As filed with the Securities and Exchange Commission on December 23, 2009
1933 Act Registration File No. 333-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___
[ ] Post-Effective Amendment No. ___
(Check appropriate box or boxes.)
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)
Registrant’s Telephone Number, including Area Code: (817) 967-3509
William F. Quinn, President
4151 Amon Carter Boulevard
MD 2450
Fort Worth, Texas 76155
(Name and Address of Agent for Service)
Copy to:
Francine J. Rosenberger, Esq.
K&L Gates LLP
1601 K Street, N.W.
Washington, D.C. 20006
Approximate Date of Proposed Public Offering: As soon as practicable after the Registration Statement becomes effective under the Securities Act of 1933, as amended.
It is proposed that this filing will become effective on January 22, 2009 pursuant to Rule 488.
Title of Securities Being Registered: Investor Class and Y Class shares of American Beacon Global Real Estate Fund, a series of the Registrant
No filing fee is due because the Registrant is relying on Section 24(f) of the Investment Company Act of 1940, as amended, pursuant to which it has previously registered an indefinite number of securities.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement
Letter to Shareholders
Notice of Special Meeting
Questions and Answers
Part A - Proxy Statement and Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
THE CNL FUNDS
CNL Global Real Estate Fund
450 South Orange Avenue
Orlando, FL 32801
January __, 2010
To the Shareholders:
We are pleased to announce that the CNL Global Real Estate Fund (the “CNL Fund”), the sole series of The CNL Funds (the “CNL Trust”), is proposing to reorganize into the American Beacon Global Real Estate Fund (the “AB Fund”), a newly created series of American Beacon Funds (the “AB Trust”). The AB Fund is designed to be substantially similar from an investment perspective to the CNL Fund.
A Special Meeting of Shareholders of the CNL Fund is to be held at 10:00 a.m. Eastern time on Thursday, February 22, 2010, at 450 South Orange Avenue, Orlando, FL 32801, where you will be asked to vote on the proposal to reorganize the CNL Fund into the AB Fund. A Combined Proxy Statement and Prospectus (the “Proxy Statement”) regarding the meeting, a proxy card for your vote at the meeting and a postage-prepaid envelope in which to return your proxy card are enclosed.
The reorganization transaction (the “Reorganization”) will shift management oversight responsibility for the CNL Fund from CNL Fund Advisors Company (“CNL Advisors”) to American Beacon Advisors, Inc. (the “Manager”). The Manager is an experienced provider of investment advisory services to institutional and retail investors, with over $14 billion mutual fund and $41 billion overall assets under management. Since 1986, the Manager has offered a variety of services and products, including corporate cash management, separate account management, and mutual funds.
By engaging CB Richard Ellis Global Real Estate Securities, LLC (the “Sub-Adviser”), an indirect subsidiary of CB Richard Ellis Group, Inc., one of the world’s largest publicly held commercial real estate services firms (in terms of 2008 revenues), the Manager will provide continuity of the portfolio management team that has been responsible for the CNL Fund’s performance record since its inception in 2007.The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the CNL Fund will remain the same.
The Reorganization will not result in any increase in the overall gross or net expense ratio nor any increase in the advisory fees payable by the AB Fund as compared to the expenses and advisory fees that are currently paid by the CNL Fund. If the Reorganization is approved by the CNL Fund shareholders, the front-end and contingent deferred sales charges currently applicable to Class A Shares of the CNL Fund will be eliminated. The AB Fund will charge a 2.00% early redemption fee on the proceeds of its shares that are redeemed within 90 days of their purchase; a 1.00% redemption fee generally applies to shares of the CNL Fund redeemed within 75 calendar days of purchase. Your CNL Fund share purchase date(s) will carry over to the AB Fund for purposes of determining whether or not an early redemption fee applies. The AB Fund early redemption fee of 2% will apply, if applicable to your particular situation.
The primary purpose of the Reorganization is to move the CNL Fund to the American Beacon Family of Funds. Reconstituting the CNL Fund as a series of the AB Trust has the potential to expand the distribution capabilities and increase the asset base associated with this investment portfolio.
If CNL Fund shareholders approve the Reorganization, it will take effect on or about February 26, 2010. At that time, the CNL Fund Class A and/or Institutional Class Shares you currently own would, in effect, be exchanged on a tax-free basis for, respectively, Investor Class and Y Class shares of the AB Fund with the same aggregate value, as follows:
CNL Global Real Estate Fund | à | American Beacon Global Real Estate Fund |
Class A Shares | à | Investor Class shares |
Institutional Class Shares | à | Y Class shares |
No sales loads, commissions or other transactional fees will be imposed on shareholders in connection with the tax-free exchange of their shares.
The Board of Trustees of the CNL Trust (the “CNL Board”) unanimously recommends that the shareholders vote in favor of the proposed Reorganization.
Detailed information about the proposal is contained in the enclosed materials. Whether or not you plan to attend the meeting in person, we need your vote. Once you have decided how you will vote, please promptly complete, sign, date and return the enclosed proxy card or vote by telephone or internet. If you have any questions regarding the proposal to be voted on, please do not hesitate to call (866) 745-3797.
Your vote is very important to us. Thank you for your response and for your continued investment in the CNL Global Real Estate Fund.
Respectfully,
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Andrew A. Hyltin |
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| Robert A. Bourne |
THE CNL FUNDS
CNL Global Real Estate Fund
450 South Orange Avenue
Orlando, FL 32801
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 22, 2010.
To the Shareholders of the CNL Global Real Estate Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the “Special Meeting”) of the CNL Global Real Estate Fund (the “CNL Fund”), the sole series of The CNL Funds (the “CNL Trust”), is to be held at 10:00 a.m. Eastern time on Thursday, February 22, 2010, at 450 South Orange Avenue, Orlando, FL 32801.
The Special Meeting is being held to consider an Agreement and Plan of Reorganization and Termination (the “Plan”) providing for the transfer of all of the assets of the CNL Fund to the American Beacon Global Real Estate Fund (the “AB Fund”), a newly created series of American Beacon Funds (the “AB Trust”). The transfer effectively would be (a) an exchange of your Class A and Institutional Class Shares for, respectively, Investor Class and Y Class shares of the AB Fund, which would be distributed pro rata by the CNL Fund to the holders of its shares in complete liquidation of the CNL Fund, and (b) the AB Fund’s assumption of all of the liabilities of the CNL Fund, as follows:
CNL Global Real Estate Fund | à | American Beacon Global Real Estate Fund |
Class A Shares | à | Investor Class shares |
Institutional Class Shares | à | Y Class shares |
Those present and the appointed proxies also will transact such other business, if any, as may properly come before the Special Meeting or any adjournments or postponements thereof.
Holders of record of the shares of beneficial interest in the CNL Fund as of the close of business on January 15, 2010 are entitled to vote at the Special Meeting or any adjournments or postponements thereof.
If the necessary quorum to transact business or the vote required to approve any proposal is not obtained at the Special Meeting or if quorum is obtained but sufficient votes to approve the Plan are not required, the persons named as proxies on the enclosed proxy card may propose one or more adjournments of the Special Meeting to permit, in accordance with applicable law, further solicitation of proxies with respect to the proposal. Any such adjournment as to a matter will require the affirmative vote of the holders of a majority of the shares present in person or by proxy at the session of the Special Meeting to be adjourned. The persons designated as proxies may use their discretionary authority to vote as instructed by management of the CNL Fund on questions of adjournment and on any other proposals raised at the Special Meeting to the extent permitted by the proxy rules of the Securities and Exchange Commission (the “SEC”), including proposals for which timely notice was not received, as set forth in the SEC’s proxy rules.
By order of the Board of Trustees,
Susan L. Terenzio, Secretary
January __, 2010
IMPORTANT — We urge you to sign and date the enclosed proxy card and return it in the enclosed addressed envelope, which requires no postage and is intended for your convenience. You also may vote through the internet, by visiting the website address on your proxy card, or by telephone, by using the toll-free number on your proxy card. Your prompt vote may save the CNL Fund the necessity of further solicitations to ensure a quorum at the Special Meeting. If you can attend the Special Meeting and wish to vote your shares in person at that time, you will be able to do so. |
THE CNL FUNDS
CNL Global Real Estate Fund
450 South Orange Avenue
Orlando, FL 32801
QUESTIONS AND ANSWERS
YOUR VOTE IS VERY IMPORTANT!
Dated: January __, 2009
Question: What is this document and why did you send it to me?
Answer: The attached document is a proxy statement for the CNL Global Real Estate Fund (the “CNL Fund”), the sole series of The CNL Funds (the “CNL Trust”), and a prospectus for the Investor Class and Y Class shares of a newly created series of the American Beacon Funds (the “AB Trust”) American Beacon Global Real Estate Fund (the “AB Fund”). The purposes of this Combined Proxy Statement and Prospectus (the “Proxy Statement”) are to (1) solicit votes from shareholders of the CNL Fund to approve the proposed reorganization of the CNL Fund into the AB Fund (the “Reorganization”) as described in the Agreement and Plan of Reorganization and Termination between the CNL Trust and the AB Trust (the “Plan”) and (2) provide information regarding the Investor Class and Y Class shares of the AB Fund.
The Proxy Statement contains information that shareholders of the CNL Fund should know before voting on the Reorganization. The Proxy Statement should be retained for future reference.
Question: What is the purpose of the Reorganization?
Answer: The primary purpose of the Reorganization is to move the CNL Fund to the American Beacon Family of Funds. Reconstituting the CNL Fund as a series of the AB Trust has the potential to (a) expand the CNL Fund’s presence in more distribution and channels, (b) increase its assets base, and (c) lower operating expenses as a percentage of assets. CNL Advisors recommends that the CNL Fund be reorganized as a series of the AB Trust.
Question: How will the Reorganization work?
Answer: In order to reconstitute the CNL Fund as a series of the AB Trust, a substantially similar fund, referred to as the “AB Fund,” has been created as a new series of the AB Trust. If shareholders of the CNL Fund approve the Plan, the CNL Fund will transfer all of its assets to the AB Fund in return for shares of the AB Fund and the AB Fund’s assumption of the CNL Fund’s liabilities. The CNL Fund will then distribute the shares it receives from the AB Fund to shareholders. Existing shareholders of the CNL Fund’s Class A and/or Institutional Class Shares will become shareholders of the AB Fund’s Investor Class and/or Y Class shares, respectively, and immediately after the Reorganization each shareholder will hold the same number of Investor Class and/or Y Class shares of the AB Fund, with the same net asset value per share and total value, as the Class A and/or Institutional Class Shares of the CNL Fund that he
or she held immediately prior to the Reorganization. Subsequently, the CNL Fund will be liquidated and the CNL Trust will be dissolved.
Please refer to the Proxy Statement for a detailed explanation of the proposal. If the Plan is approved by shareholders of the CNL Fund at the Special Meeting of Shareholders (the “Special Meeting”), the Reorganization presently is expected to be effective on or about February 26, 2010.
Question: How will this affect me as a shareholder?
Answer: You will become a shareholder of the AB Fund. The shares of the AB Fund that you receive will have a total net asset value equal to the total net asset value of the shares you hold in the CNL Fund as of the closing date of the Reorganization. The Reorganization will not affect the value of your investment at the time of the Reorganization. The Reorganization is expected to be tax-free to the CNL Fund and its shareholders.
The Reorganization will shift management oversight responsibility for the CNL Fund from CNL Fund Advisors Company (“CNL Advisors”) to American Beacon Advisors, Inc. (the “Manager”). By engaging CB Richard Ellis Global Real Estate Securities, LLC (the “Sub-Adviser”), the Manager will provide continuity of the portfolio management team that has been responsible for the CNL Fund’s performance record since its inception in 2007.The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the CNL Fund will remain the same. The investment objective and strategies of the AB Fund will be substantively similar to those of the CNL Fund. The AB Fund’s investment limitations are very similar to those of the CNL Fund; however, the investment limitations have been harmonized by the AB Fund to align with the limitations with those of funds in the AB Fund complex.
The Manager also will provide continuity of the other services currently provided to the CNL Fund. Foreside Fund Services, LLC (“Foreside”) is the distributor and principal underwriter of the CNL Fund’s shares and will continue to serve as such. The Manager will engage Foreside to provide sub-administrative services in connection with the marketing and distribution of shares of the AB Fund. State Street Bank and Trust Company (“State Street”), the custodian and accountant for the CNL Fund, will continue to provide custody and accounting services to the AB Fund. The Manager will provide administration services for the AB Fund; State Street currently provides administration services for the CNL Fund.
The Reorganization will move the assets of the CNL Fund from the CNL Trust, a Delaware statutory trust, to the AB Fund, a series of the AB Trust, a Massachusetts business trust. As a result of the Reorganization, the AB Fund will operate under the supervision of a different Board of Trustees and the CNL Trust will be terminated. Foreside will terminate its agreement with CNL Securities Corp., presently serving Foreside as a National Sales and Marketing Agent.
Question: Who will manage the AB Fund?
Answer: The Manager will be responsible for overseeing the management of the AB Fund, and the portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the CNL Fund will continue to manage the portfolio of the AB Fund.
The Manager is an experienced provider of investment advisory services to institutional and retail investors, with over $14 billion mutual fund and $41 billion overall assets under management. Since 1986, the Manager has offered a variety of services and products, including corporate cash management, separate account management, and mutual funds. The Manager serves retail clients as well
as defined benefit plans, defined contribution plans, foundations, endowments, corporations, and other institutional investors. There currently are 17 series of the AB Trust, substantially all of which are low-cost, no-load mutual funds open to institutional investors, retirement accounts such as IRAs, and individual investors. The American Beacon Family of Funds advised by the Manager currently includes international and domestic equity portfolios spanning a variety of longer-range investment strategies through balanced portfolios, as well as short-term investment options such as bond funds and money market funds.
The Sub-Adviser is a subsidiary of CB Richard Ellis Group, Inc., one of the world’s largest publicly held commercial real estate services firms (in terms of 2008 revenues). The Sub-Adviser is focused on managing exchange-listed global real estate securities portfolios on behalf of investors, and has dedicated real estate securities investment management offices located in Baltimore, London, Sydney, and Tokyo. The Sub-Adviser’s principals have an average of fourteen years of investment experience related to the investment management of listed domestic and global real estate securities portfolios. The Sub-Adviser was formed in 2004 and had approximately $2.04 billion of assets under management as of November 30, 2009.
Question: How will the Reorganization affect the fees and expenses I pay as a shareholder of the CNL Fund?
Answer: The Reorganization will not result in any increase in the overall gross or net expense ratios, nor in any increase in the advisory fees payable by the AB Fund over those expense ratios and advisory fees currently incurred by the CNL Fund. The AB Fund will charge a 2.00% fee on the proceeds of its shares that are redeemed within 90 days of their purchase compared to a 1.00% redemption fee on the shares of the CNL Fund redeemed within 75 calendar days of purchase. The front-end and contingent deferred sales charges currently applicable to Class A Shares of the CNL Fund will be eliminated, as Investor Class shares of the AB Fund will be offered on a no-load basis. The operating expenses of the Institutional Class Shares of the CNL Fund based on its assets as of June 30, 2009 are 4.27% of its average daily net assets before the cap on expenses. The projected total annual operating expenses for the Investor Class and Y Class shares of the AB Fund, based on the same asset levels, are 1.77%, and 1.49%, respectively, of the AB Fund’s average daily net assets. The Manager has contractually agreed to cap Fund expenses through February 28, 2011, to the extent that total annual fund operating expenses of the Investor Class and Y Class shares exceed the annual rate of 1.80% and 1.55% excluding taxes, interest, portfolio transaction expenses and other extraordinary expenses.
Question: Will the Reorganization result in any taxes?
Answer: We expect that neither the CNL Fund nor its shareholders will recognize any gain or loss for federal income tax purposes as a direct result of the Reorganization, and we expect to receive a tax opinion confirming this position. Shareholders should consult their tax adviser about other state and local tax consequences of the Reorganization, if any, because the information about tax consequences in this document relates to the federal income tax consequences of the Reorganization only.
Question: Will I be charged a sales charge or contingent deferred sales charge (CDSC) as a result of the Reorganization?
Answer: No sales loads, commissions or other transactional fees will be imposed on shareholders in connection with the Reorganization.
Question: Why do I need to vote?
Answer: Your vote is needed to ensure that a quorum and sufficient votes are present at the Special Meeting so that the proposal can be acted upon. Your immediate response on the enclosed Proxy
Card will help prevent the need for any further solicitations for a shareholder vote, which will result in additional expenses. Your vote is very important to us regardless of the number of shares you own.
Question: How does the CNL Trust’s Board of Trustees (the “CNL Board”) recommend that I vote?
Answer: After careful consideration and upon recommendation of CNL Advisors, the CNL Board unanimously recommends that shareholders vote “FOR” the Plan.
Question: Who is paying for expenses related to the Special Meeting and the Reorganization?
Answer: CNL Advisors and the Manager will pay all costs relating to the Reorganization, including the costs relating to the Special Meeting and the Proxy Statement. The CNL Fund will not incur any expenses in connection with the Reorganization.
Question: What will happen if the Plan is not approved by shareholders?
Answer: If shareholders of the CNL Fund do not approve the Plan, the CNL Fund will not be reorganized into the AB Fund. The CNL Board will meet to consider other alternatives, such as liquidation of the CNL Fund.
Question: How do I vote my shares?
Answer: You can vote your shares by mail, telephone or internet by following the instructions on the enclosed proxy card.
Question: Who do I call if I have questions?
Answer: If you have any questions about the proposal or the proxy card, please do not hesitate to call CNL Advisors at (866) 745-3797.
COMBINED PROXY STATEMENT AND PROSPECTUS
January __, 2009
FOR THE REORGANIZATION OF
CNL Global Real Estate Fund,
the sole series of The CNL Funds
450 South Orange Avenue
Orlando, FL 32801
(866) 745-3797
INTO
American Beacon Global Real Estate Fund,
a series of American Beacon Funds
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(817) 967-3509
_________________________________________
This Combined Proxy Statement and Prospectus (the “Proxy Statement”) is being sent to you in connection with the solicitation of proxies by the Board of Trustees (the “CNL Board”) of The CNL Funds (the “CNL Trust”) for use at a Special Meeting of Shareholders (the “Special Meeting”) of the CNL Global Real Estate Fund, the sole series of the CNL Trust (the “CNL Fund”), managed by CNL Fund Advisors Company (“CNL Advisors”), at the principal executive offices of the CNL Trust located at 450 South Orange Avenue Orlando, FL 32801, Thursday, February 22, 2010, at 10:00 a.m. Eastern time. At the Special Meeting, shareholders of the CNL Fund will be asked:
1. To approve an Agreement and Plan of Reorganization and Termination (the “Plan”) providing for the transfer of all of the assets of the CNL Fund to the American Beacon Global Real Estate Fund (the “AB Fund”), a newly created series of American Beacon Funds (the “AB Trust”), in exchange for:
(a) Investor Class and Y Class shares of the AB Fund equal in number and value to the CNL Fund’s Class A and Institutional Class Shares, respectively, which will be distributed pro rata by the CNL Fund to the holders of its shares in complete liquidation of the CNL Fund as follows:
CNL Global Real Estate Fund | à | American Beacon Global Real Estate Fund | |
Class A Shares | à | Investor Class shares | |
Institutional Class Shares | à | Y Class shares |
(b) the AB Fund’s assumption of all of the liabilities of the CNL Fund (collectively, the “Reorganization”); and
2. To transact any other business as may properly come before the Special Meeting or any adjournments thereof.
This Proxy Statement sets forth the basic information you should know before voting on the proposal. You should read it and keep it for future reference. Additional information relating to the AB Fund and the Proxy Statement is set forth in the AB Fund’s Statement of Additional Information dated January __, 2009, which also is incorporated by this reference into the Proxy Statement. The Statement of Additional Information is included as Part B to the Proxy Statement. Additional information about the AB Fund has been filed with the Securities and Exchange Commission (the “SEC”) and is available upon request and without charge by writing to the AB Fund or by calling (___) ___-_____. The CNL Fund expects that the Proxy Statement will be mailed to shareholders on or about January __, 2009.
The CNL Fund is the sole series of the CNL Trust, an open-end management investment company registered with the SEC and organized as a Delaware statutory trust. The AB Fund is a newly created series of the AB Trust, an open-end management investment company registered with the SEC and organized as a Massachusetts business trust.
The following documents have been filed with the SEC and are incorporated by this reference into this Proxy Statement, which means that these documents are considered legally to be part of the Proxy Statement:
? Prospectus and Statement of Additional Information of the CNL Fund, each dated April 30, 2009; and
? Semi-Annual Report to Shareholders of the CNL Fund, dated June 30, 2009 and Annual Report to Shareholders of the CNL Fund, dated December 31, 2008.
The CNL Fund’s Prospectus dated April 30, 2009 and Annual Report to Shareholders for the fiscal year ended December 31, 2008, containing audited financial statements, have been previously mailed to shareholders. Copies of these documents are available upon request and without charge by writing to the CNL Trust, through the internet at www.thecnlfunds.com, or by calling (866) 745-3797.
Because the AB Fund has not yet commenced operations as of the date of this Proxy Statement, no annual or semi-annual report is available for the AB Fund at this time.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES NOR HAS IT PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. |
The shares offered by this Proxy Statement are not deposits or obligations of any bank, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investment in the AB Fund involves investment risk, including the possible loss of principal. |
TABLE OF CONTENTS
I. | PROPOSAL – TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION | 1 | ||
A. | OVERVIEW | 1 | ||
B. | REASONS FOR THE REORGANIZATION | 1 | ||
C. | CNL BOARD CONSIDERATIONS | 2 | ||
D. | COMPARISON OF PRINCIPAL INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES OF THE FUNDS | 4 | ||
E. | COMPARISON OF PRINCIPAL RISKS | 11 | ||
F. | COMPARISON OF THE FUNDS’ INVESTMENT RESTRICTIONS AND LIMITATIONS | 11 | ||
G. | COMPARISON OF FEES AND EXPENSES | 19 | ||
H. | PERFORMANCE INFORMATION | 22 | ||
I. | COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES | 24 | ||
J. | KEY INFORMATION ABOUT THE PROPOSAL | 25 | ||
1. | SUMMARY OF THE PROPOSED REORGANIZATION | 25 | ||
2. | DESCRIPTION OF THE AB FUND’S SHARES | 26 | ||
3. | FEDERAL INCOME TAX CONSEQUENCES | 26 | ||
4. | COMPARISON OF FORMS OF ORGANIZATION AND SHAREHOLDER RIGHTS | 25 | ||
5. | CAPITALIZATION | 29 | ||
K. | ADDITIONAL INFORMATION ABOUT THE AB FUND | 29 | ||
1. | INVESTMENT ADVISER | 29 | ||
2. | OTHER SERVICE PROVIDERS | 30 | ||
3. | TAX CONSIDERATIONS | 30 | ||
4. | PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES | 31 | ||
II. | VOTING INFORMATION | 31 | ||
A. | RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED | 31 | ||
B. | HOW TO VOTE | 31 | ||
C. | PROXIES | 32 | ||
D. | QUORUM AND ADJOURMENTS | 32 | ||
E. | EFFECT OF ABSTENTIONS AND BROKER “NON-VOTES” | 32 | ||
F. | SOLICITATION OF PROXIES | 33 | ||
III. | OTHER INFORMATION | 33 | ||
A. | OTHER BUSINESS | 33 | ||
B. | NEXT MEETING OF SHAREHOLDERS | 33 | ||
C. | LEGAL MATTERS | 33 | ||
D. | INFORMATION FILED WITH THE SEC | 34 | ||
APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION | A-1 | |||
APPENDIX B OWNERSHIP OF SHARES OF THE CNL FUND | B-1 | |||
APPENDIX C VALUATION, PURCHASE, REDEMPTION AND TAX INFORMATION FOR THE AB FUND | C-1 | |||
APPENDIX D FINANCIAL HIGHLIGHTS OF THE AB FUND | D-1 |
I. PROPOSAL – TO APPROVE THE AGREEMENT AND
PLAN OF REORGANIZATION AND TERMINATION
A. OVERVIEW
The CNL Board, including all the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”), of the CNL Trust, proposes that the CNL Fund reorganize into the AB Fund and that each CNL Fund shareholder become a shareholder of the AB Fund, pursuant to the Plan attached to this Proxy Statement as Appendix A. The CNL Board considered the Reorganization at its regularly scheduled meeting held on November 19, 2009. The CNL Board believes that the Reorganization is in the best interests of the CNL Fund and its shareholders.
In order to reorganize the CNL Fund into a series of the AB Trust, a substantially similar fund, referred to as the “AB Fund,” has been created as a new series of the AB Trust. If the shareholders of the CNL Fund approve the Plan, the Reorganization will have three primary steps:
* First, the CNL Fund will transfer all of its assets to the AB Fund in exchange solely for Investor Class and Y Class shares of the AB Fund and the AB Fund’s assumption of all of the CNL Fund’s liabilities;
* Second, each holder of the CNL Fund will receive a pro rata distribution of the AB Fund’s Investor and/or Y Class Shares, as the case may be; and
* Third, the CNL Fund will be liquidated and the CNL Trust will be dissolved.
Approval of the Plan will constitute approval of the transfer of the CNL Fund’s assets, the assumption of its liabilities, the distribution of the AB Fund’s Investor and Y Class shares, and liquidation of the CNL Fund and dissolution of the CNL Trust. The Investor and Y Class shares issued in connection with the Reorganization will have an aggregate net asset value equal to the net value of the assets that the CNL Fund transferred to the AB Fund, less the CNL Fund’s liabilities that the AB Fund assumes. The value of a Fund shareholder’s account with the AB Fund immediately after the Reorganization will be the same as the value of such shareholder’s account with the CNL Fund immediately prior to the Reorganization. No sales charge or fee of any kind will be charged to the CNL Fund’s shareholders in connection with the Reorganization.
The CNL Trust believes that the Reorganization will constitute a tax-free transaction for federal income tax purposes. The CNL Trust and the AB Trust will receive an opinion from tax counsel to the AB Trust substantially to such tax treatment and effect. Therefore,, shareholders should not recognize any gain or loss on their CNL Fund shares for federal income tax purposes as a direct result of the Reorganization.
B. REASONS FOR THE REORGANIZATION
The primary purpose of the Reorganization is to move the investment portfolio and shareholders presently associated with CNL Fund to the American Beacon Family of Funds. Reconstituting the CNL Fund as a series of American Beacon has the potential to expand the distribution network and increase the investment portfolio’s assets, as the AB Trust has access to greater resources and distribution channels than does the CNL Trust.
The Reorganization will shift management oversight responsibility for the CNL Fund from CNL Advisors to American Beacon Advisors, Inc. (the “Manager”). By engaging CB Richard Ellis Global Real Estate Securities, LLC (the “Sub-Adviser”), the current sub-adviser to the CNL Fund, the Manager will provide continuity of the portfolio management team that has been responsible for the CNL Fund’s performance record since its inception in 2007.The portfolio managers of the Sub-Adviser who are primarily responsible for the day-to-day portfolio management of the CNL Fund will remain the same. The investment objective and strategies of the AB Fund will be substantively identical to those of the CNL Fund. The AB Fund’s investment limitations are very similar to those of the CNL Fund; however, the AB Fund limitations are in line with current limitations of the other American Beacon Funds. CNL Advisors recommends that the CNL Fund be reorganized as a series of the AB Trust.
The Manager will provide continuity of the other services currently provided to the CNL Fund. Foreside Fund Services, LLC (“Foreside”) is the distributor and principal underwriter of the CNL Fund’s shares and will continue to serve as the distributor and principal underwriter of the AB Fund’s shares. The Manager will engage Foreside to provide sub-administrative services in connection with the marketing and distribution of shares of the AB Fund. State Street Bank and Trust Company (“State Street”), the custodian and accountant for the CNL Fund, will continue to provide custody and accounting services to the AB Fund. The Manager will provide administration services for the AB Fund; State Street currently provides administration services for the CNL Fund. Foreside will terminate its agreement with CNL Securities Corp., presently serving Foreside as a National Sales and Marketing Agent.
The Reorganization will not result in any increase in the overall gross or net expense ratios, nor in any increase in the advisory fees payable by the AB Fund over those expense ratios and advisory fees currently incurred by the CNL Fund. The AB Fund will charge a 2.00% fee on the proceeds of its shares that are redeemed within 90 days of their purchase compared to a 1.00% redemption fee on the shares of the CNL Fund redeemed within 75 calendar days of purchase. The front-end and contingent deferred sales charges currently applicable to Class A Shares of the CNL Fund will be permanently eliminated, as Investor Class shares of the AB Fund will be offered on a no-load basis. Historically, the cost of investing in mutual funds associated with the AB Trust has been below the average of other mutual funds with comparable objectives. This is due to the AB Trust’s large asset base and cost-efficient fund management operations.
C. CNL BOARD CONSIDERATIONS
CNL Advisors proposed, and the CNL Board considered, the Reorganization at in-person meetings of the CNL Board held on September 24, 2009 and November 19, 2009. The CNL Board also met in-person on November 4, 2009 with executives and other legal and compliance personnel of the Manager to further discuss the Reorganization. Based upon its evaluation of the relevant information presented to it at these meetings, and in light of its fiduciary duties under federal and state law, the CNL Board, including all trustees who are not “interested persons” of the CNL Trust under the 1940 Act, determined that the Reorganization is in the best interests of the CNL Fund and its shareholders.
In approving the proposed Reorganization, the CNL Board carefully considered alternative reorganization options with other fund complexes as well as various other alternatives for the CNL Fund that were identified by CNL Advisors, which are described below. The Board noted that the CNL Fund assets have not achieved economies of scale since its inception in late 2007 despite significant sales efforts. The Board noted further that, as a result, the CNL Fund may not be able to achieve economies of scale unless it can be combined with another fund. The CNL Board considered the terms of the Reorganization and determined that the Reorganization would provide shareholders with the options of (i) transferring their investment to a similar fund on a tax-free basis in the Reorganization or (ii) redeeming their investment in the CNL Fund, which may have tax consequences for them. The Board noted that
liquidating and terminating the CNL Fund would provide shareholders with only one option that may have adverse tax consequences for them.
The CNL Board considered the following additional matters, among others, in approving the Reorganization:
The Terms and Conditions of the Reorganization. The CNL Board considered the terms of the Plan, and, in particular, (1) the requirement that the transfer of the assets of the CNL Fund’s Class A and Institutional Class Shares be in exchange for Investor Class and Y Class shares, respectively, of the AB Fund and (2) the AB Fund’s assumption of all known liabilities of the CNL Fund. The CNL Board also took note of the fact that no sales charges would be imposed in connection with the Reorganization. The CNL Board also noted that the Reorganization would be submitted to the CNL Fund’s shareholders for approval.
Strong Similarity of Investment Objectives, Policies and Restrictions and Continuity of Sub-Adviser. The CNL Board considered that the investment objective and strategies of the CNL Fund and the AB Fund (each sometimes referred to herein as a “Fund”) are substantively similar. The investment limitations of the CNL Fund have been harmonized and reworded by the AB Fund to be conformed with the current limitations in the AB Fund complex. A strong consideration was that the similarity of investment strategy, together with the continuation of the Sub-Adviser, provided a continuation of portfolio management expertise not otherwise available to mutual fund investors.
Expenses Relating to Reorganization. The CNL Board noted that the CNL Advisors and the Manager will bear the costs associated with the Reorganization, Special Meeting, and solicitation of proxies, including the expenses associated with preparing and filing the registration statement that includes this Proxy Statement and the cost of copying, printing and mailing proxy materials.
Relative Expense Ratios and Continuation of Cap on Expenses. The CNL Board reviewed information regarding comparative expense ratios (current and pro forma expense ratios are set forth in the “Comparison of Fees” section below) which indicated that the gross and net total annual operating expense ratios for the AB Fund would be equal to or less than the gross and net total operating expense ratios of the CNL Fund. The Board considered the fact that the Manager would contractually agree to waive through at least April 30, 2011 the advisory fee payable by the AB Fund and/or reimburse expenses of the AB Fund in order that the total annual operating expense ratios of Investor Class and Y Class of the AB Fund would not exceed 1.80% and 1.55%, respectively, which equal the expense caps currently in place for the corresponding share classes of the CNL Fund.
Economies of Scale. The CNL Board considered the potential of the AB Fund to experience economies of scale as a result of its being a series of the AB Trust because certain fixed costs, such as legal, accounting, shareholder services and trustee expenses, would be spread over a larger fund complex. The CNL Board concluded that the structure would benefit shareholders as the AB Fund grows.
Distribution and Service Fees. The CNL Board considered the fund distribution capabilities of the Manager and its affiliates and the commitment to distribute the AB Fund. The CNL Board further considered that the distribution and services under Rule 12b-1 of the 1940 Act (“Rule 12b-1”) fees currently applicable to Class A shares of the CNL Fund will not apply to the Investor Class shares of the AB Fund but that the Investor Class will have a 0.375% service fee – if those shares are exchanged for Investor Class shares of the AB Fund in connection with the Reorganization. The CNL Board also considered that a 0.10% service fee will apply to Institutional Class Shares of the CNL Fund if those shares are exchanged for Y Class shares of the AB Fund in connection with the Reorganization.
The Experience and Expertise of the Investment Adviser and Sub-Adviser. The CNL Board considered the following information regarding the Manager: (i) the Manager is an experienced provider
of investment advisory services to institutional and retail markets, with over $14 billion mutual fund and $41 billion overall assets under management; (ii) since 1986, the Manager has offered a variety of services and products, including corporate cash management, separate account management, and mutual funds; and (iii) the Manager serves retail clients as well as defined benefit plans, defined contribution plans, foundations, endowments, corporations, and other institutional investors. The CNL Board also considered that there currently are 17 series of the AB Trust, substantially all of which are low-cost, no-load mutual funds open to institutional investors, retirement accounts such as IRAs, and individual investors.
The CNL Board considered that the Sub-Adviser to the CNL Fund, a subsidiary of CB Richard Ellis Group, Inc., one of the world’s largest publicly held commercial real estate services firms (in terms of 2008 revenues), would continue to provide sub-advisory services to the AB Fund. The CNL Board noted that the Sub-Adviser’s principals have an average of fourteen years of investment experience related to the investment management of listed domestic and global real estate securities portfolios.
Tax Consequences. The CNL Board considered that the Reorganization is expected to be free from federal income tax consequences.
Other Alternatives. The CNL Board considered several alternatives to the Reorganization that were identified by CNL Advisors. These alternatives included, among others, removing the expense caps or raising the advisory fee of the CNL Fund to enable CNL Advisors to reduce its losses and, ideally, achieve a profit in managing the CNL Fund; migrating the CNL Fund to an umbrella type mutual fund service platform that may lower the Fund’s operating expenses; liquidating the CNL Fund and substituting the Sub-Adviser as the principal adviser of the CNL Fund. After considering the merits and viability of these other alternatives, the CNL Board concluded that these and other possible alternatives were less desirable than the Reorganization because they either resulted in either increased fund expenses, a taxable transaction to shareholders or were otherwise not viable alternatives or did not address the Fund’s lack of economies of scale.
Based on the foregoing and additional information presented at the CNL Board meetings discussed above, the CNL Board determined that the Reorganization is the best alternative for the CNL Fund at this time and is in the best interests of the CNL Fund and its shareholders. The CNL Board approved the Reorganization, subject to approval by shareholders of the CNL Fund and the solicitation of the shareholders of the CNL Fund to vote “FOR” the approval of the Plan, which is attached to this Proxy Statement in Appendix A.
D. COMPARISON OF PRINCIPAL INVESTMENT OBJECTIVES, STRATEGIES AND POLICIES OF THE FUNDS
The CNL Fund and the AB Fund have identical investment objectives and strategies, which are presented in the table below.
The AB Fund has been created as a shell series of the AB Trust solely for the purpose of the acquiring the CNL Fund’s assets and continuing its business investment strategy, and will not conduct any investment operations until after the closing of the Reorganization. The Manager has reviewed the CNL Fund’s current portfolio holdings and determined that those holdings are compatible with the AB Fund’s investment objectives and policies. As a result, the Manager believes that, if the Reorganization is approved, all or substantially all of the CNL Fund’s assets will be transferred to and held by the AB Fund.
CNL Fund | AB Fund | |
Investment Objective | The Fund seeks to achieve a high total return through a combination of current income and capital appreciation. There are no guarantees this objective will be met.
The Fund’s investment objective and principal investment strategies are “non-fundamental,” which means they may be changed with the approval of the Board of Trustees of the Trust and without shareholder approval.
| Same. |
Investment Strategies | Under normal circumstances, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes, if any) in equity and equity related securities issued by real estate and real estate-related companies. The Fund considers a company to be a real estate or real estate-related company if at least 50% of its assets, gross income or net profits are attributable to ownership, construction, management or sale of residential, commercial or industrial real estate or whose products or services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions that issue mortgages. Such companies include real estate investment trusts (“REITs”) and real estate operating companies (“REOCs”). A REIT qualified under the U.S. tax code is a real estate company that pools funds for investment primarily in income-producing real estate or in real estate-related loans (such as mortgages) or other interests. A U.S.-qualified REIT is not taxed on income and gains distributed to its shareholders if, among other things, it distributes to its shareholders substantially all of its taxable income (other than net capital gains) for each taxable year. Real estate companies in other countries may have similar features to U.S.-qualified REITs; however the specific characteristics and regulations for REIT-like companies may not be identical to those of U.S.-qualified REITs. The securities in which the Fund invests will principally include common stock, preferred stock, and convertible debt issued by real estate and real estate-related companies located primarily in North America, Europe, and the Asia Pacific region. It is anticipated that the Fund will | Same except added development to the list of companies that may be considered a “real estate” company. |
CNL Fund | AB Fund | |
give particular investment consideration to equity securities traded on major exchanges in the following sub-regions: United States, Canada, United Kingdom, Continental Europe, Japan, Hong Kong, Singapore, and Australia/New Zealand. The number of sub-regions may be expanded in the future. Under normal market conditions, the Fund will invest significantly (at least 40%, unless market conditions are not deemed favorable by the investment adviser, in which case the Fund would invest at least 30%) in equity securities issued by real estate and real estate-related companies organized or located outside the Unites States or doing a substantial amount of business outside the United States. The Fund will allocate its assets among no less than three different countries. The Fund may invest up to 15% of its total assets in equity securities that are traded on the major stock exchanges located in emerging markets. The Fund may invest in securities of small-, mid- and large-sized real estate or real estate-related companies. The Fund seeks to limit risk through various controls, such as diversifying the portfolio property types and geographic areas as well as by limiting the size of any one holding. The Fund will limit the maximum holding of the issued capital of any individual company to no more than 10% of the Fund’s assets. The Fund ’s investment adviser seeks to construct a portfolio with return and risk characteristics similar to the FTSE EPRA/NAREIT Global Real Estate Index Series (the “benchmark”). The benchmark is designed to track the performance of listed real estate companies and REITs worldwide. The investment adviser uses the benchmark as a guide in structuring and designing the Fund’s portfolio, but the Fund is not an index fund. The Fund typically maintains a portion of its assets in cash or cash equivalents to meet redemption requests, pay Fund expenses or satisfy other liquidity needs. These assets may be invested in overnight or short-term investment vehicles. |
CNL Fund | AB Fund | |
According to the stated investment objective and principal investment strategies of the Fund, the Sub-Adviser uses fundamental real estate analysis and quantitative securities analysis to select investments in REITs, REOCs and other real estate and real estate-related companies that the Sub-Adviser believes are attractively valued relative to comparable real estate and real estate-related companies. The Sub-Adviser will seek to identify real estate and real estate-related securities that are deemed to be under-valued relative to other permissible investment opportunities. The Sub-Adviser utilizes its proprietary global allocation model, the Sub-Regional Ranking Matrix, along with its proprietary global valuation model, VISTA, to seek to determine those global sub-regions, countries and companies that the Sub-Adviser believes offer stronger relative risk-adjusted returns over the medium term. The Sub-Adviser may consider selling or reducing the Fund’s position in a security if, among other things, it believes: • the reward/risk ratio of the security is unattractive; • the reward/risk ratio of the security is unattractive compared to a candidate company or a more attractively valued existing holding; • the long-term investment outlook for the company is unattractive relative to other investment alternatives; • or the company’s fundamentals have deteriorated in a material or long-term manner. In general, a security is sold when the Sub-Adviser believes that its relative risk-return characteristics are not attractive relative to other permissible investments over an 18- to 36-month investment horizon. The Sub-Adviser may sell a security when the investment rationale for owning the stock no longer holds, whether it is due to valuation, strategy, management changes or |
CNL Fund | AB Fund | ||
conflict issues, capital structure changes, or any other reason which alters the investment case. The Sub-Adviser applies the sell discipline in the context of optional availability of alternative investments and the relativity of risk-return characteristics. | |||
Temporary Defensive Strategy | In order to respond to adverse market, economic, political or other conditions, the Fund may assume a temporary defensive position that is inconsistent with its principal investment strategies and invest, without limitation, in cash or prime quality cash equivalents (including commercial paper, certificates of deposit, banker’s acceptances and time deposits). A defensive position, taken at the wrong time, may have an adverse impact on the Fund’s performance. The Fund may be unable to achieve its investment objective during the employment of a temporary defensive measure. | Same. | |
More About the Investment Strategies of the Funds | Equity Securities. The Fund may invest in equity securities other than common stocks. Other types of equity securities the Fund may acquire include preferred stocks, securities that are convertible into common stocks and readily marketable securities, such as rights and warrants, which derive their value from common stock. | Same. | |
Foreign Securities and Depositary Receipts. The Fund will invest in foreign securities. The Fund may invest up to 15% of its total assets in securities of real estate or real estate-related companies that are traded on the major stock exchanges in emerging markets. The Fund may invest in sponsored and unsponsored American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”) or other similar instruments. ADRs typically are issued by a U.S. bank or trust company, evidence ownership of underlying securities issued by a foreign company, and are designed for use in U.S. securities markets. EDRs are receipts issued by a European financial institution evidencing an arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use in the European securities markets. The Fund invests in depositary receipts in order to obtain exposure to foreign securities markets. For purposes of the Fund’s |
CNL Fund | AB Fund | ||
investment policies, the Fund’s investment in an ADR will be considered an investment in the underlying securities of the applicable foreign company. | |||
Foreign Currencies. In connection with its investments in securities of foreign companies, the Fund may from time to time hold various foreign currencies pending investment in foreign securities or conversion into U.S. dollars. The value of the assets of the Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in currency exchange rates. | Same. | ||
Options and Futures Contracts. Options and futures contracts are types of derivative instruments. They “derive” their value from an underlying security, index or other financial instrument. The use of options and futures permits the Fund to increase or decrease the level of risk associated with its investments or to change the character of that risk. Options and futures contracts trading is a highly specialized activity that entails greater than ordinary investment risks. The Fund may write covered call options, buy put options, buy call options and write put options on particular securities or various indices. The Fund also may invest in futures contracts and options on futures contracts. The Fund may make these investments for the purpose of protecting its assets (this is known as “hedging”) or to generate income. | Same. | ||
Investment Adviser | CNL Fund Advisors Company | American Beacon Advisers, Inc. | |
Investment Sub-Adviser | CB Richard Ellis Global Real Estate Securities, LLC | Same. | |
Portfolio Managers | Jeremy Anagnos, Steve Carroll, and William Morrill of the Sub-Adviser serve as the Fund’s portfolio managers and share responsibilities for the day-to-day management of the Fund’s investment portfolio. Mr. Anagnos, Mr. Carroll, and Mr. Morrill have 62 years of combined experience with investment management firms specializing in domestic and global real estate securities, and 40 years of combined experience | Same. In addition: William F. Quinn and Wyatt L. Crumpler will lead the Manager’s portfolio management team that has joint responsibility for the day-to-day management of the Fund. Mr. Quinn and Mr. Crumpler |
CNL Fund | AB Fund | ||
serving in the capacity as portfolio managers of listed U.S. domestic and global real estate securities accounts and they are responsible for managing the Sub-Adviser’s Global REIT Team. Jeremy Anagnos has served as portfolio manager of the Fund since its inception. Together with Mr. Carroll, Mr. Anagnos has served as Co-Chief Investment Officer (“CCIO”) and Managing Director of the Sub-Adviser since 2004. Prior to that, Mr. Anagnos was the head of Real Estate Equities Research at Deutsche Bank in London from 2000-2004. He was an Assistant Portfolio Manager working with Mr. Carroll in Europe and a REIT Analyst in the United States at LaSalle Investment Management (Securities) (“La Salle”) from 1997 through 2000. Mr. Anagnos has a degree in Finance from Boston College and holds the Chartered Financial Analyst designation. Mr. Anagnos is primarily responsible for selecting and managing the securities of European companies in the Fund’s portfolio. Mr. Anagnos has 11 years of experience in the field of real estate securities investment management and 6 years as a portfolio manager of listed real estate securities accounts. Steve Carroll has served as portfolio manager of the Fund since its inception. Together with Mr. Anagnos, he has served as CCIO and Managing Director of the Sub-Adviser since 2004. Prior to that, Mr. Carroll was employed by LaSalle from 1994 through 2004, and served as LaSalle’s Global Portfolio Manager, Regional Portfolio Manager-Europe, and Senior Analyst-U.S. Mr. Carroll is a Certified Public Accountant licensed in the State of California. He graduated from the University of California, Los Angeles with a B.A. degree in Economics and he currently serves as Chairman of the North American Index Committee for the FTSE EPRA/NAREIT Global Developed Real Estate Index. He also is a member of NAREIT (National Association of Real Estate Investment Trusts). Mr. Carroll is primarily responsible for selecting and managing the securities of Asia Pacific companies in the Fund’s portfolio. Mr. Carroll has 15 years of experience in the field of real estate securities investment management and 10 years as a | are responsible for developing the Fund’s investment program and recommending sub-advisors to the Fund’s Board. In addition, Mr. Quinn and Mr. Crumpler oversee the sub-advisors, review each sub-advisor’s performance and allocate the Fund’s assets among the sub-advisors and the Manager, as applicable. Mr. Quinn is Executive Chairman of the Manager and has served on the portfolio management team almost continuously since 1987. Mr. Crumpler joined the Manager in January 2007 as Vice President of Asset Management and a member of the portfolio management team. From January 2004 to January 2007, Mr. Crumpler was Managing Director of Corporate Accounting at American Airlines, Inc. Prior to that time, he was Director of IT Strategy and Finance for American Airlines, Inc. |
CNL Fund | AB Fund | ||
portfolio manager of listed real estate securities accounts. William Morrill has served as portfolio manager of the Fund since its inception. Mr. Morrill has served as Managing Director of the Sub-Adviser and Chairman of the Sub-Adviser’s Global Securities Advisory Committee since late 2006. Between 2004 and 2006, Mr. Morrill served as portfolio manager to Brown Investment Advisory & Trust Company. Prior to joining Brown in 2003, Mr. Morrill was a Managing Director and Chief Executive Officer of LaSalle (1995-2003), and was the head of the real estate securities operations of its predecessor company (1985-1995). Mr. Morrill has a B.A. from Johns Hopkins University and a Masters of Business Administration from Harvard Business School. Mr. Morrill is primarily responsible for selecting and managing the securities of North American companies in the Fund’s portfolio. Mr. Morrill has 27 years of experience in the field of real estate investment management and 24 years as a portfolio manager of listed real estate securities accounts. |
E. COMPARISON OF PRINCIPAL RISKS
Risk is the chance that you will lose money on your investment or that it will not earn as much as you expect. In general, the greater the risk, the more money your investment can earn for you and the more you can lose. Like other investment companies, the value of each Fund’s shares may be affected by its investment objectives, principal investment strategies and particular risk factors. The principal risks of investing in the Funds are discussed below. However, other factors may also affect each Fund’s net asset value. There is no guarantee that a Fund will achieve its investment objectives or that it will not lose principal value.
The main risks of investing in the Funds are substantially similar, as the investment objectives and strategies of the Funds are identical. In its registration statement, the AB Fund has included additional risk disclosures and revised certain risk disclosures to clarify for shareholders the principal risks of investing in the Funds.
Market Risk
Since the Fund invests most of its assets in stocks, it is subject to stock market risk. Market risk involves the possibility that the value of the Fund’s investments in stocks of a particular country will decline due to drops in that country’s stock market. In general, the value of the Fund will move in the same direction as the international stock markets in which it invests, which will vary from day to day in
response to the activities of individual companies, as well as general market, regulatory, political and economic conditions of that country.
Risks of Concentrating in the Real Estate Industry
The Fund invests primarily in real estate and real estate-related companies and, therefore, adverse economic, business or political developments affecting real estate could have a major effect on the value of the Fund’s investments. Investing in securities issued by real estate and real estate-related companies may subject the Fund to risks associated with the direct ownership of real estate, such as decreases in real estate values, overbuilding and space over-supply conditions, increased competition among competing real estate property owners and other risks related to local or general economic and business conditions, increases in operating costs and property taxes, changes in zoning laws, acts of terrorism and war, casualty or condemnation losses, possible environmental liabilities, regulatory limitations on rental rates and fluctuations in rental income due to lease terminations or expirations. Changes in interest rates, debt leverage ratios, debt maturity schedules, and the availability of credit to real estate companies may also affect the value of the Fund’s investment in real estate securities. Rising interest rates may drive up mortgage and financing costs and hinder real estate construction activity, which may negatively impact the securities that the Fund owns. Real estate securities are dependent upon specialized management skills at the operating company level, have limited diversification and are, therefore, subject to risks inherent in operating and financing a limited number of properties. Real estate securities are also subject to heavy cash flow dependency and defaults by borrowers, including the issuer of the real estate security. The real estate industry tends to be cyclical. Such cycles may adversely affect the value of the Fund’s portfolio. The Fund will indirectly bear a proportionate share of a REIT’s on-going operating fees and expenses, which may include management, operating and administrative expenses in addition to the expenses of the Fund. In addition, U.S.-qualified REITs are subject to the possibility of failing to (a) qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended (the “Code”) and (b) maintain exemption eligibility from the investment company registration requirements.
Small and Medium Capitalization Companies Risk
Investing in the securities of small and medium capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies, since small and medium-sized companies may have limited operating history, product lines, and financial resources, the securities of these companies may lack sufficient market liquidity, and they can be particularly sensitive to expected changes in interest rates, borrowing costs, and earnings.
Foreign Investing Risk
Overseas investing carries potential risks not associated with domestic investments. Such risks include, but are not limited to: (1) currency exchange rate fluctuations, (2) political and financial instability, (3) less liquidity and greater volatility of foreign investments, (4) lack of uniform accounting, auditing and financial reporting standards, (5) less government regulation and supervision of foreign stock exchanges, brokers and listed companies, (6) increased price volatility, (7) the possibility of expropriation or confiscatory taxation, limitations on the removal of cash assets, and difficulty in obtaining or enforcing court judgments, and (8) delays in transaction settlement in some foreign markets.
Emerging Markets Risk
The Fund may invest in securities of issuers located in countries with emerging economies and/or securities markets. Numerous emerging market countries have experienced serious, and frequently continuing, economic and political problems. Emerging market countries have experienced substantial
rates of inflation and, in some cases, related currency devaluations. Stock markets in many emerging market countries generally are relatively small and present risks associated with political or social instability and diplomatic developments, low liquidity, high trading costs, restrictions imposed under emergency conditions, and the limited ability to invest in listed companies and, importantly, withdraw assets from them.
Market Timing Risk
Because the Fund invests in foreign securities, it is particularly subject to the risk of market timing activities. The Fund generally prices foreign securities using their closing prices from the foreign markets in which they trade, typically prior to the Fund’s determination of its net asset value. These prices may be affected by events that occur after the close of a foreign market but before the Fund prices its shares. In such instances, the Fund may fair value foreign securities. However, some investors may engage in frequent short-term trading in the Fund to take advantage of any price differentials that may be reflected in the net asset value of the Fund’s shares. There is no assurance that fair valuation of securities can reduce or eliminate market timing. While the investment adviser monitors trading in Fund shares, there is no guarantee that it can detect all market timing activities.
Recent Market Events
Recent turbulence in financial markets and reduced liquidity in credit and fixed income markets may negatively affect issuers worldwide which may have an adverse effect on the Fund.
F. COMPARISON OF THE FUNDS’ INVESTMENT RESTRICTIONS AND
LIMITATIONS
The investment restrictions and limitations of the Funds are substantively similar, except that the investment limitations of the AB Fund differ from those of the CNL Fund to the extent necessary to harmonize them with the investment limitations of other American Beacon Funds. Unlike the CNL Fund, the AB Fund is expressly permitted to operate as a feeder fund in a master-feeder investment structure.
Except as required by the 1940 Act or the Code, if any percentage restriction on investment or utilization of assets is adhered to at the time an investment is made, a later change in percentage resulting from a change in the market values of the Fund’s assets or purchases and redemptions of Fund shares will not be considered a violation of the limitation.
A fundamental limitation cannot be changed without the affirmative vote of the lesser of: (1) 50% of the outstanding shares of the Fund; or (2) 67% of the shares present or represented at a shareholders meeting at which the holders of more than 50% of the outstanding shares are present or represented. A non-fundamental limitation may be changed by the Board of Trustees without shareholder approval.
All of the investment policies noted in the table below are fundamental limitations, which cannot be changed by the Board of Trustees without affirmative shareholder approval as described above. The AB Fund, however, has sought to harmonize the fundamental investment limitations of the CNL Fund with those of the other funds in the AB Fund complex. Although the wording appears different, the fundamental investment limitations of the CNL Fund and the AB Fund are substantially similar. Notwithstanding any other limitation on investments in other investment companies, however, the AB Fund, unlike the CNL Fund, is expressly permitted to operate as a feeder fund in a master-feeder investment structure. Each investment limitation may be found in the respective Statements of Additional Information (“SAIs”) of the CNL Fund and the AB Fund.
Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
Diversification | The Fund may not, with respect to 75% of its assets, purchase securities of any issuer (other than a U.S. Government Security or security of an investment company) if, as a result: (1) more than 5% of the Fund’s total assets would be invested in the securities of that issuer; or (2) the Fund would own more than 10% of the outstanding voting securities of a that issuer. | The Fund may not invest more than 10% of its total assets (taken at market value) in securities of any one issuer, other than obligations issued by the U.S. Government, its agencies and instrumentalities, or purchase more than 10% of the voting securities of any one issuer, with respect to 75% of the Fund’s total assets. | The Fund may not, with respect to 75 invest more than 5% of its total assets, purchase securities of any issuer (other than a U.S. Government Security or security of an investment company) if, as a result: (1) more than 5% of the Fund’s total assets would be invested in the securities of that issuer; or (2) the Fund would own more than 10% of the outstanding (taken at market value) in securities of any one issuer, other than obligations issued by the U.S. Government, its agencies and instrumentalities, or purchase more than 10% of the voting securities of a thatany one issuer, with respect to 75% of the Fund’s total assets. |
Industry Concentration | The Fund may not purchase a security if, as a result, more than 25% of the Fund’s total assets would be invested in securities of issuers conducting their principal business activities in the same industry, except that the Fund will invest at least 25% of the value of its total assets in securities issued by real estate and real estate-related companies (in which the Fund intends to concentrate). For purposes of this limitation, there is no limit on investments in U.S. Government Securities and repurchase agreements collateralized by U.S. Government Securities. | The Fund may not invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry provided that: (i) this limitation does not apply to obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities; (ii) municipalities and their agencies and authorities are not deemed to be industries; and (iii) this limitations does not apply to securities issued by real estate and real estate-related companies (in which the Fund intends to concentrate). | The Fund may not invest more than 25% of its total assets in the securities of companies primarily engaged in any one industry provided that: (i) this limitation does not apply to obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities; and (ii) municipalities and their agencies and authorities are not deemed to be industries; and (iii) this limitations does not apply to securities issued by real estate and real estate-related companies (in which the Fund intends to concentrate). |
Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
Senior Securities | The Fund may not issue senior securities except as permitted by the 1940 Act. | The Fund may not issue any senior security except as otherwise permitted (i) under the 1940 Act or (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff. | The Fund may not issue any senior securities security except as otherwise permitted by(i) under the 1940 Act or (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff. |
Borrowing | The Fund may not borrow money if, as a result, outstanding borrowings would exceed an amount equal to 331/3% of the Fund’s total assets. | The Fund may not borrow money, except as otherwise permitted under the 1940 Act or pursuant to a rule, order or interpretation issued by the SEC or its staff, including (i) as a temporary measure, (ii) by entering into reverse repurchase agreements, and (iii) by lending portfolio securities as collateral. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other similar financial instruments shall not constitute borrowing. | The Fund may not borrow money except as otherwise permitted under the 1940 Act or pursuant to a rule, order or interpretation issued by the SEC or its staff, including (i) as a temporary measure, (ii) by entering into reverse repurchase agreements, and (iii) by lending portfolio securities as collateral. For purposes of this investment limitation, the purchase or sale of options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars and other similar financial instruments shall not constitute borrowing. |
Underwriting | The Fund may not underwrite securities issued by other persons except, to the extent that in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter. | The Fund may not engage in the business of underwriting securities issued by others, except to the extent that, in connection with the disposition of securities, the Fund may be deemed an underwriter under federal securities law. | The Fund may not underwriteengage in the business of underwriting securities issued by other personsothers, except, to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter under federal securities law. |
Real Estate | The Fund may not purchase or sell real estate, except that the Fund may invest in (i) securities directly or | The Fund may not purchase or sell real estate or real estate limited partnership interests, provided, however, | The Fund may not purchase or sell real estate, except or real estate limited partnership interests, |
Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
indirectly secured by real estate or interests therein or issued by companies that invest in real estate or interests therein or (ii) securities of issues that deal in real estate or are engaged in the real estate business, including real estate investment trusts. The Fund may hold real estate and sell real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Fund’s ownership of such securities. | that the Fund may invest in REITS, REOCS and securities secured by real estate or interests therein or issued by companies which invest in real estate or interests therein when consistent with the other policies and limitations described in the Fund’s prospectus. The Fund may hold real estate and sell real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Fund’s ownership of such securities. | provided, however, that the Fund may invest in (i)REITS, REOCS and securities directly or indirectly secured by real estate or interests therein or issued by companies that which invest in real estate or interests therein or (ii) securities of issues that deal in real estate or are engaged in the real estate business, including real estate investment trusts. when consistent with the other policies and limitations described in the Fund’s prospectus. The Fund may hold real estate and sell real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Fund’s ownership of such securities. | |
Commodities | The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities). | The Fund may not invest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling foreign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed-delivery basis, and other similar financial instruments). | The Fund may not purchase or sellinvest in physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commoditiesforeign currency, options, futures contracts, options on futures contracts, forward contracts, swaps, caps, floors, collars, securities on a forward-commitment or delayed- |
Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
delivery basis, and other similar financial instruments). | |||
Loans | The Fund may not make loans to other parties, except as permitted by the 1940 Act. For purposes of this limitation, entering into repurchase agreements, lending securities and acquiring any debt security are not deemed to be the making of loans. | The Fund may not lend any security or make any other loan except (i) as otherwise permitted under the 1940 Act, (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff, (iii) through the purchase of a portion of an issue of debt securities in accordance with the Fund’s investment objective, policies and limitations, or (iv) by engaging in repurchase agreements with respect to portfolio securities. | The Fund may not lend any security or make loans to any other parties,loan except (i) as otherwise permitted by the 1940 Act. For purposes of this limitation, entering into repurchase agreements, lending securities and acquiring any debt security are not deemed to be the making of loans.under the 1940 Act, (ii) pursuant to a rule, order or interpretation issued by the SEC or its staff, (iii) through the purchase of a portion of an issue of debt securities in accordance with the Fund’s investment objective, policies and limitations, or (iv) by engaging in repurchase agreements with respect to portfolio securities. |
Other Investment Companies | None. | Notwithstanding any other limitation, the Fund may invest all of its investable assets in an open-end management investment company with substantially the same investment objectives, policies and limitations as the Fund. For this purpose, “all of the Fund’s investable assets” means that the only investment securities that will be held by the Fund will be the Fund’s interest in the investment company. | The CNL Fund has the following non-fundamental policy: |
The CNL Fund has adopted the following investment limitations that may be changed by the Board of Trustees without shareholder approval.
Non-Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
Margin and Short Sales | The Fund may not sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short (short sales “against the box”), and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. The Fund may not purchase securities on margin, except that the Fund may use short-term credit for the clearance of the Fund’s transactions, and provided that initial and variation margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin. | The Fund may not purchase securities on margin or effect short sales, except that (i) the Fund may obtain such short term credits as may be necessary for the clearance of purchases or sales of securities. | The Fund may not sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short (short sales “against the box”), and provided that transactions in futures contracts and options are not deemed to constitute selling securities short. The Fund may not purchase securities on margin or effect short sales, except that (i) the Fund may |
Restricted Securities, Illiquid Securities and Securities Not Readily Marketable | The Fund may not invest more than 15% of its net assets in illiquid assets such as: (1) securities that cannot be disposed of within seven days at their then-current value; (2) repurchase agreements not entitling the holder to payment of principal within seven days; and (3) securities subject to restrictions on the sale of the | The Fund may not invest more than 15% of its net assets in illiquid securities, including time deposits and repurchase agreements that mature in more than seven days. | The Fund may not invest more than 15% of its net assets in illiquid assets such as: (1) securities that cannot be disposed of within seven days at their then-current value; (2) repurchase agreements not entitling the holder to payment of principal within seven days; and (3) securities subject to restrictions on the sale of |
Non-Fundamental Investment Policies | |||
Policy | CNL Fund | AB Fund | Differences |
securities to the public without registration under the 1933 Act that are not readily marketable. The Fund may treat certain restricted securities as liquid pursuant to guidelines adopted by the Board of Trustees. | the securities to the public without registration under the 1933 Act that are not readily marketable. The Fund may treat certain restricted securities as liquid pursuant to guidelines adopted by the Board of Trustees. securities, including time deposits and repurchase agreements that mature in more than seven days. | ||
Control of Portfolio Companies | The Fund may not make investments for the purpose of exercising control of an issuer. Investments by the Fund in entities created under the laws of foreign countries solely to facilitate investment in securities in that country will not be deemed the making of investments for the purpose of exercising control. | None. | The AB Fund does not have a corresponding limitation. |
G. COMPARISON OF FEES AND EXPENSES
The tables below describe the fees and expenses that you pay if you buy and hold Class A or Institutional Class Shares of the CNL Fund and the pro forma fees and expenses that you may pay if you buy and hold Investor Class or Y Class shares of the AB Fund after giving effect to the Reorganization. Expenses for each Fund are based on the operating expenses incurred by the CNL Fund and estimated to have been incurred by the Investor Class shares and Y Class shares of the AB Fund as of the semi-annual period ended June 30, 2009. The pro forma fees and expenses for the Investor Class and Y Class shares of the AB Fund assume that the Reorganization had been in effect for the same period. The Manager has contractually agreed to cap Fund expenses through February 28, 2011, to the extent that total annual fund operating expenses of the Investor Class and Y Class shares exceed the annual rate of 1.80% and 1.55% excluding taxes, interest, portfolio transaction expenses and other extraordinary expenses.
Fees and Expenses | CNL | AB Fund |
Shareholder Fees (fees paid directly from your investment) | ||
Maximum Sales Charge (Load) | 5.75%(1) | None |
Maximum Sales Charge (Load) | None | None |
Maximum Deferred Sales Charge (Load) Imposed on Redemptions | 1.00%(2) | None |
Redemption Fee | 1.00%(3) | 2.00%(4) |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | ||
Management Fee | 1.00% | 0.55% |
Distribution and/or Service (Rule 12b-1) Fees | 0.25% | None(5) |
Other Expenses | 3.18% | 1.22% (5) |
Total Annual Fund | 4.43% | 1.77% |
Fee Waiver and | (2.63)% | None |
Net Expenses | 1.80% | 1.77% |
(1) There is no initial sales charge on purchases of Class A shares of the CNL Fund in amounts of $1 million or more.
(2) A contingent deferred sales charge (“CDSC”) is a one-time fee that may be charged at the time of redemption of shares of the CNL Fund. Under certain circumstances, if you redeem Class A shares within one year that were purchased with no initial sales charge as part of an investment of $1 million or more, then a 1.00% CDSC may apply.
(3) Applies to shares of the CNL Fund redeemed within 75 calendar days of purchase. This fee does not apply to shares purchased through reinvested dividends or capital gain distributions, or to (i) shares held in certain omnibus accounts or retirement plans that cannot implement the fee or (ii) redemptions of shares through systematic withdrawal plans and certain life events.
(4) Applies to the proceeds of shares of the AB Fund that are redeemed within 90 days of their purchase. The fee does not apply to shares acquired through the reinvestment of dividends and distributions, systematic purchases and redemptions, shares redeemed to return excess IRA contributions, or certain transactions made within a retirement or employee benefit plan.
(5) The Investor Class of the AB Fund has adopted a service plan pursuant to which the AB Fund will pay up to 0.375% per annum of its average daily net assets to the Manager for its activities or expenses primarily intended to result in or relate to the servicing of Investor Class shares of the AB Fund. This service fee is reflected in “Other Expenses.”
(6) CNL Advisors has contractually agreed to waive its fee and/or reimburse Class A shares Fund expenses to the extent that the total annual fund operating expenses exceed 1.80% through April 30, 2010. The Expense Limit excludes certain non-routine and other expenses or costs.
Example
The Example below is intended to help you compare the cost of investing in Class A Shares of the CNL Fund with the cost of investing in Investor Class shares of the AB Fund on a pro forma basis. The Example assumes that you invest $10,000 in each Fund and then redeem all of your shares at the end of each period. The Example also assumes that your investment has a 5% annual return, that the CNL Fund’s Total Annual Fund Operating Expenses and Net Expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
One Year | Three Years | Five Years | Ten Years | |
CNL Fund – Class A (Pro forma) | $747 | $1,614 | $2,491 | $4,726 |
AB Fund – Investor Class (Pro forma) | $180 | $557 | $959 | $2,084 |
Fees and Expenses | CNL Fund | AB Fund |
Shareholder Fees (fees paid directly from your investment) | ||
Maximum Sales Charge (Load) | None | None |
Maximum Sales Charge (Load) | None | None |
Maximum Deferred Sales Charge (Load) Imposed on Redemptions | None | None |
Redemption Fee | 1.00%(1) | 2.00%(2) |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | ||
Management Fee | 1.00% | 0.55% |
Distribution and/or Service (Rule 12b-1) Fees | None | None |
Other Expenses | 3.18% | 0.94% (3) |
Total Annual Fund | 4.18% | 1.49% |
Fee Waiver and | (2.63)% | None |
Net Expenses | 1.55% | 1.49% |
(1) Applies to shares of the CNL Fund redeemed within 75 calendar days of purchase. This fee does not apply to shares purchased through reinvested dividends or capital gain distributions, or to (i) shares held in certain omnibus accounts or retirement plans that cannot implement the fee or (ii) redemptions of shares through systematic withdrawal plans and certain life events.
(2) Applies to the proceeds of shares of the AB Fund that are redeemed within 90 days of their purchase. The fee does not apply to shares acquired through the reinvestment of dividends and distributions, shares acquired through payroll contributions to a retirement or employee benefit plan, shares redeemed to return
excess IRA contributions, certain redemption transactions made within a retirement or employee benefit plan, or redemption transactions made within a “Qualified Wrap Program”.
(3) The Y Class of the AB Fund has adopted a service plan pursuant to which the AB Fund will pay 0.10% per annum of its average daily net assets to the Manager for its activities or expenses primarily intended to result in or relate to the servicing of Y Class shares of the AB Fund. This service fee is reflected in “Other Expenses.”
(4) CNL Advisors has contractually agreed to waive its fee and/or reimburse Institutional Class shares Fund expenses to the extent that the total annual fund operating expenses exceed 1.55% through April 30, 2010. The expense limits exclude certain non-routine and other expenses or costs.
Example
The Example below is intended to help you compare the cost of investing in Institutional Class Shares of the CNL Fund with the cost of investing in Y Class shares of the AB Fund on a pro forma basis. The Example assumes that you invest $10,000 in each Fund and then redeem all of your shares at the end of each period. The Example also assumes that your investment has a 5% annual return and that the CNL Fund’s Total Annual Fund Operating Expenses and Net Expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
One Year | Three Years | Five Years | Ten Years | |
CNL Fund – Institutional Class (Pro forma) | $158 | $1,030 | $1,916 | $4,196 |
AB Fund – Y Class (Pro forma) | $152 | $471 | $813 | $1,779 |
H. PERFORMANCE INFORMATION
The AB Fund’s Investor Class and Y Class shares will adopt, respectively, the performance history of the CNL Fund’s Class A and Institutional Class Shares. The bar chart and the performance table below provide some indication of the risks of an investment in the AB Fund by showing the CNL Fund’s performance last year and by showing how the CNL Fund’s average annual returns compare with a broad measure of market performance. Of course, the CNL Fund’s past performance, before and after taxes, does not necessarily represent how the AB Fund will perform in the future. Updated performance information currently is available at www.thecnlfunds.com or by calling (866) 745-3797.
CNL Fund Class A Shares Year-By-Year Total Return
During the period shown in the bar chart, the highest quarterly return was -2.31% (for the quarter ended March 31, 2008) and the lowest quarterly return was -29.56% (for the quarter ended December 31, 2008). The CNL Fund commenced investment operations on October 30, 2007.
AVERAGE ANNUAL TOTAL RETURN
For the periods | One Year | Since Inception |
CNL Fund Class A Shares | ||
Return Before Taxes | -45.91% | -47.32% |
Return After Taxes on Distributions | -46.10% | -47.62% |
Return After Taxes on Distributions and Sale of Fund Shares | -29.77% | -39.95% |
CNL Fund Institutional Shares | ||
Return Before Taxes | -45.66% | -47.09% |
FTSE EPRA/NAREIT Global Real Estate Index (2) | -47.72% | -48.01% |
(1) | Represents commencement date of investment operations (i.e., when the CNL Fund began to invest in accordance with its investment objective). |
(2) | The FTSE EPRA/NAREIT Global Real Estate Index is an index that tracks the performance of listed real estate companies and REITs worldwide. Index returns do not reflect deductions for fees, expenses and taxes. |
After-tax returns are calculated using the historical highest individual federal marginal income tax rate in effect at the time of each distribution and assumed sale, but do not reflect the impact of state and local taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns reflect past tax effects and are not predictive of future tax effects. After-tax returns may not be relevant to investors who hold their Fund shares in a tax-deferred account (including a 401(k) or individual retirement account), or to investors that are tax-exempt.
Portfolio Turnover
Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in larger Fund distributions of net realized capital gains and, therefore, higher taxes for shareholders whose Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect each Fund’s performance. The CNL Fund’s portfolio turnover rate from January 1, 2009 through November 30, 2009 was 56% of the average value of its portfolio.
I. COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION
PROCEDURES
Foreside Fund Services, LLC (“Foreside”) is the CNL Fund’s distributor and principal underwriter. Foreside is located at Three Canal Plaza, Suite 100, Portland, Maine 04101. The CNL Fund has adopted distribution and service plans for its Class A shares under Rule 12b-1 of the 1940 Act. Rule 12b-1 fees are used to compensate the Distributor and third parties for services and expenses related to the sale and distribution of the CNL Fund’s shares and/or for providing shareholder services. Because Rule 12b-1 fees are paid out of the CNL Fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Class A shares pay a 12b-1 fee at the annual rate of 0.25% of the average daily net assets of the CNL Fund. Institutional Class Shares of the CNL Fund do not pay any Rule 12b-1 fees.
Under a Distribution Agreement with the CNL Trust, Foreside acts as the CNL Fund’s agent in connection with the continuous offering of shares of the CNL Fund. Foreside is a registered broker-dealer and is a member of the Financial Industry Regulatory Authority (“FINRA”). Foreside continually distributes shares of the CNL Fund on a best efforts basis. Foreside has no obligation to sell any specific quantity of Fund shares. Foreside may enter into agreements with selected broker-dealers, banks or other financial institutions for distribution and/or servicing of shares of the CNL Fund. Pursuant to the Distribution Agreement, Foreside receives, and may reallow to broker-dealers, all or a portion of the sales charge paid by the purchasers of Class A shares of the CNL Fund. Foreside also may retain any portion of the distribution and/or shareholder servicing (Rule 12b-1) fees received from the CNL Fund that are not paid to financial intermediaries. Foreside has appointed CNL Securities Corp. as National Sales and Marketing Agent to assist Foreside in the promotion of the CNL Fund. This appointment will be terminated upon the completion of the Reorganization.
Foreside also will be the distributor and principal underwriter of the AB Fund’s shares. Pursuant to a Sub-Administration Agreement between Foreside and the Manager, Foreside receives a fee from the Manager for providing administrative services in connection with the marketing and distribution of shares of the series of the AB Trust.
The AB Fund’s Investor Class has adopted a Service Plan (the “Investor Class Plan”), which provides that the AB Fund’s Investor Class will pay up to 0.375% per annum of its average daily net assets to the Manager (or another entity approved by the Board of Trustees of the AB Trust (the “AB Board”). The Manager or these approved entities may spend such amounts on any activities or expenses primarily intended to result in or relate to the servicing of Investor Class shares including, but not limited to, payment of shareholder service fees and transfer agency or sub-transfer agency expenses. The fees, which are included as part of the AB Fund’s “Other Expenses” in the Table of Fees and Expenses in this Proxy Statement, will be payable monthly in arrears without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the entity for the services provided pursuant to the Investor Class Plan. Thus, the Manager may realize a profit or a loss based upon its actual servicing-related expenditures for the Investor Class. The primary expenses expected to be incurred under the Investor Class Plan are transfer agency fees and servicing fees paid to financial intermediaries such as plan sponsors and broker-dealers.
The AB Fund’s Y Class also has adopted a Service Plan (the “Y Class Plan”). The Y Class Plan provides that the AB Fund’s Y Class will pay 0.10% per annum of its average daily net assets to the Manager (or another entity approved by the AB Board). The Manager or these approved entities may spend such amounts on any activities or expenses primarily intended to result in or relate to the servicing of Y Class shares including, but not limited to, payment of shareholder service fees and transfer agency or
sub-transfer agency expenses. The fees, which are included as part of the AB Fund’s “Other Expenses” in the Table of Fees and Expenses in this Proxy Statement, will be payable monthly in arrears without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the entity for the services provided pursuant to the Y Class Plan. Thus, the Manager may realize a profit or a loss based upon its actual servicing-related expenditures for the Y Class. The primary expenses expected to be incurred under the Y Class Plan are transfer agency fees and servicing fees paid to financial intermediaries such as plan sponsors and broker-dealers.
Purchase and Redemption Procedures.
Purchase Procedures. The purchase procedures for the CNL Fund and the AB Fund are similar. Investors may invest by contacting the Funds through the internet, through a broker or other financial institution who sells the Funds, or by mail, telephone or wire.
The minimum initial and subsequent investment amounts for the CNL Fund are different than the minimum amounts for the AB Fund. The minimum investment for Class A Shares of the CNL Fund is $2,000; The minimum investment for Investor Class shares of the AB Fund is $2,500. The minimum investment for Institutional Class Shares of the CNL Fund is $100,000; the minimum investment for Y Class shares of the AB Fund is $100,000. The front-end sales charge applicable to purchases of Class A Shares of the CNL Fund will not be applicable to purchases of Investor Class shares of the AB Fund.
Redemption Procedures. The CNL Fund permits, and the AB Fund will permit, redemptions through the internet, by mail, wire, and telephone. The AB Fund will charge a 2.00% early redemption fee on the proceeds of its shares that are redeemed within 90 days of their purchase; a 1.00% redemption fee generally applies to shares of the CNL Fund redeemed within 75 calendar days of purchase. Your CNL Fund shares purchase date(s) will carry over to the AB Fund for purposes of determining whether or not an early redemption fee applies. The AB Fund early redemption fee of 2% will apply, if applicable to your particular situation.
Additionally, each Fund has also reserved the right to redeem shares “in kind.” Additional shareholder account information for the AB Fund is available in Appendix C to this Proxy Statement.
J. KEY INFORMATION ABOUT THE PROPOSAL
The following is a summary of key information concerning the Reorganization. Keep in mind that more detailed information appears in the Plan, a copy of the form of which is attached to this Proxy Statement as Appendix A.
1. SUMMARY OF THE PROPOSED REORGANIZATION
At the Special Meeting, the shareholders of the CNL Fund will be asked to approve the Plan to reorganize the CNL Fund into the AB Fund. The AB Fund is a newly organized fund that will commence operations upon consummation of the Reorganization. If the Plan is approved by the shareholders of the CNL Fund and the Reorganization is consummated, the CNL Fund will transfer all of its assets to the AB Fund in exchange solely for (1) the number of full and fractional Investor Class and Y Class shares of the AB Fund equal to the number of full and fractional Class A and Institutional Class shares, respectively, of the CNL Fund as of the close of business on the closing date referred to below (the Closing) and (2) the AB Fund’s assumption of all of the CNL Fund’s liabilities. Immediately thereafter, the CNL Fund will distribute the AB Fund shares to its shareholders, by the AB Trust’s transfer agent establishing accounts on the AB Fund’s share records in the names of those shareholders and transferring those AB Fund shares to those accounts, by class, in complete liquidation of the CNL Fund. As a result, each shareholder of the CNL Fund will receive Investor Class and/or Y Class shares of the AB Fund, as the case may be. The
expenses associated with the Reorganization will not be borne by the CNL Fund’s shareholders; record of ownership will be held in book entry form only.
Until the Closing, shareholders of the CNL Fund will continue to be able to redeem their shares at the Net Asset Value (“NAV”) per share next determined after receipt by the CNL Fund’s transfer agent of a redemption request in proper form. Redemption and purchase requests received by the transfer agent after the Closing will be treated as requests received for the redemption or purchase of shares of the AB Fund received by the shareholder in connection with the Reorganization. After the Reorganization, all of the issued and outstanding shares of the CNL Fund will be canceled on the books of the CNL Fund, and the share transfer books of the CNL Fund will be permanently closed. If the Reorganization is consummated, shareholders will be free to redeem the shares of the AB Fund that they receive in the transaction at their then-current NAV. Shareholders of the CNL Fund may wish to consult their tax advisors as to any different consequences of redeeming their shares prior to the Reorganization or exchanging such shares for shares of the AB Fund in the Reorganization.
The Reorganization is subject to a number of conditions, including the approval of the Plan by the shareholders of the CNL Fund and the receipt of a legal opinion from counsel to the AB Trust with respect to certain tax issues (see Federal Income Tax Consequences, below). Assuming satisfaction of the conditions in the Plan, the closing date of the Reorganization is expected to be February 26, 2010, or another date agreed to by the CNL Trust and the AB Trust.
CNL Advisors and the Manager have agreed to pay all costs relating to the Reorganization, including the costs relating to the Special Meeting and to preparing and filing the registration statement that includes this Proxy Statement. They also will incur the costs associated with the solicitation of proxies, including the cost of copying, printing and mailing proxy materials.
The Plan may be amended by the mutual agreement of the CNL Trust, notwithstanding approval thereof by the CNL Fund’s shareholders, provided that no such amendment after that approval may have a material adverse effect on those shareholders’ interests. In addition, the Plan may be terminated at any time before the Closing by the mutual agreement of the CNL Trust and the AB Trust or by either of them (1) in the event of the other’s material breach of any representation, warranty or covenant contained in the Plan to be performed at or before the Closing, (2) if a condition to its obligations has not been met and it reasonably appears that that condition will not or cannot be met, (3) if a governmental body issues an order, decree or ruling having the effect of permanently enjoining, restraining or otherwise prohibiting consummation of the Reorganization or (4) if the Closing has not occurred by March 31, 2010, or another date as to which they agree.
2. DESCRIPTION OF THE AB FUND’S SHARES
Investor Class and Y Class shares of the AB Fund issued to the shareholders of the CNL Fund pursuant to the Reorganization will be duly authorized, validly issued, fully paid and non-assessable when issued and will be transferable without restriction and will have no preemptive or conversion rights. Investor Class shares and Y Class shares will be sold and redeemed based upon their NAV next determined after receipt of the purchase or redemption request, as described in Appendix C to this Proxy Statement.
3. FEDERAL INCOME TAX CONSEQUENCES
The CNL Trust believes the CNL Fund has qualified for treatment as a regulated investment company under Part I of Subchapter M of Chapter 1 of Subtitle A of the Code since its inception. Accordingly, the CNL Trust believes the CNL Fund has been, and expects the CNL Fund to continue
through the Closing to be, relieved of any federal income tax liability on its taxable income and net gains it distributes to shareholders to the extent provided for in Subchapter M.
The Reorganization is intended to qualify for federal income tax purposes as a tax-free reorganization under section 368(a) of the Code. As a condition to the Closing, the CNL Trust and the AB Trust will receive an opinion of counsel to the AB Trust substantially to the effect that -- based on certain assumptions and conditioned on the representations set forth in the Plan (and, if such counsel requests, in separate letters from the CNL Trust and the AB Trust) being true and complete at the time of the Closing and the Reorganization’s being consummated in accordance with the Plan (without the waiver or modification of any terms or conditions thereof and without taking into account any amendment thereof that counsel has not approved) -- the Reorganization will qualify as such a reorganization and that, accordingly, for federal income tax purposes:
• | Each Fund will be “a party to a reorganization” (within the meaning of section 368(b) of the Code); | |
• | The CNL Fund will recognize no gain or loss upon the transfer of its assets to the AB Fund in exchange solely for AB Fund’s shares and the AB Fund’s assumption of the CNL Fund’s liabilities or on the distribution of those shares to the CNL Fund’s shareholders; | |
• | A shareholder will recognize no gain or loss on the exchange of all of its CNL Fund shares solely for AB Fund shares pursuant to the Reorganization; | |
• | A shareholder’s aggregate tax basis in the AB Fund shares it receives pursuant to the Reorganization will be the same as the aggregate tax basis in its CNL Fund shares it actually or constructively surrenders in exchange for those AB Fund shares, and its holding period for those AB Fund shares will include, in each instance, its holding period for those CNL Fund shares, provided the shareholder holds them as capital assets as of the time of the Closing; | |
• | The AB Fund will recognize no gain or loss on its receipt of the CNL Fund’s assets in exchange solely for the AB Fund’s shares and its assumption of the CNL Fund’s liabilities; | |
• | The AB Fund’s basis in each transferred asset will be the same as the CNL Fund’s basis therein immediately before the Reorganization, and the AB Fund’s holding period for each such asset will include the CNL Fund’s holding period therefor (except where the AB Fund’s investment activities have the effect of reducing or eliminating an asset’s holding period); and | |
• | For purposes of section 381 of the Code, the AB Fund will be treated just as the CNL Fund would have been treated if there had been no Reorganization. Accordingly, the Reorganization will not result in the termination of the CNL Fund’s taxable year, the CNL Fund’s tax attributes enumerated in section 381(c) of the Code will be taken into account by the AB Fund as if there had been no Reorganization, and the part of the CNL Fund’s taxable year before the Reorganization will be included in the AB Fund’s taxable year after the Reorganization. |
Opinions of counsel are not binding upon the IRS or the courts. If the Reorganization is consummated but does not qualify as a tax free reorganization under the Code, and thus is taxable, the CNL Fund would recognize gain or loss on the transfer of its assets to the AB Fund and each shareholder of the CNL Fund would recognize a taxable gain or loss equal to the difference between its tax basis in the CNL Fund shares and the fair market value of the shares of the AB Fund it receives.
General Limitation on Capital Losses. Capital losses of a fund can generally be carried forward to each of the eight (8) taxable years succeeding the loss year to offset future capital gains. However, any such capital losses are subject to an annual limitation if there is a more than 50% “change in ownership”
of a fund. If, as is anticipated, at the time of the closing of the Reorganization the AB Fund has either no assets or nominal assets incident to its organization, there will be no change of ownership of the CNL Fund as a result of the Reorganization. However, the capital losses of the AB Fund, as the successor in interest to the CNL Fund, may subsequently become subject to an annual limitation as a result of sales of AB Fund shares or other reorganization transactions in which the AB Fund might engage post-Reorganization.
Tracking Your Basis and Holding Period; State and Local Taxes. After the Reorganization, you will continue to be responsible for tracking the adjusted tax basis and holding period of your shares for federal income tax purposes. You should consult your tax adviser regarding the effect, if any, of the Reorganization in light of your particular circumstances, as well as the state and local tax consequences, if any, of the Reorganization because this discussion only relates to the federal income tax consequences.
4. COMPARISON OF FORMS OF ORGANIZATION AND SHAREHOLDER RIGHTS
Set forth below is a discussion of the material differences between the Funds and the rights of their shareholders.
Governing Law. The CNL Fund is the sole series of the CNL Trust, which is organized as a Delaware statutory trust. The AB Fund is a separate series of the AB Trust, which is organized as a Massachusetts business trust. Each Fund is authorized to issue an unlimited number of shares of beneficial interest. The CNL Trust’s operations are governed by its Agreement and Declaration of Trust, including any amendments thereto (collectively, “Old Trust Declaration”) and By-Laws and applicable state law. The AB Trust’s operations are governed by its Amended and Restated Declaration of Trust (the “AB Declaration of Trust”) and By-Laws and applicable state law.
Shareholder Liability. Under the Old Trust Declaration, no shareholder of the CNL Fund shall be subject to any personal liability in connection with the assets or the affairs of the CNL Trust or of any of its series. The CNL Fund is required to indemnify shareholders and former shareholders in accordance with Delaware law against losses and expenses arising from any personal liability for any obligation of the CNL Fund solely by reason of being or having been a shareholder of the CNL Fund and not because of his or her acts or omissions or for some other reason.
Under the AB Declaration of Trust, any shareholder or former shareholder of the AB Fund shall not be held to be personally liable for any obligation or liability of the AB Trust solely by reason of being or having been a shareholder and not because of such shareholder’s acts or omissions or for some other reason. The AB Fund is required to indemnify shareholders and former shareholders against losses and expenses incurred in connection with proceedings relating to his or her being or having been a shareholder of the AB Fund and not because of his or her acts or omissions.
Board of Trustees. The Reorganization will result in a change in the Board of Trustees because the trustees of the CNL Trust are different from the trustees of the AB Trust. The CNL Board has four trustees, one of whom is an “interested person,” as that term is defined under the 1940 Act, of the Trust. For more information, refer to the Statement of Additional Information dated April 30, 2009 for the CNL Fund, which is incorporated by reference into this Proxy Statement.
The AB Board has eight trustees, one of whom is deemed an “interested person” of the AB Trust. For more information, refer to the Statement of Additional Information dated January _, 2009 to this Proxy Statement, which is incorporated by reference into this Proxy Statement.
The Reorganization also will result in a change in the officers because the officers of the CNL Trust are different from the officers of the AB Trust.
Classes. The CNL Fund offers two classes of shares: Class A and Institutional Class. The AB Fund is a separate series of the AB Trust that is expected to offer Investor Class and Y Class shares. It also is anticipated that shareholders of the CNL Fund will receive Investor Class and Y Class shares of the AB Fund in the Reorganization. Nothing contained herein shall be construed as an offer to purchase or otherwise acquire any other class of shares of the AB Fund. The AB Board has reserved the right to create and issue additional classes of the AB Fund following the Reorganization. Each share of a series or class represents an equal proportionate interest in that series or class with each other share of that series or class. Shares of each series or class generally vote together on fund- or trust-wide matters, except when required under federal securities laws to vote separately on matters that only affect a particular class, such as the approval of a distribution plan for a particular class. Structurally, there is no difference between Investor Class and Y Class shares of the AB Fund and, respectively, the CNL Fund’s Class A and Institutional Class Shares.
5. CAPITALIZATION
The capitalization of the CNL Fund as of June 30, 2009 and the AB Fund’s pro forma combined capitalization as of that date after giving effect to the Reorganization are as follows:
(unaudited) | CNL Fund | Pro forma AB Fund Investor Class | CNL Fund | Pro forma AB Fund |
Net Assets | $2.2 million | $2.2 million | $20.6 million | $20.6 million |
Shares Outstanding | 445,647 | 445,647 | 4,161,576 | 4,161,576 |
Net Asset Value per Share | $4.95 | $4.95 | $4.96 | $4.96 |
K. ADDITIONAL INFORMATION ABOUT THE AB FUND
1. INVESTMENT ADVISER AND SUB-ADVISER
The Manager, located at 4151 Amon Carter Boulevard, Forth Worth, Texas 76155, is the AB Fund’s investment adviser. The Manager is a wholly owned subsidiary of Lighthouse Holdings, Inc. (“Lighthouse”). Lighthouse is indirectly controlled by investment funds affiliated with Pharos Capital Group, LLC (“Pharos”) and TPG Capital, L.P. (“TPG”). The Manager is paid a management fee as compensation for paying investment advisory fees and for providing the AB Trust with advisory and asset allocation services. Pursuant to management and administrative services agreements, the Manager provides the AB Trust with office space, office equipment and personnel necessary to manage and administer the AB Trust’s operations. This includes:
• complying with reporting requirements;
• corresponding with shareholders;
• maintaining internal bookkeeping, accounting and auditing services and records; and
• supervising the provision of services to the AB Trust by third parties.
The management agreement provides for the Manager to receive an annualized management fee that is calculated and accrued daily, equal to 0.05% of the net assets of the AB Fund, plus amounts paid by the Manager to the Sub-Adviser.
In addition to the management fee, the Manager is paid an administrative services fee for providing administrative and management services (other than investment advisory services) to the AB Fund.
The AB Fund is responsible for expenses not otherwise assumed by the Manager, including the following: audits by independent auditors; transfer agency, custodian, fund accounting, dividend disbursing agent and shareholder recordkeeping services; taxes, if any, and the preparation of the AB Fund’s tax returns; interest; costs of Trustee and shareholder meetings; printing and mailing prospectuses and reports to existing shareholders; fees for filing reports with regulatory bodies and the maintenance of the AB Fund’s existence; legal fees; fees to federal and state authorities for the registration of shares; fees and expenses of Trustees; insurance and fidelity bond premiums; fees paid to consultants providing reports regarding adherence by the Sub-Adviser to the investment style of the AB Fund; fees paid for brokerage commission analysis for the purpose of monitoring best execution practices of the Sub-Adviser; and any extraordinary expenses of a nonrecurring nature.
The AB Fund’s assets may be allocated among one or more sub-advisers in the future by the Manager. The sub-adviser has discretion to purchase and sell securities for its segment of the AB Fund’s assets in accordance with the AB Fund’s objectives, policies, restrictions and more specific strategies provided by the Manager. Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Manager is permitted to enter into new or modified investment advisory agreements with existing or new sub-advisers without approval of the AB Fund’s shareholders, but subject to approval of the AB Fund’s Board.
The Sub-Adviser, is a subsidiary of CB Richard Ellis Group, Inc., one of the world’s largest publicly held commercial real estate services firms (in terms of 2008 revenues). The Sub-Adviser is focused on managing exchange-listed global real estate securities portfolios on behalf of investors, and has dedicated real estate securities investment management offices located in Baltimore, London, Sydney, and Tokyo. The Sub-Adviser’s principals have an average of fourteen years of investment experience related to the investment management of listed domestic and global real estate securities portfolios. The Sub-Adviser was formed in 2004 and had approximately $2.04 billion of assets under management as of November 30, 2009. The Sub-Adviser’s principal business location is 250 West Pratt Street, Baltimore, Maryland 21201.
The AB Fund’s SAI provides additional information about each portfolio manager’s compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the CNL Fund.
2. OTHER SERVICE PROVIDERS
Foreside Fund Services, LLC (“Foreside”), located at Three Canal Plaza, Suite 100, Portland, Maine 04101, is the distributor and principal underwriter of the AB Fund’s shares. Pursuant to a Sub-Administration Agreement between Foreside and the Manager, Foreside receives a fee from the Manager for providing administrative services in connection with the marketing and distribution of shares of the series of the American Beacon Funds (including the AB Fund), the American Beacon Mileage Funds, and the American Beacon Select Funds.
3. TAX CONSIDERATIONS
The AB Fund intends to make distributions that may be taxed to its shareholders as ordinary income or net capital gain. A discussion of relevant tax matters is included in Appendix C to this Proxy Statement.
4. PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES
If you purchase the AB Fund through a broker-dealer or other financial intermediary (such as a bank), the AB Fund and its related companies may pay the intermediary for the sale of AB Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the AB Fund over another investment. Ask your salesperson or visit your financial intermediary’s internet site for more information.
II. VOTING INFORMATION
A. RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
Proxies are being solicited from the shareholders of the CNL Fund by the CNL Board for the Special Meeting to be held on Thursday, February 22, 2010, at 10:00 a.m. Eastern time at principal executive offices of the CNL Trust located at 450 South Orange Avenue Orlando, FL 32801, or at such later time made necessary by adjournment. Unless revoked, all valid proxies will be voted in accordance with the specification thereon or, in the absence of specifications, “FOR” approval of the Plan.
The CNL Board has fixed the close of business on January __, 2010 (the “Record Date”) as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting and any adjournments thereof. Shareholders of record as of the Record Date will be entitled to one vote for each share held and to a proportionate fractional vote for each fractional share held. As of the Record Date, the total number of issued and outstanding shares of beneficial interest of Class A and Institutional Class shares of the CNL Fund was ________ and ________, respectively. Shareholders of record who own five percent or more of the CNL Fund as of the Record Date are set forth on Appendix B to this Proxy Statement. Approval of the Reorganization will require the affirmative vote of a majority of the outstanding voting shares of the CNL Fund as defined under the Investment Company Act of 1940, as amended.
B. HOW TO VOTE
You may vote in one of three ways:
• complete and sign the enclosed proxy ballot and mail it to us in the prepaid return envelope (if mailed in the United States);
• vote on the Internet at the website address listed on your proxy ballot; or
• call the toll-free number printed on your proxy ballot.
PLEASE NOTE, TO VOTE VIA THE INTERNET OR TELEPHONE, YOU WILL NEED THE “CONTROL NUMBER” THAT APPEARS ON YOUR PROXY BALLOT.
C. PROXIES
All proxies solicited by the CNL Board that are properly executed and received by the Secretary prior to the Meeting, and are not revoked, will be voted at the Meeting. A proxy with respect to shares held in the name of two or more persons is valid if executed by any one of them unless at or prior to its use the CNL Fund receives written notification to the contrary from any one of such persons. Shares represented by such proxies will be voted in accordance with the instructions thereon. If no specification is made on a proxy, it will be voted FOR the matters specified on the proxy. All shares that are voted and
votes to ABSTAIN will be counted towards establishing a quorum, as will broker non-votes. Broker non-votes are shares for which the beneficial owner has not voted and the broker holding the shares does not have discretionary authority to vote on the particular matter.
You may revoke a proxy once it is given. If you desire to revoke a proxy, you must submit a subsequent later dated proxy or a written notice of revocation to the CNL Fund. You may also give written notice of revocation in person at the Special Meeting. Attendance by a shareholder at the Special Meeting does not, by itself, revoke a proxy.
D. QUORUM AND ADJOURNMENTS
One-third, or thirty-three and one-third percent (331/3%), of the shares of the CNL Fund that are entitled to vote will be considered a quorum for the transaction of business. If a quorum of shareholders of the CNL Fund is not present at the Special Meeting, or if a quorum is present but sufficient votes to approve the Reorganization described in this Proxy Statement are not received, the persons named as proxies may, but are under no obligation to, propose one or more adjournments of the Special Meeting of the CNL Fund to permit further solicitation of proxies. Any business that might have been transacted at the Special Meeting with respect to the CNL Fund may be transacted at any such adjourned session(s) at which a quorum is present. The Special Meeting with respect to the CNL Fund may be adjourned from time to time by the vote of shareholders representing one-third of the shares of the CNL Fund that are entitled to vote upon the question of adjourning the Special Meeting of the CNL Fund to another date and time, whether or not a quorum is present, and the Special Meeting of the CNL Fund may be held as adjourned without further notice. The persons designated as proxies may use their discretionary authority to vote as instructed by management of the CNL Fund on questions of adjournment and on any other proposals raised at the Special Meeting to the extent permitted by the SEC’s proxy rules, including proposals for which timely notice was not received, as set forth in the SEC’s proxy rules.
E. EFFECT OF ABSTENTIONS AND BROKER “NON-VOTES”
All proxies voted, including abstentions and broker non-votes (shares held by brokers or nominees where the underlying holder has not voted and the broker does not have discretionary authority to vote the shares), will be counted toward establishing a quorum. In addition, under the rules of the New York Stock Exchange, if a broker has not received instructions from beneficial owners or persons entitled to vote and the proposal to be voted upon may “affect substantially” a shareholder’s rights or privileges, the broker may not vote the shares as to that proposal even if it has discretionary voting power. As a result, these shares also will be treated as broker non-votes for purposes of proposals that may “affect substantially” a shareholder’s rights or privileges (but will not be treated as broker non-votes for other proposals, including adjournment of the Special Meeting).
Abstentions and broker non-votes will be treated as shares voted against a proposal. Treating broker non-votes as votes against a proposal can have the effect of causing shareholders who choose not to participate in the proxy vote to prevail over shareholders who cast votes or provide voting instructions
to their brokers or nominees. In order to prevent this result, the CNL Fund may request that selected brokers or nominees refrain from returning proxies on behalf of shares for which voting instructions have not been received from beneficial owners or persons entitled to vote. The CNL Fund also may request that selected brokers or nominees return proxies on behalf of shares for which voting instructions have not been received if doing so is necessary to obtain a quorum. Abstentions and broker non-votes will not be voted “FOR” or “AGAINST” any adjournment.
F. SOLICITATION OF PROXIES
The CNL Fund expects that the solicitation of proxies will be primarily by mail and telephone. The solicitation also may include facsimile, Internet or oral communications by certain employees of CNL Advisors, who will not be paid for these services. CNL Advisors has retained Broadridge Financial Solutions, Inc. to aid in the solicitation of proxies, at an anticipated cost of approximately $_________. CNL Advisors and the Manager will bear the costs of the Special Meeting, including legal costs, the costs of retaining Broadridge Financial Solutions, Inc., and other expenses incurred in connection with the solicitation of proxies.
III. OTHER INFORMATION
A. OTHER BUSINESS
The CNL Board knows of no other business to be brought before the Special Meeting. If any other matters come before the Meeting, the CNL Board intends that proxies that do not contain specific restrictions to the contrary will be voted on those matters in accordance with the judgment of the persons named in the enclosed proxy card.
B. NEXT MEETING OF SHAREHOLDERS
The CNL Fund does not hold regular meetings of shareholders. Shareholders wishing to submit proposals for inclusion in a proxy statement for a subsequent meeting of shareholders should send their written proposals to Susan L. Terenzio, Secretary of the CNL Trust, 450 South Orange Avenue Orlando, FL 32801. Proposals must be delivered to the Secretary of the CNL Trust not later than the tenth day following the day on which public announcement of the date of the Special Meeting was first made by the CNL Trust. Such shareholder’s proposal shall set forth (a) a brief description of the business desired to be brought before the Special Meeting, the reasons for conducting such business at the Special Meeting and any material interest in such business of such shareholder and of the beneficial owner, if any, on whose behalf the proposal is made, and (b) as to the shareholder submitting the proposal and the beneficial owner, if any, on whose behalf the proposal is made, (i) the name and address of such shareholder, as they appear on the books of the CNL Trust, and of such beneficial owner and (ii) the number of shares of each class of shares of the CNL Fund which are owned beneficially and of record by such shareholder and such beneficial owner. Timely submission of a proposal does not necessarily mean that the proposal will be included.
C. LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the AB Fund in connection with the Reorganization and the tax consequences of the Reorganization will be passed upon by K&L Gates LLP. Certain legal matters in connection with the Reorganization will be passed upon by Stradley Ronon Stevens & Young, LLP for the CNL Trust and the CNL Fund.
D. INFORMATION FILED WITH THE SEC
The CNL Trust and the AB Trust are subject to the information requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith, file reports and other information, including proxy materials and charter documents, with the SEC. Reports, proxy statements, registration statements and other information filed by the CNL Trust may be inspected without charge and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549, and at the following regional offices of the SEC: Northeast Regional Office, 3 World Financial Center, Suite 400, New York, New York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire Boulevard, Suite 1100, Los Angeles, California 90036. Copies of such materials may also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549 at prescribed rates.
By Order of the Board of Trustees of The CNL Funds
Susan L. Terenzio
Secretary
January__, 2010
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION (“Agreement”) is made as of December 3, 2009, among AMERICAN BEACON FUNDS, a Massachusetts business trust (“New Trust”), on behalf of American Beacon Global Real Estate Fund, a segregated portfolio of assets (“series”) thereof (“New Fund”), THE CNL FUNDS, a Delaware statutory trust, consisting of a sole series, CNL Global Real Estate Fund (“Old Trust” or “Old Fund”), and, solely for purposes of paragraph 6, AMERICAN BEACON ADVISORS, INC., New Trust’s investment manager (“AmBeacon Manager”), and CNL FUND ADVISORS COMPANY, Old Trust’s investment manager (“CNL Manager”). (Each of New Trust and Old Trust is sometimes referred to herein as an “Investment Company,” and each of New Fund and Old Fund is sometimes referred to herein as a “Fund.”) All agreements, covenants, representations, warranties, actions, and obligations of New Fund contained herein are made and shall be deemed to be agreements, covenants, representations, warranties, actions, and obligations of, and all rights and benefits created hereunder in favor of New Fund shall inure to and be enforceable by, New Trust on New Fund’s behalf.
Each Investment Company wishes to effect a reorganization described in section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (“Code”) (all “section” references are to the Code, unless otherwise noted), and intends this Agreement to be, and adopts it as, a “plan of reorganization” within the meaning of the regulations under the Code (“Regulations”). The reorganization will involve Old Fund’s changing its identity, form, and place of organization -- by converting from Old Trust (i.e., the sole series thereof) to a series of New Trust -- by (1) transferring all its assets to New Fund (which is being established solely for the purpose of acquiring those assets and continuing Old Fund’s business) in exchange solely for voting shares of beneficial interest (“shares”) in New Fund and New Fund’s assumption of all of Old Fund’s liabilities, (2) distributing those shares pro rata to Old Fund’s shareholders in exchange for their shares therein and in complete liquidation thereof, and (3) terminating Old Fund (collectively, the “Reorganization”), all on the terms and conditions set forth herein.
Each Investment Company’s board of trustees (each, a “Board”), in each case including a majority of its members who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”)) (“Non-Interested Persons”) of either Investment Company, has duly adopted and approved this Agreement and the transactions contemplated hereby and has duly authorized performance thereof on its Fund’s behalf by all necessary Board action.
Old Fund currently offers two classes of shares, designated Class A and Institutional Class shares (“Class A Old Fund Shares” and “Institutional Class Old Fund Shares,” respectively, and collectively, “Old Fund Shares”). Old Fund previously offered and issued a third class of shares, Class C shares (“Class C Old Fund Shares”), which were converted to Class A Old Fund Shares in December 2008 and thus are not included in the term “Old Fund Shares.” New Fund will have multiple classes of shares, including two classes designated Investor Class and Class Y shares (“Investor Class New Fund Shares” and “Class Y New Fund Shares,” respectively, and collectively, “New Fund Shares”); New Fund’s other classes of shares will not be involved in the Reorganization and thus are not included in the term “New Fund Shares.” The Class A Old Fund Shares and the Investor Class New Fund Shares have substantially similar characteristics (except that the former are offered with a front-end sales load whereas the latter are not), as do the Institutional Class Old Fund Shares and the Class Y New Fund Shares.
In consideration of the mutual promises contained herein, the Investment Companies agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Subject to the requisite approval of Old Fund’s shareholders and the terms and conditions set forth herein, Old Fund shall assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2 (“Assets”) to New Fund. In exchange therefor, New Fund shall:
(a) issue and deliver to Old Fund the number of full and fractional (all references herein to “fractional” shares meaning fractions rounded to the third decimal place) (1) Investor Class New Fund Shares equal to the number of full and fractional Class A Old Fund Shares then outstanding and (2) Class Y New Fund Shares equal to the number of full and fractional Institutional Class Old Fund Shares then outstanding, and
(b) assume all of Old Fund’s liabilities described in paragraph 1.3 (“Liabilities”).
Those transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property -- including all cash, cash equivalents, securities, commodities, futures interests, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, books and records, and deferred and prepaid expenses shown as assets on Old Fund’s books -- Old Fund owns at the Effective Time (as defined in paragraph 2.1); and Old Fund has no unamortized or unpaid organizational fees or expenses that have not previously been disclosed in writing to New Trust;
1.3 The Liabilities shall consist of all of Old Fund’s known liabilities, debts, obligations, and duties arising in the ordinary course of business and existing at the Effective Time, excluding Reorganization Expenses (as defined in paragraph 3.3(f)) borne by CNL Manager and AmBeacon Manager pursuant to paragraph 6. Notwithstanding the foregoing, Old Fund will endeavor to discharge all its Liabilities before the Effective Time.
1.4 At or before the Closing, New Fund shall redeem the Initial Shares (as defined in paragraph 5.5) for the amount at which they are issued pursuant to that paragraph. At the Effective Time (or as soon thereafter as is reasonably practicable), Old Fund shall distribute the New Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of record determined at the Effective Time (each, a “Shareholder”), in proportion to their Old Fund Shares then held of record and in constructive exchange therefor, and shall completely liquidate. That distribution shall be accomplished by the Transfer Agent (as defined below) opening accounts on New Fund’s shareholder records in the Shareholders’ names and transferring those New Fund Shares thereto. Pursuant to that transfer, each Shareholder’s account shall be credited with the number of full and fractional New Fund Shares equal to the number of full and fractional Old Fund Shares that Shareholder holds at the Effective Time, by class (i.e., the account for each Shareholder that holds Class A Old Fund Shares shall be credited with the number of full and fractional Investor Class New Fund Shares due that Shareholder, and the account for each Shareholder that holds Institutional Class Old Fund Shares shall be credited with the number of full and fractional Class Y New Fund Shares due that Shareholder). The aggregate net asset value (“NAV”) of New Fund Shares to be so credited to each Shareholder’s account shall equal the aggregate NAV of the Old Fund Shares that Shareholder holds at the Effective Time. All issued and outstanding Old Fund Shares, including any represented by certificates, shall simultaneously be canceled on Old Fund’s shareholder records. New Trust shall not issue certificates representing the New Fund Shares issued in connection with the Reorganization.
1.5 As soon as reasonably practicable after distribution of the New Fund Shares pursuant to paragraph 1.4, but in all events within six months after the Effective Time, Old Trust shall be terminated and any further actions shall be taken in connection therewith as required by applicable law.
1.6 Any reporting responsibility of Old Fund to a public authority, including the responsibility for filing regulatory reports, tax returns, and other documents with the Securities and Exchange Commission (“Commission”), any state securities commission, any federal, state, and local tax authorities, and any other relevant regulatory authority, is and shall remain its responsibility up to and including the date on which it is terminated.
2. CLOSING AND EFFECTIVE TIME
2.1 Unless the Investment Companies agree otherwise, all acts necessary to consummate the Reorganization (“Closing”) shall be deemed to take place simultaneously as of immediately after the close of business (4:00 p.m., Eastern Time) on February 26, 2010 (“Effective Time”). The Closing shall be held at New Trust’s offices or at such other place as to which the Investment Companies agree.
2.2 Old Trust shall cause the custodian of Old Fund’s assets (“Custodian”) (a) to make Old Fund’s portfolio securities available to New Trust (or to its custodian, if New Trust so directs), for examination, no later than five business days preceding the Effective Time and (b) to transfer and deliver the Assets at the Effective Time to New Trust’s custodian for New Fund’s account, as follows: (1) duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers, (2) by book entry, in accordance with the Custodian’s customary practices and any securities depository (as defined in Rule 17f-4 under the 1940 Act) in which Old Fund’s assets are deposited, in the case of Old Fund’s portfolio securities and instruments deposited with those depositories, and (3) by wire transfer of federal funds in the case of cash. Old Trust shall also direct the Custodian to deliver at the Closing a certificate of an authorized officer stating that pursuant to proper instructions, of date certain and provided to the Custodian by Old Trust, the Custodian has delivered all of the portfolio securities, cash and other Assets of Old Fund to the account of New Fund. The custodian of New Trust shall certify to New Trust that the information (including adjusted basis and holding period, by lot) concerning the Assets, including all portfolio securities, as reflected on New Fund’s books immediately after the Effective Time, does or will conform to that information on Old Fund’s books immediately before the Effective Time.
2.3 Old Trust shall direct its transfer agent, which also will serve as New Fund’s transfer agent (“Transfer Agent”), to deliver at the Closing a certificate of an authorized officer stating that Old Fund’s shareholder records contain the names and addresses of all the Shareholders and the number of full and fractional outstanding Old Fund Shares each Shareholder owns at the Effective Time.
2.4 New Trust shall direct the Transfer Agent to deliver at the Closing a certificate of an authorized officer as to the opening of accounts on New Fund’s shareholder records in the names of the Shareholders and a confirmation, or other evidence satisfactory to Old Trust, that the New Fund Shares to be credited to Old Fund at the Effective Time have been credited to Old Fund’s account on those records.
2.5 At the Closing, each Investment Company shall deliver to the other (a) bills of sale, checks, assignments, stock certificates, receipts, and/or other documents the other Investment Company or its counsel reasonably requests and (b) a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient, and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES
3.1 Old Trust represents and warrants to New Trust, on New Fund’s behalf, as follows:
(a) Old Trust (1) is a statutory trust that is duly organized, validly existing, and in good standing under the laws of the State of Delaware (a “Delaware Statutory Trust”), and its Certificate of Trust has been duly filed in the office of the Secretary of State thereof, and (2) has
the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A;
(b) Old Trust is duly registered under the 1940 Act as an open-end management investment company;
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of Old Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of Old Trust, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
(d) At the Effective Time, Old Trust will have good and marketable title to the Assets and full right, power, and authority to sell, assign, transfer, and deliver the Assets hereunder free of any liens or other encumbrances (except securities that are subject to “securities loans,” as referred to in section 851(b)(2), or that are restricted to resale by their terms); and on delivery and payment for the Assets, New Trust, on New Fund’s behalf, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including restrictions that might arise under the Securities Act of 1933, as amended (“1933 Act”);
(e) Old Trust is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Delaware law, Old Trust’s Agreement and Declaration of Trust, and any amendments thereto (collectively, “Old Trust Declaration”) or By-Laws, or any agreement, indenture, instrument, contract, lease, or other undertaking (each, an “Undertaking”) to which Old Trust is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which Old Trust is a party or by which it is bound;
(f) At or before the Effective Time, either (1) all material contracts and other commitments of Old Fund (other than this Agreement and certain investment contracts, including options, futures, and forward contracts) will terminate, or (2) provision for discharge and/or New Fund’s assumption of any liabilities of Old Fund thereunder will be made, without either Fund’s incurring any penalty with respect thereto and without diminishing or releasing any rights Old Trust may have had with respect to actions taken or omitted or to be taken by any other party thereto before the Closing;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to Old Trust’s knowledge, threatened against Old Trust or any of its properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business; and Old Trust knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects Old Trust’s business or its ability to consummate the transactions contemplated hereby;
(h) Old Fund’s Statement of Assets and Liabilities (including Schedule of Investments), Statement of Operations, and Statement of Changes in Net Assets (collectively, “Statements”) at and for the fiscal year (in the case of the last Statement, for the two fiscal years) ended December 31, 2008, have been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, and are in accordance with generally accepted accounting principles consistently applied in the United States (“GAAP”); and those Statements and Old
Fund’s unaudited financial statements at and for the six months ended June 30, 2009 (copies of which Old Trust has furnished to New Trust), present fairly, in all material respects, Old Fund’s financial condition at their respective dates in accordance with GAAP, and there are no known contingent liabilities of Old Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP at either such date that are not disclosed therein;
(i) Since December 31, 2008, there has not been any material adverse change in Old Fund’s financial condition, assets, liabilities, or business, other than changes occurring in the ordinary course of business, or any incurrence by Old Fund of indebtedness maturing more than one year from the date that indebtedness was incurred; for purposes of this subparagraph, a decline in NAV per Old Fund Share due to declines in market values of securities Old Fund holds, the discharge of Old Fund liabilities, or the redemption of Old Fund Shares by its shareholders shall not constitute a material adverse change;
(j) All federal and other tax returns, dividend reporting forms, and other tax-related reports (collectively, “Returns”) of Old Fund required by law to have been filed by the Effective Time (including any properly and timely filed extensions of time to file) shall have been filed and are or will be correct in all material respects, and all federal and other taxes shown as due or required to be shown as due on those Returns shall have been paid or provision shall have been made for the payment thereof; to the best of Old Trust’s knowledge, no such Return is currently under audit and no assessment has been asserted with respect to those Returns; and Old Fund is in compliance in all material respects with applicable Regulations pertaining to the reporting of dividends and other distributions on and redemptions of its shares and to withholding in respect thereof and is not liable for any material penalties that could be imposed thereunder;
(k) For each taxable year of its operation (including its current taxable year), Old Fund has met (or for that year will meet) the requirements of Part I of Subchapter M of Chapter 1 of Subtitle A of the Code (“Subchapter M”) for qualification as a regulated investment company (“RIC”) and has been (or for that year will be) eligible to and has computed (or for that year will compute) its federal income tax under section 852; Old Fund has not at any time since its inception been liable for, and is not now liable for, any material income or excise tax pursuant to sections 852 or 4982; and Old Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it;
(l) There are no outstanding Class C Old Fund Shares; all issued and outstanding Old Fund Shares are, and at the Effective Time will be, duly and validly issued and outstanding, fully paid, and non-assessable by Old Trust and have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws; all issued and outstanding Old Fund Shares will, at the Effective Time, be held by the persons and in the amounts set forth on Old Fund’s shareholder records, as provided in paragraph 2.3; and Old Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any Old Fund Shares, nor are there outstanding any securities convertible into any Old Fund Shares;
(m) Old Fund incurred the Liabilities, which are associated with the Assets, in the ordinary course of its business;
(n) At the Effective Time, Old Fund will not be under the jurisdiction of a court in a “title 11 or similar case” (as defined in section 368(a)(3)(A));
(o) Not more than 25% of the value of Old Fund’s total assets (excluding cash, cash items, and Government securities) is invested in the stock and securities of any one issuer, and not more than 50% of the value of those assets is invested in the stock and securities of five or fewer issuers;
(p) Old Fund’s current prospectus and statement of additional information (1) conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and (2) at the date on which they were issued did not contain, and as supplemented by any supplement thereto dated prior to or at the Effective Time do not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(q) The information to be furnished by Old Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including the Financial Industry Regulatory Authority, Inc. (“FINRA”)) that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and the Registration Statement (as defined in paragraph 3.3(a)) (other than written information provided by New Trust for inclusion therein) will, on its effective date, at the Effective Time, and at the time of the Shareholders Meeting (as defined in paragraph 4.1), not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(r) The Old Trust Declaration permits Old Trust to vary its shareholders’ investment; and Old Trust does not have a fixed pool of assets -- it is a managed portfolio of securities, and CNL Manager and Old Fund’s investment sub-adviser have the authority to buy and sell securities for it;
(s) Old Fund’s investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus, except as previously disclosed in writing to New Trust; and
(t) The New Fund Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof.
3.2 New Trust, on New Fund’s behalf, represents and warrants to Old Trust as follows:
(a) New Trust (1) is a trust operating under a written instrument or declaration of trust, the beneficial interest under which is divided into transferable shares, organized under the laws of the Commonwealth of Massachusetts (commonly referred to as a “Massachusetts business trust”), (2) is duly registered under the 1940 Act as an open-end management investment company, (3) has the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A, and (4) before January 1, 1997, New Trust “claimed” classification as an association taxable as a corporation and has never elected otherwise;
(b) At the Effective Time, New Fund will be a duly established and designated series of New Trust; New Fund has not commenced operations and will not do so until after the Closing; and, immediately before the Closing, New Fund will be a shell series of New Trust, without assets (except the amount paid for the Initial Shares if they have not already been redeemed by that time) or liabilities, created for the purpose of acquiring the Assets and assuming the Liabilities;
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of New Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of New Trust, with respect to New Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency,
fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
(d) Before the Closing, there will be no (1) issued and outstanding New Fund Shares, (2) options, warrants, or other rights to subscribe for or purchase any New Fund Shares, (3) securities convertible into any New Fund Shares, or (4) any other securities issued by New Fund, except the Initial Shares;
(e) No consideration other than New Fund Shares (and New Fund’s assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization;
(f) New Fund is not currently engaged in, and New Trust’s execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Massachusetts law, New Trust’s Amended and Restated Declaration of Trust (“New Trust Declaration”), or By-Laws, or any Undertaking to which New Trust, on New Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which New Trust, on New Fund’s behalf, is a party or by which it is bound;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to New Trust’s knowledge, threatened against New Trust, with respect to New Fund or any of its properties or assets attributable or allocable to New Fund, that, if adversely determined, would materially and adversely affect New Fund’s financial condition or the conduct of its business; and New Trust, on New Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects New Fund’s business or New Trust’s ability to consummate the transactions contemplated hereby;
(h) New Fund will be a “fund” (as defined in section 851(g)(2)); it will meet the requirements of Subchapter M for qualification as a RIC, and will be eligible to and will compute its federal income tax under section 852, for its taxable year in which the Reorganization occurs; and it intends to continue to meet all those requirements, and to be eligible to and to so compute its federal income tax, for the next taxable year;
(i) The New Fund Shares to be issued and delivered to Old Fund, for the Shareholders’ accounts, pursuant to the terms hereof, (1) will at the Effective Time have been duly authorized and duly registered under the federal securities laws (and appropriate notices respecting them will have been duly filed under applicable state securities laws) and (2) when so issued and delivered, will be duly and validly issued and outstanding New Fund Shares and will be fully paid and non-assessable by New Trust;
(j) There is no plan or intention for New Fund to be dissolved or merged into another business or statutory trust or a corporation or any “fund” thereof (as defined in section 851(g)(2)) following the Reorganization;
(k) Assuming the truthfulness and correctness of Old Trust’s representation and warranty in paragraph 3.1(o), immediately after the Reorganization (1) not more than 25% of the value of New Fund’s total assets (excluding cash, cash items, and Government securities) will be invested in the stock and securities of any one issuer and (2) not more than 50% of the value of those assets will be invested in the stock and securities of five or fewer issuers;
(l) The information to be furnished by New Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including FINRA) that may be necessary in connection with the transactions contemplated herein shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and the Registration Statement (other than written information provided by Old Trust for inclusion therein) will, on its effective date, at the Effective Time, and at the time of the Shareholders Meeting, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and
(m) The New Trust Declaration permits New Trust to vary its shareholders’ investment; and New Trust does not have a fixed pool of assets -- each series thereof (including New Fund after it commences operations) is (or will be) a managed portfolio of securities, and AmBeacon Manager and each investment sub-adviser thereof have (or will have) the authority to buy and sell securities for it.
3.3 Each Investment Company (in New Trust’s case, on New Fund’s behalf), represents and warrants to the other Investment Company (in New Trust’s case, on New Fund’s behalf), as follows:
(a) No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, or state securities laws, and no consents, approvals, authorizations, or orders of any court are required, for its execution or performance of this Agreement on its Fund’s behalf, except for (1) New Trust’s filing with the Commission of a registration statement on Form N-14 relating to the New Fund Shares issuable hereunder, and any supplement or amendment thereto, including therein a prospectus and proxy statement (“Registration Statement”), and (2) consents, approvals, authorizations, and filings that have been made or received or may be required after the Effective Time;
(b) The fair market value of the New Fund Shares each Shareholder receives will be approximately equal to the fair market value of its Old Fund Shares it actually or constructively surrenders in exchange therefor;
(c) The Shareholders will pay their own expenses (such as fees of personal investment or tax advisers for advice regarding the Reorganization), if any, incurred in connection with the Reorganization;
(d) The fair market value of the Assets will equal or exceed the Liabilities to be assumed by New Fund and those to which the Assets are subject;
(e) None of the compensation received by any Shareholder who or that is an employee of or service provider to Old Fund will be separate consideration for, or allocable to, any of the Old Fund Shares that Shareholder holds; none of the New Fund Shares any such Shareholder receives will be separate consideration for, or allocable to, any employment agreement, investment advisory agreement, or other service agreement; and the compensation paid to any such Shareholder will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s-length for similar services;
(f) No expenses incurred by Old Fund or on its behalf in connection with the Reorganization will be paid or assumed by New Fund, CNL Manager, AmBeacon Manager, or any other third party unless those expenses are solely and directly related to the Reorganization (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) (“Reorganization Expenses”), and no cash or property other than New Fund Shares will be transferred to Old Fund or any of its shareholders with the intention that it be used to pay any expenses (even Reorganization Expenses) thereof; and
(g) Immediately following consummation of the Reorganization, (1) the Shareholders will own all the New Fund Shares and will own those shares solely by reason of their ownership of the Old Fund Shares immediately before the Reorganization and (2) New Fund will hold the same assets -- except for assets used to pay the Funds’ expenses incurred in connection with the Reorganization -- and be subject to the same liabilities that Old Fund held or was subject to immediately before the Reorganization, plus any liabilities for those expenses; and those excepted assets, together with the amount of all redemptions and distributions (other than regular, normal dividends) Old Fund makes immediately preceding the Reorganization, will, in the aggregate, constitute less than 1% of its net assets.
4. COVENANTS
4.1 Old Trust covenants to call a meeting of Old Fund’s shareholders to consider and act on this Agreement and to take all other action necessary to obtain approval of the transactions contemplated hereby (“Shareholders Meeting”).
4.2 Old Trust covenants that it will assist New Trust in obtaining information New Trust reasonably requests concerning the beneficial ownership of Old Fund Shares.
4.3 Old Trust covenants that it will turn over its books and records pertaining to Old Fund (including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder) to New Trust at the Closing.
4.4 Each Investment Company covenants to cooperate with the other in preparing the Registration Statement in compliance with applicable federal and state securities laws.
4.5 Each Investment Company covenants that it will, from time to time, as and when requested by the other, execute and deliver or cause to be executed and delivered all assignments and other instruments, and will take or cause to be taken further action, the other Investment Company deems necessary or desirable in order to vest in, and confirm to, (a) New Trust, on New Fund’s behalf, title to and possession of all the Assets, and (b) Old Trust title to and possession of the New Fund Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof.
4.6 New Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and applicable state securities laws it deems appropriate to commence and continue New Fund’s operations after the Effective Time.
4.7 Subject to this Agreement, each Investment Company covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate the transactions contemplated hereby.
5. CONDITIONS PRECEDENT
Each Investment Company’s obligations hereunder shall be subject to (a) performance by the other Investment Company of all its obligations to be performed hereunder at or before the Closing, (b) all representations and warranties of the other Investment Company contained herein being true and correct in all material respects at the date hereof and, except as they may be affected by the transactions contemplated hereby, at the Effective Time, with the same force and effect as if made at that time, and (c) the following further conditions that, at or before that time:
5.1 This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by both Boards and by Old Fund’s shareholders at the Shareholders Meeting;
5.2 All necessary filings shall have been made with the Commission and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the Investment Companies to carry out the transactions contemplated hereby. The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and, to each Investment Company’s best knowledge, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened, or contemplated under the 1933 Act or the 1940 Act. The Commission shall not have issued an unfavorable report with respect to the Reorganization under section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of federal, state, and local regulatory authorities (including the Commission and state securities authorities) either Investment Company deems necessary to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same would not involve a risk of a material adverse effect on either Fund’s assets or properties;
5.3 At the Effective Time, no action, suit, or other proceeding shall be pending (or, to either Investment Company’s best knowledge, threatened to be commenced) before any court, governmental agency, or arbitrator in which it is sought to enjoin the performance of, restrain, prohibit, affect the enforceability of, or obtain damages or other relief in connection with, the transactions contemplated hereby; provided that at any time before the Closing, either Investment Company may waive this condition if, in the judgment of its Board, that waiver will not have a material adverse effect on its Fund’s shareholders’ interests;
5.4 The Investment Companies shall have received an opinion of K&L Gates LLP (“Counsel”) as to the federal income tax consequences mentioned below (“Tax Opinion”). In rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Agreement, which Counsel may treat as representations and warranties made to it, and in separate letters, if Counsel requests, addressed to it. The Tax Opinion shall be substantially to the effect that -- based on the facts and assumptions stated therein and conditioned on those representations and warranties’ being true and complete at the Effective Time and consummation of the Reorganization in accordance with this Agreement (without the waiver or modification of any terms or conditions hereof and without taking into account any amendment hereof that Counsel has not approved) -- for federal income tax purposes:
(a) New Fund’s acquisition of the Assets in exchange solely for New Fund Shares and its assumption of the Liabilities, followed by Old Fund’s distribution of those shares pro rata to the Shareholders actually or constructively in exchange for their Old Fund Shares, will qualify as a “reorganization” (as defined in section 368(a)(1)(F)), and each Fund will be “a party to a reorganization” (within the meaning of section 368(b));
(b) Old Fund will recognize no gain or loss on the transfer of the Assets to New Fund in exchange solely for New Fund Shares and New Fund’s assumption of the Liabilities or on the subsequent distribution of those shares to the Shareholders in exchange for their Old Fund Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets in exchange solely for New Fund Shares and its assumption of the Liabilities;
(d) New Fund’s basis in each Asset will be the same as Old Fund’s basis therein immediately before the Reorganization, and New Fund’s holding period for each Asset will include Old Fund’s holding period therefor (except where New Fund’s investment activities have the effect of reducing or eliminating an Asset’s holding period);
(e) A Shareholder will recognize no gain or loss on the exchange of all its Old Fund Shares solely for New Fund Shares pursuant to the Reorganization;
(f) A Shareholder’s aggregate basis in the New Fund Shares it receives in the Reorganization will be the same as the aggregate basis in its Old Fund Shares it actually or constructively surrenders in exchange for those New Fund Shares, and its holding period for those New Fund Shares will include, in each instance, its holding period for those Old Fund Shares, provided the Shareholder holds them as capital assets at the Effective Time; and
(g) For purposes of section 381, New Fund will be treated just as Old Fund would have been treated if there had been no Reorganization. Accordingly, the Reorganization will not result in the termination of Old Fund’s taxable year, Old Fund’s tax attributes enumerated in section 381(c) will be taken into account by New Fund as if there had been no Reorganization, and the part of Old Fund’s taxable year before the Reorganization will be included in New Fund’s taxable year after the Reorganization.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on the Funds or any Shareholder with respect to any Asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting;
5.5 Before the Closing, New Trust’s Board shall have authorized the issuance of, and New Trust shall have issued, one Investor Class New Fund Share and one Class Y New Fund Share (“Initial Shares”) to AmBeacon Manager or an affiliate thereof, in consideration of the payment of $10.00 each (or other amount that Board determines), to vote on the investment management and sub-advisory contracts, distribution and service plan, and other agreements and plans referred to in paragraph 5.6 and to take whatever action it may be required to take as New Fund’s sole shareholder;
5.6 New Trust, on New Fund’s behalf, shall have entered into, or adopted, as appropriate, an investment management contract, a sub-advisory contract, a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and other agreements and plans necessary for New Fund’s operation as a series of an open-end management investment company. Each such contract, plan, and agreement shall have been approved by New Trust’s Board and, to the extent required by law (as interpreted by Commission staff positions), by its trustees who are Non-Interested Persons thereof and by AmBeacon Manager or its affiliate as New Fund’s sole shareholder; and
5.7 At any time before the Closing, either Investment Company may waive any of the foregoing conditions (except those set forth in paragraphs 5.1 and 5.4) if, in the judgment of its Board, such waiver will not have a material adverse effect on its Fund’s shareholders’ interests.
6. EXPENSES
Subject to complying with the representation contained in paragraph 3.3(f), each of CNL Manager and AmBeacon Manager shall bear 50% of the total Reorganization Expenses. The Reorganization Expenses include (1) costs associated with obtaining any necessary order of exemption from the 1940 Act, preparing and filing Old Fund’s prospectus supplements and the Registration Statement, and printing and distributing New Fund’s prospectus and Old Fund’s proxy materials, (2) legal and accounting fees, (3) Transfer Agent conversion costs, (4) transfer taxes for foreign securities, (5) proxy solicitation costs, and (6) expenses of holding the Shareholders Meeting (including any adjournments thereof) but exclude brokerage, CNL Manager and AmBeacon Manager travel expenses, and similar expenses in connection with the Reorganization. Notwithstanding the foregoing, expenses shall be paid by the Fund directly incurring them if and to the extent that the payment thereof by another person would result in that Fund’s disqualification as a RIC or would prevent the Reorganization from qualifying as a tax-free reorganization.
7. ENTIRE AGREEMENT; NO SURVIVAL
Neither Investment Company has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the Investment Companies. The representations, warranties, and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall not survive the Closing.
8. TERMINATION
This Agreement may be terminated at any time at or before the Closing:
8.1 By either Investment Company (a) in the event of the other Investment Company’s material breach of any representation, warranty, or covenant contained herein to be performed at or before the Closing, (b) if a condition to its obligations has not been met and it reasonably appears that that condition will not or cannot be met, (c) if a governmental body issues an order, decree, or ruling having the effect of permanently enjoining, restraining, or otherwise prohibiting consummation of the Reorganization, or (d) if the Closing has not occurred on or before March 31, 2010, or such other date as to which the Investment Companies agree; or
8.2 By the Investment Companies’ mutual agreement. In the event of termination under paragraphs 8.1(c) or (d) or 8.2, neither Investment Company (nor its trustees, officers, or shareholders) shall have any liability to the other Investment Company.
9. AMENDMENTS
The Investment Companies may amend, modify, or supplement this Agreement at any time in any manner they mutually agree on in writing, notwithstanding Old Fund’s shareholders’ approval thereof; provided that, following that approval no such amendment, modification, or supplement shall have a material adverse effect on the Shareholders’ interests.
10. SEVERABILITY
Any term or provision hereof that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions hereof or affecting the validity or enforceability of any of the terms and provisions hereof in any other jurisdiction.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, without giving effect to principles of conflicts of laws; provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to confer on or give any person, firm, trust, or corporation other than New Trust, on New Fund’s behalf, or Old Trust and their respective successors and assigns any rights or remedies under or by reason of this Agreement.
11.3 Notice is hereby given that this instrument is executed and delivered on behalf of each Investment Company’s trustees solely in their capacities as trustees, and not individually, and that each Investment Company’s obligations under this instrument are not binding on or enforceable against any of its trustees, officers, shareholders, or series other than its Fund but are only binding on and enforceable against its property attributable to and held for the benefit of its Fund (“Fund’s Property”) and not its property attributable to and held for the benefit of any other series thereof. Each Investment Company, in asserting any rights or claims under this Agreement on its or its Fund’s behalf, shall look only to the other Fund’s Property in settlement of those rights or claims and not to the property of any other series of the other Investment Company or to those trustees, officers, or shareholders.
11.4 This Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or more counterparts have been executed by each Investment Company and delivered to the other Investment Company. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and delivered by its duly authorized officer as of the day and year first written above.
| AMERICAN BEACON FUNDS, on behalf of its series, American Beacon Global Real Estate Fund | |
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| By: | /s/ Gene L. Needles, Jr. |
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| Gene L. Needles, Jr. |
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| President |
| THE CNL FUNDS | |
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| By: | /s/ Andrew A. Hyltin |
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| Andrew A. Hyltin |
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| President |
Solely for purposes of paragraph 6, | |
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By: | /s/ Andrew A. Hyltin |
| Andrew A. Hyltin |
| President |
AMERICAN BEACON ADVISORS, INC. | |
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By: | /s/ William F. Quinn |
| William F. Quinn |
| Executive Chairman |
APPENDIX B
OWNERSHIP OF SHARES OF THE CNL FUND
As of the Record Date, the CNL Fund’s shareholders of record and/or beneficial owners (to the CNL Trust’s knowledge) who owned 5% or more of each class of the CNL Fund’s shares are set forth below:
Name and Address | Class | No. of Shares Owned | % of Shares |
As of the Record Date, no shareholders may be deemed to “control” the CNL Fund. “Control” for this purpose is the ownership of more than 25% of the CNL Fund’s voting securities.
As of the Record Date, the Officers and Trustees of the CNL Trust, as a group, owned of record and beneficially less than 1.00% of the outstanding voting securities of the CNL Fund.
APPENDIX C
VALUATION, PURCHASE, REDEMPTION AND TAX INFORMATION
FOR THE AB FUND
Valuation of AB Fund Shares
The price of the AB Fund’s shares is based on its net asset value (“NAV”) per share. The AB Fund’s NAV is computed by adding total assets, subtracting all of the AB Fund’s liabilities, and dividing the result by the total number of shares outstanding. Equity securities are valued based on market value. Debt securities (other than short-term securities) usually are valued on the basis of prices provided by a pricing service. In some cases, the price of debt securities is determined using quotes obtained from brokers.
Securities may be valued at fair value, as determined in good faith and pursuant to procedures approved by the AB Board, under certain limited circumstances. For example, fair value pricing will be used when market quotations are not readily available or reliable, as determined by the Manager, such as when (i) trading for a security is restricted or stopped; (ii) a security’s trading market is closed (other than customary closings); or (iii) a security has been de-listed from a national exchange. A security with limited market liquidity may require fair value pricing if the Manager determines that the available price does not reflect the security’s true market value. In addition, if a significant event that the Manager determines to affect the value of one or more securities held by the AB Fund occurs after the close of a related exchange but before the determination of the AB Fund’s NAV, fair value pricing may be used on the affected security or securities. Fair value pricing may be used by the AB Fund, and the AB Fund may hold securities requiring fair value pricing. The AB Fund may often fair value securities as a result of significant events occurring after the close of the foreign markets in which the AB Fund invests. In addition, the AB Fund may invest in illiquid securities requiring fair value pricing.
Attempts to determine the fair value of securities introduce an element of subjectivity to the pricing of securities. As a result, the price of a security determined through fair valuation techniques may differ from the price quoted or published by other sources and may not accurately reflect the market value of the security when trading resumes. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Manager compares the new market quotation to the fair value price to evaluate the effectiveness of the AB Fund’s fair valuation procedures. If any significant discrepancies are found, the Manager may adjust the fair valuation procedures.
The NAV of the AB Fund’s shares will be determined based on a pro rata allocation of its investment income, expenses and total capital gains and losses. The AB Fund’s NAV per share is determined as of the close of the New York Stock Exchange (“Exchange”), generally 4:00 p.m. Eastern Time, on each day on which it is open for business. Because the AB Fund invests in securities primarily listed on foreign exchanges that trade on days when the AB Fund does not price its shares, the NAV per share of the AB Fund may change on days when shareholders will not be able to purchase or redeem the AB Fund’s shares.
Policy on Prohibition of Foreign Shareholders
The AB Fund requires that all shareholders be U.S. persons with a valid U.S. taxpayer identification number to open an account with the AB Fund.
Portfolio Holdings
A description of the AB Fund’s policies and procedures with respect to the disclosure of portfolio securities is available in the AB Fund’s SAI, which can be found on the AB Fund’s website.
Redemptions In Kind
Although the AB Fund intends to redeem shares in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of securities or other assets. However, shareholders always will be entitled to redeem shares for cash up to the lesser of $250,000 or 1% of the AB Fund’s net asset value during any 90-day period. Redemption in kind is not as liquid as cash redemption. In addition, to the extent that the AB Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and possibility of a lack of a liquid market for these securities.
Frequent Trading and Market Timing
Frequent trading by a mutual fund’s shareholders poses risks to other shareholders in that fund, including (i) the dilution of the fund’s NAV, (ii) an increase in the fund’s expenses, and (iii) interference with the portfolio manager’s ability to execute efficient investment strategies. Frequent, short-term trading of fund shares in an attempt to profit from day-to-day fluctuations in the fund’s NAV is known as market timing. The AB Fund is particularly at risk for market timing activity. Please see “Market Timing Risk.”
The AB Board has adopted policies and procedures intended to discourage frequent trading and market timing. These policies include a 2% redemption fee imposed on shares of the AB Fund that are sold within 90 days of purchase. The redemption fee is described further in the “Redemption Policies” section. Shareholders may transact one “round trip” in the AB Fund in any rolling 90-day period. A “round trip” is defined as two transactions, each in an opposite direction. A round trip may involve (i) a purchase or exchange into the AB Fund followed by a redemption or exchange out of the AB Fund or (ii) a redemption or exchange out of the AB Fund followed by a purchase or exchange into the AB Fund. If the Manager detects that a shareholder has exceeded one round trip in the AB Fund in any rolling 90-day period, the Manager, without prior notice to the shareholder, will prohibit the shareholder from making further purchases of the AB Fund. In general, the AB Fund reserves the right to reject any purchase order, terminate the exchange privilege, or liquidate the account of any shareholder that the Manager determines has engaged in frequent trading or market timing, regardless of whether the shareholder’s activity violates any policy stated in the AB Fund’s prospectus.
The round-trip limit does not apply to the following transaction types:
• | shares acquired through the reinvestment of dividends and distributions; | ||||
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| • | systematic purchases and redemptions; | |||
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| • | shares redeemed to return excess IRA contributions; or | |||
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| • | certain transactions made within a retirement or employee benefit plan, such as payroll contributions, minimum required distributions, loans, and hardship withdrawals, or other transactions that are initiated by a party other than the plan participant. |
Financial intermediaries that offer AB Fund shares, such as broker-dealers, third party administrators of retirement plans, and trust companies, will be asked to enforce the AB Fund’s policies to discourage frequent trading and market timing by investors. However, certain intermediaries that offer
the AB Fund’s shares have informed American Beacon that they are currently unable to enforce its policies on an automated basis. In those instances, the Manager will monitor trading activity of the intermediary in an attempt to detect patterns of activity that indicate frequent trading or market timing by underlying investors. In some cases, intermediaries that offer the AB Fund’s shares have their own policies to deter frequent trading and market timing that differ from the AB Fund’s policies. The AB Fund may defer to an intermediary’s policies. For more information, please contact the financial intermediary through which you invest in the AB Fund.
The Manager monitors trading activity in the AB Fund to attempt to identify shareholders engaged in frequent trading or market timing. The Manager may exclude transactions below a certain dollar amount from monitoring and may change that dollar amount from time to time. The ability of the Manager to detect frequent trading and market timing activity by investors who own shares through an intermediary is dependent upon the intermediary’s provision of information necessary to identify transactions by the underlying investors. The AB Fund has entered agreements with the intermediaries that service the AB Fund’s investors, pursuant to which the intermediaries agree to provide information on investor transactions to the AB Fund and to act on the AB Fund’s instructions to restrict transactions by investors who the Manager has identified as having violated the AB Fund’s policies and procedures to deter frequent trading and market timing. Wrap programs offered by certain intermediaries may be designated “Qualified Wrap Programs” by the AB Fund based on specific criteria established by the AB Fund and a certification by the intermediary that the criteria has been met. A Qualified Wrap Program is: (i) a wrap program whose sponsoring intermediary certifies that it has investment discretion over $50 million or more in client assets invested in mutual funds at the time of the certification, (ii) a wrap program whose sponsoring intermediary certifies that it directs transactions in accounts participating in the wrap program(s) in concert with changes in a model portfolio; (iii) managed by an intermediary that agrees to provide the Manager a description of the wrap program(s) that the intermediary seeks to qualify; and (iv) managed by an intermediary that agrees to provide the Manager sufficient information to identify individual accounts in the intermediary’s wrap program(s). For purposes of applying the round-trip limit, transactions initiated by clients invested in a Qualified Wrap Program will not be matched to transactions initiated by the intermediary sponsoring the Qualified Wrap Program. For example, a client’s purchase of the AB Fund followed within 90 days by the intermediary’s redemption of the AB Fund would not be considered a round trip. However, transactions initiated by a Qualified Wrap Program client are subject to the round-trip limit and will be matched to determine if the client has exceeded the round-trip limit. In addition, the Manager will monitor transactions initiated by Qualified Wrap Program intermediaries to determine whether any intermediary has engaged in frequent trading or market timing. If the Manager determines that an intermediary has engaged in activity that is harmful to the AB Fund, the Manager will revoke the intermediary’s Qualified Wrap Program status. Upon termination of status as a Qualified Wrap Program, all account transactions will be matched for purposes of testing compliance with the AB Fund’s frequent trading and market timing policies, including any applicable redemption fees.
Your CNL Fund shares purchase date(s) will carry over to the AB Fund for purposes of determining whether or not an early redemption fee applies. The AB Fund early redemption fee of 2% will apply, if applicable to your particular situation.
The AB Fund reserves the right to modify the frequent trading and market timing policies and procedures and grant or eliminate waivers to such policies and procedures at any time without advance notice to shareholders. There can be no assurance that the AB Fund’s policies and procedures to deter frequent trading and market timing will have the intended effect nor that the Manager will be able to detect frequent trading and market timing.
Purchase and Redemption of AB Fund Shares
YOUR ACCOUNT
How to Contact the AB Fund
Write to us at:
American Beacon Global Real Estate Fund
P.O. Box 219643
Kansas City, MO 64121-9643
Telephone us at:
(800) 658-5811 (toll free)
Email us at:
american_beacon.funds@ambeacon.com
Visit us online at:
www.americanbeaconfunds.com
Wire investments (or ACH payments) to:
If your account has been established, you may call (800) 658-5811 to purchase shares by wire or through Automated Clearing House Automated Clearing House (“ACH”).
Wires should be sent with these instructions:
• ABA # 0110-0002-8; AC-9905-342-3
• Attn: American Beacon Funds - _____ Class
• the Fund name and Fund number, and
• shareholder’s account number and registration.
Eligibility
• | Investor Class shares are offered to all investors, including investors using intermediary organizations such as discount brokers or plan sponsors and retirement accounts who make an initial investment of $2,500. | |
• | Y Class shares are offered without a sales charge to investors who make an initial investment of at least $100,000, including: |
agents or fiduciaries acting on behalf of their clients (such as employee benefit plans, personal trusts and other accounts for which a trust company or financial advisor acts as agent or fiduciary);
endowment funds and charitable foundations;
employee welfare plans that are tax-exempt under Section 501(c)(9) of the Internal Revenue Code of 1986, as amended (“Code”);
qualified pension and profit sharing plans;
cash and deferred arrangements under Section 401(k) of the Code;
corporations; and
other investors who make an initial investment of at least $100,000.
The Manager may allow a reasonable period of time after opening an account for an investor to meet the initial investment requirement. In addition, for investors such as trust companies and financial advisors who make investments for a group of clients, the minimum initial investment can be met through an aggregated purchase order for more than one client.
Opening an Account
A completed, signed application is required to open an account. You may obtain an application form by:
• calling (800) 658-5811, or
• downloading an account application from the AB Fund’s web site at www.americanbeaconfunds.com.
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. When you open an account, we will ask for information that will allow us to identify you. Non-public corporations and other entities may be required to provide articles of incorporation, trust or partnership agreements, tax ID numbers, and Social Security numbers for persons authorized to provide instructions on the account. The AB Fund is required by law to reject your new account application if the required identifying information is not provided.
Complete the application, sign it and:
Mail to: | or Fax to: |
American Beacon Funds | (816) 374-7408 |
General Policies
If a shareholder’s account balance in the AB Fund falls below $2,500 or $25,000 for Investor Class and Y Class, respectively, the shareholder may be asked to increase the balance. If the account balance remains below these amounts after 45 days, the AB Fund reserves the right to close the account and send the proceeds to the shareholder. The Manager reserves the right to charge shareholders of the Investor Class an annual account fee of $12.00 (to offset the costs of servicing account with low balances) if an account balance falls below certain asset levels. Additionally, IRA accounts will be charged an annual maintenance fee of $12.00 by the custodian for maintaining either a traditional IRA or a Roth IRA.
A Signature Validation Program (“SVP”) stamp guarantee may be required in order to change an account’s registration or banking instructions. You may obtain a SVP stamp at banks, broker-dealers and credit unions, but not from a notary public. The SVP stamp is analogous to the STAMP 2000 Medallion guarantee in that it is provided at similar institutions. However, it is used only for non-financial transactions.
The following policies apply to instructions you may provide to the AB Fund by telephone:
The AB Fund, its officers, trustees, employees, or agents are not responsible for the authenticity of instructions provided by telephone, nor for any loss, liability, cost or expense incurred for acting on them.
• | The AB Fund employs procedures reasonably designed to confirm that instructions communicated by telephone are genuine. | |
• | Due to the volume of calls or other unusual circumstances, telephone redemptions may be difficult to implement during certain time periods. | |
The AB Fund reserves the right to: | ||
• | liquidate a shareholder’s account at the current day’s NAV and remit proceeds via check if the AB Fund is unable to verify the shareholder’s identity within three business days of account opening, | |
• | seek reimbursement from the shareholder for any related loss incurred by the AB Fund if payment for the purchase of AB Fund shares by check does not clear the shareholder’s bank, and | |
• | reject a purchase order and seek reimbursement from the shareholder for any related loss incurred by the AB Fund if funds are not received by the applicable wire deadline. |
The AB Fund has authorized certain third party financial intermediaries, such as broker-dealers, third party administrators and trust companies, to receive purchase and redemption orders on behalf of AB Fund and to designate other intermediaries to receive purchase and redemption orders on behalf of the AB Fund. The AB Fund is deemed to have received such orders when they are received by the financial intermediaries or their designees. Thus, an order to purchase or sell AB Fund shares will be priced at the AB Fund’s next determined NAV after receipt by the financial intermediary or its designee.
The AB Fund pays administrative and/or shareholder servicing fees to the Manager that the Manager may use to compensate financial intermediaries for providing recordkeeping, administrative, and other services. The Manager may also make revenue sharing payments out of its own resources and not as an expense of the AB Fund to compensate financial intermediaries in connection with the sale, distribution, retention, and/or servicing of AB Fund shares. These payments are in addition to any fees paid to intermediaries out of the AB Fund’s assets that are included in the AB Fund’s Fees and Expenses table, such as distribution (Rule 12b-1) fees and shareholder servicing fees. Payments by the Manager to financial intermediaries may create an incentive for such intermediaries or their employees to recommend or sell shares to you. These payments are described in more detail in the AB Fund’s Statement of Additional Information.
Third parties who offer AB Fund shares may charge transaction fees and may set different minimum investments or limitations on purchasing or redeeming shares.
Purchase Policies
Shares of the AB Fund are offered and purchase orders are typically accepted until 4:00 p.m. Eastern Time or the close of the New York Stock Exchange (whichever comes first) on each day on which the Exchange is open for business. the deadlines listed below on each day on which the Exchange is open for business.
If a purchase order is received in good order prior to the AB Fund’s deadline, the purchase price will be the NAV per share next determined on that day. If a purchase order is received in good order after
the applicable deadline, the purchase price will be the NAV per share of the following day that the AB Fund is open for business. The AB Fund has the right to reject any purchase order or cease offering shares at any time. Checks to purchase shares are accepted subject to collection at full face value in U.S. funds and must be drawn in U.S. dollars on a U.S. bank. The AB Fund will not accept “starter” checks, credit card checks, money orders, cashier’s checks, official checks, or third party checks. No sales charges are assessed on the purchase or sale of AB Fund shares.
Please refer to the section titled “Limitation on Frequent Purchases and Redemptions” for information on the AB Fund’s policies regarding frequent purchases, redemptions, and exchanges.
Redemption Policies
Shares of the AB Fund may be redeemed by telephone, via the AB Fund’s website, or by mail on any day that the AB Fund is open for business. The redemption price will be the NAV next determined after a redemption request is received in good order. In order to receive the redemption price calculated on a particular business day, redemption requests must be received in good order by 4:00 p.m. Eastern Time or by the close of the Exchange (whichever comes first). For assistance with completing a redemption request, please call (800) 658-5811.
Wire proceeds from redemption requests received in good order by 4:00 p.m. Eastern time or by the close of the Exchange (whichever comes first) are generally transmitted to shareholders on the next day the AB Fund is open for business. In any event, proceeds from a redemption request will typically be transmitted to a shareholder by no later than seven days after the receipt of a redemption request in good order. Delivery of proceeds from shares purchased by check may be delayed until the check has cleared, which may take up to ten days.
A redemption fee of 2% will be deducted from your redemption amount when you sell shares of the AB Fund that you have owned for less than 90 days. The redemption fee is paid to the AB Fund and is intended to discourage frequent trading and market timing. If you purchased shares on multiple dates, the shares you have held the longest will be redeemed first for purpose of assessing the redemption fee. The redemption fee does not apply to:
• | shares acquired through the reinvestment of dividends and distributions; | |
• | shares acquired through payroll contributions to a retirement or employee benefit plan; | |
• | shares redeemed through systematic redemption plans; | |
• | shares redeemed to return excess IRA contributions; | |
• | certain redemption transactions made within a retirement or employee benefit plan, such as minimum required distributions, loans and hardship withdrawals, or other transactions that are initiated by a party other than the plan participant; or | |
• | redemption transactions made within a “Qualified Wrap Program” as defined in the section titled “Frequent Trading and Market Timing.” |
For more information on the redemption fee, including how the fee applies to investors who own shares through financial intermediaries, such as broker-dealers, third party administrators of retirement plans, and trust companies, please see the section titled “Limitations on Frequent Purchases and Redemptions.”
The AB Fund reserves the right to suspend redemptions or postpone the date of payment for more than seven days (i) when the Exchange is closed (other than for customary weekend and holiday closings); (ii) when trading on the Exchange is restricted; (iii) when the SEC determines that an emergency exists so that disposal of the AB Fund’s investments or determination of its NAV is not reasonably practicable; or (iv) by order of the SEC for protection of the AB Fund’s shareholders.
Although the AB Fund intends to redeem shares in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of securities or other assets held by the AB Fund or its portfolio. To the extent that the AB Fund redeems its shares in this manner, the shareholder assumes the risk of a subsequent change in the market value of those securities, the cost of liquidating the securities and the possibility of a lack of a liquid market for those securities.
Please refer to the section titled “Limitations on Frequent Purchases and Redemptions” for information on the AB Fund’s policies regarding frequent purchases, redemptions, and exchanges.
Exchange Policies
Shares of the Investor Class of the AB Fund may be exchanged for shares of the Investor Class of another American Beacon Fund under certain limited circumstances. Shares of the Y Class of any Fund may be exchanged for shares of the Y Class of another American Beacon Fund under certain limited circumstances. Since an exchange involves a concurrent purchase and redemption, please review the sections titled “Purchase Policies” and “Redemption Policies” for additional limitations that apply to purchases and redemptions. To exchange out of the AB Fund and into another, a shareholder must have owned shares of the redeeming AB Fund for at least 15 days if shares of the redeeming AB Fund were purchased by check. The minimum investment requirement must be met for the American Beacon Fund into which the shareholder is exchanging. AB Fund shares may be acquired through exchange only in states in which they can be legally sold. The AB Fund reserves the right to charge a fee and to modify or terminate the exchange privilege at any time.
Please refer to the section titled “Frequent Trading and Market Timing” for information on the AB Fund’s policies regarding frequent purchases, redemptions, and exchanges.
How to Purchase Investor Class Shares | How to Purchase Y Class Shares |
By Check • The minimum amount to open an account is $2,500. The minimum amount for subsequent investments by check is $50. • Make check payable to the American Beacon Funds. • Include the shareholder’s account number, Fund name, and Fund number on the check. • Mail check to: | By Check • The minimum amount to open an account is $100,000. • Make check payable to the American Beacon Funds. • Include the shareholder’s account number, Fund name, and Fund number on the check. • Mail check to: |
By Wire If your account has been established, you may call (800) 658-5811 to purchase shares by wire. The minimum amount to open an account is $2,500. The minimum amount for subsequent investments by wire is $500. Send a bank wire to State Street Bank and Trust Co. with these instructions: • ABA# 0110-0002-8; AC-9905-342-3, • Attn: American Beacon Funds-Investor Class, • the Fund name and Fund number, and • shareholder’s account number and registration. | By Wire If your account has been established, you may call (800) 658-5811 to purchase shares by wire. The minimum amount to open an account is $ 100,000. The minimum amount for subsequent investments by wire is $500. Send a bank wire to State Street Bank and Trust Co. with these instructions: • ABA# 0110-0002-8; AC-9905-342-3, • Attn: American Beacon Funds-Y Class, • the Fund name and Fund number, and • shareholder’s account number and registration. |
Via “My Account” on www.americanbeaconfunds.com • Funds will be transferred automatically from your bank account via Automated Clearing House ( “ACH”) if valid bank instructions were included on your application. If not, please call 1 (800) 658-5811 to establish bank instructions prior to the purchase. • The minimum amount for each subsequent investment is $50. | Via “My Account” on www.americanbeaconfunds.com You may purchase Y Class shares via wire transfer or ACH by selecting “My Account” on www.americanbeaconfunds.com. |
How to Purchase Investor Class Shares | How to Purchase Y Class Shares |
By Pre-Authorized Automatic Investment • The minimum account size of $2,500 must be met before establishing an automatic investment plan. • Fill in required information on the account application, including amount of automatic investment ($50 minimum). Attach a voided check to the account application. • You may also establish an automatic investment plan through www.americanbeaconfunds.com. • Funds will be transferred automatically from your bank account via ACH on or about the 5th day of each month or quarter, depending upon which periods you specify. If you establish your automatic investment plan through www.americanbeaconfunds.com, you can choose the date and frequency of transfer. | N/A |
By Exchange • Send a written request to the address above, call (800) 658-5811 and use the Automated Voice Response System or speak to a representative, or visit www.americanbeaconfunds.com. • A $2,500 minimum is required to establish a new account in the Investor Class of another American Beacon Fund by making an exchange. • The minimum amount for each exchange is $50. | By Exchange Send a written request to the address above, visit www.americanbeaconfunds.com or call (800) 658-5811 to exchange Y Class shares. |
How to Redeem Investor Class Shares | How to Redeem Y Class Shares |
By Telephone • Call (800) 658-5811 to request a redemption. • Telephone redemption orders are limited to $50,000 within any 30 day period. • Proceeds will generally be mailed only to the account address of record or transmitted by wire ($500 minimum) to a commercial bank account designated on the account application form. | By Telephone • Call (800) 658-5811 to request a redemption. • Proceeds from redemptions placed by telephone will generally be transmitted by wire only, as instructed on the application form. |
By Mail Write a letter of instruction including: • the Fund name and Fund number, • shareholder account number, • shares or dollar amount to be redeemed, and • authorized signature(s) of all persons required to sign for the account. • Mail to: • Proceeds will only be mailed to the account address of record or transmitted by wire ($500 minimum) to a commercial bank account designated on the account application form. To protect the AB Fund and your account from fraud, a STAMP 2000 Medallion signature guarantee is required for redemption orders: • with a request to send the proceeds to an address or commercial bank account other than the address or commercial bank account designated on the account application, or • for an account whose address has changed within the last 30 days if proceeds are sent by check. | By Mail Write a letter of instruction including: • the Fund name and Fund number, • shareholder account number, • shares or dollar amount to be redeemed, and • authorized signature(s) of all persons required to sign for the account. • Mail to: • Other supporting documents may be required for estates, trusts, guardianships, custodians, corporations, and welfare, pension and profit sharing plans. Call (800) 658-5811 for instructions. • Proceeds will only be mailed to the account address of record or transmitted by wire to a commercial bank account designated on the account application form. To protect the AB Fund and your account from fraud, a STAMP 2000 Medallion signature guarantee is required for redemption orders: • with a request to send the proceeds to an address or commercial bank account other than the address or commercial bank account designated on the account application, or |
How to Redeem Investor Class Shares | How to Redeem Y Class Shares |
The AB Fund only accepts STAMP 2000 Medallion signature guarantees, which may be obtained at most banks, broker-dealers and credit unions. A notary public can not provide a signature guarantee. Call (800) 658-5811 for instructions and further assistance. | • for an account requesting payment by check whose address has changed within the last 30 days. The AB Fund only accepts STAMP 2000 Medallion signature guarantees, which may be obtained at most banks, broker-dealers and credit unions. A notary public can not provide a signature guarantee. Call (800) 658-5811 for instructions and further assistance. |
Via “My Account” on www.americanbeaconfunds.com • Proceeds will only be mailed to the account address of record, transmitted by wire to a commercial bank account designated on the account application form or transferred via ACH to your bank account as designated on the account application form. • If bank instructions were not included on the account application form, please call (800) 658-5811 to establish bank instructions. • The minimum amount is $500 for a wire and $50 for a check or ACH. | Via “My Account” on www.americanbeaconfunds.com If you have established bank instructions for your account, you may request a redemption by selecting “My Account” on www.americanbeaconfunds.com. To establish bank instructions, please call (800) 658-5811. |
By Pre-Authorized Automatic Redemption • Fill in required information on the account application or establish via www.americanbeaconfunds.com ($50 minimum). • Proceeds will be transferred automatically from your Fund account to your bank account via ACH on or about the 15th day of each month. If you establish automatic redemption through www.americanbeaconfunds.com, you can choose the date and frequency of transfer. | N/A |
By Exchange • Send a written request to the address | By Exchange Send a written request to the address above, visit |
How to Redeem Investor Class Shares | How to Redeem Y Class Shares |
above, call (800) 658-5811 and use the Automated Voice Response System or speak to a representative, or visit www.americanbeaconfunds.com. • A $2,500 minimum is required to establish a new account in the Investor Class of another American Beacon Fund by making an exchange. • The minimum amount for each exchange is $50. | www.americanbeaconfunds.com or call (800) 658-5811 to exchange shares. |
Tax Information
The AB Fund generally intends to operate in a manner such that it will not be liable for federal income or excise taxes.
You will generally be taxed on the AB Fund’s distributions, regardless of whether you reinvest them in additional Fund shares or receive them in cash. The AB Fund’s distributions of net investment income (including net short-term capital gain) are taxable to you as ordinary income. The AB Fund’s distributions of net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss), if any, are taxable to you as long-term capital gain, regardless of how long you have held your shares. Distributions may also be subject to state and local income taxes. Some Fund distributions may also include nontaxable returns of capital. Return of capital distributions reduce your tax basis in your Fund shares and are treated as gain from the sale of the shares to the extent your basis would be reduced below zero.
A portion of the AB Fund’s distributions may be treated as “qualified dividend income,” taxable to individuals at a maximum federal income tax rate of 15% (0% for individuals in lower tax brackets) through 2010. A distribution is treated as qualified dividend income to the extent that the AB Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that certain holding period and other requirements are met by the AB Fund (with respect to the portfolio securities on which it receives the dividends) and the shareholder (with respect to its Fund shares). The AB Fund’s distribution of dividends that it receives from REIT’s generally do not constitute qualified dividend income.
A distribution reduces the NAV of the AB Fund’s shares by the amount of the distribution. If you purchase shares prior to a distribution of net capital gain or net investment income, you are taxed on the distribution even though it represents a return of your investment.
The sale (redemption) of AB Fund shares is a taxable transaction for federal income tax purposes. You will recognize a gain or loss on such a transaction equal to the difference, if any, between the amount of your net redemption proceeds and your tax basis in the AB Fund shares. Such gain or loss will be capital gain or loss if you held your Fund shares as capital assets. Any capital gain or loss will generally be treated as long-term capital gain or loss if you held the AB Fund shares for more than one year at the time of the sale. Any capital loss arising from the sale of shares held for six months or less, however, will
be treated as long-term capital loss to the extent of the amount of net capital gain distributions with respect to those shares.
The AB Fund will be required to withhold federal income tax at a 28% rate on all distributions of net capital gain or net investment income and redemption proceeds (regardless of whether you realize a gain or loss) otherwise payable to you if you fail to provide the AB Fund with your correct taxpayer identification number or, with respect to those distributions, if you fail to make required certifications or if you have been notified by the Internal Revenue Service that you are subject to backup withholding. Backup withholding is not an additional tax. Rather, any amounts withheld may be credited against your federal income tax liability.
Investment income the AB Fund receives from sources within foreign countries may be subject to foreign income taxes withheld at the source.
The AB Fund will mail you a statement containing information about the income tax status of distributions paid during a calendar year soon after December 31 of that year. For further information about the tax effects of investing in the AB Fund, including state and local tax matters, please see the SAI and consult your tax adviser.
Dividends and other Distributions of AB Fund Shares
The AB Fund declares dividends from net investment income and pays them annually. Any net capital gain and net gains from foreign currency transactions the AB Fund realizes are distributed at least annually.
Most investors have their dividends and capital gain distributions from a fund reinvested in additional shares of the same class of the fund. If you choose this option, or if you do not indicate any choice, your dividends and capital gain distributions will be reinvested in additional AB Fund shares. Alternatively, you may choose to have your dividends and capital gain distributions mailed to you or sent directly to your bank account. If you do not elect to have the proceeds reinvested, and the dividend or distribution amount is less than $10, your proceeds will be automatically reinvested. If five or more of your dividend and capital gain distribution checks remain uncashed after 180 days, all subsequent dividends and capital gain distributions may be reinvested. For federal income tax purposes, dividends and capital gain distributions are treated the same whether they are received in cash or reinvested.
Master-Feeder Structure
Under a master-feeder structure, a “feeder” fund invests all of its investable assets in a “master” fund with the same investment objective. The “master” fund purchases securities for investment. The master-feeder structure works as follows:
(MASTER-FEEDER STRUCTURE CHART)
Each Master-Feeder Fund can withdraw its investment in its corresponding portfolio at any time if the Board of Trustees determines that it is in the best interest of the Fund and its shareholders to do so. A change in a portfolio’s fundamental objective, policies and restrictions, which is not approved by the shareholders of its corresponding Fund, could require that Fund to redeem its interest in the portfolio. Any such redemption could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the portfolio. Should such a distribution occur, that Fund could incur brokerage fees or other transaction costs in converting such securities to cash. In addition, a distribution in kind could result in a less diversified portfolio of investments for that Fund and could affect adversely the liquidity of the
Fund. If a Master-Feeder Fund withdraws its investment in its corresponding portfolio, the Fund’s assets will be invested directly in investment securities or in another master fund, according to the investment policies and restrictions described in this Prospectus.
APPENDIX D
FINANCIAL HIGHLIGHTS OF THE AB FUND
The AB Fund will adopt the financial statements of the CNL Fund. The financial highlights table is intended to help you understand the CNL Fund’s financial performance for the past five (5) years, or, if shorter, the period of the Fund’s operation. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the CNL Fund (assuming reinvestment of all dividends and other distributions).
This information below has been audited by PricewaterhouseCoopers LLP, whose report, along with the CNL Fund’s financial statements, is included in the CNL Fund’s annual report, which is available upon request.
Class A Shares of the CNL Fund | ||||
Year ended December 31, | 2008 | 2007a | ||
Selected Per Share Data | ||||
Net asset value, beginning of year | $ | 8.64 | $ | 10.00 |
Income (loss) from investment operations: | ||||
Net investment income (loss)b |
| 0.10 |
| 0.07 |
Net realized and unrealized gain (loss) on investment transactions |
| (4.06) | (1.35) | |
Total from investment operations |
| (3.96) |
| (1.28) |
Less distributions from: | ||||
Net investment income |
| (0.07) |
| (0.08) |
Total distributions to shareholders |
| (0.07) | (0.08) | |
Redemption Fees |
| 0.00 | c | – |
Net asset value, end of year | $ | 4.61 | $ | 8.64 |
Total Return (%)d |
| (45.91) | (12.77)e | |
Ratios to Average Net Assets and Supplemental Data | ||||
Net Assets, End of Year (000s) | $ | 1,241 | $ | 61 |
Ratio of expenses before expense waiver/reimbursement (%) |
| 4.99 |
| 29.19f |
Ratio of expenses after expense waiver/reimbursement (%) |
| 1.80 |
| 1.80f |
Ratio of net investment income (loss) (%)g |
| 1.69 |
| 4.30f |
Portfolio turnover rate (%) |
| 25 |
| 6e |
(a) | For the period from October 26, 2007 (commencement of operations) to December 31, 2007. |
(b) | Per share amounts have been calculated using the average shares method. |
(c) | Amount is less than $0.005 per share. |
(d) | Does not reflect sales charges, which would reduce return. |
(e) | Not annualized. |
(f) | Annualized. |
(g) | Differences between classes are impacted by the timing of subscriptions and the timing of dividend income earned by the Fund. |
Institutional Class Shares of the CNL Fund | ||||
Year ended December 31, | 2008 | 2007a | ||
Selected Per Share Data | ||||
Net asset value, beginning of year | $ | 8.64 | $ | 10.00 |
Income (loss) from investment operations: | ||||
Net investment income (loss)b |
| 0.13 |
| 0.04 |
Net realized and unrealized gain (loss) on investment transactions |
| (4.06) | (1.31) | |
Total from investment operations |
| (3.93) |
| (1.27) |
Less distributions from: | ||||
Net investment income |
| (0.09) | (0.09) | |
Total distributions to shareholders |
| (0.09) | (0.09) | |
Redemption Fees |
| 0.00 | c | – |
Net asset value, end of year | $ | 4.62 | $ | 8.64 |
Total Return (%) |
| (45.66) | (12.73)d | |
Ratios to Average Net Assets and Supplemental Data | ||||
Net Assets, End of Year (000s) | $ | 26,880 | $ | 4,517 |
Ratio of expenses before expense waiver/reimbursement (%) |
| 5.49 |
| 28.94e |
Ratio of expenses after expense waiver/reimbursement (%) |
| 1.55 |
| 1.55e |
Ratio of net investment income (loss) (%)f |
| 2.09 |
| 2.45e |
Portfolio turnover rate (%) |
| 25 |
| 6d |
(a) | For the period from October 26, 2007 (commencement of operations) to December 31, 2007. |
(b) | Per share amounts have been calculated using the average shares method. |
(c) | Amount is less than $0.005 per share. |
(d) | Not annualized. |
(e) | Annualized. |
(f) | Differences between classes are impacted by the timing of subscriptions and the timing of dividend income earned by the Fund. |
American Beacon Global Real Estate Fund
Investor Class Shares (TICKER)
Y Class Shares (TICKER)
American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
1 (800) 658-5811
January __, 2010
This Statement of Additional Information (“SAI”) is not a prospectus and it should be read in conjunction with the Combined Proxy Statement and Prospectus dated January__, 2010 (the “Proxy/Prospectus”), for the Special Meeting of Shareholders of the CNL Global Real Estate Fund, (the “CNL Fund”) the sole series of The CNL Funds, a Delaware statutory trust, to be held on January 22, 2010. A copy of the Proxy/Prospectus is available by calling the above number.
Organization and History of the Fund | |
Non-Principal Investment Strategies and Risks | |
Investment Restrictions | |
Temporary Defensive Position | |
Portfolio Turnover | |
Disclosure of Portfolio Holdings | |
Trustees and Officers of the Trust | |
Code of Ethics | |
Proxy Voting Policies | |
Control Persons and 5% Shareholders | |
Investment Advisory Agreements | |
Management, Administrative and Distribution Services | |
Other Service Providers | |
Portfolio Managers | |
Portfolio Securities Transactions | |
Redemptions in Kind | |
Tax Information | |
Description of the Trust | |
Financial Statements | |
Other Information | |
Appendix A: Proxy Voting Policy and Procedures for the Trust | A-1 |
Appendix B: Proxy Voting Policy and Procedures for the Sub-Adviser | B-1 |
1. | a complete list of holdings for the Fund on an annual and semi-annual basis in the reports to shareholders and publicly available filings of Form N-CSR with the SEC within seventy days of the end of each fiscal semi-annual period; |
2. | a complete list of holdings for the Fund as of the end of its first and third fiscal quarters in publicly available filings of Form N-Q with the SEC within sixty days of the end of the fiscal quarter; |
3. | a complete list of holdings for the Fund as of the end of each month on the Fund’s website (www.americanbeaconfunds.com) approximately thirty days after the end of the month; |
4. | ten largest holdings for the Fund as of the end of each calendar quarter on the Fund’s website (www.americanbeaconfunds.com) and in sales materials approximately fifteen days after the end of the calendar quarter. |
Organization | Frequency of Disclosure | Lag | |
Bloomberg | Quarterly | Day following disclosure on Fund’s website | |
Lipper/Reuters | Monthly | 5 business days | |
Morningstar | Monthly | Day following disclosure on Fund’s website | |
Standard & Poor’s Ratings Services | Monthly | 2 business days | |
Thomson Financial Research | Quarterly | Day following disclosure on Fund’s website |
1. | Recipients of portfolio holdings information must agree in writing to keep the information confidential and not to trade based on the information; |
2. | Holdings may only be disclosed as of a month-end date; |
3. | No compensation may be paid to the Fund, the Manager or any other party in connection with the disclosure of information about portfolio securities; and |
4. | A member of the Manager’s Compliance Department must approve requests for holdings information. |
Name, Age and Address | Position, Term of Office and Length of Time Served with each 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 (law firm) (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994-2006); Member, Board of Trustees, Southern Methodist University; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present). |
Name, Age and Address | Position, Term of Office and Length of Time Served with each Trust | Principal Occupation(s) During Past 5 Years and Current Directorships |
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). |
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). |
Richard A. Massman (66) | Trustee since 2004 Chairman since 2008 | Consultant and General Counsel Emeritus (2009-Present) and Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-Present) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Healthcare Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present). |
R. Gerald Turner (64) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present). |
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); Immediate Past Chairman and Board Member (2003-Present), Dallas Citizens Council; Director, Baylor Health Care System Foundation (2007-Present); State Vice Chair, State Fair of Texas (1987-Present); Board Member, Southwestern Medical Foundation (1994-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present). |
Name, Age and Address | Position, Term of Office and Length of Time Served with each Trust | Principal Occupation(s) During Past 5 Years and Current Directorships |
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). |
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 serving 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). |
Name, Age and Address | Position, Term of Office and Length of Time Served with each Trust | Principal Occupation(s) During Past 5 Years and Current Directorships |
OFFICERS | ||
Term One Year | ||
William F. Quinn (61) | Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 Trustee from 1987 to 2008 | Executive Chairman (2009-Present), Chairman (2006-2009), CEO (2006-2007), President (1986-2006), and Director (2003-Present), American Beacon Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-2009); Director, Crescent Real Estate Equities, Inc. (1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment adviser) (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 Managers Advisory Committee (1997-1998, 2000-2002, 2006-Present); Vice Chairman (2004-2007) and Chairman (2007-Present), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee (1995-2008) and President (1995-2007, 2008-Present), American Beacon Mileage Funds; Trustee (1999-2008) and President (1999-2007, 2008-Present), American Beacon Select Funds; Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds, plc (2007-Present). |
Gene L. Needles, Jr. (54) | President Since 2009 Executive Vice President 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors. |
Rosemary K. Behan (50) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney, Enforcement Division, Securities and Exchange Commission (1995–2004). |
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 adviser) (1996-2004). |
Wyatt L. Crumpler (43) | VP since 2007 | Vice President, Asset Management, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007) and Director of IT Strategy and Finance (2001-2004), 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-Present). |
Rebecca L. Harris (42) | Treasurer since 1995 | Vice President, Finance, American Beacon Advisors, Inc. (1995-Present). |
Christina E. Sears (38) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. |
* | 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 Trust and Master Trust, 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 years to the Manager and one or more of the Trust’s sub-advisers. |
INTERESTED | NON-INTERESTED | |||||||
Feld | Bogart | Cline | Massman | Turner | Dunning | Duffy | Zucconi | |
Global Real Estate | None | None | None | None | None | None | None | None |
Aggregate Dollar Range of Equity Securities in all Trusts (20 Funds) | Over $100,000 | $10,001-$50,000 | $10,001-$50,000 | Over $100,000 | Over $100,000 | None | None | $10,001-$50,000 |
Name of Trustee | Aggregate Compensation From the Trust | Pension or Retirement Benefits Accrued as Part of the Trust’s Expenses | Total Compensation From the Trusts (20 funds) |
INTERESTED TRUSTEES | |||
Alan D. Feld | $______ | $0 | $______ |
NON-INTERESTED TRUSTEES | |||
W. Humphrey Bogart | $______ | $0 | $______ |
Brenda A. Cline Eugene J. Duffy Thomas M. Dunning Richard A. Massman R. Gerald Turner Paul J. Zucconi | $______ $______ $______ $______ $______ $______ | $0 $0 $0 $0 $0 $0 | $______ $______ $______ $______ $______ $______ |
Global Real Estate Fund | Total Fund | Y Class | Investor Class |
· | complying with reporting requirements; |
· | corresponding with shareholders; |
· | maintaining internal bookkeeping, accounting and auditing services and records; and |
· | supervising the provision of services to the Trust by third parties. |
Name of Investment Adviser and Portfolio Manager | Number of Other Accounts Managed and Assets by Account Type | Number of Accounts and Assets for Which Advisory Fee is Performance-Based | ||||
Registered Investment Companies | Other Pooled Investment Vehicles | Other accounts | Registered Investment Companies | Other Pooled Investment Vehicles | Other accounts | |
American Beacon Advisors, Inc. | ||||||
Wyatt Crumpler | ||||||
William F. Quinn | ||||||
CB Richard Ellis Global Real Estate Securities, LLC | ||||||
Jeremy Anagnos | ||||||
Steve Carroll | ||||||
William Morrill |
· | Derive at least 90% of its gross income each taxable year from (1) dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of securities or foreign currencies, or certain other income, including gains from options, futures or forward contracts, derived with respect to its business of investing in securities or those currencies and (2) net income from an interest in a “qualified publicly traded partnership” (“QPTP”) (“Income Requirement”); |
· | Diversify its investments so that, at the close of each quarter of its taxable year, (1) at least 50% of the value of its total assets is represented by cash and cash items, U.S. Government securities, securities of other RICs, and other securities, with those other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund’s total assets and that does not represent more than 10% of the issuer’s outstanding voting securities (equity securities of QPTPs being considered voting securities for these purposes) and (2) not more than 25% of the value of its total assets is invested in (a) securities (other than U.S. Government securities or securities of other RICs) of any one issuer, (b) securities (other than securities of other RICs) of two or more issuers the Fund controls that are determined to be engaged in the same, similar or related trades or businesses, or (c) securities of one or more QPTPs (“Diversification Requirement”); and |
· | Distribute annually to its shareholders at least 90% of the sum of its investment company taxable income (generally, taxable net investment income plus the excess (if any) of net short-term capital gain over net long-term capital loss) (“Distribution Requirement”). |
2. Conflicts of Interest - The Manager maintains a list by Fund of all affiliated persons, including the Manager and its affiliates, the Subadvisers and their affiliates as well as the Funds'’ distributor and its affiliates. Any proxy proposal involving an entity on this list could be considered to represent a conflict of interest between a) the Manager, a Subadviser, the distributor or any of their affiliates and b) Fund shareholders. The Manager will monitor the Fund’s holdings against the list of affiliated persons and will conduct an analysis based upon the following procedures to resolve these known potential conflicts as well as any unforeseen conflicts.
· | Dilution in excess of the company’s peer group, unless overall executive compensation levels (including the value of the options) are at or below the peer group; or |
1. | The Company shall maintain a list of all clients for which it votes proxies. The list will be maintained either in hard copy or electronically and updated by the Co-Chief Investment Officers or Portfolio Managers or Portfolio Administrators who will obtain proxy voting information from client agreements. |
2. | The Company shall work with the client to ensure that CBRE GRES is the designated party to receive proxy voting materials from companies or intermediaries. To that end, new account forms of broker-dealers/custodians will state that CBRE GRES should receive this documentation. The designation may also be made by telephoning contacts and/or client service representatives at broker-dealers/custodians. |
3. | The Co-Chief Chief Investment Officers shall receive all proxy voting materials and will be responsible for ensuring that proxies are voted and submitted in a timely manner. |
4. | The Co-Chief Investment Officers will review the list of clients and compare the record date of the proxies with a security holdings list for the security or company soliciting the proxy vote. |
5. | The Co-Chief Investment Officers will reasonably try to assess any material conflicts between the Company’s interests and those of its clients with respect to proxy voting by considering the situations identified in theConflicts of Interest section of this document. |
6. | So long as there are no material conflicts of interest identified, the Company will vote proxies according to the policy set forth above. The Company may also elect to abstain from voting if it deems such abstinence in its clients’ best interests. The rationale for “abstain” votes will be documented and the documentation will be maintained in the permanent file. |
7. | The Company is not required to vote every client proxy and such should not necessarily be construed as a violation of CBRE GRES’s fiduciary obligations. The Company shall at no time ignore or neglect its proxy voting responsibilities. However, there may be times when refraining from voting is in the client’s best interest, such as when an adviser’s analysis of a particular client proxy reveals that the cost of voting the proxy may exceed the expected benefit to the client (i.e., casting a vote on a foreign security may require that the adviser engage a translator or travel to a foreign country to vote in person). Such position also complies with Interpretive Bulletin 94-2 of the DOL. |
8. | The CCO shall be responsible for conducting the proxy voting cost-benefit analysis in those certain situations in which the Company believes it may be in its clients’ best interest for the Company not to vote a particular proxy. The CCO shall maintain documentation of any cost/benefit analysis with respect to client proxies that were not voted by the Company. |
9. | If the Co-Chief Investment Officers detect a conflict of interest, the Company will, at its expense, engage the services of an outside proxy voting service or consultant who will provide an independent recommendation on the direction in which the Company should vote on the proposal. The proxy voting service’s or consultant’s determination will be binding on CBRE GRES. |
10. | The Chief Co-Chief Investment Officers shall collect and submit the proxy votes in a timely manner. |
11. | The CCO will report any attempts by the Company’s personnel to influence the voting of client proxies in a manner that is inconsistent with the Company’s Policy. |
12. | All proxy votes will be recorded and the following information will be maintained: |
• | The name of the issuer of the portfolio security; |
• | The exchange ticker symbol of the portfolio security; |
• | The Council on Uniform Securities Identification Procedures (“CUSIP”) number for the portfolio security; |
• | The shareholder meeting date; |
• | The number of shares the Company is voting on firm-wide; |
• | A brief identification of the matter voted on; |
• | Whether the matter was proposed by the issuer or by a security holder; |
• | Whether or not the Company cast its vote on the matter; |
• | How the Company cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding election of directors); |
• | Whether the Company cast its vote with or against management; and |
• | Whether any client requested an alternative vote of its proxy. |
• | Conflict: CBRE GRES retains a client, or is in the process of retaining a client that is an officer or director of an issuer that is held in the Company’s client portfolios. |
• | Conflict: CBRE GRES’s supervised persons maintain a personal and/or business relationship (not an advisory relationship) with issuers or individuals that serve as officers or directors of issuers. For example, the spouse of a |
Company supervised person may be a high-level executive of an issuer that is held in the Company’s client portfolios. The spouse could attempt to influence the Company to vote in favor of management. |
• | Any request, whether written (including e-mail) or oral, received by any supervised persons of the Company, must be promptly reported to the CCO. All written requests must be retained in the permanent file. |
• | The CCO will record the identity of the client, the date of the request, and the disposition (e.g., provided a written or oral response to client’s request, referred to third party, not a proxy voting client, other dispositions, etc.) in a suitable place. |
• | In order to facilitate the management of proxy voting record keeping process, and to facilitate dissemination of such proxy voting records to clients, the CCO will distribute to any client requesting proxy voting information the complete proxy voting record of the Company for the period requested. Reports containing proxy information of only those issuers held by a certain client will not be created or distributed. 4 |
• | Furnish the information requested, free of charge, to the client within a reasonable time period (within 10 business days). Maintain a copy of the written record provided in response to client’s written (including e-mail) or oral request. A copy of the written response should be attached and maintained with the client’s written request, if applicable and maintained in the permanent file. |
• | clients are permitted to request the proxy voting record for the 5 year period prior to their request. |
_____________________
4 | For clients who have provided the Company with specific direction on proxy voting, the CCO will review the proxy voting record and permanent file in order to identify those proposals voted differently than how the Company voted clients not providing direction. |
• | Upon receipt of a proxy, copy or print a sample of the proxy statement or card and maintain the copy in a central file along with a sample of the proxy solicitation instructions. |
• | The Company’s proxy voting records may include the following: |
• | Documents prepared or created by the Company that were material to making a decision on how to vote, or that memorialized the basis for the decision. |
• | Documentation or notes or any communications received from third parties, other industry analysts, third party service providers, company’s management discussions, etc. that were material in the basis for the decision. |
• | The Company will ensure that Part II of Form ADV is updated as necessary to reflect: (i) all material changes to the Proxy Voting Policy and Procedures; and (ii) regulatory requirements. |
PART C
OTHER INFORMATION
Item 15. Indemnification
See (i) the Amended and Restated Declaration of Trust (the “Declaration of Trust”) of American Beacon Funds (the “Trust” or the “Registrant”), attached as Exhibit (a) to Post-Effective Amendment (“PEA”) No. 51 to Registrant’s Registration Statement on Form N-1A (File Nos. 033-11387 and 811-04984) (the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”) on December 15, 2004, and the Written Instrument Amending the Amended and Restated Declaration of Trust, attached as Exhibit (a) to PEA No. 74 to the Registration Statement filed with the SEC on February 27, 2009, and (ii) Bylaws, attached as Exhibit (b) to Post-Effective Amendment No. 23 to the Registration Statement filed with the SEC on December 18, 1997.
Article XI of the Declaration of Trust of the Trust provides that:
Limitation of Liability
Section 1. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees shall not be responsible for or liable in any event for neglect or wrongdoing of them or any officer, agent, employee or investment adviser of the Trust, but nothing contained herein shall protect any Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
Indemnification
Section 2.
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as "Covered Person") shall be indemnified by the appropriate portfolios to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened while in office or thereafter, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither interested persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry); provided, however, that any Shareholder may, by appropriate legal proceedings, challenge any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel, other than Trustees and officers, and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in paragraph (a) of this Section 2 may be paid by the applicable Portfolio from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him to the Trust if it is ultimately determined that he is not entitled to indemnification under this Section 2; provided, however, that:
(i) such Covered Person shall have provided appropriate security for such undertaking;
(ii) the Trust is insured against losses arising out of any such advance payments; or
(iii) either a majority of the Trustees who are neither interested persons of the Trust nor parties to the matter, or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a trial-type inquiry or full investigation), that there is reason to believe that such Covered Person will be found entitled to indemnification under this Section 2.
According to Article XII, Section 1 of the Declaration of Trust, the Trust is a trust, not a partnership. Trustees are not liable personally to any person extending credit to, contracting with or having any claim against the Trust, a particular Portfolio or the Trustees. A Trustee, however, is not protected from liability due to willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Article XII, Section 2 provides that, subject to the provisions of Section 1 of Article XII and to Article XI, the Trustees are not liable for errors of judgment or mistakes of fact or law, or for any act or omission in accordance with advice of counsel or other experts or for failing to follow such advice.
Numbered Paragraph 8 of the Management Agreement provides that:
8. Limitation of Liability of the Manager. The Manager shall not be liable for any error of judgment or mistake of law or for any loss suffered by a Trust or any Fund in connection with the matters to which this Agreement relate except a loss resulting from the willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, partner, employee, or agent of the Manager, who may be or become an officer, Board member, employee or agent of a Trust shall be deemed, when rendering services to a Trust or acting in any business of a Trust, to be rendering such services to or acting solely for a Trust and not as an officer, partner, employee, or agent or one under the control or direction of the Manager even though paid by it.
Numbered Paragraph 9 of the Investment Advisory Agreement with CB Richard Ellis Global Real Estate Securities, LLC provides that:
9. Liability of Adviser. The Adviser shall have no liability to the Trust, its shareholders or any third party arising out of or related to this Agreement except with respect to claims which occur due to any willful misfeasance, bad faith, or gross negligence in the performance of its duties or the reckless disregard of its obligations under this Agreement.
Numbered Paragraph 11 of the Administration Agreement provides that:
11. Limitation of Liability of [American Beacon Advisors, Inc. (“ABA”)]. ABA shall not be liable for any error of judgment or mistake of law or for any loss suffered by a Trust or any Series in connection with the matters to which this Agreement relate except a loss resulting from the willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, partner, employee, or agent of ABA, who may be or become an officer, Board member, employee or agent of a Trust shall be deemed, when rendering services to any Trust or acting in any business of a Trust, to be rendering such services to or acting solely for the Trust and not as an officer, partner, employee, or agent or one under the control or direction of ABA even though paid by it.
Section 4.2 of the Distribution Agreement provides that:
(a) Notwithstanding anything in this Agreement to the contrary, Foreside shall not be responsible for, and the Clients shall on behalf of each applicable Fund or Class thereof, indemnify and hold harmless Foreside, its employees, directors, officers and managers and any person who controls Foreside within the meaning of section 15 of the Securities Act or section 20 of the Securities Exchange Act of 1934, as amended, (for purposes of this Section 4.2(a), "Foreside Indemnitees") from and against, any and all losses, damages, costs, charges, reasonable counsel fees, payments, liabilities and other expenses of every nature and character (including, but not limited to, direct and indirect reasonable reprocessing costs) arising out of or attributable to all and any of the following (for purposes of this Section 4.2(a), a "Foreside Claim"):
(i) any action (or omission to act) of Foreside or its agents taken in connection with this Agreement; provided, that such action (or omission to act) is taken in good faith and without willful misfeasance, negligence or reckless disregard by Foreside of its duties and obligations under this Agreement;
(ii) any untrue statement of a material fact contained in the Registration Statement or arising out of or based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, unless such statement or omission was
made in reliance upon, and in conformity with, information furnished to the Clients in connection with the preparation of the Registration Statement or exhibits to the Registration Statement by or on behalf of Foreside;
(iii) any material breach of the Clients' agreements, representations, warranties, and covenants in Sections 2.9 and 5.2 of this Agreement; or
(iv) the reliance on or use by Foreside or its agents or subcontractors of information, records, documents or services which have been prepared, maintained or performed by the Clients or any agent of the Clients, including but not limited to any Predecessor Records provided pursuant to Section 2.9(b).
(b) Foreside will indemnify, defend and hold the Clients and their several officers and members of their Governing Bodies and any person who controls the Clients within the meaning of section 15 of the Securities Act or section 20 of the Securities Exchange Act of 1934, as amended, (collectively, the "Clients Indemnitees" and, with the Foreside Indemnitees, an "Indemnitee"), free and harmless from and against any and all claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every nature and character (including the cost of investigating or defending such claims, demands, actions, suits or liabilities and any reasonable counsel fees incurred in connection therewith), but only to the extent that such claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses result from, arise out of or are based upon all and any of the following (for purposes of this Section 4.2(c), a "Clients Claim" and, with a Foreside Claim, a "Claim"):
(i) any material action (or omission to act) of Foreside or its agents taken in connection with this Agreement, provided that such action (or omission to act) is not taken in good faith and with willful misfeasance, negligence or reckless disregard by Foreside of its duties and obligations under this Agreement.
(ii) any untrue statement of a material fact contained in the Registration Statement or any alleged omission of a material fact required to be stated or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon, and in conformity with, information furnished to the Clients in writing in connection with the preparation of the Registration Statement by or on behalf of Foreside; or
(iii) any material breach of Foreside's agreements, representations, warranties and covenants set forth in Section 2.4 and 5.1 hereof
(d) The Clients or Foreside (for purpose of this Section 4.2(d), an "Indemnifying Party") may assume the defense of any suit brought to enforce any Foreside Claim or Clients Claim, respectively, and may retain counsel chosen by the Indemnifying Party and approved by the other Party, which approval shall not be unreasonably withheld or delayed. The Indemnifying Party shall advise the other Party that it will assume the defense of the suit and retain counsel within ten (10) days of receipt of the notice of the claim. If the Indemnifying Party assumes the defense of any such suit and retains counsel, the other Party shall bear the fees and expenses of any additional counsel that they retain. If the Indemnifying Party does not assume the defense of any such suit, or if other Party does not approve of counsel chosen by the Indemnifying Party, or if the other Party has been advised that it may have available defenses or claims that are not available to or conflict with those available to the Indemnifying Party, the Indemnifying Party will reimburse any Indemnitee named as defendant in such suit for the reasonable fees and expenses of any counsel that the Indemnitee retains. An Indemnitee shall not settle or confess any claim without the prior written consent of the applicable Client, which consent shall not be unreasonably withheld or delayed.
(e) An Indemnifying Party's obligation to provide indemnification under this section is conditioned upon the Indemnifying Party receiving notice of any action brought against an Indemnitee within twenty (20) days after the summons or other first legal process is served. Such notice shall refer to the Person or Persons against whom the action is brought. The failure to provide such notice shall not relieve the Indemnifying Party of any liability that it may have to any Indemnitee except to the extent that the ability of the party entitled to such notice to defend such action has been materially adversely affected by the failure to provide notice.
(f) The provisions of this section and the parties' representations and warranties in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Indemnitee and shall survive the sale and redemption of any Shares made pursuant to subscriptions obtained by Foreside. The indemnification provisions of this section will inure exclusively to the benefit of each person that may be an Indemnitee at any time and their respective successors and assigns (it being intended that such persons be deemed to be third party beneficiaries under this Agreement).
Section 4.3 of the Distribution Agreement provides that:
(a) Neither Party shall be liable for losses, delays, failure, errors, interruption or loss of data occurring directly or indirectly by reason of circumstances beyond its reasonable control, including, without limitation, acts of God; action or inaction of civil or military authority; public enemy; war; terrorism; riot; fire; flood; sabotage; epidemics; labor disputes; civil commotion; interruption, loss or malfunction of utilities, transportation, computer or communications capabilities; insurrection; or elements of nature;
(b) Neither Party shall be liable for any consequential, special or indirect losses or damages suffered by the other Party, whether or not the likelihood of such losses or damages was known by the Party;
(c) No affiliate, director, officer, employee, manager, shareholder, partner, agent, counsel or consultant of either Party shall be liable at law or in equity for the obligations of such Party under this Agreement or for any damages suffered by the other Party related to this Agreement;
(d) Except as set forth in Section 4.2(f), there are no third party beneficiaries of this Agreement;
(e) Each Party shall have a duty to mitigate damages for which the other Party may become responsible;
(f) The assets and liabilities of each Fund are separate and distinct from the assets and liabilities of each other Fund, and no Fund shall be liable or shall be charged for any debt, obligation or liability of any other Fund, whether arising under this Agreement or otherwise; and in asserting any rights or claims under this Agreement, Foreside shall look only to the assets and property of the Fund to which Foreside's rights or claims relate in settlement of such rights or claims; and
(g) Each Party agrees promptly to notify the other party of the commencement of any litigation or proceeding of which it becomes aware arising out of or in any way connected with the issuance or sale of Shares.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 16. Exhibits.
(1) | (a) | Amended and Restated Declaration of Trust of Registrant, dated November 1, 2004 – (x)
|
| (b) | Written Instrument Amending the Amended and Restated Declaration of Trust, filed with the Commonwealth of Massachusetts on March 23, 2005 – (xvi) |
(2) | Bylaws – (i) |
(3) | Voting Trust Agreements – (not applicable) |
(4) | Agreement and Plan of Reorganization and Termination dated December 3, 2009 – (filed herewith as Appendix A to the Combined Proxy Statement and Prospectus) |
(5) | Rights of holders of the securities being registered are contained in Articles III, VIII, X, XI and XII of the Registrant’s Declaration of Trust and Articles III, V, VI and XI of the Registrant’s Bylaws |
(6) | (a) | Management Agreement among American Beacon Funds, American Beacon Mileage Funds, American Beacon Select Funds, American Beacon Master Trust and American Beacon Advisors, Inc., dated September 12, 2008 – (xv)
|
(b) | Amendment to Management Agreement, dated February 13, 2009 – (xvi) | |
(c) | Form of Amendment to Management Agreement – (xix)
| |
(d) | Form of Investment Advisory Agreement between American Beacon Advisors, Inc. and CB Richard Ellis Global Real Estate Securities, LLC – (xix) |
(7) | Form of Distribution Agreement among American Beacon Funds, American Beacon Mileage Funds, American Beacon Select Funds and Foreside Fund Services, LLC, dated March 31, 2009 – (xvii) |
(8) | Bonus, profit sharing or pension plans – (not applicable) |
(9) | (a) | Custodian Agreement between the American AAdvantage Funds and State Street Bank and Trust Company, dated December 1, 1997 – (ii)
|
(b) | Amendment to Custodian Agreement to add Small Cap Value Fund, dated January 1, 1999 – (iii) |
(c) | Amendment to Custodian Agreement to add Large Cap Growth Fund, Emerging Markets Fund, Small Cap Index Fund and International Equity Index Fund, dated July 31, 2000 – (vii) | |
(d) | Amendment to Custodian Agreement to add High Yield Bond Fund, dated December 29, 2000 – (iv) | |
(e) | Amendment to Custodian Agreement to reflect amendments to Rule 17f-5 of the 1940 Act, dated June 1, 2001 – (vii) | |
(f) | Amendment to Custodian Agreement to add Enhanced Income Fund, dated July 1, 2003 – (viii) | |
(g) | Amendment to Custodian Agreement to add Mid-Cap Value Fund and Treasury Inflation Protected Securities Fund, dated June 30, 2004– (ix) | |
(h) | Amendment to Custodian Agreement to add Small Cap Value Opportunity Fund, dated March 31, 2006 – (xii) | |
(i) | Form of Amendment to Custodian Agreement to add American Beacon Global Real Estate Fund – (xix) |
(10) | Amended and Restated Plan pursuant to Rule 18f-3, dated July 24, 2009 – (xviii) |
(11) | Opinion of Counsel as to the Legality of Shares Being Registered – (filed herewith) |
(12) | Opinion of Counsel on Tax Matters – (to be filed by subsequent amendment) |
(13) | Other Material Contracts | |
(a)(1) | Administration Agreement among American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds and the American Beacon Master Trust, and American Beacon Advisors, Inc., dated September 12, 2008 – (xv)
| |
(a)(2) | Amendment to Administration Agreement among American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds and the American Beacon Master Trust, and American Beacon Advisors, Inc., dated April 30, 2009 – (xvii)
| |
(a)(3) | Amendment to Administration Agreement among American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds and the American Beacon Master Trust, and American Beacon Advisors, Inc., dated July 24, 2009 – (xviii) | |
(a)(4) | Form of Amendment to Administration Agreement among American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds and the American Beacon Master Trust, and American Beacon Advisors, Inc. — (xix)
| |
(b)(1) | Service Plan Agreement for the American Beacon Funds Investor Class, dated March 6, 2009 – (xviii) |
(b)(2) | Service Plan Agreement for the American Beacon Funds Y Class, dated July 24, 2009 – (xviii)
| |
(c)(1) | Transfer Agency and Service Agreement between the American AAdvantage Funds and State Street Bank and Trust Company, dated January 1, 1998 – (ii)
| |
(c)(2) | Amendment to Transfer Agency and Service Agreement to add Small Cap Value Fund, dated January 1, 1999 – (iii) | |
(c)(3) | Amendment to Transfer Agency and Service Agreement to add four new series of American AAdvantage Funds, dated July 31, 2000 – (vii) | |
(c)(4) | Amendment to Transfer Agency and Service Agreement to add High Yield Bond Fund, dated December 29, 2000 – (iv) | |
(c)(5) | Amendment to Transfer Agency and Service Agreement regarding anti-money laundering procedures, dated July 24, 2002 – (vi) | |
(c)(6) | Amendment to Transfer Agency and Service Agreement regarding anti-money laundering procedures, dated September 24, 2002 – (vii) | |
(c)(7) | Amendment to Transfer Agency and Service Agreement to add Enhanced Income Fund, dated July 1, 2003 – (viii) | |
(c)(8) | Amendment to Transfer Agency and Service Agreement to replace fee schedule, dated March 26, 2004 – (xiii) | |
(c)(9) | Amendment to Transfer Agency and Service Agreement to add Mid-Cap Value Fund and Treasury Inflation Protected Securities Fund, dated June 30, 2004 – (ix) | |
(c)(10) | Amendment to Transfer Agency and Service Agreement to add Small Cap Value Opportunity Fund, dated March 31, 2006 – (xii) | |
(c)(11) | Form of Amendment to Schedule A to Transfer Agency and Service Agreement to add American Beacon Global Real Estate Fund – (xix) | |
(d)(1) | Securities Lending Authorization Agreement between American AAdvantage Funds and State Street Bank and Trust Company, dated January 2, 1998 – (ii) | |
(d)(2) | Amendment to Securities Lending Authorization Agreement to add Small Cap Value Fund, dated January 1, 1999 – (v) | |
(d)(3) | Amendment to Securities Lending Authorization Agreement to add Large Cap Growth Fund and Emerging Markets Fund, dated July 31, 2000 – (iv) | |
(d)(4) | Amendment to Securities Lending Authorization Agreement to add High Yield Bond Fund, dated December 29, 2000 – (iv) | |
(d)(5) | Amendment to Securities Lending Authorization Agreement to add Mid-Cap Value Fund, dated June 30, 2004 – (ix) |
(d)(6) | Amendment to Securities Lending Authorization Agreement regarding lending in new countries, dated August 12, 2005 – (xi) | |
(d)(7) | Amendment to Securities Lending Authorization Agreement to add Small Cap Value Opportunity Fund, dated March 31, 2006 – (xii) | |
(e) | Amended and Restated Credit Agreement between American Beacon Funds and American Beacon Advisors, Inc., dated January 31, 2008 – (xiv) |
(14) | Consent of Independent Registered Public Accounting Firm – (filed herewith) |
(15) | Financial Statements Omitted Pursuant to Item 14(a)(1) – (not applicable) |
(16) | Powers of Attorney (filed herewith) |
(17) | Other Exhibits
| |
(a) | Form of Proxy Card – (filed herewith) | |
(b) | Prospectus for the CNL Global Real Estate Fund of The CNL Funds – (filed herewith) | |
(c) | Statement of Additional Information for the CNL Global Real Estate Fund of The CNL Funds – (filed herewith) | |
(d) | Semi-Annual Report to Shareholders of the CNL Global Real Estate Fund of The CNL Funds – (filed herewith) | |
(e) | Annual Report to Shareholders of the CNL Global Real Estate Fund of The CNL Funds – (filed herewith) |
_________________________
(i) Incorporated by reference to Post-Effective Amendment No. 23 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on December 18, 1997.
(ii) Incorporated by reference to Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on February 27, 1998.
(iii) Incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on July 7, 2000.
(iv) Incorporated by reference to Post-Effective Amendment No. 34 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on December 29, 2000.
(v) Incorporated by reference to Post-Effective Amendment No. 35 to the Registration Statement on Form N-
1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on February 28, 2001.
(vi) Incorporated by reference to Post-Effective Amendment No. 41 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on October 1, 2002.
(vii) Incorporated by reference to Post-Effective Amendment No. 42 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on February 28, 2003.
(viii) Incorporated by reference to Post-Effective Amendment No. 46 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on July 1, 2003.
(ix) Incorporated by reference to Post-Effective Amendment No. 50 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on June 30, 2004.
(x) Incorporated by reference to Post-Effective Amendment No. 51 to the Registration Statement on Form N-1A of the American AAdvantage Funds as filed with the Securities and Exchange Commission on December 15, 2004.
(xi) Incorporated by reference to Post-Effective Amendment No. 56 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on September 30, 2005.
(xii) Incorporated by reference to Post-Effective Amendment No. 62 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on March 31, 2006.
(xiii) Incorporated by reference to Post-Effective Amendment No. 64 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on March 1, 2007.
(xiv) Incorporated by reference to Post-Effective Amendment No. 70 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on February 29, 2008.
(xv) Incorporated by reference to Post-Effective Amendment No. 73 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on December 31, 2008.
(xvi) Incorporated by reference to Post-Effective Amendment No. 74 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on February 27, 2009.
(xvii) Incorporated by reference to Post-Effective Amendment No. 75 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on May1, 2009.
(xviii) Incorporated by reference to Post-Effective Amendment No. 77 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on August 3, 2009.
(xix) Incorporated by reference to Post-Effective Amendment No. 79 to the Registration Statement on Form N-1A of American Beacon Funds as filed with the Securities and Exchange Commission on December 22, 2009.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the reoffering prospectus will contain the information called for by the applicable registration form for re-offerings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant undertakes to file an opinion of counsel supporting the tax matters and consequences to shareholders discussed in the Proxy/Prospectus in a post-effective amendment to this registration statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed below on its behalf by the undersigned, duly authorized, in the City of Fort With and the State of Texas on the 23rd day of December, 2009.
| AMERICAN BEACON FUNDS | |
|
| |
| By: | /s/ William F. Quinn |
| William F. Quinn | |
| President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | |
/s/ William F. Quinn | President | December 23, 2009 | |
William F. Quinn | |||
/s/ Rebecca L. Harris | Treasurer (Principal Financial Officer) | December 23, 2009 | |
Rebecca L. Harris | |||
W. Humphrey Bogart* | Trustee | December 23, 2009 | |
W. Humphrey Bogart | |||
Brenda A. Cline* | Trustee | December 23, 2009 | |
Brenda A. Cline | |||
Eugene J. Duffy* | Trustee | December 23, 2009 | |
Eugene J. Duffy | |||
Thomas M. Dunning* | Trustee | December 23, 2009 | |
Thomas M. Dunning | |||
Alan D. Feld* | Trustee | December 23, 2009 | |
Alan D. Feld | |||
Richard A. Massman* | Chairman and Trustee | December 23, 2009 | |
Richard A. Massman | |||
R. Gerald Turner* | Trustee | December 23, 2009 | |
R. Gerald Turner | |||
Paul J. Zucconi* | Trustee | December 23, 2009 | |
Paul J. Zucconi | |||
*By /s/ William F. Quinn
William F. Quinn
Attorney-In-Fact
EXHIBIT INDEX
Exhibit No. | Exhibit |
EX-99.11 | Opinion of Counsel as to the Legality of Shares Being Registered |
EX-99.14 | Consent of Independent Registered Public Accounting Firm
|
EX-99.16 | Powers of Attorney |
EX-99.17(a) | Form of Proxy Card |
EX-99.17(b) | Prospectus for the CNL Global Real Estate Fund of The CNL Funds |
EX-99.17(c) | Statement of Additional Information the CNL Global Real Estate Fund of The CNL Funds |
EX-99.17(d) | Semi-Annual Report to Shareholders of the CNL Global Real Estate Fund of The CNL Funds |
EX-99.17(e) | Annual Report to Shareholders of the CNL Global Real Estate Fund of The CNL Funds |