- 135,979 ---------- GAS UTILITIES - 3.25% AGL Resources, Inc. .......... 406,600 14,386 Atmos Energy Corp.+........... 599,700 15,916 Energen Corp. ................ 28,900 1,019 MDU Resources Group, Inc. .... 215,500 7,920 National Fuel Gas Co. ........ 522,800 17,383 New Jersey Resources Corp.+... 128,500 5,689 Nicor, Inc.+.................. 26,500 1,050 ONEOK, Inc. .................. 279,800 9,236 Peoples Energy Corp.+......... 157,800 5,733 South Jersey Industries, Inc.+........................ 26,000 691 Southern Union Co. ........... 224,548 5,820 UGI Corp. .................... 531,700 11,910 WGL Holdings, Inc.+........... 312,100 9,182 ---------- 105,935 ---------- MULTI-UTILITIES - 0.11% Vectren Corp.+................ 59,000 1,576 Westar Energy, Inc. .......... 104,100 2,180 ---------- 3,756 ---------- TOTAL UTILITIES............ 245,670 ---------- TOTAL COMMON STOCKS........ 3,068,198 ---------- SHORT TERM INVESTMENTS - 30.91% American Beacon Enhanced Cash Trust++#..................... 526,982,609 526,983 American Beacon Money Market Select Fund++#............... 467,268,690 467,269 PAR AMOUNT ----------- U.S. Treasury Bill, 4.455%, Due 6/8/2006P................ $ 14,055 13,988 ---------- TOTAL SHORT TERM INVESTMENTS.............. 1,008,240 ---------- TOTAL INVESTMENTS - 124.97% (COST $3,588,741).... 4,076,438 ---------- LIABILITIES, NET OF OTHER ASSETS - (24.97%)............ (814,543) ---------- TOTAL NET ASSETS - 100.00%.... $3,261,895 ==========
See accompanying notes -------------------------------------------------------------------------------- 12 AMERICAN BEACON SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- --------------- (+) Non-income producing security. + All or a portion of this security is on loan at April 30, 2006. See Note 5. ++ The Fund/Trust is affiliated by having the same investment advisor. See Note 2. # All or a portion of this security is purchased with cash collateral for securities loaned. P At April 30, 2006, security pledged as collateral for open futures contracts. FUTURES CONTRACTS (dollars in thousands)
NUMBER UNREALIZED OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- -------- -------------- Emini Mini Russell.......................................... 2,590 Jun 2006 $199,119 $5,821
See accompanying notes -------------------------------------------------------------------------------- 13 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES April 30, 2006 (Unaudited) (in thousands, except share and per share amounts) -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $ 3,082,186 Investments in affiliated securities, at value(B)....... 994,252 Receivable for investments sold......................... 8,352 Dividends and interest receivable....................... 2,708 Receivable for fund shares sold......................... 5,025 Receivable for variation margin on open futures contracts.............................................. 1,542 ----------- TOTAL ASSETS........................................ 4,094,065 ----------- LIABILITIES: Payable for investments purchased....................... 13,271 Payable upon return of securities loaned................ 810,832 Payable for fund shares redeemed........................ 2,269 Management and investment advisory fees payable (Note 2)..................................................... 4,496 Administrative service and service fees payable......... 872 Other liabilities....................................... 430 ----------- TOTAL LIABILITIES................................... 832,170 ----------- NET ASSETS.................................................. $ 3,261,895 =========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 2,636,390 Undistributed net investment income..................... 5,529 Accumulated net realized gain (loss).................... 126,458 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................. 493,518 ----------- NET ASSETS.................................................. $ 3,261,895 =========== Shares outstanding (no par value): Institutional Class..................................... 60,003,715 =========== PlanAhead Class......................................... 63,007,300 =========== Service Class........................................... 2,810,462 =========== AMR Class............................................... 20,220,755 =========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 22.54 =========== PlanAhead Class......................................... $ 22.11 =========== Service Class........................................... $ 22.00 =========== AMR Class............................................... $ 22.46 =========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 2,594,489 (B) Cost of investments in affiliated securities............ 994,252 (C) Market value of securities on loan...................... 792,155
See accompanying notes -------------------------------------------------------------------------------- 14 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF OPERATIONS Six Months Ended April 30, 2006 (Unaudited) (in thousands) -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)*........................................ $ 21,248 Dividend income from affiliated securities.............. 2,663 Interest income......................................... 277 Income derived from securities lending, net............. 621 -------- TOTAL INVESTMENT INCOME............................. 24,809 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 7,684 Administrative service fees (Note 2): Institutional Class................................... 1,509 PlanAhead Class....................................... 1,695 Service Class......................................... 67 Transfer agent fees: Institutional Class................................... 127 PlanAhead Class....................................... 100 Service Class......................................... 13 AMR Class............................................. 4 Fund accounting fees.................................... 267 Professional fees....................................... 54 Registration fees and expenses.......................... 36 Service fees: PlanAhead Class (Note 2).............................. 1,695 Service Class (Note 2)................................ 67 Distribution fees -- Service Class (Note 2)............. 67 Prospectus and shareholder reports...................... 397 Other expenses.......................................... 5 -------- TOTAL EXPENSES...................................... 13,787 -------- NET INVESTMENT INCOME....................................... 11,022 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from: Investments........................................... 114,653 Commission recapture.................................. 232 Futures contracts..................................... 9,100 Change in net unrealized appreciation or depreciation of: Investments........................................... 302,253 Futures contracts..................................... 10,138 -------- NET GAIN (LOSS) ON INVESTMENTS...................... 436,376 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $447,398 ======== * Foreign taxes......................................... $ 28
See accompanying notes -------------------------------------------------------------------------------- 15 AMERICAN BEACON SMALL CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED APRIL 30, OCTOBER 31, 2006 2005 -------------- ----------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 11,022 $ 14,541 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions........... 123,985 128,038 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations........................................... 312,391 68,643 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 447,398 211,222 ---------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class................................... (7,101) (1,734) PlanAhead Class....................................... (6,167) (1,962) Service Class......................................... (139) (37) AMR Class............................................. (3,772) (2,456) Net realized gain on investments: Institutional Class................................... (46,081) (20,489) PlanAhead Class....................................... (59,088) (27,260) Service Class......................................... (2,120) (632) AMR Class............................................. (17,954) (20,024) ---------- ---------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (142,422) (74,594) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 456,819 2,144,506 Reinvestment of dividends and distributions............. 138,617 70,239 Cost of shares redeemed................................. (505,953) (830,022) ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................................. 89,483 1,384,723 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS....................... 394,459 1,521,351 ---------- ---------- NET ASSETS: Beginning of period..................................... 2,867,436 1,346,085 ---------- ---------- END OF PERIOD*.......................................... $3,261,895 $2,867,436 ========== ========== * Includes undistributed net investment income (loss) of..................................................... $ 5,529 $ 12,280 ========== ==========
See accompanying notes -------------------------------------------------------------------------------- 16 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), 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"), a series of the Trust. American Beacon Advisors, Inc. (the "Manager"), 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 Fee -- .25% PLANAHEAD CLASS General public and investors investing through an Administrative Service intermediary Fee -- .25% Service Fee -- .25% SERVICE CLASS Investors investing through an intermediary Administrative Service Fee -- .25% Service Fee -- .25% Distribution Fee -- .25% AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A 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 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. -------------------------------------------------------------------------------- 17 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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. 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. -------------------------------------------------------------------------------- 18 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 six months ended April 30, 2006 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ----------- ---------- --------------- ----------- .35%-.60% $7,684 $6,158 $1,526
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 six months ended April 30, 2006, securities lending fees totaling $103,000 were paid to the Manager by the Fund. This fee is netted against securities lending income in the Statement of Operations. 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 -------------------------------------------------------------------------------- 19 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 .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 .25% of the average daily net assets of the PlanAhead and Service Classes of the Fund. 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 .10% of the average daily net assets. During the six months ended April 30, 2006, fees earned by the Manager from the Affiliated Funds were as follows:
SECURITIES LENDING DIRECT INVESTMENT COLLATERAL INVESTED IN FUNDS IN FUNDS TOTAL ----------------- ------------------- -------- $60,701 $360,153 $420,854
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- -------------------------------------------------------------------------------- 20 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 plus a fee for each Board meeting attended. At April 30, 2006, 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 April 30, 2006, 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 six months ended April 30, 2006 and the fiscal year ended October 31, 2006 were as follows (in thousands):
SIX MONTHS YEAR ENDED ENDED APRIL 30, 2006 OCTOBER 31, 2005 -------------- ---------------- (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class..................................... $ 20,806 $12,463 PlanAhead Class......................................... 23,742 16,237 Service Class........................................... 770 368 AMR Class............................................... 9,112 12,942 LONG-TERM CAPITAL GAIN Institutional Class..................................... 32,376 9,760 PlanAhead Class......................................... 41,513 12,985 Service Class........................................... 1,489 301 AMR Class............................................... 12,614 9,538 -------- ------- TOTAL DISTRIBUTIONS PAID............................ $142,422 $74,594 -------- -------
-------------------------------------------------------------------------------- 21 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- As of April 30, 2006, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes... $3,592,527 Unrealized appreciation..................................... 571,468 Unrealized depreciation..................................... (87,557) ---------- Net unrealized appreciation (depreciation).................. 483,911 Undistributed ordinary income............................... 50,655 Undistributed long-term gain (loss)......................... 90,938 ---------- Distributable earnings...................................... $ 625,504 ==========
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 April 30, 2006 (in thousands): Paid-in-capital............................................. $ (1) Undistributed net investment income......................... (594) Accumulated net realized gain (loss)........................ 595 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.................... --
4. INVESTMENT TRANSACTIONS Investment transactions for the six months ended April 30, 2006 (excluding short-term investments) are as follows (in thousands): Purchases................................................... $539,706 Proceeds from sales......................................... $632,246
A summary of the Fund's direct transactions in Affiliated Funds for the six months ended April 30, 2006 is set forth below (in thousands):
OCTOBER 31, 2005 APRIL 30, 2006 AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE --------- ------------------- --------- -------- ------------------- Select Fund................................ $124,632 $513,472 $454,685 $183,419
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 -------------------------------------------------------------------------------- 22 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 April 30, 2006, 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 ------------------ ------------------- --------------- $792,155 $139 $810,832
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. 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): Six Months Ended April 30, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS ------------------- -------------------- ------------------ ------------------- SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------ --------- ------- --------- ------ -------- ------- -------- Shares sold............. 12,488 $ 264,756 7,631 $ 161,309 989 $ 20,706 464 $ 10,048 Reinvestment of dividends............. 2,467 50,759 3,162 63,873 112 2,259 1,061 21,726 Shares redeemed......... (7,663) (164,586) (13,697) (284,556) (533) (11,222) (2,156) (45,589) ------ --------- ------- --------- ------ -------- ------- -------- Net increase (decrease) in shares outstanding........... 7,292 $ 150,929 (2,904) $ (59,374) 568 $ 11,743 (631) $(13,815) ====== ========= ======= ========= ====== ======== ======= ========
-------------------------------------------------------------------------------- 23 AMERICAN BEACON SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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) ====== ========= ======= ========== ====== ======= ======= =========
-------------------------------------------------------------------------------- 24 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 25 AMERICAN BEACON SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ---------------------------------------------------- 2006 2005(H) 2004(G) 2003(D) 2002 2001(C) ----------- ---------- -------- -------- ------- ------- (UNAUDITED) Net asset value, beginning of period.............................. $ 20.43 $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 10.08 ---------- ---------- -------- -------- ------- ------- Income from investment operations: Net investment income (loss)(A)... 0.09 0.11 0.07 (0.01) (0.01) 0.16 Net gains on securities (both realized and unrealized)(A)...... 3.05 2.31 3.09 5.24 0.47 1.81 ---------- ---------- -------- -------- ------- ------- Total income from investment operations.......................... 3.14 2.42 3.16 5.23 0.46 1.97 ---------- ---------- -------- -------- ------- ------- Less distributions: Dividends from net investment income........................... (0.14) (0.07) (0.08) (0.02) (0.11) (0.19) Distributions from net realized gains on securities.............. (0.89) (0.77) (0.44) (0.28) (0.76) (0.17) ---------- ---------- -------- -------- ------- ------- Total distributions.................. (1.03) (0.84) (0.52) (0.30) (0.87) (0.36) ---------- ---------- -------- -------- ------- ------- Net asset value, end of period....... $ 22.54 $ 20.43 $ 18.85 $ 16.21 $ 11.28 $ 11.69 ========== ========== ======== ======== ======= ======= Total return......................... 15.85%(E) 12.90% 19.86% 47.45% 3.29% 20.16% ========== ========== ======== ======== ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)....................... $1,352,646 $1,076,909 $429,540 $ 89,579 $21,936 $ 2,364 Ratios to average net assets (annualized): Expenses net of waivers(A)....... 0.83% 0.87% 0.89% 0.89% 0.82% 0.89% Expenses before waivers(A)....... 0.83% 0.87% 0.89% 0.89% 0.82% 0.89% Net investment income (loss) net of waivers(A).................. 0.80% 0.66% 0.57% 0.60% 0.81% 1.38% Net investment income (loss) before waivers(A).............. 0.80% 0.66% 0.57% 0.60% 0.81% 1.38% Portfolio turnover rate(B)........ 18%(E) 47% 35% 75% 81% 93% PLANAHEAD CLASS --------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------------------- 2006 2005(H) 2004(G) 2003(D) ----------- ---------- -------- ------- (UNAUDITED) Net asset value, beginning of period.............................. $ 20.04 $ 18.54 $ 15.95 $ 11.22 ---------- ---------- -------- ------- Income from investment operations: Net investment income (loss)(A)... 0.06 0.09 0.08 0.05 Net gains on securities (both realized and unrealized)(A)...... 2.99 2.24 2.98 5.08 ---------- ---------- -------- ------- Total income from investment operations.......................... 3.05 2.33 3.06 5.13 ---------- ---------- -------- ------- Less distributions: Dividends from net investment income........................... (0.09) (0.06) (0.03) (0.12) Distributions from net realized gains on securities.............. (0.89) (0.77) (0.44) (0.28) ---------- ---------- -------- ------- Total distributions.................. (0.98) (0.83) (0.47) (0.40) ---------- ---------- -------- ------- Net asset value, end of period....... $ 22.11 $ 20.04 $ 18.54 $ 15.95 ========== ========== ======== ======= Total return......................... 15.72%(E) 12.63% 19.56% 47.12% ========== ========== ======== ======= Ratios and supplemental data: Net assets, end of period (in thousands)....................... $1,393,234 $1,320,853 $466,364 $66,906 Ratios to average net assets (annualized): Expenses net of waivers(A)....... 1.07% 1.10% 1.15% 1.16% Expenses before waivers(A)....... 1.07% 1.10% 1.15% 1.16% Net investment income (loss) net of waivers(A).................. 0.56% 0.42% 0.33% 0.39% Net investment income (loss) before waivers(A).............. 0.56% 0.42% 0.33% 0.39% Portfolio turnover rate(B)........ 18%(E) 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. -------------------------------------------------------------------------------- 26 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS ----------------- ---------------------------------------------- ----------- YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS OCTOBER 31, ENDED OCTOBER 31, MAY 1 TO ENDED ----------------- APRIL 30, ------------------ OCTOBER 31, APRIL 30, 2002 2001(C) 2006 2005(H) 2004(G) 2003(D) 2006 ------- ------- ----------- ------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) $ 11.64 $ 10.08 $ 19.94 $ 18.49 $ 15.92 $ 11.88 $ 20.38 ------- ------- ------- ------- -------- ---------- -------- 0.06 0.15 0.03 0.04 0.01 -- 0.13 0.36 1.76 2.98 2.23 3.00 4.04 3.03 ------- ------- ------- ------- -------- ---------- -------- 0.42 1.91 3.01 2.27 3.01 4.04 3.16 ------- ------- ------- ------- -------- ---------- -------- (0.08) (0.18) (0.06) (0.05) -- -- (0.19) (0.76) (0.17) (0.89) (0.77) (0.44) -- (0.89) ------- ------- ------- ------- -------- ---------- -------- (0.84) (0.35) (0.95) (0.82) (0.44) -- (1.08) ------- ------- ------- ------- -------- ---------- -------- $ 11.22 $ 11.64 $ 22.00 $ 19.94 $ 18.49 $ 15.92 $ 22.46 ======= ======= ======= ======= ======== ========== ======== 2.99% 19.58% 15.55%(E) 12.32% 19.24% 34.01%(E) 16.02%(E) ======= ======= ======= ======= ======== ========== ======== $16,190 $ 1,197 $61,839 $44,709 $ 11,828 $ 1 $454,176 1.11% 1.17% 1.35% 1.40% 1.38% 1.49% 0.56% 1.11% 1.17% 1.35% 1.40% 1.69% 1,089.04% 0.56% 0.52% 1.06% 0.27% 0.12% 0.17% (0.05)% 1.08% 0.52% 1.06% 0.27% 0.12% (0.14)% (1,087.60)% 1.08% 81% 93% 18%(E) 47% 35% 75%(F) 18%(E) AMR CLASS ---------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------- 2005(H) 2004(G) 2003(D) 2002 2001(C) -------- -------- -------- -------- -------- $ 18.78 $ 16.13 $ 11.30 $ 11.71 $ 10.10 -------- -------- -------- -------- -------- 0.21 0.14 0.10 0.15 0.15 2.26 3.04 5.15 0.34 1.85 -------- -------- -------- -------- -------- 2.47 3.18 5.25 0.49 2.00 -------- -------- -------- -------- -------- (0.10) (0.09) (0.14) (0.14) (0.22) (0.77) (0.44) (0.28) (0.76) (0.17) -------- -------- -------- -------- -------- (0.87) (0.53) (0.42) (0.90) (0.39) -------- -------- -------- -------- -------- $ 20.38 $ 18.78 $ 16.13 $ 11.30 $ 11.71 ======== ======== ======== ======== ======== 13.23% 20.12% 47.93% 3.54% 20.52% ======== ======== ======== ======== ======== $424,965 $438,353 $327,542 $181,180 $137,811 0.58% 0.60% 0.61% 0.56% 0.64% 0.58% 0.60% 0.61% 0.56% 0.64% 0.94% 0.84% 0.95% 1.09% 1.55% 0.94% 0.84% 0.95% 1.09% 1.55% 47% 35% 75% 81% 93%
-------------------------------------------------------------------------------- 27 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (Unaudited) -------------------------------------------------------------------------------- RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS At its February 17, 2006 meeting, the Board of Trustees ("Board") considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and the subadvisors, on behalf of the Funds. In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a cost/profitability analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; -------------------------------------------------------------------------------- 28 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and whether (and if so, why) such subadvisor should have its contract renewed; - a comparison of advisory fees and expense ratios for comparable mutual funds; - a table detailing the Manager's profitability with respect to each Fund; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a Fund; -------------------------------------------------------------------------------- 29 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a discussion of whether the Manager receives, with respect to trade execution for the Funds, other special compensation, including any payment for order flow; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the class with the longest performance history, which in most cases is the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management and Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost for providing the services and the profitability of the advisory business to the Manager or subadvisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. Nature, Extent and Quality of Services With respect to the renewal of the Management Agreement, the Board considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new series so as to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote -------------------------------------------------------------------------------- 30 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to the Small Cap Value Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the Small Cap Value Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board noted that the Manager proposed to continue most of the expense waivers and reimbursements that were in place for each applicable Fund's 2005 fiscal year. The Board also noted that each sub-advised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various Funds. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arms-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. A discussion regarding the Board's considerations with respect to the Small Cap Value Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to the Small Cap Value Fund." Economies of Scale In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board noted that, in many cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The Board also noted, where applicable, for purposes of determining the investment advisory fee charged to -------------------------------------------------------------------------------- 31 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- the Funds, the fee schedule to each Investment Advisory Agreement specifies that all other assets managed by a subadvisor on behalf of AMR Corporation and its pension plans shall be considered. Thus, the Funds are able to receive additional breakpoint benefits resulting from the subadvisor's management of a larger pool of assets. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board noted that the Manager and the subadvisors may not direct the Funds' brokerage transactions to certain brokers to obtain research and other services and that the Funds participate in a brokerage recapture program. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP VALUE FUND The benchmark index referred to below is the Small Cap Value Fund's broad-based market index included in the Historical Performance section of the Prospectuses. The Lipper Small-Cap Value Fund Index includes up to the 30 largest funds in the Lipper Small-Cap Value category, where the Fund is classified by Lipper. In considering the renewal of the Management Agreement and each Investment Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for the four- and five-year periods, the 2nd quintile for the three-year period and the 3rd quintile for the one- and two-year periods compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund; (2) the Fund's total return performance exceeded the Lipper Small-Cap Value Fund Index for all relevant periods except the one-year period; (3) the portion of Fund assets allocated to Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow") outperformed the Fund's benchmark index for all relevant periods; (4) the portion of Fund assets allocated to Brandywine Asset Management, LLC ("Brandywine") outperformed the Fund's benchmark index for all relevant periods except the three-year period; (5) the portion of Fund assets allocated to Hotchkis and Wiley Capital Management, LLC ("Hotchkis") outperformed the Fund's benchmark index for all relevant periods; and (6) the portion of Fund assets allocated to The Boston Company Asset Management ("TBCAM") outperformed the Fund's benchmark index for all relevant periods. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 1st quintile, and actual -------------------------------------------------------------------------------- 32 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- management fees (including administrative fees) were in the 2nd quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper, where the 1st quintile represents the lowest fees or expenses among the group; (2) Brandywine and SSgA Funds Management, Inc. represented that they do not charge a lower fee rate for comparable client services, while Hotchkis and TBCAM represented that they do not provide similar services to any comparable accounts; (3) Dreman Value Management, LLC represented that the Fund's fee schedule is similar to comparable accounts; (4) Opus Capital Management, Inc. represented that it does not charge a lower fee for comparable client services with the exception of one account; and (5) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. -------------------------------------------------------------------------------- 33 (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 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. SAR 04/06 537381 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] SEMI-ANNUAL REPORT [PHOTO] APRIL 30, 2006 EQUITY FUNDS BALANCED FUND LARGE CAP GROWTH FUND MID-CAP VALUE FUND SMALL CAP VALUE OPPORTUNITY FUND EMERGING MARKETS FUND BOND FUNDS HIGH YIELD BOND FUND ENHANCED INCOME FUND INTERMEDIATE BOND FUND SHORT-TERM BOND FUND 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 American Beacon Funds' Performance................ 2 Market and Performance Overviews.................. 3-27 American Beacon Schedules of Investments Balanced Fund.............. 28 Large Cap Growth Fund...... 37 Mid-Cap Value Fund......... 42 Small Cap Value Opportunity Fund.................... 45 Emerging Markets Fund...... 49 High Yield Bond Fund....... 56 Enhanced Income Fund....... 63 Intermediate Bond Fund..... 70 Short-Term Bond Fund....... 76
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. American Beacon Funds April 30, 2006 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Enclosed please find the Semi-Annual Report for the American Beacon Funds for the six months ended April 30, 2006. During this time, most markets experienced strong gains. The Dow Jones Industrial Average posted gains of 10.2%, the S&P 500 Index increased by 9.6%, and the MSCI EAFE Index returned 22.9%. As of April 30, 2006, the 10-Year Treasury interest rate was 5.1%, resulting in an 0.56% total return for the bond market, as defined by the Lehman Brothers Aggregate Index. Additionally, the Federal Reserve Board increased the fed funds rate to 4.75%, up 1.00% during the six-month period. The American Beacon equity funds posted strong returns in absolute terms for the six-month period. The Institutional Class of the Emerging Markets Fund posted an increase of 35.95% during the six months. For the fixed-income funds, we saw rising interest rates offset the coupon rates of the fund's holding to some extent, resulting in modest but positive returns. The High Yield Bond Fund-Institutional Class gained 5.03% for the six months. The Enhanced Income, Intermediate Bond, and Short-Term Bond Funds all posted positive returns for the six-month period. Our hope is that the enclosed market overviews, portfolio listings, and detailed financial data are helpful to you. 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 current performance may be lower or higher than the performance data quoted. 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 April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
AVERAGE ANNUALIZED TOTAL RETURN AS OF APRIL 30, 2006 --------------------------------------- INCEPTION TICKER 10 YEAR/ DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEP. --------- ------ ------ ------ ------ ------------ Balanced Fund -- Institutional 7/17/87 AADBX 11.60% 14.98% 8.08% 8.80% Balanced Fund -- PlanAhead 8/1/94 AABPX 11.39% 14.57% 7.81% 8.50% Balanced Fund -- Service 5/31/05 ABLSX 10.84% 14.38% 7.70% 8.45% Balanced Fund -- AMR 8/1/94 AABNX 11.89% 15.20% 8.39% 9.09% Lipper Balanced Funds Index 12.57% 11.52% 4.62% 7.73% Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 15.59% 13.16% -0.55% -6.50% Large Cap Growth Fund -- AMR 7/31/00 ALFIX 15.94% 13.33% -0.43% -6.36% Lipper Large-Cap Growth Funds Index 17.74% 12.37% -1.00% -6.70% Mid-Cap Value Fund -- Institutional 02/28/06 AACIX 19.49% N/A N/A 15.78% Mid-Cap Value Fund -- PlanAhead 02/28/06 AMPAX 19.49% N/A N/A 15.78% Mid-Cap Value Fund -- AMR 06/30/04 AMDIX 19.64% N/A N/A 15.85% Lipper Mid-Cap Value Funds Index 23.02% N/A N/A 15.45% Small Cap Value Opportunity Fund -- Institutional 03/31/06 ASOIX N/A N/A N/A 1.80% Small Cap Value Opportunity Fund -- PlanAhead 03/31/06 ASDPX N/A N/A N/A 1.80% Lipper Small-Cap Value Funds Index N/A N/A N/A 0.86% Emerging Markets Fund -- Institutional 7/31/00 AEMFX 58.14% 43.54% 24.24% 15.56% Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 57.91% 43.23% 24.01% 15.37% Emerging Markets Fund -- AMR 7/31/00 AAMRX 58.56% 43.92% 24.53% 15.85% Lipper Emerging Markets Funds Index 61.47% 45.13% 24.25% 15.67% High Yield Bond Fund -- Institutional 12/29/00 AYBFX 8.53% 8.27% 9.10% 9.24% High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 8.37% 7.97% 8.85% 9.00% Lipper High Current Yield Funds Index 9.03% 9.97% 6.99% 6.95% Enhanced Income Fund -- PlanAhead 7/1/03 AANPX 4.41% N/A N/A 3.28% Lipper Interm. Investment Grade Index 0.83% N/A N/A 2.24% Intermediate Bond Fund -- Institutional 9/15/97 AABDX 0.58% 2.43% 4.81% 5.54% Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX -0.03% 1.93% 4.26% 5.09% Lipper Interm. Investment Grade Index 0.83% 2.74% 4.99% 5.58% Short-Term Bond Fund -- Institutional 12/3/87 AASBX 2.58% 2.02% 3.58% 4.96% Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 1.93% 1.44% 3.06% 4.45% Lipper Short Investment Grade Index 2.34% 1.84% 3.06% 4.59%
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 current performance may be higher or lower than the performance data quoted. 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 April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- Stocks continued their healthy climb despite high energy prices. Following a lackluster finish in 2005, U.S. stock prices climbed steadily during the first four months of 2006, ending near a five-year high. Despite continuing worries over rising energy costs and the possibility of inflation, investors' confidence remained firm. Small-cap stocks in the U.S. continued to outperform their large-cap counterparts, as has been the general trend since the bear market ended in 2002. Value outperformed growth for the period, also continuing a multi-year trend. International stocks continued to produce outstanding gains most notably in Japan and emerging markets. All eyes remained on the Federal Reserve Board ("the Fed") as it's measured pace of raising short-term rates continued. On March 28, the Fed raised its target for the federal funds rate to 4.75%, continuing its gradual tightening of monetary policy to defuse the threat of inflation. This was the Fed's 15th consecutive rate increase since June 2004. (Shortly after the close of the fiscal period, the Fed extended its streak of rate increases to 16, raising its target to 5.00%.) Because the Fed's actions affect the economy with a lag, investors are watching economic measures more closely -- either for evidence that higher rates are slowing the economy, or for evidence that the economy can continue to grow with modest inflation while absorbing higher rates (the so-called "goldilocks" scenario). Heightened focus on the Fed and the economy has led to increased volatility of equity returns, as daily market swings of 1% or more have become more common. While the ultimate effect of the Fed tightening cycle remains to be seen, its effect on stock market returns will be reflected in the earnings growth and valuation of the overall market. At the most basic level, market returns are comprised of three components: earnings growth, the valuation of those earnings (i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield. The current environment for each component of return warrants some discussion. EARNINGS: Earnings growth for the six months ended April 30 (and the past several years) has been robust and well above the long-term average. While there has been some deceleration over the six months, double-digit growth has continued longer than most expected. Looking forward, earnings growth from the financial sector may slow as higher short-term borrowing costs crimp earnings. Additionally, the energy sector has been the largest contributor to earnings growth and could see an earnings slowdown if energy prices pause or decline. VALUATION: While P/E ratios (the price of a stock divided by its anticipated earnings per share) have compressed significantly this decade, the P/E of the S&P 500, based on reported earnings, remains at 17 times earnings. This compares with a long-term average (since 1926) of 15 times earnings. Higher interest rates typically reduce the multiple that investors are willing to pay for stocks. Most importantly, however, the contribution of P/E expansion to market returns over long periods is small and is dwarfed in importance by earnings growth and dividend yield. DIVIDENDS: Returning capital to shareholders via dividends continues to grow in popularity. Favorable tax treatment, demographic trends, and investor pressure have all been supportive of higher dividend payouts. However, because earnings growth has been more robust, the percentage of earnings paid out in dividends is near an all-time low. This should be supportive of higher dividend payouts over time. Dividends will continue to be a critical component of overall return. Overall, the outlook for stock returns appears mixed. On the bullish side, the economy remains resilient, corporate earnings are strong and profit margins remain high. Investor concerns include a slowing economy, perhaps induced by higher interest rates hurting the housing sector and consumer spending. Additionally, we have enjoyed the longest bull market since 1982 and the second longest period ever without a 10% correction, recent market weakness and volatility notwithstanding. 3 DOMESTIC EQUITY MARKET OVERVIEW -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- Regardless of future trends in the economy or markets, stock selection will remain the key driver of performance going forward. This is especially true in the current environment where, thanks to multi-year performance advantages of small-cap over large-cap and value over growth, the lines between various styles are less defined. So, stock selection may be more important than style or market cap going forward. 4 PERFORMANCE OVERVIEW AMERICAN BEACON BALANCED FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Balanced Fund's Institutional Class returned 7.21% for the six months ended April 30, 2006, underperforming the 60% S&P 500 Citigroup Value/40% Lehman Brothers Aggregate Index benchmark return of 8.22% and the Lipper Balanced Funds Index return of 7.85%.
ANNUALIZED TOTAL RETURNS --------------------------------------- PERIODS ENDED 4/30/06 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1)... 7.21% 11.60% 8.08% 8.80% PlanAhead Class(1)....... 7.15% 11.39% 7.81% 8.50% Service Class(1,2)....... 6.92% 10.84% 7.70% 8.45% AMR Class(1)............. 7.41% 11.89% 8.39% 9.09% Lipper Balanced Funds Index................... 7.85% 12.57% 4.62% 7.73% S&P 500 Index(3)......... 9.64% 15.42% 2.70% 8.94% Linked S&P 500/ Citigroup Value Index(3).......... 13.57% 20.87% 4.28% 9.55% Lehman Bros. Aggregate Index(3)................ 0.56% 0.71% 5.16% 6.33% Balanced Composite Index(4)................ 8.22% 9.37% 3.97% 8.24%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 one-year, five-year and ten-year periods represents the total returns achieved by the PlanAhead Class from 4/30/96 up to 6/1/05, 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. Therefore, total returns shown may be higher than they would have been had the Service Class been in existence since 4/30/96. 3. The S&P 500 Index is an unmanaged index of common stocks publicly traded in the United States. The Linked S&P 500/Citigroup Value Index represents returns of the S&P 500/Barra Value Index ("Barra Index") up to October 31, 2005 and the S&P 500/Citigroup Value Style Index ("Citigroup Index") thereafter. The Barra 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 Citigroup Index is a market value weighted index of stocks in the S&P 500 that score highest based on an average book-to-price ratio, cash flow-to-price ratio, sales-to-price ratio, and dividend yield, representing 50% of the total market value of the S&P 500. 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. 4. 60% Linked S&P 500/Citigroup Value Index, 40% Lehman Brothers Aggregate Index. During the six-month period, the Fund's assets on average were invested 65% in equities (including equitized cash) and 35% in fixed-income securities, ending the period with 66% in equities/equitized cash and 34% in fixed-income securities. The equity portion of the Fund (excluding equitized cash) returned 11.2%, underperforming the S&P 500/Citigroup Value Style Index ("Citigroup Index") return of 13.6%. The Fund underperformed the Citigroup Index both due to stock selection and sector allocation. Stock selection in the Financials and Energy sectors detracted most from the Fund's performance. In the Financials sector, St. Paul Travelers (down 1.2%) and SLM (down 4.0%) hurt Fund performance while the Fund's positions in ConocoPhillips (up 2.9%) and Devon Energy (down 0.1%) accounted for a large portion of the Energy sector's underperformance. Equity sector allocation also had a negative impact on the Fund's relative returns during the six-month period, as the Fund was overweight in the Health Care and Consumer Staples sectors, two of the poorer performing sectors of the Citigroup Index. The fixed-income portion of the Fund returned 0.7% for the six-month period, slightly outperforming the Lehman Brothers Aggregate Index ("Lehman Index") return of 0.6%. The Fund's fixed-income performance was due mostly to good issuer selection in Finance and Industrial names within the Corporate sector. The Fund's average duration during the six-month period was 3.3 years (versus the Lehman Index average duration of 4.6 years), which helped performance as interest rates rose during the period. The sub-advisors continue to focus on the disciplined selection of attractive securities with a goal of long-term added value. 5 PERFORMANCE OVERVIEW AMERICAN BEACON BALANCED FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS
% OF EQUITIES -------- Bank of America Corp. 2.0% ConocoPhillips 1.8% Citigroup, Inc. 1.5% Altria Group, Inc. 1.3% JP Morgan Chase & Co. 1.3% Tyco International Ltd. 1.0% MetLife, Inc. 1.0% Washington Mutual, Inc. 1.0% Electronic Data Systems Corp. 1.0% Nokia Corp. 0.9%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Financials 29.1% Industrials 14.4% Consumer Staples 8.7% Consumer Discretionary 8.6% Information Technology 8.5% Energy 8.1% Health Care 7.8% Utilities 6.2% Materials 5.6% Telecommunication Services 3.0%
FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ---------- Agency 30.2% Mortgage-Backed 28.4% Corporate Bonds 24.6% Treasury 15.7% Asset-Backed 1.1%
6 PERFORMANCE OVERVIEW AMERICAN BEACON LARGE CAP GROWTH FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Growth Fund returned 8.30% for the six months ended April 30, 2006, compared to the Russell 1000 Growth Index ("Index") return of 7.06% and the Lipper Large-Cap Growth Funds Index return of 6.56%.
ANNUALIZED TOTAL RETURNS ------------------------------------ PERIODS ENDED 4/30/06 --------------------------- SINCE 6 MONTHS* 1 YEAR 5 YEAR INCEP. --------- ------ ------ ------ Institutional Class(1).... 8.30% 15.59% -0.55% -6.50% AMR Class(1).............. 8.47% 15.94% -0.43% -6.36% Lipper Large-Cap Growth Funds Index.............. 6.56% 17.74% -1.00% -6.70% Russell 1000 Growth Index(2)................. 7.06% 15.18% -0.76% -6.82%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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. The Fund gained relative value versus the Index due to good stock selection, as sector allocation detracted slightly from performance. From a stock selection standpoint, the Fund added value in seven of ten sectors. Most of the value added was generated in the Information Technology, Materials, Financials and Consumer Discretionary sectors. Positions in Corning, Inc. (up 37.5%) and Western Digital Corp. (up 73.9%) contributed most to the Information Technology sector's relative performance. In Materials, the Fund benefited from owning Monsanto Company (up 33.0%) and United States Steel Corp. (up 88.4%). The Goldman Sachs Group, Inc. (up 27.4%) and Circuit City Store, Inc. (up 61.9%) were the top contributors in the Financials and Consumer Discretionary sectors, respectively. The only significant detractor was poor stock selection in the Health Care sector, where positions in Amgen, Inc. (down 10.6%) and Johnson & Johnson (down 5.4%) hurt performance. 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 Co. 5.1% Procter & Gamble Co. 3.8% Cisco Systems, Inc. 2.8% Microsoft Corp. 2.7% Johnson & Johnson 2.1% The Boeing Co. 2.0% Google, Inc. 1.9% Amgen, Inc. 1.8% Texas Instruments, Inc. 1.8% Coach, Inc. 1.5%
SECTOR ALLOCATION
% OF EQUITIES -------- Information Technology 23.7% Health Care 19.0% Consumer Discretionary 16.6% Industrials 15.4% Consumer Staples 8.5% Financials 8.3% Energy 3.9% Materials 3.1% Utilities 1.2% Telecommunication Services 0.3%
7 PERFORMANCE OVERVIEW AMERICAN BEACON MID-CAP VALUE FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Mid-Cap Value Fund returned 11.13% for the six months ended April 30, 2006. The Fund trailed the Russell Midcap Value Index ("Index") return of 13.58% and the Lipper Mid-Cap Value Funds Index return of 13.77%.
TOTAL RETURNS --------------------------- PERIODS ENDED 4/30/06 --------------------------- SINCE 6 MONTHS* 1 YEAR INCEP. --------- ------ ------ Institutional Class(1,3)........ 11.13% 19.49% 15.78% PlanAhead Class (1,2)........... 11.13% 19.49% 15.78% AMR Class(1).................... 11.27% 19.64% 15.85% Lipper Mid-Cap Value Funds Index......................... 13.77% 23.02% 15.45% Russell Midcap Value Index(4)... 13.58% 24.75% 20.75%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 represents the total returns achieved by the AMR class from 6/30/04 up to 3/1/06, 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 AMR Class. As a result, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 6/30/04. 3. Fund performance represents the total returns achieved by the AMR Class from 6/30/04 up to 11/30/05, the inception date of the Institutional Class, and the returns of the Institutional Class since its inception. Expenses of the Institutional Class are higher than those of the AMR Class. As a result, total returns shown may be higher than they would have been had the Institutional Class been in existence since 6/30/04. 4. Russell Midcap(R) Value Index is a service mark 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 primarily due to stock selection, as sector allocation detracted only slightly. The Fund's investments in the Financials sector hurt performance most. The largest detractors were Willis Group Holdings (down 4.2%), First American Financial (down 2.0%), XL Capital (up 4.2%), and American Financial Realty Trust (down 3.2%). Stock selection in the Consumer discretionary and Industrials sectors also hurt the fund's performance. In the Consumer discretionary sector, holdings in Rent-A-Center (up 53.3%) and Sherwin-Williams (up 21.0%) aided Fund performance, but not enough to offset the impact of positions in Lear (down 21.0%), RadioShack (down 22.2%), and Valassis Communications, Inc. (down 6.3%). American Power Conversion (up 5.0%) was responsible for most of the underperformance in the Industrials sector. The Fund's holdings in the Health Care, Consumer Staples and Materials sectors added value relative to the Index, but not enough to offset the shortfall of the sectors mentioned above. Top contributors were AmerisourceBergen and Hillenbrand Industries in the Health Care sector, Loews and Reynolds American in Consumer Staples and Lafarge in Materials. Sector weightings detracted only slightly from the Fund's performance relative to the Index. An underweight in Utilities, the worst performing sector in the Index, and an overweight in Industrials, the second best performing sector in the Index, added value. Offsetting these positives were an underweight in Materials, the best performing sector of the Index, and an overweight in Health Care, the second worst performing sector. 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. 8 PERFORMANCE OVERVIEW AMERICAN BEACON MID-CAP VALUE FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS -------- Whirlpool Corp. 3.7% Torchmark, Inc. 2.5% XL Capital Ltd. 2.2% AmerisourceBergen Corp. 2.2% Magna International, Inc. 2.2% Kennametal, Inc. 2.1% Sempra Energy 2.0% NBTY, Inc. 1.8% Loews Corp. 1.8% Radian Group, Inc. 1.8%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 27.2% Consumer Discretionary 25.7% Industrials 15.6% Health Care 9.6% Utilities 7.7% Consumer Staples 6.4% Information Technology 4.3% Energy 2.3% Materials 1.2%
9 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Small Cap Value Opportunity Fund returned 2.00% for the one-month period from its inception on March 31 through April 30, 2006. The Fund was well ahead of the Russell 2000 Value Index ("Index") return of 0.27% and outperformed the Lipper Small-Cap Value Funds Index return of 0.86%.
TOTAL RETURNS ------------------ PERIODS ENDED 4/30/06 ------------------ SINCE 1 MONTH* INCEP.* -------- ------- Institutional Class(1)................... 2.00% 2.00% PlanAhead Class(1)....................... 1.90% 1.90% Lipper Small-Cap Value Funds Index....... 0.86% 0.86% Russell 2000 Value Index(2).............. 0.27% 0.27%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 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. The Fund exceeded the Index due to good stock selection, as sector allocation was neutral. Most of the excess performance came from the Fund's holdings in the Financials sector, where Corus Bankshares (up 12.6%), First Republic Bank/ San Francisco (up 15.1%), and Accredited Home Lenders (up 12.9%) were the largest contributors. Holdings in the Industrials and Information Technology sectors also were a source of excess performance. Among the Fund's Industrial sector holdings, Gardner Denver (up 14.3%), Universal Forest Products (up 17.8%), and Old Dominion Freight Line (up 19.5%) added the most value. In the Information Technology sector, CommScope (up 15.8%), Belden CDT (up 14.9%), and Sykes Enterprises (up 14.2%) were responsible for a large portion of the excess return. The sub-advisor's disciplined approach of investing in a diversified portfolio of small cap value companies should allow the Fund to generate competitive performance over longer periods of time. TOP TEN HOLDINGS
% OF NET ASSETS -------- Corus Bankshares, Inc. 1.3% Gardner Denver, Inc. 1.3% Kennametal, Inc. 1.3% FelCor Lodging Trust, Inc. 1.2% Consolidated Graphics, Inc. 1.2% Commercial Metals Co. 1.2% Eagle Materials, Inc. 1.2% Belden CDT, Inc. 1.1% Accredited Home Lenders Holding Co. 1.1% Dollar Thrifty Automotive Group, Inc. 1.1%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 31.7% Industrials 17.6% Consumer Discretionary 13.4% Information Technology 11.5% Materials 7.5% Health Care 5.2% Energy 5.1% Utilities 4.0% Consumer Staples 2.3% Telecommunication Services 1.7%
10 EMERGING MARKETS OVERVIEW April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- In the six months ended April 30, 2006, the Emerging Markets (up 38.6% in local currency terms and 37.6% in dollar terms) as measured by the MSCI Emerging Markets Index significantly outperformed developed markets as investors opted to invest in riskier assets. Emerging Markets outperformed developed markets by 22% during the period in review and by more than 10% over the last five years. Favorable valuations relative to the developed world and stronger underlying economies enticed investors. Appetite for Emerging Markets equities is at a record high with year to date inflows greater than the whole of 2005. The period in review, however, ended relatively weak due to renewed concerns about US inflation and Fed tightening. The Emerging Europe Middle East and North Africa (EMEA) was the best performing region (up 49.4% in local currency terms and 40.4% in dollar terms) as solid GDP growth and stable inflation fueled stocks. Russia (up 105% in local currency terms and 107.0% in dollar terms) continued to shine given skyrocketing oil prices during the quarter. Domestic consumption remained robust as evidenced by surging retail sales in 2005. The Russian government continued its economic liberalization efforts by proposing legislation to diversify the economy from its volatile oil sector. South Africa (up 47.5%) saw strength from both domestic and export sectors. Resource oriented stocks benefited from booming commodity markets while domestic growth was boosted by a period of monetary and fiscal stimulus. Emerging Asia followed EMEA, returning 36.7% (29.2% in local currency terms). The region was supported by strong exports and inflows into the market. South Korea showed strong performance, consecutively peaking to all time highs. However, the country has recently marked a correction. While investors had been positive due to falling oil prices and earnings of Korean companies that are dependent on domestic consumption recovery, demanding valuations, large domestic investor redemptions and concerns over global growth have pressured the market lower. Chinese equities (up 41.2%) saw a broad rally, with domestic demand-driven sectors leading. China demonstrated strong GDP growth in 2005, despite slowing fixed asset investment as the components of growth have gradually started to shift towards more consumption from a heavy dependence on investment. Latin America continued to rally, surging 36.3% in dollar terms (31.2% in local currency terms) during the period. The re-rating of the asset class continued with inflows reaching record levels in early 2006 as both economic fundamentals and valuations remained attractive. The period in review, however, ended relatively weak due to renewed concerns about US inflation and Fed tightening. Nevertheless, performance was strong across the region with particular strength in Brazil, which surged 43.5%. Among the major markets, Mexico and Chile followed returning 28.1% and 10.5%, respectively. Venezuela and Argentina led the smaller markets. Venezuela surged 74.5% after the country's largest telecom company rallied on news of a significant bid by Mexico's America Movil, the region's largest wireless service provider. Argentina (up 55%), despite rising inflation and ongoing political concerns, was driven by an impressive rally in energy stocks. 11 PERFORMANCE OVERVIEW AMERICAN BEACON EMERGING MARKETS FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Emerging Markets Fund returned 35.95% for the six months ended April 30, 2006. The Fund underperformed the MSCI Emerging Markets Index ("Index") return of 37.60% and the Lipper Emerging Market Funds Index return of 36.64% for the period.
ANNUALIZED TOTAL RETURNS ---------------------------------------- PERIODS ENDED 4/30/06 ---------------------------------------- SINCE 6 MONTHS* 1 YEAR 5 YEARS INCEP. --------- ------ ------- ------ Institutional Class(1)............... 35.95% 58.14% 24.24% 15.56% PlanAhead Class(1,2).... 35.79% 57.91% 24.01% 15.37% AMR Class(1)............ 36.10% 58.56% 24.53% 15.85% Lipper Emg Mkt Funds Index.................. 36.64% 61.47% 24.25% 15.67% MSCI Emg Mkts Index(3)............... 37.60% 62.31% 23.72% 15.43%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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. Although both country allocation and stock selection added value, the Fund underperformed the Index over the six-month period primarily due to Fund expenses and lower returns than the Index on the Fund's cash balances. Although the average cash balance was a fairly modest 6.7%, it created a significant drag on Fund performance given the strength of the emerging markets asset class during the period. Country allocation added value as the Fund underweighted the three worst-performing markets in the Index for the six-month period -- Jordan (down 16.5%), Chile (up 10.9%) and Israel (up 11.3%). The Fund also added value by overweighting India, which gained 48.2% during the period. The lone significant country detraction during the period resulted from overweighting Mexico, as it underperformed the Index with a return of 28.0%. Stock selection was slightly positive during the six-month period, as strong selections in India, South Africa, South Korea, Taiwan, Turkey, and Malaysia more than offset poor selections in China, Mexico, and Brazil. In India, Bharat Heavy Electronics gained 109.0%, while Mahanagar Telephone Nigam returned 98.0%. In South Africa, Impala Platinum Holdings (up 82.6%) and two financial companies -- African Bank Investments (up 94.1%) and Nedbank Group (up 64.7%) -- outperformed. In South Korea, Kookmin Bank gained 62.6%, and Korea Zinc returned 163.0%. Top contributors included High Tech Computer (up 201.3%) and Delta Electronics (up 85.0%) in Taiwan, Dogan Yayin Holdings (up 100.5%) and Akcansa Cimento (up 98.8%) in Turkey, and Resorts World (up 32.9%) and Genting (up 28.9%) in Malaysia. Positions that failed to keep pace with their home markets included China Telecom Corp. (up 9.8%) in China, Telefonos De Mexico (up 10.6%) and Grupo Televisa (up 16.0%) in Mexico, and Empresa Brasileira de Aeronautica (Embraer) (up 0.8%) in Brazil. The Fund's basic philosophy remains focused on investing in attractively valued companies with above-average earnings growth expectations. 12 PERFORMANCE OVERVIEW AMERICAN BEACON EMERGING MARKETS FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS -------- LUKOIL Oil Co. ADR 3.3% Petroleo Brasileiro S.A. ADR 2.1% Samsung Electronics Company Ltd. 1.9% America Movil S.A. de C.V., ADR 1.5% RAO Gazprom, ADR 1.4% Grupo Televisa, S.A., ADR 1.3% Wal-Mart de Mexico, S.A. de C.V. 1.2% United Microelectronics Corp. 1.2% Kookmin Bank 1.2% Petroleo Brasileiro S.A., ADR 1.1%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 20.5% Consumer Discretionary 13.4% Energy 12.9% Industrials 10.9% Information Technology 10.8% Telecommunication Services 10.6% Materials 9.3% Consumer Staples 5.4% Utilities 4.1% Health Care 2.1%
COUNTRY ALLOCATION (PIE CHART)
SOUTH KOREA BRAZIL TAIWAN SOUTH AFRICA MEXICO INDIA RUSSIA HONG KONG CHINA MALAYSIA ----------- ------ ------ ------------ ------ ----- ------ --------- ----- -------- 15.5% 13.1 12.6% 11.0% 8.4% 8.1% 7.5% 3.7% 3.5% 2.8% TURKEY POLAND THAILAND INDONESIA HUNGARY ISRAEL MOROCCO PHILIPPINES AUSTRIA CHILE ------ ------ -------- --------- ------- ------ ------- ----------- ------- ----- 2.7% 2.5% 2.3% 1.9% 1.0% 0.9% 0.6% 0.6% 0.4% 0.4% COLOMBIA CZECH REPUBLIC PERU ARGENTINA -------- -------------- ---- --------- 0.2% 0.2% 0.1% 0.0%
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. 13 DOMESTIC BOND MARKET OVERVIEW April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- INVESTMENT GRADE* For the six-month period ended April 30, 2006, the investment grade fixed income market, as defined by the Lehman Brothers Aggregate Index (the "Index"), returned 0.56%. Despite the rising interest rate environment, the fixed income markets managed to produce relatively attractive total returns during the period.
TOTAL RETURNS ---------------------- PERIODS ENDED 4/30/06 ---------------------- 6 MONTH 12 MONTH ------- -------- Lehman Aggregate 0.56% 0.71% Lehman Gov/Credit 0.13% 0.20% ----------------------------------------------------- SECTOR US Treasury -0.14% -0.22% US Agency 0.87% 1.33% Mortgage Backed 1.25% 1.55% Commercial MBS 0.76% 0.67% Asset Backed 1.36% 2.02% U.S. Credit: 0.04% 0.12% Industrial -0.27% -0.51% Utility -0.17% -0.40% Finance 0.49% 0.65% Non-Corporate -0.06% 0.78% ----------------------------------------------------- CREDIT QUALITY Aaa 0.70% 0.88% Aa 0.22% 0.19% A -0.16% -0.39% Baa 0.13% 0.44% ----------------------------------------------------- U.S. TREASURY 6 Month 2.07% 3.63% 2 Year 1.25% 1.78% 5 Year -0.26% -1.20% 10 Year -2.33% -3.49% 30 Year -6.01% -7.13%
(source: Lehman Brothers) During this period, the Federal Reserve Bank (the "Fed") raised the federal funds rate by 1.00%, from 3.75% to 4.75%, and market participants widely expected a rate of 5.00% at the next Fed meeting. The yield curve ended the period very flat with the two-year Treasury yielding 4.86%, ten-year Treasuries yielding 5.05%, and 30-year bonds at 5.16%. The yield curve began to invert in late 2005 as the Fed raised rates, but solid economic growth and lingering inflation fears in early 2006 pushed longer term rates up, thus flattening the yield curve. All eyes were on the Fed and the ultimate destination of short-term interest rates. For the first time in 18 years, we witnessed a change in leadership at the Fed. Alan Greenspan's succession by Ben Bernanke was a smooth transition, but it led to renewed speculation about the Fed's approach towards monetary policy and the path of interest rates. Within the investment grade fixed income markets, the largest determinant of sector returns during the period came from duration. Each sector has a different duration, so intra-sector comparisons are difficult at face value. On a duration-adjusted basis, the various spread sectors (including Credit, Mortgages, Commercial Mortgage Backed Securities, Asset-Backed Securities, and Agencies) outperformed Treasuries as spreads tightened in response to increased investor demand for yield. The mortgage market also benefited from a moderation in prepayment activity caused by rising interest rates. Within the Credit sector, total returns across the credit spectrum were mixed, but in general, lower quality outperformed higher quality as investors sought higher yields. The highest total return among the major asset classes during the six months ended April 30, 2006 came from mortgages, where a combination of low duration and moderate refinancing activity helped this sector outperform. A relatively low duration** was the primary reason for its outperformance as interest rates rose across the yield curve; however, mortgages also benefited from the rising rate environment as refinancing activity decreased. Rates on all types of mortgage products rose, which lowered the incentive for homeowners to refinance. Mortgage refinancing was a persistent factor in the mortgage market when interest rates hovered at unusually low 14 DOMESTIC BOND MARKET OVERVIEW -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- levels, but with the recent interest in longer-term interest rates, refinancing activity has diminished. * Credit ratings are a measure of the quality and safety of a bond based on the issuer's financial condition. Typically, AAA is the highest (best) and D is the lowest (worst) with those rated BBB and higher considered to be investment grade. ** Duration is a measure of price sensitivity relative to changes in interest rates. For example, if a bond had a duration of four years, a 1% increase in U.S. Treasury interest rates could be expected to result in a 4% decrease in the value of the bond. Therefore, portfolios with longer duration are typically more sensitive to changes in interest rates. (PERFORMANCE GRAPH) 4.76 3.88 4.90 4.21 4.89 4.24 4.89 4.27 4.88 4.29 4.87 4.32 4.87 4.35 4.86 4.37 2 Yr. 4.86 4.38 4.87 4.39 4.87 4.39 4.88 4.40 4.88 4.40 4.88 4.41 4.89 4.41 4.89 4.42 4.90 4.42 4.90 4.43 4.91 4.44 5 Yr. 4.91 4.44 4.92 4.45 4.92 4.45 4.93 4.46 4.94 4.46 4.95 4.47 4.95 4.47 4.96 4.48 4.97 4.49 4.97 4.49 4.98 4.50 4.99 4.50 4.99 4.51 5.00 4.51 5.01 4.52 5.02 4.52 5.02 4.53 5.03 4.53 5.04 4.54 5.04 4.55 10 Yr. 5.05 4.55 5.05 4.55 5.05 4.56 5.05 4.56 5.06 4.56 5.06 4.56 5.06 4.57 5.06 4.57 5.06 4.57 5.06 4.57 5.06 4.58 5.07 4.58 5.07 4.58 5.07 4.58 5.07 4.59 5.07 4.59 5.07 4.59 5.07 4.59 5.08 4.60 5.08 4.60 5.08 4.60 5.08 4.60 5.08 4.61 5.08 4.61 5.08 4.61 5.09 4.61 5.09 4.62 5.09 4.62 5.09 4.62 5.09 4.62 5.09 4.63 5.09 4.63 5.09 4.63 5.10 4.63 5.10 4.64 5.10 4.64 5.10 4.64 5.10 4.64 5.10 4.65 5.10 4.65 5.11 4.65 5.11 4.66 5.11 4.66 5.11 4.66 5.11 4.66 5.11 4.67 5.11 4.67 5.12 4.67 5.12 4.67 5.12 4.68 5.12 4.68 5.12 4.68 5.12 4.68 5.12 4.69 5.13 4.69 5.13 4.69 5.13 4.69 5.13 4.70 5.13 4.70 5.13 4.70 5.13 4.70 5.14 4.71 5.14 4.71 5.14 4.71 5.14 4.71 5.14 4.72 5.14 4.72 5.14 4.72 5.15 4.72 5.15 4.73 5.15 4.73 5.15 4.73 5.15 4.73 5.15 4.74 5.15 4.74 5.16 4.74 5.16 4.74 5.16 4.75 5.16 4.75 5.16 4.75 30 Yr. 5.16 4.75
The credit markets have experienced a period of relative calm in 2006 after the domestic auto manufacturers finally found their way out of the investment grade debt markets. Firmly planted in the high yield sector in late 2005, the auto manufacturer impact on the broader investment grade market was minimal. However, as the auto story faded, credit investors quickly shifted gears towards the aggressive shareholder-friendly initiatives that companies, whose stock prices lagged, began to engage. In general, credit fundamentals are very good -- debt issuance is low, balance sheets are strong, and profitability is also strong. Some companies, unfortunately, had this profile along with a flat stock price, which led equity investors to pressure management to increase leverage for the benefit of shareholders. With spreads (or interest rate differentials) at relatively tight levels, managements were further encouraged to use the debt markets for low-cost financing. This environment created significant issuer-specific risk, but fortunately the broader credit market held up relatively well. (PERFORMANCE GRAPH)
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT ----- ---------- --------- -------- ---------- Apr-04 88.00 34.00 39.00 68.00 129.00 87.00 34.00 39.00 68.00 127.00 86.00 33.00 40.00 67.00 126.00 83.00 32.00 39.00 66.00 121.00 86.00 33.00 41.00 67.00 127.00 91.00 36.00 44.00 71.00 132.00 94.00 37.00 46.00 75.00 137.00 93.00 36.00 45.00 74.00 135.00 93.00 37.00 46.00 74.00 134.00 93.00 36.00 46.00 74.00 135.00 93.00 36.00 45.00 75.00 134.00 92.00 36.00 45.00 75.00 133.00 92.00 37.00 45.00 75.00 132.00 Jul-04 95.00 38.00 47.00 77.00 136.00 95.00 38.00 47.00 77.00 137.00 92.00 36.00 47.00 76.00 132.00 91.00 36.00 46.00 75.00 131.00 90.00 36.00 46.00 75.00 128.00 92.00 36.00 47.00 76.00 132.00 92.00 36.00 47.00 76.00 132.00 90.00 35.00 46.00 75.00 129.00 89.00 34.00 45.00 74.00 127.00 87.00 34.00 44.00 73.00 125.00 88.00 34.00 45.00 73.00 127.00 86.00 34.00 44.00 72.00 124.00 86.00 33.00 43.00 70.00 124.00 Oct-04 84.00 34.00 43.00 70.00 121.00 84.00 34.00 43.00 70.00 121.00 84.00 33.00 42.00 69.00 122.00 86.00 33.00 42.00 69.00 126.00 84.00 33.00 42.00 68.00 123.00 80.00 31.00 39.00 65.00 117.00 79.00 30.00 39.00 64.00 115.00 78.00 29.00 39.00 64.00 115.00 76.00 28.00 37.00 61.00 113.00 77.00 29.00 39.00 63.00 113.00 76.00 28.00 38.00 60.00 112.00 76.00 28.00 38.00 61.00 112.00 76.00 28.00 38.00 61.00 111.00 75.00 28.00 38.00 61.00 110.00 Jan-05 74.00 28.00 37.00 59.00 109.00 76.00 28.00 38.00 61.00 113.00 77.00 28.00 37.00 61.00 115.00 74.00 28.00 37.00 59.00 111.00 74.00 28.00 38.00 60.00 110.00 74.00 28.00 38.00 59.00 110.00 73.00 28.00 38.00 58.00 108.00 71.00 28.00 36.00 57.00 106.00 71.00 28.00 37.00 57.00 106.00 70.00 27.00 36.00 56.00 105.00 76.00 29.00 39.00 59.00 116.00 78.00 29.00 40.00 59.00 120.00 Apr-05 86.00 32.00 44.00 67.00 132.00 86.00 31.00 44.00 65.00 133.00 98.00 34.00 47.00 72.00 158.00 93.00 34.00 47.00 69.00 145.00 96.00 34.00 47.00 72.00 151.00 80.00 35.00 47.00 71.00 115.00 85.00 35.00 49.00 77.00 121.00 83.00 35.00 48.00 75.00 120.00 80.00 33.00 47.00 72.00 115.00 87.00 33.00 57.00 76.00 132.00 87.00 34.00 56.00 76.00 132.00 86.00 34.00 55.00 76.00 131.00 88.00 33.00 54.00 76.00 136.00 Jul-05 85.00 32.00 54.00 74.00 131.00 84.00 32.00 53.00 73.00 130.00 82.00 31.00 52.00 71.00 125.00 80.00 31.00 51.00 70.00 123.00 79.00 32.00 51.00 69.00 119.00 79.00 32.00 51.00 69.00 120.00 80.00 33.00 52.00 69.00 120.00 80.00 33.00 53.00 69.00 121.00 77.00 32.00 53.00 68.00 115.00 83.00 34.00 55.00 72.00 123.00 81.00 34.00 54.00 71.00 120.00 81.00 34.00 54.00 72.00 120.00 81.00 33.00 54.00 71.00 122.00 81.00 32.00 53.00 72.00 120.00 Oct-05 82.00 33.00 55.00 73.00 122.00 86.00 32.00 55.00 75.00 131.00 83.00 32.00 55.00 74.00 125.00 84.00 33.00 56.00 75.00 126.00 84.00 34.00 57.00 75.00 126.00 85.00 34.00 57.00 76.00 127.00 87.00 35.00 58.00 77.00 131.00 88.00 35.00 57.00 77.00 132.00 88.00 36.00 58.00 78.00 133.00 89.00 37.00 59.00 78.00 134.00 89.00 37.00 59.00 79.00 134.00 82.00 36.00 59.00 78.00 116.00 83.00 37.00 60.00 80.00 116.00 Jan-06 84.00 37.00 60.00 80.00 117.00 84.00 37.00 60.00 80.00 117.00 83.00 36.00 59.00 79.00 116.00 81.00 36.00 59.00 78.00 113.00 80.00 36.00 59.00 77.00 113.00 80.00 36.00 58.00 77.00 113.00 79.00 36.00 57.00 76.00 111.00 78.00 35.00 57.00 76.00 109.00 78.00 35.00 56.00 76.00 109.00 79.00 35.00 57.00 77.00 111.00 80.00 37.00 58.00 78.00 111.00 81.00 36.00 58.00 78.00 113.00 81.00 37.00 59.00 79.00 113.00 Apr-06 82.00 38.00 59.00 79.00 114.00 82.00 37.00 60.00 80.00 113.00 81.00 38.00 59.00 79.00 112.00 80.00 37.00 58.00 77.00 109.00
During the period, credit spreads were flat within the higher quality issuers. Only the triple-B rated issuers tightened on average, which was partially due to the removal of the auto companies from the Index and partially due to investor demand for yield. This spread tightening was also seen, for example, in the high yield markets where incremental yield attracted investors there as well. Within the government sectors, Agencies outperformed Treasuries due primarily to their shorter duration. On a duration-adjusted basis, Agencies only minimally outperformed Treasuries as spreads improved only slightly. The headlines were relatively quiet for Agencies during this period. Management and accounting enhancements were being implemented, and investors awaited resolution of Fannie Mae's financial statement adjustments. No surprises or new news surfaced as the investigations continued. Issuance from the Agencies has been low, since their balance sheet growth is restricted; therefore, spreads continue to hover at low levels. 15 DOMESTIC BOND MARKET OVERVIEW -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Asset-Backed and Commercial Mortgage-Backed sectors produced returns similar to the high quality Credit sector after adjusting for the basic differences in interest rate sensitivity. These sectors are a relatively small portion of the Index, but they posted reasonably attractive returns nonetheless. On average, the domestic bond markets continued to post positive total returns despite the rise in interest rates. Going forward, however, with the yield curve extremely flat (relatively little differential between long- and short-term interest rates), the movement of longer-term interest rates will likely dictate bond market returns. 16 HIGH YIELD BOND MARKET OVERVIEW April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- For the six months ended April 30, 2006, the Citigroup High Yield Market Capped Index returned 4.97%. The Federal Reserve raised short term interest rates seven times in 2005, taking the federal funds rate from 2.25% to 4.00%. Under this pressure, it was actually surprising that 10 year Treasury yields only rose 0.25%, and 30 year yields actually declined. From a simplistic perspective, it became harder to justify low high yield returns when alternatives such as money market funds started looking better. This might have been a major reason why high yield mutual funds had net redemptions of over $8 billion from the market. Energy prices spiraled upward in 2005. Oil went from $42 a barrel to $60 a barrel, with a stop at $70 in between. Natural gas more than doubled going from $5.79 per thousand cubic feet to over $13. The high yield market got off to a strong start in January, just as it has done in 14 of the past 16 years. The Lehman Brothers High Yield Index rose 1.60% propelled by General Motors (6.47%) and Ford (5.68%). These issues carried weights of 6.3% and 5.6%, respectively. In Lehman's "capped" index (2% maximum weight for any issuer) the return was 1.19% for the month, more in line with the J.P. Morgan and Credit Suisse high yield indices, which were 1.24% and 1.29%, respectively. Evidence that the world may indeed be flat came from the status of the Treasury yield curve at the end of January. The 14th Fed tightening move to 4.50% on the federal funds rate pushed the two-year Treasury rate up to 4.52%, exactly the same yield as the ten-year. Only a year prior (January 2005), that spread was 0.75% (in high yield, of course, there is still a yield curve as investors correctly view credit risk as increasing over time). The market easily absorbed $14.5 billion of new issues in January, led by one of the largest new offerings ever -- $3.6 billion for NRG Energy. There were several other large issues, including $2.9 billion for Ineos, $2.1 billion for RH Donnelley, $1.5 billion for Echostar and shortly after month-end, $1 billion for HCA. Despite a robust month for issuance, refinancing, tenders and maturities were more than offsetting, shrinking the high yield market size to an estimated $958 billion, well below the June 2005 peak of $1.006 trillion. The high yield market also had a solid February. The December-February period has been seasonally strong for years, mainly due to technical factors: new allocations to the high yield asset class at the beginning of the year generally outpace the new issue supply. February's new issuance total of $5.1 billion was the lowest February since 2002 and well below an average of over $13 billion in December and January. The supply situation was even worse than it appeared because January/February redemptions and net upgrades to investment grade actually exceeded new issuance. As a result, the estimated size of the market continued to shrink. It fell to $945 billion at the end of February. In March, the high yield market shrugged off another Fed rate hike and higher Treasury yields to notch its fifth month in a row of positive returns. After General Motors and Ford Motor were downgraded, and their huge amounts of debt moved into the high yield universe, developments at both companies promise to have a major impact on the market's performance. The two biggest factors were a possible partial sale of GMAC and a possible strike at Delphi, GM's key parts supplier. On April 3, GM announced plans to sell a 51% interest in GMAC to a consortium led by Cerberus Capital. GMAC bonds were unchanged after the announcement. This was not the best possible outcome, as bondholders were hoping GMAC would be sold to an investment grade company. The next hurdle is Delphi. Its workers have rejected an offer, subsidized by GM, to accept wages more in line with current industry standards. A strike could ultimately shut down GM's production after inventories of stockpiled parts are used up. Meanwhile, GM has reported disappointing sales volumes -- March, for example, was down 13%. Given the negative overall industry dynamics and the game of "chicken," which is being played out between management and the unions, there are nu- 17 HIGH YIELD BOND MARKET OVERVIEW -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- merous possible outcomes and nothing is easy to predict. The high yield market continued to withstand heavy U.S. Treasury headwinds in April and posted its sixth consecutive month of positive returns. Year- to-date through April 2006, the Lehman Brothers 2% Capped Index was 3.24% compared with a U.S. Treasury index that was -1.64%, an outperformance of almost five percentage points. This feat, in such a short time frame, could only have been accomplished by a significant compression of yield spreads. Indeed, the Lehman index spread shrank from 3.86% over Treasuries at the end of 2005 to 3.17% as of April 30. The main pressure on the market has been in the "BB-rated" (presumably "safer") sector which most directly competes with Treasuries. Through April, BB's have lagged the total high yield market, posting a low 2.14% total return. This has created perhaps the lowest BB to B sector spread in history, at a mere 0.36%, with BB's at 2.55% and B's at 2.91%. This tightness has been exaggerated by GMAC, Ford Motor and Ford Motor Credit's inclusion in the BB's. Without them, the BB-to-Treasury spread would be around 2.10% and the BB to B would widen to about 0.80%, but that is still very tight. 18 PERFORMANCE OVERVIEW AMERICAN BEACON HIGH YIELD BOND FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the High Yield Bond Fund returned 5.03% for the six months ended April 30, 2006. The Fund outperformed the Citigroup High Yield Market Capped Index ("Index") return of 4.97% but slightly trailed the Lipper High Current Yield Funds Index which gained 5.05% for the period.
ANNUALIZED TOTAL RETURNS ------------------------------------- PERIODS ENDED 4/30/06 ------------------------------------- SINCE 6 MONTHS* 1 YEAR 5 YEARS INCEP. --------- ------ ------- ------ Institutional Class(1)...... 5.03% 8.53% 9.10% 9.24% PlanAhead Class(1,2)........ 5.01% 8.37% 8.85% 9.00% Lipper High Current Yield Funds Index................ 5.05% 9.03% 6.99% 6.95% Citigroup High-Yield Market Capped Index(5)............ 4.97% 8.69% N/A N/A Lehman Bros. High-Yield Index(4)................... 4.95% 9.16% 8.54% 8.99% Citigroup High-Yield Market Index(3)................... 4.97% 8.61% 8.70% 9.03%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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. The Citigroup High-Yield Market Index ("Citigroup Index") has replaced the Lehman Brothers U.S. Corporate High Yield Index as the Fund's broad-based market index, because the Manager has access to better statistical and performance information for the Citigroup Index. The Citigroup 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. 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 one year to maturity. 5. The Citigroup High-Yield Market Capped Index ("Citigroup Capped 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 total par amount outstanding for each issuer in the Citigroup Capped Index is capped at $5 billion, which results in a more diversified index of securities that more closely reflects the Fund's issuer diversification. The Citigroup Capped Index has an inception date of 1/2/02. The Fund outperformed the Index over the six-month period predominately due to issue selection, although sector allocation was also positive. Issue selection was strong in the Manufacturing, Consumer and Finance sectors and more than made up for poor issue selection in the Service sector. From a sector allocation perspective, the Fund overweighted the two largest sectors in the Index -- Manufacturing and Service, which added value as these sectors gained 5.9% and 5.2%, respectively. The Fund was also positively impacted by underweighting the two worst performing sectors for the period, Energy and Other Corporate as both trailed the Index with gains of 3.1% and 2.1%, respectively. 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 Fund's strategy. Hindering the Fund's sector allocation was the underweighting of the two top performing sectors for the period, Transportation and Telecommunications. Transportation, the smallest sector in the Index with a weight of 0.8%, was the top performing sector in the period with a gain of 10.2%, while Telecommunications ranked second with a return of 8.1%. Despite the increase in Treasury yields over the past six months, high yield spreads have tightened to historically narrow levels, due in part to strong corporate profit growth and low default rates. This priced-to-perfection environment should benefit the sub-advisor's "bottom up," research intensive investment process, which focuses on companies with strong cash flow and fundamental credit strength. 19 PERFORMANCE OVERVIEW AMERICAN BEACON HIGH YIELD BOND FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The sub-advisor believes that this 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 -------- UNOVA, Inc., 7.00%, Due 3/15/2008................. 1.3% Turning Stone Casino Resort, 9.125%, Due 12/15/2010...................................... 1.2% PetroQuest Energy, Inc., 10.375%, Due 5/15/2012... 1.0% E*Trade Financial Corp., 8.00%, Due 6/15/2011..... 1.0% Crystal US Holdings 3 LLC / Crystal US Sub 3 Corp, 10.50%, Due 10/1/2014........................... 1.0% Kabel Deutschland GMBH, 10.625%, Due 7/1/2014..... 0.9% Massey Energy Co., 6.875%, Due 12/15/2013......... 0.9% Echostar DBS Corp., 6.625%, Due 10/1/2014......... 0.9% Knowledge Learning Corp., 7.75%, Due 2/1/2015..... 0.9% K. Hovnanian Enterprises, Inc., 8.875%, Due 4/1/2012........................................ 0.9%
SECTOR ALLOCATION
% OF FIXED INCOME ---------- Corporate Bonds................................ 99.3% Convertibles................................... 0.7%
20 PERFORMANCE OVERVIEW AMERICAN BEACON ENHANCED INCOME FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The PlanAhead Class of the Enhanced Income Fund returned 2.97% for the six months ended April 30, 2006. Its benchmark, a blend of 75% Lehman Brothers Gov/Credit Intermediate Index and 25% Merrill Lynch All U.S. Convertibles Index, returned 2.76%. The Fund's peer group, the Lipper Intermediate Investment Grade Index, returned 0.59% over the period.
ANNUALIZED TOTAL RETURNS -------------------------------- PERIODS ENDED 4/30/06 -------------------------------- SINCE 6 MONTHS* 1 YEAR INCEPTION --------- ------ --------- PlanAhead Class(1).......... 2.97% 4.41% 3.28% Lipper Interm. Investment Grade Index............... 0.59% 0.83% 2.24% Enhanced Income Composite Index(2).................. 2.76% 4.68% 3.64%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 of all quality grades that are convertible into U.S. dollar-denominated common stock, ADRs or cash equivalents. 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 which 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. During the six-month period, the investment grade bond portion of the Fund returned 1.0% before expenses compared to a 0.7% return for Lehman Brothers Gov/Credit Intermediate Index ("Lehman Index"). As interest rates rose during the period, this portion of the Fund benefited from its relatively short duration (3.4 years versus 3.6 years for the Lehman Index). Security selection in the Corporate sector and the decision to own Mortgages (not a Lehman Index component) also added value but was offset somewhat by underperformance in the U.S. Treasury sector. The remaining portion of the Fund managed by the Fund's sub-advisor returned 10.9% before expenses. These results beat the 9.0% return of the Merrill Lynch All U.S. Convertibles Index ("ML Index") and contributed substantially to the Fund's absolute return. This portion of the Fund benefited most from owning common stocks and convertible securities with high equity sensitivity relative to the ML Index, reflecting the positive returns within the equity markets for the period. 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 Note, 4.00%, Due 2/15/2014 4.4% U.S. Treasury Note, 5.00%, Due 8/15/2011 4.3% U.S. Treasury Note, 4.75%, Due 5/15/2014 3.9% Prudential Insurance Company of America, 6.375%, Due 7/23/2006 1.9% General Electric Capital Corp., 4.125%, Due 3/4/2008 1.8% Household Finance Corp., 5.75%, Due 1/20/2007 1.6% Wachovia Corp., 6.40%, Due 4/1/2008 1.4% Credit Suisse First Boston USA, Inc., 5.875%, Due 8/1/2006 1.4% U.S. Treasury Note, 3.875%, Due 5/15/2010 1.4% John Hancock Global Funding, 5.625%, Due 6/27/2006 1.3%
FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ---------- Corporate Bonds................................. 51.0% Treasury........................................ 17.3% Total Convertible Bonds......................... 16.0% Mortgage-Backed................................. 9.9% Asset-Backed.................................... 4.7% Agency.......................................... 1.1%
21 PERFORMANCE OVERVIEW AMERICAN BEACON ENHANCED INCOME FUND(SM) -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Financials........................................ 52.5% Information Technology............................ 23.4% Health Care....................................... 10.4% Industrials....................................... 10.1% Consumer Discretionary............................ 3.6%
22 PERFORMANCE OVERVIEW AMERICAN BEACON INTERMEDIATE BOND FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Intermediate Bond Fund returned 0.42% for the six months ended April 30, 2006, trailing the Lehman Brothers Aggregate Index ("Index") return of 0.56% and the Lipper Intermediate Investment Grade Index return of 0.59%.
ANNUALIZED TOTAL RETURNS ------------------------------------- PERIODS ENDED 4/30/06 ------------------------------------- SINCE 6 MONTHS* 1 YEAR 5 YEARS INCEP. --------- ------ ------- ------ Institutional Class(1)............. 0.42% 0.58% 4.81% 5.54% PlanAhead Class(1,2)... 0.13% -0.03% 4.26% 5.09% Lipper Interm. Investment Grade Index................ 0.59% 0.83% 4.99% 5.58% Lehman Bros. Agg. Index(3)............. 0.56% 0.71% 2.58% 6.01%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 Aggregate Index is a market value weighted performance benchmark for government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Fund underperformed the Index primarily due to its exposure to U.S. Treasuries. The Fund added value through positive security selection in the Corporate sector and by underweighting U.S. Treasuries, the worst performing sector of the Index. However, performance suffered as the U.S. Treasuries the Fund owned underperformed those in the Index. The Fund's duration was similar to that of the Index over the course of the six months and, therefore, had minimal impact on the Fund's performance. 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 -------- Federal Home Loan Bank, Discount Note, Due 5/10/2006 6.5% Federal National Mortgage Association, 6.00%, Due 12/11/2033 6.5% U.S. Treasury Note, 3.875%, Due 5/15/2010 3.2% U.S. Treasury Note, 4.75%, Due 5/15/2014 2.4% U.S. Treasury Bond, 5.275%, Due 2/15/2031 2.2% U.S. Treasury Note, 4.50%, Due 2/15/2016 1.7% Federal National Mortgage Association, Pool #735224, 5.50%, Due 2/1/2035 1.6% Countrywide Alternative Loan Trust, Inc., 6.00%, Due 11/25/2035 1.5% Federal Home Loan Bank, 4.40%, Due 7/28/2008 1.4% Federal National Mortgage Association, Pool #254545, 5.00%, Due 12/1/2017 1.3%
SECTOR ALLOCATION
% OF FIXED INCOME ---------- Mortgage-Backed 36.2% Corporate Bonds 29.4% Agency 16.8% Treasury 16.0% Asset-Backed 1.6%
23 PERFORMANCE OVERVIEW AMERICAN BEACON SHORT-TERM BOND FUND(SM) April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- The Institutional Class of the Short-Term Bond Fund returned 1.66% for the six months ended April 30, 2006, which outperformed the Merrill Lynch 1-3 Year Gov/Corp. Index (the "Index") return of 1.49% and the Lipper Short Investment Grade Bond Funds Index ("Lipper") return of 1.54%.
ANNUALIZED TOTAL RETURNS ------------------------------------------ PERIODS ENDED 4/30/06 ------------------------------------------ 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1)............. 1.66% 2.58% 3.58% 4.96% PlanAhead Class(1).... 1.28% 1.93% 3.06% 4.45% Lipper Short Inv. Grade Index.......... 1.54% 2.34% 3.06% 4.59% Merrill Lynch 1-3 Yr. Gov./Corp. Index(2)............. 1.49% 2.27% 3.58% 5.06%
* Not Annualized 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 current performance may be lower or higher than the performance data quoted. 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 outperformance during the period was due to a combination of its short duration and an overweight position in the Corporate sector. Duration played the largest role in the Fund's total return as interest rates rose across the yield curve in response to the Fed's tightening of interest rates. The federal funds rate rose by 1.00% (from 3.75% to 4.75%), and longer-term rates followed suit as the economy posted reasonable growth and as inflation edged slightly higher. Interest rates rose in a parallel fashion, which allowed shorter maturities to substantially outperform longer maturities The Fund generally invests in shorter maturities along the yield curve (0 to 5 years) and had a weighted average duration of approximately 1.6 years during the period versus 1.8 years for the Index. Also contributing to the Fund's outperformance was its overweight position in the Corporate sector, which posted the best returns among sectors in the Index. In general, credit spreads had been in a relatively narrow range since early 2004, but they tightened during the period as financial strength continued to improve and investor appetite for yield increased. Returns across the credit rating spectrum were mixed, but in general, lower quality outperformed higher quality due to strong demand for yield. 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 investors' attraction to their incremental yield to maturity. The Fund's underweight position in the U.S. Agency sector, which posted returns similar to those of the Corporate sector, resulted in the Fund's underperformance in that sector compared to the Index. However, the Fund's outperformance in Corporate and Asset-Backed securities more than made up for this U.S. Agency underweighting. Going forward, the Fund's investment manager will continue to monitor interest rates and adjust the Fund's duration accordingly. 24 FUND EXPENSES April 30, 2006 (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 November 1, 2005 through April 30, 2006. 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 MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD INTERMEDIATE INSTITUTIONAL CLASS BALANCED GROWTH VALUE OPPORTUNITY** MARKETS BOND BOND ------------------- --------- --------- --------- --------------- --------- ---------- ------------ Beginning Account Value 11/1/05...................... $1,000.00 $1,000.00 $1,000.00 $ 1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06... $1,072.14 $1,082.96 $1,111.34 $ 1,020.00 $1,359.53 $1,050.29 $1,004.19 Expenses Paid During Period* 11/1/05-4/30/06.............. $ 3.08 $ 4.54 $ 4.45 $ 0.91 $ 8.94 $ 4.30 $ 1.65 Annualized Expense Ratio....... 0.60% 0.88% 1.01% 1.06% 1.53% 0.85% 0.33% SHORT-TERM INSTITUTIONAL CLASS BOND ------------------- ---------- Beginning Account Value 11/1/05...................... $1,000.00 Ending Account Value 4/30/06... $1,016.60 Expenses Paid During Period* 11/1/05-4/30/06.............. $ 1.73 Annualized Expense Ratio....... 0.35%
MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE PLANAHEAD CLASS BALANCED VALUE OPPORTUNITY** MARKETS BOND INCOME BOND --------------- --------- --------- --------------- --------- ---------- --------- ------------ Beginning Account Value 11/1/05..................... $1,000.00 $1,000.00 $ 1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06.. $1,071.54 $1,111.34 $ 1,019.00 $1,357.89 $1,050.07 $1,029.72 $1,001.25 Expenses Paid During Period* 11/1/05-4/30/06............. $ 4.37 $ 2.43 $ 1.12 $ 11.71 $ 5.53 $ 4.50 $ 4.72 Annualized Expense Ratio...... 0.85% 1.36% 1.31% 2.00% 1.09% 0.89% 0.95% SHORT-TERM PLANAHEAD CLASS BOND --------------- ---------- Beginning Account Value 11/1/05..................... $1,000.00 Ending Account Value 4/30/06.. $1,012.75 Expenses Paid During Period* 11/1/05-4/30/06............. $ 4.40 Annualized Expense Ratio...... 0.88%
SERVICE CLASS BALANCED ------------- --------- Beginning Account Value 11/1/05... $1,000.00 Ending Account Value 4/30/06...... $1,069.22 Expenses Paid During Period* 11/1/05-4/30/06................. $ 5.29 Annualized Expense Ratio.......... 1.03%
LARGE CAP MID-CAP EMERGING AMR CLASS BALANCED GROWTH VALUE MARKETS --------- ---------- ---------- ---------- --------- Beginning Account Value 11/1/05... $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06...... $1,074.07 $1.084.74 $1,112.66 $1,361.00 Expenses Paid During Period* 11/01/05-4/30/06................ $ 1.69 $ 2.93 $ 4.55 $ 7.40 Annualized Expense Ratio.......... 0.33% 0.57% 0.87% 1.26%
--------------- * 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 (181) by days in the year (365) to reflect the half-year period. ** Beginning Account Value for the Small Cap Value Opportunity Fund is as of March 31, 2006 (inception date of the Fund). Expenses are equal to the Fund's annualized ratios for the one-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 period (31) by days in the year (365) to reflect the period. 26 FUND EXPENSES April 30, 2006 (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 MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD INTERMEDIATE INSTITUTIONAL CLASS BALANCED GROWTH VALUE OPPORTUNITY** MARKETS BOND BOND ------------------- --------- ---------- ---------- --------------- --------- ---------- ------------ Beginning Account Value 11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06 $1,021.82 $1,020.43 $1,016.47 $1,003.35 $1,017.22 $1,020.60 $1,023.15 Expenses Paid During Period* 11/1/05-4/30/06 $ 3.01 $ 4.41 $ 4.25 $ 0.90 $ 7.64 $ 4.24 $ 1.66 Annualized Expense Ratio 0.60% 0.88% 1.01% 1.06% 1.53% 0.85% 0.33% SHORT-TERM INSTITUTIONAL CLASS BOND ------------------- ---------- Beginning Account Value 11/1/05 $1,000.00 Ending Account Value 4/30/06 $1,023.08 Expenses Paid During Period* 11/1/05-4/30/06 $ 1.74 Annualized Expense Ratio 0.35%
MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE PLANAHEAD CLASS BALANCED VALUE OPPORTUNITY** MARKETS BOND INCOME BOND --------------- ---------- ---------- --------------- ---------- ---------- ---------- ------------ Beginning Account Value 11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06 $1,020.58 $1,006.19 $1,003.13 $1,014.86 $1,019.40 $1,020.36 $1,020.08 Expenses Paid During Period* 11/1/05-4/30/06 $ 4.26 $ 2.31 $ 1.11 $ 10.01 $ 5.44 $ 4.48 $ 4.76 Annualized Expense Ratio 0.85% 1.36% 1.31% 2.00% 1.09% 0.89% 0.95% SHORT-TERM PLANAHEAD CLASS BOND --------------- ---------- Beginning Account Value 11/1/05 $1,000.00 Ending Account Value 4/30/06 $1,020.43 Expenses Paid During Period* 11/1/05-4/30/06 $ 4.41 Annualized Expense Ratio 0.88%
SERVICE CLASS BALANCED ------------- --------- Beginning Account Value 11/1/05 $1,000.00 Ending Account Value 4/30/06 $1,019.68 Expenses Paid During Period* 11/1/05-4/30/06 $ 5.17 Annualized Expense Ratio 1.03%
LARGE CAP MID-CAP EMERGING AMR CLASS BALANCED GROWTH VALUE MARKETS --------- ---------- ---------- ---------- --------- Beginning Account Value 11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 Ending Account Value 4/30/06 $1,023.17 $1,021.98 $1,020.49 $1,018.53 Expenses Paid During Period* 11/01/05-4/30/06 $ 1.65 $ 2.84 $ 4.35 $ 6.33 Annualized Expense Ratio 0.33% 0.57% 0.87% 1.26%
--------------- * 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 (181) by days in the year (365) to reflect the half-year period. ** Beginning Account Value for the Small Cap Value Opportunity Fund is as of March 31, 2006 (inception date of the Fund). Expenses are equal to the Fund's annualized ratios for the one-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 period (31) by days in the year (365) to reflect the period. 27 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 59.79% CONSUMER DISCRETIONARY - 5.16% AUTO COMPONENTS - 0.20% Magna International, Inc.+............ 22,000 $ 1,726 ---------- HOTELS, RESTAURANTS & LEISURE - 0.89% Carnival Corp. ....................... 32,200 1,508 Harrahs Entertainment, Inc. .......... 43,200 3,527 McDonald's Corp. ..................... 24,600 850 Yum Brands, Inc. ..................... 35,200 1,819 ---------- 7,704 ---------- HOUSEHOLD DURABLES - 1.85% Centex Corp. ......................... 114,600 6,372 Fortune Brands, Inc. ................. 28,000 2,248 Koninklijke (Royal) Philips Electronics NV....................... 59,431 2,049 Newell Rubbermaid, Inc. .............. 68,800 1,887 Pulte Homes, Inc. .................... 91,700 3,425 ---------- 15,981 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.46% Eastman Kodak Co.+.................... 86,400 2,329 Mattel, Inc. ......................... 101,600 1,644 ---------- 3,973 ---------- MEDIA - 0.53% CBS Corp. ............................ 34,100 868 The Interpublic Group of Companies, Inc.(+)+............................. 165,100 1,582 The Walt Disney Company Ltd. ......... 75,500 2,111 ---------- 4,561 ---------- MULTILINE RETAIL - 0.77% Federated Department Stores, Inc. .... 59,677 4,646 Target Corp. ......................... 38,900 2,065 ---------- 6,711 ---------- SPECIALTY RETAIL - 0.27% The Home Depot, Inc. ................. 57,800 2,308 ---------- TEXTILES & APPAREL - 0.19% Liz Claiborne, Inc. .................. 43,400 1,695 ---------- TOTAL CONSUMER DISCRETIONARY....... 44,659 ---------- CONSUMER STAPLES - 5.22% BEVERAGES - 0.56% Anheuser-Busch Companies, Inc. ....... 34,300 1,529 Diageo plc, ADR+...................... 49,800 3,299 ---------- 4,828 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) FOOD & DRUG RETAILING - 0.42% Albertson's, Inc. .................... 7,700 $ 195 Safeway, Inc.+........................ 136,000 3,418 ---------- 3,613 ---------- FOOD PRODUCTS - 1.63% ConAgra Foods, Inc. .................. 158,100 3,586 General Mills, Inc. .................. 33,300 1,643 Kraft Foods, Inc.+.................... 114,100 3,564 Sara Lee Co. ......................... 101,174 1,808 Unilever plc, ADR..................... 83,100 3,551 ---------- 14,152 ---------- TOBACCO - 2.61% Altria Group, Inc. ................... 153,600 11,237 Gallaher Group plc, ADR............... 41,600 2,644 Imperial Tobacco Group plc, ADR+...... 94,800 5,942 UST, Inc.+............................ 62,900 2,763 ---------- 22,586 ---------- TOTAL CONSUMER STAPLES............. 45,179 ---------- ENERGY - 4.85% OIL & GAS - 4.85% BP plc, ADR........................... 49,380 3,640 Chevron Corp. ........................ 104,428 6,372 ConocoPhillips........................ 230,376 15,412 Devon Energy Corp. ................... 88,000 5,290 Kerr-McGee Corp. ..................... 20,476 2,045 Occidental Petroleum Corp. ........... 70,700 7,264 Petro-Canada.......................... 40,200 1,977 ---------- TOTAL ENERGY....................... 42,000 ---------- FINANCIALS - 17.38% BANKS - 5.27% Bank of America Corp. ................ 354,096 17,676 Comerica, Inc. ....................... 31,100 1,769 First Horizon National Corp.(+)+...... 21,800 925 KeyCorp............................... 88,200 3,371 U.S. Bancorp.......................... 111,260 3,498 UnionBanCal Corp. .................... 11,700 820 Wachovia Corp. ....................... 66,900 4,004 Washington Mutual, Inc.+.............. 190,900 8,602 Wells Fargo & Co. .................... 71,600 4,918 ---------- 45,583 ----------
See accompanying notes -------------------------------------------------------------------------------- 28 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) DIVERSIFIED FINANCIALS - 6.19% The Bear Stearns Cos, Inc. ........... 26,300 $ 3,748 Capital One Financial Corp. .......... 46,000 3,986 Citigroup, Inc. ...................... 263,542 13,164 Federal Home Loan Mortgage Corp. ..... 89,900 5,489 Federal National Mortgage Association.......................... 45,000 2,277 The Goldman Sachs Group, Inc. ........ 22,000 3,526 JP Morgan Chase & Co. ................ 243,634 11,056 Merrill Lynch & Company, Inc. ........ 43,500 3,317 Morgan Stanley Dean Witter & Co. ..... 58,400 3,755 SLM Corp. ............................ 61,800 3,268 ---------- 53,586 ---------- INSURANCE - 5.68% Ace Ltd. ............................. 73,700 4,093 The Allstate Corp. ................... 88,300 4,988 American International Group, Inc. ... 34,800 2,271 AON Corp. ............................ 29,000 1,215 Assurant, Inc. ....................... 37,000 1,782 Conseco, Inc.(+)+..................... 71,400 1,803 Genworth Financial, Inc. ............. 154,800 5,139 The Hartford Financial Services Group, Inc.................................. 18,400 1,692 MetLife, Inc. ........................ 168,680 8,788 MGIC Investments Corp.+............... 42,600 3,012 Prudential Financial, Inc. ........... 28,000 2,188 The St. Paul Travelers Companies, Inc. ................................ 183,300 8,071 XL Capital Ltd. ...................... 62,100 4,092 ---------- 49,134 ---------- REAL ESTATE - 0.24% The St. Joe Co.+...................... 36,700 2,061 ---------- TOTAL FINANCIALS................... 150,364 ---------- HEALTH CARE - 4.67% HEALTH CARE EQUIPMENT & SUPPLIES - 0.39% Baxter International, Inc. ........... 88,200 3,325 ---------- HEALTH CARE PROVIDERS & SERVICES - 1.34% Cigna Corp. .......................... 29,200 3,125 HCA, Inc. ............................ 81,800 3,590 Tenet Healthcare Corp.(+)+............ 157,600 1,311 WellPoint, Inc.(+).................... 50,300 3,571 ---------- 11,597 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) PHARMACEUTICALS - 2.94% Bristol-Myers Squibb Co. ............. 286,800 $ 7,279 Merck & Company, Inc. ................ 128,200 4,413 Pfizer, Inc. ......................... 314,100 7,956 Schering-Plough Corp. ................ 164,000 3,169 Wyeth................................. 54,100 2,633 ---------- 25,450 ---------- TOTAL HEALTH CARE.................. 40,372 ---------- INDUSTRIALS - 8.63% AEROSPACE & DEFENSE - 2.23% The Boeing Co. ....................... 59,400 4,957 Lockheed Martin Corp. ................ 65,300 4,956 Northrop Grumman Corp. ............... 28,900 1,934 Raytheon Co. ......................... 104,300 4,617 United Technologies Corp. ............ 45,400 2,852 ---------- 19,316 ---------- AIR FREIGHT & COURIERS - 0.08% FedEx Corp. .......................... 5,900 679 ---------- COMMERCIAL SERVICES & SUPPLIES - 0.84% Cendant Corp. ........................ 246,300 4,293 PHH Corp.(+).......................... 6,675 186 Waste Management, Inc. ............... 73,607 2,757 ---------- 7,236 ---------- ELECTRICAL EQUIPMENT - 0.51% American Power Conversion Corp. ...... 136,700 3,040 Emerson Electrical Co. ............... 16,300 1,385 ---------- 4,425 ---------- INDUSTRIAL CONGLOMERATES - 2.76% 3M Co. ............................... 38,700 3,306 General Electric Co. ................. 128,600 4,448 Honeywell International, Inc. ........ 78,800 3,349 Textron, Inc. ........................ 41,800 3,760 Tyco International Ltd. .............. 341,201 8,991 ---------- 23,854 ---------- MACHINERY - 1.71% Caterpillar, Inc. .................... 50,300 3,810 Flowserve Corp.(+)+................... 41,200 2,370 Illinois Tool Works, Inc.(+).......... 53,200 5,463 ITT Industries, Inc. ................. 56,800 3,194 ---------- 14,837 ---------- TRANSPORTATION INFRASTRUCTURE - 0.50% Burlington Northern Santa Fe Corp. ... 54,400 4,327 ---------- TOTAL INDUSTRIALS.................. 74,674 ----------
See accompanying notes -------------------------------------------------------------------------------- 29 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) INFORMATION TECHNOLOGY - 5.09% COMMUNICATIONS EQUIPMENT - 0.95% Nokia Corp., ADR...................... 361,200 $ 8,185 ---------- COMPUTERS & PERIPHERALS - 1.38% Hewlett-Packard Co. .................. 186,900 6,069 International Business Machines Corp. ............................... 71,700 5,904 ---------- 11,973 ---------- IT CONSULTING & SERVICES - 1.26% Computer Sciences Corp.(+)............ 39,700 2,324 Electronic Data Systems Corp. ........ 315,900 8,555 ---------- 10,879 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.19% Intel Corp. .......................... 81,600 1,630 ---------- SOFTWARE - 1.31% Computer Associate International, Inc.................................. 313,203 7,943 Microsoft Corp. ...................... 141,300 3,412 ---------- 11,355 ---------- TOTAL INFORMATION TECHNOLOGY....... 44,022 ---------- MATERIALS - 3.32% CHEMICALS - 1.83% Air Products & Chemicals, Inc. ....... 26,300 1,802 Dow Chemical Co. ..................... 27,000 1,097 E. I. du Pont de Nemours & Co......... 47,300 2,086 Eastman Chemical Co. ................. 30,000 1,631 Hercules, Inc.(+)..................... 10,000 142 Lyondell Chemical Co. ................ 132,500 3,193 The Mosaic Co.(+)+.................... 250,900 3,764 PPG Industries, Inc. ................. 30,400 2,040 Tronox, Inc.(+)....................... 4,128 71 ---------- 15,826 ---------- METALS & MINING - 0.85% Alcoa, Inc. .......................... 219,096 7,401 ---------- PAPER & FOREST PRODUCTS - 0.64% International Paper Co. .............. 40,800 1,483 Sappi Ltd., ADR+...................... 127,800 1,794 Weyerhaeuser Co. ..................... 31,900 2,248 ---------- 5,525 ---------- TOTAL MATERIALS.................... 28,752 ----------
SHARES VALUE ----------- ---------- (DOLLARS IN THOUSANDS) TELECOMMUNICATION SERVICES - 1.79% Alltel Corp. ......................... 12,700 $ 818 AT&T, Inc. ........................... 97,000 2,542 BellSouth Corp. ...................... 144,200 4,871 Verizon Communications, Inc. ......... 218,628 7,221 ---------- TOTAL TELECOMMUNICATION SERVICES... 15,452 ---------- UTILITIES - 3.68% American Electric Power Company, Inc. ................................ 52,900 1,770 CenterPoint Energy, Inc.+............. 132,600 1,594 Dominion Resources, Inc. ............. 19,900 1,490 DTE Energy Co. ....................... 54,800 2,235 Entergy Corp. ........................ 77,200 5,399 Exelon Corp. ......................... 78,300 4,228 FPL Group, Inc. ...................... 131,500 5,207 Public Service Enterprise Group, Inc. ................................ 75,800 4,753 Duke Energy Corp.(+).................. 176,500 5,140 ---------- TOTAL UTILITIES.................... 31,816 ---------- TOTAL COMMON STOCKS................ 517,290 ----------
PAR AMOUNT ----------- CORPORATE OBLIGATIONS - 7.51% BANKS - 0.77% Banco Popular North America, Inc., 4.25%, Due 4/1/2008.................. $ 500 487 Bank of America Corp., 3.375%, Due 2/17/2009+............... 450 428 Bank One Corp., 5.90%, Due 11/15/2011................ 700 709 4.90%, Due 4/30/2015................. 300 278 Capital One Bank, 6.70%, Due 5/15/2008................. 450 461 4.80%, Due 2/21/2012+................ 465 442 5.125%, Due 2/15/2014................ 450 429 Credit Suisse First Boston, 6.50%, Due 5/1/2008++................ 750 764 ING Bank, NV, 5.125%, Due 5/1/2015++............... 450 427 PNC Funding Corp., 4.20%, Due 3/10/2008++............... 745 729 Synovus Financial Corp., 4.875%, Due 2/15/2013++.............. 300 285
See accompanying notes -------------------------------------------------------------------------------- 30 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Washington Mutual Financial Corp., 6.875%, Due 5/15/2011................ $ 425 $ 448 Washington Mutual, Inc., 4.625%, Due 4/1/2014................. 850 771 ---------- 6,658 ---------- COMMUNICATIONS - 0.38% AT&T Broadband Corp., 8.375%, Due 3/15/2013................ 848 949 Comcast Corp., 7.625%, Due 2/15/2008................ 300 310 5.30%, Due 1/15/2014................. 710 672 Time Warner, Inc., 6.75%, Due 4/15/2011................. 450 466 7.70%, Due 5/1/2032.................. 550 601 Viacom, Inc., 6.25%, Due 4/30/2016+++.............. 345 342 ---------- 3,340 ---------- CONSUMER, NON-CYCLICAL - 0.05% UnitedHealth Group, Inc., 5.375%, Due 3/15/2016+............... 460 441 ---------- ELECTRIC/GAS - 0.64% Columbus Southern Power Co., 5.50%, Due 3/1/2013.................. 710 693 FPL Group, Inc., 5.551%, Due 2/16/2008................ 500 501 Georgia Power Co., 4.875%, Due 7/15/2007................ 450 448 Kinder Morgan Finance Co. ULC, 5.70%, Due 1/5/2016.................. 450 434 MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008................. 495 476 5.875%, Due 10/1/2012................ 405 406 6.125%, Due 4/1/2036++............... 700 668 Public Service Enterprise Group, Inc., 6.95%, Due 6/1/2012+................. 800 839 Southern Company Capital Funding, Inc., 5.30%, Due 2/1/2007.................. 425 423 Xcel Energy, Inc., 7.00%, Due 12/1/2010................. 600 629 ---------- 5,517 ----------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) FINANCE - 2.20% American General Finance Corp., 5.375%, Due 9/1/2009+................ $ 840 $ 839 American Honda Finance Corp., 4.875%, Due 5/15/2010................ 500 485 American International Group, Inc., 6.25%, Due 5/1/2036++................ 700 692 Ameriprise Financial, Inc., 5.35%, Due 11/15/2010................ 625 617 The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008................. 800 760 The Chubb Corp., 4.934%, Due 11/16/2007............... 775 769 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014................. 450 413 Equity Residential, 5.125%, Due 3/15/2016................ 385 360 General Electric Capital Corp., 4.375%, Due 3/3/2012+................ 865 815 The Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013................. 400 376 Household Finance Corp., 5.75%, Due 1/30/2007................. 1,500 1,505 HSBC Finance Corp., 4.75%, Due 4/15/2010+................ 470 457 5.25%, Due 1/14/2011+................ 700 690 International Lease Finance Corp., 6.375%, Due 3/15/2009+............... 1,025 1,049 Liberty Mutual Corp., 7.875%, Due 10/15/2026+++............ 1,500 1,621 Merrill Lynch & Company, Inc., 6.00%, Due 2/17/2009................. 1,000 1,016 4.25%, Due 2/8/2010.................. 615 589 MetLife Global Funding I, 3.375%, Due 10/5/2007++.............. 650 631 MetLife, Inc., 5.375%, Due 12/15/2012+.............. 540 530 5.00%, Due 6/15/2015................. 385 361 ProLogis, 5.50%, Due 4/1/2012.................. 450 443 ProLogis Trust, 7.10%, Due 4/15/2008................. 470 485 Prudential Financial, Inc., 3.75%, Due 5/1/2008.................. 335 324 5.10%, Due 9/20/2014................. 410 390
See accompanying notes -------------------------------------------------------------------------------- 31 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Simon Property Group LP, 6.375%, Due 11/15/2007............... $ 400 $ 405 5.375%, Due 6/1/2011++............... 450 443 SLM Corp., 4.00%, Due 1/15/2009................. 1,500 1,442 5.45%, Due 4/25/2011................. 520 516 ---------- 19,023 ---------- INDUSTRIALS - 2.39% Amgen, Inc., 4.00%, Due 11/18/2009................ 415 396 BHP Finance (USA) Ltd., 4.80%, Due 4/15/2013................. 300 286 Bunge Limited Finance Corp., 7.80%, Due 10/15/2012................ 400 439 Carnival Corp., 3.75%, Due 11/15/2007................ 715 697 Cendant Corp., 6.875%, Due 8/15/2006................ 990 993 Cisco Systems, Inc., 5.25%, Due 2/22/2011................. 800 792 5.50%, Due 2/22/2016................. 600 585 CNF Transportation, Inc., 8.875%, Due 5/1/2010................. 1,850 2,027 DaimlerChrysler Corp., 7.75%, Due 1/18/2011+................ 1,000 1,072 DaimlerChrysler NA Holding Corp., 5.875%, Due 3/15/2011................ 700 697 DaimlerChrysler North America, 4.75%, Due 1/15/2008+................ 270 266 Dell Computer Corp., 6.55%, Due 4/15/2008................. 400 408 EOG Resources, Inc., 4.75%, Due 3/15/2014++............... 425 398 Hewlett-Packard Co., 5.75%, Due 12/15/2006+............... 570 571 Home Depot, Inc., 5.40%, Due 3/1/2016.................. 675 657 John Deere Capital Corp., 3.375%, Due 10/1/2007................ 650 632 4.40%, Due 7/15/2009................. 275 267 5.40%, Due 4/7/2010.................. 525 522 Lockheed Martin Corp., 7.20%, Due 5/1/2036+................. 700 782 Martin Marietta Material, Inc., 6.90%, Due 8/15/2007................. 200 203 Motorola, Inc., 8.00%, Due 11/1/2011................. 580 646 Nissan Motor Acceptance Corp., 5.625%, Due 3/14/2011++.............. 700 694 Northrop Grumman Corp., 4.079%, Due 11/16/2006............... 850 845
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pemex Project Funding Master Trust, 8.50%, Due 2/15/2008+................ $ 610 $ 639 Pulte Homes, Inc., 4.875%, Due 7/15/2009................ 200 195 Schering-Plough Corp., 6.75%, Due 12/1/2033+................ 400 419 Unilever Capital Corp., 7.125%, Due 11/1/2010+............... 2,000 2,124 Union Pacific Corp., 6.50%, Due 4/15/2012................. 450 468 Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030................. 650 759 WellPoint, Inc., 3.75%, Due 12/14/2007................ 380 370 Weyerhaeuser Co., 5.95%, Due 11/1/2008................. 340 342 Wyeth Corp., 5.50%, Due 2/1/2014.................. 465 454 ---------- 20,645 ---------- INSURANCE - 0.23% Aegon Funding Corp., 5.75%, Due 12/15/2020................ 450 435 AEGON, N.V., 8.00%, Due 8/15/2006................. 300 302 ASIF Global Financing, 3.90%, Due 10/22/2008++.............. 700 676 Lincoln National Corp., 4.75%, Due 2/15/2014................. 200 185 Prudential Financial, Inc., 4.50%, Due 7/15/2013+................ 400 371 ---------- 1,969 ---------- TELEPHONE - 0.85% America Movil S.A. de C.V., 6.375%, Due 3/1/2035................. 1,120 1,027 AT&T Inc., 5.10%, Due 9/15/2014................. 485 457 AT&T Wireless Services, Inc., 8.125%, Due 5/1/2012................. 550 616 8.75%, Due 3/1/2031.................. 445 559 Deutsche Telekom AG, 8.00%, Due 6/15/2010................. 380 413 France Telecom SA, 7.75%, Due 3/1/2011.................. 550 598 Nextel Communications, Inc., 6.875%, Due 10/31/2013............... 615 631 Sprint Capital Corp., 6.00%, Due 1/15/2007................. 800 803 8.375%, Due 3/15/2012................ 175 197 Telecom Italia S.p.A., 4.00%, Due 11/15/2008................ 470 453 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015+................ 500 469
See accompanying notes -------------------------------------------------------------------------------- 32 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Verizon Global Funding Corp., 4.00%, Due 1/15/2008+................ $ 545 $ 533 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006............... 570 570 ---------- 7,326 ---------- TOTAL CORPORATE OBLIGATIONS........ 64,919 ---------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.53% COMMERCIAL MORTGAGE-BACKED SECURITY - 0.67% Banc of America Commercial Mortgage, Inc., 2003-2, 4.342%, Due 3/11/2041........ 560 540 2005-6, 5.001%, Due 9/10/2047........ 959 950 Bear Stearns Commercial Mortgage Securities, Inc., 2004-PWR5, 4.831%, Due 7/11/2042..... 870 828 2005, 5.127%, Due 10/12/2042......... 630 622 Citigroup Commercial Mortgage Trust, 2004-C2, 4.38%, Due 10/15/2041....... 760 720 General Electric Capital Commercial Mortgage Corp., 2003-C2, 4.17%, Due 7/10/2037........ 430 417 JP Morgan Chase Commercial Mortgage Securities Corp., 2004-CBX, 4.529%, Due 11/12/2039............... 555 530 4.655%, Due 8/15/2042................ 407 401 4.625%, Due 3/15/2046................ 845 823 ---------- 5,831 ---------- WHOLE LOAN COLLATERALIZED MORTGAGE OBLIGATIONS - 0.86% Banc of America Mortgage Securities, 5.25%, Due 10/25/2019................ 1,149 1,110 Bear Stearns Adjustable Rate Mortgage Trust, 2005-11, 4.757%, Due 12/25/2035#..... 911 893 Bear Stearns Commercial Mortgage Securities, Inc., 5.467%, Due 4/12/2038................ 590 592 Chase Mortgage Financial Trust, 2004-S1 A3, 5.50%, Due 2/25/2019..... 82 81 Countrywide Alternative Loan Trust, Inc., 2005-53T2, 6.00%, Due 11/25/2035..... 1,348 1,321
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Countrywide Home Loan, Inc., 2004-18, 6.00%, Due 10/25/2034....... $ 496 $ 485 2005-HYB8, 5.414%, Due 12/20/2035.... 965 957 Prime Mortgage Trust, 2005-2, 5.25%, Due 7/25/2020......... 2,026 1,989 ---------- 7,428 ---------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS...................... 13,259 ---------- ASSET-BACKED SECURITIES - 0.33% AUTO LOAN - 0.10% Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009......... 904 897 ---------- OTHER ASSET-BACKED - 0.23% CarMax Auto Owner Trust, 2005-3, 4.91%, Due 1/18/2011................. 1,000 989 Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due 4/20/2012......... 1,000 989 ---------- 1,978 ---------- TOTAL ASSET-BACKED SECURITIES...... 2,875 ---------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.13% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.77% Pool #A28109, 5.50%, Due 10/1/2034........................ 1,192 1,160 Pool #A30948, 5.50%, Due 1/1/2035......................... 999 973 Pool #A45500, 5.50%, Due 6/1/2035......................... 4,127 4,010 Pool #B12563, 5.00%, Due 2/1/2019......................... 585 570 Pool #C00835, 6.50%, Due 7/1/2029......................... 277 283 Pool #C01598, 5.00%, Due 8/1/2033......................... 1,279 1,214 Pool #C01786, 5.50%, Due 2/1/2034......................... 2,401 2,336 Pool #C01796, 5.00%, Due 3/1/2034......................... 1,583 1,500 Pool #C01848, 6.00%, Due 6/1/2034......................... 1,294 1,291 Pool #C26472, 6.50%, Due 5/1/2029......................... 89 91
See accompanying notes -------------------------------------------------------------------------------- 33 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pool #C27089, 6.50%, Due 6/1/2029......................... $ 14 $ 14 Pool #E01386, 5.00%, Due 6/1/2018......................... 553 539 Pool #E01492, 5.50%, Due 10/1/2018........................ 812 806 Pool #E01602, 4.50%, Due 3/1/2019......................... 1,152 1,098 Pool #E90777, 5.50%, Due 8/1/2017......................... 86 85 Pool #E96536, 5.00%, Due 3/1/2018......................... 1,019 993 Pool #E97381, 5.50%, Due 6/1/2018......................... 187 186 Pool #G01457, 6.00%, Due 8/1/2029......................... 140 140 Pool #G08006, 6.00%, Due 8/1/2034......................... 1,149 1,146 Pool #G08072, 5.00%, Due 8/1/2035......................... 1,360 1,286 Pool #G08079, 5.00%, Due 9/1/2035......................... 1,946 1,841 Pool #G10084, 6.50%, Due 3/1/2008......................... 360 362 Pool #G11295, 5.50%, Due 9/1/2017......................... 445 442 Pool #G11879, 5.00%, Due 10/1/2020........................ 1,643 1,598 ---------- 23,964 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.17% Pool #100292, 10.00%, Due 9/1/2018......................... 152 167 Pool #252211, 6.00%, Due 1/1/2029......................... 709 709 Pool #254545, 5.00%, Due 12/1/2017........................ 1,262 1,232 Pool #254865, 4.50%, Due 9/1/2018......................... 1,922 1,834 Pool #255225, 5.50%, Due 6/1/2034......................... 683 664 Pool #323789, 6.00%, Due 6/1/2014......................... 225 227 Pool #488099, 5.50%, Due 2/1/2014......................... 289 287 Pool #535846, 6.00%, Due 4/1/2016......................... 542 549 Pool #555531, 5.50%, Due 6/1/2033......................... 601 586 Pool #555549, 5.00%, Due 6/1/2018......................... 1,541 1,504 Pool #555880, 5.50%, Due 11/1/2033........................ 1,574 1,532
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pool #725238, 5.00%, Due 3/1/2034......................... $ 1,522 $ 1,445 Pool #725706, 6.00%, Due 8/1/2032......................... 317 319 Pool #725866, 4.50%, Due 9/1/2034......................... 1,145 1,051 Pool #745418, 5.50%, Due 4/1/2036......................... 1,989 1,932 Pool #747844, 5.50%, Due 12/1/2018........................ 111 110 Pool #749219, 5.50%, Due 10/1/2033........................ 623 607 Pool #758322, 5.50%, Due 12/1/2033........................ 1,460 1,422 Pool #761337, 5.00%, Due 4/1/2019......................... 326 318 Pool #765304, 5.50%, Due 3/1/2034......................... 575 560 Pool #793062, 5.00%, Due 8/1/2034#........................ 276 274 Pool #800422, 5.023%, Due 8/1/2034#........................ 926 914 Pool #811328, 5.00%, Due 2/1/2020......................... 3,719 3,622 Pool #815762, 6.50%, Due 3/1/2035......................... 365 372 Pool #828377, 5.50%, Due 6/1/2035......................... 2,045 1,987 Pool #835760, 4.50%, Due 9/1/2035......................... 1,006 922 Pool #837219, 4.00%, Due 8/1/2020......................... 1,323 1,232 Pool #872306, 6.50%, Due 5/1/2036......................... 1,010 1,027 ---------- 27,405 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.19% 2006-9 A, 4.201%, Due 8/16/2026........................ 698 674 Pool #003515, 5.50%, Due 2/20/2034........................ 1,000 978 Pool #780400, 7.00%, Due 12/15/2025....................... 455 472 Pool #780509, 6.50%, Due 2/15/2027........................ 187 192 Pool #780615, 6.50%, Due 8/15/2027........................ 215 222 Pool #780651, 7.00%, Due 10/15/2027....................... 231 240 Pool #780680, 6.50%, Due 11/15/2027....................... 565 583 Pool #780747, 6.50%, Due 3/15/2028........................ 207 214
See accompanying notes -------------------------------------------------------------------------------- 34 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) Pool #780788, 6.50%, Due 4/15/2028........................ $ 205 $ 211 Pool #780936, 7.50%, Due 12/15/2028....................... 437 460 Pool #781035, 6.50%, Due 5/15/2029........................ 201 207 Pool #781273, 6.00%, Due 4/15/2031........................ 324 326 Pool #781288, 6.50%, Due 5/15/2031........................ 350 360 Pool #781564, 6.00%, Due 2/15/2033........................ 617 619 Pool #781589, 5.50%, Due 4/15/2033........................ 1,738 1,707 Pool #781603, 5.00%, Due 5/15/2033........................ 780 749 Pool #781636, 5.50%, Due 7/15/2033........................ 1,442 1,416 Pool #781690, 6.00%, Due 12/15/2033....................... 706 709 ---------- 10,339 ---------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS...................... 61,708 ---------- U.S. AGENCY OBLIGATIONS - 9.20% FEDERAL HOME LOAN BANK - 1.46% 4.40%, Due 7/28/2008.................. 2,630 2,588 Zero Coupon, Due 5/10/2006+(+)........ 10,090 10,078 ---------- 12,666 ---------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.51% 3.625%, Due 9/15/2006................. 15,000 14,915 5.625%, Due 3/15/2011+................ 1,000 1,014 5.875%, Due 3/21/2011+................ 495 503 4.50%, Due 1/15/2015+................. 23,930 22,564 ---------- 38,996 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.23% 4.375%, Due 9/7/2007.................. 15,000 14,835 4.50%, Due 8/4/2008................... 2,535 2,500 5.125%, Due 1/2/2014+................. 595 577 TBA, 30 YR, 6.00%, Due 12/11/2033....................... 10,090 10,043 ---------- 27,955 ---------- TOTAL U.S. AGENCY OBLIGATIONS...... 79,617 ----------
PAR AMOUNT VALUE ----------- ---------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 4.80% U.S. TREASURY BONDS - 1.36% 9.125%, Due 5/15/2018+................ $ 1,750 $ 2,358 7.875%, Due 2/15/2021+................ 500 631 6.25%, Due 8/15/2023+................. 650 718 6.875%, Due 8/15/2025+................ 1,580 1,875 6.25%, Due 5/15/2030+................. 2,410 2,724 5.375%, Due 2/15/2031+................ 3,385 3,436 ---------- 11,742 ---------- U.S. TREASURY NOTES - 3.44% 3.375%, Due 2/15/2008+................ 1,555 1,515 3.50%, Due 11/15/2009+................ 850 812 3.875%, Due 5/15/2010+................ 5,000 4,812 5.00%, Due 2/15/2011+................. 2,350 2,360 4.50%, Due 2/28/2011+................. 7,575 7,437 5.00%, Due 8/15/2011+................. 1,400 1,405 4.375%, Due 8/15/2012+................ 2,000 1,936 4.75%, Due 5/15/2014+................. 2,900 2,846 4.125%, Due 5/15/2015+................ 2,000 1,867 4.50%, Due 2/15/2016+................. 4,960 4,744 ---------- 29,734 ---------- TOTAL U.S. TREASURY OBLIGATIONS.... 41,476 ----------
SHARES ----------- SHORT TERM INVESTMENTS - 27.26% American Beacon Enhanced Cash Trustsec.h........................... 94,318,149 94,318 American Beacon Money Market Select Fundsec.h............................ 108,808,422 108,809
PAR AMOUNT ----------- U.S. Treasury Bill, 4.00%, Due 5/18/2006+P............... $ 27,320 27,262 4.455%, Due 6/8/2006P................ 5,490 5,464 ---------- TOTAL SHORT TERM INVESTMENTS....... 235,853 ---------- TOTAL INVESTMENTS - 117.55% (COST $898,521)............................ 1,016,997 ---------- LIABILITIES, NET OF OTHER ASSETS - (17.55%).................... (151,845) ---------- TOTAL NET ASSETS - 100.00%............ $ 865,152 ==========
See accompanying notes -------------------------------------------------------------------------------- 35 AMERICAN BEACON BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- --------------- ADR - American Depository Receipt (+)- Non-income producing security. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- 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 $7,356 or 0.85% of net assets. #- The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. (+)- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. h- All or a portion of this security is purchased with cash collateral for securities loaned. P- At April 30, 2006, security pledged as collateral for open futures contracts. FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------- -------------- Emini S&P 500 Index........................................ 1,327 Jun 2006 $87,310 $1,058
See accompanying notes -------------------------------------------------------------------------------- 36 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 94.49% CONSUMER DISCRETIONARY - 15.72% AUTO COMPONENTS - 0.35% ArvinMeritor, Inc. .............. 4,300 $ 72 Johnson Controls, Inc. .......... 2,200 179 -------- 251 -------- HOTELS, RESTAURANTS & LEISURE - 1.83% Brinker International, Inc.(+)... 2,500 98 Carnival Corp. .................. 1,000 47 Choice Hotels International, Inc. .......................... 6,600 353 Darden Restaurants, Inc. ........ 5,600 222 Hilton Hotels Corp. ............. 6,300 170 Marriott International, Inc. .... 900 66 Starbucks Corp.(+)............... 8,800 328 Starwood Hotels & Resorts Worldwide, Inc.(+)............. 900 51 -------- 1,335 -------- HOUSEHOLD DURABLES - 0.29% Centex Corp. .................... 600 33 Furniture Brands International, Inc.+.......................... 1,400 32 Lennar Corp. .................... 1,400 77 Toll Brothers, Inc.(+)........... 2,100 68 -------- 210 -------- INTERNET & CATALOG RETAIL - 0.53% eBay, Inc.(+).................... 11,300 389 -------- MEDIA - 5.25% CBS Corp. ....................... 7,744 197 Clear Channel Communications, Inc. .......................... 11,600 331 The E. W. Scripps Co. ........... 8,000 369 EchoStar Communications Corp.(+)....................... 7,700 238 Gannett Company, Inc. ........... 6,800 374 The Interpublic Group of Companies, Inc.(+)............. 200 2 John Wiley & Sons, Inc. ......... 2,600 95 Liberty Media Corp.(+)........... 79,300 662 The McGraw-Hill Companies, Inc. .......................... 5,300 295 The New York Times Co.(+)........ 300 7 News Corp. ...................... 9,700 167 Time Warner, Inc. ............... 43,200 752 Univision Communications(+)...... 1,100 39 Viacom, Inc.(+).................. 5,700 227 The Walt Disney Company Ltd. .... 2,400 67 -------- 3,822 -------- MULTILINE RETAIL - 2.20% Costco Wholesale Corp.(+)........ 1,800 98 Dollar General Corp. ............ 3,400 59 Family Dollar Stores, Inc. ...... 1,000 25
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) J.C. Penney Company, Inc. ....... 4,000 $ 262 Kohl's Corp.(+).................. 3,900 218 Nordstrom, Inc. ................. 4,300 165 Target Corp. .................... 7,600 404 Wal-Mart Stores, Inc. ........... 8,200 369 -------- 1,600 -------- RETAIL-BOOKSTORE - 0.13% Barnes and Noble, Inc.(+)........ 2,100 95 -------- SPECIALTY RETAIL - 3.16% Abercrombie and Fitch Co. ....... 3,400 206 AutoNation, Inc.(+).............. 3,000 67 Bed Bath & Beyond, Inc.(+)....... 3,500 134 Best Buy Company, Inc.(+)........ 3,400 193 Chico's FAS, Inc.(+)............. 1,500 56 Circuit City Stores, Inc. ....... 25,760 741 The Home Depot, Inc. ............ 6,100 243 Lowe's Companies, Inc. .......... 3,900 246 Ross Stores, Inc. ............... 100 3 Staples, Inc. ................... 15,600 412 -------- 2,301 -------- TEXTILES & APPAREL - 1.98% Coach, Inc.(+)................... 32,700 1,080 Nike, Inc. ...................... 4,400 360 -------- 1,440 -------- TOTAL CONSUMER DISCRETIONARY.............. 11,443 -------- CONSUMER STAPLES - 8.05% BEVERAGES - 1.12% The Coca-Cola Co. ............... 15,800 663 Coca-Cola Enterprises, Inc. ..... 3,200 63 PepsiCo, Inc. ................... 1,600 93 -------- 819 -------- FOOD & DRUG RETAILING - 0.97% CVS Corp.(+)..................... 1,200 36 Safeway, Inc. ................... 8,600 216 SUPERVALU Inc. .................. 6,600 191 Sysco Corp. ..................... 3,700 111 Walgreen Co. .................... 3,600 151 -------- 705 -------- FOOD PRODUCTS - 0.70% Archer-Daniels-Midland Co. ...... 9,400 342 Kellogg Co. ..................... 3,700 171 -------- 513 -------- HOUSEHOLD PRODUCTS - 3.88% Colgate-Palmolive Co. ........... 1,500 89 The Procter & Gamble Co. ........ 46,992 2,735 -------- 2,824 --------
See accompanying notes -------------------------------------------------------------------------------- 37 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) TOBACCO - 1.38% Altria Group, Inc. .............. 13,700 $ 1,002 -------- TOTAL CONSUMER STAPLES....... 5,863 -------- ENERGY - 3.73% ENERGY EQUIPMENT & SERVICES - 0.83% BJ Services Co.(+)............... 3,400 129 Halliburton Co. ................. 4,200 328 Rowan Companies, Inc. ........... 1,300 58 Unit Corp.(+).................... 1,400 81 Weatherford International Ltd.(+)........................ 200 11 -------- 607 -------- OIL & GAS - 2.90% Devon Energy Corp. .............. 9,000 541 EOG Resources, Inc. ............. 2,200 154 Equitable Resources, Inc. ....... 6,100 217 Hugoton Royalty Trust(+)......... 346 10 Kerr-McGee Corp. ................ 600 60 Occidental Petroleum Corp. ...... 900 92 Sunoco, Inc. .................... 9,700 786 XTO Energy, Inc. ................ 5,800 246 -------- 2,106 -------- TOTAL ENERGY................. 2,713 -------- FINANCIALS - 7.85% BANKS - 0.60% Bank of Hawaii Corp. ............ 600 33 Compass Bancshares, Inc.(+)...... 1,300 71 Hudson City Bancorp, Inc.(+)..... 5,400 72 U.S. Bancorp..................... 8,300 261 -------- 437 -------- DIVERSIFIED FINANCIALS - 3.74% American Express Co. ............ 6,200 334 AmeriCredit Corp.(+)............. 5,600 169 The Charles Schwab Corp. ........ 11,600 208 CIT Group, Inc. ................. 1,800 97 Citigroup, Inc. ................. 6,000 300 Countrywide Financial Corp. ..... 4,100 167 E*Trade Group, Inc.(+)........... 1,200 30 The Goldman Sachs Group, Inc. ... 1,400 224 Merrill Lynch & Company, Inc. ... 4,400 335 Moody's Corp. ................... 11,100 688 Morgan Stanley Dean Witter & Co. ........................... 1,200 77 T Rowe Price Group, Inc.(+)...... 1,100 93 -------- 2,722 -------- INSURANCE - 2.84% Ambac Financial Group, Inc. ..... 3,000 247 Assurant, Inc. .................. 900 43
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) The Hartford Financial Services Group, Inc. ................... 300 $ 28 Lincoln National Corp.+.......... 1,300 76 Loews Corp. ..................... 7,000 743 MBIA, Inc. ...................... 12,295 733 The Progressive Corp. ........... 600 65 W. R. Berkley Corp. ............. 3,500 131 -------- 2,066 -------- REAL ESTATE - 0.67% Host Marriott Corp. ............. 9,001 189 Kilroy Realty Corp.(+)........... 1,100 78 Kimco Realty Corp. .............. 900 34 The Mills Corp. ................. 100 3 ProLogis......................... 3,600 181 -------- 485 -------- TOTAL FINANCIALS............. 5,710 -------- HEALTH CARE - 17.91% BIOTECHNOLOGY - 3.67% Amgen, Inc.(+)................... 19,500 1,320 Charles River Laboratories International, Inc.(+)......... 1,700 80 Genentech, Inc.(+)............... 11,300 901 Gilead Sciences, Inc.(+)......... 3,700 213 Kos Pharmaceuticals, Inc.(+)+.... 2,400 116 MedImmune, Inc.(+)............... 1,200 38 -------- 2,668 -------- HEALTH CARE EQUIPMENT & SUPPLIES - 2.71% Advanced Medical Optics, Inc.(+)........................ 2,000 92 Applera Corporation Applied Biosystems(+).................. 7,700 222 Baxter International, Inc. ...... 9,000 339 Becton, Dickinson and Co. ....... 6,000 378 Boston Scientific Corp.(+)....... 1 -- The Cooper Companies, Inc. ...... 1,000 55 Medtronic, Inc. ................. 3,200 160 Millipore Corp.(+)............... 500 37 St. Jude Medical, Inc.(+)........ 12,900 509 Varian Medical Systems, Inc.(+)........................ 700 37 Zimmer Holdings, Inc.(+)......... 2,300 145 -------- 1,974 -------- HEALTH CARE PROVIDERS & SERVICES - 5.10% Aetna, Inc. ..................... 10,700 412 AmerisourceBergen Corp. ......... 15,400 665 Express Scripts, Inc.(+)......... 10,300 805 HCA, Inc. ....................... 3,700 162 McKesson Corp. .................. 13,300 646 UnitedHealth Group, Inc. ........ 11,300 562 WellPoint, Inc.(+)............... 6,500 461 -------- 3,713 --------
See accompanying notes -------------------------------------------------------------------------------- 38 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) PHARMACEUTICALS - 6.43% Abbott Laboratories(+)........... 9,500 $ 406 Allergan, Inc. .................. 6,000 616 Barr Pharmaceuticals, Inc.(+).... 4,300 260 Eli Lilly & Co. ................. 7,800 413 FANUC Ltd. ...................... 2,100 34 Hospira, Inc.(+)................. 1,800 69 Johnson & Johnson................ 25,700 1,506 Medco Health Solutions, Inc.(+).. 800 43 Merck & Company, Inc. ........... 3,300 114 Pfizer, Inc. .................... 1,600 41 Schering-Plough Corp. ........... 13,600 263 Sepracor, Inc.(+)+............... 5,900 263 Wyeth............................ 13,400 652 -------- 4,680 -------- TOTAL HEALTH CARE............ 13,035 -------- INDUSTRIALS - 14.54% AEROSPACE & DEFENSE - 3.80% The Boeing Co. .................. 17,100 1,427 General Dynamics Corp. .......... 1,800 118 Lockheed Martin Corp. ........... 4,000 304 Northrop Grumman Corp. .......... 5,800 388 Raytheon Co. .................... 800 35 United Technologies Corp. ....... 7,900 496 -------- 2,768 -------- AIR FREIGHT & COURIERS - 0.10% FedEx Corp. ..................... 600 69 -------- COMMERCIAL SERVICES & SUPPLIES - 1.54% CheckFree Corp.(+)............... 800 43 Corporate Executive Board........ 4,000 428 Global Payments, Inc. ........... 12,500 593 Manpower, Inc.(+)................ 900 59 -------- 1,123 -------- ELECTRICAL EQUIPMENT - 0.51% Emerson Electrical Co. .......... 4,400 374 -------- INDUSTRIAL CONGLOMERATES - 5.23% General Electric Co. ............ 106,400 3,681 Textron, Inc. ................... 400 36 Tyco International Ltd. ......... 3,500 92 -------- 3,809 -------- MACHINERY - 2.22% Caterpillar, Inc. ............... 6,200 470 Danaher Corp.(+)................. 1,300 84 Deere & Co. ..................... 2,100 184 Eaton Corp. ..................... 6,200 475 Ingersoll-Rand Company Ltd. ..... 5,400 236 Navistar International Corp.(+)....................... 3,600 95 PACCAR, Inc. .................... 1,000 72 -------- 1,616 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) ROAD & RAIL - 1.14% CSX Corp. ....................... 900 $ 62 Norfolk Southern Corp. .......... 13,100 707 Swift Transportation Company, Inc.(+)+....................... 1,900 57 -------- 826 -------- TOTAL INDUSTRIALS............ 10,585 -------- INFORMATION TECHNOLOGY - 22.39% COMMERCIAL SERVICES & SUPPLIES - 0.07% First Data Corp.(+).............. 1,100 52 -------- COMMUNICATIONS EQUIPMENT - 5.24% Cisco Systems, Inc.(+)........... 97,900 2,051 Corning, Inc.(+)................. 22,100 611 Juniper Networks, Inc.(+)........ 4,900 91 Motorola, Inc. .................. 13,600 290 QUALCOMM, Inc. .................. 13,500 693 Tellabs, Inc.(+)................. 4,800 76 -------- 3,812 -------- COMPUTERS & PERIPHERALS - 3.88% Apple Computer, Inc.(+).......... 3,100 218 Dell, Inc.(+).................... 7,500 196 EMC Corp.(+)..................... 15,600 211 Hewlett-Packard Co. ............. 22,100 718 International Business Machines Corp. ......................... 7,900 650 NCR Corp.(+)..................... 1,900 75 Network Appliance, Inc.(+)....... 2,900 108 Western Digital Corp.(+)......... 30,900 650 -------- 2,826 -------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.34% Avnet, Inc.(+)................... 7,100 186 Broadcom Corp.(+)................ 9,900 407 Intersil Corp. .................. 1,400 41 Jabil Circuit, Inc.(+)........... 8,700 339 -------- 973 -------- INTERNET SOFTWARE & SERVICES - 1.87% Google, Inc.(+).................. 3,250 1,358 -------- IT CONSULTING & SERVICES - 0.29% Affiliated Computer Services, Inc.(+)........................ 3,800 212 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 4.71% Altera Corp.(+).................. 5,400 118 Freescale Semiconductor, Inc.(+)........................ 13,300 421 Intel Corp. ..................... 3,700 74 KLA-Tencor Corp. ................ 1,900 92 Linear Technology Corp. ......... 12,000 426 LSI Logic Corporation(+)......... 19,400 207
See accompanying notes -------------------------------------------------------------------------------- 39 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Maxim Integrated Products, Inc. .......................... 3,300 $ 116 Micron Technology, Inc.(+)....... 32,200 547 Novellus Systems, Inc.(+)........ 2,400 59 Texas Instruments, Inc. ......... 36,800 1,277 Xilinx, Inc. .................... 3,300 91 -------- 3,428 -------- SOFTWARE - 4.99% Adobe Systems, Inc.(+)........... 800 32 Autodesk, Inc. .................. 6,300 265 Cadence Design Systems, Inc.(+).. 16,000 303 Electronic Arts, Inc.(+)......... 1,500 85 Microsoft Corp. ................. 82,100 1,983 Oracle Corp.(+).................. 37,100 541 Salesforce.com, Inc.(+).......... 1,400 49 Symantec Corp.(+)................ 3,600 59 Synopsys, Inc.(+)................ 14,400 314 -------- 3,631 -------- TOTAL INFORMATION TECHNOLOGY................. 16,292 -------- MATERIALS - 2.92% CHEMICALS - 1.95% Air Products & Chemicals, Inc. .......................... 3,800 260 Monsanto Co. .................... 9,300 776 Praxair, Inc. ................... 5,400 303 Rohm and Haas Co. ............... 1,600 81 -------- 1,420 -------- METALS & MINING - 0.97% Alcoa, Inc. ..................... 2,200 74 Freeport-McMoRan Copper & Gold, Inc. .......................... 1,400 91 Nucor Corp.(+)................... 1,400 152 Southern Copper Corp.(+)+........ 2,100 208 United States Steel Corp. ....... 2,600 178 -------- 703 -------- TOTAL MATERIALS.............. 2,123 -------- TELECOMMUNICATION SERVICES - 0.27% DIVERSIFIED TELECOMMUNICATION - 0.27% Sprint Nextel Corp. ............. 3,000 75 Verizon Communications, Inc. .... 3,700 122 -------- TOTAL TELECOMMUNICATION SERVICES................... 197 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) UTILITIES - 1.11% ELECTRIC UTILITIES - 1.11% CMS Energy Corp.(+).............. 4,100 $ 55 Edison International(+).......... 2,600 105 PG&E Corp. ...................... 12,500 498 Sierra Pacific Resources Corp.(+)....................... 2,500 34 TXU Corp. ....................... 2,300 114 -------- TOTAL UTILITIES.............. 806 -------- TOTAL COMMON STOCKS.......... 68,767 -------- U.S. TREASURY OBLIGATIONS - 0.01% U.S. TREASURY NOTES - 0.01% 3.375%, Due 2/28/2007............ 10 10 -------- TOTAL U.S. TREASURY OBLIGATIONS................ 10 -------- SHORT TERM INVESTMENTS - 6.67% American Beacon Enhanced Cash Trust++#....................... 556,033 556 American Beacon Money Market Select Fund++#................. 4,082,017 4,082 PAR AMOUNT ---------- U.S. Treasury Bill, 4.455%, Due 6/8/2006P.......... $ 215 214 -------- TOTAL SHORT TERM INVESTMENTS................ 4,852 -------- TOTAL INVESTMENTS - 101.17% (COST $67,250)......... 73,629 -------- LIABILITIES, NET OF OTHER ASSETS - (1.17%)............... (853) -------- TOTAL NET ASSETS - 100.00%....... $ 72,776 ========
See accompanying notes -------------------------------------------------------------------------------- 40 AMERICAN BEACON LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- --------------- (+)-Non-income producing security. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. #- All or a portion of this security is purchased with cash collateral for securities loaned. P- At April 30, 2006, security pledged as collateral for open futures contracts. FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P 500 Index........................................ 59 Jun 2006 $3,882 $39
See accompanying notes -------------------------------------------------------------------------------- 41 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 96.83% CONSUMER DISCRETIONARY - 24.94% AUTO COMPONENTS - 4.67% Johnson Controls, Inc. .......... 6,125 $ 500 Lear Corp.+...................... 25,625 604 Magna International, Inc. ....... 12,325 967 ------- 2,071 ------- AUTOMOBILES - 0.61% Winnebago Industries, Inc.+...... 9,200 271 ------- HOTELS, RESTAURANTS & LEISURE - 2.82% GTECH Holdings Corp. ............ 20,200 690 Royal Caribbean Cruises Ltd.+.... 12,300 514 Tim Hortons, Inc.+............... 1,600 43 ------- 1,247 ------- HOUSEHOLD DURABLES - 5.29% The Stanley Works................ 13,500 705 Whirlpool Corp. ................. 18,275 1,640 ------- 2,345 ------- LEISURE EQUIPMENT & PRODUCTS - 2.94% Brunswick Corp. ................. 10,400 408 Hasbro, Inc. .................... 31,950 630 Mattel, Inc. .................... 16,400 265 ------- 1,303 ------- MULTILINE RETAIL - 1.35% Family Dollar Stores, Inc. ...... 24,000 600 ------- SPECIALTY RETAIL - 7.26% AutoZone Inc.(+)................. 5,625 527 RadioShack Corp. ................ 28,925 492 Rent-A-Center, Inc.(+)........... 24,875 687 The Sherwin-Williams Co. ........ 15,000 764 The TJX Companies, Inc. ......... 31,100 750 ------- 3,220 ------- TOTAL CONSUMER DISCRETIONARY.............. 11,057 ------- CONSUMER STAPLES - 6.17% FOOD PRODUCTS - 1.71% Del Monte Foods Co.+............. 65,000 758 ------- PERSONAL PRODUCTS - 1.82% NBTY, Inc.(+)+................... 35,725 809 -------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) TOBACCO - 2.64% Loews Corp. ..................... 15,700 $ 804 UST, Inc.+....................... 8,300 365 ------- 1,169 ------- TOTAL CONSUMER STAPLES....... 2,736 ------- ENERGY - 2.20% OIL & GAS - 2.20% El Paso Corp.(+)+................ 15,500 200 Marathon Oil Corp. .............. 5,800 461 Murphy Oil Corp. ................ 6,300 316 ------- 977 ------- TOTAL ENERGY................. 977 ------- FINANCIALS - 26.34% BANKS - 5.50% Comerica, Inc. .................. 7,975 453 New York Community Bancorp, Inc.+.......................... 34,800 599 Peoples Bank+.................... 20,250 663 The South Financial Group, Inc.+.......................... 14,900 404 TCF Financial Corp. ............. 11,900 320 ------- 2,439 ------- FINANCIAL - 0.93% The First Marblehead Corp(+)+.... 8,600 414 ------- INSURANCE - 16.91% AON Corp. ....................... 17,275 724 Axis Capital Holdings Ltd. ...... 17,800 531 The First American Corp. ........ 16,625 708 IPC Holdings Ltd.+............... 16,475 439 Old Republic International Corp. ......................... 23,187 516 Protective Life Corp. ........... 11,175 563 Radian Group, Inc. .............. 12,400 778 RenaissanceRe Holdings Ltd. ..... 12,250 515 Torchmark, Inc. ................. 18,650 1,121 Willis Group Holdings Ltd.+...... 17,900 629 XL Capital Ltd. ................. 14,775 974 ------- 7,498 ------- REAL ESTATE - 3.00% American Financial Realty Trust.......................... 34,800 396 American Home Mortgage Investment Corp.+......................... 21,250 738 First Industrial Realty Trust, Inc. B28(+)+................... 5,000 196 ------- 1,330 ------- TOTAL FINANCIALS............. 11,681 -------
See accompanying notes -------------------------------------------------------------------------------- 42 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) HEALTH CARE - 9.28% HEALTH CARE EQUIPMENT & SUPPLIES - 2.51% Hillenbrand Industries, Inc. .... 12,775 $ 656 IMS Health, Inc.(+).............. 16,775 456 ------- 1,112 ------- HEALTH CARE PROVIDERS & SERVICES - 5.99% AmerisourceBergen Corp. ......... 22,450 969 Coventry Health Care, Inc.(+).... 6,600 328 HealthSouth Corp.(+)+............ 93,100 426 Triad Hospitals, Inc.(+)......... 12,900 532 Universal Health Services, Inc. .......................... 7,900 401 ------- 2,656 ------- PHARMACEUTICALS - 0.78% Valeant Pharmaceuticals International+................. 19,400 347 ------- TOTAL HEALTH CARE............ 4,115 ------- INDUSTRIALS - 15.08% AEROSPACE & DEFENSE - 1.42% Goodrich Corp. .................. 14,100 627 ------- AIR FREIGHT & COURIERS - 1.54% Ryder Systems, Inc. ............. 13,100 683 ------- COMMERCIAL SERVICES & SUPPLIES - 5.00% H&R Block, Inc.(+)............... 19,000 434 MoneyGram International, Inc. ... 16,600 563 United Stationers, Inc.(+)....... 12,700 681 Valassis Communications, Inc.(+)........................ 18,475 541 ------- 2,219 ------- ELECTRICAL EQUIPMENT - 1.57% American Power Conversion Corp. ......................... 31,400 698 ------- INDUSTRIAL CONGLOMERATES - 1.43% Reynolds American, Inc.+......... 5,800 636 ------- MACHINERY - 3.21% ITT Industries, Inc. ............ 8,600 484 Kennametal, Inc. ................ 15,175 938 ------- 1,422 ------- TRADING COMPANIES & DISTRIBUTORS - 0.91% Genuine Parts Co. ............... 9,200 402 ------- TOTAL INDUSTRIALS............ 6,687 ------- INFORMATION TECHNOLOGY - 4.22% COMMUNICATIONS EQUIPMENT - 0.81% Lucent Technologies, Inc.(+)+.... 128,175 358 -------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.44% Tech Data Corp.(+)............... 17,435 $ 640 ------- IT CONSULTING & SERVICES - 1.07% Computer Sciences Corp.(+)....... 8,075 473 ------- SOFTWARE - 0.90% Computer Associates International, Inc. ......... 15,750 399 ------- TOTAL INFORMATION TECHNOLOGY................. 1,870 ------- MATERIALS - 1.15% CHEMICALS - 1.15% FMC Corp. ....................... 8,050 512 ------- TOTAL MATERIALS.............. 512 ------- UTILITIES - 7.45% ELECTRIC UTILITIES - 4.28% CenterPoint Energy, Inc.+........ 20,500 247 Pinnacle West Capital Corp. ..... 13,900 557 Wisconsin Energy Corp. .......... 16,875 659 Xcel Energy, Inc.+............... 23,200 437 ------- 1,900 ------- GAS UTILITIES - 3.17% MDU Resources Group, Inc. ....... 13,500 496 Sempra Energy.................... 19,750 909 ------- 1,405 ------- TOTAL UTILITIES.............. 3,305 ------- TOTAL COMMON STOCKS.......... 42,940 ------- SHORT TERM INVESTMENTS - 22.93% American Beacon Enhanced Cash Trust++#....................... 5,792,591 5,793 American Beacon Money Market Select Fund++#................. 4,167,217 4,167
PAR AMOUNT ---------- U.S. Treasury Bill, 4.455%, Due 6/8/2006P..................... $ 210 209 -------- TOTAL SHORT TERM INVESTMENTS............... 10,169 -------- TOTAL INVESTMENTS 119.76% (COST $50,885)........ 53,109 -------- LIABILITIES, NET OF OTHER ASSETS - (19.76%)............. (8,764) -------- TOTAL NET ASSETS - 100.00%...... $ 44,345 ========
See accompanying notes -------------------------------------------------------------------------------- 43 AMERICAN BEACON MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- --------------- (+)-Non-income producing security. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. #- All or a portion of this security is purchased with cash collateral for securities loaned. P- At April 30, 2006, security pledged as collateral for open futures contracts. FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P Mid Cap 400 Index................................. 16 Jun 2006 $1,291 $25
See accompanying notes -------------------------------------------------------------------------------- 44 AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 99.55% CONSUMER DISCRETIONARY - 13.27% DISTRIBUTORS - 0.51% WESCO International, Inc.(+)........ 140 $ 10 ------ HOTELS, RESTAURANTS & LEISURE - 1.30% Jack in the Box, Inc.(+)............ 390 17 Landry's Restaurants, Inc. ......... 290 10 ------ 27 ------ HOUSEHOLD DURABLES - 0.74% Stanley Furniture Company, Inc.(+).. 210 6 Technical Olympic USA, Inc. ........ 450 9 ------ 15 ------ LEISURE EQUIPMENT & PRODUCTS - 0.29% RC2 Corp.(+)........................ 150 6 ------ MEDIA - 0.39% Scholastic Corp.(+)................. 300 8 ------ SPECIALTY RETAIL - 6.90% Charming Shoppes, Inc.(+)........... 1,470 20 Genesco, Inc.(+).................... 460 19 The Men's Wearhouse, Inc. .......... 510 18 Pacific Sunwear of California(+).... 400 9 Regis Corp. ........................ 340 12 Too, Inc.(+)........................ 330 13 United Auto Group, Inc. ............ 470 20 United Rentals, Inc.(+)............. 560 20 Zale Corp.(+)....................... 390 10 ------ 141 ------ TEXTILES & APPAREL - 3.14% Brown Shoe Company, Inc. ........... 510 19 Hartmarx Corp.(+)................... 1,480 13 Movado Group, Inc.(+)............... 660 13 Russell Corp.(+).................... 630 11 Unifirst Corp.(+)................... 240 8 ------ 64 ------ TOTAL CONSUMER DISCRETIONARY.... 271 ------ CONSUMER STAPLES - 2.29% FOOD & DRUG RETAILING - 0.57% Casey's General Stores, Inc.(+)..... 540 12 ------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) FOOD PRODUCTS - 1.39% Central Garden and Pet Co.(+)....... 370 $ 18 Sanderson Farms, Inc.(+)............ 380 10 ------ 28 ------ PERSONAL PRODUCTS - 0.33% Chattem, Inc.(+).................... 190 7 ------ TOTAL CONSUMER STAPLES.......... 47 ------ ENERGY - 5.12% ENERGY EQUIPMENT & SERVICES - 1.34% Oil States International, Inc.(+)... 320 13 Veritas DGC, Inc.(+)................ 300 14 ------ 27 ------ OIL & GAS - 3.78% Comstock Resources, Inc.(+)......... 410 13 Energy Partners Ltd.(+)............. 420 11 Giant Industries, Inc.(+)........... 240 17 The Houston Exploration Co.(+)...... 140 8 Stone Energy Corp.(+)............... 280 13 Swift Energy Co.(+)................. 360 15 ------ 77 ------ TOTAL ENERGY.................... 104 ------ FINANCIALS - 31.54% BANKS - 13.14% Accredited Home Lenders Holding Co.(+)............................ 400 23 Amcore Financial, Inc.(+)........... 430 13 Central Pacific Financial Corp.(+).......................... 550 21 Community Bank System, Inc. ........ 420 9 Corus Bankshares, Inc. ............. 400 27 Cybertel Capital Corp.(+)........... 450 19 First Bancorp(+).................... 570 6 First Community Bancorp(+).......... 260 15 First Niagara Financial Group, Inc.(+)........................... 920 13 First Republic Bank................. 520 23 FirstFed Financial Corp.(+)......... 340 21 Hanmi Financial Corp.(+)............ 710 14 Irwin Financial Corp. .............. 410 7 Provident Bankshares Corp. ......... 420 14 Republic Bancorp Inc(+)............. 600 12 Sterling Bancshares, Inc. .......... 450 7
See accompanying notes -------------------------------------------------------------------------------- 45 AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Sterling Financial Corp. ........... 210 $ 7 TierOne Corp.(+).................... 490 17 ------ 268 ------ DIVERSIFIED FINANCIALS - 3.56% Advanta Corp.(+).................... 330 12 Cash America International, Inc. ... 240 8 CompuCredit Corp.(+)................ 510 20 Investment Technology Group, Inc.(+)........................... 330 18 World Acceptance Corp.(+)........... 530 15 ------ 73 ------ INSURANCE - 5.51% Delphi Financial Group, Inc. ....... 420 22 Harleysville Group, Inc. ........... 610 18 LandAmerica Financial Group, Inc. ............................. 190 13 The Navigators Group, Inc.(+)....... 210 10 Ohio Casualty Corp. ................ 470 14 Stewart Information Services Corp. ............................ 360 16 Triad Guaranty, Inc.(+)............. 200 11 Universal American Financial Corp.(+).......................... 580 8 ------ 112 ------ REAL ESTATE - 9.33% Acadia Realty Trust(+).............. 500 11 Arbor Realty Trust, Inc.(+)......... 390 10 Capital Trust, Inc. ................ 300 10 CentraCore Properties Trust(+)...... 180 4 Entertainment Properties Trust(+)... 150 6 Equity Inns, Inc. .................. 730 12 Equity Lifestyle Properties, Inc.(+)........................... 320 14 FelCor Lodging Trust, Inc.(+)....... 1,140 25 Gramercy Capital Corp.(+)........... 370 9 Innkeepers USA Trust................ 810 13 Jones Lang LaSalle, Inc. ........... 130 11 Mid-America Apartment Communities, Inc.(+)........................... 190 10 Nationwide Health Properties, Inc.(+)........................... 380 8 PS Business Parks, Inc.(+).......... 150 8 RAIT Investment Trust(+)............ 650 17 Redwood Trust, Inc. ................ 150 7 Sunstone Hotel Investors, Inc.(+)... 350 10 Tanger Factory Outlet Centers, Inc.(+)........................... 190 6 ------ 191 ------ TOTAL FINANCIALS................ 644 ------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) HEALTH CARE - 5.20% BIOTECHNOLOGY - 0.76% Serologicals Corp.(+)............... 495 $ 15 ------ HEALTH CARE EQUIPMENT & SUPPLIES - 0.63% STERIS Corp.(+)..................... 560 13 ------ HEALTH CARE PROVIDERS & SERVICES - 3.81% Centene Corp.(+).................... 590 15 First Horizon Pharmaceutical Corp.(+).......................... 700 16 Gentiva Health Services, Inc.(+).... 680 11 MAXIMUS, Inc.(+).................... 170 6 Owens & Minor, Inc.(+).............. 460 15 PSS World Medical, Inc.(+).......... 830 15 ------ 78 ------ TOTAL HEALTH CARE............... 106 ------ INDUSTRIALS - 17.45% AEROSPACE & DEFENSE - 0.82% DRS Technologies, Inc.(+)........... 150 8 Esterline Technologies Corp.(+)..... 190 9 ------ 17 ------ BUILDING PRODUCTS - 4.30% Griffon Corp.(+).................... 810 22 Lennox International Inc. .......... 510 17 NCI Building Systems, Inc.(+)....... 330 21 Universal Forest Products, Inc. .... 280 21 Watsco, Inc.(+)..................... 110 7 ------ 88 ------ COMMERCIAL SERVICES & SUPPLIES - 2.88% Consolidated Graphics, Inc.(+)...... 460 24 eFunds Corp.(+)..................... 310 8 Ennis, Inc.(+)...................... 760 15 United Stationers, Inc.(+).......... 220 12 ------ 59 ------ ELECTRICAL EQUIPMENT - 1.96% Belden CDT, Inc.(+)................. 740 23 Paxar Corp.(+)...................... 770 17 ------ 40 ------
See accompanying notes -------------------------------------------------------------------------------- 46 AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) MACHINERY - 4.73% Albany International Corp.(+)....... 260 $ 10 Applied Industrial Technologies, Inc.(+)........................... 380 16 Barnes Group, Inc.(+)............... 410 18 Gardner Denver, Inc.(+)............. 350 26 Kennametal, Inc. ................... 420 26 ------ 96 ------ RENTAL AUTO/EQUIPMENT - 1.12% Dollar Thrifty Automotive Group, Inc.(+)........................... 470 23 ------ ROAD & RAIL - 1.64% Old Dominion Freight Line(+)........ 560 18 SCS Transportation, Inc.(+)......... 590 15 ------ 33 ------ TOTAL INDUSTRIALS............... 356 ------ INFORMATION TECHNOLOGY - 11.44% COMMUNICATIONS EQUIPMENT - 1.83% Black Box Corp.(+).................. 310 14 Commscope, Inc.(+).................. 690 23 ------ 37 ------ COMPUTERS & PERIPHERALS - 0.98% Hutchinson Technology, Inc.(+)...... 330 8 Komag, Inc.(+)...................... 290 12 ------ 20 ------ ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.97% Anixter International, Inc.(+)...... 380 19 Benchmark Electronics, Inc.(+)...... 585 16 Checkpoint Systems, Inc.(+)......... 660 17 CTS Corp.(+)........................ 880 12 MTS Systems Corp.(+)................ 320 14 Park Electrochemical Corp.(+)....... 470 15 Technitrol, Inc.(+)................. 300 8 ------ 101 ------ IT CONSULTING & SERVICES - 2.09% Agilysys, Inc.(+)................... 730 11 Bell Microproducts, Inc.(+)......... 640 4 ProQuest Co.(+)..................... 410 7 SYKES Enterprises, Inc.(+).......... 1,320 21 ------ 43 ------ SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.75% Photronics, Inc.(+)................. 850 15 ------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) SOFTWARE - 0.82% Parametric Technology Corp.(+)...... 570 $ 9 THQ, Inc.(+)........................ 320 8 ------ 17 ------ TOTAL INFORMATION TECHNOLOGY.... 233 ------ MATERIALS - 7.52% BASIC MATERIALS - 0.82% AMCOL International Corp.(+)........ 580 17 ------ CHEMICALS - 0.51% H.B. Fuller Co. .................... 200 10 ------ CONSTRUCTION MATERIALS - 1.17% Eagle Materials, Inc.(+)............ 360 24 ------ CONTAINERS & PACKAGING - 1.96% Greif Inc.(+)....................... 120 8 Jarden Corp.(+)..................... 420 14 Silgan Holdings, Inc. .............. 460 18 ------ 40 ------ METALS & MINING - 3.06% Carpenter Technology Corp.(+)....... 140 16 Commercial Metals Co.(+)............ 440 24 Quanex Corp. ....................... 510 22 ------ 62 ------ TOTAL MATERIALS................. 153 ------ TELECOMMUNICATION SERVICES - 1.70% General Communication, Inc.(+)...... 1,270 15 Golden Telecom, Inc.(+)............. 200 6 Premiere Global Services, Inc.(+)... 1,720 14 ------ TOTAL TELECOMMUNICATION SERVICES...................... 35 ------ UTILITIES - 4.02% ELECTRIC UTILITIES - 2.21% Black Hills Corp. .................. 340 12 Cleco Corp. ........................ 460 10 CMS Energy Corp.(+)................. 560 8 El Paso Electric Co.(+)............. 760 15 ------ 45 ------
See accompanying notes -------------------------------------------------------------------------------- 47 AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) GAS UTILITIES - 1.81% Atmos Energy Corp. ................. 420 $ 11 South Jersey Industries, Inc. ...... 550 15 Southwest Gas Corp.(+).............. 400 11 ------ 37 ------ TOTAL UTILITIES................. 82 ------ TOTAL COMMON STOCKS............. 2,031 ------ SHORT TERM INVESTMENTS - 1.00% American Beacon Money Market Select Fund#............................. 4,746 5 iShares Russell 2000 Value Index Fund.............................. 210 15 ------ TOTAL SHORT TERM INVESTMENTS.... 20 ------ TOTAL INVESTMENTS - 100.55% (COST $2,013)........................... 2,051 ------ LIABILITIES, NET OF OTHER ASSETS - (0.55%).................. (11) ------ TOTAL NET ASSETS - 100.00%.......... $2,040 ======
--------------- (+)- Non-income producing security. #- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. See accompanying notes -------------------------------------------------------------------------------- 48 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) ARGENTINA - 0.04% COMMON STOCKS Petrobras Energia Participaciones SA, ADR(+)+..................... 4,900 $ 58 -------- TOTAL ARGENTINA........... 58 -------- AUSTRIA - 0.39% COMMON STOCKS Raiffeisen International Bank- Holding AG+................. 7,371 642 -------- TOTAL AUSTRIA............. 642 -------- BRAZIL - 12.29% COMMON STOCKS - 9.24% Aracruz Celulose SA, ADR(+)+.. 1,500 83 Banco Itau Holding Financeira S.A., ADR................... 46,660 1,484 Brasil Telecom Participacoes S.A., ADR+.................. 20,300 829 Braskem SA, ADR(+)+........... 14,400 204 Centrais Eletricas Brasileiras S.A. ....................... 5,276,500 151 Companhia Brasileira de Distribuicao Group, ADR+.... 11,200 441 Companhia de Saneamento Basico do Estado de Sao Paulo...... 4,066,400 398 Companhia de Saneamento Basico do Estado de Sao Paulo, ADR+........................ 12,000 292 Companhia Paranaense de Energia, ADR+............... 16,300 179 Companhia Vale do Rio Doce, ADR......................... 31,464 1,400 Companhia Vale Do Rio Doce, ADR......................... 2,700 139 CPFL Energia S.A. ............ 21,700 308 Empresa Brasileira de Aeronautica S.A. (Embraer), ADR......................... 15,910 618 Gerdau S.A., ADR+............. 13,125 227 Grendene S.A. ................ 37,000 314 Natura Cosmeticos S.A.(+)..... 11,675 149 Petroleo Brasileiro S.A., A Shares, ADR................. 20,816 1,850 Petroleo Brasileiro S.A., ADR......................... 34,312 3,391 Tele Norte Leste Participacoes S.A., ADR................... 23,500 427 TIM Participacoes S.A., ADR(+)...................... 9,100 350 Tractebel Energia S.A. ....... 19,500 161 Unibanco - Uniao de Bancos Brasileiros S.A., ADR....... 14,875 1,180
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Unibanco - Uniao de Bancos Brasileiros S.A. ........... 7,689 $ 121 Votorantim Celulose e Papel S.A, ADR+................... 23,700 381 -------- TOTAL COMMON STOCKS.................. 15,077 -------- PREFERRED STOCKS - 3.05% All America Latina Logistica S.A. ....................... 5,580 353 Banco Itau Holding Financeira S.A. ....................... 7,824 247 Braskem SA(+)................. 43,900 309 Centrais Eletricas Brasileiras S.A. ....................... 14,382,200 378 Companhia de Tecidos Norte de Minas(+).................... 4,054,600 398 Companhia Energetica de Minas Gerais...................... 8,760,113 422 Companhia Paranaense de Energia..................... 38,515,300 423 Companhia Vale do Rio Doce.... 1,876 83 Duratex S.A. ................. 1,858 41 Gerdau S.A. .................. 21,150 365 Itausa -- Investimentos Itau S.A. ....................... 82,269 376 Klabin S.A. .................. 125,900 323 Lojas Americanas SA(+)........ 5,590,700 233 Petrol Brasileiro S.A. ....... 3,460 77 Telemar Norte Leste S.A. ..... 7,800 217 Telemig Celular Participacoes S.A. ....................... 161,711,789 363 Telemig Celular Participacoes SA, Right(+)................ 1,727,082 -- Telesp -- Telecommunicacoes de Sao Paulo S.A. ............. 15,092 359 -------- TOTAL PREFERRED STOCKS.... 4,967 -------- TOTAL BRAZIL.............. 20,044 -------- CHILE - 0.38% COMMON STOCKS Banco Santander-Chile S.A., ADR......................... 2,000 87 Grupo Enersis SA, ADR......... 36,320 444 United Breweries Co, Inc., ADR(+)...................... 3,800 94 -------- TOTAL CHILE............... 625 -------- CHINA - 3.25% COMMON STOCKS Bank of Communications Co. Ltd.(+)+++.................. 388,000 236 BYD Company Ltd.+............. 81,900 165
See accompanying notes -------------------------------------------------------------------------------- 49 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) China Construction Bank(+)+++.................. 731,000 $ 316 China Life Insurance Company Ltd.(+)+.................... 234,000 317 China Petroleum & Chemical Corp.+...................... 824,100 523 China Ping'an Insurance Company Ltd. ............... 96,000 264 China Telecom Corporation Ltd.+....................... 2,387,100 839 Huandian Power International Corp. ...................... 1,957,800 537 Huaneng Power International, Inc.+....................... 511,900 370 PetroChina Company Ltd. ...... 512,000 565 PICC Property and Casualty Company Ltd. ............... 654,000 236 Sinotrans Ltd.+............... 737,000 254 Weiqiao Textile Company Ltd.(+)..................... 319,600 422 Yanzhou Coal Mining Company Ltd.(+)+.................... 309,800 262 -------- TOTAL CHINA............... 5,306 -------- COLOMBIA - 0.22% COMMON STOCKS BanColombia SA, ADR(+)........ 10,200 353 -------- TOTAL COLOMBIA............ 353 -------- CZECH REPUBLIC - 0.15% COMMON STOCKS Central European Media Enterprises Ltd.(+)+........ 3,800 245 -------- TOTAL CZECH REPUBLIC...... 245 -------- HONG KONG - 3.51% COMMON STOCKS Asia Aluminum Holdings Ltd.(+)..................... 1,062,000 193 Brilliance China Automotive Holdings Ltd.+.............. 908,000 160 China Mobile (Hong Kong) Ltd. ....................... 72,000 419 China Resource Power Holdings Company Ltd. ............... 266,000 201 China Unicom Ltd. ............ 164,000 140 CNOOC Ltd.+................... 1,473,400 1,188 Denway Motors Ltd.+........... 1,720,000 699 Global Bio-chem Technology Group Company Ltd.+......... 986,200 515 Gome Electrical Appliances Holdings Ltd.+.............. 622,000 537 The Grande Holdings Ltd. ..... 91,000 69
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Hopewell Highway Infrastructure Ltd. ........ 169,000 $ 127 Kingboard Chemical Holdings Ltd. ....................... 54,000 142 Moulin Global Eyecare Holdings Ltd.(+)..................... 96,000 -- Panva Gas Holdings Ltd.(+)+... 233,600 102 Shanghai Industrial Holdings Ltd. ....................... 227,500 490 Shenzhen Investment Ltd.(+)... 662,000 196 Shougang Concord Century Holdings Ltd. .............. 537,000 43 Texwinca Holdings Ltd. ....... 196,000 144 TPV Technology Ltd. .......... 281,000 304 Victory City International Holdings Ltd. .............. 169,000 60 -------- TOTAL HONG KONG........... 5,729 -------- HUNGARY - 0.96% COMMON STOCKS Gedeon Richter Rt............. 4,274 921 Magyar Tavkozlesi Rt.......... 139,300 637 -------- TOTAL HUNGARY............. 1,558 -------- INDIA - 7.57% COMMON STOCKS ABB Ltd. ..................... 5,500 383 Andhra Bank(+)................ 52,010 91 Aventis Pharma Ltd. .......... 4,000 170 Bank of Baroda(+)............. 3,480 17 Bharat Electronics Ltd. ...... 22,000 1,152 Bharat Petroleum Corporation Ltd. ....................... 61,633 609 CIPLA(+)...................... 44,375 255 Container Corp.(+)............ 5,900 217 GAIL (India) Ltd.(+).......... 32,000 206 GAIL (India) Ltd., GDR++...... 6,700 271 Gammon India Ltd.(+).......... 5,000 60 Glenmark Pharmaceuticals Ltd. ....................... 20,300 145 Gujarat Ambuja Cements Ltd. ....................... 58,750 152 HCL Technologies Ltd.(+)...... 17,000 220 HDFC Bank Ltd.(+)............. 14,000 256 Hero Honda Motors Ltd.(+)..... 13,041 248 Hindalco Industries Ltd., GDR++....................... 177,000 828 Hindalco Industries Ltd.(+)... 40,000 192 Hindalco Industries Ltd., GDR(+)++.................... 44,250 127 Hindustan Lever Ltd. ......... 56,100 364 Hindustan Petroleum Corporation Ltd.(+)......... 79,500 571 Hotel Leelaventure Limited(+).................. 18,000 165 Housing Development Finance Corporation Ltd. ........... 8,700 250
See accompanying notes -------------------------------------------------------------------------------- 50 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) ICICI Bank Ltd., ADR.......... 9,800 $ 269 Infosys Technologies Ltd.(+)..................... 4,700 329 ITC Ltd. ..................... 39,000 175 ITC Ltd., GDR................. 22,500 100 Mahanagar Telephone Nigam Ltd. ....................... 148,880 705 Mahindra & Mahindra Ltd. ..... 22,500 316 Oil and Natural Gas Corporation Ltd. ........... 15,124 437 Punj Lloyd Ltd.(+)............ 4,182 95 Punjab National Bank Ltd. .... 15,000 140 Reliance Energy Ventures Ltd.(+)..................... 49,000 47 Reliance Industries Ltd. ..... 51,400 1,156 Siemens India Ltd. ........... 2,200 285 State Bank of India, GDR++.... 17,000 866 Union Bank of India(+)........ 28,781 75 UTI Bank Ltd.(+).............. 10,000 77 UTI Bank Ltd., GDR............ 14,000 104 Wipro Ltd.(+)................. 18,500 223 -------- TOTAL INDIA............... 12,348 -------- INDONESIA - 1.77% COMMON STOCKS Bank Central Asia............. 174,500 87 Indosat Tbk PT(+)............. 286,500 176 PT Astra International Tbk.... 113,400 154 PT Bank Mandiri............... 2,007,000 439 PT Bank Rakyat Indonesia...... 342,000 180 PT Gudang Garam Tbk........... 315,800 379 PT Indofood Sukses Makmur Tbk......................... 2,799,200 360 PT Perusahaan Gas Negara...... 154,500 218 PT Telekomunikasi Indonesia Tbk......................... 1,037,300 892 -------- TOTAL INDONESIA........... 2,885 -------- ISRAEL - 0.83% COMMON STOCKS Bank Hapoalim BM.............. 35,680 180 Bank Leumi le-Israel B.M...... 50,600 198 Check Point Software Technologies Ltd.(+)........ 29,300 567 Supersol Ltd.(+).............. 55,700 167 Taro Pharmaceutical Industries Ltd.(+)+.................... 18,100 235 -------- TOTAL ISRAEL.............. 1,347 -------- MALAYSIA - 2.68% COMMON STOCKS AMMB Holdings Berhad.......... 313,700 247 Bandar Raya Developments Berhad...................... 77,000 32
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Commerce Asset-Holding Berhad(+)................... 247,300 $ 430 Gamuda Berhad................. 328,500 362 Genting Berhad................ 81,500 573 Kuala Lumpur Kepong Berhad.... 84,700 231 Malayan Banking Berhad........ 191,900 588 Maxis Communications Berhad... 85,100 205 MK Land Holdings Berhad....... 103,300 23 Proton Holdings Berhad(+)..... 85,100 140 Resorts World Berhad.......... 125,300 463 Sime Darby Berhad............. 507,900 848 Telekom Malaysia Bhd(+)....... 39,000 105 Tenaga Nasional Berhad........ 50,500 119 -------- TOTAL MALAYSIA............ 4,366 -------- MEXICO - 7.85% COMMON STOCKS America Movil S.A. de C.V., ADR......................... 68,465 2,527 Cemex S.A. de C.V. ........... 42,336 286 Coca-Cola Femsa, S.A. de C.V., ADR+........................ 26,835 864 Controladora Commercial Mexicana S.A. de C.V. ...... 391,200 665 Corp GEO SA de CV(+)+......... 62,100 233 Desc S.A. de C.V.(+).......... 101,000 112 Embotelladoras Arca S.A. ..... 77,400 202 Fomento Economico Mexicano S.A. de C.V., ADR........... 5,680 528 Grupo Aeroportuario del Sureste S.A. de C.V., ADR+........................ 12,480 484 Grupo Continential, S.A. ..... 224,450 429 Grupo Financiero Banorte, S.A. de C.V.(+).................. 100,900 263 Grupo Televisa, S.A., ADR..... 96,800 2,052 Kimberly-Clark de Mexico, S.A. de C.V.+.................... 118,500 418 Organizacion Soriana SA de CV(+)+...................... 18,600 84 Telefonos de Mexico, S.A. de C.V., ADR................... 66,280 1,457 Wal-Mart de Mexico, S.A. de C.V., ADR+.................. 8,355 238 Wal-Mart de Mexico, S.A. de C.V. ....................... 691,085 1,970 -------- TOTAL MEXICO.............. 12,812 --------
See accompanying notes -------------------------------------------------------------------------------- 51 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) MOROCCO - 0.57% COMMON STOCKS Banque Maroc du Commerce Exterieur................... 2,790 $ 382 Maroc Telecom(+).............. 13,550 225 ONA (Omnium Nord Africain).... 1,940 321 -------- TOTAL MOROCCO............. 928 -------- PERU - 0.11% COMMON STOCKS Credicorp Ltd. ............... 6,900 187 -------- TOTAL PERU................ 187 -------- PHILIPPINES - 0.56% COMMON STOCKS ABS-CBN Broadcasting Corp.(+).................... 261,800 69 Banco De Oro Universal Bank, GDR(+)++.................... 14,600 203 Banco De Oro Universal Bank(+)..................... 104,900 72 Bank of the Philippine Islands..................... 244,936 289 Manila Electric Co.(+)........ 279,400 100 SM Prime Holdings............. 1,208,000 182 -------- TOTAL PHILIPPINES......... 915 -------- POLAND - 2.35% COMMON STOCKS Agora SA...................... 11,786 172 Bank Millennium SA............ 119,093 268 Bank Pekao SA................. 8,964 601 Central European Distribution Corp.(+)+................... 9,100 374 Polski Koncern Naftowy Orlen S.A. ....................... 7,343 153 Powszechna Kasa Oszczednosci Bank Polski(+).............. 96,310 1,211 Telekomunikacja Polska SA(+).. 57,100 418 TVN SA(+)..................... 20,463 640 -------- TOTAL POLAND.............. 3,837 -------- RUSSIA - 7.05% COMMON STOCKS Comstar United Telesystems, GDR(+)++.................... 25,000 187 Efes Breweries International NV(+)....................... 7,582 288 JSC Surgutneftegaz, ADR(+)+... 5,800 505 LUKOIL Oil Co., ADR........... 59,288 5,366 Mining and Metallurgical Company Norilsk Nickel, ADR(+)+..................... 5,300 700
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) NovaTek OAO, GDR(+)+.......... 8,900 $ 378 Novolipetsk Steel, GDR+++..... 11,300 251 RAO Gazprom, ADR+............. 49,250 2,236 Sberbank RF, GDR(+)........... 4,100 740 Unified Energy System, GDR(+)...................... 4,500 347 Wimm-Bill-Dann Foods, ADR(+)...................... 13,900 503 -------- TOTAL RUSSIA.............. 11,501 -------- SOUTH AFRICA - 10.33% COMMON STOCKS ABSA Group Ltd. .............. 23,420 462 African Bank Investments Ltd. ....................... 131,440 735 Alexander Forbes Ltd. ........ 160,087 413 Aspen Pharmacare Holdings Ltd. ....................... 95,520 675 Aveng Ltd. ................... 296,810 1,173 Bidvest Group Ltd. ........... 31,604 578 Foschini Ltd.(+).............. 30,300 307 Gold Fields Ltd., ADR(+)+..... 12,970 330 Gold Fields Ltd.(+)........... 19,000 478 Group Five Ltd/South Africa(+)................... 43,811 222 Harmony Gold Mining Company Ltd., ADR(+)+............... 4,787 80 Harmony Gold Mining Company Ltd.(+)..................... 22,329 368 Impala Platinum Holdings Ltd. ....................... 3,819 724 JD Group Ltd. ................ 29,320 453 Mittal Steel South Africa Ltd.(+)..................... 9,500 111 MTN Group Ltd. ............... 36,440 364 Murray & Roberts Holdings Ltd. ....................... 21,250 96 Nampak Ltd. .................. 254,900 776 Naspers Ltd. ................. 53,750 1,180 Nedbank Group Ltd. ........... 60,452 1,262 Network Healthcare Holdings Ltd. ....................... 165,600 281 Pretoria Portland Cement Company Ltd. ............... 8,370 583 Reunert Ltd.(+)............... 26,790 334 Sanlam Ltd. .................. 260,060 672 Sappi Ltd. ................... 60,460 865 Sasol Ltd. ................... 22,730 956 Shoprite Holdings Ltd. ....... 122,800 517 Standard Bank Group Ltd. ..... 22,531 321 Steinhoff International Holdings Ltd. .............. 65,659 260 Tiger Brands Ltd. ............ 26,957 751 Truworths International Ltd.(+)..................... 38,900 188 Woolworths Holdings Ltd. ..... 123,000 345 -------- TOTAL SOUTH AFRICA........ 16,860 --------
See accompanying notes -------------------------------------------------------------------------------- 52 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) SOUTH KOREA - 14.60% COMMON STOCKS - 14.16% Amorepacific Corp. ........... 420 $ 154 Cheil Industries, Inc. ....... 6,200 225 Daelim Industrial Company Ltd. ....................... 4,670 357 Daewoo Heavy Industries and Machinery Ltd. ............. 7,630 143 Doosan Heavy Industries and Construction Ltd. .......... 7,600 275 Hanjin Heavy Industries & Construction Company Ltd. ....................... 7,500 234 Hanmi Pharmaceutical Company Ltd. ....................... 997 130 Hynix Semiconductor, Inc.(+).. 10,310 360 Hyundai Department Store Company Ltd. ............... 750 72 Hyundai Engineering & Construction Company Ltd.(+)..................... 2,980 186 Hyundai Mobis................. 4,110 363 Hyundai Motor Company Ltd. ... 13,680 1,202 Industrial Bank of Korea...... 14,510 292 Kangwon Land Inc. ............ 8,771 180 Kookmin Bank.................. 21,531 1,929 Kookmin Bank, ADR............. 4,450 396 Korea Electric Power Corp. ... 22,895 1,017 Korea Zinc Company Ltd. ...... 3,580 322 KT Corp.(+)................... 1,690 76 KT Corp., ADR................. 43,000 1,001 KT&G Corp. ................... 3,070 172 Kumho Tire Company, Inc., GDR++....................... 9,900 77 Kumho Tire Company, Inc. ..... 31,590 492 LG Chemical................... 17,740 782 LG Construction Co. .......... 6,840 496 LG Electronics, Inc. ......... 11,910 986 LG Philips LCD Company Ltd.(+)..................... 3,350 141 Lotte Shopping Company Ltd., GDR(+)++.................... 17,300 355 Lotte Shopping Company Ltd.(+)..................... 572 239 NHN Corp. .................... 1,190 423 Orion Corp. .................. 1,662 435 POSCO......................... 2,390 666 POSCO, ADR.................... 3,870 273 Samsung Electronics Company Ltd.sec..................... 4,588 3,133 Samsung Fire & Marine Insurance Company Ltd. ..... 2,540 365 Samsung SDI Company Ltd. ..... 4,390 363 Shinhan Financial Group Company Ltd. ............... 29,460 1,468
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) SK Corp. ..................... 13,650 $ 1,004 SK Telecom Company Ltd. ...... 1,668 392 SK Telecom Company Ltd., ADR......................... 39,690 1,060 S-Oil Corp. .................. 3,780 293 Woongjin Coway Company Ltd. .. 9,030 268 Woongjin Coway Company Ltd., GDR(+)...................... 4,400 64 Woori Finance Holdings Company Ltd. ....................... 10,610 240 -------- TOTAL COMMON STOCKS....... 23,101 -------- PREFERRED STOCKS - 0.44% Hyundai Motor Co. ............ 3,340 198 Samsung Electronics Company Ltd. ....................... 957 518 -------- TOTAL PREFERRED STOCKS.... 716 -------- TOTAL SOUTH KOREA......... 23,817 -------- TAIWAN - 11.89% COMMON STOCKS Accton Technology Corp.(+).... 195,396 118 Advanced Semiconductor Engineering, Inc. .......... 177,118 210 AU Optronics Corp(+).......... 298,630 489 Benq Corp. ................... 591,550 494 Catcher Technology Company Ltd.(+)..................... 10,000 112 Cathay Financial Holding Company Ltd.(+)............. 496,000 1,111 Chang Hwa Commercial Bank..... 535,000 346 China Motor Co. .............. 402,860 429 Chinatrust Financial Holding Company Ltd. ............... 726,026 596 Chunghwa Telecom Company Ltd., ADR......................... 24,600 507 Compal Electronics, Inc. ..... 1,001,346 1,102 Delta Electronics, Inc. ...... 302,682 943 Elan Microelectronics Corp.(+).................... 193,873 120 Epistar Corp.(+).............. 52,000 183 Everlight Electronics Co Ltd.(+)..................... 48,000 136 Far Eastern Textile Co Ltd.(+)..................... 189,000 174 Far EasTone Telecommunication Company Ltd. ............... 98,000 122 First Financial Holding Company Ltd. ............... 1,058,250 841 Formosa Chemicals & Fibre Corp. ...................... 265,000 430 Formosa Petrochemical Corp. ...................... 100,000 185 Fubon Financial Holding Company Ltd.(+)............. 261,000 253
See accompanying notes -------------------------------------------------------------------------------- 53 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) High Tech Computer Corp. ..... 16,000 $ 511 Hon Hai Precision Industry Company Ltd. ............... 113,172 768 Largan Precision Company Ltd.(+)..................... 17,158 362 Nien Hsing Textile Company Ltd. ....................... 285,000 183 Nien Made Enterprise Company Ltd.(+)..................... 99,000 136 Optimax Technology Corp. ..... 216,090 265 Phoenix Precision Technology Corp. ...................... 55,000 125 Powerchip Semiconductor Corp. ...................... 633,000 436 Quanta Computer, Inc. ........ 623,712 1,101 Shin Kong Financial Holding Company Ltd. ............... 725,743 773 Silitech Technology Corp.(+).. 25,000 145 SinoPac Holdings.............. 1,561,987 867 Sunplus Technology Company Ltd. ....................... 235,007 289 Taishin Financial Holdings Company Ltd. ............... 201,758 133 Taiwan Cellular Corp. ........ 551,635 555 Taiwan Cement Corp.(+)........ 189,000 148 Taiwan Semiconductor Manufacturing Company Ltd. ....................... 96,000 205 Tripod Technology Corp.(+).... 45,000 169 Tsann Keun Enterprise Company Ltd.(+)..................... 95,720 144 Unimicron Technology Corp.(+).................... 98,000 163 United Microelectronics Corp. ...................... 2,806,366 1,953 United Microelectronics Corp., ADR......................... 21,900 83 Wan Hai Lines Ltd. ........... 127,000 88 Wintek Corp.(+)............... 87,000 118 Wistron Corp.(+).............. 168,000 219 Yaego Corp.(+)................ 1,303,000 564 -------- TOTAL TAIWAN.............. 19,404 -------- THAILAND - 2.13% COMMON STOCKS Advanced Info Services PCL.... 37,200 88 Bangkok Bank PCL.............. 51,600 164 CH. Karnchang Public Company Ltd. ....................... 188,900 54 Charoen Pokphand Foods PCL.... 1,194,900 175 CP Seven Eleven PCL........... 1,207,300 244 Delta Electronics PCL......... 289,200 155 Italian-Thai Development PCL......................... 183,800 35 Kasikornbank PCL.............. 382,000 692 Krung Thai Bank PCL........... 1,607,700 514
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Lalin Property PCL............ 148,400 $ 22 Land & Houses PCL............. 354,400 83 PTT Exploration & Production PCL(+)...................... 46,500 139 PTT Public Company Ltd. ...... 40,500 259 Siam Commercial Bank PCL...... 262,300 447 Siam Makro PCL................ 75,400 161 Thai Oil PCL.................. 95,400 153 Total Access Communications(+)+.......... 25,000 90 -------- TOTAL THAILAND............ 3,475 -------- TURKEY - 2.53% COMMON STOCKS Akcansa Cimento A.S........... 55,842 426 BIM Birlesik Magazalar A.S.... 9,880 385 Dogan Yayin Holding(+)........ 114,969 582 Enka Insaat ve Sanayi A.S.(+)..................... 44,838 695 Haci Omer Sabanci Holding A.S......................... 32,400 153 Hurriyet Gazetecilik ve Matbaacilik A.S.(+)......... 46,563 171 Tupras-Turkiye Petrol Rafinerileri A.S.(+)........ 20,603 436 Turkiye Garanti Bankasi A.S... 174,642 720 Turkiye Is Bankasi (Isbank)... 31,520 265 Turkiye Vakiflar Bankasi T.A.O....................... 31,400 198 Yapi ve Kredi Bankasi A.S.(+)..................... 43,973 103 -------- TOTAL TURKEY.............. 4,134 -------- SHORT TERM INVESTMENTS - 11.43% American Beacon Enhanced Cash Trusth#..................... 7,558,641 7,559 American Beacon Money Market Select Fundh#............... 10,470,365 10,470 PAR AMOUNT ------------ U.S. Treasury Bill, 4.455%, Due 6/8/2006P............... $ 625 622 -------- TOTAL SHORT TERM INVESTMENTS............. 18,651 -------- TOTAL INVESTMENTS - 105.44% (COST $122,080)............. 172,027 -------- LIABILITIES, NET OF OTHER ASSETS - (5.44%)............ (8,879) -------- TOTAL NET ASSETS - 100.00%.... $163,148 ========
See accompanying notes -------------------------------------------------------------------------------- 54 AMERICAN BEACON EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- --------------- GDR - Global Depository Receipt ADR - American Depository Receipt (+)- Non-income producing security. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- 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 $3,717 or 2.28% of net assets. sec.- The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. h- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. #- All or a portion of this security is purchased with cash collateral for securities loaned. P- At April 30, 2006, security pledged as collateral for open futures contracts.
FUTURES CONTRACTS (DOLLARS IN THOUSANDS)
UNREALIZED NUMBER OF EXPIRATION MARKET APPRECIATION/ CONTRACTS DATE VALUE (DEPRECIATION) --------- ---------- ------ -------------- Emini S&P 500 Index........................................ 139 Jun 2006 $9,146 $92
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (DOLLARS IN THOUSANDS) SETTLEMENT MARKET UNREALIZED CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS) ---------- ------ ----- 16,161 South African Rand.......................................... 8/14/2006 $2,672 $(194) ------ ----- TOTAL CONTRACTS TO DELIVER (RECEIVABLE AMOUNT $2,478).................. $2,672 $(194) ====== ===== NET CURRENCY FLUX...................................................... $(194) =====
SECTOR DIVERSIFICATION PERCENT OF NET ASSETS ------- Consumer Discretionary...................................... 12.61% Consumer Staples............................................ 5.12% Energy...................................................... 12.11% Financials.................................................. 19.34% Health Care................................................. 1.96% Industrials................................................. 10.26% Information Technology...................................... 10.13% Materials................................................... 8.66% Telecommunication Services.................................. 9.96% Utilities................................................... 3.86% Short Term Investments...................................... 11.43% Liabilities, Net of Other Assets............................ (5.44)% ------- 100.00% =======
See accompanying notes -------------------------------------------------------------------------------- 55 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 94.67% AUTO COMPONENTS - 5.03% ArvinMeritor, Inc., 8.75%, Due 3/1/2012+.................... $ 1,000 $ 1,026 Asbury Automotive Group, Inc., 9.00%, Due 6/15/2012...................................... 1,575 1,626 8.00%, Due 3/15/2014...................................... 800 806 CSK Auto Corp., 7.00%, Due 1/15/2014........................ 2,045 1,973 The Goodyear Tire & Rubber Co., 11.25%, Due 3/1/2011........ 1,800 2,016 Group 1 Automotive, Inc., 8.25%, Due 8/15/2013.............. 1,250 1,275 Pep Boys, Inc., 7.50%, Due 12/15/2014....................... 1,700 1,564 Stanadyne Corp., 10.00%, Due 8/15/2014...................... 1,000 920 Tenneco, Inc., 8.625%, Due 11/15/2014+...................... 1,000 1,013 TriMas Corp., 9.875%, Due 6/15/2012......................... 2,000 1,875 United Components, Inc., 9.375%, Due 6/15/2013.............. 2,250 2,205 -------- 16,299 -------- BASIC MATERIALS - 0.34% Lyondell Chemical Co., 11.125%, Due 7/15/2012............... 1,000 1,105 -------- COMMERCIAL SERVICES - 1.78% Iron Mountain, Inc., 6.625%, Due 1/1/2016................... 2,000 1,885 NationsRent Companies, 9.50%, Due 5/1/2015.................. 1,310 1,421 United Rentals North America, Inc., 6.50%, Due 2/15/2012.... 1,475 1,445 WH Holdings (Cayman Islands) Ltd., 9.50%, Due 4/1/2011...... 950 1,017 -------- 5,768 -------- COMMUNICATIONS - 12.65% Cadmus Communications Corp., 8.375%, Due 6/15/2014.......... 1,700 1,713 CCH I LLC, 11.00%, Due 10/1/2015............................ 518 461 Charter Communications Holdings, 10.25%, Due 9/15/2010...... 1,675 1,688 Charter Communications Operations, 8.375%, Due 4/30/2014+++.............................................. 1,150 1,156 CSC Holdings, Inc., 7.25%, Due 7/15/2008...................................... 2,150 2,174 10.50%, Due 5/15/2016..................................... 1,500 1,582 Dex Media, Inc., 9.875%, Due 8/15/2013..................................... 1,000 1,101 Zero Coupon, Due 11/15/2013(+)#........................... 1,036 881 Zero Coupon, Due 11/15/2013(+)#........................... 1,250 1,062 Dobson Cellular Systems, Inc., 9.43%, Due 11/1/2011#........ 1,675 1,734 Echostar DBS Corp., 6.625%, Due 10/1/2014+.................................... 2,975 2,867 7.125%, Due 2/1/2016++.................................... 2,500 2,441 FTD, Inc., 7.75%, Due 2/15/2014............................. 923 910 Houghton Mifflin Co., 8.25%, Due 2/1/2011................... 1,350 1,397 Insight Communications, Inc., 12.25%, Due 2/15/2011......... 2,375 2,532 Intelsat Ltd., 5.25%, Due 11/1/2008...................................... 1,250 1,203 7.625%, Due 4/15/2012+.................................... 2,250 1,929 Intelsat Subsidiary Holding Co Ltd., 8.25%, Due 1/15/2013...................................... 400 408 8.625%, Due 1/15/2015..................................... 500 520 The Interpublic Group of Companies, Inc., 6.25%, Due 11/15/2014................................................ 2,375 1,971
See accompanying notes -------------------------------------------------------------------------------- 56 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Kabel Deutschland GMBH, 10.625%, Due 7/1/2014+++............ $ 2,825 $ 3,051 L-3 Communications Corp., 6.375%, Due 10/15/2015............ 1,500 1,455 Level 3 Financing, Inc., 12.25%, Due 3/15/2013++............ 500 535 Mastec, Inc., 7.75%, Due 2/1/2008........................... 1,500 1,498 Network Communications, Inc., 10.75%, Due 12/1/2013++....... 1,000 1,028 RH Donnelley Corp., 8.875%, Due 1/15/2016++................. 1,600 1,646 Rural Cellular Corp., 8.25%, Due 3/15/2012++................ 1,000 1,050 US Unwired, Inc., 9.16%, Due 6/15/2010#..................... 1,000 1,025 -------- 41,018 -------- CONSTRUCTION & ENGINEERING - 2.32% Beazer Homes USA, Inc., 8.375%, Due 4/15/2012............... 2,000 2,083 K. Hovnanian Enterprises, Inc., 8.875%, Due 4/1/2012+....... 2,700 2,822 KB Home, 7.75%, Due 2/1/2010....................................... 1,000 1,030 9.50%, Due 2/15/2011...................................... 1,500 1,571 -------- 7,506 -------- CONSUMER, CYCLICAL - 0.88% Technical Olympic USA, Inc., 8.25%, Due 4/1/2011++.......... 1,250 1,245 TRW Automotive, Inc., 9.375%, Due 2/15/2013................. 1,500 1,613 -------- 2,858 -------- CONSUMER, NON-CYCLICAL - 1.79% Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 7.625%, Due 5/15/2014++................................... 1,350 1,374 Blyth, Inc., 5.50%, Due 11/1/2013........................... 750 634 Prestige Brands, Inc., 9.25%, Due 4/15/2012................. 2,000 2,030 Triad Hospitals, Inc., 7.00%, Due 5/15/2012................. 750 744 United Surgical Partners International, Inc., 10.00%, Due 12/15/2011................................................ 950 1,013 -------- 5,795 -------- ENERGY - 9.50% AmeriGas Partners LP/AmeriGas Eagle Finance Corp., 7.125%, Due 5/20/2016............................................. 1,400 1,386 AmeriGas Partners LP, 7.25%, Due 5/20/2015.................. 1,500 1,492 Browning-Ferris Industries, Inc., 9.25%, Due 5/1/2021....... 1,500 1,590 Chesapeake Energy Corp., 6.875%, Due 1/15/2016..................................... 1,250 1,231 6.50%, Due 8/15/2017...................................... 2,000 1,910 Clayton Williams Energy, Inc., 7.75%, Due 8/1/2013.......... 1,000 943 Energy Partners Ltd., 8.75%, Due 8/1/2010................... 2,000 2,045 Holly Energy Partners, 6.25%, Due 3/1/2015.................. 1,450 1,367 Inergy L.P./Inergy Finance Corp., 6.875%, Due 12/15/2014.... 2,224 2,102 Massey Energy Co., 6.875%, Due 12/15/2013++................. 3,000 2,888 Newfield Exploration Co., 8.375%, Due 8/15/2012............. 1,000 1,072 NRG Energy, Inc., 7.375%, Due 2/1/2016...................... 1,750 1,765 Paramount Resources Ltd., 8.50%, Due 1/31/2013.............. 2,124 2,209 PetroQuest Energy, Inc., 10.375%, Due 5/15/2012............. 3,000 3,187 Pogo Producing Co., 8.25%, Due 4/15/2011.................... 1,250 1,302 Reliant Energy, Inc., 9.50%, Due 7/15/2013.................. 1,000 1,015
See accompanying notes -------------------------------------------------------------------------------- 57 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Swift Energy Co., 7.625%, Due 7/15/2011..................................... $ 900 $ 902 9.375%, Due 5/1/2012...................................... 1,000 1,062 Tenaska, Inc., 6.528%, Due 12/30/2014++..................... 1,381 1,329 -------- 30,797 -------- FINANCE - 4.57% American Real Estate Partners, L.P., 7.125%, Due 2/15/2013................................................. 1,500 1,489 CPI Holding Company, Inc., 10.561%, Due 2/1/2015#........... 1,750 1,811 E*Trade Financial Corp., 8.00%, Due 6/15/2011............... 3,075 3,175 National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,011 Rainbow National Services LLC, 10.375%, Due 9/1/2014++...... 750 842 Residential Capital Corp., 6.898%, Due 4/17/2009++#......... 1,900 1,899 Stripes Acquisition LLC/Susser Finance Corp., 10.625%, Due 12/15/2013++.............................................. 2,000 2,125 Thornburg Mortgage, 8.00%, Due 5/15/2013.................... 2,500 2,481 -------- 14,833 -------- FOOD & DRUG RETAILING - 0.86% Rite Aid Corp., 8.125%, Due 5/1/2010+..................................... 2,000 2,045 9.50%, Due 2/15/2011...................................... 710 749 -------- 2,794 -------- FOOD PRODUCTS - 0.76% Pilgrims Pride Corp., 9.625%, Due 9/15/2011................. 2,348 2,448 -------- FOOD/RESTAURANT - 0.53% Cott Beverages, Inc., 8.00%, Due 12/15/2011................. 1,700 1,730 -------- HEALTH CARE - 6.70% Athena Neurosciences Financial LLC, 7.25%, Due 2/21/2008+... 2,300 2,286 DaVita, Inc., 7.25%, Due 3/15/2015.......................... 2,000 2,000 HCA, Inc., 6.95%, Due 5/1/2012....................................... 1,000 1,003 6.30%, Due 10/1/2012...................................... 2,000 1,942 8.36%, Due 4/15/2024...................................... 1,935 1,998 Interactive Health, 8.00%, Due 4/1/2011++................... 1,550 1,240 Omnicare, Inc., 6.875%, Due 12/15/2015...................... 2,050 2,027 Select Medical Corp., 7.625%, Due 2/1/2015.................. 1,525 1,376 Skilled Healthcare Group, Inc., 11.00%, Due 1/15/2014++..... 1,300 1,365 Sybron Dental Specialties, Inc., 8.125%, Due 6/15/2012...... 1,000 1,058 Triad Hospitals, Inc., 7.00%, Due 11/15/2013................ 1,750 1,708 US Oncology Holdings, Inc., 10.32%, Due 3/15/2015#.......... 1,000 1,015 US Oncology, Inc., 9.00%, Due 8/15/2012...................................... 1,500 1,590 10.75%, Due 8/15/2014..................................... 1,000 1,119 -------- 21,727 -------- HOTELS, RESTAURANTS & LEISURE - 3.84% AMF Bowling Worldwide, Inc., 10.00%, Due 3/1/2010........... 1,950 2,006 Landry's Restaurants, Inc., 7.50%, Due 12/15/2014........... 525 504
See accompanying notes -------------------------------------------------------------------------------- 58 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Majestic Star Casino LLC, 9.50%, Due 10/15/2010..................................... $ 1,000 $ 1,065 9.50%, Due 10/15/2010++................................... 500 533 MGM Mirage, 6.875%, Due 4/1/2016++.......................... 2,750 2,681 San Pasqual Casino Development Group, 8.00%, Due 9/15/2013++............................................... 1,800 1,818 Turning Stone Casino Resort, 9.125%, Due 12/15/2010++....... 3,710 3,858 -------- 12,465 -------- INDUSTRIALS - 23.31% Abitibi-Consolidated, Inc., 8.55%, Due 8/1/2010............. 500 513 ACIH, Inc., Zero Coupon, Due 12/15/2012(+)++#............... 2,325 1,912 Ainsworth Lumber Company Ltd., 6.75%, Due 3/15/2014......... 1,000 853 Alpha Natural Resources, LLC, 10.00%, Due 6/1/2012.......... 2,000 2,190 Altra Industrial Motion, Inc., 9.00%, Due 12/1/2011......... 1,575 1,583 Borden, Inc., 9.20%, Due 3/15/2021.......................... 1,500 1,380 Case New Holland, Inc., 9.25%, Due 8/1/2011....................................... 1,500 1,594 7.125%, Due 3/1/2014++.................................... 1,000 983 Casella Waste Systems, Inc., 9.75%, Due 2/1/2013............ 2,020 2,151 Celestica, Inc., 7.875%, Due 7/1/2011+...................... 2,500 2,544 CHC Helicopter Corp., 7.375%, Due 5/1/2014.................. 1,787 1,818 Clean Harbors, Inc., 11.25%, Due 7/15/2012.................. 650 735 Communications and Power Industries, Inc., 8.00%, Due 2/1/2012.................................................. 1,500 1,541 Corrections Corporation of America, 7.50%, Due 5/1/2011....................................... 500 506 6.75%, Due 1/31/2014+..................................... 1,500 1,463 Crystal US Holdings 3 LLC / Crystal US Sub 3 Corp, 10.50%, Due 10/1/2014#............................................ 3,990 3,152 Dycom Industries, Inc., 8.125%, Due 10/15/2015.............. 1,500 1,545 Ford Motor Credit Co., 5.625%, Due 10/1/2008..................................... 1,000 910 5.80%, Due 1/12/2009...................................... 700 634 9.473%, Due 4/15/2012#.................................... 800 801 GenCorp, Inc., 9.50%, Due 8/15/2013......................... 1,500 1,620 General Motors Acceptance Corp., 6.875%, Due 9/15/2011..................................... 2,825 2,646 6.75%, Due 12/1/2014+..................................... 600 547 General Motors Corp., 7.70%, Due 4/15/2016.................. 1,300 938 The Greenbrier Companies, Inc., 8.375%, Due 5/15/2015....... 975 1,020 GST Equipment Funding, Inc., 13.25%, Due 5/1/2007(+)sec.h... 2,500 -- Interline Brands, Inc., 11.50%, Due 5/15/2011............... 2,275 2,525 Intertape Polymer, Inc., 8.50%, Due 8/1/2014................ 1,300 1,300 J.B. Poindexter, Inc., 8.75%, Due 3/15/2014................. 2,000 1,625 Jacuzzi Brands, Inc., 9.625%, Due 7/1/2010.................. 1,550 1,660 Jefferson Smurfit Corp., 8.25%, Due 10/1/2012+.............. 1,000 970 Nell AF SARL, 8.375%, Due 8/15/2015+++...................... 2,250 2,230 Owens-Brockway Glass Containers, Inc., 8.875%, Due 2/15/2009..................................... 1,000 1,040 8.75%, Due 11/15/2012..................................... 2,250 2,402 8.25%, Due 5/15/2013...................................... 1,000 1,028 Pipe Acquisition Finance PLC, 10.913%, Due 12/15/2010++#.... 1,100 1,089 Plastipak Holdings, Inc., 8.50%, Due 12/15/2015++........... 1,475 1,490 Polypore International, Inc., 10.50%, Due 10/1/2012#........ 550 364
See accompanying notes -------------------------------------------------------------------------------- 59 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Polypore, Inc., 8.75%, Due 5/15/2012........................ $ 1,450 $ 1,374 RJ Reynolds Tobacco Holdings, Inc., 7.30%, Due 7/15/2015.... 1,350 1,370 Samsonite Corp., 8.875%, Due 6/1/2011....................... 2,500 2,650 Sequa Corp., 9.00%, Due 8/1/2009............................ 1,750 1,881 Solectron Corp., 7.97%, Due 11/15/2006...................... 1,500 1,515 SunGard Data Systems, Inc., 9.125%, Due 8/15/2013++......... 775 827 Superior Essex Communications, 9.00%, Due 4/15/2012......... 2,400 2,424 Terex Corp., 9.25%, Due 7/15/2011...................................... 1,000 1,065 7.375%, Due 1/15/2014+.................................... 2,260 2,288 Transdigm, Inc., 8.375%, Due 7/15/2011...................... 2,500 2,625 UNOVA, Inc., 7.00%, Due 3/15/2008........................... 4,250 4,271 -------- 75,592 -------- INFORMATION TECHNOLOGY - 0.66% SunGard Data Systems, Inc., 10.25%, Due 8/15/2015+++........ 2,000 2,150 -------- MATERIALS - 8.02% Abitibi-Consolidated, Inc., 6.00%, Due 6/20/2013+........... 1,000 895 BCI US Finance Corp., 10.568%, Due 7/15/2010++#............. 500 511 Compass Minerals International, Inc., 1.00%, Due 6/1/2013#................................................. 1,825 1,661 Earle M. Jorgensen Co., 9.75%, Due 6/1/2012................. 1,655 1,787 Freeport-McMoRan Copper & Gold, Inc., 6.875%, Due 2/1/2014.................................................. 1,500 1,489 Hercules, Inc., 6.75%, Due 10/15/2029....................... 1,750 1,691 Ineos Group Holdings Plc, 8.50%, Due 2/15/2016++............ 2,000 1,900 Lyondell Chemical Co., 10.875%, Due 5/1/2009................ 2,500 2,562 Nalco Co., 8.875%, Due 11/15/2013........................... 1,000 1,033 Neenah Paper, Inc., 7.375%, Due 11/15/2014.................. 2,450 2,291 The Newark Group, Inc., 9.75%, Due 3/15/2014................ 2,200 2,074 OM Group, Inc., 9.25%, Due 12/15/2011....................... 1,750 1,807 Phibro Animal Health Corp., 13.00%, Due 12/1/2007........... 500 515 Resolution Performance Products, 8.00%, Due 12/15/2009...... 1,750 1,842 Rhodia SA, 10.25%, Due 6/1/2010+............................ 2,309 2,580 UAP Holding Corp., Zero Coupon, Due 7/15/2012(+)#........... 1,506 1,357 -------- 25,995 -------- MEDIA - 3.79% Advanstar Communications, Inc., 10.75%, Due 8/15/2010..................................... 1,500 1,627 12.00%, Due 2/15/2011+.................................... 1,375 1,454 Allbritton Communications Co., 7.75%, Due 12/15/2012........ 2,590 2,596 American Media Operations, Inc., 10.25%, Due 5/1/2009+...... 1,500 1,410 LBI Media, Inc., 10.125%, Due 7/15/2012..................... 1,000 1,075 The Sheridan Group, Inc., 10.25%, Due 8/15/2011............. 2,125 2,189 Warner Music Group, 7.375%, Due 4/15/2014................... 1,600 1,576 WMG Holdings Corp., 9.50%, Due 12/15/2014#.................. 500 368 -------- 12,295 -------- RETAIL - 3.39% Jostens Holding, 10.25%, Due 12/1/2013#..................... 1,900 1,468 Jostens IH Corp., 7.625%, Due 10/1/2012..................... 950 943 NBTY, Inc., 7.125%, Due 10/1/2015++......................... 1,800 1,701
See accompanying notes -------------------------------------------------------------------------------- 60 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Phillips-Van Heusen Corp., 8.125%, Due 5/1/2013...................................... $ 735 $ 773 7.75%, Due 11/15/2023..................................... 1,800 1,890 Rafaella Apparel Group, Inc., 11.25%, Due 6/15/2011++....... 1,500 1,519 Woolworth Corp., 8.50%, Due 1/15/2022....................... 2,550 2,690 -------- 10,984 -------- SERVICES - 0.88% Knowledge Learning Corp., 7.75%, Due 2/1/2015++............. 3,000 2,846 -------- TECHNOLOGY - 1.68% Amkor Technology, Inc., 9.25%, Due 2/15/2008...................................... 2,000 2,110 7.75%, Due 5/15/2013...................................... 500 477 MagnaChip Semiconductor SA/MagnaChip Semiconductor Finance Co., 8.16%, Due 12/15/2011#.................................... 1,850 1,864 Sensata Technologies BV, 8.00%, Due 5/1/2014++.............. 1,000 1,005 -------- 5,456 -------- TELECOMMUNICATION SERVICES - 1.39% AirGate PCS, Inc., 9.375%, Due 9/1/2009..................... 1,000 1,046 Block Communications, Inc., 8.25%, Due 12/15/2015++......... 2,000 1,955 Stratos Global Corp., 9.875%, Due 2/15/2013++............... 1,500 1,506 -------- 4,507 -------- TOTAL CORPORATE OBLIGATIONS............................. 306,968 -------- CONVERTIBLE OBLIGATIONS - 0.66% TECHNOLOGY - 0.66% Nortel Networks Corp., 4.25%, Due 9/1/2008.................. 2,250 2,132 -------- TOTAL CONVERTIBLE OBLIGATIONS........................... 2,132 -------- SHARES ----------- SHORT TERM INVESTMENTS - 11.23% AIM Short-Term Investment Company Liquid Asset Fund@........ 2,051,985 2,052 American Beacon Money Market Select Fund*................... 11,875,450 11,875 PAR AMOUNT ----------- Citigroup Global Markets, Inc. Master Note@................. $ 10,000 10,000 Merrill Lynch Pierce Fenner & Smith, Inc. Tri Party Repo, 4.915%, Due 5/1/2006 (Collateral held at J.P. Morgan Chase consists of the following: U.S. Unwired, Inc., 10.00%, Due 6/15/2012, Market Value - $4,463; and Verizon NY, Inc., 7.75%, Due 4/1/2032, Market Value - $5,740.)@............. 10,000 10,000
See accompanying notes -------------------------------------------------------------------------------- 61 AMERICAN BEACON HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- wMorgan Stanley & Co, 4.925%, Due 5/1/2006 (Collateral held at The Bank of New York consists of the following: Banco Santander, 5.22%, Due 12/9/2009, Market Value - $2,616.)@......................................... $ 2,500 $ 2,500 -------- TOTAL SHORT TERM INVESTMENTS............................ 36,427 -------- TOTAL INVESTMENTS - 106.56% (COST $345,784)................. 345,527 -------- LIABILITIES, NET OF OTHER ASSETS - (6.56%).................. (21,277) -------- TOTAL NET ASSETS - 100.00%.................................. $324,250 ========
--------------- Percentages are stated as a percent of net assets. (+) - Non-income producing security. + - All or a portion of this security is on loan at April 30, 2006. See Note 5. ++ - 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 $57,728 or 17.80% of net assets. # - The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. sec. - In Default h - Valued at fair value pursuant to procedures approved by the Board of Trustees. (@) - All or a portion of this security is purchased with cash collateral for securities loaned. * - The Fund/Trust is affiliated by having the same investment advisor. See Note 2.
See accompanying notes -------------------------------------------------------------------------------- 62 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 3.97% CONSUMER DISCRETIONARY - 0.24% SPECIALTY RETAIL - 0.24% Tiffany & Co. .............................................. 7,300 $ 255 -------- TOTAL CONSUMER DISCRETIONARY............................ 255 -------- FINANCIALS - 0.78% DIVERSIFIED FINANCIALS - 0.52% The Goldman Sachs Group, Inc. .............................. 3,500 561 -------- INSURANCE - 0.26% AON Corp. .................................................. 6,750 283 -------- TOTAL FINANCIALS........................................ 844 -------- HEALTH CARE - 0.70% PHARMACEUTICALS - 0.70% Barr Pharmaceuticals, Inc.(+)............................... 6,000 363 Mylan Laboratories, Inc.(+)................................. 17,500 382 -------- TOTAL HEALTH CARE....................................... 745 -------- INDUSTRIALS - 0.68% COMMERCIAL SERVICES & SUPPLIES - 0.31% Manpower, Inc.(+)........................................... 5,000 326 -------- TRANSPORTATION INFRASTRUCTURE - 0.37% Burlington Northern Santa Fe Corp. ......................... 5,000 397 -------- TOTAL INDUSTRIALS....................................... 723 -------- INFORMATION TECHNOLOGY - 1.57% COMMUNICATIONS EQUIPMENT - 0.81% Nokia Corp., ADR............................................ 25,000 567 Tellabs, Inc.(+)............................................ 19,000 301 -------- 868 -------- IT CONSULTING & SERVICES - 0.45% Infosys Technologies Ltd., ADR+............................. 6,100 480 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.31% Atmel Corp.(+).............................................. 62,500 327 -------- TOTAL INFORMATION TECHNOLOGY............................ 1,675 -------- TOTAL COMMON STOCKS..................................... 4,242 -------- CONVERTIBLE PREFERRED STOCKS - 2.72% BANKS - 0.38% Washington Mutual, Inc. .................................... 7,200 401 -------- FINANCE - 1.21% Lazard Ltd. ................................................ 10,250 405 Lehman Brothers Holdings, Inc.+............................. 15,300 398 Morgan Stanley.............................................. 11,500 495 -------- 1,298 --------
See accompanying notes -------------------------------------------------------------------------------- 63 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) INSURANCE - 1.13% Genworth Financial, Inc. ................................... 9,300 $ 337 MetLife, Inc. .............................................. 16,000 448 Travelers Property Casualty Corp.+.......................... 17,250 426 -------- 1,211 -------- TOTAL CONVERTIBLE PREFERRED STOCKS...................... 2,910 -------- PAR AMOUNT ----------- CORPORATE OBLIGATIONS - 46.48% BANKS - 8.28% Banco Popular North America, Inc., 6.125%, Due 10/15/2006.................................... $ 500 502 4.25%, Due 4/1/2008....................................... 300 292 Bank of America Corp., 3.375%, Due 2/17/2009+............... 350 333 Bank One Corp., 4.90%, Due 4/30/2015+....................... 500 464 Capital One Bank, 4.25%, Due 12/1/2008...................................... 1,000 972 5.125%, Due 2/15/2014..................................... 330 315 Citigroup, Inc., 5.125%, Due 2/14/2011...................... 1,000 984 Credit Suisse First Boston, 6.50%, Due 5/1/2008++........... 500 509 Credit Suisse First Boston USA, Inc., 5.875%, Due 8/1/2006.................................................. 1,500 1,502 ING Bank, NV, 5.125%, Due 5/1/2015++........................ 300 284 Synovus Financial Corp., 4.875%, Due 2/15/2013+............. 500 476 Wachovia Corp., 6.40%, Due 4/1/2008......................... 1,500 1,530 Washington Mutual, Inc., 4.625%, Due 4/1/2014............... 750 680 -------- 8,843 -------- COMMERCIAL SERVICES - 0.24% WH Holdings (Cayman Islands) Ltd., 9.50%, Due 4/1/2011...... 240 257 -------- COMMUNICATIONS - 1.07% AT&T Broadband Corp., 8.375%, Due 3/15/2013................. 700 784 Time Warner, Inc., 6.75%, Due 4/15/2011..................... 350 363 -------- 1,147 -------- ELECTRIC/GAS - 1.04% Kinder Morgan Finance Co. ULC, 5.70%, Due 1/5/2016.......... 350 337 MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008....... 800 770 -------- 1,107 -------- FINANCE - 11.89% American Honda Finance Corp., 4.875%, Due 5/15/2010......... 300 291 The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 800 760 Countrywide Home Loans, Inc. 3.25%, Due 5/21/2008........... 1,000 958 E*Trade Financial Corp., 7.375%, Due 9/15/2013..................................... 150 153 7.875%, Due 12/1/2015..................................... 125 131 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 321 General Electric Capital Corp., 4.125%, Due 3/4/2008........ 2,000 1,960 The Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013......... 350 329
See accompanying notes -------------------------------------------------------------------------------- 64 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Household Finance Corp., 5.75%, Due 1/30/2007............... $ 1,750 $ 1,756 HSBC Finance Corp., 5.25%, Due 1/14/2011+................... 1,000 986 International Lease Finance Corp., 6.375%, Due 3/15/2009.... 725 742 Lehman Brothers Holdings, Inc., 3.50%, Due 8/7/2008......... 1,000 961 Merrill Lynch & Company, Inc., 6.00%, Due 2/17/2009......... 1,000 1,016 ProLogis, 5.50%, Due 4/1/2012............................... 350 344 Simon Property Group LP, 6.375%, Due 11/15/2007.................................... 400 405 5.375%, Due 6/1/2011++.................................... 350 345 SLM Corp., 4.00%, Due 1/15/2009............................. 1,300 1,250 -------- 12,708 -------- INDUSTRIALS - 12.26% Accuride Corp., 8.50%, Due 2/1/2015......................... 150 148 Aleris International, Inc., 9.00%, Due 11/15/2014+.......... 275 287 AmeriPath, Inc., 10.50%, Due 4/1/2013....................... 400 425 BHP Finance (USA) Ltd., 4.80%, Due 4/15/2013................ 550 524 Bunge Limited Finance Corp., 7.80%, Due 10/15/2012..................................... 200 220 5.35%, Due 4/15/2014...................................... 500 473 Caterpillar Financial Services Corp., 4.15%, Due 1/15/2010................................................. 1,000 956 Celestica, Inc., 7.875%, Due 7/1/2011....................... 260 265 Cendant Corp., 6.875%, Due 8/15/2006........................ 1,100 1,104 Cisco Systems, Inc., 5.25%, Due 2/22/2011................... 550 544 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 950 938 Dell Computer Corp., 6.55%, Due 4/15/2008................... 200 204 Dole Food Company, Inc., 8.875%, Due 3/15/2011.............. 142 138 DST Systems, Inc., 3.625%, Due 8/15/2023.................... 485 640 EOG Resources, Inc., 4.75%, Due 3/15/2014++................. 350 327 Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 436 Ford Motor Credit, 8.625%, Due 11/1/2010+................... 285 270 Freeport-McMoRan Copper & Gold, Inc., 10.125%, Due 2/1/2010.................................................. 400 429 Gardner Denver, Inc., 8.00%, Due 5/1/2013................... 300 315 John Deere Capital Corp., 4.125%, Due 1/15/2010............. 1,000 955 Kroger Co., 8.15%, Due 7/15/2006............................ 1,000 1,005 Nissan Motor Company Ltd., 4.625%, Due 3/8/2010++........... 590 566 Northrop Grumman Corp., 4.079%, Due 11/16/2006.............. 700 695 Pulte Homes, Inc., 4.875%, Due 7/15/2009.................... 100 97 SunGard Data Systems, Inc., 9.125%, Due 8/15/2013++......... 150 160 Telcordia Technologies, Inc., 10.00%, Due 3/15/2013++....... 200 183 Tenent Healthcare Corp., 9.50%, Due 2/1/2015++.............. 275 281 Union Pacific Corp., 6.50%, Due 4/15/2012................... 350 364 Wesco Distributing, Inc., 7.50%, Due 10/15/2017++........... 150 153 -------- 13,102 -------- INSURANCE - 8.33% Aegon Funding Corp., 5.75%, Due 12/15/2020.................. 350 339 AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 227 ASIF Global Financing, 3.90%, Due 10/22/2008++.............. 500 483 Genworth Global Funding Trusts, 5.125%, Due 3/15/2011....... 1,000 982 John Hancock Global FDG II, 3.75%, Due 9/30/2008++.......... 1,000 965 John Hancock Global Funding, 5.625%, Due 6/27/2006++........ 1,400 1,401
See accompanying notes -------------------------------------------------------------------------------- 65 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Lincoln National Corp., 4.75%, Due 2/15/2014................ $ 200 $ 185 MassMutual Global Funding II, 3.80%, Due 4/15/2009++........ 1,000 958 Prudential Financial, Inc., 4.50%, Due 7/15/2013+........... 375 347 Prudential Insurance Company of America, 6.375%, Due 7/23/2006++............................................... 2,000 2,005 Transamerica Corp., 6.75%, Due 11/15/2006................... 1,000 1,007 -------- 8,899 -------- RETAIL - 0.13% NBTY, Inc., 7.125%, Due 10/1/2015++......................... 150 142 -------- TELEPHONE - 3.24% AT&T Wireless Services, Inc., 8.125%, Due 5/1/2012.......... 250 280 France Telecom SA, 7.75%, Due 3/1/2011...................... 680 740 Sprint Capital Corp., 6.00%, Due 1/15/2007...................................... 1,200 1,205 8.375%, Due 3/15/2012..................................... 675 759 Syniverse Technologies, Inc., 7.75%, Due 8/15/2013.......... 200 199 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015..... 300 281 -------- 3,464 -------- TOTAL CORPORATE OBLIGATIONS............................. 49,669 -------- CONVERTIBLE OBLIGATIONS - 14.60% BANKS - 0.66% Bank America Corp., 0.25%, Due 1/26/2010.................... 265 279 Deutsche Bank Luxembourg SA, 4.88%, Due 5/1/2012++ #........ 110 128 Wachovia Corp., 0.25%, Due 12/15/2010....................... 280 298 -------- 705 -------- ELECTRIC UTILITIES - 0.41% CenterPoint Energy, Inc., 3.75%, Due 5/15/2023.............. 390 433 -------- ENERGY - 0.66% Schlumberger Ltd., 2.125%, Due 6/1/2023..................... 400 708 -------- FINANCE - 0.64% American Financial Group, Inc., 1.486%, Due 6/2/2033........ 625 326 Fortis Insurance NV, 7.75%, Due 1/26/2008++................. 275 360 -------- 686 -------- HOTELS, RESTAURANTS & LEISURE - 0.13% International Game Technology, Inc., Zero Coupon, Due 1/29/2033(+).............................................. 175 141 -------- INDUSTRIALS - 7.44% Armor Holdings, Inc., 2.00%, Due 11/1/2024.................. 275 347 Best Buy Company, Inc., 2.25%, Due 1/15/2022+............... 120 153 Cadence Design Systems, Inc., Zero Coupon, Due 8/15/2023(+).............................................. 260 323 Caesars Entertainment, Inc., 5.068%, Due 4/15/2024#......... 110 153 Ceradyne, Inc., 2.875%, Due 12/15/2035...................... 150 174 Commscope, Inc., 1.00%, Due 3/15/2024....................... 140 218 CSG Systems International, Inc., 2.50%, Due 6/15/2024....... 275 292 Electronics for Imaging, Inc., 1.50%, Due 6/1/2023.......... 235 263
See accompanying notes -------------------------------------------------------------------------------- 66 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Fisher Scientific International, Inc., 3.25%, Due 3/1/2024+................................................. $ 560 $ 611 Grey Wolf, Inc., 4.94%, Due 4/1/2024#....................... 215 307 Halliburton Co., 3.125%, Due 7/15/2023++.................... 210 442 L3 Communications Holdings, Inc., 3.00%, Due 8/1/2035++..... 415 413 Laboratory Corp of America Holdings, Zero Coupon, Due 9/11/2021(+).............................................. 375 294 Liberty Media Corp., 0.75%, Due 3/30/2023................... 505 538 Lockheed Martin Corp., 4.499%, Due 8/15/2033#............... 515 597 Lowe's Companies, Inc., 0.861%, Due 10/19/2021.............. 135 147 Medtronic, Inc., 1.25%, Due 9/15/2021....................... 555 547 Nabors Industries Ltd., Zero Coupon, Due 6/15/2023+(+)...... 280 327 NCI Building Systems, Inc., 2.125%, Due 11/15/2024++........ 285 477 Regal-Beloit Corp., 2.75%, Due 3/15/2024.................... 210 356 SEACOR Holdings, 2.875%, Due 12/15/2024+.................... 400 530 Teva Pharmaceutical Finance LLC, Series B, 0.25%, Due 2/1/2024.................................................. 120 142 United Auto Group, Inc., 3.50%, Due 4/1/2026++.............. 135 144 Vishay Intertechnology, Inc., 3.625%, Due 8/1/2023.......... 150 155 -------- 7,950 -------- INFORMATION TECHNOLOGY - 0.51% Amdocs Ltd., 0.50%, Due 3/15/2024+.......................... 285 285 Electronic Data Systems Corp., 3.875%, Due 7/15/2023........ 250 260 -------- 545 -------- PHARMACEUTICALS - 2.27% Amgen, Inc., Zero Coupon, Due 3/1/2032(+)................... 900 663 Genzyme Corp., 1.25%, Due 12/1/2023+........................ 550 568 Gilead Sciences, Inc., 0.50%, Due 5/1/2011++................ 250 234 Omnicare, Inc., 3.25%, Due 12/15/2035....................... 215 211 Teva Pharmaceutical Finance LLC, Series A, 0.50%, Due 2/1/2024+................................................. 170 192 Wyeth, 4.239%, Due 1/15/2024#............................... 525 556 -------- 2,424 -------- SERVICES - 0.64% priceline.com, Inc., 2.25%, Due 1/15/2025................... 140 130 Quanta Services, Inc., 4.50%, Due 10/1/2023...................................... 255 400 3.75%, Due 4/30/2026++.................................... 150 147 -------- 677 -------- TELEPHONE - 0.88% NII Holdings, Inc., 2.75%, Due 8/15/2025++.................. 700 944 -------- TRANSPORTATION INFRASTRUCTURE - 0.36% CSX Corp., Zero Coupon, Due 10/30/2021(+)................... 315 385 -------- TOTAL CONVERTIBLE OBLIGATIONS........................... 15,598 --------
See accompanying notes -------------------------------------------------------------------------------- 67 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.84% COMMERCIAL MORTGAGE-BACKED SECURITY - 1.00% Banc of America Commercial Mortgage, Inc., 2005-6, 5.001%, Due 9/10/2047............................................. $ 767 $ 760 JP Morgan Chase Commercial Mortgage Securities Corp., 4.655%, Due 8/15/2042..................................... 317 312 -------- 1,072 -------- WHOLE LOAN COLLATERALIZED MORTGAGE OBLIGATIONS - 0.84% JP Morgan Chase Commercial Mortgage Securities Corp, 4.613%, Due 10/15/2042............................................ 911 896 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 1,968 -------- ASSET-BACKED SECURITIES - 4.32% AUTO LOAN - 1.56% Banc of America Securities Auto Trust, 2005-WF1, 4.08%, Due 4/18/2010................................................. 1,000 976 Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 696 690 -------- 1,666 -------- OTHER ASSET-BACKED - 2.76% CarMax Auto Owner Trust, 2005-3, 4.91%, Due 1/18/2011....... 1,000 989 HSBC Automotive Trust, 2005-1, 4.35%, Due 6/18/2012......... 1,000 976 Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due 4/20/2012................................................. 1,000 989 -------- 2,954 -------- TOTAL ASSET-BACKED SECURITIES........................... 4,620 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.16% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.34% Pool #C01598, 5.00%, Due 8/1/2033........................... 731 694 Pool #C01786, 5.50%, Due 2/1/2034........................... 1,029 1,001 Pool #E01492, 5.50%, Due 10/1/2018.......................... 812 806 -------- 2,501 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.11% Pool #545759, 6.50%, Due 7/1/2032........................... 659 672 Pool #555549, 5.00%, Due 6/1/2018........................... 1,063 1,037 Pool #725238, 5.00%, Due 3/1/2034........................... 580 550 -------- 2,259 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.71% 2006-9 A, 4.201%, Due 8/16/2026............................. 998 962 Pool #003515, 5.50%, Due 2/20/2034.......................... 867 848 Pool #780921, 7.00%, Due 11/15/2013......................... 256 265 Pool #781564, 6.00%, Due 2/15/2033.......................... 330 332 Pool #781690, 6.00%, Due 12/15/2033......................... 483 485 -------- 2,892 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 7,652 --------
See accompanying notes -------------------------------------------------------------------------------- 68 AMERICAN BEACON ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) -w U.S. AGENCY OBLIGATIONS - 0.96% FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.47% 5.125%, Due 10/15/2008+..................................... $ 500 $ 500 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.49% 6.625%, Due 11/15/2010...................................... 500 527 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 1,027 -------- U.S. TREASURY OBLIGATIONS - 15.74% U.S. TREASURY BONDS - 0.95% 8.75%, Due 8/15/2020+....................................... 750 1,009 -------- U.S. TREASURY NOTES - 14.79% 3.875%, Due 5/15/2010+...................................... 1,500 1,444 5.00%, Due 2/15/2011+....................................... 850 853 5.00%, Due 8/15/2011+....................................... 4,600 4,618 4.00%, Due 2/15/2014+....................................... 5,000 4,671 4.75%, Due 5/15/2014+....................................... 4,300 4,220 -------- 15,806 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 16,815 -------- SHARES ---------- -W SHORT TERM INVESTMENTS - 24.78% American Beacon Enhanced Cash Trusthsec..................... 16,190,058 16,190 American Beacon Money Market Select Fundhsec................ 10,296,116 10,296 -------- TOTAL SHORT TERM INVESTMENTS............................ 26,486 -------- TOTAL INVESTMENTS - 122.57% (COST $130,635)................. 130,987 -------- LIABILITIES, NET OF OTHER ASSETS - 22.57%................... (24,121) -------- TOTAL NET ASSETS - 100.00%.................................. $106,866 ========
--------------- (+)- Non-income producing security. + - All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- 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 $12,051 or 11.28% of net assets. # - The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. h - The Fund/Trust is affiliated by having the same investment advisor. See Note 2. sec.- All or a portion of this security is purchased with cash collateral for securities loaned. See accompanying notes -------------------------------------------------------------------------------- 69 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 30.06% BANKS - 3.88% Banco Popular North America, Inc., 4.25%, Due 4/1/2008...... $ 200 $ 195 Bank of America Corp., 3.375%, Due 2/17/2009................ 200 190 Bank One Corp., 5.90%, Due 11/15/2011..................................... 440 446 4.90%, Due 4/30/2015...................................... 200 185 Capital One Bank, 6.70%, Due 5/15/2008...................................... 350 358 4.80%, Due 2/21/2012...................................... 235 223 5.125%, Due 2/15/2014..................................... 220 210 Credit Suisse First Boston, 6.50%, Due 5/1/2008++........... 350 357 ING Bank, NV, 5.125%, Due 5/1/2015++........................ 250 237 PNC Funding Corp., 4.20%, Due 3/10/2008..................... 355 348 Synovus Financial Corp., 4.875%, Due 2/15/2013+............. 200 190 Washington Mutual Financial Corp., 6.875%, Due 5/15/2011.... 230 242 Washington Mutual, Inc., 4.625%, Due 4/1/2014............... 400 363 -------- 3,544 -------- COMMUNICATIONS - 1.73% AT&T Broadband Corp., 8.375%, Due 3/15/2013................. 448 501 Comcast Corp., 7.625%, Due 2/15/2008..................................... 230 238 5.30%, Due 1/15/2014...................................... 220 208 Time Warner, Inc., 6.75%, Due 4/15/2011...................................... 200 207 7.70%, Due 5/1/2032....................................... 250 273 Viacom, Inc., 6.25%, Due 4/30/2016++........................ 155 154 -------- 1,581 -------- CONSUMER, NON-CYCLICAL - 0.22% UnitedHealth Group, Inc., 5.375%, Due 3/15/2016............. 210 201 -------- ELECTRIC/GAS - 2.85% Columbus Southern Power Co., 5.50%, Due 3/1/2013............ 320 313 FPL Group, Inc., 5.551%, Due 2/16/2008...................... 230 230 Georgia Power Co., 4.875%, Due 7/15/2007.................... 270 269 Kinder Morgan Finance Co. ULC, 5.70%, Due 1/5/2016.......... 200 193 MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008...................................... 270 260 5.875%, Due 10/1/2012..................................... 200 200 6.125%, Due 4/1/2036++.................................... 300 286 Public Service Enterprise Group, Inc., 6.95%, Due 6/1/2012.................................................. 355 372 Southern Company Capital Funding, Inc., 5.30%, Due 2/1/2007.................................................. 220 219 Xcel Energy, Inc., 7.00%, Due 12/1/2010..................... 250 262 -------- 2,604 -------- FINANCE - 7.93% American General Finance Corp., 5.375%, Due 9/1/2009........ 385 384 American Honda Finance Corp., 4.875%, Due 5/15/2010......... 200 194 American International Group, Inc., 6.25%, Due 5/1/2036++... 300 297 Ameriprise Financial, Inc., 5.35%, Due 11/15/2010........... 290 286 The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 400 380
See accompanying notes -------------------------------------------------------------------------------- 70 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) The Chubb Corp., 4.934%, Due 11/16/2007..................... $ 355 $ 352 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 200 183 Equity Residential, 5.125%, Due 3/15/2016................... 185 173 General Electric Capital Corp., 4.375%, Due 3/3/2012........ 350 330 The Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013......... 250 235 HSBC Finance Corp., 4.75%, Due 4/15/2010+..................................... 250 243 5.25%, Due 1/14/2011+..................................... 300 296 International Lease Finance Corp., 6.375%, Due 3/15/2009.... 250 256 Merrill Lynch & Company, Inc., 6.00%, Due 2/17/2009...................................... 500 508 4.25%, Due 2/8/2010....................................... 345 330 MetLife Global Funding I, 3.375%, Due 10/5/2007++........... 350 340 MetLife, Inc., 5.375%, Due 12/15/2012.................................... 240 236 5.00%, Due 6/15/2015...................................... 170 159 ProLogis, 5.50%, Due 4/1/2012............................... 200 197 ProLogis Trust, 7.10%, Due 4/15/2008........................ 220 227 Prudential Financial, Inc., 3.75%, Due 5/1/2008....................................... 130 126 5.10%, Due 9/20/2014...................................... 210 200 Simon Property Group LP, 6.375%, Due 11/15/2007.................................... 200 203 5.375%, Due 6/1/2011++.................................... 200 197 SLM Corp., 4.00%, Due 1/15/2009...................................... 700 673 5.45%, Due 4/25/2011...................................... 240 238 -------- 7,243 -------- INDUSTRIALS - 8.74% Amgen, Inc., 4.00%, Due 11/18/2009.......................... 210 200 BHP Finance (USA) Ltd., 4.80%, Due 4/15/2013................ 150 143 Bunge Limited Finance Corp., .80%, Due 10/15/2012........... 150 165 Carnival Corp., 3.75%, Due 11/15/2007....................... 380 371 Cendant Corp., 6.875%, Due 8/15/2006........................ 450 452 Cisco Systems, Inc., 5.25%, Due 2/22/2011...................................... 375 371 5.50%, Due 2/22/2016...................................... 270 263 DaimlerChrysler NA Holding Corp., 5.875%, Due 3/15/2011..... 300 299 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 140 138 Dell Computer Corp., 6.55%, Due 4/15/2008................... 400 408 EOG Resources, Inc., 4.75%, Due 3/15/2014++................. 225 210 Hewlett-Packard Co., 5.75%, Due 12/15/2006.................. 325 326 Home Depot, Inc., 5.40%, Due 3/1/2016....................... 300 292 John Deere Capital Corp., 3.375%, Due 10/1/2007..................................... 350 341 4.40%, Due 7/15/2009...................................... 130 126 5.40%, Due 4/7/2010....................................... 235 234 Lockheed Martin Corp., 7.20%, Due 5/1/2036.................. 400 447 Martin Marietta Material, Inc., 6.90%, Due 8/15/2007........ 300 304 Motorola, Inc., 8.00%, Due 11/1/2011........................ 245 273 Nissan Motor Acceptance Corp., 5.625%, Due 3/14/2011++...... 300 297 Northrop Grumman Corp., 4.079%, Due 11/16/2006.............. 450 447
See accompanying notes -------------------------------------------------------------------------------- 71 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Pemex Project Funding Master Trust, 8.50%, Due 2/15/2008+... $ 275 $ 288 Pulte Homes, Inc., 4.875%, Due 7/15/2009+................... 100 97 Schering-Plough Corp., 6.75%, Due 12/1/2033................. 200 209 Union Pacific Corp., 6.50%, Due 4/15/2012................... 200 208 Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030................. 350 409 WellPoint, Inc., 3.75%, Due 12/14/2007...................... 235 229 Weyerhaeuser Co., 5.95%, Due 11/1/2008...................... 210 211 Wyeth Corp., 5.50%, Due 2/1/2014............................ 230 225 -------- 7,983 -------- INSURANCE - 1.19% Aegon Funding Corp., 5.75%, Due 12/15/2020.................. 200 194 AEGON, N.V., 8.00%, Due 8/15/2006........................... 300 302 ASIF Global Financing, 3.90%, Due 10/22/2008++.............. 300 290 Lincoln National Corp., 4.75%, Due 2/15/2014+............... 100 92 Prudential Financial, Inc., 4.50%, Due 7/15/2013+........... 225 208 -------- 1,086 -------- TELEPHONE - 3.52% America Movil S.A. de C.V., 6.375%, Due 3/1/2035............ 540 495 AT&T Inc., 5.10%, Due 9/15/2014............................. 220 207 AT&T Wireless Services, Inc., 8.125%, Due 5/1/2012...................................... 200 224 8.75%, Due 3/1/2031....................................... 170 214 Deutsche Telekom AG, 8.00%, Due 6/15/2010................... 150 163 France Telecom SA, 7.75%, Due 3/1/2011...................... 270 294 Nextel Communications, Inc., 6.875%, Due 10/31/2013......... 290 298 Sprint Capital Corp., 6.00%, Due 1/15/2007...................................... 200 201 8.375%, Due 3/15/2012..................................... 150 169 Telecom Italia S.p.A., 4.00%, Due 11/15/2008................ 220 212 Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015+.... 200 187 Verizon Global Funding Corp., 4.00%, Due 1/15/2008.......... 250 244 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 310 310 -------- 3,218 -------- TOTAL CORPORATE OBLIGATIONS............................. 27,460 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.47% Banc of America Commercial Mortgage, Inc., 2003-2, 4.342%, Due 3/11/2041............................. 265 256 2005-6, 5.001%, Due 9/10/2047............................. 383 380 Banc of America Mortgage Securities, 5.25%, Due 10/25/2019................................................ 768 742 Bear Stearns Adjustable Rate Mortgage Trust, 2005-11, 4.757%, Due 12/25/2035#................................... 384 376 Bear Stearns Commercial Mortgage Securities, Inc., 5.467%, Due 4/12/2038..................................... 265 266 2004-PWR5, 4.831%, Due 7/11/2042.......................... 535 509 2005, 5.127%, Due 10/12/2042.............................. 430 424 Chase Mortgage Financial Trust, 2004-S1 A3, 5.50%, Due 2/25/2019................................................. 304 300 Citigroup Commercial Mortgage Trust, 2004-C2, 4.38%, Due 10/15/2041................................................ 470 445
See accompanying notes -------------------------------------------------------------------------------- 72 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Countrywide Alternative Loan Trust, Inc., 2005-53T2, 6.00%, Due 11/25/2035............................................ $ 1,394 $ 1,367 Countrywide Home Loan, Inc., 2004-18, 6.00%, Due 10/25/2034............................ 404 394 2005-HYB8, 5.414%, Due 12/20/2035......................... 449 445 General Electric Capital Commercial Mortgage Corp., 2003-C2, 4.17%, Due 7/10/2037...................................... 312 303 JP Morgan Chase Commercial Mortgage Securities Corp., 2004-CBX, 4.529%, Due 11/12/2039.......................... 255 244 4.655%, Due 8/15/2042..................................... 181 178 4.625%, Due 3/15/2046..................................... 505 492 Prime Mortgage Trust, 2005-2, 5.25%, Due 7/25/2020.......... 513 504 Residential Asset Mortgage Products, Inc., 2004-RS12, 3.767%, Due 2/25/2027..................................... 110 109 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 7,734 -------- ASSET-BACKED SECURITIES - 1.61% CarMax Auto Owner Trust, 2005-3, 4.91%, Due 1/18/2011....... 500 494 Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 487 483 Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due 4/20/2012................................................. 500 495 -------- TOTAL ASSET-BACKED SECURITIES........................... 1,472 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 28.43% FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.06% Pool #A30948, 5.50%, Due 1/1/2035........................... 1,080 1,051 Pool #A45500, 5.50%, Due 6/1/2035........................... 1,043 1,014 Pool #B12563, 5.00%, Due 2/1/2019........................... 528 515 Pool #C00647, 6.50%, Due 9/1/2028........................... 118 121 Pool #C01598, 5.00%, Due 8/1/2033........................... 914 867 Pool #E01602, 4.50%, Due 3/1/2019........................... 768 732 Pool #E96536, 5.00%, Due 3/1/2018........................... 637 621 Pool #G00738, 8.00%, Due 7/1/2027........................... 152 162 Pool #G01457, 6.00%, Due 8/1/2029........................... 399 399 Pool #G01824, 6.50%, Due 4/1/2035........................... 67 69 Pool #G08006, 6.00%, Due 8/1/2034........................... 676 674 Pool #G08072, 5.00%, Due 8/1/2035........................... 583 551 Pool #G08079, 5.00%, Due 9/1/2035........................... 487 460 Pool #G11295, 5.50%, Due 9/1/2017........................... 297 294 Pool #G11879, 5.00%, Due 10/1/2020.......................... 773 752 -------- 8,282 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.40% Pool #100293, 9.50%, Due 8/1/2029........................... 143 157 Pool #254545, 5.00%, Due 12/1/2017.......................... 1,262 1,232 Pool #254865, 4.50%, Due 9/1/2018........................... 824 786 Pool #323309, 6.00%, Due 9/1/2013........................... 151 153 Pool #323789, 6.00%, Due 6/1/2014........................... 168 171 Pool #488099, 5.50%, Due 2/1/2014........................... 399 396 Pool #545449, 6.50%, Due 2/1/2017........................... 409 418 Pool #545823, 5.50%, Due 8/1/2017........................... 510 507 Pool #555531, 5.50%, Due 6/1/2033........................... 701 683 Pool #555880, 5.50%, Due 11/1/2033.......................... 1,236 1,204 Pool #725238, 5.00%, Due 3/1/2034........................... 1,159 1,101 Pool #725866, 4.50%, Due 9/1/2034........................... 617 566
See accompanying notes -------------------------------------------------------------------------------- 73 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Pool #735224, 5.50%, Due 2/1/2035........................... $ 1,518 $ 1,479 Pool #745418, 5.50%, Due 4/1/2036........................... 995 966 Pool #747844, 5.50%, Due 12/1/2018.......................... 190 189 Pool #749219, 5.50%, Due 10/1/2033.......................... 100 97 Pool #758322, 5.50%, Due 12/1/2033.......................... 664 647 Pool #761337, 5.00%, Due 4/1/2019........................... 387 377 Pool #765304, 5.50%, Due 3/1/2034........................... 231 225 Pool #793600, 4.988%, Due 9/1/2034#......................... 443 440 Pool #811499, 5.00%, Due 9/1/2020........................... 384 374 Pool #828377, 5.50%, Due 6/1/2035........................... 518 503 Pool #835760, 4.50%, Due 9/1/2035........................... 449 412 Pool #837219, 4.00%, Due 8/1/2020........................... 567 528 Pool #872306, 6.50%, Due 5/1/2036........................... 450 458 -------- 14,069 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.97% 2006-9 A, 4.201%, Due 8/16/2026............................. 299 289 Pool #003515, 5.50%, Due 2/20/2034.......................... 800 783 Pool #780615, 6.50%, Due 8/15/2027.......................... 346 357 Pool #780747, 6.50%, Due 3/15/2028.......................... 483 498 Pool #781273, 6.00%, Due 4/15/2031.......................... 476 479 Pool #781564, 6.00%, Due 2/15/2033.......................... 485 487 Pool #781603, 5.00%, Due 5/15/2033.......................... 376 360 Pool #781690, 6.00%, Due 12/15/2033......................... 371 373 -------- 3,626 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 25,977 -------- U.S. AGENCY OBLIGATIONS - 17.10% FEDERAL HOME LOAN BANK - 7.96% 4.40%, Due 7/28/2008...................................... 1,330 1,308 Zero Coupon, Due 5/10/2006+(+)............................ 5,975 5,968 -------- 7,276 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.98% 5.625%, Due 3/15/2011+.................................... 500 507 5.875%, Due 3/21/2011+.................................... 380 387 -------- 894 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.16% 4.50%, Due 8/4/2008....................................... 1,000 986 5.125%, Due 1/2/2014+..................................... 545 529 TBA, 30 YR, 6.00%, Due 12/11/2033......................... 5,970 5,942 -------- 7,457 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 15,627 --------
See accompanying notes -------------------------------------------------------------------------------- 74 AMERICAN BEACON INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 16.34% U.S. TREASURY BONDS - 6.29% 9.125%, Due 5/15/2018+.................................... $ 300 $ 404 7.875%, Due 2/15/2021+.................................... 750 948 6.25%, Due 8/15/2023+..................................... 650 718 6.875%, Due 8/15/2025+.................................... 370 439 6.25%, Due 5/15/2030+..................................... 1,090 1,232 5.375%, Due 2/15/2031+.................................... 1,975 2,005 -------- 5,746 -------- U.S. TREASURY NOTES - 10.05% 3.375%, Due 2/15/2008+.................................... 165 161 3.875%, Due 5/15/2010+.................................... 3,000 2,887 5.00%, Due 2/15/2011+..................................... 1,000 1,004 4.50%, Due 2/28/2011+..................................... 600 589 5.00%, Due 8/15/2011+..................................... 800 803 4.75%, Due 5/15/2014+..................................... 2,200 2,159 4.50%, Due 2/15/2016+..................................... 1,655 1,583 -------- 9,186 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 14,932 -------- SHARES ----------- SHORT TERM INVESTMENTS - 28.44% American Beacon Enhanced Cash Trustsec.h.................... 14,945,879 14,946 American Beacon Money Market Select Fundsec.h............... 11,043,076 11,043 -------- TOTAL SHORT TERM INVESTMENTS............................ 25,989 -------- TOTAL INVESTMENTS - 130.45% (COST $121,946)................. 119,191 -------- LIABILITIES, NET OF OTHER ASSETS - (30.45%)................. (27,825) -------- TOTAL NET ASSETS - 100.00%.................................. $ 91,366 ========
--------------- (+)-Non-income producing security. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- 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 $2,665 or 2.92% of net assets. #- The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The Due date on these types of securities reflects the final maturity date. sec.- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. h- All or a portion of this security is purchased with cash collateral for securities loaned. See accompanying notes -------------------------------------------------------------------------------- 75 AMERICAN BEACON SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 66.69% BANKS - 17.14% Bank One Corp., 6.00%, Due 8/1/2008......................... $ 2,000 $ 2,026 Capital One Bank, 6.70%, Due 5/15/2008...................................... 1,100 1,127 4.25%, Due 12/1/2008...................................... 1,000 972 Citigroup, Inc., 4.125%, Due 2/22/2010...................... 1,000 956 Comerica Bank, 6.00%, Due 10/1/2008......................... 2,200 2,223 Credit Suisse First Boston USA, Inc., 5.875%, Due 8/1/2006.................................................. 2,000 2,003 FleetBoston Financial Corp., 3.85%, Due 2/15/2008........... 2,500 2,438 Wachovia Corp., 6.40%, Due 4/1/2008......................... 2,500 2,551 -------- 14,296 -------- COMMUNICATIONS - 2.44% Comcast Cable Communications, 6.20%, Due 11/15/2008......... 2,000 2,035 -------- ELECTRIC/GAS - 1.38% MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008....... 1,200 1,154 -------- FINANCE - 23.04% The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 2,000 1,899 Countrywide Home Loans, Inc., 3.25%, Due 5/21/2008.......... 2,000 1,917 EOP Operating LP, 7.75%, Due 11/15/2007..................... 1,000 1,032 General Electric Capital Corp., 4.125%, Due 3/4/2008........ 3,000 2,940 Goldman Sachs Group, Inc., 6.65%, Due 5/15/2009............. 1,000 1,035 Household Finance Corp., 5.75%, Due 1/30/2007............... 2,250 2,258 International Lease Finance Corp., 2.95%, Due 5/23/2006+.... 2,000 1,998 MetLife Global Funding I, 3.375%, Due 10/5/2007++........... 3,000 2,911 Monumental Global Funding, 5.20%, Due 1/30/2007++........... 1,200 1,199 Simon Property Group LP, 6.375%, Due 11/15/2007............. 2,000 2,027 -------- 19,216 -------- INDUSTRIALS - 10.98% Boeing Capital Corp., 5.65%, Due 5/15/2006+................. 626 626 Bunge Limited Finance Corp., 4.375%, Due 12/15/2008......... 1,000 971 Caterpillar Financial Services Corp., 4.15%, Due 1/15/2010................................................. 1,000 956 Cendant Corp., 6.875%, Due 8/15/2006........................ 2,140 2,148 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 2,050 2,023 John Deere Capital Corp., 3.375%, Due 10/1/2007............. 2,000 1,946 Nissan Motor Company Ltd., 4.625%, Due 3/8/2010++........... 410 394 Pulte Homes, Inc., 4.875%, Due 7/15/2009.................... 100 97 -------- 9,161 --------
See accompanying notes -------------------------------------------------------------------------------- 76 AMERICAN BEACON SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) INSURANCE - 4.72% ASIF Global Financing, 3.90%, Due 10/22/2008++.............. $ 2,000 $ 1,932 John Hancock Global Funding, 5.625%, Due 6/27/2006++........ 1,000 1,001 Prudential Insurance Company of America, 6.375%, Due 7/23/2006++............................................... 1,000 1,002 -------- 3,935 -------- TELEPHONE - 6.99% AT&T Corp., 6.00%, Due 3/15/2009............................ 2,000 2,024 Sprint Capital Corp., 6.00%, Due 1/15/2007.................. 1,800 1,807 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 2,000 2,001 -------- 5,832 -------- TOTAL CORPORATE OBLIGATIONS............................. 55,629 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.09% Banc of America Commercial Mortgage, Inc., 2005-6, 5.001%, Due 9/10/2047............................................. 767 760 Wachovia Bank Commercial Mortgage Trust, 2006-C23 A1, 5.203%, Due 1/15/2045..................................... 989 984 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 1,744 -------- ASSET-BACKED SECURITIES - 23.43% Banc of America Securities Auto Trust, 2005-WF1, 4.08%, Due 4/18/2010................................................. 3,000 2,929 Capital Auto Receivables Asset Trust, 2006-1 A4, 5.04%, Due 5/17/2010................................................. 550 546 Chase Manhattan Auto Owner Trust, 2004-A A4, 2.83%, Due 9/15/2010+................................................ 2,000 1,939 Citibank Credit Card Issuance Trust, 2004-A4, 3.20%, Due 8/24/2009................................................. 3,000 2,921 DaimlerChrysler Auto Trust, 2004-C, 3.28%, Due 12/8/2009.... 3,000 2,910 Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 1,113 1,104 HSBC Automotive Trust, 2005-1, 4.35%, Due 6/18/2012......... 2,000 1,951 Nissan Auto Receivables Owner Trust, 2004-A, 2.01%, Due 11/15/2007................................................ 431 427 USAA Auto Owner Trust, 2004-1, 2.06%, Due 4/15/2008......... 799 791 Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due 4/20/2012................................................. 1,500 1,484 Wells Fargo Financial Auto Owner Trust, 2004-A, 2.67%, Due 8/16/2010................................................. 2,600 2,539 -------- TOTAL ASSET-BACKED SECURITIES........................... 19,541 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.16% FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.20% Pool #050952, 6.50%, Due 12/1/2008.......................... 169 170 Pool #252448, 5.50%, Due 4/1/2009........................... 158 158 Pool #313430, 6.50%, Due 3/1/2012........................... 208 211 Pool #313522, 7.00%, Due 5/1/2012........................... 393 403 Pool #323223, 6.50%, Due 7/1/2013........................... 166 170 Pool #323980, 6.00%, Due 4/1/2014........................... 388 393 Pool #545038, 6.00%, Due 9/1/2014........................... 322 326 -------- 1,831 --------
See accompanying notes -------------------------------------------------------------------------------- 77 AMERICAN BEACON SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) *w GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.96% 2006-18 A, 4.968%, Due 9/15/2008............................ $ 1,000 $ 991 2006-9 A, 4.201%, Due 8/16/2026............................. 1,995 1,924 Pool #351992, 6.00%, Due 12/15/2008......................... 391 392 -------- 3,307 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 5,138 -------- SHARES ---------- *W SHORT TERM INVESTMENTS - 4.74% American Beacon Enhanced Cash Trust#sec..................... 2,320,339 2,320 American Beacon Money Market Select Fund#sec................ 1,635,152 1,635 -------- TOTAL SHORT TERM INVESTMENTS............................ 3,955 -------- TOTAL INVESTMENTS - 103.11% (COST $87,430).................. 86,007 -------- LIABILITIES, NET OF OTHER ASSETS - (3.11%).................. (2,591) -------- TOTAL NET ASSETS - 100.00%.................................. $ 83,416 ========
--------------- Percentages are stated as a percent of net assets. +- All or a portion of this security is on loan at April 30, 2006. See Note 5. ++- 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 $8,439 or 10.12% of net assets. #- The Fund/Trust is affiliated by having the same investment advisor. See Note 2. sec.- All or a portion of this security is purchased with cash collateral for securities loaned. See accompanying notes -------------------------------------------------------------------------------- 78 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 79 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES April 30, 2006 (Unaudited) (in thousands except share and per share amounts) --------------------------------------------------------------------------------
LARGE CAP MID-CAP BALANCED GROWTH VALUE ----------- ----------- ---------- ASSETS: Investments in unaffiliated securities, at value(A D)... $ 813,870 $ 68,991 $ 43,149 Investments in affiliated securities, at value(B)....... 203,127 4,638 9,960 Foreign currency, at value(C)........................... -- -- -- Cash.................................................... -- 9 -- Receivable for investments sold......................... 4,371 4,170 68 Dividends and interest receivable....................... 3,511 61 34 Receivable for fund shares sold......................... 1,720 217 203 Receivable for tax reclaims............................. -- -- -- Receivable for expense reimbursement.................... -- -- -- Receivable for variation margin on open futures contracts............................................. 53 2 8 Other assets............................................ -- -- 27 ----------- ----------- ---------- TOTAL ASSETS........................................ 1,026,652 78,088 53,449 ----------- ----------- ---------- LIABILITIES: Payable for investments purchased....................... 15,638 4,336 97 Payable upon return of securities loaned................ 145,121 856 8,913 Payable for fund shares redeemed........................ 52 -- -- Dividends payable....................................... -- -- -- Payable under excess expense reimbursement plan......... -- -- 7 Management and investment advisory fees payable (Note 2).................................................... 578 103 86 Administrative service and service fees payable......... 43 -- 1 Net unrealized depreciation on foreign currency contracts............................................. -- -- -- Other liabilities....................................... 68 17 -- ----------- ----------- ---------- TOTAL LIABILITIES................................... 161,500 5,312 9,104 ----------- ----------- ---------- NET ASSETS.................................................. $ 865,152 $ 72,776 $ 44,345 =========== =========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 717,836 71,674 41,089 Undistributed net investment income..................... 6,035 183 161 Accumulated net realized gain (loss).................... 21,747 (5,499) 846 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................ 119,534 6,418 2,249 ----------- ----------- ---------- NET ASSETS.................................................. $ 865,152 $ 72,776 $ 44,345 =========== =========== ========== Shares outstanding (no par value): Institutional Class..................................... 1,069,144 17,564 218,100 =========== =========== ========== PlanAhead Class......................................... 6,666,173 N/A 1,287 =========== =========== ========== Service Class........................................... 21,344 N/A N/A =========== =========== ========== AMR Class............................................... 52,444,854 10,843,473 4,150,575 =========== =========== ========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 14.94 $ 6.66 $ 10.11 =========== =========== ========== PlanAhead Class......................................... $ 14.10 N/A $ 10.11 =========== =========== ========== Service Class........................................... $ 14.04 N/A N/A =========== =========== ========== AMR Class............................................... $ 14.39 $ 6.70 $ 10.15 =========== =========== ========== --------------- (A) Cost of investments in unaffiliated securities.......... $ 695,394 $ 62,612 $ 40,925 (B) Cost of investments in affiliated securities............ $ 203,127 $ 4,638 $ 9,960 (C) Cost of foreign currency................................ $ -- $ -- $ -- (D) Market value of securities on loan...................... $ 142,152 $ 863 $ 8,715
See accompanying notes -------------------------------------------------------------------------------- 80 --------------------------------------------------------------------------------
SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM OPPORTUNITY MARKETS BOND INCOME BOND BOND --------------- ---------- ----------- ----------- ------------ ---------- $ 2,046 $ 153,998 $ 333,652 $ 104,501 $ 93,202 $ 82,052 5 18,029 11,875 26,486 25,989 3,955 -- 2,107 -- -- -- -- -- -- 32 -- -- 994 5 2,224 1,459 -- 1,010 -- 1 386 6,848 1,081 834 828 -- 479 537 27 319 177 -- 6 -- -- -- -- 3 -- -- -- -- -- -- 5 -- -- -- -- -- -- 8 -- 1 -- -------- ---------- ----------- ----------- ---------- ---------- 2,060 177,234 354,411 132,095 121,355 88,006 -------- ---------- ----------- ----------- ---------- ---------- 16 1,867 4,549 147 6,972 994 -- 11,630 24,636 24,910 22,996 3,570 -- -- 113 29 1 -- -- -- 274 -- -- 4 -- 3 -- -- -- -- 1 359 465 92 19 18 -- 5 78 41 1 2 -- 194 -- -- -- -- 3 28 46 10 -- 2 -------- ---------- ----------- ----------- ---------- ---------- 20 14,086 30,161 25,229 29,989 4,590 -------- ---------- ----------- ----------- ---------- ---------- $ 2,040 $ 163,148 $ 324,250 $ 106,866 $ 91,366 $ 83,416 ======== ========== =========== =========== ========== ========== 2,001 102,346 326,193 106,178 102,719 94,214 -- 491 -- (906) 2 (1,174) 1 10,434 (1,686) 1,242 (8,600) (8,007) 38 49,877 (257) 352 (2,755) (1,617) -------- ---------- ----------- ----------- ---------- ---------- $ 2,040 $ 163,148 $ 324,250 $ 106,866 $ 91,366 $ 83,416 ======== ========== =========== =========== ========== ========== 200,005 1,035,048 21,190,562 N/A 9,204,704 8,371,295 ======== ========== =========== =========== ========== ========== 105 347,380 10,486,273 10,588,871 96,729 1,216,119 ======== ========== =========== =========== ========== ========== N/A N/A N/A N/A N/A N/A ======== ========== =========== =========== ========== ========== N/A 7,848,925 N/A N/A N/A N/A ======== ========== =========== =========== ========== ========== $ 10.20 $ 17.61 $ 10.23 N/A $ 9.82 $ 8.70 ======== ========== =========== =========== ========== ========== $ 10.19 $ 17.46 $ 10.24 $ 10.09 $ 9.89 $ 8.71 ======== ========== =========== =========== ========== ========== N/A N/A N/A N/A N/A N/A ======== ========== =========== =========== ========== ========== N/A $ 17.69 N/A N/A $ N/A $ N/A ======== ========== =========== =========== ========== ========== $ 2,008 $ 104,051 $ 333,909 $ 104,149 $ 95,957 $ 83,475 $ 5 $ 18,029 $ 11,875 $ 26,486 $ 25,989 $ 3,955 $ -- $ 2,084 $ -- $ -- $ -- $ -- $ -- $ 11,347 $ 23,935 $ 24,406 $ 22,567 $ 3,499
-------------------------------------------------------------------------------- 81 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS Six Months Ended April 30, 2006 (Unaudited) (in thousands) --------------------------------------------------------------------------------
LARGE CAP MID-CAP BALANCED GROWTH VALUE -------- --------- ------- INVESTMENT INCOME: Dividend income from unaffiliated securities (net of foreign taxes)(A)..................................... $ 6,283 $ 447 $ 473 Dividend income from affiliated securities.............. 1,248 75 37 Interest income......................................... 6,615 5 4 Income derived from securities lending, net............. 87 -- 6 ------- ------ ------ TOTAL INVESTMENT INCOME............................. 14,233 527 520 ------- ------ ------ EXPENSES: Management and investment advisory fees (Note 2)........ 1,165 169 145 Administrative service fees (Note 2): Institutional Class................................... 19 -- 2 PlanAhead Class....................................... 115 -- -- Service Class......................................... -- -- -- AMR Class (formerly Institutional Class prior to 11/30/05)........................................... -- -- 11 Transfer agent fees: Institutional Class................................... 2 -- -- PlanAhead Class....................................... 12 -- -- Service Class......................................... -- -- -- AMR Class............................................. 11 3 1 Fund accounting fees.................................... 72 7 5 Professional fees....................................... 24 13 15 Registration fees and expenses.......................... 30 -- 2 Service fees: PlanAhead Class (Note 2).............................. 115 -- -- Service Class (Note 2)................................ -- -- -- Distribution plan -- Service Class (Note 2)............. -- -- -- Prospectus and shareholder reports...................... 65 5 3 Other expenses.......................................... 7 1 -- ------- ------ ------ TOTAL EXPENSES...................................... 1,637 198 184 ------- ------ ------ Net (fees waived and expenses reimbursed)/recouped by Manager (Note 2)...................................... -- -- 7 ------- ------ ------ NET EXPENSES........................................ 1,637 198 191 ------- ------ ------ NET INVESTMENT INCOME....................................... 12,596 329 329 ------- ------ ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from:(B) Investments........................................... 23,802 2,027 1,158 Commission recapture.................................. 9 2 4 Foreign currency transactions......................... -- -- -- Futures contracts..................................... 2,769 166 345 Change in net unrealized appreciation or depreciation of:(C) Investments........................................... 18,573 2,904 2,864 Foreign currency translations......................... -- -- -- Futures contracts..................................... 2,022 77 (53) ------- ------ ------ NET GAIN (LOSS) ON INVESTMENTS...................... 47,175 5,176 4,318 ------- ------ ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $59,771 $5,505 $4,647 ======= ====== ====== (A) Foreign taxes....................................... $ 35 $ -- $ 1 (B) Net of foreign withholding taxes on capital gains... $ -- $ -- $ -- (C) Net of unrealized appreciation of foreign withholding taxes on capital gains.................. $ -- $ -- $ --
--------------- (1) Commencement of Operations March 31, 2006. See accompanying notes -------------------------------------------------------------------------------- 82 --------------------------------------------------------------------------------
SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM OPPORTUNITY(1) MARKETS BOND INCOME BOND BOND --------------- -------- ---------- -------- ------------ ---------- $ 2 $ 1,382 $ -- $ 100 $ -- $ -- -- 155 292 68 50 56 -- 11 13,153 1,996 2,160 1,499 -- 15 31 18 22 1 --- ------- ------- ------ ------- ------ 2 1,563 13,476 2,182 2,232 1,556 --- ------- ------- ------ ------- ------ 1 556 821 189 114 106 -- 17 271 -- -- -- -- 5 129 137 1 12 -- -- -- -- -- -- -- -- -- -- -- -- -- 2 16 -- -- -- -- 2 3 (1) 3 3 -- -- -- -- -- -- -- 6 -- -- 6 6 -- 232 29 9 8 7 2 15 16 4 3 4 1 12 31 7 14 13 -- 5 129 137 1 12 -- -- -- -- -- -- -- -- -- -- -- -- -- 29 32 6 6 8 1 1 2 1 1 1 --- ------- ------- ------ ------- ------ 5 882 1,479 489 157 172 --- ------- ------- ------ ------- ------ (3) 3 -- -- (2) (1) --- ------- ------- ------ ------- ------ 2 885 1,479 489 155 171 --- ------- ------- ------ ------- ------ -- 678 11,997 1,693 2,077 1,385 --- ------- ------- ------ ------- ------ 1 10,428 (1,573) 1,140 (508) (77) -- -- -- -- -- -- -- 749 -- -- -- -- -- 480 -- -- -- -- 38 27,043 5,559 492 (1,121) 13 -- 15 -- -- -- -- -- 1,239 -- -- -- -- --- ------- ------- ------ ------- ------ 39 39,954 3,986 1,632 (1,629) (64) --- ------- ------- ------ ------- ------ $39 $40,632 $15,983 $3,325 $ 448 $1,321 === ======= ======= ====== ======= ====== $-- $ 125 $ -- $ -- $ -- $ -- $-- $ 32 $ -- $ -- $ -- $ -- $-- $ 125 $ -- $ -- $ -- $ --
-------------------------------------------------------------------------------- 83 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) --------------------------------------------------------------------------------
BALANCED LARGE CAP GROWTH MID-CAP VALUE ------------------------- ------------------------- ------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income..................... $ 12,596 $ 20,300 $ 329 $ 588 $ 329 $ 431 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions............................ 26,580 44,346 2,195 3,706 1,507 8,616 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations............................ 20,595 9,553 2,981 (207) 2,811 (1,124) -------- --------- ------- -------- -------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................... 59,771 74,199 5,505 4,087 4,647 7,923 -------- --------- ------- -------- -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class..................... (359) (183) -- -- (9) -- PlanAhead Class......................... (2,286) (584) -- -- -- -- Service Class........................... -- -- -- -- -- -- AMR Class*.............................. (20,180) (16,172) (376) (474) (481) (115) Net realized gain on investments: Institutional Class..................... (674) (277) -- -- (136) -- PlanAhead Class......................... (4,591) (930) -- -- -- -- AMR Class*.............................. (35,228) (21,970) -- -- (9,132) (3) -------- --------- ------- -------- -------- --------- NET DISTRIBUTIONS TO SHAREHOLDERS..... (63,318) (40,116) (376) (474) (9,758) (118) -------- --------- ------- -------- -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares............. 45,100 247,623 11,018 39,712 6,983 164,231 Reinvestment of dividends and distributions........................... 62,858 40,085 376 474 9,756 118 Cost of shares redeemed................... (52,330) (175,089) (7,035) (35,633) (11,680) (153,362) Redemption fees........................... -- -- -- -- 55 4 -------- --------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS..... 55,628 112,619 4,359 4,553 5,114 10,991 -------- --------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS......... 52,081 146,702 9,488 8,166 3 18,796 -------- --------- ------- -------- -------- --------- NET ASSETS: Beginning of period....................... 813,071 666,369 63,288 55,122 44,342 25,546 -------- --------- ------- -------- -------- --------- END OF PERIOD*............................ $865,152 $ 813,071 $72,776 $ 63,288 $ 44,345 $ 44,342 ======== ========= ======= ======== ======== ========= * Includes undistributed net investment income (loss) of........................ $ 6,035 $ 15,755 $ 183 $ 231 $ 161 $ 336 ======== ========= ======= ======== ======== =========
--------------- (1) Commencement of Operations * Formerly Institutional Class prior to 11/30/05 for Mid-Cap Value Fund See accompanying notes -------------------------------------------------------------------------------- 84 --------------------------------------------------------------------------------
SMALL CAP VALUE OPPORTUNITY(1) EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME --------------- ------------------------- ------------------------- ------------------------- SIX MONTHS SIX MONTHS SIX MONTHS FROM MARCH 31 ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED TO APRIL 30, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, 2006 2006 2005 2006 2005 2006 2005 --------------- ----------- ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) $ -- $ 678 $ 1,690 $ 11,997 $ 27,142 $ 1,693 $ 3,156 1 11,657 16,180 (1,573) 3,293 1,140 570 38 28,297 9,392 5,559 (19,461) 492 (2,306) ------ -------- -------- -------- --------- -------- -------- 39 40,632 27,262 15,983 10,974 3,325 1,420 ------ -------- -------- -------- --------- -------- -------- -- (163) (39) (8,215) (16,952) -- -- -- (36) (3) (3,781) (10,190) (2,017) (3,495) -- -- -- (1) -- -- -- -- (1,551) (577) -- -- -- -- -- (1,683) (673) (2,254) (4,274) -- -- -- (425) (86) (1,092) (2,693) (13) -- -- (14,022) (6,885) -- -- -- -- ------ -------- -------- -------- --------- -------- -------- -- (17,880) (8,263) (15,343) (34,109) (2,030) (3,495) ------ -------- -------- -------- --------- -------- -------- 2,001 19,372 41,933 68,666 164,045 7,634 31,229 -- 17,795 8,256 13,175 30,574 2,030 3,496 -- (3,592) (45,081) (95,336) (224,426) (16,434) (24,206) -- 17 2 -- -- -- -- ------ -------- -------- -------- --------- -------- -------- 2,001 33,592 5,110 (13,495) (29,807) (6,770) 10,519 ------ -------- -------- -------- --------- -------- -------- 2,040 56,344 24,109 (12,855) (52,942) (5,475) 8,444 ------ -------- -------- -------- --------- -------- -------- -- 106,804 82,695 337,105 390,047 112,341 103,897 ------ -------- -------- -------- --------- -------- -------- $2,040 $163,148 $106,804 $324,250 $ 337,105 $106,866 $112,341 ====== ======== ======== ======== ========= ======== ======== $ -- $ 491 $ 1,524 $ -- $ -- $ (906) $ (470) ====== ======== ======== ======== ========= ======== ========
-------------------------------------------------------------------------------- 85 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) -- CONTINUED --------------------------------------------------------------------------------
INTERMEDIATE BOND SHORT-TERM BOND ------------------------- ------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 2,077 $ 3,950 $ 1,385 $ 2,629 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions.......... (508) 61 (77) (140) Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations.......................................... (1,121) (2,958) 13 (1,625) -------- -------- -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................................ 448 1,053 1,321 864 -------- -------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class (terminated 3/1/05) (Note 1)...... -- (13) -- (48) PlanAhead Class....................................... (20) (39) (184) (304) Institutional Class (known as AMR Class prior to 3/1/05) (Note 1).................................... (2,132) (4,163) (1,683) (3,662) -------- -------- -------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS................... (2,152) (4,215) (1,867) (4,014) -------- -------- -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........................... 6,996 47,062 5,697 32,831 Reinvestment of dividends and distributions............. 2,151 4,212 1,862 3,994 Cost of shares redeemed................................. (10,401) (52,033) (11,862) (37,019) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS................................ (1,254) (759) (4,303) (194) -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS....................... (2,958) (3,921) (4,849) (3,344) -------- -------- -------- -------- NET ASSETS: Beginning of period..................................... 94,324 98,245 88,265 91,609 -------- -------- -------- -------- END OF PERIOD*.......................................... $ 91,366 $ 94,324 $ 83,416 $ 88,265 ======== ======== ======== ======== * Includes undistributed net investment income (loss) of.................................................... $ 2 $ 1 $ (1,174) $ (1,843) ======== ======== ======== ========
-------------------------------------------------------------------------------- 86 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), 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 Growth Fund, the American Beacon Mid-Cap Value Fund, the American Beacon Small Cap Value Opportunity 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. American Beacon Advisors, Inc. (the "Manager"), 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 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 Fee -- 0.25% PLANAHEAD CLASS General public and investors investing through an Administrative Service Fee -- 0.25% intermediary Service Fee -- 0.25% SERVICE CLASS Investors investing through an intermediary Administrative Service Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- 0.25% 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 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. Effective November 30, 2005, the existing Institutional Class of the Mid-Cap Value Fund was renamed AMR Class, and the Fund began offering a new Institutional Class of shares. -------------------------------------------------------------------------------- 87 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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, 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. 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 -------------------------------------------------------------------------------- 88 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 Growth, Mid-Cap Value, Small Cap Value Opportunity, 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 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 Growth, Mid-Cap Value, Small Cap Value Opportunity 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. -------------------------------------------------------------------------------- 89 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 impose a 2% redemption fee on certain shares held for less than 90 days, and the AMR Class of the Mid-Cap Value Fund imposes a 2% redemption fee on certain shares held for less than 180 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. The fee is retained by the class that imposes the fee. Effective May 1, 2006, the fee will be allocated to all classes of each Fund. 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 Balanced, Large Cap Growth, Mid-Cap Value, Small Cap Value Opportunity, Emerging Markets, High Yield Bond, Enhanced Income and Intermediate Bond Funds are managed by one or more investment advisors which have entered into separate -------------------------------------------------------------------------------- 90 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 Growth Fund, Mid-Cap Value Fund, Small Cap Value Opportunity 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 six months ended April 30, 2006 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% $1,165 $745 $420 Large Cap Growth Fund.............................. .35%-.55% 169 134 35 Mid-Cap Value Fund................................. .40%-.90% 145 124 21 Small Cap Value Opportunity Fund................... .45%-.55% 1 1 -- Emerging Markets Fund.............................. .80%-1.20% 556 489 67 High Yield Bond Fund............................... .52% 821 661 160 Enhanced Income Fund............................... .25%-.85% 189 134 55 Intermediate Bond Fund............................. .25% 114 40 74
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 the Statement of Operations. During the six months ended April 30, 2006, securities lending fees paid to the Manager were as follows (in thousands): Balanced Fund............................................... $15 Mid-Cap Value Fund.......................................... 1 Emerging Markets Fund....................................... 3 High Yield Bond Fund........................................ 5 Enhanced Income Fund........................................ 2 Intermediate Bond Fund...................................... 3
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. -------------------------------------------------------------------------------- 91 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 .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 .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 $262 and $50, respectively for the six months ended April 30, 2006. 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 -------------------------------------------------------------------------------- 92 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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.................................................... $28,666 $61,588 $90,254 Large Cap Growth............................................ 214 239 453 Mid-Cap Value............................................... 862 4,336 5,198 Emerging Markets............................................ 3,534 4,876 8,410 High Yield Bond............................................. 6,670 -- 6,670 Enhanced Income............................................. 1,603 12,732 14,335 Intermediate Bond........................................... 1,148 9,557 10,705 Short-Term Bond............................................. 1,311 2,373 3,684
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 plus a fee for each Board meeting attended. At April 30, 2006, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Funds, 21% of the Institutional Class of the High Yield Bond Fund, 99% of the Institutional Class of the Intermediate Bond Fund and 96% 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 borrow from, or lend money to, other participating Funds. The Funds did not utilize the credit facility during the six months ended April 30, 2006. -------------------------------------------------------------------------------- 93 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- Reimbursement of Expenses The Manager contractually agreed to reimburse the following Funds for other expenses through February 28, 2007 to the extent that total annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP ---- ----- ----------- Balanced.................................................... Service 1.09% Large Cap Growth............................................ Institutional .90% Mid-Cap Value............................................... Institutional 1.01% Emerging Markets............................................ PlanAhead 2.00% Intermediate Bond........................................... PlanAhead .95% Short-Term Bond............................................. PlanAhead .87%
During the six months ended April 30, 2006, the Manager contractually waived or reimbursed expenses as follows:
FUND CLASS AMOUNT ---- ----- ------ Balanced.................................................... Service $ 4 Large Cap Growth............................................ Institutional 31 Mid-Cap Value............................................... Institutional 40 Intermediate Bond........................................... PlanAhead 1,974 Short-Term Bond............................................. PlanAhead 328
During the six months ended April 30, 2006, 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 ---- ----- ----------- ------ Small Cap Value Opportunity................................. Institutional 1.06% $2,944 Small Cap Value Opportunity................................. PlanAhead 1.31% 1
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 agreed upon contractual expense limit. The following waived fees or reimbursed expenses are subject to potential recovery expiring in:
YEAR BALANCED LARGE CAP GROWTH MID-CAP VALUE INTERMEDIATE BOND SHORT-TERM BOND ---- -------- ---------------- -------------- ----------------- --------------- 2009................. 4 31 40 1,974 328
During the six months ended April 30, 2006, due to asset growth and a reduction of expenses, the Manager recouped $7,258 and $2,831 from the Mid-Cap Value Fund -- Institutional Class and the Emerging Markets -- PlanAhead Class, respectively for expenses previously waived during 2005. 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 -------------------------------------------------------------------------------- 94 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- 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 for the six months ended April 30, 2006 and the year ended October 31, 2005 were as follows (in thousands):
SMALL CAP VALUE BALANCED LARGE-CAP GROWTH MID CAP VALUE OPPORTUNITY ------------------------- ------------------------- ------------------------- ----------- SIX MONTHS SIX MONTHS SIX MONTHS PERIOD ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, 2006 2005 2006 2005 2006 2005 2006 ----------- ----------- ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class............ $ 405 $ 207 $ -- $ -- $ 114 $118 $ -- PlanAhead Class.... 2,594 665 -- -- -- -- -- AMR Class.......... 22,546 18,088 376 474 7,556 -- -- LONG-TERM CAPITAL GAIN Institutional Class............ 629 253 -- -- 31 -- -- PlanAhead Class.... 4,282 849 -- -- -- -- -- AMR Class.......... 32,862 20,054 -- -- 2,057 -- -- ------- ------- ---- ---- ------ ---- ---- TOTAL DISTRIBUTIONS PAID......... $63,318 $40,116 $376 $474 $9,758 $118 $ -- ------- ------- ---- ---- ------ ---- ----
EMERGING MARKETS HIGH-YIELD BOND ENHANCED INCOME ------------------------- ------------------------- ------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, 2006 2005 2006 2005 2006 2005 ----------- ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class................ $ 416 $ 39 $ 8,215 $17,772 $ -- $ -- PlanAhead Class.................... 100 3 3,781 10,707 2,017 3,495 Service Class...................... -- -- -- -- -- -- AMR Class.......................... 3,659 577 -- -- -- -- LONG-TERM CAPITAL GAIN Institutional Class................ 1,430 673 2,254 3,454 -- -- PlanAhead Class.................... 362 86 1,092 2,176 13 -- Service Class...................... -- -- -- -- -- -- AMR Class.......................... 11,913 6,885 -- -- -- -- ------- ------ ------- ------- ------ ------ TOTAL DISTRIBUTIONS PAID....... $17,880 $8,263 $15,343 $34,109 $2,030 $3,495 ------- ------ ------- ------- ------ ------
-------------------------------------------------------------------------------- 95 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
INTERMEDIATE BOND SHORT-TERM BOND ------------------------- ------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class (terminated 3/1/05)................. $ -- $ 13 $ -- $ 48 PlanAhead Class......................................... 20 39 184 304 Institutional Class (formerly known as AMR Class prior to 3/1/05)...................................... 2,132 4,163 1,683 3,662 ------ ------ ------ ------ TOTAL DISTRIBUTIONS PAID............................ $2,152 $4,215 $1,867 $4,014 ------ ------ ------ ------
As of April 30, 2006, the components of distributable earnings were as follows (in thousands):
SMALL CAP BALANCED LARGE CAP MID-CAP VALUE EMERGING FUND GROWTH FUND VALUE FUND OPPORTUNITY MARKETS FUND -------- ------------- ---------- ----------- ------------ Cost basis of investments for federal income tax purposes................................................ $904,064 $68,005 $51,378 $2,013 $123,074 Unrealized appreciation.................................. 130,211 7,222 3,866 87 50,492 Unrealized depreciation.................................. (17,278) (1,598) (2,135) (49) (1,539) -------- ------- ------- ------ -------- Net unrealized appreciation/(depreciation)............... 112,933 5,824 1,731 38 48,953 Undistributed ordinary income............................ 11,268 182 1,209 1 2,485 Undistributed long-term gain/(loss)...................... 22,972 (4,708) 317 -- 9,524 -------- ------- ------- ------ -------- Distributable earnings................................... $147,173 $ 1,098 $ 3,257 $ 39 $ 60,962 ======== ======= ======= ====== ========
ENHANCED HIGH YIELD INCOME INTERMEDIATE SHORT-TERM BOND FUND FUND BOND FUND BOND FUND ---------- ------------- ------------- ---------- Cost basis of investments for federal income tax purposes... $345,897 $130,636 $121,953 $88,902 Unrealized appreciation..................................... 4,313 3,310 60 -- Unrealized depreciation..................................... (4,683) (2,959) (2,822) (2,895) -------- -------- -------- ------- Net unrealized appreciation/(depreciation).................. (370) 351 (2,762) (2,895) Undistributed ordinary income............................... 274 -- -- 4 Undistributed long-term gain/(loss)......................... (1,569) 1,241 (8,593) (8,006) -------- -------- -------- ------- Distributable earnings...................................... $ (1,665) $ 1,592 $(11,355) $10,897 ======== ======== ======== =======
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. -------------------------------------------------------------------------------- 96 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- Accordingly, the following amounts represent current year permanent differences that have been reclassified as of April 30, 2006 (in thousands):
LARGE CAP MID-CAP EMERGING ENHANCED INTERMEDIATE SHORT-TERM BALANCED GROWTH VALUE MARKETS INCOME BOND BOND FUND FUND FUND FUND FUND FUND FUND -------- --------- ------- -------- -------- ------------ ---------- Paid-in-capital................................ $ 18 $-- $ -- $ -- $ 11 $ -- $ 1 Undistributed net investment income............ 509 (1) (14) 39 (112) 76 1,153 Accumulated net realized gain (loss)........... (527) 1 14 (39) 101 (76) (1,154) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency...................................... -- -- -- -- -- -- --
At April 30, 2006 capital loss carryforward positions for federal income tax purposes were as follows (in thousands):
FUND 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL ---- ---- ------ ------ ----- ------ ---- ---- ------ ------ ------ Large Cap Growth........................ $-- $ -- $ -- $ -- $4,035 $674 $ -- $ -- $ -- $4,709 High Yield Bond......................... -- -- -- -- -- -- -- 1,569 -- 1,569 Intermediate Bond....................... -- -- 7,367 -- 328 -- -- 318 580 8,593 Short-Term Bond......................... 437 1,991 1,218 -- 913 161 800 1,256 1,231 8,007
Net capital loss carryovers utilized for the year ended April 30, 2006 are as follows: Large Cap Growth Fund $1,852. 4. INVESTMENT TRANSACTIONS The cost of purchases and proceeds from sales and maturities of long-term investments during the six months ended April 30, 2006 were as follows (in thousands):
SMALL CAP LARGE CAP MID-CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM BALANCED GROWTH VALUE OPPORTUNITY MKT BOND INCOME BOND BOND -------- --------- ------- ----------- -------- ---------- -------- ------------ ---------- Purchases (excluding U.S. government securities)........ $152,698 $33,282 $ 8,206 $2,012 $49,474 $121,315 $ 19,044 $36,384 $16,970 Sales and maturities (excluding U.S. government securities)........ 151,062 29,013 11,435 5 37,514 138,167 18,489 32,816 17,821 Purchases of U.S. government securities......... 57,017 -- -- -- -- -- 512 15,543 2,933 Sales and maturities of U.S. government securities......... 57,009 -- -- -- -- -- 5,252 14,090 4,904
-------------------------------------------------------------------------------- 97 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- A summary of the Funds' direct transactions in Affiliated Funds for the six months ended April 30, 2006 is set forth below (in thousands):
OCTOBER 31, 2005 APRIL 30, 2006 FUND AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE ---- ----------- ------------------- --------- -------- ------------------- Balanced......................... Select Fund $56,990 $112,064 $111,049 $58,005 Large Cap Growth................. Select Fund 3,199 14,847 14,263 3,783 Mid-Cap Value.................... Select Fund 2,487 13,560 15,001 1,046 Small Cap Value Opportunity...... Select Fund -- 501 496 5 Emerging Markets................. Select Fund 3,699 39,747 37,047 6,399 High Yield Bond.................. Select Fund 8,267 107,094 103,486 11,875 Enhanced Income.................. Select Fund 4,188 24,492 27,104 1,576 Intermediate Bond................ Select Fund 3,312 16,119 16,438 2,993 Short Term Bond.................. Select Fund 2,080 21,884 23,579 385
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. -------------------------------------------------------------------------------- 98 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) -------------------------------------------------------------------------------- At April 30, 2006, 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.................................................... $142,152 $145,121 Large Cap Growth............................................ 863 856 Mid-Cap Value............................................... 8,715 8,913 Emerging Markets............................................ 11,347 11,630 High Yield Bond............................................. 23,935 24,636 Enhanced Income............................................. 24,406 24,910 Intermediate Bond........................................... 22,567 22,996 Short Term Bond............................................. 3,499 3,570
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 April 30, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------- -------------------- ------------------ BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------- -------- -------- ------ --------- ------- --------- ------- -------- Shares sold................. 123 $1,806 1,604 $ 22,490 21 $ 295 1,434 $ 20,509 Reinvestment of dividends... 68 982 474 6,468 -- -- 3,986 55,408 Shares redeemed............. (64) (943) (1,529) (21,302) -- -- (2,105) (30,085) ------ ------ ------ --------- ------- --------- ------- -------- Net increase (decrease) in shares outstanding........ 127 $1,845 549 $ 7,656 21 $ 295 3,315 $ 45,832 ====== ====== ====== ========= ======= ========= ======= ========
INSTITUTIONAL CLASS AMR CLASS -------------------- ------------------ LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT --------------------- -------- -------- ------ -------- Shares sold..................................... 1 $ 7 1,669 $ 11,011 Reinvestment of dividends....................... -- -- 57 376 Shares redeemed................................. -- (3) (1,060) (7,032) ------ ------ ------ -------- Net increase in shares outstanding.............. 1 $ 4 666 $ 4,355 ====== ====== ====== ========
-------------------------------------------------------------------------------- 99 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- ---------------- ----------------- MID-CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ------------------ ------- -------- ------ ------ ------ ------- Shares sold..................................... 260 $ 2,761 1 $ 13 399 $ 4,209 Reinvestment of dividends....................... 15 142 -- -- 1,008 9,614 Shares redeemed................................. (57) (681) -- -- (1,038)* (10,944)* ------ ------- ------ ------ ------ ------- Net increase in shares outstanding.............. 218 $ 2,222 1 $ 13 369 $ 2,879 ====== ======= ====== ====== ====== =======
* Net of Redemption Fees
INSTITUTIONAL CLASS PLANAHEAD CLASS -------------------- ------------------- SMALL CAP VALUE OPPORTUNITY FUND SHARES AMOUNT SHARES AMOUNT -------------------------------- -------- -------- ------ --------- Shares sold....................................... 200 $2,000 -- $ 1 Reinvestment of dividends......................... -- -- -- -- Shares redeemed................................... -- -- -- -- ------ ------ ------ --------- Net increase (decrease) in shares outstanding..... 200 $2,000 -- $ 1 ====== ====== ====== =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ----------------- ----------------- EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT --------------------- -------- -------- ------ ------- ------- ------- Shares sold....................................... 293 $4,804 175 $ 2,799 723 $11,769 Reinvestment of dividends......................... 123 1,788 30 434 1,066 15,573 Shares redeemed*.................................. -- (5) (30) (468) (195) (3,102) ------ ------ ------ ------- ------- ------- Net increase in shares outstanding................ 416 $6,587 175 $ 2,765 1,594 $24,240 ====== ====== ====== ======= ======= =======
* Net of Redemption Fees
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS -------------------- ------------------- ---------------- HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT -------------------- ------- --------- ------- -------- ------- ------ Shares sold...................................... 4,208 $ 42,787 2,533 $ 25,838 4 $ 41 Reinvestment of dividends........................ 818 8,329 476 4,845 -- 1 Shares redeemed.................................. (5,049) (51,448) (4,297) (43,844) (4) (44) ------ -------- ------- -------- ------- ------ Net increase (decrease) in shares outstanding.... (23) $ (332) (1,288) $(13,161) -- $ (2) ====== ======== ======= ======== ======= ======
PLANAHEAD CLASS ------------------ ENHANCED INCOME FUND SHARES AMOUNT -------------------- ------ -------- Shares sold...................................... 758 $ 7,634 Reinvestment of dividends........................ 201 2,030 Shares redeemed.................................. (1,626) (16,434) ------ -------- Net increase (decrease) in shares outstanding.... (667) $ (6,770) ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS -------------------- ------------------- INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT ---------------------- ------- --------- ------- -------- Shares sold...................................... 699 $ 6,969 3 $ 27 Reinvestment of dividends........................ 214 2,132 2 19 Shares redeemed.................................. (1,029) (10,276) (12) (125) ------ -------- ------- -------- Net decrease in shares outstanding............... (116) $ (1,175) (7) $ (79) ====== ======== ======= ========
-------------------------------------------------------------------------------- 100 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS -------------------- ------------------- SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT -------------------- ------- --------- ------- -------- Shares sold...................................... 243 $ 2,122 409 $ 3,575 Reinvestment of dividends........................ 193 1,682 21 180 Shares redeemed.................................. (1,166) (10,186) (192) (1,676) ------ -------- ------- -------- Net increase (decrease) in shares outstanding.... (730) $ (6,382) 238 $ 2,079 ====== ======== ======= ========
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 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 increase (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) ======= ========= ====== ======== ======= ======
-------------------------------------------------------------------------------- 101 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED April 30, 2006 (Unaudited) --------------------------------------------------------------------------------
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
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 -------------------------------------------------------------------------------- 102 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 103 AMERICAN BEACON BALANCED FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, -------------------------------------------------- 2006 2005 2004 2003 2002 2001(C D F) ----------- ------- ------- ------- ------ ----------- (UNAUDITED) Net asset value, beginning of period............................ $ 15.00 $ 14.31 $ 12.99 $ 10.97 $12.07 $ 12.27 ------- ------- ------- ------- ------ -------- Income from investment operations: Net investment income(A) (B).... 0.21 0.36 0.29 0.31(G) 0.11 0.51 Net gains (losses) on securities (both realized and unrealized)(B)................ 0.83 1.11 1.36 1.84(G) (0.69) (0.03) ------- ------- ------- ------- ------ -------- Total income (loss) from investment operations........................ 1.04 1.47 1.65 2.15 (0.58) 0.48 ------- ------- ------- ------- ------ -------- Less distributions: Dividends from net investment income........................ (0.38) (0.31) (0.33) (0.13) (0.44) (0.68) Distributions from net realized gains on securities........... (0.72) (0.47) -- -- (0.08) -- ------- ------- ------- ------- ------ -------- Total distributions................ (1.10) (0.78) (0.33) (0.13) (0.52) (0.68) ------- ------- ------- ------- ------ -------- Net asset value, end of period..... $ 14.94 $ 15.00 $ 14.31 $ 12.99 $10.97 $ 12.07 ======= ======= ======= ======= ====== ======== Total return....................... 7.21%(H) 10.53% 10.53% 19.77% (5.14)% 4.07% ======= ======= ======= ======= ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands).................... $15,977 $14,122 $ 8,378 $ 9,041 $8,994 $157,775 Ratios to average net assets (annualized): Expenses, net of waivers(B)... 0.60% 0.56% 0.63% 0.63% 0.62% 0.62% Expenses before waivers(B).... 0.60% 0.56% 0.63% 0.63% 0.62% 0.62% Net investment income, net of waivers(B).................. 2.79% 2.45% 2.15% 2.74% 3.12% 3.56% Net investment income (loss), before waivers(B)........... 2.79% 2.45% 2.15% 2.74% 3.12% 3.56% Portfolio turnover rate(E)...... 27%(H) 58% 62% 69% 84% 122% PLANAHEAD CLASS ----------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------------------------- 2006 2005 2004 2003 2002 2001(C D F) ----------- ------- ------- ------- ------- ----------- (UNAUDITED) Net asset value, beginning of period............................ $ 14.20 $ 13.62 $ 12.40 $ 10.81 $ 11.88 $ 12.08 ------- ------- ------- ------- ------- -------- Income from investment operations: Net investment income(A) (B).... 0.19 0.34 0.27 0.28(G) 0.41 0.51 Net gains (losses) on securities (both realized and unrealized)(B)................ 0.79 1.01 1.25 1.74(G) (0.99) (0.06) ------- ------- ------- ------- ------- -------- Total income (loss) from investment operations........................ 0.98 1.35 1.52 2.02 (0.58) 0.45 ------- ------- ------- ------- ------- -------- Less distributions: Dividends from net investment income........................ (0.36) (0.30) (0.30) (0.43) (0.41) (0.65) Distributions from net realized gains on securities........... (0.72) (0.47) -- -- (0.08) -- ------- ------- ------- ------- ------- -------- Total distributions................ (1.08) (0.77) (0.30) (0.43) (0.49) (0.65) ------- ------- ------- ------- ------- -------- Net asset value, end of period..... $ 14.10 $ 14.20 $ 13.62 $ 12.40 $ 10.81 $ 11.88 ======= ======= ======= ======= ======= ======== Total return....................... 7.15%(H) 10.12% 12.44% 19.36% (5.18)% 3.84% ======= ======= ======= ======= ======= ======== Ratios and supplemental data: Net assets, end of period (in thousands).................... $93,985 $86,875 $21,571 $13,321 $10,561 $ 12,176 Ratios to average net assets (annualized): Expenses, net of waivers(B)... 0.85% 0.86% 0.93% 0.94% 0.90% 0.84% Expenses before waivers(B).... 0.85% 0.86% 0.93% 0.94% 0.90% 0.84% Net investment income, net of waivers(B).................. 2.54% 2.14% 1.84% 2.40% 2.83% 3.29% Net investment income (loss), before waivers(B)........... 2.54% 2.14% 1.84% 2.40% 2.83% 3.29% Portfolio turnover rate(E)...... 27%(H) 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. -------------------------------------------------------------------------------- 104 --------------------------------------------------------------------------------
SERVICE CLASS AMR CLASS --------------------------- ------------------------------------------------------------------------------------------- SIX MONTHS SIX MONTHS ENDED MAY 31 TO ENDED YEAR ENDED OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, --------------------------------------------------------------------------- 2006 2005 2006 2005 2004 2003 2002 2001(C D F) ----------- ------------- ----------- -------- -------- -------- -------- ----------- (UNAUDITED) (UNAUDITED) $14.16 $ 13.96 $ 14.49 $ 13.87 $ 12.60 $ 10.98 $ 12.06 $ 12.27 ------ --------- -------- -------- -------- -------- -------- -------- 0.27 0.09 0.23 0. 39 0.32 0.34 0.48 0.56 0.67 0.11 0.80 1.05 1.31 1.78 (1.01) (0.05) ------ --------- -------- -------- -------- -------- -------- -------- 0.94 0.20 1.03 1.44 1.63 2.12 (0.53) 0.51 ------ --------- -------- -------- -------- -------- -------- -------- (0.34) -- (0.41) (0.35) (0.36) (0.50) (0.47) (0.72) (0.72) -- (0.72) (0.47) -- -- (0.08) -- ------ --------- -------- -------- -------- -------- -------- -------- (1.06) -- (1.13) (0.82) (0.36) (0.50) (0.55) (0.72) ------ --------- -------- -------- -------- -------- -------- -------- $14.04 $ 14.16 $ 14.39 $ 14.49 $ 13.87 $ 12.60 $ 10.98 $ 12.06 ====== ========= ======== ======== ======== ======== ======== ======== 6.92%(H) 1.43%(H) 7.41%(H) 10.63% 13.13% 20.06% (4.71)% 4.38% ====== ========= ======== ======== ======== ======== ======== ======== $ 299 $ 1 $754,891 $712,073 $636,420 $557,612 $487,526 $526,405 1.03% 1.09%(I) 0.33% 0.33% 0.37% 0.38% 0.35% 0.36% 1.05% 360.24%(I) 0.33% 0.33% 0.37% 0.38% 0.35% 0.36% 2.05% 1.52%(I) 3.07% 2.70% 2.40% 2.98% 3.39% 3.77% 2.04% (357.63)%(I) 3.07% 2.70% 2.40% 2.98% 3.39% 3.77% 27%(H) 58%(J) 27%(H) 58% 62% 69% 84% 122%
-------------------------------------------------------------------------------- 105 AMERICAN BEACON LARGE CAP GROWTH FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ------------------------------------------------------ 2006 2005 2004 2003 2002 2001 ----------- -------- --------- ------- -------- -------- (UNAUDITED) Net asset value, beginning of period................... $ 6.18 $ 5.82 $ 5.47 $ 4.53 $ 5.66 $ 9.54 ------ -------- --------- ------- -------- -------- Income from investment operations: Net investment income (loss)(A)..................... 0.02 0.04 0.02 0.02 0.03 (0.01) Net gains (losses) on securities (both realized and unrealized)(A).................................... 0.49 0.37 0.35 0.94 (1.16) (3.86) ------ -------- --------- ------- -------- -------- Total income (loss) from investment operations......... 0.51 0.41 0.37 0.96 (1.13) (3.87) ------ -------- --------- ------- -------- -------- Less distributions: Dividends from net investment income................ (0.03) (0.05) (0.02) (0.02) -- (0.01) ------ -------- --------- ------- -------- -------- Total distributions.................................... (0.03) (0.05) (0.02) (0.02) -- (0.01) ------ -------- --------- ------- -------- -------- Net asset value, end of period......................... $ 6.66 $ 6.18 $ 5.82 $ 5.47 $ 4.53 $ 5.66 ====== ======== ========= ======= ======== ======== Total return........................................... 8.30%(C) 7.06% 6.71% 21.15% (19.96)% (40.62)% ====== ======== ========= ======= ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)............ $ 117 $ 105 $ 1 $ 1 $ 1 $ 1 Ratios to average net assets (annualized)(A): Expenses, net of waivers.......................... 0.88% 0.89% 0.84% 0.87% 0.87% 0.99% Expenses, before waivers.......................... 0.93% 4.64% 13.22% 0.87% 0.87% 101% Net investment income (loss), net of waivers...... 0.63% (0.18)% 0.18% 0.18% 0.06% (0.26)% Net investment income (loss), before waivers...... 0.57% (3.93)% (12.20)% 0.18% 0.06% (0.28)% Portfolio turnover rate(B).......................... 44%(C) 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. (C) Not annualized. -------------------------------------------------------------------------------- 106 --------------------------------------------------------------------------------
AMR CLASS ------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- ------- ------- (UNAUDITED) $ 6.21 $ 5.84 $ 5.48 $ 4.54 $ 5.67 $ 9.55 ------- ------- ------- ------- ------- ------- 0.03 0.06 0.02 0.02 0.02 0.01 0.50 0.36 0.36 0.93 (1.14) (3.87) ------- ------- ------- ------- ------- ------- 0.53 0.42 0.38 0.95 (1.12) (3.86) ------- ------- ------- ------- ------- ------- (0.04) (0.05) (0.02) (0.01) (0.01) (0.02) ------- ------- ------- ------- ------- ------- (0.04) (0.05) (0.02) (0.01) (0.01) (0.02) ------- ------- ------- ------- ------- ------- $ 6.70 $ 6.21 $ 5.84 $ 5.48 $ 4.54 $ 5.67 ======= ======= ======= ======= ======= ======= 8.47%(C) 7.22% 6.88% 21.09% (19.85)% (40.51)% ======= ======= ======= ======= ======= ======= $72,659 $63,183 $55,121 $48,926 $28,017 $23,804 0.57% 0.64% 0.71% 0.68% 0.67% 0.70% 0.57% 0.64% 0.71% 0.68% 0.67% 0.72% 0.94% 0.98% 0.34% 0.40% 0.30% 0.08% 0.94% 0.98% 0.34% 0.40% 0.30% 0.06% 44%(C) 164% 131% 138% 135% 85%
-------------------------------------------------------------------------------- 107 AMERICAN BEACON MID-CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- --------------- NOVEMBER 30, 2005 TO FEBRUARY 28 TO APRIL 30, APRIL 30, 2006 2006 ------------------- --------------- (UNAUDITED) (UNAUDITED) Net asset value, beginning of period........................ $12.09 $ 9.80 ------ ------ Income from investment operations: Net investment income................................... 0.17 0.01 Net gains on securities (both realized and unrealized)........................................... 0.59 0.30 ------ ------ Total income from investment operations..................... 0.76 0.31 ------ ------ Less distributions: Dividends from net investment income.................... (0.16) -- Distributions from net realized gains on securities..... (2.58) -- ------ ------ Total distributions......................................... (2.74) -- ------ ------ Net asset value, end of period.............................. $10.11 $10.11 ====== ====== Total return................................................ 7.73%(A) 3.16%(A) ====== ====== Ratios and supplemental data: Net assets, end of period (in thousands)................ $2,205 $ 13 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments)....................................... 1.01% 1.36% Expenses, before expense reimbursements (recoupments)....................................... 1.06% 1.36% Net investment income, after expense reimbursements (recoupments)....................................... 1.22% 0.81% Net investment income, before expense reimbursements (recoupments)....................................... 1.17% 0.81% Portfolio turnover rate................................. 20%(A) 20%(A)
--------------- (A) Not annualized. (B) Based on average shares outstanding. (C) Annualized. (D) On November 30, 2005, the Mid-Cap Value Fund's Institutional Class of shares was renamed the AMR Class and the Fund began offering a new class of shares known as the Institutional Class. -------------------------------------------------------------------------------- 108 --------------------------------------------------------------------------------
AMR CLASS (FORMERLY INSTITUTIONAL CLASS PRIOR TO DECEMBER 1, 2005)(D) --------------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30 TO APRIL 30, OCTOBER 31, OCTOBER 31, 2006 2005 2004 ----------- ----------- ----------- (UNAUDITED) $ 11.72 $ 10.27 $ 10.00 ------- ------- ------- 0.09 0.13 0.02(B) 1.06 1.37 0.25 ------- ------- ------- 1.15 1.50 0.27 ------- ------- ------- (0.14) (0.05) -- (2.58) -- -- ------- ------- ------- (2.72) (0.05) -- ------- ------- ------- $ 10.15 $ 11.72 $ 10.27 ======= ======= ======= 11.27%(A) 14.63% 2.70%(A) ======= ======= ======= $42,127 $44,342 $25,546 0.87% 1.01% 1.14%(C) 0.83% 1.02% 1.34%(C) 1.52% 0.92% 0.73%(C) 1.55% 0.91% 0.53%(C) 20%(A) 298% 6%(A)
-------------------------------------------------------------------------------- 109 AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- --------------- MARCH 31 TO MARCH 31 TO APRIL 30, APRIL 30, 2006(A) 2006(A) ------------------- --------------- (UNAUDITED) (UNAUDITED) Net asset value, beginning of period........................ $ 10.00 $ 10.00 ------- ------- Income from investment operations: Net investment income (loss)............................ -- -- Net gains (losses) on securities (both realized and unrealized)........................................... 0.20 0.19 ------- ------- Total income from investment operations..................... 0.20 0.19 ------- ------- Less distributions: Dividends from net investment income.................... -- -- Distributions from net realized gains on securities..... -- -- ------- ------- Total distributions......................................... -- -- ------- ------- Net asset value, end of period.............................. $ 10.20 $ 10.19 ======= ======= Total return................................................ 2.00%(B) 1.90%(B) ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 2,039 $ 1 Ratios to average net assets (annualized): Expenses net of waivers............................... 1.06% 1.31% Expenses before waivers............................... 2.76% 2.81% Net investment income, net of waivers................. --% (0.28%) Net investment income, before waivers................. (1.70%) (1.78%) Portfolio turnover rate................................. 0.24%(B) 0.24%(B)
--------------- (A) March 31, 2006 is the inception date of the Small Cap Value Opportunity Fund. (B) Not annualized. -------------------------------------------------------------------------------- 110 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 111 AMERICAN BEACON EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, -------------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- ------ -------- (UNAUDITED) Net asset value, beginning of period................. $ 15.10 $ 12.64 $ 10.62 $ 7.20 $ 6.64 $ 8.17 ------- ------- ------- ------- ------ -------- Income from investment operations: Net investment income(A)......................... 0.05 .15 0.07 0.04 0.09 0.11 Net gains (losses) on securities (both realized and unrealized)(A)............................. 4.88 3.45 2.01 3.43 0.56 (1.62) ------- ------- ------- ------- ------ -------- Total income (loss) from investment operations....... 4.93 3.60 2.08 3.47 0.65 (1.51) ------- ------- ------- ------- ------ -------- Less distributions: Dividends from net investment income............. (0.21) (0.06) (0.06) (0.05) (0.09) (0.01) Distributions from net realized gains on securities..................................... (2.21) (1.08) -- -- -- (0.01) ------- ------- ------- ------- ------ -------- Total distributions.................................. (2.42) (1.14) (0.06) (0.05) (0.09) (0.02) ------- ------- ------- ------- ------ -------- Redemption fees added to beneficial interests........ --(E) --(E) --(E) -- -- -- ------- ------- ------- ------- ------ -------- Net asset value, end of period....................... $ 17.61 $ 15.10 $ 12.64 $ 10.62 $ 7.20 $ 6.64 ======= ======= ======= ======= ====== ======== Total return......................................... 35.95%(C) 30.11% 19.65% 48.45% 9.80% (18.52)% ======= ======= ======= ======= ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands)......... $18,223 $ 9,348 $ 7,282 $ 3,557 $1,769 $ 1,495 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments)(A)............................. 1.53% 1.52% 1.85% 1.76% 1.51% 1.43% Expenses, before expense reimbursements (recoupments)(A)............................. 1.53% 1.52% 1.85% 1.76% 1.51% 1.43% Net investment income (loss), after expense reimbursements (recoupments)(A).............. 0.84% 1.22% 0.74% 0.62% 1.11% 2.07% Net investment income (loss), before expense reimbursements (recoupments)(A).............. 0.84% 1.22% 0.74% 0.62% 1.11% 2.07% Portfolio turnover rate(B)....................... 30%(C) 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. -------------------------------------------------------------------------------- 112 --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS --------------------------------------------------------------------- ----------- SIX MONTHS YEAR ENDED SIX MONTHS ENDED OCTOBER 31, OCTOBER 1 TO ENDED APRIL 30, --------------------------------- OCTOBER 31, APRIL 30, 2006 2005 2004 2003 2002 2006 ----------- ------- ------- ------- ------------ ----------- $ 14.98 $ 12.53 $ 10.55 $ 7.19 $ 6.86 $ 15.17 ------- ------- ------- ------- -------- -------- 0.04 0.15 0.04 0.09 -- 0.07 4.84 3.41 1.99 3.34 0.33 4.90 ------- ------- ------- ------- -------- -------- 4.88 3.56 2.03 3.43 0.33 4.97 ------- ------- ------- ------- -------- -------- (0.19) (0.03) (0.05) (0.07) -- (0.24) (2.21) (1.08) -- -- -- (2.21) ------- ------- ------- ------- -------- -------- (2.40) (1.11) (0.05) (0.07) -- (2.45) ------- ------- ------- ------- -------- -------- --(E) --(E) --(E) --(E) -- ------- ------- ------- ------- -------- -------- $ 17.46 $ 14.98 $ 12.53 $ 10.55 $ 7.19 $ 17.69 ======= ======= ======= ======= ======== ======== 35.79%(C) 29.95% 19.33% 48.07% 4.81%(C) 36.10%(C) ======= ======= ======= ======= ======== ======== $ 6,064 $ 2,592 $ 1,214 $ 492 $ 1 $138,861 2.00% 1.75% 2.14% 2.08% 1.87%(F) 1.26% 1.86% 2.01% 2.20% 2.08% 1.87%(F) 1.26% 0.37% 1.16% 0.37% 0.57% (0.25)%(F) 1.05% 0.51% 0.90% 0.31% 0.57% (0.25)%(F) 1.05% 30%(C) 63% 76% 80% 94%(D) 30%(C) AMR CLASS --- ----------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------- 2005 2004 2003 2002 2001 ------- ------- ------- ------- ------- $ 12.68 $ 10.66 $ 7.22 $ 6.65 $ 8.18 ------- ------- ------- ------- ------- 0.24 0.10 0.07 0.09 0.13 3.42 2.00 3.44 0.59 (1.63) ------- ------- ------- ------- ------- 3.66 2.10 3.51 0.68 (1.50) ------- ------- ------- ------- ------- (0.09) (0.08) (0.07) (0.11) (0.02) (1.08) -- -- -- (0.01) ------- ------- ------- ------- ------- (1.17) (0.08) (0.07) (0.11) (0.03) ------- ------- ------- ------- ------- -- -- -- -- -- ------- ------- ------- ------- ------- $ 15.17 $ 12.68 $ 10.66 $ 7.22 $ 6.65 ======= ======= ======= ======= ======= 30.43% 20.00% 48.84% 10.10% (18.40)% ======= ======= ======= ======= ======= $94,864 $74,199 $51,498 $32,731 $20,660 1.25% 1.59% 1.50% 1.26% 1.30% 1.25% 1.59% 1.50% 1.26% 1.30% 1.60% 1.01% 0.92% 1.35% 1.76% 1.60% 1.01% 0.92% 1.35% 1.76% 63% 76% 80%(C) 94% 95%
-------------------------------------------------------------------------------- 113 AMERICAN BEACON HIGH YIELD BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, DECEMBER 29, 2000 APRIL 30, ------------------------------------------ TO OCTOBER 31, 2006 2005 2004 2003 2002 2001 ----------- -------- -------- -------- -------- ----------------- (UNAUDITED) Net asset value, beginning of period.... $ 10.22 $ 10.86 $ 10.73 $ 9.63 $ 9.82 $ 10.00 -------- -------- -------- -------- -------- ------- Income from investment operations: Net investment income............... 0.38 0.76 0.78 0.78 0.80 0.71 Net gains (losses) on securities (both realized and unrealized).... 0.12 (0.84) 0.27 1.10 (0.19) (0.18) -------- -------- -------- -------- -------- ------- Total income from investment operations............................ 0.50 (0.08) 1.05 1.88 0.61 0.53 -------- -------- -------- -------- -------- ------- Less distributions: Dividends from net investment income............................ (0.38) (0.76) (0.78) (0.78) (0.80) (0.71) Distributions from net realized gains on securities............... (0.11) 0.20 (0.14) -- -- -- -------- -------- -------- -------- -------- ------- Total distributions..................... (0.49) (0.56) (0.92) (0.78) (0.80) (0.71) -------- -------- -------- -------- -------- ------- Net asset value, end of period.......... $ 10.23 $ 10.22 $ 10.86 $ 10.73 $ 9.63 $ 9.82 ======== ======== ======== ======== ======== ======= Total return............................ 5.03%(A) 3.03% 10.19% 20.11% 6.28% 5.33%(A) ======== ======== ======== ======== ======== ======= Ratios and supplemental data: Net assets, end of period (in thousands)........................ $216,870 $216,744 $241,777 $161,380 $104,813 $53,275 Ratios to average net assets (annualized): Expenses, net of waivers.......... 0.85% 0.84% 0.88% 0.90% 0.90% 0.90%(D) Expenses, before waivers.......... 0.85% 0.84% 0.92% 1.00% 0.98% 1.07%(D) Net investment income, net of waivers......................... 7.58% 7.24% 7.27% 7.51% 8.02% 8.48%(D) Net investment income (loss), before waivers.................. 7.58% 7.24% 7.23% 7.41% 7.94% 8.31%(D) Portfolio turnover rate............. 39%(A) 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. -------------------------------------------------------------------------------- 114 --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS ---------------------------------------------------------- ------------------------------------------------ SIX MONTHS FOUR MONTHS YEAR ENDED ENDED YEAR ENDED OCTOBER 31, MARCH 1 TO ENDED OCTOBER 31, MAY 1 TO APRIL 30, ------------------------------ OCTOBER 31, FEBRUARY 28, ------------------- OCTOBER 31, 2006 2005 2004 2003 2002 2006 2005 2004 2003 ----------- -------- -------- -------- ----------- ------------ ------ ---------- ----------- (UNAUDITED) (UNAUDITED) $ 10.22 $ 10.87 $ 10.73 $ 9.63 $10.10 $10.41 $10.87 $ 10.73 $ 10.47 -------- -------- -------- -------- ------ ------ ------ ---------- --------- 0.37 0.74 0.74 0.75 0.50 0.25 0.70 0.71 0.29 0.13 (0.85) 0.28 1.10 (0.47) 0.13 (0.45) 0.27 0.26 -------- -------- -------- -------- ------ ------ ------ ---------- --------- 0.50 (0.11) 1.02 1.85 0.03 0.38 0.25 0.98 0.55 -------- -------- -------- -------- ------ ------ ------ ---------- --------- (0.37) (0.74) (0.74) (0.75) (0.50) (0.24) (0.71) (0.70) (0.29) (0.11) 0.20 (0.14) -- -- (0.11) -- (0.14) -- -------- -------- -------- -------- ------ ------ ------ ---------- --------- (0.48) (0.54) (0.88) (0.75) (0.50) (0.35) (0.71) (0.84) (0.29) -------- -------- -------- -------- ------ ------ ------ ---------- --------- $ 10.24 $ 10.22 $ 10.87 $ 10.73 $ 9.63 $10.44 $10.41 $ 10.87 $ 10.73 ======== ======== ======== ======== ====== ====== ====== ========== ========= 5.01%(A) 2.69% 9.94% 19.57% (0.26)%(A) 3.72%(A) 2.33% 9.41% 5.46%(A) ======== ======== ======== ======== ====== ====== ====== ========== ========= $107,380 $120,360 $148,266 $125,654 $4,029 $ 42 $ 1 $ 4 $ 1 1.09% 1.08% 1.20% 1.24% 1.27%(D) 1.33% 1.46% 1.57% 1.71%(D) 1.09% 1.08% 1.20% 1.24% 1.27%(D) 1.33% 4.01% 440.81% 806.83%(D) 7.32% 7.00% 6.95% 7.11% 7.20%(D) 7.04% 6.59% 6.57% 6.51%(D) 7.32% 7.00% 6.95% 7.11% 7.20%(D) 7.04% 4.04% (432.67)% (798.61)%(D) 39%(A) 128% 138% 114% 163%(B) 39%(A) 128% 138% 114%(C)
-------------------------------------------------------------------------------- 115 AMERICAN BEACON ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) --------------------------------------------------------------------------------
PLANAHEAD CLASS ----------------------------------------------- SIX MONTHS YEAR ENDED ENDED OCTOBER 31, JUNE 30 TO APRIL 30, ------------------- OCTOBER 31, 2006 2005 2004 2003 ----------- -------- -------- ----------- (UNAUDITED) Net asset value, beginning of period........................ $ 9.98 $ 10.16 $ 9.96 $ 10.00 -------- -------- -------- -------- Income from investment operations: Net investment income................................... 0.15 0.29 0.26 0.07(B) Net gains (losses) on securities (both realized and unrealized)........................................... 0.15 (0.16) 0.20 (0.04) -------- -------- -------- -------- Total income from investment operations..................... 0.30 0.13 0.46 0.03 -------- -------- -------- -------- Less distributions: Dividends from net investment income.................... (0.19) (0.31) (0.26) (0.07) Distributions from net realized gains on securities..... -- -- -- -- -------- -------- -------- -------- Total distributions......................................... (0.19) (0.31) (0.26) (0.07) -------- -------- -------- -------- Net asset value, end of period.............................. $ 10.09 $ 9.98 $ 10.16 $ 9.96 ======== ======== ======== ======== Total return................................................ 2.97%(A) 1.32% 4.70% 0.32%(A) ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $106,866 $112,341 $103,897 $101,072 Ratios to average net assets (annualized): Expenses.............................................. 0.89% 0.92% 1.00% 0.93%(C) Net investment income................................. 3.10% 2.79% 2.54% 2.20%(C) Portfolio turnover rate................................. 18%(A) 41% 72% 57%(A)
--------------- (A) Not annualized. (B) Based on average shares outstanding. (C) Annualized. -------------------------------------------------------------------------------- 116 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 117 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. -------------------------------------------------------------------------------- 118 --------------------------------------------------------------------------------
PLAN AHEAD CLASS INSTITUTIONAL CLASS (FORMERLY AMR CLASS PRIOR TO 3/1/05) ---------------------------------------------------------- ---------------------------------------------------------------- SIX SIX MONTHS MONTHS ENDED YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------------------- APRIL 30, --------------------------------------------------- 2006 2005 2004 2003 2002 2001 2006 2005(D) 2004 2003 2002 2001 ---------- ------- ------- ------ ------ ------- ---------- -------- -------- -------- -------- ------- $10.08 $ 10.41 $ 10.31 $10.27 $10.34 $ 9.57 $ 10.01 $ 10.33 $ 10.24 $ 10.22 $ 10.30 $ 9.53 ------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- ------- 0.19 0.36 0.35 0.39 0.48 0.53 0.22 0.42 0.40 0.45 0.53 0.58 (0.18) (0.30) 0.14 0.04 (0.07) 0.77 (0.18) (0.29) 0.14 0.02 (0.08) 0.77 ------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- ------- 0.01 0.06 0.49 0.43 0.41 1.30 0.04 0.13 0.54 0.47 0.45 1.35 ------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- ------- (0.20) (0.39) (0.39) (0.39) (0.48) (0.53) (0.23) (0.45) (0.45) (0.45) (0.53) (0.58) -- -- -- -- -- -- -- -- -- -- -- -- ------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- ------- (0.20) (0.39) (0.39) (0.39) (0.48) (0.53) (0.23) (0.45) (0.45) (0.45) (0.53) (0.58) ------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- ------- $ 9.89 $ 10.08 $ 10.41 $10.31 $10.27 $ 10.34 $ 9.82 $ 10.01 $ 10.33 $ 10.24 $ 10.22 $ 10.30 ====== ======= ======= ====== ====== ======= ======= ======== ======== ======== ======== ======= 0.13%(C) 0.54% 4.86% 4.25% 4.10% 13.91% 0.42%(C) 1.26% 5.38% 4.62% 4.57% 14.58% ====== ======= ======= ====== ====== ======= ======= ======== ======== ======== ======== ======= $ 957 $ 1,054 $ 1,091 $1,395 $1,691 $ 300 $90,409 $ 93,270 $ 96,242 $131,927 $144,098 $95,820 0.95% 0.95% 0.92% 0.86% 0.86% 0.83% 0.33% 0.31% 0.34% 0.32% 0.30% 0.30% 1.35% 1.19% 0.93% 0.86% 0.86% 0.83% 0.33% 0.31% 0.34% 0.32% 0.30% 0.30% 3.93% 3.48% 3.39% 3.70% 4.60% 5.04% 4.55% 4.12% 3.97% 4.32% 5.23% 5.84% 3.53% 3.24% 3.38% 3.70% 4.60% 5.04% 4.55% 4.12% 3.97% 4.32% 5.23% 5.84% 119%(C) 119% 106% 187% 185% 164% 119%(C) 119% 106% 187% 185% 164%
-------------------------------------------------------------------------------- 119 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. (F) For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period. -------------------------------------------------------------------------------- 120 --------------------------------------------------------------------------------
PLANAHEAD CLASS ----------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, --------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------ ------- ------ ------ ------- (UNAUDITED) $ 8.77 $ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 9.21 ------- ------ ------- ------ ------ ------- 0.12(F) 0.28 0.25 0.39 0.43 0.55 (0.01) (0.24) (0.07) (0.08) (0.14) 0.41 ------- ------ ------- ------ ------ ------- 0.11 0.04 0.18 0.31 0.29 0.96 ------- ------ ------- ------ ------ ------- (0.17) (0.36) (0.42) (0.43) (0.46) (0.55) ------- ------ ------- ------ ------ ------- (0.17) (0.36) (0.42) (0.43) (0.46) (0.55) ------- ------ ------- ------ ------ ------- $ 8.71 $ 8.77 $ 9.09 $ 9.33 $ 9.45 $ 9.62 ======= ====== ======= ====== ====== ======= 1.28%(C) 0.46% 1.84% 3.38% 3.16% 10.69% ======= ====== ======= ====== ====== ======= $10,598 $8,582 $ 7,781 $5,783 $3,520 $ 1,257 0.88% 0.87% 0.87% 0.86% 0.73% 0.75% 0.89% 0.94% 0.87% 0.86% 0.77% 0.75% 2.80% 2.59% 2.44% 4.00% 4.16% 5.76% 2.79% 2.52% 2.44% 4.00% 4.12% 5.76% 24%(C) 38% 41% 81% 63% 104% INSTITUTIONAL (FORMERLY AMR CLASS PRIOR TO 3/1/05) ------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED OCTOBER 31, APRIL 30, ----------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- ------- ------- (UNAUDITED) $ 8.75 $ 9.07 $ 9.31 $ 9.44 $ 9.60 $ 9.20 ------- ------- ------- ------- ------- ------- 0.15(F) 0.29 0.27 0.42 0.44 0.59 (0.01) (0.20) (0.05) (0.07) (0.11) 0.40 ------- ------- ------- ------- ------- ------- 0.14 0.09 0.22 0.35 0.33 0.99 ------- ------- ------- ------- ------- ------- (0.19) (0.41) (0.46) (0.48) (0.49) (0.59) ------- ------- ------- ------- ------- ------- (0.19) (0.41) (0.46) (0.48) (0.49) (0.59) ------- ------- ------- ------- ------- ------- $ 8.70 $ 8.75 $ 9.07 $ 9.31 $ 9.44 $ 9.60 ======= ======= ======= ======= ======= ======= 1.66%(C) 1.00% 2.39% 3.82% 3.60% 11.07% ======= ======= ======= ======= ======= ======= $72,818 $79,683 $80,504 $91,911 $89,932 $81,370 0.35% 0.33% 0.33% 0.33% 0.30% 0.33% 0.35% 0.33% 0.33% 0.33% 0.30% 0.33% 3.34% 3.15% 3.00% 4.54% 4.63% 6.26% 3.34% 3.15% 3.00% 4.54% 4.63% 6.26% 24%(C) 38% 41% 81% 63% 104%
-------------------------------------------------------------------------------- 121 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS (Unaudited) -------------------------------------------------------------------------------- 1. RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS At their February 17, 2006 meeting, the Board of Trustees ("Board") considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and the subadvisors, on behalf of the Funds. In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a cost/profitability analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; -------------------------------------------------------------------------------- 122 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and whether (and if so, why) such subadvisor should have its contract renewed; - a comparison of advisory fees and expense ratios for comparable mutual funds; - a table detailing the Manager's profitability with respect to each Fund; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a Fund; -------------------------------------------------------------------------------- 123 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - a discussion of whether the Manager receives, with respect to trade execution for the Funds, other special compensation, including any payment for order flow; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the class with the longest performance history, which in most cases is the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management and Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost for providing the services and the profitability of the advisory business to the Manager or subadvisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. Nature, Extent and Quality of Services With respect to the renewal of the Management Agreement, the Board considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new Funds so as to enhance the Trusts' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote -------------------------------------------------------------------------------- 124 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. Discussions regarding the Board's considerations with respect to each Fund's performance are below under "Additional Considerations and Conclusions with Respect to each Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board noted that the Manager proposed to continue most of the expense waivers and reimbursements that were in place for each applicable Fund's 2005 fiscal year. The Board also noted that each sub-advised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various Funds. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arms-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. Discussions regarding the Board's considerations with respect to each Fund's fee rates are set forth below under "Additional Considerations and Conclusions with Respect to each Fund." Economies of Scale In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board noted that, in many cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The Board also noted, where applicable, for purposes of determining the investment advisory fee charged to the Funds, the fee schedule to each Investment Advisory Agreement specifies that all other assets -------------------------------------------------------------------------------- 125 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- managed by a subadvisor on behalf of AMR Corporation and its pension plans shall be considered. Thus, the Funds are able to receive additional breakpoint benefits resulting from the subadvisor's management of a larger pool of assets. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board noted that the Manager and the subadvisors may not direct the Funds' brokerage transactions to certain brokers to obtain research and other services and that the Funds participate in a brokerage recapture program. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The benchmark indices referred to below include the Fund's broad-based market index included in the Historical Performance section of the Prospectuses and the respective Lipper Index for each Fund. The Money Market Funds do not compare their performance to a market index, so the Board considered the relative performance of those Funds versus the respective Lipper Average, which includes all comparable funds in the Lipper category. Each Lipper Index includes up to the 30 largest funds in the respective Lipper category where the Fund is classified by Lipper. Additional Considerations and Conclusions with Respect to the Balanced Fund In considering the renewal of the Management Agreement and each Investment Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for all relevant periods tracked by Lipper compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund ("Performance Universe"); (2) the Fund's total return performance exceeded the Lipper Balanced Fund Index for these same periods; (3) the portion of Fund assets allocated to the Manager, which manages only fixed income securities, outperformed or matched a relevant fixed income benchmark index for all relevant periods; (4) the portion of Fund assets allocated to Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow"), which manages equity and fixed income securities, outperformed the Fund's benchmark index for all relevant periods; (5) the portion of Fund assets allocated to Brandywine Asset Management, LLC ("Brandywine"), which manages equity and fixed income securities, outperformed the Fund's benchmark index for all relevant periods; and (6) the portion of Fund assets allocated to Hotchkis and Wiley Capital Management, LLC ("Hotchkis"), which manages only equity securities, outperformed a relevant equity benchmark index for all relevant periods. -------------------------------------------------------------------------------- 126 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 1st quintile and actual management fees (including administrative fees) were in the 2nd quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper ("Fee Universe"), where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's Service Class; (3) Brandywine represented that it does not charge a lower fee rate for comparable client services, while Hotchkis represented that it does not provide similar services to any comparable accounts; and (4) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the direct management of a portion of the Fund's assets and oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Emerging Markets Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 4th quintile for the one- and two-year periods, the 3rd quintile for the three- and four-year periods and the 2nd quintile for the five-year period compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper Emerging Market Fund Index for the five-year period but underperformed for the other periods tracked by Lipper; (3) the portion of Fund assets allocated to The Boston Company Asset Management, LLC ("TBCAM") outperformed the Fund's benchmark index for the five-year and since inception periods but underperformed for the one- and three-year periods; (4) TBCAM's explanation that its performance lagged during the year due to reallocation into value securities; (5) the portion of Fund assets allocated to Morgan Stanley Investment Management Inc. ("MSIM Inc.") outperformed or matched the Fund's benchmark index for all relevant periods except the since inception period. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 3rd quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's PlanAhead Class; (3) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund; (4) TBCAM represented that it does not provide similar services to any comparable accounts; (5) MSIM Inc. represented that the Fund's fee rates are lower than MSIM Inc.'s standard fee schedules for similarly managed mutual funds; and (6) the fee schedule of MSIM Inc. includes breakpoints, which reduce fee rates as the assets of the Fund increase. -------------------------------------------------------------------------------- 127 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager, TBCAM and MSIM Inc. under the Agreements are fair and reasonable; (2) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (3) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Enhanced Income Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 5th quintile for the one-year period and the 3rd quintile for the two-year period compared to the Performance Universe; (2) the Fund's total return performance underperformed the Lipper Intermediate Investment Grade Index for these same periods; (3) the Manager's explanation that comparison of the performance of the Fund, which invests in both fixed income and convertible securities, to the Performance Universe and the Lipper Intermediate Investment Grade Index, which include mutual funds that invest primarily in fixed income securities, is not suitable; (4) the portion of Fund assets allocated to the Manager, which manages only fixed income securities, outperformed a relevant fixed income benchmark index for all relevant periods; (5) the portion of Fund assets allocated to Calamos Advisors LLC ("Calamos"), which manages convertible securities, outperformed a relevant convertibles securities benchmark index for all relevant periods; and (6) the Fund has a short performance history to compare to its peers. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the PlanAhead Class total expenses and actual management fees (including administrative fees) were in the 5th quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; and (2) Calamos represented that it does not provide similar services to any comparable accounts. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and Calamos under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the direct management of a portion of the Fund's assets and oversight of the Fund's subadvisor; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisor's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the High Yield Bond Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 3rd quintile for the one- and two-year periods, the 5th quintile for the three-year period, the 2nd quintile for the four-year period, and the 1st quintile for the five-year period compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper High Yield Bond Fund Index for the four- and five-year periods -------------------------------------------------------------------------------- 128 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- but underperformed for the other periods tracked by Lipper; and (3) Post Advisory Group, LLC ("Post") outperformed a relevant Fund benchmark index for the one- and five-year periods. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 3rd quintile, and actual management fees (including administrative fees) were in the 5th quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; (2) Post's representation that the subadvisory fee charged is among the lowest for similar services. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and Post under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the oversight of the Fund's subadvisor; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisor's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Intermediate Bond Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for the one-year period, 2nd quintile for the two-and five-year periods, and 3rd quintile for the three- and four-year periods compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper Intermediate Investment Grade Fund Index for the one-year period but underperformed for the other periods tracked by Lipper; (3) the portion of Fund assets allocated to the Manager outperformed the Fund's benchmark index for the one- and three-year periods but underperformed for the five-year and since inception periods; (4) the Manager's explanation that its longer-term performance was reduced due to poor issuer selection and duration decisions; and (5) the portion of Fund assets allocated to Barrow outperformed the Fund's benchmark index for all relevant time periods. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's PlanAhead Class; (3) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund; and (4) the fee schedule of Barrow includes breakpoints, which reduce fee rates as the assets of the Fund increase. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and Barrow under the Agreements are fair and reasonable; (2) determined that the Fund and its shareholders would benefit from the Manager's and subadvisor's continued management of the Fund; and (3) approved the renewal of the Agreements with respect to the Fund. -------------------------------------------------------------------------------- 129 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- Additional Considerations and Conclusions with Respect to the Large Cap Growth Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 2nd quintile for the three-year period, 3rd quintile for the two-, four- and five-year periods, and 4th quintile for the one-year period compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper Large Cap Growth Fund Index for the three-, four- and five-year periods but underperformed for the other periods tracked by Lipper; (3) the portion of Fund assets allocated to Goldman Sachs Asset Management, L.P. ("GSAM") outperformed the Fund's benchmark index for all relevant periods; (4) the portion of Fund assets allocated to J.P. Morgan Investment Management Inc. ("JPMIM") underperformed the Fund's benchmark index for all relevant periods; (5) JPMIM's explanation that its underperformance during the last year was due to stock selection; and (6) the Manager's representation that it will continue to monitor JPMIM's performance closely. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 2nd quintile, and actual management fees (including administrative fees) were in the 5th quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group ; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's Institutional Class; (3) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund; (4) GSAM and JPMIM represented that they do not provide similar services to any comparable accounts; and (5) the fee schedules of GSAM and JPMIM include breakpoints, which reduce fee rates as the assets of the Fund increase. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager, GSAM and JPMIM under the Agreements are fair and reasonable; (2) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (3) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Mid-Cap Value Fund In considering the renewal of the Agreements with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 3rd quintile for the one-year period compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper Mid-Cap Value Fund Index for the same period; (3) the portion of Fund assets allocated to Barrow and Pzena Investment Management, LLC ("Pzena") underperformed the Fund's benchmark index for the one-year and since inception periods; (4) Barrow's explanation that its underperformance was primarily due to stock selection in the financial sector and its underweight position in REIT securities; and (5) the subadvisors have managed the Fund for a relatively short period of time and have not established a meaningful performance history. In addition, the Trustees considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 2nd quintile and actual -------------------------------------------------------------------------------- 130 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- management fees (including administrative fees) were in the 5th quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; and (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's Institutional Class. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including the oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Short-Term Bond Fund In considering the renewal of the Management Agreement with the Fund, the Trustees considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for the five-year period and the 2nd quintile for all other relevant periods tracked by Lipper compared to the Performance Universe; (2) the Fund's total return performance exceeded the Lipper Short Investment Grade Bond Fund Index for the same periods; and (3) the Fund's performance exceeded its benchmark index for the one- and three-year periods but underperformed for the five- and ten-year periods. In addition, the Trustees considered the fees payable under the Management Agreement. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the Fee Universe, where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager contractually agreed to continue to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's PlanAhead Class; and (3) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees: (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable; (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (3) approved the renewal of the Management Agreement with respect to the Fund. 2. APPROVAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT FOR SMALL CAP VALUE OPPORTUNITY FUND At the February 17, 2006 Board meeting, the Manager proposed that the Board approve the Manager as the manager, and PanAgora Asset Management, Inc. ("PanAgora") as an investment advisor, to the Small Cap Value Opportunity Fund (the "Fund"), a new series of the Funds. The Fund commenced operations on March 31, 2006. Prior to the meeting, the Board requested and reviewed information provided by the Manager and PanAgora, and the Investment Committee of the Board met with representatives from PanAgora. -------------------------------------------------------------------------------- 131 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- APPOINTMENT OF THE MANAGER With respect to the appointment of the Manager, the Trustees considered the information provided by the Manager, including responses by the Manager to inquiries requesting: - a description of the investment objectives and strategies of the Fund; - a description of the services proposed to be provided to the Fund; - identification of the professional personnel to perform services for the Fund and their background and responsibilities; - a comparison of the proposed advisory fee and estimated total expense ratio to comparable mutual funds and an explanation of any material differences; - any special regulatory issues that could be relevant to the Fund; - a discussion of any economies of scale expected in the future; - an evaluation of any benefits to the Manager or the Fund as result of their relationship; and - any other information the Manager believed would be material to the Trustees' consideration of the appointment. In determining whether to appoint the Manager, the Trustees considered the best interests of the Fund as well as the following factors: (1) the Manager's ability to retain key investment personnel and an active client service program; (2) the Manager's goal to provide consistent above average long-term performance at low cost; (3) the continuing efforts of the Manager to add new series so as to enhance the Funds' product line; (4) the Manager's record in building improved compliance and control functions that reduce risk to the Funds; (5) the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the subadvisors; (6) the proposed expense ratio for the Fund is lower than the respective industry averages; and (7) the Trustees deemed the estimated profitability of the Manager with respect to its services to the Fund to be reasonable in light of the fact that the Manager provides high-quality services at a low cost to investors, allocates the Fund's assets among subadvisors, monitors and evaluates the performance of the Fund's subadvisor and provides a comprehensive compliance program for the Fund. APPOINTMENT OF PANAGORA With respect to the appointment of PanAgora, the Board considered, among other materials, responses by PanAgora 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 PanAgora with the performance of applicable indices; - an analysis of the proposed investment advisory fee; -------------------------------------------------------------------------------- 132 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- - whether PanAgora 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 clients a lower fee; - a description of the portfolio managers' compensation, including any incentive arrangements; - a description of PanAgora's compliance program, code of ethics and related matters, as well as its trading activities; - a description of the disaster recovery plan and the results of the latest test; - a summary of any material past, pending or anticipated litigation or regulatory proceedings; and - any other information PanAgora believed would be material to the Board's consideration of the Agreement. The Board considered several factors when evaluating PanAgora and in approving the Investment Advisory Agreement (the "Agreement"), including that the Manager had screened a universe of available small cap equity managers to identify those meeting certain minimum criteria. The Board considered PanAgora's experience in managing small cap assets, its reputation and financial condition, the past performance of similar accounts managed by PanAgora, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the Fund. A discussion of the factors relating to the Board's selection of PanAgora and approval of the Agreement follows. Nature, extent and quality of the services to be provided by PanAgora The Board considered PanAgora's investment philosophy and investment process, as well as the background and experience of the members of its small cap investment team and investment policy committee. The Board also considered PanAgora's investment resources, infrastructure, the adequacy of its compliance program, and recent investigations of certain of PanAgora's affiliated companies. In this regard, the Board concluded that these investigations would not affect PanAgora's management of the Fund. In addition, the Board took into consideration PanAgora's capacity to manage a large amount of small cap assets and its business experience. The Board also noted the Manager's conclusion that the investment process to be employed by PanAgora would be highly consistent with the Fund's investment objectives and policies, as well as the Manager's strong recommendation on behalf of PanAgora. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by PanAgora were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Agreement. Performance of PanAgora The Board evaluated PanAgora's historical investment performance record in managing assets utilizing a small cap mandate. In particular, the Board evaluated the performance of the PanAgora Small Cap Value Stock Selector Composite for the one- and three-year periods ended September 30, 2005 versus a peer group of U.S. small cap value managers in the Mercer investment universe. The -------------------------------------------------------------------------------- 133 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- Board noted that the performance of the Composite outperformed the median performance of the Mercer investment universe for the two- and three-year periods and was slightly below the median for the one-year period. The Board also considered that the performance of the Composite exceeded a relevant benchmark for the three-year period ended December 31, 2005. The Board concluded that the historical investment performance record of PanAgora supported approval of the Agreement. Comparisons of the amounts to be paid under the Agreement with those under contracts between PanAgora and its other clients In evaluating the Agreement, the Board reviewed PanAgora's advisory fee schedule and breakpoints for the Fund. The Board considered a comparison of the advisory fees to be charged by PanAgora under the Agreement versus PanAgora's standard fee schedule for accounts with a similar investment mandate. The Board noted that PanAgora's fee rate for advising the Fund under the Agreement is lower than the standard fee rate charged by PanAgora. The Board also considered that PanAgora represented that it does not charge lower advisory fees to other clients for comparable services. The comparative data regarding the fees PanAgora charges to other clients with a similar investment mandate assisted the Board in concluding that PanAgora's advisory fees under the Agreement appeared to be within a reasonable range for the services to be provided to the Fund. Costs of the services to be provided and profits to be realized by PanAgora and its affiliates from the relationship with the Fund Since the subadvisory relationship with PanAgora is new, the Board did not consider the costs of the services to be provided and profits to be realized by PanAgora and its affiliates from the relationship with the Fund. However, the Board noted that PanAgora does not charge a lower advisory fee to other clients for comparable services. Extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund investors The Board considered that PanAgora's fee rate represents a significant discount from its standard fee rate for similar accounts. The Board considered that the fees paid to PanAgora are passed through the Manager by the Fund and that the Manager would not benefit economically from the proposed fee agreement. The Board also considered that the Manager negotiated "breakpoints" in PanAgora's fees based on the levels of assets in the Fund. Thus, the Board concluded that the Fund is receiving economies of scale due to the relatively low fees and breakpoints incorporated into the fee schedule. Benefits to be derived by PanAgora from the relationship with the Fund The Board considered the "fall-out" or ancillary benefits that may accrue to PanAgora as a result of the advisory relationship with the Fund, including greater exposure in the marketplace with respect to PanAgora's investment process and expanding the level of assets under management by PanAgora. The Board noted that PanAgora may not direct the Fund's brokerage transactions to certain brokers to obtain research and other services and that the Fund participates in a brokerage recapture program. After consideration of this information, the Board concluded that the potential -------------------------------------------------------------------------------- 134 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED (Unaudited) -------------------------------------------------------------------------------- benefits accruing to PanAgora by virtue of its relationship with the Fund appear to be fair and reasonable. Board's Conclusion The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. However, based on the various considerations described above, the Board, including a majority of the independent Trustees, concluded that the proposed investment advisory fee is reasonable and that the approval of the Agreement is in the best interests of the Fund and its shareholders and, as a result, approved the Agreement. -------------------------------------------------------------------------------- 135 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 136 (This page intentionally left blank) (LIGHTHOUSE LOGO) -------------------------------------------------------------------------------- 137 (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 Growth Fund, American Beacon Mid-Cap Value Fund, American Beacon Small Cap Value Opportunity 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. SAR04/06 537385 ITEM 2. CODE OF ETHICS. The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the "Code") nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder reports presented in Item 1. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not Applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 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 reports 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) Not applicable. (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: July 7, 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: July 7, 2006 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: July 7, 2006