UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
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)
Gene L. Needles, Jr., 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, 2009
Date of reporting period: October 31, 2009
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(GRAPHIC)
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
OCTOBER 31, 2009
HIGH YIELD BOND FUND
ENHANCED INCOME FUND
INTERMEDIATE BOND FUND
SHORT-TERM BOND FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
Contents
President's Message ............................................... 1
American Beacon Funds' Performance ................................ 2
Market and Performance Overviews .................................. 3-9
American Beacon Schedules of Investments
High Yield Bond Fund ........................................... 14
Enhanced Income Fund ........................................... 24
Intermediate Bond Fund ......................................... 34
Short-Term Bond Fund ........................................... 45
Additional Information ......................................... Back Cover
Investing in debt securities entails interest rate risk which is the risk that
debt securities will decrease in value with increases in market interest rates.
Investing in high yield securities involves additional risks when compared to
investing in investment grade securities. These include a greater risk of
default or bankruptcy and an increased sensitivity to financial difficulties or
changes in interest rates. The four highest Moody's ratings for long-term
obligations (or issuers thereof) are Aaa, Aa, A and Baa. Obligations rated Aaa
are judged to be of the highest quality, with minimal credit risk. Obligations
rated Aa are judged to be of high quality and are subject to very low credit
risk. Obligations rated A are considered upper-medium grade and are subject to
low credit risk. Obligations rated Baa are subject to moderate credit risk. They
are considered medium-grade and as such may possess certain speculative
characteristics. Moody's appends numerical modifiers 1, 2, and 3 to each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
(PHOTO OF GENE L. NEEDLES, JR.)
FELLOW SHAREHOLDERS
As an introduction to the Annual Report for the American Beacon Funds for
the 12-month period ended October 31, 2009, please let me take a moment to tell
you how pleased I am to have been serving as President and CEO of American
Beacon Advisors since April 15, 2009. I consider it a privilege to hold this
position, and I take its responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm no
stranger to the ups and downs that markets can deliver. As a fellow investor and
shareholder, I experience these trends in much the same way you do. The majority
of 2008 was difficult in many ways. However, when I took the helm at American
Beacon, I already had many reasons to be optimistic about what might develop in
2009. As of October 31, 2009, my optimism has been largely confirmed.
For example, for the one-year period (as of 10/31/09), the American Beacon
High Yield Bond Fund-Institutional Class returned a robust 39.06%, and the
American Beacon Intermediate Bond Fund-Institutional Class returned 16.16%. Of
course, one year of performance doesn't tell the whole story, especially when
you're investing for the long term. Please note that the recent market
performance has helped to produce short-term returns that are not typical and
may not continue in the future.
Many of us have long-term goals, including retirement, driving our
investment decisions. While this 12-month period began amid a frightening
recessionary environment, we finished the year with increasing confidence that
markets have begun to stabilize, that liquidity has returned to the debt markets
and that equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective,
employing a buy-and-hold philosophy (consistent with each Fund's objectives),
and doing the right thing according to your risk tolerance and time horizon is
not always easy. But the professionals at American Beacon are dedicated to
working hard to help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and am pleased to be able to share my enthusiasm about the
path ahead with you.
A financial advisor can be an important ally in creating investment
success, so--as you review the enclosed annual report--please feel free to
discuss your thoughts and concerns with a trusted advisor. And, as always, the
professionals associated with the American Beacon Funds are grateful for the
opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
Gene L. Needles, Jr.
President
American Beacon Funds
1
DOMESTIC BOND MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
As bad as things looked at the beginning of this period, it was, in
retrospect, just the beginning of what ultimately became the worst financial
crisis in the United States since the Great Depression.
The one-year period ended October 31, 2009 began on the heels of several
historic events: the takeover of Bear Stearns by JPMorgan for $2 per share, the
bankruptcy of 160-year-old Lehman Brothers, government intervention regarding
Fannie Mae and Freddie Mac, and the controversial bailout of AIG. These events
in the fourth quarter of 2008 marked the crescendo for corporate collapses, but
the fixed-income markets didn't reach maximum stress until December 2008. At
that time, credit spreads reached their widest point.
The Federal Funds Rate began this one-year period at 2.00%. However, by
year-end 2008, the Federal Reserve Board (the Fed) had already cut this rate
down to the 0.00-0.25% range. Shorter-term interest rates followed the Fed's
path and declined significantly at the beginning of this period.
Longer-term interest rates ended the period nearly unchanged, but their
course throughout the period was volatile. Longer-term rates declined
dramatically at the end of 2008 (from 4.00% to 2.00%) after the Fed announced a
series of quantitative easing measures to stimulate the economy. With the Fed
Funds Rate at effectively 0%, the Fed had to use other means to add liquidity
into the system. The Fed announced that it would purchase large amounts of U.S.
Treasury and agency securities and over $1 trillion of mortgage-backed
securities.
In early 2009, the U.S. Treasury Department announced a massive increase in
the federal budget deficit, due to stimulus spending and declining tax revenues.
This led to increases in longer-term interest rates, as investors anticipated a
significant increase in Treasury issuance. By the third quarter 2009,
longer-term rates were nearly back to where they started 12 months prior.
During 2009, positive economic activity was largely attributable to the
wide variety of government stimulus programs. As such, the economic data did not
offer much insight into the true sustainability of what was perceived as a
recovery in mid-2009.
Given the economic lows experienced at the end of 2008 and beginning of
2009, the speed of the bond market recovery was impressive. The fixed-income
markets have functioned well over the past 12 months, as evidenced by the
significantly tighter credit spreads and the absence of government involvement
in several key credit markets.
Through the end of 2009 and in the year to come, we may see continued
government spending programs. However, it may be possible to better estimate the
strength of the consumer and the status of the housing market. A recovery in the
housing market, in particular, is critical to the sustainability of the economic
recovery and would likely increase investor confidence in the domestic bond
market as well.
2
HIGH YIELD BOND MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
Over the 12-month period ended October 31, 2009, the high yield asset class
outperformed almost every major asset class in both the fixed income and equity
universes. The 47.6% return of the JPMorgan Global High Yield Index was
remarkable, especially when compared to the S&P 500, which returned 9.8%, and
10-year Treasuries, which returned 9.2% in the same time period.
With the future of the financial system in doubt and with significant
skepticism surrounding the U.S. government's efforts to intervene in the
economy, expectations of rapidly escalating default rates caused spreads to
widen, reaching a peak level of more than 19% in December 2008. Since the
beginning of 2009, high yield bonds have tightened in spread versus U.S.
Treasury bonds. However, at the end of October 2009, spreads were still
significant and exceeding the 20-year average.
Perhaps the most important factor over the 12-month period as of October
31, 2009 was the return of liquidity to the markets. The high yield market
received impressive inflows from retail funds, and this allowed leveraged
companies to refinance their upcoming maturities. In October 2008, there was
fear that companies with debt ratings of BBB or single A may not find buyers for
their debt. With valuations at severely depressed levels, and with the hope that
government stimulus plans would ultimately revive the economy, investors began
returning to the high yield sector toward year-end 2008, driving a technical
rally into the beginning of 2009 that was focused mainly on higher quality
(BB-rated) high yield credits. Beginning in March, what had been a largely
technical rally got some fundamental support as signs of economic improvement
emerged.
In addition, lower quality credits began to see spreads tighten rapidly, as
investors sought out higher return opportunities. We've seen lower-rated
companies gain access to the market--not only to refinance their capital
structure, but also for general corporate purposes to fund growth. Spreads
tightened significantly, falling by more than half from 16% in March to less
than 8% at the end of October.
Access to capital and declining defaults over the last year caused the
riskiest assets to perform the best. For the 12-month period ended October 31,
2009, CCC-rated securities returned 97.1%, single B securities returned 41.5%,
and BB-rated bonds returned 36.7%.
Fundamentally, we saw stabilization in earnings in the second and third
quarters of 2009. Investors seemed surprised at how management teams were able
to reduce their cost structures to conserve their cash balances in the face of
historic revenue declines. The pace of defaults slowed significantly when
compared to the previous 12-month period. Looking back to October 2008, the
par-weighted default rate was 11.0%, and the issuer-weighted rate was slightly
lower at 10.1%.
The outlook for the coming year offers expectations of a 4-5% default rate.
This is due to the return of liquidity in the market and stabilization
expectations for earnings in most sectors. A period of earnings momentum is
expected, as 81% of the companies in the S&P 500 Index beat their third quarter
estimates. There have even been signs of improvement in the housing market, and
markets appear to be expecting some expansion to the economy.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON HIGH YIELD BOND FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the High Yield Bond Fund returned 39.06% for the
twelve months ended October 31, 2009. The Fund underperformed the JPMorgan
Global High-Yield Index (the "Index") return of 47.57%, but outperformed the
Lipper High Current Yield Funds Index, which returned 35.67% for the period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 12/29/00* THROUGH 10/31/09
(PERFORMANCE GRAPH)
* Inception of Fund
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 10/31/09
------------------------------ VALUE OF
SINCE $10,000
INCEP. 12/29/00-
1 YEAR 5 YEARS (12/29/00) 10/31/09
------ -------- ---------- ---------
Institutional Class(1,5) ................... 39.06% 3.97% 6.88% $18,003
Investor Class(1,2,5) ...................... 38.70% 3.70% 6.62% 17,621
AMR Class (1,,3,5) ......................... 39.41% 4.09% 6.95% 18,106
JPMorgan Global High-Yield Index (4) ....... 47.57% 6.22% 8.27% 20,174
Lipper High Current Yield Funds Index (4) .. 35.67% 4.00% 5.40% 15,914
(1.) The Investor Class was formerly known as the PlanAhead Class. Performance
shown is historical and may not be indicative of future returns. Investment
returns and principal value will vary, and shares may be worth more or less
at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares. A
portion of the fees charged to the Institutional Class of the Fund was
waived through 2004. Performance prior to waiving fees was lower than the
actual returns shown for periods through 2004.
(2.) Fund performance for the since inception period represents the total
returns achieved by the Institutional Class from 12/29/00 up to 3/1/02, the
inception date of the Investor Class, and the returns of the Investor Class
since its inception. Expenses of the Investor Class are higher than those
of the Institutional Class. As a result, total returns shown may be higher
than they would have been had the Investor Class been in existence since
12/29/00.
(3.) Fund performance for the five-year and since inception periods represents
the total returns achieved by the Institutional Class from 12/29/00 up to
9/4/07, the inception date of the AMR Class, and the returns of the AMR
Class since its inception. Expenses of the AMR Class are lower than those
of the Institutional Class. As a result, total returns shown may be lower
than they would have been had the AMR Class been in existence since
12/29/00.
(4.) The JPMorgan Global High-Yield Index ("JPMorgan Index") is an unmanaged
index of fixed income securities with a maximum credit rating of BB+ or
Ba1. Issues must be publicly registered or issued under Rule 144A under the
Securities Act of 1933, with a minimum issue size of $75 million (par
amount). A maximum of two issues per issuer are included in the JPMorgan
Index. Convertible bonds, preferred stock, and floating-rate bonds are
excluded from the JPMorgan Index. The Lipper High Current Yield Funds Index
tracks the results of the 30 largest mutual funds in the Lipper High
Current Yield Funds category. Lipper is an independent mutual fund research
and ranking service. One cannot directly invest in an index.
(5.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Investor and AMR Class shares was
0.86%, 1.11% and 0.59%, respectively. The expense ratios above may vary
from the expense ratios presented in other sections of this report that are
based on expenses incurred during the period covered by this report.
The Fund underperformed the Index over the twelve-month period due to the
Fund's cash balances returning less than the Index, as well as issue selection
and sector allocation from a sector and credit quality perspective.
From a sector perspective, the Fund's underperformance stemmed from issue
selections in the Cable/Media, Manufacturing, and Finance sectors, while the
Fund added value through selections in the Service sector.
From a sector allocation perspective, the Fund benefited from overweighting
the Finance sector (up 80.1%), which was the best performing sector in the Index
for the period. However, underweighting the Utilities sector (up 45.7%) and
overweighting the Other Corporate sector (up 35.1%) contributed to the Fund's
relative underperformance.
From a credit quality perspective, issue selections in the CCC-rated credit
group led to the Fund's relative underperformance, despite value added through
selections in the CC-rated group.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON HIGH YIELD BOND FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
From a credit quality allocation perspective, underweighting the CC-rated
group and overweighting the B-rated and A-rated credit groups detracted from
performance.
Each sub-advisor's "bottom-up", research intensive investment process,
which focuses on a company's cash flow and fundamental credit strengths, remains
in place.
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
Ford Motor Credit Co. LLC, 9.875%, Due 8/10/2011 ...................... 1.4%
JBS USA LLC, 11.625%, Due 5/1/2014 .................................... 1.1%
HCA, Inc., 9.625%, Due 11/15/2016 ..................................... 1.0%
Harrah's Operating Co., Inc., 11.250%, Due 6/1/2017 ................... 1.0%
Texas Competitive Electric Holdings Co. LLC, 10.250%, Due 11/1/2015 ... 0.9%
MacDermid, Inc., 9.500%, Due 4/15/2017 ................................ 0.9%
Wind Acquisition Finance S.A., 10.750%, Due 12/1/2015 ................. 0.9%
US Oncology, Inc., 6.428%, Due 3/15/2012 .............................. 0.9%
MGM Mirage, 6.625%, Due 7/15/2015 ..................................... 0.8%
WMG Holdings Corp., Zero Coupon, Due 12/15/2014 ....................... 0.8%
SECTOR ALLOCATION
% OF
FIXED
INCOME
------
Corporate Bonds........................................................ 99.1%
Asset Backed........................................................... 0.3%
Mortgage-Backed........................................................ 0.1%
Convertible Bonds...................................................... 0.5%
5
PERFORMANCE OVERVIEW
AMERICAN BEACON ENHANCED INCOME FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Investor Class of the Enhanced Income Fund returned 21.50% for the
twelve months ended October 31, 2009. Its benchmark, a blend of 75% Barclays
Capital Aggregate Index ("Barclays Index") and 25% BofA Merrill Lynch All U.S.
Convertibles Index ("ML Index"), returned 19.54%. The Fund's peer group, the
Lipper Intermediate Investment Grade Index, returned 17.77% for the same period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/1/03* THROUGH 10/31/09
(PERFORMANCE GRAPH)
* Inception of Fund
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 10/31/09
--------------------------- VALUE OF
SINCE $10,000
INCEP. 7/1/03-
1 YEAR 5 YEARS (7/1/03) 10/31/09
------ ------- -------- --------
Investor Class(1,4) ................................ 21.50% 4.69% 4.49% $13,212
Enhanced Income Composite Index(3) ................. 19.54% 4.37% 4.42% 13,153
Barclays Capital Aggregate Index(2) ................ 13.79% 5.05% 4.68% 13,043
BofA Merrill Lynch All U.S. Convertibles Index(2) .. 37.26% 2.38% 4.16% 12,948
Lipper Intermediate Investment Grade Index(2) ...... 17.77% 4.16% 3.97% 12,798
(1.) The Investor Class was formerly known as the PlanAhead Class. Performance
shown is historical and may not be indicative of future returns. Please
note that the recent growth rate in the stock market has helped to produce
short-term returns that are not typical and may not continue in the future.
Investment returns and principal value will vary, and shares may be worth
more or less at redemption than at original purchase. Performance shown is
as of date indicated and current performance may be lower or higher than
the performance data quoted. To obtain performance as of the most recent
month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009.
Fund performance in the table above does not reflect the deduction of taxes
a shareholder would pay on distributions or the redemption of shares.
(2.) The Barclays Capital Aggregate Index represents returns of the Barclays
Capital Gov./Credit Intermediate Index ("Intermediate Index") up to October
31, 2006 and the Barclays Capital Aggregate Index ("Aggregate Index")
thereafter. The Intermediate Index is an unmanaged index of investment
grade corporate and government debt issues with maturities between one and
ten years. The Aggregate Index is a market value weighted index of
government, corporate, mortgage-backed and asset-backed fixed-rate debt
securities of all maturities. The BofA Merrill Lynch All U.S. Convertibles
Index is an unmanaged index of domestic securities of all quality grades
that are convertible into U.S. dollar-denominated common stock, ADRs or
cash equivalents. The Lipper Intermediate Investment Grade Index tracks the
results of the 30 largest mutual funds in the Lipper Intermediate
Investment Grade Funds category. Lipper is an independent mutual fund
research and ranking service. One cannot directly invest in an index.
(3.) To reflect the Fund's allocation of its assets between investment grade
fixed-income securities and convertible securities, the returns of the
Barclays Capital Aggregate Index and the BofA Merrill Lynch All U.S.
Convertibles Index have been combined in a 75%/25% proportion.
(4.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Investor Class shares was 1.04%. The expense ratio
above may vary from the expense ratio presented in other sections of this
report that is based on expenses incurred during the period covered by this
report.
The Fund's assets have been allocated approximately 75% to American Beacon
Advisors, Inc. (the "Manager") which invests primarily in income producing,
short- and intermediate-term investment grade bonds and 25% to a sub-advisor
which invests in convertible bonds, convertible preferreds, high yield bonds,
and equities in order to enhance the potential return of the Fund.
During the twelve-month period, the investment grade bond portion of the
Fund returned 18.2% before expenses, compared to a 13.8% return for the Barclays
Index. This portion of the Fund outperformed largely due to a substantial
overweight position in Corporates, the second best performing sector in the
Barclays Index.
The remaining portion of the Fund, managed by the Fund's sub-advisor,
returned 34.0% before expenses. These results trailed the 37.3% return of the ML
Index. This portion of the Fund, which has a higher quality bias than the ML
Index, was hurt by a strong rally in the most speculative grade credits within
the ML Index. Issue selection within the Financials and Information Technology
sectors also detracted from performance.
The Manager and the Fund's sub-advisor remain focused on the Fund's
investment objectives of generating income and capital appreciation.
6
PERFORMANCE OVERVIEW
AMERICAN BEACON ENHANCED INCOME FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
U.S. Treasury, 4.125%, Due 5/15/2015 ................................. 2.9%
Federal Home Loan Mortgage Corporation, Pool # G08079, 5.000%,
Due 9/1/2035 ...................................................... 2.2%
Federal Farm Credit Bank, 3.000%, Due 9/22/2014 ...................... 2.2%
Bank of America Corp. (FDIC Guaranteed), 2.100%, Due 4/30/2012 ....... 2.2%
U.S. Treasury, 6.250%, Due 8/15/2023 ................................. 2.0%
JPMorgan Chase & Co., 3.700%, Due 1/20/2015 .......................... 1.6%
Federal Home Loan Mortgage Corporation, Pool # G08255, 5.000%,
Due 3/1/2038 ...................................................... 1.5%
Federal National Mortgage Association, Pool # 745418, 5.500%,
Due 4/1/2036 ...................................................... 1.4%
U.S. Treasury, 5.250%, Due 11/15/2028 ................................ 1.2%
American Express Credit Account Master Trust, 5.350%, Due 1/15/2014 .. 1.2%
FIXED-INCOME SECTOR ALLOCATION
% OF
FIXED
INCOME
------
Corporate Bonds ...................................................... 43.4%
Mortgage-Backed ...................................................... 23.3%
Convertible Bonds .................................................... 14.2%
U.S. Treasury ........................................................ 8.8%
U.S. Agency .......................................................... 6.7%
Asset-Backed ......................................................... 3.6%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES
--------
Energy ............................................................... 27.9%
Financials ........................................................... 23.5%
Consumer Staples ..................................................... 14.1%
Information Technology ............................................... 9.0%
Materials ............................................................ 8.4%
Consumer Discretionary ............................................... 6.8%
Industrials .......................................................... 6.1%
Health Care .......................................................... 4.2%
7
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERMEDIATE BOND FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Intermediate Bond Fund returned 16.17% for
the twelve months ended October 31, 2009, outperforming the Barclays Capital
Aggregate Index (the "Index") return of 13.79% but trailing the Lipper
Intermediate Investment Grade Index return of 17.77% for the same period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 10/31/09 $10,000
--------------------------- 10/31/99-
1 YEAR 5 YEARS 10 YEARS 10/31/09
------ ------- -------- ---------
Institutional Class(1,4) ................. 16.17% 5.44% 6.24% $18,311
Investor Class(1,2,4) .................... 15.75% 5.36% 6.20% 18,246
Barclays Capital Agg. Index(3) ........... 13.79% 5.05% 6.31% 18,439
Lipper Intermediate Inv. Grade Index(3) .. 17.77% 4.16% 5.65% 17,333
(1.) Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares. Performance shown reflects the Fund's receipt in
December 2006 and March 2008 of class action proceeds that were related to
investment activity in 2002. The Fund's performance was higher than it
would have been absent receipt of the settlement proceeds.
(2.) Fund performance represents the total returns achieved by the Institutional
Class up to 3/2/09, the inception date of the Investor Class, and the
returns of the Investor Class since its inception. Expenses of the Investor
Class are higher than those of the Institutional Class. As a result, total
returns shown may be higher than they would have been had the Investor
Class been in existence since 10/31/99.
(3.) The Barclays Capital Aggregate Index is a market value weighted index of
government, corporate, mortgage-backed and asset-backed fixed-rate debt
securities of all maturities. The Lipper Intermediate Investment Grade
Index tracks the results of the 30 largest mutual funds in the Lipper
Intermediate Investment Grade Funds category. Lipper is an independent
research and ranking service. One cannot directly invest in an index.
(4.) The total annual Fund operating expense ratios set forth in the most recent
Fund prospectus for the Institutional and Investor Class shares was 0.31%
and 0.88%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report that is based on expenses
incurred during the period covered by this report.
The Fund added value relative to the Index through both sector allocation
and security selection. An overweight position in Corporates, the second best
performing sector in the Index, accounted for the bulk of the excess
performance. Among the Fund's corporate bond holdings, the lower rated issuers
(A1 to Baa3) were the largest contributors. An underweight in U.S. Treasuries,
the poorest performing sector of the Index, also generated positive returns
relative to the Index.
The Fund's investment managers remain focused on a conservative approach
toward investing in the bond market, focusing on issuer-specific opportunities
to add value.
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
U.S. Treasury, 2.375%, Due 9/30/2014 ............................ 3.0%
Morgan Stanley (FDIC Guaranteed), 2.250%, Due 3/13/2012 ......... 2.4%
Federal Home Loan Bank, 3.625%, Due 10/18/2013 .................. 1.7%
Federal National Mortgage Association, Pool # 982817, 5.000%,
Due 5/1/2038 ................................................. 1.7%
Federal Home Loan Mortgage Corporation, Pool # G04185, 6.000%,
Due 3/1/2038 ................................................. 1.5%
U.S. Treasury, 3.625%, Due 8/15/2019 ............................ 1.5%
U.S. Treasury, 4.250%, Due 5/15/2039 ............................ 1.2%
Federal National Mortgage Association, Pool # 889174, 5.500%,
Due 8/1/2037 ................................................. 1.1%
U.S. Treasury, 3.750%, Due 11/15/2018 ........................... 1.0%
Federal National Mortgage Association, 2.875%, Due 12/11/2013 ... 1.0%
SECTOR ALLOCATION
% OF
FIXED
INCOME
------
Corporates....................................................... 41.6%
Mortgage-Backed.................................................. 34.4%
U.S. Treasury.................................................... 12.5%
U.S. Agency...................................................... 8.6%
Asset-Backed..................................................... 2.9%
8
PERFORMANCE OVERVIEW
AMERICAN BEACON SHORT-TERM BOND FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Short-Term Bond Fund returned 6.56% for the
twelve months ended October 31, 2009, which outperformed the BofA Merrill Lynch
1-3 Year Corp/Gov Index ("the Index") return of 6.36% but underperformed the
Lipper Short Investment Grade Bond Funds Index ("Lipper") return of 9.67%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 10/31/09 $10,000
--------------------------- 10/31/99-
1 YEAR 5 YEARS 10 YEARS 10/31/09
------ ------- -------- ---------
Institutional Class(1,3) ............................ 6.56% 3.97% 4.66% $15,762
Investor Class(1,3) ................................. 6.34% 3.46% 4.17% 15,045
Lipper Short Inv. Grade Index(2) .................... 9.67% 3.12% 3.93% 14,706
BofA Merrill Lynch 1-3Yr. Gov./Corp Index(2) ........ 6.36% 4.22% 4.84% 16,036
(1.) The Investor Class was formerly known as the PlanAhead Class. Performance
shown is historical and may not be indicative of future returns. Investment
returns and principal value will vary, and shares may be worth more or less
at redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares. A
portion of the fees charged to the Investor Class of the Fund has been
waived. Performance prior to waiving fees was lower than the actual returns
shown. Performance shown reflects the Fund's receipt in December 2006 and
March 2008 of class action proceeds that were related to investment
activity in 2002. The Fund's performance was higher than it would have been
absent receipt of the settlement proceeds.
(2.) The BofA Merrill Lynch 1-3 Yr. Gov./Corp. Index is a market value weighted
performance benchmark for government and corporate fixed-rate debt
securities with maturities between one and three years. The Lipper Short
Investment Grade Bond Funds Index tracks the results of the 30 largest
mutual funds in the Lipper Short Investment Grade Bond Funds category.
Lipper is an independent mutual fund research and ranking service. One
cannot directly invest in an index.
(3.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional and Investor Class shares was 0.32%
and 0.89%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
As compared to the Index, the Fund outperformed due to overweight positions
in the Corporate and Asset-Backed sectors. These sectors significantly
outperformed Treasuries and Agencies during the period as the credit markets
recovered in 2009. The overweight positions were relatively small at the
beginning of the period when credit markets were compromised, but the positions
grew as liquidity and normalcy returned to the markets. The Fund generally
maintains an overweight position in investment-grade Corporate and Asset-Backed
securities to generate incremental yield-to-maturity compared to the Index.
Duration did not play a significant role during the period, as the Fund's
duration was essentially neutral to that of the Index. Looking forward, with
interest rates at such low levels, the Fund will likely seek a duration range of
neutral-to-short of the Index, while the economy slowly regains its footing and
as interest rates begin to rise.
Overall, the past couple of years were extremely challenging, but we remain
confident in the long-term success of the Fund's investment strategy. Markets
have stabilized, and the worst of the financial crisis appears to be behind us.
However, the recovery is not expected to be swift and will require diligence as
it unfolds. We will continue to be conservative in our approach to credit risk,
and we will look to take advantage of opportunities in this market to generate
attractive long-term results.
9
PERFORMANCE OVERVIEW
AMERICAN BEACON SHORT-TERM BOND FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
Bank of America Corp. (FDIC Guaranteed), 2.375%, Due 6/22/2012 ... 6.6%
Federal National Mortgage Association, 1.375%, Due 4/28/2011 ..... 5.2%
Federal Home Loan Mortgage Corporation, 2.125%, Due 3/23/2012 .... 4.6%
General Electric Capital Corp. (FDIC Guaranteed), 2.250%,
Due 3/12/2012 ................................................. 3.3%
Federal Home Loan Mortgage Corporation, 1.625%, Due 4/26/2011 .... 3.3%
Citibank NA (FDIC Guaranteed), 1.625%, Due 3/30/2011 ............. 3.3%
USAA Auto Owner Trust, 5.550%, Due 2/15/2013 ..................... 2.0%
AT&T Wireless Services, Inc., 7.875%, Due 3/1/2011 ............... 1.8%
John Deere Capital Corp., 4.125%, Due 1/15/2010 .................. 1.5%
MBNA Corp., 7.500%, Due 3/15/2012 ................................ 1.4%
SECTOR ALLOCATION
% OF
FIXED
INCOME
------
Corporate ........................................................ 50.8%
Agency............................................................ 27.7%
Asset-Backed...................................................... 19.3%
Mortgage-Backed................................................... 2.2%
10
FUND EXPENSES - ACTUAL
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs, including redemption fees if applicable, and (2) ongoing costs, including
management fees, administrative service fees, distribution (12b-1) fees, and
other Fund expenses. The examples below are intended to help you understand the
ongoing cost (in dollars) of investing in a particular Fund and to compare these
costs with the ongoing costs of investing in other mutual funds. The examples
are based on an investment of $1,000 invested at the beginning of the period in
each Class and held for the entire period from May 1, 2009 through October 31,
2009.
ACTUAL EXPENSES
The following tables provide information about actual account values and
actual expenses. You may use the information on this page, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the "Expenses Paid During
Period" for the applicable Fund to estimate the expenses you paid on your
account during this period. Shareholders of the Investor and Institutional
Classes that invest in a Fund through an IRA may be subject to a custodial IRA
fee of $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.
HIGH YIELD INTERMEDIATE SHORT-TERM
INSTITUTIONAL CLASS BOND FUND BOND FUND BOND FUND
- ------------------- ---------- ------------ ----------
Beginning Account Value 5/1/09 ................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 .................. $1,251.50 $1,070.05 $1,034.91
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 4.31 $ 1.83 $ 1.90
Annualized Expense Ratio ....................... 0.76% 0.35% 0.37%
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
INVESTOR CLASS BOND FUND FUND BOND FUND BOND FUND
- -------------- ---------- ---------- ------------ ----------
Beginning Account Value 5/1/09 ................. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 .................. $1,249.93 $1,103.65 $1,066.85 $1,034.05
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 5.67 $ 5.67 $ 4.27 $ 2.77
Annualized Expense Ratio ....................... 1.00% 1.07% 0.82% 0.54%
HIGH YIELD
AMR CLASS BOND FUND
- --------- ----------
Beginning Account Value 5/1/09 ................. $1,000.00
Ending Account Value 10/31/2009 ................ $1,253.05
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 2.90
Annualized Expense Ratio ....................... 0.51%
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the
half-year period.
See accompanying notes
11
FUND EXPENSES - HYPOTHETICAL
OCTOBER 31, 2009 (UNAUDITED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The following tables provide information about hypothetical account values
and hypothetical expenses based on a Fund's actual expense ratio and an assumed
5% per year rate of return before expenses (not the Fund's actual return). You
may compare the ongoing costs of investing in a particular Fund with other funds
by contrasting this 5% hypothetical example and the 5% hypothetical examples
that appear in the shareholder reports of the other funds. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. Shareholders of the
Investor and Institutional Classes that invest in a Fund through an IRA may be
subject to a custodial IRA fee of $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, such as redemption fees as applicable. Similarly, the expense examples for
other funds do not reflect any transaction costs charged by those funds, such as
sales charges (loads), redemption fees or exchange fees. Therefore, the
following tables are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
HIGH YIELD INTERMEDIATE SHORT-TERM
INSTITUTIONAL CLASS BOND FUND BOND FUND BOND FUND
- ------------------- ---------- ------------ ----------
Beginning Account Value 5/1/09 ................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 .................. $1,021.37 $1,023.44 $1,023.34
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 3.87 $ 1.79 $ 1.89
Annualized Expense Ratio ....................... 0.76% 0.35% 0.37%
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
INVESTOR CLASS BOND FUND FUND BOND FUND BOND FUND
- -------------- ---------- ---------- ------------ ----------
Beginning Account Value 5/1/09 ................. $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 .................. $1,020.16 $1,019.81 $1,021.07 $1,022.48
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 5.09 $ 5.45 $ 4.18 $ 2.75
Annualized Expense Ratio ....................... 1.00% 1.07% 0.82% 0.54%
HIGH YIELD
AMR CLASS BOND FUND
- --------- ----------
Beginning Account Value 5/1/09 ................. $1,000.00
Ending Account Value 10/31/09 .................. $1,022.63
Expenses Paid During Period 5/1/09-10/31/09 * .. $ 2.60
Annualized Expense Ratio ....................... 0.51%
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the
half year period.
See accompanying notes
12
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds (comprised of American Beacon Enhanced Income Fund,
American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund,
and American Beacon Short-Term Bond Fund) (collectively the "Funds"), including
the schedules of investments, as of October 31, 2009, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of each Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds at October 31, 2009, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/Ernst & Young LLP
Dallas, Texas
December 23, 2009
See accompanying notes
13
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
PREFERRED STOCKS - 0.12%
FINANCIALS - 0.12%
DIVERSIFIED FINANCIALS - 0.12%
Federal Home Loan Mortgage Corp. ## ...................................... 10,000 $ 11
Preferred Blocker, Inc. +++ .............................................. 454 277
TOTAL PREFERRED STOCKS ................................................... 288
------------
PAR
AMOUNT
----------
CORPORATE OBLIGATIONS - 96.48%
AUTO COMPONENTS - 0.99%
Allison Transmission, Inc., 11.00%, Due 11/1/2015 +++ .................... $ 1,100 1,122
Cooper-Standard Automotive, Inc., 8.375%, Due 12/15/2014 ................. 920 147
TRW Automotive, Inc., 7.25%, Due 3/15/2017 +++ ........................... 1,100 1,001
2,270
------------
AUTO LOAN - 3.21%
Ford Motor Credit Co. LLC,
9.75%, Due 9/15/2010 .................................................. 500 512
9.875%, Due 8/10/2011 ................................................. 3,055 3,125
7.50%, Due 8/1/2012 ................................................... 645 628
8.70%, Due 10/1/2014 .................................................. 200 200
GMAC, Inc.,
7.25%, Due 3/2/2011 +++ ............................................... 410 403
6.875%, Due 9/15/2011 +++ ............................................. 1,800 1,728
8.00%, Due 11/1/2031 +++ .............................................. 945 808
7,404
------------
BASIC MATERIALS - 3.63%
Associated Materials LLC, 9.875%, Due 11/15/2016 +++ ..................... 400 410
Boise Paper Holdings LLC, 9.00%, Due 11/1/2017 +++ ....................... 275 278
Clearwater Paper Corp., 10.625%, Due 6/15/2016 +++ ....................... 1,000 1,090
CPG International I, Inc., 7.868%, Due 7/1/2012 # ........................ 460 386
Johnson Diversey, Inc., 9.625%, Due 5/15/2012 ............................ 300 305
NewPage Corp., 11.375%, Due 12/31/2014 +++ ............................... 1,125 1,122
PE Paper Escrow GmbH, 12.00%, Due 8/1/2014 +++ ........................... 650 712
Rio Tinto Finance USA Ltd., 9.00%, Due 5/1/2019 .......................... 535 666
Solutia, Inc., 8.75%, Due 11/1/2017 ...................................... 300 311
Teck Resources Ltd.,
9.75%, Due 5/15/2014 .................................................. 1,170 1,313
10.75%, Due 5/15/2019 ................................................. 1,000 1,165
Weyerhaeuser Co., 7.375%, Due 10/1/2019 .................................. 600 618
8,376
------------
CASINO/GAMING - 4.56%
Ameristar Casinos, Inc., 9.25%, Due 6/1/2014 +++ ......................... 1,100 1,144
Fontainebleau Las Vegas Holdings LLC, 10.25%, Due 6/15/2015 +++ .......... 1,800 63
Harrah's Operating Co., Inc., 11.25%, Due 6/1/2017 +++ ................... 2,175 2,218
Las Vegas Sands Corp., 6.375%, Due 2/15/2015 ............................. 845 744
See accompanying notes
14
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Mandalay Resort Group, 9.375%, Due 2/15/2010 ............................. $ 720 $ 718
MGM Mirage,
10.375%, Due 5/15/2014 +++ ............................................ 750 799
6.625%, Due 7/15/2015 ................................................. 2,300 1,742
11.375%, Due 3/1/2018 +++ ............................................. 450 405
MTR Gaming Group, Inc., 12.625%, Due 7/15/2014 +++ ....................... 625 613
Pinnacle Entertainment, Inc.,
7.50%, Due 6/15/2015 .................................................. 900 810
8.625%, Due 8/1/2017 +++ .............................................. 100 99
Pokagon Gaming Authority, 10.375%, Due 6/15/2014 +++ ..................... 1,000 1,035
Station Casinos, Inc.,
6.875%, Due 3/1/2016 ss ............................................... 500 20
7.75%, Due 8/15/2016 ss ............................................... 400 97
10,507
------------
COMMERCIAL SERVICES - 0.90%
Iron Mountain, Inc., 8.00%, Due 6/15/2020 ................................ 400 407
RSC Equipment Rental, Inc.,
9.50%, Due 12/1/2014 .................................................. 1,100 1,086
10.00%, Due 7/15/2017 +++ ............................................. 535 581
2,074
------------
COMMUNICATIONS - 16.01%
CC Holdings GS V LLC, 7.75%, Due 5/1/2017 +++ ............................ 760 798
CCO Holdings LLC, 8.75%, Due 11/15/2013 ss ............................... 1,200 1,311
Centennial Communications Corp., 6.04%, Due 1/1/2013 # ................... 990 983
Charter Communications Holdings LLC,
10.25%, Due 9/15/2010 ss .............................................. 1,100 1,331
13.50%, Due 1/15/2011 ................................................. 1,100 3
1.00%, Due 1/15/2014 .................................................. 1,100 14
10.875%, Due 9/15/2014 +++ ss ......................................... 385 425
11.00%, Due 10/1/2015 ss .............................................. 800 160
Cricket Communications, Inc., 9.375%, Due 11/1/2014 ...................... 1,310 1,271
Crown Castle International Corp., 9.00%, Due 1/15/2015 ................... 1,000 1,055
CSC Holdings LLC, 8.50%, Due 4/15/2014 +++ ............................... 1,100 1,162
Dex Media, Inc.,
9.875%, Due 8/15/2013 ................................................. 1,470 294
1.00%, Due 11/15/2013 # ss ............................................ 400 72
8.00%, Due 11/15/2013 ss .............................................. 1,100 198
Digicel Group Ltd.,
8.875%, Due 1/15/2015 +++ ............................................. 1,100 1,045
9.125%, Due 1/15/2015 +++ ............................................. 1,050 1,008
DirecTV Holdings LLC, 7.625%, Due 5/15/2016 .............................. 500 542
DISH DBS Corp., 7.125%, Due 2/1/2016 ..................................... 1,500 1,500
GCI, Inc., 8.625%, Due 11/15/2019 +++ .................................... 630 630
Idearc, Inc., 8.00%, Due 11/15/2016 ...................................... 1,914 96
Intelsat Corp., 9.25%, Due 8/15/2014 ..................................... 875 890
See accompanying notes
15
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Intelsat Jackson Holdings Ltd., 11.25%, Due 6/15/2016 .................... $ 1,500 $ 1,598
Intelsat Subsidiary Holding Co. Ltd., 8.50%, Due 1/15/2013 ............... 500 502
iPCS, Inc., 2.608%, Due 5/1/2013 # ....................................... 810 709
Lamar Media Corp.,
7.25%, Due 1/1/2013 ................................................... 600 589
9.75%, Due 4/1/2014 ................................................... 500 550
Level 3 Financing, Inc., 8.75%, Due 2/15/2017 ............................ 630 539
Liberty Media LLC, 5.70%, Due 5/15/2013 .................................. 1,000 940
LIN Television Corp., 6.50%, Due 5/15/2013 ............................... 1,100 1,031
Mediacom LLC, 8.50%, Due 10/15/2015 ...................................... 925 934
MetroPCS Wireless, Inc., 9.25%, Due 11/1/2014 ............................ 1,100 1,108
Nielsen Finance LLC, Zero Coupon, Due 8/1/2016 ### ....................... 620 544
Quebecor Media, Inc., 7.75%, Due 3/15/2016 ............................... 1,600 1,580
Qwest Communications International, Inc., 7.50%, Due 2/15/2014 ........... 200 196
Qwest Corp.,
3.549%, Due 6/15/2013 # ............................................... 460 428
8.375%, Due 5/1/2016 +++ .............................................. 1,500 1,549
6.875%, Due 9/15/2033 ................................................. 725 611
Radio One, Inc., 6.375%, Due 2/15/2013 ................................... 900 450
Sinclair Television Group, Inc., 9.25%, Due 11/1/2017 +++ ................ 1,000 985
Sprint Capital Corp., 8.75%, Due 3/15/2032 ............................... 1,405 1,215
Telesat Canada, 12.50%, Due 11/1/2017 .................................... 1,000 1,096
Time Warner Telecom Holdings, Inc., 9.25%, Due 2/15/2014 ................. 935 963
Univision Communications, Inc.,
12.00%, Due 7/1/2014 +++ .............................................. 895 968
9.75%, Due 3/15/2015 +++ .............................................. 1,342 1,040
UPC Holding BV, 9.875%, Due 4/15/2018 +++ ................................ 200 211
Viasat, Inc., 8.875%, Due 9/15/2016 +++ .................................. 200 203
Virgin Media Finance PLC, 8.75%, Due 4/15/2014 ........................... 850 867
Visant Holding Corp., 8.75%, Due 12/1/2013 ............................... 325 332
Windstream Corp., 7.875%, Due 11/1/2017 +++ .............................. 400 404
36,930
------------
CONSTRUCTION & ENGINEERING - 0.38%
KB Home,
6.25%, Due 6/15/2015 .................................................. 500 470
9.10%, Due 9/15/2017 .................................................. 400 416
886
------------
CONSUMER DISCRETIONARY - 8.06%
Burlington Coat Factory Warehouse Corp., 11.125%, Due 4/15/2014 .......... 425 439
Carrols Corp., 9.00%, Due 1/15/2013 ...................................... 662 662
Dollar General Corp., 10.625%, Due 7/15/2015 ............................. 900 985
Duane Reade, Inc., 11.75%, Due 8/1/2015 +++ .............................. 700 746
Easton-Bell Sports, Inc., 8.375%, Due 10/1/2012 .......................... 690 662
Education Management LLC, 10.25%, Due 6/1/2016 ........................... 198 216
HSN, Inc., 11.25%, Due 8/1/2016 .......................................... 650 709
See accompanying notes
16
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Jostens Holding Corp., 10.25%, Due 12/1/2013 # ........................... $ 150 $ 155
Jostens IH Corp., 7.625%, Due 10/1/2012 .................................. 1,000 1,006
K Hovnanian Enterprises, Inc., 10.625%, Due 10/15/2016 +++ ............... 810 806
KAR Auction Services, Inc., 8.75%, Due 5/1/2014 .......................... 600 607
Meritage Homes Corp., 6.25%, Due 3/15/2015 ............................... 745 687
Michaels Stores, Inc., 10.00%, Due 11/1/2014 ............................. 1,100 1,100
Navistar International Corp., 8.25%, Due 11/1/2021 ....................... 1,080 1,054
Neiman Marcus Group, Inc., 9.00%, Due 10/15/2015 ......................... 812 718
NPC International, Inc., 9.50%, Due 5/1/2014 ............................. 700 691
QVC, Inc., 7.50%, Due 10/1/2019 +++ ...................................... 615 609
Rite Aid Corp., 9.75%, Due 6/12/2016 ..................................... 1,580 1,706
Sally Holdings LLC, 10.50%, Due 11/15/2016 ............................... 800 848
Speedway Motorsports, Inc., 8.75%, Due 6/1/2016 +++ ...................... 385 402
Ticketmaster Entertainment, Inc., 10.75%, Due 8/1/2016 ................... 1,000 1,030
Wesco Distribution, Inc., 7.50%, Due 10/15/2017 .......................... 1,040 1,023
WMG Acquisition Corp., 9.50%, Due 6/15/2016 +++ .......................... 1,000 1,068
Yonkers Racing Corp., 11.375%, Due 7/15/2016 +++ ......................... 625 650
18,579
------------
CONSUMER STAPLES - 5.79%
ACCO Brands Corp., 10.625%, Due 3/15/2015 +++ ............................ 400 428
Corrections Corp. of America, 7.75%, Due 6/1/2017 ........................ 805 829
Cott Beverages, Inc., 8.00%, Due 12/15/2011 .............................. 375 375
CRC Health Corp., 10.75%, Due 2/1/2016 ................................... 1,525 1,197
Dole Food Co, Inc., 13.875%, Due 3/15/2014 +++ ........................... 1,000 1,170
Great Atlantic & Pacific Tea Co., 11.375%, Due 8/1/2015 +++ .............. 575 592
Jarden Corp., 7.50%, Due 5/1/2017 ........................................ 1,000 985
JBS USA LLC, 11.625%, Due 5/1/2014 +++ ................................... 2,200 2,437
Pinnacle Foods Finance LLC, 10.625%, Due 4/1/2017 ........................ 1,125 1,148
Prestige Brands, Inc., 9.25%, Due 4/15/2012 .............................. 330 337
Reable Therapeutics, 11.75%, Due 11/15/2014 .............................. 1,150 1,150
Smithfield Foods, Inc., 10.00%, Due 7/15/2014 +++ ........................ 1,165 1,223
SUPERVALU, Inc., 8.00%, Due 5/1/2016 ..................................... 900 916
Tyson Foods, Inc., 10.50%, Due 3/1/2014 .................................. 500 570
13,357
------------
ENERGY - 14.76%
Adaro Indonesia PT, 7.625%, Due 10/22/2019 +++ ........................... 360 355
Arch Coal, Inc., 8.75%, Due 8/1/2016 +++ ................................. 300 307
Berry Petroleum Co., 10.25%, Due 6/1/2014 ................................ 1,460 1,562
Bill Barrett Corp., 9.875%, Due 7/15/2016 ................................ 200 212
Chesapeake Energy Corp., 6.625%, Due 1/15/2016 +++ ....................... 1,800 1,730
Cie Generale de Geophysique-Veritas,
7.50%, Due 5/15/2015 ..................................................... 1,000 993
9.50%, Due 5/15/2016 +++ ................................................. 100 105
Compton Petroleum Finance Corp., 7.625%, Due 12/1/2013 ................... 800 590
Concho Resources, Inc., 8.625%, Due 10/1/2017 ............................ 620 639
See accompanying notes
17
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Copano Energy LLC, 8.125%, Due 3/1/2016 .................................. $ 1,000 $ 978
Drummond Co., Inc., 9.00%, Due 10/15/2014 +++ ............................ 90 91
Dynegy Holdings, Inc., 8.375%, Due 5/1/2016 .............................. 1,300 1,212
El Paso Corp.,
12.00%, Due 12/12/2013 ................................................ 1,000 1,145
8.25%, Due 2/15/2016 .................................................. 500 518
7.00%, Due 6/15/2017 .................................................. 500 500
Enterprise Products Operating LLC, 7.034%, Due 1/15/2068 ................. 1,810 1,665
Forest Oil Corp., 8.50%, Due 2/15/2014 +++ ............................... 420 426
Helix Energy Solutions Group, Inc., 9.50%, Due 1/15/2016 +++ ............. 475 488
Holly Corp., 9.875%, Due 6/15/2017 +++ ................................... 300 310
Intergen NV, 9.00%, Due 6/30/2017 +++ .................................... 1,100 1,144
International Coal Group, Inc., 10.25%, Due 7/15/2014 .................... 505 480
Linn Energy LLC,
11.75%, Due 5/15/2017 +++ ............................................. 124 138
9.875%, Due 7/1/2018 .................................................. 1,280 1,306
Mariner Energy, Inc.,
7.50%, Due 4/15/2013 .................................................. 1,000 975
11.75%, Due 6/30/2016 ................................................. 100 110
MarkWest Energy Partners LP,
6.875%, Due 11/1/2014 ................................................. 800 760
8.75%, Due 4/15/2018 .................................................. 825 844
Mirant Americas Generation LLC, 8.30%, Due 5/1/2011 ...................... 325 331
Mirant North America LLC, 7.375%, Due 12/31/2013 ......................... 1,100 1,083
NRG Energy, Inc.,
7.25%, Due 2/1/2014 ................................................... 800 794
7.375%, Due 2/1/2016 .................................................. 1,400 1,391
OPTI Canada, Inc., 8.25%, Due 12/15/2014 ................................. 735 577
Peabody Energy Corp.,
6.875%, Due 3/15/2013 ................................................. 600 606
7.375%, Due 11/1/2016 ................................................. 500 505
Petrohawk Energy Corp.,
9.125%, Due 7/15/2013 ................................................. 800 828
10.50%, Due 8/1/2014 .................................................. 1,100 1,199
Plains Exploration & Production Co.,
10.00%, Due 3/1/2016 .................................................. 600 642
7.625%, Due 6/1/2018 .................................................. 500 486
Quicksilver Resources, Inc.,
8.25%, Due 8/1/2015 ................................................... 1,000 978
9.125%, Due 8/15/2019 ................................................. 835 845
Regency Energy Partners LP, 9.375%, Due 6/1/2016 +++ ..................... 885 934
SandRidge Energy, Inc.,
9.875%, Due 5/15/2016 +++ ............................................. 750 802
8.00%, Due 6/1/2018 +++ ............................................... 1,000 990
See accompanying notes
18
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Tesoro Corp.,
6.50%, Due 6/1/2017 ................................................... $ 1,000 $ 895
9.75%, Due 6/1/2019 ................................................... 565 581
34,050
------------
FINANCE - 8.25%
Alliant Holdings I, Inc., 11.00%, Due 5/1/2015 +++ ....................... 575 561
American Real Estate Partners, L.P., 8.125%, Due 6/1/2012 ................ 1,395 1,395
E*Trade Financial Corp., 12.50%, Due 11/30/2017 .......................... 625 694
Felcor Lodging LP, 10.00%, Due 10/1/2014 +++ ............................. 900 889
Forest City Enterprises, Inc., 7.625%, Due 6/1/2015 ...................... 900 769
Fresenius US Finance II, Inc., 9.00%, Due 7/15/2015 +++ .................. 600 660
Galaxy Entertainment Finance Co. Ltd., 9.875%, Due 12/15/2012 +++ ........ 1,200 1,176
Hawker Beechcraft Acquisition Co. LLC, 9.75%, Due 4/1/2017 ............... 1,150 768
HUB International Holdings, Inc., 10.25%, Due 6/15/2015 +++ .............. 1,400 1,291
Hughes Network Systems LLC, 9.50%, Due 4/15/2014 ......................... 725 738
International Lease Finance Corp.,
4.375%, Due 11/1/2009 ................................................. 405 405
5.75%, Due 6/15/2011 .................................................. 400 359
JP Morgan Chase & Co., 7.90%, Due 12/31/2049 ............................. 500 503
LaBranche & Co., Inc., 11.00%, Due 5/15/2012 ............................. 1,225 1,177
Lehman Brothers Holdings, Inc., 6.20%, Due 9/26/2014 ss .................. 900 142
Liberty Mutual Group, Inc., 10.75%, Due 6/15/2058 +++ .................... 685 719
Nationwide Mutual Insurance Co., 9.375%, Due 8/15/2039 +++ ............... 920 961
NII Capital Corp., 10.00%, Due 8/15/2016 +++ ............................. 850 897
Nuveen Investments, Inc., 5.00%, Due 9/15/2010 ........................... 650 634
Rainbow National Services LLC, 10.375%, Due 9/1/2014 +++ ................. 995 1,045
Realogy Corp.,
11.00%, Due 4/15/2014 ................................................. 400 264
12.375%, Due 4/15/2015 ................................................ 600 324
Reliance Intermediate Holdings LP, 9.50%, Due 12/15/2019 +++ ............. 750 771
Rouse Company, 8.00%, Due 4/30/2049 ss ................................... 660 601
Universal City Development Partners Ltd.,
8.875%, Due 11/15/2015 +++ ............................................ 300 297
10.875%, Due 11/15/2016 +++ ........................................... 100 100
Wachovia Capital Trust III, 5.80%, Due 3/15/2042 ......................... 575 411
Wells Fargo Capital XIII, 7.70%, Due 12/29/2049 .......................... 500 465
19,016
------------
HEALTH CARE - 7.04%
Biomet, Inc., 10.375%, Due 10/15/2017 .................................... 500 538
DaVita, Inc., 7.25%, Due 3/15/2015 ....................................... 1,100 1,086
Fresenius Medical Care Capital Trust IV, 7.875%, Due 6/15/2011 ........... 1,100 1,119
HCA, Inc.,
9.125%, Due 11/15/2014 +++ ............................................ 1,400 1,449
9.625%, Due 11/15/2016 ................................................ 2,236 2,373
Health Net, Inc., 6.375%, Due 6/1/2017 ................................... 725 638
See accompanying notes
19
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
HealthSouth Corp., 7.218%, Due 6/15/2014 # ............................... $ 1,075 $ 1,054
Psychiatric Solutions, Inc., 7.75%, Due 7/15/2015 +++ .................... 1,000 960
Talecris Biotherapeutics Holdings Corp., 7.75%, Due 11/15/2016 +++ ....... 450 456
Tenet Healthcare Corp.,
10.00%, Due 5/1/2018 +++ .............................................. 1,000 1,103
8.875%, Due 7/1/2019 +++ .............................................. 200 214
United Surgical Partners International, Inc., 9.25%, Due 5/1/2017 ........ 1,000 992
US Oncology, Inc., 6.428%, Due 3/15/2012 # ............................... 2,289 2,014
Vanguard Health Holding Co. I LLC, 11.25%, Due 10/1/2015 # ............... 1,150 1,208
Vanguard Health Holding Co. II LLC, 9.00%, Due 10/1/2014 ................. 1,000 1,040
16,244
------------
HOTELS, RESTAURANTS & LEISURE - 1.44%
Denny's Holdings, Inc., 10.00%, Due 10/1/2012 ............................ 575 586
Reynolds Group DL Escrow LLC, 7.75%, Due 10/15/2016 +++ .................. 650 647
Royal Caribbean Cruises Ltd.,
11.875%, Due 7/15/2015 ................................................ 100 112
7.25%, Due 3/15/2018 .................................................. 1,000 910
Starwood Hotels & Resorts Worldwide, Inc., 6.75%, Due 5/15/2018 .......... 1,100 1,059
3,314
------------
INDUSTRIALS - 8.27%
Alliance One International, Inc., 10.00%, Due 7/15/2016 +++ .............. 300 312
Belden, Inc., 9.25%, Due 6/15/2019 +++ ................................... 565 605
Case New Holland, Inc.,
7.75%, Due 9/1/2013 +++ ............................................... 685 680
7.125%, Due 3/1/2014 .................................................. 900 891
Casella Waste Systems, Inc.,
9.75%, Due 2/1/2013 ................................................... 1,150 1,098
11.00%, Due 7/15/2014 +++ ............................................. 850 907
CEVA Group plc,
10.00%, Due 9/1/2014 +++ .............................................. 1,000 935
11.625%, Due 10/1/2016 +++ ............................................ 100 101
Clean Harbors, Inc., 7.625%, Due 8/15/2016 +++ ........................... 1,015 1,040
Freescale Semiconductor, Inc., 8.875%, Due 12/15/2014 .................... 1,100 894
Goodyear Tire & Rubber Co., 10.50%, Due 5/15/2016 ........................ 780 844
Graphic Packaging International, Inc., 9.50%, Due 8/15/2013 .............. 600 616
Johnsondiversey Holdings, Inc., 10.67%, Due 5/15/2013 # .................. 800 812
Kansas City Southern de Mexico S.A. de C.V., 12.50%, Due 4/1/2016 +++ .... 700 786
Motors Liquidation Co., 8.375%, Due 7/15/2033 ............................ 970 146
NewPage Corp., 10.00%, Due 5/1/2012 ...................................... 600 393
Novelis, Inc., 7.25%, Due 2/15/2015 ...................................... 1,100 987
Owens-Brockway Glass Container, Inc., 6.75%, Due 12/1/2014 ............... 1,100 1,097
RBS Global, Inc., 9.50%, Due 8/1/2014 .................................... 1,100 1,089
Sanmina-SCI Corp., 8.125%, Due 3/1/2016 .................................. 1,100 1,051
Solo Cup Co.,
10.50%, Due 11/1/2013 +++ ............................................. 300 318
See accompanying notes
20
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
8.50%, Due 2/15/2014 .................................................. $ 700 $ 681
Spirit Aerosystems, Inc., 7.50%, Due 10/1/2017 +++ ....................... 340 337
TFM S.A.B. de C.V., 9.375%, Due 5/1/2012 ................................. 950 969
TransDigm, Inc., 7.75%, Due 7/15/2014 +++ ................................ 380 382
USG Corp., 9.75%, Due 8/1/2014 +++ ....................................... 460 483
WCA Waste Corp., 9.25%, Due 6/15/2014 .................................... 625 619
19,073
------------
MATERIALS - 4.18%
Freeport-McMoRan Copper & Gold, Inc., 8.375%, Due 4/1/2017 ............... 920 989
Huntsman International LLC, 7.875%, Due 11/15/2014 ....................... 1,100 1,034
Ineos Group Holdings plc, 8.50%, Due 2/15/2016 +++ ....................... 800 448
MacDermid, Inc., 9.50%, Due 4/15/2017 +++ ................................ 2,225 2,103
Nalco Co.,
8.875%, Due 11/15/2013 ................................................ 800 824
8.25%, Due 5/15/2017 +++ .............................................. 800 840
Newark Group, Inc., 9.75%, Due 3/15/2014 ss .............................. 2,200 605
Norske Skogindustrier ASA,
8.625%, Due 6/15/2011 ................................................. 1,100 693
6.125%, Due 10/15/2015 +++ ............................................ 1,000 655
Steel Dynamics, Inc., 8.25%, Due 4/15/2016 +++ ........................... 995 1,000
Tube City IMS Corp., 9.75%, Due 2/1/2015 ................................. 500 455
9,646
------------
MEDIA - 0.75%
WMG Holdings Corp., Zero Coupon, Due 12/15/2014 ### ...................... 1,755 1,737
------------
SERVICES - 0.48%
ARAMARK Corp., 8.50%, Due 2/1/2015 ....................................... 1,100 1,111
------------
TECHNOLOGY - 1.89%
First Data Corp., 9.875%, Due 9/24/2015 .................................. 1,100 1,015
Jabil Circuit, Inc.,
7.75%, Due 7/15/2016 .................................................. 500 519
8.25%, Due 3/15/2018 .................................................. 500 531
SunGard Data Systems, Inc.,
9.125%, Due 8/15/2013 ................................................. 500 509
10.625%, Due 5/15/2015 +++ ............................................ 975 1,050
10.25%, Due 8/15/2015 ................................................. 700 722
4,346
------------
TELECOMMUNICATION SERVICES - 1.97%
Inmarsat Finance II plc, 10.375%, Due 11/15/2012 # ....................... 1,600 1,652
Millicom International Cellular S.A., 10.00%, Due 12/1/2013 .............. 600 620
Wind Acquisition Finance S.A.,
10.75%, Due 12/1/2015 +++ * ........................................... 1,900 2,052
11.75%, Due 7/15/2017 +++ ............................................. 200 226
4,550
------------
See accompanying notes
21
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
TELEPHONE - 0.59%
Sprint Nextel Corp., 8.375%, Due 8/15/2017 ............................... $ 1,415 $ 1,365
------------
UTILITIES - 3.33%
AES Corp.,
9.375%, Due 9/15/2010 ................................................. 292 301
9.75%, Due 4/15/2016 +++ .............................................. 1,125 1,226
8.00%, Due 10/15/2017 ................................................. 500 502
CMS Energy Corp., 8.75%, Due 6/15/2019 ................................... 980 1,079
Edison Mission Energy, 7.00%, Due 5/15/2017 .............................. 500 404
Elwood Energy LLC, 8.159%, Due 7/5/2026 .................................. 739 657
Energy Future Holdings Corp., 10.875%, Due 11/1/2017 ..................... 650 452
Orion Power Holdings, Inc., 12.00%, Due 5/1/2010 ......................... 910 940
Texas Competitive Electric Holdings Co. LLC, 10.25%, Due 11/1/2015 ....... 2,995 2,126
7,687
------------
TOTAL CORPORATE OBLIGATIONS .............................................. 222,522
------------
CONVERTIBLE OBLIGATIONS - 0.51%
FINANCE - 0.22%
E*Trade Financial Corp., 12.50%, Due 8/31/2019 ........................... 355 509
------------
HOTELS, RESTAURANTS & LEISURE - 0.29%
Horizon Lines, Inc., 4.25%, Due 8/15/2012 ................................ 850 671
------------
TOTAL CONVERTIBLE OBLIGATIONS ............................................ 1,180
------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.10%
Crown Castle Towers LLC, 5.772%, Due 11/15/2036 +++ ...................... 225 230
------------
ASSET_BACKED SECURITIES - 0.31%
Discover Financial Services, 10.25%, Due 7/15/2019 ....................... 600 704
------------
SHARES
----------
SHORT TERM INVESTMENTS - 1.71%
JP Morgan U.S. Government Money Market Fund .............................. 3,938,329 3,938
------------
TOTAL INVESTMENTS - 99.23% (COST $218,052) .................................. $ 228,862
OTHER ASSETS, NET OF LIABILITIES - 0.77% .................................... 1,787
TOTAL NET ASSETS - 100.00% .................................................. $ 230,649
============
See accompanying notes
22
AMERICAN BEACON HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $77,729
or 33.70% of net assets. The Fund has no right to demand registration of
these securities.
# The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
ss Non-income producing - Issuer is in default.
* Step Up/Down
See accompanying notes
23
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 2.98%
ENERGY - 1.66%
ENERGY EQUIPMENT & SERVICES - 1.25%
ENSCO International, Inc. ................................................ 7,300 $ 334
Noble Corp. .............................................................. 10,150 414
Transocean Ltd. ## ....................................................... 5,100 428
1,176
------------
OIL & GAS - 0.41%
Apache Corp. ............................................................. 1,450 136
Devon Energy Corp. ....................................................... 1,850 120
Noble Energy, Inc. ....................................................... 1,900 125
381
------------
TOTAL ENERGY ............................................................. 1,157
------------
FINANCIALS - 0.40%
DIVERSIFIED FINANCIALS - 0.40%
BlackRock, Inc. .......................................................... 625 135
T Rowe Price Group, Inc. ................................................. 4,800 234
TOTAL FINANCIALS ......................................................... 369
------------
HEALTH CARE - 0.25%
OPTICAL SUPPLIES - 0.25%
Alcon, Inc. .............................................................. 1,630 233
------------
INDUSTRIALS - 0.14%
AEROSPACE & DEFENSE - 0.14%
United Technologies Corp. ................................................ 2,150 132
------------
INFORMATION TECHNOLOGY - 0.53%
COMMUNICATIONS EQUIPMENT - 0.22%
Cisco Systems, Inc. ## ................................................... 9,280 212
------------
IT CONSULTING & SERVICES - 0.31%
Accenture plc ............................................................ 7,770 288
------------
TOTAL INFORMATION TECHNOLOGY ............................................. 500
------------
TOTAL COMMON STOCKS ...................................................... 2,791
------------
CONVERTIBLE PREFERRED STOCKS - 1.81%
CONSUMER STAPLES - 0.33%
FOOD PRODUCTS - 0.33%
Bunge Ltd. ............................................................... 525 310
------------
FINANCIALS - 0.76%
BANKS - 0.76%
Bank of America Corp. .................................................... 385 322
Wells Fargo & Co. ........................................................ 440 394
TOTAL FINANCIALS ......................................................... 716
------------
See accompanying notes
24
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
INDUSTRIALS - 0.22%
HOUSEHOLD DURABLES - 0.22%
Stanley Works ............................................................ 255 $ 208
------------
MATERIALS - 0.50%
METALS & MINING - 0.50%
Freeport-McMoRan Copper & Gold, Inc. ..................................... 4,360 466
------------
TOTAL CONVERTIBLE PREFERRED STOCKS ....................................... 1,700
------------
PREFERRED STOCKS - 1.57%
CONSUMER DISCRETIONARY - 0.40%
FOOD PRODUCTS - 0.40%
Archer-Daniels-Midland Co. ............................................... 8,850 378
------------
CONSUMER STAPLES - 0.51%
FOOD PRODUCTS - 0.25%
Bunge Ltd. ............................................................... 2,800 229
------------
HEALTH CARE - 0.26%
Merck & Co., Inc. ........................................................ 1,010 244
------------
TOTAL CONSUMER STAPLES ................................................... 473
------------
FINANCIALS - 0.66%
DIVERSIFIED FINANCIALS - 0.56%
AMG Capital Trust I ...................................................... 4,150 150
Vale Capital II .......................................................... 5,000 378
528
------------
INSURANCE - 0.10%
American International Group, Inc. ....................................... 8,100 91
------------
TOTAL FINANCIALS ......................................................... 619
------------
TOTAL PREFERRED STOCKS ................................................... 1,470
------------
PAR
AMOUNT
----------
CORPORATE OBLIGATIONS - 38.55%
AEROSPACE & DEFENSE - 0.29%
Raytheon Co., 5.375%, Due 4/1/2013 ....................................... $ 250 273
------------
BANKS - 11.71%
Bank of America Corp.,
7.80%, Due 9/15/2016 .................................................. 600 657
6.00%, Due 9/1/2017 ................................................... 400 408
7.625%, Due 6/1/2019 .................................................. 200 231
Bank of New York Mellon Corp., 5.125%, Due 8/27/2013 ..................... 350 379
Bank One Corp., 4.90%, Due 4/30/2015 ..................................... 250 261
Barclays Bank plc, 6.75%, Due 5/22/2019 .................................. 300 337
BP Capital Markets plc, 3.875%, Due 3/10/2015 ............................ 200 208
See accompanying notes
25
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Citigroup, Inc.,
5.50%, Due 10/15/2014 ................................................. $ 150 $ 154
6.125%, Due 11/21/2017 ................................................ 275 281
8.50%, Due 5/22/2019 .................................................. 750 877
Credit Suisse N.Y.,
3.45%, Due 7/2/2012 ................................................... 600 620
5.30%, Due 8/13/2019 .................................................. 250 259
Deutsche Bank AG, 3.875%, Due 8/18/2014 .................................. 275 280
Goldman Sachs Group, Inc.,
5.35%, Due 1/15/2016 .................................................. 650 682
6.25%, Due 9/1/2017 ................................................... 550 588
ING Bank, NV, 5.125%, Due 5/1/2015 +++ ................................... 300 299
JP Morgan Chase & Co.,
3.70%, Due 1/20/2015 .................................................. 1,450 1,457
6.00%, Due 1/15/2018 .................................................. 250 268
Merrill Lynch & Co., Inc., 6.11%, Due 1/29/2037 .......................... 275 260
Morgan Stanley,
7.30%, Due 5/13/2019 .................................................. 280 314
5.625%, Due 9/23/2019 ................................................. 250 252
Rabobank Nederland NV, 4.20%, Due 5/13/2014 +++ .......................... 200 208
UBS AG, 5.875%, Due 12/20/2017 ........................................... 275 282
Wachovia Corp., 5.75%, Due 2/1/2018 ...................................... 625 653
Wells Fargo & Co.,
5.25%, Due 10/23/2012 ................................................. 300 321
3.75%, Due 10/1/2014 .................................................. 150 150
5.625%, Due 12/11/2017 ................................................ 275 286
------------
BASIC MATERIALS - 0.12%
Terra Capital, Inc., 7.75%, Due 11/1/2019 +++ ............................ 110 111
------------
BEVERAGES - 0.45%
Constellation Brands, Inc., 7.25%, Due 9/1/2016 .......................... 425 426
------------
COMMUNICATIONS - 1.33%
Comcast Cable Communications Holdings, Inc., 8.375%, Due 3/15/2013 ....... 109 127
Comcast Corp., 6.55%, Due 7/1/2039 ....................................... 300 313
France Telecom S.A., 4.375%, Due 7/8/2014 ................................ 150 158
Telefonica Emisiones SAU, 6.421%, Due 6/20/2016 .......................... 300 333
Time Warner Cable, Inc., 5.85%, Due 5/1/2017 ............................. 300 315
1,246
------------
CONSUMER DISCRETIONARY - 1.48%
Anheuser-Busch InBev Worldwide, Inc., 8.00%, Due 11/15/2039 +++ .......... 100 124
Royal Caribbean Cruises Ltd., 7.50%, Due 10/15/2027 ...................... 500 402
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 .............................. 325 418
See accompanying notes
26
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Wesco Distribution, Inc., 7.50%, Due 10/15/2017 .......................... $ 450 $ 443
1,387
------------
CONSUMER STAPLES - 0.89%
Coca-Cola Enterprises, Inc., 7.375%, Due 3/3/2014 ........................ 150 176
Hanesbrands, Inc., 4.593%, Due 12/15/2014 # .............................. 440 396
Kellogg Co., 4.25%, Due 3/6/2013 ......................................... 250 264
836
------------
ENERGY - 2.02%
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 .................... 275 291
ConocoPhillips,
4.60%, Due 1/15/2015 .................................................. 200 214
5.20%, Due 5/15/2018 .................................................. 325 344
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014 +++ ..................... 250 266
FirstEnergy Solutions Corp., 4.80%, Due 2/15/2015 +++ .................... 150 154
Frontier Oil Corp., 8.50%, Due 9/15/2016 ................................. 250 255
Hornbeck Offshore Services, Inc., 6.125%, Due 12/1/2014 .................. 290 268
Range Resources Corp., 8.00%, Due 5/15/2019 .............................. 100 104
1,896
------------
FINANCE - 3.93%
CME Group, Inc., 5.40%, Due 8/1/2013 ..................................... 230 249
General Electric Capital Corp.,
5.90%, Due 5/13/2014 .................................................. 200 219
5.65%, Due 6/9/2014 ................................................... 500 540
5.625%, Due 5/1/2018 .................................................. 250 257
6.00%, Due 8/7/2019 ................................................... 300 315
HSBC Finance Corp., 5.25%, Due 1/14/2011 ................................. 1,050 1,088
Petroplus Finance Ltd., 9.375%, Due 9/15/2019 +++ ........................ 225 226
Thomson Reuters Corp., 4.70%, Due 10/15/2019 ............................. 250 251
TIAA Global Markets, Inc., 5.125%, Due 10/10/2012 +++ .................... 500 537
3,682
------------
HEALTH CARE - 0.13%
Psychiatric Solutions, Inc., 7.75%, Due 7/15/2015 ........................ 125 123
------------
INDUSTRIALS - 5.66%
American Honda Finance Corp., 4.625%, Due 4/2/2013 +++ ................... 325 333
BE Aerospace, Inc., 8.50%, Due 7/1/2018 .................................. 325 338
Burlington Northern Santa Fe Corp., 5.75%, Due 3/15/2018 ................. 325 351
Canadian National Railway Co., 5.55%, Due 5/15/2018 ...................... 250 273
Caterpillar Financial Services Corp.,
4.15%, Due 1/15/2010 .................................................. 300 302
4.25%, Due 2/8/2013 ................................................... 250 261
Daimler Finance NA LLC,
5.875%, Due 3/15/2011 ................................................. 250 261
5.75%, Due 9/8/2011 ................................................... 250 264
Deere & Co., 4.375%, Due 10/16/2019 ...................................... 250 252
See accompanying notes
27
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Gardner Denver, Inc., 8.00%, Due 5/1/2013 ................................ $ 300 $ 288
Goodyear Tire & Rubber Co., 7.857%, Due 8/15/2011 ........................ 300 305
Gulfmark Offshore, Inc., 7.75%, Due 7/15/2014 ............................ 120 117
Honeywell International, Inc., 4.25%, Due 3/1/2013 ....................... 250 265
Kansas City Southern Railway, 13.00%, Due 12/15/2013 ..................... 210 241
NBTY, Inc., 7.125%, Due 10/1/2015 ........................................ 150 146
Norfolk Southern Corp., 5.75%, Due 4/1/2018 .............................. 325 353
Northrop Grumman Corp., 5.05%, Due 8/1/2019 .............................. 150 158
Terex Corp., 8.00%, Due 11/15/2017 ....................................... 125 115
Tyco International Finance SA, 4.125%, Due 10/15/2014 .................... 125 128
Union Pacific Corp., 7.875%, Due 1/15/2019 ............................... 300 370
United Technologies Corp., 6.125%, Due 7/15/2038 ......................... 165 183
5,304
------------
INSURANCE - 2.39%
Aegon Funding Corp., 5.75%, Due 12/15/2020 ............................... 350 332
American International Group, Inc.,
5.85%, Due 1/16/2018 .................................................. 250 188
6.25%, Due 5/1/2036 ................................................... 325 219
Lincoln National Corp., 4.75%, Due 2/15/2014 ............................. 105 106
MetLife, Inc., 6.375%, Due 6/15/2034 ..................................... 250 271
Metropolitan Life Global Funding I, 4.625%, Due 8/19/2010 +++ ............ 700 714
Pricoa Global Funding I, 5.40%, Due 10/18/2012 +++ ....................... 150 158
Prudential Financial, Inc., 4.50%, Due 7/15/2013 ......................... 250 254
2,242
------------
PHARMACEUTICALS - 0.45%
Bristol-Myers Squibb Co., 5.45%, Due 5/1/2018 ............................ 125 136
GlaxoSmithKline Capital, Inc., 5.65%, Due 5/15/2018 ...................... 125 138
Merck & Co., Inc., 5.85%, Due 6/30/2039 .................................. 140 152
426
------------
REAL ESTATE - 0.61%
ProLogis, 5.625%, Due 11/15/2016 ......................................... 250 230
Simon Property Group LP, 5.30%, Due 5/30/2013 ............................ 325 337
567
------------
SOVEREIGN - 0.34%
Province of Ontario Canada, 4.10%, Due 6/16/2014 ......................... 300 317
------------
TECHNOLOGY - 3.02%
Cisco Systems, Inc., 5.25%, Due 2/22/2011 ................................ 250 264
Dell, Inc., 5.875%, Due 6/15/2019 ........................................ 70 75
Hewlett-Packard Co., 4.50%, Due 3/1/2013 ................................. 325 348
International Business Machines Corp., 7.625%, Due 10/15/2018 ............ 150 186
Jabil Circuit, Inc., 8.25%, Due 3/15/2018 ................................ 325 345
Lender Processing Services, Inc., 8.125%, Due 7/1/2016 ................... 325 342
Oracle Corp., 5.00%, Due 7/8/2019 ........................................ 300 316
Seagate Technology, 6.80%, Due 10/1/2016 ................................. 350 343
See accompanying notes
28
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
SunGard Data Systems, Inc., 9.125%, Due 8/15/2013 ........................ $ 150 $ 153
Syniverse Technologies, Inc., 7.75%, Due 8/15/2013 ....................... 325 310
Xerox Corp.,
5.65%, Due 5/15/2013 .................................................. 75 79
8.25%, Due 5/15/2014 .................................................. 60 69
2,830
------------
TELEPHONE - 2.64%
America Movil, S.A.B. de C.V., 6.375%, Due 3/1/2035 ...................... 275 281
AT&T, Inc.,
5.625%, Due 6/15/2016 ................................................. 200 218
5.50%, Due 2/1/2018 ................................................... 400 420
6.80%, Due 5/15/2036 .................................................. 125 137
6.40%, Due 5/15/2038 .................................................. 200 211
Verizon Communications, Inc.,
5.50%, Due 4/1/2017 ................................................... 250 265
6.90%, Due 4/15/2038 .................................................. 325 367
Verizon Wireless Capital, LLC, 3.75%, Due 5/20/2011 +++ .................. 270 279
Vodafone Group plc, 6.15%, Due 2/27/2037 ................................. 275 293
2,471
------------
UTILITIES - 1.09%
Duke Energy Carolinas LLC, 5.10%, Due 4/15/2018 .......................... 250 264
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 .................... 275 293
Pacific Gas & Electric Co., 6.25%, Due 12/1/2013 ......................... 175 197
Virginia Electric and Power Co., 5.40%, Due 4/30/2018 .................... 250 267
1,021
------------
TOTAL CORPORATE OBLIGATIONS .............................................. 36,130
------------
CONVERTIBLE OBLIGATIONS - 12.19%
BASIC MATERIALS - 1.28%
Allegheny Technologies, Inc., 4.25%, Due 6/1/2014 ........................ 260 288
Newmont Mining Corp.,
3.00%, Due 2/15/2012 .................................................. 50 60
1.25%, Due 7/15/2014 .................................................. 425 506
1.625%, Due 7/15/2017 ................................................. 220 259
Sterlite Industries India Ltd., 4.00%, Due 10/30/2014 .................... 90 89
1,202
------------
COMMUNICATIONS - 1.39%
Anixter International, Inc., 1.00%, Due 2/15/2013 ........................ 410 376
Arris Group, Inc., 2.00%, Due 11/15/2026 ................................. 240 225
Symantec Corp., 1.00%, Due 6/15/2013 ..................................... 400 445
VeriSign, Inc., 3.25%, Due 8/15/2037 ..................................... 300 255
1,301
------------
CONSUMER DISCRETIONARY - 0.91%
Archer-Daniels-Midland Co., 0.875%, Due 2/15/2014 ........................ 280 282
Best Buy Co., Inc., 2.25%, Due 1/15/2022 ................................. 200 212
See accompanying notes
29
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
GameStop Corp., 8.00%, Due 10/1/2012 ..................................... $ 225 $ 232
International Game Technology, 3.25%, Due 5/1/2014 +++ ................... 110 130
856
------------
CONSUMER STAPLES - 0.30%
Kinetic Concepts, Inc., 3.25%, Due 4/15/2015 +++ ......................... 310 284
------------
ENERGY - 1.21%
Cameron International Corp., 2.50%, Due 6/15/2026 ........................ 190 237
Chesapeake Energy Corp., 2.50%, Due 5/15/2037 ............................ 570 502
Transocean, Inc., 1.50%, Due 12/15/2037 .................................. 410 394
1,133
------------
FINANCE - 0.55%
Janus Capital Group, Inc., 3.25%, Due 7/15/2014 .......................... 190 226
Leucadia National Corp., 3.75%, Due 4/15/2014 ............................ 250 289
515
------------
HEALTH CARE - 0.37%
Biovail Corp., 5.375%, Due 8/1/2014 +++ .................................. 200 229
Henry Schein, Inc., 3.00%, Due 8/15/2034 ................................. 100 120
349
------------
INDUSTRIALS - 1.51%
Alliant Techsystems, Inc., 2.75%, Due 9/15/2011 .......................... 320 327
Danaher Corp., Zero Coupon, Due 1/22/2021 ................................ 370 372
Fisher Scientific International, Inc., 3.25%, Due 3/1/2024 ............... 230 291
SEACOR Holdings, Inc., 2.875%, Due 12/15/2024 ............................ 210 238
Trinity Industries, Inc., 3.875%, Due 6/1/2036 ........................... 250 183
1,411
------------
PHARMACEUTICALS - 1.71%
Beckman Coulter, Inc., 2.50%, Due 12/15/2036 ............................. 213 241
Charles River Laboratories International, Inc., 2.25%, Due 6/15/2013 ..... 280 277
Life Technologies Corp., 1.50%, Due 2/15/2024 ............................ 246 275
Mylan, Inc., 1.25%, Due 3/15/2012 ........................................ 480 473
Teva Pharmaceutical Finance LLC, 0.25%, Due 2/1/2026 ..................... 295 334
1,600
------------
TECHNOLOGY - 2.96%
CACI International, Inc., 2.125%, Due 5/1/2014 ........................... 230 240
DST Systems, Inc., 4.125%, Due 8/15/2023 ................................. 220 231
EMC Corp., 1.75%, Due 12/1/2013 .......................................... 590 708
Intel Corp., 2.95%, Due 12/15/2035 ....................................... 255 233
Linear Technology Corp., 3.00%, Due 5/1/2027 ............................. 120 115
NetApp, Inc., 1.75%, Due 6/1/2013 ........................................ 545 599
Sybase, Inc., 3.50%, Due 8/15/2029 +++ ................................... 580 645
2,771
------------
TOTAL CONVERTIBLE OBLIGATIONS ............................................ 11,422
------------
See accompanying notes
30
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.76%
Banc of America Commercial Mortgage, Inc.,
2005-6 A1, 5.001%, Due 9/10/2047 ...................................... $ 305 $ 310
2007-2 A2, 5.634%, Due 4/10/2049 ...................................... 650 656
JP Morgan Chase Commercial Mortgage Securities Corp.,
2005-LDP3 A1, 4.655%, Due 8/15/2042 ................................... 58 58
2007-CB19 A4, 5.746%, Due 2/12/2049 ................................... 400 365
2007-CB20 A2, 5.629%, Due 2/12/2051 ................................... 550 562
LB-UBS Commercial Mortgage Trust, 2007-C1 A4, 5.424%, Due 2/15/2040 ...... 450 380
Wachovia Bank Commercial Mortgage Trust, 2007-C32 A2, 5.735%,
Due 6/15/2049 ......................................................... 260 260
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS ............................. 2,591
------------
ASSET-BACKED SECURITIES - 3.20%
American Express Credit Account Master Trust, 2006-2 A, 5.35%,
Due 1/15/2014 ......................................................... 1,050 1,117
BMW Floorplan Master Owner Trust, 2009-1A A, 1.394%, Due 9/15/2014 +++# .. 250 249
Capital One Multi-Asset Execution Trust, 2006-A10 A10, 5.15%,
Due 6/15/2014 ......................................................... 800 850
Discover Card Master Trust, 2009-A2 A, 1.545%, Due 2/17/2015 # ........... 200 201
Ford Credit Floorplan Master Owner Trust, 2009-2 A, 1.794%,
Due 9/15/2014 # ....................................................... 250 251
Volkswagen Auto Loan Enhanced Trust, 2008-2 A4A, 6.24%, Due 7/20/2015 .... 300 333
TOTAL ASSET-BACKED SECURITIES ............................................ 3,001
------------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 17.99%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.24%
5.00%, Due 2/1/2021 ................................................... 870 926
4.50%, Due 4/1/2021 ................................................... 866 910
5.00%, Due 9/1/2035 ................................................... 2,012 2,090
5.50%, Due 4/1/2037 ................................................... 644 679
5.00%, Due 3/1/2038 ................................................... 1,342 1,392
5.50%, Due 5/1/2038 ................................................... 744 784
6,781
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.52%
6.50%, Due 7/1/2032 ................................................... 334 362
5.50%, Due 6/1/2033 ................................................... 748 792
4.50%, Due 9/1/2034 ................................................... 388 396
5.50%, Due 12/1/2035 .................................................. 811 856
5.00%, Due 2/1/2036 ................................................... 675 702
5.50%, Due 4/1/2036 ................................................... 1,227 1,296
5.50%, Due 2/1/2037 ................................................... 963 1,015
6.00%, Due 9/1/2037 ................................................... 655 697
6.00%, Due 1/1/2038 ................................................... 877 933
7,049
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.23%
4.201%, Due 8/16/2026 ................................................. 457 469
6.00%, Due 2/15/2033 .................................................. 729 782
5.50%, Due 4/15/2033 .................................................. 974 1,035
See accompanying notes
31
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
5.00%, Due 5/15/2033 .................................................. $ 707 $ 741
3,027
------------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS ............................ 16,857
------------
U.S. AGENCY OBLIGATIONS - 5.94%
FEDERAL FARM CREDIT BANK - 2.18%
3.00%, Due 9/22/2014 .................................................. 2,000 2,043
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.49%
6.25%, Due 7/15/2032 .................................................. 375 456
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.96%
5.375%, Due 6/12/2017 ................................................. 800 905
------------
OTHER GOVERNMENT RELATED - 2.17%
Bank of America Corp. (FDIC Guaranteed), 2.10%, Due 4/30/2012 ......... 2,000 2,033
------------
TENNESSEE VALLEY AUTHORITY - 0.14%
5.25%, Due 9/15/2039 .................................................. 130 133
------------
TOTAL U.S. AGENCY OBLIGATIONS ............................................ 5,570
------------
U.S. TREASURY OBLIGATIONS - 7.85%
4.125%, Due 5/15/2015 ................................................. 2,500 2,710
3.75%, Due 11/15/2018 ................................................. 1,000 1,031
6.25%, Due 8/15/2023 .................................................. 1,500 1,860
5.25%, Due 11/15/2028 ................................................. 1,050 1,195
4.75%, Due 2/15/2037 .................................................. 420 455
4.50%, Due 8/15/2039 .................................................. 100 105
TOTAL U.S. TREASURY OBLIGATIONS .......................................... 7,356
------------
SHARES
----------
SHORT TERM INVESTMENTS - 4.45%
JP Morgan U.S. Government Money Market Fund .............................. 4,171,479 4,171
------------
TOTAL INVESTMENTS - 99.29% (COST $89,607) ................................... $ 93,059
OTHER ASSETS, NET OF LIABILITIES - 0.71% .................................... 668
TOTAL NET ASSETS - 100.00% .................................................. $ 93,727
============
See accompanying notes
32
AMERICAN BEACON ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $4,946
or 5.28% of net assets. The Fund has no right to demand registration of
these securities.
# The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
See accompanying notes
33
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 38.85%
AEROSPACE & DEFENSE - 0.10%
Raytheon Co., 5.375%, Due 4/1/2013 ....................................... $ 200 $ 218
------------
BANKS - 9.64%
Bank of America Corp.,
7.80%, Due 9/15/2016 .................................................. 700 767
6.00%, Due 9/1/2017 ................................................... 200 204
7.625%, Due 6/1/2019 .................................................. 800 923
Bank of New York Mellon Corp.,
4.95%, Due 11/1/2012 .................................................. 140 152
5.125%, Due 8/27/2013 ................................................. 250 271
Bank One Corp.,
5.90%, Due 11/15/2011 ................................................. 760 817
4.90%, Due 4/30/2015 .................................................. 500 523
Barclays Bank plc, 6.75%, Due 5/22/2019 .................................. 350 394
Bear Stearns Cos., Inc.,
6.40%, Due 10/2/2017 .................................................. 605 661
7.25%, Due 2/1/2018 ................................................... 270 309
BP Capital Markets plc,
3.125%, Due 3/10/2012 ................................................. 520 538
3.875%, Due 3/10/2015 ................................................. 600 624
Citigroup, Inc.,
5.50%, Due 10/15/2014 ................................................. 300 308
6.125%, Due 11/21/2017 ................................................ 755 770
8.50%, Due 5/22/2019 .................................................. 1,100 1,286
Credit Suisse N.Y.,
3.45%, Due 7/2/2012 ................................................... 700 723
5.30%, Due 8/13/2019 .................................................. 425 440
Deutsche Bank AG, 3.875%, Due 8/18/2014 .................................. 400 407
Goldman Sachs Group, Inc.,
5.35%, Due 1/15/2016 .................................................. 625 656
6.25%, Due 9/1/2017 ................................................... 800 856
5.95%, Due 1/18/2018 .................................................. 215 226
6.75%, Due 10/1/2037 .................................................. 245 258
ING Bank, NV, 5.125%, Due 5/1/2015 +++ ................................... 250 250
JP Morgan Chase & Co.,
3.70%, Due 1/20/2015 .................................................. 1,900 1,909
6.00%, Due 1/15/2018 .................................................. 250 268
Merrill Lynch & Co., Inc.,
6.40%, Due 8/28/2017 .................................................. 145 150
6.875%, Due 4/25/2018 ................................................. 1,075 1,157
6.11%, Due 1/29/2037 .................................................. 360 340
Morgan Stanley,
7.30%, Due 5/13/2019 .................................................. 370 414
See accompanying notes
34
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
5.625%, Due 9/23/2019 ................................................. $ 400 $ 402
Rabobank Nederland NV, 4.20%, Due 5/13/2014 +++ .......................... 600 626
State Street Corp., 4.30%, Due 5/30/2014 ................................. 260 273
UBS AG, 5.875%, Due 12/20/2017 ........................................... 400 411
Wachovia Corp., 5.75%, Due 2/1/2018 ...................................... 600 627
Washington Mutual Finance Corp., 6.875%, Due 5/15/2011 ................... 230 242
Wells Fargo & Co.,
5.25%, Due 10/23/2012 ................................................. 350 374
3.75%, Due 10/1/2014 .................................................. 500 500
5.625%, Due 12/11/2017 ................................................ 475 494
20,550
------------
BASIC MATERIALS - 0.35%
E. I. du Pont de Nemours & Co., 5.875%, Due 1/15/2014 .................... 395 440
Lubrizol Corp., 8.875%, Due 2/1/2019 ..................................... 255 318
758
------------
COMMUNICATIONS - 2.76%
Alltel Corp., 7.00%, Due 7/1/2012 ........................................ 215 239
British Telecommunications plc, 9.125%, Due 12/15/2010 # ................. 445 479
Comcast Cable Communications Holdings, Inc., 8.375%, Due 3/15/2013 ....... 128 149
Comcast Corp.,
5.30%, Due 1/15/2014 .................................................. 460 491
5.875%, Due 2/15/2018 ................................................. 235 248
6.55%, Due 7/1/2039 ................................................... 350 365
France Telecom S.A., 4.375%, Due 7/8/2014 ................................ 415 438
Nokia Corp., 5.375%, Due 5/15/2019 ....................................... 500 516
Rogers Communications, Inc., 6.80%, Due 8/15/2018 ........................ 250 282
Telecom Italia Capital SA, 4.95%, Due 9/30/2014 .......................... 395 410
Telefonica Emisiones SAU,
5.984%, Due 6/20/2011 ................................................. 285 303
4.949%, Due 1/15/2015 ................................................. 425 450
6.421%, Due 6/20/2016 ................................................. 350 388
Time Warner Cable, Inc.,
8.25%, Due 2/14/2014 .................................................. 330 387
5.85%, Due 5/1/2017 ................................................... 700 736
5,881
------------
CONSUMER DISCRETIONARY - 0.77%
Anheuser-Busch InBev Worldwide, Inc.,
3.00%, Due 10/15/2012 ................................................. 390 393
8.00%, Due 11/15/2039 +++ ............................................. 175 217
Best Buy Co., Inc., 6.75%, Due 7/15/2013 ................................. 240 258
Lowe's Companies, Inc.,
5.50%, Due 10/15/2035 ................................................. 300 300
6.65%, Due 9/15/2037 .................................................. 130 150
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 .............................. 250 322
1,640
------------
See accompanying notes
35
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
CONSUMER STAPLES - 1.72%
Altria Group, Inc., 9.70%, Due 11/10/2018 ................................ $ 275 $ 339
Coca-Cola Enterprises, Inc., 7.375%, Due 3/3/2014 ........................ 175 206
Costco Wholesale Corp., 5.30%, Due 3/15/2012 ............................. 645 699
Dr Pepper Snapple Group, Inc., 6.82%, Due 5/1/2018 ....................... 205 234
Express Scripts, Inc., 6.25%, Due 6/15/2014 .............................. 480 527
Kellogg Co., 4.25%, Due 3/6/2013 ......................................... 250 264
Kroger Co., 7.50%, Due 1/15/2014 ......................................... 220 254
Lorillard Tobacco Co., 8.125%, Due 6/23/2019 ............................. 255 283
Mead Johnson Nutrition Co., 4.90%, Due 11/1/2019 +++ ..................... 350 349
Safeway, Inc., 6.25%, Due 3/15/2014 ...................................... 460 508
3,663
------------
ENERGY - 3.14%
Cameron International Corp., 6.375%, Due 7/15/2018 ....................... 125 134
Canadian Natural Resources Ltd.,
6.70%, Due 7/15/2011 .................................................. 400 430
6.25%, Due 3/15/2038 .................................................. 360 381
ConocoPhillips,
4.60%, Due 1/15/2015 .................................................. 1,060 1,137
5.20%, Due 5/15/2018 .................................................. 250 264
5.75%, Due 2/1/2019 ................................................... 380 416
Consolidated Natural Gas Co., 6.00%, Due 10/15/2010 ...................... 175 182
Energy Transfer Partners LP,
8.50%, Due 4/15/2014 .................................................. 520 604
9.00%, Due 4/15/2019 .................................................. 300 363
Enterprise Products Operating LLC, 6.125%, Due 10/15/2039 ................ 255 256
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014 +++ ..................... 400 425
EQT Corp., 8.125%, Due 6/1/2019 .......................................... 165 189
FirstEnergy Solutions Corp., 4.80%, Due 2/15/2015 +++ .................... 175 180
Marathon Oil Corp., 6.00%, Due 10/1/2017 ................................. 275 292
Petrobras International Finance Co., 6.875%, Due 1/20/2040 ............... 110 110
Spectra Energy Capital Corp., 5.65%, Due 3/1/2020 ........................ 265 272
TransCanada PipeLines Ltd., 7.625%, Due 1/15/2039 ........................ 520 664
Valero Energy Corp.,
9.375%, Due 3/15/2019 ................................................. 170 201
6.625%, Due 6/15/2037 ................................................. 205 188
6,688
------------
FINANCE - 4.31%
American Express Co., 8.15%, Due 3/19/2038 ............................... 325 411
American Express Credit Corp., 5.875%, Due 5/2/2013 ...................... 305 327
Ameriprise Financial, Inc., 5.35%, Due 11/15/2010 ........................ 730 749
CME Group, Inc., 5.40%, Due 8/1/2013 ..................................... 630 682
Countrywide Home Loans, Inc., 4.00%, Due 3/22/2011 ....................... 70 72
General Electric Capital Corp.,
5.90%, Due 5/13/2014 .................................................. 800 876
See accompanying notes
36
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
General Electric Capital Corp.,
5.65%, Due 6/9/2014 ................................................... $ 450 $ 486
5.625%, Due 5/1/2018 .................................................. 695 715
6.00%, Due 8/7/2019 ................................................... 350 368
5.875%, Due 1/14/2038 ................................................. 645 616
HSBC Finance Corp., 5.25%, Due 1/14/2011 ................................. 1,550 1,607
International Lease Finance Corp., 5.75%, Due 6/15/2011 .................. 240 216
Novartis Capital Corp., 4.125%, Due 2/10/2014 ............................ 395 417
PNC Funding Corp., 4.25%, Due 9/21/2015 .................................. 390 391
Thomson Reuters Corp., 4.70%, Due 10/15/2019 ............................. 400 402
TIAA Global Markets, Inc., 5.125%, Due 10/10/2012 +++ .................... 800 858
9,193
------------
HEALTH CARE - 0.46%
Covidien International Finance SA, 5.45%, Due 10/15/2012 ................. 120 130
UnitedHealth Group, Inc., 5.25%, Due 3/15/2011 ........................... 820 856
986
------------
INDUSTRIALS - 4.12%
American Honda Finance Corp., 4.625%, Due 4/2/2013 +++ ................... 250 256
Amphenol Corp., 4.75%, Due 11/15/2014 .................................... 155 155
Burlington Northern Santa Fe Corp., 5.75%, Due 3/15/2018 ................. 250 270
Canadian National Railway Co.,
5.55%, Due 5/15/2018 .................................................. 400 436
5.55%, Due 3/1/2019 ................................................... 165 181
Caterpillar Financial Services Corp.,
4.15%, Due 1/15/2010 .................................................. 200 201
4.85%, Due 12/7/2012 .................................................. 195 208
4.25%, Due 2/8/2013 ................................................... 250 261
CRH America, Inc., 6.00%, Due 9/30/2016 .................................. 370 383
Daimler Finance NA LLC,
5.875%, Due 3/15/2011 ................................................. 300 313
5.75%, Due 9/8/2011 ................................................... 200 211
Deere & Co., 4.375%, Due 10/16/2019 ...................................... 400 403
Eaton Corp., 5.60%, Due 5/15/2018 ........................................ 280 298
Home Depot, Inc., 5.20%, Due 3/1/2011 .................................... 485 507
Honeywell International, Inc., 4.25%, Due 3/1/2013 ....................... 670 709
John Deere Capital Corp.,
4.125%, Due 1/15/2010 ................................................. 675 680
5.40%, Due 10/17/2011 ................................................. 555 597
Koninklijke Philips Electronics NV, 5.75%, Due 3/11/2018 ................. 165 178
L-3 Communications Corp., 5.20%, Due 10/15/2019 +++ ...................... 160 162
Norfolk Southern Corp., 5.75%, Due 4/1/2018 .............................. 250 272
Northrop Grumman Corp., 5.05%, Due 8/1/2019 .............................. 200 210
Tyco Electronics Group SA, 6.55%, Due 10/1/2017 .......................... 225 236
Tyco International Finance SA,
4.125%, Due 10/15/2014 ................................................ 200 204
See accompanying notes
37
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
8.50%, Due 1/15/2019 .................................................. $ 320 $ 390
Union Pacific Corp., 7.875%, Due 1/15/2019 ............................... 350 432
United Technologies Corp.,
6.125%, Due 2/1/2019 .................................................. 155 175
6.125%, Due 7/15/2038 ................................................. 125 139
Waste Management, Inc., 7.375%, Due 3/11/2019 ............................ 270 315
8,782
------------
INSURANCE - 1.61%
Aegon Funding Corp., 5.75%, Due 12/15/2020 ............................... 200 189
American International Group, Inc.,
5.85%, Due 1/16/2018 .................................................. 200 151
6.25%, Due 5/1/2036 ................................................... 250 169
John Hancock Global Funding II, 7.90%, Due 7/2/2010 +++ .................. 700 728
Lincoln National Corp., 4.75%, Due 2/15/2014 ............................. 50 51
MetLife, Inc.,
5.375%, Due 12/15/2012 ................................................ 240 258
6.375%, Due 6/15/2034 ................................................. 400 434
Metropolitan Life Global Funding I, 4.625%, Due 8/19/2010 +++ ............ 500 510
Pricoa Global Funding I, 5.40%, Due 10/18/2012 +++ ....................... 175 184
Prudential Financial, Inc.,
4.50%, Due 7/15/2013 .................................................. 200 203
5.10%, Due 9/20/2014 .................................................. 280 288
Willis North America, Inc., 6.20%, Due 3/28/2017 ......................... 280 274
3,439
------------
PHARMACEUTICALS - 0.91%
Bristol-Myers Squibb Co., 5.45%, Due 5/1/2018 ............................ 125 136
GlaxoSmithKline Capital, Inc., 5.65%, Due 5/15/2018 ...................... 125 138
Hospira, Inc., 6.05%, Due 3/30/2017 ...................................... 205 216
Merck & Co., Inc., 5.85%, Due 6/30/2039 .................................. 180 196
Pfizer, Inc., 4.45%, Due 3/15/2012 ....................................... 565 599
Wyeth Corp., 5.50%, Due 2/1/2014 ......................................... 590 646
1,931
------------
REAL ESTATE - 0.56%
Equity Residential, 5.125%, Due 3/15/2016 ................................ 380 375
ProLogis, 5.625%, Due 11/15/2016 ......................................... 200 184
Simon Property Group LP,
5.30%, Due 5/30/2013 .................................................. 250 259
5.75%, Due 12/1/2015 .................................................. 370 382
1,200
------------
SOVEREIGN - 0.17%
Province of Ontario Canada, 4.10%, Due 6/16/2014 ......................... 350 370
------------
TECHNOLOGY - 2.21%
Cisco Systems, Inc., 5.25%, Due 2/22/2011 ................................ 200 211
See accompanying notes
38
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Computer Sciences Corp.,
5.50%, Due 3/15/2013 .................................................. $ 220 $ 232
6.50%, Due 3/15/2018 .................................................. 505 551
Dell, Inc.,
3.375%, Due 6/15/2012 ................................................. 235 243
5.875%, Due 6/15/2019 ................................................. 90 97
Hewlett-Packard Co.,
4.25%, Due 2/24/2012 .................................................. 440 465
4.50%, Due 3/1/2013 ................................................... 250 268
6.125%, Due 3/1/2014 .................................................. 310 349
International Business Machines Corp.,
4.75%, Due 11/29/2012 ................................................. 325 352
7.625%, Due 10/15/2018 ................................................ 570 705
ITT Corp., 4.90%, Due 5/1/2014 ........................................... 640 679
Oracle Corp., 5.00%, Due 7/8/2019 ........................................ 350 369
Xerox Corp.,
5.65%, Due 5/15/2013 .................................................. 50 53
8.25%, Due 5/15/2014 .................................................. 115 132
4,706
------------
TELEPHONE - 2.49%
America Movil, S.A.B. de C.V., 6.375%, Due 3/1/2035 ...................... 375 383
AT&T Wireless Services, Inc., 8.75%, Due 3/1/2031 ........................ 335 442
AT&T, Inc.,
5.10%, Due 9/15/2014 .................................................. 755 814
5.625%, Due 6/15/2016 ................................................. 400 435
5.50%, Due 2/1/2018 ................................................... 300 315
6.80%, Due 5/15/2036 .................................................. 225 247
6.40%, Due 5/15/2038 .................................................. 125 132
Deutsche Telekom AG, 8.50%, Due 6/15/2010 ................................ 340 355
Verizon Communications, Inc.,
5.50%, Due 4/1/2017 ................................................... 400 424
6.90%, Due 4/15/2038 .................................................. 400 452
Verizon Wireless Capital, LLC,
3.75%, Due 5/20/2011 +++ .............................................. 370 382
8.50%, Due 11/15/2018 +++ ............................................. 435 542
Vodafone Group plc, 6.15%, Due 2/27/2037 ................................. 360 384
5,307
------------
UTILITIES - 3.53%
Columbus Southern Power Co., 5.50%, Due 3/1/2013 ......................... 495 522
Dominion Resources, Inc.,
Series A, 5.60%, Due 11/15/2016 ....................................... 475 502
Series D, 8.875%, Due 1/15/2019 ....................................... 80 101
Duke Energy Carolinas LLC, 5.10%, Due 4/15/2018 .......................... 400 423
Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016 .......................... 355 388
Exelon Generation Co. LLC, 6.25%, Due 10/1/2039 .......................... 265 277
See accompanying notes
39
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Kerr-McGee Corp., 6.95%, Due 7/1/2024 .................................... $ 325 $ 344
MidAmerican Energy Holdings Co.,
5.875%, Due 10/1/2012 ................................................. 405 442
6.125%, Due 4/1/2036 .................................................. 375 400
Pacific Gas & Electric Co., 6.25%, Due 12/1/2013 ......................... 150 169
Public Service Enterprise Group, Inc., 6.95%, Due 6/1/2012 ............... 590 651
Sempra Energy, 6.50%, Due 6/1/2016 ....................................... 285 313
Southern Power Co., 6.25%, Due 7/15/2012 ................................. 450 494
Spectra Energy Capital LLC, 5.668%, Due 8/15/2014 ........................ 255 271
Union Electric Co., 6.70%, Due 2/1/2019 .................................. 370 415
Virginia Electric and Power Co., 5.40%, Due 4/30/2018 .................... 400 427
Westar Energy, Inc., 6.00%, Due 7/1/2014 ................................. 200 216
Wisconsin Electric Power Co., 6.25%, Due 12/1/2015 ....................... 470 543
Xcel Energy, Inc., 5.613%, Due 4/1/2017 .................................. 581 618
7,516
------------
TOTAL CORPORATE OBLIGATIONS .............................................. 82,828
------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.26%
Banc of America Commercial Mortgage, Inc.,
2006-4 A4, 5.634%, Due 7/10/2046 ...................................... 1,180 1,165
2005-6 A1, 5.001%, Due 9/10/2047 ...................................... 153 155
2007-2 A2, 5.634%, Due 4/10/2049 ...................................... 850 858
Bear Stearns Commercial Mortgage Securities, Inc.,
2006-T22 A2, 5.463%, Due 4/12/2038 .................................... 830 843
2006-PWR14 A4, 5.201%, Due 12/11/2038 ................................. 540 513
2006-PW13 A4, 5.54%, Due 9/11/2041 .................................... 710 718
2004-PWR5 A4, 4.831%, Due 7/11/2042 ................................... 835 818
2005-T20 A2, 5.127%, Due 10/12/2042 ................................... 430 436
Chase Mortgage Finance Corp., 2006-A1 A1, 6.024%, Due 9/25/2036 ss ....... 770 672
Citicorp Mortgage Securities, Inc., 2006-3 2A1, 5.50%, Due 6/25/2021 ..... 353 343
Citigroup Commercial Mortgage Trust, 2004-C2 A3, 4.38%, Due 10/15/2041 ... 770 770
Citigroup/Deutsche Bank Commercial Mortgage Trust, 2007-CD5 A4, 5.886%,
Due 11/15/2044 ........................................................ 1,495 1,477
JP Morgan Chase Commercial Mortgage Securities Corp.,
2004-CBX A4, 4.529%, Due 1/12/2037 .................................... 255 257
2005-LDP3 A1, 4.655%, Due 8/15/2042 ................................... 33 33
2005-LDP1 A2, 4.625%, Due 3/15/2046 ................................... 713 714
2006-LDP9 A3, 5.336%, Due 5/15/2047 ................................... 695 625
2007-CB19 A4, 5.746%, Due 2/12/2049 ................................... 550 502
2007-CB20 A2, 5.629%, Due 2/12/2051 ................................... 750 766
LB-UBS Commercial Mortgage Trust, 2007-C1 A4, 5.424%, Due 2/15/2040 ...... 550 465
Prime Mortgage Trust, 2005-2, 5.25%, Due 7/25/2020 ....................... 436 441
Wachovia Bank Commercial Mortgage Trust, 2007-C32 A2, 5.735%,
Due 6/15/2049 ......................................................... 410 410
Wells Fargo Mortgage Backed Securities Trust, 2006-11 A8, 6.00%,
Due 9/25/2036 ......................................................... 415 366
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS ............................. 13,347
------------
See accompanying notes
40
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
ASSET-BACKED SECURITIES - 2.75%
American Express Credit Account Master Trust, 2006-2 A, 5.35%,
Due 1/15/2014 ......................................................... $ 1,550 $ 1,648
BMW Floorplan Master Owner Trust, 2009-1A A, 1.394%,
Due 9/15/2014 +++ ss .................................................. 400 399
Capital One Multi-Asset Execution Trust, 2006-A10 A10, 5.15%,
Due 6/15/2014 ......................................................... 1,150 1,222
Discover Card Master Trust, 2009-A2 A, 1.545%, Due 2/17/2015 ss .......... 600 603
Ford Credit Floorplan Master Owner Trust, 2009-2 A, 1.794%,
Due 9/15/2014 ss ...................................................... 400 401
Honda Auto Receivables Owner Trust, 2009-3 A4, 3.30%, Due 9/15/2015 ...... 385 395
Hyundai Auto Receivables Trust, 2009-A A4, 3.15%, Due 3/15/2016 .......... 220 223
John Deere Owner Trust,
2009-A A3, 2.59%, Due 10/15/2013 ...................................... 395 402
2009-A A4, 3.96%, Due 5/16/2016 ....................................... 215 224
Volkswagen Auto Loan Enhanced Trust, 2008-2 A4A, 6.24%, Due 7/20/2015 .... 300 333
TOTAL ASSET-BACKED SECURITIES ............................................ 5,850
------------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 25.80%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 8.16%
4.50%, Due 3/1/2019 ................................................... 419 444
5.00%, Due 10/1/2020 .................................................. 1,017 1,083
5.50%, Due 12/1/2022 .................................................. 129 138
5.00%, Due 4/1/2023 ................................................... 335 354
5.50%, Due 1/1/2024 ................................................... 597 636
5.00%, Due 8/1/2033 ................................................... 601 625
5.50%, Due 2/1/2034 ................................................... 769 813
6.00%, Due 8/1/2034 ................................................... 352 376
5.00%, Due 8/1/2035 ................................................... 403 419
5.00%, Due 9/1/2035 ................................................... 584 606
5.00%, Due 9/1/2035 ................................................... 1,006 1,045
6.00%, Due 8/1/2036 ................................................... 601 640
5.50%, Due 11/1/2036 .................................................. 534 564
5.50%, Due 4/1/2037 ................................................... 644 678
5.50%, Due 5/1/2037 ................................................... 374 394
6.00%, Due 9/1/2037 ................................................... 274 292
6.00%, Due 12/1/2037 .................................................. 321 343
5.00%, Due 3/1/2038 ................................................... 1,907 1,979
6.00%, Due 3/1/2038 ................................................... 2,992 3,183
5.00%, Due 3/1/2038 ................................................... 987 1,024
5.50%, Due 5/1/2038 ................................................... 930 980
5.50%, Due 6/1/2038 ................................................... 744 784
17,400
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.93%
6.50%, Due 2/1/2017 ................................................... 167 181
5.00%, Due 12/1/2017 .................................................. 590 630
4.50%, Due 9/1/2018 ................................................... 1,106 1,172
4.00%, Due 8/1/2020 ................................................... 335 342
5.50%, Due 5/1/2023 .................................................. 53 56
See accompanying notes
41
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
5.00%, Due 12/1/2023 .................................................. $ 626 $ 660
5.00%, Due 3/1/2024 ................................................... 1,590 1,677
5.00%, Due 3/1/2034 ................................................... 761 792
5.50%, Due 6/1/2034 ................................................... 408 431
4.50%, Due 9/1/2034 ................................................... 259 264
5.50%, Due 2/1/2035 ................................................... 878 929
5.00%, Due 11/1/2035 .................................................. 1,333 1,386
5.50%, Due 12/1/2035 .................................................. 624 659
5.50%, Due 12/1/2035 .................................................. 335 354
5.50%, Due 1/1/2036 ................................................... 528 558
5.50%, Due 1/1/2036 ................................................... 823 870
5.50%, Due 2/1/2036 ................................................... 643 679
5.00%, Due 2/1/2036 ................................................... 675 702
5.00%, Due 3/1/2036 ................................................... 625 649
5.50%, Due 4/1/2036 ................................................... 1,534 1,620
6.00%, Due 9/1/2036 ................................................... 337 359
6.50%, Due 9/1/2036 ................................................... 1,315 1,416
5.50%, Due 11/1/2036 .................................................. 508 536
6.00%, Due 11/1/2036 .................................................. 614 654
6.50%, Due 12/1/2036 .................................................. 594 639
6.00%, Due 12/1/2036 .................................................. 580 618
5.50%, Due 2/1/2037 ................................................... 963 1,015
5.50%, Due 8/1/2037 ................................................... 2,137 2,259
6.00%, Due 8/1/2037 ................................................... 646 688
6.50%, Due 8/1/2037 ................................................... 905 973
6.00%, Due 9/1/2037 ................................................... 983 1,046
6.00%, Due 11/1/2037 .................................................. 1,130 1,203
6.00%, Due 1/1/2038 ................................................... 1,403 1,493
5.00%, Due 3/1/2038 ................................................... 154 160
5.00%, Due 4/1/2038 ................................................... 814 846
5.00%, Due 4/1/2038 ................................................... 1,132 1,176
5.00%, Due 5/1/2038 ................................................... 3,422 3,553
5.50%, Due 6/1/2038 ................................................... 738 778
5.00%, Due 6/1/2038 ................................................... 1,067 1,108
5.50%, Due 6/1/2038 ................................................... 921 971
36,102
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.71%
4.201%, Due 8/16/2026 ................................................. 261 268
6.50%, Due 3/15/2028 .................................................. 316 342
6.00%, Due 4/15/2031 .................................................. 386 415
5.50%, Due 2/20/2034 .................................................. 452 480
1,505
------------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS ............................ 55,007
------------
See accompanying notes
42
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 8.04%
FEDERAL HOME LOAN BANK - 1.74%
3.625%, Due 10/18/2013 ................................................ $ 3,500 $ 3,701
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.34%
6.25%, Due 7/15/2032 .................................................. 600 730
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.04%
2.875%, Due 12/11/2013 ................................................ 2,000 2,046
5.125%, Due 1/2/2014 .................................................. 385 410
4.625%, Due 10/15/2014 ................................................ 500 547
5.375%, Due 6/12/2017 ................................................. 1,200 1,357
4,360
------------
OTHER GOVERNMENT RELATED - 3.82%
Citibank NA (FDIC Guaranteed), 1.625%, Due 3/30/2011 .................. 2,000 2,025
Morgan Stanley (FDIC Guaranteed), 2.25%, Due 3/13/2012 ................ 5,000 5,104
Bank of America Corp. (FDIC Guaranteed), 2.10%, Due 4/30/2012 ......... 1,000 1,016
8,145
------------
TENNESSEE VALLEY AUTHORITY - 0.10%
5.25%, Due 9/15/2039 .................................................. 200 205
------------
TOTAL U.S. AGENCY OBLIGATIONS ............................................ 17,141
------------
U.S. TREASURY OBLIGATIONS - 11.66%
1.375%, Due 2/15/2012 ................................................. 1,850 1,862
1.375%, Due 3/15/2012 ................................................. 1,000 1,006
2.375%, Due 9/30/2014 ................................................. 6,270 6,295
4.125%, Due 5/15/2015 ................................................. 1,000 1,084
3.75%, Due 11/15/2018 ................................................. 2,000 2,062
3.625%, Due 8/15/2019 ................................................. 3,095 3,154
7.875%, Due 2/15/2021 ................................................. 1,050 1,457
6.25%, Due 8/15/2023 .................................................. 1,400 1,736
6.875%, Due 8/15/2025 ................................................. 770 1,021
5.25%, Due 11/15/2028 ................................................. 750 853
4.75%, Due 2/15/2037 .................................................. 1,300 1,410
4.25%, Due 5/15/2039 .................................................. 2,500 2,506
4.50%, Due 8/15/2039 .................................................. 400 418
TOTAL U.S. TREASURY OBLIGATIONS .......................................... 24,864
------------
SHARES
----------
SHORT TERM INVESTMENTS - 5.81%
JP Morgan U.S. Government Money Market Fund .............................. 12,391,640 12,392
------------
TOTAL INVESTMENTS - 99.17% (COST $202,907) .................................. $ 211,429
OTHER ASSETS, NET OF LIABILITIES - 0.83% .................................... 1,767
TOTAL NET ASSETS - 100.00% .................................................. $ 213,196
============
See accompanying notes
43
AMERICAN BEACON INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
+++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $6,068
or 2.85% of net assets. The Fund has no right to demand registration of
these securities.
# Step Up/Down
ss The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
See accompanying notes
44
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 48.05%
BANKS - 8.77%
Barclays Bank plc, 5.45%, Due 9/12/2012 .................................. $ 1,000 $ 1,083
Credit Suisse First Boston, 5.00%, Due 5/15/2013 ......................... 2,000 2,135
Goldman Sachs Group, Inc., 4.75%, Due 7/15/2013 .......................... 2,000 2,101
JP Morgan Chase & Co., 6.75%, Due 2/1/2011 ............................... 2,000 2,116
Morgan Stanley, 5.05%, Due 1/21/2011 ..................................... 2,000 2,073
Rabobank Nederland NV, 2.65%, Due 8/17/2012 +++ .......................... 2,000 2,024
Wachovia Corp., 2.253%, Due 5/1/2013 # ................................... 1,000 1,016
Wells Fargo & Co., 5.25%, Due 10/23/2012 ................................. 1,000 1,070
13,618
------------
COMMUNICATIONS - 2.34%
Comcast Cable Communications Holdings, Inc., 8.375%, Due 3/15/2013 ....... 1,365 1,587
Telefonica Emisiones SAU, 0.809%, Due 2/4/2013 # ......................... 1,000 980
Time Warner Cable, Inc., 5.40%, Due 7/2/2012 ............................. 1,000 1,068
3,635
------------
CONSUMER DISCRETIONARY - 0.65%
Anheuser-Busch InBev Worldwide, Inc., 3.00%, Due 10/15/2012 .............. 1,000 1,009
------------
CONSUMER STAPLES - 1.72%
Kellogg Co., 6.60%, Due 4/1/2011 ......................................... 1,000 1,075
Kraft Foods, Inc., 5.625%, Due 11/1/2011 ................................. 500 534
Roche Holdings, Inc., 4.50%, Due 3/1/2012 +++ ............................ 1,000 1,058
2,667
------------
ENERGY - 2.82%
Canadian Natural Resources Ltd., 6.70%, Due 7/15/2011 .................... 1,000 1,075
Devon Financing Corp. U.L.C., 6.875%, Due 9/30/2011 ...................... 1,000 1,091
Marathon Oil Canada Corp., 8.375%, Due 5/1/2012 .......................... 1,000 1,130
XTO Energy, Inc., 5.90%, Due 8/1/2012 .................................... 1,000 1,079
4,375
------------
FINANCE - 7.55%
Berkshire Hathaway Finance Corp., 4.00%, Due 4/15/2012 ................... 1,000 1,053
CME Group, Inc., 5.40%, Due 8/1/2013 ..................................... 250 271
Dexia Credit Local N.Y., 2.375%, Due 9/23/2011 +++ ....................... 2,000 2,050
General Electric Capital Corp.,
5.875%, Due 2/15/2012 ................................................. 1,500 1,617
0.422%, Due 3/20/2014 # ............................................... 1,446 1,326
HSBC Finance Corp., 6.75%, Due 5/15/2011 ................................. 1,000 1,063
MBNA Corp., 7.50%, Due 3/15/2012 ......................................... 2,000 2,188
TIAA Global Markets, Inc., 5.125%, Due 10/10/2012 +++ .................... 2,000 2,146
11,714
------------
HEALTH CARE - 0.67%
UnitedHealth Group, Inc., 5.125%, Due 11/15/2010 ......................... 1,000 1,038
------------
See accompanying notes
45
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
INDUSTRIALS - 9.55%
American Honda Finance Corp., 4.625%, Due 4/2/2013 +++ ................... $ 1,000 $ 1,024
Burlington Northern Santa Fe Corp., 6.75%, Due 7/15/2011 ................. 1,000 1,087
Caterpillar Financial Services Corp.,
4.15%, Due 1/15/2010 .................................................. 2,000 2,013
4.25%, Due 2/8/2013 ................................................... 500 521
Daimler Finance NA LLC, 5.75%, Due 9/8/2011 .............................. 1,000 1,057
John Deere Capital Corp.,
4.125%, Due 1/15/2010 ................................................. 2,325 2,344
5.25%, Due 10/1/2012 .................................................. 1,000 1,087
Lockheed Martin Corp., 8.20%, Due 12/1/2009 .............................. 1,000 1,005
Nissan Motor Acceptance Corp., 4.625%, Due 3/8/2010 +++ .................. 1,000 999
Norfolk Southern Corp., 8.625%, Due 5/15/2010 ............................ 1,000 1,042
Northrop Grumman Corp., 7.125%, Due 2/15/2011 ............................ 1,000 1,069
Raytheon Co., 4.85%, Due 1/15/2011 ....................................... 450 467
Union Pacific Corp., 6.50%, Due 4/15/2012 ................................ 1,000 1,102
14,817
------------
INSURANCE - 5.89%
ING Security Life Institutional Funding, 4.25%, Due 1/15/2010 +++ ........ 1,500 1,489
John Hancock Global Funding II, 7.90%, Due 7/2/2010 +++ .................. 2,000 2,080
MassMutual Global Funding II, 3.625%, Due 7/16/2012 +++ .................. 500 516
Metropolitan Life Global Funding I,
4.625%, Due 8/19/2010 +++ ............................................. 1,500 1,530
2.875%, Due 9/17/2012 +++ ............................................. 1,000 1,004
Monumental Global Funding II, 4.625%, Due 3/15/2010 +++ .................. 1,000 1,002
Pricoa Global Funding I,
4.20%, Due 1/15/2010 +++ .............................................. 1,000 1,000
5.40%, Due 10/18/2012 +++ ............................................. 500 525
9,146
------------
REAL ESTATE - 0.67%
Simon Property Group LP, 5.375%, Due 6/1/2011 ............................ 1,000 1,045
------------
TECHNOLOGY - 1.57%
Cisco Systems, Inc., 5.25%, Due 2/22/2011 ................................ 550 580
Dell, Inc., 3.375%, Due 6/15/2012 ........................................ 500 518
Hewlett-Packard Co.,
2.25%, Due 5/27/2011 .................................................. 500 510
2.95%, Due 8/15/2012 .................................................. 500 513
Xerox Corp., 5.65%, Due 5/15/2013 ........................................ 300 315
2,436
------------
TELEPHONE - 4.49%
AT&T Wireless Services, Inc., 7.875%, Due 3/1/2011 ....................... 2,500 2,708
Deutsche Telekom AG, 8.50%, Due 6/15/2010 ................................ 1,000 1,045
France Telecom S.A., 7.75%, Due 3/1/2011 ................................. 1,000 1,081
Verizon Wireless Capital, LLC, 5.25%, Due 2/1/2012 +++ ................... 1,000 1,069
See accompanying notes
46
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
Vodafone Group plc, 5.50%, Due 6/15/2011 ................................. $ 1,000 $ 1,059
6,962
------------
UTILITIES - 1.36%
Dominion Resources, Inc., 5.70%, Due 9/17/2012 ........................... 1,000 1,094
Midamerican Energy Holdings Co., 3.15%, Due 7/15/2012 .................... 1,000 1,020
2,114
------------
TOTAL CORPORATE OBLIGATIONS .............................................. 74,576
------------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.90%
Banc of America Commercial Mortgage, Inc.,
2005-6 A1, 5.001%, Due 9/10/2047 ...................................... 305 309
2007-2 A2, 5.634%, Due 4/10/2049 ...................................... 800 807
Wachovia Bank Commercial Mortgage Trust, 2006-C23 A1, 5.203%,
Due 1/15/2045 ......................................................... 282 286
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS ............................. 1,402
------------
ASSET-BACKED SECURITIES - 18.31%
Bank of America Auto Trust,
2009-1A A3, 2.67%, Due 7/15/2013 +++ .................................. 1,000 1,019
2009-2A A3, 2.13%, Due 9/15/2013 +++ .................................. 1,000 1,011
BMW Floorplan Master Owner Trust, 2009-1A A, 1.394%,
Due 9/15/2014 +++ # ................................................... 2,000 1,994
Capital One Multi-Asset Execution Trust, 2009-A2 A2, 3.20%,
Due 4/15/2014 ......................................................... 2,000 2,059
CarMax Auto Owner Trust, 2005-3 A4, 4.91%, Due 1/18/2011 ................. 298 299
Citibank Credit Card Issuance Trust, 2009-A3 A3, 2.70%, Due 6/24/2013 .... 2,000 2,046
CitiFinancial Auto Issuance Trust, 2009-1 A3, 2.59%, Due 10/15/2013 +++ .. 2,000 2,000
Discover Card Master Trust, 2009-A2 A, 1.545%, Due 2/17/2015 # ........... 2,000 2,010
Ford Credit Auto Owner Trust, 2009-D A3, 2.17%, Due 10/15/2013 ........... 1,000 1,012
Ford Credit Floorplan Master Owner Trust, 2009-2 A, 1.794%,
Due 9/15/2014 # ....................................................... 2,000 2,004
GE Capital Credit Card Master Note Trust, 2009-2 A, 3.69%,
Due 7/15/2015 ......................................................... 2,000 2,052
GE Equipment Midticket LLC, 2009-1 A3, 2.34%, Due 6/17/2013 .............. 1,000 1,002
Harley-Davidson Motorcycle Trust, 2007-3 A4, 5.52%, Due 11/15/2013 ....... 2,000 2,112
Honda Auto Receivables Owner Trust, 2009-3 A3, 2.31%, Due 5/15/2013 ...... 1,500 1,523
Nissan Auto Lease Trust, 2009-B A3, 2.07%, Due 1/15/2015 ................. 2,000 2,008
USAA Auto Owner Trust, 2007-1 A4, 5.55%, Due 2/15/2013 ................... 3,000 3,161
Volkswagen Auto Loan Enhanced Trust, 2008-2 A4A, 6.24%, Due 7/20/2015 .... 1,000 1,109
TOTAL ASSET-BACKED SECURITIES ............................................ 28,421
------------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 1.20%
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.20%
4.968%, Due 12/16/2021 ................................................ 514 525
4.201%, Due 8/16/2026 ................................................. 1,307 1,341
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS ............................ 1,866
------------
U.S. AGENCY OBLIGATIONS - 26.18%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 7.84%
1.625%, Due 4/26/2011 ................................................. 5,000 5,064
See accompanying notes
47
AMERICAN BEACON SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- ------------
(DOLLARS IN THOUSANDS)
2.125%, Due 3/23/2012 ................................................. $ 7,000 $ 7,101
12,165
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.20%
1.375%, Due 4/28/2011 ................................................. 8,000 8,067
------------
OTHER GOVERNMENT RELATED - 13.14%
Citibank NA (FDIC Guaranteed), 1.625%, Due 3/30/2011 .................. 5,000 5,061
General Electric Capital Corp. (FDIC Guaranteed), 2.25%,
Due 3/12/2012 ...................................................... 5,000 5,098
Bank of America Corp. (FDIC Guaranteed), 2.375%, Due 6/22/2012 ........ 10,000 10,231
TOTAL U.S. AGENCY OBLIGATIONS ............................................ 20,390
------------
40,622
------------
SHARES
----------
SHORT TERM INVESTMENTS - 4.38%
JP Morgan U.S. Government Money Market Fund .............................. 6,788,470 6,789
------------
TOTAL INVESTMENTS - 99.02% (COST $150,583) .................................. $ 153,676
OTHER ASSETS, NET OF LIABILITIES - 0.98% .................................... 1,517
TOTAL NET ASSETS - 100.00% .................................................. $ 155,193
============
Percentages are stated as a percent of net assets.
+++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $25,540
or 16.46% of net assets. The Fund has no right to demand registration of
these securities.
# The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
See accompanying notes
48
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2009 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
BOND FUND FUND BOND FUND BOND FUND
----------- ---------- ------------ ------------
ASSETS:
Investments in unaffiliated securities, at value (A) .... $ 228,862 $ 93,059 $ 211,429 $ 153,676
Receivable for investments sold ......................... 6,327 -- 494 --
Dividends and interest receivable ....................... 5,703 863 1,788 1,110
Receivable for fund shares sold ......................... 634 11 385 681
Receivable for tax reclaims ............................. 1 5 7 --
Receivable for expense reimbursement .................... -- -- 9 19
Prepaid expenses ........................................ 23 12 22 16
----------- ---------- ----------- -----------
TOTAL ASSETS ......................................... 241,550 93,950 214,134 155,502
----------- ---------- ----------- -----------
LIABILITIES:
Payable for investments purchased ....................... 6,160 10 504 --
Payable for fund shares redeemed ........................ 4,116 45 353 212
Dividends payable ....................................... 176 -- -- 12
Management and investment advisory fees payable
(Note 2) ............................................. 317 83 35 26
Administrative service and service fees payable ......... 52 51 9 20
Other liabilities ....................................... 80 34 37 39
----------- ---------- ----------- -----------
TOTAL LIABILITIES .................................... 10,901 223 938 309
----------- ---------- ----------- -----------
NET ASSETS ................................................. $ 230,649 $ 93,727 $ 213,196 $ 155,193
=========== ========== =========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................ 247,100 92,917 204,807 160,667
Undistributed net investment income ........................ 503 (117) 501 (137)
Accumulated net realized (loss) ............................ (27,764) (2,525) (634) (8,430)
Unrealized appreciation of investments, futures contracts,
and foreign currency .................................... 10,810 3,452 8,522 3,093
----------- ---------- ----------- -----------
NET ASSETS ................................................. $ 230,649 $ 93,727 $ 213,196 $ 155,193
=========== ========== =========== ===========
Shares outstanding (no par value):
Institutional Class ..................................... 5,612,015 N/A 19,744,087 14,132,465
=========== ========== =========== ===========
Investor Class .......................................... 10,771,460 9,142,658 207,169 3,439,981
=========== ========== =========== ===========
AMR Class ............................................... 11,005,351 N/A N/A N/A
=========== ========== =========== ===========
Net asset value, offering and redemption price per share:
Institutional Class ..................................... $ 8.42 N/A $ 10.69 $ 8.83
=========== ========== =========== ===========
Investor Class .......................................... $ 8.42 $ 10.25 $ 10.68 $ 8.84
=========== ========== =========== ===========
AMR Class ............................................... $ 8.42 N/A N/A N/A
=========== ========== =========== ===========
A Cost of investments in unaffiliated securities ........... $ 218,052 $ 89,607 $ 202,907 $ 150,583
49
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2009 (IN THOUSANDS)
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
BOND FUND FUND BOND FUND BOND FUND
---------- -------- ------------ ----------
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of
foreign taxes) (A) ................................... $ 56 $ 306 $ 30 $ 17
Dividend income from affiliated securities .............. 9 5 11 2
Interest income ......................................... 21,157 3,930 9,115 6,023
Income derived from securities lending, net ............. -- 92 299 440
-------- -------- ------- --------
TOTAL INVESTMENT INCOME ........................... 21,222 4,333 9,455 6,482
-------- -------- ------- --------
EXPENSES:
Management and investment advisory fees (Note 2) ........ 726 265 407 444
Administrative service fees (Note 2):
Institutional Class .................................. 165 -- 102 101
Investor Class ....................................... 154 267 2 62
AMR Class ............................................ 42 -- -- --
Transfer agent fees:
Institutional Class .................................. -- -- 14 17
Investor Class ....................................... 3 7 2 --
Custody and fund accounting fees ........................ 37 17 42 44
Professional fees ....................................... 32 26 34 34
Registration fees and expenses .......................... 39 16 20 34
Service fees (Note 2):
Investor Class ....................................... 129 283 2 52
Prospectus and shareholder reports ...................... 40 5 8 14
Trustee fees ............................................ 22 8 24 29
Other expenses .......................................... 12 6 11 14
-------- -------- ------- --------
TOTAL EXPENSES .................................... 1,401 900 668 845
-------- -------- ------- --------
Net (fees waived and expenses reimbursed)/recouped by
Manager (Note 2) ..................................... -- -- (11) (73)
-------- -------- ------- --------
NET EXPENSES ...................................... 1,401 900 657 772
-------- -------- ------- --------
NET INVESTMENT INCOME ...................................... 19,821 3,433 8,798 5,710
-------- -------- ------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments .......................................... (11,143) (244) 1,112 5,301
Commission recapture (Note 1) ........................ -- 2 -- --
Change in net unrealized appreciation or depreciation of:
Investments .......................................... 61,933 14,228 17,269 2,645
-------- -------- ------- --------
NET GAIN ON INVESTMENTS ........................... 50,790 13,986 18,381 7,946
-------- -------- ------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 70,611 $ 17,419 $27,179 $ 13,656
======== ======== ======= ========
A Foreign taxes ............................................ $ -- $ 1 $ -- $ --
See accompanying notes
50
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
High Yield Bond Fund Enhanced Income Fund
------------------------- ------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October October 31,
2009 2008 31, 2009 2008
----------- ----------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 19,821 $ 15,343 $ 3,433 $ 3,923
Net realized (loss) on investments, futures contracts,
and foreign currency transactions .................... (11,143) (14,708) (242) (1,148)
Change in net unrealized appreciation or
depreciation of investments, futures contracts, and
foreign currency translations ........................ 61,933 (48,374) 14,228 (14,259)
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ................................ 70,611 (47,739) 17,419 (11,484)
--------- --------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .................................. (6,264) (7,731) -- --
Investor Class ....................................... (4,848) (1,837) (3,577) (5,038)
AMR Class ............................................ (8,707) (5,774) -- --
Net realized gain on investments:
Investor Class ....................................... -- -- -- (2,097)
Return of Capital:
Investor Class ....................................... -- -- (173) --
--------- --------- -------- ---------
NET DISTRIBUTIONS TO SHAREHOLDERS ................. (19,819) (15,342) (3,750) (7,135)
--------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................... 297,510 72,610 24,626 79,277
Reinvestment of dividends and distributions ............. 17,602 13,364 3,745 7,127
Cost of shares redeemed ................................. (255,402) (128,737) (48,782) (67,105)
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ............................. 59,710 (42,763) (20,411) 19,299
--------- --------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ...................... 110,502 (105,844) (6,742) 680
--------- --------- -------- ---------
NET ASSETS:
Beginning of period ..................................... 120,147 225,991 100,469 99,789
--------- --------- -------- ---------
END OF PERIOD * ......................................... $ 230,649 $ 120,147 $ 93,727 $ 100,469
========= ========= ======== =========
* Includes undistributed net investment income (loss) of ... $ 503 $ 503 $ (117) $ (96)
========= ========= ======== =========
51
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Intermediate Bond Fund Short-Term Bond Fund
------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
2009 2008 2009 2008
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................... $ 8,798 $ 7,050 $ 5,710 $ 5,355
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions ......... 1,112 70 5,301 (4,833)
Change in net unrealized appreciation or depreciation of
investments, futures contracts, and foreign currency
translations ......................................... 17,269 (8,956) 2,645 309
--------- -------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ................................ 27,179 (1,836) 13,656 831
--------- -------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .................................. (8,775) (7,053) (7,180) (6,084)
Investor Class ....................................... (23) -- (653) (220)
--------- -------- --------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS ................. (8,798) (7,053) (7,833) (6,304)
--------- -------- --------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................... 154,268 103,092 92,994 200,633
Reinvestment of dividends and distributions ............. 8,797 7,052 7,696 6,236
Cost of shares redeemed ................................. (115,884) (63,295) (214,778) (30,341)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ............................. 47,181 46,849 (114,088) 176,528
--------- -------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS ...................... 65,562 37,960 (108,265) 171,055
--------- -------- --------- --------
NET ASSETS:
Beginning of period ..................................... 147,634 109,674 263,458 92,403
--------- -------- --------- --------
END OF PERIOD * ......................................... $ 213,196 $147,634 $ 155,193 $263,458
========= ======== ========= ========
* Includes undistributed net investment income (loss) of ... $ 501 $ 501 $ (137) $ (563)
========= ======== ========= ========
See accompanying notes
52
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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, as
amended, (the "Act") as a diversified, open-end management investment company.
These financial statements and notes to the financial statements relate to the
American Beacon High Yield Bond Fund, the American Beacon 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 Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
Class Disclosure
Prior to March 1, 2009, the Investor Class was known as the PlanAhead
Class. March 2, 2009 is the inception date of the Investor Class of the
Intermediate Bond Fund.
Each Fund, except the Enhanced Income Fund, has multiple classes of shares
designed to meet the needs of different groups of investors; however, not all
Funds offer all classes. The following table sets forth the differences amongst
the classes:
CLASS: OFFERED TO:
- ----- -----------
INSTITUTIONAL CLASS Investors making an initial investment of $250,000
INVESTOR CLASS General public and investors investing through an
intermediary
AMR CLASS Investors in the tax-exempt retirement and benefit plans
of AMR Corporation and its affiliates
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in footnote 2.
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.
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. The prices of debt securities may be
determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
53
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Securities for which market prices are not readily available or are not
reflective of the fair value of the security, as determined by the Manager, will
be priced at fair value following procedures approved by the Board of Trustees
(the "Board").
Valuation Inputs
Various inputs may be used to determine the value of the Funds'
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value securities are not
necessarily an indication of the risk associated with investing in those
securities.
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3 - Prices determined using other significant unobservable inputs.
Unobservable inputs reflect the Fund's own assumptions about the factors
market participants would use in pricing an investment, and would be based
on the best information available.
A summary of the inputs used to value the Funds' investments as of October
31, 2009 is as follows (in thousands):
HIGH YIELD BOND Level 1 Level 2 Level 3 Total
- --------------- ------- -------- ------- --------
Preferred Stocks ........................ $ 11 $ 277 $-- $ 288
Corporate Obligations ................... -- 222,522 -- 222,522
Convertible Obligations ................. -- 1,180 -- 1,180
Non-Agency Mortgage Backed Obligations .. -- 230 -- 230
Asset-Backed Obligations ................ -- 704 -- 704
Short Term Investments .................. 3,938 -- -- 3,938
------ -------- --- --------
Total Investments in Securities ...... $3,949 $224,913 $-- $228,862
====== ======== === ========
ENHANCED INCOME FUND Level 1 Level 2 Level 3 Total
- -------------------- ------- -------- ------- --------
Preferred Stocks ........................ $1,320 $ 150 $-- $ 1,470
Common Stock ............................ 2,791 -- -- 2,791
Convertible Preferred ................... 1,390 310 -- 1,700
Convertible Obligations ................. -- 11,422 -- 11,422
Corporate Obligations ................... -- 36,130 -- 36,130
Non-Agency Mortgage Backed Obligations .. -- 2,591 -- 2,591
Asset-Backed Obligations ................ -- 3,001 -- 3,001
U.S. Agency Mortgage Backed
Obligations .......................... -- 16,857 -- 16,857
U.S. Agency Obligations ................. -- 5,570 -- 5,570
U.S. Treasury Obligations ............... -- 7,356 -- 7,356
Short Term Investments .................. 4,171 -- -- 4,171
------ ------- --- -------
Total Investments in Securities ...... $9,672 $83,387 $-- $93,059
====== ======= === =======
INTERMEDIATE BOND FUND Level 1 Level 2 Level 3 Total
- ---------------------- ------- -------- ------- --------
Corporate Obligations ................... $ -- $ 82,828 $-- $ 82,828
Non-Agency Mortgage Backed Obligations .. -- 13,347 -- 13,347
Asset-Backed Obligations ................ -- 5,850 -- 5,850
U.S. Agency Mortgage Backed Obligations . -- 55,007 -- 55,007
U.S. Agency Obligations ................. -- 17,141 -- 17,141
U.S. Treasury Obligations ............... -- 24,864 -- 24,864
Short Term Investments .................. 12,392 -- -- 12,392
------- -------- --- --------
Total Investments in Securities ...... $12,392 $199,037 $-- $211,429
======= ======== === ========
54
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
SHORT-TERM BOND FUND Level 1 Level 2 Level 3 Total
- -------------------- ------- -------- ------- --------
Corporate Obligations ................... $ -- $ 74,576 $-- $ 74,576
Non-Agency Mortgage Backed Obligations .. -- 1,402 -- 1,402
Asset-Backed Obligations ................ -- 28,421 -- 28,421
U.S. Agency Mortgage Backed
Obligations .......................... -- 1,866 -- 1,866
U.S. Agency Obligations ................. -- 40,622 -- 40,622
Short Term Investments .................. 6,789 -- -- 6,789
------ -------- --- --------
Total Investments in Securities ...... $6,789 $146,887 $-- $153,676
====== ======== === ========
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. The Funds may purchase securities with delivery or payment to
occur at a later date. At the time the Funds enter into a commitment to purchase
a security, the transaction is recorded, and the value of the security is
reflected in the net asset value. The value of the security may vary with market
fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Funds. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Funds generally will be
declared daily, payable monthly. Distributions, if any, of net realized capital
gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If a Fund's investment advisor chooses to execute a
transaction through a participating broker, the broker rebates a portion of the
commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund. These amounts are reported with the net realized gains in the Fund's
Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class),
gains, and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or
55
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
liabilities. The Trust's maximum exposure under these arrangements is dependent
on claims that may be made in the future and, therefore, cannot be estimated.
The Trust has had no prior claims or losses pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory, fund management and securities lending services. Investment assets of
the High Yield Bond, Enhanced Income, and Intermediate Bond Funds are managed by
one or more investment advisors which have entered into separate investment
advisory agreements with the Manager. As compensation for performing the duties
required under the Management Agreement, the Manager receives from the High
Yield Bond Fund, and Enhanced Income Fund an annualized fee equal to 0.05% of
the average daily net assets plus amounts paid by the Manager to the investment
advisors hired by the Manager to direct investment activities of the Funds. The
Manager receives an annualized fee of 0.20% of the average daily net assets of
the Intermediate Bond Fund and pays a portion of its fee to an investment
advisor hired by the Manager to direct investment activities of a portion of the
Fund. The Manager is one of the investment advisors of the Enhanced Income Fund
and receives an annualized fee of 0.15% on the portion of assets managed by the
Manager. The Manager serves as the sole investment advisor to the Short-Term
Bond Fund, Pursuant to the Management Agreement, the Manager receives from the
Fund an annualized fee equal to 0.20% of average daily net assets of the
Short-Term Bond Fund. Management fees paid during the year ended October 31,
2009 were as follows (dollars in thousands):
AMOUNTS PAID NET AMOUNTS
MANAGEMENT MANAGEMENT TO INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
---------- ---------- ------------- -----------
High Yield Bond..... 0.30%-0.45% 726 631 95
Enhanced Income..... 0.20%-0.80% 265 221 44
Intermediate Bond... 0.20% 407 173 234
As discussed in Footnote 5, prior to May 19, 2009, as compensation for
services provided by the Manager in connection with securities lending
activities, the lending Funds paid to the Manager, with respect to cash
collateral posted by borrowers, a fee up to 25% of the net monthly interest
income (the gross interest income earned by the investment of cash collateral,
less the amount paid to borrowers and related expenses) from such activities
and, with respect to loan fees paid by borrowers when a borrower posts
collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statements of Operations. During
the year ended October 31, 2009, securities lending fees paid to the Manager
were as follows (in thousands):
Enhanced Income..... 11
Intermediate Bond... 38
Short-Term Bond..... 55
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative services to the
Funds. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives, an annualized fee of
0.05% of the average daily net assets of the AMR Class and 0.30% of the average
daily net assets of the Institutional and Investor Classes of each Fund except
for the Institutional Class of the Intermediate and Short-Term Bond Funds from
which the Manager received a fee of 0.05% of average daily net assets.
56
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Distribution Plans
The Trust, has adopted a "defensive" Distribution Plan (the "Plan") in
accordance with Rule 12b-1 under the Act, pursuant to which no fees may be
charged to the Funds for distribution purposes. However, the Plan authorizes the
management and administrative service fees received by the Manager and the
investment advisors hired by the Manager to be used for distribution purposes.
Under this Plan, the Trust does not intend to compensate the Manager or any
other party, either directly or indirectly, for the distribution of Trust
shares.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the Investor Class. As
compensation for performing the duties required under the Service Plan, the
Manager receives up to 0.375% of the average daily net assets of the Investor
Class of each Fund.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the
"MM Select Fund") and the American Beacon US Government Money Market Select Fund
(the "USG Select Fund") (collectively, the "Select Fund"). Prior to May 19, 2009
cash collateral received by certain Funds in connection with securities lending
could be invested in the Select Funds. The Funds and the Select Funds have the
same investment advisor and therefore, are considered to be affiliated. The
Manager serves as investment advisor to the Select Funds and receives from the
Select Funds an annualized management fee of 0.09% of the average daily net
assets of the Select Funds. During the year ended October 31, 2009, fees earned
by the Manager from the Select Funds were as follows:
SECURITIES LENDING
DIRECT INVESTMENT IN COLLATERAL INVESTED
AFFILIATED FUNDS IN AFFILIATED FUNDS TOTAL
-------------------- ------------------- -----
High Yield Bond..... 268 -- 268
Enhanced Income..... 343 1,095 1,438
Intermediate Bond... 825 4,507 5,332
Short-Term Bond..... 139 6,241 6,380
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission
("SEC"), the Funds, along with other registered investment companies having
management contracts with the Manager, may participate in an interfund lending
program as a borrower. This program provides an alternative credit facility
allowing the Funds to borrow from other participating Funds. For the year ended
October 31, 2009, the High Yield Bond Fund borrowed from the American Beacon
Money Market Portfolio on average $19,712,907 for two days at 0.96% with
interest charges of $1,037.
Reimbursement of Expenses
The Manager voluntarily agreed to reimburse the Intermediate and Short-Term
Bond Funds for operating expenses. For the period ended October 31, 2009, the
Manager reimbursed fees for the Intermediate Bond Fund Institutional and
Investor Classes of $8,015 and $2,494, respectively. The Manager reimbursed fees
for the Short-Term Bond Institutional and Investor Classes of $8,672 and
$64,396, respectively.
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
57
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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. During the year ended
October 31, 2009, the Funds have not recorded a liability for potential
reimbursement, due to the current assessment that a reimbursement is unlikely.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Funds do not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
October 31, 2009 remains subject to examination by the Internal Revenue Service.
If applicable, the Funds recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in "Other expenses" on the Statements
of Operations.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid during the fiscal years ended
October 31, 2009 and October 31, 2008 were as follows (in thousands)
HIGH YIELD BOND ENHANCED INCOME
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2009 2008 2009 2008
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class ....... $ 6,264 $ 7,731 $ -- $ --
Investor Class ............ 4,848 1,837 3,577 5,674
AMR Class ................. 8,707 5,774 -- --
LONG-TERM CAPITAL GAIN
Institutional Class ....... -- -- --
Investor Class ............ -- -- -- 1,461
AMR Class ................. -- -- -- --
RETURN OF CAPITAL
Institutional Class ....... -- -- -- --
Investor Class ............ -- -- 173 --
AMR Class ................. -- -- -- --
------- ------- ------ ------
TOTAL DISTRIBUTIONS PAID $19,819 $15,342 $3,750 $7,135
======= ======= ====== ======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
INTERMEDIATE BOND SHORT-TERM BOND
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2009 2008 2009 2008
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class .......... $8,775 $7,053 $7,180 $6,084
Investor Class ............... 23 -- 653 220
AMR Class .................... -- -- -- --
LONG-TERM CAPITAL GAIN .......... -- -- -- --
Institutional Class .......... -- -- -- --
Investor Class ............... -- -- -- --
AMR Class .................... -- -- -- --
------ ------ ------ ------
TOTAL DISTRIBUTIONS PAID .. $8,798 $7,053 $7,833 $6,304
====== ====== ====== ======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
58
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
As of October 31, 2009, the components of distributable earnings on a tax basis
were as follows (in thousands):
HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
BOND INCOME BOND BOND
---------- -------- ------------ ----------
Cost basis of investments for federal
income tax purposes $220,786 $89,726 $202,915 $151,255
Unrealized appreciation 18,973 5,136 9,160 2,667
Unrealized depreciation (10,897) (1,803) (646) (246)
-------- ------- -------- --------
Net unrealized appreciation/(depreciation) 8,076 3,333 8,514 2,421
Undistributed ordinary income 326 -- 502 523
Undistributed long-term gain/(loss) (25,030) (2,523) (626) (8,430)
-------- ------- -------- --------
Distributable earnings $(16,628) $ 810 $ 8,390 $ (5,486)
======== ======= ======== ========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, book amortization for premiums,
and income adjustments associated with contingent payment debt instruments.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statements
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, foreign currency, book amortization of premium, pay down reclasses,
income adjustments associated with contingent payment debt instruments, and
dividend reclasses that have been reclassified as of October 31, 2009 (in
thousands):
HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
BOND INCOME BOND BOND
---------- -------- ------------ ----------
Paid-in-capital......................................... $-- $ 70 $-- $ (1)
Undistributed net investment income..................... (2) 123 -- 2,549
Accumulated net realized gain (loss).................... 1 (194) -- (2,548)
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency............... 1 1 -- --
At October 31, 2009, capital loss carry forward positions for federal
income tax purposes were as follows (in thousands):
FUND 2013 2014 2015 2016 2017 TOTAL
- ---- ---- ----- ---- ------ ----- ------
High Yield Bond..... -- 1,722 -- 14,332 8,926 25,030
Enhanced Income..... -- -- -- 2,058 465 2,523
Intermediate Bond... -- 626 -- -- -- 626
Short-Term Bond..... 378 2,387 467 5,198 -- 8,430
The Intermediate Bond and Short-Term Bond Funds utilized $1,118 and $2,753,
respectively, of net capital loss carryovers for the year ended October 31,
2009.
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the year ended October 31, 2009 were as follows (in
thousands):
59
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
BOND INCOME BOND BOND
---------- -------- ------------ ----------
Purchases (excluding U.S. government securities).............. $430,145 $46,039 $348,067 $296,642
Sales and maturities (excluding U.S. government securities)... 368,254 65,473 303,196 412,571
Purchases of U.S. government securities....................... -- 10,983 189,639 110,489
Sales and maturities of U.S. government securities............ -- 13,119 187,106 298,074
A summary of the Funds' direct transactions in Select Funds for the year
ended October 31, 2009 is set forth below (in thousands):
OCTOBER 31, 2008 OCTOBER 31, 2009
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
-------------- ------------------- --------- ------ -------------------
High Yield Bond..... MM Select Fund $5,762 $-- $5,762 $--
Enhanced Income..... MM Select Fund 3,057 -- 3,057 --
Intermediate Bond... MM Select Fund 7,368 -- 7,368 --
Short-Term Bond..... MM Select Fund 1,241 -- 1,241 --
5. SECURITIES LENDING
On May 19, 2009 the Enhanced Income, Intermediate Bond, and Short-Term Bond
Funds terminated their security lending program. Prior to that the Funds, the
Agent, and the Manager retained 75%, 15%, and 10%, respectively, of the income
generated from the securities lending, as stated on the Statements of
Operations.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (shares and dollars in thousands):
YEAR ENDED OCTOBER 31, 2009
INSTITUTIONAL CLASS INVESTOR CLASS AMR CLASS
------------------- ----------------- -------------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- -------- ------ -------- ------- ---------
Shares sold .......................... 4,158 $27,998 16,984 $119,477 20,142 $ 150,035
Reinvestment of dividends ............ 601 4,158 626 4,738 1,177 8,706
Shares redeemed ...................... (8,324) (58,240) (8,898) (65,269) (16,820) (131,893)
------ -------- ------ -------- ------- ---------
Net increase (decrease) in shares
outstanding ....................... (3,565) $(26,084) 8,712 $ 58,946 4,499 $ 26,848
====== ======== ====== ======== ======= =========
INVESTOR CLASS
-------------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- -------- --------
Shares sold .......................... 2,591 $ 24,626
Reinvestment of dividends ............ 393 3,745
Shares redeemed ...................... (5,256) (48,782)
------ --------
Net (decrease) in shares outstanding.. (2,272) $(20,411)
====== ========
INSTITUTIONAL CLASS INVESTOR CLASS
------------------- -----------------
INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT
- ---------------------- -------- --------- ------ --------
Shares sold .......................... 14,857 $ 152,046 213 $2,222
Reinvestment of dividends ............ 850 8,774 2 23
Shares redeemed ...................... (11,318) (115,800) (8) (84)
------- --------- --- ------
Net increase in shares outstanding ... 4,389 $ 45,020 207 $2,161
======= ========= === ======
60
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
INSTITUTIONAL CLASS INVESTOR CLASS
------------------- -----------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- --------- ------ ---------
Shares sold .......................... 4,547 $ 39,495 6,121 $ 53,499
Reinvestment of dividends ............ 827 7,178 59 518
Shares redeemed ...................... (21,058) (182,876) (3,640) (31,902)
------- --------- ------ --------
Net increase (decrease) in shares
outstanding ....................... (15,684) $(136,203) 2,540 $ 22,115
======= ========= ====== ========
PERIOD ENDED OCTOBER 31, 2008
INSTITUTIONAL CLASS INVESTOR CLASS AMR CLASS
------------------- ----------------- ------------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- -------- ------ -------- ------- --------
Shares sold .......................... 3,029 $ 28,128 2,332 $ 21,959 2,416 $ 22,523
Reinvestment of dividends ............ 645 5,835 193 1,751 639 5,778
Shares redeemed ...................... (5,867) (54,359) (3,309) (31,075) (4,693) (43,303)
------ -------- ------ -------- ------ --------
Net (decrease) in shares outstanding.. (2,193) $(20,396) (784) $ (7,365) (1,638) $(15,002)
====== ======== ====== ======== ====== ========
INVESTOR CLASS
-------------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- -------- --------
Shares sold .......................... 8,011 $ 79,277
Reinvestment of dividends ............ 714 7,127
Shares redeemed ...................... (6,812) (67,105)
------ --------
Net increase in shares outstanding ... 1,913 $ 19,299
====== ========
INSTITUTIONAL CLASS
-------------------
INTERMEDIATE BOND FUND SHARES AMOUNT
- ---------------------- -------- --------
Shares sold .......................... 10,030 $103,092
Reinvestment of dividends ............ 695 7,052
Shares redeemed ...................... (6,232) (63,295)
------ --------
Net increase in shares outstanding ... 4,493 $ 46,849
====== ========
INSTITUTIONAL CLASS INVESTOR CLASS
------------------- -----------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- --------- ------ --------
Shares sold .......................... 22,147 $ 193,487 816 $ 7,146
Reinvestment of dividends ............ 696 6,082 17 154
Shares redeemed ...................... (3,197) (27,969) (271) (2,372)
------ --------- ---- -------
Net increase in shares outstanding ... 19,646 $ 171,600 562 $ 4,928
====== ========= ==== =======
7. SUBSEQUENT EVENTS
In preparing the financial statements as of October 31, 2009, management
considered the impact of subsequent events occurring through December 23, 2009,
for potential recognition or disclosure in these financial statements.
61
AMERICAN BEACON HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class
--------------------------------------------------
Year Ended October 31,
--------------------------------------------------
2009 2008(A) 2007 2006(B) 2005
------- ------- -------- -------- --------
Net asset value, beginning of period ....................... $ 6.77 $ 10.11 $ 10.20 $ 10.22 $ 10.86
------- ------- -------- -------- --------
Income from investment operations:
Net investment income ................................... 0.79 0.78 0.77 0 .88 0.76
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.66 (3.34) (0.09) 0.09 (0.84)
------- ------- -------- -------- --------
Total income (loss) from investment operations ............. 2.45 (2.56) 0.68 0.97 (0.08)
------- ------- -------- -------- --------
Less distributions:
Dividends from net investment income .................... (0.80) (0.78) (0.77) (0.88) (0.76)
Distributions from net realized gains on securities ..... -- -- -- (0.11) 0.20
------- ------- -------- -------- --------
Total distributions ........................................ (0.80) (0.78) (0.77) (0.99) (0.56)
------- ------- -------- -------- --------
Net asset value, end of period ............................. $ 8.42 $ 6.77 $ 10.11 $ 10.20 $ 10.22
======= ======= ======== ======== ========
Total return ............................................... 39.06% (27.03)% 6.85% 8.78% 3.03%
======= ======= ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $47,254 $62,138 $114,911 $231,693 $216,744
Ratios to average net assets (annualized):
Expenses, net of waivers ................................ 0.79% 0.85% 0.85% 0.85% 0.84%
Expenses, before waivers ................................ 0.79% 0.85% 0.86% 0.85% 0.84%
Net investment income, net of waivers ................... 11.46% 8.38% 7.55% 7.55% 7.24%
Net investment income, before waivers ................... 11.46% 8.38% 7.54% 7.55% 7.24%
Portfolio turnover rate ................................. 212% 157% 92% 88% 128%
Investor Class
-------------------------------------------------
Year Ended October 31,
-------------------------------------------------
2009 2008(A) 2007 2006(B) 2005
------- -------- ------- ------- --------
Net asset value, beginning of period ....................... $ 6.77 $ 10.11 $ 10.21 $ 10.22 $ 10.87
------- ------- ------- ------- --------
Income from investment operations:
Net investment income ................................... 0.78 0.75 0.75 0.85 0.74
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.65 (3.34) (0.10) 0.10 (0.85)
------- ------- ------- ------- --------
Total income (loss) from investment operations ............. 2.43 (2.59) 0.65 0.95 (0.11)
------- ------- ------- ------- --------
Less distributions:
Dividends from net investment income .................... (0.78) (0.75) (0.75) (0.85) (0.74)
Distributions from net realized gains on securities ..... -- -- -- (0.11) 0.20
------- ------- ------- ------- --------
Total distributions ........................................ (0.78) (0.75) (0.75) (0.96) (0.54)
------- ------- ------- ------- --------
Net asset value, end of period ............................. $ 8.42 $ 6.77 $ 10.11 $ 10.21 $ 10.22
======= ======= ======= ======= ========
Total return ............................................... 38.70% (27.24)% 6.52% 8.63% 2.69%
======= ======= ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $90,736 $13,949 $28,758 $80,284 $120,360
Ratios to average net assets (annualized):
Expenses, net of waivers ................................ 1.01% 1.10% 1.08% 1.08% 1.08%
Expenses, before waivers ................................ 1.01% 1.10% 1.08% 1.08% 1.08%
Net investment income, net of waivers ................... 9.36% 8.06% 7.32% 7.33% 7.00%
Net investment income, before waivers ................... 9.36% 8.06% 7.32% 7.33% 7.00%
Portfolio turnover rate ................................. 212% 157% 92% 88% 128%
AMR Class
-----------------------------
Year Ended September
October 31, 4 to
----------------- October
2009 2008(A) 31, 2007
------- ------- ---------
Net asset value, beginning of period ....................... $ 6.77 $ 10.11 $ 9.94
------- ------- -------
Income from investment operations:
Net investment income ................................... 0.81 0.80 0.12
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.65 (3.34) 0.17
------- ------- -------
Total income (loss) from investment operations ............. 2.46 (2.54) 0.29
------- ------- -------
Less distributions:
Dividends from net investment income .................... (0.81) (0.80) (0.12)
Distributions from net realized gains on securities ..... -- -- --
------- ------- -------
Total distributions ........................................ (0.81) (0.80) (0.12)
------- ------- -------
Net asset value, end of period ............................. $ 8.42 $ 6.77 $ 10.11
======= ======= =======
Total return ............................................... 39.41% (26.84)% 2.94%(C)
======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $92,659 $44,060 $82,322
Ratios to average net assets (annualized):
Expenses, net of waivers ................................ 0.53% 0.58% 0.61%(D)
Expenses, before waivers ................................ 0.53% 0.58% 0.61%(D)
Net investment income, net of waivers ................... 10.34% 8.64% 7.54%(D)
Net investment income, before waivers ................... 10.34% 8.64% 7.54%(D)
Portfolio turnover rate ................................. 212% 157% 92%(E)
(A) On May 21, 2008, Post Advisory Group, LLC ceased managing a portion of the
High Yield Bond Fund and on May 22, 2008 Logan Circle Partners, L.P. began
managing a portion of the High Yield Bond Fund.
(B) Franklin Advisers, Inc. was added as an investment advisor to the High
Yield Bond Fund on September 12, 2006.
(C) Not annualized.
(D) Annualized.
(E) Portfolio turnover rate is for the period from November 1, 2006 through
October 31, 2007.
62
AMERICAN BEACON ENHANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Investor Class
---------------------------------------------------
Year Ended October 31,
---------------------------------------------------
2009 2008 2007 2006 2005
------- -------- ------- -------- --------
Net asset value, beginning of period ....................... $ 8.80 $ 10.50 $ 10.25 $ 9.98 $ 10.16
------- -------- ------- -------- --------
Income from investment operations:
Net investment income ................................... 0.32 0.41 0.36 0.33 0.29
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.53 (1.39) 0.32 0.29 (0.16)
------- -------- ------- -------- --------
Total income (loss) from investment operations ............. 1.85 (0.98) 0.68 0.62 0.13
------- -------- ------- -------- --------
Less distributions:
Dividends from net investment income .................... (0.40) (0.49) (0.42) (0.35) (0.31)
Distributions from net realized gains on securities ..... -- (0.23) (0.01) -- --
Return of capital ....................................... 0.00(A) -- -- -- --
------- -------- ------- -------- --------
Total distributions ........................................ (0.40) (0.72) (0.43) (0.35) (0.31)
------- -------- ------- -------- --------
Net asset value, end of period ............................. $ 10.25 $ 8.80 $ 10.50 $ 10.25 $ 9.98
======= ======== ======= ======== ========
Total return ............................................... 21.50% (10.02)% 6.75% 6.36% 1.32%
======= ======== ======= ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $93,727 $100,469 $99,789 $125,915 $112,341
Ratios to average net assets (annualized):
Expenses ................................................ 1.01% 0.92% 0.94% 0.93% 0.92%
Net investment income ................................... 3.86% 3.64% 3.69% 3.21% 2.79%
Portfolio turnover rate ................................. 53% 76% 103% 65% 41%
(A) The tax return of capital is calculated based upon outstanding shares at
the time of distribution. Amounts are less than $0.01 per share..
63
AMERICAN BEACON INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class (formerly AMR Class prior Investor
to 3/1/05) Class
--------------------------------------------------- -----------
Year Ended October 31, March 2 to
--------------------------------------------------- October 31,
2009 2008 2007 2006 2005(A) 2009
-------- -------- -------- ------- -------- -----------
Net asset value, beginning of period ....................... $ 9.61 $ 10.10 $ 10.02 $ 10.01 $ 10.33 $ 10.14
-------- -------- -------- ------- -------- -------
Income from investment operations:
Net investment income ................................... 0.46 0.50 0.50 0.46 0.42 0.27
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.07 (0.51) 0.07 0.02 (0.29) 0.54
-------- -------- -------- ------- -------- -------
Total income (loss) from investment operations ............. 1.53 (0.01) 0.57 0.48 0.13 0.81
-------- -------- -------- ------- -------- -------
Less distributions:
Dividends from net investment income .................... (0.45) (0.48) (0.49) (0.47) (0.45) (0.27)
Distributions from net realized gains on securities ..... -- -- -- -- -- --
-------- -------- -------- ------- -------- -------
Total distributions ........................................ (0.45) (0.48) (0.49) (0.47) (0.45) (0.27)
-------- -------- -------- ------- -------- -------
Net asset value, end of period ............................. $ 10.69 $ 9.61 $ 10.10 $ 10.02 $ 10.01 $ 10.68
======== ======== ======== ======= ======== =======
Total return ............................................... 16.17% (0.26)% 5.83% 4.96% 1.26% 8.05%(B)
======== ======== ======== ======= ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $210,983 $147,634 $109,674 $97,319 $ 93,270 $ 2,213
Ratios to average net assets (annualized):
Expenses, net of waivers ................................ 0.32% 0.30% 0.34% 0.35% 0.31% 0.81%(C)
Expenses, before waivers ................................ 0.32% 0.30% 0.34% 0.35% 0.31% 1.22%(C)
Net investment income, net of waivers ................... 4.32% 4.70% 4.86% 4.64% 4.12% 3.74%(C)
Net investment income, before waivers ................... 4.31% 4.70% 4.86% 4.64% 4.12% 3.33%(C)
Portfolio turnover rate ................................. 157% 105% 85% 122% 119% 157%(D)
(A) 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.
(B) Not annualized.
(C) Annualized.
(D) Portfolio turnover rate is for the period from November 1, 2008 through
October 31, 2009.
64
AMERICAN BEACON SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class Investor Class
Year Ended October 31 Year Ended October 31,
------------------------------------------------- -------------------------------------------
2009 2008 2007 2006 2005(A) 2009 2008 2007 2006 2005
---------- ---------- --------- --------- ------- --------- -------- -------- -------- ------
Net asset value,
beginning of period ....... $ 8.58 $ 8.79 $ 8.74 $ 8.75 $ 9.07 $ 8.59 $ 8.81 $ 8.76 $ 8.77 $ 9.09
-------- -------- ------- ------- ------- ------- ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss) ................. 0.22(B) 0.35(B) 0.39(B) 0.32(B) 0.29 0.20(B) 0.29(B) 0.35(B) 0.27(B) 0.28
Net gains (losses) on
securities (both
realized and
unrealized) ......... 0.33 (0.15) 0.09 0.07 (0.20) 0.34 (0.15) 0.09 0.07 (0.24)
-------- -------- ------- ------- ------- ------- ------ ------ ------ ------
Total income from investment
operations ................ 0.55 0.20 0.48 0.39 0.09 0.54 0.14 0.44 0.34 0.04
-------- -------- ------- ------- ------- ------- ------ ------ ------ ------
Less distributions:
Dividends from net
investment income ..... (0.30) (0.41) (0.43) (0.40) (0.41) (0.29) (0.36) (0.39) (0.35) (0.36)
Distributions from net
realized gains on
securities -- -- -- -- -- -- -- -- -- --
-------- -------- ------- ------- ------- ------- ------ ------ ------ ------
Total distributions .......... (0.30) (0.41) (0.43) (0.40) (0.41) (0.29) (0.36) (0.39) (0.35) (0.36)
-------- -------- ------- ------- ------- ------- ------ ------ ------ ------
Net asset value, end of
period .................... $ 8.83 $ 8.58 $ 8.79 $ 8.74 $ 8.75 $ 8.84 $ 8.59 $ 8.81 $ 8.76 $ 8.77
======== ======== ======= ======= ======= ======= ====== ====== ====== ======
Total return ................. 6.56% 2.21% 5.61% 4.56% 1.00% 6.34% 1.54% 5.08% 4.01% 0.46%
======== ======== ======= ======= ======= ======= ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of
period (in thousands) .. $124,791 $255,725 $89,427 $73,417 $79,683 $30,402 $7,733 $2,976 $7,189 $8,582
Ratios to average net
assets (annualized):
Expenses, net of
waivers ................ 0.33% 0.31% 0.37% 0.35% 0.33% 0.54% 0.85% 0.87% 0.88% 0.87%
Expenses, before
waivers ................ 0.33% 0.31% 0.37% 0.35% 0.33% 0.85% 0.88% 0.98% 0.90% 0.94%
Net investment income,
net of waivers ......... 2.62% 3.75% 4.48% 3.64% 3.15% 2.20% 3.19% 3.91% 3.10% 2.59%
Net investment income,
before waivers ......... 2.61% 3.75% 4.48% 3.64% 3.15% 1.89% 3.16% 3.81% 3.08% 2.52%
Portfolio turnover rate ... 140% 21% 40% 48% 38% 140% 21% 40% 48% 38%
(A) 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.
(B) 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.
65
AMERICAN BEACON FUNDS
PRIVACY POLICY
(UNAUDITED)
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service providers;
and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION (UNAUDITED)
For corporate shareholders in the Funds, the percentage of ordinary
dividend income distributed for the year ended October 31, 2009, which is
designated as qualifying for the dividends-received deduction, is as follows:
Enhanced Income Fund 2.60%
For shareholders in the Funds, the percentage of dividend income
distributed for the year ended October 31, 2009, which is designated as
qualified dividends income under the Jobs and Growth Tax Relief Act of 2003, is
as follows:
Enhanced Income Fund 3.28%
Shareholders will receive notification in January 2010 of the percentage
applicable to the preparation of their 2009 income tax returns.
66
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67
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUNDS
(UNAUDITED)
At its May 27, 2009 meeting, the Board of Trustees ("Board") considered the
renewal of each existing Management Agreement between American Beacon Advisors,
Inc. (the "Manager") and the American Beacon Funds ("Beacon Trust") (the
"Funds") and each Investment Advisory Agreement between the Manager and a
subadvisor ("Investment Advisory Agreements" and collectively with the
Management Agreement, the "Agreements"). In preparation for the Board's
consideration to renew these Agreements, the Board and its Investment Committee
undertook steps to gather and consider information furnished by the Manager, the
subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 13, 2009 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
In connection with the Board's consideration of the Management Agreement
and each Investment Advisory Agreement, the Trustees considered, among other
materials, responses by the Manager and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements, as well as Parts 1 and II of its Form ADV registration
statement with the SEC;
- a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- a description of any payments by the subadvisors to the manager to
support the Funds' marketing efforts;
- an evaluation of any other benefits to the firm or Funds as a result
of their relationship, if any;
- confirmation that the firm's financial condition would not impair its
ability to provide high-quality advisory services to the Funds;
- a description of any internal actions the firm has taken or
anticipates taking in light of the current and projected decrease in
revenues from prior years as a result of the current economic
environment and, as applicable, information regarding the firm's
decline in assets under management from January 1, 2008 through March
31, 2009;
- a description of the scope of portfolio management services provided
to the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies, and any advantages or disadvantages that might accrue to
the Funds due to the firm's involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- 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;
68
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
- a description of trade allocation procedures among accounts managed by
the firm;
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates
- a certification by the firm regarding the reasonable design of its
compliance program;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto and a related certification of compliance by
the firm;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of any revenue sharing activities with respect to the
Funds;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Management Agreement and each Investment Advisory
Agreement, the Board also obtained an analysis provided by Lipper that compared:
(i) investment performance of each Fund versus comparable investment companies
and appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds; and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund with more than one class of shares, the class of
shares used for comparative purposes was the class with the longest performance
history, which in most cases was the Institutional Class. References below to
each Fund's Lipper peer group are to the group of comparable mutual funds
included in the analysis provided by Lipper.
Provided below is an overview of the primary factors the Trustees
considered at the Investment Committee meeting on May 13, 2009 at which the
Trustees reviewed the investment performance of the Manager and each subadvisor
and the primary factors considered by the Board at its May 27, 2009 meeting at
which the Board considered the renewal of the Agreements. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Management Agreement and each Investment Advisory Agreement, and
each Trustee may have afforded different weight to the various factors. Legal
counsel to the independent Trustees provided the Board with a memorandum
regarding its responsibilities pertaining to the renewal of the Agreements. The
memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts. Based
on its evaluation, the Board unanimously concluded that the terms of each
Agreement were reasonable and fair and that the renewal of each Agreement was in
the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each
Investment Advisory Agreement, the Trustees considered the best interests of
each Fund separately. While the Management Agreement and the Investment Advisory
Agreements for all of the Funds were considered at the May 27, 2009 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
69
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
provided; (2) the investment performance of a Fund and, as applicable, each
subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent
provided) the subadvisors in rendering their services and their resulting
profits or losses; (4) the extent to which economies of scale have been taken
into account in setting each fee schedule; (5) whether fee levels reflect these
economies of scale for the benefit of Fund investors; (6) comparisons of
services and fees with contracts entered into by the Manager or a subadvisor or
their affiliates with other clients (such as pension funds and other
institutional funds); and (7) any other benefits derived or anticipated to be
derived by the Manager or a subadvisor from their relationship with a Fund. The
Trustees posed questions to various management personnel of the Manager
regarding certain key aspects of the materials submitted in support of the
renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes 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.
With respect to the renewal of each Investment Advisory Agreement, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing the Funds, the size of the
subadvisor and their ability to continue to attract and retain qualified
investment personnel. Based on the foregoing information, the Board concluded
that the nature, extent and quality of the management and advisory services
provided by the Manager and each subadvisor were appropriate for each Fund and,
thus, determined to renew the Management Agreement and the Investment Advisory
Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. The Manager also noted that it generally was
satisfied with the performance of the subadvisors. A discussion regarding the
Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services Provided to the Funds and the Profits Realized by the
Manager from its Relationship with the Funds. In analyzing the cost of services
and profitability of the Manager and a subadvisor by Fund, the Board considered
the revenues earned and the expenses incurred by the Manager. The profits or
losses were noted at both an individual Fund level and at an aggregate level for
all Funds. The Board also considered that the Management Agreement for the
Beacon Trust, stipulates that, to the extent that a Fund invests all of its
investable assets in another registered investment company (i.e., is a "Feeder
Fund"), the Fund will not pay the Manager a management fee. The index series of
the Funds also operate under a master-feeder structure, but each of these series
invests in a master portfolio that is not managed by the Manager. As such, the
Board considered that the Manager does not receive a management fee with respect
to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. With
respect to the Short-Term Bond Fund, the Board also considered the Manager's
advisory fees for services provided by the Manager to institutional separate
accounts with similar investment strategies. Although the Board noted that, in
certain cases, the fee rates paid by other clients is lower than the fee rates
paid by the Funds, the difference reflects the greater level of responsibility
and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year and to discontinue the expense waivers and
reimbursements for certain classes of the Funds that were closing or maintained
competitive expense ratios without such expense waivers. The Board further
considered that each subadvised Fund pays the Manager the amounts due to its
subadvisors, and the Manager remits these amounts directly to the applicable
subadvisors. The Board considered that the Manager receives service and
administrative fees to compensate the Manager for providing administrative
services to the Funds and to compensate third-party administrators and
broker-dealers for services to Fund shareholders. In addition, the Board
considered that the Manager receives management fees for overseeing the
securities lending relationships on behalf of various Funds. The Board also
noted that certain classes of the Funds maintain higher expense ratios in order
to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in
connection with its investment advisory services to the Fund, the Board
considered that, in many cases, the Manager has negotiated the lowest
subadvisory fee a subadvisor charges for any comparable client accounts. The
Board gave less weight to profitability considerations or did not view this data
as imperative to its deliberations given the arm's length nature of the
relationship between the Manager and the subadvisors with respect to the
negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management and
investment advisory fees, the Board considered whether economies of scale will
be realized as the Funds grow and whether fee levels reflect these economies of
scale for the benefit of Fund shareholders. In this regard, the Board considered
that the Manager has negotiated breakpoints in many subadvisory fee rates. The
Board also noted that, for purposes of determining the fee rates chargeable to
the Funds, many subadvisors have agreed to take into account other assets of AMR
Corporation and its pension plans that are managed by the subadvisors. Thus, the
Funds are able to receive lower effective fee rates. The Board also noted the
Manager's representation that Fund assets have decreased significantly primarily
due to market depreciation in 2008 and the first quarter of 2009, as well as
significant share redemptions from the Money Market Funds and the inability of
certain competitor money market funds' to maintain positive yields, causing mass
redemptions in money market funds
70
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
throughout the industry. Based on the foregoing information, the Board concluded
that the Manager and subadvisor fee schedules for each Fund provides for a
reasonable sharing of benefits from any economies of scale with the Fund.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager and/or the
subadvisors as a result of the advisory relationships with the Funds, including
greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. The Board also considered that
the Manager's relationship with the Funds continues to be a significant factor
in attracting separate account assets for the Manager, noting specifically the
Manager's utilization of the Large Cap Value Fund model for a newly registered
actively managed exchange traded fund managed by the Manager. In addition, the
Board noted that the Manager provides services to each Trust at a relatively low
cost. The Board considered that certain of the subadvisors reimburse the Manager
for certain of its costs relating to distribution activities for the Funds. The
Board also considered that Funds did not pay commissions to any affiliated
broker-dealer of the Manager or the relevant subadvisor during the most recent
fiscal year ended October 31.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager and the subadvisors by virtue of their
relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
Except for the Short-Term Bond Fund, the performance comparisons below were
made versus each Fund's Lipper peer universe median. References to the Lipper
expense universe below are to the universe of comparable mutual funds included
in the analysis provided to the Trustees by Lipper, Inc.
Additional Considerations and Conclusions with Respect to the Enhanced Income
Fund
In considering the renewal of the Management Agreement for the Enhanced
Income Fund, the Trustees considered the following additional factors: (1) the
Enhanced Income Fund's unique investment strategy as compared to other funds in
its peer universe and the impact of such strategy on peer performance and
expense ratio comparisons; (2) the Fund underperformed the peer universe median
for the one-, and three-year periods, but outperformed for the five-year period
ended March 31, 2009; (3) management's analysis regarding the rationale for the
underperformance of the Enhanced Income Fund; (4) the Manager outperformed the
peer universe median with respect to its allocated portion of the Fund's assets
for the one-, three, and five-year periods; and (5) the expense ratio of the
Fund ranked worse than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreement with
Calamos Advisors LLC ("Calamos"), the Trustees considered the following
additional factors: (1) Calamos underperformed the peer universe median for the
one-, three- and five- year periods, but outperformed the Merrill Lynch All U.S.
Convertibles Index for the one-, three-, and five-year periods ended March 31,
2009; (2) management's analysis regarding the rationale for Calamos'
underperformance; (3) that management will continue to monitor, and the Board or
its Investment Committee will periodically review, Calamos' investment
performance with respect to its allocated portion of the Enhanced Income Fund's
asset; (4) Calamos' representation that it does not manage other accounts
comparable to the Fund; and (5) the Manager's recommendation to continue to
retain Calamos.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and Calamos under the Agreements are fair and
reasonable, (2) determined that the Enhanced Income Fund and its shareholders
would benefit from the Manager's and Calamos' continued management of the Fund
and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Enhanced Income Fund.
Additional Considerations and Conclusions with Respect to the High Yield Bond
Fund
In considering the renewal of the Management Agreement for the High Yield
Bond Fund, the Trustees considered the following additional factors: (1) the
High Yield Bond Fund underperformed the peer universe median for the one-,
three- and five-year periods ended March 31, 2009; (2) management's analysis
regarding the rationale for the underperformance of the High Yield Bond Fund;
(3) the relatively short tenure of the two subadvisors (Franklin Advisors, Inc.
("Franklin") was hired in mid-September 2006 and Logan Circle Partners, L.P.
("Logan Circle") was hired mid-May 2008); and (4) the expense ratio of the
Institutional Class of Fund shares ranked worse than the median of its Lipper
expense universe. In this regard, the Board noted that management expects the
High Yield Bond Fund's expense ratio to decline because the newly approved
investment advisor, Logan Circle, charges a lower fee rate.
In considering the renewal of the Investment Advisory Agreement with
Franklin Advisors, Inc. ("Franklin") and Logan Circle, the Trustees considered
the following additional factors: (1) Franklin outperformed the peer universe
median for the one- and two-year periods ended March 31, 2009; (2) Logan Circle
was added as a subadvisor in May 2008 and therefore does not have performance of
greater than one year, however it outperformed the peer universe median for the
one-quarter period ended March 31, 2009; (3) each of the Fund's subadvisors has
informed the Manager that it does not use Fund commissions to obtain proprietary
or third-party soft dollars research; (4) each of the Fund's subadvisors has
indicated that it does not charge lower advisory fees to other clients for which
it provides comparable services; and (5) the Manager's recommendation to
continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and the subadvisors under the Agreements are fair and
reasonable, (2) determined that the High Yield Bond Fund and its shareholders
would benefit from the Manager's and subadvisors' continued management of the
Fund and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the High Yield Bond Fund.
71
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
Additional Considerations and Conclusions with Respect to the Intermediate Bond
Fund
In considering the renewal of the Management Agreement for the Intermediate
Bond Fund, the Trustees considered the following additional factors: (1) the
Intermediate Bond Fund outperformed the peer universe median for the one-,
three- five- and ten-year periods ended March 31, 2009; (2) the Manager
outperformed the universe peer median with respect to its allocated portion of
the Fund's assets for the one-, three-, five- and ten-year periods ended March
31, 2009; and (3) the expense ratio of the Institutional Class of Fund shares
ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreement with
Barrow, the Trustees considered the following additional factors: (1) Barrow
outperformed the peer universe median with respect to its allocated portion of
the Fund's assets for the one-, three-, five- and ten-year periods ended March
31, 2009; (2) Barrow has informed the Manager that it uses Fund commissions to
obtain proprietary research, the application of which benefits the Fund and
Barrow's other clients; (3) Barrow has indicated that it does not charge lower
advisory fees to other clients for which it provides comparable services; and
(4) the Manager's recommendation to continue to retain Barrow.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and Barrow under the Agreements are fair and
reasonable, (2) determined that the Intermediate Bond Fund and its shareholders
would benefit from the Manager's and Barrow's continued management of the Fund
and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Intermediate Bond Fund.
Additional Considerations and Conclusions with Respect to the Short-Term Bond
Fund
In considering the renewal of the Management Agreement for the Short-Term
Bond Fund, the Trustees considered the following additional factors: (1) the
Short-Term Bond Fund outperformed its benchmark index for the one-, three-,
five- and ten-year periods for the period ended March 31, 2009; (2) the
Short-Term Bond Fund outperformed the Lipper Index for all reported periods
ended March 31, 2009; and (3) the expense ratio of the Institutional Class of
Fund shares was ranked better than the median of its Lipper expense universe.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager under the Management Agreement are fair and reasonable,
(2) determined that the Short-Term Bond Fund and its shareholders would benefit
from the Manager's continued management of the Fund and (3) approved the renewal
of the Management Agreement with respect to the Short-Term Bond Fund.
72
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees nineteen funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a
Partner in the law firm of Akin, Gump, Strauss, Hauer &
Feld, LLP (1960-Present); Director, Clear Channel
Communications (1984-Present); Trustee, CenterPoint
Properties (1994-2006); Member, Board of Trustees, Southern
Methodist University ; Member, Board of Visitors, M.D.
Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital;
Trustee, American Beacon Mileage Funds (1996-present);
Trustee, American Beacon Select Funds (1996-present);
Trustee, American Beacon Master Trust Funds (1996-present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation
(1992-2004); Consultant, New River Canada Ltd. (mutual fund
servicing company) (1998-2003); President and CEO, Allmerica
Trust Company, NA (1996-1997); President and CEO, Fidelity
Investments Southwest Company (1983-1995); Senior Vice
President of Regional Centers, Fidelity Investments
(1988-1995); Trustee, American Beacon Mileage Funds
(2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer
and Secretary, Kimbell Art Foundation (1993-Present);
Trustee, Texas Christian University (1998-Present); Trustee,
W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health
Foundation) (2001-2006); Director, Christian Church
Foundation (1999-2007); Trustee, American Beacon Mileage
Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994-Present); Director, Sunrise Bank of Atlanta
(2008-Present); Chairman, Special Contributions Fund Board
of Trustees, National Association for the Advancement of
Colored People (2007-Present); Trustee, National Association
for the Advancement of Colored People (2000-Present); Board
of Visitors, Emory University (2006-Present); Trustee,
Atlanta Botanical Garden (2006-Present); Board Member,
Willie L. Brown Jr. Institute on Politics and Public Service
(2001-Present); Chair, National Association of Securities
Professionals (2000-2002); Deputy Chief Administrative
Officer, City of Atlanta (1985-1990); Trustee, American
Beacon Mileage Funds (2008-present); Trustee, American
Beacon Select Funds (2008-present); Trustee, American Beacon
Master Trust Funds (2008-present).
73
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
Thomas M. Dunning (66) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief
Executive Officer (2003-2007), Lockton Dunning Benefits
(consulting firm in employee benefits); Director, Oncor
Electric Delivery Company LLC (2007-present); Advisory
Director, Comerica Texas (2003-present); Immediate Past
Chairman and Board Member, Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-present); State Vice Chair, State Fair of Texas; Board
Member, Southwestern Medical Foundation (1994-present);
Trustee, American Beacon Mileage Funds (2008-present);
Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present),
Chairman since 2008 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in oil and gas
exploration and production, refining, real estate, farming,
ranching and venture capital activities) (1994-2009).
Chairman (2007-Present) and Director (2005-Present), The
Dallas Opera Foundation; Chairman (2006-Present) and
Director (2005-Present), Temple Emanu-El Foundation;
Trustee, Presbyterian Hospital Foundation (2006-Present);
Trustee, American Beacon Mileage Funds (2004-present);
Trustee, American Beacon Select Funds (2004-present);
Trustee, American Beacon Master Trust Funds (2004-present).
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Federal
Dallas, Texas 75275 Preferred Capital Corp. (2001-2003); Director, Kronus
Worldwide Inc. (chemical manufacturing) (2003-Present);
Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of
Directors; Member, Methodist Hospital Advisory Board;
Co-Chair, Knight Commission on Intercollegiate Athletics;
Trustee, American Beacon Mileage Funds (2001-present);
Trustee, American Beacon Select Funds (2001-present);
Trustee, American Beacon Master Trust Funds (2001-present).
Paul J. Zucconi,CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
nonstandard automobile insurance) (2004-present); Director,
Titanium Metals Corporation (producer of titanium melted and
mill products and sponge) (2002- present); Director,
Torchmark Corporation (life and health insurance products)
(2002-present); Director, National Kidney Foundation of
North Texas (2003-Present); Director, Dallas Chapter of
National Association of Corporate Directors (2004-Present);
Partner, KPMG (1976-2001); Trustee, American Beacon Mileage
Funds (2008-present); Trustee, American Beacon Select Funds
(2008-present); Trustee, American Beacon Master Trust Funds
(2008-present).
74
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
OFFICERS
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
TERM
One Year
William F. Quinn** (61) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009) and
President from CEO (2006-2007), President (1986-2006) and Director
2007 to 2008 and (2003-Present), American Beacon Advisors, Inc.; Chairman
2009 to Present (1989-2003) and Director (1979-1989, 2003-Present), American
President from Airlines Federal Credit Union; Director, Hicks Acquisition
1987 to 2007 I, Inc. (2007-2009); Director, Crescent Real Estate
and 2008 to 2009 Equities, Inc.(1994-2007); Director, Pritchard, Hubble &
Trustee from Herr, LLC (investment advisor) (2001-2006); Director of
1987 to 2008 Investment Committee, Southern Methodist University
Endowment Fund (1996-Present); Member, Southern Methodist
University Cox School of Business Advisory Board
(1999-2002); Member, New York Stock Exchange Pension Manager
Committee (1997-1998, 2000-2002, 2006-Present); Chairman
(2007-Present) and Vice Chairman (2004-2007), Committee for
the Investment of Employee Benefits; Director, United Way of
Metropolitan Tarrant County (1988-2000, 2004-Present);
Trustee, American Beacon Mileage Funds (1995-2008); Trustee,
American Beacon Select Funds (1999-2008); Trustee, American
Beacon Master Trust (1995-2008).
Gene L. Needles, Jr. (54) President 2009 to President, CEO and Director (2009-Present), American Beacon
Present Advisors, Inc. President (November 2009-Present), Executive
Executive Vice Vice President (May 2009-November 2009) of the American
President 2009 Beacon Funds, American Beacon Mileage Funds, American Beacon
Select Funds, and American Beacon Master Trust. President
(2008-2009), Touchstone Investments; President (2003-2007),
CEO (2004-2007), Managing Director of Sales (2002-2003),
National Sales Manager (1999-2002), and Regional Sales
Manager (1993-1999), AIM Distributors.
Rosemary K. Behan (50) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006-Present); Assistant General Counsel,
Officer since 2006 First Command Financial Planning, Inc. (2004-2006); Attorney
(1995-2004), Securities and Exchange Commission.
Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American
Beacon Advisors, Inc. (2004-Present); Regional Vice
President, Neuberger Berman, LLC (investment advisor)
(1996-2004).
Wyatt Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors,
Inc. (2007-Present); Managing Director of Corporate
Accounting (2004-2007), Director of IT Strategy and Finance
(2002-2004), American Airlines, Inc.
Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present); Director American Beacon
Global Funds SPC (2002-present); Director, American Beacon
Global Funds plc (2007-2009).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors, Inc.
1995 (1995-Present).
Christina E. Sears (38) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon
and Asst. Advisors, Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's and Master Trust's sub-advisors.
75
(AMERICAN BEACON LOGO)
DELIVERY OF DOCUMENTS
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 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.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
(GRAPHIC) (GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional and Investor Classes American Beacon Funds
Call (800) 658-5811 P.O. Box 219643
AMR Class(SM) Kansas City, MO 64121-9643
Call (800) 345-2345
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments A description of the policies and procedures the
provided in each semi-annual and annual report, Fund uses to determine how to vote proxies
the Fund files a complete schedule of its relating to portfolio securities is available in
portfolio holdings with the Securities and the Fund's Statement of Additional Information,
Exchange Commission ("SEC") on Form N-Q as of is available free of charge on the Fund's
the first and third fiscal quarters. The Fund's website (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's website at calling 1-800-967-9009 or by accessing the SEC's
www.sec.gov. The Forms N-Q may also be reviewed website at www.sec.gov. The Fund's proxy voting
and copied at the SEC's Public Reference Room, record for the most recent year ended June 30 is
450 Fifth Street, NW, Washington, DC 20549. filed annually with the SEC on Form N-PX. The
Information regarding the operation of the SEC's Fund's Forms N-PX are available on the SEC's
Public Reference Room may be obtained by calling website at www.sec.gov. The Fund's proxy voting
1-800-SEC-0330. A complete schedule of the record may also be obtained by calling
Fund's portfolio holdings is also available on 1-800-967-9009.
the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each
month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Beacon Funds, American Beacon High Yield Bond Fund, American Beacon
Enhanced Income Fund, American Beacon Intermediate Bond Fund and American Beacon
Short-Term Bond Fund are service marks of American Beacon Advisors, Inc.
AR 10/09
00071316
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
OCTOBER 31, 2009
EQUITY FUNDS
BALANCED FUND
LARGE CAP GROWTH FUND
MID-CAP VALUE FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
Contents
- --------
President's Message................................................ 1
American Beacon Funds' Performance................................. 2
Market and Performance Overviews................................... 3-23
American Beacon Schedules of Investments
Balanced Fund................................................... 12
Large Cap Growth Fund........................................... 22
Mid-Cap Value Fund.............................................. 25
Additional Information.......................................... Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
Investing in debt securities entails interest rate risk which is the risk that
debt securities will decrease in value with increases in market interest rates.
Investing in the securities of mid-capitalization companies involves greater
risk and the possibility of greater price volatility than investing in larger
capitalization and more established companies.
(PHOTO OF GENE L. NEEDLES, JR.)
FELLOW SHAREHOLDERS,
As an introduction to the Annual Report for the American Beacon Funds for
the 12-month period ended October 31, 2009, please let me take a moment to tell
you how pleased I am to have been serving as President and CEO of American
Beacon Advisors since April 15, 2009. I consider it a privilege to hold this
position, and I take its responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm
no stranger to the ups and downs that markets can deliver. As a fellow investor
and shareholder, I experience these trends in much the same way you do. The
majority of 2008 was difficult in many ways. However, when I took the helm at
American Beacon, I already had many reasons to be optimistic about what might
develop in 2009. As of October 31, 2009, my optimism has been largely confirmed.
For example, for the one-year period (as of 10/31/09), the American Beacon
Mid-Cap Value Fund-Institutional Class returned a robust 30.46%, and the
American Beacon Balanced Fund - Institutional Class returned 16.64%. Of course,
one year of performance doesn't tell the whole story, especially when you're
investing for the long term. Please note that the recent growth rate in the
stock market has helped to produce short-term returns that are not typical and
may not continue in the future.
Many of us have long-term goals, including retirement, driving our
investment decisions. While this 12-month period began amid a frightening
recessionary environment, we finished the year with increasing confidence that
markets have begun to stabilize, that liquidity has returned to the debt markets
and that equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective,
employing a buy-and-hold philosophy (consistent with each Fund's objectives),
and doing the right thing according to your risk tolerance and time horizon is
not always easy. But the professionals at American Beacon are dedicated to
working hard to help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and am pleased to be able to share my enthusiasm about the
path ahead with you.
A financial advisor can be an important ally in creating investment
success, so--as you review the enclosed annual report--please feel free to
discuss your thoughts and concerns with a trusted advisor. And, as always, the
professionals associated with the American Beacon Funds are grateful for the
opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
Gene L. Needles, Jr.
President
American Beacon Funds
1
DOMESTIC EQUITY MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
The past 12-month period saw a great deal of volatility in equity markets.
The first quarter of 2009 saw marginal improvements in U.S. housing, income and
consumption data. The U.S. Treasury partnered with private investors to purchase
toxic bank assets, which spurred a market rally late in the first quarter.
Soon after his January inauguration, President Obama attempted to blunt the
impact of the recession in the U.S. by signing an almost $800 billion economic
stimulus package, introducing a sizable mortgage relief program and initiating
stress tests for the nation's banks. Other stimulus packages were enacted
worldwide, representing an unprecedented commitment from governments across the
globe to stabilize the world's economies.
While the markets behaved sluggishly at the beginning of the first quarter,
they picked up speed following more encouraging data suggesting that the economy
had begun to move from recession to recovery. The global equity market rally
that began in early March and continued into May was one of the strongest
rebounds since the Great Depression era. Toward the end of the second quarter,
investors showed concern that the equity markets had moved too far ahead of
economic realities. The sharp equity rally lost momentum, as equity markets
pulled back modestly in June.
During the third quarter, stronger-than-expected corporate
earnings--combined with encouraging economic news--rekindled the rally to some
degree. The United States announced that gross domestic product (GDP) contracted
in the second quarter, but by a better-than-expected -1.0% (subsequently revised
to -0.7%). Meanwhile, strong demand for automobiles, fueled by the U.S.
Government's "Cash for Clunkers" program, produced the first signs of growth in
the American manufacturing industry since January 2008. The third quarter of
2009 saw housing numbers improve, increased merger and acquisition activity, and
evidence of capital markets normalization. In addition to stabilization,
liquidity was a major contributor to market strength.
Unfortunately, the domestic equity markets struggled with the effects of
rising unemployment, a tight credit environment, and weakness in commercial real
estate. Amid fears about job stability, the U.S. Consumer Confidence Index
declined to 53.1 in September from 54.5 in August 2009. Although the pace of job
losses slowed, total U.S. unemployment continued to rise in October 2009, along
with credit default and delinquency rates.
Third quarter corporate earnings results were mixed. Many companies were
quick to downsize in response to reduced demand. Corporate profits exceeded
reduced expectations due to cost cutting. It remains to be seen if increased
corporate profitability ultimately leads to more hiring and, thus, increased
consumer demand.
This pattern of positive developments tempered with set-backs is typical of
economic recoveries. Different types of economic activity require more time to
be effective. Some uncertainty about what will drive the markets going forward
remains, as the Federal Reserve Board (the Fed) may start to reverse and unwind
the unprecedented levels of support provided to the U.S. economy. The magnitude
of any consumer-led recovery remains difficult to gauge, as it is hard to
distinguish between a traditional cyclical recovery and potentially artificial
gains resulting from the U.S. Government's stimulus measures.
As the Fed's plans become clearer, the market may favor companies with
higher earnings and balance sheet quality. These companies with solid
fundamentals may provide better upside potential than more speculative
companies. It is unlikely that the lowest credit quality companies (without
earnings or dividends) will remain market leaders, since there are many
companies with excellent fundamentals selling for equally attractive prices.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON BALANCED FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Balanced Fund's Institutional Class returned 16.64% for the twelve
months ended October 31, 2009, outperforming the 60% Russell 1000(R) Value/40%
Barclays Capital Aggregate Index benchmark return of 9.20%, but trailing the
Lipper Mixed-Asset Target Allocation Growth Funds Index return of 16.95%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 10/31/09 $10,000
--------------------------- 10/31/99-
1 YEAR 5 YEARS 10 YEARS 10/31/09
------ ------- -------- ---------
Institutional Class(1, 5).. 16.64% 2.82% 4.89% $16,122
Investor Class(1, 5)....... 16.29% 2.53% 4.62% $15,706
Advisor Class(1, 2, 5)..... 16.05% 2.27% 4.48% $15,506
AMR Class(1, 5)............ 16.95% 3.06% 5.16% $16,547
Balanced Composite
Index(3)................ 9.20% 2.32% 3.87% $14,619
Russell 1000 Value Index
(4)..................... 4.79% -0.05% 1.70% $11,838
Barclays Capital
Aggregate Index(4)...... 13.79% 5.05% 6.31% $18,439
Lipper Mixed-Asset
Target Allocation
Growth Funds Index (4).. 16.95% 2.70% 3.38% $13,935
(1.) The Investor and Advisor Classes were formerly known as the PlanAhead and
Service Classes, respectively. Performance shown is historical and may not
be indicative of future returns. Please note that the recent growth rate in
the stock market has helped to produce short-term returns that are not
typical and may not continue in the future. Investment returns and
principal value will vary, and shares may be worth more or less at
redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares.
(2.) Fund performance for the five-year and ten-year periods represents the
total returns achieved by the Investor Class from 10/31/99 up to 5/31/05,
the inception date of the Advisor Class, and the returns of the Advisor
Class since its inception. Expenses of the Advisor Class are higher than
those of the Investor Class. Therefore, total returns shown may be higher
than they would have been had the Advisor Class been in existence since
10/31/99. A portion of the fees charged to the Advisor Class of the Fund
was waived in 2005. Performance prior to waiving fees was lower than actual
returns shown for 2005.
(3.) To reflect the Fund's allocation of its assets between investment grade
fixed-income securities and equity securities, the returns of the Russell
1000 Value Index and the Barclays Capital Aggregate Index have been
combined in a 60%/40% proportion.
(4.) The Russell 1000 Value Index is an unmanaged index of those stocks in the
Russell 1000 Index with lower price-to-book ratios and lower forecasted
growth values. Russell 1000 Value Index is a registered trade mark of Frank
Russell Company. The Barclays Capital Aggregate Index is a market value
weighted index of government, corporate, mortgage-backed and asset-backed
fixed-rate debt securities of all maturities. The Lipper Mixed-Asset Target
Allocation Growth Funds Index tracks the results of the 30 largest mutual
funds in the Lipper Mixed-Asset Target Allocation Growth Funds category.
Lipper is an independent mutual fund research and ranking service. One
cannot directly invest in an index.
(5.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Investor, Advisor and AMR Class
shares was 0.57%, 0.91%, 1.08% and 0.32%, respectively. The expense ratios
above may vary from the expense ratios presented in other sections of this
report that are based on expenses incurred during the period covered by
this report.
During the twelve-month period, the Fund's assets on average were invested
55% in equities (including equitized cash) and 45% in fixed-income securities,
ending the period with 62% in equities/equitized cash and 38% in fixed-income
securities.
The equity portion of the Fund (excluding equitized cash) returned 11.9%,
outperforming the Russell 1000(R) Value Index (the "Index") return of 4.8%. The
Fund's equities outperformed the Index as both stock selection and sector
allocation generated excess returns. Good stock selection in the Industrials,
Health Care, Materials, and Consumer Discretionary sectors contributed the most
value relative to the Index. In the Industrials sector, Honeywell International
(up 23.3%), Tyco International (up 51.7%), and 3M (up 18.4%) were a significant
source of added value. The largest contributors to positive performance in the
Health Care sector were Schering-Plough (up 89.8%), Merck (up 8.1%) and Eli
Lilly (up 8.3%). Alcoa (up 59.1%) and Air Products & Chemicals (up 40.3%) had
the largest impact on performance in the Materials sector. Strong performers in
the Consumer Discretionary sector included Target (up 23.1%) and McDonald's (up
6.2% for the period the Fund owned
3
PERFORMANCE OVERVIEW
AMERICAN BEACON BALANCED FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
the security). The aforementioned positive returns were slightly offset by poor
stock selection in the Information Technology sector where Hewlett Packard (up
21.6%) and CA (up 18.5%) had the largest negative impact.
During the twelve-month period, a four times overweight in Information
Technology, the best performing sector in the Index, and an underweight in
Financials, the worst performing sector in the Index, added value to the Fund's
relative returns through sector allocation. An overweight position in the
Industrials sector slightly detracted value from performance.
The fixed-income portion of the Fund returned 22.1% for the period,
outperforming the Barclays Capital Aggregate Index (the "Barclays Index") return
of 13.8%. The Fund's exposure to Agencies, Treasuries, and Corporates
contributed to most of the superior performance during the twelve-month period.
A near two times overweight in Corporates, the best performing sector in the
Barclays Index, combined with superior security selection among Corporate
issuers, ultimately accounted for a majority of the excess return.
The sub-advisors continue to focus on the disciplined selection of
attractive securities that should allow the Fund to benefit long term.
TOP TEN EQUITY HOLDINGS
% OF
EQUITIES
--------
ConocoPhillips........................................ 2.3%
JPMorgan Chase & Co................................... 1.9%
Bank of America Corp.................................. 1.6%
Wells Fargo & Co. .................................... 1.6%
Hewlett-Packard Co. .................................. 1.5%
International Business Machines Corp. ................ 1.3%
Pfizer, Inc. ......................................... 1.3%
Raytheon Co. ......................................... 1.3%
Honeywell International, Inc. ........................ 1.2%
Philip Morris International, Inc. .................... 1.2%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES
--------
Financials............................................ 21.4%
Industrials........................................... 15.5%
Information Technology................................ 12.3%
Energy................................................ 12.1%
Health Care........................................... 10.9%
Consumer Staples...................................... 8.4%
Consumer Discretionary................................ 7.6%
Utilities............................................. 5.4%
Telecommunication Services............................ 3.4%
Materials............................................. 3.0%
FIXED-INCOME SECTOR ALLOCATION
% OF
FIXED
INCOME
------
Corporate Bonds...................................... 47.3%
Mortgage-Backed...................................... 24.0%
Agency............................................... 15.4%
U.S. Treasury........................................ 11.5%
Asset-Backed......................................... 1.8%
4
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP GROWTH FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Large Cap Growth Fund returned 12.34% for
the twelve months ended October 31, 2009, trailing both the Russell 1000(R)
Growth Index (the "Index") return of 17.51% and the Lipper Large-Cap Growth
Funds Index return of 16.91%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/09
(PERFORMANCE GRAPH)
* Inception of Fund
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 10/31/09
---------------------------- VALUE OF
SINCE $10,000
INCEP. 7/31/00-
1 YEAR 5 YEARS (7/31/00) 10/31/09
------ ------- --------- --------
Institutional
Class(1, 3) .......... 12.34% -1.83% -6.55% $5,345
AMR Class(1, 3) ........ 12.46% -1.55% -6.35% $5,451
Russell 1000
Growth Index(2) ..... 17.51% 1.27% -5.22% $6,092
Lipper Large-Cap
Growth Funds
Index(2) ............. 16.91% 0.86% -5.60% $5,867
(1.) Performance shown is historical and may not be indicative of future
returns. Please note that the recent growth rate in the stock market has
helped to produce short-term returns that are not typical and may not
continue in the future. Investment returns and principal value will vary,
and shares may be worth more or less at redemption than at original
purchase. Performance shown is as of date indicated, and current
performance may be lower or higher than the performance data quoted. To
obtain performance as of the most recent month end, please visit
www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the
table above does not reflect the deduction of taxes a shareholder would pay
on distributions or the redemption of shares. A portion of the fees charged
to the Institutional Class of the Fund has been waived since 2004.
Performance prior to waiving the fees was lower than actual returns shown
for periods since 2004.
(2.) The Russell 1000 Growth Index is an unmanaged index of those stocks in the
Russell 1000 Index with higher price-to-book ratios and higher forecasted
growth values. Russell 1000 Growth Index and Russell 1000 Index are
registered trademarks of Frank Russell Company. The Lipper Large-Cap Growth
Funds Index tracks the results of the 30 largest mutual funds in the Lipper
Large-Cap Growth Funds category. Lipper is an independent mutual fund
research and ranking service. One cannot directly invest in an index.
(3.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional and AMR Class shares was 1.01% and
0.65%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
The Fund underperformed the Index primarily due to stock selection, though
sector allocation also detracted modestly from the Fund's relative returns. Most
of the Fund's underperformance was attributed to poor security selection in the
Health Care, Materials, Financials, Industrials, and Information Technology
sectors. In the Health Care sector, Amgen (down 9.0%) and Schering Plough (up
41.1% for the period the Fund owned the security) detracted the most relative
value. For the period the Fund owned the securities, Southern Copper (down 9.6%)
and Monsanto (down 24.2%) had the largest negative impact in the Materials
sector, while State Street (down 31.2%) and CME (down 20.8%) were the largest
detractors in the Financials sector. In the Industrials sector, positions in
General Dynamics (up 6.0%) and Emerson (down 22.6% for the period the Fund owned
the security) hurt performance most. The Fund's holdings in the Information
Technology sector that had the largest impact for the period the Fund owned the
securities were IBM (up 22.2%) and Adobe Systems (down 12.3%).
Overweight positions in the Health Care and Energy sectors detracted value
relative to the Index, as did an underweight in Information Technology, the best
performing sector in the Index. This was somewhat offset by being underweight in
the Financials sector.
Looking forward, the Fund's sub-advisors will continue to maintain a
disciplined, long-term approach to equity investing in larger stocks with
above-average growth potential.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP GROWTH FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
Apple Computer, Inc. .................. 3.0%
Cognizant Technology Solutions Corp. .. 2.6%
Hewlett-Packard Co..................... 2.5%
QUALCOMM, Inc. ........................ 2.4%
Cisco Systems, Inc. ................... 2.2%
Google, Inc. .......................... 2.0%
priceline.com, Inc. ................... 2.0%
Medco Health Solutions, Inc. .......... 1.9%
Microsoft Corp. ....................... 1.9%
Goldman Sachs Group, Inc. ............. 1.8%
SECTOR ALLOCATION
% OF
EQUITIES
--------
Information Technology................ 32.6%
Industrials........................... 14.5%
Consumer Discretionary................ 13.8%
Health Care........................... 13.3%
Financials............................ 11.6%
Energy................................ 7.6%
Materials............................. 2.4%
Consumer Staples...................... 2.0%
Utilities............................. 1.7%
Telecommunication Services............ 0.5%
6
PERFORMANCE OVERVIEW
AMERICAN BEACON MID-CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Mid-Cap Value Fund returned 30.46% for the
twelve months ended October 31, 2009. The Fund outperformed the Russell
Midcap(R) Value Index (the "Index") return of 14.52% and the Lipper Mid-Cap
Value Funds Index return of 20.66%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 6/30/04* THROUGH 10/31/09
(PERFORMANCE GRAPH)
* Inception of Fund
Annualized Total Returns
Periods Ended 10/31/09
--------------------------- Value of
Since $10,000
Incep. 6/30/04-
1 Year 5 Years (6/30/04) 10/31/09
------ ------- --------- --------
Institutional
Class(1, 3, 6) ... 30.46% 1.95% 2.34% $11,311
Investor Class
(1, 2, 6) ........ 29.98% 1.74% 2.13% $11,193
Advisor Class
(1, 4, 6) ........ 30.60% 1.78% 2.18% $11,217
AMR Class (1, 6)..... 30.56% 2.09% 2.47% $11,391
Russell Midcap
Value Index(5).... 14.52% 2.06% 2.69% $11,522
Lipper Mid-Cap
Value Funds
Index(5) ......... 20.66% 2.01% 1.99% $11,112
(1.) The Investor and Advisor Classes were formerly known as the PlanAhead and
Service Classes, respectively. Performance shown is historical and may not
be indicative of future returns. Please note that the recent growth rate in
the stock market has helped to produce short-term returns that are not
typical and may not continue in the future. Investment returns and
principal value will vary, and shares may be worth more or less at
redemption than at original purchase. Performance shown is as of date
indicated and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares. A
portion of the fees charged to the AMR Class of the Fund was waived through
2005. Performance prior to waiving fees was lower than the actual returns
shown for periods through 2005.
(2.) Fund performance for the five-year and since inception periods represents
the total returns achieved by the AMR Class from 6/30/04 up to 3/1/06, the
inception date of the Investor Class, and the returns of the Investor Class
since its inception. Expenses of the Investor Class are higher than those
of the AMR Class. As a result, total returns shown may be higher than they
would have been had the Investor Class been in existence since 6/30/04. A
portion of the fees charged to the Investor Class of the Fund has been
waived since 2006. Performance prior to waiving fees was lower than actual
returns shown since 2006.
(3.) Fund performance represents the total returns achieved by the AMR Class
from 6/30/04 up to 11/30/05, the inception date of the Institutional Class,
and the returns of the Institutional Class since its inception. Expenses of
the Institutional Class are higher than those of the AMR Class. As a
result, total returns shown may be higher than they would have been had the
Institutional Class been in existence since 6/30/04. A portion of the fees
charged to the Institutional Class of the Fund has been waived since 2007.
Performance prior to waiving fees was lower than actual returns shown since
2007.
(4.) Performance shown prior to the 6/29/07 inception of the Advisor Class is
that of the AMR Class from 6/30/04 to 11/30/05, the Institutional Class
from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 6/29/07.
Because the AMR, Institutional, and Investor Classes had lower expenses,
their performance was better than the Advisor Class would have realized
during the same period. A portion of the fees charged to the Advisor Class
of the Fund has been waived since 2007. Performance prior to waiving fees
was lower than the actual returns shown since 2007.
(5.) The Russell Midcap Value Index is an unmanaged index of those stocks in the
Russell Midcap Index with lower price-to-book ratios and lower forecasted
growth values. The Russell Midcap Index measures the performance of the 800
smallest companies in the Russell 1000 Index. Russell Midcap Value Index
and Russell 1000 Index are registered trademarks of Frank Russell Company.
The Lipper Mid-Cap Value Funds Index tracks the results of the 30 largest
mutual funds in the Lipper Mid-Cap Value Funds category. Lipper is an
independent mutual fund research and ranking service. One cannot directly
invest in an index.
(6.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Investor, Service, and AMR Class
shares was 1.17%, 1.33%, 2.05%, and 0.83%, respectively. The expense ratios
above may vary from the expense ratios presented in other sections of this
report that are based on expenses incurred during the period covered by
this report.
The Fund outperformed the Index due to both stock selection and sector
allocation.
Holdings in the Financials, Information Technology, and Utilities sectors
had the largest positive impact on performance through stock selection. In the
Financials sector, Capital One (up 72.6% for the period the Fund owned the
security), Delphi Financial Group (up 41.1%) and Conseco (up 180.1%) added the
most value to the Fund's return relative to the Index. Motorola (up 67.0%) and
Alcatel Lucent (up 45.4%) were the largest contributors in the Information
Technology sector, as was PNM Resources (up 7.7% for the period the Fund owned
the security) in the Utilities sector.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON MID-CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
This excess performance, in the previously mentioned sectors, was slightly
offset by poor security selection in the Health Care sector where Mednax (up
62.8% for the period the Fund owned the security) and Quest Diagnostics (up
20.6%) were the largest detractors.
Significant overweight positions in the Consumer Discretionary, Information
Technology, and Health Care sectors, the three best performing sectors in the
Index, added value through sector allocation. An underweight in Financials, the
worst performing sector in the Index, also generated excess returns.
The sub-advisors' philosophy of investing in undervalued companies that
exhibit improving profitability and earnings growth potential should allow the
Fund to benefit longer term.
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
L-3 Communications Holdings, Inc. ... 2.5%
PNC Financial Services Group, Inc. .. 2.2%
Cardinal Health, Inc. ............... 2.0%
Fifth Third Bancorp. ................ 1.9%
Capital One Financial Corp. ......... 1.7%
Murphy Oil Corp. .................... 1.6%
Computer Sciences Corp. ............. 1.5%
Stanley Works. ...................... 1.5%
Spirit Aerosystems Holdings, Inc. ... 1.5%
Eaton Corp. ......................... 1.4%
SECTOR ALLOCATION
% OF
EQUITIES
--------
Financials.......................... 25.5%
Consumer Discretionary.............. 20.1%
Industrials......................... 14.0%
Health Care......................... 11.4%
Information Technology.............. 11.1%
Utilities........................... 8.8%
Energy.............................. 4.6%
Consumer Staples.................... 4.5%
8
FUND EXPENSES - ACTUAL
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs, including redemption fees if applicable, and (2) ongoing costs, including
management fees, administrative service fees, distribution (12b-1) fees, and
other Fund expenses. The examples below are intended to help you understand the
ongoing cost (in dollars) of investing in a particular Fund and to compare these
costs with the ongoing costs of investing in other mutual funds. The examples
are based on an investment of $1,000 invested at the beginning of the period in
each Class and held for the entire period from May 1, 2009 through October 31,
2009.
ACTUAL EXPENSES
The following tables provide information about actual account values and
actual expenses. You may use the information on this page, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the "Expenses Paid During
Period" for the applicable Fund to estimate the expenses you paid on your
account during this period. Shareholders of the Investor and Institutional
Classes that invest in a Fund through an IRA may be subject to a custodial IRA
fee of $12 that is typically deducted each December. If your account was subject
to a custodial IRA fee during the period, your costs would have been $12 higher.
Large Cap
Balanced Growth Mid-Cap
Institutional Class Fund Fund Value Fund
- ------------------- --------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,180.63 $1,158.51 $1,261.67
Expenses Paid During Period 5/1/09-
10/31/09 * ........................ $ 3.41 $ 5.17 $ 5.59
Annualized Expense Ratio ............. 0.62% 0.95% 0.98%
Balanced Mid-Cap
Investor Class Fund Value Fund
- -------------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,178.50 $1,259.20
Expenses Paid During Period 5/1/09-
10/31/09 * ........................ $ 5.22 $ 7.00
Annualized Expense Ratio ............. 0.95% 1.23%
Balanced Mid-Cap
Advisor Class Fund Value Fund
- ------------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,177.38 $1,260.50
Expenses Paid During Period 5/1/09-
10/31/09 * ........................ $ 6.15 $ 9.17
Annualized Expense Ratio ............. 1.12% 1.61%
Balanced Large Cap Mid-Cap
AMR Class Fund Growth Fund Value Fund
- --------- --------- ----------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $ 1,000.00 $1,000.00
Ending Account Value 10/31/2009 ...... $1,181.82 $ 1,160.10 $1,262.90
Expenses Paid During Period 5/1/09-
10/31/09 * ........................ $ 2.03 $ 3.65 $ 4.56
Annualized Expense Ratio ............. 0.37% 0.67% 0.80%
- ----------
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the
half- year period.
9
FUND EXPENSES - HYPOTHETICAL
OCTOBER 31, 2009 (UNAUDITED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The following tables provide information about hypothetical account values
and hypothetical expenses based on a Fund's actual expense ratio and an assumed
5% per year rate of return before expenses (not the Fund's actual return). You
may compare the ongoing costs of investing in a particular Fund with other funds
by contrasting this 5% hypothetical example and the 5% hypothetical examples
that appear in the shareholder reports of the other funds. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. Shareholders of the
Investor and Institutional Classes that invest in a Fund through an IRA may be
subject to a custodial IRA fee of $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, such as redemption fees as applicable. Similarly, the expense examples for
other funds do not reflect any transaction costs charged by those funds, such as
sales charges (loads), redemption fees or exchange fees. Therefore, the
following tables are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
Large Cap
Balanced Growth Mid-Cap
Institutional Class Fund Fund Value Fund
- ------------------- --------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,022.08 $1,020.42 $1,020.27
Expenses Paid During Period 5/1/09-
10/31/09* ......................... $ 3.16 $ 4.84 $ 4.99
Annualized Expense Ratio ............. 0.62% 0.95% 0.98%
Balanced Mid-Cap
Investor Class Fund Value Fund
- -------------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,020.42 $1,019.00
Expenses Paid During Period 5/1/09-
10/31/09* ......................... $ 4.84 $ 6.26
Annualized Expense Ratio ............. 0.95% 1.23%
Balanced Mid-Cap
Advisor Class Fund Value Fund
- ------------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,019.56 $1,017.09
Expenses Paid During Period 5/1/09-
10/31/09* ......................... $ 5.70 $ 8.19
Annualized Expense Ratio ............. 1.12% 1.61%
Large Cap
Balanced Growth Mid-Cap
AMR Class Fund Fund Value Fund
- --------- --------- --------- ----------
Beginning Account Value 5/1/09 ....... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 10/31/09 ........ $1,023.34 $1,021.83 $1,021.17
Expenses Paid During Period 5/1/09-
10/31/09* ......................... $ 1.89 $ 3.41 $ 4.08
Annualized Expense Ratio ............. 0.37% 0.67% 0.80%
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the
half year period.
10
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds (comprised of American Beacon Balanced Fund, American
Beacon Large Cap Growth Fund, and American Beacon Mid-Cap Value Fund)
(collectively the "Funds"), including the schedules of investments, as of
October 31, 2009, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of each Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds at October 31, 2009, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/Ernst & Young LLP
Dallas, Texas
December 23, 2009
11
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 57.15%
CONSUMER DISCRETIONARY - 4.35%
HOTELS, RESTAURANTS & LEISURE - 1.14%
Carnival Corp. ................................... 117,400 $ 3,419
McDonald's Corp. ................................. 57,500 3,370
Wyndham Worldwide Corp. .......................... 143,200 2,441
--------
9,230
--------
INTERNET & CATALOG RETAIL - 0.13%
eBay, Inc. ## .................................... 48,100 1,071
--------
MEDIA - 1.28%
CBS Corp. ........................................ 190,100 2,237
Comcast Corp. .................................... 128,600 1,803
Interpublic Group of Cos., Inc. ## ............... 211,200 1,271
Time Warner Cable, Inc. .......................... 45,400 1,791
Walt Disney Co. Ltd. ............................. 121,000 3,312
--------
10,414
--------
MULTILINE RETAIL - 0.89%
J.C. Penney Company, Inc. ........................ 65,100 2,157
Target Corp. ..................................... 67,700 3,279
Wal-Mart Stores, Inc. ............................ 36,900 1,833
--------
7,269
--------
SPECIALTY RETAIL - 0.91%
Gap, Inc. ........................................ 51,700 1,104
The Home Depot, Inc. ............................. 180,950 4,540
Limited Brands, Inc. ............................. 100,400 1,767
--------
7,411
--------
TOTAL CONSUMER DISCRETIONARY ........................ 35,395
--------
CONSUMER STAPLES - 4.83%
BEVERAGES - 1.05%
Coca-Cola Co. .................................... 29,800 1,589
Diageo plc, ADR .................................. 68,200 4,434
PepsiCo, Inc. .................................... 41,200 2,495
--------
8,518
--------
FOOD & DRUG RETAILING - 0.58%
Safeway, Inc. .................................... 166,500 3,718
Sysco Corp. ...................................... 38,600 1,021
--------
4,739
--------
FOOD PRODUCTS - 0.40%
H.J. Heinz Co. ................................... 46,500 1,871
Kraft Foods, Inc. ................................ 49,600 1,365
--------
3,236
--------
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
HOUSEHOLD PRODUCTS - 0.27%
The Procter & Gamble Co. ......................... 38,000 $ 2,204
--------
TOBACCO - 2.53%
Altria Group, Inc. ............................... 103,000 1,865
Imperial Tobacco Group plc, ADR .................. 121,900 7,129
Lorillard, Inc. .................................. 20,600 1,601
Philip Morris International, Inc. ................ 210,400 9,964
--------
20,559
--------
TOTAL CONSUMER STAPLES .............................. 39,256
--------
ENERGY - 6.91%
OIL & GAS - 6.91%
BP plc, ADR ...................................... 78,300 4,433
Chevron Corp. .................................... 101,428 7,763
ConocoPhillips ................................... 377,176 18,927
Devon Energy Corp. ............................... 87,900 5,688
Duke Energy Corp. ................................ 178,000 2,816
Exxon Mobil Corp. ................................ 74,300 5,325
Occidental Petroleum Corp. ....................... 63,200 4,796
Royal Dutch Shell plc, ADR ....................... 110,500 6,427
--------
TOTAL ENERGY ........................................ 56,175
--------
FINANCIALS - 12.24%
BANKS - 7.58%
Bank of America Corp. ............................ 916,080 13,357
Bank of New York Mellon Corp. .................... 55,700 1,485
Citigroup, Inc. .................................. 791,003 3,235
Comerica, Inc. ................................... 25,800 716
JP Morgan Chase & Co. ............................ 365,834 15,281
KeyCorp .......................................... 235,457 1,269
PNC Financial Services Group, Inc. ............... 197,758 9,678
State Street Corp. ............................... 9,600 403
SunTrust Banks, Inc. ............................. 38,900 743
U.S. Bancorp ..................................... 118,560 2,753
Washington Mutual, Inc. .......................... 468,800 --
Wells Fargo & Co. ................................ 461,898 12,712
--------
61,632
--------
DIVERSIFIED FINANCIALS - 1.56%
American Express Co. ............................. 178,200 6,209
Capital One Financial Corp. ...................... 69,700 2,551
Morgan Stanley Dean Witter & Co. ................. 71,300 2,290
SLM Corp. ## ..................................... 165,200 1,602
--------
12,652
--------
INSURANCE - 3.10%
ACE Ltd. ......................................... 77,500 3,980
See accompanying notes
12
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Allstate Corp. ................................... 77,400 $ 2,289
Genworth Financial, Inc. ......................... 194,300 2,064
Hartford Financial Services Group, Inc. .......... 33,000 809
Lincoln National Corp. ........................... 21,500 512
MetLife, Inc. .................................... 143,788 4,893
Prudential Financial, Inc. ....................... 29,400 1,330
Travelers Cos., Inc. ............................. 108,400 5,397
XL Capital Ltd. .................................. 237,900 3,904
--------
25,178
--------
TOTAL FINANCIALS .................................... 99,462
--------
HEALTH CARE - 6.23%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.55%
Baxter International, Inc. ....................... 47,700 2,578
CareFusion Corp. ## .............................. 34,550 773
Zimmer Holdings, Inc. ## ......................... 21,300 1,120
--------
4,471
--------
HEALTH CARE PROVIDERS & SERVICES - 1.29%
Cardinal Health, Inc. ............................ 69,100 1,958
CIGNA Corp. ...................................... 153,900 4,285
UnitedHealth Group, Inc. ......................... 72,300 1,876
WellPoint, Inc. ## ............................... 50,900 2,380
--------
10,499
--------
PHARMACEUTICALS - 4.39%
Amgen, Inc. ## ................................... 22,300 1,198
Bristol-Myers Squibb Co. ......................... 414,500 9,036
Eli Lilly & Co. .................................. 171,000 5,816
Johnson & Johnson ................................ 62,400 3,685
Merck & Co., Inc. ................................ 127,900 3,956
Merck & Co., Inc. ................................ 52,500 1,481
Pfizer, Inc. ..................................... 613,754 10,452
--------
35,624
--------
TOTAL HEALTH CARE ................................... 50,594
--------
INDUSTRIALS - 8.87%
AEROSPACE & DEFENSE - 2.78%
Boeing Co. ....................................... 95,000 4,541
Lockheed Martin Corp. ............................ 37,900 2,607
Northrop Grumman Corp. ........................... 62,500 3,133
Raytheon Co. ..................................... 229,100 10,374
United Technologies Corp. ........................ 30,800 1,893
--------
22,548
--------
AIR FREIGHT & COURIERS - 0.48%
FedEx Corp. ...................................... 54,100 3,932
--------
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
INDUSTRIAL CONGLOMERATES - 3.12%
3M Co. ........................................... 61,800 $ 4,547
General Electric Co. ............................. 447,300 6,378
Honeywell International, Inc. .................... 281,600 10,107
Textron, Inc. .................................... 100,000 1,778
Tyco International Ltd. .......................... 75,725 2,540
--------
25,350
--------
MACHINERY - 2.14%
Caterpillar, Inc. ................................ 40,000 2,202
Cummins, Inc. .................................... 64,600 2,782
Eaton Corp. ...................................... 34,400 2,080
Illinois Tool Works, Inc. ........................ 72,200 3,315
ITT Industries, Inc. ............................. 77,000 3,904
PACCAR, Inc. ..................................... 82,300 3,079
--------
17,362
--------
TRANSPORTATION INFRASTRUCTURE - 0.35%
Burlington Northern Santa Fe Corp. ............... 38,000 2,862
--------
TOTAL INDUSTRIALS 72,054
--------
INFORMATION TECHNOLOGY - 7.03%
COMMUNICATIONS EQUIPMENT - 0.70%
Nokia Corp., ADR ................................. 450,200 5,677
--------
COMPUTERS & PERIPHERALS - 2.98%
Dell, Inc. ## .................................... 137,000 1,985
Hewlett-Packard Co. .............................. 251,100 11,917
International Business Machines Corp. ............ 85,600 10,325
--------
24,227
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS -1.27%
Intel Corp. ...................................... 364,600 6,967
Tyco Electronics Ltd. ............................ 155,325 3,301
--------
10,268
--------
IT CONSULTING & SERVICES - 0.09%
Accenture plc .................................... 20,400 756
--------
SOFTWARE - 1.99%
CA, Inc. ......................................... 253,974 5,313
Microsoft Corp. .................................. 317,300 8,799
Oracle Corp. ..................................... 98,600 2,080
--------
16,192
--------
TOTAL INFORMATION TECHNOLOGY 57,120
--------
MATERIALS - 1.70%
CHEMICALS - 1.61%
Air Products & Chemicals, Inc. ................... 24,000 1,851
See accompanying notes
13
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Dow Chemical Co. ................................. 68,300 $ 1,604
E. I. du Pont de Nemours & Co. ................... 173,900 5,533
Eastman Chemical Co. ............................. 40,600 2,132
PPG Industries, Inc. ............................. 35,600 2,009
--------
13,129
--------
METALS & MINING - 0.09%
Alcoa, Inc. ...................................... 56,200 698
--------
TOTAL MATERIALS 13,827
--------
TELECOMMUNICATION SERVICES - 1.93%
DIVERSIFIED TELECOMMUNICATION - 1.93%
AT&T, Inc. ....................................... 260,477 6,687
Verizon Communications, Inc. ..................... 150,428 4,451
Vodafone Group plc, ADR .......................... 206,000 4,571
--------
TOTAL TELECOMMUNICATION SERVICES 15,709
--------
UTILITIES - 3.06%
ELECTRIC UTILITIES - 2.50%
CenterPoint Energy, Inc. ......................... 173,900 2,191
Constellation Energy Group, Inc. ................. 66,100 2,044
Dominion Resources, Inc. ......................... 105,300 3,590
Edison International ............................. 65,900 2,097
Entergy Corp. .................................... 30,900 2,371
Exelon Corp. ..................................... 84,800 3,982
FPL Group, Inc. .................................. 44,400 2,180
Public Service Enterprise Group, Inc. ............ 64,000 1,907
--------
20,362
--------
GAS UTILITIES - 0.56%
Spectra Energy Corp. ............................. 236,100 4,514
--------
TOTAL UTILITIES 24,876
--------
TOTAL COMMON STOCKS 464,468
--------
PAR
AMOUNT
----------
CORPORATE OBLIGATIONS - 17.93%
AEROSPACE & DEFENSE - 0.07%
Raytheon Co.,
5.375%, Due 4/1/2013 .......................... $ 550 601
--------
BANKS - 3.19%
Bank of America Corp.,
6.50%, Due 8/1/2016 ........................... 2,090 2,236
7.80%, Due 9/15/2016 .......................... 700 767
6.00%, Due 9/1/2017 ........................... 400 408
Bank of New York Mellon Corp.,
4.95%, Due 11/1/2012 .......................... 355 385
5.125%, Due 8/27/2013 ......................... 400 433
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Bank One Corp.,
5.90%, Due 11/15/2011 ......................... $ 820 $ 882
4.90%, Due 4/30/2015 .......................... 250 261
Barclays Bank plc,
6.75%, Due 5/22/2019 .......................... 350 394
Bear Stearns Cos., Inc.,
6.40%, Due 10/2/2017 .......................... 555 607
7.25%, Due 2/1/2018 ........................... 340 389
BP Capital Markets plc,
3.125%, Due 3/10/2012 ......................... 415 429
3.875%, Due 3/10/2015 ......................... 200 208
Citigroup, Inc.,
6.375%, Due 8/12/2014 ......................... 1,170 1,241
5.50%, Due 10/15/2014 ......................... 550 564
6.125%, Due 11/21/2017 ........................ 760 776
8.50%, Due 5/22/2019 .......................... 650 760
Credit Suisse N.Y.,
3.45%, Due 7/2/2012 ........................... 700 723
5.30%, Due 8/13/2019 .......................... 325 336
Deutsche Bank AG,
3.875%, Due 8/18/2014 ......................... 325 331
Fifth Third Bancorp,
8.25%, Due 3/1/2038 ........................... 1,500 1,444
Goldman Sachs Group, Inc.,
5.35%, Due 1/15/2016 .......................... 725 761
6.25%, Due 9/1/2017 ........................... 650 695
5.95%, Due 1/18/2018 .......................... 280 295
6.75%, Due 10/1/2037 .......................... 1,402 1,477
ING Bank, NV,
5.125%, Due 5/1/2015 +++ ...................... 450 449
JP Morgan Chase & Co.,
3.70%, Due 1/20/2015 .......................... 1,650 1,658
6.00%, Due 1/15/2018 .......................... 500 535
Korea Development Bank,
8.00%, Due 1/23/2014 .......................... 900 1,028
Merrill Lynch & Co., Inc.,
6.40%, Due 8/28/2017 .......................... 340 351
6.875%, Due 4/25/2018 ......................... 875 942
6.11%, Due 1/29/2037 .......................... 365 345
Morgan Stanley,
7.30%, Due 5/13/2019 .......................... 350 392
5.625%, Due 9/23/2019 ......................... 350 352
Rabobank Nederland NV,
4.20%, Due 5/13/2014 +++ ...................... 200 208
State Street Corp.,
4.30%, Due 5/30/2014 .......................... 290 305
UBS AG,
5.875%, Due 12/20/2017 ........................ 325 334
See accompanying notes
14
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Wachovia Corp.,
5.75%, Due 2/1/2018 ........................... $ 775 $ 810
Washington Mutual Finance Corp.,
6.875%, Due 5/15/2011 ......................... 420 443
Wells Fargo & Co.,
5.25%, Due 10/23/2012 ......................... 350 374
3.75%, Due 10/1/2014 .......................... 350 350
5.625%, Due 12/11/2017 ........................ 250 260
--------
25,938
--------
BASIC MATERIALS - 0.10%
E. I. du Pont de Nemours & Co.,
5.875%, Due 1/15/2014 ......................... 560 623
Lubrizol Corp.,
8.875%, Due 2/1/2019 .......................... 185 231
--------
854
--------
COMMUNICATIONS - 1.82%
Alltel Corp.,
7.00%, Due 7/1/2012 ........................... 300 333
British Telecommunications plc,
9.125%, Due 12/15/2010 # ...................... 575 619
Comcast Cable Communications Holdings, Inc.,
8.375%, Due 3/15/2013 ......................... 128 149
Comcast Corp.,
5.30%, Due 1/15/2014 .......................... 410 437
5.875%, Due 2/15/2018 ......................... 305 322
6.45%, Due 3/15/2037 .......................... 2,630 2,696
6.55%, Due 7/1/2039 ........................... 350 365
France Telecom S.A.,
4.375%, Due 7/8/2014 .......................... 465 491
Nokia Corp.,
5.375%, Due 5/15/2019 ......................... 600 620
Rogers Communications, Inc.,
6.80%, Due 8/15/2018 .......................... 350 394
Telecom Italia Capital SA,
4.95%, Due 9/30/2014 .......................... 475 493
Telefonica Emisiones SAU,
5.984%, Due 6/20/2011 ......................... 380 404
4.949%, Due 1/15/2015 ......................... 515 545
6.421%, Due 6/20/2016 ......................... 350 388
Time Warner Cable, Inc.,
8.25%, Due 2/14/2014 .......................... 300 352
5.85%, Due 5/1/2017 ........................... 895 941
7.30%, Due 7/1/2038 ........................... 1,920 2,163
Viacom, Inc.,
6.875%, Due 4/30/2036 ......................... 2,880 3,040
--------
14,752
--------
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
CONSUMER DISCRETIONARY - 0.44%
Anheuser-Busch InBev Worldwide, Inc.,
3.00%, Due 10/15/2012 ......................... $ 470 $ 474
8.00%, Due 11/15/2039 +++ ..................... 125 155
Best Buy Co., Inc.,
6.75%, Due 7/15/2013 .......................... 415 446
Lowe's Companies, Inc.,
5.50%, Due 10/15/2035 ......................... 210 210
6.65%, Due 9/15/2037 .......................... 170 196
Wal-Mart Stores, Inc.,
7.55%, Due 2/15/2030 .......................... 425 547
6.50%, Due 8/15/2037 .......................... 1,340 1,551
--------
3,579
--------
CONSUMER STAPLES - 0.77%
Altria Group, Inc.,
9.70%, Due 11/10/2018 ......................... 365 449
Coca-Cola Enterprises, Inc.,
7.375%, Due 3/3/2014 .......................... 175 206
Costco Wholesale Corp.,
5.30%, Due 3/15/2012 .......................... 825 894
Dr Pepper Snapple Group, Inc.,
6.82%, Due 5/1/2018 ........................... 250 286
Express Scripts, Inc.,
6.25%, Due 6/15/2014 .......................... 570 626
Kellogg Co.,
4.25%, Due 3/6/2013 ........................... 500 528
Kraft Foods, Inc.,
7.00%, Due 8/11/2037 .......................... 1,580 1,726
Kroger Co.,
7.50%, Due 1/15/2014 .......................... 190 219
Lorillard Tobacco Co.,
8.125%, Due 6/23/2019 ......................... 310 345
Mead Johnson Nutrition Co.,
4.90%, Due 11/1/2019 +++ ...................... 405 404
Safeway, Inc.,
6.25%, Due 3/15/2014 .......................... 535 591
--------
6,274
--------
ENERGY - 1.67%
Cameron International Corp.,
6.375%, Due 7/15/2018 ......................... 215 231
Canadian Natural Resources Ltd.,
6.70%, Due 7/15/2011 .......................... 410 441
6.25%, Due 3/15/2038 .......................... 365 386
ConocoPhillips,
4.60%, Due 1/15/2015 .......................... 900 966
5.20%, Due 5/15/2018 .......................... 425 449
5.75%, Due 2/1/2019 ........................... 310 339
6.50%, Due 2/1/2039 ........................... 705 789
See accompanying notes
15
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Consolidated Natural Gas Co.,
6.00%, Due 10/15/2010 ......................... $ 495 $ 515
Energy Transfer Partners LP,
8.50%, Due 4/15/2014 .......................... 605 703
9.00%, Due 4/15/2019 .......................... 260 314
Enterprise Products Operating LLC,
6.125%, Due 10/15/2039 ........................ 310 311
EOG Resources Canada, Inc.,
4.75%, Due 3/15/2014 +++ ...................... 350 372
EQT Corp.,
8.125%, Due 6/1/2019 .......................... 190 218
FirstEnergy Solutions Corp.,
4.80%, Due 2/15/2015 +++ ...................... 175 179
Marathon Oil Corp.,
6.00%, Due 10/1/2017 .......................... 415 440
Petrobras International Finance Co.,
6.875%, Due 1/20/2040 ......................... 125 125
Shell International Finance BV,
6.375%, Due 12/15/2038 ........................ 1,760 2,043
Spectra Energy Capital Corp.,
5.65%, Due 3/1/2020 ........................... 310 319
TransCanada PipeLines Ltd.,
7.625%, Due 1/15/2039 ......................... 340 434
Transocean, Inc.,
6.80%, Due 3/15/2038 .......................... 3,170 3,625
Valero Energy Corp.,
9.375%, Due 3/15/2019 ......................... 155 183
6.625%, Due 6/15/2037 ......................... 185 170
--------
13,552
--------
FINANCE - 1.26%
American Express Co.,
8.15%, Due 3/19/2038 .......................... 325 411
American Express Credit Corp.,
5.875%, Due 5/2/2013 .......................... 475 510
Ameriprise Financial, Inc.,
5.35%, Due 11/15/2010 ......................... 775 795
CME Group, Inc.,
5.40%, Due 8/1/2013 ........................... 735 796
Countrywide Home Loans, Inc.,
4.00%, Due 3/22/2011 .......................... 140 143
General Electric Capital Corp.,
5.65%, Due 6/9/2014 ........................... 1,050 1,134
5.625%, Due 5/1/2018 .......................... 765 787
6.00%, Due 8/7/2019 ........................... 350 368
5.875%, Due 1/14/2038 ......................... 625 597
HSBC Finance Corp.,
5.25%, Due 1/14/2011 .......................... 1,400 1,451
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
International Lease Finance Corp.,
5.75%, Due 6/15/2011 .......................... $ 475 $ 427
Novartis Capital Corp.,
4.125%, Due 2/10/2014 ......................... 560 591
Novartis Securities Investment Ltd.,
5.125%, Due 2/10/2019 ......................... 1,164 1,239
PNC Funding Corp.,
4.25%, Due 9/21/2015 .......................... 460 461
Thomson Reuters Corp.,
4.70%, Due 10/15/2019 ......................... 350 352
TIAA Global Markets, Inc.,
5.125%, Due 10/10/2012 +++ .................... 200 215
--------
10,277
--------
HEALTH CARE - 0.65%
Covidien International Finance SA,
5.45%, Due 10/15/2012 ......................... 360 391
6.55%, Due 10/15/2037 ......................... 1,500 1,748
UnitedHealth Group, Inc.,
5.25%, Due 3/15/2011 .......................... 765 799
6.625%, Due 11/15/2037 ........................ 2,000 2,022
6.875%, Due 2/15/2038 ......................... 285 305
--------
5,265
--------
INDUSTRIALS - 2.46%
American Honda Finance Corp.,
4.625%, Due 4/2/2013 +++ ...................... 425 435
Amphenol Corp.,
4.75%, Due 11/15/2014 ......................... 240 240
Burlington Northern Santa Fe Corp.,
5.75%, Due 3/15/2018 .......................... 425 460
Canadian National Railway Co.,
5.55%, Due 5/15/2018 .......................... 350 382
5.55%, Due 3/1/2019 ........................... 175 192
Caterpillar Financial Services Corp.,
4.85%, Due 12/7/2012 .......................... 265 283
Con-way, Inc.,
8.875%, Due 5/1/2010 .......................... 1,850 1,870
CRH America, Inc.,
6.00%, Due 9/30/2016 .......................... 835 864
Daimler Finance NA LLC,
7.75%, Due 1/18/2011 .......................... 1,000 1,062
5.875%, Due 3/15/2011 ......................... 450 469
5.75%, Due 9/8/2011 ........................... 550 581
Deere & Co.,
4.375%, Due 10/16/2019 ........................ 350 352
Eaton Corp.,
5.60%, Due 5/15/2018 .......................... 340 362
FedEx Corp.,
8.00%, Due 1/15/2019 .......................... 900 1,090
See accompanying notes
16
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Home Depot, Inc.,
5.20%, Due 3/1/2011 ........................... $ 445 $ 465
Honeywell International, Inc.,
4.25%, Due 3/1/2013 ........................... 1,080 1,143
John Deere Capital Corp.,
5.40%, Due 10/17/2011 ......................... 650 700
Koninklijke Philips Electronics NV,
5.75%, Due 3/11/2018 .......................... 335 360
L-3 Communications Corp.,
5.20%, Due 10/15/2019 +++ ..................... 190 192
Norfolk Southern Corp.,
5.75%, Due 4/1/2018 ........................... 425 462
Northrop Grumman Corp.,
5.05%, Due 8/1/2019 ........................... 150 158
Tyco Electronics Group SA,
6.55%, Due 10/1/2017 .......................... 2,057 2,159
7.125%, Due 10/1/2037 ......................... 1,750 1,795
Tyco International Finance SA,
4.125%, Due 10/15/2014 ........................ 175 179
8.50%, Due 1/15/2019 .......................... 385 470
Unilever Capital Corp.,
7.125%, Due 11/1/2010 ......................... 2,000 2,132
Union Pacific Corp.,
7.875%, Due 1/15/2019 ......................... 350 432
United Technologies Corp.,
6.125%, Due 2/1/2019 .......................... 190 214
6.125%, Due 7/15/2038 ......................... 210 233
Waste Management, Inc.,
7.375%, Due 3/11/2019 ......................... 255 297
--------
20,033
--------
INSURANCE - 0.78%
Aegon Funding Corp.,
5.75%, Due 12/15/2020 ......................... 450 426
American International Group, Inc.,
5.85%, Due 1/16/2018 .......................... 550 414
6.25%, Due 5/1/2036 ........................... 425 287
John Hancock Global Funding II,
7.90%, Due 7/2/2010 +++ ....................... 25 26
Liberty Mutual Insurance Co.,
7.875%, Due 10/15/2026 +++ .................... 1,500 1,374
Lincoln National Corp.,
4.75%, Due 2/15/2014 .......................... 245 248
MetLife, Inc.,
5.375%, Due 12/15/2012 ........................ 535 576
6.375%, Due 6/15/2034 ......................... 350 379
Metropolitan Life Global Funding I,
4.625%, Due 8/19/2010 +++ ..................... 900 918
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Pricoa Global Funding I,
5.40%, Due 10/18/2012 +++ ..................... $ 175 $ 184
Prudential Financial, Inc.,
4.50%, Due 7/15/2013 .......................... 550 559
5.10%, Due 9/20/2014 .......................... 550 567
Willis North America, Inc.,
6.20%, Due 3/28/2017 .......................... 360 352
--------
6,310
--------
PHARMACEUTICALS - 1.19%
Amgen, Inc.,
6.90%, Due 6/1/2038 ........................... 1,480 1,794
AstraZeneca plc,
6.45%, Due 9/15/2037 .......................... 1,880 2,182
Biogen Idec, Inc.,
6.875%, Due 3/1/2018 .......................... 1,500 1,637
Bristol-Myers Squibb Co.,
5.45%, Due 5/1/2018 ........................... 250 272
GlaxoSmithKline Capital, Inc.,
5.65%, Due 5/15/2018 .......................... 250 275
6.375%, Due 5/15/2038 ......................... 1,020 1,157
Hospira, Inc.,
6.05%, Due 3/30/2017 .......................... 360 379
Merck & Co., Inc.,
5.85%, Due 6/30/2039 .......................... 180 196
Pfizer, Inc.,
4.45%, Due 3/15/2012 .......................... 770 817
Wyeth Corp.,
5.50%, Due 2/1/2014 ........................... 890 975
--------
9,684
--------
REAL ESTATE - 0.22%
Equity Residential,
5.125%, Due 3/15/2016 ......................... 365 360
ProLogis,
5.625%, Due 11/15/2016 ........................ 550 506
Simon Property Group LP,
5.30%, Due 5/30/2013 .......................... 425 440
5.75%, Due 12/1/2015 .......................... 460 475
--------
1,781
--------
SOVEREIGN - 0.05%
Province of Ontario Canada,
4.10%, Due 6/16/2014 .......................... 350 370
--------
TECHNOLOGY - 1.04%
Cisco Systems, Inc.,
5.90%, Due 2/15/2039 .......................... 1,420 1,511
Computer Sciences Corp.,
5.50%, Due 3/15/2013 .......................... 255 269
See accompanying notes
17
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
6.50%, Due 3/15/2018 .......................... $ 495 $ 541
Dell, Inc.,
3.375%, Due 6/15/2012 ......................... 290 300
5.875%, Due 6/15/2019 ......................... 90 97
Hewlett-Packard Co.,
4.25%, Due 2/24/2012 .......................... 585 618
4.50%, Due 3/1/2013 ........................... 425 455
6.125%, Due 3/1/2014 .......................... 460 517
International Business Machines Corp.,
4.75%, Due 11/29/2012 ......................... 480 521
7.625%, Due 10/15/2018 ........................ 770 953
ITT Corp.,
4.90%, Due 5/1/2014 ........................... 845 896
Oracle Corp.,
5.00%, Due 7/8/2019 ........................... 350 369
6.50%, Due 4/15/2038 .......................... 1,055 1,202
Xerox Corp.,
5.65%, Due 5/15/2013 .......................... 75 79
8.25%, Due 5/15/2014 .......................... 75 86
--------
8,414
--------
TELEPHONE - 0.87%
America Movil, S.A.B. de C.V.,
6.375%, Due 3/1/2035 .......................... 350 357
AT&T Wireless Services, Inc.,
8.75%, Due 3/1/2031 ........................... 330 435
AT&T, Inc.,
5.10%, Due 9/15/2014 .......................... 860 927
5.625%, Due 6/15/2016 ......................... 400 435
5.50%, Due 2/1/2018 ........................... 300 315
6.80%, Due 5/15/2036 .......................... 150 165
6.40%, Due 5/15/2038 .......................... 1,840 1,944
Deutsche Telekom AG,
8.50%, Due 6/15/2010 .......................... 380 397
Verizon Communications, Inc.,
5.50%, Due 4/1/2017 ........................... 350 371
6.90%, Due 4/15/2038 .......................... 275 311
Verizon Wireless Capital, LLC,
3.75%, Due 5/20/2011 +++ ...................... 360 372
8.50%, Due 11/15/2018 +++ ..................... 515 642
Vodafone Group plc,
6.15%, Due 2/27/2037 .......................... 365 389
--------
7,060
--------
UTILITIES - 1.35%
American Water Capital Corp.,
6.593%, Due 10/15/2037 ........................ 1,367 1,425
Columbus Southern Power Co.,
5.50%, Due 3/1/2013 ........................... 660 696
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Dominion Resources, Inc.,
Series A, 5.60%, Due 11/15/2016 ............... $ 500 $ 528
Series D, 8.875%, Due 1/15/2019 ............... 120 152
Duke Energy Carolinas LLC,
5.10%, Due 4/15/2018 .......................... 350 370
Duke Energy Indiana, Inc.,
6.05%, Due 6/15/2016 .......................... 520 569
Exelon Generation Co. LLC,
6.25%, Due 10/1/2039 .......................... 310 324
Kerr-McGee Corp.,
6.95%, Due 7/1/2024 ........................... 380 402
MidAmerican Energy Holdings Co.,
5.875%, Due 10/1/2012 ......................... 960 1,047
6.125%, Due 4/1/2036 .......................... 350 373
Pacific Gas & Electric Co.,
6.25%, Due 12/1/2013 .......................... 175 197
Public Service Enterprise Group, Inc.,
6.95%, Due 6/1/2012 ........................... 845 932
Sempra Energy,
6.50%, Due 6/1/2016 ........................... 315 346
Southern Power Co.,
6.25%, Due 7/15/2012 .......................... 705 773
Spectra Energy Capital LLC,
5.668%, Due 8/15/2014 ......................... 310 330
Union Electric Co.,
6.70%, Due 2/1/2019 ........................... 325 365
Virginia Electric and Power Co.,
5.40%, Due 4/30/2018 .......................... 350 374
Westar Energy, Inc.,
6.00%, Due 7/1/2014 ........................... 175 189
Wisconsin Electric Power Co.,
6.25%, Due 12/1/2015 .......................... 570 659
Xcel Energy, Inc.,
5.613%, Due 4/1/2017 .......................... 869 924
--------
10,975
--------
TOTAL CORPORATE OBLIGATIONS 145,719
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.24%
COMMERCIAL MORTGAGE-BACKED SECURITY - 1.20%
Banc of America Commercial Mortgage, Inc.,
2005-6 A1, 5.001%, Due 9/10/2047 .............. 382 387
2007-2 A2, 5.634%, Due 4/10/2049 .............. 700 707
Bear Stearns Commercial Mortgage Securities, Inc.,
2006-T22 A2, 5.463%, Due 4/12/2038 ............ 905 919
2006-PW13 A4, 5.54%, Due 9/11/2041 ............ 875 885
2004-PWR5 A4, 4.831%, Due 7/11/2042 ........... 2,010 1,968
See accompanying notes
18
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
2005-T20 A2, 5.127%, Due 10/12/2042 ........... $ 875 $ 888
Citigroup Commercial Mortgage Trust,
2004-C2 A3, 4.38%, Due 10/15/2041 ............. 995 996
JP Morgan Chase Commercial Mortgage Securities
Corp.,
2005-LDP3 A1, 4.655%, Due 8/15/2042 ........... 74 75
2005-LDP1 A2, 4.625%, Due 3/15/2046 ........... 941 941
2007-CB19 A4, 5.746%, Due 2/12/2049 ........... 550 502
2007-CB20 A2, 5.629%, Due 2/12/2051 ........... 700 715
LB-UBS Commercial Mortgage Trust,
2007-C1 A4, 5.424%, Due 2/15/2040 ............. 500 422
Wachovia Bank Commercial Mortgage Trust,
2007-C32 A2, 5.735%, Due 6/15/2049 ............ 330 330
--------
9,735
--------
WHOLE LOAN COLLATERALIZED MORTGAGE
OBLIGATIONS - 1.04%
Banc of America Commercial Mortgage, Inc.,
2006-4 A4, 5.634%, Due 7/10/2046 .............. 1,355 1,338
Bear Stearns Commercial Mortgage Securities, Inc.,
2006-PWR14 A4, 5.201%, Due 12/11/2038 ......... 665 632
Chase Mortgage Finance Corp.,
2006-A1 A1, 6.024%, Due 9/25/2036 ss .......... 1,095 955
Citicorp Mortgage Securities, Inc.,
2006-3 2A1, 5.50%, Due 6/25/2021 .............. 940 914
Citigroup/Deutsche Bank Commercial Mortgage Trust,
2007-CD5 A4, 5.886%, Due 11/15/2044 ........... 1,690 1,670
JP Morgan Chase Commercial Mortgage Securities
Corp.,
2004-CBX A4, 4.529%, Due 1/12/2037 ............ 555 559
2006-LDP9 A3, 5.336%, Due 5/15/2047 ........... 615 553
Prime Mortgage Trust,
2005-2, 5.25%, Due 7/25/2020 .................. 1,273 1,289
Wells Fargo Mortgage Backed Securities Trust,
2006-11 A8, 6.00%, Due 9/25/2036 .............. 656 579
--------
8,489
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS 18,224
--------
ASSET-BACKED SECURITIES - 0.67%
ASSET BACKED SECURITIES - 0.27%
BMW Floorplan Master Owner Trust,
2009-1A A, 1.394%, Due 9/15/2014 +++ ss ....... 350 349
Ford Credit Floorplan Master Owner Trust,
2009-2 A, 1.794%, Due 9/15/2014 ss ............ 350 351
Honda Auto Receivables Owner Trust,
2009-3 A4, 3.30%, Due 9/15/2015 ............... 470 483
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Hyundai Auto Receivables Trust,
2009-A A4, 3.15%, Due 3/15/2016 ............... $ 270 $ 273
John Deere Owner Trust,
2009-A A3, 2.59%, Due 10/15/2013 .............. 480 488
2009-A A4, 3.96%, Due 5/16/2016 ............... 265 276
--------
2,220
--------
American Express Credit Account Master Trust,
2006-2 A, 5.35%, Due 1/15/2014 ................ 1,400 1,489
Capital One Multi-Asset Execution Trust,
2006-A10 A10, 5.15%, Due 6/15/2014 ............ 1,050 1,116
Discover Card Master Trust,
2009-A2 A, 1.545%, Due 2/17/2015 ss ........... 200 201
Volkswagen Auto Loan Enhanced Trust,
2008-2 A4A, 6.24%, Due 7/20/2015 .............. 400 444
--------
3,250
--------
TOTAL ASSET-BACKED SECURITIES 5,470
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.88%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.52%
4.50%, Due 3/1/2019 ........................... 628 666
5.00%, Due 10/1/2020 .......................... 254 271
5.00%, Due 4/1/2023 ........................... 1,162 1,228
5.50%, Due 1/1/2024 ........................... 530 565
5.00%, Due 8/1/2033 ........................... 1,322 1,375
5.50%, Due 2/1/2034 ........................... 1,154 1,220
5.00%, Due 3/1/2034 ........................... 1,009 1,048
6.00%, Due 6/1/2034 ........................... 729 781
6.00%, Due 8/1/2034 ........................... 598 639
5.00%, Due 8/1/2035 ........................... 940 977
5.00%, Due 9/1/2035 ........................... 1,199 1,246
5.00%, Due 9/1/2035 ........................... 671 697
6.00%, Due 8/1/2036 ........................... 969 1,033
5.50%, Due 11/1/2036 .......................... 1,071 1,130
5.50%, Due 4/1/2037 ........................... 1,287 1,357
5.50%, Due 5/1/2037 ........................... 735 775
6.00%, Due 9/1/2037 ........................... 436 464
5.00%, Due 3/1/2038 ........................... 1,477 1,533
6.00%, Due 3/1/2038 ........................... 2,729 2,903
5.50%, Due 5/1/2038 ........................... 521 549
--------
20,457
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.80%
5.50%, Due 2/1/2014 ........................... 211 227
6.00%, Due 4/1/2016 ........................... 210 227
5.00%, Due 12/1/2017 .......................... 590 630
4.50%, Due 9/1/2018 ........................... 369 391
4.00%, Due 8/1/2020 ........................... 781 798
See accompanying notes
19
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
5.50%, Due 5/1/2023 ........................... $ 180 $ 192
5.00%, Due 12/1/2023 .......................... 569 600
5.00%, Due 3/1/2024 ........................... 588 621
5.00%, Due 3/1/2034 ........................... 1,379 1,436
4.50%, Due 9/1/2034 ........................... 647 659
5.50%, Due 12/1/2035 .......................... 437 461
5.50%, Due 12/1/2035 .......................... 332 351
5.50%, Due 1/1/2036 ........................... 1,030 1,087
5.50%, Due 2/1/2036 ........................... 693 732
5.00%, Due 2/1/2036 ........................... 675 702
5.00%, Due 3/1/2036 ........................... 1,226 1,274
5.50%, Due 4/1/2036 ........................... 920 972
6.00%, Due 9/1/2036 ........................... 787 838
6.50%, Due 9/1/2036 ........................... 1,762 1,897
5.50%, Due 12/1/2036 .......................... 1,300 1,371
5.50%, Due 2/1/2037 ........................... 1,284 1,354
5.50%, Due 8/1/2037 ........................... 860 909
6.00%, Due 8/1/2037 ........................... 1,101 1,172
6.50%, Due 8/1/2037 ........................... 293 315
6.00%, Due 11/1/2037 .......................... 595 633
5.50%, Due 3/1/2038 ........................... 2,144 2,260
5.00%, Due 4/1/2038 ........................... 4,006 4,159
5.00%, Due 6/1/2038 ........................... 1,778 1,846
5.50%, Due 6/1/2038 ........................... 2,191 2,309
6.00%, Due 9/1/2038 ........................... 477 507
--------
30,930
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.56%
7.00%, Due 12/15/2025 ......................... 238 263
4.201%, Due 8/16/2026 ......................... 588 603
6.50%, Due 8/15/2027 .......................... 280 303
6.50%, Due 11/15/2027 ......................... 296 320
7.50%, Due 12/15/2028 ......................... 224 254
5.50%, Due 7/15/2033 .......................... 770 819
6.00%, Due 12/15/2033 ......................... 804 863
5.50%, Due 2/20/2034 .......................... 1,055 1,120
--------
4,545
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS ....... 55,932
--------
U.S. AGENCY OBLIGATIONS - 5.86%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.04%
4.50%, Due 1/15/2015 .......................... 22,140 24,016
6.25%, Due 7/15/2032 .......................... 525 639
--------
24,655
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.80%
5.125%, Due 1/2/2014 .......................... 645 688
4.625%, Due 10/15/2014 ........................ 1,000 1,093
5.375%, Due 6/12/2017 ......................... 1,000 1,131
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
6.25%, Due 5/15/2029 .......................... $ 12,200 $ 14,647
6.00%, Due 4/18/2036 .......................... 5,065 5,217
--------
22,776
--------
TENNESSEE VALLEY AUTHORITY - 0.02%
5.25%, Due 9/15/2039 .......................... 170 174
--------
TOTAL U.S. AGENCY OBLIGATIONS ....................... 47,605
--------
U.S. TREASURY OBLIGATIONS - 3.82%
1.375%, Due 2/15/2012 ......................... 2,625 2,642
2.00%, Due 11/30/2013 ......................... 3,000 3,009
2.375%, Due 9/30/2014 ......................... 3,865 3,880
4.125%, Due 5/15/2015 ......................... 2,000 2,168
3.00%, Due 9/30/2016 .......................... 1,000 1,002
3.75%, Due 11/15/2018 ......................... 2,000 2,062
3.625%, Due 8/15/2019 ......................... 3,265 3,328
7.875%, Due 2/15/2021 ......................... 1,200 1,665
6.25%, Due 8/15/2023 .......................... 800 992
6.875%, Due 8/15/2025 ......................... 580 769
5.25%, Due 11/15/2028 ......................... 750 853
4.75%, Due 2/15/2037 .......................... 130 141
4.50%, Due 5/15/2038 .......................... 4,000 4,178
4.25%, Due 5/15/2039 .......................... 3,290 3,298
4.50%, Due 8/15/2039 .......................... 1,000 1,045
TOTAL U.S. TREASURY OBLIGATIONS .................. 31,032
--------
SHARES
----------
SHORT TERM INVESTMENTS - 5.24%
American Beacon U.S. Government Money Market
Select Fund * ................................. 5,000,000 5,000
JP Morgan U.S. Government Money Market Fund ...... 33,209,477 33,209
PAR
AMOUNT
----------
U.S. Treasury,
0.03%, Due 12/10/2009 @ ....................... $ 4,378 4,378
TOTAL SHORT TERM INVESTMENTS ..................... 42,587
--------
TOTAL INVESTMENTS 99.79% - (COST $804,925) 811,037
OTHER ASSETS, NET OF LIABILITIES - 0.21% ............ 1,695
TOTAL NET ASSETS - 100.00% .......................... $812,732
========
See accompanying notes
20
AMERICAN BEACON BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $6,474
or 0.80% of net assets. The Fund has no right to demand registration of
these securities.
# Step Up/Down
ss The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
* The Fund is affiliated by having the same investment advisor.
@ At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------- --------------
Emini S&P 500 Index .. 802 Dec 2009 $41,423 $(831)
======= =====
See accompanying notes
21
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 93.63%
CONSUMER DISCRETIONARY - 12.90%
HOTELS, RESTAURANTS & LEISURE - 1.28%
Carnival Corp. ................................... 11,039 $ 322
McDonald's Corp. ................................. 10,071 590
--------
912
--------
INTERNET & CATALOG RETAIL - 3.90%
Amazon.com, Inc. ## .............................. 4,150 493
eBay, Inc. ## .................................... 37,300 831
priceline.com, Inc. ## ........................... 9,229 1,456
--------
2,780
--------
MEDIA - 0.98%
The McGraw-Hill Companies, Inc. .................. 24,309 699
--------
MULTILINE RETAIL - 1.69%
Costco Wholesale Corp. ........................... 5,500 312
Kohl's Corp. ## .................................. 9,000 515
Target Corp. ..................................... 7,700 373
--------
1,200
--------
SPECIALTY RETAIL - 4.20%
Aeropostale, Inc. ## ............................. 15,243 572
AutoZone, Inc. ## ................................ 4,033 546
Best Buy Company, Inc. ........................... 10,100 386
Dollar Tree, Inc. ## ............................. 12,730 574
O'Reilly Automotive, Inc. ## ..................... 8,950 334
Ross Stores, Inc. ................................ 13,299 585
--------
2,997
--------
TEXTILES & APPAREL - 0.85%
Coach, Inc. ...................................... 18,401 607
--------
TOTAL CONSUMER DISCRETIONARY 9,195
--------
CONSUMER STAPLES - 1.92%
FOOD & DRUG RETAILING - 1.03%
CVS Caremark Corp. ............................... 20,650 729
--------
HOUSEHOLD PRODUCTS - 0.89%
Colgate-Palmolive Co. ............................ 8,079 635
--------
TOTAL CONSUMER STAPLES 1,364
--------
ENERGY - 7.06%
ENERGY EQUIPMENT & SERVICES - 1.61%
FMC Technologies, Inc. ## ........................ 5,850 308
Transocean Ltd. ## ............................... 6,948 583
Weatherford International Ltd. ## ................ 14,600 256
--------
1,147
--------
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
OIL & GAS - 5.45%
Apache Corp. ..................................... 7,134 $ 672
EOG Resources, Inc. .............................. 7,548 616
Murphy Oil Corp. ................................. 11,237 687
Occidental Petroleum Corp. ....................... 7,975 605
Peabody Energy Corp. ............................. 6,250 247
Petroleo Brasileiro S.A., ADR .................... 8,700 402
Suncor Energy, Inc. .............................. 19,916 658
--------
3,887
--------
TOTAL ENERGY 5,034
--------
FINANCIALS - 10.86%
BANKS - 3.17%
Goldman Sachs Group, Inc. ........................ 7,654 1,302
JP Morgan Chase & Co. ............................ 22,900 957
--------
2,259
--------
DIVERSIFIED FINANCIALS - 7.69%
BlackRock, Inc. .................................. 3,050 660
Charles Schwab Corp. ............................. 33,500 581
Franklin Resources, Inc. ......................... 6,830 715
IntercontinentalExchange, Inc. ## ................ 3,250 326
Invesco Ltd. ..................................... 8,200 173
Knight Capital Group, Inc. ## .................... 29,448 496
Mastercard, Inc. ................................. 3,600 789
TD Ameritrade Holding Corp. ## ................... 29,553 570
Visa, Inc. ....................................... 15,450 1,171
--------
5,481
--------
TOTAL FINANCIALS 7,740
--------
HEALTH CARE - 12.45%
BIOTECHNOLOGY - 2.00%
Celgene Corp. ## ................................. 6,400 327
Gilead Sciences, Inc. ## ......................... 25,821 1,098
--------
1,425
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.24%
Baxter International, Inc. ....................... 12,600 681
Becton, Dickinson & Co. .......................... 8,340 570
Mindray Medical International Ltd. ............... 11,200 345
--------
1,596
--------
HEALTH CARE PROVIDERS & SERVICES - 1.72%
McKesson Corp. ................................... 10,454 614
WellPoint, Inc. ## ............................... 13,176 616
--------
1,230
--------
PHARMACEUTICALS - 6.49%
Abbott Laboratories .............................. 12,855 650
See accompanying notes
22
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Amgen, Inc. ## ................................... 10,380 $ 558
Eli Lilly & Co. .................................. 18,823 640
Johnson & Johnson ................................ 10,225 604
Medco Health Solutions, Inc. ## .................. 23,900 1,341
Teva Pharmaceutical Industries Ltd., ADR ......... 16,450 830
--------
4,623
--------
TOTAL HEALTH CARE 8,874
--------
INDUSTRIALS - 13.55%
AEROSPACE & DEFENSE - 2.81%
General Dynamics Corp. ........................... 9,779 613
Lockheed Martin Corp. ............................ 8,204 564
United Technologies Corp. ........................ 13,400 824
--------
2,001
--------
COMMERCIAL SERVICES & SUPPLIES - 3.57%
Apollo Group, Inc.## ............................. 8,926 510
CH Robinson Worldwide, Inc. ...................... 5,500 303
H&R Block, Inc. .................................. 34,868 639
Hewitt Associates, Inc. ## ....................... 15,961 567
ITT Educational Services, Inc. ## ................ 5,862 530
--------
2,549
--------
CONSTRUCTION & ENGINEERING - 1.15%
Aecom Technology Corp. ## ........................ 10,200 257
Fluor Corp. ...................................... 12,690 564
--------
821
--------
ELECTRICAL EQUIPMENT - 0.43%
First Solar, Inc. ## ............................. 2,500 305
--------
INDUSTRIAL CONGLOMERATES - 0.82%
3M Co. ........................................... 7,910 582
--------
MACHINERY - 3.08%
Danaher Corp. .................................... 12,200 832
Flowserve Corp. .................................. 6,423 631
Joy Global, Inc. ................................. 14,518 732
--------
2,195
--------
ROAD & RAIL - 1.22%
Union Pacific Corp. .............................. 15,800 871
--------
TRADING COMPANIES & DISTRIBUTORS - 0.47%
Fastenal Co. ..................................... 9,700 335
--------
TOTAL INDUSTRIALS 9,659
--------
INFORMATION TECHNOLOGY - 30.53%
COMMUNICATIONS EQUIPMENT - 6.23%
Cisco Systems, Inc. ## ........................... 68,539 1,566
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Corning, Inc. .................................... 41,648 $ 609
Juniper Networks, Inc. ## ........................ 20,850 532
QUALCOMM, Inc. ................................... 41,859 1,733
--------
4,440
--------
COMPUTERS & PERIPHERALS - 9.49%
Apple Computer, Inc. ## .......................... 11,201 2,111
Dell, Inc. ## .................................... 44,740 648
EMC Corp. ## ..................................... 35,211 580
Hewlett-Packard Co. .............................. 37,553 1,782
International Business Machines Corp. ............ 7,859 948
Western Digital Corp. ## ......................... 20,567 693
--------
6,762
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.85%
Intel Corp. ...................................... 31,837 608
--------
INTERNET SOFTWARE & SERVICES - 2.73%
Equinix, Inc. ## ................................. 6,300 538
Google, Inc. ## .................................. 2,630 1,410
--------
1,948
--------
IT CONSULTING & SERVICES - 4.23%
Accenture plc .................................... 15,520 576
Cognizant Technology Solutions Corp. ## .......... 47,275 1,827
The Western Union Co. ............................ 33,733 613
--------
3,016
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 2.04%
Lam Research Corp. ## ............................ 7,100 239
Linear Technology Corp. ## ....................... 9,700 251
Marvell Technology Group Ltd. ## ................. 23,800 327
Texas Instruments, Inc. .......................... 27,308 640
--------
1,457
--------
SOFTWARE - 4.96%
Activision Blizzard, Inc. ## ..................... 51,518 558
Adobe Systems, Inc. ## ........................... 11,200 369
Microsoft Corp. .................................. 48,080 1,333
Oracle Corp. ..................................... 60,380 1,274
--------
3,534
--------
TOTAL INFORMATION TECHNOLOGY 21,765
--------
MATERIALS - 2.25%
CHEMICALS - 1.03%
Ecolab, Inc. ..................................... 7,450 328
Monsanto Co. ..................................... 6,000 403
--------
731
--------
See accompanying notes
23
AMERICAN BEACON LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
CONTAINERS & PACKAGING - 0.74%
Owens-Illinois, Inc. ## .......................... 16,569 $ 528
--------
METALS & MINING - 0.48%
Freeport-McMoRan Copper & Gold, Inc. ## .......... 4,700 345
--------
TOTAL MATERIALS ..................................... 1,604
--------
TELECOMMUNICATION SERVICES - 0.49%
WIRELESS TELECOMMUNICATION SERVICES - 0.49%
American Tower Corp. ## .......................... 9,450 348
--------
UTILITIES - 1.62%
GAS UTILITIES - 1.62%
Petrohawk Energy Corp. ## ........................ 9,700 228
Southwestern Energy Co. ## ....................... 21,300 928
--------
TOTAL UTILITIES ..................................... 1,156
--------
TOTAL COMMON STOCKS ................................. 66,739
--------
SHORT TERM INVESTMENTS - 6.79%
JP Morgan U.S. Government Money Market Fund ...... 4,149,528 4,149
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
U.S. Treasury,
0.02%, Due 12/10/2009+++ ...................... $ 693 693
TOTAL SHORT TERM INVESTMENTS 4,842
--------
TOTAL INVESTMENTS 100.42% - (COST $63,854) 71,581
LIABILITIES, NET OF OTHER ASSETS - (0.42%) (297)
TOTAL NET ASSETS - 100.00% $ 71,284
========
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
---------- ---------- ------ --------------
Emini S&P 500 Index .. 92 Dec 2009 $4,752 $(96)
====== ====
See accompanying notes
24
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 91.74%
CONSUMER DISCRETIONARY - 17.63%
AUDIO/VIDEO PRODUCTS - 1.06%
Harman International Industries, Inc. ............ 22,250 $ 837
--------
AUTO COMPONENTS - 1.66%
Advance Auto Parts, Inc. ......................... 16,400 611
Magna International, Inc. ........................ 17,825 706
--------
1,317
--------
HOTELS, RESTAURANTS & LEISURE - 2.01%
International Game Technology .................... 61,700 1,101
Royal Caribbean Cruises Ltd. ..................... 24,300 491
--------
1,592
--------
HOUSEHOLD DURABLES - 3.46%
Black & Decker Corp. ............................. 16,800 793
Stanley Works .................................... 26,000 1,176
Whirlpool Corp. .................................. 10,775 772
--------
2,741
--------
LEISURE EQUIPMENT & PRODUCTS - 0.64%
Mattel, Inc. ..................................... 26,550 503
--------
MEDIA - 1.17%
Omnicom Group, Inc. .............................. 26,975 925
--------
MULTILINE RETAIL - 1.37%
J.C. Penney Company, Inc. ........................ 32,775 1,086
--------
SPECIALTY RETAIL - 5.92%
Family Dollar Stores, Inc. ....................... 27,500 778
GameStop Corp. ## ................................ 42,700 1,037
Gildan Activewear, Inc. ## ....................... 45,950 815
Hanesbrands, Inc. ## ............................. 40,600 878
Regis Corp. ...................................... 39,625 643
Rent-A-Center, Inc. ## ........................... 29,200 536
--------
4,687
--------
TEXTILES & APPAREL - 0.34%
Sealy Corp. ## ................................... 93,775 272
--------
TOTAL CONSUMER DISCRETIONARY 13,960
--------
CONSUMER STAPLES - 4.21%
FOOD & DRUG RETAILING - 1.04%
Sysco Corp. ...................................... 31,000 820
--------
FOOD PRODUCTS - 0.68%
Sara Lee Corp. ................................... 47,825 540
--------
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
PERSONAL PRODUCTS - 0.75%
Avon Products, Inc. .............................. 18,425 $ 591
--------
TOBACCO - 1.74%
Lorillard, Inc. .................................. 8,900 692
Reynolds American, Inc. .......................... 14,200 688
--------
1,380
--------
TOTAL CONSUMER STAPLES 3,331
--------
ENERGY - 4.30%
ENERGY EQUIPMENT & SERVICES - 1.38%
BJ Services Co. .................................. 56,775 1,090
--------
OIL & GAS - 2.92%
El Paso Corp. .................................... 79,300 778
Murphy Oil Corp. ................................. 20,300 1,241
Valero Energy Corp. .............................. 16,275 295
--------
2,314
--------
TOTAL ENERGY 3,404
--------
FINANCIALS - 23.60%
BANKS - 7.22%
Comerica, Inc. ................................... 32,700 907
Fifth Third Bancorp .............................. 165,900 1,483
First Horizon National Corp. ## .................. 13,135 155
New York Community Bancorp, Inc. ................. 51,300 554
People's United Financial, Inc. .................. 24,854 398
PNC Financial Services Group, Inc. ............... 35,203 1,723
Popular, Inc. .................................... 59,175 128
SunTrust Banks, Inc. ............................. 19,400 371
--------
5,719
--------
DIVERSIFIED FINANCIALS - 3.07%
Ameriprise Financial, Inc. ....................... 11,800 409
Capital One Financial Corp. ...................... 36,500 1,336
SLM Corp. ## ..................................... 71,100 690
--------
2,435
--------
INSURANCE - 11.95%
Axis Capital Holdings Ltd. ....................... 31,300 904
The Chubb Corp. .................................. 15,400 747
Conseco, Inc. ## ................................. 92,050 480
Delphi Financial Group, Inc. ..................... 47,800 1,037
Fidelity National Financial, Inc. ................ 62,800 852
First American Corp. ............................. 8,975 273
Hartford Financial Services Group, Inc. .......... 15,400 378
Protective Life Corp. ............................ 46,725 900
RenaissanceRe Holdings Ltd. ...................... 20,275 1,064(p)
See accompanying notes
25
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Torchmark Corp. .................................. 25,425 $ 1,032
Validus Holdings Ltd. ............................ 28,932 732
Willis Group Holdings Ltd. ....................... 37,700 1,018
XL Capital Ltd. .................................. 2,600 43
--------
9,460
--------
REAL ESTATE - 1.36%
Annaly Capital Management, Inc. .................. 63,600 1,075
--------
TOTAL FINANCIALS 18,689
--------
HEALTH CARE - 10.55%
HEALTH CARE EQUIPMENT & SUPPLIES - 2.70%
CareFusion Corp. ## .............................. 23,587 528
IMS Health, Inc. ................................. 47,625 781
Zimmer Holdings, Inc. ## ......................... 15,875 834
--------
2,143
--------
HEALTH CARE PROVIDERS & SERVICES - 7.85%
Aetna, Inc. ...................................... 24,000 625
Cardinal Health, Inc. ............................ 54,725 1,551
CIGNA Corp. ...................................... 25,700 715
Coventry Health Care, Inc. ## .................... 40,200 797
Mednax, Inc. ## .................................. 13,850 719
Omnicare, Inc. ................................... 43,900 951
Quest Diagnostics, Inc. .......................... 15,300 856
--------
6,214
--------
TOTAL HEALTH CARE 8,357
--------
INDUSTRIALS - 13.02%
AEROSPACE & DEFENSE - 5.08%
Goodrich Corp. ................................... 15,700 853
L-3 Communications Holdings, Inc. ................ 27,900 2,017
Spirit Aerosystems Holdings, Inc. ## ............. 72,600 1,156
--------
4,026
--------
BUILDING PRODUCTS - 0.49%
Armstrong World Industries, Inc. ## .............. 10,475 390
--------
COMMERCIAL SERVICES & SUPPLIES - 0.45%
Avery Dennison Corp. ............................. 9,900 353
--------
ELECTRICAL EQUIPMENT - 0.83%
Cooper Industries plc ## ......................... 16,950 656
--------
FREIGHT TRANSPORTATION - 0.94%
Ryder System, Inc. ............................... 18,400 746
--------
MACHINERY - 5.23%
Brady Corp. ...................................... 26,925 729
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Eaton Corp. ...................................... 18,900 $ 1,142
Graco, Inc. ...................................... 27,500 757
ITT Industries, Inc. ............................. 15,700 796
SPX Corp. ........................................ 13,500 713
--------
4,137
--------
TOTAL INDUSTRIALS 10,308
--------
INFORMATION TECHNOLOGY - 10.29%
COMMUNICATIONS EQUIPMENT - 1.67%
Alcatel-Lucent, ADR .............................. 250,323 924
Motorola, Inc. ................................... 46,300 397
--------
1,321
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.83%
Avnet, Inc.## .................................... 45,875 1,137
Tyco Electronics Ltd. ............................ 52,175 1,109
--------
2,246
--------
IT CONSULTING & SERVICES - 2.70%
Alliance Data Systems Corp. ## ................... 16,600 913
Computer Sciences Corp. ## ....................... 23,200 1,176
Tech Data Corp. ## ............................... 1,272 49
--------
2,138
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 1.93%
Lam Research Corp. ## ............................ 19,475 656
Microchip Technology, Inc. ....................... 36,300 870
--------
1,526
--------
SOFTWARE - 1.16%
CA, Inc. ......................................... 43,850 917
--------
TOTAL INFORMATION TECHNOLOGY 8,148
--------
UTILITIES - 8.14%
ELECTRIC UTILITIES - 5.33%
CenterPoint Energy, Inc. ......................... 61,400 774
Edison International ............................. 11,600 369
Pinnacle West Capital Corp. ...................... 21,900 686
PNM Resources, Inc. .............................. 61,425 658
Portland General Electric Co. .................... 39,050 726
Xcel Energy, Inc. ................................ 53,400 1,007
--------
4,220
--------
GAS UTILITIES - 2.81%
MDU Resources Group, Inc. ........................ 43,150 896
Sempra Energy .................................... 14,925 768
See accompanying notes
26
AMERICAN BEACON MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
---------- --------
(DOLLARS IN THOUSANDS)
Spectra Energy Corp. ............................. 29,200 $ 558
--------
2,222
--------
TOTAL UTILITIES 6,442
--------
TOTAL COMMON STOCKS 72,639
--------
PREFERRED STOCKS - 0.94%
CONSUMER DISCRETIONARY - 0.94%
TEXTILES & APPAREL - 0.94%
Sealy Corp. ## ................................... 9,571 745
--------
SHORT TERM INVESTMENTS - 7.52%
JP Morgan U.S. Government Money Market Fund ...... 5,146,241 5,146
PAR
AMOUNT
----------
U.S. Treasury,
0.02%, Due 12/10/2009+++ ...................... $ 809 809
TOTAL SHORT TERM INVESTMENTS 5,955
--------
TOTAL INVESTMENTS 100.20% - (COST $83,304) 79,339
LIABILITIES, NET OF OTHER ASSETS - (0.20%) (162)
TOTAL NET ASSETS - 100.00% $ 79,177
========
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
---------- ---------- ------ --------------
Emini S&P 400 Index .. 88 Dec 2009 $5,785 $(263)
====== =====
See accompanying notes
27
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2009 (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
BALANCED LARGE CAP MID-CAP
FUND GROWTH FUND VALUE FUND
----------- ----------- ----------
ASSETS:
Investments in unaffiliated securities, at value (A) ......... $ 806,037 $ 71,581 $ 79,339
Investments in affiliated securities, at value (B) ........... 5,000 -- --
Receivable for investments sold .............................. 1,182 647 939
Dividends and interest receivable ............................ 4,168 38 29
Receivable for fund shares sold .............................. 275 138 152
Receivable for tax reclaims .................................. 12 2 --
Receivable for expense reimbursement ......................... -- -- 5
Prepaid expenses ............................................. 36 2 11
----------- ----------- ----------
TOTAL ASSETS .............................................. 816,710 72,408 80,475
----------- ----------- ----------
LIABILITIES:
Payable for investments purchased ............................ 1,999 683 867
Payable for fund shares redeemed ............................. 55 183 99
Payable for variation margin on open futures contracts ....... 1,162 110 146
Management and investment advisory fees payable (Note 2) ..... 516 108 137
Administrative service and service fees payable .............. 94 3 13
Other liabilities ............................................ 152 37 36
----------- ----------- ----------
TOTAL LIABILITIES ........................................ 3,978 1,124 1,298
----------- ----------- ----------
NET ASSETS ...................................................... $ 812,732 $ 71,284 $ 79,177
=========== =========== ==========
ANALYSIS OF NET ASSETS:
Paid-in-capital ................................................. 914,309 92,027 105,104
Undistributed net investment income ............................. 19,001 274 492
Accumulated net realized (loss) ................................. (126,425) (28,648) (22,191)
Unrealized appreciation (depreciation) of investments, futures
contracts, and foreign currency ................................. 5,847 7,631 (4,228)
----------- ----------- ----------
NET ASSETS ...................................................... $ 812,732 $ 71,284 $ 79,177
=========== =========== ==========
Shares outstanding (no par value):
Institutional Class .......................................... 2,519,638 26,232 290,172
=========== =========== ==========
Investor Class ............................................... 8,662,478 N/A 3,101,252
=========== =========== ==========
Advisor Class ................................................ 600,234 N/A 897
=========== =========== ==========
AMR Class .................................................... 60,213,998 14,220,106 7,066,440
=========== =========== ==========
Net asset value, offering and redemption price per share:
Institutional Class .......................................... $ 11.83 $ 4.97 $ 7.57
=========== =========== ==========
Investor Class ............................................... $ 10.96 N/A $ 7.54
=========== =========== ==========
Advisor Class ................................................ $ 11.35 N/A $ 7.49
=========== =========== ==========
AMR Class .................................................... $ 11.31 $ 5.00 $ 7.59
=========== =========== ==========
(A) Cost of investments in unaffiliated securities .............. $ 799,359 $ 63,854 $ 83,304
(B) Cost of investments in affiliated securities ................ $ 5,000 $ -- $ --
See accompanying notes
28
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2009
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
BALANCED LARGE CAP MID-CAP
FUND GROWTH FUND VALUE FUND
----------- ----------- ----------
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of foreign
taxes) (A) ................................................ $ 12,955 $ 808 $ 1,221
Dividend income from affiliated securities ................... 55 5 6
Interest income .............................................. 16,344 1 1
Income derived from securities lending, net .................. 588 55 58
-------- -------- -------
TOTAL INVESTMENT INCOME ................................ 29,942 869 1,286
-------- -------- -------
EXPENSES:
Management and investment advisory fees (Note 2) ............. 1,681 275 360
Administrative service fees (Note 2):
Institutional Class ....................................... 108 -- 6
Investor Class ............................................ 285 -- 52
Advisor Class ............................................. 20 -- --
AMR Class ................................................. 297 29 19
Transfer agent fees:
Institutional Class ....................................... 3 -- 1
Investor Class ............................................ 6 -- 3
Advisor Class ............................................. 1 -- --
AMR Class ................................................. 39 4 1
Custody and fund accounting fees ............................. 119 8 8
Professional fees ............................................ 49 27 28
Registration fees and expenses ............................... 39 -- 34
Service fees (Note 2):
Investor Class ............................................ 286 -- 44
Advisor Class ............................................. 17 -- --
Distribution fees- Advisor Class (Note 2) .................... 17 -- --
Prospectus and shareholder reports ........................... 54 11 5
Trustee fees ................................................. 82 5 4
Other expenses ............................................... 78 9 12
-------- -------- -------
TOTAL EXPENSES ......................................... 3,181 368 577
-------- -------- -------
Net (fees waived and expenses reimbursed)/recouped by Manager
(Note 2) .................................................. -- -- (22)
-------- -------- -------
NET EXPENSES ........................................... 3,181 368 555
-------- -------- -------
NET INVESTMENT INCOME ........................................... 26,761 501 731
-------- -------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ............................................... (44,409) (12,980) (9,311)
Commission recapture (Note 1) ............................. 8 6 21
Futures contracts ......................................... (7,775) (639) (492)
Change in net unrealized appreciation or depreciation of:
Investments ............................................... 131,072 19,773 23,675
Futures contracts ......................................... 8,931 677 1,128
-------- -------- -------
NET GAIN ON INVESTMENTS ................................ 87,827 6,837 15,021
-------- -------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $114,588 $ 7,338 $15,752
======== ======== =======
(A) Foreign taxes ............................................... $ 24 $ 2 $ 1
See accompanying notes
29
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Large Cap
Balanced Fund Growth Fund Mid-Cap Value Fund
------------------------- ------------------- -------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October October October October
2009 2008 31, 2009 31, 2008 31, 2009 31, 2008
----------- ----------- -------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 26,761 $ 35,336 $ 501 $ 868 $ 731 $ 1,382
Net realized (loss) on investments, futures
contracts, and foreign currency transactions ........ (52,176) (67,673) (13,613) (14,713) (9,782) (12,043)
Change in net unrealized appreciation or
depreciation of investments, futures contracts,
and foreign currency translations ................... 140,003 (277,483) 20,450 (24,338) 24,803 (31,024)
--------- ---------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ 114,588 (309,820) 7,338 (38,183) 15,752 (41,685)
--------- ---------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ................................. (1,697) (1,424) (1) (1) (42) (84)
Investor Class ...................................... (4,916) (5,471) -- -- (285) (326)
Advisor Class ....................................... -- (318) -- -- -- --
AMR Class ........................................... (28,892) (27,782) (836) (791) (838) (1,140)
Net realized gain on investments:
Institutional Class ................................. -- (2,559) -- (3) -- (405)
Investor Class ...................................... -- (10,490) -- -- -- (2,179)
Advisor Class ....................................... -- (602) -- -- -- --
AMR Class ........................................... -- (45,704) -- (2,748) -- (4,985)
--------- ---------- -------- -------- -------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS ................ (35,505) (94,350) (837) (3,543) (1,165) (9,119)
--------- ---------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .......................... 88,318 83,795 20,562 34,857 26,852 30,505
Reinvestment of dividends and distributions ............ 35,347 93,808 837 3,543 1,163 9,098
Cost of shares redeemed ................................ (143,929) (181,757) (13,675) (41,432) (16,512) (63,782)
Redemption fees ........................................ -- -- -- -- 27 43
--------- ---------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS .................... (20,264) (4,154) 7,724 (3,032) 11,530 (24,136)
--------- ---------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ..................... 58,819 (408,324) 14,225 (44,758) 26,117 (74,940)
--------- ---------- -------- -------- -------- --------
NET ASSETS:
Beginning of period .................................... 753,913 1,162,237 57,059 101,817 53,060 128,000
--------- ---------- -------- -------- -------- --------
END OF PERIOD * ........................................ $ 812,732 $ 753,913 $ 71,284 $ 57,059 $ 79,177 $ 53,060
========= ========== ======== ======== ======== ========
* Includes undistributed net investment income (loss) of .. $ 19,001 $ 27,287 $ 274 $ 610 $ 492 $ 937
========= ========== ======== ======== ======== ========
See accompanying notes
30
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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, diversified, open-end management investment
company. These financial statements and notes to the financial statements relate
to the American Beacon Balanced Fund, the American Beacon Large Cap Growth Fund,
and the American Beacon Mid-Cap Value Fund (each a "Fund" and collectively, the
"Funds"), each a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
Class Disclosure
Prior to March 1, 2009, the Investor and Advisor Classes were known as the
PlanAhead and Service Classes, respectively.
Each Fund has multiple classes of shares designed to meet the needs of
different groups of investors; however, not all Funds offer all classes. The
following table sets forth the differences amongst the classes:
CLASS: OFFERED TO:
- ------ -----------
INSTITUTIONAL CLASS Investors making an initial investment of $250,000
INVESTOR CLASS General public and investors investing through an
intermediary
ADVISOR CLASS Investors investing through an intermediary
AMR CLASS Investors in the tax-exempt retirement and benefit plans
of AMR Corporation and its affiliates
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in footnote 2.
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.
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. Prices of debt securities may be
determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
31
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Securities for which market prices are not readily available or are not
reflective of the fair value of the security, as determined by the Manager, will
be priced at fair value following procedures approved by the Board of Trustees
(the "Board").
Valuation Inputs
Various inputs may be used to determine the value of the Funds'
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value securities are not
necessarily an indication of the risk associated with investing in those
securities.
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk, and others.
Level 3 - Prices determined using other significant unobservable inputs.
Unobservable inputs reflect the Fund's own assumptions about the
factors market participants would use in pricing an investment,
and would be based on the best information available.
The Funds' investments are summarized by level based on the inputs used to
determine their values. As of October 31, 2009 the investments were classified
as described below: (in thousands)
BALANCED FUND Level 1 Level 2 Level 3 Total
- ------------- -------- -------- ------- --------
Common Stock..................................... $464,468 $ -- $-- $464,468
Corporate Obligations............................ -- 145,719 -- 145,719
Non-Agency Mortgage Backed Obligations........... -- 18,224 -- 18,224
Asset-Backed Obligations......................... -- 5,470 -- 5,470
U.S. Agency Mortgage Backed Obligations.......... -- 55,932 -- 55,932
U.S. Agency Obligations.......................... -- 47,605 -- 47,605
U.S. Treasury Obligations........................ -- 31,032 -- 31,032
Short Term Investments........................... 38,209 4,378 -- 42,587
-------- -------- --- --------
Total Investments in Securities............... $502,677 $308,360 $-- $811,037
======== ======== === ========
Futures Contracts................................ 41,423 41,423
LARGE CAP GROWTH FUND Level 1 Level 2 Level 3 Total
- --------------------- ------- ------- ------- -------
Common Stock..................................... $66,739 $ -- $-- $66,739
Short Term Investments........................... 4,149 693 -- 4,842
------- ---- --- -------
Total Investments in Securities............... $70,888 $693 $-- $71,581
======= ==== === =======
Futures Contracts................................ 4,752 4,752
MID-CAP VALUE FUND Level 1 Level 2 Level 3 Total
- ------------------ ------- ------- ------- -------
Common Stock..................................... $72,639 $ -- $-- $72,639
Preferred Stock.................................. 745 -- -- 745
Short Term Investments........................... 5,146 809 -- 5,955
------- ---- --- -------
Total Investments in Securities............... $78,530 $809 $-- $79,339
======= ==== === =======
Futures Contracts................................ 5,785 5,785
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. The Funds may purchase securities with delivery or payment to
occur at a later date. At the time the Funds enter into a commitment to purchase
a security, the transaction is recorded, and the value of the security is
reflected in the net asset value. The value of the security may vary with market
fluctuations.
32
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Funds. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Funds may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Funds reflect this
amount on the Schedules of Investments as a U.S. Treasury Bill held as
collateral for futures contracts or as a Deposit with broker for futures
contracts on the Statement of Assets and Liabilities. Payments to and from the
broker, known as variation margin, are required to be made on a daily basis as
the price of the futures contract fluctuates. Changes in initial settlement
values are accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized. Futures contracts are valued at the most recent settlement price
established each day by the exchange on which they are traded.
Balanced
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments, futures contracts,
and foreign currency..................................... Equity Contracts* $(831)
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------- ----------------- ----------
Net realized gain (loss) from futures contracts............. Equity Contracts $(7,775)
Change in net unrealized appreciation or depreciation of
futures contracts........................................ Equity Contracts 8,931
Large Cap Growth
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments, futures contracts,
and foreign currency..................................... Equity Contracts* $(96)
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------- ----------------- ----------
Net realized gain (loss) from futures contracts............. Equity Contracts $(639)
Change in net unrealized appreciation or depreciation of
futures contracts........................................ Equity Contracts 677
Mid-Cap Value
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments, futures contracts,
and foreign currency..................................... Equity Contracts* $(263)
33
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------- ----------------- ----------
Net realized gain (loss) from futures contracts............. Equity Contracts $(492)
Change in net unrealized appreciation or depreciation of
futures contracts........................................ Equity Contracts 1,128
* Includes cumulative appreciation/depreciation of futures contracts as
reported in the Schedule of Investments footnotes. Only current day's
variation margin is reported within the Statements of Assets and
Liabilities.
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared
and paid at least annually. Distributions, if any, of net realized capital gains
are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If a Fund's investment advisor chooses to execute a
transaction through a participating broker, the broker rebates a portion of the
commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund. These amounts are reported with the net realized gains in the Fund's
Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class),
gains, and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The AMR Class of the Mid-Cap Value Fund imposes a 2% redemption fee on
certain shares held for less than 180 days. The fee is deducted from the
redemption proceeds and is intended to offset the trading costs, market impact
and other costs associated with short-term trading activity in the Funds. The
"first-in, first-out" method is used to determine the holding period. The fee is
allocated to all classes of each Fund pro-rata based on their respective net
assets.
Other
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust 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.
34
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory, fund management and securities lending services. Investment assets of
Funds are managed multiple investment advisors which have entered into separate
investment advisory agreements with the Manager. As compensation for performing
the duties required under the Management Agreement, the Manager receives from
the Funds an annualized fee equal to 0.05% of the average daily net assets plus
amounts paid by the Manager to the investment advisors hired by the Manager to
direct investment activities for the Funds. Management fees paid during the year
ended October 31, 2009 were as follows (dollars in thousands):
AMOUNTS PAID NET AMOUNTS
MANAGEMENT FEE MANAGEMENT TO INVESTMENT RETAINED BY
RATE FEE ADVISORS MANAGER
-------------- ---------- ------------- -----------
Balanced.................. 0.175%-0.65% $1,681 $1,317 $364
Large Cap Growth.......... 0.30%-0.60% 275 246 29
Mid-Cap Value............. 0.35%-0.90% 360 331 29
On May 19, 2009 the Funds terminated their security lending program. Prior
to that, as compensation for services provided by the Manager in connection with
securities lending activities, the lending Funds paid to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statements of Operations. During
the year ended October 31, 2009, securities lending fees paid to the Manager
were as follows (in thousands):
Balanced.................. $69
Large Cap Growth.......... 7
Mid-Cap Value............. 7
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative services to the
Funds. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.30% of the average daily net assets of the Institutional, Investor, and
Advisor Classes and 0.05% of the average daily net assets of the AMR Class of
each of the Funds.
Distribution Plans
The Trust, except for the Advisor Class of the Funds, has adopted a
"defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the Act, pursuant to which no fees may be charged to the Funds for distribution
purposes. However, the Plan authorizes the management and administrative service
fees received by the Manager and the investment advisors hired by the Manager to
be used for distribution purposes. Under this Plan, the Trust does not intend to
compensate the Manager or any other party, either directly or indirectly, for
the distribution of Trust shares.
A separate Distribution Plan (the "Distribution Plan") has been adopted
pursuant to Rule 12b-1 under the Act for the Advisor Class of the Funds. Under
the Distribution Plan, as compensation for distribution assistance, the Manager
receives an annual fee of 0.25% of the average daily net assets of the Advisor
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.
35
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the Investor and Advisor
Classes. As compensation for performing the duties required under the Service
Plans, the Manager receives up to 0.375% of the average daily net assets of the
Investor Class and 0.25% of the average daily net assets of the Advisor Class of
each Fund.
Brokerage Commissions
Affiliated entities of a sub-advisor to the Large Cap Growth Fund received
net commissions on purchases and sales of the Fund's portfolio securities
totaling $628 for the year ended October 31, 2009.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the
"MM Select Fund") or the US Government Money Market Select Fund (the "USG Select
Fund") (collectively, the "Select Funds"). Cash collateral received by certain
Funds in connection with securities lending may be invested in the Select Funds.
The Funds and the Select Funds have the same investment advisor and therefore,
are considered to be affiliated. The Manager serves as investment advisor to the
Select Funds and receives from the Select Funds an annualized fee up to 0.09% of
its average daily net assets. During the year ended October 31, 2009, fees
earned by the Manager from the Select Funds were as follows (in thousands):
SECURITIES LENDING
DIRECT INVESTMENT IN COLLATERAL INVESTED IN
AFFILIATED FUNDS AFFILIATED FUNDS TOTAL
-------------------- ---------------------- -----
Balanced...................... $ 5 $6 $11
Large Cap Growth.............. -- 1 1
Mid-Cap Value................. -- 1 1
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Funds, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Funds to borrow from other
participating Funds. For the year ended October 31, 2009, the Fund did not
utilize the credit facility.
Reimbursement of Expenses
The Manager agreed to reimburse the following Funds to the extent that
total annual fund operating expenses exceeded the Fund's expense cap. For the
period ended October 31, 2009, the Manager waived or reimbursed expenses as
follows:
Expense Cap
-----------------------------------------------
11/1/08 3/1/09 WAIVED OR
TO TO REIMBURSED
FUND CLASS 2/28/09 10/31/09 EXPENSES
- ---- ------------- ------- -------- ----------
Large Cap Growth................ Institutional 0.90% -- $ 21
Mid-Cap Value................... Institutional 0.98% 0.98% 2,949
Mid-Cap Value................... Investor 1.23% 1.23% 19,360
Mid-Cap Value................... Advisor 1.50% 1.50% 2
Expense Reimbursement Plan
The Funds have adopted an Expense Reimbursement Plan whereby the Manager
may seek repayment of fees waived or expenses reimbursed for a period of up to
three years. However, reimbursement will occur only if the Class' average net
assets have grown or expenses have declined sufficiently to allow reimbursement
without causing its expense ratio to exceed the previously agreed upon
contractual expense limit. During the
36
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
year ended October 31, 2009, the Funds have not recorded a liability for
potential reimbursement, due to the current assessment that a reimbursement is
unlikely.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Funds do not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
October 31, 2009 remains subject to examination by the Internal Revenue Service.
If applicable, the Funds recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in "Other expenses" on the Statements
of Operations.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid during the fiscal years ended
October 31, 2009 and October 31, 2008 were as follows (in thousands)
BALANCED LARGE CAP GROWTH MID-CAP VALUE
------------------------- ------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2009 2008 2009 2008 2009 2008
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class ........... $ 1,697 $ 1,997 $ 1 $ 1 $ 42 $ 139
Investor Class ................ 4,916 7,821 -- -- 285 618
Advisor Class ................. -- 453 -- -- -- --
AMR Class ..................... 28,892 38,025 836 791 838 1,809
LONG-TERM CAPITAL GAIN
Institutional Class ........... -- 1,986 -- 3 -- 350
Investor Class ................ -- 8,140 -- -- -- 1,887
Advisor Class ................. -- 467 -- -- -- --
AMR Class ..................... -- 35,461 -- 2,748 -- 4,316
------- ------- ---- ------ ------ ------
TOTAL DISTRIBUTIONS PAID ... $35,505 $94,350 $837 $3,543 $1,165 $9,119
======= ======= ==== ====== ====== ======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of October 31, 2009, the components of distributable earnings on a tax basis
were as follows (in thousands):
LARGE CAP MID-CAP
BALANCED GROWTH VALUE
--------- --------- --------
Cost basis of investments for federal income tax purposes........ $ 839,225 $ 64,683 $ 83,982
Unrealized appreciation.......................................... 76,020 9,513 7,165
Unrealized depreciation.......................................... (104,208) (2,615) (11,808)
--------- -------- --------
Net unrealized appreciation/(depreciation)....................... (28,188) 6,898 (4,643)
Undistributed ordinary income.................................... 19,568 275 491
Undistributed long-term gain/(loss).............................. (92,136) (27,820) (21,512)
Other temporary differences ..................................... (821) (96) (263)
--------- -------- --------
Distributable earnings........................................... $(101,577) $(20,743) $(25,927)
========= ======== ========
37
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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 reclassifications of income from real estate
investment securities.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statements
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, foreign currency, book amortization of premium, pay down reclasses,
income adjustments associated with contingent payment debt instruments, and
dividend reclasses that have been reclassified as of October 31, 2009 (in
thousands):
LARGE CAP MID-CAP
BALANCED GROWTH VALUE
--------- --------- --------
Paid-in-capital ................................................. $ 5 $ 1 $ (8)
Undistributed net investment income ............................. 458 -- (11)
Accumulated net realized gain (loss) ............................ (463) (1) 20
Unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency ............................... -- -- (1)
At October 31, 2009, capital loss carry forward positions for federal
income tax purposes were as follows (in thousands):
FUND 2016 2017 TOTAL
- ---- ------- ------- -------
Balanced......................................................... $68,541 $24,427 $92,968
Large Cap Growth................................................. 15,053 12,863 27,916
Mid-Cap Value.................................................... 13,378 8,397 21,775
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales and maturities of
long-term investments during the year ended October 31, 2009 were as follows
(in thousands):
LARGE CAP MID-CAP
BALANCED GROWTH VALUE
--------- --------- --------
Purchases (excluding U.S. government securities)................. $408,499 $92,947 $42,292
Sales and maturities (excluding U.S. government securities)...... 389,577 79,554 22,409
Purchases of U.S. government securities.......................... 116,709 -- --
Sales and maturities of U.S. government securities............... 104,913 -- --
A summary of the Funds' direct transactions in Select Funds for the year
ended October 31, 2009 is set forth below (in thousands):
OCTOBER 31, 2008 OCTOBER 31, 2009
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
--------------- ------------------- --------- ------- -------------------
Balanced.......................... MM Select Fund $34,006 $ -- $34,006 $ --
Balanced.......................... USG Select Fund -- 10,000 5,000 5,000
Large Cap Growth.................. MM Select Fund 3,451 -- 3,451 --
Mid-Cap Value..................... MM Select Fund 4,196 -- 4,196 --
5. SECURITIES LENDING
Prior to May 19, 2009, the Funds, the Agent, and the Manager retained 75%,
15%, and 10%, respectively, of the income generated from securities lending, as
stated on the Statements of Operations.
38
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (shares and dollars in thousands):
YEAR ENDED OCTOBER 31, 2009
INSTITUTIONAL
CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
----------------- ----------------- ---------------- -----------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- ------ -------- ------ -------- ------ ------- ------ --------
Shares sold ...................................... 1,198 $ 12,097 2,427 $ 24,255 76 $ 744 5,034 $ 51,222
Reinvestment of dividends ........................ 170 1,684 517 4,771 -- -- 3,047 28,892
Shares redeemed .................................. (2,288) (23,603) (4,930) (47,789) (261) (2,590) (7,155) (69,947)
------ -------- ------ -------- ---- ------- ------ --------
Net increase (decrease) in shares outstanding .... (920) $ (9,822) (1,986) $(18,763) (185) $(1,846) 926 $ 10,167
====== ======== ====== ======== ==== ======= ====== ========
INSTITUTIONAL
CLASS AMR CLASS
--------------- -----------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- ------ ------ ------ --------
Shares sold ...................................... 27 $121 4,528 $ 20,441
Reinvestment of dividends ........................ -- 1 205 836
Shares redeemed .................................. (19) (93) (3,124) (13,582)
--- ---- ------ --------
Net increase in shares outstanding ............... 8 $ 29 1,609 $ 7,695
=== ==== ====== ========
INSTITUTIONAL
CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
--------------- ---------------- --------------- -----------------
MID-CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ ------ ------ ------- ------ ------ ------ --------
Shares sold ...................................... 39 $ 255 1,083 $ 6,831 1 $ 5 3,018 $ 19,761
Reinvestment of dividends ........................ 7 41 52 284 -- -- 153 838
Shares redeemed .................................. (136) (792)* (834) (4,607)* -- --* (1,846) (11,086)*
---- ----- ----- ------- --- --- ------ --------
Net increase (decrease) in shares outstanding .... (90) $(496) 301 $ 2,508 1 $ 5 1,325 $ 9,513
==== ===== ===== ======= === === ====== ========
* Net of Redemption Fees
PERIOD ENDED OCTOBER 31, 2008
INSTITUTIONAL
CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
----------------- ----------------- ---------------- -----------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- ------ -------- ------ -------- ------ ------- ------ --------
Shares sold ...................................... 1,198 $ 16,083 2,230 $ 28,546 297 $ 3,951 2,713 $ 35,215
Reinvestment of dividends ........................ 272 3,895 1,160 15,508 70 920 5,368 73,485
Shares redeemed .................................. (1,225) (16,311) (6,179) (76,210) (218) (2,729) (6,818) (86,507)
------ -------- ------ -------- ---- ------- ------ --------
Net increase (decrease) in shares outstanding .... 245 $ 3,667 (2,789) $(32,156) 149 $ 2,142 1,263 $ 22,193
====== ======== ====== ======== ==== ======= ====== ========
INSTITUTIONAL
CLASS AMR CLASS
--------------- -----------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- ------ ------ ------ --------
Shares sold ...................................... 4 $22 5,386 $ 34,835
Reinvestment of dividends ........................ -- 4 492 3,539
Shares redeemed .................................. (1) (8) (6,432) (41,424)
--- --- ------ --------
Net increase (decrease) in shares outstanding .... 3 $18 (554) $ (3,050)
=== === ====== ========
INSTITUTIONAL
CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
---------------- ----------------- --------------- -----------------
MID-CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ ------- ------ -------- ------ ------ ------ --------
Shares sold ...................................... 322 $ 2,868 1,423 $ 12,385 -- $-- 1,756 $ 15,252
Reinvestment of dividends ........................ 50 469 263 2,504 -- -- 641 6,125
Shares redeemed .................................. (541) (4,589)* (2,825) (25,705)* -- --* (3,772) (33,445)*
---- ------- ------ -------- --- --- ------ --------
Net (decrease) in shares outstanding ............. (169) $(1,252) (1,139) $(10,816) -- $-- (1,375) $(12,068)
==== ======= ====== ======== === === ====== ========
* Net of Redemption Fees
39
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
7. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in
the Fund's financial statements through December 23, 2009. Management has
determined that there are no material events that would require disclosure in
the Funds' financial statements through this date.
40
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41
AMERICAN BEACON BALANCED FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class
Year Ended October 31,
--------------------------------------------
2009 2008 2007 2006 2005
------- ------- ------- ------- -------
Net asset value, beginning of period ........ $ 10.63 $ 16.09 $ 15.83 $ 15.00 $ 14.31
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(A) ................. 0.43 0.47 0.50 0.39 0.36
Net gains (losses) on securities (both
realized and unrealized) .............. 1.25 (4.70) 0.90 1.54 1.11
------- ------- ------- ------- -------
Total income (loss) from investment
operations ............................... 1.68 (4.23) 1.40 1.93 1.47
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ..... (0.48) (0.44) (0.42) (0.38) (0.31)
Distributions from net realized gains on
securities ............................ -- (0.79) (0.72) (0.72) (0.47)
------- ------- ------- ------- -------
Total distributions ......................... (0.48) (1.23) (1.14) (1.10) (0.78)
------- ------- ------- ------- -------
Net asset value, end of period .............. $ 11.83 $ 10.63 $ 16.09 $ 15.83 $ 15.00
======= ======= ======= ======= =======
Total return(E) ............................. 16.64% (28.23)% 9.31% 13.60% 10.53%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands).. $29,808 $36,557 $51,399 $22,587 $14,122
Ratios to average net assets (annualized):
Expenses, net of waivers ................. 0.60% 0.56% 0.57% 0.59% 0.56%
Expenses, before waivers ................. 0.60% 0.56% 0.57% 0.59% 0.56%
Net investment income, net of waivers .... 3.60% 3.37% 2.91% 2.81% 2.45%
Net investment income (loss), before
waivers ............................... 3.60% 3.37% 2.91% 2.81% 2.45%
Portfolio turnover rate .................. 57% 53% 50% 59% 58%
Investor Class
Year Ended October 31,
-------------------------------------------------
2009 2008 2007 2006 2005
------- -------- -------- -------- -------
Net asset value, beginning of period ........ $ 9.91 $ 15.09 $ 14.91 $ 14.20 $ 13.62
------- -------- -------- -------- -------
Income from investment operations:
Net investment income(A) ................. 0.30 0.41 0.41 0.35 0.34
Net gains (losses) on securities (both
realized and unrealized) .............. 1.23 (4.39) 0.87 1.44 1.01
------- -------- -------- -------- -------
Total income (loss) from investment
operations ............................... 1.53 (3.98) 1.28 1.79 1.35
------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income ..... (0.48) (0.41) (0.38) (0.36) (0.30)
Distributions from net realized gains on
securities ............................ -- (0.79) (0.72) (0.72) (0.47)
------- -------- -------- -------- -------
Total distributions ......................... (0.48) (1.20) (1.10) (1.08) (0.77)
------- -------- -------- -------- -------
Net asset value, end of period .............. $ 10.96 $ 9.91 $ 15.09 $ 14.91 $ 14.20
======= ======== ======== ======== =======
Total return(E) ............................. 16.29% (28.39)% 9.06% 13.31% 10.12%
======= ======== ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands).. $94,915 $105,473 $202,750 $111,837 $86,875
Ratios to average net assets (annualized):
Expenses, net of waivers ................. 0.89% 0.82% 0.83% 0.85% 0.86%
Expenses, before waivers ................. 0.89% 0.82% 0.83% 0.85% 0.86%
Net investment income, net of waivers .... 3.26% 3.12% 2.65% 2.55% 2.14%
Net investment income (loss), before
waivers ............................... 3.26% 3.12% 2.65% 2.55% 2.14%
Portfolio turnover rate .................. 57% 53% 50% 59% 58%
Advisor Class
---------------------------------------------
Year Ended October 31, May 31 to
-------------------------------- October 31,
2009 2008 2007 2006 2005
------ ------- ------ ------ -----------
Net asset value, beginning of period ........ $ 9.77 $ 14.95 $14.83 $14.16 $ 13.96
------ ------- ------ ------ --------
Income from investment operations:
Net investment income(A) ................. 0.37 0.34 0.41 0.38 0.09
Net gains (losses) on securities (both
realized and unrealized) .............. 1.21 (4.31) 0.83 1.35 0.11
------ ------- ------ ------ --------
Total income (loss) from investment
operations ............................... 1.58 (3.97) 1.24 1.73 0.20
------ ------- ------ ------ --------
Less distributions:
Dividends from net investment income ..... -- (0.42) (0.40) (0.34) --
Distributions from net realized gains on
securities ............................ -- (0.79) (0.72) (0.72) --
------ ------- ------ ------ --------
Total distributions ......................... -- (1.21) (1.12) (1.06) --
------ ------- ------ ------ --------
Net asset value, end of period .............. $11.35 $ 9.77 $14.95 $14.83 $ 14.16
====== ======= ====== ====== ========
Total return(E) ............................. 16.17% (28.65)% 8.83% 12.94% 1.43%(B)
====== ======= ====== ====== ========
Ratios and supplemental data:
Net assets, end of period (in thousands).. $6,812 $ 7,674 $9,504 $1,562 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers ................. 1.09% 1.07% 1.07% 1.22% 1.09%(C)
Expenses, before waivers ................. 1.09% 1.07% 1.07% 1.22% 360.24%(C)
Net investment income, net of waivers .... 3.06% 2.86% 2.34% 2.18% 1.52%(C)
Net investment income (loss), before
waivers ............................... 3.06% 2.86% 2.34% 2.17% (357.63)%(C)
Portfolio turnover rate .................. 57% 53% 50% 59% 58%(D)
AMR Class
-------------------------------------------------
Year Ended October 31,
-------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value, beginning of period ........ $ 10.19 $ 15.49 $ 15.27 $ 14.49 $ 13.87
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ................. 0.39 0.49 0.50 0.45 0.39
Net gains (losses) on securities (both
realized and unrealized) .............. 1.24 (4.52) 0.89 1.46 1.05
-------- -------- -------- -------- --------
Total income (loss) from investment
operations ............................... 1.63 (4.03) 1.39 1.91 1.44
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ..... (0.51) (0.48) (0.45) (0.41) (0.35)
Distributions from net realized gains on
securities ............................ -- (0.79) (0.72) (0.72) (0.47)
-------- -------- -------- -------- --------
Total distributions ......................... (0.51) (1.27) (1.17) (1.13) (0.82)
-------- -------- -------- -------- --------
Net asset value, end of period .............. $ 11.31 $ 10.19 $ 15.49 $ 15.27 $ 14.49
======== ======== ======== ======== ========
Total return(E) ............................. 16.95% (28.08)% 9.59% 13.98% 10.63%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands).. $681,197 $604,209 $898,584 $817,333 $712,073
Ratios to average net assets (annualized):
Expenses, net of waivers ................. 0.35% 0.31% 0.31% 0.33% 0.33%
Expenses, before waivers ................. 0.35% 0.31% 0.31% 0.33% 0.33%
Net investment income, net of waivers .... 3.75% 3.62% 3.21% 3.08% 2.70%
Net investment income (loss), before
waivers ............................... 3.75% 3.62% 3.21% 3.08% 2.70%
Portfolio turnover rate .................. 57% 53% 50% 59% 58%
(A) Through October 31, 2005, net investment income was calculated by
subtracting class expenses per share from the Fund's net investment income
per share before class expenses.
(B) Not annualized.
(C) Annualized.
(D) Portfolio turnover rate is for the period from November 1, 2004 through
October 31, 2005.
(E) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. For the Institutional Class for the year ended 2005 the Total
return has been restated from 12.78%. For the Advisor Class for the years
ended 2008, 2007, and 2006, the Total returns have been restated from
(28.58%), 8.76%, and 13.01%, respectively.
42
AMERICAN BEACON LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class
------------------------------------------------
Year Ended October 31,
------------------------------------------------
2009(A) 2008 2007 2006(B) 2005
------- -------- ------ ------- -------
Net asset value, beginning of period ................................ $ 4.49 $ 7.67 $ 6.89 $ 6.18 $ 5.82
------ ------- ------ ------ ------
Income from investment operations:
Net investment income ............................................ 0.03 0.05 0.04 0.04 0.04
Net gains (losses) on securities (both realized and unrealized) .. 0.50 (2.97) 0.77 0.70 0.37
------ ------- ------ ------ ------
Total income (loss) from investment operations ...................... 0.53 (2.92) 0.81 0.74 0.41
------ ------- ------ ------ ------
Less distributions:
Dividends from net investment income ............................. (0.05) (0.04) (0.03) (0.03) (0.05)
Distributions from net realized gains on securities .............. -- (0.22) -- -- --
------ ------- ------ ------ ------
Total distributions ................................................. (0.05) (0.26) (0.03) (0.03) (0.05)
------ ------- ------ ------ ------
Net asset value, end of period ...................................... $ 4.97 $ 4.49 $ 7.67 $ 6.89 $ 6.18
====== ======= ====== ====== ======
Total return(C) ..................................................... 12.09% (39.35)% 11.84% 12.04% 7.06%
====== ======= ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ......................... $ 130 $ 83 $ 119 $ 110 $ 105
Ratios to average net assets (annualized):
Expenses, net of waivers ......................................... 0.93% 0.89% 0.90% 0.90% 0.89%
Expenses, before waivers ......................................... 0.94% 0.95% 1.06% 0.99% 4.64%
Net investment income (loss), net of waivers ..................... 0.38% 0.74% 0.58% 0.56% (0.18)%
Net investment income (loss), before waivers ..................... 0.36% 0.68% 0.42% 0.48% (3.93)%
Portfolio turnover rate .......................................... 147% 112% 128% 181% 164%
AMR Class
Year Ended October 31,
-------------------------------------------------
2009(A) 2008 2007 2006(B) 2005
------- -------- -------- ------- -------
Net asset value, beginning of period ................................ $ 4.52 $ 7.72 $ 6.95 $ 6.21 $ 5.84
------- -------- -------- ------- -------
Income from investment operations:
Net investment income ............................................ 0.04 0.07 0.06 0.05 0.06
Net gains (losses) on securities (both realized and unrealized) .. 0.51 (2.99) 0.77 0.73 0.36
------- -------- -------- ------- -------
Total income (loss) from investment operations ...................... 0.55 (2.92) 0.83 0.78 0.42
------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income ............................. (0.07) (0.06) (0.06) (0.04) (0.05)
Distributions from net realized gains on securities .............. -- (0.22) -- -- --
------- -------- -------- ------- -------
Total distributions ................................................. (0.07) (0.28) (0.06) (0.04) (0.05)
------- -------- -------- ------- -------
Net asset value, end of period ...................................... $ 5.00 $ 4.52 $ 7.72 $ 6.95 $ 6.21
======= ======= ======== ======= =======
Total return(C) ..................................................... 12.46% (39.17)% 12.07% 12.52% 7.22%
======= ======= ======== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ......................... $71,154 $56,976 $101,698 $82,042 $63,183
Ratios to average net assets (annualized):
Expenses, net of waivers ......................................... 0.63% 0.59% 0.60% 0.59% 0.64%
Net investment income (loss), before waivers ..................... 0.63% 0.59% 0.60% 0.59% 0.64%
Net investment income (loss), net of waivers ..................... 0.86% 1.05% 0.85% 0.88% 0.98%
Net investment income (loss), before waivers ..................... 0.86% 1.05% 0.85% 0.88% 0.98%
Portfolio turnover rate .......................................... 147% 112% 128% 181% 164%
(A) On March 17, 2009, Winslow Capital Management, Inc. assumed management of
the Large Cap Growth Fund's assets previously managed by Goldman Sachs
Asset Management, L.P.
(B) On September 12, 2006, The Renaissance Group, LLC assumed management of the
Large Cap Growth Fund's assets previously managed by J.P. Morgan Investment
Management, Inc.
(C) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. The Total return of the Institutional Class for the year
ended 2008 has been restated from (39.48%).
43
AMERICAN BEACON MID-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class
------------------------------------
November
Year Ended October 31, 30 to
------------------------- October
2009 2008 2007 31, 2006
------ ------- ------ --------
Net asset value, beginning of period .................... $ 5.94 $ 11.01 $10.81 $ 12.09
------ ------- ------ --------
Income from investment operations:
Net investment income ................................ 0.10 0.16 0.12 0.21
Net gains (losses) on securities (both realized
and unrealized) ................................... 1.65 (4.31) 0.41 1.25
------ ------- ------ --------
Total income (loss) from investment operations .......... 1.75 (4.15) 0.53 1.46
------ ------- ------ --------
Less distributions:
Dividends from net investment income ................. (0.12) (0.16) (0.07) (0.16)
Distributions from net realized gains on securities .. -- (0.76) (0.26) (2.58)
------ ------- ------ --------
Total distributions ..................................... (0.12) (0.92) (0.33) (2.74)
------ ------- ------ --------
Redemption fees added to beneficial interests(B) ........ 0.00 0.00 0.00 0.00
Net asset value, end of period .......................... $ 7.57 $ 5.94 $11.01 $ 10.81
====== ======= ====== ========
Total return(G) ......................................... 30.24% (40.86)% 4.97% 15.19%(C)
====== ======= ====== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $2,197 $ 2,256 $6,047 $ 3,396
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 0.98% 0.98% 0.92% 1.19%(D)
Expenses, before waivers ............................. 1.13% 1.16% 1.09% 1.19%(D)
Net investment income, net of waivers ................ 1.29% 1.51% 1.22% 1.11%(D)
Net investment income, before waivers ................ 1.14% 1.33% 1.05% 1.11%(D)
Portfolio turnover rate .............................. 42% 28% 35% 42%(E)
Investor Class
--------------------------------------
February
Year Ended October 31, 28 to
--------------------------- October
2009 2008 2007 31, 2006
------- ------- ------- --------
Net asset value, beginning of period .................... $ 5.92 $ 10.96 $ 10.80 $ 9.80
------- ------- ------- -------
Income from investment operations:
Net investment income ................................ 0.07 0.14 0.10 0.01
Net gains (losses) on securities (both realized
and unrealized) ................................... 1.66 (4.31) 0.40 0.99
------- ------- ------- -------
Total income (loss) from investment operations .......... 1.73 (4.17) 0.50 1.00
------- ------- ------- -------
Less distributions:
Dividends from net investment income ................. (0.11) (0.11) (0.08) --
Distributions from net realized gains on securities .. -- (0.76) (0.26) --
------- ------- ------- -------
Total distributions ..................................... (0.11) (0.87) (0.34) --
------- ------- ------- -------
Redemption fees added to beneficial interests(B) ........ 0.00 0.00 0.00 0.00
Net asset value, end of period .......................... $ 7.54 $ 5.92 $ 10.96 $ 10.80
======= ======= ======= =======
Total return(G) ......................................... 29.93% (41.04)% 4.68% 10.20%(C)
======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $23,369 $16,550 $43,158 $27,240
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 1.23% 1.23% 1.23% 1.49%(D)
Expenses, before waivers ............................. 1.34% 1.32% 1.26% 1.61%(D)
Net investment income, net of waivers ................ 0.98% 1.27% 0.93% 0.57%(D)
Net investment income, before waivers ................ 0.87% 1.18% 0.90% 0.44%(D)
Portfolio turnover rate .............................. 42% 28% 35% 42%(E)
Advisor Class
---------------------------------
June
Year Ended October 31, 29 to
---------------------- October
2009 2008 31, 2007
-------- ------- --------
Net asset value, beginning of period .................... $ 5.87 $ 10.94 $ 11.73
------ ------- -------
Income from investment operations:
Net investment income ................................ 0.15 0.10 0.01
Net gains (losses) on securities (both realized
and unrealized) ................................... 1.60 (4.27) (0.80)
------ ------- -------
Total income (loss) from investment operations .......... 1.75 (4.17) (0.79)
------ ------- -------
Less distributions:
Dividends from net investment income ................. (0.13) (0.14) --
Distributions from net realized gains on securities .. -- (0.76) --
------ ------- -------
Total distributions ..................................... (0.13) (0.90) --
------ ------- -------
Redemption fees added to beneficial interests(B) ........ 0.00 0.00 0.00
Net asset value, end of period .......................... $ 7.49 $ 5.87 $ 10.94
====== ======= =======
Total return(G) ......................................... 30.64% (41.28)% (6.73)%(C)
====== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $ 7 $ 1 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 1.50% 1.50% 1.50%(D)
Expenses, before waivers ............................. 1.58% 2.04% 1.80%(D)
Net investment income, net of waivers ................ 0.22% 1.02% 0.32%(D)
Net investment income, before waivers ................ 0.14% 0.48% 0.02%(D)
Portfolio turnover rate .............................. 42% 28% 35%(F)
AMR Class (formerly Institutional Class prior
to December 1, 2005)(A)
-----------------------------------------------
Year Ended October 31,
-----------------------------------------------
2009 2008 2007 2006 2005
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 5.97 $ 11.07 $ 10.87 $ 11.72 $ 10.27
------- ------- ------- ------- -------
Income from investment operations:
Net investment income ................................ 0.07 0.18 0.18 0.12 0.13
Net gains (losses) on securities (both realized
and unrealized) ................................... 1.70 (4.35) 0.36 1.75 1.37
------- ------- ------- ------- -------
Total income (loss) from investment operations .......... 1.77 (4.17) 0.54 1.87 1.50
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income ................. (0.15) (0.17) (0.08) (0.14) (0.05)
Distributions from net realized gains on securities .. -- (0.76) (0.26) (2.58) --
------- ------- ------- ------- -------
Total distributions ..................................... (0.15) (0.93) (0.34) (2.72) (0.05)
------- ------- ------- ------- -------
Redemption fees added to beneficial interests(B) ........ 0.00 0.00 0.00 0.00 0.00
Net asset value, end of period .......................... $ 7.59 $ 5.97 $ 11.07 $ 10.87 $ 11.72
======= ======= ======= ======= =======
Total return(G) ......................................... 30.56% (40.82)% 5.09% 19.16% 14.63%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $53,604 $34,253 $78,794 $66,290 $44,342
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 0.83% 0.82% 0.75% 0.97% 1.01%
Expenses, before waivers ............................. 0.82% 0.82% 0.75% 0.92% 1.02%
Net investment income, net of waivers ................ 1.38% 1.68% 1.41% 1.38% 0.92%
Net investment income, before waivers ................ 1.38% 1.68% 1.40% 1.42% 0.91%
Portfolio turnover rate .............................. 42% 28% 35% 42% 298%
(A) On November 30, 2005, the Mid-Cap Value Fund's Institutional Class of
shares was renamed the AMR Class and the Fund began offering a new class of
shares known as the Institutional Class.
(B) Amounts represent less than $0.01 per share.
(C) Not annualized.
(D) Annualized.
(E) Portfolio turnover rate is for the period from November 1, 2005 through
October 31, 2006.
(F) Portfolio turnover rate is for the period from November 1, 2006 through
October 31, 2007.
(G) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. For the Institutional Class for the years and period then
ended 2008, 2007 and 2006, the Total returns have been restated from
(40.96%), 4.87%, and 15.30%, respectively. For the Investor Class for the
year ended 2008, the Total return has been restated from (41.14%). For the
Advisor Class for the years and period then ended 2008 and 2007, the Total
returns have been restated from (41.24%) and (6.65%), respectively. For the
AMR Class for the years ended 2008 and 2007, the Total returns have been
restated from (40.87%) and 5.19%, respectively.
44
AMERICAN BEACON FUNDS
PRIVACY POLICY
(UNAUDITED)
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or
more of the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our
customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION (UNAUDITED)
For corporate shareholders in the Funds, the percentage of ordinary
dividend income distributed for the year ended October 31, 2009, which is
designated as qualifying for the dividends-received deduction, is as follows:
Balanced Fund 27.57%
Large Cap Growth Fund 42.76%
Mid-Cap Value Fund 44.20%
For shareholders in the Funds, the percentage of dividend income
distributed for the year ended October 31, 2009, which is designated as
qualified dividends income under the Jobs and Growth Tax Relief Act of 2003, is
as follows:
Balanced Fund 32.96%
Large Cap Growth Fund 67.01%
Mid-Cap Value Fund 75.92%
Shareholders will receive notification in January 2010 of the
percentage applicable to the preparation of their 2009 income tax returns.
45
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENT
(UNAUDITED)
At its May 27, 2009 meeting, the Board of Trustees ("Board")
considered the renewal of each existing Management Agreement between American
Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds ("Beacon
Trust") (the "Funds") and each Investment Advisory Agreement between the Manager
and a subadvisor ("Investment Advisory Agreements" and collectively with the
Management Agreement, the "Agreements"). In preparation for the Board's
consideration to renew these Agreements, the Board and its Investment Committee
undertook steps to gather and consider information furnished by the Manager, the
subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to
obtain relevant comparative information regarding the performance, fees and
expenses of the Funds. The Investment Committee held a separate meeting on May
13, 2009 to consider the information provided by Lipper. Further, the Board took
into consideration information furnished for the Board's review and
consideration throughout the year at regular Board and Investment Committee
meetings, as well as information specifically prepared in connection with the
renewal process.
In connection with the Board's consideration of the Management
Agreement and each Investment Advisory Agreement, the Trustees considered, among
other materials, responses by the Manager and the subadvisors to inquiries
requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements, as well as Parts 1 and II of its Form ADV registration
statement with the SEC;
- a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- a description of any payments by the subadvisors to the manager to
support the Funds' marketing efforts;
- an evaluation of any other benefits to the firm or Funds as a result
of their relationship, if any;
- confirmation that the firm's financial condition would not impair its
ability to provide high-quality advisory services to the Funds;
- a description of any internal actions the firm has taken or
anticipates taking in light of the current and projected decrease in
revenues from prior years as a result of the current economic
environment and, as applicable, information regarding the firm's
decline in assets under management from January 1, 2008 through March
31, 2009;
- a description of the scope of portfolio management services provided
to the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies, and any advantages or disadvantages that might accrue to
the Funds due to the firm's involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
46
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
- 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 discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates
- a certification by the firm regarding the reasonable design of its
compliance program;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto and a related certification of compliance by
the firm;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of any revenue sharing activities with respect to the
Funds;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Management Agreement and each Investment
Advisory Agreement, the Board also obtained an analysis provided by Lipper that
compared: (i) investment performance of each Fund versus comparable investment
companies and appropriate indices; (ii) total Fund expenses of each Fund versus
comparable mutual funds; and (iii) each Fund's investment advisory fees versus
comparable mutual funds. For each Fund with more than one class of shares, the
class of shares used for comparative purposes was the class with the longest
performance history, which in most cases was
47
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
the Institutional Class. References below to each Fund's Lipper peer group are
to the group of comparable mutual funds included in the analysis provided by
Lipper.
Provided below is an overview of the primary factors the Trustees
considered at the Investment Committee meeting on May 13, 2009 at which the
Trustees reviewed the investment performance of the Manager and each subadvisor
and the primary factors considered by the Board at its May 27, 2009 meeting at
which the Board considered the renewal of the Agreements. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Management Agreement and each Investment Advisory Agreement, and
each Trustee may have afforded different weight to the various factors. Legal
counsel to the independent Trustees provided the Board with a memorandum
regarding its responsibilities pertaining to the renewal of the Agreements. The
memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts. Based
on its evaluation, the Board unanimously concluded that the terms of each
Agreement were reasonable and fair and that the renewal of each Agreement was in
the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each
Investment Advisory Agreement, the Trustees considered the best interests of
each Fund separately. While the Management Agreement and the Investment Advisory
Agreements for all of the Funds were considered at the May 27, 2009 meeting, the
Board considered each Fund's investment management and subadvisory relationships
separately. In each instance, the Board considered, among other things, the
following factors: (1) the nature and quality of the services provided; (2) the
investment performance of a Fund and, as applicable, each subadvisor for a Fund;
(3) the costs incurred by the Manager and (to the extent provided) the
subadvisors in rendering their services and their resulting profits or losses;
(4) the extent to which economies of scale have been taken into account in
setting each fee schedule; (5) whether fee levels reflect these economies of
scale for the benefit of Fund investors; (6) comparisons of services and fees
with contracts entered into by the Manager or a subadvisor or their affiliates
with other clients (such as pension funds and other institutional funds); and
(7) any other benefits derived or anticipated to be derived by the Manager or a
subadvisor from their relationship with a Fund. The Trustees posed questions to
various management personnel of the Manager regarding certain key aspects of the
materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of
the Management Agreement, the Board considered: the background and experience of
key investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes 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.
With respect to the renewal of each Investment Advisory Agreement, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing the Funds, the size of the
subadvisor and their ability to continue to attract and retain qualified
investment personnel. Based on the foregoing information, the Board concluded
that the nature, extent and quality of the management and advisory services
provided by the Manager and each subadvisor were appropriate for each Fund and,
thus, determined to renew the Management Agreement and the Investment Advisory
Agreement for each Fund.
Investment Performance. The Board evaluated the comparative
information provided by Lipper and the Manager regarding each Fund's investment
performance relative to its benchmark index(es) and peer group. The Board
considered the information provided by Lipper regarding its independent peer
selection methodology to select all peer groups and universes. The Board also
considered the performance reports and discussions with management at Board and
Committee meetings throughout the year. The Manager also noted that it generally
was satisfied with the performance of the subadvisors. A discussion regarding
the Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services Provided to the Funds and the Profits Realized
by the Manager from its Relationship with the Funds. In analyzing the cost of
services and profitability of the Manager and a subadvisor by Fund, the Board
considered the revenues earned and the expenses incurred by the Manager. The
profits or losses were noted at both an individual Fund level and at an
aggregate level for all Funds. The Board also considered that the Management
Agreement for the Beacon Trust, stipulates that, to the extent that a Fund
invests all of its investable assets in another registered investment company
(i.e., is a "Feeder Fund"), the Fund will not pay the Manager a management fee.
The index series of the Funds also operate under a master-feeder structure, but
each of these series invests in a master portfolio that is not
48
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
managed by the Manager. As such, the Board considered that the Manager does not
receive a management fee with respect to the International Equity Index, S&P 500
Index, or Small Cap Index Funds. With respect to the Short-Term Bond Fund, the
Board also considered the Manager's advisory fees for services provided by the
Manager to institutional separate accounts with similar investment strategies.
Although the Board noted that, in certain cases, the fee rates paid by other
clients is lower than the fee rates paid by the Funds, the difference reflects
the greater level of responsibility and regulatory requirements associated with
managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year and to discontinue the expense waivers and
reimbursements for certain classes of the Funds that were closing or maintained
competitive expense ratios without such expense waivers. The Board further
considered that each subadvised Fund pays the Manager the amounts due to its
subadvisors, and the Manager remits these amounts directly to the applicable
subadvisors. The Board considered that the Manager receives service and
administrative fees to compensate the Manager for providing administrative
services to the Funds and to compensate third-party administrators and
broker-dealers for services to Fund shareholders. In addition, the Board
considered that the Manager receives management fees for overseeing the
securities lending relationships on behalf of various Funds. The Board also
noted that certain classes of the Funds maintain higher expense ratios in order
to compensate third-party distributors.
In analyzing the cost of services and profitability for each
subadvisor in connection with its investment advisory services to the Fund, the
Board considered that, in many cases, the Manager has negotiated the lowest
subadvisory fee a subadvisor charges for any comparable client accounts. The
Board gave less weight to profitability considerations or did not view this data
as imperative to its deliberations given the arm's length nature of the
relationship between the Manager and the subadvisors with respect to the
negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the
management and investment advisory fees, the Board considered whether economies
of scale will be realized as the Funds grow and whether fee levels reflect these
economies of scale for the benefit of Fund shareholders. In this regard, the
Board considered that the Manager has negotiated breakpoints in many subadvisory
fee rates. The Board also noted that, for purposes of determining the fee rates
chargeable to the Funds, many subadvisors have agreed to take into account other
assets of AMR Corporation and its pension plans that are managed by the
subadvisors. Thus, the Funds are able to receive lower effective fee rates. The
Board also noted the Manager's representation that Fund assets have decreased
significantly primarily due to market depreciation in 2008 and the first quarter
of 2009, as well as significant share redemptions from the Money Market Funds
and the inability of certain competitor money market funds' to maintain positive
yields, causing mass redemptions in money market funds throughout the industry.
Based on the foregoing information, the Board concluded that the Manager and
subadvisor fee schedules for each Fund provides for a reasonable sharing of
benefits from any economies of scale with the Fund.
Benefits Derived from the Relationship with the Funds. The Board
considered the "fall-out" or ancillary benefits that accrue to the Manager
and/or the subadvisors as a result of the advisory relationships with the Funds,
including greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. The Board also considered that
the Manager's relationship with the Funds continues to be a significant factor
in attracting separate account assets for the Manager, noting specifically the
Manager's utilization of the Large Cap Value Fund model for a newly registered
actively managed exchange traded fund managed by the Manager. In addition, the
Board noted that the Manager provides services to each Trust at a relatively low
cost. The Board considered that certain of the subadvisors reimburse the Manager
for certain of its costs relating to distribution activities for the Funds. The
Board also considered that Funds did not pay commissions to any affiliated
broker-dealer of the Manager or the relevant subadvisor during the most recent
fiscal year ended October 31.
Based on the foregoing information, the Board concluded that the
potential benefits accruing to the Manager and the subadvisors by virtue of
their relationships with the Funds appear to be fair and reasonable. Additional
Considerations and Conclusions with Respect to Each Fund
Except for the Short-Term Bond Fund, the performance comparisons below
were made versus each Fund's Lipper peer universe median. References to the
Lipper expense universe below are to the universe of comparable mutual funds
included in the analysis provided to the Trustees by Lipper, Inc.
49
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
Additional Considerations and Conclusions with Respect to the Balanced Fund
In considering the renewal of the Management Agreement with respect to
the Balanced Fund, the Trustees considered the following additional factors: (1)
the Balanced Fund outperformed the peer universe median for the one-, three-,
five- and ten-year periods ended March 31, 2009; (2) the Manager outperformed
its market index with respect to its portion of the Fund's fixed income assets
for the one-, three- and five-year periods ended March 31, 2009; and (3) the
expense ratio of the Institutional Class of Fund shares ranked better than the
median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with
Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow"), Brandywine Global
Investment Management, LLC ("Brandywine") and Hotchkis and Wiley Capital
Management, LLC ("Hotchkis"), the Trustees considered the following additional
factors: (1) Barrow outperformed the peer universe median for the one-, three-,
five- and ten-year periods ended March 31, 2009; (2) Brandywine outperformed the
peer universe median for the one-, three-, five- and ten-year periods ended
March 31, 2009; (3) Hotchkis outperformed its market benchmark index with
respect to its allocated portion of the Fund's equity assets for the ten-year
period and the quarter ended March 31, 2009, but underperformed for the one-
three- and five- year periods; (4) management's analysis of the rationale for
Hotchkis' underperformance; (5) each of the Fund's subadvisors has informed the
Manager that it uses Fund commissions to obtain proprietary research, the
application of which benefits the Fund; (6) each of the Fund's subadvisors has
indicated that it does not charge lower advisory fees to other clients for which
it provides comparable services; and (7) the Manager's recommendation to
continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded
that the fees paid to the Manager and the subadvisors under the Agreements are
fair and reasonable, (2) determined that the Balanced Fund and its shareholders
would benefit from the Manager's and subadvisors' continued management of the
Fund and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Balanced Fund.
Additional Considerations and Conclusions with Respect to the Large Cap Growth
Fund
In considering the renewal of the Management Agreement for the Large
Cap Growth Fund, the Trustees considered the following additional factors: (1)
the Large Cap Growth Fund underperformed the peer universe median for the one-,
three- and five-year periods ended March 31, 2009; (2) management's analysis
regarding the rationale for the underperformance of the Large Cap Growth Fund;
and (3) the expense ratio of the Institutional Class of Fund shares ranked
better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with
Renaissance Group LLC, dba Renaissance Investment Management ("Renaissance"),
the Trustees considered the following additional factors: (1) Renaissance
underperformed the peer universe median for the one- and two- year period ended
March 31, 2009; (2) management's analysis regarding the rationale for
Renaissance's underperformance; (3) Renaissance has informed the Manager that it
uses Fund commissions to obtain proprietary research, the application of which
benefits the Fund and Renaissance's other clients; (4) Renaissance has indicated
that it charges lower advisory fees to two similarly managed accounts driven by
the significant size of such portfolios; and (5) the Manager's recommendation to
continue to retain Renaissance as a subadvisor.
Based on these and other considerations the Trustees (1) concluded
that the fees paid to the Manager and the subadvisor under the Agreements are
fair and reasonable, (2) determined that the Large Cap Growth Fund and its
shareholders would benefit from the Manager's and subadvisor's continued
management of the Fund and (3) approved the renewal of the Management and
Investment Advisory Agreements with respect to the Large Cap Growth Fund.
Additional Considerations and Conclusions with Respect to the Mid-Cap Value Fund
In considering the renewal of the Management Agreement for the Mid-Cap
Value Fund, the Trustees considered the following additional factors: (1) the
Mid-Cap Value Fund outperformed its peer group universe median for the one-year
period ended March 31, 2009 and underperformed for the three-year period; (2)
management's analysis regarding the rationale for the underperformance of the
Mid-Cap Value Fund; and (3) the expense ratio of the Institutional Class of Fund
shares ranked better than the median of its Lipper expense universe (after
consideration of the Manager's waiver).
In considering the renewal of the Investment Advisory Agreements with
Barrow and Pzena Investment Management, LLC ("Pzena"), the Trustees considered
the following additional factors: (1) Barrow outperformed the peer universe
median for the one- and three-year periods ended March 31, 2009; (2) Pzena
underperformed the peer universe median for the one- and three-year periods
ended March 31, 2009; (3) management's analysis regarding the rationale for
50
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISORY AGREEMENTS
Pzena's underperformance; (4) that the Manager will continue to monitor and
Board or its Investment Committee will periodically review, Pzena's investment
performance with respect to its allocated portion of the Mid Cap Value Fund's
assets; (5) Pzena has lowered its investment management fee by 15%; (6) Barrow
has informed the Manager that it uses Fund commissions to obtain proprietary
research, the application of which benefits the Fund and Barrow's other clients;
(7) Barrow and Pzena have indicated that they do not charge lower advisory fee
rates to other clients for which they provide comparable services; and (6) the
Manager's recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded
that the fees paid to the Manager and the subadvisors under the Agreements are
fair and reasonable, (2) determined that the Mid-Cap Value Fund and its
shareholders would benefit from the Manager's and subadvisors' continued
management of the Fund and (3) approved the renewal of the Management and
Investment Advisory Agreements with respect to the Mid-Cap Value Fund.
51
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust")
are listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees nineteen funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ------------------------- ------------------- ----------------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a Partner in
the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present);
Director, Clear Channel Communications (1984-Present); Trustee,
CenterPoint Properties (1994-2006); Member, Board of Trustees,
Southern Methodist University ; Member, Board of Visitors, M.D.
Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee,
American Beacon Mileage Funds (1996-present); Trustee, American Beacon
Select Funds (1996-present); Trustee, American Beacon Master Trust
Funds (1996-present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation (1992-2004);
Consultant, New River Canada Ltd. (mutual fund servicing company)
(1998-2003); President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments Southwest Company
(1983-1995); Senior Vice President of Regional Centers, Fidelity
Investments (1988-1995); Trustee, American Beacon Mileage Funds
(2004-present); Trustee, American Beacon Select Funds (2004-present);
Trustee, American Beacon Master Trust Funds (2004-present).
Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and
Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas
Christian University (1998-Present); Trustee, W.I. Cook Foundation,
Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director,
Christian Church Foundation (1999-2007); Trustee, American Beacon
Mileage Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset Management
(1994-Present); Director, Sunrise Bank of Atlanta (2008-Present);
Chairman, Special Contributions Fund Board of Trustees, National
Association for the Advancement of Colored People (2007-Present);
Trustee, National Association for the Advancement of Colored People
(2000-Present); Board of Visitors, Emory University (2006-Present);
Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie
L. Brown Jr. Institute on Politics and Public Service (2001-Present);
Chair, National Association of Securities Professionals (2000-2002);
Deputy Chief Administrative Officer, City of Atlanta (1985-1990);
Trustee, American Beacon Mileage Funds (2008-present); Trustee,
American Beacon Select Funds (2008-present); Trustee, American Beacon
Master Trust Funds (2008-present).
52
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ------------------------- ------------------- ----------------------------------------------------------------------
Thomas M. Dunning (66) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief Executive
Officer (2003-2007), Lockton Dunning Benefits (consulting firm in
employee benefits); Director, Oncor Electric Delivery Company LLC
(2007-present); Advisory Director, Comerica Texas (2003-present);
Immediate Past Chairman and Board Member, Dallas Citizens Council;
Director, Baylor Health Care System Foundation (2007-present); State
Vice Chair, State Fair of Texas; Board Member, Southwestern Medical
Foundation (1994-present); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present), Senior Vice
Chairman since 2008 President and General Counsel, Hunt Consolidated, Inc. (holding
company engaged in oil and gas exploration and production, refining,
real estate, farming, ranching and venture capital activities)
(1994-2009). Chairman (2007-Present) and Director (2005-Present), The
Dallas Opera Foundation; Chairman (2006-Present) and Director
(2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian
Hospital Foundation (2006-Present); Trustee, American Beacon Mileage
Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present); Director,
225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc.
Southern Methodist Univ. (1996-Present); Director, California Federal Preferred Capital Corp.
Dallas, Texas 75275 (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of Directors;
Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission
on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds
(2001-present); Trustee, American Beacon Select Funds (2001-present);
Trustee, American Beacon Master Trust Funds (2001-present).
Paul J. Zucconi,CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
nonstandard automobile insurance) (2004-present); Director, Titanium
Metals Corporation (producer of titanium melted and mill products and
sponge) (2002- present); Director, Torchmark Corporation (life and
health insurance products) (2002-present); Director, National Kidney
Foundation of North Texas (2003-Present); Director, Dallas Chapter of
National Association of Corporate Directors (2004-Present); Partner,
KPMG (1976-2001); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
OFFICERS
Term
One Year
William F. Quinn** (61) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009) and CEO
President from (2006-2007), President (1986-2006) and Director (2003-Present),
2007 to 2008 and American Beacon Advisors, Inc.; Chairman (1989-2003) and Director
2009 to Present (1979-1989, 2003-Present), American Airlines Federal Credit Union;
President from Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent
1987 to 2007 Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble &
and 2008 to 2009 Herr, LLC (investment advisor) (2001-2006); Director of Investment
Trustee from Committee, Southern Methodist University Endowment Fund
1987 to 2008 (1996-Present); Member, Southern Methodist University Cox School of
Business Advisory Board (1999-2002); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002, 2006-Present);
Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for
the Investment of Employee Benefits; Director, United Way of
Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee,
American Beacon Mileage Funds (1995-2008); Trustee, American Beacon
Select Funds (1999-2008); Trustee, American Beacon Master Trust
(1995-2008).
53
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
Gene L. Needles, Jr. (54) President 2009 to President, CEO and Director (2009-Present), American Beacon Advisors,
Present Inc. President (November 2009-Present), Executive Vice President (May
2009-November 2009) of the American Beacon Funds, American Beacon
Mileage Funds, American Beacon Select Funds, and American Beacon
Master Trust. President (2008-2009), Touchstone Investments;
President (2003-2007), CEO (2004-2007), Managing Director of Sales
(2002-2003), National Sales Manager (1999-2002), and Regional Sales
Manager (1993-1999), AIM Distributors.
Rosemary K. Behan (50) VP, Secretary and Vice President, Legal and Compliance, American Beacon Advisors, Inc.
Chief Legal (2006-Present); Assistant General Counsel, First Command Financial
Officer since 2006 Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and
Exchange Commission.
Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon
Advisors, Inc. (2004-Present); Regional Vice President, Neuberger
Berman, LLC (investment advisor) (1996-2004).
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- ------------------------- ------------------- ----------------------------------------------------------------------
Wyatt Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors, Inc.
(2007-Present); Managing Director of Corporate Accounting (2004-2007),
Director of IT Strategy and Finance (2002-2004), American Airlines,
Inc.
Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors,
Inc. (1988-Present); Director American Beacon Global Funds SPC
(2002-present); Director, American Beacon Global Funds plc
(2007-2009).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors, Inc.
1995 (1995-Present).
Christina E. Sears (38) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon Advisors,
and Asst. Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's and Master Trust's sub-advisors.
54
(AMERICAN BEACON FUNDS(R) LOGO)
DELIVERY OF DOCUMENTS
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 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.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
(GRAPHIC) (GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional, Investor, and Advisor Classes American Beacon Funds
Call (800) 658-5811 P.O. Box 219643
AMR Class(SM) Kansas City, MO 64121-9643
Call (800) 345-2345
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, the Fund files a complete schedule of its portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and
third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website
at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's
Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information
regarding the operation of the SEC's Public Reference Room may be obtained by
calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is
also available on the Funds' website (www.americanbeaconfunds.com) approximately
thirty days after the end of each month.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures the Fund uses to determine how to
vote proxies relating to portfolio securities is available in the Fund's
Statement of Additional Information, is available free of charge on the Fund's
website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by
accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for
the most recent year ended June 30 is filed annually with the SEC on Form N-PX.
The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The
Fund's proxy voting record may also be obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
TRUST SERVICES ERNST & YOUNG LLP Portland, Maine
Boston, Massachusetts Kansas City, Missouri Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Beacon Funds, American Beacon Balanced Fund, American Beacon Large Cap
Growth Fund, and American Beacon Mid-Cap Value Fund are service marks of
American Beacon Advisors, Inc.
AR 10//09
00071319
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
October 31, 2009
EMERGING MARKETS FUND
INTERNATIONAL EQUITY FUND
ABOUT AMERICAN BEACON ADVISORS
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
CONTENTS
President's Message................ 1
Market and Performance Overview ... 6
Schedules of Investments:
Emerging Markets................ 11
International Equity............ 16
Additional Information ............ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and,
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
Investing in foreign equities entails additional risk not associated with
domestic equities, such as currency fluctuations, economic and political
instability and differences in accounting standards. The risks of investing in
foreign equities are heightened when investing in emerging markets.
American Beacon Funds October 31, 2009
(PHOTO OF GENE L. NEEDLES, JR.)
FELLOW SHAREHOLDERS,
As an introduction to the Annual Report for the American Beacon Emerging
Markets Fund and American Beacon International Equity Fund for the 12-month
period ended October 31, 2009, please let me take a moment to tell you how
pleased I am to have been serving as President and CEO of American Beacon
Advisors since April 15, 2009. I consider it a privilege to hold this position,
and I take its responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm
no stranger to the ups and downs that markets can deliver. As a fellow investor
and shareholder, I experience these trends in much the same way you do. The
majority of 2008 was difficult in many ways. However, when I took the helm at
American Beacon, I already had many reasons to be optimistic about what might
develop in 2009. As of October 31, 2009, my optimism has been largely confirmed.
For the one-year period (as of 10/31/09), the American Beacon Emerging
Markets Fund returned a robust 60.56%, and the American Beacon International
Equity Fund returned 27.44%. Of course, one year of performance doesn't tell the
whole story, especially when you're investing for the long term. Please note
that the recent growth rate in the stock market has helped to produce short-term
returns that are not typical and may not continue in the future.
Many of us have long-term goals, including retirement, driving our
investment decisions. While this 12-month period began amid a frightening
recessionary environment, we finished the year with increasing confidence that
markets have begun to stabilize, that liquidity has returned to the debt markets
and that equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective,
employing a buy-and-hold philosophy (consistent with each Fund's objectives),
and doing the right thing according to your risk tolerance and time horizon is
not always easy. But the professionals at American Beacon are dedicated to
working hard to help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and am pleased to be able to share my enthusiasm about the
path ahead with you.
A financial advisor can be an important ally in creating investment
success, so--as you review the enclosed annual report--please feel free to
discuss your thoughts and concerns with a trusted advisor. And, as always, the
professionals associated with the American Beacon Funds are grateful for the
opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
----------------------------------------
Gene L. Needles, Jr.
President
American Beacon Funds
1
EMERGING MARKETS OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
Emerging markets soared during the year ended October 31, 2009. The MSCI
Emerging Markets Index gained 64.1% during that one-year period. While the
markets behaved with some trepidation at the beginning of the second quarter
2009, encouraging economic data suggested a turn from recession to recovery. The
global equity market rally that began in early March was one of the strongest
rebounds since the Great Depression era.
China's stimulus package and a weaker U.S. dollar supported higher
commodity prices, which comprise a meaningful part of the emerging market profit
pool. This helped to stabilize Russia's economy and currency and to buffer the
economic impact to Brazil and Chile.
Emerging markets equities continued to surge late in the third quarter of
2009, continuing an impressive run that started back in late October 2008.
Returns broadened during the quarter on a country basis. Smaller Eastern
European countries outperformed during the period, while China and India lagged
after outperforming earlier in the year. We saw favorable prospects develop for
gross domestic product (GDP) growth in Emerging Asia, as the Asian Development
Bank upgraded its forecast to 6.4% from 6.0% for the region. Low interest rates
coupled with various fiscal stimulus programs globally have created a favorable
environment for stocks to bounce back sharply from mid-recession lows.
Companies generated better-than-expected earnings during the second and
third quarters of 2009. While much of the earnings outperformance thus far has
been driven by cost-cutting measures, certain industries, such as technology and
mining, have seen sequential revenue improvements as the inventory cycle has
begun to provide a boost for manufacturers. Investors have been awaiting
evidence that improved trends in capacity utilization and manufacturing will
translate into a sustainable global recovery.
Although the global economic environment has improved, it has not turned
decidedly positive. Emerging economies have held up better than expected, fueled
by accommodative monetary policy and China's massive stimulus package. However,
further earnings upgrades for many sectors will be harder to come by as
inventories are replenished, cost cutting plateaus, and government spending
reverses.
Despite the threats of the return of commodity inflation, protectionism,
and weak reform agendas, the longer-term prospects for emerging markets remain
intact. While the developed world is dealing with deleveraging and stubbornly
high unemployment, high global liquidity, healthy household savings, and
generally solid financial footing may allow emerging markets to invest in their
local economies without extreme leverage. There are many reasons to be
optimistic about the outlook for these markets.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON EMERGING MARKETS FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Emerging Markets Fund returned 60.56% for
the twelve months ended October 31, 2009. The Fund underperformed the MSCI
Emerging Markets Index (the "Index") return of 64.13% but outperformed the
Lipper Emerging Market Funds Index return of 56.89% for the period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 10/31/09 VALUE OF
---------------------------- $10,000
SINCE 7/31/00-
1 YEAR 5 YEARS INCEPTION 10/31/09
------ ------- --------- --------
Institutional
Class(1, 4)............... 60.56% 14.95% 10.91% $26,060
Investor Class(1, 2, 4)..... 60.24% 14.63% 10.66% $25,526
AMR Class(1, 4) ............ 61.01% 15.24% 11.19% $26,679
MSCI Emg Mkts Index(3)...... 64.13% 16.78% 11.30% $26,930
Lipper Emg Mkts Funds
Index(3)................. 56.89% 14.43% 10.38% $24,941
(1.) The Investor Class was formerly known as the PlanAhead Class. Performance
shown is historical and may not be indicative of future returns. Please
note that the recent growth rate in the stock market has helped to produce
short-term returns that are not typical and may not continue in the future.
Investment returns and principal value will vary, and shares may be worth
more or less at redemption than at original purchase. Performance shown is
as of date indicated, and current performance may be lower or higher than
the performance data quoted. To obtain performance as of the most recent
month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009.
Fund performance in the table above does not reflect the deduction of taxes
a shareholder would pay on distributions or the redemption of shares.
(2.) Fund performance for the since inception period represents the total
returns achieved by the Institutional Class from 7/31/00 up to 10/1/02, the
inception date of the Investor Class, and the returns of the Investor Class
since its inception. Expenses of the Investor Class are higher than those
of the Institutional Class. Therefore, total returns shown may be higher
than they would have been had the Investor Class been in existence since
7/31/00. A portion of the fees charged to the Investor Class of the Fund
was waived in 2004 and 2005 and recouped in 2006. Performance prior to fee
waivers and fee recoupment is different than the actual returns shown.
(3.) The MSCI Emerging Markets Index is a market capitalization weighted index
composed of companies that are representative of the market structure of
developing countries in Latin America, Asia, Eastern Europe, the Middle
East and Africa. The Lipper Emerging Market Funds Index tracks the results
of the 30 largest mutual funds in the Lipper Emerging Market Funds
category. Lipper is an independent mutual fund research and ranking
service. One cannot directly invest in an index.
(4.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Investor and AMR Class shares was
1.39%, 1.73% and 1.18%, respectively. The expense ratios above may vary
from the expense ratios presented in other sections of this report that are
based on expenses incurred during the period covered by this report.
The Fund underperformed the Index by 3.57% over the twelve-month period due
to the Fund's equitized cash balances returning less than the Index, and Fund
expenses, while stock selection and country allocation added value.
Stock selection had a significantly positive impact, specifically due to
investments in Taiwan and Thailand, while holdings in Russia and India detracted
from performance. In Taiwan, the Fund benefited from investments in HON HAI
Precision Industry Co. Ltd. (up 91.3%) and Chinatrust Financial Holding Co. Ltd.
(up 123.6%), and in Thailand from investments in companies Charoen Pokphand
Foods PCL (up 258.3%) and Krung Thai Bank PCL (up 155.1%). Investments in
Russian company Gazprom OAO (up 15.6%) and Indian company Satyam Computer
Services Ltd. (down 82.1% for the period the Fund owned the security)
contributed negatively for the period.
From a country allocation perspective, the Fund added value through
overweighting Indonesia (up 127.4%) and underweighting Israel (up 31.4%).
Indonesia was the best performing market in the Index for the twelve-month
period. Underweighting Brazil (up 91.6%) detracted from the Fund's relative
performance.
The Fund's basic philosophy remains focused on investing in attractively
valued companies with above-average earnings growth expectations.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON EMERGING MARKETS FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
Samsung Electronics Co. Ltd. .................. 3.2%
Petroleo Brasileiro S.A. ...................... 2.9%
China Mobile Ltd. ............................. 2.0%
Vale S.A. ..................................... 2.0%
PetroChina Co. Ltd. ........................... 1.9%
China Construction Bank Corp. ................. 1.8%
Itau Unibanco Banco Multiplo S.A. ............. 1.6%
LUKOIL Oil Co. ................................ 1.4%
America Movil, S.A.B. de C.V. ................. 1.4%
Taiwan Semiconductor Manufacturing Co. Ltd. ... 1.3%
SECTOR ALLOCATION
% OF
EQUITIES
---------
Financials..................................... 28.2%
Information Technology ........................ 12.6%
Energy......................................... 11.8%
Telecommunication Services..................... 11.5%
Materials...................................... 11.0%
Consumer Discretionary......................... 7.4%
Consumer Staples............................... 5.8%
Industrials.................................... 5.5%
Utilities...................................... 4.0%
Health Care.................................... 2.2%
COUNTRY ALLOCATION
(PIE CHART)
% OF
EQUITIES
---------
China......................................... 18.1%
South Korea................................... 15.1%
Brazil........................................ 13.8%
Taiwan........................................ 11.4%
India......................................... 8.5%
South Africa.................................. 8.3%
Other Asia.................................... 8.2%
Other Europe, Middle East, Africa............. 7.9%
Russia........................................ 5.2%
Mexico........................................ 3.5%
4
FUND EXPENSES
AMERICAN BEACON EMERGING MARKETS FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, such as redemption fees, and (2) ongoing costs, including management
fees, administrative service fees, distribution (12b-1) fees, and other Fund
expenses. The examples below are intended to help you understand the ongoing
cost (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2009
through October 31, 2009.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
Investor and Institutional Classes that invest in the Fund through an IRA may be
subject to a custodial IRA fee of $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 Investor and Institutional Classes that invest in the Fund through an IRA
may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund, such as redemption fees. Similarly, the expense examples for other funds
do not reflect any transaction costs charged by those funds, such as sales
charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical"
lines of the table are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
Beginning Ending
Account Account Expenses Paid
Value Value During Period*
5/1/09 10/31/09 5/1/09-10/31/09
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,397.66 $ 9.61
Hypothetical $1,000.00 $1,017.19 $ 8.08
(5% return before expenses)
INVESTOR CLASS
Actual $1,000.00 $1,396.20 $11.35
Hypothetical $1,000.00 $1,015.73 $ 9.55
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,399.30 $ 8.16
Hypothetical $1,000.00 $1,018.40 $ 6.87
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 1.59%, 1.88% and 1.35% for the Institutional, Investor
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 (184) by days in the year (365) to
reflect the half year period.
5
INTERNATIONAL EQUITY MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
The first part of the 12-month period ended October 31, 2009 was
characterized by a continuation of the prior market declines. This was followed
by a sharp rally from early March through the end of September and then a
correction in October. For the 12-month period, the EAFE Index gained 27.7%.
Early in the period, the credit crisis and world recession dominated.
Investors demonstrated growing concern that the global financial system would
fail. Several high profile banks in the U.S. and Europe faced bankruptcy,
government conservatorship, private takeover or distressed sale. This caused
further deleveraging and led to extreme investor risk aversion, which continued
to pressure global capital markets. Combined with 2008's significant market
retreat, investors faced the worst bear market since the 1930s.
However, the unprecedented synchronized rescue by monetary and fiscal
policymakers globally saved the collapsing financial system. Investors began to
look past short-term economic hurdles and instead focused on the likelihood of
economic recovery. From the mid-March 2009 lows, global equities rebounded
tremendously. We witnessed strong rotation into financials and more cyclical
sectors, as investors anticipated improvements in both the credit markets and
the global economy.
The performance of European stocks was mixed, despite the generally
positive business and consumer confidence in the region. Norway was the second
developed economy (following Australia) to raise interest rates since the start
of the financial crisis, as the country benefited from the recovery in commodity
prices. Ireland, on the other hand, fell sharply on concerns over growing
government indebtedness related to the bailouts of ailing banks. In Asia, stocks
were underpinned based on the reacceleration of Chinese economic growth, which
added confidence to the economies in the region.
International returns were amplified by the strength of foreign currencies
relative to the U.S. dollar. Early in the period, deleveraging and risk
reduction led to temporary demand for the U.S. dollar. The U.S. dollar
appreciated versus every major currency except the Japanese yen during the
financial crisis, only to lose strength after the March 2009 equity market lows.
The remainder of the period was characterized by U.S. dollar weakness as
economic growth strengthened and investors embraced risk.
6
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the International Equity Fund returned 27.44%
for the twelve months ended October 31, 2009. The Fund underperformed the MSCI
EAFE Index (the "Index") return of 27.71% and the Lipper International Funds
Index return of 28.18% for the period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 10/31/09 VALUE OF
--------------------------- $10,000
1 YEAR 5 YEARS 10 YEARS 10/31/99-10/31/09
------ ------- -------- -----------------
Institutional Class(1, 6) ......... 27.44% 4.62% 4.45% $15,450
Y Class(1, 2, 6) .................. 27.44% 4.62% 4.45% $15,450
Investor C lass(1, 6) ............. 27.08% 4.35% 4.22% $15,112
Advisor Class(1, 3, 6) ............ 26.58% 4.05% 4.01% $14,821
Retirement Class(1, 4, 6) ......... 26.58% 4.05% 4.01% $14,821
AMR Class(1, 6) ................... 27.70% 4.90% 4.71% $15,850
Lipper Int'l. Funds Index(5) ...... 28.18% 5.93% 3.32% $13,862
MSCI EAFE Index (5) ............... 27.71% 5.10% 2.05% $12,249
(1.) The Investor and Advisor Classes were formerly known as the PlanAhead and
Service Classes, respectively. Performance shown is historical and may not
be indicative of future returns. Please note that the recent growth rate in
the stock market has helped to produce short-term returns that are not
typical and may not continue in the future. Investment returns and
principal value will vary, and shares may be worth more or less at
redemption than at original purchase. Performance shown is as of date
indicated and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares.
(2.) Fund performance for the one-year, five-year, and ten-year periods
represents the total returns achieved by the Institutional Class from
10/31/99 up to 8/3/09, the inception date of the Y Class, and the returns
of the Y Class since its inception. Expenses of the Y Class are higher than
those of the Institutional Class. As a result, total returns shown may be
higher than they would have been had the Y Class been in existence since
10/31/99.
(3.) Fund performance for the ten-year period represents the total returns
achieved by the Investor Class from 10/31/99 up to 5/1/03, the inception
date of the Advisor Class, and the returns of the Advisor Class since its
inception. Expenses of the Advisor Class are higher than those of the
Investor Class. As a result, total returns shown may be higher than they
would have been had the Advisor Class been in existence since 10/31/99. A
portion of the fees charged to the Advisor Class of the Fund was waived
through 2007. Performance prior to waiving fees was lower than the actual
returns shown for periods through 2007.
(4.) Fund performance for the one-year, five-year, and ten-year periods
represents the total returns achieved by the Investor Class from 10/31/99
through 4/30/03 and the Advisor Class from 5/1/03 up to 5/1/09, the
inception date of the Retirement Class, and the returns of the Retirement
Class since its inception. Expenses of the Retirement Class are higher than
those of the Advisor and Investor Classes. As a result, total returns shown
may be higher than they would have been had the Retirement Class been in
existence since 10/31/99.
(5.) The Lipper International Funds Index tracks the results of the 30 largest
mutual funds in the Lipper International Funds category. Lipper is an
independent mutual fund research and ranking service. One cannot directly
invest in an index. The MSCI EAFE Index is a market capitalization weighted
index of international stock performance composed of equities from
developed markets excluding the U.S. and Canada.
(6.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement,
and AMR Class shares was 0.67%, 0.83%, 1.05%, 1.35%, 1.49%, and 0.42%,
respectively. The expense ratios above may vary from the expense ratios
presented in other sections of this report that are based on expenses
incurred during the period covered by this report.
The Fund underperformed the Index by 0.27% over the twelve-month period
primarily due to Fund expenses. While the Fund lost value through country
allocation, it was more than offset by positive stock selection during the
period.
Stock selection had a significantly beneficial impact overall, specifically
in Germany and Ireland, though selections in Canada detracted from performance.
The Fund added value through investments in German Industrial companies Siemens
AG (up 59.3%) and Deutsche Post AG (up 65.1%) and in Irish Material stocks,
including CRH plc (up 35.2%) and Smurfit Kappa Group plc (up 342.8%). In Canada,
investment in the Telecommunication Services company TELUS Corp. (down 4.7%)
detracted from relative performance.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
From a country allocation perspective, underweighting Japan (up 13.8%)
added value for the period, but not enough to overcome the negative impact from
underweighting Australia (up 65.3%), one of the best performing EAFE markets for
the period. Overweighting Ireland (down 19.4%) - the only EAFE market to post
negative returns for the twelve-month period - and underweighting Spain (up
56.2%) also hurt performance for the period.
Although economic and market conditions vary from period to period, the
Fund's primary strategy of investing in undervalued companies with above-average
earnings growth expectations remains consistent.
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
Sanofi-Aventis S.A. ............................... 2.5%
HSBC Holdings plc.................................. 2.3%
Siemens AG......................................... 2.3%
Vodafone Group plc................................. 2.2%
BP plc............................................. 1.8%
Total S.A. ........................................ 1.8%
Novartis AG........................................ 1.8%
Royal Dutch Shell plc. ............................ 1.7%
DBS Group Holdings Ltd. ........................... 1.5%
E.ON AG............................................ 1.5%
SECTOR ALLOCATION
% OF
EQUITIES
--------
Financials......................................... 22.2%
Industrials........................................ 16.0%
Consumer Discretionary............................. 13.6%
Energy............................................. 9.3%
Health Care........................................ 9.0%
Telecommunications Services........................ 8.4%
Materials.......................................... 7.0%
Consumer Staples................................... 5.4%
Information Technology............................. 5.2%
Utilities.......................................... 3.9%
REGIONAL ALLOCATION*
(PIE CHART)
North America 7.6%
Europe 72.0%
Pacific Rim 20.4%
* shown as a percentage of equities
8
FUND EXPENSES
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, such as redemption fees, and (2) ongoing costs, including management
fees, administrative service fees, distribution (12b-1) fees, and other Fund
expenses. The examples below are intended to help you understand the ongoing
cost (in dollars) of investing in the Fund and to compare these costs with the
ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2009
through October 31, 2009.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
Investor and Institutional Classes that invest in the Fund through an IRA may be
subject to a custodial IRA fee of $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 Investor and Institutional Classes that invest in the
Fund through an IRA may be subject to a custodial IRA fee of $12 that is
typically deducted each December. If your account was subject to a custodial IRA
fee during the period, your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund, such as redemption fees. Similarly, the expense examples for other funds
do not reflect any transaction costs charged by those funds, such as sales
charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical"
lines of the table are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
Ending
Beginning Account Expenses Paid During
Account Value Value Period*
5/1/09 10/31/09 5/1/09-10/31/09
------------- --------- --------------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,300.08 $4.23
Hypothetical $1,000.00 $1,021.53 $3.72
(5% return before expenses)
Y CLASS**
Actual $1,000.00 $1,041.64 $1.72
Hypothetical $1,000.00 $1,010.63 $1.71
(5% return before expenses)
INVESTOR CLASS
Actual $1,000.00 $1,298.81 $6.37
Hypothetical $1,000.00 $1,019.66 $5.60
(5% return before expenses)
ADVISOR CLASS
Actual $1,000.00 $1,295.82 $8.85
Hypothetical $1,000.00 $1,017.49 $7.78
(5% return before expenses)
RETIREMENT CLASS
Actual $1,000.00 $1,290.33 $8.50
Hypothetical $1,000.00 $1,017.74 $7.53
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,301.92 $2.79
Hypothetical $1,000.00 $1,022.79 $2.45
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.73%, 0.69%, 1.10%, 1.53%, 1.48% and 0.48% for the
Institutional, Y, Investor, Advisor, Retirement 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 (184) by days in the year (365) to reflect the half
year period.
** Beginning account value for Y Class is the inception date of 8/3/09.
Expenses are equal to the Class annualized ratio for the period multiplied
by the average account value for the period multiplied by the number
derived by dividing the number of days in the period (90) by the days in
the year (365).
9
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds (comprised of American Beacon Emerging Markets Fund and
American Beacon International Equity Fund) (collectively the "Funds"), including
the schedules of investments, as of October 31, 2009, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of each Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds at October 31, 2009, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/Ernst & Young LLP
Dallas, Texas
December 23, 2009
10
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
BRAZIL - 13.21%
COMMON STOCKS - 10.84%
Amil Participacoes S.A. ................. 18,100 $ 102
Banco Bradesco S.A., ADR ................ 22,800 449
Banco Santander Brasil S.A., ADR## ...... 50,000 593
BM & F Bovespa S.A. ..................... 76,000 492
BRF - Brasil Foods S.A.## ............... 28,005 679
Centrais Eletricas Brasileiras S.A. ..... 21,866 309
Cia Brasileira de Meios de Pagamento .... 31,800 292
Cia de Bebidas das Americas, ADR ........ 6,600 594
Cia de Saneamento Basico do Estado de Sao
Paulo ................................ 10,670 203
Cia de Saneamento Basico do Estado de Sao
Paulo, ADR .............................. 1,260 49
Cia de Saneamento de Minas
Gerais-COPASA ........................ 11,200 200
Cia Energetica de Minas Gerais, ADR ..... 1,852 29
Empresa Brasileira de Aeronautica S.A.
(Embraer), ADR ## .................... 5,200 105
Grendene S.A. ........................... 74,940 336
Itau Unibanco Banco Holding S.A., ADR ... 91,849 1,758
Medial Saude S.A. ## .................... 38,800 315
MRV Engenharia e Participacoes S.A. ..... 15,400 287
PDG Realty SA Empreendimentos e
Participacoes ........................ 36,000 304
Petroleo Brasileiro S.A., ADR ........... 3,530 163
Petroleo Brasileiro S.A., A Shares,
ADR .................................. 90,839 3,644
Porto Seguro SA ......................... 10,100 106
Redecard S.A. ........................... 30,600 454
Tractebel Energia S.A. .................. 22,330 265
Vale S.A. ............................... 97,096 2,337
---------------
TOTAL COMMON STOCKS ........................ 14,065
---------------
PREFERRED STOCKS - 2.37%
Banco Bradesco S.A. ..................... 8,000 157
Braskem S.A. ## ......................... 78,600 522
Cia de Tecidos do Norte de Minas -
Coteminas ............................ 54,862 181
Cia Energetica de Minas Gerais .......... 43,549 680
Itau Unibanco Banco Holding S.A. ........ 13,955 265
Net Servicos de Comunicacao S.A. ## ..... 25,177 315
Tele Norte Leste Participacoes S.A.,
ADR .................................. 23,260 443
Ultrapar Participacoes S.A. ............. 6,200 269
Vale S.A., A Shares ..................... 10,704 240
---------------
TOTAL PREFERRED STOCKS ..................... 3,072
---------------
TOTAL BRAZIL ............................... 17,137
---------------
CZECH REPUBLIC - 0.75%
COMMON STOCKS - 0.75%
CEZ ..................................... 3,452 171
Komercni Banka, a.s. .................... 3,024 599
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Telefonica O2 Czech Republic a.s. ....... 8,753 $ 207
TOTAL CZECH REPUBLIC ....................... 977
---------------
HONG KONG/CHINA - 17.27%
COMMON STOCKS - 17.27%
Anhui Conch Cement Co. Ltd. ............. 16,200 105
Anhui Expressway Co. Ltd. ............... 308,000 193
Asia Cement China Holdings Corp. ........ 250,000 157
Bank of China Ltd. ...................... 1,655,900 946
Beijing Enterprises Holdings Ltd. ....... 69,500 414
Belle International Holdings Ltd. ....... 275,000 277
Bosideng International Holdings Ltd. .... 2,150,000 380
China CITIC Bank ........................ 574,000 428
China Communications Services Corp.
Ltd. ................................. 256,000 133
China Construction Bank Corp. ........... 2,735,360 2,350
China Dongxiang Group Co. ............... 189,000 116
China Life Insurance Co. Ltd. ........... 196,000 903
China Mobile Ltd. ....................... 211,000 1,976
China Mobile Ltd., ADR .................. 14,250 666
China Molybdenum Co. Ltd. ............... 165,000 135
China Oilfield Services Ltd. 212,000 229
China Power International Development
Ltd. ## .............................. 1,511,800 416
China Railway Construction Corp. Ltd. ... 127,100 170
China Resources Cement Holdings
Ltd. ## .............................. 36,000 17
China Resources Land Ltd. ............... 54,000 130
China Resources Power Holdings Co. Ltd. . 132,000 274
China Unicom Hong Kong Ltd. ............. 124,744 160
China Zhongwang Holdings Ltd.## ......... 410,800 386
CNOOC Ltd. .............................. 37,000 55
CNOOC Ltd., ADR ......................... 2,320 346
COSCO Pacific Ltd. ...................... 392,578 547
Datang International Power Generation Co.
Ltd. ................................. 294,000 136
Denway Motors Ltd. ...................... 856,700 406
Dongfeng Motor Group Co. Ltd. ........... 534,000 634
Fushan International Energy Group Ltd. .. 282,000 213
Global Bio-chem Technology Group Co.
Ltd. ................................. 1,261,800 308
GOME Electrical Appliances Holdings
Ltd. ## .............................. 2,362,240 694
Huaneng Power International, Inc. ....... 469,900 301
Huaneng Power International, Inc., ADR .. 530 14
Industrial & Commercial Bank of China ... 1,669,000 1,328
Jiangsu Expressway Co. Ltd. ............. 128,000 113
Lumena Resources Corp. ## ............... 300,000 107
NWS Holdings Ltd. ....................... 84,842 161
PetroChina Co. Ltd. ..................... 1,820,000 2,197
PetroChina Co. Ltd., ADR ................ 1,960 235
Ping'an Insurance Co. of China Ltd. ..... 63,500 556
Renhe Commercial Holdings Co. Ltd. ...... 2,700,000 511
Shanghai Industrial Holdings Ltd. ....... 127,000 591
Shimao Property Holdings Ltd. ........... 84,000 156
See accompanying notes
11
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Sinopharm Group Co. ## .................. 8,800 $ 32
Sinotrans Ltd. .......................... 1,535,000 402
Soho China Ltd. ......................... 737,500 396
Texwinca Holdings Ltd. .................. 44,000 37
TPV Technology Ltd. ..................... 596,970 385
Weiqiao Textile Co. ..................... 658,100 458
Wynn Macau Ltd.## ....................... 88,800 115
TOTAL HONG KONG/CHINA ...................... 22,395
---------------
HUNGARY - 0.84%
COMMON STOCKS - 0.84%
Mol Hungarian Oil and Gas plc## ......... 5,394 452
OTP Bank## .............................. 9,162 254
Richter Gedeon Nyrt. .................... 1,848 384
TOTAL HUNGARY ........................... 1,090
---------------
INDIA - 8.12%
COMMON STOCKS - 8.12%
Andhra Bank ............................. 84,800 199
Asian Paints Ltd. ....................... 4,854 166
Bank of India ........................... 14,910 103
Bharat Heavy Electricals Ltd. ........... 12,567 583
Bharat Petroleum Corp. Ltd. ............. 18,973 206
Bharti Airtel Ltd. ...................... 82,520 509
Colgate-Palmolive India Ltd. ............ 9,841 145
Deccan Chronicle Holdings Ltd. .......... 23,879 69
DLF Ltd. ................................ 14,700 114
Glenmark Pharmaceuticals Ltd. ........... 99,610 470
Godrej Consumer Products Ltd. ........... 19,813 112
GVK Power & Infrastructure Ltd. ## ...... 276,272 256
HDFC Bank Ltd. .......................... 30,223 1,031
Hero Honda Motors Ltd. .................. 18,399 604
Hindustan Construction Co. .............. 73,740 192
Hindustan Petroleum Corp. Ltd. .......... 66,804 502
Hindustan Unilever Ltd. ................. 37,440 221
India Cements Ltd. ...................... 275,510 636
IndusInd Bank Ltd. ...................... 74,974 183
Infosys Technologies Ltd. ............... 24,215 1,132
Infosys Technologies Ltd., ADR .......... 1,530 70
ITC Ltd. ................................ 24,650 133
Jaiprakash Associates Ltd. .............. 91,715 398
KSK Energy Ventures Ltd. ## ............. 46,000 189
Mahanagar Telephone Nigam Ltd. .......... 182,310 262
Marico Ltd. ............................. 51,000 104
Maruti Suzuki India Ltd. ................ 4,722 138
Nestle India Ltd. ....................... 1,927 105
Reliance Industries Ltd. ................ 13,790 558
State Bank of India Ltd., GDR++ ......... 9,190 841
Tata Motors Ltd. ........................ 8,269 96
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Wipro Ltd. .............................. 15,928 $ 205
TOTAL INDIA ................................ 10,532
---------------
INDONESIA - 2.38%
COMMON STOCKS - 2.38%
Astra International Tbk PT .............. 117,900 382
Bank Mandiri Tbk PT ..................... 542,000 260
PT Bank Central Asia Tbk ................ 866,000 411
PT Bank Rakyat Indonesia Tbk ............ 372,000 272
PT Bumi Resources Tbk ................... 619,500 150
PT Gudang Garam Tbk ..................... 166,300 247
PT Indocement Tunggal Prakarsa Tbk ...... 125,000 143
PT Indofood Sukses Makmur Tbk ........... 698,500 221
PT Indosat Tbk .......................... 399,500 213
PT Kalbe Farma Tbk ...................... 270,100 34
PT Perusahaan Gas Negara Persero Tbk .... 579,500 216
PT Telekomunikasi Indonesia Tbk ......... 618,800 536
TOTAL INDONESIA 3,085
---------------
ISRAEL - 1.42%
COMMON STOCKS - 1.42%
Bank Hapoalim B.M.## .................... 89,270 324
Check Point Software Technologies
Ltd. ## .............................. 9,368 291
Makhteshim-Agan Industries Ltd. ......... 48,720 229
Teva Pharmaceutical Industries Ltd.,
ADR .................................. 19,733 996
TOTAL ISRAEL 1,840
---------------
MALAYSIA - 2.38%
COMMON STOCKS - 2.38%
CIMB Group Holdings Bhd ................. 81,300 296
Digi.Com Bhd ............................ 21,100 135
Gamuda Bhd .............................. 350,400 319
Genting Malaysia Bhd .................... 701,810 559
Malayan Banking Bhd ..................... 631,870 1,221
Sime Darby Bhd .......................... 77,100 199
Tenaga Nasional Bhd ..................... 146,100 359
TOTAL MALAYSIA ............................. 3,088
---------------
MEXICO - 3.35%
COMMON STOCKS - 3.35%
America Movil, S.A.B. de C.V., ADR ...... 41,147 1,816
Coca-Cola Femsa, S.A. de C.V., ADR ...... 160 9
Consorcio ARA, S.A.B. de C.V.## ......... 288,900 181
Embotelladoras Arca, S.A.B. de C.V. ..... 139,630 350
Fomento Economico Mexicano, S.A.B. de
C.V., ADR ............................ 10,200 442
Gruma, S.A.B. de C.V. ## ................ 18,990 35
Grupo Continential, S.A.B. de C.V. ...... 145,050 340
Grupo Financiero Banorte, S.A.B. de
C.V. ................................. 176,489 579
Grupo Modelo, S.A.B. de C.V. ## ......... 19,500 90
See accompanying notes
12
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Grupo Televisa, S.A., ADR ............... 25,600 $ 496
TOTAL MEXICO ............................... 4,338
---------------
PHILIPPINES - 0.41%
COMMON STOCKS - 0.41%
ABS-CBN Broadcasting Corp. .............. 47,030 30
Bank of the Philippine Islands .......... 163,027 159
Metro Pacific Investments Corp.## ....... 2,202,000 153
Metropolitan Bank & Trust ............... 98,300 83
Union Bank of the Philippines ........... 156,300 111
TOTAL PHILIPPINES 536
---------------
POLAND - 2.17%
COMMON STOCKS - 2.17%
Bank Handlowy W Warszawie S.A. ## ....... 9,112 199
Bank Pekao S.A. ## ...................... 11,564 615
Bank Zachodni WBK S.A. ## ............... 4,790 254
Cyfrowy Polsat S.A. ..................... 20,207 97
Polski Koncern Naftowy Orlen S.A. ## .... 24,467 253
Powszechna Kasa Oszczednosci Bank Polski
S.A. ................................. 50,975 603
Telekomunikacja Polska S.A. ............. 135,109 790
TOTAL POLAND ............................... 2,811
---------------
RUSSIA - 4.97%
COMMON STOCKS - 4.97%
Gazprom OAO, ADR ........................ 68,510 1,655
LUKOIL Oil Co., ADR ..................... 30,186 1,763
Mobile TeleSystems OJSC, ADR ............ 3,550 161
OJSC MMC Norilsk Nickel, ADR ## ......... 37,974 501
OJSC Rosneft Oil Co.## .................. 54,054 414
Polyus Gold Co., ADR .................... 9,241 246
RusHydro, ADR ## ........................ 54,500 194
Sberbank RF, GDR## ...................... 2,000 520
Vimpel-Communications, ADR## ............ 18,187 326
Wimm-Bill-Dann Foods OJSC, ADR## ........ 4,112 278
X 5 Retail Group NV ## .................. 15,932 382
X 5 Retail Group NV, GDR ## ............. 251 6
TOTAL RUSSIA ............................... 6,446
---------------
SOUTH AFRICA - 7.96%
COMMON STOCKS - 7.96%
African Bank Investments Ltd. ........... 70,679 275
Anglo Platinum Ltd. ## .................. 8,007 684
AngloGold Ashanti Ltd. .................. 3,465 130
AngloGold Ashanti Ltd., ADR ............. 15,484 581
ArcelorMittal South Africa Ltd. ......... 29,024 390
Barloworld Ltd. ......................... 59,070 368
FirstRand Ltd. .......................... 373,950 838
Gold Fields Ltd., ADR ................... 13,910 177
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Harmony Gold Mining Co. Ltd. ............ 9,400 $ 94
Harmony Gold Mining Co. Ltd., ADR ....... 1,300 13
Impala Platinum Holdings Ltd. ........... 24,200 528
Imperial Holdings Ltd. .................. 20,700 214
JD Group Ltd. ........................... 18,670 104
Mr Price Group Ltd. ..................... 46,993 215
MTN Group Ltd. .......................... 92,836 1,393
Murray & Roberts Holdings Ltd. .......... 29,060 207
Nampak Ltd. ............................. 194,890 422
Naspers Ltd. ............................ 24,026 864
Nedbank Group Ltd. ...................... 23,014 347
SABMiller plc ........................... 28,604 764
Sanlam Ltd. ............................. 59,260 163
Sappi Ltd. .............................. 97,794 359
Sasol Ltd. .............................. 14,610 547
Sasol Ltd., ADR ......................... 5,140 192
Tiger Brands Ltd. ....................... 12,449 250
Vodacom Group Pty Ltd.## ................ 29,000 201
TOTAL SOUTH AFRICA ......................... 10,320
---------------
SOUTH KOREA - 14.37%
COMMON STOCKS - 14.10%
Amorepacific Corp. ...................... 376 261
Cheil Industries, Inc. .................. 5,248 196
Cheil Worldwide, Inc. ................... 1,173 303
CJ CheilJedang Corp. .................... 1,508 257
Hana Financial Group, Inc. .............. 3,470 104
Hyundai Engineering & Construction Co.
Ltd. ................................. 5,565 309
Hyundai Motor Co. ....................... 7,660 695
Kangwon Land, Inc. ...................... 28,300 381
KB Financial Group, Inc. ## ............. 30,173 1,462
Kia Motors Corp.## ...................... 8,118 121
Korea Electric Power Corp. ## ........... 24,235 689
Korea Exchange Bank ..................... 7,450 85
Korean Reinsurance Co. .................. 29,650 267
KT Corp. ................................ 9,880 323
KT Corp., ADR ........................... 25,080 403
KT&G Corp. .............................. 7,845 458
LG Chem Ltd. ............................ 3,673 634
LG Corp. ................................ 2,164 124
LG Dacom Corp. .......................... 4,400 70
LG Display Co. Ltd. ..................... 10,030 242
LG Display Co. Ltd., ADR ................ 5,500 65
LG Electronics, Inc. .................... 1,127 105
Lotte Chilsung Beverage Co. Ltd. ........ 72 49
Lotte Confectionery Co. Ltd. ............ 124 126
Lotte Shopping Co. Ltd. ................. 2,404 687
NCSoft Corp. ............................ 933 99
NHN Corp.## ............................. 2,441 363
OCI Co. Ltd. ............................ 1,280 226
See accompanying notes
13
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
POSCO ................................... 1,837 $ 763
POSCO, ADR .............................. 1,520 155
Samsung Electronics Co. Ltd. ............ 6,203 3,734
Samsung Fire & Marine Insurance Co.
Ltd. ................................. 3,442 631
Shinhan Financial Group Co. Ltd. ## ..... 31,996 1,223
Shinsegae Co. Ltd. ...................... 687 298
SK Telecom Co. Ltd. ..................... 488 75
SK Telecom Co. Ltd., ADR ................ 41,690 697
S-Oil Corp. ............................. 8,574 418
SSCP Co. Ltd.## ......................... 10,299 68
Tong Yang Life Insurance ## ............. 15,680 188
Woongjin Coway Co. Ltd. ................. 14,406 484
Yuhan Corp. ............................. 2,786 450
---------------
TOTAL COMMON STOCKS 18,288
---------------
PREFERRED STOCKS - 0.27%
Samsung Electronics Co. Ltd. ............ 881 354
---------------
TOTAL SOUTH KOREA .......................... 18,642
---------------
TAIWAN - 10.85%
COMMON STOCKS - 10.85%
Acer, Inc. .............................. 121,886 289
Asia Cement Corp. ....................... 239,000 252
Asustek Computer, Inc. .................. 189,356 349
AU Optronics Corp. ...................... 395,520 352
AU Optronics Corp., ADR ................. 31,010 274
Catcher Technology Co. Ltd. ............. 37,000 90
Cathay Financial Holding Co. Ltd.## ..... 525,400 907
China Steel Corp. ....................... 1,121,502 998
Chinatrust Financial Holding Co. Ltd. ... 716,326 433
Compal Electronics, Inc. ................ 614,345 770
First Financial Holding Co. Ltd. ........ 731,201 425
Foxconn Technology Co. Ltd. ............. 76,300 256
Fubon Financial Holding Co. Ltd.## ...... 298,000 333
HON HAI Precision Industry Co. Ltd. ..... 436,112 1,717
HTC Corp. ............................... 60,970 610
Lite-On Technology Corp. ................ 134,000 177
Mega Financial Holding Co. Ltd. ......... 454,000 254
Nan Ya Printed Circuit Board Corp. ...... 127,989 400
Siliconware Precision Industries Co. .... 179,000 239
SinoPac Financial Holdings Co. Ltd.## ... 1,584,987 586
Taishin Financial Holdings Co. Ltd.## ... 337,000 133
Taiwan Fertilizer Co. Ltd. .............. 93,000 290
Taiwan Semiconductor Manufacturing
Co. Ltd. ............................. 947,385 1,723
Tatung Co. Ltd.## ....................... 2,302,000 511
United Microelectronics Corp.## ......... 1,408,226 688
Wistron Corp. ........................... 232,280 394
Yaego Corp. ............................. 949,000 264
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Yuanta Financial Holding Co. Ltd. ....... 543,000 $ 359
TOTAL TAIWAN 14,073
---------------
THAILAND - 2.68%
COMMON STOCKS - 2.68%
Bangkok Bank PCL ........................ 212,690 702
Charoen Pokphand Foods PCL .............. 606,100 163
Kasikornbank PCL ........................ 422,600 1,012
Krung Thai Bank PCL ..................... 1,288,200 339
PTT Exploration & Production PCL ........ 36,000 156
PTT PCL ................................. 67,600 486
Siam Cement PCL ......................... 35,930 216
Siam Commercial Bank PCL ................ 99,500 226
Thai Union Frozen Products PCL .......... 206,700 172
TOTAL THAILAND ............................. 3,472
---------------
TURKEY - 2.26%
COMMON STOCKS - 2.26%
Akbank TAS .............................. 44,721 240
Anadolu Efes Biracilik Ve Malt
Sanayii A.S. ......................... 23,504 266
Coca-Cola Icecek A.S. ................... 6,255 48
Tupras-Turkiye Petrol Rafinerileri A.S. . 17,760 303
Turk Telekomunikasyon A.S. .............. 36,035 109
Turkcell Iletisim Hizmetleri A.S. ....... 65,730 435
Turkcell Iletisim Hizmetleri A.S., ADR .. 2,900 48
Turkiye Garanti Bankasi A.S. ............ 122,398 439
Turkiye Halk Bankasi A.S. ............... 36,755 217
Turkiye Is Bankasi (Isbank) ............. 158,447 595
Turkiye Sise ve Cam Fabrikalari A.S. .... 216,517 226
TOTAL TURKEY 2,926
---------------
UNITED KINGDOM - 0.09%
COMMON STOCKS - 0.09%
JKX Oil & Gas plc ....................... 26,720 120
---------------
SHORT TERM INVESTMENTS - 3.73%
JP Morgan U.S. Government Money Market
Fund ................................. 3,732,017 3,732
PAR
AMOUNT
---------------
U.S. Treasury,
0.02%, Due 12/10/2009# ............... $ 1,105 1,105
TOTAL SHORT TERM INVESTMENTS 4,837
---------------
TOTAL INVESTMENTS 99.21% -
(COST $103,170) . ....................... 128,665
OTHER ASSETS, NET OF LIABILITIES - 0.79% ... 1,022
TOTAL NET ASSETS - 100.00% ................. $ 129,687
===============
See accompanying notes
14
AMERICAN BEACON EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
++ Security exempt from registration under the Securities Act of 1933. These
securities may be resold to qualified institutional buyers pursuant to Rule
144A. At the period end, the value of these securities amounted to $841 or
0.65% of net assets. The Fund has no right to demand registration of these
securities.
# At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------ --------------
Emini S&P 500 Index .. 118 Dec 2009 $6,095 $(119)
====== =====
SECTOR DIVERSIFICATION
Percent of
Net Assets
----------
Communications ................. 1.43%
Consumer Discretionary ......... 7.08%
Consumer Staples ............... 5.55%
Energy ......................... 11.26%
Financials ..................... 26.90%
Health Care .................... 2.12%
Industrials .................... 5.26%
Information Technology ......... 12.05%
Materials ...................... 10.49%
Telecommunication Services ..... 9.56%
Utilities ...................... 3.78%
Short Term Investments ......... 3.73%
Other Assets, Net of
Liabilities ................. 0.79%
------
100.00%
======
See accompanying notes
15
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
AUSTRALIA - 1.12%
COMMON STOCKS - 1.12%
BlueScope Steel Ltd. .................... 1,082,721 $ 2,844
Foster's Group Ltd. ..................... 450,285 2,194
Insurance Australia Group Ltd. .......... 2,154,061 7,200
QBE Insurance Group Ltd. ................ 156,500 3,150
TOTAL AUSTRALIA 15,388
---------------
AUSTRIA - 0.24%
COMMON STOCKS - 0.24%
Telekom Austria AG ...................... 202,700 3,319
---------------
BELGIUM - 0.44%
COMMON STOCKS - 0.44%
Anheuser-Busch InBev NV ................. 127,200 5,978
---------------
CANADA - 0.79%
COMMON STOCKS - 0.79%
Precision Drilling Trust ................ 1,017,429 6,601
TELUS Corp. ............................. 134,810 4,225
TOTAL CANADA 10,826
---------------
DENMARK - 0.22%
COMMON STOCKS - 0.22%
Novo Nordisk AS ......................... 47,425 2,949
---------------
FINLAND - 1.02%
COMMON STOCKS - 1.02%
Nokia Oyj ............................... 707,019 8,922
UPM-Kymmene Oyj ......................... 420,277 5,059
TOTAL FINLAND 13,981
---------------
FRANCE - 12.78%
COMMON STOCKS - 12.78%
Accor S.A. .............................. 154,849 7,446
AXA S.A. ................................ 580,833 14,434
BNP Paribas ............................. 177,174 13,329
Carrefour S.A. .......................... 174,600 7,499
Compagnie Generale des Etablissements
Michelin ............................. 90,220 6,686
France Telecom S.A. ..................... 592,369 14,647
Groupe Danone ........................... 52,252 3,139
Sanofi-Aventis S.A. ..................... 474,371 34,673
Societe Generale ........................ 157,610 10,468
Technip S.A. ............................ 218,223 13,755
Total S.A.+ ............................. 416,407 24,796
VINCI S.A. .............................. 219,034 11,432
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Vivendi S.A. ............................ 453,916 $ 12,573
TOTAL FRANCE 174,877
---------------
GERMANY - 11.14%
COMMON STOCKS - 10.99%
Allianz SE .............................. 75,482 8,651
Bayer AG ................................ 156,609 10,847
Bayerische Motoren Werke AG ............. 221,470 10,821
Celesio AG .............................. 245,480 6,118
Daimler AG .............................. 121,400 5,910
Deutsche Post AG ........................ 1,153,144 19,466
E.ON AG ................................. 548,042 20,948
HeidelbergCement AG ..................... 24,580 1,464
Linde AG ................................ 105,646 11,048
Merck KGaA .............................. 81,740 7,688
Muenchener
Rueckversicherungs-Gesellschaft AG ... 45,297 7,184
SAP AG .................................. 196,610 8,885
Siemens AG .............................. 347,808 31,341
---------------
TOTAL COMMON STOCKS 150,371
---------------
PREFERRED STOCKS - 0.15%
Henkel AG & Co. KGaA .................... 46,482 2,108
---------------
TOTAL GERMANY 152,479
---------------
GREECE - 0.91%
COMMON STOCKS - 0.91%
OPAP S.A. ............................... 307,449 7,856
Public Power Corp. S.A.## ............... 228,870 4,652
TOTAL GREECE 12,508
---------------
HONG KONG/CHINA - 2.16%
COMMON STOCKS - 2.16%
Cheung Kong Holdings Ltd. ............... 472,500 6,016
Esprit Holdings Ltd. .................... 822,000 5,386
Hutchison Whampoa Ltd. .................. 187,000 1,309
Kerry Properties Ltd. ................... 390,500 2,200
Swire Pacific Ltd. ...................... 622,100 7,560
Yue Yuen Industrial Holdings Ltd. ....... 2,537,667 7,032
TOTAL HONG KONG/CHINA 29,503
---------------
IRELAND - 0.69%
COMMON STOCKS - 0.69%
CRH plc, ADR ............................ 167,632 4,089
Smurfit Kappa Group plc ## .............. 688,413 5,357
TOTAL IRELAND .............................. 9,446
---------------
See accompanying notes
16
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
ITALY - 2.02%
COMMON STOCKS - 2.02%
Atlantia S.p.A........................... 121,000 $ 2,864
Eni S.p.A. .............................. 233,856 5,798
Finmeccanica S.p.A. ..................... 370,390 6,218
Intesa Sanpaolo S.p.A ## ................ 824,480 3,473
Snam Rete Gas S.p.A+ .................... 1,030,173 4,998
UniCredit S.p.A. ........................ 1,284,864 4,298
TOTAL ITALY ................................ 27,649
---------------
JAPAN - 13.96%
COMMON STOCKS - 13.96%
Aeon Co. Ltd. ........................... 466,900 4,162
Benesse Holdings, Inc. .................. 33,000 1,464
Canon, Inc. ............................. 199,500 7,486
Central Japan Railway Co. ............... 544 3,632
Chuo Mitsui Trust Holdings, Inc. ........ 1,298,400 4,701
Daito Trust Construction Co. Ltd. ....... 104,900 4,386
Fanuc Ltd. .............................. 177,000 14,867
FUJIFILM Holdings Corp. ................. 107,900 3,101
Haseko Corp.## .......................... 3,521,018 2,641
Honda Motor Co. Ltd. .................... 226,300 7,003
Hoya Corp. .............................. 185,300 4,058
INPEX Corp. ............................. 335 2,741
JS Group Corp. .......................... 310,400 5,076
KDDI Corp. .............................. 1,824 9,692
Keyence Corp. ........................... 14,500 2,877
Konica Minolta Holdings, Inc. ........... 347,500 3,241
Kubota Corp. ............................ 184,000 1,428
Mitsubishi Corp. ........................ 191,800 4,097
Mitsubishi Estate Co. Ltd. .............. 238,000 3,614
Mitsubishi Gas Chemical Co., Inc. ....... 1,168,000 5,330
Mitsubishi UFJ Financial Group, Inc. .... 1,647,800 8,796
Murata Manufacturing Co. Ltd. ........... 73,690 3,632
NGK Spark Plug Co. Ltd. ................. 643,000 7,275
Nintendo Co. Ltd. ....................... 11,400 2,907
Nomura Holdings, Inc. ................... 973,100 6,810
Sankyo Co. Ltd. ......................... 110,800 6,313
Secom Co. Ltd. .......................... 61,300 2,867
Seven & I Holdings Co. Ltd. ............. 140,800 3,087
Shin-Etsu Chemical Co. Ltd. ............. 145,000 7,639
SMC Corp. ............................... 45,900 5,275
Sony Corp. .............................. 64,102 1,884
Sony Financial Holdings, Inc. ........... 2,609 7,456
Sumitomo Corp. .......................... 363,700 3,541
Takeda Pharmaceutical Co. Ltd. .......... 16,000 643
Tokyo Electron Ltd. ..................... 171,300 9,522
Tokyo Gas Co. Ltd. ...................... 1,147,000 4,541
Tokyo Steel Manufacturing Co. Ltd. ...... 357,100 4,680
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Toyota Motor Corp. ...................... 218,600 $ 8,650
TOTAL JAPAN 191,115
---------------
NETHERLANDS - 5.59%
COMMON STOCKS - 5.59%
Akzo Nobel N.V. + ....................... 233,801 13,817
ASML Holding N.V. ....................... 211,757 5,701
ING Groep N.V. ##+ ...................... 379,330 4,904
Koninklijke Philips Electronics N.V. .... 564,828 14,199
Randstad Holding N.V. ## ................ 55,060 2,094
Reed Elsevier N.V. ...................... 724,072 8,461
SBM Offshore N.V. ....................... 265,765 5,112
TNT N.V. ................................ 585,978 15,525
Unilever N.V. ........................... 218,722 6,736
TOTAL NETHERLANDS .......................... 76,549
---------------
NORWAY - 1.71%
COMMON STOCKS - 1.71%
Aker Solutions ASA ...................... 1,109,250 13,387
StatoilHydro ASA ........................ 75,290 1,787
Telenor ASA ## .......................... 640,840 8,249
TOTAL NORWAY 23,423
---------------
PORTUGAL - 0.62%
COMMON STOCKS - 0.62%
Portugal Telecom, SGPS, S.A. ............ 747,760 8,540
---------------
SINGAPORE - 2.66%
COMMON STOCKS - 2.66%
DBS Group Holdings Ltd. ................. 2,313,182 21,108
Flextronics International Ltd. ## ....... 848,510 5,498
Singapore Telecommunications Ltd. ....... 4,703,000 9,744
TOTAL SINGAPORE 36,350
---------------
SOUTH KOREA - 1.07%
COMMON STOCKS - 1.07%
Hyundai Heavy Industries ................ 56,474 7,830
KB Financial Group, Inc., ADR ## + ...... 143,018 6,785
TOTAL SOUTH KOREA .......................... 14,615
---------------
SPAIN - 3.55%
COMMON STOCKS - 3.55%
Banco Bilbao Vizcaya Argentaria S.A. .... 233,200 4,177
Banco Santander S.A. .................... 361,009 5,811
Banco Santander S.A., GDR ............... 400,828 6,371
Banco Santander S.A., Right ## .......... 310,129 55
Enagas S.A. ............................. 229,984 4,735
Iberdrola S.A. .......................... 271,304 2,460
Repsol YPF S.A. ......................... 257,990 6,868
See accompanying notes
17
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Telefonica S.A. ......................... 650,634 $ 18,160
TOTAL SPAIN 48,637
---------------
SWEDEN - 2.31%
COMMON STOCKS - 2.31%
Atlas Copco AB .......................... 645,240 8,817
Nordea Bank AB .......................... 582,370 6,214
Skandinaviska Enskilda Banken ## ........ 814,675 5,075
Telefonaktiebolaget LM Ericsson ......... 1,082,375 11,540
TOTAL SWEDEN 31,646
---------------
SWITZERLAND - 8.35%
COMMON STOCKS - 8.35%
Adecco S.A.+ ............................ 130,550 5,836
Compagnie Financiere Richemont S.A. ..... 265,588 7,436
Credit Suisse Group AG .................. 135,900 7,259
Julius Baer Group Ltd. .................. 53,000 1,995
Lonza Group AG .......................... 52,740 4,110
Nestle S.A. ............................. 162,878 7,571
Novartis AG ............................. 462,160 24,108
Roche Holding AG ........................ 116,613 18,684
Swiss Reinsurance Co. Ltd. .............. 100,960 4,114
UBS AG## ................................ 1,117,300 18,711
Zurich Financial Services AG ............ 62,966 14,415
TOTAL SWITZERLAND 114,239
---------------
UNITED KINGDOM - 22.36%
COMMON STOCKS - 22.36%
Anglo American plc ## ................... 219,270 7,971
Aviva plc ............................... 1,874,344 11,736
BAE Systems plc ......................... 2,071,389 10,659
Barclays Bank plc ## .................... 863,600 4,518
BG Group plc ............................ 240,800 4,151
BP plc .................................. 2,630,409 24,773
British American Tobacco plc ............ 283,180 9,042
British Sky Broadcasting Group plc ...... 863,040 7,524
BT Group plc ............................ 1,754,900 3,747
Cadbury plc ............................. 499,764 6,295
Cairn Energy plc ## ..................... 48,000 2,075
Centrica plc ............................ 1,670,765 6,787
Compass Group plc ....................... 735,520 4,670
GlaxoSmithKline plc ..................... 907,203 18,631
HSBC Holdings plc ....................... 2,889,943 31,848
Informa plc ............................. 456,400 2,189
International Power Co. ................. 597,900 2,489
Kingfisher plc .......................... 1,256,400 4,596
Lloyds Banking Group plc + .............. 2,906,600 4,112
Marks and Spencer Group plc ............. 354,320 1,985
Michael Page International .............. 685,409 3,609
Pearson plc ............................. 534,980 7,281
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Prudential plc .......................... 459,100 $ 4,166
Qinetiq Group plc ....................... 536,100 1,437
Reed Elsevier plc ....................... 492,300 3,735
Rexam plc ............................... 591,642 2,690
Rio Tinto plc ........................... 168,558 7,450
Rolls-Royce Group plc C Shares
Entitlement Dec. 09## ++ ............. 95,218,680 156
Rolls-Royce Group plc ................... 1,586,978 11,719
Royal Dutch Shell plc, A Shares ......... 343,949 10,230
Royal Dutch Shell plc, B Shares ......... 441,679 12,794
Smith & Nephew plc ...................... 519,047 4,592
Smiths Group plc ........................ 275,620 4,032
Standard Chartered plc .................. 351,090 8,621
Tesco plc ............................... 615,900 4,110
Unilever plc ............................ 426,551 12,768
Vodafone Group plc ...................... 13,535,986 29,948
WPP Group plc + ......................... 352,600 3,162
Xstrata ## .............................. 262,100 3,754
TOTAL UNITED KINGDOM 306,052
---------------
UNITED STATES - 0.15%
COMMON STOCKS - 0.15%
News Corp. .............................. 172,040 1,982
---------------
SHORT TERM INVESTMENTS - 2.72%
American Beacon U.S. Government Money
Market Select Fund# .................. 3,956,093 3,956
JP Morgan U.S. Government Money Market
Fund ................................. 33,282,254 33,282
TOTAL SHORT TERM INVESTMENTS 37,238
---------------
SECURITIES LENDING
COLLATERAL - 4.10%
American Beacon U.S. Government Money
Market Select Fund# .................. 31,052,537 31,053
JP Morgan U.S. Government Money Market
Fund ................................. 25,000,000 25,000
TOTAL SECURITIES LENDING COLLATERAL ........ 56,053
---------------
TOTAL INVESTMENTS 102.68% -
(COST $1,308,627) ....................... 1,405,342
LIABILITIES, NET OF
OTHER ASSETS - (2.68%) .................. (36,686)
TOTAL NET ASSETS - 100.00% ................. $ 1,368,656
===============
See accompanying notes
18
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+ All or a portion of this security is on loan at October 31, 2009.
++ Valued at fair value pursuant to procedures approved by the Board of
Trustees.
# The Fund is affiliated by having the same investment advisor.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- ------- --------------
Australia SPI Index ........ 40 Dec 2009 $ 4,178 $ (50)
Canada S&PCDA 60 Index ..... 39 Dec 2009 4,676 (176)
France CAC 40 Index ........ 101 Dec 2009 5,338 (213)
Germany DAX Index .......... 20 Dec 2009 3,986 (181)
Hang Seng Index ............ 9 Nov 2009 1,256 (25)
Italy MIB 30 Index ......... 11 Dec 2009 1,786 (82)
Netherlands 200 AEX Index .. 14 Nov 2009 1,246 (76)
Spain IBEX 35 Index ........ 14 Nov 2009 2,343 (51)
Sweden OMX Index ........... 97 Nov 2009 1,298 42
Tokyo FE TOPIX Index ....... 107 Dec 2009 10,568 (326)
UK FTSE 100 Index .......... 128 Dec 2009 10,552 (94)
------- -------
$47,227 $(1,232)
======= =======
See accompanying notes
19
AMERICAN BEACON INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
(DOLLARS IN THOUSANDS)
SETTLEMENT MARKET UNREALIZED
DATE VALUE GAIN/(LOSS)
---------- ------- -----------
CONTRACTS TO DELIVER
1,797 Australian Dollar ................ 12/18/2009 $ 1,610 $ (60)
2,204 Canadian Dollar .................. 12/18/2009 2,037 15
4,253 Euro Currency .................... 12/18/2009 6,258 (20)
493,867 Japanese Yen ..................... 12/18/2009 5,488 (22)
2,617 Pound Sterling ................... 12/18/2009 4,294 (74)
4,203 Swedish Krona .................... 12/18/2009 593 10
1,989 Swiss Franc ...................... 12/18/2009 1,939 (12)
------- -----
TOTAL CONTRACTS TO DELIVER
(RECEIVABLE AMOUNT $22,056) ............. $22,219 $(163)
------- -----
CONTRACTS TO RECEIVE
6,040 Australian Dollar ................ 12/18/2009 $ 5,413 $ 198
6,694 Canadian Dollar .................. 12/18/2009 6,186 (31)
13,206 Euro Currency .................... 12/18/2009 19,432 93
1,388,110 Japanese Yen ..................... 12/18/2009 15,425 282
8,469 Pound Sterling ................... 12/18/2009 13,896 (176)
11,285 Swedish Krona .................... 12/18/2009 1,592 (29)
5,850 Swiss Franc ...................... 12/18/2009 5,704 43
------- -----
TOTAL CONTRACTS TO RECEIVE
(PAYABLE AMOUNT $67,268) ................ $67,648 $ 380
------- -----
NET CURRENCY FLUCTUATION ................... $ 217
=====
SECTOR DIVERSIFICATION
Percent of
Net Assets
----------
Consumer Discretionary ............ 13.01%
Consumer Staples .................. 5.15%
Energy ............................ 8.87%
Financials ........................ 21.29%
Health Care ....................... 8.63%
Industrials ....................... 15.37%
Information Technology ............ 4.98%
Materials ......................... 6.73%
Telecommunication Services ........ 8.06%
Utilities ......................... 3.77%
Short Term Investments ............ 6.82%
Liabilities, Net of Other Assets .. (2.68)%
------
100.00%
======
See accompanying notes
20
AMERICAN BEACON FUNDS(SM)
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
EMERGING
MARKETS INTERNATIONAL
FUND EQUITY FUND
---------- -------------
ASSETS:
Investments in unaffiliated securities, at value (A D) ............... $ 128,665 $ 1,370,333
Investments in affiliated securities, at value (B) ................... -- 35,009
Foreign currency, at value (C) ....................................... 1,437 5,015
Deposit with brokers for futures contracts ........................... -- 3,944
Receivable for investments sold ...................................... 417 11,824
Dividends and interest receivable .................................... 168 2,659
Receivable for fund shares sold ...................................... 75 1,365
Receivable for tax reclaims .......................................... 4 169
Net unrealized Appreciation on foreign currency contracts ............ -- 217
Prepaid expenses ..................................................... 11 83
---------- -----------
TOTAL ASSETS ...................................................... 130,777 1,430,618
---------- -----------
LIABILITIES:
Payable for investments purchased .................................... 696 2,072
Payable upon return of securities loaned ............................. -- 56,053
Payable for fund shares redeemed ..................................... 30 1,288
Payable for variation margin on open futures contracts ............... 179 517
Management and investment advisory fees payable (Note 2) ............. 88 1,396
Administrative service and service fees payable ...................... 11 410
Other liabilities .................................................... 86 226
---------- -----------
TOTAL LIABILITIES ................................................. 1,090 61,962
---------- -----------
NET ASSETS .............................................................. $ 129,687 $ 1,368,656
========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ......................................................... 134,505 1,488,152
Undistributed net investment income ..................................... 1,183 41,027
Accumulated net realized (loss) ......................................... (31,371) (256,287)
Unrealized appreciation of investments, futures contracts, and foreign
currency ............................................................. 25,370 95,764
---------- -----------
NET ASSETS .............................................................. $ 129,687 $ 1,368,656
========== ===========
Shares outstanding (no par value):
Institutional Class .................................................. 794,255 31,576,195
========== ===========
Y Class .............................................................. N/A 67
========== ===========
Investor Class ....................................................... 867,527 29,125,166
========== ===========
Advisor Class ........................................................ N/A 113,319
========== ===========
Retirement Class ..................................................... N/A 85
========== ===========
AMR Class ............................................................ 9,147,677 27,641,470
========== ===========
Net asset value, offering and redemption price per share:
Institutional Class .................................................. $ 11.95 $ 15.51
========== ===========
Y Class .............................................................. N/A $ 15.52
========== ===========
Investor Class ....................................................... $ 11.77 $ 15.30
========== ===========
Advisor Class ........................................................ N/A $ 15.20
========== ===========
Retirement Class ..................................................... N/A $ 15.20
========== ===========
AMR Class ............................................................ $ 12.02 $ 15.61
========== ===========
(A) Cost of investments in unaffiliated securities ...................... $ 103,170 $ 1,273,619
(B) Cost of investments in affiliated securities ........................ $ -- $ 35,009
(C) Cost of foreign currency ............................................ $ 1,448 $ 4,979
(D) Market value of securities on loan .................................. $ -- $ 53,380
See accompanying notes
21
AMERICAN BEACON FUNDS(SM)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2009 (IN THOUSANDS)
EMERGING
MARKETS INTERNATIONAL
FUND EQUITY FUND
-------- -------------
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of foreign taxes) (A) ... $ 2,610 $ 40,091
Dividend income from affiliated securities ................................ 7 48
Interest income ........................................................... 4 36
Income derived from securities lending, net ............................... 96 1,777
-------- ---------
TOTAL INVESTMENT INCOME ............................................. 2,717 41,952
-------- ---------
EXPENSES:
Management and investment advisory fees (Note 2) .......................... 773 4,042
Administrative service fees (Note 2):
Institutional Class .................................................... 21 1,343
Investor Class ......................................................... 19 1,181
Advisor Class .......................................................... -- 5
AMR Class .............................................................. 44 177
Transfer agent fees:
Institutional Class .................................................... 1 33
Investor Class ......................................................... 4 35
Advisor Class .......................................................... -- 3
AMR Class .............................................................. 5 23
Custody and fund accounting fees .......................................... 468 281
Professional fees ......................................................... 43 75
Registration fees and expenses ............................................ 31 75
Service fees (Note 2):
Investor Class ......................................................... 16 1,240
Advisor Class .......................................................... -- 4
Distribution fees - Advisor Class (Note 2) ................................ -- 4
Prospectus and shareholder reports ........................................ 4 189
Trustee fees .............................................................. 10 121
Other expenses ............................................................ 54 317
-------- ---------
TOTAL EXPENSES ...................................................... 1,493 9,148
-------- ---------
Net (fees waived and expenses reimbursed)/recouped by Manager
(Note 2) ............................................................... -- --
-------- ---------
NET EXPENSES ........................................................ 1,493 9,148
-------- ---------
NET INVESTMENT INCOME ........................................................ 1,224 32,804
-------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from: (B)
Investments ............................................................ (13,356) (234,766)
Commission recapture (Note 1) .......................................... -- 68
Foreign currency transactions .......................................... (5,706) (2,677)
Futures contracts ...................................................... 7 (7,027)
Change in net unrealized appreciation or depreciation of:
Investments ............................................................ 56,033 340,188
Foreign currency translations .......................................... 10,156 142,812
Futures contracts ...................................................... 1,196 15,561
-------- ---------
NET GAIN ON INVESTMENTS ............................................. 48,330 254,159
-------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................... $ 49,554 $ 286,963
======== =========
(A) Foreign taxes ............................................................ $ 270 $ 3,998
(B) Net of foreign withholding taxes on capital gains ........................ $ 2 $ --
See accompanying notes
22
AMERICAN BEACON FUNDS(SM)
STATEMENT OF CHANGES OF NET ASSETS (IN THOUSANDS)
Emerging Markets Fund International Equity Fund
------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
2009 2008 2009 2008
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .................................. $ 1,224 $ 2,837 $ 32,804 $ 71,599
Net realized gain (loss) on investments, futures
contracts, and foreign currency transactions ........ (19,055) 1,673 (244,402) 33,063
Change in net unrealized appreciation or depreciation
of investments, futures contracts, and foreign
currency translations ............................... 67,385 (133,877) 498,561 (1,329,781)
-------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ..................... 49,554 (129,367) 286,963 (1,225,119)
-------- --------- ---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ................................. (129) (58) (22,416) (40,937)
Investor Class ...................................... (93) (43) (17,116) (20,913)
Advisor Class ....................................... -- -- (61) (105)
AMR Class ........................................... (2,146) (2,023) (17,313) (18,454)
Net realized gain on investments:
Institutional Class ................................. (798) (2,019) (12,166) (155,609)
Investor Class ...................................... (756) (1,876) (10,088) (87,859)
Advisor Class ....................................... -- -- (40) (482)
AMR Class ........................................... (11,268) (39,911) (8,489) (63,681)
-------- --------- ---------- -----------
NET DISTRIBUTIONS TO SHAREHOLDERS ................ (15,190) (45,930) (87,689) (388,040)
-------- --------- ---------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .......................... 21,046 28,155 264,266 443,828
Reinvestment of dividends and distributions ............ 15,153 45,849 81,731 366,395
Cost of shares redeemed ................................ (24,071) (112,884) (500,348) (1,148,081)
Redemption fees ........................................ 18 161 217 868
-------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS .................... 12,146 (38,719) (154,134) (336,990)
-------- --------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ..................... 46,510 (214,016) 45,140 (1,950,149)
-------- --------- ---------- -----------
NET ASSETS:
Beginning of period .................................... 83,177 297,193 1,323,516 3,273,665
-------- --------- ---------- -----------
END OF PERIOD * ........................................ $129,687 $ 83,177 $1,368,656 $ 1,323,516
======== ========= ========== ===========
*Includes undistributed net investment income (loss) of ... $ 1,183 $ 2,109 $ 41,027 $ 70,764
======== ========= ========== ===========
See accompanying notes
23
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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 diversified, open-end management investment company.
These financial statements and notes to the financial statements relate to the
American Beacon Emerging Markets and International Equity Funds (the "Funds"),
each a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
Class Disclosure
Prior to March 1, 2009, the Investor and Advisor Classes were formerly
known as the PlanAhead and Service Classes, respectively. May 1 and August 3,
2009 are the inception dates of the Retirement and Y Classes, respectively.
The Funds have multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
CLASS: OFFERED TO:
- ------ --------------------------------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $250,000
Y CLASS Investors making an initial investment of $100,000
INVESTOR CLASS General public and investors investing through an
intermediary
ADVISOR CLASS Investors investing through an intermediary
RETIREMENT CLASS Investors investing through an intermediary
AMR CLASS Investors in the tax-exempt retirement and benefit plans
of AMR Corporation and its affiliates
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in footnote 2.
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.
Security Valuation
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. The prices of debt securities may be
determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
24
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Securities for which the market prices are not readily available or are not
reflective of the fair value of the security, as determined by the Manager, will
be priced at fair value following procedures approved by the Board of Trustees
(the "Board").
Most foreign markets close before the Exchange. Developments that could
affect the values of securities that occur between the close of a foreign market
and the close of the Exchange normally will not be reflected in security
valuations. If such developments are so significant that they will, in the
judgment of the pricing committee of the Fund, clearly and materially affect the
value of securities, the foreign market closing prices may be adjusted to
reflect the fair value of the securities as of the close of the Exchange, as
determined in good faith and pursuant to procedures approved by the Board.
Adjustments to closing prices to reflect fair value on affected foreign
securities may be provided by an independent pricing service. Of the total
investments at October 31, 2009, for the Emerging Markets and International
Equity Funds $84,980 or 65.5% and $1,164,113 or 85.1%, respectively, were valued
at fair value based on procedures established by the Board.
Valuation Inputs
Various inputs may be used to determine the value of the Funds'
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value securities are not
necessarily an indication of the risk associated with investing in those
securities.
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3 - Prices determined using other significant unobservable inputs.
Unobservable inputs reflect the Fund's own assumptions about the factors
market participants would use in pricing an investment, and would be based
on the best information available.
The Funds' investments are summarized by level based on the inputs used to
determine their values. As of October 31, 2009 the Funds' investments were
classified as follows: (in thousands)
EMERGING MARKETS Level 1 Level 2 Level 3 Total
- ---------------- --------- ------- ------- --------
Preferred Stocks................................ $ 3,073 $ 353 $-- $ 3,426
Common Stocks................................... 35,776 84,626 -- 120,402
Short Term Investments.......................... 3,732 1,105 -- 4,837
------- ------- --- --------
Total Investments in Securities.............. $42,581 $86,084 $-- $128,665
======= ======= === ========
Futures Contracts............................... 6,095 -- -- 6,095
INTERNATIONAL EQUITY Level 1 Level 2 Level 3 Total
- -------------------- --------- ---------- ------- ----------
Preferred Stocks................................ $ -- $ 2,108 $-- $ 2,108
Common Stocks................................... 150,941 1,159,002 -- 1,309,943
Short Term Investments.......................... 93,291 -- -- 93,291
-------- ---------- --- ----------
Total Investments in Securities.............. $244,232 $1,161,110 $-- $1,405,342
======== ========== === ==========
Forward Exchange Contracts - Assets............. $ 67,648 -- -- $67,648
Forward Exchange Contracts - Liabilities........ (22,219) -- -- (22,219)
Futures Contracts............................... 47,227 -- -- 47,227
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. The Funds may purchase securities with delivery or payment to
occur at a later date. At the time the Funds enter into a
25
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
commitment to purchase a security, the transaction is recorded, and the value of
the security is reflected in the net asset value. The value of the security may
vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Funds. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the mean of the bid and ask prices of
such currencies against U.S. dollars as last quoted by a recognized dealer.
Income, expenses and purchases and sales of investments are translated into U.S.
dollars at the rate of exchange prevailing on the respective dates of such
transactions. The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and is reported with all other foreign
currency gains and losses in the Funds' Statements of Operations.
Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts to hedge the
exchange rate risk on investment transactions or to hedge the value of the Funds
securities denominated in foreign currencies. Forward foreign currency contracts
are valued at the forward exchange rate prevailing on the day of valuation. The
Funds bear the market risk that arises from changes in foreign exchange rates,
and accordingly, the unrealized gain (loss) on these contracts is reflected in
the accompanying financial statements. The Funds also bear the credit risk if
the counterparty fails to perform under the contract.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Funds may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Funds are required to set aside
or deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The initial margin
amount is reflected as a Deposit with broker for futures contracts on the
Statements of Assets and Liabilities. Payments to and from the broker, known as
variation margin, are required to be made on a daily basis as the price of the
futures contract fluctuates. Changes in initial settlement values are accounted
for as unrealized appreciation (depreciation) until the contracts are
terminated, at which time realized gains and losses are recognized. Futures
contracts are valued at the most recent settlement price established each day by
the exchange on which they are traded.
Emerging Markets
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments, futures contracts, and foreign currency...... Equity Contracts* $(119)
26
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------- ---------------- ----------
Net realized gain (loss) from futures contracts................................. Equity Contracts $ 7
Change in net unrealized appreciation or depreciation of futures contracts...... Equity Contracts 1,196
International Equity
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Statement of Assets and Liabilities Asset Derivatives Fair Value
- ----------------------------------- ------------------ ----------
Net unrealized appreciation on foreign currency contracts...... Foreign Exchange $380
Currency Contracts
Liability Derivatives
---------------------
Foreign Exchange
Net unrealized appreciation on foreign currency contracts............................ Currency Contracts (163)
Unrealized appreciation of investments, futures contracts, and foreign currency...... Equity Contracts* (1,232)
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------- ---------------- ----------
Net realized gain (loss) from futures contracts................................. Equity Contracts $(7,027)
Change in net unrealized appreciation or depreciation of futures contracts...... Equity Contracts 15,561
* Includes cumulative appreciation/depreciation of futures contracts as
reported in the Schedule of Investments footnotes. Only current day's
variation margin is reported within the Statements of Assets and
Liabilities.
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared
and paid at least annually. Distributions, if any, of net realized capital gains
are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If the Funds' investment advisor chooses to execute
a transaction through a participating broker, the broker rebates a portion of
the commission back to the Funds. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Funds. This amount is reported with the net realized gain in the Funds'
Statements of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class),
gains, and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The Funds impose a 2% redemption fee on shares held for less than 90 days.
The fee is deducted from the redemption proceeds and is intended to offset the
trading costs, market impact and other costs associated
27
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
with short-term trading activity in the Funds. The "first-in, first-out" method
is used to determine the holding period. The fee is allocated to all classes of
the Funds pro-rata based on their respective net assets.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory, fund management, and securities lending services. Investment assets of
the Funds are managed by multiple investment advisors that have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Funds an annualized fee equal to 0.05% of the average daily
net assets plus amounts paid by the Manager to the investment advisors hired by
the Manager to direct investment activities of the Funds. Management fees paid
during the year ended October 31, 2009 were as follows (dollars in thousands):
AMOUNTS PAID NET AMOUNTS
MANAGEMENT MANAGEMENT TO INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
----------- ---------- ------------- -----------
Emerging Markets............ 0.60%-0.95% $ 773 $ 722 $ 51
International Equity........ 0.20%-0.55% $4,042 $3,442 $600
As compensation for services provided by the Manager in connection with
securities lending activities, the lending Funds pays to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statements of Operations. During
the year ended October 31, 2009, securities lending fees paid to the Manager oh
behalf of the Emerging Markets and International Equity Funds were $12,594 and
$238,271, respectively.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative services to the
Funds. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor
and Retirement Classes of the Funds and 0.05% of the average daily net assets of
the AMR Class of the Funds.
Distribution Plans
The Funds, except for the Advisor and Retirement Classes of the Funds, have
adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule
12b-1 under the Act, pursuant to which no fees may be
28
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
charged to the Funds for distribution purposes. However, the Plan authorizes the
management and administrative service fees received by the Manager and the
investment advisors hired by the Manager to be used for distribution purposes.
Under this Plan, the Funds do not intend to compensate the Manager or any other
party, either directly or indirectly, for the distribution of Funds shares.
Separate Distribution Plans (the "Distribution Plans") have been adopted
pursuant to Rule 12b-1 under the Act for the Advisor and Retirement Classes of
the Funds. Under the Distribution Plans, as compensation for distribution
assistance, the Manager receives an annual fee of 0.25% of the average daily net
assets of the Advisor Class and 0.50% of the average daily net assets of the
Retirement 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 Y, Investor, Advisor
and Retirement Classes. As compensation for performing the duties required under
the Service Plans, the Manager receives 0.10% of the average daily net assets of
the Y Class, 0.25% of the average daily net assets of the Advisor and Retirement
Classes and up to 0.375% of the average daily net assets of the Investor Class
of the Funds.
Brokerage Commissions
Affiliated entities of an investment advisor to the Funds received net
commissions on purchases and sales of the Funds' portfolio securities totaling
$14,316 and $2,420 for the Emerging Markets and International Equity Funds,
respectively for the year ended October 31, 2009.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the
"MM Select Fund") or the US Government Money Market Fund (the "USG Select
Fund"), (collectively the "Select Funds"). Cash collateral received by the Funds
in connection with securities lending may be invested in the Select Funds. The
Funds and the Select Funds have the same investment advisor and therefore, are
considered to be affiliated. The Manager serves as investment advisor to the
Select Funds and receives from the Select Funds an annualized fee equal to 0.09%
of its average daily net assets. During the year ended October 31, 2009, fees
earned by the Manager from the Select funds were as follows:
DIRECT SECURITIES LENDING
INVESTMENTS IN COLLATERAL INVESTED
SELECT FUNDS IN SELECT FUNDS TOTAL
-------------- ------------------- -------
Emerging Markets......... $ 594 $ 1,054 $ 1,648
International Equity..... 5,743 10,534 16,277
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from other
participating Funds. The Fund did not utilize the credit facility during the
year ended October 31, 2009.
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may
seek repayment of fees waived or expenses reimbursed for a period of up to three
years. However, reimbursement will occur only if the Class's average net assets
have grown or expenses have declined sufficiently to allow reimbursement without
causing its expense ratio to exceed the previously agreed upon contractual
expense limit. During the
29
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
year ended October 31, 2009, the International Equity Advisor Class waived $130.
A liability has not been booked as the Manager does not intend to seek
repayment.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Funds do not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
October 31, 2009 remains subject to examination by the Internal Revenue Service.
If applicable, the Funds recognize interest accrued related to unrecognized tax
benefits in interest expense and penalties in "Other expenses" on the Statement
of Operations.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid during the fiscal years ended
October 31, 2009 and October 31, 2008 were as follows (in thousands):
EMERGING MARKETS INTERNATIONAL EQUITY
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2009 2008 2009 2008
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class............. $ 129 $ 550 $24,114 $ 69,221
Investor Class.................. 93 499 17,999 36,886
Advisor Class................... -- -- 66 193
AMR Class....................... 2,146 11,725 17,924 30,031
LONG-TERM CAPITAL GAIN
Institutional Class............. 798 1,527 10,468 127,324
Investor Class.................. 756 1,420 9,205 71,886
Advisor Class................... -- -- 35 395
AMR Class....................... 11,268 30,209 7,878 52,104
------- ------- ------- --------
TOTAL DISTRIBUTIONS PAID.............. $15,190 $45,930 $87,689 $388,040
======= ======= ======= ========
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of October 31, 2009, the components of distributable earnings on a tax
basis were as follows (in thousands):
EMERGING INTERNATIONAL
MARKETS EQUITY
---------- -------------
Cost basis of investments for federal income tax purposes ...... $117,402 $1,348,848
Unrealized appreciation ........................................ 20,279 203,598
Unrealized depreciation ........................................ (9,016) (147,105)
-------- ----------
Net unrealized appreciation/(depreciation) ..................... 11,263 56,493
Undistributed ordinary income .................................. 1,932 45,083
Undistributed long-term gain/(loss) ............................ (17,887) (223,489)
Other temporary differences .................................... (126) 2,417
-------- ----------
Distributable earnings ......................................... $ (4,818) $ (119,496)
======== ==========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gain/(losses) on certain
30
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
derivative instruments, the realization for tax purposes of unrealized
gain/(losses) on investments in passive foreign investment companies, and
Section 732 basis adjustments.
Due to inherent differences in the recognition of income, expenses and
realized gains/(losses) under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from foreign currency gains/(losses) from sales of
investments in passive foreign investment companies, and Section 732 basis
adjustments that have been reclassified as of October 31, 2009 (in thousands):
EMERGING INTERNATIONAL
MARKETS EQUITY
-------- -------------
Paid-in-capital ..................................................................... $ -- $ 2,825
Undistributed net investment income ................................................. 218 (5,635)
Accumulated net realized loss ....................................................... (217) 2,811
Unrealized depreciation of investments, futures contracts and foreign currency ...... (1) (1)
At October 31, 2009 the capital loss carry forward positions for federal
income tax purposes were $18,006 for Emerging Markets Fund and $224,721 for
International Equity Fund expiring in 2017. (in thousands)
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, for the year ended October 31, 2009 were (in
thousands):
EMERGING INTERNATIONAL
MARKETS EQUITY
-------- -------------
Purchases ....................... $79,113 $473,161
Sales and Maturities ............ 65,097 562,166
A summary of the Fund's direct transactions in the Select Funds for the
year ended October 31, 2009 is set forth below (in thousands):
OCTOBER 31, 2008 OCTOBER 31, 2009
AFFILIATED FUND SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
--------------- ------------------- --------- ------- -------------------
Emerging Markets MM Select Fund $ 5,304 $ -- $ 5,304 $ --
International Equity MM Select Fund 26,918 -- 26,918 --
International Equity USG Select Fund -- 17,051 13,095 3,956
5. SECURITIES LENDING
On May 19, 2009, the Emerging Markets Fund terminated its securities
lending program. The International Equity Fund may lend its securities to
qualified financial institutions, such as certain broker-dealers, to earn
additional income. The borrowers are required to secure their loans continuously
with collateral in an amount at least equal to the fair value of the securities
loaned, initially in an amount at least equal to 102% of the fair value of
domestic securities loaned and 105% of the fair value of international
securities loaned. Collateral is monitored and marked to market daily. Daily
mark to market amounts are required to be paid to the borrower or received from
the borrower by the end of the following business day. This one day settlement
for mark to market amounts may result in the collateral being temporarily less
than the value of the securities on loan or temporarily more than the required
minimum collateral.
31
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
To the extent that a loan is collateralized by cash, such cash collateral
shall be invested by the securities lending agent (the "Agent") in money market
mutual funds, and other short-term investments, provided the investments meet
certain quality and diversification requirements.
Securities lending income is generated from the demand premium (if any)
paid by the borrower to borrow a specific security and from the return on
investment of cash collateral, reduced by negotiated rebate fees paid to the
borrower and transaction costs. To the extent that a loan is secured by non-cash
collateral, securities lending income is generated as a demand premium reduced
by transaction costs. The Fund, the Agent, and the Manager retain 75%, 15%, and
10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive any income
associated with that security and any gain or loss in the market price that may
occur during the term of the loan.
Securities lending transactions pose certain risks to the Fund, including
that the borrower may not provide additional collateral when required or return
the securities when due, that the value of the short-term investments will be
less than the amount of cash collateral required to be returned to the borrower,
that non-cash collateral may be subject to legal constraints in the event of a
borrower bankruptcy, and that the cash collateral investments could become
illiquid and unable to be used to return collateral to the borrower. The Fund
could also experience delays and costs in gaining access to the collateral. The
Fund bears the risk of any deficiency in the amount of the cash collateral
available for return to the borrower and any action which impairs its ability to
liquidate non-cash collateral to satisfy a borrower default.
As of October 31, 2009, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
MARKET VALUE OF
SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL POSTED BY BORROWER
- ------------------ ------------------- ----------------------------------
$53,380 $-- $56,053
Cash collateral is listed in the Fund's Schedule of Investments and is
shown on the Statement of Assets and Liabilities. Income earned on these
investments is included in Income derived from securities lending in the
Statement of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged
except to satisfy a borrower default. Therefore, non-cash collateral is not
included on the Fund's Schedule of Investments or Statement of Assets and
Liabilities.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund (dollars and shares in thousands):
Year ended October 31, 2009
INSTITUTIONAL
CLASS INVESTOR CLASS AMR CLASS
--------------- ---------------- -----------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- ------ ------ ------ ------- ------ --------
Shares sold..................................... 119 $1,207 355 $ 3,717 1,767 $ 16,122
Reinvestment of dividends....................... 126 917 114 822 1,832 13,414
Shares redeemed................................. (59) (672)* (187) (1,654)* (2,458) (21,727)*
--- ------ ---- ------- ------ --------
Net increase in shares outstanding.............. 186 $1,452 282 $ 2,885 1,141 $ 7,809
=== ====== ==== ======= ====== ========
32
AMERICAN BEACON FUNDS(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
INSTITUTIONAL CLASS Y CLASS INVESTOR CLASS
-------------------- --------------- -------------------
INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------- -------- --------- ------ ------ ------- ---------
Shares sold..................................... 7,840 $ 100,116 -- $ 1 7,880 99,626
Reinvestment of dividends....................... 2,451 29,191 -- -- 2,263 26,656
Shares redeemed................................. (21,920) (270,772)* -- --* (13,941) (175,030)*
------- --------- --- --- ------- ---------
Net increase (decrease) in shares outstanding... (11,629) $(141,465) -- $ 1 (3,798) $ (48,748)
======= ========= === === ======= =========
RETIREMENT
ADVISOR CLASS CLASS AMR CLASS
--------------- --------------- -----------------
INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------- ------ ------ ------ ------ ------ --------
Shares sold..................................... 21 $ 262 -- $ 1 4,956 $ 64,260
Reinvestment of dividends....................... 7 82 -- -- 2,157 25,802
Shares redeemed................................. (35) (464)* -- --* (4,240) (53,865)*
--- ----- --- --- ------ --------
Net increase (decrease) in shares outstanding... (7) $(120) -- $ 1 2,873 $ 36,197
=== ===== === === ====== ========
Year Ended October 31, 2008
INSTITUTIONAL
CLASS INVESTOR CLASS AMR CLASS
---------------- ---------------- ------------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- ------ ------- ------ ------- ------ ---------
Shares sold..................................... 7 $ 117 540 $ 9,707 1,030 $ 18,331
Reinvestment of dividends....................... 109 2,039 101 1,876 2,222 41,934
Shares redeemed................................. (76) (1,074)* (544) (9,254)* (6,393) (102,395)*
--- ------- ---- ------- ------ ---------
Net increase (decrease) in shares outstanding... 40 $ 1,082 97 $ 2,329 (3,141) $ (42,130)
=== ======= ==== ======= ====== =========
INSTITUTIONAL CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
------------------- ------------------- ---------------- ------------------
INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------- ------- --------- ------- --------- ------ ------- ------ ---------
Shares sold.................................. 6,925 $ 137,615 12,711 $ 257,961 40 $ 790 2,312 $ 47,462
Reinvestment of dividends.................... 7,822 177,012 4,768 106,664 26 585 3,605 82,134
Shares redeemed.............................. (33,276) (680,261)* (18,249) (352,680)* (130) (2,617)* (5,574) (111,655)*
------- --------- ------- --------- ---- ------- ------ ---------
Net increase (decrease) in shares
outstanding............................... (18,529) $(365,634) (770) $ 11,945 (64) $(1,242) 343 $ 17,941
======= ========= ======= ========= ==== ======= ====== =========
- ----------
* Net of Redemption Fees
7. SUBSEQUENT EVENTS
In preparing the financial statements as of October 31, 2009, management
considered the impact of subsequent events occurring through December 23, 2009,
for potential recognition or disclosure in these financial statements.
33
AMERICAN BEACON EMERGING MARKETS FUND(SM)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
----------------------------------------------
Year Ended October 31,
----------------------------------------------
2009 2008 2007 2006 2005
------- ------- ------- ------- ------
Net asset value, beginning of period ............................. $ 9.00 $ 24.20 $ 17.42 $ 15.10 $12.64
------- ------- ------- ------- ------
Income from investment operations:
Net investment income ......................................... 0.05 0.23 0.26 0.11 0.15
Net gains (losses) on securities (both realized and
unrealized) ................................................ 4.42 (11.78) 9.11 4.63 3.45
------- ------- ------- ------- ------
Total income (loss) from investment operations ................... 4.47 (11.55) 9.37 4.74 3.60
------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income .......................... (0.21) (0.10) (0.10) (0.21) (0.06)
Distributions from net realized gains on securities ........... (1.31) (3.55) (2.49) (2.21) (1.08)
------- ------- ------- ------- ------
Total distributions .............................................. (1.52) (3.65) (2.59) (2.42) (1.14)
------- ------- ------- ------- ------
Redemption fees added to beneficial interests(A) ................. 0.00 0.00 0.00 0.00 0.00
Net asset value, end of period ................................... $ 11.95 $ 9.00 $ 24.20 $ 17.42 $15.10
======= ======= ======= ======= ======
Total return(B) .................................................. 60.56% (55.59)% 60.83% 34.58% 30.03%
======= ======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...................... $ 9,494 $ 5,478 $13,773 $16,552 $9,348
Ratios to average net assets (annualized):
Expenses, net of waivers ...................................... 1.66% 1.38% 1.60% 1.56% 1.52%
Expenses, before waivers ...................................... 1.66% 1.38% 1.60% 1.56% 1.52%
Net investment income, net of waivers ......................... 0.95% 1.35% 0.93% 0.80% 1.22%
Net investment income, before waivers ......................... 0.95% 1.35% 0.93% 0.80% 1.22%
Portfolio turnover rate ....................................... 70% 82% 81% 67% 63%
Investor Class
---------------------------------------------
Year Ended October 31,
---------------------------------------------
2009 2008 2007 2006 2005
------- ------- ------- ------ ------
Net asset value, beginning of period ............................. $ 8.85 $ 23.91 $ 17.22 $14.98 $12.53
------- ------- ------- ------ ------
Income from investment operations:
Net investment income ......................................... 0.04 0.17 0.11 0.09 0.15
Net gains (losses) on securities (both realized and
unrealized) ................................................ 4.35 (11.60) 9.11 4.55 3.41
------- ------- ------- ------ ------
Total income (loss) from investment operations ................... 4.39 (11.43) 9.22 4.64 3.56
------- ------- ------- ------ ------
Less distributions:
Dividends from net investment income .......................... (0.16) (0.08) (0.04) (0.19) (0.03)
Distributions from net realized gains on securities ........... (1.31) (3.55) (2.49) (2.21) (1.08)
------- ------- ------- ------ ------
Total distributions .............................................. (1.47) (3.63) (2.53) (2.40) (1.11)
------- ------- ------- ------ ------
Redemption fees added to beneficial interests(A) ................. 0.00 0.00 0.00 0.00 0.00
Net asset value, end of period ................................... $ 11.77 $ 8.85 $ 23.91 $17.22 $14.98
======= ======= ======= ====== ======
Total return(B) .................................................. 60.24% (55.75)% 60.38% 34.01% 29.86%
======= ======= ======= ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...................... $10,208 $ 5,183 $11,694 $5,841 $2,592
Ratios to average net assets (annualized):
Expenses, net of waivers ...................................... 1.96% 1.72% 1.96% 2.04% 1.75%
Expenses, before waivers ...................................... 1.96% 1.72% 1.96% 1.91% 2.01%
Net investment income, net of waivers ......................... 0.65% 1.00% 0.65% 0.49% 1.16%
Net investment income, before waivers ......................... 0.65% 1.00% 0.65% 0.62% 0.90%
Portfolio turnover rate ....................................... 70% 82% 81% 67% 63%
AMR Class
--------------------------------------------------
Year Ended October 31,
--------------------------------------------------
2009 2008 2007 2006 2005
-------- ------- -------- -------- -------
Net asset value, beginning of period ............................. $ 9.06 $ 24.37 $ 17.52 $ 15.17 $ 12.68
-------- ------- -------- -------- -------
Income from investment operations:
Net investment income ......................................... 0.09 0.33 0.19 0.15 0.24
Net gains (losses) on securities (both realized and
unrealized) ................................................ 4.43 (11.91) 9.30 4.65 3.42
-------- ------- -------- -------- -------
Total income (loss) from investment operations ................... 4.52 (11.58) 9.49 4.80 3.66
-------- ------- -------- -------- -------
Less distributions:
Dividends from net investment income .......................... (0.25) (0.18) (0.15) (0.24) (0.09)
Distributions from net realized gains on securities ........... (1.31) (3.55) (2.49) (2.21) (1.08)
-------- ------- -------- -------- -------
Total distributions .............................................. (1.56) (3.73) (2.64) (2.45) (1.17)
-------- ------- -------- -------- -------
Redemption fees added to beneficial interests(A) ................. 0.00 0.00 0.00 0.00 0.00
Net asset value, end of period ................................... $ 12.02 $ 9.06 $ 24.37 $ 17.52 $ 15.17
======== ======= ======== ======== =======
Total return(B) .................................................. 61.01% (55.48)% 61.28% 34.88% 30.45%
======== ======= ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...................... $109,985 $72,516 $271,726 $135,146 $94,864
Ratios to average net assets (annualized):
Expenses, net of waivers ...................................... 1.42% 1.17% 1.37% 1.30% 1.25%
Expenses, before waivers ...................................... 1.42% 1.17% 1.37% 1.30% 1.25%
Net investment income, net of waivers ......................... 1.27% 1.46% 1.25% 1.01% 1.60%
Net investment income, before waivers ......................... 1.27% 1.46% 1.25% 1.01% 1.60%
Portfolio turnover rate ....................................... 70% 82% 81% 67% 63%
- ----------
(A) Amounts represent less than $0.01 per share.
(B) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. For the Institutional Class for the years ended 2006 and
2005, the Total returns have been restated from 34.49% and 30.11%,
respectively. For the Investor Class for the years ended 2008, 2007, 2006,
and 2005, the Total returns have been restated from (55.77%), 60.17%,
34.16%, and 29.95%, respectively. For the AMR Class for the years ended
2007, 2006, and 2005, the Total returns have been restated from 61.19%,
34.87%, and 30.43%, respectively.
34
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Y Class
Institutional Class ----------
---------------------------------------------------------- August
Year Ended October 31, 3 to
---------------------------------------------------------- October
2009 2008 2007 2006 2005 31, 2009
-------- -------- ---------- ---------- ---------- ----------
Net asset value, beginning of period ..................... $ 13.13 $ 27.32 $ 24.68 $ 20.98 $ 18.47 $14.89
-------- -------- ---------- ---------- ---------- ------
Income from investment operations:
Net investment income(A, B) ........................... 0.54 0.77 0.65 0.60 0.44 0.04
Net gains (losses) on securities (both realized and
unrealized)(A) ..................................... 2.78 (11.60) 4.31 4.86 2.31 0.59
-------- -------- ---------- ---------- ---------- ------
Total income (loss) from investment operations ........... 3.32 (10.83) 4.96 5.46 2.75 0.63
-------- -------- ---------- ---------- ---------- ------
Less distributions:
Dividends from net investment income .................. (0.61) (0.70) (0.50) (0.43) (0.24) --
Distributions from net realized gains on securities ... (0.33) (2.66) (1.82) (1.33) -- --
-------- -------- ---------- ---------- ---------- ------
Total distributions ...................................... (0.94) (3.36) (2.32) (1.76) (0.24) --
-------- -------- ---------- ---------- ---------- ------
Redemption fees added to beneficial interest(C) .......... 0.00 0.00 0.00 0.00 0.00 0.00
-------- -------- ---------- ---------- ---------- ------
Net asset value, end of period ........................... $ 15.51 $ 13.13 $ 27.32 $ 24.68 $ 20.98 $15.52
======== ======== ========== ========== ========== ======
Total return(H) .......................................... 27.44% (44.81)% 21.54% 27.55% 14.99% 4.23%(F)
======== ======== ========== ========== ========== ======
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $489,836 $567,414 $1,686,668 $1,549,521 $1,286,441 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers(A) ........................ 0.73% 0.66% 0.67% 0.71% 0.70% 0.69%(G)
Expenses, before waivers(A) ........................ 0.73% 0.66% 0.67% 0.71% 0.70% 0.69%(G)
Net investment income, net of waivers(A) ........... 2.76% 2.91% 2.46% 2.52% 2.17% 1.00%(G)
Net investment income (loss), before waivers(A) .... 2.76% 2.91% 2.46% 2.52% 2.17% 1.00%(G)
Portfolio turnover rate(D) ............................ 41% 31% 38% 40% 37% 41%(E)
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon International Equity Portfolio through February 28,
2006.
(B) 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 through October 31, 2005.
(C) Amounts represent less than $0.01 per share.
(D) The International Equity Fund invested all of its investable assets in the
American Beacon International Equity Portfolio through February 28, 2006.
Portfolio turnover rate through February 28, 2006 is that of the American
Beacon International Equity Portfolio.
(E) Portfolio turnover rate is for the period from November 1, 2008 through
October 31, 2009.
(F) Not annualized.
(G) Annualized.
(H) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. The Total returns for the Institutional Class for the years
ended 2006 and 2005, have been restated from 27.49%, and 15.04%,
respectively.
35
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Investor Class
----------------------------------------------------
Year Ended October 31,
----------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value, beginning of period ..................... $ 12.95 $ 26.99 $ 24.42 $ 20.79 $ 18.31
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A, B) ........................... 0.37 0.66 0.58 0.50 0.41
Net gains (losses) on securities (both realized and
unrealized)(A) ..................................... 2.87 (11.41) 4.26 4.84 2.29
-------- -------- -------- -------- --------
Total income (loss) from investment operations ........... 3.24 (10.75) 4.84 5.34 2.70
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income .................. (0.56) (0.63) (0.45) (0.38) (0.22)
Distributions from net realized gains on securities ... (0.33) (2.66) (1.82) (1.33) --
-------- -------- -------- -------- --------
Total distributions ...................................... (0.89) (3.29) (2.27) (1.71) (0.22)
-------- -------- -------- -------- --------
Redemption fees added to beneficial interest(C) .......... 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $ 15.30 $ 12.95 $ 26.99 $ 24.42 $ 20.79
======== ======== ======== ======== ========
Total return(E) .......................................... 27.08% (44.96)% 21.22% 27.20% 14.80%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $445,596 $426,473 $909,385 $771,298 $560,770
Ratios to average net assets (annualized):
Expenses, net of waivers(A) ........................ 1.05% 0.92% 0.93% 0.96% 0.95%
Expenses, before waivers(A) ........................ 1.05% 0.92% 0.93% 0.96% 0.95%
Net investment income, net of waivers(A) ........... 2.45% 2.82% 2.26% 2.25% 1.96%
Net investment income (loss), before waivers(A) .... 2.45% 2.82% 2.26% 2.25% 1.96%
Portfolio turnover rate(D) ............................ 41% 31% 38% 40% 37%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon International Equity Portfolio through February 28,
2006.
(B) 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 through October 31, 2005.
(C) Amounts represent less than $0.01 per share.
(D) The International Equity Fund invested all of its investable assets in the
American Beacon International Equity Portfolio through February 28, 2006.
Portfolio turnover rate through February 28, 2006 is that of the American
Beacon International Equity Portfolio.
(E) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. The Total returns for the Investor Class for the year ended
2005, has been restated from 14.73%.
36
AMERICAN BEACON INTERNATIONAL EQUITY FUND(SM)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Retirement
Advisor Class Class
------------------------------------------------ -----------
Year Ended October 31, May 1 to
------------------------------------------------ October 31,
2009 2008 2007 2006 2005 2009
-------- -------- -------- ------ ------ -----------
Net asset value, beginning of period ..................... $ 12.86 $ 26.83 $ 24.24 $20.61 $18.24 $ 11.78
-------- -------- -------- ------ ------ -------
Income from investment operations:
Net investment income(A,B) ............................ 0.31 0.62 0.56 0.46 0.37 0.12
Net gains (losses) on securities (both realized and
unrealized)(A) ..................................... 2.86 (11.35) 4.20 4.76 2.26 3.30
-------- -------- -------- ------ ------ -------
Total income (loss) from investment operations ........... 3.17 (10.73) 4.76 5.22 2.63 3.42
-------- -------- -------- ------ ------ -------
Less distributions:
Dividends from net investment income .................. (0.50) (0.58) (0.35) (0.26) (0.26) --
Distributions from net realized gains on securities ... (0.33) (2.66) (1.82) (1.33) -- --
-------- -------- -------- ------ ------ -------
Total distributions ...................................... (0.83) (3.24) (2.17) (1.59) (0.26) --
-------- -------- -------- ------ ------ -------
Redemption fees added to beneficial interest(C) .......... 0.00 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- ------ ------ -------
Net asset value, end of period ........................... $ 15.20 $ 12.86 $ 26.83 $24.24 $20.61 $ 15.20
======== ======== ======== ====== ====== =======
Total return(H) .......................................... 26.58% (45.10)% 21.00% 26.73% 14.51% 29.03%(F)
======== ======== ======== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $ 1,722 $ 1,546 $ 4,932 $4,740 $2,987 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers(A) ........................ 1.44% 1.19% 1.12% 1.16% 1.21% 1.48%(G)
Expenses, before waivers(A) ........................ 1.45% 1.19% 1.15% 1.19% 1.21% 1.48%(G)
Net investment income, net of waivers(A) ........... 2.26% 2.36% 2.04% 2.09% 1.70% 1.72%(G)
Net investment income (loss), before waivers(A) .... 2.25% 2.36% 2.01% 2.05% 1.70% 1.72%(G)
Portfolio turnover rate(D) ............................ 41% 31% 38% 40% 37% 41%(E)
AMR Class
----------------------------------------------------
Year Ended October 31,
----------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- -------- --------
Net asset value, beginning of period ..................... $ 13.25 $ 27.54 $ 24.86 $ 21.12 $ 18.58
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A,B) ............................ 0.37 0.72 0.73 0.63 0.50
Net gains (losses) on securities (both realized and
unrealized)(A) ..................................... 2.99 (11.58) 4.33 4.92 2.33
-------- -------- -------- -------- --------
Total income (loss) from investment operations ........... 3.36 (10.86) 5.06 5.55 2.83
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income .................. (0.67) (0.77) (0.56) (0.48) (0.29)
Distributions from net realized gains on securities ... (0.33) (2.66) (1.82) (1.33) --
-------- -------- -------- -------- --------
Total distributions ...................................... (1.00) (3.43) (2.38) (1.81) (0.29)
-------- -------- -------- -------- --------
Redemption fees added to beneficial interest(C) .......... 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net asset value, end of period ........................... $ 15.61 $ 13.25 $ 27.54 $ 24.86 $ 21.12
======== ======== ======== ======== ========
Total return(H) .......................................... 27.70% (44.65)% 21.86% 27.88% 15.32%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $431,499 $328,083 $672,680 $563,231 $448,096
Ratios to average net assets (annualized):
Expenses, net of waivers(A) ........................ 0.48% 0.41% 0.42% 0.45% 0.44%
Expenses, before waivers(A) ........................ 0.48% 0.41% 0.42% 0.45% 0.44%
Net investment income, net of waivers(A) ........... 3.00% 3.24% 2.77% 2.76% 2.49%
Net investment income (loss), before waivers(A) .... 3.00% 3.24% 2.77% 2.76% 2.49%
Portfolio turnover rate(D) ............................ 41% 31% 38% 40% 37%
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the American Beacon International Equity Portfolio through February 28,
2006.
(B) 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 through October 31, 2005.
(C) Amounts represent less than $0.01 per share.
(D) The International Equity Fund invested all of its investable assets in the
American Beacon International Equity Portfolio through February 28, 2006.
Portfolio turnover rate through February 28, 2006 is that of the American
Beacon International Equity Portfolio.
(E) Portfolio turnover rate is for the period from November 1, 2008 through
October 31, 2009.
(F) Not annualized.
(G) Annualized.
(H) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. For the Advisor Class for the years ended 2007, 2006, and
2005, the Total returns have been restated from 20.85%, 26.89%, and 14.45%,
respectively.
37
AMERICAN BEACON FUNDS
PRIVACY POLICY & FEDERAL TAX INFORMATION
OCTOBER 31, 2009 (UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
For shareholders in the Fund, the percentage of dividend income distributed
for the year ended October 31, 2009, which is designated as qualified dividend
income under the Jobs Growth Tax Relief Act of 2003, was 95.43% for Emerging
Markets Fund and 85.43% for International Equity Fund. Shareholders will receive
notification in January 2010 of the percentage applicable to the preparation of
their 2009 income tax returns.
The International Equity Fund designated a foreign tax credit of $3,975,774
and recognized foreign source income of $43,931,743.
Pursuant to Section 852 of the Internal Revenue Code, the Emerging Markets
Fund designated $12,821,432 and the International Equity Fund designated
$27,586,802 as long-term capital gain dividends for the tax year ended October
31, 2009.
38
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISOR AGREEMENT (UNAUDITED)
At its May 27, 2009 meeting, the Board of Trustees ("Board") considered the
renewal of each existing Management Agreement between American Beacon Advisors,
Inc. (the "Manager") and the American Beacon Funds ("Beacon Trust") (the
"Funds") and each Investment Advisory Agreement between the Manager and a
subadvisor ("Investment Advisory Agreements" and collectively with the
Management Agreement, the "Agreements"). In preparation for the Board's
consideration to renew these Agreements, the Board and its Investment Committee
undertook steps to gather and consider information furnished by the Manager, the
subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 13, 2009 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
In connection with the Board's consideration of the Management Agreement
and each Investment Advisory Agreement, the Trustees considered, among other
materials, responses by the Manager and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements, as well as Parts 1 and II of its Form ADV registration
statement with the SEC;
- a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- a description of any payments by the subadvisors to the manager to
support the Funds' marketing efforts;
- an evaluation of any other benefits to the firm or Funds as a result
of their relationship, if any;
- confirmation that the firm's financial condition would not impair its
ability to provide high-quality advisory services to the Funds;
- a description of any internal actions the firm has taken or
anticipates taking in light of the current and projected decrease in
revenues from prior years as a result of the current economic
environment and, as applicable, information regarding the firm's
decline in assets under management from January 1, 2008 through March
31, 2009;
- a description of the scope of portfolio management services provided
to the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies, and any advantages or disadvantages that might accrue to
the Funds due to the firm's involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- 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;
39
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISOR AGREEMENT (UNAUDITED)
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates
- a certification by the firm regarding the reasonable design of its
compliance program;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto and a related certification of compliance by
the firm;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of any revenue sharing activities with respect to the
Funds;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Management Agreement and each Investment Advisory
Agreement, the Board also obtained an analysis provided by Lipper that compared:
(i) investment performance of each Fund versus comparable investment companies
and appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds; and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund with more than one class of shares, the class of
shares used for comparative purposes was the class with the longest performance
history, which in most cases was the Institutional Class. References below to
each Fund's Lipper peer group are to the group of comparable mutual funds
included in the analysis provided by Lipper.
Provided below is an overview of the primary factors the Trustees
considered at the Investment Committee meeting on May 13, 2009 at which the
Trustees reviewed the investment performance of the Manager and each subadvisor
and the primary factors considered by the Board at its May 27, 2009 meeting at
which the Board considered the renewal of the Agreements. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Management Agreement and each Investment Advisory Agreement, and
each Trustee may have afforded different weight to the various factors. Legal
counsel to the independent Trustees provided the Board with a memorandum
regarding its responsibilities pertaining to the renewal of the Agreements. The
memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts. Based
on its evaluation, the Board unanimously concluded that the terms of each
Agreement were reasonable and fair and that the renewal of each Agreement was in
the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each
Investment Advisory Agreement, the Trustees considered the best interests of
each Fund separately. While the Management Agreement and the Investment Advisory
Agreements for all of the Funds were considered at the May 27, 2009 meeting, the
Board considered each Fund's investment management and subadvisory relationships
separately. In each instance, the Board considered, among other things, the
following factors: (1) the nature and quality of the services provided; (2) the
investment performance of a Fund and, as applicable, each subadvisor for a Fund;
(3) the costs incurred by the Manager and (to the extent provided) the
subadvisors in rendering their services and their resulting profits or losses;
(4) the extent to which
40
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISOR AGREEMENT (UNAUDITED)
economies of scale have been taken into account in setting each fee schedule;
(5) whether fee levels reflect these economies of scale for the benefit of Fund
investors; (6) comparisons of services and fees with contracts entered into by
the Manager or a subadvisor or their affiliates with other clients (such as
pension funds and other institutional funds); and (7) any other benefits derived
or anticipated to be derived by the Manager or a subadvisor from their
relationship with a Fund. The Trustees posed questions to various management
personnel of the Manager regarding certain key aspects of the materials
submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes 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.
With respect to the renewal of each Investment Advisory Agreement, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing the Funds, the size of the
subadvisor and their ability to continue to attract and retain qualified
investment personnel. Based on the foregoing information, the Board concluded
that the nature, extent and quality of the management and advisory services
provided by the Manager and each subadvisor were appropriate for each Fund and,
thus, determined to renew the Management Agreement and the Investment Advisory
Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. The Manager also noted that it generally was
satisfied with the performance of the subadvisors. A discussion regarding the
Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services Provided to the Funds and the Profits Realized by the
Manager from its Relationship with the Funds. In analyzing the cost of services
and profitability of the Manager and a subadvisor by Fund, the Board considered
the revenues earned and the expenses incurred by the Manager. The profits or
losses were noted at both an individual Fund level and at an aggregate level for
all Funds. The Board also considered that the Management Agreement for the
Beacon Trust, stipulates that, to the extent that a Fund invests all of its
investable assets in another registered investment company (i.e., is a "Feeder
Fund"), the Fund will not pay the Manager a management fee. The index series of
the Funds also operate under a master-feeder structure, but each of these series
invests in a master portfolio that is not managed by the Manager. As such, the
Board considered that the Manager does not receive a management fee with respect
to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. With
respect to the Short-Term Bond Fund, the Board also considered the Manager's
advisory fees for services provided by the Manager to institutional separate
accounts with similar investment strategies. Although the Board noted that, in
certain cases, the fee rates paid by other clients is lower than the fee rates
paid by the Funds, the difference reflects the greater level of responsibility
and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year and to discontinue the expense waivers and
reimbursements for certain classes of the Funds that were closing or maintained
competitive expense ratios without such expense waivers. The Board further
considered that each subadvised Fund pays the Manager the amounts due to its
subadvisors, and the Manager remits these amounts directly to the applicable
subadvisors. The Board considered that the Manager receives service and
administrative fees to compensate the Manager for providing administrative
services to the Funds and to compensate third-party administrators and
broker-dealers for services to Fund shareholders. In addition, the Board
considered that the Manager receives management fees for overseeing the
securities lending relationships on behalf of various Funds. The Board also
noted that certain classes of the Funds maintain higher expense ratios in order
to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in
connection with its investment advisory services to the Fund, the Board
considered that, in many cases, the Manager has negotiated the lowest
subadvisory fee a subadvisor charges for any comparable client accounts. The
Board gave less weight to profitability considerations or did not view this data
as imperative to its deliberations given the arm's length nature of the
relationship between the Manager and the subadvisors with respect to the
negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management and
investment advisory fees, the Board considered whether economies of scale will
be realized as the Funds grow and whether fee levels reflect these economies of
scale for the benefit of Fund shareholders. In this regard, the Board considered
that the Manager has negotiated breakpoints in many subadvisory fee rates. The
Board also noted that, for purposes of determining the fee rates chargeable to
the Funds, many subadvisors have agreed to take into account other assets of AMR
Corporation and its pension plans that are managed by the subadvisors. Thus, the
Funds are able to receive lower effective fee rates. The Board also noted the
Manager's representation that Fund assets have decreased significantly primarily
due to market depreciation in 2008 and the first quarter of 2009, as well as
significant share redemptions from the Money Market Funds and the inability of
certain competitor money market funds' to maintain positive yields, causing mass
redemptions in money market funds throughout the industry. Based on the
foregoing information, the Board concluded that the Manager and subadvisor fee
schedules for each Fund provides for a reasonable sharing of benefits from any
economies of scale with the Fund.
41
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT
ADVISOR AGREEMENT (UNAUDITED)
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager and/or the
subadvisors as a result of the advisory relationships with the Funds, including
greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. The Board also considered that
the Manager's relationship with the Funds continues to be a significant factor
in attracting separate account assets for the Manager, noting specifically the
Manager's utilization of the Large Cap Value Fund model for a newly registered
actively managed exchange traded fund managed by the Manager. In addition, the
Board noted that the Manager provides services to each Trust at a relatively low
cost. The Board considered that certain of the subadvisors reimburse the Manager
for certain of its costs relating to distribution activities for the Funds. The
Board also considered that Funds did not pay commissions to any affiliated
broker-dealer of the Manager or the relevant subadvisor during the most recent
fiscal year ended October 31.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager and the subadvisors by virtue of their
relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
Except for the Short-Term Bond Fund, the performance comparisons below were
made versus each Fund's Lipper peer universe median. References to the Lipper
expense universe below are to the universe of comparable mutual funds included
in the analysis provided to the Trustees by Lipper, Inc.
Additional Considerations and Conclusions with Respect to the Emerging Markets
Fund
In considering the renewal of the Management Agreement for the Emerging
Markets Fund, the Trustees considered the following additional factors: (1) the
Emerging Markets Fund outperformed the peer universe median for the one-,
three-, and five-year periods ended March 31, 2009 and (2) the expense ratio of
the Institutional Class of the Fund ranked better than the median of its Lipper
expense universe.
In considering the renewal of the Investment Advisory Agreements with The
Boston Company Asset Management, LLC ("TBC") and Morgan Stanley Investment
Management Inc. ("MSIM"), the Trustees considered the following additional
factors: (1) MSIM outperformed the peer universe median for the three- and
five-year periods ended March 31, 2009, but underperformed for the one-year
period; (2) TBC outperformed the peer universe median for the one-, three- and
five-year periods ended March 31, 2009; (3) each of the Fund's subadvisors has
informed the Manager that it uses Fund commissions to obtain proprietary
research, the application of which benefits the Fund and each subadvisor's other
clients; (4) each of the Fund's subadvisors has indicated that it does not
charge lower advisory fees to other clients for which it provides comparable
services; and (5) the Manager's recommendation to continue to retain each
subadvisor.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and the subadvisors under the Agreements are fair and
reasonable, (2) determined that the Emerging Markets Fund and its shareholders
would benefit from the Manager's and subadvisors' continued management of the
Fund and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Emerging Markets Fund.
Additional Considerations and Conclusions with Respect to the International
Equity Fund
In considering the renewal of the Management Agreement for the
International Equity Fund, the Trustees considered the following additional
factors: (1) the Fund outperformed the peer universe median for the one-, three-
and five-year periods ended March 31, 2009, and matched the peer universe median
for the ten-year period and (2) the expense ratio of the Institutional Class of
Fund shares ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with
Causeway Capital Management LLC ("Causeway"), Lazard Asset Management LLC
("Lazard"), Templeton Investment Counsel, LLC ("Templeton"), and TBC, the
Trustees considered the following additional factors: (1) Templeton outperformed
the peer universe median for the one-, three-, five- and ten-year periods ended
March 31, 2009; (2) Causeway outperformed the peer universe median for the
three-, five- and ten-year periods ended March 31, 2009, but underperformed for
the one-year period; (3) Lazard outperformed the peer universe median for the
one-, three- and five-year periods, but underperformed for the ten-year period
ended March 31, 2009; (4) TBC outperformed the peer universe median for the
one-year period ended March 31, 2009, but underperformed for the three-year
period; (5) each of the Fund's subadvisors has informed the Manager that it uses
Fund commissions to obtain proprietary research, the application of which
benefits the Fund and each subadvisor's other clients; (6) each of the Fund's
subadvisors has indicated that it does not charge lower advisory fees to other
clients for which it provides comparable services; and (7) the Manager's
recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and the subadvisors under the Agreements are fair and
reasonable, (2) determined that the International Equity Fund and its
shareholders would benefit from the Manager's and subadvisors' continued
management of the Fund and (3) approved the renewal of the Management and
Investment Advisory Agreements with respect to the International Equity Fund.
42
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees nineteen funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a
Partner in the law firm of Akin, Gump, Strauss, Hauer &
Feld, LLP (1960-Present); Director, Clear Channel
Communications (1984-Present); Trustee, CenterPoint
Properties (1994-2006); Member, Board of Trustees, Southern
Methodist University ; Member, Board of Visitors, M.D.
Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital;
Trustee, American Beacon Mileage Funds (1996-present);
Trustee, American Beacon Select Funds (1996-present);
Trustee, American Beacon Master Trust Funds (1996-present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation
(1992-2004); Consultant, New River Canada Ltd. (mutual fund
servicing company) (1998-2003); President and CEO, Allmerica
Trust Company, NA (1996-1997); President and CEO, Fidelity
Investments Southwest Company (1983-1995); Senior Vice
President of Regional Centers, Fidelity Investments
(1988-1995); Trustee, American Beacon Mileage Funds
(2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer
and Secretary, Kimbell Art Foundation (1993-Present);
Trustee, Texas Christian University (1998-Present); Trustee,
W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health
Foundation) (2001-2006); Director, Christian Church
Foundation (1999-2007); Trustee, American Beacon Mileage
Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994-Present); Director, Sunrise Bank of Atlanta
(2008-Present); Chairman, Special Contributions Fund Board
of Trustees, National Association for the Advancement of
Colored People (2007-Present); Trustee, National Association
for the Advancement of Colored People (2000-Present); Board
of Visitors, Emory University (2006-Present); Trustee,
Atlanta Botanical Garden (2006-Present); Board Member,
Willie L. Brown Jr. Institute on Politics and Public Service
(2001-Present); Chair, National Association of Securities
Professionals (2000-2002); Deputy Chief Administrative
Officer, City of Atlanta (1985-1990); Trustee, American
Beacon Mileage Funds (2008-present); Trustee, American
Beacon Select Funds (2008-present); Trustee, American Beacon
Master Trust Funds (2008-present).
43
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
Thomas M. Dunning (66) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief
Executive Officer (2003-2007), Lockton Dunning Benefits
(consulting firm in employee benefits); Director, Oncor
Electric Delivery Company LLC (2007-present); Advisory
Director, Comerica Texas (2003-present); Immediate Past
Chairman and Board Member, Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-present); State Vice Chair, State Fair of Texas; Board
Member, Southwestern Medical Foundation (1994-present);
Trustee, American Beacon Mileage Funds (2008-present);
Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present),
Chairman since 2008 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in oil and gas
exploration and production, refining, real estate, farming,
ranching and venture capital activities) (1994-2009).
Chairman (2007-Present) and Director (2005-Present), The
Dallas Opera Foundation; Chairman (2006-Present) and
Director (2005-Present), Temple Emanu-El Foundation;
Trustee, Presbyterian Hospital Foundation (2006-Present);
Trustee, American Beacon Mileage Funds (2004-present);
Trustee, American Beacon Select Funds (2004-present);
Trustee, American Beacon Master Trust Funds (2004-present).
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Federal
Dallas, Texas 75275 Preferred Capital Corp. (2001-2003); Director, Kronus
Worldwide Inc. (chemical manufacturing) (2003-Present);
Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of
Directors; Member, Methodist Hospital Advisory Board;
Co-Chair, Knight Commission on Intercollegiate Athletics;
Trustee, American Beacon Mileage Funds (2001-present);
Trustee, American Beacon Select Funds (2001-present);
Trustee, American Beacon Master Trust Funds (2001-present).
Paul J. Zucconi, CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
nonstandard automobile insurance) (2004-present); Director,
Titanium Metals Corporation (producer of titanium melted and
mill products and sponge) (2002- present); Director,
Torchmark Corporation (life and health insurance products)
(2002-present); Director, National Kidney Foundation of
North Texas (2003-Present); Director, Dallas Chapter of
National Association of Corporate Directors (2004-Present);
Partner, KPMG (1976-2001); Trustee, American Beacon Mileage
Funds (2008-present); Trustee, American Beacon Select Funds
(2008-present); Trustee, American Beacon Master Trust Funds
(2008-present).
OFFICERS
Term
One Year
William F. Quinn** (61) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009) and
President from CEO (2006-2007), President (1986-2006) and Director
2007 to 2008 and (2003-Present), American Beacon Advisors, Inc.; Chairman
2009-Present (1989-2003) and Director (1979-1989, 2003-Present), American
President from Airlines Federal Credit Union; Director, Hicks Acquisition
1987 to 2007 I, Inc. (2007-2009); Director, Crescent Real Estate
and 2008 to 2009 Equities, Inc.(1994-2007); Director, Pritchard, Hubble &
Trustee from Herr, LLC (investment advisor) (2001-2006); Director of
1987 to 2008 Investment Committee, Southern Methodist University
Endowment Fund (1996-Present); Member, Southern Methodist
University Cox School of Business Advisory Board
(1999-2002); Member, New York Stock Exchange Pension
Manager Committee (1997-1998, 2000-2002, 2006-Present);
Chairman (2007-Present) and Vice Chairman (2004-2007),
Committee for the Investment of Employee Benefits;
Director, United Way of Metropolitan Tarrant County
(1988-2000, 2004-Present); Trustee, American Beacon
Mileage Funds (1995-2008); Trustee, American Beacon
Select Funds (1999-2008); Trustee, American Beacon Master
Trust (1995-2008).
44
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------- ------------------------------------------------------------
Gene L. Needles, Jr. (54) President 2009 to President, CEO and Director (2009-Present), American Beacon
Present Advisors, Inc. President (November 2009-Present), Executive
Vice President (May 2009-November 2009) of the American
Beacon Funds, American Beacon Mileage Funds, American Beacon
Select Funds, and American Beacon Master Trust. President
(2008-2009), Touchstone Investments; President (2003-2007),
CEO (2004-2007), Managing Director of Sales (2002-2003),
National Sales Manager (1999-2002), and Regional Sales
Manager (1993-1999), AIM Distributors.
Rosemary K. Behan (50) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006-Present); Assistant General Counsel,
Officer since 2006 First Command Financial Planning, Inc. (2004-2006); Attorney
(1995-2004), Securities and Exchange Commission.
Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American
Beacon Advisors, Inc. (2004-Present); Regional Vice
President, Neuberger Berman, LLC (investment advisor)
(1996-2004).
Wyatt Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors,
Inc. (2007-Present); Managing Director of Corporate
Accounting (2004-2007), Director of IT Strategy and Finance
(2002-2004), American Airlines, Inc.
Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present); Director American Beacon
Global Funds SPC (2002-present); Director, American Beacon
Global Funds plc (2007-2009).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors, Inc.
1995 (1995-Present).
Christina E. Sears (38) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon
and Asst. Advisors, Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's and Master Trust's sub-advisors.
45
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46
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47
(AMERICAN BEACON FUNDS(SM) 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:
(GRAPHIC)
BY E-MAIL:
american_beacon.funds@ambeacon.com
(GRAPHIC)
ON THE INTERNET:
Visit our website at www.americanbeaconfunds.com
(GRAPHIC)
BY TELEPHONE:
Institutional, Y, Investor, Advisor, and Retirement Classes
Call (800) 658-5811
AMR Class(SM)
Call (800) 345-2345
(GRAPHIC)
BY MAIL:
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, the Fund files a complete schedule of its portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and
third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website
at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's
Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information
regarding the operation of the SEC's Public Reference Room may be obtained by
calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is
also available on the Funds' website (www.americanbeaconfunds.com) approximately
thirty days after the end of each month.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures the Fund uses to determine how to
vote proxies relating to portfolio securities is available in the Fund's
Statement of Additional Information, is available free of charge on the Fund's
website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by
accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for
the most recent year ended June 30 is filed annually with the SEC on Form N-PX.
The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The
Fund's proxy voting record may also be obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
CUSTODIAN
STATE STREET BANK AND TRUST
Boston, Massachusetts
TRANSFER AGENT
BOSTON FINANCIAL DATA SERVICES
Kansas City, Missouri
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
ERNST & YOUNG LLP
Dallas, Texas
DISTRIBUTOR
FORESIDE FUND SERVICES
Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Beacon Funds, American Beacon Emerging Markets Fund, and American
Beacon International Equity Fund are service marks of American Beacon Advisors,
Inc.
AR 10/09
00071315
GUIDANCE | VISION | EXPERIENCE
(GRAPHIC)
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
OCTOBER 31, 2009
LARGE CAP VALUE FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
Contents
President's Message................................................ 1
Market and Performance Overview.................................... 2
Schedule of Investments............................................ 7
Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds October 31, 2009
(PHOTO OF GENE L. NEEDLES, JR.)
FELLOW SHAREHOLDERS,
As an introduction to the American Beacon Large Cap Value Fund Annual
Report for the 12-month period ended October 31, 2009, please let me take a
moment to tell you how pleased I am to have been serving as President and CEO of
American Beacon Advisors since April 15, 2009. I consider it a privilege to hold
this position, and I take its responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm
no stranger to the ups and downs that markets can deliver. As a fellow investor
and shareholder, I experience these trends in much the same way you do. The
majority of 2008 was difficult in many ways. However, when I took the helm at
American Beacon, I already had many reasons to be optimistic about what might
develop in 2009. As of October 31, 2009, my optimism has been largely confirmed.
For the one-year period (as of 10/31/09), American Beacon Large Cap Value
Fund-Institutional Class returned 12.41%. Of course, one year of performance
doesn't tell the whole story, especially when you're investing for the long
term. Please note that the recent growth rate in the stock market has helped to
produce short-term returns that are not typical and may not continue in the
future.
Many of us have long-term goals, including retirement, driving our
investment decisions. While this 12-month period began amid a frightening
recessionary environment, we finished the year with increasing confidence that
markets have begun to stabilize, that liquidity has returned to the debt markets
and that equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective,
employing a buy-and-hold philosophy (consistent with the Fund's objectives), and
doing the right thing according to your risk tolerance and time horizon is not
always easy. But the professionals at American Beacon are dedicated to working
hard to help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and am pleased to be able to share my enthusiasm about the
path ahead with you.
A financial advisor can be an importantally in creating investment
success, so--as you review the enclosed annual report--please feel free to
discuss your thoughts and concerns with a trusted advisor. And, as always, the
professionals associated with the American Beacon Funds are grateful for the
opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
Gene L. Needles, Jr.
President
American Beacon Funds
1
DOMESTIC EQUITY MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
The past 12-month period saw a great deal of volatility in equity markets.
The first quarter of 2009 saw marginal improvements in U.S. housing, income and
consumption data. The U.S. Treasury partnered with private investors to purchase
toxic bank assets, which spurred a market rally late in the first quarter.
Soon after his January inauguration, President Obama attempted to blunt the
impact of the recession in the U.S. by signing an almost $800 billion economic
stimulus package, introducing a sizable mortgage relief program and initiating
stress tests for the nation's banks. Other stimulus packages were enacted
worldwide, representing an unprecedented commitment from governments across the
globe to stabilize the world's economies.
While the markets behaved sluggishly at the beginning of the first quarter,
they picked up speed following more encouraging data suggesting that the economy
had begun to move from recession to recovery. The global equity market rally
that began in early March and continued into May was one of the strongest
rebounds since the Great Depression era. Toward the end of the second quarter,
investors showed concern that the equity markets had moved too far ahead of
economic realities. The sharp equity rally lost momentum, as equity markets
pulled back modestly in June.
During the third quarter, stronger-than-expected corporate
earnings--combined with encouraging economic news--rekindled the rally to some
degree. The United States announced that gross domestic product (GDP) contracted
in the second quarter, but by a better-than-expected -1.0% (subsequently revised
to -0.7%). Meanwhile, strong demand for automobiles, fueled by the U.S.
Government's "Cash for Clunkers" program, produced the first signs of growth in
the American manufacturing industry since January 2008. The third quarter of
2009 saw housing numbers improve, increased merger and acquisition activity, and
evidence of capital markets normalization. In addition to stabilization,
liquidity was a major contributor to market strength.
Unfortunately, the domestic equity markets struggled with the effects of
rising unemployment, a tight credit environment, and weakness in commercial real
estate. Amid fears about job stability, the U.S. Consumer Confidence Index
declined to 53.1 in September from 54.5 in August 2009. Although the pace of job
losses slowed, total U.S. unemployment continued to rise in October 2009, along
with credit default and delinquency rates.
Third quarter corporate earnings results were mixed. Many companies were
quick to downsize in response to reduced demand. Corporate profits exceeded
reduced expectations due to cost cutting. It remains to be seen if increased
corporate profitability ultimately leads to more hiring and, thus, increased
consumer demand.
This pattern of positive developments tempered with set-backs is typical of
economic recoveries. Different types of economic activity require more time to
be effective. Some uncertainty about what will drive the markets going forward
remains, as the Federal Reserve Board (the Fed) may start to reverse and unwind
the unprecedented levels of support provided to the U.S. economy. The magnitude
of any consumer-led recovery remains difficult to gauge, as it is hard to
distinguish between a traditional cyclical recovery and potentially artificial
gains resulting from the U.S. Government's stimulus measures.
As the Fed's plans become clearer, the market may favor companies with
higher earnings and balance sheet quality. These companies with solid
fundamentals may provide better upside potential than more speculative
companies. It is unlikely that the lowest credit quality companies (without
earnings or dividends) will remain market leaders, since there are many
companies with excellent fundamentals selling for equally attractive prices.
2
DOMESTIC EQUITY MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Large Cap Value Fund returned 12.41% for the
twelve months ended October 31, 2009. The Fund outperformed the Russell 1000(R)
Value Index (the "Index") return of 4.79% and the Lipper Large-Cap Value Funds
Index return of 10.69%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 10/31/09 $10,000
--------------------------- 10/31/99-
1 YEAR 5 YEARS 10 YEARS 10/31/09
------ ------- -------- ---------
Institutional Class(1, 6) ................... 12.41% 1.35% 3.97% $14,754
Y Class (1, 2, 6) ........................... 12.41% 1.35% 3.97% 14,754
Investor Class(1, 6) ........................ 11.99% 1.08% 3.69% 14,363
Advisor Class(1, 3, 6) ...................... 11.81% 0.87% 3.58% 14,213
Retirement Class (1, 4, 6) .................. 11.60% 0.83% 3.56% 14,185
AMR Class(1, 6) ............................. 12.59% 1.61% 4.23% 15,130
Lipper Large-Cap Value Funds Index(5) ....... 10.69% 0.39% 0.50% 10,514
Russell 1000 Value Index (5) ................ 4.79% -0.05% 1.70% 11,838
(1.) The Investor and Advisor Classes were formerly known as the PlanAhead and
Service Classes, respectively. Please note that the recent growth rate in
the stock market has helped to produce short-term returns that are not
typical and may not continue in the future. Performance shown is historical
and may not be indicative of future returns. Investment returns and
principal value will vary, and shares may be worth more or less at
redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares.
(2.) Fund performance for the one-year, five-year and ten-year periods
represents the total returns achieved by the Institutional Class from
10/31/99 up to 8/3/09, the inception date of the Y Class, and the returns
of the Y Class since its inception. Expenses of the Y Class are higher than
those of the Institutional Class. As a result, total returns shown may be
higher than they would have been had the Y Class been in existence since
10/31/99.
(3.) Fund performance for the five-year and ten-year periods represents the
total returns achieved by the Investor Class from 10/31/99 up to 5/31/05,
the inception date of the Advisor Class, and the returns of the Advisor
Class since its inception. Expenses of the Advisor Class are higher than
those of the Investor Class. As a result, total returns shown may be higher
than they would have been had the Advisor Class been in existence since
10/31/99.
(4.) Fund performance for the one-year, five-year and ten-year periods
represents the total returns achieved by the Investor Class from 10/31/99
through 5/31/05 and the Advisor Class from 6/1/05 up to 5/1/09, the
inception date of the Retirement Class, and the returns of the Retirement
Class since its inception. Expenses of the Retirement Class are higher than
those of the Advisor and Investor Classes. As a result, total returns shown
may be higher than they would have been had the Retirement Class been in
existence since 10/31/99. A portion of the fees charged to the Advisor
Class of the Fund was waived in 2005. Performance prior to waiving fees was
lower than the actual returns shown for 2005.
(5.) The Russell 1000 Value Index is an unmanaged index of those stocks in the
Russell 1000 Index with lower price-to-book ratios and lower forecasted
growth values. Russell 1000 Value Index is a registered trademark of the
Frank Russell Company. The Lipper Large-Cap Value Funds Index tracks the
results of the 30 largest mutual funds in the Lipper Large-Cap Value Funds
category. Lipper is an independent mutual fund research and ranking
service. One cannot directly invest in an index.
(6.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement,
and AMR Class shares was 0.59%, 0.69%, 0.97%, 1.09%, 1.34%, and 0.33%,
respectively. The expense ratios above may vary from the expense ratios
presented in other sections of this report that are based on expenses
incurred during the period covered by this report.
The Fund generated excess performance through both stock selection and
sector allocation. From a stock selection standpoint, the Fund's holdings in the
Industrials, Consumer Staples, Consumer Discretionary, and Health Care sectors
added the most value relative to the Index.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
Companies in the Industrials sector that had the greatest impact on the Fund's
return were Honeywell International (up 22.6%), 3M (up 18.0%), and Molex (up
34.3%). In the Consumer Staples sector, Philip Morris International (up 14.3%),
L'Oreal (up 39.8%), and Unilever (up 11.9% for the period the Fund owned the
security) were the largest contributors, as were Gentex (up 73.4%), Polo Ralph
Lauren (up 93.1% for the period the Fund owned the security), and Target (up
22.4%) in the Consumer Discretionary sector. In the Health Care sector,
Schering-Plough (up 88.7%), Hospira (up 60.5%), and Merck (up 8.1% for the
period the Fund owned the security) added the most value relative to the Index.
Poor stock selection in the Information Technology sector, mostly in Hewlett
Packard (up 24.4%) and Tyco Electronics (down 46.6% for the period the Fund
owned the security), detracted value relative to the Index but not enough to
offset the positive impact of the aforementioned sectors.
A larger than four times overweight in Information Technology, the best
performing sector in the Index, and an underweight in Financials, the worst
performing sector in the Index, added value through sector allocation. This was
somewhat offset by an overweight in Industrials, the second worst performing
sector in the Index, and an underweight in the Consumer Discretionary sector,
which detracted relative value from the Fund's performance.
The sub-advisors continue to invest in a broadly diversified portfolio of
companies that they believe have attractive valuations and above-average
earnings growth potential. This approach should allow the Fund to benefit over
the longer term.
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
ConocoPhillips.................................................... 3.2%
International Business Machines Corp. ............................ 3.1%
JPMorgan Chase & Co. ............................................. 3.1%
Bank of America Corp. ............................................ 2.2%
Raytheon Co. ..................................................... 1.9%
Hewlett-Packard Co. .............................................. 1.9%
Pfizer, Inc. ..................................................... 1.8%
Well Fargo & Co. ................................................. 1.7%
Diageo plc........................................................ 1.6%
PNC Financial Services Group, Inc................................. 1.5%
SECTOR ALLOCATION
% OF
EQUITIES
--------
Financials........................................................ 19.7%
Information Technology............................................ 15.9%
Industrials....................................................... 12.8%
Consumer Staples.................................................. 12.0%
Health Care....................................................... 11.0%
Energy............................................................ 9.8%
Consumer Discretionary............................................ 8.1%
Utilities......................................................... 5.8%
Telecommunication Services........................................ 2.6%
Materials......................................................... 2.3%
4
FUND EXPENSES
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The examples below are
intended to help you understand the ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2009
through October 31, 2009.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
Investor and Institutional Classes that invest in the Fund through an IRA may be
subject to a custodial IRA fee of $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 Investor 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.
Ending
Beginning Account Expenses Paid During
Account Value Value Period*
5/1/09 10/31/09 5/1/09-10/31/09
------------- --------- --------------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,228.00 $3.54
Hypothetical $1,000.00 $1,022.03 $3.21
(5% return before expenses)
Y CLASS**
Actual $1,000.00 $1,046.83 $1.70
Hypothetical $1,000.00 $1,010.63 $1.71
(5% return before expenses)
INVESTOR CLASS
Actual $1,000.00 $1,225.12 $5.55
Hypothetical $1,000.00 $1,020.21 $5.04
(5% return before expenses)
ADVISOR CLASS
Actual $1,000.00 $1,224.34 $6.22
Hypothetical $1,000.00 $1,019.61 $5.65
(5% return before expenses)
RETIREMENT CLASS
Actual $1,000.00 $1,213.27 $7.60
Hypothetical $1,000.00 $1,018.30 $6.97
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,228.32 $2.13
Hypothetical $1,000.00 $1,023.29 $1.94
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.63%, 0.99%, 1.11%, 0.38%, 1.37% and 0.68% for the
Institutional, Investor, Advisor, AMR, Retirement and Y Classes
respectively, multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the half
year period.
** Beginning account value for Y Class is the inception date of 8/3/09.
Expenses are equal to the Class annualized ratio for the period multiplied
by the average account value for the period multiplied by the number
derived by dividing the number of days in the period (90) by the days in
the year (365).
5
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of American Beacon Large Cap Value Fund
and the Board of Trustees of American Beacon Funds:
We have audited the accompanying statement of assets and liabilities of American
Beacon Large Cap Value Fund (a portfolio of American Beacon Funds) (the "Fund"),
including the schedule of investments, as of October 31, 2009, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Large Cap Value Fund at October 31, 2009, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated therein, in conformity with U.S. generally accepted
accounting principles.
/s/Ernst & Young LLP
Dallas, Texas
December 23, 2009
6
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 96.39%
CONSUMER DISCRETIONARY - 7.78%
AUTO COMPONENTS - 0.57%
Gentex Corp. ................................................... 2,365,000 $ 37,864
-----------
HOTELS, RESTAURANTS & LEISURE - 1.60%
Carnival Corp. ................................................. 1,046,400 30,471
McDonald's Corp. ............................................... 809,800 47,462
Wyndham Worldwide Corp. ........................................ 1,680,680 28,656
-----------
106,589
-----------
INTERNET & CATALOG RETAIL - 0.06%
eBay, Inc. ## .................................................. 193,300 4,305
-----------
MEDIA - 1.55%
CBS Corp. ...................................................... 2,737,800 32,224
Comcast Corp. .................................................. 517,400 7,254
Interpublic Group of Cos., Inc.## .............................. 850,000 5,117
Time Warner Cable, Inc. ........................................ 182,700 7,205
Walt Disney Co. Ltd. ........................................... 1,396,600 38,225
Warner Music Group Corp. ## .................................... 2,322,000 13,375
-----------
103,400
-----------
MULTILINE RETAIL - 1.58%
J.C. Penney Company, Inc. ...................................... 1,512,000 50,093
Target Corp. ................................................... 814,300 39,436
Wal-Mart Stores, Inc. .......................................... 311,200 15,460
-----------
104,989
-----------
SPECIALTY RETAIL - 1.42%
Gap, Inc. ...................................................... 207,900 4,436
The Home Depot, Inc. ........................................... 3,294,367 82,656
Limited Brands, Inc. ........................................... 403,900 7,109
-----------
94,201
-----------
TEXTILES & APPAREL - 1.00%
Polo Ralph Lauren Corp. ........................................ 890,000 66,234
-----------
TOTAL CONSUMER DISCRETIONARY ...................................... 517,582
-----------
CONSUMER STAPLES - 11.60%
BEVERAGES - 2.20%
Coca-Cola Co. .................................................. 316,100 16,851
Diageo plc, ADR ................................................ 1,626,200 105,735
PepsiCo, Inc. .................................................. 397,400 24,063
-----------
146,649
-----------
FOOD & DRUG RETAILING - 1.75%
Safeway, Inc. .................................................. 2,484,900 55,488
Sysco Corp. .................................................... 2,305,140 60,971
-----------
116,459
-----------
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
FOOD PRODUCTS - 3.30%
ConAgra Foods, Inc. ............................................ 2,600,000 $ 54,600
H.J. Heinz Co. ................................................. 526,500 21,187
Hershey Co. .................................................... 1,084,000 40,964
Kellogg Co. .................................................... 990,000 51,025
Kraft Foods, Inc. .............................................. 200,300 5,512
Unilever N.V. .................................................. 1,500,000 46,335
-----------
219,623
-----------
HOUSEHOLD PRODUCTS - 0.37%
The Procter & Gamble Co. ....................................... 430,000 24,940
-----------
PERSONAL PRODUCTS - 0.82%
L'Oreal SA ..................................................... 2,675,000 54,597
-----------
TOBACCO - 3.16%
Altria Group, Inc. ............................................. 1,312,900 23,776
Imperial Tobacco Group plc, ADR ................................ 1,394,100 81,527
Lorillard, Inc. ................................................ 82,900 6,443
Philip Morris International, Inc. .............................. 2,076,900 98,362
-----------
210,108
-----------
TOTAL CONSUMER STAPLES ............................................ 772,376
-----------
ENERGY - 9.42%
ENERGY EQUIPMENT & SERVICES - 0.61%
Weatherford International Ltd.## ............................... 2,300,000 40,319
-----------
OIL & GAS - 8.81%
BP plc, ADR .................................................... 957,600 54,219
Chevron Corp. .................................................. 1,034,162 79,155
ConocoPhillips ................................................. 4,290,396 215,292
Devon Energy Corp. ............................................. 989,300 64,018
Duke Energy Corp. .............................................. 2,260,900 35,767
Exxon Mobil Corp. .............................................. 754,100 54,046
Occidental Petroleum Corp. ..................................... 774,400 58,762
Royal Dutch Shell plc, ADR ..................................... 432,200 25,137
-----------
586,396
-----------
TOTAL ENERGY ...................................................... 626,715
-----------
FINANCIALS - 19.03%
BANKS - 11.68%
Banco Santander S.A. ........................................... 2,884,000 46,317
Bank of America Corp. .......................................... 9,997,890 145,769
Bank of New York Mellon Corp. .................................. 619,200 16,508
Citigroup, Inc. ................................................ 4,239,368 17,339
Comerica, Inc. ................................................. 106,600 2,958
East West Bancorp, Inc. ........................................ 1,638,200 14,793
See accompanying notes
7
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
JP Morgan Chase & Co. .......................................... 4,885,498 $ 204,067
KeyCorp ........................................................ 910,874 4,910
M&T Bank Corp. ................................................. 590,000 37,082
PNC Financial Services Group, Inc. ............................. 2,026,749 99,189
State Street Corp. ............................................. 90,900 3,816
SunTrust Banks, Inc. ........................................... 160,600 3,069
Synovus Financial Corp. ........................................ 4,516,000 10,026
U.S. Bancorp ................................................... 1,544,160 35,855
Washington Mutual, Inc. ........................................ 1,765,000 --
Wells Fargo & Co. .............................................. 4,030,758 110,926
Zions Bancorporation ........................................... 1,728,000 24,469
-----------
777,093
-----------
DIVERSIFIED FINANCIALS - 3.40%
American Express Co. ........................................... 1,854,600 64,614
Capital One Financial Corp. .................................... 1,207,400 44,191
Charles Schwab Corp. ........................................... 1,247,620 21,634
Mitsubishi UFJ Financial Group, Inc., ADR ...................... 8,256,000 43,839
Morgan Stanley Dean Witter & Co. ............................... 894,600 28,735
SLM Corp.## .................................................... 2,435,500 23,624
-----------
226,637
-----------
INSURANCE - 3.95%
ACE Ltd. ....................................................... 1,075,700 55,248
Aflac, Inc. .................................................... 779,000 32,321
Allstate Corp. ................................................. 308,400 9,119
Genworth Financial, Inc. ....................................... 781,400 8,298
Hartford Financial Services Group, Inc. ........................ 889,050 21,799
Lincoln National Corp. ......................................... 580,600 13,836
MetLife, Inc. .................................................. 1,128,659 38,408
Prudential Financial, Inc. ..................................... 118,100 5,342
Travelers Cos., Inc. ........................................... 997,100 49,646
XL Capital Ltd. ................................................ 1,745,400 28,642
-----------
262,659
-----------
TOTAL FINANCIALS .................................................. 1,266,389
-----------
HEALTH CARE - 10.59%
HEALTH CARE EQUIPMENT & SUPPLIES - 1.59%
Baxter International, Inc. ..................................... 1,596,900 86,328
CareFusion Corp.## ............................................. 658,950 14,741
Zimmer Holdings, Inc. ## ....................................... 85,700 4,505
-----------
105,574
-----------
HEALTH CARE PROVIDERS & SERVICES - 2.51%
Cardinal Health, Inc. .......................................... 1,317,900 37,349
CIGNA Corp. .................................................... 1,694,500 47,175
UnitedHealth Group, Inc. ....................................... 857,700 22,257
Universal Health Services, Inc. ................................ 605,730 33,709
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
WellPoint, Inc.## .............................................. 565,900 $ 26,462
-----------
166,952
-----------
PHARMACEUTICALS - 6.49%
Amgen, Inc. ## ................................................. 415,900 22,346
Bristol-Myers Squibb Co. ....................................... 4,075,000 88,835
Eli Lilly & Co. ................................................ 2,150,600 73,142
Hospira, Inc. ## ............................................... 1,143,000 51,024
Johnson & Johnson .............................................. 719,800 42,504
Merck & Co., Inc. .............................................. 1,204,800 36,688
Pfizer, Inc. ................................................... 6,909,049 117,661
-----------
432,200
-----------
TOTAL HEALTH CARE ................................................. 704,726
-----------
INDUSTRIALS - 12.33%
AEROSPACE & DEFENSE - 4.73%
Boeing Co. ..................................................... 1,963,200 93,841
Lockheed Martin Corp. .......................................... 152,400 10,483
Northrop Grumman Corp. ......................................... 1,337,800 67,064
Raytheon Co. ................................................... 2,731,500 123,682
United Technologies Corp. ...................................... 324,700 19,953
-----------
315,023
-----------
AIR FREIGHT & COURIERS - 0.31%
FedEx Corp. .................................................... 286,200 20,804
-----------
INDUSTRIAL CONGLOMERATES - 4.00%
3M Co. ......................................................... 673,100 49,520
General Electric Co. ........................................... 6,321,500 90,145
Honeywell International, Inc. .................................. 2,679,225 96,157
Textron, Inc. .................................................. 1,124,500 19,994
Tyco International Ltd. ........................................ 304,900 10,229
-----------
266,045
-----------
MACHINERY - 3.01%
Caterpillar, Inc. .............................................. 376,500 20,730
Cummins, Inc. .................................................. 259,800 11,187
Deere & Co. .................................................... 1,039,000 47,327
Eaton Corp. .................................................... 342,100 20,680
Illinois Tool Works, Inc. ...................................... 887,000 40,731
ITT Industries, Inc. ........................................... 930,300 47,166
PACCAR, Inc. ................................................... 331,300 12,394
-----------
200,215
-----------
TRANSPORTATION INFRASTRUCTURE - 0.28%
Burlington Northern Santa Fe Corp. ............................. 242,900 18,295
-----------
TOTAL INDUSTRIALS ................................................. 820,382
-----------
See accompanying notes
8
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
INFORMATION TECHNOLOGY - 15.32%
COMMUNICATIONS EQUIPMENT - 1.01%
Nokia Corp., ADR ............................................... 5,342,300 $ 67,366
-----------
COMPUTERS & PERIPHERALS - 7.72%
Apple Computer, Inc. ## ........................................ 457,000 86,145
Dell, Inc. ## .................................................. 1,634,400 23,682
EMC Corp. ## ................................................... 4,000,000 65,880
Hewlett-Packard Co. ............................................ 2,728,600 129,499
International Business Machines Corp. .......................... 1,730,900 208,764
-----------
513,970
-----------
ELECTRICAL EQUIPMENT - 0.51%
Molex, Inc. - Class A .......................................... 1,688,000 27,937
Molex, Inc. .................................................... 339,000 6,329
-----------
34,266
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.47%
Intel Corp. .................................................... 4,406,900 84,216
Tyco Electronics Ltd. .......................................... 625,200 13,285
-----------
97,501
-----------
IT CONSULTING & SERVICES - 0.05%
Accenture plc .................................................. 82,200 3,048
-----------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.66%
Texas Instruments, Inc. ........................................ 1,882,000 44,133
-----------
SOFTWARE - 3.90%
Adobe Systems, Inc. ## ......................................... 1,500,000 49,410
CA, Inc. ....................................................... 1,021,703 21,374
Intuit, Inc.## ................................................. 1,398,100 40,643
Microsoft Corp. ................................................ 2,870,500 79,599
Oracle Corp. ................................................... 3,255,700 68,695
-----------
259,721
-----------
TOTAL INFORMATION TECHNOLOGY ...................................... 1,020,005
-----------
MATERIALS - 2.26%
CHEMICALS - 2.22%
Air Products & Chemicals, Inc. ................................. 1,067,500 82,336
Dow Chemical Co. ............................................... 973,900 22,867
E. I. du Pont de Nemours & Co. ................................. 1,062,300 33,802
PPG Industries, Inc. ........................................... 154,500 8,719
-----------
147,724
-----------
METALS & MINING - 0.04%
Alcoa, Inc. .................................................... 226,300 2,811
-----------
TOTAL MATERIALS ................................................... 150,535
-----------
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
TELECOMMUNICATION SERVICES - 2.51%
DIVERSIFIED TELECOMMUNICATION - 2.51%
AT&T, Inc. ..................................................... 2,564,852 $ 65,840
Verizon Communications, Inc. ................................... 1,359,446 40,226
Vodafone Group plc, ADR ........................................ 2,758,900 61,220
-----------
TOTAL TELECOMMUNICATION SERVICES .................................. 167,286
-----------
UTILITIES - 5.55%
ELECTRIC UTILITIES - 4.14%
CenterPoint Energy, Inc. ....................................... 2,175,700 27,414
Constellation Energy Group, Inc. ............................... 927,100 28,666
Dominion Resources, Inc. ....................................... 2,813,900 95,926
Edison International ........................................... 262,100 8,340
Entergy Corp. .................................................. 240,200 18,428
Exelon Corp. ................................................... 340,900 16,009
FPL Group, Inc. ................................................ 1,136,700 55,812
Public Service Enterprise Group, Inc. .......................... 828,600 24,692
-----------
275,287
-----------
GAS UTILITIES - 0.81%
Spectra Energy Corp. ........................................... 2,813,500 53,794
-----------
MULTI-UTILITIES - 0.60%
Questar Corp. .................................................. 1,006,000 40,079
-----------
TOTAL UTILITIES ................................................... 369,160
-----------
TOTAL COMMON STOCKS ............................................... 6,415,156
-----------
SHORT TERM INVESTMENTS - 3.89%
American Beacon U.S. Government Money Market Select Fund +++ ... 60,000,000 60,000
JP Morgan U.S. Government Money Market Fund .................... 173,618,181 173,618
PAR
AMOUNT
-----------
U.S. Treasury,
0.04%, Due 12/10/2009# ...................................... $ 25,103 25,101
TOTAL SHORT TERM INVESTMENTS ...................................... 258,719
-----------
TOTAL INVESTMENTS 100.28% - (COST $7,325,652) ........................ 6,673,875
LIABILITIES, NET OF OTHER ASSETS - (0.28%) ........................... (18,335)
TOTAL NET ASSETS - 100.00% ........................................... $ 6,655,540
===========
See accompanying notes
9
AMERICAN BEACON LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+++ The Fund is affiliated by having the same investment advisor.
# At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- -------- --------------
Emini S&P 500 Index........... 4,872 Dec 2009 $251,639 $(4,874)
======== =======
See accompanying notes
10
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value (A) ................................ $ 6,613,875
Investments in affiliated securities, at value (B) .................................... 60,000
Receivable for investments sold ....................................................... 3,705
Dividends and interest receivable ..................................................... 9,635
Receivable for fund shares sold ....................................................... 9,612
Receivable for tax reclaims ........................................................... 137
Prepaid expenses ...................................................................... 245
------------
TOTAL ASSETS ....................................................................... 6,697,209
------------
LIABILITIES:
Payable for investments purchased ..................................................... 21,116
Payable for fund shares redeemed ...................................................... 4,983
Payable for variation margin on open futures contracts ................................ 7,062
Management and investment advisory fees payable (Note 2) .............................. 4,435
Administrative service and service fees payable ....................................... 2,890
Other liabilities ..................................................................... 1,183
------------
TOTAL LIABILITIES .................................................................. 41,669
------------
NET ASSETS ............................................................................... $ 6,655,540
============
ANALYSIS OF NET ASSETS:
Paid-in-capital ....................................................................... 9,221,166
Undistributed net investment income ................................................... 85,814
Accumulated net realized loss ......................................................... (1,994,789)
Unrealized depreciation of investments, futures contracts, and foreign currency ....... (656,651)
------------
NET ASSETS ............................................................................... $ 6,655,540
============
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class ................................................................... 136,141,119
============
Y Class ............................................................................... 64
============
Investor Class ........................................................................ 244,930,398
============
Advisor Class ......................................................................... 7,469,344
============
Retirement Class ...................................................................... 79
============
AMR Class ............................................................................. 32,262,314
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class ................................................................... $ 16.32
============
Y Class ............................................................................... $ 16.32
============
Investor Class ........................................................................ $ 15.51
============
Advisor Class ......................................................................... $ 15.39
============
Retirement Class ...................................................................... $ 15.36
============
AMR Class ............................................................................. $ 16.14
============
- ----------
(A) Cost of investments in unaffiliated securities ..................................... $ 7,265,652
(B) Cost of investments in affiliated securities ....................................... $ 60,000
See accompanying notes
11
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2009 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from unaffiliated securities (net of foreign taxes)* .................. $ 167,510
Dividend income from affiliated securities ............................................ 611
Interest income ....................................................................... 137
Income derived from securities lending, net ........................................... 2,093
Other income .......................................................................... 1
------------
TOTAL INVESTMENT INCOME ......................................................... 170,352
------------
EXPENSES:
Management and investment advisory fees (Note 2) ...................................... 13,660
Administrative service fees (Note 2):
Institutional Class ................................................................ 5,643
Investor Class ..................................................................... 9,889
Advisor Class ...................................................................... 291
AMR Class .......................................................................... 228
Transfer agent fees:
Institutional Class ................................................................ 129
Investor Class ..................................................................... 243
Advisor Class ...................................................................... 7
AMR Class .......................................................................... 29
Custody and fund accounting fees ...................................................... 966
Professional fees ..................................................................... 228
Registration fees and expenses ........................................................ 178
Service fees:
Investor Class (Note 2) ............................................................ 10,451
Advisor Class (Note 2) ............................................................. 242
Distribution fees - Advisor Class (Note 2) ............................................ 242
Prospectus and shareholder reports .................................................... 1,209
Trustee fees .......................................................................... 609
Other expenses ........................................................................ 726
------------
TOTAL EXPENSES .................................................................. 44,970
------------
Net fees waived and expenses reimbursed by Manager (Note 2) ........................... (12)
------------
NET EXPENSES .................................................................... 44,958
------------
NET INVESTMENT INCOME .................................................................... 125,394
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ........................................................................ (743,912)
Commission recapture (Note 1) ...................................................... 218
Futures contracts .................................................................. (82,123)
Change in net unrealized appreciation or depreciation of:
Investments ........................................................................ 1,269,011
Futures contracts .................................................................. 97,160
------------
NET GAIN ON INVESTMENTS ......................................................... 540,354
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................................... $ 665,748
============
* Foreign taxes ...................................................................... $ 675
See accompanying notes
12
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
STATEMENT OF CHANGES OF NET ASSETS (IN THOUSANDS)
Year Ended Year Ended
October 31, October 31,
2009 2008
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................................................. $ 125,394 $ 171,389
Net realized loss on investments, futures contracts, and foreign currency
transactions ....................................................................... (825,817) (1,148,714)
Change in net unrealized appreciation or (depreciation) of investments, futures
contracts, and foreign currency translations ....................................... 1,366,171 (3,031,895)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................. 665,748 (4,009,220)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ................................................................ (57,494) (41,356)
Investor Class ..................................................................... (96,586) (76,907)
Advisor Class ...................................................................... (2,701) (1,578)
AMR Class .......................................................................... (15,992) (16,885)
Net realized gain on investments:
Institutional Class ................................................................ -- (71,604)
Investor Class ..................................................................... -- (153,834)
Advisor Class ...................................................................... -- (3,382)
AMR Class .......................................................................... -- (26,071)
----------- -----------
NET DISTRIBUTIONS TO SHAREHOLDERS ............................................... (172,773) (391,617)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ......................................................... 1,578,918 3,966,783
Reinvestment of dividends and distributions ........................................... 164,886 370,495
Cost of shares redeemed ............................................................... (1,810,886) (2,471,194)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........... (67,082) 1,866,084
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS .................................................... 425,893 (2,534,753)
----------- -----------
NET ASSETS:
Beginning of period ................................................................... 6,229,647 8,764,400
----------- -----------
END OF PERIOD * ....................................................................... $ 6,655,540 $ 6,229,647
=========== ===========
* Includes undistributed net investment income of ........................................ $ 85,814 $ 133,193
=========== ===========
See accompanying notes
13
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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, as
amended (the "Act"), as a diversified, open-end management investment company.
These financial statements and notes to the financial statements relate to the
American Beacon Large Cap Value Fund (the "Fund"), a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
Class Disclosure
Prior to March 1, 2009, the Investor and Advisor Classes were known as the
PlanAhead and Service Classes, respectively. The inception dates of the
Retirement and Y Classes are May 1 and August 3, 2009, respectively.
The Fund has multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
CLASS: OFFERED TO:
- ------ -----------
INSTITUTIONAL CLASS Investors making an initial investment of $250,000
Y CLASS Investors making an initial investment of $100,000
INVESTOR CLASS General public and investors investing through an intermediary
ADVISOR CLASS Investors investing through an intermediary
RETIREMENT CLASS Investors investing through an intermediary
AMR CLASS Investors in the tax-exempt retirement and benefit plans of AMR Corporation and its affiliates
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in footnote 2.
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
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. The prices of debt securities may be
determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
14
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Securities for which the market prices are not readily available or are not
reflective of the fair value of the security, as determined by the Manager, will
be priced at fair value following procedures approved by the Trust's Board of
Trustees (the "Board").
Valuation Inputs
Various inputs may be used to determine the value of the Fund's
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value securities are not
necessarily an indication of the risk associated with investing in those
securities.
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest
rates, prepayment speeds, credit risk, and others.
Level 3 - Prices determined using other significant unobservable inputs.
Unobservable inputs reflect the Fund's own assumptions about the
factors market participants would use in pricing an investment,
and would be based on the best information available.
The Fund's investments are summarized by level based on the inputs used to
determine their values. As of October 31, 2009, the Fund's investments were
classified as follows: (in thousands)
Level 1 Level 2 Level 3 Total
---------- ------- ------- ----------
Common Stock ........................... $6,415,156 $ -- $-- $6,415,156
Short Term Investments ................. 233,618 25,101 -- 258,719
---------- ------- --- ----------
Total Investments in Securities ..... $6,648,774 $25,101 $-- $6,673,875
========== ======= === ==========
Futures Contracts ...................... 251,639 -- -- 251,639
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. The Fund may purchase securities with delivery or payment to
occur at a later date. At the time the Fund enters into a commitment to purchase
a security, the transaction is recorded and the value of the security is
reflected in the net asset value. The value of the security may vary with market
fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Fund. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Fund may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Fund reflects this
amount on the 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
15
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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.
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments, futures contracts, and foreign currency....... Equity Contracts* $(4,874)
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivatives Fair Value
- ----------------------- ----------------- ----------
Net realized gain (loss) from futures contracts....................................... Equity Contracts $(82,123)
Change in net unrealized appreciation or depreciation of futures contracts............ Equity Contracts $ 97,160
* Includes cumulative appreciation/depreciation of futures contracts as
reported in the Schedule of Investments footnotes. Only current day's
variation margin is reported within the Statements of Assets and
Liabilities.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid at least annually. Distributions, if any, of net realized capital gains
are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with
certain brokers or dealers. If the Fund's investment advisor chooses to execute
a transaction through a participating broker, the broker rebates a portion of
the commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund. This amount is reported with the net realized gain in the Fund's Statement
of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class),
gains, and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
16
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory, fund management, and securities lending services. Investment assets of
the Fund are managed by multiple investment advisors which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Fund an annualized fee equal to 0.05% of the average daily net
assets plus amounts paid by the Manager to investment advisors hired by the
Manager to direct investment activities of the Fund. Management fees paid during
the year ended October 31, 2009 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISORS MANAGER
- ----------- ---------- --------------- -----------
0.175%-0.65% $13,660 $10,800 $2,860
As discussed in Footnote 5, prior to May 19, 2009, as compensation for
services provided by the Manager in connection with securities lending
activities, the lending Fund paid to the Manager, with respect to cash
collateral posted by borrowers, a fee up to 25% of the net monthly interest
income (the gross interest income earned by the investment of cash collateral,
less the amount paid to borrowers and related expenses) from such activities
and, with respect to loan fees paid by borrowers when a borrower posts
collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statement of Operations. During
the year ended October 31, 2009, securities lending fees paid to the Manager
were $251,178.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative services to the
Fund. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor
and Retirement Classes of the Fund and 0.05% of the average daily net assets of
the AMR Class of the Fund.
Distribution Plans
The Fund, except for the Advisor and Retirement Classes of the Fund, has
adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule
12b-1 under the Act, pursuant to which no fees may be charged to the Fund for
distribution purposes. However, the Plan authorizes the management and
administrative service fees received by the Manager and the investment advisors
hired by the Manager to be used for distribution purposes. Under this Plan, the
Fund does not intend to compensate the Manager or any other party, either
directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the "Distribution Plans") have been adopted
pursuant to Rule 12b-1 under the Act for the Advisor and Retirement Classes of
the Fund. Under the Distribution Plans, as compensation for distribution
assistance, the Manager receives an annual fee of 0.25% of the average daily net
assets of the Advisor Class and 0.50% of the average daily net assets of the
Retirement 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 LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Service Plans
The Manager and the Trust entered into Service Plans that obligate the
Manager to oversee additional shareholder servicing of the Y, Investor, Advisor
and Retirement Classes. As compensation for performing the duties required under
the Service Plans, the Manager receives 0.10% of the average daily net assets of
Y Class, 0.25% of the average daily net assets of the Advisor and Retirement
Classes and up to 0.375% of the average daily net assets of the Investor Class
of the Fund.
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the
"MM Select Fund") and the American Beacon US Government Money Market Select Fund
(the "USG Select Fund"), (collectively the "Select Funds"). Prior to May 19,
2009, some cash collateral received by the Fund in connection with securities
lending was invested in the Select Funds. The Select Funds and the Fund have the
same investment advisor and therefore, are considered to be affiliated. The
Manager serves as investment advisor to the Select Funds and receives from the
Select Funds an annualized fee of 0.09% of its average daily net assets of the
Select Funds. During the year ended October 31, 2009, the Manager earned fees
from the Select Funds totaling $71,192 on the Fund's direct investment in the
Select Funds and $17,303 from the Fund's securities lending collateral invested
in the Select Funds.
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange
Commission ("SEC"), the Fund, along with other registered investment companies
having management contracts with the Manager, may participate in an interfund
lending program as a borrower. This program provides an alternative credit
facility allowing the Fund to borrow from other participating Funds. During the
year ended October 31, 2009, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may
seek repayment of fees waived or expenses reimbursed for a period of up to three
years. However, reimbursement will occur only if the Class's average net assets
have grown or expenses have declined sufficiently to allow reimbursement without
causing its expense ratio to exceed the previously agreed upon contractual
expense limit. During the year ended October 31, 2009, the Advisor Class waived
$11,791. A liability has not been booked as the Manager does not intend to seek
repayment of this waiver.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to 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.
The Fund does not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
October 31, 2009 remains subject to examination by the Internal Revenue Service.
If applicable, the Fund recognizes interest accrued related to unrecognized tax
benefits in interest expense and penalties in "Other expenses" on the Statement
of Operations.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
18
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
The tax character of distributions paid during the fiscal years ended
October 31, 2009 and October 31, 2008 were as follows (in thousands):
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2009 2008
----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class.......... $ 57,494 $ 65,641
Investor Class............... 96,586 129,081
Advisor Class................ 2,701 2,725
AMR Class.................... 15,992 25,728
LONG-TERM CAPITAL GAIN
Institutional Class.......... -- 47,318
Investor Class............... -- 101,660
Advisor Class................ -- 2,235
AMR Class.................... -- 17,229
-------- --------
TOTAL DISTRIBUTIONS PAID........... $172,773 $391,617
======== ========
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of October 31, 2009, the components of distributable earnings on a tax
basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes...... $ 7,596,245
Unrealized appreciation........................................ 535,735
Unrealized depreciation........................................ (1,458,105)
-----------
Net unrealized appreciation/(depreciation)..................... (922,370)
Undistributed ordinary income.................................. 85,814
Undistributed long-term gain/(loss)............................ (1,724,240)
Other temporary differences.................................... (4,830)
-----------
Distributable earnings......................................... $(2,565,626)
===========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales and the realization for tax
purposes of unrealized gains/(losses) on certain derivative instruments.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, foreign currency, and dividend reclasses that have been reclassified
as of October 31, 2009 (in thousands):
Paid-in-capital..................................................................................... $ 14
Undistributed net investment income................................................................. ---
Accumulated net realized gain (loss)................................................................ (14)
Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency....... ---
At October 31, 2009 the capital loss carry forward positions for federal
income tax purposes were $1,044,692 and $684,423 expiring in 2016 and 2017,
respectively. (in thousands)
19
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investments
other than short-term obligations for the year ended October 31, 2009 were (in
thousands) $1,919,417 and $1,447,731, respectively.
A summary of the Fund's direct ownership and transactions in the Select
Funds for the year ended October 31, 2009 is set forth below (in thousands):
OCTOBER 31, 2008 OCTOBER 31, 2009
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------- ------------------- --------- -------- -------------------
MM Select Fund ............... $362,064 $ -- $362,064 $ --
USG Select Fund .............. $ -- $60,000 $ -- $60,000
5. SECURITIES LENDING
On May 19, 2009, the Fund terminated its securities lending program. Prior
to that, the Fund, the Agent, and the Manager retained 75%, 15%, and 10%,
respectively, of the income generated from securities lending, as stated on the
Statement of Operations.
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund (dollars and shares in thousands):
Year Ended October 31, 2009
INSTITUTIONAL CLASS Y CLASS INVESTOR CLASS
------------------- --------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ ------ ------- -----------
Shares sold ..................... 38,693 $ 535,949 -- $ 1 74,391 $ 985,338
Reinvestment of dividends ....... 4,043 53,008 -- -- 7,465 93,236
Shares redeemed ................. (42,400) (575,194) -- -- (88,535) (1,151,477)
------- --------- --- --- ------- -----------
Net increase (decrease) in shares
outstanding .................. 336 $ 13,763 -- $ 1 (6,679) $ (72,903)
======= ========= === === ======= ===========
ADVISOR CLASS RETIREMENT CLASS AMR CLASS
------------------- ---------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ ------- ------- --------
Shares sold ..................... 1,726 $ 22,607 -- $ 1 2,516 $ 35,022
Reinvestment of dividends ....... 214 2,650 -- -- 1,236 15,992
Shares redeemed ................. (1,478) (19,228) -- -- (4,909) (64,987)
------ -------- --- --- ------ --------
Net increase (decrease) in shares
outstanding .................. 462 $ 6,029 -- $ 1 (1,157) $(13,973)
====== ======== === === ====== ========
Year Ended October 31, 2008
INSTITUTIONAL CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
-------------------- -------------------- ----------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ---------- ------ -------- ------ ---------
Shares sold ..................... 72,124 $1,522,430 113,619 $2,297,576 5,559 $111,669 1,693 $ 35,108
Reinvestment of dividends ....... 4,204 99,590 9,867 222,989 220 4,960 1,833 42,956
Shares redeemed ................. (36,318) (729,713) (81,231) (1,524,704) (2,814) (55,162) (7,797) (161,615)
------- ---------- ------- ---------- ------ -------- ------ --------
Net increase (decrease) in
shares outstanding ........... 40,010 $ 892,307 42,255 $ 995,861 2,965 $ 61,467 (4,271) $ (83,551)
======= ========== ======= ========== ====== ======== ====== =========
20
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
7. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in
the Fund's financial statements through December 23, 2009. Management has
determined that there are no material events that would require disclosure in
the Fund's financial statements through this date.
21
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class Y Class
------------------------------------------------------- --------
August
Year Ended October 31, 3 to
------------------------------------------------------- October
2009 2008 2007 2006 2005 31, 2009
---------- ---------- ---------- -------- -------- --------
Net asset value, beginning of period ....................... $ 15.01 $ 26.03 $ 23.77 $ 21.00 $ 18.23 $ 15.59
---------- ---------- ---------- -------- -------- -------
Income from investment operations:
Net investment income(A, B) ............................. 0.35 0.51 0.40 0.31 0.28 0.06
Net gains (losses) on securities (both realized and
unrealized) .......................................... 1.40 (10.41) 2.78 3.48 2.74 0.67
---------- ---------- ---------- -------- -------- -------
Total income (loss) from investment operations ............. 1.75 (9.90) 3.18 3.79 3.02 0.73
---------- ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net investment income .................... (0.44) (0.41) (0.31) (0.26) (0.25) --
Distributions from net realized gains on securities ..... -- (0.71) (0.61) (0.76) -- --
---------- ---------- ---------- -------- -------- -------
Total distributions ........................................ (0.44) (1.12) (0.92) (1.02) (0.25) --
---------- ---------- ---------- -------- -------- -------
Net asset value, end of period ............................. $ 16.32 $ 15.01 $ 26.03 $ 23.77 $ 21.00 $ 16.32
========== ========== ========== ======== ======== =======
Total return ............................................... 12.41% (39.59)% 13.76% 18.69% 16.64% 4.68%(F)
========== ========== ========== ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $2,221,162 $2,038,539 $2,493,451 $958,830 $201,111 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 0.61% 0.58% 0.59% 0.60% 0.60% 0.68%(C)
Expenses, before waivers ............................. 0.61% 0.58% 0.59% 0.60% 0.60% 0.68%(C)
Net investment income, net of waivers ................ 2.36% 2.19% 1.82% 1.86% 1.58% 1.58%(C)
Net investment income (loss), before waivers ......... 2.36% 2.19% 1.82% 1.86% 1.58% 1.58%(C)
Portfolio turnover rate ................................. 27% 28% 20% 26% 25% 27%(D)
Investor Class
---------------------------------------------------------
Year Ended October 31,
---------------------------------------------------------
2009 2008 2007 2006 2005
---------- ---------- ---------- ---------- --------
Net asset value, beginning of period ....................... $ 14.29 $ 24.83 $ 22.74 $ 20.16 $ 17.54
---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income(A, B) ............................. 0.28 0.41 0.35 0.28 0.27
Net gains (losses) on securities (both realized and
unrealized) ............................................. 1.34 (9.88) 2.63 3.31 2.58
---------- ---------- ---------- ---------- --------
Total income (loss) from investment operations ............. 1.62 (9.47) 2.98 3.59 2.85
---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income .................... (0.40) (0.36) (0.28) (0.25) (0.23)
Distributions from net realized gains on securities ..... -- (0.71) (0.61) (0.76) --
---------- ---------- ---------- ---------- --------
Total distributions ........................................ (0.40) (1.07) (0.89) (1.01) (0.23)
---------- ---------- ---------- ---------- --------
Net asset value, end of period ............................. $ 15.51 $ 14.29 $ 24.83 $ 22.74 $ 20.16
========== ========== ========== ========== ========
Total return ............................................... 11.99% (39.72)% 13.46% 18.44% 16.33%
========== ========== ========== ========== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $3,798,632 $3,594,565 $5,198,835 $2,586,410 $526,357
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 0.93% 0.83% 0.83% 0.85% 0.86%
Expenses, before waivers ............................. 0.93% 0.83% 0.83% 0.85% 0.86%
Net investment income, net of waivers ................ 2.05% 1.94% 1.59% 1.61% 1.30%
Net investment income (loss), before waivers ......... 2.05% 1.94% 1.59% 1.61% 1.30%
Portfolio turnover rate ................................. 27% 28% 20% 26% 25%
Retirement
Advisor Class Class
---------------------------------------------- ----------
May
Year Ended October 31, 31 to May 1 to
------------------------------------ October October
2009 2008 2007 2006 31, 2005 31, 2009
-------- ------- ------- ------- -------- ----------
Net asset value, beginning of period ....................... $ 14.19 $ 24.70 $ 22.64 $ 20.13 $ 19.33 $12.66
-------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income(A, B) ............................. 0.26 0.32 0.28 0.26 0.01 0.08
Net gains (losses) on securities (both realized and
unrealized) ............................................. 1.32 (9.79) 2.62 3.27 0.79 2.62
-------- ------- ------- ------- ------- ------
Total income (loss) from investment operations ............. 1.58 (9.47) 2.90 3.53 0.80 2.70
-------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income .................... (0.38) (0.33) (0.23) (0.26) -- --
Distributions from net realized gains on securities ..... -- (0.71) (0.61) (0.76) -- --
-------- ------- ------- ------- ------- ------
Total distributions ........................................ (0.38) (1.04) (0.84) (1.02) -- --
-------- ------- ------- ------- ------- ------
Net asset value, end of period ............................. $ 15.39 $ 14.19 $ 24.70 $ 22.64 $ 20.13 $15.36
======== ======= ======= ======= ======= ======
Total return ............................................... 11.81% (39.87)% 13.16% 18.18% 4.14%(F) 21.33%(F)
======== ======= ======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $114,945 $99,416 $99,854 $39,077 $11,604 $ 1
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 1.10% 1.08% 1.08% 1.09% 1.14%(C) 1.37%(C)
Expenses, before waivers ............................. 1.12% 1.08% 1.08% 1.09% 1.77%(C) 1.37%(C)
Net investment income, net of waivers ................ 1.86% 1.69% 1.32% 1.39% 1.72%(C) 1.15%(C)
Net investment income (loss), before waivers ......... 1.84% 1.69% 1.32% 1.39% 1.09%(C) 1.15%(C)
Portfolio turnover rate ................................. 27% 28% 20% 26% 25%(E) 27%(D)
AMR Class
---------------------------------------------------
Year Ended October 31,
---------------------------------------------------
2009 2008 2007 2006 2005
-------- -------- -------- ---------- --------
Net asset value, beginning of period ....................... $ 14.88 $ 25.80 $ 23.55 $ 20.78 $ 18.02
-------- -------- -------- ---------- --------
Income from investment operations:
Net investment income(A, B) ............................. 0.37 0.51 0.45 0.35 0.31
Net gains (losses) on securities (both realized and
unrealized) ............................................. 1.38 (10.26) 2.76 3.47 2.73
-------- -------- -------- ---------- --------
Total income (loss) from investment operations ............. 1.75 (9.75) 3.21 3.82 3.04
-------- -------- -------- ---------- --------
Less distributions:
Dividends from net investment income .................... (0.49) (0.46) (0.35) (0.29) (0.28)
Distributions from net realized gains on securities ..... -- (0.71) (0.61) (0.76) --
-------- -------- -------- ---------- --------
Total distributions ........................................ (0.49) (1.17) (0.96) (1.05) (0.28)
-------- -------- -------- ---------- --------
Net asset value, end of period ............................. $ 16.14 $ 14.88 $ 25.80 $ 23.55 $ 20.78
======== ======== ======== ========== ========
Total return ............................................... 12.59% (39.43)% 14.03% 19.08% 16.95%
======== ======== ======== ========== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $520,799 $497,127 $972,260 $1,024,899 $848,219
Ratios to average net assets (annualized):
Expenses, net of waivers ............................. 0.36% 0.32% 0.32% 0.34% 0.35%
Expenses, before waivers ............................. 0.36% 0.32% 0.32% 0.34% 0.35%
Net investment income, net of waivers ................ 2.62% 2.44% 2.13% 2.18% 1.87%
Net investment income (loss), before waivers ......... 2.62% 2.44% 2.13% 2.18% 1.87%
Portfolio turnover rate ................................. 27% 28% 20% 26% 25%
(A) Through October 31, 2005, net investment income was calculated by
subtracting class expenses per share from the Fund's net investment income
per share before class expenses.
(B) For purposes of this calculation, through October 31, 2007, the change in
undistributed net investment income per share was derived by dividing the
change in undistributed net investment income by average shares
outstanding.
(C) Annualized.
(D) Portfolio turnover rate is for the period from November 1, 2008 through
October 31, 2009.
(E) Portfolio turnover rate is for the period from November 1, 2004 through
October 31, 2005.
(F) Not annualized.
22
AMERICAN BEACON LARGE CAP VALUE FUND(SM)
PRIVACY POLICY & FEDERAL TAX INFORMATION
OCTOBER 31, 2009 (UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
For corporate shareholders in the Fund, the percentage of ordinary dividend
income distributed for the year ended October 31, 2009, which is designated as
qualifying for the dividends-received deduction, was 76.75%.
For shareholders in the Fund, the percentage of dividend income distributed
for the year ended October 31, 2009, which is designated as qualified dividend
income under the Jobs Growth Tax Relief Act of 2003 was 100.00%. Shareholders
will receive notification in January 2010 of the percentage applicable to the
preparation of their 2009 income tax returns.
23
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT ADVISORY
AGREEMENTS (UNAUDITED)
At its May 27, 2009 meeting, the Board of Trustees ("Board") considered the
renewal of each existing Management Agreement between American Beacon Advisors,
Inc. (the "Manager") and the American Beacon Funds ("Beacon Trust") (the
"Funds") and each Investment Advisory Agreement between the Manager and a
subadvisor ("Investment Advisory Agreements" and collectively with the
Management Agreement, the "Agreements"). In preparation for the Board's
consideration to renew these Agreements, the Board and its Investment Committee
undertook steps to gather and consider information furnished by the Manager, the
subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 13, 2009 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
In connection with the Board's consideration of the Management Agreement
and each Investment Advisory Agreement, the Trustees considered, among other
materials, responses by the Manager and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements, as well as Parts 1 and II of its Form ADV registration
statement with the SEC;
- a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- a description of any payments by the subadvisors to the manager to
support the Funds' marketing efforts;
- an evaluation of any other benefits to the firm or Funds as a result
of their relationship, if any;
- confirmation that the firm's financial condition would not impair its
ability to provide high-quality advisory services to the Funds;
- a description of any internal actions the firm has taken or
anticipates taking in light of the current and projected decrease in
revenues from prior years as a result of the current economic
environment and, as applicable, information regarding the firm's
decline in assets under management from January 1, 2008 through March
31, 2009;
- a description of the scope of portfolio management services provided
to the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies, and any advantages or disadvantages that might accrue to
the Funds due to the firm's involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
24
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT ADVISORY
AGREEMENTS (UNAUDITED)
- 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 discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates
- a certification by the firm regarding the reasonable design of its
compliance program;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto and a related certification of compliance by
the firm;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of any revenue sharing activities with respect to the
Funds;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Management Agreement and each Investment Advisory
Agreement, the Board also obtained an analysis provided by Lipper that compared:
(i) investment performance of each Fund versus comparable investment companies
and appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds; and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund with more than one class of shares, the class of
shares used for comparative purposes was the class with the longest performance
history, which in most cases was the Institutional Class. References below to
each Fund's Lipper peer group are to the group of comparable mutual funds
included in the analysis provided by Lipper.
Provided below is an overview of the primary factors the Trustees
considered at the Investment Committee meeting on May 13, 2009 at which the
Trustees reviewed the investment performance of the Manager and each subadvisor
and the primary factors considered by the Board at its May 27, 2009 meeting at
which the Board considered the renewal of the Agreements. The Board did
25
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT ADVISORY
AGREEMENTS (UNAUDITED)
not identify any particular information that was most relevant to its
consideration to renew the Management Agreement and each Investment Advisory
Agreement, and each Trustee may have afforded different weight to the various
factors. Legal counsel to the independent Trustees provided the Board with a
memorandum regarding its responsibilities pertaining to the renewal of the
Agreements. The memorandum explained the regulatory requirements surrounding the
Trustees' process for evaluating investment advisors and the terms of the
contracts. Based on its evaluation, the Board unanimously concluded that the
terms of each Agreement were reasonable and fair and that the renewal of each
Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each
Investment Advisory Agreement, the Trustees considered the best interests of
each Fund separately. While the Management Agreement and the Investment Advisory
Agreements for all of the Funds were considered at the May 27, 2009 meeting, the
Board considered each Fund's investment management and subadvisory relationships
separately. In each instance, the Board considered, among other things, the
following factors: (1) the nature and quality of the services provided; (2) the
investment performance of a Fund and, as applicable, each subadvisor for a Fund;
(3) the costs incurred by the Manager and (to the extent provided) the
subadvisors in rendering their services and their resulting profits or losses;
(4) the extent to which economies of scale have been taken into account in
setting each fee schedule; (5) whether fee levels reflect these economies of
scale for the benefit of Fund investors; (6) comparisons of services and fees
with contracts entered into by the Manager or a subadvisor or their affiliates
with other clients (such as pension funds and other institutional funds); and
(7) any other benefits derived or anticipated to be derived by the Manager or a
subadvisor from their relationship with a Fund. The Trustees posed questions to
various management personnel of the Manager regarding certain key aspects of the
materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes 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.
With respect to the renewal of each Investment Advisory Agreement, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing the Funds, the size of the
subadvisor and their ability to continue to attract and retain qualified
investment personnel. Based on the foregoing information, the Board concluded
that the nature, extent and quality of the management and advisory services
provided by the Manager and each subadvisor were appropriate for each Fund and,
thus, determined to renew the Management Agreement and the Investment Advisory
Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. The Manager also noted that it generally was
satisfied with the performance of the subadvisors. A discussion regarding the
Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services Provided to the Funds and the Profits Realized by the
Manager from its Relationship with the Funds. In analyzing the cost of services
and profitability of the Manager and a subadvisor by Fund, the Board considered
the revenues earned and the expenses incurred by the Manager. The profits or
losses were noted at both an individual Fund level and at an aggregate level for
all Funds. The Board also considered that the Management Agreement for the
Beacon Trust, stipulates that, to the extent that a Fund invests all of its
investable assets in another registered investment company (i.e., is a "Feeder
Fund"), the Fund will not pay the Manager a management fee. The index series of
the Funds also operate under a master-feeder structure, but each of these series
invests in a master portfolio that is not managed by the Manager. As such, the
Board considered that the Manager does not receive a management fee with respect
to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. With
respect to the Short-Term Bond Fund, the Board also considered the Manager's
advisory fees for services provided by the Manager to institutional separate
accounts with similar investment strategies. Although the Board noted that, in
certain cases, the fee rates paid by other clients is lower than the fee rates
paid by the Funds, the difference reflects the greater level of responsibility
and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year and to discontinue the expense waivers and
reimbursements for certain
26
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT ADVISORY
AGREEMENTS (UNAUDITED)
classes of the Funds that were closing or maintained competitive expense ratios
without such expense waivers. The Board further considered that each subadvised
Fund pays the Manager the amounts due to its subadvisors, and the Manager remits
these amounts directly to the applicable subadvisors. The Board considered that
the Manager receives service and administrative fees to compensate the Manager
for providing administrative services to the Funds and to compensate third-party
administrators and broker-dealers for services to Fund shareholders. In
addition, the Board considered that the Manager receives management fees for
overseeing the securities lending relationships on behalf of various Funds. The
Board also noted that certain classes of the Funds maintain higher expense
ratios in order to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in
connection with its investment advisory services to the Fund, the Board
considered that, in many cases, the Manager has negotiated the lowest
subadvisory fee a subadvisor charges for any comparable client accounts. The
Board gave less weight to profitability considerations or did not view this data
as imperative to its deliberations given the arm's length nature of the
relationship between the Manager and the subadvisors with respect to the
negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management and
investment advisory fees, the Board considered whether economies of scale will
be realized as the Funds grow and whether fee levels reflect these economies of
scale for the benefit of Fund shareholders. In this regard, the Board considered
that the Manager has negotiated breakpoints in many subadvisory fee rates. The
Board also noted that, for purposes of determining the fee rates chargeable to
the Funds, many subadvisors have agreed to take into account other assets of AMR
Corporation and its pension plans that are managed by the subadvisors. Thus, the
Funds are able to receive lower effective fee rates. The Board also noted the
Manager's representation that Fund assets have decreased significantly primarily
due to market depreciation in 2008 and the first quarter of 2009, as well as
significant share redemptions from the Money Market Funds and the inability of
certain competitor money market funds' to maintain positive yields, causing mass
redemptions in money market funds throughout the industry. Based on the
foregoing information, the Board concluded that the Manager and subadvisor fee
schedules for each Fund provides for a reasonable sharing of benefits from any
economies of scale with the Fund.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager and/or the
subadvisors as a result of the advisory relationships with the Funds, including
greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. The Board also considered that
the Manager's relationship with the Funds continues to be a significant factor
in attracting separate account assets for the Manager, noting specifically the
Manager's utilization of the Large Cap Value Fund model for a newly registered
actively managed exchange traded fund managed by the Manager. In addition, the
Board noted that the Manager provides services to each Trust at a relatively low
cost. The Board considered that certain of the subadvisors reimburse the Manager
for certain of its costs relating to distribution activities for the Funds. The
Board also considered that Funds did not pay commissions to any affiliated
broker-dealer of the Manager or the relevant subadvisor during the most recent
fiscal year ended October 31.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager and the subadvisors by virtue of their
relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
Except for the Short-Term Bond Fund, the performance comparisons below were
made versus each Fund's Lipper peer universe median. References to the Lipper
expense universe below are to the universe of comparable mutual funds included
in the analysis provided to the Trustees by Lipper, Inc.
Additional Considerations and Conclusions with Respect to the Large Cap Value
Fund
In considering the renewal of the Management Agreement for the Large Cap
Value Fund, the Trustees considered the following additional factors: (1) the
Large Cap Value Fund outperformed the peer universe median for the five-, and
ten-year periods ended March 31, 2009 but underperformed for the one- and
three-year periods; (2) management's analysis regarding the rationale for the
underperformance of the Large Cap Value Fund; and (3) the expense ratio of the
Institutional Class of Fund shares ranked better than the median of its Lipper
universe.
In considering the renewal of the Investment Advisory Agreements with
Barrow, Brandywine, Hotchkis and Metropolitan West Capital Management, LLC
("MetWest"), the Trustees considered the following additional factors: (1)
Barrow outperformed the
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF INVESTMENT ADVISORY
AGREEMENTS (UNAUDITED)
peer universe median for the one-, three-, five- and ten-year periods ended
March 31, 2009; (2) Brandywine outperformed the peer universe median for the
ten-year period ended March 31, 2009 but underperformed for the one-, three- and
five-year periods; (3) Hotchkis outperformed the peer universe median for the
ten-year period and the quarter ended March 31, 2009, but underperformed for the
one-, three- and five-year periods; (4) MetWest outperformed the peer universe
median for the one-; three- and five-year periods ended March 31, 2009; (5)
management's analysis regarding the rationale for Brandywine's and Hotchkis'
underperformance; (6) each of the Fund's subadvisors has informed the Manager
that it uses Fund commissions to obtain proprietary research, the application of
which benefits the Fund and each of the subadvisor's clients, but there is
little or no impact to the Fund; (7) each of the Fund's subadvisors has
indicated that it does not charge lower advisory fees to other clients for which
it provides comparable services; and (8) the Manager's recommendation to
continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and the subadvisors under the Agreements are fair and
reasonable, (2) determined that the Large Cap Value Fund and its shareholders
would benefit from the Manager's and subadvisors' continued management of the
Fund and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Large Cap Value Fund.
28
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees nineteen funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED
NAME, AGE AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND CURRENT DIRECTORSHIPS
- --------------------- --------------------------- ---------------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust until
removal, resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a Partner in
the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP
(1960-Present); Director, Clear Channel Communications
(1984-Present); Trustee, CenterPoint Properties (1994-2006); Member,
Board of Trustees, Southern Methodist University ; Member, Board of
Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy
Hospital; Trustee, American Beacon Mileage Funds (1996-present);
Trustee, American Beacon Select Funds (1996-present); Trustee,
American Beacon Master Trust Funds (1996-present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust until
removal, resignation or
retirement*
W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation
(1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing
company) (1998-2003); President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments Southwest
Company (1983-1995); Senior Vice President of Regional Centers,
Fidelity Investments (1988-1995); Trustee, American Beacon Mileage
Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); American Beacon Master Trust Funds (2004-present).
Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and
Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas
Christian University (1998-Present); Trustee, W.I. Cook Foundation,
Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director,
Christian Church Foundation (1999-2007); Trustee, American Beacon
Mileage Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset Management
(1994-Present); Director, Sunrise Bank of Atlanta (2008-Present);
Chairman, Special Contributions Fund Board of Trustees, National
Association for the Advancement of Colored People (2007-Present);
Trustee, National Association for the Advancement of Colored People
(2000-Present); Board of Visitors, Emory University (2006-Present);
Trustee, Atlanta Botanical Garden (2006-Present); Board Member,
Willie L. Brown Jr. Institute on Politics and Public Service
(2001-Present); Chair, National Association of Securities
Professionals (2000-2002); Deputy Chief Administrative Officer, City
of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
29
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED
NAME, AGE AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND CURRENT DIRECTORSHIPS
- --------------------- --------------------------- ---------------------------------------------------------------------
Thomas M. Dunning (66) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief Executive
Officer (2003-2007), Lockton Dunning Benefits (consulting firm in
employee benefits); Director, Oncor Electric Delivery Company LLC
(2007-present); Advisory Director, Comerica Texas (2003-present);
Immediate Past Chairman and Board Member, Dallas Citizens Council;
Director, Baylor Health Care System Foundation (2007-present); State
Vice Chair, State Fair of Texas; Board Member, Southwestern Medical
Foundation (1994-present); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present), Senior Vice
Chairman since 2008 President and General Counsel, Hunt Consolidated, Inc. (holding
company engaged in oil and gas exploration and production, refining,
real estate, farming, ranching and venture capital activities)
(1994-2009). Chairman (2007-Present) and Director (2005-Present), The
Dallas Opera Foundation; Chairman (2006-Present) and Director
(2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian
Hospital Foundation (2006-Present); Trustee, American Beacon Mileage
Funds (2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present); Director,
225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc.
Southern Methodist Univ. (1996-Present); Director, California Federal Preferred Capital Corp.
Dallas, Texas 75275 (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of Directors;
Member, Methodist Hospital Advisory Board; Co-Chair, Knight
Commission on Intercollegiate Athletics; Trustee, American Beacon
Mileage Funds (2001-present); Trustee, American Beacon Select Funds
(2001-present); Trustee, American Beacon Master Trust Funds
(2001-present).
Paul J. Zucconi,CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
nonstandard automobile insurance) (2004-present); Director, Titanium
Metals Corporation (producer of titanium melted and mill products and
sponge) (2002- present); Director, Torchmark Corporation (life and
health insurance products) (2002-present); Director, National Kidney
Foundation of North Texas (2003-Present); Director, Dallas Chapter of
National Association of Corporate Directors (2004-Present); Partner,
KPMG (1976-2001); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds (2008-present);
Trustee, American Beacon Master Trust Funds (2008-present).
30
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED
NAME, AGE AND ADDRESS WITH THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND CURRENT DIRECTORSHIPS
- --------------------- --------------------------- ---------------------------------------------------------------------
OFFICERS TERM
One Year
William F. Quinn** (61) Executive Vice President Executive Chairman (2009-Present), Chairman (2006-2009) and CEO
from 2007 to 2008 and 2009 (2006-2007), President (1986-2006) and Director (2003-Present),
to Present President from American Beacon Advisors, Inc.; Chairman (1989-2003) and Director
1987 to 2007 and 2008 to (1979-1989, 2003-Present), American Airlines Federal Credit Union;
2009 Trustee from 1987 to Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent
2008 Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble &
Herr, LLC (investment advisor) (2001-2006); Director of Investment
Committee, Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist University Cox School of
Business Advisory Board (1999-2002); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002, 2006-Present);
Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for
the Investment of Employee Benefits; Director, United Way of
Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee,
American Beacon Mileage Funds (1995-2008); Trustee, American Beacon
Select Funds (1999-2008); Trustee, American Beacon Master Trust
(1995-2008).
Gene L. Needles, Jr. (54) President 2009 to Present President, CEO and Director (2009-Present), American Beacon Advisors,
Executive Vice President Inc. President (November 2009-Present), Executive Vice President (May
2009 Present 2009-November 2009) of the American Beacon Funds, American Beacon
Mileage Funds, American Beacon Select Funds, and American Beacon
Master Trust. President (2008-2009), Touchstone Investments;
President (2003-2007), CEO (2004-2007), Managing Director of Sales
(2002-2003), National Sales Manager (1999-2002), and Regional Sales
Manager (1993-1999), AIM Distributors.
Rosemary K. Behan (50) VP, Secretary and Chief Vice President, Legal and Compliance, American Beacon Advisors, Inc.
Legal Officer since 2006 (2006-Present); Assistant General Counsel, First Command Financial
Planning, Inc. (2004-2006); Attorney (1995-2004), Securities and
Exchange Commission.
Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon
Advisors, Inc. (2004-Present); Regional Vice President, Neuberger
Berman, LLC (investment advisor) (1996-2004).
Wyatt Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors, Inc.
(2007-Present); Managing Director of Corporate Accounting
(2004-2007), Director of IT Strategy and Finance (2002-2004),
American Airlines, Inc.
Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors,
Inc. (1988-Present); Director American Beacon Global Funds SPC
(2002-present); Director, American Beacon Global Funds plc
(2007-2009).
Rebecca L. Harris (42) Treasurer since 1995 Vice President, Finance, American Beacon Advisors, Inc.
(1995-Present).
Christina E. Sears (38) Chief Compliance Officer Chief Compliance Officer, American Beacon Advisors, Inc.
since 2004 and Asst. (2004-Present); Senior Compliance Analyst, American Beacon Advisors,
Secretary since 1999 Inc. (1998-2004).
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's and Master Trust's sub-advisors.
31
(GRAPHIC)
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32
(AMERICAN BEACON FUNDS(SM 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:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
(GRAPHIC) (GRAPHIC)
BY TELEPHONE: BY MAIL:
Institutional, Y, Investor, Advisor and Retirement Classes American Beacon Funds
Call (800) 658-5811 P.O. Box 219643
AMR Class(SM) Kansas City, MO 64121-9643
Call (800) 345-2345
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in A description of the policies and procedures the Fund uses
each semi-annual and annual report, the Fund files a to determine how to vote proxies relating to portfolio
complete schedule of its portfolio holdings with the securities is available in the Fund's Statement of
Securities and Exchange Commission ("SEC") on Form N-Q as Additional Information, is available free of charge on the
of the first and third fiscal quarters. The Fund's Forms Fund's website (www.americanbeaconfunds.com) and by
N-Q are available on the SEC's website at www.sec.gov. The calling 1-800-967-9009 or by accessing the SEC's website
Forms N-Q may also be reviewed and copied at the SEC's at www.sec.gov. The Fund's proxy voting record for the
Public Reference Room, 450 Fifth Street, NW, Washington, most recent year ended June 30 is filed annually with the
DC 20549. Information regarding the operation of the SEC's SEC on Form N-PX. The Fund's Forms N-PX are available on
Public Reference Room may be obtained by calling the SEC's website at www.sec.gov. The Fund's proxy voting
1-800-SEC-0330. A complete schedule of the Fund's record may also be obtained by calling 1-800-967-9009.
portfolio holdings is also available on the Funds' website
(www.americanbeaconfunds.com) approximately thirty days
after the end of each month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED PUBLIC DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ACCOUNTING FIRM FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine
Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Beacon Funds and American Beacon Large Cap Value Fund are service marks
of American Beacon Advisors, Inc.
AR 10/09
00071317
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
October 31, 2009
SMALL CAP VALUE FUND
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
Contents
President's Message...................... 1
Market and Performance Overview.......... 2
Schedule of Investments.................. 7
Additional Information................... Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
Investing in the securities of small capitalization companies involves greater
risk and the possibility of greater price volatility than investing in larger
capitalization and more established companies.
American Beacon Funds October 31, 2009
(PHOTO OF GENE L. NEEDLES, JR.)
FELLOW SHAREHOLDERS,
As an introduction to the American Beacon Small Cap Value Fund Annual
Report for the 12-month period ended October 31, 2009, please let me take a
moment to tell you how pleased I am to have been serving as President and CEO of
American Beacon Advisors since April 15, 2009. I consider it a privilege to hold
this position, and I take its responsibilities quite seriously.
I've enjoyed a long, successful career in the investment business, and I'm
no stranger to the ups and downs that markets can deliver. As a fellow investor
and shareholder, I experience these trends in much the same way you do. The
majority of 2008 was difficult in many ways. However, when I took the helm at
American Beacon, I already had many reasons to be optimistic about what might
develop in 2009. As of October 31, 2009, my optimism has been largely confirmed.
For the one-year period (as of 10/31/09), American Beacon Small Cap Value
Fund-Institutional Class returned 16.97%. Of course, one year of performance
doesn't tell the whole story, especially when you're investing for the long
term. Please note that the recent growth rate in the stock market has helped to
produce short-term returns that are not typical and may not continue in the
future.
Many of us have long-term goals, including retirement, driving our
investment decisions. While this 12-month period began amid a frightening
recessionary environment, we finished the year with increasing confidence that
markets have begun to stabilize, that liquidity has returned to the debt markets
and that equity markets have had a substantial recovery.
I know as well as you do that maintaining a long-term perspective,
employing a buy-and-hold philosophy (consistent with the Fund's objectives), and
doing the right thing according to your risk tolerance and time horizon is not
always easy. But the professionals at American Beacon are dedicated to working
hard to help investors succeed.
Just as you maintain a commitment to your goals--and to those who inspire
you to create your goals--we maintain a strong commitment to due diligence and
oversight. That commitment is one of the key reasons I am honored to serve as
President and CEO, and am pleased to be able to share my enthusiasm about the
path ahead with you.
A financial advisor can be an important ally in creating investment
success, so--as you review the enclosed annual report--please feel free to
discuss your thoughts and concerns with a trusted advisor. And, as always, the
professionals associated with the American Beacon Funds are grateful for the
opportunity to serve you.
Best Regards,
/s/ Gene L. Needles, Jr.
Gene L. Needles, Jr.
President
American Beacon Funds
1
DOMESTIC EQUITY MARKET OVERVIEW
OCTOBER 31, 2009 (UNAUDITED)
The past 12-month period saw a great deal of volatility in equity markets.
The first quarter of 2009 saw marginal improvements in U.S. housing, income and
consumption data. The U.S. Treasury partnered with private investors to purchase
toxic bank assets, which spurred a market rally late in the first quarter.
Soon after his January inauguration, President Obama attempted to blunt the
impact of the recession in the U.S. by signing an almost $800 billion economic
stimulus package, introducing a sizable mortgage relief program and initiating
stress tests for the nation's banks. Other stimulus packages were enacted
worldwide, representing an unprecedented commitment from governments across the
globe to stabilize the world's economies.
While the markets behaved sluggishly at the beginning of the first quarter,
they picked up speed following more encouraging data suggesting that the economy
had begun to move from recession to recovery. The global equity market rally
that began in early March and continued into May was one of the strongest
rebounds since the Great Depression era. Toward the end of the second quarter,
investors showed concern that the equity markets had moved too far ahead of
economic realities. The sharp equity rally lost momentum, as equity markets
pulled back modestly in June.
During the third quarter, stronger-than-expected corporate
earnings--combined with encouraging economic news--rekindled the rally to some
degree. The United States announced that gross domestic product (GDP) contracted
in the second quarter, but by a better-than-expected -1.0% (subsequently revised
to -0.7%). Meanwhile, strong demand for automobiles, fueled by the U.S.
Government's "Cash for Clunkers" program, produced the first signs of growth in
the American manufacturing industry since January 2008. The third quarter of
2009 saw housing numbers improve, increased merger and acquisition activity, and
evidence of capital markets normalization. In addition to stabilization,
liquidity was a major contributor to market strength.
Unfortunately, the domestic equity markets have struggled with the effects
of rising unemployment, a tight credit environment, and weakness in commercial
real estate. Amid fears about job stability, the U.S. Consumer Confidence Index
declined to 53.1 in September from 54.5 in August 2009. Although the pace of job
losses slowed, total U.S. unemployment continued to rise in October 2009, along
with credit default and delinquency rates.
Third quarter corporate earnings results were mixed. Many companies were
quick to downsize in response to reduced demand. Corporate profits exceeded
reduced expectations due to cost cutting. It remains to be seen if increased
corporate profitability ultimately leads to more hiring and, thus, increased
consumer demand.
This pattern of positive developments tempered with set-backs is typical of
economic recoveries. Different types of economic activity require more time to
be effective. Some uncertainty about what will drive the markets going forward
remains, as the Federal Reserve Board (the Fed) may start to reverse and unwind
the unprecedented levels of support provided to the U.S. economy. The magnitude
of any consumer-led recovery remains difficult to gauge, as it is hard to
distinguish between a traditional cyclical recovery and potentially artificial
gains resulting from the U.S. Government's stimulus measures.
As the Fed's plans become clearer, the market may favor companies with
higher earnings and balance sheet quality. These companies with solid
fundamentals may provide better upside potential than more speculative
companies. It is unlikely that the lowest credit quality companies (without
earnings or dividends) will remain market leaders, since there are many
companies with excellent fundamentals selling for equally attractive prices.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
The Institutional Class of the Small Cap Value Fund returned 16.97% for the
twelve months ended October 31, 2009, outperforming the Russell 2000(R) Value
Index (the "Index") return of 1.96% and the Lipper Small-Cap Value Funds Index
return of 13.99% for the same period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/99 THROUGH 10/31/09
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 10/31/09 $10,000
----------------------------- 10/31/99-
1 YEAR 5 YEARS 10 YEARS 10/31/09
-------- ------- -------- ----------
Institutional Class(1, 6) ...... 16.97% 1.12% 10.19% $26,387
Y Class(1, 2, 6) ............... 16.81% 1.09% 10.17% 26,351
Investor Class(1, 6) ........... 16.59% 0.85% 9.90% 25,710
Advisor Class(1, 3, 6) ......... 16.41% 0.61% 9.72% 25,287
Retirement Class (1, 4, 6) ..... 16.25% 0.58% 9.71% 25,251
AMR Class(1, 6) ................ 17.30% 1.39% 10.49% 27,126
Lipper Small-Cap Value Funds
Index(5) .................... 13.99% 1.73% 8.39% 22,393
Russell 2000 Value Index(5) .... 1.96% 0.08% 7.53% 20,663
(1.) The Investor and Advisor Classes were formerly known as the PlanAhead and
Service Classes, respectively. Please note that the recent growth rate in
the stock market has helped to produce short-term returns that are not
typical and may not continue in the future. Performance shown is historical
and may not be indicative of future returns. Investment returns and
principal value will vary, and shares may be worth more or less at
redemption than at original purchase. Performance shown is as of date
indicated, and current performance may be lower or higher than the
performance data quoted. To obtain performance as of the most recent month
end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund
performance in the table above does not reflect the deduction of taxes a
shareholder would pay on distributions or the redemption of shares.
(2.) Fund performance for the one-year, five-year and ten-year periods
represents the total returns achieved by the Institutional Class from
10/31/99 up to 8/3/09, the inception date of the Y Class. Expenses of the Y
Class are higher than those of the Institutional Class. As a result, total
returns shown may be higher than they would have been had the Y Class been
in existence since 10/31/99.
(3.) Fund performance for the ten-year period represents the total returns
achieved by the Investor Class from 10/31/99 up to 5/1/03, and the returns
of the Advisor Class since its inception. Expenses of the Advisor Class are
higher than those of the Investor Class. As a result, total returns shown
may be higher than they would have been had the Advisor Class been in
existence since 10/31/99. A portion of the fees charged to the Advisor
Class of the Fund was waived through 2004. Performance prior to waiving
fees was lower than the actual returns shown for periods through 2004.
(4.) Fund performance for the one-year, five-year and ten-year periods
represents the total returns achieved by the Investor Class from 10/31/99
up to 5/1/03 and the Advisor Class from 5/1/03 up to 5/1/09, the inception
date of the Retirement Class, and the returns of the Retirement Class since
its inception. Expenses of the Retirement Class are higher than those of
the Advisor and Investor Classes. As a result, total returns shown may be
higher than they would have been had the Retirement Class been in existence
since 10/31/99.
(5.) Russell 2000 Value Index is a registered trademark of Frank Russell
Company. The Russell 2000 Value Index is an unmanaged index of those stocks
in the Russell 2000 Index with lower price-to-book ratios and lower
forecasted growth values. The Lipper Small-Cap Value Funds Index tracks the
results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds
category. Lipper is an independent mutual fund research and ranking
service. One cannot directly invest in an index.
(6.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement and
AMR Class shares was 0.82%, 0.92%, 1.19%, 1.32%, 1.59%, and 0.57%,
respectively. The expense ratios above may vary from the expense ratios
presented in other sections of this report that are based on expenses
incurred during the period covered by this report.
The Fund outperformed the Index in eight of the ten sectors, generating
excess performance through both stock selection and sector allocation. The
Fund's superior performance in stock selection resulted primarily from its
holdings in the Industrials, Financials, Energy, and Utilities sectors.
Individual holdings in the Industrials sector that had the largest impact on the
Fund's performance were Oshkosh (up 319.3%), Flowserve (up 71.0%), and Timken
(up 49.7%). For the period the Fund owned the securities, Legg Mason (up 14.8%)
and Jeffries Group (up 31.4%) added the most relative value in the Financials
sector. In the Energy
3
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
OCTOBER 31, 2009 (UNAUDITED)
sector, Dril-Quip (up 97.9%), Oil States International (up 50.3%), and Arena
Resources (up 37.9%) were the largest contributors, while OGE Energy (up 27.7%),
Energen (up 30.4%), and NV Energy (up 19.1%) added the most relative value in
the Utilities sector. Poor stock selection in the Information Technology sector
detracted value from performance. Lexmark International (down 27.0% for the
period the Fund owned the security), Comtech Telecommunications (down 34.2%) and
ManTech International (down 14.7%) were the largest detractors in the
Information Technology sector.
The Fund's underweight in Financials, the second worst performing sector in
the Index, added value to performance through sector allocation. Overweights in
the Information Technology and Consumer Discretionary sectors also generated
excess returns. An overweight in Energy, the worst performing sector in the
Index, detracted from the Fund's performance relative to the Index.
The sub-advisors continue to focus on uncovering investment opportunities
through stock selection that should benefit the Fund's performance over the
longer term.
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
Valassis Communications, Inc. ... 1.4%
Hanover Insurance Group, Inc. ... 1.0%
Oshkosh Corp. ................... 0.8%
LifePoint Hospitals, Inc. ....... 0.8%
Rent-a-Center, Inc. ............. 0.8%
Gentex Corp. .................... 0.8%
Aspen Insurance Holdings Ltd. ... 0.8%
Great Plains Energy, Inc. ....... 0.8%
Men's Wearhouse, Inc. ........... 0.8%
Tidewater, Inc. ................. 0.7%
SECTOR ALLOCATION
% OF
EQUITIES
--------
Financials ...................... 21.6%
Industrials ..................... 20.5%
Consumer Discretionary .......... 14.5%
Information Technology .......... 14.5%
Health Care ..................... 8.6%
Utilities ....................... 6.3%
Energy .......................... 5.9%
Materials ....................... 4.9%
Consumer Staples ................ 2.8%
Telecommunication Services ...... 0.4%
4
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
FUND EXPENSES
OCTOBER 31, 2009 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The examples below are
intended to help you understand the ongoing cost (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2009
through October 31, 2009.
ACTUAL EXPENSE
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
Investor and Institutional Classes that invest in the Fund through an IRA may be
subject to a custodial IRA fee of $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 Investor 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.
Beginning Ending
Account Account Expenses Paid
Value Value During Period*
5/1/09 10/31/09 5/1/09-10/31/09
------------ ----------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,209.25 $4.73
Hypothetical $1,000.00 $1,020.92 $4.33
(5% return before expenses)
Y CLASS**
Actual $1,000.00 $1,024.24 $2.74
Hypothetical $1,000.00 $1,009.59 $2.74
(5% return before expenses)
INVESTOR CLASS
Actual $1,000.00 $1,206.19 $6.73
Hypothetical $1,000.00 $1,019.11 $6.16
(5% return before expenses)
ADVISOR CLASS
Actual $1,000.00 $1,206.39 $7.17
Hypothetical $1,000.00 $1,018.70 $6.56
(5% return before expenses)
RETIREMENT CLASS
Actual $1,000.00 $1,204.67 $8.46
Hypothetical $1,000.00 $1,017.49 $7.78
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,210.48 $3.34
Hypothetical $1,000.00 $1,022.18 $3.06
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.85%, 1.21%, 1.29%, 0.60%, 1.53% and 1.11% for the
Institutional, Investor, Advisor, AMR, Retirement and Y Classes
respectively, multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (365) to reflect the half
year period.
** Beginning account value for Y Class is the inception date of 8/3/09.
Expenses are equal to the Class annualized ratio for the period multiplied
by the average account value for the period multiplied by the number
derived by dividing the number of days in the period (90) by the days in
the year (365).
5
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of American Beacon Small Cap Value Fund
and the Board of Trustees of American Beacon Funds:
We have audited the accompanying statement of assets and liabilities of American
Beacon Small Cap Value Fund (a portfolio of American Beacon Funds) (the "Fund"),
including the schedule of investments, as of October 31, 2009, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2009, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Small Cap Value Fund at October 31, 2009, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated therein, in conformity with U.S. generally accepted
accounting principles.
/s/Ernst & Young LLP
Dallas, Texas
December 23, 2009
6
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 95.04%
COMMUNICATIONS - 0.25%
MEDIA - 0.25%
Belo Corp. ................................... 167,900 $ 789
Courier Corp. ................................ 46,314 687
Meredith Corp. ............................... 138,970 3,761
-----------
TOTAL COMMUNICATIONS 5,237
-----------
CONSUMER DISCRETIONARY - 13.76%
AUTO COMPONENTS - 1.16%
American Axle & Manufacturing Holdings,
Inc. + .................................... 1,027,200 6,153
ATC Technology Corp. ## ...................... 21,600 451
Gentex Corp. ................................. 1,024,850 16,408
Superior Industries International, Inc. ...... 58,500 777
-----------
23,789
-----------
DISTRIBUTORS - 0.19%
Beacon Roofing Supply, Inc. ## ............... 50,500 725
WESCO International, Inc. ## ................. 122,300 3,126
-----------
3,851
-----------
HOTELS, RESTAURANTS & LEISURE - 1.68%
Ameristar Casinos, Inc. ...................... 340,500 5,012
Boyd Gaming Corp. ## + ....................... 197,630 1,455
CEC Entertainment, Inc. ## ................... 33,100 967
CKE Restaurants, Inc. ........................ 244,000 2,135
Cracker Barrel Old Country Store, Inc. ....... 82,811 2,745
Domino's Pizza, Inc. ## ...................... 118,300 868
Jack in the Box, Inc. ## ..................... 542,050 10,169
Lakes Entertainment, Inc. ## ................. 150,800 371
Orient-Express Hotels Ltd. ................... 69,200 595
Panera Bread Co. ## .......................... 72,280 4,335
Pinnacle Entertainment, Inc. ## .............. 248,000 2,096
Speedway Motorsports, Inc. ................... 166,610 2,256
Wendy's Group Inc. ........................... 422,100 1,667
-----------
34,671
-----------
HOUSEHOLD DURABLES - 1.60%
Cavco Industries, Inc. ## .................... 40,760 1,239
Ethan Allen Interiors, Inc. + ................ 273,350 3,406
Helen of Troy Ltd. ## ........................ 50,348 1,150
Knoll, Inc. .................................. 117,180 1,148
M.D.C. Holdings, Inc. ........................ 131,780 4,299
National Presto Industries, Inc. ............. 12,000 1,043
Ryland Group, Inc. ........................... 289,250 5,366
Snap-On, Inc. ................................ 85,030 3,106
Whirlpool Corp. .............................. 171,700 12,292
-----------
33,049
-----------
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
INTERNET & CATALOG RETAIL - 0.32%
NutriSystem, Inc. + ......................... 184,300 $ 3,966
School Specialty, Inc. ## .................... 38,400 855
Systemax, Inc. ## ............................ 125,400 1,690
-----------
6,511
-----------
LEISURE EQUIPMENT & PRODUCTS - 0.78%
Brunswick Corp. .............................. 521,900 4,948
Callaway Golf Co. ............................ 382,960 2,619
Polaris Industries, Inc. ..................... 54,600 2,297
Scholastic Corp. ............................. 143,800 3,576
Thor Industries, Inc. ........................ 101,430 2,660
-----------
16,100
-----------
MEDIA - 0.33%
Interpublic Group of Cos., Inc. ## ........... 941,100 5,666
inVentiv Health, Inc. ## ..................... 68,900 1,170
-----------
6,836
-----------
MULTILINE RETAIL - 0.94%
Big Lots, Inc. ## ............................ 221,050 5,537
BJ's Wholesale Club, Inc. ## ................. 153,730 5,385
Dillards, Inc. ............................... 168,900 2,301
Saks, Inc. ## + .............................. 1,097,860 6,159
-----------
19,382
-----------
SPECIALTY RETAIL - 5.40%
Aaron Rents, Inc. + .......................... 185,600 4,649
Bare Escentuals, Inc. ## ..................... 140,700 1,777
Bebe Stores, Inc. ............................ 360,950 2,260
Buckle, Inc. + ............................... 28,500 855
Cabela's, Inc. ## + .......................... 792,700 9,964
Childrens Place Retail Stores, Inc. ## ....... 66,240 2,083
Finish Line, Inc., Class A Shares ............ 46,955 476
Foot Locker, Inc. ............................ 794,300 8,324
Genesco, Inc. ## ............................. 46,500 1,212
Group 1 Automotive, Inc. ..................... 53,700 1,365
Gymboree Corp. ## ............................ 260,970 11,110
Interline Brands, Inc. ## .................... 16,200 237
Jos. A. Bank Clothiers, Inc. ## .............. 85,390 3,499
MarineMax, Inc. ## ........................... 81,800 557
Men's Wearhouse, Inc. ........................ 667,400 15,464
OfficeMax, Inc. .............................. 468,293 5,353
Pep Boys, Inc. ............................... 107,100 939
RadioShack Corp. ............................. 671,800 11,347
Regis Corp. .................................. 106,600 1,731
Rent-A-Center, Inc. ## ....................... 897,450 16,477
Sonic Automotive, Inc., A Shares + ........... 183,380 1,640
Stage Stores, Inc. ........................... 129,320 1,526
Tractor Supply Co. ## ........................ 48,550 2,170
See accompanying notes
7
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
Williams-Sonoma, Inc. ........................ 327,854 $ 6,157
-----------
111,172
-----------
TEXTILES & APPAREL - 1.36%
Brown Shoe Company, Inc. ..................... 122,720 1,273
Jones Apparel Group, Inc. .................... 416,000 7,442
Quiksilver, Inc. ## .......................... 2,560,900 5,096
Skechers U.S.A., Inc. ## ..................... 212,760 4,642
Timberland Co. ## ............................ 205,050 3,318
Unifirst Corp. ............................... 29,600 1,245
Warnaco Group, Inc. ## ....................... 74,000 2,999
Wolverine World Wide, Inc. ................... 81,300 2,080
-----------
28,095
-----------
TOTAL CONSUMER DISCRETIONARY 283,456
-----------
CONSUMER STAPLES - 2.62%
FOOD & DRUG RETAILING - 1.18%
Casey's General Stores, Inc. ................. 171,473 5,407
Flowers Foods, Inc. .......................... 103,230 2,411
Ingles Markets, Inc. ......................... 87,900 1,352
Ruddick Corp. ................................ 146,650 3,919
Spartan Stores, Inc. ......................... 425,450 6,024
Winn-Dixie Stores, Inc. ## ................... 460,090 5,102
-----------
24,215
-----------
FOOD PRODUCTS - 1.13%
American Italian Pasta Co. ## ................ 43,000 1,168
Cal-Maine Foods, Inc. + ...................... 142,800 3,877
Chiquita Brands International, Inc. ## ....... 91,400 1,480
Corn Products International, Inc. ............ 55,500 1,564
Del Monte Foods Co. .......................... 330,300 3,567
Fresh Del Monte Produce, Inc. ## ............. 98,400 2,136
Hain Celestial Group, Inc. ## ................ 119,120 2,089
Herbalife Ltd. ............................... 115,200 3,877
Overhill Farms, Inc. ## ...................... 316,300 1,727
Smithfield Foods, Inc. ## + .................. 131,300 1,752
-----------
23,237
-----------
HOUSEHOLD PRODUCTS - 0.03%
Central Garden and Pet Co. ## ................ 73,900 699
-----------
TOBACCO - 0.28%
Alliance One International, Inc. ## .......... 232,100 1,024
Universal Corp. .............................. 112,700 4,687
-----------
5,711
-----------
TOTAL CONSUMER STAPLES 53,862
-----------
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
ENERGY - 5.65%
ENERGY EQUIPMENT & SERVICES - 3.16%
Atwood Oceanics, Inc. ## ..................... 42,100 $ 1,494
CARBO Ceramics, Inc. + ....................... 28,160 1,644
Complete Production Services, Inc. ## ........ 109,100 1,040
Dresser-Rand Group, Inc. ## .................. 89,700 2,644
Dril-Quip, Inc. ## ........................... 97,380 4,732
Global Industries Ltd. ## .................... 176,400 1,286
Gulfmark Offshore, Inc. ## ................... 86,400 2,391
Key Energy Services, Inc. ## ................. 64,500 472
Lufkin Industries, Inc. ...................... 55,130 3,145
Oil States International, Inc. ## ............ 336,221 11,579
Parker Drilling Co. ## ....................... 238,300 1,239
Patterson-UTI Energy, Inc. ................... 114,650 1,786
Rowan Companies, Inc. ........................ 106,200 2,469
SEACOR Holdings, Inc. ## ..................... 63,900 5,193
Superior Energy Services, Inc. ## ............ 68,900 1,489
Tidewater, Inc. .............................. 367,200 15,301
Unit Corp. ## ................................ 156,465 6,115
Willbros Group, Inc. ## ...................... 81,300 1,068
-----------
65,087
-----------
OIL & GAS - 2.49%
Arena Resources, Inc. ## ..................... 132,730 4,945
Comstock Resources, Inc. ## .................. 112,330 4,616
CVR Energy, Inc. ## .......................... 161,000 1,694
Delek US Holdings, Inc. ...................... 110,300 744
Encore Acquisition Co. ## .................... 111,200 4,122
EXCO Resources, Inc. ......................... 539,500 8,427
Forest Oil Corp. ## .......................... 119,990 2,352
Helix Energy Solutions Group, Inc. ## ........ 172,700 2,371
Holly Corp. .................................. 291,250 8,449
Penn Virginia Corp. .......................... 322,310 6,527
Stone Energy Corp. ## ........................ 247,500 3,794
Tesoro Corp. ................................. 229,200 3,241
-----------
51,282
-----------
TOTAL ENERGY 116,369
-----------
FINANCIALS - 20.48%
BANKS - 3.60%
1st Source Corp. ............................. 34,120 506
BancorpSouth, Inc. + ......................... 161,550 3,648
City National Corp. + ........................ 276,503 10,416
Community Bank System, Inc. .................. 30,400 566
CVB Financial Corp. + ........................ 170,233 1,364
First Horizon National Corp. ## .............. 868,855 10,279
First Niagara Financial Group, Inc. .......... 181,200 2,327
See accompanying notes
8
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
FirstMerit Corp. ............................. 253,662 $ 4,807
Hancock Holding Co. .......................... 71,720 2,601
Home Federal Bancorp Inc. + .................. 171,000 1,975
National Penn Bancshares, Inc. ............... 212,940 1,197
NewAlliance Bancshares, Inc. ................. 371,778 4,119
Old National Bancorp ......................... 149,200 1,547
PacWest Bancorp .............................. 122,410 2,078
Provident Financial Services, Inc. ........... 311,460 3,348
Southwest Bancorp, Inc. ...................... 121,240 1,193
Sterling Bancshares, Inc. .................... 136,400 760
Synovus Financial Corp. ...................... 728,600 1,617
Territorial Bancorp, Inc. ## ................. 6,700 110
Trustmark Corp. .............................. 131,950 2,500
Washington Federal, Inc. ..................... 460,364 7,895
Washington Trust Bancorp, Inc. ............... 29,800 448
Webster Financial Corp. ...................... 641,800 7,259
Wintrust Financial Corp. ..................... 57,900 1,633
-----------
74,193
-----------
DIVERSIFIED FINANCIALS - 3.72%
AmeriCredit Corp. ## + ....................... 124,400 2,196
Cash America International, Inc. ............. 230,636 6,979
Credit Acceptance Corp. ## + ................. 159,100 5,468
Ezcorp, Inc. ## .............................. 638,550 8,282
Federated Investors, Inc. .................... 55,900 1,467
Financial Federal Corp. ...................... 179,980 3,675
Investment Technology Group, Inc. ## ......... 471,515 10,171
Knight Capital Group, Inc. ## ................ 363,650 6,128
Lazard Ltd. .................................. 90,502 3,417
Marshall & Ilsley Corp. ...................... 265,900 1,415
MF Global Ltd. ## + .......................... 271,800 1,935
Nelnet, Inc. ## .............................. 184,700 2,591
Piper Jaffray Co. ## ......................... 232,753 10,797
Raymond James Financial, Inc. + .............. 220,430 5,204
Student Loan Corp. ........................... 33,600 1,413
Texas Capital Bancshares, Inc. ## ............ 95,050 1,385
World Acceptance Corp. ## + .................. 168,250 4,221
-----------
76,744
-----------
INSURANCE - 9.63%
Allied World Assurance Co. Holdings Ltd. ..... 100,900 4,516
American Equity Investment Life Holding Co. .. 209,900 1,379
American Financial Group, Inc. ............... 359,500 8,844
American National Insurance Co. .............. 44,700 3,732
American Physicians Capital, Inc. ............ 9,916 280
AmTrust Financial Services, Inc. ............. 240,100 2,708
Argo Group International Holdings Ltd. ## .... 219,557 7,456
Aspen Insurance Holdings Ltd. ................ 624,830 16,121
CNA Surety Corp. ## .......................... 239,200 3,459
SHARES VALUE
----------- -----------
(DOLLARS IN THOUSANDS)
Conseco, Inc. ## ............................. 886,200 $ 4,617
Delphi Financial Group, Inc. ................. 403,000 8,745
Employers Holdings, Inc. ..................... 537,400 7,964
Endurance Specialty Holdings Ltd. ............ 139,400 5,017
First American Corp. ......................... 295,770 8,989
Flagstone Reinsurance Holdings Ltd. .......... 225,500 2,469
Hanover Insurance Group, Inc. ................ 481,750 20,267
HCC Insurance Holdings, Inc. ................. 183,170 4,834
Horace Mann Educators Corp. .................. 94,900 1,180
Infinity Property and Casualty Corp. ......... 50,698 1,961
Max Capital Group Ltd. ....................... 106,400 2,197
Montpelier Re Holdings Ltd. .................. 65,108 1,052
National Western Life Insurance Co. .......... 2,100 370
Navigators Group, Inc. ## .................... 154,300 8,189
Old Republic International Corp. ............. 313,800 3,351
OneBeacon Insurance Group Ltd. ............... 48,000 572
Platinum Underwriters Holdings Ltd. .......... 123,900 4,432
PMA Capital Corp. ## ......................... 231,200 1,105
Presidential Life Corp. ...................... 108,700 1,014
ProAssurance Corp. ## ........................ 36,900 1,855
Reinsurance Group of America, Inc. ........... 265,900 12,258
Safety Insurance Group, Inc. ................. 44,100 1,476
StanCorp Financial Group, Inc. ............... 352,450 12,939
Stewart Information Services Corp. ........... 109,880 982
Torchmark Corp. .............................. 187,800 7,625
Tower Group, Inc. ............................ 207,200 5,093
United America Indemnity Ltd. ## ............. 1,206,243 8,456
United Fire & Casualty, Co. .................. 38,830 679
Unitrin, Inc. ................................ 65,500 1,284
Universal American Corp. ## .................. 415,100 4,151
Validus Holdings Ltd. ........................ 112,444 2,845
White Mountains Insurance Group Ltd. ......... 3,300 1,021
Zenith National Insurance Corp. .............. 27,310 779
-----------
198,263
-----------
REAL ESTATE - 3.53%
Alexandria Real Estate Equities, Inc. + ...... 66,630 3,609
BioMed Realty Trust, Inc. .................... 527,570 7,159
CapLease, Inc. ............................... 943,100 3,235
CBL & Associates Properties, Inc. + .......... 265,170 2,164
Cohen & Steers, Inc. + ....................... 132,548 2,562
DiamondRock Hospitality Co. .................. 817,390 6,220
Douglas Emmett, Inc. ......................... 292,270 3,449
EastGroup Properties, Inc. ................... 61,510 2,264
Entertainment Properties Trust ............... 147,350 5,013
Essex Property Trust, Inc. ................... 47,080 3,540
Extra Space Storage, Inc. .................... 272,950 2,612
Forestar Group, Inc. ## ...................... 32,100 474
See accompanying notes
9
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Hilltop Holdings, Inc. ## ............ 116,000 $ 1,373
LaSalle Hotel Properties ............. 231,920 3,980
Mack-Cali Realty Corp. ............... 107,980 3,342
MI Developments, Inc. ................ 425,100 6,036
Mission West Properties, Inc. ........ 136,010 904
Omega Healthcare Investors, Inc. ..... 244,670 3,709
Redwood Trust, Inc. .................. 195,775 2,729
Urstadt Biddle Properties, Inc. ...... 65,970 974
U-Store-It Trust ..................... 1,077,630 6,143
WP Carey & Co. LLC ................... 40,920 1,134
---------------
72,625
---------------
TOTAL FINANCIALS 421,825
---------------
HEALTH CARE - 8.20%
BIOTECHNOLOGY - 0.05%
Cubist Pharmaceuticals, Inc. ## ...... 64,300 1,089
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.98%
CONMED Corp. ## ...................... 27,200 576
The Cooper Companies, Inc. ........... 55,600 1,557
Immucor, Inc. ## ..................... 83,030 1,485
IMS Health, Inc. ..................... 229,500 3,762
Kensey Nash Corp. ## ................. 91,630 2,191
Kinetic Concepts, Inc. ## ............ 145,900 4,842
STERIS Corp. ......................... 196,340 5,745
---------------
20,158
---------------
HEALTH CARE PROVIDERS & SERVICES - 4.85%
Air Methods Corp. ## ................. 115,670 3,533
AMERIGROUP Corp. ## .................. 394,710 8,703
Assisted Living Concepts, Inc. ## .... 48,410 1,003
Centene Corp. ## ..................... 291,550 5,198
Coventry Health Care, Inc. ## ........ 50,500 1,001
Gentiva Health Services, Inc. ## ..... 354,000 8,496
Health Net, Inc. ## .................. 173,400 2,585
Healthways Inc. ## .................. 62,300 1,002
Kindred Healthcare, Inc. ## .......... 80,100 1,178
LifePoint Hospitals, Inc. ## ......... 594,780 16,850
Lincare Holdings, Inc. ## ............ 364,000 11,433
Magellan Health Services, Inc. ## .... 143,730 4,618
MAXIMUS, Inc. ........................ 222,875 10,310
Mednax Inc. ## ...................... 75,150 3,902
Molina Healthcare, Inc. ## ........... 52,400 981
Odyssey HealthCare, Inc. ## .......... 237,960 3,317
Parexel International Corp. ## ....... 565,480 7,080
RehabCare Group, Inc. ## ............. 117,960 2,212
Res-Care, Inc. ## .................... 303,350 3,649
Sun Healthcare Group, Inc. ## ........ 223,400 2,029
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Triple-S Management Corp. ## + ....... 50,300 $ 840
---------------
99,920
---------------
PHARMACEUTICALS - 2.32%
Endo Pharmaceuticals Holdings,
Inc. ## ........................... 455,320 10,199
King Pharmaceuticals, Inc. ## ........ 1,346,600 13,641
Medicis Pharmaceutical Corp. ......... 264,800 5,606
NBTY, Inc. ## ........................ 348,250 12,680
Perrigo Co. + ........................ 148,200 5,512
---------------
47,638
---------------
TOTAL HEALTH CARE 168,805
---------------
INDUSTRIALS - 19.45%
AEROSPACE & DEFENSE - 1.73%
AAR Corp ## ........................ 130,800 2,565
BE Aerospace, Inc. ## ................ 426,540 7,562
Ceradyne, Inc. ## .................... 90,000 1,451
Curtiss-Wright Corp. ................. 105,150 3,135
Esterline Technologies Corp. ## ...... 98,850 4,163
Hawk Corp. ## ........................ 107,600 1,498
Spirit Aerosystems Holdings,
Inc. ## ........................... 153,270 2,440
Triumph Group, Inc. .................. 206,230 9,654
World Fuel Services Corp. ............ 60,800 3,092
---------------
35,560
---------------
AIRLINES - 0.06%
Aircastle Ltd. ....................... 162,769 1,289
---------------
BUILDING PRODUCTS - 2.07%
Apogee Enterprises, Inc. ............. 345,000 4,568
Armstrong World Industries, Inc. ## .. 185,300 6,902
Crane Co. ............................ 301,950 8,409
Drew Industries, Inc. ## ............. 144,771 2,771
Griffon Corp. ## ..................... 154,651 1,356
Insituform Technologies, Inc. ## ..... 404,700 8,580
Simpson Manufacturing Co., Inc. ...... 359,775 8,415
USG Corp. ## + ....................... 134,000 1,761
---------------
42,762
---------------
COMMERCIAL SERVICES & SUPPLIES - 5.86%
Administaff, Inc. .................... 215,200 5,341
American Ecology Corp. ............... 144,090 2,395
Brink's Home Security Holdings,
Inc. ## ........................... 115,380 3,574
Clean Harbors, Inc. ## ............... 52,668 2,973
Convergys Corp. ## ................... 276,100 2,996
Con-way, Inc. ........................ 76,500 2,524
CSG Systems International, Inc. ## ... 109,800 1,794
Deluxe Corp. ......................... 133,300 1,897
Dollar Financial Corp. ## ............ 39,800 747
See accompanying notes
10
AMERICAN BEACON SMALL CAP VALUE
FUND SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Ennis, Inc. .......................... 94,700 $ 1,435
G&K Services, Inc. ................... 37,820 838
Heidrick & Struggles International,
Inc. .............................. 249,420 6,824
Herman Miller, Inc. .................. 210,700 3,255
Hudson Highland Group, Inc. ## ....... 511,600 1,658
Kelly Services, Inc. ................. 149,600 1,658
Koppers Holdings, Inc. ............... 30,100 786
Korn/Ferry International ## .......... 791,140 12,627
Layne Christensen Co. ## ............. 62,990 1,631
Manpower, Inc. ....................... 87,100 4,129
McGrath Rentcorp ..................... 85,448 1,688
PHH Corp. ## + ....................... 522,800 8,448
Pre-Paid Legal Services, Inc. ## ..... 62,370 2,466
Spherion Corp. ## .................... 400,400 1,982
Steelcase, Inc., A Shares ............ 420,760 2,428
Team Inc. ## ........................ 140,754 2,284
TeleTech Holdings, Inc. ## ........... 3,000 54
United Stationers, Inc. ## ........... 126,300 5,954
Valassis Communications, Inc. ## ..... 1,615,100 29,443
Viad Corp. ........................... 81,430 1,425
Waste Connections, Inc. ## ........... 171,490 5,390
---------------
120,644
---------------
CONSTRUCTION & ENGINEERING - 1.69%
Comfort Systems USA, Inc. ............ 649,395 7,078
EMCOR Group, Inc. ## ................. 482,300 11,392
Granite Construction, Inc. ........... 135,170 3,860
MasTec, Inc. ## ...................... 69,200 817
Shaw Group Inc. ## ................... 123,407 3,167
Tutor Perini Corp. ## ................ 479,700 8,467
---------------
34,781
---------------
CONSUMER DISCRETIONARY - 0.07%
Weight Watchers International, Inc. .. 51,600 1,368
---------------
DIVERSIFIED MANUFACTURING - 0.71%
Acuity Brands, Inc. .................. 99,194 3,140
Barnes Group, Inc. ................... 153,630 2,435
Kennametal, Inc. ..................... 382,900 9,021
---------------
14,596
---------------
ELECTRICAL EQUIPMENT - 1.48%
Anixter International, Inc. ## ....... 180,859 7,569
AZZ, Inc. ## ......................... 25,200 863
Encore Wire Corp. + .................. 53,570 1,112
EnerSys ## ........................... 98,700 2,181
General Cable Corp. ## + ............. 86,800 2,703
Hubbell, Inc. ........................ 157,300 6,690
Powell Industries, Inc. ## ........... 10,400 383
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Regal-Beloit Corp. ................... 191,600 $ 8,982
---------------
30,483
---------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -0.73%
Diebold, Inc. ........................ 388,210 11,739
PerkinElmer, Inc. .................... 183,700 3,419
---------------
15,158
---------------
MACHINERY - 3.87%
Applied Industrial Technologies,
Inc. .............................. 212,000 4,289
Astec Industries, Inc. ## ............ 139,786 3,215
Brady Corp. .......................... 87,750 2,376
Briggs & Stratton Corp. .............. 25,500 477
Bucyrus International, Inc. .......... 102,800 4,566
CIRCOR International, Inc. ........... 34,800 948
Flowserve Corp. ...................... 81,500 8,004
Gardner Denver, Inc. ## .............. 242,800 8,719
Harsco Corp. ......................... 201,100 6,333
Middleby Corp ## ................... 16,800 761
Miller Industries, Inc. ## ........... 231,100 2,323
Mueller Industries, Inc. ............. 106,810 2,527
Oshkosh Corp. ........................ 542,000 16,943
Reliance Steel & Aluminum Co. ........ 28,800 1,051
RSC Holdings, Inc. ## + .............. 71,390 481
SPX Corp. ............................ 17,400 918
Terex Corp. ## ....................... 465,400 9,410
Timken Co. ........................... 101,510 2,236
Trinity Industries, Inc. ............. 44,400 750
Watts Water Technologies, Inc. ....... 117,900 3,331
---------------
79,658
---------------
MARINE - 0.67%
Cal Dive International, Inc. ## ...... 306,000 2,350
Genco Shipping & Trading Ltd. + ...... 303,000 6,027
Hornbeck Offshore Services, Inc. ## .. 53,500 1,300
Kirby Corp. ## ....................... 122,000 4,124
---------------
13,801
---------------
ROAD & RAIL - 0.51%
Amerco, Inc. ## ...................... 20,835 881
Arkansas Best Corp. .................. 36,000 929
Bristow Group, Inc. ## ............... 60,300 1,758
GATX Corp. ........................... 193,400 5,257
Marten Transport Ltd. ## ............. 94,610 1,659
---------------
10,484
---------------
TOTAL INDUSTRIALS 400,584
---------------
INFORMATION TECHNOLOGY - 13.82%
COMMUNICATIONS EQUIPMENT - 1.16%
Adaptec, Inc. ## ..................... 158,500 506
See accompanying notes
11
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Arris Group, Inc. ## ................. 282,240 $ 2,896
Avocent Corp. ## ..................... 202,700 5,041
Black Box Corp. ...................... 266,400 7,062
Harmonic, Inc. ## .................... 503,910 2,645
Harte Hanks, Inc. .................... 44,200 519
Sonus Networks, Inc. ## .............. 1,008,747 1,937
Sycamore Networks, Inc. ## ........... 1,195,500 3,407
---------------
24,013
---------------
COMPUTERS & PERIPHERALS - 1.54%
Avid Technology, Inc. ## ............. 111,540 1,409
Electronics for Imaging, Inc. ## ..... 606,656 7,073
Hypercom Corp ## ................... 615,100 1,753
Ingram Micro, Inc. ## ................ 833,700 14,715
Mercury Computer Systems, Inc. ## .... 355,200 3,801
NCR Corp. ## ......................... 119,000 1,208
Teradata Corp. ## .................... 65,000 1,812
---------------
31,771
---------------
ELECTRONIC COMPONENTS - 0.94%
II-VI, Inc. ## ....................... 56,516 1,496
Plexus Corp ## ..................... 444,100 11,236
Thomas & Betts Corp. ## .............. 191,900 6,565
---------------
19,297
---------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -
2.71%
Analogic Corp. ....................... 72,830 2,720
Arrow Electronics, Inc. ## ........... 246,700 6,251
AVX Corp. ............................ 280,400 3,174
Benchmark Electronics, Inc. ## ....... 423,300 7,112
Coherent, Inc. ## .................... 9,700 244
Littelfuse, Inc. ## .................. 421,200 11,608
Methode Electronics, Inc. ............ 869,433 6,303
MTS Systems Corp. .................... 120,220 3,186
Multi-Fineline Electronix, Inc. ## ... 31,300 853
Vishay Intertechnology, Inc. ## ...... 2,301,800 14,340
---------------
55,791
---------------
INTERNET SOFTWARE & SERVICES - 1.04%
DealerTrack Holdings, Inc. ## ........ 205,929 3,394
EarthLink, Inc. ...................... 491,100 3,978
InterActiveCorp ## ................... 457,600 8,667
United Online, Inc. .................. 271,380 2,171
Websense, Inc. ## .................... 195,970 3,147
---------------
21,357
---------------
IT CONSULTING & SERVICES - 1.71%
CACI International, Inc. ## .......... 149,900 7,138
ManTech International Corp. ## ....... 147,400 6,465
Ness Technologies, Inc. ## ........... 411,800 2,714
Patni Computer Systems Ltd., ADR ..... 74,300 1,430
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
SRA International, Inc. ## ........... 109,860 $ 2,061
SYNNEX Corp. ## ...................... 171,900 4,423
Syntel, Inc. ......................... 31,700 1,136
Tech Data Corp. ## ................... 256,400 9,853
---------------
35,220
---------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS -
1.70%
Brooks Automation, Inc. ## ........... 1,258,000 8,655
Cirrus Logic, Inc. ## ................ 378,690 1,833
Cymer, Inc. ## ....................... 108,890 3,728
Fairchild Semiconductor International,
Inc. ## ........................... 83,000 621
FEI Co. ## ........................... 150,130 3,575
Formfactor, Inc. ## .................. 185,900 3,158
International Rectifier Corp. ## ..... 53,000 969
MKS Instruments, Inc. ## ............. 284,339 4,447
ON Semiconductor Corp. ## ............ 431,900 2,889
Teradyne, Inc. ## .................... 409,430 3,427
TriQuint Semiconductor, Inc. ## ...... 311,960 1,682
---------------
34,984
---------------
SOFTWARE - 3.02%
Aspen Technology, Inc. ## ............ 264,760 2,780
Cadence Design Systems, Inc. ## ...... 479,300 2,929
Cognex Corp. ......................... 576,200 9,271
DST Systems, Inc. ## ................. 64,900 2,707
EPIQ Systems, Inc. ## ................ 196,653 2,480
Fair Isaac Corp. ..................... 36,400 740
infoGROUP, Inc. ...................... 1,114,300 7,310
Informatica Corp. ## ................. 176,260 3,742
JDA Software Group, Inc. ## .......... 380,750 7,554
Lawson Software, Inc. ## ............. 1,145,700 7,229
Mentor Graphics Corp. ## ............. 1,120,700 8,181
Novell, Inc. ## ...................... 827,400 3,384
TIBCO Software, Inc. ## .............. 293,500 2,568
TradeStation Group, Inc. ## .......... 181,920 1,404
---------------
62,279
---------------
TOTAL INFORMATION TECHNOLOGY 284,712
---------------
MATERIALS - 4.65%
BASIC MATERIALS - 0.03%
Innophos Holdings, Inc. .............. 35,100 679
---------------
CHEMICALS - 1.89%
H.B. Fuller Co. ...................... 99,330 1,898
Olin Corp. ........................... 415,700 6,348
OM Group Inc. ## .................... 63,100 1,705
PolyOne Corp. ## ..................... 1,636,000 9,129
RPM International, Inc. .............. 846,800 14,921
See accompanying notes
12
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
Westlake Chemical Corp. .............. 204,300 $ 4,962
---------------
38,963
---------------
CONTAINERS & PACKAGING - 1.05%
Greif, Inc. .......................... 82,300 4,405
Jarden Corp. ......................... 212,600 5,823
Packaging Corp. of America ........... 291,320 5,325
Rock-Tenn Co. ........................ 64,400 2,821
Temple-Inland, Inc. .................. 210,100 3,246
---------------
21,620
---------------
METALS & MINING - 1.59%
AMCOL International Corp. ............ 73,980 1,926
Carpenter Technology Corp. ........... 530,030 11,146
Century Aluminum Co. ## .............. 67,800 588
Coeur d'Alene Mines Corp. ## + ....... 161,950 3,252
Compass Minerals International,
Inc. .............................. 14,500 904
GrafTech Int'l Ltd. ## ............... 210,120 2,837
Hecla Mining Co. ## + ................ 278,100 1,143
Kaiser Aluminum Corp. ................ 41,600 1,662
Patriot Coal Corp. ## + .............. 135,500 1,531
RTI International Metals, Inc. ## .... 186,030 3,853
Schnitzer Steel Industries, Inc. ..... 14,400 623
Universal Stainless & Alloy ## ....... 36,700 554
USEC, Inc. ## + ...................... 493,600 1,905
Worthington Industries, Inc. ......... 66,970 740
---------------
32,664
---------------
PAPER & FOREST PRODUCTS - 0.09%
Glatfelter ........................... 2,750 29
Wausau Paper Corp. ................... 194,770 1,708
---------------
1,737
---------------
TOTAL MATERIALS 95,663
---------------
TELECOMMUNICATION SERVICES - 0.14%
DIVERSIFIED TELECOMMUNICATION - 0.14%
Cincinnati Bell, Inc. ## ............. 539,400 1,661
EchoStar Corp. ## .................... 70,800 1,286
---------------
TOTAL TELECOMMUNICATION SERVICES 2,947
---------------
UTILITIES - 6.02%
ELECTRIC UTILITIES - 4.62%
Avista Corp. ......................... 132,300 2,508
Black Hills Corp. .................... 115,000 2,802
El Paso Electric Co. ## .............. 326,490 6,122
Empire District Electric Co. ......... 175,950 3,178
Great Plains Energy, Inc. ............ 922,400 15,957
IDACORP, Inc. ........................ 289,900 8,143
Mirant Corp. ## ...................... 310,700 4,344
SHARES VALUE
--------------- ---------------
(DOLLARS IN THOUSANDS)
OGE Energy Corp. ..................... 362,800 $ 12,052
Pinnacle West Capital Corp. .......... 185,110 5,798
PNM Resources, Inc. .................. 464,500 4,979
Portland General Electric Co. ........ 816,610 15,181
RRI Energy, Inc. ## .................. 196,900 1,038
Westar Energy, Inc. .................. 684,600 13,110
---------------
95,212
---------------
GAS UTILITIES - 1.06%
AGL Resources, Inc. .................. 55,100 1,926
Atmos Energy Corp. ................... 277,700 7,734
Energen Corp. ........................ 105,502 4,629
Nicor, Inc. .......................... 81,970 3,040
Southern Union Co. ................... 139,000 2,720
Southwest Gas Corp. .................. 65,700 1,642
---------------
21,691
---------------
MULTI-UTILITIES - 0.34%
NV Energy, Inc. ...................... 609,400 6,984
---------------
TOTAL UTILITIES 123,887
---------------
TOTAL COMMON STOCKS ..................... 1,957,347
---------------
SHORT TERM INVESTMENTS - 5.01%
American Beacon U.S. Government Money
Market Select Fund ++ ............. 20,000,000 20,000
JP Morgan U.S. Government Money Market
Fund .............................. 74,972,062 74,972
PAR AMOUNT
---------------
U.S. Treasury,
0.02%, Due 12/10/2009 # ........... $ 8,268 8,267
TOTAL SHORT TERM INVESTMENTS ............ 103,239
---------------
SHARES
---------------
SECURITIES LENDING
COLLATERAL - 4.95%
American Beacon U.S. Government Money
Market Select Fund +++ ............ 50,000,000 50,000
JP Morgan U.S. Government Money Market
Fund .............................. 51,879,406 51,879
TOTAL SECURITIES LENDING COLLATERAL ..... 101,879
---------------
TOTAL INVESTMENTS 105.00% -
(COST $2,105,955) ....................... 2,162,465
LIABILITIES, NET OF OTHER ASSETS -
(5.00%) .................................. (103,020)
TOTAL NET ASSETS - 100.00% ................. $ 2,059,445
===============
See accompanying notes
13
AMERICAN BEACON SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2009
Percentages are stated as a percent of net assets.
## Non-income producing security.
+ All or a portion of this security is on loan at October 31, 2009.
+++ The Fund is affiliated by having the same investment advisor.
# At October 31, 2009, security pledged as collateral for open futures
contracts.
FUTURES CONTRACTS
(DOLLARS IN THOUSANDS)
UNREALIZED
NUMBER OF EXPIRATION MARKET APPRECIATION/
CONTRACTS DATE VALUE (DEPRECIATION)
--------- ---------- -------- --------------
Emini Mini Russell .. 1,793 Dec 2009 $100,731 $(5,968)
======== ========
See accompanying notes
14
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value (A C) ....... $ 2,092,465
Investments in affiliated securities, at value (B) ........... 70,000
Receivable for investments sold .............................. 12,349
Dividends and interest receivable ............................ 669
Receivable for fund shares sold .............................. 1,491
Receivable for tax reclaims .................................. 2
Prepaid expenses ............................................. 89
-----------
TOTAL ASSETS .............................................. 2,177,065
-----------
LIABILITIES:
Payable for investments purchased ............................ 7,979
Payable upon return of securities loaned ..................... 101,879
Payable for fund shares redeemed ............................. 1,051
Payable for variation margin on open futures contracts ....... 2,559
Management and investment advisory fees payable (Note 2) ..... 2,909
Administrative service and service fees payable .............. 734
Other liabilities ............................................ 509
-----------
TOTAL LIABILITIES ......................................... 117,620
-----------
NET ASSETS ...................................................... $ 2,059,445
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .............................................. 2,634,209
Undistributed net investment income .......................... 9,850
Accumulated net realized loss ................................ (635,156)
Unrealized appreciation of investments, futures contracts,
and foreign currency ...................................... 50,542
-----------
NET ASSETS ...................................................... $ 2,059,445
===========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class .......................................... 72,333,735
===========
Y Class ...................................................... 71
===========
Investor Class ............................................... 51,209,186
===========
Advisor Class ................................................ 2,028,093
===========
Retirement Class ............................................. 86
===========
AMR Class .................................................... 18,932,884
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class .......................................... $ 14.39
===========
Y Class ...................................................... $ 14.37
===========
Investor Class ............................................... $ 14.05
===========
Advisor Class ................................................ $ 13.97
===========
Retirement Class ............................................. $ 13.95
===========
AMR Class .................................................... $ 14.32
===========
- ----------
(A) Cost of investments in unaffiliated securities .............. $ 2,035,955
(B) Cost of investments in affiliated securities ................ $ 70,000
(C) Market value of securities on loan .......................... $ 99,198
SEE ACCOMPANYING NOTES
15
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2009 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from unaffiliated securities
(net of foreign taxes)* ................................... $ 26,400
Dividend income from affiliated securities ................... 160
Interest income .............................................. 44
Income derived from securities lending, net .................. 3,122
-----------
TOTAL INVESTMENT INCOME ................................... 29,726
-----------
EXPENSES:
Management and investment advisory fees (Note 2) ............. 7,981
Administrative service fees (Note 2):
Institutional Class ....................................... 2,531
Investor Class ............................................ 1,949
Advisor Class ............................................. 82
AMR Class ................................................. 103
Transfer agent fees:
Institutional Class ....................................... 59
Investor Class ............................................ 50
Advisor Class ............................................. 4
AMR Class ................................................. 11
Custody and fund accounting fees ............................. 290
Professional fees ............................................ 87
Registration fees and expenses ............................... 67
Service fees:
Investor Class (Note 2) ................................... 2,021
Advisor Class (Note 2) .................................... 68
Distribution fees - Advisor Class (Note 2) ................... 69
Prospectus and shareholder reports ........................... 418
Trustee fees ................................................. 183
Other expenses ............................................... 196
-----------
TOTAL EXPENSES ............................................ 16,169
-----------
Net fees waived and expenses reimbursed by Manager (Note 2) .. (9)
-----------
NET EXPENSES .............................................. 16,160
-----------
NET INVESTMENT INCOME ........................................... 13,566
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ............................................... (340,575)
Commission recapture (Note 1) ............................. 278
Futures contracts ......................................... (14,698)
Change in net unrealized appreciation or depreciation of:
Investments ............................................... 597,542
Futures contracts ......................................... 27,946
-----------
NET GAIN ON INVESTMENTS ................................ 270,493
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 284,059
===========
* Foreign taxes .............................................. $ 40
SEE ACCOMPANYING NOTES
16
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
STATEMENT OF CHANGES OF NET ASSETS (IN THOUSANDS)
Year Ended Year Ended
October 31, October 31,
2009 2008
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................................ $ 13,566 $ 32,606
Net realized loss on investments, futures contracts, and
foreign currency transactions ............................. (354,995) (266,287)
Change in net unrealized appreciation or (depreciation) of
investments, futures contracts, and foreign currency
translations .............................................. 625,488 (785,333)
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ................................................... 284,059 (1,019,014)
---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ....................................... (13,600) (13,291)
Investor Class ............................................ (8,841) (9,332)
Advisor Class ............................................. (311) (298)
AMR Class ................................................. (3,927) (4,903)
Net realized gain on investments:
Institutional Class ....................................... -- (152,714)
Investor Class ............................................ -- (145,952)
Advisor Class ............................................. -- (7,763)
AMR Class ................................................. -- (43,605)
---------- -----------
NET DISTRIBUTIONS TO SHAREHOLDERS ...................... (26,679) (377,858)
---------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ................................ 529,412 463,771
Reinvestment of dividends and distributions .................. 26,349 371,165
Cost of shares redeemed ...................................... (523,004) (879,196)
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE
---------- -----------
TRANSACTIONS ........................................... 32,757 (44,260)
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ........................... 290,137 (1,441,132)
---------- -----------
NET ASSETS:
Beginning of period .......................................... 1,769,308 3,210,440
---------- -----------
END OF PERIOD * .............................................. $2,059,445 $ 1,769,308
========== ===========
* Includes undistributed net investment income of ............... $ 9,850 $ 23,220
========== ===========
SEE ACCOMPANYING NOTES
17
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
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, as
amended (the "Act"), as a diversified, open-end management investment company.
These financial statements and notes to the financial statements relate to the
American Beacon Small Cap Value Fund (the "Fund"), a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of Lighthouse Holdings, Inc. and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
Class Disclosure
Prior to March 1, 2009, the Investor and Advisor Classes were known as the
PlanAhead and Service Classes, respectively. May 1, 2009 and August 3, 2009 are
the inception dates of the Retirement and Y Classes, respectively.
The Fund has multiple classes of shares designed to meet the needs of
different groups of investors. The following table sets forth the differences
amongst the classes:
CLASS: OFFERED TO:
- ------ -----------
INSTITUTIONAL CLASS Investors making an initial investment of $250,000
Y CLASS Investors making an initial investment of $100,000
INVESTOR CLASS General public and investors investing through an
intermediary
ADVISOR CLASS Investors investing through an intermediary
RETIREMENT CLASS Investors investing through an intermediary
AMR CLASS Investors in the tax-exempt retirement and benefit plans
of AMR Corporation and its affiliates
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in footnote 2.
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
Investments are valued at the close of the New York Stock Exchange (the
"Exchange"), normally 4 p.m. ET, each day that the Exchange is open for
business. Equity securities for which market quotations are available are valued
at the last sale price or official closing price (closing bid price or last
evaluated quote if no sale has occurred) on the primary market or exchange on
which they trade.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by an independent pricing service and may take into
account appropriate factors such as institution-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. The prices of debt securities may be
determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method, which approximates market value.
18
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
Securities for which market prices are not readily available or are not
reflective of the fair value of the security, as determined by the Manager, will
be priced at fair value following procedures approved by the Board of Trustees
(the "Board").
Valuation Inputs
Various inputs may be used to determine the value of the Fund's
investments. These inputs are summarized in three broad levels for financial
statement purposes. The inputs or methodologies used to value securities are not
necessarily an indication of the risk associated with investing in those
securities.
Level 1 - Quoted prices in active markets for identical
securities.
Level 2 - Prices determined using other significant observable
inputs. These may include quoted prices for similar
securities, interest rates, prepayment speeds, credit
risk, and others.
Level 3 - Prices determined using other significant unobservable
inputs. Unobservable inputs reflect the Fund's own
assumptions about the factors market participants would
use in pricing an investment, and would be based on the
best information available.
The Fund's investments are summarized by level based on the inputs used to
determine their values. As of October 31, 2009, the Fund's investments were
classified as follows: (in thousands)
Level 1 Level 2 Level 3 Total
---------- ------- ------- ----------
Common Stock ........................ $1,957,347 $ -- $-- $1,957,347
Short Term Investments .............. 196,851 8,267 -- 205,118
---------- ------ --- ----------
Total Investments in Securities .. $2,154,198 $8,267 $-- $2,162,465
========== ====== === ==========
Futures Contracts ................... $ 100,731 -- -- $ 100,731
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. The Fund may purchase securities with delivery or payment to
occur at a later date. At the time the Fund enters into a commitment to purchase
a security, the transaction is recorded and the value of the security is
reflected in the net asset value. The value of the security may vary with market
fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date
except certain dividends from foreign securities which are recorded as soon as
the information is available to the Fund. Interest income is earned from
settlement date, recorded on the accrual basis, and adjusted, if necessary, for
accretion of discounts and amortization of premiums. For financial and tax
reporting purposes, realized gains and losses are determined on the basis of
specific lot identification.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Fund may enter into
financial futures contracts as a method for keeping assets readily convertible
to cash if needed to meet shareholder redemptions or for other needs while
maintaining exposure to the stock or bond market, as applicable. The primary
risks associated with the use of futures contracts are the possibility of
illiquid markets or imperfect correlation between the values of the contracts
and the underlying securities, or that the counterparty will fail to perform its
obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The Fund reflects this
amount on the 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
19
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
contract fluctuates. Changes in initial settlement values are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at
which time realized gains and losses are recognized. Futures contracts are
valued at the most recent settlement price established each day by the exchange
on which they are traded.
Values of Derivative Instruments not accounted for as hedging instruments as of
October 31, 2009 (in thousands)
Liability
Statement of Assets and Liabilities Derivatives Fair Value
- ----------------------------------- ----------------- ----------
Unrealized appreciation of investments,
futures contracts, and foreign currency .. Equity Contracts* $(5,968)
Effect of derivative instruments not accounted for as hedging instruments during
the year ended October 31, 2009 (in thousands)
Statement of Operations Derivative Fair Value
- ----------------------------------- ----------------- ----------
Net realized gain (loss) from futures
contracts ................................ Equity Contracts $(14,698)
Change in net unrealized appreciation or
depreciation of futures contracts ........ Equity Contracts $ 27,946
* Includes cumulative appreciation/depreciation of futures contracts as
reported in the Schedule of Investments footnotes. Only current day's
variation margin is reported within the Statements of Assets and
Liabilities.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid at least annually. Distributions, if any, of net realized capital gains
are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with
certain brokers or dealers. If the Fund's investment advisor chooses to execute
a transaction through a participating broker, the broker rebates a portion of
the commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund. This amount is reported with the net realized gain in the Fund's Statement
of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class),
gains, and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the operations of
that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
20
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory, fund management, and securities lending services. Investment assets of
the Fund are managed by multiple investment advisors which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Fund an annualized fee equal to 0.05% of the average daily net
assets plus amounts paid by the Manager to the investment advisors hired by the
Manager to direct investment activities of the Fund. Management fees paid during
the year ended October 31, 2009 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT FEE RATE MANAGEMENT FEE INVESTMENT ADVISORS RETAINED BY MANAGER
- ------------------- -------------- ------------------- -------------------
0.30%-0.55% $7,981 $7,118 $863
As compensation for services provided by the Manager in connection with
securities lending activities, the lending Fund pays to the Manager, with
respect to cash collateral posted by borrowers, a fee up to 25% of the net
monthly interest income (the gross interest income earned by the investment of
cash collateral, less the amount paid to borrowers and related expenses) from
such activities and, with respect to loan fees paid by borrowers when a borrower
posts collateral other than cash, a fee up to 25% of such loan fees. This fee is
netted against securities lending income in the Statement of Operations. During
the year ended October 31, 2009, securities lending fees paid to the Manager
were $376,084.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
which obligates the Manager to provide or oversee administrative services to the
Fund. As compensation for performing the duties required under the
Administrative Services Agreement, the Manager receives an annualized fee of
0.30% of the average daily net assets of the Institutional, Y, Investor,
Advisor, and Retirement Classes of the Fund and 0.05% of the average daily net
assets of the AMR Class of the Fund.
Distribution Plans
The Fund, except for the Advisor and Retirement Classes of the Fund, has
adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule
12b-1 under the Act, pursuant to which no fees may be charged to the Fund for
distribution purposes. However, the Plan authorizes the management and
administrative service fees received by the Manager and the investment advisors
hired by the Manager to be used for distribution purposes. Under this Plan, the
Fund does not intend to compensate the Manager or any other party, either
directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the "Distribution Plans") have been adopted
pursuant to Rule 12b-1 under the Act for the Advisor and Retirement Classes of
the Fund. Under the Distribution Plans, as compensation for distribution
assistance, the Manager receives an annual fee of 0.25% of the average daily net
assets of the Advisor Class and 0.50% of the average daily net assets of the
Retirement 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 Y, Investor, Advisor
and Retirement Classes. As compensation for performing the duties required under
the Service Plans, the Manager receives 0.10% of the average daily net assets of
the Y Class, 0.25% of
21
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
the average daily net assets of the Advisor and Retirement Classes, and up to
0.375% of the average daily net assets of the Investor Class of the Fund.
Brokerage Commissions
Affiliated entities of a sub-advisor to the Fund received net commissions
on purchases and sales of the Fund's portfolio securities totaling $36,667 for
the year ended October 31, 2009.
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the
"MM Select Fund") and the American Beacon US Government Money Market Select Fund
(the "USG Select Fund"), (collectively the "Select Funds"). Cash collateral
received by the Fund in connection with securities lending may be invested in
the Select Funds. The Select Funds and the Fund have the same investment advisor
and therefore, are considered to be affiliated. The Manager serves as investment
advisor to the Select Funds and receives from the Select Funds an annualized fee
of 0.09% of the average daily net assets of the Select Funds. During the year
ended October 31, 2009, the Manager earned fees from the Select Funds totaling
$18,730 on the Fund's direct investment in the Select Funds and $43,516 from the
Fund's securities lending collateral invested in the Select Funds.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from other
participating Funds. During the year ended October 31, 2009, the Fund did not
utilize the credit facility.
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may
seek repayment of fees waived or expenses reimbursed for a period of up to three
years. However, reimbursement will occur only if the Class's average net assets
have grown or expenses have declined sufficiently to allow reimbursement without
causing its expense ratio to exceed the previously agreed upon contractual
expense limit. During the year ended October 31, 2009, the Advisor Class waived
$9,375. A liability has not been booked as the Manager does not intend to seek
repayment of this reimbursement.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to 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.
The Fund does not have any unrecognized tax benefits in the accompanying
financial statements. Each of the tax years in the four year period ended
October 31, 2008 remains subject to examination by the Internal Revenue Service.
If applicable, the Fund recognizes interest accrued related to unrecognized tax
benefits in interest expense and penalties in "Other expenses" on the Statement
of Operations.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid during the fiscal years ended
October 31, 2009 and October 31, 2008 were as follows (in thousands):
22
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
2009 2008
----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME*
Institutional Class .. $13,600 $ 37,816
Investor Class ....... 8,841 32,770
Advisor Class ........ 311 1,545
AMR Class ............ 3,927 11,905
LONG-TERM CAPITAL GAIN
Institutional Class .. -- 128,189
Investor Class ....... -- 122,514
Advisor Class ........ -- 6,516
AMR Class ............ -- 36,603
------- --------
TOTAL DISTRIBUTIONS PAID ... $26,679 $377,858
======= ========
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of October 31, 2009, the components of distributable earnings on a tax basis
were as follows (in thousands):
Cost basis of investments for federal income tax purposes .. $2,161,523
Unrealized appreciation .................................... 225,324
Unrealized depreciation .................................... (224,382)
----------
Net unrealized appreciation/(depreciation) ................. 942
Undistributed ordinary income .............................. 7,869
Undistributed long-term gain/(loss) ........................ (577,607)
Other temporary differences ................................ (5,968)
----------
Distributable earnings ..................................... $ (574,764)
==========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash sales, the realization for tax purposes
of unrealized gains/(losses) on certain derivative instruments, and
reclassifications of income from real estate investment securities.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, foreign currency, and dividend reclasses that have been reclassified
as of October 31, 2009 (in thousands):
Paid-in-capital ......................................... $ --
Undistributed net investment income (loss) .............. (257)
Accumulated net realized gain (loss) .................... 258
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency ............... (1)
At October 31, 2009 the capital loss carry forward positions for federal
income tax purposes were $259,968 and $323,607 expiring in 2016 and 2017
respectively. (in thousands)
4. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, for the year ended October 31, 2009 were (in
thousands) $1,143,259 and $993,662, respectively.
A summary of the Fund's direct transactions in the Select Funds for the
year ended October 31, 2009 is set forth below (in thousands):
23
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
OCTOBER 31, 2008 OCTOBER 31, 2009
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------------------- ------------------- --------- ------- -------------------
MM Select Fund ...... $93,829 $ -- $93,829 $ --
USG Select Fund ..... $ -- $30,000 $10,000 $20,000
5. SECURITIES LENDING
The Fund may lend its securities to qualified financial institutions, such
as certain broker-dealers, to earn additional income. The borrowers are required
to secure their loans continuously with collateral in an amount at least equal
to the fair value of the securities loaned, initially in an amount at least
equal to 102% of the fair value of domestic securities loaned and 105% of the
fair value of international securities loaned. Collateral is monitored and
marked to market daily. Daily mark to market amounts are required to be paid to
the borrower or received from the borrower by the end of the following business
day. This one day settlement for mark to market amounts may result in the
collateral being temporarily less than the value of the securities on loan or
temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral
shall be invested by the securities lending agent (the "Agent") in money market
mutual funds, and other short-term investments, provided the investments meet
certain quality and diversification requirements.
Securities lending income is generated from the demand premium (if any)
paid by the borrower to borrow a specific security and from the return on
investment of cash collateral, reduced by negotiated rebate fees paid to the
borrower and transaction costs. To the extent that a loan is secured by non-cash
collateral, securities lending income is generated as a demand premium reduced
by transaction costs. The Fund, the Agent, and the Manager retain 75%, 15%, and
10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive any income
associated with that security and any gain or loss in the market price that may
occur during the term of the loan.
Securities lending transactions pose certain risks to the Fund, including
that the borrower may not provide additional collateral when required or return
the securities when due, that the value of the short-term investments will be
less than the amount of cash collateral required to be returned to the borrower,
that non-cash collateral may be subject to legal constraints in the event of a
borrower bankruptcy, and that the cash collateral investments could become
illiquid and unable to be used to return collateral to the borrower. The Fund
could also experience delays and costs in gaining access to the collateral. The
Fund bears the risk of any deficiency in the amount of the cash collateral
available for return to the borrower and any action which impairs its ability to
liquidate non-cash collateral to satisfy a borrower default.
As of October 31, 2009, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
MARKET VALUE OF
SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL POSTED BY BORROWER
- ------------------ ------------------- ----------------------------------
$ 99,198 $-- $101,879
Cash collateral is listed in the Fund's Schedule of Investments and is
shown on the Statement of Assets and Liabilities. Income earned on these
investments is included in Income derived from securities lending in the
Statement of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged
except to satisfy a borrower default. Therefore, non-cash collateral is not
included on the Fund's Schedule of Investments or Statement of Assets and
Liabilities.
24
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
6. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Fund (dollars and shares in thousands):
Year Ended October 31, 2009
INSTITUTIONAL CLASS Y CLASS INVESTOR CLASS
------------------- ----------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ -------- ------- ---------
Shares sold ............................ 26,973 $ 326,038 -- $ 1 11,685 $ 134,422
Reinvestment of dividends .............. 1,227 13,407 -- -- 813 8,704
Shares redeemed ........................ (21,813) (257,527) -- -- (18,535) (216,176)
------- --------- --- --- ------- ----------
Net increase (decrease) in shares
outstanding ......................... 6,387 $ 81,918 -- $ 1 (6,037) $(73,050)
======= ========= === === ======= ==========
ADVISOR CLASS RETIREMENT CLASS AMR CLASS
------------------- ----------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ -------- ------- ---------
Shares sold ............................ 752 $ 8,517 -- $ 1 4,659 $ 60,433
Reinvestment of dividends .............. 29 311 -- -- 361 3,927
Shares redeemed ........................ (1,513) (17,313) -- -- (2,907) (31,988)
------- -------- --- --- ------ --------
Net increase (decrease) in shares
outstanding ......................... (732) $ (8,485) -- $ 1 (2,113) $(32,372)
======= ======== === === ====== ========
Year Ended October 31, 2008
INSTITUTIONAL CLASS INVESTOR CLASS ADVISOR CLASS AMR CLASS
------------------- ----------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- --------- ------ -------- ------- --------- ------- ---------
Shares sold ............................ 14,496 $ 244,453 10,422 $172,430 888 $ 14,694 1,925 $ 32,194
Reinvestment of dividends .............. 8,983 161,791 8,677 152,805 460 8,061 2,708 48,508
Shares redeemed ........................ (21,496) (364,982) (22,737) (376,472) (1,809) (29,610) (6,475) (108,132)
------- --------- ------- -------- ------ --------- ------ ---------
Net increase (decrease) in shares
outstanding ......................... 1,983 $ (41,262) (3,638) $(51,237) (461) $ (6,855) (1,842) $ (27,430)
======= ========= ======= ======== ====== ========= ====== =========
7. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in
the Fund's financial statements through December 23, 2009. Management has
determined that there are no material events that would require disclosure in
the Fund's financial statements through this date.
25
AMERICAN BEACON SMALL CAP VALUE FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class Y Class
--------------------------------------------------------- -----------
August
Year Ended October 31, 3 to
--------------------------------------------------------- October
2009 2008 2007 2006 2005(A) 31, 2009
---------- -------- ---------- ---------- ---------- -----------
Net asset value, beginning
of period .................. $ 12.53 $ 22.10 $ 22.53 $ 20.43 $ 18.85 $ 14.03
---------- -------- ---------- ---------- ---------- -----------
Income from investment
operations:
Net investment income
(loss) .................. 0.10 0.25 0.22 0.19 0.11 0.00
Net gains (losses) on
securities (both realized
and unrealized) ......... 1.96 (7.13) 1.10 2.94 2.31 0.34
---------- -------- ---------- ---------- ---------- -----------
Total income (loss) from
investment operations ...... 2.06 (6.88) 1.32 3.13 2.42 0.34
---------- -------- ---------- ---------- ---------- -----------
Less distributions:
Dividends from net
investment income ....... (0.20) (0.22) (0.19) (0.14) (0.07) --
Distributions from net
realized gains on
securities .............. -- (2.47) (1.56) (0.89) (0.77) --
---------- -------- ---------- ---------- ---------- -----------
Total distributions ........... (0.20) (2.69) (1.75) (1.03) (0.84) --
---------- -------- ---------- ---------- ---------- -----------
Net asset value, end of
period ..................... $ 14.39 $ 12.53 $ 22.10 $ 22.53 $ 20.43 $ 14.37
========== ======== ========== ========== ========== ===========
Total return(E) ............... 16.97% (34.84)% 6.10% 15.80% 12.90% 2.42%(C)
========== ======== ========== ========== ========== ===========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .......... $1,040,805 $826,232 $1,413,734 $1,319,024 $1,076,909 $ 1
Ratios to average net
assets (annualized):
Expenses, net of
waivers .............. 0.84% 0.81% 0.80% 0.82% 0.87% 1.11%(D)
Expenses before
waivers .............. 0.84% 0.81% 0.80% 0.82% 0.87% 1.11%(D)
Net investment
income (loss), net of
waivers .............. 0.87% 1.36% 0.94% 0.83% 0.66% 0.03%(D)
Net investment
income (loss),
before waivers ....... 0.87% 1.36% 0.94% 0.83% 0.66% 0.03%(D)
Portfolio turnover rate .... 61% 62% 52% 48% 47% 61%(B)
Investor Class
-------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------
2009 2008 2007 2006 2005(A)
-------- -------- ---------- ---------- ----------
Net asset value, beginning
of period .................. $ 12.22 $ 21.62 $ 22.08 $ 20.04 $ 18.54
-------- -------- ---------- ---------- ----------
Income from investment
operations:
Net investment income
(loss) .................. 0.08 0.20 0.16 0.13 0.09
Net gains (losses) on
securities (both realized
and unrealized) ......... 1.91 (6.97) 1.07 2.89 2.24
-------- -------- ---------- ---------- ----------
Total income (loss) from
investment operations ...... 1.99 (6.77) 1.23 3.02 2.33
-------- -------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income ....... (0.16) (0.16) (0.13) (0.09) (0.06)
Distributions from net
realized gains on
securities .............. -- (2.47) (1.56) (0.89) (0.77)
-------- -------- ---------- ---------- ----------
Total distributions ........... (0.16) (2.63) (1.69) (0.98) (0.83)
-------- -------- ---------- ---------- ----------
Net asset value, end of
period ..................... $ 14.05 $ 12.22 $ 21.62 $ 22.08 $ 20.04
======== ======== ========== ========== ==========
Total return(E) ............... 16.68% (35.04)% 5.83% 15.56% 12.63%
======== ======== ========== ========== ==========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .......... $719,239 $699,670 $1,316,188 $1,333,814 $1,320,853
Ratios to average net
assets (annualized):
Expenses, net of
waivers .............. 1.15% 1.06% 1.05% 1.06% 1.10%
Expenses before
waivers .............. 1.15% 1.06% 1.05% 1.06% 1.10%
Net investment
income (loss), net of
waivers .............. 0.59% 1.12% 0.70% 0.59% 0.42%
Net investment
income (loss),
before waivers ....... 0.59% 1.12% 0.70% 0.59% 0.42%
Portfolio turnover rate .... 61% 62% 52% 48% 47%
Retirement
Advisor Class Class
--------------------------------------------------------- -----------
Year Ended October 31, May 1 to
--------------------------------------------------------- October 31,
2009 2008 2007 2006 2005(A) 2009
---------- -------- ---------- ---------- ---------- -----------
Net asset value, beginning
of period .................. $ 12.13 $ 21.46 $ 21.94 $ 19.94 $ 18.49 $ 11.58
---------- -------- ---------- ---------- ---------- -----------
Income from investment
operations:
Net investment income
(loss) .................. 0.06 0.16 0.10 0.07 0.04 (0.02)
Net gains (losses) on
securities (both realized
and unrealized) ......... 1.90 (6.93) 1.07 2.88 2.23 2.39
---------- -------- ---------- ---------- ---------- -----------
Total income (loss) from
investment operations ...... 1.96 (6.77) 1.17 2.95 2.27 2.37
---------- -------- ---------- ---------- ---------- -----------
Less distributions:
Dividends from net
investment income ....... (0.12) (0.09) (0.09) (0.06) (0.05) --
Distributions from net
realized gains on
securities .............. -- (2.47) (1.56) (0.89) (0.77) --
---------- -------- ---------- ---------- ---------- -----------
Total distributions ........... (0.12) (2.56) (1.65) (0.95) (0.82) --
---------- -------- ---------- ---------- ---------- -----------
Net asset value, end of
period ..................... $ 13.97 $ 12.13 $ 21.46 $ 21.94 $ 19.94 $ 13.95
========== ======== ========== ========== ========== ===========
Total return(E) ............... 16.41% (35.19)% 5.55% 15.23% 12.32% 20.47%(C)
========== ======== ========== ========== ========== ===========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .......... $ 28,333 $ 33,479 $ 69,112 $ 70,602 $ 44,709 $ 1
Ratios to average net
assets (annualized):
Expenses, net of
waivers .............. 1.31% 1.31% 1.32% 1.34% 1.40% 1.53%(D)
Expenses before
waivers .............. 1.34% 1.31% 1.32% 1.34% 1.40% 1.53%(D)
Net investment
income (loss), net of
waivers .............. 0.48% 0.86% 0.43% 0.31% 0.12% (0.28)%(D)
Net investment
income (loss),
before waivers ....... 0.44% 0.86% 0.43% 0.31% 0.12% (0.28)%(D)
Portfolio turnover rate .... 61% 62% 52% 48% 47% 61%(B)
AMR Class
-------------------------------------------------------
Year Ended October 31,
-------------------------------------------------------
2009 2008 2007 2006 2005(A)
-------- -------- ---------- ---------- ----------
Net asset value, beginning
of period .................. $ 12.48 $ 22.05 $ 22.48 $ 20.38 $ 18.78
-------- -------- ---------- ---------- ----------
Income from investment
operations:
Net investment income
(loss) .................. 0.11 0.33 0.30 0.27 0.21
Net gains (losses) on
securities (both realized
and unrealized) ......... 1.97 (7.15) 1.08 2.91 2.26
-------- -------- ---------- ---------- ----------
Total income (loss) from
investment operations ...... 2.08 (6.82) 1.38 3.18 2.47
-------- -------- ---------- ---------- ----------
Less distributions:
Dividends from net
investment income ....... (0.24) (0.28) (0.25) (0.19) (0.10)
Distributions from net
realized gains on
securities .............. -- (2.47) (1.56) (0.89) (0.77)
-------- -------- ---------- ---------- ----------
Total distributions ........... (0.24) (2.75) (1.81) (1.08) (0.87)
-------- -------- ---------- ---------- ----------
Net asset value, end of
period ..................... $ 14.32 $ 12.48 $ 22.05 $ 22.48 $ 20.38
======== ======== ========== ========== ==========
Total return(E) ............... 17.30% (34.71)% 6.39% 16.12% 13.23%
======== ======== ========== ========== ==========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .......... $271,066 $209,927 $ 411,406 $ 412,857 $ 424,965
Ratios to average net
assets (annualized):
Expenses, net of
waivers .............. 0.59% 0.56% 0.54% 0.55% 0.58%
Expenses before
waivers .............. 0.59% 0.56% 0.54% 0.55% 0.58%
Net investment
income (loss), net of
waivers .............. 1.11% 1.62% 1.21% 1.10% 0.94%
Net investment
income (loss),
before waivers ....... 1.11% 1.62% 1.21% 1.10% 0.94%
Portfolio turnover rate .... 61% 62% 52% 48% 47%
(A) Opus Capital Group, LLC was added as an investment advisor on February 1,
2005 and Metropolitan West Capital Management, LLC and Dreman Value
Management, LLC were added as investment advisors on August 31, 2005.
(B) Portfolio turnover rate is for the period from November 1, 2008 through
October 31, 2009.
(C) Not annualized.
(D) Annualized.
(E) May include adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions.
26
AMERICAN BEACON FUNDS
PRIVACY POLICY & FEDERAL TAX INFORMATION
(UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service providers;
and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
For corporate shareholders in the Fund, the percentage of ordinary dividend
income distributed for the year ended October 31, 2009, which is designated as
qualifying for the dividends-received deduction, was 38.12%.
For shareholders in the Fund, the percentage of dividend income distributed
for the year ended October 31, 2009, which is designated as qualified dividend
income under the Jobs Growth Tax Relief Act of 2003, was 69.55%. Shareholders
will receive notification in January 2010 of the percentage applicable to the
preparation of their 2009 income tax returns.
27
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
At its May 27, 2009 meeting, the Board of Trustees ("Board") considered the
renewal of each existing Management Agreement between American Beacon Advisors,
Inc. (the "Manager") and the American Beacon Funds ("Beacon Trust") (the
"Funds") and each Investment Advisory Agreement between the Manager and a
subadvisor ("Investment Advisory Agreements" and collectively with the
Management Agreement, the "Agreements"). In preparation for the Board's
consideration to renew these Agreements, the Board and its Investment Committee
undertook steps to gather and consider information furnished by the Manager, the
subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of
independent legal counsel, requested and received certain relevant information
from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 13, 2009 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
In connection with the Board's consideration of the Management Agreement
and each Investment Advisory Agreement, the Trustees considered, among other
materials, responses by the Manager and the subadvisors to inquiries requesting:
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's most recent audited or unaudited financial
statements, as well as Parts 1 and II of its Form ADV registration
statement with the SEC;
- a summary of any material 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 profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- a description of any payments by the subadvisors to the manager to
support the Funds' marketing efforts;
- an evaluation of any other benefits to the firm or Funds as a result
of their relationship, if any;
- confirmation that the firm's financial condition would not impair its
ability to provide high-quality advisory services to the Funds;
- a description of any internal actions the firm has taken or
anticipates taking in light of the current and projected decrease in
revenues from prior years as a result of the current economic
environment and, as applicable, information regarding the firm's
decline in assets under management from January 1, 2008 through March
31, 2009;
- a description of the scope of portfolio management services provided
to the Funds, including whether such services differ from the services
provided to other clients, including other registered investment
companies, and any advantages or disadvantages that might accrue to
the Funds due to the firm's involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- 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;
28
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates
- a certification by the firm regarding the reasonable design of its
compliance program;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto and a related certification of compliance by
the firm;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and
- verification of the firm's insurance coverage with regards to the
services provided to the Funds.
In addition to the foregoing, the Manager provided the following
information specific to the renewal of the Management Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of any revenue sharing activities with respect to the
Funds;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Management Agreement and each Investment Advisory
Agreement, the Board also obtained an analysis provided by Lipper that compared:
(i) investment performance of each Fund versus comparable investment companies
and appropriate indices; (ii) total Fund expenses of each Fund versus comparable
mutual funds; and (iii) each Fund's investment advisory fees versus comparable
mutual funds. For each Fund with more than one class of shares, the class of
shares used for comparative purposes was the class with the longest performance
history, which in most cases was the Institutional Class. References below to
each Fund's Lipper peer group are to the group of comparable mutual funds
included in the analysis provided by Lipper.
Provided below is an overview of the primary factors the Trustees
considered at the Investment Committee meeting on May 13, 2009 at which the
Trustees reviewed the investment performance of the Manager and each subadvisor
and the primary factors considered by the Board at its May 27, 2009 meeting at
which the Board considered the renewal of the Agreements. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Management Agreement and each Investment Advisory Agreement, and
each Trustee may have afforded different weight to the various factors. Legal
counsel to the independent Trustees provided the Board with a memorandum
regarding its responsibilities pertaining to the renewal of the Agreements. The
memorandum explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts. Based
on its evaluation, the Board unanimously concluded that the terms of each
Agreement were reasonable and fair and that the renewal of each Agreement was in
the best interests of the Funds and their shareholders.
Considerations With Respect to All Funds
In determining whether to renew the Management Agreement and each
Investment Advisory Agreement, the Trustees considered the best interests of
each Fund separately. While the Management Agreement and the Investment Advisory
Agreements for all of the Funds were considered at the May 27, 2009 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
29
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
provided; (2) the investment performance of a Fund and, as applicable, each
subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent
provided) the subadvisors in rendering their services and their resulting
profits or losses; (4) the extent to which economies of scale have been taken
into account in setting each fee schedule; (5) whether fee levels reflect these
economies of scale for the benefit of Fund investors; (6) comparisons of
services and fees with contracts entered into by the Manager or a subadvisor or
their affiliates with other clients (such as pension funds and other
institutional funds); and (7) any other benefits derived or anticipated to be
derived by the Manager or a subadvisor from their relationship with a Fund. The
Trustees posed questions to various management personnel of the Manager
regarding certain key aspects of the materials submitted in support of the
renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the
Management Agreement, the Board considered: the background and experience of key
investment personnel and the Manager's ability to retain them; the Manager's
disciplined investment approach and goal to provide consistent above average
long-term performance at a low cost; the Manager's continuing efforts to add new
series and share classes 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.
With respect to the renewal of each Investment Advisory Agreement, the
Trustees considered the background and experience of each subadvisor's
investment personnel responsible for managing the Funds, the size of the
subadvisor and their ability to continue to attract and retain qualified
investment personnel. Based on the foregoing information, the Board concluded
that the nature, extent and quality of the management and advisory services
provided by the Manager and each subadvisor were appropriate for each Fund and,
thus, determined to renew the Management Agreement and the Investment Advisory
Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. The Manager also noted that it generally was
satisfied with the performance of the subadvisors. A discussion regarding the
Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services Provided to the Funds and the Profits Realized by the
Manager from its Relationship with the Funds. In analyzing the cost of services
and profitability of the Manager and a subadvisor by Fund, the Board considered
the revenues earned and the expenses incurred by the Manager. The profits or
losses were noted at both an individual Fund level and at an aggregate level for
all Funds. The Board also considered that the Management Agreement for the
Beacon Trust, stipulates that, to the extent that a Fund invests all of its
investable assets in another registered investment company (i.e., is a "Feeder
Fund"), the Fund will not pay the Manager a management fee. The index series of
the Funds also operate under a master-feeder structure, but each of these series
invests in a master portfolio that is not managed by the Manager. As such, the
Board considered that the Manager does not receive a management fee with respect
to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. With
respect to the Short-Term Bond Fund, the Board also considered the Manager's
advisory fees for services provided by the Manager to institutional separate
accounts with similar investment strategies. Although the Board noted that, in
certain cases, the fee rates paid by other clients is lower than the fee rates
paid by the Funds, the difference reflects the greater level of responsibility
and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year and to discontinue the expense waivers and
reimbursements for certain classes of the Funds that were closing or maintained
competitive expense ratios without such expense waivers. The Board further
considered that each subadvised Fund pays the Manager the amounts due to its
subadvisors, and the Manager remits these amounts directly to the applicable
subadvisors. The Board considered that the Manager receives service and
administrative fees to compensate the Manager for providing administrative
services to the Funds and to compensate third-party administrators and
broker-dealers for services to Fund shareholders. In addition, the Board
considered that the Manager receives management fees for overseeing the
securities lending relationships on behalf of various Funds. The Board also
noted that certain classes of the Funds maintain higher expense ratios in order
to compensate third-party distributors.
In analyzing the cost of services and profitability for each subadvisor in
connection with its investment advisory services to the Fund, the Board
considered that, in many cases, the Manager has negotiated the lowest
subadvisory fee a subadvisor charges for any comparable client accounts. The
Board gave less weight to profitability considerations or did not view this data
as imperative to its deliberations given the arm's length nature of the
relationship between the Manager and the subadvisors with respect to the
negotiation of subadvisory fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management and
investment advisory fees, the Board considered whether economies of scale will
be realized as the Funds grow and whether fee levels reflect these economies of
scale for the benefit of Fund shareholders. In this regard, the Board considered
that the Manager has negotiated breakpoints in many subadvisory fee rates. The
Board also noted that, for purposes of determining the fee rates chargeable to
the Funds, many subadvisors have agreed to take into account other assets of AMR
Corporation and its pension plans that are managed by the subadvisors. Thus, the
Funds are able to receive lower effective fee rates. The Board also noted the
Manager's representation that Fund assets have decreased significantly primarily
due to market depreciation in 2008 and the first quarter of 2009, as well as
significant share redemptions from the Money Market Funds and the inability of
certain competitor money market funds' to maintain positive yields, causing mass
redemptions in money market funds throughout
30
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT
AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
the industry. Based on the foregoing information, the Board concluded that the
Manager and subadvisor fee schedules for each Fund provides for a reasonable
sharing of benefits from any economies of scale with the Fund.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager and/or the
subadvisors as a result of the advisory relationships with the Funds, including
greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. The Board also considered that
the Manager's relationship with the Funds continues to be a significant factor
in attracting separate account assets for the Manager, noting specifically the
Manager's utilization of the Large Cap Value Fund model for a newly registered
actively managed exchange traded fund managed by the Manager. In addition, the
Board noted that the Manager provides services to each Trust at a relatively low
cost. The Board considered that certain of the subadvisors reimburse the Manager
for certain of its costs relating to distribution activities for the Funds. The
Board also considered that Funds did not pay commissions to any affiliated
broker-dealer of the Manager or the relevant subadvisor during the most recent
fiscal year ended October 31.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager and the subadvisors by virtue of their
relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
Except for the Short-Term Bond Fund, the performance comparisons below were
made versus each Fund's Lipper peer universe median. References to the Lipper
expense universe below are to the universe of comparable mutual funds included
in the analysis provided to the Trustees by Lipper, Inc.
Additional Considerations and Conclusions with Respect to the Small Cap Value
Fund
In considering the renewal of the Management Agreement for the Small Cap
Value Fund, the Trustees considered the following additional factors: (1) the
Small Cap Value Fund outperformed the peer universe median for the one-, three-,
and ten-year periods ended March 31, 2009 but underperformed for the five-year
period; and (2) the expense ratio of the Institutional Class of Fund shares
ranked better than the median of its Lipper expense universe.
In considering the renewal of the Investment Advisory Agreements with
Barrow, Brandywine, Dreman Value Management, LLC ("Dreman"), Hotchkis, MetWest,
TBC, and Opus Capital Group, LLC ("Opus"), the Trustees considered the following
additional factors: (1) Hotchkis outperformed the peer universe median for the
ten-year period and the quarter ended March 31, 2009, but underperformed for the
one- three- and five-year periods; (2) Brandywine outperformed the peer universe
median for the three- and ten-year periods ended March 31, 2009, but
underperformed for the one- and five-year periods; (3) Barrow outperformed the
peer universe median for the three- and five-year periods ended March 31, 2009,
but underperformed for the one-year period; (4) TBC and Opus outperformed the
peer universe median for the one- and three-year periods ended March 31, 2009;
(5) Dreman and MetWest have not been allocated a portion of Fund assets to date;
(6) management's analysis regarding the rationale for Hotchkis', Brandywine's
and Barrow's underperformance; (7) that management will continue to monitor, and
the Board or its Investment Committee will periodically review, Barrow's
investment performance with respect to its allocated portion of the Small Cap
Value Fund's assets; (8) Barrow, Brandywine, Hotchkis, and TBC informed the
Manager that they use Fund commissions to obtain proprietary research, the
application of which benefits the Fund and each of those subadvisors' clients;
(9) Barrow, Brandywine, Hotchkis and TBC have indicated that they do not charge
lower advisory fees to other clients for which they provide comparable services;
and (10) the Manager's recommendation to continue to retain each subadvisor.
Based on these and other considerations the Trustees (1) concluded that the
fees paid to the Manager and the subadvisors under the Agreements are fair and
reasonable, (2) determined that the Small Cap Value Fund and its shareholders
would benefit from the Manager's and subadvisors' continued management of the
Fund and (3) approved the renewal of the Management and Investment Advisory
Agreements with respect to the Small Cap Value Fund.
31
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees nineteen funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is a
Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld,
LLP (1960-Present); Director, Clear Channel Communications
(1984-Present); Trustee, CenterPoint Properties (1994-2006);
Member, Board of Trustees, Southern Methodist University;
Member, Board of Visitors, M.D. Anderson Hospital; Board of
Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage
Funds (1996-present); Trustee, American Beacon Select Funds
(1996-present); Trustee, American Beacon Master Trust Funds
(1996-present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation
(1992-2004); Consultant, New River Canada Ltd. (mutual fund
servicing company) (1998-2003); President and CEO, Allmerica
Trust Company, NA (1996-1997); President and CEO, Fidelity
Investments Southwest Company (1983-1995); Senior Vice President
of Regional Centers, Fidelity Investments (1988-1995); Trustee,
American Beacon Mileage Funds (2004-present); Trustee, American
Beacon Select Funds (2004-present); Trustee, American Beacon
Master Trust Funds (2004-present).
Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and
Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas
Christian University (1998-Present); Trustee, W.I. Cook
Foundation, Inc. (d/b/a Cook Children's Health Foundation)
(2001-2006); Director, Christian Church Foundation (1999-2007);
Trustee, American Beacon Mileage Funds (2004-present); Trustee,
American Beacon Select Funds (2004-present); Trustee, American
Beacon Master Trust Funds (2004-present).
Eugene J. Duffy (55) Trustee since 2008 Bank of Atlanta (2008-Present); Chairman, Special Contributions
Fund Board of Trustees, National Association for the Advancement
of Colored People (2007-Present); Trustee, National Association
for the Advancement of Colored People (2000-Present); Board of
Visitors, Emory University (2006-Present); Trustee, Atlanta
Botanical Garden (2006-Present); Board Member, Willie L. Brown
Jr. Institute on Politics and Public Service (2001-Present);
Chair, National Association of Securities Professionals
(2000-2002); Deputy Chief Administrative Officer, City of
Atlanta (1985-1990); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds
(2008-present); Trustee, American Beacon Master Trust Funds
(2008-present).
32
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------------------
Thomas M. Dunning (66) Trustee since 2008 Consultant, (2008-Present); Chairman (2003-2008) and Chief
Executive Officer (2003-2007), Lockton Dunning Benefits
(consulting firm in employee benefits); Director, Oncor Electric
Delivery Company LLC (2007-present); Advisory Director, Comerica
Texas (2003-present); Immediate Past Chairman and Board Member,
Dallas Citizens Council; Director, Baylor Health Care System
Foundation (2007-present); State Vice Chair, State Fair of
Texas; Board Member, Southwestern Medical Foundation
(1994-present); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds
(2008-present); Trustee, American Beacon Master Trust Funds
(2008-present).
Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present), Senior
Chairman since Vice President and General Counsel, Hunt Consolidated, Inc.
2008 (holding company engaged in oil and gas exploration and
production, refining, real estate, farming, ranching and venture
capital activities) (1994-2009). Chairman (2007-Present) and
Director (2005-Present), The Dallas Opera Foundation; Chairman
(2006-Present) and Director (2005-Present), Temple Emanu-El
Foundation; Trustee, Presbyterian Hospital Foundation
(2006-Present); Trustee, American Beacon Mileage Funds
(2004-present); Trustee, American Beacon Select Funds
(2004-present); Trustee, American Beacon Master Trust Funds
(2004-present).
R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Company,
Southern Methodist Univ. Inc. (1996-Present); Director, California Federal Preferred
Dallas, Texas 75275 Capital Corp. (2001-2003); Director, Kronus Worldwide Inc.
(chemical manufacturing) (2003-Present); Director, First
Broadcasting Investment Partners, LLC (2003-2007); Member,
Salvation Army of Dallas Board of Directors; Member, Methodist
Hospital Advisory Board; Co-Chair, Knight Commission on
Intercollegiate Athletics; Trustee, American Beacon Mileage
Funds (2001-present); Trustee, American Beacon Select Funds
(2001-present); Trustee, American Beacon Master Trust Funds
(2001-present).
Paul J. Zucconi, CPA Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of
(68) nonstandard automobile insurance) (2004-present); Director,
Titanium Metals Corporation (producer of titanium melted and
mill products and sponge) (2002-present); Director, Torchmark
Corporation (life and health insurance products) (2002-present);
Director, National Kidney Foundation of North Texas
(2003-Present); Director, Dallas Chapter of National Association
of Corporate Directors (2004-Present); Partner, KPMG
(1976-2001); Trustee, American Beacon Mileage Funds
(2008-present); Trustee, American Beacon Select Funds
(2008-present); Trustee, American Beacon Master Trust Funds
(2008-present).
OFFICERS
Term
One Year
William F. Quinn** (61) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009) and CEO
President from (2006-2007), President (1986-2006) and Director (2003-Present),
2007 to 2008 and American Beacon Advisors, Inc.; Chairman (1989-2003) and
2009 to Present Director (1979-1989, 2003-Present), American Airlines Federal
President from Credit Union; Director, Crescent Real Estate Equities,
1987 to 2007 Inc. (1994-2007); Director, Pritchard, Hubble & Herr, LLC
and 2008 to 2009 (investment advisor) (2001-2006); Director of Investment
Trustee from Committee, Southern Methodist University Endowment Fund
1987 to 2008 (1996-Present); Member, Southern Methodist University Cox School
of Business Advisory Board (1999-2002); Member, New York Stock
Exchange Pension Manager Committee (1997-1998, 2000-2002,
2006-Present); Chairman (2007-Present) and Vice Chairman
(2004-2007), Committee for the Investment of Employee Benefits;
Director, United Way of Metropolitan Tarrant County (1988-2000,
2004-Present); Trustee, American Beacon Mileage Funds
(1995-2008); Trustee, American Beacon Select Funds (1999-2008);
Trustee, American Beacon Master Trust (1995-2008).
33
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------------------
Gene L. Needles, Jr. President 2009 to President, CEO and Director (2009-Present), American Beacon
(54) Present and Advisors, Inc. President (November 2009-Present), Executive Vice
Executive Vice President (May 2009-November 2009) of the American Beacon Funds,
President 2009 American Beacon Mileage Funds, American Beacon Select Funds, and
American Beacon Master Trust. President (2008-2009), Touchstone
Investments; President (2003-2007), CEO (2004-2007), Managing
Director of Sales (2002-2003), National Sales Manager
(1999-2002), and Regional Sales Manager (1993-1999), AIM
Distributors.
Rosemary K. Behan (50) VP, Secretary and Vice President, Legal and Compliance, American Beacon Advisors,
Chief Legal Inc. (2006-Present); Assistant General Counsel, First Command
Officer since 2006 Financial Planning, Inc. (2004-2006); Attorney (1995-2004),
Securities and Exchange Commission.
Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon
Advisors, Inc. (2004-Present); Regional Vice President,
Neuberger Berman, LLC (investment advisor) (1996-2004).
Wyatt Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors, Inc.
(2007-Present); Managing Director of Corporate Accounting
(2004-2007), Director of IT Strategy and Finance (2002-2004),
American Airlines, Inc.
Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present); Director American Beacon Global
Funds SPC (2002-present); Director, American Beacon Global Funds
plc (2007-2009).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors, Inc.
1995 (1995-Present).
Christina E. Sears (38) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American Beacon
and Asst. Advisors, Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's and Master Trust's sub-advisors.
34
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35
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36
(AMERICAN BEACON FUNDS(SM) 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:
(GRAPHIC)
BY E-MAIL:
american_beacon.funds@ambeacon.com
(GRAPHIC)
ON THE INTERNET:
Visit our website at www.americanbeaconfunds.com
(GRAPHIC)
BY TELEPHONE:
Institutional, Y, Investor, Advisor and Retirement Classes
Call (800) 658-5811
AMR Class(SM)
Call (800) 345-2345
(GRAPHIC)
BY MAIL:
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, the Fund files a complete schedule of its portfolio holdings with
the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and
third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website
at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's
Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information
regarding the operation of the SEC's Public Reference Room may be obtained by
calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is
also available on the Funds' website (www.americanbeaconfunds.com) approximately
thirty days after the end of each month.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures the Fund uses to determine how to
vote proxies relating to portfolio securities is available in the Fund's
Statement of Additional Information, is available free of charge on the Fund's
website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by
accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for
the most recent year ended June 30 is filed annually with the SEC on Form N-PX.
The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The
Fund's proxy voting record may also be obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
CUSTODIAN
STATE STREET BANK AND TRUST
Boston, Massachusetts
TRANSFER AGENT
BOSTON FINANCIAL DATA SERVICES
Kansas City, Missouri
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
Dallas, Texas
DISTRIBUTOR
FORESIDE FUND SERVICES
Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Beacon Funds and American Beacon Small Cap Value Fund are service marks
of American Beacon Advisors, Inc.
AR 10/09
00071318
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive
and financial officers (the "Code"). The Trust did not amend, nor grant
any waivers to, the provisions of the Code during the period covered by
the shareholder report presented in Item 1. The Code is filed herewith as
Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Mr. Paul Zucconi, a
member of the Trust's Audit and Compliance Committee, is an "audit committee
financial expert" as defined in Form N-CSR. Mr. Paul Zucconi is
"independent" as defined
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$280,229 10/31/2007
$85,006 12/31/2007
$294,836 10/31/2008
$88,878 12/31/2008
$298,018 10/31/2009
$72,414 12/31/2009
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$8,750 10/31/2007
$6,250* 12/31/2007 (revised)
$0 10/31/2008
$0 12/31/2008
$13,750* 10/31/2009
$0 12/31/2009
</Table>
<FN>
*Review of N-1A filings
</FN>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$29,199** 10/31/2007
$11,141 12/31/2007
$12,698* 10/31/2008
$6,095 12/31/2008
$10,077 10/31/2009
$10,257 12/31/2009
</Table>
<FN>
* For review of 2007 tax returns
** 2005 and 2006 tax compliance and tax advice
related to International Equity Fund reorganization
</FN>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 10/31/2007
$0 12/31/2007
$0 10/31/2008
$0 12/31/2008
$0 10/31/2009
$0 12/31/2009
</Table>
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and any
special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$37,949 $0 N/A 10/31/2007
$17,391 $0 N/A 12/31/2007 (revised)
$12,698 $0 N/A 10/31/2008
$6,095 $0 N/A 12/31/2008
$23,827 $0 N/A 10/31/2009
$10,257 $0 N/A 12/31/2009
</Table>
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder report presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached hereto
as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By /s/ Gene L. Needles, Jr.
----------------------
Gene L. Needles, Jr.
President
Date: January 6, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ Gene L. Needles, Jr.
----------------------
Gene L. Needles, Jr.
President
Date: January 6, 2010
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: January 6, 2010