UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
WILLIAM F. QUINN, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: October 31, 2006
Date of reporting period: April 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
G U I D A N C E | V I S I O N | E X P E R I E N C E
[AMERICAN BEACON FUNDS LOGO]
SEMI-ANNUAL REPORT
[PHOTO]
APRIL 30, 2006
INTERNATIONAL EQUITY FUND
About American Beacon Advisors
- --------------------------------
Since 1986, American Beacon
Advisors has offered a variety
of products and investment
advisory services to numerous
institutional and retail
clients, including a variety of
mutual funds, corporate cash
management, and separate account
management.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations,
financial planners, and other
institutional investors. With
American Beacon Advisors, you
can put the experience of a
multi-billion dollar asset
management firm to work for your
company.
<Table>
<Caption>
Contents
-----------------------------------------------
President's Message........... 1
Market and Performance
Overview................... 2
Schedule of Investments....... 6
Additional Information...............Back Cover
</Table>
Any opinions herein, including forecasts, reflect our judgement as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and,
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
Investing in foreign equities entails additional risk not associated with
domestic equities, such as currency fluctuations, economic and political
instability and differences in accounting standards.
American Beacon Funds April 30, 2006
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
I am pleased to present
you with the Semi-Annual
Report for the American
Beacon International
Equity Fund for the six
months ended April 30,
2006. During this time,
the Dow Jones Industrial
Average posted gains of
10.22%, the S&P 500 Index
increased by 9.64%, and
the MSCI EAFE Index
returned 22.89%.
The Institutional
Class of the International
Equity Fund posted gains
of 22.79% for the
six-month period, and
30.96%, 29.70%, 11.30%,
and 10.37% for the
one-year, three-year,
five-year, and ten-year time periods, respectively.
I hope that the enclosed market overviews, portfolio listings, and detailed
financial data are helpful to you. As always, we welcome the opportunity to
serve your financial needs. To obtain further details about the American Beacon
Funds family or access your account information, please visit our web site at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon International Equity Fund.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President, American Beacon Funds
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the performance
data quoted. To obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009.
1
INTERNATIONAL EQUITY MARKET OVERVIEW
- --------------------------------------------------------------------------------
Global economic growth remained strong during the six-month period ended April
30, 2006. In spite of this economic strength and volatile food and energy
prices, inflation was relatively subdued worldwide. Yet, in this environment the
world's two largest central banks tightened monetary policy.
The U.S. Federal Reserve Board increased the federal funds target rate in
four quarter-point increments to 4.75%. The European Central Bank raised
short-term rates twice to 2.50%, after keeping them unchanged since June 2003.
In March 2006, the Bank of Japan ended its deflation-fighting policy, which
could allow short-term rates to increase from their effective zero percent rate.
Even after these changes, interest rates remained at levels considered
supportive of further economic growth. The possibility of future rate increases
remained.
Robust economic growth sustained strong demand for oil and other
commodities, which kept prices high during most of the reporting period. In
particular, many industrial metals prices continued to rise at double-digit
rates, led by zinc, whose contract price rose 107% over the six month period.
This contributed to economic growth in countries that are tied to mining and
industrial commodities, such as Australia and Canada and emerging markets in
Asia and Latin America.
Notably, availability of cash and historically low interest rates fueled
mergers and acquisitions, as well as leveraged buyouts and other corporate
activity, which intensified during the period. In just the first quarter of
2006, the total value of global deals announced was $923 billion, almost 38%
more than in the comparable period in 2005. About $416 billion (45%) was
attributed to European companies, which have been the most active worldwide. In
this environment, global equity markets performed strongly, particularly outside
the U.S. As of April 30, 2006, the six-month total return for the MSCI EAFE
Index was 23.10%, calculated in U.S. dollars. By comparison, the total return
for the MSCI USA Index was 9.85%.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the International Equity Fund returned 22.79%
for the six months ended April 30, 2006. The Fund underperformed the MSCI EAFE
Index ("Index") return of 22.89% and the Lipper International Funds Index return
of 24.13% for the period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/06
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1)...... 22.79% 30.96% 11.30% 10.37%
PlanAhead Class(1).......... 22.67% 30.65% 11.11% 10.13%
AMR Class(1)................ 23.04% 31.31% 11.58% 10.66%
Service Class(1,2).......... 22.49% 30.27% 10.91% 10.03%
Lipper Int'l. Funds Index... 24.13% 36.65% 10.10% 8.45%
MSCI EAFE Index............. 22.89% 33.49% 9.18% 6.68%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the five-year and ten-year periods
represents the total returns achieved by the PlanAhead Class from 4/30/96 up
to 5/1/03, the inception date of the Service Class, and the returns of the
Service Class since its inception. Expenses of the Service Class are higher
than those of the PlanAhead Class. As a result, total returns shown may be
higher than they would have been had the Service Class been in existence
since 4/30/96.
The Fund underperformed the Index by 0.10% over the six-month period
primarily due to Fund expenses. Although stock selection was negative, it was
more than offset by positive country allocation.
Country allocation added value as the Fund had an overweight in Norway,
which was the best-performing EAFE market for the period with a gain of nearly
40%. Additional value was added by investing in South Korea, a non-EAFE market,
which returned over 36%.
Although stock selection in the Netherlands and Switzerland had a
significantly positive impact, it was more than offset by negative stock
selections in Norway, France and the United Kingdom. Frontline (down 12.8%), was
the biggest disappointment in Norway, while two telecommunications companies,
France Telecom (down 10.2%) and Vodafone Group (down 8.7%) contributed to the
Fund's underperformance in France and the United Kingdom. In the Netherlands,
significant positions in TNT and ING Groep added value, as each gained over 40%
for the period. In Switzerland, two financial holdings led the way, as Credit
Suisse Group and Zurich Financial Services each gained over 40% for the six
months.
Although economic and market conditions vary from period to period, the
Fund's primary strategy of investing in undervalued companies with above-average
earnings growth expectations remains consistent.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Sanofi-Synthelabo 2.0%
Total S.A. 1.9%
Royal Bank of Scotland Group plc 1.8%
France Telecom S.A. 1.7%
GlaxoSmithKline plc 1.7%
BNP Paribas 1.5%
BAE Systems plc 1.4%
Koninklijke (Royal) Philips Electronics N.V. 1.4%
Vodafone Group plc 1.3%
Deutsche Post AG 1.3%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 27.8%
Consumer Discretionary 14.3%
Industrials 10.9%
Energy 8.4%
Consumer Staples 8.0%
Health Care 7.9%
Telecommunication Services 7.7%
Information Technology 6.5%
Materials 5.0%
Utilities 3.6%
</Table>
REGIONAL ALLOCATION*
<Table>
<Caption>
PACIFIC RIM NORTH AMERICA CENTRAL AMERICA EUROPE
- ----------- ------------- --------------- ------
25.1% 2.2% 0.2% 72.5%
</Table>
(PIE CHART)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, such as redemption fees, and (2) ongoing costs, including management
fees, administrative service fees, distribution (12b-1) fees, and other Fund
expenses. The examples below are intended to help you understand the ongoing
cost (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account
4
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
was subject to a custodial IRA fee during the period, your costs would have been
$12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund, such as redemption fees. Similarly, the expense examples for other funds
do not reflect any transaction costs charged by those funds, such as sales
charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical"
lines of the table are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING PERIOD*
VALUE VALUE 11/1/05-
11/1/05 4/30/06 4/30/06
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,227.87 $4.12
Hypothetical $1,000.00 $1,021.10 $3.73
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,226.66 $5.51
Hypothetical $1,000.00 $1,019.84 $5.00
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,224.95 $6.36
Hypothetical $1,000.00 $1,019.08 $5.77
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,230.43 $2.68
Hypothetical $1,000.00 $1,022.39 $2.43
(5% return before expenses)
</Table>
* Expense amounts are inclusive of the Fund's proportionate
share of expenses of the American Beacon Master Trust International Equity
Portfolio through February 28, 2006. Expenses are equal to the Fund's
annualized expense ratios for the six-month period of 0.75%, 1.00%, 1.15%,
0.48%, for the Institutional, PlanAhead, Service, and AMR Classes,
respectively, multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (181) by days in the year (365) to reflect the
half-year period.
5
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
AUSTRALIA - 1.44%
COMMON STOCKS
Alumina Ltd. ................. 732,248 $ 3,983
BlueScope Steel Ltd. ......... 932,935 5,444
Commonwealth Bank of
Australia................... 208,440 7,443
Macquarie Airports Management
Ltd. ....................... 2,475,943 6,170
Macquarie Infrastructure
Group....................... 766,305 2,078
Multiplex Group............... 1,181,442 2,747
National Australia Bank....... 342,730 9,793
News Corp. ................... 182,280 3,128
----------
TOTAL AUSTRALIA........... 40,786
----------
CANADA - 2.00%
COMMON STOCKS
Alcan, Inc.(+)................ 78,471 4,097
BCE, Inc. .................... 306,060 7,542
Celestica, Inc.(+)............ 728,000 8,185
Husky Energy, Inc.+........... 113,480 6,679
Jean Coutu Group, Inc.(+)+.... 371,200 3,947
Manulife Financial Corp. ..... 218,098 14,240
Rogers Communications,
Inc.(+)..................... 283,582 12,020
----------
TOTAL CANADA.............. 56,710
----------
CHINA - 0.65%
COMMON STOCKS
PetroChina Company Ltd. ...... 16,846,100 18,577
----------
TOTAL CHINA............... 18,577
----------
DENMARK - 0.14%
COMMON STOCKS
Vestas Wind Systems(+)........ 141,526 3,841
----------
TOTAL DENMARK............. 3,841
----------
FINLAND - 1.49%
COMMON STOCKS
KCI Konecranes Oyj(+)......... 432,600 8,017
Nokia Oyj(+).................. 293,400 6,681
Stora Enso Oyj, R Shares...... 232,400 3,641
Stora Enso Oyj, A Shares...... 68,102 1,078
Stora Enso Oyj................ 213,542 3,352
UPM-Kymmene Oyj............... 835,200 19,599
----------
TOTAL FINLAND............. 42,368
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
FRANCE - 12.61%
COMMON STOCKS
Accor S.A. ................... 105,680 $ 6,652
AXA........................... 930,921 34,165
BNP Paribas................... 442,478 41,812
BNP Paribas(+)................ 28,697 2,619
Carrefour S.A. ............... 405,886 23,545
Compagnie Generale des
Etablissements Michelin+.... 116,670 8,419
France Telecom S.A.+.......... 2,062,872 48,173
Lafarge S.A. ................. 71,862 8,840
Lagardere S.C.A. ............. 117,800 9,734
Publicis Groupe SA(+)......... 173,692 7,220
Sanofi-Synthelabo............. 615,287 58,024
Schneider Electric S.A. ...... 91,500 10,360
Suez S.A.+.................... 367,235 14,450
Thomson S.A.(+)............... 132,825 2,748
Total S.A. ................... 189,771 52,480
Vinci S.A. ................... 140,982 14,007
Vivendi SA(+)................. 389,500 14,221
----------
TOTAL FRANCE.............. 357,469
----------
GERMANY - 7.62%
COMMON STOCKS
Allianz AG(+)+................ 42,802 7,166
BASF AG+...................... 58,310 4,999
Bayer AG+..................... 113,510 5,243
Bayerische Motoren Werke
Akitengesellshaft........... 478,244 26,011
Celesio AG+................... 130,045 12,239
Deutsche Bank AG.............. 141,300 17,349
Deutsche Post AG.............. 1,412,630 37,657
Deutsche Telekom(+)+.......... 479,200 8,657
E.ON AG+...................... 175,654 21,392
Fresenius Medical Care AG(+).. 44,222 5,306
Infineon Technologies AG(+)... 491,500 6,009
Muenchener Rueckversicherung-
Gesellschaft AG+............ 47,997 6,801
Siemens AG.................... 350,426 33,157
Volkswagen AG+................ 311,400 24,047
----------
TOTAL GERMANY............. 216,033
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
6
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
HONG KONG - 1.37%
COMMON STOCKS
Cheung Kong Holdings Ltd. .... 835,500 $ 9,418
Hang Lung Group Ltd.(+)....... 2,451,000 5,817
Henderson Land Development
Company Ltd.(+)............. 2,036,200 11,963
Hutchison Whampoa Ltd. ....... 199,000 1,958
Hutchison Whampoa Ltd.,
Right(+).................... 10 --
Swire Pacific Ltd. ........... 957,100 9,826
----------
TOTAL HONG KONG........... 38,982
----------
IRELAND - 2.20%
COMMON STOCKS
Allied Irish Banks............ 379,890 9,164
Bank of Ireland............... 621,900 11,683
Bank of Ireland(+)............ 591,400 11,087
CRH plc....................... 343,570 12,613
CRH plc....................... 178,925 6,580
Depfa Bank plc................ 594,921 11,168
----------
TOTAL IRELAND............. 62,295
----------
ITALY - 3.92%
COMMON STOCKS
Assicurazioni Generali
S.p.A.(+)................... 184,400 6,912
Banco Popolare di Verona e
Novara Scrl+................ 314,308 8,847
Enel S.p.A.(+)................ 1,175,700 10,160
Eni S.p.A. ................... 797,391 24,345
Mediaset SpA(+)............... 1,400,056 17,716
Telecom Italia S.p.A.+........ 3,653,489 10,232
UniCredito Italiano S.p.A. ... 4,366,833 32,890
----------
TOTAL ITALY............... 111,102
----------
JAPAN - 15.88%
COMMON STOCKS
Acom Company Ltd. ............ 125,030 7,291
Canon, Inc. .................. 191,400 14,641
East Japan Railway Co.(+)..... 1,429 11,157
Fuji Photo Film Company
Ltd.(+)..................... 114,400 3,888
Hitachi Ltd. ................. 685,500 5,099
Honda Motor Company Ltd. ..... 244,600 17,379
Hoya Corp. ................... 231,700 9,381
Japan Tobacco, Inc.(+)........ 2,542 10,225
Kao Corp. .................... 285,600 7,675
KDDI Corp. ................... 678 4,180
Konica Minolta Holdings,
Inc. ....................... 945,440 12,455
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Kuraray Company Ltd.(+)....... 225,000 $ 2,776
Mabuchi Motor Company Ltd.+... 69,000 3,890
Minebea Company Ltd. ......... 1,055,700 6,833
Mitsubishi Tokyo Financial
Group, Inc. ................ 1,342 21,097
Murata Manufacturing Company
Ltd.(+)..................... 105,600 7,688
NEC Corp. .................... 417,300 2,921
Nidec Corp.(+)................ 102,000 7,865
Nintendo Company Ltd. ........ 24,100 3,598
Nippon Express Co.+........... 2,023,700 10,681
Nissan Motor Company Ltd. .... 2,306,900 30,329
Nomura Holdings, Inc. ........ 848,000 19,177
Promise Company Ltd. ......... 196,150 12,093
Ricoh Company Ltd.(+)......... 528,800 10,496
ROHM Company Ltd. ............ 107,200 11,411
Sankyo Company Ltd. .......... 77,200 5,478
Sekisui House Ltd. ........... 583,600 9,036
SFCG Co Ltd.(+)+.............. 23,135 5,297
Shin-Etsu Chemical Company
Ltd. ....................... 82,600 4,773
Sompo Japan Insurance,
Inc. ....................... 376,900 5,462
Sony Corp. ................... 319,002 16,025
Sumitomo Mitsui Financial
Group, Inc. ................ 2,077 22,801
Sumitomo Trust and Banking
Company Ltd. ............... 829,700 8,832
Takeda Chemical Industries
Ltd. ....................... 514,000 31,418
Takefuji Corp. ............... 393,370 25,565
TDK Corp.(+).................. 110,500 9,248
THK Co Ltd.(+)................ 214,900 7,021
Tokyo Gas Company Ltd.(+)..... 2,315,200 11,203
Toyoda Gosei Company Ltd. .... 200,888 5,540
Toyota Motor Corp. ........... 83,100 4,861
Yamanouchi Pharmaceutical
Company Ltd. ............... 294,800 12,298
Yamato Holdings Corp. ........ 565,300 11,270
----------
TOTAL JAPAN............... 450,354
----------
LUXEMBOURG - 0.18%
COMMON STOCKS
Stolt-Nielsen SA(+)........... 179,260 5,103
----------
TOTAL LUXEMBOURG.......... 5,103
----------
MEXICO - 0.17%
COMMON STOCKS
Telefonos de Mexico, S.A. de
C.V., ADR................... 214,800 4,724
----------
TOTAL MEXICO.............. 4,724
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
7
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
NETHERLANDS - 5.67%
COMMON STOCKS
ABN AMRO Holding N.V.+........ 398,828 $ 11,920
Heineken N.V. ................ 291,500 11,809
IHC Caland N.V.(+)............ 75,300 8,079
ING Groep N.V. ............... 840,944 34,226
Koninklijke (Royal) Philips
Electronics N.V.(+)......... 1,146,567 39,562
TNT N.V. ..................... 749,434 26,984
Unilever N.V. ................ 195,517 14,121
VNU N.V. ..................... 189,000 6,488
Wolters Kluwer N.V.+.......... 287,180 7,482
----------
TOTAL NETHERLANDS......... 160,671
----------
NORWAY - 1.60%
COMMON STOCKS
DnB Nor ASA+.................. 540,800 7,500
Frontline Ltd.+............... 259,600 8,400
Statoil ASA................... 266,900 8,788
Telenor ASA................... 1,796,490 20,835
----------
TOTAL NORWAY.............. 45,523
----------
PORTUGAL - 0.36%
COMMON STOCKS
Portugal Telecom, SGPS,
S.A. ....................... 792,250 10,085
----------
TOTAL PORTUGAL............ 10,085
----------
SINGAPORE - 1.26%
COMMON STOCKS
Creative Technology Ltd. ..... 633,920 4,130
Development Bank of Singapore
Group Holdings Ltd. ........ 1,889,455 21,274
Flextronics International
Ltd.(+)..................... 899,000 10,213
----------
TOTAL SINGAPORE........... 35,617
----------
SOUTH KOREA - 3.20%
COMMON STOCKS
Kookmin Bank, ADR............. 252,110 22,450
Korea Electric Power Corp. ... 86,860 3,859
LG Electronics, Inc. ......... 76,760 6,356
POSCO......................... 44,432 12,389
Samsung Electronics Company
Ltd.++...................... 37,943 25,907
Samsung Electronics Company
Ltd., GDR#.................. 21,600 7,366
Shinhan Financial Group
Company Ltd. ............... 82,320 4,102
SK Telecom Company Ltd. ...... 34,976 8,214
----------
TOTAL SOUTH KOREA......... 90,643
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
SPAIN - 2.77%
COMMON STOCKS
Banco Bilbao Vizcaya
Argentaria, S.A.(+)......... 525,080 $ 11,599
Banco Popular Espanol SA...... 506,100 7,643
Banco Santander Central
Hispano SA.................. 34,750 539
Banco Santander Central
Hispano SA, GDR............. 560,544 8,648
Enagas S.A.(+)................ 159,919 3,519
Iberdrola S.A. ............... 218,397 7,114
Repsol YPF S.A. .............. 276,340 8,255
Repsol YPF SA, ADR(+)......... 189,300 5,652
Telefonica S.A. .............. 1,592,630 25,518
----------
TOTAL SPAIN............... 78,487
----------
SWEDEN - 1.98%
COMMON STOCKS
Atlas Copco AB................ 472,530 13,966
Autoliv, Inc. ................ 150,650 8,393
Electrolux AB+................ 98,580 2,954
ForeningsSparbanken AB+....... 139,000 3,825
Nordea AB..................... 617,020 7,963
Securitas AB.................. 381,930 7,966
Telefonaktiebolaget LM
Ericsson(+)+................ 2,006,000 7,142
Volvo AB...................... 78,140 3,929
----------
TOTAL SWEDEN.............. 56,138
----------
SWITZERLAND - 6.58%
COMMON STOCKS
Adecco SA..................... 138,320 8,577
Ciba Specialty Chemicals
Holding, Inc. .............. 178,450 10,950
Compagnie Financiere Richemont
AG.......................... 183,900 9,527
Credit Suisse Group+.......... 530,239 33,306
Geberit AG.................... 974 1,136
Lonza Group AG................ 53,670 3,808
Nestle SA..................... 68,027 20,748
Novartis AG................... 577,939 33,156
Swiss Reinsurance+............ 282,900 20,644
Swiss Reinsurance, Right(+)... 282,900 --
Syngenta AG................... 80,851 11,278
UBS AG........................ 72,170 8,554
Zurich Financial Services
AG.......................... 102,513 24,942
----------
TOTAL SWITZERLAND......... 186,626
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
8
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
UNITED KINGDOM - 21.71%
COMMON STOCKS
Alliance Unichem plc.......... 393,650 $ 6,378
AMVESCAP plc.................. 339,930 3,716
Anglo American plc............ 176,995 7,536
Aviva plc..................... 898,640 13,126
BAE Systems plc............... 5,248,375 39,958
Barclays Bank plc............. 1,204,100 15,041
Barratt Development plc....... 396,343 7,170
Boots Group PLC(+)............ 806,625 10,311
BP plc........................ 2,145,328 26,465
British American Tobacco
Industries plc.............. 916,252 23,425
British Sky Broadcasting Group
plc......................... 914,390 8,762
BT Group plc.................. 1,595,443 6,379
Cadbury Schweppes plc......... 827,350 8,207
Centrica plc.................. 2,136,810 11,641
Compass Group plc............. 4,029,135 17,376
Diageo plc.................... 1,219,343 20,123
Gallaher Group plc(+)......... 503,903 8,004
GKN plc....................... 1,659,018 9,484
GlaxoSmithKline plc........... 1,679,844 47,665
HBOS plc...................... 625,351 10,976
HSBC Holdings plc............. 617,749 10,674
HSBC Holdings plc(+).......... 457,700 7,804
Imperial Tobacco Group
plc(+)...................... 331,040 10,287
J. Sainsbury plc.............. 1,454,634 8,866
Kingfisher plc................ 3,292,698 13,525
Marks and Spencer Group plc... 1,034,718 11,048
National Grid plc............. 1,303,978 13,685
NETeller plc(+)............... 7,681 109
Pearson plc(+)................ 512,020 7,096
Reckitt Benckiser plc(+)...... 193,300 7,046
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Rentokil Initial plc.......... 1,438,070 $ 4,189
Reuters Group plc............. 1,147,272 8,138
Rolls-Royce plc............... 1,084,550 9,424
Rolls-Royce plc(+)............ 58,348,790 106
Royal Bank of Scotland Group
plc......................... 1,586,559 51,817
Royal Dutch Shell plc, ADR.... 31,660 2,157
Royal Dutch Shell plc, B
Shares...................... 648,129 23,177
Royal Dutch Shell plc, A
Shares...................... 911,809 31,266
Shire plc(+).................. 363,440 5,667
Smiths Group plc.............. 438,030 8,143
Standard Chartered plc........ 177,350 4,709
Tate & Lyle plc............... 990,077 10,020
TI Automotive(+)h............. 655,200 --
Unilever plc.................. 1,844,521 19,593
Vodafone Group plc............ 16,028,944 37,852
Yell Group plc................ 811,330 7,605
----------
TOTAL UNITED KINGDOM...... 615,746
----------
SHORT TERM INVESTMENTS - 14.15%
American Beacon Enhanced Cash
Trust*P..................... 196,978,229 196,978
American Beacon Money Market
Select Fund*P............... 204,369,205 204,369
----------
TOTAL SHORT TERM
INVESTMENTS............. 401,347
----------
TOTAL INVESTMENTS - 108.95%
(COST $2,368,749)........... 3,089,227
----------
LIABILITIES, NET OF OTHER
ASSETS - (8.95%)............ (253,656)
----------
TOTAL NET ASSETS - 100.00%.... $2,835,571
==========
</Table>
- ---------------
GDR - Global Depository Receipt
ADR - American Depository Receipt
(+) Non-income producing security.
+ All or a portion of this security is on loan at April 30, 2006. See Note 5.
# Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $7,366 or 0.26% of net
assets.
h Valued at fair value pursuant to procedures approved by the Board of
Trustees.
* The Fund/Trust is affiliated by having the same investment advisor. See
Note 2.
P All or a portion of this security is purchased with cash collateral for
securities loaned.
See accompanying notes
- --------------------------------------------------------------------------------
9
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- -------- --------------
Australia SPI Index.............................. 79 Jun 2006 $ 7,872 $ 285
Canada S&PCDA 60 Index........................... 90 Jun 2006 11,034 140
France CAC 40 Index.............................. 227 Jun 2006 14,539 92
Germany DAX Index................................ 56 Jun 2006 10,630 90
Hang Seng Index.................................. 22 May 2006 2,345 0
Italy MIB 30 Index............................... 24 Jun 2006 5,650 (34)
Netherlands 200 AEX Index........................ 43 May 2006 5,055 66
Spain IBEX 35 Index.............................. 38 May 2006 5,665 72
Sweden OMX Index................................. 256 May 2006 3,591 (27)
Tokyo FE TOPIX Index............................. 253 Jun 2006 38,194 1,448
UK FTSE 100 Index................................ 324 Jun 2006 35,476 78
-------- ------
$140,051 $2,210
======== ======
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS)
- -------------------- ---------- -------- -----------
3,253 Australian Dollar..................................... 6/16/2006 $ 2,469 $ (128)
4,123 Canadian Dollar....................................... 6/16/2006 3,693 (136)
10,609 Euro Currency........................................ 6/16/2006 13,427 (507)
1,269,657 Japanese Yen...................................... 6/16/2006 11,228 (369)
6,533 Pound Sterling........................................ 6/16/2006 11,921 (545)
9,653 Swedish Krona......................................... 6/16/2006 1,317 (66)
3,609 Swiss Franc........................................... 6/16/2006 2,925 (135)
-------- -------
TOTAL CONTRACTS TO DELIVER
(RECEIVABLE AMOUNT $45,094)............................... $ 46,980 $(1,886)
-------- -------
CONTRACTS TO RECEIVE
12,395 Australian Dollar.................................... 6/16/2006 $ 9,409 $ 258
15,460 Canadian Dollar...................................... 6/16/2006 13,846 459
39,737 Euro Currency........................................ 6/16/2006 50,293 2,382
24,448 Japanese Yen......................................... 6/16/2006 44,612 1,956
5,265,974 Pound Sterling.................................... 6/16/2006 46,569 1,328
33,766 Swedish Krona........................................ 6/16/2006 4,607 269
15,626 Swiss Franc.......................................... 6/16/2006 12,666 636
-------- -------
TOTAL CONTRACTS TO RECEIVE
(PAYABLE AMOUNT $174,714)................................. $182,002 $ 7,288
======== =======
NET CURRENCY FLUCTUATION.................................... $ 5,402
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
10
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
<Table>
<Caption>
PERCENT OF
NET ASSETS
----------
Consumer Discretionary...................................... 13.96%
Consumer Staples............................................ 7.69%
Energy...................................................... 7.33%
Financials.................................................. 26.37%
Health Care................................................. 7.48%
Industrials................................................. 10.94%
Information Technology...................................... 5.71%
Materials................................................... 4.69%
Telecommunication Services.................................. 7.21%
Utilities................................................... 3.42%
Short Term Investments...................................... 14.15%
Liabilities, Net of Other Assets............................ (8.95)%
-------
100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
11
AMERICAN BEACON INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited) (in thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<Table>
ASSETS:
Investments in unaffiliated securities, at value(A C)... $ 2,687,880
Investments in affiliated securities, at value(B)....... 401,347
Foreign currency, at value(D)........................... 8,241
Deposit with brokers for futures contracts.............. 6,591
Receivable for investments sold......................... 9,869
Dividends and interest receivable....................... 11,358
Receivable for fund shares sold......................... 4,036
Receivable for tax reclaims............................. 524
Unrealized appreciation on foreign currency contracts... 5,402
-----------
TOTAL ASSETS........................................ 3,135,248
-----------
LIABILITIES:
Payable for investments purchased....................... 13,617
Payable upon return of securities loaned................ 279,983
Payable for fund shares redeemed........................ 1,776
Payable for variation margin on open futures
contracts.............................................. 939
Management and investment advisory fees payable (Note
2)..................................................... 2,354
Administrative service and service fees payable......... 592
Other liabilities....................................... 416
-----------
TOTAL LIABILITIES................................... 299,677
-----------
NET ASSETS.................................................. $ 2,835,571
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 1,983,226
Undistributed net investment income..................... 10,385
Accumulated net realized gain (loss).................... 111,583
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................. 730,377
-----------
NET ASSETS.................................................. $ 2,835,571
===========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class..................................... 66,138,823
===========
PlanAhead Class......................................... 30,281,383
===========
Service Class........................................... 184,862
===========
AMR Class............................................... 22,814,418
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class..................................... $ 23.77
===========
PlanAhead Class......................................... $ 23.55
===========
Service Class........................................... $ 23.43
===========
AMR Class............................................... $ 23.92
===========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 1,967,402
(B) Cost of investments in affiliated securities............ 401,347
(C) Market value of securities on loan...................... 266,413
(D) Cost of foreign currency................................ 8,017
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
12
AMERICAN BEACON INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited) (in thousands)
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of
foreign taxes)*........................................ $ 18,326
Dividend income from affiliated securities.............. 975
Interest income......................................... 76
Income derived from securities lending, net............. 236
Investment income allocated from the Portfolio.......... 15,160
Expenses allocated from the Portfolio................... (4,050)
Other income............................................ 1
--------
TOTAL INVESTMENT INCOME............................. 30,724
--------
EXPENSES:
Management and investment advisory fees (Note 2)........ 1,551
Administrative service fees (Note 2):
Institutional Class................................... 1,759
PlanAhead Class....................................... 784
Service Class......................................... 4
Transfer agent fees:
Institutional Class................................... 99
PlanAhead Class....................................... 57
Service Class......................................... --
AMR Class............................................. 8
Fund accounting fees.................................... 225
Professional fees....................................... 27
Registration fees and expenses.......................... 65
Service fees:
PlanAhead Class (Note 2).............................. 784
Service Class (Note 2)................................ 4
Distribution fees -- Service Class (Note 2)............. 4
Prospectus and shareholder reports...................... 151
Other expenses.......................................... 11
--------
TOTAL EXPENSES...................................... 5,533
--------
Net (fees waived and expenses reimbursed)/recouped by
Manager (Note 2)....................................... (1)
--------
NET EXPENSES........................................ 5,532
--------
NET INVESTMENT INCOME....................................... 25,192
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Investments........................................... 55,412
Commission recapture.................................. 53
Foreign currency translations......................... 7,790
Futures contracts..................................... (4,757)
Net realized gain (loss) allocated from Portfolio..... 62,091
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 18,855
Futures contracts..................................... (2,057)
Foreign currency translations......................... 102,232
Net change in unrealized gain/loss allocated from
Portfolio............................................ 259,383
--------
NET GAIN (LOSS) ON INVESTMENTS...................... 499,002
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $524,194
========
* Foreign taxes......................................... $ 1,531
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
13
AMERICAN BEACON INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2006 2005
-------------- -----------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 25,192 $ 47,523
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions........... 120,589 186,828**
Change in net unrealized appreciation or depreciation of
investments, futures contracts, and foreign currency
translations........................................... 378,413 44,556
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 524,194 278,907
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class................................... (25,843) (13,529)
PlanAhead Class....................................... (10,419) (4,004)
Service Class......................................... (39) (22)
AMR Class............................................. (10,085) (7,644)
Net realized gain on investments:
Institutional Class................................... (80,744) --
PlanAhead Class....................................... (36,241) --
Service Class......................................... (195) --
AMR Class............................................. (28,011) --
---------- ----------
NET DISTRIBUTIONS TO SHAREHOLDERS................... (191,577) (25,199)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................... 277,246 766,799
Reinvestment of dividends and distributions............. 176,178 22,373
Cost of shares redeemed................................. (248,892) (545,309)
Redemption fees......................................... 128 58
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS.................................. 204,660 243,921
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS....................... 537,277 497,629
---------- ----------
NET ASSETS:
Beginning of period..................................... 2,298,294 1,800,665
---------- ----------
END OF PERIOD*.......................................... $2,835,571 $2,298,294
========== ==========
* Includes undistributed net investment income (loss)
of..................................................... $ 10,385 $ 38,005
========== ==========
** Includes $902 payment by affiliate (Note 2).
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
14
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American Beacon International Equity Fund, a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
Reorganization
Prior to March 1, 2006, the American Beacon International Equity Fund (the
"Fund") invested all of its investable assets in the International Equity
Portfolio (the "Portfolio") of the American Beacon Master Trust.
At the close of business on February 28, 2006, the American Beacon Master
Trust International Equity Portfolio redeemed for cash and securities the
investment of the American Independence Funds Trust International Equity
Multi-Manager Stock Fund (the "Redeeming Fund") as follows (in thousands):
<Table>
Cash........................................................ $ 9.583
Securities at market value.................................. $94.585
</Table>
Upon completion of the Redeeming Fund transaction, the American Beacon
International Equity Fund was the sole shareholder in the American Beacon Master
Trust International Equity Portfolio ("the Terminating Portfolio"). Accordingly,
on February 28, 2006 the American Beacon International Equity Fund withdrew its
interest in the Terminating Portfolio. The Fund received a distribution of cash
and securities from the Terminating Portfolio with a market value equal to the
Fund's investment in the Terminating Portfolio in the amount of $2,598,672 at
the close of business.
The Terminating Portfolio then ceased operations.
The following is a summary of the significant accounting policies followed
by the Funds.
- --------------------------------------------------------------------------------
15
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
<Table>
<Caption>
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- ------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service
Fee -- 0.25%
PLANAHEAD CLASS General public and investors investing through an Administrative Service
intermediary Fee -- 0.25%
Service Fee -- 0.25%
SERVICE CLASS Investors investing through an intermediary Administrative Service
Fee -- 0.25%
Service Fee -- 0.25%
Distribution Fee -- 0.25%
AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A
AMR Corporation and its affiliates
</Table>
Investment income, net capital gains (losses) and all expenses incurred by
the Fund are allocated based on the relative net assets of each class, except
for service fees and certain other fees and expenses related solely to one class
of shares.
Security Valuation
The Fund records its investment in the Portfolio at fair value. Valuation
of securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes
to Financial Statements which are included elsewhere in this report.
Redemption Fees
The Fund imposes a 2% redemption fee on certain Institutional, PlanAhead
Service and AMR Class shares held for less than 90 days. The fee is deducted
from the redemption proceeds and is intended to offset the trading costs, market
impact and other costs associated with short-term trading activity in the Fund.
The "first-in, first-out" method is used to determine the holding period. The
fee is retained by the class that imposes the fee. Effective May 1, 2006, the
fee will be allocated to all classes of the Fund based on their respective net
assets.
Investment Income
The Fund records its share of net investment income and realized and
unrealized gain (loss) in the Portfolio each day. All net investment income and
realized and unrealized gain (loss) of the Portfolio is allocated pro rata among
the Fund and other investors in the Portfolio at the time of such determination.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid annually. Distributions, if any, of net realized capital gains are
generally paid annually and recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
16
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
that obligates the Manager to provide or oversee administrative and management
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee of
..25% of the average daily net assets of the Institutional, PlanAhead and Service
Classes of the Fund.
Distribution Plans
The Trust, except for the Service Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940, pursuant to which no fees may be charged to
the Funds for distribution purposes. However, the Plan authorizes the management
fees received by the Manager and the investment advisors hired by the Manager to
be used for distribution purposes. Under this Plan, the Trust does not intend to
compensate the Manager or any other party, either directly or indirectly, for
the distribution of Trust shares.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Service Class of the Fund. Under
the Distribution Plan, as compensation for distribution assistance, the Manager
receives an annual fee of .25% of the average daily net assets of the Service
Class. The fee will be payable without regard to whether the amount of the fee
is more or less than the actual expenses incurred in a particular month by the
Manager for distribution assistance.
- --------------------------------------------------------------------------------
17
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the PlanAhead and Service
Classes. As compensation for performing the duties required under the Service
Plans, the Manager receives .25% of the average daily net assets of the
PlanAhead and Service Classes of the Fund.
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-interested Trustees (other than
Mr. O'Sullivan) and their spouses are provided free unlimited air transportation
on American. Retired Trustees and their spouses are provided free air
transportation on American, up to a maximum annual value of $40,000. The Trust
compensates each Trustee with payments in an amount equal to the Trustee's
income tax on the value of this free airline travel. Mr. O'Sullivan, as a
retiree of American, already receives flight benefits. Mr. O'Sullivan receives
an annual retainer plus a fee for each Board meeting attended. At April 30,
2006, AMR Corporation and subsidiary companies and Employee Benefit Trusts
thereof owned 100% of AMR Class shares of the Fund.
During the period ended October 31, 2005, subadvisors voluntarily
reimbursed the Portfolio for certain losses totaling $941,000. A $383,000
reimbursement was made to compensate the Portfolio for a loss associated with a
rights offering that expired. The shares that would have been acquired through a
full exercise of the rights were subsequently purchased on the open market. The
subadvisor reimbursed the Portfolio for the appreciation of the shares over the
exercise price, transaction costs and foreign exchange costs incurred in making
this purchase in the open market. A $558,000 reimbursement was made to
compensate the Portfolio for a loss associated with a security that violated
investment restrictions. The reimbursement amount allocated to the Fund totaled
$902,000 for the period and is reflected in the gain/loss section of the
Statement of Operations.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from, or
lend money to, other participating Funds. At April 30, 2006, the Fund had not
utilized the credit facility.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to comply with the requirements of Subchapter
M of the Internal Revenue Code and to distribute substantially all net
investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the charac-
- --------------------------------------------------------------------------------
18
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
ter of distributions and composition of net assets for tax purposes may differ
from those reflected in the accompanying financial statements.
The tax character of distributions during the six months ended April 30,
2006 and fiscal year ended October 31, 2005 (in thousands):
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
---------------- ----------------
(UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class..................................... $ 41,982 $13,529
PlanAhead Class......................................... 18,822 4,004
Service Class........................................... 101 22
AMR Class............................................... 14,547 7,644
LONG-TERM CAPITAL GAIN
Institutional Class..................................... 64,611 --
PlanAhead Class......................................... 28,968 --
Service Class........................................... 156 --
AMR Class............................................... 22,390 --
-------- -------
TOTAL DISTRIBUTIONS PAID............................ $191,577 $25,199
-------- -------
</Table>
As of April 30, 2006, the components of distributable earnings were as
follows (in thousands):
<Table>
Cost basis of investments for federal income tax purposes... $2,400,188
Unrealized appreciation..................................... 708,494
Unrealized depreciation..................................... (19,455)
----------
Net unrealized appreciation/(depreciation).................. 689,039
Undistributed ordinary income............................... 61,471
Undistributed long-term gain/(loss)......................... 84,875
----------
Distributable earnings...................................... $ 835,385
==========
</Table>
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gains/(losses) on certain derivative instruments, book
amortization for premiums, and the realization for tax purposes of unrealized
gains/(losses) on investments in passive foreign investment companies.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
- --------------------------------------------------------------------------------
19
AMERICAN BEACON INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (unaudited)
- --------------------------------------------------------------------------------
Accordingly, the following amounts represent current year permanent
differences that have been reclassified as of April 30, 2006 (in thousands):
<Table>
Paid-in-capital............................................. $ 2,797
Undistributed net investment income......................... (6,426)
Accumulated net realized gain (loss)........................ 3,629
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency.................... --
</Table>
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund
(shares and dollars in thousands):
Six Months Ended April 30, 2006
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- ----------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------- ------ ------- ------- ---------
Shares sold............ 7,223 $ 157,350 4,633 $ 100,930 43 $ 925 816 $ 18,041
Reinvestment of
dividends............ 4,440 92,342 2,207 45,506 11 234 1,823 38,096
Shares redeemed*....... (6,829) (148,797) (3,536) (76,813) (15) (317) (1,039) (22,837)
------- --------- ------ --------- ------ ------- ------- ---------
Net increase in shares
outstanding.......... 4,834 $ 100,895 3,304 $ 69,623 39 $ 842 1,600 $ 33,300
======= ========= ====== ========= ====== ======= ======= =========
</Table>
* Net of Redemption Fees
Year Ended October 31, 2005
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- ---------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------- ------ ------ ------- ---------
Shares sold............ 16,308 $ 330,188 14,933 $ 299,953 162 $3,261 6,624 $ 133,397
Reinvestment of
dividends............ 543 10,788 199 3,920 1 22 383 7,643
Shares redeemed*....... (11,284) (228,220) (5,111) (103,087) (59) (1,188) (10,557) (212,756)
------- --------- ------ --------- ------ ------ ------- ---------
Net increase in shares
outstanding.......... 5,567 $ 112,756 10,021 $ 200,786 104 $2,095 (3,550) $ (71,716)
======= ========= ====== ========= ====== ====== ======= =========
</Table>
* Net of Redemption Fees
- --------------------------------------------------------------------------------
20
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
21
AMERICAN BEACON INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------------
2006 2005 2004(B) 2003(F) 2002 2001(E)
---------- ---------- ---------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 20.98 $ 18.47 $ 15.46 $ 12.10 $ 13.77 $ 17.95
---------- ---------- ---------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A D).......... 0.22 0.44 0.30 0.25 0.21 0.24
Net gains (losses) on securities
(both realized and
unrealized)(D).................. 4.32 2.31 3.12 3.47 (1.62) (2.96)
---------- ---------- ---------- -------- -------- --------
Total income (loss) from investment
operations......................... 4.54 2.75 3.42 3.72 (1.41) (2.72)
---------- ---------- ---------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income.......................... (0.42) (0.24) (0.41) (0.36) (0.26) (0.22)
Distributions from net realized
gains on securities............. (1.33) -- -- -- -- (1.24)
---------- ---------- ---------- -------- -------- --------
Total distributions................. (1.75) (0.24) (0.41) (0.36) (0.26) (1.46)
---------- ---------- ---------- -------- -------- --------
Redemption fees added to beneficial
interest........................... --(I) --(I) --(I) --(I) -- --
---------- ---------- ---------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD...... $ 23.77 $ 20.98 $ 18.47 $ 15.46 $ 12.10 $ 13.77
========== ========== ========== ======== ======== ========
TOTAL RETURN........................ 22.79%(G) 15.04% 22.49% 31.61% (10.51)% (16.54)%
========== ========== ========== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...................... $1,572,394 $1,286,441 $1,029,272 $722,333 $537,476 $519,151
Ratios to average net assets
(annualized):
Expenses, net of waivers(D)..... 0.75% 0.70% 0.76% 0.79% 0.75% 0.78%
Expenses, before waivers(D)..... 0.75% 0.70% 0.76% 0.79% 0.75% 0.78%
Net investment income, net of
waivers(D).................... 2.01% 2.17% 1.69% 1.97% 1.56% 1.54%
Net investment income (losses),
before waivers(D)............. 2.01% 2.17% 1.69% 1.97% 1.56% 1.54%
Portfolio turnover rate(C)....... 21%(G) 37% 36% 44% 43% 36%
<Caption>
PLANAHEAD CLASS
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------------------
2006 2005 2004(B) 2003(F) 2002 2001(E)
---------- -------- -------- -------- ------- --------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 20.79 $ 18.31 $ 15.34 $ 11.95 $ 13.58 $ 17.72
-------- -------- -------- -------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A D).......... 0.20 0.41 0.26 0.22 0.15 0.19
Net gains (losses) on securities
(both realized and
unrealized)(D).................. 4.27 2.29 3.08 3.46 (1.56) (2.92)
-------- -------- -------- -------- ------- --------
Total income (loss) from investment
operations......................... 4.47 2.70 3.34 3.68 (1.41) (2.73)
-------- -------- -------- -------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income.......................... (0.38) (0.22) (0.37) (0.29) (0.22) (0.17)
Distributions from net realized
gains on securities............. (1.33) -- -- -- -- (1.24)
-------- -------- -------- -------- ------- --------
Total distributions................. (1.71) (0.22) (0.37) (0.29) (0.22) (1.41)
-------- -------- -------- -------- ------- --------
Redemption fees added to beneficial
interest........................... --(I) --(I) --(I) --(I) -- --
-------- -------- -------- -------- ------- --------
NET ASSET VALUE, END OF PERIOD...... $ 23.55 $ 20.79 $ 18.31 $ 15.34 $ 11.95 $ 13.58
======== ======== ======== ======== ======= ========
TOTAL RETURN........................ 22.67%(G) 14.73% 22.16% 31.62% (10.57)% (16.79)%
======== ======== ======== ======== ======= ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)...................... $713,177 $560,770 $310,540 $177,425 $99,636 $113,948
Ratios to average net assets
(annualized):
Expenses, net of waivers(D)..... 1.00% 0.95% 1.02% 1.10% 1.04% 1.10%
Expenses, before waivers(D)..... 1.00% 0.95% 1.02% 1.10% 1.04% 1.10%
Net investment income, net of
waivers(D).................... 1.76% 1.96% 1.46% 1.68% 1.35% 1.22%
Net investment income (losses),
before waivers(D)............. 1.76% 1.96% 1.46% 1.68% 1.35% 1.22%
Portfolio turnover rate(C)....... 21%(G) 37% 36% 44% 43% 36%
</Table>
- ---------------
(A) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(B) The Boston Company was added as an investment advisor to the International
Equity Fund on September 27, 2004.
(C) The International Equity Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2006. Portfolio turnover rate
through February 28, 2006 is that of the Portfolio.
(D) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon Master Trust International Equity Portfolio through
February 28, 2006.
(E) Causeway Capital Management, LLC replaced Merrill Lynch Investment
Managers, L.P. as investment advisor to the International Equity Fund on
August 31, 2001.
(F) Independence Investment LLC was removed as an investment advisor to the
International Equity Fund on October 24, 2003.
(G) Not annualized
(H) Portfolio turnover rate is for the period November 1, 2002 through October
31, 2003.
(I) Amounts represent less than $0.01 per share.
(J) Annualized.
- --------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
<Table>
<Caption>
SERVICE CLASS AMR CLASS
---------------------------------------------------- -----------------------------------------
SIX MONTHS YEAR ENDED SIX MONTHS
ENDED OCTOBER 31, MAY 1 TO ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------- OCTOBER 31, APRIL 30, ----------------------
2006 2005 2004(B) 2003(F) 2006 2005 2004(B)
------------- ------ ------- ----------- ------------- -------- --------
$20.61 $18.24 $15.31 $ 12.18 $ 21.12 $ 18.58 $ 15.54
------ ------ ------ ---------- -------- -------- --------
0.18 0.37 0.30 0.09 0.25 0.50 0.34
4.23 2.26 2.99 3.04 4.36 2.33 3.14
------ ------ ------ ---------- -------- -------- --------
4.41 2.63 3.29 3.13 4.61 2.83 3.48
------ ------ ------ ---------- -------- -------- --------
(0.26) (0.26) (0.36) -- (0.48) (0.29) (0.44)
(1.33) -- -- -- (1.33) -- --
------ ------ ------ ---------- -------- -------- --------
(1.59) (0.26) (0.36) -- (1.81) (0.29) (0.44)
------ ------ ------ ---------- -------- -------- --------
--(I) --(I) --(I) --(I) --(I) --(I) --(I)
------ ------ ------ ---------- -------- -------- --------
$23,43 $20.61 $18.24 $ 15.31 $ 23.92 $ 21.12 $ 18.58
====== ====== ====== ========== ======== ======== ========
22.49%(G) 14.45% 21.88% 25.70%(G) 23.04%(G) 15.32% 22.84%
====== ====== ====== ========== ======== ======== ========
$4,332 $2,987 $ 739 $ 1 $545,668 $448,096 $460,114
1.15% 1.21% 1.27% 1.50%(J) 0.48% 0.44% 0.49%
1.23% 1.21% 6.26% 1,139.08%(J) 0.48% 0.44% 0.49%
1.62% 1.70% 0.81% 1.33%(J) 2.26% 2.49% 1.97%
1.55% 1.70% (4.18)% (1,136.25)%(J) 2.26% 2.49% 1.97%
21%(G) 37% 36% 44%(H) 21%(G) 37% 36%
<Caption>
AMR CLASS
------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------
2003(F) 2002 2001(E)
-------- -------- --------
$ 12.18 $ 13.86 $ 18.07
-------- -------- --------
0.29 0.24 0.28
3.46 (1.62) (2.98)
-------- -------- --------
3.75 (1.38) (2.70)
-------- -------- --------
(0.39) (0.30) (0.27)
-- -- (1.24)
-------- -------- --------
(0.39) (0.30) (1.51)
-------- -------- --------
--(I) -- --
-------- -------- --------
$ 15.54 $ 12.18 $ 13.86
======== ======== ========
31.77% (10.26)% (16.35)%
======== ======== ========
$322,801 $264,579 $301,762
0.52% 0.49% 0.52%
0.52% 0.49% 0.52%
2.22% 1.81% 1.78%
2.22% 1.81% 1.78%
44% 43% 36%
</Table>
- --------------------------------------------------------------------------------
23
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(Unaudited)
- --------------------------------------------------------------------------------
RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS
At its February 17, 2006 meeting, the Board of Trustees ("Board")
considered the renewal of the existing Management Agreement between the Manager
and the American Beacon Funds (the "Funds") and each Investment Advisory
Agreement between the Manager and the subadvisors, on behalf of the Funds. In
preparation for the Board's consideration to renew these Agreements, the Board
and its Investment Committee undertook steps to gather and consider information
furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager and each subadvisor. In addition,
the Board's Investment Committee worked with Lipper to obtain relevant
comparative information regarding the performance, fees and expenses of the
Funds. The Investment Committee held separate meetings on December 8, 2005,
February 8, 2006 and February 17, 2006 to consider the information provided by
Lipper. Further, the Board took into consideration information furnished for the
Board's review and consideration throughout the year at regular Board and
Investment Committee meetings, as well as information specifically prepared in
connection with the renewal process.
The Trustees considered, among other materials, responses by the Manager
and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or any
other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements as well as Parts I and II of its Form ADV;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including the
results of any recent regulatory examination or independent audit;
- a comparison of the performance of that portion of Fund assets managed by
each firm with performance of other similar accounts managed by the firm,
including a discussion of relative performance versus a peer group
average and any remedial measures if the firm's performance was
materially below that of the peer group;
- a cost/profitability analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to the Funds,
if available;
- an analysis of compensation, including a comparison with fees charged to
other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of any other benefits to the firm or Funds as a result of
their relationship, if any;
- --------------------------------------------------------------------------------
24
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- confirmation that the firm's financial condition does not raise concerns
that the firm would be unable to continue providing the same scope and
quality of services to the Funds;
- a description of the scope of portfolio management services provided to
the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year;
- a description of the basis upon which portfolio managers are compensated,
including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with respect
to Fund transactions, including the firm's methodology for obtaining the
most favorable execution and the use of any affiliated broker-dealers;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the firm;
- a summary of any material changes to the firm's compliance program with
regard to federal, state, corporate and Fund requirements;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading policy
and disaster recovery plan, including a description of any material
changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling persons;
and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to appropriate indices,
including comments on the relative performance of each subadvisor and
each Fund versus comparable indices;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and whether (and if so, why) such subadvisor
should have its contract renewed;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- a table detailing the Manager's profitability with respect to each Fund;
- --------------------------------------------------------------------------------
25
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- an analysis of any material complaints received from Fund shareholders;
- a description of the Manager's securities lending practices and the fees
received from such practices;
- a description of the portfolio turnover rate and average execution costs
for each Fund and each subadvisor to a Fund;
- a discussion of whether the Manager receives, with respect to trade
execution for the Funds, other special compensation, including any
payment for order flow; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of each Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds, and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund, the class used for comparative purposes was the
class with the longest performance history, which in most cases is the
Institutional Class. References below to each Fund's Lipper peer group are to
the group of comparable mutual funds included in the analysis provided by
Lipper.
The Trustees also received a memorandum from their legal counsel detailing
the Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered
at its February 2006 meeting. The Board did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to the various factors.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered the
best interests of each Fund separately. In addition, while the Management
Agreement and the Investment Advisory Agreements for all of the Funds were
considered at the same Board meeting, the Board considered each Fund's
investment management and subadvisory relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost
for providing the services and the profitability of the advisory business to the
Manager or subadvisor; (4) the extent to which economies of scale have been
taken into account in setting the fee schedule; and (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors. The Trustees
posed questions to various management personnel of the Manager regarding certain
key aspects of the material submitted in support of the renewal.
- --------------------------------------------------------------------------------
26
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
Nature, Extent and Quality of Services
With respect to the renewal of the Management Agreement, the Board
considered: the Manager's ability to retain key investment personnel and to
provide consistent performance and an active client service program; the
Manager's goal to provide consistent above average long-term performance at low
cost; the continuing efforts by the Manager to add new series so as to enhance
the Funds' product line; the Manager's record in building improved compliance,
control and credit functions that reduce risks to the Funds; the addition of
personnel to manage the Funds, promote sales and improve services; and the
active role played by the Manager in monitoring and, as appropriate,
recommending replacements for the investment subadvisors and master portfolios.
Based on this information, the Board concluded that the nature, extent and
quality of the management and advisory services provided by the Manager and each
subadvisor were appropriate for each Fund and, thus, supported a decision to
renew the Management and each Investment Advisory Agreement.
Investment Performance
The Board evaluated the comparative information provided by Lipper and the
Manager regarding each Fund's investment performance relative to its benchmark
index(es) and peer group. The Board also considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
A discussion regarding the Board's considerations with respect to the
International Equity Fund's performance appears below under "Additional
Considerations and Conclusions with Respect to the International Equity Fund."
Cost of Services and Profits Realized
In analyzing the cost of services and profitability of the Manager in
connection with its investment advisory services to a Fund, the Board considered
the Manager's operations and low cost structure. The Board noted that the
Manager proposed to continue most of the expense waivers and reimbursements that
were in place for each applicable Fund's 2005 fiscal year. The Board also noted
that each sub-advised Fund pays the Manager the amounts due to its subadvisors,
and the Manager remits these amounts directly to the applicable subadvisors. The
Board considered that the Manager receives service and administrative fees to
compensate the Manager for providing administrative services to the Funds and to
compensate third-party administrators and broker-dealers for services to Fund
shareholders. In addition, the Board considered that the Manager receives
management fees for overseeing the securities lending relationships on behalf of
various Funds.
In analyzing the cost of services and profitability of each subadvisor in
connection with its investment advisory services to a Fund, the Board considered
that, in many cases, the Manager has negotiated the lowest subadvisory fee a
subadvisor charges for any comparable client accounts. The Board gave less
weight to profitability considerations or did not view this data as imperative
to its deliberations given the arms-length nature of the relationship between
the Manager and the subadvisors with respect to the negotiation of subadvisory
fees.
- --------------------------------------------------------------------------------
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
A discussion regarding the Board's considerations with respect to the
International Equity Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to the International Equity Fund."
Economies of Scale
In considering the reasonableness of the management and investment advisory
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. In this regard, the Board noted that, in many
cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The
Board also noted, where applicable, for purposes of determining the investment
advisory fee charged to the Funds, the fee schedule to each Investment Advisory
Agreement specifies that all other assets managed by a subadvisor on behalf of
AMR Corporation and its pension plans shall be considered. Thus, the Funds are
able to receive additional breakpoint benefits resulting from the subadvisor's
management of a larger pool of assets. With respect to the management fee, the
Board acknowledged the Manager's low cost structure and the increasing costs of
personnel, technology and operations. Based on these considerations, the Board
concluded that the Funds' fee structures are reasonably designed to pass on
economies of scale to Fund shareholders.
Benefits to be Derived from the Relationship with the Funds
The Board considered the "fall-out" or ancillary benefits that accrue to
the Manager and/or the subadvisors as a result of the advisory relationships
with the Funds, including greater exposure in the marketplace with respect to
the Manager's or subadvisor's investment process and expanding the level of
assets under management by the Manager and the subadvisors. The Board noted that
the Manager and the subadvisors may not direct the Funds' brokerage transactions
to certain brokers to obtain research and other services and that the Funds
participate in a brokerage recapture program. After consideration of this
information, the Board concluded that the potential benefits accruing to the
Manager and the subadvisors by virtue of their relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL
EQUITY FUND
The benchmark index referred to below is the International Equity Fund's
broad-based market index included in the Historical Performance section of the
Prospectuses. The Lipper International Multi-Cap Value Fund Index includes up to
the 30 largest funds in the Lipper International Multi-Cap Value category, where
the Fund is classified by Lipper.
In considering the renewal of the Management Agreement and each Investment
Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 2nd quintile for the ten-year period, 3rd quintile for the two-, three-,
four- and five-year periods and the 4th quintile for the one-year period
compared to the returns of a peer group of mutual funds identified by Lipper as
having an investment objective
- --------------------------------------------------------------------------------
28
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
similar to the Fund; (2) the Fund's total return performance exceeded the Lipper
International Multi-Cap Value Fund Index for the ten-year period but
underperformed for the other periods tracked by Lipper; (3) the portion of Fund
assets allocated to Causeway Capital Management, LLC ("Causeway") outperformed
the Fund's benchmark index for the three-, five- and ten-year periods but
underperformed for the one-year period; (4) Causeway's explanation that the
underperformance for the one-year period was due primarily to underweight
positions in certain momentum cyclical sectors; (5) the portion of Fund assets
allocated to Lazard Asset Management LLC ("Lazard") underperformed the Fund's
benchmark index for all relevant periods; (6) the Manager's explanation that
Lazard underperformed due to its emphasis on large cap, higher quality
securities; (7) the Manager's recommendation to continue to retain Lazard due to
its improved relative performance among the Fund's subadvisors; (8) the portion
of Fund assets allocated to Templeton Investment Counsel, LLC ("Templeton")
outperformed the Fund's benchmark index for the three-, five- and ten-year
periods but underperformed for the one-year period; and (9) the portion of Fund
assets allocated to The Boston Company Asset Management, LLC ("TBCAM")
outperformed the Fund's benchmark index for all relevant periods.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
and actual management fees (including administrative fees) were in the 1st
quintile compared to the expenses and fees of a peer group of similar funds
classified by Lipper, where the 1st quintile represents the lowest fees or
expenses among the group; (2) Causeway and Templeton represented that they do
not charge a lower fee rate for comparable client services, while TBCAM
represented that it does not provide similar services to any comparable
accounts; and (3) the fee schedules of each subadvisor include breakpoints,
which reduce fee rates as the assets of the Fund increase.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and the
subadvisors under the Agreements are fair and reasonable; (2) concluded that the
profits to the Manager are reasonable in light of the quality of services
provided to the Fund, including the oversight of the Fund's subadvisors; (3)
determined that the Fund and its shareholders would benefit from the Manager's
and subadvisors' continued management of the Fund; and (4) approved the renewal
of the Agreements with respect to the Fund.
- --------------------------------------------------------------------------------
29
(AMERICAN BEACON FUNDS LOGO)
- --------------------------------------------------------------------------------
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts. If you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request.
If you invest in the Fund through a financial institution, you may be able to
receive the Fund's regulatory mailings, such as the Prospectus, Annual Report
and Semi-Annual Report, by e-mail. If you are interested in this option, please
go to www.icsdelivery.com and search for your financial institution's name or
contact your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
<Table>
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
American-Beacon.Funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
</Table>
- --------------------------------------------------------------------------------
<Table>
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450
AMR Class(SM) Fort Worth, TX 76155
Call (800) 345-2345
PlanAhead Class(R) and Service Class
Call (800) 388-3344
</Table>
- --------------------------------------------------------------------------------
<Table>
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds
semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio
schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of
Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge
third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website
the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most
reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on
Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's
regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may
may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009.
schedule of each Fund's portfolio holdings is also available
on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal
quarter.
</Table>
FUND SERVICE PROVIDERS:
<Table>
CUSTODIAN TRANSFER AGENT INDEPENDENT DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES REGISTERED PUBLIC FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri ACCOUNTING FIRM Portland, Maine
ERNST & YOUNG LLP
Chicago, Illinois
</Table>
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds is a service mark of AMR Corporation.
American Beacon International Equity Fund is a service mark of American Beacon
Advisors, Inc.
SAR 04/06
537386
G U I D A N C E | V I S I O N | E X P E R I E N C E
[AMERICAN BEACON FUNDS LOGO]
SEMI-ANNUAL REPORT
[PHOTO]
APRIL 30, 2006
LARGE CAP VALUE FUND
About American Beacon
- --------------------------------
Since 1986, American Beacon
Advisors has offered a variety
of products and investment
advisory services to numerous
institutional and retail
clients, including a variety of
mutual funds, corporate cash
management, and separate account
management.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations,
financial planners, and other
institutional investors. With
American Beacon Advisors, you
can put the experience of a
multi-billion dollar asset
management firm to work for your
company.
<Table>
<Caption>
Contents
-----------------------------------------------
President's Message........... 1
Market and Performance
Overview................... 2
Schedule of Investments....... 6
</Table>
<Table>
Additional Information...............Back Cover
</Table>
Any opinions herein, including forecasts, reflect our judgement as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds April 30, 2006
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
Iam pleased to present you
with the Semi-Annual
Report for the American
Beacon Large Cap Value
Fund for the six months
ended April 30, 2006.
During this time, the Dow
Jones Industrial Average
posted gains of 10.22%,
the S&P 500 Index
increased by 9.64%, while
the Russell 2000 Index
returned 18.91%.
The Institutional
Class of the Large Cap
Value Fund produced
returns of 12.1% for the
period and continued to surpass its respective Lipper benchmark for all periods
ended April 30, 2006.
I hope that the enclosed market overviews, portfolio listings, and detailed
financial data are helpful to you. As always, we welcome the opportunity to
serve your financial needs. To obtain further details about the American Beacon
Funds family or access your account information, please visit our web site at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Large Cap Value Fund.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President, American Beacon Funds
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the performance
data quoted. To obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009.
1
DOMESTIC EQUITY MARKET OVERVIEW
- --------------------------------------------------------------------------------
Stocks continued their healthy climb despite high energy prices. Following a
lackluster finish in 2005, U.S. stock prices climbed steadily during the first
four months of 2006, ending near a five-year high. Despite continuing worries
over rising energy costs and the possibility of inflation, investors' confidence
remained firm.
Small-cap stocks in the U.S. continued to outperform their large-cap
counterparts, as has been the general trend since the bear market ended in 2002.
Value outperformed growth for the period, also continuing a multi-year trend.
International stocks continued to produce outstanding gains most notably in
Japan and emerging markets.
All eyes remained on the Federal Reserve Board ("the Fed") as its measured
pace of raising short-term rates continued. On March 28, the Fed raised its
target for the federal funds rate to 4.75%, continuing its gradual tightening of
monetary policy to defuse the threat of inflation. This was the Fed's 15th
consecutive rate increase since June 2004. (Shortly after the close of the
fiscal period, the Fed extended its streak of rate increases to 16, raising its
target to 5.00%.)
Because the Fed's actions affect the economy with a lag, investors are
watching economic measures more closely -- either for evidence that higher rates
are slowing the economy, or for evidence that the economy can continue to grow
with modest inflation while absorbing higher rates (the so-called "goldilocks"
scenario). Heightened focus on the Fed and the economy has led to increased
volatility of equity returns, as daily market swings of 1% or more have become
more common.
While the ultimate effect of the Fed tightening cycle remains to be seen,
its effect on stock market returns will be reflected in the earnings growth and
valuation of the overall market. At the most basic level, market returns are
comprised of three components: earnings growth, the valuation of those earnings
(i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield.
The current environment for each component of return warrants some discussion.
EARNINGS: Earnings growth for the six months ended April 30 (and the past
several years) has been robust and well above the long-term average. While there
has been some deceleration over the six months, double-digit growth has
continued longer than most expected. Looking forward, earnings growth from the
financial sector may slow as higher short-term borrowing costs crimp earnings.
Additionally, the energy sector has been the largest contributor to earnings
growth and could see an earnings slowdown if energy prices pause or decline.
VALUATION: While P/E ratios (the price of a stock divided by its anticipated
earnings per share) have compressed significantly this decade, the P/E of the
S&P 500, based on reported earnings, remains at 17 times earnings. This compares
with a long-term average (since 1926) of 15 times earnings. Higher interest
rates typically reduce the multiple that investors are willing to pay for
stocks. Most importantly, however, the contribution of P/E expansion to market
returns over long periods is small and is dwarfed in importance by earnings
growth and dividend yield.
DIVIDENDS: Returning capital to shareholders via dividends continues to grow in
popularity. Favorable tax treatment, demographic trends, and investor pressure
have all been supportive of higher dividend payouts. However, because earnings
growth has been more robust, the percentage of earnings paid out in dividends is
near an all-time low. This should be supportive of higher dividend payouts over
time. Dividends will continue to be a critical component of overall return.
Overall, the outlook for stock returns appears mixed. On the bullish side,
the economy remains resilient, corporate earnings are strong and profit margins
remain high. Investor concerns include a slowing economy, perhaps induced by
higher interest rates hurting the housing sector and consumer spending.
Additionally, we have enjoyed the longest bull market since 1982 and the second
longest period ever without a 10% correction, recent market weakness and
volatility notwithstanding.
Regardless of future trends in the economy or markets, stock selection will
remain the key driver of performance going forward. This is especially true in
the current environment where, thanks to multi-year performance advantages of
small-cap over large-cap and value over growth, the lines between various styles
are less defined. So, stock selection may be more important than style or market
cap going forward.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Value Fund returned 12.10% for the
six months ended April 30, 2006, lagging the Linked S&P 500/Citigroup Value
Index ("Index") return of 13.57% but ahead of the Lipper Multi-Cap Value Funds
Index return of 11.88%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/06
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1).... 12.10% 20.23% 9.64% 10.32%
PlanAhead Class(1)........ 11.98% 19.95% 22.93% 10.01%
Service Class(1,2)........ 11.86% 19.65% 9.28% 9.98%
AMR Class(1).............. 12.25% 20.55% 9.92% 10.60%
Lipper Multi-Cap Value
Funds Index.............. 11.88% 18.03% 6.97% 9.89%
S&P 500 Index(3).......... 9.64% 15.42% 2.70% 8.94%
Linked S&P 500/Citigroup
Value Index(3)........... 13.57% 20.87% 4.28% 9.55%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative of
future returns. Investment returns and principal value will vary, and shares
may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
higher or lower than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the one-year, five-year and ten-year
periods represents the total returns achieved by the PlanAhead Class from
4/30/96 up to 6/1/05, the inception date of the Service Class, and the
returns of the Service Class since its inception. Expenses of the Service
Class are higher than those of the PlanAhead Class. Therefore, total returns
shown may be higher than they would have been had the Service Class been in
existence since 4/30/96.
3. The S&P 500 Index is an unmanaged index of common stocks
publicly traded in the United States. The Linked S&P 500/ Citigroup Value
Index represents returns of the S&P 500/Barra Value Index ("Barra Index") up
to October 31, 2005 and the S&P 500/Citigroup Value Style Index ("Citigroup
Index") thereafter. The Barra Index is a market value weighted index of
stocks with book-to-price ratios in the top 50% of the S&P 500 Index. The
Citigroup Index is a market value weighted index of stocks in the S&P 500
that score highest based on an average of book-to-price ratio, cash
flow-to-price ratio, sales-to-price ratio, and dividend yield, representing
50% of the total market value of the S&P 500.
The Fund underperformed the Index both through stock selection and sector
allocation. From a stock selection standpoint, the Fund had good stock selection
in the Health Care, Consumer Staples and Industrials sectors. Companies with the
greatest positive impact in the Health Care sector were Bristol-Myers Squibb (up
22.8%) and Pfizer (up 18.6%). In the Consumer Staples sector,
Archer-Daniels-Midland (up 50.1%) was by far the largest contributor. CSX (up
50.3%) and Boeing (up 30.1%) in the Industrials sector also added meaningful
value versus the Index. This excess performance versus the Index, however, was
offset by poor stock selection in the Financials, Energy, Information
Technology, and Telecommunications Services sectors. In the Financials sector,
the largest detractors were St. Paul Travelers (down 1.2%), SLM (down 4.0%), and
American International Group (up 1.1%), while ConocoPhillips (up 2.9%) detracted
from the Fund's Energy sector returns. Strong results from Information
Technology holdings Apple Computer (up 22.2%) and Oracle Systems (up 16.1%) were
insufficient to offset poor returns in Computer Associates International (down
9.1%), Autodesk (down 6.8%), and International Business Machines (up 1.1%).
Finally, the Fund's position in Vodafone Group (down 8.2%) hurt performance most
in the Telecommunications Services sector.
Sector weightings also detracted value during the period, as overweights in
the Health Care sector, the second worst performing sector of the Index, and in
Consumer Staples, another one of the poorer performing sectors of the Index,
hurt the Fund's relative performance.
The sub-advisors continue to invest in a broadly diversified portfolio of
companies that they believe have attractive valuations and above average
earnings growth potential. This approach should allow the Fund to benefit over
the longer-term.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP VALUE FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
ConocoPhillips 2.8%
JP Morgan Chase & Co. 2.2%
Bank of America Corp. 2.1%
Tyco International Ltd. 1.7%
Citigroup, Inc. 1.7%
Altria Group, Inc. 1.6%
Washington Mutual, Inc. 1.4%
The Boeing Co. 1.4%
International Business Machines Corp. 1.3%
Nokia Corp. 1.2%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 26.3%
Industrials 13.6%
Consumer Staples 10.6%
Information Technology 10.6%
Consumer Discretionary 9.4%
Health Care 8.0%
Energy 7.9%
Materials 5.1%
Utilities 4.9%
Telecommunication Services 3.6%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The examples below are
intended to help you understand the ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If
4
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP VALUE FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
you were subject to any transaction costs during the period, your costs would
have been higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
11/1/05 4/30/06 11/01/05-4/30/06
--------- ------- ----------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,121.01 $3.18
Hypothetical $1,000.00 $1,021.80 $3.03
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,119.78 $4.48
Hypothetical $1,000.00 $1,020.57 $4.27
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,118.59 $5.75
Hypothetical $1,000.00 $1,019.37 $5.48
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,122.54 $1.79
Hypothetical $1,000.00 $1,023.11 $1.71
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.60%, 0.85%, 1.09%, 0.34%, for the
Institutional, PlanAhead, Service, and AMR Classes, respectively, multiplied
by the average account value over the period, multiplied by the number
derived by dividing the number of days in the most recent fiscal half-year
(181) by days in the year (365) to reflect the half-year period.
5
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 91.73%
CONSUMER DISCRETIONARY - 8.58%
AUTO COMPONENTS - 0.22%
Magna International, Inc.+.... 79,900 $ 6,268
----------
HOTELS, RESTAURANTS & LEISURE - 0.95%
Carnival Corp. ............... 133,900 6,269
Harrahs Entertainment,
Inc. ....................... 141,100 11,519
McDonald's Corp. ............. 84,400 2,918
Yum Brands, Inc. ............. 123,300 6,372
----------
27,078
----------
HOUSEHOLD DURABLES - 2.48%
Centex Corp. ................. 401,100 22,301
Fortune Brands, Inc. ......... 94,900 7,621
Koninklijke (Royal) Philips
Electronics NV.............. 196,666 6,781
Matsushita Electric Industrial
Company Ltd., ADR........... 720,000 17,431
Newell Rubbermaid, Inc.+...... 161,600 4,431
Pulte Homes, Inc. ............ 321,000 11,989
----------
70,554
----------
LEISURE EQUIPMENT & PRODUCTS - 0.51%
Eastman Kodak Co.+............ 285,400 7,694
Mattel, Inc. ................. 413,400 6,689
----------
14,383
----------
MEDIA - 2.35%
CBS Corp. .................... 116,500 2,967
Clear Channel Communications,
Inc. ....................... 496,000 14,151
The Interpublic Group of
Companies, Inc.(+)+......... 583,300 5,588
The Walt Disney Company
Ltd. ....................... 969,500 27,107
Warner Music Group Corp.+..... 642,000 16,988
----------
66,801
----------
MULTILINE RETAIL - 1.55%
Federated Department Stores,
Inc. ....................... 203,656 15,855
J.C. Penney Company, Inc. .... 316,000 20,685
Target Corp. ................. 140,100 7,439
----------
43,979
----------
SPECIALTY RETAIL - 0.28%
The Home Depot, Inc. ......... 202,400 8,082
----------
TEXTILES & APPAREL - 0.24%
Liz Claiborne, Inc. .......... 177,300 6,924
----------
TOTAL CONSUMER
DISCRETIONARY........... 244,069
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
CONSUMER STAPLES - 9.76%
BEVERAGES - 1.32%
Anheuser-Busch Companies,
Inc. ....................... 138,900 $ 6,192
Diageo plc, ADR............... 471,500 31,237
----------
37,429
----------
FOOD & DRUG RETAILING - 0.46%
Albertson's, Inc. ............ 24,400 618
Safeway, Inc. ................ 495,300 12,447
----------
13,065
----------
FOOD PRODUCTS - 3.30%
Archer-Daniels-Midland Co. ... 642,000 23,330
ConAgra Foods, Inc. .......... 654,700 14,849
General Mills, Inc. .......... 139,500 6,883
Kellogg Co. .................. 370,000 17,135
Kraft Foods, Inc.+............ 393,900 12,305
Sara Lee Co. ................. 411,028 7,345
Unilever plc, ADR............. 282,500 12,071
----------
93,918
----------
HOUSEHOLD PRODUCTS - 0.61%
The Clorox Co. ............... 269,000 17,265
----------
PERSONAL PRODUCTS - 0.35%
L'Oreal SA, ADR(+)+........... 547,000 10,092
----------
TOBACCO - 3.72%
Altria Group, Inc. ........... 623,400 45,608
Gallaher Group plc, ADR....... 97,400 6,190
Imperial Tobacco Group plc,
ADR+........................ 420,500 26,357
UST, Inc.+.................... 628,000 27,588
----------
105,743
----------
TOTAL CONSUMER STAPLES.... 277,512
----------
ENERGY - 7.25%
DIVERSIFIED FINANCIALS - 0.22%
Petro-Canada.................. 124,700 6,133
----------
ENERGY EQUIPMENT & SERVICES - 0.83%
Weatherford International
Ltd.(+)..................... 445,000 23,554
----------
OIL & GAS - 6.20%
BP plc, ADR................... 180,136 13,280
Chevron Corp. ................ 397,062 24,229
ConocoPhillips................ 1,208,796 80,868
Devon Energy Corp. ........... 328,400 19,740
Kerr-McGee Corp. ............. 86,589 8,647
Occidental Petroleum Corp. ... 289,200 29,712
----------
176,476
----------
TOTAL ENERGY.............. 206,163
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
6
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
FINANCIALS - 24.10%
BANKS - 6.61%
Bank of America Corp. ........ 1,204,578 $ 60,132
Comerica, Inc. ............... 109,000 6,199
First Horizon National
Corp.(+)+.................... 74,500 3,160
KeyCorp....................... 317,800 12,146
TCF Financial Corp.+.......... 367,000 9,858
U.S. Bancorp.................. 383,160 12,047
UnionBanCal Corp. ............ 44,000 3,084
Wachovia Corp. ............... 226,900 13,580
Washington Mutual, Inc.+...... 869,700 39,189
Wells Fargo & Co. ............ 415,200 28,520
----------
187,915
----------
DIVERSIFIED FINANCIALS - 9.76%
The Bear Stearns Cos, Inc. ... 86,300 12,299
Capital One Financial
Corp. ....................... 194,000 16,808
The Charles Schwab Corp. ..... 1,254,000 22,446
Citigroup, Inc. .............. 965,038 48,204
Federal Home Loan Mortgage
Corp. ....................... 314,600 19,209
Federal National Mortgage
Association.................. 158,100 8,000
The Goldman Sachs Group,
Inc. ........................ 70,300 11,268
JP Morgan Chase & Co. ........ 1,358,198 61,635
Merrill Lynch & Company,
Inc. ........................ 158,500 12,087
Mitsubishi UFJ Financial
Group, Inc., ADR+............ 1,339,000 20,969
Morgan Stanley Dean Witter &
Co. ......................... 484,800 31,173
SLM Corp. .................... 255,200 13,495
----------
277,593
----------
INSURANCE - 7.48%
Ace Ltd. ..................... 235,200 13,063
The Allstate Corp. ........... 368,328 20,807
American International Group,
Inc. ........................ 376,000 24,534
AON Corp. .................... 95,000 3,981
Assurant, Inc. ............... 130,100 6,267
The Chubb Corp. .............. 396,000 20,410
Conseco, Inc.(+).............. 239,600 6,050
Genworth Financial, Inc. ..... 541,700 17,984
The Hartford Financial
Services Group, Inc. ........ 64,500 5,930
MetLife, Inc. ................ 551,700 28,744
MGIC Investments Corp. ....... 154,900 10,951
Prudential Financial, Inc. ... 98,100 7,665
The St. Paul Travelers
Companies, Inc. ............. 621,800 27,378
XL Capital Ltd. .............. 286,600 18,884
----------
212,648
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
REAL ESTATE - 0.25%
The St. Joe Co.+.............. 128,600 $ 7,222
----------
TOTAL FINANCIALS........... 685,378
----------
HEALTH CARE - 7.38%
HEALTH CARE EQUIPMENT & SUPPLIES - 1.68%
Baxter International, Inc. ... 786,700 29,658
C.R. Bard, Inc. .............. 245,000 18,243
----------
47,901
----------
HEALTH CARE PROVIDERS & SERVICES - 1.53%
Cigna Corp. .................. 103,900 11,117
HCA, Inc. .................... 282,400 12,395
Tenet Healthcare Corp.(+)+.... 678,700 5,647
WellPoint, Inc.(+)............ 202,400 14,370
----------
43,529
----------
PHARMACEUTICALS - 4.17%
AstraZeneca PLC, ADR.......... 335,000 18,469
Bristol-Myers Squibb Co. ..... 1,162,900 29,514
Merck & Company, Inc. ........ 452,200 15,565
Pfizer, Inc. ................. 1,255,800 31,809
Schering-Plough Corp. ........ 662,600 12,802
Wyeth......................... 211,900 10,313
----------
118,472
----------
TOTAL HEALTH CARE.......... 209,902
----------
INDUSTRIALS - 12.48%
AEROSPACE & DEFENSE - 3.77%
The Boeing Co. ............... 469,100 39,146
L-3 Communications Holdings,
Inc. ........................ 224,000 18,301
Lockheed Martin Corp. ........ 221,600 16,819
Northrop Grumman Corp. ....... 95,300 6,376
Raytheon Co. ................. 366,100 16,207
United Technologies Corp. .... 166,000 10,427
----------
107,276
----------
AIR FREIGHT & COURIERS - 0.07%
FedEx Corp. .................. 18,400 2,118
----------
COMMERCIAL SERVICES & SUPPLIES - 0.93%
Cendant Corp.(+).............. 944,000 16,454
PHH Corp.(+).................. 8,300 232
Waste Management, Inc. ....... 257,665 9,652
----------
26,338
----------
ELECTRICAL EQUIPMENT - 0.63%
American Power Conversion
Corp.+....................... 579,400 12,886
Emerson Electrical Co. ....... 60,000 5,097
----------
17,983
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
7
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
INDUSTRIAL CONGLOMERATES - 3.90%
3M Co. ....................... 162,400 $ 13,874
General Electric Co. ......... 684,800 23,687
Honeywell International,
Inc. ........................ 281,700 11,972
Textron, Inc. ................ 143,300 12,890
Tyco International Ltd. ...... 1,838,400 48,442
----------
110,865
----------
MACHINERY - 2.63%
Caterpillar, Inc. ............ 179,800 13,618
Deere & Co. .................. 189,000 16,590
Flowserve Corp.(+)+........... 144,100 8,289
Illinois Tool Works,
Inc.(+)...................... 221,100 22,707
ITT Industries, Inc. ......... 240,300 13,512
----------
74,716
----------
TRANSPORTATION INFRASTRUCTURE - 0.55%
Burlington Northern Santa Fe
Corp. ....................... 198,100 15,755
----------
TOTAL INDUSTRIALS.......... 355,051
----------
INFORMATION TECHNOLOGY - 9.73%
COMMUNICATIONS EQUIPMENT - 1.54%
Lucent Technologies,
Inc.(+)+..................... 3,920,000 10,937
Nokia Corp., ADR.............. 1,450,800 32,875
----------
43,812
----------
COMPUTERS & PERIPHERALS - 3.13%
Apple Computer, Inc.(+)....... 386,000 27,171
Hewlett-Packard Co. .......... 728,500 23,654
International Business
Machines Corp. .............. 462,400 38,074
----------
88,899
----------
ELECTRICAL EQUIPMENT - 0.59%
Molex, Inc.+.................. 139,000 5,160
Molex, Inc., Class A Shares... 361,000 11,606
----------
16,766
----------
IT CONSULTING & SERVICES - 1.27%
Computer Sciences Corp.(+).... 106,300 6,224
Electronic Data Systems
Corp. ....................... 1,106,100 29,953
----------
36,177
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.90%
Intel Corp. .................. 302,200 6,038
Texas Instruments, Inc. ...... 563,000 19,541
----------
25,579
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
SOFTWARE - 2.30%
Autodesk, Inc.(+)............. 174,000 $ 7,315
Computer Associates
International, Inc. ......... 1,096,460 27,806
Microsoft Corp. .............. 494,700 11,947
Oracle Corp.(+)............... 1,259,000 18,369
----------
65,437
----------
TOTAL INFORMATION
TECHNOLOGY............... 276,670
----------
MATERIALS - 4.63%
CHEMICALS - 2.54%
Air Products & Chemicals,
Inc. ........................ 352,600 24,160
Dow Chemical Co. ............. 105,900 4,301
E. I. du Pont de Nemours &
Co.+......................... 163,600 7,215
Hercules, Inc.(+)............. 119,400 1,697
Lyondell Chemical Co.+........ 555,600 13,390
The Mosaic Co.(+)+............ 877,900 13,168
PPG Industries, Inc. ......... 118,000 7,920
Tronox, Inc.(+)+.............. 16,572 287
----------
72,138
----------
METALS & MINING - 0.90%
Alcoa, Inc.+.................. 763,068 25,776
----------
PAPER & FOREST PRODUCTS - 1.19%
International Paper Co. ...... 134,500 4,889
Sappi Ltd., ADR+.............. 357,100 5,014
Weyerhaeuser Co. ............. 338,900 23,882
----------
33,785
----------
TOTAL MATERIALS............ 131,699
----------
TELECOMMUNICATION SERVICES - 3.34%
DIVERSIFIED TELECOMMUNICATION - 2.83%
Alltel Corp. ................. 50,000 3,219
AT&T, Inc. ................... 1,039,800 27,253
BellSouth Corp. .............. 569,900 19,251
Verizon Communications,
Inc. ........................ 928,646 30,673
----------
80,396
----------
WIRELESS TELECOMMUNICATION SERVICES - 0.51%
Vodafone Group plc, ADR+...... 612,000 14,504
----------
TOTAL TELECOMMUNICATION
SERVICES................. 94,900
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
8
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
UTILITIES - 4.48%
ELECTRIC UTILITIES - 3.66%
American Electric Power
Company, Inc. .............. 213,300 $ 7,137
CenterPoint Energy, Inc.+..... 534,300 6,422
Dominion Resources, Inc. ..... 83,600 6,259
DTE Energy Co. ............... 209,000 8,523
Duke Energy Corp.(+).......... 800,300 23,305
Entergy Corp. ................ 323,300 22,612
Exelon Corp. ................. 339,600 18,338
FPL Group, Inc. .............. 460,500 18,236
Public Service Enterprise
Group, Inc. ................ 263,200 16,503
----------
TOTAL UTILITIES........... 127,335
----------
TOTAL COMMON STOCKS....... 2,608,679
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
SHORT TERM INVESTMENTS - 14.39%
American Beacon Enhanced Cash
Trust++#.................... 119,199,913 $ 119,200
American Beacon Money Market
Select Fund++#.............. 273,271,527 273,272
</Table>
<Table>
<Caption>
PAR
AMOUNT
-----------
U.S. Treasury Bill,
4.455%, Due 6/8/2006P......... $ 16,820 16,740
----------
TOTAL SHORT TERM
INVESTMENTS............. 409,212
----------
TOTAL INVESTMENTS - 106.12%
(COST $2,657,399)........... 3,017,891
----------
LIABILITIES, NET OF OTHER
ASSETS - (6.12%)............ (174,007)
----------
TOTAL NET ASSETS - 100%....... $2,843,884
==========
</Table>
- ---------------
ADR - American Depository Receipt
(+) Non-income producing security.
+ All or a portion of this security is on loan at April 30, 2006. See Note 5.
++ The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
# All or a portion of this security is purchased with cash collateral for
securities loaned.
P At April 30, 2006, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(dollars in thousands)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- -------- --------------
Emini S&P 500 Index......................................... 3,440 Jun 2006 $226,335 $1,062
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
9
AMERICAN BEACON LARGE CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited) (in thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<Table>
ASSETS:
Investments in unaffiliated securities, at value(A C)... $ 2,625,419
Investments in affiliated securities, at value(B)....... 392,472
Receivable for investments sold......................... 7,449
Dividends and interest receivable....................... 4,637
Receivable for fund shares sold......................... 13,408
Receivable for variation margin on open futures
contracts.............................................. 140
-----------
TOTAL ASSETS........................................ 3,043,525
-----------
LIABILITIES:
Payable for investments purchased....................... 12,587
Payable upon return of securities loaned................ 183,405
Payable for fund shares redeemed........................ 1,021
Management and investment advisory fees payable (Note
2)..................................................... 1,719
Administrative service and service fees payable......... 678
Other liabilities....................................... 231
-----------
TOTAL LIABILITIES................................... 199,641
-----------
NET ASSETS.................................................. $ 2,843,884
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 2,402,167
Undistributed net investment income..................... 10,783
Accumulated net realized gain (loss).................... 69,380
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................. 361,554
-----------
NET ASSETS.................................................. $ 2,843,884
===========
Shares outstanding (no par value):
Institutional Class..................................... 24,431,833
===========
PlanAhead Class......................................... 66,956,803
===========
Service Class........................................... 1,145,041
===========
AMR Class............................................... 37,446,687
===========
Net asset value, offering and redemption price per share:
Institutional Class..................................... $ 22.45
===========
PlanAhead Class......................................... $ 21.50
===========
Service Class........................................... $ 21.43
===========
AMR Class............................................... $ 22.20
===========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 2,264,927
(B) Cost of investments in affiliated securities............ 392,472
(C) Market value of securities on loan...................... 178,867
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
10
AMERICAN BEACON LARGE CAP VALUE FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited) (in thousands)
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of
foreign taxes)*........................................ $ 23,504
Dividend income from affiliated securities.............. 3,985
Interest income......................................... 298
Income derived from securities lending, net............. 53
--------
TOTAL INVESTMENT INCOME............................. 27,840
--------
EXPENSES:
Management and investment advisory fees (Note 2)........ 3,188
Administrative service fees (Note 2):
Institutional Class................................... 440
PlanAhead Class....................................... 1,265
Service Class......................................... 21
Transfer agent fees:
Institutional Class................................... 20
PlanAhead Class....................................... 39
Service Class......................................... 1
AMR Class............................................. 12
Fund accounting fees.................................... 237
Professional fees....................................... 52
Registration fees and expenses.......................... 136
Service fees:
PlanAhead Class (Note 2).............................. 1,266
Service Class (Note 2)................................ 21
Distribution fees -- Service Class (Note 2)............. 21
Prospectus and shareholder reports...................... 128
Other expenses.......................................... 11
--------
TOTAL EXPENSES...................................... 6,858
--------
NET INVESTMENT INCOME....................................... 20,982
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Investments........................................... 67,596
Commission recapture.................................. 199
Futures contracts..................................... 11,855
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 148,243
Futures contracts..................................... 2,232
--------
NET GAIN (LOSS) ON INVESTMENTS...................... 230,125
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $251,107
========
* Foreign taxes......................................... $ 135
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
11
AMERICAN BEACON LARGE CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2006 2005
----------- -----------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 20,982 $ 20,301
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions........... 79,650 73,494
Change in net unrealized appreciation or depreciation of
investments, futures contracts, and foreign currency
translations........................................... 150,475 61,431
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 251,107 155,226
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class................................... (2,811) (909)
PlanAhead Class....................................... (9,026) (1,111)
Service Class......................................... (183) --
AMR Class............................................. (12,220) (11,555)
Net realized gain on investments:
Institutional Class................................... (8,283) --
PlanAhead Class....................................... (28,149) --
Service Class......................................... (544) --
AMR Class............................................. (32,018) --
---------- ----------
NET DISTRIBUTIONS TO SHAREHOLDERS................... (93,234) (13,575)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................... 1,342,064 936,214
Reinvestment of dividends and distributions............. 88,860 13,156
Cost of shares redeemed................................. (332,204) (299,876)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS.................................. 1,098,720 649,494
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS....................... 1,256,593 791,145
---------- ----------
NET ASSETS:
Beginning of period..................................... 1,587,291 796,146
---------- ----------
END OF PERIOD*.......................................... $2,843,884 $1,587,291
========== ==========
* Includes undistributed net investment income (loss)
of..................................................... $ 10,783 $ 14,208
========== ==========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
12
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American Beacon Large Cap Value Fund (the "Fund"), a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
<Table>
<Caption>
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- ------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service
Fee -- .25%
PLANAHEAD CLASS General public and investors investing through an Administrative Service
intermediary Fee -- .25%
Service Fee -- .25%
SERVICE CLASS Investors investing through an intermediary Administrative Service
Fee -- .25%
Service Fee -- .25%
Distribution Fee -- .25%
AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A
AMR Corporation and its affiliates
</Table>
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official price (closing bid price or last evaluated
quote if no sale has occurred) on the primary market or exchange on which they
trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. When a price is unavailable from a
pricing service or when the price provided by the pricing service is deemed not
to represent fair value, the prices of debt securities may be determined using
quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
Securities for which the market prices are not readily available or are not
reflective of the fair value of the security, the security will be priced at a
fair value following procedures approved by the Board of Trustees (the "Board").
In light of the judgement involved in fair value decisions, there can be no
assurance that a fair value assigned to a particular security is accurate.
- --------------------------------------------------------------------------------
13
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Fund. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Fund may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Fund reflects this
amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral
for futures contracts. Payments to and from the broker, known as variation
margin, are required to be made on a daily basis as the price of the futures
contract fluctuates. Changes in initial settlement values are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at
which time realized gains and losses are recognized. Futures contracts are
valued at the most recent settlement price established each day by the exchange
on which they are traded.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid annually. Distributions, if any, of net realized capital gains are
generally paid annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with
certain brokers or dealers. If the Fund's investment advisor chooses to execute
a transaction through a participating broker, the broker rebates a portion of
the commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
- --------------------------------------------------------------------------------
14
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, fund management and securities lending services. Investment
assets of the Fund are managed by multiple investment advisors which have
entered into separate investment advisory agreements with the Manager. As
compensation for performing the duties required under the Management Agreement,
the Manager receives from the Fund an annualized fee equal to .10% of the
average daily net assets plus amounts paid by the Manager to the investment
advisors hired by the Manager to direct investment activities of the Funds.
Management fees paid during the six months ended April 30, 2006 were as follows
(dollars in thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
- ----------- ---------- --------------- -----------
..225%-.70% $3,188 $2,071 $1,117
</Table>
As compensation for services provided by the Manager in connection with
securities lending activities, the lending Fund pays to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. During the
six months ended April 30, 2006, securities lending fees totaling $16,000 were
paid to the Manager by the Fund. This fee is netted against securities lending
income in the Statement of Operations.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the
- --------------------------------------------------------------------------------
15
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Manager receives an annualized fee of .25% of the average daily net assets of
the Institutional, PlanAhead and Service Classes of the Fund.
Distribution Plans
The Trust, except for the Service Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940, pursuant to which no fees may be charged to
the Fund for distribution purposes. However, the Plan authorizes the management
fees received by the Manager and the investment advisors hired by the Manager to
be used for distribution purposes. Under this Plan, the Trust does not intend to
compensate the Manager or any other party, either directly or indirectly, for
the distribution of Trust shares.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Service Class of the Fund. Under
the Distribution Plan, as compensation for distribution assistance, the Manager
receives an annual fee of .25% of the average daily net assets of the Service
Class. The fee will be payable without regard to whether the amount of the fee
is more or less than the actual expenses incurred in a particular month by the
Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the PlanAhead and Service
Classes. As compensation for performing the duties required under the Service
Plans, the Manager receives .25% of the average daily net assets of the
PlanAhead and Service Classes of the Fund.
Investment in Affiliated Funds
The Fund is permitted, pursuant to an exemptive order by the Securities and
Exchange Commission ("SEC") and approved procedures by the Board, to invest up
to 25% of its total assets in the American Beacon Money Market Select Fund (the
"Select Fund"), an affiliated fund. The Fund and the Select Fund have the same
investment advisor and therefore, are considered to be affiliated. Cash
collateral received by the Fund in connection with securities lending may be
invested in the Select Fund and the American Beacon Enhanced Cash Trust (the
"Cash Trust") (collectively, the "Affiliated Funds"). The Manager serves as
Trustee and investment advisor to the Affiliated Funds and receives from the
Affiliated Funds an annualized fee equal to .10% of the average daily net
assets. During the six months ended April 30, 2006, fees earned by the Manager
from the Affiliated Funds were as follows:
<Table>
<Caption>
SECURITIES LENDING
DIRECT INVESTMENT COLLATERAL INVESTED
IN FUNDS IN FUNDS TOTAL
- ----------------- ------------------- --------
$91,832 $72,062 $163,894
</Table>
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-
- --------------------------------------------------------------------------------
16
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
interested Trustees (other than Mr. O'Sullivan) and their spouses are provided
free unlimited air transportation on American. Retired Trustees and their
spouses are provided free air transportation on American, up to a maximum annual
value of $40,000. The Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. Mr.
O'Sullivan, as a retiree of American, already receives flight benefits. Mr.
O'Sullivan receives an annual retainer plus a fee for each Board meeting
attended.
At April 30, 2006, AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof owned 100% of AMR Class shares of the Fund.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from, or
lend money to, other participating Funds. At April 30, 2006, the Fund had not
utilized the credit facility.
Reimbursement of Expenses
The Manager reimbursed expenses of the Service Class totaling $17 for the
Fund during the six months ended April 30, 2006.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to comply with the requirements of Subchapter
M of the Internal Revenue Code and to distribute substantially all net
investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
- --------------------------------------------------------------------------------
17
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The tax character of distributions during the six months ended April 30,
2006 and the fiscal year ended October 31, 2005 were as follows (in thousands):
<Table>
<Caption>
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31, 2005
-------------- ----------------
(UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class..................................... $ 3,518 $ 909
PlanAhead Class......................................... 11,426 1,111
Service Class........................................... 230 --
AMR Class............................................... 14,950 11,555
LONG-TERM CAPITAL GAIN
Institutional Class..................................... 7,576 --
PlanAhead Class......................................... 25,749 --
Service Class........................................... 497 --
AMR Class............................................... 29,288 --
------- -------
TOTAL DISTRIBUTIONS PAID............................ $93,234 $13,575
------- -------
</Table>
As of April 30, 2006, the components of distributable earnings were as
follows (in thousands):
<Table>
Cost basis of investments for federal income tax purposes... $2,668,611
Unrealized appreciation..................................... 373,305
Unrealized depreciation..................................... (24,025)
----------
Net unrealized appreciation/(depreciation).................. 349,280
Undistributed ordinary income............................... 28,884
Undistributed long-term gain/(loss)......................... 63,464
----------
Distributable earnings...................................... $ 441,628
==========
</Table>
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gains/(losses) on certain derivative instruments, book
amortization for premiums, and the realization for tax purposes of unrealized
gains/(losses) on investments in passive foreign investment companies.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences that have been reclassified as of April 30, 2006 (in thousands):
<Table>
Paid-in-capital............................................. $ 7
Undistributed net investment income......................... (167)
Accumulated net realized gain (loss)........................ 160
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency.................... --
</Table>
- --------------------------------------------------------------------------------
18
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended April 30, 2006 (excluding
short-term investments) are as follows (in thousands):
<Table>
Purchases................................................... $1,280,245
Proceeds from sales......................................... $ 279,555
</Table>
A summary of the Fund's direct transactions in Affiliated Funds for the six
months ended April 30, 2006 is set forth below (in thousands):
<Table>
<Caption>
OCTOBER 31, 2005 APRIL 30, 2006
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------- ------------------- ---------- ---------- -------------------
Select Fund.............................. $163,848 $1,906,590 $1,861,372 $209,066
</Table>
5. SECURITIES LENDING
The Fund may lend its securities to qualified financial institutions, such
as certain broker-dealers, to earn additional income. The borrowers are required
to secure their loans continuously with collateral in an amount at least equal
to the fair value of the securities loaned, initially in an amount at least
equal to 102% of the fair value of domestic securities loaned and 105% of the
fair value of international securities loaned. Collateral is marked to market
and monitored daily. To the extent that a loan is collateralized by cash, such
collateral shall be invested by the securities lending agent (the "Agent") in
short-term instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and diversification
requirements.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and the Agent and is recorded as income for the Fund. To the
extent that a loan is secured by non-cash collateral, brokers pay the Fund
negotiated lenders' fees, which are divided between the Fund and the Agent and
are recorded as securities lending income for the Fund. The Fund also continues
to receive income on the securities loaned, and any gain or loss in the market
price of securities loaned that may occur during the term of the loan.
Risks to the Fund in securities lending transactions are that the borrower
may not provide additional collateral when required or return the securities
when due, and that the value of the short-term investments will be less than the
amount of cash collateral required to be returned to the borrower.
At April 30, 2006, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
<Table>
<Caption>
MARKET VALUE OF
SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL
- ------------------ ------------------- ---------------
$178,867 $ -- $183,405
</Table>
Cash collateral is invested in the Cash Trust and the Select Fund. These
amounts have been included as investments in the Schedule of Investments and
Statement of Assets and Liabilities. Income earned on these investments is
reported as Income derived from securities lending in the Statement of
Operations.
- --------------------------------------------------------------------------------
19
AMERICAN BEACON LARGE CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Non-cash collateral received by the Fund may not be sold or repledged;
therefore, non-cash collateral is not included on the Fund's Schedule of
Investments or Statement of Assets and Liabilities.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund (dollars and shares in thousands):
Six Months Ended April 30, 2006
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- ----------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------- ------ ------- ------- ---------
Shares sold.............. 16,729 $358,320 45,338 $ 934,752 666 $13,719 1,656 $ 35,273
Reinvestment of
dividends.............. 439 9,253 1,715 34,642 36 727 2,125 44,238
Shares redeemed.......... (2,315) (49,783) (6,206) (128,680) (133) (2,739) (7,148) (151,002)
------ -------- ------ --------- ------ ------- ------- ---------
Net increase (decrease)
in shares
outstanding............ 14,853 $317,790 40,847 $ 840,714 569 $11,707 (3,367) $ (71,491)
====== ======== ====== ========= ====== ======= ======= =========
</Table>
Year Ended October 31, 2005
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- ----------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ --------- ------ ------- ------- ---------
Shares sold............. 8,194 $167,141 25,447 $ 500,989 589 $11,617 12,849 $ 256,467
Reinvestment of
dividends............. 25 496 58 1,105 -- -- 592 11,555
Shares redeemed......... (1,299) (26,180) (2,332) (45,952) (13) (261) (11,251) (227,483)
------ -------- ------ --------- ------ ------- ------- ---------
Net increase in shares
outstanding........... 6,920 $141,457 23,173 $ 456,142 576 $11,356 2,190 $ 40,539
====== ======== ====== ========= ====== ======= ======= =========
</Table>
- --------------------------------------------------------------------------------
20
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
21
AMERICAN BEACON LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------
2006 2005 2004 2003 2002 2001(B D)
----------- -------- ------- ------- ------- ---------
(UNAUDITED)
Net asset value, beginning of period.............. $ 21.00 $ 18.23 $ 15.62 $ 12.55 $ 14.51 $ 15.83
-------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)(A C).............. 0.17 0.28 0.26 0.25(F) 0.27 0.28
Net gains (losses) on securities (both realized
and unrealized)(C)............................ 2.30 2.74 2.62 3.11(F) (1.76) (0.61)
-------- -------- ------- ------- ------- -------
Total income (loss) from investment operations.... 2.47 3.02 2.88 3.36 (1.49) (0.33)
-------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income........... (0.26) (0.25) (0.27) (0.29) (0.30) (0.50)
Distributions from net realized gains on
securities.................................... (0.76) -- -- -- (0.17) (0.49)
-------- -------- ------- ------- ------- -------
Total distributions............................... (1.02) (0.25) (0.27) (0.29) (0.47) (0.99)
-------- -------- ------- ------- ------- -------
Net asset value, end of period.................... $ 22.45 $ 21.00 $ 18.23 $ 15.62 $ 12.55 $ 14.51
======== ======== ======= ======= ======= =======
Total return...................................... 12.10%(G) 16.64% 18.59% 27.30% (10.83)% (2.21)%
======== ======== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)....... $548,403 $201,111 $48,451 $23,512 $21,589 $10,081
Ratios to average net assets (annualized):
Expenses, net of waivers(C)................... 0.60% 0.60% 0.66% 0.66% 0.61% 0.64%
Expenses, before waivers(C)................... 0.60% 0.60% 0.66% 0.66% 0.61% 0.64%
Net investment income, net of waivers(C)...... 1.87% 1.58% 1.49% 1.88% 1.82% 1.76%
Net investment income, before waivers(C)...... 1.87% 1.58% 1.49% 1.88% 1.82% 1.76%
Portfolio turnover rate(E)..................... 14%(G) 25% 29% 27% 34% 60%
<Caption>
PLANAHEAD CLASS
------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------
2006 2005 2004 2003
----------- -------- ------- -------
(UNAUDITED)
Net asset value, beginning of period.............. $ 20.16 $ 17.54 $ 15.05 $ 12.09
---------- -------- ------- -------
Income from investment operations:
Net investment income (loss)(A C).............. 0.16 0.27 0.23 0.22(F)
Net gains (losses) on securities (both realized
and unrealized)(C)............................ 2.19 2.58 2.49 2.99(F)
---------- -------- ------- -------
Total income (loss) from investment operations.... 2.35 2.85 2.72 3.21
---------- -------- ------- -------
Less distributions:
Dividends from net investment income........... (0.25) (0.23) (0.23) (0.25)
Distributions from net realized gains on
securities.................................... (0.76) -- -- --
---------- -------- ------- -------
Total distributions............................... (1.01) (0.23) (0.23) (0.25)
---------- -------- ------- -------
Net asset value, end of period.................... $ 21.50 $ 20.16 $ 17.54 $ 15.05
========== ======== ======= =======
Total return...................................... 11.98%(G) 16.33% 18.26% 26.99%
========== ======== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)....... $1,439,537 $526,357 $51,489 $21,331
Ratios to average net assets (annualized):
Expenses, net of waivers(C)................... 0.85% 0.86% 0.94% 0.95%
Expenses, before waivers(C)................... 0.85% 0.86% 0.94% 0.95%
Net investment income, net of waivers(C)...... 1.63% 1.30% 1.21% 1.57%
Net investment income, before waivers(C)...... 1.63% 1.30% 1.21% 1.57%
Portfolio turnover rate(E)..................... 14%(G) 25% 29% 27%
</Table>
- ---------------
(A) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share for the Institutional, PlanAhead and AMR Classes.
(B) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed
management of the Large Cap Value Fund's assets previously managed by
Merrill Lynch Investment Managers, L.P.
(C) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Large Cap Value Portfolio through February 28,
2002.
(D) Metropolitan West Capital Management, LLC replaced Independence Investment
LLC as investment advisor to the Large Cap Value Fund on December 1, 2000.
(E) The Large Cap Value Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(F) For the year ended October 31, 2003, the net investment income and net
gains (losses) on securities (both realized and unrealized) has been
restated from 0.20 and 3.16, respectively for Institutional Class and 0.10
and 3.11, respectively for PlanAhead Class.
(G) Not annualized.
(H) Annualized.
(I) Portfolio turnover rate is for the period from November 1, 2004 through
October 31, 2005.
- --------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
<Table>
<Caption>
SERVICE CLASS AMR CLASS
PLANAHEAD CLASS ------------------------ -----------
----------------------- SIX MONTHS SIX MONTHS
YEAR ENDED OCTOBER 31, ENDED MAY 31 TO ENDED
----------------------- APRIL 30, OCTOBER 31, APRIL 30,
2002 2001(B D) 2006 2005 2006
-------- ------------ ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
$ 14.00 $ 15.40 $ 20.13 $ 19.33 $ 20.78
------- ------- ------- ------- --------
0.25 0.26 0.20 0.01 0.19
(1.74) (0.62) 2.12 0.79 2.28
------- ------- ------- ------- --------
(1.49) (0.36) 2.32 0.80 2.47
------- ------- ------- ------- --------
(0.25) (0.55) (0.26) -- (0.29)
(0.17) (0.49) (0.76) -- (0.76)
------- ------- ------- ------- --------
(0.42) (1.04) (1.02) -- (1.05)
------- ------- ------- ------- --------
$ 12.09 $ 14.00 $ 21.43 $ 20.13 $ 22.20
======= ======= ======= ======= ========
(11.13)% (2.47)% 11.86%(G) 4.14%(G) 12.25%(G)
======= ======= ======= ======= ========
$15,941 $12,280 $24,537 $11,604 $831,407
0.93% 0.89% 1.09% 1.14%(H) 0.34%
0.93% 0.89% 1.10% 1.77%(H) 0.34%
1.53% 1.54% 1.42% 1.72%(H) 2.23%
1.53% 1.54% 1.42% 1.09%(H) 2.23%
34% 60% 14%(G) 25%(I) 14%(G)
<Caption>
AMR CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2005 2004 2003 2002 2001(B D)
-------- -------- -------- -------- ---------
$ 18.02 $ 15.44 $ 12.40 $ 14.34 $ 15.75
-------- -------- -------- -------- --------
0.31 0.30 0.29 0.31 0.34
2.73 2.58 3.06 (1.75) (0.63)
-------- -------- -------- -------- --------
3.04 2.88 3.35 (1.44) (0.29)
-------- -------- -------- -------- --------
(0.28) (0.30) (0.31) (0.33) (0.63)
-- -- -- (0.17) (0.49)
-------- -------- -------- -------- --------
(0.28) (0.30) (0.31) (0.50) (1.12)
-------- -------- -------- -------- --------
$ 20.78 $ 18.02 $ 15.44 $ 12.40 $ 14.34
======== ======== ======== ======== ========
16.95% 18.89% 27.64% (10.62)% (1.98)%
======== ======== ======== ======== ========
$848,219 $696,206 $598,869 $511,287 $654,239
0.35% 0.39% 0.36% 0.36% 0.36%
0.35% 0.39% 0.36% 0.36% 0.36%
1.87% 1.79% 2.13% 2.06% 2.09%
1.87% 1.79% 2.13% 2.06% 2.09%
25% 29% 27% 34% 60%
</Table>
- --------------------------------------------------------------------------------
23
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(Unaudited)
- --------------------------------------------------------------------------------
RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS
At its February 17, 2006 meeting, the Board of Trustees ("Board")
considered the renewal of the existing Management Agreement between the Manager
and the American Beacon Funds (the "Funds") and each Investment Advisory
Agreement between the Manager and the subadvisors, on behalf of the Funds. In
preparation for the Board's consideration to renew these Agreements, the Board
and its Investment Committee undertook steps to gather and consider information
furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager and each subadvisor. In addition,
the Board's Investment Committee worked with Lipper to obtain relevant
comparative information regarding the performance, fees and expenses of the
Funds. The Investment Committee held separate meetings on December 8, 2005,
February 8, 2006 and February 17, 2006 to consider the information provided by
Lipper. Further, the Board took into consideration information furnished for the
Board's review and consideration throughout the year at regular Board and
Investment Committee meetings, as well as information specifically prepared in
connection with the renewal process.
The Trustees considered, among other materials, responses by the Manager
and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or any
other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements as well as Parts I and II of its Form ADV;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including the
results of any recent regulatory examination or independent audit;
- a comparison of the performance of that portion of Fund assets managed by
each firm with performance of other similar accounts managed by the firm,
including a discussion of relative performance versus a peer group
average and any remedial measures if the firm's performance was
materially below that of the peer group;
- a cost/profitability analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to the Funds,
if available;
- an analysis of compensation, including a comparison with fees charged to
other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of any other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise concerns
that the firm would be unable to continue providing the same scope and
quality of services to the Funds;
- --------------------------------------------------------------------------------
24
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a description of the scope of portfolio management services provided to
the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year;
- a description of the basis upon which portfolio managers are compensated,
including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with respect
to Fund transactions, including the firm's methodology for obtaining the
most favorable execution and the use of any affiliated broker-dealers;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the firm;
- a summary of any material changes to the firm's compliance program with
regard to federal, state, corporate and Fund requirements;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading policy
and disaster recovery plan, including a description of any material
changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling persons;
and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to appropriate indices,
including comments on the relative performance of each subadvisor and
each Fund versus comparable indices;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and whether (and if so, why) such subadvisor
should have its contract renewed;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- a table detailing the Manager's profitability with respect to each Fund;
- an analysis of any material complaints received from Fund shareholders;
- a description of the Manager's securities lending practices and the fees
received from such practices;
- a description of the portfolio turnover rate and average execution costs
for each Fund and each subadvisor to a Fund;
- --------------------------------------------------------------------------------
25
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a discussion of whether the Manager receives, with respect to trade
execution for the Funds, other special compensation, including any
payment for order flow; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of each Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds, and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund, the class used for comparative purposes was the
class with the longest performance history, which in most cases is the
Institutional Class. References below to each Fund's Lipper peer group are to
the group of comparable mutual funds included in the analysis provided by
Lipper.
The Trustees also received a memorandum from their legal counsel detailing
the Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered
at its February 2006 meeting. The Board did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to the various factors.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered the
best interests of each Fund separately. In addition, while the Management
Agreement and the Investment Advisory Agreements for all of the Funds were
considered at the same Board meeting, the Board considered each Fund's
investment management and subadvisory relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost
for providing the services and the profitability of the advisory business to the
Manager or subadvisor; (4) the extent to which economies of scale have been
taken into account in setting the fee schedule; and (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors. The Trustees
posed questions to various management personnel of the Manager regarding certain
key aspects of the material submitted in support of the renewal.
Nature, Extent and Quality of Services
With respect to the renewal of the Management Agreement, the Board
considered: the Manager's ability to retain key investment personnel and to
provide consistent performance and an active client service program; the
Manager's goal to provide consistent above average long-term performance at low
cost; the continuing efforts by the Manager to add new series so as to enhance
the Funds' product line; the Manager's record in building improved compliance,
control and credit functions that reduce risks to the Funds; the addition of
personnel to manage the Funds, promote
- --------------------------------------------------------------------------------
26
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
sales and improve services; and the active role played by the Manager in
monitoring and, as appropriate, recommending replacements for the investment
subadvisors and master portfolios. Based on this information, the Board
concluded that the nature, extent and quality of the management and advisory
services provided by the Manager and each subadvisor were appropriate for each
Fund and, thus, supported a decision to renew the Management and each Investment
Advisory Agreement.
Investment Performance
The Board evaluated the comparative information provided by Lipper and the
Manager regarding each Fund's investment performance relative to its benchmark
index(es) and peer group. The Board also considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
A discussion regarding the Board's considerations with respect to the Large Cap
Value Fund's performance appears below under "Additional Considerations and
Conclusions with Respect to the Large Cap Value Fund."
Cost of Services and Profits Realized
In analyzing the cost of services and profitability of the Manager in
connection with its investment advisory services to a Fund, the Board considered
the Manager's operations and low cost structure. The Board noted that the
Manager proposed to continue most of the expense waivers and reimbursements that
were in place for each applicable Fund's 2005 fiscal year. The Board also noted
that each sub-advised Fund pays the Manager the amounts due to its subadvisors,
and the Manager remits these amounts directly to the applicable subadvisors. The
Board considered that the Manager receives service and administrative fees to
compensate the Manager for providing administrative services to the Funds and to
compensate third-party administrators and broker-dealers for services to Fund
shareholders. In addition, the Board considered that the Manager receives
management fees for overseeing the securities lending relationships on behalf of
various Funds.
In analyzing the cost of services and profitability of each subadvisor in
connection with its investment advisory services to a Fund, the Board considered
that, in many cases, the Manager has negotiated the lowest subadvisory fee a
subadvisor charges for any comparable client accounts. The Board gave less
weight to profitability considerations or did not view this data as imperative
to its deliberations given the arms-length nature of the relationship between
the Manager and the subadvisors with respect to the negotiation of subadvisory
fees.
A discussion regarding the Board's considerations with respect to the Large
Cap Value Fund's fee rates is set forth below under "Additional Considerations
and Conclusions with Respect to the Large Cap Value Fund."
Economies of Scale
In considering the reasonableness of the management and investment advisory
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. In this regard, the Board noted that, in many
cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The
Board also noted, where applicable, for purposes of determining the investment
advisory fee charged to
- --------------------------------------------------------------------------------
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
the Funds, the fee schedule to each Investment Advisory Agreement specifies that
all other assets managed by a subadvisor on behalf of AMR Corporation and its
pension plans shall be considered. Thus, the Funds are able to receive
additional breakpoint benefits resulting from the subadvisor's management of a
larger pool of assets. With respect to the management fee, the Board
acknowledged the Manager's low cost structure and the increasing costs of
personnel, technology and operations. Based on these considerations, the Board
concluded that the Funds' fee structures are reasonably designed to pass on
economies of scale to Fund shareholders.
Benefits to be Derived from the Relationship with the Funds
The Board considered the "fall-out" or ancillary benefits that accrue to
the Manager and/or the subadvisors as a result of the advisory relationships
with the Funds, including greater exposure in the marketplace with respect to
the Manager's or subadvisor's investment process and expanding the level of
assets under management by the Manager and the subadvisors. The Board noted that
the Manager and the subadvisors may not direct the Funds' brokerage transactions
to certain brokers to obtain research and other services and that the Funds
participate in a brokerage recapture program. After consideration of this
information, the Board concluded that the potential benefits accruing to the
Manager and the subadvisors by virtue of their relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE LARGE CAP VALUE
FUND
In considering the renewal of the Management Agreement and each Investment
Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 1st quintile for the one-, two-, three-, four- and five-year periods and
the 2nd quintile for the ten-year period compared to the returns of a peer group
of mutual funds identified by Lipper as having an investment objective similar
to the Fund; (2) the Fund's total return performance exceeded the Lipper
Multi-Cap Value Fund Index for all relevant periods tracked by Lipper; and (3)
the portion of Fund assets allocated to Barrow, Hanley, Mewhinney & Strauss,
Inc., Brandywine Asset Management, LLC ("Brandywine"), Hotchkis and Wiley
Capital Management, LLC ("Hotchkis"),and Metropolitan West Capital Management,
LLC ("MetWest Capital") outperformed the Fund's benchmark index for all relevant
periods.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
and actual management fees (including administrative fees) were in the 1st
quintile compared to the expenses and fees of a peer group of similar funds
classified by Lipper, where the 1st quintile represents the lowest fees or
expenses among the group; (2) the Manager contractually agreed to continue to
waive fees and/or reimburse expenses to the extent necessary to maintain a
competitive total expense ratio for the Fund's Service Class; (3) Brandywine and
MetWest Capital represented that they do not charge a lower fee rate for
comparable client services, while Hotchkis represented that it does not provide
similar services to any comparable accounts; and (4) the fee schedules of each
subadvisor include breakpoints, which reduce fee rates as the assets of the Fund
increase.
- --------------------------------------------------------------------------------
28
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and the
subadvisors under the Agreements are fair and reasonable; (2) concluded that the
profits to the Manager are reasonable in light of the quality of services
provided to the Fund, including the oversight of the Fund's subadvisors; (3)
determined that the Fund and its shareholders would benefit from the Manager's
and subadvisors' continued management of the Fund; and (4) approved the renewal
of the Agreements with respect to the Fund.
- --------------------------------------------------------------------------------
29
(AMERICAN BEACON FUNDS LOGO)
- --------------------------------------------------------------------------------
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts, if you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request.
If you invest in the Fund through a financial institution, you may be able to
receive the Fund's regulatory mailings, such as the Prospectus, Annual Report
and Semi-Annual Report, by e-mail. If you are interested in this option, please
go to www.icsdelivery.com and search for your financial institution's name or
contact your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
<Table>
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american-beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
</Table>
- --------------------------------------------------------------------------------
<Table>
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450
AMR Class(SM) Fort Worth, TX 76155
Call (800) 345-2345
PlanAhead Class(R) and Service Class
Call (800) 388-3344
</Table>
- --------------------------------------------------------------------------------
<Table>
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in each A description of the policies and procedures the Fund uses
semi-annual and annual report, the Fund files a complete to determine how to vote proxies relating to portfolio
schedule of its portfolio holdings with the Securities and securities is available in the Fund's Statement of
Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge
third fiscal quarters. The Fund's Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website
the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. The Fund's proxy voting record for the most
reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on
Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Fund's Forms N-PX are available on the SEC's
regarding the operation of the SEC's Public Reference Room website at www.sec.gov. The Fund's proxy voting record may
may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009.
schedule of the Fund's portfolio holdings is also available
on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal
quarter.
</Table>
FUND SERVICE PROVIDERS:
<Table>
CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ERNST & YOUNG LLP FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri Chicago, Illinois Portland, Maine
</Table>
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds is a service mark of AMR Corporation.
American Beacon Large Cap Value Fund is a service mark of American Beacon
Advisors, Inc.
SAR 04/06
537387
G U I D A N C E | V I S I O N | E X P E R I E N C E
[AMERICAN BEACON FUNDS LOGO]
SEMI-ANNUAL REPORT
[PHOTO]
APRIL 30, 2006
SMALL CAP VALUE FUND
About American Beacon
- --------------------------------
Since 1986, American Beacon
Advisors has offered a variety
of products and investment
advisory services to numerous
institutional and retail
clients, including a variety of
mutual funds, corporate cash
management, and separate account
management.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations,
financial planners, and other
institutional investors. With
American Beacon Advisors, you
can put the experience of a
multi-billion dollar asset
management firm to work for your
company.
<Table>
<Caption>
Contents
-----------------------------------------------
President's Message........... 1
Market and Performance
Overview................... 2
Schedule of Investments....... 6
</Table>
<Table>
Additional Information...............Back Cover
</Table>
Any opinions herein, including forecasts, reflect our judgement as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
Investing in the securities of small capitalization companies involves greater
risk and the possibility of greater price volatility than investing in larger
capitalization and more established companies.
American Beacon Funds April 30, 2006
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
Iam pleased to present you
with the Semi-Annual
Report for the American
Beacon Small Cap Value
Fund for the six months
ended April 30, 2006.
During this time, the Dow
Jones Industrial Average
posted gains of 10.22%,
the S&P 500 Index
increased by 9.64%, while
the Russell 2000 Index
returned 18.91%.
The Institutional
Class of the Small Cap
Value Fund produced
returns of 15.85% during
the six months and 26.30%,
28.24%, 18.63% for the one-year, three-year, and five-year time periods,
respectively.
I hope that the enclosed market overviews, portfolio listings, and detailed
financial data are helpful to you. As always, we welcome the opportunity to
serve your financial needs. To obtain further details about the American Beacon
Funds family or access your account information, please visit our web site at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Small Cap Value Fund.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President, American Beacon Funds
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the performance
data quoted. To obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009.
1
DOMESTIC EQUITY MARKET OVERVIEW
- --------------------------------------------------------------------------------
Stocks continued their healthy climb despite high energy prices. Following a
lackluster finish in 2005, U.S. stock prices climbed steadily during the first
four months of 2006, ending near a five-year high. Despite continuing worries
over rising energy costs and the possibility of inflation, investors' confidence
remained firm.
Small-cap stocks in the U.S. continued to outperform their large-cap
counterparts, as has been the general trend since the bear market ended in 2002.
Value outperformed growth for the period, also continuing a multi-year trend.
International stocks continued to produce outstanding gains most notably in
Japan and emerging markets.
All eyes remained on the Federal Reserve Board ("the Fed") as its measured
pace of raising short-term rates continued. On March 28, the Fed raised its
target for the federal funds rate to 4.75%, continuing its gradual tightening of
monetary policy to defuse the threat of inflation. This was the Fed's 15th
consecutive rate increase since June 2004. (Shortly after the close of the
fiscal period, the Fed extended its streak of rate increases to 16, raising its
target to 5.00%.)
Because the Fed's actions affect the economy with a lag, investors are
watching economic measures more closely -- either for evidence that higher rates
are slowing the economy, or for evidence that the economy can continue to grow
with modest inflation while absorbing higher rates (the so-called "goldilocks"
scenario). Heightened focus on the Fed and the economy has led to increased
volatility of equity returns, as daily market swings of 1% or more have become
more common.
While the ultimate effect of the Fed tightening cycle remains to be seen,
its effect on stock market returns will be reflected in the earnings growth and
valuation of the overall market. At the most basic level, market returns are
comprised of three components: earnings growth, the valuation of those earnings
(i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield.
The current environment for each component of return warrants some discussion.
EARNINGS: Earnings growth for the six months ended April 30 (and the past
several years) has been robust and well above the long-term average. While there
has been some deceleration over the six months, double-digit growth has
continued longer than most expected. Looking forward, earnings growth from the
financial sector may slow as higher short-term borrowing costs crimp earnings.
Additionally, the energy sector has been the largest contributor to earnings
growth and could see an earnings slowdown if energy prices pause or decline.
VALUATION: While P/E ratios (the price of a stock divided by its
anticipated earnings per share) have compressed significantly this decade, the
P/E of the S&P 500, based on reported earnings, remains at 17 times earnings.
This compares with a long-term average (since 1926) of 15 times earnings. Higher
interest rates typically reduce the multiple that investors are willing to pay
for stocks. Most importantly, however, the contribution of P/E expansion to
market returns over long periods is small and is dwarfed in importance by
earnings growth and dividend yield.
DIVIDENDS: Returning capital to shareholders via dividends continues to
grow in popularity. Favorable tax treatment, demographic trends, and investor
pressure have all been supportive of higher dividend payouts. However, because
earnings growth has been more robust, the percentage of earnings paid out in
dividends is near an all-time low. This should be supportive of higher dividend
payouts over time. Dividends will continue to be a critical component of overall
return.
Overall, the outlook for stock returns appears mixed. On the bullish side,
the economy remains resilient, corporate earnings are strong, and profit margins
remain high. Investor concerns include a slowing economy, perhaps induced by
higher interest rates hurting the housing sector and consumer spending.
Additionally, we have enjoyed the longest bull market since 1982 and the second
longest period ever without a 10% correction, recent market weakness and
volatility notwithstanding.
Regardless of future trends in the economy or markets, stock selection will
remain the key driver of performance going forward. This is especially true in
the current environment where, thanks to multi-year performance advantages of
small-cap over large-cap and value over growth, the lines between various styles
are less defined. So, stock selection may be more important than style or market
cap going forward.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Small Cap Value Fund returned 15.85% for the
six months ended April 30, 2006, lagging the Russell 2000 Value Index ("Index")
return of 17.52% and the Lipper Small-Cap Value Funds Index return of 17.44% for
the same period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
-------------------------------------
PERIODS ENDED 4/30/06
-------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEP.
--------- ------ ------- ------
Institutional Class(1).... 15.85% 26.30% 18.63% 15.95%
PlanAhead Class(1,2)...... 15.72% 25.96% 18.26% 15.66%
AMR Class(1,2)............ 16.02% 26.65% 18.94% 16.27%
Service Class(1,3)........ 15.55% 25.63% 18.06% 15.53%
Lipper Small-Cap Value
Funds Index.............. 17.44% 30.09% 15.77% 14.12%
Russell 2000 Value
Index.................... 17.52% 30.85% 15.25% 13.91%
</Table>
* Not Annualized
Russell 2000 (R) Value Index is a service mark of the Frank Russell Company. The
Russell 2000 Value Index is an unmanaged index of those stocks in the Russell
2000 Index with below-average price-to-book ratios and below-average forecasted
growth values.
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the since inception period represents
the total returns achieved by the Institutional Class from 12/31/98 up to
3/1/99, the inception date of the PlanAhead and AMR Classes, and the returns
of the PlanAhead and AMR Classes since inception of these Classes. Expenses
of the PlanAhead Class are higher than those of the Institutional Class. As
a result, total returns shown may be higher than they would have been had
the PlanAhead Class been in existence since 12/31/98. Expenses of the AMR
Class are lower than those of the Institutional Class. As a result, total
returns shown may be lower than they would have been had the AMR Class been
in existence since 12/31/98.
3. Fund performance for the five-year and since inception
periods represents the total returns achieved by the Institutional Class
from 12/31/98 up to 3/1/99, the returns of the PlanAhead Class from 3/1/99
up to 5/1/03 (the inception date of the Service Class), and the returns of
the Service Class since its inception. Expenses of the Service Class are
higher than those of the Institutional and PlanAhead Classes. As a result,
total returns shown may be higher than they would have been had the Service
Class been in existence since 12/31/98.
The Fund lagged the Index due to stock selection, as sector allocation
added slightly to the Fund's relative performance.
Holdings in the Financials sector were a significant source of excess
performance, but not enough to offset negative stock selection in the Materials,
Consumer Discretionary, and Industrials sectors. Top contributors in Financials
included American Financial Group (up 30.4%), Hanover Insurance Group (up
39.7%), and Piper Jaffray (up 103.5%). In the Materials sector, positions in
Worthington Industries (down 0.2%) and Lubrizol (up 6.2%) were the major
detractors. Lear (down 21.0%) in the Consumer Discretionary sector and Deluxe
(down 26.5%) in Industrials were responsible for a large portion of the
underperformance in those sectors.
The Fund's only significant underweighting was in the Financials sector,
one of the poorer performing sectors of the Index. The underweighting generated
positive relative performance, but was somewhat offset by the negative impact of
an overweight in the Utilities sector, the worst performing sector of the Index.
The sub-advisors continue to focus on stock selection, to uncover
investment opportunities that should benefit the Fund's performance over the
longer-term.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
American Financial Group, Inc. 1.2%
Flowserve Corp. 1.0%
Protective Life Corp. 0.9%
AGCO Corp. 0.8%
Reinsurance Group of America, Inc. 0.8%
Ingram Micro, Inc. 0.8%
Lear Corp. 0.8%
Valassis Communications, Inc. 0.8%
The Men's Wearhouse, Inc. 0.7%
The Hanover Insurance Group, Inc. 0.7%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 23.8%
Consumer Discretionary 20.6%
Industrials 18.4%
Information Technology 10.9%
Utilities 8.0%
Materials 6.7%
Energy 4.5%
Consumer Staples 3.9%
Health Care 3.1%
Telecommunication Services 0.1%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The examples below are
intended to help you understand the ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
11/1/05 4/30/06 11/01/05-4/30/06
--------- ------- ----------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,158.53 $4.42
Hypothetical $1,000.00 $1,020.70 $4.14
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,157.16 $5.72
Hypothetical $1,000.00 $1,019.49 $5.35
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,155.50 $7.22
Hypothetical $1,000.00 $1,018.09 $6.76
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,160.21 $2.98
Hypothetical $1,000.00 $1,022.04 $2.79
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.83%, 1.07%, 1.35%, 0.56%, for the
Institutional, PlanAhead, Service, and AMR Classes, respectively, multiplied
by the average account value over the period, multiplied by the number
derived by dividing the number of days in the most recent fiscal half-year
(181) by days in the year (365) to reflect the half-year period.
5
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 94.06%
CONSUMER DISCRETIONARY - 19.40%
AUTO COMPONENTS - 2.77%
American Axle & Manufacturing
Holdings, Inc.+............. 534,300 $ 9,409
ArvinMeritor, Inc. ........... 686,300 11,413
Bandag, Inc.+................. 85,100 3,414
Bandag, Inc., A Shares........ 3,600 123
BorgWarner, Inc. ............. 256,600 15,583
Commercial Vehicle Group,
Inc.(+)+.................... 240,300 4,869
Gentex Corp.(+)............... 235,000 3,445
Keystone Automotive
Industries, Inc.(+)+........ 79,500 3,284
Lear Corp.+................... 1,095,000 25,820
Modine Manufacturing Co.(+)... 142,400 4,131
Tenneco, Inc.(+)+............. 125,500 3,018
TRW Automotive Holdings
Corp.(+).................... 88,400 1,961
Westinghouse Air Brake
Technologies Corp.+......... 106,900 3,905
----------
90,375
----------
AUTOMOBILES - 0.13%
Winnebago Industries, Inc.+... 146,900 4,326
----------
DISTRIBUTORS - 0.10%
Spectrum Brands, Inc.(+)+..... 194,500 3,219
----------
HOTELS, RESTAURANTS & LEISURE - 1.94%
CBRL Group, Inc.+............. 150,900 6,143
CEC Entertainment, Inc.(+)+... 215,000 7,547
Jack in the Box, Inc.(+)+..... 121,400 5,075
Kerzner International
Ltd.(+)+.................... 113,400 8,861
Landry's Restaurants, Inc.+... 316,200 11,216
Live Nation, Inc.(+).......... 170,700 3,243
Lodgian, Inc.(+).............. 567,100 7,565
Magna Entertainment
Corp.(+)+................... 754,100 4,645
Ruby Tuesday, Inc.+........... 187,500 5,582
Sunterra Corp.(+)+............ 252,000 3,359
----------
63,236
----------
HOUSEHOLD DURABLES - 5.34%
American Greeting Corp.+...... 622,400 14,016
Beazer Homes USA, Inc.+....... 217,600 12,540
Blyth, Inc. .................. 407,500 8,374
Ethan Allen Interiors,
Inc.+....................... 329,600 14,796
Furniture Brands
International, Inc.+........ 716,500 16,479
Helen of Troy Ltd.(+)+........ 289,800 5,987
HNI Corp. .................... 30,700 1,623
Hovnanian Enterprises,
Inc.(+)+.................... 154,000 6,125
M.D.C. Holdings, Inc.+........ 153,873 8,891
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Matthews International
Corp. ...................... 68,000 $ 2,366
Meritage Homes Corp.(+)+...... 94,900 6,224
Standard Pacific Corp.+....... 337,800 10,712
Steiner Leisure Ltd.(+)+...... 259,300 3,957
Technical Olympic USA, Inc.+.. 248,800 5,225
Tempur-Pedic International,
Inc.(+)+.................... 526,700 8,317
The Toro Co. ................. 95,800 4,737
Tupperware Corp.+............. 895,300 18,891
WCI Communities, Inc.(+)+..... 776,300 19,897
William Lyon Homes, Inc.(+)+.. 17,600 1,761
The Yankee Candle Company,
Inc.+....................... 106,900 3,222
----------
174,140
----------
INTERNET & CATALOG RETAIL - 0.27%
Insight Enterprises,
Inc.(+)+.................... 301,200 5,955
School Specialty, Inc.(+)+.... 75,600 2,749
----------
8,704
----------
LEISURE EQUIPMENT & PRODUCTS - 0.38%
Brunswick Corp. .............. 277,800 10,895
Polaris Industries, Inc.+..... 33,800 1,619
----------
12,514
----------
MEDIA - 1.01%
Courier Corp.+................ 70,999 3,063
Dow Jones & Company, Inc.+.... 44,000 1,627
Entercom Communications
Corp.+...................... 181,000 4,791
Gray Television, Inc.+........ 67,400 512
Hearst-Argyle Television,
Inc.+....................... 67,400 1,552
Journal Communications,
Inc.+....................... 144,500 1,695
Journal Register Co. ......... 274,150 3,065
Lin TV Corp.(+)............... 102,428 905
Meredith Corp.(+)............. 29,100 1,443
R.H. Donnelley Corp.+......... 45,000 2,526
Scholastic Corp.(+)+.......... 150,500 3,994
Source Interlink Companies,
Inc.(+)+.................... 424,300 4,595
Triple Crown Media, Inc.(+)... 11,460 61
Westwood One, Inc.(+)......... 320,700 3,095
----------
32,924
----------
MULTILINE RETAIL - 0.96%
Big Lots, Inc.(+)+............ 45,375 656
BJ's Wholesale Club,
Inc.(+)+.................... 491,900 15,062
Fred's, Inc.(+)+.............. 519,900 7,377
The Reader's Digest
Association, Inc.(+)........ 92,900 2,422
Tuesday Morning Corp.+........ 309,600 5,867
----------
31,384
----------
SPECIALTY RETAIL - 5.16%
Big 5 Sporting Goods Corp.+... 209,700 3,886
Borders Group, Inc. .......... 602,500 14,219
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
6
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Charming Shoppes, Inc.(+)+.... 417,900 $ 5,746
Claire's Stores, Inc. ........ 291,100 10,252
Foot Locker, Inc. ............ 183,200 4,247
Genesco, Inc.(+)+............. 16,700 690
Group 1 Automotive, Inc.+..... 203,000 11,080
HOT Topic, Inc.(+)+........... 256,200 3,799
The Men's Wearhouse, Inc.+.... 687,300 24,358
OfficeMax, Inc. .............. 220,200 8,522
Pacific Sunwear of
California(+)............... 19,500 454
PETCO Animal Supplies,
Inc.(+)+.................... 199,700 4,373
RadioShack Corp. ............. 250,400 4,257
Regis Corp.+.................. 377,100 13,225
Rent-A-Center, Inc.(+)........ 377,850 10,436
Sonic Automotive, Inc., A
Shares+..................... 501,300 13,545
Stage Stores, Inc.+........... 318,580 9,959
United Auto Group, Inc.+...... 29,900 1,265
United Rentals, Inc.(+)+...... 263,500 9,399
Zale Corp.(+)+................ 593,700 14,635
----------
168,347
----------
TEXTILES & APPAREL - 1.34%
Brown Shoe Company, Inc. ..... 6,450 245
Columbia Sportswear Co.(+)+... 89,368 4,548
Jones Apparel Group, Inc. .... 154,700 5,314
Kellwood Co.+................. 180,400 5,780
Kenneth Cole Productions,
Inc.+....................... 122,800 3,133
K-Swiss, Inc. ................ 72,300 2,073
New York & Co, Inc.(+)+....... 129,400 2,015
The Timberland Co.(+)......... 201,700 6,868
Tommy Hilfiger Corp.(+)+...... 78,200 1,302
The Warnaco Group, Inc.(+)+... 560,500 12,488
----------
43,766
----------
TOTAL CONSUMER
DISCRETIONARY........... 632,935
----------
CONSUMER STAPLES - 3.61%
BEVERAGES - 0.08%
The Boston Beer Company,
Inc.(+)+.................... 93,600 2,525
----------
COMMERCIAL SERVICES - 0.11%
Steiner Leisure Ltd.(+)+...... 81,800 3,527
----------
FOOD & DRUG RETAILING - 0.76%
Agrium, Inc. ................. 638,100 16,476
Pathmark Stores, Inc.(+)+..... 298,400 3,089
Ruddick Corp. ................ 231,600 5,375
----------
24,940
----------
FOOD PRODUCTS - 1.85%
Chiquita Brands International,
Inc.+....................... 227,600 3,692
Del Monte Foods Co. .......... 1,452,500 16,936
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
J&J Snack Foods Corp. ........ 53,800 $ 1,843
The JM Smucker Co.(+)......... 44,200 1,735
Lance, Inc.+.................. 100,110 2,554
Pilgrim's Pride
Corporation(+)+............. 32,200 841
Ralcorp Holdings, Inc.(+)+.... 277,900 10,360
Sanderson Farms, Inc.(+)+..... 70,023 1,856
Sensient Technologies Corp.+.. 494,350 10,159
Smithfield Foods, Inc.(+)..... 389,400 10,475
----------
60,451
----------
PERSONAL PRODUCTS - 0.30%
Chattem, Inc.(+).............. 73,100 2,634
NBTY, Inc.(+)+................ 318,000 7,203
----------
9,837
----------
RETAIL-DRUG STORE - 0.18%
Longs Drug Stores Corp.(+).... 120,700 5,722
----------
TOBACCO - 0.33%
Schweitzer Mauduit
International, Inc. ........ 77,900 1,886
Universal Corp.+.............. 236,800 9,015
----------
10,901
----------
TOTAL CONSUMER STAPLES.... 117,903
----------
ENERGY - 4.19%
ENERGY - 0.22%
Pioneer Drilling Co.(+)....... 437,900 7,098
----------
ENERGY EQUIPMENT & SERVICES - 2.18%
Dril-Quip, Inc.(+)+........... 41,300 2,973
FMC Technologies, Inc.(+)..... 37,500 2,047
Global Industries Ltd.(+)..... 562,000 8,919
Maverick Tube Corp.(+)+....... 166,400 9,056
Oil States International,
Inc.(+)+.................... 325,600 13,144
Tetra Technologies, Inc.(+)+.. 139,350 6,856
Unit Corp.(+)+................ 217,500 12,561
Universal Compression
Holdings, Inc.(+)+.......... 149,900 8,379
Veritas DGC, Inc.(+)+......... 152,200 7,293
----------
71,228
----------
OIL & GAS - 1.79%
Berry Petroleum Co.+.......... 2,900 214
Cimarex Energy Co.+........... 117,400 5,042
Edge Petroleum Corp.(+)+...... 103,700 2,396
Encore Acquisition Co.(+)+.... 406,549 12,457
Energy Partners Ltd.(+)+...... 159,700 4,119
Forest Oil Corp.(+)........... 9,300 340
The Houston Exploration
Co.(+)+..................... 186,700 10,440
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
7
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Pogo Producing Co.+........... 126,000 $ 6,261
Stone Energy Corp.(+)+........ 221,500 10,433
Tsakos Energy Navigation
Ltd.+....................... 172,400 6,617
----------
58,319
----------
TOTAL ENERGY.............. 136,645
----------
FINANCIALS - 22.36%
BANKS - 5.61%
Alabama National Bancorp+..... 32,700 2,252
Anchor BanCorp Wisconsin,
Inc.+....................... 51,138 1,492
Astoria Financial Corp. ...... 115,200 3,608
BancorpSouth, Inc.+........... 354,200 9,078
Bank of Hawaii Corp. ......... 193,600 10,514
BankAtlantic Bancorp, Inc.+... 482,300 7,196
Chemical Financial Corp.+..... 165,531 4,819
Chittenden Corp.+............. 214,125 5,901
Citizens Banking Corp.+....... 141,500 3,700
City National Corp. .......... 30,700 2,240
The Colonial BancGroup,
Inc. ....................... 338,000 8,764
Community Bank System, Inc.+.. 225,800 4,636
Corus Bankshares, Inc.+....... 6,787 454
Cullen/Frost Bankers, Inc. ... 215,200 12,456
Downey Financial Corp.+....... 107,500 7,716
F.N.B. Corp.+................. 236,400 3,967
First Commonwealth Financial
Corp.+...................... 156,600 2,095
First Republic Bank+.......... 87,100 3,791
FirstFed Financial
Corp.(+)+................... 13,000 818
Flushing Financial Corp.(+)+.. 87,700 1,485
Fulton Financial Corp.+....... 111,599 1,836
Greater Bay Bancorp+.......... 79,000 2,182
Independence Community Bank
Corp. ...................... 26,400 1,109
International Bancshares
Corp.+...................... 231,128 6,613
Investors Financial Services
Corp.+...................... 28,200 1,350
Irwin Financial Corp.+........ 3,800 70
MAF Bancorp, Inc.+............ 112,500 4,993
NBT Bancorp, Inc.+............ 154,406 3,368
Pacific Capital Bancorp+...... 22,900 768
PFF Bancorp, Inc.+............ 8,400 288
Provident Bankshares Corp.+... 113,720 3,953
Republic Bancorp, Inc.+....... 565,298 6,484
S&T Bancorp, Inc.+............ 9,364 332
Sky Financial Group, Inc. .... 215,194 5,563
Sterling Bancshares, Inc. .... 146,200 2,421
Sterling Financial Corp. ..... 84,799 2,726
Susquehanna Bancshares,
Inc.+....................... 215,000 5,132
Timberland Bancorp, Inc.+..... 14,800 429
Trustmark Corp.+.............. 340,960 10,709
United Bankshares, Inc.+...... 77,571 2,830
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Washington Federal, Inc. ..... 356,994 $ 8,539
Webster Financial Corp. ...... 258,800 12,151
Westamerica
Bancorporation(+)........... 15,800 808
Wilmington Trust Corp.(+)..... 28,400 1,258
----------
182,894
----------
DIVERSIFIED FINANCIALS - 2.56%
Ace Cash Express, Inc.(+)+.... 197,900 5,343
Affiliated Managers Group,
Inc.(+)+.................... 88,000 8,914
AmeriCredit Corp.(+).......... 33,200 1,005
Asset Acceptance Capital
Corp.(+)+................... 496,100 10,364
Assured Guaranty Ltd. ........ 166,900 4,148
Asta Funding, Inc.+........... 197,500 7,175
CapitalSource, Inc.+.......... 70,030 1,646
Cash America International,
Inc. ....................... 271,300 8,920
Financial Federal Corp.+...... 235,800 6,697
IndyMac Bancorp, Inc.+........ 163,100 7,881
Knight Capital Group,
Inc.(+)..................... 314,800 5,276
MortgageIT Holdings, Inc.+.... 280,500 3,220
Piper Jaffray Co.(+).......... 139,600 9,758
Raymond James Financial,
Inc. ....................... 105,300 3,196
----------
83,543
----------
INSURANCE - 10.39%
21st Century Insurance
Group+...................... 353,400 5,676
Alfa Corp.+................... 78,403 1,320
American Equity Investment
Life Holding Co.+........... 85,800 1,163
American Financial Group,
Inc.+....................... 907,500 40,184
American National Insurance
Co.+........................ 24,717 2,947
AmerUs Group Co.+............. 244,800 14,358
Arch Capital Group Ltd.(+).... 139,000 8,444
Argonaut Group, Inc.(+)+...... 15,007 524
Arthur J Gallagher & Co.+..... 553,900 15,199
Aspen Insurance Holdings
Ltd. ....................... 235,800 5,742
The Commerce Group, Inc. ..... 76,100 4,415
Conseco, Inc.(+)+............. 552,900 13,961
Delphi Financial Group,
Inc.+....................... 336,400 17,624
FBL Financial Group, Inc. .... 235,600 7,928
The First American Corp. ..... 112,700 4,801
Fremont General Corp.+........ 31,700 705
Great American Financial
Resources, Inc.+............ 80,800 1,726
The Hanover Insurance Group,
Inc. ....................... 459,700 24,318
Harleysville Group, Inc. ..... 7,971 239
HCC Insurance Holdings,
Inc.+....................... 248,800 8,332
Hilb Rogal & Hobbs Co.+....... 53,100 2,171
Horace Mann Educators Corp. .. 387,000 6,738
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
8
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Infinity Property and Casualty
Corp.+...................... 157,798 $ 7,076
KMG America Corp.(+)+......... 366,591 3,321
LandAmerica Financial Group,
Inc.+....................... 30,500 2,116
Max Re Capital Ltd. .......... 288,200 7,061
Mercury General Corp.+........ 156,100 8,331
National Western Life
Insurance Co.+.............. 2,500 580
The Navigators Group,
Inc.(+)..................... 179,700 8,502
Odyssey Re Holdings Corp.+.... 394,200 9,480
Ohio Casualty Corp.+.......... 360,840 10,699
The Phoenix Companies, Inc. .. 91,400 1,388
PMA Capital Corp.(+)+......... 110,200 1,078
Protective Life Corp. ........ 577,300 29,096
Quanta Capital Holdings
Ltd.(+)+.................... 265,200 689
Reinsurance Group of America,
Inc.+....................... 541,000 26,022
Scottish Re Group Ltd.+....... 137,400 3,192
StanCorp Financial Group,
Inc. ....................... 220,800 10,894
Stewart Information Services
Corp.+...................... 12,900 557
Triad Guaranty, Inc.(+)+...... 241,000 13,139
United America Indemnity
Ltd.(+)+.................... 300,997 7,146
----------
338,882
----------
INVESTMENT COMPANIES - 0.21%
American Capital Strategies
Ltd. ....................... 194,100 6,759
----------
REAL ESTATE - 3.59%
Aames Investment Corp.+....... 480,800 2,548
Alexandria Real Estate
Equities, Inc. ............. 17,400 1,576
American Financial Realty
Trust....................... 385,400 4,386
Annaly Mortgage Management,
Inc.(+)+.................... 436,500 5,880
Bluegreen Corp.(+)............ 321,300 3,962
Brookfield Homes Corp.+....... 73,070 3,405
Capital Lease Funding,
Inc.+....................... 194,400 2,076
Capital Trust, Inc.+.......... 108,000 3,359
Comstock Homebuilding
Companies, Inc.(+)+......... 147,700 1,376
Corrections Corp of
America(+).................. 54,506 2,446
Eagle Hospitality Properties
Trust, Inc.(+)+............. 196,000 1,762
Education Realty Trust,
Inc.+....................... 170,600 2,545
Equity Inns, Inc.+............ 521,300 8,445
Fieldstone Investment Corp.+.. 408,900 4,702
First Potomac Realty Trust.... 100,500 2,773
Government Properties Trust,
Inc.+....................... 22,900 198
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Health Care Real Estate
Investment Trust, Inc. +.... 46,700 $ 1,625
Innkeepers USA Trust.......... 230,000 3,685
Jameson Inns, Inc.(+)+........ 945,600 2,307
Jones Lang LaSalle, Inc.+..... 91,600 7,764
LaSalle Hotel Properties...... 278,500 12,179
Lexington Corporate Properties
Trust+...................... 464,200 10,008
MI Developments, Inc. ........ 401,800 13,991
Mission West Properties,
Inc. ....................... 222,200 2,644
Redwood Trust, Inc. .......... 86,000 3,652
Strategic Hotel Capital,
Inc. ....................... 195,400 4,432
Thomas Properties Group,
Inc. ....................... 108,500 1,426
Ventas, Inc. ................. 59,800 1,954
----------
117,106
----------
TOTAL FINANCIALS.......... 729,184
----------
HEALTH CARE - 2.86%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.17%
CONMED Corp.(+)+.............. 34,728 758
The Cooper Companies, Inc.+... 28,800 1,579
Encore Medical Corp.(+)+...... 329,600 1,806
Medical Action Industries,
Inc.(+)+.................... 52,900 1,265
----------
5,408
----------
HEALTH CARE PROVIDERS & SERVICES - 2.32%
Amedisys, Inc.(+)+............ 132,100 4,380
AMERIGROUP Corp.(+)........... 8,700 225
Amsurg Corp.(+)+.............. 191,200 4,883
Apria Healthcare Group,
Inc.(+)..................... 427,500 9,362
Kindred Healthcare, Inc.(+)+.. 327,600 7,948
Magellan Health Services,
Inc.(+)+.................... 419,900 17,069
Option Care, Inc.+............ 531,363 7,604
Orchid Cellmark, Inc.(+)+..... 237,449 1,107
Pediatrix Medical Group,
Inc.(+)+.................... 150,400 7,613
RehabCare Group, Inc.(+)+..... 106,900 1,756
Res-Care, Inc.(+)............. 233,400 4,792
Triad Hospitals, Inc.(+)+..... 159,400 6,567
Universal Health Services,
Inc.+....................... 46,000 2,336
----------
75,642
----------
PHARMACEUTICALS - 0.37%
Endo Pharmaceuticals Holdings,
Inc.(+)..................... 54,000 1,698
King Pharmaceuticals,
Inc.(+)..................... 488,700 8,499
Watson Pharmaceuticals,
Inc.(+)..................... 65,100 1,851
----------
12,048
----------
TOTAL HEALTH CARE......... 93,098
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
9
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
INDUSTRIALS - 17.34%
AEROSPACE & DEFENSE - 0.88%
Alliant Techsystems,
Inc.(+)...................... 28,200 $ 2,256
Armor Holdings, Inc.(+)+...... 171,500 10,473
EDO Corp.+.................... 115,800 3,026
Esterline Technologies
Corp.(+)+.................... 209,500 9,285
Herley Industries, Inc.(+)+... 180,800 3,829
----------
28,869
----------
AIR FREIGHT & COURIERS - 0.43%
Ryder Systems, Inc. .......... 266,400 13,893
----------
BUILDING PRODUCTS - 0.72%
ElkCorp+...................... 189,700 5,776
Insituform Technologies,
Inc.(+)+..................... 401,000 10,218
Lennox International Inc. .... 194,800 6,356
Universal Forest Products,
Inc.+........................ 13,500 1,010
----------
23,360
----------
CHEMICALS - 0.18%
Pioneer Companies, Inc.(+)+... 187,400 6,001
----------
COMMERCIAL SERVICES & SUPPLIES - 5.95%
Adesa, Inc.+.................. 175,200 4,469
Allied Waste Industries,
Inc.(+)...................... 156,700 2,219
Bowne & Company, Inc.+........ 750,500 11,790
The Brinks Co. ............... 195,330 9,923
Casella Waste Systems,
Inc.(+)...................... 119,100 1,852
Central Parking Corp.+........ 213,800 3,260
Ceridian Corp.(+)............. 102,000 2,472
Clean Harbors, Inc.(+)+....... 121,800 3,505
Consolidated Graphics,
Inc.(+)...................... 57,500 3,007
Convergys Corp.(+)............ 841,300 16,380
Con-way, Inc.(+).............. 214,700 11,963
CSG Systems International,
Inc.(+)+..................... 234,000 5,916
Deluxe Corp.+................. 430,100 10,254
Electro Rent Corp.(+)+........ 100,600 1,622
John H. Harland Co.+.......... 112,500 4,663
Kelly Services, Inc.+......... 397,300 10,993
Labor Ready, Inc.(+)+......... 150,100 3,967
LECG Corp.(+)+................ 443,500 8,200
McGrath Rentcorp+............. 108,038 2,905
Navigant Consulting,
Inc.(+)+..................... 350,900 7,397
NCO Group, Inc.(+)+........... 227,542 4,881
PHH Corp.(+).................. 277,000 7,723
Sabre Holdings Corp.+......... 837,598 19,340
Sotheby's Holdings(+)......... 42,500 1,275
Spherion Corp.(+)+............ 366,600 3,879
Steelcase, Inc., A
Shares(+).................... 48,400 906
Valassis Communications,
Inc.(+)...................... 836,700 24,490
Waste Connections, Inc.(+)+... 129,700 4,993
----------
194,244
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
CONSTRUCTION & ENGINEERING - 0.63%
Comfort Systems USA, Inc. .... 213,000 $ 3,250
Granite Construction, Inc. ... 141,800 6,574
Infrasource Services,
Inc.(+)+..................... 114,100 2,155
The Shaw Group, Inc.(+)+...... 282,500 8,645
----------
20,624
----------
ELECTRICAL EQUIPMENT - 1.08%
Brady Corp. .................. 314,900 11,327
The Genlyte Group, Inc.(+)+... 75,900 5,230
II-VI, Inc.(+)+............... 212,100 4,594
Regal-Beloit Corp.+........... 247,400 11,544
Thomas & Betts Corp.(+)....... 45,900 2,614
----------
35,309
----------
MACHINERY - 5.34%
AGCO Corp.(+)+................ 1,143,480 27,066
Briggs & Stratton Corp.+...... 394,200 13,300
Circor International, Inc.+... 109,600 3,321
Flowserve Corp.(+)+........... 554,600 31,901
The Greenbrier Companies,
Inc.+........................ 100,700 4,043
Harsco Corp.+................. 163,300 13,611
IDEX Corp. ................... 243,800 12,385
Kaydon Corp.+................. 326,400 14,016
Kennametal, Inc. ............. 36,700 2,270
Navistar International
Corp.(+)+.................... 331,700 8,750
Reliance Steel & Aluminum
Co. ......................... 86,900 7,730
Terex Corp.(+)................ 217,900 18,859
The Timken Co. ............... 358,500 12,512
Wabash National Corp.+........ 238,900 4,324
----------
174,088
----------
MARINE - 0.95%
Alexander & Baldwin, Inc. .... 175,000 8,727
Kirby Corp.(+)................ 218,300 16,089
Overseas Shipholding Group,
Inc. ........................ 123,500 6,030
----------
30,846
----------
ROAD & RAIL - 0.97%
Arkansas Best Corp.+.......... 162,900 6,992
Covenant Transportation,
Inc.(+)+..................... 182,300 2,523
Laidlaw International,
Inc. ........................ 326,200 8,073
Swift Transportation Company,
Inc.(+)+..................... 202,253 6,058
Werner Enterprises, Inc.+..... 63,000 1,208
YRC Worldwide, Inc.(+)+....... 157,900 6,632
----------
31,486
----------
SEMICONDUCTOR EQUIPMENT - 0.09%
GSI Group, Inc.(+)............ 310,200 3,105
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
10
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
TRADING COMPANIES & DISTRIBUTORS - 0.06%
MSC Industrial Direct Company,
Inc. ........................ 36,100 $ 1,872
----------
TRANSPORT-SERVICES - 0.06%
Bristow Group, Inc.(+)+....... 51,200 1,837
----------
TOTAL INDUSTRIALS.......... 565,534
----------
INFORMATION TECHNOLOGY - 10.39%
COMMUNICATIONS EQUIPMENT - 0.74%
Andrew Corp.(+)............... 174,900 1,850
Carrier Access Corp.(+)....... 328,300 2,557
Comtech Telecommunications
Corp.(+)+.................... 146,800 4,177
Emulex Corp.(+)............... 329,300 5,977
Foundry Networks, Inc.(+)..... 256,000 3,638
PC-Tel, Inc.(+)............... 78,700 831
Plantronics, Inc. ............ 18,700 701
Symmetricom, Inc.(+)+......... 332,100 2,690
Tekelec(+).................... 114,600 1,607
----------
24,028
----------
COMPUTERS & PERIPHERALS - 0.70%
Avid Technology, Inc.(+)+..... 86,600 3,338
Electronics for Imaging,
Inc.(+)+..................... 173,200 4,756
Mercury Computer Systems,
Inc.(+)+..................... 284,400 5,421
Western Digital Corp.(+)...... 449,600 9,460
----------
22,975
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.84%
Arrow Electronics, Inc.(+).... 439,000 15,892
Avnet, Inc.(+)................ 887,300 23,203
Benchmark Electronics,
Inc.(+)+..................... 413,400 11,286
CyberOptics Corp.(+)+......... 100,000 1,528
Global Imaging Systems,
Inc.(+)+..................... 94,900 3,544
Ingram Micro, Inc.(+)......... 1,414,200 26,007
Littlefuse, Inc.(+)+.......... 337,200 10,888
Mettler-Toledo International,
Inc.(+)...................... 35,200 2,281
PerkinElmer, Inc. ............ 102,300 2,193
Plexus Corp.(+)............... 312,600 13,617
Vishay Intertechnology,
Inc.(+)...................... 948,900 14,822
----------
125,261
----------
INTERNET SOFTWARE & SERVICES - 1.00%
EarthLink, Inc.(+)+........... 1,325,500 12,049
InfoSpace, Inc.(+)+........... 124,600 3,181
Netgear, Inc.(+)+............. 215,200 4,831
NIC, Inc(+)................... 435,700 2,680
United Online, Inc.+.......... 329,900 4,252
WebEx Communications,
Inc.(+)+..................... 157,500 5,568
----------
32,561
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
IT CONSULTING & SERVICES - 0.53%
BearingPoint, Inc.(+)+........ 543,000 $ 5,039
Perot Systems Corp.(+)........ 360,700 5,439
Phase Forward Inc.(+)......... 357,600 4,899
SI International, Inc.(+)+.... 60,900 2,075
----------
17,452
----------
OFFICE ELECTRONICS - 0.41%
IKON Office Solutions,
Inc.+........................ 1,002,800 13,237
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.92%
Actel Corp.(+)................ 170,200 2,735
Cabot Microelectronics
Corp.(+)+.................... 132,600 4,337
Cirrus Logic, Inc.(+)......... 249,800 2,361
FEI Co.(+)+................... 201,700 4,385
Integrated Device
Technology(+)+............... 379,500 5,776
MKS Instruments, Inc.(+)...... 111,000 2,649
Omnivision Technologies,
Inc.(+)+..................... 135,785 3,949
QLogic Corp.(+)............... 96,000 1,998
Teradyne, Inc.(+)............. 117,700 1,984
----------
30,174
----------
SOFTWARE - 2.25%
Agile Software Corp.(+)+...... 66,200 461
Entrust, Inc.(+).............. 627,000 2,088
Epicor Software Corp.(+)+..... 416,400 5,051
EPIQ Systems, Inc.(+)+........ 134,000 2,333
Mentor Graphics Corp.(+)...... 1,185,500 15,565
Mercury Interactive
Corp.(+)..................... 153,000 5,508
Novell, Inc.(+)............... 168,600 1,386
Omnicell, Inc.(+)+............ 253,000 3,370
PLATO Learning, Inc.(+)....... 262,714 2,627
Progress Software Corp.(+).... 164,000 4,525
The Reynolds and Reynolds
Co. ......................... 432,200 12,854
RSA Security, Inc.(+)......... 419,200 8,778
SafeNet, Inc.(+)+............. 232,900 4,679
Sybase, Inc.(+)+.............. 190,200 4,141
----------
73,366
----------
TOTAL INFORMATION
TECHNOLOGY............... 339,054
----------
MATERIALS - 6.28%
CHEMICALS - 2.99%
CF Industries Holdings,
Inc.+........................ 714,300 12,357
Cytec Industries, Inc. ....... 103,700 6,271
FMC Corp. .................... 120,600 7,665
Georgia Gulf Corp.+........... 314,600 9,331
H.B. Fuller Co.+.............. 145,800 7,625
Hercules, Inc.(+)............. 964,500 13,706
International Flavors &
Fragrances, Inc. ............ 72,400 2,558
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
11
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Lubrizol Corp. ............... 416,600 $ 18,168
Olin Corp.+................... 379,800 7,805
PolyOne Corp.(+)+............. 1,234,000 10,958
Tronox, Inc.+................. 67,400 1,173
----------
97,617
----------
CONTAINERS & PACKAGING - 0.34%
AptarGroup, Inc. ............. 140,100 7,342
Longview Fibre Co. ........... 78,900 2,056
Silgan Holdings, Inc. ........ 38,958 1,513
----------
10,911
----------
METALS & MINING - 2.68%
Alpha Natural Resources,
Inc.(+)+..................... 202,400 5,082
Century Aluminum Co.(+)+...... 420,200 20,006
Compass Minerals
International, Inc.+......... 103,200 2,717
Foundation Coal Holdings,
Inc.+........................ 400,700 20,316
Gibraltar Industries, Inc.+... 289,900 8,056
Metal Management, Inc.(+)..... 46,800 1,519
Quanex Corp.+................. 90,150 3,855
RTI International Metals,
Inc.(+)+..................... 100,000 6,014
Worthington Industries,
Inc.+........................ 1,011,100 19,969
----------
87,534
----------
PAPER & FOREST PRODUCTS - 0.27%
Glatfelter.................... 198,700 3,720
Neenah Paper, Inc.(+)+........ 70,300 2,256
Wausau Paper Corp.+........... 189,800 2,729
----------
8,705
----------
TOTAL MATERIALS............ 204,767
----------
TELECOMMUNICATION SERVICES - 0.10%
DIVERSIFIED TELECOMMUNICATION - 0.10%
Commonwealth Telephone
Enterprises, Inc.+........... 102,700 3,408
----------
TOTAL TELECOMMUNICATION
SERVICES................. 3,408
----------
UTILITIES - 7.53%
ELECTRIC UTILITIES - 4.17%
Alliant Energy Corp. ......... 265,800 8,495
Black Hills Corp.+............ 37,700 1,372
Cleco Corp.+.................. 175,800 3,955
Duquesne Light Holdings,
Inc.+........................ 813,300 13,802
El Paso Electric Co.(+)....... 193,900 3,829
Great Plains Energy, Inc.+.... 614,300 17,354
Hawaiian Electric Industries,
Inc.+........................ 63,200 1,698
Northeast Utilities........... 1,113,500 22,437
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
NSTAR......................... 571,600 $ 15,805
OGE Energy Corp. ............. 437,800 13,204
Pike Electric Corp.(+)........ 143,500 2,745
PNM Resources, Inc.+.......... 232,500 5,885
Puget Energy, Inc.+........... 412,900 8,576
WPS Resources Corp.+.......... 336,500 16,822
----------
135,979
----------
GAS UTILITIES - 3.25%
AGL Resources, Inc. .......... 406,600 14,386
Atmos Energy Corp.+........... 599,700 15,916
Energen Corp. ................ 28,900 1,019
MDU Resources Group, Inc. .... 215,500 7,920
National Fuel Gas Co. ........ 522,800 17,383
New Jersey Resources Corp.+... 128,500 5,689
Nicor, Inc.+.................. 26,500 1,050
ONEOK, Inc. .................. 279,800 9,236
Peoples Energy Corp.+......... 157,800 5,733
South Jersey Industries,
Inc.+........................ 26,000 691
Southern Union Co. ........... 224,548 5,820
UGI Corp. .................... 531,700 11,910
WGL Holdings, Inc.+........... 312,100 9,182
----------
105,935
----------
MULTI-UTILITIES - 0.11%
Vectren Corp.+................ 59,000 1,576
Westar Energy, Inc. .......... 104,100 2,180
----------
3,756
----------
TOTAL UTILITIES............ 245,670
----------
TOTAL COMMON STOCKS........ 3,068,198
----------
SHORT TERM INVESTMENTS - 30.91%
American Beacon Enhanced Cash
Trust++#..................... 526,982,609 526,983
American Beacon Money Market
Select Fund++#............... 467,268,690 467,269
<Caption>
PAR
AMOUNT
-----------
U.S. Treasury Bill, 4.455%,
Due 6/8/2006P................ $ 14,055 13,988
----------
TOTAL SHORT TERM
INVESTMENTS.............. 1,008,240
----------
TOTAL INVESTMENTS -
124.97% (COST $3,588,741).... 4,076,438
----------
LIABILITIES, NET OF OTHER
ASSETS - (24.97%)............ (814,543)
----------
TOTAL NET ASSETS - 100.00%.... $3,261,895
==========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
12
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
- ---------------
(+) Non-income producing security.
+ All or a portion of this security is on loan at April 30, 2006. See Note 5.
++ The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
# All or a portion of this security is purchased with cash collateral for
securities loaned.
P At April 30, 2006, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(dollars in thousands)
<Table>
<Caption>
NUMBER UNREALIZED
OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- -------- --------------
Emini Mini Russell.......................................... 2,590 Jun 2006 $199,119 $5,821
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
13
AMERICAN BEACON SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited) (in thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<Table>
ASSETS:
Investments in unaffiliated securities, at value(A C)... $ 3,082,186
Investments in affiliated securities, at value(B)....... 994,252
Receivable for investments sold......................... 8,352
Dividends and interest receivable....................... 2,708
Receivable for fund shares sold......................... 5,025
Receivable for variation margin on open futures
contracts.............................................. 1,542
-----------
TOTAL ASSETS........................................ 4,094,065
-----------
LIABILITIES:
Payable for investments purchased....................... 13,271
Payable upon return of securities loaned................ 810,832
Payable for fund shares redeemed........................ 2,269
Management and investment advisory fees payable (Note
2)..................................................... 4,496
Administrative service and service fees payable......... 872
Other liabilities....................................... 430
-----------
TOTAL LIABILITIES................................... 832,170
-----------
NET ASSETS.................................................. $ 3,261,895
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 2,636,390
Undistributed net investment income..................... 5,529
Accumulated net realized gain (loss).................... 126,458
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................. 493,518
-----------
NET ASSETS.................................................. $ 3,261,895
===========
Shares outstanding (no par value):
Institutional Class..................................... 60,003,715
===========
PlanAhead Class......................................... 63,007,300
===========
Service Class........................................... 2,810,462
===========
AMR Class............................................... 20,220,755
===========
Net asset value, offering and redemption price per share:
Institutional Class..................................... $ 22.54
===========
PlanAhead Class......................................... $ 22.11
===========
Service Class........................................... $ 22.00
===========
AMR Class............................................... $ 22.46
===========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 2,594,489
(B) Cost of investments in affiliated securities............ 994,252
(C) Market value of securities on loan...................... 792,155
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
14
AMERICAN BEACON SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited) (in thousands)
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of
foreign taxes)*........................................ $ 21,248
Dividend income from affiliated securities.............. 2,663
Interest income......................................... 277
Income derived from securities lending, net............. 621
--------
TOTAL INVESTMENT INCOME............................. 24,809
--------
EXPENSES:
Management and investment advisory fees (Note 2)........ 7,684
Administrative service fees (Note 2):
Institutional Class................................... 1,509
PlanAhead Class....................................... 1,695
Service Class......................................... 67
Transfer agent fees:
Institutional Class................................... 127
PlanAhead Class....................................... 100
Service Class......................................... 13
AMR Class............................................. 4
Fund accounting fees.................................... 267
Professional fees....................................... 54
Registration fees and expenses.......................... 36
Service fees:
PlanAhead Class (Note 2).............................. 1,695
Service Class (Note 2)................................ 67
Distribution fees -- Service Class (Note 2)............. 67
Prospectus and shareholder reports...................... 397
Other expenses.......................................... 5
--------
TOTAL EXPENSES...................................... 13,787
--------
NET INVESTMENT INCOME....................................... 11,022
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:
Investments........................................... 114,653
Commission recapture.................................. 232
Futures contracts..................................... 9,100
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 302,253
Futures contracts..................................... 10,138
--------
NET GAIN (LOSS) ON INVESTMENTS...................... 436,376
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $447,398
========
* Foreign taxes......................................... $ 28
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
15
AMERICAN BEACON SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2006 2005
-------------- -----------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 11,022 $ 14,541
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions........... 123,985 128,038
Change in net unrealized appreciation or depreciation of
investments, futures contracts, and foreign currency
translations........................................... 312,391 68,643
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 447,398 211,222
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class................................... (7,101) (1,734)
PlanAhead Class....................................... (6,167) (1,962)
Service Class......................................... (139) (37)
AMR Class............................................. (3,772) (2,456)
Net realized gain on investments:
Institutional Class................................... (46,081) (20,489)
PlanAhead Class....................................... (59,088) (27,260)
Service Class......................................... (2,120) (632)
AMR Class............................................. (17,954) (20,024)
---------- ----------
NET DISTRIBUTIONS TO SHAREHOLDERS................... (142,422) (74,594)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................... 456,819 2,144,506
Reinvestment of dividends and distributions............. 138,617 70,239
Cost of shares redeemed................................. (505,953) (830,022)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS.................................. 89,483 1,384,723
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS....................... 394,459 1,521,351
---------- ----------
NET ASSETS:
Beginning of period..................................... 2,867,436 1,346,085
---------- ----------
END OF PERIOD*.......................................... $3,261,895 $2,867,436
========== ==========
* Includes undistributed net investment income (loss)
of..................................................... $ 5,529 $ 12,280
========== ==========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
16
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust"), is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American Beacon Small Cap Value Fund (the "Fund"), a series of the Trust.
American Beacon Advisors, Inc. (the "Manager"), is a wholly-owned
subsidiary of AMR Corporation, the parent company of American Airlines, Inc.
("American"), and was organized in 1986 to provide business management,
advisory, administrative and asset management consulting services to the Trust
and other investors.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
<Table>
<Caption>
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- ------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service
Fee -- .25%
PLANAHEAD CLASS General public and investors investing through an Administrative Service
intermediary Fee -- .25%
Service Fee -- .25%
SERVICE CLASS Investors investing through an intermediary Administrative Service
Fee -- .25%
Service Fee -- .25%
Distribution Fee -- .25%
AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A
AMR Corporation and its affiliates
</Table>
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official price (closing bid price or last evaluated
quote if no sale has occurred) on the primary market or exchange on which they
trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. When a price is unavailable from a
pricing service or when the price provided by the pricing service is deemed not
to represent fair value, the prices of debt securities may be determined using
quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
Securities for which the market prices are not readily available or are not
reflective of the fair value of the security, the security will be priced at a
fair value following procedures approved by the Board of Trustees (the "Board").
In light of the judgement involved in fair value decisions, there can be no
assurance that a fair value assigned to a particular security is accurate.
- --------------------------------------------------------------------------------
17
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Fund. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Fund may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Fund reflects this
amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral
for futures contracts. Payments to and from the broker, known as variation
margin, are required to be made on a daily basis as the price of the futures
contract fluctuates. Changes in initial settlement values are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at
which time realized gains and losses are recognized. Futures contracts are
valued at the most recent settlement price established each day by the exchange
on which they are traded.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid annually. Distributions, if any, of net realized capital gains are
generally paid annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with
certain brokers or dealers. If the Fund's investment advisor chooses to execute
a transaction through a participating broker, the broker rebates a portion of
the commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
- --------------------------------------------------------------------------------
18
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, fund management and securities lending services. Investment
assets of the Fund are managed by multiple investment advisors which have
entered into separate investment advisory agreements with the Manager. As
compensation for performing the duties required under the Management Agreement,
the Manager receives from the Fund an annualized fee equal to .10% of the
average daily net assets plus amounts paid by the Manager to the investment
advisors hired by the Manager to direct investment activities of the Funds.
Management fees paid during the six months ended April 30, 2006 were as follows
(dollars in thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
- ----------- ---------- --------------- -----------
.35%-.60% $7,684 $6,158 $1,526
</Table>
As compensation for services provided by the Manager in connection with
securities lending activities, the lending Fund pays to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. During the
six months ended April 30, 2006, securities lending fees totaling $103,000 were
paid to the Manager by the Fund. This fee is netted against securities lending
income in the Statement of Operations.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the
- --------------------------------------------------------------------------------
19
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Manager receives an annualized fee of .25% of the average daily net assets of
the Institutional, PlanAhead and Service Classes of the Fund.
Distribution Plans
The Trust, except for the Service Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940, pursuant to which no fees may be charged to
the Fund for distribution purposes. However, the Plan authorizes the management
fees received by the Manager and the investment advisors hired by the Manager to
be used for distribution purposes. Under this Plan, the Trust does not intend to
compensate the Manager or any other party, either directly or indirectly, for
the distribution of Trust shares.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Service Class of the Fund. Under
the Distribution Plan, as compensation for distribution assistance, the Manager
receives an annual fee of .25% of the average daily net assets of the Service
Class. The fee will be payable without regard to whether the amount of the fee
is more or less than the actual expenses incurred in a particular month by the
Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the PlanAhead and Service
Classes. As compensation for performing the duties required under the Service
Plans, the Manager receives .25% of the average daily net assets of the
PlanAhead and Service Classes of the Fund.
Investment in Affiliated Funds
The Fund is permitted, pursuant to an exemptive order by the Securities and
Exchange Commission ("SEC") and approved procedures by the Board, to invest up
to 25% of its total assets in the American Beacon Money Market Select Fund (the
"Select Fund"), an affiliated fund. The Fund and the Select Fund have the same
investment advisor and therefore, are considered to be affiliated. Cash
collateral received by the Fund in connection with securities lending may be
invested in the Select Fund and the American Beacon Enhanced Cash Trust (the
"Cash Trust") (collectively, the "Affiliated Funds"). The Manager serves as
Trustee and investment advisor to the Affiliated Funds and receives from the
Affiliated Funds an annualized fee equal to .10% of the average daily net
assets. During the six months ended April 30, 2006, fees earned by the Manager
from the Affiliated Funds were as follows:
<Table>
<Caption>
SECURITIES LENDING
DIRECT INVESTMENT COLLATERAL INVESTED
IN FUNDS IN FUNDS TOTAL
- ----------------- ------------------- --------
$60,701 $360,153 $420,854
</Table>
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-
- --------------------------------------------------------------------------------
20
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
interested Trustees (other than Mr. O'Sullivan) and their spouses are provided
free unlimited air transportation on American. Retired Trustees and their
spouses are provided free air transportation on American, up to a maximum annual
value of $40,000. The Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. Mr.
O'Sullivan, as a retiree of American, already receives flight benefits. Mr.
O'Sullivan receives an annual retainer plus a fee for each Board meeting
attended.
At April 30, 2006, AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof owned 100% of AMR Class shares of the Fund.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from, or
lend money to, other participating Funds. At April 30, 2006, the Fund had not
utilized the credit facility.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to comply with the requirements of Subchapter
M of the Internal Revenue Code and to distribute substantially all net
investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions during the six months ended April 30,
2006 and the fiscal year ended October 31, 2006 were as follows (in thousands):
<Table>
<Caption>
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31, 2005
-------------- ----------------
(UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class..................................... $ 20,806 $12,463
PlanAhead Class......................................... 23,742 16,237
Service Class........................................... 770 368
AMR Class............................................... 9,112 12,942
LONG-TERM CAPITAL GAIN
Institutional Class..................................... 32,376 9,760
PlanAhead Class......................................... 41,513 12,985
Service Class........................................... 1,489 301
AMR Class............................................... 12,614 9,538
-------- -------
TOTAL DISTRIBUTIONS PAID............................ $142,422 $74,594
-------- -------
</Table>
- --------------------------------------------------------------------------------
21
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
As of April 30, 2006, the components of distributable earnings were as
follows (in thousands):
<Table>
Cost basis of investments for federal income tax purposes... $3,592,527
Unrealized appreciation..................................... 571,468
Unrealized depreciation..................................... (87,557)
----------
Net unrealized appreciation (depreciation).................. 483,911
Undistributed ordinary income............................... 50,655
Undistributed long-term gain (loss)......................... 90,938
----------
Distributable earnings...................................... $ 625,504
==========
</Table>
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gains/(losses) on certain derivative instruments, book
amortization for premiums, and the realization for tax purposes of unrealized
gains/(losses) on investments in passive foreign investment companies.
Due to inherent differences in the recognition of income, expenses, and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences that have been reclassified as of April 30, 2006 (in thousands):
<Table>
Paid-in-capital............................................. $ (1)
Undistributed net investment income......................... (594)
Accumulated net realized gain (loss)........................ 595
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency.................... --
</Table>
4. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended April 30, 2006 (excluding
short-term investments) are as follows (in thousands):
<Table>
Purchases................................................... $539,706
Proceeds from sales......................................... $632,246
</Table>
A summary of the Fund's direct transactions in Affiliated Funds for the six
months ended April 30, 2006 is set forth below (in thousands):
<Table>
<Caption>
OCTOBER 31, 2005 APRIL 30, 2006
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------- ------------------- --------- -------- -------------------
Select Fund................................ $124,632 $513,472 $454,685 $183,419
</Table>
5. SECURITIES LENDING
The Fund may lend its securities to qualified financial institutions, such
as certain broker-dealers, to earn additional income. The borrowers are required
to secure their loans continuously with collateral in an amount at least equal
to the fair value of the securities loaned, initially in an
- --------------------------------------------------------------------------------
22
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
amount at least equal to 102% of the fair value of domestic securities loaned
and 105% of the fair value of international securities loaned. Collateral is
marked to market and monitored daily. To the extent that a loan is
collateralized by cash, such collateral shall be invested by the securities
lending agent (the "Agent") in short-term instruments, money market mutual
funds, and such other short-term investments, provided the investments meet
certain quality and diversification requirements.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and the Agent and is recorded as income for the Fund. To the
extent that a loan is secured by non-cash collateral, brokers pay the Fund
negotiated lenders' fees, which are divided between the Fund and the Agent and
are recorded as securities lending income for the Fund. The Fund also continues
to receive income on the securities loaned, and any gain or loss in the market
price of securities loaned that may occur during the term of the loan.
Risks to the Fund in securities lending transactions are that the borrower
may not provide additional collateral when required or return the securities
when due, and that the value of the short-term investments will be less than the
amount of cash collateral required to be returned to the borrower.
At April 30, 2006, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
<Table>
<Caption>
MARKET VALUE OF
SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL
- ------------------ ------------------- ---------------
$792,155 $139 $810,832
</Table>
Cash collateral is invested in the Cash Trust and the Select Fund. These
amounts have been included as investments in the Schedule of Investments and
Statement of Assets and Liabilities. Income earned on these investments is
reported as Income derived from securities lending in the Statement of
Operations.
Non-Cash collateral received by the Fund may not be sold or repledged;
therefore, non-cash collateral is not included on the Fund's Schedule of
Investments or Statement of Assets and Liabilities.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund (dollars and shares in thousands):
Six Months Ended April 30, 2006
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
------------------- -------------------- ------------------ -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------- --------- ------ -------- ------- --------
Shares sold............. 12,488 $ 264,756 7,631 $ 161,309 989 $ 20,706 464 $ 10,048
Reinvestment of
dividends............. 2,467 50,759 3,162 63,873 112 2,259 1,061 21,726
Shares redeemed......... (7,663) (164,586) (13,697) (284,556) (533) (11,222) (2,156) (45,589)
------ --------- ------- --------- ------ -------- ------- --------
Net increase (decrease)
in shares
outstanding........... 7,292 $ 150,929 (2,904) $ (59,374) 568 $ 11,743 (631) $(13,815)
====== ========= ======= ========= ====== ======== ======= ========
</Table>
- --------------------------------------------------------------------------------
23
AMERICAN BEACON SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Year Ended October 31, 2005
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
------------------- --------------------- ----------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------- ---------- ------ ------- ------- ---------
Shares sold........... 38,008 $ 759,658 52,534 $1,035,304 2,036 $40,048 15,182 $ 309,496
Reinvestment of
dividends........... 923 18,570 1,443 28,520 34 669 1,123 22,480
Shares redeemed....... (9,004) (182,580) (13,220) (262,130) (467) (9,230) (18,790) (376,082)
------ --------- ------- ---------- ------ ------- ------- ---------
Net increase
(decrease) in shares
outstanding......... 29,927 $ 595,648 40,757 $ 801,694 1,603 $31,487 (2,485) $ (44,106)
====== ========= ======= ========== ====== ======= ======= =========
</Table>
- --------------------------------------------------------------------------------
24
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
25
AMERICAN BEACON SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------
2006 2005(H) 2004(G) 2003(D) 2002 2001(C)
----------- ---------- -------- -------- ------- -------
(UNAUDITED)
Net asset value, beginning of
period.............................. $ 20.43 $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 10.08
---------- ---------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss)(A)... 0.09 0.11 0.07 (0.01) (0.01) 0.16
Net gains on securities (both
realized and unrealized)(A)...... 3.05 2.31 3.09 5.24 0.47 1.81
---------- ---------- -------- -------- ------- -------
Total income from investment
operations.......................... 3.14 2.42 3.16 5.23 0.46 1.97
---------- ---------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income........................... (0.14) (0.07) (0.08) (0.02) (0.11) (0.19)
Distributions from net realized
gains on securities.............. (0.89) (0.77) (0.44) (0.28) (0.76) (0.17)
---------- ---------- -------- -------- ------- -------
Total distributions.................. (1.03) (0.84) (0.52) (0.30) (0.87) (0.36)
---------- ---------- -------- -------- ------- -------
Net asset value, end of period....... $ 22.54 $ 20.43 $ 18.85 $ 16.21 $ 11.28 $ 11.69
========== ========== ======== ======== ======= =======
Total return......................... 15.85%(E) 12.90% 19.86% 47.45% 3.29% 20.16%
========== ========== ======== ======== ======= =======
Ratios and supplemental data:
Net assets, end of period (in
thousands)....................... $1,352,646 $1,076,909 $429,540 $ 89,579 $21,936 $ 2,364
Ratios to average net assets
(annualized):
Expenses net of waivers(A)....... 0.83% 0.87% 0.89% 0.89% 0.82% 0.89%
Expenses before waivers(A)....... 0.83% 0.87% 0.89% 0.89% 0.82% 0.89%
Net investment income (loss) net
of waivers(A).................. 0.80% 0.66% 0.57% 0.60% 0.81% 1.38%
Net investment income (loss)
before waivers(A).............. 0.80% 0.66% 0.57% 0.60% 0.81% 1.38%
Portfolio turnover rate(B)........ 18%(E) 47% 35% 75% 81% 93%
<Caption>
PLANAHEAD CLASS
---------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------
2006 2005(H) 2004(G) 2003(D)
----------- ---------- -------- -------
(UNAUDITED)
Net asset value, beginning of
period.............................. $ 20.04 $ 18.54 $ 15.95 $ 11.22
---------- ---------- -------- -------
Income from investment operations:
Net investment income (loss)(A)... 0.06 0.09 0.08 0.05
Net gains on securities (both
realized and unrealized)(A)...... 2.99 2.24 2.98 5.08
---------- ---------- -------- -------
Total income from investment
operations.......................... 3.05 2.33 3.06 5.13
---------- ---------- -------- -------
Less distributions:
Dividends from net investment
income........................... (0.09) (0.06) (0.03) (0.12)
Distributions from net realized
gains on securities.............. (0.89) (0.77) (0.44) (0.28)
---------- ---------- -------- -------
Total distributions.................. (0.98) (0.83) (0.47) (0.40)
---------- ---------- -------- -------
Net asset value, end of period....... $ 22.11 $ 20.04 $ 18.54 $ 15.95
========== ========== ======== =======
Total return......................... 15.72%(E) 12.63% 19.56% 47.12%
========== ========== ======== =======
Ratios and supplemental data:
Net assets, end of period (in
thousands)....................... $1,393,234 $1,320,853 $466,364 $66,906
Ratios to average net assets
(annualized):
Expenses net of waivers(A)....... 1.07% 1.10% 1.15% 1.16%
Expenses before waivers(A)....... 1.07% 1.10% 1.15% 1.16%
Net investment income (loss) net
of waivers(A).................. 0.56% 0.42% 0.33% 0.39%
Net investment income (loss)
before waivers(A).............. 0.56% 0.42% 0.33% 0.39%
Portfolio turnover rate(B)........ 18%(E) 47% 35% 75%
</Table>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Small Cap Value Portfolio through February 28,
2002.
(B) The Small Cap Value Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(C) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed
management of the Small Cap Value Fund's assets previously managed by
Merrill Lynch Investment Managers, L.P.
(D) Barrow, Hanley, Mewhinney & Strauss, Inc. was added as an investment
advisor to the Small Cap Value Fund on September 18, 2003.
(E) Not annualized.
(F) Portfolio turnover rate is for the period November 1, 2002 through October
31, 2003.
(G) The Boston Company was added as an investment advisor to the Small Cap
Value Fund on September 27, 2004.
(H) Opus Capital Management, Inc. was added as an investment advisor on
February 1, 2005 and Metropolitan West Capital Management, LLC, SSgA Funds
Management, Inc. and Dreman Value Management, LLC were added as investment
advisors on August 12, 2005.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS AMR CLASS
----------------- ---------------------------------------------- -----------
YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS
OCTOBER 31, ENDED OCTOBER 31, MAY 1 TO ENDED
----------------- APRIL 30, ------------------ OCTOBER 31, APRIL 30,
2002 2001(C) 2006 2005(H) 2004(G) 2003(D) 2006
------- ------- ----------- ------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
$ 11.64 $ 10.08 $ 19.94 $ 18.49 $ 15.92 $ 11.88 $ 20.38
------- ------- ------- ------- -------- ---------- --------
0.06 0.15 0.03 0.04 0.01 -- 0.13
0.36 1.76 2.98 2.23 3.00 4.04 3.03
------- ------- ------- ------- -------- ---------- --------
0.42 1.91 3.01 2.27 3.01 4.04 3.16
------- ------- ------- ------- -------- ---------- --------
(0.08) (0.18) (0.06) (0.05) -- -- (0.19)
(0.76) (0.17) (0.89) (0.77) (0.44) -- (0.89)
------- ------- ------- ------- -------- ---------- --------
(0.84) (0.35) (0.95) (0.82) (0.44) -- (1.08)
------- ------- ------- ------- -------- ---------- --------
$ 11.22 $ 11.64 $ 22.00 $ 19.94 $ 18.49 $ 15.92 $ 22.46
======= ======= ======= ======= ======== ========== ========
2.99% 19.58% 15.55%(E) 12.32% 19.24% 34.01%(E) 16.02%(E)
======= ======= ======= ======= ======== ========== ========
$16,190 $ 1,197 $61,839 $44,709 $ 11,828 $ 1 $454,176
1.11% 1.17% 1.35% 1.40% 1.38% 1.49% 0.56%
1.11% 1.17% 1.35% 1.40% 1.69% 1,089.04% 0.56%
0.52% 1.06% 0.27% 0.12% 0.17% (0.05)% 1.08%
0.52% 1.06% 0.27% 0.12% (0.14)% (1,087.60)% 1.08%
81% 93% 18%(E) 47% 35% 75%(F) 18%(E)
<Caption>
AMR CLASS
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2005(H) 2004(G) 2003(D) 2002 2001(C)
-------- -------- -------- -------- --------
$ 18.78 $ 16.13 $ 11.30 $ 11.71 $ 10.10
-------- -------- -------- -------- --------
0.21 0.14 0.10 0.15 0.15
2.26 3.04 5.15 0.34 1.85
-------- -------- -------- -------- --------
2.47 3.18 5.25 0.49 2.00
-------- -------- -------- -------- --------
(0.10) (0.09) (0.14) (0.14) (0.22)
(0.77) (0.44) (0.28) (0.76) (0.17)
-------- -------- -------- -------- --------
(0.87) (0.53) (0.42) (0.90) (0.39)
-------- -------- -------- -------- --------
$ 20.38 $ 18.78 $ 16.13 $ 11.30 $ 11.71
======== ======== ======== ======== ========
13.23% 20.12% 47.93% 3.54% 20.52%
======== ======== ======== ======== ========
$424,965 $438,353 $327,542 $181,180 $137,811
0.58% 0.60% 0.61% 0.56% 0.64%
0.58% 0.60% 0.61% 0.56% 0.64%
0.94% 0.84% 0.95% 1.09% 1.55%
0.94% 0.84% 0.95% 1.09% 1.55%
47% 35% 75% 81% 93%
</Table>
- --------------------------------------------------------------------------------
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(Unaudited)
- --------------------------------------------------------------------------------
RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS
At its February 17, 2006 meeting, the Board of Trustees ("Board")
considered the renewal of the existing Management Agreement between the Manager
and the American Beacon Funds (the "Funds") and each Investment Advisory
Agreement between the Manager and the subadvisors, on behalf of the Funds. In
preparation for the Board's consideration to renew these Agreements, the Board
and its Investment Committee undertook steps to gather and consider information
furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager and each subadvisor. In addition,
the Board's Investment Committee worked with Lipper to obtain relevant
comparative information regarding the performance, fees and expenses of the
Funds. The Investment Committee held separate meetings on December 8, 2005,
February 8, 2006 and February 17, 2006 to consider the information provided by
Lipper. Further, the Board took into consideration information furnished for the
Board's review and consideration throughout the year at regular Board and
Investment Committee meetings, as well as information specifically prepared in
connection with the renewal process.
The Trustees considered, among other materials, responses by the Manager
and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or any
other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements as well as Parts I and II of its Form ADV;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including the
results of any recent regulatory examination or independent audit;
- a comparison of the performance of that portion of Fund assets managed by
each firm with performance of other similar accounts managed by the firm,
including a discussion of relative performance versus a peer group
average and any remedial measures if the firm's performance was
materially below that of the peer group;
- a cost/profitability analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to the Funds,
if available;
- an analysis of compensation, including a comparison with fees charged to
other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of any other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise concerns
that the firm would be unable to continue providing the same scope and
quality of services to the Funds;
- --------------------------------------------------------------------------------
28
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a description of the scope of portfolio management services provided to
the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year;
- a description of the basis upon which portfolio managers are compensated,
including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with respect
to Fund transactions, including the firm's methodology for obtaining the
most favorable execution and the use of any affiliated broker-dealers;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the firm;
- a summary of any material changes to the firm's compliance program with
regard to federal, state, corporate and Fund requirements;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading policy
and disaster recovery plan, including a description of any material
changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling persons;
and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to appropriate indices,
including comments on the relative performance of each subadvisor and
each Fund versus comparable indices;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and whether (and if so, why) such subadvisor
should have its contract renewed;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- a table detailing the Manager's profitability with respect to each Fund;
- an analysis of any material complaints received from Fund shareholders;
- a description of the Manager's securities lending practices and the fees
received from such practices;
- a description of the portfolio turnover rate and average execution costs
for each Fund and each subadvisor to a Fund;
- --------------------------------------------------------------------------------
29
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a discussion of whether the Manager receives, with respect to trade
execution for the Funds, other special compensation, including any
payment for order flow; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of each Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds, and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund, the class used for comparative purposes was the
class with the longest performance history, which in most cases is the
Institutional Class. References below to each Fund's Lipper peer group are to
the group of comparable mutual funds included in the analysis provided by
Lipper.
The Trustees also received a memorandum from their legal counsel detailing
the Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered
at its February 2006 meeting. The Board did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to the various factors.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered the
best interests of each Fund separately. In addition, while the Management
Agreement and the Investment Advisory Agreements for all of the Funds were
considered at the same Board meeting, the Board considered each Fund's
investment management and subadvisory relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost
for providing the services and the profitability of the advisory business to the
Manager or subadvisor; (4) the extent to which economies of scale have been
taken into account in setting the fee schedule; and (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors. The Trustees
posed questions to various management personnel of the Manager regarding certain
key aspects of the material submitted in support of the renewal.
Nature, Extent and Quality of Services
With respect to the renewal of the Management Agreement, the Board
considered: the Manager's ability to retain key investment personnel and to
provide consistent performance and an active client service program; the
Manager's goal to provide consistent above average long-term performance at low
cost; the continuing efforts by the Manager to add new series so as to enhance
the Funds' product line; the Manager's record in building improved compliance,
control and credit functions that reduce risks to the Funds; the addition of
personnel to manage the Funds, promote
- --------------------------------------------------------------------------------
30
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
sales and improve services; and the active role played by the Manager in
monitoring and, as appropriate, recommending replacements for the investment
subadvisors and master portfolios. Based on this information, the Board
concluded that the nature, extent and quality of the management and advisory
services provided by the Manager and each subadvisor were appropriate for each
Fund and, thus, supported a decision to renew the Management and each Investment
Advisory Agreement.
Investment Performance
The Board evaluated the comparative information provided by Lipper and the
Manager regarding each Fund's investment performance relative to its benchmark
index(es) and peer group. The Board also considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
A discussion regarding the Board's considerations with respect to the Small Cap
Value Fund's performance appears below under "Additional Considerations and
Conclusions with Respect to the Small Cap Value Fund."
Cost of Services and Profits Realized
In analyzing the cost of services and profitability of the Manager in
connection with its investment advisory services to a Fund, the Board considered
the Manager's operations and low cost structure. The Board noted that the
Manager proposed to continue most of the expense waivers and reimbursements that
were in place for each applicable Fund's 2005 fiscal year. The Board also noted
that each sub-advised Fund pays the Manager the amounts due to its subadvisors,
and the Manager remits these amounts directly to the applicable subadvisors. The
Board considered that the Manager receives service and administrative fees to
compensate the Manager for providing administrative services to the Funds and to
compensate third-party administrators and broker-dealers for services to Fund
shareholders. In addition, the Board considered that the Manager receives
management fees for overseeing the securities lending relationships on behalf of
various Funds.
In analyzing the cost of services and profitability of each subadvisor in
connection with its investment advisory services to a Fund, the Board considered
that, in many cases, the Manager has negotiated the lowest subadvisory fee a
subadvisor charges for any comparable client accounts. The Board gave less
weight to profitability considerations or did not view this data as imperative
to its deliberations given the arms-length nature of the relationship between
the Manager and the subadvisors with respect to the negotiation of subadvisory
fees.
A discussion regarding the Board's considerations with respect to the Small
Cap Value Fund's fee rates is set forth below under "Additional Considerations
and Conclusions with Respect to the Small Cap Value Fund."
Economies of Scale
In considering the reasonableness of the management and investment advisory
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. In this regard, the Board noted that, in many
cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The
Board also noted, where applicable, for purposes of determining the investment
advisory fee charged to
- --------------------------------------------------------------------------------
31
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
the Funds, the fee schedule to each Investment Advisory Agreement specifies that
all other assets managed by a subadvisor on behalf of AMR Corporation and its
pension plans shall be considered. Thus, the Funds are able to receive
additional breakpoint benefits resulting from the subadvisor's management of a
larger pool of assets. With respect to the management fee, the Board
acknowledged the Manager's low cost structure and the increasing costs of
personnel, technology and operations. Based on these considerations, the Board
concluded that the Funds' fee structures are reasonably designed to pass on
economies of scale to Fund shareholders.
Benefits to be Derived from the Relationship with the Funds
The Board considered the "fall-out" or ancillary benefits that accrue to
the Manager and/or the subadvisors as a result of the advisory relationships
with the Funds, including greater exposure in the marketplace with respect to
the Manager's or subadvisor's investment process and expanding the level of
assets under management by the Manager and the subadvisors. The Board noted that
the Manager and the subadvisors may not direct the Funds' brokerage transactions
to certain brokers to obtain research and other services and that the Funds
participate in a brokerage recapture program. After consideration of this
information, the Board concluded that the potential benefits accruing to the
Manager and the subadvisors by virtue of their relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP VALUE
FUND
The benchmark index referred to below is the Small Cap Value Fund's
broad-based market index included in the Historical Performance section of the
Prospectuses. The Lipper Small-Cap Value Fund Index includes up to the 30
largest funds in the Lipper Small-Cap Value category, where the Fund is
classified by Lipper.
In considering the renewal of the Management Agreement and each Investment
Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 1st quintile for the four- and five-year periods, the 2nd quintile for
the three-year period and the 3rd quintile for the one- and two-year periods
compared to the returns of a peer group of mutual funds identified by Lipper as
having an investment objective similar to the Fund; (2) the Fund's total return
performance exceeded the Lipper Small-Cap Value Fund Index for all relevant
periods except the one-year period; (3) the portion of Fund assets allocated to
Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow") outperformed the Fund's
benchmark index for all relevant periods; (4) the portion of Fund assets
allocated to Brandywine Asset Management, LLC ("Brandywine") outperformed the
Fund's benchmark index for all relevant periods except the three-year period;
(5) the portion of Fund assets allocated to Hotchkis and Wiley Capital
Management, LLC ("Hotchkis") outperformed the Fund's benchmark index for all
relevant periods; and (6) the portion of Fund assets allocated to The Boston
Company Asset Management ("TBCAM") outperformed the Fund's benchmark index for
all relevant periods.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
were in the 1st quintile, and actual
- --------------------------------------------------------------------------------
32
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
management fees (including administrative fees) were in the 2nd quintile
compared to the expenses and fees of a peer group of similar funds classified by
Lipper, where the 1st quintile represents the lowest fees or expenses among the
group; (2) Brandywine and SSgA Funds Management, Inc. represented that they do
not charge a lower fee rate for comparable client services, while Hotchkis and
TBCAM represented that they do not provide similar services to any comparable
accounts; (3) Dreman Value Management, LLC represented that the Fund's fee
schedule is similar to comparable accounts; (4) Opus Capital Management, Inc.
represented that it does not charge a lower fee for comparable client services
with the exception of one account; and (5) the fee schedules of each subadvisor
include breakpoints, which reduce fee rates as the assets of the Fund increase.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and the
subadvisors under the Agreements are fair and reasonable; (2) concluded that the
profits to the Manager are reasonable in light of the quality of services
provided to the Fund, including the oversight of the Fund's subadvisors; (3)
determined that the Fund and its shareholders would benefit from the Manager's
and subadvisors' continued management of the Fund; and (4) approved the renewal
of the Agreements with respect to the Fund.
- --------------------------------------------------------------------------------
33
(AMERICAN BEACON FUNDS LOGO)
- --------------------------------------------------------------------------------
DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts, if you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request.
If you invest in the Fund through a financial institution, you may be able to
receive the Fund's regulatory mailings, such as the Prospectus, Annual Report
and Semi-Annual Report, by e-mail. If you are interested in this option, please
go to www.icsdelivery.com and search for your financial institution's name or
contact your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
<Table>
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american-beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
</Table>
- --------------------------------------------------------------------------------
<Table>
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450
AMR Class(SM) Fort Worth, TX 76155
Call (800) 345-2345
PlanAhead Class(R) and Service Class
Call (800) 388-3344
</Table>
- --------------------------------------------------------------------------------
<Table>
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in each A description of the policies and procedures the Fund uses
semi-annual and annual report, the Fund files a complete to determine how to vote proxies relating to portfolio
schedule of its portfolio holdings with the Securities and securities is available in the Fund's Statement of
Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge
third fiscal quarters. The Fund's Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website
the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. The Fund's proxy voting record for the most
reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on
Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Fund's Forms N-PX are available on the SEC's
regarding the operation of the SEC's Public Reference Room website at www.sec.gov. The Fund's proxy voting record may
may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009.
schedule of the Fund's portfolio holdings is also available
on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal
quarter.
</Table>
FUND SERVICE PROVIDERS:
<Table>
CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ERNST & YOUNG LLP FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri Chicago, Illinois Portland, Maine
</Table>
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds is a service mark of AMR Corporation.
American Beacon Small Cap Value Fund is a service mark of American Beacon
Advisors, Inc.
SAR 04/06
537381
G U I D A N C E | V I S I O N | E X P E R I E N C E
[AMERICAN BEACON FUNDS LOGO]
SEMI-ANNUAL REPORT
[PHOTO]
APRIL 30, 2006
EQUITY FUNDS
BALANCED FUND
LARGE CAP GROWTH FUND
MID-CAP VALUE FUND
SMALL CAP VALUE OPPORTUNITY FUND
EMERGING MARKETS FUND
BOND FUNDS
HIGH YIELD BOND FUND
ENHANCED INCOME FUND
INTERMEDIATE BOND FUND
SHORT-TERM BOND FUND
About American Beacon
- --------------------------------
Since 1986, American Beacon
Advisors has offered a variety
of products and investment
advisory services to numerous
institutional and retail
clients, including a variety of
mutual funds, corporate cash
management, and separate account
management.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations,
financial planners, and other
institutional investors. With
American Beacon Advisors, you
can put the experience of a
multi-billion dollar asset
management firm to work for your
company
<Table>
<Caption>
Contents
-----------------------------------------------
President's Message........... 1
American Beacon Funds'
Performance................ 2
Market and Performance
Overviews.................. 3-27
American Beacon Schedules of Investments
Balanced Fund.............. 28
Large Cap Growth Fund...... 37
Mid-Cap Value Fund......... 42
Small Cap Value Opportunity
Fund.................... 45
Emerging Markets Fund...... 49
High Yield Bond Fund....... 56
Enhanced Income Fund....... 63
Intermediate Bond Fund..... 70
Short-Term Bond Fund....... 76
</Table>
<Table>
Additional Information.............. Back Cover
</Table>
Any opinions herein, including forecasts, reflect our judgement as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds April 30, 2006
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
Enclosed please find the
Semi-Annual Report for the
American Beacon Funds for
the six months ended April
30, 2006. During this
time, most markets
experienced strong gains.
The Dow Jones Industrial
Average posted gains of
10.2%, the S&P 500 Index
increased by 9.6%, and the
MSCI EAFE Index returned
22.9%. As of April 30,
2006, the 10-Year Treasury
interest rate was 5.1%,
resulting in an 0.56%
total return for the bond
market, as defined by the
Lehman Brothers Aggregate
Index. Additionally, the
Federal Reserve Board increased the fed funds rate to 4.75%, up 1.00% during the
six-month period.
The American Beacon equity funds posted strong returns in absolute terms
for the six-month period. The Institutional Class of the Emerging Markets Fund
posted an increase of 35.95% during the six months.
For the fixed-income funds, we saw rising interest rates offset the coupon
rates of the fund's holding to some extent, resulting in modest but positive
returns. The High Yield Bond Fund-Institutional Class gained 5.03% for the six
months. The Enhanced Income, Intermediate Bond, and Short-Term Bond Funds all
posted positive returns for the six-month period.
Our hope is that the enclosed market overviews, portfolio listings, and
detailed financial data are helpful to you. As always, we welcome the
opportunity to serve your financial needs. To obtain further details about the
American Beacon Funds family or access your account information, please visit
our web site at www.americanbeaconfunds.com. Thank you for your continued
confidence in the American Beacon Funds.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President, American Beacon Funds
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the performance
data quoted. To obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009.
1
AMERICAN BEACON FUNDS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUALIZED TOTAL RETURN AS OF
APRIL 30, 2006
---------------------------------------
INCEPTION TICKER 10 YEAR/
DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEP.
--------- ------ ------ ------ ------ ------------
Balanced Fund -- Institutional 7/17/87 AADBX 11.60% 14.98% 8.08% 8.80%
Balanced Fund -- PlanAhead 8/1/94 AABPX 11.39% 14.57% 7.81% 8.50%
Balanced Fund -- Service 5/31/05 ABLSX 10.84% 14.38% 7.70% 8.45%
Balanced Fund -- AMR 8/1/94 AABNX 11.89% 15.20% 8.39% 9.09%
Lipper Balanced Funds Index 12.57% 11.52% 4.62% 7.73%
Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 15.59% 13.16% -0.55% -6.50%
Large Cap Growth Fund -- AMR 7/31/00 ALFIX 15.94% 13.33% -0.43% -6.36%
Lipper Large-Cap Growth Funds Index 17.74% 12.37% -1.00% -6.70%
Mid-Cap Value Fund -- Institutional 02/28/06 AACIX 19.49% N/A N/A 15.78%
Mid-Cap Value Fund -- PlanAhead 02/28/06 AMPAX 19.49% N/A N/A 15.78%
Mid-Cap Value Fund -- AMR 06/30/04 AMDIX 19.64% N/A N/A 15.85%
Lipper Mid-Cap Value Funds Index 23.02% N/A N/A 15.45%
Small Cap Value Opportunity Fund -- Institutional 03/31/06 ASOIX N/A N/A N/A 1.80%
Small Cap Value Opportunity Fund -- PlanAhead 03/31/06 ASDPX N/A N/A N/A 1.80%
Lipper Small-Cap Value Funds Index N/A N/A N/A 0.86%
Emerging Markets Fund -- Institutional 7/31/00 AEMFX 58.14% 43.54% 24.24% 15.56%
Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 57.91% 43.23% 24.01% 15.37%
Emerging Markets Fund -- AMR 7/31/00 AAMRX 58.56% 43.92% 24.53% 15.85%
Lipper Emerging Markets Funds Index 61.47% 45.13% 24.25% 15.67%
High Yield Bond Fund -- Institutional 12/29/00 AYBFX 8.53% 8.27% 9.10% 9.24%
High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 8.37% 7.97% 8.85% 9.00%
Lipper High Current Yield Funds Index 9.03% 9.97% 6.99% 6.95%
Enhanced Income Fund -- PlanAhead 7/1/03 AANPX 4.41% N/A N/A 3.28%
Lipper Interm. Investment Grade Index 0.83% N/A N/A 2.24%
Intermediate Bond Fund -- Institutional 9/15/97 AABDX 0.58% 2.43% 4.81% 5.54%
Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX -0.03% 1.93% 4.26% 5.09%
Lipper Interm. Investment Grade Index 0.83% 2.74% 4.99% 5.58%
Short-Term Bond Fund -- Institutional 12/3/87 AASBX 2.58% 2.02% 3.58% 4.96%
Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 1.93% 1.44% 3.06% 4.45%
Lipper Short Investment Grade Index 2.34% 1.84% 3.06% 4.59%
</Table>
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be higher or lower than the performance
data quoted. To obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009.
Performance shown for the PlanAhead and AMR Classes prior to their inception
dates is that of the Institutional Class. Performance shown for the Service
Class prior to its inception date is that of the Institutional and PlanAhead
Classes since their inception dates. Fund performance does not reflect the
deduction of taxes a shareholder would pay on distributions or the redemption of
shares.
2
DOMESTIC EQUITY MARKET OVERVIEW
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Stocks continued their healthy climb despite high energy prices. Following a
lackluster finish in 2005, U.S. stock prices climbed steadily during the first
four months of 2006, ending near a five-year high. Despite continuing worries
over rising energy costs and the possibility of inflation, investors' confidence
remained firm.
Small-cap stocks in the U.S. continued to outperform their large-cap
counterparts, as has been the general trend since the bear market ended in 2002.
Value outperformed growth for the period, also continuing a multi-year trend.
International stocks continued to produce outstanding gains most notably in
Japan and emerging markets.
All eyes remained on the Federal Reserve Board ("the Fed") as it's measured
pace of raising short-term rates continued. On March 28, the Fed raised its
target for the federal funds rate to 4.75%, continuing its gradual tightening of
monetary policy to defuse the threat of inflation. This was the Fed's 15th
consecutive rate increase since June 2004. (Shortly after the close of the
fiscal period, the Fed extended its streak of rate increases to 16, raising its
target to 5.00%.)
Because the Fed's actions affect the economy with a lag, investors are
watching economic measures more closely -- either for evidence that higher rates
are slowing the economy, or for evidence that the economy can continue to grow
with modest inflation while absorbing higher rates (the so-called "goldilocks"
scenario). Heightened focus on the Fed and the economy has led to increased
volatility of equity returns, as daily market swings of 1% or more have become
more common.
While the ultimate effect of the Fed tightening cycle remains to be seen,
its effect on stock market returns will be reflected in the earnings growth and
valuation of the overall market. At the most basic level, market returns are
comprised of three components: earnings growth, the valuation of those earnings
(i.e. price-to-earnings ("P/E") expansion or contraction) and dividend yield.
The current environment for each component of return warrants some discussion.
EARNINGS: Earnings growth for the six months ended April 30 (and the past
several years) has been robust and well above the long-term average. While there
has been some deceleration over the six months, double-digit growth has
continued longer than most expected. Looking forward, earnings growth from the
financial sector may slow as higher short-term borrowing costs crimp earnings.
Additionally, the energy sector has been the largest contributor to earnings
growth and could see an earnings slowdown if energy prices pause or decline.
VALUATION: While P/E ratios (the price of a stock divided by its
anticipated earnings per share) have compressed significantly this decade, the
P/E of the S&P 500, based on reported earnings, remains at 17 times earnings.
This compares with a long-term average (since 1926) of 15 times earnings. Higher
interest rates typically reduce the multiple that investors are willing to pay
for stocks. Most importantly, however, the contribution of P/E expansion to
market returns over long periods is small and is dwarfed in importance by
earnings growth and dividend yield.
DIVIDENDS: Returning capital to shareholders via dividends continues to
grow in popularity. Favorable tax treatment, demographic trends, and investor
pressure have all been supportive of higher dividend payouts. However, because
earnings growth has been more robust, the percentage of earnings paid out in
dividends is near an all-time low. This should be supportive of higher dividend
payouts over time. Dividends will continue to be a critical component of overall
return.
Overall, the outlook for stock returns appears mixed. On the bullish side,
the economy remains resilient, corporate earnings are strong and profit margins
remain high. Investor concerns include a slowing economy, perhaps induced by
higher interest rates hurting the housing sector and consumer spending.
Additionally, we have enjoyed the longest bull market since 1982 and the second
longest period ever without a 10% correction, recent market weakness and
volatility notwithstanding.
3
DOMESTIC EQUITY MARKET OVERVIEW -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Regardless of future trends in the economy or markets, stock selection will
remain the key driver of performance going forward. This is especially true in
the current environment where, thanks to multi-year performance advantages of
small-cap over large-cap and value over growth, the lines between various styles
are less defined. So, stock selection may be more important than style or market
cap going forward.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON BALANCED FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Balanced Fund's Institutional Class returned 7.21% for the six months
ended April 30, 2006, underperforming the 60% S&P 500 Citigroup Value/40% Lehman
Brothers Aggregate Index benchmark return of 8.22% and the Lipper Balanced Funds
Index return of 7.85%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/06
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1)... 7.21% 11.60% 8.08% 8.80%
PlanAhead Class(1)....... 7.15% 11.39% 7.81% 8.50%
Service Class(1,2)....... 6.92% 10.84% 7.70% 8.45%
AMR Class(1)............. 7.41% 11.89% 8.39% 9.09%
Lipper Balanced Funds
Index................... 7.85% 12.57% 4.62% 7.73%
S&P 500 Index(3)......... 9.64% 15.42% 2.70% 8.94%
Linked S&P 500/ Citigroup
Value Index(3).......... 13.57% 20.87% 4.28% 9.55%
Lehman Bros. Aggregate
Index(3)................ 0.56% 0.71% 5.16% 6.33%
Balanced Composite
Index(4)................ 8.22% 9.37% 3.97% 8.24%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the one-year, five-year and ten-year
periods represents the total returns achieved by the PlanAhead Class from
4/30/96 up to 6/1/05, the inception date of the Service Class, and the
returns of the Service Class since its inception. Expenses of the Service
Class are higher than those of the PlanAhead Class. Therefore, total returns
shown may be higher than they would have been had the Service Class been in
existence since 4/30/96.
3. The S&P 500 Index is an unmanaged index of common
stocks publicly traded in the United States. The Linked S&P 500/Citigroup
Value Index represents returns of the S&P 500/Barra Value Index ("Barra
Index") up to October 31, 2005 and the S&P 500/Citigroup Value Style Index
("Citigroup Index") thereafter. The Barra Index is a market value weighted
index of stocks with book-to-price ratios in the top 50% of the S&P 500
Index. The Citigroup Index is a market value weighted index of stocks in the
S&P 500 that score highest based on an average book-to-price ratio, cash
flow-to-price ratio, sales-to-price ratio, and dividend yield, representing
50% of the total market value of the S&P 500. The Lehman Brothers Aggregate
Index is a market value weighted index of government, corporate,
mortgage-backed and asset-backed fixed-rate debt securities of all
maturities.
4. 60% Linked S&P 500/Citigroup Value Index, 40% Lehman
Brothers Aggregate Index.
During the six-month period, the Fund's assets on average were invested 65%
in equities (including equitized cash) and 35% in fixed-income securities,
ending the period with 66% in equities/equitized cash and 34% in fixed-income
securities.
The equity portion of the Fund (excluding equitized cash) returned 11.2%,
underperforming the S&P 500/Citigroup Value Style Index ("Citigroup Index")
return of 13.6%. The Fund underperformed the Citigroup Index both due to stock
selection and sector allocation. Stock selection in the Financials and Energy
sectors detracted most from the Fund's performance. In the Financials sector,
St. Paul Travelers (down 1.2%) and SLM (down 4.0%) hurt Fund performance while
the Fund's positions in ConocoPhillips (up 2.9%) and Devon Energy (down 0.1%)
accounted for a large portion of the Energy sector's underperformance.
Equity sector allocation also had a negative impact on the Fund's relative
returns during the six-month period, as the Fund was overweight in the Health
Care and Consumer Staples sectors, two of the poorer performing sectors of the
Citigroup Index.
The fixed-income portion of the Fund returned 0.7% for the six-month
period, slightly outperforming the Lehman Brothers Aggregate Index ("Lehman
Index") return of 0.6%. The Fund's fixed-income performance was due mostly to
good issuer selection in Finance and Industrial names within the Corporate
sector. The Fund's average duration during the six-month period was 3.3 years
(versus the Lehman Index average duration of 4.6 years), which helped
performance as interest rates rose during the period.
The sub-advisors continue to focus on the disciplined selection of
attractive securities with a goal of long-term added value.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON BALANCED FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
<Table>
<Caption>
% OF
EQUITIES
--------
Bank of America Corp. 2.0%
ConocoPhillips 1.8%
Citigroup, Inc. 1.5%
Altria Group, Inc. 1.3%
JP Morgan Chase & Co. 1.3%
Tyco International Ltd. 1.0%
MetLife, Inc. 1.0%
Washington Mutual, Inc. 1.0%
Electronic Data Systems Corp. 1.0%
Nokia Corp. 0.9%
</Table>
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 29.1%
Industrials 14.4%
Consumer Staples 8.7%
Consumer Discretionary 8.6%
Information Technology 8.5%
Energy 8.1%
Health Care 7.8%
Utilities 6.2%
Materials 5.6%
Telecommunication Services 3.0%
</Table>
FIXED-INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF FIXED
INCOME
----------
Agency 30.2%
Mortgage-Backed 28.4%
Corporate Bonds 24.6%
Treasury 15.7%
Asset-Backed 1.1%
</Table>
6
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP GROWTH FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Growth Fund returned 8.30% for the
six months ended April 30, 2006, compared to the Russell 1000 Growth Index
("Index") return of 7.06% and the Lipper Large-Cap Growth Funds Index return of
6.56%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
------------------------------------
PERIODS ENDED 4/30/06
--------------------------- SINCE
6 MONTHS* 1 YEAR 5 YEAR INCEP.
--------- ------ ------ ------
Institutional Class(1).... 8.30% 15.59% -0.55% -6.50%
AMR Class(1).............. 8.47% 15.94% -0.43% -6.36%
Lipper Large-Cap Growth
Funds Index.............. 6.56% 17.74% -1.00% -6.70%
Russell 1000 Growth
Index(2)................. 7.06% 15.18% -0.76% -6.82%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Russell 1000(R) Growth Index is a service mark of the Frank
Russell Company. The Russell 1000 Growth Index is an unmanaged index of
those stocks in the Russell 1000 Index with above-average price-to-book
ratios and above-average forecasted growth values.
The Fund gained relative value versus the Index due to good stock
selection, as sector allocation detracted slightly from performance.
From a stock selection standpoint, the Fund added value in seven of ten
sectors. Most of the value added was generated in the Information Technology,
Materials, Financials and Consumer Discretionary sectors. Positions in Corning,
Inc. (up 37.5%) and Western Digital Corp. (up 73.9%) contributed most to the
Information Technology sector's relative performance. In Materials, the Fund
benefited from owning Monsanto Company (up 33.0%) and United States Steel Corp.
(up 88.4%). The Goldman Sachs Group, Inc. (up 27.4%) and Circuit City Store,
Inc. (up 61.9%) were the top contributors in the Financials and Consumer
Discretionary sectors, respectively. The only significant detractor was poor
stock selection in the Health Care sector, where positions in Amgen, Inc. (down
10.6%) and Johnson & Johnson (down 5.4%) hurt performance.
Looking forward, the Fund's sub-advisors will continue to maintain a
disciplined, long-term approach to equity investing in larger stocks with above
average growth potential.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
General Electric Co. 5.1%
Procter & Gamble Co. 3.8%
Cisco Systems, Inc. 2.8%
Microsoft Corp. 2.7%
Johnson & Johnson 2.1%
The Boeing Co. 2.0%
Google, Inc. 1.9%
Amgen, Inc. 1.8%
Texas Instruments, Inc. 1.8%
Coach, Inc. 1.5%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Information Technology 23.7%
Health Care 19.0%
Consumer Discretionary 16.6%
Industrials 15.4%
Consumer Staples 8.5%
Financials 8.3%
Energy 3.9%
Materials 3.1%
Utilities 1.2%
Telecommunication Services 0.3%
</Table>
7
PERFORMANCE OVERVIEW
AMERICAN BEACON MID-CAP VALUE FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Mid-Cap Value Fund returned 11.13% for the
six months ended April 30, 2006. The Fund trailed the Russell Midcap Value Index
("Index") return of 13.58% and the Lipper Mid-Cap Value Funds Index return of
13.77%.
<Table>
<Caption>
TOTAL RETURNS
---------------------------
PERIODS ENDED 4/30/06
---------------------------
SINCE
6 MONTHS* 1 YEAR INCEP.
--------- ------ ------
Institutional Class(1,3)........ 11.13% 19.49% 15.78%
PlanAhead Class (1,2)........... 11.13% 19.49% 15.78%
AMR Class(1).................... 11.27% 19.64% 15.85%
Lipper Mid-Cap Value Funds
Index......................... 13.77% 23.02% 15.45%
Russell Midcap Value Index(4)... 13.58% 24.75% 20.75%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance represents the total returns achieved by
the AMR class from 6/30/04 up to 3/1/06, the inception date of the PlanAhead
Class, and the returns of the PlanAhead Class since its inception. Expenses
of the PlanAhead Class are higher than those of the AMR Class. As a result,
total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 6/30/04.
3. Fund performance represents the total returns achieved by
the AMR Class from 6/30/04 up to 11/30/05, the inception date of the
Institutional Class, and the returns of the Institutional Class since its
inception. Expenses of the Institutional Class are higher than those of the
AMR Class. As a result, total returns shown may be higher than they would
have been had the Institutional Class been in existence since 6/30/04.
4. Russell Midcap(R) Value Index is a service mark of the Frank
Russell Company. The Russell Midcap Value Index is an unmanaged index of
those stocks in the Russell Midcap Index with below-average price-to-book
ratios and below-average forecasted growth values.
The Fund underperformed the Index primarily due to stock selection, as
sector allocation detracted only slightly. The Fund's investments in the
Financials sector hurt performance most. The largest detractors were Willis
Group Holdings (down 4.2%), First American Financial (down 2.0%), XL Capital (up
4.2%), and American Financial Realty Trust (down 3.2%). Stock selection in the
Consumer discretionary and Industrials sectors also hurt the fund's performance.
In the Consumer discretionary sector, holdings in Rent-A-Center (up 53.3%) and
Sherwin-Williams (up 21.0%) aided Fund performance, but not enough to offset the
impact of positions in Lear (down 21.0%), RadioShack (down 22.2%), and Valassis
Communications, Inc. (down 6.3%). American Power Conversion (up 5.0%) was
responsible for most of the underperformance in the Industrials sector. The
Fund's holdings in the Health Care, Consumer Staples and Materials sectors added
value relative to the Index, but not enough to offset the shortfall of the
sectors mentioned above. Top contributors were AmerisourceBergen and Hillenbrand
Industries in the Health Care sector, Loews and Reynolds American in Consumer
Staples and Lafarge in Materials.
Sector weightings detracted only slightly from the Fund's performance
relative to the Index. An underweight in Utilities, the worst performing sector
in the Index, and an overweight in Industrials, the second best performing
sector in the Index, added value. Offsetting these positives were an underweight
in Materials, the best performing sector of the Index, and an overweight in
Health Care, the second worst performing sector.
The sub-advisors' philosophy of investing in undervalued companies that
exhibit improving profitability and earnings growth potential should allow the
Fund to benefit longer-term.
8
PERFORMANCE OVERVIEW
AMERICAN BEACON MID-CAP VALUE FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
Whirlpool Corp. 3.7%
Torchmark, Inc. 2.5%
XL Capital Ltd. 2.2%
AmerisourceBergen Corp. 2.2%
Magna International, Inc. 2.2%
Kennametal, Inc. 2.1%
Sempra Energy 2.0%
NBTY, Inc. 1.8%
Loews Corp. 1.8%
Radian Group, Inc. 1.8%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 27.2%
Consumer Discretionary 25.7%
Industrials 15.6%
Health Care 9.6%
Utilities 7.7%
Consumer Staples 6.4%
Information Technology 4.3%
Energy 2.3%
Materials 1.2%
</Table>
9
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Small Cap Value Opportunity Fund returned
2.00% for the one-month period from its inception on March 31 through April 30,
2006. The Fund was well ahead of the Russell 2000 Value Index ("Index") return
of 0.27% and outperformed the Lipper Small-Cap Value Funds Index return of
0.86%.
<Table>
<Caption>
TOTAL RETURNS
------------------
PERIODS ENDED
4/30/06
------------------
SINCE
1 MONTH* INCEP.*
-------- -------
Institutional Class(1)................... 2.00% 2.00%
PlanAhead Class(1)....................... 1.90% 1.90%
Lipper Small-Cap Value Funds Index....... 0.86% 0.86%
Russell 2000 Value Index(2).............. 0.27% 0.27%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Russell 2000(R) Value Index is a service mark of the Frank
Russell Company. The Russell 2000 Value Index is an unmanaged index of those
stocks in the Russell 2000 Index with below-average price-to-book ratios and
below-average forecasted growth values.
The Fund exceeded the Index due to good stock selection, as sector
allocation was neutral. Most of the excess performance came from the Fund's
holdings in the Financials sector, where Corus Bankshares (up 12.6%), First
Republic Bank/ San Francisco (up 15.1%), and Accredited Home Lenders (up 12.9%)
were the largest contributors. Holdings in the Industrials and Information
Technology sectors also were a source of excess performance. Among the Fund's
Industrial sector holdings, Gardner Denver (up 14.3%), Universal Forest Products
(up 17.8%), and Old Dominion Freight Line (up 19.5%) added the most value. In
the Information Technology sector, CommScope (up 15.8%), Belden CDT (up 14.9%),
and Sykes Enterprises (up 14.2%) were responsible for a large portion of the
excess return.
The sub-advisor's disciplined approach of investing in a diversified
portfolio of small cap value companies should allow the Fund to generate
competitive performance over longer periods of time.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
Corus Bankshares, Inc. 1.3%
Gardner Denver, Inc. 1.3%
Kennametal, Inc. 1.3%
FelCor Lodging Trust, Inc. 1.2%
Consolidated Graphics, Inc. 1.2%
Commercial Metals Co. 1.2%
Eagle Materials, Inc. 1.2%
Belden CDT, Inc. 1.1%
Accredited Home Lenders Holding Co. 1.1%
Dollar Thrifty Automotive Group, Inc. 1.1%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 31.7%
Industrials 17.6%
Consumer Discretionary 13.4%
Information Technology 11.5%
Materials 7.5%
Health Care 5.2%
Energy 5.1%
Utilities 4.0%
Consumer Staples 2.3%
Telecommunication Services 1.7%
</Table>
10
EMERGING MARKETS OVERVIEW
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
In the six months ended April 30, 2006, the Emerging Markets (up 38.6% in local
currency terms and 37.6% in dollar terms) as measured by the MSCI Emerging
Markets Index significantly outperformed developed markets as investors opted to
invest in riskier assets. Emerging Markets outperformed developed markets by 22%
during the period in review and by more than 10% over the last five years.
Favorable valuations relative to the developed world and stronger underlying
economies enticed investors. Appetite for Emerging Markets equities is at a
record high with year to date inflows greater than the whole of 2005. The period
in review, however, ended relatively weak due to renewed concerns about US
inflation and Fed tightening.
The Emerging Europe Middle East and North Africa (EMEA) was the best
performing region (up 49.4% in local currency terms and 40.4% in dollar terms)
as solid GDP growth and stable inflation fueled stocks. Russia (up 105% in local
currency terms and 107.0% in dollar terms) continued to shine given skyrocketing
oil prices during the quarter. Domestic consumption remained robust as evidenced
by surging retail sales in 2005. The Russian government continued its economic
liberalization efforts by proposing legislation to diversify the economy from
its volatile oil sector. South Africa (up 47.5%) saw strength from both domestic
and export sectors. Resource oriented stocks benefited from booming commodity
markets while domestic growth was boosted by a period of monetary and fiscal
stimulus.
Emerging Asia followed EMEA, returning 36.7% (29.2% in local currency
terms). The region was supported by strong exports and inflows into the market.
South Korea showed strong performance, consecutively peaking to all time highs.
However, the country has recently marked a correction. While investors had been
positive due to falling oil prices and earnings of Korean companies that are
dependent on domestic consumption recovery, demanding valuations, large domestic
investor redemptions and concerns over global growth have pressured the market
lower. Chinese equities (up 41.2%) saw a broad rally, with domestic
demand-driven sectors leading. China demonstrated strong GDP growth in 2005,
despite slowing fixed asset investment as the components of growth have
gradually started to shift towards more consumption from a heavy dependence on
investment.
Latin America continued to rally, surging 36.3% in dollar terms (31.2% in
local currency terms) during the period. The re-rating of the asset class
continued with inflows reaching record levels in early 2006 as both economic
fundamentals and valuations remained attractive. The period in review, however,
ended relatively weak due to renewed concerns about US inflation and Fed
tightening. Nevertheless, performance was strong across the region with
particular strength in Brazil, which surged 43.5%. Among the major markets,
Mexico and Chile followed returning 28.1% and 10.5%, respectively. Venezuela and
Argentina led the smaller markets. Venezuela surged 74.5% after the country's
largest telecom company rallied on news of a significant bid by Mexico's America
Movil, the region's largest wireless service provider. Argentina (up 55%),
despite rising inflation and ongoing political concerns, was driven by an
impressive rally in energy stocks.
11
PERFORMANCE OVERVIEW
AMERICAN BEACON EMERGING MARKETS FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Emerging Markets Fund returned 35.95% for
the six months ended April 30, 2006. The Fund underperformed the MSCI Emerging
Markets Index ("Index") return of 37.60% and the Lipper Emerging Market Funds
Index return of 36.64% for the period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
----------------------------------------
PERIODS ENDED 4/30/06
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEP.
--------- ------ ------- ------
Institutional
Class(1)............... 35.95% 58.14% 24.24% 15.56%
PlanAhead Class(1,2).... 35.79% 57.91% 24.01% 15.37%
AMR Class(1)............ 36.10% 58.56% 24.53% 15.85%
Lipper Emg Mkt Funds
Index.................. 36.64% 61.47% 24.25% 15.67%
MSCI Emg Mkts
Index(3)............... 37.60% 62.31% 23.72% 15.43%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the five-year and since inception
periods represents the total returns achieved by the Institutional Class
from 7/31/00 up to 10/1/02, the inception date of the PlanAhead Class, and
the returns of the PlanAhead Class since its inception. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. Therefore,
total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 7/31/00.
3. The MSCI Emerging Markets Index is a market
capitalization weighted index composed of companies that are representative
of the market structure of developing countries in Latin America, Asia,
Eastern Europe, the Middle East and Africa.
Although both country allocation and stock selection added value, the Fund
underperformed the Index over the six-month period primarily due to Fund
expenses and lower returns than the Index on the Fund's cash balances. Although
the average cash balance was a fairly modest 6.7%, it created a significant drag
on Fund performance given the strength of the emerging markets asset class
during the period.
Country allocation added value as the Fund underweighted the three
worst-performing markets in the Index for the six-month period -- Jordan (down
16.5%), Chile (up 10.9%) and Israel (up 11.3%). The Fund also added value by
overweighting India, which gained 48.2% during the period. The lone significant
country detraction during the period resulted from overweighting Mexico, as it
underperformed the Index with a return of 28.0%.
Stock selection was slightly positive during the six-month period, as
strong selections in India, South Africa, South Korea, Taiwan, Turkey, and
Malaysia more than offset poor selections in China, Mexico, and Brazil. In
India, Bharat Heavy Electronics gained 109.0%, while Mahanagar Telephone Nigam
returned 98.0%. In South Africa, Impala Platinum Holdings (up 82.6%) and two
financial companies -- African Bank Investments (up 94.1%) and Nedbank Group (up
64.7%) -- outperformed. In South Korea, Kookmin Bank gained 62.6%, and Korea
Zinc returned 163.0%.
Top contributors included High Tech Computer (up 201.3%) and Delta
Electronics (up 85.0%) in Taiwan, Dogan Yayin Holdings (up 100.5%) and Akcansa
Cimento (up 98.8%) in Turkey, and Resorts World (up 32.9%) and Genting (up
28.9%) in Malaysia. Positions that failed to keep pace with their home markets
included China Telecom Corp. (up 9.8%) in China, Telefonos De Mexico (up 10.6%)
and Grupo Televisa (up 16.0%) in Mexico, and Empresa Brasileira de Aeronautica
(Embraer) (up 0.8%) in Brazil.
The Fund's basic philosophy remains focused on investing in attractively
valued companies with above-average earnings growth expectations.
12
PERFORMANCE OVERVIEW
AMERICAN BEACON EMERGING MARKETS FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
LUKOIL Oil Co. ADR 3.3%
Petroleo Brasileiro S.A. ADR 2.1%
Samsung Electronics Company Ltd. 1.9%
America Movil S.A. de C.V., ADR 1.5%
RAO Gazprom, ADR 1.4%
Grupo Televisa, S.A., ADR 1.3%
Wal-Mart de Mexico, S.A. de C.V. 1.2%
United Microelectronics Corp. 1.2%
Kookmin Bank 1.2%
Petroleo Brasileiro S.A., ADR 1.1%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 20.5%
Consumer Discretionary 13.4%
Energy 12.9%
Industrials 10.9%
Information Technology 10.8%
Telecommunication Services 10.6%
Materials 9.3%
Consumer Staples 5.4%
Utilities 4.1%
Health Care 2.1%
</Table>
COUNTRY ALLOCATION
(PIE CHART)
<Table>
<Caption>
SOUTH KOREA BRAZIL TAIWAN SOUTH AFRICA MEXICO INDIA RUSSIA HONG KONG CHINA MALAYSIA
----------- ------ ------ ------------ ------ ----- ------ --------- ----- --------
15.5% 13.1 12.6% 11.0% 8.4% 8.1% 7.5% 3.7% 3.5% 2.8%
<Caption>
TURKEY POLAND THAILAND INDONESIA HUNGARY ISRAEL MOROCCO PHILIPPINES AUSTRIA CHILE
------ ------ -------- --------- ------- ------ ------- ----------- ------- -----
2.7% 2.5% 2.3% 1.9% 1.0% 0.9% 0.6% 0.6% 0.4% 0.4%
<Caption>
COLOMBIA CZECH REPUBLIC PERU ARGENTINA
-------- -------------- ---- ---------
0.2% 0.2% 0.1% 0.0%
</Table>
Investing in foreign equities entails additional risk not associated with
domestic equities, such as currency fluctuations, economic and political
instability and differences in accounting standards. The risks of investing in
foreign equities are heightened when investing in emerging markets.
13
DOMESTIC BOND MARKET OVERVIEW
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT GRADE*
For the six-month period ended April 30, 2006, the investment grade fixed income
market, as defined by the Lehman Brothers Aggregate Index (the "Index"),
returned 0.56%. Despite the rising interest rate environment, the fixed income
markets managed to produce relatively attractive total returns during the
period.
<Table>
<Caption>
TOTAL RETURNS
----------------------
PERIODS ENDED 4/30/06
----------------------
6 MONTH 12 MONTH
------- --------
Lehman Aggregate 0.56% 0.71%
Lehman Gov/Credit 0.13% 0.20%
- -----------------------------------------------------
SECTOR
US Treasury -0.14% -0.22%
US Agency 0.87% 1.33%
Mortgage Backed 1.25% 1.55%
Commercial MBS 0.76% 0.67%
Asset Backed 1.36% 2.02%
U.S. Credit: 0.04% 0.12%
Industrial -0.27% -0.51%
Utility -0.17% -0.40%
Finance 0.49% 0.65%
Non-Corporate -0.06% 0.78%
- -----------------------------------------------------
CREDIT QUALITY
Aaa 0.70% 0.88%
Aa 0.22% 0.19%
A -0.16% -0.39%
Baa 0.13% 0.44%
- -----------------------------------------------------
U.S. TREASURY
6 Month 2.07% 3.63%
2 Year 1.25% 1.78%
5 Year -0.26% -1.20%
10 Year -2.33% -3.49%
30 Year -6.01% -7.13%
</Table>
(source: Lehman Brothers)
During this period, the Federal Reserve Bank (the "Fed") raised the federal
funds rate by 1.00%, from 3.75% to 4.75%, and market participants widely
expected a rate of 5.00% at the next Fed meeting. The yield curve ended the
period very flat with the two-year Treasury yielding 4.86%, ten-year Treasuries
yielding 5.05%, and 30-year bonds at 5.16%. The yield curve began to invert in
late 2005 as the Fed raised rates, but solid economic growth and lingering
inflation fears in early 2006 pushed longer term rates up, thus flattening the
yield curve. All eyes were on the Fed and the ultimate destination of short-term
interest rates.
For the first time in 18 years, we witnessed a change in leadership at the
Fed. Alan Greenspan's succession by Ben Bernanke was a smooth transition, but it
led to renewed speculation about the Fed's approach towards monetary policy and
the path of interest rates.
Within the investment grade fixed income markets, the largest determinant
of sector returns during the period came from duration. Each sector has a
different duration, so intra-sector comparisons are difficult at face value. On
a duration-adjusted basis, the various spread sectors (including Credit,
Mortgages, Commercial Mortgage Backed Securities, Asset-Backed Securities, and
Agencies) outperformed Treasuries as spreads tightened in response to increased
investor demand for yield. The mortgage market also benefited from a moderation
in prepayment activity caused by rising interest rates. Within the Credit
sector, total returns across the credit spectrum were mixed, but in general,
lower quality outperformed higher quality as investors sought higher yields.
The highest total return among the major asset classes during the six
months ended April 30, 2006 came from mortgages, where a combination of low
duration and moderate refinancing activity helped this sector outperform. A
relatively low duration** was the primary reason for its outperformance as
interest rates rose across the yield curve; however, mortgages also benefited
from the rising rate environment as refinancing activity decreased. Rates on all
types of mortgage products rose, which lowered the incentive for homeowners to
refinance. Mortgage refinancing was a persistent factor in the mortgage market
when interest rates hovered at unusually low
14
DOMESTIC BOND MARKET OVERVIEW -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
levels, but with the recent interest in longer-term interest rates, refinancing
activity has diminished.
* Credit ratings are a measure of the quality and safety of a
bond based on the issuer's financial condition. Typically, AAA is the
highest (best) and D is the lowest (worst) with those rated BBB and higher
considered to be investment grade.
** Duration is a measure of price sensitivity relative to changes
in interest rates. For example, if a bond had a duration of four years, a 1%
increase in U.S. Treasury interest rates could be expected to result in a 4%
decrease in the value of the bond. Therefore, portfolios with longer
duration are typically more sensitive to changes in interest rates.
(PERFORMANCE GRAPH)
<Table>
4.76 3.88
4.90 4.21
4.89 4.24
4.89 4.27
4.88 4.29
4.87 4.32
4.87 4.35
4.86 4.37
2 Yr. 4.86 4.38
4.87 4.39
4.87 4.39
4.88 4.40
4.88 4.40
4.88 4.41
4.89 4.41
4.89 4.42
4.90 4.42
4.90 4.43
4.91 4.44
5 Yr. 4.91 4.44
4.92 4.45
4.92 4.45
4.93 4.46
4.94 4.46
4.95 4.47
4.95 4.47
4.96 4.48
4.97 4.49
4.97 4.49
4.98 4.50
4.99 4.50
4.99 4.51
5.00 4.51
5.01 4.52
5.02 4.52
5.02 4.53
5.03 4.53
5.04 4.54
5.04 4.55
10 Yr. 5.05 4.55
5.05 4.55
5.05 4.56
5.05 4.56
5.06 4.56
5.06 4.56
5.06 4.57
5.06 4.57
5.06 4.57
5.06 4.57
5.06 4.58
5.07 4.58
5.07 4.58
5.07 4.58
5.07 4.59
5.07 4.59
5.07 4.59
5.07 4.59
5.08 4.60
5.08 4.60
5.08 4.60
5.08 4.60
5.08 4.61
5.08 4.61
5.08 4.61
5.09 4.61
5.09 4.62
5.09 4.62
5.09 4.62
5.09 4.62
5.09 4.63
5.09 4.63
5.09 4.63
5.10 4.63
5.10 4.64
5.10 4.64
5.10 4.64
5.10 4.64
5.10 4.65
5.10 4.65
5.11 4.65
5.11 4.66
5.11 4.66
5.11 4.66
5.11 4.66
5.11 4.67
5.11 4.67
5.12 4.67
5.12 4.67
5.12 4.68
5.12 4.68
5.12 4.68
5.12 4.68
5.12 4.69
5.13 4.69
5.13 4.69
5.13 4.69
5.13 4.70
5.13 4.70
5.13 4.70
5.13 4.70
5.14 4.71
5.14 4.71
5.14 4.71
5.14 4.71
5.14 4.72
5.14 4.72
5.14 4.72
5.15 4.72
5.15 4.73
5.15 4.73
5.15 4.73
5.15 4.73
5.15 4.74
5.15 4.74
5.16 4.74
5.16 4.74
5.16 4.75
5.16 4.75
5.16 4.75
30 Yr. 5.16 4.75
</Table>
The credit markets have experienced a period of relative calm in 2006 after the
domestic auto manufacturers finally found their way out of the investment grade
debt markets. Firmly planted in the high yield sector in late 2005, the auto
manufacturer impact on the broader investment grade market was minimal. However,
as the auto story faded, credit investors quickly shifted gears towards the
aggressive shareholder-friendly initiatives that companies, whose stock prices
lagged, began to engage. In general, credit fundamentals are very good -- debt
issuance is low, balance sheets are strong, and profitability is also strong.
Some companies, unfortunately, had this profile along with a flat stock price,
which led equity investors to pressure management to increase leverage for the
benefit of shareholders. With spreads (or interest rate differentials) at
relatively tight levels, managements were further encouraged to use the debt
markets for low-cost financing. This environment created significant
issuer-specific risk, but fortunately the broader credit market held up
relatively well.
(PERFORMANCE GRAPH)
<Table>
<Caption>
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT
----- ---------- --------- -------- ----------
Apr-04 88.00 34.00 39.00 68.00 129.00
87.00 34.00 39.00 68.00 127.00
86.00 33.00 40.00 67.00 126.00
83.00 32.00 39.00 66.00 121.00
86.00 33.00 41.00 67.00 127.00
91.00 36.00 44.00 71.00 132.00
94.00 37.00 46.00 75.00 137.00
93.00 36.00 45.00 74.00 135.00
93.00 37.00 46.00 74.00 134.00
93.00 36.00 46.00 74.00 135.00
93.00 36.00 45.00 75.00 134.00
92.00 36.00 45.00 75.00 133.00
92.00 37.00 45.00 75.00 132.00
Jul-04 95.00 38.00 47.00 77.00 136.00
95.00 38.00 47.00 77.00 137.00
92.00 36.00 47.00 76.00 132.00
91.00 36.00 46.00 75.00 131.00
90.00 36.00 46.00 75.00 128.00
92.00 36.00 47.00 76.00 132.00
92.00 36.00 47.00 76.00 132.00
90.00 35.00 46.00 75.00 129.00
89.00 34.00 45.00 74.00 127.00
87.00 34.00 44.00 73.00 125.00
88.00 34.00 45.00 73.00 127.00
86.00 34.00 44.00 72.00 124.00
86.00 33.00 43.00 70.00 124.00
Oct-04 84.00 34.00 43.00 70.00 121.00
84.00 34.00 43.00 70.00 121.00
84.00 33.00 42.00 69.00 122.00
86.00 33.00 42.00 69.00 126.00
84.00 33.00 42.00 68.00 123.00
80.00 31.00 39.00 65.00 117.00
79.00 30.00 39.00 64.00 115.00
78.00 29.00 39.00 64.00 115.00
76.00 28.00 37.00 61.00 113.00
77.00 29.00 39.00 63.00 113.00
76.00 28.00 38.00 60.00 112.00
76.00 28.00 38.00 61.00 112.00
76.00 28.00 38.00 61.00 111.00
75.00 28.00 38.00 61.00 110.00
Jan-05 74.00 28.00 37.00 59.00 109.00
76.00 28.00 38.00 61.00 113.00
77.00 28.00 37.00 61.00 115.00
74.00 28.00 37.00 59.00 111.00
74.00 28.00 38.00 60.00 110.00
74.00 28.00 38.00 59.00 110.00
73.00 28.00 38.00 58.00 108.00
71.00 28.00 36.00 57.00 106.00
71.00 28.00 37.00 57.00 106.00
70.00 27.00 36.00 56.00 105.00
76.00 29.00 39.00 59.00 116.00
78.00 29.00 40.00 59.00 120.00
Apr-05 86.00 32.00 44.00 67.00 132.00
86.00 31.00 44.00 65.00 133.00
98.00 34.00 47.00 72.00 158.00
93.00 34.00 47.00 69.00 145.00
96.00 34.00 47.00 72.00 151.00
80.00 35.00 47.00 71.00 115.00
85.00 35.00 49.00 77.00 121.00
83.00 35.00 48.00 75.00 120.00
80.00 33.00 47.00 72.00 115.00
87.00 33.00 57.00 76.00 132.00
87.00 34.00 56.00 76.00 132.00
86.00 34.00 55.00 76.00 131.00
88.00 33.00 54.00 76.00 136.00
Jul-05 85.00 32.00 54.00 74.00 131.00
84.00 32.00 53.00 73.00 130.00
82.00 31.00 52.00 71.00 125.00
80.00 31.00 51.00 70.00 123.00
79.00 32.00 51.00 69.00 119.00
79.00 32.00 51.00 69.00 120.00
80.00 33.00 52.00 69.00 120.00
80.00 33.00 53.00 69.00 121.00
77.00 32.00 53.00 68.00 115.00
83.00 34.00 55.00 72.00 123.00
81.00 34.00 54.00 71.00 120.00
81.00 34.00 54.00 72.00 120.00
81.00 33.00 54.00 71.00 122.00
81.00 32.00 53.00 72.00 120.00
Oct-05 82.00 33.00 55.00 73.00 122.00
86.00 32.00 55.00 75.00 131.00
83.00 32.00 55.00 74.00 125.00
84.00 33.00 56.00 75.00 126.00
84.00 34.00 57.00 75.00 126.00
85.00 34.00 57.00 76.00 127.00
87.00 35.00 58.00 77.00 131.00
88.00 35.00 57.00 77.00 132.00
88.00 36.00 58.00 78.00 133.00
89.00 37.00 59.00 78.00 134.00
89.00 37.00 59.00 79.00 134.00
82.00 36.00 59.00 78.00 116.00
83.00 37.00 60.00 80.00 116.00
Jan-06 84.00 37.00 60.00 80.00 117.00
84.00 37.00 60.00 80.00 117.00
83.00 36.00 59.00 79.00 116.00
81.00 36.00 59.00 78.00 113.00
80.00 36.00 59.00 77.00 113.00
80.00 36.00 58.00 77.00 113.00
79.00 36.00 57.00 76.00 111.00
78.00 35.00 57.00 76.00 109.00
78.00 35.00 56.00 76.00 109.00
79.00 35.00 57.00 77.00 111.00
80.00 37.00 58.00 78.00 111.00
81.00 36.00 58.00 78.00 113.00
81.00 37.00 59.00 79.00 113.00
Apr-06 82.00 38.00 59.00 79.00 114.00
82.00 37.00 60.00 80.00 113.00
81.00 38.00 59.00 79.00 112.00
80.00 37.00 58.00 77.00 109.00
</Table>
During the period, credit spreads were flat within the higher quality
issuers. Only the triple-B rated issuers tightened on average, which was
partially due to the removal of the auto companies from the Index and partially
due to investor demand for yield. This spread tightening was also seen, for
example, in the high yield markets where incremental yield attracted investors
there as well.
Within the government sectors, Agencies outperformed Treasuries due
primarily to their shorter duration. On a duration-adjusted basis, Agencies only
minimally outperformed Treasuries as spreads improved only slightly. The
headlines were relatively quiet for Agencies during this period. Management and
accounting enhancements were being implemented, and investors awaited resolution
of Fannie Mae's financial statement adjustments. No surprises or new news
surfaced as the investigations continued. Issuance from the Agencies has been
low, since their balance sheet growth is restricted; therefore, spreads continue
to hover at low levels.
15
DOMESTIC BOND MARKET OVERVIEW -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Asset-Backed and Commercial Mortgage-Backed sectors produced returns
similar to the high quality Credit sector after adjusting for the basic
differences in interest rate sensitivity. These sectors are a relatively small
portion of the Index, but they posted reasonably attractive returns nonetheless.
On average, the domestic bond markets continued to post positive total
returns despite the rise in interest rates. Going forward, however, with the
yield curve extremely flat (relatively little differential between long- and
short-term interest rates), the movement of longer-term interest rates will
likely dictate bond market returns.
16
HIGH YIELD BOND MARKET OVERVIEW
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 2006, the Citigroup High Yield Market Capped
Index returned 4.97%.
The Federal Reserve raised short term interest rates seven times in 2005,
taking the federal funds rate from 2.25% to 4.00%. Under this pressure, it was
actually surprising that 10 year Treasury yields only rose 0.25%, and 30 year
yields actually declined. From a simplistic perspective, it became harder to
justify low high yield returns when alternatives such as money market funds
started looking better. This might have been a major reason why high yield
mutual funds had net redemptions of over $8 billion from the market.
Energy prices spiraled upward in 2005. Oil went from $42 a barrel to $60 a
barrel, with a stop at $70 in between. Natural gas more than doubled going from
$5.79 per thousand cubic feet to over $13.
The high yield market got off to a strong start in January, just as it has
done in 14 of the past 16 years. The Lehman Brothers High Yield Index rose 1.60%
propelled by General Motors (6.47%) and Ford (5.68%). These issues carried
weights of 6.3% and 5.6%, respectively. In Lehman's "capped" index (2% maximum
weight for any issuer) the return was 1.19% for the month, more in line with the
J.P. Morgan and Credit Suisse high yield indices, which were 1.24% and 1.29%,
respectively.
Evidence that the world may indeed be flat came from the status of the
Treasury yield curve at the end of January. The 14th Fed tightening move to
4.50% on the federal funds rate pushed the two-year Treasury rate up to 4.52%,
exactly the same yield as the ten-year. Only a year prior (January 2005), that
spread was 0.75% (in high yield, of course, there is still a yield curve as
investors correctly view credit risk as increasing over time).
The market easily absorbed $14.5 billion of new issues in January, led by
one of the largest new offerings ever -- $3.6 billion for NRG Energy. There were
several other large issues, including $2.9 billion for Ineos, $2.1 billion for
RH Donnelley, $1.5 billion for Echostar and shortly after month-end, $1 billion
for HCA. Despite a robust month for issuance, refinancing, tenders and
maturities were more than offsetting, shrinking the high yield market size to an
estimated $958 billion, well below the June 2005 peak of $1.006 trillion.
The high yield market also had a solid February. The December-February
period has been seasonally strong for years, mainly due to technical factors:
new allocations to the high yield asset class at the beginning of the year
generally outpace the new issue supply. February's new issuance total of $5.1
billion was the lowest February since 2002 and well below an average of over $13
billion in December and January. The supply situation was even worse than it
appeared because January/February redemptions and net upgrades to investment
grade actually exceeded new issuance. As a result, the estimated size of the
market continued to shrink. It fell to $945 billion at the end of February.
In March, the high yield market shrugged off another Fed rate hike and
higher Treasury yields to notch its fifth month in a row of positive returns.
After General Motors and Ford Motor were downgraded, and their huge amounts
of debt moved into the high yield universe, developments at both companies
promise to have a major impact on the market's performance. The two biggest
factors were a possible partial sale of GMAC and a possible strike at Delphi,
GM's key parts supplier. On April 3, GM announced plans to sell a 51% interest
in GMAC to a consortium led by Cerberus Capital. GMAC bonds were unchanged after
the announcement. This was not the best possible outcome, as bondholders were
hoping GMAC would be sold to an investment grade company.
The next hurdle is Delphi. Its workers have rejected an offer, subsidized
by GM, to accept wages more in line with current industry standards. A strike
could ultimately shut down GM's production after inventories of stockpiled parts
are used up. Meanwhile, GM has reported disappointing sales volumes -- March,
for example, was down 13%. Given the negative overall industry dynamics and the
game of "chicken," which is being played out between management and the unions,
there are nu-
17
HIGH YIELD BOND MARKET OVERVIEW -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
merous possible outcomes and nothing is easy to predict.
The high yield market continued to withstand heavy U.S. Treasury headwinds
in April and posted its sixth consecutive month of positive returns. Year-
to-date through April 2006, the Lehman Brothers 2% Capped Index was 3.24%
compared with a U.S. Treasury index that was -1.64%, an outperformance of almost
five percentage points. This feat, in such a short time frame, could only have
been accomplished by a significant compression of yield spreads. Indeed, the
Lehman index spread shrank from 3.86% over Treasuries at the end of 2005 to
3.17% as of April 30.
The main pressure on the market has been in the "BB-rated" (presumably
"safer") sector which most directly competes with Treasuries. Through April,
BB's have lagged the total high yield market, posting a low 2.14% total return.
This has created perhaps the lowest BB to B sector spread in history, at a mere
0.36%, with BB's at 2.55% and B's at 2.91%. This tightness has been exaggerated
by GMAC, Ford Motor and Ford Motor Credit's inclusion in the BB's. Without them,
the BB-to-Treasury spread would be around 2.10% and the BB to B would widen to
about 0.80%, but that is still very tight.
18
PERFORMANCE OVERVIEW
AMERICAN BEACON HIGH YIELD BOND FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the High Yield Bond Fund returned 5.03% for the
six months ended April 30, 2006. The Fund outperformed the Citigroup High Yield
Market Capped Index ("Index") return of 4.97% but slightly trailed the Lipper
High Current Yield Funds Index which gained 5.05% for the period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
-------------------------------------
PERIODS ENDED 4/30/06
-------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEP.
--------- ------ ------- ------
Institutional Class(1)...... 5.03% 8.53% 9.10% 9.24%
PlanAhead Class(1,2)........ 5.01% 8.37% 8.85% 9.00%
Lipper High Current Yield
Funds Index................ 5.05% 9.03% 6.99% 6.95%
Citigroup High-Yield Market
Capped Index(5)............ 4.97% 8.69% N/A N/A
Lehman Bros. High-Yield
Index(4)................... 4.95% 9.16% 8.54% 8.99%
Citigroup High-Yield Market
Index(3)................... 4.97% 8.61% 8.70% 9.03%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the since inception period represents
the total returns achieved by the Institutional Class from 12/29/00 up to
3/1/02, the inception date of the PlanAhead Class, and the returns of the
PlanAhead Class since its inception. Expenses of the PlanAhead Class are
higher than those of the Institutional Class. As a result, total returns
shown may be higher than they would have been had the PlanAhead Class been
in existence since 12/29/00.
3. The Citigroup High-Yield Market Index ("Citigroup Index")
has replaced the Lehman Brothers U.S. Corporate High Yield Index as the
Fund's broad-based market index, because the Manager has access to better
statistical and performance information for the Citigroup Index. The
Citigroup Index is an unmanaged index of fixed income securities with a
maximum credit rating of BB+, a minimum amount outstanding of $100 million,
and at least 1 year to maturity.
4. The Lehman Brothers U.S. Corporate High Yield Index is an
unmanaged index of fixed income securities with a maximum credit rating of
Ba1, a minimum amount outstanding of $100 million, and at least one year to
maturity.
5. The Citigroup High-Yield Market Capped Index ("Citigroup
Capped Index") is an unmanaged index of fixed income securities with a
maximum credit rating of BB+, a minimum amount outstanding of $100 million,
and at least 1 year to maturity. The total par amount outstanding for each
issuer in the Citigroup Capped Index is capped at $5 billion, which results
in a more diversified index of securities that more closely reflects the
Fund's issuer diversification. The Citigroup Capped Index has an inception
date of 1/2/02.
The Fund outperformed the Index over the six-month period predominately due
to issue selection, although sector allocation was also positive. Issue
selection was strong in the Manufacturing, Consumer and Finance sectors and more
than made up for poor issue selection in the Service sector.
From a sector allocation perspective, the Fund overweighted the two largest
sectors in the Index -- Manufacturing and Service, which added value as these
sectors gained 5.9% and 5.2%, respectively. The Fund was also positively
impacted by underweighting the two worst performing sectors for the period,
Energy and Other Corporate as both trailed the Index with gains of 3.1% and
2.1%, respectively. It is important to note that any sector over- or
underweighting is a residual of the investment process and not an active part of
the Fund's strategy.
Hindering the Fund's sector allocation was the underweighting of the two
top performing sectors for the period, Transportation and Telecommunications.
Transportation, the smallest sector in the Index with a weight of 0.8%, was the
top performing sector in the period with a gain of 10.2%, while
Telecommunications ranked second with a return of 8.1%.
Despite the increase in Treasury yields over the past six months, high
yield spreads have tightened to historically narrow levels, due in part to
strong corporate profit growth and low default rates. This priced-to-perfection
environment should benefit the sub-advisor's "bottom up," research intensive
investment process, which focuses on companies with strong cash flow and
fundamental credit strength.
19
PERFORMANCE OVERVIEW
AMERICAN BEACON HIGH YIELD BOND FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The sub-advisor believes that this comprehensive research approach, which has
generated outperformance for the Fund in the past, will continue to deliver
strong performance over the long term.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
UNOVA, Inc., 7.00%, Due 3/15/2008................. 1.3%
Turning Stone Casino Resort, 9.125%, Due
12/15/2010...................................... 1.2%
PetroQuest Energy, Inc., 10.375%, Due 5/15/2012... 1.0%
E*Trade Financial Corp., 8.00%, Due 6/15/2011..... 1.0%
Crystal US Holdings 3 LLC / Crystal US Sub 3 Corp,
10.50%, Due 10/1/2014........................... 1.0%
Kabel Deutschland GMBH, 10.625%, Due 7/1/2014..... 0.9%
Massey Energy Co., 6.875%, Due 12/15/2013......... 0.9%
Echostar DBS Corp., 6.625%, Due 10/1/2014......... 0.9%
Knowledge Learning Corp., 7.75%, Due 2/1/2015..... 0.9%
K. Hovnanian Enterprises, Inc., 8.875%, Due
4/1/2012........................................ 0.9%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF FIXED
INCOME
----------
Corporate Bonds................................ 99.3%
Convertibles................................... 0.7%
</Table>
20
PERFORMANCE OVERVIEW
AMERICAN BEACON ENHANCED INCOME FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The PlanAhead Class of the Enhanced Income Fund returned 2.97% for the six
months ended April 30, 2006. Its benchmark, a blend of 75% Lehman Brothers
Gov/Credit Intermediate Index and 25% Merrill Lynch All U.S. Convertibles Index,
returned 2.76%. The Fund's peer group, the Lipper Intermediate Investment Grade
Index, returned 0.59% over the period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
--------------------------------
PERIODS ENDED 4/30/06
--------------------------------
SINCE
6 MONTHS* 1 YEAR INCEPTION
--------- ------ ---------
PlanAhead Class(1).......... 2.97% 4.41% 3.28%
Lipper Interm. Investment
Grade Index............... 0.59% 0.83% 2.24%
Enhanced Income Composite
Index(2).................. 2.76% 4.68% 3.64%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated, and current performance may be
lower or higher than the performance data quoted. To obtain performance as
of the most recent month end, please visit www.americanbeaconfunds.com or
call 1-800-967-9009. Fund performance shown in the table above does not
reflect the deduction of taxes a shareholder would pay on distributions or
the redemption of shares.
2. 75% Lehman Bros. Gov./Credit Intermediate Index, 25%
Merrill Lynch All U.S. Convertibles Index. The Lehman Bros. Gov./Credit
Intermediate Index is an unmanaged index of investment grade corporate and
government debt issues with maturities between one and ten years. The
Merrill Lynch All U.S. Convertibles Index is an unmanaged index of domestic
securities of all quality grades that are convertible into U.S.
dollar-denominated common stock, ADRs or cash equivalents.
The Fund's assets have been allocated approximately 75% to American Beacon
Advisors, Inc. (the "Manager") which invests primarily in income producing,
short- and intermediate-term investment grade bonds and 25% to a sub-advisor
which invests in securities including convertible bonds, convertible preferreds,
high yield bonds and equities in order to try to enhance the return of the
overall Fund.
During the six-month period, the investment grade bond portion of the Fund
returned 1.0% before expenses compared to a 0.7% return for Lehman Brothers
Gov/Credit Intermediate Index ("Lehman Index"). As interest rates rose during
the period, this portion of the Fund benefited from its relatively short
duration (3.4 years versus 3.6 years for the Lehman Index). Security selection
in the Corporate sector and the decision to own Mortgages (not a Lehman Index
component) also added value but was offset somewhat by underperformance in the
U.S. Treasury sector.
The remaining portion of the Fund managed by the Fund's sub-advisor
returned 10.9% before expenses. These results beat the 9.0% return of the
Merrill Lynch All U.S. Convertibles Index ("ML Index") and contributed
substantially to the Fund's absolute return. This portion of the Fund benefited
most from owning common stocks and convertible securities with high equity
sensitivity relative to the ML Index, reflecting the positive returns within the
equity markets for the period.
The Manager and the Fund's sub-advisor remain focused on the Fund's
investment objectives of generating income and capital appreciation.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
U.S. Treasury Note, 4.00%, Due 2/15/2014 4.4%
U.S. Treasury Note, 5.00%, Due 8/15/2011 4.3%
U.S. Treasury Note, 4.75%, Due 5/15/2014 3.9%
Prudential Insurance Company of America, 6.375%,
Due 7/23/2006 1.9%
General Electric Capital Corp., 4.125%, Due
3/4/2008 1.8%
Household Finance Corp., 5.75%, Due 1/20/2007 1.6%
Wachovia Corp., 6.40%, Due 4/1/2008 1.4%
Credit Suisse First Boston USA, Inc., 5.875%, Due
8/1/2006 1.4%
U.S. Treasury Note, 3.875%, Due 5/15/2010 1.4%
John Hancock Global Funding, 5.625%, Due 6/27/2006 1.3%
</Table>
FIXED-INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF FIXED
INCOME
----------
Corporate Bonds................................. 51.0%
Treasury........................................ 17.3%
Total Convertible Bonds......................... 16.0%
Mortgage-Backed................................. 9.9%
Asset-Backed.................................... 4.7%
Agency.......................................... 1.1%
</Table>
21
PERFORMANCE OVERVIEW
AMERICAN BEACON ENHANCED INCOME FUND(SM) -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials........................................ 52.5%
Information Technology............................ 23.4%
Health Care....................................... 10.4%
Industrials....................................... 10.1%
Consumer Discretionary............................ 3.6%
</Table>
22
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERMEDIATE BOND FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Intermediate Bond Fund returned 0.42% for
the six months ended April 30, 2006, trailing the Lehman Brothers Aggregate
Index ("Index") return of 0.56% and the Lipper Intermediate Investment Grade
Index return of 0.59%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
-------------------------------------
PERIODS ENDED 4/30/06
-------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEP.
--------- ------ ------- ------
Institutional
Class(1)............. 0.42% 0.58% 4.81% 5.54%
PlanAhead Class(1,2)... 0.13% -0.03% 4.26% 5.09%
Lipper Interm.
Investment Grade
Index................ 0.59% 0.83% 4.99% 5.58%
Lehman Bros. Agg.
Index(3)............. 0.56% 0.71% 2.58% 6.01%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may be
worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. Fund performance for the since inception period represents the total
returns achieved by the Institutional Class from 9/15/97 up to 3/2/98, the
inception date of the PlanAhead Class, and the returns of the PlanAhead
Class since its inception. Expenses of the PlanAhead Class are higher than
those of the Institutional Class. As a result, total returns shown may be
higher than they would have been had the PlanAhead Class been in existence
since 9/15/97.
3. Since inception return is from 8/31/97. The Lehman Brothers
Aggregate Index is a market value weighted performance benchmark for
government, corporate, mortgage-backed and asset-backed fixed-rate debt
securities of all maturities.
The Fund underperformed the Index primarily due to its exposure to U.S.
Treasuries. The Fund added value through positive security selection in the
Corporate sector and by underweighting U.S. Treasuries, the worst performing
sector of the Index. However, performance suffered as the U.S. Treasuries the
Fund owned underperformed those in the Index. The Fund's duration was similar to
that of the Index over the course of the six months and, therefore, had minimal
impact on the Fund's performance.
The Fund's investment managers remain focused on a conservative approach
toward investing in the bond market, focusing on issuer-specific opportunities.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
--------
Federal Home Loan Bank, Discount Note, Due
5/10/2006 6.5%
Federal National Mortgage Association, 6.00%, Due
12/11/2033 6.5%
U.S. Treasury Note, 3.875%, Due 5/15/2010 3.2%
U.S. Treasury Note, 4.75%, Due 5/15/2014 2.4%
U.S. Treasury Bond, 5.275%, Due 2/15/2031 2.2%
U.S. Treasury Note, 4.50%, Due 2/15/2016 1.7%
Federal National Mortgage Association, Pool
#735224, 5.50%, Due 2/1/2035 1.6%
Countrywide Alternative Loan Trust, Inc., 6.00%,
Due 11/25/2035 1.5%
Federal Home Loan Bank, 4.40%, Due 7/28/2008 1.4%
Federal National Mortgage Association, Pool
#254545, 5.00%, Due 12/1/2017 1.3%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF FIXED
INCOME
----------
Mortgage-Backed 36.2%
Corporate Bonds 29.4%
Agency 16.8%
Treasury 16.0%
Asset-Backed 1.6%
</Table>
23
PERFORMANCE OVERVIEW
AMERICAN BEACON SHORT-TERM BOND FUND(SM)
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Short-Term Bond Fund returned 1.66% for the
six months ended April 30, 2006, which outperformed the Merrill Lynch 1-3 Year
Gov/Corp. Index (the "Index") return of 1.49% and the Lipper Short Investment
Grade Bond Funds Index ("Lipper") return of 1.54%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
------------------------------------------
PERIODS ENDED 4/30/06
------------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional
Class(1)............. 1.66% 2.58% 3.58% 4.96%
PlanAhead Class(1).... 1.28% 1.93% 3.06% 4.45%
Lipper Short Inv.
Grade Index.......... 1.54% 2.34% 3.06% 4.59%
Merrill Lynch 1-3 Yr.
Gov./Corp.
Index(2)............. 1.49% 2.27% 3.58% 5.06%
</Table>
* Not Annualized
1. Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may be
worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. The Merrill Lynch 1-3 Yr. Gov./Corp. Index is a market value
weighted performance benchmark for government and corporate fixed-rate debt
securities with maturities between one and three years.
The Fund's outperformance during the period was due to a combination of its
short duration and an overweight position in the Corporate sector.
Duration played the largest role in the Fund's total return as interest
rates rose across the yield curve in response to the Fed's tightening of
interest rates. The federal funds rate rose by 1.00% (from 3.75% to 4.75%), and
longer-term rates followed suit as the economy posted reasonable growth and as
inflation edged slightly higher. Interest rates rose in a parallel fashion,
which allowed shorter maturities to substantially outperform longer maturities
The Fund generally invests in shorter maturities along the yield curve (0 to 5
years) and had a weighted average duration of approximately 1.6 years during the
period versus 1.8 years for the Index.
Also contributing to the Fund's outperformance was its overweight position
in the Corporate sector, which posted the best returns among sectors in the
Index. In general, credit spreads had been in a relatively narrow range since
early 2004, but they tightened during the period as financial strength continued
to improve and investor appetite for yield increased. Returns across the credit
rating spectrum were mixed, but in general, lower quality outperformed higher
quality due to strong demand for yield.
The Fund also held an overweight position in the Asset-Backed sector (autos
and credit cards), which outperformed their government equivalents during the
period due to investors' attraction to their incremental yield to maturity.
The Fund's underweight position in the U.S. Agency sector, which posted
returns similar to those of the Corporate sector, resulted in the Fund's
underperformance in that sector compared to the Index. However, the Fund's
outperformance in Corporate and Asset-Backed securities more than made up for
this U.S. Agency underweighting.
Going forward, the Fund's investment manager will continue to monitor
interest rates and adjust the Fund's duration accordingly.
24
FUND EXPENSES
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
FUND EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs, including redemption fees if applicable, and (2) ongoing costs, including
management fees, administrative service fees, and other Fund expenses. The
examples below are intended to help you understand the ongoing cost (in dollars)
of investing in a particular Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in a Fund through an IRA may be
subject to a custodial IRA fee of $12 that is typically deducted each December.
If your account was subject to a custodial IRA fee during the period, your costs
would have been $12 higher.
<Table>
<Caption>
LARGE CAP MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD INTERMEDIATE
INSTITUTIONAL CLASS BALANCED GROWTH VALUE OPPORTUNITY** MARKETS BOND BOND
- ------------------- --------- --------- --------- --------------- --------- ---------- ------------
Beginning Account Value
11/1/05...................... $1,000.00 $1,000.00 $1,000.00 $ 1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 4/30/06... $1,072.14 $1,082.96 $1,111.34 $ 1,020.00 $1,359.53 $1,050.29 $1,004.19
Expenses Paid During Period*
11/1/05-4/30/06.............. $ 3.08 $ 4.54 $ 4.45 $ 0.91 $ 8.94 $ 4.30 $ 1.65
Annualized Expense Ratio....... 0.60% 0.88% 1.01% 1.06% 1.53% 0.85% 0.33%
<Caption>
SHORT-TERM
INSTITUTIONAL CLASS BOND
- ------------------- ----------
Beginning Account Value
11/1/05...................... $1,000.00
Ending Account Value 4/30/06... $1,016.60
Expenses Paid During Period*
11/1/05-4/30/06.............. $ 1.73
Annualized Expense Ratio....... 0.35%
</Table>
<Table>
<Caption>
MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE
PLANAHEAD CLASS BALANCED VALUE OPPORTUNITY** MARKETS BOND INCOME BOND
- --------------- --------- --------- --------------- --------- ---------- --------- ------------
Beginning Account Value
11/1/05..................... $1,000.00 $1,000.00 $ 1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 4/30/06.. $1,071.54 $1,111.34 $ 1,019.00 $1,357.89 $1,050.07 $1,029.72 $1,001.25
Expenses Paid During Period*
11/1/05-4/30/06............. $ 4.37 $ 2.43 $ 1.12 $ 11.71 $ 5.53 $ 4.50 $ 4.72
Annualized Expense Ratio...... 0.85% 1.36% 1.31% 2.00% 1.09% 0.89% 0.95%
<Caption>
SHORT-TERM
PLANAHEAD CLASS BOND
- --------------- ----------
Beginning Account Value
11/1/05..................... $1,000.00
Ending Account Value 4/30/06.. $1,012.75
Expenses Paid During Period*
11/1/05-4/30/06............. $ 4.40
Annualized Expense Ratio...... 0.88%
</Table>
<Table>
<Caption>
SERVICE CLASS BALANCED
- ------------- ---------
Beginning Account Value 11/1/05... $1,000.00
Ending Account Value 4/30/06...... $1,069.22
Expenses Paid During Period*
11/1/05-4/30/06................. $ 5.29
Annualized Expense Ratio.......... 1.03%
</Table>
<Table>
<Caption>
LARGE CAP MID-CAP EMERGING
AMR CLASS BALANCED GROWTH VALUE MARKETS
- --------- ---------- ---------- ---------- ---------
Beginning Account Value 11/1/05... $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 4/30/06...... $1,074.07 $1.084.74 $1,112.66 $1,361.00
Expenses Paid During Period*
11/01/05-4/30/06................ $ 1.69 $ 2.93 $ 4.55 $ 7.40
Annualized Expense Ratio.......... 0.33% 0.57% 0.87% 1.26%
</Table>
- ---------------
* Expenses are equal to the Fund's annualized expense ratios for the six-month
period multiplied by the average account value over the period, multiplied by
the number derived by dividing the number of days in the most recent fiscal
half-year (181) by days in the year (365) to reflect the half-year period.
** Beginning Account Value for the Small Cap Value Opportunity Fund is as of
March 31, 2006 (inception date of the Fund). Expenses are equal to the Fund's
annualized ratios for the one-month period multiplied by the average account
value over the period multiplied by the number derived by dividing the number
of days in the most recent period (31) by days in the year (365) to reflect
the period.
26
FUND EXPENSES
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on a Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in a
particular Fund with other funds by contrasting this 5% hypothetical example and
the 5% hypothetical examples that appear in the shareholder reports of the other
funds. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
Shareholders of the PlanAhead and Institutional Classes that invest in a Fund
through an IRA may be subject to a custodial IRA fee of $12 that is typically
deducted each December. If your account was subject to a custodial IRA fee
during the period, your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by a
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
LARGE CAP MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD INTERMEDIATE
INSTITUTIONAL CLASS BALANCED GROWTH VALUE OPPORTUNITY** MARKETS BOND BOND
- ------------------- --------- ---------- ---------- --------------- --------- ---------- ------------
Beginning Account Value
11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value
4/30/06 $1,021.82 $1,020.43 $1,016.47 $1,003.35 $1,017.22 $1,020.60 $1,023.15
Expenses Paid During
Period* 11/1/05-4/30/06 $ 3.01 $ 4.41 $ 4.25 $ 0.90 $ 7.64 $ 4.24 $ 1.66
Annualized Expense Ratio 0.60% 0.88% 1.01% 1.06% 1.53% 0.85% 0.33%
<Caption>
SHORT-TERM
INSTITUTIONAL CLASS BOND
- ------------------- ----------
Beginning Account Value
11/1/05 $1,000.00
Ending Account Value
4/30/06 $1,023.08
Expenses Paid During
Period* 11/1/05-4/30/06 $ 1.74
Annualized Expense Ratio 0.35%
</Table>
<Table>
<Caption>
MID-CAP SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE
PLANAHEAD CLASS BALANCED VALUE OPPORTUNITY** MARKETS BOND INCOME BOND
- --------------- ---------- ---------- --------------- ---------- ---------- ---------- ------------
Beginning Account Value
11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value
4/30/06 $1,020.58 $1,006.19 $1,003.13 $1,014.86 $1,019.40 $1,020.36 $1,020.08
Expenses Paid During
Period* 11/1/05-4/30/06 $ 4.26 $ 2.31 $ 1.11 $ 10.01 $ 5.44 $ 4.48 $ 4.76
Annualized Expense Ratio 0.85% 1.36% 1.31% 2.00% 1.09% 0.89% 0.95%
<Caption>
SHORT-TERM
PLANAHEAD CLASS BOND
- --------------- ----------
Beginning Account Value
11/1/05 $1,000.00
Ending Account Value
4/30/06 $1,020.43
Expenses Paid During
Period* 11/1/05-4/30/06 $ 4.41
Annualized Expense Ratio 0.88%
</Table>
<Table>
<Caption>
SERVICE CLASS BALANCED
- ------------- ---------
Beginning Account Value 11/1/05 $1,000.00
Ending Account Value 4/30/06 $1,019.68
Expenses Paid During Period*
11/1/05-4/30/06 $ 5.17
Annualized Expense Ratio 1.03%
</Table>
<Table>
<Caption>
LARGE CAP MID-CAP EMERGING
AMR CLASS BALANCED GROWTH VALUE MARKETS
- --------- ---------- ---------- ---------- ---------
Beginning Account Value 11/1/05 $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 4/30/06 $1,023.17 $1,021.98 $1,020.49 $1,018.53
Expenses Paid During Period*
11/01/05-4/30/06 $ 1.65 $ 2.84 $ 4.35 $ 6.33
Annualized Expense Ratio 0.33% 0.57% 0.87% 1.26%
</Table>
- ---------------
* Expenses are equal to the Fund's annualized expense ratios for the six-month
period multiplied by the average account value over the period, multiplied by
the number derived by dividing the number of days in the most recent fiscal
half-year (181) by days in the year (365) to reflect the half-year period.
** Beginning Account Value for the Small Cap Value Opportunity Fund is as of
March 31, 2006 (inception date of the Fund). Expenses are equal to the Fund's
annualized ratios for the one-month period multiplied by the average account
value over the period multiplied by the number derived by dividing the number
of days in the most recent period (31) by days in the year (365) to reflect
the period.
27
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 59.79%
CONSUMER DISCRETIONARY - 5.16%
AUTO COMPONENTS - 0.20%
Magna International, Inc.+............ 22,000 $ 1,726
----------
HOTELS, RESTAURANTS & LEISURE - 0.89%
Carnival Corp. ....................... 32,200 1,508
Harrahs Entertainment, Inc. .......... 43,200 3,527
McDonald's Corp. ..................... 24,600 850
Yum Brands, Inc. ..................... 35,200 1,819
----------
7,704
----------
HOUSEHOLD DURABLES - 1.85%
Centex Corp. ......................... 114,600 6,372
Fortune Brands, Inc. ................. 28,000 2,248
Koninklijke (Royal) Philips
Electronics NV....................... 59,431 2,049
Newell Rubbermaid, Inc. .............. 68,800 1,887
Pulte Homes, Inc. .................... 91,700 3,425
----------
15,981
----------
LEISURE EQUIPMENT & PRODUCTS - 0.46%
Eastman Kodak Co.+.................... 86,400 2,329
Mattel, Inc. ......................... 101,600 1,644
----------
3,973
----------
MEDIA - 0.53%
CBS Corp. ............................ 34,100 868
The Interpublic Group of Companies,
Inc.(+)+............................. 165,100 1,582
The Walt Disney Company Ltd. ......... 75,500 2,111
----------
4,561
----------
MULTILINE RETAIL - 0.77%
Federated Department Stores, Inc. .... 59,677 4,646
Target Corp. ......................... 38,900 2,065
----------
6,711
----------
SPECIALTY RETAIL - 0.27%
The Home Depot, Inc. ................. 57,800 2,308
----------
TEXTILES & APPAREL - 0.19%
Liz Claiborne, Inc. .................. 43,400 1,695
----------
TOTAL CONSUMER DISCRETIONARY....... 44,659
----------
CONSUMER STAPLES - 5.22%
BEVERAGES - 0.56%
Anheuser-Busch Companies, Inc. ....... 34,300 1,529
Diageo plc, ADR+...................... 49,800 3,299
----------
4,828
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
FOOD & DRUG RETAILING - 0.42%
Albertson's, Inc. .................... 7,700 $ 195
Safeway, Inc.+........................ 136,000 3,418
----------
3,613
----------
FOOD PRODUCTS - 1.63%
ConAgra Foods, Inc. .................. 158,100 3,586
General Mills, Inc. .................. 33,300 1,643
Kraft Foods, Inc.+.................... 114,100 3,564
Sara Lee Co. ......................... 101,174 1,808
Unilever plc, ADR..................... 83,100 3,551
----------
14,152
----------
TOBACCO - 2.61%
Altria Group, Inc. ................... 153,600 11,237
Gallaher Group plc, ADR............... 41,600 2,644
Imperial Tobacco Group plc, ADR+...... 94,800 5,942
UST, Inc.+............................ 62,900 2,763
----------
22,586
----------
TOTAL CONSUMER STAPLES............. 45,179
----------
ENERGY - 4.85%
OIL & GAS - 4.85%
BP plc, ADR........................... 49,380 3,640
Chevron Corp. ........................ 104,428 6,372
ConocoPhillips........................ 230,376 15,412
Devon Energy Corp. ................... 88,000 5,290
Kerr-McGee Corp. ..................... 20,476 2,045
Occidental Petroleum Corp. ........... 70,700 7,264
Petro-Canada.......................... 40,200 1,977
----------
TOTAL ENERGY....................... 42,000
----------
FINANCIALS - 17.38%
BANKS - 5.27%
Bank of America Corp. ................ 354,096 17,676
Comerica, Inc. ....................... 31,100 1,769
First Horizon National Corp.(+)+...... 21,800 925
KeyCorp............................... 88,200 3,371
U.S. Bancorp.......................... 111,260 3,498
UnionBanCal Corp. .................... 11,700 820
Wachovia Corp. ....................... 66,900 4,004
Washington Mutual, Inc.+.............. 190,900 8,602
Wells Fargo & Co. .................... 71,600 4,918
----------
45,583
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
28
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
DIVERSIFIED FINANCIALS - 6.19%
The Bear Stearns Cos, Inc. ........... 26,300 $ 3,748
Capital One Financial Corp. .......... 46,000 3,986
Citigroup, Inc. ...................... 263,542 13,164
Federal Home Loan Mortgage Corp. ..... 89,900 5,489
Federal National Mortgage
Association.......................... 45,000 2,277
The Goldman Sachs Group, Inc. ........ 22,000 3,526
JP Morgan Chase & Co. ................ 243,634 11,056
Merrill Lynch & Company, Inc. ........ 43,500 3,317
Morgan Stanley Dean Witter & Co. ..... 58,400 3,755
SLM Corp. ............................ 61,800 3,268
----------
53,586
----------
INSURANCE - 5.68%
Ace Ltd. ............................. 73,700 4,093
The Allstate Corp. ................... 88,300 4,988
American International Group, Inc. ... 34,800 2,271
AON Corp. ............................ 29,000 1,215
Assurant, Inc. ....................... 37,000 1,782
Conseco, Inc.(+)+..................... 71,400 1,803
Genworth Financial, Inc. ............. 154,800 5,139
The Hartford Financial Services Group,
Inc.................................. 18,400 1,692
MetLife, Inc. ........................ 168,680 8,788
MGIC Investments Corp.+............... 42,600 3,012
Prudential Financial, Inc. ........... 28,000 2,188
The St. Paul Travelers Companies,
Inc. ................................ 183,300 8,071
XL Capital Ltd. ...................... 62,100 4,092
----------
49,134
----------
REAL ESTATE - 0.24%
The St. Joe Co.+...................... 36,700 2,061
----------
TOTAL FINANCIALS................... 150,364
----------
HEALTH CARE - 4.67%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.39%
Baxter International, Inc. ........... 88,200 3,325
----------
HEALTH CARE PROVIDERS & SERVICES - 1.34%
Cigna Corp. .......................... 29,200 3,125
HCA, Inc. ............................ 81,800 3,590
Tenet Healthcare Corp.(+)+............ 157,600 1,311
WellPoint, Inc.(+).................... 50,300 3,571
----------
11,597
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
PHARMACEUTICALS - 2.94%
Bristol-Myers Squibb Co. ............. 286,800 $ 7,279
Merck & Company, Inc. ................ 128,200 4,413
Pfizer, Inc. ......................... 314,100 7,956
Schering-Plough Corp. ................ 164,000 3,169
Wyeth................................. 54,100 2,633
----------
25,450
----------
TOTAL HEALTH CARE.................. 40,372
----------
INDUSTRIALS - 8.63%
AEROSPACE & DEFENSE - 2.23%
The Boeing Co. ....................... 59,400 4,957
Lockheed Martin Corp. ................ 65,300 4,956
Northrop Grumman Corp. ............... 28,900 1,934
Raytheon Co. ......................... 104,300 4,617
United Technologies Corp. ............ 45,400 2,852
----------
19,316
----------
AIR FREIGHT & COURIERS - 0.08%
FedEx Corp. .......................... 5,900 679
----------
COMMERCIAL SERVICES & SUPPLIES - 0.84%
Cendant Corp. ........................ 246,300 4,293
PHH Corp.(+).......................... 6,675 186
Waste Management, Inc. ............... 73,607 2,757
----------
7,236
----------
ELECTRICAL EQUIPMENT - 0.51%
American Power Conversion Corp. ...... 136,700 3,040
Emerson Electrical Co. ............... 16,300 1,385
----------
4,425
----------
INDUSTRIAL CONGLOMERATES - 2.76%
3M Co. ............................... 38,700 3,306
General Electric Co. ................. 128,600 4,448
Honeywell International, Inc. ........ 78,800 3,349
Textron, Inc. ........................ 41,800 3,760
Tyco International Ltd. .............. 341,201 8,991
----------
23,854
----------
MACHINERY - 1.71%
Caterpillar, Inc. .................... 50,300 3,810
Flowserve Corp.(+)+................... 41,200 2,370
Illinois Tool Works, Inc.(+).......... 53,200 5,463
ITT Industries, Inc. ................. 56,800 3,194
----------
14,837
----------
TRANSPORTATION INFRASTRUCTURE - 0.50%
Burlington Northern Santa Fe Corp. ... 54,400 4,327
----------
TOTAL INDUSTRIALS.................. 74,674
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
29
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
INFORMATION TECHNOLOGY - 5.09%
COMMUNICATIONS EQUIPMENT - 0.95%
Nokia Corp., ADR...................... 361,200 $ 8,185
----------
COMPUTERS & PERIPHERALS - 1.38%
Hewlett-Packard Co. .................. 186,900 6,069
International Business Machines
Corp. ............................... 71,700 5,904
----------
11,973
----------
IT CONSULTING & SERVICES - 1.26%
Computer Sciences Corp.(+)............ 39,700 2,324
Electronic Data Systems Corp. ........ 315,900 8,555
----------
10,879
----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.19%
Intel Corp. .......................... 81,600 1,630
----------
SOFTWARE - 1.31%
Computer Associate International,
Inc.................................. 313,203 7,943
Microsoft Corp. ...................... 141,300 3,412
----------
11,355
----------
TOTAL INFORMATION TECHNOLOGY....... 44,022
----------
MATERIALS - 3.32%
CHEMICALS - 1.83%
Air Products & Chemicals, Inc. ....... 26,300 1,802
Dow Chemical Co. ..................... 27,000 1,097
E. I. du Pont de Nemours & Co......... 47,300 2,086
Eastman Chemical Co. ................. 30,000 1,631
Hercules, Inc.(+)..................... 10,000 142
Lyondell Chemical Co. ................ 132,500 3,193
The Mosaic Co.(+)+.................... 250,900 3,764
PPG Industries, Inc. ................. 30,400 2,040
Tronox, Inc.(+)....................... 4,128 71
----------
15,826
----------
METALS & MINING - 0.85%
Alcoa, Inc. .......................... 219,096 7,401
----------
PAPER & FOREST PRODUCTS - 0.64%
International Paper Co. .............. 40,800 1,483
Sappi Ltd., ADR+...................... 127,800 1,794
Weyerhaeuser Co. ..................... 31,900 2,248
----------
5,525
----------
TOTAL MATERIALS.................... 28,752
----------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
TELECOMMUNICATION SERVICES - 1.79%
Alltel Corp. ......................... 12,700 $ 818
AT&T, Inc. ........................... 97,000 2,542
BellSouth Corp. ...................... 144,200 4,871
Verizon Communications, Inc. ......... 218,628 7,221
----------
TOTAL TELECOMMUNICATION SERVICES... 15,452
----------
UTILITIES - 3.68%
American Electric Power Company,
Inc. ................................ 52,900 1,770
CenterPoint Energy, Inc.+............. 132,600 1,594
Dominion Resources, Inc. ............. 19,900 1,490
DTE Energy Co. ....................... 54,800 2,235
Entergy Corp. ........................ 77,200 5,399
Exelon Corp. ......................... 78,300 4,228
FPL Group, Inc. ...................... 131,500 5,207
Public Service Enterprise Group,
Inc. ................................ 75,800 4,753
Duke Energy Corp.(+).................. 176,500 5,140
----------
TOTAL UTILITIES.................... 31,816
----------
TOTAL COMMON STOCKS................ 517,290
----------
</Table>
<Table>
<Caption>
PAR
AMOUNT
-----------
CORPORATE OBLIGATIONS - 7.51%
BANKS - 0.77%
Banco Popular North America, Inc.,
4.25%, Due 4/1/2008.................. $ 500 487
Bank of America Corp.,
3.375%, Due 2/17/2009+............... 450 428
Bank One Corp.,
5.90%, Due 11/15/2011................ 700 709
4.90%, Due 4/30/2015................. 300 278
Capital One Bank,
6.70%, Due 5/15/2008................. 450 461
4.80%, Due 2/21/2012+................ 465 442
5.125%, Due 2/15/2014................ 450 429
Credit Suisse First Boston,
6.50%, Due 5/1/2008++................ 750 764
ING Bank, NV,
5.125%, Due 5/1/2015++............... 450 427
PNC Funding Corp.,
4.20%, Due 3/10/2008++............... 745 729
Synovus Financial Corp.,
4.875%, Due 2/15/2013++.............. 300 285
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
30
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Washington Mutual Financial Corp.,
6.875%, Due 5/15/2011................ $ 425 $ 448
Washington Mutual, Inc.,
4.625%, Due 4/1/2014................. 850 771
----------
6,658
----------
COMMUNICATIONS - 0.38%
AT&T Broadband Corp.,
8.375%, Due 3/15/2013................ 848 949
Comcast Corp.,
7.625%, Due 2/15/2008................ 300 310
5.30%, Due 1/15/2014................. 710 672
Time Warner, Inc.,
6.75%, Due 4/15/2011................. 450 466
7.70%, Due 5/1/2032.................. 550 601
Viacom, Inc.,
6.25%, Due 4/30/2016+++.............. 345 342
----------
3,340
----------
CONSUMER, NON-CYCLICAL - 0.05%
UnitedHealth Group, Inc.,
5.375%, Due 3/15/2016+............... 460 441
----------
ELECTRIC/GAS - 0.64%
Columbus Southern Power Co.,
5.50%, Due 3/1/2013.................. 710 693
FPL Group, Inc.,
5.551%, Due 2/16/2008................ 500 501
Georgia Power Co.,
4.875%, Due 7/15/2007................ 450 448
Kinder Morgan Finance Co.
ULC,
5.70%, Due 1/5/2016.................. 450 434
MidAmerican Energy Holdings Co.,
3.50%, Due 5/15/2008................. 495 476
5.875%, Due 10/1/2012................ 405 406
6.125%, Due 4/1/2036++............... 700 668
Public Service Enterprise Group, Inc.,
6.95%, Due 6/1/2012+................. 800 839
Southern Company Capital Funding,
Inc.,
5.30%, Due 2/1/2007.................. 425 423
Xcel Energy, Inc.,
7.00%, Due 12/1/2010................. 600 629
----------
5,517
----------
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
FINANCE - 2.20%
American General Finance Corp.,
5.375%, Due 9/1/2009+................ $ 840 $ 839
American Honda Finance Corp.,
4.875%, Due 5/15/2010................ 500 485
American International Group, Inc.,
6.25%, Due 5/1/2036++................ 700 692
Ameriprise Financial, Inc.,
5.35%, Due 11/15/2010................ 625 617
The Bear Stearns Cos, Inc.,
2.875%, Due 7/2/2008................. 800 760
The Chubb Corp.,
4.934%, Due 11/16/2007............... 775 769
EOP Operating Limited Partnership,
4.75%, Due 3/15/2014................. 450 413
Equity Residential,
5.125%, Due 3/15/2016................ 385 360
General Electric Capital Corp.,
4.375%, Due 3/3/2012+................ 865 815
The Goldman Sachs Group, Inc.,
4.75%, Due 7/15/2013................. 400 376
Household Finance Corp.,
5.75%, Due 1/30/2007................. 1,500 1,505
HSBC Finance Corp.,
4.75%, Due 4/15/2010+................ 470 457
5.25%, Due 1/14/2011+................ 700 690
International Lease Finance Corp.,
6.375%, Due 3/15/2009+............... 1,025 1,049
Liberty Mutual Corp.,
7.875%, Due 10/15/2026+++............ 1,500 1,621
Merrill Lynch & Company, Inc.,
6.00%, Due 2/17/2009................. 1,000 1,016
4.25%, Due 2/8/2010.................. 615 589
MetLife Global Funding I,
3.375%, Due 10/5/2007++.............. 650 631
MetLife, Inc.,
5.375%, Due 12/15/2012+.............. 540 530
5.00%, Due 6/15/2015................. 385 361
ProLogis,
5.50%, Due 4/1/2012.................. 450 443
ProLogis Trust,
7.10%, Due 4/15/2008................. 470 485
Prudential Financial, Inc.,
3.75%, Due 5/1/2008.................. 335 324
5.10%, Due 9/20/2014................. 410 390
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
31
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Simon Property Group LP,
6.375%, Due 11/15/2007............... $ 400 $ 405
5.375%, Due 6/1/2011++............... 450 443
SLM Corp.,
4.00%, Due 1/15/2009................. 1,500 1,442
5.45%, Due 4/25/2011................. 520 516
----------
19,023
----------
INDUSTRIALS - 2.39%
Amgen, Inc.,
4.00%, Due 11/18/2009................ 415 396
BHP Finance (USA) Ltd.,
4.80%, Due 4/15/2013................. 300 286
Bunge Limited Finance Corp.,
7.80%, Due 10/15/2012................ 400 439
Carnival Corp.,
3.75%, Due 11/15/2007................ 715 697
Cendant Corp.,
6.875%, Due 8/15/2006................ 990 993
Cisco Systems, Inc.,
5.25%, Due 2/22/2011................. 800 792
5.50%, Due 2/22/2016................. 600 585
CNF Transportation, Inc.,
8.875%, Due 5/1/2010................. 1,850 2,027
DaimlerChrysler Corp.,
7.75%, Due 1/18/2011+................ 1,000 1,072
DaimlerChrysler NA Holding Corp.,
5.875%, Due 3/15/2011................ 700 697
DaimlerChrysler North America,
4.75%, Due 1/15/2008+................ 270 266
Dell Computer Corp.,
6.55%, Due 4/15/2008................. 400 408
EOG Resources, Inc.,
4.75%, Due 3/15/2014++............... 425 398
Hewlett-Packard Co.,
5.75%, Due 12/15/2006+............... 570 571
Home Depot, Inc.,
5.40%, Due 3/1/2016.................. 675 657
John Deere Capital Corp.,
3.375%, Due 10/1/2007................ 650 632
4.40%, Due 7/15/2009................. 275 267
5.40%, Due 4/7/2010.................. 525 522
Lockheed Martin Corp.,
7.20%, Due 5/1/2036+................. 700 782
Martin Marietta Material, Inc.,
6.90%, Due 8/15/2007................. 200 203
Motorola, Inc.,
8.00%, Due 11/1/2011................. 580 646
Nissan Motor Acceptance Corp.,
5.625%, Due 3/14/2011++.............. 700 694
Northrop Grumman Corp.,
4.079%, Due 11/16/2006............... 850 845
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Pemex Project Funding Master Trust,
8.50%, Due 2/15/2008+................ $ 610 $ 639
Pulte Homes, Inc.,
4.875%, Due 7/15/2009................ 200 195
Schering-Plough Corp.,
6.75%, Due 12/1/2033+................ 400 419
Unilever Capital Corp.,
7.125%, Due 11/1/2010+............... 2,000 2,124
Union Pacific Corp.,
6.50%, Due 4/15/2012................. 450 468
Wal-Mart Stores, Inc.,
7.55%, Due 2/15/2030................. 650 759
WellPoint, Inc.,
3.75%, Due 12/14/2007................ 380 370
Weyerhaeuser Co.,
5.95%, Due 11/1/2008................. 340 342
Wyeth Corp.,
5.50%, Due 2/1/2014.................. 465 454
----------
20,645
----------
INSURANCE - 0.23%
Aegon Funding Corp.,
5.75%, Due 12/15/2020................ 450 435
AEGON, N.V.,
8.00%, Due 8/15/2006................. 300 302
ASIF Global Financing,
3.90%, Due 10/22/2008++.............. 700 676
Lincoln National Corp.,
4.75%, Due 2/15/2014................. 200 185
Prudential Financial, Inc.,
4.50%, Due 7/15/2013+................ 400 371
----------
1,969
----------
TELEPHONE - 0.85%
America Movil S.A. de C.V.,
6.375%, Due 3/1/2035................. 1,120 1,027
AT&T Inc.,
5.10%, Due 9/15/2014................. 485 457
AT&T Wireless Services, Inc.,
8.125%, Due 5/1/2012................. 550 616
8.75%, Due 3/1/2031.................. 445 559
Deutsche Telekom AG,
8.00%, Due 6/15/2010................. 380 413
France Telecom SA,
7.75%, Due 3/1/2011.................. 550 598
Nextel Communications, Inc.,
6.875%, Due 10/31/2013............... 615 631
Sprint Capital Corp.,
6.00%, Due 1/15/2007................. 800 803
8.375%, Due 3/15/2012................ 175 197
Telecom Italia S.p.A.,
4.00%, Due 11/15/2008................ 470 453
Telefonos de Mexico, S.A. de C.V.,
5.50%, Due 1/27/2015+................ 500 469
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
32
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Verizon Global Funding Corp.,
4.00%, Due 1/15/2008+................ $ 545 $ 533
Verizon Wireless Capital, LLC,
5.375%, Due 12/15/2006............... 570 570
----------
7,326
----------
TOTAL CORPORATE OBLIGATIONS........ 64,919
----------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.53%
COMMERCIAL MORTGAGE-BACKED SECURITY - 0.67%
Banc of America Commercial Mortgage,
Inc.,
2003-2, 4.342%, Due 3/11/2041........ 560 540
2005-6, 5.001%, Due 9/10/2047........ 959 950
Bear Stearns Commercial Mortgage
Securities, Inc.,
2004-PWR5, 4.831%, Due 7/11/2042..... 870 828
2005, 5.127%, Due 10/12/2042......... 630 622
Citigroup Commercial Mortgage Trust,
2004-C2, 4.38%, Due 10/15/2041....... 760 720
General Electric Capital Commercial
Mortgage Corp.,
2003-C2, 4.17%, Due 7/10/2037........ 430 417
JP Morgan Chase Commercial Mortgage
Securities Corp.,
2004-CBX,
4.529%, Due 11/12/2039............... 555 530
4.655%, Due 8/15/2042................ 407 401
4.625%, Due 3/15/2046................ 845 823
----------
5,831
----------
WHOLE LOAN COLLATERALIZED MORTGAGE OBLIGATIONS - 0.86%
Banc of America Mortgage Securities,
5.25%, Due 10/25/2019................ 1,149 1,110
Bear Stearns Adjustable Rate Mortgage
Trust,
2005-11, 4.757%, Due 12/25/2035#..... 911 893
Bear Stearns Commercial Mortgage
Securities, Inc.,
5.467%, Due 4/12/2038................ 590 592
Chase Mortgage Financial Trust,
2004-S1 A3, 5.50%, Due 2/25/2019..... 82 81
Countrywide Alternative Loan Trust,
Inc.,
2005-53T2, 6.00%, Due 11/25/2035..... 1,348 1,321
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Countrywide Home Loan, Inc.,
2004-18, 6.00%, Due 10/25/2034....... $ 496 $ 485
2005-HYB8, 5.414%, Due 12/20/2035.... 965 957
Prime Mortgage Trust,
2005-2, 5.25%, Due 7/25/2020......... 2,026 1,989
----------
7,428
----------
TOTAL NON-AGENCY MORTGAGE-BACKED
OBLIGATIONS...................... 13,259
----------
ASSET-BACKED SECURITIES - 0.33%
AUTO LOAN - 0.10%
Household Automotive Trust,
2004-1, 3.30%, Due 5/18/2009......... 904 897
----------
OTHER ASSET-BACKED - 0.23%
CarMax Auto Owner Trust, 2005-3,
4.91%, Due 1/18/2011................. 1,000 989
Volkswagen Auto Loan Enhanced Trust,
2005-1, 4.86%, Due 4/20/2012......... 1,000 989
----------
1,978
----------
TOTAL ASSET-BACKED SECURITIES...... 2,875
----------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.13%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.77%
Pool #A28109, 5.50%,
Due 10/1/2034........................ 1,192 1,160
Pool #A30948, 5.50%,
Due 1/1/2035......................... 999 973
Pool #A45500, 5.50%,
Due 6/1/2035......................... 4,127 4,010
Pool #B12563, 5.00%,
Due 2/1/2019......................... 585 570
Pool #C00835, 6.50%,
Due 7/1/2029......................... 277 283
Pool #C01598, 5.00%,
Due 8/1/2033......................... 1,279 1,214
Pool #C01786, 5.50%,
Due 2/1/2034......................... 2,401 2,336
Pool #C01796, 5.00%,
Due 3/1/2034......................... 1,583 1,500
Pool #C01848, 6.00%,
Due 6/1/2034......................... 1,294 1,291
Pool #C26472, 6.50%,
Due 5/1/2029......................... 89 91
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
33
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Pool #C27089, 6.50%,
Due 6/1/2029......................... $ 14 $ 14
Pool #E01386, 5.00%,
Due 6/1/2018......................... 553 539
Pool #E01492, 5.50%,
Due 10/1/2018........................ 812 806
Pool #E01602, 4.50%,
Due 3/1/2019......................... 1,152 1,098
Pool #E90777, 5.50%,
Due 8/1/2017......................... 86 85
Pool #E96536, 5.00%,
Due 3/1/2018......................... 1,019 993
Pool #E97381, 5.50%,
Due 6/1/2018......................... 187 186
Pool #G01457, 6.00%,
Due 8/1/2029......................... 140 140
Pool #G08006, 6.00%,
Due 8/1/2034......................... 1,149 1,146
Pool #G08072, 5.00%,
Due 8/1/2035......................... 1,360 1,286
Pool #G08079, 5.00%,
Due 9/1/2035......................... 1,946 1,841
Pool #G10084, 6.50%,
Due 3/1/2008......................... 360 362
Pool #G11295, 5.50%,
Due 9/1/2017......................... 445 442
Pool #G11879, 5.00%,
Due 10/1/2020........................ 1,643 1,598
----------
23,964
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.17%
Pool #100292, 10.00%,
Due 9/1/2018......................... 152 167
Pool #252211, 6.00%,
Due 1/1/2029......................... 709 709
Pool #254545, 5.00%,
Due 12/1/2017........................ 1,262 1,232
Pool #254865, 4.50%,
Due 9/1/2018......................... 1,922 1,834
Pool #255225, 5.50%,
Due 6/1/2034......................... 683 664
Pool #323789, 6.00%,
Due 6/1/2014......................... 225 227
Pool #488099, 5.50%,
Due 2/1/2014......................... 289 287
Pool #535846, 6.00%,
Due 4/1/2016......................... 542 549
Pool #555531, 5.50%,
Due 6/1/2033......................... 601 586
Pool #555549, 5.00%,
Due 6/1/2018......................... 1,541 1,504
Pool #555880, 5.50%,
Due 11/1/2033........................ 1,574 1,532
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Pool #725238, 5.00%,
Due 3/1/2034......................... $ 1,522 $ 1,445
Pool #725706, 6.00%,
Due 8/1/2032......................... 317 319
Pool #725866, 4.50%,
Due 9/1/2034......................... 1,145 1,051
Pool #745418, 5.50%,
Due 4/1/2036......................... 1,989 1,932
Pool #747844, 5.50%,
Due 12/1/2018........................ 111 110
Pool #749219, 5.50%,
Due 10/1/2033........................ 623 607
Pool #758322, 5.50%,
Due 12/1/2033........................ 1,460 1,422
Pool #761337, 5.00%,
Due 4/1/2019......................... 326 318
Pool #765304, 5.50%,
Due 3/1/2034......................... 575 560
Pool #793062, 5.00%,
Due 8/1/2034#........................ 276 274
Pool #800422, 5.023%,
Due 8/1/2034#........................ 926 914
Pool #811328, 5.00%,
Due 2/1/2020......................... 3,719 3,622
Pool #815762, 6.50%,
Due 3/1/2035......................... 365 372
Pool #828377, 5.50%,
Due 6/1/2035......................... 2,045 1,987
Pool #835760, 4.50%,
Due 9/1/2035......................... 1,006 922
Pool #837219, 4.00%,
Due 8/1/2020......................... 1,323 1,232
Pool #872306, 6.50%,
Due 5/1/2036......................... 1,010 1,027
----------
27,405
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.19%
2006-9 A, 4.201%,
Due 8/16/2026........................ 698 674
Pool #003515, 5.50%,
Due 2/20/2034........................ 1,000 978
Pool #780400, 7.00%,
Due 12/15/2025....................... 455 472
Pool #780509, 6.50%,
Due 2/15/2027........................ 187 192
Pool #780615, 6.50%,
Due 8/15/2027........................ 215 222
Pool #780651, 7.00%,
Due 10/15/2027....................... 231 240
Pool #780680, 6.50%,
Due 11/15/2027....................... 565 583
Pool #780747, 6.50%,
Due 3/15/2028........................ 207 214
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
34
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
Pool #780788, 6.50%,
Due 4/15/2028........................ $ 205 $ 211
Pool #780936, 7.50%,
Due 12/15/2028....................... 437 460
Pool #781035, 6.50%,
Due 5/15/2029........................ 201 207
Pool #781273, 6.00%,
Due 4/15/2031........................ 324 326
Pool #781288, 6.50%,
Due 5/15/2031........................ 350 360
Pool #781564, 6.00%,
Due 2/15/2033........................ 617 619
Pool #781589, 5.50%,
Due 4/15/2033........................ 1,738 1,707
Pool #781603, 5.00%,
Due 5/15/2033........................ 780 749
Pool #781636, 5.50%,
Due 7/15/2033........................ 1,442 1,416
Pool #781690, 6.00%,
Due 12/15/2033....................... 706 709
----------
10,339
----------
TOTAL U.S. AGENCY MORTGAGE-BACKED
OBLIGATIONS...................... 61,708
----------
U.S. AGENCY OBLIGATIONS - 9.20%
FEDERAL HOME LOAN BANK - 1.46%
4.40%, Due 7/28/2008.................. 2,630 2,588
Zero Coupon, Due 5/10/2006+(+)........ 10,090 10,078
----------
12,666
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.51%
3.625%, Due 9/15/2006................. 15,000 14,915
5.625%, Due 3/15/2011+................ 1,000 1,014
5.875%, Due 3/21/2011+................ 495 503
4.50%, Due 1/15/2015+................. 23,930 22,564
----------
38,996
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.23%
4.375%, Due 9/7/2007.................. 15,000 14,835
4.50%, Due 8/4/2008................... 2,535 2,500
5.125%, Due 1/2/2014+................. 595 577
TBA, 30 YR, 6.00%,
Due 12/11/2033....................... 10,090 10,043
----------
27,955
----------
TOTAL U.S. AGENCY OBLIGATIONS...... 79,617
----------
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ----------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 4.80%
U.S. TREASURY BONDS - 1.36%
9.125%, Due 5/15/2018+................ $ 1,750 $ 2,358
7.875%, Due 2/15/2021+................ 500 631
6.25%, Due 8/15/2023+................. 650 718
6.875%, Due 8/15/2025+................ 1,580 1,875
6.25%, Due 5/15/2030+................. 2,410 2,724
5.375%, Due 2/15/2031+................ 3,385 3,436
----------
11,742
----------
U.S. TREASURY NOTES - 3.44%
3.375%, Due 2/15/2008+................ 1,555 1,515
3.50%, Due 11/15/2009+................ 850 812
3.875%, Due 5/15/2010+................ 5,000 4,812
5.00%, Due 2/15/2011+................. 2,350 2,360
4.50%, Due 2/28/2011+................. 7,575 7,437
5.00%, Due 8/15/2011+................. 1,400 1,405
4.375%, Due 8/15/2012+................ 2,000 1,936
4.75%, Due 5/15/2014+................. 2,900 2,846
4.125%, Due 5/15/2015+................ 2,000 1,867
4.50%, Due 2/15/2016+................. 4,960 4,744
----------
29,734
----------
TOTAL U.S. TREASURY OBLIGATIONS.... 41,476
----------
</Table>
<Table>
<Caption>
SHARES
-----------
SHORT TERM INVESTMENTS - 27.26%
American Beacon Enhanced Cash
Trustsec.h........................... 94,318,149 94,318
American Beacon Money Market Select
Fundsec.h............................ 108,808,422 108,809
</Table>
<Table>
<Caption>
PAR
AMOUNT
-----------
U.S. Treasury Bill,
4.00%, Due 5/18/2006+P............... $ 27,320 27,262
4.455%, Due 6/8/2006P................ 5,490 5,464
----------
TOTAL SHORT TERM INVESTMENTS....... 235,853
----------
TOTAL INVESTMENTS - 117.55% (COST
$898,521)............................ 1,016,997
----------
LIABILITIES, NET OF OTHER
ASSETS - (17.55%).................... (151,845)
----------
TOTAL NET ASSETS - 100.00%............ $ 865,152
==========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
35
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
- ---------------
ADR - American Depository Receipt
(+)- Non-income producing security.
+- All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $7,356 or 0.85% of net assets.
#- The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
(+)- The Fund/Trust is affiliated by having the same investment advisor. See
Note 2.
h- All or a portion of this security is purchased with cash collateral for
securities loaned.
P- At April 30, 2006, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------- --------------
Emini S&P 500 Index........................................ 1,327 Jun 2006 $87,310 $1,058
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
36
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 94.49%
CONSUMER DISCRETIONARY - 15.72%
AUTO COMPONENTS - 0.35%
ArvinMeritor, Inc. .............. 4,300 $ 72
Johnson Controls, Inc. .......... 2,200 179
--------
251
--------
HOTELS, RESTAURANTS & LEISURE - 1.83%
Brinker International, Inc.(+)... 2,500 98
Carnival Corp. .................. 1,000 47
Choice Hotels International,
Inc. .......................... 6,600 353
Darden Restaurants, Inc. ........ 5,600 222
Hilton Hotels Corp. ............. 6,300 170
Marriott International, Inc. .... 900 66
Starbucks Corp.(+)............... 8,800 328
Starwood Hotels & Resorts
Worldwide, Inc.(+)............. 900 51
--------
1,335
--------
HOUSEHOLD DURABLES - 0.29%
Centex Corp. .................... 600 33
Furniture Brands International,
Inc.+.......................... 1,400 32
Lennar Corp. .................... 1,400 77
Toll Brothers, Inc.(+)........... 2,100 68
--------
210
--------
INTERNET & CATALOG RETAIL - 0.53%
eBay, Inc.(+).................... 11,300 389
--------
MEDIA - 5.25%
CBS Corp. ....................... 7,744 197
Clear Channel Communications,
Inc. .......................... 11,600 331
The E. W. Scripps Co. ........... 8,000 369
EchoStar Communications
Corp.(+)....................... 7,700 238
Gannett Company, Inc. ........... 6,800 374
The Interpublic Group of
Companies, Inc.(+)............. 200 2
John Wiley & Sons, Inc. ......... 2,600 95
Liberty Media Corp.(+)........... 79,300 662
The McGraw-Hill Companies,
Inc. .......................... 5,300 295
The New York Times Co.(+)........ 300 7
News Corp. ...................... 9,700 167
Time Warner, Inc. ............... 43,200 752
Univision Communications(+)...... 1,100 39
Viacom, Inc.(+).................. 5,700 227
The Walt Disney Company Ltd. .... 2,400 67
--------
3,822
--------
MULTILINE RETAIL - 2.20%
Costco Wholesale Corp.(+)........ 1,800 98
Dollar General Corp. ............ 3,400 59
Family Dollar Stores, Inc. ...... 1,000 25
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
J.C. Penney Company, Inc. ....... 4,000 $ 262
Kohl's Corp.(+).................. 3,900 218
Nordstrom, Inc. ................. 4,300 165
Target Corp. .................... 7,600 404
Wal-Mart Stores, Inc. ........... 8,200 369
--------
1,600
--------
RETAIL-BOOKSTORE - 0.13%
Barnes and Noble, Inc.(+)........ 2,100 95
--------
SPECIALTY RETAIL - 3.16%
Abercrombie and Fitch Co. ....... 3,400 206
AutoNation, Inc.(+).............. 3,000 67
Bed Bath & Beyond, Inc.(+)....... 3,500 134
Best Buy Company, Inc.(+)........ 3,400 193
Chico's FAS, Inc.(+)............. 1,500 56
Circuit City Stores, Inc. ....... 25,760 741
The Home Depot, Inc. ............ 6,100 243
Lowe's Companies, Inc. .......... 3,900 246
Ross Stores, Inc. ............... 100 3
Staples, Inc. ................... 15,600 412
--------
2,301
--------
TEXTILES & APPAREL - 1.98%
Coach, Inc.(+)................... 32,700 1,080
Nike, Inc. ...................... 4,400 360
--------
1,440
--------
TOTAL CONSUMER
DISCRETIONARY.............. 11,443
--------
CONSUMER STAPLES - 8.05%
BEVERAGES - 1.12%
The Coca-Cola Co. ............... 15,800 663
Coca-Cola Enterprises, Inc. ..... 3,200 63
PepsiCo, Inc. ................... 1,600 93
--------
819
--------
FOOD & DRUG RETAILING - 0.97%
CVS Corp.(+)..................... 1,200 36
Safeway, Inc. ................... 8,600 216
SUPERVALU Inc. .................. 6,600 191
Sysco Corp. ..................... 3,700 111
Walgreen Co. .................... 3,600 151
--------
705
--------
FOOD PRODUCTS - 0.70%
Archer-Daniels-Midland Co. ...... 9,400 342
Kellogg Co. ..................... 3,700 171
--------
513
--------
HOUSEHOLD PRODUCTS - 3.88%
Colgate-Palmolive Co. ........... 1,500 89
The Procter & Gamble Co. ........ 46,992 2,735
--------
2,824
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
37
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
TOBACCO - 1.38%
Altria Group, Inc. .............. 13,700 $ 1,002
--------
TOTAL CONSUMER STAPLES....... 5,863
--------
ENERGY - 3.73%
ENERGY EQUIPMENT & SERVICES - 0.83%
BJ Services Co.(+)............... 3,400 129
Halliburton Co. ................. 4,200 328
Rowan Companies, Inc. ........... 1,300 58
Unit Corp.(+).................... 1,400 81
Weatherford International
Ltd.(+)........................ 200 11
--------
607
--------
OIL & GAS - 2.90%
Devon Energy Corp. .............. 9,000 541
EOG Resources, Inc. ............. 2,200 154
Equitable Resources, Inc. ....... 6,100 217
Hugoton Royalty Trust(+)......... 346 10
Kerr-McGee Corp. ................ 600 60
Occidental Petroleum Corp. ...... 900 92
Sunoco, Inc. .................... 9,700 786
XTO Energy, Inc. ................ 5,800 246
--------
2,106
--------
TOTAL ENERGY................. 2,713
--------
FINANCIALS - 7.85%
BANKS - 0.60%
Bank of Hawaii Corp. ............ 600 33
Compass Bancshares, Inc.(+)...... 1,300 71
Hudson City Bancorp, Inc.(+)..... 5,400 72
U.S. Bancorp..................... 8,300 261
--------
437
--------
DIVERSIFIED FINANCIALS - 3.74%
American Express Co. ............ 6,200 334
AmeriCredit Corp.(+)............. 5,600 169
The Charles Schwab Corp. ........ 11,600 208
CIT Group, Inc. ................. 1,800 97
Citigroup, Inc. ................. 6,000 300
Countrywide Financial Corp. ..... 4,100 167
E*Trade Group, Inc.(+)........... 1,200 30
The Goldman Sachs Group, Inc. ... 1,400 224
Merrill Lynch & Company, Inc. ... 4,400 335
Moody's Corp. ................... 11,100 688
Morgan Stanley Dean Witter &
Co. ........................... 1,200 77
T Rowe Price Group, Inc.(+)...... 1,100 93
--------
2,722
--------
INSURANCE - 2.84%
Ambac Financial Group, Inc. ..... 3,000 247
Assurant, Inc. .................. 900 43
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
The Hartford Financial Services
Group, Inc. ................... 300 $ 28
Lincoln National Corp.+.......... 1,300 76
Loews Corp. ..................... 7,000 743
MBIA, Inc. ...................... 12,295 733
The Progressive Corp. ........... 600 65
W. R. Berkley Corp. ............. 3,500 131
--------
2,066
--------
REAL ESTATE - 0.67%
Host Marriott Corp. ............. 9,001 189
Kilroy Realty Corp.(+)........... 1,100 78
Kimco Realty Corp. .............. 900 34
The Mills Corp. ................. 100 3
ProLogis......................... 3,600 181
--------
485
--------
TOTAL FINANCIALS............. 5,710
--------
HEALTH CARE - 17.91%
BIOTECHNOLOGY - 3.67%
Amgen, Inc.(+)................... 19,500 1,320
Charles River Laboratories
International, Inc.(+)......... 1,700 80
Genentech, Inc.(+)............... 11,300 901
Gilead Sciences, Inc.(+)......... 3,700 213
Kos Pharmaceuticals, Inc.(+)+.... 2,400 116
MedImmune, Inc.(+)............... 1,200 38
--------
2,668
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.71%
Advanced Medical Optics,
Inc.(+)........................ 2,000 92
Applera Corporation Applied
Biosystems(+).................. 7,700 222
Baxter International, Inc. ...... 9,000 339
Becton, Dickinson and Co. ....... 6,000 378
Boston Scientific Corp.(+)....... 1 --
The Cooper Companies, Inc. ...... 1,000 55
Medtronic, Inc. ................. 3,200 160
Millipore Corp.(+)............... 500 37
St. Jude Medical, Inc.(+)........ 12,900 509
Varian Medical Systems,
Inc.(+)........................ 700 37
Zimmer Holdings, Inc.(+)......... 2,300 145
--------
1,974
--------
HEALTH CARE PROVIDERS & SERVICES - 5.10%
Aetna, Inc. ..................... 10,700 412
AmerisourceBergen Corp. ......... 15,400 665
Express Scripts, Inc.(+)......... 10,300 805
HCA, Inc. ....................... 3,700 162
McKesson Corp. .................. 13,300 646
UnitedHealth Group, Inc. ........ 11,300 562
WellPoint, Inc.(+)............... 6,500 461
--------
3,713
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
38
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
PHARMACEUTICALS - 6.43%
Abbott Laboratories(+)........... 9,500 $ 406
Allergan, Inc. .................. 6,000 616
Barr Pharmaceuticals, Inc.(+).... 4,300 260
Eli Lilly & Co. ................. 7,800 413
FANUC Ltd. ...................... 2,100 34
Hospira, Inc.(+)................. 1,800 69
Johnson & Johnson................ 25,700 1,506
Medco Health Solutions, Inc.(+).. 800 43
Merck & Company, Inc. ........... 3,300 114
Pfizer, Inc. .................... 1,600 41
Schering-Plough Corp. ........... 13,600 263
Sepracor, Inc.(+)+............... 5,900 263
Wyeth............................ 13,400 652
--------
4,680
--------
TOTAL HEALTH CARE............ 13,035
--------
INDUSTRIALS - 14.54%
AEROSPACE & DEFENSE - 3.80%
The Boeing Co. .................. 17,100 1,427
General Dynamics Corp. .......... 1,800 118
Lockheed Martin Corp. ........... 4,000 304
Northrop Grumman Corp. .......... 5,800 388
Raytheon Co. .................... 800 35
United Technologies Corp. ....... 7,900 496
--------
2,768
--------
AIR FREIGHT & COURIERS - 0.10%
FedEx Corp. ..................... 600 69
--------
COMMERCIAL SERVICES & SUPPLIES - 1.54%
CheckFree Corp.(+)............... 800 43
Corporate Executive Board........ 4,000 428
Global Payments, Inc. ........... 12,500 593
Manpower, Inc.(+)................ 900 59
--------
1,123
--------
ELECTRICAL EQUIPMENT - 0.51%
Emerson Electrical Co. .......... 4,400 374
--------
INDUSTRIAL CONGLOMERATES - 5.23%
General Electric Co. ............ 106,400 3,681
Textron, Inc. ................... 400 36
Tyco International Ltd. ......... 3,500 92
--------
3,809
--------
MACHINERY - 2.22%
Caterpillar, Inc. ............... 6,200 470
Danaher Corp.(+)................. 1,300 84
Deere & Co. ..................... 2,100 184
Eaton Corp. ..................... 6,200 475
Ingersoll-Rand Company Ltd. ..... 5,400 236
Navistar International
Corp.(+)....................... 3,600 95
PACCAR, Inc. .................... 1,000 72
--------
1,616
--------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
ROAD & RAIL - 1.14%
CSX Corp. ....................... 900 $ 62
Norfolk Southern Corp. .......... 13,100 707
Swift Transportation Company,
Inc.(+)+....................... 1,900 57
--------
826
--------
TOTAL INDUSTRIALS............ 10,585
--------
INFORMATION TECHNOLOGY - 22.39%
COMMERCIAL SERVICES & SUPPLIES - 0.07%
First Data Corp.(+).............. 1,100 52
--------
COMMUNICATIONS EQUIPMENT - 5.24%
Cisco Systems, Inc.(+)........... 97,900 2,051
Corning, Inc.(+)................. 22,100 611
Juniper Networks, Inc.(+)........ 4,900 91
Motorola, Inc. .................. 13,600 290
QUALCOMM, Inc. .................. 13,500 693
Tellabs, Inc.(+)................. 4,800 76
--------
3,812
--------
COMPUTERS & PERIPHERALS - 3.88%
Apple Computer, Inc.(+).......... 3,100 218
Dell, Inc.(+).................... 7,500 196
EMC Corp.(+)..................... 15,600 211
Hewlett-Packard Co. ............. 22,100 718
International Business Machines
Corp. ......................... 7,900 650
NCR Corp.(+)..................... 1,900 75
Network Appliance, Inc.(+)....... 2,900 108
Western Digital Corp.(+)......... 30,900 650
--------
2,826
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.34%
Avnet, Inc.(+)................... 7,100 186
Broadcom Corp.(+)................ 9,900 407
Intersil Corp. .................. 1,400 41
Jabil Circuit, Inc.(+)........... 8,700 339
--------
973
--------
INTERNET SOFTWARE & SERVICES - 1.87%
Google, Inc.(+).................. 3,250 1,358
--------
IT CONSULTING & SERVICES - 0.29%
Affiliated Computer Services,
Inc.(+)........................ 3,800 212
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 4.71%
Altera Corp.(+).................. 5,400 118
Freescale Semiconductor,
Inc.(+)........................ 13,300 421
Intel Corp. ..................... 3,700 74
KLA-Tencor Corp. ................ 1,900 92
Linear Technology Corp. ......... 12,000 426
LSI Logic Corporation(+)......... 19,400 207
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
39
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Maxim Integrated Products,
Inc. .......................... 3,300 $ 116
Micron Technology, Inc.(+)....... 32,200 547
Novellus Systems, Inc.(+)........ 2,400 59
Texas Instruments, Inc. ......... 36,800 1,277
Xilinx, Inc. .................... 3,300 91
--------
3,428
--------
SOFTWARE - 4.99%
Adobe Systems, Inc.(+)........... 800 32
Autodesk, Inc. .................. 6,300 265
Cadence Design Systems, Inc.(+).. 16,000 303
Electronic Arts, Inc.(+)......... 1,500 85
Microsoft Corp. ................. 82,100 1,983
Oracle Corp.(+).................. 37,100 541
Salesforce.com, Inc.(+).......... 1,400 49
Symantec Corp.(+)................ 3,600 59
Synopsys, Inc.(+)................ 14,400 314
--------
3,631
--------
TOTAL INFORMATION
TECHNOLOGY................. 16,292
--------
MATERIALS - 2.92%
CHEMICALS - 1.95%
Air Products & Chemicals,
Inc. .......................... 3,800 260
Monsanto Co. .................... 9,300 776
Praxair, Inc. ................... 5,400 303
Rohm and Haas Co. ............... 1,600 81
--------
1,420
--------
METALS & MINING - 0.97%
Alcoa, Inc. ..................... 2,200 74
Freeport-McMoRan Copper & Gold,
Inc. .......................... 1,400 91
Nucor Corp.(+)................... 1,400 152
Southern Copper Corp.(+)+........ 2,100 208
United States Steel Corp. ....... 2,600 178
--------
703
--------
TOTAL MATERIALS.............. 2,123
--------
TELECOMMUNICATION SERVICES - 0.27%
DIVERSIFIED TELECOMMUNICATION - 0.27%
Sprint Nextel Corp. ............. 3,000 75
Verizon Communications, Inc. .... 3,700 122
--------
TOTAL TELECOMMUNICATION
SERVICES................... 197
--------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
UTILITIES - 1.11%
ELECTRIC UTILITIES - 1.11%
CMS Energy Corp.(+).............. 4,100 $ 55
Edison International(+).......... 2,600 105
PG&E Corp. ...................... 12,500 498
Sierra Pacific Resources
Corp.(+)....................... 2,500 34
TXU Corp. ....................... 2,300 114
--------
TOTAL UTILITIES.............. 806
--------
TOTAL COMMON STOCKS.......... 68,767
--------
U.S. TREASURY OBLIGATIONS - 0.01%
U.S. TREASURY NOTES - 0.01%
3.375%, Due 2/28/2007............ 10 10
--------
TOTAL U.S. TREASURY
OBLIGATIONS................ 10
--------
SHORT TERM INVESTMENTS - 6.67%
American Beacon Enhanced Cash
Trust++#....................... 556,033 556
American Beacon Money Market
Select Fund++#................. 4,082,017 4,082
<Caption>
PAR
AMOUNT
----------
U.S. Treasury Bill,
4.455%, Due 6/8/2006P.......... $ 215 214
--------
TOTAL SHORT TERM
INVESTMENTS................ 4,852
--------
TOTAL INVESTMENTS -
101.17% (COST $67,250)......... 73,629
--------
LIABILITIES, NET OF OTHER
ASSETS - (1.17%)............... (853)
--------
TOTAL NET ASSETS - 100.00%....... $ 72,776
========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
40
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
- ---------------
(+)-Non-income producing security.
+- All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
#- All or a portion of this security is purchased with cash collateral for
securities loaned.
P- At April 30, 2006, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------ --------------
Emini S&P 500 Index........................................ 59 Jun 2006 $3,882 $39
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
41
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 96.83%
CONSUMER DISCRETIONARY - 24.94%
AUTO COMPONENTS - 4.67%
Johnson Controls, Inc. .......... 6,125 $ 500
Lear Corp.+...................... 25,625 604
Magna International, Inc. ....... 12,325 967
-------
2,071
-------
AUTOMOBILES - 0.61%
Winnebago Industries, Inc.+...... 9,200 271
-------
HOTELS, RESTAURANTS & LEISURE - 2.82%
GTECH Holdings Corp. ............ 20,200 690
Royal Caribbean Cruises Ltd.+.... 12,300 514
Tim Hortons, Inc.+............... 1,600 43
-------
1,247
-------
HOUSEHOLD DURABLES - 5.29%
The Stanley Works................ 13,500 705
Whirlpool Corp. ................. 18,275 1,640
-------
2,345
-------
LEISURE EQUIPMENT & PRODUCTS - 2.94%
Brunswick Corp. ................. 10,400 408
Hasbro, Inc. .................... 31,950 630
Mattel, Inc. .................... 16,400 265
-------
1,303
-------
MULTILINE RETAIL - 1.35%
Family Dollar Stores, Inc. ...... 24,000 600
-------
SPECIALTY RETAIL - 7.26%
AutoZone Inc.(+)................. 5,625 527
RadioShack Corp. ................ 28,925 492
Rent-A-Center, Inc.(+)........... 24,875 687
The Sherwin-Williams Co. ........ 15,000 764
The TJX Companies, Inc. ......... 31,100 750
-------
3,220
-------
TOTAL CONSUMER
DISCRETIONARY.............. 11,057
-------
CONSUMER STAPLES - 6.17%
FOOD PRODUCTS - 1.71%
Del Monte Foods Co.+............. 65,000 758
-------
PERSONAL PRODUCTS - 1.82%
NBTY, Inc.(+)+................... 35,725 809
-------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
TOBACCO - 2.64%
Loews Corp. ..................... 15,700 $ 804
UST, Inc.+....................... 8,300 365
-------
1,169
-------
TOTAL CONSUMER STAPLES....... 2,736
-------
ENERGY - 2.20%
OIL & GAS - 2.20%
El Paso Corp.(+)+................ 15,500 200
Marathon Oil Corp. .............. 5,800 461
Murphy Oil Corp. ................ 6,300 316
-------
977
-------
TOTAL ENERGY................. 977
-------
FINANCIALS - 26.34%
BANKS - 5.50%
Comerica, Inc. .................. 7,975 453
New York Community Bancorp,
Inc.+.......................... 34,800 599
Peoples Bank+.................... 20,250 663
The South Financial Group,
Inc.+.......................... 14,900 404
TCF Financial Corp. ............. 11,900 320
-------
2,439
-------
FINANCIAL - 0.93%
The First Marblehead Corp(+)+.... 8,600 414
-------
INSURANCE - 16.91%
AON Corp. ....................... 17,275 724
Axis Capital Holdings Ltd. ...... 17,800 531
The First American Corp. ........ 16,625 708
IPC Holdings Ltd.+............... 16,475 439
Old Republic International
Corp. ......................... 23,187 516
Protective Life Corp. ........... 11,175 563
Radian Group, Inc. .............. 12,400 778
RenaissanceRe Holdings Ltd. ..... 12,250 515
Torchmark, Inc. ................. 18,650 1,121
Willis Group Holdings Ltd.+...... 17,900 629
XL Capital Ltd. ................. 14,775 974
-------
7,498
-------
REAL ESTATE - 3.00%
American Financial Realty
Trust.......................... 34,800 396
American Home Mortgage Investment
Corp.+......................... 21,250 738
First Industrial Realty Trust,
Inc. B28(+)+................... 5,000 196
-------
1,330
-------
TOTAL FINANCIALS............. 11,681
-------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
42
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
HEALTH CARE - 9.28%
HEALTH CARE EQUIPMENT & SUPPLIES - 2.51%
Hillenbrand Industries, Inc. .... 12,775 $ 656
IMS Health, Inc.(+).............. 16,775 456
-------
1,112
-------
HEALTH CARE PROVIDERS & SERVICES - 5.99%
AmerisourceBergen Corp. ......... 22,450 969
Coventry Health Care, Inc.(+).... 6,600 328
HealthSouth Corp.(+)+............ 93,100 426
Triad Hospitals, Inc.(+)......... 12,900 532
Universal Health Services,
Inc. .......................... 7,900 401
-------
2,656
-------
PHARMACEUTICALS - 0.78%
Valeant Pharmaceuticals
International+................. 19,400 347
-------
TOTAL HEALTH CARE............ 4,115
-------
INDUSTRIALS - 15.08%
AEROSPACE & DEFENSE - 1.42%
Goodrich Corp. .................. 14,100 627
-------
AIR FREIGHT & COURIERS - 1.54%
Ryder Systems, Inc. ............. 13,100 683
-------
COMMERCIAL SERVICES & SUPPLIES - 5.00%
H&R Block, Inc.(+)............... 19,000 434
MoneyGram International, Inc. ... 16,600 563
United Stationers, Inc.(+)....... 12,700 681
Valassis Communications,
Inc.(+)........................ 18,475 541
-------
2,219
-------
ELECTRICAL EQUIPMENT - 1.57%
American Power Conversion
Corp. ......................... 31,400 698
-------
INDUSTRIAL CONGLOMERATES - 1.43%
Reynolds American, Inc.+......... 5,800 636
-------
MACHINERY - 3.21%
ITT Industries, Inc. ............ 8,600 484
Kennametal, Inc. ................ 15,175 938
-------
1,422
-------
TRADING COMPANIES & DISTRIBUTORS - 0.91%
Genuine Parts Co. ............... 9,200 402
-------
TOTAL INDUSTRIALS............ 6,687
-------
INFORMATION TECHNOLOGY - 4.22%
COMMUNICATIONS EQUIPMENT - 0.81%
Lucent Technologies, Inc.(+)+.... 128,175 358
-------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.44%
Tech Data Corp.(+)............... 17,435 $ 640
-------
IT CONSULTING & SERVICES - 1.07%
Computer Sciences Corp.(+)....... 8,075 473
-------
SOFTWARE - 0.90%
Computer Associates
International, Inc. ......... 15,750 399
-------
TOTAL INFORMATION
TECHNOLOGY................. 1,870
-------
MATERIALS - 1.15%
CHEMICALS - 1.15%
FMC Corp. ....................... 8,050 512
-------
TOTAL MATERIALS.............. 512
-------
UTILITIES - 7.45%
ELECTRIC UTILITIES - 4.28%
CenterPoint Energy, Inc.+........ 20,500 247
Pinnacle West Capital Corp. ..... 13,900 557
Wisconsin Energy Corp. .......... 16,875 659
Xcel Energy, Inc.+............... 23,200 437
-------
1,900
-------
GAS UTILITIES - 3.17%
MDU Resources Group, Inc. ....... 13,500 496
Sempra Energy.................... 19,750 909
-------
1,405
-------
TOTAL UTILITIES.............. 3,305
-------
TOTAL COMMON STOCKS.......... 42,940
-------
SHORT TERM INVESTMENTS - 22.93%
American Beacon Enhanced Cash
Trust++#....................... 5,792,591 5,793
American Beacon Money Market
Select Fund++#................. 4,167,217 4,167
</Table>
<Table>
<Caption>
PAR
AMOUNT
----------
U.S. Treasury Bill, 4.455%, Due
6/8/2006P..................... $ 210 209
--------
TOTAL SHORT TERM
INVESTMENTS............... 10,169
--------
TOTAL INVESTMENTS
119.76% (COST $50,885)........ 53,109
--------
LIABILITIES, NET OF OTHER
ASSETS - (19.76%)............. (8,764)
--------
TOTAL NET ASSETS - 100.00%...... $ 44,345
========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
43
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
- ---------------
(+)-Non-income producing security.
+- All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
#- All or a portion of this security is purchased with cash collateral for
securities loaned.
P- At April 30, 2006, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------ --------------
Emini S&P Mid Cap 400 Index................................. 16 Jun 2006 $1,291 $25
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
44
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 99.55%
CONSUMER DISCRETIONARY - 13.27%
DISTRIBUTORS - 0.51%
WESCO International, Inc.(+)........ 140 $ 10
------
HOTELS, RESTAURANTS & LEISURE - 1.30%
Jack in the Box, Inc.(+)............ 390 17
Landry's Restaurants, Inc. ......... 290 10
------
27
------
HOUSEHOLD DURABLES - 0.74%
Stanley Furniture Company, Inc.(+).. 210 6
Technical Olympic USA, Inc. ........ 450 9
------
15
------
LEISURE EQUIPMENT & PRODUCTS - 0.29%
RC2 Corp.(+)........................ 150 6
------
MEDIA - 0.39%
Scholastic Corp.(+)................. 300 8
------
SPECIALTY RETAIL - 6.90%
Charming Shoppes, Inc.(+)........... 1,470 20
Genesco, Inc.(+).................... 460 19
The Men's Wearhouse, Inc. .......... 510 18
Pacific Sunwear of California(+).... 400 9
Regis Corp. ........................ 340 12
Too, Inc.(+)........................ 330 13
United Auto Group, Inc. ............ 470 20
United Rentals, Inc.(+)............. 560 20
Zale Corp.(+)....................... 390 10
------
141
------
TEXTILES & APPAREL - 3.14%
Brown Shoe Company, Inc. ........... 510 19
Hartmarx Corp.(+)................... 1,480 13
Movado Group, Inc.(+)............... 660 13
Russell Corp.(+).................... 630 11
Unifirst Corp.(+)................... 240 8
------
64
------
TOTAL CONSUMER DISCRETIONARY.... 271
------
CONSUMER STAPLES - 2.29%
FOOD & DRUG RETAILING - 0.57%
Casey's General Stores, Inc.(+)..... 540 12
------
</Table>
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
FOOD PRODUCTS - 1.39%
Central Garden and Pet Co.(+)....... 370 $ 18
Sanderson Farms, Inc.(+)............ 380 10
------
28
------
PERSONAL PRODUCTS - 0.33%
Chattem, Inc.(+).................... 190 7
------
TOTAL CONSUMER STAPLES.......... 47
------
ENERGY - 5.12%
ENERGY EQUIPMENT & SERVICES - 1.34%
Oil States International, Inc.(+)... 320 13
Veritas DGC, Inc.(+)................ 300 14
------
27
------
OIL & GAS - 3.78%
Comstock Resources, Inc.(+)......... 410 13
Energy Partners Ltd.(+)............. 420 11
Giant Industries, Inc.(+)........... 240 17
The Houston Exploration Co.(+)...... 140 8
Stone Energy Corp.(+)............... 280 13
Swift Energy Co.(+)................. 360 15
------
77
------
TOTAL ENERGY.................... 104
------
FINANCIALS - 31.54%
BANKS - 13.14%
Accredited Home Lenders Holding
Co.(+)............................ 400 23
Amcore Financial, Inc.(+)........... 430 13
Central Pacific Financial
Corp.(+).......................... 550 21
Community Bank System, Inc. ........ 420 9
Corus Bankshares, Inc. ............. 400 27
Cybertel Capital Corp.(+)........... 450 19
First Bancorp(+).................... 570 6
First Community Bancorp(+).......... 260 15
First Niagara Financial Group,
Inc.(+)........................... 920 13
First Republic Bank................. 520 23
FirstFed Financial Corp.(+)......... 340 21
Hanmi Financial Corp.(+)............ 710 14
Irwin Financial Corp. .............. 410 7
Provident Bankshares Corp. ......... 420 14
Republic Bancorp Inc(+)............. 600 12
Sterling Bancshares, Inc. .......... 450 7
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
45
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
Sterling Financial Corp. ........... 210 $ 7
TierOne Corp.(+).................... 490 17
------
268
------
DIVERSIFIED FINANCIALS - 3.56%
Advanta Corp.(+).................... 330 12
Cash America International, Inc. ... 240 8
CompuCredit Corp.(+)................ 510 20
Investment Technology Group,
Inc.(+)........................... 330 18
World Acceptance Corp.(+)........... 530 15
------
73
------
INSURANCE - 5.51%
Delphi Financial Group, Inc. ....... 420 22
Harleysville Group, Inc. ........... 610 18
LandAmerica Financial Group,
Inc. ............................. 190 13
The Navigators Group, Inc.(+)....... 210 10
Ohio Casualty Corp. ................ 470 14
Stewart Information Services
Corp. ............................ 360 16
Triad Guaranty, Inc.(+)............. 200 11
Universal American Financial
Corp.(+).......................... 580 8
------
112
------
REAL ESTATE - 9.33%
Acadia Realty Trust(+).............. 500 11
Arbor Realty Trust, Inc.(+)......... 390 10
Capital Trust, Inc. ................ 300 10
CentraCore Properties Trust(+)...... 180 4
Entertainment Properties Trust(+)... 150 6
Equity Inns, Inc. .................. 730 12
Equity Lifestyle Properties,
Inc.(+)........................... 320 14
FelCor Lodging Trust, Inc.(+)....... 1,140 25
Gramercy Capital Corp.(+)........... 370 9
Innkeepers USA Trust................ 810 13
Jones Lang LaSalle, Inc. ........... 130 11
Mid-America Apartment Communities,
Inc.(+)........................... 190 10
Nationwide Health Properties,
Inc.(+)........................... 380 8
PS Business Parks, Inc.(+).......... 150 8
RAIT Investment Trust(+)............ 650 17
Redwood Trust, Inc. ................ 150 7
Sunstone Hotel Investors, Inc.(+)... 350 10
Tanger Factory Outlet Centers,
Inc.(+)........................... 190 6
------
191
------
TOTAL FINANCIALS................ 644
------
</Table>
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
HEALTH CARE - 5.20%
BIOTECHNOLOGY - 0.76%
Serologicals Corp.(+)............... 495 $ 15
------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.63%
STERIS Corp.(+)..................... 560 13
------
HEALTH CARE PROVIDERS & SERVICES - 3.81%
Centene Corp.(+).................... 590 15
First Horizon Pharmaceutical
Corp.(+).......................... 700 16
Gentiva Health Services, Inc.(+).... 680 11
MAXIMUS, Inc.(+).................... 170 6
Owens & Minor, Inc.(+).............. 460 15
PSS World Medical, Inc.(+).......... 830 15
------
78
------
TOTAL HEALTH CARE............... 106
------
INDUSTRIALS - 17.45%
AEROSPACE & DEFENSE - 0.82%
DRS Technologies, Inc.(+)........... 150 8
Esterline Technologies Corp.(+)..... 190 9
------
17
------
BUILDING PRODUCTS - 4.30%
Griffon Corp.(+).................... 810 22
Lennox International Inc. .......... 510 17
NCI Building Systems, Inc.(+)....... 330 21
Universal Forest Products, Inc. .... 280 21
Watsco, Inc.(+)..................... 110 7
------
88
------
COMMERCIAL SERVICES & SUPPLIES - 2.88%
Consolidated Graphics, Inc.(+)...... 460 24
eFunds Corp.(+)..................... 310 8
Ennis, Inc.(+)...................... 760 15
United Stationers, Inc.(+).......... 220 12
------
59
------
ELECTRICAL EQUIPMENT - 1.96%
Belden CDT, Inc.(+)................. 740 23
Paxar Corp.(+)...................... 770 17
------
40
------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
46
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
MACHINERY - 4.73%
Albany International Corp.(+)....... 260 $ 10
Applied Industrial Technologies,
Inc.(+)........................... 380 16
Barnes Group, Inc.(+)............... 410 18
Gardner Denver, Inc.(+)............. 350 26
Kennametal, Inc. ................... 420 26
------
96
------
RENTAL AUTO/EQUIPMENT - 1.12%
Dollar Thrifty Automotive Group,
Inc.(+)........................... 470 23
------
ROAD & RAIL - 1.64%
Old Dominion Freight Line(+)........ 560 18
SCS Transportation, Inc.(+)......... 590 15
------
33
------
TOTAL INDUSTRIALS............... 356
------
INFORMATION TECHNOLOGY - 11.44%
COMMUNICATIONS EQUIPMENT - 1.83%
Black Box Corp.(+).................. 310 14
Commscope, Inc.(+).................. 690 23
------
37
------
COMPUTERS & PERIPHERALS - 0.98%
Hutchinson Technology, Inc.(+)...... 330 8
Komag, Inc.(+)...................... 290 12
------
20
------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.97%
Anixter International, Inc.(+)...... 380 19
Benchmark Electronics, Inc.(+)...... 585 16
Checkpoint Systems, Inc.(+)......... 660 17
CTS Corp.(+)........................ 880 12
MTS Systems Corp.(+)................ 320 14
Park Electrochemical Corp.(+)....... 470 15
Technitrol, Inc.(+)................. 300 8
------
101
------
IT CONSULTING & SERVICES - 2.09%
Agilysys, Inc.(+)................... 730 11
Bell Microproducts, Inc.(+)......... 640 4
ProQuest Co.(+)..................... 410 7
SYKES Enterprises, Inc.(+).......... 1,320 21
------
43
------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.75%
Photronics, Inc.(+)................. 850 15
------
</Table>
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
SOFTWARE - 0.82%
Parametric Technology Corp.(+)...... 570 $ 9
THQ, Inc.(+)........................ 320 8
------
17
------
TOTAL INFORMATION TECHNOLOGY.... 233
------
MATERIALS - 7.52%
BASIC MATERIALS - 0.82%
AMCOL International Corp.(+)........ 580 17
------
CHEMICALS - 0.51%
H.B. Fuller Co. .................... 200 10
------
CONSTRUCTION MATERIALS - 1.17%
Eagle Materials, Inc.(+)............ 360 24
------
CONTAINERS & PACKAGING - 1.96%
Greif Inc.(+)....................... 120 8
Jarden Corp.(+)..................... 420 14
Silgan Holdings, Inc. .............. 460 18
------
40
------
METALS & MINING - 3.06%
Carpenter Technology Corp.(+)....... 140 16
Commercial Metals Co.(+)............ 440 24
Quanex Corp. ....................... 510 22
------
62
------
TOTAL MATERIALS................. 153
------
TELECOMMUNICATION SERVICES - 1.70%
General Communication, Inc.(+)...... 1,270 15
Golden Telecom, Inc.(+)............. 200 6
Premiere Global Services, Inc.(+)... 1,720 14
------
TOTAL TELECOMMUNICATION
SERVICES...................... 35
------
UTILITIES - 4.02%
ELECTRIC UTILITIES - 2.21%
Black Hills Corp. .................. 340 12
Cleco Corp. ........................ 460 10
CMS Energy Corp.(+)................. 560 8
El Paso Electric Co.(+)............. 760 15
------
45
------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
47
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
--------- ---------
(DOLLARS IN THOUSANDS)
GAS UTILITIES - 1.81%
Atmos Energy Corp. ................. 420 $ 11
South Jersey Industries, Inc. ...... 550 15
Southwest Gas Corp.(+).............. 400 11
------
37
------
TOTAL UTILITIES................. 82
------
TOTAL COMMON STOCKS............. 2,031
------
SHORT TERM INVESTMENTS - 1.00%
American Beacon Money Market Select
Fund#............................. 4,746 5
iShares Russell 2000 Value Index
Fund.............................. 210 15
------
TOTAL SHORT TERM INVESTMENTS.... 20
------
TOTAL INVESTMENTS - 100.55% (COST
$2,013)........................... 2,051
------
LIABILITIES, NET OF OTHER
ASSETS - (0.55%).................. (11)
------
TOTAL NET ASSETS - 100.00%.......... $2,040
======
</Table>
- ---------------
(+)- Non-income producing security.
#- The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
See accompanying notes
- --------------------------------------------------------------------------------
48
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
ARGENTINA - 0.04%
COMMON STOCKS
Petrobras Energia
Participaciones SA,
ADR(+)+..................... 4,900 $ 58
--------
TOTAL ARGENTINA........... 58
--------
AUSTRIA - 0.39%
COMMON STOCKS
Raiffeisen International Bank-
Holding AG+................. 7,371 642
--------
TOTAL AUSTRIA............. 642
--------
BRAZIL - 12.29%
COMMON STOCKS - 9.24%
Aracruz Celulose SA, ADR(+)+.. 1,500 83
Banco Itau Holding Financeira
S.A., ADR................... 46,660 1,484
Brasil Telecom Participacoes
S.A., ADR+.................. 20,300 829
Braskem SA, ADR(+)+........... 14,400 204
Centrais Eletricas Brasileiras
S.A. ....................... 5,276,500 151
Companhia Brasileira de
Distribuicao Group, ADR+.... 11,200 441
Companhia de Saneamento Basico
do Estado de Sao Paulo...... 4,066,400 398
Companhia de Saneamento Basico
do Estado de Sao Paulo,
ADR+........................ 12,000 292
Companhia Paranaense de
Energia, ADR+............... 16,300 179
Companhia Vale do Rio Doce,
ADR......................... 31,464 1,400
Companhia Vale Do Rio Doce,
ADR......................... 2,700 139
CPFL Energia S.A. ............ 21,700 308
Empresa Brasileira de
Aeronautica S.A. (Embraer),
ADR......................... 15,910 618
Gerdau S.A., ADR+............. 13,125 227
Grendene S.A. ................ 37,000 314
Natura Cosmeticos S.A.(+)..... 11,675 149
Petroleo Brasileiro S.A., A
Shares, ADR................. 20,816 1,850
Petroleo Brasileiro S.A.,
ADR......................... 34,312 3,391
Tele Norte Leste Participacoes
S.A., ADR................... 23,500 427
TIM Participacoes S.A.,
ADR(+)...................... 9,100 350
Tractebel Energia S.A. ....... 19,500 161
Unibanco - Uniao de Bancos
Brasileiros S.A., ADR....... 14,875 1,180
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Unibanco - Uniao de Bancos
Brasileiros S.A. ........... 7,689 $ 121
Votorantim Celulose e Papel
S.A, ADR+................... 23,700 381
--------
TOTAL COMMON
STOCKS.................. 15,077
--------
PREFERRED STOCKS - 3.05%
All America Latina Logistica
S.A. ....................... 5,580 353
Banco Itau Holding Financeira
S.A. ....................... 7,824 247
Braskem SA(+)................. 43,900 309
Centrais Eletricas Brasileiras
S.A. ....................... 14,382,200 378
Companhia de Tecidos Norte de
Minas(+).................... 4,054,600 398
Companhia Energetica de Minas
Gerais...................... 8,760,113 422
Companhia Paranaense de
Energia..................... 38,515,300 423
Companhia Vale do Rio Doce.... 1,876 83
Duratex S.A. ................. 1,858 41
Gerdau S.A. .................. 21,150 365
Itausa -- Investimentos Itau
S.A. ....................... 82,269 376
Klabin S.A. .................. 125,900 323
Lojas Americanas SA(+)........ 5,590,700 233
Petrol Brasileiro S.A. ....... 3,460 77
Telemar Norte Leste S.A. ..... 7,800 217
Telemig Celular Participacoes
S.A. ....................... 161,711,789 363
Telemig Celular Participacoes
SA, Right(+)................ 1,727,082 --
Telesp -- Telecommunicacoes de
Sao Paulo S.A. ............. 15,092 359
--------
TOTAL PREFERRED STOCKS.... 4,967
--------
TOTAL BRAZIL.............. 20,044
--------
CHILE - 0.38%
COMMON STOCKS
Banco Santander-Chile S.A.,
ADR......................... 2,000 87
Grupo Enersis SA, ADR......... 36,320 444
United Breweries Co, Inc.,
ADR(+)...................... 3,800 94
--------
TOTAL CHILE............... 625
--------
CHINA - 3.25%
COMMON STOCKS
Bank of Communications Co.
Ltd.(+)+++.................. 388,000 236
BYD Company Ltd.+............. 81,900 165
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
49
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
China Construction
Bank(+)+++.................. 731,000 $ 316
China Life Insurance Company
Ltd.(+)+.................... 234,000 317
China Petroleum & Chemical
Corp.+...................... 824,100 523
China Ping'an Insurance
Company Ltd. ............... 96,000 264
China Telecom Corporation
Ltd.+....................... 2,387,100 839
Huandian Power International
Corp. ...................... 1,957,800 537
Huaneng Power International,
Inc.+....................... 511,900 370
PetroChina Company Ltd. ...... 512,000 565
PICC Property and Casualty
Company Ltd. ............... 654,000 236
Sinotrans Ltd.+............... 737,000 254
Weiqiao Textile Company
Ltd.(+)..................... 319,600 422
Yanzhou Coal Mining Company
Ltd.(+)+.................... 309,800 262
--------
TOTAL CHINA............... 5,306
--------
COLOMBIA - 0.22%
COMMON STOCKS
BanColombia SA, ADR(+)........ 10,200 353
--------
TOTAL COLOMBIA............ 353
--------
CZECH REPUBLIC - 0.15%
COMMON STOCKS
Central European Media
Enterprises Ltd.(+)+........ 3,800 245
--------
TOTAL CZECH REPUBLIC...... 245
--------
HONG KONG - 3.51%
COMMON STOCKS
Asia Aluminum Holdings
Ltd.(+)..................... 1,062,000 193
Brilliance China Automotive
Holdings Ltd.+.............. 908,000 160
China Mobile (Hong Kong)
Ltd. ....................... 72,000 419
China Resource Power Holdings
Company Ltd. ............... 266,000 201
China Unicom Ltd. ............ 164,000 140
CNOOC Ltd.+................... 1,473,400 1,188
Denway Motors Ltd.+........... 1,720,000 699
Global Bio-chem Technology
Group Company Ltd.+......... 986,200 515
Gome Electrical Appliances
Holdings Ltd.+.............. 622,000 537
The Grande Holdings Ltd. ..... 91,000 69
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Hopewell Highway
Infrastructure Ltd. ........ 169,000 $ 127
Kingboard Chemical Holdings
Ltd. ....................... 54,000 142
Moulin Global Eyecare Holdings
Ltd.(+)..................... 96,000 --
Panva Gas Holdings Ltd.(+)+... 233,600 102
Shanghai Industrial Holdings
Ltd. ....................... 227,500 490
Shenzhen Investment Ltd.(+)... 662,000 196
Shougang Concord Century
Holdings Ltd. .............. 537,000 43
Texwinca Holdings Ltd. ....... 196,000 144
TPV Technology Ltd. .......... 281,000 304
Victory City International
Holdings Ltd. .............. 169,000 60
--------
TOTAL HONG KONG........... 5,729
--------
HUNGARY - 0.96%
COMMON STOCKS
Gedeon Richter Rt............. 4,274 921
Magyar Tavkozlesi Rt.......... 139,300 637
--------
TOTAL HUNGARY............. 1,558
--------
INDIA - 7.57%
COMMON STOCKS
ABB Ltd. ..................... 5,500 383
Andhra Bank(+)................ 52,010 91
Aventis Pharma Ltd. .......... 4,000 170
Bank of Baroda(+)............. 3,480 17
Bharat Electronics Ltd. ...... 22,000 1,152
Bharat Petroleum Corporation
Ltd. ....................... 61,633 609
CIPLA(+)...................... 44,375 255
Container Corp.(+)............ 5,900 217
GAIL (India) Ltd.(+).......... 32,000 206
GAIL (India) Ltd., GDR++...... 6,700 271
Gammon India Ltd.(+).......... 5,000 60
Glenmark Pharmaceuticals
Ltd. ....................... 20,300 145
Gujarat Ambuja Cements
Ltd. ....................... 58,750 152
HCL Technologies Ltd.(+)...... 17,000 220
HDFC Bank Ltd.(+)............. 14,000 256
Hero Honda Motors Ltd.(+)..... 13,041 248
Hindalco Industries Ltd.,
GDR++....................... 177,000 828
Hindalco Industries Ltd.(+)... 40,000 192
Hindalco Industries Ltd.,
GDR(+)++.................... 44,250 127
Hindustan Lever Ltd. ......... 56,100 364
Hindustan Petroleum
Corporation Ltd.(+)......... 79,500 571
Hotel Leelaventure
Limited(+).................. 18,000 165
Housing Development Finance
Corporation Ltd. ........... 8,700 250
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
50
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
ICICI Bank Ltd., ADR.......... 9,800 $ 269
Infosys Technologies
Ltd.(+)..................... 4,700 329
ITC Ltd. ..................... 39,000 175
ITC Ltd., GDR................. 22,500 100
Mahanagar Telephone Nigam
Ltd. ....................... 148,880 705
Mahindra & Mahindra Ltd. ..... 22,500 316
Oil and Natural Gas
Corporation Ltd. ........... 15,124 437
Punj Lloyd Ltd.(+)............ 4,182 95
Punjab National Bank Ltd. .... 15,000 140
Reliance Energy Ventures
Ltd.(+)..................... 49,000 47
Reliance Industries Ltd. ..... 51,400 1,156
Siemens India Ltd. ........... 2,200 285
State Bank of India, GDR++.... 17,000 866
Union Bank of India(+)........ 28,781 75
UTI Bank Ltd.(+).............. 10,000 77
UTI Bank Ltd., GDR............ 14,000 104
Wipro Ltd.(+)................. 18,500 223
--------
TOTAL INDIA............... 12,348
--------
INDONESIA - 1.77%
COMMON STOCKS
Bank Central Asia............. 174,500 87
Indosat Tbk PT(+)............. 286,500 176
PT Astra International Tbk.... 113,400 154
PT Bank Mandiri............... 2,007,000 439
PT Bank Rakyat Indonesia...... 342,000 180
PT Gudang Garam Tbk........... 315,800 379
PT Indofood Sukses Makmur
Tbk......................... 2,799,200 360
PT Perusahaan Gas Negara...... 154,500 218
PT Telekomunikasi Indonesia
Tbk......................... 1,037,300 892
--------
TOTAL INDONESIA........... 2,885
--------
ISRAEL - 0.83%
COMMON STOCKS
Bank Hapoalim BM.............. 35,680 180
Bank Leumi le-Israel B.M...... 50,600 198
Check Point Software
Technologies Ltd.(+)........ 29,300 567
Supersol Ltd.(+).............. 55,700 167
Taro Pharmaceutical Industries
Ltd.(+)+.................... 18,100 235
--------
TOTAL ISRAEL.............. 1,347
--------
MALAYSIA - 2.68%
COMMON STOCKS
AMMB Holdings Berhad.......... 313,700 247
Bandar Raya Developments
Berhad...................... 77,000 32
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Commerce Asset-Holding
Berhad(+)................... 247,300 $ 430
Gamuda Berhad................. 328,500 362
Genting Berhad................ 81,500 573
Kuala Lumpur Kepong Berhad.... 84,700 231
Malayan Banking Berhad........ 191,900 588
Maxis Communications Berhad... 85,100 205
MK Land Holdings Berhad....... 103,300 23
Proton Holdings Berhad(+)..... 85,100 140
Resorts World Berhad.......... 125,300 463
Sime Darby Berhad............. 507,900 848
Telekom Malaysia Bhd(+)....... 39,000 105
Tenaga Nasional Berhad........ 50,500 119
--------
TOTAL MALAYSIA............ 4,366
--------
MEXICO - 7.85%
COMMON STOCKS
America Movil S.A. de C.V.,
ADR......................... 68,465 2,527
Cemex S.A. de C.V. ........... 42,336 286
Coca-Cola Femsa, S.A. de C.V.,
ADR+........................ 26,835 864
Controladora Commercial
Mexicana S.A. de C.V. ...... 391,200 665
Corp GEO SA de CV(+)+......... 62,100 233
Desc S.A. de C.V.(+).......... 101,000 112
Embotelladoras Arca S.A. ..... 77,400 202
Fomento Economico Mexicano
S.A. de C.V., ADR........... 5,680 528
Grupo Aeroportuario del
Sureste S.A. de C.V.,
ADR+........................ 12,480 484
Grupo Continential, S.A. ..... 224,450 429
Grupo Financiero Banorte, S.A.
de C.V.(+).................. 100,900 263
Grupo Televisa, S.A., ADR..... 96,800 2,052
Kimberly-Clark de Mexico, S.A.
de C.V.+.................... 118,500 418
Organizacion Soriana SA de
CV(+)+...................... 18,600 84
Telefonos de Mexico, S.A. de
C.V., ADR................... 66,280 1,457
Wal-Mart de Mexico, S.A. de
C.V., ADR+.................. 8,355 238
Wal-Mart de Mexico, S.A. de
C.V. ....................... 691,085 1,970
--------
TOTAL MEXICO.............. 12,812
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
51
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
MOROCCO - 0.57%
COMMON STOCKS
Banque Maroc du Commerce
Exterieur................... 2,790 $ 382
Maroc Telecom(+).............. 13,550 225
ONA (Omnium Nord Africain).... 1,940 321
--------
TOTAL MOROCCO............. 928
--------
PERU - 0.11%
COMMON STOCKS
Credicorp Ltd. ............... 6,900 187
--------
TOTAL PERU................ 187
--------
PHILIPPINES - 0.56%
COMMON STOCKS
ABS-CBN Broadcasting
Corp.(+).................... 261,800 69
Banco De Oro Universal Bank,
GDR(+)++.................... 14,600 203
Banco De Oro Universal
Bank(+)..................... 104,900 72
Bank of the Philippine
Islands..................... 244,936 289
Manila Electric Co.(+)........ 279,400 100
SM Prime Holdings............. 1,208,000 182
--------
TOTAL PHILIPPINES......... 915
--------
POLAND - 2.35%
COMMON STOCKS
Agora SA...................... 11,786 172
Bank Millennium SA............ 119,093 268
Bank Pekao SA................. 8,964 601
Central European Distribution
Corp.(+)+................... 9,100 374
Polski Koncern Naftowy Orlen
S.A. ....................... 7,343 153
Powszechna Kasa Oszczednosci
Bank Polski(+).............. 96,310 1,211
Telekomunikacja Polska SA(+).. 57,100 418
TVN SA(+)..................... 20,463 640
--------
TOTAL POLAND.............. 3,837
--------
RUSSIA - 7.05%
COMMON STOCKS
Comstar United Telesystems,
GDR(+)++.................... 25,000 187
Efes Breweries International
NV(+)....................... 7,582 288
JSC Surgutneftegaz, ADR(+)+... 5,800 505
LUKOIL Oil Co., ADR........... 59,288 5,366
Mining and Metallurgical
Company Norilsk Nickel,
ADR(+)+..................... 5,300 700
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
NovaTek OAO, GDR(+)+.......... 8,900 $ 378
Novolipetsk Steel, GDR+++..... 11,300 251
RAO Gazprom, ADR+............. 49,250 2,236
Sberbank RF, GDR(+)........... 4,100 740
Unified Energy System,
GDR(+)...................... 4,500 347
Wimm-Bill-Dann Foods,
ADR(+)...................... 13,900 503
--------
TOTAL RUSSIA.............. 11,501
--------
SOUTH AFRICA - 10.33%
COMMON STOCKS
ABSA Group Ltd. .............. 23,420 462
African Bank Investments
Ltd. ....................... 131,440 735
Alexander Forbes Ltd. ........ 160,087 413
Aspen Pharmacare Holdings
Ltd. ....................... 95,520 675
Aveng Ltd. ................... 296,810 1,173
Bidvest Group Ltd. ........... 31,604 578
Foschini Ltd.(+).............. 30,300 307
Gold Fields Ltd., ADR(+)+..... 12,970 330
Gold Fields Ltd.(+)........... 19,000 478
Group Five Ltd/South
Africa(+)................... 43,811 222
Harmony Gold Mining Company
Ltd., ADR(+)+............... 4,787 80
Harmony Gold Mining Company
Ltd.(+)..................... 22,329 368
Impala Platinum Holdings
Ltd. ....................... 3,819 724
JD Group Ltd. ................ 29,320 453
Mittal Steel South Africa
Ltd.(+)..................... 9,500 111
MTN Group Ltd. ............... 36,440 364
Murray & Roberts Holdings
Ltd. ....................... 21,250 96
Nampak Ltd. .................. 254,900 776
Naspers Ltd. ................. 53,750 1,180
Nedbank Group Ltd. ........... 60,452 1,262
Network Healthcare Holdings
Ltd. ....................... 165,600 281
Pretoria Portland Cement
Company Ltd. ............... 8,370 583
Reunert Ltd.(+)............... 26,790 334
Sanlam Ltd. .................. 260,060 672
Sappi Ltd. ................... 60,460 865
Sasol Ltd. ................... 22,730 956
Shoprite Holdings Ltd. ....... 122,800 517
Standard Bank Group Ltd. ..... 22,531 321
Steinhoff International
Holdings Ltd. .............. 65,659 260
Tiger Brands Ltd. ............ 26,957 751
Truworths International
Ltd.(+)..................... 38,900 188
Woolworths Holdings Ltd. ..... 123,000 345
--------
TOTAL SOUTH AFRICA........ 16,860
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
52
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
SOUTH KOREA - 14.60%
COMMON STOCKS - 14.16%
Amorepacific Corp. ........... 420 $ 154
Cheil Industries, Inc. ....... 6,200 225
Daelim Industrial Company
Ltd. ....................... 4,670 357
Daewoo Heavy Industries and
Machinery Ltd. ............. 7,630 143
Doosan Heavy Industries and
Construction Ltd. .......... 7,600 275
Hanjin Heavy Industries &
Construction Company
Ltd. ....................... 7,500 234
Hanmi Pharmaceutical Company
Ltd. ....................... 997 130
Hynix Semiconductor, Inc.(+).. 10,310 360
Hyundai Department Store
Company Ltd. ............... 750 72
Hyundai Engineering &
Construction Company
Ltd.(+)..................... 2,980 186
Hyundai Mobis................. 4,110 363
Hyundai Motor Company Ltd. ... 13,680 1,202
Industrial Bank of Korea...... 14,510 292
Kangwon Land Inc. ............ 8,771 180
Kookmin Bank.................. 21,531 1,929
Kookmin Bank, ADR............. 4,450 396
Korea Electric Power Corp. ... 22,895 1,017
Korea Zinc Company Ltd. ...... 3,580 322
KT Corp.(+)................... 1,690 76
KT Corp., ADR................. 43,000 1,001
KT&G Corp. ................... 3,070 172
Kumho Tire Company, Inc.,
GDR++....................... 9,900 77
Kumho Tire Company, Inc. ..... 31,590 492
LG Chemical................... 17,740 782
LG Construction Co. .......... 6,840 496
LG Electronics, Inc. ......... 11,910 986
LG Philips LCD Company
Ltd.(+)..................... 3,350 141
Lotte Shopping Company Ltd.,
GDR(+)++.................... 17,300 355
Lotte Shopping Company
Ltd.(+)..................... 572 239
NHN Corp. .................... 1,190 423
Orion Corp. .................. 1,662 435
POSCO......................... 2,390 666
POSCO, ADR.................... 3,870 273
Samsung Electronics Company
Ltd.sec..................... 4,588 3,133
Samsung Fire & Marine
Insurance Company Ltd. ..... 2,540 365
Samsung SDI Company Ltd. ..... 4,390 363
Shinhan Financial Group
Company Ltd. ............... 29,460 1,468
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
SK Corp. ..................... 13,650 $ 1,004
SK Telecom Company Ltd. ...... 1,668 392
SK Telecom Company Ltd.,
ADR......................... 39,690 1,060
S-Oil Corp. .................. 3,780 293
Woongjin Coway Company Ltd. .. 9,030 268
Woongjin Coway Company Ltd.,
GDR(+)...................... 4,400 64
Woori Finance Holdings Company
Ltd. ....................... 10,610 240
--------
TOTAL COMMON STOCKS....... 23,101
--------
PREFERRED STOCKS - 0.44%
Hyundai Motor Co. ............ 3,340 198
Samsung Electronics Company
Ltd. ....................... 957 518
--------
TOTAL PREFERRED STOCKS.... 716
--------
TOTAL SOUTH KOREA......... 23,817
--------
TAIWAN - 11.89%
COMMON STOCKS
Accton Technology Corp.(+).... 195,396 118
Advanced Semiconductor
Engineering, Inc. .......... 177,118 210
AU Optronics Corp(+).......... 298,630 489
Benq Corp. ................... 591,550 494
Catcher Technology Company
Ltd.(+)..................... 10,000 112
Cathay Financial Holding
Company Ltd.(+)............. 496,000 1,111
Chang Hwa Commercial Bank..... 535,000 346
China Motor Co. .............. 402,860 429
Chinatrust Financial Holding
Company Ltd. ............... 726,026 596
Chunghwa Telecom Company Ltd.,
ADR......................... 24,600 507
Compal Electronics, Inc. ..... 1,001,346 1,102
Delta Electronics, Inc. ...... 302,682 943
Elan Microelectronics
Corp.(+).................... 193,873 120
Epistar Corp.(+).............. 52,000 183
Everlight Electronics Co
Ltd.(+)..................... 48,000 136
Far Eastern Textile Co
Ltd.(+)..................... 189,000 174
Far EasTone Telecommunication
Company Ltd. ............... 98,000 122
First Financial Holding
Company Ltd. ............... 1,058,250 841
Formosa Chemicals & Fibre
Corp. ...................... 265,000 430
Formosa Petrochemical
Corp. ...................... 100,000 185
Fubon Financial Holding
Company Ltd.(+)............. 261,000 253
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
53
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
High Tech Computer Corp. ..... 16,000 $ 511
Hon Hai Precision Industry
Company Ltd. ............... 113,172 768
Largan Precision Company
Ltd.(+)..................... 17,158 362
Nien Hsing Textile Company
Ltd. ....................... 285,000 183
Nien Made Enterprise Company
Ltd.(+)..................... 99,000 136
Optimax Technology Corp. ..... 216,090 265
Phoenix Precision Technology
Corp. ...................... 55,000 125
Powerchip Semiconductor
Corp. ...................... 633,000 436
Quanta Computer, Inc. ........ 623,712 1,101
Shin Kong Financial Holding
Company Ltd. ............... 725,743 773
Silitech Technology Corp.(+).. 25,000 145
SinoPac Holdings.............. 1,561,987 867
Sunplus Technology Company
Ltd. ....................... 235,007 289
Taishin Financial Holdings
Company Ltd. ............... 201,758 133
Taiwan Cellular Corp. ........ 551,635 555
Taiwan Cement Corp.(+)........ 189,000 148
Taiwan Semiconductor
Manufacturing Company
Ltd. ....................... 96,000 205
Tripod Technology Corp.(+).... 45,000 169
Tsann Keun Enterprise Company
Ltd.(+)..................... 95,720 144
Unimicron Technology
Corp.(+).................... 98,000 163
United Microelectronics
Corp. ...................... 2,806,366 1,953
United Microelectronics Corp.,
ADR......................... 21,900 83
Wan Hai Lines Ltd. ........... 127,000 88
Wintek Corp.(+)............... 87,000 118
Wistron Corp.(+).............. 168,000 219
Yaego Corp.(+)................ 1,303,000 564
--------
TOTAL TAIWAN.............. 19,404
--------
THAILAND - 2.13%
COMMON STOCKS
Advanced Info Services PCL.... 37,200 88
Bangkok Bank PCL.............. 51,600 164
CH. Karnchang Public Company
Ltd. ....................... 188,900 54
Charoen Pokphand Foods PCL.... 1,194,900 175
CP Seven Eleven PCL........... 1,207,300 244
Delta Electronics PCL......... 289,200 155
Italian-Thai Development
PCL......................... 183,800 35
Kasikornbank PCL.............. 382,000 692
Krung Thai Bank PCL........... 1,607,700 514
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Lalin Property PCL............ 148,400 $ 22
Land & Houses PCL............. 354,400 83
PTT Exploration & Production
PCL(+)...................... 46,500 139
PTT Public Company Ltd. ...... 40,500 259
Siam Commercial Bank PCL...... 262,300 447
Siam Makro PCL................ 75,400 161
Thai Oil PCL.................. 95,400 153
Total Access
Communications(+)+.......... 25,000 90
--------
TOTAL THAILAND............ 3,475
--------
TURKEY - 2.53%
COMMON STOCKS
Akcansa Cimento A.S........... 55,842 426
BIM Birlesik Magazalar A.S.... 9,880 385
Dogan Yayin Holding(+)........ 114,969 582
Enka Insaat ve Sanayi
A.S.(+)..................... 44,838 695
Haci Omer Sabanci Holding
A.S......................... 32,400 153
Hurriyet Gazetecilik ve
Matbaacilik A.S.(+)......... 46,563 171
Tupras-Turkiye Petrol
Rafinerileri A.S.(+)........ 20,603 436
Turkiye Garanti Bankasi A.S... 174,642 720
Turkiye Is Bankasi (Isbank)... 31,520 265
Turkiye Vakiflar Bankasi
T.A.O....................... 31,400 198
Yapi ve Kredi Bankasi
A.S.(+)..................... 43,973 103
--------
TOTAL TURKEY.............. 4,134
--------
SHORT TERM INVESTMENTS - 11.43%
American Beacon Enhanced Cash
Trusth#..................... 7,558,641 7,559
American Beacon Money Market
Select Fundh#............... 10,470,365 10,470
<Caption>
PAR
AMOUNT
------------
U.S. Treasury Bill, 4.455%,
Due 6/8/2006P............... $ 625 622
--------
TOTAL SHORT TERM
INVESTMENTS............. 18,651
--------
TOTAL INVESTMENTS - 105.44%
(COST $122,080)............. 172,027
--------
LIABILITIES, NET OF OTHER
ASSETS - (5.44%)............ (8,879)
--------
TOTAL NET ASSETS - 100.00%.... $163,148
========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
54
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
- ---------------
<Table>
GDR - Global Depository Receipt
ADR - American Depository Receipt
(+)- Non-income producing security.
+- All or a portion of this security is on loan at April 30,
2006. See Note 5.
++- Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these
securities amounted to $3,717 or 2.28% of net assets.
sec.- The coupon rate shown on floating or adjustable rate
securities represents the rate at period end. The due date
on these types of securities reflects the final maturity
date.
h- The Fund/Trust is affiliated by having the same investment
advisor. See Note 2.
#- All or a portion of this security is purchased with cash
collateral for securities loaned.
P- At April 30, 2006, security pledged as collateral for open
futures contracts.
</Table>
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------ --------------
Emini S&P 500 Index........................................ 139 Jun 2006 $9,146 $92
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(DOLLARS IN THOUSANDS)
<Table>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS)
---------- ------ -----
16,161 South African Rand.......................................... 8/14/2006 $2,672 $(194)
------ -----
TOTAL CONTRACTS TO DELIVER (RECEIVABLE AMOUNT $2,478).................. $2,672 $(194)
====== =====
NET CURRENCY FLUX...................................................... $(194)
=====
</Table>
SECTOR DIVERSIFICATION
<Table>
PERCENT OF
NET ASSETS
-------
Consumer Discretionary...................................... 12.61%
Consumer Staples............................................ 5.12%
Energy...................................................... 12.11%
Financials.................................................. 19.34%
Health Care................................................. 1.96%
Industrials................................................. 10.26%
Information Technology...................................... 10.13%
Materials................................................... 8.66%
Telecommunication Services.................................. 9.96%
Utilities................................................... 3.86%
Short Term Investments...................................... 11.43%
Liabilities, Net of Other Assets............................ (5.44)%
-------
100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
55
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 94.67%
AUTO COMPONENTS - 5.03%
ArvinMeritor, Inc., 8.75%, Due 3/1/2012+.................... $ 1,000 $ 1,026
Asbury Automotive Group, Inc.,
9.00%, Due 6/15/2012...................................... 1,575 1,626
8.00%, Due 3/15/2014...................................... 800 806
CSK Auto Corp., 7.00%, Due 1/15/2014........................ 2,045 1,973
The Goodyear Tire & Rubber Co., 11.25%, Due 3/1/2011........ 1,800 2,016
Group 1 Automotive, Inc., 8.25%, Due 8/15/2013.............. 1,250 1,275
Pep Boys, Inc., 7.50%, Due 12/15/2014....................... 1,700 1,564
Stanadyne Corp., 10.00%, Due 8/15/2014...................... 1,000 920
Tenneco, Inc., 8.625%, Due 11/15/2014+...................... 1,000 1,013
TriMas Corp., 9.875%, Due 6/15/2012......................... 2,000 1,875
United Components, Inc., 9.375%, Due 6/15/2013.............. 2,250 2,205
--------
16,299
--------
BASIC MATERIALS - 0.34%
Lyondell Chemical Co., 11.125%, Due 7/15/2012............... 1,000 1,105
--------
COMMERCIAL SERVICES - 1.78%
Iron Mountain, Inc., 6.625%, Due 1/1/2016................... 2,000 1,885
NationsRent Companies, 9.50%, Due 5/1/2015.................. 1,310 1,421
United Rentals North America, Inc., 6.50%, Due 2/15/2012.... 1,475 1,445
WH Holdings (Cayman Islands) Ltd., 9.50%, Due 4/1/2011...... 950 1,017
--------
5,768
--------
COMMUNICATIONS - 12.65%
Cadmus Communications Corp., 8.375%, Due 6/15/2014.......... 1,700 1,713
CCH I LLC, 11.00%, Due 10/1/2015............................ 518 461
Charter Communications Holdings, 10.25%, Due 9/15/2010...... 1,675 1,688
Charter Communications Operations, 8.375%, Due
4/30/2014+++.............................................. 1,150 1,156
CSC Holdings, Inc.,
7.25%, Due 7/15/2008...................................... 2,150 2,174
10.50%, Due 5/15/2016..................................... 1,500 1,582
Dex Media, Inc.,
9.875%, Due 8/15/2013..................................... 1,000 1,101
Zero Coupon, Due 11/15/2013(+)#........................... 1,036 881
Zero Coupon, Due 11/15/2013(+)#........................... 1,250 1,062
Dobson Cellular Systems, Inc., 9.43%, Due 11/1/2011#........ 1,675 1,734
Echostar DBS Corp.,
6.625%, Due 10/1/2014+.................................... 2,975 2,867
7.125%, Due 2/1/2016++.................................... 2,500 2,441
FTD, Inc., 7.75%, Due 2/15/2014............................. 923 910
Houghton Mifflin Co., 8.25%, Due 2/1/2011................... 1,350 1,397
Insight Communications, Inc., 12.25%, Due 2/15/2011......... 2,375 2,532
Intelsat Ltd.,
5.25%, Due 11/1/2008...................................... 1,250 1,203
7.625%, Due 4/15/2012+.................................... 2,250 1,929
Intelsat Subsidiary Holding Co Ltd.,
8.25%, Due 1/15/2013...................................... 400 408
8.625%, Due 1/15/2015..................................... 500 520
The Interpublic Group of Companies, Inc., 6.25%, Due
11/15/2014................................................ 2,375 1,971
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
56
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Kabel Deutschland GMBH, 10.625%, Due 7/1/2014+++............ $ 2,825 $ 3,051
L-3 Communications Corp., 6.375%, Due 10/15/2015............ 1,500 1,455
Level 3 Financing, Inc., 12.25%, Due 3/15/2013++............ 500 535
Mastec, Inc., 7.75%, Due 2/1/2008........................... 1,500 1,498
Network Communications, Inc., 10.75%, Due 12/1/2013++....... 1,000 1,028
RH Donnelley Corp., 8.875%, Due 1/15/2016++................. 1,600 1,646
Rural Cellular Corp., 8.25%, Due 3/15/2012++................ 1,000 1,050
US Unwired, Inc., 9.16%, Due 6/15/2010#..................... 1,000 1,025
--------
41,018
--------
CONSTRUCTION & ENGINEERING - 2.32%
Beazer Homes USA, Inc., 8.375%, Due 4/15/2012............... 2,000 2,083
K. Hovnanian Enterprises, Inc., 8.875%, Due 4/1/2012+....... 2,700 2,822
KB Home,
7.75%, Due 2/1/2010....................................... 1,000 1,030
9.50%, Due 2/15/2011...................................... 1,500 1,571
--------
7,506
--------
CONSUMER, CYCLICAL - 0.88%
Technical Olympic USA, Inc., 8.25%, Due 4/1/2011++.......... 1,250 1,245
TRW Automotive, Inc., 9.375%, Due 2/15/2013................. 1,500 1,613
--------
2,858
--------
CONSUMER, NON-CYCLICAL - 1.79%
Avis Budget Car Rental LLC/Avis Budget Finance, Inc.,
7.625%, Due 5/15/2014++................................... 1,350 1,374
Blyth, Inc., 5.50%, Due 11/1/2013........................... 750 634
Prestige Brands, Inc., 9.25%, Due 4/15/2012................. 2,000 2,030
Triad Hospitals, Inc., 7.00%, Due 5/15/2012................. 750 744
United Surgical Partners International, Inc., 10.00%, Due
12/15/2011................................................ 950 1,013
--------
5,795
--------
ENERGY - 9.50%
AmeriGas Partners LP/AmeriGas Eagle Finance Corp., 7.125%,
Due 5/20/2016............................................. 1,400 1,386
AmeriGas Partners LP, 7.25%, Due 5/20/2015.................. 1,500 1,492
Browning-Ferris Industries, Inc., 9.25%, Due 5/1/2021....... 1,500 1,590
Chesapeake Energy Corp.,
6.875%, Due 1/15/2016..................................... 1,250 1,231
6.50%, Due 8/15/2017...................................... 2,000 1,910
Clayton Williams Energy, Inc., 7.75%, Due 8/1/2013.......... 1,000 943
Energy Partners Ltd., 8.75%, Due 8/1/2010................... 2,000 2,045
Holly Energy Partners, 6.25%, Due 3/1/2015.................. 1,450 1,367
Inergy L.P./Inergy Finance Corp., 6.875%, Due 12/15/2014.... 2,224 2,102
Massey Energy Co., 6.875%, Due 12/15/2013++................. 3,000 2,888
Newfield Exploration Co., 8.375%, Due 8/15/2012............. 1,000 1,072
NRG Energy, Inc., 7.375%, Due 2/1/2016...................... 1,750 1,765
Paramount Resources Ltd., 8.50%, Due 1/31/2013.............. 2,124 2,209
PetroQuest Energy, Inc., 10.375%, Due 5/15/2012............. 3,000 3,187
Pogo Producing Co., 8.25%, Due 4/15/2011.................... 1,250 1,302
Reliant Energy, Inc., 9.50%, Due 7/15/2013.................. 1,000 1,015
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
57
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Swift Energy Co.,
7.625%, Due 7/15/2011..................................... $ 900 $ 902
9.375%, Due 5/1/2012...................................... 1,000 1,062
Tenaska, Inc., 6.528%, Due 12/30/2014++..................... 1,381 1,329
--------
30,797
--------
FINANCE - 4.57%
American Real Estate Partners, L.P., 7.125%, Due
2/15/2013................................................. 1,500 1,489
CPI Holding Company, Inc., 10.561%, Due 2/1/2015#........... 1,750 1,811
E*Trade Financial Corp., 8.00%, Due 6/15/2011............... 3,075 3,175
National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,011
Rainbow National Services LLC, 10.375%, Due 9/1/2014++...... 750 842
Residential Capital Corp., 6.898%, Due 4/17/2009++#......... 1,900 1,899
Stripes Acquisition LLC/Susser Finance Corp., 10.625%, Due
12/15/2013++.............................................. 2,000 2,125
Thornburg Mortgage, 8.00%, Due 5/15/2013.................... 2,500 2,481
--------
14,833
--------
FOOD & DRUG RETAILING - 0.86%
Rite Aid Corp.,
8.125%, Due 5/1/2010+..................................... 2,000 2,045
9.50%, Due 2/15/2011...................................... 710 749
--------
2,794
--------
FOOD PRODUCTS - 0.76%
Pilgrims Pride Corp., 9.625%, Due 9/15/2011................. 2,348 2,448
--------
FOOD/RESTAURANT - 0.53%
Cott Beverages, Inc., 8.00%, Due 12/15/2011................. 1,700 1,730
--------
HEALTH CARE - 6.70%
Athena Neurosciences Financial LLC, 7.25%, Due 2/21/2008+... 2,300 2,286
DaVita, Inc., 7.25%, Due 3/15/2015.......................... 2,000 2,000
HCA, Inc.,
6.95%, Due 5/1/2012....................................... 1,000 1,003
6.30%, Due 10/1/2012...................................... 2,000 1,942
8.36%, Due 4/15/2024...................................... 1,935 1,998
Interactive Health, 8.00%, Due 4/1/2011++................... 1,550 1,240
Omnicare, Inc., 6.875%, Due 12/15/2015...................... 2,050 2,027
Select Medical Corp., 7.625%, Due 2/1/2015.................. 1,525 1,376
Skilled Healthcare Group, Inc., 11.00%, Due 1/15/2014++..... 1,300 1,365
Sybron Dental Specialties, Inc., 8.125%, Due 6/15/2012...... 1,000 1,058
Triad Hospitals, Inc., 7.00%, Due 11/15/2013................ 1,750 1,708
US Oncology Holdings, Inc., 10.32%, Due 3/15/2015#.......... 1,000 1,015
US Oncology, Inc.,
9.00%, Due 8/15/2012...................................... 1,500 1,590
10.75%, Due 8/15/2014..................................... 1,000 1,119
--------
21,727
--------
HOTELS, RESTAURANTS & LEISURE - 3.84%
AMF Bowling Worldwide, Inc., 10.00%, Due 3/1/2010........... 1,950 2,006
Landry's Restaurants, Inc., 7.50%, Due 12/15/2014........... 525 504
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
58
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Majestic Star Casino LLC,
9.50%, Due 10/15/2010..................................... $ 1,000 $ 1,065
9.50%, Due 10/15/2010++................................... 500 533
MGM Mirage, 6.875%, Due 4/1/2016++.......................... 2,750 2,681
San Pasqual Casino Development Group, 8.00%, Due
9/15/2013++............................................... 1,800 1,818
Turning Stone Casino Resort, 9.125%, Due 12/15/2010++....... 3,710 3,858
--------
12,465
--------
INDUSTRIALS - 23.31%
Abitibi-Consolidated, Inc., 8.55%, Due 8/1/2010............. 500 513
ACIH, Inc., Zero Coupon, Due 12/15/2012(+)++#............... 2,325 1,912
Ainsworth Lumber Company Ltd., 6.75%, Due 3/15/2014......... 1,000 853
Alpha Natural Resources, LLC, 10.00%, Due 6/1/2012.......... 2,000 2,190
Altra Industrial Motion, Inc., 9.00%, Due 12/1/2011......... 1,575 1,583
Borden, Inc., 9.20%, Due 3/15/2021.......................... 1,500 1,380
Case New Holland, Inc.,
9.25%, Due 8/1/2011....................................... 1,500 1,594
7.125%, Due 3/1/2014++.................................... 1,000 983
Casella Waste Systems, Inc., 9.75%, Due 2/1/2013............ 2,020 2,151
Celestica, Inc., 7.875%, Due 7/1/2011+...................... 2,500 2,544
CHC Helicopter Corp., 7.375%, Due 5/1/2014.................. 1,787 1,818
Clean Harbors, Inc., 11.25%, Due 7/15/2012.................. 650 735
Communications and Power Industries, Inc., 8.00%, Due
2/1/2012.................................................. 1,500 1,541
Corrections Corporation of America,
7.50%, Due 5/1/2011....................................... 500 506
6.75%, Due 1/31/2014+..................................... 1,500 1,463
Crystal US Holdings 3 LLC / Crystal US Sub 3 Corp, 10.50%,
Due 10/1/2014#............................................ 3,990 3,152
Dycom Industries, Inc., 8.125%, Due 10/15/2015.............. 1,500 1,545
Ford Motor Credit Co.,
5.625%, Due 10/1/2008..................................... 1,000 910
5.80%, Due 1/12/2009...................................... 700 634
9.473%, Due 4/15/2012#.................................... 800 801
GenCorp, Inc., 9.50%, Due 8/15/2013......................... 1,500 1,620
General Motors Acceptance Corp.,
6.875%, Due 9/15/2011..................................... 2,825 2,646
6.75%, Due 12/1/2014+..................................... 600 547
General Motors Corp., 7.70%, Due 4/15/2016.................. 1,300 938
The Greenbrier Companies, Inc., 8.375%, Due 5/15/2015....... 975 1,020
GST Equipment Funding, Inc., 13.25%, Due 5/1/2007(+)sec.h... 2,500 --
Interline Brands, Inc., 11.50%, Due 5/15/2011............... 2,275 2,525
Intertape Polymer, Inc., 8.50%, Due 8/1/2014................ 1,300 1,300
J.B. Poindexter, Inc., 8.75%, Due 3/15/2014................. 2,000 1,625
Jacuzzi Brands, Inc., 9.625%, Due 7/1/2010.................. 1,550 1,660
Jefferson Smurfit Corp., 8.25%, Due 10/1/2012+.............. 1,000 970
Nell AF SARL, 8.375%, Due 8/15/2015+++...................... 2,250 2,230
Owens-Brockway Glass Containers, Inc.,
8.875%, Due 2/15/2009..................................... 1,000 1,040
8.75%, Due 11/15/2012..................................... 2,250 2,402
8.25%, Due 5/15/2013...................................... 1,000 1,028
Pipe Acquisition Finance PLC, 10.913%, Due 12/15/2010++#.... 1,100 1,089
Plastipak Holdings, Inc., 8.50%, Due 12/15/2015++........... 1,475 1,490
Polypore International, Inc., 10.50%, Due 10/1/2012#........ 550 364
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
59
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Polypore, Inc., 8.75%, Due 5/15/2012........................ $ 1,450 $ 1,374
RJ Reynolds Tobacco Holdings, Inc., 7.30%, Due 7/15/2015.... 1,350 1,370
Samsonite Corp., 8.875%, Due 6/1/2011....................... 2,500 2,650
Sequa Corp., 9.00%, Due 8/1/2009............................ 1,750 1,881
Solectron Corp., 7.97%, Due 11/15/2006...................... 1,500 1,515
SunGard Data Systems, Inc., 9.125%, Due 8/15/2013++......... 775 827
Superior Essex Communications, 9.00%, Due 4/15/2012......... 2,400 2,424
Terex Corp.,
9.25%, Due 7/15/2011...................................... 1,000 1,065
7.375%, Due 1/15/2014+.................................... 2,260 2,288
Transdigm, Inc., 8.375%, Due 7/15/2011...................... 2,500 2,625
UNOVA, Inc., 7.00%, Due 3/15/2008........................... 4,250 4,271
--------
75,592
--------
INFORMATION TECHNOLOGY - 0.66%
SunGard Data Systems, Inc., 10.25%, Due 8/15/2015+++........ 2,000 2,150
--------
MATERIALS - 8.02%
Abitibi-Consolidated, Inc., 6.00%, Due 6/20/2013+........... 1,000 895
BCI US Finance Corp., 10.568%, Due 7/15/2010++#............. 500 511
Compass Minerals International, Inc., 1.00%, Due
6/1/2013#................................................. 1,825 1,661
Earle M. Jorgensen Co., 9.75%, Due 6/1/2012................. 1,655 1,787
Freeport-McMoRan Copper & Gold, Inc., 6.875%, Due
2/1/2014.................................................. 1,500 1,489
Hercules, Inc., 6.75%, Due 10/15/2029....................... 1,750 1,691
Ineos Group Holdings Plc, 8.50%, Due 2/15/2016++............ 2,000 1,900
Lyondell Chemical Co., 10.875%, Due 5/1/2009................ 2,500 2,562
Nalco Co., 8.875%, Due 11/15/2013........................... 1,000 1,033
Neenah Paper, Inc., 7.375%, Due 11/15/2014.................. 2,450 2,291
The Newark Group, Inc., 9.75%, Due 3/15/2014................ 2,200 2,074
OM Group, Inc., 9.25%, Due 12/15/2011....................... 1,750 1,807
Phibro Animal Health Corp., 13.00%, Due 12/1/2007........... 500 515
Resolution Performance Products, 8.00%, Due 12/15/2009...... 1,750 1,842
Rhodia SA, 10.25%, Due 6/1/2010+............................ 2,309 2,580
UAP Holding Corp., Zero Coupon, Due 7/15/2012(+)#........... 1,506 1,357
--------
25,995
--------
MEDIA - 3.79%
Advanstar Communications, Inc.,
10.75%, Due 8/15/2010..................................... 1,500 1,627
12.00%, Due 2/15/2011+.................................... 1,375 1,454
Allbritton Communications Co., 7.75%, Due 12/15/2012........ 2,590 2,596
American Media Operations, Inc., 10.25%, Due 5/1/2009+...... 1,500 1,410
LBI Media, Inc., 10.125%, Due 7/15/2012..................... 1,000 1,075
The Sheridan Group, Inc., 10.25%, Due 8/15/2011............. 2,125 2,189
Warner Music Group, 7.375%, Due 4/15/2014................... 1,600 1,576
WMG Holdings Corp., 9.50%, Due 12/15/2014#.................. 500 368
--------
12,295
--------
RETAIL - 3.39%
Jostens Holding, 10.25%, Due 12/1/2013#..................... 1,900 1,468
Jostens IH Corp., 7.625%, Due 10/1/2012..................... 950 943
NBTY, Inc., 7.125%, Due 10/1/2015++......................... 1,800 1,701
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
60
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Phillips-Van Heusen Corp.,
8.125%, Due 5/1/2013...................................... $ 735 $ 773
7.75%, Due 11/15/2023..................................... 1,800 1,890
Rafaella Apparel Group, Inc., 11.25%, Due 6/15/2011++....... 1,500 1,519
Woolworth Corp., 8.50%, Due 1/15/2022....................... 2,550 2,690
--------
10,984
--------
SERVICES - 0.88%
Knowledge Learning Corp., 7.75%, Due 2/1/2015++............. 3,000 2,846
--------
TECHNOLOGY - 1.68%
Amkor Technology, Inc.,
9.25%, Due 2/15/2008...................................... 2,000 2,110
7.75%, Due 5/15/2013...................................... 500 477
MagnaChip Semiconductor SA/MagnaChip Semiconductor Finance
Co.,
8.16%, Due 12/15/2011#.................................... 1,850 1,864
Sensata Technologies BV, 8.00%, Due 5/1/2014++.............. 1,000 1,005
--------
5,456
--------
TELECOMMUNICATION SERVICES - 1.39%
AirGate PCS, Inc., 9.375%, Due 9/1/2009..................... 1,000 1,046
Block Communications, Inc., 8.25%, Due 12/15/2015++......... 2,000 1,955
Stratos Global Corp., 9.875%, Due 2/15/2013++............... 1,500 1,506
--------
4,507
--------
TOTAL CORPORATE OBLIGATIONS............................. 306,968
--------
CONVERTIBLE OBLIGATIONS - 0.66%
TECHNOLOGY - 0.66%
Nortel Networks Corp., 4.25%, Due 9/1/2008.................. 2,250 2,132
--------
TOTAL CONVERTIBLE OBLIGATIONS........................... 2,132
--------
<Caption>
SHARES
-----------
SHORT TERM INVESTMENTS - 11.23%
AIM Short-Term Investment Company Liquid Asset Fund@........ 2,051,985 2,052
American Beacon Money Market Select Fund*................... 11,875,450 11,875
<Caption>
PAR
AMOUNT
-----------
Citigroup Global Markets, Inc. Master Note@................. $ 10,000 10,000
Merrill Lynch Pierce Fenner & Smith, Inc. Tri Party Repo,
4.915%, Due 5/1/2006 (Collateral held at J.P. Morgan Chase
consists of the following: U.S. Unwired, Inc., 10.00%, Due
6/15/2012, Market Value - $4,463; and Verizon NY, Inc.,
7.75%, Due 4/1/2032, Market Value - $5,740.)@............. 10,000 10,000
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
61
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
wMorgan Stanley & Co, 4.925%, Due 5/1/2006 (Collateral held
at The Bank of New York consists of the following: Banco
Santander, 5.22%, Due 12/9/2009, Market
Value - $2,616.)@......................................... $ 2,500 $ 2,500
--------
TOTAL SHORT TERM INVESTMENTS............................ 36,427
--------
TOTAL INVESTMENTS - 106.56% (COST $345,784)................. 345,527
--------
LIABILITIES, NET OF OTHER ASSETS - (6.56%).................. (21,277)
--------
TOTAL NET ASSETS - 100.00%.................................. $324,250
========
</Table>
- ---------------
<Table>
Percentages are stated as a percent of net assets.
(+) - Non-income producing security.
+ - All or a portion of this security is on loan at April 30,
2006. See Note 5.
++ - Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these
securities amounted to $57,728 or 17.80% of net assets.
# - The coupon rate shown on floating or adjustable rate
securities represents the rate at period end. The due date
on these types of securities reflects the final maturity
date.
sec. - In Default
h - Valued at fair value pursuant to procedures approved by the
Board of Trustees.
(@) - All or a portion of this security is purchased with cash
collateral for securities loaned.
* - The Fund/Trust is affiliated by having the same investment
advisor. See Note 2.
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
62
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 3.97%
CONSUMER DISCRETIONARY - 0.24%
SPECIALTY RETAIL - 0.24%
Tiffany & Co. .............................................. 7,300 $ 255
--------
TOTAL CONSUMER DISCRETIONARY............................ 255
--------
FINANCIALS - 0.78%
DIVERSIFIED FINANCIALS - 0.52%
The Goldman Sachs Group, Inc. .............................. 3,500 561
--------
INSURANCE - 0.26%
AON Corp. .................................................. 6,750 283
--------
TOTAL FINANCIALS........................................ 844
--------
HEALTH CARE - 0.70%
PHARMACEUTICALS - 0.70%
Barr Pharmaceuticals, Inc.(+)............................... 6,000 363
Mylan Laboratories, Inc.(+)................................. 17,500 382
--------
TOTAL HEALTH CARE....................................... 745
--------
INDUSTRIALS - 0.68%
COMMERCIAL SERVICES & SUPPLIES - 0.31%
Manpower, Inc.(+)........................................... 5,000 326
--------
TRANSPORTATION INFRASTRUCTURE - 0.37%
Burlington Northern Santa Fe Corp. ......................... 5,000 397
--------
TOTAL INDUSTRIALS....................................... 723
--------
INFORMATION TECHNOLOGY - 1.57%
COMMUNICATIONS EQUIPMENT - 0.81%
Nokia Corp., ADR............................................ 25,000 567
Tellabs, Inc.(+)............................................ 19,000 301
--------
868
--------
IT CONSULTING & SERVICES - 0.45%
Infosys Technologies Ltd., ADR+............................. 6,100 480
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.31%
Atmel Corp.(+).............................................. 62,500 327
--------
TOTAL INFORMATION TECHNOLOGY............................ 1,675
--------
TOTAL COMMON STOCKS..................................... 4,242
--------
CONVERTIBLE PREFERRED STOCKS - 2.72%
BANKS - 0.38%
Washington Mutual, Inc. .................................... 7,200 401
--------
FINANCE - 1.21%
Lazard Ltd. ................................................ 10,250 405
Lehman Brothers Holdings, Inc.+............................. 15,300 398
Morgan Stanley.............................................. 11,500 495
--------
1,298
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
63
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
INSURANCE - 1.13%
Genworth Financial, Inc. ................................... 9,300 $ 337
MetLife, Inc. .............................................. 16,000 448
Travelers Property Casualty Corp.+.......................... 17,250 426
--------
1,211
--------
TOTAL CONVERTIBLE PREFERRED STOCKS...................... 2,910
--------
<Caption>
PAR
AMOUNT
-----------
CORPORATE OBLIGATIONS - 46.48%
BANKS - 8.28%
Banco Popular North America, Inc.,
6.125%, Due 10/15/2006.................................... $ 500 502
4.25%, Due 4/1/2008....................................... 300 292
Bank of America Corp., 3.375%, Due 2/17/2009+............... 350 333
Bank One Corp., 4.90%, Due 4/30/2015+....................... 500 464
Capital One Bank,
4.25%, Due 12/1/2008...................................... 1,000 972
5.125%, Due 2/15/2014..................................... 330 315
Citigroup, Inc., 5.125%, Due 2/14/2011...................... 1,000 984
Credit Suisse First Boston, 6.50%, Due 5/1/2008++........... 500 509
Credit Suisse First Boston USA, Inc., 5.875%, Due
8/1/2006.................................................. 1,500 1,502
ING Bank, NV, 5.125%, Due 5/1/2015++........................ 300 284
Synovus Financial Corp., 4.875%, Due 2/15/2013+............. 500 476
Wachovia Corp., 6.40%, Due 4/1/2008......................... 1,500 1,530
Washington Mutual, Inc., 4.625%, Due 4/1/2014............... 750 680
--------
8,843
--------
COMMERCIAL SERVICES - 0.24%
WH Holdings (Cayman Islands) Ltd., 9.50%, Due 4/1/2011...... 240 257
--------
COMMUNICATIONS - 1.07%
AT&T Broadband Corp., 8.375%, Due 3/15/2013................. 700 784
Time Warner, Inc., 6.75%, Due 4/15/2011..................... 350 363
--------
1,147
--------
ELECTRIC/GAS - 1.04%
Kinder Morgan Finance Co. ULC, 5.70%, Due 1/5/2016.......... 350 337
MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008....... 800 770
--------
1,107
--------
FINANCE - 11.89%
American Honda Finance Corp., 4.875%, Due 5/15/2010......... 300 291
The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 800 760
Countrywide Home Loans, Inc. 3.25%, Due 5/21/2008........... 1,000 958
E*Trade Financial Corp.,
7.375%, Due 9/15/2013..................................... 150 153
7.875%, Due 12/1/2015..................................... 125 131
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 321
General Electric Capital Corp., 4.125%, Due 3/4/2008........ 2,000 1,960
The Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013......... 350 329
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
64
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Household Finance Corp., 5.75%, Due 1/30/2007............... $ 1,750 $ 1,756
HSBC Finance Corp., 5.25%, Due 1/14/2011+................... 1,000 986
International Lease Finance Corp., 6.375%, Due 3/15/2009.... 725 742
Lehman Brothers Holdings, Inc., 3.50%, Due 8/7/2008......... 1,000 961
Merrill Lynch & Company, Inc., 6.00%, Due 2/17/2009......... 1,000 1,016
ProLogis, 5.50%, Due 4/1/2012............................... 350 344
Simon Property Group LP,
6.375%, Due 11/15/2007.................................... 400 405
5.375%, Due 6/1/2011++.................................... 350 345
SLM Corp., 4.00%, Due 1/15/2009............................. 1,300 1,250
--------
12,708
--------
INDUSTRIALS - 12.26%
Accuride Corp., 8.50%, Due 2/1/2015......................... 150 148
Aleris International, Inc., 9.00%, Due 11/15/2014+.......... 275 287
AmeriPath, Inc., 10.50%, Due 4/1/2013....................... 400 425
BHP Finance (USA) Ltd., 4.80%, Due 4/15/2013................ 550 524
Bunge Limited Finance Corp.,
7.80%, Due 10/15/2012..................................... 200 220
5.35%, Due 4/15/2014...................................... 500 473
Caterpillar Financial Services Corp., 4.15%, Due
1/15/2010................................................. 1,000 956
Celestica, Inc., 7.875%, Due 7/1/2011....................... 260 265
Cendant Corp., 6.875%, Due 8/15/2006........................ 1,100 1,104
Cisco Systems, Inc., 5.25%, Due 2/22/2011................... 550 544
DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 950 938
Dell Computer Corp., 6.55%, Due 4/15/2008................... 200 204
Dole Food Company, Inc., 8.875%, Due 3/15/2011.............. 142 138
DST Systems, Inc., 3.625%, Due 8/15/2023.................... 485 640
EOG Resources, Inc., 4.75%, Due 3/15/2014++................. 350 327
Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 436
Ford Motor Credit, 8.625%, Due 11/1/2010+................... 285 270
Freeport-McMoRan Copper & Gold, Inc., 10.125%, Due
2/1/2010.................................................. 400 429
Gardner Denver, Inc., 8.00%, Due 5/1/2013................... 300 315
John Deere Capital Corp., 4.125%, Due 1/15/2010............. 1,000 955
Kroger Co., 8.15%, Due 7/15/2006............................ 1,000 1,005
Nissan Motor Company Ltd., 4.625%, Due 3/8/2010++........... 590 566
Northrop Grumman Corp., 4.079%, Due 11/16/2006.............. 700 695
Pulte Homes, Inc., 4.875%, Due 7/15/2009.................... 100 97
SunGard Data Systems, Inc., 9.125%, Due 8/15/2013++......... 150 160
Telcordia Technologies, Inc., 10.00%, Due 3/15/2013++....... 200 183
Tenent Healthcare Corp., 9.50%, Due 2/1/2015++.............. 275 281
Union Pacific Corp., 6.50%, Due 4/15/2012................... 350 364
Wesco Distributing, Inc., 7.50%, Due 10/15/2017++........... 150 153
--------
13,102
--------
INSURANCE - 8.33%
Aegon Funding Corp., 5.75%, Due 12/15/2020.................. 350 339
AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 227
ASIF Global Financing, 3.90%, Due 10/22/2008++.............. 500 483
Genworth Global Funding Trusts, 5.125%, Due 3/15/2011....... 1,000 982
John Hancock Global FDG II, 3.75%, Due 9/30/2008++.......... 1,000 965
John Hancock Global Funding, 5.625%, Due 6/27/2006++........ 1,400 1,401
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
65
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Lincoln National Corp., 4.75%, Due 2/15/2014................ $ 200 $ 185
MassMutual Global Funding II, 3.80%, Due 4/15/2009++........ 1,000 958
Prudential Financial, Inc., 4.50%, Due 7/15/2013+........... 375 347
Prudential Insurance Company of America, 6.375%, Due
7/23/2006++............................................... 2,000 2,005
Transamerica Corp., 6.75%, Due 11/15/2006................... 1,000 1,007
--------
8,899
--------
RETAIL - 0.13%
NBTY, Inc., 7.125%, Due 10/1/2015++......................... 150 142
--------
TELEPHONE - 3.24%
AT&T Wireless Services, Inc., 8.125%, Due 5/1/2012.......... 250 280
France Telecom SA, 7.75%, Due 3/1/2011...................... 680 740
Sprint Capital Corp.,
6.00%, Due 1/15/2007...................................... 1,200 1,205
8.375%, Due 3/15/2012..................................... 675 759
Syniverse Technologies, Inc., 7.75%, Due 8/15/2013.......... 200 199
Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015..... 300 281
--------
3,464
--------
TOTAL CORPORATE OBLIGATIONS............................. 49,669
--------
CONVERTIBLE OBLIGATIONS - 14.60%
BANKS - 0.66%
Bank America Corp., 0.25%, Due 1/26/2010.................... 265 279
Deutsche Bank Luxembourg SA, 4.88%, Due 5/1/2012++ #........ 110 128
Wachovia Corp., 0.25%, Due 12/15/2010....................... 280 298
--------
705
--------
ELECTRIC UTILITIES - 0.41%
CenterPoint Energy, Inc., 3.75%, Due 5/15/2023.............. 390 433
--------
ENERGY - 0.66%
Schlumberger Ltd., 2.125%, Due 6/1/2023..................... 400 708
--------
FINANCE - 0.64%
American Financial Group, Inc., 1.486%, Due 6/2/2033........ 625 326
Fortis Insurance NV, 7.75%, Due 1/26/2008++................. 275 360
--------
686
--------
HOTELS, RESTAURANTS & LEISURE - 0.13%
International Game Technology, Inc., Zero Coupon, Due
1/29/2033(+).............................................. 175 141
--------
INDUSTRIALS - 7.44%
Armor Holdings, Inc., 2.00%, Due 11/1/2024.................. 275 347
Best Buy Company, Inc., 2.25%, Due 1/15/2022+............... 120 153
Cadence Design Systems, Inc., Zero Coupon, Due
8/15/2023(+).............................................. 260 323
Caesars Entertainment, Inc., 5.068%, Due 4/15/2024#......... 110 153
Ceradyne, Inc., 2.875%, Due 12/15/2035...................... 150 174
Commscope, Inc., 1.00%, Due 3/15/2024....................... 140 218
CSG Systems International, Inc., 2.50%, Due 6/15/2024....... 275 292
Electronics for Imaging, Inc., 1.50%, Due 6/1/2023.......... 235 263
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
66
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Fisher Scientific International, Inc., 3.25%, Due
3/1/2024+................................................. $ 560 $ 611
Grey Wolf, Inc., 4.94%, Due 4/1/2024#....................... 215 307
Halliburton Co., 3.125%, Due 7/15/2023++.................... 210 442
L3 Communications Holdings, Inc., 3.00%, Due 8/1/2035++..... 415 413
Laboratory Corp of America Holdings, Zero Coupon, Due
9/11/2021(+).............................................. 375 294
Liberty Media Corp., 0.75%, Due 3/30/2023................... 505 538
Lockheed Martin Corp., 4.499%, Due 8/15/2033#............... 515 597
Lowe's Companies, Inc., 0.861%, Due 10/19/2021.............. 135 147
Medtronic, Inc., 1.25%, Due 9/15/2021....................... 555 547
Nabors Industries Ltd., Zero Coupon, Due 6/15/2023+(+)...... 280 327
NCI Building Systems, Inc., 2.125%, Due 11/15/2024++........ 285 477
Regal-Beloit Corp., 2.75%, Due 3/15/2024.................... 210 356
SEACOR Holdings, 2.875%, Due 12/15/2024+.................... 400 530
Teva Pharmaceutical Finance LLC, Series B, 0.25%, Due
2/1/2024.................................................. 120 142
United Auto Group, Inc., 3.50%, Due 4/1/2026++.............. 135 144
Vishay Intertechnology, Inc., 3.625%, Due 8/1/2023.......... 150 155
--------
7,950
--------
INFORMATION TECHNOLOGY - 0.51%
Amdocs Ltd., 0.50%, Due 3/15/2024+.......................... 285 285
Electronic Data Systems Corp., 3.875%, Due 7/15/2023........ 250 260
--------
545
--------
PHARMACEUTICALS - 2.27%
Amgen, Inc., Zero Coupon, Due 3/1/2032(+)................... 900 663
Genzyme Corp., 1.25%, Due 12/1/2023+........................ 550 568
Gilead Sciences, Inc., 0.50%, Due 5/1/2011++................ 250 234
Omnicare, Inc., 3.25%, Due 12/15/2035....................... 215 211
Teva Pharmaceutical Finance LLC, Series A, 0.50%, Due
2/1/2024+................................................. 170 192
Wyeth, 4.239%, Due 1/15/2024#............................... 525 556
--------
2,424
--------
SERVICES - 0.64%
priceline.com, Inc., 2.25%, Due 1/15/2025................... 140 130
Quanta Services, Inc.,
4.50%, Due 10/1/2023...................................... 255 400
3.75%, Due 4/30/2026++.................................... 150 147
--------
677
--------
TELEPHONE - 0.88%
NII Holdings, Inc., 2.75%, Due 8/15/2025++.................. 700 944
--------
TRANSPORTATION INFRASTRUCTURE - 0.36%
CSX Corp., Zero Coupon, Due 10/30/2021(+)................... 315 385
--------
TOTAL CONVERTIBLE OBLIGATIONS........................... 15,598
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
67
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.84%
COMMERCIAL MORTGAGE-BACKED SECURITY - 1.00%
Banc of America Commercial Mortgage, Inc., 2005-6, 5.001%,
Due 9/10/2047............................................. $ 767 $ 760
JP Morgan Chase Commercial Mortgage Securities Corp.,
4.655%, Due 8/15/2042..................................... 317 312
--------
1,072
--------
WHOLE LOAN COLLATERALIZED MORTGAGE OBLIGATIONS - 0.84%
JP Morgan Chase Commercial Mortgage Securities Corp, 4.613%,
Due 10/15/2042............................................ 911 896
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 1,968
--------
ASSET-BACKED SECURITIES - 4.32%
AUTO LOAN - 1.56%
Banc of America Securities Auto Trust, 2005-WF1, 4.08%, Due
4/18/2010................................................. 1,000 976
Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 696 690
--------
1,666
--------
OTHER ASSET-BACKED - 2.76%
CarMax Auto Owner Trust, 2005-3, 4.91%, Due 1/18/2011....... 1,000 989
HSBC Automotive Trust, 2005-1, 4.35%, Due 6/18/2012......... 1,000 976
Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due
4/20/2012................................................. 1,000 989
--------
2,954
--------
TOTAL ASSET-BACKED SECURITIES........................... 4,620
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.16%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.34%
Pool #C01598, 5.00%, Due 8/1/2033........................... 731 694
Pool #C01786, 5.50%, Due 2/1/2034........................... 1,029 1,001
Pool #E01492, 5.50%, Due 10/1/2018.......................... 812 806
--------
2,501
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.11%
Pool #545759, 6.50%, Due 7/1/2032........................... 659 672
Pool #555549, 5.00%, Due 6/1/2018........................... 1,063 1,037
Pool #725238, 5.00%, Due 3/1/2034........................... 580 550
--------
2,259
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.71%
2006-9 A, 4.201%, Due 8/16/2026............................. 998 962
Pool #003515, 5.50%, Due 2/20/2034.......................... 867 848
Pool #780921, 7.00%, Due 11/15/2013......................... 256 265
Pool #781564, 6.00%, Due 2/15/2033.......................... 330 332
Pool #781690, 6.00%, Due 12/15/2033......................... 483 485
--------
2,892
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 7,652
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
68
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
- -w
U.S. AGENCY OBLIGATIONS - 0.96%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.47%
5.125%, Due 10/15/2008+..................................... $ 500 $ 500
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.49%
6.625%, Due 11/15/2010...................................... 500 527
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 1,027
--------
U.S. TREASURY OBLIGATIONS - 15.74%
U.S. TREASURY BONDS - 0.95%
8.75%, Due 8/15/2020+....................................... 750 1,009
--------
U.S. TREASURY NOTES - 14.79%
3.875%, Due 5/15/2010+...................................... 1,500 1,444
5.00%, Due 2/15/2011+....................................... 850 853
5.00%, Due 8/15/2011+....................................... 4,600 4,618
4.00%, Due 2/15/2014+....................................... 5,000 4,671
4.75%, Due 5/15/2014+....................................... 4,300 4,220
--------
15,806
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 16,815
--------
SHARES
----------
- -W
SHORT TERM INVESTMENTS - 24.78%
American Beacon Enhanced Cash Trusthsec..................... 16,190,058 16,190
American Beacon Money Market Select Fundhsec................ 10,296,116 10,296
--------
TOTAL SHORT TERM INVESTMENTS............................ 26,486
--------
TOTAL INVESTMENTS - 122.57% (COST $130,635)................. 130,987
--------
LIABILITIES, NET OF OTHER ASSETS - 22.57%................... (24,121)
--------
TOTAL NET ASSETS - 100.00%.................................. $106,866
========
</Table>
- ---------------
(+)- Non-income producing security.
+ - All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $12,051 or 11.28% of net assets.
# - The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
h - The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
sec.- All or a portion of this security is purchased with cash collateral for
securities loaned.
See accompanying notes
- --------------------------------------------------------------------------------
69
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 30.06%
BANKS - 3.88%
Banco Popular North America, Inc., 4.25%, Due 4/1/2008...... $ 200 $ 195
Bank of America Corp., 3.375%, Due 2/17/2009................ 200 190
Bank One Corp.,
5.90%, Due 11/15/2011..................................... 440 446
4.90%, Due 4/30/2015...................................... 200 185
Capital One Bank,
6.70%, Due 5/15/2008...................................... 350 358
4.80%, Due 2/21/2012...................................... 235 223
5.125%, Due 2/15/2014..................................... 220 210
Credit Suisse First Boston, 6.50%, Due 5/1/2008++........... 350 357
ING Bank, NV, 5.125%, Due 5/1/2015++........................ 250 237
PNC Funding Corp., 4.20%, Due 3/10/2008..................... 355 348
Synovus Financial Corp., 4.875%, Due 2/15/2013+............. 200 190
Washington Mutual Financial Corp., 6.875%, Due 5/15/2011.... 230 242
Washington Mutual, Inc., 4.625%, Due 4/1/2014............... 400 363
--------
3,544
--------
COMMUNICATIONS - 1.73%
AT&T Broadband Corp., 8.375%, Due 3/15/2013................. 448 501
Comcast Corp.,
7.625%, Due 2/15/2008..................................... 230 238
5.30%, Due 1/15/2014...................................... 220 208
Time Warner, Inc.,
6.75%, Due 4/15/2011...................................... 200 207
7.70%, Due 5/1/2032....................................... 250 273
Viacom, Inc., 6.25%, Due 4/30/2016++........................ 155 154
--------
1,581
--------
CONSUMER, NON-CYCLICAL - 0.22%
UnitedHealth Group, Inc., 5.375%, Due 3/15/2016............. 210 201
--------
ELECTRIC/GAS - 2.85%
Columbus Southern Power Co., 5.50%, Due 3/1/2013............ 320 313
FPL Group, Inc., 5.551%, Due 2/16/2008...................... 230 230
Georgia Power Co., 4.875%, Due 7/15/2007.................... 270 269
Kinder Morgan Finance Co. ULC, 5.70%, Due 1/5/2016.......... 200 193
MidAmerican Energy Holdings Co.,
3.50%, Due 5/15/2008...................................... 270 260
5.875%, Due 10/1/2012..................................... 200 200
6.125%, Due 4/1/2036++.................................... 300 286
Public Service Enterprise Group, Inc., 6.95%, Due
6/1/2012.................................................. 355 372
Southern Company Capital Funding, Inc., 5.30%, Due
2/1/2007.................................................. 220 219
Xcel Energy, Inc., 7.00%, Due 12/1/2010..................... 250 262
--------
2,604
--------
FINANCE - 7.93%
American General Finance Corp., 5.375%, Due 9/1/2009........ 385 384
American Honda Finance Corp., 4.875%, Due 5/15/2010......... 200 194
American International Group, Inc., 6.25%, Due 5/1/2036++... 300 297
Ameriprise Financial, Inc., 5.35%, Due 11/15/2010........... 290 286
The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 400 380
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
70
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
The Chubb Corp., 4.934%, Due 11/16/2007..................... $ 355 $ 352
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 200 183
Equity Residential, 5.125%, Due 3/15/2016................... 185 173
General Electric Capital Corp., 4.375%, Due 3/3/2012........ 350 330
The Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013......... 250 235
HSBC Finance Corp.,
4.75%, Due 4/15/2010+..................................... 250 243
5.25%, Due 1/14/2011+..................................... 300 296
International Lease Finance Corp., 6.375%, Due 3/15/2009.... 250 256
Merrill Lynch & Company, Inc.,
6.00%, Due 2/17/2009...................................... 500 508
4.25%, Due 2/8/2010....................................... 345 330
MetLife Global Funding I, 3.375%, Due 10/5/2007++........... 350 340
MetLife, Inc.,
5.375%, Due 12/15/2012.................................... 240 236
5.00%, Due 6/15/2015...................................... 170 159
ProLogis, 5.50%, Due 4/1/2012............................... 200 197
ProLogis Trust, 7.10%, Due 4/15/2008........................ 220 227
Prudential Financial, Inc.,
3.75%, Due 5/1/2008....................................... 130 126
5.10%, Due 9/20/2014...................................... 210 200
Simon Property Group LP,
6.375%, Due 11/15/2007.................................... 200 203
5.375%, Due 6/1/2011++.................................... 200 197
SLM Corp.,
4.00%, Due 1/15/2009...................................... 700 673
5.45%, Due 4/25/2011...................................... 240 238
--------
7,243
--------
INDUSTRIALS - 8.74%
Amgen, Inc., 4.00%, Due 11/18/2009.......................... 210 200
BHP Finance (USA) Ltd., 4.80%, Due 4/15/2013................ 150 143
Bunge Limited Finance Corp., .80%, Due 10/15/2012........... 150 165
Carnival Corp., 3.75%, Due 11/15/2007....................... 380 371
Cendant Corp., 6.875%, Due 8/15/2006........................ 450 452
Cisco Systems, Inc.,
5.25%, Due 2/22/2011...................................... 375 371
5.50%, Due 2/22/2016...................................... 270 263
DaimlerChrysler NA Holding Corp., 5.875%, Due 3/15/2011..... 300 299
DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 140 138
Dell Computer Corp., 6.55%, Due 4/15/2008................... 400 408
EOG Resources, Inc., 4.75%, Due 3/15/2014++................. 225 210
Hewlett-Packard Co., 5.75%, Due 12/15/2006.................. 325 326
Home Depot, Inc., 5.40%, Due 3/1/2016....................... 300 292
John Deere Capital Corp.,
3.375%, Due 10/1/2007..................................... 350 341
4.40%, Due 7/15/2009...................................... 130 126
5.40%, Due 4/7/2010....................................... 235 234
Lockheed Martin Corp., 7.20%, Due 5/1/2036.................. 400 447
Martin Marietta Material, Inc., 6.90%, Due 8/15/2007........ 300 304
Motorola, Inc., 8.00%, Due 11/1/2011........................ 245 273
Nissan Motor Acceptance Corp., 5.625%, Due 3/14/2011++...... 300 297
Northrop Grumman Corp., 4.079%, Due 11/16/2006.............. 450 447
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
71
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pemex Project Funding Master Trust, 8.50%, Due 2/15/2008+... $ 275 $ 288
Pulte Homes, Inc., 4.875%, Due 7/15/2009+................... 100 97
Schering-Plough Corp., 6.75%, Due 12/1/2033................. 200 209
Union Pacific Corp., 6.50%, Due 4/15/2012................... 200 208
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030................. 350 409
WellPoint, Inc., 3.75%, Due 12/14/2007...................... 235 229
Weyerhaeuser Co., 5.95%, Due 11/1/2008...................... 210 211
Wyeth Corp., 5.50%, Due 2/1/2014............................ 230 225
--------
7,983
--------
INSURANCE - 1.19%
Aegon Funding Corp., 5.75%, Due 12/15/2020.................. 200 194
AEGON, N.V., 8.00%, Due 8/15/2006........................... 300 302
ASIF Global Financing, 3.90%, Due 10/22/2008++.............. 300 290
Lincoln National Corp., 4.75%, Due 2/15/2014+............... 100 92
Prudential Financial, Inc., 4.50%, Due 7/15/2013+........... 225 208
--------
1,086
--------
TELEPHONE - 3.52%
America Movil S.A. de C.V., 6.375%, Due 3/1/2035............ 540 495
AT&T Inc., 5.10%, Due 9/15/2014............................. 220 207
AT&T Wireless Services, Inc.,
8.125%, Due 5/1/2012...................................... 200 224
8.75%, Due 3/1/2031....................................... 170 214
Deutsche Telekom AG, 8.00%, Due 6/15/2010................... 150 163
France Telecom SA, 7.75%, Due 3/1/2011...................... 270 294
Nextel Communications, Inc., 6.875%, Due 10/31/2013......... 290 298
Sprint Capital Corp.,
6.00%, Due 1/15/2007...................................... 200 201
8.375%, Due 3/15/2012..................................... 150 169
Telecom Italia S.p.A., 4.00%, Due 11/15/2008................ 220 212
Telefonos de Mexico, S.A. de C.V., 5.50%, Due 1/27/2015+.... 200 187
Verizon Global Funding Corp., 4.00%, Due 1/15/2008.......... 250 244
Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 310 310
--------
3,218
--------
TOTAL CORPORATE OBLIGATIONS............................. 27,460
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.47%
Banc of America Commercial Mortgage, Inc.,
2003-2, 4.342%, Due 3/11/2041............................. 265 256
2005-6, 5.001%, Due 9/10/2047............................. 383 380
Banc of America Mortgage Securities, 5.25%, Due
10/25/2019................................................ 768 742
Bear Stearns Adjustable Rate Mortgage Trust, 2005-11,
4.757%, Due 12/25/2035#................................... 384 376
Bear Stearns Commercial Mortgage Securities, Inc.,
5.467%, Due 4/12/2038..................................... 265 266
2004-PWR5, 4.831%, Due 7/11/2042.......................... 535 509
2005, 5.127%, Due 10/12/2042.............................. 430 424
Chase Mortgage Financial Trust, 2004-S1 A3, 5.50%, Due
2/25/2019................................................. 304 300
Citigroup Commercial Mortgage Trust, 2004-C2, 4.38%, Due
10/15/2041................................................ 470 445
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
72
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Countrywide Alternative Loan Trust, Inc., 2005-53T2, 6.00%,
Due 11/25/2035............................................ $ 1,394 $ 1,367
Countrywide Home Loan, Inc.,
2004-18, 6.00%, Due 10/25/2034............................ 404 394
2005-HYB8, 5.414%, Due 12/20/2035......................... 449 445
General Electric Capital Commercial Mortgage Corp., 2003-C2,
4.17%, Due 7/10/2037...................................... 312 303
JP Morgan Chase Commercial Mortgage Securities Corp.,
2004-CBX, 4.529%, Due 11/12/2039.......................... 255 244
4.655%, Due 8/15/2042..................................... 181 178
4.625%, Due 3/15/2046..................................... 505 492
Prime Mortgage Trust, 2005-2, 5.25%, Due 7/25/2020.......... 513 504
Residential Asset Mortgage Products, Inc., 2004-RS12,
3.767%, Due 2/25/2027..................................... 110 109
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 7,734
--------
ASSET-BACKED SECURITIES - 1.61%
CarMax Auto Owner Trust, 2005-3, 4.91%, Due 1/18/2011....... 500 494
Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 487 483
Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due
4/20/2012................................................. 500 495
--------
TOTAL ASSET-BACKED SECURITIES........................... 1,472
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 28.43%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.06%
Pool #A30948, 5.50%, Due 1/1/2035........................... 1,080 1,051
Pool #A45500, 5.50%, Due 6/1/2035........................... 1,043 1,014
Pool #B12563, 5.00%, Due 2/1/2019........................... 528 515
Pool #C00647, 6.50%, Due 9/1/2028........................... 118 121
Pool #C01598, 5.00%, Due 8/1/2033........................... 914 867
Pool #E01602, 4.50%, Due 3/1/2019........................... 768 732
Pool #E96536, 5.00%, Due 3/1/2018........................... 637 621
Pool #G00738, 8.00%, Due 7/1/2027........................... 152 162
Pool #G01457, 6.00%, Due 8/1/2029........................... 399 399
Pool #G01824, 6.50%, Due 4/1/2035........................... 67 69
Pool #G08006, 6.00%, Due 8/1/2034........................... 676 674
Pool #G08072, 5.00%, Due 8/1/2035........................... 583 551
Pool #G08079, 5.00%, Due 9/1/2035........................... 487 460
Pool #G11295, 5.50%, Due 9/1/2017........................... 297 294
Pool #G11879, 5.00%, Due 10/1/2020.......................... 773 752
--------
8,282
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.40%
Pool #100293, 9.50%, Due 8/1/2029........................... 143 157
Pool #254545, 5.00%, Due 12/1/2017.......................... 1,262 1,232
Pool #254865, 4.50%, Due 9/1/2018........................... 824 786
Pool #323309, 6.00%, Due 9/1/2013........................... 151 153
Pool #323789, 6.00%, Due 6/1/2014........................... 168 171
Pool #488099, 5.50%, Due 2/1/2014........................... 399 396
Pool #545449, 6.50%, Due 2/1/2017........................... 409 418
Pool #545823, 5.50%, Due 8/1/2017........................... 510 507
Pool #555531, 5.50%, Due 6/1/2033........................... 701 683
Pool #555880, 5.50%, Due 11/1/2033.......................... 1,236 1,204
Pool #725238, 5.00%, Due 3/1/2034........................... 1,159 1,101
Pool #725866, 4.50%, Due 9/1/2034........................... 617 566
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
73
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #735224, 5.50%, Due 2/1/2035........................... $ 1,518 $ 1,479
Pool #745418, 5.50%, Due 4/1/2036........................... 995 966
Pool #747844, 5.50%, Due 12/1/2018.......................... 190 189
Pool #749219, 5.50%, Due 10/1/2033.......................... 100 97
Pool #758322, 5.50%, Due 12/1/2033.......................... 664 647
Pool #761337, 5.00%, Due 4/1/2019........................... 387 377
Pool #765304, 5.50%, Due 3/1/2034........................... 231 225
Pool #793600, 4.988%, Due 9/1/2034#......................... 443 440
Pool #811499, 5.00%, Due 9/1/2020........................... 384 374
Pool #828377, 5.50%, Due 6/1/2035........................... 518 503
Pool #835760, 4.50%, Due 9/1/2035........................... 449 412
Pool #837219, 4.00%, Due 8/1/2020........................... 567 528
Pool #872306, 6.50%, Due 5/1/2036........................... 450 458
--------
14,069
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.97%
2006-9 A, 4.201%, Due 8/16/2026............................. 299 289
Pool #003515, 5.50%, Due 2/20/2034.......................... 800 783
Pool #780615, 6.50%, Due 8/15/2027.......................... 346 357
Pool #780747, 6.50%, Due 3/15/2028.......................... 483 498
Pool #781273, 6.00%, Due 4/15/2031.......................... 476 479
Pool #781564, 6.00%, Due 2/15/2033.......................... 485 487
Pool #781603, 5.00%, Due 5/15/2033.......................... 376 360
Pool #781690, 6.00%, Due 12/15/2033......................... 371 373
--------
3,626
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 25,977
--------
U.S. AGENCY OBLIGATIONS - 17.10%
FEDERAL HOME LOAN BANK - 7.96%
4.40%, Due 7/28/2008...................................... 1,330 1,308
Zero Coupon, Due 5/10/2006+(+)............................ 5,975 5,968
--------
7,276
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.98%
5.625%, Due 3/15/2011+.................................... 500 507
5.875%, Due 3/21/2011+.................................... 380 387
--------
894
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 8.16%
4.50%, Due 8/4/2008....................................... 1,000 986
5.125%, Due 1/2/2014+..................................... 545 529
TBA, 30 YR, 6.00%, Due 12/11/2033......................... 5,970 5,942
--------
7,457
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 15,627
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
74
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 16.34%
U.S. TREASURY BONDS - 6.29%
9.125%, Due 5/15/2018+.................................... $ 300 $ 404
7.875%, Due 2/15/2021+.................................... 750 948
6.25%, Due 8/15/2023+..................................... 650 718
6.875%, Due 8/15/2025+.................................... 370 439
6.25%, Due 5/15/2030+..................................... 1,090 1,232
5.375%, Due 2/15/2031+.................................... 1,975 2,005
--------
5,746
--------
U.S. TREASURY NOTES - 10.05%
3.375%, Due 2/15/2008+.................................... 165 161
3.875%, Due 5/15/2010+.................................... 3,000 2,887
5.00%, Due 2/15/2011+..................................... 1,000 1,004
4.50%, Due 2/28/2011+..................................... 600 589
5.00%, Due 8/15/2011+..................................... 800 803
4.75%, Due 5/15/2014+..................................... 2,200 2,159
4.50%, Due 2/15/2016+..................................... 1,655 1,583
--------
9,186
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 14,932
--------
<Caption>
SHARES
-----------
SHORT TERM INVESTMENTS - 28.44%
American Beacon Enhanced Cash Trustsec.h.................... 14,945,879 14,946
American Beacon Money Market Select Fundsec.h............... 11,043,076 11,043
--------
TOTAL SHORT TERM INVESTMENTS............................ 25,989
--------
TOTAL INVESTMENTS - 130.45% (COST $121,946)................. 119,191
--------
LIABILITIES, NET OF OTHER ASSETS - (30.45%)................. (27,825)
--------
TOTAL NET ASSETS - 100.00%.................................. $ 91,366
========
</Table>
- ---------------
(+)-Non-income producing security.
+- All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $2,665 or 2.92% of net assets.
#- The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The Due date on these types of securities reflects
the final maturity date.
sec.- The Fund/Trust is affiliated by having the same investment advisor. See
Note 2.
h- All or a portion of this security is purchased with cash collateral for
securities loaned.
See accompanying notes
- --------------------------------------------------------------------------------
75
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 66.69%
BANKS - 17.14%
Bank One Corp., 6.00%, Due 8/1/2008......................... $ 2,000 $ 2,026
Capital One Bank,
6.70%, Due 5/15/2008...................................... 1,100 1,127
4.25%, Due 12/1/2008...................................... 1,000 972
Citigroup, Inc., 4.125%, Due 2/22/2010...................... 1,000 956
Comerica Bank, 6.00%, Due 10/1/2008......................... 2,200 2,223
Credit Suisse First Boston USA, Inc., 5.875%, Due
8/1/2006.................................................. 2,000 2,003
FleetBoston Financial Corp., 3.85%, Due 2/15/2008........... 2,500 2,438
Wachovia Corp., 6.40%, Due 4/1/2008......................... 2,500 2,551
--------
14,296
--------
COMMUNICATIONS - 2.44%
Comcast Cable Communications, 6.20%, Due 11/15/2008......... 2,000 2,035
--------
ELECTRIC/GAS - 1.38%
MidAmerican Energy Holdings Co., 3.50%, Due 5/15/2008....... 1,200 1,154
--------
FINANCE - 23.04%
The Bear Stearns Cos, Inc., 2.875%, Due 7/2/2008............ 2,000 1,899
Countrywide Home Loans, Inc., 3.25%, Due 5/21/2008.......... 2,000 1,917
EOP Operating LP, 7.75%, Due 11/15/2007..................... 1,000 1,032
General Electric Capital Corp., 4.125%, Due 3/4/2008........ 3,000 2,940
Goldman Sachs Group, Inc., 6.65%, Due 5/15/2009............. 1,000 1,035
Household Finance Corp., 5.75%, Due 1/30/2007............... 2,250 2,258
International Lease Finance Corp., 2.95%, Due 5/23/2006+.... 2,000 1,998
MetLife Global Funding I, 3.375%, Due 10/5/2007++........... 3,000 2,911
Monumental Global Funding, 5.20%, Due 1/30/2007++........... 1,200 1,199
Simon Property Group LP, 6.375%, Due 11/15/2007............. 2,000 2,027
--------
19,216
--------
INDUSTRIALS - 10.98%
Boeing Capital Corp., 5.65%, Due 5/15/2006+................. 626 626
Bunge Limited Finance Corp., 4.375%, Due 12/15/2008......... 1,000 971
Caterpillar Financial Services Corp., 4.15%, Due
1/15/2010................................................. 1,000 956
Cendant Corp., 6.875%, Due 8/15/2006........................ 2,140 2,148
DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 2,050 2,023
John Deere Capital Corp., 3.375%, Due 10/1/2007............. 2,000 1,946
Nissan Motor Company Ltd., 4.625%, Due 3/8/2010++........... 410 394
Pulte Homes, Inc., 4.875%, Due 7/15/2009.................... 100 97
--------
9,161
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
76
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
INSURANCE - 4.72%
ASIF Global Financing, 3.90%, Due 10/22/2008++.............. $ 2,000 $ 1,932
John Hancock Global Funding, 5.625%, Due 6/27/2006++........ 1,000 1,001
Prudential Insurance Company of America, 6.375%, Due
7/23/2006++............................................... 1,000 1,002
--------
3,935
--------
TELEPHONE - 6.99%
AT&T Corp., 6.00%, Due 3/15/2009............................ 2,000 2,024
Sprint Capital Corp., 6.00%, Due 1/15/2007.................. 1,800 1,807
Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 2,000 2,001
--------
5,832
--------
TOTAL CORPORATE OBLIGATIONS............................. 55,629
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.09%
Banc of America Commercial Mortgage, Inc., 2005-6, 5.001%,
Due 9/10/2047............................................. 767 760
Wachovia Bank Commercial Mortgage Trust, 2006-C23 A1,
5.203%, Due 1/15/2045..................................... 989 984
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 1,744
--------
ASSET-BACKED SECURITIES - 23.43%
Banc of America Securities Auto Trust, 2005-WF1, 4.08%, Due
4/18/2010................................................. 3,000 2,929
Capital Auto Receivables Asset Trust, 2006-1 A4, 5.04%, Due
5/17/2010................................................. 550 546
Chase Manhattan Auto Owner Trust, 2004-A A4, 2.83%, Due
9/15/2010+................................................ 2,000 1,939
Citibank Credit Card Issuance Trust, 2004-A4, 3.20%, Due
8/24/2009................................................. 3,000 2,921
DaimlerChrysler Auto Trust, 2004-C, 3.28%, Due 12/8/2009.... 3,000 2,910
Household Automotive Trust, 2004-1, 3.30%, Due 5/18/2009.... 1,113 1,104
HSBC Automotive Trust, 2005-1, 4.35%, Due 6/18/2012......... 2,000 1,951
Nissan Auto Receivables Owner Trust, 2004-A, 2.01%, Due
11/15/2007................................................ 431 427
USAA Auto Owner Trust, 2004-1, 2.06%, Due 4/15/2008......... 799 791
Volkswagen Auto Loan Enhanced Trust, 2005-1, 4.86%, Due
4/20/2012................................................. 1,500 1,484
Wells Fargo Financial Auto Owner Trust, 2004-A, 2.67%, Due
8/16/2010................................................. 2,600 2,539
--------
TOTAL ASSET-BACKED SECURITIES........................... 19,541
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.16%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.20%
Pool #050952, 6.50%, Due 12/1/2008.......................... 169 170
Pool #252448, 5.50%, Due 4/1/2009........................... 158 158
Pool #313430, 6.50%, Due 3/1/2012........................... 208 211
Pool #313522, 7.00%, Due 5/1/2012........................... 393 403
Pool #323223, 6.50%, Due 7/1/2013........................... 166 170
Pool #323980, 6.00%, Due 4/1/2014........................... 388 393
Pool #545038, 6.00%, Due 9/1/2014........................... 322 326
--------
1,831
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
77
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
*w
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.96%
2006-18 A, 4.968%, Due 9/15/2008............................ $ 1,000 $ 991
2006-9 A, 4.201%, Due 8/16/2026............................. 1,995 1,924
Pool #351992, 6.00%, Due 12/15/2008......................... 391 392
--------
3,307
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 5,138
--------
SHARES
----------
*W
SHORT TERM INVESTMENTS - 4.74%
American Beacon Enhanced Cash Trust#sec..................... 2,320,339 2,320
American Beacon Money Market Select Fund#sec................ 1,635,152 1,635
--------
TOTAL SHORT TERM INVESTMENTS............................ 3,955
--------
TOTAL INVESTMENTS - 103.11% (COST $87,430).................. 86,007
--------
LIABILITIES, NET OF OTHER ASSETS - (3.11%).................. (2,591)
--------
TOTAL NET ASSETS - 100.00%.................................. $ 83,416
========
</Table>
- ---------------
Percentages are stated as a percent of net assets.
+- All or a portion of this security is on loan at April 30, 2006. See Note 5.
++- Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $8,439 or 10.12% of net assets.
#- The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
sec.- All or a portion of this security is purchased with cash collateral for
securities loaned.
See accompanying notes
- --------------------------------------------------------------------------------
78
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
79
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2006 (Unaudited) (in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP MID-CAP
BALANCED GROWTH VALUE
----------- ----------- ----------
ASSETS:
Investments in unaffiliated securities, at value(A D)... $ 813,870 $ 68,991 $ 43,149
Investments in affiliated securities, at value(B)....... 203,127 4,638 9,960
Foreign currency, at value(C)........................... -- -- --
Cash.................................................... -- 9 --
Receivable for investments sold......................... 4,371 4,170 68
Dividends and interest receivable....................... 3,511 61 34
Receivable for fund shares sold......................... 1,720 217 203
Receivable for tax reclaims............................. -- -- --
Receivable for expense reimbursement.................... -- -- --
Receivable for variation margin on open futures
contracts............................................. 53 2 8
Other assets............................................ -- -- 27
----------- ----------- ----------
TOTAL ASSETS........................................ 1,026,652 78,088 53,449
----------- ----------- ----------
LIABILITIES:
Payable for investments purchased....................... 15,638 4,336 97
Payable upon return of securities loaned................ 145,121 856 8,913
Payable for fund shares redeemed........................ 52 -- --
Dividends payable....................................... -- -- --
Payable under excess expense reimbursement plan......... -- -- 7
Management and investment advisory fees payable (Note
2).................................................... 578 103 86
Administrative service and service fees payable......... 43 -- 1
Net unrealized depreciation on foreign currency
contracts............................................. -- -- --
Other liabilities....................................... 68 17 --
----------- ----------- ----------
TOTAL LIABILITIES................................... 161,500 5,312 9,104
----------- ----------- ----------
NET ASSETS.................................................. $ 865,152 $ 72,776 $ 44,345
=========== =========== ==========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 717,836 71,674 41,089
Undistributed net investment income..................... 6,035 183 161
Accumulated net realized gain (loss).................... 21,747 (5,499) 846
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................ 119,534 6,418 2,249
----------- ----------- ----------
NET ASSETS.................................................. $ 865,152 $ 72,776 $ 44,345
=========== =========== ==========
Shares outstanding (no par value):
Institutional Class..................................... 1,069,144 17,564 218,100
=========== =========== ==========
PlanAhead Class......................................... 6,666,173 N/A 1,287
=========== =========== ==========
Service Class........................................... 21,344 N/A N/A
=========== =========== ==========
AMR Class............................................... 52,444,854 10,843,473 4,150,575
=========== =========== ==========
Net asset value, offering and redemption price per share:
Institutional Class..................................... $ 14.94 $ 6.66 $ 10.11
=========== =========== ==========
PlanAhead Class......................................... $ 14.10 N/A $ 10.11
=========== =========== ==========
Service Class........................................... $ 14.04 N/A N/A
=========== =========== ==========
AMR Class............................................... $ 14.39 $ 6.70 $ 10.15
=========== =========== ==========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 695,394 $ 62,612 $ 40,925
(B) Cost of investments in affiliated securities............ $ 203,127 $ 4,638 $ 9,960
(C) Cost of foreign currency................................ $ -- $ -- $ --
(D) Market value of securities on loan...................... $ 142,152 $ 863 $ 8,715
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
80
- --------------------------------------------------------------------------------
<Table>
<Caption>
SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
OPPORTUNITY MARKETS BOND INCOME BOND BOND
--------------- ---------- ----------- ----------- ------------ ----------
$ 2,046 $ 153,998 $ 333,652 $ 104,501 $ 93,202 $ 82,052
5 18,029 11,875 26,486 25,989 3,955
-- 2,107 -- -- -- --
-- -- 32 -- -- 994
5 2,224 1,459 -- 1,010 --
1 386 6,848 1,081 834 828
-- 479 537 27 319 177
-- 6 -- -- -- --
3 -- -- -- -- --
-- 5 -- -- -- --
-- -- 8 -- 1 --
-------- ---------- ----------- ----------- ---------- ----------
2,060 177,234 354,411 132,095 121,355 88,006
-------- ---------- ----------- ----------- ---------- ----------
16 1,867 4,549 147 6,972 994
-- 11,630 24,636 24,910 22,996 3,570
-- -- 113 29 1 --
-- -- 274 -- -- 4
-- 3 -- -- -- --
1 359 465 92 19 18
-- 5 78 41 1 2
-- 194 -- -- -- --
3 28 46 10 -- 2
-------- ---------- ----------- ----------- ---------- ----------
20 14,086 30,161 25,229 29,989 4,590
-------- ---------- ----------- ----------- ---------- ----------
$ 2,040 $ 163,148 $ 324,250 $ 106,866 $ 91,366 $ 83,416
======== ========== =========== =========== ========== ==========
2,001 102,346 326,193 106,178 102,719 94,214
-- 491 -- (906) 2 (1,174)
1 10,434 (1,686) 1,242 (8,600) (8,007)
38 49,877 (257) 352 (2,755) (1,617)
-------- ---------- ----------- ----------- ---------- ----------
$ 2,040 $ 163,148 $ 324,250 $ 106,866 $ 91,366 $ 83,416
======== ========== =========== =========== ========== ==========
200,005 1,035,048 21,190,562 N/A 9,204,704 8,371,295
======== ========== =========== =========== ========== ==========
105 347,380 10,486,273 10,588,871 96,729 1,216,119
======== ========== =========== =========== ========== ==========
N/A N/A N/A N/A N/A N/A
======== ========== =========== =========== ========== ==========
N/A 7,848,925 N/A N/A N/A N/A
======== ========== =========== =========== ========== ==========
$ 10.20 $ 17.61 $ 10.23 N/A $ 9.82 $ 8.70
======== ========== =========== =========== ========== ==========
$ 10.19 $ 17.46 $ 10.24 $ 10.09 $ 9.89 $ 8.71
======== ========== =========== =========== ========== ==========
N/A N/A N/A N/A N/A N/A
======== ========== =========== =========== ========== ==========
N/A $ 17.69 N/A N/A $ N/A $ N/A
======== ========== =========== =========== ========== ==========
$ 2,008 $ 104,051 $ 333,909 $ 104,149 $ 95,957 $ 83,475
$ 5 $ 18,029 $ 11,875 $ 26,486 $ 25,989 $ 3,955
$ -- $ 2,084 $ -- $ -- $ -- $ --
$ -- $ 11,347 $ 23,935 $ 24,406 $ 22,567 $ 3,499
</Table>
- --------------------------------------------------------------------------------
81
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
Six Months Ended April 30, 2006 (Unaudited) (in thousands)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP MID-CAP
BALANCED GROWTH VALUE
-------- --------- -------
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of
foreign taxes)(A)..................................... $ 6,283 $ 447 $ 473
Dividend income from affiliated securities.............. 1,248 75 37
Interest income......................................... 6,615 5 4
Income derived from securities lending, net............. 87 -- 6
------- ------ ------
TOTAL INVESTMENT INCOME............................. 14,233 527 520
------- ------ ------
EXPENSES:
Management and investment advisory fees (Note 2)........ 1,165 169 145
Administrative service fees (Note 2):
Institutional Class................................... 19 -- 2
PlanAhead Class....................................... 115 -- --
Service Class......................................... -- -- --
AMR Class (formerly Institutional Class prior to
11/30/05)........................................... -- -- 11
Transfer agent fees:
Institutional Class................................... 2 -- --
PlanAhead Class....................................... 12 -- --
Service Class......................................... -- -- --
AMR Class............................................. 11 3 1
Fund accounting fees.................................... 72 7 5
Professional fees....................................... 24 13 15
Registration fees and expenses.......................... 30 -- 2
Service fees:
PlanAhead Class (Note 2).............................. 115 -- --
Service Class (Note 2)................................ -- -- --
Distribution plan -- Service Class (Note 2)............. -- -- --
Prospectus and shareholder reports...................... 65 5 3
Other expenses.......................................... 7 1 --
------- ------ ------
TOTAL EXPENSES...................................... 1,637 198 184
------- ------ ------
Net (fees waived and expenses reimbursed)/recouped by
Manager (Note 2)...................................... -- -- 7
------- ------ ------
NET EXPENSES........................................ 1,637 198 191
------- ------ ------
NET INVESTMENT INCOME....................................... 12,596 329 329
------- ------ ------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from:(B)
Investments........................................... 23,802 2,027 1,158
Commission recapture.................................. 9 2 4
Foreign currency transactions......................... -- -- --
Futures contracts..................................... 2,769 166 345
Change in net unrealized appreciation or depreciation
of:(C)
Investments........................................... 18,573 2,904 2,864
Foreign currency translations......................... -- -- --
Futures contracts..................................... 2,022 77 (53)
------- ------ ------
NET GAIN (LOSS) ON INVESTMENTS...................... 47,175 5,176 4,318
------- ------ ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $59,771 $5,505 $4,647
======= ====== ======
(A) Foreign taxes....................................... $ 35 $ -- $ 1
(B) Net of foreign withholding taxes on capital gains... $ -- $ -- $ --
(C) Net of unrealized appreciation of foreign
withholding taxes on capital gains.................. $ -- $ -- $ --
</Table>
- ---------------
(1) Commencement of Operations March 31, 2006.
See accompanying notes
- --------------------------------------------------------------------------------
82
- --------------------------------------------------------------------------------
<Table>
<Caption>
SMALL CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
OPPORTUNITY(1) MARKETS BOND INCOME BOND BOND
--------------- -------- ---------- -------- ------------ ----------
$ 2 $ 1,382 $ -- $ 100 $ -- $ --
-- 155 292 68 50 56
-- 11 13,153 1,996 2,160 1,499
-- 15 31 18 22 1
--- ------- ------- ------ ------- ------
2 1,563 13,476 2,182 2,232 1,556
--- ------- ------- ------ ------- ------
1 556 821 189 114 106
-- 17 271 -- -- --
-- 5 129 137 1 12
-- -- -- -- -- --
-- -- -- -- -- --
-- 2 16 -- -- --
-- 2 3 (1) 3 3
-- -- -- -- -- --
-- 6 -- -- 6 6
-- 232 29 9 8 7
2 15 16 4 3 4
1 12 31 7 14 13
-- 5 129 137 1 12
-- -- -- -- -- --
-- -- -- -- -- --
-- 29 32 6 6 8
1 1 2 1 1 1
--- ------- ------- ------ ------- ------
5 882 1,479 489 157 172
--- ------- ------- ------ ------- ------
(3) 3 -- -- (2) (1)
--- ------- ------- ------ ------- ------
2 885 1,479 489 155 171
--- ------- ------- ------ ------- ------
-- 678 11,997 1,693 2,077 1,385
--- ------- ------- ------ ------- ------
1 10,428 (1,573) 1,140 (508) (77)
-- -- -- -- -- --
-- 749 -- -- -- --
-- 480 -- -- -- --
38 27,043 5,559 492 (1,121) 13
-- 15 -- -- -- --
-- 1,239 -- -- -- --
--- ------- ------- ------ ------- ------
39 39,954 3,986 1,632 (1,629) (64)
--- ------- ------- ------ ------- ------
$39 $40,632 $15,983 $3,325 $ 448 $1,321
=== ======= ======= ====== ======= ======
$-- $ 125 $ -- $ -- $ -- $ --
$-- $ 32 $ -- $ -- $ -- $ --
$-- $ 125 $ -- $ -- $ -- $ --
</Table>
- --------------------------------------------------------------------------------
83
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED LARGE CAP GROWTH MID-CAP VALUE
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2006 2005 2006 2005 2006 2005
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................... $ 12,596 $ 20,300 $ 329 $ 588 $ 329 $ 431
Net realized gain (loss) on investments,
futures contracts, and foreign currency
transactions............................ 26,580 44,346 2,195 3,706 1,507 8,616
Change in net unrealized appreciation or
depreciation of investments, futures
contracts, and foreign currency
translations............................ 20,595 9,553 2,981 (207) 2,811 (1,124)
-------- --------- ------- -------- -------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... 59,771 74,199 5,505 4,087 4,647 7,923
-------- --------- ------- -------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class..................... (359) (183) -- -- (9) --
PlanAhead Class......................... (2,286) (584) -- -- -- --
Service Class........................... -- -- -- -- -- --
AMR Class*.............................. (20,180) (16,172) (376) (474) (481) (115)
Net realized gain on investments:
Institutional Class..................... (674) (277) -- -- (136) --
PlanAhead Class......................... (4,591) (930) -- -- -- --
AMR Class*.............................. (35,228) (21,970) -- -- (9,132) (3)
-------- --------- ------- -------- -------- ---------
NET DISTRIBUTIONS TO SHAREHOLDERS..... (63,318) (40,116) (376) (474) (9,758) (118)
-------- --------- ------- -------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares............. 45,100 247,623 11,018 39,712 6,983 164,231
Reinvestment of dividends and
distributions........................... 62,858 40,085 376 474 9,756 118
Cost of shares redeemed................... (52,330) (175,089) (7,035) (35,633) (11,680) (153,362)
Redemption fees........................... -- -- -- -- 55 4
-------- --------- ------- -------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS..... 55,628 112,619 4,359 4,553 5,114 10,991
-------- --------- ------- -------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS......... 52,081 146,702 9,488 8,166 3 18,796
-------- --------- ------- -------- -------- ---------
NET ASSETS:
Beginning of period....................... 813,071 666,369 63,288 55,122 44,342 25,546
-------- --------- ------- -------- -------- ---------
END OF PERIOD*............................ $865,152 $ 813,071 $72,776 $ 63,288 $ 44,345 $ 44,342
======== ========= ======= ======== ======== =========
* Includes undistributed net investment
income (loss) of........................ $ 6,035 $ 15,755 $ 183 $ 231 $ 161 $ 336
======== ========= ======= ======== ======== =========
</Table>
- ---------------
(1) Commencement of Operations
* Formerly Institutional Class prior to 11/30/05 for Mid-Cap Value Fund
See accompanying notes
- --------------------------------------------------------------------------------
84
- --------------------------------------------------------------------------------
<Table>
<Caption>
SMALL CAP VALUE
OPPORTUNITY(1) EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME
--------------- ------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
FROM MARCH 31 ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
TO APRIL 30, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2006 2006 2005 2006 2005 2006 2005
--------------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
$ -- $ 678 $ 1,690 $ 11,997 $ 27,142 $ 1,693 $ 3,156
1 11,657 16,180 (1,573) 3,293 1,140 570
38 28,297 9,392 5,559 (19,461) 492 (2,306)
------ -------- -------- -------- --------- -------- --------
39 40,632 27,262 15,983 10,974 3,325 1,420
------ -------- -------- -------- --------- -------- --------
-- (163) (39) (8,215) (16,952) -- --
-- (36) (3) (3,781) (10,190) (2,017) (3,495)
-- -- -- (1) -- -- --
-- (1,551) (577) -- -- -- --
-- (1,683) (673) (2,254) (4,274) -- --
-- (425) (86) (1,092) (2,693) (13) --
-- (14,022) (6,885) -- -- -- --
------ -------- -------- -------- --------- -------- --------
-- (17,880) (8,263) (15,343) (34,109) (2,030) (3,495)
------ -------- -------- -------- --------- -------- --------
2,001 19,372 41,933 68,666 164,045 7,634 31,229
-- 17,795 8,256 13,175 30,574 2,030 3,496
-- (3,592) (45,081) (95,336) (224,426) (16,434) (24,206)
-- 17 2 -- -- -- --
------ -------- -------- -------- --------- -------- --------
2,001 33,592 5,110 (13,495) (29,807) (6,770) 10,519
------ -------- -------- -------- --------- -------- --------
2,040 56,344 24,109 (12,855) (52,942) (5,475) 8,444
------ -------- -------- -------- --------- -------- --------
-- 106,804 82,695 337,105 390,047 112,341 103,897
------ -------- -------- -------- --------- -------- --------
$2,040 $163,148 $106,804 $324,250 $ 337,105 $106,866 $112,341
====== ======== ======== ======== ========= ======== ========
$ -- $ 491 $ 1,524 $ -- $ -- $ (906) $ (470)
====== ======== ======== ======== ========= ======== ========
</Table>
- --------------------------------------------------------------------------------
85
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) -- CONTINUED
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERMEDIATE BOND SHORT-TERM BOND
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 2,077 $ 3,950 $ 1,385 $ 2,629
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions.......... (508) 61 (77) (140)
Change in net unrealized appreciation or depreciation of
investments, futures contracts, and foreign currency
translations.......................................... (1,121) (2,958) 13 (1,625)
-------- -------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................................ 448 1,053 1,321 864
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class (terminated 3/1/05) (Note 1)...... -- (13) -- (48)
PlanAhead Class....................................... (20) (39) (184) (304)
Institutional Class (known as AMR Class prior to
3/1/05) (Note 1).................................... (2,132) (4,163) (1,683) (3,662)
-------- -------- -------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS................... (2,152) (4,215) (1,867) (4,014)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................... 6,996 47,062 5,697 32,831
Reinvestment of dividends and distributions............. 2,151 4,212 1,862 3,994
Cost of shares redeemed................................. (10,401) (52,033) (11,862) (37,019)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS................................ (1,254) (759) (4,303) (194)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS....................... (2,958) (3,921) (4,849) (3,344)
-------- -------- -------- --------
NET ASSETS:
Beginning of period..................................... 94,324 98,245 88,265 91,609
-------- -------- -------- --------
END OF PERIOD*.......................................... $ 91,366 $ 94,324 $ 83,416 $ 88,265
======== ======== ======== ========
* Includes undistributed net investment income (loss)
of.................................................... $ 2 $ 1 $ (1,174) $ (1,843)
======== ======== ======== ========
</Table>
- --------------------------------------------------------------------------------
86
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust"), is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American Beacon Balanced Fund, the American Beacon Large Cap Growth Fund, the
American Beacon Mid-Cap Value Fund, the American Beacon Small Cap Value
Opportunity Fund, the American Beacon Emerging Markets Fund, the American Beacon
High Yield Bond Fund, the American Beacon Enhanced Income Fund, the American
Beacon Intermediate Bond Fund and the American Beacon Short-Term Bond Fund (each
a "Fund" and collectively, the "Funds"), each a series of the Trust.
American Beacon Advisors, Inc. (the "Manager"), is a wholly-owned
subsidiary of AMR Corporation, the parent company of American Airlines, Inc.
("American"), and was organized in 1986 to provide business management,
advisory, administrative and asset management consulting services to the Trust
and other investors.
Class Disclosure
Each Fund, except the Enhanced Income Fund, has multiple classes of shares
designed to meet the needs of different groups of investors. Please note that
not all Funds offer all classes. The following table sets forth the differences
amongst the classes:
<Table>
<Caption>
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- ------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service Fee -- 0.25%
PLANAHEAD CLASS General public and investors investing through an Administrative Service Fee -- 0.25%
intermediary Service Fee -- 0.25%
SERVICE CLASS Investors investing through an intermediary Administrative Service Fee -- 0.25%
Service Fee -- 0.25%
Distribution Fee -- 0.25%
AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A
AMR Corporation and its affiliates
</Table>
Investment income, net capital gains (losses) and all expenses incurred by
the Funds are allocated based on the relative net assets of each class, except
for service fees and certain other fees and expenses related solely to one class
of shares.
Reorganization Intermediate Bond and Short-Term Bond Funds
Effective March 1, 2005, the existing Institutional Class of the
Intermediate Bond and Short-Term Bond Funds was terminated, and Institutional
Class shares were exchanged for AMR Class shares of each Fund. Following the
exchange, the former AMR Class of shares for these Funds was renamed
Institutional Class.
Effective November 30, 2005, the existing Institutional Class of the
Mid-Cap Value Fund was renamed AMR Class, and the Fund began offering a new
Institutional Class of shares.
- --------------------------------------------------------------------------------
87
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. When a price is unavailable from a
pricing service or when the price provided by the pricing service is deemed not
to represent fair value, the prices of debt securities may be determined using
quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method which approximates market value.
Securities for which the market prices are not readily available or are not
reflective of the fair value of the security, will be priced at a fair value
following procedures approved by the Board of Trustees (the "Board"). In light
of the judgement involved in fair value decisions, there can be no assurance
that a fair value assigned to a particular security is accurate.
Most foreign markets close before the Exchange. Developments that could
affect the values of securities that occur between the close of a foreign market
and the close of the Exchange normally will not be reflected in security
valuations. If such developments are so significant such that they will, in the
judgement of the pricing committee of the Funds, clearly and materially affect
the value of securities, the previous closing prices may be adjusted to reflect
the fair value of the securities as of the close of the Exchange, as determined
in good faith and pursuant to procedures approved by the Board. Adjustments to
closing prices to reflect fair value on affected foreign securities may be
provided by an independent pricing service.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income is recorded on the ex-dividend date except certain
dividends from foreign securities which are recorded as soon as the information
is available to the Funds. Interest income is earned from settlement date,
recorded on the accrual basis, and adjusted, if necessary, for accretion of
discounts and amortization of premiums. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of specific lot
identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the mean of the bid and ask prices of
such currencies against U.S. dollars as last quoted by a recognized dealer.
Income, expenses and purchases and sales of investments are translated into U.S.
dollars at the rate of exchange prevailing on the respective dates of such
- --------------------------------------------------------------------------------
88
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
transactions. The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and is reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Forward Foreign Currency Contracts
The Emerging Markets Fund may enter into forward foreign currency contracts
to hedge the exchange rate risk on investment transactions or to hedge the value
of fund securities denominated in foreign currencies. Forward foreign currency
contracts are valued at the forward exchange rate prevailing on the day of
valuation.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Fund from a securities dealer or a bank which are subject to resale at a later
date. Repurchase agreements are fully collateralized. The collateral is
monitored daily by each Fund so that the collateral's market value equals or
exceeds the carrying value of the repurchase agreement, including accrued
interest.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Balanced, Large Cap
Growth, Mid-Cap Value, Small Cap Value Opportunity, Emerging Markets, High Yield
Bond and Enhanced Income Funds may enter into financial futures contracts as a
method for keeping assets readily convertible to cash if needed to meet
shareholder redemptions or for other needs while maintaining exposure to the
stock or bond market, as applicable. The primary risks associated with the use
of futures contracts are the possibility of illiquid markets or imperfect
correlation between the values of the contracts and the underlying securities,
or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Funds reflect this
amount on the Schedules of Investments as a U.S. Treasury Bill held as
collateral for futures contracts. Payments to and from the broker, known as
variation margin, are required to be made on a daily basis as the price of the
futures contract fluctuates. Changes in initial settlement values are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized. Futures
contracts are valued at the most recent settlement price established each day by
the exchange on which they are traded.
Dividends to Shareholders
Dividends from net investment income of the Balanced, Large Cap Growth,
Mid-Cap Value, Small Cap Value Opportunity and Emerging Markets Funds normally
will be declared and paid annually. The High Yield Bond, Enhanced Income,
Intermediate Bond and Short-Term Bond Funds generally declare dividends from net
investment income daily, payable monthly. Distributions, if any, of net realized
capital gains are generally paid annually and recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
89
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Commission Recapture
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If a Fund's investment advisor chooses to execute a
transaction through a participating broker, the broker rebates a portion of the
commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The Institutional, PlanAhead and AMR Classes of the Emerging Markets Fund
impose a 2% redemption fee on certain shares held for less than 90 days, and the
AMR Class of the Mid-Cap Value Fund imposes a 2% redemption fee on certain
shares held for less than 180 days. The fee is deducted from the redemption
proceeds and is intended to offset the trading costs, market impact and other
costs associated with short-term trading activity in the Fund. The "first-in,
first-out" method is used to determine the holding period. The fee is retained
by the class that imposes the fee. Effective May 1, 2006, the fee will be
allocated to all classes of each Fund.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, fund management and securities lending services. Investment
assets of the Balanced, Large Cap Growth, Mid-Cap Value, Small Cap Value
Opportunity, Emerging Markets, High Yield Bond, Enhanced Income and Intermediate
Bond Funds are managed by one or more investment advisors which have entered
into separate
- --------------------------------------------------------------------------------
90
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
investment advisory agreements with the Manager. As compensation for performing
the duties required under the Management Agreement, the Manager receives from
the Balanced Fund, Large Cap Growth Fund, Mid-Cap Value Fund, Small Cap Value
Opportunity Fund, Emerging Markets Fund, High Yield Bond Fund and Enhanced
Income Fund an annualized fee equal to .10% of the average daily net assets plus
amounts paid by the Manager to the investment advisors hired by the Manager to
direct investment activities of the Funds. The Manager receives an annualized
fee of .25% of the average daily net assets of the Intermediate Bond Fund and
pays a portion of their fee to an investment advisor hired by the Manager to
direct investment activities of a portion of the Fund. The Manager serves as the
sole investment advisor to the Short-Term Bond Fund. Pursuant to the Management
Agreement, the Manager receives from the Fund an annualized fee equal to .25% of
the average daily net assets of the Short-Term Bond Fund. Management fees paid
during the six months ended April 30, 2006 were as follows (dollars in
thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
----------- ---------- --------------- -----------
Balanced Fund...................................... .225%-.70% $1,165 $745 $420
Large Cap Growth Fund.............................. .35%-.55% 169 134 35
Mid-Cap Value Fund................................. .40%-.90% 145 124 21
Small Cap Value Opportunity Fund................... .45%-.55% 1 1 --
Emerging Markets Fund.............................. .80%-1.20% 556 489 67
High Yield Bond Fund............................... .52% 821 661 160
Enhanced Income Fund............................... .25%-.85% 189 134 55
Intermediate Bond Fund............................. .25% 114 40 74
</Table>
As compensation for services provided by the Manager in connection with
securities lending activities, the lending Fund pays to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statement of Operations. During
the six months ended April 30, 2006, securities lending fees paid to the Manager
were as follows (in thousands):
<Table>
Balanced Fund............................................... $15
Mid-Cap Value Fund.......................................... 1
Emerging Markets Fund....................................... 3
High Yield Bond Fund........................................ 5
Enhanced Income Fund........................................ 2
Intermediate Bond Fund...................................... 3
</Table>
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative and management
services to the Funds. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee of
..25% of the average daily net assets of the Institutional, PlanAhead and Service
Classes of each of the Funds.
- --------------------------------------------------------------------------------
91
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Distribution Plans
The Trust, except for the Service Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Investment Company Act of 1940, pursuant to which no fees may be charged to
the Funds for distribution purposes. However, the Plan authorizes the management
fees received by the Manager and the investment advisors hired by the Manager to
be used for distribution purposes. Under this Plan, the Trust does not intend to
compensate the Manager or any other party, either directly or indirectly, for
the distribution of Trust shares.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Service Class of the Funds. Under
the Distribution Plan, as compensation for distribution assistance, the Manager
receives an annual fee of .25% of the average daily net assets of the Service
Class. The fee will be payable without regard to whether the amount of the fee
is more or less than the actual expenses incurred in a particular month by the
Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the PlanAhead and Service
Classes. As compensation for performing the duties required under the Service
Plans, the Manager receives .25% of the average daily net assets of the
PlanAhead and Service Classes of each Fund.
Brokerage Commissions
Affiliated entities of a subadvisor to the Large Cap Growth Fund and the
Emerging Markets Fund received net commissions on purchases and sales of the
Fund's portfolio securities totaling $262 and $50, respectively for the six
months ended April 30, 2006.
Investment in Affiliated Funds
The Funds are permitted, pursuant to an exemptive order by the Securities
and Exchange Commission ("SEC") and approved procedures by the Board, to invest
up to 25% of its total assets in the American Beacon Money Market Select Fund
(the "Select Fund"), an affiliated fund. The Funds and the Select Fund have the
same investment advisor and therefore, are considered to be affiliated. Cash
collateral received by certain Funds in connection with securities lending may
be invested in the Select Fund and the American Beacon Enhanced Cash Trust (the
"Business Trust") (collectively, the "Affiliated Funds"). The Manager serves as
Trustee and investment advisor to the Affiliated Funds and receives from the
Affiliated Funds an annualized fee equal to 0.10% of the
- --------------------------------------------------------------------------------
92
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
average daily net assets. During the period, fees earned by the Manager from the
Affiliated Funds were as follows:
<Table>
<Caption>
SECURITIES LENDING
DIRECT INVESTMENT COLLATERAL INVESTED
IN FUNDS IN FUNDS TOTAL
----------------- ------------------- -------
Balanced.................................................... $28,666 $61,588 $90,254
Large Cap Growth............................................ 214 239 453
Mid-Cap Value............................................... 862 4,336 5,198
Emerging Markets............................................ 3,534 4,876 8,410
High Yield Bond............................................. 6,670 -- 6,670
Enhanced Income............................................. 1,603 12,732 14,335
Intermediate Bond........................................... 1,148 9,557 10,705
Short-Term Bond............................................. 1,311 2,373 3,684
</Table>
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Mr. Feld and the non-interested Trustees (other than
Mr. O'Sullivan) and their spouses are provided free unlimited air transportation
on American. Retired Trustees and their spouses are provided free transportation
on American, up to a maximum annual value of $40,000. The Trust compensates each
Trustee with payments in an amount equal to the Trustee's income tax on the
value of this free airline travel. Mr. O'Sullivan, as a retiree of American,
already receives flight benefits. This Trustee receives an annual retainer plus
a fee for each Board meeting attended.
At April 30, 2006, AMR Corporation and subsidiary companies and Employee
Benefit Trusts thereof owned 100% of AMR Class shares of the Funds, 21% of the
Institutional Class of the High Yield Bond Fund, 99% of the Institutional Class
of the Intermediate Bond Fund and 96% of the Institutional Class of the
Short-Term Bond Fund.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Funds, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Funds to borrow from, or
lend money to, other participating Funds. The Funds did not utilize the credit
facility during the six months ended April 30, 2006.
- --------------------------------------------------------------------------------
93
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Reimbursement of Expenses
The Manager contractually agreed to reimburse the following Funds for other
expenses through February 28, 2007 to the extent that total annual fund
operating expenses exceed the following amounts:
<Table>
<Caption>
FUND CLASS EXPENSE CAP
- ---- ----- -----------
Balanced.................................................... Service 1.09%
Large Cap Growth............................................ Institutional .90%
Mid-Cap Value............................................... Institutional 1.01%
Emerging Markets............................................ PlanAhead 2.00%
Intermediate Bond........................................... PlanAhead .95%
Short-Term Bond............................................. PlanAhead .87%
</Table>
During the six months ended April 30, 2006, the Manager contractually
waived or reimbursed expenses as follows:
<Table>
<Caption>
FUND CLASS AMOUNT
- ---- ----- ------
Balanced.................................................... Service $ 4
Large Cap Growth............................................ Institutional 31
Mid-Cap Value............................................... Institutional 40
Intermediate Bond........................................... PlanAhead 1,974
Short-Term Bond............................................. PlanAhead 328
</Table>
During the six months ended April 30, 2006, the Manager voluntarily waived
or reimbursed expenses as follows in order to maintain expense ratios at or
below the levels noted below:
<Table>
<Caption>
EXPENSE
FUND CLASS RATIO LIMIT AMOUNT
- ---- ----- ----------- ------
Small Cap Value Opportunity................................. Institutional 1.06% $2,944
Small Cap Value Opportunity................................. PlanAhead 1.31% 1
</Table>
Expense Reimbursement Plan
The Funds have adopted an Expense Reimbursement Plan whereby the Manager
may seek repayment of fees waived or expenses reimbursed for a period of up to
three years. However, reimbursement will occur only if the Class' average net
assets have grown or expenses have declined sufficiently to allow reimbursement
without causing its expense ratio to exceed the previously agreed upon
contractual expense limit. The following waived fees or reimbursed expenses are
subject to potential recovery expiring in:
<Table>
<Caption>
YEAR BALANCED LARGE CAP GROWTH MID-CAP VALUE INTERMEDIATE BOND SHORT-TERM BOND
- ---- -------- ---------------- -------------- ----------------- ---------------
2009................. 4 31 40 1,974 328
</Table>
During the six months ended April 30, 2006, due to asset growth and a
reduction of expenses, the Manager recouped $7,258 and $2,831 from the Mid-Cap
Value Fund -- Institutional Class and the Emerging Markets -- PlanAhead Class,
respectively for expenses previously waived during 2005.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net
- --------------------------------------------------------------------------------
94
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
realized capital gains on the sale of investments. Therefore, no federal income
or excise tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions for the six months ended April 30, 2006
and the year ended October 31, 2005 were as follows (in thousands):
<Table>
<Caption>
SMALL CAP
VALUE
BALANCED LARGE-CAP GROWTH MID CAP VALUE OPPORTUNITY
------------------------- ------------------------- ------------------------- -----------
SIX MONTHS SIX MONTHS SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
2006 2005 2006 2005 2006 2005 2006
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID
FROM:
ORDINARY INCOME
Institutional
Class............ $ 405 $ 207 $ -- $ -- $ 114 $118 $ --
PlanAhead Class.... 2,594 665 -- -- -- -- --
AMR Class.......... 22,546 18,088 376 474 7,556 -- --
LONG-TERM CAPITAL GAIN
Institutional
Class............ 629 253 -- -- 31 -- --
PlanAhead Class.... 4,282 849 -- -- -- -- --
AMR Class.......... 32,862 20,054 -- -- 2,057 -- --
------- ------- ---- ---- ------ ---- ----
TOTAL
DISTRIBUTIONS
PAID......... $63,318 $40,116 $376 $474 $9,758 $118 $ --
------- ------- ---- ---- ------ ---- ----
</Table>
<Table>
<Caption>
EMERGING MARKETS HIGH-YIELD BOND ENHANCED INCOME
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2006 2005 2006 2005 2006 2005
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class................ $ 416 $ 39 $ 8,215 $17,772 $ -- $ --
PlanAhead Class.................... 100 3 3,781 10,707 2,017 3,495
Service Class...................... -- -- -- -- -- --
AMR Class.......................... 3,659 577 -- -- -- --
LONG-TERM CAPITAL GAIN
Institutional Class................ 1,430 673 2,254 3,454 -- --
PlanAhead Class.................... 362 86 1,092 2,176 13 --
Service Class...................... -- -- -- -- -- --
AMR Class.......................... 11,913 6,885 -- -- -- --
------- ------ ------- ------- ------ ------
TOTAL DISTRIBUTIONS PAID....... $17,880 $8,263 $15,343 $34,109 $2,030 $3,495
------- ------ ------- ------- ------ ------
</Table>
- --------------------------------------------------------------------------------
95
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERMEDIATE BOND SHORT-TERM BOND
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2006 2005 2006 2005
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class (terminated 3/1/05)................. $ -- $ 13 $ -- $ 48
PlanAhead Class......................................... 20 39 184 304
Institutional Class (formerly known as AMR Class
prior to 3/1/05)...................................... 2,132 4,163 1,683 3,662
------ ------ ------ ------
TOTAL DISTRIBUTIONS PAID............................ $2,152 $4,215 $1,867 $4,014
------ ------ ------ ------
</Table>
As of April 30, 2006, the components of distributable earnings were as
follows (in thousands):
<Table>
<Caption>
SMALL CAP
BALANCED LARGE CAP MID-CAP VALUE EMERGING
FUND GROWTH FUND VALUE FUND OPPORTUNITY MARKETS FUND
-------- ------------- ---------- ----------- ------------
Cost basis of investments for federal income tax
purposes................................................ $904,064 $68,005 $51,378 $2,013 $123,074
Unrealized appreciation.................................. 130,211 7,222 3,866 87 50,492
Unrealized depreciation.................................. (17,278) (1,598) (2,135) (49) (1,539)
-------- ------- ------- ------ --------
Net unrealized appreciation/(depreciation)............... 112,933 5,824 1,731 38 48,953
Undistributed ordinary income............................ 11,268 182 1,209 1 2,485
Undistributed long-term gain/(loss)...................... 22,972 (4,708) 317 -- 9,524
-------- ------- ------- ------ --------
Distributable earnings................................... $147,173 $ 1,098 $ 3,257 $ 39 $ 60,962
======== ======= ======= ====== ========
</Table>
<Table>
<Caption>
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
BOND FUND FUND BOND FUND BOND FUND
---------- ------------- ------------- ----------
Cost basis of investments for federal income tax purposes... $345,897 $130,636 $121,953 $88,902
Unrealized appreciation..................................... 4,313 3,310 60 --
Unrealized depreciation..................................... (4,683) (2,959) (2,822) (2,895)
-------- -------- -------- -------
Net unrealized appreciation/(depreciation).................. (370) 351 (2,762) (2,895)
Undistributed ordinary income............................... 274 -- -- 4
Undistributed long-term gain/(loss)......................... (1,569) 1,241 (8,593) (8,006)
-------- -------- -------- -------
Distributable earnings...................................... $ (1,665) $ 1,592 $(11,355) $10,897
======== ======== ======== =======
</Table>
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gains/(losses) on certain derivative instruments, book
amortization for premiums, and the realization for tax purposes of unrealized
gains/(losses) on investments in passive foreign investment companies.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
- --------------------------------------------------------------------------------
96
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
Accordingly, the following amounts represent current year permanent
differences that have been reclassified as of April 30, 2006 (in thousands):
<Table>
<Caption>
LARGE CAP MID-CAP EMERGING ENHANCED INTERMEDIATE SHORT-TERM
BALANCED GROWTH VALUE MARKETS INCOME BOND BOND
FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------- -------- -------- ------------ ----------
Paid-in-capital................................ $ 18 $-- $ -- $ -- $ 11 $ -- $ 1
Undistributed net investment income............ 509 (1) (14) 39 (112) 76 1,153
Accumulated net realized gain (loss)........... (527) 1 14 (39) 101 (76) (1,154)
Unrealized appreciation (depreciation) of
investments, futures contracts and foreign
currency...................................... -- -- -- -- -- -- --
</Table>
At April 30, 2006 capital loss carryforward positions for federal income
tax purposes were as follows (in thousands):
<Table>
<Caption>
FUND 2006 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL
- ---- ---- ------ ------ ----- ------ ---- ---- ------ ------ ------
Large Cap Growth........................ $-- $ -- $ -- $ -- $4,035 $674 $ -- $ -- $ -- $4,709
High Yield Bond......................... -- -- -- -- -- -- -- 1,569 -- 1,569
Intermediate Bond....................... -- -- 7,367 -- 328 -- -- 318 580 8,593
Short-Term Bond......................... 437 1,991 1,218 -- 913 161 800 1,256 1,231 8,007
</Table>
Net capital loss carryovers utilized for the year ended April 30, 2006 are
as follows: Large Cap Growth Fund $1,852.
4. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term
investments during the six months ended April 30, 2006 were as follows (in
thousands):
<Table>
<Caption>
SMALL CAP
LARGE CAP MID-CAP VALUE EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
BALANCED GROWTH VALUE OPPORTUNITY MKT BOND INCOME BOND BOND
-------- --------- ------- ----------- -------- ---------- -------- ------------ ----------
Purchases (excluding
U.S. government
securities)........ $152,698 $33,282 $ 8,206 $2,012 $49,474 $121,315 $ 19,044 $36,384 $16,970
Sales and maturities
(excluding U.S.
government
securities)........ 151,062 29,013 11,435 5 37,514 138,167 18,489 32,816 17,821
Purchases of U.S.
government
securities......... 57,017 -- -- -- -- -- 512 15,543 2,933
Sales and maturities
of U.S. government
securities......... 57,009 -- -- -- -- -- 5,252 14,090 4,904
</Table>
- --------------------------------------------------------------------------------
97
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
A summary of the Funds' direct transactions in Affiliated Funds for the six
months ended April 30, 2006 is set forth below (in thousands):
<Table>
<Caption>
OCTOBER 31, 2005 APRIL 30, 2006
FUND AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- ---- ----------- ------------------- --------- -------- -------------------
Balanced......................... Select Fund $56,990 $112,064 $111,049 $58,005
Large Cap Growth................. Select Fund 3,199 14,847 14,263 3,783
Mid-Cap Value.................... Select Fund 2,487 13,560 15,001 1,046
Small Cap Value Opportunity...... Select Fund -- 501 496 5
Emerging Markets................. Select Fund 3,699 39,747 37,047 6,399
High Yield Bond.................. Select Fund 8,267 107,094 103,486 11,875
Enhanced Income.................. Select Fund 4,188 24,492 27,104 1,576
Intermediate Bond................ Select Fund 3,312 16,119 16,438 2,993
Short Term Bond.................. Select Fund 2,080 21,884 23,579 385
</Table>
5. SECURITIES LENDING
Each Fund may lend its securities to qualified financial institutions, such
as certain broker-dealers, to earn additional income. The borrowers are required
to secure their loans continuously with collateral in an amount at least equal
to the fair value of the securities loaned, initially in an amount at least
equal to 102% of the fair value of domestic securities loaned and or 105% of the
fair value of international securities loaned. Collateral is marked to market
and monitored daily. To the extent that a loan is collateralized by cash, such
collateral shall be invested by the securities lending agent (the "Agent") in
short-term instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and diversification
requirements.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and the Agent and is recorded as income for the Fund. To the
extent that a loan is secured by non-cash collateral, brokers pay the Fund
negotiated lenders' fees, which are divided between the Fund and the Agent and
are recorded as securities lending income for the Fund. The Fund also continues
to receive income on the securities loaned, and any gain or loss in the market
price of securities loaned that may occur during the term of the loan.
Risks to the Fund in securities lending transactions are that the borrower
may not provide additional collateral when required or return the securities
when due, and that the value of the short-term investments will be less than the
amount of cash collateral required to be returned to the borrower.
- --------------------------------------------------------------------------------
98
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
At April 30, 2006, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
<Table>
<Caption>
MARKET VALUE OF
FUND SECURITIES ON LOAN CASH COLLATERAL
- ---- ------------------ ---------------
Balanced.................................................... $142,152 $145,121
Large Cap Growth............................................ 863 856
Mid-Cap Value............................................... 8,715 8,913
Emerging Markets............................................ 11,347 11,630
High Yield Bond............................................. 23,935 24,636
Enhanced Income............................................. 24,406 24,910
Intermediate Bond........................................... 22,567 22,996
Short Term Bond............................................. 3,499 3,570
</Table>
Cash collateral for each Fund, other than High Yield Bond, was invested in
the Business Trust and the Select Fund. These amounts have been included as
investments in each Fund's Schedule of Investments and Statements of Assets and
Liabilities. Income earned on these investments is reported as Income derived
from securities lending in the Statements of Operations.
Non-Cash collateral received by the Funds may not be sold or repledged;
therefore, non-cash collateral is not included on the Funds' Schedule of
Investments or Statement of Assets and Liabilities.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (shares and dollars in thousands):
Period Ended April 30, 2006
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- -------------------- ------------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- -------- -------- ------ --------- ------- --------- ------- --------
Shares sold................. 123 $1,806 1,604 $ 22,490 21 $ 295 1,434 $ 20,509
Reinvestment of dividends... 68 982 474 6,468 -- -- 3,986 55,408
Shares redeemed............. (64) (943) (1,529) (21,302) -- -- (2,105) (30,085)
------ ------ ------ --------- ------- --------- ------- --------
Net increase (decrease) in
shares outstanding........ 127 $1,845 549 $ 7,656 21 $ 295 3,315 $ 45,832
====== ====== ====== ========= ======= ========= ======= ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS AMR CLASS
-------------------- ------------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ --------
Shares sold..................................... 1 $ 7 1,669 $ 11,011
Reinvestment of dividends....................... -- -- 57 376
Shares redeemed................................. -- (3) (1,060) (7,032)
------ ------ ------ --------
Net increase in shares outstanding.............. 1 $ 4 666 $ 4,355
====== ====== ====== ========
</Table>
- --------------------------------------------------------------------------------
99
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
------------------- ---------------- -----------------
MID-CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------ ------- -------- ------ ------ ------ -------
Shares sold..................................... 260 $ 2,761 1 $ 13 399 $ 4,209
Reinvestment of dividends....................... 15 142 -- -- 1,008 9,614
Shares redeemed................................. (57) (681) -- -- (1,038)* (10,944)*
------ ------- ------ ------ ------ -------
Net increase in shares outstanding.............. 218 $ 2,222 1 $ 13 369 $ 2,879
====== ======= ====== ====== ====== =======
</Table>
* Net of Redemption Fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS
-------------------- -------------------
SMALL CAP VALUE OPPORTUNITY FUND SHARES AMOUNT SHARES AMOUNT
- -------------------------------- -------- -------- ------ ---------
Shares sold....................................... 200 $2,000 -- $ 1
Reinvestment of dividends......................... -- -- -- --
Shares redeemed................................... -- -- -- --
------ ------ ------ ---------
Net increase (decrease) in shares outstanding..... 200 $2,000 -- $ 1
====== ====== ====== =========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ----------------- -----------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ ------- ------- -------
Shares sold....................................... 293 $4,804 175 $ 2,799 723 $11,769
Reinvestment of dividends......................... 123 1,788 30 434 1,066 15,573
Shares redeemed*.................................. -- (5) (30) (468) (195) (3,102)
------ ------ ------ ------- ------- -------
Net increase in shares outstanding................ 416 $6,587 175 $ 2,765 1,594 $24,240
====== ====== ====== ======= ======= =======
</Table>
* Net of Redemption Fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS
-------------------- ------------------- ----------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------- -------- ------- ------
Shares sold...................................... 4,208 $ 42,787 2,533 $ 25,838 4 $ 41
Reinvestment of dividends........................ 818 8,329 476 4,845 -- 1
Shares redeemed.................................. (5,049) (51,448) (4,297) (43,844) (4) (44)
------ -------- ------- -------- ------- ------
Net increase (decrease) in shares outstanding.... (23) $ (332) (1,288) $(13,161) -- $ (2)
====== ======== ======= ======== ======= ======
</Table>
<Table>
<Caption>
PLANAHEAD CLASS
------------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- ------ --------
Shares sold...................................... 758 $ 7,634
Reinvestment of dividends........................ 201 2,030
Shares redeemed.................................. (1,626) (16,434)
------ --------
Net increase (decrease) in shares outstanding.... (667) $ (6,770)
====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS
-------------------- -------------------
INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT
- ---------------------- ------- --------- ------- --------
Shares sold...................................... 699 $ 6,969 3 $ 27
Reinvestment of dividends........................ 214 2,132 2 19
Shares redeemed.................................. (1,029) (10,276) (12) (125)
------ -------- ------- --------
Net decrease in shares outstanding............... (116) $ (1,175) (7) $ (79)
====== ======== ======= ========
</Table>
- --------------------------------------------------------------------------------
100
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS
-------------------- -------------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------- --------
Shares sold...................................... 243 $ 2,122 409 $ 3,575
Reinvestment of dividends........................ 193 1,682 21 180
Shares redeemed.................................. (1,166) (10,186) (192) (1,676)
------ -------- ------- --------
Net increase (decrease) in shares outstanding.... (730) $ (6,382) 238 $ 2,079
====== ======== ======= ========
</Table>
Period Ended October 31, 2005
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------- ------------------ -------------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- -------- -------- ------ --------- ------ --------- ------- ---------
Shares sold.............. 404 $6,028 5,096 $ 71,560 -- $ 1 11,920 $ 170,034
Reinvestment of
dividends.............. 32 459 108 1,484 -- -- 2,736 38,142
Shares redeemed.......... (80) (1,192) (671) (9,463) -- -- (11,427) (164,434)
------ ------ ------ --------- ------ --------- ------- ---------
Net increase in shares
outstanding............ 356 $5,295 4,533 $ 63,581 -- $ 1 3,229 $ 43,742
====== ====== ====== ========= ====== ========= ======= =========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS AMR CLASS
-------------------- ------------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- ------- --------- ------ --------
Shares sold.................................... 17 $ 102 6,502 $ 39,610
Reinvestment of dividends...................... -- -- 76 474
Shares redeemed................................ -- -- (5,843) (35,633)
------- --------- ------ --------
Net increase (decrease) in shares
outstanding.................................. 17 $ 102 735 $ 4,451
======= ========= ====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------
MID CAP VALUE FUND SHARES AMOUNT
- ------------------ ------- ---------
Shares sold.................................... 14,157 $ 164,231
Reinvestment of dividends...................... 11 118
Shares redeemed*............................... (12,873) (153,358)
------- ---------
Net increase (decrease) in shares
outstanding.................................. 1,295 $ 10,991
======= =========
</Table>
* Net of redemption fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ---------------- ------------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- ------- --------- ------ ------ ------- --------
Shares sold.................................... 164 $ 2,342 187 $2,602 2,688 $ 36,989
Reinvestment of dividends...................... 54 706 7 88 575 7,462
Shares redeemed*............................... (176) (2,291) (118) (1,644) (2,858) (41,144)
------- --------- ------ ------ ------- --------
Net increase (decrease) in shares
outstanding.................................. 42 $ 757 76 $1,046 405 $ 3,307
======= ========= ====== ====== ======= ========
</Table>
* Net of redemption fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS
-------------------- ------------------ ----------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ -------- ------- ------
Shares sold.................................... 9,936 $ 104,727 5,626 $ 59,314 -- $ 4
Reinvestment of dividends...................... 1,682 17,740 1,216 12,834 -- --
Shares redeemed................................ (12,669) (133,918) (8,714) (90,501) (1) (7)
------- --------- ------ -------- ------- ------
Net increase (decrease) in shares
outstanding.................................. (1,051) $ (11,451) (1,872) $(18,353) (1) $ (3)
======= ========= ====== ======== ======= ======
</Table>
- --------------------------------------------------------------------------------
101
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2006 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS
--------------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- ------- ---------
Shares sold.................................... 3,082 $ 31,229
Reinvestment of dividends...................... 346 3,496
Shares redeemed................................ (2,400) (24,206)
------- ---------
Net increase in shares outstanding............. 1,028 $ 10,519
======= =========
</Table>
<Table>
<Caption>
INSTITUTIONAL
INSTITUTIONAL CLASS CLASS (FORMERLY
(TERMINATED AMR CLASS
3/1/05)* PLANAHEAD CLASS THROUGH 3/1/05)
-------------------- ---------------- ------------------
INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------- ------- --------- ------ ------ ------- --------
Shares sold.................................... -- $ -- 18 $ 181 4,580 $ 46,881
Reinvestment of dividends...................... 1 11 4 38 408 4,163
Shares redeemed................................ (88) (912) (22) (222) (4,980) (50,899)
------- --------- ------ ------ ------- --------
Net increase (decrease) in shares
outstanding.................................. (87) $ (901) -- $ (3) 8 $ 145
======= ========= ====== ====== ======= ========
</Table>
* Activity is for the period from November 1, 2004 through February 28, 2005
<Table>
<Caption>
INSTITUTIONAL
INSTITUTIONAL CLASS CLASS (FORMERLY
(TERMINATED AMR CLASS
3/1/05)* PLANAHEAD CLASS THROUGH 3/1/05)
------------------- ----------------- ------------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- -------- ------ ------- ------- --------
Shares sold....................................... 110 $ 982 581 $ 5,167 3,008 $ 26,682
Reinvestment of dividends......................... 5 46 32 288 412 3,660
Shares redeemed................................... (481) (4,291) (491) (4,384) (3,193) (28,344)
------ ------- ------ ------- ------- --------
Net increase (decrease) in shares outstanding..... (366) $(3,263) 122 $ 1,071 227 $ 1,998
====== ======= ====== ======= ======= ========
</Table>
* Activity is for the period from November 1, 2004 through February 28, 2005
- --------------------------------------------------------------------------------
102
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
103
AMERICAN BEACON BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------
2006 2005 2004 2003 2002 2001(C D F)
----------- ------- ------- ------- ------ -----------
(UNAUDITED)
Net asset value, beginning of
period............................ $ 15.00 $ 14.31 $ 12.99 $ 10.97 $12.07 $ 12.27
------- ------- ------- ------- ------ --------
Income from investment operations:
Net investment income(A) (B).... 0.21 0.36 0.29 0.31(G) 0.11 0.51
Net gains (losses) on securities
(both realized and
unrealized)(B)................ 0.83 1.11 1.36 1.84(G) (0.69) (0.03)
------- ------- ------- ------- ------ --------
Total income (loss) from investment
operations........................ 1.04 1.47 1.65 2.15 (0.58) 0.48
------- ------- ------- ------- ------ --------
Less distributions:
Dividends from net investment
income........................ (0.38) (0.31) (0.33) (0.13) (0.44) (0.68)
Distributions from net realized
gains on securities........... (0.72) (0.47) -- -- (0.08) --
------- ------- ------- ------- ------ --------
Total distributions................ (1.10) (0.78) (0.33) (0.13) (0.52) (0.68)
------- ------- ------- ------- ------ --------
Net asset value, end of period..... $ 14.94 $ 15.00 $ 14.31 $ 12.99 $10.97 $ 12.07
======= ======= ======= ======= ====== ========
Total return....................... 7.21%(H) 10.53% 10.53% 19.77% (5.14)% 4.07%
======= ======= ======= ======= ====== ========
Ratios and supplemental data:
Net assets, end of period (in
thousands).................... $15,977 $14,122 $ 8,378 $ 9,041 $8,994 $157,775
Ratios to average net assets
(annualized):
Expenses, net of waivers(B)... 0.60% 0.56% 0.63% 0.63% 0.62% 0.62%
Expenses before waivers(B).... 0.60% 0.56% 0.63% 0.63% 0.62% 0.62%
Net investment income, net of
waivers(B).................. 2.79% 2.45% 2.15% 2.74% 3.12% 3.56%
Net investment income (loss),
before waivers(B)........... 2.79% 2.45% 2.15% 2.74% 3.12% 3.56%
Portfolio turnover rate(E)...... 27%(H) 58% 62% 69% 84% 122%
<Caption>
PLANAHEAD CLASS
-----------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------
2006 2005 2004 2003 2002 2001(C D F)
----------- ------- ------- ------- ------- -----------
(UNAUDITED)
Net asset value, beginning of
period............................ $ 14.20 $ 13.62 $ 12.40 $ 10.81 $ 11.88 $ 12.08
------- ------- ------- ------- ------- --------
Income from investment operations:
Net investment income(A) (B).... 0.19 0.34 0.27 0.28(G) 0.41 0.51
Net gains (losses) on securities
(both realized and
unrealized)(B)................ 0.79 1.01 1.25 1.74(G) (0.99) (0.06)
------- ------- ------- ------- ------- --------
Total income (loss) from investment
operations........................ 0.98 1.35 1.52 2.02 (0.58) 0.45
------- ------- ------- ------- ------- --------
Less distributions:
Dividends from net investment
income........................ (0.36) (0.30) (0.30) (0.43) (0.41) (0.65)
Distributions from net realized
gains on securities........... (0.72) (0.47) -- -- (0.08) --
------- ------- ------- ------- ------- --------
Total distributions................ (1.08) (0.77) (0.30) (0.43) (0.49) (0.65)
------- ------- ------- ------- ------- --------
Net asset value, end of period..... $ 14.10 $ 14.20 $ 13.62 $ 12.40 $ 10.81 $ 11.88
======= ======= ======= ======= ======= ========
Total return....................... 7.15%(H) 10.12% 12.44% 19.36% (5.18)% 3.84%
======= ======= ======= ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in
thousands).................... $93,985 $86,875 $21,571 $13,321 $10,561 $ 12,176
Ratios to average net assets
(annualized):
Expenses, net of waivers(B)... 0.85% 0.86% 0.93% 0.94% 0.90% 0.84%
Expenses before waivers(B).... 0.85% 0.86% 0.93% 0.94% 0.90% 0.84%
Net investment income, net of
waivers(B).................. 2.54% 2.14% 1.84% 2.40% 2.83% 3.29%
Net investment income (loss),
before waivers(B)........... 2.54% 2.14% 1.84% 2.40% 2.83% 3.29%
Portfolio turnover rate(E)...... 27%(H) 58% 62% 69% 84% 122%
</Table>
- ---------------
(A) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(B) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Balanced Portfolio through February 28, 2002.
(C) On September 7, 2001, American Beacon Advisors, Inc. assumed management of
the fixed income portion of the Balanced Fund's assets previously managed
by Merrill Lynch Investment Managers, L.P.
(D) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed
management of the equity portion of the Balanced Fund's assets previously
managed by Merrill Lynch Investment Managers, L.P.
(E) The Balanced Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(F) Independence Investment LLC was removed as an investment advisor to the
Balanced Fund on November 30, 2000.
(G) For the year ended October 31, 2003, the net investment income and net
gains (losses) on securities (both realized and unrealized) has been
restated from 0.30 and 1.85, respectively for Institutional Class and 0.36
and 1.66, respectively for PlanAhead Class.
(H) Not annualized.
(I) Annualized.
(J) Portfolio turnover rate is for the period from November 1, 2004 through
October 31, 2005.
- --------------------------------------------------------------------------------
104
- --------------------------------------------------------------------------------
<Table>
<Caption>
SERVICE CLASS AMR CLASS
--------------------------- -------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED MAY 31 TO ENDED YEAR ENDED OCTOBER 31,
APRIL 30, OCTOBER 31, APRIL 30, ---------------------------------------------------------------------------
2006 2005 2006 2005 2004 2003 2002 2001(C D F)
----------- ------------- ----------- -------- -------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
$14.16 $ 13.96 $ 14.49 $ 13.87 $ 12.60 $ 10.98 $ 12.06 $ 12.27
------ --------- -------- -------- -------- -------- -------- --------
0.27 0.09 0.23 0. 39 0.32 0.34 0.48 0.56
0.67 0.11 0.80 1.05 1.31 1.78 (1.01) (0.05)
------ --------- -------- -------- -------- -------- -------- --------
0.94 0.20 1.03 1.44 1.63 2.12 (0.53) 0.51
------ --------- -------- -------- -------- -------- -------- --------
(0.34) -- (0.41) (0.35) (0.36) (0.50) (0.47) (0.72)
(0.72) -- (0.72) (0.47) -- -- (0.08) --
------ --------- -------- -------- -------- -------- -------- --------
(1.06) -- (1.13) (0.82) (0.36) (0.50) (0.55) (0.72)
------ --------- -------- -------- -------- -------- -------- --------
$14.04 $ 14.16 $ 14.39 $ 14.49 $ 13.87 $ 12.60 $ 10.98 $ 12.06
====== ========= ======== ======== ======== ======== ======== ========
6.92%(H) 1.43%(H) 7.41%(H) 10.63% 13.13% 20.06% (4.71)% 4.38%
====== ========= ======== ======== ======== ======== ======== ========
$ 299 $ 1 $754,891 $712,073 $636,420 $557,612 $487,526 $526,405
1.03% 1.09%(I) 0.33% 0.33% 0.37% 0.38% 0.35% 0.36%
1.05% 360.24%(I) 0.33% 0.33% 0.37% 0.38% 0.35% 0.36%
2.05% 1.52%(I) 3.07% 2.70% 2.40% 2.98% 3.39% 3.77%
2.04% (357.63)%(I) 3.07% 2.70% 2.40% 2.98% 3.39% 3.77%
27%(H) 58%(J) 27%(H) 58% 62% 69% 84% 122%
</Table>
- --------------------------------------------------------------------------------
105
AMERICAN BEACON LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------
2006 2005 2004 2003 2002 2001
----------- -------- --------- ------- -------- --------
(UNAUDITED)
Net asset value, beginning of period................... $ 6.18 $ 5.82 $ 5.47 $ 4.53 $ 5.66 $ 9.54
------ -------- --------- ------- -------- --------
Income from investment operations:
Net investment income (loss)(A)..................... 0.02 0.04 0.02 0.02 0.03 (0.01)
Net gains (losses) on securities (both realized and
unrealized)(A).................................... 0.49 0.37 0.35 0.94 (1.16) (3.86)
------ -------- --------- ------- -------- --------
Total income (loss) from investment operations......... 0.51 0.41 0.37 0.96 (1.13) (3.87)
------ -------- --------- ------- -------- --------
Less distributions:
Dividends from net investment income................ (0.03) (0.05) (0.02) (0.02) -- (0.01)
------ -------- --------- ------- -------- --------
Total distributions.................................... (0.03) (0.05) (0.02) (0.02) -- (0.01)
------ -------- --------- ------- -------- --------
Net asset value, end of period......................... $ 6.66 $ 6.18 $ 5.82 $ 5.47 $ 4.53 $ 5.66
====== ======== ========= ======= ======== ========
Total return........................................... 8.30%(C) 7.06% 6.71% 21.15% (19.96)% (40.62)%
====== ======== ========= ======= ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............ $ 117 $ 105 $ 1 $ 1 $ 1 $ 1
Ratios to average net assets (annualized)(A):
Expenses, net of waivers.......................... 0.88% 0.89% 0.84% 0.87% 0.87% 0.99%
Expenses, before waivers.......................... 0.93% 4.64% 13.22% 0.87% 0.87% 101%
Net investment income (loss), net of waivers...... 0.63% (0.18)% 0.18% 0.18% 0.06% (0.26)%
Net investment income (loss), before waivers...... 0.57% (3.93)% (12.20)% 0.18% 0.06% (0.28)%
Portfolio turnover rate(B).......................... 44%(C) 164% 131% 138% 135% 85%
</Table>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Large Cap Growth Portfolio through February 28,
2001.
(B) The Large Cap Growth Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2001. Portfolio turnover rate
through February 28, 2001 was that of the Portfolio.
(C) Not annualized.
- --------------------------------------------------------------------------------
106
- --------------------------------------------------------------------------------
<Table>
<Caption>
AMR CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------
2006 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------- -------
(UNAUDITED)
$ 6.21 $ 5.84 $ 5.48 $ 4.54 $ 5.67 $ 9.55
------- ------- ------- ------- ------- -------
0.03 0.06 0.02 0.02 0.02 0.01
0.50 0.36 0.36 0.93 (1.14) (3.87)
------- ------- ------- ------- ------- -------
0.53 0.42 0.38 0.95 (1.12) (3.86)
------- ------- ------- ------- ------- -------
(0.04) (0.05) (0.02) (0.01) (0.01) (0.02)
------- ------- ------- ------- ------- -------
(0.04) (0.05) (0.02) (0.01) (0.01) (0.02)
------- ------- ------- ------- ------- -------
$ 6.70 $ 6.21 $ 5.84 $ 5.48 $ 4.54 $ 5.67
======= ======= ======= ======= ======= =======
8.47%(C) 7.22% 6.88% 21.09% (19.85)% (40.51)%
======= ======= ======= ======= ======= =======
$72,659 $63,183 $55,121 $48,926 $28,017 $23,804
0.57% 0.64% 0.71% 0.68% 0.67% 0.70%
0.57% 0.64% 0.71% 0.68% 0.67% 0.72%
0.94% 0.98% 0.34% 0.40% 0.30% 0.08%
0.94% 0.98% 0.34% 0.40% 0.30% 0.06%
44%(C) 164% 131% 138% 135% 85%
</Table>
- --------------------------------------------------------------------------------
107
AMERICAN BEACON MID-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- ---------------
NOVEMBER 30,
2005 TO FEBRUARY 28 TO
APRIL 30, APRIL 30,
2006 2006
------------------- ---------------
(UNAUDITED) (UNAUDITED)
Net asset value, beginning of period........................ $12.09 $ 9.80
------ ------
Income from investment operations:
Net investment income................................... 0.17 0.01
Net gains on securities (both realized and
unrealized)........................................... 0.59 0.30
------ ------
Total income from investment operations..................... 0.76 0.31
------ ------
Less distributions:
Dividends from net investment income.................... (0.16) --
Distributions from net realized gains on securities..... (2.58) --
------ ------
Total distributions......................................... (2.74) --
------ ------
Net asset value, end of period.............................. $10.11 $10.11
====== ======
Total return................................................ 7.73%(A) 3.16%(A)
====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $2,205 $ 13
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments)....................................... 1.01% 1.36%
Expenses, before expense reimbursements
(recoupments)....................................... 1.06% 1.36%
Net investment income, after expense reimbursements
(recoupments)....................................... 1.22% 0.81%
Net investment income, before expense reimbursements
(recoupments)....................................... 1.17% 0.81%
Portfolio turnover rate................................. 20%(A) 20%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Based on average shares outstanding.
(C) Annualized.
(D) On November 30, 2005, the Mid-Cap Value Fund's Institutional Class of
shares was renamed the AMR Class and the Fund began offering a new class of
shares known as the Institutional Class.
- --------------------------------------------------------------------------------
108
- --------------------------------------------------------------------------------
<Table>
<Caption>
AMR CLASS (FORMERLY INSTITUTIONAL CLASS
PRIOR TO DECEMBER 1, 2005)(D)
---------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30 TO
APRIL 30, OCTOBER 31, OCTOBER 31,
2006 2005 2004
----------- ----------- -----------
(UNAUDITED)
$ 11.72 $ 10.27 $ 10.00
------- ------- -------
0.09 0.13 0.02(B)
1.06 1.37 0.25
------- ------- -------
1.15 1.50 0.27
------- ------- -------
(0.14) (0.05) --
(2.58) -- --
------- ------- -------
(2.72) (0.05) --
------- ------- -------
$ 10.15 $ 11.72 $ 10.27
======= ======= =======
11.27%(A) 14.63% 2.70%(A)
======= ======= =======
$42,127 $44,342 $25,546
0.87% 1.01% 1.14%(C)
0.83% 1.02% 1.34%(C)
1.52% 0.92% 0.73%(C)
1.55% 0.91% 0.53%(C)
20%(A) 298% 6%(A)
</Table>
- --------------------------------------------------------------------------------
109
AMERICAN BEACON SMALL CAP VALUE OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- ---------------
MARCH 31 TO MARCH 31 TO
APRIL 30, APRIL 30,
2006(A) 2006(A)
------------------- ---------------
(UNAUDITED) (UNAUDITED)
Net asset value, beginning of period........................ $ 10.00 $ 10.00
------- -------
Income from investment operations:
Net investment income (loss)............................ -- --
Net gains (losses) on securities (both realized and
unrealized)........................................... 0.20 0.19
------- -------
Total income from investment operations..................... 0.20 0.19
------- -------
Less distributions:
Dividends from net investment income.................... -- --
Distributions from net realized gains on securities..... -- --
------- -------
Total distributions......................................... -- --
------- -------
Net asset value, end of period.............................. $ 10.20 $ 10.19
======= =======
Total return................................................ 2.00%(B) 1.90%(B)
======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ 2,039 $ 1
Ratios to average net assets (annualized):
Expenses net of waivers............................... 1.06% 1.31%
Expenses before waivers............................... 2.76% 2.81%
Net investment income, net of waivers................. --% (0.28%)
Net investment income, before waivers................. (1.70%) (1.78%)
Portfolio turnover rate................................. 0.24%(B) 0.24%(B)
</Table>
- ---------------
(A) March 31, 2006 is the inception date of the Small Cap Value Opportunity
Fund.
(B) Not annualized.
- --------------------------------------------------------------------------------
110
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
111
AMERICAN BEACON EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2006 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------ --------
(UNAUDITED)
Net asset value, beginning of period................. $ 15.10 $ 12.64 $ 10.62 $ 7.20 $ 6.64 $ 8.17
------- ------- ------- ------- ------ --------
Income from investment operations:
Net investment income(A)......................... 0.05 .15 0.07 0.04 0.09 0.11
Net gains (losses) on securities (both realized
and unrealized)(A)............................. 4.88 3.45 2.01 3.43 0.56 (1.62)
------- ------- ------- ------- ------ --------
Total income (loss) from investment operations....... 4.93 3.60 2.08 3.47 0.65 (1.51)
------- ------- ------- ------- ------ --------
Less distributions:
Dividends from net investment income............. (0.21) (0.06) (0.06) (0.05) (0.09) (0.01)
Distributions from net realized gains on
securities..................................... (2.21) (1.08) -- -- -- (0.01)
------- ------- ------- ------- ------ --------
Total distributions.................................. (2.42) (1.14) (0.06) (0.05) (0.09) (0.02)
------- ------- ------- ------- ------ --------
Redemption fees added to beneficial interests........ --(E) --(E) --(E) -- -- --
------- ------- ------- ------- ------ --------
Net asset value, end of period....................... $ 17.61 $ 15.10 $ 12.64 $ 10.62 $ 7.20 $ 6.64
======= ======= ======= ======= ====== ========
Total return......................................... 35.95%(C) 30.11% 19.65% 48.45% 9.80% (18.52)%
======= ======= ======= ======= ====== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)......... $18,223 $ 9,348 $ 7,282 $ 3,557 $1,769 $ 1,495
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments)(A)............................. 1.53% 1.52% 1.85% 1.76% 1.51% 1.43%
Expenses, before expense reimbursements
(recoupments)(A)............................. 1.53% 1.52% 1.85% 1.76% 1.51% 1.43%
Net investment income (loss), after expense
reimbursements (recoupments)(A).............. 0.84% 1.22% 0.74% 0.62% 1.11% 2.07%
Net investment income (loss), before expense
reimbursements (recoupments)(A).............. 0.84% 1.22% 0.74% 0.62% 1.11% 2.07%
Portfolio turnover rate(B)....................... 30%(C) 63% 76% 80% 94% 95%
</Table>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Emerging Markets Portfolio through February 28,
2002.
(B) The Emerging Markets Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(C) Not annualized.
(D) Portfolio turnover rate is for the period from November 1, 2001 through
October 31, 2002.
(E) Amounts represent less than $0.01 per share.
(F) Annualized.
- --------------------------------------------------------------------------------
112
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
- --------------------------------------------------------------------- -----------
SIX MONTHS YEAR ENDED SIX MONTHS
ENDED OCTOBER 31, OCTOBER 1 TO ENDED
APRIL 30, --------------------------------- OCTOBER 31, APRIL 30,
2006 2005 2004 2003 2002 2006
----------- ------- ------- ------- ------------ -----------
$ 14.98 $ 12.53 $ 10.55 $ 7.19 $ 6.86 $ 15.17
------- ------- ------- ------- -------- --------
0.04 0.15 0.04 0.09 -- 0.07
4.84 3.41 1.99 3.34 0.33 4.90
------- ------- ------- ------- -------- --------
4.88 3.56 2.03 3.43 0.33 4.97
------- ------- ------- ------- -------- --------
(0.19) (0.03) (0.05) (0.07) -- (0.24)
(2.21) (1.08) -- -- -- (2.21)
------- ------- ------- ------- -------- --------
(2.40) (1.11) (0.05) (0.07) -- (2.45)
------- ------- ------- ------- -------- --------
--(E) --(E) --(E) --(E) --
------- ------- ------- ------- -------- --------
$ 17.46 $ 14.98 $ 12.53 $ 10.55 $ 7.19 $ 17.69
======= ======= ======= ======= ======== ========
35.79%(C) 29.95% 19.33% 48.07% 4.81%(C) 36.10%(C)
======= ======= ======= ======= ======== ========
$ 6,064 $ 2,592 $ 1,214 $ 492 $ 1 $138,861
2.00% 1.75% 2.14% 2.08% 1.87%(F) 1.26%
1.86% 2.01% 2.20% 2.08% 1.87%(F) 1.26%
0.37% 1.16% 0.37% 0.57% (0.25)%(F) 1.05%
0.51% 0.90% 0.31% 0.57% (0.25)%(F) 1.05%
30%(C) 63% 76% 80% 94%(D) 30%(C)
<Caption>
AMR CLASS
- --- -----------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
$ 12.68 $ 10.66 $ 7.22 $ 6.65 $ 8.18
------- ------- ------- ------- -------
0.24 0.10 0.07 0.09 0.13
3.42 2.00 3.44 0.59 (1.63)
------- ------- ------- ------- -------
3.66 2.10 3.51 0.68 (1.50)
------- ------- ------- ------- -------
(0.09) (0.08) (0.07) (0.11) (0.02)
(1.08) -- -- -- (0.01)
------- ------- ------- ------- -------
(1.17) (0.08) (0.07) (0.11) (0.03)
------- ------- ------- ------- -------
-- -- -- -- --
------- ------- ------- ------- -------
$ 15.17 $ 12.68 $ 10.66 $ 7.22 $ 6.65
======= ======= ======= ======= =======
30.43% 20.00% 48.84% 10.10% (18.40)%
======= ======= ======= ======= =======
$94,864 $74,199 $51,498 $32,731 $20,660
1.25% 1.59% 1.50% 1.26% 1.30%
1.25% 1.59% 1.50% 1.26% 1.30%
1.60% 1.01% 0.92% 1.35% 1.76%
1.60% 1.01% 0.92% 1.35% 1.76%
63% 76% 80%(C) 94% 95%
</Table>
- --------------------------------------------------------------------------------
113
AMERICAN BEACON HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, DECEMBER 29, 2000
APRIL 30, ------------------------------------------ TO OCTOBER 31,
2006 2005 2004 2003 2002 2001
----------- -------- -------- -------- -------- -----------------
(UNAUDITED)
Net asset value, beginning of period.... $ 10.22 $ 10.86 $ 10.73 $ 9.63 $ 9.82 $ 10.00
-------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income............... 0.38 0.76 0.78 0.78 0.80 0.71
Net gains (losses) on securities
(both realized and unrealized).... 0.12 (0.84) 0.27 1.10 (0.19) (0.18)
-------- -------- -------- -------- -------- -------
Total income from investment
operations............................ 0.50 (0.08) 1.05 1.88 0.61 0.53
-------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment
income............................ (0.38) (0.76) (0.78) (0.78) (0.80) (0.71)
Distributions from net realized
gains on securities............... (0.11) 0.20 (0.14) -- -- --
-------- -------- -------- -------- -------- -------
Total distributions..................... (0.49) (0.56) (0.92) (0.78) (0.80) (0.71)
-------- -------- -------- -------- -------- -------
Net asset value, end of period.......... $ 10.23 $ 10.22 $ 10.86 $ 10.73 $ 9.63 $ 9.82
======== ======== ======== ======== ======== =======
Total return............................ 5.03%(A) 3.03% 10.19% 20.11% 6.28% 5.33%(A)
======== ======== ======== ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in
thousands)........................ $216,870 $216,744 $241,777 $161,380 $104,813 $53,275
Ratios to average net assets
(annualized):
Expenses, net of waivers.......... 0.85% 0.84% 0.88% 0.90% 0.90% 0.90%(D)
Expenses, before waivers.......... 0.85% 0.84% 0.92% 1.00% 0.98% 1.07%(D)
Net investment income, net of
waivers......................... 7.58% 7.24% 7.27% 7.51% 8.02% 8.48%(D)
Net investment income (loss),
before waivers.................. 7.58% 7.24% 7.23% 7.41% 7.94% 8.31%(D)
Portfolio turnover rate............. 39%(A) 128% 138% 114% 163% 145%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Portfolio turnover rate is for the period from November 1, 2001 through
October 31, 2002.
(C) Portfolio turnover rate is for the period from November 1, 2002 through
October 31, 2003.
(D) Annualized.
- --------------------------------------------------------------------------------
114
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS
---------------------------------------------------------- ------------------------------------------------
SIX MONTHS FOUR MONTHS YEAR ENDED
ENDED YEAR ENDED OCTOBER 31, MARCH 1 TO ENDED OCTOBER 31, MAY 1 TO
APRIL 30, ------------------------------ OCTOBER 31, FEBRUARY 28, ------------------- OCTOBER 31,
2006 2005 2004 2003 2002 2006 2005 2004 2003
----------- -------- -------- -------- ----------- ------------ ------ ---------- -----------
(UNAUDITED) (UNAUDITED)
$ 10.22 $ 10.87 $ 10.73 $ 9.63 $10.10 $10.41 $10.87 $ 10.73 $ 10.47
-------- -------- -------- -------- ------ ------ ------ ---------- ---------
0.37 0.74 0.74 0.75 0.50 0.25 0.70 0.71 0.29
0.13 (0.85) 0.28 1.10 (0.47) 0.13 (0.45) 0.27 0.26
-------- -------- -------- -------- ------ ------ ------ ---------- ---------
0.50 (0.11) 1.02 1.85 0.03 0.38 0.25 0.98 0.55
-------- -------- -------- -------- ------ ------ ------ ---------- ---------
(0.37) (0.74) (0.74) (0.75) (0.50) (0.24) (0.71) (0.70) (0.29)
(0.11) 0.20 (0.14) -- -- (0.11) -- (0.14) --
-------- -------- -------- -------- ------ ------ ------ ---------- ---------
(0.48) (0.54) (0.88) (0.75) (0.50) (0.35) (0.71) (0.84) (0.29)
-------- -------- -------- -------- ------ ------ ------ ---------- ---------
$ 10.24 $ 10.22 $ 10.87 $ 10.73 $ 9.63 $10.44 $10.41 $ 10.87 $ 10.73
======== ======== ======== ======== ====== ====== ====== ========== =========
5.01%(A) 2.69% 9.94% 19.57% (0.26)%(A) 3.72%(A) 2.33% 9.41% 5.46%(A)
======== ======== ======== ======== ====== ====== ====== ========== =========
$107,380 $120,360 $148,266 $125,654 $4,029 $ 42 $ 1 $ 4 $ 1
1.09% 1.08% 1.20% 1.24% 1.27%(D) 1.33% 1.46% 1.57% 1.71%(D)
1.09% 1.08% 1.20% 1.24% 1.27%(D) 1.33% 4.01% 440.81% 806.83%(D)
7.32% 7.00% 6.95% 7.11% 7.20%(D) 7.04% 6.59% 6.57% 6.51%(D)
7.32% 7.00% 6.95% 7.11% 7.20%(D) 7.04% 4.04% (432.67)% (798.61)%(D)
39%(A) 128% 138% 114% 163%(B) 39%(A) 128% 138% 114%(C)
</Table>
- --------------------------------------------------------------------------------
115
AMERICAN BEACON ENHANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS
-----------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JUNE 30 TO
APRIL 30, ------------------- OCTOBER 31,
2006 2005 2004 2003
----------- -------- -------- -----------
(UNAUDITED)
Net asset value, beginning of period........................ $ 9.98 $ 10.16 $ 9.96 $ 10.00
-------- -------- -------- --------
Income from investment operations:
Net investment income................................... 0.15 0.29 0.26 0.07(B)
Net gains (losses) on securities (both realized and
unrealized)........................................... 0.15 (0.16) 0.20 (0.04)
-------- -------- -------- --------
Total income from investment operations..................... 0.30 0.13 0.46 0.03
-------- -------- -------- --------
Less distributions:
Dividends from net investment income.................... (0.19) (0.31) (0.26) (0.07)
Distributions from net realized gains on securities..... -- -- -- --
-------- -------- -------- --------
Total distributions......................................... (0.19) (0.31) (0.26) (0.07)
-------- -------- -------- --------
Net asset value, end of period.............................. $ 10.09 $ 9.98 $ 10.16 $ 9.96
======== ======== ======== ========
Total return................................................ 2.97%(A) 1.32% 4.70% 0.32%(A)
======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $106,866 $112,341 $103,897 $101,072
Ratios to average net assets (annualized):
Expenses.............................................. 0.89% 0.92% 1.00% 0.93%(C)
Net investment income................................. 3.10% 2.79% 2.54% 2.20%(C)
Portfolio turnover rate................................. 18%(A) 41% 72% 57%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Based on average shares outstanding.
(C) Annualized.
- --------------------------------------------------------------------------------
116
(This page intentionally left blank)
(LIGHTHOUSE LOGO)
- --------------------------------------------------------------------------------
117
AMERICAN BEACON INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS (TERMINATED 3/1/05)
----------------------------------------------------
FROM
NOVEMBER 1,
2004 TO YEAR ENDED OCTOBER 31,
FEBRUARY 28, -------------------------------------
2005(D) 2004 2003 2002 2001
------------ ------- ------- ------- -------
Net asset value, beginning of period........................ $ 10.54 $ 10.45 $ 10.42 $ 10.51 $ 9.72
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(A)................................ 0.13 0.37 0.41 0.51 0.57
Net gains (losses) on securities (both realized and
unrealized)(A)........................................ (0.11) 0.14 0.03 (0.09) 0.79
------- ------- ------- ------- -------
Total income from investment operations..................... 0.02 0.51 0.44 0.42 1.36
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.15) (0.42) (0.41) (0.51) (0.57)
Distributions from net realized gains on securities..... -- -- -- -- --
------- ------- ------- ------- -------
Total distributions......................................... (0.15) (0.42) (0.41) (0.51) (0.57)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 10.41 $ 10.54 $ 10.45 $ 10.42 $ 10.51
======= ======= ======= ======= =======
Total return................................................ 0.17%(C) 4.90% 4.31% 4.21% 14.36%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ N/A $ 912 $ 1,024 $74,919 $60,842
Ratios to average net assets (annualized):
Expenses, net of waivers(A)........................... 0.37% 0.80% 0.58% 0.56% 0.54%
Expenses, before waivers(A)........................... 0.37% 0.80% 0.58% 0.56% 0.54%
Net investment income, net of waivers(A).............. 3.82% 3.51% 4.02% 4.99% 5.55%
Net investment income, before waivers(A).............. 3.82% 3.51% 4.02% 4.99% 5.55%
Portfolio turnover rate(B).............................. 119%(E) 106% 187% 185% 164%
</Table>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Intermediate Bond Portfolio through February
28, 2002.
(B) The Intermediate Bond Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(C) Not annualized.
(D) On March 1, 2005, the existing Institutional Class shares were terminated
and exchanged for AMR Class shares at a conversion rate of 1.0202.
Following this exchange, the former AMR Class Shares were re-named
Institutional Class.
(E) Portfolio turnover rate is for the period November 1, 2004 through October
31, 2005.
- --------------------------------------------------------------------------------
118
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLAN AHEAD CLASS INSTITUTIONAL CLASS (FORMERLY AMR CLASS PRIOR TO 3/1/05)
---------------------------------------------------------- ----------------------------------------------------------------
SIX SIX
MONTHS MONTHS
ENDED YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------- APRIL 30, ---------------------------------------------------
2006 2005 2004 2003 2002 2001 2006 2005(D) 2004 2003 2002 2001
---------- ------- ------- ------ ------ ------- ---------- -------- -------- -------- -------- -------
$10.08 $ 10.41 $ 10.31 $10.27 $10.34 $ 9.57 $ 10.01 $ 10.33 $ 10.24 $ 10.22 $ 10.30 $ 9.53
------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- -------
0.19 0.36 0.35 0.39 0.48 0.53 0.22 0.42 0.40 0.45 0.53 0.58
(0.18) (0.30) 0.14 0.04 (0.07) 0.77 (0.18) (0.29) 0.14 0.02 (0.08) 0.77
------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- -------
0.01 0.06 0.49 0.43 0.41 1.30 0.04 0.13 0.54 0.47 0.45 1.35
------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- -------
(0.20) (0.39) (0.39) (0.39) (0.48) (0.53) (0.23) (0.45) (0.45) (0.45) (0.53) (0.58)
-- -- -- -- -- -- -- -- -- -- -- --
------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- -------
(0.20) (0.39) (0.39) (0.39) (0.48) (0.53) (0.23) (0.45) (0.45) (0.45) (0.53) (0.58)
------ ------- ------- ------ ------ ------- ------- -------- -------- -------- -------- -------
$ 9.89 $ 10.08 $ 10.41 $10.31 $10.27 $ 10.34 $ 9.82 $ 10.01 $ 10.33 $ 10.24 $ 10.22 $ 10.30
====== ======= ======= ====== ====== ======= ======= ======== ======== ======== ======== =======
0.13%(C) 0.54% 4.86% 4.25% 4.10% 13.91% 0.42%(C) 1.26% 5.38% 4.62% 4.57% 14.58%
====== ======= ======= ====== ====== ======= ======= ======== ======== ======== ======== =======
$ 957 $ 1,054 $ 1,091 $1,395 $1,691 $ 300 $90,409 $ 93,270 $ 96,242 $131,927 $144,098 $95,820
0.95% 0.95% 0.92% 0.86% 0.86% 0.83% 0.33% 0.31% 0.34% 0.32% 0.30% 0.30%
1.35% 1.19% 0.93% 0.86% 0.86% 0.83% 0.33% 0.31% 0.34% 0.32% 0.30% 0.30%
3.93% 3.48% 3.39% 3.70% 4.60% 5.04% 4.55% 4.12% 3.97% 4.32% 5.23% 5.84%
3.53% 3.24% 3.38% 3.70% 4.60% 5.04% 4.55% 4.12% 3.97% 4.32% 5.23% 5.84%
119%(C) 119% 106% 187% 185% 164% 119%(C) 119% 106% 187% 185% 164%
</Table>
- --------------------------------------------------------------------------------
119
AMERICAN BEACON SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS (TERMINATED 3/1/05)
----------------------------------------------------------------------
FROM NOVEMBER 1,
2004 YEAR ENDED OCTOBER 31,
TO FEBRUARY 28, -------------------------------------------
2005(D) 2004 2003 2002 2001
---------------- ------ ------ ------ -------
Net asset value, beginning of period........... $ 9.09 $ 9.32 $ 9.45 $ 9.62 $ 9.21
------ ------ ------ ------ -------
Income from investment operations:
Net investment income(B)................... 0.11 0.24 0.37 0.42 0.57
Net gains (losses) on securities (both
realized and unrealized)(B).............. (0.15) (0.03) (0.04) (0.11) 0.41
------ ------ ------ ------ -------
Total income from investment operations........ (0.04) 0.21 0.33 0.31 0.98
------ ------ ------ ------ -------
Less distributions:
Dividends from net investment income....... (0.13) (0.44) (0.46) (0.48) (0.57)
------ ------ ------ ------ -------
Total distributions............................ (0.13) (0.44) (0.46) (0.48) (0.57)
------ ------ ------ ------ -------
Net asset value, end of period................. $ 8.92 $ 9.09 $ 9.32 $ 9.45 $ 9.62
====== ====== ====== ====== =======
Total return................................... (0.44)%(C) 2.21% 3.58% 3.37% 10.98%
====== ====== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands)... N/A $3,324 $3,745 $8,396 $ 4,226
Ratios to average net assets (annualized):
Expenses, net of waivers(B).............. 0.61% 0.62% 0.54% 0.44% 0.51%
Expenses, before waivers(B).............. 0.61% 0.62% 0.54% 0.44% 0.51%
Net investment income, net of waivers
(B).................................... 1.82% 2.72% 4.30% 4.47% 6.06%
Net investment income, before
waivers(B)............................. 1.82% 2.72% 4.30% 4.47% 6.06%
Portfolio turnover rate(A)................. 38%(E) 41% 81% 63% 104%
</Table>
- ---------------
(A) The Short-Term Bond Fund invested all of its investable assets in its
corresponding Portfolio through February 28, 2002. Portfolio turnover rate
through February 28, 2002 was that of the Portfolio.
(B) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Short-Term Bond Portfolio through February 28,
2002.
(C) Not annualized.
(D) On March 1, 2005, the existing Institutional Class shares were terminated
and exchanged for AMR Class shares at a conversion rate of 1.0014.
Following this exchange, the former AMR Class Shares were re-named
Institutional Class.
(E) Portfolio turnover rate is for the period November 1, 2004 through October
31, 2005.
(F) For purposes of this calculation, the change in undistributed net
investment income per share was derived by dividing the change in
undistributed net investment income by average shares outstanding for the
period.
- --------------------------------------------------------------------------------
120
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS
-----------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------
2006 2005 2004 2003 2002 2001
----------- ------ ------- ------ ------ -------
(UNAUDITED)
$ 8.77 $ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 9.21
------- ------ ------- ------ ------ -------
0.12(F) 0.28 0.25 0.39 0.43 0.55
(0.01) (0.24) (0.07) (0.08) (0.14) 0.41
------- ------ ------- ------ ------ -------
0.11 0.04 0.18 0.31 0.29 0.96
------- ------ ------- ------ ------ -------
(0.17) (0.36) (0.42) (0.43) (0.46) (0.55)
------- ------ ------- ------ ------ -------
(0.17) (0.36) (0.42) (0.43) (0.46) (0.55)
------- ------ ------- ------ ------ -------
$ 8.71 $ 8.77 $ 9.09 $ 9.33 $ 9.45 $ 9.62
======= ====== ======= ====== ====== =======
1.28%(C) 0.46% 1.84% 3.38% 3.16% 10.69%
======= ====== ======= ====== ====== =======
$10,598 $8,582 $ 7,781 $5,783 $3,520 $ 1,257
0.88% 0.87% 0.87% 0.86% 0.73% 0.75%
0.89% 0.94% 0.87% 0.86% 0.77% 0.75%
2.80% 2.59% 2.44% 4.00% 4.16% 5.76%
2.79% 2.52% 2.44% 4.00% 4.12% 5.76%
24%(C) 38% 41% 81% 63% 104%
<Caption>
INSTITUTIONAL (FORMERLY AMR CLASS PRIOR TO 3/1/05)
-------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------
2006 2005 2004 2003 2002 2001
----------- ------- ------- ------- ------- -------
(UNAUDITED)
$ 8.75 $ 9.07 $ 9.31 $ 9.44 $ 9.60 $ 9.20
------- ------- ------- ------- ------- -------
0.15(F) 0.29 0.27 0.42 0.44 0.59
(0.01) (0.20) (0.05) (0.07) (0.11) 0.40
------- ------- ------- ------- ------- -------
0.14 0.09 0.22 0.35 0.33 0.99
------- ------- ------- ------- ------- -------
(0.19) (0.41) (0.46) (0.48) (0.49) (0.59)
------- ------- ------- ------- ------- -------
(0.19) (0.41) (0.46) (0.48) (0.49) (0.59)
------- ------- ------- ------- ------- -------
$ 8.70 $ 8.75 $ 9.07 $ 9.31 $ 9.44 $ 9.60
======= ======= ======= ======= ======= =======
1.66%(C) 1.00% 2.39% 3.82% 3.60% 11.07%
======= ======= ======= ======= ======= =======
$72,818 $79,683 $80,504 $91,911 $89,932 $81,370
0.35% 0.33% 0.33% 0.33% 0.30% 0.33%
0.35% 0.33% 0.33% 0.33% 0.30% 0.33%
3.34% 3.15% 3.00% 4.54% 4.63% 6.26%
3.34% 3.15% 3.00% 4.54% 4.63% 6.26%
24%(C) 38% 41% 81% 63% 104%
</Table>
- --------------------------------------------------------------------------------
121
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS
(Unaudited)
- --------------------------------------------------------------------------------
1. RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS
At their February 17, 2006 meeting, the Board of Trustees ("Board")
considered the renewal of the existing Management Agreement between the Manager
and the American Beacon Funds (the "Funds") and each Investment Advisory
Agreement between the Manager and the subadvisors, on behalf of the Funds. In
preparation for the Board's consideration to renew these Agreements, the Board
and its Investment Committee undertook steps to gather and consider information
furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager and each subadvisor. In addition,
the Board's Investment Committee worked with Lipper to obtain relevant
comparative information regarding the performance, fees and expenses of the
Funds. The Investment Committee held separate meetings on December 8, 2005,
February 8, 2006 and February 17, 2006 to consider the information provided by
Lipper. Further, the Board took into consideration information furnished for the
Board's review and consideration throughout the year at regular Board and
Investment Committee meetings, as well as information specifically prepared in
connection with the renewal process.
The Trustees considered, among other materials, responses by the Manager
and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or any
other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements as well as Parts I and II of its Form ADV;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including the
results of any recent regulatory examination or independent audit;
- a comparison of the performance of that portion of Fund assets managed by
each firm with performance of other similar accounts managed by the firm,
including a discussion of relative performance versus a peer group
average and any remedial measures if the firm's performance was
materially below that of the peer group;
- a cost/profitability analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to the Funds,
if available;
- an analysis of compensation, including a comparison with fees charged to
other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of any other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise concerns
that the firm would be unable to continue providing the same scope and
quality of services to the Funds;
- --------------------------------------------------------------------------------
122
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a description of the scope of portfolio management services provided to
the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year;
- a description of the basis upon which portfolio managers are compensated,
including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with respect
to Fund transactions, including the firm's methodology for obtaining the
most favorable execution and the use of any affiliated broker-dealers;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a description of trade allocation procedures among accounts managed by
the firm;
- a summary of any material changes to the firm's compliance program with
regard to federal, state, corporate and Fund requirements;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading policy
and disaster recovery plan, including a description of any material
changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling persons;
and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to appropriate indices,
including comments on the relative performance of each subadvisor and
each Fund versus comparable indices;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and whether (and if so, why) such subadvisor
should have its contract renewed;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- a table detailing the Manager's profitability with respect to each Fund;
- an analysis of any material complaints received from Fund shareholders;
- a description of the Manager's securities lending practices and the fees
received from such practices;
- a description of the portfolio turnover rate and average execution costs
for each Fund and each subadvisor to a Fund;
- --------------------------------------------------------------------------------
123
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- a discussion of whether the Manager receives, with respect to trade
execution for the Funds, other special compensation, including any
payment for order flow; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
The Board also obtained an analysis provided by Lipper that compared: (i)
investment performance of each Fund versus comparable investment companies and
appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds, and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund, the class used for comparative purposes was the
class with the longest performance history, which in most cases is the
Institutional Class. References below to each Fund's Lipper peer group are to
the group of comparable mutual funds included in the analysis provided by
Lipper.
The Trustees also received a memorandum from their legal counsel detailing
the Board's responsibilities pertaining to the renewal of the Management and
Investment Advisory Agreements. This memorandum explained the regulatory
requirements surrounding the Trustees' process for evaluating investment
advisors and the terms of the contracts.
Provided below is an overview of the primary factors the Board considered
at its February 2006 meeting. The Board did not identify any particular
information that was most relevant to its consideration to renew the Management
and Investment Advisory Agreements, and each Trustee may have afforded different
weight to the various factors.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to approve the continuance of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered the
best interests of each Fund separately. In addition, while the Management
Agreement and the Investment Advisory Agreements for all of the Funds were
considered at the same Board meeting, the Board considered each Fund's
investment management and subadvisory relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost
for providing the services and the profitability of the advisory business to the
Manager or subadvisor; (4) the extent to which economies of scale have been
taken into account in setting the fee schedule; and (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors. The Trustees
posed questions to various management personnel of the Manager regarding certain
key aspects of the material submitted in support of the renewal.
Nature, Extent and Quality of Services
With respect to the renewal of the Management Agreement, the Board
considered: the Manager's ability to retain key investment personnel and to
provide consistent performance and an active client service program; the
Manager's goal to provide consistent above average long-term performance at low
cost; the continuing efforts by the Manager to add new Funds so as to enhance
the Trusts' product line; the Manager's record in building improved compliance,
control and credit functions that reduce risks to the Funds; the addition of
personnel to manage the Funds, promote
- --------------------------------------------------------------------------------
124
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
sales and improve services; and the active role played by the Manager in
monitoring and, as appropriate, recommending replacements for the investment
subadvisors and master portfolios. Based on this information, the Board
concluded that the nature, extent and quality of the management and advisory
services provided by the Manager and each subadvisor were appropriate for each
Fund and, thus, supported a decision to renew the Management and each Investment
Advisory Agreement.
Investment Performance
The Board evaluated the comparative information provided by Lipper and the
Manager regarding each Fund's investment performance relative to its benchmark
index(es) and peer group. The Board also considered the performance reports and
discussions with management at Board and Committee meetings throughout the year.
Discussions regarding the Board's considerations with respect to each Fund's
performance are below under "Additional Considerations and Conclusions with
Respect to each Fund."
Cost of Services and Profits Realized
In analyzing the cost of services and profitability of the Manager in
connection with its investment advisory services to a Fund, the Board considered
the Manager's operations and low cost structure. The Board noted that the
Manager proposed to continue most of the expense waivers and reimbursements that
were in place for each applicable Fund's 2005 fiscal year. The Board also noted
that each sub-advised Fund pays the Manager the amounts due to its subadvisors,
and the Manager remits these amounts directly to the applicable subadvisors. The
Board considered that the Manager receives service and administrative fees to
compensate the Manager for providing administrative services to the Funds and to
compensate third-party administrators and broker-dealers for services to Fund
shareholders. In addition, the Board considered that the Manager receives
management fees for overseeing the securities lending relationships on behalf of
various Funds.
In analyzing the cost of services and profitability of each subadvisor in
connection with its investment advisory services to a Fund, the Board considered
that, in many cases, the Manager has negotiated the lowest subadvisory fee a
subadvisor charges for any comparable client accounts. The Board gave less
weight to profitability considerations or did not view this data as imperative
to its deliberations given the arms-length nature of the relationship between
the Manager and the subadvisors with respect to the negotiation of subadvisory
fees.
Discussions regarding the Board's considerations with respect to each
Fund's fee rates are set forth below under "Additional Considerations and
Conclusions with Respect to each Fund."
Economies of Scale
In considering the reasonableness of the management and investment advisory
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. In this regard, the Board noted that, in many
cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The
Board also noted, where applicable, for purposes of determining the investment
advisory fee charged to the Funds, the fee schedule to each Investment Advisory
Agreement specifies that all other assets
- --------------------------------------------------------------------------------
125
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
managed by a subadvisor on behalf of AMR Corporation and its pension plans shall
be considered. Thus, the Funds are able to receive additional breakpoint
benefits resulting from the subadvisor's management of a larger pool of assets.
With respect to the management fee, the Board acknowledged the Manager's low
cost structure and the increasing costs of personnel, technology and operations.
Based on these considerations, the Board concluded that the Funds' fee
structures are reasonably designed to pass on economies of scale to Fund
shareholders.
Benefits to be Derived from the Relationship with the Funds
The Board considered the "fall-out" or ancillary benefits that accrue to
the Manager and/or the subadvisors as a result of the advisory relationships
with the Funds, including greater exposure in the marketplace with respect to
the Manager's or subadvisor's investment process and expanding the level of
assets under management by the Manager and the subadvisors. The Board noted that
the Manager and the subadvisors may not direct the Funds' brokerage transactions
to certain brokers to obtain research and other services and that the Funds
participate in a brokerage recapture program. After consideration of this
information, the Board concluded that the potential benefits accruing to the
Manager and the subadvisors by virtue of their relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND
The benchmark indices referred to below include the Fund's broad-based
market index included in the Historical Performance section of the Prospectuses
and the respective Lipper Index for each Fund. The Money Market Funds do not
compare their performance to a market index, so the Board considered the
relative performance of those Funds versus the respective Lipper Average, which
includes all comparable funds in the Lipper category. Each Lipper Index includes
up to the 30 largest funds in the respective Lipper category where the Fund is
classified by Lipper.
Additional Considerations and Conclusions with Respect to the Balanced Fund
In considering the renewal of the Management Agreement and each Investment
Advisory Agreement (collectively, the "Agreements") with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 1st quintile for all relevant periods tracked by Lipper compared to the
returns of a peer group of mutual funds identified by Lipper as having an
investment objective similar to the Fund ("Performance Universe"); (2) the
Fund's total return performance exceeded the Lipper Balanced Fund Index for
these same periods; (3) the portion of Fund assets allocated to the Manager,
which manages only fixed income securities, outperformed or matched a relevant
fixed income benchmark index for all relevant periods; (4) the portion of Fund
assets allocated to Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow"), which
manages equity and fixed income securities, outperformed the Fund's benchmark
index for all relevant periods; (5) the portion of Fund assets allocated to
Brandywine Asset Management, LLC ("Brandywine"), which manages equity and fixed
income securities, outperformed the Fund's benchmark index for all relevant
periods; and (6) the portion of Fund assets allocated to Hotchkis and Wiley
Capital Management, LLC ("Hotchkis"), which manages only equity securities,
outperformed a relevant equity benchmark index for all relevant periods.
- --------------------------------------------------------------------------------
126
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
were in the 1st quintile and actual management fees (including administrative
fees) were in the 2nd quintile compared to the expenses and fees of a peer group
of similar funds classified by Lipper ("Fee Universe"), where the 1st quintile
represents the lowest fees or expenses among the group; (2) the Manager
contractually agreed to continue to waive fees and/or reimburse expenses to the
extent necessary to maintain a competitive total expense ratio for the Fund's
Service Class; (3) Brandywine represented that it does not charge a lower fee
rate for comparable client services, while Hotchkis represented that it does not
provide similar services to any comparable accounts; and (4) the fee schedules
of each subadvisor include breakpoints, which reduce fee rates as the assets of
the Fund increase.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and the
subadvisors under the Agreements are fair and reasonable; (2) concluded that the
profits to the Manager are reasonable in light of the quality of services
provided to the Fund, including the direct management of a portion of the Fund's
assets and oversight of the Fund's subadvisors; (3) determined that the Fund and
its shareholders would benefit from the Manager's and subadvisors' continued
management of the Fund; and (4) approved the renewal of the Agreements with
respect to the Fund.
Additional Considerations and Conclusions with Respect to the Emerging Markets
Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 4th quintile for the one- and two-year periods, the 3rd quintile for the
three- and four-year periods and the 2nd quintile for the five-year period
compared to the Performance Universe; (2) the Fund's total return performance
exceeded the Lipper Emerging Market Fund Index for the five-year period but
underperformed for the other periods tracked by Lipper; (3) the portion of Fund
assets allocated to The Boston Company Asset Management, LLC ("TBCAM")
outperformed the Fund's benchmark index for the five-year and since inception
periods but underperformed for the one- and three-year periods; (4) TBCAM's
explanation that its performance lagged during the year due to reallocation into
value securities; (5) the portion of Fund assets allocated to Morgan Stanley
Investment Management Inc. ("MSIM Inc.") outperformed or matched the Fund's
benchmark index for all relevant periods except the since inception period.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
and actual management fees (including administrative fees) were in the 3rd
quintile compared to the Fee Universe, where the 1st quintile represents the
lowest fees or expenses among the group; (2) the Manager contractually agreed to
continue to waive fees and/or reimburse expenses to the extent necessary to
maintain a competitive total expense ratio for the Fund's PlanAhead Class; (3)
the Manager's profitability analysis indicated that it incurred a loss on the
services it provided to the Fund; (4) TBCAM represented that it does not provide
similar services to any comparable accounts; (5) MSIM Inc. represented that the
Fund's fee rates are lower than MSIM Inc.'s standard fee schedules for similarly
managed mutual funds; and (6) the fee schedule of MSIM Inc. includes
breakpoints, which reduce fee rates as the assets of the Fund increase.
- --------------------------------------------------------------------------------
127
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager, TBCAM and
MSIM Inc. under the Agreements are fair and reasonable; (2) determined that the
Fund and its shareholders would benefit from the Manager's and subadvisors'
continued management of the Fund; and (3) approved the renewal of the Agreements
with respect to the Fund.
Additional Considerations and Conclusions with Respect to the Enhanced Income
Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 5th quintile for the one-year period and the 3rd quintile for the
two-year period compared to the Performance Universe; (2) the Fund's total
return performance underperformed the Lipper Intermediate Investment Grade Index
for these same periods; (3) the Manager's explanation that comparison of the
performance of the Fund, which invests in both fixed income and convertible
securities, to the Performance Universe and the Lipper Intermediate Investment
Grade Index, which include mutual funds that invest primarily in fixed income
securities, is not suitable; (4) the portion of Fund assets allocated to the
Manager, which manages only fixed income securities, outperformed a relevant
fixed income benchmark index for all relevant periods; (5) the portion of Fund
assets allocated to Calamos Advisors LLC ("Calamos"), which manages convertible
securities, outperformed a relevant convertibles securities benchmark index for
all relevant periods; and (6) the Fund has a short performance history to
compare to its peers.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the PlanAhead Class total expenses and
actual management fees (including administrative fees) were in the 5th quintile
compared to the Fee Universe, where the 1st quintile represents the lowest fees
or expenses among the group; and (2) Calamos represented that it does not
provide similar services to any comparable accounts.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and Calamos
under the Agreements are fair and reasonable; (2) concluded that the profits to
the Manager are reasonable in light of the quality of services provided to the
Fund, including the direct management of a portion of the Fund's assets and
oversight of the Fund's subadvisor; (3) determined that the Fund and its
shareholders would benefit from the Manager's and subadvisor's continued
management of the Fund; and (4) approved the renewal of the Agreements with
respect to the Fund.
Additional Considerations and Conclusions with Respect to the High Yield Bond
Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 3rd quintile for the one- and two-year periods, the 5th quintile for the
three-year period, the 2nd quintile for the four-year period, and the 1st
quintile for the five-year period compared to the Performance Universe; (2) the
Fund's total return performance exceeded the Lipper High Yield Bond Fund Index
for the four- and five-year periods
- --------------------------------------------------------------------------------
128
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
but underperformed for the other periods tracked by Lipper; and (3) Post
Advisory Group, LLC ("Post") outperformed a relevant Fund benchmark index for
the one- and five-year periods.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
were in the 3rd quintile, and actual management fees (including administrative
fees) were in the 5th quintile compared to the Fee Universe, where the 1st
quintile represents the lowest fees or expenses among the group; (2) Post's
representation that the subadvisory fee charged is among the lowest for similar
services.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and Post
under the Agreements are fair and reasonable; (2) concluded that the profits to
the Manager are reasonable in light of the quality of services provided to the
Fund, including the oversight of the Fund's subadvisor; (3) determined that the
Fund and its shareholders would benefit from the Manager's and subadvisor's
continued management of the Fund; and (4) approved the renewal of the Agreements
with respect to the Fund.
Additional Considerations and Conclusions with Respect to the Intermediate
Bond Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 1st quintile for the one-year period, 2nd quintile for the two-and
five-year periods, and 3rd quintile for the three- and four-year periods
compared to the Performance Universe; (2) the Fund's total return performance
exceeded the Lipper Intermediate Investment Grade Fund Index for the one-year
period but underperformed for the other periods tracked by Lipper; (3) the
portion of Fund assets allocated to the Manager outperformed the Fund's
benchmark index for the one- and three-year periods but underperformed for the
five-year and since inception periods; (4) the Manager's explanation that its
longer-term performance was reduced due to poor issuer selection and duration
decisions; and (5) the portion of Fund assets allocated to Barrow outperformed
the Fund's benchmark index for all relevant time periods.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
and actual management fees (including administrative fees) were in the 1st
quintile compared to the Fee Universe, where the 1st quintile represents the
lowest fees or expenses among the group; (2) the Manager contractually agreed to
continue to waive fees and/or reimburse expenses to the extent necessary to
maintain a competitive total expense ratio for the Fund's PlanAhead Class; (3)
the Manager's profitability analysis indicated that it incurred a loss on the
services it provided to the Fund; and (4) the fee schedule of Barrow includes
breakpoints, which reduce fee rates as the assets of the Fund increase.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and Barrow
under the Agreements are fair and reasonable; (2) determined that the Fund and
its shareholders would benefit from the Manager's and subadvisor's continued
management of the Fund; and (3) approved the renewal of the Agreements with
respect to the Fund.
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129
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
Additional Considerations and Conclusions with Respect to the Large Cap Growth
Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 2nd quintile for the three-year period, 3rd quintile for the two-, four-
and five-year periods, and 4th quintile for the one-year period compared to the
Performance Universe; (2) the Fund's total return performance exceeded the
Lipper Large Cap Growth Fund Index for the three-, four- and five-year periods
but underperformed for the other periods tracked by Lipper; (3) the portion of
Fund assets allocated to Goldman Sachs Asset Management, L.P. ("GSAM")
outperformed the Fund's benchmark index for all relevant periods; (4) the
portion of Fund assets allocated to J.P. Morgan Investment Management Inc.
("JPMIM") underperformed the Fund's benchmark index for all relevant periods;
(5) JPMIM's explanation that its underperformance during the last year was due
to stock selection; and (6) the Manager's representation that it will continue
to monitor JPMIM's performance closely.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
were in the 2nd quintile, and actual management fees (including administrative
fees) were in the 5th quintile compared to the Fee Universe, where the 1st
quintile represents the lowest fees or expenses among the group ; (2) the
Manager contractually agreed to continue to waive fees and/or reimburse expenses
to the extent necessary to maintain a competitive total expense ratio for the
Fund's Institutional Class; (3) the Manager's profitability analysis indicated
that it incurred a loss on the services it provided to the Fund; (4) GSAM and
JPMIM represented that they do not provide similar services to any comparable
accounts; and (5) the fee schedules of GSAM and JPMIM include breakpoints, which
reduce fee rates as the assets of the Fund increase.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager, GSAM and
JPMIM under the Agreements are fair and reasonable; (2) determined that the Fund
and its shareholders would benefit from the Manager's and subadvisors' continued
management of the Fund; and (3) approved the renewal of the Agreements with
respect to the Fund.
Additional Considerations and Conclusions with Respect to the Mid-Cap Value
Fund
In considering the renewal of the Agreements with the Fund, the Trustees
considered performance data for various periods ended December 31, 2005. In this
regard, they considered that: (1) the total return performance of the Fund was
in the 3rd quintile for the one-year period compared to the Performance
Universe; (2) the Fund's total return performance exceeded the Lipper Mid-Cap
Value Fund Index for the same period; (3) the portion of Fund assets allocated
to Barrow and Pzena Investment Management, LLC ("Pzena") underperformed the
Fund's benchmark index for the one-year and since inception periods; (4)
Barrow's explanation that its underperformance was primarily due to stock
selection in the financial sector and its underweight position in REIT
securities; and (5) the subadvisors have managed the Fund for a relatively short
period of time and have not established a meaningful performance history.
In addition, the Trustees considered the fees payable under the Agreements.
In this regard, they considered that: (1) the Institutional Class total expenses
were in the 2nd quintile and actual
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130
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
management fees (including administrative fees) were in the 5th quintile
compared to the Fee Universe, where the 1st quintile represents the lowest fees
or expenses among the group; and (2) the Manager contractually agreed to
continue to waive fees and/or reimburse expenses to the extent necessary to
maintain a competitive total expense ratio for the Fund's Institutional Class.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager and the
subadvisors under the Agreements are fair and reasonable; (2) concluded that the
profits to the Manager are reasonable in light of the quality of services
provided to the Fund, including the oversight of the Fund's subadvisors; (3)
determined that the Fund and its shareholders would benefit from the Manager's
continued management of the Fund; and (4) approved the renewal of the Agreements
with respect to the Fund.
Additional Considerations and Conclusions with Respect to the Short-Term Bond
Fund
In considering the renewal of the Management Agreement with the Fund, the
Trustees considered performance data for various periods ended December 31,
2005. In this regard, they considered that: (1) the total return performance of
the Fund was in the 1st quintile for the five-year period and the 2nd quintile
for all other relevant periods tracked by Lipper compared to the Performance
Universe; (2) the Fund's total return performance exceeded the Lipper Short
Investment Grade Bond Fund Index for the same periods; and (3) the Fund's
performance exceeded its benchmark index for the one- and three-year periods but
underperformed for the five- and ten-year periods.
In addition, the Trustees considered the fees payable under the Management
Agreement. In this regard, they considered that: (1) the Institutional Class
total expenses and actual management fees (including administrative fees) were
in the 1st quintile compared to the Fee Universe, where the 1st quintile
represents the lowest fees or expenses among the group; (2) the Manager
contractually agreed to continue to waive fees and/or reimburse expenses to the
extent necessary to maintain a competitive total expense ratio for the Fund's
PlanAhead Class; and (3) the Manager's profitability analysis indicated that it
incurred a loss on the services it provided to the Fund.
Based on these considerations and those noted above with respect to all
Funds, the Trustees: (1) concluded that the fees paid to the Manager under the
Management Agreement are fair and reasonable; (2) determined that the Fund and
its shareholders would benefit from the Manager's continued management of the
Fund; and (3) approved the renewal of the Management Agreement with respect to
the Fund.
2. APPROVAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT FOR SMALL
CAP VALUE OPPORTUNITY FUND
At the February 17, 2006 Board meeting, the Manager proposed that the Board
approve the Manager as the manager, and PanAgora Asset Management, Inc.
("PanAgora") as an investment advisor, to the Small Cap Value Opportunity Fund
(the "Fund"), a new series of the Funds. The Fund commenced operations on March
31, 2006. Prior to the meeting, the Board requested and reviewed information
provided by the Manager and PanAgora, and the Investment Committee of the Board
met with representatives from PanAgora.
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131
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
APPOINTMENT OF THE MANAGER
With respect to the appointment of the Manager, the Trustees considered the
information provided by the Manager, including responses by the Manager to
inquiries requesting:
- a description of the investment objectives and strategies of the Fund;
- a description of the services proposed to be provided to the Fund;
- identification of the professional personnel to perform services for the
Fund and their background and responsibilities;
- a comparison of the proposed advisory fee and estimated total expense
ratio to comparable mutual funds and an explanation of any material
differences;
- any special regulatory issues that could be relevant to the Fund;
- a discussion of any economies of scale expected in the future;
- an evaluation of any benefits to the Manager or the Fund as result of
their relationship; and
- any other information the Manager believed would be material to the
Trustees' consideration of the appointment.
In determining whether to appoint the Manager, the Trustees considered the
best interests of the Fund as well as the following factors: (1) the Manager's
ability to retain key investment personnel and an active client service program;
(2) the Manager's goal to provide consistent above average long-term performance
at low cost; (3) the continuing efforts of the Manager to add new series so as
to enhance the Funds' product line; (4) the Manager's record in building
improved compliance and control functions that reduce risk to the Funds; (5) the
active role played by the Manager in monitoring and, as appropriate,
recommending replacements for the subadvisors; (6) the proposed expense ratio
for the Fund is lower than the respective industry averages; and (7) the
Trustees deemed the estimated profitability of the Manager with respect to its
services to the Fund to be reasonable in light of the fact that the Manager
provides high-quality services at a low cost to investors, allocates the Fund's
assets among subadvisors, monitors and evaluates the performance of the Fund's
subadvisor and provides a comprehensive compliance program for the Fund.
APPOINTMENT OF PANAGORA
With respect to the appointment of PanAgora, the Board considered, among
other materials, responses by PanAgora to inquiries requesting:
- a description of the advisory and related services proposed to be
provided to the Fund;
- identification of the professional personnel to perform services for the
Fund and their education, experience and responsibilities;
- a comparison of the performance of accounts similar to the Fund managed
by PanAgora with the performance of applicable indices;
- an analysis of the proposed investment advisory fee;
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132
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
- whether PanAgora charges a lower advisory fee to other clients for which
it provides services comparable to the services proposed for the Fund
and, if so, an explanation of the rationale for charging the other
clients a lower fee;
- a description of the portfolio managers' compensation, including any
incentive arrangements;
- a description of PanAgora's compliance program, code of ethics and
related matters, as well as its trading activities;
- a description of the disaster recovery plan and the results of the latest
test;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings; and
- any other information PanAgora believed would be material to the Board's
consideration of the Agreement.
The Board considered several factors when evaluating PanAgora and in
approving the Investment Advisory Agreement (the "Agreement"), including that
the Manager had screened a universe of available small cap equity managers to
identify those meeting certain minimum criteria. The Board considered PanAgora's
experience in managing small cap assets, its reputation and financial condition,
the past performance of similar accounts managed by PanAgora, its overall
capabilities to perform the services under the Agreement and its willingness to
perform those services for the Fund. A discussion of the factors relating to the
Board's selection of PanAgora and approval of the Agreement follows.
Nature, extent and quality of the services to be provided by PanAgora
The Board considered PanAgora's investment philosophy and investment
process, as well as the background and experience of the members of its small
cap investment team and investment policy committee. The Board also considered
PanAgora's investment resources, infrastructure, the adequacy of its compliance
program, and recent investigations of certain of PanAgora's affiliated
companies. In this regard, the Board concluded that these investigations would
not affect PanAgora's management of the Fund. In addition, the Board took into
consideration PanAgora's capacity to manage a large amount of small cap assets
and its business experience. The Board also noted the Manager's conclusion that
the investment process to be employed by PanAgora would be highly consistent
with the Fund's investment objectives and policies, as well as the Manager's
strong recommendation on behalf of PanAgora. Based on this information, the
Board concluded that the nature, extent and quality of the advisory services to
be provided by PanAgora were appropriate for the Fund in light of its investment
objective, and, thus, supported a decision to approve the Agreement.
Performance of PanAgora
The Board evaluated PanAgora's historical investment performance record in
managing assets utilizing a small cap mandate. In particular, the Board
evaluated the performance of the PanAgora Small Cap Value Stock Selector
Composite for the one- and three-year periods ended September 30, 2005 versus a
peer group of U.S. small cap value managers in the Mercer investment universe.
The
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133
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
Board noted that the performance of the Composite outperformed the median
performance of the Mercer investment universe for the two- and three-year
periods and was slightly below the median for the one-year period. The Board
also considered that the performance of the Composite exceeded a relevant
benchmark for the three-year period ended December 31, 2005. The Board concluded
that the historical investment performance record of PanAgora supported approval
of the Agreement.
Comparisons of the amounts to be paid under the Agreement with those under
contracts between PanAgora and its other clients
In evaluating the Agreement, the Board reviewed PanAgora's advisory fee
schedule and breakpoints for the Fund. The Board considered a comparison of the
advisory fees to be charged by PanAgora under the Agreement versus PanAgora's
standard fee schedule for accounts with a similar investment mandate. The Board
noted that PanAgora's fee rate for advising the Fund under the Agreement is
lower than the standard fee rate charged by PanAgora. The Board also considered
that PanAgora represented that it does not charge lower advisory fees to other
clients for comparable services. The comparative data regarding the fees
PanAgora charges to other clients with a similar investment mandate assisted the
Board in concluding that PanAgora's advisory fees under the Agreement appeared
to be within a reasonable range for the services to be provided to the Fund.
Costs of the services to be provided and profits to be realized by PanAgora
and its affiliates from the relationship with the Fund
Since the subadvisory relationship with PanAgora is new, the Board did not
consider the costs of the services to be provided and profits to be realized by
PanAgora and its affiliates from the relationship with the Fund. However, the
Board noted that PanAgora does not charge a lower advisory fee to other clients
for comparable services.
Extent to which economies of scale would be realized as the Fund grows and
whether fee levels reflect these economies of scale for the benefit of Fund
investors
The Board considered that PanAgora's fee rate represents a significant
discount from its standard fee rate for similar accounts. The Board considered
that the fees paid to PanAgora are passed through the Manager by the Fund and
that the Manager would not benefit economically from the proposed fee agreement.
The Board also considered that the Manager negotiated "breakpoints" in
PanAgora's fees based on the levels of assets in the Fund. Thus, the Board
concluded that the Fund is receiving economies of scale due to the relatively
low fees and breakpoints incorporated into the fee schedule.
Benefits to be derived by PanAgora from the relationship with the Fund
The Board considered the "fall-out" or ancillary benefits that may accrue
to PanAgora as a result of the advisory relationship with the Fund, including
greater exposure in the marketplace with respect to PanAgora's investment
process and expanding the level of assets under management by PanAgora. The
Board noted that PanAgora may not direct the Fund's brokerage transactions to
certain brokers to obtain research and other services and that the Fund
participates in a brokerage recapture program. After consideration of this
information, the Board concluded that the potential
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134
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
benefits accruing to PanAgora by virtue of its relationship with the Fund appear
to be fair and reasonable.
Board's Conclusion
The Board did not identify any single factor as being of paramount
importance, and different Trustees may have given different weight to different
factors. However, based on the various considerations described above, the
Board, including a majority of the independent Trustees, concluded that the
proposed investment advisory fee is reasonable and that the approval of the
Agreement is in the best interests of the Fund and its shareholders and, as a
result, approved the Agreement.
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137
(AMERICAN BEACON FUNDS LOGO)
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DELIVERY OF DOCUMENTS
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report and Semi-Annual Report to those addresses shared by
two or more accounts. If you wish to receive individual copies of these
documents, please contact your financial institution. Delivery of individual
copies will commence thirty days after receiving your request.
If you invest in the Funds through a financial institution, you may be able to
receive the Fund's regulatory mailings, such as the Prospectus, Annual Report
and Semi-Annual Report, by e-mail. If you are interested in this option, please
go to www.icsdelivery.com and search for your financial institution's name or
contact your financial institution directly.
TO OBTAIN MORE INFORMATION ABOUT THE FUNDS:
<Table>
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american-beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
</Table>
- --------------------------------------------------------------------------------
<Table>
(TELEPHONE GRAPHIC) (MAILBOX GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional Class American Beacon Funds
Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450
AMR Class(SM) Fort Worth, TX 76155
Call (800) 345-2345
PlanAhead Class(R) and Service Class
Call (800) 388-3344
</Table>
- --------------------------------------------------------------------------------
<Table>
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds
semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio
schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of
Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge
third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website
the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most
reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on
Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's
regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may
may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009.
schedule of each Fund's portfolio holdings is also available
on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal
quarter.
</Table>
FUND SERVICE PROVIDERS:
<Table>
CUSTODIAN TRANSFER AGENT INDEPENDENT DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES REGISTERED PUBLIC FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri ACCOUNTING FIRM Portland, Maine
ERNST & YOUNG LLP
Chicago, Illinois
</Table>
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
- --------------------------------------------------------------------------------
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds is a service mark of AMR Corporation.
American Beacon Balanced Fund, American Beacon Large Cap Growth Fund, American
Beacon Mid-Cap Value Fund, American Beacon Small Cap Value Opportunity Fund,
American Beacon Emerging Markets Fund, American Beacon High Yield Bond Fund,
American Beacon Enhanced Income Fund, American Beacon Intermediate Bond Fund and
American Beacon Short-Term Bond Fund are service marks of American Beacon
Advisors, Inc.
SAR04/06
537385
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal
executive and financial officers (the "Code") nor did it grant any waivers to
the provisions of the Code during the period covered by the shareholder reports
presented in Item 1.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached hereto
as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: July 7, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: July 7, 2006
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: July 7, 2006