UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
Gene L. Needles, Jr., PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
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) 391-6100
Date of fiscal year end: October 31, 2010
Date of reporting period: October 31, 2010
ITEM 1. REPORT TO STOCKHOLDERS.
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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 | 8 | |
Additional Information | Back Cover |
Any opinions herein, including forecasts, reflect our judgment 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 | October 31, 2010 |
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Fellow Shareholders,
Throughout the past 12 months, one theme prevailed: investments placed with experienced, forward-thinking managers can still benefit. Opportunity abounds for those with the foresight to know how to capitalize on changing market conditions. It’s no coincidence that this theme also goes to the heart of the American Beacon Funds investment philosophy.
It’s a philosophy that has served shareholders in the American Beacon Large Cap Value Fund well. For the 12 months ended October 31, 2010, the Fund (Institutional Class) generated a return of 15.68%. Please note that the recent growth rate in the stock market has helped to produce short-term increases that are not typical and may not continue in the future.
While we keep a watchful eye on your investment in our funds, we also remain focused on seeking out new opportunities to help keep your financial goals on course. This is what guides the composition of American Beacon Funds’ product line-up. It is also what led to the addition of several new funds this past year: the American Beacon Zebra Large Cap and the Zebra Small Cap Equity Funds, which use a proprietary strategy to attempt to capture a unique source of equity return—the liquidity premium. We also recently added the American Beacon Evercore Small Cap Equity Fund, which relies on a fundamental bottom-up investment approach and is managed by the well-regarded Evercore Asset Management, LLC.
Continuously searching for new ways to serve our fellow shareholders’ needs is our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a thoughtful and analytical eye over all the factors that influence our investments.
We want to thank you for your continued investment in the American Beacon Funds. As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we remain dedicated to offering you both the level of superior service and knowledgeable investment management you’ve come to expect from us. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
![]() Gene L. Needles, Jr. President American Beacon Funds | ||||
Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing. Distributed by Foreside Fund Services, LLC.
There is no guarantee that the Funds’ investment objective will be met. At times, certain securities held by the American Beacon Zebra Large Cap Equity and Small Cap Equity Funds may have limited marketability and may be difficult to sell. Investing in the securities of small and mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Because the American Beacon Evercore Small Cap Equity Fund is a focused portfolio of fewer companies, the increase or decrease of the value of a single stock may have a greater impact on the Fund’s NAV and total return when compared to other diversified funds.
1
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
Extreme swings in investor sentiment and significant volatility in equity returns characterized the U.S. stock market’s performance during the past 12 months. Market returns were robust for the first several months of the year, only to be followed by a significant correction through the spring and summer months that was triggered by fears of a double-dip recession and concerns over the sovereign debt crisis in Europe. By August, many investors had seemingly grown despondent and sentiment towards equities reached extreme lows as the perceived safety of bonds drew increasing commitment.
September’s history as the cruelest month combined with recession fears made equities look like dead money. A surprising thing happened on the way to the funeral, however, as equity markets rallied sharply for the month. They posted the best September return in 71 years and the third best return of any month over the past 10 years. An interesting aspect of the rally was the absence of any real catalyst.
In the end, the S&P 500 returned 16.52% for 12 months ended October 31, 2010. Contributions to this performance were widespread, with most sectors finishing up in double digits.
Sector Results
Consumer Discretionary, Industrials, Telecommunications and Materials stocks were among the strongest performers, while financials and energy were significant laggards. Continuing sluggishness in loan demand, a persistent stream of negative regulatory pronouncements out of Washington and the seemingly endless flow of mortgage problems tempered enthusiasm for the banking industry. Insurers were pressured by weak fixed income returns given the near zero interest rate environment, volatile returns in the equity market, and the specter of further delays in the recovery in real estate markets.
The trend of Gross Domestic Product (“GDP”) growth slowed significantly throughout the year—from 5.0% in the fourth quarter of 2009 to 1.7% in the second quarter of 2010. Subpar growth persisted into the third quarter of 2010 as well.
Consumer Spending
With growth at such a sluggish pace, consumer spending remained weak especially in light of deferred hiring by employers. Given these conditions, there is little reason to expect a resumption of normal economic growth until employment can show meaningful improvement. More and more, the strong GDP growth in the fourth quarter of 2009 and the first quarter of 2010 is looking like an inventory driven anomaly.
Absent the change in inventories, real final sales grew at less than 1.5% over the past four quarters. This was extraordinarily weak for the first 12 months out of a severe recession. However, profit growth has been exceptional as businesses restrained their spending. Margins at many companies were at or above prior peaks. Corporate balance sheets were also very strong, as cash balances grew due to the reluctance to make large capital expenditures.
Yet, jobs still hold the key to recovery. Job statistics have not been encouraging. Without significant growth in employment, consumer and business spending is likely to remain sluggish and the recovery in housing will be pushed farther into the future.
Limited Economic Stimulus
Policymakers in Washington have made a concerted effort to jumpstart the economy, but the results have been limited at best. Now, the government is running out of ammunition as more than two-thirds of the fiscal stimulus budget has been spent and the Federal Reserve has already slashed interest rates to the bone. At the state and local government level, employment was maintained with Federal stimulus money in 2010, but the projected new political mix in Congress next year is not expected to continue that support. Our sub-advisors anticipate retrenchment in state and municipal employment and spending to be a headwind for the economy in the coming year.
As for the overall market, it is inexpensive but it remains subject to economic uncertainty. The unemployment/underemployment figures are the highest since the 1930s and the Federal Reserve has
2
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
pushed short-term rates to zero without much to show for it. This implies a very fragile economic environment with a minimal cushion.
Meanwhile, bonds seem to be making a case for stocks. The monetary policies of the Federal Reserve appear to be designed to move investors into riskier alternatives, such as equities, by keeping bond interest rates at record lows. As investor interest returns to domestic stocks, our managers see a number of positives. As mentioned earlier, corporate balance sheets are quite strong and many companies are positioned to return significant amounts of cash to shareholders, both in the form of share repurchases and (most importantly) increased dividends. Many stocks have a dividend yield which exceeds the interest rate of 10-year Treasury bonds and yet still have the potential to grow returns further through both earnings and dividend growth. Also, most financial stocks are not currently paying any dividends. As we mentioned earlier, many of these financial companies are building significant amounts of excess capital which is likely to be used to restore dividend yields.
Also encouraging is that aggressive cost-cutting during the recession formed lean businesses with tremendous operating leverage. As revenue growth has resurfaced—in fact, some 90% of companies saw revenue gains in the third quarter of 2010—it has created an earnings tailwind. Profit margins on incremental revenue have been more than three times profit margins on base revenue. This is providing the overall market with remarkable operating leverage.
Our managers continue to find compelling valuation opportunities given that the market remains nearly 20% below its 2007 peak. Though less extraordinary than they were in early 2009, these valuation opportunities remain attractive, particularly relative to fixed income alternatives. There appear to be fewer valuation spreads at the sector level, but many at the stock level, making it more of a stock-picker’s market than a cyclical one. This is a prime environment for active equity managers in search of bottom-up valuation opportunities.
3
Performance Overview
American Beacon Large Cap Value FundSM
American Beacon Large Cap Value FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Large Cap Value Fund returned 15.68% for the twelve months ended October 31, 2010. The Fund underperformed the Russell 1000® Value Index (the “Index”) return of 15.71% but outperformed the Lipper Large-Cap Value Funds Index return of 13.06%.
Comparison of Change in Value of a $10,000 Investment
for the Period from 10/31/00 through 10/31/10
for the Period from 10/31/00 through 10/31/10
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Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class (1,8) | 15.68 | % | 1.18 | % | 5.00 | % | $ | 16,285 | ||||||||
Y Class (1,2,8) | 15.50 | % | 1.15 | % | 4.98 | % | 16,259 | |||||||||
Investor Class (1,8) | 15.27 | % | 0.90 | % | 4.70 | % | 15,834 | |||||||||
Advisor Class (1,3,8) | 15.14 | % | 0.69 | % | 4.58 | % | 15,651 | |||||||||
Retirement Class (1,4,8) | 14.78 | % | 0.59 | % | 4.53 | % | 15,572 | |||||||||
A Class with sales charge (1,5,8) | 8.62 | % | -0.29 | % | 4.08 | % | 14,923 | |||||||||
A Class without sales charge (1,5,8) | 15.27 | % | 0.90 | % | 4.70 | % | 15,834 | |||||||||
C Class with sales charge (1,6,8) | 14.08 | % | 0.86 | % | 4.69 | % | 15,807 | |||||||||
C Class without sales charge (1,6,8) | 15.08 | % | 0.86 | % | 4.69 | % | 15,807 | |||||||||
AMR Class (1,8) | 16.04 | % | 1.45 | % | 5.27 | % | 16,708 | |||||||||
Lipper Large-Cap Value Funds Index (7) | 13.06 | % | 0.95 | % | 1.16 | % | 11,223 | |||||||||
Russell 1000 Value Index (7) | 15.71 | % | 0.62 | % | 2.64 | % | 12,982 |
1. | Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. 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 Institutional Class from 10/31/00 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
3. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/00 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/00. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than the actual returns shown for 2005. | |
4. | Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 through 5/31/05 and the Advisor Class from 6/1/05 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/00. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 through 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. A Class shares have a maximum sales charge of 5.75%. | |
6. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 through 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase. | |
7. | The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value Index is a registered trademark of the Frank Russell Company. The Lipper Large-Cap Value Funds Index tracks the results of the 30 largest |
4
Performance Overview
American Beacon Large Cap Value FundSM
American Beacon Large Cap Value FundSM
October 31, 2010 (Unaudited)
mutual funds in the Lipper Large-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | ||
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.62%, 0.69%, 0.94%, 1.13%, 1.34%, 1.12%, 1.87% and 0.37%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Prior to the deduction of expenses, the Fund slightly outperformed the Index. However, the Fund did not generate enough excess performance to offset its expenses. Gross of Fund expenses, the Fund added value entirely through sector allocation, as stock selection detracted from performance.
From a stock selection standpoint, the Fund’s holdings in the Financials and Energy sectors detracted the most value relative to the Index. Companies in the Financials sector that had the greatest impact on the Fund’s underperformance were Mitsubishi UFJ Financial Group (down 10.0%), XL Capital (down 1.1%) and Charles Schwab (down 10.4%). In the Energy sector, BP (down 34.3%) and Weatherford International (down 4.1%) were the largest detractors. Good stock selection in the Industrials sector where Honeywell International (up 36.2%), PACCAR (up 24.1%), and 3M (up 17.1%) were the largest contributors, added value relative to the Index but not enough to offset the negative impact of the aforementioned sectors.
Underweight positions in Energy and Financials, the two worst performing sectors in the Index, added value through sector allocation. This was somewhat offset by an underweight in the Utilities sector which detracted relative value from the Fund’s 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.
Top Ten Holdings
% of | ||||
Net Assets | ||||
ConocoPhillips | 3.2 | % | ||
International Business Machines Corp. | 3.2 | % | ||
JPMorgan Chase & Co. | 2.8 | % | ||
Vodafone Group plc | 2.1 | % | ||
Bank of America Corp. | 1.9 | % | ||
Pfizer, Inc | 1.7 | % | ||
Hewlett-Packard Co. | 1.6 | % | ||
Wells Fargo & Co. | 1.6 | % | ||
Microsoft Corp. | 1.5 | % | ||
Diageo plc | 1.5 | % |
Sector Allocation
% of | ||||
Equities | ||||
Financials | 20.0 | % | ||
Information Technology | 16.6 | % | ||
Industrials | 11.5 | % | ||
Health Care | 11.2 | % | ||
Energy | 10.4 | % | ||
Consumer Staples | 9.3 | % | ||
Consumer Discretionary | 8.9 | % | ||
Telecommunication Services | 4.2 | % | ||
Utilities | 4.1 | % | ||
Materials | 3.8 | % |
5
Fund Expenses
American Beacon Large Cap Value FundSM
American Beacon Large Cap Value FundSM
October 31, 2010 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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.
Beginning | Ending | |||||||||||
Account | Account | Expenses Paid | ||||||||||
Value | Value | During Period* | ||||||||||
5/1/10 | 10/31/10 | 5/1/10-10/31/10 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 993.57 | $ | 2.91 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 992.49 | $ | 3.52 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,021.68 | $ | 3.57 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.55 | $ | 4.82 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,020.37 | $ | 4.89 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 990.92 | $ | 5.47 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,019.71 | $ | 5.55 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 989.15 | $ | 6.87 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,018.30 | $ | 6.97 | ||||||
A Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.17 | $ | 4.95 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,019.86 | $ | 4.93 | ||||||
C Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,087.20 | $ | 3.21 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,015.78 | $ | 3.14 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 994.59 | $ | 1.66 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,023.54 | $ | 1.68 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.70%, 0.96%, 1.09%, 1.37%, 0.33%, 1.06% and 1.87% for the Institutional, Y, Investor, Advisor, Retirement, AMR, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. | |
# | 5% return before expenses. | |
** | Beginning account value is the inception date of 5/17/10 and 9/1/10, for the A and C Classes, respectively. Expenses are equal to the Fund’s annualized expense ratio for the period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (168) and (61), respectively by days in the year (365). |
6
American Beacon Large Cap Value FundSM
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Large Cap Value Fund:
American Beacon Large Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Large Cap Value Fund (one of the funds constituting the American Beacon Funds) (collectively, the “Fund”), as of October 31, 2010, and the related statement of operations for the year then ended, the statement of changes of net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Large Cap Value Fund at October 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![-s- Ernst & Young LLP](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858605.gif)
Dallas, Texas
December 23, 2010
December 23, 2010
7
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
COMMON STOCK — 94.76% | ||||||||
CONSUMER DISCRETIONARY — 8.39% | ||||||||
Auto Components — 0.14% | ||||||||
Johnson Controls, Inc. | 321,500 | 11,291 | ||||||
Automobiles — 0.34% | ||||||||
Toyota Motor Corp.* | 393,300 | 27,854 | ||||||
Hotels, Restaurants & Leisure — 1.49% | ||||||||
Carnival Corp. | 1,159,300 | 50,047 | ||||||
McDonald’s Corp. | 440,900 | 34,289 | ||||||
Wyndham Worldwide Corp. | 1,318,480 | 37,906 | ||||||
122,242 | ||||||||
Media — 1.66% | ||||||||
CBS Corp. | 1,383,700 | 23,426 | ||||||
Comcast Corp. | 897,600 | 17,351 | ||||||
Interpublic Group of Cos., Inc.† | 926,500 | 9,589 | ||||||
Time Warner Cable, Inc. | 173,000 | 10,012 | ||||||
Time Warner, Inc. | 1,944,000 | 63,199 | ||||||
Warner Music Group Corp.† | 2,322,000 | 12,074 | ||||||
135,651 | ||||||||
Multiline Retail — 1.70% | ||||||||
J.C. Penney Company, Inc. | 1,900,700 | 59,264 | ||||||
Nordstrom, Inc. | 243,680 | 9,384 | ||||||
Target Corp. | 539,700 | 28,032 | ||||||
Wal-Mart Stores, Inc. | 786,960 | 42,630 | ||||||
139,310 | ||||||||
Specialty Retail — 2.26% | ||||||||
Abercrombie & Fitch Co. | 865,430 | 37,092 | ||||||
Gap, Inc. | 3,535,200 | 67,204 | ||||||
Limited Brands, Inc. | 130,200 | 3,827 | ||||||
The Home Depot, Inc. | 2,507,467 | 77,430 | ||||||
185,553 | ||||||||
Textiles & Apparel — 0.80% | ||||||||
Polo Ralph Lauren Corp. | 681,000 | 65,975 | ||||||
Total Consumer Discretionary | 687,876 | |||||||
CONSUMER STAPLES — 8.83% | ||||||||
Beverages — 2.15% | ||||||||
Coca-Cola Co. | 430,400 | 26,392 | ||||||
Diageo plc* | 1,689,400 | 125,016 | ||||||
PepsiCo, Inc. | 378,300 | 24,703 | ||||||
176,111 | ||||||||
Food & Drug Retailing — 1.31% | ||||||||
CVS Caremark Corp. | 1,206,000 | 36,325 | ||||||
Safeway, Inc. | 2,322,500 | 53,185 | ||||||
Sysco Corp. | 599,140 | 17,651 | ||||||
107,161 | ||||||||
Food Products — 2.74% | ||||||||
ConAgra Foods, Inc. | 2,600,000 | 58,474 | ||||||
H.J. Heinz Co. | 1,166,000 | 57,262 | ||||||
Hershey Co. | 1,200,000 | 59,388 | ||||||
Kraft Foods, Inc. | 152,000 | 4,905 | ||||||
Unilever N.V. | 1,500,000 | 44,535 | ||||||
224,564 | ||||||||
Shares | Value | |||||||
($000) | ||||||||
Tobacco — 2.63% | ||||||||
Altria Group, Inc. | 1,407,600 | 35,781 | ||||||
Imperial Tobacco Group plc* | 1,180,300 | 75,539 | ||||||
Lorillard, Inc. | 58,600 | 5,001 | ||||||
Philip Morris International, Inc. | 1,698,700 | 99,374 | ||||||
215,695 | ||||||||
Total Consumer Staples | 723,531 | |||||||
ENERGY — 9.88% | ||||||||
Energy Equipment & Services — 0.94% | ||||||||
Transocean Ltd.† | 611,800 | 38,764 | ||||||
Weatherford International Ltd.† | 2,300,000 | 38,663 | ||||||
77,427 | ||||||||
Oil & Gas — 8.94% | ||||||||
BP plc | 1,230,500 | 50,241 | ||||||
Chevron Corp. | 877,862 | 72,520 | ||||||
ConocoPhillips | 4,400,696 | 261,402 | ||||||
Exxon Mobil Corp. | 903,100 | 60,029 | ||||||
Hess Corp. | 1,020,000 | 64,291 | ||||||
Marathon Oil Corp. | 357,000 | 12,698 | ||||||
Occidental Petroleum Corp. | 830,300 | 65,286 | ||||||
QEP Resources, Inc. | 1,006,000 | 33,228 | ||||||
Royal Dutch Shell plc* | 630,500 | 40,554 | ||||||
Spectra Energy Corp. | 3,016,500 | 71,702 | ||||||
731,951 | ||||||||
Total Energy | 809,378 | |||||||
FINANCIALS — 18.93% | ||||||||
Banks — 7.56% | ||||||||
Allied Irish Banks plc† | 96,000 | 7,164 | ||||||
Banco Santander S.A.* | 4,974,000 | 63,717 | ||||||
Bank of America Corp. | 13,558,090 | 155,106 | ||||||
Bank of New York Mellon Corp. | 863,200 | 21,632 | ||||||
East West Bancorp, Inc. | 2,224,982 | 39,226 | ||||||
KeyCorp. | 870,174 | 7,127 | ||||||
M&T Bank Corp. | 590,000 | 44,103 | ||||||
PNC Financial Services Group, Inc. | 2,081,349 | 112,185 | ||||||
SunTrust Banks, Inc. | 201,200 | 5,034 | ||||||
Wells Fargo & Co. | 4,923,058 | 128,393 | ||||||
Zions Bancorporation | 1,728,000 | 35,700 | ||||||
619,387 | ||||||||
Diversified Financials — 7.52% | ||||||||
American Express Co. | 1,802,500 | 74,732 | ||||||
Capital One Financial Corp. | 1,328,500 | 49,513 | ||||||
Charles Schwab Corp. | 1,600,000 | 24,640 | ||||||
Citigroup, Inc.† | 13,709,268 | 57,168 | ||||||
Goldman Sachs Group, Inc. | 213,800 | 34,411 | ||||||
JPMorgan Chase & Co. | 6,076,198 | 228,647 | ||||||
Mitsubishi UFJ Financial Group, Inc.* | 8,256,000 | 38,473 | ||||||
Morgan Stanley Dean Witter & Co. | 1,810,500 | 45,027 | ||||||
SLM Corp.† | 2,611,200 | 31,073 | ||||||
State Street Corp. | 787,500 | 32,886 | ||||||
616,570 | ||||||||
Insurance — 3.24% | ||||||||
ACE Ltd. | 550,200 | 32,693 | ||||||
Allstate Corp. | 727,300 | 22,175 | ||||||
Genworth Financial, Inc.† | 1,180,200 | 13,383 |
See accompanying notes
8
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Hartford Financial Services Group, Inc. | 1,423,550 | 34,137 | ||||||
Lincoln National Corp. | 1,155,200 | 28,279 | ||||||
MetLife, Inc. | 1,411,059 | 56,909 | ||||||
Prudential Financial, Inc. | 154,000 | 8,097 | ||||||
Travelers Cos., Inc. | 495,800 | 27,368 | ||||||
XL Group plc | 2,018,100 | 42,683 | ||||||
265,724 | ||||||||
Real Estate — 0.61% | ||||||||
Annaly Capital Management, Inc.‡ | 2,833,200 | 50,176 | ||||||
Total Financials | 1,551,857 | |||||||
HEALTH CARE — 10.66% | ||||||||
Biotechnology — 0.31% | ||||||||
Amgen, Inc.† | 440,000 | 25,164 | ||||||
Health Care Equipment & Supplies — 2.43% | ||||||||
Baxter International, Inc. | 2,343,400 | 119,279 | ||||||
Covidien PLC | 304,500 | 12,140 | ||||||
Hospira, Inc.† | 1,143,000 | 67,986 | ||||||
199,405 | ||||||||
Health Care Providers & Services — 1.49% | ||||||||
Cardinal Health, Inc. | 1,413,000 | 49,016 | ||||||
CIGNA Corp. | 1,143,100 | 40,226 | ||||||
WellPoint, Inc.† | 606,800 | 32,974 | ||||||
122,216 | ||||||||
Pharmaceuticals — 6.43% | ||||||||
Abbott Laboratories | 1,106,000 | 56,760 | ||||||
Bristol-Myers Squibb Co. | 3,577,400 | 96,232 | ||||||
Eli Lilly & Co. | 1,789,400 | 62,987 | ||||||
Johnson & Johnson | 1,264,300 | 80,498 | ||||||
Merck & Co., Inc. | 2,610,599 | 94,713 | ||||||
Pfizer, Inc. | 7,785,849 | 135,473 | ||||||
526,663 | ||||||||
Total Health Care | 873,448 | |||||||
INDUSTRIALS — 10.90% | ||||||||
Aerospace & Defense — 3.66% | ||||||||
Boeing Co. | 1,384,700 | 97,816 | ||||||
Lockheed Martin Corp. | 374,400 | 26,691 | ||||||
Northrop Grumman Corp. | 1,371,400 | 86,686 | ||||||
Raytheon Co. | 1,917,800 | 88,372 | ||||||
299,565 | ||||||||
Air Freight & Couriers — 0.20% | ||||||||
FedEx Corp. | 186,700 | 16,377 | ||||||
Commercial Services & Supplies — 0.46% | ||||||||
RR Donnelley & Sons Co. | 2,028,910 | 37,433 | ||||||
Construction & Engineering — 0.31% | ||||||||
Shaw Group, Inc.† | 834,715 | 25,509 | ||||||
Electrical Equipment — 0.01% | ||||||||
Molex, Inc. — Class A | 64,490 | 1,101 | ||||||
Industrial Conglomerates — 2.65% | ||||||||
3M Co. | 387,400 | 32,627 | ||||||
General Electric Co. | 5,053,900 | 80,963 | ||||||
Honeywell International, Inc. | 1,917,025 | 90,311 |
Shares | Value | |||||||
($000) | ||||||||
Tyco International Ltd. | 355,400 | 13,605 | ||||||
217,506 | ||||||||
Machinery — 3.61% | ||||||||
Cummins, Inc. | 104,300 | 9,189 | ||||||
Deere & Co. | 1,039,000 | 79,795 | ||||||
Eaton Corp. | 181,500 | 16,123 | ||||||
Illinois Tool Works, Inc. | 739,400 | 33,791 | ||||||
ITT Industries, Inc. | 997,400 | 47,067 | ||||||
PACCAR, Inc. | 1,052,330 | 53,942 | ||||||
SPX Corp. | 834,000 | 55,928 | ||||||
295,835 | ||||||||
Total Industrials | 893,326 | |||||||
INFORMATION TECHNOLOGY — 15.69% | ||||||||
Communications Equipment — 0.43% | ||||||||
Cisco Systems, Inc.† | 1,549,700 | 35,380 | ||||||
Computers & Peripherals — 7.09% | ||||||||
Apple Computer, Inc.† | 349,000 | 105,004 | ||||||
EMC Corp.† | 4,000,000 | 84,040 | ||||||
Hewlett-Packard Co. | 3,134,900 | 131,854 | ||||||
International Business Machines Corp. | 1,806,400 | 259,399 | ||||||
580,297 | ||||||||
Electronic Equipment & Instruments — 0.41% | ||||||||
Avnet, Inc.† | 560,800 | 16,701 | ||||||
Tyco Electronics Ltd. | 544,200 | 17,240 | ||||||
33,941 | ||||||||
Internet Software & Services — 1.21% | ||||||||
eBay, Inc.† | 2,447,000 | 72,945 | ||||||
Xerox Corp. | 2,227,800 | 26,065 | ||||||
99,010 | ||||||||
IT Consulting & Services — 0.06% | ||||||||
Accenture plc | 113,400 | 5,070 | ||||||
Semiconductor Equipment & Products — 2.54% | ||||||||
ASML Holding N.V. | 341,550 | 11,336 | ||||||
Intel Corp. | 5,004,700 | 100,445 | ||||||
Micron Technology, Inc.† | 1,964,600 | 16,247 | ||||||
Texas Instruments, Inc. | 2,720,300 | 80,439 | ||||||
208,467 | ||||||||
Software — 3.95% | ||||||||
CA, Inc. | 1,503,903 | 34,906 | ||||||
Intuit, Inc.† | 1,422,000 | 68,256 | ||||||
Microsoft Corp. | 4,750,400 | 126,550 | ||||||
Oracle Corp. | 3,199,600 | 94,068 | ||||||
323,780 | ||||||||
Total Information Technology | 1,285,945 | |||||||
MATERIALS — 3.63% | ||||||||
Chemicals — 2.48% | ||||||||
Air Products & Chemicals, Inc. | 337,700 | 28,694 | ||||||
Celanese Corp. | 10,200 | 364 | ||||||
Dow Chemical Co. | 2,913,000 | 89,808 | ||||||
E. I. du Pont de Nemours & Co. | 1,470,600 | 69,530 | ||||||
PPG Industries, Inc. | 186,700 | 14,320 | ||||||
202,716 | ||||||||
Metals & Mining — 0.73% | ||||||||
Cliffs Natural Resources, Inc. | 551,300 | 35,945 |
See accompanying notes
9
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Newmont Mining Corp. | 389,000 | 23,678 | ||||||
59,623 | ||||||||
Paper & Forest Products — 0.42% | ||||||||
International Paper Co. | 1,376,500 | 34,798 | ||||||
Total Materials | 297,137 | |||||||
TELECOMMUNICATION SERVICES — 3.93% | ||||||||
Diversified Telecommunication Services — 1.78% | ||||||||
AT&T, Inc. | 2,781,452 | 79,272 | ||||||
Nokia Corp.* | 4,161,700 | 44,447 | ||||||
Verizon Communications, Inc. | 694,986 | 22,566 | ||||||
146,285 | ||||||||
Wireless Telecommunication Services — 2.15% | ||||||||
Vodafone Group plc* | 6,398,200 | 176,014 | ||||||
Total Telecommunication Services | 322,299 | |||||||
UTILITIES — 3.92% | ||||||||
Electric Utilities — 3.71% | ||||||||
CenterPoint Energy, Inc. | 2,553,000 | 42,278 | ||||||
Dominion Resources, Inc. | 2,691,640 | 116,978 | ||||||
Edison International | 405,100 | 14,948 | ||||||
Entergy Corp. | 498,500 | 37,153 | ||||||
Exelon Corp. | 703,400 | 28,713 | ||||||
NextEra Energy, Inc. | 1,160,700 | 63,885 | ||||||
303,955 | ||||||||
Multi-Utilities — 0.21% | ||||||||
Questar Corp. | 1,006,000 | 17,072 | ||||||
Total Utilities | 321,027 | |||||||
Total Common Stock (Cost $7,449,759) | 7,765,824 | |||||||
SHORT-TERM INVESTMENTS — 4.41% | ||||||||
American Beacon U.S. Government Money Market Select Fund § | 60,000,000 | 60,000 | ||||||
JPMorgan U.S. Government Money Market Fund | 301,599,122 | 301,599 | ||||||
Total Short-Term Investments (Cost $361,599) | 361,599 | |||||||
TOTAL INVESTMENTS — 99.17% (Cost $7,811,358) | 8,127,423 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 0.83% | 68,318 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 8,195,741 | ||||||
* | ADR — American Depository Receipt | |
† | Non-income producing security. | |
‡ | REIT | |
§ | The Fund is affiliated by having the same investment advisor. |
Percentages are stated as a percent of net assets.
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
S&P 500 Mini E Index Future | 6,633 | September, 2010 | $ | 391,248 | $ | 20,282 | ||||||||||
$ | 391,248 | $ | 20,282 | |||||||||||||
See accompanying notes
10
American Beacon Large Cap Value FundSM
Statement of Assets and Liabilities
Statement of Assets and Liabilities
October 31, 2010 (in thousands, except share and per share amounts)
Assets: | ||||
Investments in unaffiliated securities, at value A | $ | 8,067,423 | ||
Investments in affiliated securities, at value B | 60,000 | |||
Deposit with brokers for futures contracts | 29,506 | |||
Receivable for investments sold | 69,512 | |||
Dividends and interest receivable | 10,358 | |||
Receivable for fund shares sold | 9,952 | |||
Receivable for tax reclaims | 95 | |||
Receivable for variation margin on open futures contracts | 134 | |||
Prepaid expenses | 287 | |||
Total assets | 8,247,267 | |||
Liabilities: | ||||
Payable for investments purchased | 36,988 | |||
Payable for fund shares redeemed | 4,971 | |||
Management and investment advisory fees payable (Note 2) | 5,201 | |||
Administrative service and service fees payable (Note 2) | 3,114 | |||
Other liabilities | 1,252 | |||
Total liabilities | 51,526 | |||
Net assets | $ | 8,195,741 | ||
Analysis of Net Assets: | ||||
Paid-in-capital | 9,829,602 | |||
Undistributed net investment income | 86,896 | |||
Accumulated net realized loss | (2,057,103 | ) | ||
Unrealized appreciation of investments and futures contracts | 336,346 | |||
Net assets | $ | 8,195,741 | ||
Shares outstanding (no par value): | ||||
Institutional Class | 181,355,401 | |||
Y Class | 114,796 | |||
Investor Class | 235,108,660 | |||
Advisor Class | 7,332,543 | |||
Retirement Class | 124 | |||
A Class | 46,235 | |||
C Class | 2,166 | |||
AMR Class | 30,383,566 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 18 .56 | ||
Y Class | $ | 18 .49 | ||
Investor Class | $ | 17 .61 | ||
Advisor Class | $ | 17 .47 | ||
Retirement Class | $ | 17 .32 | ||
A Class (Net asset value only) | $ | 17 .61 | ||
A Class (Offering and redemption price) | $ | 18 .68 | ||
C Class | $ | 17 .58 | ||
AMR Class | $ | 18 .37 | ||
A | Cost of investments in unaffiliated securities | $ | 7,751,358 | |||
B | Cost of investments in affiliated securities | $ | 60,000 |
See accompanying notes
11
American Beacon Large Cap Value FundSM
Statement of Operations
Statement of Operations
Year Ended October 31, 2010 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes)* | $ | 174,442 | ||
Dividend income from affiliated securities | 65 | |||
Interest income | 28 | |||
Total investment income | 174,535 | |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 17,873 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 8,116 | |||
Y Class | 4 | |||
Investor Class | 12,421 | |||
Advisor Class | 380 | |||
AMR Class | 274 | |||
Transfer agent fees: | ||||
Institutional Class | 146 | |||
Investor Class | 268 | |||
Advisor Class | 15 | |||
AMR Class | 29 | |||
Custody and fund accounting fees | 1,025 | |||
Professional fees | 393 | |||
Registration fees and expenses | 169 | |||
Service fees (Note 2): | ||||
Y Class | 1 | |||
Investor Class | 15,279 | |||
Advisor Class | 316 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 316 | |||
Prospectus and shareholder reports | 860 | |||
Trustee fees | 530 | |||
Other expenses | 571 | |||
Total expenses | 58,986 | |||
Net investment income | 115,549 | |||
Realized and unrealized gain (loss) on investments: | ||||
Net realized gain (loss) from: | ||||
Investments | (76,879 | ) | ||
Commission recapture (Note 1) | 188 | |||
Futures contracts | 14,382 | |||
Change in net unrealized appreciation or depreciation of: | ||||
Investments | 967,842 | |||
Futures contracts | 25,156 | |||
Net gain on investments | 930,689 | |||
Net increase in net assets resulting from operations | $ | 1,046,238 | ||
* Foreign taxes | $ | 1,208 |
See accompanying notes
12
American Beacon Large Cap Value FundSM
Statement of Changes of Net Assets (in thousands)
Statement of Changes of Net Assets (in thousands)
Year Ended | Year Ended | |||||||
October 31, | October 31, | |||||||
2010 | 2009 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 115,549 | $ | 125,394 | ||||
Net realized loss on investments and futures contracts | (62,309 | ) | (825,817 | ) | ||||
Change in net unrealized appreciation of investments and futures contracts | 992,998 | 1,366,171 | ||||||
Net increase in net assets resulting from operations | 1,046,238 | 665,748 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (40,440 | ) | (57,494 | ) | ||||
Y Class | (15 | ) | — | |||||
Investor Class | (61,616 | ) | (96,586 | ) | ||||
Advisor Class | (1,747 | ) | (2,701 | ) | ||||
AMR Class | (10,649 | ) | (15,992 | ) | ||||
Net distributions to shareholders | (114,467 | ) | (172,773 | ) | ||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 2,598,273 | 1,578,918 | ||||||
Reinvestment of dividends and distributions | 109,446 | 164,886 | ||||||
Cost of shares redeemed | (2,099,289 | ) | (1,810,886 | ) | ||||
Net increase (decrease) in net assets from capital share transactions | 608,430 | (67,082 | ) | |||||
Net increase in net assets | 1,540,201 | 425,893 | ||||||
Net Assets: | ||||||||
Beginning of period | 6,655,540 | 6,229,647 | ||||||
End of Period * | $ | 8,195,741 | $ | 6,655,540 | ||||
*Includes undistributed net investment income of | $ | 86,896 | $ | 85,814 | ||||
See accompanying notes
13
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of 19 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, 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 Lighthouse Holdings, Inc. 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 inception dates of the A and C Classes are May 17 and September 1, 2010, respectively.
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: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of AMR Corporation and its affiliates | |
A Class | General public and investors investing through an intermediary with applicable sales charges | |
C Class | General public and investors investing through an intermediary with applicable sales charges |
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.
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. 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 fair value.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
14
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Valuation Inputs
Various inputs may be used to determine the value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 | — | Quoted prices in active markets for identical securities. | ||
Level 2 | — | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | ||
Level 3 | — | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
The Fund’s investments are summarized by level based on the inputs used to determine their values. During the period there were no significant transfers between levels. As of October 31, 2010, the Fund’s investments were classified as follows: (in thousands)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock | $ | 7,765,824 | $ | — | $ | — | $ | 7,765,824 | ||||||||
Short Term Investments | 361,599 | — | — | 361,599 | ||||||||||||
Total Investments in Securities | $ | 8,127,423 | $ | — | $ | — | $ | 8,127,423 | ||||||||
Futures Contracts | $ | 20,282 | — | — | $ | 20,282 |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the 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 Statement of Assets and Liabilities as deposit with broker 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
15
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||||||
Unrealized appreciation of investments, futures contracts, and foreign currency | Equity Contracts* | $ | 20,282 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 14,382 | |||||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | $ | 25,156 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least 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. This amount is reported with the net realized gain in the Fund’s Statement of Operations.
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 trustees 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.
16
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
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 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 0.05% of the average daily net assets plus amounts paid by the Manager to unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2010 were as follows (dollars in thousands):
Amounts paid to | Net Amounts | |||||
Management | Management | Investment | Retained by | |||
Fee Rate | Fee | Advisors | Manager | |||
0.175%-0.65% | $17,873 | $14,113 | $3,760 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor and Retirement Classes of the Fund, 0.40% of the average daily net assets of the A and C Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund. Administrative Service fees for the Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Distribution Plans
The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C 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. Distribution fees for the Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes and up to 0.375% of the average daily net assets of the Investor Class of the
17
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Fund. Service fees for the Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon US Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee of 0.09% of its average daily net assets of the Select Funds. During the year ended October 31, 2010, the Manager earned fees from the Select Funds totaling $57,671 on the Fund’s direct investment in the Select Funds.
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“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 other participating Funds. During the year ended October 31, 2010, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Fund has 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’s 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. During the year ended October 31, 2010, the C Class waived $8. A liability has not been booked as the Manager does not intend to seek repayment of this waiver.
3. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company, by complying with all applicable provisions of the Code, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes each Fund is treated as a single entity for the purpose of determining such qualifications.
The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2010 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
Dividends are categorized 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 paid during the fiscal years ended October 31, 2010 and October 31, 2009 were as follows (in thousands):
18
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Year Ended | Year Ended | |||||||
October 31, | October 31, | |||||||
2010 | 2009 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 40,440 | $ | 57,494 | ||||
Y Class | 15 | — | ||||||
Investor Class | 61,616 | 96,586 | ||||||
Advisor Class | 1,747 | 2,701 | ||||||
AMR Class | 10,649 | 15,992 | ||||||
Total distributions paid | $ | 114,467 | $ | 172,773 | ||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2010, the components of distributable earnings (deficit) on a tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes | $ | 8,076,661 | ||
Unrealized appreciation | 1,002,212 | |||
Unrealized depreciation | (951,450 | ) | ||
Net unrealized appreciation/(depreciation) | 50,762 | |||
Undistributed ordinary income | 86,895 | |||
Accumulated long-term gain/(loss) | (1,791,840 | ) | ||
Other temporary differences | 20,322 | |||
Distributable earnings/(deficit) | $ | (1,633,861 | ) | |
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 and the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments.
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 regulations, 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 derived from Section 732 basis adjustments that have been reclassified as of October 31, 2010 (in thousands):
Paid-in-capital | $ | 6 | ||
Undistributed net investment income | — | |||
Accumulated net realized gain (loss) | (5 | ) | ||
Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency | (1 | ) |
At October 31, 2010 the capital loss carry forward positions for federal income tax purposes were $1,044,692, $684,423, and $42,443 expiring in 2016, 2017, and 2018 respectively. (in thousands)
4. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments other than short-term obligations for the year ended October 31, 2010 were (in thousands) $2,459,149 and $1,998,023, respectively.
A summary of the Fund’s direct ownership and transactions in the Select Funds for the year ended October 31, 2010 is set forth below (in thousands):
19
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
October 31, 2009 | October 31, 2010 | |||||||||||||||
Affiliate | Shares/Market Value | Purchases | Sales | Shares/Market Value | ||||||||||||
USG Select Fund | $ | 60,000 | $ | 10,000 | $ | 10,000 | $ | 60,000 |
5. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):
Year Ended October 31, 2010
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 67,332 | $ | 1,191,741 | 199 | $ | 3,527 | 80,103 | $ | 1,343,174 | 1,315 | $ | 21,942 | ||||||||||||||||||||
Reinvestment of dividends | 2,134 | 36,957 | 1 | 15 | 3,645 | 60,109 | 105 | 1,716 | ||||||||||||||||||||||||
Shares redeemed | (24,252 | ) | (425,661 | ) | (85 | ) | (1,472 | ) | (93,570 | ) | (1,565,806 | ) | (1,557 | ) | (26,092 | ) | ||||||||||||||||
Net increase (decrease) in shares outstanding | 45,214 | $ | 803,037 | 115 | $ | 2,070 | (9,822 | ) | $ | (162,523 | ) | (137 | ) | $ | (2,434 | ) | ||||||||||||||||
Retirement Class | AMR Class | A Class | C Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | — | $ | 1 | 2,145 | $ | 37,065 | 46 | $ | 786 | 2 | $ | 37 | ||||||||||||||||||||
Reinvestment of dividends | — | — | 623 | 10,649 | — | — | — | — | ||||||||||||||||||||||||
Shares redeemed | — | — | (4,647 | ) | (80,258 | ) | — | — | — | — | ||||||||||||||||||||||
Net increase (decrease) in shares outstanding | — | $ | 1 | (1,879 | ) | $ | (32,544 | ) | 46 | $ | 786 | 2 | $ | 37 | ||||||||||||||||||
Year Ended October 31, 2009
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold | 38,693 | $ | 535,949 | — | $ | 1 | 74,391 | $ | 985,338 | |||||||||||||||
Reinvestment of dividends | 4,043 | 53,008 | — | — | 7,465 | 93,236 | ||||||||||||||||||
Shares redeemed | (42,400 | ) | (575,194 | ) | — | — | (88,535 | ) | (1,151,477 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | 336 | $ | 13,763 | — | $ | 1 | (6,679 | ) | $ | (72,903 | ) | |||||||||||||
Advisor Class | Retirement Class | AMR Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold | 1,726 | $ | 22,607 | — | $ | 1 | 2,516 | $ | 35,022 | |||||||||||||||
Reinvestment of dividends | 214 | 2,650 | — | — | 1,236 | 15,992 | ||||||||||||||||||
Shares redeemed | (1,478 | ) | (19,228 | ) | — | — | (4,909 | ) | (64,987 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | 462 | $ | 6,029 | — | $ | 1 | (1,157 | ) | $ | (13,973 | ) | |||||||||||||
20
Internationally left blank.
21
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||||||||||
Year | August | |||||||||||||||||||||||||||||||
ended | 03 to | Year Ended | ||||||||||||||||||||||||||||||
Year Ended October 31, | October | October | October 31, | |||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2009 | 2010 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.32 | $ | 15.01 | $ | 26.03 | $ | 23.77 | $ | 21.00 | $ | 16.32 | $ | 15.59 | $ | 15.51 | ||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||
Net investment incomeA | 0.32 | 0.35 | 0.51 | 0.40 | 0.31 | 0.29 | 0.06 | 0.23 | ||||||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 2.22 | 1.40 | (10.41 | ) | 2.78 | 3.48 | 2.22 | 0.67 | 2.12 | |||||||||||||||||||||||
Total income (loss) from investment operations | 2.54 | 1.75 | (9.90 | ) | 3.18 | 3.79 | 2.51 | 0.73 | 2.35 | |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.30 | ) | (0.44 | ) | (0.41 | ) | (0.31 | ) | (0.26 | ) | (0.34 | ) | — | (0.25 | ) | |||||||||||||||||
Distributions from net realized gains on securities | — | — | (0.71 | ) | (0.61 | ) | (0.76 | ) | — | — | — | |||||||||||||||||||||
Total distributions | (0.30 | ) | (0.44 | ) | (1.12 | ) | (0.92 | ) | (1.02 | ) | (0.34 | ) | — | (0.25 | ) | |||||||||||||||||
Net asset value, end of period | $ | 18.56 | $ | 16.32 | $ | 15.01 | $ | 26.03 | $ | 23.77 | $ | 18.49 | $ | 16.32 | $ | 17.61 | ||||||||||||||||
Total return B | 15.68 | % | 12.41 | % | (39.59 | )% | 13.76 | % | 18.69 | % | 15.50 | % | 4.68 | %D | 15.27 | % | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,366,011 | $ | 2,221,162 | $ | 2,038,539 | $ | 2,493,451 | $ | 958,830 | $ | 2,123 | $ | 1 | $ | 4,140,584 | ||||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||||||
Expenses, net of waivers | 0.59 | % | 0.61 | % | 0.58 | % | 0.59 | % | 0.60 | % | 0.70 | % | 0.68 | %E | 0.96 | % | ||||||||||||||||
Expenses, before waivers | 0.59 | % | 0.61 | % | 0.58 | % | 0.59 | % | 0.60 | % | 0.70 | % | 0.68 | %E | 0.96 | % | ||||||||||||||||
Net investment income, net of waivers | 1.73 | % | 2.36 | % | 2.19 | % | 1.82 | % | 1.86 | % | 1.51 | % | 1.58 | %E | 1.36 | % | ||||||||||||||||
Net investment income (loss), before waivers | 1.73 | % | 2.36 | % | 2.19 | % | 1.82 | % | 1.86 | % | 1.51 | % | 1.58 | %E | 1.36 | % | ||||||||||||||||
Portfolio turnover rate | 28 | % | 27 | % | 28 | % | 20 | % | 26 | % | 28 | % | 27 | %C | 28 | % |
A | For purposes of this calculation, through October 31, 2007, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding. | |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
C | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. | |
D | Not annualized. | |
E | Annualized. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
22
Advisor Class | Retirement Class | AMR Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year | May | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ended | 01 to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | October | October | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2009 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||||||||||||||||||
$ | 14.29 | $ | 24.83 | $ | 22.74 | $ | 20.16 | $ | 15.39 | $ | 14.19 | $ | 24.70 | $ | 22.64 | $ | 20.13 | $ | 15.36 | $ | 12.66 | $ | 16.14 | $ | 14.88 | $ | 25.80 | |||||||||||||||||||||||||||||
0.28 | 0.41 | 0.35 | 0.28 | 0.21 | 0.26 | 0.32 | 0.28 | 0.26 | 0.18 | 0.08 | 0.34 | 0.37 | 0.51 | |||||||||||||||||||||||||||||||||||||||||||
1.34 | (9.88 | ) | 2.63 | 3.31 | 2.10 | 1.32 | (9.79 | ) | 2.62 | 3.27 | 2.07 | 2.62 | 2.22 | 1.38 | (10.26 | ) | ||||||||||||||||||||||||||||||||||||||||
1.62 | (9.47 | ) | 2.98 | 3.59 | 2.31 | 1.58 | (9.47 | ) | 2.90 | 3.53 | 2.25 | 2.70 | 2.56 | 1.75 | (9.75 | ) | ||||||||||||||||||||||||||||||||||||||||
(0.40 | ) | (0.36 | ) | (0.28 | ) | (0.25 | ) | (0.23 | ) | (0.38 | ) | (0.33 | ) | (0.23 | ) | (0.26 | ) | (0.29 | ) | — | (0.33 | ) | (0.49 | ) | (0.46 | ) | ||||||||||||||||||||||||||||||
— | (0.71 | ) | (0.61 | ) | (0.76 | ) | — | — | (0.71 | ) | (0.61 | ) | (0.76 | ) | — | — | — | — | (0.71 | ) | ||||||||||||||||||||||||||||||||||||
(0.40 | ) | (1.07 | ) | (0.89 | ) | (1.01 | ) | (0.23 | ) | (0.38 | ) | (1.04 | ) | (0.84 | ) | (1.02 | ) | (0.29 | ) | — | (0.33 | ) | (0.49 | ) | (1.17 | ) | ||||||||||||||||||||||||||||||
$ | 15.51 | $ | 14.29 | $ | 24.83 | $ | 22.74 | $ | 17.47 | $ | 15.39 | $ | 14.19 | $ | 24.70 | $ | 22.64 | $ | 17.32 | $ | 15.36 | $ | 18.37 | $ | 16.14 | $ | 14.88 | |||||||||||||||||||||||||||||
11.99 | % | (39.72 | )% | 13.46 | % | 18.44 | % | 15.14 | % | 11.81 | % | (39.87 | )% | 13.16 | % | 18.18 | % | 14.78 | % | 21.33 | %D | 16.04 | % | 12.59 | % | (39.43 | )% | |||||||||||||||||||||||||||||
$ | 3,798,632 | $ | 3,594,565 | $ | 5,198,835 | $ | 2,586,410 | $ | 128,080 | $ | 114,945 | $ | 99,416 | $ | 99,854 | $ | 39,077 | $ | 2 | $ | 1 | $ | 558,089 | $ | 520,799 | $ | 497,127 | |||||||||||||||||||||||||||||
0.93 | % | 0.83 | % | 0.83 | % | 0.85 | % | 1.10 | % | 1.10 | % | 1.08 | % | 1.08 | % | 1.09 | % | 1.37 | % | 1.37 | %E | 0.34 | % | 0.36 | % | 0.32 | % | |||||||||||||||||||||||||||||
0.93 | % | 0.83 | % | 0.83 | % | 0.85 | % | 1.10 | % | 1.12 | % | 1.08 | % | 1.08 | % | 1.09 | % | 1.37 | % | 1.37 | %E | 0.34 | % | 0.36 | % | 0.32 | % | |||||||||||||||||||||||||||||
2.05 | % | 1.94 | % | 1.59 | % | 1.61 | % | 1.23 | % | 1.86 | % | 1.69 | % | 1.32 | % | 1.39 | % | 0.95 | % | 1.15 | %E | 1.98 | % | 2.62 | % | 2.44 | % | |||||||||||||||||||||||||||||
2.05 | % | 1.94 | % | 1.59 | % | 1.61 | % | 1.23 | % | 1.84 | % | 1.69 | % | 1.32 | % | 1.39 | % | 0.95 | % | 1.15 | %E | 1.98 | % | 2.62 | % | 2.44 | % | |||||||||||||||||||||||||||||
27 | % | 28 | % | 20 | % | 26 | % | 28 | % | 27 | % | 28 | % | 20 | % | 26 | % | 28 | % | 27 | %C | 28 | % | 27 | % | 28 | % |
23
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
AMR Class | A Class | C Class | ||||||||||||||
May | September | |||||||||||||||
Year Ended October | 17 to | 01 to | ||||||||||||||
31, | October | October | ||||||||||||||
2007 | 2006 | 31, 2010 | 31, 2010 | |||||||||||||
Net asset value, beginning of period | $ | 23.55 | $ | 20.78 | $ | 16.93 | $ | 16.17 | ||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss)A | 0.45 | 0.35 | 0.03 | (0.01 | ) | |||||||||||
Net gains (losses) on securities (both realized and unrealized) | 2.76 | 3.47 | 0.65 | 1.42 | ||||||||||||
Total income (loss) from investment operations | 3.21 | 3.82 | 0.68 | 1.41 | ||||||||||||
Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.35 | ) | (0.29 | ) | — | — | ||||||||||
Distributions from net realized gains on securities | (0.61 | ) | (0.76 | ) | — | — | ||||||||||
Total distributions | (0.96 | ) | (1.05 | ) | — | — | ||||||||||
Net asset value, end of period | $ | 25.80 | $ | 23.55 | $ | 17.61 | $ | 17.58 | ||||||||
Total return B | 14.03 | % | 19.08 | % | 4.02 | %D | 8.72 | %D | ||||||||
Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 972,260 | $ | 1,024,899 | $ | 814 | $ | 38 | ||||||||
Ratios to average net assets (annualized): | ||||||||||||||||
Expenses, net of waivers | 0.32 | % | 0.34 | % | 1.06 | %E | 1 .87 | %E | ||||||||
Expenses, before waivers | 0.32 | % | 0.34 | % | 1.06 | %E | 2 .14 | %E | ||||||||
Net investment income, net of waivers | 2.13 | % | 2.18 | % | 1.09 | %E | (0.50 | )%E | ||||||||
Net investment income (loss), before waivers | 2.13 | % | 2.18 | % | 1.09 | %E | (0.76 | )%E | ||||||||
Portfolio turnover rate | 20 | % | 26 | % | 28 | %F | 28 | %F |
A | For purposes of this calculation, through October 31, 2007, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding. | |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
C | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. | |
D | Not annualized. | |
E | Annualized. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
24
American Beacon Funds
Privacy Policy & Federal Tax Information
Privacy Policy & Federal Tax Information
October 31, 2010 (Unaudited)
Privacy Policy
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources: |
• | information we receive from you on applications or other forms; | ||
• | information about your transactions with us or our service providers; and | ||
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
For corporate shareholders in the Fund, the percentage of ordinary dividend income distributed for the year ended October 31, 2010, which is designated as qualifying for the dividends-received deduction, was 83.07%.
For shareholders in the Fund, the percentage of dividend income distributed for the year ended October 31, 2010, which is designated as qualified dividend income under the Jobs Growth Tax Relief Act of 2003 was 100.00%. Shareholders will receive notification in January 2011 of the percentage applicable to the preparation of their 2010 income tax returns.
25
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
(Unaudited)
At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements” and collectively with the Management Agreement, the “Agreements”). 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 a separate meeting on May 10, 2010 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.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, 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 1 and II of its Form ADV registration statement with the SEC; | ||
• | a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; | ||
• | 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; | ||
• | a description of any payments by the subadvisors to the manager to support the Funds’ marketing efforts; | ||
• | 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 would not impair its ability to provide high-quality advisory services to the Funds; | ||
• | a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for 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, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; | ||
• | a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; | ||
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; | ||
• | 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 best 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 discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; | ||
• | a description of trade allocation procedures among accounts managed by the firm; | ||
• | a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates | ||
• | a certification by the firm regarding the reasonable design of its compliance program; | ||
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; | ||
• | 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:
26
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
(Unaudited)
• | a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; | ||
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; | ||
• | a comparison of advisory fees and expense ratios for comparable mutual funds; | ||
• | an analysis of any material complaints received from Fund shareholders; | ||
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; | ||
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; | ||
• | a description of the Manager’s securities lending practices and the fees received from such practices; | ||
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; | ||
• | a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and | ||
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated. |
In connection with the Management Agreement and each Investment Advisory Agreement, 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 with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was 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.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 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 a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing 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, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
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 considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions
27
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements (Unaudited)
with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Funds. The Board further considered that each subadvised 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 program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the 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 arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is 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 considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.
In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits 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 also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.
In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to each Trust at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal years ended October 31, and December 31, 2009.
Based on the foregoing 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 performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.
28
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements (Unaudited)
Additional Considerations and Conclusions with Respect to the Large Cap Value Fund
In considering the renewal of the Management Agreement for the Large Cap Value Fund, the Trustees considered the following additional factors: (1) the Large Cap Value Fund outperformed the peer universe median for the one-, three-, five-, and ten-year periods ended March 31, 2010; and (2) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper universe.
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine’), Hotchkis and Wiley Capital Management, LLC (“Hotchkis”) and Metropolitan West Capital Management, LLC (“MetWest”), the Trustees considered the following additional factors: (1) Barrow outperformed the peer universe median for the one- , three-, five- and ten-year periods ended March 31, 2010; (2) Brandywine outperformed the peer universe median for the one-, five- and ten-year periods ended March 31, 2010 but underperformed for the three-year period; (3) Hotchkis outperformed the peer universe median for the one-and ten -year periods ended March 31, 2010, but underperformed for the three- and five-year periods; (4) MetWest outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (5) management’s explanation that Hotchkis’ underperformance was due, in part, to its over exposure to the financial sector, while its performance was superior in all other sectors; (6) Hochkis’ performance on the behalf of the Fund exceeded the Lipper Large Cap Value index for the twelve-month period ended March 31, 2010; (7) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (8) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (9) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Large Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Large Cap Value Fund.
29
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-three funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
INTERESTED TRUSTEES | Term Lifetime of Trust until removal, resignation or retirement* | |||
Alan D. Feld** (73) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994- 2006); Member, Board of Trustees, Southern Methodist University; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-present); Trustee, American Beacon Select Funds (1999-present); Trustee, American Beacon Master Trust (1996-present). | ||
NON-INTERESTED TRUSTEES | Term Lifetime of Trust until removal, resignation or retirement* | |||
W. Humphrey Bogart (66) | Trustee since 2004 | Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust Funds (2004-present). | ||
Brenda A. Cline (49) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children’s Health Foundation) (2001-2006); Director, Christian Church Foundation (1999- 2007); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
Eugene J. Duffy (56) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994- Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001-Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). |
30
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
Position, Term of | ||||
Office and | ||||
Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Thomas M. Dunning (68) | Trustee since 2008 | Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-present); Director, Baylor Health Care System Foundation (2007-present); State Vice Chair, State Fair of Texas (1987-present); Board Member, Southwestern Medical Foundation (1994-present); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
Richard A. Massman (67) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present), Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities). Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005 -Present), Temple Emanu-El Foundation; Trustee, Presbyterian Hospital Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
R. Gerald Turner (64) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-present); Trustee, American Beacon Select Funds (2001-present); Trustee, American Beacon Master Trust (2001-present). | ||
Paul J. Zucconi,CPA (70) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002-present); Director, Torchmark Corporation (life and health insurance products) (2002-present); Director, National Kidney Foundation of North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004-Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
OFFICERS | ||||
William F. Quinn** (62) | Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009) and CEO (2006- 2007), President (1986-2006) and Director (2003- Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-2008); Trustee, American Beacon Select Funds (1999-2008); Trustee, American Beacon Master Trust (1995-2008); Director, American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). |
31
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
OFFICERS | Term One Year | |||
Gene L. Needles, Jr. (55) | President 2009 to Present and Executive Vice President 2009 to Present | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors. | ||
Rosemary K. Behan (51) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and Exchange Commission. | ||
Brian E. Brett (50) | VP since 2004 | Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). | ||
Wyatt Crumpler (44) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. | ||
Michael W. Fields (56) | VP since 1989 | Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (49) | Treasurer since 2010 | Vice President, Finance and Accounting (2010-Present), Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. | ||
Terri L. McKinney (47) | VP since 2009 | Vice-President, Enterprise Services (2009-Present), Managing Director (2003-2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice-President, Board of Trustees (2008-Present), Trustee (2006-2008) Down Syndrome Guild of Dallas. | ||
Jeffrey K. Ringdahl (35) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice-President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Christina E. Sears (39) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. | |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust’s and Master Trust’s sub-advisors. |
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Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967 -9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
Custodian | Transfer Agent | Independent Registered | Distributor | |||
State Street Bank and | Boston Financial Data | Public Accounting | Foreside Fund Services, | |||
Trust | Services | Firm | LLC | |||
Boston, Massachusetts | Kansas City, Missouri | Ernst & Young LLP | Portland, Maine | |||
Dallas, Texas |
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 or Summary Prospectus.
American Beacon Funds and American Beacon Large Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR 10/10
LV1010
LV1010
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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 | 8 | |||
Additional Information | Back Cover |
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies.
American Beacon Funds | October 31, 2010 |
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Fellow Shareholders,
Throughout the past 12 months, one theme prevailed: investments placed with experienced, forward-thinking managers can still benefit. Opportunity abounds for those with the foresight to know how to capitalize on changing market conditions. It’s no coincidence that this theme also goes to the heart of the American Beacon Funds investment philosophy.
It’s a philosophy that has served shareholders in the American Beacon Small Cap Value Fund well. For the 12 months ended October 31, 2010 the Fund (Institutional Class) generated a 24.71% return. Please note that the recent growth rate in the stock market has helped to produce short-term increases that are not typical and may not continue in the future.
While we keep a watchful eye on your investment in our funds, we also remain focused on seeking out new opportunities to help keep your financial goals on course. This is what guides the composition of American Beacon Funds’ product line-up. It is also what led to the addition of several new funds this past year: the American Beacon Zebra Large Cap and the Zebra Small Cap Equity Funds, which use a proprietary strategy to attempt to capture a unique source of equity return—the liquidity premium. We also recently added the American Beacon Evercore Small Cap Equity Fund, which relies on a fundamental bottom-up investment approach and is managed by the well-regarded Evercore Asset Management, LLC.
Continuously searching for new ways to serve our fellow shareholders’ needs is our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a thoughtful and analytical eye over all the factors that influence our investments.
We want to thank you for your continued investment in the American Beacon Funds. As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we remain dedicated to offering you both the level of superior service and knowledgeable investment management you’ve come to expect from us.
To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
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Gene L. Needles, Jr. | ||||
President American Beacon Funds | ||||
Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing. Distributed by Foreside Fund Services, LLC.
There is no guarantee that the Funds’ investment objective will be met. At times, certain securities held by the American Beacon Zebra Large Cap Equity and Small Cap Equity Funds may have limited marketability and may be difficult to sell. Investing in the securities of small and mid- capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Because the American Beacon Evercore Small Cap Equity Fund is a focused portfolio of fewer companies, the increase or decrease of the value of a single stock may have a greater impact on the Fund’s NAV and total return when compared to other diversified funds.
1
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
Extreme swings in investor sentiment and significant volatility in equity returns characterized the U.S. stock market’s performance during the past 12 months. Market returns were robust for the first several months of the year, only to be followed by a significant correction through the spring and summer months that was triggered by fears of a double-dip recession and concerns over the sovereign debt crisis in Europe. By August, many investors had seemingly grown despondent and sentiment towards equities reached extreme lows as the perceived safety of bonds drew increasing commitment.
September’s history as the cruelest month combined with recession fears made equities look like dead money. A surprising thing happened on the way to the funeral, however, as equity markets rallied sharply for the month. They posted the best September return in 71 years and the third best return of any month over the past 10 years. An interesting aspect of the rally was the absence of any real catalyst.
In the end, the S&P 500 returned 16.52% for 12 months ended October 31, 2010. Contributions to this performance were widespread, with most sectors finishing up in double digits.
Sector Results
Consumer Discretionary, Industrials, Telecommunications and Materials stocks were among the strongest performers, while financials and energy were significant laggards. Continuing sluggishness in loan demand, a persistent stream of negative regulatory pronouncements out of Washington and the seemingly endless flow of mortgage problems tempered enthusiasm for the banking industry. Insurers were pressured by weak fixed income returns given the near zero interest rate environment, volatile returns in the equity market, and the specter of further delays in the recovery in real estate markets.
The trend of Gross Domestic Product (“GDP”) growth slowed significantly throughout the year—from 5.0% in the fourth quarter of 2009 to 1.7% in the second quarter of 2010. Subpar growth persisted into the third quarter of 2010 as well.
Consumer Spending
With growth at such a sluggish pace, consumer spending remained weak especially in light of deferred hiring by employers. Given these conditions, there is little reason to expect a resumption of normal economic growth until employment can show meaningful improvement. More and more, the strong GDP growth in the fourth quarter of 2009 and the first quarter of 2010 is looking like an inventory driven anomaly.
Absent the change in inventories, real final sales grew at less than 1.5% over the past four quarters. This was extraordinarily weak for the first 12 months out of a severe recession. However, profit growth has been exceptional as businesses restrained their spending. Margins at many companies were at or above prior peaks. Corporate balance sheets were also very strong, as cash balances grew due to the reluctance to make large capital expenditures.
Yet, jobs still hold the key to recovery. Job statistics have not been encouraging. Without significant growth in employment, consumer and business spending is likely to remain sluggish and the recovery in housing will be pushed farther into the future.
Limited Economic Stimulus
Policymakers in Washington have made a concerted effort to jumpstart the economy, but the results have been limited at best. Now, the government is running out of ammunition as more than two-thirds of the fiscal stimulus budget has been spent and the Federal Reserve has already slashed interest rates to the bone. At the state and local government level, employment was maintained with Federal stimulus money in 2010, but the projected new political mix in Congress next year is not expected to continue that support. Our sub-advisors anticipate retrenchment in state and municipal employment and spending to be a headwind for the economy in the coming year.
As for the overall market, it is inexpensive but it remains subject to economic uncertainty. The unemployment/underemployment figures are the highest since the 1930’s and the Federal Reserve has pushed short-term rates to zero without much to show for it. This implies a very fragile economic environment with a minimal cushion.
2
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
Meanwhile, bonds seem to be making a case for stocks. The monetary policies of the Federal Reserve appear to be designed to move investors into riskier alternatives, such as equities, by keeping bond interest rates at record lows. As investor interest returns to domestic stocks, our managers see a number of positives. As mentioned earlier, corporate balance sheets are quite strong and many companies are positioned to return significant amounts of cash to shareholders, both in the form of share repurchases and (most importantly) increased dividends. Many stocks have a dividend yield which exceeds the interest rate of 10-year Treasury bonds and yet still have the potential to grow returns further through both earnings and dividend growth. Also, most financial stocks are not currently paying any dividends. As we mentioned earlier, many of these financial companies are building significant amounts of excess capital which is likely to be used to restore dividend yields.
Also encouraging is that aggressive cost-cutting during the recession formed lean businesses with tremendous operating leverage. As revenue growth has resurfaced—in fact, some 90% of companies saw revenue gains in the third quarter of 2010—it has created an earnings tailwind. Profit margins on incremental revenue have been more than three times profit margins on base revenue. This is providing the overall market with remarkable operating leverage.
Our managers continue to find compelling valuation opportunities given that the market remains nearly 20% below its 2007 peak. Though less extraordinary than they were in early 2009, these valuation opportunities remain attractive, particularly relative to fixed income alternatives. There appear to be fewer valuation spreads at the sector level, but many at the stock level, making it more of a stock-picker’s market than a cyclical one. This is a prime environment for active equity managers in search of bottom-up valuation opportunities.
3
Performance Overview
American Beacon Small Cap Value FundSM
American Beacon Small Cap Value FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Small Cap Value Fund returned 24.71% for the twelve months ended October 31, 2010, outperforming the Russell 2000® Value Index (the “Index”) return of 24.43% and the Lipper Small-Cap Value Funds Index return of 23.65% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/00 through 10/31/10
For the Period from 10/31/00 through 10/31/10
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Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,8) | 24.71 | % | 3.15 | % | 11.20 | % | $ | 28,921 | ||||||||
Y Class(1,2,8) | 24.44 | % | 3.08 | % | 11.16 | % | 28,819 | |||||||||
Investor Class(1,8) | 24.30 | % | 2.86 | % | 10.88 | % | 28,095 | |||||||||
Advisor Class(1,3,8) | 24.05 | % | 2.63 | % | 10.68 | % | 27,567 | |||||||||
Retirement Class (1,4,8) | 23.82 | % | 2.56 | % | 10.64 | % | 27,478 | |||||||||
A Class with sales charge (1,5,8) | 17.05 | % | 1.64 | % | 10.22 | % | 26,473 | |||||||||
A Class without sales charge(1,5,8) | 24.22 | % | 2.85 | % | 10.87 | % | 28,075 | |||||||||
C Class with sales charge (1,6,8) | 23.01 | % | 2.81 | % | 10.86 | % | 28,027 | |||||||||
C Class without sales charge (1,6,8) | 24.01 | % | 2.81 | % | 10.86 | % | 28,027 | |||||||||
AMR Class(1,8) | 25.00 | % | 3.41 | % | 11.50 | % | 29,696 | |||||||||
Lipper Small-Cap Value Funds Index(7) | 23.65 | % | 3.26 | % | 8.87 | % | 23,392 | |||||||||
Russell 2000 Value Index(7) | 24.43 | % | 2.02 | % | 8.17 | % | 21,919 |
1. | Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. 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 Institutional Class from 10/31/00 up to 8/3/09, the inception date of the Y Class. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
3. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/00 up to 5/1/03, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/00. A portion of the fees charged to the Advisor Class of the Fund was waived through 2004. Performance prior to waiving fees was lower than the actual returns shown for periods through 2004. | |
4. | Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 5/1/03 and the Advisor Class from 5/1/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/00. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. The maximum sales charge for A Class is 5.75%. | |
6. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. | |
7. | Russell 2000 Value Index is a registered trademark of Frank Russell Company. The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. The Lipper Small-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.85%, 1.12%, 1.16%, 1.35%, 1.54%, 1.35%, 2.10%, and 0.60%, respectively. The expense ratios above may vary |
4
Performance Overview
American Beacon Small Cap Value FundSM
American Beacon Small Cap Value FundSM
October 31, 2010 (Unaudited)
from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index by generating excess performance entirely through sector allocation, as stock selection detracted value relative to the Index. The Fund’s underweight in the Financials sector added value through sector allocation. Overweights in the Consumer Discretionary, Health Care, and Information Technology sectors also generated excess returns.
The Fund’s poor performance in stock selection resulted primarily from its holdings in the Industrials and Financials sectors. For the period the Fund owned the securities, Corinthian Colleges (down 61.7%), FTI Consulting (down 21.7%), and Career Education (down 28.6%) had the largest negative impact to performance in the Industrials sector. In the Financials sector, Synovus Financial (down 9.8%), Wilmington Trust (down 55.8% for the period the Fund owned the security), and Investment Technology Group (down 34.0%) detracted the most relative value. Good stock selection in the Health Care and Materials sectors added value to performance. Endo Pharmaceutical (up 64.9%) and AmeriGroup (up 86.1%) were the largest contributors in the Health Care sector. Individual holdings in the Materials sector that had the largest impact on the Fund’s performance were Carpenter Technology (up 89.5%) and RPM International (up 22.9%).
The sub-advisors continue to focus on uncovering investment opportunities through stock selection that should benefit the Fund’s performance over the longer term.
Top Ten Holdings
% of | ||||
Net Assets | ||||
Valassis Communications, Inc. | 1.0 | % | ||
Tidewater, Inc. | 0.9 | % | ||
Terex Corp. | 0.8 | % | ||
Rent-A-Center, Inc. | 0.8 | % | ||
Aspen Insurance Holdings Ltd. | 0.8 | % | ||
Vishay Intertechnology, Inc. | 0.8 | % | ||
Portland General Electric Co. | 0.7 | % | ||
AMERIGROUP Corp. | 0.7 | % | ||
PolyOne Corp. | 0.7 | % | ||
Great Plains Energy, Inc. | 0.7 | % |
Sector Allocation
% of Equities | ||||
Financials | 25.1 | % | ||
Consumer Discretionary | 16.9 | % | ||
Information Technology | 14.7 | % | ||
Industrials | 14.5 | % | ||
Health Care | 9.1 | % | ||
Materials | 6.1 | % | ||
Utilities | 6.0 | % | ||
Energy | 5.3 | % | ||
Consumer Staples | 2.1 | % | ||
Telecommunication Services | 0.2 | % |
5
Fund Expenses
American Beacon Small Cap Value FundSM
American Beacon Small Cap Value FundSM
October 31, 2010 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
Actual Expense
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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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.
Beginning | Ending | |||||||||||
Account | Account | Expenses Paid | ||||||||||
Value | Value | During Period* | ||||||||||
5/1/10 | 10/31/10 | 5/1/10-10/31/10 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 970.09 | $ | 3.97 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 969.43 | $ | 4.52 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,020.62 | $ | 4.63 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 968.28 | $ | 5.80 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,019.31 | $ | 5.96 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 967.62 | $ | 6.45 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,018.65 | $ | 6.61 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 966.34 | $ | 7.63 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,017.44 | $ | 7.83 | ||||||
A Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,003.46 | $ | 5.87 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,017.13 | $ | 5.94 | ||||||
C Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,111.39 | $ | 3.64 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,004.84 | $ | 3.52 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 971.55 | $ | 2.78 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,022.38 | $ | 2.85 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.80%, 0.91%, 1.17%, 1.30%, 1.54%, 0.56%, 1.28% and 2.10% for the Institutional, Y, Investor, Advisor, Retirement, AMR, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. | |
# | 5% return before expenses. | |
** | Beginning account values for A and C Classes are their inception dates of 5/17/10 and 9/1/10, respectively. Expenses are equal to the Classes annualized ratio for the period multiplied by the average account value for the period multiplied by the number derived by dividing the number of days in the period (168 and 61, respectively) by the days in the year (365). |
6
American Beacon Small Cap Value FundSM
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Small Cap Value Fund:
American Beacon Small Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Small Cap Value Fund (one of the funds constituting the American Beacon Funds) (collectively, the “Fund”), as of October 31, 2010, and the related statement of operations for the year then ended, the statement of changes of net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Small Cap Value Fund at October 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
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Dallas, Texas
December 23, 2010
December 23, 2010
7
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
COMMON STOCK — 95.45% | ||||||||
CONSUMER DISCRETIONARY — 16.10% | ||||||||
Auto Components — 1.51% | ||||||||
American Axle & Manufacturing Holdings, Inc.* | 1,101,000 | 10,151 | ||||||
Cooper Tire & Rubber Co. | 125,600 | 2,463 | ||||||
Gentex Corp. | 970,900 | 19,399 | ||||||
Goodyear Tire & Rubber Co.* | 795,900 | 8,134 | ||||||
Superior Industries International, Inc. | 53,500 | 960 | ||||||
Westinghouse Air Brake Technologies Corp. | 5,400 | 253 | ||||||
41,360 | ||||||||
Automobiles — 0.17% | ||||||||
Thor Industries, Inc. | 143,920 | 4,532 | ||||||
Commercial Services & Supplies — 0.10% | ||||||||
Viad Corp. | 140,670 | 2,808 | ||||||
Distributors — 0.18% | ||||||||
Brightpoint, Inc.* | 664,600 | 4,978 | ||||||
Hotels, Restaurants & Leisure — 1.06% | ||||||||
Ameristar Casinos, Inc. | 218,100 | 3,900 | ||||||
Bob Evans Farms, Inc. | 52,400 | 1,504 | ||||||
Boyd Gaming Corp.* | 177,130 | 1,472 | ||||||
Brinker International, Inc. | 8,525 | 158 | ||||||
CEC Entertainment, Inc.* | 36,940 | 1,226 | ||||||
Cracker Barrel Old Country Store, Inc. | 77,311 | 4,166 | ||||||
Domino’s Pizza, Inc.* | 110,500 | 1,640 | ||||||
Gaylord Entertainment Co.* † | 78,339 | 2,612 | ||||||
International Speedway Corp. | 5,950 | 136 | ||||||
Jack in the Box, Inc.* | 249,540 | 5,779 | ||||||
Lakes Entertainment, Inc.* | 150,800 | 353 | ||||||
Life Time Fitness, Inc.* | 2,664 | 96 | ||||||
Orient-Express Hotels Ltd.* | 167,900 | 2,126 | ||||||
Papa John’s International, Inc.* | 9,400 | 243 | ||||||
Ruby Tuesday, Inc.* | 79,844 | 966 | ||||||
Sonic Corp.* | 18,500 | 164 | ||||||
Speedway Motorsports, Inc. | 152,210 | 2,329 | ||||||
28,870 | ||||||||
Household Durables — 1.62% | ||||||||
American Greetings Corp. | 74,500 | 1,443 | ||||||
Cavco Industries, Inc.* | 52,889 | 1,676 | ||||||
Ethan Allen Interiors, Inc. | 284,780 | 4,320 | ||||||
Furniture Brands International, Inc.* | 891,150 | 4,465 | ||||||
Helen of Troy Ltd.* | 71,123 | 1,824 | ||||||
Lancaster Colony Corp. | 98,390 | 4,908 | ||||||
M.D.C. Holdings, Inc. | 144,950 | 3,732 | ||||||
Mohawk Industries, Inc.* | 16,400 | 940 | ||||||
National Presto Industries, Inc. | 14,600 | 1,634 | ||||||
Ryland Group, Inc. | 337,870 | 5,061 | ||||||
Tupperware Corp. | 31,600 | 1,416 | ||||||
Whirlpool Corp. | 169,800 | 12,877 | ||||||
44,296 | ||||||||
Internet & Catalog Retail — 0.06% | ||||||||
Insight Enterprises, Inc.* | 86,700 | 1,311 |
Shares | Value | |||||||
($000) | ||||||||
School Specialty, Inc.* | 14,500 | 194 | ||||||
1,505 | ||||||||
Leisure Equipment & Products — 0.59% | ||||||||
Brunswick Corp. | 516,200 | 8,166 | ||||||
Callaway Golf Co. | 469,267 | 3,229 | ||||||
JAKKS Pacific, Inc.* | 59,575 | 1,123 | ||||||
RC2 Corp.* | 176,300 | 3,720 | ||||||
16,238 | ||||||||
Media — 1.97% | ||||||||
Belo Corp.* | 172,200 | 997 | ||||||
Cinemark Holdings, Inc. | 192,800 | 3,384 | ||||||
Gannett Company, Inc. | 365,700 | 4,334 | ||||||
Harte Hanks, Inc. | 114,887 | 1,388 | ||||||
John Wiley & Sons, Inc. | 118,500 | 5,114 | ||||||
Meredith Corp. | 178,840 | 6,072 | ||||||
Scholastic Corp. | 134,400 | 3,958 | ||||||
Sinclair Broadcast Group, Inc.* | 92,500 | 739 | ||||||
Valassis Communications, Inc.* | 847,400 | 27,963 | ||||||
53,949 | ||||||||
Multiline Retail — 1.40% | ||||||||
99 Cents Only Stores* | 503,100 | 7,758 | ||||||
Big Lots, Inc.* | 504,700 | 15,832 | ||||||
BJ’s Wholesale Club, Inc.* | 128,730 | 5,372 | ||||||
Dillards, Inc.† | 157,700 | 4,023 | ||||||
Saks, Inc.* † | 487,600 | 5,432 | ||||||
38,417 | ||||||||
Specialty Retail — 6.19% | ||||||||
Aaron Rents, Inc.† | 279,500 | 5,271 | ||||||
Aéropostale, Inc.* | 172,200 | 4,198 | ||||||
America’s Car-Mart, Inc.* | 11,150 | 297 | ||||||
Bebe Stores, Inc. | 537,300 | 3,525 | ||||||
Big 5 Sporting Goods Corp. | 172,180 | 2,328 | ||||||
Buckle, Inc.† | 95,900 | 2,790 | ||||||
Cabela’s, Inc.* † | 925,400 | 17,156 | ||||||
Cato Corp. | 45,100 | 1,193 | ||||||
Childrens Place Retail Stores, Inc.* | 103,990 | 4,582 | ||||||
Collective Brands, Inc.* | 464,900 | 7,127 | ||||||
Copart, Inc.* | 10,500 | 356 | ||||||
DG FastChannel, Inc.* | 394,450 | 9,289 | ||||||
Dress Barn, Inc.* | 147,300 | 3,379 | ||||||
DSW, Inc.* † | 28,200 | 938 | ||||||
Finish Line, Inc. | 96,300 | 1,473 | ||||||
Foot Locker, Inc. | 774,580 | 12,339 | ||||||
Genesco, Inc.* | 43,400 | 1,422 | ||||||
Group 1 Automotive, Inc.* † | 60,100 | 2,119 | ||||||
Gymboree Corp.* | 144,400 | 9,395 | ||||||
Hanesbrands, Inc.* | 5,900 | 146 | ||||||
Interline Brands, Inc.* | 16,200 | 325 | ||||||
Jos. A. Bank Clothiers, Inc.* | 47,950 | 2,091 | ||||||
Men’s Wearhouse, Inc. | 660,100 | 16,133 | ||||||
OfficeMax, Inc.* | 599,933 | 10,619 | ||||||
Pep Boys, Inc. | 98,000 | 1,146 | ||||||
RadioShack Corp. | 627,900 | 12,640 | ||||||
Regis Corp. | 113,575 | 2,323 | ||||||
Rent-A-Center, Inc.* | 888,748 | 22,342 | ||||||
Sonic Automotive, Inc. | 39,600 | 432 |
See accompanying notes
8
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Stage Stores, Inc. | 120,820 | 1,611 | ||||||
Talbots, Inc.* | 438,140 | 4,285 | ||||||
Williams-Sonoma, Inc. | 184,484 | 5,972 | ||||||
169,242 | ||||||||
Textiles & Apparel — 1.25% | ||||||||
Carter’s, Inc.* | 119,200 | 2,968 | ||||||
Deckers Outdoor Corp.* | 31,900 | 1,853 | ||||||
G-III Apparel Group Ltd.* | 25,700 | 678 | ||||||
Quiksilver, Inc.* | 1,559,300 | 6,502 | ||||||
Skechers U.S.A., Inc.* | 423,100 | 8,226 | ||||||
The Jones Group, Inc. | 483,525 | 6,993 | ||||||
Timberland Co.* | 196,630 | 4,125 | ||||||
True Religion Apparel, Inc.* | 47,100 | 963 | ||||||
Unifirst Corp. | 30,800 | 1,418 | ||||||
Volcom, Inc.* | 13,800 | 237 | ||||||
Wolverine World Wide, Inc. | 5,850 | 170 | ||||||
34,133 | ||||||||
Total Consumer Discretionary | 440,328 | |||||||
CONSUMER STAPLES — 2.01% | ||||||||
Food & Drug Retailing — 0.54% | ||||||||
Casey’s General Stores, Inc. | 81,776 | 3,390 | ||||||
Central European Distribution Corp.* | 6,375 | 159 | ||||||
Flowers Foods, Inc. | 169,400 | 4,317 | ||||||
Nash Finch Co. | 25,450 | 1,066 | ||||||
Spartan Stores, Inc. | 248,000 | 3,708 | ||||||
Winn-Dixie Stores, Inc.* | 327,800 | 2,196 | ||||||
14,836 | ||||||||
Food Products — 1.27% | ||||||||
Corn Products International, Inc. | 4,200 | 179 | ||||||
Del Monte Foods Co. | 373,475 | 5,356 | ||||||
Fresh Del Monte Produce, Inc.* | 113,400 | 2,510 | ||||||
Hain Celestial Group, Inc.* | 224,660 | 5,556 | ||||||
Herbalife Ltd. | 107,600 | 6,871 | ||||||
J&J Snack Foods Corp. | 3,950 | 169 | ||||||
Lance, Inc. | 185,150 | 4,210 | ||||||
Overhill Farms, Inc.* | 316,300 | 1,645 | ||||||
Ralcorp Holdings, Inc.* | 6,300 | 391 | ||||||
Sanderson Farms, Inc. | 66,245 | 2,781 | ||||||
Smithfield Foods, Inc.* | 307,100 | 5,144 | ||||||
34,812 | ||||||||
Household Products — 0.03% | ||||||||
Central Garden and Pet Co.* | 83,300 | 870 | ||||||
Tobacco — 0.17% | ||||||||
Universal Corp. | 106,939 | 4,432 | ||||||
Vector Group Ltd.† | 9,485 | 177 | ||||||
4,609 | ||||||||
Total Consumer Staples | 55,127 | |||||||
ENERGY — 5.08% | ||||||||
Energy Equipment & Services — 3.47% | ||||||||
Atwood Oceanics, Inc.* | 287,975 | 9,362 | ||||||
Bristow Group, Inc.* | 286,000 | 11,091 | ||||||
Cal Dive International, Inc.* | 592,410 | 2,998 | ||||||
Cobalt International Energy, Inc.* | 562,300 | 5,201 | ||||||
Exterran Holdings, Inc.* | 116,900 | 2,942 | ||||||
Matrix Service Co.* | 301,149 | 2,734 |
Shares | Value | |||||||
($000) | ||||||||
Oceaneering International, Inc.* | 3,900 | 241 | ||||||
Oil States International, Inc.* | 222,100 | 11,354 | ||||||
Patterson-UTI Energy, Inc. | 107,150 | 2,080 | ||||||
Rowan Companies, Inc.* | 193,800 | 6,376 | ||||||
SEACOR Holdings, Inc.* | 59,750 | 5,661 | ||||||
Superior Energy Services, Inc.* | 5,925 | 164 | ||||||
Tesco Corp.* | 183,633 | 2,325 | ||||||
Tetra Technologies, Inc.* | 57,100 | 557 | ||||||
Tidewater, Inc. | 534,360 | 24,651 | ||||||
Unit Corp.* | 188,905 | 7,411 | ||||||
95,148 | ||||||||
Oil & Gas — 1.61% | ||||||||
Comstock Resources, Inc.* | 206,900 | 4,624 | ||||||
Contango Oil & Gas Co.* | 3,600 | 189 | ||||||
CVR Energy, Inc.* | 183,200 | 1,744 | ||||||
EXCO Resources, Inc. | 533,600 | 7,913 | ||||||
Forest Oil Corp.* | 5,225 | 161 | ||||||
Frontier Oil Corp. * | 335,590 | 4,447 | ||||||
Frontline Ltd. | 4,162 | 120 | ||||||
Holly Corp. | 245,500 | 8,035 | ||||||
Penn Virginia Corp. | 281,510 | 4,172 | ||||||
Petroleum Development Corp.* | 36,000 | 1,124 | ||||||
SM Energy Co. | 2,624 | 109 | ||||||
Stone Energy Corp.* | 640,300 | 10,008 | ||||||
Tesoro Corp. * | 12,200 | 158 | ||||||
W&T Offshore, Inc. | 17,025 | 185 | ||||||
Western Refining, Inc.* † | 142,300 | 946 | ||||||
43,935 | ||||||||
Total Energy | 139,083 | |||||||
FINANCIALS — 23.87% | ||||||||
Banks — 6.90% | ||||||||
Associated Banc-Corp. | 988,520 | 12,525 | ||||||
Astoria Financial Corp. | 201,300 | 2,500 | ||||||
BancorpSouth, Inc. | 8,250 | 109 | ||||||
Bank of Hawaii Corp. | 3,350 | 145 | ||||||
Bank of the Ozarks, Inc. | 275,350 | 10,466 | ||||||
Boston Private Financial Holdings, Inc. | 140,600 | 803 | ||||||
Brookline Bancorp, Inc. | 348,720 | 3,397 | ||||||
Cathay General Bancorp. | 180,100 | 2,449 | ||||||
Citizens Republic Bancorp, Inc.* | 3,768,090 | 2,600 | ||||||
City National Corp. | 100,383 | 5,177 | ||||||
Columbia Banking System, Inc. | 146,322 | 2,665 | ||||||
Community Bank System, Inc.† | 28,300 | 661 | ||||||
CVB Financial Corp.† | 477,753 | 3,636 | ||||||
Dime Community Bancshares, Inc. | 3,600 | 53 | ||||||
F.N.B. Corp. | 211,800 | 1,800 | ||||||
First Commonwealth Financial Corp. | 191,900 | 1,117 | ||||||
First Financial Bancorp | 579,200 | 9,754 | ||||||
First Financial Holdings, Inc. | 109,600 | 1,145 | ||||||
First Horizon National Corp.* | 574,581 | 5,798 | ||||||
First Interstate Bancsystem, Inc. | 296,000 | 3,836 | ||||||
First Midwest Bancorp, Inc. | 138,800 | 1,487 | ||||||
First Niagara Financial Group, Inc. | 165,700 | 1,964 | ||||||
FirstMerit Corp. | 9,125 | 157 | ||||||
Fulton Financial Corp. | 390,350 | 3,646 | ||||||
Glacier Bancorp, Inc. | 273,670 | 3,558 |
See accompanying notes
9
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | ||||||||
($000) | |||||||||
Hancock Holding Co. | 217,200 | 6,824 | |||||||
Home Federal Bancorp, Inc. | 171,000 | 2,059 | |||||||
Iberiabank Corp. | 289,700 | 15,078 | |||||||
International Bancshares Corp. | 124,502 | 2,133 | |||||||
MB Financial, Inc. | 96,000 | 1,429 | |||||||
National Penn Bancshares, Inc. | 658,037 | 4,271 | |||||||
Northwest Bancshares, Inc. | 227,600 | 2,581 | |||||||
Old National Bancorp | 334,920 | 3,168 | |||||||
PacWest Bancorp* | 161,100 | 2,808 | |||||||
Popular, Inc.* | 1,315,500 | 3,591 | |||||||
PrivateBancorp, Inc. | 132,000 | 1,556 | |||||||
Provident Financial Services, Inc. | 389,820 | 4,927 | |||||||
Republic Bancorp, Inc. | 25,200 | 515 | |||||||
Southwest Bancorp, Inc. * | 144,780 | 1,433 | |||||||
Sterling Bancshares, Inc. | 406,160 | 2,189 | |||||||
Susquehanna Bancshares, Inc. | 243,200 | 1,921 | |||||||
SVB Financial Group* | 145,740 | 6,316 | |||||||
Synovus Financial Corp. | 6,391,300 | 13,804 | |||||||
Territorial Bancorp, Inc. | 6,700 | 114 | |||||||
Umpqua Holdings Corp. | 183,500 | 2,019 | |||||||
United Community Banks, Inc.* | 755,000 | 1,480 | |||||||
Washington Federal, Inc. | 379,380 | 5,702 | |||||||
Washington Trust Bancorp, Inc. | 29,890 | 600 | |||||||
Webster Financial Corp. | 801,110 | 13,715 | |||||||
WesBanco, Inc. | 35,900 | 596 | |||||||
Wilmington Trust Corp. | 607,547 | 4,320 | |||||||
Wintrust Financial Corp. | 57,500 | 1,722 | |||||||
Zions Bancorporation | 12,000 | 248 | |||||||
188,567 | |||||||||
Diversified Financials — 4.83% | |||||||||
Apollo Investment Corp. | 16,075 | 177 | |||||||
Ares Capital Corp. | 549,200 | 9,194 | |||||||
CapitalSource, Inc. | 598,000 | 3,654 | |||||||
Cash America International, Inc. | 363,575 | 12,809 | |||||||
CoreLogic, Inc. * | 353,960 | 6,219 | |||||||
Credit Acceptance Corp.* † | 111,050 | 6,531 | |||||||
Duff & Phelps Corp. | 193,150 | 2,693 | |||||||
E*Trade Financial Corp.* | 475,829 | 6,804 | |||||||
Ezcorp, Inc.* | 891,174 | 19,143 | |||||||
Fifth Street Finance Corp. | 911,300 | 10,753 | |||||||
Investment Technology Group, Inc.* | 614,924 | 8,757 | |||||||
Janus Capital Group, Inc. | 693,500 | 7,323 | |||||||
KAR Auction Services, Inc.* | 12,300 | 158 | |||||||
Kirkland’s, Inc.* | 289,550 | 3,894 | |||||||
Knight Capital Group, Inc.* | 511,150 | 6,660 | |||||||
MF Global Holdings Ltd.* | 273,700 | 2,143 | |||||||
National Financial Partners Corp.* | 76,700 | 1,058 | |||||||
Nelnet, Inc. | 172,500 | 3,876 | |||||||
Piper Jaffray Co.* | 103,477 | 3,205 | |||||||
Raymond James Financial, Inc. | 18,350 | 518 | |||||||
Symetra Financial Corp. | 1,119,100 | 12,366 | |||||||
Waddell & Reed Financial, Inc. | 6,625 | 193 | |||||||
Walter Investment Management Corp.‡ | 138,600 | 2,539 | |||||||
World Acceptance Corp.* † | 37,600 | 1,622 | |||||||
132,289 | |||||||||
Shares | Value | |||||||
($000) | ||||||||
Insurance — 9.33% | ||||||||
Allied World Assurance Co. Holdings Ltd. | 97,175 | 5,559 | ||||||
Alterra Capital Holdings Ltd. | 104,100 | 2,103 | ||||||
American Equity Investment Life Holding Co. | 196,100 | 2,128 | ||||||
American Financial Group, Inc. | 221,965 | 6,788 | ||||||
AmTrust Financial Services, Inc. | 223,392 | 3,344 | ||||||
Argo Group International Holdings Ltd. | 275,300 | 9,550 | ||||||
Aspen Insurance Holdings Ltd. | 760,500 | 21,574 | ||||||
CNA Surety Corp.* | 96,320 | 1,854 | ||||||
CNO Financial Group, Inc.* | 1,785,300 | 9,712 | ||||||
Delphi Financial Group, Inc. | 504,200 | 13,649 | ||||||
Employers Holdings, Inc. | 508,000 | 8,225 | ||||||
Endurance Specialty Holdings Ltd. | 134,500 | 5,568 | ||||||
Enstar Group Ltd.* | 14,003 | 1,123 | ||||||
FBL Financial Group, Inc. | 13,300 | 348 | ||||||
First American Financial Corp. | 438,420 | 6,155 | ||||||
Flagstone Reinsurance Holdings SA | 210,600 | 2,296 | ||||||
Global Indemnity Plc* | 610,421 | 10,304 | ||||||
Hanover Insurance Group, Inc. | 294,755 | 13,338 | ||||||
HCC Insurance Holdings, Inc. | 246,470 | 6,527 | ||||||
Horace Mann Educators Corp. | 107,000 | 2,000 | ||||||
Infinity Property and Casualty Corp. | 47,398 | 2,453 | ||||||
Maiden Holdings Ltd. | 113,700 | 870 | ||||||
Mercury General Corp. | 112,700 | 4,787 | ||||||
MGIC Investment Corp.* | 1,513,839 | 13,352 | ||||||
Montpelier Re Holdings Ltd. | 114,408 | 2,096 | ||||||
National Western Life Insurance Co. | 2,100 | 336 | ||||||
Navigators Group, Inc.* | 198,300 | 9,116 | ||||||
Old Republic International Corp. | 198,530 | 2,621 | ||||||
OneBeacon Insurance Group Ltd. | 44,900 | 632 | ||||||
Platinum Underwriters Holdings Ltd. | 119,400 | 5,140 | ||||||
Presidential Life Corp. | 95,200 | 911 | ||||||
ProAssurance Corp.* | 66,800 | 3,840 | ||||||
Protective Life Corp. | 363,510 | 8,713 | ||||||
Reinsurance Group of America, Inc. | 243,000 | 12,167 | ||||||
RLI Corp. | 38,600 | 2,216 | ||||||
Safety Insurance Group, Inc. | 41,100 | 1,910 | ||||||
Selective Insurance Group, Inc. | 115,700 | 1,958 | ||||||
StanCorp Financial Group, Inc. | 412,650 | 17,703 | ||||||
Torchmark Corp. | 185,700 | 10,637 | ||||||
Tower Group, Inc. | 275,900 | 6,699 | ||||||
Unitrin, Inc. | 114,100 | 2,773 | ||||||
Universal American Corp. * | 387,900 | 6,237 | ||||||
White Mountains Insurance Group Ltd. | 18,074 | 5,769 | ||||||
255,081 | ||||||||
Real Estate — 2.81% | ||||||||
Alexandria Real Estate Equities, Inc.‡ . | 621 | 46 | ||||||
Anworth Mortgage Asset Corp.‡ | 22,375 | 157 | ||||||
BioMed Realty Trust, Inc.‡ | 334,430 | 6,137 | ||||||
Brandywine Realty Trust‡ | 308,090 | 3,688 | ||||||
CapLease, Inc.‡ | 943,100 | 5,527 | ||||||
CBL & Associates Properties, Inc.† ‡ | 396,025 | 6,210 | ||||||
CommonWealth REIT‡ | 6,656 | 169 | ||||||
DCT Industrial Trust, Inc.‡ | 901,600 | 4,517 | ||||||
DiamondRock Hospitality Co.‡ | 570,590 | 6,037 |
See accompanying notes
10
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Entertainment Properties Trust‡ | 160,690 | 7,429 | ||||||
Getty Realty Corp.‡ | 62,450 | 1,780 | ||||||
Hospitality Properties Trust‡ | 7,425 | 169 | ||||||
Inland Real Estate Corp.‡ | 492,870 | 4,283 | ||||||
LaSalle Hotel Properties‡ | 241,540 | 5,722 | ||||||
Lexington Realty Trust‡ | 929,550 | 7,232 | ||||||
Medical Properties Trust, Inc.‡ | 16,010 | 179 | ||||||
MI Developments, Inc. | 448,600 | 6,509 | ||||||
National Health Investors, Inc.‡ | 105,970 | 4,906 | ||||||
Omega Healthcare Investors, Inc.‡ | 214,340 | 4,930 | ||||||
Pennsylvania Real Estate Investment Trust* | 1,786 | 25 | ||||||
Urstadt Biddle Properties, Inc.‡ | 68,700 | 1,320 | ||||||
76,972 | ||||||||
Total Financials | 652,909 | |||||||
HEALTH CARE — 8.67% | ||||||||
Biotechnology — 0.22% | ||||||||
Celera Corp.* | 108,900 | 621 | ||||||
Charles River Laboratories International, Inc.* | 14,613 | 479 | ||||||
Cubist Pharmaceuticals, Inc.* | 109,100 | 2,539 | ||||||
Viropharma, Inc.* | 143,800 | 2,353 | ||||||
5,992 | ||||||||
Health Care Equipment & Supplies — 1.41% | ||||||||
Bio-Rad Laboratories, Inc.* | 3,000 | 272 | ||||||
CONMED Corp.* | 25,900 | 570 | ||||||
Haemonetics Corp.* | 129,160 | 7,059 | ||||||
Hillenbrand, Inc. | 115,200 | 2,476 | ||||||
ICU Medical, Inc.* | 3,600 | 131 | ||||||
Kensey Nash Corp.* | 130,270 | 3,512 | ||||||
Kinetic Concepts, Inc.* | 405,700 | 15,429 | ||||||
STERIS Corp. | 268,215 | 9,178 | ||||||
38,627 | ||||||||
Health Care Providers & Services — 5.75% | ||||||||
Air Methods Corp.* | 89,050 | 3,642 | ||||||
Alere, Inc.* | 5,491 | 162 | ||||||
Almost Family, Inc.* | 181,500 | 6,267 | ||||||
Amedisys, Inc.* † | 16,100 | 410 | ||||||
AMERIGROUP Corp.* | 476,230 | 19,873 | ||||||
AMN Healthcare Services, Inc.* | 33,800 | 179 | ||||||
Amsurg Corp.* | 8,525 | 154 | ||||||
Assisted Living Concepts, Inc.* | 57,230 | 1,846 | ||||||
Centene Corp.* | 543,500 | 12,131 | ||||||
Community Health Systems, Inc.* | 67,500 | 2,030 | ||||||
Covance, Inc.* | 9,400 | 442 | ||||||
Coventry Health Care, Inc.* | 46,100 | 1,080 | ||||||
Gentiva Health Services, Inc.* | 627,100 | 14,599 | ||||||
Hanger Orthopedic Group, Inc.* | 55,700 | 1,043 | ||||||
Health Management Associates, Inc.* | 32,000 | 256 | ||||||
Health Net, Inc.* | 206,000 | 5,539 | ||||||
HealthSouth Corp.* | 746,400 | 13,502 | ||||||
Healthspring, Inc.* | 112,450 | 3,282 | ||||||
LifePoint Hospitals, Inc.* | 539,380 | 18,296 | ||||||
Magellan Health Services, Inc.* | 264,700 | 12,706 | ||||||
MAXIMUS, Inc. | 191,000 | 11,580 | ||||||
Mednax, Inc.* | 114,485 | 6,779 |
Shares | Value | |||||||
($000) | ||||||||
Molina Healthcare, Inc.* | 48,900 | 1,267 | ||||||
Omnicare, Inc. | 195,200 | 4,708 | ||||||
Omnicell, Inc.* | 276,240 | 3,859 | ||||||
Owens & Minor, Inc. | 5,700 | 162 | ||||||
Parexel International Corp.* | 219,200 | 4,713 | ||||||
RehabCare Group, Inc.* | 277,310 | 6,165 | ||||||
Triple-S Management Corp.* | 47,000 | 793 | ||||||
157,465 | ||||||||
Pharmaceuticals — 1.29% | ||||||||
Endo Pharmaceuticals Holdings, Inc.* | 518,150 | 19,037 | ||||||
Impax Laboratories, Inc.* | 117,300 | 2,210 | ||||||
King Pharmaceuticals, Inc.* | 222,700 | 3,149 | ||||||
Medicis Pharmaceutical Corp. | 283,300 | 8,428 | ||||||
Par Pharmaceutical Cos., Inc.* | 72,000 | 2,341 | ||||||
35,165 | ||||||||
Total Health Care | 237,249 | |||||||
INDUSTRIALS — 13.84% | ||||||||
Aerospace & Defense — 0.90% | ||||||||
Alliant Techsystems, Inc.* | 2,400 | 183 | ||||||
Spirit Aerosystems Holdings, Inc.* | 483,730 | 10,468 | ||||||
Triumph Group, Inc. | 130,000 | 10,867 | ||||||
World Fuel Services Corp. | 113,600 | 3,207 | ||||||
24,725 | ||||||||
Airlines — 0.06% | ||||||||
Aircastle Ltd. | 164,669 | 1,517 | ||||||
Building Products — 1.30% | ||||||||
Apogee Enterprises, Inc. | 63,457 | 666 | ||||||
Armstrong World Industries, Inc.* | 147,140 | 6,143 | ||||||
Crane Co. | 186,400 | 7,132 | ||||||
Drew Industries, Inc.* | 68,410 | 1,441 | ||||||
Griffon Corp.* | 144,551 | 1,704 | ||||||
Insituform Technologies, Inc.* | 400,300 | 8,646 | ||||||
Simpson Manufacturing Co., Inc. | 371,625 | 9,878 | ||||||
35,610 | ||||||||
Commercial Services & Supplies — 5.93% | ||||||||
Administaff, Inc. | 212,800 | 5,577 | ||||||
Atlas Air Worldwide Holdings, Inc.* | 194,320 | 10,155 | ||||||
Brink’s Co. | 272,815 | 6,438 | ||||||
Clean Harbors, Inc.* | 85,498 | 6,028 | ||||||
Convergys Corp.* | 263,200 | 2,979 | ||||||
Con-way, Inc. | 505,000 | 16,669 | ||||||
Corinthian Colleges, Inc.* † | 716,000 | 3,738 | ||||||
CSG Systems International, Inc.* | 102,600 | 1,995 | ||||||
Deluxe Corp. | 124,600 | 2,547 | ||||||
Ennis, Inc. | 88,500 | 1,597 | ||||||
FTI Consulting, Inc.* | 280,270 | 9,938 | ||||||
G&K Services, Inc. | 35,220 | 871 | ||||||
Geo Group, Inc.* | 6,850 | 176 | ||||||
Heidrick & Struggles International, Inc. | 402,710 | 8,650 | ||||||
Hudson Highland Group, Inc.* | 630,300 | 2,219 | ||||||
Kelly Services, Inc.* | 149,888 | 2,226 | ||||||
Korn/Ferry International* | 550,860 | 9,712 | ||||||
Layne Christensen Co.* | 40,100 | 1,120 | ||||||
Manpower, Inc. | 122,600 | 6,710 | ||||||
McGrath Rentcorp | 123,508 | 3,126 |
See accompanying notes
11
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Mobile Mini, Inc.* | 623,100 | 10,861 | ||||||
PHH Corp.* | 600,500 | 11,571 | ||||||
Pre-Paid Legal Services, Inc.* † | 18,528 | 1,115 | ||||||
Resources Connection, Inc. | 178,327 | 2,887 | ||||||
Schawk, Inc. | 13,300 | 258 | ||||||
Steelcase, Inc.† | 502,142 | 4,223 | ||||||
Team, Inc.* | 120,754 | 2,396 | ||||||
Tetra Tech, Inc.* | 139,540 | 2,939 | ||||||
United Stationers, Inc.* | 114,000 | 6,407 | ||||||
Waste Connections, Inc. | 138,340 | 5,636 | ||||||
Weight Watchers International, Inc. | 224,400 | 7,515 | ||||||
Wright Express Corp.* | 110,400 | 4,163 | ||||||
162,442 | ||||||||
Construction & Engineering — 0.97% | ||||||||
Comfort Systems USA, Inc. | 711,375 | 8,145 | ||||||
EMCOR Group, Inc.* | 492,700 | 12,736 | ||||||
Granite Construction, Inc. | 237,160 | 5,735 | ||||||
26,616 | ||||||||
Diversified Manufacturing — 0.01% | ||||||||
Barnes Group, Inc. | 9,350 | 170 | ||||||
Electrical Equipment — 1.01% | ||||||||
AMETEK, Inc. | 3,700 | 200 | ||||||
EnerSys* | 6,750 | 178 | ||||||
General Cable Corp.* | 6,350 | 177 | ||||||
GrafTech Int’l Ltd.* | 10,350 | 170 | ||||||
GT Solar International, Inc.* † | 277,400 | 2,283 | ||||||
Hubbell, Inc. | 147,000 | 7,941 | ||||||
Regal-Beloit Corp. | 189,500 | 10,936 | ||||||
Thomas & Betts Corp.* | 87,270 | 3,801 | ||||||
Vishay Precision Group, Inc.* | 108,414 | 1,843 | ||||||
27,529 | ||||||||
Industrial Conglomerates — 0.25% | ||||||||
Chemed Corp. | 2,700 | 159 | ||||||
GATX Corp. | 186,650 | 5,909 | ||||||
Teleflex, Inc. | 2,575 | 144 | ||||||
US Ecology, Inc. | 42,160 | 684 | ||||||
6,896 | ||||||||
Machinery — 2.51% | ||||||||
Astec Industries, Inc.* | 155,210 | 4,574 | ||||||
Briggs & Stratton Corp. | 425 | 7 | ||||||
Ceradyne, Inc.* | 52,200 | 1,243 | ||||||
Columbus McKinnon Corp.* | 126,710 | 2,225 | ||||||
Esterline Technologies Corp.* | 165,475 | 10,000 | ||||||
John Bean Technologies Corp. | 64,300 | 1,100 | ||||||
Miller Industries, Inc. | 231,100 | 3,111 | ||||||
Mueller Industries, Inc. | 250,970 | 7,379 | ||||||
Oshkosh Corp.* | 286,400 | 8,452 | ||||||
Reliance Steel & Aluminum Co. | 26,300 | 1,101 | ||||||
RSC Holdings, Inc.* | 353,340 | 2,855 | ||||||
Terex Corp.* | 1,032,100 | 23,170 | ||||||
Trinity Industries, Inc. | 147,500 | 3,353 | ||||||
68,570 | ||||||||
Marine — 0.72% | ||||||||
Diana Shipping, Inc.* | 11,375 | 155 | ||||||
Genco Shipping & Trading Ltd.* † | 619,300 | 10,250 | ||||||
Gulfmark Offshore, Inc.* | 49,062 | 1,453 |
Shares | Value | |||||||
($000) | ||||||||
Kirby Corp.* | 181,100 | 7,785 | ||||||
19,643 | ||||||||
Road & Rail — 0.18% | ||||||||
Forward Air Corp. | 9,900 | 266 | ||||||
Landstar System, Inc. | 5,400 | 203 | ||||||
Marten Transport Ltd. | 95,270 | 2,024 | ||||||
Ryder System, Inc. | 3,375 | 148 | ||||||
Saia, Inc.* | 165,800 | 2,400 | ||||||
5,041 | ||||||||
Total Industrials | 378,759 | |||||||
INFORMATION TECHNOLOGY — 14.03% | ||||||||
Communications Equipment — 1.88% | ||||||||
Anixter International, Inc. | 3,000 | 161 | ||||||
Arris Group, Inc.* | 1,187,711 | 11,058 | ||||||
Atheros Communications, Inc.* | 69,560 | 2,159 | ||||||
Black Box Corp. | 385,000 | 12,782 | ||||||
Brocade Communications Systems, Inc.* | 44,100 | �� | 279 | |||||
CommScope, Inc.* | 5,600 | 177 | ||||||
InterDigital, Inc.* | 512,700 | 17,211 | ||||||
Plantronics, Inc. | 18,725 | 672 | ||||||
Sonus Networks, Inc.* | 1,213,137 | 3,773 | ||||||
Tekelec, Inc.* | 243,880 | 3,175 | ||||||
51,447 | ||||||||
Computers & Peripherals — 0.96% | ||||||||
Avid Technology, Inc.* | 303,030 | 3,824 | ||||||
Electronics for Imaging, Inc.* | 355,300 | 4,864 | ||||||
Hypercom Corp.* | 1,036,300 | 6,176 | ||||||
Lexmark International, Inc.* | 147,575 | 5,612 | ||||||
Mercury Computer Systems, Inc.* | 351,300 | 5,565 | ||||||
Synaptics, Inc.* † | 5,525 | 149 | ||||||
26,190 | ||||||||
Electronic Equipment & Instruments — 4.14% | ||||||||
Arrow Electronics, Inc.* | 225,400 | 6,674 | ||||||
AVX Corp. | 262,000 | 3,757 | ||||||
Benchmark Electronics, Inc.* | 395,500 | 6,498 | ||||||
Diebold, Inc. | 495,670 | 15,192 | ||||||
Ingram Micro, Inc.* | 779,200 | 13,761 | ||||||
Jabil Circuit, Inc. | 30,550 | 469 | ||||||
Littelfuse, Inc.* | 394,200 | 16,726 | ||||||
Methode Electronics, Inc. | 754,800 | 7,012 | ||||||
Multi-Fineline Electronix, Inc.* | 43,250 | 1,059 | ||||||
Plexus Corp.* | 354,700 | 10,765 | ||||||
Tech Data Corp.* | 239,600 | 10,300 | ||||||
Vishay Intertechnology, Inc.* | 1,886,500 | 21,318 | ||||||
113,531 | ||||||||
Internet Software & Services — 1.07% | ||||||||
DealerTrack Holdings, Inc.* | 15,900 | 307 | ||||||
EarthLink, Inc. | 478,850 | 4,305 | ||||||
Ebix, Inc.* † | 322,550 | 7,967 | ||||||
InterActiveCorp* | 427,600 | 11,930 | ||||||
Websense, Inc.* | 238,440 | 4,797 | ||||||
29,306 | ||||||||
IT Consulting & Services — 1.61% | ||||||||
Broadridge Financial Solutions, Inc. | 246,427 | 5,421 | ||||||
CACI International, Inc.* | 226,300 | 11,342 |
See accompanying notes
12
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
ManTech International Corp.* | 218,900 | 8,583 | ||||||
Ness Technologies, Inc.* | 610,800 | 2,944 | ||||||
SYNNEX Corp.* | 539,700 | 15,674 | ||||||
43,964 | ||||||||
Semiconductor Equipment & Products — 1.87% | ||||||||
Amkor Technology, Inc.* † | 334,900 | 2,415 | ||||||
ATMI, Inc.* | 12,300 | 217 | ||||||
Brooks Automation, Inc.* | 1,244,200 | 8,448 | ||||||
Cymer, Inc.* | 136,050 | 5,027 | ||||||
Entegris, Inc.* | 70,800 | 423 | ||||||
Fairchild Semiconductor International, Inc.* | 200,100 | 2,255 | ||||||
International Rectifier Corp.* | 48,500 | 1,127 | ||||||
Microsemi Corp.* | 8,425 | 169 | ||||||
MKS Instruments, Inc.* | 215,700 | 4,454 | ||||||
ON Semiconductor Corp.* | 874,800 | 6,710 | ||||||
QLogic Corp.* | 253,610 | 4,456 | ||||||
Teradyne, Inc.* | 335,400 | 3,770 | ||||||
Tessera Technologies, Inc.* | 577,650 | 11,397 | ||||||
Varian Semiconductor Equipment Associates, Inc.* | 7,500 | 245 | ||||||
51,113 | ||||||||
Software — 2.50% | ||||||||
Aspen Technology, Inc.* | 322,970 | 3,617 | ||||||
Cadence Design Systems, Inc.* | 847,810 | 7,181 | ||||||
Cognex Corp. | 569,900 | 15,217 | ||||||
DST Systems, Inc. | 90,625 | 3,921 | ||||||
FARO Technologies, Inc.* | 167,500 | 4,043 | ||||||
Jack Henry & Associates, Inc. | 6,525 | 177 | ||||||
JDA Software Group, Inc.* | 485,810 | 12,291 | ||||||
Mentor Graphics Corp.* | 1,184,700 | 12,796 | ||||||
Net 1 UEPS Technologies, Inc.* | 5,300 | 65 | ||||||
Netscout Systems, Inc.* | 206,340 | 4,843 | ||||||
Novell, Inc.* | 718,800 | 4,262 | ||||||
68,413 | ||||||||
Total Information Technology | 383,964 | |||||||
MATERIALS — 5.86% | ||||||||
Chemicals — 1.96% | ||||||||
A. Schulman, Inc. | 48,200 | 1,046 | ||||||
Cabot Corp. | 122,500 | 4,167 | ||||||
H.B. Fuller Co. | 100,600 | 2,076 | ||||||
Innophos Holdings, Inc. | 39,800 | 1,461 | ||||||
NewMarket Corp. | 30,800 | 3,650 | ||||||
OM Group, Inc.* | 71,375 | 2,375 | ||||||
PolyOne Corp.* | 1,531,400 | 19,786 | ||||||
RPM International, Inc. | 655,975 | 13,585 | ||||||
Scotts Miracle-Gro Co. | 3,075 | 164 | ||||||
Solutia, Inc.* | 225,600 | 4,086 | ||||||
Stepan Co. | 16,800 | 1,133 | ||||||
53,529 | ||||||||
Construction Materials — 0.39% | ||||||||
Ameron International Corp. | 2,594 | 178 | ||||||
Tutor Perini Corp.* | 457,625 | 10,622 | ||||||
10,800 | ||||||||
Containers & Packaging — 0.94% | ||||||||
Boise, Inc.* | 156,800 | 1,137 |
Shares | Value | |||||||
($000) | ||||||||
Greif, Inc. | 168,000 | 9,868 | ||||||
Jarden Corp. | 199,525 | 6,397 | ||||||
Rock-Tenn Co. | 71,700 | 4,076 | ||||||
Sealed Air Corp. | 80,000 | 1,852 | ||||||
Silgan Holdings, Inc. | 73,200 | 2,471 | ||||||
25,801 | ||||||||
Metals & Mining — 1.80% | ||||||||
Carpenter Technology Corp. | 114,270 | 4,075 | ||||||
Century Aluminum Co.* | 157,600 | 2,131 | ||||||
Coeur d’Alene Mines Corp.* | 359,050 | 7,400 | ||||||
Gammon Gold, Inc.* | 22,453 | 153 | ||||||
Gibraltar Industries, Inc.* | 433,339 | 3,956 | ||||||
Haynes International, Inc. | 175,400 | 6,360 | ||||||
James River Coal Co.* | 2,149 | 37 | ||||||
Kaiser Aluminum Corp. | 189,800 | 8,539 | ||||||
New Gold, Inc.* | 27,189 | 201 | ||||||
Noranda Aluminum Holding Corp.* | 875,000 | 8,681 | ||||||
Pan American Silver Corp. | 7,125 | 227 | ||||||
RTI International Metals, Inc.* | 158,515 | 4,930 | ||||||
Thompson Creek Metals Co., Inc.* | 13,850 | 167 | ||||||
Universal Stainless & Alloy* | 82,300 | 2,382 | ||||||
49,239 | ||||||||
Paper & Forest Products — 0.77% | ||||||||
Buckeye Technologies, Inc. | 52,100 | 940 | ||||||
Domtar Corp. | 139,120 | 11,041 | ||||||
Louisiana-Pacific Corp.* | 808,090 | 6,255 | ||||||
PH Glatfelter Co. | 79,200 | 985 | ||||||
Wausau Paper Corp.* | 202,840 | 1,712 | ||||||
20,933 | ||||||||
Total Materials | 160,302 | |||||||
TELECOMMUNICATION SERVICES — 0.24% | ||||||||
Diversified Telecommunication — 0.01% | ||||||||
General Communication, Inc.* | 23,240 | 243 | ||||||
Diversified Telecommunication Services — 0.23% | ||||||||
Aviat Networks, Inc.* | 273,050 | 1,242 | ||||||
Cincinnati Bell, Inc.* | 504,200 | 1,235 | ||||||
EchoStar Corp.* | 80,600 | 1,709 | ||||||
Loral Space & Communications, Inc.* | 37,200 | 2,070 | ||||||
6,256 | ||||||||
Total Telecommunication Services | 6,499 | |||||||
UTILITIES — 5.75% | ||||||||
Electric Utilities — 3.79% | ||||||||
ALLETE, Inc. | 4,950 | 180 | ||||||
Black Hills Corp. | 105,100 | 3,346 | ||||||
El Paso Electric Co.* | 362,020 | 8,906 | ||||||
Empire District Electric Co. | 266,200 | 5,601 | ||||||
Great Plains Energy, Inc. | 1,036,700 | 19,728 | ||||||
Hawaiian Electric Industries, Inc. | 135,080 | 3,045 | ||||||
IDACORP, Inc. | 159,700 | 5,877 | ||||||
NV Energy, Inc. | 395,248 | 5,399 | ||||||
OGE Energy Corp. | 331,600 | 14,643 | ||||||
Pike Electric Corp.* | 26,700 | 202 | ||||||
Pinnacle West Capital Corp. | 169,110 | 6,961 | ||||||
PNM Resources, Inc. | 628,740 | 7,413 | ||||||
Portland General Electric Co. | 955,170 | 19,962 |
See accompanying notes
13
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
TECO Energy, Inc. | 9,425 | 166 | ||||||
Unisource Energy Corp. | 67,200 | 2,357 | ||||||
103,786 | ||||||||
Gas Utilities — 1.29% | ||||||||
AGL Resources, Inc. | 132,200 | 5,190 | ||||||
Atmos Energy Corp. | 418,390 | 12,321 | ||||||
Southern Union Co. | 174,200 | 4,378 | ||||||
Southwest Gas Corp. | 61,300 | 2,131 | ||||||
UGI Corp. | 175,000 | 5,266 | ||||||
WGL Holdings, Inc. | 155,220 | 5,984 | ||||||
35,270 | ||||||||
Multi-Utilities — 0.67% | ||||||||
Avista Corp. | 123,600 | 2,699 | ||||||
Vectren Corp. | 6,375 | 175 | ||||||
Westar Energy, Inc. | 614,000 | 15,534 | ||||||
18,408 | ||||||||
Total Utilities | 157,464 | |||||||
Total Common Stock (Cost $2,272,103) | 2,611,684 | |||||||
SHORT-TERM INVESTMENTS — 4.10% (Cost $112,188) | ||||||||
JPMorgan U.S. Government Money Market Fund | 112,187,772 | 112,188 | ||||||
SECURITIES LENDING COLLATERAL — 2.11% | ||||||||
American Beacon U.S. Government Money Market Select Fund§ | 48,791,547 | 48,791 | ||||||
Wells Fargo Advantage Government Money Market Fund | 8,952,934 | 8,953 | ||||||
Total Securities Lending Collateral(Cost $57,744) | 57,744 | |||||||
TOTAL INVESTMENTS — 101.66% (Cost $2,442,035) | 2,781,616 | |||||||
LIABILITIES, NET OF OTHER ASSETS — (1.66%) | (45,469 | ) | ||||||
TOTAL NET ASSETS — 100.00% | $ | 2,736,146 | ||||||
* | Non-income producing security. | |
† | All or a portion of this security is on loan at October 31, 2010. | |
‡ | REIT | |
§ | The Fund is affiliated by having the same investment advisor. |
Percentages are stated as a percent of net assets.
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
Russell 2000 Mini Index Future | 1,718 | December, 2010 | $ | 120,638 | $ | 7,525 | ||||||||||
$ | 120,638 | $ | 7,525 | |||||||||||||
See accompanying notes
14
American Beacon Small Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2010 (in thousands, except share and per share amounts)
Statement of Assets and Liabilities
October 31, 2010 (in thousands, except share and per share amounts)
Assets: | ||||
Investments in unaffiliated securities, at value A C | $ | 2,732,825 | ||
Investments in affiliated securities, at value B | 48,791 | |||
Deposit with brokers for futures contracts | 7,681 | |||
Receivable for investments sold | 18,323 | |||
Dividends and interest receivable | 787 | |||
Receivable for fund shares sold | 2,681 | |||
Receivable for tax reclaims | 2 | |||
Receivable for variation margin on open futures contracts | 787 | |||
Prepaid expenses | 128 | |||
Total assets | 2,812,005 | |||
Liabilities: | ||||
Payable for investments purchased | 8,501 | |||
Payable upon return of securities loaned | 57,744 | |||
Payable for fund shares redeemed | 2,860 | |||
Payable for bank overdraft | 1,634 | |||
Management and investment advisory fees payable (Note 2) | 3,700 | |||
Administrative service and service fees payable (Note 2) | 864 | |||
Professional fees payable | 26 | |||
Other liabilities | 530 | |||
Total liabilities | 75,859 | |||
Net assets | $ | 2,736,146 | ||
Analysis of Net Assets: | ||||
Paid-in-capital | 2,834,787 | |||
Undistributed net investment income | 8,788 | |||
Accumulated net realized loss | (454,535 | ) | ||
Unrealized appreciation of investments and futures contracts | 347,106 | |||
Net assets | $ | 2,736,146 | ||
Shares outstanding (no par value): | ||||
Institutional Class | 82,407,470 | |||
Y Class | 52,394 | |||
Investor Class | 52,396,459 | |||
Advisor Class | 1,863,091 | |||
Retirement Class | 20,863 | |||
A Class | 1,041 | |||
C Class | 373 | |||
AMR Class | 18,059,152 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 17.84 | ||
Y Class | $ | 17.76 | ||
Investor Class | $ | 17.40 | ||
Advisor Class | $ | 17.33 | ||
Retirement Class | $ | 17.23 | ||
A Class (Net asset value only) | $ | 17.39 | ||
A Class (Offering and redemption price) | $ | 18.45 | ||
C Class | $ | 17.37 | ||
AMR Class | $ | 17.76 | ||
A Cost of investments in unaffiliated securities | $ | 2,393,244 | ||
B Cost of investments in affiliated securities | $ | 48,791 | ||
C Market value of securities on loan | $ | 56,425 |
See accompanying notes
15
American Beacon Small Cap Value FundSM
Statement of Operations
Year Ended October 31, 2010 (in thousands)
Statement of Operations
Year Ended October 31, 2010 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes)* | $ | 33,540 | ||
Dividend income from affiliated securities | 18 | |||
Interest income | 11 | |||
Income derived from securities lending, net | 567 | |||
Total investment income | 34,136 | |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 11,693 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 3,959 | |||
Y Class | 1 | |||
Investor Class | 2,468 | |||
Advisor Class | 93 | |||
Retirement Class | 1 | |||
AMR Class | 191 | |||
Transfer agent fees: | ||||
Institutional Class | 75 | |||
Investor Class | 53 | |||
Advisor Class | 2 | |||
AMR Class | 35 | |||
Custody and fund accounting fees | 349 | |||
Professional fees | 150 | |||
Registration fees and expenses | 111 | |||
Service fees (Note 2): | ||||
Y Class | 1 | |||
Investor Class | 2,972 | |||
Advisor Class | 78 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 78 | |||
Retirement Class | 1 | |||
Prospectus and shareholder reports | 313 | |||
Trustee fees | 178 | |||
Other expenses | 198 | |||
Total expenses | 23,000 | |||
Net investment income | 11,136 | |||
Realized and unrealized gain (loss) on investments: | ||||
Net realized gain (loss) from: | ||||
Investments | 174,179 | |||
Commission recapture (Note 1) | 136 | |||
Futures contracts | 5,466 | |||
Change in net unrealized appreciation or depreciation of: | ||||
Investments | 283,071 | |||
Futures contracts | 13,493 | |||
Net gain on investments | 476,345 | |||
Net increase in net assets resulting from operations | $ | 487,481 | ||
* Foreign taxes | $ | 37 |
See accompanying notes
16
American Beacon Small Cap Value FundSM
Statement of Changes of Net Assets (in thousands)
Statement of Changes of Net Assets (in thousands)
Year Ended | Year Ended | |||||||
October 31, | October 31, | |||||||
2010 | 2009 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 11,136 | $ | 13,566 | ||||
Net realized gain (loss) on investments and futures contracts | 179,781 | (354,995 | ) | |||||
Change in net unrealized appreciation of investments and futures contracts | 296,564 | 625,488 | ||||||
Net increase in net assets resulting from operations | 487,481 | 284,059 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (6,896 | ) | (13,600 | ) | ||||
Investor Class | (2,275 | ) | (8,841 | ) | ||||
Advisor Class | — | (311 | ) | |||||
AMR Class | (2,187 | ) | (3,927 | ) | ||||
Net distributions to shareholders | (11,358 | ) | (26,679 | ) | ||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 942,144 | 529,412 | ||||||
Reinvestment of dividends and distributions | 11,249 | 26,349 | ||||||
Cost of shares redeemed | (752,815 | ) | (523,004 | ) | ||||
Net increase in net assets from capital share transactions | 200,578 | 32,757 | ||||||
Net increase in net assets | 676,701 | 290,137 | ||||||
Net Assets: | ||||||||
Beginning of period | 2,059,445 | 1,769,308 | ||||||
End of Period * | $ | 2,736,146 | $ | 2,059,445 | ||||
*Includes undistributed net investment income of | $ | 8,788 | $ | 9,850 | ||||
See accompanying notes
17
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of 19 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, 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 Lighthouse Holdings, Inc. 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 inception dates of the A and C Classes are May 17, 2010 and September 1, 2010, respectively.
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: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates | |
A Class | General public and investors investing through an intermediary with applicable sales charges | |
C Class | General public and investors investing through an intermediary with applicable sales charges |
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.
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. 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 fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the “Board”).
18
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Futures are valued based upon the last sale price at the close of market on the principal exchange on which they are traded.
Valuation Inputs
Various inputs may be used to determine the value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 — | Quoted prices in active markets for identical securities. | ||
Level 2 — | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | ||
Level 3 — | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
The Fund’s investments are summarized by level based on the inputs used to determine their values. During the period there were no significant transfers between levels. As of October 31, 2010, the Fund’s investments were classified as follows: (in thousands)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock | $ | 2,611,684 | $ | — | $ | — | $ | 2,611,684 | ||||||||
Short Term Investments | 112,188 | — | — | 112,188 | ||||||||||||
Security Lending Collateral | 57,744 | — | — | 57,744 | ||||||||||||
Total Investments in Securities | $ | 2,781,616 | $ | — | $ | — | $ | 2,781,616 | ||||||||
Futures Contracts | $ | 7,525 | — | — | $ | 7,525 |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the 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 Statement of Assets and Liabilities as deposit with broker 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
19
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
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.
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||||||
Unrealized appreciation of investments, futures contracts, and foreign currency | Equity Contracts* | $ | 7,525 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 5,466 | |||||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | $ | 13,493 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least 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. This amount is reported with the net realized gain in the Fund’s Statement of Operations.
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 trustees 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.
20
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
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 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 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2010 were as follows (dollars in thousands):
Amounts paid to | ||||||
Management Fee Rate | Management Fee | Investment Advisors | Net Amounts Retained by Manager | |||
0.30%-0.60% | $11,693 | $10,416 | $1,277 |
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 year ended October 31, 2010, securities lending fees paid to the Manager were $94,172.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.40% of the average daily net assets of the A and C Classes of the Fund, 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund and 0.05% of the average daily net assets of the AMR Class of the Fund. Administrative Service Fees for the A and C Classes for the period ended October 31, 2010 were less than $500.
Distribution Plans
The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C 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. Distribution expenses for the A and C Classes for the period ended October 31, 2010 were less than $500.
21
American Beacon Small Cap Value FundSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund. Service expenses for the Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Brokerage Commissions
Affiliated entities of a sub-advisor to the Fund received net commissions on purchases and sales of the Fund’s portfolio securities totaling $25,348 for the year ended October 31, 2010.
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon US Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Fund in connection with securities lending may be invested in the Select Funds. The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee of 0.09% of the average daily net assets of the Select Funds. During the year ended October 31, 2010, the Manager earned fees from the Select Funds totaling $16,293 on the Fund’s direct investment in the Select Funds and $76,628 from the Fund’s securities lending collateral invested in the Select Funds.
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 other participating Funds. During the year ended October 31, 2010, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Fund has 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’s 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. During the year ended October 31, 2010, the C Class waived $2. A liability has not been booked as the Manager does not intend to seek repayment of this reimbursement.
3. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company, by complying with all applicable provisions of the Code and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2010 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
22
American Beacon Small Cap Value FundSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Dividends are categorized 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 paid during the fiscal years ended October 31, 2010 and October 31, 2009 were as follows (in thousands):
Year Ended | Year Ended | |||||||
October 31, | October 31, | |||||||
2010 | 2009 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 6,896 | $ | 13,600 | ||||
Investor Class | 2,275 | 8,841 | ||||||
Advisor Class | — | 311 | ||||||
AMR Class | 2,187 | 3,927 | ||||||
Total distributions paid | $ | 11,358 | $ | 26,679 | ||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2010, the components of distributable earnings (deficit) on a tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes | $ | 2,493,555 | ||
Unrealized appreciation | 437,144 | |||
Unrealized depreciation | (149,083 | ) | ||
Net unrealized appreciation/(depreciation) | 288,061 | |||
Undistributed ordinary income | 6,755 | |||
Accumulated long-term gain/(loss) | (400,983 | ) | ||
Other temporary differences | 7,525 | |||
Distributable earnings/(deficit) | $ | (98,642 | ) | |
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, and reclassifications of income from real estate investment securities.
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 regulations, 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 derived from reclassifications of income from real estate investment securities as of October 31, 2010 (in thousands):
Paid-in-capital | $ | — | ||
Undistributed net investment income (loss) | (840 | ) | ||
Accumulated net realized gain (loss) | 840 | |||
Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency | — |
At October 31, 2010 the capital loss carry forward positions for federal income tax purposes were $69,851 and $323,607 expiring in 2016 and 2017, respectively. The Fund utilized $190,117 of net capital loss carryovers for the year ended October 31, 2010. (in thousands)
4. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2010 were (in thousands) $1,603,697 and $1,405,879, respectively.
23
American Beacon Small Cap Value FundSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
A summary of the Fund’s direct transactions and security lending collateral transactions in the Select Funds for the year ended October 31, 2010 is set forth below (in thousands):
October 31, 2009 | October 31, 2010 | |||||||||||||||||||
Affiliate | Shares/Market Value | Purchases | Sales | Shares/Market Value | ||||||||||||||||
Direct | USG Select Fund | $ | 20,000 | $ | 5,000 | $ | 25,000 | $ | — | |||||||||||
Security Lending | USG Select Fund | $ | 50,000 | $ | 409,114 | $ | 410,323 | $ | 48,791 |
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 monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retain 75%, 15%, and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive any income associated with that security and any gain or loss in the market price that may occur during the term of the loan.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
As of October 31, 2010, 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 Posted by Borrower | ||||||
$56,425 | $ | — | $ | 57,744 |
Cash collateral is listed in the Fund’s Schedule of Investments and is shown on the Statement of Assets and Liabilities as a payable. Income earned on these investments is included in Income derived from securities lending in the Statement of Operations.
24
American Beacon Small Cap Value FundSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities.
6. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):
Year Ended October 31, 2010
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 26,347 | $ | 442,447 | 98 | $ | 1,732 | 15,077 | $ | 249,419 | 937 | $ | 15,835 | ||||||||||||||||||||
Reinvestment of dividends | 431 | 6,838 | — | — | 143 | 2,224 | — | — | ||||||||||||||||||||||||
Shares redeemed | (16,704 | ) | (273,902 | ) | (46 | ) | (788 | ) | (14,033 | ) | (226,469 | ) | (1,102 | ) | (17,989 | ) | ||||||||||||||||
Net increase (decrease) in shares outstanding | 10,074 | $ | 175,383 | 52 | $ | 944 | 1,187 | $ | 25,174 | (165 | ) | $ | (2,154 | ) | ||||||||||||||||||
Retirement Class | AMR Class | A Class | C Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 22 | $ | 390 | 13,750 | $ | 232,298 | 1 | $ | 17 | — | $ | 6 | ||||||||||||||||||||
Reinvestment of dividends | — | — | 138 | 2,187 | — | — | — | — | ||||||||||||||||||||||||
Shares redeemed | (1 | ) | (25 | ) | (14,762 | ) | (233,642 | ) | — | — | — | — | ||||||||||||||||||||
Net increase (decrease) in shares outstanding | 21 | $ | 365 | (874 | ) | $ | 843 | 1 | $ | 17 | — | $ | 6 | |||||||||||||||||||
Year Ended October 31, 2009
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold | 26,973 | $ | 326,038 | — | $ | 1 | 11,685 | $ | 134,422 | |||||||||||||||
Reinvestment of dividends | 1,227 | 13,407 | — | — | 813 | 8,704 | ||||||||||||||||||
Shares redeemed | (21,813 | ) | (257,527 | ) | — | — | (18,535 | ) | (216,176 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | 6,387 | $ | 81,918 | — | $ | 1 | (6,037 | ) | $ | (73,050 | ) | |||||||||||||
Advisor Class | Retirement Class | AMR Class | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
Shares sold | 752 | $ | 8,517 | — | $ | 1 | 4,659 | $ | 60,433 | |||||||||||||||
Reinvestment of dividends | 29 | 311 | — | — | 361 | 3,927 | ||||||||||||||||||
Shares redeemed | (1,513 | ) | (17,313 | ) | — | — | (2,907 | ) | (31,988 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | (732 | ) | $ | (8,485 | ) | — | $ | 1 | 2,113 | $ | 32,372 | |||||||||||||
25
American Beacon Small Cap Value Fund SM
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||||||||||||||||||||||
Year | ||||||||||||||||||||||||||||||||||||||||||||
Ended | August | |||||||||||||||||||||||||||||||||||||||||||
Institutional Class | October | 3 to | Investor Class | |||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | 31, | October | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2010 | 31, 2009 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.39 | $ | 12.53 | $ | 22.10 | $ | 22.53 | $ | 20.43 | $ | 14.37 | $ | 14.03 | $ | 14.05 | $ | 12.22 | $ | 21.62 | $ | 22.08 | ||||||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.08 | 0.10 | 0.25 | 0.22 | 0.19 | 0.14 | 0.00 | 0.03 | 0.08 | 0.20 | 0.16 | |||||||||||||||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 3.46 | 1.96 | (7.13 | ) | 1.10 | 2.94 | 3.36 | 0.34 | 3.37 | 1.91 | (6.97 | ) | 1.07 | |||||||||||||||||||||||||||||||
Total income (loss) from investment operations | 3.54 | 2.06 | (6.88 | ) | 1.32 | 3.13 | 3.50 | 0.34 | 3.40 | 1.99 | (6.77 | ) | 1.23 | |||||||||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.09 | ) | (0.20 | ) | (0.22 | ) | (0.19 | ) | (0.14 | ) | (0.11 | ) | — | (0.05 | ) | (0.16 | ) | (0.16 | ) | (0.13 | ) | |||||||||||||||||||||||
Distributions from net realized gains on securities | — | — | (2.47 | ) | (1.56 | ) | (0.89 | ) | — | — | — | — | (2.47 | ) | (1.56 | ) | ||||||||||||||||||||||||||||
Total distributions | (0.09 | ) | (0.20 | ) | (2.69 | ) | (1.75 | ) | (1.03 | ) | (0.11 | ) | — | (0.05 | ) | (0.16 | ) | (2.63 | ) | (1.69 | ) | |||||||||||||||||||||||
Net asset value, end of period | $ | 17.84 | $ | 14.39 | $ | 12.53 | $ | 22.10 | $ | 22.53 | $ | 17.76 | $ | 14.37 | $ | 17.40 | $ | 14.05 | $ | 12.22 | $ | 21.62 | ||||||||||||||||||||||
Total return A,B | 24.71 | % | 16.97 | % | (34.84 | )% | 6.10 | % | 15.80 | % | 24.44 | % | 2 .42 | %C | 24.21 | % | 16.59 | % | (35.04 | )% | 5.83 | % | ||||||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,470,084 | $ | 1,040,805 | $ | 826,232 | $ | 1,413,734 | $ | 1,319,024 | $ | 931 | $ | 1 | $ | 911,737 | $ | 719,239 | $ | 699,670 | $ | 1,316,188 | ||||||||||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||||||||||||||||||
Expenses, net of waivers | 0.81 | % | 0.84 | % | 0.81 | % | 0.80 | % | 0.82 | % | 0.91 | % | 1 .11 | %D | 1.18 | % | 1.15 | % | 1.06 | % | 1.05 | % | ||||||||||||||||||||||
Expenses before waivers | 0.81 | % | 0.84 | % | 0.81 | % | 0.80 | % | 0.82 | % | 0.91 | % | 1 .11 | %D | 1.18 | % | 1.15 | % | 1.06 | % | 1.05 | % | ||||||||||||||||||||||
Net investment income (loss), net of waivers | 0.52 | % | 0.87 | % | 1.36 | % | 0.94 | % | 0.83 | % | 0.39 | % | 0 .03 | %D | 0.17 | % | 0.59 | % | 1.12 | % | 0.70 | % | ||||||||||||||||||||||
Net investment income (loss), before waivers | 0.52 | % | 0.87 | % | 1.36 | % | 0.94 | % | 0.83 | % | 0.39 | % | 0 .03 | %D | 0.17 | % | 0.59 | % | 1.12 | % | 0.70 | % | ||||||||||||||||||||||
Portfolio turnover rate | 59 | % | 61 | % | 62 | % | 52 | % | 48 | % | 59 | % | 61 | % E | 59 | % | 61 | % | 62 | % | 52 | % |
A | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
C | Not annualized. | |
D | Annualized. | |
E | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
26
Retirement Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ended | May | September | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advisor Class | October | May 1 to | AMR Class | 17 to | 1 to | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | 31, | October | Year Ended October 31, | October | October | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | 2010 | 2009 | 2008 | 2007 | 2006 | 2010 | 31, 2009 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||
$ | 20.04 | $ | 13.97 | $ | 12.13 | $ | 21.46 | $ | 21.94 | $ | 19.94 | $ | 13.95 | $ | 11.58 | $ | 14.32 | $ | 12.48 | $ | 22.05 | $ | 22.48 | $ | 20.38 | $ | 17.33 | $ | 15.62 | |||||||||||||||||||||||||||||||
0.13 | 0.01 | 0.06 | 0.16 | 0.10 | 0.07 | 0.04 | (0.02 | ) | 0.18 | 0.11 | 0.33 | 0.30 | 0.27 | 0.00 | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||||||
2.89 | 3.35 | 1.90 | (6.93 | ) | 1.07 | 2.88 | 3.28 | 2.39 | 3.38 | 1.97 | (7.15 | ) | 1.08 | 2.91 | 0.06 | 1.76 | ||||||||||||||||||||||||||||||||||||||||||||
3.02 | 3.36 | 1.96 | (6.77 | ) | 1.17 | 2.95 | 3.32 | 2.37 | 3.56 | 2.08 | (6.82 | ) | 1.38 | 3.18 | 0.06 | 1.75 | ||||||||||||||||||||||||||||||||||||||||||||
(0.09 | ) | — | (0.12 | ) | (0.09 | ) | (0.09 | ) | (0.06 | ) | (0.04 | ) | — | (0.12 | ) | (0.24 | ) | (0.28 | ) | (0.25 | ) | (0.19 | ) | — | — | |||||||||||||||||||||||||||||||||||
(0.89 | ) | — | — | (2.47 | ) | (1.56 | ) | (0.89 | ) | — | — | — | — | (2.47 | ) | (1.56 | ) | (0.89 | ) | — | — | |||||||||||||||||||||||||||||||||||||||
(0.98 | ) | — | (0.12 | ) | (2.56 | ) | (1.65 | ) | (0.95 | ) | (0.04 | ) | — | (0.12 | ) | (0.24 | ) | (2.75 | ) | (1.81 | ) | (1.08 | ) | — | — | |||||||||||||||||||||||||||||||||||
$ | 22.08 | $ | 17.33 | $ | 13.97 | $ | 12.13 | $ | 21.46 | $ | 21.94 | $ | 17.23 | $ | 13.95 | $ | 17.76 | $ | 14.32 | $ | 12.48 | $ | 22.05 | $ | 22.48 | $ | 17.39 | $ | 17.37 | |||||||||||||||||||||||||||||||
15.56 | % | 24.05 | % | 16.41 | % | (35.19 | )% | 5.55 | % | 15.23 | % | 23.82 | % | 20 .47 | %C | 25.00 | % | 17.30 | % | (34.71 | )% | 6.39 | % | 16.12 | % | 0.35 | %C | 11.20 | %C | |||||||||||||||||||||||||||||||
$ | 1,333,814 | $ | 32,295 | $ | 28,333 | $ | 33,479 | $ | 69,112 | $ | 70,602 | $ | 360 | $ | 1 | $ | 320,715 | $ | 271,066 | $ | 209,927 | $ | 411,406 | $ | 412,857 | $ | 18 | $ | 6 | |||||||||||||||||||||||||||||||
1.06 | % | 1.32 | % | 1.31 | % | 1.31 | % | 1.32 | % | 1.34 | % | 1.54 | % | 1.53 | %D | 0.57 | % | 0.59 | % | 0.56 | % | 0.54 | % | 0.55 | % | 1.28 | %D | 2.10 | %D | |||||||||||||||||||||||||||||||
1.06 | % | 1.32 | % | 1.34 | % | 1.31 | % | 1.32 | % | 1.34 | % | 1.54 | % | 1.53 | %D | 0.57 | % | 0.59 | % | 0.56 | % | 0.54 | % | 0.55 | % | 1.28 | %D | 2.69 | %D | |||||||||||||||||||||||||||||||
0.59 | % | 0.03 | % | 0.48 | % | 0.86 | % | 0.43 | % | 0.31 | % | (0.20 | )% | (0.28 | )%D | 0.76 | % | 1.11 | % | 1.62 | % | 1.21 | % | 1.10 | % | 0.01 | %D | (1.28 | )%D | |||||||||||||||||||||||||||||||
0.59 | % | 0.03 | % | 0.44 | % | 0.86 | % | 0.43 | % | 0.31 | % | (0.20 | )% | (0.28 | )%D | 0.76 | % | 1.11 | % | 1.62 | % | 1.21 | % | 1.10 | % | 0.01 | %D | (1.86 | )%D | |||||||||||||||||||||||||||||||
48 | % | 59 | % | 61 | % | 62 | % | 52 | % | 48 | % | 59 | % | 61 | % E | 59 | % | 61 | % | 62 | % | 52 | % | 48 | % | 59 | % F | 59 | % F |
27
American Beacon Funds
Privacy Policy & Federal Tax Information
(Unaudited)
Privacy Policy & Federal Tax Information
(Unaudited)
Privacy Policy
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; | ||
• | information about your transactions with us or our service providers; and | ||
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
For corporate shareholders in the Fund, the percentage of ordinary dividend income distributed for the year ended October 31, 2010, which is designated as qualifying for the dividends-received deduction, was 71.29%.
For shareholders in the Fund, the percentage of dividend income distributed for the year ended October 31, 2010, which is designated as qualified dividend income under the Jobs Growth Tax Relief Act of 2003, was 100%. Shareholders will receive notification in January 2011 of the percentage applicable to the preparation of their 2010 income tax returns.
28
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements” and collectively with the Management Agreement, the “Agreements”). 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 a separate meeting on May 10, 2010 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.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, 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 1 and II of its Form ADV registration statement with the SEC; | ||
• | a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; | ||
• | 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; | ||
• | a description of any payments by the subadvisors to the manager to support the Funds’ marketing efforts; | ||
• | 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 would not impair its ability to provide high-quality advisory services to the Funds; | ||
• | a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for 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, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; | ||
• | a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; | ||
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; | ||
• | 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 best 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 discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; | ||
• | a description of trade allocation procedures among accounts managed by the firm; | ||
• | a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates | ||
• | a certification by the firm regarding the reasonable design of its compliance program; | ||
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; | ||
• | 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. |
29
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
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 comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; | ||
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; | ||
• | a comparison of advisory fees and expense ratios for comparable mutual funds; | ||
• | an analysis of any material complaints received from Fund shareholders; | ||
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; | ||
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; | ||
• | a description of the Manager’s securities lending practices and the fees received from such practices; | ||
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; | ||
• | a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and | ||
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated. |
In connection with the Management Agreement and each Investment Advisory Agreement, 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 with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was 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.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 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 a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing 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, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
30
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
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 considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Funds. The Board further considered that each subadvised 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 program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the 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 arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is 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 considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.
In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits 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 also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.
In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to each Trust at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal years ended October 31, and December 31, 2009.
Based on the foregoing 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 performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.
31
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
Agreement and Investment Advisory Agreements of the Fund
(Unaudited)
Additional Considerations and Conclusions with Respect to the Small Cap Value Fund
In considering the renewal of the Management Agreement for the Small Cap Value Fund, the Trustees considered the following additional factors: (1) the Small Cap Value Fund outperformed the peer universe median for the one-, three-, five-and ten-year periods ended March 31, 2010; and (2) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”), Dreman Value Management, LLC (“Dreman”), Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), Metropolitan West Capital Management, LLC (“MetWest”), Opus Capital Group, LLC (“Opus”) and The Boston Company Asset Management, LLC (“TBC”), the Trustees considered the following additional factors: (1) Barrow outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (2) Brandywine outperformed the peer universe median for the ten-year period ended March 31, 2010, but underperformed for the one-, three- and five-year periods; (3) management’s representation that although Brandywine’s annualized performance for the one-, three- and five-year periods was below the peer universe median due to poor investment results in 2007 and 2009, Brandywine has outperformed the Fund’s benchmark index for the past three out of four years; (4) Hotchkis outperformed the peer universe median for the one- and ten-year periods, but underperformed for the three- and five-year periods; (5) management’s explanation that Hotchkis’ underperformance was due, in part, to large exposure to the homebuilders sector in 2006 and 2007 and poor stock selection in the financials and industrials sectors in 2008; (6) Hotchkis’ performance for the twelve months ended March 31, 2010 outperformed the Lipper Small Cap Value index; (7) Opus outperformed the peer universe median for the three-year period ended March 31, 2010, but underperformed for the one- and five-year periods; (8) TBC outperformed the peer universe median for the three- and five-year periods ended March 31, 2010, but underperformed for the one-year period; (9) management’s explanation of the reasons for Hotchkis’s, Brandywine’s and Barrow’s underperformance; (10) Dreman and MetWest have not been allocated a portion of Fund assets to date; (11) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (12) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (13) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Small Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Small Cap Value Fund.
32
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-three funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust | ||||
until removal, | ||||
resignation or | ||||
retirement* | ||||
Alan D. Feld** (73) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994- 2006); Member, Board of Trustees, Southern Methodist University; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-present); Trustee, American Beacon Select Funds (1999-present); Trustee, American Beacon Master Trust (1996-present). | ||
NON-INTERESTED | ||||
TRUSTEES | Term | |||
Lifetime of Trust | ||||
until removal, | ||||
resignation or | ||||
retirement* | ||||
W. Humphrey Bogart (66) | Trustee since 2004 | Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998- 2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004- present). | ||
Brenda A. Cline (49) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children’s Health Foundation) (2001-2006); Director, Christian Church Foundation (1999- 2007); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust Funds (2004-present). | ||
Eugene J. Duffy (56) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994- Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001- Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008- present). |
33
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Thomas M. Dunning (68) | Trustee since 2008 | Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-present); Director, Baylor Health Care System Foundation (2007-present); State Vice Chair, State Fair of Texas (1987-present); Board Member, Southwestern Medical Foundation (1994-present); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
Richard A. Massman (67) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present), Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities). Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Hospital Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004- present); Trustee, American Beacon Master Trust (2004-present). | ||
R. Gerald Turner (64) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-present); Trustee, American Beacon Select Funds (2001- present); Trustee, American Beacon Master Trust (2001-present). | ||
Paul J. Zucconi,CPA (70) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- present); Director, Torchmark Corporation (life and health insurance products) (2002- present); Director, National Kidney Foundation of North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004- Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
William F. Quinn** (62) | Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009) and CEO (2006- 2007), President (1986-2006) and Director (2003-Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007- 2009); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996- Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007- Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988- 2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-2008); Trustee, American Beacon Select Funds (1999-2008); Trustee, American Beacon Master Trust (1995-2008); Director, American Beacon Global Funds SPC (2002- present); Director, American Beacon Global Funds plc (2007-2009). |
34
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Gene L. Needles, Jr. (55) | President 2009 to Present and Executive Vice President 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors. | ||
Rosemary K. Behan (51) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006- Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and Exchange Commission. | ||
Brian E. Brett (50) | VP since 2004 | Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). | ||
Wyatt Crumpler (44) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007- Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. | ||
Michael W. Fields (56) | VP since 1989 | Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (49) | Treasurer since 2010 | Vice President, Finance and Accounting (2010-Present), Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. | ||
Terri L. McKinney (47) | VP since 2009 | Vice-President, Enterprise Services (2009-Present), Managing Director (2003- 2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice-President, Board of Trustees (2008-Present), Trustee (2006- 2008) Down Syndrome Guild of Dallas. | ||
Jeffrey K. Ringdahl (35) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice- President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Christina E. Sears (39) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. | |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust’s and Master Trust’s sub-advisors. |
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If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary 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.
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On the Internet:
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By Telephone:
Institutional, Y, Investor, Advisor and Retirement Classes
Call (800) 658-5811
AMR ClassSM
Call (800) 345-2345
Institutional, Y, Investor, Advisor and Retirement Classes
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By Mail:
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
Custodian | Transfer Agent | Independent Registered | Distributor | |||
State Street Bank and | Boston Financial Data | Public Accounting | Foreside Fund Services, | |||
Trust | Services | Firm | LLC | |||
Boston, Massachusetts | Kansas City, Missouri | Ernst & Young LLP | Portland, Maine | |||
Dallas, Texas |
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 or Summary Prospectus.
American Beacon Funds and American Beacon Small Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR 10/10
SV1010
SV1010
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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 | |||
Schedules of Investments: | ||||
Emerging Markets | 11 | |||
International Equity | 16 | |||
Additional Information | Back Cover |
Any opinions herein, including forecasts, reflect our judgment 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 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.
American Beacon Funds | October 31, 2010 |
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Fellow Shareholders,
As the global economic recovery fluctuated over the past 12 months, one theme prevailed: investments placed with experienced, forward-thinking managers can still benefit. Opportunity abounds for those with the foresight to know how to capitalize on changing market conditions. It’s no coincidence that this theme also goes to the heart of the American Beacon Funds investment philosophy.
It’s a philosophy that has continued to serve our shareholders well. For the 12 months ended October 31, 2010, the American Beacon Emerging Markets Fund (Institutional Class) reported a return of 23.36%, while the American Beacon International Equity Fund (Institutional Class) returned 10.81% over the same period. Please note that the recent growth rate in the stock market has helped to produce short-term increases that are not typical and may not continue in the future.
While we keep a watchful eye on your investment in our funds, we also remain focused on seeking out new opportunities to help keep your financial goals on course. This is what guides the composition of American Beacon Funds’ product line-up. It is also what led to the addition of several new funds this past year: the American Beacon Zebra Large Cap and the Zebra Small Cap Equity Funds, which use a proprietary strategy to attempt to capture a unique source of equity return—the liquidity premium. We also recently added the American Beacon Evercore Small Cap Equity Fund, which relies on a fundamental bottom-up investment approach and is managed by the well-regarded Evercore Asset Management, LLC.
Continuously searching for new ways to serve our fellow shareholders’ needs is our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a thoughtful and analytical eye over all the factors that influence our investments.
We want to thank you for your continued investment in the American Beacon Funds. As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we remain dedicated to offering you both the level of superior service and knowledgeable investment management you’ve come to expect from us.
To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
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Gene L. Needles, Jr. | ||||
President American Beacon Funds | ||||
Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing. Distributed by Foreside Fund Services, LLC.
There is no guarantee that the Funds’ investment objective will be met. At times, certain securities held by the American Beacon Zebra Large Cap Equity and Small Cap Equity Funds may have limited marketability and may be difficult to sell. Investing in the securities of small and mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Because the American Beacon Evercore Small Cap Equity Fund is a focused portfolio of fewer companies, the increase or decrease of the value of a single stock may have a greater impact on the Fund’s NAV and total return when compared to other diversified funds.
1
Emerging Markets Overview
October 31, 2010 (Unaudited)
For the 12 months ended October 31, 2010, the MSCI Emerging Markets Index produced a return of 23.56% Throughout much of the past year, risk aversion stemming from poor economic data releases and exhilaration resulting from central bank intervention oscillated financial markets back and forth. To this point, global equities bounced sharply off their lows in early July as positive European bank stress test results signaled that the worst of the European debt crisis had passed. Second quarter corporate earnings also surprised on the upside, adding to hopes that the global economy was still on the road to recovery. However, in August, risk aversion reemerged on the back of rapidly deteriorating economic data, particularly in the U.S. At the same time, sovereign debt rating cuts and outlook downgrades within the Eurozone reignited European sovereign debt fears. In response to this weakening backdrop, the U.S. Federal Reserve announced it would reinvest its maturing agency and mortgage-backed securities into Treasuries and would stand by to assist the U.S. economic recovery with further quantitative easing if need be.
Against this backdrop, Emerging Market equities outperformed developed markets for the year, as investors sought out markets with economies that offered greater growth potential. The Emerging Europe, Middle East and North Africa region led regional gains returning 24.8%. Latin America and Emerging Asia followed returning 23.5% and 23.0%, respectively.
China tightened lending policies just enough to moderate the pace of loan growth and remove some of the froth from its property market. While the government has indicated a willingness to remove the peg to the U.S. dollar and allow a strengthening of the currency, evidence points to a prolonged and moderate appreciation of the Yuan. China surpassed Japan to become the world’s second largest economy, a reminder of the country’s critical role to the global economic recovery.
The next six to 12 months will be challenging for EM Central Banks as rising food inflation continues in emerging Asia. An effort to stem inflationary pressures with tightening monetary policy could spark continued foreign investment flows attracted to higher yields, denting export pricing competitiveness. Brazil is contemplating further taxation of foreign inflows on top of its current 4% surcharge to mitigate further currency appreciation.
All told, emerging markets have performed relatively well compared to the G7. Still, there has been a notable shift in favor of domestic demand versus cyclical sectors that are more exposed to trade. China, for instance, has curbed credit expansion to dampen speculative property investing. Lending has been robust, and many Chinese banks could be forced to raise capital to support future growth and protect balance sheets from loan losses
Still, the outlook for Emerging Markets remains positive. With a burgeoning middle class, pent up consumer demand, and young populations, emerging markets appear unmatched in their prospective return on investment. The staggering growth of emerging market economies has led to a new dynamic in global consumerism. Increasing wealth and modernization across these markets is creating a new global middle class, which will likely become tomorrow’s most important consumer base.
2
Performance Overview
American Beacon Emerging Markets FundSM
American Beacon Emerging Markets FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Emerging Markets Fund returned 23.36% for the twelve months ended October 31, 2010. The Fund underperformed the MSCI Emerging Markets Index (“Index”) return of 23.56% and the Lipper Emerging Markets Funds Index return of 26.39% for the period.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/00 Through 10/31/10
For The Period From 10/31/00 Through 10/31/10
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Value of | ||||||||||||||||
Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,7) | 23.36 | % | 13.73 | % | 14.68 | % | $ | 39,347 | ||||||||
Y Class (1,2,7) | 23.19 | % | 13.70 | % | 14.67 | % | 32,103 | |||||||||
Investor Class(1,3,7) | 22.85 | % | 13.35 | % | 14.40 | % | 38,384 | |||||||||
A Class with sales Charge(1,4,7) | 15.61 | % | 11.99 | % | 13.70 | % | 29,516 | |||||||||
A Class without sales Charge(1,4,7) | 22.68 | % | 13.32 | % | 14.38 | % | 31,316 | |||||||||
C Class with sales Charge(1,5,7) | 21.60 | % | 13.30 | % | 14.37 | % | 31,294 | |||||||||
C Class without sales Charge(1,5,7) | 22.60 | % | 13.30 | % | 14.37 | % | 31,294 | |||||||||
AMR Class(1,7) | 23.47 | % | 13.98 | % | 14.95 | % | 40,268 | |||||||||
MSCI Emg Mkts Index (6) | 23.56 | % | 14.94 | % | 14.62 | % | 39,152 | |||||||||
Lipper Emg Mkts Funds Index(6) | 26.39 | % | 13.27 | % | 14.06 | % | 37,283 |
1. | Performance shown is historical and may not be indicative of future returns. Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. 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 the 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 represent the returns achieved by the Institutional Class from 10/31/00 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
3. | Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 10/31/00 up to 10/1/02, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Investor Class been in existence since 10/31/00. A portion of the fees charged to the Investor Class of the Fund was waived in 2004 and 2005 and recouped in 2006. Performance prior to fee waivers and fee recoupment is different than the actual returns shown. | |
4. | Fund performance for the one-year, five-year, and ten-year periods represent the returns achieved by the Institutional Class from 10/31/00 through 10/1/02, the Investor Class from 10/1/02 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. The maximum sales charge for A Class is 5.75%. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represent the returns achieved by the Institutional Class from 10/31/00 through 10/1/02, the Investor Class from 10/1/02 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. | |
6. | The MSCI Emerging Markets Index is a market capitalization weighted index composed of companies that are representative of the market structure of developing countries in Latin America, Asia, Eastern Europe, the Middle East and Africa. The Lipper Emerging Markets Funds Index tracks the results of the 30 largest mutual funds in the Lipper Emerging Market Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
7. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 1.67%, 1.77%, 1.97%, 2.17%, 2.72%, and 1.43%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index over the twelve-month period as a result of poor stock selection and the Fund’s cash balances returning less than the Index. Country allocation added value for the period.
Stock selections in South Korea, Taiwan, and South Africa led to the relative underperformance, more than offsetting positive selections in India. In
3
Performance Overview
American Beacon Emerging Markets FundSM
American Beacon Emerging Markets FundSM
October 31, 2010 (Unaudited)
South Korea, investment in Tong Yang Life Insurance (down 9.9%) contributed to the relative underperformance. Detractors in Taiwan included Transcend Information, Inc. (down 20.8% during the period it was held by the Fund) and Cathay Financial Holding Co. Ltd. (down 7.7%), and in South Africa, ArcelorMittal South Africa Ltd. (down 13.5%) underperformed. Positive contributors in India, such as State Bank of India (up 54.1%), Glenmark Pharmaceuticals Ltd. (up 59.9% during the period it was held by the Fund), and Bank of India (up 57.1%) added value for the period.
Relative contribution from country allocation was positive for the twelve-month period, as a result of overweighting Thailand and Turkey (up 61.8% and 54.7%, respectively), and underweighting Russia (up 13.4%). Null weighting Chile and Colombia (up 58.2% and 74.4%, respectively) detracted from performance for the period.
The Fund’s basic philosophy remains focused on investing in attractively valued companies with above-average earnings growth expectations.
Top Ten Holdings
% of | ||||
Net Assets | ||||
Samsung Electronics Co. Ltd. | 2.4 | % | ||
Petroleo Brasileiro S.A. | 2.4 | % | ||
Itau Unibanco Banco Holding S.A. | 1.5 | % | ||
Vale S.A. | 1.5 | % | ||
America Movil, S.A.B. de C.V. | 1.5 | % | ||
Gazprom OAO | 1.4 | % | ||
China Mobile Ltd. | 1.4 | % | ||
Reliance Industries Ltd. | 1.3 | % | ||
China Construction Bank Corp. | 1.2 | % | ||
LUKOIL Oil Co. | 1.2 | % |
Sector Allocation
% of Equities | ||||
Financials | 27.4 | % | ||
Information Technology | 11.9 | % | ||
Materials | 11.4 | % | ||
Telecommunication Services | 11.3 | % | ||
Energy | 9.2 | % | ||
Industrials | 9.0 | % | ||
Consumer Staples | 7.7 | % | ||
Consumer Discretionary | 7.3 | % | ||
Utilities | 2.6 | % | ||
Health Care | 2.2 | % |
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Country Allocation
% of | ||||
Equities | ||||
Hong Kong/China | 16.7 | % | ||
South Korea | 14.8 | % | ||
Brazil | 14.0 | % | ||
India | 9.7 | % | ||
Taiwan | 9.3 | % | ||
South Africa | 8.1 | % | ||
Russia | 5.0 | % | ||
Mexico | 4.3 | % | ||
Indonesia | 3.0 | % | ||
Poland | 3.0 | % | ||
Thailand | 2.5 | % | ||
Turkey | 2.5 | % | ||
Malaysia | 1.8 | % | ||
Philippines | 1.4 | % | ||
Peru | 1.0 | % | ||
Egypt | 0.9 | % | ||
Hungary | 0.7 | % | ||
Czech Republic | 0.4 | % | ||
Lebanon | 0.3 | % | ||
Singapore | 0.3 | % | ||
Argentina | 0.1 | % | ||
United Kingdom | 0.1 | % | ||
Israel | 0.1 | % | ||
United States | 0.0 | % |
4
Fund Expenses
American Beacon Emerging Markets FundSM
American Beacon Emerging Markets FundSM
October 31, 2010 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 | |||||||||||
Account | Account | Expenses Paid | ||||||||||
Value | Value | During Period* | ||||||||||
5/1/10 | 10/31/10 | 5/1/10-10/31/10 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,104.78 | $ | 7.16 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,018.40 | $ | 6.87 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,104.11 | $ | 7.48 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,018.10 | $ | 7.17 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,102.62 | $ | 9.49 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,016.18 | $ | 9.10 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,105.06 | $ | 7.64 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,017.95 | $ | 7.32 | ||||||
A Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,179.34 | $ | 8.87 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,014.84 | $ | 8.24 | ||||||
C Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,106.29 | $ | 4.40 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,004.11 | $ | 4.25 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.35%, 1.41%, 1.79%, 1.44%, 1.78% and 2.54% for the Institutional, Y, Investor, AMR, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. | |
# | 5% return before expenses | |
** | Beginning account value is the inception date of 5/17/10 and 9/1/10 for the A and C Classes, respectively. Expenses are equal to the Fund’s annualized expense ratio for the period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (168 and 61) for the A and C Classes, respectively by the days in the year (365). |
5
International Equity Market Overview
October 31, 2010 (Unaudited)
For the 12 months ended October 31, 2010, the MSCI EAFE Index produced a return of 8.36% During this time, global equities generally advanced against a backdrop of heightened volatility and an uneven global economic recovery. Developed markets grew at a more subdued pace, with demand recovery and rising asset prices heavily underpinned by government-sponsored, liquidity-enhancing measures. This official intervention took its toll on the balance sheets of developed nations, and growing concerns of potential sovereign defaults in several European countries significantly roiled equity markets.
Most developed market policymakers kept interest rates at historically low levels and began quantitative easing programs. This flooded the financial system with new money through direct asset purchases. The measures buoyed equities throughout the world markets. Headline growth continued to recover and corporate earnings rebounded sharply. However, critical economic fundamentals such as employment, home prices and credit creation all remained substantially depressed. This led many investors to question the true health of the global economy and the sustainability of the recovery.
Yet, a handful of economic indicators fueled optimism that the underpinnings of the global economy were sound. During the first quarter, for example, the German IFO survey of business confidence registered 98.1, its highest level since June 2008. In addition, Japan staged the beginnings of a bear market rally. A surge in exports supported a more optimistic growth forecast and the Bank of Japan (BOJ) resumed quantitative easing to keep pressure off the yen.
Most markets were helped by the U.S. Federal Reserve’s policy of keeping interest rates low. After a strong rally from early February through mid-April, developed-market equities corrected rather sharply during the balance of the second quarter. The MSCI EAFE Index declined in each of the three months of the quarter, with the May reading dropping the most since early 2009 as a result of concerns surrounding Europe and China. Europe’s ongoing debt problem weighed heavily on international equity markets, while U.S. dollar-based losses were compounded by weak currencies, except in Japan where the yen rose against the U.S. dollar. The risk trade remained dormant due to several factors, including Europe’s tenuous financial situation, tension in the Middle East and Korea, the Gulf of Mexico oil disaster, and weak U.S. job creation. Germany introduced a 10-month ban on naked short-selling, and the European and U.S. governments made progress in instituting regulations that would limit hedge fund and banking activity. All of this had a negative, albeit temporary, effect on the global financials sector.
However, global equities surged during the third quarter, with September setting records not seen since the Depression in many markets. European banks rallied, as the less than strenuous stress test yielded few risks in the sector. With only seven banks found to be short of capital totaling 3.5 billion euros, investors moved to take long positions in the sector. Higher-risk markets that had been heavily sold off (Spain, Italy and Portugal) posted solid returns. However, revelations about Ireland’s continued financial crisis crimped sentiment later in the period. Japan struggled against a resilient yen that has forced the Bank of Japan to announce a quantitative easing program aimed at helping the export sector. A weaker U.S. dollar complemented base currency performance and also helped lift commodity stocks during the period. There were cautionary signs amidst this most recent rally, however. Earnings momentum began to slow and 2011 forecasts had begun to decline due to rising raw material prices, more challenging comparables, and questionable demand.
Developed market equities continued to grind higher during October as the “risk on” trade continued against the backdrop of expected Fed QE2 (further quantitative easing) in early November. The euro area markets along with the U.K. outperformed Asia, as both Japan and Australia lagged during the period. The quarterly earnings season began during the month with early signs pointing to a mixed picture. While some companies continued to outperform expectations, the outlook statements in a variety of sectors pointed to a slowing trajectory of GDP growth globally in the next 12 months, potentially holding back sequential EPS growth.
6
Performance Overview
American Beacon International Equity FundSM
American Beacon International Equity FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the International Equity Fund returned 10.81% for the twelve months ended October 31, 2010. The Fund outperformed the MSCI EAFE Index (“Index”) return of 8.36% but underperformed the Lipper International Funds Index return of 12.98% for the period.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/00 Through 10/31/10
For The Period From 10/31/00 Through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858616.gif)
Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,8) | 10.81 | % | 3.84 | % | 5.28 | % | $ | 16,726 | ||||||||
Y Class(1,2,8) | 10.70 | % | 3.82 | % | 5.27 | % | 16,710 | |||||||||
Investor Class(1,8) | 10.36 | % | 3.54 | % | 5.03 | % | 16,338 | |||||||||
Advisor Class(1,3,8) | 10.13 | % | 3.25 | % | 4.81 | % | 15,989 | |||||||||
Retirement Class(1,4,8) | 9.93 | % | 3.21 | % | 4.79 | % | 15,961 | |||||||||
A Class with sales charge(1,5,8) | 3.91 | % | 2.30 | % | 4.40 | % | 15,381 | |||||||||
A Class without sales charge(1,5,8) | 10.23 | % | 3.52 | % | 5.02 | % | 16,318 | |||||||||
C Class with sales charge(1,6,8) | 9.03 | % | 3.48 | % | 5.00 | % | 16,289 | |||||||||
C Class without sales charge(1,6,8) | 10.03 | % | 3.48 | % | 5.00 | % | 16,289 | |||||||||
AMR Class(1,8) | 11.05 | % | 4.11 | % | 5.54 | % | 17,141 | |||||||||
Lipper Int’l. Funds Index(7) | 12.98 | % | 4.85 | % | 4.24 | % | 15,139 | |||||||||
MSCI EAFE Index (7) | 8.36 | % | 3.31 | % | 3.17 | % | 13,669 |
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 Institutional Class from 10/31/00 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
3. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/00 up to 5/1/03, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/00. A portion of the fees charged to the Advisor Class of the Fund was waived through 2007. Performance prior to waiving fees was lower than the actual returns shown for periods through 2007. | |
4. | Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 through 4/30/03 and the Advisor Class from 5/1/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/00. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. The maximum sales charge for A Class is 5.75%. | |
6. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. | |
7. | The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. | |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.74%, 0.70%, 1.06%, 1.46%, 1.49%, 1.24%, 1.99%, and 0.49%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
7
Performance Overview
American Beacon International Equity FundSM
October 31, 2010 (Unaudited)
The Fund outperformed the Index by 2.45% over the twelve-month period due to stock selection and country allocation.
Stock selections within the United Kingdom, Japan, and South Korea benefited the Fund’s relative performance. In the United Kingdom, the Fund added value through investments in Rolls-Royce Group plc (up 39.0%) and Informa plc (up 49.4%). Fanuc Ltd. (up 71.2%) and Daito Trust Construction Co. Ltd. (up 48.4%) in Japan and Hyundai Heavy Industries Co. Ltd. (up 136.6%) and Hyundai Mobis (up 48.3%) in South Korea also contributed to the Fund’s relative outperformance. Stock selections in Hong Kong and Australia detracted from relative performance, including Esprit Holdings Ltd. (down 16.5%) in Hong Kong and Nufarm Ltd. (down 48.5% for the period the Fund owned the security) and BlueScope Steel Ltd. (down 26.2%) in Australia.
Country allocation contributed positively to relative performance, specifically underweighting Spain (down 8.6%) and overweighting Singapore (up 30.7%), though the Fund lost value through underweighting Australia (up 12.5%) during the period.
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.
Top Ten Holdings
% of | ||||
Net Assets | ||||
Sanofi-Aventis S.A. | 2.4 | % | ||
HSBC Holdings plc | 2.1 | % | ||
Royal Dutch Shell plc | 1.9 | % | ||
Siemens AG | 1.8 | % | ||
DBS Group Holdings Ltd. | 1.7 | % | ||
Novartis AG | 1.7 | % | ||
Vodafone Group plc | 1.6 | % | ||
GlaxoSmithKline plc | 1.5 | % | ||
UBS AG | 1.5 | % | ||
Roche Holding Ltd. | 1.8 | % |
Sector Allocation
% | ||||
Financials | 22.3 | % | ||
Industrials | 16.3 | % | ||
Consumer Discretionary | 13.0 | % | ||
Materials | 9.5 | % | ||
Health Care | 9.3 | % | ||
Energy | 8.3 | % | ||
Telecommunication Services | 6.8 | % | ||
Information Technology | 5.9 | % | ||
Consumer Staples | 5.7 | % | ||
Utilities | 2.9 | % |
Regional Allocation*
![(PIE CHART)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858617.gif)
* | shown as a percentage of equities |
Region | ||||
Europe | 70.5 | % | ||
Asia | 26.9 | % | ||
North America | 1.9 | % | ||
Middle East | 0.7 | % |
8
Fund Expenses
American Beacon International Equity FundSM
American Beacon International Equity FundSM
October 31, 2010 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 Investor and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 | |||||||||||
Account | Account | Expenses Paid | ||||||||||
Value | Value | During Period* | ||||||||||
5/1/10 | 10/31/10 | 5/1/10-10/31/10 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,058.41 | $ | 3.68 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,021.63 | $ | 3.62 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,057.26 | $ | 4.25 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,021.07 | $ | 4.18 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,055.95 | $ | 5.60 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,019.76 | $ | 5.50 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,054.82 | $ | 6.53 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,018.85 | $ | 6.41 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,053.60 | $ | 7.51 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,017.90 | $ | 7.38 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,059.34 | $ | 2.39 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,022.89 | $ | 2.35 | ||||||
A Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,159.83 | $ | 6.18 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,017.28 | $ | 5.78 | ||||||
C Class** | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,104.58 | $ | 3.44 | ||||||
Hypothetical# | $ | 1,000.00 | $ | 1,005.03 | $ | 3.33 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.71%, 0.82%, 1.08%, 1.26%, 1.45%, 0.46%, 1.25% and 1.99% for the Institutional, Y, Investor, Advisor, Retirement, AMR, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. | |
# | 5% return before expenses. | |
** | Beginning account value is the inception date of 5/17/10 and 9/1/10 for the A and C Classes, respectively. Expenses are equal to the Fund’s annualized expense ratio for the period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (168 and 61) for the A and C Classes, respectively by the days in the year (365). |
9
American Beacon Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Emerging Markets Fund and American Beacon International Equity Fund:
American Beacon Emerging Markets Fund and American Beacon International Equity Fund:
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of the American Beacon Emerging Markets Fund and the American Beacon International Equity Fund (two of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2010, and the related statements of operations for the year then ended, the statements of changes of net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Emerging Markets Fund and the American Beacon International Equity Fund at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![(-s- Ernst & Young LLP)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858605.gif)
Dallas, Texas
December 23, 2010
December 23, 2010
10
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
ARGENTINA — 0.13% | ||||||||
COMMON STOCKS — 0.13% (Cost $136) | ||||||||
Banco Macro S.A., ADR* | 3,992 | 199 | ||||||
BRAZIL — 13.17% | ||||||||
COMMON STOCKS — 10.89% (Cost $13,206) | ||||||||
Banco Bradesco S.A., ADR* | 22,484 | 468 | ||||||
Banco do Brasil S.A. | 19,900 | 387 | ||||||
Banco Santander Brasil S.A., ADR* | 58,840 | 847 | ||||||
BM & F Bovespa S.A. | 75,800 | 635 | ||||||
Brasil Telecom Participacoes S.A., ADR* † | 1,760 | 39 | ||||||
BRF — Brasil Foods S.A. | 42,110 | 612 | ||||||
Centrais Eletricas Brasileiras S.A. | 15,966 | 220 | ||||||
Cia de Bebidas das Americas, ADR* | 5,200 | 724 | ||||||
Cia de Saneamento Basico do Estado de Sao Paulo | 1,770 | 40 | ||||||
Cia de Saneamento de Minas Gerais- COPASA | 34,300 | 527 | ||||||
Cielo S.A. | 53,100 | 457 | ||||||
Empresa Brasileira de Aeronautica S.A. (Embraer), ADR* | 9,620 | 278 | ||||||
Gerdau S.A., ADR* | 34,770 | 453 | ||||||
Grendene S.A. | 53,640 | 280 | ||||||
Itau Unibanco Banco Holding S.A., GDR‡ | 79,519 | 1,952 | ||||||
JBS S.A. | 138,400 | 532 | ||||||
Light S.A. | 19,800 | 249 | ||||||
MRV Engenharia e Participacoes S.A. | 30,100 | 294 | ||||||
OGX Petroleo e Gas Participacoes S.A.† | 24,000 | 315 | ||||||
PDG Realty S.A. Empreendimentos e Participacoes | 40,800 | 510 | ||||||
Petroleo Brasileiro S.A., A Shares, ADR* | 75,649 | 2,358 | ||||||
Petroleo Brasileiro S.A., ADR* | 35,250 | 1,203 | ||||||
Porto Seguro S.A. | 26,160 | 385 | ||||||
Redecard S.A. | 47,400 | 613 | ||||||
Tele Norte Leste Participacoes S.A., ADR* | 26,060 | 400 | ||||||
TIM Participacoes S.A., ADR* | 5,500 | 177 | ||||||
Vale S.A., ADR* | 30,310 | 975 | ||||||
Vivo Participacoes S.A., GDR‡ | 15,700 | 450 | ||||||
Total Common Stock | 16,380 | |||||||
PREFERRED STOCKS — 2.28% (Cost $1,550) | ||||||||
Banco Bradesco S.A. | 9,680 | 200 | ||||||
Braskem S.A. | 35,800 | 367 | ||||||
Cia de Tecidos do Norte de Minas — Coteminas | 54,862 | 142 | ||||||
Cia Energetica de Minas Gerais | 41,703 | 734 | ||||||
Gerdau S.A.† | 5,800 | 75 | ||||||
Itau Unibanco Banco Holding S.A. | 13,955 | 340 | ||||||
Ultrapar Participacoes S.A. | 4,600 | 279 | ||||||
Vale S.A., ADR* | 34,286 | 985 | ||||||
Vale S.A., A Shares | 10,704 | 301 | ||||||
Total Preferred Stocks | 3,423 | |||||||
Total Brazil | 19,803 | |||||||
CZECH REPUBLIC — 0.41% | ||||||||
COMMON STOCKS — 0.41% (Cost $369) | ||||||||
Komercni Banka, a.s. | 2,724 | 618 | ||||||
Shares | Value | |||||||
($000) | ||||||||
EGYPT — 0.83% | ||||||||
COMMON STOCKS — .83% (Cost $1,080) | ||||||||
Commercial International Bank Egypt SAE | 79,742 | 601 | ||||||
Juhayna Food Industries† | 202,733 | 194 | ||||||
National Societe Generale Bank | 6,391 | 45 | ||||||
Telecom Egypt | 131,353 | 403 | ||||||
Total Egypt | 1,243 | |||||||
HONG KONG/CHINA — 15.74% | ||||||||
COMMON STOCKS — 15.74% (Cost $19,813) | ||||||||
Agricultural Bank of China† | 590,000 | 311 | ||||||
AIA Group Ltd. † | 203,000 | 604 | ||||||
Asia Cement China Holdings Corp. | 599,500 | 271 | ||||||
Bank of China Ltd. | 1,131,900 | 679 | ||||||
Beijing Capital International Airport Co. Ltd. | 1,012,000 | 557 | ||||||
Beijing Enterprises Holdings Ltd. | 52,500 | 359 | ||||||
Belle International Holdings Ltd. | 261,000 | 469 | ||||||
BYD Electronic International Co. Ltd. | 826,000 | 439 | ||||||
China Citic Bank Corp. Ltd. | 319,000 | 231 | ||||||
China Coal Energy Ltd. | 244,000 | 422 | ||||||
China Communications Services Corp. Ltd. | 494,000 | 287 | ||||||
China Construction Bank Corp. | 1,934,360 | 1,844 | ||||||
China Gas Holdings Ltd. | 422,000 | 242 | ||||||
China High Speed Transmission Equipment Group Co Ltd. | 102,000 | 208 | ||||||
China Life Insurance Co. Ltd. | 120,000 | 526 | ||||||
China Mobile Ltd., ADR* | 8,170 | 420 | ||||||
China Mobile Ltd. | 166,500 | 1,695 | ||||||
China Oilfield Services Ltd. | 184,000 | 297 | ||||||
China Pacific Insurance Group Co Ltd. | 91,000 | 377 | ||||||
China Petroleum & Chemical Corp. | 216,000 | 203 | ||||||
China Petroleum & Chemical Corp., ADR* | 3,300 | 315 | ||||||
China Power International Development Ltd. | 1,458,800 | 331 | ||||||
China Railway Group Ltd. | 694,000 | 560 | ||||||
China Resources Power Holdings Co. Ltd. | 202,000 | 388 | ||||||
China Shenhua Energy Company Ltd. | 64,000 | 286 | ||||||
China Telecom Corp. Ltd. | 692,000 | 359 | ||||||
COSCO Pacific Ltd. | 327,578 | 509 | ||||||
Dongfeng Motor Group Co. Ltd. | 208,000 | 450 | ||||||
Global Bio-chem Technology Group Co. Ltd. | 2,402,520 | 391 | ||||||
Guangzhou Automobile Group Co. Ltd. | 149,370 | 229 | ||||||
Harbin Power Equipment Co. Ltd. | 100,000 | 135 | ||||||
Hengan International Group Co. Ltd. | 20,000 | 189 | ||||||
Huaneng Power International, Inc., ADR* | 7,260 | 166 | ||||||
Huaneng Power International, Inc. | 655,900 | 374 | ||||||
Industrial & Commercial Bank of China | 1,565,000 | 1,260 | ||||||
JA Solar Holdings Co Ltd., ADR* † | 26,610 | 222 | ||||||
Lumena Resources Corp †† | 686,000 | 243 | ||||||
Maanshan Iron & Steel | 354,000 | 204 | ||||||
Netease.com, Inc., ADR* † | 4,300 | 180 | ||||||
NWS Holdings Ltd. | 267,526 | 630 | ||||||
PetroChina Co. Ltd. | 948,000 | 1,154 | ||||||
PetroChina Co. Ltd., ADR* | 1,960 | 241 | ||||||
Ping’an Insurance Co. of China Ltd. | 37,500 | 402 | ||||||
Renhe Commercial Holdings Co. Ltd. | 3,764,000 | 719 |
See accompanying notes
11
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Shanghai Industrial Holdings Ltd. | 84,000 | 388 | ||||||
Sinotrans Ltd. | 1,461,000 | 396 | ||||||
Sohu.com, Inc.† | 5,100 | 380 | ||||||
Tencent Holdings Ltd. | 21,000 | 481 | ||||||
Tianjin Development Holdings | 44,000 | 34 | ||||||
TPV Technology Ltd. | 206,970 | 128 | ||||||
Tsingtao Brewery Co. Ltd. | 36,000 | 193 | ||||||
Want Want China Holdings Ltd. | 287,000 | 265 | ||||||
Weiqiao Textile Co. | 517,600 | 407 | ||||||
Xinjiang Goldwind Science and Technology Co. Ltd.† § | 116,400 | 302 | ||||||
Yanzhou Coal Mining Co. Ltd. | 106,000 | 305 | ||||||
Total Hong Kong/China | 23,657 | |||||||
HUNGARY — 0.64% | ||||||||
COMMON STOCKS — .64% (Cost $686) | ||||||||
Mol Hungarian Oil and Gas plc | 3,984 | 424 | ||||||
Richter Gedeon Nyrt | 2,281 | 543 | ||||||
Total Hungary | 967 | |||||||
INDIA — 9.14% | ||||||||
COMMON STOCKS — 9.14% (Cost $10,060) | ||||||||
Asian Paints Ltd. | 4,854 | 293 | ||||||
Bank of India | 40,620 | 444 | ||||||
Bharti Airtel Ltd. | 117,330 | 861 | ||||||
Dr Reddy’s Laboratories Ltd. | 13,235 | 495 | ||||||
Engineers India Ltd. | 25,108 | 196 | ||||||
Glenmark Pharmaceuticals Ltd. | 104,854 | 804 | ||||||
HDFC Bank Ltd. | 17,202 | 879 | ||||||
Hindalco Industries Ltd. | 79,462 | 379 | ||||||
India Cements Ltd. | 304,530 | 757 | ||||||
IndusInd Bank Ltd. | 74,974 | 450 | ||||||
Infosys Technologies Ltd. | 16,309 | 1,089 | ||||||
Infrastructure Development Finance Co. Ltd. | 102,531 | 462 | ||||||
ITC Ltd. | 55,129 | 211 | ||||||
Jindal Steel & Power Ltd. | 15,566 | 244 | ||||||
KSK Energy Ventures Ltd.† | 46,000 | 173 | ||||||
Larsen & Toubro Ltd. | 8,182 | 372 | ||||||
Mahanagar Telephone Nigam Ltd.† | 182,310 | 276 | ||||||
NMDC Ltd. | 60,270 | 376 | ||||||
Patni Computer Systems Ltd. | 6,350 | 66 | ||||||
Reliance Industries Ltd. | 77,117 | 1,904 | ||||||
Rolta India Ltd. | 131,360 | 493 | ||||||
Rural Electrification Corp. Ltd. | 39,656 | 331 | ||||||
State Bank of India | 3,595 | 255 | ||||||
State Bank of India, GDR‡ ** | 5,630 | 777 | ||||||
Sun TV Network Ltd. | 17,777 | 200 | ||||||
Tata Consultancy Services Ltd. | 10,315 | 244 | ||||||
Tata Motors Ltd. | 27,377 | 717 | ||||||
Total India | 13,748 | |||||||
INDONESIA — 2.87% | ||||||||
COMMON STOCKS — 2.87% (Cost $2,333) | ||||||||
Astra Agro Lestari Tbk PT | 47,500 | 132 | ||||||
Astra International Tbk PT | 112,400 | 716 | ||||||
Bank Rakyat Indonesia Persero Tbk PT | 269,500 | 344 | ||||||
Lippo Karawaci Tbk PT† | 5,881,000 | 408 | ||||||
PT Bank Central Asia Tbk | 675,000 | 529 | ||||||
PT Indofood Sukses Makmur Tbk | 698,500 | 407 | ||||||
PT Indosat Tbk | 968,000 | 650 | ||||||
PT International Nickel Indonesia Tbk | 204,500 | 109 | ||||||
PT Medco Energi Internasional Tbk | 470,000 | 214 | ||||||
PT Perusahaan Gas Negara Persero Tbk | 318,500 | 144 |
Shares | Value | |||||||
($000) | ||||||||
PT Telekomunikasi Indonesia Tbk | 651,800 | 664 | ||||||
Total Indonesia | 4,317 | |||||||
ISRAEL — 0.11% | ||||||||
COMMON STOCKS — 0.11% (Cost $140) | ||||||||
Teva Pharmaceutical Industries Ltd., ADR* | 3,180 | 165 | ||||||
LEBANON — 0.33% | ||||||||
COMMON STOCKS — .33% (Cost $517) | ||||||||
Banque Audi sal- Audi Saradar Group, GDR‡ | 31,198 | 260 | ||||||
BLOM Bank SAL, GDR‡ | 24,710 | 231 | ||||||
Total Lebanon | 491 | |||||||
MALAYSIA — 1.73% | ||||||||
COMMON STOCKS — 1.73% (Cost $1,691) | ||||||||
Axiata Group Bhd† | 477,400 | 689 | ||||||
Genting Malaysia Bhd | 688,610 | 775 | ||||||
Malayan Banking Bhd | 230,970 | 668 | ||||||
Sime Darby Bhd | 123,400 | 350 | ||||||
Tenaga Nasional Bhd | 42,200 | 119 | ||||||
Total Malaysia | 2,601 | |||||||
MEXICO — 4.01% | ||||||||
COMMON STOCKS — 4.01% (Cost $4,327) | ||||||||
America Movil, S.A.B. de C.V., ADR* | 38,657 | 2,213 | ||||||
Consorcio ARA, S.A.B. de C.V. | 278,700 | 177 | ||||||
Desarrolladora Homex, S.A.B. de C.V., ADR* † | 16,482 | 553 | ||||||
Embotelladoras Arca, S.A.B. de C.V. | 91,730 | 379 | ||||||
Empresas ICA, S.A.B. de C.V.† | 63,200 | 167 | ||||||
Fomento Economico Mexicano, S.A.B. de C.V., ADR* | 10,200 | 560 | ||||||
Genomma Lab Internacional SA de C.V.† | 104,700 | 226 | ||||||
Grupo Continential, S.A.B. de C.V. | 105,750 | 298 | ||||||
Grupo Financiero Banorte, S.A.B. de C.V. | 114,689 | 491 | ||||||
Grupo Simec SAB de C.V. STET† | 12,400 | 30 | ||||||
Industrias CH S.A.B de C.V.† | 34,100 | 123 | ||||||
Urbi Desarrollos Urbanos, S.A.B. de C.V.† | 51,300 | 109 | ||||||
Wal-Mart de Mexico, S.A.B. de C.V. | 259,400 | 710 | ||||||
Total Mexico | 6,036 | |||||||
PERU — 0.93% | ||||||||
COMMON STOCKS — .93% (Cost $1,059) | ||||||||
Compania de Minas Buenaventura S.A., ADR* | 7,030 | 373 | ||||||
Credicorp Ltd. | 5,110 | 643 | ||||||
Southern Copper Corp. | 8,821 | 378 | ||||||
Total Peru | 1,394 | |||||||
PHILIPPINES — 1.33% | ||||||||
COMMON STOCKS — 1.33% (Cost $1,426) | ||||||||
Ayala Corp. | 31,220 | 292 | ||||||
Bank of the Philippine Islands | 257,523 | 351 | ||||||
Metro Pacific Investments Corp. | 3,462,000 | 345 | ||||||
Metropolitan Bank & Trust | 208,100 | 379 | ||||||
Philippine Long Distance Telephone Co. | 5,080 | 316 | ||||||
SM Investments Corp. | 25,220 | 320 | ||||||
Total Philippines | 2,003 | |||||||
POLAND — 2.81% | ||||||||
COMMON STOCKS — 2.81% (Cost $3,715) | ||||||||
Asseco Poland S.A. | 30,151 | 558 |
See accompanying notes
12
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Bank Pekao S.A. | 10,096 | 660 | ||||||
Central European Distribution Corp.† | 12,111 | 302 | ||||||
Eurocash S.A. | 43,301 | 398 | ||||||
Polski Koncern Naftowy Orlen S.A. | 11,594 | 164 | ||||||
Powszechna Kasa Oszczednosci Bank Polski S.A. | 44,487 | 702 | ||||||
Powszechny Zaklad Ubezpieczen S.A. | 2,689 | 357 | ||||||
Telekomunikacja Polska S.A. | 170,652 | 1,087 | ||||||
Total Poland | 4,228 | |||||||
RUSSIA — 4.69% | ||||||||
COMMON STOCKS — 4.69% (Cost $5,618) | ||||||||
Gazprom OAO, ADR* | 97,360 | 2,127 | ||||||
LUKOIL Oil Co., ADR* | 31,833 | 1,778 | ||||||
OJSC MMC Norilsk Nickel, ADR* | 14,349 | 268 | ||||||
Sberbank of Russia, GDR‡ | 3,700 | 1,397 | ||||||
VimpelCom Ltd., ADR* † | 31,170 | 478 | ||||||
Wimm-Bill-Dann Foods OJSC, ADR* | 24,048 | 610 | ||||||
X 5 Retail Group NV, GDR †‡ | 251 | 11 | ||||||
X 5 Retail Group NV† | 9,232 | 386 | ||||||
Total Russia | 7,055 | |||||||
SINGAPORE — 0.26% | ||||||||
COMMON STOCKS — 0.26% (Cost $274) | ||||||||
Golden Agri-Resources Ltd. | 760,000 | 382 | ||||||
SOUTH AFRICA — 7.62% | ||||||||
COMMON STOCKS — 7.62% (Cost $8,864) | ||||||||
Anglo Platinum Ltd. | 4,482 | 443 | ||||||
AngloGold Ashanti Ltd., ADR* | 2,734 | 129 | ||||||
ArcelorMittal South Africa Ltd. | 27,784 | 319 | ||||||
AVI Ltd. | 101,542 | 406 | ||||||
Barloworld Ltd. | 47,150 | 353 | ||||||
Clicks Group Ltd. | 65,300 | 426 | ||||||
Impala Platinum Holdings Ltd. | 28,100 | 795 | ||||||
Imperial Holdings Ltd. | 16,200 | 264 | ||||||
JD Group Ltd. | 74,900 | 527 | ||||||
MTN Group Ltd. | 93,266 | 1,678 | ||||||
Murray & Roberts Holdings Ltd. | 113,710 | 704 | ||||||
Nampak Ltd. | 114,140 | 321 | ||||||
Naspers Ltd. | 17,426 | 915 | ||||||
Nedbank Group Ltd. | 23,420 | 438 | ||||||
Pick n Pay Stores Ltd. | 46,795 | 308 | ||||||
SABMiller plc. | 18,104 | 586 | ||||||
Sappi Ltd.† | 63,644 | 315 | ||||||
Sasol Ltd. | 14,610 | 658 | ||||||
Sasol Ltd., ADR* | 4,490 | 203 | ||||||
Standard Bank Group Ltd. | 93,726 | 1,382 | ||||||
Telkom South Africa Ltd. | 56,100 | 290 | ||||||
Total South Africa | 11,460 | |||||||
SOUTH KOREA — 13.97% | ||||||||
PREFERRED STOCKS — 0.16% (Cost $102) | ||||||||
Samsung Electronics Co. Ltd. | 484 | 238 | ||||||
COMMON STOCKS — 13.82% (Cost $16,182) | ||||||||
Amorepacific Corp. | 207 | 191 | ||||||
Cheil Industries, Inc. | 3,669 | 308 | ||||||
Cheil Worldwide, Inc. | 22,378 | 244 | ||||||
CJ CheilJedang Corp. | 249 | 48 | ||||||
GS Engineering & Construction Corp. | 2,646 | 225 | ||||||
Hite Brewery Co. Ltd. | 2,167 | 242 | ||||||
Hyundai Development Co. | 20,540 | 576 | ||||||
Hyundai Engineering & Construction Co. Ltd. | 4,302 | 288 |
Shares | Value | |||||||
($000) | ||||||||
Hyundai Heavy Industries Co. Ltd. | 1,047 | 341 | ||||||
Hyundai Mobis | 2,346 | 584 | ||||||
Hyundai Motor Co. | 6,082 | 919 | ||||||
Hyundai Steel Co. | 2,197 | 213 | ||||||
Jinro Ltd. | 5,100 | 172 | ||||||
KB Financial Group, Inc. | 35,756 | 1,588 | ||||||
KB Financial Group, Inc., ADR* | 1,950 | 88 | ||||||
Korea Electric Power Corp. | 15,465 | 407 | ||||||
Korea Electric Power Corp., ADR* | 780 | 10 | ||||||
Korea Exchange Bank | 9,280 | 111 | ||||||
Korean Reinsurance Co. | 35,733 | 402 | ||||||
KT Corp., ADR* | 7,930 | 164 | ||||||
KT Corp. | 6,482 | 256 | ||||||
KT&G Corp. | 8,693 | 534 | ||||||
LG Chem Ltd. | 2,255 | 696 | ||||||
LG Display Co. Ltd. | 8,060 | 275 | ||||||
LG Display Co. Ltd., ADR* | 2,995 | 52 | ||||||
LG Electronics, Inc. | 9,453 | 832 | ||||||
Lotte Chilsung Beverage Co. Ltd. | 244 | 167 | ||||||
NHN Corp.† | 1,868 | 331 | ||||||
Nong Shim Co. Ltd. | 3,235 | 595 | ||||||
OCI Co. Ltd. | 1,087 | 320 | ||||||
POSCO, ADR* | 660 | 69 | ||||||
POSCO | 1,883 | 773 | ||||||
Samsung C&T Corp. | 3,880 | 228 | ||||||
Samsung Electronics Co. Ltd. | 5,170 | 3,422 | ||||||
Samsung Fire & Marine Insurance Co. Ltd. | 6,068 | 1,041 | ||||||
Shinhan Financial Group Co. Ltd. | 26,626 | 1,030 | ||||||
Shinsegae Co. Ltd. | 866 | 439 | ||||||
SK Telecom Co. Ltd. | 790 | 120 | ||||||
SK Telecom Co. Ltd., ADR* | 40,170 | 740 | ||||||
S-Oil Corp. | 3,539 | 218 | ||||||
SSCP Co. Ltd.† | 10,299 | 70 | ||||||
Tong Yang Life Insurance | 49,300 | 521 | ||||||
Woongjin Coway Co. Ltd. | 12,226 | 444 | ||||||
Yuhan Corp. | 3,370 | 478 | ||||||
Total Common Stocks | 20,772 | |||||||
Total South Korea | 21,010 | |||||||
TAIWAN — 8.80% | ||||||||
COMMON STOCKS — 8.80% (Cost $11,152) | ||||||||
Acer, Inc. | 115,979 | 337 | ||||||
Asia Cement Corp. | 333,720 | 344 | ||||||
Asustek Computer, Inc. | 81,353 | 660 | ||||||
AU Optronics Corp., ADR* | 44,760 | 449 | ||||||
AU Optronics Corp. | 332,520 | 332 | ||||||
Catcher Technology Co. Ltd. | 149,000 | 397 | ||||||
Cathay Financial Holding Co. Ltd. | 218,920 | 335 | ||||||
China Steel Corp. | 281,890 | 286 | ||||||
Chinatrust Financial Holding Co. Ltd. | 890,914 | 556 | ||||||
First Financial Holding Co. Ltd. | 961,406 | 635 | ||||||
Formosa Plastics Corp. | 102,000 | 293 | ||||||
Fubon Financial Holding Co. Ltd. | 237,034 | 290 | ||||||
HON HAI Precision Industry Co. Ltd. | 319,645 | 1,210 | ||||||
HTC Corp. | 17,818 | 402 | ||||||
InnoLux Display Corp. | 192,000 | 258 | ||||||
KGI Securities Co. Ltd. | 375,000 | 176 | ||||||
Lite-On Technology Corp. | 113,679 | 150 | ||||||
Nan Ya Printed Circuit Board Corp. | 93,989 | 384 | ||||||
Quanta Computer, Inc. | 526,000 | 965 | ||||||
Siliconware Precision Industries Co., ADR* | 7,320 | 41 | ||||||
Siliconware Precision Industries Co. | 154,000 | 168 |
See accompanying notes
13
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
SinoPac Financial Holdings Co. Ltd. | 1,576,987 | 595 | ||||||
Taiwan Fertilizer Co. Ltd. | 68,000 | 232 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR* | 9,190 | 100 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 794,385 | 1,629 | ||||||
Tatung Co. Ltd.† | 1,634,000 | 385 | ||||||
Transcend Information, Inc. | 129,520 | 322 | ||||||
Uni-President Enterprises Corp. | 292,400 | 380 | ||||||
United Microelectronics Corp. | 1,382,226 | 657 | ||||||
United Microelectronics Corp., ADR* | 13,250 | 41 | ||||||
Yuanta Financial Holding Co. Ltd. | 349,000 | 219 | ||||||
Total Taiwan | 13,228 | |||||||
THAILAND — 2.33% | ||||||||
COMMON STOCKS — 2.33% (Cost $2,163) | ||||||||
Bangkok Bank PCL | 102,990 | 531 | ||||||
Kasikornbank PCL | 282,500 | 1,140 | ||||||
PTT PCL | 44,900 | 434 | ||||||
Siam Cement PCL | 47,300 | 499 | ||||||
Siam Commercial Bank PCL | 157,400 | 538 | ||||||
Total Access Communication PCL | 257,400 | 361 | ||||||
Total Thailand | 3,503 | |||||||
TURKEY — 2.32% | ||||||||
COMMON STOCKS — 2.32% (Cost $2,050) | ||||||||
Akbank T.A.S. | 47,033 | 295 | ||||||
Anadolu Efes Biracilik Ve Malt Sanayii A.S. | 40,706 | 650 | ||||||
Coca-Cola Icecek A.S. | 20,496 | 263 | ||||||
TAV Havalimanlari Holding A.S.† | 96,253 | 503 | ||||||
Tupras-Turkiye Petrol Rafinerileri A.S. | 10,915 | 293 | ||||||
Turk Telekomunikasyon A.S. | 87,714 | 410 | ||||||
Turkcell Iletisim Hizmetleri A.S. | 41,370 | 300 | ||||||
Turkcell Iletisim Hizmetleri A.S., ADR* | 400 | 7 | ||||||
Turkiye Garanti Bankasi A.S. | 84,605 | 519 | ||||||
Turkiye Is Bankasi (Isbank) | 48,472 | 218 | ||||||
Turkiye Sise ve Cam Fabrikalari A.S.† | 15,693 | 29 | ||||||
Total Turkey | 3,487 | |||||||
UNITED KINGDOM — 0.13% | ||||||||
COMMON STOCKS — 0.13% (Cost $157) | ||||||||
JKX Oil & Gas plc. | 43,010 | 194 | ||||||
UNITED STATES — 0.04% | ||||||||
COMMON STOCKS — 0.04% (Cost $161) | ||||||||
Fuqi International, Inc.† | 8,460 | 63 | ||||||
SHORT-TERM INVESTMENTS — 3.24% (Cost $4,871) | ||||||||
JPMorgan U.S. Government Money Market Fund | 4,870,913 | 4,871 | ||||||
TOTAL INVESTMENTS — 97.58% (Cost $113,702) | 146,723 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 2.42% | 3,635 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 150,358 | ||||||
Percentages are stated as a percent of net assets. | ||
* | ADR — American Depository Receipt | |
† | Non-income producing security. | |
‡ | GDR — Global Depository Receipt | |
§ | Private Placement | |
** | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $777 or 0.52% of net assets. The Fund has no right to demand registration of these securities. | |
†† | Fair valued by the Fair Valuation Committee. |
See accompanying notes
14
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
MSCI Emerging Market EMini Future | 151 | December, 2010 | $ | 8,379 | $ | 392 | ||||||||||
$ | 8,379 | $ | 392 | |||||||||||||
See accompanying notes
15
American Beacon International Equity FundSM
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
AUSTRALIA — 1.35% | ||||||||
COMMON STOCKS — 1.35% (Cost $20,868) | ||||||||
BlueScope Steel Ltd. | 752,169 | 1,470 | ||||||
Foster’s Group Ltd. | 699,501 | 4,002 | ||||||
Nufarm Ltd. | 817,753 | 3,645 | ||||||
QBE Insurance Group Ltd. | 627,176 | 10,554 | ||||||
Total Australia | 19,671 | |||||||
AUSTRIA — 0.21% | ||||||||
COMMON STOCKS — 0.21% (Cost $5,477) | ||||||||
Telekom Austria AG | 202,700 | 3,103 | ||||||
BELGIUM — 0.55% | ||||||||
COMMON STOCKS — 0.55% (Cost $2,309) | ||||||||
Anheuser-Busch InBev NV | 127,200 | 7,973 | ||||||
CANADA — 1.14% | ||||||||
COMMON STOCKS — 1.14% (Cost $12,984) | ||||||||
Potash Corp of Saskatchewan, Inc. | 19,200 | 2,777 | ||||||
Precision Drilling Corp. † | 672,029 | 5,271 | ||||||
Rogers Communications, Inc., Class B† | 79,600 | 2,900 | ||||||
Talisman Energy, Inc. | 319,100 | 5,785 | ||||||
Total Canada | 16,733 | |||||||
DENMARK — 0.30% | ||||||||
COMMON STOCKS — .30% (Cost $2,667) | ||||||||
Novo Nordisk AS | 25,525 | 2,687 | ||||||
Pandora A.S. | 35,660 | 1,730 | ||||||
Total Denmark | 4,417 | |||||||
FINLAND — 0.58% | ||||||||
COMMON STOCKS — 0.58% (Cost $8,975) | ||||||||
Nokia Oyj | 782,709 | 8,454 | ||||||
FRANCE — 12.17% | ||||||||
COMMON STOCKS — 12.17% (Cost $146,923) | ||||||||
Alstom S.A. | 167,274 | 8,442 | ||||||
AXA S.A. | 617,060 | 11,233 | ||||||
BNP Paribas | 173,588 | 12,696 | ||||||
Carrefour S.A. | 150,880 | 8,144 | ||||||
Cie Generale des Etablissements Michelin | 90,220 | 7,176 | ||||||
EADS N.V. | 359,168 | 9,440 | ||||||
France Telecom S.A. | 266,590 | 6,406 | ||||||
Gemalto N.V. | 79,534 | 3,622 | ||||||
Groupe Danone | 82,250 | 5,206 | ||||||
Sanofi-Aventis S.A. | 498,839 | 34,838 | ||||||
Societe Generale | 177,415 | 10,624 | ||||||
Technip S.A. | 102,961 | 8,654 | ||||||
Total S.A. | 391,987 | 21,302 | ||||||
Valeo S.A.* | 126,896 | 6,821 | ||||||
VINCI S.A. | 195,425 | 10,439 | ||||||
Vivendi S.A. | 452,956 | 12,921 | ||||||
Total France | 177,964 | |||||||
GERMANY — 8.72% | ||||||||
COMMON STOCKS — 8.72% (Cost $106,956) | ||||||||
Allianz SE — REG | 44,554 | 5,583 | ||||||
Bayer AG | 76,715 | 5,725 | ||||||
Bayerische Motoren Werke AG | 94,930 | 6,806 | ||||||
Celesio AG | 245,480 | 5,853 | ||||||
Deutsche Post AG | 973,057 | 18,148 | ||||||
E.ON AG | 581,170 | 18,200 | ||||||
Linde AG | 81,803 | 11,778 |
Shares | Value | |||||||
($000) | ||||||||
Merck KGaA | 57,150 | 4,761 | ||||||
Muenchener Rueckversicherungs-Gesellschaft AG | 89,017 | 13,920 | ||||||
SAP AG | 204,010 | 10,639 | ||||||
Siemens AG | 228,525 | 26,105 | ||||||
Total Germany | 127,518 | |||||||
GREECE — 0.34% | ||||||||
COMMON STOCKS — 0.34% (Cost $6,814) | ||||||||
OPAP S.A. | 260,110 | 4,905 | ||||||
HONG KONG/CHINA — 3.47% | ||||||||
COMMON STOCKS — 3.47% (Cost $43,348) | ||||||||
AIA Group Ltd.* | 802,000 | 2,390 | ||||||
Cheung Kong Holdings Ltd. | 472,500 | 7,211 | ||||||
Esprit Holdings Ltd. | 1,827,105 | 9,782 | ||||||
Hang Seng Bank Ltd. | 344,800 | 5,031 | ||||||
HSBC Holdings plc | 1,128,796 | 11,723 | ||||||
Hutchison Whampoa Ltd. | 187,000 | 1,846 | ||||||
Swire Pacific Ltd. | 322,100 | 4,563 | ||||||
Yue Yuen Industrial Holdings Ltd. | 2,281,667 | 8,183 | ||||||
Total Hong Kong/China | 50,729 | |||||||
IRELAND — 0.84% | ||||||||
COMMON STOCKS — .84% (Cost $18,999) | ||||||||
CRH plc | 421,062 | 7,211 | ||||||
Smurfit Kappa Group plc | 465,636 | 5,010 | ||||||
Total Ireland | 12,221 | |||||||
ISRAEL — 0.68% | ||||||||
COMMON STOCKS — 0.68% (Cost $10,098) | ||||||||
Teva Pharmaceutical Industries Ltd., ADR‡ | 191,717 | 9,950 | ||||||
ITALY — 3.15% | ||||||||
COMMON STOCKS — 3.15% (Cost $45,391) | ||||||||
Atlantia S.p.A. | 201,030 | 4,594 | ||||||
Buzzi Unicem S.p.A.† | 217,715 | 2,500 | ||||||
Eni S.p.A. | 233,856 | 5,269 | ||||||
Finmeccanica S.p.A. | 536,770 | 7,493 | ||||||
Intesa Sanpaolo S.p.A. | 1,072,743 | 3,774 | ||||||
Prysmian S.p.A. | 139,442 | 2,703 | ||||||
Saras S.p.A.*† | 2,322,607 | 5,137 | ||||||
Snam Rete Gas S.p.A. | 969,171 | 5,251 | ||||||
UniCredit S.p.A. | 3,573,757 | 9,316 | ||||||
Total Italy | 46,037 | |||||||
JAPAN — 16.28% | ||||||||
COMMON STOCKS — 16.28% (Cost $234,370) | ||||||||
ASICS Corp. | 136,980 | 1,479 | ||||||
Benesse Holdings, Inc. | 61,500 | 2,954 | ||||||
Bridgestone Corp. | 342,700 | 6,146 | ||||||
Canon, Inc. | 139,900 | 6,467 | ||||||
Chuo Mitsui Trust Holdings, Inc. | 1,043,400 | 3,773 | ||||||
Daito Trust Construction Co. Ltd. | 104,900 | 6,335 | ||||||
Daiwa House Industry Co. Ltd. | 366,000 | 3,953 | ||||||
Don Quijote Co. Ltd. | 59,800 | 1,634 | ||||||
eAccess Ltd. | 4,290 | 3,129 | ||||||
East Japan Railway Co. | 67,700 | 4,186 | ||||||
Fanuc Ltd. | 62,000 | 8,976 | ||||||
FUJIFILM Holdings Corp. | 107,900 | 3,600 | ||||||
Haseko Corp.* | 3,521,018 | 3,019 | ||||||
Honda Motor Co. Ltd. | 383,900 | 14,012 | ||||||
Hoya Corp. | 185,300 | 4,334 | ||||||
ITOCHU Corp. | 221,700 | 1,945 | ||||||
JGC Corp. | 332,000 | 6,354 |
See accompanying notes
16
American Beacon International Equity FundSM
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
KDDI Corp. | 2,287 | 12,320 | ||||||
Keyence Corp. | 10,900 | 2,702 | ||||||
Konica Minolta Holdings, Inc. | 347,500 | 3,368 | ||||||
Kubota Corp. | 333,000 | 2,963 | ||||||
Mitsubishi Corp. | 125,000 | 3,006 | ||||||
Mitsubishi Gas Chemical Co., Inc. | 934,000 | 5,780 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 3,165,000 | 14,750 | ||||||
Nidec Corp. | 44,200 | 4,372 | ||||||
Nintendo Co. Ltd. | 11,400 | 2,954 | ||||||
Nomura Holdings, Inc. | 660,300 | 3,430 | ||||||
Ryohin Keikak Co. Ltd. † | 111,100 | 3,943 | ||||||
Sankyo Co. Ltd. | 110,800 | 5,908 | ||||||
Seven & I Holdings Co. Ltd. | 224,200 | 5,218 | ||||||
Shin-Etsu Chemical Co. Ltd. | 312,300 | 15,815 | ||||||
SMC Corp. | 35,700 | 5,457 | ||||||
Sony Financial Holdings, Inc. | 2,609 | 9,078 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 139,400 | 4,178 | ||||||
Tokyo Electron Ltd. | 95,700 | 5,405 | ||||||
Tokyo Steel Manufacturing Co. Ltd. | 773,200 | 7,668 | ||||||
Toyoda Gosei Co. Ltd. | 240,400 | 5,180 | ||||||
Toyota Motor Corp. | 456,600 | 16,221 | ||||||
Ushio, Inc. | 197,000 | 3,283 | ||||||
Yahoo! Japan Corp. | 13,291 | 4,652 | ||||||
Yamada Denki Co. Ltd. | 73,370 | 4,769 | ||||||
Yamato Holdings Co. Ltd. | 254,600 | 3,208 | ||||||
Total Japan | 237,924 | |||||||
NETHERLANDS — 4.77% | ||||||||
COMMON STOCKS — 4.77% (Cost $66,925) | ||||||||
Akzo Nobel N.V. | 239,286 | 14,208 | ||||||
ING Groep N.V. | 971,170 | 10,367 | ||||||
Koninklijke Philips Electronics N.V. | 308,897 | 9,342 | ||||||
Randstad Holding N.V. | 83,910 | 3,994 | ||||||
Reed Elsevier N.V. | 976,537 | 12,724 | ||||||
SBM Offshore N.V.§ | 265,765 | 5,423 | ||||||
TNT N.V. | 513,554 | 13,652 | ||||||
Total Netherlands | 69,710 | |||||||
NORWAY — 1.90% | ||||||||
COMMON STOCKS — 1.90% (Cost $19,858) | ||||||||
Aker Solutions ASA. | 759,890 | 11,573 | ||||||
StatoilHydro ASA. | 266,630 | 5,823 | ||||||
Telenor ASA. | 640,840 | 10,335 | ||||||
Total Norway | 27,731 | |||||||
PORTUGAL — 0.74% | ||||||||
COMMON STOCKS — 0.74% (Cost $5,853) | ||||||||
Portugal Telecom, SGPS, S.A. | 747,760 | 10,792 | ||||||
SINGAPORE — 2.49% | ||||||||
COMMON STOCKS — 2.49% (Cost $23,119) | ||||||||
DBS Group Holdings Ltd. | 2,338,060 | 25,109 | ||||||
Singapore Telecommunications Ltd. | 4,703,000 | 11,228 | ||||||
Total Singapore | 36,337 | |||||||
SOUTH KOREA — 2.16% | ||||||||
COMMON STOCKS — 2.16% (Cost $21,087) | ||||||||
Hyundai Heavy Industries Co. Ltd. | 30,458 | 9,920 | ||||||
Hyundai Mobis | 20,200 | 5,026 | ||||||
KB Financial Group, Inc., ADR‡ | 143,018 | 6,422 | ||||||
KT&G Corp. | 110,987 | 6,816 | ||||||
Samsung Electronics Co. Ltd., GDR** †† | 10,114 | 3,376 | ||||||
Total South Korea | 31,560 | |||||||
Shares | Value | |||||||
($000) | ||||||||
SPAIN — 4.05% | ||||||||
COMMON STOCKS — 4.05% (Cost $46,775) | ||||||||
Amadeus IT Holdings S.A., A Shares* | 140,700 | 2,866 | ||||||
Banco Santander S.A. | 1,453,591 | 18,719 | ||||||
Enagas S.A. | 332,547 | 7,329 | ||||||
Gamesa Corp. Tecnologica S.A. | 657,309 | 4,574 | ||||||
Iberdrola S.A. | 700,919 | 5,912 | ||||||
Repsol YPF S.A. | 257,990 | 7,154 | ||||||
Telefonica S.A. | 467,503 | 12,623 | ||||||
Total Spain | 59,177 | |||||||
SWEDEN — 1.81% | ||||||||
COMMON STOCKS — 1.81% (Cost $18,375) | ||||||||
Atlas Copco AB, A Shares | 265,000 | 5,538 | ||||||
Skandinaviska Enskilda Banken, A Shares | 890,216 | 6,897 | ||||||
Telefonaktiebolaget LM Ericsson, B Shares | 1,270,230 | 13,958 | ||||||
Total Sweden | 26,393 | |||||||
SWITZERLAND — 7.84% | ||||||||
COMMON STOCKS — 7.84% (Cost $101,484) | ||||||||
Adecco S.A. | 130,550 | 7,297 | ||||||
Compagnie Financiere Richemont S.A. | 92,382 | 4,608 | ||||||
Givaudan S.A. | 7,317 | 7,540 | ||||||
Julius Baer Group Ltd. | 53,000 | 2,237 | ||||||
Nestle S.A. | 162,878 | 8,921 | ||||||
Novartis AG | 421,512 | 24,437 | ||||||
Roche Holding AG | 177,780 | 26,106 | ||||||
Swiss Reinsurance Co. Ltd. | 100,960 | 4,853 | ||||||
UBS AG | 1,263,740 | 21,395 | ||||||
Zurich Financial Services AG | 29,291 | 7,170 | ||||||
Total Switzerland | 114,564 | |||||||
UNITED KINGDOM — 19.53% | ||||||||
RIGHTS — 0.03% (Cost $—) | ||||||||
Standard Chartered plc‡‡ | 44,535 | 375 | ||||||
COMMON STOCKS — 19.50% (Cost $242,837) | ||||||||
Amec plc | 113,560 | 1,976 | ||||||
Anglo American plc | 188,369 | 8,777 | ||||||
Aviva plc | 1,874,344 | 11,957 | ||||||
BAE Systems plc | 1,811,289 | 10,004 | ||||||
Balfour Beatty plc | 261,234 | 1,158 | ||||||
BG Group plc | 137,442 | 2,677 | ||||||
BHP Billiton plc | 180,892 | 6,416 | ||||||
BP plc | 1,558,200 | 10,632 | ||||||
British American Tobacco plc | 280,840 | 10,710 | ||||||
GlaxoSmithKline plc | 1,110,684 | 21,730 | ||||||
Home Retail Group plc | 405,579 | 1,423 | ||||||
HSBC Holdings plc | 1,886,997 | 19,626 | ||||||
Informa plc | 837,593 | 5,852 | ||||||
International Power plc | 597,900 | 3,998 | ||||||
Kingfisher plc | 1,370,800 | 5,223 | ||||||
Lloyds Banking Group plc | 4,600,244 | 5,082 | ||||||
Marks and Spencer Group plc | 646,520 | 4,428 | ||||||
Michael Page International plc | 685,409 | 5,175 | ||||||
Pearson plc | 534,980 | 8,182 | ||||||
Prudential plc | 744,080 | 7,517 | ||||||
Rexam plc | 2,133,889 | 10,863 | ||||||
Rio Tinto plc | 130,610 | 8,447 | ||||||
Rolls-Royce Group plc | 106,179,190 | 17,116 | ||||||
Royal Dutch Shell plc, A Shares | 579,105 | 18,791 | ||||||
Royal Dutch Shell plc, B Shares | 299,206 | 9,581 | ||||||
Standard Chartered plc | 356,290 | 10,308 |
See accompanying notes
17
American Beacon International Equity FundSM
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Unilever plc | 646,811 | 18,645 | ||||||
Vodafone Group plc | 8,509,021 | 23,158 | ||||||
Wm Morrison Supermarkets plc | 929,100 | 4,374 | ||||||
WPP Group plc | 352,600 | 4,102 | ||||||
Xstrata plc | 370,100 | 7,173 | ||||||
Total Common Stock | 285,101 | |||||||
Total United Kingdom | 285,476 | |||||||
UNITED STATES — 0.62% | ||||||||
COMMON STOCKS — 0.62% (Cost $12,892) | ||||||||
Flextronics International Ltd. | 848,510 | 6,075 | ||||||
Transocean Ltd.* | 46,147 | 2,924 | ||||||
Total United States | 8,999 | |||||||
SHORT-TERM INVESTMENTS — 3.98% (Cost $58,222) | ||||||||
JPMorgan U.S. Government Money Market Fund | 58,221,767 | 58,222 | ||||||
SECURITIES LENDING | ||||||||
COLLATERAL — 0.50% | ||||||||
American Beacon U.S. Government Money Market Select Fund ∆ | 4,369,820 | 4,370 | ||||||
Wells Fargo Advantage Government Money Market Fund | 3,082,260 | 3,082 | ||||||
Total Securities Lending Collateral(Cost $7,452) | 7,452 | |||||||
TOTAL INVESTMENTS — 100.15% (Cost $1,291,058) | 1,464,012 | |||||||
LIABILITIES, NET OF OTHER ASSETS — (0.15%) | (2,179 | ) | ||||||
TOTAL NET ASSETS — 100.00% | $ | 1,461,833 | ||||||
Percentages are stated as a percent of net assets. | ||
† | All or a portion of this security is on loan at October 31, 2010. | |
‡ | ADR — American Depository Receipt | |
§ | Private Placement | |
** | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $3,376 or 0.23% of net assets. The Fund has no right to demand registration of these securities. | |
†† | GDR — Global Depository Receipt | |
‡‡ | Right |
∆ The Fund is affiliated by having the same investment advisor.
See accompanying notes
18
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
France CAC 40 Index | 140 | December, 2010 | $ | 7,421 | $ | 146 | ||||||||||
Germany DAX Index | 26 | December, 2010 | 5,980 | 305 | ||||||||||||
UK FTSE 100 Index | 174 | December, 2010 | 15,748 | 334 | ||||||||||||
Hang Seng Index | 13 | November, 2010 | 1,926 | (54 | ) | |||||||||||
Italy MIB 30 Index | 14 | December, 2010 | 2,080 | 56 | ||||||||||||
Tokyo FE TOPIX Index | 150 | December, 2010 | 15,009 | (290 | ) | |||||||||||
Spain IBEX 35 Index | 19 | November, 2010 | 2,830 | 60 | ||||||||||||
Sweden OMX Index | 137 | November, 2010 | 2,224 | 13 | ||||||||||||
Canada S&PCDA 60 Index | 54 | December, 2010 | 7,714 | 274 | ||||||||||||
Australia SPI Index | 54 | December, 2010 | 6,149 | (24 | ) | |||||||||||
Netherlands 200 AEX Index | 20 | November, 2010 | 1,870 | 22 | ||||||||||||
$ | 68,951 | $ | 841 | |||||||||||||
Forward Foreign Currency Exchange Contracts
(dollars in thousands)
(dollars in thousands)
Settlement | Unrealized Gain/ | ||||||||||||||
Contracts To Deliver | Date | Value | (Loss) | ||||||||||||
2,225 | Australian Dollar | 12/17/2010 | $ | 2,168 | $ | (53 | ) | ||||||||
2,770 | Canadian Dollar | 12/17/2010 | 2,713 | (9 | ) | ||||||||||
4,968 | Euro Currency | 12/17/2010 | 6,911 | (209 | ) | ||||||||||
456,703 | Japanese Yen | 12/17/2010 | 5,678 | (246 | ) | ||||||||||
3,491 | Pound Sterling | 12/17/2010 | 5,591 | (93 | ) | ||||||||||
5,314 | Swedish Krona | 12/17/2010 | 794 | (19 | ) | ||||||||||
2,030 | Swiss Franc | 12/17/2010 | 2,064 | — | |||||||||||
Total contracts to deliver (Receivable amount $25,290) | $ | 25,919 | $ | (629 | ) | ||||||||||
Settlement | Unrealized Gain/ | ||||||||||||||
Contracts To Receive | Date | Value | (Loss) | ||||||||||||
7,738 | Australian Dollar | 12/17/2010 | $ | 7,539 | $ | 311 | |||||||||
9,710 | Canadian Dollar | 12/17/2010 | 9,510 | 57 | |||||||||||
17,100 | Euro Currency | 12/17/2010 | 23,787 | 1,531 | |||||||||||
1,673,631 | Japanese Yen | 12/17/2010 | 20,807 | 643 | |||||||||||
11,660 | Pound Sterling | 12/17/2010 | 18,677 | 542 | |||||||||||
17,854 | Swedish Krona | 12/17/2010 | 2,699 | 142 | |||||||||||
7,484 | Swiss Franc | 12/17/2010 | 7,608 | 73 | |||||||||||
Total contracts to recieve (Payable amount $87,328) | $ | 90,627 | $ | 3,299 | |||||||||||
Net Currency Fluctuation | $ | 2,670 | |||||||||||||
See accompanying notes
19
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2010 (in thousands, except share and per share amounts)
Statements of Assets and Liabilities
October 31, 2010 (in thousands, except share and per share amounts)
Emerging | ||||||||
Markets | International | |||||||
Fund | Equity Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at value A D | $ | 146,723 | $ | 1,459,642 | ||||
Investments in affiliated securities, at value B | — | 4,370 | ||||||
Foreign currency, at value C | 2,156 | 1,079 | ||||||
Deposit with brokers for futures contracts | 1,305 | 4,570 | ||||||
Receivable for investments sold | 637 | 2,478 | ||||||
Dividends and interest receivable | 182 | 3,089 | ||||||
Receivable for fund shares sold | 295 | 976 | ||||||
Receivable for tax reclaims | 5 | 831 | ||||||
Receivable for expense reimbursement (Note 2) | 17 | — | ||||||
Receivable for variation margin on open futures contracts | 30 | — | ||||||
Net unrealized Appreciation on foreign currency contracts | — | 2,670 | ||||||
Prepaid expenses | 56 | 113 | ||||||
Total assets | 151,406 | 1,479,818 | ||||||
Liabilities: | ||||||||
Payable for investments purchased | 608 | 7,606 | ||||||
Payable upon return of securities loaned | — | 7,452 | ||||||
Payable for fund shares redeemed | 8 | 684 | ||||||
Payable for variation margin on open futures contracts | — | 142 | ||||||
Management and investment advisory fees payable (Note 2) | 341 | 1,294 | ||||||
Administrative service and service fees payable (Note 2) | 13 | 416 | ||||||
Professional fees payable | 24 | 32 | ||||||
Trustee fees payable | 1 | 35 | ||||||
Prospectus and shareholder reports | 3 | 175 | ||||||
Other liabilities | 50 | 149 | ||||||
Total liabilities | 1,048 | 17,985 | ||||||
Net Assets | $ | 150,358 | $ | 1,461,833 | ||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | 128,583 | 1,477,569 | ||||||
Undistributed net investment income | 408 | 32,347 | ||||||
Accumulated net realized (loss) | (12,052 | ) | (224,903 | ) | ||||
Unrealized appreciation of investments, futures contracts, and foreign currency | 33,419 | 176,820 | ||||||
Net assets | $ | 150,358 | $ | 1,461,833 | ||||
Shares outstanding (no par value): | ||||||||
Institutional Class | 620,099 | 31,665,422 | ||||||
Y Class | 877 | 14,266 | ||||||
Investor Class | 873,536 | 28,243,793 | ||||||
Advisor Class | N/A | 44,562 | ||||||
Retirement Class | N/A | 85 | ||||||
A Class | 123 | 244 | ||||||
C Class | 78 | 67 | ||||||
AMR Class | 8,814,887 | 27,978,840 | ||||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 14.55 | $ | 16.67 | ||||
Y Class | $ | 14.53 | $ | 17.17 | ||||
Investor Class | $ | 14.29 | $ | 16.42 | ||||
Advisor Class | N/A | $ | 16.74 | |||||
Retirement Class | N/A | $ | 16.71 | |||||
A Class (Net asset value only) | $ | 14.27 | $ | 16.40 | ||||
A Class (Offering and redemption price) | $ | 15.14 | $ | 17.40 | ||||
C Class | $ | 14.26 | $ | 16.39 | ||||
AMR Class | $ | 14.62 | $ | 16.78 | ||||
A Cost of investments in unaffiliated securities | $ | 113,702 | $ | 1,286,688 | ||||
B Cost of investments in affiliated securities | $ | — | $ | 4,370 | ||||
C Cost of foreign currency | $ | 2,154 | $ | 1,070 | ||||
D Market value of securities on loan | $ | — | $ | 7,078 |
See accompanying notes
20
American Beacon FundsSM
Statements of Operations
Year Ended October 31, 2010 (in thousands)
Statements of Operations
Year Ended October 31, 2010 (in thousands)
Emerging | ||||||||
Markets | International | |||||||
Fund | Equity Fund | |||||||
Investment Income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes)A | $ | 2,902 | $ | 38,612 | ||||
Dividend income from affiliated securities | — | 4 | ||||||
Interest income | — | 17 | ||||||
Income derived from securities lending, net | — | 1,371 | ||||||
Total investment income | 2,902 | 40,004 | ||||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 1,047 | 4,278 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 30 | 1,492 | ||||||
Investor Class | 34 | 1,326 | ||||||
Advisor Class | — | 2 | ||||||
AMR Class | 58 | 218 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | — | 35 | ||||||
Investor Class | 3 | 36 | ||||||
AMR Class | 4 | 27 | ||||||
Custody and fund accounting fees | 597 | 559 | ||||||
Professional fees | 35 | 108 | ||||||
Registration fees and expenses | 22 | 80 | ||||||
Service fees (Note 2): | ||||||||
Investor Class | 28 | 1,607 | ||||||
Advisor Class | — | 2 | ||||||
Distribution fees- Advisor Class (Note 2) | — | 2 | ||||||
Prospectus and shareholder reports | 6 | 168 | ||||||
Trustee fees | 9 | 109 | ||||||
Other expenses | 32 | 191 | ||||||
Total expenses | 1,905 | 10,240 | ||||||
Net (fees waived and expenses reimbursed) (Note 2) | (29 | ) | — | |||||
Net expenses | 1,876 | 10,240 | ||||||
Net investment income | 1,026 | 29,764 | ||||||
Realized and unrealized gain (loss) on investments: | ||||||||
Net realized gain (loss) from: | ||||||||
Investments | 17,856 | 32,044 | ||||||
Commission recapture (Note 1) | — | 45 | ||||||
Foreign currency transactions | 952 | 1,199 | ||||||
Futures contracts | 688 | 2,543 | ||||||
Change in net unrealized appreciation or depreciation of: | ||||||||
Investments | 4,259 | 73,250 | ||||||
Foreign currency translations | 3,279 | 5,733 | ||||||
Futures contracts | 511 | 2,073 | ||||||
Net gain on investments | 27,545 | 116,887 | ||||||
Net increase in net assets resulting from operations | $ | 28,571 | $ | 146,651 | ||||
A Foreign taxes | $ | 352 | $ | 3,791 |
See accompanying notes
21
American Beacon FundsSM
Statements of Changes of Net Assets (in thousands)
Statements of Changes of Net Assets (in thousands)
Emerging Markets Fund | International Equity Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 1,026 | $ | 1,224 | $ | 29,764 | $ | 32,804 | ||||||||
Net realized gain (loss) on investments, futures contracts, and foreign currency transactions | 19,496 | (19,055 | ) | 35,831 | (244,402 | ) | ||||||||||
Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations | 8,049 | 67,385 | 81,056 | 498,561 | ||||||||||||
Net increase in net assets resulting from operations | 28,571 | 49,554 | 146,651 | 286,963 | ||||||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (130 | ) | (129 | ) | (15,298 | ) | (22,416 | ) | ||||||||
Investor Class | (131 | ) | (93 | ) | (12,702 | ) | (17,116 | ) | ||||||||
Advisor Class | — | — | — | (61 | ) | |||||||||||
AMR Class | (1,717 | ) | (2,146 | ) | (14,360 | ) | (17,313 | ) | ||||||||
Net realized gain on investments: | ||||||||||||||||
Institutional Class | — | (798 | ) | — | (12,166 | ) | ||||||||||
Investor Class | — | (756 | ) | — | (10,088 | ) | ||||||||||
Advisor Class | — | — | — | (40 | ) | |||||||||||
AMR Class | — | (11,268 | ) | — | (8,489 | ) | ||||||||||
Net distributions to shareholders | (1,978 | ) | (15,190 | ) | (42,360 | ) | (87,689 | ) | ||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 19,983 | 21,046 | 253,975 | 264,266 | ||||||||||||
Reinvestment of dividends and distributions | 1,969 | 15,153 | 39,420 | 81,731 | ||||||||||||
Cost of shares redeemed | (27,910 | ) | (24,071 | ) | (304,686 | ) | (500,348 | ) | ||||||||
Redemption fees | 36 | 18 | 177 | 217 | ||||||||||||
Net increase (decrease) in net assets from capital share transactions | (5,922 | ) | 12,146 | (11,114 | ) | (154,134 | ) | |||||||||
Net increase in net assets | 20,671 | 46,510 | 93,177 | 45,140 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 129,687 | 83,177 | 1,368,656 | 1,323,516 | ||||||||||||
End of Period * | $ | 150,358 | $ | 129,687 | $ | 1,461,833 | $ | 1,368,656 | ||||||||
* Includes undistributed net investment income (loss) of | $ | 408 | $ | 1,183 | $ | 32,347 | $ | 41,027 | ||||||||
See accompanying notes
22
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”) which is comprised of 19 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Emerging Markets and International Equity Funds (the “Funds”), each a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.
Class Disclosure
March 1, 2010 is the inception date of the Y Class of the Emerging Markets Fund. May 17, 2010 and September 1, 2010 are the inception dates of the A and C Classes, respectively.
The Funds have 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: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges | |
C Class | General public and investors investing through an intermediary with applicable sales charges | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.
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. 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 fair value.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the “Board”).
23
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Futures are valued based upon the last sale price at the close of market on the principal exchange on which they are traded.
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 that they will, in the judgment of the pricing committee of the Fund, clearly and materially affect the value of securities, the foreign market 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.
Valuation Inputs
Various inputs may be used to determine the value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. The common stock was fair valued by the Fair Valuation Committee according to procedures established by the Board.
Level 3 – Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.
The Funds’ investments are summarized by level based on the inputs used to determine their values. As of October 31, 2010 the Funds’ investments were classified as follows: (in thousands)
Emerging Markets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Preferred Stocks | $ | 4,061 | $ | — | $ | — | $ | 4,061 | ||||||||
Common Stocks | 137,548 | 243 | — | 137,791 | ||||||||||||
Short Term Investments | 4,871 | — | — | 4,871 | ||||||||||||
Total Investments in Securities | $ | 146,480 | $ | 243 | $ | — | $ | 146,723 | ||||||||
Futures Contracts | 392 | — | — | 392 | ||||||||||||
International Equity | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,397,963 | $ | — | $ | — | $ | 1,397,963 | ||||||||
Rights | 375 | — | — | 375 | ||||||||||||
Securities Lending Collateral | 7,452 | — | — | 7,452 | ||||||||||||
Short Term Investments | 58,222 | — | — | 58,222 | ||||||||||||
Total Investments in Securities | $ | 1,464,012 | $ | — | $ | — | $ | 1,464,012 | ||||||||
Forward Exchange Contracts – Assets | $ | 3,299 | — | — | $ | 3,299 | ||||||||||
Forward Exchange Contracts – Liabilities | (629 | ) | — | — | (629 | ) | ||||||||||
Futures Contracts | 841 | — | — | 841 |
For the Emerging Markets and International Equity Funds for the period October 31, 2009 through October 31, 2010, common stock with a value of $85,841 and $1,161,110, respectively was transferred from Level 2 to Level 1 as of the end of the period in accordance with fair value procedures established by the Board at October 31, 2010.
24
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.
Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Funds securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Funds bear the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Funds also bear the credit risk if the counterparty fails to perform under the contract.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The 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 Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The initial margin amount is reflected as a Deposit with broker for futures contracts on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
Emerging Markets
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
25
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Statement of Assets and Liabilities | Asset Derivatives | Total | ||||
Unrealized appreciation of investments, futures contracts, and foreign currency | Equity Contracts* | $ | 392 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 688 | |||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | 511 |
International Equity
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||||
Foreign Exchange | ||||||
Net unrealized appreciation on foreign currency contracts | Currency Contracts | $ | 3,299 | |||
Unrealized appreciation of investments, futures contracts, and foreign currency | Equity Contracts* | 841 |
Liability | ||||||
Derivatives | ||||||
Foreign Exchange | ||||||
Net unrealized appreciation on foreign currency contracts | Currency Contracts | (629 | ) |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 2,543 | |||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | 2,073 | ||||
Foreign Exchange | ||||||
Net realized gain (loss) from forwards contracts | Currency Contracts | 1,199 | ||||
Foreign Exchange | ||||||
Change in net unrealized appreciation or depreciation of forwards contracts | Currency Contracts | 5,733 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If the Funds’ investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Funds. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Funds. This amount is reported with the net realized gain in the Funds’ Statements of Operations.
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
26
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
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 Funds impose a 2% redemption fee on 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 Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Funds pro-rata based on their respective net assets.
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 investment advisory, fund management, and securities lending services. Investment assets of the Funds are managed by multiple investment advisors that 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 Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Funds. Management fees paid during the year ended October 31, 2010 were as follows (dollars in thousands):
Amounts paid to | Net Amounts | |||||||||||||||
Management | Management | Investment | Retained by | |||||||||||||
Fee Rate | Fee | Advisors | Manager | |||||||||||||
Emerging Markets | 0.60%-0.95 | % | $ | 1,047 | $ | 979 | $ | 68 | ||||||||
International Equity | 0.20%-0.55 | % | $ | 4,278 | $ | 3,590 | $ | 688 |
As compensation for services provided by the Manager in connection with securities lending activities, the lending Funds 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 Statements of Operations. During the year ended October 31, 2010, securities lending fees paid to the Manager on behalf of the International Equity Fund was $179,914.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.40% of the average daily net assets of the A and C Classes, 0.30% of the average daily net assets of the Institutional, Y,
27
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Investor, Advisor and Retirement Classes of the Funds, and 0.05% of the average daily net assets of the AMR Class of the Funds. Administrative Service fees for the Y, Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Distribution Plans
The Funds, except for the Advisor, Retirement, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Funds shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C 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. Distribution fees for the Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds. Service fees for the Y, Retirement, A, and C Classes for the period ended October 31, 2010 were less than $500.
Brokerage Commissions
Affiliated entities of an investment advisor to the Funds received net commissions on purchases and sales of the Funds’ portfolio securities totaling $2,073 and $1,420 for the Emerging Markets and International Equity Funds, respectively for the year ended October 31, 2010.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) or the US Government Money Market Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Funds in connection with securities lending may be invested in the Select Funds. The Funds and the Select Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee equal to 0.09% of its average daily net assets. During the year ended October 31, 2010, fees earned by the Manager from the Select Funds were as follows:
Direct | Securities Lending | |||||||||||
Investments in | Collateral Invested | |||||||||||
Select Funds | in Select Funds | Total | ||||||||||
International Equity | $ | 3,165 | $ | 36,249 | $ | 39,414 |
28
American Beacon FundsSM
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (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 other participating Funds. The Funds did not utilize the credit facility during the year ended October 31, 2010.
Reimbursement of Expenses
The Manager contractually agreed to reimburse the Emerging Markets Fund to the extent that total operating expenses exceeded the Fund’s expense cap. Of these amounts $17,000 was receivable from the Manager at October 31, 2010. For the year ended October 31, 2010, the Manager reimbursed expenses as follows:
Expense Caps | ||||||||||||||||
11/1/09 to | 3/1/10 to | Reimbursed | ||||||||||||||
Fund | Class | 2/28/10 | 2/28/11 | Expenses | ||||||||||||
Emerging Markets | Institutional | — | 1.35 | % | $ | 19,440 | ||||||||||
Emerging Markets | Y | — | 1.45 | % | 18 | |||||||||||
Emerging Markets | Investor | — | 1.79 | % | 9,356 | |||||||||||
Emerging Markets | A | — | 1.79 | % | 3 | |||||||||||
Emerging Markets | C | — | 2.54 | % | 4 |
Expense Reimbursement Plan
The Fund has 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’s 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. For the year ended October 31, 2010, the Emerging Markets Fund has not recorded a liability for potential reimbursements that will be expiring in 2013, due to the current assessment that a reimbursement is unlikely.
3. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company, by complying with all applicable provisions of the Code, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treaded as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2010 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
Dividends are categorized 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 paid during the fiscal years ended October 31, 2010 and October 31, 2009 were as follows (in thousands):
29
American Beacon FundsSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Emerging Markets | International Equity | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 130 | $ | 129 | $ | 15,298 | $ | 22,416 | ||||||||
Investor Class | 131 | 93 | 12,702 | 17,116 | ||||||||||||
Advisor Class | — | — | — | 61 | ||||||||||||
AMR Class | 1,717 | 2,146 | 14,360 | 17,313 | ||||||||||||
Long-term capital gain | ||||||||||||||||
Institutional Class | — | 798 | — | 12,166 | ||||||||||||
Investor Class | — | 756 | — | 10,088 | ||||||||||||
Advisor Class | — | — | — | 40 | ||||||||||||
AMR Class | — | 11,268 | — | 8,489 | ||||||||||||
Total distributions paid | $ | 1,978 | $ | 15,190 | $ | 42,360 | $ | 87,689 | ||||||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2010, the components of distributable earnings (deficit) on a tax basis were as follows (in thousands):
Emerging | International | |||||||
Markets | Equity | |||||||
Cost basis of investments for federal income tax purposes | $ | 122,291 | $ | 1,329,456 | ||||
Unrealized appreciation | 30,441 | 247,667 | ||||||
Unrealized depreciation | (6,009 | ) | (113,111 | ) | ||||
Net unrealized appreciation/(depreciation) | 24,432 | 134,556 | ||||||
Undistributed ordinary income | 946 | 42,380 | ||||||
Accumulated long-term gain/(loss) | (4,000 | ) | (196,918 | ) | ||||
Other temporary differences | 397 | 4,246 | ||||||
Distributable earnings/(deficit) | $ | 21,775 | $ | (15,736 | ) | |||
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 gain/(losses) on certain derivative instruments, the realization for tax purposes of unrealized gain/(losses) on investments in passive foreign investment companies, and Section 732 basis adjustments.
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 regulations, 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 derived from foreign currency, gains/(losses) from sales of investments in passive foreign investment companies and Section 732 basis adjustments that have been reclassified as of October 31, 2010 (in thousands):
Emerging | International | |||||||
Markets | Equity | |||||||
Paid-in-capital | $ | — | $ | 531 | ||||
Undistributed net investment income | 177 | 3,916 | ||||||
Accumulated net realized loss | (177 | ) | (4,447 | ) | ||||
Unrealized depreciation of investments, futures contracts and foreign currency | — | — |
At October 31, 2010 the capital loss carry forward positions for federal income tax purposes were $3,608 for Emerging Markets Fund and $196,077 for International Equity Fund expiring in 2017 (in thousands).
30
American Beacon FundsSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
The Emerging Markets Fund and the International Equity Fund utilized $14,398 and $28,739, respectively, of net capital loss carryovers for the year ended October 31, 2010.
4. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2010 were (in thousands):
Emerging | International | |||||||
Markets | Equity | |||||||
Purchases | $ | 81,791 | $ | 489,710 | ||||
Sales and Maturities | 90,205 | 511,536 |
A summary of the Fund’s direct transactions in the Select Funds for the year ended October 31, 2010 is set forth below (in thousands):
October 31, 2009 | October 31, 2010 | |||||||||||||||||||
Affiliated Fund | Shares/Market Value | Purchases | Sales | Shares/Market Value | ||||||||||||||||
International Equity-Direct | USG Select Fund | $ | 3,956 | $ | 9,044 | $ | 13,000 | $ | — | |||||||||||
International Equity-Security Lending | USG Select Fund | $ | 31,053 | $ | 653,548 | $ | 680,231 | $ | 4,370 |
5. Securities Lending
The International Equity 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 monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statement of Assets and Liabilities as a payable.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retain 75%, 15%, and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive any income associated with that security and any gain or loss in the market price that may occur during the term of the loan.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
31
American Beacon FundsSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
As of October 31, 2010, 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 Posted by Borrower | ||||||
$7,078 | $ | — | $ | 7,452 |
The Fund excludes $654,406 of securities on loan that were sold prior to October 31, 2010.
Cash collateral is listed in the Fund’s Schedule of Investments and is shown on the Statement of Assets and Liabilities. Income earned on these investments is included in Income derived from securities lending in the Statement of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non -cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities.
6. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):
Year ended October 31, 2010
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 76 | $ | 969 | 1 | $ | 11 | 344 | $ | 4,388 | |||||||||||||||
Reinvestment of dividends | 10 | 125 | — | — | 10 | 127 | ||||||||||||||||||
Shares redeemed | (260 | ) | (3,540 | )* | — | — | * | (348 | ) | (4,368 | )* | |||||||||||||
Net increase (decrease) in shares outstanding | (174 | ) | $ | (2,446 | ) | 1 | $ | 11 | 6 | $ | 147 | |||||||||||||
AMR Class | A Class | C Class | ||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1,102 | $ | 14,612 | — | $ | 2 | — | $ | 1 | |||||||||||||||
Reinvestment of dividends | 137 | 1,717 | — | — | — | — | ||||||||||||||||||
Shares redeemed | (1,572 | ) | (19,966 | )* | — | — | * | — | — | * | ||||||||||||||
Net increase (decrease) in shares outstanding | (333 | ) | $ | (3,637 | ) | — | $ | 2 | — | $ | 1 | |||||||||||||
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 5,496 | $ | 83,841 | 15 | $ | 227 | 7,001 | $ | 105,328 | 20 | $ | 300 | ||||||||||||||||||||
Reinvestment of dividends | 802 | 12,580 | — | — | 806 | 12,480 | — | — | ||||||||||||||||||||||||
Shares redeemed | (6,209 | ) | (96,106 | )* | (1 | ) | (9 | )* | (8,688 | ) | (132,955 | )* | (89 | ) | (1,424 | )* | ||||||||||||||||
Net increase (decrease) in shares outstanding | 89 | $ | 315 | 14 | $ | 218 | (881 | ) | $ | (15,147 | ) | (69 | ) | $ | (1,124 | ) | ||||||||||||||||
Retirement Class | AMR Class | A Class | C Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | — | $ | — | 4,214 | $ | 64,274 | — | $ | 4 | — | $ | 1 | ||||||||||||||||||||
Reinvestment of dividends | — | — | 912 | 14,360 | — | — | — | — | ||||||||||||||||||||||||
Shares redeemed | — | — | * | (4,789 | ) | (74,015 | )* | — | — | * | — | — | * | |||||||||||||||||||
Net increase (decrease) in shares outstanding | — | $ | — | 337 | $ | 4,619 | — | $ | 4 | — | $ | 1 | ||||||||||||||||||||
32
American Beacon FundsSM
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Year Ended October 31, 2009
Institutional Class | Investor Class | AMR Class | ||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 119 | $ | 1,207 | 355 | $ | 3,717 | 1,767 | $ | 16,122 | |||||||||||||||
Reinvestment of dividends | 126 | 917 | 114 | 822 | 1,832 | 13,414 | ||||||||||||||||||
Shares redeemed | (59 | ) | (672 | )* | (187 | ) | (1,654 | )* | (2,458 | ) | (21,727 | )* | ||||||||||||
Net increase in shares outstanding | 186 | $ | 1,452 | 282 | $ | 2,885 | 1,141 | $ | 7,809 | |||||||||||||||
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 7,840 | $ | 100,116 | — | $ | 1 | 7,880 | $ | 99,626 | |||||||||||||||
Reinvestment of dividends | 2,451 | 29,191 | — | — | 2,263 | 26,656 | ||||||||||||||||||
Shares redeemed | (21,920 | ) | (270,772 | )* | — | — | * | (13,941 | ) | (175,030 | )* | |||||||||||||
Net increase (decrease) in shares outstanding | (11,629 | ) | $ | (141,465 | ) | — | $ | 1 | (3,798 | ) | $ | (48,748 | ) | |||||||||||
Advisor Class | Retirement Class | AMR Class | ||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 21 | $ | 262 | — | $ | 1 | 4,956 | $ | 64,260 | |||||||||||||||
Reinvestment of dividends | 7 | 82 | — | — | 2,157 | 25,802 | ||||||||||||||||||
Shares redeemed | (35 | ) | (464 | )* | — | — | * | (4,240 | ) | (53,865 | )* | |||||||||||||
Net increase (decrease) in shares outstanding | (7 | ) | $ | (120 | ) | — | $ | 1 | 2,873 | $ | 36,197 | |||||||||||||
* | Net of Redemption Fees |
33
American Beacon Emerging Markets FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||
March | ||||||||||||||||||||||||
Institutional Class | 1 to | |||||||||||||||||||||||
Year Ended October 31, | October | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | |||||||||||||||||||
Net asset value, beginning of period | $ | 11.95 | $ | 9.00 | $ | 24.20 | $ | 17.42 | $ | 15.10 | $ | 12.29 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.05 | 0.23 | 0.26 | 0.11 | 0.04 | ||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 2.63 | 4.42 | (11.78 | ) | 9.11 | 4.63 | 2.20 | |||||||||||||||||
Total income (loss) from investment operations | 2.76 | 4.47 | (11.55 | ) | 9.37 | 4.74 | 2.24 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.16 | ) | (0.21 | ) | (0.10 | ) | (0.10 | ) | (0.21 | ) | — | |||||||||||||
Distributions from net realized gains on securities | — | (1.31 | ) | (3.55 | ) | (2.49 | ) | (2.21 | ) | — | ||||||||||||||
Total distributions | (0.16 | ) | (1.52 | ) | (3.65 | ) | (2.59 | ) | (2.42 | ) | — | |||||||||||||
Redemption fees added to beneficial interestsA | — | — | — | — | — | — | ||||||||||||||||||
Net asset value, end of period | $ | 14.55 | $ | 11.95 | $ | 9.00 | $ | 24.20 | $ | 17.42 | $ | 14.53 | ||||||||||||
Total return B,C | 23.36 | % | 60.56 | % | (55.59 | )% | 60.83 | % | 34.58 | % | 18 .23 | %D | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,023 | $ | 9,494 | $ | 5,478 | $ | 13,773 | $ | 16,552 | $ | 13 | ||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||
Expenses, net of waivers | 1.39 | % | 1.66 | % | 1.38 | % | 1.60 | % | 1.56 | % | 1 .42 | %E | ||||||||||||
Expenses, before waivers | 1.58 | % | 1.66 | % | 1.38 | % | 1.60 | % | 1.56 | % | 1 .82 | %E | ||||||||||||
Net investment income (loss), net of waivers | 0.77 | % | 0.95 | % | 1.35 | % | 0.93 | % | 0.80 | % | 0 .79 | %E | ||||||||||||
Net investment income (loss), before waivers | 0.58 | % | 0.95 | % | 1.35 | % | 0.93 | % | 0.80 | % | 0 .40 | %E | ||||||||||||
Portfolio turnover rate | 64 | % | 70 | % | 82 | % | 81 | % | 67 | % | 64 | % F |
A | Amounts represent less than $0.01 per share. | |
B | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
D | Not annualized. | |
E | Annualized. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
34
C Class | |||||||||||||||||||||||||||||||||||||||||||||||
A Class | September | ||||||||||||||||||||||||||||||||||||||||||||||
Investor Class | AMR Class | May 17 to | 1 to | ||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | October | October | ||||||||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | ||||||||||||||||||||||||||||||||||||
$ | 11.77 | $ | 8.85 | $ | 23.91 | $ | 17.22 | $ | 14.98 | $ | 12.02 | $ | 9.06 | $ | 24.37 | $ | 17.52 | $ | 15.17 | $ | 12.10 | $ | 12.89 | ||||||||||||||||||||||||
0.04 | 0.04 | 0.17 | 0.11 | 0.09 | 0.11 | 0.09 | 0.33 | 0.19 | 0.15 | 0.02 | (0.02 | ) | |||||||||||||||||||||||||||||||||||
2.63 | 4.35 | (11.60 | ) | 9.11 | 4.55 | 2.68 | 4.43 | (11.91 | ) | 9.30 | 4.65 | 2.15 | 1.39 | ||||||||||||||||||||||||||||||||||
2.67 | 4.39 | (11.43 | ) | 9.22 | 4.64 | 2.79 | 4.52 | (11.58 | ) | 9.49 | 4.80 | 2.17 | 1.37 | ||||||||||||||||||||||||||||||||||
(0.15 | ) | (0.16 | ) | (0.08 | ) | (0.04 | ) | (0.19 | ) | (0.19 | ) | (0.25 | ) | (0.18 | ) | (0.15 | ) | (0.24 | ) | — | — | ||||||||||||||||||||||||||
— | (1.31 | ) | (3.55 | ) | (2.49 | ) | (2.21 | ) | — | (1.31 | ) | (3.55 | ) | (2.49 | ) | (2.21 | ) | — | — | ||||||||||||||||||||||||||||
(0.15 | ) | (1.47 | ) | (3.63 | ) | (2.53 | ) | (2.40 | ) | (0.19 | ) | (1.56 | ) | (3.73 | ) | (2.64 | ) | (2.45 | ) | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
$ | 14.29 | $ | 11.77 | $ | 8.85 | $ | 23.91 | $ | 17.22 | $ | 14.62 | $ | 12.02 | $ | 9.06 | $ | 24.37 | $ | 17.52 | $ | 14.27 | $ | 14.26 | ||||||||||||||||||||||||
22.85 | % | 60.24 | % | (55.75 | )% | 60.38 | % | 34.01 | % | 23.47 | % | 61.01 | % | (55.48 | )% | 61.28 | % | 34.88 | % | 17.93 | %D | 10.63 | %D | ||||||||||||||||||||||||
$ | 12,478 | $ | 10,208 | $ | 5,183 | $ | 11,694 | $ | 5,841 | $ | 128,841 | $ | 109,985 | $ | 72,516 | $ | 271,726 | $ | 135,146 | $ | 2 | $ | 1 | ||||||||||||||||||||||||
1.77 | % | 1.96 | % | 1.72 | % | 1.96 | % | 2.04 | % | 1.34 | % | 1.42 | % | 1.17 | % | 1.37 | % | 1.30 | % | 1.78 | %E | 2.54 | %E | ||||||||||||||||||||||||
1.86 | % | 1.96 | % | 1.72 | % | 1.96 | % | 1.91 | % | 1.34 | % | 1.42 | % | 1.17 | % | 1.37 | % | 1.30 | % | 2.26 | %E | 4.49 | %E | ||||||||||||||||||||||||
0.37 | % | 0.65 | % | 1.00 | % | 0.65 | % | 0.49 | % | 0.79 | % | 1.27 | % | 1.46 | % | 1.25 | % | 1.01 | % | 0.39 | %E | (0.96 | )%E | ||||||||||||||||||||||||
0.29 | % | 0.65 | % | 1.00 | % | 0.65 | % | 0.62 | % | 0.79 | % | 1.27 | % | 1.46 | % | 1.25 | % | 1.01 | % | (0.10 | )%E | (2.91 | )%E | ||||||||||||||||||||||||
64 | % | 70 | % | 82 | % | 81 | % | 67 | % | 64 | % | 70 | % | 82 | % | 81 | % | 67 | % | 64 | % F | 64 | % F |
35
American Beacon International Equity FundSM
Financial Highlights
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||||||
August | ||||||||||||||||||||||||||||
Institutional Class | 3 to | |||||||||||||||||||||||||||
Year Ended October 31, | October | |||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2010 | 31, 2009 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 15.51 | $ | 13.13 | $ | 27.32 | $ | 24.68 | $ | 20.98 | $ | 15.52 | $ | 14 .89 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment incomeA | 0.35 | 0.54 | 0.77 | 0.65 | 0.60 | 0.04 | 0.04 | |||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized)A | 1.30 | 2.78 | (11.60 | ) | 4.31 | 4.86 | 1.61 | 0.59 | ||||||||||||||||||||
Total income (loss) from investment operations | 1.65 | 3.32 | (10.83 | ) | 4.96 | 5.46 | 1.65 | 0.63 | ||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.49 | ) | (0.61 | ) | (0.70 | ) | (0.50 | ) | (0.43 | ) | — | — | ||||||||||||||||
Distributions from net realized gains on securities | — | (0.33 | ) | (2.66 | ) | (1.82 | ) | (1.33 | ) | — | — | |||||||||||||||||
Total distributions | (0.49 | ) | (0.94 | ) | (3.36 | ) | (2.32 | ) | (1.76 | ) | — | — | ||||||||||||||||
Redemption fees added to beneficial interestC | — | 0.00 | 0.00 | 0.00 | 0.00 | — | 0.00 | |||||||||||||||||||||
Net asset value, end of period | $ | 16.67 | $ | 15.51 | $ | 13.13 | $ | 27.32 | $ | 24.68 | $ | 17.17 | $ | 15 .52 | ||||||||||||||
Total return D,E | 10.81 | % | 27.44 | % | (44.81 | )% | 21.54 | % | 27.55 | % | 10.63 | % | 4 .23 | %H | ||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 527,718 | $ | 489,837 | $ | 567,414 | $ | 1,686,668 | $ | 1,549,521 | $ | 245 | $ | 1 | ||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||
Expenses, net of waiversA | 0.71 | % | 0.73 | % | 0.66 | % | 0.67 | % | 0.71 | % | 0.81 | % | 0 .69 | %B | ||||||||||||||
Expenses, before waiversA | 0.71 | % | 0.73 | % | 0.66 | % | 0.67 | % | 0.71 | % | 0.81 | % | 0 .69 | %B | ||||||||||||||
Net investment income, net of waiversA | 2.21 | % | 2.76 | % | 2.91 | % | 2.46 | % | 2.52 | % | 1.44 | % | 1 .00 | %B | ||||||||||||||
Net investment income (loss), before waiversA | 2.21 | % | 2.76 | % | 2.91 | % | 2.46 | % | 2.52 | % | 1.44 | % | 1 .00 | %B | ||||||||||||||
Portfolio turnover rateF | 38 | % | 41 | % | 31 | % | 38 | % | 40 | % | 38 | % | 41 | %G |
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 American Beacon International Equity Portfolio through February 28, 2006. | |
B | Annualized. | |
C | Amounts represent less than $0.01 per share. | |
D | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
E | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
F | The International Equity Fund invested all of its investable assets in the American Beacon International Equity Portfolio through February 28, 2006. Portfolio turnover rate through February 28, 2006 is that of the American Beacon International Equity Portfolio. | |
G | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. | |
H | Not annualized. |
36
American Beacon International Equity FundSM
Financial Highlights
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net asset value, beginning of period | $ | 15.30 | $ | 12.95 | $ | 26.99 | $ | 24.42 | $ | 20.79 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment incomeA | 0.29 | 0.37 | 0.66 | 0.58 | 0.50 | |||||||||||||||
Net gains (losses) on securities (both realized and unrealized)A | 1.27 | 2.87 | (11.41 | ) | 4.26 | 4.84 | ||||||||||||||
Total income (loss) from investment operations | 1.56 | 3.24 | (10.75 | ) | 4.84 | 5.34 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.44 | ) | (0.56 | ) | (0.63 | ) | (0.45 | ) | (0.38 | ) | ||||||||||
Distributions from net realized gains on securities | — | (0.33 | ) | (2.66 | ) | (1.82 | ) | (1.33 | ) | |||||||||||
Total distributions | (0.44 | ) | (0.89 | ) | (3.29 | ) | (2.27 | ) | (1.71 | ) | ||||||||||
Redemption fees added to beneficial interestC | — | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
Net asset value, end of period | $ | 16.42 | $ | 15.30 | $ | 12.95 | $ | 26.99 | $ | 24.42 | ||||||||||
Total return D,E | 10.36 | % | 27.08 | % | (44.96 | )% | 21.22 | % | 27.20 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 463,704 | $ | 445,596 | $ | 426,473 | $ | 909,385 | $ | 771,298 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, net of waiversA | 1.07 | % | 1.05 | % | 0.92 | % | 0.93 | % | 0.96 | % | ||||||||||
Expenses, before waiversA | 1.07 | % | 1.05 | % | 0.92 | % | 0.93 | % | 0.96 | % | ||||||||||
Net investment income, net of waiversA | 1.83 | % | 2.45 | % | 2.82 | % | 2.26 | % | 2.25 | % | ||||||||||
Net investment income (loss), before waiversA | 1.83 | % | 2.45 | % | 2.82 | % | 2.26 | % | 2.25 | % | ||||||||||
Portfolio turnover rateB | 38 | % | 41 | % | 31 | % | 38 | % | 40 | % |
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 American Beacon International Equity Portfolio through February 28, 2006. | |
B | The International Equity Fund invested all of its investable assets in the American Beacon International Equity Portfolio through February 28, 2006. Portfolio turnover rate through February 28, 2006 is that of the American Beacon International Equity Portfolio. | |
C | Amounts represent less than $0.01 per share. | |
D | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
E | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. |
37
American Beacon International Equity FundSM
Financial Highlights
Financial Highlights
(For a share outstanding throughout the period)
Retirement Class | ||||||||||||||||||||||||
Advisor Class | Year Ended | |||||||||||||||||||||||
Year Ended October 31, | October 31, | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2010 | |||||||||||||||||||
Net asset value, beginning of period | $ | 15.20 | $ | 12.86 | $ | 26.83 | $ | 24.24 | $ | 20.61 | $ | 15.20 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss)A | 0.89 | 0.31 | 0.62 | 0.56 | 0.46 | 0.22 | ||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized)A | 0.65 | 2.86 | (11.35 | ) | 4.20 | 4.76 | 1.29 | |||||||||||||||||
Total income (loss) from investment operations | 1.54 | 3.17 | (10.73 | ) | 4.76 | 5.22 | 1.51 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | — | (0.50 | ) | (0.58 | ) | (0.35 | ) | (0.26 | ) | — | ||||||||||||||
Distributions from net realized gains on securities | — | (0.33 | ) | (2.66 | ) | (1.82 | ) | (1.33 | ) | — | ||||||||||||||
Total distributions | — | (0.83 | ) | (3.24 | ) | (2.17 | ) | (1.59 | ) | — | ||||||||||||||
Redemption fees added to beneficial interestC | — | 0.00 | 0.00 | 0.00 | 0.00 | — | ||||||||||||||||||
Net asset value, end of period | $ | 16.74 | $ | 15.20 | $ | 12.86 | $ | 26.83 | $ | 24.24 | $ | 16.71 | ||||||||||||
Total return D,E | 10.13 | % | 26.58 | % | (45.10 | )% | 21.00 | % | 26.73 | % | 9.93 | % | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 746 | $ | 1,722 | $ | 1,546 | $ | 4,932 | $ | 4,740 | $ | 1 | ||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||
Expenses, net of waiversA | 1.26 | % | 1.44 | % | 1.19 | % | 1.12 | % | 1.16 | % | 1.47 | % | ||||||||||||
Expenses, before waiversA | 1.26 | % | 1.45 | % | 1.19 | % | 1.15 | % | 1.19 | % | 1.66 | % | ||||||||||||
Net investment income, net of waiversA | 1.64 | % | 2.26 | % | 2.36 | % | 2.04 | % | 2.09 | % | 1.44 | % | ||||||||||||
Net investment income (loss), before waiversA | 1.64 | % | 2.25 | % | 2.36 | % | 2.01 | % | 2.05 | % | 1.25 | % | ||||||||||||
Portfolio turnover rateH | 38 | % | 41 | % | 31 | % | 38 | % | 40 | % | 38 | % |
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 American Beacon International Equity Portfolio through February 28, 2006. | |
B | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. | |
C | Amounts represent less than $0.01 per share. | |
D | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
E | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
F | Not annualized. | |
G | Annualized. | |
H | The International Equity Fund invested all of its investable assets in the American Beacon International Equity Portfolio through February 28, 2006. Portfolio turnover rate through February 28, 2006 is that of the American Beacon International Equity Portfolio. | |
I | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
38
A Class | C Class | |||||||||||||||||||||||||||||
May | September | |||||||||||||||||||||||||||||
May 1 to | AMR Class | 17 to | 1 to | |||||||||||||||||||||||||||
October | Year Ended October 31, | October | October | |||||||||||||||||||||||||||
31, 2009 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | |||||||||||||||||||||||
$ | 11.78 | $ | 15.61 | $ | 13.25 | $ | 27.54 | $ | 24.86 | $ | 21.12 | $ | 14.14 | $ | 14.82 | |||||||||||||||
0.12 | 0.39 | 0.37 | 0.72 | 0.73 | 0.63 | 0.03 | (0.01 | ) | ||||||||||||||||||||||
3.30 | 1.30 | 2.99 | (11.58 | ) | 4.33 | 4.92 | 2.23 | 1.58 | ||||||||||||||||||||||
3.42 | 1.69 | 3.36 | (10.86 | ) | 5.06 | 5.55 | 2.26 | 1.57 | ||||||||||||||||||||||
— | (0.52 | ) | (0.67 | ) | (0.77 | ) | (0.56 | ) | (0.48 | ) | — | — | ||||||||||||||||||
— | — | (0.33 | ) | (2.66 | ) | (1.82 | ) | (1.33 | ) | — | — | |||||||||||||||||||
— | (0.52 | ) | (1.00 | ) | (3.43 | ) | (2.38 | ) | (1.81 | ) | — | — | ||||||||||||||||||
0.00 | — | 0.00 | 0.00 | 0.00 | 0.00 | — | — | |||||||||||||||||||||||
$ | 15.20 | $ | 16.78 | $ | 15.61 | $ | 13.25 | $ | 27.54 | $ | 24.86 | $ | 16.40 | $ | 16.39 | |||||||||||||||
29.03 | %F | 11.05 | % | 27.70 | % | (44.65 | )% | 21.86 | % | 27.88 | % | 15 .98 | %F | 10 .59 | %F | |||||||||||||||
$ | 1 | $ | 469,414 | $ | 431,499 | $ | 328,083 | $ | 672,680 | $ | 563,231 | $ | 4 | $ | 1 | |||||||||||||||
1.48 | %G | 0.46 | % | 0.48 | % | 0.41 | % | 0.42 | % | 0.45 | % | 1.25 | %G | 1.99 | %G | |||||||||||||||
1.48 | %G | 0.46 | % | 0.48 | % | 0.41 | % | 0.42 | % | 0.45 | % | 1.26 | %G | 2 .60 | %G | |||||||||||||||
1.72 | %G | 2.45 | % | 3.00 | % | 3.24 | % | 2.77 | % | 2.76 | % | 0 .98 | %G | (0 .20 | )%G | |||||||||||||||
1.72 | %G | 2.45 | % | 3.00 | % | 3.24 | % | 2.77 | % | 2.76 | % | 0 .96 | %G | (0 .81 | )%G | |||||||||||||||
41 | %I | 38 | % | 41 | % | 31 | % | 38 | % | 40 | % | 38 | %B | 38 | %B |
39
American Beacon Funds
Privacy Policy & Federal Tax Information
Privacy Policy & Federal Tax Information
October 31, 2010 (Unaudited)
Privacy Policy
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; | ||
• | information about your transactions with us or our service providers; and | ||
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
For shareholders in the Fund, the percentage of dividend income distributed for the year ended October 31, 2010, which is designated as qualified dividend income under the Jobs Growth Tax Relief Act of 2003, was 96.75% for Emerging Markets Fund and 60.58% for International Equity Fund. Shareholders will receive notification in January 2011 of the percentage applicable to the preparation of their 2010 income tax returns.
The International Equity Fund designated a foreign tax credit of $3,776,580 and recognized foreign source income of $41,985,136.
40
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisor Agreement (Unaudited)
At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements” and collectively with the Management Agreement, the “Agreements”). 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 a separate meeting on May 10, 2010 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.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, 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 1 and II of its Form ADV registration statement with the SEC; | ||
• | a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; | ||
• | 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; | ||
• | a description of any payments by the subadvisors to the manager to support the Funds’ marketing efforts; | ||
• | 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 would not impair its ability to provide high-quality advisory services to the Funds; | ||
• | a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for 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, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; | ||
• | a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; | ||
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; | ||
• | 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 best 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 discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; | ||
• | a description of trade allocation procedures among accounts managed by the firm; | ||
• | a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates | ||
• | a certification by the firm regarding the reasonable design of its compliance program; | ||
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; | ||
• | 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:
41
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisor Agreement (Unaudited)
• | a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; | ||
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; | ||
• | a comparison of advisory fees and expense ratios for comparable mutual funds; | ||
• | an analysis of any material complaints received from Fund shareholders; | ||
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; | ||
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; | ||
• | a description of the Manager’s securities lending practices and the fees received from such practices; | ||
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; | ||
• | a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and | ||
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated. |
In connection with the Management Agreement and each Investment Advisory Agreement, 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 with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was 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.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 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 a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing 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, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
42
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisor Agreement (Unaudited)
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 considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Funds. The Board further considered that each subadvised 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 program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the 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 arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is 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 considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.
In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits 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 also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.
In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to each Trust at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal years ended October 31, and December 31, 2009.
Based on the foregoing 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
43
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisor Agreement (Unaudited)
The performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.
Additional Considerations and Conclusions with Respect to the Emerging Markets Fund
In considering the renewal of the Management Agreement for the Emerging Markets Fund, the Trustees considered the following additional factors: (1) the Emerging Markets Fund outperformed the peer universe median for the one-, three-, and five-year periods ended March 31, 2010; and (2) the expense ratio of the Institutional Class of the Fund ranked worse than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with The Boston Company Asset Management, LLC (“TBC”) and Morgan Stanley Investment Management Inc. (“MSIM”), the Trustees considered the following additional factors: (1) MSIM outperformed the peer universe median for the five-year period ended March 31, 2010, but underperformed for the one- and three-year periods; (2) TBC outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (4) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (5) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Emerging Markets Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund, and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Emerging Markets Fund.
Additional Considerations and Conclusions with Respect to the International Equity Fund
In considering the renewal of the Management Agreement for the International Equity Fund, the Trustees considered the following additional factors: (1) the Fund outperformed the peer universe median for the one-, three- and ten-year periods ended March 31, 2010, but underperformed for the five-year period; and (2) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Causeway Capital Management LLC (“Causeway”), Lazard Asset Management LLC (“Lazard”), Templeton Investment Counsel, LLC (“Templeton”), and TBC, the Trustees considered the following additional factors: (1) Templeton outperformed the peer universe median for the one-, three-, five- and ten-year periods ended March 31, 2010; (2) Causeway outperformed the peer universe median for the one-, three-, five- and ten-year periods ended March 31, 2010; (3) Lazard outperformed the peer universe median for the three- and ten-year periods ended March 31, 2010, but underperformed for the one- and five-year periods; (4) TBC underperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (5) management’s explanation that TBC’s underperformance was due, in part, to poor stock selection in the financial and materials sectors; (6) TBC significantly outperformed its Lipper peer group for the twelve months ended March 31, 2010; (7) management’s explanation that Lazard’s underperformance was due, in part, to poor stock selection in the financial and industrial sectors; (8) Lazard significantly outperformed its Lipper peer group for the twelve months ended March 31, 2010; (9) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (10) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (11) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the International Equity Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the International Equity Fund.
44
Trustees and Officers of the American Beacon Funds
(Unaudited)
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees 23 funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (73) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994-2006); Member, Board of Trustees, Southern Methodist University ; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-present); Trustee, American Beacon Select Funds (1999-present); Trustee, American Beacon Master Trust (1996-present). | ||
NON-INTERESTED TRUSTEES | Term Lifetime of Trust until removal, resignation or retirement* | |||
W. Humphrey Bogart (66) | Trustee since 2004 | Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
Brenda A. Cline (49) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children’s Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
Eugene J. Duffy (56) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994- Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001-Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). |
45
Trustees and Officers of the American Beacon Funds
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Thomas M. Dunning (68) | Trustee since 2008 | Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-present); Director, Baylor Health Care System Foundation (2007-present); State Vice Chair, State Fair of Texas (1987-present); Board Member, Southwestern Medical Foundation (1994-present); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
Richard A. Massman (67) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present), Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities). Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Hospital Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
R. Gerald Turner (64) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-present); Trustee, American Beacon Select Funds (2001-present); Trustee, American Beacon Master Trust (2001-present). | ||
Paul J. Zucconi, CPA (70) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- present); Director, Torchmark Corporation (life and health insurance products) (2002-present); Director, National Kidney Foundation of North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004-Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
OFFICERS | ||||
William F. Quinn** (62) | Term One Year Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009) and CEO (2006- 2007), President (1986-2006) and Director (2003-Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-2008); Trustee, American Beacon Select Funds (1999-2008); Trustee, American Beacon Master Trust (1995-2008); Director, American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). |
46
Trustees and Officers of the American Beacon Funds
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Gene L. Needles, Jr. (55) | President 2009 to Present | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors. | ||
Rosemary K. Behan (51) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and Exchange Commission. | ||
Brian E. Brett (50) | VP since 2004 | Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). | ||
Wyatt Crumpler (44) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. | ||
Michael W. Fields (56) | VP since 1989 | Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (49) | Treasurer since 2010 | Vice President, Finance and Accounting (2010-Present), Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. | ||
Terri L. McKinney (47) | VP since 2009 | Vice-President, Enterprise Services (2009-Present), Managing Director (2003-2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice-President, Board of Trustees (2008-Present), Trustee (2006-2008) Down Syndrome Guild of Dallas. | ||
Jeffrey K. Ringdahl (35) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice-President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Christina E. Sears (39) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. | |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust’s and Master Trust’s sub-advisors. |
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Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
Custodian | Transfer Agent | Independent Registered | Distributor | |||
State Street Bank and | Boston Financial Data | Public Accounting | Foreside Fund Services, | |||
Trust | Services | Firm | LLC | |||
Boston, Massachusetts | Kansas City, Missouri | Ernst & Young LLP | Portland, Maine | |||
Dallas, Texas |
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 or summary prospectus.
American Beacon Funds, American Beacon Emerging Markets Fund, and American Beacon International Equity Fund are service marks of American Beacon Advisors, Inc.
AR 10//10
IN1010
IN1010
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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 Overviews | 2-12 | |||
American Beacon Schedules of Investments | ||||
Balanced Fund | 14 | |||
Large Cap Growth Fund | 22 | |||
Mid-Cap Value Fund | 25 | |||
Additional Information | Back Cover |
Any opinions herein, including forecasts, reflect our judgment 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 debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in the securities of mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies.
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Fellow Shareholders,
Throughout the past 12 months, one theme prevailed: investments placed with experienced, forward-thinking managers can still benefit. Opportunity abounds for those with the foresight to know how to capitalize on changing market conditions. It’s no coincidence that this theme also goes to the heart of the American Beacon Funds investment philosophy.
It’s a philosophy that continued serving our domestic equity investors well. For the 12-month period ended October 31, 2010 the American Beacon Balanced Fund (Institutional Class) returned 12.47%. The American Beacon Large Cap Growth Fund (Institutional Class) similarly generated 17.70% and the American Beacon Mid-Cap Value Fund (Institutional Class) rose 23.19% over the same period. Please note that the recent growth rate in the stock market has helped to produce short-term increases that are not typical and may not continue in the future.
While we keep a watchful eye on your investment in our funds, we also remain focused on seeking out new opportunities to help keep your financial goals on course. This is what guides the composition of American Beacon Funds’ product line-up. It is also what led to the addition of several new funds this past year: the American Beacon Zebra Large Cap and the Zebra Small Cap Equity Funds, which use a proprietary strategy to attempt to capture a unique source of equity return—the liquidity premium. We also recently added the American Beacon Evercore Small Cap Equity Fund, which relies on a fundamental bottom-up investment approach and is managed by the well-regarded Evercore Asset Management, LLC.
Continuously searching for new ways to serve our fellow shareholders’ needs is our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a thoughtful and analytical eye over all the factors that influence our investments.
We want to thank you for your continued investment in the American Beacon Funds. As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we remain dedicated to offering you both the level of superior service and knowledgeable investment management you’ve come to expect from us.
To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
![]() | ||||
Gene L. Needles, Jr. | ||||
President American Beacon Funds | ||||
Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing. Distributed by Foreside Fund Services, LLC.
There is no guarantee that the Funds’ investment objective will be met. At times, certain securities held by the American Beacon Zebra Large Cap Equity and Small Cap Equity Funds may have limited marketability and may be difficult to sell. Investing in the securities of small and mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Because the American Beacon Evercore Small Cap Equity Fund is a focused portfolio of fewer companies, the increase or decrease of the value of a single stock may have a greater impact on the Fund’s NAV and total return when compared to other diversified funds.
1
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
Extreme swings in investor sentiment and significant volatility in equity returns characterized the U.S. stock market’s performance during the past 12 months. Market returns were robust for the first several months of the year, only to be followed by a significant correction through the spring and summer months that was triggered by fears of a double-dip recession and concerns over the sovereign debt crisis in Europe. By August, many investors had seemingly grown despondent and sentiment towards equities reached extreme lows as the perceived safety of bonds drew increasing commitment.
September’s history as the cruelest month combined with recession fears made equities look like dead money. A surprising thing happened on the way to the funeral, however, as equity markets rallied sharply for the month. They posted the best September return in 71 years and the third best return of any month over the past 10 years. An interesting aspect of the rally was the absence of any real catalyst.
In the end, the S&P 500 returned 16.52% for 12 months ended October 31, 2010. Contributions to this performance were widespread, with most sectors finishing up in double digits.
Sector Results
Consumer Discretionary, Industrials, Telecommunications and Materials stocks were among the strongest performers, while financials and energy were significant laggards. Continuing sluggishness in loan demand, a persistent stream of negative regulatory pronouncements out of Washington and the seemingly endless flow of mortgage problems tempered enthusiasm for the banking industry. Insurers were pressured by weak fixed income returns given the near zero interest rate environment, volatile returns in the equity market, and the specter of further delays in the recovery in real estate markets.
The trend of Gross Domestic Product (“GDP”) growth slowed significantly throughout the year—from 5.0% in the fourth quarter of 2009 to 1.7% in the second quarter of 2010. Subpar growth persisted into the third quarter of 2010 as well.
Consumer Spending
With growth at such a sluggish pace, consumer spending remained weak especially in light of deferred hiring by employers. Given these conditions, there is little reason to expect a resumption of normal economic growth until employment can show meaningful improvement. More and more, the strong GDP growth in the fourth quarter of 2009 and the first quarter of 2010 is looking like an inventory driven anomaly.
Absent the change in inventories, real final sales grew at less than 1.5% over the past four quarters. This was extraordinarily weak for the first 12 months out of a severe recession. However, profit growth has been exceptional as businesses restrained their spending. Margins at many companies were at or above prior peaks. Corporate balance sheets were also very strong, as cash balances grew due to the reluctance to make large capital expenditures.
Yet, jobs still hold the key to recovery. Job statistics have not been encouraging. Without significant growth in employment, consumer and business spending is likely to remain sluggish and the recovery in housing will be pushed farther into the future.
Limited Economic Stimulus
Policymakers in Washington have made a concerted effort to jumpstart the economy, but the results have been limited at best. Now, the government is running out of ammunition as more than two-thirds of the fiscal stimulus budget has been spent and the Federal Reserve has already slashed interest rates to the bone. At the state and local government level, employment was maintained with Federal stimulus money in 2010, but the projected new political mix in Congress next year is not expected to continue that support. Our sub-advisors anticipate retrenchment in state and municipal employment and spending to be a headwind for the economy in the coming year.
As for the overall market, it is inexpensive but it remains subject to economic uncertainty. The unemployment/underemployment figures are the highest since the 1930’s and the Federal Reserve has pushed short-term rates to zero
2
Domestic Equity Market Overview
October 31, 2010 (Unaudited)
without much to show for it. This implies a very fragile economic environment with a minimal cushion.
Meanwhile, bonds seem to be making a case for stocks. The monetary policies of the Federal Reserve appear to be designed to move investors into riskier alternatives, such as equities, by keeping bond interest rates at record lows. As investor interest returns to domestic stocks, our managers see a number of positives. As mentioned earlier, corporate balance sheets are quite strong and many companies are positioned to return significant amounts of cash to shareholders, both in the form of share repurchases and (most importantly) increased dividends. Many stocks have a dividend yield which exceeds the interest rate of 10-year Treasury bonds and yet still have the potential to grow returns further through both earnings and dividend growth. Also, most financial stocks are not currently paying any dividends. As we mentioned earlier, many of these financial companies are building significant amounts of excess capital which is likely to be used to restore dividend yields.
Also encouraging is that aggressive cost-cutting during the recession formed lean businesses with tremendous operating leverage. As revenue growth has resurfaced—in fact, some 90% of companies saw revenue gains in the third quarter of 2010—it has created an earnings tailwind. Profit margins on incremental revenue have been more than three times profit margins on base revenue. This is providing the overall market with remarkable operating leverage.
Our managers continue to find compelling valuation opportunities given that the market remains nearly 20% below its 2007 peak. Though less extraordinary than they were in early 2009, these valuation opportunities remain attractive, particularly relative to fixed income alternatives. There appear to be fewer valuation spreads at the sector level, but many at the stock level, making it more of a stock-picker’s market than a cyclical one. This is a prime environment for active equity managers in search of bottom-up valuation opportunities.
3
Performance Overview
American Beacon Balanced FundSM
American Beacon Balanced FundSM
October 31, 2010 (Unaudited)
The Balanced Fund’s Institutional Class returned 12.47% for the twelve months ended October 31, 2010. The Fund underperformed the 60% Russell 1000® Value/40% Barclays Capital Aggregate Index benchmark return of 13.06% and the Lipper Mixed-Asset Target Allocation Growth Funds Index return of 14.21%.
Comparison of Change in Value of a $10,000 Investment
For The Period from 10/31/00 through 10/31/10
For The Period from 10/31/00 through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858619.gif)
Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,8) | 12.47 | % | 3.18 | % | 5.60 | % | $ | 17,246 | ||||||||
Y Class(1,3,8) | 12.40 | % | 3.16 | % | 5.60 | % | $ | 17,237 | ||||||||
Investor Class(1,8) | 12.06 | % | 2.89 | % | 5.31 | % | $ | 16,781 | ||||||||
Advisor Class(1,2,8) | 11.96 | % | 2.67 | % | 5.17 | % | $ | 16,550 | ||||||||
A Class with sales charge(1,4,8) | 5.64 | % | 1.68 | % | 4.69 | % | $ | 15,818 | ||||||||
A Class without sales charge(1,4,8) | 12.10 | % | 2.90 | % | 5.32 | % | $ | 16,787 | ||||||||
C Class with sales charge(1,5,8) | 10.77 | % | 2.84 | % | 5.29 | % | $ | 16,738 | ||||||||
C Class without sales charge(1,5,8) | 11.77 | % | 2.84 | % | 5.29 | % | $ | 16,738 | ||||||||
AMR Class(1,8) | 12.84 | % | 3.46 | % | 5.89 | % | $ | 17,718 | ||||||||
Balanced Composite Index(6) | 13.06 | % | 3.34 | % | 4.49 | % | $ | 15,510 | ||||||||
Russell 1000 Value Index(7) | 15.71 | % | 0.62 | % | 2.64 | % | $ | 12,982 | ||||||||
Barclays Capital Aggregate Index(7) | 8.01 | % | 6.45 | % | 6.38 | % | $ | 18,561 | ||||||||
Lipper Mixed-Asset Target Allocation Growth Funds Index(7) | 14.21 | % | 3.84 | % | 4.03 | % | $ | 14,850 |
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 our website at 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 ten-year period represents the total returns achieved by the Investor Class from 10/31/00 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/00. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than actual returns shown for 2005. | |
3. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Institutional Class from 10/31/00 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/00. | |
4. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. A Class has a maximum sales charge of 5.75%. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Investor Class from 10/31/00 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge for C Class is 1% for shares redeemed within one year of the date of purchase. | |
6. | To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and equity securities, the returns of the Russell 1000 Value Index and the Barclays Capital Aggregate Index have been combined in a 60%/40% proportion. | |
7. | The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value Index is a registered trade mark of Frank Russell Company. The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Mixed-Asset Target Allocation Growth Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mixed-Asset Target Allocation Growth Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 0.61%, 0.71%, 0.90%, 1.10%, 1.11%, 1.86%, and 0.36%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
During the twelve-month period, the Fund’s assets on average were invested 63% in equities (including equitized cash) and 37% in fixed-income securities, ending the period with 64% in
4
Performance Overview
American Beacon Balanced FundSM
American Beacon Balanced FundSM
October 31, 2010 (Unaudited)
equities/equitized cash and 36% in fixed-income securities.
The equity portion of the Fund (excluding equitized cash) returned 15.0%, underperforming the Russell 1000® Value Index (the “Index”) return of 15.7%. The Fund’s equities underperformed the Index entirely due to security selection as sector allocation added to relative returns. The Fund’s holdings in the Information Technology, Financials, and Energy sectors detracted the most value relative to the Index. Microsoft (down 2.4%) and Dell (down 13.3% for the period the Fund owned the security) had the largest negative impact on performance in the Information Technology sector. In the Financials sector, XL Capital (down 0.9%), ACE (up 19.0%), and JPMorgan Chase (down 10.0%) were the largest detractors. BP (down 33.6%) and Transocean (down 17.8% for the period the Fund owned the security) hurt performance most in the Energy sector. The aforementioned returns were slightly offset by good security selection in the Consumer Staples and Health Care sectors. In the Consumer Staples sector, Imperial Tobacco Group (up 15.3%) and Diageo (up 17.6%) added the most value to relative returns. For the period the Fund owned the securities, Astrazeneca (up 21.5%), Merck (up 17.6%) and Bristol Myers Squibb (up 30.9%) were the largest contributors in the Health Care sector.
Underweight positions in Energy and Financials, the two worst performing sectors in the Index, added value to the Fund’s relative returns through sector allocation. An underweight in the Utilities sector detracted from performance.
The fixed-income portion of the Fund returned 9.8% for the period, outperforming the Barclays Capital Aggregate Index (the “Barclays Index”) return of 8.0%. A significant overweight in Corporates, the second best performing sector in the Barclays Index, and an underweight position in Mortgage Pass-Throughs contributed most to the Fund’s performance through sector allocation. The Fund’s holdings in Agency securities also added value.
The sub-advisors continue to focus on the disciplined selection of attractive securities that should allow the Fund to benefit long term.
Top Ten Holdings
% of | ||||
Net Assets | ||||
ConocoPhillips | 2.3 | % | ||
JPMorgan Chase & Co. | 2.0 | % | ||
Bank of America Corp. | 1.4 | % | ||
International Business Machines Corp. | 1.8 | % | ||
Wells Fargo & Co. | 1.6 | % | ||
Hewlett-Packard Co. | 1.4 | % | ||
Vodafone Group plc | 1.5 | % | ||
Pfizer, Inc. | 1.5 | % | ||
Microsoft Corp. | 1.4 | % | ||
PNC Financial Services Group, Inc. | 1.2 | % |
Sector Allocation
% of Equities | ||||
Financials | 23.0 | % | ||
Information Technology | 13.7 | % | ||
Industrials | 11.7 | % | ||
Energy | 11.4 | % | ||
Health Care | 11.1 | % | ||
Consumer Discretionary | 9.3 | % | ||
Consumer Staples | 7.0 | % | ||
Telecommunication Services | 4.8 | % | ||
Utilities | 4.1 | % | ||
Materials | 3.9 | % |
Sector Allocation
% of Fixed | ||||
Income | ||||
Corporate | 46.9 | % | ||
U.S. Agency Mortgage Backed Obligations | 16.3 | % | ||
Agency | 14.3 | % | ||
U.S. TIPS | 13.9 | % | ||
Commercial Mortgage Backed Securities | 3.1 | % | ||
Asset-Backed | 2.9 | % | ||
Mortgage-Backed | 1.6 | % | ||
Municipal Obligations | 0.9 | % | ||
Other Government | 0.1 | % |
5
Performance Overview
American Beacon Large Cap Growth FundSM
American Beacon Large Cap Growth FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Large Cap Growth Fund returned 17.70% for the twelve months ended October 31, 2010, trailing both the Russell 1000® Growth Index (the “Index”) return of 19.65% and the Lipper Large-Cap Growth Funds Index return of 18.26%.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/00 through 10/31/10
For the Period from 10/31/00 through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858620.gif)
Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,6) | 17.70 | % | 0.05 | % | -4.08 | % | $ | 6,596 | ||||||||
Y Class(1,2,6) | 17.50 | % | 0.02 | % | -4.09 | % | 6,280 | |||||||||
A Class with sales Charge(1,3,6) | 10.81 | % | -1.17 | % | -4.66 | % | 5,919 | |||||||||
A Class without sales charge (1,3,6) | 17.50 | % | 0.02 | % | -4.09 | % | 6,280 | |||||||||
C Class with sales Charge(1,4,6) | 16.30 | % | -0.02 | % | -4.11 | % | 6,270 | |||||||||
C Class without sales charge (1,4,6) | 17.30 | % | -0.02 | % | -4.11 | % | 6,270 | |||||||||
AMR Class(1,6) | 18.11 | % | 0.38 | % | -3.87 | % | 6,741 | |||||||||
Russell 1000 Growth Index(5) | 19.65 | 3.21 | -2.52 | 7,748 | ||||||||||||
Lipper Large-Cap Growth Funds Index(5) | 18.26 | % | 1.95 | % | -3.10 | % | 7,299 |
1. | Performance shown is historical and may not be indicative of future returns. Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. 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. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2004. Performance prior to waiving the fees was lower than actual returns shown for periods since 2004. | |
2. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Institutional Class from 10/31/00 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Y Class been in existence since 3/1/10. | |
3. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Institutional Class from 10/31/00 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. A Class has a maximum sales charge of 5.75%. | |
4. | Fund performance for the one-year, five-year, and ten-year periods represents the total returns achieved by the Institutional Class from 10/31/00 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge for C Class is 1% for shares redeemed within one year of the date of purchase. | |
5. | The Russell 1000 Growth Index is an unmanaged index of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Russell 1000 Growth Index and Russell 1000 Index are registered trademarks of Frank Russell Company. The Lipper Large-Cap Growth Funds Index tracks the results of the 30 largest mutual funds in the Lipper Large-Cap Growth Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
6. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, A, C, and AMR Class shares was 0.95%, 1.05%, 1.45%, 2.20%, and 0.64%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index entirely due to stock selection, as sector allocation added modest value to the Fund’s relative returns. Most of the Fund’s underperformance was attributed to poor security selection in the Financials and Health Care sectors. In the Financials sector, JPMorgan Chase (down 11.4%) and Knight Capital Group (down 13.3%) were the largest detractors. For the period the Fund owned the securities, Express Scripts (up 3.9%) and Becton Dickinson (up 0.4%) had the largest impact on performance in the Health Care sector. Good stock selection in the Information Technology sector, where Baidu (up 160.0%) and Lexmark International (up 0.2%) were the largest contributors for the period the Fund owned the securities, added to the Fund’s relative returns.
A neutral position in Consumer Discretionary and an overweight position in Industrials, two of
6
Performance Overview
American Beacon Large Cap Growth FundSM
American Beacon Large Cap Growth FundSM
October 31, 2010 (Unaudited)
the better performing sectors in the Index, added value relative to the Index, as did an underweight in the Consumer Staples sector. This was somewhat offset by being underweight in the Materials sector.
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 | ||||
Apple Computer, Inc. | 3.1 | % | ||
Union Pacific Corp. | 2.3 | % | ||
Oracle Corp. | 2.3 | % | ||
Express Scripts, Inc. | 2.1 | % | ||
Cognizant Technology Solutions Corp. | 1.9 | % | ||
EMC Corp. | 1.9 | % | ||
Cisco Systems, Inc. | 1.8 | % | ||
Deere & Co. | 1.7 | % | ||
priceline.com, Inc. | 1.6 | % | ||
Texas Instruments, Inc. | 1.4 | % |
Sector Allocation
% of Equities | ||||
Information Technology | 37.5 | % | ||
Industrials | 18.4 | % | ||
Consumer Discretionary | 17.3 | % | ||
Health Care | 10.3 | % | ||
Financials | 6.3 | % | ||
Energy | 5.0 | % | ||
Materials | 2.8 | % | ||
Consumer Staples | 1.5 | % | ||
Telecommunication Services | 0.9 | % |
7
Performance Overview
American Beacon Mid-Cap Value FundSM
American Beacon Mid-Cap Value FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Mid-Cap Value Fund returned 23.19% for the twelve months ended October 31, 2010. The Fund trailed the Russell Midcap® Value Index (the “Index”) return of 27.49% but outperformed the Lipper Mid-Cap Value Funds Index return of 22.16%.
Comparison of Change in Value of a $10,000 Investment
For the Period from 6/30/04* through 10/31/10
For the Period from 6/30/04* through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858621.gif)
* | Inception of Fund |
Value of | ||||||||||||||||
Annualized Total Returns | Since | $10,000 | ||||||||||||||
Periods Ended 10/31/10 | Incep. | 6/30/04- | ||||||||||||||
1 Year | 5 Years | (6/30/04) | 10/31/10 | |||||||||||||
Institutional Class(1,3,9) | 23.19 | % | 3.43 | % | 5.38 | % | $ | 13,933 | ||||||||
Y Class(1,4,9) | 23.19 | % | 3.43 | % | 5.38 | % | 13,935 | |||||||||
Investor Class (1,2,9) | 22.93 | % | 3.17 | % | 5.17 | % | 13,760 | |||||||||
Advisor Class (1,5,9) | 22.37 | % | 3.12 | % | 5.13 | % | 13,726 | |||||||||
A Class with sales charge (1,6,9) | 15.60 | % | 1.90 | % | 4.15 | % | 13,730 | |||||||||
A Class without sales charge (1,6,9) | 22.66 | % | 3.12 | % | 5.13 | % | 12,941 | |||||||||
C Class with sales charge (1,7,9) | 21.66 | % | 3.12 | % | 5.13 | % | 13,730 | |||||||||
C Class without sales charge (1,7,9) | 22.66 | % | 3.12 | % | 5.13 | % | 13,730 | |||||||||
AMR Class (1,9) | 23.28 | % | 3.59 | % | 5.50 | % | 14,044 | |||||||||
Russell Midcap Value Index(8) | 27.49 | % | 3.38 | % | 6.26 | % | 14,690 | |||||||||
Lipper Mid-Cap Value Funds Index(8) | 22.16 | % | 3.48 | % | 4.94 | % | 13,574 |
1. | Performance shown is historical and may not be indicative of future returns. Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. 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. A portion of the fees charged to the AMR Class of the Fund was waived through 2005. Performance prior to waiving fees was lower than the actual returns shown for periods through 2005. | |
2. | Fund performance for the five-year and since inception periods represents the total returns achieved by the AMR Class from 6/30/04 up to 3/1/06, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor 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 Investor Class been in existence since 6/30/04. A portion of the fees charged to the Investor Class of the Fund has been waived since 2006. Performance prior to waiving fees was lower than actual returns shown since 2006. | |
3. | Fund performance for the year and since inception periods 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. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than actual returns shown since 2007. | |
4. | Fund performance for the one-year, five-year and since inception periods 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 total returns of the Institutional Class from 11/30/05 up to 3/1/10, the inception date of the Y Class and the returns of the Y Class since its inception. Expenses of the AMR and Institutional Classes are lower than those of the Y Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 6/30/04.. | |
5. | Fund performance for the five-year and since inception periods represents the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 6/29/07. Because the AMR, Institutional, and Investor Classes had lower expenses, their performance was better than the Advisor Class would have realized during the same period. A portion of the fees charged to the Advisor Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than the actual returns shown since 2007. | |
6. | Performance shown prior to the 5/17/10 inception of the A Class is that of the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 5/17/10. Because the AMR, Institutional, and Investor Classes had lower expenses, their performance was better than the A Class would have realized during the same period. A Class shares has a maximum sales charge of 5.75%. | |
7. | Performance shown prior to the 9/1/10 inception of the C Class is that of the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 9/1/10. Because the AMR, Institutional, and Investor Classes had lower expenses, their performance was better than the C Class would have realized during the same period. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
8
Performance Overview
American Beacon Mid-Cap Value FundSM
American Beacon Mid-Cap Value FundSM
October 31, 2010 (Unaudited)
8. | The Russell Midcap Value Index is an unmanaged index of those stocks in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. Russell Midcap Value Index and Russell 1000 Index are registered trademarks of Frank Russell Company. The Lipper Mid-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mid-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
9. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 1.15%, 1.25%, 1.36%, 1.60%, 1.65%, 2.24%, and 0.84%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index entirely due to stock selection as sector allocation was neutral relative to the Index.
Most of the Fund’s poor performance in stock selection resulted primarily from its holdings in the Health Care, Industrials, Financials, and Information Technology sectors. In the Health Care sector, Zimmer Holdings (down 9.8%) and Immucor (down 11.3% for the period the Fund owned the security) detracted the most value relative to the Index. Individual holdings that had the largest impact on performance in the Industrials sector were Armstrong World Industries (up 0.7%) and Ryder System (up 9.8%). In the Financials sector, Primerica (up 35.3% for the period the Fund owned the security) and XL Capital (down 5.6%) were the largest detractors, while Motorola (down 23.9%) hurt performance most in the Information Technology sector. Good security selection in the Consumer Discretionary sector, where Magna International (up 86.7%), Gildan Activewear (up 70.6%), and Family Dollar Stores (up 65.4%) were the largest contributors, added relative value.
A significant overweight in the Consumer Discretionary sector added value through sector allocation. This was negated by an absence from Materials and Telecommunication Services, two of the better performing sectors in the Index, which detracted value relative to the Index.
The sub-advisors’ philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer term.
Top Ten Holdings
% of | ||||
Net Assets | ||||
L-3 Communications Holdings, Inc. | 2.8 | % | ||
Willis Group Holdings plc | 2.3 | % | ||
Avnet, Inc. | 2.1 | % | ||
J.C. Penney Company, Inc. | 1.9 | % | ||
Tyco Electronics Ltd. | 1.9 | % | ||
Fifth Third Bancorp | 1.8 | % | ||
Brady Corp. | 1.8 | % | ||
Stanley Black & Decker, Inc. | 1.5 | % | ||
CA, Inc. | 1.5 | % | ||
Con-way, Inc. | 1.5 | % |
Sector Allocation
% of Equities | ||||
Financials | 25.1 | % | ||
Industrials | 18.9 | % | ||
Consumer Discretionary | 17.4 | % | ||
Information Technology | 10.5 | % | ||
Health Care | 10.4 | % | ||
Utilities | 6.2 | % | ||
Energy | 5.0 | % | ||
Consumer Staples | 4.1 | % | ||
Materials | 2.4 | % |
9
Fund Expenses
October 31, 2010 (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, 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 a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
Actual Expenses
The following tables provide information about actual account values and actual expenses. You may use the information on this page, 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 “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
Institutional Class | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,010.04 | $ | 1,029.98 | $ | 985.12 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 2.94 | $ | 5.01 | $ | 4.90 | ||||||
Annualized Expense Ratio | 0.58 | % | 0.98 | % | 0.98 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
Y Class | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,007.98 | $ | 1,028.22 | $ | 983.96 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 4.76 | $ | 5.42 | $ | 6.15 | ||||||
Annualized Expense Ratio | 0.94 | % | 1.06 | % | 1.23 | % |
Balanced | Mid-Cap | |||||||
Investor Class | Fund | Value Fund | ||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 10/31/10 | $ | 1,007.98 | $ | 983.96 | ||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 4.76 | $ | 6.15 | ||||
Annualized Expense Ratio | 0.94 | % | 1.23 | % |
Balanced | Mid-Cap | |||||||
Advisor Class | Fund | Value Fund | ||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 10/31/10 | $ | 1,007.66 | $ | 982.76 | ||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 5.47 | $ | 7.20 | ||||
Annualized Expense Ratio | 1.08 | % | 1.44 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
A Class** | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/17/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,039.03 | $ | 1,079.60 | $ | 1,020.00 | ||||||
Expenses Paid During Period 5/17/10-10/31/10* | $ | 5.04 | $ | 7.13 | $ | 6.84 | ||||||
Annualized Expense Ratio | 1.08 | % | 1.49 | % | 1.48 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
C Class** | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 9/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,052.43 | $ | 1,125.73 | $ | 1,106.02 | ||||||
Expenses Paid During Period 9/1/10-10/31/10* | $ | 3.14 | $ | 3.84 | $ | 3.88 | ||||||
Annualized Expense Ratio | 1.83 | % | 2.20 | % | 2.24 | % |
10
Fund Expenses
October 31, 2010 (Unaudited)
Balanced | Large Cap | Mid-Cap | ||||||||||
AMR Class | Fund | Growth Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/2010 | $ | 1,011.74 | $ | 1,031.58 | $ | 986.17 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 1.67 | $ | 3.69 | $ | 3.85 | ||||||
Annualized Expense Ratio | 0.33 | % | 0.72 | % | 0.77 | % |
Hypothetical Example for Comparison Purposes
The following tables 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 Investor and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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, such as redemption fees as applicable. 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 following tables 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 | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
Institutional Class | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,022.28 | $ | 1,020.27 | $ | 1,020.27 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 2.96 | $ | 4.99 | $ | 4.99 | ||||||
Annualized Expense Ratio | 0.58 | % | 0.98 | % | 0.98 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
Y Class | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,020.47 | $ | 1,019.86 | $ | 1,019.00 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 4.79 | $ | 5.40 | $ | 6.26 | ||||||
Annualized Expense Ratio | 0.94 | % | 1.06 | % | 1.23 | % |
Balanced | Mid-Cap | |||||||
Investor Class | Fund | Value Fund | ||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 10/31/10 | $ | 1,020.47 | $ | 1,019.00 | ||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 4.79 | $ | 6.26 | ||||
Annualized Expense Ratio | 0.94 | % | 1.23 | % |
Balanced | Mid-Cap | |||||||
Advisor Class | Fund | Value Fund | ||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value 10/31/10 | $ | 1,019.76 | $ | 1,017.95 | ||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 5.50 | $ | 7.32 | ||||
Annualized Expense Ratio | 1.08 | % | 1.44 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
A Class** | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/17/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,018.06 | $ | 1,016.15 | $ | 1,016.21 | ||||||
Expenses Paid During Period 5/17/10-10/31/10* | $ | 5.00 | $ | 6.92 | $ | 6.86 | ||||||
Annualized Expense Ratio | 1.08 | % | 1.49 | % | 1.48 | % |
11
Fund Expenses
October 31, 2010 (Unaudited)
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
C Class** | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 9/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,005.30 | $ | 1,004.68 | $ | 1,004.61 | ||||||
Expenses Paid During Period 9/1/10-10/31/10* | $ | 3.06 | $ | 3.68 | $ | 3.75 | ||||||
Annualized Expense Ratio | 1.83 | % | 2.20 | % | 2.24 | % |
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
AMR Class | Fund | Fund | Value Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,023.54 | $ | 1,021.58 | $ | 1,021.32 | ||||||
Expenses Paid During Period 5/1/10-10/31/10* | $ | 1.68 | $ | 3.67 | $ | 3.92 | ||||||
Annualized Expense Ratio | 0.33 | % | 0.72 | % | 0.77 | % |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year ( 184 ) by days in the year ( 365 ) to reflect the half year period. | |
** | Beginning account value is the inception date of 5/17/10 and 9/1/10 for the A and C Classes, respectively. Expenses are equal to the Fund’s annualized expense ratios for the period multiplied by the average account value over the period multiplied by the number derived by dividing the number of days in the period (168 and 61 for the A and C Classes, respectively) by days in the year (365). |
12
American Beacon Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Balanced Fund, American Beacon Large Cap Growth Fund, and American Beacon Mid-Cap Value Fund:
American Beacon Balanced Fund, American Beacon Large Cap Growth Fund, and American Beacon Mid-Cap Value Fund:
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of the American Beacon Balanced Fund, the American Beacon Large Cap Growth Fund, and the American Beacon Mid-Cap Value Fund (three of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Balanced Fund, the American Beacon Large Cap Growth Fund, and the American Beacon Mid-Cap Value Fund at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![(GRAPHIC)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858605.gif)
Dallas, Texas
December 23, 2010
December 23, 2010
13
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
COMMON STOCK — 59.26% | ||||||||
CONSUMER DISCRETIONARY — 5.52% | ||||||||
Auto Components — 0.24% | ||||||||
Johnson Controls, Inc. | 60,300 | 2,118 | ||||||
Automobiles — 0.26% | ||||||||
Toyota Motor Corp.* | 32,600 | 2,309 | ||||||
Hotels, Restaurants & Leisure — 1.16% | ||||||||
Carnival Corp. | 105,300 | 4,545 | ||||||
McDonald’s Corp. | 35,200 | 2,738 | ||||||
Wyndham Worldwide Corp. | 100,100 | 2,878 | ||||||
10,161 | ||||||||
Media — 0.96% | ||||||||
CBS Corp. | 103,400 | 1,751 | ||||||
Comcast Corp. | 160,200 | 3,096 | ||||||
Interpublic Group of Cos., Inc.† | 161,500 | 1,672 | ||||||
Time Warner Cable, Inc. | 32,400 | 1,875 | ||||||
8,394 | ||||||||
Multiline Retail — 1.28% | ||||||||
J.C. Penney Company, Inc. | 115,400 | 3,598 | ||||||
Target Corp. | 46,450 | 2,413 | ||||||
Wal-Mart Stores, Inc. | 94,900 | 5,141 | ||||||
11,152 | ||||||||
Specialty Retail — 1.61% | ||||||||
Abercrombie & Fitch Co. | 73,900 | 3,167 | ||||||
Gap, Inc. | 391,200 | 7,436 | ||||||
Limited Brands, Inc. | 23,700 | 697 | ||||||
The Home Depot, Inc. | 89,750 | 2,771 | ||||||
14,071 | ||||||||
Total Consumer Discretionary | 48,205 | |||||||
CONSUMER STAPLES — 4.14% | ||||||||
Beverages — 1.03% | ||||||||
Coca-Cola Co. | 35,300 | 2,165 | ||||||
Diageo plc* | 68,200 | 5,046 | ||||||
PepsiCo, Inc. | 27,300 | 1,783 | ||||||
8,994 | ||||||||
Food & Drug Retailing — 0.90% | ||||||||
CVS Caremark Corp. | 140,700 | 4,237 | ||||||
Safeway, Inc. | 99,500 | 2,279 | ||||||
Sysco Corp. | 45,100 | 1,329 | ||||||
7,845 | ||||||||
Food Products — 0.10% | ||||||||
Kraft Foods, Inc. | 28,100 | 907 | ||||||
Tobacco — 2.11% | ||||||||
Altria Group, Inc. | 103,000 | 2,618 | ||||||
Imperial Tobacco Group plc* | 86,800 | 5,555 | ||||||
Lorillard, Inc. | 10,500 | 896 | ||||||
Philip Morris International, Inc. | 159,100 | 9,308 | ||||||
18,377 | ||||||||
Total Consumer Staples | 36,123 | |||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
ENERGY — 6.77% | ||||||||
Energy Equipment & Services — 0.38% | ||||||||
Transocean Ltd.† | 53,000 | 3,358 | ||||||
Oil & Gas — 6.39% | ||||||||
BP plc* | 103,100 | 4,210 | ||||||
Chevron Corp. | 71,428 | 5,901 | ||||||
ConocoPhillips | 330,676 | 19,641 | ||||||
Exxon Mobil Corp. | 85,100 | 5,657 | ||||||
Marathon Oil Corp. | 64,800 | 2,305 | ||||||
Occidental Petroleum Corp. | 63,200 | 4,969 | ||||||
Royal Dutch Shell plc* | 115,400 | 7,423 | ||||||
Spectra Energy Corp. | 236,100 | 5,612 | ||||||
55,718 | ||||||||
Total Energy | 59,076 | |||||||
FINANCIALS — 13.65% | ||||||||
Banks — 4.59% | ||||||||
Bank of America Corp. | 1,032,480 | 11,812 | ||||||
Bank of New York Mellon Corp. | 71,300 | 1,787 | ||||||
KeyCorp. | 149,257 | 1,222 | ||||||
PNC Financial Services Group, Inc. | 190,458 | 10,266 | ||||||
SunTrust Banks, Inc. | 35,000 | 876 | ||||||
Wells Fargo & Co. | 538,598 | 14,046 | ||||||
40,009 | ||||||||
Diversified Financials — 5.14% | ||||||||
American Express Co. | 135,100 | 5,601 | ||||||
Capital One Financial Corp. | 130,900 | 4,879 | ||||||
Citigroup, Inc.† | 1,555,303 | 6,486 | ||||||
Goldman Sachs Group, Inc. | 17,100 | 2,752 | ||||||
JPMorgan Chase & Co. | 459,134 | 17,276 | ||||||
Morgan Stanley Dean Witter & Co. | 155,000 | 3,855 | ||||||
SLM Corp.† | 165,200 | 1,966 | ||||||
State Street Corp. | 49,700 | 2,075 | ||||||
44,890 | ||||||||
Insurance — 3.42% | ||||||||
ACE Ltd. | 45,300 | 2,692 | ||||||
Allstate Corp. | 131,200 | 4,000 | ||||||
Genworth Financial, Inc.† | 218,000 | 2,472 | ||||||
Hartford Financial Services Group, Inc. | 138,200 | 3,314 | ||||||
Lincoln National Corp. | 82,600 | 2,022 | ||||||
MetLife, Inc. | 157,288 | 6,344 | ||||||
Prudential Financial, Inc. | 24,800 | 1,304 | ||||||
Travelers Cos., Inc. | 49,200 | 2,716 | ||||||
XL Group plc. | 235,100 | 4,972 | ||||||
29,836 | ||||||||
Real Estate — 0.50% | ||||||||
Annaly Capital Management, Inc.‡ | 244,900 | 4,337 | ||||||
Total Financials | 119,072 | |||||||
HEALTH CARE — 6.58% | ||||||||
Biotechnology — 0.24% | ||||||||
Amgen, Inc.† | 36,400 | 2,082 | ||||||
Health Care Equipment & Supplies — 0.80% | ||||||||
Baxter International, Inc. | 94,500 | 4,810 | ||||||
Covidien PLC. | 54,500 | 2,173 | ||||||
6,983 | ||||||||
See accompanying notes
14
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Health Care Providers & Services — 0.98% | ||||||||
Cardinal Health, Inc. | 69,100 | 2,397 | ||||||
CIGNA Corp. | 96,800 | 3,406 | ||||||
WellPoint, Inc.† | 50,900 | 2,766 | ||||||
8,569 | ||||||||
Pharmaceuticals — 4.56% | ||||||||
Bristol-Myers Squibb Co. | 254,500 | 6,846 | ||||||
Eli Lilly & Co. | 106,500 | 3,749 | ||||||
Johnson & Johnson | 119,000 | 7,577 | ||||||
Merck & Co., Inc. | 240,176 | 8,714 | ||||||
Pfizer, Inc. | 741,254 | 12,897 | ||||||
39,783 | ||||||||
Total Health Care | 57,417 | |||||||
INDUSTRIALS — 6.93% | ||||||||
Aerospace & Defense — 2.02% | ||||||||
Boeing Co. | 39,600 | 2,797 | ||||||
Lockheed Martin Corp. | 67,100 | 4,784 | ||||||
Northrop Grumman Corp. | 48,800 | 3,085 | ||||||
Raytheon Co. | 150,600 | 6,940 | ||||||
17,606 | ||||||||
Air Freight & Couriers — 0.34% | ||||||||
FedEx Corp. | 34,000 | 2,982 | ||||||
Commercial Services & Supplies — 0.36% | ||||||||
RR Donnelley & Sons Co. | 168,960 | 3,117 | ||||||
Construction & Engineering — 0.25% | ||||||||
Shaw Group, Inc.† | 72,200 | 2,206 | ||||||
Industrial Conglomerates — 2.19% | ||||||||
3M Co. | 32,000 | 2,695 | ||||||
General Electric Co. | 363,000 | 5,815 | ||||||
Honeywell International, Inc. | 172,900 | 8,146 | ||||||
Tyco International Ltd. | 64,125 | 2,455 | ||||||
19,111 | ||||||||
Machinery — 1.77% | ||||||||
Cummins, Inc. | 18,400 | 1,621 | ||||||
Eaton Corp. | 21,100 | 1,874 | ||||||
Illinois Tool Works, Inc. | 54,100 | 2,472 | ||||||
ITT Industries, Inc. | 77,000 | 3,634 | ||||||
PACCAR, Inc. | 114,000 | 5,844 | ||||||
15,445 | ||||||||
Total Industrials | 60,467 | |||||||
INFORMATION TECHNOLOGY — 8.12% | ||||||||
Communications Equipment — 0.35% | ||||||||
Cisco Systems, Inc.† | 133,400 | 3,046 | ||||||
Computers & Peripherals — 3.20% | ||||||||
Hewlett-Packard Co. | 297,100 | 12,496 | ||||||
International Business Machines Corp. | 107,500 | 15,436 | ||||||
27,932 | ||||||||
Electronic Equipment & Instruments — 0.51% | ||||||||
Avnet, Inc.† | 46,400 | 1,382 | ||||||
Tyco Electronics Ltd. | 97,225 | 3,080 | ||||||
4,462 | ||||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Internet Software & Services — 0.22% | ||||||||
Xerox Corp. | 163,900 | 1,918 | ||||||
IT Consulting & Services — 0.10% | ||||||||
Accenture plc. | 20,400 | 912 | ||||||
Semiconductor Equipment & Products — 1.41% | ||||||||
ASML Holding N.V | 28,330 | 940 | ||||||
Intel Corp. | 398,900 | 8,006 | ||||||
Micron Technology, Inc.† | 162,600 | 1,345 | ||||||
Texas Instruments, Inc. | 69,400 | 2,052 | ||||||
12,343 | ||||||||
Software — 2.32% | ||||||||
CA, Inc. | 277,474 | 6,440 | ||||||
Microsoft Corp. | 450,600 | 12,004 | ||||||
Oracle Corp | 61,400 | 1,805 | ||||||
20,249 | ||||||||
Total Information Technology | 70,862 | |||||||
MATERIALS — 2.30% | ||||||||
Chemicals — 1.43% | ||||||||
Air Products & Chemicals, Inc. | 27,000 | 2,294 | ||||||
Celanese Corp. | 1,800 | 64 | ||||||
Dow Chemical Co. | 79,200 | 2,442 | ||||||
E. I. du Pont de Nemours & Co. | 107,000 | 5,059 | ||||||
PPG Industries, Inc. | 34,000 | 2,608 | ||||||
12,467 | ||||||||
Metals & Mining — 0.57% | ||||||||
Cliffs Natural Resources, Inc. | 45,900 | 2,992 | ||||||
Newmont Mining Corp. | 32,800 | 1,997 | ||||||
4,989 | ||||||||
Paper & Forest Products — 0.30% | ||||||||
International Paper Co. | 103,600 | 2,619 | ||||||
Total Materials | 20,075 | |||||||
TELECOMMUNICATION SERVICES — 2.84% | ||||||||
Diversified Telecommunication Services — 1.35% | ||||||||
AT&T, Inc. | 233,477 | 6,654 | ||||||
Nokia Corp.* | 316,200 | 3,377 | ||||||
Verizon Communications, Inc. | 52,808 | 1,715 | ||||||
11,746 | ||||||||
Wireless Telecommunication Services — 1.50% | ||||||||
Vodafone Group plc* | 474,800 | 13,062 | ||||||
Total Telecommunication Services | 24,808 | |||||||
UTILITIES — 2.41% | ||||||||
CenterPoint Energy, Inc. | 190,100 | 3,148 | ||||||
Dominion Resources, Inc. | 107,400 | 4,668 | ||||||
Edison International | 74,200 | 2,738 | ||||||
Entergy Corp. | 46,900 | 3,495 | ||||||
Exelon Corp. | 122,600 | 5,005 | ||||||
NextEra Energy, Inc. | 35,100 | 1,932 | ||||||
Total Utilities | 20,986 | |||||||
Total Common Stock (Cost $490,911) | 517,091 | |||||||
CORPORATE OBLIGATION — 16.51% | �� | |||||||
Energy — 0.02% |
See accompanying notes
15
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Petrobras International Finance Co., 6.875%, Due 1/20/2040 | 125 | 145 | ||||||
Finance — 6.14% | ||||||||
Aegon Funding Corp., 5.75%, Due 12/15/2020 | 350 | 377 | ||||||
American Express Co., | ||||||||
2.75%, Due 9/15/2015 | 150 | 151 | ||||||
8.15%, Due 3/19/2038 | 225 | 307 | ||||||
American Express Credit Corp., 5.875%, Due 5/2/2013 | 605 | 666 | ||||||
ANZ National Int’l Ltd., 2.375%, Due 12/21/2012§ | 350 | 357 | ||||||
Bank of America Corp., | ||||||||
6.50%, Due 8/1/2016 | 2,090 | 2,331 | ||||||
7.80%, Due 9/15/2016 | 700 | 803 | ||||||
6.00%, Due 9/1/2017 | 400 | 430 | ||||||
7.625%, Due 6/1/2019 | 400 | 468 | ||||||
Bank of New York Mellon Corp., 4.95%, Due 11/1/2012 | 355 | 384 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 250 | 271 | ||||||
Barclays Bank plc, | ||||||||
3.90%, Due 4/7/2015 | 330 | 354 | ||||||
6.75%, Due 5/22/2019 | 350 | 416 | ||||||
Bear Stearns Cos., Inc., | ||||||||
6.40%, Due 10/2/2017 | 555 | 647 | ||||||
7.25%, Due 2/1/2018 | 840 | 1,025 | ||||||
Berkshire Hathaway Finance Corp., 5.75%, Due 1/15/2040 | 360 | 377 | ||||||
Berkshire Hathaway, Inc., 1.40%, Due 2/10/2012 | 1,435 | 1,451 | ||||||
BNP Paribas, 0.690%, Due 4/8/2013** | 800 | 797 | ||||||
Canadian Imperial Bank of Commerce, 1.45%, Due 9/13/2013 | 515 | 521 | ||||||
Citigroup, Inc., | ||||||||
6.375%, Due 8/12/2014 | 1,170 | 1,313 | ||||||
0.715%, Due 11/5/2014** | 320 | 302 | ||||||
6.01%, Due 1/15/2015 | 540 | 598 | ||||||
6.125%, Due 11/21/2017 | 660 | 735 | ||||||
8.50%, Due 5/22/2019 | 1,000 | 1,256 | ||||||
CME Group, Inc., | ||||||||
5.40%, Due 8/1/2013 | 260 | 291 | ||||||
5.75%, Due 2/15/2014 | 465 | 529 | ||||||
CNA Financial Corp., 7.35%, Due 11/15/2019 | 245 | 276 | ||||||
Countrywide Financial Corp., 5.80%, Due 6/7/2012 | 235 | 248 | ||||||
Credit Suisse N.Y., | ||||||||
3.45%, Due 7/2/2012 | 700 | 729 | ||||||
5.30%, Due 8/13/2019 | 325 | 361 | ||||||
Deutsche Bank AG, 3.875%, Due 8/18/2014 | 325 | 349 | ||||||
Fifth Third Bancorp, 8.25%, Due 3/1/2038 | 1,500 | 1,758 | ||||||
General Electric Capital Corp., | ||||||||
5.90%, Due 5/13/2014 | 350 | 398 | ||||||
0.490%, Due 1/8/2016** | 1,125 | 1,056 | ||||||
5.625%, Due 5/1/2018 | 765 | 855 | ||||||
6.00%, Due 8/7/2019 | 350 | 395 | ||||||
5.50%, Due 1/8/2020 | 250 | 275 | ||||||
5.875%, Due 1/14/2038 | 625 | 636 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 725 | 799 | ||||||
6.25%, Due 9/1/2017 | 650 | 735 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
5.95%, Due 1/18/2018 | 565 | 628 | ||||||
6.00%, Due 6/15/2020 | 175 | 194 | ||||||
6.75%, Due 10/1/2037 | 1,902 | 1,994 | ||||||
HSBC Finance Corp., 0.539%, Due 1/15/2014** | 1,050 | 998 | ||||||
ING Bank, NV, 5.125%, Due 5/1/2015§ | 450 | 480 | ||||||
JPMorgan Chase & Co., | ||||||||
3.70%, Due 1/20/2015 | 1,240 | 1,311 | ||||||
6.00%, Due 1/15/2018 | 375 | 428 | ||||||
5.50%, Due 10/15/2040 | 325 | 327 | ||||||
JPMorgan Chase Bank, NA, 0.623%, Due 6/13/2016§ ** | 415 | 390 | ||||||
Liberty Mutual Insurance Co., 7.875%, Due 10/15/2026§ | 1,500 | 1,587 | ||||||
Lincoln National Corp., 4.75%, Due 2/15/2014 | 245 | 261 | ||||||
Lloyds TSB Bank plc, 4.375%, Due 1/12/2015§ | 325 | 341 | ||||||
MassMutual Global Funding II, 0.453%, Due 12/6/2013§ ** | 400 | 395 | ||||||
Mellon Funding Corp., 0.526%, Due 5/15/2014** | 250 | 248 | ||||||
Merrill Lynch & Co., Inc., | ||||||||
6.40%, Due 8/28/2017 | 1,000 | 1,090 | ||||||
6.50%, Due 7/15/2018 | 260 | 283 | ||||||
6.11%, Due 1/29/2037 | 365 | 347 | ||||||
MetLife, Inc., | ||||||||
5.375%, Due 12/15/2012 | 535 | 579 | ||||||
6.375%, Due 6/15/2034 | 350 | 387 | ||||||
Metropolitan Life Global Funding I, 0.542%, Due 3/15/2012§ ** | 320 | 320 | ||||||
Monumental Global Funding III, 0.489%, Due 1/15/2014§ ** | 325 | 312 | ||||||
Morgan Stanley, | ||||||||
2.876%, Due 5/14/2013** | 700 | 717 | ||||||
0.769%, Due 10/15/2015** | 320 | 294 | ||||||
7.30%, Due 5/13/2019 | 350 | 404 | ||||||
5.625%, Due 9/23/2019 | 350 | 368 | ||||||
Nasdaq OMX Group, | ||||||||
4.00%, Due 1/15/2015 | 185 | 193 | ||||||
5.55%, Due 1/15/2020 | 185 | 195 | ||||||
Nationwide Building Society, 5.50%, Due 7/18/2012§ | 500 | 535 | ||||||
Nordea Bank AB, | ||||||||
2.50%, Due 11/13/2012§ | 350 | 359 | ||||||
4.875%, Due 1/27/2020§ | 300 | 323 | ||||||
PNC Funding Corp., | ||||||||
4.25%, Due 9/21/2015 | 730 | 789 | ||||||
4.375%, Due 8/11/2020 | 330 | 334 | ||||||
Pricoa Global Funding I, 5.40%, Due 10/18/2012§ | 175 | 188 | ||||||
ProLogis, 5.625%, Due 11/15/2016 | 175 | 184 | ||||||
Prudential Financial, Inc., | ||||||||
4.50%, Due 7/15/2013 | 550 | 587 | ||||||
5.10%, Due 9/20/2014 | 445 | 488 | ||||||
7.375%, Due 6/15/2019 | 300 | 364 | ||||||
Rabobank Nederland NV, | ||||||||
4.20%, Due 5/13/2014§ | 200 | 218 | ||||||
2.125%, Due 10/13/2015 | 385 | 388 | ||||||
Simon Property Group LP, 10.35%, Due 4/1/2019 | 325 | 459 | ||||||
Societe Generale N.Y., 2.20%, Due 9/14/2013§ | 300 | 304 |
See accompanying notes
16
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
State Street Corp., 4.30%, Due 5/30/2014 | 290 | 320 | ||||||
Travelers Cos., Inc., 3.90%, Due 11/1/2020 | 160 | 162 | ||||||
Travelers Property Casualty Corp., 5.00%, Due 3/15/2013 | 400 | 437 | ||||||
U.S. Bancorp, 1.375%, Due 9/13/2013 | 570 | 575 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 325 | 373 | ||||||
UnitedHealth Group, Inc., | ||||||||
3.875%, Due 10/15/2020 | 325 | 324 | ||||||
6.625%, Due 11/15/2037 | 2,000 | 2,242 | ||||||
Wachovia Corp., | ||||||||
0.659%, Due 10/15/2016** | 650 | 595 | ||||||
5.75%, Due 2/1/2018 | 775 | 879 | ||||||
Wells Fargo & Co., 5.625%, Due 12/11/2017 | 250 | 283 | ||||||
Westpac Banking Corp., 2.25%, Due 11/19/2012 | 330 | 338 | ||||||
Willis North America, Inc., 6.20%, Due 3/28/2017 | 360 | 386 | ||||||
53,532 | ||||||||
Industrials — 8.72% | ||||||||
Alltel Corp., 7.00%, Due 7/1/2012 | 300 | 329 | ||||||
Altria Group, Inc., 9.70%, Due 11/10/2018 | 365 | 503 | ||||||
America Movil, S.A.B. de C.V., 6.375%, Due 3/1/2035 | 350 | 396 | ||||||
American Honda Finance Corp., | ||||||||
4.625%, Due 4/2/2013§ | 425 | 458 | ||||||
3.875%, Due 9/21/2020§ | 150 | 152 | ||||||
Amgen, Inc., 6.90%, Due 6/1/2038 | 1,480 | 1,834 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
3.00%, Due 10/15/2012 | 470 | 489 | ||||||
5.00%, Due 4/15/2020 | 330 | 366 | ||||||
8.00%, Due 11/15/2039§ | 125 | 174 | ||||||
Apache Corp., 5.10%, Due 9/1/2040 | 170 | 170 | ||||||
AT&T, Inc., | ||||||||
5.10%, Due 9/15/2014 | 860 | 965 | ||||||
5.625%, Due 6/15/2016 | 400 | 468 | ||||||
5.50%, Due 2/1/2018 | 300 | 349 | ||||||
6.80%, Due 5/15/2036 | 150 | 173 | ||||||
6.40%, Due 5/15/2038 | 1,840 | 2,041 | ||||||
5.35%, Due 9/1/2040§ | 283 | 278 | ||||||
Baxter International, Inc., 1.80%, Due 3/15/2013 | 230 | 235 | ||||||
Best Buy Co., Inc., 6.75%, Due 7/15/2013 | 415 | 465 | ||||||
Biogen Idec, Inc., 6.875%, Due 3/1/2018 | 1,500 | 1,766 | ||||||
Boeing Co., 1.875%, Due 11/20/2012 | 350 | 358 | ||||||
Burlington Northern Santa Fe LLC, | ||||||||
5.75%, Due 3/15/2018 | 425 | 493 | ||||||
7.95%, Due 8/15/2030 | 205 | 268 | ||||||
5.75%, Due 5/1/2040 | 170 | 180 | ||||||
CA, Inc., 5.375%, Due 12/1/2019 | 305 | 330 | ||||||
Cameron International Corp., 6.375%, Due 7/15/2018 | 215 | 249 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 350 | 410 | ||||||
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 | 365 | 418 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.90%, Due 12/17/2012 | 300 | 307 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
6.125%, Due 2/17/2014 | 620 | 715 | ||||||
2.75%, Due 6/24/2015 | 340 | 358 | ||||||
Coca-Cola Enterprises, Inc., 7.375%, Due 3/3/2014 | 175 | 211 | ||||||
Comcast Cable Communications | ||||||||
Holdings, Inc., 8.375%, Due 3/15/2013 | 128 | 148 | ||||||
Comcast Corp., | ||||||||
6.30%, Due 11/15/2017 | 480 | 569 | ||||||
5.875%, Due 2/15/2018 | 305 | 352 | ||||||
6.45%, Due 3/15/2037 | 2,630 | 2,891 | ||||||
6.55%, Due 7/1/2039 | 350 | 392 | ||||||
ConocoPhillips, | ||||||||
4.60%, Due 1/15/2015 | 900 | 1,011 | ||||||
5.20%, Due 5/15/2018 | 425 | 491 | ||||||
5.75%, Due 2/1/2019 | 310 | 371 | ||||||
Costco Wholesale Corp., 5.30%, Due 3/15/2012 | 725 | 771 | ||||||
Covidien International Finance SA, | ||||||||
5.45%, Due 10/15/2012 | 395 | 430 | ||||||
6.55%, Due 10/15/2037 | 1,500 | 1,820 | ||||||
CRH America, Inc., 6.00%, Due 9/30/2016 | 635 | 714 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 325 | 321 | ||||||
CVS Caremark Corp., 3.25%, Due 5/18/2015 | 170 | 179 | ||||||
Daimler Finance NA LLC, | ||||||||
7.75%, Due 1/18/2011 | 1,000 | 1,014 | ||||||
5.875%, Due 3/15/2011 | 450 | 459 | ||||||
5.75%, Due 9/8/2011 | 550 | 573 | ||||||
Dell, Inc., 3.375%, Due 6/15/2012 | 190 | 197 | ||||||
DIRECTV Holdings LLC, | ||||||||
3.55%, Due 3/15/2015 | 505 | 530 | ||||||
6.35%, Due 3/15/2040 | 160 | 171 | ||||||
E. I. du Pont de Nemours & Co., 5.875%, Due 1/15/2014 | 95 | 109 | ||||||
Eaton Corp., 5.60%, Due 5/15/2018 | 340 | 393 | ||||||
eBay, Inc., 0.875%, Due 10/15/2013 | 265 | 265 | ||||||
EI Du Pont de Nemours & Co., 3.25%, Due 1/15/2015 | 545 | 585 | ||||||
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014§ | 350 | 379 | ||||||
Equity Residential, 5.125%, Due 3/15/2016 | 470 | 517 | ||||||
Express Scripts, Inc., 6.25%, Due 6/15/2014 | 570 | 657 | ||||||
France Telecom S.A., | ||||||||
4.375%, Due 7/8/2014 | 295 | 326 | ||||||
2.125%, Due 9/16/2015 | 150 | 152 | ||||||
GlaxoSmithKline Capital, Inc., 5.65%, Due 5/15/2018 | 250 | 296 | ||||||
Hewlett-Packard Co., | ||||||||
4.50%, Due 3/1/2013 | 425 | 460 | ||||||
6.125%, Due 3/1/2014 | 460 | 533 | ||||||
Honeywell International, Inc., 4.25%, Due 3/1/2013 | 580 | 628 | ||||||
Hospira, Inc., 6.05%, Due 3/30/2017 | 260 | 301 | ||||||
International Business Machines Corp., | ||||||||
4.75%, Due 11/29/2012 | 480 | 521 | ||||||
7.625%, Due 10/15/2018 | 770 | 1,022 | ||||||
ITT Corp., 4.90%, Due 5/1/2014 | 695 | 769 | ||||||
John Deere Capital Corp., 4.90%, Due 9/9/2013 | 620 | 686 |
See accompanying notes
17
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 320 | 351 | ||||||
Kellogg Co., 4.25%, Due 3/6/2013 | 500 | 537 | ||||||
Koninklijke Philips Electronics NV, 5.75%, Due 3/11/2018 | 335 | 391 | ||||||
Kraft Foods, Inc., | ||||||||
7.00%, Due 8/11/2037 | 1,580 | 1,900 | ||||||
6.50%, Due 2/9/2040 | 245 | 281 | ||||||
L-3 Communications Corp., 4.75%, Due 7/15/2020 | 400 | 418 | ||||||
Lorillard Tobacco Co., 8.125%, Due 6/23/2019 | 310 | 358 | ||||||
Marathon Oil Corp., 6.00%, Due 10/1/2017 | 415 | 487 | ||||||
Medtronic, Inc., 3.00%, Due 3/15/2015 | 1,065 | 1,132 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 425 | 492 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 150 | 168 | ||||||
Novartis Capital Corp., | ||||||||
4.125%, Due 2/10/2014 | 560 | 613 | ||||||
2.90%, Due 4/24/2015 | 695 | 736 | ||||||
Novartis Securities Investment Ltd., 5.125%, Due 2/10/2019 | 1,164 | 1,336 | ||||||
Oracle Corp., 6.50%, Due 4/15/2038 | 1,055 | 1,270 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 325 | 367 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 150 | 154 | ||||||
Rogers Communications, Inc., 6.80%, Due 8/15/2018 | 350 | 437 | ||||||
Shell International Finance BV, 3.10%, Due 6/28/2015 | 340 | 361 | ||||||
Simon Property Group LP, 5.75%, Due 12/1/2015 | 460 | 525 | ||||||
Teck Resources Ltd., 6.00%, Due 8/15/2040 | 165 | 172 | ||||||
Telecom Italia Capital SA, 4.95%, Due 9/30/2014 | 475 | 513 | ||||||
Telefonica Emisiones SAU, | ||||||||
4.949%, Due 1/15/2015 | 425 | 469 | ||||||
6.421%, Due 6/20/2016 | 350 | 417 | ||||||
Thermo Fisher Scientific, Inc., 3.20%, Due 5/1/2015 | 240 | 253 | ||||||
Thomson Reuters Corp., 4.70%, Due 10/15/2019 | 150 | 163 | ||||||
Time Warner Cable, Inc., | ||||||||
5.85%, Due 5/1/2017 | 350 | 399 | ||||||
6.75%, Due 7/1/2018 | 755 | 906 | ||||||
7.30%, Due 7/1/2038 | 1,920 | 2,315 | ||||||
Time Warner, Inc., 4.875%, Due 3/15/2020 | 160 | 176 | ||||||
Transocean, Inc., 6.80%, Due 3/15/2038 | 3,170 | 3,329 | ||||||
Tyco Electronics Group SA, | ||||||||
6.55%, Due 10/1/2017 | 455 | 531 | ||||||
7.125%, Due 10/1/2037 | 1,750 | 2,065 | ||||||
Tyco International Finance SA, | �� | |||||||
4.125%, Due 10/15/2014 | 175 | 191 | ||||||
8.50%, Due 1/15/2019 | 385 | 509 | ||||||
Unilever Capital Corp., 7.125%, Due 11/1/2010 | 2,000 | 2,000 | ||||||
Union Pacific Corp., 7.875%, Due 1/15/2019 | 350 | 459 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
United Technologies Corp., 6.125%, Due 7/15/2038 | 210 | 247 | ||||||
Valero Energy Corp., | ||||||||
9.375%, Due 3/15/2019 | 155 | 199 | ||||||
6.625%, Due 6/15/2037 | 185 | 187 | ||||||
Verizon Communications, Inc., | ||||||||
5.50%, Due 4/1/2017 | 350 | 403 | ||||||
6.90%, Due 4/15/2038 | 275 | 328 | ||||||
Verizon Wireless Capital, LLC, | ||||||||
3.75%, Due 5/20/2011 | 360 | 366 | ||||||
8.50%, Due 11/15/2018 | 415 | 568 | ||||||
Viacom, Inc., 6.875%, Due 4/30/2036 | 2,880 | 3,360 | ||||||
Vodafone Group plc, 6.15%, Due 2/27/2037 | 365 | 416 | ||||||
Wal-Mart Stores, Inc., | ||||||||
7.55%, Due 2/15/2030 | 350 | 459 | ||||||
6.50%, Due 8/15/2037 | 1,340 | 1,606 | ||||||
5.00%, Due 10/25/2040 | 185 | 184 | ||||||
Waste Management, Inc., 7.375%, Due 3/11/2019 | 255 | 321 | ||||||
Wyeth Corp., 5.50%, Due 2/1/2014 | 1,465 | 1,666 | ||||||
Xerox Corp., | ||||||||
5.50%, Due 5/15/2012 | 400 | 425 | ||||||
5.65%, Due 5/15/2013 | 75 | 82 | ||||||
8.25%, Due 5/15/2014 | 160 | 192 | ||||||
76,101 | ||||||||
Other Government — 0.04% | ||||||||
Province of Ontario Canada, 4.10%, Due 6/16/2014 | 350 | 386 | ||||||
Utilities — 1.59% | ||||||||
Columbus Southern Power Co., 5.50%, Due 3/1/2013 | 660 | 725 | ||||||
Commonwealth Edison Co., 4.00%, Due 8/1/2020 | 175 | 182 | ||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 350 | 369 | ||||||
Dominion Resources, Inc., | ||||||||
5.60%, Due 11/15/2016 | 400 | 470 | ||||||
8.875%, Due 1/15/2019 | 120 | 162 | ||||||
Duke Energy Carolinas LLC, 5.10%, Due 4/15/2018 | 350 | 398 | ||||||
Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016 | 520 | 618 | ||||||
EDF SA, 4.60%, Due 1/27/2020§ | 320 | 353 | ||||||
Energy Transfer Partners LP, | ||||||||
8.50%, Due 4/15/2014 | 605 | 720 | ||||||
9.00%, Due 4/15/2019 | 260 | 332 | ||||||
Enterprise Products Operating LLC, | ||||||||
5.65%, Due 4/1/2013 | 400 | 437 | ||||||
6.125%, Due 10/15/2039 | 310 | 328 | ||||||
Exelon Generation Co. LLC, 6.25%, Due 10/1/2039 | 310 | 323 | ||||||
FirstEnergy Solutions Corp., 4.80%, Due 2/15/2015 | 175 | 189 | ||||||
MidAmerican Energy Holdings Co., | ||||||||
5.875%, Due 10/1/2012 | 760 | 827 | ||||||
6.125%, Due 4/1/2036 | 350 | 390 | ||||||
National Rural Utilities Cooperative Finance Corp., 1.125%, Due 11/1/2013 | 380 | 381 | ||||||
Pacific Gas & Electric Co., | ||||||||
6.25%, Due 12/1/2013 | 175 | 200 | ||||||
3.50%, Due 10/1/2020 | 300 | 302 |
See accompanying notes
18
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Progress Energy, Inc., 4.875%, Due 12/1/2019 | 350 | 385 | ||||||
Public Service Enterprise Group, Inc., 6.95%, Due 6/1/2012 | 745 | 815 | ||||||
Sempra Energy, 6.50%, Due 6/1/2016 | 315 | 380 | ||||||
Southern Power Co., 6.25%, Due 7/15/2012 | 525 | 571 | ||||||
Spectra Energy Capital Corp., 5.65%, Due 3/1/2020 | 310 | 344 | ||||||
Spectra Energy Capital LLC, 5.668%, Due 8/15/2014 | 310 | 348 | ||||||
TransCanada PipeLines Ltd., | ||||||||
7.625%, Due 1/15/2039 | 340 | 445 | ||||||
6.10%, Due 6/1/2040 | 170 | 190 | ||||||
Union Electric Co., 6.70%, Due 2/1/2019 | 430 | 519 | ||||||
Virginia Electric and Power Co., 5.40%, Due 4/30/2018 | 350 | 406 | ||||||
Westar Energy, Inc., 6.00%, Due 7/1/2014 | 175 | 201 | ||||||
Wisconsin Electric Power Co., 6.25%, Due 12/1/2015 | 480 | 584 | ||||||
Xcel Energy, Inc., 5.613%, Due 4/1/2017 | 869 | 967 | ||||||
13,861 | ||||||||
Total Corporate Obligations (Cost $130,125) | 144,025 | |||||||
NON-AGENCY MORTGAGE-BACKED | ||||||||
OBLIGATIONS — 1.25% | ||||||||
Banc of America Commercial Mortgage, Inc., | ||||||||
5.317%, Due 9/10/2047 | 350 | 362 | ||||||
5.634%, Due 4/10/2049 | 700 | 727 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., | ||||||||
5.201%, Due 12/11/2038 | 665 | 721 | ||||||
5.54%, Due 9/11/2041 | 1,070 | 1,170 | ||||||
4.831%, Due 7/11/2042 | 510 | 529 | ||||||
Citigroup Commercial Mortgage Trust, 4.38%, Due 10/15/2041 | 995 | 1,006 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.886%, Due 11/15/2044 | 930 | 1,005 | ||||||
GS Mortgage Securities Corp II, 4.607%, Due 7/10/2039 | 350 | 356 | ||||||
GS Mortgage Securities Trust, 3.679%, Due 8/10/2043§ | 397 | 418 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042 | 337 | 350 | ||||||
3.853%, Due 6/15/2043§ | 696 | 730 | ||||||
4.625%, Due 3/15/2046 | 430 | 441 | ||||||
5.742%, Due 2/12/2049 | 550 | 585 | ||||||
5.629%, Due 2/12/2051 | 700 | 734 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040 | 500 | 536 | ||||||
Prime Mortgage Trust, 5.25%, Due 7/25/2020 | 914 | 932 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Wachovia Bank Commercial Mortgage | ||||||||
Trust, 5.739%, Due 6/15/2049 | 330 | 343 | ||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $10,085) | 10,945 | |||||||
ASSET-BACKED SECURITIES — 0.98% | ||||||||
American Express Credit Account Master Trust, 5.35%, Due 1/15/2014 | 1,400 | 1,443 | ||||||
Bank of America Auto Trust, 0.75%, Due 6/15/2012§ | 561 | 562 | ||||||
BMW Floorplan Master Owner Trust, 1.406%, Due 9/15/2014§ ** | 350 | 354 | ||||||
Capital One Multi-Asset Execution Trust, 5.15%, Due 6/15/2014 | 1,050 | 1,088 | ||||||
Citibank Credit Card Issuance Trust, 1.806%, Due 5/15/2014** | 650 | 663 | ||||||
Discover Card Master Trust, 1.556%, Due 2/17/2015** | 200 | 203 | ||||||
Ford Credit Auto Lease Trust, 1.04%, Due 3/15/2013§ | 711 | 712 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.806%, Due 9/15/2014** | 350 | 356 | ||||||
Harley-Davidson Motorcycle Trust, 1.87%, Due 2/15/2014 | 350 | 353 | ||||||
Honda Auto Receivables Owner Trust, 3.30%, Due 9/15/2015 | 470 | 492 | ||||||
Hyundai Auto Receivables Trust, 3.15%, Due 3/15/2016 | 270 | 284 | ||||||
John Deere Owner Trust, | ||||||||
2.59%, Due 10/15/2013 | 316 | 320 | ||||||
3.96%, Due 5/16/2016 | 265 | 279 | ||||||
Nissan Master Owner Trust Receivables, 1.406%, Due 1/15/2015§ ** | 650 | 658 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
0.66%, Due 5/21/2012 | 319 | 319 | ||||||
6.24%, Due 7/20/2015 | 400 | 438 | ||||||
Total Asset-Backed Securities (Cost $8,327) | 8,524 | |||||||
U.S. AGENCY MORTGAGE-BACKED | ||||||||
OBLIGATIONS — 6.14% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
4.50%, Due 3/1/2019 | 479 | 507 | ||||||
5.00%, Due 10/1/2020 | 189 | 202 | ||||||
5.00%, Due 4/1/2023 | 655 | 697 | ||||||
4.50%, Due 5/1/2025 | 2,187 | 2,333 | ||||||
5.00%, Due 8/1/2033 | 1,047 | 1,119 | ||||||
5.50%, Due 2/1/2034 | 871 | 941 | ||||||
5.00%, Due 3/1/2034 | 787 | 841 | ||||||
6.00%, Due 6/1/2034 | 574 | 636 | ||||||
6.00%, Due 8/1/2034 | 459 | 505 | ||||||
5.00%, Due 8/1/2035 | 736 | 786 | ||||||
5.00%, Due 9/1/2035 | 920 | 984 | ||||||
5.00%, Due 9/1/2035 | 528 | 563 | ||||||
6.00%, Due 8/1/2036 | 470 | 513 | ||||||
5.50%, Due 11/1/2036 | 715 | 768 | ||||||
5.50%, Due 4/1/2037 | 935 | 1,004 | ||||||
5.50%, Due 5/1/2037 | 504 | 541 | ||||||
6.00%, Due 9/1/2037 | 312 | 339 | ||||||
5.50%, Due 12/1/2037 | 767 | 828 | ||||||
5.00%, Due 3/1/2038 | 1,012 | 1,074 | ||||||
6.00%, Due 3/1/2038 | 1,383 | 1,500 |
See accompanying notes
19
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
5.50%, Due 5/1/2038 | 399 | 428 | ||||||
5.50%, Due 10/1/2039 | 817 | 876 | ||||||
17,985 | ||||||||
Federal National Mortgage Association | ||||||||
5.50%, Due 2/1/2014 | 130 | 140 | ||||||
6.00%, Due 4/1/2016 | 150 | 163 | ||||||
5.00%, Due 12/1/2017 | 437 | 470 | �� | |||||
4.50%, Due 9/1/2018 | 284 | 304 | ||||||
4.00%, Due 8/1/2020 | 567 | 598 | ||||||
5.00%, Due 12/1/2023 | 374 | 398 | ||||||
5.00%, Due 3/1/2024 | 421 | 449 | ||||||
4.50%, Due 4/1/2024 | 592 | 635 | ||||||
5.00%, Due 3/1/2034 | 1,109 | 1,188 | ||||||
4.50%, Due 9/1/2034 | 534 | 565 | ||||||
5.50%, Due 12/1/2035 | 212 | 229 | ||||||
5.50%, Due 12/1/2035 | 344 | 372 | ||||||
5.50%, Due 1/1/2036 | 613 | 662 | ||||||
5.50%, Due 2/1/2036 | 504 | 544 | ||||||
5.00%, Due 2/1/2036 | 517 | 552 | ||||||
5.00%, Due 3/1/2036 | 937 | 1,002 | ||||||
5.50%, Due 4/1/2036 | 665 | 718 | ||||||
6.50%, Due 9/1/2036 | 1,138 | 1,268 | ||||||
6.00%, Due 9/1/2036 | 531 | 578 | ||||||
5.50%, Due 12/1/2036 | 879 | 947 | ||||||
5.50%, Due 2/1/2037 | 869 | 936 | ||||||
5.50%, Due 8/1/2037 | 669 | 724 | ||||||
5.50%, Due 3/1/2038 | 1,404 | 1,508 | ||||||
5.00%, Due 4/1/2038 | 1,010 | 1,075 | ||||||
5.00%, Due 6/1/2038 | 1,395 | 1,483 | ||||||
5.50%, Due 6/1/2038 | 1,773 | 1,905 | ||||||
6.00%, Due 9/1/2038 | 304 | 331 | ||||||
4.50%, Due 1/1/2040 | 2,029 | 2,132 | ||||||
5.00%, Due 7/1/2040 | 2,109 | 2,244 | ||||||
4.00%, Due 9/1/2040 | 1,487 | 1,534 | ||||||
25,654 | ||||||||
Government National Mortgage Association | ||||||||
7.00%, Due 12/15/2025 | 209 | 241 | ||||||
4.201%, Due 8/16/2026 | 477 | 489 | ||||||
2.989%, Due 3/16/2039 | 1,044 | 1,096 | ||||||
6.50%, Due 8/15/2027 | 234 | 262 | ||||||
6.50%, Due 11/15/2027 | 241 | 270 | ||||||
7.50%, Due 12/15/2028 | 189 | 219 | ||||||
5.50%, Due 7/15/2033 | 614 | 669 | ||||||
6.00%, Due 12/15/2033 | 627 | 696 | ||||||
5.50%, Due 2/20/2034 | 843 | 917 | ||||||
5.00%, Due 10/15/2039 | 2,032 | 2,208 | ||||||
5.00%, Due 10/15/2039 | 1,149 | 1,249 | ||||||
5.50%, Due 2/15/2040 | 1,517 | 1,647 | ||||||
9,963 | ||||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $50,697) | 53,602 | |||||||
U.S. AGENCY OBLIGATIONS — 4.99% | ||||||||
Federal Farm Credit Bank | ||||||||
3.00%, Due 9/22/2014 | 600 | 647 | ||||||
Federal Home Loan Mortgage Corporation | ||||||||
4.50%, Due 1/15/2015 | 22,140 | 25,244 | ||||||
Federal National Mortgage Association | ||||||||
5.125%, Due 1/2/2014 | 645 | 718 | ||||||
4.625%, Due 10/15/2014 | 1,000 | 1,140 | ||||||
6.25%, Due 5/15/2029 | 12,200 | 15,760 | ||||||
17,618 | ||||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Total U.S. Agency Obligations (Cost $37,059) | 43,509 | |||||||
U.S. TREASURY OBLIGATIONS — 4.88% | ||||||||
U.S. Treasury Bonds | ||||||||
7.875%, Due 2/15/2021 | 1,200 | 1,764 | ||||||
6.25%, Due 8/15/2023 | 800 | 1,070 | ||||||
6.875%, Due 8/15/2025 | 580 | 826 | ||||||
5.25%, Due 11/15/2028 | 750 | 919 | ||||||
4.75%, Due 2/15/2037 | 130 | 148 | ||||||
4.50%, Due 8/15/2039 | 1,630 | 1,772 | ||||||
4.375%, Due 5/15/2040 | 3,080 | 3,280 | ||||||
9,779 | ||||||||
U.S. Treasury Notes | ||||||||
1.375%, Due 2/15/2012 | 1,955 | 1,983 | ||||||
2.625%, Due 7/31/2014 | 2,000 | 2,138 | ||||||
2.50%, Due 4/30/2015 | 1,000 | 1,065 | ||||||
2.125%, Due 5/31/2015 | 4,620 | 4,842 | ||||||
4.25%, Due 8/15/2015 | 1,200 | 1,377 | ||||||
1.25%, Due 9/30/2015 | 590 | 593 | ||||||
3.00%, Due 9/30/2016 | 1,000 | 1,083 | ||||||
3.125%, Due 10/31/2016 | 6,000 | 6,537 | ||||||
3.75%, Due 11/15/2018 | 4,000 | 4,461 | ||||||
3.625%, Due 2/15/2020 | 2,700 | 2,948 | ||||||
3.50%, Due 5/15/2020 | 5,100 | 5,500 | ||||||
2.625%, Due 8/15/2020 | 310 | 310 | ||||||
32,837 | ||||||||
Total U.S. Treasury Obligations (Cost $40,218) | 42,616 | |||||||
MUNICIPAL OBLIGATIONS — 0.33% | ||||||||
Municipal Electric Authority of Georgia, | ||||||||
6.64%, Due 4/1/2057 | 1,920 | 1,973 | ||||||
6.66%, Due 4/1/2057 | 710 | 724 | ||||||
State of Illinois, 1.823%, Due 1/1/2011 | 200 | 200 | ||||||
Total Municipal Obligations (Cost $2,817) | 2,897 | |||||||
SHORT-TERM INVESTMENTS — 4.48% | ||||||||
American Beacon U.S. Government Money Market Select Fund †† | 2,900,000 | 2,900 | ||||||
JPMorgan U.S. Government Money Market Fund | 30,368,277 | 30,368 | ||||||
U.S. Treasury , 0.00%, Due 8/25/2011 | 5,800 | 5,791 | ||||||
Total Short-Term Investments (Cost $39,059) | 39,059 | |||||||
TOTAL INVESTMENTS — 98.82% (Cost $809,298) | 862,268 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 1.18% | 10,280 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 872,548 | ||||||
* | ADR — American Depository Receipt | |
† | Non-income producing security. | |
‡ | REIT |
See accompanying notes
20
American Beacon Balanced Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
§ | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $11,337 or 1.30% of net assets. The Fund has no right to demand registration of these securities | |
** | 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 is affiliated by having the same investment advisor. |
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
S&P 500 Mini E Index Future | 570 | December, 2010 | $ | 33,621 | $ | 1,413 | ||||||||||
$ | 33,621 | $ | 1,413 | |||||||||||||
See accompanying notes
21
American Beacon Large Cap Growth Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
COMMON STOCK — 91.51% | ||||||||
CONSUMER DISCRETIONARY — 15.84% | ||||||||
Auto Components — 1.19% | ||||||||
BorgWarner, Inc.* | 4,400 | 247 | ||||||
Johnson Controls, Inc. | 25,883 | 909 | ||||||
1,156 | ||||||||
Hotels, Restaurants & Leisure — 3.08% | ||||||||
Cheesecake Factory, Inc.* | 29,736 | 866 | ||||||
Ctrip.com International Ltd.* † | 9,200 | 479 | ||||||
Dick’s Sporting Goods, Inc.* | 8,000 | 231 | ||||||
Starbucks Corp. | 30,694 | 874 | ||||||
Yum! Brands, Inc. | 10,700 | 530 | ||||||
2,980 | ||||||||
Internet & Catalog Retail — 2.70% | ||||||||
Amazon.com, Inc.* | 6,550 | 1,082 | ||||||
priceline.com, Inc.* | 4,100 | 1,545 | ||||||
2,627 | ||||||||
Leisure Equipment & Products — 0.81% | ||||||||
Mattel, Inc. | 33,822 | 789 | ||||||
Media — 1.41% | ||||||||
NetFlix, Inc.* | 1,500 | 260 | ||||||
Omnicom Group, Inc. | 20,078 | 883 | ||||||
Scripps Networks Interactive, Inc., Class A | 4,500 | 229 | ||||||
1,372 | ||||||||
Multiline Retail — 1.93% | ||||||||
Costco Wholesale Corp. | 6,900 | 433 | ||||||
Kohl’s Corp.* | 13,400 | 686 | ||||||
Target Corp. | 14,631 | 760 | ||||||
1,879 | ||||||||
Specialty Retail — 2.52% | ||||||||
Dollar Tree, Inc.* | 15,993 | 821 | ||||||
O’Reilly Automotive, Inc.* | 10,150 | 594 | ||||||
Ross Stores, Inc. | 14,233 | 839 | ||||||
Urban Outfitters, Inc.* | 6,200 | 191 | ||||||
2,445 | ||||||||
Textiles & Apparel — 2.20% | ||||||||
Coach, Inc. | 18,276 | 914 | ||||||
NIKE, Inc., Class B | 15,059 | 1,226 | ||||||
2,140 | ||||||||
Total Consumer Discretionary | 15,388 | |||||||
CONSUMER STAPLES — 1.36% | ||||||||
Beverages — 0.46% | ||||||||
PepsiCo, Inc. | 6,900 | 451 | ||||||
Food Products — 0.40% | ||||||||
Green Mountain Coffee Roasters, Inc.* | 11,800 | 389 | ||||||
Personal Products — 0.50% | ||||||||
The Esteé Lauder Companies, Inc., Class A | 6,800 | 484 | ||||||
Total Consumer Staples | 1,324 | |||||||
Shares | Value | |||||||
($000) | ||||||||
ENERGY — 4.60% | ||||||||
Energy Equipment & Services — 2.82% | ||||||||
FMC Technologies, Inc.* | 11,700 | 844 | ||||||
Helmerich & Payne, Inc. | 19,722 | 844 | ||||||
Schlumberger Ltd | 15,100 | 1,054 | ||||||
2,742 | ||||||||
Oil & Gas — 1.77% | ||||||||
Occidental Petroleum Corp. | 10,480 | 824 | ||||||
Peabody Energy Corp. | 8,600 | 455 | ||||||
Petroleo Brasileiro S.A.† | 14,200 | 443 | ||||||
1,722 | ||||||||
Total Energy | 4,464 | |||||||
FINANCIALS — 5.78% | ||||||||
American Express Co. | 18,154 | 753 | ||||||
Ameriprise Financial, Inc. | 16,591 | 858 | ||||||
CME Group, Inc. | 1,700 | 492 | ||||||
Franklin Resources, Inc. | 6,000 | 688 | ||||||
Goldman Sachs Group, Inc. | 8,200 | 1,319 | ||||||
IntercontinentalExchange, Inc.* | 3,550 | 408 | ||||||
JPMorgan Chase & Co. | 18,300 | 689 | ||||||
TD Ameritrade Holding Corp. | 23,700 | 405 | ||||||
Total Financials | 5,612 | |||||||
HEALTH CARE — 9.44% | ||||||||
Biotechnology — 2.25% | ||||||||
Amgen, Inc.* | 14,497 | 829 | ||||||
Celgene Corp.* | 7,600 | 472 | ||||||
Gilead Sciences, Inc.* | 22,193 | 880 | ||||||
2,181 | ||||||||
Health Care Equipment & Supplies — 0.38% | ||||||||
Varian Medical Systems, Inc.* | 5,900 | 373 | ||||||
Health Care Providers & Services — 4.64% | ||||||||
AmerisourceBergen Corp. | 25,519 | 838 | ||||||
Express Scripts, Inc.* | 41,773 | 2,027 | ||||||
McKesson Corp. | 12,539 | 827 | ||||||
UnitedHealth Group, Inc. | 22,690 | 818 | ||||||
4,510 | ||||||||
Pharmaceuticals — 2.17% | ||||||||
Johnson & Johnson | 12,686 | 807 | ||||||
Shire plc† | 9,700 | 680 | ||||||
Teva Pharmaceutical Industries Ltd.† | 12,000 | 623 | ||||||
2,110 | ||||||||
Total Health Care | 9,174 | |||||||
INDUSTRIALS — 16.82% | ||||||||
Aerospace & Defense — 1.36% | ||||||||
Goodrich Corp. | 5,400 | 443 | ||||||
United Technologies Corp. | 11,800 | 882 | ||||||
1,325 | ||||||||
Air Freight & Couriers — 1.36% | ||||||||
CH Robinson Worldwide, Inc. | 7,400 | 522 | ||||||
United Parcel Service, Inc., Class B | 11,911 | 802 | ||||||
1,324 | ||||||||
Construction & Engineering — 0.64% | ||||||||
Fluor Corp. | 13,000 | 626 | ||||||
See accompanying notes
22
American Beacon Large Cap Growth Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Electronic Equipment & Instruments — 0.85% | ||||||||
Emerson Electric Co. | 14,961 | 821 | ||||||
Industrial Conglomerates — 0.79% | ||||||||
3M Co. | 9,093 | 766 | ||||||
Machinery — 7.84% | ||||||||
Caterpillar, Inc. | 9,756 | 767 | ||||||
Cummins, Inc. | 9,131 | 804 | ||||||
Danaher Corp. | 27,200 | 1,179 | ||||||
Deere & Co. | 21,353 | 1,641 | ||||||
Eaton Corp. | 9,567 | 850 | ||||||
Illinois Tool Works, Inc. | 15,900 | 727 | ||||||
Joy Global, Inc. | 11,004 | 781 | ||||||
Parker Hannifin Corp. | 11,292 | 864 | ||||||
7,613 | ||||||||
Road & Rail — 3.13% | ||||||||
Norfolk Southern Corp. | 13,348 | 821 | ||||||
Union Pacific Corp. | 25,327 | 2,221 | ||||||
3,042 | ||||||||
Trading Companies & Distributors — 0.84% | ||||||||
WW Grainger, Inc. | 6,596 | 818 | ||||||
Total Industrials | 16,335 | |||||||
INFORMATION TECHNOLOGY — 34.27% | ||||||||
Communications Equipment — 4.32% | ||||||||
Cisco Systems, Inc.* | 77,834 | 1,777 | ||||||
Corning, Inc. | 42,707 | 781 | ||||||
Juniper Networks, Inc.* | 9,900 | 321 | ||||||
QUALCOMM, Inc. | 29,100 | 1,313 | ||||||
4,192 | ||||||||
Computers & Peripherals — 12.43% | ||||||||
Apple Computer, Inc.* | 10,144 | 3,053 | ||||||
Dell, Inc.* | 56,570 | 813 | ||||||
EMC Corp.* | 88,097 | 1,851 | ||||||
Hewlett-Packard Co. | 18,678 | 786 | ||||||
International Business Machines Corp. | 5,852 | 840 | ||||||
Lexmark International, Inc.* | 17,883 | 680 | ||||||
NetApp, Inc.* | 25,871 | 1,378 | ||||||
SanDisk Corp.* | 21,539 | 809 | ||||||
Seagate Technology plc* | 67,012 | 982 | ||||||
Western Digital Corp.* | 27,829 | 891 | ||||||
12,083 | ||||||||
Electronic Equipment & Instruments — 0.91% | ||||||||
Agilent Technologies, Inc.* | 11,900 | 414 | ||||||
Amphenol Corp., Class A | 9,300 | 466 | ||||||
880 | ||||||||
Internet Software & Services — 2.24% | ||||||||
Baidu, Inc.* † | 7,500 | 825 | ||||||
Google, Inc., Class A* | 2,205 | 1,352 | ||||||
2,177 | ||||||||
IT Consulting & Services — 4.10% | ||||||||
AutoZone, Inc.* | 3,443 | 818 | ||||||
Cognizant Technology Solutions Corp.* . | 28,500 | 1,858 | ||||||
Visa, Inc., A Shares | 16,650 | 1,302 | ||||||
3,978 | ||||||||
Shares | Value | |||||||
($000) | ||||||||
Semiconductor Equipment & Products — 4.87% | ||||||||
Altera Corp. | 25,989 | 811 | ||||||
Broadcom Corp., Class A | 22,651 | 923 | ||||||
Intel Corp. | 40,642 | 816 | ||||||
QLogic Corp.* | 45,225 | 795 | ||||||
Texas Instruments, Inc. | 46,904 | 1,386 | ||||||
4,731 | ||||||||
Software — 5.40% | ||||||||
Autodesk, Inc.* | 17,800 | 644 | ||||||
Cerner Corp.* | 5,400 | 474 | ||||||
Citrix Systems, Inc.* | 12,200 | 782 | ||||||
Intuit, Inc.* | 5,900 | 283 | ||||||
Microsoft Corp. | 32,327 | 861 | ||||||
Oracle Corp. | 74,800 | 2,199 | ||||||
5,243 | ||||||||
Total Information Technology | 33,284 | |||||||
MATERIALS — 2.59% | ||||||||
Chemicals — 0.42% | ||||||||
Ecolab, Inc. | 8,350 | 412 | ||||||
Metals & Mining — 2.17% | ||||||||
Cliffs Natural Resources, Inc. | 12,300 | 802 | ||||||
Walter Energy, Inc. | 14,854 | 1,306 | ||||||
2,108 | ||||||||
Total Materials | 2,520 | |||||||
TELECOMMUNICATION SERVICES — 0.81% | ||||||||
American Tower Corp., Class A* | 15,200 | 784 | ||||||
Total Common Stock (Cost $72,494) | 88,885 | |||||||
SHORT-TERM INVESTMENTS - 6.69% (Cost $6,502) | ||||||||
JPMorgan U.S. Government Money Market Fund | 6,502,142 | 6,502 | ||||||
TOTAL INVESTMENTS — 98.20% (Cost $78,996) | 95,387 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 1.80% | 1,746 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 97,133 | ||||||
* | Non-income producing security. | |
† | ADR — American Depository Receipt |
See accompanying notes
23
American Beacon Large Cap Growth Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
S&P 500 Mini E Index Future | 119 | December , 2010 | $ | 7,019 | $ | 117 | ||||||||||
$ | 7,019 | $ | 117 | |||||||||||||
See accompanying notes
24
American Beacon Mid-Cap Value Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
COMMON STOCK — 92.67% | ||||||||
CONSUMER DISCRETIONARY — 15.53% | ||||||||
Hotels, Restaurants & Leisure — 2.26% | ||||||||
International Game Technology | 67,500 | 1,052 | ||||||
Royal Caribbean Cruises Ltd.* | 31,800 | 1,258 | ||||||
2,310 | ||||||||
Household Durables — 3.62% | ||||||||
Fortune Brands, Inc. | 25,775 | 1,393 | ||||||
Newell Rubbermaid, Inc. | 28,000 | 494 | ||||||
Sealy Corp.* | 93,775 | 247 | ||||||
Stanley Black & Decker, Inc. | 25,200 | 1,561 | ||||||
3,695 | ||||||||
Media — 1.49% | ||||||||
Omnicom Group, Inc. | 34,525 | 1,518 | ||||||
Multiline Retail — 3.29% | ||||||||
Family Dollar Stores, Inc. | 31,200 | 1,441 | ||||||
J.C. Penney Company, Inc. | 61,675 | 1,923 | ||||||
3,364 | ||||||||
Specialty Retail — 4.87% | ||||||||
Advance Auto Parts, Inc. | 15,900 | 1,033 | ||||||
Hanesbrands, Inc.* | 41,900 | 1,039 | ||||||
Limited Brands, Inc. | 42,200 | 1,240 | ||||||
Rent-A-Center, Inc. | 29,200 | 734 | ||||||
Sherwin-Williams Co. | 12,675 | 925 | ||||||
4,971 | ||||||||
Total Consumer Discretionary | 15,858 | |||||||
CONSUMER STAPLES — 3.87% | ||||||||
Food & Drug Retailing — 0.93% | ||||||||
Sysco Corp. | 32,100 | 946 | ||||||
Personal Products — 1.01% | ||||||||
Avon Products, Inc. | 33,875 | 1,031 | ||||||
Tobacco — 1.93% | ||||||||
Lorillard, Inc. | 12,000 | 1,024 | ||||||
Reynolds American, Inc. | 14,700 | 954 | ||||||
1,978 | ||||||||
Total Consumer Staples | 3,955 | |||||||
ENERGY — 4.69% | ||||||||
El Paso Corp. | 81,700 | 1,083 | ||||||
Murphy Oil Corp. | 19,800 | 1,289 | ||||||
Seadrill Ltd. | 31,900 | 971 | ||||||
Spectra Energy Corp. | 32,500 | 773 | ||||||
Valero Energy Corp. | 37,475 | 673 | ||||||
Total Energy | 4,789 | |||||||
FINANCIALS — 23.46% | ||||||||
Banks — 5.85% | ||||||||
Comerica, Inc. | 22,675 | 811 | ||||||
Fifth Third Bancorp | 146,550 | 1,841 | ||||||
KeyCorp | 85,500 | 700 | ||||||
New York Community Bancorp, Inc. | 64,400 | 1,090 | ||||||
PNC Financial Services Group, Inc. | 16,600 | 895 |
Shares | Value | |||||||
($000) | ||||||||
Regions Financial Corp. | 101,250 | 638 | ||||||
5,975 | ||||||||
Diversified Financials — 3.72% | ||||||||
Ameriprise Financial, Inc. | 20,900 | 1,080 | ||||||
Capital One Financial Corp. | 34,000 | 1,268 | ||||||
Marshall & Ilsley Corp. | 98,450 | 582 | ||||||
SLM Corp.* | 73,400 | 873 | ||||||
3,803 | ||||||||
Insurance — 11.67% | ||||||||
Axis Capital Holdings Ltd. | 22,400 | 762 | ||||||
Delphi Financial Group, Inc. | 52,775 | 1,429 | ||||||
Fidelity National Financial, Inc. | 6,300 | 84 | ||||||
Hartford Financial Services Group, Inc. | 15,400 | 369 | ||||||
Protective Life Corp. | 57,425 | 1,376 | ||||||
RenaissanceRe Holdings Ltd. | 24,425 | 1,472 | ||||||
The Chubb Corp. | 12,900 | 748 | ||||||
Torchmark Corp. | 25,650 | 1,469 | ||||||
Validus Holdings Ltd. | 37,607 | 1,067 | ||||||
Willis Group Holdings plc | 73,645 | 2,342 | ||||||
XL Group plc | 38,000 | 804 | ||||||
11,922 | ||||||||
Real Estate — 2.22% | ||||||||
Annaly Capital Management, Inc.† | 44,400 | 786 | ||||||
Hospitality Properties Trust† | 64,675 | 1,476 | ||||||
2,262 | ||||||||
Total Financials | 23,962 | |||||||
HEALTH CARE — 9.68% | ||||||||
Health Care Equipment & Supplies — 2.07% | ||||||||
Immucor, Inc.* | 56,225 | 978 | ||||||
Zimmer Holdings, Inc.* | 24,025 | 1,140 | ||||||
2,118 | ||||||||
Health Care Providers & Services — 6.42% | ||||||||
Aetna, Inc. | 41,100 | 1,227 | ||||||
Cardinal Health, Inc. | 31,500 | 1,093 | ||||||
CIGNA Corp. | 28,900 | 1,017 | ||||||
Coventry Health Care, Inc.* | 59,200 | 1,387 | ||||||
Omnicare, Inc. | 43,800 | 1,056 | ||||||
Quest Diagnostics, Inc. | 15,700 | 771 | ||||||
6,551 | ||||||||
Pharmaceuticals — 1.19% | ||||||||
Forest Laboratories, Inc.* | 36,750 | 1,215 | ||||||
Total Health Care | 9,884 | |||||||
INDUSTRIALS — 17.65% | ||||||||
Aerospace & Defense — 6.57% | ||||||||
Curtiss-Wright Corp. | 38,900 | 1,201 | ||||||
Goodrich Corp. | 16,100 | 1,321 | ||||||
L-3 Communications Holdings, Inc. | 40,075 | 2,893 | ||||||
Spirit Aerosystems Holdings, Inc.* | 59,650 | 1,291 | ||||||
6,706 | ||||||||
Building Products — 1.33% | ||||||||
Masco Corp. | 127,650 | 1,361 | ||||||
Commercial Services & Supplies — 2.92% | ||||||||
Apollo Group, Inc.* | 19,575 | 734 |
See accompanying notes
25
American Beacon Mid-Cap Value Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares | Value | |||||||
($000) | ||||||||
Con-way, Inc. | 46,625 | 1,539 | ||||||
Dun & Bradstreet Corp. | 9,500 | 707 | ||||||
2,980 | ||||||||
Electrical Equipment — 3.13% | ||||||||
Brady Corp. | 58,350 | 1,794 | ||||||
Molex, Inc. | 68,900 | 1,399 | ||||||
3,193 | ||||||||
Machinery — 2.89% | ||||||||
Eaton Corp. | 14,100 | 1,252 | ||||||
ITT Industries, Inc. | 16,100 | 760 | ||||||
SPX Corp. | 14,000 | 939 | ||||||
2,951 | ||||||||
Road & Rail — 0.81% | ||||||||
Ryder System, Inc. | 19,000 | 831 | ||||||
Total Industrials | 18,022 | |||||||
INFORMATION TECHNOLOGY — 9.80% | ||||||||
Communications Equipment — 0.70% | ||||||||
Alcatel-Lucent * ‡ | 207,023 | 718 | ||||||
Electronic Equipment & Instruments — 4.00% | ||||||||
Avnet, Inc.* | 73,125 | 2,178 | ||||||
Tyco Electronics Ltd. | 60,000 | 1,901 | ||||||
4,079 | ||||||||
Internet Software & Services — 0.72% | ||||||||
Xerox Corp. | 62,600 | 732 | ||||||
IT Consulting & Services — 1.72% | ||||||||
Alliance Data Systems Corp.* | 17,100 | 1,039 | ||||||
Computer Sciences Corp. | 14,700 | 721 | ||||||
1,760 | ||||||||
Semiconductor Equipment & Products — 1.14% | ||||||||
Microchip Technology, Inc. | 36,200 | 1,165 | ||||||
Software — 1.52% | ||||||||
CA, Inc. | 66,800 | 1,550 | ||||||
Total Information Technology | 10,004 | |||||||
MATERIALS — 2.24% | ||||||||
Chemicals — 1.02% | ||||||||
PPG Industries, Inc. | 13,525 | 1,037 | ||||||
Containers & Packaging — 1.22% | ||||||||
Jarden Corp. | 39,025 | 1,252 | ||||||
Total Materials | 2,289 | |||||||
UTILITIES — 5.75% | ||||||||
Electric Utilities — 4.88% | ||||||||
CenterPoint Energy, Inc. | 66,100 | 1,095 | ||||||
Edison International | 23,900 | 882 | ||||||
Pinnacle West Capital Corp. | 22,700 | 934 | ||||||
PNM Resources, Inc. | 84,500 | 996 | ||||||
Xcel Energy, Inc. | 45,300 | 1,081 | ||||||
4,988 | ||||||||
Shares | Value | |||||||
($000) | ||||||||
Gas Utilities — 0.87% | ||||||||
MDU Resources Group, Inc. | 44,450 | 886 | ||||||
Total Utilities | 5,874 | |||||||
Total Common Stock (Cost $83,355) | 94,637 | |||||||
PREFERRED STOCK — 0.71% (Cost $940) | ||||||||
CONSUMER DISCRETIONARY — 0.71% | ||||||||
Sealy Corp. | 9,571 | 720 | ||||||
SHORT-TERM INVESTMENTS - 5.89% (Cost $6,011) | ||||||||
JPMorgan U.S. Government Money Market Fund | 6,010,842 | 6,011 | ||||||
TOTAL INVESTMENTS — 99.27% (Cost $90,306) | 101,368 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 0.73% | 743 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 102,111 | ||||||
* | Non-income producing security. | |
† | REIT | |
‡ | ADR — American Depository Receipt |
See accompanying notes
26
American Beacon Mid-Cap Value Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Futures Contracts
(dollars in thousands)
(dollars in thousands)
Unrealized | ||||||||||||||||
Number of | Appreciation/ | |||||||||||||||
Contracts | Expiration Date | Value | (Depreciation) | |||||||||||||
S&P 400 Midcap E Index Future | 79 | December, 2010 | $ | 6,537 | $ | 417 | ||||||||||
$ | 6,537 | $ | 417 | |||||||||||||
See accompanying notes
27
American Beacon Funds
Statements of Assets and Liabilities
October 31, 2010 (in thousands except share and per share amounts)
Statements of Assets and Liabilities
October 31, 2010 (in thousands except share and per share amounts)
Balanced | Large Cap | Mid-Cap | ||||||||||
Fund | Growth Fund | Value Fund | ||||||||||
Assets: | ||||||||||||
Investments in unaffiliated securities, at value A | $ | 859,368 | $ | 95,387 | $ | 101,368 | ||||||
Investments in affiliated securities, at value B | 2,900 | — | — | |||||||||
Cash | 2,093 | — | 50 | |||||||||
Deposit with brokers for futures contracts | 2,547 | 536 | 486 | |||||||||
Receivable for investments sold | 5,314 | 1,542 | 389 | |||||||||
Dividends and interest receivable | 3,912 | 30 | 89 | |||||||||
Receivable for fund shares sold | 554 | 268 | 174 | |||||||||
Receivable for tax reclaims | 11 | — | — | |||||||||
Receivable for expense reimbursement (Note 2) | — | — | 2 | |||||||||
Receivable for variation margin on open futures contracts | 11 | 2 | 31 | |||||||||
Prepaid expenses | 74 | 51 | 91 | |||||||||
Total assets | 876,784 | 97,816 | 102,680 | |||||||||
Liabilities: | ||||||||||||
Payable for investments purchased | 3,272 | 515 | 344 | |||||||||
Payable for fund shares redeemed | 191 | — | — | |||||||||
Management and investment advisory fees payable (Note 2) | 548 | 129 | 179 | |||||||||
Administrative service and service fees payable (Note 2) | 84 | 4 | 18 | |||||||||
Professional fees payable | 20 | 26 | 23 | |||||||||
Trustee fees payable | 12 | 1 | 1 | |||||||||
Prospectus and shareholder reports | 59 | 5 | — | |||||||||
Other liabilities | 50 | 3 | 4 | |||||||||
Total liabilities | 4,236 | 683 | 569 | |||||||||
Net Assets | $ | 872,548 | $ | 97,133 | $ | 102,111 | ||||||
Analysis of Net Assets: | ||||||||||||
Paid-in-capital | 913,330 | 105,046 | 110,560 | |||||||||
Undistributed (distributions in excess of) net investment income | (724 | ) | 75 | 722 | ||||||||
Accumulated net realized (loss) | (94,440 | ) | (24,495 | ) | (20,650 | ) | ||||||
Unrealized appreciation of investments and futures contracts | 54,382 | 16,507 | 11,479 | |||||||||
Net assets | $ | 872,548 | $ | 97,133 | $ | 102,111 | ||||||
Shares outstanding (no par value): | ||||||||||||
Institutional Class | 2,646,180 | 21,456 | 299,718 | |||||||||
Y Class | 3,604 | 3,763 | 118 | |||||||||
Investor Class | 7,245,388 | N/A | 3,829,846 | |||||||||
Advisor Class | 506,038 | N/A | 8,487 | |||||||||
A Class | 3,952 | 1,134 | 1,962 | |||||||||
C Class | 88 | 193 | 120 | |||||||||
AMR Class | 62,276,866 | 16,503,496 | 6,904,080 | |||||||||
Net asset value, offering and redemption price per share: | ||||||||||||
Institutional Class | $ | 12.62 | $ | 5.84 | $ | 9.27 | ||||||
Y Class | $ | 12.78 | $ | 5.83 | $ | 9.27 | ||||||
Investor Class | $ | 11.66 | N/A | $ | 9.20 | |||||||
Advisor Class | $ | 12.11 | N/A | $ | 9.12 | |||||||
A Class (Net asset value only) | $ | 11.94 | $ | 5.83 | $ | 9.18 | ||||||
A Class (Offering and redemption price) | $ | 12.67 | $ | 6.19 | $ | 9.74 | ||||||
C Class | $ | 11.92 | $ | 5.83 | $ | 9.18 | ||||||
AMR Class | $ | 12.02 | $ | 5.88 | $ | 9.27 | ||||||
A Cost of investments in unaffiliated securities | $ | 806,398 | $ | 78,996 | $ | 90,306 | ||||||
B Cost of investments in affiliated securities | $ | 2,900 | $ | — | $ | — |
See accompanying notes
28
American Beacon Funds
Statements of Operations
For the year ended October 31, 2010 (in thousands except share and per share amounts)
Statements of Operations
For the year ended October 31, 2010 (in thousands except share and per share amounts)
Large Cap | ||||||||||||
Balanced | Growth | Mid-Cap | ||||||||||
Fund | Fund | Value Fund | ||||||||||
Investment Income: | ||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 13,061 | $ | 669 | $ | 1,817 | ||||||
Dividend income from affiliated securities | 4 | — | — | |||||||||
Interest income | 14,784 | — | — | |||||||||
Total investment income | 27,849 | 669 | 1,817 | |||||||||
Expenses: | ||||||||||||
Management and investment advisory fees (Note 2) | 1,946 | 407 | 551 | |||||||||
Administrative service fees (Note 2): | ||||||||||||
Institutional Class | 97 | — | 8 | |||||||||
Investor Class | 273 | — | 88 | |||||||||
Advisor Class | 20 | — | — | |||||||||
AMR Class | 363 | 38 | 30 | |||||||||
Transfer agent fees: | �� | |||||||||||
Institutional Class | 2 | — | 1 | |||||||||
Investor Class | 8 | — | 3 | |||||||||
Advisor Class | 1 | — | — | |||||||||
AMR Class | 40 | 5 | 3 | |||||||||
Custody and fund accounting fees | 117 | 11 | 14 | |||||||||
Professional fees | 66 | 32 | 31 | |||||||||
Registration fees and expenses | 48 | 12 | 36 | |||||||||
Service fees (Note 2): | ||||||||||||
Investor Class | 314 | — | 73 | |||||||||
Advisor Class | 17 | — | — | |||||||||
Distribution fees- Advisor Class (Note 2) | 17 | — | — | |||||||||
Prospectus and shareholder reports | 46 | 5 | 7 | |||||||||
Trustee fees | 58 | 5 | 9 | |||||||||
Other expenses | 75 | 11 | 14 | |||||||||
Total expenses | 3,508 | 526 | 868 | |||||||||
Net (fees waived and expenses reimbursed) (Note 2) | — | — | (17 | ) | ||||||||
Net expenses | 3,508 | 526 | 851 | |||||||||
Net investment income | 24,341 | 143 | 966 | |||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments | 24,885 | 3,359 | 345 | |||||||||
Commission recapture (Note 1) | 9 | 6 | 15 | |||||||||
Futures contracts | 2,587 | 788 | 1,181 | |||||||||
Change in net unrealized appreciation or depreciation of: | ||||||||||||
Investments | 46,291 | 8,663 | 15,028 | |||||||||
Futures contracts | 2,244 | 213 | 679 | |||||||||
Net gain on investments | 76,016 | 13,029 | 17,248 | |||||||||
Net increase in net assets resulting from operations | $ | 100,357 | $ | 13,172 | $ | 18,214 | ||||||
A Foreign taxes | $ | 28 | $ | 2 | $ | — |
See accompanying notes
29
American Beacon Funds
Statements of Changes in Net Assets (in thousands)
Statements of Changes in Net Assets (in thousands)
Balanced Fund | Large Cap Growth Fund | Mid-Cap Value Fund | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
October 31, | October 31, | October | October | October 31, | October | |||||||||||||||||||
2010 | 2009 | 31, 2010 | 31, 2009 | 2010 | 31, 2009 | |||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 24,341 | $ | 26,761 | $ | 143 | $ | 501 | $ | 966 | $ | 731 | ||||||||||||
Net realized gain (loss) on investments and futures contracts | 27,481 | (52,176 | ) | 4,153 | (13,613 | ) | 1,541 | (9,782 | ) | |||||||||||||||
Change in net unrealized appreciation or depreciation of investments and futures contracts | 48,535 | 140,003 | 8,876 | 20,450 | 15,707 | 24,803 | ||||||||||||||||||
Net increase in net assets resulting from operations | 100,357 | 114,588 | 13,172 | 7,338 | 18,214 | 15,752 | ||||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||
Institutional Class | (1,651 | ) | (1,697 | ) | — | (1 | ) | (15 | ) | (42 | ) | |||||||||||||
Investor Class | (4,637 | ) | (4,916 | ) | — | — | (161 | ) | (285 | ) | ||||||||||||||
Advisor Class | (314 | ) | — | — | — | — | — | |||||||||||||||||
AMR Class | (42,865 | ) | (28,892 | ) | (342 | ) | (836 | ) | (561 | ) | (838 | ) | ||||||||||||
Net distributions to shareholders | (49,467 | ) | (35,505 | ) | (342 | ) | (837 | ) | (737 | ) | (1,165 | ) | ||||||||||||
Capital Share Transactions: | ||||||||||||||||||||||||
Proceeds from sales of shares | 75,404 | 88,318 | 46,888 | 20,562 | 42,825 | 26,852 | ||||||||||||||||||
Reinvestment of dividends and distributions | 49,350 | 35,347 | 342 | 837 | 736 | 1,163 | ||||||||||||||||||
Cost of shares redeemed | (115,828 | ) | (143,929 | ) | (34,211 | ) | (13,675 | ) | (38,192 | ) | (16,512 | ) | ||||||||||||
Redemption fees | — | — | — | — | 88 | 27 | ||||||||||||||||||
Net increase (decrease) in net assets from capital share transactions | 8,926 | (20,264 | ) | 13,019 | 7,724 | 5,457 | 11,530 | |||||||||||||||||
Net increase in net assets | 59,816 | 58,819 | 25,849 | 14,225 | 22,934 | 26,117 | ||||||||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of period | 812,732 | 753,913 | 71,284 | 57,059 | 79,177 | 53,060 | ||||||||||||||||||
End of Period * | $ | 872,548 | $ | 812,732 | $ | 97,133 | $ | 71,284 | $ | 102,111 | $ | 79,177 | ||||||||||||
*Includes undistributed (distributions in excess of) net investment income (loss) of | $ | (724 | ) | $ | 19,001 | $ | 75 | $ | 274 | $ | 722 | $ | 492 | |||||||||||
See accompanying notes
30
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of 19 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, 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, and the American Beacon Mid-Cap Value 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 Lighthouse Holdings, Inc. 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 inception date of the Y Class is March 1, 2010, the inception date of the A Class is May 17, 2010 and the inception date of the C Class is September 1, 2010.
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | Individual investors investing directly or through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges | |
C Class | General public and investors investing through an intermediary with applicable sales charges | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation and its affiliates |
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.
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. 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 fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the “Board”).
31
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Futures are valued based upon the last sale price at the close of market on the principal exchange on which they are traded.
Valuation Inputs
Various inputs may be used to determine the value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 — | Quoted prices in active markets for identical securities. | |||
Level 2 — | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities are fixed-income securities that are valued using observable inputs as stated above. | |||
Level 3 — | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
The Funds’ investments are summarized by level based on the inputs used to determine their values. During the period, there were no significant transfers between levels for the Funds. As of October 31, 2010, the investments were classified as described below: (in thousands)
Balanced Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 517,091 | $ | — | $ | — | $ | 517,091 | ||||||||
Corporate Obligations | — | 144,025 | — | 144,025 | ||||||||||||
Non-Agency Mortgage Backed Obligations | — | 10,945 | — | 10,945 | ||||||||||||
Asset-Backed Obligations | — | 8,524 | — | 8,524 | ||||||||||||
U.S. Agency Mortgage Backed Obligations | — | 53,602 | — | 53,602 | ||||||||||||
U.S. Agency Obligations | — | 43,509 | — | 43,509 | ||||||||||||
U.S. Treasury Obligations | — | 42,616 | — | 42,616 | ||||||||||||
Municipal Obligations | — | 2,897 | — | 2,897 | ||||||||||||
Short Term Investments | 33,268 | 5,791 | — | 39,059 | ||||||||||||
Total Investments in Securities | $ | 550,359 | $ | 311,909 | $ | — | $ | 862,268 | ||||||||
Futures Contracts | 1,413 | — | — | 1,413 |
Large Cap Growth Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 88,885 | $ | — | $ | — | $ | 88,885 | ||||||||
Short Term Investments | 6,502 | — | — | 6,502 | ||||||||||||
Total Investments in Securities | $ | 95,387 | $ | — | $ | — | $ | 95,387 | ||||||||
Futures Contracts | 117 | — | — | 117 |
Mid-Cap Value Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 94,637 | $ | — | $ | — | $ | 94,637 | ||||||||
Preferred Stock | 720 | — | — | 720 | ||||||||||||
Short Term Investments | 6,011 | — | — | 6,011 | ||||||||||||
Total Investments in Securities | $ | 101,368 | $ | — | $ | — | $ | 101,368 | ||||||||
Futures Contracts | 417 | — | — | 417 |
32
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the 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.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The 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 or as a Deposit with broker for futures contracts on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
Balanced
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||
Unrealized appreciation of investments and futures contracts | Equity Contracts* | $1,413 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||
Net realized gain (loss) from futures contracts | Equity Contracts | $2,587 | ||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | 2,244 |
Large Cap Growth
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||
Unrealized appreciation of investments and futures contracts | Equity Contracts* | $117 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||
Net realized gain (loss) from futures contracts | Equity Contracts | $788 | ||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | 213 |
33
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Mid-Cap Value
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Values of Derivative Instruments not accounted for as hedging instruments as of October 31, 2010 (in thousands)
Statement of Assets and Liabilities | Asset Derivatives | Total | ||
Unrealized appreciation of investments and futures contracts | Equity Contracts* | $417 |
Effect of derivative instruments not accounted for as hedging instruments during the year ended October 31, 2010 (in thousands)
Statement of Operations | Derivative | Total | ||
Net realized gain (loss) from futures contracts | Equity Contracts | $1,181 | ||
Change in net unrealized appreciation or depreciation of futures contracts | Equity Contracts | 679 |
* | Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statements of Assets and Liabilities. |
Dividends to Shareholders
Dividends from net investment income of the Balanced Fund normally will be declared and paid quarterly. Dividends from net investment income of the Large Cap Growth and Mid-Cap Value Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. These amounts are reported with the net realized gains in the Fund’s Statement of Operations.
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 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 Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of each Fund pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust
34
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
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 investment advisory, fund management and securities lending services. Investment assets of Funds are managed 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 Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities for the Funds. Management fees paid during the year ended October 31, 2010 were as follows (dollars in thousands):
Amounts paid | Net Amounts | |||||||||||||||
Management | Management | to Investment | Retained by | |||||||||||||
Fee Rate | Fee | Advisors | Manager | |||||||||||||
Balanced | 0.175%-0.65 | % | $ | 1,946 | $ | 1,518 | $ | 428 | ||||||||
Large Cap Growth | 0.35%-0.60 | % | 407 | 369 | 38 | |||||||||||
Mid-Cap Value | 0.35%-0.90 | % | 551 | 505 | 46 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, and Advisor Classes, 0.40% of the average daily net assets of the A and C Classes, and 0.05% of the average daily net assets of the AMR Class of each of the Funds. Administrative Service fees for the Y, A, and C Classes for the period ended October 31, 2010 were less than $500.
Distribution Plans
The Trust, except for the Advisor, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service 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 Advisor, A, and C Classes of the Funds. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes and 1.00% of the average daily net assets of the C 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. Distribution fees for the A and C Classes for the period ended October 31, 2010 were less than $500.
35
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Investor, Y, Advisor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor Class and up to 0.375% of the average daily net assets of the Investor Class. Service fees for the Y, A, and C Classes for the period ended October 31, 2010 were less than $500.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) or the US Government Money Market Select Fund (the “USG Select Fund”) (collectively, the “Select Funds”). The Funds and the Select Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee up to 0.09% of its average daily net assets. During the year ended October 31, 2010, the Manager earned $4,274 from the Balanced Fund’s investment in the Select Funds.
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 other participating Funds. For the year ended October 31, 2010, the Large Cap Growth Fund borrowed from the USG Select Fund on average $1,547,218 for two days at 0.77% with interest charges of $65, and the Mid-Cap Value Fund borrowed from the USG Select Fund $174,735 for one day at 0.89% with interest charges of $4.
Reimbursement of Expenses
The Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded the Fund’s expense cap. Of these amounts, approximately $2,000 was receivable from the Manager at October 31, 2010 for the Mid-Cap Value Fund. For the period ended October 31, 2010, the Manager waived or reimbursed expenses as follows:
Expense Cap | ||||||||||||||||
11/1/09 | 3/1/10 | Waived or | ||||||||||||||
to | to | Reimbursed | ||||||||||||||
Fund | Class | 2/28/10 | 10/31/10 | Expenses | ||||||||||||
Mid-Cap Value | Institutional | 0.98 | % | 0.98 | % | 2,299 | ||||||||||
Mid-Cap Value | Y | — | 1.08 | % | 0 | |||||||||||
Mid-Cap Value | Investor | 1.23 | % | 1.23 | % | 14,296 | ||||||||||
Mid-Cap Value | Advisor | 1.50 | % | 1.49 | % | 33 | ||||||||||
Mid-Cap Value | A | — | 1.49 | % | 1 | |||||||||||
Mid-Cap Value | C | — | 2.24 | % | 2 |
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 carryover of excess expenses potentially reimbursable to the Manager but not recorded as a liability for the Mid-Cap Value Fund are $26,000, $25,000, and $17,000, expiring 2011, 2012, and 2013, respectively. During the year ended October 31, 2010, the Funds have not recorded a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely.
36
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
3. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company, by complying with all applicable provisions of the Code, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2010 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized 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 paid during the fiscal years ended October 31, 2010 and October 31, 2009 were as follows (in thousands)
Balanced | Large Cap Growth | Mid-Cap Value | ||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
October 31, | October 31, | October 31, | October 31, | October 31, | October 31, | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Distributions paid from: | ||||||||||||||||||||||||
Ordinary income* | ||||||||||||||||||||||||
Institutional Class | $ | 1,651 | $ | 1,697 | $ | — | $ | 1 | $ | 15 | $ | 42 | ||||||||||||
Investor Class | 4,637 | 4,916 | — | — | 161 | 285 | ||||||||||||||||||
Advisor Class | 314 | — | — | — | — | — | ||||||||||||||||||
AMR Class | 42,865 | 28,892 | 342 | 836 | 561 | 838 | ||||||||||||||||||
Total distributions paid | $ | 49,467 | $ | 35,505 | $ | 342 | $ | 837 | $ | 737 | $ | 1,165 | ||||||||||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2010, the components of distributable earnings (deficit) on a tax basis were as follows (in thousands):
Large Cap | Mid-Cap | |||||||||||
Balanced | Growth | Value | ||||||||||
Cost basis of investments for federal income tax purposes | $ | 839,809 | $ | 79,512 | $ | 91,079 | ||||||
Unrealized appreciation | 96,366 | 16,221 | 13,823 | |||||||||
Unrealized depreciation | (73,907 | ) | (346 | ) | (3,534 | ) | ||||||
Net unrealized appreciation/(depreciation) | 22,459 | 15,875 | 10,289 | |||||||||
Undistributed ordinary income | (1 | ) | 74 | 722 | ||||||||
Accumulated long-term gain/(loss) | (64,660 | ) | (23,979 | ) | (19,877 | ) | ||||||
Other temporary differences | 1,420 | 117 | 417 | |||||||||
Distributable earnings/(deficit) | $ | (40,782 | ) | $ | (7,913 | ) | $ | (8,449 | ) | |||
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
37
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
derivative instruments, book amortization for premiums, and reclassifications of income from real estate investment securities.
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 regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, Section 732 basis adjustments, non-deductable expenses, and dividend reclasses that have been reclassified as of October 31, 2010 (in thousands):
Large Cap | Mid-Cap | |||||||||||
Balanced | Growth | Value | ||||||||||
Paid-in-capital | $ | (9,905 | ) | $ | — | $ | (1 | ) | ||||
Undistributed net investment income | 5,401 | — | 1 | |||||||||
Accumulated net realized gain (loss) | 4,504 | — | — | |||||||||
Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency | — | — | — |
At October 31, 2010, capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
Fund | 2016 | 2017 | Total | |||||||||
Balanced | $ | 38,821 | $ | 24,427 | $ | 63,248 | ||||||
Large Cap Growth | 10,999 | 12,863 | 23,862 | |||||||||
Mid-Cap Value | 11,063 | 8,397 | 19,460 |
The Balanced Fund, Large Cap Growth Fund, and Mid-Cap Value Fund utilized $29,720, $4,053, and $2,315, respectively, of net capital loss carryovers for the year ended October 31, 2010.
4. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments during the year ended October 31, 2010 were as follows (in thousands):
Large Cap | Mid-Cap | |||||||||||
Balanced | Growth | Value | ||||||||||
Purchases (excluding U.S. government securities) | $ | 326,787 | $ | 75,860 | $ | 41,182 | ||||||
Sales and maturities (excluding U.S. government securities) | 342,349 | 65,690 | 34,581 | |||||||||
Purchases of U.S. government securities | 77,797 | — | — | |||||||||
Sales and maturities of U.S. government securities | 71,111 | — | — |
A summary of the Funds’ direct transactions in Select Funds for the year ended October 31, 2010 is set forth below (in thousands):
October 31, 2009 | October 31, 2010 | |||||||||||||||||||
Affiliate | Shares/Market Value | Purchases | Sales | Shares/Market Value | ||||||||||||||||
Balanced | USG Select Fund | $ | 5,000 | $ | — | $ | 2,100 | $ | 2,900 |
5. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):
38
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Year Ended October 31, 2010
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 938 | $ | 11,665 | 4 | $ | 46 | 2,259 | $ | 25,989 | 97 | $ | 1,140 | ||||||||||||||||||||
Reinvestment of dividends | 133 | 1,630 | — | 1 | 402 | 4,540 | 27 | 314 | ||||||||||||||||||||||||
Shares redeemed | (944 | ) | (11,665 | ) | — | — | (4,078 | ) | (46,277 | ) | (218 | ) | (2,568 | ) | ||||||||||||||||||
Net increase (decrease) in shares outstanding | 127 | $ | 1,630 | 4 | $ | 47 | (1,417 | ) | $ | (15,748 | ) | (94 | ) | $ | (1,114 | ) | ||||||||||||||||
AMR Class | A Class | C Class | ||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 3,103 | $ | 36,517 | 4 | $ | 46 | — | $ | 1 | |||||||||||||||
Reinvestment of dividends | 3,684 | 42,865 | — | — | — | — | ||||||||||||||||||
Shares redeemed | (4,724 | ) | (55,318 | ) | — | — | — | — | ||||||||||||||||
Net increase (decrease) in shares outstanding | 2,063 | $ | 24,064 | 4 | $ | 46 | — | $ | 1 | |||||||||||||||
Institutional Class | Y Class | AMR Class | ||||||||||||||||||||||
Large Cap Growth Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 7 | $ | 38 | 4 | $ | 20 | 8,548 | $ | 46,823 | |||||||||||||||
Reinvestment of dividends | — | — | — | — | 63 | 342 | ||||||||||||||||||
Shares redeemed | (12 | ) | (66 | ) | — | — | (6,328 | ) | (34,145 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | (5 | ) | $ | (28 | ) | 4 | $ | 20 | 2,283 | $ | 13,020 | |||||||||||||
A Class | C Class | |||||||||||||||
Large Cap Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 1 | $ | 6 | — | $ | 1 | ||||||||||
Reinvestment of dividends | — | — | — | — | ||||||||||||
Shares redeemed | — | — | — | — | ||||||||||||
Net increase (decrease) in shares outstanding | 1 | $ | 6 | — | $ | 1 | ||||||||||
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 59 | $ | 507 | — | $ | 1 | 1,672 | $ | 14,465 | 8 | $ | 64 | ||||||||||||||||||||
Reinvestment of dividends | 2 | 14 | — | — | 20 | 161 | — | — | ||||||||||||||||||||||||
Shares redeemed | (51 | ) | (439 | )* | — | — | * | (963 | ) | (8,239 | )* | — | — | * | ||||||||||||||||||
Net increase (decrease) in shares outstanding | 10 | $ | 82 | — | $ | 1 | 729 | $ | 6,387 | 8 | $ | 64 | ||||||||||||||||||||
AMR Class | A Class | C Class | ||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 3,214 | $ | 27,770 | 2 | $ | 17 | — | $ | 1 | |||||||||||||||
Reinvestment of dividends | 68 | 561 | — | — | — | — | ||||||||||||||||||
Shares redeemed | (3,444 | ) | (29,426 | )* | — | — | * | — | -- | * | ||||||||||||||
Net increase (decrease) in shares outstanding | (162 | ) | $ | (1,095 | ) | 2 | $ | 17 | — | $ | 1 | |||||||||||||
* | Net of Redemption Fees |
39
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Year Ended October 31, 2009
Institutional Class | Investor Class | Advisor Class | AMR Class | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,198 | $ | 12,097 | 2,427 | $ | 24,255 | 76 | $ | 744 | 5,034 | $ | 51,222 | ||||||||||||||||||||
Reinvestment of dividends | 170 | 1,684 | 517 | 4,771 | — | — | 3,047 | 28,892 | ||||||||||||||||||||||||
Shares redeemed | (2,288 | ) | (23,603 | ) | (4,930 | ) | (47,789 | ) | (261 | ) | (2,590 | ) | (7,155 | ) | (69,947 | ) | ||||||||||||||||
Net increase (decrease) in shares outstanding | (920 | ) | $ | (9,822 | ) | (1,986 | ) | $ | (18,763 | ) | (185 | ) | $ | (1,846 | ) | 926 | $ | 10,167 | ||||||||||||||
Institutional Class | AMR Class | |||||||||||||||
Large Cap Growth Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 27 | $ | 121 | 4,528 | $ | 20,441 | ||||||||||
Reinvestment of dividends | — | 1 | 205 | 836 | ||||||||||||
Shares redeemed | (19 | ) | (93 | ) | (3,124 | ) | (13,582 | ) | ||||||||
Net increase in shares outstanding | 8 | $ | 29 | 1,609 | $ | 7,695 | ||||||||||
Institutional Class | Investor Class | Advisor Class | AMR Class | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 39 | $ | 255 | 1,083 | $ | 6,831 | 1 | $ | 5 | 3,018 | $ | 19,761 | ||||||||||||||||||||
Reinvestment of dividends | 7 | 41 | 52 | 284 | — | — | 153 | 838 | ||||||||||||||||||||||||
Shares redeemed | (136 | ) | (792 | )* | (834 | ) | (4,607 | )* | — | — | * | (1,846 | ) | (11,086 | )* | |||||||||||||||||
Net increase (decrease) in shares outstanding | (90 | ) | $ | (496 | ) | 301 | $ | 2,508 | 1 | $ | 5 | 1,325 | $ | 9,513 | ||||||||||||||||||
* | Net of Redemption Fees |
40
Intentionally left blank.
41
American Beacon Balanced Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||||||||||||||
March | ||||||||||||||||||||||||||||||||||||
Institutional Class | 01 to | Investor Class | ||||||||||||||||||||||||||||||||||
Year Ended October 31, | October | Year Ended October 31, | ||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.83 | $ | 10.63 | $ | 16.09 | $ | 15.83 | $ | 15.00 | $ | 12.20 | $ | 10.96 | $ | 9.91 | $ | 15.09 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.35 | 0.43 | 0.47 | 0.50 | 0.39 | 0.16 | 0.25 | 0.30 | 0.41 | |||||||||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 1.10 | 1.25 | (4.70 | ) | 0.90 | 1.54 | 0.57 | 1.04 | 1.23 | (4.39 | ) | |||||||||||||||||||||||||
Total income (loss) from investment operations | 1.45 | 1.68 | (4.23 | ) | 1.40 | 1.93 | 0.73 | 1.29 | 1.53 | (3.98 | ) | |||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.66 | ) | (0.48 | ) | (0.44 | ) | (0.42 | ) | (0.38 | ) | (0.15 | ) | (0.59 | ) | (0.48 | ) | (0.41 | ) | ||||||||||||||||||
Distributions from net realized gains on securities | — | — | (0.79 | ) | (0.72 | ) | (0.72 | ) | — | — | — | (0.79 | ) | |||||||||||||||||||||||
Total distributions | (0.66 | ) | (0.48 | ) | (1.23 | ) | (1.14 | ) | (1.10 | ) | (0.15 | ) | (0.59 | ) | (0.48 | ) | (1.20 | ) | ||||||||||||||||||
Net asset value, end of period | $ | 12.62 | $ | 11.83 | $ | 10.63 | $ | 16.09 | $ | 15.83 | $ | 12.78 | $ | 11.66 | $ | 10.96 | $ | 9.91 | ||||||||||||||||||
Total return A | 12.47 | % | 16.64 | % | (28.23 | )% | 9.31 | % | 13.60 | % | 5.99 | %B | 12.06 | % | 16.29 | % | (28.39 | )% | ||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 33,405 | $ | 29,808 | $ | 36,557 | $ | 51,399 | $ | 22,587 | $ | 46 | $ | 84,500 | $ | 94,915 | $ | 105,473 | ||||||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||||||||||
Expenses, net of waivers | 0.58 | % | 0.60 | % | 0.56 | % | 0.57 | % | 0.59 | % | 0.68 | %C | 0.93 | % | 0.89 | % | 0.82 | % | ||||||||||||||||||
Expenses, before waivers | 0.58 | % | 0.60 | % | 0.56 | % | 0.57 | % | 0.59 | % | 0.68 | %C | 0.93 | % | 0.89 | % | 0.82 | % | ||||||||||||||||||
Net investment income, net of waivers | 2.67 | % | 3.60 | % | 3.37 | % | 2.91 | % | 2.81 | % | 2.54 | %C | 2.34 | % | 3.26 | % | 3.12 | % | ||||||||||||||||||
Net investment income, before waivers | 2.67 | % | 3.60 | % | 3.37 | % | 2.91 | % | 2.81 | % | 2.54 | %C | 2.34 | % | 3.26 | % | 3.12 | % | ||||||||||||||||||
Portfolio turnover rate | 40 | % | 57 | % | 53 | % | 50 | % | 59 | % | 40 | %D | 40 | % | 57 | % | 53 | % |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
B | Not annualized. | |
C | Annualized. | |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
42
A Class | C Class | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
May | September | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Advisor Class | AMR Class | 17 to | 01 to | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | October | October | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2010 | 2009 | 2008 | 2007 | 2006 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | |||||||||||||||||||||||||||||||||||||||||||
$ | 14.91 | $ | 14.20 | $ | 11.35 | $ | 9.77 | $ | 14.95 | $ | 14.83 | $ | 14.16 | $ | 11.31 | $ | 10.19 | $ | 15.49 | $ | 15.27 | $ | 14.49 | $ | 11.50 | $ | 11.32 | |||||||||||||||||||||||||||||
0.41 | 0.35 | 0.32 | 0.37 | 0.34 | 0.41 | 0.38 | 0.35 | 0.39 | 0.49 | 0.50 | 0.45 | 0.02 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0.87 | 1.44 | 1.01 | 1.21 | (4.31 | ) | 0.83 | 1.35 | 1.07 | 1.24 | (4.52 | ) | 0.89 | 1.46 | 0.43 | 0.59 | |||||||||||||||||||||||||||||||||||||||||
1.28 | 1.79 | 1.33 | 1.58 | (3.97 | ) | 1.24 | 1.73 | 1.42 | 1.63 | (4.03 | ) | 1.39 | 1.91 | 0.45 | 0.60 | |||||||||||||||||||||||||||||||||||||||||
(0.38 | ) | (0.36 | ) | (0.57 | ) | — | (0.42 | ) | (0.40 | ) | (0.34 | ) | (0.71 | ) | (0.51 | ) | (0.48 | ) | (0.45 | ) | (0.41 | ) | (0.01 | ) | 0.00 | |||||||||||||||||||||||||||||||
(0.72 | ) | (0.72 | ) | — | — | (0.79 | ) | (0.72 | ) | (0.72 | ) | — | — | (0.79 | ) | (0.72 | ) | (0.72 | ) | — | — | |||||||||||||||||||||||||||||||||||
(1.10 | ) | (1.08 | ) | (0.57 | ) | (1.21 | ) | (1.12 | ) | (1.06 | ) | (0.71 | ) | (0.51 | ) | (1.27 | ) | (1.17 | ) | (1.13 | ) | (0.01 | ) | 0.00 | ||||||||||||||||||||||||||||||||
$ | 15.09 | $ | 14.91 | $ | 12.11 | $ | 11.35 | $ | 9.77 | $ | 14.95 | $ | 14.83 | $ | 12.02 | $ | 11.31 | $ | 10.19 | $ | 15.49 | $ | 15.27 | $ | 11.94 | $ | 11.92 | |||||||||||||||||||||||||||||
9.06 | % | 13.31 | % | 11.96 | % | 16.17 | % | (28.65 | )% | 8.83 | % | 12.94 | % | 12.84 | % | 16.95 | % | (28.08 | )% | 9.59 | % | 13.98 | % | 3.90 | %B | 5.33 | %B | |||||||||||||||||||||||||||||
$ | 202,750 | $ | 111,837 | $ | 6,127 | $ | 6,812 | $ | 7,674 | $ | 9,504 | $ | 1,562 | $ | 748,422 | $ | 681,197 | $ | 604,209 | $ | 898,584 | $ | 817,333 | $ | 47 | $ | 1 | |||||||||||||||||||||||||||||
0.83 | % | 0.85 | % | 1.09 | % | 1.09 | % | 1.07 | % | 1.07 | % | 1.22 | % | 0.33 | % | 0.35 | % | 0.31 | % | 0.31 | % | 0.33 | % | 1.08 | %C | 1.86 | %C | |||||||||||||||||||||||||||||
0.83 | % | 0.85 | % | 1.09 | % | 1.09 | % | 1.07 | % | 1.07 | % | 1.22 | % | 0.33 | % | 0.35 | % | 0.31 | % | 0.31 | % | 0.33 | % | 1.08 | %C | 2.14 | %C | |||||||||||||||||||||||||||||
2.65 | % | 2.55 | % | 2.18 | % | 3.06 | % | 2.86 | % | 2.34 | % | 2.18 | % | 2.92 | % | 3.75 | % | 3.62 | % | 3.21 | % | 3.08 | % | 1.51 | %C | 0.48 | %C | |||||||||||||||||||||||||||||
2.65 | % | 2.55 | % | 2.18 | % | 3.06 | % | 2.86 | % | 2.34 | % | 2.17 | % | 2.92 | % | 3.75 | % | 3.62 | % | 3.21 | % | 3.08 | % | 1.51 | %C | 0.20 | %C | |||||||||||||||||||||||||||||
50 | % | 59 | % | 40 | % | 57 | % | 53 | % | 50 | % | 59 | % | 40 | % | 57 | % | 53 | % | 50 | % | 59 | % | 40 | %D | 40 | %D |
43
American Beacon Large Cap Growth Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2010 | 2009A | 2008 | 2007 | 2006B | ||||||||||||||||
Net asset value, beginning of period | $ | 4.97 | $ | 4.49 | $ | 7.67 | $ | 6.89 | $ | 6.18 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.00 | 0.03 | 0.05 | 0.04 | 0.04 | |||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.88 | 0.50 | (2.97 | ) | 0.77 | 0.70 | ||||||||||||||
Total income (loss) from investment operations | 0.88 | 0.53 | (2.92 | ) | 0.81 | 0.74 | ||||||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.01 | ) | (0.05 | ) | (0.04 | ) | (0.03 | ) | (0.03 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | (0.22 | ) | — | — | ||||||||||||||
Total distributions | (0.01 | ) | (0.05 | ) | (0.26 | ) | (0.03 | ) | (0.03 | ) | ||||||||||
Net asset value, end of period | $ | 5.84 | $ | 4.97 | $ | 4.49 | $ | 7.67 | $ | 6.89 | ||||||||||
Total return C | 17.70 | % | 12.09 | % | (39.35 | )% | 11.84 | % | 12.04 | % | ||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 125 | $ | 130 | $ | 83 | $ | 119 | $ | 110 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, net of waivers | 0.94 | % | 0.93 | % | 0.89 | % | 0.90 | % | 0.90 | % | ||||||||||
Expenses, before waivers | 0.94 | % | 0.94 | % | 0.95 | % | 1.06 | % | 0.99 | % | ||||||||||
Net investment income (loss), net of waivers | (0.02 | )% | 0.38 | % | 0.74 | % | 0.58 | % | 0.56 | % | ||||||||||
Net investment income (loss), before waivers | (0.02 | )% | 0.36 | % | 0.68 | % | 0.42 | % | 0.48 | % | ||||||||||
Portfolio turnover rate | 92 | % | 147 | % | 112 | % | 128 | % | 181 | % |
A | On March 17, 2009, Winslow Capital Management, Inc. assumed management of the Large Cap Growth Fund’s assets previously managed by Goldman Sachs Asset Management, L.P. | |
B | On September 12, 2006, The Renaissance Group, LLC assumed management of the Large Cap Growth Fund’s assets previously managed by J.P. Morgan Investment Management, Inc. | |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
D | Not annualized. | |
E | Annualized. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
44
Y Class | C Class | |||||||||||||||||||||||||||||
March | A Class | September | ||||||||||||||||||||||||||||
01 to | AMR Class | May 17 to | 01 to | |||||||||||||||||||||||||||
October | Year Ended October 31, | October | October | |||||||||||||||||||||||||||
31, 2010 | 2010 | 2009A | 2008 | 2007 | 2006B | 31, 2010 | 31, 2010 | |||||||||||||||||||||||
$ | 5.41 | $ | 5.00 | $ | 4.52 | $ | 7.72 | $ | 6.95 | $ | 6.21 | $ | 5.40 | $ | 5.17 | |||||||||||||||
0.00 | 0.01 | 0.04 | 0.07 | 0.06 | 0.05 | (0.01 | ) | (0.02 | ) | |||||||||||||||||||||
0.42 | 0.89 | 0.51 | (2.99 | ) | 0.77 | 0.73 | 0.44 | 0.68 | ||||||||||||||||||||||
0.42 | 0.90 | 0.55 | (2.92 | ) | 0.83 | 0.78 | 0.43 | 0.66 | ||||||||||||||||||||||
— | (0.02 | ) | (0.07 | ) | (0.06 | ) | (0.06 | ) | (0.04 | ) | — | — | ||||||||||||||||||
— | — | — | (0.22 | ) | — | — | — | — | ||||||||||||||||||||||
— | (0.02 | ) | (0.07 | ) | (0.28 | ) | (0.06 | ) | (0.04 | ) | — | — | ||||||||||||||||||
$ | 5.83 | $ | 5.88 | $ | 5.00 | $ | 4.52 | $ | 7.72 | $ | 6.95 | $ | 5.83 | $ | 5.83 | |||||||||||||||
7.76 | %D | 18.11 | % | 12.46 | % | (39.17 | )% | 12.07 | % | 12.52 | % | 7.96 | %D | 12.77 | %D | |||||||||||||||
$ | 22 | $ | 96,978 | $ | 71,154 | $ | 56,976 | $ | 101,698 | $ | 82,042 | $ | 7 | $ | 1 | |||||||||||||||
1.06 | %E | 0.69 | % | 0.63 | % | 0.59 | % | 0.60 | % | 0.59 | % | 1.49 | %E | 2.20 | %E | |||||||||||||||
1.06 | %E | 0.69 | % | 0.63 | % | 0.59 | % | 0.60 | % | 0.59 | % | 1.49 | %E | 3.14 | %E | |||||||||||||||
(0.33 | )%E | 0.19 | % | 0.86 | % | 1.05 | % | 0.85 | % | 0.88 | % | (0.90 | )%E | (1.68 | )%E | |||||||||||||||
(0.33 | )%E | 0.19 | % | 0.86 | % | 1.05 | % | 0.85 | % | 0.88 | % | (0.90 | )%E | (2.62 | )%E | |||||||||||||||
92 | %F | 92 | % | 147 | % | 112 | % | 128 | % | 181 | % | 92 | %F | 92 | %F |
45
American Beacon Mid-Cap Value Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||||||||||||||
Institutional Class | March | |||||||||||||||||||||||||||||||||||
November | 01 to | |||||||||||||||||||||||||||||||||||
30 to | October | Investor Class | ||||||||||||||||||||||||||||||||||
Year Ended October 31, | October | 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 31, 2006 | 2010 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 7.57 | $ | 5.94 | $ | 11.01 | $ | 10.81 | $ | 12.09 | $ | 8.48 | $ | 7.54 | $ | 5.92 | $ | 10.96 | ||||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.08 | 0.10 | 0.16 | 0.12 | 0.21 | 0.06 | 0.06 | 0.07 | 0.14 | |||||||||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 1.67 | 1.65 | (4.31 | ) | 0.41 | 1.25 | 0.73 | 1.65 | 1.66 | (4.31 | ) | |||||||||||||||||||||||||
Total income (loss) from investment operations | 1.75 | 1.75 | (4.15 | ) | 0.53 | 1.46 | 0.79 | 1.71 | 1.73 | (4.17 | ) | |||||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.05 | ) | (0.12 | ) | (0.16 | ) | (0.07 | ) | (0.16 | ) | — | (0.05 | ) | (0.11 | ) | (0.11 | ) | |||||||||||||||||||
Distributions from net realized gains on securities | — | — | (0.76 | ) | (0.26 | ) | (2.58 | ) | — | — | — | (0.76 | ) | |||||||||||||||||||||||
Total distributions | (0.05 | ) | (0.12 | ) | (0.92 | ) | (0.33 | ) | (2.74 | ) | — | (0.05 | ) | (0.11 | ) | (0.87 | ) | |||||||||||||||||||
Redemption fees added to beneficial interestsB | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||||||
Net asset value, end of period | $ | 9.27 | $ | 7.57 | $ | 5.94 | $ | 11.01 | $ | 10.81 | $ | 9.27 | $ | 9.20 | $ | 7.54 | $ | 5.92 | ||||||||||||||||||
Total return C,D | 23.19 | % | 30.24 | % | (40.86 | )% | 4.97 | % | 15.19 | %E | 9.32 | %E | 22.77 | % | 29.93 | % | (41.04 | )% | ||||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,778 | $ | 2,197 | $ | 2,256 | $ | 6,047 | $ | 3,396 | $ | 1 | $ | 35,223 | $ | 23,369 | $ | 16,550 | ||||||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||||||||||
Expenses, net of waivers | 0.98 | % | 0.98 | % | 0.98 | % | 0.92 | % | 1.19 | %F | 1.01 | %F | 1.23 | % | 1.23 | % | 1.23 | % | ||||||||||||||||||
Expenses, before waivers | 1.06 | % | 1.13 | % | 1.16 | % | 1.09 | % | 1.19 | %F | 1.05 | %F | 1.27 | % | 1.34 | % | 1.32 | % | ||||||||||||||||||
Net investment income (loss), net of waivers | 0.99 | % | 1.29 | % | 1.51 | % | 1.22 | % | 1.11 | %F | 0.97 | %F | 0.75 | % | 0.98 | % | 1.27 | % | ||||||||||||||||||
Net investment income (loss), before waivers | 0.90 | % | 1.14 | % | 1.33 | % | 1.05 | % | 1.11 | %F | 0.93 | %F | 0.70 | % | 0.87 | % | 1.18 | % | ||||||||||||||||||
Portfolio turnover rate | 40 | % | 42 | % | 28 | % | 35 | % | 42 | %H | 40 | %I | 40 | % | 42 | % | 28 | % |
A | 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. | |
B | Amounts represent less than $0.01 per share. | |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
D | May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. | |
E | Not annualized. | |
F | Annualized. | |
G | Portfolio turnover rate is for the period from November 1, 2006 through October 31, 2007. | |
H | Portfolio turnover rate is for the period from November 1, 2005 through October 31, 2006. | |
I | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
46
Advisor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
February | June | AMR Class (formerly Institutional Class prior to | May | September | ||||||||||||||||||||||||||||||||||||||||||||||
28 to | 29 to | December 1, 2005)A | 17 to | 01 to | ||||||||||||||||||||||||||||||||||||||||||||||
October | Year Ended October 31, | October | Year Ended October 31, | October | October | |||||||||||||||||||||||||||||||||||||||||||||
2007 | 31, 2006 | 2010 | 2009 | 2008 | 31, 2007 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 10.80 | $ | 9.80 | $ | 7.49 | $ | 5.87 | $ | 10.94 | $ | 11.73 | $ | 7.59 | $ | 5.97 | $ | 11.07 | $ | 10.87 | $ | 11.72 | $ | 9.00 | $ | 8.30 | |||||||||||||||||||||||||
0.10 | 0.01 | 0.07 | 0.15 | 0.10 | 0.01 | 0.10 | 0.07 | 0.18 | 0.18 | 0.12 | 0.01 | (0.01 | ) | |||||||||||||||||||||||||||||||||||||
0.40 | 0.99 | 1.61 | 1.60 | (4.27 | ) | (0.80 | ) | 1.66 | 1.70 | (4.35 | ) | 0.36 | 1.75 | 0.17 | 0.89 | |||||||||||||||||||||||||||||||||||
0.50 | 1.00 | 1.68 | 1.75 | (4.17 | ) | (0.79 | ) | 1.76 | 1.77 | (4.17 | ) | 0.54 | 1.87 | 0.18 | 0.88 | |||||||||||||||||||||||||||||||||||
(0.08 | ) | — | (0.05 | ) | (0.13 | ) | (0.14 | ) | — | (0.08 | ) | (0.15 | ) | (0.17 | ) | (0.08 | ) | (0.14 | ) | — | — | |||||||||||||||||||||||||||||
(0.26 | ) | — | — | — | (0.76 | ) | — | — | — | (0.76 | ) | (0.26 | ) | (2.58 | ) | — | — | |||||||||||||||||||||||||||||||||
(0.34 | ) | — | (0.05 | ) | (0.13 | ) | (0.90 | ) | — | (0.08 | ) | (0.15 | ) | (0.93 | ) | (0.34 | ) | (2.72 | ) | — | — | |||||||||||||||||||||||||||||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||||||||||||||
$ | 10.96 | $ | 10.80 | $ | 9.12 | $ | 7.49 | $ | 5.87 | $ | 10.94 | $ | 9.27 | $ | 7.59 | $ | 5.97 | $ | 11.07 | $ | 10.87 | $ | 9.18 | $ | 9.18 | |||||||||||||||||||||||||
4.68 | % | 10.20 | %E | 22.53 | % | 30.64 | % | (41.28 | )% | (6.73 | )%E | 23.28 | % | 30.56 | % | (40.82 | )% | 5.09 | % | 19.16 | % | 2.00 | %E | 10.60 | %E | |||||||||||||||||||||||||
$ | 43,158 | $ | 27,240 | $ | 78 | $ | 7 | $ | 1 | $ | 1 | $ | 64,012 | $ | 53,604 | $ | 34,253 | $ | 78,794 | $ | 66,290 | $ | 18 | $ | 1 | |||||||||||||||||||||||||
1.23 | % | 1.49 | %F | 1.44 | % | 1.50 | % | 1.50 | % | 1.50 | %F | 0.77 | % | 0.83 | % | 0.82 | % | 0.75 | % | 0.97 | % | 1.48 | %F | 2.24 | %F | |||||||||||||||||||||||||
1.26 | % | 1.61 | %F | 1.55 | % | 1.58 | % | 2.04 | % | 1.80 | %F | 0.77 | % | 0.82 | % | 0.82 | % | 0.75 | % | 0.92 | % | 1.51 | %F | 3.20 | %F | |||||||||||||||||||||||||
0.93 | % | 0.57 | %F | 0.47 | % | 0.22 | % | 1.02 | % | 0.32 | %F | 1.19 | % | 1.38 | % | 1.68 | % | 1.41 | % | 1.38 | % | 0.47 | %F | (0.36 | )%F | |||||||||||||||||||||||||
0.90 | % | 0.44 | %F | 0.36 | % | 0.14 | % | 0.48 | % | 0.02 | %F | 1.19 | % | 1.38 | % | 1.68 | % | 1.40 | % | 1.42 | % | 0.44 | %F | (1.32 | )%F | |||||||||||||||||||||||||
35 | % | 42 | %H | 40 | % | 42 | % | 28 | % | 35 | %G | 40 | % | 42 | % | 28 | % | 35 | % | 42 | % | 40 | %I | 40 | %I |
47
American Beacon Funds
Privacy Policy & Federal Tax Information
(Unaudited)
Privacy Policy & Federal Tax Information
(Unaudited)
Privacy Policy
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; | ||
• | information about your transactions with us or our service providers; and | ||
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended October 31, 2010, which is designated as qualifying for the dividends-received deduction, is as follows:
Balanced Fund | 35.83 | % | ||
Large Cap Growth Fund | 83.07 | % | ||
Mid-Cap Value Fund | 66.74 | % |
For shareholders in the Funds, the percentage of dividend income distributed for the year ended October 31, 2010, which is designated as qualified dividends income under the Jobs and Growth Tax Relief Act of 2003, is as follows:
Balanced Fund | 44.70 | % | ||
Large Cap Growth Fund | 100.00 | % | ||
Mid-Cap Value Fund | 100.00 | % |
Shareholders will receive notification in January 2011 of the percentage applicable to the preparation of their 2010 income tax returns.
48
Disclosure Regarding the Board of Trustees’ Approval of Investment
Advisory Agreement
(Unaudited)
Advisory Agreement
(Unaudited)
At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements” and collectively with the Management Agreement, the “Agreements”). 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 a separate meeting on May 10, 2010 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.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, 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 1 and II of its Form ADV registration statement with the SEC; | ||
• | a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; | ||
• | 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; | ||
• | a description of any payments by the subadvisers to the manager to support the Funds’ marketing efforts; | ||
• | 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 would not impair its ability to provide high-quality advisory services to the Funds; | ||
• | a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for 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, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; | ||
• | a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; | ||
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; | ||
• | 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 best 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 discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; | ||
• | a description of trade allocation procedures among accounts managed by the firm; | ||
• | a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates | ||
• | a certification by the firm regarding the reasonable design of its compliance program; | ||
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; | ||
• | 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. |
49
Disclosure Regarding the Board of Trustees’ Approval of Investment
Advisory Agreements
Advisory Agreements
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 comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; | ||
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; | ||
• | a comparison of advisory fees and expense ratios for comparable mutual funds; | ||
• | an analysis of any material complaints received from Fund shareholders; | ||
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; | ||
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; | ||
• | a description of the Manager’s securities lending practices and the fees received from such practices; | ||
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; | ||
• | a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and | ||
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated. |
In connection with the Management Agreement and each Investment Advisory Agreement, 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 with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was 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.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 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 a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing 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, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
50
Disclosure Regarding the Board of Trustees’ Approval of Investment
Advisory Agreements
Advisory Agreements
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 considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Funds. The Board further considered that each subadvised 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 program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the 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 arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is 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 considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.
In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits 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 also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.
In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to each Trust at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal years ended October 31, and December 31, 2009.
Based on the foregoing 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 performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.
51
Disclosure Regarding the Board of Trustees’ Approval of Investment
Advisory Agreements
Advisory Agreements
Additional Considerations and Conclusions with Respect to the Balanced Fund
In considering the renewal of the Management Agreement with respect to the Balanced Fund, the Trustees considered the following additional factors: (1) the Balanced Fund outperformed the peer universe median for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; (2) the Manager outperformed its market index with respect to its portion of the Fund’s fixed income assets for the one-, three- and five-year periods ended March 31, 2010; (3) management’s explanation that the Fund’s recent underperformance was due, in part, to the temporary reclassification of the Fund’s Lipper universe from the Lipper Mixed-Asset Target Allocation Growth Funds (MTAG) universe to the Lipper Mixed-Asset Target Allocation Moderate Funds (MTAM) universe; and (4) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”) and Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), the Trustees considered the following additional factors: (1) Barrow outperformed the peer universe median for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; (2) Brandywine outperformed the peer universe median for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; (3) Hotchkis outperformed its market benchmark index with respect to its allocated portion of the Fund’s equity assets for the one-year period ended March 31, 2010 and since inception, but underperformed for the three- and five-year periods and underperformed its Lipper equity peer group for the five year period ended March 31, 2010; (4) management’s explanation of the reasons for Hotchkis’ under performance; (5) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (6) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (7) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Balanced Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Balanced Fund.
Additional Considerations and Conclusions with Respect to the Large Cap Growth Fund
In considering the renewal of the Management Agreement for the Large Cap Growth Fund, the Trustees considered the following additional factors: (1) the Large Cap Growth Fund underperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2010; (2) management’s explanation that the underperformance of the Fund was due, in part, to the underperformance of the Fund’s previous subadvisors and a discussion of the steps taken by the Manager to address the Fund’s underperformance, including replacing the Fund’s subadvisors with Renaissance Group LLC, dba Renaissance Investment Management (“Renaissance”) and Winslow Capital Management, Inc. (“Winslow”); and (3) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Renaissance and Winslow, the Trustees considered the following additional factors: (1) Renaissance underperformed the peer universe median for the one- and three- year periods ended March 31, 2010; (2) Winslow underperformed the peer universe median for the one-year period ended March 31, 2010; (3) management’s explanation that Renaissance’s underperformance was due, in part, to the underperformance of high quality growth stocks in 2007 and 2009; (4) management’s representation that Renaissance has substantially outperformed following similar market conditions in the past; (5) management’s explanation that Winslow’s underperformance was due, in part, to stock selection in the industrials, financials and health care sectors; (6) the relatively short tenure of Winslow (Winslow was hired in March 2009); (7) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (8) whether the subadvisors use Fund commissions to obtain proprietary or third-party research (9) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisor under the Agreements are fair and reasonable, (2) determined that the Large Cap Growth Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Large Cap Growth Fund.
Additional Considerations and Conclusions with Respect to the Mid-Cap Value Fund
In considering the renewal of the Management Agreement for the Mid-Cap Value Fund, the Trustees considered the following additional factors: (1) the Mid-Cap Value Fund outperformed its peer group universe median for the one-, three- and five-year periods ended March 31, 2010; and (2) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Barrow and Pzena Investment Management, LLC (“Pzena”), the Trustees considered the following additional factors: (1) Barrow matched the peer universe median for the three-year period ended March 31, 2010, but underperformed for the one- and five-year periods; (2) Pzena outperformed the peer universe median for the one-year period ended March 31, 2010, but underperformed for the three- and five year periods; (3) management’s explanation that Pzena’s underperformance was due, in part, to poor stock selection and an overweighting in the financials sector during 2007 and 2008, while its stock selection in all other sectors exceeded that of the benchmark index in 2008; (4) Pzena’s performance for the twelve months period ended March 31, 2010 ranked better than the performance of its Lipper peer group; (5) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (6) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (7) the Manager’s recommendation to continue to retain each subadvisor.
52
Disclosure Regarding the Board of Trustees’ Approval of Investment
Advisory Agreements
Advisory Agreements
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Mid-Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Mid-Cap Value Fund.
53
Trustees and Officers of the American Beacon Funds
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-three funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (73) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994- 2006); Member, Board of Trustees, Southern Methodist University ; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-present); Trustee, American Beacon Select Funds (1999-present); Trustee, American Beacon Master Trust (1996-present). | ||
NON-INTERESTED | ||||
TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (66) | Trustee since 2004 | Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998- 2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004- present). | ||
Brenda A. Cline (49) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children’s Health Foundation) (2001-2006); Director, Christian Church Foundation (1999- 2007); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
Eugene J. Duffy (56) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001- Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008- present). |
54
Trustees and Officers of the American Beacon Funds
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Thomas M. Dunning (68) | Trustee since 2008 | Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-present); Director, Baylor Health Care System Foundation (2007-present); State Vice Chair, State Fair of Texas (1987-present); Board Member, Southwestern Medical Foundation (1994-present); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
Richard A. Massman (67) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present), Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities). Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Hospital Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004- present); Trustee, American Beacon Master Trust (2004-present). | ||
R. Gerald Turner (64) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-present); Trustee, American Beacon Select Funds (2001-present); Trustee, American Beacon Master Trust (2001-present). | ||
Paul J. Zucconi,CPA (70) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- present); Director, Torchmark Corporation (life and health insurance products) (2002-present); Director, National Kidney Foundation of North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004-Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
William F. Quinn** (62) | Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009) and CEO (2006-2007), President (1986-2006) and Director (2003-Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-2008); Trustee, American Beacon Select Funds (1999-2008); Trustee, American Beacon Master Trust (1995-2008); Director, American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). |
55
Trustees and Officers of the American Beacon Funds
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Gene L. Needles, Jr. (55) | President 2009 to Present Executive Vice President 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors. | ||
Rosemary K. Behan (51) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and Exchange Commission. | ||
Brian E. Brett (50) | VP since 2004 | Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). | ||
Wyatt Crumpler (44) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. | ||
Michael W. Fields (56) | VP since 1989 | Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (49) | Treasurer since 2010 | Vice President, Finance and Accounting (2010-Present), Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. | ||
Terri L. McKinney (46) | VP since 2009 | Vice-President, Enterprise Services (2009-Present), Managing Director (2003-2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice-President, Board of Trustees (2008-Present), Trustee (2006-2008) Down Syndrome Guild of Dallas. | ||
Jeffrey K. Ringdahl (35) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice-President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Christina E. Sears (39) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. | |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust’s and Master Trust’s sub-advisors. |
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American Beacon Funds
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P.O. Box 219643
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Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
Custodian | Transfer Agent | Independent Registered | Distributor | |||
State Street Bank and | Boston Financial Data | Public Accounting | Foreside Fund Services, | |||
Trust | Services | Firm | LLC | |||
Boston, Massachusetts | Kansas City, Missouri | Ernst & Young LLP | Portland, Maine | |||
Dallas, Texas |
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 of Summary Prospectus.
American Beacon Funds, American Beacon Balanced Fund, American Beacon Large Cap Growth Fund, and American Beacon Mid-Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR 10//10
VF1010
VF1010
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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 Overviews | 2-14 | |||
American Beacon Schedules of Investments | ||||
High Yield Bond Fund | 16 | |||
Retirement Income & Appreciation Fund | 21 | |||
Intermediate Bond Fund | 26 | |||
Short-Term Bond Fund | 34 | |||
Additional Information | Back Cover |
Investing in debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in high yield securities involves additional risks when compared to investing in investment grade securities. These include a greater risk of default or bankruptcy and an increased sensitivity to financial difficulties or changes in interest rates. The four highest Moody’s ratings for long-term obligations (or issuers thereof) are Aaa, Aa, A and Baa. Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. Obligations rated A are considered upper-medium grade and are subject to low credit risk. Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Any opinions herein, including forecasts, reflect our judgment 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.
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Fellow Shareholders,
Throughout the past 12 months, one theme prevailed: investments placed with experienced, forward-thinking managers can still benefit. Opportunity abounds for those with the foresight to know how to capitalize on changing market conditions. It’s no coincidence that this theme also goes to the heart of the American Beacon Funds investment philosophy.
It’s a philosophy that has served our shareholders well. For the 12 months ended October 31, 2010, the American Beacon High Yield Bond Fund (Institutional Class) returned 17.17%. The American Beacon Intermediate Bond Fund (Institutional Class) returned 7.56%, the American Beacon Short-Term Bond Fund (Institutional Class) generated a 3.78% return, and the American Beacon Retirement and Income Appreciation Fund (Investor Class) generated an increase of 8.60% over the same period. Please note that the recent market performance has helped to produce short-term returns that are not typical and may not continue in the future.
While we keep a watchful eye on your investment in our funds, we also remain focused on seeking out new opportunities to help keep your financial goals on course. This is what guides the composition of American Beacon Funds’ product line-up. It is also what led to the addition of several new funds this past year: the American Beacon Zebra Large Cap and the Zebra Small Cap Equity Funds, which use a proprietary strategy to attempt to capture a unique source of equity return—the liquidity premium. We also recently added the American Beacon Evercore Small Cap Equity Fund, which relies on a fundamental bottom-up investment approach and is managed by the well-regarded Evercore Asset Management, LLC.
Continuously searching for new ways to serve our fellow shareholders’ needs is our commitment to you, a commitment we summarize as: Oversight 360. Ours is a continuous commitment to cast a thoughtful and analytical eye over all the factors that influence our investments.
We want to thank you for your continued investment in the American Beacon Funds. As you review the enclosed market overview, portfolio listings, and detailed financial data, please know that we remain dedicated to offering you both the level of superior service and knowledgeable investment management you’ve come to expect from us. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, | ||||
![]() | ||||
Gene L. Needles, Jr. | ||||
President American Beacon Funds | ||||
Securities of these Funds may only be sold by offering each Funds’ Prospectus and Summary Prospectus. You should consider the investment objectives, risks, fees and expenses of any mutual fund carefully before investing. This and other information is available in each Funds’ Prospectus and Summary Prospectus which you may obtain at www.americanbeaconfunds.com or by calling 1-800-967-9009. Please read the Prospectus and Summary Prospectus carefully before investing. Distributed by Foreside Fund Services, LLC.
There is no guarantee that the Funds’ investment objective will be met. At times, certain securities held by the American Beacon Zebra Large Cap Equity and Small Cap Equity Funds may have limited marketability and may be difficult to sell. Investing in the securities of small and mid-capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. Because the American Beacon Evercore Small Cap Equity Fund is a focused portfolio of fewer companies, the increase or decrease of the value of a single stock may have a greater impact on the Fund’s NAV and total return when compared to other diversified funds.
1
Domestic Bond Market Overview
October 31, 2010 (Unaudited)
The investment-grade fixed income markets had another year of attractive returns as interest rates declined and credit markets improved. The Barclay’s Aggregate Index produced an 8.01% total return led primarily by the Corporate sector, which reported over 11% returns. U.S. fixed income markets were buoyed by the moderate levels of inflation and economic growth and strong investor demand for yield.
The period began in late 2009 as the U.S. economy was pulling out of the subprime crisis and was exhibiting signs of a typical post-recession recovery. Government stimulus programs were working their way through the system, and the inventory rebuilding cycle was in full swing. Interest rates rose from their crisis lows, and investors were even beginning to contemplate the Federal Reserve Bank’s (“the Fed”) exit from its extraordinarily accommodative monetary policy measures.
Unfortunately, a critical component of other recent recoveries was missing this time — the housing market. Given the problems with the banking system, the agency underwriters (Freddie and Fannie), and the consumer in general, the housing market could not contribute to the recovery as it had in the past. As such, by mid-2010 when the stimulus programs faded and the inventory cycle was complete, economic growth began to roll over.
At that same time, a fiscal crisis in Europe erupted as several smaller Eurozone countries were not able to sustain their budget deficits and debt balances. Volatility and uncertainty in Europe led many investors to reduce their appetite for risk and caused companies to delay capital spending programs until the markets calmed.
The confluence of events led investors to anticipate that the Fed would engage in a second round of quantitative easing in an effort to prevent a double-dip U.S. recession. Investors expected the Fed to purchase Treasury notes along the yield curve to inject more money into the system. In addition, investors also began to anticipate additional stimulus from Congress in the form of tax relief and extended unemployment benefits. As such, by October 2010, glimmers of hope were beginning to emerge among investors and in the economic data that the nascent recovery would regain strength.
While the influences during this period caused investors to pause and interest rates to decline, the impact was likely temporary. By period end the government’s commitment to the U.S. recovery appeared to restore investor confidence and led to strong investor demand for yield in an otherwise very low-yielding environment.
2
High Yield Bond Market Overview
October 31, 2010 (Unaudited)
For the 12 months ended October 31, 2010, JPMorgan Global High Yield Bond Index produced a return of 19.10%.
The fiscal year started with optimism that the U.S. economy and financial markets would continue their recovery from recession. In this environment many high yield issuers were able to come to market to refinance bank debt and extend their debt maturities.
Improving fundamentals that resulted from better financial results and healthier balance sheets not to mention a strong technical backdrop from investor demand for the asset class in general— tightened high yield spreads dramatically from the beginning of the fiscal year until mid-January of 2010. At that point, concerns about increasing government debt problems particularly in Europe caused a temporary correction. The market shrugged off the sovereign debt concerns and resumed its rebound until late April. At that time the European sovereign debt problems, which centered on Greece, resurfaced. This time the market suffered a more severe correction, one that lasted through June.
Supportive actions by both the U.S. and European Union ultimately helped calm the sovereign debt concerns.
The Federal Reserve made it clear that it would hold short-term interest rates low indefinitely. This ignited a search for yield, driving more money into the high yield asset class. It provided an extremely strong level of technical support. Investors began to emerge from their risk adverse stances and returned their focus to investing in growth opportunities.
Throughout the year, fundamental factors also continued to improve, with favorable earnings reports and with the default rate remaining below 1% for each of the first three quarters of 2010. This combination of favorable fundamentals, coupled with improving market technicals led to a strong performance for high yield bonds as spreads fell to 6.25% from nearly 7.5% at the beginning of the period.
Most high yield issuers now have lower leverage than a year ago. The $245 billion in new high yield issues (through October 31, 2010) already exceeded the record set in the marketplace for the calendar year 2009. Almost 70% of this debt was issued to improve liquidity by retiring other debt on the issuing company’s balance sheet. Many of these companies have used their proceeds to retire outstanding bank loans. Those repaid loans greatly diminish the threat of an impending “maturity cliff” in 2013-2015, which had concerned the market and cast a pall over the market.
As the period drew to a close, we have also seen lower-rated entities access the market and even a return of “dividend” deals involving private equity sponsors.
3
Performance Overview
American Beacon High Yield Bond FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the High Yield Bond Fund returned 17.17% for the twelve months ended October 31, 2010. The Fund underperformed the JPMorgan Global High-Yield Index (“Index”) return of 19.10% and the Lipper High Current Yield Funds Index return of 18.67% for the period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 12/29/00* through 10/31/10
For the Period from 12/29/00* through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858623.gif)
* | Inception of Fund |
Value of | ||||||||||||||||
Annualized Total Returns | Since | $10,000 | ||||||||||||||
Periods Ended 10/31/10 | Incep. | 12/29/00- | ||||||||||||||
1 Year | 5 Years | (12/29/00) | 10/31/10 | |||||||||||||
Institutional Class(1,8) | 17.17 | % | 6.68 | % | 7.88 | % | $ | 21,093 | ||||||||
Y Class(1,4,8) | 17.34 | % | 6.71 | % | 7.90 | % | 21,124 | |||||||||
Investor Class(1,2,8) | 17.00 | % | 6.44 | % | 7.63 | % | 20,617 | |||||||||
A Class with sales charge (1,5,8) | 11.69 | % | 5.46 | % | 7.12 | % | 19,680 | |||||||||
A Class without Sales charge (1,5,8) | 17.26 | % | 6.49 | % | 7.66 | % | 20,664 | |||||||||
C Class with sales charge (1,6,8) | 15.66 | % | 6.38 | % | 7.60 | % | 20,558 | |||||||||
C Class without sales charge (1,6,8) | 16.66 | % | 6.38 | % | 7.60 | % | 20,558 | |||||||||
AMR Class (1,3,8) | 17.59 | % | 6.88 | % | 7.98 | % | 21,291 | |||||||||
JPMorgan Global High-Yield Index (7) | 19.10 | % | 9.10 | % | 9.33 | % | 24,027 | |||||||||
Lipper High Current Yield Funds Index (7) | 18.67 | % | 6.76 | % | 6.68 | % | 18,885 |
1. | Performance shown is historical and may not be indicative of future returns. Please note that recent market performance has helped to produce short-term returns that are not typical and may not continue in the future. 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. A portion of the fees charged to the Institutional Class of the Fund was waived through 2004. Performance prior to waiving fees was lower than the actual returns shown for periods through 2004. | |
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 Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor 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 Investor Class been in existence since 12/29/00. | |
3. | Fund performance for the five-year and since inception periods represents the total returns achieved by the Institutional Class from 12/29/00 up to 9/4/07, the inception date of the AMR Class, and the returns of the AMR Class since its inception. 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 12/29/00. | |
4. | Fund performance for the one-year, five-year, and since inception periods represent the returns achieved by the Institutional Class from 12/29/00 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 12/29/00. | |
5. | Fund performance for the one-year, five-year, and since inception periods represent the returns achieved by the Institutional Class from 12/29/00 through 3/1/02, and the returns of the Investor Class from 3/1/02 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 12/29/00. The maximum sales charge for A Class is 4.75%. | |
6. | Fund performance for the one-year, five-year, and since inception periods represent the returns achieved by the Institutional Class from 12/29/00 through 3/1/02, and the returns of the Investor Class from 3/1/02 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 12/29/00. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. | |
7. | The JPMorgan Global High-Yield Index (“JPMorgan Index”) is an unmanaged index of fixed income securities with a maximum credit rating of BB+ or Ba1. Issues must be publicly registered or issued under Rule 144A under the Securities Act of 1933, with a minimum issue size of $75 million (par amount). A maximum of two issues per issuer are included in the JPMorgan Index. Convertible bonds, preferred stock, and floating-rate bonds are excluded from the JPMorgan Index. The Lipper High Current Yield Funds Index tracks the results of the 30 largest mutual funds in the Lipper High Current Yield Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 0.80%, 0.90%, 1.02%, 1.12%, 2.05%, and |
4
Performance Overview
American Beacon High Yield Bond FundSM
October 31, 2010 (Unaudited)
0.54%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index over the twelve-month period due to issue selection and allocation from a sector and credit quality perspective, as well as the Fund’s cash balances returning less than the Index.
From a sector standpoint, issue selections in the Finance, Cable/Media, and Other Corporate sectors contributed to the Fund’s relative underperformance, despite positive contribution from selections in the Manufacturing and Utility sectors.
From a sector allocation perspective, the Fund benefited from overweighting the Cable/Media sector (up 21.6%), but not enough to compensate for value lost through underweighting the Finance sector (up 26.1%) and overweighting the Other Corporate sector (up 12.7%).
From a credit quality perspective, issue selections in the Below-C, B, and BBB-rated credit groups added value, but not enough to compensate for poor selections in the CCC-rated credit group.
From a credit quality allocation perspective, underweighting the top-performing CC-rated credit group (up 51.2%) and overweighting the B-rated credit group (up 15.8%) contributed to the Fund’s relative underperformance, while overweighting the CCC-rated group (up 23.4%) contributed positively for the period.
The sub-advisors’ “bottom-up”, research intensive investment process, which focuses on companies with strong cash flow and fundamental credit strength, remains in place.
Top Ten Holdings
% of | ||||
Net Assets | ||||
HCA, Inc., 9.625%, Due 11/15/2016 | 1.2 | % | ||
MacDermid, Inc., 9.500%, Due 4/15/2017 | 1.1 | % | ||
NewPage Corp., 11.375%, Due 12/31/2014 | 1.0 | % | ||
US Oncology, Inc., 6.428%, Due 3/15/2012 | 1.0 | % | ||
Ford Motor Credit Co. LLC, 6.625%, Due 8/15/2017 | 1.0 | % | ||
JBS USA LLC, 11.625%, Due 5/1/2014 | 0.9 | % | ||
Intelsat Jackson Holdings Ltd., 11.250%, Due 6/15/2016 | 0.9 | % | ||
CIT Group, Inc., 7.000%, Due 5/1/2017 | 0.9 | % | ||
Chesapeake Energy Corp., 6.625%, Due 8/15/2020 | 0.9 | % | ||
Enterprise Products Operating LLC, 7.034%, Due 1/15/2068 | 0.8 | % |
Sector Allocation
% of Fixed | ||||
Income | ||||
Corporate | 99.4 | % | ||
Convertibles | 0.6 | % |
5
Performance Overview
American Beacon Retirement Income and Appreciation FundSM
October 31, 2010 (Unaudited)
The Y Class of the Retirement Income and Appreciation Fund returned 8.67% for the twelve months ended October 31, 2010. Its benchmark, a blend of 75% Barclays Capital Aggregate Index (“Barclays Index”) and 25% BofA Merrill Lynch All U.S. Convertibles Index (“ML Index”), returned 11.26%. The Fund’s peer group, the Lipper Intermediate Investment Grade Index, returned 10.99% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 7/1/03* through 10/31/10
For the Period from 7/1/03* through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858624.gif)
* | Inception of Fund |
Value of | ||||||||||||||||
Annualized Total Returns | Since | $10,000 | ||||||||||||||
Periods Ended 10/31/10 | Incep. | 7/1/03- | ||||||||||||||
1 Year | 5 Years | (7/1/03) | 10/31/10 | |||||||||||||
Investor Class(1,7) | 8.60 | % | 6.15 | % | 5.04 | % | $ | 14,345 | ||||||||
Y Class(1,2,7) | 8.67 | % | 6.17 | % | 5.05 | % | 14,355 | |||||||||
A Class with sales Charge(1,3,7) | 3.48 | % | 5.13 | % | 4.35 | % | 13,667 | |||||||||
A Class without sales Charge(1,3,7) | 8.63 | % | 6.16 | % | 5.04 | % | 14,350 | |||||||||
C Class with sales Charge(1,4,7) | 7.40 | % | 6.11 | % | 5.02 | % | 14,320 | |||||||||
C Class without sales Charge(1,4,7) | 8.40 | % | 6.11 | % | 5.02 | % | 14,320 | |||||||||
Retirement Income and Appreciation Composite Index(6) | 11.26 | % | 6.33 | % | 5.33 | % | 14,634 | |||||||||
Barclays Capital Aggregate Index (5) | 8.01 | % | 6.45 | % | 6.37 | % | 14,088 | |||||||||
BofA Merrill Lynch All U.S. Convertibles Index (5) | 3.18 | % | 4.70 | % | N/A | 15,639 | ||||||||||
Lipper Intermediate Investment Grade Index (5) | 10.99 | % | 6.06 | % | 5.93 | % | 14,204 |
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 since inception periods represent the returns achieved by the Investor Class from 7/1/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Y Class been in existence since 7/1/03. | |
3. | Fund performance for the one-year, five-year, and since inception periods represent the returns achieved by the Investor Class from 7/1/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 7/1/03. The maximum sales charge for A Class is 4.75%. | |
4. | Fund performance for the one-year, five-year, and since inception periods represent the returns achieved by the Investor Class from 7/1/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 7/1/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. | |
5. | The Barclays Capital Aggregate Index represents returns of the Barclays Capital Gov./Credit Intermediate Index (“Intermediate Index”) up to October 31, 2006 and the Barclays Capital Aggregate Index (“Aggregate Index”) thereafter. The Intermediate Index is an unmanaged index of investment grade corporate and government debt issues with maturities between one and ten years. The Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The BofA 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 Lipper Intermediate Investment Grade Index tracks the results of the 30 largest mutual funds in the Lipper Intermediate Investment Grade Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
6. | To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and convertible securities, the returns of the Barclays Capital Aggregate Index and the BofA Merrill Lynch All U.S. Convertibles Index have been combined in a 75%/25% proportion. | |
7. | The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Y, Investor, A, and C Class shares was 0.77%, 1.02%, 1.15%, and 1.90%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. |
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 convertible bonds, convertible preferreds, high yield bonds, and equities in order to enhance the potential return of the Fund.
6
Performance Overview
American Beacon Retirement Income and Appreciation FundSM
October 31, 2010 (Unaudited)
During the twelve-month period, the investment grade bond portion of the Fund returned 8.4% before expenses, compared to an 8.0% return for the Barclays Index. This portion of the Fund outperformed largely due to a substantial overweight position in Corporates, the second best performing sector in the Barclays Index.
The remaining portion of the Fund, managed by the Fund’s sub-advisor, returned 12.7% before expenses. These results trailed the 20.8% return of the ML Index due to the sub-advisor’s high quality bias. Strong performance in the most speculative segment of the convertible market continued to define the most recent annual period, as the speculative grade portion of the ML Index posted a gain of 26.4%, dramatically outperforming the 10.1% return from the investment grade segment of the ML Index. The sub-advisor’s portion of the portfolio was invested in names with better balance sheets, lower debt levels, and higher cash flows. This portion of the portfolio was also hurt by stock selection in the Consumer Discretionary sector and underweighting this sector which was the best performing sector in the ML Index.
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 | ||||
Federal National Mortgage Association, 4.500%, Due 1/1/2040 | 1.4 | % | ||
Federal Home Loan Mortgage Corporation, Pool # G08079, 5.000%, Due 9/1/2035 | 1.3 | % | ||
Federal National Mortgage Association, 4.000%, Due 9/1/2040 | 1.0 | % | ||
EMC Corp., 1.750%, Due 12/1/2013 | 1.0 | % | ||
General Electric Capital Corp., 0.450%, Due 1/8/2016 | 0.8 | % | ||
Federal National Mortgage Association, Pool # 745418, 5.500%, Due 4/1/2036 | 0.8 | % | ||
American Express Credit Account Master Trust, 5.350%, Due 1/15/2014 | 0.8 | % | ||
Federal Home Loan Mortgage Corporation, Pool # A73703, 5.000%, Due 3/1/2038 | 0.8 | % | ||
Citigroup, Inc., 8.500%, Due 5/22/2019 | 0.7 | % | ||
NetApp, Inc., 1.750%, Due 6/1/2013 | 0.7 | % |
Sector Allocation
% of Fixed | ||||
Income | ||||
Corporate | 39.7 | % | ||
U.S. TIPS | 22.1 | % | ||
Convertibles | 14.2 | % | ||
U.S. Agency Mortgage-Backed Obligations | 12.0 | % | ||
Asset-Backed | 5.4 | % | ||
Mortgage-Backed | 3.1 | % | ||
Commercial Mortgage-Backed Securities | 2.6 | % | ||
Agency | 0.4 | % | ||
Other Government | 0.3 | % | ||
Municipal Obligations | 0.2 | % |
Sector Allocation
% of | ||||
Equities | ||||
Information Technology | 22.1 | % | ||
Financials | 19.1 | % | ||
Energy | 16.2 | % | ||
Consumer Discretionary | 12.5 | % | ||
Industrials | 10.4 | % | ||
Materials | 7.9 | % | ||
Health Care | 6.8 | % | ||
Consumer Staples | 5.0 | % |
7
Performance Overview
American Beacon Intermediate Bond FundSM
October 31, 2010 (Unaudited)
American Beacon Intermediate Bond FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Intermediate Bond Fund returned 7.56% for the twelve months ended October 31, 2010, underperforming the Barclays Capital Aggregate Index (the “Index”) return of 8.01% and the Lipper Intermediate Investment Grade Index return of 10.99% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/00 through 10/31/10
For the Period from 10/31/00 through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858625.gif)
Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,7) | 7.56 | % | 6.72 | % | 6.35 | % | $ | 18,513 | ||||||||
Y Class(1,3,7) | 7.41 | % | 6.69 | % | 6.34 | % | 18,488 | |||||||||
Investor Class (1,2,7) | 7.01 | % | 6.53 | % | 6.26 | % | 18,353 | |||||||||
A Class with sales Charge(1,4,7) | 1.82 | % | 5.47 | % | 5.73 | % | 17,451 | |||||||||
A Class without sales Charge(1,4,7) | 6.87 | % | 6.51 | % | 6.25 | % | 18,330 | |||||||||
C Class with sales Charge(1,5,7) | 5.87 | % | 6.50 | % | 6.25 | % | 18,329 | |||||||||
C Class without sales Charge(1,5,7) | 6.87 | % | 6.50 | % | 6.25 | % | 18,329 | |||||||||
Barclays Capital Agg. Index (6) | 8.01 | % | 6.45 | % | 6.38 | % | 18,561 | |||||||||
Lipper Intermediate Inv. Grade Index (6) | 10.99 | % | 6.06 | % | 6.11 | % | 18,093 |
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. Performance shown reflects the Fund’s receipt in December 2006 and March 2008 of class action proceeds that were related to investment activity in 2002. The Fund’s performance was higher than it would have been absent receipt of the settlement proceeds. | |
2. | Fund performance represents the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor 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 Investor Class been in existence since 10/31/00. | |
3. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/00 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
4. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/00 through 3/2/09, the Investor Class from 3/2/09 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. The maximum sales charge for A Class is 4.75%. | |
5. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/00 through 3/2/09, the Investor Class from 3/2/09 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase. | |
6. | The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Intermediate Investment Grade Index tracks the results of the 30 largest mutual funds in the Lipper Intermediate Investment Grade Funds category. Lipper is an independent research and ranking service. One cannot directly invest in an index. | |
7. | The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.33%, 0.71%, 1.23%, 1.08%, and 1.83%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. |
Prior to the deduction of expenses, the Fund outperformed the Index. However, the Fund did not generate enough excess performance to offset expenses. Gross of Fund expenses, the Fund added value relative to the Index entirely through sector allocation as security selection detracted from performance. An overweight in Corporates, the second best performing sector in the Index, accounted for the majority of the excess performance. Among the Fund’s corporate bond holdings, the lower rated issuers (A1 to Baa3) were the largest contributors. Underweight positions in Mortgage Pass-Throughs, Agencies and U.S. Treasuries also generated positive returns relative to the Index.
8
Performance Overview
American Beacon Intermediate Bond FundSM
October 31, 2010 (Unaudited)
The Fund’s investment managers remain focused on a conservative approach toward investing in the bond market, focusing on issuer-specific opportunities to add value.
Top Ten Holdings
% of | ||||
Net Assets | ||||
Federal Home Loan Mortgage Corporation, 5.000%, Due 4/1/2040 | 1.7 | % | ||
Federal National Mortgage Association, 5.000%, Due 4/1/2025 | 1.4 | % | ||
Federal National Mortgage Association, 4.500%, Due 6/1/2025 | 1.4 | % | ||
Federal National Mortgage Association, 4.500%, Due 1/1/2040 | 1.3 | % | ||
Federal National Mortgage Association, 5.500%, Due 6/1/2040 | 1.2 | % | ||
Federal National Mortgage Association, 5.000%, Due 5/1/2040 | 1.2 | % | ||
Federal Home Loan Mortgage Corporation, Pool # A73703, 5.000%, Due 3/1/2038 | 1.1 | % | ||
Federal Home Loan Mortgage Corporation, 5.500%, Due 5/1/2038 | 0.9 | % | ||
Federal National Mortgage Association, 4.000%, Due 9/1/2040 | 0.8 | % |
Sector Allocation
% of Fixed | ||||
Income | ||||
Corporate | 39.4 | % | ||
U.S. TIPS | 26.3 | % | ||
U.S. Agency Mortgage-Backed Obligations | 21.2 | % | ||
Mortgage-Backed | 5.6 | % | ||
Asset-Backed | 3.5 | % | ||
Commercial Mortgage-Backed Securities | 3.4 | % | ||
Agency | 0.4 | % | ||
Municipal Obligations | 0.1 | % | ||
Other Government | 0.1 | % |
9
Performance Overview
American Beacon Short-Term Bond FundSM
American Beacon Short-Term Bond FundSM
October 31, 2010 (Unaudited)
The Institutional Class of the Short-Term Bond Fund returned 3.78% for the twelve months ended October 31, 2010, which outperformed the BofA Merrill Lynch 1-3 Year Gov/Corp Index (“Index”) return of 3.18% but underperformed the Lipper Short Investment Grade Bond Funds Index (“Lipper”) return of 5.43%.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/00 through 10/31/10
For the Period from 10/31/00 through 10/31/10
![(PERFORMANCE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858626.gif)
Value of | ||||||||||||||||
Annualized Total Returns | $10,000 | |||||||||||||||
Periods Ended 10/31/10 | 10/31/00- | |||||||||||||||
1 Year | 5 Years | 10 Years | 10/31/10 | |||||||||||||
Institutional Class(1,6) | 3.78 | % | 4.53 | % | 4.43 | % | $ | 15,419 | ||||||||
Y Class(1,2,6) | 3.75 | % | 4.53 | % | 4.42 | % | 15,414 | |||||||||
Investor Class(1,6) | 3.33 | % | 4.05 | % | 3.95 | % | 14,727 | |||||||||
A Class with sales Charge(1,3,6) | 0.73 | % | 3.54 | % | 3.68 | % | 14,356 | |||||||||
A Class without sales Charge(1,3,6) | 3.35 | % | 4.05 | % | 3.95 | % | 14,730 | |||||||||
C Class with sales Charge(1,4,6) | 2.28 | % | 4.04 | % | 3.94 | % | 14,720 | |||||||||
C Class without sales Charge(1,4,6) | 3.28 | % | 4.04 | % | 3.94 | % | 14,720 | |||||||||
Lipper Short Inv. Grade Index (2) | 5.43 | % | 3.99 | % | 3.89 | % | 14,643 | |||||||||
BofA Merrill Lynch 1-3Yr. Gov./Corp Index(2) | 3.18 | % | 4.70 | % | 4.54 | % | 15,585 |
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. A portion of the fees charged to the Investor Class of the Fund has been waived. Performance prior to waiving fees was lower than the actual returns shown. Performance shown reflects the Fund’s receipt in December 2006 and March 2008 of class action proceeds that were related to investment activity in 2002. The Fund’s performance was higher than it would have been absent receipt of the settlement proceeds. | |
2. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/00 through 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 10/31/00. | |
3. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Investor Class from 10/31/00 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/00. The maximum sales charge for A Class is 2.50%. | |
4. | Fund performance for the one-year, five-year, and ten-year periods represent the total returns achieved by the Investor Class from 10/31/00 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/00. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase. | |
5. | The BofA 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 Lipper Short Investment Grade Bond Funds Index tracks the results of the 30 largest mutual funds in the Lipper Short Investment Grade Bond Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. | |
6. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.33%, 0.73%, 0.85%, 1.08%, and 1.83%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
As compared to the Index, the Fund outperformed due to its overweight positions in the Corporate and Asset-Backed sectors. These sectors outperformed Treasuries and Agencies during the period as the credit markets continued to recover following the gradually improving economy. The Fund generally maintains overweight positions in these sectors to generate incremental yield-to-maturity compared to the Index.
The Fund’s duration was shorter than that of the Index during the period in response to the ultra-low interest rate environment. The Fund’s short duration resulted in a slightly lower total return than would have been the case with a neutral duration. While we do not expect the Federal Reserve Bank to raise interest rates soon, we do want to protect the Fund from an ultimate rise in rates that will inevitably accompany an
10
Performance Overview
American Beacon Short-Term Bond FundSM
American Beacon Short-Term Bond FundSM
October 31, 2010 (Unaudited)
economic recovery. In the mean time, we intend to opportunistically add duration to the Fund to keep it within approximately 20% of Index duration until the Fed rate hikes become more imminent.
Despite the recent volatility in Europe and the sluggish U.S. recovery, the credit markets performed well during the period as corporate profitability improved and as investors sought higher yields. The backdrop for the improvement, however, is fragile given the weak state of the U.S. housing market and uncertainty in international capital markets. Although the Fund does not invest in obligations of the affected countries, investor sentiment in general is difficult to anticipate, and a broader tilt towards risk aversion may adversely affect the U.S. credit markets.
As such, while we look for opportunity to generate attractive results in this environment, we will maintain our conservative approach towards credit risk and seek to outperform over the long term on a risk-adjusted basis.
Top Ten Holdings
% of | ||||
Net Assets | ||||
Government National Mortgage Association, 3.069%, Due 6/16/2036 | 2.0 | % | ||
Dexia Credit Local N.Y., 0.693%, Due 3/5/2013 | 1.9 | % | ||
John Deere Owner Trust, 0.720%, Due 7/16/2012 | 1.9 | % | ||
JPMorgan Chase & Co., 0.902%, Due 2/26/2013 | 1.9 | % | ||
Chrysler Financial Lease Trust, 1.780%, Due 6/15/2011 | 1.7 | % | ||
Citigroup, Inc., 0.558%, Due 11/5/2014 | 1.6 | % | ||
Goldman Sachs Group, Inc., 4.750%, Due 7/15/2013 | 1.4 | % | ||
MBNA Corp., 7.500%, Due 3/15/2012 | 1.4 | % | ||
Progress Energy, Inc., 7.100%, Due 3/1/2011 | 1.4 | % | ||
Credit Suisse First Boston, 5.000%, Due 5/15/2013 | 1.4 | % |
Sector Allocation
% of Fixed | ||||
Income | ||||
Corporate | 52.8 | % | ||
Asset-Backed | 23.9 | % | ||
U.S. TIPS | 12.1 | % | ||
U.S. Agency Mortgage-Backed Obligations | 7.0 | % | ||
Commercial Mortgage-Backed Securities | 4.0 | % | ||
Municipal Obligations | 0.2 | % |
11
Fund Expenses
American Beacon Funds
American Beacon Funds
October 31, 2010 (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, 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 a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2010 through October 31, 2010.
Actual Expenses
The following tables provide information about actual account values and actual expenses. You may use the information on this page, 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 “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
High Yield | Intermediate | Short-Term | ||||||||||
Institutional Class | Bond Fund | Bond Fund | Bond Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,060.58 | $ | 1,051.29 | $ | 1,021.11 | ||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 4.16 | $ | 1.65 | $ | 1.58 | ||||||
Annualized Expense Ratio | 0.80 | % | 0.32 | % | 0.31 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Y Class | Bond Fund | Fund | Bond Fund | Bond Fund | ||||||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,060.36 | $ | 1,051.20 | $ | 1,048.87 | $ | 1,017.73 | ||||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 5.50 | $ | 5.53 | $ | 4.08 | $ | 3.76 | ||||||||
Annualized Expense Ratio | 1.06 | % | 1.07 | % | 0.79 | % | 0.74 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Investor Class | Bond Fund | Fund | Bond Fund | Bond Fund | ||||||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,060.36 | $ | 1,051.20 | $ | 1,048.87 | $ | 1,017.73 | ||||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 5.50 | $ | 5.53 | $ | 4.08 | $ | 3.76 | ||||||||
Annualized Expense Ratio | 1.06 | % | 1.07 | % | 0.79 | % | 0.74 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Intermediate | Short-Term | Appreciation | |||||||||||||
A Class** | Bond Fund | Bond Fund | Bond Fund | Fund | ||||||||||||
Beginning Account Value 5/17/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,086.59 | $ | 1,043.07 | $ | 1,017.79 | $ | 1,055.15 | ||||||||
Expenses Paid During Period 5/17/10-10/31/10 * | $ | 5.35 | $ | 4.44 | $ | 3.74 | $ | 5.36 | ||||||||
Annualized Expense Ratio | 1.12 | % | 0.95 | % | 0.81 | % | 1.14 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Intermediate | Short-Term | Appreciation | |||||||||||||
C Class** | Bond Fund | Bond Fund | Bond Fund | Fund | ||||||||||||
Beginning Account Value 9/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,053.27 | $ | 1,005.57 | $ | 1,004.78 | $ | 1,021.02 | ||||||||
Expenses Paid During Period 9/1/10-10/31/10 * | $ | 3.16 | $ | 2.87 | $ | 2.64 | $ | 3.87 | ||||||||
Annualized Expense Ratio | 1.87 | % | 1.74 | % | 1.60 | % | 2.33 | % |
12
Fund Expenses
American Beacon Funds
American Beacon Funds
October 31, 2010 (Unaudited)
High Yield | ||||
AMR Class | Bond Fund | |||
Beginning Account Value 5/1/10 | $ | 1,000.00 | ||
Ending Account Value 10/31/2010 | $ | 1,063.10 | ||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 2.86 | ||
Annualized Expense Ratio | 0.55 | % |
Hypothetical Example for Comparison Purposes
The following tables 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 Investor and Institutional Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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, such as redemption fees as applicable. 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 following tables 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.
High Yield | Intermediate | Short-Term | ||||||||||
Institutional Class | Bond Fund | Bond Fund | Bond Fund | |||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||
Ending Account Value 10/31/10 | $ | 1,021.17 | $ | 1,023.59 | $ | 1,023.64 | ||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 4.08 | $ | 1.63 | $ | 1.58 | ||||||
Annualized Expense Ratio | 0.80 | % | 0.32 | % | 0.31 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Y Class | Bond Fund | Fund | Bond Fund | Bond Fund | ||||||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,019.86 | $ | 1,019.81 | $ | 1,021.22 | $ | 1,021.48 | ||||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 5.40 | $ | 5.45 | $ | 4.02 | $ | 3.77 | ||||||||
Annualized Expense Ratio | 1.06 | % | 1.07 | % | 0.79 | % | 0.74 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Investor Class | Bond Fund | Fund | Bond Fund | Bond Fund | ||||||||||||
Beginning Account Value 5/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,019.86 | $ | 1,019.81 | $ | 1,021.22 | $ | 1,021.48 | ||||||||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 5.40 | $ | 5.45 | $ | 4.02 | $ | 3.77 | ||||||||
Annualized Expense Ratio | 1.06 | % | 1.07 | % | 0.79 | % | 0.74 | % |
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Intermediate | Short-Term | Appreciation | |||||||||||||
A Class** | Bond Fund | Bond Fund | Bond Fund | Fund | ||||||||||||
Beginning Account Value 5/17/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,019.56 | $ | 1,020.42 | $ | 1,021.12 | $ | 1,019.46 | ||||||||
Expenses Paid During Period 5/17/10-10/31/10 * | $ | 5.70 | $ | 4.84 | $ | 4.13 | $ | 5.80 | ||||||||
Annualized Expense Ratio | 1.12 | % | 0.95 | % | 0.81 | % | 1.14 | % |
13
Fund Expenses
American Beacon Funds
American Beacon Funds
October 31, 2010 (Unaudited)
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Intermediate | Short-Term | Appreciation | |||||||||||||
C Class** | Bond Fund | Bond Fund | Bond Fund | Fund | ||||||||||||
Beginning Account Value 9/1/10 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | $ | 1,000.00 | ||||||||
Ending Account Value 10/31/10 | $ | 1,015.78 | $ | 1,016.43 | $ | 1,017.14 | $ | 1,013.46 | ||||||||
Expenses Paid During Period 9/1/10-10/31/10 * | $ | 9.50 | $ | 8.84 | $ | 8.13 | $ | 11.82 | ||||||||
Annualized Expense Ratio | 1.87 | % | 1.74 | % | 1.60 | % | 2.33 | % |
High Yield | ||||
AMR Class | Bond Fund | |||
Beginning Account Value 5/1/10 | $ | 1,000.00 | ||
Ending Account Value 10/31/10 | $ | 1,022.43 | ||
Expenses Paid During Period 5/1/10-10/31/10 * | $ | 2.80 | ||
Annualized Expense Ratio | 0.55 | % |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. | |
** | Beginning account value is the Fund inception. Expenses are equal to the Fund’s expense ratio, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the period (168 and 61) for the A and C Classes, respectively, by the days in the year (365). |
14
American Beacon Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund:
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of the American Beacon High Yield Bond Fund, the American Beacon Intermediate Bond Fund, the American Beacon Retirement Income and Appreciation Fund, and the American Beacon Short-Term Bond Fund (four of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2010, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon High Yield Bond Fund, the American Beacon Intermediate Bond Fund, the American Beacon Retirement Income and Appreciation Fund, and the American Beacon Short-Term Bond Fund at October 31, 2010, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![-s- Ernst & Young LLP](https://capedge.com/proxy/N-CSR/0000950123-11-001531/d78586d7858605.gif)
Dallas, Texas
December 23, 2010
December 23, 2010
15
American Beacon High Yield Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
COMMON STOCK — 0.17% | ||||||||
COMMUNICATIONS — 0.17% | ||||||||
Communications — 0.08% | ||||||||
Charter Communications, Inc.* † | 9,435 | 151 | ||||||
151 | ||||||||
Media — 0.09% | ||||||||
Dex One Corp.* | 23,761 | 166 | ||||||
SuperMedia, Inc.* | 1,037 | 7 | ||||||
173 | ||||||||
Total Communications | 324 | |||||||
Total Common Stock (Cost $1,828) | 324 | |||||||
PREFERRED STOCK — 0.17% | ||||||||
FINANCIALS — 0.17% | ||||||||
Diversified Financials — 0.00% | ||||||||
Federal Home Loan Mortgage Corp.* | 10,000 | 5 | ||||||
Finance — 0.17% | ||||||||
Ally Financial, Inc.‡ | 359 | 319 | ||||||
Total Financials | 324 | |||||||
Total Preferred Stock (Cost $253) | 324 | |||||||
CORPORATE OBLIGATION — 94.80% | ||||||||
Casino/Gaming — 0.00% | ||||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, Due 6/15/2015‡ # | 1,800 | 5 | ||||||
Station Casinos, Inc., | ||||||||
6.875%, Due 3/1/2016 # | 500 | 0 | ||||||
7.75%, Due 8/15/2016 # | 500 | 0 | ||||||
5 | ||||||||
Consumer — 6.56% | ||||||||
Alliance One International, Inc., 10.00%, Due 7/15/2016 | 400 | 440 | ||||||
Central Garden and Pet Co., 8.25%, Due 3/1/2018 | 445 | 467 | ||||||
Diversey Holdings, Inc., 10.50%, Due 5/15/2020 | 800 | 930 | ||||||
Dole Food Co, Inc., 13.875%, Due 3/15/2014 | 115 | 142 | ||||||
Easton-Bell Sports, Inc., 9.75%, Due 12/1/2016 | 705 | 772 | ||||||
Fage Dairy Industries, 9.875%, Due 2/1/2020‡ | 815 | 780 | ||||||
Jarden Corp., 7.50%, Due 5/1/2017 | 800 | 851 | ||||||
JBS Finance II Ltd., 8.25%, Due 1/29/2018‡ | 265 | 280 | ||||||
JBS USA LLC, 11.625%, Due 5/1/2014 | 1,400 | 1,654 | ||||||
Michael Foods, Inc., 9.75%, Due 7/15/2018‡ | 525 | 572 | ||||||
NBTY, Inc., 9.00%, Due 10/1/2018‡ | 425 | 452 | ||||||
Pinnacle Foods Finance LLC, | ||||||||
9.25%, Due 4/1/2015‡ | 800 | 843 | ||||||
10.625%, Due 4/1/2017 | 175 | 190 | ||||||
Pinnacle Foods Finance LLC / Pinnacle Foods Finance Corp., 8.25%, Due 9/1/2017‡ | 400 | 418 | ||||||
Prestige Brands, Inc., 8.25%, Due 4/1/2018 | 630 | 657 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Simmons Foods, Inc., 10.50%, Due 11/1/2017‡ | 750 | 750 | ||||||
Spectrum Brands Holdings, Inc., 9.50%, Due 6/15/2018‡ | 525 | 583 | ||||||
Visant Corp., 10.00%, Due 10/1/2017‡ | 1,320 | 1,406 | ||||||
12,187 | ||||||||
Energy — 15.38% | ||||||||
Antero Resources Finance Corp., 9.375%, Due 12/1/2017 | 700 | 744 | ||||||
Berry Petroleum Co., | ||||||||
10.25%, Due 6/1/2014 | 397 | 458 | ||||||
6.75%, Due 11/1/2020 | 415 | 428 | ||||||
BreitBurn Energy Partners LP, 8.625%, Due 10/15/2020‡ | 400 | 404 | ||||||
Brigham Exploration Co., 8.75%, Due 10/1/2018‡ | 700 | 756 | ||||||
Carrizo Oil & Gas, Inc., 8.625%, Due 10/15/2018‡ | 705 | 714 | ||||||
Chaparral Energy, Inc., 9.875%, Due 10/1/2020‡ | 600 | 632 | ||||||
CHC Helicopter SA, 9.25%, Due 10/15/2020‡ | 1,360 | 1,420 | ||||||
Chesapeake Energy Corp., 6.625%, Due 8/15/2020 | 1,575 | 1,667 | ||||||
Cie Generale de Geophysique-Veritas, | ||||||||
7.50%, Due 5/15/2015 | 500 | 516 | ||||||
9.50%, Due 5/15/2016 | 400 | 442 | ||||||
Coffeyville Resources LLC, | ||||||||
9.00%, Due 4/1/2015‡ | 485 | 520 | ||||||
10.875%, Due 4/1/2017‡ | 385 | 410 | ||||||
Compton Petroleum Finance Corp., 10.00%, Due 9/15/2017 | 522 | 446 | ||||||
Copano Energy LLC, 8.125%, Due 3/1/2016 | 800 | 826 | ||||||
Crosstex Energy LP, 8.875%, Due 2/15/2018 | 500 | 540 | ||||||
El Paso Corp., 7.00%, Due 6/15/2017 | 1,000 | 1,090 | ||||||
Energy Transfer Equity LP, 7.50%, Due 10/15/2020 | 975 | 1,063 | ||||||
Enterprise Products Operating LLC, 7.034%, Due 1/15/2068 | 1,510 | 1,558 | ||||||
Harvest Operations Corp., 6.875%, Due 10/1/2017‡ | 295 | 310 | ||||||
Helix Energy Solutions Group, Inc., 9.50%, Due 1/15/2016‡ | 480 | 497 | ||||||
Hilcorp Energy, 8.00%, Due 2/15/2020‡ | 500 | 528 | ||||||
Holly Corp., 9.875%, Due 6/15/2017 | 300 | 329 | ||||||
Inergy LP/Inergy Finance Corp., 7.00%, Due 10/1/2018‡ | 535 | 559 | ||||||
Linn Energy LLC, 8.625%, Due 4/15/2020‡ | 900 | 972 | ||||||
Linn Energy LLC/Linn Energy Finance Corp., 7.75%, Due 2/1/2021‡ | 970 | 1,002 | ||||||
MarkWest Energy Partners LP, 8.75%, Due 4/15/2018 | 560 | 615 | ||||||
MarkWest Energy Partners LP / MarkWest Energy Finance Corp., 6.75%, Due 11/1/2020 | 500 | 511 | ||||||
Martin Midstream Partners & Finance, 8.875%, Due 4/1/2018‡ | 945 | 983 | ||||||
Offshore Group Investments Ltd., 11.50%, Due 8/1/2015‡ | 500 | 530 | ||||||
OPTI Canada, Inc., | ||||||||
9.75%, Due 8/15/2013‡ | 1,000 | 1,020 |
See accompanying notes
16
American Beacon High Yield Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
8.25%, Due 12/15/2014 | 800 | 606 | ||||||
Petrohawk Energy Corp., | ||||||||
10.50%, Due 8/1/2014 | 900 | 1,028 | ||||||
7.25%, Due 8/15/2018 | 565 | 586 | ||||||
Plains Exploration & Production Co., 10.00%, Due 3/1/2016 | 900 | 1,027 | ||||||
Quicksilver Resources, Inc., | ||||||||
8.25%, Due 8/1/2015 | 400 | 407 | ||||||
9.125%, Due 8/15/2019 | 500 | 534 | ||||||
Regency Energy Partners LP/Regency | ||||||||
Energy Finance Corp., | ||||||||
9.375%, Due 6/1/2016 | 635 | 711 | ||||||
6.875%, Due 12/1/2018 | 145 | 152 | ||||||
SandRidge Energy, Inc., | ||||||||
9.875%, Due 5/15/2016‡ | 100 | 107 | ||||||
8.00%, Due 6/1/2018‡ | 900 | 900 | ||||||
28,548 | ||||||||
Finance — 9.56% | ||||||||
Alliant Holdings I, Inc., 11.00%, Due 5/1/2015‡ | 850 | 894 | ||||||
Ally Financial, Inc., | ||||||||
6.875%, Due 8/28/2012 | 1,000 | 1,050 | ||||||
8.00%, Due 12/31/2018 | 400 | 414 | ||||||
7.50%, Due 9/15/2020‡ | 550 | 594 | ||||||
8.00%, Due 11/1/2031 | 725 | 792 | ||||||
Bank of America Corp., 8.125%, Due 12/29/2049 | 1,000 | 1,009 | ||||||
Bank One Capital III, 8.75%, Due 9/1/2030 | 420 | 493 | ||||||
CEDC Finance Corp International, Inc., 9.125%, Due 12/1/2016‡ | 1,175 | 1,269 | ||||||
CIT Group, Inc., 7.00%, Due 5/1/2017 | 1,700 | 1,691 | ||||||
Columbus International, Inc., 11.50%, Due 11/20/2014‡ | 460 | 516 | ||||||
E*Trade Financial Corp., 12.50%, Due 11/30/2017 | 650 | 752 | ||||||
Expro Finance Luxembourg SCA, 8.50%, Due 12/15/2016‡ | 900 | 887 | ||||||
HUB International Holdings, Inc., 10.25%, Due 6/15/2015‡ | 825 | 827 | ||||||
International Lease Finance Corp., | ||||||||
5.65%, Due 6/1/2014 | 1,100 | 1,100 | ||||||
6.75%, Due 9/1/2016‡ | 400 | 436 | ||||||
Liberty Mutual Group, Inc., 10.75%, Due 6/15/2058‡ § | 735 | 911 | ||||||
Marsico Parent Co. LLC, | ||||||||
10.625%, Due 1/15/2016‡ | 800 | 480 | ||||||
12.50%, Due 7/15/2016‡ | 658 | 33 | ||||||
MBNA Capital A, 8.278%, Due 12/1/2026 | 625 | 638 | ||||||
Midwest Gaming Borrower LLC, 11.625%, Due 4/15/2016‡ | 800 | 820 | ||||||
Nationwide Mutual Insurance Co., 9.375%, Due 8/15/2039‡ | 500 | 586 | ||||||
Navios Maritime Acquisition Corp/Navios Acquisition Finance US, Inc., 8.625%, Due 11/1/2017‡ | 350 | 354 | ||||||
Pinafore LLC/Pinafore, Inc., 9.00%, Due 10/1/2018‡ | 100 | 107 | ||||||
Reliance Intermediate Holdings LP, 9.50%, Due 12/15/2019‡ | 820 | 871 | ||||||
Sabra Health Care LP/Sabra Capital Corp., 8.125%, Due 11/1/2018‡ | 225 | 233 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
17,757 | ||||||||
Manufacturing — 21.37% | ||||||||
Accuride Corp., 9.50%, Due 8/1/2018‡ | 900 | 981 | ||||||
Advanced Micro Devices, Inc., | ||||||||
8.125%, Due 12/15/2017 | 200 | 216 | ||||||
7.75%, Due 8/1/2020‡ | 100 | 106 | ||||||
Allison Transmission, Inc., 11.00%, Due 11/1/2015‡ | 800 | 868 | ||||||
American Axle & Manufacturing Holdings, Inc., 5.25%, Due 2/11/2014 | 485 | 472 | ||||||
ArvinMeritor, Inc., 10.625%, Due 3/15/2018 | 500 | 568 | ||||||
Building Materials Corp. of America, | ||||||||
6.875%, Due 8/15/2018‡ | 300 | 300 | ||||||
7.50%, Due 3/15/2020‡ | 400 | 409 | ||||||
Case New Holland, Inc., 7.875%, Due 12/1/2017‡ | 420 | 469 | ||||||
Catalyst Paper Corp., 11.00%, Due 12/15/2016‡ | 375 | 337 | ||||||
Cleaver-Brooks, Inc., 12.25%, Due 5/1/2016‡ | 390 | 410 | ||||||
Colt Defense LLC, 8.75%, Due 11/15/2017‡ | 730 | 548 | ||||||
Consol Energy, Inc., | ||||||||
8.00%, Due 4/1/2017‡ | 770 | 843 | ||||||
8.25%, Due 4/1/2020‡ | 365 | 407 | ||||||
CPG International I, Inc., 7.501%, Due 7/1/2012§ | 460 | 460 | ||||||
DynCorp International, Inc., 10.375%, Due 7/1/2017‡ | 445 | 455 | ||||||
EVERTEC, Inc., 11.00%, Due 10/1/2018‡ | 650 | 654 | ||||||
First Data Corp., | ||||||||
9.875%, Due 9/24/2015 | 500 | 423 | ||||||
10.55%, Due 9/24/2015 | 1,020 | 862 | ||||||
FMG Resources August 2006 Pty Ltd., 7.00%, Due 11/1/2015‡ | 300 | 308 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
6.625%, Due 8/15/2017 | 1,705 | 1,906 | ||||||
8.125%, Due 1/15/2020 | 900 | 1,101 | ||||||
Freescale Semiconductor, Inc., | ||||||||
8.875%, Due 12/15/2014 | 500 | 509 | ||||||
10.75%, Due 8/1/2020‡ | 1,000 | 1,038 | ||||||
Goodman Global Group, Inc., %, Due 12/15/2014 | 285 | 183 | ||||||
Goodyear Tire & Rubber Co., 8.25%, Due 8/15/2020 | 800 | 852 | ||||||
Grupo Papelero Scribe SA, 8.875%, Due 4/7/2020‡ | 315 | 317 | ||||||
Hillman Group, Inc., 10.875%, Due 6/1/2018‡ | 315 | 337 | ||||||
Huntsman International LLC, | ||||||||
7.875%, Due 11/15/2014 | 800 | 836 | ||||||
8.625%, Due 3/15/2021‡ | 100 | 110 | ||||||
Idearc, Inc., Due 11/15/2016# | 1,314 | 0 | ||||||
Ineos Finance PLC, 9.00%, Due 5/15/2015‡ | 200 | 212 | ||||||
Ineos Group Holdings plc, 8.50%, Due 2/15/2016‡ | 600 | 546 | ||||||
International Coal Group, Inc., 9.125%, Due 4/1/2018 | 430 | 469 | ||||||
KB Home, | ||||||||
6.25%, Due 6/15/2015 | 400 | 386 | ||||||
9.10%, Due 9/15/2017 | 400 | 416 |
See accompanying notes
17
American Beacon High Yield Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
M/I Homes, Inc., 8.625%, Due 11/15/2018‡ | 500 | 500 | ||||||
MacDermid, Inc., 9.50%, Due 4/15/2017‡ | 1,825 | 1,947 | ||||||
Manitowoc Co., Inc., 9.50%, Due 2/15/2018 | 700 | 753 | ||||||
Meritage Homes Corp., 6.25%, Due 3/15/2015 | 425 | 427 | ||||||
Momentive Performance Materials, Inc., | ||||||||
9.75%, Due 12/1/2014 | 405 | 426 | ||||||
9.00%, Due 1/15/2021‡ | 715 | 742 | ||||||
Motors Liquidation Co., 8.375%, Due 7/15/2033 # | 1,570 | 565 | ||||||
Mueller Water Products, Inc., 8.75%, Due 9/1/2020‡ | 450 | 488 | ||||||
NewPage Corp., 11.375%, Due 12/31/2014 | 1,950 | 1,871 | ||||||
Norske Skogindustrier ASA, 6.125%, Due 10/15/2015‡ | 1,450 | 1,110 | ||||||
Novelis, Inc., 7.25%, Due 2/15/2015 | 500 | 516 | ||||||
NXP BV / NXP Funding LLC, 9.75%, Due 8/1/2018‡ | 200 | 218 | ||||||
Omnova Solutions, Inc., 7.875%, Due 11/1/2018‡ | 200 | 205 | ||||||
Oshkosh Corp., 8.50%, Due 3/1/2020 | 410 | 454 | ||||||
Peabody Energy Corp., 7.375%, Due 11/1/2016 | 800 | 906 | ||||||
Quiksilver, Inc., 6.875%, Due 4/15/2015 | 605 | 590 | ||||||
RBS Global, Inc. / Rexnord LLC, 8.50%, Due 5/1/2018 | 900 | 945 | ||||||
Reynolds Group, 8.50%, Due 5/15/2018‡ | 900 | 920 | ||||||
Reynolds Group Issuer Inc / Reynolds Group Issuer LLC / Reynolds Group Issuer Lu, 9.00%, Due 4/15/2019‡ | 1,100 | 1,143 | ||||||
Ryerson, Inc., 12.00%, Due 11/1/2015 | 420 | 437 | ||||||
Sanmina-SCI Corp., 8.125%, Due 3/1/2016 | 900 | 925 | ||||||
Solo Cup Co., 8.50%, Due 2/15/2014 | 1,700 | 1,529 | ||||||
Standard Pacific Corp., 8.375%, Due 5/15/2018 | 200 | 207 | ||||||
Stratus Technologies, Inc., 12.00%, Due 3/29/2015‡ | 425 | 357 | ||||||
SunGard Data Systems, Inc., 10.25%, Due 8/15/2015 | 100 | 105 | ||||||
The Manitowoc Co Inc, 8.50%, Due 11/1/2020 | 100 | 104 | ||||||
Titan International, Inc., 7.875%, Due 10/1/2017‡ | 440 | 458 | ||||||
TriMas Corp., 9.75%, Due 12/15/2017‡ | 200 | 218 | ||||||
TRW Automotive, Inc., 8.875%, Due 12/1/2017‡ | 325 | 361 | ||||||
Tutor Perini Corp., 7.625%, Due 11/1/2018‡ | 440 | 447 | ||||||
USG Corp., 9.75%, Due 8/1/2014‡ | 460 | 481 | ||||||
39,669 | ||||||||
Service — 20.92% | ||||||||
Aquilex Holdings LLC/Aquilex Finance Corp., 11.125%, Due 12/15/2016 | 220 | 210 | ||||||
Brickman Group Holdings, Inc., 9.125%, Due 11/1/2018‡ | 435 | 448 | ||||||
Casella Waste Systems, Inc., 9.75%, Due 2/1/2013 | 900 | 906 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
CEVA Group plc, | ||||||||
11.625%, Due 10/1/2016‡ | 100 | 108 | ||||||
11.50%, Due 4/1/2018‡ | 700 | 746 | ||||||
CKE Restaurants, Inc., 11.375%, Due 7/15/2018‡ | 800 | 863 | ||||||
Clean Harbors, Inc., 7.625%, Due 8/15/2016 | 325 | 343 | ||||||
CRC Health Corp., 10.75%, Due 2/1/2016 | 925 | 919 | ||||||
DaVita, Inc., | ||||||||
6.375%, Due 11/1/2018 | 300 | 307 | ||||||
6.625%, Due 11/1/2020 | 200 | 206 | ||||||
DineEquity, Inc., 9.50%, Due 10/30/2018‡ | 375 | 399 | ||||||
DJO Finance LLC / DJO Finance Corp., 9.75%, Due 10/15/2017‡ | 475 | 494 | ||||||
Energy Solutions, Inc., 10.75%, Due 8/15/2018‡ | 505 | 552 | ||||||
Games Merger Corp., 11.00%, Due 6/1/2018‡ | 600 | 666 | ||||||
Harrah’s Operating Co., Inc., | ||||||||
5.625%, Due 6/1/2015 | 1,000 | 745 | ||||||
11.25%, Due 6/1/2017 | 1,200 | 1,326 | ||||||
HCA, Inc., 9.625%, Due 11/15/2016** | 2,000 | 2,174 | ||||||
Hertz Corp., 7.50%, Due 10/15/2018‡ | 400 | 412 | ||||||
Interactive Data Corp., 10.25%, Due 8/1/2018‡ | 650 | 709 | ||||||
inVentiv Health, Inc., 10.00%, Due 8/15/2018‡ | 300 | 302 | ||||||
Liberty Tire Recycling, 11.00%, Due 10/1/2016‡ | 455 | 474 | ||||||
Live Nation Entertainment, Inc., 8.125%, Due 5/15/2018‡ | 830 | 855 | ||||||
Mandalay Resort Group, 7.625%, Due 7/15/2013 | 350 | 326 | ||||||
Marina District Finance Co., Inc., | ||||||||
9.50%, Due 10/15/2015‡ | 200 | 197 | ||||||
9.875%, Due 8/15/2018‡ | 1,350 | 1,333 | ||||||
MGM Resorts International, | ||||||||
6.75%, Due 9/1/2012 | 325 | 321 | ||||||
6.625%, Due 7/15/2015 | 1,500 | 1,314 | ||||||
10.00%, Due 11/1/2016‡ | 600 | 588 | ||||||
Michaels Stores, Inc., 7.75%, Due 11/1/2018‡ | 800 | 792 | ||||||
MultiPlan, Inc., 9.875%, Due 9/1/2018‡ | 250 | 268 | ||||||
Mylan, Inc., 7.875%, Due 7/15/2020‡ | 975 | 1,087 | ||||||
NCL Corp Ltd., 11.75%, Due 11/15/2016 | 600 | 694 | ||||||
Neiman Marcus Group, Inc., 10.375%, Due 10/15/2015 | 435 | 459 | ||||||
Nielsen Finance LLC, Zero Coupon%, Due 8/1/2016§ | 680 | 693 | ||||||
NPC International, Inc., 9.50%, Due 5/1/2014 | 625 | 647 | ||||||
OnCure Holdings, Inc., 11.75%, Due 5/15/2017‡ | 850 | 782 | ||||||
PharmaNet Development Group, Inc., 10.875%, Due 4/15/2017‡ | 400 | 416 | ||||||
Pinnacle Entertainment, Inc., 7.50%, Due 6/15/2015 | 800 | 796 | ||||||
Pokagon Gaming Authority, 10.375%, Due 6/15/2014‡ | 800 | 832 | ||||||
QVC, Inc., 7.50%, Due 10/1/2019‡ | 640 | 688 | ||||||
Regal Entertainment Group, 9.125%, Due 8/15/2018 | 190 | 202 |
See accompanying notes
18
American Beacon High Yield Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Rite Aid Corp., 9.75%, Due 6/12/2016 | 1,355 | 1,469 | ||||||
RITE AID Corp., 8.00%, Due 8/15/2020‡ | 100 | 103 | ||||||
Sally Holdings LLC, 10.50%, Due 11/15/2016 | 350 | 384 | ||||||
Shingle Springs Tribal Gaming Authority, 9.375%, Due 6/15/2015‡ | 600 | 408 | ||||||
Sitel LLC, 11.50%, Due 4/1/2018‡ | 500 | 404 | ||||||
Speedway Motorsports, Inc., 8.75%, Due 6/1/2016 | 225 | 245 | ||||||
Starwood Hotels & Resorts Worldwide, Inc., | ||||||||
6.75%, Due 5/15/2018 | 800 | 886 | ||||||
7.15%, Due 12/1/2019 | 250 | 282 | ||||||
Tenet Healthcare Corp., 10.00%, Due 5/1/2018 | 900 | 1,044 | ||||||
Ticketmaster Entertainment, Inc., 10.75%, Due 8/1/2016 | 700 | 775 | ||||||
Trans Union LLC, 11.375%, Due 6/15/2018‡ | 300 | 346 | ||||||
UHS Escrow Corp., 7.00%, Due 10/1/2018‡ | 1,100 | 1,161 | ||||||
United Rentals North America, Inc., 8.375%, Due 9/15/2020 | 570 | 579 | ||||||
United Surgical Partners International, Inc., 9.25%, Due 5/1/2017** | 800 | 846 | ||||||
US Oncology, Inc., 6.428%, Due 3/15/2012§ ** | 1,923 | 1,874 | ||||||
WCA Waste Corp., 9.25%, Due 6/15/2014 | 650 | 673 | ||||||
Yonkers Racing Corp., 11.375%, Due 7/15/2016‡ | 700 | 767 | ||||||
38,845 | ||||||||
Telecommunications — 15.81% | ||||||||
Abengoa Finance SAU, 8.875%, Due 11/1/2017‡ | 1,295 | 1,276 | ||||||
AES Corp., 9.75%, Due 4/15/2016 | 50 | 58 | ||||||
Cablevision Systems Corp., 8.625%, Due 9/15/2017 | 500 | 564 | ||||||
Calpine Corp., | ||||||||
7.875%, Due 7/31/2020‡ | 300 | 314 | ||||||
7.50%, Due 2/15/2021‡ | 600 | 614 | ||||||
CCH II Holdings LLC, 13.50%, Due 11/30/2016 | 1,057 | 1,265 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp., 7.25%, Due 10/30/2017‡ | 300 | 310 | ||||||
Cengage Learning Acquisitions, Inc., 10.50%, Due 1/15/2015‡ | 525 | 543 | ||||||
Clear Channel Worldwide, 9.25%, Due 12/15/2017 | 110 | 119 | ||||||
Clear Channel Worldwide Holdings, Inc., 9.25%, Due 12/15/2017 | 700 | 765 | ||||||
Clearwire Communications LLC, 12.00%, Due 12/1/2015‡ | 35 | 39 | ||||||
Clearwire Communications LLC/Clearwire Finance, Inc., 12.00%, Due 12/1/2015‡ | 390 | 433 | ||||||
Cricket Communications, Inc., 7.75%, Due 5/15/2016 | 615 | 663 | ||||||
Crown Castle International Corp., 9.00%, Due 1/15/2015 | 800 | 894 | ||||||
Digicel Group Ltd., | ||||||||
8.875%, Due 1/15/2015‡ | 800 | 812 | ||||||
9.125%, Due 1/15/2015‡ | 650 | 661 | ||||||
DISH DBS Corp., 7.125%, Due 2/1/2016 | 1,300 | 1,378 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Dynegy Holdings, Inc., | ||||||||
7.50%, Due 6/1/2015‡ | 850 | 659 | ||||||
8.375%, Due 5/1/2016 | 600 | 461 | ||||||
Forest City Enterprises, Inc., 7.625%, Due 6/1/2015 | 800 | 750 | ||||||
GCI, Inc., 8.625%, Due 11/15/2019 | 370 | 407 | ||||||
GeoEye, Inc., 8.625%, Due 10/1/2016 | 1,000 | 1,048 | ||||||
HSN, Inc., 11.25%, Due 8/1/2016 | 650 | 751 | ||||||
Intelsat Jackson Holdings Ltd., 7.25%, Due 10/15/2020‡ | 100 | 102 | ||||||
Intelsat Jackson Holdings SA, 11.25%, Due 6/15/2016 | 1,500 | 1,632 | �� | |||||
Intelsat Luxembourg SA, 11.50%, Due 2/4/2017 | 1,000 | 1,081 | ||||||
Intergen NV, 9.00%, Due 6/30/2017‡ | 900 | 972 | ||||||
Level 3 Financing, Inc., 10.00%, Due 2/1/2018 | 500 | 479 | ||||||
Media General, Inc., 11.75%, Due 2/15/2017 | 800 | 856 | ||||||
Mediacom LLC / Mediacom Capital Corp., 9.125%, Due 8/15/2019 | 400 | 423 | ||||||
MetroPCS Wireless, Inc., | ||||||||
9.25%, Due 11/1/2014 | 221 | 231 | ||||||
7.875%, Due 9/1/2018 | 645 | 692 | ||||||
NII Capital Corp., 10.00%, Due 8/15/2016 | 380 | 431 | ||||||
Novasep Holding SAS, 9.75%, Due 12/15/2016‡ | 605 | 505 | ||||||
NRG Energy, Inc., 7.375%, Due 2/1/2016 | 1,400 | 1,457 | ||||||
Radio One, Inc., 6.375%, Due 2/15/2013 | 900 | 758 | ||||||
Rainbow National Services LLC, 8.75%, Due 9/1/2012‡ | 250 | 252 | ||||||
RRI Energy, Inc., 7.625%, Due 6/15/2014 | 475 | 479 | ||||||
Telesat Canada, 12.50%, Due 11/1/2017 | 797 | 940 | ||||||
TW Telecom Holdings, Inc., 8.00%, Due 3/1/2018 | 450 | 486 | ||||||
Univision Communications, Inc., | ||||||||
12.00%, Due 7/1/2014‡ | 555 | 614 | ||||||
9.75%, Due 3/15/2015‡ | 636 | 675 | ||||||
7.875%, Due 11/1/2020‡ | 680 | 714 | ||||||
WMG Holdings Corp., 9.50%, Due 12/15/2014§ | 830 | 789 | ||||||
29,352 | ||||||||
Transportation — 0.69% | ||||||||
American Petroleum Tankers LLC, 10.25%, Due 5/1/2015‡ | 850 | 884 | ||||||
General Maritime Corp., 12.00%, Due 11/15/2017 | 200 | 206 | ||||||
Greenbrier Cos., Inc., 8.375%, Due 5/15/2015 | 200 | 199 | ||||||
1,289 | ||||||||
Utility — 4.50% | ||||||||
Cincinnati Bell, Inc., 8.75%, Due 3/15/2018 | 430 | 416 | ||||||
CMS Energy Corp., 8.75%, Due 6/15/2019 | 500 | 600 | ||||||
Elwood Energy LLC, 8.159%, Due 7/5/2026 | 676 | 636 |
See accompanying notes
19
American Beacon High Yield Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Energy Future Intermediate Holding Co. LLC, 10.00%, Due 12/1/2020 | 568 | 595 | ||||||
Frontier Communications Corp., | ||||||||
8.25%, Due 4/15/2017 | 200 | 228 | ||||||
8.50%, Due 4/15/2020 | 200 | 231 | ||||||
8.75%, Due 4/15/2022 | 400 | 465 | ||||||
Integra Telecom Holdings, Inc., 10.75%, Due 4/15/2016‡ | 500 | 529 | ||||||
Sprint Capital Corp., 8.75%, Due 3/15/2032 | 935 | 1,025 | ||||||
Sprint Nextel Corp., 8.375%, Due 8/15/2017 | 900 | 992 | ||||||
Texas Competitive Electric Holdings Co. LLC, 10.25%, Due 11/1/2015 | 1,500 | 930 | ||||||
Wind Acquisition Finance S.A., | ||||||||
12.00%, Due 12/1/2015‡ †† | 700 | 742 | ||||||
11.75%, Due 7/15/2017‡ | 625 | 713 | ||||||
12.25%, Due 7/15/2017‡ | 214 | 249 | ||||||
8,351 | ||||||||
Total Corporate Obligations (Cost $165,005) | 176,003 | |||||||
CONVERTIBLE OBLIGATION — 0.57% | ||||||||
Finance — 0.18% | ||||||||
E*Trade Financial Corp., %, Due 8/31/2019 | 240 | 332 | ||||||
Hotels, Restaurants & Leisure — 0.39% | ||||||||
Horizon Lines, Inc., 4.25%, Due 8/15/2012 | 800 | 732 | ||||||
Total Convertible Obligations (Cost $856) | 1,064 | |||||||
SHORT-TERM INVESTMENTS — 2.72% (Cost $5,042) | ||||||||
JPMorgan U.S. Government Money Market Fund | 5,042,317 | 5,042 | ||||||
TOTAL INVESTMENTS — 98.43% (Cost $172,984) | 182,757 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 1.57% | 2,914 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 185,671 | ||||||
Percentages are stated as a percent of net assets.
* | Non-income producing security. | |
† | Warrant. | |
‡ | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $77,703 or 41.85% of net assets. The Fund has no right to demand registration of these securities. | |
§ | 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. | |
** | Is Payment in Kind. | |
†† | Step Up/Down. | |
# | Non-income producing, issuer is in default. |
See accompanying notes
20
American Beacon Retirement Income and Appreciation Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
COMMON STOCK — 4.41% | ||||||||
CONSUMER DISCRETIONARY — 0.28% | ||||||||
Hotels, Restaurants & Leisure — 0.14% | ||||||||
Carnival Corp. | 4,200 | 181 | ||||||
Media — 0.14% | ||||||||
Omnicom Group, Inc. | 4,000 | 176 | ||||||
Total Consumer Discretionary | 357 | |||||||
ENERGY — 0.76% | ||||||||
Ensco plc* | 7,300 | 338 | ||||||
Halliburton Co.† | 9,000 | 287 | ||||||
Noble Corp. | 10,150 | 351 | ||||||
Total Energy | 976 | |||||||
FINANCIALS — 0.55% | ||||||||
Affiliated Managers Group, Inc.† | 3,700 | 317 | ||||||
JPMorgan Chase & Co. | 3,300 | 124 | ||||||
T Rowe Price Group, Inc. | 4,800 | 265 | ||||||
Total Financials | 706 | |||||||
HEALTH CARE — 0.23% | ||||||||
St. Jude Medical, Inc. † | 7,500 | 287 | ||||||
INDUSTRIALS — 0.67% | ||||||||
Aerospace & Defense — 0.13% | ||||||||
United Technologies Corp. | 2,150 | 161 | ||||||
Machinery — 0.54% | ||||||||
Eaton Corp. | 3,900 | 347 | ||||||
Parker Hannifin Corp. | 4,500 | 344 | ||||||
691 | ||||||||
Total Industrials | 852 | |||||||
INFORMATION TECHNOLOGY — 1.42% | ||||||||
Communications Equipment — 0.62% | ||||||||
Cisco Systems, Inc.† | 20,500 | 468 | ||||||
QUALCOMM, Inc. | 7,200 | 325 | ||||||
793 | ||||||||
IT Consulting & Services — 0.27% | ||||||||
Accenture plc | 7,770 | 347 | ||||||
Semiconductor Equipment & Products — 0.27% | ||||||||
Applied Materials, Inc.† | 28,000 | 346 | ||||||
Software — 0.25% | ||||||||
Microsoft Corp. | 12,000 | 320 | ||||||
Total Information Technology | 1,806 | |||||||
MATERIALS — 0.50% | ||||||||
Barrick Gold Corp.† | 6,700 | 322 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 3,400 | 322 | ||||||
Total Materials | 644 | |||||||
Total Common Stock (Cost $5,504) | 5,628 | |||||||
PREFERRED STOCK — 1.55% | ||||||||
CONSUMER DISCRETIONARY — 0.52% | ||||||||
Archer-Daniels-Midland Co. | 15,350 | 664 | ||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
CONSUMER STAPLES — 0.32% | ||||||||
Bunge Ltd. | 4,500 | 407 | ||||||
ENERGY — 0.27% | ||||||||
Apache Corp. | 6,000 | 349 | ||||||
FINANCIALS — 0.44% | ||||||||
AMG Capital Trust I | 4,150 | 195 | ||||||
Vale Capital II | 4,000 | 361 | ||||||
Total Financials | 556 | |||||||
Total Preferred Stock (Cost $1,570) | 1,976 | |||||||
CONVERTIBLE PREFERRED STOCK — 0.44% | ||||||||
FINANCIALS — 0.23% | ||||||||
Wells Fargo & Co. | 300 | 300 | ||||||
HEALTH CARE — 0.21% | ||||||||
Mylan, Inc. | 225 | 268 | ||||||
Total Convertible Preferred Stock (Cost $561) | 568 | |||||||
CORPORATE OBLIGATION — 35.85% | ||||||||
Finance — 17.56% | ||||||||
Aegon Funding Corp., 5.75%, Due 12/15/2020 | 250 | 269 | ||||||
American Express Co., 2.75%, Due 9/15/2015 | 125 | 126 | ||||||
ANZ National Int’l Ltd., 2.375%, Due 12/21/2012‡ | 300 | 306 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 600 | 688 | ||||||
6.00%, Due 9/1/2017 | 400 | 430 | ||||||
7.625%, Due 6/1/2019 | 200 | 234 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 250 | 271 | ||||||
Barclays Bank plc, | ||||||||
3.90%, Due 4/7/2015 | 290 | 311 | ||||||
6.75%, Due 5/22/2019 | 300 | 356 | ||||||
Bear Stearns Cos., Inc., 7.25%, Due 2/1/2018 | 500 | 610 | ||||||
BNP Paribas, 0.690%, Due 4/8/2013§ | 750 | 747 | ||||||
Citigroup, Inc., | ||||||||
0.715%, Due 11/5/2014§ | 300 | 283 | ||||||
6.125%, Due 11/21/2017 | 275 | 306 | ||||||
8.50%, Due 5/22/2019 | 750 | 942 | ||||||
CME Group, Inc., 5.40%, Due 8/1/2013 | 230 | 257 | ||||||
Credit Suisse N.Y., | ||||||||
3.45%, Due 7/2/2012 | 600 | 625 | ||||||
5.30%, Due 8/13/2019 | 250 | 277 | ||||||
Deutsche Bank AG, 3.875%, Due 8/18/2014 | 275 | 296 | ||||||
FTI Consulting, Inc., 7.75%, Due 10/1/2016 | 150 | 159 | ||||||
General Electric Capital Corp., | ||||||||
0.490%, Due 1/8/2016§ | 1,033 | 969 | ||||||
5.625%, Due 5/1/2018 | 250 | 279 | ||||||
6.00%, Due 8/7/2019 | 300 | 339 | ||||||
5.50%, Due 1/8/2020 | 350 | 385 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 475 | 523 | ||||||
6.25%, Due 9/1/2017 | 550 | 622 | ||||||
6.00%, Due 6/15/2020 | 135 | 150 |
See accompanying notes
21
American Beacon Retirement Income and Appreciation Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000's) | ||||||||
HSBC Finance Corp., 0.539%, Due 1/15/2014§ | 850 | 808 | ||||||
ING Bank, NV, 5.125%, Due 5/1/2015‡ | 300 | 320 | ||||||
Janus Capital Group, Inc., 6.95%, Due 6/15/2017 | 125 | 131 | ||||||
JPMorgan Chase & Co., | ||||||||
3.70%, Due 1/20/2015 | 500 | 529 | ||||||
6.00%, Due 1/15/2018 | 175 | 200 | ||||||
5.50%, Due 10/15/2040 | 250 | 252 | ||||||
JPMorgan Chase Bank, NA, 0.623%, Due 6/13/2016‡ § | 375 | 353 | ||||||
Leucadia National Corp., | ||||||||
8.125%, Due 9/15/2015 | 100 | 109 | ||||||
7.125%, Due 3/15/2017 | 192 | 198 | ||||||
Lincoln National Corp., 4.75%, Due 2/15/2014 | 105 | 112 | ||||||
Lloyds TSB Bank plc, 4.375%, Due 1/12/2015‡ | 300 | 315 | ||||||
MassMutual Global Funding II, 0.453%, Due 12/6/2013‡ § | 400 | 395 | ||||||
Mellon Funding Corp., 0.526%, Due 5/15/2014§ | 250 | 248 | ||||||
Merrill Lynch & Co., Inc., 6.11%, Due 1/29/2037 | 275 | 262 | ||||||
MetLife, Inc., 6.375%, Due 6/15/2034 | 250 | 277 | ||||||
Metropolitan Life Global Funding I, 0.542%, Due 3/15/2012‡ § | 300 | 300 | ||||||
Monumental Global Funding III, 0.489%, Due 1/15/2014‡ § | 300 | 288 | ||||||
Morgan Stanley, | ||||||||
2.876%, Due 5/14/2013§ | 550 | 563 | ||||||
0.769%, Due 10/15/2015§ | 300 | 276 | ||||||
7.30%, Due 5/13/2019 | 280 | 323 | ||||||
5.625%, Due 9/23/2019 | 250 | 263 | ||||||
Nationwide Building Society, 5.50%, Due 7/18/2012‡ | 450 | 481 | ||||||
Nordea Bank AB, | ||||||||
2.50%, Due 11/13/2012‡ | 250 | 257 | ||||||
4.875%, Due 1/27/2020‡ | 250 | 269 | ||||||
PNC Funding Corp., 4.375%, Due 8/11/2020 | 260 | 263 | ||||||
Pricoa Global Funding I, 5.40%, Due 10/18/2012‡ | 150 | 161 | ||||||
ProLogis, 5.625%, Due 11/15/2016 | 125 | 132 | ||||||
Prudential Financial, Inc., | ||||||||
4.50%, Due 7/15/2013 | 250 | 267 | ||||||
7.375%, Due 6/15/2019 | 250 | 303 | ||||||
Rabobank Nederland NV, 4.20%, Due 5/13/2014‡ | 200 | 218 | ||||||
Simon Property Group LP, 10.35%, Due 4/1/2019 | 300 | 424 | ||||||
Societe Generale N.Y., 2.20%, Due 9/14/2013‡ | 250 | 253 | ||||||
Travelers Cos., Inc., 3.90%, Due 11/1/2020 | 130 | 132 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 275 | 315 | ||||||
UnitedHealth Group, Inc., 3.875%, Due 10/15/2020 | 250 | 249 | ||||||
Wachovia Corp., | ||||||||
0.659%, Due 10/15/2016§ | 600 | 549 | ||||||
5.75%, Due 2/1/2018 | 475 | 539 | ||||||
Wells Fargo & Co., 5.625%, Due 12/11/2017 | 275 | 311 | ||||||
22,405 | ||||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000's) | ||||||||
Industrials — 15.46% | ||||||||
America Movil, S.A.B. de C.V., 6.375%, Due 3/1/2035 | 275 | 311 | ||||||
American Honda Finance Corp., | ||||||||
4.625%, Due 4/2/2013‡ | 325 | 350 | ||||||
3.875%, Due 9/21/2020‡ | 125 | 126 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
5.00%, Due 4/15/2020 | 290 | 322 | ||||||
8.00%, Due 11/15/2039‡ | 100 | 139 | ||||||
Apache Corp., 5.10%, Due 9/1/2040 | 130 | 130 | ||||||
AT&T, Inc., | ||||||||
5.625%, Due 6/15/2016 | 200 | 234 | ||||||
5.50%, Due 2/1/2018 | 400 | 466 | ||||||
6.80%, Due 5/15/2036 | 125 | 144 | ||||||
6.40%, Due 5/15/2038 | 125 | 139 | ||||||
ATP Oil & Gas Corp., 11.875%, Due 5/1/2015‡ | 150 | 137 | ||||||
Bio Rad Labs, 8.00%, Due 9/15/2016 | 275 | 300 | ||||||
Boeing Co., 1.875%, Due 11/20/2012 | 250 | 256 | ||||||
Burlington Northern Santa Fe LLC, | ||||||||
5.75%, Due 3/15/2018 | 325 | 377 | ||||||
5.75%, Due 5/1/2040 | 140 | 148 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 250 | 293 | ||||||
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 | 275 | 315 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.90%, Due 12/17/2012 | 100 | 102 | ||||||
4.25%, Due 2/8/2013 | 250 | 268 | ||||||
2.75%, Due 6/24/2015 | 280 | 295 | ||||||
Coca-Cola Enterprises, Inc., 7.375%, Due 3/3/2014 | 150 | 181 | ||||||
Comcast Cable Communications | ||||||||
Holdings, Inc., 8.375%, Due 3/15/2013 | 109 | 126 | ||||||
Comcast Corp., 6.55%, Due 7/1/2039 | 300 | 336 | ||||||
Comstock Resources, Inc., 8.375%, Due 10/15/2017 | 300 | 311 | ||||||
Concho Resources, Inc., 8.625%, Due 10/1/2017 | 275 | 298 | ||||||
ConocoPhillips, | ||||||||
4.60%, Due 1/15/2015 | 200 | 225 | ||||||
5.20%, Due 5/15/2018 | 325 | 376 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 250 | 247 | ||||||
CVS Caremark Corp., 3.25%, Due 5/18/2015 | 140 | 147 | ||||||
Daimler Finance NA LLC, | ||||||||
5.875%, Due 3/15/2011 | 250 | 255 | ||||||
5.75%, Due 9/8/2011 | 250 | 260 | ||||||
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014‡ | 250 | 271 | ||||||
France Telecom S.A., 2.125%, Due 9/16/2015 | 125 | 127 | ||||||
Frontier Oil Corp., 8.50%, Due 9/15/2016 | 300 | 316 | ||||||
GlaxoSmithKline Capital, Inc., 5.65%, Due 5/15/2018 | 125 | 148 | ||||||
Hanesbrands, Inc., 8.00%, Due 12/15/2016 | 300 | 325 | ||||||
Hewlett-Packard Co., 4.50%, Due 3/1/2013 | 325 | 352 | ||||||
Holly Corp., 9.875%, Due 6/15/2017 | 140 | 153 | ||||||
International Business Machines Corp., 7.625%, Due 10/15/2018 | 150 | 199 |
See accompanying notes
22
American Beacon Retirement Income and Appreciation Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Jabil Circuit, Inc., 8.25%, Due 3/15/2018 | 325 | 381 | ||||||
Jarden Corp., | ||||||||
7.50%, Due 5/1/2017 | 30 | 32 | ||||||
7.50%, Due 1/15/2020 | 120 | 127 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 300 | 329 | ||||||
Kellogg Co., 4.25%, Due 3/6/2013 | 250 | 268 | ||||||
NetFlix, Inc., 8.50%, Due 11/15/2017 | 275 | 308 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 325 | 376 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 150 | 168 | ||||||
Oshkosh Corp., 8.25%, Due 3/1/2017 | 50 | 55 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 300 | 339 | ||||||
Petroplus Finance Ltd., 9.375%, Due 9/15/2019‡ | 225 | 216 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 125 | 128 | ||||||
Royal Caribbean Cruises Ltd., 7.50%, Due 10/15/2027 | 500 | 500 | ||||||
Seagate HDD Cayman, 6.875%, Due 5/1/2020‡ | 350 | 357 | ||||||
Service Corp International, 8.00%, Due 11/15/2021 | 225 | 245 | ||||||
SESI LLC, 6.875%, Due 6/1/2014 | 435 | 439 | ||||||
Shell International Finance BV, 3.10%, Due 6/28/2015 | 280 | 297 | ||||||
Spirit Aerosystems, Inc., 7.50%, Due 10/1/2017 | 450 | 473 | ||||||
Swift Energy Co., 7.125%, Due 6/1/2017 | 375 | 379 | ||||||
Syniverse Technologies, Inc., 7.75%, Due 8/15/2013 | 325 | 332 | ||||||
Telefonica Emisiones SAU, 6.421%, Due 6/20/2016 | 300 | 357 | ||||||
Terex Corp., 8.00%, Due 11/15/2017 | 125 | 125 | ||||||
Thomson Reuters Corp., 4.70%, Due 10/15/2019 | 125 | 136 | ||||||
Time Warner Cable, Inc., 5.85%, Due 5/1/2017 | 300 | 342 | ||||||
Time Warner, Inc., 4.875%, Due 3/15/2020 | 150 | 165 | ||||||
Triumph Group, Inc., 8.00%, Due 11/15/2017 | 300 | 310 | ||||||
Tyco International Finance SA, 4.125%, Due 10/15/2014 | 125 | 136 | ||||||
Union Pacific Corp., 7.875%, Due 1/15/2019 | 300 | 393 | ||||||
United Technologies Corp., 6.125%, Due 7/15/2038 | 165 | 194 | ||||||
Verizon Communications, Inc., | ||||||||
5.50%, Due 4/1/2017 | 250 | 288 | ||||||
6.90%, Due 4/15/2038 | 325 | 388 | ||||||
Verizon Wireless Capital, LLC, 3.75%, Due 5/20/2011 | 270 | 275 | ||||||
Vodafone Group plc, 6.15%, Due 2/27/2037 | 275 | 313 | ||||||
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 | 250 | 328 | ||||||
WESCO Distribution, Inc., 7.50%, Due 10/15/2017 | 450 | 459 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
Xerox Corp., | ||||||||
5.65%, Due 5/15/2013 | 75 | 82 | ||||||
8.25%, Due 5/15/2014 | 150 | 180 | ||||||
19,725 | ||||||||
Manufacturing — 0.36% | ||||||||
Advanced Micro Devices, Inc., | ||||||||
8.125%, Due 12/15/2017 | 130 | 140 | ||||||
7.75%, Due 8/1/2020‡ | 175 | 186 | ||||||
Oshkosh Corp., 8.50%, Due 3/1/2020 | 125 | 138 | ||||||
464 | ||||||||
Media — 0.08% | ||||||||
Interpublic Group of Cos., Inc., 4.75%, Due 3/15/2023 | 90 | 104 | ||||||
Other Government — 0.26% | ||||||||
Province of Ontario Canada, 4.10%, Due 6/16/2014 | 300 | 331 | ||||||
Utilities — 2.13% | ||||||||
Commonwealth Edison Co., 4.00%, Due 8/1/2020 | 135 | 141 | ||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 300 | 316 | ||||||
Duke Energy Carolinas LLC, 5.10%, Due 4/15/2018 | 250 | 285 | ||||||
EDF SA, 4.60%, Due 1/27/2020‡ | 300 | 331 | ||||||
FirstEnergy Solutions Corp., 4.80%, Due 2/15/2015 | 150 | 162 | ||||||
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 | 275 | 307 | ||||||
Pacific Gas & Electric Co., | ||||||||
6.25%, Due 12/1/2013 | 175 | 200 | ||||||
3.50%, Due 10/1/2020 | 250 | 251 | ||||||
Progress Energy, Inc., 4.875%, Due 12/1/2019 | 250 | 275 | ||||||
TransCanada PipeLines Ltd., 6.10%, Due 6/1/2040 | 140 | 156 | ||||||
Virginia Electric and Power Co., 5.40%, Due 4/30/2018 | 250 | 290 | ||||||
2,714 | ||||||||
Total Corporate Obligations (Cost $42,411) | 45,743 | |||||||
CONVERTIBLE OBLIGATION — 12.75% | ||||||||
Basic Materials — 1.30% | ||||||||
Allegheny Technologies, Inc., 4.25%, Due 6/1/2014 | 260 | 383 | ||||||
Goldcorp, Inc., 2.00%, Due 8/1/2014 | 225 | 278 | ||||||
Newmont Mining Corp., | ||||||||
3.00%, Due 2/15/2012 | 50 | 69 | ||||||
1.25%, Due 7/15/2014 | 425 | 605 | ||||||
1.625%, Due 7/15/2017 | 220 | 317 | ||||||
1,652 | ||||||||
Communications — 1.20% | ||||||||
Anixter International, Inc., 1.00%, Due 2/15/2013 | 610 | 654 | ||||||
priceline.com, Inc., 1.25%, Due 3/15/2015‡ | 300 | 431 | ||||||
Symantec Corp., 1.00%, Due 6/15/2013 | 400 | 449 | ||||||
1,534 | ||||||||
Consumer Discretionary — 0.51% | ||||||||
Best Buy Co., Inc., 2.25%, Due 1/15/2022 | 200 | 222 |
See accompanying notes
23
American Beacon Retirement Income and Appreciation Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
International Game Technology, 3.25%, Due 5/1/2014 | 110 | 122 | ||||||
RadioShack Corp., 2.50%, Due 8/1/2013‡ | 275 | 302 | ||||||
646 | ||||||||
Convertible Obligations — 1.70% | ||||||||
Alpha Natural Resources, Inc., 2.375%, Due 4/15/2015 | 300 | 351 | ||||||
American Medical Systems Holdings, Inc., 4.00%, Due 9/15/2041 | 250 | 323 | ||||||
Gilead Sciences, Inc., 1.625%, Due 5/1/2016‡ | 157 | 174 | ||||||
Microsoft Corp., %, Due 6/15/2013‡ | 300 | 314 | ||||||
Omnicom Group, Inc., 0.000%, Due 7/1/2038 | 150 | 153 | ||||||
Salix Pharmaceuticals Ltd., 2.75%, Due 5/15/2015 | 71 | 79 | ||||||
SanDisk Corp., 1.50%, Due 8/15/2017 | 464 | 452 | ||||||
SYNNEX Corp., 4.00%, Due 5/15/2018‡ | 275 | 328 | ||||||
2,174 | ||||||||
Energy — 0.38% | ||||||||
Chesapeake Energy Corp., 2.50%, Due 5/15/2037 | 570 | 491 | ||||||
491 | ||||||||
Finance — 0.41% | ||||||||
Janus Capital Group, Inc., 3.25%, Due 7/15/2014 | 190 | 210 | ||||||
Leucadia National Corp., 3.75%, Due 4/15/2014 | 250 | 315 | ||||||
525 | ||||||||
Health Care — 1.08% | ||||||||
Biovail Corp., 5.375%, Due 8/1/2014‡ | 250 | 490 | ||||||
LifePoint Hospitals, Inc., 3.50%, Due 5/15/2014 | 325 | 323 | ||||||
Medtronic, Inc., 1.625%, Due 4/15/2013 | 560 | 564 | ||||||
1,377 | ||||||||
Industrials — 1.34% | ||||||||
Danaher Corp., 0.01%, Due 1/22/2021 | 370 | 465 | ||||||
Fisher Scientific International, Inc., 3.25%, Due 3/1/2024 | 230 | 305 | ||||||
Itron, Inc., 2.50%, Due 8/1/2026 | 275 | 304 | ||||||
ON Semiconductor Corp., 2.625%, Due 12/15/2026 | 300 | 314 | ||||||
Stanley Black & Decker, Inc., 0.01%, Due 5/17/2012§ | 275 | 316 | ||||||
1,704 | ||||||||
Pharmaceuticals — 1.12% | ||||||||
Endo Pharmaceuticals Holdings, Inc., 1.75%, Due 4/15/2015 | 250 | 343 | ||||||
Life Technologies Corp., 1.50%, Due 2/15/2024 | 246 | 286 | ||||||
Mylan, Inc., 1.25%, Due 3/15/2012 | 430 | 456 | ||||||
Teva Pharmaceutical Finance Co. LLC, 0.25%, Due 2/1/2026 | 295 | 347 | ||||||
1,432 | ||||||||
Technology — 3.71% | ||||||||
CACI International, Inc., 2.125%, Due 5/1/2014 | 230 | 259 | ||||||
EMC Corp., 1.75%, Due 12/1/2013 | 900 | 1,285 | ||||||
Intel Corp., 3.25%, Due 8/1/2039‡ | 500 | 593 | ||||||
Linear Technology Corp., 3.00%, Due 5/1/2027 | 295 | 305 |
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000's) | ||||||||
Navistar International Corp., 3.00%, Due 10/15/2014 | 300 | 360 | ||||||
NetApp, Inc., 1.75%, Due 6/1/2013 | 545 | 949 | ||||||
Rovi Corp., 2.625%, Due 2/15/2040‡ | 300 | 376 | ||||||
Xilinx, Inc., 2.625%, Due 6/15/2017‡ | 525 | 602 | ||||||
4,729 | ||||||||
Total Convertible Obligations (Cost $13,908) | 16,264 | |||||||
ASSET-BACKED SECURITIES — 4.67% | ||||||||
American Express Credit Account | ||||||||
Master Trust, 5.35%, Due 1/15/2014 | 1,050 | 1,083 | ||||||
Bank of America Auto Trust, 0.75%, Due 6/15/2012‡ | 518 | 518 | ||||||
BMW Floorplan Master Owner Trust, 1.406%, Due 9/15/2014‡ § | 250 | 253 | ||||||
Capital One Multi-Asset Execution Trust, 5.15%, Due 6/15/2014 | 800 | 829 | ||||||
Citibank Credit Card Issuance Trust, 1.806%, Due 5/15/2014§ | 600 | 612 | ||||||
Discover Card Master Trust, 1.556%, Due 2/17/2015§ | 200 | 203 | ||||||
Ford Credit Auto Lease Trust, 1.04%, Due 3/15/2013‡ | 674 | 675 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.806%, Due 9/15/2014§ | 250 | 254 | ||||||
Harley-Davidson Motorcycle Trust, 1.87%, Due 2/15/2014 | 300 | 303 | ||||||
Nissan Master Owner Trust Receivables, 1.406%, Due 1/15/2015‡ § | 600 | 607 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
0.66%, Due 5/21/2012 | 294 | 294 | ||||||
6.24%, Due 7/20/2015 | 300 | 329 | ||||||
Total Asset-Backed Securities (Cost $5,850) | 5,960 | |||||||
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS — 3.00% | ||||||||
Banc of America Commercial Mortgage, Inc., | ||||||||
5.317%, Due 9/10/2047 | 270 | 279 | ||||||
5.634%, Due 4/10/2049 | 650 | 674 | ||||||
GS Mortgage Securities Corp II, 4.607%, Due 7/10/2039 | 270 | 275 | ||||||
JPMorgan Chase Commercial Mortgage | ||||||||
Securities Corp., | ||||||||
4.678%, Due 7/15/2042 | 260 | 270 | ||||||
3.853%, Due 6/15/2043‡ | 547 | 573 | ||||||
5.742%, Due 2/12/2049 | 400 | 426 | ||||||
5.629%, Due 2/12/2051 | 550 | 577 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040 | 450 | 482 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.739%, Due 6/15/2049 | 260 | 271 | ||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $3,692) | 3,827 | |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS — 13.09% | ||||||||
Federal Home Loan Mortgage Corporation | ||||||||
5.00%, Due 2/1/2021 | 602 | 645 |
See accompanying notes
24
American Beacon Retirement Income and Appreciation Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
4.50%, Due 4/1/2021 | 617 | 657 | ||||||
5.00%, Due 9/1/2035 | 1,584 | 1,689 | ||||||
5.50%, Due 4/1/2037 | 467 | 502 | ||||||
5.00%, Due 3/1/2038 | 991 | 1,052 | ||||||
5.50%, Due 5/1/2038 | 570 | 612 | ||||||
5,157 | ||||||||
Federal National Mortgage Association | ||||||||
6.50%, Due 7/1/2032 | 261 | 295 | ||||||
5.50%, Due 6/1/2033 | 575 | 623 | ||||||
4.50%, Due 9/1/2034 | 321 | 339 | ||||||
5.50%, Due 12/1/2035 | 639 | 690 | ||||||
5.00%, Due 2/1/2036 | 517 | 552 | ||||||
5.50%, Due 4/1/2036 | 887 | 959 | ||||||
5.50%, Due 2/1/2037 | 652 | 702 | ||||||
6.00%, Due 9/1/2037 | 412 | 449 | ||||||
6.00%, Due 1/1/2038 | 581 | 631 | ||||||
4.50%, Due 1/1/2040 | 1,660 | 1,744 | ||||||
4.00%, Due 9/1/2040 | 1,190 | 1,228 | ||||||
8,212 | ||||||||
Government National Mortgage Association | ||||||||
4.201%, Due 8/16/2026 | 371 | 381 | ||||||
2.989%, Due 3/16/2039 | 796 | 835 | ||||||
6.00%, Due 2/15/2033 | 577 | 640 | ||||||
5.50%, Due 4/15/2033 | 788 | 858 | ||||||
5.00%, Due 5/15/2033 | 575 | 622 | ||||||
3,336 | ||||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $15,558) | 16,705 | |||||||
U.S. AGENCY OBLIGATIONS — 0.34% | ||||||||
Federal Farm Credit Bank, 3.00%, Due 9/22/2014 | 400 | 431 | ||||||
U.S. TREASURY OBLIGATIONS — 19.80% | ||||||||
U.S. Treasury Bonds | ||||||||
7.875%, Due 2/15/2021 | 300 | 441 | ||||||
6.25%, Due 8/15/2023 | 1,500 | 2,004 | ||||||
6.875%, Due 8/15/2025 | 250 | 356 | ||||||
5.25%, Due 11/15/2028 | 1,050 | 1,287 | ||||||
4.75%, Due 2/15/2037 | 420 | 478 | ||||||
4.50%, Due 8/15/2039 | 1,210 | 1,316 | ||||||
5,882 | ||||||||
U.S. Treasury Notes | ||||||||
2.625%, Due 7/31/2014 | 6,000 | 6,413 | ||||||
2.50%, Due 4/30/2015 | 1,000 | 1,065 | ||||||
4.25%, Due 8/15/2015 | 1,200 | 1,377 | ||||||
3.00%, Due 9/30/2016 | 1,000 | 1,083 | ||||||
3.125%, Due 10/31/2016 | 3,800 | 4,140 | ||||||
3.75%, Due 11/15/2018 | 2,550 | 2,844 | ||||||
3.625%, Due 2/15/2020 | 2,250 | 2,457 | ||||||
19,379 | ||||||||
Total U.S. Treasury Obligations (Cost $24,047) | 25,261 | |||||||
MUNICIPAL OBLIGATIONS — 0.16% (Cost $200) | ||||||||
State of Illinois, 1.823%, Due 1/1/2011 | 200 | 200 | ||||||
Total Municipal Obligations | 200 | |||||||
SHORT-TERM INVESTMENTS — 3.16% (Cost $4,036) | ||||||||
JPMorgan U.S. Government Money Market Fund | 4,036,211 | 4,036 | ||||||
Shares/Par | ||||||||
Amount | Value | |||||||
(par and dollars in 000’s) | ||||||||
TOTAL INVESTMENTS — 99.22% (Cost $117,737) | 126,599 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 0.78% | 991 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 127,590 | ||||||
Percentages are stated as a percent of net assets.
* | ADR — American Depository Receipt | |
† | Non-income producing security. | |
‡ | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $12,267 or 9.61% of net assets. The Fund has no right to demand registration of these securities. | |
§ | 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. |
See accompanying notes
25
American Beacon Intermediate Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
CORPORATE OBLIGATIONS — 38.05% | ||||||||
Energy — 0.04% | ||||||||
Petrobras International Finance Co., 6.875%, Due 1/20/2040 | 110 | 127 | ||||||
Finance — 17.48% | ||||||||
Aegon Funding Corp., 5.75%, Due 12/15/2020 | 400 | 430 | ||||||
American Express Co., | ||||||||
2.75%, Due 9/15/2015 | 225 | 227 | ||||||
8.15%, Due 3/19/2038 | 325 | 444 | ||||||
American Express Credit Corp., 5.875%, Due 5/2/2013 | 700 | 770 | ||||||
ANZ National Int’l Ltd., 2.375%, Due 12/21/2012* | 350 | 357 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 700 | 803 | ||||||
6.00%, Due 9/1/2017 | 500 | 538 | ||||||
7.625%, Due 6/1/2019 | 1,100 | 1,288 | ||||||
Bank of New York Mellon Corp., 4.95%, Due 11/1/2012 | 290 | 314 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 500 | 542 | ||||||
Barclays Bank plc, | ||||||||
3.90%, Due 4/7/2015 | 380 | 407 | ||||||
6.75%, Due 5/22/2019 | 350 | 416 | ||||||
Bear Stearns Cos., Inc., | ||||||||
6.40%, Due 10/2/2017 | 605 | 706 | ||||||
7.25%, Due 2/1/2018 | 1,170 | 1,428 | ||||||
Berkshire Hathaway Finance Corp., 5.75%, Due 1/15/2040 | 325 | 340 | ||||||
Berkshire Hathaway, Inc., 1.40%, Due 2/10/2012 | 1,900 | 1,922 | ||||||
BNP Paribas, 0.690%, Due 4/8/2013† | 950 | 947 | ||||||
Canadian Imperial Bank of Commerce, 1.45%, Due 9/13/2013 | 645 | 652 | ||||||
Citigroup, Inc., | ||||||||
0.715%, Due 11/5/2014† | 380 | 359 | ||||||
6.01%, Due 1/15/2015 | 520 | 576 | ||||||
6.125%, Due 11/21/2017 | 755 | 840 | ||||||
8.50%, Due 5/22/2019 | 1,450 | 1,821 | ||||||
CME Group, Inc., | ||||||||
5.40%, Due 8/1/2013 | 260 | 291 | ||||||
5.75%, Due 2/15/2014 | 510 | 580 | ||||||
CNA Financial Corp., 7.35%, Due 11/15/2019 | 210 | 237 | ||||||
Countrywide Financial Corp., 5.80%, Due 6/7/2012 | 455 | 480 | ||||||
Credit Suisse N.Y., | ||||||||
3.45%, Due 7/2/2012 | 700 | 729 | ||||||
5.30%, Due 8/13/2019 | 425 | 472 | ||||||
Deutsche Bank AG, 3.875%, Due 8/18/2014 | 400 | 430 | ||||||
General Electric Capital Corp., | ||||||||
5.90%, Due 5/13/2014 | 440 | 500 | ||||||
0.490%, Due 1/8/2016† | 1,300 | 1,220 | ||||||
5.625%, Due 5/1/2018 | 695 | 777 | ||||||
6.00%, Due 8/7/2019 | 350 | 395 | ||||||
5.50%, Due 1/8/2020 | 800 | 881 | ||||||
5.875%, Due 1/14/2038 | 645 | 656 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 800 | 881 | ||||||
6.25%, Due 9/1/2017 | 800 | 904 | ||||||
5.95%, Due 1/18/2018 | 460 | 511 | ||||||
6.00%, Due 6/15/2020 | 490 | 545 | ||||||
6.75%, Due 10/1/2037 | 345 | 362 | ||||||
HSBC Finance Corp., 0.539%, Due 1/15/2014† | 1,100 | 1,046 | ||||||
ING Bank, NV, 5.125%, Due 5/1/2015* | 250 | 267 | ||||||
JPMorgan Chase & Co., | ||||||||
3.70%, Due 1/20/2015 | 1,630 | 1,724 | ||||||
6.00%, Due 1/15/2018 | 450 | 514 | ||||||
5.50%, Due 10/15/2040 | 425 | 428 | ||||||
JPMorgan Chase Bank, NA, 0.623%, Due 6/13/2016 † | 480 | 452 | ||||||
Lincoln National Corp., 4.75%, Due 2/15/2014 | 50 | 53 | ||||||
Lloyds TSB Bank plc, 4.375%, Due 1/12/2015* | 375 | 393 |
See accompanying notes
26
American Beacon Intermediate Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
MassMutual Global Funding II, 0.453%, Due 12/6/2013* † | 500 | 494 | ||||||
Mellon Funding Corp., 0.526%, Due 5/15/2014† | 500 | 495 | ||||||
Merrill Lynch & Co., Inc., | ||||||||
6.40%, Due 8/28/2017 | 905 | 986 | ||||||
6.50%, Due 7/15/2018 | 520 | 566 | ||||||
6.11%, Due 1/29/2037 | 360 | 343 | ||||||
MetLife, Inc., | ||||||||
5.375%, Due 12/15/2012 | 735 | 796 | ||||||
6.375%, Due 6/15/2034 | 500 | 553 | ||||||
Metropolitan Life Global Funding I, 0.542%, Due 3/15/2012* † | 380 | 380 | ||||||
Monumental Global Funding III, 0.489%, Due 1/15/2014* † | 375 | 359 | ||||||
Morgan Stanley, | ||||||||
2.876%, Due 5/14/2013† | 750 | 768 | ||||||
0.769%, Due 10/15/2015† | 380 | 349 | ||||||
7.30%, Due 5/13/2019 | 370 | 427 | ||||||
5.625%, Due 9/23/2019 | 600 | 630 | ||||||
Nasdaq OMX Group, | ||||||||
4.00%, Due 1/15/2015 | 165 | 172 | ||||||
5.55%, Due 1/15/2020 | 165 | 174 | ||||||
Nationwide Building Society, 5.50%, Due 7/18/2012* | 550 | 588 | ||||||
Nordea Bank AB, | ||||||||
2.50%, Due 11/13/2012* | 400 | 411 | ||||||
4.875%, Due 1/27/2020* | 450 | 484 | ||||||
PNC Funding Corp., | ||||||||
4.25%, Due 9/21/2015 | 1,010 | 1,092 | ||||||
4.375%, Due 8/11/2020 | 410 | 415 | ||||||
Pricoa Global Funding I, 5.40%, Due 10/18/2012* | 175 | 188 | ||||||
ProLogis, 5.625%, Due 11/15/2016 | 200 | 211 | ||||||
Prudential Financial, Inc., | ||||||||
4.50%, Due 7/15/2013 | 200 | 214 | ||||||
5.10%, Due 9/20/2014 | 375 | 411 | ||||||
7.375%, Due 6/15/2019 | 450 | 545 | ||||||
Rabobank Nederland NV, | ||||||||
4.20%, Due 5/13/2014* | 600 | 653 | ||||||
2.125%, Due 10/13/2015 | 510 | 514 | ||||||
Simon Property Group LP, 10.35%, Due 4/1/2019 | 375 | 530 | ||||||
Societe Generale N.Y., 2.20%, Due 9/14/2013* | 450 | 456 | ||||||
State Street Corp., 4.30%, Due 5/30/2014 | 260 | 287 | ||||||
Travelers Cos., Inc., 3.90%, Due 11/1/2020 | 210 | 213 | ||||||
Travelers Property Casualty Corp., 5.00%, Due 3/15/2013 | 510 | 557 | ||||||
U.S. Bancorp, 1.375%, Due 9/13/2013 | 850 | 858 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 400 | 458 | ||||||
UnitedHealth Group, Inc., 3.875%, Due 10/15/2020 | 425 | 424 | ||||||
Wachovia Corp., | ||||||||
0.659%, Due 10/15/2016† | 750 | 686 | ||||||
5.75%, Due 2/1/2018 | 750 | 851 | ||||||
Wells Fargo & Co., 5.625%, Due 12/11/2017 | 475 | 537 | ||||||
Westpac Banking Corp., 2.25%, Due 11/19/2012 | 375 | 384 | ||||||
Willis North America, Inc., 6.20%, Due 3/28/2017 | 280 | 300 | ||||||
51,614 | ||||||||
Industrials — 15.57% | ||||||||
Alltel Corp., 7.00%, Due 7/1/2012 | 215 | 235 | ||||||
Altria Group, Inc., 9.70%, Due 11/10/2018 | 275 | 379 | ||||||
America Movil, S.A.B. de C.V., 6.375%, Due 3/1/2035 | 375 | 424 | ||||||
American Honda Finance Corp., | ||||||||
4.625%, Due 4/2/2013* | 250 | 270 | ||||||
3.875%, Due 9/21/2020* | 225 | 227 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
3.00%, Due 10/15/2012 | 390 | 405 | ||||||
5.00%, Due 4/15/2020 | 380 | 421 | ||||||
8.00%, Due 11/15/2039* | 175 | 244 | ||||||
Apache Corp., 5.10%, Due 9/1/2040 | 200 | 200 | ||||||
AT&T, Inc., | ||||||||
5.10%, Due 9/15/2014 | 755 | 848 |
See accompanying notes
27
American Beacon Intermediate Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
5.625%, Due 6/15/2016 | 400 | 468 | ||||||
5.50%, Due 2/1/2018 | 600 | 699 | ||||||
6.80%, Due 5/15/2036 | 225 | 260 | ||||||
6.40%, Due 5/15/2038 | 200 | 222 | ||||||
5.35%, Due 9/1/2040* | 283 | 278 | ||||||
Baxter International, Inc., 1.80%, Due 3/15/2013 | 270 | 276 | ||||||
Best Buy Co., Inc., 6.75%, Due 7/15/2013 | 345 | 386 | ||||||
Boeing Co., 1.875%, Due 11/20/2012 | 400 | 409 | ||||||
Burlington Northern Santa Fe LLC, | ||||||||
5.75%, Due 3/15/2018 | 600 | 696 | ||||||
7.95%, Due 8/15/2030 | 180 | 235 | ||||||
5.75%, Due 5/1/2040 | 190 | 202 | ||||||
CA, Inc., 5.375%, Due 12/1/2019 | 370 | 401 | ||||||
Cameron International Corp., 6.375%, Due 7/15/2018 | 225 | 260 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 400 | 468 | ||||||
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 | 360 | 413 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.90%, Due 12/17/2012 | 100 | 102 | ||||||
4.25%, Due 2/8/2013 | 250 | 268 | ||||||
6.125%, Due 2/17/2014 | 750 | 865 | ||||||
2.75%, Due 6/24/2015 | 380 | 400 | ||||||
Coca-Cola Enterprises, Inc., 7.375%, Due 3/3/2014 | 175 | 211 | ||||||
Comcast Cable Communications Holdings, Inc., 8.375%, Due 3/15/2013 | 128 | 148 | ||||||
Comcast Corp., | ||||||||
6.30%, Due 11/15/2017 | 465 | 551 | ||||||
5.875%, Due 2/15/2018 | 235 | 272 | ||||||
6.55%, Due 7/1/2039 | 500 | 560 | ||||||
ConocoPhillips, | ||||||||
4.60%, Due 1/15/2015 | 1,060 | 1,191 | ||||||
5.20%, Due 5/15/2018 | 600 | 693 | ||||||
5.75%, Due 2/1/2019 | 380 | 455 | ||||||
Costco Wholesale Corp., 5.30%, Due 3/15/2012 | 645 | 686 | ||||||
Covidien International Finance SA, 5.45%, Due 10/15/2012 | 500 | 544 | ||||||
CRH America, Inc., 6.00%, Due 9/30/2016 | 370 | 416 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 425 | 420 | ||||||
CVS Caremark Corp., 3.25%, Due 5/18/2015 | 190 | 200 | ||||||
Daimler Finance NA LLC, | ||||||||
5.875%, Due 3/15/2011 | 300 | 306 | ||||||
5.75%, Due 9/8/2011 | 200 | 208 | ||||||
Dell, Inc., 3.375%, Due 6/15/2012 | 235 | 244 | ||||||
DIRECTV Holdings LLC, | ||||||||
3.55%, Due 3/15/2015 | 625 | 656 | ||||||
6.35%, Due 3/15/2040 | 145 | 155 | ||||||
E. I. du Pont de Nemours & Co., 5.875%, Due 1/15/2014 | 67 | 77 | ||||||
Eaton Corp., 5.60%, Due 5/15/2018 | 280 | 324 | ||||||
eBay, Inc., 0.875%, Due 10/15/2013 | 335 | 336 | ||||||
EI Du Pont de Nemours & Co., 3.25%, Due 1/15/2015 | 660 | 708 | ||||||
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014* | 400 | 434 | ||||||
Equity Residential, 5.125%, Due 3/15/2016 | 425 | 467 | ||||||
Express Scripts, Inc., 6.25%, Due 6/15/2014 | 685 | 790 | ||||||
France Telecom S.A., | ||||||||
4.375%, Due 7/8/2014 | 235 | 260 | ||||||
2.125%, Due 9/16/2015 | 225 | 228 | ||||||
GlaxoSmithKline Capital, Inc., 5.65%, Due 5/15/2018 | 125 | 148 | ||||||
Hewlett-Packard Co., | ||||||||
4.50%, Due 3/1/2013 | 250 | 271 | ||||||
6.125%, Due 3/1/2014 | 310 | 359 | ||||||
Honeywell International, Inc., 4.25%, Due 3/1/2013 | 520 | 563 | ||||||
Hospira, Inc., 6.05%, Due 3/30/2017 | 205 | 237 | ||||||
International Business Machines Corp., | ||||||||
4.75%, Due 11/29/2012 | 325 | 353 | ||||||
7.625%, Due 10/15/2018 | 695 | 922 | ||||||
ITT Corp., 4.90%, Due 5/1/2014 | 640 | 708 | ||||||
John Deere Capital Corp., 4.90%, Due 9/9/2013 | 650 | 720 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 480 | 526 | ||||||
See accompanying notes
28
American Beacon Intermediate Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
Kellogg Co., 4.25%, Due 3/6/2013 | 250 | 268 | ||||||
Koninklijke Philips Electronics NV, 5.75%, Due 3/11/2018 | 165 | 193 | ||||||
Kraft Foods, Inc., 6.50%, Due 2/9/2040 | 220 | 252 | ||||||
L-3 Communications Corp., 4.75%, Due 7/15/2020 | 395 | 412 | ||||||
Lorillard Tobacco Co., 8.125%, Due 6/23/2019 | 255 | 295 | ||||||
Marathon Oil Corp., 6.00%, Due 10/1/2017 | 275 | 323 | ||||||
Medtronic, Inc., 3.00%, Due 3/15/2015 | 965 | 1,026 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 300 | 347 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 200 | 225 | ||||||
Novartis Capital Corp., | ||||||||
4.125%, Due 2/10/2014 | 395 | 432 | ||||||
2.90%, Due 4/24/2015 | 630 | 667 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 375 | 423 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 225 | 231 | ||||||
Rogers Communications, Inc., 6.80%, Due 8/15/2018 | 250 | 312 | ||||||
Shell International Finance BV, 3.10%, Due 6/28/2015 | 380 | 403 | ||||||
Simon Property Group LP, 5.75%, Due 12/1/2015 | 370 | 423 | ||||||
Teck Resources Ltd., 6.00%, Due 8/15/2040 | 205 | 214 | ||||||
Telecom Italia Capital SA, 4.95%, Due 9/30/2014 | 395 | 427 | ||||||
Telefonica Emisiones SAU, | ||||||||
4.949%, Due 1/15/2015 | 425 | 469 | ||||||
6.421%, Due 6/20/2016 | 450 | 536 | ||||||
Thermo Fisher Scientific, Inc., 3.20%, Due 5/1/2015 | 230 | 243 | ||||||
Thomson Reuters Corp., 4.70%, Due 10/15/2019 | 225 | 244 | ||||||
Time Warner Cable, Inc., | ||||||||
5.85%, Due 5/1/2017 | 450 | 513 | ||||||
6.75%, Due 7/1/2018 | 825 | 990 | ||||||
Time Warner, Inc., 4.875%, Due 3/15/2020 | 290 | 318 | ||||||
Tyco Electronics Group SA, 6.55%, Due 10/1/2017 | 225 | 263 | ||||||
Tyco International Finance SA, | ||||||||
4.125%, Due 10/15/2014 | 200 | 218 | ||||||
8.50%, Due 1/15/2019 | 320 | 423 | ||||||
Union Pacific Corp., 7.875%, Due 1/15/2019 | 550 | 721 | ||||||
United Technologies Corp., 6.125%, Due 7/15/2038 | 125 | 147 | ||||||
Valero Energy Corp., | ||||||||
9.375%, Due 3/15/2019 | 170 | 218 | ||||||
6.625%, Due 6/15/2037 | 205 | 207 | ||||||
Verizon Communications, Inc., | ||||||||
5.50%, Due 4/1/2017 | 500 | 576 | ||||||
6.90%, Due 4/15/2038 | 500 | 597 | ||||||
Verizon Wireless Capital, LLC, | ||||||||
3.75%, Due 5/20/2011 | 370 | 376 | ||||||
8.50%, Due 11/15/2018 | 435 | 596 | ||||||
Vodafone Group plc, 6.15%, Due 2/27/2037 | 360 | 410 | ||||||
Wal-Mart Stores, Inc., | ||||||||
7.55%, Due 2/15/2030 | 400 | 525 | ||||||
5.00%, Due 10/25/2040 | 235 | 233 | ||||||
Waste Management, Inc., 7.375%, Due 3/11/2019 | 270 | 340 | ||||||
Wyeth Corp., 5.50%, Due 2/1/2014 | 1,605 | 1,825 | ||||||
Xerox Corp., | ||||||||
5.50%, Due 5/15/2012 | 510 | 542 | ||||||
5.65%, Due 5/15/2013 | 50 | 55 | ||||||
8.25%, Due 5/15/2014 | 190 | 228 | ||||||
45,994 | ||||||||
Other Government — 0.13% | ||||||||
Province of Ontario Canada, 4.10%, Due 6/16/2014 | 350 | 386 | ||||||
Utilities — 4.83% | ||||||||
Columbus Southern Power Co., 5.50%, Due 3/1/2013 | 495 | 544 | ||||||
Commonwealth Edison Co., 4.00%, Due 8/1/2020 | 190 | 198 | ||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 350 | 369 | ||||||
Dominion Resources, Inc., | ||||||||
5.60%, Due 11/15/2016 | 475 | 558 | ||||||
8.875%, Due 1/15/2019 | 80 | 108 | ||||||
Duke Energy Carolinas LLC, 5.10%, Due 4/15/2018 | 400 | 455 |
See accompanying notes
29
American Beacon Intermediate Bond Fund
Schedule of Investments
October 31, 2010
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016 | 355 | 422 | ||||||
EDF SA, 4.60%, Due 1/27/2020* | 580 | 640 | ||||||
Energy Transfer Partners LP, | ||||||||
8.50%, Due 4/15/2014 | 520 | 619 | ||||||
9.00%, Due 4/15/2019 | 300 | 383 | ||||||
Enterprise Products Operating LLC, | ||||||||
5.65%, Due 4/1/2013 | 490 | 535 | ||||||
6.125%, Due 10/15/2039 | 255 | 270 | ||||||
Exelon Generation Co. LLC, 6.25%, Due 10/1/2039 | 365 | 380 | ||||||
FirstEnergy Solutions Corp., 4.80%, Due 2/15/2015 | 175 | 189 | ||||||
MidAmerican Energy Holdings Co., | ||||||||
5.875%, Due 10/1/2012 | 505 | 550 | ||||||
6.125%, Due 4/1/2036 | 375 | 418 | ||||||
National Rural Utilities Cooperative Finance Corp., 1.125%, Due 11/1/2013 | 485 | 486 | ||||||
Pacific Gas & Electric Co., | ||||||||
6.25%, Due 12/1/2013 | 150 | 171 | ||||||
3.50%, Due 10/1/2020 | 450 | 452 | ||||||
Progress Energy, Inc., 4.875%, Due 12/1/2019 | 600 | 661 | ||||||
Public Service Enterprise Group, Inc., 6.95%, Due 6/1/2012 | 690 | 754 | ||||||
Sempra Energy, 6.50%, Due 6/1/2016 | 285 | 344 | ||||||
Southern Power Co., 6.25%, Due 7/15/2012 | 550 | 598 | ||||||
Spectra Energy Capital Corp., 5.65%, Due 3/1/2020 | 265 | 294 | ||||||
Spectra Energy Capital LLC, 5.668%, Due 8/15/2014 | 255 | 286 | ||||||
TransCanada PipeLines Ltd., | ||||||||
7.625%, Due 1/15/2039 | 520 | 680 | ||||||
6.10%, Due 6/1/2040 | 290 | 324 | ||||||
Union Electric Co., 6.70%, Due 2/1/2019 | 510 | 615 | ||||||
Virginia Electric and Power Co., 5.40%, Due 4/30/2018 | 400 | 464 | ||||||
Westar Energy, Inc., 6.00%, Due 7/1/2014 | 200 | 230 | ||||||
Wisconsin Electric Power Co., 6.25%, Due 12/1/2015 | 500 | 609 | ||||||
Xcel Energy, Inc., 5.613%, Due 4/1/2017 | 581 | 647 | ||||||
14,253 | ||||||||
Total Corporate Obligations (Cost $103,864) | 112,374 | |||||||
ASSET-BACKED SECURITIES — 3.19% | ||||||||
American Express Credit Account Master Trust, 5.35%, Due 1/15/2014 | 1,550 | 1,599 | ||||||
Bank of America Auto Trust, 0.75%, Due 6/15/2012* | 648 | 648 | ||||||
BMW Floorplan Master Owner Trust, 1.406%, Due 9/15/2014* † | 400 | 405 | ||||||
Capital One Multi-Asset Execution Trust, 5.15%, Due 6/15/2014 | 1,150 | 1,191 | ||||||
Citibank Credit Card Issuance Trust, 1.806%, Due 5/15/2014† | 750 | 765 | ||||||
Discover Card Master Trust, 1.556%, Due 2/17/2015† | 600 | 610 | ||||||
Ford Credit Auto Lease Trust, 1.04%, Due 3/15/2013* | 861 | 862 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.806%, Due 9/15/2014† | 400 | 406 | ||||||
Harley-Davidson Motorcycle Trust, 1.87%, Due 2/15/2014 | 350 | 353 | ||||||
Honda Auto Receivables Owner Trust, 3.30%, Due 9/15/2015 | 385 | 403 | ||||||
Hyundai Auto Receivables Trust, 3.15%, Due 3/15/2016 | 220 | 232 | ||||||
John Deere Owner Trust, | ||||||||
2.59%, Due 10/15/2013 | 260 | 263 | ||||||
3.96%, Due 5/16/2016 | 215 | 226 | ||||||
Nissan Master Owner Trust Receivables, 1.406%, Due 1/15/2015* † | 750 | 759 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
0.66%, Due 5/21/2012 | 368 | 368 | ||||||
6.24%, Due 7/20/2015 | 300 | 329 | ||||||
Total Asset-Backed Securities (Cost $9,246) | 9,419 | |||||||
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS — 3.83% | ||||||||
Banc of America Commercial Mortgage, Inc., | ||||||||
5.317%, Due 9/10/2047 | 380 | 392 | ||||||
5.634%, Due 4/10/2049 | 850 | 883 | ||||||
Bear Stearns Commercial Mortgage Securities, Inc., | ||||||||
5.201%, Due 12/11/2038 | 790 | 857 |
See accompanying notes
30
American Beacon Intermediate Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
5.54%, Due 9/11/2041 | 1,285 | 1,403 | ||||||
4.831%, Due 7/11/2042 | 835 | 867 | ||||||
Citigroup Commercial Mortgage Trust, 4.38%, Due 10/15/2041 | 770 | 778 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.886%, Due 11/15/2044 | 840 | 908 | ||||||
GS Mortgage Securities Corp II, 4.607%, Due 7/10/2039 | 380 | 387 | ||||||
GS Mortgage Securities Trust, 3.679%, Due 8/10/2043* | 595 | 627 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042 | 366 | 380 | ||||||
3.853%, Due 6/15/2043* | 745 | 782 | ||||||
4.625%, Due 3/15/2046 | 326 | 335 | ||||||
5.742%, Due 2/12/2049 | 550 | 585 | ||||||
5.629%, Due 2/12/2051 | 750 | 787 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040 | 550 | 589 | ||||||
Prime Mortgage Trust, 5.25%, Due 7/25/2020 | 313 | 319 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.739%, Due 6/15/2049 | 410 | 427 | ||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $10,477) | 11,306 | |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS — 25.36% | ||||||||
Federal Home Loan Mortgage Corporation — 7.24% | ||||||||
4.50%, Due 3/1/2019 | 319 | 338 | ||||||
5.00%, Due 10/1/2020 | 755 | 809 | ||||||
5.00%, Due 4/1/2023 | 189 | 201 | ||||||
5.00%, Due 8/1/2033 | 476 | 509 | ||||||
5.50%, Due 2/1/2034 | 580 | 628 | ||||||
6.00%, Due 8/1/2034 | 270 | 297 | ||||||
5.00%, Due 8/1/2035 | 315 | 337 | ||||||
5.00%, Due 9/1/2035 | 792 | 845 | ||||||
6.00%, Due 8/1/2036 | 291 | 318 | ||||||
5.50%, Due 4/1/2037 | 467 | 502 | ||||||
5.50%, Due 12/1/2037 | 1,905 | 2,056 | ||||||
5.00%, Due 3/1/2038 | 729 | 773 | ||||||
5.00%, Due 3/1/2038 | 1,306 | 1,386 | ||||||
6.00%, Due 3/1/2038 | 1,516 | 1,644 | ||||||
5.50%, Due 5/1/2038 | 713 | 765 | ||||||
5.50%, Due 6/1/2038 | 558 | 598 | ||||||
5.50%, Due 10/1/2039 | 736 | 788 | ||||||
5.00%, Due 4/1/2040 | 4,775 | 5,066 | ||||||
5.00%, Due 5/1/2040 | 3,292 | 3,524 | ||||||
21,384 | ||||||||
Federal National Mortgage Association — 16.77% | ||||||||
6.50%, Due 2/1/2017 | 124 | 136 | ||||||
5.00%, Due 12/1/2017 | 437 | 470 | ||||||
4.50%, Due 9/1/2018 | 851 | 911 | ||||||
4.00%, Due 8/1/2020 | 243 | 256 | ||||||
5.00%, Due 11/1/2023 | 87 | 93 | ||||||
5.00%, Due 3/1/2024 | 1,137 | 1,213 | ||||||
4.50%, Due 4/1/2024 | 530 | 568 | ||||||
5.00%, Due 4/1/2025 | 3,898 | 4,157 | ||||||
4.50%, Due 5/1/2025 | 176 | 187 | ||||||
4.50%, Due 6/1/2025 | 3,982 | 4,217 | ||||||
5.00%, Due 3/1/2034 | 612 | 655 | ||||||
5.50%, Due 6/1/2034 | 324 | 350 | ||||||
4.50%, Due 9/1/2034 | 214 | 226 | ||||||
5.50%, Due 2/1/2035 | 678 | 735 | ||||||
5.00%, Due 11/1/2035 | 948 | 1,013 | ||||||
5.50%, Due 12/1/2035 | 492 | 531 | ||||||
5.50%, Due 1/1/2036 | 606 | 655 | ||||||
5.00%, Due 2/1/2036 | 517 | 552 | ||||||
5.50%, Due 4/1/2036 | 1,108 | 1,197 | ||||||
6.00%, Due 9/1/2036 | 227 | 248 | ||||||
6.50%, Due 9/1/2036 | 849 | 946 | ||||||
6.50%, Due 12/1/2036 | 388 | 432 | ||||||
5.50%, Due 2/1/2037 | 652 | 702 |
See accompanying notes
31
American Beacon Intermediate Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
5.50%, Due 8/1/2037 | 1,664 | 1,801 | ||||||
6.00%, Due 9/1/2037 | 619 | 673 | ||||||
6.00%, Due 1/1/2038 | 929 | 1,010 | ||||||
5.50%, Due 3/1/2038 | 2,895 | 3,133 | ||||||
5.00%, Due 4/1/2038 | 616 | 655 | ||||||
5.00%, Due 4/1/2038 | 733 | 779 | ||||||
5.00%, Due 5/1/2038 | 2,372 | 2,523 | ||||||
5.50%, Due 6/1/2038 | 496 | 533 | ||||||
5.00%, Due 6/1/2038 | 837 | 890 | ||||||
5.50%, Due 6/1/2038 | 745 | 801 | ||||||
4.50%, Due 1/1/2040 | 3,689 | 3,876 | ||||||
5.00%, Due 5/1/2040 | 6,221 | 6,617 | ||||||
5.50%, Due 6/1/2040 | 3,205 | 3,443 | ||||||
4.00%, Due 9/1/2040 | 2,280 | 2,353 | ||||||
49,537 | ||||||||
Government National Mortgage Association — 1.35% | ||||||||
4.201%, Due 8/16/2026 | 212 | 217 | ||||||
2.989%, Due 3/16/2039 | 1,144 | 1,201 | ||||||
6.50%, Due 3/15/2028 | 271 | 307 | ||||||
6.00%, Due 4/15/2031 | 319 | 354 | ||||||
5.50%, Due 2/20/2034 | 361 | 393 | ||||||
5.50%, Due 2/15/2040 | 1,383 | 1,502 | ||||||
3,974 | ||||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $72,524) | 74,895 | |||||||
U.S. AGENCY OBLIGATIONS — 0.34% | ||||||||
5.125%, Due 1/2/2014 | 385 | 429 | ||||||
4.625%, Due 10/15/2014 | 500 | 570 | ||||||
Total U.S. Agency Obligations (Cost $890) | 999 | |||||||
U.S. TREASURY OBLIGATIONS — 25.29% | ||||||||
U.S. Treasury Bonds — 5.48% | ||||||||
7.875%, Due 2/15/2021 | 1,050 | 1,543 | ||||||
6.25%, Due 8/15/2023 | 1,400 | 1,872 | ||||||
6.875%, Due 8/15/2025 | 770 | 1,096 | ||||||
5.25%, Due 11/15/2028 | 750 | 919 | ||||||
4.75%, Due 2/15/2037 | 1,300 | 1,478 | ||||||
4.50%, Due 8/15/2039 | 2,810 | 3,056 | ||||||
4.375%, Due 5/15/2040 | 5,845 | 6,226 | ||||||
16,190 | ||||||||
U.S. Treasury Notes — 19.81% | ||||||||
1.375%, Due 2/15/2012 | 3,625 | 3,677 | ||||||
0.75%, Due 8/15/2013 | 9,000 | 9,073 | ||||||
2.625%, Due 7/31/2014 | 4,000 | 4,275 | ||||||
2.50%, Due 4/30/2015 | 5,000 | 5,327 | ||||||
2.125%, Due 5/31/2015 | 7,130 | 7,473 | ||||||
4.25%, Due 8/15/2015 | 2,000 | 2,296 | ||||||
1.25%, Due 9/30/2015 | 540 | 543 | ||||||
3.00%, Due 9/30/2016 | 3,050 | 3,303 | ||||||
3.125%, Due 10/31/2016 | 3,300 | 3,595 | ||||||
3.75%, Due 11/15/2018 | 2,600 | 2,900 | ||||||
3.625%, Due 2/15/2020 | 3,050 | 3,330 | ||||||
3.50%, Due 5/15/2020 | 11,535 | 12,440 | ||||||
2.625%, Due 8/15/2020 | 265 | 265 | ||||||
58,497 | ||||||||
Total U.S. Treasury Obligations (Cost $73,007) | 74,687 | |||||||
MUNICIPAL OBLIGATIONS — 0.08% | ||||||||
State of Illinois, 1.823%, Due 1/1/2011 | 250 | 250 |
Shares | ||||||||
SHORT-TERM INVESTMENTS — 3.26% (Cost $9,620) | ||||||||
JPMorgan U.S. Government Money Market Fund | 9,620,319 | 9,620 | ||||||
TOTAL INVESTMENTS — 99.40% (Cost $279,878) | 293,550 |
See accompanying notes
32
American Beacon Intermediate Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
OTHER ASSETS, NET OF LIABILITIES — 0.60% | 1,766 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 295,316 | ||||||
Percentages are stated as a percent of net assets. | ||
* | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $11,206 or 3.79% of net assets. The Fund has no right to demand registration of these securities. | |
† | 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. |
See accompanying notes
33
American Beacon Short-Term Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
CORPORATE OBLIGATIONS — 50.50% | ||||||||
Finance — 27.57% | ||||||||
Barclays Bank plc, 5.45%, Due 9/12/2012 | 1,000 | 1,084 | ||||||
Berkshire Hathaway Finance Corp., 4.00%, Due 4/15/2012 | 1,000 | 1,049 | ||||||
Berkshire Hathaway, Inc., 0.834%, Due 2/11/2013* | 2,000 | 2,010 | ||||||
BNP Paribas, 0.690%, Due 4/8/2013* | 1,500 | 1,495 | ||||||
Citigroup, Inc., 0.715%, Due 11/5/2014* | 2,573 | 2,428 | ||||||
CME Group, Inc., 5.40%, Due 8/1/2013 | 250 | 280 | ||||||
Credit Suisse First Boston, 5.00%, Due 5/15/2013 | 2,000 | 2,188 | ||||||
Dexia Credit Local N.Y., 0.693%, Due 3/5/2013* † | 3,000 | 2,988 | ||||||
General Electric Capital Corp., | ||||||||
0.421%, Due 3/20/2014* | 1,446 | 1,390 | ||||||
0.552%, Due 9/15/2014* | 1,218 | 1,170 | ||||||
Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013 | 2,000 | 2,152 | ||||||
HSBC Finance Corp., 6.75%, Due 5/15/2011 | 1,000 | 1,031 | ||||||
JPMorgan Chase & Co., 0.958%, Due 2/26/2013* | 3,000 | 3,010 | ||||||
MassMutual Global Funding II, | ||||||||
3.625%, Due 7/16/2012† | 500 | 521 | ||||||
0.453%, Due 12/6/2013* † | 700 | 692 | ||||||
MBNA Corp., 7.50%, Due 3/15/2012 | 2,000 | 2,145 | ||||||
Mellon Funding Corp., 0.526%, Due 5/15/2014* | 2,000 | 1,981 | ||||||
Metropolitan Life Global Funding I, | ||||||||
0.542%, Due 3/15/2012* † | 1,000 | 1,001 | ||||||
2.875%, Due 9/17/2012† | 1,000 | 1,031 | ||||||
Monumental Global Funding III, 0.489%, Due 1/15/2014* † | 1,000 | 959 | ||||||
Morgan Stanley, 0.589%, Due 1/9/2014* | 2,000 | 1,905 | ||||||
Nationwide Building Society, 5.50%, Due 7/18/2012† | 1,000 | 1,070 | ||||||
Pricoa Global Funding I, | ||||||||
0.388%, Due 1/30/2012* † | 800 | 795 | ||||||
5.40%, Due 10/18/2012† | 500 | 536 | ||||||
Rabobank Nederland NV, 2.65%, Due 8/17/2012† | 2,000 | 2,066 | ||||||
Svenska Handelsbanken AB, 4.875%, Due 6/10/2014† | 1,500 | 1,652 | ||||||
UBS AG, 1.439%, Due 2/23/2012* | 1,000 | 1,008 | ||||||
UnitedHealth Group, Inc., 5.125%, Due 11/15/2010 | 1,000 | 1,001 | ||||||
Wachovia Bank NA, 0.834%, Due 11/3/2014* | 1,000 | 957 | ||||||
Wachovia Corp., 2.236%, Due 5/1/2013* | 1,000 | 1,029 | ||||||
42,624 | ||||||||
Industrials — 19.46% | ||||||||
American Honda Finance Corp., 4.625%, Due 4/2/2013† | 1,000 | 1,078 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
3.00%, Due 10/15/2012 | 1,000 | 1,039 | ||||||
2.50%, Due 3/26/2013 | 1,000 | 1,029 | ||||||
AT&T Wireless Services, Inc., 7.875%, Due 3/1/2011 | 1,500 | 1,537 | ||||||
Burlington Northern Santa Fe LLC, 4.875%, Due 1/15/2015 | 1,000 | 1,115 | ||||||
Canadian Natural Resources Ltd., 6.70%, Due 7/15/2011 | 1,000 | 1,041 | ||||||
Caterpillar Financial Services Corp., 4.25%, Due 2/8/2013 | 500 | 536 | ||||||
Cellco Partnership / Verizon Wireless Capital LLC, 5.25%, Due 2/1/2012 | 1,000 | 1,058 | ||||||
Comcast Cable Communications Holdings, Inc., 8.375%, Due 3/15/2013 | 1,365 | 1,580 | ||||||
Daimler Finance NA LLC, 5.75%, Due 9/8/2011 | 1,000 | 1,041 | ||||||
Devon Financing Corp. U.L.C., 6.875%, Due 9/30/2011 | 1,000 | 1,054 | ||||||
France Telecom S.A., 4.375%, Due 7/8/2014 | 1,000 | 1,104 | ||||||
General Mills, Inc., 5.25%, Due 8/15/2013 | 1,000 | 1,118 | ||||||
John Deere Capital Corp., 5.25%, Due 10/1/2012 | 1,000 | 1,087 | ||||||
Kraft Foods, Inc., 5.625%, Due 11/1/2011 | 500 | 523 | ||||||
Marathon Oil Canada Corp., 8.375%, Due 5/1/2012 | 1,000 | 1,098 | ||||||
Nissan Motor Acceptance Corp., 5.625%, Due 3/14/2011† | 2,000 | 2,036 | ||||||
Northrop Grumman Corp., 7.125%, Due 2/15/2011 | 1,000 | 1,018 | ||||||
Telefonica Emisiones SAU, 0.775%, Due 2/4/2013* | 1,000 | 985 | ||||||
Time Warner Cable, Inc., 5.40%, Due 7/2/2012 | 1,000 | 1,070 | ||||||
Tyco International Finance SA, 6.75%, Due 2/15/2011 | 2,000 | 2,035 | ||||||
Union Pacific Corp., 6.50%, Due 4/15/2012 | 500 | 538 |
See accompanying notes
34
American Beacon Short-Term Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
5.45%, Due 1/31/2013 | 1,000 | 1,093 | ||||||
Vodafone Group plc, 5.50%, Due 6/15/2011 | 1,000 | 1,031 | ||||||
Volkswagen International Finance N.V., 1.625%, Due 8/12/2013† | 1,000 | 1,009 | ||||||
Xerox Corp., 5.65%, Due 5/15/2013 | 300 | 329 | ||||||
XTO Energy, Inc., | ||||||||
5.90%, Due 8/1/2012 | 1,000 | 1,093 | ||||||
6.25%, Due 4/15/2013 | 719 | 813 | ||||||
30,088 | ||||||||
Utilities — 3.47% | ||||||||
Dominion Resources, Inc., 5.70%, Due 9/17/2012 | 1,000 | 1,088 | ||||||
FPL Group Capital, Inc., 0.818%, Due 11/9/2012* | 1,000 | 1,005 | ||||||
Midamerican Energy Holdings Co., 3.15%, Due 7/15/2012 | 1,000 | 1,037 | ||||||
Progress Energy, Inc., 7.10%, Due 3/1/2011 | 2,181 | 2,227 | ||||||
5,357 | ||||||||
Total Corporate Obligations (Cost $76,240) | 78,069 | |||||||
ASSET-BACKED SECURITIES — 25.29% | ||||||||
Bank of America Auto Trust, | ||||||||
0.75%, Due 6/15/2012† | 863 | 864 | ||||||
2.67%, Due 7/15/2013† | 986 | 999 | ||||||
2.13%, Due 9/15/2013† | 1,000 | 1,011 | ||||||
BMW Floorplan Master Owner Trust, 1.406%, Due 9/15/2014* † | 2,000 | 2,024 | ||||||
Capital One Multi-Asset Execution Trust, 3.20%, Due 4/15/2014 | 2,000 | 2,033 | ||||||
CarMax Auto Owner Trust, 0.83%, Due 11/15/2012 | 974 | 975 | ||||||
Chase Issuance Trust, 1.806%, Due 4/15/2014* | 2,000 | 2,038 | ||||||
Chrysler Financial Lease Trust, 1.78%, Due 6/15/2011† | 2,599 | 2,605 | ||||||
Citibank Credit Card Issuance Trust, 2.70%, Due 6/24/2013 | 2,000 | 2,029 | ||||||
CitiFinancial Auto Issuance Trust, 2.59%, Due 10/15/2013† | 2,000 | 2,033 | ||||||
Discover Card Master Trust, 1.556%, Due 2/17/2015* | 2,000 | 2,032 | ||||||
Ford Credit Auto Owner Trust, 2.17%, Due 10/15/2013 | 1,000 | 1,015 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.806%, Due 9/15/2014* | 2,000 | 2,032 | ||||||
GE Capital Credit Card Master Note Trust, 3.69%, Due 7/15/2015 | 2,000 | 2,088 | ||||||
GE Equipment Midticket LLC, 2.34%, Due 6/17/2013 | 958 | 969 | ||||||
Harley-Davidson Motorcycle Trust, 5.52%, Due 11/15/2013 | 1,677 | 1,732 | ||||||
Honda Auto Receivables Owner Trust, 2.31%, Due 5/15/2013 | 1,500 | 1,521 | ||||||
John Deere Owner Trust, 0.72%, Due 7/16/2012 | 3,000 | 3,004 | ||||||
Mercedes-Benz Auto Receivables Trust, 0.70%, Due 8/15/2012 | 1,000 | 1,001 | ||||||
Nissan Auto Lease Trust, 2.07%, Due 1/15/2015 | 2,000 | 2,019 | ||||||
Nissan Master Owner Trust Receivables, 1.406%, Due 1/15/2015* † | 1,000 | 1,012 | ||||||
USAA Auto Owner Trust, 5.55%, Due 2/15/2013 | 1,960 | 1,991 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
0.66%, Due 5/21/2012 | 981 | 981 | ||||||
6.24%, Due 7/20/2015 | 1,000 | 1,095 | ||||||
Total Asset-Backed Securities (Cost $38,536) | 39,103 | |||||||
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS — 3.93% | ||||||||
Banc of America Commercial Mortgage, Inc., | ||||||||
4.561%, Due 11/10/2041 | 1,170 | 1,195 | ||||||
5.634%, Due 4/10/2049 | 800 | 831 | ||||||
GMAC Mortgage Servicer Advance Funding Co. Ltd., 4.25%, Due 1/15/2022† | 2,000 | 2,013 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp., 3.853%, Due 6/15/2043† | 994 | 1,042 | ||||||
NCUA Guaranteed Notes, 1.84%, Due 10/7/2020 | 1,000 | 1,000 | ||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $5,999) | 6,081 | |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS — 6.97% | ||||||||
4.968%, Due 12/16/2021 | 344 | 349 | ||||||
4.201%, Due 8/16/2026 | 1,061 | 1,087 | ||||||
2.782%, Due 6/16/2036 | 1,975 | 2,052 | ||||||
3.069%, Due 6/16/2036 | 2,943 | 3,114 | ||||||
2.989%, Due 3/16/2039 | 1,989 | 2,088 | ||||||
3.210%, Due 10/16/2039 | 1,980 | 2,085 | ||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $10,328) | 10,775 |
See accompanying notes
35
American Beacon Short-Term Bond Fund
Schedule of Investments
Schedule of Investments
October 31, 2010
Par Amount | Value | |||||||
($000) | ($000) | |||||||
U.S. TREASURY OBLIGATIONS — 11.97% | ||||||||
2.50%, Due 3/31/2015 | 13,500 | 14,386 | ||||||
1.75%, Due 7/31/2015 | 4,000 | 4,119 | ||||||
Total U.S. Treasury Obligations (Cost $17,500) | 18,505 | |||||||
MUNICIPAL OBLIGATIONS — 0.23% (Cost $350) | ||||||||
State of Illinois, 1.823%, Due 1/1/2011 | 350 | 350 | ||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS — 0.54% (Cost $836) | ||||||||
JPMorgan U.S. Government Money Market Fund | 836,463 | 836 | ||||||
TOTAL INVESTMENTS — 99.44% (Cost $149,789) | 153,719 | |||||||
OTHER ASSETS, NET OF LIABILITIES — 0.56% | 866 | |||||||
TOTAL NET ASSETS — 100.00% | $ | 154,585 | ||||||
Percentages are stated as a percent 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. | |
† | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $31,038 or 20.08% of net assets. The Fund has no right to demand registration of these securities. |
See accompanying notes
36
American Beacon Funds
Statements of Assets and Liabilities
For the year ended October 31, 2010
Statements of Assets and Liabilities
For the year ended October 31, 2010
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Bond Fund | Fund | Bond Fund | Bond Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in unaffiliated securities, at value A | $ | 182,757 | $ | 126,599 | $ | 293,550 | $ | 153,719 | ||||||||
Receivable for investments sold | 4,850 | 251 | 201 | — | ||||||||||||
Dividends and interest receivable | 3,846 | 1,008 | 2,446 | 789 | ||||||||||||
Receivable for fund shares sold | 384 | 154 | 431 | 141 | ||||||||||||
Receivable for tax reclaims | 2 | 8 | 9 | 4 | ||||||||||||
Receivable for expense reimbursement (Note 2) | — | — | — | 2 | ||||||||||||
Prepaid expenses | 54 | 55 | 53 | 57 | ||||||||||||
Other assets | 45 | — | — | — | ||||||||||||
Total assets | 191,938 | 128,075 | 296,690 | 154,712 | ||||||||||||
Liabilities: | ||||||||||||||||
Payable for investments purchased | 5,774 | 215 | 1,253 | — | ||||||||||||
Payable for fund shares redeemed | 23 | 12 | 7 | 32 | ||||||||||||
Dividends payable | 150 | 48 | — | 5 | ||||||||||||
Management and investment advisory fees payable (Note 2) | 221 | 114 | 50 | 26 | ||||||||||||
Administrative service and service fees payable (Note 2) | 35 | 63 | 14 | 17 | ||||||||||||
Professional fees payable | 25 | 28 | 25 | 30 | ||||||||||||
Trustee fees payable | 7 | 1 | 3 | 6 | ||||||||||||
Prospectus and shareholder reports | 20 | 3 | 5 | 1 | ||||||||||||
Other liabilities | 12 | 1 | 17 | 10 | ||||||||||||
Total liabilities | 6,267 | 485 | 1,374 | 127 | ||||||||||||
Net Assets | $ | 185,671 | $ | 127,590 | $ | 295,316 | $ | 154,585 | ||||||||
Analysis of Net Assets: | ||||||||||||||||
Paid-in-capital | 186,058 | 120,544 | 276,244 | 159,053 | ||||||||||||
Undistributed (distributions in excess of) net investment income | 503 | (62 | ) | 501 | (539 | ) | ||||||||||
Accumulated net realized gain (loss) | (10,663 | ) | (1,754 | ) | 4,899 | (7,859 | ) | |||||||||
Unrealized appreciation of investments | 9,773 | 8,862 | 13,672 | 3,930 | ||||||||||||
Net assets | $ | 185,671 | $ | 127,590 | $ | 295,316 | $ | 154,585 | ||||||||
Shares outstanding (no par value): | ||||||||||||||||
Institutional Class | 4,578,664 | N/A | 26,192,234 | 14,773,710 | ||||||||||||
Y Class | 123 | 34,017 | 34,444 | 5,762 | ||||||||||||
Investor Class | 5,976,348 | 11,655,630 | 345,470 | 2,605,711 | ||||||||||||
A Class | 4,375 | 15,317 | 4,155 | 4,940 | ||||||||||||
C Class | 4,033 | 95,659 | 29,296 | 113 | ||||||||||||
AMR Class | 9,936,936 | N/A | N/A | N/A | ||||||||||||
Net asset value, offering and redemption price per share: | ||||||||||||||||
Institutional Class | $ | 9.05 | N/A | $ | 11.10 | $ | 8.89 | |||||||||
Y Class | $ | 9.06 | $ | 10 .80 | $ | 11.10 | $ | 8.90 | ||||||||
Investor Class | $ | 9.06 | $ | 10 .81 | $ | 11.08 | $ | 8.89 | ||||||||
A Class (Net asset value only) | $ | 9.08 | $ | 10 .81 | $ | 11.07 | $ | 8.89 | ||||||||
A Class (Offering and redemption price) | $ | 9.53 | $ | 11 .35 | $ | 11.62 | $ | 9.12 | ||||||||
C Class | $ | 9.05 | $ | 10 .82 | $ | 11.08 | $ | 8.90 | ||||||||
AMR Class | $ | 9.06 | N/A | N/A | N/A | |||||||||||
A Cost of investments in unaffiliated securities | $ | 172,984 | $ | 117,737 | $ | 279,878 | $ | 149,789 |
See accompanying notes
37
American Beacon Funds
Statements of Operations
Year Ended October 31, 2010 (in thousands)
Statements of Operations
Year Ended October 31, 2010 (in thousands)
Retirement | ||||||||||||||||
Income and | ||||||||||||||||
High Yield | Appreciation | Intermediate | Short-Term | |||||||||||||
Bond Fund | Fund | Bond Fund | Bond Fund | |||||||||||||
Investment Income: | ||||||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 31 | $ | 265 | $ | 13 | $ | 3 | ||||||||
Interest income | 21,280 | 4,227 | 9,521 | 4,246 | ||||||||||||
Miscellaneous Income | 96 | — | — | — | ||||||||||||
Total investment income | 21,407 | 4,492 | 9,534 | 4,249 | ||||||||||||
Expenses: | ||||||||||||||||
Management and investment advisory fees (Note 2) | 878 | 369 | 514 | 324 | ||||||||||||
Administrative service fees (Note 2): | ||||||||||||||||
Institutional Class | 134 | — | 127 | 63 | ||||||||||||
Investor Class | 241 | 347 | 9 | 105 | ||||||||||||
AMR Class | 51 | — | — | — | ||||||||||||
Transfer agent fees: | ||||||||||||||||
Institutional Class | 3 | — | 15 | 8 | ||||||||||||
Investor Class | 7 | 8 | — | 4 | ||||||||||||
AMR Class | 8 | — | — | — | ||||||||||||
Custody and fund accounting fees | 45 | 23 | 49 | 34 | ||||||||||||
Professional fees | 40 | 38 | 42 | 44 | ||||||||||||
Registration fees and expenses | 51 | 20 | 48 | 34 | ||||||||||||
Service fees (Note 2): | ||||||||||||||||
Investor Class | 200 | 428 | 7 | 88 | ||||||||||||
Distribution fees- C Class (Note 2) | — | 1 | — | — | ||||||||||||
Prospectus and shareholder reports | 25 | 2 | 11 | 11 | ||||||||||||
Trustee fees | 18 | 9 | 17 | 11 | ||||||||||||
Other expenses | 24 | 11 | 23 | 19 | ||||||||||||
Total expenses | 1,725 | 1,256 | 862 | 745 | ||||||||||||
Net (fees waived and expenses reimbursed)/recouped by Manager (Note 2) | — | — | (2 | ) | (65 | ) | ||||||||||
Net expenses | 1,725 | 1,256 | 860 | 680 | ||||||||||||
Net investment income | 19,682 | 3,236 | 8,674 | 3,569 | ||||||||||||
Realized and unrealized gain (loss) on investments: | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments | 17,096 | 871 | 5,763 | 1,400 | ||||||||||||
Change in net unrealized appreciation or depreciation of: | ||||||||||||||||
Investments | (1,037 | ) | 5,410 | 5,150 | 837 | |||||||||||
Net gain on investments | 16,059 | 6,281 | 10,913 | 2,237 | ||||||||||||
Net increase in net assets resulting from operations | $ | 35,741 | $ | 9,517 | $ | 19,587 | $ | 5,806 | ||||||||
A Foreign taxes | $ | — | $ | 1 | $ | — | $ | — |
See accompanying notes
38
American Beacon Funds
Statements of Changes in Net Assets (in thousands)
Statements of Changes in Net Assets (in thousands)
Retirement Income and | ||||||||||||||||
High Yield Bond Fund | Appreciation Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October | |||||||||||||
2010 | 2009 | 2010 | 31, 2009 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 19,682 | $ | 19,821 | $ | 3,236 | $ | 3,433 | ||||||||
Net realized gain (loss) on investments | 17,096 | (11,143 | ) | 871 | (242 | ) | ||||||||||
Change in net unrealized appreciation or depreciation of investments | (1,037 | ) | 61,933 | 5,410 | 14,228 | |||||||||||
Net increase in net assets resulting from operations | 35,741 | 70,611 | 9,517 | 17,419 | ||||||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (3,870 | ) | (6,264 | ) | — | — | ||||||||||
Y Class | — | — | (2 | ) | — | |||||||||||
Investor Class | (6,758 | ) | (4,848 | ) | (3,375 | ) | (3,577 | ) | ||||||||
C Class | — | — | (1 | ) | — | |||||||||||
AMR Class | (9,049 | ) | (8,707 | ) | — | — | ||||||||||
Return of Capital: | ||||||||||||||||
Investor Class | — | — | — | (173 | ) | |||||||||||
Net distributions to shareholders | (19,677 | ) | (19,819 | ) | (3,378 | ) | (3,750 | ) | ||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 256,394 | 297,510 | 41,365 | 24,626 | ||||||||||||
Reinvestment of dividends and distributions | 17,683 | 17,602 | 2,727 | 3,745 | ||||||||||||
Cost of shares redeemed | (335,193 | ) | (255,402 | ) | (16,368 | ) | (48,782 | ) | ||||||||
Redemption fees | 74 | — | — | — | ||||||||||||
Net increase (decrease) in net assets from capital share transactions | (61,042 | ) | 59,710 | 27,724 | (20,411 | ) | ||||||||||
Net increase (decrease) in net assets | (44,978 | ) | 110,502 | 33,863 | (6,742 | ) | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 230,649 | 120,147 | 93,727 | 100,469 | ||||||||||||
End of Period * | $ | 185,671 | $ | 230,649 | $ | 127,590 | $ | 93,727 | ||||||||
*Includes undistributed net investment income (loss) of | $ | 503 | $ | 503 | $ | (62 | ) | $ | (117 | ) | ||||||
See accompanying notes
39
American Beacon Funds
Statements of Changes in Net Assets (in thousands)
Statements of Changes in Net Assets (in thousands)
Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 8,674 | $ | 8,798 | $ | 3,569 | $ | 5,710 | ||||||||
Net realized gain on investments | 5,763 | 1,112 | 1,400 | 5,301 | ||||||||||||
Change in net unrealized appreciation or depreciation of investments | 5,150 | 17,269 | 837 | 2,645 | ||||||||||||
Net increase in net assets resulting from operations | 19,587 | 27,179 | 5,806 | 13,656 | ||||||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (8,812 | ) | (8,775 | ) | (3,855 | ) | (7,180 | ) | ||||||||
Y Class | (2 | ) | — | — | — | |||||||||||
Investor Class | (89 | ) | (23 | ) | (945 | ) | (653 | ) | ||||||||
C Class | (1 | ) | — | — | — | |||||||||||
Net distributions to shareholders | (8,904 | ) | (8,798 | ) | (4,800 | ) | (7,833 | ) | ||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 210,797 | 154,268 | 84,366 | 92,994 | ||||||||||||
Reinvestment of dividends and distributions | 8,901 | 8,797 | 4,725 | 7,696 | ||||||||||||
Cost of shares redeemed | (148,261 | ) | (115,884 | ) | (90,705 | ) | (214,778 | ) | ||||||||
Net increase (decrease) in net assets from capital share transactions | 71,437 | 47,181 | (1,614 | ) | (114,088 | ) | ||||||||||
Net increase (decrease) in net assets | 82,120 | 65,562 | (608 | ) | (108,265 | ) | ||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 213,196 | 147,634 | 155,193 | 263,458 | ||||||||||||
End of Period * | $ | 295,316 | $ | 213,196 | $ | 154,585 | $ | 155,193 | ||||||||
*Includes undistributed net investment income (loss) of | $ | 501 | $ | 501 | $ | (539 | ) | $ | (137 | ) | ||||||
See accompanying notes
40
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”) which is comprised of 19 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon High Yield Bond Fund, the American Beacon Retirement Income and Appreciation 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 Lighthouse Holdings, Inc. 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 inception date of the Y Class is March 1, 2010, the inception date of the A Class is May 17, 2010 and the inception date of the C Class is September 1, 2010.
Each Fund, has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | Individual investors investing directly or through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges | |
C Class | General public and investors investing through an intermediary with applicable sales charges | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation and its affiliates |
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2.
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. 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 fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the “Board”).
41
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Valuation Inputs
Various inputs may be used to determine the value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 — Quoted prices in active markets for identical securities. | |||
Level 2 — Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities are fixed-income securities that are valued using observable inputs as stated above. | |||
Level 3 — Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
The Funds’ investments are summarized by level based on the inputs used to determine their values. During the period there were no significant transfers between levels for the Funds. As of October 31, 2010, the investments were classified as described below (in thousands):
High Yield Bond Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 324 | $ | — | $ | — | $ | 324 | ||||||||
Preferred Stocks | 324 | — | — | 324 | ||||||||||||
Corporate Obligations | — | 176,003 | — | 176,003 | ||||||||||||
Convertible Obligations | — | 1,064 | — | 1,064 | ||||||||||||
Short Term Investments | 5,042 | — | — | 5,042 | ||||||||||||
Total Investments in Securities | $ | 5,690 | $ | 177,067 | $ | — | $ | 182,757 | ||||||||
Retirement Income and Appreciation Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Preferred Stocks | $ | 1,976 | $ | — | $ | — | $ | 1,976 | ||||||||
Common Stock | 5,628 | — | — | 5,628 | ||||||||||||
Convertible Preferred | 568 | — | — | 568 | ||||||||||||
Convertible Obligations | — | 16,264 | — | 16,264 | ||||||||||||
Corporate Obligations | — | 45,743 | — | 45,743 | ||||||||||||
Non-Agency Mortgage Backed Obligations | — | 3,827 | — | 3,827 | ||||||||||||
Asset-Backed Obligations | — | 5,960 | — | 5,960 | ||||||||||||
U.S. Agency Mortgage Backed Obligations | — | 16,705 | — | 16,705 | ||||||||||||
U.S. Agency Obligations | — | 431 | — | 431 | ||||||||||||
U.S. Treasury Obligations | — | 25,261 | — | 25,261 | ||||||||||||
Municipal Obligations | — | 200 | — | 200 | ||||||||||||
Short Term Investments | 4,036 | — | — | 4,036 | ||||||||||||
Total Investments in Securities | $ | 12,208 | $ | 114,391 | $ | — | $ | 126,599 | ||||||||
Intermediate Bond Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 112,374 | $ | — | $ | 112,374 | ||||||||
Non-Agency Mortgage Backed Obligations | — | 11,306 | — | 11,306 | ||||||||||||
Asset-Backed Obligations | — | 9,419 | — | 9,419 | ||||||||||||
U.S. Agency Mortgage Backed Obligations | — | 74,895 | — | 74,895 | ||||||||||||
U.S. Agency Obligations | — | 999 | — | 999 | ||||||||||||
U.S. Treasury Obligations | — | 74,687 | — | 74,687 | ||||||||||||
Municipal Obligations | — | 250 | — | 250 | ||||||||||||
Short Term Investments | 9,620 | — | — | 9,620 | ||||||||||||
Total Investments in Securities | $ | 9,620 | $ | 283,930 | $ | — | $ | 293,550 | ||||||||
42
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
Short-Term Bond Fund | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 78,069 | $ | — | $ | 78,069 | ||||||||
Non-Agency Mortgage Backed Obligations | — | 6,081 | — | 6,081 | ||||||||||||
Asset-Backed Obligations | — | 39,103 | — | 39,103 | ||||||||||||
U.S. Agency Mortgage Backed Obligations | — | 10,775 | — | 10,775 | ||||||||||||
U.S. Treasury Obligations | — | 18,505 | — | 18,505 | ||||||||||||
Municipal Obligations | — | 350 | — | 350 | ||||||||||||
Short Term Investments | 836 | — | — | 836 | ||||||||||||
Total Investments in Securities | $ | 836 | $ | 152,883 | $ | — | $ | 153,719 | ||||||||
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the 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.
Dividends to Shareholders
Dividends from net investment income of the Funds generally will be declared daily, payable monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. These amounts are reported with the net realized gains in the Fund’s Statement of Operations.
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 trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust
43
American Beacon Funds
Notes to Financial Statements
October 31, 2010
Notes to Financial Statements
October 31, 2010
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 investment advisory, fund management and securities lending services. Investment assets of the High Yield Bond, Retirement Income and Appreciation, and Intermediate Bond Funds are managed by one or more 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 High Yield Bond Fund and Retirement Income and Appreciation Fund an annualized fee equal to 0.05% 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 0.20% of the average daily net assets of the Intermediate Bond Fund and pays a portion of its fee to an investment advisor hired by the Manager to direct investment activities of a portion of the Fund. The Manager is one of the investment advisors of the Retirement Income and Appreciation Fund and receives an annualized fee of 0.15% on the portion of assets managed by the Manager. 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 0.20% of average daily net assets of the Short-Term Bond Fund. Management fees paid during the year ended October 31, 2010 were as follows (dollars in thousands):
Amounts paid | Net Amounts | |||||||||||||||
Management | Management | to Investment | Retained by | |||||||||||||
Fee Rate | Fee | Advisors | Manager | |||||||||||||
High Yield Bond | 0.30%-0.45 | % | 878 | 765 | 113 | |||||||||||
Retirement Income and Appreciation | 0.20%-0.80 | % | 369 | 310 | 59 | |||||||||||
Intermediate Bond | 0.20 | % | 514 | 213 | 301 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives, an annualized fee of 0.05% of the average daily net assets of the AMR Class, 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes and 0.40% of the average daily net assets of the A and C Classes of each Fund except for the Institutional Class of the Intermediate and Short-Term Bond Funds from which the Manager received a fee of 0.05% of average daily net assets. Administrative Service fees for the Y, A, and C Classes for the period ended October 31, 2010 were less than $500.
Distribution Plans
The Trust, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service 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 A and C Classes of the Funds. Under the Distribution Plan, as compensation for distribution
44
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of each A Class and 1.00% of the average daily net assets of each C 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. Distribution fees for the A and some C Classes for the period ended October 31, 2010 were less than $500.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Investor, Y, A, and C Classes. As compensation for performing the duties required under the Service Plan, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of each Fund. Service fees for the Y, A, and C Classes for the period ended October 31, 2010 were less than $500.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“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 other participating Funds. For the year ended October 31, 2010, the High Yield Bond Fund borrowed from the both the American Beacon Money Market Portfolio and the American Beacon U.S. Government Money Market Select Fund on average $8,070,957 for nine days at 0.78% with interest charges of $1,582. The Retirement Income and Appreciation Fund borrowed from the American Beacon U.S. Government Money Market Select Fund 82,732 for 1 day at 0.85% with an interest charge of $2.
Reimbursement of Expenses
The Manager voluntarily reimbursed $4 to the A Class of the Retirement Income and Appreciation Fund for operating expenses. The Manager contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded the Fund’s expense cap. Of these amounts approximately $2,000 was receivable from the Manager at October 31, 2010 for the Short-Term Bond Fund. For the period ended October 31, 2010, the Manager reimbursed expenses as follows:
Expense Caps | ||||||||||||||||
3/1/10 to | Reimbursed | Expiration of | ||||||||||||||
Fund | Class | 2/28/11 | Expenses | Reimbursements | ||||||||||||
High Yield Bond | A | 1.12 | % | $ | 4 | 2013 | ||||||||||
High Yield Bond | C | 1.87 | % | 7 | 2013 | |||||||||||
Intermediate Bond | Y | 0.65 | % | 17 | 2013 | |||||||||||
Intermediate Bond | Investor | 0.79 | % | 2,224 | 2013 | |||||||||||
Intermediate Bond | A | 0.99 | % | 3 | 2013 | |||||||||||
Intermediate Bond | C | 1.74 | % | 76 | 2013 | |||||||||||
Short-Term Bond | Y | 0.65 | % | 1 | 2013 | |||||||||||
Short-Term Bond* | Investor | 0.79 | % | 64,854 | 2013 | |||||||||||
Short-Term Bond | A | 0.85 | % | 7 | 2013 | |||||||||||
Short Term Bond | C | 1.60 | % | 1 | 2013 |
* | The contractual expense cap was changed from 0.74% to 0.79% for the Short-Term Bond Investor Class on July 29, 2010. |
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 carryover of excess expenses potentially reimbursable to the Manager but not recorded as a liability for the
45
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Intermediate Bond Fund is $10,509 expiring in 2012 and for the Short-Term Bond Fund $1,657 and $73,068 expiring in 2011 and 2012, respectively. During the year ended October 31, 2010, the Funds have not recorded a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely.
3. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company, by complying with all applicable provisions of the Code, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2010 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized 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 paid during the fiscal years ended October 31, 2010 and October 31, 2009 were as follows (in thousands)
Retirement Income and | ||||||||||||||||
High Yield Bond | Appreciation | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 3,870 | $ | 6,264 | $ | — | $ | — | ||||||||
Y Class | — | — | 2 | — | ||||||||||||
Investor Class | 6,758 | 4,848 | 3,375 | 3,577 | ||||||||||||
AMR Class | 9,049 | 8,707 | — | — | ||||||||||||
C Class | — | — | 1 | — | ||||||||||||
Return of Capital | ||||||||||||||||
Institutional Class | — | — | — | — | ||||||||||||
Investor Class | — | — | — | 173 | ||||||||||||
AMR Class | — | — | — | — | ||||||||||||
Total distributions paid | $ | 19,677 | $ | 19,819 | $ | 3,378 | $ | 3,750 | ||||||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
Intermediate Bond | Short-Term Bond | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
October 31, | October 31, | October 31, | October 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 8,812 | $ | 8,775 | $ | 3,855 | $ | 7,180 | ||||||||
Y Class | 2 | — | — | — | ||||||||||||
Investor Class | 89 | 23 | 945 | 653 | ||||||||||||
AMR Class | — | — | — | — | ||||||||||||
C Class | 1 | — | — | — | ||||||||||||
Total distributions paid | $ | 8,904 | $ | 8,798 | $ | 4,800 | $ | 7,833 | ||||||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
46
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
As of October 31, 2010, the components of distributable earnings (deficit) on a tax basis were as follows (in thousands):
Retirement | ||||||||||||||||
High Yield | Income and | Intermediate | Short-Term | |||||||||||||
Bond | Appreciation | Bond | Bond | |||||||||||||
Cost basis of investments for federal income tax purposes | $ | 173,945 | $ | 117,938 | $ | 279,893 | $ | 150,864 | ||||||||
Unrealized appreciation | 14,097 | 9,114 | 14,249 | 3,455 | ||||||||||||
Unrealized depreciation | (5,285 | ) | (453 | ) | (592 | ) | (600 | ) | ||||||||
Net unrealized appreciation/(depreciation) | 8,812 | 8,661 | 13,657 | 2,855 | ||||||||||||
Undistributed ordinary income | 652 | 181 | 3,862 | 540 | ||||||||||||
Accumulated long-term gain/(loss) | (9,702 | ) | (1,748 | ) | 1,554 | (7,859 | ) | |||||||||
Other temporary differences | (149 | ) | (48 | ) | (1 | ) | (4 | ) | ||||||||
Distributable earnings/(deficit) | $ | (387 | ) | $ | 7,046 | $ | 19,072 | $ | (4,468 | ) | ||||||
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, book amortization for premiums, and income adjustments associated with contingent payment debt instruments.
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 regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, income adjustments associated with contingent payment debt instruments, and dividend reclasses that have been reclassified as of October 31, 2010 (in thousands):
Retirement | ||||||||||||||||
High Yield | Income and | Intermediate | Short-Term | |||||||||||||
Bond | Appreciation | Bond | Bond | |||||||||||||
Paid-in-capital | $ | — | $ | (97 | ) | $ | — | $ | — | |||||||
Undistributed net investment income | (5 | ) | 197 | 230 | 829 | |||||||||||
Accumulated net realized gain (loss) | 5 | (100 | ) | (230 | ) | (829 | ) | |||||||||
Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency | — | — | — | — |
At October 31, 2010, capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
Fund | 2014 | 2015 | 2016 | 2017 | Total | |||||||||||||||
High Yield Bond | — | — | — | 9,702 | 9,702 | |||||||||||||||
Retirement Income and Appreciation | — | — | 1,283 | 465 | 1,748 | |||||||||||||||
Intermediate Bond | — | — | — | — | — | |||||||||||||||
Short-Term Bond | 2,194 | 467 | 5,198 | — | 7,859 |
The High Yield Bond Fund, Retirement Income and Appreciation Fund, Intermediate Bond, and Short-Term Bond Funds utilized $15,328, $774, $626, and $571, respectively, of net capital loss carryovers for the year ended October 31, 2010.
47
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
4. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments during the year ended October 31, 2010 were as follows (in thousands):
Retirement | ||||||||||||||||
High Yield | Income and | Intermediate | Short-Term | |||||||||||||
Bond | Appreciation | Bond | Bond | |||||||||||||
Purchases (excluding U.S. government securities) | $ | 376,714 | $ | 82,951 | $ | 304,603 | $ | 99,253 | ||||||||
Sales and maturities (excluding U.S. government securities) | 441,986 | 55,427 | 229,771 | 94,434 | ||||||||||||
Purchases of U.S. government securities | — | 29,112 | 184,384 | 18,983 | ||||||||||||
Sales and maturities of U.S. government securities | — | 14,243 | 139,450 | 1,532 |
5. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):
Year Ended October 31, 2010
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1,192 | $ | 10,318 | — | $ | 1 | 10,613 | $ | 91,795 | |||||||||||||||
Reinvestment of dividends | 228 | 1,978 | — | — | 767 | 6,656 | ||||||||||||||||||
Shares redeemed | (2,453 | ) | (21,256 | )* | — | — | * | (16,175 | ) | (139,538 | )* | |||||||||||||
Net increase (decrease) in shares outstanding | (1,033 | ) | $ | (8,960 | ) | — | $ | 1 | (4,795 | ) | $ | (41,087 | ) | |||||||||||
AMR Class | A Class | C Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 17,993 | $ | 154,205 | 4 | $ | 39 | 4 | $ | 36 | |||||||||||||||
Reinvestment of dividends | 1,042 | 9,049 | — | — | — | — | ||||||||||||||||||
Shares redeemed | (20,103 | ) | (174,325 | )* | — | — | * | — | — | * | ||||||||||||||
Net increase (decrease) in shares outstanding | (1,068 | ) | $ | (11,071 | ) | 4 | $ | 39 | 4 | $ | 36 | |||||||||||||
Y Class | Investor Class | A Class | C Class | |||||||||||||||||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 34 | $ | 357 | 3,818 | $ | 39,811 | 15 | $ | 164 | 96 | $ | 1,033 | ||||||||||||||||||||
Reinvestment of dividends | — | 2 | 262 | 2,724 | — | — | — | 1 | ||||||||||||||||||||||||
Shares redeemed | — | — | (1,567 | ) | (16,368 | ) | — | — | — | — | ||||||||||||||||||||||
Net increase in shares outstanding | 34 | $ | 359 | 2,513 | $ | 26,167 | 15 | $ | 164 | 96 | $ | 1,034 | ||||||||||||||||||||
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 19,109 | $ | 208,277 | 34 | $ | 381 | 163 | $ | 1,767 | |||||||||||||||
Reinvestment of dividends | 812 | 8,811 | — | 2 | 8 | 88 | ||||||||||||||||||
Shares redeemed | (13,473 | ) | (147,900 | ) | — | (2 | ) | (33 | ) | (359 | ) | |||||||||||||
Net increase in shares outstanding | 6,448 | $ | 69,188 | 34 | $ | 381 | 138 | $ | 1,496 | |||||||||||||||
A Class | C Class | |||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 4 | $ | 46 | 29 | $ | 326 | ||||||||||
Reinvestment of dividends | — | — | — | — | ||||||||||||
Shares redeemed | — | — | — | — | ||||||||||||
Net increase in shares outstanding | 4 | $ | 46 | 29 | $ | 326 | ||||||||||
48
American Beacon Funds
Notes to Financial Statements
Notes to Financial Statements
October 31, 2010
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 3,254 | $ | 28,766 | 6 | $ | 51 | 6,276 | $ | 55,504 | |||||||||||||||
Reinvestment of dividends | 435 | 3,852 | — | — | 99 | 873 | ||||||||||||||||||
Shares redeemed | (3,048 | ) | (26,963 | ) | — | — | (7,209 | ) | (63,742 | ) | ||||||||||||||
Net increase (decrease) in shares outstanding | 641 | $ | 5,655 | 6 | $ | 51 | (834 | ) | $ | (7,365 | ) | |||||||||||||
A Class | C Class | |||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 5 | $ | 44 | — | $ | 1 | ||||||||||
Reinvestment of dividends | — | — | — | — | ||||||||||||
Shares redeemed | — | — | — | — | ||||||||||||
Net increase (decrease) in shares outstanding | 5 | $ | 44 | — | $ | 1 | ||||||||||
Period Ended October 31, 2009
Institutional Class | Investor Class | AMR Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 4,158 | $ | 27,998 | 16,984 | $ | 119,477 | 20,142 | $ | 150,035 | |||||||||||||||
Reinvestment of dividends | 601 | 4,158 | 626 | 4,738 | 1,177 | 8,706 | ||||||||||||||||||
Shares redeemed | (8,324 | ) | (58,240 | ) | (8,898 | ) | (65,269 | ) | (16,820 | ) | (131,893 | ) | ||||||||||||
Net increase (decrease) in shares outstanding | (3,565 | ) | $ | (26,084 | ) | 8,712 | $ | 58,946 | 4,499 | $ | 26,848 | |||||||||||||
* | Net of Redemption Fees |
Investor Class | ||||||||
Retirement Income and Appreciation Fund | Shares | Amount | ||||||
Shares sold | 2,591 | $ | 24,626 | |||||
Reinvestment of dividends | 393 | 3,745 | ||||||
Shares redeemed | (5,256 | ) | (48,782 | ) | ||||
Net (decrease) in shares outstanding | (2,272 | ) | $ | (20,411 | ) | |||
Institutional Class | Investor Class | |||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 14,857 | $ | 152,046 | 213 | $ | 2,222 | ||||||||||
Reinvestment of dividends | 850 | 8,774 | 2 | 23 | ||||||||||||
Shares redeemed | (11,318 | ) | (115,800 | ) | (8 | ) | (84 | ) | ||||||||
Net increase in shares outstanding | 4,389 | $ | 45,020 | 207 | $ | 2,161 | ||||||||||
Institutional Class | Investor Class | |||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 4,547 | $ | 39,495 | 6,121 | $ | 53,499 | ||||||||||
Reinvestment of dividends | 827 | 7,178 | 59 | 518 | ||||||||||||
Shares redeemed | (21,058 | ) | (182,876 | ) | (3,640 | ) | (31,902 | ) | ||||||||
Net increase (decrease) in shares outstanding | (15,684 | ) | $ | (136,203 | ) | 2,540 | $ | 22,115 | ||||||||
49
American Beacon High Yield Bond Fund
Financial Highlights
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||||||||||
March | ||||||||||||||||||||||||
Institutional Class | 01 to | |||||||||||||||||||||||
Year Ended October 31, | October | |||||||||||||||||||||||
2010 | 2009 | 2008A | 2007 | 2006B | 31, 2010 | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 10.20 | $ | 10.22 | $ | 8.63 | ||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income | 0.75 | 0.79 | 0.78 | 0.77 | 0.88 | 0.50 | ||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.63 | 1.66 | (3.34 | ) | (0.09 | ) | 0.09 | 0.43 | ||||||||||||||||
Total income (loss) from investment operations | 1.38 | 2.45 | (2.56 | ) | 0.68 | 0.97 | 0.93 | |||||||||||||||||
Less distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.75 | ) | (0.80 | ) | (0.78 | ) | (0.77 | ) | (0.88 | ) | (0.50 | ) | ||||||||||||
Distributions from net realized gains on securities | — | — | — | — | (0.11 | ) | — | |||||||||||||||||
Total distributions | (0.75 | ) | (0.80 | ) | (0.78 | ) | (0.77 | ) | (0.99 | ) | (0.50 | ) | ||||||||||||
Net asset value, end of period | $ | 9.05 | $ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 10.20 | $ | 9.06 | ||||||||||||
Total return C | 17.17 | % | 39.06 | % | (27.03 | )% | 6.85 | % | 8.78 | % | 11 .17 | %D | ||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 41,459 | $ | 47,254 | $ | 62,138 | $ | 114,911 | $ | 231,693 | $ | 1 | ||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||
Expenses, net of waivers | 0.79 | % | 0.79 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0 .82 | %E | ||||||||||||
Expenses, before waivers | 0.79 | % | 0.79 | % | 0.85 | % | 0.86 | % | 0.85 | % | 0 .82 | %E | ||||||||||||
Net investment income, net of waivers | 8.69 | % | 11.46 | % | 8.38 | % | 7.55 | % | 7.55 | % | 8 .53 | %E | ||||||||||||
Net investment income, before waivers | 8.69 | % | 11.46 | % | 8.38 | % | 7.54 | % | 7.55 | % | 8 .53 | %E | ||||||||||||
Portfolio turnover rate | 176 | % | 212 | % | 157 | % | 92 | % | 88 | % | 176 | %F |
A | On May 21, 2008, Post Advisory Group, LLC ceased managing a portion of the High Yield Bond Fund and on May 22, 2008 Logan Circle Partners, L.P. began managing a portion of the High Yield Bond Fund. | |
B | Franklin Advisers, Inc. was added as an investment advisor to the High Yield Bond Fund on September 12, 2006. | |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
D | Not annualized. | |
E | Annualized. | |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. | |
G | Portfolio turnover rate is for the period from November 1, 2006 through October 31, 2007. |
50
AMR Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||
September | May | September | ||||||||||||||||||||||||||||||||||||||||
Investor Class | 4 to | 17 to | 1 to | |||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | October | October | October | ||||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008A | 2007 | 2006B | 2010 | 2009 | 2008A | 31, 2007 | 31, 2010 | 31, 2010 | ||||||||||||||||||||||||||||||||
$ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 10.21 | $ | 10.22 | $ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 9.94 | $ | 8.67 | $ | 8.68 | |||||||||||||||||||||
0.73 | 0.78 | 0.75 | 0.75 | 0.85 | 0.78 | 0.81 | 0.80 | 0.12 | 0.32 | 0.09 | ||||||||||||||||||||||||||||||||
0.64 | 1.65 | (3.34 | ) | (0.10 | ) | 0.10 | 0.63 | 1.65 | (3.34 | ) | 0.17 | 0.41 | 0.37 | |||||||||||||||||||||||||||||
1.37 | 2.43 | (2.59 | ) | 0.65 | 0.95 | 1.41 | 2.46 | (2.54 | ) | 0.29 | 0.73 | 0.46 | ||||||||||||||||||||||||||||||
(0.73 | ) | (0.78 | ) | (0.75 | ) | (0.75 | ) | (0.85 | ) | (0.77 | ) | (0.81 | ) | (0.80 | ) | (0.12 | ) | (0.32 | ) | (0.09 | ) | |||||||||||||||||||||
— | — | — | — | (0.11 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
(0.73 | ) | (0.78 | ) | (0.75 | ) | (0.75 | ) | (0.96 | ) | (0.77 | ) | (0.81 | ) | (0.80 | ) | (0.12 | ) | (0.32 | ) | (0.09 | ) | |||||||||||||||||||||
$ | 9.06 | $ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 10.21 | $ | 9.06 | $ | 8.42 | $ | 6.77 | $ | 10.11 | $ | 9.08 | $ | 9.05 | |||||||||||||||||||||
17.00 | % | 38.70 | % | (27 .24 | )% | 6.52 | % | 8.63 | % | 17.59 | % | 39.41 | % | (26.84 | )% | 2 .94 | %D | 8 .66 | %D | 5 .31 | %D | |||||||||||||||||||||
$ | 54,142 | $ | 90,736 | $ | 13,949 | $ | 28,758 | $ | 80,284 | $ | 89,992 | $ | 92,659 | $ | 44,060 | $ | 82,322 | $ | 40 | $ | 37 | |||||||||||||||||||||
1.04 | % | 1.01 | % | 1.10 | % | 1.08 | % | 1.08 | % | 0.54 | % | 0.53 | % | 0.58 | % | 0 .61 | %E | 1 .12 | %E | 1 .87 | %E | |||||||||||||||||||||
1.04 | % | 1.01 | % | 1.10 | % | 1.08 | % | 1.08 | % | 0.54 | % | 0.53 | % | 0.58 | % | 0 .61 | %E | 1 .30 | %E | 2 .29 | %E | |||||||||||||||||||||
8.48 | % | 9.36 | % | 8.06 | % | 7.32 | % | 7.33 | % | 8.91 | % | 10.34 | % | 8.64 | % | 7 .54 | %E | 7 .11 | %E | 5 .40 | %E | |||||||||||||||||||||
8.48 | % | 9.36 | % | 8.06 | % | 7.32 | % | 7.33 | % | 8.91 | % | 10.34 | % | 8.64 | % | 7 .54 | %E | 6 .93 | %E | 4 .97 | %E | |||||||||||||||||||||
176 | % | 212 | % | 157 | % | 92 | % | 88 | % | 176 | % | 212 | % | 157 | % | 92 | %G | 176 | %F | 176 | %F |
51
American Beacon Retirement Income and Appreciation Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y Class | A Class | |||||||||||||||||||||||||||
March | �� | May | ||||||||||||||||||||||||||
1 to | Investor Class | 17 to | ||||||||||||||||||||||||||
October | Year Ended October 31, | October | ||||||||||||||||||||||||||
31, 2010 | 2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.31 | $ | 10.25 | $ | 8.80 | $ | 10.50 | $ | 10.25 | $ | 9.98 | $ | 10.37 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income | 0.20 | 0.36 | 0.32 | 0.41 | 0.36 | 0.33 | 0.13 | |||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.49 | 0.51 | 1.53 | (1.39 | ) | 0.32 | 0.29 | 0.44 | ||||||||||||||||||||
Total income (loss) from investment operations | 0.69 | 0.87 | 1.85 | (0.98 | ) | 0.68 | 0.62 | 0.57 | ||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.31 | ) | (0.40 | ) | (0.49 | ) | (0.42 | ) | (0.35 | ) | (0.13 | ) | ||||||||||||||
Distributions from net realized gains on securities | — | — | — | (0.23 | ) | (0.01 | ) | — | — | |||||||||||||||||||
Return of capital | — | — | 0.00 | E | — | — | — | — | ||||||||||||||||||||
Total distributions | (0.20 | ) | (0.31 | ) | (0.40 | ) | (0.72 | ) | (0.43 | ) | (0.35 | ) | (0.13 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.80 | $ | 10.81 | $ | 10.25 | $ | 8.80 | $ | 10.50 | $ | 10.25 | $ | 10.81 | ||||||||||||||
Total return A | 6.78 | %B | 8.60 | % | 21.50 | % | (10.02 | )% | 6.75 | % | 6.36 | % | 5.52 | %B | ||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 367 | $ | 126,022 | $ | 93,727 | $ | 100,469 | $ | 99,789 | $ | 125,915 | $ | 166 | ||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||
Expenses | 0.80 | %C | 1.08 | % | 1.01 | % | 0.92 | % | 0.94 | % | 0.93 | % | 1.14 | %C | ||||||||||||||
Expenses, before waivers | 0.80 | %C | 1.08 | % | 1.01 | % | 0.92 | % | 0.94 | % | 0.93 | % | 1.20 | %C | ||||||||||||||
Net investment income | 2.74 | %C | 2.79 | % | 3.86 | % | 3.64 | % | 3.69 | % | 3.21 | % | 2.10 | %C | ||||||||||||||
Net investment income, before waivers | 2.74 | %C | 2.79 | % | 3.86 | % | 3.64 | % | 3.69 | % | 3.21 | % | 2.03 | %C | ||||||||||||||
Portfolio turnover rate | 51 | %D | 51 | % | 53 | % | 76 | % | 103 | % | 65 | % | 51 | % D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
B | Not annualized. | |
C | Annualized. | |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. | |
E | The tax return of capital is calculated based upon outstanding shares at the time of the distribution. Amounts are less than $0.01 per share. |
52
C Class | ||
September | ||
01 to | ||
October | ||
31, 2010 | ||
$ | 10.61 | |
0.03 | ||
0.20 | ||
0.23 | ||
(0.02 | ) | |
— | ||
— | ||
(0.02 | ) | |
$ | 10.82 | |
2.19 | %B | |
$ | 1,035 | |
1.96 | %C | |
2.33 | %C | |
1.77 | %C | |
1.40 | %C | |
51 | % D |
53
American Beacon Intermediate Bond Fund
Financial Highlights
(For a share outstanding throughout the period)
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | |||||||||||||||||||||||||||||||
�� | March 1 | Year | March 2 | |||||||||||||||||||||||||||||
Institutional Class | to | Ended | to | |||||||||||||||||||||||||||||
Year Ended October 31, | October | October | October | |||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | 31, 2009 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.69 | $ | 9.61 | $ | 10.10 | $ | 10.02 | $ | 10.01 | $ | 10.69 | $ | 10.68 | $ | 10.14 | ||||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income | 0.39 | 0.46 | 0.50 | 0.50 | 0.46 | 0.23 | 0.33 | 0.27 | ||||||||||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.40 | 1.07 | (0.51 | ) | 0.07 | 0.02 | 0.41 | 0.41 | 0.54 | |||||||||||||||||||||||
Total income (loss) from investment operations | 0.79 | 1.53 | (0.01 | ) | 0.57 | 0.48 | 0.64 | 0.74 | 0.81 | |||||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.38 | ) | (0.45 | ) | (0.48 | ) | (0.49 | ) | (0.47 | ) | (0.23 | ) | (0.34 | ) | (0.27 | ) | ||||||||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total distributions | (0.38 | ) | (0.45 | ) | (0.48 | ) | (0.49 | ) | (0.47 | ) | (0.23 | ) | (0.34 | ) | (0.27 | ) | ||||||||||||||||
Net asset value, end of period | $ | 11.10 | $ | 10.69 | $ | 9.61 | $ | 10.10 | $ | 10.02 | $ | 11.10 | $ | 11.08 | $ | 10.68 | ||||||||||||||||
Total return A | 7.56 | % | 16.17 | % | (0.26 | )% | 5.83 | % | 4.96 | % | 6.03 | %B | 7.01 | % | 8.05 | %B | ||||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 290,734 | $ | 210,983 | $ | 147,634 | $ | 109,674 | $ | 97,319 | $ | 382 | $ | 3,829 | $ | 2,213 | ||||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||||||
Expenses, net of waivers | 0.33 | % | 0.32 | % | 0.30 | % | 0.34 | % | 0.35 | % | 0.64 | %C | 0.76 | % | 0.81 | %C | ||||||||||||||||
Expenses, before waivers | 0.33 | % | 0.32 | % | 0.30 | % | 0.34 | % | 0.35 | % | 0.67 | %C | 0.83 | % | 1.22 | %C | ||||||||||||||||
Net investment income, net of waivers | 3.39 | % | 4.32 | % | 4.70 | % | 4.86 | % | 4.64 | % | 2.60 | %C | 2.95 | % | 3.74 | %C | ||||||||||||||||
Net investment income, before waivers | 3.39 | % | 4.31 | % | 4.70 | % | 4.86 | % | 4.64 | % | 2.58 | %C | 2.88 | % | 3.33 | %C | ||||||||||||||||
Portfolio turnover rate | 96 | % | 157 | % | 105 | % | 85 | % | 122 | % | 96 | % D | 96 | % | 157 | % E |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
B | Not annualized. | |
C | Annualized. | |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. | |
E | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
54
A Class | C Class | |||||
May | September | |||||
17 to | 1 to | |||||
October | October | |||||
31, 2010 | 31, 2010 | |||||
$ | 10.74 | $ | 11.05 | |||
0.13 | 0.03 | |||||
0.33 | 0.03 | |||||
0.46 | 0.06 | |||||
(0.13 | ) | (0.03 | ) | |||
— | — | |||||
(0.13 | ) | (0.03 | ) | |||
$ | 11.07 | $ | 11.08 | |||
4.31 | %B | 0.56 | %B | |||
$ | 46 | $ | 325 | |||
0.95 | %C | 1.74 | %C | |||
1.05 | %C | 2.09 | %C | |||
2.25 | %C | 1.23 | %C | |||
2.15 | %C | 0.88 | %C | |||
96 | % D | 96 | % D |
55
American Beacon Short-Term Bond Fund
Financial Highlights
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||||||
March | ||||||||||||||||||||||||||||
1 to | Year Ended | |||||||||||||||||||||||||||
Year Ended October 31, | October | October 31, | ||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 31, 2010 | 2010 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.83 | $ | 8.58 | $ | 8.79 | $ | 8.74 | $ | 8.75 | $ | 8.84 | $ | 8.84 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||||||||
Net investment income (loss) | 0.23 | 0.22 | A | 0.35 | A | 0.39 | A | 0.32 | A | 0.15 | 0.08 | |||||||||||||||||
Net gains (losses) on securities (both realized and unrealized) | 0.10 | 0.33 | (0.15 | ) | 0.09 | 0.07 | 0.08 | 0.21 | ||||||||||||||||||||
Total income from investment operations | 0.33 | 0.55 | 0.20 | 0.48 | 0.39 | 0.23 | 0.29 | |||||||||||||||||||||
Less distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.27 | ) | (0.30 | ) | (0.41 | ) | (0.43 | ) | (0.40 | ) | �� | (0.17 | ) | (0.24 | ) | |||||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Total distributions | (0.27 | ) | (0.30 | ) | (0.41 | ) | (0.43 | ) | (0.40 | ) | (0.17 | ) | (0.24 | ) | ||||||||||||||
Net asset value, end of period | $ | 8.89 | $ | 8.83 | $ | 8.58 | $ | 8.79 | $ | 8.74 | $ | 8.90 | $ | 8.89 | ||||||||||||||
Total return B | 3.78 | % | 6.56 | % | 2.21 | % | 5.61 | % | 4.56 | % | 2.55 | %C | 3.33 | % | ||||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 131,314 | $ | 124,791 | $ | 255,725 | $ | 89,427 | $ | 73,417 | $ | 51 | $ | 23,175 | ||||||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||||||||||
Expenses, net of waivers | 0.35 | % | 0.33 | % | 0.31 | % | 0.37 | % | 0.35 | % | 0.64 | %D | 0.67 | % | ||||||||||||||
Expenses, before waivers | 0.35 | % | 0.33 | % | 0.31 | % | 0.37 | % | 0.35 | % | 0.65 | %D | 0.86 | % | ||||||||||||||
Net investment income (loss), net of waivers | 2.27 | % | 2.62 | % | 3.75 | % | 4.48 | % | 3.64 | % | 1.47 | %D | 1.94 | % | ||||||||||||||
Net investment income (loss), before waivers | 2.27 | % | 2.61 | % | 3.75 | % | 4.48 | % | 3.64 | % | 1.45 | %D | 1.75 | % | ||||||||||||||
Portfolio turnover rate | 60 | % | 140 | % | 21 | % | 40 | % | 48 | % | 60 | %E | 60 | % |
A | 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. | |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. | |
C | Not annualized. | |
D | Annualized. | |
E | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
56
A Class | C Class | |||||||||||||||||||||
May | September | |||||||||||||||||||||
17 to | 01 to | |||||||||||||||||||||
October | October | |||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 31, 2010 | 31, 2010 | |||||||||||||||||
$ | 8.59 | $ | 8.81 | $ | 8.76 | $ | 8.77 | $ | 8.84 | $ | 8.88 | |||||||||||
0.20 | A | 0.29 | A | 0.35 | A | 0.27 | A | 0.09 | (0.04 | ) | ||||||||||||
0.34 | (0.15 | ) | 0.09 | 0.07 | 0.07 | 0.08 | ||||||||||||||||
0.54 | 0.14 | 0.44 | 0.34 | 0.16 | 0.04 | |||||||||||||||||
(0.29 | ) | (0.36 | ) | (0.39 | ) | (0.35 | ) | (0.11 | ) | (0.02 | ) | |||||||||||
— | — | — | — | — | — | |||||||||||||||||
(0.29 | ) | (0.36 | ) | (0.39 | ) | (0.35 | ) | (0.11 | ) | (0.02 | ) | |||||||||||
$ | 8.84 | $ | 8.59 | $ | 8.81 | $ | 8.76 | $ | 8.89 | $ | 8.90 | |||||||||||
6.34 | % | 1.54 | % | 5.08 | % | 4.01 | % | 1.78 | %C | 0.48 | %C | |||||||||||
$ | 30,402 | $ | 7,733 | $ | 2,976 | $ | 7,189 | $ | 44 | $ | 1 | |||||||||||
0.54 | % | 0.85 | % | 0.87 | % | 0.88 | % | 0.81 | %D | 1.60 | %D | |||||||||||
0.85 | % | 0.88 | % | 0.98 | % | 0.90 | % | 1.02 | %D | 2.28 | %D | |||||||||||
2.20 | % | 3.19 | % | 3.91 | % | 3.10 | % | 0.69 | %D | (2.88 | )%D | |||||||||||
1.89 | % | 3.16 | % | 3.81 | % | 3.08 | % | 0.49 | %D | (3.57 | )%D | |||||||||||
140 | % | 21 | % | 40 | % | 48 | % | 60 | %E | 60 | %E |
57
American Beacon Funds
Privacy Policy & Federal Tax Information
Privacy Policy & Federal Tax Information
(Unaudited)
Privacy Policy
The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; | ||
• | information about your transactions with us or our service providers; and | ||
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended October 31, 2010, which is designated as qualifying for the dividends-received deduction, is as follows:
High Yield Bond Fund | 0.12 | % | ||
Retirement Income and Appreciation Fund | 4.66 | % |
For shareholders in the Funds, the percentage of dividend income distributed for the year ended October 31, 2010, which is designated as qualified dividends income under the Jobs and Growth Tax Relief Act of 2003, is as follows:
Retirement Income and Appreciation Fund | 6.41 | % |
Shareholders will receive notification in January 2011 of the percentage applicable to the preparation of their 2010 income tax returns.
58
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59
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Funds
(Unaudited)
At its May 25, 2010 meeting, the Board of Trustees (“Board”) considered the renewal of each existing Management Agreement between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (the “Funds”) and each Investment Advisory Agreement between the Manager and a subadvisor (“Investment Advisory Agreements” and collectively with the Management Agreement, the “Agreements”). 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 a separate meeting on May 10, 2010 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.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, 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 1 and II of its Form ADV registration statement with the SEC; | ||
• | a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; | ||
• | 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; | ||
• | a description of any payments by the subadvisers to the manager to support the Funds’ marketing efforts; | ||
• | 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 would not impair its ability to provide high-quality advisory services to the Funds; | ||
• | a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment that may affect or are expected to affect the services performed for 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, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; | ||
• | a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; | ||
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; | ||
• | 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 best 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 discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; | ||
• | a description of trade allocation procedures among accounts managed by the firm; | ||
• | a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates | ||
• | a certification by the firm regarding the reasonable design of its compliance program; | ||
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; | ||
• | 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. |
60
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
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 comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; | ||
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; | ||
• | a comparison of advisory fees and expense ratios for comparable mutual funds; | ||
• | an analysis of any material complaints received from Fund shareholders; | ||
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; | ||
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; | ||
• | a description of the Manager’s securities lending practices and the fees received from such practices; | ||
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; | ||
• | a description of the portfolio turnover rate and average execution costs for each Fund and, as applicable, each subadvisor to a Fund; and | ||
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated. |
In connection with the Management Agreement and each Investment Advisory Agreement, 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 with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was 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.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2010 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 25, 2010 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 25, 2010 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 a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s generally favorable long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the manager’s commitment to increase assets in the Funds as demonstrated, for example, by the recent substantial increase in sales personnel; the Manager’s continuing efforts to add new series and share classes to enhance the Funds’ product line; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; and efforts made by the Manager to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing information, the Board concluded that the nature, extent and
61
Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
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 considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Funds stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Funds. The Board further considered that each subadvised 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 program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the 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 arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is 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 considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted the Manager’s representation that assets in the Funds’ complex increased during 2009, primarily due to market appreciation.
In addition, the Board noted the Manager’s representation that, due to the existing low cost structure of the Funds, further breakpoints in the management fee would not be appropriate at this time. The Board also considered that the management fee for the Money Market Funds is amongst the lowest in the industry. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.
Benefits 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 also considered that the Manager’s relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager and the Manager’s use of the Large Cap Value Fund model for an actively managed exchange traded fund, managed by the Manager.
In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted that the benefit plans of AMR Corporation, which are managed by the Manager, remain the largest or one of the largest shareholders in most of the Funds and the Manager’s representation that it provides services to each Trust at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that, with the exception of the Emerging Markets Fund, the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal years ended October 31, and December 31, 2009.
Based on the foregoing 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
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Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
The performance comparisons below were made versus each Fund’s Lipper peer universe median. References to the Lipper expense universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper.
Additional Considerations and Conclusions with Respect to the Retirement Income and Appreciation Fund
In considering the renewal of the Management Agreement for the Retirement Income and Appreciation Fund, the Trustees considered the following additional factors: (1) the Retirement Income and Appreciation Fund’s unique investment strategy as compared to other funds in its peer universe and the impact of such strategy on peer performance and expense ratio comparisons; (2) the Fund outperformed the peer universe median for the one- and five-year periods ended March 31, 2010, but underperformed for the three-year period; (3) the Manager outperformed the peer universe median with respect to its allocated portion of the Fund’s assets for the three- and five-year periods ended March 31, 2010, but underperformed for the one-year period; and (4) the expense ratio of the Fund ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreement with Calamos Advisors LLC (“Calamos”), the Trustees considered the following additional factors: (1) Calamos underperformed the peer universe median for the one- and five-year periods ended March 31, 2010, but underperformed for the three-year period; (3) representations by Calamos regarding fee rates it charges to other comparable clients; (4) whether Calamos uses Fund commissions to obtain proprietary or third-party research; and (5) the Manager’s recommendation to continue to retain Calamos.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and Calamos under the Agreements are fair and reasonable, (2) determined that the Retirement Income and Appreciation Fund and its shareholders would benefit from the Manager’s and Calamos’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Retirement Income and Appreciation Fund.
Additional Considerations and Conclusions with Respect to the High Yield Bond Fund
In considering the renewal of the Management Agreement for the High Yield Bond Fund, the Trustees considered the following additional factors: (1) the High Yield Bond Fund outperformed the peer universe median for the one-year period ended March 31, 2010, but underperformed for the three- and five-year periods; (2) management’s explanation that the underperformance of the High Yield Bond Fund was due, in part, to overweighting in the Cable/Media sector and, more recently, large cash in flows and out flows; (3) the steps management has taken to address the Fund’s underperformance, including replacing the previous subadvisors with Franklin Advisors, Inc. (“Franklin”) and Logan Circle Partners, L.P. (“Logan Circle”); and (4) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with Franklin and Logan Circle, the Trustees considered the following additional factors: (1) Franklin outperformed the peer universe median for the three-year period ended March 31, 2010, but underperformed for the one-year period; (2) Logan Circle was added as a subadvisor in May 2008 and therefore does not have performance of greater than one year, however, it outperformed the peer universe median for the one-quarter and one-year period ended March 31, 2010; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (4) whether the subadvisors use Fund commissions to obtain proprietary or third-party research; and (5) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the High Yield Bond Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the High Yield Bond Fund.
Additional Considerations and Conclusions with Respect to the Intermediate Bond Fund
In considering the renewal of the Management Agreement for the Intermediate Bond Fund, the Trustees considered the following additional factors: (1) the Intermediate Bond Fund outperformed the peer universe median for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; (2) the Manager outperformed the universe peer median with respect to its allocated portion of the Fund’s assets for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; and (3) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreement with Barrow, the Trustees considered the following additional factors: (1) Barrow outperformed the peer universe median with respect to its allocated portion of the Fund’s assets for the three-, five- and ten-year periods ended March 31, 2010, but underperformed for the one-year period; (2) representations by Barrow regarding fee rates it charges to other comparable clients; (3) whether Barrow uses Fund commissions to obtain proprietary or third-party research; and (4) the Manager’s recommendation to continue to retain Barrow.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and Barrow under the Agreements are fair and reasonable, (2) determined that the Intermediate Bond Fund and its shareholders would benefit from the Manager’s and Barrow’s continued management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Intermediate Bond Fund.
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Disclosure Regarding the Board of Trustees’ Approval of Investment Advisory Agreements
Additional Considerations and Conclusions with Respect to the Short-Term Bond Fund
In considering the renewal of the Management Agreement for the Short-Term Bond Fund, the Trustees considered the following additional factors: (1) the Short-Term Bond Fund outperformed its benchmark index for the one-year period ended March 31, 2010, but underperformed for the three-, five- and ten-year periods; (2) the Short-Term Bond Fund outperformed the Lipper Index for the three- and five-year periods ended March 31, 2010; and (3) the expense ratio of the Institutional Class of Fund shares was ranked better than the median of its Lipper expense universe.
Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Short-Term Bond 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 Short-Term Bond Fund.
64
Trustees and Officers of the American Beacon Funds
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees 23 funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term Lifetime of Trust until removal, resignation or retirement* | ||||
Alan D. Feld** (73) | Trustee since 1996 | Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994- 2006); Member, Board of Trustees, Southern Methodist University ; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-present); Trustee, American Beacon Select Funds (1999-present); Trustee, American Beacon Master Trust (1996-present). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (66) | Trustee since 2004 | Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998- 2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004- present). | ||
Brenda A. Cline (49) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children’s Health Foundation) (2001-2006); Director, Christian Church Foundation (1999- 2007); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-present); Trustee, American Beacon Master Trust (2004-present). | ||
Eugene J. Duffy (56) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994- Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001- Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008- present). |
65
Trustees and Officers of the American Beacon Funds
(Unaudited)
Position, Term of | ||||
Office and Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Thomas M. Dunning (68) | Trustee since 2008 | Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-present); Director, Baylor Health Care System Foundation (2007-present); State Vice Chair, State Fair of Texas (1987-present); Board Member, Southwestern Medical Foundation (1994- present); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
Richard A. Massman (67) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present), Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities). Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Hospital Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004- present); Trustee, American Beacon Master Trust (2004-present). | ||
R. Gerald Turner (64) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-present); Trustee, American Beacon Select Funds (2001- present); Trustee, American Beacon Master Trust (2001-present). | ||
Paul J. Zucconi,CPA (70) | Trustee since 2008 | Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- present); Director, Torchmark Corporation (life and health insurance products) (2002- present); Director, National Kidney Foundation of North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004- Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-present); Trustee, American Beacon Select Funds (2008-present); Trustee, American Beacon Master Trust (2008-present). | ||
OFFICERS | ||||
William F. Quinn** (62) | Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009) and CEO (2006- 2007), President (1986-2006) and Director (2003-Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007- 2009); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996- Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007- Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988- 2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-2008); Trustee, American Beacon Select Funds (1999-2008); Trustee, American Beacon Master Trust (1995-2008); Director, American Beacon Global Funds SPC (2002- present); Director, American Beacon Global Funds plc (2007-2009). |
66
Trustees and Officers of the American Beacon Funds
(Unaudited)
OFFICERS
Position, Term of | ||||
Office and | ||||
Length | ||||
of Time Served | Principal Occupation(s) During Past 5 Years | |||
Name, Age and Address | with the Trust | and Current Directorships | ||
Term One Year | ||||
Gene L. Needles, Jr. (55) | President 2009 to Present Executive Vice President 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors | ||
Rosemary K. Behan (51) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006- Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and Exchange Commission. | ||
Brian E. Brett (50) | VP since 2004 | Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). | ||
Wyatt Crumpler (44) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007- Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. | ||
Michael W. Fields (56) | VP since 1989 | Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-present); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (49) | Treasurer since 2010 | Vice President, Finance and Accounting (2010-Present), Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. | ||
Terri L. McKinney (46) | VP since 2009 | Vice-President, Enterprise Services (2009-Present), Managing Director (2003- 2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice-President, Board of Trustees (2008-Present), Trustee (2006- 2008) Down Syndrome Guild of Dallas. | ||
Jeffrey K. Ringdahl (35) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Christina E. Sears (39) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). |
* | The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. | |
** | Mr. Feld is deemed to be an “interested person” of the Trusts, as defined by the 1940 Act. Mr. Feld’s law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust’s and Master Trust’s sub-advisors. |
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Kansas City, MO 64121-9643
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available on the Funds’ website (www.americanbeaconfunds.com) approximately twenty days after the end of each month.
Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.
Fund Service Providers:
Custodian | Transfer Agent | Independent Registered | Distributor | |||
State Street Bank and | Boston Financial Data | Public Accounting | Foreside Fund Services, | |||
Trust | Services | Firm | LLC | |||
Boston, Massachusetts | Kansas City, Missouri | Ernst & Young LLP | Portland, Maine | |||
Dallas, Texas |
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 or Summary Prospectus.
American Beacon Funds, American Beacon High Yield Fund, American Beacon Retirement Income and Appreciation Fund, American Beacon Intermediate Bond Fund, and American Beacon Short-Term Bond Fund are service marks of American Beacon Advisors, Inc.
AR 10/10
BF1010
BF1010
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The Trust amended its code February 16, 2010 to disclose a change in the Principal Financial Office. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust’s Board of Trustees has determined that Mr. Paul Zucconi, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Mr. Paul Zucconi is “independent” as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
Audit Fees | Fiscal Year Ended | |||
$ | 294,836 | 10/31/2008 | ||
$ | 88,878 | 12/31/2008 | ||
$ | 0 | 8/31/2009 | ||
$ | 298,018 | 10/31/2009 | ||
$ | 72,414 | 12/31/2009 | ||
$ | 37,869 | 8/31/2010 | ||
$ | 318,158 | 10/31/2010 | ||
$ | 95,455 | 12/31/2010 |
(b)
Audit-Related | ||||
Fees | Fiscal Year Ended | |||
$ | 0 | 10/31/2008 | ||
$ | 0 | 12/31/2008 | ||
$ | 0 | 8/31/2009 | ||
$ | 13,750 | * | 10/31/2009 | |
$ | 0 | 12/31/2009 | ||
$ | 0 | 8/31/2010 | ||
$ | 12,375 | * | 10/31/2010 | |
$ | 3,875 | * | 12/31/2010 |
* | Review of N-1A filings |
(c)
Tax Fees | Fiscal Year Ended | |||
$ | 10,077 | 10/31/2008 (Revised) | ||
$ | 10,257 | 12/31/2008 (Revised) | ||
$ | 0 | 8/31/2009 | ||
$ | 11,628 | 10/31/2009 | ||
$ | 1,704 | 12/31/2009 | ||
$ | 3,426 | 8/31/2010 | ||
$ | 40,277 | 10/31/2010 | ||
$ | 5,129 | 12/31/2010 |
(d)
All Other Fees | Fiscal Year Ended | |||
$ | 0 | 10/31/2008 | ||
$ | 0 | 12/31/2008 | ||
$ | 0 | 8/31/2009 | ||
$ | 0 | 10/31/2009 | ||
$ | 0 | 12/31/2009 | ||
$ | 0 | 8/31/2010 | ||
$ | 0 | 10/31/2010 | ||
$ | 0 | 12/31/2010 |
(e)(1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:
• | to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors; | ||
• | to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; | ||
• | to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence; | ||
• | to review the arrangements for and scope of the annual audit and any special audits; and | ||
• | to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service. |
The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Aggregate Non-Audit Fees for Services Rendered to the:
Adviser’s Affiliates Providing | ||||||||||||
Registrant | Adviser | Ongoing Services to Registrant | Fiscal Year Ended | |||||||||
$ | 10.077 | $ | 0 | N/A | 10/31/2008 | |||||||
$ | 10.257 | $ | 0 | N/A | 12/31/2008 | |||||||
$ | 0 | $ | 0 | N/A | 8/31/2009 | |||||||
$ | 25.378 | $ | 0 | N/A | 10/31/2009 | |||||||
$ | 1,704 | $ | 0 | N/A | 12/31/2009 | |||||||
$ | 3,426 | $ | 0 | N/A | 8/31/2010 | |||||||
$ | 52,652 | $ | 0 | N/A | 10/31/2010 | |||||||
$ | 9,004 | $ | 0 | N/A | 12/31/2010 |
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By | /s/ Gene L. Needles, Jr. | |||
Gene L. Needles, Jr. | ||||
President | ||||
Date: January 7, 2011 |
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/ Gene L. Needles, Jr. | |||
Gene L. Needles, Jr. | ||||
President | ||||
Date: January 7, 2011 | ||||
By | /s/ Melinda G. Heika | |||
Melinda G. Heika | ||||
Treasurer | ||||
Date: January 7, 2011 |