UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
GENE L. NEEDLES, JR., PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant’s telephone number, including area code: (817) 391-6100
Date of fiscal year end: October 31, 2013
Date of reporting period: October 31, 2013
ITEM 1. REPORTS TO STOCKHOLDERS.
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
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Back Cover |
The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | October 31, 2013 |
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Most of the conventional measures people use to gauge the performance of the stock market as a whole are measures of large-cap stocks. The venerable Dow Jones Industrial Average, which has been around in one form or another since 1896, averages the performance of just 30 stocks. The S&P 500 Index has probably surpassed the Dow as the most common referent for the market as a whole; it contains 500 of the largest U.S. stocks.
So when people talk briefly about how the stock market is doing - for instance, the radio headlines in the evening’s rush hour - they’re generally talking about the performance of large caps. But these are hardly the full picture of the equity market, nor are they necessarily even a static benchmark to be measured against. These indexes are changing all the time. |
On September 30, 2013, the Dow dropped three laggards - Hewlett-Packard, Bank of America and Alcoa - in favor of Nike, Visa and Goldman Sachs. The changes to the S&P 500 have been even more extensive. Just within the 12 months under review, there were 16 companies moving in and out of the index. There have been 241 changes to the 500 companies in that index since 1999.
That makes comparisons within the large-cap universe trickier than they might seem at first blush. That’s one reason we’re proud of our American Beacon Large Cap Value Fund. Rather than tracking an ever-changing index, our Fund is rooted in the judgment of experienced and respected large-cap managers.
• | For the 12 months ended October 31, 2013, the American Beacon Large Cap Value Fund (Investor Class) returned 30.26%. |
Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards,
Gene L. Needles, Jr.
President
American Beacon Funds
1
Domestic Equity Market Overview
October 31, 2013 (Unaudited)
U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.
The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.
The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.
Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.
This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.
Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.
For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.
2
American Beacon Large Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Large Cap Value Fund (the “Fund”) returned 30.26% for the twelve months ended October 31, 2013. The Fund outperformed the Russell 1000® Value Index (the “Index”) return of 28.29% and the Lipper Large-Cap Value Funds Index return of 28.82% for the same period.
Comparison of Change in Value of a $10,000 Investment for the Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/2013
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional Class(1,8) | 30.70 | % | 15.47 | % | 8.76 | % | $ | 23,160 | ||||||||
Y Class (1, 2, 8) | 30.59 | % | 15.38 | % | 8.72 | % | 23,067 | |||||||||
Investor Class(1,8) | 30.26 | % | 15.05 | % | 8.43 | % | 22,464 | |||||||||
Advisor Class(1,3,8) | 30.05 | % | 14.89 | % | 8.26 | % | 22,112 | |||||||||
Retirement Class (1,4,8) | 29.68 | % | 14.58 | % | 8.11 | % | 21,810 | |||||||||
A Class with sales charge (1,5,8) | 22.52 | % | 13.59 | % | 7.74 | % | 21,069 | |||||||||
A Class without sales charge (1,5,8) | 30.03 | % | 14.94 | % | 8.38 | % | 22,357 | |||||||||
C Class with sales charge (1,6,8) | 28.00 | % | 14.36 | % | 8.11 | % | 21,801 | |||||||||
C Class without sales charge (1,6,8) | 29.00 | % | 14.36 | % | 8.11 | % | 21,801 | |||||||||
AMR Class(1,8) | 31.00 | % | 15.75 | % | 9.04 | % | 23,762 | |||||||||
Lipper Large-Cap Value Funds Index (7) | 28.82 | % | 13.90 | % | 7.04 | % | 19,736 | |||||||||
Russell 1000 Value Index (7) | 28.29 | % | 14.06 | % | 7.81 | % | 21,208 |
1. | Please note that recent growth in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
3. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/03 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/03. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than the actual returns shown for 2005. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 5/31/05 and the Advisor Class from 6/1/05 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03. |
5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. A Class shares have a maximum sales charge of 5.75%. |
6. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 through 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase. |
7. | The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 1000 Value Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. The Lipper Large-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Large-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
3
American Beacon Large Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.60%, 0.70%, 0.97%, 1.09%, 1.43%, 1.13%, 1.89%, and 0.34%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index as both stock selection and sector allocation added value relative to the Index.
From a stock selection standpoint, the Fund’s Financials and Energy sectors’ holdings added the most value to performance. In the Financials sector, companies that had the greatest impact on performance included Bank of America (up 51.5%), Lincoln National (up 86.6%) and Unum Group (up 60.2%). In the Energy sector, Exxon Mobil (up 0.5%) added the most relative value due to the Fund owning a much smaller position in the security compared to the Index. Chevron (up 12.4%) and Halliburton (up 66.8%) also contributed to the Fund’s returns. Poor stock selection in the Consumer Staples and Information Technology sectors, detracted relative value. Philip Morris International (up 4.6%), Imperial Tobacco Group (up 4.3%) and Wal-Mart (up 4.0%) hurt relative performance in the Consumer Staples sector. In the Information Technology sector, International Business Machines (down 8.1%) was the largest detractor. Not owning Yahoo, which was up 95.7% in the Index, also negatively impacted performance.
The Fund’s overweight position in Information Technology, the best performing sector in the Index, added relative value through sector allocation. Underweight positions in Utilities, the worst performing sector in the Index, and the Energy sector, also contributed to the Fund’s returns.
The sub-advisors continue to invest in a broadly diversified portfolio of companies that they believe have attractive valuations and above-average earnings growth potential. This approach should allow the Fund to benefit over the longer term.
Top Ten Holdings (% Net Assets)
JPMorgan Chase & Co. | 3.7 | |||||||
Wells Fargo & Co. | 2.6 | |||||||
Bank of America Corp. | 2.2 | |||||||
Pfizer, Inc. | 2.1 | |||||||
Microsoft Corp. | 2.1 | |||||||
Johnson & Johnson | 1.8 | |||||||
WellPoint, Inc. | 1.7 | |||||||
Merck & Co., Inc. | 1.6 | |||||||
BP plc | 1.9 | |||||||
Citigroup | 1.9 | |||||||
Total Fund Holdings | 184 |
Sector Allocation (% Equities)
Financials | 25.4 | |||
Health Care | 14.5 | |||
Energy | 12.5 | |||
Industrials | 10.7 | |||
Information Technology | 10.1 | |||
Consumer Discretionary | 10.1 | |||
Consumer Staples | 7.8 | |||
Utilities | 3.8 | |||
Telecommunication Services | 3.7 | |||
Materials | 1.0 | |||
Manufacturing | 0.4 |
4
American Beacon Large Cap Value FundSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expenses
The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,113.39 | $ | 3.09 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,113.09 | $ | 3.52 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.88 | $ | 3.36 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,111.53 | $ | 4.90 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,110.68 | $ | 5.64 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.86 | $ | 5.40 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,109.27 | $ | 6.96 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.60 | $ | 6.67 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,110.49 | $ | 5.69 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.81 | $ | 5.45 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,114.68 | $ | 1.65 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.64 | $ | 1.58 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,105.83 | $ | 10.40 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.32 | $ | 9.96 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.66%, 0.92%, 1.06%, 1.31%, 1.07%, 1.96% and 0.31% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
5
American Beacon Large Cap Value FundSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Large Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Large Cap Value Fund (one of the funds constituting the American Beacon Funds) (the “Fund”), as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the, American Beacon Large Cap Value Fund at October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
December 30, 2013
6
American Beacon Large Cap Value FundSM
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCK - 94.95% |
| |||||||
CONSUMER DISCRETIONARY - 9.65% |
| |||||||
Auto Components - 1.66% |
| |||||||
Delphi Automotive PLC F | 393,320 | $ | 22,498 | |||||
Johnson Controls, Inc. | 2,968,035 | 136,975 | ||||||
Magna International, Inc., Class A | 186,000 | 15,754 | ||||||
|
| |||||||
175,227 | ||||||||
|
| |||||||
Automobiles - 2.83% |
| |||||||
General Motors Co.A | 3,131,473 | 115,709 | ||||||
Hertz Global Holdings, Inc.A | 3,417,800 | 78,473 | ||||||
Toyota Motor Corp., ADR B | 806,800 | 104,416 | ||||||
|
| |||||||
298,598 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.66% |
| |||||||
Carnival Corp. | 1,685,500 | 58,402 | ||||||
McDonald’s Corp. | 110,025 | 10,620 | ||||||
|
| |||||||
69,022 | ||||||||
|
| |||||||
Household Durables - 0.39% |
| |||||||
Stanley Black & Decker, Inc. | 518,604 | 41,016 | ||||||
|
| |||||||
Leisure Equipment & Products - 0.05% |
| |||||||
Hasbro, Inc. | 99,787 | 5,154 | ||||||
|
| |||||||
Media - 1.86% | ||||||||
Comcast Corp., Class A | 883,000 | 42,013 | ||||||
Comcast Corp. Special Class A | 583,710 | 27,026 | ||||||
Interpublic Group of Cos., Inc. | 2,356,800 | 39,594 | ||||||
McGraw-Hill Cos., Inc. | 76,660 | 5,342 | ||||||
Omnicom Group, Inc. | 182,527 | 12,432 | ||||||
Time Warner Cable, Inc. | 385,800 | 46,353 | ||||||
Viacom, Inc., Class B | 110,180 | 9,177 | ||||||
Walt Disney Co. | 204,955 | 14,058 | ||||||
|
| |||||||
195,995 | ||||||||
|
| |||||||
Multiline Retail - 1.89% | ||||||||
Dillard’s, Inc., Class A | 379,500 | 31,111 | ||||||
Kohl’s Corp. | 49,542 | 2,814 | ||||||
Target Corp. | 2,545,556 | 164,927 | ||||||
|
| |||||||
198,852 | ||||||||
|
| |||||||
Specialty Retail - 0.31% | ||||||||
Advance Auto Parts, Inc. | 65,486 | 6,495 | ||||||
Lowe’s Cos., Inc. | 478,800 | 23,834 | ||||||
Staples, Inc. | 142,537 | 2,298 | ||||||
|
| |||||||
32,627 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 1,016,491 | ||||||
|
| |||||||
CONSUMER STAPLES - 7.49% |
| |||||||
Beverages - 1.21% | ||||||||
Coca-Cola Enterprises, Inc. | 90,600 | 3,781 | ||||||
Diageo PLC, ADR B | 679,616 | 86,712 | ||||||
Dr Pepper Snapple Group, Inc. | 103,510 | 4,901 | ||||||
Molson Coors Brewing Co., Class B | 299,900 | 16,195 | ||||||
PepsiCo, Inc. | 184,800 | 15,540 | ||||||
|
| |||||||
127,129 | ||||||||
|
| |||||||
Food & Drug Retailing - 2.53% |
| |||||||
CVS Caremark Corp. | 275,643 | 17,162 | ||||||
Kroger Co. | 1,543,100 | 66,106 | ||||||
Sysco Corp. | 1,520,900 | 49,186 | ||||||
Wal-Mart Stores, Inc. | 1,748,060 | 134,163 | ||||||
|
| |||||||
266,617 | ||||||||
|
| |||||||
Food Products - 0.98% | ||||||||
Danone S.A., ADR B | 625,450 | 9,313 | ||||||
General Mills, Inc. | 304,475 | 15,352 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Kellogg Co. | 440,139 | $ | 27,839 | |||||
Mondelez International, Inc., Class A | 939,700 | 31,611 | ||||||
Nestle S.A., ADR B | 266,912 | 19,327 | ||||||
|
| |||||||
103,442 | ||||||||
|
| |||||||
Household Products - 0.06% |
| |||||||
Procter & Gamble Co. | 72,999 | 5,895 | ||||||
|
| |||||||
Tobacco - 2.71% | ||||||||
Altria Group, Inc. | 1,421,742 | 52,931 | ||||||
Imperial Tobacco Group PLC, ADR B,F | 912,900 | 68,458 | ||||||
Lorillard, Inc. | 249,840 | 12,744 | ||||||
Philip Morris International, Inc. | 1,698,351 | 151,358 | ||||||
|
| |||||||
285,491 | ||||||||
|
| |||||||
Total Consumer Staples |
| 788,574 | ||||||
|
| |||||||
ENERGY - 11.93% |
| |||||||
Energy Equipment & Services - 0.80% |
| |||||||
Halliburton Co. | 1,591,700 | 84,407 | ||||||
|
| |||||||
Oil & Gas - 11.13% | ||||||||
Apache Corp. | 894,721 | 79,451 | ||||||
BP PLC, ADR B | 4,300,940 | 199,995 | ||||||
Chevron Corp. | 593,040 | 71,141 | ||||||
Cobalt International Energy, Inc.A | 2,887,700 | 67,024 | ||||||
ConocoPhillips | 1,207,340 | 88,498 | ||||||
EOG Resources, Inc. | 23,306 | 4,158 | ||||||
Exxon Mobil Corp. | 262,526 | 23,528 | ||||||
Hess Corp. | 859,800 | 69,816 | ||||||
Kosmos Energy Ltd.A | 837,000 | 8,922 | ||||||
Marathon Oil Corp. | 798,600 | 28,159 | ||||||
Marathon Petroleum Corp. | 453,150 | 32,473 | ||||||
Murphy Oil Corp. | 301,500 | 18,186 | ||||||
Occidental Petroleum Corp. | 1,612,378 | 154,917 | ||||||
Phillips 66 | 1,275,020 | 82,150 | ||||||
Royal Dutch Shell PLC, Class B, ADR B,F | 1,339,000 | 93,087 | ||||||
Seadrill Ltd. | 1,018,200 | 47,468 | ||||||
Total S.A., ADR B | 1,685,800 | 103,137 | ||||||
|
| |||||||
1,172,110 | ||||||||
|
| |||||||
Total Energy |
| 1,256,517 | ||||||
|
| |||||||
FINANCIALS - 24.11% |
| |||||||
Banks - 4.49% | ||||||||
Bank of America Corp. | 16,942,590 | 236,518 | ||||||
Bank of New York Mellon Corp. | 1,495,057 | 47,543 | ||||||
PNC Financial Services Group, Inc. | 1,350,794 | 99,324 | ||||||
SunTrust Banks, Inc. | 2,672,300 | 89,896 | ||||||
|
| |||||||
473,281 | ||||||||
|
| |||||||
Diversified Financials - 12.84% |
| |||||||
American Express Co. | 1,212,500 | 99,183 | ||||||
BlackRock, Inc., Class A | 33,245 | 10,000 | ||||||
Blackstone Group LP C | 1,474,600 | 38,752 | ||||||
Capital One Financial Corp. | 1,932,600 | 132,712 | ||||||
Charles Schwab Corp. | 2,094,500 | 47,440 | ||||||
Citigroup, Inc. | 4,163,776 | 203,109 | ||||||
Franklin Resources, Inc. | 180,675 | 9,731 | ||||||
Goldman Sachs Group, Inc. | 132,175 | 21,262 | ||||||
JPMorgan Chase & Co. | 7,540,504 | 388,638 | ||||||
KKR & Co., LP C | 1,815,500 | 39,850 | ||||||
Moody’s Corp. | 71,320 | 5,039 | ||||||
Morgan Stanley | 817,800 | 23,495 | ||||||
Nasdaq OMX Group | 115,116 | 4,079 |
See accompanying notes
7
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
SLM Corp. | 1,778,600 | $ | 45,123 | |||||
State Street Corp. | 147,714 | 10,350 | ||||||
Wells Fargo & Co. | 6,406,571 | 273,497 | ||||||
|
| |||||||
1,352,260 | ||||||||
|
| |||||||
Insurance - 6.30% |
| |||||||
ACE Ltd. | 431,396 | 41,172 | ||||||
Allstate Corp. | 1,250,000 | 66,325 | ||||||
American International Group, Inc. | 2,248,600 | 116,140 | ||||||
Aon PLC F | 125,646 | 9,937 | ||||||
Berkshire Hathaway, Inc., Class B A | 612,575 | 70,495 | ||||||
Chubb Corp. | 76,500 | 7,044 | ||||||
Hartford Financial Services Group, Inc. | 1,335,750 | 45,015 | ||||||
Lincoln National Corp. | 1,018,400 | 46,246 | ||||||
MetLife, Inc. | 2,961,741 | 140,119 | ||||||
Prudential Financial, Inc. | 164,808 | 13,414 | ||||||
Travelers Cos., Inc. | 172,209 | 14,862 | ||||||
Unum Group | 1,697,500 | 53,879 | ||||||
XL Group PLC F | 1,285,300 | 39,292 | ||||||
|
| |||||||
663,940 | ||||||||
|
| |||||||
Real Estate - 0.48% |
| |||||||
Hatteras Financial Corp.D | 889,600 | 16,191 | ||||||
Two Harbors Investment Corp.D | 3,640,959 | 33,970 | ||||||
|
| |||||||
50,161 | ||||||||
|
| |||||||
Total Financials |
| 2,539,642 | ||||||
|
| |||||||
HEALTH CARE - 13.81% |
| |||||||
Health Care Equipment & Supplies - 1.95% |
| |||||||
Covidien PLC F | 545,280 | 34,958 | ||||||
Medtronic, Inc. | 2,324,029 | 133,400 | ||||||
St. Jude Medical, Inc. | 147,646 | 8,473 | ||||||
Thermo Fisher Scientific, Inc. | 134,120 | 13,114 | ||||||
Zimmer Holdings, Inc. | 179,900 | 15,736 | ||||||
|
| |||||||
205,681 | ||||||||
|
| |||||||
Health Care Providers & Services - 3.55% |
| |||||||
Aetna, Inc. | 267,400 | 16,766 | ||||||
Express Scripts Holding Co.A | 136,830 | 8,555 | ||||||
Humana, Inc. | 845,200 | 77,885 | ||||||
Quest Diagnostics, Inc. | 392,942 | 23,541 | ||||||
UnitedHealth Group, Inc. | 997,700 | 68,103 | ||||||
WellPoint, Inc. | 2,110,100 | 178,936 | ||||||
|
| |||||||
373,786 | ||||||||
|
| |||||||
Pharmaceuticals - 8.31% |
| |||||||
Abbott Laboratories | 327,589 | 11,973 | ||||||
AbbVie, Inc. | 44,029 | 2,133 | ||||||
AstraZeneca PLC, ADR B,F | 906,700 | 47,928 | ||||||
GlaxoSmithKline PLC, ADR B,F | 821,300 | 43,225 | ||||||
Johnson & Johnson | 2,059,371 | 190,719 | ||||||
Merck & Co., Inc. | 3,765,556 | 169,789 | ||||||
Novartis AG, ADR B | 793,300 | 61,520 | ||||||
Pfizer, Inc. | 7,110,607 | 218,154 | ||||||
Roche Holding AG, ADR B | 92,631 | 6,423 | ||||||
Sanofi, ADR B | 2,306,400 | 123,346 | ||||||
Zoetis, Inc. | 9,850 | 312 | ||||||
|
| |||||||
875,522 | ||||||||
|
| |||||||
Total Health Care |
| 1,454,989 | ||||||
|
| |||||||
INDUSTRIALS - 10.23% |
| |||||||
Aerospace & Defense - 3.26% |
| |||||||
Boeing Co. | 318,900 | 41,616 | ||||||
General Dynamics Corp. | 712,600 | 61,733 | ||||||
Lockheed Martin Corp. | 546,056 | 72,811 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Northrop Grumman Corp. | 277,287 | $ | 29,811 | |||||
Raytheon Co. | 1,401,600 | 115,450 | ||||||
United Technologies Corp. | 198,085 | 21,047 | ||||||
|
| |||||||
342,468 | ||||||||
|
| |||||||
Air Freight & Couriers - 0.68% |
| |||||||
FedEx Corp. | 414,100 | 54,247 | ||||||
United Parcel Service, Inc., Class B | 177,100 | 17,398 | ||||||
|
| |||||||
71,645 | ||||||||
|
| |||||||
Commercial Services & Supplies - 0.01% |
| |||||||
Dun & Bradstreet Corp. | 9,831 | 1,070 | ||||||
|
| |||||||
Electrical Equipment - 0.83% |
| |||||||
Emerson Electric Co. | 1,308,800 | 87,650 | ||||||
|
| |||||||
Industrial Conglomerates - 2.21% |
| |||||||
3M Co. | 164,383 | 20,688 | ||||||
General Electric Co. | 3,248,500 | 84,916 | ||||||
Honeywell International, Inc. | 1,335,368 | 115,816 | ||||||
Tyco International Ltd. | 298,690 | 10,917 | ||||||
|
| |||||||
232,337 | ||||||||
|
| |||||||
Machinery - 3.18% |
| |||||||
Caterpillar, Inc. | 552,400 | 46,048 | ||||||
Cummins, Inc. | 559,800 | 71,106 | ||||||
Danaher Corp. | 191,387 | 13,797 | ||||||
Illinois Tool Works, Inc. | 453,550 | 35,735 | ||||||
Joy Global, Inc. | 873,300 | 49,560 | ||||||
PACCAR, Inc. | 703,600 | 39,120 | ||||||
Pentair Ltd. | 66,968 | 4,493 | ||||||
Reliance Steel & Aluminum Co. | 495,200 | 36,293 | ||||||
Xylem, Inc. | 1,137,421 | 39,241 | ||||||
|
| |||||||
335,393 | ||||||||
|
| |||||||
Road & Rail - 0.06% |
| |||||||
Canadian National Railway Co. | 61,488 | 6,759 | ||||||
|
| |||||||
Total Industrials |
| 1,077,322 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 9.62% |
| |||||||
Communications Equipment - 1.04% |
| |||||||
Cisco Systems, Inc. | 822,700 | 18,511 | ||||||
Corning, Inc. | 5,337,900 | 91,224 | ||||||
|
| |||||||
109,735 | ||||||||
|
| |||||||
Computers & Peripherals - 3.21% |
| |||||||
Apple, Inc. | 136,130 | 71,108 | ||||||
Hewlett-Packard Co. | 4,211,069 | 102,624 | ||||||
International Business Machines Corp. | 336,415 | 60,289 | ||||||
Seagate Technology PLC F | 1,353,025 | 65,865 | ||||||
Western Digital Corp. | 542,600 | 37,781 | ||||||
|
| |||||||
337,667 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.31% |
| |||||||
Eaton Corp PLC F | 134,154 | 9,466 | ||||||
TE Connectivity Ltd. | 456,700 | 23,515 | ||||||
|
| |||||||
32,981 | ||||||||
|
| |||||||
IT Consulting & Services - 0.31% |
| |||||||
Accenture PLC, Class A F | 283,978 | 20,872 | ||||||
Fidelity National Information Services, Inc. | 59,020 | 2,877 | ||||||
Fiserv, Inc.A | 53,430 | 5,596 | ||||||
Western Union Co. | 188,754 | 3,213 | ||||||
|
| |||||||
32,558 | ||||||||
|
|
See accompanying notes
8
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Semiconductor Equipment & Products - 0.86% |
| |||||||
Applied Materials, Inc. | 1,919,700 | $ | 34,267 | |||||
Intel Corp. | 1,288,817 | 31,486 | ||||||
Texas Instruments, Inc. | 583,800 | 24,566 | ||||||
|
| |||||||
90,319 | ||||||||
|
| |||||||
Software - 3.89% |
| |||||||
Activision Blizzard, Inc. | 3,880,100 | 64,565 | ||||||
Check Point Software Technologies Ltd.A | 578,300 | 33,553 | ||||||
Microsoft Corp. | 6,152,000 | 217,474 | ||||||
Oracle Corp. | 2,832,784 | 94,898 | ||||||
|
| |||||||
410,490 | ||||||||
|
| |||||||
Total Information Technology |
| 1,013,750 | ||||||
|
| |||||||
MATERIALS - 0.98% |
| |||||||
Chemicals - 0.95% |
| |||||||
Air Products & Chemicals, Inc. | 38,278 | 4,173 | ||||||
Dow Chemical Co. | 1,261,500 | 49,791 | ||||||
EI du Pont de Nemours & Co. | 492,500 | 30,141 | ||||||
PPG Industries, Inc. | 82,908 | 15,137 | ||||||
Valspar Corp. | 14,390 | 1,007 | ||||||
|
| |||||||
100,249 | ||||||||
|
| |||||||
Containers & Packaging - 0.03% |
| |||||||
Crown Holdings, Inc.A | 72,870 | 3,177 | ||||||
|
| |||||||
Total Materials |
| 103,426 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 3.55% |
| |||||||
Diversified Telecommunication Services - 2.19% |
| |||||||
AT&T, Inc. | 3,879,012 | 140,421 | ||||||
Verizon Communications, Inc. | 1,796,376 | 90,735 | ||||||
|
| |||||||
231,156 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 1.36% |
| |||||||
China Mobile Ltd., ADR B | 535,100 | 27,836 | ||||||
Vodafone Group PLC, | 3,134,044 | 115,395 | ||||||
|
| |||||||
143,231 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 374,387 | ||||||
|
| |||||||
UTILITIES - 3.58% |
| |||||||
CenterPoint Energy, Inc. | 2,704,700 | 66,536 | ||||||
Duke Energy Corp. | 52,570 | 3,771 | ||||||
Edison International | 391,800 | 19,210 | ||||||
Entergy Corp. | 921,000 | 59,607 | ||||||
Exelon Corp. | 2,538,500 | 72,449 | ||||||
NRG Energy, Inc. | 1,546,300 | 44,116 | ||||||
PPL Corp. | 86,176 | 2,640 | ||||||
Public Service Enterprise Group, Inc. | 3,260,276 | 109,218 | ||||||
|
| |||||||
Total Utilities |
| 377,547 | ||||||
|
| |||||||
Total Common Stock (Cost $7,665,801) |
| 10,002,645 | ||||||
|
| |||||||
PREFERRED STOCK - 0.47% |
| |||||||
FINANCIALS - 0.13% |
| |||||||
Insurance - 0.05% | ||||||||
Allstate Corp., 1.00%, | 207,930 | 5,024 | ||||||
|
| |||||||
Real Estate Investment Trusts - 0.08% |
| |||||||
Public Storage, Inc., | 402,584 | 8,800 | ||||||
|
| |||||||
Total Financials |
| 13,824 | ||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
MANUFACTURING - 0.34% |
| |||||||
Aerospace/Defense - 0.01% |
| |||||||
United Technologies Corp., 7.50%, Due 8/1/2015 | 14,770 | $ | 935 | |||||
|
| |||||||
Auto Manufacturing - 0.33% |
| |||||||
General Motors Co., 4.75%, Due 12/1/2013 | 677,125 | 34,750 | ||||||
|
| |||||||
Total Manufacturing |
| 35,685 | ||||||
|
| |||||||
Total Preferred Stock (Cost $46,266) |
| 49,509 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS- 4.47% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select Class E | 45,000,000 | 45,000 | ||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 425,863,603 | 425,864 | ||||||
|
| |||||||
Total Short-Term Investments (Cost $470,864) |
| 470,864 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.89% (Cost $8,182,931) |
| 10,523,018 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.11% |
| 11,627 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 10,534,645 | |||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | ADR - American Depositary Receipt. |
C | Limited Partnership. |
D | REIT - Real Estate Investment Trust. |
E | The Fund is affiliated by having the same investment advisor. |
F | PLC - Public Limited Company. |
See accompanying notes
9
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2013
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
S&P 500 Mini E Index Futures | Long | 3,637 | December, 2013 | $ | 318,419 | $ | 8,852 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 318,419 | $ | 8,852 | |||||||||||||||||
|
|
|
|
See accompanying notes
10
American Beacon Large Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Assets: | ||||
Investments in unaffiliated securities, at fair value A | $ | 10,478,018 | ||
Investments in affiliated securities, at fair value B | 45,000 | |||
Deposit with brokers for futures contracts | 14,919 | |||
Receivable for investments sold | 1,316 | |||
Dividends and interest receivable | 8,180 | |||
Receivable for fund shares sold | 8,532 | |||
Receivable for tax reclaims | 412 | |||
Prepaid expenses | 221 | |||
|
| |||
Total assets | 10,556,598 | |||
|
| |||
Liabilities: | ||||
Payable for variation margin from open futures contracts | 1,746 | |||
Payable for fund shares redeemed | 9,302 | |||
Payable under excess expense reimbursement plan (Note 2) | 3 | |||
Management and investment advisory fees payable | 6,918 | |||
Administrative service and service fees payable | 3,235 | |||
Transfer agent fees payable | 87 | |||
Custody and fund accounting fees payable | 181 | |||
Professional fees payable | 62 | |||
Prospectus and shareholder reports fees payable | 192 | |||
Trustee fees payable | 158 | |||
Other liabilities | 69 | |||
|
| |||
Total liabilities | 21,953 | |||
|
| |||
Net assets | $ | 10,534,645 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | 8,681,713 | |||
Undistributed net investment income | 128,250 | |||
Accumulated net realized loss | (624,258 | ) | ||
Unrealized appreciation of investments | 2,340,088 | |||
Unrealized appreciation of futures contracts | 8,852 | |||
|
| |||
Net assets | $ | 10,534,645 | ||
|
| |||
Shares outstanding at no par value (unlimited shares authorized): | ||||
Institutional Class | 196,772,491 | |||
|
| |||
Y Class | 11,942,303 | |||
|
| |||
Investor Class | 149,317,750 | |||
|
| |||
Advisor Class | 4,964,117 | |||
|
| |||
Retirement Class | 162,163 | |||
|
| |||
A Class | 457,362 | |||
|
| |||
C Class | 201,420 | |||
|
| |||
AMR Class | 26,695,282 | |||
|
| |||
Net assets (not in thousands): | ||||
Institutional Class | $ | 5,428,755,279 | ||
|
| |||
Y Class | $ | 327,938,666 | ||
|
| |||
Investor Class | $ | 3,899,010,929 | ||
|
| |||
Advisor Class | $ | 128,528,036 | ||
|
| |||
Retirement Class | $ | 4,132,109 | ||
|
| |||
A Class | $ | 11,904,903 | ||
|
| |||
C Class | $ | 5,199,605 | ||
|
| |||
AMR Class | $ | 729,175,488 | ||
|
|
See accompanying notes
11
American Beacon Large Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 27.59 | ||
|
| |||
Y Class | $ | 27.46 | ||
|
| |||
Investor Class | $ | 26.11 | ||
|
| |||
Advisor Class | $ | 25.89 | ||
|
| |||
Retirement Class | $ | 25.48 | ||
|
| |||
A Class (offering price $27.62) | $ | 26.03 | ||
|
| |||
C Class | $ | 25.81 | ||
|
| |||
AMR Class | $ | 27.31 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 8,137,931 | ||
B Cost of investments in affiliated securities | $ | 45,000 |
See accompanying notes
12
American Beacon Large Cap Value Fund
Statement of Operations
For the year ended October 31, 2013 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 241,379 | ||
Dividend income from affiliated securities | 17 | |||
Interest income | 8 | |||
Other income | 2 | |||
|
| |||
Total investment income | 241,406 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 21,886 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 14,003 | |||
Y Class | 671 | |||
Investor Class | 10,989 | |||
Advisor Class | 346 | |||
Retirement Class | 11 | |||
A Class | 35 | |||
C Class | 14 | |||
AMR Class | 327 | |||
Transfer agent fees: | ||||
Institutional Class | 696 | |||
Y Class | 1 | |||
Investor Class | 193 | |||
Advisor Class | 7 | |||
Retirement Class | 1 | |||
A Class | 2 | |||
C Class | 1 | |||
AMR Class | 23 | |||
Custody and fund accounting fees | 998 | |||
Professional fees | 324 | |||
Registration fees and expenses | 202 | |||
Service fees (Note 2): | ||||
Y Class | 224 | |||
Investor Class | 13,189 | |||
Advisor Class | 289 | |||
Retirement Class | 9 | |||
A Class | 13 | |||
C Class | 5 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 289 | |||
Retirement Class | 18 | |||
A Class | 22 | |||
C Class | 36 | |||
Prospectus and shareholder report expenses | 251 | |||
Insurance fees | 58 | |||
Trustee fees | 629 | |||
Other expenses | 290 | |||
|
| |||
Total expenses | 66,052 | |||
|
| |||
Net fees recouped by Manager (Note 2) | 3 | |||
|
| |||
Net expenses | 66,055 | |||
|
| |||
Net investment income | 175,351 | |||
|
| |||
Realized and unrealized gain (loss) on investments: | ||||
Net realized gain (loss) from: | ||||
Investments | 568,419 | |||
Commission recapture (Note 3) | 225 | |||
Futures contracts | 44,888 | |||
Change in net unrealized appreciation or (depreciation) from: | ||||
Investments | 1,646,696 | |||
Futures contracts | 14,133 | |||
|
| |||
Net gain on investments | 2,274,361 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 2,449,712 | ||
|
| |||
A Foreign taxes | $ | 1,866 |
See accompanying notes
13
American Beacon Large Cap Value Fund
Statement of Changes in Net Assets (in thousands)
Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 175,351 | $ | 170,988 | ||||
Net realized gain from investments and futures contracts | 613,532 | 219,441 | ||||||
Change in net unrealized appreciation from investments and futures contracts | 1,660,829 | 830,976 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 2,449,712 | 1,221,405 | ||||||
|
|
|
| |||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (88,612 | ) | (82,469 | ) | ||||
Y Class | (2,997 | ) | (3,555 | ) | ||||
Investor Class | (64,236 | ) | (77,449 | ) | ||||
Advisor Class | (1,759 | ) | (2,549 | ) | ||||
Retirement Class | (57 | ) | (18 | ) | ||||
A Class | (126 | ) | (88 | ) | ||||
C Class | (35 | ) | (23 | ) | ||||
AMR Class | (14,045 | ) | (14,457 | ) | ||||
|
|
|
| |||||
Net distributions to shareholders | (171,867 | ) | (180,608 | ) | ||||
|
|
|
| |||||
Net (decrease) in net assets from capital share transactions | (98,431 | ) | (667,940 | ) | ||||
|
|
|
| |||||
Net increase in net assets | 2,179,414 | 372,857 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 8,355,231 | 7,982,374 | ||||||
|
|
|
| |||||
End of Period * | $ | 10,534,645 | $ | 8,355,231 | ||||
|
|
|
| |||||
* Includes undistributed net investment income of | $ | 128,250 | $ | 125,361 | ||||
|
|
|
|
See accompanying notes
14
American Beacon Large Cap Value FundSM
October 31, 2013
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Large Cap Value Fund (the “Fund”), a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Fund believes the adoption of these ASUs will not have a material impact on its financial statement disclosures.
15
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Net Amounts Retained by Manager | |||||||||||
0.23 | % | $ | 21,886 | $ | 17,215 | $ | 4,671 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund, 0.40% of the average daily net assets of the A and C Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund.
Distribution Plans
The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of its average daily net assets of the Select Funds. During the year ended October 31, 2013, the Manager earned fees from the Select Funds totaling $46,532 on the Fund’s direct investment in the Select Funds.
16
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended October 31, 2013, the Fund participated as a lender by loaning, on average, $7,157,824 for 4 days at an average rate of 0.76% with interest charges of $578. This amount is included as interest income on the Statement of Operations.
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. During the year ended October 31, 2013, the Manager recouped $2,821 of excess carryover expenses expiring in 2014 from the C Class. The carryover of excess expenses potentially reimbursable are $1,444 and $91, expiring in 2014 and 2015, respectively.
Sales Commissions
The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $10,699 from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $688 in CDSC fees were collected for the Fund.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”), for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
17
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
Valuation Inputs
Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock* | $ | 10,002,645 | $ | — | $ | — | $ | 10,002,645 | ||||||||
Preferred Stock* | 49,509 | — | — | 49,509 | ||||||||||||
Short-Term Investments - Money Markets | 470,864 | — | — | 470,864 | ||||||||||||
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| |||||||||
Total Investments in Securities | $ | 10,523,018 | $ | — | $ | — | $ | 10,523,018 | ||||||||
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| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 8,852 | $ | — | $ | — | $ | 8,852 |
* | Refer to the Schedule of Investments for industry information. |
18
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
19
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
4. Securities and Other Investments
Real Estate Investment Trusts
The Fund may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Fund re-characterizes distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.
Other Investment Company Securities and Other Exchange Traded Products
The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
For the six months ended October 31, 2013, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
20
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||||||||
For the Quarter Ended | April 30, 2013 | October 31, 2013 | ||||||
Large Cap Value Fund | 185 | 191 |
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of derivative financial instruments as of October 31, 2013:
Statement of Assets and Liabilities | Derivatives | Fair Value | ||||||
Unrealized appreciation of futures contracts | Equity Contracts | $ | 8,852 |
The effect of derivative financial instruments during the year ended October 31, 2013:
Statement of Operations | Derivatives | Total | ||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 44,888 | |||||
Change in net unrealized appreciation or (depreciation) from futures contracts | Equity Contracts | 14,133 |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. Principal Risks
In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.
If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case
21
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
7. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid were as follows (in thousands):
Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 88,612 | $ | 82,469 | ||||
Y Class | 2,997 | 3,555 | ||||||
Investor Class | 64,236 | 77,449 | ||||||
Advisor Class | 1,759 | 2,549 | ||||||
Retirement Class | 57 | 18 | ||||||
A Class | 126 | 88 | ||||||
C Class | 35 | 23 | ||||||
AMR Class | 14,045 | 14,457 | ||||||
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Total distributions paid | $ | 171,867 | $ | 180,608 | ||||
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* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
22
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes | $ | 8,368,666 | ||
Unrealized appreciation | 2,458,818 | |||
Unrealized depreciation | (304,466 | ) | ||
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Net unrealized appreciation or (depreciation) | 2,154,352 | |||
Undistributed ordinary income | 124,792 | |||
Accumulated long-term gain or (loss) | (435,082 | ) | ||
Other temporary differences | 8,870 | |||
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| |||
Distributable earnings or (deficits) | $ | 1,852,932 | ||
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Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains or losses on certain derivative instruments and reclassifications of income from real estate investment securities.
Due to inherent differences in the recognition of income, expenses and realized gains or losses under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from Section 732 basis adjustments that have been reclassified as of October 31, 2013 (in thousands):
Paid-in-capital | $ | 8 | ||
Undistributed net investment income (loss) | (595 | ) | ||
Accumulated net realized gain (loss) | 587 | |||
Unrealized appreciation or (depreciation) of investments and futures contracts | — |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
At October 31, 2013 the capital loss carry forward positions that may be applied against realized net taxable gains in each succeeding year or until the expiration date, whichever occurs first, prior to the RIC MOD provisions are $383,787 and $42,443 expiring in 2017 and 2018 respectively. The Fund utilized $527,690 of net capital loss carryovers for the year ended October 31, 2013 (in thousands).
23
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013, were $3,020,985 and $3,038,986, respectively (in thousands).
A summary of the Fund’s direct transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):
Affiliate | October 31, 2012 Shares/Fair Value | Purchases | Sales | October 31, 2013 Shares/Fair Value | Dividend Income | |||||||||||||||
USG Select Fund | $ | 35,000 | $ | 15,000 | $ | 5,000 | $ | 45,000 | $ | 17 |
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):
For the Year Ended October 31, 2013
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 40,124 | $ | 983,383 | 9,020 | $ | 216,172 | 29,777 | $ | 691,666 | 1,229 | $ | 28,327 | ||||||||||||||||||||
Reinvestment of dividends | 3,850 | 84,356 | 131 | 2,860 | 2,959 | 61,550 | 83 | 1,708 | ||||||||||||||||||||||||
Shares redeemed | (28,594 | ) | (694,960 | ) | (1,332 | ) | (33,146 | ) | (61,332 | ) | (1,380,588 | ) | (1,466 | ) | (33,539 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 15,380 | $ | 372,779 | 7,819 | $ | 185,886 | (28,596 | ) | $ | (627,372 | ) | (154 | ) | $ | (3,504 | ) | ||||||||||||||||
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Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 97 | $ | 2,175 | 225 | $ | 5,373 | 104 | $ | 2,465 | 5,766 | $ | 143,403 | ||||||||||||||||||||
Reinvestment of dividends | 3 | 57 | 5 | 115 | 1 | 31 | 649 | 14,045 | ||||||||||||||||||||||||
Shares redeemed | (49 | ) | (1,169 | ) | (78 | ) | (1,876 | ) | (25 | ) | (602 | ) | (7,928 | ) | (190,237 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 51 | $ | 1,063 | 152 | $ | 3,612 | 80 | $ | 1,894 | (1,513 | ) | $ | (32,789 | ) | ||||||||||||||||||
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Totals | ||||||||
Shares | Amount | |||||||
Shares sold | 86,342 | $ | 2,072,964 | |||||
Reinvestment of dividends | 7,681 | 164,722 | ||||||
Shares redeemed | (100,804 | ) | (2,336,117 | ) | ||||
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Net increase (decrease) in shares outstanding | (6,781 | ) | $ | (98,431 | ) | |||
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For the Year Ended October 31, 2012
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 38,505 | $ | 784,522 | 2,764 | $ | 57,155 | 26,251 | $ | 506,078 | 1,041 | $ | 19,728 | ||||||||||||||||||||
Reinvestment of dividends | 4,077 | 75,537 | 192 | 3,547 | 4,246 | 74,766 | 143 | 2,499 | ||||||||||||||||||||||||
Shares redeemed | (39,268 | ) | (795,028 | ) | (5,966 | ) | (126,980 | ) | (61,686 | ) | (1,177,109 | ) | (3,341 | ) | (65,045 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 3,314 | $ | 65,031 | (3,010 | ) | $ | (66,278 | ) | (31,189 | ) | $ | (596,265 | ) | (2,157 | ) | $ | (42,818 | ) | ||||||||||||||
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24
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 104 | $ | 1,982 | 171 | $ | 3,306 | 63 | $ | 1,219 | 11,216 | $ | 224,730 | ||||||||||||||||||||
Reinvestment of dividends | 1 | 18 | 4 | 79 | 1 | 20 | 789 | 14,457 | ||||||||||||||||||||||||
Shares redeemed | (51 | ) | (943 | ) | (89 | ) | (1,684 | ) | (16 | ) | (317 | ) | (14,041 | ) | (270,477 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 54 | $ | 1,057 | 86 | $ | 1,701 | 48 | $ | 922 | (2,036 | ) | $ | (31,290 | ) | ||||||||||||||||||
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Totals | ||||||||
Shares | Amount | |||||||
Shares sold | 80,115 | $ | 1,598,720 | |||||
Reinvestment of dividends | 9,453 | 170,923 | ||||||
Shares redeemed | (124,458 | ) | (2,437,583 | ) | ||||
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Net increase (decrease) in shares outstanding | (34,890 | ) | $ | (667,940 | ) | |||
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25
American Beacon Large Cap Value FundSM
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 21.58 | $ | 18.99 | $ | 18.56 | $ | 16.32 | $ | 15.01 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.50 | 0.45 | 0.39 | 0.32 | 0.35 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 6.00 | 2.60 | 0.30 | 2.22 | 1.40 | |||||||||||||||
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Total income (loss) from investment operations | 6.50 | 3.05 | 0.69 | 2.54 | 1.75 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.49 | ) | (0.46 | ) | (0.26 | ) | (0.30 | ) | (0.44 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.49 | ) | (0.46 | ) | (0.26 | ) | (0.30 | ) | (0.44 | ) | ||||||||||
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Net asset value, end of period | $ | 27.59 | $ | 21.58 | $ | 18.99 | $ | 18.56 | $ | 16.32 | ||||||||||
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Total return B | 30.70 | % | 16.48 | % | 3.69 | % | 15.68 | % | 12.41 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,428,755 | $ | 3,914,173 | $ | 3,380,918 | $ | 3,366,011 | $ | 2,221,162 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before reimbursements | 0.58 | % | 0.59 | % | 0.58 | % | 0.59 | % | 0.61 | % | ||||||||||
Expenses, net of reimbursements | 0.58 | % | 0.59 | % | 0.58 | % | 0.59 | % | 0.61 | % | ||||||||||
Net investment income (loss), before reimbursements | 1.99 | % | 2.23 | % | 1.96 | % | 1.73 | % | 2.36 | % | ||||||||||
Net investment income, net of reimbursements | 1.99 | % | 2.23 | % | 1.96 | % | 1.73 | % | 2.36 | % | ||||||||||
Portfolio turnover rate | 34 | % | 30 | % | 90 | % | 28 | % | 27 | % |
A | On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
26
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | |||||||||||||||||||||||||||||||||||||
Year Ended October 31, | August 3 to Oct. 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2009 | |||||||||||||||||||||||||||||
$ | 21.47 | $ | 18.92 | $ | 18.49 | $ | 16.32 | $ | 15.59 | $ | 20.43 | $ | 17.99 | $ | 17.61 | $ | 15.51 | $ | 14.29 | |||||||||||||||||||
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0.40 | 0.53 | 0.37 | 0.29 | 0.06 | 0.39 | 0.36 | 0.30 | 0.23 | 0.28 | |||||||||||||||||||||||||||||
6.05 | 2.50 | 0.30 | 2.22 | 0.67 | 5.69 | 2.47 | 0.29 | 2.12 | 1.34 | |||||||||||||||||||||||||||||
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6.45 | 3.03 | 0.67 | 2.51 | 0.73 | 6.08 | 2.83 | 0.59 | 2.35 | 1.62 | |||||||||||||||||||||||||||||
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(0.46 | ) | (0.48 | ) | (0.24 | ) | (0.34 | ) | — | (0.40 | ) | (0.39 | ) | (0.21 | ) | (0.25 | ) | (0.40 | ) | ||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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(0.46 | ) | (0.48 | ) | (0.24 | ) | (0.34 | ) | — | (0.40 | ) | (0.39 | ) | (0.21 | ) | (0.25 | ) | (0.40 | ) | ||||||||||||||||||||
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$ | 27.46 | $ | 21.47 | $ | 18.92 | $ | 18.49 | $ | 16.32 | $ | 26.11 | $ | 20.43 | $ | 17.99 | $ | 17.61 | $ | 15.51 | |||||||||||||||||||
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30.59 | % | 16.43 | % | 3.58 | % | 15.50 | % | 4.68 | %C | 30.26 | % | 16.05 | % | 3.30 | % | 15.27 | % | 11.99 | % | |||||||||||||||||||
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$ | 327,939 | $ | 88,509 | $ | 134,968 | $ | 2,123 | $ | 1 | $ | 3,899,011 | $ | 3,635,333 | $ | 3,761,691 | $ | 4,140,584 | $ | 3,798,632 | |||||||||||||||||||
0.66 | % | 0.69 | % | 0.69 | % | 0.70 | % | 0.68 | %D | 0.93 | % | 0.96 | % | 0.95 | % | 0.96 | % | 0.93 | % | |||||||||||||||||||
0.66 | % | 0.69 | % | 0.69 | % | 0.70 | % | 0.68 | %D | 0.93 | % | 0.96 | % | 0.95 | % | 0.96 | % | 0.93 | % | |||||||||||||||||||
1.78 | % | 2.12 | % | 1.88 | % | 1.51 | % | 1.58 | %D | 1.67 | % | 1.89 | % | 1.59 | % | 1.36 | % |
|
2.05 |
% | ||||||||||||||||||
1.78 | % | 2.12 | % | 1.88 | % | 1.51 | % | 1.58 | %D | 1.67 | % | 1.89 | % | 1.59 | % | 1.36 | % | 2.05 | % | |||||||||||||||||||
34 | % | 30 | % | 90 | % | 28 | % | 27 | %E | 34 | % | 30 | % | 90 | % | 28 | % | 27 | % |
27
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Advisor Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 20.25 | $ | 17.83 | $ | 17.47 | $ | 15.39 | $ | 14.19 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.35 | 0.31 | 0.27 | 0.21 | 0.26 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 5.65 | 2.48 | 0.28 | 2.10 | 1.32 | |||||||||||||||
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Total income (loss) from investment operations | 6.00 | 2.79 | 0.55 | 2.31 | 1.58 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.36 | ) | (0.37 | ) | (0.19 | ) | (0.23 | ) | (0.38 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.36 | ) | (0.37 | ) | (0.19 | ) | (0.23 | ) | (0.38 | ) | ||||||||||
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Net asset value, end of period | $ | 25.89 | $ | 20.25 | $ | 17.83 | $ | 17.47 | $ | 15.39 | ||||||||||
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Total return B | 30.05 | % | 15.96 | % | 3.11 | % | 15.14 | % | 11.81 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 128,528 | $ | 103,629 | $ | 129,739 | $ | 128,080 | $ | 114,945 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before recoupments | 1.07 | % | 1.08 | % | 1.08 | % | 1.10 | % | 1.12 | % | ||||||||||
Expenses, net of recoupments | 1.07 | % | 1.08 | % | 1.08 | % | 1.10 | % | 1.10 | % | ||||||||||
Net investment income (loss), before recoupements | 1.52 | % | 1.78 | % | 1.46 | % | 1.23 | % | 1.84 | % | ||||||||||
Net investment income, net of recoupments | 1.52 | % | 1.78 | % | 1.46 | % | 1.23 | % | 1.86 | % | ||||||||||
Portfolio turnover rate | 34 | % | 30 | % | 90 | % | 28 | % | 27 | % |
A | On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
28
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Retirement Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | May 1 to Oct. 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 20.07 | $ | 17.74 | $ | 17.32 | $ | 15.36 | $ | 12.66 | $ | 20.41 | $ | 18.01 | $ | 17.61 | $ | 16.93 | $ | 20.29 | $ | 17.95 | $ | 17.58 | $ | 16.17 | |||||||||||||||||||||||||
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0.35 | 0.28 | 0.20 | 0.18 | 0.08 | 0.38 | 0.36 | 0.24 | 0.03 | 0.23 | 0.22 | 0.10 | (0.01 | ) | |||||||||||||||||||||||||||||||||||||
5.50 | 2.42 | 0.30 | 2.07 | 2.62 | 5.65 | 2.44 | 0.31 | 0.65 | 5.58 | 2.42 | 0.32 | 1.42 | ||||||||||||||||||||||||||||||||||||||
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5.85 | 2.70 | 0.50 | 2.25 | 2.70 | 6.03 | 2.80 | 0.55 | 0.68 | 5.81 | 2.64 | 0.42 | 1.41 | ||||||||||||||||||||||||||||||||||||||
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(0.44 | ) | (0.37 | ) | (0.08 | ) | (0.29 | ) | — | (0.41 | ) | (0.40 | ) | (0.15 | ) | — | (0.29 | ) | (0.30 | ) | (0.05 | ) | — | ||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
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(0.44 | ) | (0.37 | ) | (0.08 | ) | (0.29 | ) | — | (0.41 | ) | (0.40 | ) | (0.15 | ) | — | (0.29 | ) | (0.30 | ) | (0.05 | ) | — | ||||||||||||||||||||||||||||
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$ | 25.48 | $ | 20.07 | $ | 17.74 | $ | 17.32 | $ | 15.36 | $ | 26.03 | $ | 20.41 | $ | 18.01 | $ | 17.61 | $ | 25.81 | $ | 20.29 | $ | 17.95 | $ | 17.58 | |||||||||||||||||||||||||
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29.68 | % | 15.57 | % | 2.86 | % | 14.78 | % | 21.33 | %C | 30.03 | % | 15.91 | % | 3.12 | % | 4.02 | %C | 29.00 | % | 14.97 | % | 2.36 | % | 8.72 | %C | |||||||||||||||||||||||||
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$ | 4,132 | $ | 2,230 | $ | 1,019 | $ | 2 | $ | 1 | $ | 11,905 | $ | 6,222 | $ | 3,942 | $ | 814 | $ | 5,200 | $ | 2,468 | $ | 1,329 | $ | 38 | |||||||||||||||||||||||||
1.33 | % | 1.42 | % | 1.39 | % | 1.37 | % | 1.37 | %D | 1.08 | % | 1.12 | % | 1.16 | % | 1.06 | %D | 1.84 | % | 1.88 | % | 2.54 | % | 2.14 | %D | |||||||||||||||||||||||||
1.33 | % | 1.42 | % | 1.39 | % | 1.37 | % | 1.37 | %D | 1.08 | % | 1.12 | % | 1.16 | % | 1.06 | %D | 1.92 | % | 1.87 | % | 1.84 | % | 1.87 | %D | |||||||||||||||||||||||||
1.18 | % | 1.19 | % | 1.06 | % | 0.95 | % | 1.15 | %D | 1.44 | % | 1.66 | % | 1.37 | % | 1.09 | %D | 0.68 | % | 0.89 | % | (0.01 | )% | (0.76 | )%D | |||||||||||||||||||||||||
1.18 | % | 1.19 | % | 1.06 | % | 0.95 | % | 1.15 | %D | 1.44 | % | 1.66 | % | 1.37 | % | 1.09 | %D | 0.60 | % | 0.89 | % | 0.68 | % | (0.50 | )%D | |||||||||||||||||||||||||
34 | % | 30 | % | 90 | % | 28 | % | 27 | %E | 34 | % | 30 | % | 90 | % | 28 | %F | 34 | % | 30 | % | 90 | % | 28 | %F |
29
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
AMR Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 21.36 | $ | 18.81 | $ | 18.37 | $ | 16.14 | $ | 14.88 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.57 | 0.52 | 0.41 | 0.34 | 0.37 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 5.92 | 2.54 | 0.32 | 2.22 | 1.38 | |||||||||||||||
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Total income (loss) from investment operations | 6.49 | 3.06 | 0.73 | 2.56 | 1.75 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.54 | ) | (0.51 | ) | (0.29 | ) | (0.33 | ) | (0.49 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.54 | ) | (0.51 | ) | (0.29 | ) | (0.33 | ) | (0.49 | ) | ||||||||||
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Net asset value, end of period | $ | 27.31 | $ | 21.36 | $ | 18.81 | $ | 18.37 | $ | 16.14 | ||||||||||
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Total return B | 31.05 | % | 16.75 | % | 3.94 | % | 16.04 | % | 12.59 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 729,175 | $ | 602,667 | $ | 568,768 | $ | 558,089 | $ | 520,799 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before reimbursements | 0.32 | % | 0.33 | % | 0.33 | % | 0.34 | % | 0.36 | % | ||||||||||
Expenses, net of reimbursements | 0.32 | % | 0.33 | % | 0.33 | % | 0.34 | % | 0.36 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.26 | % | 2.51 | % | 2.21 | % | 1.98 | % | 2.62 | % | ||||||||||
Net investment income, net of reimbursements | 2.26 | % | 2.51 | % | 2.21 | % | 1.98 | % | 2.62 | % | ||||||||||
Portfolio turnover rate | 34 | % | 30 | % | 90 | % | 28 | % | 27 | % |
A | On December 1, 2010, MFS Institutional Advisors, Inc. assumed management of the Large Cap Value Fund’s assets previously managed by Metropolitan West Capital Management, LLC. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
30
American Beacon Funds
Privacy Policy & Federal Tax Information
October 31, 2013 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2013.
The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends Received Deduction | 77.06 | % | ||
Qualified Dividend Income | 100.00 | % |
Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.
31
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; |
• | a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC; |
• | a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; |
• | a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers; |
• | a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts; |
• | a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm; |
• | an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
• | confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds; |
• | a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; |
• | a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; |
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; |
• | a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations; |
• | a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds; |
• | a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers; |
• | a description of any actual or potential conflicts of interest anticipated in managing Fund assets; |
• | a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; |
• | a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf; |
• | a description of trade allocation procedures among accounts managed by the firm; |
• | a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions; |
• | a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds; |
32
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
• | a certification by the firm regarding the reasonable design of its compliance program; |
• | a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review; |
• | confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds; |
• | a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt; |
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; |
• | a description of the firm’s affiliation with any broker-dealer; |
• | a discussion of any anticipated change in the firm’s controlling persons; and |
• | verification of the firm’s insurance coverage with regards to the services provided to the Funds. |
In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:
• | a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; |
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; |
• | a comparison of advisory fee rates and expense ratios for comparable mutual funds; |
• | a profit/loss analysis of the Manager; |
• | an analysis of any material complaints received from Fund shareholders; |
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; |
• | a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds; |
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; |
• | a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds; |
• | a description of the Manager’s securities lending practices and the fees received from such practices; |
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; |
• | a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund; |
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated; and |
• | confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt. |
In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.
The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
33
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement
In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
34
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.
In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.
In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.
Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.
The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.
Additional Considerations and Conclusions with Respect to the American Beacon Large Cap Value Fund
In considering the renewal of the Management Agreement for the American Beacon Large Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Large Cap Value Fund outperformed the Lipper performance universe median for the one-, three-, five-, and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and higher than the median of its Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, LLC (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”), Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), and Massachusetts Financial Services Company (“MFS”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median for the three-, five- and ten-year periods ended March 31, 2013, but underperformed for the one-year period; (2) Brandywine outperformed the Lipper performance universe median for the one-, three- and ten-year periods ended March 31, 2013, but underperformed for the five-year period; (3) Hotchkis outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (4) MFS outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (5) the Manager’s explanation that Brandywine’s underperformance for some of the periods considered was due in part to underperformance in 2008, Brandywine’s defensive position in 2009, and a focus on high quality securities and large capitalization companies in 2011, when these types of investments generally underperformed; (6) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (7) the Manager’s recommendation to continue to retain each subadvisor.
35
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Large Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Large Cap Value Fund.
36
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gerard J. Arpey** (55) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Alan D. Feld*** (76) | 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); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (69) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (52) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (59) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (71) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (70) | 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); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). |
37
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Barbara J. McKenna, CFA (50) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (67) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012) | ||
Paul J. Zucconi, CPA (73) | 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) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
Gene L. Needles, Jr. (58) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (54) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 - present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present). | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (47) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (43) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (59) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (52) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present). | ||
Terri L. McKinney (49) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (38) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). |
38
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Samuel J. Silver (50) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (42) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc. | ||
John J. Okray (39) | Asst. Secretary since 2010 | Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (56) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, 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. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager. |
*** | Mr. Feld is deemed to be an “interested person” of the 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-advisors. |
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Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
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By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
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By Telephone: Institutional, Y, Investor, Advisor, Retirement Classes Call (800) 658-5811 AMR ClassSM Call (800) 345-2345 | By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, DC 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month. | Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Large Cap Value Fund is a service mark of American Beacon Advisors, Inc.
AR 10/13
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
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Back Cover |
The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | October 31, 2013 |
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The past year has been a very strong period for small-cap stocks. Even though the larger-cap issues in the S&P 500 Index returned 27.18% in the 12 months under review, the Russell 2000 Index, which represents small-cap companies, beat that figure with room to spare, increasing by an impressive 36.28%.
Since much investing research suggests that, over the long term, small-cap stocks tend to outperform larger-cap stocks, it might be assumed that the past 12 months are the natural order of things. But recent history shows this isn’t the case. In fact, as recently as 2011, while the S&P 500 Index was nudging upward at 2.11%, the Russell 2000 Index was actually losing ground, declining in value by 4.18%. |
That illustrates the fact that smaller stocks tend to be more volatile than larger ones. That’s just one reason that we at American Beacon Advisors believe in actively managed funds, where the judgment of seasoned investment professionals can be put to work for your portfolio. That sort of judgment can be even more critical in the realm of small-cap stocks.
• | For the 12 months ended October 31, 2013, the American Beacon Small Cap Value Fund (Investor Class) returned 38.11%. |
The Fund boasts six highly regarded sub-advisors, chosen to complement each other’s strategies. That manager diversification is also another factor helping mitigate the inherent volatility of the small-cap arena.
Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards,
Gene L. Needles, Jr.
President
American Beacon Funds
1
Domestic Equity Market Overview
October 31, 2013 (Unaudited)
U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.
The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.
The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.
Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.
This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.
Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.
For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.
2
American Beacon Small Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Small Cap Value Fund (the “Fund”) returned 38.11% for the twelve months ended October 31, 2013, outperforming the Russell 2000® Value Index (the “Index”) return of 32.83% and the Lipper Small-Cap Value Funds Index return of 33.56% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/2013
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional Class (1,8) | 38.59 | % | 19.19 | % | 10.05 | % | $ | 26,060 | ||||||||
Y Class (1,2,8) | 38.45 | % | 19.04 | % | 9.98 | % | 25,894 | |||||||||
Investor Class (1,8) | 38.11 | % | 18.77 | % | 9.72 | % | 25,285 | |||||||||
Advisor Class (1,3,8) | 37.86 | % | 18.60 | % | 9.50 | % | 24,773 | |||||||||
Retirement Class (1,4,8) | 37.47 | % | 18.31 | % | 9.36 | % | 24,468 | |||||||||
A Class with sales | 29.91 | % | 17.21 | % | 9.00 | % | 23,680 | |||||||||
A Class without sales | 37.83 | % | 18.62 | % | 9.65 | % | 25,120 | |||||||||
C Class with sales | 35.88 | % | 18.03 | % | 9.38 | % | 24,510 | |||||||||
C Class without sales | 36.88 | % | 18.03 | % | 9.38 | % | 24,510 | |||||||||
AMR Class (1,8) | 38.90 | % | 19.49 | % | 10.33 | % | 26,727 | |||||||||
Lipper Small-Cap Value Funds Index (7) | 33.56 | % | 17.17 | % | 9.47 | % | 24,722 | |||||||||
Russell 2000 Value Index (7) | 32.83 | % | 14.84 | % | 8.78 | % | 23,207 |
1. | Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
3. | A portion of the fees charged to the Advisor Class of the Fund was waived through 2004. Performance prior to waiving fees was lower than the actual returns shown for periods through 2004. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Advisor Class from 10/31/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03. |
5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%. |
6. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
7. | Russell 2000 Value Index is a registered trademark of Frank Russell Company. The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Value Index and Russell 2000 Index are registered trademarks of the Frank Russell Company. The Lipper Small-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.92%, 1.01%, 1.28%, 1.42%, 1.73%, 1.54%, 2.31%, and 0.66%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
3
American Beacon Small Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Fund outperformed the Index mostly through stock selection, although sector allocation also added significant value relative to the Index.
Most of the Fund’s excess performance was attributed to holdings in the Financials sector which contributed approximately 215 basis points (2.15%) to relative performance. In the Financials sector, E*Trade Financial (up 102.8%) and Avis Budget Group (up 87.5%) were the largest contributors. Not owning Armour Residential REIT, which was down 32.9% in the Index, also positively impacted performance. Holdings in the Consumer Discretionary, Health Care and Materials sectors, also added relative value. In the Consumer Discretionary sector, Brunswick (up 91.6%) and Quiksilver (up 170.7%) were the largest contributors. Health Management Associates (up 101.5%), HealthSouth (up 61.2%) and Covance (up 83.2%) added the most value to performance in the Health Care sector. In the Materials sector, US Silicia Holdings (up 196.0%) and PolyOne (up 60.3%) contributed most to the Fund’s returns. Not owning Hecla Mining, which was down 52.2% in the Index, also added relative value. Poor stock selection in the Information Technology sector detracted value relative to the Index. Ebix (down 38.7%) was the largest detractor in the Information Technology sector. Not owning MEMC Electronic Materials, also hurt performance.
An overweight in Industrials, one of the better performing sectors in the Index, added relative value through sector allocation. Underweight positions in the Utilities and Financials sectors also contributed to the Fund’s returns.
The sub-advisors continue to focus on uncovering investment opportunities through stock selection that should benefit the Fund’s performance over the longer term.
Top Ten Holdings (% Net Assets)
Oshkosh Corp. | 0.9 | |||||||
LifePoint Hospitals, Inc. | 0.8 | |||||||
First Horizon National Corp. | 0.8 | |||||||
HealthSouth Corp. | 0.7 | |||||||
Endurance Specialty Holdings Ltd. | 0.7 | |||||||
Brunswick Corp. | 0.7 | |||||||
Aspen Insurance Holdings Ltd. | 0.6 | |||||||
E*Trade Financial Corp. | 0.6 | |||||||
Rent-A-Center, Inc. | 0.6 | |||||||
Con-way, Inc. | 0.6 | |||||||
Total Fund Holdings | 511 |
Sector Allocation (% Equities)
Financials | 28.9 | |||
Industrials | 21.1 | |||
Consumer Discretionary | 13.7 | |||
Information Technology | 12.8 | |||
Materials | 6.6 | |||
Health Care | 6.6 | |||
Energy | 6.2 | |||
Utilities | 2.9 | |||
Consumer Staples | 0.7 | |||
Telecommunication Services | 0.4 |
4
American Beacon Small Cap Value FundSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expense
The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,179.14 | $ | 4.45 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.12 | $ | 4.13 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,178.39 | $ | 4.94 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.67 | $ | 4.58 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,176.95 | $ | 6.42 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.31 | $ | 5.96 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,176.01 | $ | 7.13 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.65 | $ | 6.61 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,173.73 | $ | 8.71 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.19 | $ | 8.08 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,175.72 | $ | 7.24 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.55 | $ | 6.72 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,180.09 | $ | 3.02 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.43 | $ | 2.80 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,171.28 | $ | 11.33 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,014.77 | $ | 10.51 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.81%, 0.90%, 1.17%, 1.30%, 1.59%, 1.32%, 2.07% and 0.55% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
5
American Beacon Small Cap Value FundSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Small Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Small Cap Value Fund (one of the funds constituting the American Beacon Funds) (the “Funds”), as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Small Cap Value Fund at October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
December 30, 2013
6
American Beacon Small Cap Value FundSM
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCK - 92.94% |
| |||||||
CONSUMER DISCRETIONARY - 12.74% |
| |||||||
Auto Components - 1.27% |
| |||||||
American Axle & Manufacturing Holdings, Inc.A | 1,646,109 | $ | 30,634 | |||||
Dana Holding Corp. | 1,132,340 | 22,194 | ||||||
Standard Motor Products, Inc. | 68,887 | 2,491 | ||||||
Tenneco, Inc.A | 183,200 | 9,722 | ||||||
|
| |||||||
65,041 | ||||||||
|
| |||||||
Automobiles - 0.83% |
| |||||||
Avis Budget Group, Inc.A | 932,400 | 29,212 | ||||||
Hyster-Yale Materials Handling, Inc. | 54,452 | 4,271 | ||||||
Thor Industries, Inc. | 157,570 | 9,141 | ||||||
|
| |||||||
42,624 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.69% |
| |||||||
Brinker International, Inc. | 133,295 | 5,921 | ||||||
CEC Entertainment, Inc. | 39,235 | 1,819 | ||||||
International Speedway Corp., Class A | 79,434 | 2,598 | ||||||
Lakes Entertainment, Inc.A | 150,800 | 632 | ||||||
Orient-Express Hotels Ltd., | 581,940 | 7,746 | ||||||
Ruby Tuesday, Inc.A | 500,100 | 2,966 | ||||||
Speedway Motorsports, Inc. | 103,500 | 1,890 | ||||||
The Cheesecake Factory, Inc. | 250,250 | 11,823 | ||||||
|
| |||||||
35,395 | ||||||||
|
| |||||||
Household Durables - 1.48% |
| |||||||
Cavco Industries, Inc.A | 59,779 | 3,501 | ||||||
Ethan Allen Interiors, Inc. | 290,070 | 7,727 | ||||||
Helen of Troy Ltd.A | 185,189 | 8,652 | ||||||
InvenSense, Inc.A B | 499,230 | 8,432 | ||||||
Knoll, Inc. | 336,880 | 5,532 | ||||||
M/I Homes, Inc.A | 305,676 | 6,257 | ||||||
Matthews International Corp., Class A | 38,880 | 1,579 | ||||||
Standard Pacific Corp.A | 1,085,420 | 8,607 | ||||||
Whirlpool Corp. | 174,200 | 25,435 | ||||||
|
| |||||||
75,722 | ||||||||
|
| |||||||
Internet & Catalog Retail - 0.05% |
| |||||||
Insight Enterprises, Inc.A | 116,389 | 2,452 | ||||||
|
| |||||||
Leisure Equipment & Products - 0.86% |
| |||||||
Brunswick Corp. | 781,590 | 35,274 | ||||||
Callaway Golf Co. | 122,120 | 1,029 | ||||||
LeapFrog Enterprises, Inc.A B | 191,800 | 1,642 | ||||||
Smith & Wesson Holding | 187,800 | 2,024 | ||||||
Sturm Ruger & Co., Inc.B | 58,000 | 3,794 | ||||||
|
| |||||||
43,763 | ||||||||
|
| |||||||
Media - 1.66% |
| |||||||
Banner Corp. | 29,600 | 1,132 | ||||||
DreamWorks Animation SKG, Inc., Class AA B | 198,780 | 6,806 | ||||||
EW Scripps Co., Class A A | 409,100 | 8,108 | ||||||
John Wiley & Sons, Inc., Class A | 322,593 | 16,223 | ||||||
Meredith Corp. | 179,247 | 9,195 | ||||||
New York Times Co., Class A B | 1,077,920 | 14,908 | ||||||
Valassis Communications, Inc.B | 1,031,430 | 28,221 | ||||||
|
| |||||||
84,593 | ||||||||
|
| |||||||
Multiline Retail - 0.39% |
| |||||||
Big Lots, Inc. | 518,430 | 18,850 | ||||||
Fred’s, Inc., Class A | 79,540 | 1,289 | ||||||
|
| |||||||
20,139 | ||||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
Specialty Retail - 3.70% |
| |||||||
Aaron’s, Inc. | 128,410 | $ | 3,643 | |||||
America’s Car-Mart, Inc.A | 252,750 | 11,561 | ||||||
Asbury Automotive Group, Inc.A | 83,220 | 3,999 | ||||||
Cato Corp., Class A | 226,500 | 6,788 | ||||||
Children’s Place Retail Stores, Inc.A | 193,550 | 10,566 | ||||||
Express, Inc. | 627,970 | 14,575 | ||||||
Genesco, Inc.A | 65,500 | 4,461 | ||||||
Jos A Bank Clothiers, Inc.A | 98,140 | 4,709 | ||||||
Men’s Wearhouse, Inc. | 455,223 | 19,257 | ||||||
OfficeMax, Inc. | 1,050,300 | 15,734 | ||||||
Penske Automotive Group, Inc. | 164,700 | 6,525 | ||||||
Pep Boys, Inc.A | 864,390 | 11,185 | ||||||
Rent-A-Center, Inc.B | 949,718 | 32,519 | ||||||
Rush Enterprises, Inc., Class AA | 485,000 | 13,881 | ||||||
Sonic Automotive, Inc., Class A | 673,440 | 15,004 | ||||||
Titan Machinery, Inc.A B | 410,000 | 7,232 | ||||||
Zumiez, Inc.A | 223,050 | 6,611 | ||||||
|
| |||||||
188,250 | ||||||||
|
| |||||||
Textiles & Apparel - 1.81% |
| |||||||
Deckers Outdoor Corp.A B | 251,280 | 17,296 | ||||||
G-III Apparel Group Ltd.A | 50,200 | 2,847 | ||||||
Guess?, Inc. | 969,970 | 30,311 | ||||||
Jones Group, Inc. | 364,500 | 5,664 | ||||||
Oxford Industries, Inc. | 96,430 | 6,921 | ||||||
Quiksilver, Inc.A | 1,436,700 | 11,953 | ||||||
Skechers U.S.A., Inc., | 392,340 | 11,433 | ||||||
Vera Bradley, Inc.A B | 272,850 | 6,044 | ||||||
|
| |||||||
92,469 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 650,448 | ||||||
|
| |||||||
CONSUMER STAPLES - 0.68% |
| |||||||
Food & Drug Retailing - 0.30% |
| |||||||
Andersons, Inc. | 46,640 | 3,460 | ||||||
Casey’s General Stores, Inc. | 155,436 | 11,328 | ||||||
Ingles Markets, Inc., Class A | 23,000 | 594 | ||||||
|
| |||||||
15,382 | ||||||||
|
| |||||||
Food Products - 0.31% |
| |||||||
Dean Foods Co. | 455,620 | 8,885 | ||||||
Fresh Del Monte Produce, Inc. | 150,480 | 4,001 | ||||||
USANA Health Sciences, Inc.A | 37,900 | 2,586 | ||||||
|
| |||||||
15,472 | ||||||||
|
| |||||||
Personal Products - 0.01% | ||||||||
Steiner Leisure Ltd.A | 11,700 | 655 | ||||||
|
| |||||||
Tobacco - 0.06% | ||||||||
Universal Corp.B | 58,400 | 3,097 | ||||||
|
| |||||||
Total Consumer Staples |
| 34,606 | ||||||
|
| |||||||
ENERGY - 5.77% |
| |||||||
Energy Equipment & Services - 3.87% |
| |||||||
Atwood Oceanics, Inc.A | 426,447 | 22,657 | ||||||
Bristow Group, Inc. | 91,740 | 7,382 | ||||||
Exterran Holdings, Inc.A | 197,300 | 5,633 | ||||||
Gulf Island Fabrication, Inc. | 170,870 | 4,309 | ||||||
Hercules Offshore, Inc.A | 398,670 | 2,711 | ||||||
Key Energy Services, Inc.A | 2,603,510 | 20,359 | ||||||
McDermott International, Inc.A | 802,000 | 5,670 | ||||||
Newpark Resources, Inc.A | 1,373,100 | 17,507 | ||||||
Parker Drilling Co.A | 362,400 | 2,609 |
See accompanying notes
7
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Patterson-UTI Energy, Inc. | 441,800 | $ | 10,718 | |||||
PDC Energy, Inc.A | 58,320 | 3,955 | ||||||
Precision Drilling Corp.B | 2,732,000 | 28,933 | ||||||
RPC, Inc.B | 548,800 | 10,065 | ||||||
SEACOR Holdings, Inc. | 58,710 | 5,742 | ||||||
Superior Energy Services, Inc.A | 583,040 | 15,643 | ||||||
Tesco Corp.A | 740,044 | 12,714 | ||||||
Tidewater, Inc. | 148,490 | 8,942 | ||||||
Unit Corp.A | 234,676 | 12,065 | ||||||
|
| |||||||
197,614 | ||||||||
|
| |||||||
Oil & Gas - 1.90% |
| |||||||
Berry Petroleum Co., Class A | 353,800 | 16,894 | ||||||
Bill Barrett Corp.A B | 146,000 | 4,040 | ||||||
Cloud Peak Energy, Inc. | 582,150 | 9,087 | ||||||
Comstock Resources, Inc. | 111,100 | 1,901 | ||||||
EPL Oil & Gas, Inc.A | 363,500 | 11,588 | ||||||
Helix Energy Solutions Group, Inc.A | 618,600 | 14,636 | ||||||
Resolute Energy Corp.A | 174,800 | 1,640 | ||||||
Stone Energy Corp.A | 149,900 | 5,226 | ||||||
Synergy Resources Corp.A | 726,200 | 7,523 | ||||||
Ultra Petroleum Corp.A B | 210,510 | 3,865 | ||||||
Western Refining, Inc.B | 227,200 | 7,332 | ||||||
WPX Energy, Inc.A | 601,500 | 13,317 | ||||||
|
| |||||||
97,049 | ||||||||
|
| |||||||
Total Energy |
| 294,663 | ||||||
|
| |||||||
FINANCIALS - 26.90% |
| |||||||
Banks - 11.67% |
| |||||||
1st Source Corp. | 60,700 | 1,905 | ||||||
Associated Banc-Corp. | 1,774,620 | 28,855 | ||||||
Astoria Financial Corp. | 271,800 | 3,590 | ||||||
Bancorp, Inc.A | 356,837 | 5,770 | ||||||
BancorpSouth, Inc. | 458,497 | 10,133 | ||||||
Bank of Hawaii Corp. | 52,100 | 3,021 | ||||||
Bank of the Ozarks, Inc. | 426,250 | 21,091 | ||||||
BankUnited, Inc. | 46,400 | 1,428 | ||||||
BBCN Bancorp, Inc. | 195,100 | 2,893 | ||||||
Berkshire Hills Bancorp, Inc. | 51,898 | 1,317 | ||||||
BOK Financial Corp. | 77,570 | 4,750 | ||||||
Boston Private Financial Holdings, Inc. | 587,110 | 6,687 | ||||||
Brookline Bancorp, Inc. | 794,250 | 7,045 | ||||||
Cardinal Financial Corp. | 265,500 | 4,381 | ||||||
Cathay General Bancorp | 198,960 | 4,900 | ||||||
Central Pacific Financial Corp. | 76,500 | 1,409 | ||||||
Chemical Financial Corp. | 106,330 | 3,114 | ||||||
City Holding Co.B | 35,710 | 1,625 | ||||||
City National Corp. | 366,175 | 26,405 | ||||||
CoBiz Financial, Inc. | 422,227 | 4,581 | ||||||
Columbia Banking System, Inc. | 106,830 | 2,744 | ||||||
Community Bank System, Inc. | 26,230 | 952 | ||||||
Community Trust Bancorp, Inc. | 37,900 | 1,614 | ||||||
CVB Financial Corp. | 844,593 | 12,280 | ||||||
Dime Community Bancshares, Inc. | 86,255 | 1,411 | ||||||
East West Bancorp, Inc. | 359,405 | 12,108 | ||||||
First Commonwealth Financial Corp. | 283,600 | 2,464 | ||||||
First Financial Bancorp | 167,800 | 2,604 | ||||||
First Horizon National Corp. | 3,848,783 | 40,989 | ||||||
First Interstate Bancsystem, Inc. | 214,000 | 5,374 | ||||||
First Midwest Bancorp, Inc. | 827,542 | 13,762 | ||||||
First Niagara Financial Group, Inc. | 1,270,477 | 14,013 | ||||||
FirstMerit Corp. | 601,721 | 13,515 | ||||||
Flushing Financial Corp. | 30,900 | 621 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
FNB Corp. | 319,630 | $ | 3,999 | |||||
Fulton Financial Corp. | 878,365 | 10,725 | ||||||
Glacier Bancorp, Inc. | 449,000 | 12,406 | ||||||
Hancock Holding Co. | 427,813 | 14,024 | ||||||
Hanmi Financial Corp. | 391,700 | 6,847 | ||||||
Home Federal Bancorp, Inc. | 172,900 | 2,696 | ||||||
Iberiabank Corp. | 360,270 | 21,051 | ||||||
Independent Bank Corp. | 49,080 | 1,761 | ||||||
International Bancshares Corp. | 229,017 | 5,233 | ||||||
Lakeland Financial Corp. | 35,410 | 1,260 | ||||||
MB Financial, Inc. | 465,230 | 13,817 | ||||||
National Penn Bancshares, Inc. | 384,277 | 3,985 | ||||||
NBT Bancorp, Inc. | 120,363 | 2,933 | ||||||
Northwest Bancshares, Inc. | 282,190 | 3,948 | ||||||
Old National Bancorp | 255,840 | 3,720 | ||||||
Pinnacle Financial Partners, Inc. | 161,220 | 4,998 | ||||||
Popular, Inc.A | 226,200 | 5,712 | ||||||
PrivateBancorp, Inc. | 192,800 | 4,697 | ||||||
Prosperity Bancshares, Inc. | 421,174 | 26,302 | ||||||
Provident Financial Services, Inc. | 534,580 | 10,018 | ||||||
Renasant Corp. | 62,900 | 1,804 | ||||||
Republic Bancorp, Inc., Class A | 45,800 | 1,054 | ||||||
S&T Bancorp, Inc. | 89,100 | 2,185 | ||||||
Sandy Spring Bancorp, Inc. | 58,700 | 1,438 | ||||||
State Bank Financial Corp. | 861,150 | 14,691 | ||||||
Sterling Financial Corp. | 153,900 | 4,457 | ||||||
Susquehanna Bancshares, Inc. | 466,320 | 5,496 | ||||||
Synovus Financial Corp. | 8,992,870 | 29,227 | ||||||
Taylor Capital Group, Inc.A | 27,000 | 621 | ||||||
TCF Financial Corp. | 158,541 | 2,407 | ||||||
UMB Financial Corp. | 121,240 | 7,143 | ||||||
Umpqua Holdings Corp.B | 398,965 | 6,531 | ||||||
United Community Banks, Inc.A | 326,990 | 5,098 | ||||||
Valley National BancorpB | 1,067,170 | 10,405 | ||||||
Washington Federal, Inc. | 476,260 | 10,849 | ||||||
Washington Trust Bancorp, Inc. | 67,360 | 2,215 | ||||||
Webster Financial Corp. | 900,016 | 25,101 | ||||||
WesBanco, Inc. | 128,543 | 3,779 | ||||||
Western Alliance BancorpA | 532,818 | 11,269 | ||||||
Wintrust Financial Corp. | 462,140 | 20,108 | ||||||
|
| |||||||
595,361 | ||||||||
|
| |||||||
Diversified Financials - 4.02% |
| |||||||
Capitol Federal Financial, Inc. | 411,650 | 5,216 | ||||||
Cash America International, Inc. | 387,500 | 15,287 | ||||||
CoreLogic, Inc.A | 542,540 | 18,050 | ||||||
Credit Acceptance Corp.A | 69,268 | 8,194 | ||||||
E*Trade Financial Corp.A | 1,928,890 | 32,619 | ||||||
Encore Capital Group, Inc.A B | 244,800 | 11,958 | ||||||
ExlService Holdings, Inc.A | 298,800 | 8,638 | ||||||
EZCORP, Inc., Class AA | 1,010,150 | 15,890 | ||||||
Federated Investors, Inc., | 238,942 | 6,480 | ||||||
Global Cash Access Holdings, | 1,307,600 | 10,853 | ||||||
Green Dot Corp., Class AA | 720,000 | 15,451 | ||||||
Interactive Brokers Group, Inc., Class A | 142,421 | 2,938 | ||||||
Janus Capital Group, Inc.B | 1,924,535 | 18,995 | ||||||
Nelnet, Inc., Class A | 128,804 | 5,491 | ||||||
NewStar Financial, Inc.A | 64,030 | 1,115 | ||||||
Oritani Financial Corp. | 111,800 | 1,813 | ||||||
Piper Jaffray Cos.A | 263,567 | 9,459 | ||||||
Prospect Capital Corp.B | 120,967 | 1,372 | ||||||
Stifel Financial Corp.A | 174,800 | 7,158 | ||||||
Waddell & Reed Financial, Inc., Class A | 71,717 | 4,429 |
See accompanying notes
8
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
World Acceptance Corp.A B | 39,580 | $ | 4,121 | |||||
|
| |||||||
205,527 | ||||||||
|
| |||||||
Insurance - 7.09% |
| |||||||
Allied World Assurance Co. Holdings AG | 141,445 | 15,317 | ||||||
American Equity Investment Life Holding Co. | 180,670 | 3,765 | ||||||
American Financial Group, Inc. | 204,535 | 11,507 | ||||||
Amtrust Financial Services, Inc.B | 203,621 | 7,811 | ||||||
Argo Group International Holdings Ltd. | 220,700 | 9,265 | ||||||
Aspen Insurance Holdings Ltd. | 849,780 | 33,151 | ||||||
Assurant, Inc. | 37,900 | 2,216 | ||||||
Assured Guaranty Ltd. | 131,110 | 2,688 | ||||||
CNO Financial Group, Inc. | 1,273,830 | 19,846 | ||||||
Employers Holdings, Inc. | 111,360 | 3,349 | ||||||
Endurance Specialty Holdings Ltd. | 650,670 | 35,977 | ||||||
Enstar Group Ltd.A | 167,943 | 22,829 | ||||||
FBL Financial Group, Inc., Class A | 38,700 | 1,731 | ||||||
Global Indemnity PLCA,F | 434,123 | 10,692 | ||||||
Hanover Insurance Group, Inc. | 197,220 | 11,545 | ||||||
HCC Insurance Holdings, Inc. | 188,860 | 8,621 | ||||||
Hilltop Holdings, Inc.A | 50,000 | 867 | ||||||
Horace Mann Educators Corp. | 533,700 | 14,783 | ||||||
Infinity Property & Casualty Corp. | 43,738 | 3,000 | ||||||
Kemper Corp. | 153,190 | 5,671 | ||||||
Maiden Capital Financing Trust | 166,160 | 1,819 | ||||||
MBIA, Inc.A | 89,300 | 1,015 | ||||||
Montpelier Re Holdings Ltd. | 239,613 | 6,616 | ||||||
National Western Life Insurance Co., Class A | 7,730 | 1,608 | ||||||
Navigators Group, Inc.A | 39,693 | 2,232 | ||||||
Old Republic International Corp. | 431,500 | 7,245 | ||||||
Platinum Underwriters Holdings Ltd. | 196,547 | 12,223 | ||||||
Primerica, Inc. | 95,400 | 4,097 | ||||||
ProAssurance Corp. | 285,910 | 12,957 | ||||||
Protective Life Corp. | 493,650 | 22,748 | ||||||
Renaissancere Holdings Ltd. | 51,000 | 4,779 | ||||||
RLI Corp. | 97,800 | 9,240 | ||||||
Safety Insurance Group, Inc. | 38,030 | 2,080 | ||||||
Selective Insurance Group, Inc. | 123,290 | 3,239 | ||||||
StanCorp Financial Group, Inc. | 31,020 | 1,827 | ||||||
State Auto Financial Corp. | 61,949 | 1,177 | ||||||
Stewart Information Services Corp. | 9,800 | 307 | ||||||
Symetra Financial Corp. | 1,113,865 | 20,863 | ||||||
United Fire Group, Inc. | 40,700 | 1,290 | ||||||
Validus Holdings Ltd. | 249,130 | 9,836 | ||||||
White Mountains Insurance Group Ltd. | 17,204 | 10,048 | ||||||
|
| |||||||
361,877 | ||||||||
|
| |||||||
Real Estate - 4.04% |
| |||||||
Acadia Realty TrustC | 193,300 | 5,155 | ||||||
Ashford Hospitality Trust, Inc.C | 173,130 | 2,261 | ||||||
Associated Estates Realty Corp.C | 135,480 | 2,078 | ||||||
Brandywine Realty TrustC | 410,555 | 5,842 | ||||||
Campus Crest Communities, Inc.C | 1,268,950 | 12,702 | ||||||
CapLease, Inc.C | 1,191,838 | 10,131 | ||||||
CBL & Associates Properties, Inc.C | 203,115 | 4,024 | ||||||
Chatham Lodging TrustC | 500,000 | 9,430 | ||||||
Chesapeake Lodging TrustC | 535,100 | 12,612 | ||||||
Colony Financial, Inc.C | 480,700 | 9,725 | ||||||
Corporate Office Properties TrustC | 345,920 | 8,510 | ||||||
EastGroup Properties, Inc.C | 129,520 | 8,245 | ||||||
First Potomac Realty TrustC | 267,100 | 3,283 | ||||||
Forestar Group, Inc.A | 86,800 | 1,938 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Getty Realty Corp.C | 347,460 | $ | 6,664 | |||||
Granite Real Estate Investment TrustC | 145,300 | 5,010 | ||||||
HFF, Inc., Class A | 148,020 | 3,634 | ||||||
Hospitality Properties TrustC | 139,733 | 4,105 | ||||||
KKR Financial Holdings LLCB D G | 195,098 | 1,933 | ||||||
LaSalle Hotel PropertiesC | 755,900 | 23,471 | ||||||
Mack-Cali Realty Corp.C | 185,686 | 3,818 | ||||||
National Health Investors, Inc.C | 146,910 | 9,185 | ||||||
Pebblebrook Hotel TrustC | 338,244 | 10,215 | ||||||
Pennsylvania Real Estate Investment TrustC | 204,845 | 3,714 | ||||||
RLJ Lodging TrustC | 948,050 | 23,948 | ||||||
Starwood Property Trust, Inc.C | 411,950 | 10,583 | ||||||
Urstadt Biddle Properties, Inc., Class AC | 219,300 | 4,329 | ||||||
|
| |||||||
206,545 | ||||||||
|
| |||||||
Real Estate Investment Trusts - 0.08% |
| |||||||
Omega Healthcare Investors, Inc.B C | 128,935 | 4,286 | ||||||
|
| |||||||
Total Financials |
| 1,373,596 | ||||||
|
| |||||||
HEALTH CARE - 6.12% |
| |||||||
Biotechnology - 0.37% |
| |||||||
Charles River Laboratories International, Inc.A | 118,794 | 5,846 | ||||||
United Therapeutics Corp.A | 149,700 | 13,251 | ||||||
|
| |||||||
19,097 | ||||||||
|
| |||||||
Health Care Equipment & Supplies - 0.77% |
| |||||||
Computer Programs and Systems, Inc. | 131,390 | 7,494 | ||||||
CONMED Corp. | 59,220 | 2,148 | ||||||
Fabrinet | 86,400 | 1,446 | ||||||
Globus Medical, Inc., Class AA | 253,840 | 4,874 | ||||||
Hillenbrand, Inc. | 78,720 | 2,221 | ||||||
Hill-Rom Holdings, Inc. | 113,934 | 4,704 | ||||||
ICU Medical, Inc.A | 85,820 | 5,304 | ||||||
Integra LifeSciences Holdings Corp.A | 63,885 | 2,925 | ||||||
Natus Medical, Inc.A | 417,720 | 8,242 | ||||||
|
| |||||||
39,358 | ||||||||
|
| |||||||
Health Care Providers & Services - 4.59% |
| |||||||
Air Methods Corp.B | 228,930 | 10,009 | ||||||
Allscripts Healthcare Solutions, Inc. | 904,060 | 12,503 | ||||||
Amsurg Corp.A | 192,780 | 8,268 | ||||||
Community Health Systems, Inc. | 227,300 | 9,917 | ||||||
Covance, Inc.A | 182,300 | 16,272 | ||||||
Ensign Group, Inc. | 481,249 | 20,492 | ||||||
Gentiva Health Services, Inc. | 75,665 | 866 | ||||||
Hanger Orthopedic Group, Inc.A | 477,840 | 17,537 | ||||||
Health Management Associates, Inc., Class A | 405,600 | 5,200 | ||||||
HealthSouth Corp. | 1,078,470 | 37,866 | ||||||
Kindred Healthcare, Inc. | 308,800 | 4,286 | ||||||
LifePoint Hospitals, Inc.A | 798,710 | 41,246 | ||||||
Magellan Health Services, Inc.A | 76,510 | 4,491 | ||||||
MAXIMUS, Inc. | 137,820 | 6,677 | ||||||
Omnicell, Inc.A | 339,350 | 7,829 | ||||||
Owens & Minor, Inc. | 152,420 | 5,704 | ||||||
Select Medical Holdings Corp. | 172,770 | 1,465 | ||||||
Triple-S Management Corp., Class BA | 126,961 | 2,261 | ||||||
WellCare Health Plans, Inc.A | 318,000 | 21,204 | ||||||
|
| |||||||
234,093 | ||||||||
|
| |||||||
Pharmaceuticals - 0.39% |
| |||||||
Jazz Pharmaceuticals PLCA,F | 107,400 | 9,745 |
See accompanying notes
9
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Taro Pharmaceutical Industries Ltd.A | 132,800 | $ | 10,405 | |||||
|
| |||||||
20,150 | ||||||||
|
| |||||||
Total Health Care |
| 312,698 | ||||||
|
| |||||||
INDUSTRIALS - 19.63% |
| |||||||
Aerospace & Defense - 2.63% |
| |||||||
AAR Corp. | 222,186 | 6,506 | ||||||
Aerovironment, Inc.A | 746,660 | 20,242 | ||||||
Aircastle Ltd. | 584,586 | 11,031 | ||||||
Alliant Techsystems, Inc. | 196,215 | 21,362 | ||||||
Curtiss-Wright Corp. | 121,852 | 6,066 | ||||||
Exelis, Inc. | 564,700 | 9,312 | ||||||
Huntington Ingalls Industries, Inc. | 346,300 | 24,777 | ||||||
Moog, Inc., Class AA | 270,700 | 16,169 | ||||||
Triumph Group, Inc. | 265,700 | 19,037 | ||||||
|
| |||||||
134,502 | ||||||||
|
| |||||||
Building Products - 2.13% |
| |||||||
American Woodmark Corp.A | 126,190 | 4,280 | ||||||
Apogee Enterprises, Inc. | 207,617 | 6,494 | ||||||
Armstrong World Industries, Inc. | 193,640 | 10,346 | ||||||
Crane Co. | 417,304 | 26,500 | ||||||
Drew Industries, Inc. | 107,430 | 5,399 | ||||||
Masonite International Corp. | 421,400 | 20,585 | ||||||
Simpson Manufacturing Co., Inc. | 381,325 | 13,518 | ||||||
Trex Co., Inc.A | 281,800 | 19,788 | ||||||
Universal Forest Products, Inc. | 40,100 | 2,122 | ||||||
|
| |||||||
109,032 | ||||||||
|
| |||||||
Commercial Services & Supplies - 5.96% |
| |||||||
ABM Industries, Inc. | 117,930 | 3,244 | ||||||
Aceto Corp. | 336,950 | 5,374 | ||||||
Atlas Air Worldwide Holdings, Inc.A | 57,600 | 2,133 | ||||||
Bridgepoint Education, Inc.A | 162,500 | 3,185 | ||||||
Brink’s Co. | 178,310 | 5,599 | ||||||
Convergys Corp. | 308,790 | 6,096 | ||||||
Con-way, Inc. | 780,310 | 32,150 | ||||||
CSG Systems International, Inc. | 326,380 | 9,093 | ||||||
Deluxe Corp. | 138,960 | 6,544 | ||||||
DeVry, Inc. | 204,600 | 7,345 | ||||||
Dun & Bradstreet Corp. | 101,600 | 11,053 | ||||||
Ennis, Inc. | 81,580 | 1,448 | ||||||
Geo Group, Inc.C | 330,172 | 11,645 | ||||||
Global Payments, Inc. | 139,100 | 8,274 | ||||||
Heidrick & Struggles International, Inc. | 161,500 | 2,991 | ||||||
Herman Miller, Inc. | 832,890 | 25,270 | ||||||
Hudson Global, Inc.A | 630,300 | 2,048 | ||||||
Interface, Inc. | 567,870 | 11,499 | ||||||
ITT Educational Services, Inc.B | 70,000 | 2,808 | ||||||
Kelly Services, Inc., Class A | 109,800 | 2,290 | ||||||
Koppers Holdings, Inc. | 83,094 | 3,699 | ||||||
Korn/Ferry InternationalA | 1,059,460 | 25,215 | ||||||
McGrath Rentcorp | 221,688 | 7,908 | ||||||
Mobile Mini, Inc. | 605,400 | 21,867 | ||||||
Monotype Imaging Holdings, Inc. | 278,650 | 7,864 | ||||||
Navigant Consulting, Inc.A | 213,443 | 3,703 | ||||||
PHH Corp.A | 807,900 | 19,430 | ||||||
PHI, Inc.A | 31,100 | 1,238 | ||||||
Pitney Bowes, Inc.B | 605,200 | 12,915 | ||||||
Quad Graphics, Inc.B | 81,800 | 2,856 | ||||||
RR Donnelley & Sons Co.B | 544,900 | 10,119 | ||||||
Steelcase, Inc., Class A | 514,492 | 8,433 | ||||||
TAL International Group, Inc.B | 101,480 | 4,902 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
TrueBlue, Inc.A | 346,940 | $ | 8,569 | |||||
United Stationers Supply Co. | 119,600 | 5,315 | ||||||
|
| |||||||
304,122 | ||||||||
|
| |||||||
Construction & Engineering - 1.94% |
| |||||||
AECOM Technology Corp.A | 302,300 | 9,607 | ||||||
Aegion Corp.A | 589,077 | 12,076 | ||||||
Comfort Systems USA, Inc. | 912,715 | 17,004 | ||||||
Dycom Industries, Inc.A | 650,550 | 19,289 | ||||||
EMCOR Group, Inc. | 62,775 | 2,326 | ||||||
MYR Group, Inc.A | 414,500 | 10,964 | ||||||
Tutor Perini Corp. | 596,977 | 13,701 | ||||||
URS Corp. | 259,760 | 14,084 | ||||||
|
| |||||||
99,051 | ||||||||
|
| |||||||
Diversified Manufacturing - 0.24% |
| |||||||
Barnes Group, Inc. | 348,122 | 12,372 | ||||||
|
| |||||||
Electrical Equipment - 1.53% |
| |||||||
Brady Corp., Class A | 78,359 | 2,287 | ||||||
Energy XXI Bermuda Ltd. | 173,860 | 5,052 | ||||||
EnerSys, Inc. | 275,025 | 18,248 | ||||||
General Cable Corp. | 275,964 | 9,087 | ||||||
Geospace Technologies Corp.A | 122,121 | 11,897 | ||||||
Global Power Equipment Group, Inc. | 160,210 | 3,262 | ||||||
Regal-Beloit Corp. | 384,220 | 28,176 | ||||||
|
| |||||||
78,009 | ||||||||
|
| |||||||
Industrial Conglomerates - 0.22% |
| |||||||
Carlisle Cos., Inc. | 42,992 | 3,125 | ||||||
Chemed Corp.B | 96,100 | 6,517 | ||||||
Standex International Corp. | 27,700 | 1,704 | ||||||
|
| |||||||
11,346 | ||||||||
|
| |||||||
Machinery - 3.15% |
| |||||||
American Railcar Industries, Inc.B | 38,900 | 1,593 | ||||||
Astec Industries, Inc. | 147,360 | 4,982 | ||||||
CIRCOR International, Inc. | 120,900 | 8,919 | ||||||
Esterline Technologies Corp.A | 124,191 | 9,955 | ||||||
FreightCar America, Inc. | 187,660 | 4,174 | ||||||
Greenbrier Cos., Inc.A | 68,000 | 1,805 | ||||||
ITT Corp. | 128,700 | 5,113 | ||||||
John Bean Technologies Corp. | 98,700 | 2,683 | ||||||
L.B. Foster Co., Class A | 19,680 | 920 | ||||||
Meritor, Inc.A | 1,249,000 | 8,581 | ||||||
Miller Industries, Inc. | 231,100 | 4,331 | ||||||
Oshkosh Corp. | 915,100 | 43,549 | ||||||
SPX Corp. | 31,384 | 2,847 | ||||||
Terex Corp. | 726,000 | 25,374 | ||||||
Titan International, Inc. | 1,054,700 | 15,293 | ||||||
Trinity Industries, Inc. | 361,431 | 18,299 | ||||||
Wabash National Corp.A | 205,400 | 2,395 | ||||||
|
| |||||||
160,813 | ||||||||
|
| |||||||
Marine - 0.27% |
| |||||||
Gulfmark Offshore, Inc., Class A | 66,700 | 3,320 | ||||||
Matson, Inc. | 379,800 | 10,289 | ||||||
|
| |||||||
13,609 | ||||||||
|
| |||||||
Real Estate - 0.25% |
| |||||||
Amerco, Inc. | 63,690 | 12,861 | ||||||
|
| |||||||
Road & Rail - 0.77% |
| |||||||
Forward Air Corp. | 380,009 | 15,383 | ||||||
Landstar System, Inc. | 125,360 | 6,931 | ||||||
Ryder System, Inc. | 260,615 | 17,156 | ||||||
|
| |||||||
39,470 | ||||||||
|
|
See accompanying notes
10
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Trading Companies & Distributors - 0.54% |
| |||||||
Air Lease Corp. | 299,600 | $ | 8,808 | |||||
MRC Global, Inc.A | 388,400 | 10,856 | ||||||
WESCO International, Inc.A B | 92,600 | 7,914 | ||||||
|
| |||||||
27,578 | ||||||||
|
| |||||||
Total Industrials |
| 1,002,765 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 11.93% |
| |||||||
Communications Equipment - 1.87% |
| |||||||
Anixter International, Inc. | 89,100 | 7,617 | ||||||
ARRIS Group, Inc.A | 1,375,368 | 24,563 | ||||||
Brocade Communications Systems, Inc.A | 2,841,092 | 22,786 | ||||||
InterDigital, Inc. | 396,650 | 15,370 | ||||||
IxiaA | 513,470 | 7,281 | ||||||
Plantronics, Inc. | 122,550 | 5,262 | ||||||
Symmetricom, Inc.A | 315,000 | 2,259 | ||||||
Verint Systems, Inc.A | 286,490 | 10,463 | ||||||
|
| |||||||
95,601 | ||||||||
|
| |||||||
Computers & Peripherals - 0.24% |
| |||||||
Lexmark International, Inc., Class A | 187,700 | 6,673 | ||||||
Mercury Systems, Inc.A | 580,637 | 5,353 | ||||||
|
| |||||||
12,026 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 3.34% |
| |||||||
Arrow Electronics, Inc. | 261,600 | 12,562 | ||||||
AVX Corp. | 505,800 | 6,702 | ||||||
Benchmark Electronics, Inc.A | 176,500 | 4,012 | ||||||
Celestica, Inc.A | 171,185 | 1,876 | ||||||
Ingram Micro, Inc., | 653,401 | 15,139 | ||||||
Intersil Corp., Class A | 476,600 | 5,319 | ||||||
Itron, Inc.A | 71,371 | 3,045 | ||||||
Jabil Circuit, Inc. | 385,000 | 8,031 | ||||||
Littelfuse, Inc. | 203,300 | 17,287 | ||||||
Methode Electronics, Inc. | 774,500 | 19,812 | ||||||
Plexus Corp.A | 624,825 | 23,918 | ||||||
Sanmina Corp.A | 350,385 | 5,102 | ||||||
Scansource, Inc.A | 69,700 | 2,681 | ||||||
Tech Data Corp.A | 128,804 | 6,706 | ||||||
TTM Technologies, Inc.A | 295,545 | 2,586 | ||||||
Veeco Instruments, Inc.A | 139,320 | 4,070 | ||||||
Vishay Intertechnology, Inc.A | 2,577,610 | 31,626 | ||||||
|
| |||||||
170,474 | ||||||||
|
| |||||||
Internet Software & Services - 0.38% |
| |||||||
Netgear, Inc.A | 666,200 | 19,160 | ||||||
|
| |||||||
IT Consulting & Services - 0.93% |
| |||||||
Booz Allen Hamilton Holding Corp. | 414,100 | 8,199 | ||||||
CACI International, Inc., Class AA | 75,500 | 5,434 | ||||||
CIBER, Inc.A | 117,200 | 381 | ||||||
InnerWorkings, Inc.A | 108,110 | 1,035 | ||||||
Mantech International Corp., Class A | 128,625 | 3,594 | ||||||
Sykes Enterprises, Inc.A | 198,120 | 3,709 | ||||||
SYNNEX Corp.A | 362,260 | 22,206 | ||||||
Unisys Corp.A | 120,000 | 3,162 | ||||||
|
| |||||||
47,720 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 3.93% |
| |||||||
Advanced Energy Industries, Inc.A | 271,840 | 5,676 | ||||||
ATMI, Inc.A | 271,220 | 7,415 | ||||||
Brooks Automation, Inc. | 1,442,900 | 13,910 | ||||||
Cirrus Logic, Inc.A B | 279,590 | 6,271 | ||||||
Diodes, Inc.A | 670,500 | 16,240 | ||||||
Entropic Communications, Inc.A | 1,730,300 | 7,406 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Fairchild Semiconductor International, Inc.A | 1,245,400 | $ | 15,779 | |||||
FEI Co. | 84,210 | 7,501 | ||||||
GT Advanced Technologies, Inc.A B | 642,640 | 4,820 | ||||||
International Rectifier Corp.A | 172,900 | 4,502 | ||||||
Kulicke & Soffa Industries, Inc.A | 1,274,327 | 16,440 | ||||||
Micrel, Inc. | 186,209 | 1,713 | ||||||
Microsemi Corp. | 180,745 | 4,542 | ||||||
MKS Instruments, Inc. | 267,390 | 7,925 | ||||||
Omnivision Technologies, Inc.A | 839,500 | 11,761 | ||||||
ON Semiconductor Corp.A | 1,742,500 | 12,302 | ||||||
Photronics, Inc.A | 856,000 | 7,190 | ||||||
PMC - Sierra, Inc.A | 755,340 | 4,434 | ||||||
QLogic Corp.A | 923,940 | 11,411 | ||||||
Semtech Corp.A | 303,800 | 9,451 | ||||||
Teradyne, Inc.A B | 1,179,870 | 20,637 | ||||||
TriQuint Semiconductor, Inc.A | 495,000 | 3,925 | ||||||
|
| |||||||
201,251 | ||||||||
|
| |||||||
Software - 1.24% |
| |||||||
Cognex Corp. | 172,570 | 5,393 | ||||||
Comverse, Inc.A | 192,280 | 6,072 | ||||||
DST Systems, Inc. | 69,210 | 5,867 | ||||||
Epiq Systems, Inc. | 70,329 | 1,052 | ||||||
FARO Technologies, Inc.A | 364,010 | 17,290 | ||||||
Mentor Graphics Corp. | 827,190 | 18,265 | ||||||
Netscout Systems, Inc.A | 327,330 | 9,270 | ||||||
|
| |||||||
63,209 | ||||||||
|
| |||||||
Total Information Technology |
| 609,441 | ||||||
|
| |||||||
MATERIALS - 6.15% |
| |||||||
Chemicals - 2.49% |
| |||||||
A. Schulman, Inc. | 50,690 | 1,679 | ||||||
American Vanguard Corp. | 563,600 | 14,710 | ||||||
Cabot Corp. | 119,003 | 5,547 | ||||||
Cytec Industries, Inc. | 122,180 | 10,152 | ||||||
Huntsman Corp. | 720,772 | 16,736 | ||||||
Innophos Holdings, Inc. | 125,950 | 6,313 | ||||||
Innospec, Inc. | 64,700 | 2,980 | ||||||
Landec Corp.A | 521,850 | 6,111 | ||||||
Olin Corp.B | 868,540 | 19,551 | ||||||
PolyOne Corp. | 957,400 | 29,008 | ||||||
Scotts Miracle-Gro Co., Class A | 247,900 | 14,557 | ||||||
|
| |||||||
127,344 | ||||||||
|
| |||||||
Containers & Packaging - 0.48% |
| |||||||
KapStone Paper and Packaging Corp. | 255,872 | 13,295 | ||||||
Owens-Illinois, Inc.A | 350,400 | 11,139 | ||||||
|
| |||||||
24,434 | ||||||||
|
| |||||||
Metals & Mining - 2.84% |
| |||||||
Allegheny Technologies, Inc. | 300,450 | 9,945 | ||||||
Allied Nevada Gold Corp.A B | 1,327,910 | 5,418 | ||||||
AMCOL International Corp. | 255,908 | 8,210 | ||||||
AuRico Gold, Inc.B | 2,389,600 | 9,821 | ||||||
Carpenter Technology Corp. | 161,320 | 9,571 | ||||||
Coeur d’Alene Mines Corp. | 179,969 | 2,197 | ||||||
Gibraltar Industries, Inc.A | 468,139 | 7,495 | ||||||
Haynes International, Inc. | 112,300 | 6,053 | ||||||
Horsehead Holding Corp.A | 860,400 | 12,484 | ||||||
Kaiser Aluminum Corp. | 219,770 | 14,823 | ||||||
Materion Corp. | 687,200 | 20,485 | ||||||
Noranda Aluminum Holding Corp. | 1,357,600 | 3,693 | ||||||
Pan American Silver Corp. | 224,038 | 2,377 |
See accompanying notes
11
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
RTI International Metals, Inc.A | 86,100 | $ | 2,919 | |||||
Steel Dynamics, Inc. | 240,998 | 4,331 | ||||||
US Silica Holdings, Inc.B | 398,350 | 13,871 | ||||||
Worthington Industries, Inc. | 280,810 | 11,384 | ||||||
|
| |||||||
145,077 | ||||||||
|
| |||||||
Paper & Forest Products - 0.34% |
| |||||||
Louisiana-Pacific Corp.A | 476,540 | 8,106 | ||||||
Resolute Forest Products, Inc.A | 278,900 | 4,460 | ||||||
Schweitzer-Mauduit International, Inc. | 79,400 | 4,913 | ||||||
|
| |||||||
17,479 | ||||||||
|
| |||||||
Total Materials |
| 314,334 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 0.36% |
| |||||||
Diversified Telecommunication Services - 0.16% |
| |||||||
EchoStar Corp., Class A A | 125,700 | 6,029 | ||||||
Vonage Holdings Corp.A | 588,000 | 2,193 | ||||||
|
| |||||||
8,222 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 0.20% |
| |||||||
Iridium Communications, Inc. A,B | 143,600 | 866 | ||||||
Telephone & Data Systems, Inc. | 303,263 | 9,455 | ||||||
|
| |||||||
10,321 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 18,543 | ||||||
|
| |||||||
UTILITIES - 2.66% |
| |||||||
Electric - 1.96% |
| |||||||
El Paso Electric Co. | 301,120 | 10,590 | ||||||
Great Plains Energy, Inc. | 979,210 | 22,953 | ||||||
Hawaiian Electric Industries, Inc.B | 423,590 | 11,255 | ||||||
IDACORP, Inc. | 241,265 | 12,449 | ||||||
NorthWestern Corp. | 174,450 | 7,997 | ||||||
Ormat Technologies, Inc.B | 113,500 | 2,959 | ||||||
PNM Resources, Inc. | 218,910 | 5,236 | ||||||
Portland General Electric Co. | 920,464 | 26,418 | ||||||
TECO Energy, Inc. | 20,935 | 359 | ||||||
|
| |||||||
100,216 | ||||||||
|
| |||||||
Gas - 0.35% |
| |||||||
Laclede Group, Inc. | 158,030 | 7,438 | ||||||
WGL Holdings, Inc. | 232,230 | 10,453 | ||||||
|
| |||||||
17,891 | ||||||||
|
| |||||||
Multi-Utilities - 0.35% |
| |||||||
Avista Corp. | 146,030 | 4,058 | ||||||
Westar Energy, Inc. | 431,690 | 13,646 | ||||||
|
| |||||||
17,704 | ||||||||
|
| |||||||
Total Utilities |
| 135,811 | ||||||
|
| |||||||
Total Common Stock (Cost $3,576,495) |
| 4,746,905 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 6.22% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select Class E | 20,000,000 | 20,000 | ||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 297,502,677 | 297,503 | ||||||
|
| |||||||
Total Short-Term Investments | 317,503 | |||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
SECURITIES LENDING COLLATERAL - 5.87% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select Class E | 267,629,679 | $ | 267,629 | |||||
DWS Government and Agency Securities Portfolio, Institutional Class | 32,053,754 | 32,054 | ||||||
|
| |||||||
Total Securities Lending Collateral (Cost $299,683) | 299,683 | |||||||
|
| |||||||
TOTAL INVESTMENTS - 105.03% |
| 5,364,091 | ||||||
LIABILITIES, NET OF OTHER ASSETS - (5.03%) |
| (256,678 | ) | |||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 5,107,413 | |||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | All or a portion of this security is on loan at October 31, 2013. |
C | REIT - Real Estate Investment Trust. |
D | Limited Liability Company. |
E | The Fund is affiliated by having the same investment advisor. |
F | PLC - Public Limited Company. |
G | Master Limited Partnership. |
See accompanying notes
12
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2013
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Russell 2000 Mini Index Future | Long | 2,748 | December, 2013 | $ | 301,675 | $ | 8,081 | |||||||||||||
|
|
|
| |||||||||||||||||
$ | 301,675 | $ | 8,081 | |||||||||||||||||
|
|
|
|
See accompanying notes
13
American Beacon Small Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Assets: | ||||
Investments in unaffiliated securities, at fair value A C | $ | 5,076,462 | ||
Investments in affiliated securities, at fair value B | 287,629 | |||
Deposit with brokers for futures contracts | 11,493 | |||
Receivable for investments sold | 47,095 | |||
Dividends and interest receivable | 1,188 | |||
Receivable for fund shares sold | 8,443 | |||
Prepaid expenses | 87 | |||
|
| |||
Total assets | 5,432,397 | |||
|
| |||
Liabilities: | ||||
Payable for investments purchased | 12,799 | |||
Payable for variation margin from open futures contracts | 2,364 | |||
Payable upon return of securities loaned | 299,683 | |||
Payable for fund shares redeemed | 1,452 | |||
Payable under excess expense reimbursement plan (Note 2) | — | |||
Foreign currency, at fair value D | 6 | |||
Management and investment advisory fees payable | 6,888 | |||
Administrative service and service fees payable | 1,350 | |||
Transfer agent fees payable | 67 | |||
Custody and fund accounting fees payable | 58 | |||
Professional fees payable | 41 | |||
Prospectus and shareholder reports fees payable | 205 | |||
Trustee fees payable | 40 | |||
Other liabilities | 31 | |||
|
| |||
Total liabilities | 324,984 | |||
|
| |||
Net assets | $ | 5,107,413 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | 3,498,099 | |||
Undistributed net investment income | 17,740 | |||
Accumulated net realized gain | 413,084 | |||
Unrealized appreciation of investments | 1,170,409 | |||
Unrealized appreciation of futures contracts | 8,081 | |||
|
| |||
Net assets | $ | 5,107,413 | ||
|
| |||
Shares outstanding at no par value (unlimited shares authorized): | ||||
Institutional Class | 122,323,085 | |||
|
| |||
Y Class | 4,417,308 | |||
|
| |||
Investor Class | 34,251,856 | |||
|
| |||
Advisor Class | 3,253,317 | |||
|
| |||
Retirement Class | 392,283 | |||
|
| |||
A Class | 496,345 | |||
|
| |||
C Class | 240,446 | |||
|
| |||
AMR Class | 17,942,253 | |||
|
| |||
Net assets (not in thousands): | ||||
Institutional Class | $ | 3,430,107,382 | ||
|
| |||
Y Class | $ | 122,849,739 | ||
|
| |||
Investor Class | $ | 934,041,370 | ||
|
| |||
Advisor Class | $ | 88,032,906 | ||
|
| |||
Retirement Class | $ | 10,445,612 | ||
|
| |||
A Class | $ | 13,417,645 | ||
|
| |||
C Class | $ | 6,396,419 | ||
|
| |||
AMR Class | $ | 502,121,807 | ||
|
|
See accompanying notes
14
American Beacon Small Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 28.04 | ||
|
| |||
Y Class | $ | 27.81 | ||
|
| |||
Investor Class | $ | 27.27 | ||
|
| |||
Advisor Class | $ | 27.06 | ||
|
| |||
Retirement Class | $ | 26.63 | ||
|
| |||
A Class (offering price $28.68) | $ | 27.03 | ||
|
| |||
C Class | $ | 26.60 | ||
|
| |||
AMR Class | $ | 27.99 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 3,906,052 | ||
B Cost of investments in affiliated securities | $ | 287,629 | ||
C Fair value of securities on loan | $ | 292,628 | ||
D Cost of foreign currency | $ | (6 | ) |
See accompanying notes
15
American Beacon Small Cap Value FundSM
Statement of Operations
For the year ended October 31, 2013 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 74,376 | ||
Dividend income from affiliated securities | 5 | |||
Interest income | 5 | |||
Income derived from securities lending, net | 2,261 | |||
|
| |||
Total investment income | 76,647 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 19,539 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 8,399 | |||
Y Class | 213 | |||
Investor Class | 2,454 | |||
Advisor Class | 187 | |||
Retirement Class | 22 | |||
A Class | 29 | |||
C Class | 16 | |||
AMR Class | 195 | |||
Transfer agent fees: | ||||
Institutional Class | 350 | |||
Y Class | 4 | |||
Investor Class | 57 | |||
Advisor Class | 5 | |||
Retirement Class | 4 | |||
A Class | 4 | |||
C Class | 2 | |||
AMR Class | 9 | |||
Custody and fund accounting fees | 458 | |||
Professional fees | 165 | |||
Registration fees and expenses | 132 | |||
Service fees (Note 2): | ||||
Y Class | 71 | |||
Investor Class | 2,989 | |||
Advisor Class | 156 | |||
Retirement Class | 19 | |||
A Class | 11 | |||
C Class | 6 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 156 | |||
Retirement Class | 37 | |||
A Class | 18 | |||
C Class | 40 | |||
Prospectus and shareholder report expenses | 277 | |||
Insurance fees | 14 | |||
Trustee fees | 278 | |||
Other expenses | 195 | |||
|
| |||
Total expenses | 36,511 | |||
|
| |||
Net fees waived and expenses (reimbursed) or recouped (Note 2) | (3 | ) | ||
|
| |||
Net expenses | 36,508 | |||
|
| |||
Net investment income | 40,139 | |||
|
| |||
Realized and unrealized gain (loss) on investments: | ||||
Net realized gain (loss) from: | ||||
Investments | 405,345 | |||
Commission recapture (Note 3) | 121 | |||
Foreign currency transactions | 6 | |||
Futures contracts | 44,815 | |||
Change in net unrealized appreciation or (depreciation) from: | ||||
Investments | 830,613 | |||
Futures contracts | 11,445 | |||
|
| |||
Net gain on investments | 1,292,345 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 1,332,484 | ||
|
| |||
A Foreign taxes | $ | 204 |
See accompanying notes
16
American Beacon Small Cap Value FundSM
Statement of Changes of Net Assets (in thousands)
Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 40,139 | $ | 26,394 | ||||
Net realized gain from investments, futures contracts, and foreign currency transactions | 450,287 | 231,741 | ||||||
Change in net unrealized appreciation from investments, futures contracts, and foreign currency transactions | 842,058 | 125,094 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 1,332,484 | 383,229 | ||||||
|
|
|
| |||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (28,357 | ) | (8,493 | ) | ||||
Y Class | (583 | ) | (185 | ) | ||||
Investor Class | (6,427 | ) | (197 | ) | ||||
Advisor Class | (423 | ) | — | |||||
Retirement Class | (46 | ) | (14 | ) | ||||
A Class | (41 | ) | (4 | ) | ||||
C Class | (11 | ) | — | |||||
AMR Class | (4,619 | ) | (2,114 | ) | ||||
Net realized gain on investments: | ||||||||
Institutional Class | (61,004 | ) | — | |||||
Y Class | (1,275 | ) | — | |||||
Investor Class | (20,484 | ) | — | |||||
Advisor Class | (1,302 | ) | — | |||||
Retirement Class | (190 | ) | — | |||||
A Class | (120 | ) | — | |||||
C Class | (71 | ) | — | |||||
AMR Class | (8,358 | ) | — | |||||
|
|
|
| |||||
Net distributions to shareholders | (133,311 | ) | (11,007 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from capital share transactions | 566,911 | (123,312 | ) | |||||
|
|
|
| |||||
Net increase in net assets | 1,766,084 | 248,910 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 3,341,329 | 3,092,419 | ||||||
|
|
|
| |||||
End of Period * | $ | 5,107,413 | $ | 3,341,329 | ||||
|
|
|
| |||||
* Includes undistributed net investment income of | $ | 17,740 | $ | 19,858 | ||||
|
|
|
|
See accompanying notes
17
American Beacon Small Cap Value FundSM
October 31, 2013
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Small Cap Value Fund (the “Fund”), a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.
Class Disclosure
The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Fund believes the adoption of these ASUs will not have a material impact on its financial statement disclosures.
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement,
18
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
the Manager receives from the Fund an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Net Amounts Retained by Manager | |||||||||||
0.47 | % | $ | 19,539 | $ | 17,208 | $ | 2,331 |
As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. This fee is included in Income derived from securities lending and Management and investment advisory fees on the Statement of Operations. During the year ended October 31, 2013, securities lending fees paid to the Manager were $260,101.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund, 0.40% of the average daily net assets of the A and C Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund.
Distribution Plans
The Fund, except for the Advisor, Retirement, A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund.
Brokerage Commissions
Affiliated entities of an investment advisor to the Fund received net commissions on purchases and sales of the Fund’s portfolio securities totaling $12,970 for the year ended October 31, 2013.
19
American Beacon Small Cap Value FundSM
October 31, 2013
Investment in Affiliated Funds
The Fund may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) and the American Beacon U.S. Government Money Market Select Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Fund in connection with securities lending may be invested in the Select Funds. The Select Funds and the Fund have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2013, the Manager earned fees from the Select Funds totaling $16,888 on the Fund’s direct investment in the Select Funds and $218,552 from the Fund’s securities lending collateral invested in the Select Funds.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended October 31, 2013, the Fund did not utilize the credit facility.
Expense Reimbursement Plan
The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. During the year ended October 31, 2013, the manager contractually reimbursed $2,549 for the A Class and $672 for the C Class. Of these amounts $251 was payable to the Manager at October 31, 2013. The reimbursed expenses will expire in 2016. The carryover of excess expenses potentially reimbursable to the Manager but not recorded as a liability is $5,000 expiring in 2015. The Manager recouped $1 of excess carryover expenses expiring in 2014 from the Y Class. The Fund did not record a liability for potential reimbursements due to the current assessment that a reimbursement is unlikely.
Sales Commissions
The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $8,573 from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $1,562 in CDSC fees were collected for the Fund.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
20
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.
Valuation Inputs
Various inputs may be used to determine the fair value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):
21
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock* | $ | 4,746,905 | $ | — | $ | — | $ | 4,746,905 | ||||||||
Short-Term Investments - Money Markets | 317,503 | — | — | 317,503 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds | 299,683 | — | — | 299,683 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 5,364,091 | $ | — | $ | — | $ | 5,364,901 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 8,081 | $ | — | $ | — | $ | 8,081 |
* | Refer to the Schedule of Investments for industry information. |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
22
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
4. Securities and Other Investments
Real Estate Investment Trusts
The Fund may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Fund re-characterizes distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.
Other Investment Company Securities and Other Exchange Traded Products
The Fund may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Fund may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
For the six months ended October 31, 2013, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
23
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
The Fund’s average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||||||||
For the Quarter Ended | April 30, 2013 | October 31, 2013 | ||||||
Small Cap Value Fund | 99 | 119 |
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of derivative financial instruments as of October 31, 2013:
Statement of Assets and Liabilities | Derivatives | Fair Value | ||||
Unrealized appreciation of futures contracts | Equity Contracts | $ | 8,081 |
The effect of derivative financial instruments during the year ended October 31, 2013:
Statement of Operations | Derivatives | Balance | ||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 44,815 | |||
Change in net unrealized appreciation or (depreciation) from futures contracts | Equity Contracts | 11,445 |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. Principal Risks
In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Fund has unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.
If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest
24
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
7. Federal Income and Excise Taxes
It is the policy of the Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.
The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statement of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid were as follows (in thousands):
Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 28,357 | $ | 8,493 | ||||
Y Class | 583 | 185 | ||||||
Investor Class | 6,427 | 197 | ||||||
Advisor Class | 423 | — | ||||||
Retirement Class | 46 | 14 | ||||||
A Class | 41 | 4 | ||||||
C Class | 11 | — | ||||||
AMR Class | 4,619 | 2,114 | ||||||
Long-Term Capital gain | ||||||||
Institutional Class | 61,004 | — | ||||||
Y Class | 1,275 | — | ||||||
Investor Class | 20,484 | — | ||||||
Advisor Class | 1,302 | — | ||||||
Retirement Class | 190 | — | ||||||
A Class | 120 | — | ||||||
C Class | 71 | — | ||||||
AMR Class | 8,358 | — | ||||||
|
|
|
| |||||
Total distributions paid | $ | 133,311 | $ | 11,007 | ||||
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
25
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes | $ | 4,229,436 | ||
Unrealized appreciation | 1,225,683 | |||
Unrealized depreciation | (91,028 | ) | ||
|
| |||
Net unrealized appreciation or (depreciation) | 1,134,655 | |||
Undistributed ordinary income | 138,320 | |||
Accumulated long-term gain or (loss) | 328,258 | |||
Other temporary differences | 8,081 | |||
|
| |||
Distributable earnings or (deficits) | $ | 1,609,314 | ||
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains (losses) on certain derivative instruments and reclassifications of income from real estate investment securities.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from reclassifications of foreign currency and income from real estate investment securities as of October 31, 2013 (in thousands):
Paid-in-capital | $ | (59 | ) | |
Undistributed net investment income (loss) | (1,750 | ) | ||
Accumulated net realized gain (loss) | 1,809 | |||
Unrealized appreciation or (depreciation) of investments and futures contracts | — |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
For the year ended October 31, 2013 the Fund did not have capital loss carryovers.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013 were $2,213,166 and $1,906,487, respectively (in thousands).
26
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
A summary of the Fund’s transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):
Affiliate | October 31, 2012 Shares/Fair Value | Purchases | Sales | October 31, 2013 Shares/Fair Value | Dividend Income | |||||||||||||||||||
Direct | USG Select Fund | $ | 5,000 | $ | 15,000 | $ | — | $ | 20,000 | $ | 5 | |||||||||||||
Securities Lending | USG Select Fund | 155,060 | 886,178 | 773,609 | 267,629 | — |
9. Securities Lending
The Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10% and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
As of October 31, 2013, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
Fair Value of Securities on Loan | Non-Cash Collateral | Cash Collateral Posted by Borrower | ||||||||
$ | 292,628 | $ | — | $ | 299,683 |
27
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Cash collateral is listed in the Fund’s Schedule of Investments and is shown on the Statement of Assets and Liabilities. Income earned on these investments is included in Income derived from securities lending in the Statement of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedule of Investments or Statement of Assets and Liabilities.
10. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):
For the Year Ended October 31, 2013
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 37,159 | $ | 902,916 | 3,218 | $ | 79,916 | 8,515 | $ | 204,966 | 1,651 | $ | 39,639 | ||||||||||||||||||||
Reinvestment of dividends | 4,074 | 87,155 | 76 | 1,609 | 1,280 | 26,702 | 83 | 1,725 | ||||||||||||||||||||||||
Shares redeemed | (22,965 | ) | (558,334 | ) | (743 | ) | (18,501 | ) | (12,103 | ) | (280,730 | ) | (678 | ) | (15,889 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 18,268 | $ | 431,737 | 2,551 | $ | 63,024 | (2,308 | ) | $ | (49,062 | ) | 1,056 | $ | 25,475 | ||||||||||||||||||
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Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 241 | $ | 5,651 | 379 | $ | 9,237 | 137 | $ | 3,248 | 6,574 | $ | 163,072 | ||||||||||||||||||||
Reinvestment of dividends | 12 | 236 | 8 | 151 | 4 | 80 | 609 | 12,977 | ||||||||||||||||||||||||
Shares redeemed | (178 | ) | (3,948 | ) | (90 | ) | (2,136 | ) | (17 | ) | (396 | ) | (3,840 | ) | (92,435 | ) | ||||||||||||||||
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Net increase in shares outstanding | 75 | $ | 1,939 | 297 | $ | 7,252 | 124 | $ | 2,932 | 3,343 | $ | 83,614 | ||||||||||||||||||||
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Totals | ||||||||
Shares | Amount | |||||||
Shares sold | 57,874 | $ | 1,408,645 | |||||
Reinvestment of dividends | 6,146 | 130,635 | ||||||
Shares redeemed | (40,614 | ) | (972,369 | ) | ||||
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Net increase in shares outstanding | 23,406 | $ | 566,911 | |||||
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For the Year Ended October 31, 2012
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 23,720 | $ | 479,712 | 849 | $ | 16,953 | 6,070 | $ | 119,765 | 1,164 | $ | 22,488 | ||||||||||||||||||||
Reinvestment of dividends | 434 | 8,287 | 10 | 185 | 10 | 194 | — | — | ||||||||||||||||||||||||
Shares redeemed | (18,398 | ) | (371,650 | ) | (560 | ) | (11,286 | ) | (15,772 | ) | (310,055 | ) | (786 | ) | (15,262 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 5,756 | $ | 116,349 | 299 | $ | 5,852 | (9,692 | ) | $ | (190,096 | ) | 378 | $ | 7,226 | ||||||||||||||||||
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Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 273 | $ | 5,134 | 157 | $ | 3,079 | 68 | $ | 1,319 | 7,278 | $ | 139,525 | ||||||||||||||||||||
Reinvestment of dividends | 1 | 14 | — | 4 | — | — | 111 | 2,114 | ||||||||||||||||||||||||
Shares redeemed | (57 | ) | (1,121 | ) | (57 | ) | (1,158 | ) | (13 | ) | (260 | ) | (10,896 | ) | (211,293 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 217 | $ | 4,027 | 100 | $ | 1,925 | 55 | $ | 1,059 | (3,507 | ) | $ | (69,654 | ) | ||||||||||||||||||
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28
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2013
Totals | ||||||||
Shares | Amount | |||||||
Shares sold | 39,579 | $ | 787,975 | |||||
Reinvestment of dividends | 566 | 10,798 | ||||||
Shares redeemed | (46,539 | ) | (922,085 | ) | ||||
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Net decrease in shares outstanding | (6,394 | ) | $ | (123,312 | ) | |||
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29
American Beacon Small Cap Value Fund SM
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | August 3 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2009 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 21.04 | $ | 18.75 | $ | 17.84 | $ | 14.39 | $ | 12.53 | $ | 20.89 | $ | 18.66 | $ | 17.76 | $ | 14.37 | $ | 14.03 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.25 | 0.17 | 0.08 | 0.08 | 0.10 | 0.22 | 0.15 | 0.06 | 0.14 | 0.00 | ||||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 7.60 | 2.20 | 0.92 | 3.46 | 1.96 | 7.55 | 2.19 | 0.92 | 3.36 | 0.34 | ||||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 7.85 | 2.37 | 1.00 | 3.54 | 2.06 | 7.77 | 2.34 | 0.98 | 3.50 | 0.34 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.27 | ) | (0.08 | ) | (0.09 | ) | (0.09 | ) | (0.20 | ) | (0.27 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | — | |||||||||||||||||||||
Distributions from net realized gains on securities | (0.58 | ) | — | — | — | — | (0.58 | ) | — | — | — | — | ||||||||||||||||||||||||||||
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Total distributions | (0.85 | ) | (0.08 | ) | (0.09 | ) | (0.09 | ) | (0.20 | ) | (0.85 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | — | |||||||||||||||||||||
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Net asset value, end of period | $ | 28.04 | $ | 21.04 | $ | 18.75 | $ | 17.84 | $ | 14.39 | $ | 27.81 | $ | 20.89 | $ | 18.66 | $ | 17.76 | $ | 14.37 | ||||||||||||||||||||
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Total return B | 38.59 | % | 12.71 | % | 5.57 | % | 24.71 | % | 16.97 | % | 38.45 | % | 12.58 | % | 5.49 | % | 24.44 | % | 2.42 | %E | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,430,107 | $ | 2,189,761 | $ | 1,843,285 | $ | 1,470,084 | $ | 1,040,805 | $ | 122,850 | $ | 38,982 | $ | 29,234 | $ | 931 | $ | 1 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses before (reimbursements) or recoupments | 0.82 | % | 0.82 | % | 0.82 | % | 0.81 | % | 0.84 | % | 0.91 | % | 0.91 | % | 0.94 | % | 0.91 | % | 1.11 | %C | ||||||||||||||||||||
Expenses, net of (reimbursements) or recoupments | 0.82 | % | 0.82 | % | 0.82 | % | 0.81 | % | 0.84 | % | 0.91 | % | 0.91 | % | 0.94 | % | 0.91 | % | 1.11 | %C | ||||||||||||||||||||
Net investment income (loss), before (reimbursements) or recoupments | 1.01 | % | 0.87 | % | 0.47 | % | 0.52 | % | 0.87 | % | 0.74 | % | 0.77 | % | 0.30 | % | 0.39 | % | 0.03 | %C | ||||||||||||||||||||
Net investment income (loss), net of (reimbursements) or recoupments | 1.01 | % | 0.87 | % | 0.47 | % | 0.52 | % | 0.87 | % | 0.74 | % | 0.77 | % | 0.30 | % | 0.39 | % | 0.03 | %C | ||||||||||||||||||||
Portfolio turnover rate | 48 | % | 51 | % | 59 | % | 59 | % | 61 | % | 48 | % | 51 | % | 59 | % | 59 | % | 61 | %D |
A | On November 30, 2010, Metropolitan West Capital Management LLC was terminated and ceased managing assets of the Small Cap Value Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
E | Not annualized. |
30
American Beacon Small Cap Value Fund SM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | Advisor Class | |||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2009 | |||||||||||||||||||||||||||||
$ | 20.47 | $ | 18.23 | $ | 17.40 | $ | 14.05 | $ | 12.22 | $ | 20.35 | $ | 18.15 | $ | 17.33 | $ | 13.97 | $ | 12.13 | |||||||||||||||||||
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0.18 | 0.11 | 0.02 | 0.03 | 0.08 | 0.14 | 0.06 | (0.01 | ) | 0.01 | 0.06 | ||||||||||||||||||||||||||||
7.38 | 2.13 | 0.88 | 3.37 | 1.91 | 7.34 | 2.14 | 0.89 | 3.35 | 1.90 | |||||||||||||||||||||||||||||
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7.56 | 2.24 | 0.90 | 3.40 | 1.99 | 7.48 | 2.20 | 0.88 | 3.36 | 1.96 | |||||||||||||||||||||||||||||
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(0.18 | ) | 0.00 | (0.07 | ) | (0.05 | ) | (0.16 | ) | (0.19 | ) | — | (0.06 | ) | — | (0.12 | ) | ||||||||||||||||||||||
(0.58 | ) | — | — | — | — | (0.58 | ) | — | — | — | — | |||||||||||||||||||||||||||
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(0.76 | ) | 0.00 | (0.07 | ) | (0.05 | ) | (0.16 | ) | (0.77 | ) | — | (0.06 | ) | — | (0.12 | ) | ||||||||||||||||||||||
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$ | 27.27 | $ | 20.47 | $ | 18.23 | $ | 17.40 | $ | 14.05 | $ | 27.06 | $ | 20.35 | $ | 18.15 | $ | 17.33 | $ | 13.97 | |||||||||||||||||||
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38.11 | % | 12.31 | % | 5.20 | % | 24.21 | % | 16.59 | % | 37.93 | % | 12.12 | % | 5.07 | % | 24.05 | % | 16.41 | % | |||||||||||||||||||
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$ | 934,041 | $ | 748,550 | $ | 843,400 | $ | 911,737 | $ | 719,239 | $ | 88,033 | $ | 44,731 | $ | 33,032 | $ | 32,295 | $ | 28,333 | |||||||||||||||||||
1.18 | % | 1.18 | % | 1.17 | % | 1.18 | % | 1.15 | % | 1.31 | % | 1.32 | % | 1.32 | % | 1.32 | % | 1.34 | % | |||||||||||||||||||
1.18 | % | 1.18 | % | 1.17 | % | 1.18 | % | 1.15 | % | 1.31 | % | 1.32 | % | 1.32 | % | 1.32 | % | 1.31 | % | |||||||||||||||||||
0.73 | % | 0.51 | % | 0.12 | % | 0.17 | % | 0.59 | % | 0.46 | % | 0.35 | % | (0.02 | )% | 0.03 | % | 0.44 | % | |||||||||||||||||||
0.73 | % | 0.51 | % | 0.12 | % | 0.17 | % | 0.59 | % | 0.46 | % | 0.35 | % | (0.02 | )% | 0.03 | % | 0.48 | % | |||||||||||||||||||
48 | % | 51 | % | 59 | % | 59 | % | 61 | % | 48 | % | 51 | % | 59 | % | 59 | % | 61 | % |
31
American Beacon Small Cap Value Fund SM
Financial Highlights
(For a share outstanding throughout the period)
Retirement Class | A Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | May 1 to Oct. 31, | Year Ended October 31, | May 17 to Oct. 31, | |||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 20.05 | $ | 18.01 | $ | 17.23 | $ | 13.95 | $ | 11.58 | $ | 20.35 | $ | 18.19 | $ | 17.39 | $ | 17.33 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.09 | 0.06 | 0.02 | 0.04 | (0.02 | ) | 0.16 | 0.08 | 0.03 | 0.00 | ||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 7.21 | 2.05 | 0.81 | 3.28 | 2.39 | 7.30 | 2.12 | 0.83 | 0.06 | |||||||||||||||||||||||||||
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Total income (loss) from investment operations | 7.30 | 2.11 | 0.83 | 3.32 | 2.37 | 7.46 | 2.20 | 0.86 | 0.06 | |||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.07 | ) | (0.05 | ) | (0.04 | ) | — | (0.20 | ) | (0.04 | ) | (0.06 | ) | — | ||||||||||||||||||||
Distributions from net realized gains on securities | (0.58 | ) | — | — | — | — | (0.58 | ) | — | — | — | |||||||||||||||||||||||||
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Total distributions | (0.72 | ) | (0.07 | ) | (0.05 | ) | (0.04 | ) | — | (0.78 | ) | (0.04 | ) | (0.06 | ) | — | ||||||||||||||||||||
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Net asset value, end of period | $ | 26.63 | $ | 20.05 | $ | 18.01 | $ | 17.23 | $ | 13.95 | $ | 27.03 | $ | 20.35 | $ | 18.19 | $ | 17.39 | ||||||||||||||||||
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Total return B | 37.52 | % | 11.77 | % | 4.79 | % | 23.82 | % | 20.47 | %E | 37.83 | % | 12.11 | % | 4.92 | % | 0.35 | %E | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,446 | $ | 6,366 | $ | 1,817 | $ | 360 | $ | 1 | $ | 13,418 | $ | 4,064 | $ | 1,822 | $ | 18 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses before reimbursements | 1.60 | % | 1.63 | % | 1.62 | % | 1.54 | % | 1.53 | %C | 1.35 | % | 1.44 | % | 1.57 | % | 1.28 | %C | ||||||||||||||||||
Expenses, net of reimbursements | 1.60 | % | 1.63 | % | 1.62 | % | 1.54 | % | 1.53 | %C | 1.32 | % | 1.34 | % | 1.57 | % | 1.28 | %C | ||||||||||||||||||
Net investment income (loss), before reimbursements | 0.29 | % | 0.02 | % | (0.35 | )% | (0.20 | )% | (0.28 | )%C | 0.30 | % | 0.21 | % | (0.32 | )% | 0.01 | %C | ||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.29 | % | 0.02 | % | (0.35 | )% | (0.20 | )% | (0.28 | )%C | 0.34 | % | 0.32 | % | (0.32 | )% | 0.01 | %C | ||||||||||||||||||
Portfolio turnover rate | 48 | % | 51 | % | 59 | % | 59 | % | 61 | %D | 48 | % | 51 | % | 59 | % | 59 | %F |
A | On November 30, 2010, Metropolitan West Capital Management LLC was terminated and ceased managing assets of the Small Cap Value Fund. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
E | Not annualized. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
32
American Beacon Small Cap Value Fund SM
Financial Highlights
(For a share outstanding throughout the period)
C Class | AMR Class | |||||||||||||||||||||||||||||||||
Year Ended October 31, | Sept. 1 to Oct. 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||||||||||||
$ | 20.07 | $ | 18.04 | $ | 17.37 | $ | 15.62 | $ | 21.00 | $ | 18.71 | $ | 17.76 | $ | 14.32 | $ | 12.48 | |||||||||||||||||
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0.03 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.23 | 0.34 | 0.13 | 0.18 | 0.11 | |||||||||||||||||||||||
7.17 | 2.06 | 0.74 | 1.76 | 7.66 | 2.08 | 0.92 | 3.38 | 1.97 | ||||||||||||||||||||||||||
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7.20 | 2.03 | 0.70 | 1.75 | 7.89 | 2.42 | 1.05 | 3.56 | 2.08 | ||||||||||||||||||||||||||
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(0.09 | ) | — | (0.03 | ) | — | (0.32 | ) | (0.13 | ) | (0.10 | ) | (0.12 | ) | (0.24 | ) | |||||||||||||||||||
(0.58 | ) | — | — | — | (0.58 | ) | — | — | — | — | ||||||||||||||||||||||||
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(0.67 | ) | — | (0.03 | ) | — | (0.90 | ) | (0.13 | ) | (0.10 | ) | (0.12 | ) | (0.24 | ) | |||||||||||||||||||
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$ | 26.60 | $ | 20.07 | $ | 18.04 | $ | 17.37 | $ | 27.99 | $ | 21.00 | $ | 18.71 | $ | 17.76 | $ | 14.32 | |||||||||||||||||
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36.88 | % | 11.25 | % | 4.06 | % | 11.20 | %E | 38.95 | % | 13.00 | % | 5.85 | % | 25.00 | % | 17.30 | % | |||||||||||||||||
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$ | 6,396 | $ | 2,330 | $ | 1,106 | $ | 6 | $ | 502,122 | $ | 306,545 | $ | 338,723 | $ | 320,715 | $ | 271,066 | |||||||||||||||||
2.09 | % | 2.21 | % | 2.60 | % | 2.69 | %C | 0.56 | % | 0.56 | % | 0.56 | % | 0.57 | % | 0.59 | % | |||||||||||||||||
2.07 | % | 2.10 | % | 2.60 | % | 2.10 | %C | 0.56 | % | 0.56 | % | 0.56 | % | 0.57 | % | 0.59 | % | |||||||||||||||||
(0.41 | )% | (0.54 | )% | (1.36 | )% | (1.86 | )%C | 1.26 | % | 1.14 | % | 0.72 | % | 0.76 | % | 1.11 | % | |||||||||||||||||
(0.39 | )% | (0.43 | )% | (1.36 | )% | (1.28 | )%C | 1.26 | % | 1.14 | % | 0.72 | % | 0.76 | % | 1.11 | % | |||||||||||||||||
48 | % | 51 | % | 59 | % | 59 | %F | 48 | % | 51 | % | 59 | % | 59 | % | 61 | % |
33
American Beacon Funds SM
Privacy Policy and Federal Tax Information
October 31, 2013 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2013.
The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Corporate Dividends Received Deduction | 79.14 | % | ||
Qualified Dividend Income | 100.00 | % |
The Small Cap Value Fund designated $92,808,449 as long term capital gains distributions for the year ended October 31, 2013.
Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.
34
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; |
• | a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC; |
• | a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; |
• | a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers; |
• | a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts; |
• | a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm; |
• | an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
• | confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds; |
• | a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; |
• | a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; |
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; |
• | a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations; |
• | a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds; |
• | a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions; |
• | a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers; |
• | a description of any actual or potential conflicts of interest anticipated in managing Fund assets; |
• | a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; |
• | a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf; |
35
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
• | a description of trade allocation procedures among accounts managed by the firm; |
• | a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions; |
• | a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds; |
• | a certification by the firm regarding the reasonable design of its compliance program; |
• | a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review; |
• | confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds; |
• | a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt; |
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; |
• | a description of the firm’s affiliation with any broker-dealer; |
• | a discussion of any anticipated change in the firm’s controlling persons; and |
• | verification of the firm’s insurance coverage with regards to the services provided to the Funds. |
In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:
• | a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; |
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; |
• | a comparison of advisory fee rates and expense ratios for comparable mutual funds; |
• | a profit/loss analysis of the Manager; |
• | an analysis of any material complaints received from Fund shareholders; |
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; |
• | a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds; |
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; |
• | a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds; |
• | a description of the Manager’s securities lending practices and the fees received from such practices; |
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; |
• | a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund; |
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated; and |
• | confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt. |
In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
36
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.
The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement
In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
37
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.
In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.
In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.
Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.
The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.
Additional Considerations and Conclusions with Respect to the American Beacon Small Cap Value Fund
In considering the renewal of the Management Agreement for the American Beacon Small Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Small Cap Value Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and three-year periods ended March 31, 2013 and had performance equal to the peer group median for the five-year period; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.
38
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, MeWhinney & Strauss, LLC (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”), Dreman Value Management, LLC (“Dreman”), Hotchkis and Wiley Capital Management LLC (“Hotchkis”), Opus Capital Group, LLC (“Opus”), and The Boston Company Asset Management, LLC (“TBC”) , the Trustees considered the following additional factors: (1) Barrow and TBC each outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Brandywine outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013, but underperformed for the five- and ten-year periods; (3) Dreman underperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) Hotchkis outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (5) Opus underperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (6) the Manager’s explanation that Brandywine’s underperformance was due in part to its underperformance compared to its peers in 2009 when it focused on small capitalization companies with earnings which generally underperformed those with negative earnings or no earnings that year, and Brandywine’s underperformance in 2010 and 2012 significantly impacted period results; (7) the Manager’s explanation that Opus’ underperformance was due to the underperformance of its portfolio in 2009 when companies with negative earnings or no earnings performed better than companies with positive earnings and during 2012 when Opus’ high quality investment approach was not favored by the market, though this approach historically has provided long-term outperformance and downside protection and the Manager’s belief that the portfolio is currently well positioned to outperform when the strategy returns to favor; (8) the Manager’s explanation that Dreman’s underperformance was due primarily to its underperformance in 2012; (9) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (10) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Small Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Small Cap Value Fund.
39
Trustees and Officers of the American Beacon Funds
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gerard J. Arpey** (55) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Alan D. Feld*** (76) | 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); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (69) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (52) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (59) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (71) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (70) | 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); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). |
40
Trustees and Officers of the American Beacon Funds SM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Barbara J. McKenna, CFA (50) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (67) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
Paul J. Zucconi,CPA (73) | 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) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
Gene L. Needles, Jr. (58) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (54) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 – present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present). | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (47) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (43) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (59) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (52) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present). | ||
Terri L. McKinney (49) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (38) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). |
41
Trustees and Officers of the American Beacon Funds SM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Samuel J. Silver (50) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (42) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc. | ||
John J. Okray (39) | Asst. Secretary since 2010 | Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (56) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, 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. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager. |
*** | Mr. Feld is deemed to be an “interested person” of the 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-advisors. |
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Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
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By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
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By Telephone: Institutional, Y, Investor, Advisor and Retirement Classes Call (800) 658-5811 AMR ClassSM Call (800) 345-2345 | By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month. | Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds and American Beacon Small Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR 10/13
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
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Schedules of Investments | 11 | |||
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Back Cover |
The Emerging Markets Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The risks of investing in foreign securities are heightened when investing in emerging markets. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
The International Equity Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | October 31, 2013 |
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The biggest single change in the life of the global stock markets over the past 12 months may have stemmed from a U.S. event: Ben Bernanke’s announcement in May that the Federal Reserve would begin considering how to end its monthly asset purchases. International stocks, particularly those in emerging markets, went into a prolonged sell-off, not just because of concerns about the strength of the U.S. stock market but concerns about rising interest rates as well.
But the recent changes in emerging markets go beyond the taper, and may simply reflect maturing economies. As Ruchir Sharma of Morgan Stanley Investment Management (a sub-advisor to the American Beacon Emerging Markets Fund) points out in his book Breakout Nations, boom economies begin to slow from 9% to 10% annual growth down to 5% or 6% when their per capita income reaches a middle-class level. Currently, a middle-class income in emerging markets is about $4,000 a year. |
The economies of the BRIC countries – Brazil, Russia, India, China – may be slowing down now because of that middle-class barrier. Though these countries have been driving the emerging markets for the past decade, the global economy could be turning a corner now, with new economies stepping up to fuel the world’s growth.
We believe it takes a seasoned hand to navigate the complexities of an ever-changing global economy. That’s why we have some of the world’s most respected international asset managers as sub-advisors to the American Beacon International Equity Fund and the American Beacon Emerging Markets Fund.
For the 12 months ended October 31, 2013:
• | The American Beacon Emerging Markets Fund (Investor Class) returned 7.89%. |
• | The American Beacon International Equity Fund (Investor Class) returned 27.73%. |
Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
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Gene L. Needles, Jr. President American Beacon Funds |
1
October 31, 2013 (Unaudited)
For the 12-month period that ended October 31, 2013, emerging markets trailed their developed market counterparts. However, starting in August, emerging markets outperformed developed-market equities for three months in a row, as measured by the MSCI Emerging Markets Index and the MSCI World Index, respectively. For the 12-month period as a whole, the MSCI Emerging Markets Index increased by 6.53% (in U.S. dollars).
Within emerging markets, a key contributor to performance at the end of 2012 had been the decidedly more positive tone of economic data from China, which alleviated concerns that the world’s second-largest economy would succumb to a sharp slowdown. The country’s manufacturing sector continued to expand, consumer confidence remained stable and both retail sales and electricity generation were on the rise, providing more evidence that China’s recovery would extend into 2013. Notable reforms also continued in India, where select industries were opened up to foreign investment, creating a more promising long-term market environment.
The rally carried through to the beginning of 2013, helped by news that reinforced the global economic recovery. Headlines from Europe were encouraging, but sentiment was later tempered when a hotly contested bailout of the Cypriot financial system added to fears that the eurozone’s debt crisis could be deepening. Meanwhile, China’s manufacturing sector extended its recovery, albeit at a mild pace, strengthening hopes for a more robust economy as the country completed a key leadership transition. By the end of the first quarter, India’s central bank cut rates and offered very dovish rhetoric for continued easing despite higher inflation, which negatively affected the market.
By the second quarter, volatility set in as investors pondered the end of the easy-money era. In May, when U.S. Federal Reserve chairman Ben Bernanke indicated that the central bank could begin winding down its bond-buying programs, the 10-year Treasury yield spiked. This caused the carry trade, which had supported emerging-market equities and currencies, to unwind quickly. Countries with sizable current account deficits and some dependency on foreign investment to fund such a profile were hit hardest – particularly India, Indonesia, Brazil, South Africa and Turkey.
Eventually, selling pressure abated toward the end of the summer due to a number of positive factors. Supportive signs included relatively consistent data supporting a reacceleration of China’s economy, fairly aggressive government policy responses in some of the markets with the weakest currencies, including India, Indonesia and Turkey, and the U.S. Federal Reserve stepping back from its plan to begin tapering its quantitative-easing policy. At the same time, the broader global economic outlook also improved, with economies in the U.S., Japan and Europe showing signs of growth.
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American Beacon Emerging Markets FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Emerging Markets Fund (the “Fund”) returned 7.89% for the twelve months ended October 31, 2013. The Fund outperformed the MSCI Emerging Markets Index (the “Index”) return of 6.53% and the Lipper Emerging Markets Funds Index return of 7.83% for the period.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/03 Through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional Class (1,6) | 8.39 | % | 14.21 | % | 11.26 | % | $ | 29,058 | ||||||||
Y Class (1,2,6) | 8.22 | % | 14.09 | % | 11.20 | % | 28,911 | |||||||||
Investor Class (1,6) | 7.89 | % | 13.77 | % | 10.88 | % | 28,090 | |||||||||
A Class with sales | 1.72 | % | 12.41 | % | 10.22 | % | 28,064 | |||||||||
A Class without sales | 7.94 | % | 13.75 | % | 10.87 | % | 26,459 | |||||||||
C Class with sales | 6.06 | % | 13.21 | % | 10.61 | 27,403 | ||||||||||
C Class without sales | 7.06 | % | 13.21 | % | 10.61 | % | 27,403 | |||||||||
AMR Class (1,6) | 8.34 | % | 14.29 | % | 11.44 | % | 29,542 | |||||||||
MSCI Emg Mkts | 6.53 | % | 15.34 | % | 12.41 | % | 32,228 | |||||||||
Lipper Emg Mkts Funds Index (5) | 7.83 | % | 15.39 | % | 11.99 | % | 31,029 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of the date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%. |
4. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
5. | The MSCI Emerging Markets Index is a market capitalization weighted index composed of companies that are representative of the market structure of developing countries in Latin America, Asia, Eastern Europe, the Middle East and Africa. The Lipper Emerging Markets Funds Index tracks the results of the 30 largest mutual funds in the Lipper Emerging Markets Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
6. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 1.51%, 1.73%, 1.85%, 2.02%, 3.75%, and 1.25%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index over the twelve-month period due to stock selection, as country allocation detracted from relative performance for the period.
Stock selections in China and Brazil added value during the period, offsetting the impact of poor selections in Mexico and India. In China, investments in Sinotrans Ltd. (up 64.0%) and Guangzhou Automobile Group (up 84.1%) benefited the Fund. In Brazil, the Fund added value through investment in TIM Participacoes S.A. (up 49.7%). Detractors in Mexico included Desarrolladora Homex SAB (down 91.4%) and Urbi Desarrollos Urbanos SAB (down 85.4%), both of which were held for less than the full twelve-month period. Detractors in India included Indian Oil Corp Ltd. (down 29.9%).
3
American Beacon Emerging Markets FundSM
Performance Overview
October 31, 2013 (Unaudited)
Relative contribution from country allocation was negative for the twelve-month period, as a result of underweighting Taiwan (up 18.1%) and overweighting Brazil (down 1.5%). Underweighting Chile (down 14.6%) – the second-worst performing country in the Index – benefited relative performance during the period.
The Fund’s basic philosophy remains focused on investing in attractively valued companies with above-average earnings growth expectations.
Top Ten Holdings (% Net Assets)
Petroleo Brasileiro S.A. | 3.2 | |||||||
Gazprom OAO | 2.0 | |||||||
China Mobile Ltd. | 1.9 | |||||||
KB Financial Group, Inc. | 1.7 | |||||||
Banco Santander Brasil S.A. | 1.6 | |||||||
POSCO | 1.5 | |||||||
Erste Group Bank AG | 1.3 | |||||||
Lukoil OAO | 1.2 | |||||||
Samsung Electronics Co. Ltd. | 3.9 | |||||||
Shinhan Financial Group Co. Ltd. | 1.5 | |||||||
Total Fund Holdings | 299 |
Sector Allocation (% Equities)
Financials | 25.8 | |||
Information Technology | 11.9 | |||
Consumer Discretionary | 10.2 | |||
Energy | 10.2 | |||
Industrials | 9.7 | |||
Telecommunication Services | 9.3 | |||
Materials | 8.8 | |||
Consumer Staples | 7.8 | |||
Utilities | 3.7 | |||
Health Care | 2.2 | |||
Private Placement | 0.4 |
Country Allocation (% Equities)
Hong Kong/China | 19.0 | |||
South Korea | 18.9 | |||
Brazil | 15.4 | |||
India | 9.4 | |||
Taiwan | 6.0 | |||
Russia | 5.5 | |||
Mexico | 4.3 | |||
Turkey | 2.4 | |||
Thailand | 2.4 | |||
Poland | 2.3 | |||
South Africa | 2.2 | |||
Austria | 1.6 | |||
Malaysia | 1.6 | |||
Philippines | 1.4 | |||
Indonesia | 1.3 | |||
Czech Republic | 1.2 | |||
Hungary | 0.9 | |||
United Kingdom | 0.6 | |||
Singapore | 0.5 | |||
Peru | 0.5 | |||
Chile | 0.4 | |||
Switzerland | 0.3 | |||
Netherlands | 0.3 | |||
Colombia | 0.3 | |||
Egypt | 0.3 | |||
Qatar | 0.2 | |||
Argentina | 0.2 | |||
Spain | 0.2 | |||
Japan | 0.2 | |||
United States | 0.1 | |||
United Arab Emirates | 0.1 |
4
American Beacon Emerging Markets FundSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchase payments and redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expenses
The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional
Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.59 | $ | 6.87 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.40 | $ | 6.87 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.64 | $ | 7.37 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.90 | $ | 7.38 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.32 | $ | 9.09 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.18 | $ | 9.10 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.35 | $ | 9.04 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.23 | $ | 9.05 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.44 | $ | 7.17 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.10 | $ | 7.17 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,011.11 | $ | 12.88 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,012.40 | $ | 12.88 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.35%, 1.45%, 1.79%, 1.78%, 2.54% and 1.41% for the Institutional, Y, Investor, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
5
International Equity Market Overview
October 31, 2013 (Unaudited)
The 12-month period through October 31, 2013, marked a time in which most international equity markets rose significantly. A number of macroeconomic events moved markets higher during the period as supportive monetary policy and improving investor sentiment overcame still-muted economic growth.
The beginning of the review period coincided with the onset of new political cycles in economies representing more than half of global economic output. U.S. president Barack Obama won a second term in the White House, senior Communist Party member Xi Jinping was tapped to lead China’s top decision-making body and Shinzo Abe won Japan’s general election, returning to the prime minister’s office.
In Japan, the newly elected prime minister vowed to tackle deflation and economic weakness, bolstering expectations. Japan’s stock market was the pacesetter for the rest of the developed world after Abe took office and the subsequent implementation of an aggressive monetary policy. The temporary resolution of the U.S. fiscal cliff – a combination of tax increases and spending cuts – also buoyed markets into the new year.
Later in 2013, the eurozone’s economy finally expanded after the longest recession since the adoption of the euro, and in Japan, equities were supported by quantitative easing policies coupled with efforts to devalue the yen and combat deflation. However, slowing growth in China and messaging from U.S. policymakers about tapering the bond-buying program were poorly received by markets during the latter part of the second quarter.
In the third quarter and through October, equities advanced globally, supported by better economic data in Europe and Asia. In the United States, the much-discussed quantitative easing taper did not occur, leading to strong stock market performance and better gross domestic product numbers. In Europe, German chancellor Angela Merkel won re-election in a show of support for the austerity and growth measures she has spearheaded in response to Europe’s sovereign debt crisis.
Despite tempered economic growth, it was a strong period for stock markets in the developed world. The MSCI EAFE Index rose by 26.9% in the 12 months ended October 31, 2013, as every country and region represented in the MSCI World Index was positive (when measured in U.S. dollars) for the period, with the exception of Israel, which fell 0.3%.
6
American Beacon International Equity FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the International Equity Fund (the “Fund”) returned 27.73% for the twelve months ended October 31, 2013. The Fund outperformed the MSCI EAFE Index (the “Index”) return of 26.88% and the Lipper International Funds Index return of 24.92% for the period.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/03 Through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional Class (1,8) | 28.14 | % | 13.22 | % | 8.41 | % | $ | 22,418 | ||||||||
Y Class (1,2,8) | 28.04 | % | 13.13 | % | 8.37 | % | 22,332 | |||||||||
Investor Class (1,8) | 27.73 | % | 12.83 | % | 8.08 | % | 21,751 | |||||||||
Advisor Class (1,3,8) | 27.51 | % | 12.57 | % | 7.82 | % | 21,224 | |||||||||
Retirement Class (1,4,8) | 27.22 | % | 12.45 | % | 7.76 | % | 21,114 | |||||||||
A Class with sales charge (1,5,8) | 20.16 | % | 11.38 | % | 7.38 | % | 20,383 | |||||||||
A Class without sales charge (1,5,8) | 27.51 | % | 12.71 | % | 8.02 | % | 21,632 | |||||||||
C Class with sales charge (1,6,8) | 25.56 | % | 12.15 | % | 7.75 | % | 21,099 | |||||||||
C Class without sales charge (1,6,8) | 26.56 | % | 12.15 | % | 7.75 | % | 21,099 | |||||||||
AMR Class (1,8) | 28.56 | % | 13.50 | % | 8.69 | % | 23,016 | |||||||||
Lipper Int’l. Funds Index (7) | 24.92 | % | 12.63 | % | 8.20 | % | 21,987 | |||||||||
MSCI EAFE Index (7) | 26.88 | % | 11.99 | % | 7.71 | % | 21,025 |
1. | Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 8/3/09, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
3. | A portion of the fees charged to the Advisor Class of the Fund was waived through 2007. Performance prior to waiving fees was lower than the actual returns shown for periods through 2007. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by Advisor Class from 10/31/03 up to 5/1/09, the inception date of the Retirement Class, and the returns of the Retirement Class since its inception. Expenses of the Retirement Class are higher than those of the Advisor and Investor Classes. As a result, total returns shown may be higher than they would have been had the Retirement Class been in existence since 10/31/03. |
5. | Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 5.75%. |
6. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
7. | The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. One cannot directly invest in an index. |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.73%, 0.81%, 1.10%, 1.32%, 6.41%, 1.30%, 2.13%, and 0.46%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index over the twelve-month period due to stock selection, as country allocation detracted from relative performance.
7
American Beacon International Equity FundSM
Performance Overview
October 31, 2013 (Unaudited)
Stock selections in the United Kingdom and the Netherlands contributed to the Fund’s relative outperformance. Within the United Kingdom, the Fund added value through investments in Lloyds Banking Group PLC (up 88.8%) and Aviva PLC (up 41.2%). In the Netherlands, Reed Elsevier NV (up 54.5%) and SBM Offshore NV (up 63.2%) benefited relative performance for the period. Stock selections in Japan lagged during the period, including Softbank Corp. (up 41.1%) and Sony Financial Holdings Inc. (down 24.7%). Both stocks were held for less than the full twelve-month period.
From a country allocation perspective, the Fund lost value through overweighting non-Index constituents South Korea and Canada (up 12.7% and 6.0%, respectively), and underweighting Japan (up 34.0%). Underweighting Australia (up 15.5%) contributed positively to relative performance for the year.
Although economic and market conditions vary from period to period, the Fund’s primary strategy of investing in undervalued companies with above-average earnings growth expectations remains consistent.
Top Ten Holdings (% Net Assets)
Novartis AG Reg | 2.5 | |||||||
Sanofi | 2.5 | |||||||
BNP Paribas | 2.3 | |||||||
Lloyds Banking Group PLC | 2.0 | |||||||
Bayer AG Reg | 2.0 | |||||||
Royal Dutch Shell PLC | 1.9 | |||||||
Akzo Nobel | 1.7 | |||||||
Siemens AG Reg | 1.5 | |||||||
Toyota Motor Corp. | 1.4 | |||||||
British American Tobacco plc | 1.5 | |||||||
Total Fund Holdings | 162 |
Sector Allocation (% Equities)
Financials | 22.7 | |||
Consumer Discretionary | 15.7 | |||
Industrials | 12.7 | |||
Health Care | 11.5 | |||
Energy | 10.8 | |||
Materials | 8.2 | |||
Consumer Staples | 6.8 | |||
Telecommunication Services | 5.4 | |||
Information Technology | 4.9 | |||
Utilities | 1.4 |
Country Allocation (% Equities)
United Kingdom | 23.8 | |||
France | 12.6 | |||
Japan | 12.4 | |||
Germany | 11.0 | |||
Switzerland | 8.3 | |||
Netherlands | 6.9 | |||
Sweden | 3.4 | |||
Spain | 2.8 | |||
South Korea | 2.7 | |||
Singapore | 2.5 | |||
Italy | 2.4 | |||
Canada | 2.3 | |||
Hong Kong/China | 1.7 | |||
Belgium | 1.3 | |||
Norway | 1.3 | |||
Ireland | 1.0 | |||
Australia | 0.9 | |||
Finland | 0.7 | |||
Luxembourg | 0.6 | |||
Portugal | 0.5 | |||
Denmark | 0.4 | |||
Austria | 0.3 | |||
Greece | 0.2 |
8
American Beacon International Equity FundSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchase payments and redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expenses
The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Shareholders of the Investor and Institutional Classes that invest in the Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,132.61 | $ | 3.92 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.53 | $ | 3.72 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,132.21 | $ | 4.68 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.82 | $ | 4.43 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,130.98 | $ | 5.80 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.76 | $ | 5.50 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,129.86 | $ | 6.50 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.11 | $ | 6.16 | ||||||
Retirement Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,128.71 | $ | 7.89 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.80 | $ | 7.48 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,129.89 | $ | 6.71 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.90 | $ | 6.36 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,134.81 | $ | 2.42 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.94 | $ | 2.29 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,125.42 | $ | 10.66 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.17 | $ | 10.11 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.73%, 0.87%, 1.08%, 1.21%, 1.47%, 1.25%, 1.99% and 0.45% for the Institutional, Y, Investor, Advisor, Retirement, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
9
American Beacon FundsSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Emerging Markets Fund and American Beacon International Equity Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon Emerging Markets Fund and American Beacon International Equity Fund (two of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon Emerging Markets Fund and American Beacon International Equity Fund at October 31, 2013, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
December 30, 2013
10
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Argentina - 0.21% |
| |||||||
Preferred Stocks - (Cost $365) |
| |||||||
Nortel Inversora S.A., Class B, ADR A | 12,460 | $ | 268 | |||||
|
| |||||||
Austria - 1.54% | ||||||||
Common Stocks - (Cost $1,945) |
| |||||||
Erste Group Bank AG | 46,986 | 1,657 | ||||||
Vienna Insurance Group AG | 5,774 | 306 | ||||||
|
| |||||||
Total Austria |
| 1,963 | ||||||
|
| |||||||
Brazil - 14.50% | ||||||||
Common Stocks - (Cost $18,390) |
| |||||||
Banco Bradesco S.A. | 28,650 | 459 | ||||||
Banco do Brasil S.A. | 81,190 | 1,078 | ||||||
Banco Santander Brasil S.A., ADRA | 298,350 | 2,068 | ||||||
Brasil Insurance Participacoes e Administracao S.A. | 31,600 | 288 | ||||||
BRF - Brasil Foods S.A. | 36,674 | 861 | ||||||
CCR S.A. | 33,651 | 280 | ||||||
Centrais Eletricas Brasileiras S.A., ADRA B | 135,270 | 427 | ||||||
Cia de Saneamento Basico do | 28,260 | 300 | ||||||
Diagnosticos da America S.A. | 55,600 | 285 | ||||||
EDP - Energias do Brasil S.A. | 66,800 | 382 | ||||||
Embraer S.A., ADRA | 34,580 | 1,016 | ||||||
Gerdau S.A., ADRA | 19,150 | 152 | ||||||
Grupo BTG Pactual | 10,400 | 139 | ||||||
JBS S.A. | 114,900 | 413 | ||||||
Magnesita Refratarios S.A. | 67,600 | 188 | ||||||
Marfrig Alimentos S.A. | 172,800 | 351 | ||||||
Petroleo Brasileiro S.A., ADRA B | 117,390 | 2,047 | ||||||
Petroleo Brasileiro S.A., A Shares, ADRA B | 78,999 | 1,435 | ||||||
Petroleo Brasileiro S.A.B | 24,160 | 211 | ||||||
Raia Drogasil S.A.B | 15,025 | 110 | ||||||
Sul America S.A. | 26,243 | 192 | ||||||
Telefonica Brasil S.A., ADRA | 53,215 | 1,180 | ||||||
TIM Participacoes S.A. | 233,300 | 1,189 | ||||||
Ultrapar Participacoes S.A. | 10,372 | 276 | ||||||
Vale S.A., ADRA | 27,860 | 446 | ||||||
Viver Incorporadora e Construtora S.A.B | 431,588 | 58 | ||||||
|
| |||||||
Total Common Stocks |
| 15,831 | ||||||
|
| |||||||
Preferred Stocks - (Cost $2,154) |
| |||||||
Banco Bradesco S.A. | 36,496 | 526 | ||||||
Companhia de Bebidas, ADRA | 13,001 | 484 | ||||||
Gerdau S.A. | 23,500 | 185 | ||||||
Itau Unibanco Holding S.A. | 9,110 | 141 | ||||||
Itau Unibanco Holding S.A., ADRA | 51,938 | 799 | ||||||
Petroleo Brasileiro S.A.B | 42,625 | 389 | ||||||
|
| |||||||
Total Preferred Stocks |
| 2,524 | ||||||
|
| |||||||
Convertible Preferred Bond - (Cost $116) |
| |||||||
Viver Incorporadora e Construtora S.A.B F | 270,118 | 145 | ||||||
|
| |||||||
Total Brazil |
| 18,500 | ||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
Chile - 0.35% |
| |||||||
Common Stocks - (Cost $476) |
| |||||||
S.A.C.I. Falabella | 44,469 | $ | 443 | |||||
|
| |||||||
Colombia - 0.23% |
| |||||||
Common Stocks - (Cost $212) |
| |||||||
Grupo de Inversiones Suramericana S.A. | 10,467 | 207 | ||||||
Preferred Stocks - (Cost $97) |
| |||||||
Grupo de Inversiones Suramericana S.A. | 4,700 | 93 | ||||||
|
| |||||||
Total Colombia |
| 300 | ||||||
|
| |||||||
Czech Republic - 1.09% |
| |||||||
Common Stocks - (Cost $1,391) |
| |||||||
Komercni Banka A.S. | 1,868 | 464 | ||||||
Telefonica Czech Republic A.S. | 56,930 | 928 | ||||||
|
| |||||||
Total Czech Republic |
| 1,392 | ||||||
|
| |||||||
Egypt - 0.31% |
| |||||||
Common Stocks - (Cost $392) |
| |||||||
Eastern Tobacco B | 26,280 | 393 | ||||||
|
| |||||||
Hong Kong/China - 17.91% |
| |||||||
Common Stocks - (Cost $22,817) |
| |||||||
Ajisen China Holdings Ltd. | 384,000 | 403 | ||||||
Anhui Conch Cement Co., Ltd. H | 153,000 | 535 | ||||||
Asia Cement China Holdings Corp. | 91,500 | 50 | ||||||
AsiaInfo-Linkage, Inc.B | 69,810 | 810 | ||||||
Bank of China Ltd. H | 1,691,000 | 794 | ||||||
Beijing Capital International Airport Co. Ltd. H | 562,000 | 395 | ||||||
Beijing Enterprises Holdings Ltd. | 18,000 | 147 | ||||||
Bosideng International Holdings Ltd. | 3,552,000 | 816 | ||||||
Chaoda Modern Agriculture Holdings Ltd.F | 2,200,000 | 253 | ||||||
China Communications Services Corp. Ltd. H | 338,000 | 209 | ||||||
China Construction Bank H | 1,699,325 | 1,320 | ||||||
China Life Insurance Co., Ltd. H | 136,000 | 361 | ||||||
China Mengniu Dairy Co., Ltd. | 61,000 | 267 | ||||||
China Mobile Ltd. | 233,500 | 2,452 | ||||||
China Oilfield Services Ltd. H | 102,000 | 285 | ||||||
China Overseas Grand Oceans Group Ltd. | 53,000 | 63 | ||||||
China Overseas Land & Investment Ltd. | 64,000 | 198 | ||||||
China Pacific Insurance Group Co., Ltd. H | 104,600 | 377 | ||||||
China Petroleum & Chemical Corp. H | 202,800 | 166 | ||||||
China Power International Development Ltd. | 272,800 | 107 | ||||||
China Railway Group Ltd. H | 300,000 | 170 | ||||||
China Resources Power Holdings Co., Ltd. | 98,000 | 257 | ||||||
China Shenhua Energy Co., Ltd. | 105,000 | 319 | ||||||
China Yuchai International Ltd. | 17,000 | 397 | ||||||
Chongqing Changan Automobile Co., Ltd. | 31,600 | 58 | ||||||
CNOOC Ltd. | 206,000 | 421 | ||||||
Cosco International Holdings Ltd. | 1,036,000 | 448 |
See accompanying notes
11
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COSCO Pacific Ltd. | 336,592 | $ | 489 | |||||
Dickson Concepts International Ltd. | 280,445 | 175 | ||||||
Dongfang Electric Corp. H | 182,800 | 294 | ||||||
Dongfeng Motor Group Co., Ltd. H | 244,000 | 344 | ||||||
First Pacific Co., Ltd. | 917,874 | 1,044 | ||||||
Global Bio-chem Technology Group Co., Ltd.B | 1,690,520 | 131 | ||||||
Guangzhou Automobile Group Co., Ltd. H | 127,370 | 151 | ||||||
Industrial & Commercial Bank of China Ltd. H | 901,555 | 630 | ||||||
Lianhua Supermarket Holdings Co., Ltd. H | 480,000 | 308 | ||||||
NetEase, Inc., ADRA | 700 | 47 | ||||||
NWS Holdings Ltd. | 269,303 | 422 | ||||||
Parkson Retail Group Ltd.B | 899,000 | 307 | ||||||
People’s Food Holdings Ltd. | 911 | 1 | ||||||
PICC Property and Casualty Co., Ltd. H | 239,380 | 365 | ||||||
Qihoo 360 Technology Co., Ltd.B | 3,578 | 296 | ||||||
Samsonite International S.A. | 155,400 | 424 | ||||||
Shanghai Industrial Holdings Ltd. | 151,000 | 497 | ||||||
Sihuan Pharmaceutical Holdings Group Ltd. | 184,000 | 137 | ||||||
Sino Biopharmaceutical | 188,000 | 132 | ||||||
Sinotrans Ltd. H | 6,043,058 | 1,488 | ||||||
Sinotrans Shipping Ltd. | 2,868,000 | 943 | ||||||
Tencent Holdings Ltd. | 14,400 | 786 | ||||||
Tsingtao Brewery Co., Ltd. H | 24,000 | 196 | ||||||
Uni-President China Holdings Ltd. | 141,000 | 141 | ||||||
Weiqiao Textile Co., Ltd. H | 898,600 | 548 | ||||||
Xinhua Winshare Publishing and Media Co., Ltd. H | 341,000 | 200 | ||||||
Zhejiang Expressway Co., Ltd. H | 312,000 | 285 | ||||||
|
| |||||||
Total Hong Kong/China |
| 22,859 | ||||||
|
| |||||||
Hungary - 0.88% |
| |||||||
Common Stocks - (Cost $1,306) |
| |||||||
Magyar Telekom Telecommunications PLC | 284,733 | 391 | ||||||
Richter Gedeon NyrtB | 38,160 | 726 | ||||||
|
| |||||||
Total Hungary |
| 1,117 | ||||||
|
| |||||||
India - 8.82% | ||||||||
Common Stocks - (Cost $12,350) |
| |||||||
Asian Paints Ltd.B | 28,345 | 249 | ||||||
Bharat Heavy Electricals Ltd. | 129,720 | 298 | ||||||
Glenmark Pharmaceuticals Ltd. | 30,648 | 281 | ||||||
Grasim Industries Ltd. | 870 | 40 | ||||||
HCL Technologies Ltd. | 13,462 | 239 | ||||||
HDFC Bank Ltd. | 34,590 | 382 | ||||||
Hindustan Petroleum Corp., Ltd. | 86,120 | 283 | ||||||
ICICI Bank Ltd., ADRA | 2,830 | 106 | ||||||
ICICI Bank Ltd. | 15,530 | 284 | ||||||
Idea Cellular Ltd. | 94,034 | 263 | ||||||
India Cements Ltd. | 376,000 | 306 | ||||||
Indian Oil Corp Ltd. | 233,370 | 770 | ||||||
IndusInd Bank Ltd. | 27,113 | 197 | ||||||
ING Bank Ltd.B | 15,352 | 147 | ||||||
ITC Ltd. | 72,130 | 393 | ||||||
Jubilant Life Sciences Ltd. | 64,530 | 105 | ||||||
Maruti Suzuki India Ltd. | 6,030 | 161 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
NMDC Ltd. | 195,450 | $ | 440 | |||||
Oriental Bank of Commerce | 47,910 | 141 | ||||||
Power Grid Corp. of India Ltd. | 147,120 | 242 | ||||||
Punjab National Bank Ltd. | 17,520 | 156 | ||||||
Reliance Industries Ltd. | 61,520 | 917 | ||||||
Reliance Infrastructure Ltd. | 185,525 | 1,307 | ||||||
Rolta India Ltd. | 126,160 | 129 | ||||||
Sesa Sterlite Ltd. ADRB | 4,332 | 56 | ||||||
Sesa Sterlite Ltd. | 76,014 | 249 | ||||||
State Bank of India | 12,120 | 354 | ||||||
State Bank of India, GDRC | 2,380 | 139 | ||||||
Steel Authority of India Ltd. | 279,710 | 283 | ||||||
Sun PharmaceuticalB | 28,898 | 285 | ||||||
Tata Chemicals Ltd.B | 144,820 | 632 | ||||||
Tata Consultancy Services Ltd. | 13,193 | 453 | ||||||
UPL Ltd.B | 274,087 | 732 | ||||||
Zee Entertainment Enterprises Ltd. | 53,868 | 233 | ||||||
|
| |||||||
Total India |
| 11,252 | ||||||
|
| |||||||
Indonesia - 1.25% |
| |||||||
Common Stocks - (Cost $1,898) |
| |||||||
Aneka Tambang Persero Tbk PT | 407,500 | 58 | ||||||
Bank Negara Indonesia Persero Tbk PT | 355,000 | 151 | ||||||
Bank Rakyat Indonesia Persero Tbk PT | 80,500 | 56 | ||||||
Bank Tabungan Negara Persero Tbk PT | 1,588,510 | 137 | ||||||
Gudang Garam Tbk PT | 27,500 | 90 | ||||||
Indosat Tbk PT | 467,500 | 182 | ||||||
Kalbe Farma Tbk PT | 1,671,000 | 193 | ||||||
Matahari Department Store Tbk PT | 189,500 | 207 | ||||||
Semen Indonesia PerseroB | 110,500 | 141 | ||||||
XL Axiata Tbk PTB | 960,603 | 381 | ||||||
|
| |||||||
Total Indonesia |
| 1,596 | ||||||
|
| |||||||
Japan - 0.22% |
| |||||||
Common Stocks - (Cost $343) |
| |||||||
Nexon Co., Ltd. | 24,100 | 281 | ||||||
|
| |||||||
Malaysia - 1.48% |
| |||||||
Common Stocks - (Cost $1,761) |
| |||||||
Astro Malaysia Holdings BhdB | 226,800 | 208 | ||||||
CIMB Group Holdings Bhd | 259,684 | 616 | ||||||
Gamuda Bhd | 177,700 | 274 | ||||||
Genting Bhd | 94,900 | 315 | ||||||
IHH Healthcare Bhd | 149,100 | 195 | ||||||
IJM Corp., Bhd | 154,600 | 284 | ||||||
|
| |||||||
Total Malaysia |
| 1,892 | ||||||
|
| |||||||
Mexico - 4.01% |
| |||||||
Common Stocks - (Cost $6,129) |
| |||||||
ALFA S.A.B. | 177,845 | 487 | ||||||
Alpek SA de C.V.B | 18,000 | 39 | ||||||
America Movil, S.A.B. de C.V., Series L, ADRA | 48,858 | 1,046 | ||||||
Cemex, S.A.B. de C.V., Series L, ADRA | 130,172 | 1,378 | ||||||
Consorcio ARA, S.A.B. de C.V. | 191,100 | 75 | ||||||
Desarrolladora Homex, S.A.B. de C.V.B | 456,630 | 101 | ||||||
Fomento Economico Mexicano, S.A.B. de C.V., Series B, ADRA | 3,892 | 363 | ||||||
Grupo Financiero Banorte, S.A.B. de C.V. | 56,547 | 362 |
See accompanying notes
12
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Grupo Financiero Santander Mexico, S.A.B. de C.V., ADRA | 25,703 | $ | 363 | |||||
Macquarie Mexico Real Estate NPVB | 100,000 | 184 | ||||||
Mexichem, S.A.B. de C.V. | 49,316 | 205 | ||||||
Urbi Desarrollos Urbanos, S.A.B. de C.V.B F | 1,452,850 | 119 | ||||||
Wal-Mart de Mexico, S.A.B. de C.V. | 151,706 | 394 | ||||||
|
| |||||||
Total Mexico |
| 5,116 | ||||||
|
| |||||||
Netherlands - 0.28% |
| |||||||
Common Stocks - (Cost $236) |
| |||||||
Yandex N.V. B | 9,749 | 359 | ||||||
|
| |||||||
Peru - 0.49% |
| |||||||
Common Stocks - (Cost $610) |
| |||||||
Credicorp Ltd. | 4,540 | 620 | ||||||
|
| |||||||
Philippines - 1.29% |
| |||||||
Common Stocks - (Cost $1,382) |
| |||||||
BDO Unibank, Inc.B | 193,930 | 365 | ||||||
Bloomberry Resorts Corp.B | 457,700 | 108 | ||||||
DMCI Holdings, Inc.B | 211,340 | 253 | ||||||
International Container Terminal Services, Inc.B | 115,250 | 277 | ||||||
Lt Group, Inc.B | 247,900 | 95 | ||||||
Metro Pacific Investments Corp. | 2,622,800 | 296 | ||||||
SM Investments Corp. | 12,510 | 248 | ||||||
|
| |||||||
Total Philippines |
| 1,642 | ||||||
|
| |||||||
Poland - 2.14% |
| |||||||
Common Stocks - (Cost $2,354) |
| |||||||
Asseco Poland S.A. | 8,231 | 134 | ||||||
Bank Pekao S.A. | 10,714 | 671 | ||||||
Bank Zachodni WBK S.A. | 6,502 | 792 | ||||||
PKO Bank Polski S.A. | 25,110 | 333 | ||||||
Synthos S.A.B | 271,370 | 460 | ||||||
Telekomunikacja Polska S.A. | 103,683 | 336 | ||||||
|
| |||||||
Total Poland |
| 2,726 | ||||||
|
| |||||||
Qatar - 0.16% |
| |||||||
Common Stocks - (Cost $209) |
| |||||||
Ooredoo QSC B | 5,439 | 208 | ||||||
|
| |||||||
Russia - 5.19% |
| |||||||
Common Stocks - (Cost $6,315) |
| |||||||
Gazprom OAO, ADRA | 270,360 | 2,521 | ||||||
Lukoil OAO, ADRA | 24,234 | 1,587 | ||||||
Lukoil OAO, ADRA | 197 | 13 | ||||||
Mail.ru Group Ltd., GDRB C | 8,370 | 309 | ||||||
Megafon, GDRB C | 7,237 | 263 | ||||||
Mobile TeleSystems OJSC, ADRA | 12,500 | 285 | ||||||
NovaTek OAO, GDRC | 3,000 | 422 | ||||||
Rosneft Oil Co., GDRC | 69,310 | 547 | ||||||
RusHydro JSC, ADRA | 242,140 | 409 | ||||||
Sberbank, ADRA B | 21,530 | 275 | ||||||
|
| |||||||
Total Russia |
| 6,631 | ||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
Singapore - 0.47% |
| |||||||
Common Stocks - (Cost $487) |
| |||||||
Flextronics International Ltd.B | 21,260 | $ | 168 | |||||
Haw Par Corp., Ltd. | 72,957 | 436 | ||||||
|
| |||||||
Total Singapore |
| 604 | ||||||
|
| |||||||
South Africa - 2.10% |
| |||||||
Common Stocks - (Cost $2,648) |
| |||||||
AngloGold Ashanti Ltd. | 12,210 | 186 | ||||||
Barclays Africa Group Ltd. | 28,270 | 435 | ||||||
JD Group Ltd. | 73,390 | 226 | ||||||
Life Healthcare Group Holdings Ltd. | 39,349 | 161 | ||||||
Murray & Roberts Holdings Ltd.B | 63,260 | 193 | ||||||
Naspers Ltd., N Shares | 5,341 | 500 | ||||||
Pick n Pay Stores Ltd. | 34,271 | 162 | ||||||
Sasol Ltd. | 5,978 | 305 | ||||||
Standard Bank Group Ltd. | 31,701 | 403 | ||||||
Telkom S.A. Ltd.B | 42,340 | 111 | ||||||
|
| |||||||
Total South Africa |
| 2,682 | ||||||
|
| |||||||
South Korea - 17.79% |
| |||||||
Common Stocks - (Cost $18,625) |
| |||||||
Cheil Worldwide, Inc. | 4,970 | 122 | ||||||
Cosmax, Inc.B | 1,980 | 97 | ||||||
Coway Co., Ltd. | 4,953 | 283 | ||||||
Doosan Infracore Co., Ltd.B | 5,450 | 78 | ||||||
GS Retail Co., Ltd.B | 3,600 | 99 | ||||||
Hana Financial Group, Inc. | 6,050 | 233 | ||||||
Hite Jinro Ltd. | 14,357 | 353 | ||||||
Hotel Shilla Co., Ltd.B | 2,529 | 163 | ||||||
Hyundai Department Store Co., Ltd. | 528 | 84 | ||||||
Hyundai Development Co-Engineering & Construction | 11,540 | 257 | ||||||
Hyundai Engineering & Construction Co., Ltd. | 5,849 | 336 | ||||||
Hyundai Glovis Co., Ltd | 1,107 | 246 | ||||||
Hyundai Mobis | 4,176 | 1,179 | ||||||
Hyundai Motor Co. | 5,173 | 1,234 | ||||||
Hyundai Rotem CompanyB | 120 | 4 | ||||||
KB Financial Group, Inc. | 55,244 | 2,188 | ||||||
Kia Motors Corp. | 7,970 | 464 | ||||||
Korea Electric Power Corp.B | 26,735 | 715 | ||||||
Korea Electric Power Corp., ADRA | 11,050 | 146 | ||||||
KT Corp., ADRA | 14,860 | 247 | ||||||
KT Corp. | 2,250 | 74 | ||||||
KT Skylife Co., Ltd.B | 2,070 | 55 | ||||||
LG Electronics, Inc. | 6,708 | 430 | ||||||
LG Household & Health Care Ltd. | 337 | 175 | ||||||
LG UPlus Corp. | 15,200 | 174 | ||||||
Lotte Chilsung Beverage Co., Ltd. | 259 | 384 | ||||||
Lotte Confectionery Co., Ltd. | 428 | 734 | ||||||
Mirae Asset Securities Co., Ltd. | 6,870 | 232 | ||||||
Naver Corp. | 166 | 93 | ||||||
NCSoft Corp. | 1,208 | 234 | ||||||
NongShim Co., Ltd. | 768 | 186 | ||||||
Orion Corp. | 118 | 115 | ||||||
Paradise Co. Ltd.B | 4,880 | 125 | ||||||
POSCO | 6,253 | 1,866 | ||||||
Samsung Electronics Co., Ltd. | 3,479 | 4,806 | ||||||
Samsung Fire & Marine Insurance Co., Ltd. | 1,172 | 274 | ||||||
Shinhan Financial Group Co., Ltd. | 43,412 | 1,897 |
See accompanying notes
13
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Shinsegae Co., Ltd. | 2,129 | $ | 537 | |||||
SK Hynix, Inc.B | 5,980 | 180 | ||||||
SK Telecom Co., Ltd. | 1,146 | 245 | ||||||
SK Telecom Co., Ltd., ADRA | 7,640 | 187 | ||||||
Tong Yang Life Insurance | 14,260 | 151 | ||||||
|
| |||||||
Total Common Stocks |
| 21,682 | ||||||
|
| |||||||
Preferred Stocks - (Cost $563) |
| |||||||
Hyundai Motor Co., Ltd. | 7,542 | 821 | ||||||
Samsung Electronics Co., Ltd. | 213 | 206 | ||||||
|
| |||||||
Total Preferred Stocks |
| 1,027 | ||||||
|
| |||||||
Total South Korea |
| 22,709 | ||||||
|
| |||||||
Spain - 0.15% |
| |||||||
Common Stocks - (Cost $200) |
| |||||||
Cemex Latam Holdings S.A. B | 25,491 | 195 | ||||||
|
| |||||||
Switzerland - 0.32% |
| |||||||
Common Stocks - (Cost $360) |
| |||||||
Coca-Cola HBC AG B | 14,332 | 414 | ||||||
|
| |||||||
Taiwan - 5.64% |
| |||||||
Common Stocks - (Cost $6,725) |
| |||||||
Advanced Semiconductor Engineering, Inc. | 150,000 | 147 | ||||||
Chailease Holding Co., Ltd. | 96,250 | 234 | ||||||
China Life Insurance Co., Ltd.B | 115,617 | 113 | ||||||
Cleanaway Co., Ltd. | 16,000 | 100 | ||||||
Compal Electronics, Inc. | 1,255,000 | 983 | ||||||
CTBC Financial Holding Co., Ltd. | 225,785 | 153 | ||||||
Delta Electronics, Inc. | 9,000 | 47 | ||||||
Eclat Textile Co., Ltd. | 14,280 | 157 | ||||||
First Financial Holding Co., Ltd. | 882,085 | 546 | ||||||
Fubon Financial Holding Co., Ltd. | 142,000 | 208 | ||||||
Ginko International Co., Ltd. | 12,000 | 229 | ||||||
HON HAI Precision Industry Co., Ltd. | 237,964 | 603 | ||||||
MediaTek, Inc. | 22,000 | 301 | ||||||
Mega Financial Holding Co., Ltd. | 15,000 | 13 | ||||||
Nan Ya Printed Circuit Board Corp. | 243,099 | 328 | ||||||
Powertech Technology, Inc. | 28,400 | 51 | ||||||
Siliconware Precision Industries Co. | 196,000 | 238 | ||||||
Siliconware Precision Industries Co., ADRA | 15,000 | 90 | ||||||
Simplo Technology Co., Ltd.B | 46,000 | 226 | ||||||
Taiwan Cement Corp. | 83,000 | 121 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. | 390,385 | 1,456 | ||||||
TPK Holding Co., Ltd. | 8,000 | 56 | ||||||
Transcend Information, Inc. | 50,520 | 160 | ||||||
Uni-President Enterprises Corp. | 160,669 | 306 | ||||||
United Microelectronics Corp. | 649,226 | 275 | ||||||
Young Fast Optoelectronics Co., Ltd. | 56,541 | 62 | ||||||
|
| |||||||
Total Taiwan |
| 7,203 | ||||||
|
| |||||||
Thailand - 2.24% |
| |||||||
Common Stocks - (Cost $2,666) |
| |||||||
Advanced Info Service PCL | 44,700 | 338 | ||||||
Bangkok Bank PCL, NVDRD | 66,400 | 440 | ||||||
Bangkok Bank PCL | 55,490 | 367 | ||||||
Bank of AyudhyaB | 106,200 | 131 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Kasikornbank PCL, NVDRD | 22,500 | $ | 137 | |||||
Kasikornbank PCL | 43,700 | 272 | ||||||
Land and Houses PCL, NVDRD | 919,100 | 325 | ||||||
Minor International PCLB | 220,300 | 173 | ||||||
Robinson Dept Store PLCB | 112,600 | 191 | ||||||
Supalai PCL, NVDRD | 23,500 | 13 | ||||||
Supalai Public Co., Ltd.B | 367,600 | 209 | ||||||
Total Access Communication PCL | 40,400 | 146 | ||||||
Total Access Communication PCL, NVDRD | 32,100 | 116 | ||||||
|
| |||||||
Total Thailand |
| 2,858 | ||||||
|
| |||||||
Turkey - 2.27% |
| |||||||
Common Stocks - (Cost $2,765) |
| |||||||
Anadolu Efes Biracilik Ve Malt Sanayii A.S. | 21,452 | 274 | ||||||
Asya Katilim Bankasi A.S. | 124,810 | 127 | ||||||
Aygaz A.S. | 94,590 | 433 | ||||||
Turkcell Iletisim Hizmetleri A.S.B | 32,236 | 200 | ||||||
Turkiye Garanti Bankasi A.S. | 200,910 | 809 | ||||||
Turkiye Sise ve Cam Fabrikalari A.S. | 162,304 | 239 | ||||||
Turkiye Vakiflar Bankasi Tao | 280,147 | 674 | ||||||
Ulker Biskuvi Sanayi A.S. | 18,895 | 145 | ||||||
|
| |||||||
Total Turkey |
| 2,901 | ||||||
|
| |||||||
United Arab Emirates - 0.10% |
| |||||||
Common Stocks - (Cost $128) |
| |||||||
Emaar Properties PJSC B | 75,580 | 125 | ||||||
|
| |||||||
United Kingdom - 0.60% |
| |||||||
Common Stocks - (Cost $688) |
| |||||||
Eurasia Drilling Co., Ltd., GDRC | 428 | 18 | ||||||
JKX Oil & Gas PLCB E | 76,470 | 91 | ||||||
Mondi PLC E | 20,750 | 368 | ||||||
SABMiller PLC E | 5,676 | 295 | ||||||
|
| |||||||
Total United Kingdom |
| 772 | ||||||
|
| |||||||
United States - 0.11% |
| |||||||
Common Stocks - (Cost $98) |
| |||||||
Eurasia Drilling Co., Ltd., GDR C | 3,279 | 139 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 5.25% (Cost $6,702) |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 6,701,910 | 6,702 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.39% (Cost $125,903) |
| 126,862 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.61% |
| 783 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 127,645 | |||||
|
|
Percentages are stated as a percent of net assets.
A | ADR - American Depositary Receipt. |
B | Non-income producing security. |
C | GDR - Global Depositary Receipt. |
D | NVDR - Non Voting Depositary Receipt |
E | PLC – Public Limited Company. |
F | Valued at fair value pursuant to procedures approved by the Board of Trustees. |
See accompanying notes
14
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2013
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||
Mini MSCI Emg Mkt Dec Futures | Long | 130 | December, 2013 | $ | 6,655 | $ | 56 | |||||||
|
|
|
| |||||||||||
$ | 6,655 | $ | 56 | |||||||||||
|
|
|
|
Foreign Currency Contracts Open on October 31, 2013:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Sell | JPY | 121,344 | 11/27/2013 | BOA | $ | 1,060 | $ | — | $ | 1,060 | ||||||||||||||||
Sell | JPY | 121,344 | 11/27/2013 | SSB | 1,045 | — | 1,045 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 2,105 | $ | — | $ | 2,105 | |||||||||||||||||||||
|
|
|
|
|
|
Glossary:
Counterparty Abbreviations: | ||
BOA | Bank of America, N.A. | |
SSB | State Street Bank | |
Currency Abbreviations: | ||
JPY | Japanese Yen |
See accompanying notes
15
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Australia - 0.86% |
| |||||||
Common Stocks - (Cost $14,521) |
| |||||||
Ansell Ltd.A | 373,033 | $ | 6,872 | |||||
James Hardie Industries PLC, CDI I | 1,100,370 | 11,367 | ||||||
|
| |||||||
Total Australia |
| 18,239 | ||||||
|
| |||||||
Austria - 0.31% |
| |||||||
Common Stocks - (Cost $5,930) |
| |||||||
Uniqa Insurance Group AG A | 542,807 | 6,648 | ||||||
|
| |||||||
Belgium - 1.18% |
| |||||||
Common Stocks - (Cost $14,490) |
| |||||||
Anheuser-Busch InBev N.V. | 187,012 | 19,450 | ||||||
KBC Groep N.V.A | 102,483 | 5,587 | ||||||
|
| |||||||
Total Belgium |
| 25,037 | ||||||
|
| |||||||
Canada - 2.17% |
| |||||||
Common Stocks - (Cost $42,642) |
| |||||||
Imperial Oil Ltd.AB | 317,800 | 13,878 | ||||||
MDA Corp.A B C | 116,600 | 8,896 | ||||||
Rogers Communications, Inc., Class B | 218,100 | 9,898 | ||||||
Suncor Energy, Inc. | 170,600 | 6,200 | ||||||
Talisman Energy, Inc. | 578,700 | 7,215 | ||||||
|
| |||||||
Total Canada |
| 46,087 | ||||||
|
| |||||||
Denmark - 0.34% |
| |||||||
Common Stocks - (Cost $7,635) |
| |||||||
Carlsberg A.S. Class BA | 71,799 | 7,169 | ||||||
|
| |||||||
Finland - 0.69% |
| |||||||
Common Stocks - (Cost $8,935) |
| |||||||
Sampo OYJ, Class A | 312,053 | 14,783 | ||||||
|
| |||||||
France - 11.78% |
| |||||||
Common Stocks - (Cost $184,338) |
| |||||||
Alstom S.A. | 231,990 | 8,631 | ||||||
AXA S.A. | 698,972 | 17,462 | ||||||
BNP Paribas | 671,414 | 49,719 | ||||||
Cap Gemini S.A. | 143,105 | 9,414 | ||||||
Cie de St-Gobain | 157,400 | 8,280 | ||||||
Cie Generale des Etablissements Michelin | 90,840 | 9,499 | ||||||
France Telecom S.A. | 438,720 | 6,022 | ||||||
GDF Suez | 266,014 | 6,624 | ||||||
Legrand S.A. | 251,286 | 14,272 | ||||||
Peugeot S.A. | 144,287 | 1,901 | ||||||
Sanofi | 499,636 | 53,280 | ||||||
Technip S.A. | 155,215 | 16,259 | ||||||
Total S.A. | 353,909 | 21,751 | ||||||
Valeo S.A.C | 165,540 | 16,442 | ||||||
Vivendi S.A. | 442,753 | 11,238 | ||||||
|
| |||||||
Total France |
| 250,794 | ||||||
|
| |||||||
Germany - 10.30% |
| |||||||
Common Stocks - (Cost $146,997) |
| |||||||
Bayer AG Reg | 344,011 | 42,757 | ||||||
Bayerische Motoren Werke AG | 125,228 | 14,204 | ||||||
Commerzbank AGA | 401,960 | 5,168 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Daimler AG | 249,594 | $ | 20,482 | |||||
Deutsche Boerse AGA | 98,550 | 7,420 | ||||||
Deutsche Post AG Reg | 230,310 | 7,794 | ||||||
E.ON AG | 159,760 | 2,919 | ||||||
HeidelbergCement AG | 133,810 | 10,548 | ||||||
Infineon Technologies AG | 1,022,540 | 9,898 | ||||||
Linde AG | 39,207 | 7,450 | ||||||
Merck KGaA | 155,275 | 25,847 | ||||||
METRO AG | 219,610 | 10,297 | ||||||
Muenchener Rueckversicherungs AG Reg | 68,556 | 14,325 | ||||||
SAP AG | 105,552 | 8,292 | ||||||
Siemens AG Reg | 249,557 | 31,912 | ||||||
|
| |||||||
Total Germany |
| 219,313 | ||||||
|
| |||||||
Greece - 0.16% |
| |||||||
Common Stocks - (Cost $3,831) |
| |||||||
Piraeus Bank S.A. A | 1,655,581 | 3,439 | ||||||
|
| |||||||
Hong Kong/China - 1.58% |
| |||||||
Common Stocks - (Cost $26,848) |
| |||||||
AIA Group Ltd. | 1,662,800 | 8,439 | ||||||
Cheung Kong Holdings Ltd. | 7,826 | 123 | ||||||
China Merchants Holdings Intl. | 1,320,000 | 4,673 | ||||||
CNOOC Ltd. | 7,028,000 | 14,396 | ||||||
Hutchison Whampoa Ltd. | 238,000 | 2,964 | ||||||
The Link REITC | 10,512 | 53 | ||||||
Yue Yuen Industrial Holdings Ltd. | 1,061,167 | 2,915 | ||||||
|
| |||||||
Total Hong Kong/China |
| 33,563 | ||||||
|
| |||||||
Ireland - 0.95% |
| |||||||
Common Stocks - (Cost $15,891) |
| |||||||
CRH PLC I | 608,660 | 14,863 | ||||||
Smurfit Kappa Group PLC I | 217,948 | 5,312 | ||||||
|
| |||||||
Total Ireland |
| 20,175 | ||||||
|
| |||||||
Italy - 2.25% |
| |||||||
Common Stocks - (Cost $38,756) |
| |||||||
Atlantia SpA | 481,177 | 10,551 | ||||||
ENI SpA | 877,966 | 22,231 | ||||||
Intesa Sanpaolo SpA | 2,847,656 | 7,080 | ||||||
Snam Rete Gas SpA | 753,324 | 3,883 | ||||||
UniCredit SpA | 563,187 | 4,236 | ||||||
|
| |||||||
Total Italy |
| 47,981 | ||||||
|
| |||||||
Japan - 11.59% |
| |||||||
Common Stocks - (Cost $187,967) |
| |||||||
AEON Financial Service Co., Ltd.B | 210,700 | 6,439 | ||||||
Asics Corp. | 615,280 | 10,806 | ||||||
Daikin Industries Ltd. | 152,900 | 8,754 | ||||||
Daiwa House Industry Co. Ltd. | 549,000 | 10,949 | ||||||
Don Quijote Co., Ltd. | 263,100 | 17,445 | ||||||
Hitachi Ltd. | 1,027,000 | 7,154 | ||||||
ITOCHU Corp. | 523,400 | 6,270 | ||||||
Japan Tobacco, Inc. | 309,100 | 11,159 | ||||||
JGC Corp. | 338,000 | 12,873 | ||||||
KDDI Corp. | 336,600 | 18,177 | ||||||
Konica Minolta, Inc. | 1,253,500 | 10,351 | ||||||
LIXIL Group Corp. | 468,700 | 10,954 | ||||||
Nissan Motor Co., Ltd. | 1,060,100 | 10,587 | ||||||
Seven & I Holdings Co., Ltd. | 306,700 | 11,291 | ||||||
Shin-Etsu Chemical Co., Ltd. | 203,200 | 11,428 |
See accompanying notes
16
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Sumitomo Mitsui Financial Group, Inc. | 552,900 | $ | 26,513 | |||||
Tokyo Electron Ltd. | 133,700 | 7,302 | ||||||
Toyota Motor Corp. | 459,000 | 29,689 | ||||||
Trend Micro, Inc.A | 284,900 | 10,546 | ||||||
Yahoo Japan Corp. | 1,741,500 | 8,094 | ||||||
|
| |||||||
Total Japan | 246,781 | |||||||
|
| |||||||
Luxembourg - 0.55% | ||||||||
Common Stocks - (Cost $8,147) |
| |||||||
RTL Group S.A. | 107,460 | 11,672 | ||||||
|
| |||||||
Netherlands - 6.50% | ||||||||
Common Stocks - (Cost $108,490) |
| |||||||
Akzo Nobel | 494,073 | 35,929 | ||||||
European Aeronautic Defence and Space Co., N.V. | 175,106 | 12,033 | ||||||
ING Groep N.V. CVAA | 1,120,680 | 14,277 | ||||||
Koninklijke Philips Electronics N.V. | 240,627 | 8,521 | ||||||
PostNL N.V. | 1,768,987 | 9,276 | ||||||
Randstad Holding N.V. | 49,730 | 3,069 | ||||||
Reed Elsevier N.V. | 1,232,569 | 24,826 | ||||||
SBM Offshore N.V.A D | 692,530 | 14,509 | ||||||
TNT Express N.V. | 1,003,090 | 9,261 | ||||||
Unilever N.V., GDRE | 170,393 | 6,749 | ||||||
|
| |||||||
Total Netherlands | 138,450 | |||||||
|
| |||||||
Norway - 1.18% | ||||||||
Common Stocks - (Cost $19,020) |
| |||||||
Petroleum Geo-Services ASAA | 468,387 | 5,681 | ||||||
Statoil ASA | 340,020 | 8,054 | ||||||
Telenor ASA | 472,140 | 11,341 | ||||||
|
| |||||||
Total Norway | 25,076 | |||||||
|
| |||||||
Portugal - 0.45% | ||||||||
Common Stocks - (Cost $11,695) |
| |||||||
Galp Energia SGPS S.A.A | 358,780 | 6,079 | ||||||
Portugal Telecom SGPS S.A. RegB | 771,300 | 3,482 | ||||||
|
| |||||||
Total Portugal | 9,561 | |||||||
|
| |||||||
Singapore - 2.29% | ||||||||
Common Stocks - (Cost $36,088) |
| |||||||
DBS Group Holdings Ltd. | 1,156,342 | 15,583 | ||||||
Flextronics International Ltd.A | 1,277,170 | 10,077 | ||||||
Sembcorp Industries Ltd. | 1,160,000 | 4,968 | ||||||
Sembcorp Marine Ltd. | 2,058,000 | 7,455 | ||||||
Singapore Telecommunications Ltd. | 3,526,000 | 10,730 | ||||||
|
| |||||||
Total Singapore | 48,813 | |||||||
|
| |||||||
South Korea - 2.56% | ||||||||
Common Stocks - (Cost $49,087) |
| |||||||
Hyundai Mobis | 18,049 | 5,096 | ||||||
KB Financial Group, Inc., ADRF | 182,978 | 7,101 | ||||||
KT&G Corp. | 133,562 | 9,758 | ||||||
LG Electronics, Inc. | 119,709 | 7,674 | ||||||
POSCO | 34,148 | 10,190 | ||||||
Samsung Electronics Co., Ltd. | 1,321 | 1,824 | ||||||
Samsung Electronics Co., Ltd., GDRE | 9,122 | 6,335 | ||||||
SK Telecom Co., Ltd. | 30,873 | 6,607 | ||||||
|
| |||||||
Total South Korea | 54,585 | |||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
Spain - 2.64% | ||||||||
Common Stocks - (Cost $40,372) |
| |||||||
Banco Bilbao Vizcaya Argentaria S.A. | 487,022 | $ | 5,706 | |||||
Mediaset Espana Comunicacion S.A. | 776,703 | 9,491 | ||||||
Red Electrica Corporation S.A.A | 227,574 | 14,186 | ||||||
Repsol S.A. | 312,385 | 8,389 | ||||||
Tecnicas Reunidas S.A. | 141,301 | 7,281 | ||||||
Telefonica S.A. | 637,086 | 11,232 | ||||||
|
| |||||||
Total Spain | 56,285 | |||||||
|
| |||||||
Sweden - 3.16% | ||||||||
Common Stocks - (Cost $48,501) |
| |||||||
Assa Abloy AB, Class B | 324,195 | 16,095 | ||||||
Autoliv, Inc. | 93,749 | 8,413 | ||||||
Ericsson LM, Class B | 788,560 | 9,413 | ||||||
Getinge AB, Class B | 313,520 | 9,943 | ||||||
Skandinaviska Enskilda Banken AB, Class A | 1,011,052 | 12,247 | ||||||
Swedbank AB, Class A | 424,858 | 11,080 | ||||||
|
| |||||||
Total Sweden | 67,191 | |||||||
|
| |||||||
Switzerland - 7.82% | ||||||||
Common Stocks - (Cost $121,978) |
| |||||||
ABB Ltd.A | 275,570 | 7,037 | ||||||
Credit Suisse Group AG Reg | 251,836 | 7,835 | ||||||
GAM Holding AG | 558,826 | 10,470 | ||||||
Givaudan S.A. Reg | 7,622 | 10,820 | ||||||
Novartis AG Reg | 690,352 | 53,602 | ||||||
Roche Holding AG Genusschein | 90,825 | 25,145 | ||||||
Swatch Groug AGA | 16,583 | 10,609 | ||||||
Swiss Re AG | 104,450 | 9,175 | ||||||
UBS AG Reg | 1,150,959 | 22,275 | ||||||
Zurich Insurance Group AG | 33,975 | 9,394 | ||||||
|
| |||||||
Total Switzerland | 166,362 | |||||||
|
| |||||||
Taiwan - 0.01% | ||||||||
Common Stocks - (Cost $221) |
| |||||||
Noble Group Ltd. | 283,000 | 235 | ||||||
|
| |||||||
United Kingdom - 22.38% |
| |||||||
Common Stocks - (Cost $382,091) |
| |||||||
Aviva PLC I | 3,338,669 | 24,042 | ||||||
BAE Systems PLC I | 1,564,304 | 11,405 | ||||||
Balfour Beatty PLC I | 1,430,406 | 6,553 | ||||||
Barclays PLC I | 2,745,730 | 11,605 | ||||||
BG Group PLC I | 1,000,144 | 20,422 | ||||||
BP PLC I | 1,197,900 | 9,271 | ||||||
British American Tobacco PLC I | 572,302 | 31,530 | ||||||
Carnival PLCA I | 196,777 | 7,017 | ||||||
Direct Line Insurance Group | 2,733,421 | 9,861 | ||||||
GlaxoSmithKline PLC I | 450,970 | 11,884 | ||||||
Glencore Xstrata PLCA I | 2,156,531 | 11,756 | ||||||
HSBC Holdings PLC I | 2,236,606 | 24,622 | ||||||
Informa PLC I | 1,865,264 | 16,733 | ||||||
Kingfisher PLC I | 1,692,500 | 10,244 | ||||||
Ladbrokes PLCA I | 1,281,071 | 3,925 | ||||||
Lloyds Banking Group PLCA I | 34,898,063 | 43,382 | ||||||
Marks & Spencer Group PLC I | 1,472,810 | 11,890 | ||||||
Michael Page International PLC I | 776,247 | 6,031 | ||||||
Prudential PLC I | 918,984 | 18,846 | ||||||
Reed Elsevier PLC I | 745,924 | 10,453 | ||||||
Rexam PLCA I | 3,056,344 | 25,458 |
See accompanying notes
17
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Rio Tinto PLC I | 156,808 | $ | 7,940 | |||||
Rolls-Royce Holdings PLC I | 399,000 | 7,357 | ||||||
Royal Dutch Shell PLC, Class A I | 956,362 | 31,842 | ||||||
Royal Dutch Shell PLC, Class B I | 256,246 | 8,873 | ||||||
Standard Chartered PLC I | 705,899 | 16,972 | ||||||
Taylor Wimpey PLC I | 4,741,878 | 8,379 | ||||||
Tesco PLC I | 4,505,929 | 26,313 | ||||||
Unilever PLC I | 305,046 | 12,350 | ||||||
Vodafone Group PLC I | 8,139,006 | 29,297 | ||||||
|
| |||||||
Total Common Stocks |
| 476,253 | ||||||
|
| |||||||
Preferred Stocks - (Cost $55) |
| |||||||
Rolls-Royce Holdings PLCAG I | 34,314,000 | 55 | ||||||
|
| |||||||
Total United Kingdom |
| 476,308 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS- 5.02% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassH | 10,000,000 | 10,000 | ||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 96,787,806 | 96,788 | ||||||
|
| |||||||
Total Short-Term Investments (Cost $106,788) |
| 106,788 | ||||||
|
| |||||||
SECURITIES LENDING COLLATERAL - 1.14% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassH | 19,596,044 | 19,596 | ||||||
DWS Government and Agency Securities Portfolio, Institutional Class | 4,576,001 | 4,576 | ||||||
|
| |||||||
Total Securities Lending Collateral |
| 24,172 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.86% (Cost $1,655,486) |
| 2,125,507 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.14% |
| 3,067 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 2,128,575 | |||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | All or a portion of this security is on loan at October 31, 2013. |
C | REIT - Real Estate Investment Trust. |
D | Private Placement. |
E | GDR - Global Depositary Receipt. |
F | ADR - American Depositary Receipt. |
G | Valued at fair value pursuant to procedures approved by the Board of Trustees. |
H | The Fund is affiliated by having the same investment advisor. |
I | PLC - Public Limited Company. |
See accompanying notes
18
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2013
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
Amsterdam Index Future | Long | 34 | November, 2013 | $ | 3,614 | $ | 84 | |||||||||
CAC 40 Index Futures | Long | 227 | December, 2013 | 13,219 | 364 | |||||||||||
DAX Index Futures | Long | 39 | December, 2013 | 11,973 | 444 | |||||||||||
FTSE 100 Index Futures | Long | 269 | December, 2013 | 28,993 | 534 | |||||||||||
FTSE MIB Index Futures | Long | 23 | December, 2013 | 3,024 | 191 | |||||||||||
Hang Seng Index Futures | Long | 26 | November, 2013 | 3,897 | 73 | |||||||||||
IBEX 35 Index Future | Long | 34 | November, 2013 | 4,557 | 76 | |||||||||||
OMX 30 Index Futures | Long | 212 | November, 2013 | 4,203 | 31 | |||||||||||
S&P TSX 60 Index Futures | Long | 84 | December, 2013 | 12,342 | 507 | |||||||||||
SPI 200 Futures | Long | 85 | December, 2013 | 10,898 | 277 | |||||||||||
TOPIX Index Futures | Long | 226 | December, 2013 | 27,631 | 179 | |||||||||||
|
|
|
| |||||||||||||
$ | 124,351 | $ | 2,760 | |||||||||||||
|
|
|
|
Foreign Currency Contracts Open on October 31, 2013:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||||||
Buy | AUD | 6,017,212 | 12/9/2013 | RBS | $ | 275,908 | $ | — | $ | 275,908 | ||||||||||||||
Buy | AUD | 1,069,349 | 12/9/2013 | BOA | 4,104 | — | 4,104 | |||||||||||||||||
Buy | AUD | 1,059,920 | 12/9/2013 | CBK | — | (3,042 | ) | (3,042 | ) | |||||||||||||||
Sell | AUD | 383,796 | 12/9/2013 | GLM | — | (12,531 | ) | (12,531 | ) | |||||||||||||||
Buy | CAD | 7,904,045 | 12/9/2013 | GLM | 93,675 | — | 93,675 | |||||||||||||||||
Buy | CAD | 1,298,337 | 12/9/2013 | BOA | — | (7,258 | ) | (7,258 | ) | |||||||||||||||
Buy | CAD | 1,134,488 | 12/9/2013 | CBK | 4,241 | — | 4,241 | |||||||||||||||||
Sell | CAD | 491,547 | 12/9/2013 | GLM | — | (3,631 | ) | (3,631 | ) | |||||||||||||||
Buy | CHF | 8,467,732 | 12/9/2013 | CBK | 264,690 | — | 264,690 | |||||||||||||||||
Buy | CHF | 1,204,951 | 12/9/2013 | RBS | — | (4,923 | ) | (4,923 | ) | |||||||||||||||
Buy | CHF | 973,442 | 12/9/2013 | BOA | — | (9,176 | ) | (9,176 | ) | |||||||||||||||
Sell | CHF | 487,272 | 12/9/2013 | BOA | — | (14,532 | ) | (14,532 | ) | |||||||||||||||
Buy | EUR | 18,868,598 | 12/9/2013 | CBK | 573,819 | — | 573,819 | |||||||||||||||||
Buy | EUR | 3,300,918 | 12/9/2013 | RBS | — | (282 | ) | (282 | ) | |||||||||||||||
Buy | EUR | 3,439,418 | 12/9/2013 | SOG | — | (42,747 | ) | (42,747 | ) | |||||||||||||||
Sell | EUR | 1,098,496 | 12/9/2013 | BOA | — | (29,170 | ) | (29,170 | ) | |||||||||||||||
Buy | GBP | 17,297,742 | 12/9/2013 | BRC | 532,607 | — | 532,607 | |||||||||||||||||
Buy | GBP | 2,886,964 | 12/9/2013 | RBS | — | (8,773 | ) | (8,773 | ) | |||||||||||||||
Buy | GBP | 1,994,105 | 12/9/2013 | SOG | — | (474 | ) | (474 | ) | |||||||||||||||
Sell | GBP | 974,611 | 12/9/2013 | BOA | — | (24,927 | ) | (24,927 | ) | |||||||||||||||
Buy | JPY | 14,829,058 | 12/9/2013 | UAG | 165,317 | — | 165,317 | |||||||||||||||||
Buy | JPY | 2,663,145 | 12/9/2013 | BOA | — | (38,669 | ) | (38,669 | ) | |||||||||||||||
Buy | JPY | 3,365,012 | 12/9/2013 | BOA | — | (6,209 | ) | (6,209 | ) | |||||||||||||||
Sell | JPY | 828,963 | 12/9/2013 | SOG | — | (11,479 | ) | (11,479 | ) | |||||||||||||||
Buy | SEK | 2,172,075 | 12/9/2013 | CBK | 48,139 | — | 48,139 | |||||||||||||||||
Buy | SEK | 414,309 | 12/9/2013 | RBS | — | (2,908 | ) | (2,908 | ) | |||||||||||||||
Buy | SEK | 155,424 | 12/9/2013 | BOA | — | (2,391 | ) | (2,391 | ) | |||||||||||||||
Sell | SEK | 96,523 | 12/9/2013 | RBS | — | (1,793 | ) | (1,793 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
$ | 1,962,500 | $ | (224,915 | ) | $ | 1,737,585 | ||||||||||||||||||
|
|
|
|
|
|
Glossary: |
Counterparty Abbreviations: | ||||||||||
BOA | Bank of America, N.A. | GLM | Goldman Sachs Bank | UAG | UBS AG | |||||
BRC | Barclays Bank PLC | RBS | Royal Bank of Scotland | |||||||
CBK | Citibank, N.A. | SOG | Societe Generale | |||||||
Currency Abbreviations: | ||||||||||
AUD | Australian Dollar | EUR | Euro | SEK | Swedish Krona | |||||
CAD | Canadian Dollar | GBP | British Pound | |||||||
CHF | Swiss Franc | JPY | Japanese Yen |
See accompanying notes
19
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Emerging Markets Fund | International Equity Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A D | $ | 126,862 | $ | 2,095,911 | ||||
Investments in affiliated securities, at fair value B | — | 29,596 | ||||||
Foreign currency, at fair value C | 628 | 130 | ||||||
Foreign currency deposits with brokers, at fair value E | — | 14,063 | ||||||
Cash | — | 6,333 | ||||||
Deposit with brokers for futures contracts | 434 | — | ||||||
Receivable for investments sold | 789 | 4,420 | ||||||
Receivable for variation margin on open futures contracts | — | 2,760 | ||||||
Dividends and interest receivable | 215 | 3,369 | ||||||
Receivable for fund shares sold | 284 | 3,961 | ||||||
Receivable for tax reclaims | 6 | 797 | ||||||
Receivable for expense reimbursement (Note 2) | 1 | 6 | ||||||
Unrealized appreciation from foreign currency contracts | 2 | 1,963 | ||||||
Prepaid expenses | 16 | 56 | ||||||
Other assets | 1 | — | ||||||
|
|
|
| |||||
Total assets | 129,238 | 2,163,365 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | 1,050 | 3,490 | ||||||
Payable upon return of securities loaned | — | 24,172 | ||||||
Payable for fund shares redeemed | 51 | 4,159 | ||||||
Payable for variation margin from open futures contracts | 74 | — | ||||||
Management and investment advisory fees payable | 298 | 1,820 | ||||||
Administrative service and service fees payable | 10 | 607 | ||||||
Transfer agent fees payable | 2 | 106 | ||||||
Custody and fund accounting fees payable | 24 | 71 | ||||||
Professional fees payable | 50 | 34 | ||||||
Trustee fees payable | 3 | 24 | ||||||
Payable for prospectus and shareholder reports | 10 | 71 | ||||||
Unrealized depreciation from foreign currency contracts | — | 225 | ||||||
Other liabilities | 21 | 11 | ||||||
|
|
|
| |||||
Total liabilities | 1,593 | 34,790 | ||||||
|
|
|
| |||||
Net Assets | $ | 127,645 | $ | 2,128,575 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | 129,271 | 1,773,726 | ||||||
Undistributed net investment income | 903 | 31,437 | ||||||
Accumulated net realized (loss) | (3,546 | ) | (151,298 | ) | ||||
Unrealized appreciation of investments | 959 | 470,212 | ||||||
Unrealized appreciation of foreign currency contracts | 2 | 1,738 | ||||||
Unrealized appreciation of futures contracts | 56 | 2,760 | ||||||
|
|
|
| |||||
Net assets | $ | 127,645 | $ | 2,128,575 | ||||
|
|
|
| |||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 819,718 | 43,383,926 | ||||||
|
|
|
| |||||
Y Class | 160,514 | 21,239,570 | ||||||
|
|
|
| |||||
Investor Class | 559,459 | 16,994,193 | ||||||
|
|
|
| |||||
Advisor Class | N/A | 256,940 | ||||||
|
|
|
| |||||
Retirement Class | N/A | 35,426 | ||||||
|
|
|
| |||||
A Class | 41,249 | 206,529 | ||||||
|
|
|
| |||||
C Class | 5,198 | 62,643 | ||||||
|
|
|
| |||||
AMR Class | 8,858,855 | 23,217,272 | ||||||
|
|
|
|
See accompanying notes
20
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Emerging Markets Fund | International Equity Fund | |||||||
Net assets (not in thousands): | ||||||||
Institutional Class | $ | 9,961,512 | $ | 870,729,423 | ||||
|
|
|
| |||||
Y Class | $ | 1,962,093 | $ | 441,945,876 | ||||
|
|
|
| |||||
Investor Class | $ | 6,674,975 | $ | 337,424,064 | ||||
|
|
|
| |||||
Advisor Class | $ | N/A | $ | 5,231,812 | ||||
|
|
|
| |||||
Retirement Class | $ | N/A | $ | 754,850 | ||||
|
|
|
| |||||
A Class | $ | 491,293 | $ | 4,113,299 | ||||
|
|
|
| |||||
C Class | $ | 61,507 | $ | 1,219,537 | ||||
|
|
|
| |||||
AMR Class | $ | 108,493,177 | $ | 467,156,090 | ||||
|
|
|
| |||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 12.15 | $ | 20.07 | ||||
|
|
|
| |||||
Y Class | $ | 12.22 | $ | 20.81 | ||||
Investor Class | $ | 11.93 | $ | 19.86 | ||||
|
|
|
| |||||
Advisor Class | $ | N/A | $ | 20.36 | ||||
|
|
|
| |||||
Retirement Class | $ | N/A | $ | 21.31 | ||||
|
|
|
| |||||
A Class (offering price $12.64 and $21.14, respectively) | $ | 11.91 | $ | 19.92 | ||||
|
|
|
| |||||
C Class | $ | 11.83 | $ | 19.47 | ||||
|
|
|
| |||||
AMR Class | $ | 12.25 | $ | 20.12 | ||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 125,903 | $ | 1,625,890 | ||||
B Cost of investments in affiliated securities | $ | — | $ | 29,596 | ||||
C Cost of foreign currency | $ | 630 | $ | 128 | ||||
D Fair value of securities on loan | $ | — | $ | 22,989 | ||||
E Cost of foreign currency deposits with brokers | $ | — | $ | 13,910 |
See accompanying notes
21
American Beacon FundsSM
Statements of Operations
For the year ended October 31, 2013 (in thousands)
Emerging Markets Fund | International Equity Fund | |||||||
Investment Income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 2,672 | $ | 49,458 | ||||
Dividend income from affiliated securities | — | 4 | ||||||
Interest income | — | 44 | ||||||
Income derived from securities lending | — | 2,127 | ||||||
|
|
|
| |||||
Total investment income | 2,672 | 51,633 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 951 | 5,433 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 25 | 2,183 | ||||||
Y Class | 6 | 736 | ||||||
Investor Class | 22 | 1,118 | ||||||
Advisor Class | — | 9 | ||||||
Retirement Class | — | 2 | ||||||
A Class | 3 | 11 | ||||||
C Class | — | 3 | ||||||
AMR Class | 49 | 206 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 1 | 339 | ||||||
Y Class | — | 156 | ||||||
Investor Class | 5 | 96 | ||||||
Advisor Class | — | 1 | ||||||
A Class | — | 1 | ||||||
AMR Class | 2 | 16 | ||||||
Custody and fund accounting fees | 384 | 476 | ||||||
Professional fees | 129 | 106 | ||||||
Registration fees and expenses | 62 | 137 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 2 | 244 | ||||||
Investor Class | 18 | 1,271 | ||||||
Advisor Class | — | 7 | ||||||
Retirement Class | — | 1 | ||||||
A Class | 1 | 4 | ||||||
C Class | — | 1 | ||||||
Distribution fees (Note 2): | ||||||||
Advisor Class | — | 7 | ||||||
Retirement Class | — | 2 | ||||||
A Class | 2 | 7 | ||||||
C Class | — | 7 | ||||||
Prospectus and shareholder report expenses | 20 | 170 | ||||||
Trustee fees | 8 | 120 | ||||||
Other expenses | 17 | 259 | ||||||
|
|
|
| |||||
Total expenses | 1,707 | 13,129 | ||||||
|
|
|
| |||||
Net fees waived and expenses (reimbursed) or recouped (Note 2) | (46 | ) | (88 | ) | ||||
|
|
|
| |||||
Net expenses | 1,661 | 13,041 | ||||||
|
|
|
| |||||
Net investment income | 1,011 | 38,592 | ||||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from: B | ||||||||
Investments | 4,224 | 63,873 | ||||||
Commission recapture (Note 3) | 1 | 51 | ||||||
Foreign currency transactions | (1,806 | ) | (6,336 | ) | ||||
Futures contracts | 561 | 17,348 | ||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||
Investments | 6,371 | 327,981 | ||||||
Foreign currency transactions | (1,130 | ) | (1,520 | ) | ||||
Futures contracts | 86 | 3,047 | ||||||
|
|
|
| |||||
Net gain from investments | 8,307 | 404,444 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | $ | 9,318 | $ | 443,036 | ||||
|
|
|
| |||||
A Foreign taxes | $ | 316 | $ | 4,312 | ||||
B Net of foreign withholding taxes on capital gains | $ | 3 | $ | — |
See accompanying notes
22
American Beacon FundsSM
Statements of Changes of Net Assets (in thousands)
Emerging Markets Fund | International Equity Fund | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 1,011 | $ | 1,410 | $ | 38,592 | $ | 37,716 | ||||||||
Net realized gain (loss) from investments, futures contracts, and foreign currency transactions | 2,980 | (635 | ) | 74,936 | (69,509 | ) | ||||||||||
Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and foreign currency transactions | 5,327 | 2,709 | 329,508 | 152,378 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 9,318 | 3,484 | 443,036 | 120,585 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (92 | ) | (105 | ) | (16,101 | ) | (18,420 | ) | ||||||||
Y Class | (21 | ) | (62 | ) | (55 | ) | (32 | ) | ||||||||
Investor Class | (55 | ) | (71 | ) | (10,473 | ) | (12,396 | ) | ||||||||
Advisor Class | — | — | (106 | ) | (28 | ) | ||||||||||
A Class | (5 | ) | (4 | ) | (40 | ) | (13 | ) | ||||||||
C Class | — | — | (5 | ) | (3 | ) | ||||||||||
AMR Class | (1,078 | ) | (1,312 | ) | (10,213 | ) | (14,493 | ) | ||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | — | (905 | ) | — | — | |||||||||||
Y Class | — | (572 | ) | — | — | |||||||||||
Investor Class | — | (1,012 | ) | — | — | |||||||||||
A Class | — | (46 | ) | — | — | |||||||||||
C Class | — | (1 | ) | — | — | |||||||||||
AMR Class | — | (12,236 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (1,251 | ) | (16,326 | ) | (36,993 | ) | (45,385 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | (2,995 | ) | (1,769 | ) | 269,606 | 88,615 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | 5,072 | (14,611 | ) | 675,649 | 163,815 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 122,573 | 137,184 | 1,452,926 | 1,289,111 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 127,645 | $ | 122,573 | $ | 2,128,575 | $ | 1,452,926 | ||||||||
|
|
|
|
|
|
|
| |||||||||
* Includes undistributed net investment income (loss) of | $ | 903 | $ | 1,040 | $ | 31,437 | $ | 37,686 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes
23
American Beacon FundsSM
October 31, 2013
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Emerging Markets Fund and the American Beacon International Equity Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
Retirement Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.
24
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services. Investment assets of the Funds are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities of the Funds. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Net Amounts Retained by Manager | |||||||||||||
Emerging Markets | 0.81 | % | $ | 951 | $ | 893 | $ | 58 | ||||||||
International Equity | 0.32 | % | 5,433 | 4,315 | 1,118 |
As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers, a fee up to 25% of such loan fees. This fee is netted against securities lending income in the Statements of Operations. During the year ended October 31, 2013, securities lending fees paid to the Manager on behalf of the International Equity Fund was $241,760.
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor and Retirement Classes, 0.40% of the average daily net assets of the A and C Classes, and 0.05% of the average daily net assets of the AMR Class of the Funds.
Distribution Plans
The Funds, except for the Advisor, Retirement, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Funds shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, Retirement, A, and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, 0.50% of the average daily net assets of the Retirement Class, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, Retirement, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor and Retirement Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
25
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Brokerage Commissions
Affiliated entities of an investment advisor to the Emerging Markets Fund received net commissions on purchases and sales of the Fund’s portfolio securities totaling $1,753 for the year ended October 31, 2013.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”)and the U.S. Government Money Market Fund (the “USG Select Fund”), (collectively the “Select Funds”). Cash collateral received by the Funds in connection with securities lending may be invested in the Select Funds. The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2013, fees earned by the Manager from the Select Funds were as follows:
Direct Investments in Select Funds | Securities Lending Collateral Invested in Select Funds | Total | ||||||||||
International Equity | $ | 8,927 | $ | 30,495 | $ | 39,422 |
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended October 31, 2013, the Funds did not utilize the credit facility.
Expense Reimbursement Plan
The Manager voluntary and contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded a Fund’s expense cap. For the year ended October 31, 2013, the Manager reimbursed expenses as follows:
Expense Caps | ||||||||||||||||||
Fund | Class | 11/1/12 to 2/28/13 | 3/1/13 to 10/31/13 | Reimbursed (Recouped) Expenses | Expiration of Reimbursements | |||||||||||||
Emerging Markets | Institutional | 1.35 | % | 1.35 | % | $ | 24,715 | 2016 | ||||||||||
Emerging Markets | Y | 1.45 | % | 1.45 | % | 6,073 | 2016 | |||||||||||
Emerging Markets | Investor | 1.79 | % | 1.79 | % | 12,067 | 2016 | |||||||||||
Emerging Markets | A | 1.79 | % | 1.79 | % | 2,550 | 2016 | |||||||||||
Emerging Markets | C | 2.54 | % | 2.54 | % | 288 | 2016 | |||||||||||
International Equity | Institutional* | 0.72 | %* | 0.71 | %* | 88,916 | 2016 | |||||||||||
International Equity | Retirement | 1.47 | % | 1.47 | % | (38 | ) | 2016 | ||||||||||
International Equity | A | 1.25 | % | 1.25 | % | (1,015 | ) | 2016 | ||||||||||
International Equity | C | 1.99 | % | 1.99 | % | (266 | ) | 2016 |
* | Voluntary Reimbursement |
Of these amounts, $1,192 and $6,195 were a receivable from the Manager to the Emerging Markets and International Equity Funds respectively, at October 31, 2013. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
26
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
Emerging Markets | $ | — | 67,581 | 2014 | ||||||||
Emerging Markets | — | 28,833 | 2015 | |||||||||
International Equity | 1,312 | 2,051 | 2014 | |||||||||
International Equity | 7 | 19,484 | 2015 |
The Manager recouped excess carryover expenses of $31 from the Retirement Class expiring in 2014 and $7 expiring in 2015, $1,015 from the A Class expiring in 2014, and $266 from the C Class expiring in 2014 from the International Equity Fund for the period ended October 31, 2013. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely.
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside collected $424 and $5,192 for Emerging Markets and International Equity Funds, respectively from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $440 in CDSC fees were collected for the Emerging Markets Fund. There were no CDSC fees for the International Equity Fund
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.
27
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the Fund determines that developments between the close of a foreign market and the close of the Exchange will, in its judgment, materially affect the value of some or all of its portfolio securities, the Fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the Exchange. In deciding whether it is necessary to adjust closing prices to reflect fair value, the Fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A Fund may also fair value securities in other situations, such as when a particular foreign market is closed, but the Fund is open. The Fund uses outside pricing services to provide it with closing prices and information to evaluate and/or adjust those prices. The Fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the Fund routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Level 3 – Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
Over-the-counter (“OTC”) financial derivative instruments, such as foreign currency contracts, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker dealer quotations or pricing service providers. Depending on the product and the terms of the transaction, the fair value of the financial derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation
28
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends, and exchange rates. Financial derivatives that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):
Emerging Markets* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Preferred Stocks | $ | 3,912 | $ | — | $ | — | $ | 3,912 | ||||||||
Foreign Common Stocks | 115,592 | 372 | — | 115,964 | ||||||||||||
Foreign Convertible Preferred Bonds | — | 145 | — | 145 | ||||||||||||
U.S. Common Stocks | 139 | — | — | 139 | ||||||||||||
Short-Term Investments – Money Markets | 6,702 | — | — | 6,702 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 126,345 | $ | 517 | $ | — | $ | 126,862 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 56 | $ | — | $ | — | $ | 56 | ||||||||
Forward Currency Contracts | 2 | — | — | 2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Assets | $ | 58 | $ | — | $ | — | $ | 58 | ||||||||
|
|
|
|
|
|
|
| |||||||||
International Equity* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Preferred Stocks | $ | — | $ | 55 | $ | — | $ | 55 | ||||||||
Foreign Common Stocks | 1,994,492 | — | — | 1,994,492 | ||||||||||||
Short-Term Investments – Money Markets | 106,788 | — | — | 106,788 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds | 24,172 | — | — | 24,172 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 2,125,452 | $ | 55 | $ | — | $ | 2,125,507 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 2,760 | $ | — | $ | — | $ | 2,760 | ||||||||
Foreign Currency Contracts | — | 1,963 | — | 1,963 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Assets | $ | 2,760 | $ | 1,963 | $ | — | $ | 4,723 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||
Futures Contracts | $ | — | $ | — | $ | — | $ | — | ||||||||
Foreign Currency Contracts | — | 225 | — | 225 | ||||||||||||
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|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Liabilities | $ | — | $ | 225 | $ | — | $ | 225 | ||||||||
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|
|
* | Refer to the Schedules of Investments for country information. |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
29
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Currency Translation
All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses, and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in fair values of securities held and is reported with all other foreign currency gains and losses in the Funds’ Statements of Operations.
Dividends to Shareholders
Dividends from net investment income of the Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The AMR Class of the International Equity Fund and all Classes of the Emerging Markets Fund impose a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Funds pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
30
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
4. Securities and Other Investments
Restricted Securities
Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the year ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
Forward Foreign Currency Contracts
The Funds may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of the Fund’s securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Funds bear the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Funds also bear the credit risk if the counterparty fails to perform under the contract.
For the six months ended October 31, 2013, the Funds entered into foreign currency exchange contracts primarily for return enhancement and hedging.
The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this disclosure, volume is measured by the amounts bought and sold in USD (in thousands).
Outstanding Contract Amounts Bought | ||||||||
For the Quarter Ended | April 30 2013 | October 31, 2013 | ||||||
Emerging Markets | $ | — | $ | — | ||||
International Equity | 200,873 | 100,516 |
Outstanding Contract Amounts Sold | ||||||||
For the Quarter Ended | April 30 2013 | October 31, 2013 | ||||||
Emerging Markets | $ | 280 | $ | 243 | ||||
International Equity | 60,938 | 4,361 |
31
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. A Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statements of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
For the six months ended October 31, 2013, the Funds entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||||||||
For the Quarter Ended | April 30, 2013 | October 31, 2013 | ||||||
Emerging Markets | 10 | 9 | ||||||
International Equity | 17 | 9 |
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of financial instruments on the Statement of Assets and Liabilities as of October 31, 2013:
Assets | Derivative | Emerging Markets | International Equity | |||||||
Unrealized appreciation of foreign currency contracts | Foreign Exchange Contract | $ | 2 | $ | 1,963 | |||||
Unrealized appreciation of futures contracts | Equity Contract | 56 | 2,760 | |||||||
Liabilities | Derivative | Emerging Markets | International Equity | |||||||
Unrealized depreciation of foreign currency contracts | Foreign Exchange Contract | $ | — | $ | 225 | |||||
Unrealized depreciation of futures contracts | Equity Contract | — | — |
The effect of financial derivative instruments on the Statements of Operations for the year ended October 31, 2013:
Statements of Operations: | Derivative | Emerging Markets | International Equity | |||||||
Net realized gain (loss) from foreign currency contracts | Foreign Exchange Contract | $ | (1,806 | ) | $ | (6,336 | ) | |||
Net realized gain (loss) from futures contracts | Equity Contract | 561 | 17,348 |
32
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Statements of Operations: | Derivative | Emerging Markets | International Equity | |||||||
Change in net unrealized appreciation or (depreciation) of foreign currency contracts | Foreign Exchange Contract | $ | (1,130 | ) | $ | (1,520 | ) | |||
Change in net unrealized appreciation or (depreciation) of futures contracts | Equity Contract | 86 | 3,047 |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. Principal Risks
In the normal course of business the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Fund’s income. Similar to credit risk, the Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Fund’s investments may be illiquid and the Fund may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Fund’s investments in financial derivatives and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.
If the Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Fund’s investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
33
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
7. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treaded as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid were as follows (in thousands):
Emerging Markets | International Equity | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Distributions paid from: Ordinary income* | ||||||||||||||||
Institutional Class | $ | 92 | $ | 105 | $ | 16,101 | $ | 18,420 | ||||||||
Y Class | 21 | 62 | 55 | 32 | ||||||||||||
Investor Class | 55 | 71 | 10,473 | 12,396 | ||||||||||||
Advisor Class | — | — | 106 | 28 | ||||||||||||
A Class | 5 | 4 | 40 | 13 | ||||||||||||
C Class | — | — | 5 | 3 | ||||||||||||
AMR Class | 1,078 | 1,312 | 10,213 | 14,493 | ||||||||||||
Long-Term Capital gains | ||||||||||||||||
Institutional Class | — | 905 | — | — | ||||||||||||
Y Class | — | 572 | — | — | ||||||||||||
Investor Class | — | 1,012 | — | — | ||||||||||||
Advisor Class | — | — | — | — | ||||||||||||
A Class | — | 46 | — | — | ||||||||||||
C Class | — | 1 | — | — | ||||||||||||
AMR Class | — | 12,236 | — | — | ||||||||||||
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| |||||||||
Total distributions paid | $ | 1,251 | $ | 16,326 | $ | 36,993 | $ | 45,385 | ||||||||
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| |||||||||
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2013, the components of distributable earnings or (deficit) on a tax basis were as follows (in thousands):
34
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Emerging Markets | International Equity | |||||||
Cost basis of investments for federal income tax purposes | $ | 129,724 | $ | 1,671,051 | ||||
Unrealized appreciation | 13,083 | 481,976 | ||||||
Unrealized depreciation | (15,945 | ) | (27,520 | ) | ||||
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| |||||
Net unrealized appreciation or (depreciation) | (2,862 | ) | 454,456 | |||||
Undistributed ordinary income | 1,259 | 34,912 | ||||||
Accumulated long-term gain or (loss) | (78 | ) | (137,319 | ) | ||||
Other temporary differences | 55 | 2,800 | ||||||
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| |||||
Distributable earnings or (deficits) | $ | (1,626 | ) | $ | 354,849 | |||
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|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gain (losses) on certain derivative instruments, the realization for tax purposes of unrealized gain (losses) on investments in passive foreign investment companies, and Section 732 basis adjustments.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent differences derived from foreign currency, gains (losses) from sales of investments in passive foreign investment companies, and Section 732 basis adjustments that have been reclassified as of October 31, 2013 (in thousands):
Emerging Markets | International Equity | |||||||
Paid-in-capital | $ | — | $ | 883 | ||||
Undistributed net investment income (loss) | 103 | (7,848 | ) | |||||
Accumulated net realized gain (loss) | (103 | ) | 6,965 | |||||
Unrealized appreciation or depreciation of investments, futures contracts, and foreign currency contracts | — | — |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
35
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Losses incurred that will be carried forward under the provisions of the Act for the year ended October 31, 2013 are as follows (in thousands):
Loss Carryforward Character | ||||||||||||
Fund | Short-Term | Long-Term | Total | |||||||||
Emerging Markets | $ | — | $ | 22 | $ | 22 |
As of October 31, 2013 the capital loss carryforward positions of the Fund prior to the provisions of RIC MOD that may be applied against realized net taxable gains in each succeeding year or until their expiration dates, whichever occurs first, are as follows (in thousands):
Fund | 2017 | |||
International Equity | $ | 134,561 |
The Emerging Markets Fund utilized $1,606 of long-term losses under the provisions of the Act. The International Equity Fund utilized $33,010 of short-term losses and $43,716 of long-term losses under the provisions of the Act. The International Equity Fund utilized $8,584 of loss carryforwards position occurring prior to the provision of the Act (in thousands).
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):
Emerging Markets | International Equity | |||||||
Purchases | $ | 60,840 | $ | 704,605 | ||||
Sales and Maturities | 65,905 | 445,056 |
A summary of the International Equity Fund’s transactions in the USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):
Affiliated Fund | October 31, 2012 Shares/Fair Value | Purchases | Sales | October 31, 2013 Shares/Fair Value | Dividend Income | |||||||||||||||||
Direct | USG Select Fund | $ | 10,000 | $ | 25,000 | $ | 25,000 | $ | 10,000 | $ | 4 | |||||||||||
Securities Lending | USG Select Fund | 1,598 | 787,129 | 769,131 | 19,596 | — |
9. Securities Lending
The International Equity Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to the fair value of the securities loaned, initially in an amount at least equal to 102% of the fair value of domestic securities loaned and 105% of the fair value of international securities loaned. Collateral is monitored and marked to market daily. Daily mark to market amounts are required to be paid to the borrower or received from the borrower by the end of the following business day. This one day settlement for mark to market amounts may result in the collateral being temporarily less than the value of the securities on loan or temporarily more than the required minimum collateral.
To the extent that a loan is collateralized by cash, such cash collateral shall be invested by the securities lending agent (the “Agent”) in money market mutual funds, and other short-term investments, provided the investments meet certain quality and diversification requirements. Securities purchased with cash collateral proceeds are listed in the Fund’s Schedule of Investments and the collateral is shown on the Statements of Assets and Liabilities as a payable.
36
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retained 80%, 10% and 10%, respectively, of the income generated from securities lending.
While securities are on loan, the Fund continues to receive certain income associated with that security and any gain or loss in the market price that may occur during the term of the loan. In the case of domestic equities, the value of any dividend is received in the form of a substitute payment approximately equal to the dividend. In the case of foreign securities, a negotiated amount is received that is less than the actual dividend, but higher than the dividend amount minus the foreign tax that the Fund would be subject to on the dividend.
Securities lending transactions pose certain risks to the Fund, including that the borrower may not provide additional collateral when required or return the securities when due, that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower, that non-cash collateral may be subject to legal constraints in the event of a borrower bankruptcy, and that the cash collateral investments could become illiquid and unable to be used to return collateral to the borrower. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the cash collateral available for return to the borrower and any action which impairs its ability to liquidate non-cash collateral to satisfy a borrower default.
At October 31, 2013, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
Fair Value of Securities on Loan | Non-Cash Collateral | Cash Collateral Posted by Borrower | ||
$22,989 | $— | $24,172 |
Cash collateral is listed in the Fund’s Schedules of Investments and is shown on Statements of Assets and Liabilities. Income earned on these investments is included in Income derived from securities lending in the Statements of Operations.
Non-cash collateral received by the Fund may not be sold or re-pledged except to satisfy a borrower default. Therefore, non-cash collateral is not included on the Fund’s Schedules of Investments or Statements of Assets and Liabilities.
10. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Fund (shares and dollars in thousands):
For the Year ended October 31, 2013
Institutional Class | Y Class | Investor Class | A Class | |||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 167 | $ | 2,009 | 81 | $ | 933 | 117 | $ | 1,351 | 7 | $ | 75 | ||||||||||||||||||||
Redemption fees | — | 1 | — | — | — | 1 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 8 | 92 | 2 | 20 | 5 | 54 | — | 2 | ||||||||||||||||||||||||
Shares redeemed | (84 | ) | (1,000 | ) | (83 | ) | (978 | ) | (320 | ) | (3,650 | ) | (27 | ) | (292 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 91 | $ | 1,102 | — | $ | (25 | ) | (198 | ) | $ | (2,244 | ) | (20 | ) | $ | (215 | ) | |||||||||||||||
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37
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
C Class | AMR Class | Totals | ||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 9 | $ | 100 | 3,016 | $ | 35,188 | 3,397 | $ | 39,656 | |||||||||||||||
Redemption fees | — | — | — | 16 | — | 18 | ||||||||||||||||||
Reinvestment of dividends | — | — | 90 | 1,078 | 105 | 1,246 | ||||||||||||||||||
Shares redeemed | (4 | ) | (43 | ) | (3,285 | ) | (37,952 | ) | (3,803 | ) | (43,915 | ) | ||||||||||||
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Net increase (decrease) in shares outstanding | 5 | $ | 57 | (179 | ) | $ | (1,670 | ) | (301 | ) | $ | (2,995 | ) | |||||||||||
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Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 13,571 | $ | 239,015 | 28,347 | $ | 506,048 | 7,619 | $ | 131,317 | 367 | $ | 6,480 | ||||||||||||||||||||
Redemption fees | — | 71 | — | 17 | — | 40 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 811 | 13,572 | 3 | 42 | 625 | 10,387 | 6 | 106 | ||||||||||||||||||||||||
Shares redeemed | (8,904 | ) | (157,386 | ) | (7,201 | ) | (129,986 | ) | (19,776 | ) | (337,332 | ) | (201 | ) | (3,475 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 5,478 | $ | 95,272 | 21,149 | $ | 376,121 | (11,532 | ) | $ | (195,588 | ) | 172 | $ | 3,111 | ||||||||||||||||||
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Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 35 | $ | 650 | 159 | $ | 2,784 | 61 | $ | 1,045 | 6,551 | $ | 116,120 | ||||||||||||||||||||
Redemption fees | — | — | — | — | — | — | — | 40 | ||||||||||||||||||||||||
Reinvestment of dividends | — | — | 2 | 33 | — | 5 | 610 | 10,213 | ||||||||||||||||||||||||
Shares redeemed | (3 | ) | (59 | ) | (33 | ) | (574 | ) | (6 | ) | (108 | ) | (8,018 | ) | (139,459 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 32 | $ | 591 | 128 | $ | 2,243 | 55 | $ | 942 | (857 | ) | $ | (13,086 | ) | ||||||||||||||||||
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Totals | ||||||||
International Equity Fund | Shares | Amount | ||||||
Shares sold | 56,710 | $ | 1,003,459 | |||||
Redemption fees | — | 168 | ||||||
Reinvestment of dividends | 2,057 | 34,358 | ||||||
Shares redeemed | (44,142 | ) | (768,043 | ) | ||||
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|
|
| |||||
Net increase (decrease) in shares outstanding | 14,625 | $ | 269,606 | |||||
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|
|
For the Year Ended October 31, 2012
Institutional Class | Y Class | Investor Class | A Class | |||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 10 | $ | 113 | 115 | $ | 1,324 | 124 | $ | 1,394 | 33 | $ | 356 | ||||||||||||||||||||
Redemption fees | — | 1 | — | — | — | 1 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 98 | 1,005 | 60 | 626 | 102 | 1,034 | 4 | 40 | ||||||||||||||||||||||||
Shares redeemed | (52 | ) | (596 | ) | (429 | ) | (4,960 | ) | (195 | ) | (2,137 | ) | (10 | ) | (110 | ) | ||||||||||||||||
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| |||||||||||||||||
Net increase (decrease) in shares outstanding | 56 | $ | 523 | (254 | ) | $ | (3,010 | ) | 31 | $ | 292 | 27 | $ | 286 | ||||||||||||||||||
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C Class | AMR Class | Totals | ||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1 | $ | 4 | 2,982 | $ | 34,518 | 3,265 | $ | 37,709 | |||||||||||||||
Redemption fees | — | — | — | 12 | — | 14 | ||||||||||||||||||
Reinvestment of dividends | — | 1 | 1,304 | 13,548 | 1,568 | 16,254 | ||||||||||||||||||
Shares redeemed | (1 | ) | (7 | ) | (4,187 | ) | (47,936 | ) | (4,874 | ) | (55,746 | ) | ||||||||||||
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| |||||||||||||
Net increase (decrease) in shares outstanding | — | $ | (2 | ) | 99 | $ | 142 | (41 | ) | $ | (1,769 | ) | ||||||||||||
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38
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 12,127 | $ | 182,817 | 53 | $ | 806 | 10,041 | $ | 149,389 | 31 | $ | 479 | ||||||||||||||||||||
Redemption fees | — | 8 | — | — | — | 11 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 1,161 | 16,128 | 2 | 32 | 886 | 12,231 | 2 | 28 | ||||||||||||||||||||||||
Shares redeemed | (8,916 | ) | (134,303 | ) | (10 | ) | (150 | ) | (7,985 | ) | (118,644 | ) | (13 | ) | (195 | ) | ||||||||||||||||
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Net increase in shares outstanding | 4,372 | $ | 64,650 | 45 | $ | 688 | 2,942 | $ | 42,987 | 20 | $ | 312 | ||||||||||||||||||||
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Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 3 | $ | 52 | 60 | $ | 920 | 2 | $ | 36 | 4,926 | $ | 74,189 | ||||||||||||||||||||
Redemption fees | — | — | — | — | — | — | — | 4 | ||||||||||||||||||||||||
Reinvestment of dividends | — | — | — | 7 | — | 3 | 1,043 | 14,493 | ||||||||||||||||||||||||
Shares redeemed | — | (2 | ) | (12 | ) | (182 | ) | — | (4 | ) | (7,254 | ) | (109,538 | ) | ||||||||||||||||||
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Net increase (decrease) in shares outstanding | 3 | $ | 50 | 48 | $ | 745 | 2 | $ | 35 | (1,285 | ) | $ | (20,852 | ) | ||||||||||||||||||
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Totals | ||||||||
International Equity Fund | Shares | Amount | ||||||
Shares sold | 27,243 | $ | 408,688 | |||||
Redemption fees | — | 23 | ||||||
Reinvestment of dividends | 3,094 | 42,922 | ||||||
Shares redeemed | (24,190 | ) | (363,018 | ) | ||||
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Net increase (decrease) in shares outstanding | 6,147 | $ | 88,615 | |||||
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39
American Beacon Emerging Markets FundSM
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 11.33 | $ | 12.67 | $ | 14.55 | $ | 11.95 | $ | 9.00 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.09 | 0.12 | 0.16 | 0.13 | 0.05 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.86 | 0.11 | (1.91 | ) | 2.63 | 4.42 | ||||||||||||||
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Total income (loss) from investment operations | 0.95 | 0.23 | (1.75 | ) | 2.76 | 4.47 | ||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.16 | ) | (0.13 | ) | (0.16 | ) | (0.21 | ) | ||||||||||
Distributions from net realized gains on securities | — | (1.41 | ) | — | — | (1.31 | ) | |||||||||||||
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Total distributions | (0.13 | ) | (1.57 | ) | (0.13 | ) | (0.16 | ) | (1.52 | ) | ||||||||||
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Redemption fees added to beneficial interests | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | — | |||||||||||
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Net asset value, end of period | $ | 12.15 | $ | 11.33 | $ | 12.67 | $ | 14.55 | $ | 11.95 | ||||||||||
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Total return C | 8.39 | % | 3.05 | % | (12.18 | )% | 23.36 | % | 60.56 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 9,962 | $ | 8,256 | $ | 8,523 | $ | 9,023 | $ | 9,494 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.64 | % | 1.50 | % | 1.55 | % | 1.58 | % | 1.66 | % | ||||||||||
Expenses, net of reimbursements | 1.35 | % | 1.33 | % | 1.24 | % | 1.39 | % | 1.66 | % | ||||||||||
Net investment income (loss), before reimbursements | 0.58 | % | 0.87 | % | 0.99 | % | 0.58 | % | 0.95 | % | ||||||||||
Net investment income (loss), net of reimbursements | 0.87 | % | 1.04 | % | 1.30 | % | 0.77 | % | 0.95 | % | ||||||||||
Portfolio turnover rate | 55 | % | 44 | % | 101 | % | 64 | % | 70 | % |
A | Brandes Investment Partners, LP was added as an investment manager to the Emerging Markets Fund on December 31, 2010. |
B | Amounts represent less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
40
American Beacon Emerging Markets FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | A Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | March 1 to Oct. 31, | Year Ended October 31, | Year Ended October 31, | May 17 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||||||||
$11.41 | $ | 12.75 | $ | 14.53 | $ | 12.29 | $ | 11.13 | $ | 12.44 | $ | 14.29 | $ | 11.77 | $ | 8.85 | $ | 11.11 | $ | 12.47 | $ | 14.27 | $ | 12.10 | ||||||||||||||||||||||||||
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0.11 | 0.06 | 0.13 | 0.04 | 0.04 | 0.08 | 0.13 | 0.04 | 0.04 | 0.06 | 0.10 | 0.06 | 0.02 | ||||||||||||||||||||||||||||||||||||||
0.83 | 0.16 | (1.91 | ) | 2.20 | 0.84 | 0.12 | (1.93 | ) | 2.63 | 4.35 | 0.82 | 0.09 | (1.85 | ) | 2.15 | |||||||||||||||||||||||||||||||||||
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0.94 | 0.22 | (1.78 | ) | 2.24 | 0.88 | 0.20 | (1.80 | ) | 2.67 | 4.39 | 0.88 | 0.19 | (1.79 | ) | 2.17 | |||||||||||||||||||||||||||||||||||
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(0.13 | ) | (0.15 | ) | — | — | (0.08 | ) | (0.10 | ) | (0.05 | ) | (0.15 | ) | (0.16 | ) | (0.08 | ) | (0.14 | ) | (0.01 | ) | — | ||||||||||||||||||||||||||||
— | (1.41 | ) | — | — | — | (1.41 | ) | — | — | (1.31 | ) | — | (1.41 | ) | — | — | ||||||||||||||||||||||||||||||||||
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(0.13 | ) | (1.56 | ) | — | — | (0.08 | ) | (1.51 | ) | (0.05 | ) | (0.15 | ) | (1.47 | ) | (0.08 | ) | (1.55 | ) | (0.01 | ) | — | ||||||||||||||||||||||||||||
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0.00B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | — | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | |||||||||||||||||||||||||||
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$12.22 | $ | 11.41 | $ | 12.75 | $ | 14.53 | $ | 11.93 | $ | 11.13 | $ | 12.44 | $ | 14.29 | $ | 11.77 | $ | 11.91 | $ | 11.11 | $ | 12.47 | $ | 14.27 | ||||||||||||||||||||||||||
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8.22 | % | 2.91 | % | (12.25 | )% | 18.23 | %D | 7.89 | % | 2.72 | % | (12.65 | )% | 22.85 | % | 60.24 | % | 7.94 | % | 2.64 | % | (12.58 | )% | 17.93 | %D | |||||||||||||||||||||||||
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$1,962 | $ | 1,837 | $ | 5,296 | $ | 13 | $ | 6,675 | $ | 8,427 | $ | 9,030 | $ | 12,478 | $ | 10,208 | $ | 491 | $ | 685 | $ | 433 | $ | 2 | ||||||||||||||||||||||||||
1.75 | % | 1.72 | % | 1.68 | % | 1.82 | %E | 1.95 | % | 1.84 | % | 1.84 | % | 1.86 | % | 1.96 | % | 2.19 | % | 2.01 | % | 2.97 | % | 2.26 | %E | |||||||||||||||||||||||||
1.45 | % | 1.44 | % | 1.33 | % | 1.42 | %E | 1.79 | % | 1.75 | % | 1.70 | % | 1.77 | % | 1.96 | % | 1.79 | % | 1.78 | % | 1.46 | % | 1.78 | %E | |||||||||||||||||||||||||
0.56 | % | (0.05 | )% | 0.99 | % | 0.40 | %E | 0.26 | % | 0.56 | % | 0.77 | % | 0.29 | % | 0.65 | % | 0.11 | % | 0.46 | % | (0.10 | )% | (0.10 | )%E | |||||||||||||||||||||||||
0.86 | % | 0.23 | % | 1.35 | % | 0.79 | %E | 0.42 | % | 0.65 | % | 0.91 | % | 0.37 | % | 0.65 | % | 0.51 | % | 0.69 | % | 1.41 | % | 0.39 | %E | |||||||||||||||||||||||||
55 | % | 44 | % | 101 | % | 64 | %F | 55 | % | 44 | % | 101 | % | 64 | % | 70 | % | 55 | % | 44 | % | 101 | % | 64 | %F |
41
American Beacon Emerging Markets FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | AMR Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | Sept. 1 to Oct. 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.05 | $ | 12.38 | $ | 14.26 | $ | 12.89 | $ | 11.44 | $ | 12.74 | $ | 14.62 | $ | 12.02 | $ | 9.06 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.05 | ) | 0.03 | 0.09 | (0.02 | ) | 0.12 | 0.14 | 0.18 | 0.11 | 0.09 | |||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.83 | 0.07 | (1.97 | ) | 1.39 | 0.83 | 0.12 | (1.97 | ) | 2.68 | 4.43 | |||||||||||||||||||||||||
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Total income (loss) from investment operations | 0.78 | 0.10 | (1.88 | ) | 1.37 | 0.95 | 0.26 | (1.79 | ) | 2.79 | 4.52 | |||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | — | (0.02 | ) | — | — | (0.14 | ) | (0.15 | ) | (0.09 | ) | (0.19 | ) | (0.25 | ) | |||||||||||||||||||||
Distributions from net realized gains on securities | — | (1.41 | ) | — | — | — | (1.41 | ) | — | — | (1.31 | ) | ||||||||||||||||||||||||
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Total distributions | — | (1.43 | ) | — | — | (0.14 | ) | (1.56 | ) | (0.09 | ) | (0.19 | ) | (1.56 | ) | |||||||||||||||||||||
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Redemption fees added to beneficial interests | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | — | |||||||||||||||||||
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Net asset value, end of period | $ | 11.83 | $ | 11.05 | $ | 12.38 | $ | 14.26 | $ | 12.25 | $ | 11.44 | $ | 12.74 | $ | 14.62 | $ | 12.02 | ||||||||||||||||||
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Total return C | 7.06 | % | 1.83 | % | (13.18 | )% | 10.63 | %D | 8.34 | % | 3.26 | % | (12.30 | )% | 23.47 | % | 61.01 | % | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 62 | $ | 5 | $ | 8 | $ | 1 | $ | 108,493 | $ | 103,363 | $ | 113,894 | $ | 128,841 | $ | 109,985 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 3.26 | % | 3.74 | % | 26.96 | % | 4.49 | %E | 1.39 | % | 1.24 | % | 1.31 | % | 1.34 | % | 1.42 | % | ||||||||||||||||||
Expenses, net of reimbursements | 2.54 | % | 2.52 | % | 2.41 | % | 2.54 | %E | 1.39 | % | 1.24 | % | 1.31 | % | 1.34 | % | 1.42 | % | ||||||||||||||||||
Net investment income (loss), before reimbursements | (0.55 | )% | (1.19 | )% | (23.86 | )% | (2.91 | )%E | 0.90 | % | 1.15 | % | 1.29 | % | 0.79 | % | 1.27 | % | ||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.18 | % | 0.03 | % | 0.69 | % | (0.96 | )%E | 0.90 | % | 1.15 | % | 1.29 | % | 0.79 | % | 1.27 | % | ||||||||||||||||||
Portfolio turnover rate | 55 | % | 44 | % | 101 | % | 64 | %F | 55 | % | 44 | % | 101 | % | 64 | % | 70 | % |
A | Brandes Investment Partners, LP was added as an investment manager to the Emerging Markets Fund on December 31, 2010. |
B | Amounts represent less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
42
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43
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012A | 2011 | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 16.05 | $ | 15.27 | $ | 16.67 | $ | 15.51 | $ | 13.13 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.36 | 0.41 | 0.46 | 0.35 | 0.54 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 4.07 | 0.92 | (1.41 | ) | 1.30 | 2.78 | ||||||||||||||
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Total income (loss) from investment operations | 4.43 | 1.33 | (0.95 | ) | 1.65 | 3.32 | ||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.41 | ) | (0.55 | ) | (0.45 | ) | (0.49 | ) | (0.61 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | (0.33 | ) | ||||||||||||||||
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Total distributions | (0.41 | ) | (0.55 | ) | (0.45 | ) | (0.49 | ) | (0.94 | ) | ||||||||||
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| |||||||||||
Redemption fees added to beneficial interest | — | — | — | — | 0.00 | B | ||||||||||||||
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| |||||||||||
Net asset value, end of period | $ | 20.07 | $ | 16.05 | $ | 15.27 | $ | 16.67 | $ | 15.51 | ||||||||||
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Total return C | 28.14 | % | 9.25 | % | (5.89 | )% | 10.81 | % | 27.44 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 870,729 | $ | 608,256 | $ | 512,093 | $ | 527,718 | $ | 489,837 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.72 | % | 0.72 | % | 0.70 | % | 0.71 | % | 0.73 | % | ||||||||||
Expenses, net of reimbursements | 0.71 | % | 0.72 | % | 0.70 | % | 0.71 | % | 0.73 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.16 | % | 2.85 | % | 2.90 | % | 2.21 | % | 2.76 | % | ||||||||||
Net investment income, net of reimbursements | 2.17 | % | 2.85 | % | 2.90 | % | 2.21 | % | 2.76 | % | ||||||||||
Portfolio turnover rate | 27 | % | 60 | % | 33 | % | 38 | % | 41 | % |
A | The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
44
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | |||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Aug. 3 to Oct. 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||||||
2013 | 2012A | 2011 | 2010 | 2009 | 2013 | 2012A | 2011 | 2010 | 2009 | |||||||||||||||||||||||||||||
$ | 16.65 | $ | 15.82 | $ | 17.17 | $ | 15.52 | $ | 14.89 | $ | 15.88 | $ | 15.11 | $ | 16.42 | $ | 15.30 | $ | 12.95 | |||||||||||||||||||
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0.62 | 0.41 | 0.49 | 0.04 | 0.04 | 0.25 | 0.38 | 0.44 | 0.29 | 0.37 | |||||||||||||||||||||||||||||
3.97 | 0.95 | (1.50 | ) | 1.61 | 0.59 | 4.09 | 0.87 | (1.44 | ) | 1.27 | 2.87 | |||||||||||||||||||||||||||
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4.59 | 1.36 | (1.01 | ) | 1.65 | 0.63 | 4.34 | 1.25 | (1.00 | ) | 1.56 | 3.24 | |||||||||||||||||||||||||||
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| |||||||||||||||||||
(0.43 | ) | (0.53 | ) | (0.34 | ) | — | — | (0.36 | ) | (0.48 | ) | (0.31 | ) | (0.44 | ) | (0.56 | ) | |||||||||||||||||||||
— | — | — | — | — | (0.33 | ) | ||||||||||||||||||||||||||||||||
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(0.43 | ) | (0.53 | ) | (0.34 | ) | — | — | (0.36 | ) | (0.48 | ) | (0.31 | ) | (0.44 | ) | (0.89 | ) | |||||||||||||||||||||
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— | — | — | — | 0.00 | B | — | — | — | — | 0.00 | B | |||||||||||||||||||||||||||
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$ | 20.81 | $ | 16.65 | $ | 15.82 | $ | 17.17 | $ | 15.52 | $ | 19.86 | $ | 15.88 | $ | 15.11 | $ | 16.42 | $ | 15.30 | |||||||||||||||||||
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28.04 | % | 9.15 | % | (6.00 | )% | 10.63 | % | 4.23 | %D | 27.81 | % | 8.77 | % | (6.21 | )% | 10.36 | % | 27.08 | % | |||||||||||||||||||
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| |||||||||||||||||||
$ | 441,946 | $ | 1,512 | $ | 720 | $ | 245 | $ | 1 | $ | 337,424 | $ | 453,142 | $ | 386,560 | $ | 463,704 | $ | 445,596 | |||||||||||||||||||
0.85 | % | 0.80 | % | 0.81 | % | 0.81 | % | 0.69 | %E | 1.04 | % | 1.09 | % | 1.07 | % | 1.07 | % | 1.05 | % | |||||||||||||||||||
0.85 | % | 0.80 | % | 0.81 | % | 0.81 | % | 0.69 | %E | 1.04 | % | 1.09 | % | 1.07 | % | 1.07 | % | 1.05 | % | |||||||||||||||||||
2.55 | % | 2.74 | % | 3.00 | % | 1.44 | % | 1.00 | %E | 1.67 | % | 2.50 | % | 2.55 | % | 1.83 | % | 2.45 | % | |||||||||||||||||||
2.55 | % | 2.74 | % | 3.00 | % | 1.44 | % | 1.00 | %E | 1.67 | % | 2.50 | % | 2.55 | % | 1.83 | % | 2.45 | % | |||||||||||||||||||
27 | % | 60 | % | 33 | % | 38 | % | 41 | %F | 27 | % | 60 | % | 33 | % | 38 | % | 41 | % |
45
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Advisor Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012A | 2011 | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 16.36 | $ | 15.52 | $ | 16.74 | $ | 15.20 | $ | 12.86 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | (0.41 | ) | 0.09 | 0.07 | 0.89 | 0.31 | ||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 4.83 | 1.18 | (1.12 | ) | 0.65 | 2.86 | ||||||||||||||
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| |||||||||||
Total income (loss) from investment operations | 4.42 | 1.27 | (1.05 | ) | 1.54 | 3.17 | ||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.42 | ) | (0.43 | ) | (0.17 | ) | — | (0.50 | ) | |||||||||||
Distributions from net realized gains on securities | — | — | (0.33 | ) | ||||||||||||||||
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Total distributions | (0.42 | ) | (0.43 | ) | (0.17 | ) | — | (0.83 | ) | |||||||||||
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Redemption fees added to beneficial interest | — | — | — | — | 0.00 | B | ||||||||||||||
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Net asset value, end of period | $ | 20.36 | $ | 16.36 | $ | 15.52 | $ | 16.74 | $ | 15.20 | ||||||||||
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Total return C | 27.51 | % | 8.59 | % | (6.35 | )% | 10.13 | % | 26.58 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,232 | $ | 1,397 | $ | 1,015 | $ | 746 | $ | 1,722 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before (reimbursements) or recoupments | 1.20 | % | 1.31 | % | 1.24 | % | 1.26 | % | 1.45 | % | ||||||||||
Expenses, net of (reimbursements) or recoupments | 1.20 | % | 1.31 | % | 1.24 | % | 1.26 | % | 1.44 | % | ||||||||||
Net investment income (loss), before (reimbursements) or recoupments | 1.39 | % | 2.18 | % | 2.52 | % | 1.64 | % | 2.25 | % | ||||||||||
Net investment income, net of (reimbursements) or recoupments | 1.39 | % | 2.18 | % | 2.52 | % | 1.64 | % | 2.26 | % | ||||||||||
Portfolio turnover rate | 27 | % | 60 | % | 33 | % | 38 | % | 41 | % |
A | The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
G | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
46
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
Retirement Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | May 1 to Oct. 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012A | 2011 | 2010 | 2009 | 2013 | 2012A | 2011 | 2010 | 2013 | 2012A | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 16.75 | $ | 15.44 | $ | 16.71 | $ | 15.20 | $ | 11.78 | $ | 16.02 | $ | 15.33 | $ | 16.40 | $ | 14.14 | $ | 15.70 | $ | 15.21 | $ | 16.39 | $ | 14.82 | |||||||||||||||||||||||||
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0.19 | (0.45 | ) | 0.39 | 0.22 | 0.12 | 0.43 | 0.48 | 0.12 | 0.03 | 0.52 | 0.40 | 0.07 | (0.01 | ) | ||||||||||||||||||||||||||||||||||||
4.37 | 1.76 | (1.44 | ) | 1.29 | 3.30 | 3.89 | 0.76 | (1.14 | ) | 2.23 | 3.59 | 0.71 | (1.25 | ) | 1.58 | |||||||||||||||||||||||||||||||||||
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4.56 | 1.31 | (1.05 | ) | 1.51 | 3.42 | 4.32 | 1.24 | (1.02 | ) | 2.26 | 4.11 | 1.11 | (1.18 | ) | 1.57 | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||
— | (0.22 | ) | — | — | (0.42 | ) | (0.55 | ) | (0.05 | ) | — | (0.34 | ) | (0.62 | ) | — | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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— | — | (0.22 | ) | — | — | (0.42 | ) | (0.55 | ) | (0.05 | ) | — | (0.34 | ) | (0.62 | ) | — | — | ||||||||||||||||||||||||||||||||
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— | — | — | — | 0.00 | B | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
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$ | 21.31 | $ | 16.75 | $ | 15.44 | $ | 16.71 | $ | 15.20 | $ | 19.92 | $ | 16.02 | $ | 15.33 | $ | 16.40 | $ | 19.47 | $ | 15.70 | $ | 15.21 | $ | 16.39 | |||||||||||||||||||||||||
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27.22 | % | 8.48 | % | (6.37 | )% | 9.93 | % | 29.03 | %D | 27.51 | % | 8.62 | % | (6.26 | )% | 15.98 | %D | 26.56 | % | 7.89 | % | (7.20 | )% | 10.59 | %D | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||
$ | 755 | $ | 52 | $ | 1 | $ | 1 | $ | 1 | $ | 4,113 | $ | 1,255 | $ | 461 | $ | 4 | $ | 1,220 | $ | 115 | $ | 76 | $ | 1 | |||||||||||||||||||||||||
1.46 | % | 6.40 | % | 3.43 | % | 1.66 | % | 1.48 | %E | 1.21 | % | 1.29 | % | 2.24 | % | 1.26 | %E | 1.95 | % | 2.12 | % | 7.39 | % | 2.60 | %E | |||||||||||||||||||||||||
1.47 | % | 1.24 | % | 1.30 | % | 1.47 | % | 1.48 | %E | 1.25 | % | 1.26 | % | 1.22 | % | �� | 1.25 | %E | 1.99 | % | 1.98 | % | 1.95 | % | 1.99 | %E | ||||||||||||||||||||||||
1.78 | % | (3.06 | )% | 0.17 | % | 1.25 | % | 1.72 | %E | 1.73 | % | 2.03 | % | 1.03 | % | 0.96 | %E | 1.13 | % | 1.56 | % | (4.32 | )% | (0.81 | )%E | |||||||||||||||||||||||||
1.78 | % | 2.10 | % | 2.30 | % | 1.44 | % | 1.72 | %E | 1.69 | % | 2.07 | % | 2.05 | % | 0.98 | %E | 1.09 | % | 1.70 | % | 1.11 | % | (0.20 | )%E | |||||||||||||||||||||||||
27 | % | 60 | % | 33 | % | 38 | % | 41 | %F | 27 | % | 60 | % | 33 | % | 38 | %G | 27 | % | 60 | % | 33 | % | 38 | %G |
47
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
AMR Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012A | 2011 | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 16.08 | $ | 15.31 | $ | 16.78 | $ | 15.61 | $ | 13.25 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.46 | 0.49 | 0.53 | 0.39 | 0.37 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 4.04 | 0.87 | (1.44 | ) | 1.30 | 2.99 | ||||||||||||||
|
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|
|
|
|
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| |||||||||||
Total income (loss) from investment operations | 4.50 | 1.36 | (0.91 | ) | 1.69 | 3.36 | ||||||||||||||
|
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.46 | ) | (0.59 | ) | (0.56 | ) | (0.52 | ) | (0.67 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | (0.33 | ) | ||||||||||||||||
|
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| |||||||||||
Total distributions | (0.46 | ) | (0.59 | ) | (0.56 | ) | (0.52 | ) | (1.00 | ) | ||||||||||
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| |||||||||||
Redemption fees added to beneficial interest | — | — | — | — | 0.00 | B | ||||||||||||||
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| |||||||||||
Net asset value, end of period | $ | 20.12 | $ | 16.08 | $ | 15.31 | $ | 16.78 | $ | 15.61 | ||||||||||
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| |||||||||||
Total return C | 28.56 | % | 9.47 | % | (5.62 | )% | 11.05 | % | 27.70 | % | ||||||||||
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| |||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 467,156 | $ | 387,197 | $ | 388,185 | $ | 469,414 | $ | 431,499 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.43 | % | 0.45 | % | 0.45 | % | 0.46 | % | 0.48 | % | ||||||||||
Expenses, net of reimbursements | 0.43 | % | 0.45 | % | 0.45 | % | 0.46 | % | 0.48 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.47 | % | 3.16 | % | 3.15 | % | 2.45 | % | 3.00 | % | ||||||||||
Net investment income, net of reimbursements | 2.47 | % | 3.16 | % | 3.15 | % | 2.45 | % | 3.00 | % | ||||||||||
Portfolio turnover rate | 27 | % | 60 | % | 33 | % | 38 | % | 41 | % |
A | The Boston Company Asset Management, LLC was added as an investment advisor to the International Equity Fund on December 31, 2011. |
B | Amount represents less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
48
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2013 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Funds is required to be provided to shareholders based upon the Funds’ income and distributions for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.
The Funds designated the following items with regard to distributions paid during the fiscal year ended October 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Funds to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Emerging Markets | International Equity | |||||||
Corporate Dividends Received Deduction | 0.00 | % | 0.00 | % | ||||
Qualified Dividend Income | 100.00 | % | 100.00 | % |
The International Equity Fund designated a foreign tax credit of $4,230,285.
Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.
49
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisor Agreements of the Funds (Unaudited)
At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; |
• | a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC; |
• | a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; |
• | a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers; |
• | a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts; |
• | a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm; |
• | an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
• | confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds; |
• | a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; |
• | a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; |
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; |
• | a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations; |
• | a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds; |
• | a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions; |
• | a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers; |
• | a description of any actual or potential conflicts of interest anticipated in managing Fund assets; |
• | a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; |
• | a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf; |
50
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
• | a description of trade allocation procedures among accounts managed by the firm; |
• | a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions; |
• | a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds; |
• | a certification by the firm regarding the reasonable design of its compliance program; |
• | a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review; |
• | confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds; |
• | a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt; |
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; |
• | a description of the firm’s affiliation with any broker-dealer; |
• | a discussion of any anticipated change in the firm’s controlling persons; and |
• | verification of the firm’s insurance coverage with regards to the services provided to the Funds. |
In addition, the Manager provided the following information specific to the renewal of the Management Agreement:
• | a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; |
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; |
• | a comparison of advisory fee rates and expense ratios for comparable mutual funds; |
• | a profit/loss analysis of the Manager; |
• | an analysis of any material complaints received from Fund shareholders; |
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; |
• | a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds; |
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; |
• | a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds; |
• | a description of the Manager’s securities lending practices and the fees received from such practices; |
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; |
• | a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund; |
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated; and |
• | confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt. |
In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
51
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements
The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and Each Investment Advisory Agreement
In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
52
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.
In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.
In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.
Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.
The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.
Additional Considerations and Conclusions with Respect to the American Beacon Emerging Markets Fund
In considering the renewal of the Management Agreement for the American Beacon Emerging Markets Fund, the Trustees considered the following additional factors: (1) the American Beacon Emerging Markets Fund outperformed the Lipper performance universe median for the five-year period ended March 31, 2013, but underperformed for the one-, three-, and ten-year periods; (2) the
53
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Fund’s performance was equal to the Lipper performance group median for the one-year period ended March 31, 2013, but underperformed for the three- and five-year periods; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having an average expense ratio.
In considering the renewal of the Investment Advisory Agreements with The Boston Company Asset Management, LLC (“TBC”), Morgan Stanley Investment Management Inc., including the MSIM subadvisors Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company (collectively, “MSIM”), and Brandes Investment Partners, L.P. (“Brandes”), the Trustees considered the following additional factors: (1) MSIM outperformed the Lipper performance universe median for the one-, three- and ten-year periods ended March 31, 2013, but underperformed for the five-year period; (2) TBC outperformed the Lipper performance universe median for the five-year period ended March 31, 2013 but underperformed for the one-, three- and ten-year periods; (3) Brandes was added as a subadvisor in December 2010 and outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) the Manager’s explanation that MSIM’s underperformance was due in part to over- and under-weightings of certain sectors and countries in 2008 and 2009; (5) the Manager’s explanation that TBC’s underperformance was due to the underperformance of its portfolio during 2011 and 2012 when TBC’s low valuation investment approach was not favored by the market, though this approach historically has provided long-term outperformance and downside protection and the Manager’s belief that the portfolio is currently well positioned to outperform when its strategy returns to favor; (6) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (7) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Emerging Markets Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Emerging Markets Fund.
Additional Considerations and Conclusions with Respect to the American Beacon International Equity Fund
In considering the renewal of the Management Agreement for the American Beacon International Equity Fund, the Trustees considered the following additional factors: (1) the American Beacon International Equity Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, but underperformed for the three-year period; (3) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (4) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.
In considering the renewal of the Investment Advisory Agreements with Causeway Capital Management LLC (“Causeway”), Lazard Asset Management LLC (“Lazard”), and Templeton Investment Counsel, LLC (“Templeton”), the Trustees considered the following additional factors: (1) Templeton and Causeway each outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) Lazard outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013, but underperformed for the ten-year period; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon International Equity Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon International Equity Fund.
54
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gerard J. Arpey** (55) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Alan D. Feld*** (76) | 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); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (69) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (52) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (59) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (71) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (70) | 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); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). |
55
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Barbara J. McKenna, CFA (50) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (67) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
Paul J. Zucconi,CPA (73) | 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) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
Gene L. Needles, Jr. (58) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (54) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008 – present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present). | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (47) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (43) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (59) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (52) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 – Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present). | ||
Terri L. McKinney (49) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (38) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). |
56
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Samuel J. Silver (50) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (42) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc. | ||
John J. Okray (39) | Asst. Secretary since 2010 | Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (56) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, 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. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager. |
*** | Mr. Feld is deemed to be an “interested person” of the 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-advisors. |
57
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If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
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By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
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By Telephone: Institutional, Y, Investor, Advisor, And Retirement Classes Call (800) 658-5811 AMR ClassSM Call (800) 345-2345 | By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 202-551-8090. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com approximately twenty days after the end of each month. | Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or summary prospectus.
American Beacon Funds, American Beacon Emerging Markets Fund, and American Beacon International Equity Fund are service marks of American Beacon Advisors, Inc.
AR 10/13
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
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The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
Duration is a measure of price sensitivity relative to changes in interest rates.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | October 31, 2013 |
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The past 12 months has been a remarkable period for the stock market. It’s not just that the S&P 500 Index increased by 27.18%, although that is pretty remarkable in itself. The S&P 500 has not increased by that much in a single calendar year in a decade, not since 2003.
Maybe even more notable was how broad-based the rally was. In addition to the strong returns for the S&P 500 Index during the period under review, the Russell Midcap Index returned 33.79% and the Russell 2000 Index (which represents small-cap companies) returned 36.28%. |
The consistency goes beyond asset classes. Among the 11 sectors identified by Morningstar, 10 increased by more than 10% over the 12-month period.
Everywhere you turn, there are opportunities to be had. Here at American Beacon, we’re pleased to have a wide range of funds that delve into nearly every area of the equity markets, giving open-minded investors a multitude of carefully managed choices.
For the 12-month period ended October 31, 2013:
• | The American Beacon Balanced Fund (Investor Class) returned 18.65%. |
• | The American Beacon Mid-Cap Value Fund (Investor Class) returned 38.69%. |
• | The American Beacon Small Cap Value II Fund (Investor Class) returned 33.55%. |
We’re proud to offer all these funds to our shareholders, as part of a broad menu of choices for investors.
Thank you for your continued investment in American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards,
Gene L. Needles, Jr.
President
American Beacon Funds
1
Domestic Equity Market Overview
October 31, 2013 (Unaudited)
U.S. stocks posted strong results for the year ended October 31, 2013, with the S&P 500 Index rising 27.18% over those 12 months. An improving economy, low interest rates and recovering investor sentiment helped drive the market higher, as well as the Federal Reserve’s continued quantitative easing program. Equity markets shrugged off incessant political stalemates and climbed even when the government shut down for 16 days in October. Meanwhile, robust corporate earnings growth has kept valuations in check despite the appreciation in stock prices. At current prices, the S&P 500 Index’s price-to-earnings ratio based on consensus earnings is in line with its 15-year median, yet the 10-year Treasury yield is 2.6%, well below its 15-year median.
The 12-month period began with a rough patch. During the first two weeks of November 2012, the S&P 500 Index slipped by more than 5%, as the markets reacted nervously to negotiations over the fiscal cliff. But the index quickly rebounded and gained more than 8% between that point and the end of the year, setting the stage for its gains throughout 2013.
The early part of 2013 proved to be very strong. At the end of the first quarter, the S&P 500 Index finally surpassed its pre-crash high, closing at its highest mark since October 2007. The index gained 14.1% between the first of the year and May 21. On that day, though, Federal Reserve chairman Ben Bernanke indicated that the Fed’s asset-purchasing program would be coming to an end at some point. This first mention of the so-called taper sent shock waves through the market. The S&P 500 Index dropped more than 5% in the space of a month.
Subsequently, June broke a seven-month winning streak for both the S&P 500 and the Nasdaq indexes, but the market quickly found its footing and began to rally at that point. Even with the taper-induced drop-off, by the end of June, the S&P 500 Index had posted its best first half of any year since 1998.
This performance was bolstered by a U.S. economy that appears to have formed a sound foundation with no obvious signs of a contraction in the near term. For perspective, each recession in the past 50 years has been preceded by three conditions: 1) an inverted yield curve, 2) a tight labor market and 3) a positive output gap (actual gross domestic product [GDP] expressed as a percentage of potential GDP). None of these conditions are evident today. In fact, the yield curve is steep, there is considerable slack in the labor market, and the output gap is decidedly negative.
Coming off a disappointing fourth quarter of 2012, in which GDP grew at just 0.4%, GDP bounced back to 1.1% growth in the first quarter of 2013, 2.5% in the second quarter and 2.8% in the third quarter. Unemployment continued to drop in a slow but mostly steady fashion, from 7.8% in November 2012 to 7.3% in October 2013. Although this was good news for the larger economy, the falling unemployment rate made some investors nervous, because Chairman Bernanke has indicated that the economy would be healthy enough for him to end quantitative easing once the unemployment rate reached 7.0%.
For the 12 months that ended October 31, 2013, in addition to the robust performance of the S&P 500 Index, the rally was strong in all areas of market capitalization. The Russell Midcap® Index was up 33.79% and the Russell 2000® Index (which represents small-cap stocks) was up 36.28%.
2
American Beacon Balanced FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Balanced Fund (the “Fund”) returned 18.65% for the twelve months ended October 31, 2013. The Fund outperformed the 60% Russell 1000® Value/40% Barclays Capital Aggregate Index benchmark return of 15.81% but trailed the Lipper Mixed-Asset Target Allocation Growth Funds Index return of 19.00%.
Comparison of Change in Value of a $10,000 Investment
For The Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional Class (1,8) | 19.04 | % | 13.15 | % | 7.50 | % | $ | 20,619 | ||||||||
Y Class (1,3,8) | 18.97 | % | 13.05 | % | 7.46 | % | 20,530 | |||||||||
Investor Class (1,8) | 18.65 | % | 12.77 | % | 7.17 | % | 19,984 | |||||||||
Advisor Class (1,2,8) | 18.52 | % | 12.59 | % | 6.97 | % | 19,612 | |||||||||
A Class with sales charge (1,4,8) | 11.66 | % | 11.35 | % | 6.48 | % | 18,742 | |||||||||
A Class without sales charge (1,4,8) | 18.45 | % | 12.67 | % | 7.12 | % | 19,891 | |||||||||
C Class with sales charge (1,5,8) | 16.50 | % | 12.10 | % | 6.85 | % | 19,400 | |||||||||
C Class without sales charge (1,5,8) | 17.50 | % | 12.10 | % | 6.85 | % | 19,400 | |||||||||
AMR Class (1,8) | 19.32 | % | 13.45 | % | 7.77 | % | 21,130 | |||||||||
Balanced Composite Index (6) | 15.81 | % | 11.25 | % | 6.91 | % | 19,508 | |||||||||
Russell 1000 Value Index (7) | 28.29 | % | 14.06 | % | 7.81 | % | 21,208 | |||||||||
Barclays Capital Aggregate Index (7) | -1.08 | % | 6.09 | % | 4.78 | % | 15,945 | |||||||||
Lipper Mixed-Asset Target Allocation Growth Funds Index (7) | 19.00 | % | 12.88 | % | 6.96 | % | 19,595 |
1. | Please note that the recent growth in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the |
most recent month end, please visit our website at www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/03 up to 5/31/05, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the Advisor Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the Advisor Class been in existence since 10/31/03. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005. Performance prior to waiving fees was lower than actual returns shown for 2005. |
3. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. A Class has a maximum sales charge of 5.75%. |
5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. Therefore, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1% for shares redeemed within one year of the date of purchase. |
6. | To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and equity securities, the returns of the Russell 1000 Value Index and the Barclays Capital Aggregate Index have been combined in a 60%/40% proportion. |
7. | The Russell 1000 Value Index is an unmanaged index of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted values. Russell 1000 Value Index and Russell 1000 Index are a registered trademarks of Frank Russell Company. The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Mixed-Asset Target Allocation Growth Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mixed-Asset Target Allocation Growth Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 0.60%, 0.71%, 0.93%, 1.10%, 1.14%, 1.86%, and 0.33%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
3
American Beacon Balanced FundSM
Performance Overview
October 31, 2013 (Unaudited)
During the twelve-month period, the Fund’s assets on average were invested 66% in equities (including equitized cash) and 34% in fixed-income securities, ending the period with approximately 65% in equities and 35% in fixed-income securities.
The equity portion of the Fund (excluding equitized cash) returned 32.3%, outperforming the Russell 1000® Value Index (the “Index”) return of 28.3%. The Fund’s equities outperformed the Index as both security selection and sector allocation added value relative to the Index. The Fund’s Financials companies added over 185 basis points (1.85%) to performance. In the Financials sector, Bank of America (up 51.7%), Lincoln National (up 85.4%) and Unum Group (up 59.9%) were the largest contributors. The Fund’s Energy companies also contributed to the Fund’s excess performance. Not owning Exxon Mobil positively impacted performance in the Energy sector. Chevron (up 12.2%) and Halliburton (up 65.9%) also contributed to the Fund’s returns. Poor stock selection in the Consumer Staples sector detracted relative value. Philip Morris International (up 4.7%) and Wal-Mart Stores (up 3.4%) detracted from performance in the Consumer Staples sector.
A significant overweight position in Information Technology, the best performing sector in the Index, added relative value through sector allocation. Underweight positions in Utilities and Materials, two of the poorer performing sectors in the Index, also contributed to the Fund’s returns.
The fixed-income portion of the Fund returned
-0.5% for the twelve-month period, outperforming the Barclays Capital Aggregate Index (the “Barclays Index”) return of -1.1%. During the period, the Fund’s Corporate securities holdings outperformed the Barclays Index. Within Corporates, holdings in the manufacturing and finance sectors added the most relative value, as did a higher allocation in the finance sector. The Fund’s exposure to U.S. Treasuries also contributed to returns. The Fund’s shorter duration mostly had a positive impact on relative performance as rates generally rose over the course of the year.
The sub-advisors continue to focus on the disciplined selection of attractive securities that should allow the Fund to benefit long term.
Top Ten Holdings (% Net Assets) | ||||||||
JPMorgan Chase & Co. | 2.3 | |||||||
Bank of America Corp. | 1.5 | |||||||
Citigroup, Inc. | 1.3 | |||||||
Wells Fargo & Co. | 1.5 | |||||||
Microsoft Corp. | 1.4 | |||||||
WellPoint, Inc. | 1.3 | |||||||
Pfizer, Inc. | 1.2 | |||||||
Merck & Co., Inc. | 1.0 | |||||||
Johnson & Johnson | 1.0 | |||||||
BP plc | 1.4 | |||||||
Total Fund Holdings | 501 | |||||||
Sector Allocation (% Equities) |
| |||||||
Financials | 25.7 | |||||||
Health Care | 14.7 | |||||||
Energy | 13.5 | |||||||
Information Technology | 10.3 | |||||||
Consumer Discretionary | 9.8 | |||||||
Industrials | 9.8 | |||||||
Consumer Staples | 6.8 | |||||||
Utilities | 4.0 | |||||||
Telecommunication Services | 3.8 | |||||||
Materials | 1.1 | |||||||
Manufacturing | 0.4 | |||||||
Service | 0.2 | |||||||
Sector Allocation (% Fixed Income) |
| |||||||
U.S. Treasury | 35.0 | |||||||
Mortgage-Backed Obligations | 20.2 | |||||||
Finance | 17.2 | |||||||
Manufacturing | 5.9 | |||||||
Agency | 5.3 | |||||||
Service | 3.8 | |||||||
Energy | 3.6 | |||||||
Asset-Backed Obligations | 2.8 | |||||||
Telecommunications | 1.9 | |||||||
Utilities | 1.6 | |||||||
Municipal Obligations | 0.9 | |||||||
Consumer | 0.9 | |||||||
Transportation | 0.9 |
Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
4 |
American Beacon Mid-Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Mid-Cap Value Fund (the “Fund”) returned 38.69% for the twelve months ended October 31, 2013. The Fund outperformed the Russell Midcap® Value Index (the “Index”) return of 33.45% and the Lipper Mid-Cap Value Funds Index return of 34.94% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 6/30/04* through 10/31/13
* | Inception of Fund |
Total Returns for the Period ended 10/31/13 |
| |||||||||||||||
1 Year | 5 Years | Since Incep. (6/30/04) | Value of $10,000 6/30/04- 10/31/13 | |||||||||||||
Institutional Class (1,3,9) | 39.18 | % | 22.03 | % | 9.57 | % | $ | 23,465 | ||||||||
Y Class (1,4,9) | 38.99 | % | 21.96 | % | 9.53 | % | 23,394 | |||||||||
Investor Class (1,2,9) | 38.69 | % | 21.85 | % | 9.40 | % | 23,135 | |||||||||
Advisor Class (1,5,9) | 38.43 | % | 21.53 | % | 9.21 | % | 22,773 | |||||||||
A Class with sales charge (1,6,9) | 30.44 | % | 20.03 | % | 8.52 | % | 21,455 | |||||||||
A Class without sales charge (1,6,9) | 38.39 | % | 21.46 | % | 9.21 | % | 22,764 | |||||||||
C Class with sales charge (1,7,9) | 36.32 | % | 20.90 | % | 8.94 | % | 22,245 | |||||||||
C Class without sales charge (1,7,9) | 37.32 | % | 20.90 | % | 8.94 | % | 22,245 | |||||||||
AMR Class (1,9) | 39.43 | % | 22.20 | % | 9.72 | % | 23,775 | |||||||||
Russell Midcap Value Index(8) | 33.45 | % | 18.85 | % | 9.76 | % | 23,857 | |||||||||
Lipper Mid-Cap Value Funds Index(8) | 34.94 | % | 18.64 | % | 8.62 | % | 21,647 |
1. | Please note that the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the |
fees charged to the AMR Class of the Fund was waived through 2005. Performance prior to waiving fees was lower than the actual returns shown for periods through 2005. |
2. | Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 up to 3/1/06, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the AMR Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 6/30/04. A portion of the fees charged to the Investor Class of the Fund has been waived since 2006. Performance prior to waiving fees was lower than actual returns shown since 2006. |
3. | Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 up to 11/30/05, the inception date of the Institutional Class, and the returns of the Institutional Class since its inception. Expenses of the Institutional Class are higher than those of the AMR Class. As a result, total returns shown may be higher than they would have been had the Institutional Class been in existence since 6/30/04. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than actual returns shown since 2007. |
4. | Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 up to 11/30/05, the inception date of the Institutional Class, and the total returns of the Institutional Class from 11/30/05 up to 3/1/10, the inception date of the Y Class and the returns of the Y Class since its inception. Expenses of the AMR and Institutional Classes are lower than those of the Y Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 6/30/04. |
5. | Fund performance for the since inception period represents the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 6/29/07, the inception date of the Advisor Class, and the returns of the Advisor Class since its inception. Expenses of the AMR, Institutional, and Investor Classes are lower than those of the Advisor Class. As a result, total returns shown may be higher than they would have been had the Advisor Class been in existence since 6/30/04. A portion of the fees charged to the Advisor Class of the Fund has been waived since 2007. Performance prior to waiving fees was lower than the actual returns shown since 2007. |
6. | Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the AMR, Institutional, and Investor Classes are lower than those of the A Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 6/30/04. A Class shares has a maximum sales charge of 5.75%. |
7. | Fund performance for the five-year and since inception periods represent the total returns achieved by the AMR Class from 6/30/04 to 11/30/05, the Institutional Class from 11/30/05 to 3/1/06 and the Investor Class from 3/1/06 to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the AMR, Institutional, and Investor Classes |
5
American Beacon Mid-Cap Value FundSM
Performance Overview
October 31, 2013 (Unaudited)
are lower than those of the C Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/30/04. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
8. | The Russell Midcap Value Index is an unmanaged index of those stocks in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index. Russell Midcap Value Index and Russell 1000 Index are registered trademarks of Frank Russell Company. The Lipper Mid-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Mid-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
9. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 1.07%, 1.29%, 1.45%, 2.00%, 1.62%, 2.47%, and 0.79%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index as both stock selection and sector allocation added value relative to the Index.
Most of the Fund’s excess performance was attributed to holdings in the Financials sector which contributed over 270 basis points (2.70%) to performance. In the Financials sector, not owning American Capital Agency and HCP, which were down 22.8% and 0.9%, respectively, in the Index, added relative value. The Fund’s Consumer Discretionary sector companies also contributed to performance. In the Consumer Discretionary sector, Delphi Automotive (up 88.3%) and Hanesbrands (up 105.8%) were the largest contributors. The aforementioned good performance was slightly offset by poor stock selection in the Health Care and Utilities sectors. Not owning Boston Scientific and HCA, which were up 127.4% and 76.7%, respectively, in the Index, negatively impacted performance in the Health Care sector. Laboratory Corporation of America (up 18.2%) also detracted relative value. In the Utilities sector, Entergy (down 7.5%) and Great Plains Energy (up 8.9%) detracted from the Fund’s returns.
Significant overweight positions in the Industrials and Consumer Discretionary sectors added relative value through sector allocation. An underweight in Utilities, the worst performing sector in the Index, also contributed to the Fund’s performance.
The sub-advisors’ philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer term.
Top Ten Holdings (% Net Assets) | ||||||||
Parker Hannifin Corp. | 1.5 | |||||||
Cigna Corp. | 1.5 | |||||||
Avnet, Inc. | 1.5 | |||||||
Interpublic Group of Cos., Inc. | 1.4 | |||||||
Fifth Third Bancorp | 1.4 | |||||||
Stanley Black & Decker, Inc. | 1.3 | |||||||
Assurant, Inc. | 1.3 | |||||||
Microchip Technology, Inc. | 1.2 | |||||||
Willis Group Holdings plc | 1.9 | |||||||
Delphi Automotive plc | 1.2 | |||||||
Total Fund Holdings | 150 | |||||||
Sector Allocation (% Equities) |
| |||||||
Financials | 28.5 | |||||||
Consumer Discretionary | 16.1 | |||||||
Industrials | 14.8 | |||||||
Information Technology | 10.5 | |||||||
Health Care | 9.8 | |||||||
Energy | 7.0 | |||||||
Utilities | 4.7 | |||||||
Materials | 4.5 | |||||||
Consumer Staples | 4.2 |
The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
6
American Beacon Small Cap Value II FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Small Cap Value II Fund (the “Fund”) returned 33.55% for the twelve months ended October 31, 2013, outperforming the Russell 2000® Value Index (the “Index”) return of 32.83%, but slightly trailing the Lipper Small-Cap Value Funds Index return of 33.56% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 11/15/11* through 10/31/13
* | Inception of Fund |
Total Returns for the Period ended 10/31/13
1 Year | Since Incep. (11/15/11)† | Value of $10,000 11/15/11- 10/31/13 | ||||||||||
Y Class (1,3) | 33.55 | % | 19.86 | % | $ | 14,343 | ||||||
Investor Class (1,3) | 33.55 | % | 19.86 | % | 14,266 | |||||||
Russell 2000 Value Index (2) | 32.83 | % | 23.77 | % | 15,194 | |||||||
Lipper Small-Cap Value Funds Index (2) | 33.56 | % | 21.97 | % | 14,765 |
† | Not annualized. |
1. | Please note the recent growth rate in the stock market has helped to produce short-term returns that are not typical and may not continue in the future. Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | The Russell 2000 Value Index is an unmanaged index of those stocks in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. Russell 2000 Value Index and Russell 2000 Index are registered trademarks of Frank Russell Company. The Lipper Small-Cap Value Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Value Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
3. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Y and Investor Class shares was 4.52% and 4.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund outperformed the Index entirely through sector allocation, as stock selection detracted minimal value relative to the Index.
The Fund’s underweight position in the Utilities and Financials sectors added relative value to performance through sector allocation. A significant overweight in Industrials, the second best performing sector in the Index, also contributed to the Fund’s returns.
From a stock selection standpoint, holdings in the Information Technology, Industrials, Health Care and Consumer Discretionary sectors detracted relative value. In the Information Technology sector, Netgear (down 11.6%) and Polycom (up 2.2%) hurt performance. Titan International (down 33.7%) and Graftech International (down 19.8%) negatively impacted the Fund’s performance in the Industrials sector. In the Health Care sector, RTI Surgical (down 32.6%) was the largest detractor, while Ruby Tuesday (down 17.3%) hurt performance in the Consumer Discretionary sector. Not owning Fifth & Pacific, which was up 141.3% in the Index, also negatively impacted the Fund’s returns. The Fund benefited from good stock selection in the Financials sector, but not enough to offset the impact of the aforementioned sectors. In the Financials sector, Gain Capital Holdings (up 114.3%), Protective Life (up 71.8%) and American Equity Investment Life (up 83.7%) contributed most to performance relative to the Index.
The sub-advisors continue to focus on uncovering investment opportunities through stock selection that should benefit the Fund’s performance over the longer-term.
Top Ten Holdings (% Net Assets)
Photronics, Inc. | 2.1 | |||||||
Protective Life Corp. | 1.5 | |||||||
Bancorp, Inc. | 1.5 | |||||||
Unit Corp. | 1.3 | |||||||
Crane Co. | 1.3 | |||||||
Barnes Group, Inc. | 1.2 | |||||||
Stone Energy Corp. | 1.2 | |||||||
Cabot Corp. | 1.1 | |||||||
OM Group, Inc. | 1.1 | |||||||
Kulicke & Soffa Industries, Inc. | 1.1 | |||||||
Total Fund Holdings | 155 |
7
American Beacon Small Cap Value II FundSM
Performance Overview
October 31, 2013 (Unaudited)
Sector Allocation (% Equities)
Financials | 27.4 | |||
Industrials | 20.4 | |||
Information Technology | 13.5 | |||
Consumer Discretionary | 11.0 | |||
Energy | 9.5 | |||
Materials | 7.2 | |||
Consumer Staples | 6.1 | |||
Health Care | 4.0 | |||
Utilities | 0.8 |
The Fund may invest in futures contracts, which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The intrinsic value of stocks selected for the Fund may never be realized by the market, and the prices of value stocks may go down. While investing in value stocks may limit downside risk over time, the Fund may produce more modest gains than riskier stock funds as a trade-off for this potentially lower risk. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. The Fund may participate in a securities lending program. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
8
American Beacon FundsSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expenses
The following tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The following tables provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund, such as sales charges (loads) or redemption fees as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the following tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
9
American Beacon FundsSM
Fund Expenses
October 31, 2013 (Unaudited)
Balanced Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.02 | $ | 3.02 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,069.14 | $ | 3.65 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.68 | $ | 3.57 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,067.80 | $ | 4.69 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.67 | $ | 4.58 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,066.77 | $ | 5.52 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.86 | $ | 5.40 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,066.49 | $ | 5.73 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.66 | $ | 5.60 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,070.95 | $ | 1.67 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.59 | $ | 1.63 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,062.55 | $ | 9.67 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.83 | $ | 9.45 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.70%, 0.90%, 1.06%, 1.10%, 1.86%, and 0.32% for the Institutional, Y, Investor, Advisor, A, C, and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Mid-Cap Value Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,161.26 | $ | 5.34 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.27 | $ | 4.99 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,159.48 | $ | 5.88 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.76 | $ | 5.50 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,159.45 | $ | 6.69 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.00 | $ | 6.26 | ||||||
Advisor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,158.02 | $ | 8.10 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.69 | $ | 7.58 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,157.76 | $ | 8.10 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.69 | $ | 7.58 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,161.94 | $ | 3.92 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.58 | $ | 3.67 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,152.75 | $ | 12.15 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,013.91 | $ | 11.37 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.98%, 1.08%, 1.23%, 1.49%, 1.49%, 2.24%, and 0.72% for the Institutional, Y, Investor, Advisor, A, C, and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Small Cap Value Fund II
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,151.27 | $ | 5.91 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.71 | $ | 5.55 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,149.43 | $ | 7.42 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.30 | $ | 6.97 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.09% and 1.37% for the Y and Investor Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
10
American Beacon Funds
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund (three of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the, American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund, and American Beacon Small Cap Value II Fund at October 31, 2013, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
December 30, 2013
11
American Beacon Balanced FundSM
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCK - 58.16% |
| |||||||
CONSUMER DISCRETIONARY - 5.75% |
| |||||||
Auto Components - 1.01% |
| |||||||
Delphi Automotive PLC | 14,000 | $ | 801 | |||||
Johnson Controls, Inc. | 149,400 | 6,895 | ||||||
Magna International, Inc., Class A | 9,600 | 813 | ||||||
|
| |||||||
8,509 | ||||||||
|
| |||||||
Automobiles - 1.97% |
| |||||||
General Motors Co.A | 157,600 | 5,823 | ||||||
Hertz Global Holdings, Inc.A | 204,420 | 4,693 | ||||||
Toyota Motor Corp., ADRB | 47,500 | 6,148 | ||||||
|
| |||||||
16,664 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.37% |
| |||||||
Carnival Corp. | 89,700 | 3,108 | ||||||
|
| |||||||
Household Durables - 0.20% |
| |||||||
Stanley Black & Decker, Inc. | 21,300 | 1,685 | ||||||
|
| |||||||
Media - 0.85% |
| |||||||
Comcast Corp., Class A | 41,600 | 1,979 | ||||||
Comcast Corp., Special Class A | 18,200 | 843 | ||||||
Interpublic Group of Cos., Inc. | 119,000 | 1,999 | ||||||
Time Warner Cable, Inc. | 19,400 | 2,331 | ||||||
|
| |||||||
7,152 | ||||||||
|
| |||||||
Multiline Retail - 1.20% |
| |||||||
Dillard’s, Inc., Class A | 24,600 | 2,017 | ||||||
Target Corp. | 124,500 | 8,066 | ||||||
|
| |||||||
10,083 | ||||||||
|
| |||||||
Specialty Retail - 0.15% |
| |||||||
Lowe’s Cos., Inc. | 25,400 | 1,264 | ||||||
|
| |||||||
Total Consumer Discretionary |
| 48,465 | ||||||
|
| |||||||
CONSUMER STAPLES - 4.03% |
| |||||||
Beverages - 0.67% |
| |||||||
Diageo PLC, ADRB | 30,600 | 3,904 | ||||||
Molson Coors Brewing Co., Class B | 15,900 | 859 | ||||||
PepsiCo, Inc. | 10,000 | 841 | ||||||
|
| |||||||
5,604 | ||||||||
|
| |||||||
Food & Drug Retailing - 1.58% |
| |||||||
Kroger Co. | 77,800 | 3,333 | ||||||
Sysco Corp. | 84,500 | 2,733 | ||||||
Wal-Mart Stores, Inc. | 93,700 | 7,192 | ||||||
|
| |||||||
13,258 | ||||||||
|
| |||||||
Food Products - 0.35% |
| |||||||
Kellogg Co. | 19,800 | 1,252 | ||||||
Mondelez International, Inc., Class A | 51,100 | 1,719 | ||||||
|
| |||||||
2,971 | ||||||||
|
| |||||||
Tobacco - 1.43% |
| |||||||
Altria Group, Inc. | 66,100 | 2,461 | ||||||
Imperial Tobacco Group PLC, ADRB | 47,000 | 3,525 | ||||||
Philip Morris International, Inc. | 68,300 | 6,086 | ||||||
|
| |||||||
12,072 | ||||||||
|
| |||||||
Total Consumer Staples |
| 33,905 | ||||||
|
| |||||||
ENERGY - 7.95% |
| |||||||
Energy Equipment & Services - 1.00% |
| |||||||
Cobalt International Energy, Inc.A | 152,400 | 3,537 | ||||||
Halliburton Co. | 92,400 | 4,900 | ||||||
|
| |||||||
8,437 | ||||||||
|
|
Shares | Fair Value | |||||||
Oil & Gas - 6.95% |
| |||||||
Apache Corp. | 47,500 | $ | 4,218 | |||||
BP PLC, ADRB | 255,478 | 11,880 | ||||||
Chevron Corp. | 26,828 | 3,218 | ||||||
ConocoPhillips | 64,090 | 4,698 | ||||||
Hess Corp. | 52,200 | 4,239 | ||||||
Kosmos Energy Ltd.A | 45,700 | 487 | ||||||
Marathon Oil Corp. | 41,500 | 1,463 | ||||||
Marathon Petroleum Corp. | 24,850 | 1,781 | ||||||
Murphy Oil Corp. | 16,800 | 1,013 | ||||||
Occidental Petroleum Corp. | 81,600 | 7,840 | ||||||
Phillips 66 | 68,295 | 4,400 | ||||||
Royal Dutch Shell PLC, | 70,700 | 4,915 | ||||||
Seadrill Ltd. | 63,700 | 2,970 | ||||||
Total S.A., ADRB | 89,000 | 5,445 | ||||||
|
| |||||||
58,567 | ||||||||
|
| |||||||
Total Energy |
| 67,004 | ||||||
|
| |||||||
FINANCIALS - 14.76% |
| |||||||
Banks - 2.83% |
| |||||||
Bank of America Corp. | 903,580 | 12,615 | ||||||
Bank of New York Mellon Corp. | 53,000 | 1,685 | ||||||
PNC Financial Services Group, Inc. | 63,825 | 4,693 | ||||||
SunTrust Banks, Inc. | 144,600 | 4,864 | ||||||
|
| |||||||
23,857 | ||||||||
|
| |||||||
Diversified Financials - 7.81% |
| |||||||
American Express Co. | 62,700 | 5,129 | ||||||
Blackstone Group LPC | 89,800 | 2,360 | ||||||
Capital One Financial Corp. | 101,100 | 6,943 | ||||||
Charles Schwab Corp. | 96,700 | 2,190 | ||||||
Citigroup, Inc. | 230,170 | 11,228 | ||||||
JPMorgan Chase & Co. | 373,434 | 19,246 | ||||||
KKR & Co., LPC | 110,600 | 2,428 | ||||||
Morgan Stanley | 44,400 | 1,276 | ||||||
SLM Corp. | 96,400 | 2,446 | ||||||
Wells Fargo & Co. | 290,898 | 12,418 | ||||||
|
| |||||||
65,664 | ||||||||
|
| |||||||
Insurance - 4.01% |
| |||||||
ACE Ltd. | 18,000 | 1,718 | ||||||
Allstate Corp. | 62,000 | 3,290 | ||||||
American International Group, Inc. | 123,500 | 6,379 | ||||||
Berkshire Hathaway, Inc., | 34,081 | 3,922 | ||||||
Hartford Financial Services Group, Inc. | 73,200 | 2,467 | ||||||
Lincoln National Corp. | 75,100 | 3,410 | ||||||
MetLife, Inc. | 159,400 | 7,540 | ||||||
Unum Group | 92,300 | 2,930 | ||||||
XL Group PLC | 70,100 | 2,143 | ||||||
|
| |||||||
33,799 | ||||||||
|
| |||||||
Real Estate - 0.11% |
| |||||||
Two Harbors Investment Corp.D | 102,500 | 956 | ||||||
|
| |||||||
Total Financials |
| 124,276 | ||||||
|
| |||||||
HEALTH CARE - 8.64% |
| |||||||
Health Care Equipment & Supplies - 1.14% |
| |||||||
Covidien PLC | 26,300 | 1,686 | ||||||
Medtronic, Inc. | 122,900 | 7,055 | ||||||
Zimmer Holdings, Inc. | 9,400 | 822 | ||||||
|
| |||||||
9,563 | ||||||||
|
| |||||||
Health Care Providers & Services - 2.43% |
| |||||||
Aetna, Inc. | 12,200 | 765 | ||||||
Humana, Inc. | 45,500 | 4,193 |
See accompanying notes
12
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
Quest Diagnostics, Inc. | 16,500 | $ | 989 | |||||
UnitedHealth Group, Inc. | 52,700 | 3,597 | ||||||
WellPoint, Inc. | 129,200 | 10,956 | ||||||
|
| |||||||
20,500 | ||||||||
|
| |||||||
Pharmaceuticals - 5.07% | ||||||||
AstraZeneca PLC, ADRB | 46,800 | 2,474 | ||||||
GlaxoSmithKline PLC, ADRB | 50,100 | 2,637 | ||||||
Johnson & Johnson | 87,400 | 8,094 | ||||||
Merck & Co., Inc. | 193,200 | 8,711 | ||||||
Novartis AG, ADRB | 47,000 | 3,645 | ||||||
Pfizer, Inc. | 331,654 | 10,174 | ||||||
Sanofi, ADRB | 130,100 | 6,958 | ||||||
|
| |||||||
42,693 | ||||||||
|
| |||||||
Total Health Care |
| 72,756 | ||||||
|
| |||||||
INDUSTRIALS - 5.75% | ||||||||
Aerospace & Defense - 1.72% |
| |||||||
Boeing Co. | 16,800 | 2,192 | ||||||
General Dynamics Corp. | 41,400 | 3,586 | ||||||
Lockheed Martin Corp. | 16,000 | 2,133 | ||||||
Northrop Grumman Corp. | 8,400 | 903 | ||||||
Raytheon Co. | 68,700 | 5,660 | ||||||
|
| |||||||
14,474 | ||||||||
|
| |||||||
Air Freight & Couriers - 0.33% |
| |||||||
FedEx Corp. | 21,100 | 2,764 | ||||||
|
| |||||||
Electrical Equipment - 0.55% | ||||||||
Emerson Electric Co. | 68,600 | 4,594 | ||||||
|
| |||||||
Industrial Conglomerates - 1.09% |
| |||||||
General Electric Co. | 170,400 | 4,454 | ||||||
Honeywell International, Inc. | 54,600 | 4,736 | ||||||
|
| |||||||
9,190 | ||||||||
|
| |||||||
Machinery - 2.06% | ||||||||
Caterpillar, Inc. | 33,800 | 2,818 | ||||||
Cummins, Inc. | 29,300 | 3,721 | ||||||
Illinois Tool Works, Inc. | 21,400 | 1,686 | ||||||
Joy Global, Inc. | 53,600 | 3,042 | ||||||
PACCAR, Inc. | 36,400 | 2,024 | ||||||
Reliance Steel & Aluminum Co. | 31,100 | 2,279 | ||||||
Xylem, Inc. | 53,700 | 1,853 | ||||||
|
| |||||||
17,423 | ||||||||
|
| |||||||
Total Industrials |
| 48,445 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 6.07% |
| |||||||
Communications Equipment - 0.68% |
| |||||||
Cisco Systems, Inc. | 37,700 | 848 | ||||||
Corning, Inc. | 285,500 | 4,879 | ||||||
|
| |||||||
5,727 | ||||||||
|
| |||||||
Computers & Peripherals - 2.10% |
| |||||||
Apple, Inc. | 7,710 | 4,027 | ||||||
Hewlett-Packard Co. | 214,500 | 5,227 | ||||||
International Business Machines Corp. | 11,800 | 2,115 | ||||||
Seagate Technology PLC | 84,325 | 4,105 | ||||||
Western Digital Corp. | 32,300 | 2,249 | ||||||
|
| |||||||
17,723 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.14% |
| |||||||
TE Connectivity Ltd. | 23,225 | 1,196 | ||||||
|
| |||||||
Semiconductor Equipment & Products - 0.56% |
| |||||||
Applied Materials, Inc. | 116,400 | 2,078 | ||||||
Intel Corp. | 55,400 | 1,353 |
Shares | Fair Value | |||||||
Texas Instruments, Inc. | 30,100 | $ | 1,267 | |||||
|
| |||||||
4,698 | ||||||||
|
| |||||||
Software - 2.59% | ||||||||
Activision Blizzard, Inc. | 235,900 | 3,925 | ||||||
Check Point Software Technologies Ltd.A | 32,900 | 1,909 | ||||||
Microsoft Corp. | 332,200 | 11,744 | ||||||
Oracle Corp. | 126,300 | 4,231 | ||||||
|
| |||||||
21,809 | ||||||||
|
| |||||||
Total Information Technology |
| 51,153 | ||||||
|
| |||||||
MATERIALS - 0.64% | ||||||||
Dow Chemical Co. | 76,700 | 3,027 | ||||||
EI du Pont de Nemours & Co. | 38,200 | 2,338 | ||||||
|
| |||||||
Total Materials |
| 5,365 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 2.21% |
| |||||||
Diversified Telecommunication Services - 1.45% |
| |||||||
AT&T, Inc. | 220,877 | 7,996 | ||||||
Verizon Communications, Inc. | 84,408 | 4,263 | ||||||
|
| |||||||
12,259 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 0.76% |
| |||||||
China Mobile Ltd., ADRB | 34,600 | 1,800 | ||||||
Vodafone Group PLC, ADRB | 124,200 | 4,573 | ||||||
|
| |||||||
6,373 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 18,632 | ||||||
|
| |||||||
UTILITIES - 2.36% | ||||||||
CenterPoint Energy, Inc. | 138,400 | 3,405 | ||||||
Edison International | 22,000 | 1,079 | ||||||
Entergy Corp. | 49,400 | 3,197 | ||||||
Exelon Corp. | 133,800 | 3,819 | ||||||
NRG Energy, Inc. | 83,700 | 2,388 | ||||||
Public Service Enterprise Group, Inc. | 178,600 | 5,982 | ||||||
|
| |||||||
Total Utilities |
| 19,870 | ||||||
|
| |||||||
Total Common Stock |
| 489,871 | ||||||
|
| |||||||
PREFERRED STOCK - 0.77% |
| |||||||
FINANCIALS - 0.38% | ||||||||
Insurance - 0.20% | ||||||||
Allstate Corp., 1.00%, Due | 68,300 | 1,650 | ||||||
|
| |||||||
Real Estate - 0.18% | ||||||||
Public Storage, Inc., 5.75%, Due | 68,900 | 1,506 | ||||||
|
| |||||||
Total Financials |
| 3,156 | ||||||
|
| |||||||
MANUFACTURING - 0.25% |
| |||||||
General Motors Co., 4.75%, Due 12/1/2013 | 41,700 | 2,140 | ||||||
|
| |||||||
SERVICE - 0.14% | ||||||||
Comcast Corp., 5.00%, Due 12/15/2061 | 52,500 | 1,182 | ||||||
|
| |||||||
Total Preferred Stock (Cost $6,668) |
| 6,478 | ||||||
|
| |||||||
Par Amount | ||||||||
(000’s) | ||||||||
CORPORATE OBLIGATIONS 12.58% |
| |||||||
MANUFACTURING- 2.09% |
| |||||||
ABB Finance USA, Inc., | ||||||||
2.875%, Due 5/8/2022 | $ | 175 | 170 |
See accompanying notes
13
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Altera Corp., | ||||||||
1.75%, Due 5/15/2017 | $ | 165 | $ | 164 | ||||
2.50%, Due 11/15/2018 | 165 | 164 | ||||||
American Honda Finance Corp., | ||||||||
3.875%, Due 9/21/2020E | 250 | 264 | ||||||
Analog Devices, Inc., | ||||||||
3.00%, Due 4/15/2016 | 225 | 235 | ||||||
Apple, Inc., | ||||||||
2.40%, Due 5/3/2023 | 740 | 676 | ||||||
Applied Materials, Inc., | ||||||||
2.65%, Due 6/15/2016 | 310 | 323 | ||||||
BHP Billiton Finance USA Ltd., | ||||||||
1.625%, Due 2/24/2017 | 285 | 288 | ||||||
CA, Inc., | ||||||||
4.50%, Due 8/15/2023 | 425 | 427 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.10%, Due 5/29/2015 | 270 | 272 | ||||||
1.625%, Due 6/1/2017 | 480 | 485 | ||||||
Cooper US, Inc., | ||||||||
3.875%, Due 12/15/2020 | 355 | 370 | ||||||
Cummins, Inc., | ||||||||
3.65%, Due 10/1/2023 | 425 | 433 | ||||||
Daimler Finance North America LLC, | ||||||||
3.00%, Due 3/28/2016E F | 160 | 167 | ||||||
2.95%, Due 1/11/2017E F | 300 | 312 | ||||||
2.40%, Due 4/10/2017E F | 550 | 560 | ||||||
Dow Chemical Co., | ||||||||
4.25%, Due 11/15/2020 | 370 | 395 | ||||||
4.125%, Due 11/15/2021 | 300 | 310 | ||||||
Eaton Corp., PLC, | ||||||||
5.60%, Due 5/15/2018 | 205 | 234 | ||||||
2.75%, Due 11/2/2022E | 200 | 188 | ||||||
EMC Corp., | ||||||||
1.875%, Due 6/1/2018 | 560 | 562 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017F | 300 | 324 | ||||||
5.875%, Due 8/2/2021F | 400 | 458 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 325 | 331 | ||||||
4.65%, Due 12/9/2021 | 235 | 238 | ||||||
4.05%, Due 9/15/2022 | 300 | 292 | ||||||
6.00%, Due 9/15/2041 | 1,885 | 1,839 | ||||||
Intel Corp., | ||||||||
1.35%, Due 12/15/2017 | 540 | 536 | ||||||
3.30%, Due 10/1/2021 | 315 | 318 | �� | |||||
John Deere Capital Corp., | ||||||||
1.05%, Due 10/11/2016 | 315 | 316 | ||||||
1.30%, Due 3/12/2018 | 465 | 461 | ||||||
Johnson Controls, Inc., | ||||||||
5.00%, Due 3/30/2020 | 320 | 353 | ||||||
Koninklijke Philips Electronics N.V., | ||||||||
5.75%, Due 3/11/2018 | 270 | 314 | ||||||
LYB International Finance BV, | ||||||||
4.00%, Due 7/15/2023 | 220 | 222 | ||||||
Northrop Grumman Corp., | ||||||||
5.05%, Due 8/1/2019 | 150 | 169 | ||||||
Oracle Corp., | ||||||||
1.20%, Due 10/15/2017 | 445 | 439 | ||||||
PACCAR Financial Corp., | ||||||||
1.15%, Due 8/16/2016 | 290 | 291 | ||||||
Precision Castparts Corp., | ||||||||
0.70%, Due 12/20/2015 | 240 | 239 |
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Rio Tinto Finance USA Ltd., | ||||||||
2.50%, Due 5/20/2016 | $ | 405 | $ | 418 | ||||
Teck Resources Ltd., | ||||||||
6.00%, Due 8/15/2040 | 70 | 67 | ||||||
Toyota Motor Credit Corp., | ||||||||
2.05%, Due 1/12/2017 | 265 | 272 | ||||||
Tyco Electronics Group S.A., | ||||||||
1.60%, Due 2/3/2015 | 150 | 151 | ||||||
6.55%, Due 10/1/2017 | 175 | 203 | ||||||
United Technologies Corp., | ||||||||
1.80%, Due 6/1/2017 | 980 | 1,000 | ||||||
6.125%, Due 7/15/2038 | 450 | 549 | ||||||
Volkswagen International Finance N.V., | ||||||||
1.625%, Due 3/22/2015E | 500 | 506 | ||||||
Xerox Corp., | ||||||||
8.25%, Due 5/15/2014 | 160 | 166 | ||||||
2.95%, Due 3/15/2017 | 150 | 155 | ||||||
|
| |||||||
17,626 | ||||||||
|
| |||||||
FINANCE- 6.10% | ||||||||
AEGON Funding Co. LLC, | ||||||||
5.75%, Due 12/15/2020F | 350 | 399 | ||||||
American Express Co., | ||||||||
4.05%, Due 12/3/2042 | 390 | 349 | ||||||
American Express Credit Corp., | ||||||||
1.75%, Due 6/12/2015 | 370 | 377 | ||||||
1.30%, Due 7/29/2016 | 280 | 282 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 625 | 750 | ||||||
4.875%, Due 6/1/2022 | 600 | 657 | ||||||
Bank of America Corp., | ||||||||
6.50%, Due 8/1/2016 | 1,340 | 1,522 | ||||||
7.80%, Due 9/15/2016 | 700 | 811 | ||||||
2.60%, Due 1/15/2019 | 395 | 398 | ||||||
7.625%, Due 6/1/2019 | 1,295 | 1,614 | ||||||
Bank of New York Mellon Corp., | ||||||||
2.30%, Due 7/28/2016 | 505 | 524 | ||||||
Bank of Nova Scotia, | ||||||||
0.75%, Due 10/9/2015 | 335 | 335 | ||||||
Bank One Corp., | ||||||||
4.90%, Due 4/30/2015 | 250 | 264 | ||||||
Barclays Bank PLC, | ||||||||
3.90%, Due 4/7/2015 | 330 | 345 | ||||||
6.75%, Due 5/22/2019 | 350 | 423 | ||||||
Bear Stearns Cos. LLC, | ||||||||
7.25%, Due 2/1/2018F | 2,300 | 2,774 | ||||||
Berkshire Hathaway Finance Corp., | ||||||||
0.95%, Due 8/15/2016 | 315 | 316 | ||||||
BNP Paribas S.A., | ||||||||
3.60%, Due 2/23/2016 | 320 | 338 | ||||||
Boston Properties LP, | ||||||||
3.125%, Due 9/1/2023C | 255 | 239 | ||||||
Branch Banking & Trust Co., | ||||||||
1.45%, Due 10/3/2016 | 525 | 531 | ||||||
Canadian Imperial Bank of Commerce, | ||||||||
2.35%, Due 12/11/2015 | 465 | 480 | ||||||
Capital One Financial Corp., | ||||||||
2.15%, Due 3/23/2015 | 345 | 351 | ||||||
Citigroup, Inc., | ||||||||
1.178%, Due 4/1/2014G | 6 | 6 | ||||||
6.375%, Due 8/12/2014 | 874 | 912 | ||||||
0.546%, Due 11/5/2014G | 320 | 320 | ||||||
1.70%, Due 7/25/2016 | 380 | 384 | ||||||
8.50%, Due 5/22/2019 | 1,970 | 2,549 |
See accompanying notes
14
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
CNA Financial Corp., | ||||||||
7.35%, Due 11/15/2019 | $ | 385 | $ | 475 | ||||
ERP Operating LP, | ||||||||
3.00%, Due 4/15/2023C | 205 | 195 | ||||||
Fifth Third Bancorp, | ||||||||
3.625%, Due 1/25/2016 | 325 | 343 | ||||||
0.672%, Due 12/20/2016G | 1,000 | 988 | ||||||
8.25%, Due 3/1/2038 | 455 | 614 | ||||||
General Electric Capital Corp., | ||||||||
5.625%, Due 5/1/2018 | 375 | 435 | ||||||
6.00%, Due 8/7/2019 | 350 | 414 | ||||||
5.50%, Due 1/8/2020 | 250 | 289 | ||||||
5.30%, Due 2/11/2021 | 205 | 228 | ||||||
3.15%, Due 9/7/2022 | 635 | 622 | ||||||
5.875%, Due 1/14/2038 | 280 | 316 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 725 | 792 | ||||||
6.25%, Due 9/1/2017 | 650 | 752 | ||||||
5.95%, Due 1/18/2018 | 590 | 677 | ||||||
6.00%, Due 6/15/2020 | 175 | 203 | ||||||
5.75%, Due 1/24/2022 | 400 | 454 | ||||||
HCP, Inc., | ||||||||
5.375%, Due 2/1/2021 | 425 | 470 | ||||||
Health Care REIT, Inc., | ||||||||
4.125%, Due 4/1/2019D | 240 | 255 | ||||||
5.25%, Due 1/15/2022D | 275 | 298 | ||||||
Humana, Inc., | ||||||||
3.15%, Due 12/1/2022 | 480 | 453 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015E | 450 | 466 | ||||||
0.937%, Due 5/23/2016G | 990 | 964 | ||||||
3.75%, Due 3/7/2017E | 400 | 423 | ||||||
JPMorgan Chase & Co., | ||||||||
0.584%, Due 6/13/2016G | 1,000 | 991 | ||||||
5.50%, Due 10/15/2040 | 325 | 354 | ||||||
KeyCorp, | ||||||||
5.10%, Due 3/24/2021 | 255 | 283 | ||||||
Liberty Mutual Group, Inc., | ||||||||
5.00%, Due 6/1/2021E | 280 | 302 | ||||||
Liberty Mutual Insurance Co., | ||||||||
7.875%, Due 10/15/2026E | 1,500 | 1,844 | ||||||
Lincoln National Corp., | ||||||||
4.75%, Due 2/15/2014 | 245 | 248 | ||||||
Lloyds TSB Bank PLC, | ||||||||
4.375%, Due 1/12/2015E | 325 | 338 | ||||||
Loews Corp., | ||||||||
5.25%, Due 3/15/2016 | 650 | 716 | ||||||
Merrill Lynch & Co. Inc., | ||||||||
6.40%, Due 8/28/2017 | 705 | 819 | ||||||
6.11%, Due 1/29/2037 | 365 | 391 | ||||||
MetLife, Inc., | ||||||||
6.375%, Due 6/15/2034 | 350 | 429 | ||||||
Morgan Stanley, | ||||||||
0.724%, Due 10/15/2015G | 920 | 916 | ||||||
5.375%, Due 10/15/2015 | 1,400 | 1,511 | ||||||
1.75%, Due 2/25/2016 | 385 | 389 | ||||||
7.30%, Due 5/13/2019 | 350 | 427 | ||||||
5.625%, Due 9/23/2019 | 350 | 399 | ||||||
3.75%, Due 2/25/2023 | 385 | 380 | ||||||
National Australia Bank Ltd., | ||||||||
4.375%, Due 12/10/2020E | 325 | 352 | ||||||
Nordea Bank AB, | ||||||||
4.875%, Due 1/27/2020E | 300 | 333 | ||||||
PNC Funding Corp., | ||||||||
4.25%, Due 9/21/2015 | 335 | 357 |
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
4.375%, Due 8/11/2020 | $ | 330 | $ | 359 | ||||
3.30%, Due 3/8/2022 | 425 | 420 | ||||||
Prudential Financial, Inc., | ||||||||
7.375%, Due 6/15/2019 | 300 | 373 | ||||||
Rabobank Nederland, | ||||||||
2.125%, Due 10/13/2015 | 340 | 349 | ||||||
Royal Bank of Canada, | ||||||||
1.15%, Due 3/13/2015 | 285 | 288 | ||||||
0.625%, Due 12/5/2016 | 575 | 575 | ||||||
Simon Property Group LP, | ||||||||
6.125%, Due 5/30/2018C | 550 | 649 | ||||||
10.35%, Due 4/1/2019C | 325 | 446 | ||||||
State Street Corp., | ||||||||
2.875%, Due 3/7/2016 | 510 | 535 | ||||||
SunTrust Banks, Inc., | ||||||||
3.50%, Due 1/20/2017 | 345 | 366 | ||||||
Toronto Dominion Bank, | ||||||||
2.625%, Due 9/10/2018 | 160 | 165 | ||||||
Trinity Acquisition PLC, | ||||||||
4.625%, Due 8/15/2023 | 295 | 298 | ||||||
UBS AG, | ||||||||
5.875%, Due 12/20/2017 | 611 | 708 | ||||||
UnitedHealth Group, Inc., | ||||||||
1.625%, Due 3/15/2019 | 330 | 321 | ||||||
3.875%, Due 10/15/2020 | 325 | 345 | ||||||
3.95%, Due 10/15/2042 | 215 | 188 | ||||||
US Bancorp, | ||||||||
1.65%, Due 5/15/2017 | 280 | 282 | ||||||
Ventas Realty LP, | ||||||||
5.70%, Due 9/30/2043C | 175 | 184 | ||||||
Wachovia Corp., | ||||||||
0.576%, Due 10/28/2015G | 865 | 862 | ||||||
0.614%, Due 10/15/2016G | 910 | 899 | ||||||
5.75%, Due 2/1/2018 | 695 | 811 | ||||||
WellPoint, Inc., | ||||||||
4.35%, Due 8/15/2020 | 520 | 558 | ||||||
Wells Fargo & Co., | ||||||||
2.15%, Due 1/15/2019 | 215 | 216 | ||||||
|
| |||||||
51,352 | ||||||||
|
| |||||||
CONSUMER- 0.32% | ||||||||
Altria Group, Inc., | ||||||||
4.75%, Due 5/5/2021 | 310 | 334 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
5.00%, Due 4/15/2020 | 330 | 375 | ||||||
8.00%, Due 11/15/2039 | 125 | 184 | ||||||
ConAgra Foods, Inc., | ||||||||
3.20%, Due 1/25/2023 | 275 | 261 | ||||||
Diageo Capital PLC, | ||||||||
1.50%, Due 5/11/2017 | 880 | 885 | ||||||
Kellogg Co., | ||||||||
1.875%, Due 11/17/2016 | 150 | 154 | ||||||
Kraft Foods Group, Inc., | ||||||||
1.625%, Due 6/4/2015 | 170 | 173 | ||||||
SABMiller Holdings, Inc., | ||||||||
4.95%, Due 1/15/2042E | 300 | 307 | ||||||
|
| |||||||
2,673 | ||||||||
|
| |||||||
SERVICE- 1.36% | ||||||||
AbbVie, Inc., | ||||||||
1.20%, Due 11/6/2015 | 280 | 282 | ||||||
2.90%, Due 11/6/2022 | 420 | 401 | ||||||
Baxter International, Inc., | ||||||||
1.85%, Due 1/15/2017 | 155 | 159 | ||||||
Becton Dickinson and Co., | ||||||||
3.25%, Due 11/12/2020 | 290 | 297 |
See accompanying notes
15
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Cardinal Health, Inc., | ||||||||
3.20%, Due 3/15/2023 | $ | 445 | $ | 423 | ||||
CBS Corp., | ||||||||
3.375%, Due 3/1/2022 | 500 | 489 | ||||||
Celgene Corp., | ||||||||
5.25%, Due 8/15/2043 | 185 | 186 | ||||||
Comcast Corp., | ||||||||
5.875%, Due 2/15/2018 | 535 | 625 | ||||||
6.55%, Due 7/1/2039 | 450 | 555 | ||||||
Covidien International Finance S.A., | ||||||||
2.80%, Due 6/15/2015 | 220 | 227 | ||||||
CVS Caremark Corp., | ||||||||
3.25%, Due 5/18/2015 | 170 | 177 | ||||||
DIRECTV Holdings LLC, | ||||||||
6.35%, Due 3/15/2040F | 155 | 160 | ||||||
eBay, Inc., | ||||||||
1.35%, Due 7/15/2017 | 240 | 240 | ||||||
Genzyme Corp., | ||||||||
5.00%, Due 6/15/2020 | 275 | 308 | ||||||
Gilead Sciences, Inc., | ||||||||
2.40%, Due 12/1/2014 | 245 | 250 | ||||||
GlaxoSmithKline Capital PLC, | ||||||||
1.50%, Due 5/8/2017 | 725 | 731 | ||||||
Home Depot, Inc., | ||||||||
2.70%, Due 4/1/2023 | 180 | 171 | ||||||
Lowe’s Companies, Inc., | ||||||||
3.875%, Due 9/15/2023 | 770 | 792 | ||||||
McKesson Corp., | ||||||||
3.25%, Due 3/1/2016 | 160 | 168 | ||||||
Novartis Capital Corp., | ||||||||
2.90%, Due 4/24/2015 | 210 | 218 | ||||||
Quest Diagnostics, Inc., | ||||||||
4.75%, Due 1/30/2020 | 150 | 160 | ||||||
Sanofi, | ||||||||
1.25%, Due 4/10/2018 | 560 | 551 | ||||||
4.00%, Due 3/29/2021 | 355 | 381 | ||||||
St Jude Medical, Inc., | ||||||||
2.50%, Due 1/15/2016 | 395 | 406 | ||||||
Teva Pharmaceutical Finance II, | ||||||||
3.00%, Due 6/15/2015 | 220 | 228 | ||||||
Thomson Reuters Corp., | ||||||||
4.70%, Due 10/15/2019 | 150 | 165 | ||||||
Time Warner Cable, Inc., | ||||||||
5.85%, Due 5/1/2017 | 650 | 715 | ||||||
6.75%, Due 7/1/2018 | 95 | 107 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 460 | 509 | ||||||
4.75%, Due 3/29/2021 | 325 | 353 | ||||||
Viacom, Inc., | ||||||||
4.50%, Due 2/27/2042 | 450 | 394 | ||||||
Walgreen Co., | ||||||||
3.10%, Due 9/15/2022 | 180 | 172 | ||||||
Wal-Mart Stores, Inc., | ||||||||
7.55%, Due 2/15/2030 | 350 | 475 | ||||||
|
| |||||||
11,475 | ||||||||
|
| |||||||
UTILITIES- 0.55% | ||||||||
Commonwealth Edison Co., | ||||||||
4.00%, Due 8/1/2020 | 175 | 188 | ||||||
Consolidated Edison Co. of New York, Inc., | ||||||||
5.50%, Due 12/1/2039 | 350 | 395 | ||||||
Duke Energy Indiana, Inc., | ||||||||
6.05%, Due 6/15/2016 | 330 | 371 |
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
EDF S.A., | ||||||||
4.60%, Due 1/27/2020E | $ | 320 | $ | 353 | ||||
MidAmerican Energy Holdings Co., | ||||||||
6.125%, Due 4/1/2036 | 500 | 567 | ||||||
National Rural Utilities Cooperative Finance Corp., | ||||||||
5.45%, Due 4/10/2017 | 315 | 357 | ||||||
Pacific Gas & Electric Co., | ||||||||
6.25%, Due 12/1/2013 | 175 | 176 | ||||||
Progress Energy, Inc., | ||||||||
4.875%, Due 12/1/2019 | 350 | 389 | ||||||
Sempra Energy, | ||||||||
6.50%, Due 6/1/2016 | 210 | 238 | ||||||
Sierra Pacific Power Co., | ||||||||
3.375%, Due 8/15/2023 | 205 | 205 | ||||||
Southwestern Electric Power Co., | ||||||||
3.55%, Due 2/15/2022 | 600 | 589 | ||||||
Union Electric Co., | ||||||||
6.70%, Due 2/1/2019 | 260 | 314 | ||||||
Xcel Energy, Inc., | ||||||||
5.613%, Due 4/1/2017 | 434 | 485 | ||||||
|
| |||||||
4,627 | ||||||||
|
| |||||||
ENERGY- 1.17% | ||||||||
Apache Corp., | ||||||||
5.10%, Due 9/1/2040 | 170 | 173 | ||||||
BP Capital Markets PLC, | ||||||||
4.50%, Due 10/1/2020 | 430 | 472 | ||||||
2.50%, Due 11/6/2022 | 540 | 499 | ||||||
Cameron International Corp., | ||||||||
6.375%, Due 7/15/2018 | 330 | 389 | ||||||
Canadian Natural Resources Ltd., | ||||||||
3.45%, Due 11/15/2021 | 430 | 432 | ||||||
6.25%, Due 3/15/2038 | 365 | 419 | ||||||
ConocoPhillips, | ||||||||
6.65%, Due 7/15/2018 | 460 | 556 | ||||||
Devon Energy Corp., | ||||||||
4.75%, Due 5/15/2042 | 300 | 284 | ||||||
Energy Transfer Partners LP, | ||||||||
8.50%, Due 4/15/2014C | 329 | 340 | ||||||
9.00%, Due 4/15/2019C | 265 | 339 | ||||||
Enterprise Products Operating LLC, | ||||||||
6.125%, Due 10/15/2039F | 450 | 504 | ||||||
EOG Resources, Inc., | ||||||||
2.50%, Due 2/1/2016 | 325 | 337 | ||||||
Halliburton Co., | ||||||||
3.25%, Due 11/15/2021 | 525 | 529 | ||||||
Husky Energy, Inc., | ||||||||
3.95%, Due 4/15/2022 | 480 | 489 | ||||||
Marathon Oil Corp., | ||||||||
6.00%, Due 10/1/2017 | 290 | 334 | ||||||
Phillips 66, | ||||||||
1.95%, Due 3/5/2015 | 200 | 203 | ||||||
4.30%, Due 4/1/2022 | 385 | 400 | ||||||
Pride International, Inc., | ||||||||
6.875%, Due 8/15/2020 | 220 | 264 | ||||||
Shell International Finance BV, | ||||||||
0.625%, Due 12/4/2015 | 525 | 526 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, Due 8/15/2014F | 315 | 327 | ||||||
5.65%, Due 3/1/2020F | 455 | 499 | ||||||
Spectra Energy Partners LP, | ||||||||
4.60%, Due 6/15/2021C | 175 | 185 | ||||||
The Williams Cos., Inc., |
See accompanying notes
16
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
3.70%, Due 1/15/2023 | $ | 180 | $ | 165 | ||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 300 | 302 | ||||||
7.625%, Due 1/15/2039 | 335 | 454 | ||||||
6.10%, Due 6/1/2040 | 170 | 197 | ||||||
Valero Energy Corp., | ||||||||
9.375%, Due 3/15/2019 | 190 | 248 | ||||||
|
| |||||||
9,866 | ||||||||
|
| |||||||
TRANSPORTATION- 0.30% |
| |||||||
Burlington Northern Santa Fe LLC, | ||||||||
7.95%, Due 8/15/2030F | 235 | 312 | ||||||
5.75%, Due 5/1/2040F | 170 | 188 | ||||||
5.15%, Due 9/1/2043F | 200 | 206 | ||||||
Canadian National Railway Co., | ||||||||
5.55%, Due 5/15/2018 | 350 | 405 | ||||||
CSX Corp., | ||||||||
3.70%, Due 11/1/2023 | 485 | 484 | ||||||
5.50%, Due 4/15/2041 | 325 | 348 | ||||||
Norfolk Southern Corp., | ||||||||
5.75%, Due 4/1/2018 | 425 | 491 | ||||||
United Parcel Service, Inc., | ||||||||
1.125%, Due 10/1/2017 | 125 | 124 | ||||||
|
| |||||||
2,558 | ||||||||
|
| |||||||
TELECOMMUNICATIONS- 0.69% |
| |||||||
America Movil SAB de CV, | ||||||||
6.375%, Due 3/1/2035 | 350 | 383 | ||||||
AT&T, Inc., | ||||||||
0.80%, Due 12/1/2015 | 370 | 370 | ||||||
5.35%, Due 9/1/2040 | 248 | 242 | ||||||
4.35%, Due 6/15/2045 | 341 | 282 | ||||||
Cellco Partnership, | ||||||||
8.50%, Due 11/15/2018 | 425 | 546 | ||||||
Deutsche Telekom International Finance BV, | ||||||||
4.875%, Due 3/6/2042E | 300 | 290 | ||||||
Oi S.A., | ||||||||
5.75%, Due 2/10/2022E | 385 | 361 | ||||||
Orange S.A., | ||||||||
4.375%, Due 7/8/2014 | 165 | 169 | ||||||
2.125%, Due 9/16/2015 | 150 | 153 | ||||||
Verizon Communications, Inc., | ||||||||
4.60%, Due 4/1/2021 | 380 | 408 | ||||||
3.50%, Due 11/1/2021 | 200 | 200 | ||||||
5.15%, Due 9/15/2023 | 170 | 184 | ||||||
6.40%, Due 9/15/2033 | 350 | 396 | ||||||
6.90%, Due 4/15/2038 | 275 | 326 | ||||||
6.55%, Due 9/15/2043 | 600 | 695 | ||||||
Vodafone Group PLC, | ||||||||
1.625%, Due 3/20/2017 | 390 | 390 | ||||||
6.15%, Due 2/27/2037 | 365 | 409 | ||||||
|
| |||||||
5,804 | ||||||||
|
| |||||||
Total Corporate Obligations |
| 105,981 | ||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS 0.10% |
| |||||||
Oil & Gas - 0.10% |
| |||||||
Petrobras International Finance Co., | ||||||||
3.875%, Due 1/27/2016 | 200 | 207 | ||||||
3.50%, Due 2/6/2017 | 140 | 142 | ||||||
6.875%, Due 1/20/2040 | 150 | 150 | ||||||
Petroleos Mexicanos, | ||||||||
6.00%, Due 3/5/2020 | 325 | 365 |
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Total Foreign Government Obligations (Cost $809) |
| $ | 864 | |||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 2.08% |
| |||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | $ | 227 | 228 | |||||
5.633%, Due 4/10/2049, 2007-2 A2 | 58 | 59 | ||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
5.201%, Due 12/11/2038, 2006-PW14 A4 | 665 | 733 | ||||||
5.54%, Due 9/11/2041, 2006-PW13 A4 | 420 | 460 | ||||||
GNR Project Loans, | ||||||||
1.692%, Due 11/16/2035, 2010-148 A | 150 | 151 | ||||||
2.174%, Due 7/16/2038, 2011-147 A | 1,913 | 1,936 | ||||||
1.147%, Due 12/16/2038, 2013-139 A | 1,996 | 1,971 | ||||||
2.989%, Due 3/16/2039, 2010-71 AC | 228 | 230 | ||||||
1.624%, Due 7/16/2039, 2013-78 AB | 1,978 | 1,956 | ||||||
1.367%, Due 11/16/2041, 2013 125 AB | 1,992 | 1,962 | ||||||
2.543%, Due 9/16/2044, 2011-96 AC | 699 | 712 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,400 | 2,496 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.679%, Due 8/10/2043, 2010-C1 A1E | 327 | 347 | ||||||
3.849%, Due 12/10/2043, 2010-C2 A1E | 510 | 540 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2E | 500 | 526 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 101 | 101 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1E | 650 | 674 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3E | 550 | 600 | ||||||
4.625%, Due 3/15/2046, 2005-LDP1 A2 | 52 | 52 | ||||||
5.706%, Due 2/12/2049, 2007-CB19 A4 | 550 | 616 | ||||||
5.629%, Due 2/12/2051, 2007-CB20 A2 | 46 | 46 | ||||||
JPMBB Commercial Mortgage Securities Trust 2013-C12, | ||||||||
3.157%, Due 7/15/2045, 2013 C12 ASB | 450 | 457 | ||||||
LB-UBS Commercial Mortgage Trust, | ||||||||
5.424%, Due 2/15/2040, 2007-C1 A4 | 500 | 555 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
5.728%, Due 6/15/2049, 2007-C32 A2 | 87 | 89 | ||||||
|
| |||||||
Total Non-Agency Mortgage-Backed Obligations |
| 17,497 | ||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS - 0.98% |
| |||||||
Capital Auto Receivables Asset Trust 2013-2, | ||||||||
0.92%, Due 9/20/2016, 2013-2 A2 | 1,500 | 1,502 | ||||||
Citibank Credit Card Issuance Trust, | ||||||||
1.11%, Due 7/23/2018, 2013 A3 A3 | 880 | 885 |
See accompanying notes
17
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
CNH Equipment Trust, | ||||||||
2.04%, Due 10/17/2016, 2011-A A4 | $ | 380 | $ | 386 | ||||
0.94%, Due 5/15/2017, 2012 A A3 | 381 | 382 | ||||||
Ford Credit Auto Lease Trust, | ||||||||
0.60%, Due 3/15/2016, 2013-A A3 | 240 | 240 | ||||||
Ford Credit Floorplan Master Owner Trust, | ||||||||
1.50%, Due 9/15/2018, 2013-5 A1 | 1,100 | 1,112 | ||||||
National Credit Union Administration, | ||||||||
0.574%, Due 3/11/2020, 2011 R3 1AG | 1,797 | 1,798 | ||||||
Nissan Auto Lease Trust, | ||||||||
0.58%, Due 11/16/2015, 2012 B A3 | 415 | 415 | ||||||
Nissan Master Owner Trust Receivables, | ||||||||
0.474%, Due 2/15/2018, 2013-A AG | 1,500 | 1,498 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $8,200) | 8,218 | |||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.08% |
| |||||||
Federal Home Loan Mortgage Corporation | ||||||||
4.50%, Due 3/1/2019 | 147 | 155 | ||||||
5.00%, Due 10/1/2020 | 61 | 64 | ||||||
3.50%, Due 9/1/2028 | 2,285 | 2,414 | ||||||
5.00%, Due 8/1/2033 | 318 | 345 | ||||||
5.50%, Due 2/1/2034 | 296 | 323 | ||||||
5.00%, Due 3/1/2034 | 225 | 243 | ||||||
6.00%, Due 6/1/2034 | 223 | 247 | ||||||
6.00%, Due 8/1/2034 | 178 | 196 | ||||||
5.00%, Due 8/1/2035 | 192 | 207 | ||||||
5.00%, Due 9/1/2035 | 138 | 149 | ||||||
5.50%, Due 4/1/2037 | 215 | 233 | ||||||
5.50%, Due 5/1/2038 | 115 | 124 | ||||||
0.57%, Due 12/15/2040G | 579 | 580 | ||||||
4.00%, Due 1/1/2041 | 839 | 880 | ||||||
4.50%, Due 2/1/2041 | 702 | 750 | ||||||
3.50%, Due 3/1/2042 | 448 | 458 | ||||||
3.50%, Due 6/1/2042 | 2,267 | 2,319 | ||||||
3.50%, Due 7/1/2042 | 580 | 594 | ||||||
3.00%, Due 8/1/2042 | 928 | 913 | ||||||
|
| |||||||
11,194 | ||||||||
|
| |||||||
Federal National Mortgage Association | ||||||||
5.50%, Due 2/1/2014 | 6 | 6 | ||||||
6.00%, Due 4/1/2016 | 37 | 39 | ||||||
5.00%, Due 12/1/2017 | 126 | 134 | ||||||
4.50%, Due 9/1/2018 | 93 | 99 | ||||||
4.00%, Due 8/1/2020 | 139 | 148 | ||||||
3.50%, Due 1/1/2026 | 187 | 197 | ||||||
4.00%, Due 5/1/2026 | 976 | 1,039 | ||||||
4.00%, Due 6/1/2026 | 1,234 | 1,321 | ||||||
3.50%, Due 1/1/2028 | 275 | 291 | ||||||
5.00%, Due 3/1/2034 | 351 | 382 | ||||||
4.50%, Due 9/1/2034 | 148 | 158 | ||||||
5.50%, Due 12/1/2035 | 94 | 103 | ||||||
5.00%, Due 2/1/2036 | 141 | 153 | ||||||
5.50%, Due 4/1/2036 | 182 | 198 | ||||||
6.00%, Due 9/1/2036 | 139 | 152 | ||||||
5.50%, Due 2/1/2037 | 210 | 229 | ||||||
5.50%, Due 6/1/2038 | 60 | 65 | ||||||
4.50%, Due 1/1/2040 | 779 | 833 | ||||||
5.00%, Due 5/1/2040 | 2,371 | 2,586 | ||||||
4.00%, Due 9/1/2040 | 603 | 636 | ||||||
4.00%, Due 1/1/2041 | 1,099 | 1,159 |
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
4.00%, Due 2/1/2041 | $ | 2,827 | $ | 2,986 | ||||
5.00%, Due 3/1/2041 | 949 | 1,036 | ||||||
4.00%, Due 4/1/2041 | 846 | 895 | ||||||
4.50%, Due 4/1/2041 | 1,845 | 1,979 | ||||||
4.50%, Due 5/1/2041 | 485 | 522 | ||||||
4.50%, Due 8/1/2041 | 1,163 | 1,248 | ||||||
4.50%, Due 10/1/2041 | 703 | 755 | ||||||
3.50%, Due 9/1/2042 | 795 | 817 | ||||||
4.50%, Due 1/1/2043 | 2,098 | 2,249 | ||||||
4.00%, Due 7/1/2043 | 1,274 | 1,331 | ||||||
|
| |||||||
23,746 | ||||||||
|
| |||||||
Government National Mortgage Association | ||||||||
7.00%, Due 12/15/2025 | 122 | 142 | ||||||
6.50%, Due 8/15/2027 | 122 | 140 | ||||||
6.50%, Due 11/15/2027 | 130 | 149 | ||||||
7.50%, Due 12/15/2028 | 113 | 134 | ||||||
5.50%, Due 7/15/2033 | 276 | 309 | ||||||
6.00%, Due 12/15/2033 | 309 | 350 | ||||||
6.00%, Due 10/15/2038 | 557 | 615 | ||||||
5.00%, Due 10/15/2039 | 1,902 | 2,120 | ||||||
5.50%, Due 2/15/2040 | 582 | 637 | ||||||
4.00%, Due 5/15/2040 | 632 | 675 | ||||||
3.50%, Due 3/15/2043 | 729 | 757 | ||||||
5.50%, Due 2/20/2034 | 396 | 442 | ||||||
4.50%, Due 10/20/2040 | 878 | 962 | ||||||
6.00%, Due 5/20/2042 | 352 | 394 | ||||||
|
| |||||||
7,826 | ||||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $41,939) |
| 42,766 | ||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS - 12.40% |
| |||||||
0.25%, Due 12/15/2015 | 3,650 | 3,643 | ||||||
1.50%, Due 6/30/2016 | 3,000 | 3,081 | ||||||
3.125%, Due 10/31/2016 | 3,000 | 3,224 | ||||||
0.875%, Due 1/31/2017 | 8,685 | 8,734 | ||||||
0.75%, Due 12/31/2017 | 800 | 790 | ||||||
1.50%, Due 8/31/2018 | 3,800 | 3,843 | ||||||
1.375%, Due 9/30/2018 | 1,000 | 1,004 | ||||||
1.125%, Due 5/31/2019 | 4,000 | 3,915 | ||||||
1.25%, Due 2/29/2020 | 2,600 | 2,519 | ||||||
2.00%, Due 11/15/2021 | 4,090 | 4,026 | ||||||
2.00%, Due 2/15/2022 | 4,985 | 4,883 | ||||||
6.25%, Due 8/15/2023 | 800 | 1,064 | ||||||
6.875%, Due 8/15/2025 | 580 | 822 | ||||||
5.25%, Due 11/15/2028 | 450 | 567 | ||||||
4.75%, Due 2/15/2037 | 130 | 157 | ||||||
4.50%, Due 8/15/2039 | 730 | 852 | ||||||
3.125%, Due 11/15/2041 | 3,230 | 2,946 | ||||||
2.875%, Due 5/15/2043 | 68,015 | 58,354 | ||||||
|
| |||||||
Total U.S. Treasury Obligations |
| 104,424 | ||||||
|
| |||||||
U.S. AGENCY OBLIGATIONS - 1.89% |
| |||||||
Federal Home Loan Mortgage Corp., | ||||||||
4.50%, Due 1/15/2015 | 15,140 | 15,919 | ||||||
|
| |||||||
MUNICIPAL OBLIGATIONS - 0.33% |
| |||||||
Municipal Electric Authority of Georgia, | ||||||||
6.64%, Due 4/1/2057 | 70 | 74 |
See accompanying notes
18
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
6.66%, Due 4/1/2057 | $ | 2,630 | $ | 2,738 | ||||
|
| |||||||
Total Municipal Obligations |
| 2,812 | ||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 5.30% (Cost $44,675) |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 44,674,762 | 44,675 | ||||||
|
| |||||||
TOTAL INVESTMENTS -99.67% |
| 839,505 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.33% |
| 2,801 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 842,306 | |||||
|
|
A | Non-income producing security. |
B | ADR - American Depositary Receipt. |
C | Limited Partnership. |
D | REIT - Real Estate Investment Trust. |
E | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $10,053 or 1.19% of net assets. The Fund has no right to demand registration of these securities. |
F | Limited Liability Company. |
G | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
S&P 500 Mini E Index Futures | Long | 409 | December, 2013 | $ | 35,808 | $ | 1,295 | |||||||||
|
|
|
| |||||||||||||
$ | 35,808 | $ | 1,295 | |||||||||||||
|
|
|
|
See accompanying notes
19
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCK - 92.70% |
| |||||||
CONSUMER DISCRETIONARY - 14.88% |
| |||||||
Auto Components - 2.35% |
| |||||||
Dana Holding Corp. | 61,275 | $ | 1,201 | |||||
Delphi Automotive PLC | 46,825 | 2,679 | ||||||
TRW Automotive Holdings Corp.A | 17,925 | 1,346 | ||||||
|
| |||||||
5,226 | ||||||||
|
| |||||||
Automobiles - 0.37% |
| |||||||
Harley-Davidson, Inc. | 12,696 | 813 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 2.08% |
| |||||||
Darden Restaurants, Inc. | 18,955 | 977 | ||||||
International Game Technology | 91,600 | 1,722 | ||||||
Royal Caribbean Cruises Ltd. | 45,500 | 1,913 | ||||||
|
| |||||||
4,612 | ||||||||
|
| |||||||
Household Durables - 1.72% |
| |||||||
Newell Rubbermaid, Inc. | 30,719 | 910 | ||||||
Stanley Black & Decker, Inc. | 36,744 | 2,906 | ||||||
|
| |||||||
3,816 | ||||||||
|
| |||||||
Leisure Equipment & Products - 0.34% |
| |||||||
Hasbro, Inc. | 14,591 | 754 | ||||||
|
| |||||||
Media - 3.14% |
| |||||||
Interpublic Group of Cos., Inc. | 188,461 | 3,166 | ||||||
News Corp, Class AA | 21,875 | 385 | ||||||
News Corp., Class BA | 53,200 | 954 | ||||||
Omnicom Group, Inc. | 36,275 | 2,471 | ||||||
|
| |||||||
6,976 | ||||||||
|
| |||||||
Multiline Retail - 0.42% |
| |||||||
Dollar General Corp.A | 16,198 | 936 | ||||||
|
| |||||||
Specialty Retail - 4.46% |
| |||||||
American Eagle Outfitters, Inc. | 61,651 | 955 | ||||||
Hanesbrands, Inc. | 29,800 | 2,029 | ||||||
L Brands, Inc. | 28,700 | 1,797 | ||||||
Murphy USA, Inc.A | 26,100 | 1,059 | ||||||
PetSmart, Inc. | 10,859 | 790 | ||||||
Rent-A-Center, Inc. | 11,000 | 377 | ||||||
Sally Beauty Holdings, Inc.A | 30,020 | 790 | ||||||
Staples, Inc. | 130,125 | 2,097 | ||||||
|
| |||||||
9,894 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 33,027 | ||||||
|
| |||||||
CONSUMER STAPLES - 3.90% |
| |||||||
Beverages - 0.80% |
| |||||||
Coca-Cola Enterprises, Inc. | 16,556 | 691 | ||||||
Molson Coors Brewing Co., Class B | 20,246 | 1,093 | ||||||
|
| |||||||
1,784 | ||||||||
|
| |||||||
Food & Drug Retailing - 0.84% |
| |||||||
Kroger Co. | 24,980 | 1,070 | ||||||
Sysco Corp. | 24,431 | 790 | ||||||
|
| |||||||
1,860 | ||||||||
|
| |||||||
Food Products - 1.19% |
| |||||||
Darling International, Inc.A | 43,950 | 1,023 | ||||||
Ingredion, Inc. | 14,355 | 944 | ||||||
JM Smucker Co. | 5,998 | 667 | ||||||
|
| |||||||
2,634 | ||||||||
|
| |||||||
Tobacco - 1.07% |
| |||||||
Lorillard, Inc. | 24,300 | 1,240 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Reynolds American, Inc. | 22,000 | $ | 1,130 | |||||
|
| |||||||
2,370 | ||||||||
|
| |||||||
Total Consumer Staples | 8,648 | |||||||
|
| |||||||
ENERGY - 6.53% | ||||||||
Energy Equipment & Services - 3.07% |
| |||||||
Baker Hughes, Inc. | 39,500 | 2,295 | ||||||
Helmerich & Payne, Inc. | 18,200 | 1,411 | ||||||
McDermott International, Inc.A | 62,224 | 440 | ||||||
Nabors Industries Ltd. | 28,777 | 503 | ||||||
Superior Energy Services, Inc.A | 81,025 | 2,174 | ||||||
|
| |||||||
6,823 | ||||||||
|
| |||||||
Gas - Pipelines - 0.50% | ||||||||
Spectra Energy Corp. | 31,028 | 1,104 | ||||||
|
| |||||||
Oil & Gas - 2.96% | ||||||||
EQT Corp. | 10,386 | 889 | ||||||
Murphy Oil Corp. | 35,200 | 2,123 | ||||||
Newfield Exploration Co.A | 30,369 | 925 | ||||||
Pioneer Natural Resources Co. | 4,577 | 937 | ||||||
Range Resources Corp. | 6,536 | 495 | ||||||
Seadrill Ltd. | 25,700 | 1,198 | ||||||
|
| |||||||
6,567 | ||||||||
|
| |||||||
Total Energy | 14,494 | |||||||
|
| |||||||
FINANCIALS - 26.39% | ||||||||
Banks - 8.07% | ||||||||
CIT Group, Inc. | 41,300 | 1,989 | ||||||
Comerica, Inc. | 37,050 | 1,604 | ||||||
Fifth Third Bancorp | 157,822 | 3,004 | ||||||
First Niagara Financial Group, Inc. | 134,000 | 1,478 | ||||||
Hancock Holding Co. | 23,247 | 762 | ||||||
KeyCorp | 140,250 | 1,757 | ||||||
New York Community Bancorp, Inc. | 112,300 | 1,820 | ||||||
People’s United Financial, Inc. | 114,500 | 1,652 | ||||||
Regions Financial Corp. | 103,600 | 998 | ||||||
SunTrust Banks, Inc. | 32,044 | 1,078 | ||||||
TCF Financial Corp. | 45,972 | 698 | ||||||
Zions Bancorporation | 37,853 | 1,074 | ||||||
|
| |||||||
17,914 | ||||||||
|
| |||||||
Diversified Financials - 5.22% | ||||||||
Ameriprise Financial, Inc. | 25,711 | 2,586 | ||||||
Capital One Financial Corp. | 23,500 | 1,614 | ||||||
Discover Financial Services | 35,900 | 1,862 | ||||||
Invesco Ltd. | 42,550 | 1,436 | ||||||
Legg Mason, Inc. | 38,275 | 1,472 | ||||||
SLM Corp. | 69,800 | 1,771 | ||||||
Towers Watson & Co., Class A | 7,396 | 849 | ||||||
|
| |||||||
11,590 | ||||||||
|
| |||||||
Insurance - 10.66% | ||||||||
Allstate Corp. | 14,424 | 765 | ||||||
Assurant, Inc. | 48,425 | 2,832 | ||||||
Axis Capital Holdings Ltd. | 29,250 | 1,387 | ||||||
Endurance Specialty Holdings Ltd. | 16,237 | 898 | ||||||
Genworth Financial, Inc., Class AA | 77,100 | 1,120 | ||||||
Hartford Financial Services Group, Inc. | 32,869 | 1,108 | ||||||
ING US, Inc. | 56,725 | 1,760 | ||||||
PartnerRe Ltd. | 9,452 | 947 | ||||||
Primerica, Inc. | 26,450 | 1,136 | ||||||
Reinsurance Group of America, Inc. | 14,694 | 1,046 | ||||||
Renaissancere Holdings Ltd. | 21,050 | 1,973 |
See accompanying notes
20
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Torchmark Corp. | 16,287 | $ | 1,187 | |||||
Unum Group | 18,163 | 576 | ||||||
Validus Holdings Ltd. | 34,493 | 1,362 | ||||||
Willis Group Holdings PLC | 91,838 | 4,138 | ||||||
XL Group PLC | 47,100 | 1,440 | ||||||
|
| |||||||
23,675 | ||||||||
|
| |||||||
Real Estate - 2.06% | ||||||||
Alexandria Real Estate Equities, Inc.C | 14,138 | 930 | ||||||
Cole Real Estate Investment, Inc.C | 73,563 | 1,045 | ||||||
Hospitality Properties TrustC | 55,350 | 1,626 | ||||||
Host Hotels & Resorts, Inc. B | 51,757 | 960 | ||||||
|
| |||||||
4,561 | ||||||||
|
| |||||||
Residential - 0.38% | ||||||||
American Campus Communities, Inc.C | 24,423 | 844 | ||||||
|
| |||||||
Total Financials |
| 58,584 | ||||||
|
| |||||||
HEALTH CARE - 9.05% | ||||||||
Biotechnology - 0.36% | ||||||||
Charles River Laboratories International, Inc.A | 16,261 | 800 | ||||||
|
| |||||||
Health Care Equipment & Supplies - 3.27% |
| |||||||
Becton Dickinson and Co. | 17,350 | 1,824 | ||||||
CareFusion Corp.A | 25,607 | 993 | ||||||
Dentsply International, Inc. | 20,546 | 968 | ||||||
Patterson Cos., Inc. | 27,689 | 1,177 | ||||||
St. Jude Medical, Inc. | 40,000 | 2,295 | ||||||
|
| |||||||
7,257 | ||||||||
|
| |||||||
Health Care Providers & Services - 5.42% |
| |||||||
AmerisourceBergen Corp. | 11,348 | 741 | ||||||
Cardinal Health, Inc. | 38,000 | 2,229 | ||||||
Cigna Corp. | 42,550 | 3,276 | ||||||
Laboratory Corp. of America HoldingsA | 16,975 | 1,713 | ||||||
Mednax, Inc.A | 9,383 | 1,023 | ||||||
Omnicare, Inc. | 38,700 | 2,134 | ||||||
Quest Diagnostics, Inc. | 15,299 | 917 | ||||||
|
| |||||||
12,033 | ||||||||
|
| |||||||
Total Health Care |
| 20,090 | ||||||
|
| |||||||
INDUSTRIALS - 13.75% |
| |||||||
Aerospace & Defense - 1.44% |
| |||||||
Curtiss-Wright Corp. | 13,525 | 673 | ||||||
L-3 Communications Holdings, Inc. | 25,025 | 2,514 | ||||||
|
| |||||||
3,187 | ||||||||
|
| |||||||
Building Products - 1.38% | ||||||||
Masco Corp. | 86,100 | 1,819 | ||||||
Owens CorningA | 34,500 | 1,240 | ||||||
|
| |||||||
3,059 | ||||||||
|
| |||||||
Commercial Services & Supplies - 1.59% |
| |||||||
Cintas Corp. | 17,386 | 935 | ||||||
Clean Harbors, Inc.A | 16,996 | 1,050 | ||||||
Con-way, Inc. | 37,325 | 1,537 | ||||||
|
| |||||||
3,522 | ||||||||
|
| |||||||
Construction & Engineering - 2.22% |
| |||||||
AECOM Technology Corp.A | 65,325 | 2,076 | ||||||
Fluor Corp. | 12,264 | 910 | ||||||
URS Corp. | 35,650 | 1,933 | ||||||
|
| |||||||
4,919 | ||||||||
|
|
Shares | Fair Value | |||||||
(000’s) | ||||||||
Electrical Equipment - 1.10% |
| |||||||
Brady Corp., Class A | 49,175 | $ | 1,435 | |||||
Regal-Beloit Corp. | 13,699 | 1,005 | ||||||
|
| |||||||
2,440 | ||||||||
|
| |||||||
Industrial Conglomerates - 0.61% |
| |||||||
KBR, Inc. | 39,000 | 1,347 | ||||||
|
| |||||||
Machinery - 4.98% | ||||||||
Dover Corp. | 11,285 | 1,036 | ||||||
Joy Global, Inc. | 19,500 | 1,107 | ||||||
Parker Hannifin Corp. | 28,567 | 3,334 | ||||||
Pentair Ltd. | 28,500 | 1,912 | ||||||
SPX Corp. | 24,800 | 2,250 | ||||||
Xylem, Inc. | 41,864 | 1,444 | ||||||
|
| |||||||
11,083 | ||||||||
|
| |||||||
Marine - 0.43% | ||||||||
Golar LNG Ltd. | 25,700 | 954 | ||||||
|
| |||||||
Total Industrials |
| 30,511 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 9.70% |
| |||||||
Communications Equipment - 1.11% |
| |||||||
Anixter International, Inc. | 20,350 | 1,740 | ||||||
Juniper Networks, Inc.A | 38,641 | 720 | ||||||
|
| |||||||
2,460 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 3.88% |
| |||||||
Avnet, Inc. | 81,175 | 3,222 | ||||||
Diebold, Inc. | 15,294 | 458 | ||||||
Eaton Corp PLC | 20,600 | 1,454 | ||||||
Ingram Micro, Inc., Class AA | 99,775 | 2,312 | ||||||
TE Connectivity Ltd. | 22,775 | 1,173 | ||||||
|
| |||||||
8,619 | ||||||||
|
| |||||||
IT Consulting & Services - 1.33% |
| |||||||
Fidelity National Information Services, Inc. | 24,072 | 1,174 | ||||||
Total System Services, Inc. | 59,800 | 1,783 | ||||||
|
| |||||||
2,957 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 1.23% |
| |||||||
Microchip Technology, Inc. | 63,562 | 2,731 | ||||||
|
| |||||||
Software - 2.15% | ||||||||
CA, Inc. | 66,000 | 2,096 | ||||||
Cadence Design Systems, Inc.A | 53,762 | 697 | ||||||
Symantec Corp. | 40,973 | 932 | ||||||
Synopsys, Inc.A | 28,442 | 1,037 | ||||||
|
| |||||||
4,762 | ||||||||
|
| |||||||
Total Information Technology |
| 21,529 | ||||||
|
| |||||||
MATERIALS - 4.17% | ||||||||
Chemicals - 2.32% | ||||||||
Air Products & Chemicals, Inc. | 6,912 | 753 | ||||||
Albemarle Corp. | 15,891 | 1,052 | ||||||
Rockwood Holdings, Inc. | 39,829 | 2,520 | ||||||
Scotts Miracle-Gro Co., Class A | 13,927 | 818 | ||||||
|
| |||||||
5,143 | ||||||||
|
| |||||||
Containers & Packaging - 1.06% |
| |||||||
Greif, Inc., Class A | 17,085 | 914 | ||||||
Owens-Illinois, Inc.A | 23,565 | 749 | ||||||
Silgan Holdings, Inc. | 15,229 | 686 | ||||||
|
| |||||||
2,349 | ||||||||
|
|
See accompanying notes
21
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Metals & Mining - 0.79% | ||||||||
Allegheny Technologies, Inc. | 31,446 | $ | 1,040 | |||||
Nucor Corp. | 13,745 | 712 | ||||||
|
| |||||||
1,752 | ||||||||
|
| |||||||
Total Materials | 9,244 | |||||||
|
| |||||||
UTILITIES - 4.33% | ||||||||
Electric - 2.60% | ||||||||
CenterPoint Energy, Inc. | 32,500 | 800 | ||||||
Edison International | 11,966 | 587 | ||||||
Entergy Corp. | 23,625 | 1,528 | ||||||
Great Plains Energy, Inc. | 48,153 | 1,128 | ||||||
Pinnacle West Capital Corp. | 12,800 | 717 | ||||||
Portland General Electric Co. | 35,320 | 1,014 | ||||||
|
| |||||||
5,774 | ||||||||
|
| |||||||
Gas - 0.70% | ||||||||
AGL Resources, Inc. | 22,518 | 1,078 | ||||||
ONEOK, Inc. | 8,300 | 469 | ||||||
|
| |||||||
1,547 | ||||||||
|
| |||||||
Multi-Utilities - 1.03% | ||||||||
SCANA Corp. | 12,393 | 578 | ||||||
Xcel Energy, Inc. | 59,349 | 1,713 | ||||||
|
| |||||||
2,291 | ||||||||
|
| |||||||
Total Utilities | 9,612 | |||||||
|
| |||||||
Total Common Stock (Cost $169,578) |
| 205,739 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 6.27% |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 13,908,035 | 13,908 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 98.97% |
| 219,647 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 1.03% |
| 2,289 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 221,936 | |||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | Limited Partnership. |
C | REIT - Real Estate Investment Trust. |
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
S&P 400 Midcap E Index Future | Long | 100 | December, 2013 | $ | 12,864 | $ | 266 | |||||||||
|
|
|
| |||||||||||||
$ | 12,864 | $ | 266 | |||||||||||||
|
|
|
|
See accompanying notes
22
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCK - 95.33% |
| |||||||
CONSUMER DISCRETIONARY - 10.45% |
| |||||||
Auto Components - 1.71% |
| |||||||
Dana Holding Corp. | 1,775 | $ | 35 | |||||
Fuel Systems Solutions, Inc.A | 2,456 | 44 | ||||||
|
| |||||||
79 | ||||||||
|
| |||||||
Distributors - 0.76% |
| |||||||
Core-Mark Holding Co., Inc. | 488 | 35 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.86% |
| |||||||
CEC Entertainment, Inc. | 355 | 16 | ||||||
Ruby Tuesday, Inc.A | 3,941 | 24 | ||||||
|
| |||||||
40 | ||||||||
|
| |||||||
Household Durables - 1.17% |
| |||||||
ACCO Brands Corp.A | 3,500 | 20 | ||||||
Helen of Troy Ltd.A | 720 | 34 | ||||||
|
| |||||||
54 | ||||||||
|
| |||||||
Media - 0.43% |
| |||||||
John Wiley & Sons, Inc., Class A | 400 | 20 | ||||||
|
| |||||||
Specialty Retail - 4.72% |
| |||||||
Buckle, Inc. | 778 | 38 | ||||||
Children’s Place Retail Stores, Inc.A | 717 | 39 | ||||||
Citi Trends, Inc.A | 2,997 | 44 | ||||||
Genesco, Inc.A | 405 | 28 | ||||||
Men’s Wearhouse, Inc. | 1,098 | 46 | ||||||
West Marine, Inc.A | 1,951 | 24 | ||||||
|
| |||||||
219 | ||||||||
|
| |||||||
Textiles & Apparel - 0.80% |
| |||||||
R.G. Barry Corp. | 1,155 | 22 | ||||||
Rocky Brands, Inc. | 1,012 | 15 | ||||||
|
| |||||||
37 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 484 | ||||||
|
| |||||||
CONSUMER STAPLES - 5.81% |
| |||||||
Beverages - 0.54% |
| |||||||
National Beverage Corp. | 1,390 | 25 | ||||||
|
| |||||||
Food & Drug Retailing - 2.40% |
| |||||||
Andersons, Inc. | 676 | 51 | ||||||
Casey’s General Stores, Inc. | 265 | 19 | ||||||
CST Brands, Inc. | 1,270 | 41 | ||||||
|
| |||||||
111 | ||||||||
|
| |||||||
Food Products - 2.20% |
| |||||||
Cal-Maine Foods, Inc. | 375 | 19 | ||||||
Darling International, Inc.A | 1,931 | 45 | ||||||
Inventure Foods, Inc.A | 3,360 | 38 | ||||||
|
| |||||||
102 | ||||||||
|
| |||||||
Personal Products - 0.67% |
| |||||||
Elizabeth Arden, Inc.A | 863 | 31 | ||||||
|
| |||||||
Total Consumer Staples |
| 269 | ||||||
|
| |||||||
ENERGY - 9.09% |
| |||||||
Energy Equipment & Services - 6.28% |
| |||||||
Atwood Oceanics, Inc.A | 575 | 31 | ||||||
C&J Energy Services, Inc.A | 1,080 | 25 | ||||||
Cal Dive International, Inc.A | 11,493 | 23 | ||||||
Hornbeck Offshore Services, Inc.A | 764 | 42 | ||||||
Key Energy Services, Inc.A | 2,181 | 17 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Patterson-UTI Energy, Inc. | 1,922 | $ | 47 | |||||
Superior Energy Services, Inc.A | 1,456 | 39 | ||||||
Tetra Technologies, Inc.A | 605 | 8 | ||||||
Unit Corp.A | 1,176 | 59 | ||||||
|
| |||||||
291 | ||||||||
|
| |||||||
Oil & Gas - 2.81% |
| |||||||
Natural Gas Services Group, Inc.A | 534 | 15 | ||||||
Stone Energy Corp.A | 1,550 | 54 | ||||||
Triangle Petroleum Corp.A | 3,774 | 40 | ||||||
Vaalco Energy, Inc. | 3,926 | 21 | ||||||
|
| |||||||
130 | ||||||||
|
| |||||||
Total Energy |
| 421 | ||||||
|
| |||||||
FINANCIALS - 26.12% |
| |||||||
Banks - 9.71% |
| |||||||
1st Source Corp. | 530 | 17 | ||||||
Bancorp, Inc.A | 4,233 | 67 | ||||||
BBCN Bancorp, Inc. | 830 | 12 | ||||||
Boston Private Financial Holdings, Inc. | 1,715 | 20 | ||||||
Bryn Mawr Bank Corp. | 825 | 23 | ||||||
C&F Financial Statutory Trust I | 615 | 33 | ||||||
Cardinal Financial Corp. | 1,850 | 31 | ||||||
Center Bancorp, Inc. | 743 | 11 | ||||||
Dime Community Bancshares, Inc. | 910 | 15 | ||||||
Eagle Bancorp, Inc.A | 833 | 22 | ||||||
First Financial Holdings, Inc. | 254 | 15 | ||||||
FirstMerit Corp. | 755 | 17 | ||||||
German American Bancorp, Inc. | 413 | 11 | ||||||
Hanmi Financial Corp. | 798 | 14 | ||||||
Horizon Bancorp | 1,433 | 31 | ||||||
Investors Bancorp, Inc. | 1,005 | 24 | ||||||
Prosperity Bancshares, Inc. | 589 | 36 | ||||||
United Financial Bancorp, Inc. | 900 | 14 | ||||||
ViewPoint Financial Group, Inc. | 719 | 16 | ||||||
Washington Federal, Inc. | 901 | 21 | ||||||
|
| |||||||
450 | ||||||||
|
| |||||||
Diversified Financials - 3.97% |
| |||||||
Cash America International, Inc. | 480 | 19 | ||||||
CBIZ, Inc.A | 2,675 | 22 | ||||||
ConnectOne Bancorp, Inc.A | 657 | 25 | ||||||
Gain Capital Holdings, Inc. | 1,407 | 15 | ||||||
GFI Group, Inc. | 4,291 | 15 | ||||||
Nicholas Financial, Inc. | 1,200 | 19 | ||||||
Pacific Continental Corp. | 1,536 | 21 | ||||||
Piper Jaffray Cos.A | 823 | 30 | ||||||
Texas Capital Bancshares, Inc.A | 351 | 18 | ||||||
|
| |||||||
184 | ||||||||
|
| |||||||
Insurance - 4.69% |
| |||||||
American Equity Investment Life Holding Co. | 1,710 | 36 | ||||||
Enstar Group Ltd.A | 105 | 14 | ||||||
Horace Mann Educators Corp. | 1,087 | 30 | ||||||
Investors Title Co. | 175 | 14 | ||||||
Primerica, Inc. | 720 | 31 | ||||||
ProAssurance Corp. | 454 | 21 | ||||||
Protective Life Corp. | 1,555 | 71 | ||||||
|
| |||||||
217 | ||||||||
|
| |||||||
Real Estate - 7.75% |
| |||||||
Alexander & Baldwin, Inc. | 690 | 26 | ||||||
BioMed Realty Trust, Inc.B | 1,624 | 32 | ||||||
Chatham Lodging TrustB | 1,250 | 24 |
See accompanying notes
23
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Colony Financial, Inc.B | 1,279 | $ | 26 | |||||
DiamondRock Hospitality Co.B | 2,938 | 33 | ||||||
Forestar Group, Inc.A | 806 | 18 | ||||||
Franklin Street Properties Corp.B | 1,777 | 23 | ||||||
KKR Financial Holdings LLCC | 3,255 | 32 | ||||||
LaSalle Hotel PropertiesB | 858 | 27 | ||||||
Newcastle Investment Corp. | 2,505 | 14 | ||||||
Pebblebrook Hotel TrustB | 1,018 | 31 | ||||||
PS Business Parks, Inc.B | 380 | 31 | ||||||
Ryman Hospitality Properties, Inc.B | 450 | 17 | ||||||
Summit Hotel Properties, Inc.B | 2,720 | 25 | ||||||
|
| |||||||
359 | ||||||||
|
| |||||||
Total Financials |
| 1,210 | ||||||
|
| |||||||
HEALTH CARE - 3.87% | ||||||||
Biotechnology - 0.43% | ||||||||
RTI Biologics, Inc.A | 7,004 | 20 | ||||||
|
| |||||||
Health Care Equipment & Supplies - 0.99% |
| |||||||
CONMED Corp. | 858 | 31 | ||||||
Hillenbrand, Inc. | 545 | 15 | ||||||
|
| |||||||
46 | ||||||||
|
| |||||||
Health Care Providers & Services - 2.45% |
| |||||||
Ensign Group, Inc. | 735 | 31 | ||||||
Health Net, Inc.A | 650 | 20 | ||||||
Magellan Health Services, Inc.A | 525 | 31 | ||||||
Select Medical Holdings Corp. | 1,645 | 14 | ||||||
US Physical Therapy, Inc. | 530 | 17 | ||||||
|
| |||||||
113 | ||||||||
|
| |||||||
Total Health Care |
| 179 | ||||||
|
| |||||||
INDUSTRIALS - 19.41% |
| |||||||
Aerospace & Defense - 1.23% |
| |||||||
Sparton Corp. | 1,450 | 38 | ||||||
Triumph Group, Inc. | 265 | 19 | ||||||
|
| |||||||
57 | ||||||||
|
| |||||||
Building Products - 1.66% |
| |||||||
Crane Co. | 933 | 60 | ||||||
Universal Forest Products, Inc. | 327 | 17 | ||||||
|
| |||||||
77 | ||||||||
|
| |||||||
Commercial Services & Supplies - 3.43% |
| |||||||
Brink’s Co. | 688 | 22 | ||||||
Iconix Brand Group, Inc.A | 1,258 | 45 | ||||||
Koppers Holdings, Inc. | 780 | 35 | ||||||
Layne Christensen Co.A | 1,248 | 24 | ||||||
United Stationers Supply Co. | 740 | 33 | ||||||
|
| |||||||
159 | ||||||||
|
| |||||||
Construction & Engineering - 3.56% |
| |||||||
EMCOR Group, Inc. | 1,210 | 45 | ||||||
Granite Construction, Inc. | 1,016 | 33 | ||||||
MasTec, Inc.A | 1,583 | 50 | ||||||
MYR Group, Inc.A | 275 | 7 | ||||||
URS Corp. | 560 | 30 | ||||||
|
| |||||||
165 | ||||||||
|
| |||||||
Diversified Manufacturing - 1.19% |
| |||||||
Barnes Group, Inc. | 1,550 | 55 | ||||||
|
| |||||||
Electrical Equipment - 2.38% |
| |||||||
AZZ, Inc. | 820 | 37 | ||||||
GrafTech International Ltd.A | 3,544 | 32 | ||||||
Houston Wire & Cable Co. | 1,110 | 15 |
Shares | Fair Value | |||||||
(000’s) | ||||||||
Powell Industries, Inc. | 411 | $ | 26 | |||||
|
| |||||||
110 | ||||||||
|
| |||||||
Industrial Conglomerates - 1.23% |
| |||||||
Teleflex, Inc. | 384 | 35 | ||||||
US Ecology, Inc. | 610 | 22 | ||||||
|
| |||||||
57 | ||||||||
|
| |||||||
Machinery - 2.09% | ||||||||
Astec Industries, Inc. | 610 | 21 | ||||||
CIRCOR International, Inc. | 368 | 27 | ||||||
EnPro Industries, Inc.A | 523 | 31 | ||||||
John Bean Technologies Corp. | 670 | 18 | ||||||
|
| |||||||
97 | ||||||||
|
| |||||||
Marine - 0.50% | ||||||||
CAI International, Inc.A | 1,040 | 23 | ||||||
|
| |||||||
Road & Rail - 2.14% | ||||||||
Marten Transport Ltd. | 1,471 | 26 | ||||||
Old Dominion Freight Line, Inc.A | 1,050 | 50 | ||||||
Ryder System, Inc. | 220 | 14 | ||||||
TravelCenters of America LLCA | 1,100 | 9 | ||||||
|
| |||||||
99 | ||||||||
|
| |||||||
Total Industrials |
| 899 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 12.89% |
| |||||||
Communications Equipment - 3.37% |
| |||||||
Anixter International, Inc. | 260 | 22 | ||||||
ARRIS Group, Inc.A | 1,730 | 31 | ||||||
NICE Systems Ltd., ADRD | 963 | 38 | ||||||
Oplink Communications, Inc.A | 1,423 | 26 | ||||||
Polycom, Inc.A | 3,749 | 39 | ||||||
|
| |||||||
156 | ||||||||
|
| |||||||
Computers & Peripherals - 0.45% |
| |||||||
Mercury Systems, Inc.A | 2,281 | 21 | ||||||
|
| |||||||
Electronic Equipment & Instruments - 4.30% |
| |||||||
Electro Scientific Industries, Inc. | 3,774 | 44 | ||||||
Itron, Inc.A | 655 | 28 | ||||||
MTS Systems Corp. | 470 | 31 | ||||||
Tech Data Corp.A | 530 | 28 | ||||||
Tronox Ltd., Class A | 975 | 23 | ||||||
Vishay Intertechnology, Inc.A | 3,663 | 45 | ||||||
|
| |||||||
199 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 4.77% |
| |||||||
Entegris, Inc.A | 3,165 | 33 | ||||||
Kulicke & Soffa Industries, Inc.A | 3,957 | 51 | ||||||
LTX-Credence Corp.A | 2,678 | 16 | ||||||
Omnivision Technologies, Inc.A | 1,645 | 23 | ||||||
Photronics, Inc.A | 11,716 | 98 | ||||||
|
| |||||||
221 | ||||||||
|
| |||||||
Total Information Technology |
| 597 | ||||||
|
| |||||||
MATERIALS - 6.89% |
| |||||||
Chemicals - 4.96% | ||||||||
American Vanguard Corp. | 530 | 14 | ||||||
Cabot Corp. | 1,141 | 54 | ||||||
Innophos Holdings, Inc. | 775 | 39 | ||||||
KMG Chemicals, Inc. | 735 | 15 | ||||||
Olin Corp. | 510 | 11 | ||||||
OM Group, Inc.A | 1,543 | 52 | ||||||
Sensient Technologies Corp. | 405 | 21 |
See accompanying notes
24
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Stepan Co. | 410 | $ | 24 | |||||
|
| |||||||
230 | ||||||||
|
| |||||||
Metals & Mining - 1.04% |
| |||||||
RTI International Metals, Inc.A | 868 | 29 | ||||||
Stillwater Mining Co.A | 1,702 | 19 | ||||||
|
| |||||||
48 | ||||||||
|
| |||||||
Paper & Forest Products - 0.89% |
| |||||||
Schweitzer-Mauduit International, Inc. | 670 | 41 | ||||||
|
| |||||||
Total Materials |
| 319 | ||||||
|
| |||||||
UTILITIES - 0.80% |
| |||||||
Electric - 0.32% |
| |||||||
Portland General Electric Co. | 540 | 15 | ||||||
|
| |||||||
Gas - 0.48% | ||||||||
Laclede Group, Inc. | 455 | 22 | ||||||
|
| |||||||
Total Utilities |
| 37 | ||||||
|
| |||||||
Total Common Stock (Cost $3,556) |
| 4,415 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 5.12% (Cost $237) |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 237,140 | 237 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 100.45% (Cost $3,793) |
| 4,652 | ||||||
LIABILITIES, NET OF OTHER |
| (20 | ) | |||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 4,632 | |||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | REIT - Real Estate Investment Trust. |
C | Limited Liability Company. |
D | ADR - American Depositary Receipt. |
Futures Contracts Open on October 31, 2013 (000’s):
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
Russell 2000 Mini Index Future | Long | 2 | December, 2013 | $ | 220 | $ | 7 | |||||||||
|
|
|
| |||||||||||||
$ | 220 | $ | 7 | |||||||||||||
|
|
|
|
See accompanying notes
25
Statements of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Balanced Fund | Mid-Cap Value Fund | Small Cap Value II Fund | ||||||||||
Assets: | ||||||||||||
Investments in unaffiliated securities, at fair value A | $ | 839,505 | $ | 219,647 | $ | 4,652 | ||||||
Cash | 1 | — | — | |||||||||
Deposit with brokers for futures contracts | 1,755 | 446 | 9 | |||||||||
Receivable for investments sold | — | 479 | 9 | |||||||||
Dividends and interest receivable | 2,987 | 121 | 1 | |||||||||
Receivable for fund shares sold | 938 | 2,194 | — | |||||||||
Receivable for tax reclaims | 8 | 1 | — | |||||||||
Receivable for expense reimbursement (Note 2) | — | — | 3 | |||||||||
Prepaid expenses | 37 | 21 | — | |||||||||
|
|
|
|
|
| |||||||
Total assets | 845,231 | 222,909 | 4,674 | |||||||||
|
|
|
|
|
| |||||||
Liabilities: | ||||||||||||
Payable for investments purchased | 324 | 392 | 8 | |||||||||
Payable for fund shares redeemed | 1,613 | 119 | — | |||||||||
Payable for variation margin from open futures contracts | 194 | 52 | 2 | |||||||||
Payable under excess expense reimbursement plan (Note 2) | 2 | 6 | — | |||||||||
Management and investment advisory fees payable | 554 | 333 | 9 | |||||||||
Administrative service and service fees payable | 114 | 32 | 3 | |||||||||
Transfer agent fees payable | 10 | 2 | — | |||||||||
Custody and fund accounting fees payable | 15 | 3 | — | |||||||||
Professional fees payable | 34 | 24 | 19 | |||||||||
Trustee fees payable | 12 | — | — | |||||||||
Payable for prospectus and shareholder reports | 50 | 8 | — | |||||||||
Other liabilities | 3 | 2 | 1 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 2,925 | 973 | 42 | |||||||||
|
|
|
|
|
| |||||||
Net Assets | $ | 842,306 | $ | 221,936 | $ | 4,632 | ||||||
|
|
|
|
|
| |||||||
Analysis of Net Assets: | ||||||||||||
Paid-in-capital | 676,009 | 170,903 | 3,345 | |||||||||
Undistributed net investment income | 121 | 1,330 | 6 | |||||||||
Accumulated net realized gain | 24,993 | 13,276 | 416 | |||||||||
Unrealized appreciation of investments | 139,888 | 36,161 | 858 | |||||||||
Unrealized appreciation of futures contracts | 1,295 | 266 | 7 | |||||||||
|
|
|
|
|
| |||||||
Net assets | $ | 842,306 | $ | 221,936 | $ | 4,632 | ||||||
|
|
|
|
|
| |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||
Institutional Class | 3,734,443 | 5,040,230 | N/A | |||||||||
|
|
|
|
|
| |||||||
Y Class | 443,709 | 197,419 | 161,054 | |||||||||
|
|
|
|
|
| |||||||
Investor Class | 7,299,748 | 1,235,116 | 168,858 | |||||||||
|
|
|
|
|
| |||||||
Advisor Class | 406,039 | 51,726 | N/A | |||||||||
|
|
|
|
|
| |||||||
A Class | 419,714 | 118,298 | N/A | |||||||||
|
|
|
|
|
| |||||||
C Class | 764,763 | 65,495 | N/A | |||||||||
|
|
|
|
|
| |||||||
AMR Class | 41,487,795 | 8,764,470 | N/A | |||||||||
|
|
|
|
|
| |||||||
Net assets (not in thousands): | ||||||||||||
Institutional Class | $ | 60,916,035 | $ | 72,206,907 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
Y Class | $ | 7,262,894 | $ | 2,813,712 | $ | 2,267,875 | ||||||
|
|
|
|
|
| |||||||
Investor Class | $ | 109,336,889 | $ | 17,871,568 | $ | 2,363,999 | ||||||
|
|
|
|
|
| |||||||
Advisor Class | $ | 6,352,890 | $ | 727,587 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
A Class | $ | 6,284,539 | $ | 1,666,696 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
C Class | $ | 11,573,900 | $ | 904,692 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
AMR Class | $ | 640,578,862 | $ | 125,744,473 | $ | N/A | ||||||
|
|
|
|
|
|
See accompanying notes
26
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2013 (in thousands, except share and per share amounts)
Balanced Fund | Mid-Cap Value Fund | Small Cap Value II Fund | ||||||||||
Net asset value, offering and redemption price per share: | ||||||||||||
Institutional Class | $ | 16.31 | $ | 14.33 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
Y Class | $ | 16.37 | $ | 14.25 | $ | 14.08 | ||||||
|
|
|
|
|
| |||||||
Investor Class | $ | 14.98 | $ | 14.47 | $ | 14.00 | ||||||
|
|
|
|
|
| |||||||
Advisor Class | $ | 15.65 | $ | 14.07 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
A Class | $ | 14.97 | $ | 14.09 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
A Class (offering price) | $ | 15.88 | $ | 14.95 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
C Class | $ | 15.13 | $ | 13.81 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
AMR Class | $ | 15.44 | $ | 14.35 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
A Cost of investments in unaffiliated securities | $ | 699,617 | $ | 183,486 | $ | 3,793 |
See accompanying notes
27
American Beacon Funds
Statements of Operations
For the year ended October 31, 2013 (in thousands)
Balanced Fund | Mid-Cap Value Fund | Small Cap Value II Fund | ||||||||||
Investment Income: | ||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 13,390 | $ | 3,116 | $ | 57 | ||||||
Dividend income from affiliated securities | 1 | — | — | |||||||||
Interest income | 7,613 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total investment income | 21,004 | 3,116 | 57 | |||||||||
|
|
|
|
|
| |||||||
Expenses: | ||||||||||||
Management and investment advisory fees (Note 2) | 1,774 | 862 | 25 | |||||||||
Administrative service fees (Note 2): | ||||||||||||
Institutional Class | 152 | 142 | — | |||||||||
Y Class | 11 | 3 | 6 | |||||||||
Investor Class | 304 | 23 | 6 | |||||||||
Advisor Class | 15 | 2 | — | |||||||||
A Class | 19 | 2 | — | |||||||||
C Class | 25 | 2 | — | |||||||||
AMR Class | 319 | 47 | — | |||||||||
Transfer agent fees: | ||||||||||||
Institutional Class | 12 | 5 | — | |||||||||
Y Class | — | — | — | |||||||||
Investor Class | 10 | 3 | 1 | |||||||||
Advisor Class | — | 1 | — | |||||||||
A Class | 1 | — | — | |||||||||
C Class | 2 | — | — | |||||||||
AMR Class | 17 | 4 | — | |||||||||
Custody and fund accounting fees | 111 | 26 | 6 | |||||||||
Professional fees | 63 | 35 | 24 | |||||||||
Registration fees and expenses | 86 | 72 | 36 | |||||||||
Service fees (Note 2): | ||||||||||||
Y Class | 4 | 1 | 2 | |||||||||
Investor Class | 339 | 20 | 7 | |||||||||
Advisor Class | 12 | 1 | — | |||||||||
A Class | 7 | 1 | — | |||||||||
C Class | 9 | 1 | — | |||||||||
Distribution fees (Note 2): | ||||||||||||
Advisor Class | 12 | 1 | — | |||||||||
A Class | 12 | 2 | — | |||||||||
C Class | 63 | 4 | — | |||||||||
Prospectus and shareholder report expenses | 66 | 10 | 1 | |||||||||
Trustee fees | 57 | 10 | — | |||||||||
Other expenses | 67 | 21 | 4 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 3,569 | 1,301 | 118 | |||||||||
|
|
|
|
|
| |||||||
Net fees waived and expenses (reimbursed) or recouped by Manager (Note 2) | 2 | (6 | ) | (69 | ) | |||||||
|
|
|
|
|
| |||||||
Net expenses | 3,571 | 1,295 | 49 | |||||||||
|
|
|
|
|
| |||||||
Net investment income | 17,433 | 1,821 | 8 | |||||||||
|
|
|
|
|
| |||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments | 51,173 | 11,976 | 367 | |||||||||
Commission recapture (Note 3) | 57 | 21 | — | |||||||||
Futures contracts | 6,940 | 1,993 | 58 | |||||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||||||
Investments | 58,261 | 32,902 | 701 | |||||||||
Futures contracts | 1,886 | 300 | 9 | |||||||||
|
|
|
|
|
| |||||||
Net gain from investments | 118,317 | 47,192 | 1,135 | |||||||||
|
|
|
|
|
| |||||||
Net increase in net assets resulting from operations | $ | 135,750 | $ | 49,013 | $ | 1,143 | ||||||
|
|
|
|
|
| |||||||
A Foreign taxes | $ | 98 | $ | — | $ | — |
See accompanying notes
28
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
Balanced Fund | Mid-Cap Value Fund | Small Cap Value II Fund | ||||||||||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended Oct. 31, 2013 | From Nov. 15 to Oct. 31, 2012 | |||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 17,433 | $ | 23,022 | $ | 1,821 | $ | 2,075 | $ | 8 | $ | 7 | ||||||||||||
Net realized gain from investments and futures contracts | 58,170 | 31,933 | 13,990 | 16,482 | 425 | 47 | ||||||||||||||||||
Change in net unrealized appreciation or (depreciation) from investments and futures contracts | 60,147 | 56,120 | 33,202 | (4,428 | ) | 710 | 155 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase in net assets resulting from operations | 135,750 | 111,075 | 49,013 | 14,129 | 1,143 | 209 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||
Institutional Class | (1,020 | ) | (887 | ) | (657 | ) | (451 | ) | — | — | ||||||||||||||
Y Class | (72 | ) | (71 | ) | (13 | ) | (1 | ) | (7 | ) | (1 | ) | ||||||||||||
Investor Class | (1,894 | ) | (2,133 | ) | (35 | ) | (14 | ) | (7 | ) | (2 | ) | ||||||||||||
Advisor Class | (93 | ) | (50 | ) | (8 | ) | — | — | — | |||||||||||||||
A Class | (84 | ) | (52 | ) | (4 | ) | (1 | ) | — | — | ||||||||||||||
C Class | (77 | ) | (41 | ) | (5 | ) | — | — | — | |||||||||||||||
AMR Class | (14,207 | ) | (22,506 | ) | (1,435 | ) | (788 | ) | — | — | ||||||||||||||
Net realized gain from investments: | ||||||||||||||||||||||||
Institutional Class | (909 | ) | — | (1,547 | ) | — | — | — | ||||||||||||||||
Y Class | (61 | ) | — | (29 | ) | — | (24 | ) | — | |||||||||||||||
Investor Class | (2,087 | ) | — | (182 | ) | — | (24 | ) | — | |||||||||||||||
Advisor Class | (56 | ) | — | (19 | ) | — | — | — | ||||||||||||||||
A Class | (85 | ) | — | (11 | ) | — | — | — | ||||||||||||||||
C Class | (94 | ) | — | (11 | ) | — | — | — | ||||||||||||||||
AMR Class | (12,494 | ) | — | (3,149 | ) | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net distributions to shareholders | (33,233 | ) | (25,740 | ) | (7,105 | ) | (1,255 | ) | (62 | ) | (3 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in net assets from capital share transactions | (112,932 | ) | (87,607 | ) | 63,892 | 10,834 | 218 | 127 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in net assets | (10,415 | ) | (2,272 | ) | 105,800 | 23,708 | 1,299 | 333 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of period | 852,721 | 854,993 | 116,136 | 92,428 | 3,333 | 3,000 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of Period * | $ | 842,306 | $ | 852,721 | $ | 221,936 | $ | 116,136 | $ | 4,632 | $ | 3,333 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
* Includes undistributed net investment income (loss) of | $ | 121 | $ | (955 | ) | $ | 1,330 | $ | 1,685 | $ | 6 | $ | 3 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
29
American Beacon FundsSM
October 31, 2013
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Balanced Fund, the American Beacon Mid-Cap Value Fund, and the American Beacon Small Cap Value II Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
Advisor Class | Investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory, fund management, and securities lending services.
30
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Investment assets of the Funds are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the unaffiliated investment advisors hired by the Manager to direct investment activities for the Funds. Management fees paid by the Funds during the year ended October 31, 2013 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Net Amounts Retained by Manager | |||||||||||||
Balanced | 0.22 | % | $ | 1,774 | $ | 1,369 | $ | 405 | ||||||||
Mid-Cap Value | 0.56 | % | 862 | 786 | 76 | |||||||||||
Small Cap Value II | 0.61 | % | 25 | 23 | 2 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, and Advisor Classes, 0.40% of the average daily net assets of the A and C Classes, and 0.05% of the average daily net assets of the AMR Class of each of the Funds.
Distribution Plans
The Funds, except for the Advisor, A, and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the Advisor, A, and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Advisor and A Classes, and 1.00% of the average daily net assets of the C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, Advisor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, 0.25% of the average daily net assets of the Advisor Class and up to 0.375% of the average daily net assets of the Investor Class of the Funds.
Investment in Affiliated Funds
The Funds may invest in the American Beacon Money Market Select Fund (the “MM Select Fund”) or the U.S. Government Money Market Select Fund (the “USG Select Fund”) (collectively, the “Select Funds”). The Select Funds and the Funds have the same investment advisor and therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives Management and Administrative Service fees totaling 0.10% of the average daily net assets of the Select Fund. During the year ended October 31, 2013, the Manager earned $2,669 from the Balanced Fund’s investment in the Select Funds.
31
American Beacon FundsSM
October 31, 2013
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from other participating Funds. During the year ended October 31, 2013, the Mid-Cap Value Fund borrowed on average $775,991 for one day at 0.73% with interest charges of $16. During the year ended October 31, 2013, the Balanced and Small Cap Value II Funds did not utilize the credit facility.
Expense Reimbursement Plan
The Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. For the period ended October 31, 2013, the Manager waived or reimbursed expenses as follows:
Expense Cap | ||||||||||||||||||
Fund | Class | 11/1/12 to 2/28/13 | 3/1/13 to 10/31/13 | Reimbursed or (Recouped) Expenses | Expiration | |||||||||||||
Balanced | Y | 0.70 | % | N/A | $ | (826 | ) | 2016 | ||||||||||
Balanced | A* | 1.10 | %* | 1.10 | % | (170 | ) | 2016 | ||||||||||
Balanced | C | 1.85 | % | N/A | (593 | ) | 2016 | |||||||||||
Mid-Cap Value | Institutional | 0.98 | % | 0.98 | % | 3,598 | 2016 | |||||||||||
Mid-Cap Value | Y | 1.08 | % | 1.08 | % | 259 | 2016 | |||||||||||
Mid-Cap Value | Investor | 1.23 | % | 1.23 | % | 1,575 | 2016 | |||||||||||
Mid-Cap Value | Advisor | 1.49 | % | 1.49 | % | 726 | 2016 | |||||||||||
Mid-Cap Value | A | 1.49 | % | 1.49 | % | (42 | ) | 2016 | ||||||||||
Mid-Cap Value | C | 2.24 | % | 2.24 | % | 25 | 2016 | |||||||||||
Small Cap Value II | Y | 1.09 | % | 1.09 | % | 34,513 | 2016 | |||||||||||
Small Cap Value II | Investor | 1.37 | % | 1.37 | % | 34,837 | 2016 |
* | Voluntary Reimbursement |
Of these amounts, $2,712 was receivable from the Manager at October 31, 2013 Small Cap Value II Fund and $1,590 and $6,141 was payable to the Manager for the Balanced and Mid-Cap Value Funds, respectively. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The Funds did not record a liability for potential reimbursements, due to the current assessment that a reimbursement is unlikely. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
Balanced | $ | 1,674 | $ | 4,186 | 2014 | |||||||
Balanced | — | 1,232 | 2015 | |||||||||
Mid-Cap Value | 49 | 56,975 | 2014 | |||||||||
Mid-Cap Value | — | 36,006 | 2015 | |||||||||
Small Cap Value II | — | 118,169 | 2015 |
The Manager recouped excess carryover expenses of $840 from the Y Class, $182 from the A Class, and $652 from the C Class of the Balanced Fund, expiring in 2014, and $49 from the A Class of the Mid-Cap Value Fund, expiring in 2014. During the year ended October 31, 2013, the Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely.
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside has collected $19,538 and $3,482 for the Balanced and Mid-Cap Value Funds, respectively from the sale of Class A Shares.
32
American Beacon FundsSM
October 31, 2013
A CDSC of 0.50% will be deducted with respect to Class A Shares on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013, there were no CDSC fees collected for Class A Shares of the Funds.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $2,052 in CDSC fees were collected for the Balanced Fund.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. Prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.
Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Fund’s Board.
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
33
American Beacon FundsSM
October 31, 2013
Level 1 - | Quoted prices in active markets for identical securities. | |
Level 2 - | Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities are fixed-income securities that are valued using observable inputs as stated above. | |
Level 3 - | Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. |
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.
Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows, and market-based yield spreads for each tranche, and incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. During the year ended October 31, 2013, there were no transfers between levels. As of October 31, 2013, the investments were classified as described below (in thousands):
34
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Balanced Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 489,871 | $ | — | $ | — | $ | 489,871 | ||||||||
Preferred Stock | 6,478 | — | — | 6,478 | ||||||||||||
Corporate Obligations | — | 105,981 | — | 105,981 | ||||||||||||
Foreign Government Obligations | — | 864 | — | 864 | ||||||||||||
Commercial Mortgage-Backed Obligations | — | 17,497 | — | 17,497 | ||||||||||||
Asset-Backed Obligations | — | 8,218 | — | 8,218 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 42,766 | — | 42,766 | ||||||||||||
U.S. Treasury Obligations | — | 104,424 | — | 104,424 | ||||||||||||
U.S. Agency Obligations | — | 15,919 | — | 15,919 | ||||||||||||
Municipal Obligations | — | 2,812 | — | 2,812 | ||||||||||||
Short-Term Investments - Money Markets | 44,675 | — | — | 44,675 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 541,024 | $ | 298,481 | $ | — | $ | 839,505 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 1,295 | $ | — | $ | — | $ | 1,295 | ||||||||
Mid-Cap Value Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 205,739 | $ | — | $ | — | $ | 205,739 | ||||||||
Short-Term Investments - Money Markets | 13,908 | — | — | 13,908 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 219,647 | $ | — | $ | — | $ | 219,647 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 266 | $ | — | $ | — | $ | 266 | ||||||||
Small Cap Value II Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 4,415 | $ | — | $ | — | $ | 4,415 | ||||||||
Short-Term Investments - Money Markets | 237 | — | — | 237 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 4,652 | $ | — | $ | — | $ | 4,652 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 7 | $ | — | $ | — | $ | 7 |
* | Refer to the Schedule of Investments for industry information. |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Balanced Fund normally will be declared and paid quarterly. Dividends from net investment income of the Mid-Cap Value and Small Cap Value II Funds normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
35
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gains in the Fund’s Statement of Operations.
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The AMR Class of the Mid-Cap Value Fund imposes a 2% redemption fee on certain shares held for less than 180 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Funds. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of each Fund pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Securities and Other Investments
Real Estate Investment Trusts
The Funds may own shares of real estate investment trusts (“REITS”) which report information on the source of their distributions annually. The Funds re-characterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the re-characterization will be estimated based on available information, which may include the previous year allocation. If new or additional information becomes available from the REITs at a later date, a re-characterization will be made the following year. These re-characterizations are not recorded for financial statement purposes, but as an adjustment to the calculation of taxable income.
36
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Restricted Securities
Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Financial Derivative Instruments
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Funds are required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. A Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.
For the six months ended October 31, 2013, the Funds entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
The Funds’ average futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
37
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Average Futures Contracts Outstanding | ||||||||
For the Quarter Ended | April 30, 2013 | October 31, 2013 | ||||||
Balanced | 40 | 31 | ||||||
Mid-Cap Value | 8 | 9 | ||||||
Small Cap Value II | 2 | 1 |
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of derivative financial instruments as of October 31, 2013:
Statements of Assets and Liabilities | Derivative | Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||||
Unrealized appreciation of futures contracts | Equity Contracts | $ | 1,295 | $ | 266 | $ | 7 |
The effect of derivative financial instruments during the year ended October 31, 2013:
Statements of Operations | ||||||||||||||||
Net realized gain (loss) from futures contracts | Equity Contracts | 6,940 | 1,993 | 58 | ||||||||||||
Change in net unrealized appreciation or (depreciation) of futures contracts | Equity Contracts | 1,886 | 300 | 9 |
(1) | See Note 3 in the Notes to Financial Statements for additional information. |
(2) | The volume of derivative activity described above is reflective of the derivative activity through the current period of operations. |
6. Principal Risks
In the normal course of business the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists. Security values fluctuate (market risk) and may decline due to factors affecting securities markets in general, particular industries represented in the securities markets or conditions specifically related to a particular company. Failure of the other party to a transaction to perform (credit and counterparty risk), for example by not making principal and interest payments when due, reduces the value of the issuer’s debt and could reduce the Funds’ income. Similar to credit risk, the Funds may be exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will fail to make required payments or otherwise comply with the terms of the instrument, transaction or contract. The potential loss could exceed the value of the financial assets recorded in the financial statements. Some of the Funds’ investments may be illiquid and the Funds may not be able to vary the portfolio investments in response to changes in economic and other conditions. If a Fund is required to liquidate all or a portion of its investments quickly, the Fund may realize significantly less than the value at which it previously recorded those investments.
Market Risks
The Funds’ investments in financial derivatives and other financial instruments expose the Funds to various risks such as, but not limited to, interest rate, foreign currency and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a fixed income’s market price to interest rate (i.e. yield) movements.
If the Funds invest directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the base currency of the Funds, or, in the case of hedging positions, that the Funds’ base currency will decline in value relative to the currency being hedged.
38
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, the Funds’ investments in foreign currency denominated securities may reduce the returns of the Fund.
The fair values of equities, such as common stocks and preferred securities or equity related investments such as futures, may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities.
7. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
39
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
The tax character of distributions paid were as follows (in thousands):
Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||||||||
Distributions paid from: | ||||||||||||||||||||||||
Ordinary income* | ||||||||||||||||||||||||
Institutional Class | $ | 1,020 | $ | 843 | $ | 657 | $ | 451 | $ | — | $ | — | ||||||||||||
Y Class | 72 | 67 | 13 | 1 | 28 | 1 | ||||||||||||||||||
Investor Class | 1,894 | 2,026 | 35 | 14 | 28 | 2 | ||||||||||||||||||
Advisor Class | 93 | 47 | 8 | — | — | — | ||||||||||||||||||
A Class | 84 | 49 | 4 | 1 | — | — | ||||||||||||||||||
C Class | 77 | 39 | 5 | — | — | — | ||||||||||||||||||
AMR Class | 14,207 | 21,380 | 1,435 | 788 | — | — | ||||||||||||||||||
Long-Term Capital Gains | ||||||||||||||||||||||||
Institutional Class | 909 | 44 | 1,547 | — | — | — | ||||||||||||||||||
Y Class | 61 | 4 | 29 | — | 3 | — | ||||||||||||||||||
Investor Class | 2,087 | 107 | 182 | — | 3 | — | ||||||||||||||||||
Advisor Class | 56 | 3 | 19 | — | — | — | ||||||||||||||||||
A Class | 85 | 3 | 11 | — | — | — | ||||||||||||||||||
C Class | 94 | 2 | 11 | — | — | — | ||||||||||||||||||
AMR Class | 12,494 | 1,126 | 3,149 | — | — | — | ||||||||||||||||||
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| |||||||||||||
Total distributions paid | $ | 33,233 | $ | 25,740 | $ | 7,105 | $ | 1,255 | $ | 62 | $ | 3 | ||||||||||||
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|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Cost basis of investments for federal income tax purposes | $ | 718,450 | $ | 184,210 | $ | 3,794 | ||||||
Unrealized appreciation | 134,141 | 36,543 | 907 | |||||||||
Unrealized depreciation | (13,086 | ) | (1,106 | ) | (49 | ) | ||||||
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|
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| |||||||
Net unrealized appreciation or (depreciation) | 121,055 | 35,437 | 858 | |||||||||
Undistributed ordinary income | 12,158 | 5,657 | 141 | |||||||||
Accumulated long-term gain or (loss) | 31,786 | 9,673 | 282 | |||||||||
Other temporary differences | 1,298 | 266 | 6 | |||||||||
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| |||||||
Distributable earnings or (deficits) | $ | 166,297 | $ | 51,033 | $ | 1,287 | ||||||
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|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains or losses on certain derivative instruments and book amortization of premiums.
Due to inherent differences in the recognition of income, expenses and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.
40
American Beacon FundsSM
Notes to Financial Statesments
October 31, 2013
Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, Section 732 basis adjustments, non-deductible expenses, income from real estate investment securities, and dividend reclasses that have been reclassified as of October 31, 2013 (in thousands):
Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Paid-in-capital | $ | — | $ | 1 | $ | — | ||||||
Undistributed net investment income | 1,090 | (19 | ) | 8 | ||||||||
Accumulated net realized gain (loss) | (1,090 | ) | 18 | (8 | ) | |||||||
Unrealized appreciation or (depreciation) of investments and futures contracts | — | — | — |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
For the year ended October 31, 2013, the Funds did not have capital loss carryforwards.
8. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):
Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Purchases (excluding U.S. government securities) | $ | 412,690 | $ | 115,202 | $ | 2,815 | ||||||
Sales and maturities (excluding U.S. government securities) | 550,364 | 69,249 | 2,674 | |||||||||
Purchases of U.S. government securities | 121,061 | — | — | |||||||||
Sales and maturities of U.S. government securities | 45,448 | — | — |
A summary of the Balanced Fund’s transactions in USG Select Fund for the year ended October 31, 2013 is set forth below (in thousands):
Affiliate | October 31, 2012 Shares/Fair Value | Purchases | Sales | October 31, 2013 Shares/Fair Value | Dividend Income | |||||||||||||||||||
Direct | USG Select Fund | $ | — | $ | 5,000 | $ | 5,000 | $ | — | $ | 1 |
41
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
9. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):
For the Year Ended October 31, 2013
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,578 | $ | 24,033 | 379 | $ | 5,977 | 5,452 | $ | 76,643 | 340 | $ | 4,925 | ||||||||||||||||||||
Reinvestment of dividends | 128 | 1,905 | 8 | 118 | 284 | 3,855 | 11 | 149 | ||||||||||||||||||||||||
Shares redeemed | (840 | ) | (12,662 | ) | (117 | ) | (1,822 | ) | (5,220 | ) | (73,411 | ) | (127 | ) | (1,870 | ) | ||||||||||||||||
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Net increase in shares outstanding | 866 | $ | 13,276 | 270 | $ | 4,273 | 516 | $ | 7,087 | 224 | $ | 3,204 | ||||||||||||||||||||
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A Class | C Class | AMR Class | Totals | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 251 | $ | 3,543 | 526 | $ | 7,634 | 10,401 | $ | 153,598 | 18,927 | $ | 276,353 | ||||||||||||||||||||
Reinvestment of dividends | 11 | 147 | 11 | 158 | 1,897 | 26,701 | 2,350 | 33,033 | ||||||||||||||||||||||||
Shares redeemed | (80 | ) | (1,133 | ) | (41 | ) | (596 | ) | (23,319 | ) | (330,824 | ) | (29,744 | ) | (422,318 | ) | ||||||||||||||||
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Net increase in shares outstanding | 182 | $ | 2,557 | 496 | $ | 7,196 | (11,021 | ) | $ | (150,525 | ) | (8,467 | ) | $ | (112,932 | ) | ||||||||||||||||
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Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 2,446 | $ | 31,998 | 182 | $ | 2,464 | 1,154 | $ | 15,280 | 27 | $ | 331 | ||||||||||||||||||||
Redemption Fees | — | 20 | — | — | — | 3 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 204 | 2,201 | 2 | 25 | 19 | 211 | 2 | 27 | ||||||||||||||||||||||||
Shares redeemed | (733 | ) | (9,125 | ) | (34 | ) | (420 | ) | (317 | ) | (4,009 | ) | (20 | ) | (258 | ) | ||||||||||||||||
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Net increase in shares outstanding | 1,917 | $ | 25,094 | 150 | $ | 2,069 | 856 | $ | 11,485 | 9 | $ | 100 | ||||||||||||||||||||
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A Class | C Class | AMR Class | Totals | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 115 | $ | 1,525 | 41 | $ | 529 | 5,497 | $ | 69,734 | 9,462 | $ | 121,861 | ||||||||||||||||||||
Redemption Fees | — | — | — | — | — | 41 | — | 64 | ||||||||||||||||||||||||
Reinvestment of dividends | 1 | 10 | 1 | 12 | 425 | 4,584 | 654 | 7,070 | ||||||||||||||||||||||||
Shares redeemed | (22 | ) | (296 | ) | — | (1 | ) | (4,118 | ) | (50,994 | ) | (5,244 | ) | (65,103 | ) | |||||||||||||||||
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Net increase in shares outstanding | 94 | $ | 1,239 | 42 | $ | 540 | 1,804 | $ | 23,365 | 4,872 | $ | 63,892 | ||||||||||||||||||||
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Y Class | Investor Class | Totals | ||||||||||||||||||||||
Small Cap Value II Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | — | $ | — | 13 | $ | 161 | 13 | $ | 161 | |||||||||||||||
Reinvestment of dividends | 3 | 32 | 3 | 31 | 6 | 63 | ||||||||||||||||||
Shares redeemed | — | — | (1 | ) | (6 | ) | (1 | ) | (6 | ) | ||||||||||||||
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Net increase (decrease) in shares outstanding | 3 | $ | 32 | 15 | $ | 186 | 18 | $ | 218 | |||||||||||||||
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For the Year Ended October 31, 2012
Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 997 | $ | 13,684 | 404 | $ | 5,674 | 3,822 | $ | 48,716 | 58 | $ | 762 | ||||||||||||||||||||
Reinvestment of dividends | 62 | 875 | 5 | 70 | 160 | 2,070 | 3 | 50 | ||||||||||||||||||||||||
Shares redeemed | (592 | ) | (8,159 | ) | (267 | ) | (3,728 | ) | (4,209 | ) | (53,423 | ) | (165 | ) | (2,181 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 467 | $ | 6,400 | 142 | $ | 2,016 | (227 | ) | $ | (2,637 | ) | (104 | ) | $ | (1,369 | ) | ||||||||||||||||
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42
American Beacon Funds
Notes to Financial Statements
October 31, 2013
A Class | C Class | AMR Class | Totals | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 274 | $ | 3,506 | 213 | $ | 2,760 | 20,665 | $ | 267,520 | 26,433 | $ | 342,622 | ||||||||||||||||||||
Reinvestment of dividends | 3 | 41 | 3 | 36 | 1,694 | 22,506 | 1,930 | 25,648 | ||||||||||||||||||||||||
Shares redeemed | (88 | ) | (1,159 | ) | (23 | ) | (296 | ) | (29,737 | ) | (386,931 | ) | (35,081 | ) | (455,877 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 189 | $ | 2,388 | 193 | $ | 2,500 | (7,378 | ) | $ | (96,905 | ) | (6,718 | ) | $ | (87,607 | ) | ||||||||||||||||
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Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 419 | $ | 4,378 | 43 | $ | 466 | 347 | $ | 3,608 | 40 | $ | 405 | ||||||||||||||||||||
Redemption Fees | — | 62 | — | — | — | 7 | — | 1 | ||||||||||||||||||||||||
Reinvestment of dividends | 46 | 450 | — | 1 | 1 | 13 | — | — | ||||||||||||||||||||||||
Shares redeemed | (779 | ) | (8,141 | ) | (1 | ) | (9 | ) | (156 | ) | (1,671 | ) | (1 | ) | (13 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | (314 | ) | $ | (3,251 | ) | 42 | $ | 458 | 192 | $ | 1,957 | 39 | $ | 393 | ||||||||||||||||||
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A Class | C Class | AMR Class | Totals | |||||||||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 18 | $ | 182 | 21 | $ | 222 | 10,775 | $ | 112,305 | 11,663 | $ | 121,566 | ||||||||||||||||||||
Redemption Fees | — | 1 | — | — | — | 214 | — | 285 | ||||||||||||||||||||||||
Reinvestment of dividends | — | — | — | — | 80 | 788 | 127 | 1,252 | ||||||||||||||||||||||||
Shares redeemed | (4 | ) | (38 | ) | — | — | (9,748 | ) | (102,397 | ) | (10,689 | ) | (112,269 | ) | ||||||||||||||||||
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Net increase (decrease) in shares outstanding | 14 | $ | 145 | 21 | $ | 222 | 1,107 | $ | 10,910 | 1,101 | $ | 10,834 | ||||||||||||||||||||
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Y Class | Investor Class | Totals | ||||||||||||||||||||||
Small Cap Value II Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 8 | $ | 85 | 4 | $ | 39 | 12 | $ | 124 | |||||||||||||||
Reinvestment of dividends | — | 1 | — | 2 | — | 3 | ||||||||||||||||||
Shares redeemed | — | — | — | — | — | — | ||||||||||||||||||
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Net increase (decrease) in shares outstanding | 8 | $ | 86 | 4 | $ | 41 | 12 | $ | 127 | |||||||||||||||
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43
American Beacon Balanced FundSM
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | March 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.27 | $ | 12.89 | $ | 12.62 | $ | 11.83 | $ | 10.63 | $ | 14.32 | $ | 12.93 | $ | 12.78 | $ | 12.20 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.30 | 0.32 | 0.32 | 0.35 | 0.43 | 0.39 | 0.17 | 0.36 | 0.16 | |||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 2.35 | 1.38 | 0.29 | 1.10 | 1.25 | 2.26 | 1.51 | 0.24 | 0.57 | |||||||||||||||||||||||||||
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Total income (loss) from investment operations | 2.65 | 1.70 | 0.61 | 1.45 | 1.68 | 2.65 | 1.68 | 0.60 | 0.73 | |||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.66 | ) | (0.48 | ) | (0.29 | ) | (0.29 | ) | (0.45 | ) | (0.15 | ) | ||||||||||||||||||
Distributions from net realized gains on securities | (0.31 | ) | — | — | — | — | (0.31 | ) | — | — | — | |||||||||||||||||||||||||
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Total distributions | (0.61 | ) | (0.32 | ) | (0.34 | ) | (0.66 | ) | (0.48 | ) | (0.60 | ) | (0.29 | ) | (0.45 | ) | (0.15 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 16.31 | $ | 14.27 | $ | 12.89 | $ | 12.62 | $ | 11.83 | $ | 16.37 | $ | 14.32 | $ | 12.93 | $ | 12.78 | ||||||||||||||||||
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Total return A | 19.04 | % | 13.23 | % | 4.87 | % | 12.47 | % | 16.64 | % | 18.97 | % | 13.04 | % | 4.73 | % | 5.99 | %B | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 60,916 | $ | 40,938 | $ | 30,962 | $ | 33,405 | $ | 29,808 | $ | 7,263 | $ | 2,482 | $ | 401 | $ | 46 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.60 | % | 0.59 | % | 0.58 | % | 0.58 | % | 0.60 | % | 0.68 | % | 0.69 | % | 1.48 | % | 0.68 | %C | ||||||||||||||||||
Expenses, net of reimbursements | 0.60 | % | 0.59 | % | 0.58 | % | 0.58 | % | 0.60 | % | 0.70 | % | 0.69 | % | 0.70 | % | 0.68 | %C | ||||||||||||||||||
Net investment income, before (reimbursements) or recoupments | 1.86 | % | 2.27 | % | 2.49 | % | 2.67 | % | 3.60 | % | 1.71 | % | 2.08 | % | 1.55 | % | 2.54 | %C | ||||||||||||||||||
Net investment income, net of (reimbursements) or recoupments | 1.86 | % | 2.27 | % | 2.49 | % | 2.67 | % | 3.60 | % | 1.69 | % | 2.08 | % | 2.34 | % | 2.54 | %C | ||||||||||||||||||
Portfolio turnover rate | 56 | % | 58 | % | 47 | % | 40 | % | 57 | % | 56 | % | 58 | % | 47 | % | 40 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
44
American Beacon Balanced FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | Advisor Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, |
Year Ended October 31, | |||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||||||||||||
$ 13.16 | $ | 11.93 | $ | 11.66 | $ | 10.96 | $ | 9.91 | $ | 13.73 | $ | 12.36 | $ | 12.11 | $ | 11.35 | $ | 9.77 | ||||||||||||||||||
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0.26 | 0.23 | 0.25 | 0.25 | 0.30 | (0.12 | ) | 0.42 | 0.41 | 0.32 | 0.37 | ||||||||||||||||||||||||||
2.13 | 1.30 | 0.28 | 1.04 | 1.23 | 2.60 | 1.14 | 0.11 | 1.01 | 1.21 | |||||||||||||||||||||||||||
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2.39 | 1.53 | 0.53 | 1.29 | 1.53 | 2.48 | 1.56 | 0.52 | 1.33 | 1.58 | |||||||||||||||||||||||||||
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(0.26) | (0.30 | ) | (0.26 | ) | (0.59 | ) | (0.48 | ) | (0.25 | ) | (0.19 | ) | (0.27 | ) | (0.57 | ) | — | |||||||||||||||||||
(0.31) | — | — | — | — | (0.31 | ) | — | — | — | — | ||||||||||||||||||||||||||
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(0.57) | (0.30 | ) | (0.26 | ) | (0.59 | ) | (0.48 | ) | (0.56 | ) | (0.19 | ) | (0.27 | ) | (0.57 | ) | — | |||||||||||||||||||
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$ 14.98 | $ | 13.16 | $ | 11.93 | $ | 11.66 | $ | 10.96 | $ | 15.65 | $ | 13.73 | $ | 12.36 | $ | 12.11 | $ | 11.35 | ||||||||||||||||||
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18.65% | 12.86 | % | 4.52 | % | 12.06 | % | 16.29 | % | 18.52 | % | 12.62 | % | 4.33 | % | 11.96 | % | 16.17 | % | ||||||||||||||||||
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$109,337 | $ | 89,272 | $ | 83,657 | $ | 84,500 | $ | 94,915 | $ | 6,353 | $ | 2,507 | $ | 3,536 | $ | 6,127 | $ | 6,812 | ||||||||||||||||||
0.92% | 0.92 | % | 0.92 | % | 0.93 | % | 0.89 | % | 1.07 | % | 1.09 | % | 1.09 | % | 1.09 | % | 1.09 | % | ||||||||||||||||||
0.92% | 0.92 | % | 0.92 | % | 0.93 | % | 0.89 | % | 1.07 | % | 1.09 | % | 1.09 | % | 1.09 | % | 1.09 | % | ||||||||||||||||||
1.62% | 1.95 | % | 2.16 | % | 2.34 | % | 3.26 | % | 1.32 | % | 1.82 | % | 2.01 | % | 2.18 | % | 3.06 | % | ||||||||||||||||||
1.62% | 1.95 | % | 2.16 | % | 2.34 | % | 3.26 | % | 1.32 | % | 1.82 | % | 2.01 | % | 2.18 | % | 3.06 | % | ||||||||||||||||||
56% | 58 | % | 47 | % | 40 | % | 57 | % | 56 | % | 58 | % | 47 | % | 40 | % | 57 | % |
45
American Beacon Balanced FundSM
Financial Highlights
(For a share outstanding throughout the period)
A Class | C Class | |||||||||||||||||||||||||||||||
Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | |||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.16 | $ | 12.06 | $ | 11.94 | $ | 11.50 | $ | 13.33 | $ | 12.13 | $ | 11.92 | $ | 11.32 | ||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||
Net investment income | 0.22 | 0.33 | 0.38 | 0.02 | 0.17 | 0.15 | 0.20 | 0.01 | ||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 2.14 | 1.17 | 0.14 | 0.43 | 2.11 | 1.29 | 0.22 | 0.59 | ||||||||||||||||||||||||
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Total income (loss) from investment operations | 2.36 | 1.50 | 0.52 | 0.45 | 2.28 | 1.44 | 0.42 | 0.60 | ||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.24 | ) | (0.40 | ) | (0.40 | ) | (0.01 | ) | (0.17 | ) | (0.24 | ) | (0.21 | ) | 0.00 | |||||||||||||||||
Distributions from net realized gains on securities | (0.31 | ) | — | — | — | (0.31 | ) | — | — | — | ||||||||||||||||||||||
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Total distributions | (0.55 | ) | (0.40 | ) | (0.40 | ) | (0.01 | ) | (0.48 | ) | (0.24 | ) | (0.21 | ) | 0.00 | |||||||||||||||||
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| |||||||||||||||||
Net asset value, end of period | $ | 14.97 | $ | 13.16 | $ | 12.06 | $ | 11.94 | $ | 15.13 | $ | 13.33 | $ | 12.13 | $ | 11.92 | ||||||||||||||||
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| |||||||||||||||||
Total return A | 18.45 | % | 12.65 | % | 4.37 | % | 3.90 | %B | 17.50 | % | 11.86 | % | 3.56 | % | 5.33 | %B | ||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 6,284 | $ | 3,127 | $ | 588 | $ | 47 | $ | 11,574 | $ | 3,579 | $ | 922 | $ | 1 | ||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||
Expenses, before (reimbursements) or recoupments | 1.10 | % | 1.13 | % | 1.59 | % | 1.08 | %C | 1.84 | % | 1.85 | % | 2.34 | % | 2.14 | %C | ||||||||||||||||
Expenses, net of (reimbursements) or recoupments | 1.10 | % | 1.09 | % | 1.10 | % | 1.08 | %C | 1.85 | % | 1.83 | % | 1.82 | % | 1.86 | %C | ||||||||||||||||
Net investment income, before (reimbursements) or recoupments | 1.31 | % | 1.62 | % | 1.47 | % | 1.51 | %C | 0.51 | % | 0.88 | % | 0.66 | % | 0.20 | %C | ||||||||||||||||
Net investment income, net of (reimbursements) or recoupments | 1.30 | % | 1.66 | % | 1.95 | % | 1.51 | %C | 0.50 | % | 0.90 | % | 1.18 | % | 0.48 | %C | ||||||||||||||||
Portfolio turnover rate | 56 | % | 58 | % | 47 | % | 40 | %D | 56 | % | 58 | % | 47 | % | 40 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
46
American Beacon Balanced FundSM
Financial Highlights
(For a share outstanding throughout the period)
AMR Class | ||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||
$ | 13.54 | $ | 12.27 | $ | 12.02 | $ | 11.31 | $ | 10.19 | |||||||||
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0.27 | 0.31 | 0.34 | 0.35 | 0.39 | ||||||||||||||
2.27 | 1.34 | 0.27 | 1.07 | 1.24 | ||||||||||||||
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2.54 | 1.65 | 0.61 | 1.42 | 1.63 | ||||||||||||||
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(0.33 | ) | (0.38 | ) | (0.36 | ) | (0.71 | ) | (0.51 | ) | |||||||||
(0.31 | ) | — | — | — | — | |||||||||||||
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(0.64 | ) | (0.38 | ) | (0.36 | ) | (0.71 | ) | (0.51 | ) | |||||||||
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$ | 15.44 | $ | 13.54 | $ | 12.27 | $ | 12.02 | $ | 11.31 | |||||||||
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19.32 | % | 13.55 | % | 5.09 | % | 12.84 | % | 16.95 | % | |||||||||
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$ | 640,579 | $ | 710,816 | $ | 734,927 | $ | 748,422 | $ | 681,197 | |||||||||
0.33 | % | 0.32 | % | 0.33 | % | 0.33 | % | 0.35 | % | |||||||||
0.33 | % | 0.32 | % | 0.33 | % | 0.33 | % | 0.35 | % | |||||||||
2.29 | % | 2.57 | % | 2.75 | % | 2.92 | % | 3.75 | % | |||||||||
2.29 | % | 2.57 | % | 2.75 | % | 2.92 | % | 3.75 | % | |||||||||
56 | % | 58 | % | 47 | % | 40 | % | 57 | % |
47
American Beacon Mid-Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 10.95 | $ | 9.73 | $ | 9.27 | $ | 7.57 | $ | 5.94 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.14 | 0.09 | 0.08 | 0.10 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 3.93 | 1.21 | 0.48 | 1.67 | 1.65 | |||||||||||||||
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Total income (loss) from investment operations | 4.06 | 1.35 | 0.57 | 1.75 | 1.75 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.20 | ) | (0.13 | ) | (0.11 | ) | (0.05 | ) | (0.12 | ) | ||||||||||
Distributions from net realized gains on securities | (0.48 | ) | — | — | — | — | ||||||||||||||
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Total distributions | (0.68 | ) | (0.13 | ) | (0.11 | ) | (0.05 | ) | (0.12 | ) | ||||||||||
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Redemption fees added to beneficial interestsC | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
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Net asset value, end of period | $ | 14.33 | $ | 10.95 | $ | 9.73 | $ | 9.27 | $ | 7.57 | ||||||||||
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Total return D | 39.18 | % | 14.07 | % | 6.08 | % | 23.19 | % | 30.24 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 72,207 | $ | 34,208 | $ | 33,441 | $ | 2,778 | $ | 2,197 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before (reimbursements) or recoupments | 0.99 | % | 1.06 | % | 1.10 | % | 1.06 | % | 1.13 | % | ||||||||||
Expenses, net of (reimbursements) or recoupments | 0.98 | % | 0.98 | % | 0.97 | % | 0.98 | % | 0.98 | % | ||||||||||
Net investment income (loss), before (reimbursements) or recoupments | 1.05 | % | 1.17 | % | 0.91 | % | 0.90 | % | 1.14 | % | ||||||||||
Net investment income, net of reimbursements (recoupments) | 1.06 | % | 1.25 | % | 1.04 | % | 0.99 | % | 1.29 | % | ||||||||||
Portfolio turnover rate | 48 | % | 87 | % | 107 | % | 40 | % | 42 | % |
A | Lee Munder Capital Group, LLC was added as an investment manager to the Mid-Cap Value Fund on July 1, 2011. |
B | Based on average shares outstanding. |
C | Amounts represent less than $0.01 per share. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
E | Not annualized. |
F | Annualized. |
G | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
48
American Beacon Mid-Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | Advisor Class | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | March 1 to Oct. 31, | Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2009 | |||||||||||||||||||||||||||||||||||||||||
$ | 10.92 | $ | 9.72 | $ | 9.27 | $ | 8.48 | $ | 10.98 | $ | 9.71 | $ | 9.20 | $ | 7.54 | $ | 5.92 | $ | 10.81 | $ | 9.56 | $ | 9.12 | $ | 7.49 | $ | 5.87 | |||||||||||||||||||||||||||
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0.17 | 0.13 | 0.08 | 0.06 | 0.23 | 0.34 | (0.03 | )B | 0.06 | 0.07 | 0.11 | 0.05 | 0.07 | 0.07 | 0.15 | ||||||||||||||||||||||||||||||||||||||||
3.86 | 1.21 | 0.48 | 0.73 | 3.83 | 1.00 | 0.63 | 1.65 | 1.66 | 3.83 | 1.23 | 0.45 | 1.61 | 1.60 | |||||||||||||||||||||||||||||||||||||||||
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4.03 | 1.34 | 0.56 | 0.79 | 4.06 | 1.34 | 0.60 | 1.71 | 1.73 | 3.94 | 1.28 | 0.52 | 1.68 | 1.75 | |||||||||||||||||||||||||||||||||||||||||
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(0.22 | ) | (0.14 | ) | (0.11 | ) | — | (0.09 | ) | (0.07 | ) | (0.09 | ) | (0.05 | ) | (0.11 | ) | (0.20 | ) | (0.03 | ) | (0.08 | ) | (0.05 | ) | (0.13 | ) | ||||||||||||||||||||||||||||
(0.48 | ) | — | — | — | (0.48 | ) | — | — | — | — | (0.48 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
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(0.70 | ) | (0.14 | ) | (0.11 | ) | — | (0.57 | ) | (0.07 | ) | (0.09 | ) | (0.05 | ) | (0.11 | ) | (0.68 | ) | (0.03 | ) | (0.08 | ) | (0.05 | ) | (0.13 | ) | ||||||||||||||||||||||||||||
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— | — | 0.00 | 0.00 | 0.00 | — | 0.00 | 0.00 | 0.00 | — | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||||||||||||||||||||||
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$ | 14.25 | $ | 10.92 | $ | 9.72 | $ | 9.27 | $ | 14.47 | $ | 10.98 | $ | 9.71 | $ | 9.20 | $ | 7.54 | $ | 14.07 | $ | 10.81 | $ | 9.56 | $ | 9.12 | $ | 7.49 | |||||||||||||||||||||||||||
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38.99 | % | 13.97 | % | 5.98 | % | 9.32 | %E | 38.69 | % | 13.84 | % | 6.49 | % | 22.77 | % | 29.93 | % | 38.43 | % | 13.44 | % | 5.65 | % | 22.53 | % | 30.64 | % | |||||||||||||||||||||||||||
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$ | 2,814 | $ | 516 | $ | 52 | $ | 1 | $ | 17,871 | $ | 4,157 | $ | 1,812 | $ | 35,223 | $ | 23,369 | $ | 728 | $ | 465 | $ | 37 | $ | 78 | $ | 7 | |||||||||||||||||||||||||||
1.11 | % | 1.28 | % | 11.62 | % | 1.05 | %F | 1.25 | % | 1.44 | % | 1.32 | % | 1.27 | % | 1.34 | % | 1.61 | % | 1.99 | % | 1.98 | % | 1.55 | % | 1.58 | % | |||||||||||||||||||||||||||
1.08 | % | 1.06 | % | 1.06 | % | 1.01 | %F | 1.23 | % | 1.23 | % | 1.23 | % | 1.23 | % | 1.23 | % | 1.49 | % | 1.48 | % | 1.49 | % | 1.44 | % | 1.50 | % | |||||||||||||||||||||||||||
0.79 | % | 0.82 | % | (9.44 | )% | 0.93 | %F | 0.68 | % | 0.75 | % | 1.33 | % | 0.70 | % | 0.87 | % | 0.46 | % | 0.10 | % | 0.21 | % | 0.36 | % | 0.14 | % | |||||||||||||||||||||||||||
0.82 | % | 1.03 | % | 1.12 | % | 0.97 | %F | 0.70 | % | 0.96 | % | 1.42 | % | 0.75 | % | 0.98 | % | 0.58 | % | 0.61 | % | 0.69 | % | 0.47 | % | 0.22 | % | |||||||||||||||||||||||||||
48 | % | 87 | % | 107 | % | 40 | %G | 48 | % | 87 | % | 107 | % | 40 | % | 42 | % | 48 | % | 87 | % | 107 | % | 40 | % | 42 | % |
49
American Beacon Mid-Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
A Class | ||||||||||||||||
Year Ended October 31, | May 17 to Oct. 31, | |||||||||||||||
2013 | 2012 | 2011A | 2010 | |||||||||||||
Net asset value, beginning of period | $ | 10.82 | $ | 9.61 | $ | 9.18 | $ | 9.00 | ||||||||
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| |||||||||
Income from investment operations: | ||||||||||||||||
Net investment income (loss) | 0.14 | 0.09 | 0.11 | 0.01 | ||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 3.80 | 1.20 | 0.40 | 0.17 | ||||||||||||
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Total income (loss) from investment operations | 3.94 | 1.29 | 0.51 | 0.18 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.19 | ) | (0.08 | ) | (0.08 | ) | — | |||||||||
Distributions from net realized gains on securities | (0.48 | ) | — | — | — | |||||||||||
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Total distributions | (0.67 | ) | (0.08 | ) | (0.08 | ) | — | |||||||||
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Redemption fees added to beneficial interestsC | — | 0.00 | 0.00 | 0.00 | ||||||||||||
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Net asset value, end of period | $ | 14.09 | $ | 10.82 | $ | 9.61 | $ | 9.18 | ||||||||
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Total return D | 38.39 | % | 13.56 | % | 5.49 | % | 2.00 | %E | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,667 | $ | 264 | $ | 101 | $ | 18 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before (reimbursements) or recoupments | 1.48 | % | 1.61 | % | 3.44 | % | 1.51 | %F | ||||||||
Expenses, net of (reimbursements) or recoupments | 1.49 | % | 1.49 | % | 1.48 | % | 1.48 | %F | ||||||||
Net investment income (loss), before (reimbursements) or recoupments | 0.44 | % | 0.56 | % | (1.36 | )% | 0.44 | %F | ||||||||
Net investment income (loss), net of (reimbursements) or recoupments | 0.43 | % | 0.68 | % | 0.60 | % | 0.47 | %F | ||||||||
Portfolio turnover rate | 48 | % | 87 | % | 107 | % | 40 | %G |
A | Lee Munder Capital Group, LLC was added as an investment manager to the Mid-Cap Value Fund on July 1, 2011. |
B | Based on average shares outstanding. |
C | Amounts represent less than $0.01 per share. |
D | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
E | Not annualized. |
F | Annualized. |
G | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
50
American Beacon Mid-Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
C Class | AMR Class | |||||||||||||||||||||||||||||||||
Year Ended October 31, | Sept. 1 to Oct. 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||||||||||||
$ | 10.70 | $ | 9.56 | $ | 9.18 | $ | 8.30 | $ | 10.96 | $ | 9.73 | $ | 9.27 | $ | 7.59 | $ | 5.97 | |||||||||||||||||
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0.11 | 0.06 | 0.05 | (0.01 | ) | 0.15 | 0.24 | 0.15 | 0.10 | 0.07 | |||||||||||||||||||||||||
3.67 | 1.15 | 0.38 | 0.89 | 3.94 | 1.14 | 0.43 | 1.66 | 1.70 | ||||||||||||||||||||||||||
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3.78 | 1.21 | 0.43 | 0.88 | 4.09 | 1.38 | 0.58 | 1.76 | 1.77 | ||||||||||||||||||||||||||
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(0.19 | ) | (0.07 | ) | (0.05 | ) | — | (0.22 | ) | (0.15 | ) | (0.12 | ) | (0.08 | ) | (0.15 | ) | ||||||||||||||||||
(0.48 | ) | — | — | — | (0.48 | ) | — | — | — | — | ||||||||||||||||||||||||
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(0.67 | ) | (0.07 | ) | (0.05 | )�� | — | (0.70 | ) | (0.15 | ) | (0.12 | ) | (0.08 | ) | (0.15 | ) | ||||||||||||||||||
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— | — | 0.00 | 0.00 | 0.00 | — | 0.00 | 0.00 | 0.00 | ||||||||||||||||||||||||||
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$ | 13.81 | $ | 10.70 | $ | 9.56 | $ | 9.18 | $ | 14.35 | $ | 10.96 | $ | 9.73 | $ | 9.27 | $ | 7.59 | |||||||||||||||||
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37.32 | % | 12.75 | % | 4.64 | % | 10.60 | %E | 39.43 | % | 14.34 | % | 6.20 | % | 23.28 | % | 30.56 | % | |||||||||||||||||
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$ | 905 | $ | 254 | $ | 22 | $ | 1 | $ | 125,744 | $ | 76,273 | $ | 56,963 | $ | 64,012 | $ | 53,604 | |||||||||||||||||
2.25 | % | 2.46 | % | 19.14 | % | 3.20 | %F | 0.73 | % | 0.78 | % | 0.83 | % | 0.77 | % | 0.82 | % | |||||||||||||||||
2.24 | % | 2.22 | % | 2.24 | % | 2.24 | %F | 0.73 | % | 0.78 | % | 0.83 | % | 0.77 | % | 0.83 | % | |||||||||||||||||
(0.27 | )% | (0.40 | )% | (16.96 | )% | (1.32 | )%F | 1.32 | % | 1.46 | % | 1.34 | % | 1.19 | % | 1.38 | % | |||||||||||||||||
(0.26 | )% | (0.15 | )% | (0.06 | )% | (0.36 | )%F | 1.32 | % | 1.46 | % | 1.34 | % | 1.19 | % | 1.38 | % | |||||||||||||||||
48 | % | 87 | % | 107 | % | 40 | %G | 48 | % | 87 | % | 107 | % | 40 | % | 42 | % |
51
American Beacon Small Cap Value II FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | Investor Class | |||||||||||||||
Year Ended Oct. 31, 2013 | Nov. 15 to Oct. 31, 2012 | Year Ended Oct. 31, 2013 | Nov. 15 to Oct. 31, 2012 | |||||||||||||
Net asset value, beginning of period | $ | 10.70 | $ | 10.00 | $ | 10.67 | $ | 10.00 | ||||||||
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Income from investment operations: | ||||||||||||||||
Net investment income | 0.04 | 0.04 | 0.01 | 0.01 | ||||||||||||
Net gains from investments (both realized and unrealized) | 3.54 | 0.67 | 3.52 | 0.67 | ||||||||||||
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Total income from investment operations | 3.58 | 0.71 | 3.53 | 0.68 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.05 | ) | (0.01 | ) | (0.05 | ) | (0.01 | ) | ||||||||
Distributions from net realized gains on securities | (0.15 | ) | – | (0.15 | ) | – | ||||||||||
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Total distributions | (0.20 | ) | (0.01 | ) | (0.20 | ) | (0.01 | ) | ||||||||
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Redemption fees added to beneficial interestsA | — | — | — | — | ||||||||||||
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Net asset value, end of period | $ | 14.08 | $ | 10.70 | $ | 14.00 | $ | 10.67 | ||||||||
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Total return B | 33.93 | % | 7.10 | % | 33.55 | % | 6.82 | % | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 2,268 | $ | 1,693 | $ | 2,364 | $ | 1,640 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 2.82 | % | 4.44 | %C | 3.11 | % | 4.80 | %C | ||||||||
Expenses, net of reimbursements | 1.09 | % | 1.06 | %C | 1.37 | % | 1.33 | %C | ||||||||
Net investment (loss), before reimbursements | (1.38 | )% | (3.03 | )%C | (1.68 | )% | (3.39 | )%C | ||||||||
Net investment income, net of reimbursements | 0.35 | % | 0.35 | %C | 0.06 | % | 0.08 | %C | ||||||||
Portfolio turnover rate | 71 | % | 82 | % | 71 | % | 82 | % |
A | Amounts represent less than $0.01 per share. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Annualized. |
52
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2013 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Corporate Dividends Received Deduction | 45.09 | % | 75.68 | % | 83.77 | % | ||||||
Qualified Dividend Income | 63.65 | % | 100.00 | % | 100.00 | % |
The Balanced Fund designated $15,786,450 as long-term capital gains distributions for the year ended October 31, 2013.
The Mid-Cap Value Fund designated $4,948,487 as long-term capital gains distributions for the year ended October 31, 2013.
The Small Cap Value II Fund designated $5,274 as long-term capital gains and $52,198 as short term capital gains distributions for the year ended October 31, 2013.
Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.
53
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; |
• | a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC; |
• | a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; |
• | a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers; |
• | a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts; |
• | a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm; |
• | an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
• | confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds; |
• | a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; |
• | a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; |
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; |
• | a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations; |
• | a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds; |
• | a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions; |
• | a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers; |
• | a description of any actual or potential conflicts of interest anticipated in managing Fund assets; |
• | a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; |
54
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
• | a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf; |
• | a description of trade allocation procedures among accounts managed by the firm; |
• | a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions; |
• | a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds; |
• | a certification by the firm regarding the reasonable design of its compliance program; |
• | a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review; |
• | confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds; |
• | a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt; |
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; |
• | a description of the firm’s affiliation with any broker-dealer; |
• | a discussion of any anticipated change in the firm’s controlling persons; and |
• | verification of the firm’s insurance coverage with regards to the services provided to the Funds. |
In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:
• | a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; |
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; |
• | a comparison of advisory fee rates and expense ratios for comparable mutual funds; |
• | a profit/loss analysis of the Manager; |
• | an analysis of any material complaints received from Fund shareholders; |
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; |
• | a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds; |
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; |
• | a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds; |
• | a description of the Manager’s securities lending practices and the fees received from such practices; |
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; |
• | a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund; |
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated; and |
• | confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt. |
In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
55
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.
The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement
In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
56
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.
In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.
In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.
Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.
The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.
57
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Additional Considerations and Conclusions with Respect to the American Beacon Balanced Fund
In considering the renewal of the Management Agreement for the American Beacon Balanced Fund, the Trustees considered the following additional factors: (1) the American Beacon Balanced Fund outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, and was equal to the Lipper performance group median for the three-year period; (3) the Manager outperformed its applicable benchmark index with respect to its portion of the Fund’s fixed income assets for the one-, three-, five- and ten-year periods ended March 31, 2013; (4) the expense ratio of the Institutional Class of Fund shares was lower than the median of its Lipper expense universe and Lipper expense group; and (5) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.
In considering the renewal of the Investment Advisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), Brandywine Global Investment Management, LLC (“Brandywine”) and Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), the Trustees considered the following additional factors: (1) Barrow, Brandywine and Hotchkis each outperformed the Lipper performance universe median for the one-, three-, five- and ten-year periods ended March 31, 2013; (2) the Manager’s explanation that, although the equity portion of the Brandywine portfolio underperformed its equity benchmark index for the five-year period ended March 31, 2013, Brandywine outperformed for the one-, three-, five- and ten-year periods ended March 31, 2013, and that Brandywine’s underperformance of its equity portion for the five-year period was due in part to over-and under-weightings of certain sectors during that period; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Balanced Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Balanced Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Mid-Cap Value Fund
In considering the renewal of the Management Agreement for the American Beacon Mid-Cap Value Fund, the Trustees considered the following additional factors: (1) the American Beacon Mid-Cap Value Fund outperformed its Lipper performance universe median and Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (2) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe; (3) the expense ratio of the Institutional Class of the Fund was higher than the median of its Lipper expense group; (4) the Institutional Class of the Fund was categorized by Morningstar as having an average expense ratio; and (5) the expense ratio level is impacted by the smaller asset size of the Fund, and thus, is likely to decrease as the Fund grows.
In considering the renewal of the Investment Advisory Agreements with Barrow, Pzena Investment Management, LLC (“Pzena”) and Lee Munder Capital Group, LLC (“Lee Munder”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median for the three- and five-year periods ended March 31, 2013, but underperformed for the one-year period; (2) Pzena outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (3) Lee Munder outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (5) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Mid-Cap Value Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Mid-Cap Value Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Small Cap Value II Fund
In considering the renewal of the Management Agreement for the American Beacon Small Cap Value II Fund, the Trustees considered the following additional factors: (1) the American Beacon Small Cap Value II Fund underperformed the Lipper performance universe median and Lipper performance group median for the one-year period ended March 31, 2013; (2) the expense ratio of the Y Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (3) the Y Class of the Fund was categorized by Morningstar as having an average expense ratio.
In considering the renewal of the Investment Advisory Agreements with Dean Capital Management, LLC (“Dean”), Fox Asset Management, LLC (“Fox”) and Signia Capital Management, LLC (“Signia”), the Trustees considered the following additional factors: (1) Dean outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (2) Fox and Signia each underperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (3) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (4) the Manager’s recommendation to continue to retain each subadvisor, based upon, among other factors, the relatively brief period that this Fund has been in operation.
58
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon Small Cap Value II Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Small Cap Value II Fund.
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Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gerard J. Arpey** (55) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Alan D. Feld*** (76) | 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); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (69) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (52) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (59) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (71) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (70) | 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); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). |
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Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Barbara J. McKenna, CFA (50) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (67) | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
Paul J. Zucconi, CPA (73) | 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) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
OFFICERS | ||||
Term | ||||
One Year | ||||
Gene L. Needles, Jr. (58) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (54) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary, American Beacon Advisors, Inc. (2008-present); Secretary, Lighthouse Holdings, Inc. (2008-Present); Secretary Lighthouse Holdings Parent, Inc. (2008-Present). | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt L. Crumpler (47) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (43) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (59) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (52) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer, Lighthouse Holdings, Inc. (2010 - Present); Treasurer, Lighthouse Holdings Parent, Inc. (2010-Present). | ||
Terri L. McKinney (49) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
Jeffrey K. Ringdahl (38) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). |
61
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
Samuel J. Silver (50) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (42) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc. | ||
John J. Okray (39) | Asst. Secretary since 2010 | Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010 - Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (56) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, 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. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager. |
*** | Mr. Feld is deemed to be an “interested person” of the 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-advisors. |
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Delivery of Documents
eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
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By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
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By Telephone: Institutional, Y, Investor, and Advisor Classes Call (800) 658-5811 AMR ClassSM Call (800) 345-2345 | By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (800)-SEC-0330. A complete schedule of the Fund’s portfolio holdings is also available at www.americanbeaconfunds.com approximately twenty days after the end of each month. | Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus of Summary Prospectus.
American Beacon Funds, American Beacon Balanced Fund, American Beacon Mid-Cap Value Fund and American Beacon Small Cap Value II Fund are service marks of American Beacon Advisors, Inc.
AR 10/13
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
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Back Cover |
An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. An obligation rated ‘AA’ by Standard & Poor’s differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong. An obligation rated ‘A’ by Standard & Poor’s is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong. An obligation rated ‘BBB’ by Standard & Poor’s exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ by Standard & Poor’s are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
Duration is a measure of price sensitivity relative to changes in interest rates.
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions, and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
American Beacon Funds | October 31, 2013 |
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Maybe the most prominent story in the bond markets over the past year has been the fact that the 10-year Treasury note has finally started recovering after bottoming out at all-time lows in July 2012. While that’s a good sign for the bond market as a whole, those yields are still near historic lows.
Despite the Treasury note’s recovery, there’s no doubt that it was a challenging year for fixed-income investors. For the period under review, the Barclays U.S. Aggregate Bond Index – the benchmark for the broader bond market – declined by 1.08%. That’s a troubling scenario for what is often considered a relatively safe investment. |
Other areas of the fixed-income market managed to prosper, though. The JPMorgan Global High Yield Index returned 8.93% for the period under review.
That helps highlight the potential advantage of having a nimble, active manager handling fixed-income investments.
For the 12 months ended October 31, 2013:
• | The American Beacon High Yield Bond Fund (Investor Class) returned 8.73%. |
• | The American Beacon Retirement Income and Appreciation Fund (Investor Class) returned 3.14%. |
• | The American Beacon Intermediate Bond Fund (Investor Class) returned -1.58%. |
• | The American Beacon Short-Term Bond Fund (Investor Class) returned 0.03%. |
Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.
Best Regards, |
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Gene L. Needles, Jr. President American Beacon Funds |
1
October 31, 2013 (Unaudited)
The U.S. Federal Reserve Bank (the “Fed”) and its quantitative easing program (QE) were the primary forces behind the domestic fixed-income market’s performance during the year ended October 31, 2013. The QE phase of the Fed’s monetary stimulus program, which began in September 2012 with the purchase of $85 billion per month of treasuries and mortgages, sent the 10-year Treasury note yield down to a record-low 1.60% shortly after this period began on October 31, 2012.
Given the Fed’s support, longer-term Treasury yields held below 2.00% until May 2013 when Fed chairman Ben Bernanke referred to a possible “tapering,” or reduction, of the QE program. Because the U.S. economic improvement had been only modest up to that point, Mr. Bernanke’s comments shocked the bond market and caused a sharp increase in interest rates. The 10-year Treasury note yield rose to 3.00% by September 2013.
Despite the Fed’s optimism, the economic data and the dysfunction in Washington D.C. in late 2013 prevented the Fed from tapering QE after all. Interest rates remained volatile, in a downward trend, through October 31, 2013 and ended the period at 2.50%.
During late 2013, the Fed changed course when the economic data confirmed that the economy was still struggling and had not reached a self-sustaining growth trajectory. In particular, employment and inflation were still below the Fed’s targeted objectives. The Fed indicated that a 7.0% unemployment rate was necessary for the tapering of QE, but the rate was 7.3% in October 2013. Likewise, inflation readings were struggling to remain above 1.00%.
Due to the low interest rates, the housing market received a much-needed boost and provided room for optimism about the overall economy. The relief, however, was short lived as the rate increase following the Fed’s tapering discussions sent a chill back into the market. Home sales remained firm through the summer but were beginning to slow as winter approached. The interaction between the Fed and the housing market will be a vital aspect of the economy’s ability to recover.
Long-term interest rates may have been volatile during the year, but yield spreads for corporate and mortgage bonds were fairly stable. On October 31, 2012, the Barclays Investment Grade Corporate Bond Index had a yield spread of 137 basis points (1.37%). At period end, on October 31, 2013, the yield spread was 131 basis points (1.31%). Yield spread measures the difference in yield between a corporate or mortgage bond and a similar-maturity Treasury bond.
For the first six months of the period, the Barclays Aggregate Index return was slightly positive at 0.90%. However, when the Fed’s taper talk began in mid-2013, interest rates rose and pushed the index into negative territory. For the last six months of the period, the index returned -1.97%. Overall, the index returned -1.08% for the year ended October 31, 2013.
2
High Yield Bond Market Overview
October 31, 2013 (Unaudited)
The high-yield fixed-income market posted another year of strong returns in the period under review, as the JPMorgan Global High-Yield Index returned 8.9% for the 12 months ended October 31, 2013. Once again, high-yield bonds were the best performing fixed-income asset class for the period due to the move higher in interest rates. The 10-year Treasury lost 4.6% in the time period, and the market saw emerging-market debt diverge from high-yield returns by losing more than 2.5%.
The high-yield market, as well as many other financial markets, experienced a sharp correction from late May through late June, as comments from the Federal Reserve led the market to worry that tapering from the quantitative easing (QE) program could end sooner than expected and caused interest rates to spike. However, the Fed managed to calm the markets by reiterating that any eventual tapering from QE would be data-dependent. This clarification from the Fed was followed by the nomination of Janet Yellen to succeed Ben Bernanke as Federal Reserve chair and the expectation that she would continue his easy money policies. As a result, interest rates stabilized, albeit at levels significantly higher than they were prior to May.
Aside from outflows related to the interest rate volatility in the early summer, money generally flowed into the high-yield asset class during the year, as investors continued to seek income-producing investments in an environment of low interest rates around the globe. While Treasury yields rose, the potential negative effect was mitigated by high-yield spreads that narrowed from 5.9% over Treasuries to 4.9%, and the yield-to-worst of the high-yield index actually declined from 6.7% to 6.0% over the 12 months under review. Despite a slowdown over the summer, the capital markets were wide open for most of the year, enabling issuers to access the high-yield market to refinance debt at lower rates and to extend maturities.
In the 12 months under review, new issuance exceeded $450 billion, representing 924 issues. By the end of the period, just over 50% of the new issuance was used to refinance debt with the balance split between acquisitions and general corporate activity. The market has also seen an increase in dividends and other shareholder-friendly decisions by management teams in the high-yield credit market.
The combination of corporations being able to issue debt and strong credit fundamentals were key drivers in maintaining a low default rate during the year. On a par-weighted basis, the 12 months experienced just 1.1% in defaults, while the issuer default rate was just 2.4%.
While the high-yield market’s relative returns were strong when compared to fixed-income, high-yield could not keep up with the equity markets. The S&P 500 Index returned 27.2% and the Russell 2000 Index returned 36.3% for the period under review. With the move higher in interest rates, BB-rated bonds lagged the overall market by returning 5.9%, single-B issues showed less rate sensitivity by achieving a 10.3% return and CCC-rated bonds did their best to keep up with the equity market by gaining 16.0%.
3
American Beacon High Yield Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the High Yield Bond Fund (the “Fund”) returned 8.73% for the twelve months ended October 31, 2013. The Fund slightly trailed the JPMorgan Global High-Yield Index (the “Index”) return of 8.93% and the Lipper High Current Yield Funds Index return of 9.07% for the period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/2003 through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional | 8.94 | % | 15.82 | % | 7.21 | % | $ | 20,067 | ||||||||
Y Class (1,3,7) | 8.74 | % | 15.64 | % | 7.13 | % | 19,911 | |||||||||
Investor Class (1,7) | 8.73 | % | 15.54 | % | 6.95 | % | 19,575 | |||||||||
A Class with sales charge (1,4,7) | 3.50 | % | 14.45 | % | 6.44 | % | 18,667 | |||||||||
A Class without sales charge (1,4,7) | 8.61 | % | 15.58 | % | 6.96 | % | 19,606 | |||||||||
C Class with sales charge (1,5,7) | 6.90 | % | 14.97 | % | 6.68 | % | 19,099 | |||||||||
C Class without sales charge (1,5,7) | 7.90 | % | 14.97 | % | 6.68 | % | 19,099 | |||||||||
AMR Class (1,2,7) | 9.25 | % | 16.13 | % | 7.39 | % | 20,405 | |||||||||
JPMorgan Global High-Yield | 8.93 | % | 18.27 | % | 9.12 | % | 23,940 | |||||||||
Lipper High Current Yield Funds Index (6) | 9.07 | % | 15.51 | % | 7.44 | % | 20,491 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Institutional Class of the Fund was waived through 2004. |
Performance prior to waiving fees was lower than the actual returns shown for periods through 2004. |
2. | Fund performance for the ten-year period represents the total return achieved by the Institutional Class from 10/31/03 up to 9/4/07, the inception date of the AMR Class, and the returns of the AMR Class since its inception. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 10/31/03. |
3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
4. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 4.75%. |
5. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
6. | The JPMorgan Global High-Yield Index (“JPMorgan Index”) is an unmanaged index of fixed income securities with a maximum credit rating of BB+ or Ba1. Issues must be publicly registered or issued under Rule 144A under the Securities Act of 1933, with a minimum issue size of $75 million (par amount). A maximum of two issues per issuer are included in the JPMorgan Index. Convertible bonds, preferred stock, and floating-rate bonds are excluded from the JPMorgan Index. The Lipper High Current Yield Funds Index tracks the results of the 30 largest mutual funds in the Lipper High Current Yield Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
7. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 0.94%, 1.14%, 1.17%, 1.47%, 2.17%, and 0.63%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Prior to the deduction of expenses, the Fund outperformed the Index. On a gross of fee basis, the Fund’s added value relative to the Index was largely driven by strong issue selection across sectors and credit quality categories.
4
American Beacon High Yield Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
From a sector standpoint, issue selections in the Service, Manufacturing and Energy sectors benefited returns. The Fund’s holdings in these sectors not only outperformed the sector returns in the Index, but also outperformed the Index as a whole.
From a sector allocation perspective, the Fund’s modest cash position detracted given the strong absolute returns generated by the high yield asset class. The Fund’s relative weights among the remaining sectors had a minimal impact on results.
From a credit quality perspective, issue selections in the BB and B-rated categories had a positive impact on the Fund’s relative returns. The Fund’s holdings in the CCC-rated category trailed those of the Index and detracted from relative performance.
From a credit quality allocation perspective, the combination of underweighting BB-rated securities and overweighting CCC-rated securities benefited relative returns.
The sub-advisors’ “bottom-up,” research intensive investment process, which focuses on companies with strong cash flow and fundamental credit strength, remains in place.
Top Ten Holdings (% Net Assets)
Clear Channel Communications, Inc., 9.00%, Due 3/1/21 | 0.9 | |||
E*Trade Financial Corp., 6.375%, Due 11/15/19 | 0.9 | |||
Clear Channel Worldwide Holdings, Inc., 7.625%, Due 3/15/20 | 0.6 | |||
Sprint Nextel Corp., 11.500%, Due 11/15/21 | 0.6 | |||
Ally Financial, Inc., 7.500%, Due 9/15/2020 | 0.6 | |||
EPL Oil & Gas, Inc., 8.250%, Due 2/15/2018 | 0.6 | |||
Sabine Pass LNG LP, 7.500%, Due 11/30/16 | 0.6 | |||
ArcelorMittal, 6.000%, Due 3/1/2021 | 0.5 | |||
Equinix, Inc., 5.375%, Due 4/1/2023 | 0.5 | |||
Cumulus Media Holdings, Inc., 7.750%, Due 5/1/2019 | 0.5 | |||
Total Fund Holdings | 514 |
Sector Weightings (% Investments)
Service | 27.9 | |||
Manufacturing | 20.2 | |||
Energy | 18.0 | |||
Telecommunications | 11.4 | |||
Finance | 10.8 | |||
Consumer | 4.9 | |||
Utilities | 3.2 | |||
Transportation | 2.5 | |||
Convertible Obligations | 0.6 | |||
Equity | 0.5 |
Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Investing in high yield securities involves additional risks when compared to investing in investment-grade securities. These include a greater risk of default or bankruptcy and an increased sensitivity to financial difficulties or changes in interest rates. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
5
American Beacon Retirement Income and Appreciation FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Retirement Income and Appreciation Fund (the “Fund”) returned 3.14% for the twelve months ended October 31, 2013. Its benchmark, a blend of 75% Barclays Capital Aggregate Index (the “Aggregate Index”) and 25% BofA Merrill Lynch All U.S. Convertibles Index (the “ML Index”) (combined the “Retirement Income and Appreciation Composite Index”), returned 4.74%. The Fund’s peer group, the Morningstar US OE Retirement Income Category, increased 7.29% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03 - 10/31/13 | |||||||||||||
Y Class (1,2,7) | 3.43 | % | 8.33 | % | 4.92 | % | $ | 16,166 | ||||||||
Investor Class (1,7) | 3.14 | % | 8.13 | % | 4.82 | % | 16,020 | |||||||||
A Class with sales Charge (1,3,7) | 0.08 | % | 7.08 | % | 4.31 | % | 15,253 | |||||||||
A Class without sales Charge (1,3,7) | 3.18 | % | 8.13 | % | 4.82 | % | 16,019 | |||||||||
C Class with sales Charge (1,4,7) | 1.01 | % | 7.55 | % | 4.54 | % | 15,592 | |||||||||
C Class without sales Charge (1,4,7) | 2.01 | % | 7.55 | % | 4.54 | % | 15,592 | |||||||||
Retirement Income and Appreciation Composite | 4.74 | % | 9.06 | % | 5.34 | % | 16,826 | |||||||||
Barclays Capital Aggregate | -1.08 | % | 6.09 | % | 4.78 | % | 15,549 | |||||||||
BofA Merrill Lynch All U.S. Convertibles Index (5) | 23.94 | % | 17.77 | % | 7.22 | % | 20,078 | |||||||||
Morningstar US OE Retirement Income (5) | 7.29 | % | 8.74 | % | 4.70 | % | 15,833 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Y Class been in existence since 10/31/03. |
3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 2.50%. |
4. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
5. | The Barclays Capital Aggregate Index represents returns of the Barclays Capital Gov./Credit Intermediate Index (“Intermediate Index”) up to October 31, 2006 and the Barclays Capital Aggregate Index (“Aggregate Index”) thereafter. The Intermediate Index is an unmanaged index of investment grade corporate and government debt issues with maturities between one and ten years. The Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The BofA Merrill Lynch All U.S. Convertibles Index is an unmanaged index of domestic securities of all quality grades that are convertible into U.S. dollar-denominated common stock, ADRs or cash equivalents. The Morningstar US OE Retirement Income has replaced the Lipper Intermediate Investment Grade Index. The Morningstar US OE Retirement Income category includes funds that invest in a mix of stocks, bonds and cash for those investors already in or entering retirement. One cannot directly invest in an index |
6. | To reflect the Fund’s allocation of its assets between investment grade fixed-income securities and convertible securities, the returns of the Barclays Capital Aggregate Index and the BofA Merrill Lynch All U.S. Convertibles Index have been combined in a 75%/25% proportion. |
7. | The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Y, Investor, A, and C Class shares was 0.88%, 1.13%, 1.29%, and 2.05%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. |
The Fund’s assets have been allocated approximately 75% to American Beacon Advisors, Inc. (the “Manager”) that invests primarily in income producing, short and intermediate-term investment grade bonds and 25% to a sub-advisor that invests in securities including convertible bonds, convertible preferreds, high yield bonds and equities in order to try to enhance the return of the overall Fund.
6
American Beacon Retirement Income and Appreciation FundSM
Performance Overview
October 31, 2013 (Unaudited)
During the twelve-month period, the investment grade bond portion of the Fund declined 0.5%, outperforming the 1.1% decline for the Aggregate Index. This segment of the Fund’s outperformance can be attributed to a combination of favorable allocation decisions and strong security selection among sectors and credit quality categories.
During the period, the overweight to the Financial sector was a positive as Financial securities were one of the best performing categories in the Aggregate Index (up 1.8%). In addition, maintaining an underweight allocation to Treasury securities also proved beneficial.
The performance from the Fund’s Treasury securities trailed those in the Aggregate Index and hampered relative returns offsetting some of the benefits from the underweight allocation. However, within the Financial sector, security selection was strong and complimented the benefit of the overweight allocation.
The Fund’s positioning and security selection among the various credit quality categories aided returns relative to the Aggregate Index. The combination of underweighting AA-rated securities and overweighting A-rated securities was a key driver. Strong security selection in the A category had a significant impact on the Fund’s relative returns. However, the Fund’s holdings in the BBB-rated category trailed those of the Aggregate Index and detracted from relative performance.
The remaining portion of the Fund, managed by the Fund’s sub-advisor, returned 18.7%. These results trailed the 23.9% return of the ML Index. Much of the underperformance for this segment of the Fund can be attributed to less favorable security selection in two particular economic sectors. The Fund’s holdings in the Information Technology and Healthcare sectors lagged those in the ML Index. While the Fund’s positions generated strong absolute returns and generated double-digit gains, these results did not keep pace with the holdings in the ML Index.
The Manager and the Fund’s sub-advisor remain focused on the Fund’s investment objectives of generating income and capital appreciation.
Top Ten Holdings (% Net Assets)
GNR Project Loans, 3.200%, Due 11/16/2044 | 2.3 | |||
GNR Project Loans, 2.170%, Due 4/16/2041 | 2.2 | |||
Freddie Mac Gold Pool, 3.50%, Due 6/1/42 | 1.7 | |||
GNR Project Loans, 2.700%, Due 4/16/2043 | 1.7 | |||
Ally Master Owner Trust, 1.21%, Due 6/15/17 | 1.4 | |||
GNR Project Loans, 2.543%, Due 9/16/2044 | 1.3 | |||
Fannie Mae Pool, 5.00%, Due 1/1/41 | 1.3 | |||
National Credit Union Administration, 0.674%, Due 10/7/20 | 1.3 | |||
GNR Project Loans, 2.210%, Due 12/16/2035 | 1.3 | |||
Citigroup, Inc., 8.50%, Due 5/22/2019 | 1.2 | |||
Total Fund Holdings | 250 |
Sector Weightings (% Fixed Income)
Mortgage-Backed Obligations | 23.0 | |||
Finance | 21.2 | |||
U.S. Treasury | 15.0 | |||
Manufacturing | 11.8 | |||
Service | 11.5 | |||
Asset-Backed Obligations | 6.2 | |||
Telecommunications | 3.6 | |||
Energy | 2.9 | |||
Utilities | 2.4 | |||
Consumer | 1.2 | |||
Transportation | 1.2 |
Sector Weightings (% Equity)
Finance | 21.5 | |||
Information Technology | 15.9 | |||
Manufacturing | 13.9 | |||
Financials | 13.8 | |||
Energy | 12.6 | |||
Transportation | 4.4 | |||
Utilities | 4.1 | |||
Health Care | 3.5 | |||
Consumer Discretionary | 3.5 | |||
Industrials | 3.4 | |||
Telecommunications | 3.4 |
Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
7
American Beacon Intermediate Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Intermediate Bond Fund (the “Fund”) declined 1.58% for the twelve months ended October 31, 2013, trailing the Barclays Capital Aggregate Index (the “Index”) decline of 1.08% and the Lipper Core Bond Funds Index decline of 0.70% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional | -1.04 | % | 6.33 | % | 4.86 | % | $ | 16,068 | ||||||||
Y Class(1,3,7) | -1.42 | % | 6.18 | % | 4.78 | % | 15,957 | |||||||||
Investor Class (1,2,7) | -1.58 | % | 5.86 | % | 4.62 | % | 15,713 | |||||||||
A Class with sales Charge(1,4,7) | -6.35 | % | 4.70 | % | 4.05 | % | 14,874 | |||||||||
A Class without sales Charge(1,4,7) | -1.69 | % | 5.72 | % | 4.56 | % | 15,615 | |||||||||
C Class with sales Charge(1,5,7) | -3.51 | % | 5.23 | % | 4.31 | % | 15,256 | |||||||||
C Class without sales Charge(1,5,7) | -2.51 | % | 5.23 | % | 4.31 | % | 15,256 | |||||||||
Barclays Capital Agg. Index (6) | -1.08 | % | 6.09 | % | 4.78 | % | 15,942 | |||||||||
Lipper Core Bond Funds Index (6) | -0.70 | % | 7.46 | % | 4.69 | % | 15,823 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. |
2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 10/31/03. |
3. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total returns |
shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/2/09, the Investor Class from 3/2/09 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 4.75%. |
5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/2/09, the Investor Class from 3/2/09 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase. |
6. | The Barclays Capital Aggregate Index is a market value weighted index of government, corporate, mortgage-backed and asset-backed fixed-rate debt securities of all maturities. The Lipper Core Bond Funds Index tracks the results of the 30 largest mutual funds in the Lipper Core Bond Funds category. Lipper is an independent research and ranking service. One cannot directly invest in an index. |
7. | The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.34%, 1.00%, 0.85%, 1.13%, and 1.88%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. |
Prior to the deduction of expenses, the Fund outperformed the Index. On a gross of fee basis, the Fund’s added value relative to the Index was largely driven by advantageous weightings across sectors and credit quality categories.
During the period, the overweight to the Financial sector was a positive as Financial securities were one of the best performing categories in the market (up 1.8%). In addition, maintaining an underweight allocation to Treasury securities also proved beneficial.
The performance from the Fund’s Treasury securities trailed those in the Index and hampered relative returns offsetting some of the benefits from the underweight allocation. However, within the Financial sector, security selection was strong and complimented the benefit of the overweight allocation.
8
American Beacon Intermediate Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Fund’s positioning within the various credit quality categories helped returns relative to the Index. The combination of underweighting AA-rated securities and overweighting A-rated securities was a key driver. Offsetting some of the positioning benefits, the Fund’s holdings in the BBB-rated category trailed those of the Index and detracted from relative performance.
The Fund’s duration positioning during the period remained similar to the duration profile of the Index. As interest rates rose in the maturity range in which the Fund has significant investments (3 – 7 years), the Fund benefited from strong issue selection that helped navigate the difficult interest rate environment.
The Fund’s investment managers remain focused on a conservative approach toward investing in the bond market and on issuer-specific opportunities.
Top Ten Holdings (% Net Assets)
GNR Project Loans, 2.170%, Due 4/16/2041 | 1.7 | |||
Fannie Mae Pool, 4.50%, Due 4/1/2041 | 1.5 | |||
Fannie Mae Pool, 4.00%, Due 12/1/2040 | 1.3 | |||
Freddie Mac Gold Pool, 3.50%, Due 6/1/2042 | 1.1 | |||
GNR Project Loans, 1.732%, Due 5/16/2042 | 1.0 | |||
Freddie Mac Gold Pool, 3.500%, Due 9/1/2028 | 1.0 | |||
Ally Master Owner Trust, 1.21%, Due 6/15/2017 | 1.0 | |||
Bear Stearns Cos. LLC, 7.250%, Due 2/1/2018 | 1.0 | |||
Citigroup, Inc., 8.50%, Due 5/22/2019 | 0.9 | |||
Fannie Mae Pool, 4.000%, Due 2/1/2041 | 0.9 | |||
Total Fund Holdings | 379 |
Sector Weightings (% Investments)
Mortgage-Backed Obligations | 29.3 | |||
U.S. Treasury | 20.3 | |||
Finance | 19.9 | |||
Manufacturing | 7.6 | |||
Service | 5.4 | |||
Asset-Backed Obligations | 4.8 | |||
Energy | 4.6 | |||
Telecommunications | 3.2 | |||
Utilities | 2.8 | |||
Consumer | 1.1 | |||
Transportation | 1.0 |
Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
9
American Beacon Short-Term Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Investor Class of the Short-Term Bond Fund (the “Fund”) returned 0.47% for the twelve-month period ended October 31, 2013, which underperformed the BofA Merrill Lynch 1-3 Year Gov/Corp Index (the “Index”) return of 0.85% and the Lipper Short Investment Grade Bond Funds Index (the “Lipper”) return of 0.85%.
Comparison of Change in Value of a $10,000 Investment For the Period from 10/31/03 through 10/31/13
Total Returns for the Period ended 10/31/13
1 Year | 5 Years | 10 Years | Value of $10,000 10/31/03- 10/31/13 | |||||||||||||
Institutional | 0.47 | % | 2.71 | % | 2.93 | % | $ | 13,342 | ||||||||
Y Class(1,2,6) | 0.22 | % | 2.64 | % | 2.89 | % | 13,295 | |||||||||
Investor Class(1,6) | 0.03 | % | 2.34 | % | 2.46 | % | 12,748 | |||||||||
A Class with sales Charge(1,3,6) | -2.55 | % | 1.77 | % | 2.17 | % | 12,395 | |||||||||
A Class without sales Charge(1,3,6) | 0.00 | % | 2.29 | % | 2.43 | % | 12,713 | |||||||||
C Class with sales Charge(1,4,6) | -1.73 | % | 1.83 | % | 2.20 | % | 12,434 | |||||||||
C Class without sales Charge(1,4,6) | -0.73 | % | 1.83 | % | 2.20 | % | 12,434 | |||||||||
Lipper Short Inv. Grade Bond Funds Index (5) | 0.85 | % | 4.10 | % | 2.87 | % | 13,275 | |||||||||
BofA Merrill Lynch 1-3Yr. Gov./Corp Index(5) | 0.85 | % | 2.56 | % | 2.97 | % | 13,393 |
1. | Performance shown is historical and is not indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to the Investor Class of the Fund has been waived. Performance prior to waiving fees was lower than the actual returns shown. |
2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/03 through 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y Class are higher than those of the Institutional Class. As a result, total |
returns shown may be higher than they would have been had the Y Class been in existence since 10/31/03. |
3. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 10/31/03. The maximum sales charge for A Class is 2.50%. |
4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/03 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 10/31/03. The maximum contingent deferred sales charge is 1.00% for shares redeemed within one year of the date of purchase. |
5. | The BofA Merrill Lynch 1-3 Yr. Gov./Corp. Index is a market value weighted performance benchmark for government and corporate fixed-rate debt securities with maturities between one and three years. The Lipper Short Investment Grade Bond Funds Index tracks the results of the 30 largest mutual funds in the Lipper Short Investment Grade Bond Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. |
6. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.37%, 0.72%, 0.89%, 1.12%, and 1.90%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
Prior to the deduction of expenses, the Fund’s return was essentially equal to that of the Index. The Fund had overweight positions in the major credit sectors, including investment-grade Corporates and Asset-Backeds, which performed well as the economy improved and as the budget impasse in Washington was resolved. The Fund was also overweight Agency Mortgage-Backed securities which underperformed as spreads widened in response to slower prepayment speeds.
The Fund’s duration position detracted slightly from performance as interest rates ended the period nearly where they began. The Fund’s average duration of 1.2 was shorter than the Index duration of 1.8. Given the slope of the yield curve, the Fund earned slightly less income that it would have earned if its duration were neutral.
Given the unusually low levels of interest rates, we maintained a short duration to protect the Fund from an ultimate rise in rates. Although a rate increase does not appear to be imminent, the absolute low level of yields warrants a more defensive approach toward duration overall.
10
American Beacon Short-Term Bond FundSM
Performance Overview
October 31, 2013 (Unaudited)
The Lipper peer group continued to benefit from the outperformance of high-yield bonds. During the period, the BofA Merrill Lynch 1-3 Year US Cash Pay High Yield Index returned 7.83% versus 1.85% for the investment-grade BofA Merrill Lynch 1-3 Year US Corporate Index. The Fund, which is investment-grade only, often lags the Lipper Index during periods of strong high yield outperformance.
Given the macroeconomic backdrop, we will continue to look for opportunity in this low interest rate environment and strive to protect the Fund from volatility across the globe. We will maintain our conservative approach toward credit risk and seek to outperform over the long term on a risk-adjusted basis.
Top Ten Holdings (% Net Assets)
National Credit Union Administration, 0.674%, Due 1/8/2020 | 3.1 | |||
National Credit Union Administration, 0.625%, Due 3/11/20 | 3.1 | |||
Nissan Master Owner Trust Receivables, 0.503%, Due 2/15/18 | 2.2 | |||
Capital Auto Receivables Asset Trust 2013-1, 0.920%, Due 9/20/16 | 2.2 | |||
ING Bank N.V., 1.808%, Due 6/9/14, 144A | 1.9 | |||
Volkswagen International Finance N.V., 1.15%, Due 11/20/15, 144A | 1.9 | |||
Danske Bank A/S, 1.355%, Due 4/14/14, 144A | 1.9 | |||
Morgan Stanley, 3.450%, Due 11/2/15 | 1.9 | |||
General Electric Capital Corp., 1.500%, Due 7/12/2016 | 1.9 | |||
AbbVie, Inc., 1.200%, Due 11/6/2015 | 1.9 | |||
Total Fund Holdings | 84 |
Sector Weightings (% Investments)
Asset-Backed Obligations | 25.1 | |||
Finance | 24.0 | |||
U.S. Treasury | 17.0 | |||
Mortgage-Backed Obligations | 12.1 | |||
Manufacturing | 9.4 | |||
Service | 4.4 | |||
Consumer | 3.1 | |||
Telecommunications | 2.5 | |||
Utilities | 1.1 | |||
Transportation | 0.7 | |||
Energy | 0.6 |
Investing in debt securities entails interest rate risk, which is the risk that debt securities will decrease in value with increases in market interest rates. Investing in foreign securities entails additional risk not associated with domestic securities, such as currency fluctuations, economic and political instability and differences in accounting standards. Credit risk is the risk that the issuer of a bond will fail to make timely payment of interest or principal; and the decline in an issuer’s credit rating can cause the price of its bonds to go down. Please see the prospectus for a complete discussion of the Fund’s risks. There can be no assurances that the investment objectives of this Fund will be met.
11
American Beacon FundsSM
Fund Expenses
October 31, 2013 (Unaudited)
Fund Expense Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees if applicable, and (2) ongoing costs, including sales charges (loads) on purchase payments including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2013 through October 31, 2013.
Actual Expenses
The following tables provide information about actual account values and actual expenses. You may use the information on this page, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the “Expenses Paid During Period” for the applicable Fund to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
Hypothetical Example for Comparison Purposes
The following tables provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes that invest in a Fund through an IRA or Roth IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund, such as redemption fees as applicable. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the following tables are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
12
American Beacon FundsSM
Fund Expenses
October 31, 2013 (Unaudited)
High Yield Bond Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.55 | $ | 4.52 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.72 | $ | 4.53 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.00 | $ | 4.97 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.27 | $ | 4.99 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.59 | $ | 5.38 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.86 | $ | 5.40 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.48 | $ | 5.68 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.56 | $ | 5.70 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.88 | $ | 3.10 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.13 | $ | 3.11 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.46 | $ | 9.47 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.78 | $ | 9.50 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.89%, 0.98%, 1.06%, 1.12%, 1.87% and 0.61% for the Institutional, Y, Investor, A, C and AMR Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Retirement Income and Appreciation Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,007.38 | $ | 4.05 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.76 | $ | 5.66 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.56 | $ | 5.70 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,005.57 | $ | 5.91 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.31 | $ | 5.96 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,000.63 | $ | 9.88 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.32 | $ | 9.96 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.80%, 1.12%, 1.17% and 1.96% for the Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Intermediate Bond Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 982.35 | $ | 1.70 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.49 | $ | 1.73 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 980.05 | $ | 3.24 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.93 | $ | 3.31 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 980.09 | $ | 3.94 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.22 | $ | 4.02 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 979.12 | $ | 4.94 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.21 | $ | 5.04 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 975.40 | $ | 8.66 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.43 | $ | 8.84 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.34%, 0.65%, 0.79%, 0.99% and 1.74% for the Institutional, Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
Short-Term Bond Fund
Beginning Account Value 5/1/13 | Ending Account Value 10/31/13 | Expenses Paid During Period* 5/1/13-10/31/13 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 999.81 | $ | 1.92 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.29 | $ | 1.94 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 998.54 | $ | 3.22 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.98 | $ | 3.26 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 997.75 | $ | 3.98 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.22 | $ | 4.02 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 998.61 | $ | 4.28 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 994.90 | $ | 8.10 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.09 | $ | 8.19 |
* | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.38%, 0.64%, 0.79%, 0.85% and 1.61% for the Institutional, Y, Investor, A and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. |
** | 5% return before expenses. |
13
American Beacon FundsSM
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of
American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund (four of the funds constituting the American Beacon Funds) (collectively, the “Funds”), as of October 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the American Beacon High Yield Bond Fund, American Beacon Intermediate Bond Fund, American Beacon Retirement Income and Appreciation Fund, and American Beacon Short-Term Bond Fund at October 31, 2013, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Dallas, Texas
December 30, 2013
14
American Beacon High Yield Bond FundSM
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCKS - 0.19% | ||||||||
CONSUMER DISCRETIONARY- 0.12% | ||||||||
Automobiles - 0.12% | ||||||||
General Motors Co.C | 6,381 | $ | 235 | |||||
|
| |||||||
MANUFACTURING- 0.05% | ||||||||
Paper & Forest Products - 0.05% | ||||||||
Catalyst Paper Corp.C | 8,426 | 9 | ||||||
NewPage Holdings, Inc.A C | 1,200 | 106 | ||||||
|
| |||||||
Total Manufacturing | 115 | |||||||
|
| |||||||
SERVICE- 0.01% | ||||||||
Other Service - 0.01% | ||||||||
Dex Media, Inc.C | 2,606 | 18 | ||||||
|
| |||||||
TRANSPORTATION- 0.01% | ||||||||
Other Transportation - 0.01% | ||||||||
CEVA Holdings LLCA B C | 22 | 21 | ||||||
|
| |||||||
Total Common Stocks (Cost $1,853) | 389 | |||||||
|
| |||||||
RIGHTS - 0.09% (Cost $541) | ||||||||
TRANSPORTATION- 0.09% | ||||||||
Other Transportation - 0.09% | ||||||||
Horizon Lines, Inc., Exercise price $0.051, Expires 9/27/2036A C D | 3,581,642 | 182 | ||||||
|
| |||||||
PREFERRED STOCKS - 0.18% | ||||||||
AGENCY- 0.03% | ||||||||
Federal Home Loan Mortgage Corporation - 0.03% | ||||||||
Federal Home Loan Mortgage Corp., 1.00%, Due 12/31/2049C E K | 10,000 | 71 | ||||||
|
| |||||||
FINANCE- 0.15% | ||||||||
Banks - 0.15% | ||||||||
GMAC Capital Trust I, 1.00%, Due 2/15/2040E | 11,600 | 311 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $540) | 382 | |||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS - 0.02% (Cost $68) | ||||||||
TRANSPORTATION- 0.02% | ||||||||
Other Transportation - 0.02% | ||||||||
CEVA Holding LLC, Series A-2 A B C | 49 | 45 | ||||||
|
| |||||||
Par Amount | ||||||||
(000’s) | ||||||||
CONVERTIBLE OBLIGATIONS - 0.56% | ||||||||
Consumer - 0.03% | ||||||||
CEDC Finance Corp International, Inc., 10.00%, Due 4/30/2018 | $ | 78 | 68 | |||||
|
| |||||||
Finance - 0.19% | ||||||||
E*Trade Financial Corp., 0.01%, Due 8/31/2019 | 240 | 393 | ||||||
|
| |||||||
Manufacturing - 0.24% | ||||||||
Alpha Appalachia Holdings, Inc., 3.25%, Due 8/1/2015 | 525 | 499 | ||||||
|
| |||||||
Transportation - 0.10% | ||||||||
YRC Worldwide, Inc., 10.00%, Due 3/31/2015 F | 256 | 205 | ||||||
|
| |||||||
Total Convertible Obligations (Cost $1,010) | 1,165 | |||||||
|
| |||||||
CORPORATE OBLIGATIONS - 92.92% | ||||||||
Consumer - 4.60% | ||||||||
American Rock Salt Co. LLC, 8.25%, Due 5/1/2018B G | 335 | 325 |
See accompanying notes
15
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
ARAMARK Corp., 5.75%, Due 3/15/2020G | $ | 280 | $ | 293 | ||||
CEDC Finance Corp International, Inc., 8.00%, Due 4/30/2018F J* | 173 | 162 | ||||||
Del Monte Corp., 7.625%, Due 2/15/2019 | 945 | 983 | ||||||
Dole Food Co., Inc., 7.25%, Due 5/1/2019G | 100 | 101 | ||||||
FAGE Dairy Industry S.A., 9.875%, Due 2/1/2020G | 425 | 460 | ||||||
First Quality Finance Co. Inc., 4.625%, Due 5/15/2021G | 350 | 331 | ||||||
Innovation Ventures LLC, 9.50%, Due 8/15/2019B G | 300 | 278 | ||||||
JBS Investments GmbH, 7.75%, Due 10/28/2020G | 50 | 52 | ||||||
JBS USA LLC, | ||||||||
8.25%, Due 2/1/2020B G | 400 | 429 | ||||||
7.25%, Due 6/1/2021B G | 500 | 512 | ||||||
Libbey Glass, Inc., 6.875%, Due 5/15/2020 | 455 | 489 | ||||||
Marfrig Holding Europe BV, 8.375%, Due 5/9/2018G | 200 | 189 | ||||||
Motors Liquidation Co., 8.375%, Due 7/15/2049 A E | 1,570 | — | ||||||
Pinnacle Operating Corp., 9.00%, Due 11/15/2020G | 295 | 308 | ||||||
Post Holdings, Inc., 7.375%, Due 2/15/2022G | 400 | 427 | ||||||
Prestige Brands, Inc., | ||||||||
8.25%, Due 4/1/2018 | 300 | 319 | ||||||
8.125%, Due 2/1/2020 | 205 | 228 | ||||||
Revlon Consumer Products Corp., 5.75%, Due 2/15/2021G | 200 | 198 | ||||||
Reynolds Group Issuer Inc., | ||||||||
8.50%, Due 5/15/2018 | 400 | 424 | ||||||
9.00%, Due 4/15/2019 | 685 | 732 | ||||||
9.875%, Due 8/15/2019 | 100 | 111 | ||||||
5.75%, Due 10/15/2020 | 605 | 624 | ||||||
8.25%, Due 2/15/2021 | 300 | 312 | ||||||
Simmons Foods, Inc., 10.50%, Due 11/1/2017G | 350 | 367 | ||||||
Smithfield Foods, Inc., 7.75%, Due 7/1/2017 | 155 | 180 | ||||||
Spectrum Brands Escrow Corp., 6.625%, Due 11/15/2022G | 470 | 501 | ||||||
Sun Merger Sub, Inc., 5.875%, Due 8/1/2021G | 100 | 105 | ||||||
Viskase Cos., Inc., 9.875%, Due 1/15/2018G | 150 | 159 | ||||||
|
| |||||||
9,599 | ||||||||
|
| |||||||
Energy - 16.82% | ||||||||
Access Midstream Partners LP, 6.125%, Due 7/15/2022H | 280 | 300 | ||||||
Antero Resources Finance Corp., | ||||||||
6.00%, Due 12/1/2020 | 575 | 607 | ||||||
5.375%, Due 11/1/2021G | 200 | 203 | ||||||
Basic Energy Services, Inc., 7.75%, Due 10/15/2022 | 290 | 293 | ||||||
Bonanza Creek Energy, Inc., 6.75%, Due 4/15/2021 | 180 | 191 | ||||||
Calumet Specialty Products Partners LP, 9.375%, Due 5/1/2019H | 300 | 332 | ||||||
Carrizo Oil & Gas, Inc., | ||||||||
8.625%, Due 10/15/2018 | 300 | 329 | ||||||
7.50%, Due 9/15/2020 | 100 | 109 | ||||||
CGG S.A., 6.50%, Due 6/1/2021 | 600 | 623 | ||||||
Chaparral Energy, Inc., | ||||||||
9.875%, Due 10/1/2020 | 475 | 542 | ||||||
8.25%, Due 9/1/2021 | 100 | 110 | ||||||
7.625%, Due 11/15/2022 | 780 | 842 | ||||||
Chesapeake Energy Corp., | ||||||||
6.625%, Due 8/15/2020 | 400 | 451 | ||||||
6.875%, Due 11/15/2020 | 485 | 548 | ||||||
5.75%, Due 3/15/2023 | 550 | 583 | ||||||
Clayton Williams Energy, Inc., 7.75%, Due 4/1/2019 | 500 | 511 | ||||||
Comstock Resources, Inc., | ||||||||
7.75%, Due 4/1/2019 | 310 | 324 | ||||||
9.50%, Due 6/15/2020 | 155 | 172 | ||||||
Continental Resources, Inc., 5.00%, Due 9/15/2022 | 280 | 292 | ||||||
Drill Rigs Holdings, Inc., 6.50%, Due 10/1/2017G | 840 | 883 | ||||||
Eagle Rock Energy Partners LP, 8.375%, Due 6/1/2019H | 500 | 514 | ||||||
Energy Transfer Equity LP, 7.50%, Due 10/15/2020H | 700 | 809 | ||||||
EPL Oil & Gas, Inc., 8.25%, Due 2/15/2018 | 1,225 | 1,313 | ||||||
EV Energy Partner LP, 8.00%, Due 4/15/2019H | 430 | 430 |
See accompanying notes
16
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Expro Finance Luxembourg SCA, 8.50%, Due 12/15/2016G | $ | 500 | $ | 524 | ||||
Forbes Energy Services Ltd., 9.00%, Due 6/15/2019 | 365 | 369 | ||||||
Genesis Energy LP, | ||||||||
7.875%, Due 12/15/2018H | 80 | 86 | ||||||
5.75%, Due 2/15/2021H | 355 | 360 | ||||||
Goodrich Petroleum Corp., 8.875%, Due 3/15/2019 | 500 | 526 | ||||||
Halcon Resources Corp., | ||||||||
9.75%, Due 7/15/2020 | 100 | 109 | ||||||
8.875%, Due 5/15/2021 | 400 | 417 | ||||||
9.25%, Due 2/15/2022G | 100 | 106 | ||||||
Hercules Offshore, Inc., | ||||||||
10.25%, Due 4/1/2019G | 910 | 1,027 | ||||||
8.75%, Due 7/15/2021G | 200 | 220 | ||||||
7.50%, Due 10/1/2021G | 330 | 345 | ||||||
Hilcorp Energy I LP, 7.625%, Due 4/15/2021G H | 295 | 320 | ||||||
Holly Energy Partners LP, 6.50%, Due 3/1/2020H | 225 | 236 | ||||||
Key Energy Services, Inc., 6.75%, Due 3/1/2021 | 305 | 310 | ||||||
Kinder Morgan Finance Co. LLC, 6.00%, Due 1/15/2018B G | 500 | 544 | ||||||
Kinder Morgan, Inc., 5.00%, Due 2/15/2021G | 100 | 100 | ||||||
Linn Energy LLC, | ||||||||
6.50%, Due 5/15/2019B | 155 | 155 | ||||||
7.00%, Due 11/1/2019B G | 100 | 100 | ||||||
8.625%, Due 4/15/2020B | 700 | 746 | ||||||
7.75%, Due 2/1/2021B I | 820 | 847 | ||||||
Magnum Hunter Resources Corp., 9.75%, Due 5/15/2020G | 700 | 742 | ||||||
MarkWest Energy Partners LP, 4.50%, Due 7/15/2023H | 510 | 495 | ||||||
MEG Energy Corp., 7.00%, Due 3/31/2024G | 105 | 107 | ||||||
Memorial Production Partners LP, 7.625%, Due 5/1/2021H | 310 | 315 | ||||||
Midstates Petroleum, Inc., 9.25%, Due 6/1/2021 | 300 | 309 | ||||||
Oasis Petroleum, Inc., 6.875%, Due 3/15/2022G | 585 | 632 | ||||||
Offshore Group Investment Ltd., | ||||||||
7.50%, Due 11/1/2019 | 505 | 549 | ||||||
7.125%, Due 4/1/2023 | 400 | 407 | ||||||
Pacific Drilling S.A., 5.375%, Due 6/1/2020G | 350 | 353 | ||||||
Pacific Drilling V Ltd., 7.25%, Due 12/1/2017G | 300 | 326 | ||||||
PBF Holding Co. LLC, 8.25%, Due 2/15/2020B | 500 | 523 | ||||||
Penn Virginia Corp., 8.50%, Due 5/1/2020 | 615 | 653 | ||||||
Penn Virginia Resource Partners LP, | ||||||||
8.375%, Due 6/1/2020H | 200 | 222 | ||||||
6.50%, Due 5/15/2021G H | 300 | 309 | ||||||
PetroQuest Energy, Inc., 10.00%, Due 9/1/2017B | 415 | 427 | ||||||
Pioneer Energy Services Corp., 9.875%, Due 3/15/2018 | 220 | 237 | ||||||
QEP Resources, Inc., | ||||||||
5.375%, Due 10/1/2022 | 300 | 293 | ||||||
5.25%, Due 5/1/2023 | 300 | 289 | ||||||
QR Energy LP, 9.25%, Due 8/1/2020H | 670 | 702 | ||||||
Quicksilver Resources, Inc., | ||||||||
7.00%, Due 6/21/2019G | 100 | 97 | ||||||
9.125%, Due 8/15/2019 | 200 | 195 | ||||||
Range Resources Corp., 5.00%, Due 3/15/2023 | 270 | 269 | ||||||
Regency Energy Partners LP, 6.50%, Due 7/15/2021H | 225 | 241 | ||||||
Resolute Energy Corp., 8.50%, Due 5/1/2020 | 750 | 788 | ||||||
Rex Energy Corp., 8.875%, Due 12/1/2020 | 305 | 329 | ||||||
Rockies Express Pipeline LLC, | ||||||||
6.85%, Due 7/15/2018B G | 135 | 127 | ||||||
6.00%, Due 1/15/2019B G | 170 | 151 | ||||||
Sabine Pass Liquefaction LLC, | ||||||||
5.625%, Due 2/1/2021B G | 1,005 | 1,015 | ||||||
5.625%, Due 4/15/2023B G | 430 | 421 | ||||||
Samson Investment Co., 10.25%, Due 2/15/2020G | 815 | 880 | ||||||
Sanchez Energy Corp., 7.75%, Due 6/15/2021G | 745 | 760 | ||||||
SandRidge Energy, Inc., | ||||||||
7.50%, Due 3/15/2021 | 665 | 705 |
See accompanying notes
17
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
8.125%, Due 10/15/2022 | $ | 280 | $ | 298 | ||||
Talos Production LLC, 9.75%, Due 2/15/2018B G | 490 | 495 | ||||||
Targa Resources Partners LP, 5.25%, Due 5/1/2023H | 460 | 460 | ||||||
W&T Offshore, Inc., 8.50%, Due 6/15/2019 | 595 | 641 | ||||||
WPX Energy, Inc., 6.00%, Due 1/15/2022 | 575 | 604 | ||||||
|
| |||||||
35,124 | ||||||||
|
| |||||||
Finance - 10.18% | ||||||||
Aircastle Ltd., 6.25%, Due 12/1/2019 | 545 | 580 | ||||||
Algeco Scotsman Global Finance PLC, 8.50%, Due 10/15/2018G | 500 | 536 | ||||||
Ally Financial, Inc., | ||||||||
5.50%, Due 2/15/2017 | 120 | 130 | ||||||
8.00%, Due 12/31/2018 | 200 | 233 | ||||||
7.50%, Due 9/15/2020 | 1,035 | 1,210 | ||||||
A-S Co-Issuer Subsidiary, Inc., 7.875%, Due 12/15/2020G | 450 | 466 | ||||||
Aviv Healthcare Properties LP, | ||||||||
7.75%, Due 2/15/2019H | 200 | 216 | ||||||
6.00%, Due 10/15/2021G H | 100 | 103 | ||||||
Bank of America Corp., 8.125%, Due 12/31/2049E | 900 | 1,006 | ||||||
Bank One Capital III, 8.75%, Due 9/1/2030 | 275 | 358 | ||||||
CIT Group, Inc., | ||||||||
5.50%, Due 2/15/2019G | 100 | 108 | ||||||
5.375%, Due 5/15/2020 | 200 | 214 | ||||||
5.00%, Due 8/15/2022 | 800 | 810 | ||||||
CNL Lifestyle Properties, Inc., 7.25%, Due 4/15/2019 | 250 | 260 | ||||||
Denali Borrower LLC, 5.625%, Due 10/15/2020B G | 170 | 168 | ||||||
E*Trade Financial Corp., | ||||||||
6.75%, Due 6/1/2016 | 105 | 113 | ||||||
6.00%, Due 11/15/2017 | 360 | 382 | ||||||
6.375%, Due 11/15/2019 | 1,770 | 1,894 | ||||||
Fidelity & Guaranty Life Holdings, Inc., 6.375%, Due 4/1/2021G | 200 | 209 | ||||||
General Electric Capital Corp., 7.125%, Due 12/31/2049E | 200 | 223 | ||||||
Genworth Financial, Inc., 6.15%, Due 11/15/2066E | 325 | 294 | ||||||
Geo Group, Inc., | ||||||||
6.625%, Due 2/15/2021 | 275 | 291 | ||||||
5.125%, Due 4/1/2023 | 225 | 211 | ||||||
Hockey Merger Sub 2, Inc., 7.875%, Due 10/1/2021G | 480 | 495 | ||||||
Icahn Enterprises LP, 6.00%, Due 8/1/2020G H | 225 | 231 | ||||||
iStar Financial, Inc., 9.00%, Due 6/1/2017 | 570 | 663 | ||||||
JPMorgan Chase & Co., 6.00%, Due 12/31/2049 | 800 | 774 | ||||||
MetLife, Inc., 10.75%, Due 8/1/2069 | 150 | 224 | ||||||
Nationwide Mutual Insurance Co., 9.375%, Due 8/15/2039G | 225 | 314 | ||||||
Neuberger Berman Group LLC, 5.875%, Due 3/15/2022B G | 400 | 409 | ||||||
Nielsen Co., LUX SARL, 5.50%, Due 10/1/2021G | 200 | 206 | ||||||
Nuveen Investments, Inc., | ||||||||
5.50%, Due 9/15/2015 | 380 | 369 | ||||||
9.125%, Due 10/15/2017G | 590 | 572 | ||||||
9.50%, Due 10/15/2020G | 730 | 695 | ||||||
Onex USI Acquisition Corp., 7.75%, Due 1/15/2021G | 300 | 306 | ||||||
Oppenheimer Holdings, Inc., 8.75%, Due 4/15/2018 | 400 | 430 | ||||||
Provident Funding Associates LP, | ||||||||
10.125%, Due 2/15/2019G H | 255 | 284 | ||||||
6.75%, Due 6/15/2021G H | 700 | 716 | ||||||
Realogy Group LLC, 9.00%, Due 1/15/2020B G | 270 | 313 | ||||||
ROC Finance LLC, 12.125%, Due 9/1/2018B G | 750 | 810 | ||||||
Royal Bank of Scotland Group PLC, 6.125%, Due 12/15/2022 | 800 | 827 | ||||||
SLM Corp., | ||||||||
8.45%, Due 6/15/2018 | 300 | 350 | ||||||
5.50%, Due 1/15/2019 | 500 | 519 | ||||||
Synovus Financial Corp., | ||||||||
5.125%, Due 6/15/2017 | 575 | 587 | ||||||
7.875%, Due 2/15/2019 | 540 | 614 | ||||||
TMX Finance LLC, 8.50%, Due 9/15/2018B G | 225 | 239 | ||||||
Western Alliance Bancorp, 10.00%, Due 9/1/2015 | 270 | 291 | ||||||
|
| |||||||
21,253 | ||||||||
|
|
See accompanying notes
18
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Manufacturing - 18.99% | ||||||||
Abengoa Finance SAU, 8.875%, Due 11/1/2017G | $ | 400 | $ | 421 | ||||
Accudyne Industries Borrower / Accudyne Industries LLC, 7.75%, Due 12/15/2020G | 150 | 157 | ||||||
Activision Blizzard, Inc., 5.625%, Due 9/15/2021G | 300 | 311 | ||||||
Advanced Micro Devices, Inc., 7.50%, Due 8/15/2022 | 650 | 630 | ||||||
Ainsworth Lumber Co. Ltd, 7.50%, Due 12/15/2017G | 293 | 317 | ||||||
Aleris International, Inc., 7.875%, Due 11/1/2020 | 360 | 382 | ||||||
Allison Transmission, Inc., 7.125%, Due 5/15/2019G | 600 | 647 | ||||||
ArcelorMittal, | ||||||||
4.25%, Due 8/5/2015 | 170 | 176 | ||||||
6.00%, Due 3/1/2021E | 1,000 | 1,048 | ||||||
6.75%, Due 2/25/2022E | 435 | 473 | ||||||
Arch Coal, Inc., | ||||||||
8.75%, Due 8/1/2016 | 205 | 205 | ||||||
9.875%, Due 6/15/2019 | 160 | 136 | ||||||
ARD Finance S.A., 11.125%, Due 6/1/2018F G | 518 | 570 | ||||||
Ardagh Packaging Finance PLC, | ||||||||
7.00%, Due 11/15/2020G | 600 | 597 | ||||||
4.875%, Due 11/15/2022G | 250 | 246 | ||||||
ArvinMeritor, Inc., 10.625%, Due 3/15/2018 | 200 | 216 | ||||||
Ashland, Inc., 4.75%, Due 8/15/2022 | 505 | 485 | ||||||
Barminco Finance Property Ltd., 9.00%, Due 6/1/2018G | 300 | 284 | ||||||
Blackboard, Inc., 7.75%, Due 11/15/2019G | 100 | 101 | ||||||
BMC Software Finance, Inc., 8.125%, Due 7/15/2021G | 775 | 819 | ||||||
BMC Software, Inc., 7.25%, Due 6/1/2018 | 215 | 223 | ||||||
Boart Longyear Management Property Ltd., | ||||||||
10.00%, Due 10/1/2018G | 180 | 184 | ||||||
7.00%, Due 4/1/2021G | 230 | 171 | ||||||
Catalyst Paper Corp., 11.00%, Due 10/30/2017F K | 146 | 83 | ||||||
CDW LLC, 8.50%, Due 4/1/2019B | 450 | 498 | ||||||
Cemex Finance LLC, 9.375%, Due 10/12/2022B G | 200 | 225 | ||||||
Cemex SAB de CV, | ||||||||
9.00%, Due 1/11/2018G | 500 | 544 | ||||||
5.875%, Due 3/25/2019G | 200 | 196 | ||||||
Chrysler Group LLC, 8.00%, Due 6/15/2019B | 270 | 299 | ||||||
Consol Energy, Inc., | ||||||||
8.00%, Due 4/1/2017 | 100 | 106 | ||||||
8.25%, Due 4/1/2020 | 500 | 547 | ||||||
Consolidated Container Co. LLC, 10.125%, Due 7/15/2020B G | 400 | 432 | ||||||
CPG Merger Sub LLC, 8.00%, Due 10/1/2021B G | 295 | 305 | ||||||
Eagle Spinco, Inc., 4.625%, Due 2/15/2021G | 535 | 517 | ||||||
Eldorado Gold Corp., 6.125%, Due 12/15/2020G | 630 | 627 | ||||||
Euramax International, Inc., 9.50%, Due 4/1/2016 | 100 | 99 | ||||||
Exopack Holding Corp., 10.00%, Due 6/1/2018 | 300 | 324 | ||||||
FMG Resources August 2006 Property Ltd., | ||||||||
7.00%, Due 11/1/2015G | 210 | 218 | ||||||
6.00%, Due 4/1/2017G | 575 | 601 | ||||||
6.875%, Due 2/1/2018G | 500 | 530 | ||||||
8.25%, Due 11/1/2019G | 780 | 865 | ||||||
6.875%, Due 4/1/2022G | 35 | 37 | ||||||
FQM Akubra, Inc., 7.50%, Due 6/1/2021G | 100 | 106 | ||||||
Freescale Semiconductor, Inc., | ||||||||
9.25%, Due 4/15/2018G | 64 | 69 | ||||||
8.05%, Due 2/1/2020 | 400 | 431 | ||||||
10.75%, Due 8/1/2020 | 200 | 228 | ||||||
6.00%, Due 1/15/2022G | 100 | 101 | ||||||
General Motors Financial Co. Inc., 3.25%, Due 5/15/2018G | 300 | 299 | ||||||
Gibraltar Industries, Inc., 6.25%, Due 2/1/2021 | 350 | 362 | ||||||
Goodyear Tire & Rubber Co., 6.50%, Due 3/1/2021 | 700 | 740 | ||||||
Horsehead Holding Corp., | ||||||||
10.50%, Due 6/1/2017G | 530 | 572 |
See accompanying notes
19
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
INEOS Finance PLC, 8.375%, Due 2/15/2019G | $ | 200 | $ | 223 | ||||
INEOS Group Holdings S.A., 6.125%, Due 8/15/2018G | 400 | 404 | ||||||
Inmet Mining Corp., 8.75%, Due 6/1/2020G | 500 | 553 | ||||||
K Hovnanian Enterprises, Inc., 7.25%, Due 10/15/2020G | 230 | 245 | ||||||
KB Home, | ||||||||
7.00%, Due 12/15/2021 | 100 | 103 | ||||||
7.50%, Due 9/15/2022 | 500 | 524 | ||||||
Liberty Tire Recycling LLC, 11.00%, Due 10/1/2016B G | 325 | 332 | ||||||
Louisiana-Pacific Corp., 7.50%, Due 6/1/2020 | 425 | 469 | ||||||
M/I Homes, Inc., 8.625%, Due 11/15/2018 | 200 | 217 | ||||||
Manitowoc Co., Inc., 8.50%, Due 11/1/2020 | 150 | 170 | ||||||
Mcron Finance Sub LLC, 8.375%, Due 5/15/2019B G | 135 | 150 | ||||||
MedAssets, Inc., 8.00%, Due 11/15/2018 | 175 | 189 | ||||||
Meritor, Inc., 6.75%, Due 6/15/2021 | 200 | 202 | ||||||
Midwest Vanadium Property Ltd., 11.50%, Due 2/15/2018G | 200 | 168 | ||||||
Milacron LLC, 7.75%, Due 2/15/2021B G | 260 | 272 | ||||||
Mueller Water Products, Inc., 7.375%, Due 6/1/2017 | 290 | 298 | ||||||
Murray Energy Corp., 8.625%, Due 6/15/2021G | 300 | 321 | ||||||
Navistar International Corp., 8.25%, Due 11/1/2021 | 200 | 204 | ||||||
Norske Skogindustrier ASA, 6.125%, Due 10/15/2015G | 575 | 397 | ||||||
Novelis, Inc., 8.75%, Due 12/15/2020 | 500 | 556 | ||||||
Nufarm Australia Ltd., 6.375%, Due 10/15/2019G | 290 | 299 | ||||||
Olin Corp., 5.50%, Due 8/15/2022 | 400 | 402 | ||||||
Orion Engineered Carbons Bondco GmbH, 9.625%, Due 6/15/2018G | 200 | 222 | ||||||
Orion Engineered Carbons Finance & Co. SCA, 9.25%, Due 8/1/2019F G | 200 | 209 | ||||||
Peabody Energy Corp., | ||||||||
7.375%, Due 11/1/2016 | 600 | 675 | ||||||
6.00%, Due 11/15/2018 | 155 | 164 | ||||||
6.25%, Due 11/15/2021 | 510 | 527 | ||||||
Perstorp Holding AB, 8.75%, Due 5/15/2017G | 500 | 522 | ||||||
Pittsburgh Glass Works LLC, | ||||||||
8.50%, Due 4/15/2016B G | 300 | 314 | ||||||
8.00%, Due 11/15/2018B G | 295 | 301 | ||||||
Plastipak Holdings, Inc., 6.50%, Due 10/1/2021G | 230 | 239 | ||||||
Rain CII Carbon LLC, 8.25%, Due 1/15/2021B G | 300 | 310 | ||||||
Reliance Intermediate Holdings LP, 9.50%, Due 12/15/2019G H | 760 | 833 | ||||||
Renaissance Acquisition Corp., 6.875%, Due 8/15/2021G | 505 | 514 | ||||||
Rentech Nitrogen Partners LP, 6.50%, Due 4/15/2021G H | 950 | 921 | ||||||
Rockwood Specialties Group, Inc., 4.625%, Due 10/15/2020 | 310 | 319 | ||||||
Sanmina Corp., 7.00%, Due 5/15/2019G | 435 | 462 | ||||||
Schaeffler Finance BV, 8.50%, Due 2/15/2019G | 200 | 225 | ||||||
SIWF Merger Sub, Inc., 6.25%, Due 6/1/2021G | 160 | 161 | ||||||
Smurfit Kappa Treasury Funding Ltd., 7.50%, Due 11/20/2025 | 550 | 605 | ||||||
Sophia LP, 9.75%, Due 1/15/2019G H | 250 | 273 | ||||||
SRA International, Inc., 11.00%, Due 10/1/2019 | 100 | 104 | ||||||
Stackpole International Intermediate Co., 7.75%, Due 10/15/2021G | 575 | 598 | ||||||
Standard Pacific Corp., 6.25%, Due 12/15/2021 | 300 | 309 | ||||||
SunGard Data Systems, Inc., 6.625%, Due 11/1/2019 | 295 | 308 | ||||||
Taylor Morrison Communities, Inc., | ||||||||
7.75%, Due 4/15/2020G | 754 | 833 | ||||||
5.25%, Due 4/15/2021G | 210 | 205 | ||||||
Terex Corp., 6.00%, Due 5/15/2021 | 435 | 454 | ||||||
Texas Industries, Inc., 9.25%, Due 8/15/2020 | 340 | 376 | ||||||
TPC Group, Inc., 8.75%, Due 12/15/2020G | 565 | 594 | ||||||
TransDigm, Inc., | ||||||||
7.75%, Due 12/15/2018 | 145 | 156 | ||||||
7.50%, Due 7/15/2021 | 235 | 256 | ||||||
Tronox Finance LLC, 6.375%, Due 8/15/2020B | 505 | 515 | ||||||
UCI International, Inc., 8.625%, Due 2/15/2019 | 235 | 242 | ||||||
US Coatings Acquisition, Inc., 7.375%, Due 5/1/2021G | 300 | 319 | ||||||
Viasystems, Inc., 7.875%, Due 5/1/2019G | 460 | 490 | ||||||
Wolverine World Wide, Inc., 6.125%, Due 10/15/2020 | 210 | 223 | ||||||
Xerium Technologies, Inc., 8.875%, Due 6/15/2018 | 95 | 99 | ||||||
Zachry Holdings, Inc., 7.50%, Due 2/1/2020G | 310 | 322 | ||||||
|
| |||||||
39,657 | ||||||||
|
|
See accompanying notes
20
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Service - 26.22% | ||||||||
Acadia Healthcare Co., Inc., 12.875%, Due 11/1/2018 | $ | 231 | $ | 279 | ||||
ACE Cash Express, Inc., 11.00%, Due 2/1/2019G | 220 | 196 | ||||||
ADT Corp., 6.25%, Due 10/15/2021G | 145 | 154 | ||||||
Ahern Rentals, Inc., 9.50%, Due 6/15/2018G | 560 | 600 | ||||||
Alere, Inc., | ||||||||
7.25%, Due 7/1/2018 | 400 | 439 | ||||||
6.50%, Due 6/15/2020 | 725 | 742 | ||||||
AMC Entertainment, Inc., 9.75%, Due 12/1/2020 | 410 | 468 | ||||||
Biomet, Inc., | ||||||||
6.50%, Due 8/1/2020 | 200 | 213 | ||||||
6.50%, Due 10/1/2020 | 500 | 520 | ||||||
Boyd Gaming Corp., 9.125%, Due 12/1/2018 | 380 | 413 | ||||||
Burlington Coat Factory Warehouse Corp., 10.00%, Due 2/15/2019 | 625 | 701 | ||||||
Cablevision Systems Corp., 8.00%, Due 4/15/2020 | 600 | 681 | ||||||
Caesars Entertainment Operating Co., Inc., | ||||||||
11.25%, Due 6/1/2017 | 910 | 908 | ||||||
12.75%, Due 4/15/2018 | 625 | 369 | ||||||
8.50%, Due 2/15/2020 | 100 | 92 | ||||||
9.00%, Due 2/15/2020 | 525 | 492 | ||||||
Caesars Entertainment Resort Properties LLC, 8.00%, Due 10/1/2020B G | 100 | 100 | ||||||
Carmike Cinemas, Inc., 7.375%, Due 5/15/2019 | 200 | 217 | ||||||
Carrols Restaurant Group, Inc., 11.25%, Due 5/15/2018 | 300 | 344 | ||||||
CB OnCure Holdings, Inc., 11.75%, Due 5/15/2017 | 325 | — | ||||||
CCO Holdings LLC, 5.75%, Due 9/1/2023B G | 575 | 547 | ||||||
Cengage Learning Acquisitions, Inc., | ||||||||
12.00%, Due 6/30/2019G K | 400 | 54 | ||||||
11.50%, Due 4/15/2020G K | 75 | 56 | ||||||
Cenveo Corp., 8.875%, Due 2/1/2018 | 950 | 956 | ||||||
Chinos Intermediate Holdings A, Inc., 7.75%, Due 5/1/2019F G | 120 | 121 | ||||||
CHS/Community Health Systems, Inc., | ||||||||
5.125%, Due 8/15/2018 | 100 | 104 | ||||||
8.00%, Due 11/15/2019 | 200 | 217 | ||||||
7.125%, Due 7/15/2020 | 300 | 316 | ||||||
Clean Harbors, Inc., 5.125%, Due 6/1/2021 | 275 | 279 | ||||||
Clear Channel Communications, Inc., 9.00%, Due 3/1/2021 | 1,920 | 1,934 | ||||||
Clear Channel Worldwide Holdings, Inc., | ||||||||
7.625%, Due 3/15/2020 | 1,240 | 1,319 | ||||||
6.50%, Due 11/15/2022 | 350 | 365 | ||||||
ClubCorp Club Operations, Inc., 10.00%, Due 12/1/2018 | 195 | 216 | ||||||
Columbus International, Inc., 11.50%, Due 11/20/2014G | 330 | 356 | ||||||
Covanta Holding Corp., 6.375%, Due 10/1/2022 | 250 | 258 | ||||||
Crown Media Holdings, Inc., 10.50%, Due 7/15/2019 | 520 | 585 | ||||||
CSC Holdings LLC, 6.75%, Due 11/15/2021B | 900 | 981 | ||||||
CST Brands, Inc., 5.00%, Due 5/1/2023G | 325 | 314 | ||||||
Cumulus Media Holdings, Inc., 7.75%, Due 5/1/2019 | 975 | 1,029 | ||||||
CyrusOne LP, 6.375%, Due 11/15/2022H | 235 | 237 | ||||||
Dave & Buster’s, Inc., 11.00%, Due 6/1/2018 | 500 | 551 | ||||||
DaVita, Inc., 5.75%, Due 8/15/2022 | 200 | 205 | ||||||
DISH DBS Corp., | ||||||||
7.125%, Due 2/1/2016 | 500 | 553 | ||||||
4.25%, Due 4/1/2018 | 285 | 289 | ||||||
7.875%, Due 9/1/2019 | 230 | 267 | ||||||
5.125%, Due 5/1/2020 | 230 | 233 | ||||||
6.75%, Due 6/1/2021 | 710 | 769 | ||||||
5.875%, Due 7/15/2022 | 200 | 205 | ||||||
5.00%, Due 3/15/2023 | 200 | 191 | ||||||
DynCorp International, Inc., 10.375%, Due 7/1/2017 | 430 | 453 | ||||||
EnergySolutions Inc., 10.75%, Due 8/15/2018 | 475 | 512 | ||||||
Entercom Radio LLC, 10.50%, Due 12/1/2019B | 370 | 421 |
See accompanying notes
21
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Envision Healthcare Corp., 8.125%, Due 6/1/2019 | $ | 300 | $ | 326 | ||||
Equinix, Inc., 5.375%, Due 4/1/2023 | 1,050 | 1,042 | ||||||
Felcor Lodging LP, 5.625%, Due 3/1/2023H | 235 | 231 | ||||||
First Data Corp., | ||||||||
8.25%, Due 1/15/2021G | 800 | 852 | ||||||
11.25%, Due 1/15/2021G | 100 | 110 | ||||||
12.625%, Due 1/15/2021 | 575 | 663 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, Due 6/15/2015B E G I K | 800 | 1 | ||||||
Gannett Company, Inc., | ||||||||
5.125%, Due 7/15/2020G | 100 | 102 | ||||||
6.375%, Due 10/15/2023G | 400 | 422 | ||||||
Gray Television, Inc., 7.50%, Due 10/1/2020 | 905 | 948 | ||||||
Hanger Orthopedic Group, Inc., 7.125%, Due 11/15/2018 | 170 | 181 | ||||||
Harron Communications LP, 9.125%, Due 4/1/2020G H | 175 | 194 | ||||||
HCA Holdings, Inc., | ||||||||
6.25%, Due 2/15/2021 | 100 | 105 | ||||||
7.75%, Due 5/15/2021 | 500 | 548 | ||||||
HCA, Inc., | ||||||||
6.50%, Due 2/15/2020 | 155 | 172 | ||||||
7.50%, Due 2/15/2022 | 400 | 450 | ||||||
5.875%, Due 3/15/2022 | 200 | 211 | ||||||
4.75%, Due 5/1/2023 | 675 | 650 | ||||||
5.875%, Due 5/1/2023 | 500 | 504 | ||||||
Hertz Corp., | ||||||||
6.75%, Due 4/15/2019 | 400 | 432 | ||||||
6.25%, Due 10/15/2022 | 300 | 314 | ||||||
Hilton Worldwide Finance LLC, 5.625%, Due 10/15/2021B G | 320 | 329 | ||||||
Hologic, Inc., 6.25%, Due 8/1/2020 | 300 | 319 | ||||||
inVentiv Health, Inc., 9.00%, Due 1/15/2018G | 100 | 104 | ||||||
iPayment Holdings, Inc., 7.50%, Due 11/15/2018F | 210 | 126 | ||||||
iPayment, Inc., 10.25%, Due 5/15/2018 | 375 | 289 | ||||||
Isle of Capri Casinos, Inc., | ||||||||
7.75%, Due 3/15/2019 | 150 | 161 | ||||||
8.875%, Due 6/15/2020 | 245 | 261 | ||||||
Jaguar Holding Co. I, 9.375%, Due 10/15/2017F G | 300 | 318 | ||||||
Jaguar Holding Co. II, 9.50%, Due 12/1/2019G | 100 | 112 | ||||||
JC Penney Corp, Inc., 6.875%, Due 10/15/2015 | 775 | 662 | ||||||
Jo-Ann Stores Holdings, Inc., 9.75%, Due 10/15/2019F G | 275 | 285 | ||||||
L Brands, Inc., 5.625%, Due 10/15/2023 | 320 | 327 | ||||||
Landry’s, Inc., 9.375%, Due 5/1/2020G | 400 | 433 | ||||||
LIN Television Corp., | ||||||||
8.375%, Due 4/15/2018 | 170 | 181 | ||||||
6.375%, Due 1/15/2021 | 200 | 204 | ||||||
Marina District Finance Co., Inc., 9.50%, Due 10/15/2015 | 387 | 406 | ||||||
Mediacom LLC, 7.25%, Due 2/15/2022B | 220 | 232 | ||||||
MGM Resorts International, | ||||||||
6.625%, Due 7/15/2015 | 200 | 216 | ||||||
11.375%, Due 3/1/2018 | 300 | 385 | ||||||
8.625%, Due 2/1/2019 | 105 | 123 | ||||||
6.75%, Due 10/1/2020 | 335 | 365 | ||||||
6.625%, Due 12/15/2021 | 615 | 657 | ||||||
Michaels Finco Holdings, Inc., 7.50%, Due 8/1/2018F G | 225 | 232 | ||||||
Midcontinent Communications & Finance Corp., 6.25%, Due 8/1/2021G | 295 | 298 | ||||||
Monitronics Escrow Corp., 9.125%, Due 4/1/2020G | 135 | 143 | ||||||
Monitronics International, Inc., 9.125%, Due 4/1/2020 | 295 | 313 | ||||||
Nara Cable Funding Ltd., 8.875%, Due 12/1/2018G | 600 | 641 | ||||||
National CineMedia LLC, 7.875%, Due 7/15/2021B | 100 | 111 | ||||||
NBTY, Inc., 9.00%, Due 10/1/2018 | 360 | 395 | ||||||
NCL Corp Ltd., 5.00%, Due 2/15/2018G | 195 | 197 | ||||||
Neiman Marcus Group, Inc., 8.75%, Due 10/15/2021F G | 335 | 344 | ||||||
New Look Bondco I PLC, 8.375%, Due 5/14/2018G | 400 | 416 | ||||||
Nexstar Broadcasting, Inc., 6.875%, Due 11/15/2020G | 495 | 517 |
See accompanying notes
22
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Nord Anglia Education UK Holdings PLC, 10.25%, Due 4/1/2017G | $ | 200 | $ | 222 | ||||
Nord Anglia Education, Inc., 8.50%, Due 2/15/2018F G | 200 | 202 | ||||||
NPC International, Inc., 10.50%, Due 1/15/2020 | 350 | 403 | ||||||
OnCure Holdings, Inc., 11.75%, Due 1/15/2017 | 116 | 126 | ||||||
Par Pharmaceutical Cos., Inc., 7.375%, Due 10/15/2020 | 300 | 312 | ||||||
Petco Holdings, Inc., 8.50%, Due 10/15/2017F G | 220 | 224 | ||||||
PHH Corp., 6.375%, Due 8/15/2021 | 275 | 272 | ||||||
Pinnacle Entertainment, Inc., 7.75%, Due 4/1/2022 | 355 | 388 | ||||||
PNK Finance Corp., 6.375%, Due 8/1/2021G | 475 | 499 | ||||||
Radio One, Inc., 6.00%, Due 5/24/2016F | 835 | 845 | ||||||
Radio Systems Corp., 8.375%, Due 11/1/2019G | 200 | 221 | ||||||
Regal Cinemas Corp., 8.625%, Due 7/15/2019 | 400 | 432 | ||||||
Rite Aid Corp., 8.00%, Due 8/15/2020 | 290 | 325 | ||||||
Safway Group Holding LLC, 7.00%, Due 5/15/2018B G | 300 | 311 | ||||||
Serta Simmons Holdings LLC, 8.125%, Due 10/1/2020B G | 260 | 277 | ||||||
Service Corp International, 7.50%, Due 4/1/2027 | 350 | 375 | ||||||
Sirius XM Radio, Inc., 5.25%, Due 8/15/2022G | 425 | 431 | ||||||
Starz LLC, 5.00%, Due 9/15/2019B | 465 | 470 | ||||||
Tenet Healthcare Corp., | ||||||||
8.00%, Due 8/1/2020 | 460 | 501 | ||||||
8.125%, Due 4/1/2022G | 570 | 624 | ||||||
6.875%, Due 11/15/2031 | 250 | 220 | ||||||
TransUnion LLC, 11.375%, Due 6/15/2018B | 100 | 111 | ||||||
United Rentals North America, Inc., | ||||||||
7.375%, Due 5/15/2020 | 125 | 139 | ||||||
7.625%, Due 4/15/2022 | 470 | 526 | ||||||
Universal Hospital Services, Inc., 7.625%, Due 8/15/2020 | 410 | 431 | ||||||
Univision Communications, Inc., | ||||||||
7.875%, Due 11/1/2020G | 750 | 833 | ||||||
6.75%, Due 9/15/2022G | 115 | 125 | ||||||
5.125%, Due 5/15/2023G | 200 | 198 | ||||||
Valeant Pharmaceuticals International, | ||||||||
7.50%, Due 7/15/2021G | 200 | 222 | ||||||
6.75%, Due 8/15/2021G | 450 | 479 | ||||||
Visant Corp., 10.00%, Due 10/1/2017 | 590 | 543 | ||||||
VPI Escrow Corp., 6.375%, Due 10/15/2020G | 920 | 982 | ||||||
WideOpenWest Finance LLC, 10.25%, Due 7/15/2019B | 225 | 249 | ||||||
WMG Acquisition Corp., | ||||||||
11.50%, Due 10/1/2018 | 285 | 330 | ||||||
6.00%, Due 1/15/2021G | 325 | 341 | ||||||
Wok Acquisition Corp., 10.25%, Due 6/30/2020G | 145 | 158 | ||||||
|
| |||||||
54,728 | ||||||||
|
| |||||||
Telecommunications - 10.73% | ||||||||
Avanti Communications Group PLC, 10.00%, Due 10/1/2019G | 300 | 314 | ||||||
Avaya, Inc., | ||||||||
9.00%, Due 4/1/2019G | 450 | 452 | ||||||
10.50%, Due 3/1/2021G | 250 | 218 | ||||||
Brightstar Corp., 9.50%, Due 12/1/2016G | 250 | 275 | ||||||
CenturyLink, Inc., 5.80%, Due 3/15/2022 | 300 | 297 | ||||||
Cincinnati Bell, Inc., | ||||||||
8.75%, Due 3/15/2018 | 865 | 916 | ||||||
8.375%, Due 10/15/2020 | 300 | 320 | ||||||
Clearwire Communications LLC, 12.00%, Due 12/1/2017B G | 208 | 244 | ||||||
CommScope Holding Co. Inc., 6.625%, Due 6/1/2020F G | 200 | 205 | ||||||
CommScope, Inc., 8.25%, Due 1/15/2019G | 294 | 323 | ||||||
Consolidated Communications Finance Co., 10.875%, Due 6/1/2020 | 195 | 226 | ||||||
Cricket Communications, Inc., 7.75%, Due 10/15/2020 | 400 | 457 | ||||||
Crown Castle International Corp., 5.25%, Due 1/15/2023 | 385 | 381 | ||||||
Digicel Group Ltd., 8.25%, Due 9/30/2020G | 500 | 528 | ||||||
Digicel Ltd., 6.00%, Due 4/15/2021G | 200 | 194 | ||||||
eAccess Ltd., 8.25%, Due 4/1/2018G | 300 | 329 | ||||||
EarthLink, Inc., | ||||||||
8.875%, Due 5/15/2019 | 510 | 504 |
See accompanying notes
23
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
7.375%, Due 6/1/2020 | $ | 480 | $ | 476 | ||||
Frontier Communications Corp., | ||||||||
8.50%, Due 4/15/2020 | 400 | 457 | ||||||
8.75%, Due 4/15/2022 | 200 | 229 | ||||||
7.875%, Due 1/15/2027 | 100 | 99 | ||||||
Hughes Satellite Systems Corp., 7.625%, Due 6/15/2021 | 375 | 411 | ||||||
Intelsat Jackson Holdings S.A., | ||||||||
7.25%, Due 10/15/2020 | 550 | 597 | ||||||
7.50%, Due 4/1/2021 | 300 | 327 | ||||||
6.625%, Due 12/15/2022G | 610 | 622 | ||||||
Intelsat Luxembourg S.A., | ||||||||
6.75%, Due 6/1/2018G | 65 | 68 | ||||||
7.75%, Due 6/1/2021G | 410 | 433 | ||||||
8.125%, Due 6/1/2023G | 615 | 650 | ||||||
Level 3 Financing, Inc., | ||||||||
10.00%, Due 2/1/2018 | 70 | 75 | ||||||
8.125%, Due 7/1/2019 | 535 | 590 | ||||||
8.625%, Due 7/15/2020 | 630 | 712 | ||||||
Millicom International Cellular S.A., 6.625%, Due 10/15/2021G | 200 | 206 | ||||||
NII Capital Corp., 7.625%, Due 4/1/2021 | 495 | 287 | ||||||
Nokia OYJ, 6.625%, Due 5/15/2039 | 665 | 655 | ||||||
Oi S.A., 5.75%, Due 2/10/2022G | 425 | 398 | ||||||
Sprint Capital Corp., 8.75%, Due 3/15/2032 | 395 | 428 | ||||||
Sprint Corp., 7.875%, Due 9/15/2023G | 580 | 629 | ||||||
Sprint Nextel Corp., | ||||||||
8.375%, Due 8/15/2017 | 100 | 116 | ||||||
9.00%, Due 11/15/2018G | 500 | 606 | ||||||
7.00%, Due 3/1/2020G | 100 | 111 | ||||||
7.00%, Due 8/15/2020 | 515 | 552 | ||||||
11.50%, Due 11/15/2021 | 980 | 1,275 | ||||||
6.00%, Due 11/15/2022 | 500 | 493 | ||||||
Syniverse Holdings, Inc., 9.125%, Due 1/15/2019 | 290 | 314 | ||||||
T-Mobile USA, Inc., 6.542%, Due 4/28/2020 | 300 | 318 | ||||||
UPCB Finance VI Ltd., 6.875%, Due 1/15/2022G | 650 | 700 | ||||||
VimpelCom Holdings BV, 7.504%, Due 3/1/2022G | 200 | 215 | ||||||
Virgin Media Finance PLC, | ||||||||
4.875%, Due 2/15/2022 | 125 | 106 | ||||||
6.375%, Due 4/15/2023G | 255 | 261 | ||||||
Virgin Media Secured Finance PLC, 5.25%, Due 1/15/2021 | 575 | 583 | ||||||
WaveDivision Escrow LLC, 8.125%, Due 9/1/2020B G | 235 | 247 | ||||||
Wind Acquisition Finance S.A., | ||||||||
11.75%, Due 7/15/2017G | 650 | 691 | ||||||
7.25%, Due 2/15/2018G | 325 | 342 | ||||||
Wind Acquisition Holdings Finance S.A., 12.25%, Due 7/15/2017F G | 626 | 637 | ||||||
Windstream Corp., | ||||||||
7.50%, Due 6/1/2022 | 225 | 236 | ||||||
6.375%, Due 8/1/2023 | 75 | 73 | ||||||
|
| |||||||
22,408 | ||||||||
|
| |||||||
Transportation - 2.39% | ||||||||
Bristow Group, Inc., 6.25%, Due 10/15/2022 | 300 | 315 | ||||||
CEVA Group PLC, 4.00%, Due 5/1/2018G | 100 | 87 | ||||||
CHC Helicopter S.A., | ||||||||
9.25%, Due 10/15/2020 | 500 | 541 | ||||||
9.375%, Due 6/1/2021 | 100 | 101 | ||||||
Florida East Coast Holdings Corp., 10.50%, Due 8/1/2017F | 290 | 302 | ||||||
Florida East Coast Railway Corp., 8.125%, Due 2/1/2017 | 300 | 315 | ||||||
HD Supply, Inc., | ||||||||
7.50%, Due 7/15/2020G | 590 | 623 | ||||||
11.50%, Due 7/15/2020 | 185 | 223 | ||||||
Horizon Lines LLC, | ||||||||
11.00%, Due 10/15/2016B | 183 | 183 | ||||||
13.00%, Due 10/15/2016B F | 231 | 208 |
See accompanying notes
24
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Martin Midstream Partners LP, | ||||||||
8.875%, Due 4/1/2018H | $ | 437 | $ | 464 | ||||
7.25%, Due 2/15/2021H | 335 | 342 | ||||||
Quality Distribution LLC, 9.875%, Due 11/1/2018B | 225 | 248 | ||||||
Swift Services Holdings, Inc., 10.00%, Due 11/15/2018 | 325 | 364 | ||||||
Syncreon Group BV, 8.625%, Due 11/1/2021G | 400 | 405 | ||||||
Watco Cos. LLC, 6.375%, Due 4/1/2023B G | 270 | 267 | ||||||
|
| |||||||
4,988 | ||||||||
|
| |||||||
Utilities - 2.99% | ||||||||
AES Corp., 9.75%, Due 4/15/2016 | 210 | 248 | ||||||
Calpine Corp., | ||||||||
7.875%, Due 7/31/2020G | 90 | 98 | ||||||
7.50%, Due 2/15/2021G | 650 | 702 | ||||||
6.00%, Due 1/15/2022G | 100 | 104 | ||||||
5.875%, Due 1/15/2024G | 100 | 100 | ||||||
Elwood Energy LLC, 8.159%, Due 7/5/2026B | 257 | 272 | ||||||
Enel S.p.A., 8.75%, Due 9/24/2073G | 230 | 249 | ||||||
Energy Future Intermediate Holding Co. LLC, 10.00%, Due 12/1/2020B | 575 | 604 | ||||||
InterGen N.V., 7.00%, Due 6/30/2023G | 400 | 413 | ||||||
NRG Energy, Inc., | ||||||||
7.625%, Due 1/15/2018 | 450 | 511 | ||||||
7.875%, Due 5/15/2021 | 635 | 702 | ||||||
Sabine Pass LNG LP, | ||||||||
7.50%, Due 11/30/2016H | 1,205 | 1,345 | ||||||
6.50%, Due 11/1/2020H | 380 | 397 | ||||||
Texas Competitive Electric Holdings Co. LLC, 11.50%, Due 10/1/2020B G | 700 | 499 | ||||||
|
| |||||||
6,244 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $189,575) | 194,001 | |||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS - 0.07% (Cost $158) | ||||||||
Energy - 0.07% | ||||||||
Petrobras Global Finance BV, 4.375%, Due 5/20/2023 | 160 | 148 | ||||||
|
| |||||||
Shares | ||||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 4.28% (Cost $8,940) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 8,940,111 | 8,940 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 98.31% (Cost $202,685) | 205,252 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 1.69% |
| 3,538 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 208,790 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Valued at fair value pursuant to procedures approved by the Board of Trustees. |
B | Limited Liability Company. |
C | Non-income producing security. |
D | Call. |
E | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
F | Payment in Kind. See Note 4 in the Notes to Financial Statements. |
G | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $74,644 or 35.75% of net assets. The Fund has no right to demand registration of these securities. |
J | Step Up/Down. |
H | Limited Partnership. |
I | Non-voting participating shares. |
J | Step Up/Down - A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. |
K | In default. |
See accompanying notes
25
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
COMMON STOCKS - 3.33% (Cost $3,829) | ||||||||
CONSUMER DISCRETIONARY- 0.27% | ||||||||
Household Durables - 0.27% | ||||||||
Lennar Corp., Class A | 10,100 | $ | 359 | |||||
|
| |||||||
ENERGY- 0.28% | ||||||||
Oil & Gas - 0.28% | ||||||||
Continental Resources, Inc.A | 3,240 | 369 | ||||||
|
| |||||||
FINANCIALS- 1.05% | ||||||||
Diversified Financials - 1.05% | ||||||||
Citigroup, Inc. | 7,145 | 349 | ||||||
Franklin Resources, Inc. | 6,855 | 369 | ||||||
JPMorgan Chase & Co. | 6,545 | 337 | ||||||
T. Rowe Price Group, Inc. | 4,525 | 350 | ||||||
|
| |||||||
Total Financials | 1,405 | |||||||
|
| |||||||
HEALTH CARE- 0.26% | ||||||||
Pharmaceuticals - 0.26% | ||||||||
Mylan, Inc.A | 9,310 | 353 | ||||||
|
| |||||||
INDUSTRIALS- 0.26% | ||||||||
Construction & Engineering - 0.26% | ||||||||
Chicago Bridge & Iron Co. NV | 4,700 | 348 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY- 1.21% | ||||||||
Electronic Equipment & Instruments - 0.25% | ||||||||
Eaton Corp PLC | 4,770 | 337 | ||||||
|
| |||||||
Internet Software & Services - 0.26% | ||||||||
eBay, Inc.A | 6,515 | 343 | ||||||
|
| |||||||
Semiconductor Equipment & Products - 0.52% | ||||||||
Lam Research Corp.A | 6,140 | 333 | ||||||
QUALCOMM, Inc. | 5,180 | 360 | ||||||
|
| |||||||
693 | ||||||||
|
| |||||||
Software - 0.18% | ||||||||
TIBCO Software, Inc.A | 9,625 | 236 | ||||||
|
| |||||||
Total Common Stocks (Cost $3,829) | 4,443 | |||||||
|
| |||||||
PREFERRED STOCKS - 4.29% (Cost $5,042) | ||||||||
ENERGY- 0.69% | ||||||||
Oil & Gas - 0.69% | ||||||||
Chesapeake Energy Corp., 5.75%, Due 12/31/2049B | 410 | 480 | ||||||
Chesapeake Energy Corp., 5.75%, Due 12/31/2049B C | 369 | 437 | ||||||
|
| |||||||
Total Energy | 917 | |||||||
|
| |||||||
FINANCE- 1.62% | ||||||||
Banks - 0.26% | ||||||||
New York Community Capital Trust V, 6.00%, Due 11/01/2051 | 7,070 | 345 | ||||||
|
| |||||||
Insurance - 0.62% | ||||||||
Maiden Holdings Ltd., 7.25%, Due 9/15/2016 | 3,260 | 153 | ||||||
MetLife, Inc., 5.00%, Due 3/26/2014 | 23,730 | 681 | ||||||
|
| |||||||
834 | ||||||||
|
| |||||||
Other Finance - 0.74% | ||||||||
AMG Capital Trust I, 5.10%, Due 4/15/2036 | 14,880 | 1,000 | ||||||
|
| |||||||
Total Finance | 1,834 | |||||||
|
| |||||||
MANUFACTURING- 1.06% | ||||||||
Aerospace/Defense - 0.64% | ||||||||
United Technologies Corp., 7.50%, Due 8/1/2015 | 13,620 | 863 | ||||||
|
|
See accompanying notes
26
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
Machinery - 0.29% | ||||||||
Stanley Black & Decker, Inc., 4.75%, Due 11/17/2015 | 3,010 | $ | 384 | |||||
|
| |||||||
Metals/Mining - 0.13% | ||||||||
Cliffs Natural Resources, Inc., 7.00%, Due 2/1/2016 | 7,500 | 170 | ||||||
|
| |||||||
Total Manufacturing | 1,417 | |||||||
|
| |||||||
TELECOMMUNICATIONS- 0.26% | ||||||||
Telecom - 0.26% | ||||||||
Crown Castle International Corp., 4.50%, Due 11/01/2016 | 3,340 | 342 | ||||||
|
| |||||||
TRANSPORTATION- 0.34% | ||||||||
Other Transportation - 0.34% | ||||||||
Genesee & Wyoming, Inc., 5.00%, Due 10/01/2015 | 3,360 | 449 | ||||||
|
| |||||||
UTILITIES- 0.32% | ||||||||
Electric - 0.32% | ||||||||
NextEra Energy, Inc., 5.60%, Due 6/1/2015 | 7,280 | 420 | ||||||
|
| |||||||
Total Preferred Stocks (Cost $5,042) | 5,724 | |||||||
|
| |||||||
Par Amount | ||||||||
(000’s) | ||||||||
CONVERTIBLE OBLIGATIONS - 16.56% | ||||||||
Consumer - 0.18% | ||||||||
Jarden Corp., 1.50%, Due 6/15/2019 B | $ | 205 | 234 | |||||
|
| |||||||
Energy - 0.93% | ||||||||
Hornbeck Offshore Services, Inc., 1.625%, Due 11/15/2026 | 390 | 462 | ||||||
Newpark Resources, Inc., 4.00%, Due 10/1/2017 | 360 | 502 | ||||||
SEACOR Holdings, Inc., 2.50%, Due 12/15/2027B | 220 | 283 | ||||||
|
| |||||||
1,247 | ||||||||
|
| |||||||
Finance - 1.81% | ||||||||
Ares Capital Corp., 4.75%, Due 1/15/2018B | 400 | 411 | ||||||
Leucadia National Corp., 3.75%, Due 4/15/2014 | 250 | 336 | ||||||
Molina Healthcare, Inc., 1.125%, Due 1/15/2020B | 435 | 443 | ||||||
Portfolio Recovery Associates, Inc., 3.00%, Due 8/1/2020B | 90 | 105 | ||||||
Walter Investment Management Corp., 4.50%, Due 11/1/2019 | 350 | 364 | ||||||
WellPoint, Inc., 2.75%, Due 10/15/2042B | 585 | 760 | ||||||
|
| |||||||
2,419 | ||||||||
|
| |||||||
Manufacturing - 6.05% | ||||||||
Cemex SAB de CV, 4.875%, Due 3/15/2015 | 300 | 347 | ||||||
Cornerstone OnDemand, Inc., 1.50%, Due 7/1/2018B | 110 | 125 | ||||||
Danaher Corp., 0.01%, Due 1/22/2021 | 210 | 440 | ||||||
Electronic Arts, Inc., 0.75%, Due 7/15/2016 | 625 | 693 | ||||||
Iconix Brand Group, Inc., 1.50%, Due 3/15/2018B | 530 | 680 | ||||||
KB Home, 1.375%, Due 2/1/2019 | 200 | 198 | ||||||
Lam Research Corp., 0.50%, Due 5/15/2016 | 290 | 338 | ||||||
Linear Technology Corp., 3.00%, Due 5/1/2027 | 400 | 428 | ||||||
Medidata Solutions, Inc., 1.00%, Due 8/1/2018B | 170 | 206 | ||||||
Micron Technology, Inc., 1.875%, Due 6/1/2014 | 260 | 333 | ||||||
NetSuite, Inc., 0.25%, Due 6/1/2018B | 210 | 231 | ||||||
Nuance Communications, Inc., 2.75%, Due 8/15/2027 | 220 | 231 | ||||||
RTI International Metals, Inc., 3.00%, Due 12/1/2015 | 300 | 347 | ||||||
Salesforce.com, Inc., 0.25%, Due 4/1/2018B | 745 | 814 | ||||||
SanDisk Corp., 0.50%, Due 10/15/2020B | 1,020 | 1,039 | ||||||
Standard Pacific Corp., 1.25%, Due 8/1/2032 | 300 | 373 | ||||||
Take-Two Interactive Software, Inc., | ||||||||
1.75%, Due 12/1/2016 | 125 | 149 | ||||||
1.00%, Due 7/1/2018 | 160 | 177 | ||||||
Trinity Industries, Inc., 3.875%, Due 6/1/2036 | 525 | 681 | ||||||
Workday, Inc., 0.75%, Due 7/15/2018B | 210 | 237 | ||||||
|
| |||||||
8,067 | ||||||||
|
|
See accompanying notes
27
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Service - 7.14% | ||||||||
BioMarin Pharmaceutical, Inc., | ||||||||
0.75%, Due 10/15/2018 | $ | 93 | $ | 96 | ||||
1.50%, Due 10/15/2020 | 77 | 79 | ||||||
Chemed Corp., 1.875%, Due 5/15/2014 | 420 | 428 | ||||||
Concur Technologies, Inc., 0.50%, Due 6/15/2018B | 210 | 248 | ||||||
Ctrip.com International Ltd., 1.25%, Due 10/15/2018B | 325 | 338 | ||||||
Cubist Pharmaceuticals, Inc., | ||||||||
1.125%, Due 9/1/2018B | 360 | 389 | ||||||
1.875%, Due 9/1/2020B | 90 | 97 | ||||||
Dealertrack Technologies, Inc., 1.50%, Due 3/15/2017 | 325 | 386 | ||||||
Gilead Sciences, Inc., 1.625%, Due 5/1/2016 | 385 | 1,205 | ||||||
Healthways, Inc., 1.50%, Due 7/1/2018B | 28 | 22 | ||||||
Hologic, Inc., 2.00%, Due 12/15/2037D | 580 | 681 | ||||||
Illumina, Inc., 0.25%, Due 3/15/2016B | 560 | 697 | ||||||
Integra LifeSciences Holdings Corp., 1.625%, Due 12/15/2016 | 340 | 359 | ||||||
International Game Technology, 3.25%, Due 5/1/2014 | 615 | 680 | ||||||
Liberty Interactive LLC, 0.75%, Due 3/30/2043B E | 360 | 430 | ||||||
Merrimack Pharmaceuticals, Inc., 4.50%, Due 7/15/2020 | 75 | 57 | ||||||
MGM Resorts International, 4.25%, Due 4/15/2015 | 529 | 648 | ||||||
Omnicom Group, Inc., 0.01%, Due 7/31/2032 | 570 | 726 | ||||||
priceline.com, Inc., 1.00%, Due 3/15/2018 | 515 | 682 | ||||||
Salix Pharmaceuticals Ltd., 1.50%, Due 3/15/2019 | 525 | 687 | ||||||
Shutterfly, Inc., 0.25%, Due 5/15/2018B | 320 | 340 | ||||||
TIBCO Software, Inc., 2.25%, Due 5/1/2032 | 235 | 238 | ||||||
|
| |||||||
9,513 | ||||||||
|
| |||||||
Telecommunications - 0.45% | ||||||||
Ixia, 3.00%, Due 12/15/2015 | 300 | 336 | ||||||
JDS Uniphase Corp., 0.625%, Due 8/15/2033B | 257 | 270 | ||||||
|
| |||||||
606 | ||||||||
|
| |||||||
Total Convertible Obligations (Cost $19,504) | 22,086 | |||||||
|
| |||||||
CORPORATE OBLIGATIONS - 33.59% | ||||||||
Consumer - 0.95% | ||||||||
Altria Group, Inc., 4.75%, Due 5/5/2021 | 300 | 323 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
5.00%, Due 4/15/2020 | 290 | 329 | ||||||
8.00%, Due 11/15/2039 | 100 | 148 | ||||||
Kellogg Co., 1.875%, Due 11/17/2016 | 150 | 154 | ||||||
SABMiller Holdings, Inc., 4.95%, Due 1/15/2042B | 300 | 307 | ||||||
|
| |||||||
1,261 | ||||||||
|
| |||||||
Energy - 1.31% | ||||||||
Apache Corp., 5.10%, Due 9/1/2040 | 130 | 133 | ||||||
BP Capital Markets PLC, 3.20%, Due 3/11/2016 | 280 | 294 | ||||||
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 | 275 | 316 | ||||||
Devon Energy Corp., 4.75%, Due 5/15/2042 | 300 | 284 | ||||||
EOG Resources, Inc., 2.50%, Due 2/1/2016 | 250 | 259 | ||||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 300 | 302 | ||||||
6.10%, Due 6/1/2040 | 140 | 162 | ||||||
|
| |||||||
1,750 | ||||||||
|
| |||||||
Finance - 17.45% | ||||||||
AEGON Funding Co. LLC, 5.75%, Due 12/15/2020E | 250 | 285 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 775 | 930 | ||||||
4.875%, Due 6/1/2022 | 400 | 438 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 600 | 695 | ||||||
7.625%, Due 6/1/2019 | 1,250 | 1,559 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 250 | 264 | ||||||
Barclays Bank PLC, | ||||||||
3.90%, Due 4/7/2015 | 290 | 303 | ||||||
6.75%, Due 5/22/2019 | 650 | 786 | ||||||
Bear Stearns Cos. LLC, 7.25%, Due 2/1/2018E | 925 | 1,116 | ||||||
BNP Paribas S.A., 3.60%, Due 2/23/2016 | 280 | 296 |
See accompanying notes
28
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Citigroup, Inc., | ||||||||
1.178%, Due 4/1/2014D | $ | 6 | $ | 6 | ||||
0.546%, Due 11/5/2014D | 300 | 300 | ||||||
8.50%, Due 5/22/2019 | 1,250 | 1,618 | ||||||
Deutsche Bank AG, 3.875%, Due 8/18/2014 | 275 | 282 | ||||||
Fifth Third Bancorp, 3.625%, Due 1/25/2016 | 275 | 290 | ||||||
General Electric Capital Corp., | ||||||||
0.443%, Due 1/8/2016D | 1,145 | 1,142 | ||||||
5.625%, Due 5/1/2018 | 250 | 290 | ||||||
6.00%, Due 8/7/2019 | 300 | 355 | ||||||
5.50%, Due 1/8/2020 | 650 | 752 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 475 | 519 | ||||||
6.25%, Due 9/1/2017 | 550 | 636 | ||||||
6.00%, Due 6/15/2020 | 835 | 967 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015B | 300 | 310 | ||||||
3.75%, Due 3/7/2017B | 1,100 | 1,164 | ||||||
JPMorgan Chase & Co., | ||||||||
0.584%, Due 6/13/2016D | 375 | 371 | ||||||
5.50%, Due 10/15/2040 | 350 | 381 | ||||||
Lincoln National Corp., 4.75%, Due 2/15/2014 | 105 | 106 | ||||||
Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015B | 300 | 312 | ||||||
Merrill Lynch & Co. Inc., 6.11%, Due 1/29/2037 | 275 | 294 | ||||||
MetLife, Inc., 6.375%, Due 6/15/2034 | 400 | 490 | ||||||
Morgan Stanley, | ||||||||
0.724%, Due 10/15/2015D | 900 | 896 | ||||||
7.30%, Due 5/13/2019 | 530 | 647 | ||||||
5.625%, Due 9/23/2019 | 450 | 513 | ||||||
National Australia Bank Ltd., 4.375%, Due 12/10/2020B | 250 | 271 | ||||||
Nordea Bank AB, 4.875%, Due 1/27/2020B | 250 | 277 | ||||||
PNC Funding Corp., 4.375%, Due 8/11/2020 | 260 | 283 | ||||||
Prudential Financial, Inc., 7.375%, Due 6/15/2019 | 250 | 311 | ||||||
Simon Property Group LP, 10.35%, Due 4/1/2019F G | 300 | 412 | ||||||
Svenska Handelsbanken AB, 2.875%, Due 4/4/2017 | 650 | 679 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 552 | 640 | ||||||
UnitedHealth Group, Inc., 3.875%, Due 10/15/2020 | 250 | 265 | ||||||
Wachovia Corp., 0.614%, Due 10/15/2016D | 850 | 840 | ||||||
|
| |||||||
23,291 | ||||||||
|
| |||||||
Manufacturing - 4.62% | ||||||||
American Honda Finance Corp., | ||||||||
2.125%, Due 2/28/2017B | 500 | 511 | ||||||
3.875%, Due 9/21/2020B | 250 | 264 | ||||||
Caterpillar Financial Services Corp., 2.75%, Due 6/24/2015 | 280 | 290 | ||||||
Daimler Finance North America LLC, | ||||||||
3.00%, Due 3/28/2016B E | 150 | 156 | ||||||
0.945%, Due 8/1/2016B E | 500 | 501 | ||||||
2.95%, Due 1/11/2017B E | 300 | 312 | ||||||
2.40%, Due 4/10/2017B E | 450 | 458 | ||||||
Dow Chemical Co., 4.125%, Due 11/15/2021 | 300 | 310 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017E | 300 | 324 | ||||||
5.875%, Due 8/2/2021E | 350 | 401 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 250 | 254 | ||||||
4.05%, Due 9/15/2022 | 350 | 341 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 300 | 331 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 150 | 169 | ||||||
United Technologies Corp., 6.125%, Due 7/15/2038 | 450 | 550 | ||||||
Volkswagen International Finance N.V., 1.625%, Due 3/22/2015B | 650 | 658 | ||||||
Xerox Corp., | ||||||||
8.25%, Due 5/15/2014 | 150 | 156 | ||||||
2.95%, Due 3/15/2017 | 175 | 180 | ||||||
|
| |||||||
6,166 | ||||||||
|
|
See accompanying notes
29
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Service - 3.27% | ||||||||
AbbVie, Inc., 2.90%, Due 11/6/2022 | $ | 300 | $ | 286 | ||||
CBS Corp., 3.375%, Due 3/1/2022 | 500 | 489 | ||||||
Comcast Corp., 6.55%, Due 7/1/2039 | 400 | 493 | ||||||
CVS Caremark Corp., 3.25%, Due 5/18/2015 | 140 | 146 | ||||||
McKesson Corp., 3.25%, Due 3/1/2016 | 140 | 147 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 125 | 134 | ||||||
Thomson Reuters Corp., 4.70%, Due 10/15/2019 | 125 | 138 | ||||||
Time Warner Cable, Inc., 5.85%, Due 5/1/2017 | 650 | 715 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 450 | 498 | ||||||
4.75%, Due 3/29/2021 | 325 | 353 | ||||||
Viacom, Inc., 4.50%, Due 2/27/2042 | 550 | 481 | ||||||
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 | 350 | 475 | ||||||
|
| |||||||
4,355 | ||||||||
|
| |||||||
Telecommunications - 2.80% | ||||||||
America Movil SAB de CV, 6.375%, Due 3/1/2035 | 275 | 301 | ||||||
AT&T, Inc., 4.35%, Due 6/15/2045 | 473 | 391 | ||||||
Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042B | 850 | 820 | ||||||
Orange S.A., 2.125%, Due 9/16/2015 | 125 | 127 | ||||||
Verizon Communications, Inc., | ||||||||
5.50%, Due 4/1/2017 | 250 | 282 | ||||||
4.60%, Due 4/1/2021 | 340 | 365 | ||||||
6.90%, Due 4/15/2038 | 325 | 385 | ||||||
6.55%, Due 9/15/2043 | 550 | 638 | ||||||
Vodafone Group PLC, 6.15%, Due 2/27/2037 | 375 | 420 | ||||||
|
| |||||||
3,729 | ||||||||
|
| |||||||
Transportation - 1.05% | ||||||||
Burlington Northern Santa Fe LLC, | ||||||||
5.75%, Due 5/1/2040E | 140 | 155 | ||||||
5.15%, Due 9/1/2043E | 300 | 309 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 250 | 289 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 250 | 268 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 325 | 376 | ||||||
|
| |||||||
1,397 | ||||||||
|
| |||||||
Utilities - 2.14% | ||||||||
Commonwealth Edison Co., 4.00%, Due 8/1/2020 | 135 | 145 | ||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 300 | 339 | ||||||
EDF S.A., 4.60%, Due 1/27/2020B | 300 | 331 | ||||||
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 | 500 | 567 | ||||||
Pacific Gas & Electric Co., 6.25%, Due 12/1/2013 | 175 | 176 | ||||||
Progress Energy, Inc., 4.875%, Due 12/1/2019 | 350 | 389 | ||||||
Southern Co., 1.95%, Due 9/1/2016 | 310 | 316 | ||||||
Southwestern Electric Power Co., 3.55%, Due 2/15/2022 | 600 | 589 | ||||||
|
| |||||||
2,852 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $41,738) | 44,801 | |||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS - 0.41% | ||||||||
Energy - 0.41% | ||||||||
Petrobras International Finance Co., 3.875%, Due 1/27/2016 | 200 | 207 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 300 | 337 | ||||||
|
| |||||||
Total Foreign Government Obligations (Cost $497) | 544 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS - 5.58% | ||||||||
Ally Master Owner Trust, 1.21%, Due 6/15/2017, 2012 3 A2 | 1,800 | 1,811 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.50%, Due 9/15/2018, 2013-5 A1 | 1,200 | 1,213 | ||||||
National Credit Union Administration, | ||||||||
0.574%, Due 3/11/2020, 2011 R3 1AD | 1,611 | 1,612 | ||||||
0.624%, Due 10/7/2020, 2010 R1 1AD | 1,701 | 1,709 | ||||||
Nissan Master Owner Trust Receivables, 0.644%, Due 5/15/2017, 2012 A AD | 1,100 | 1,102 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $7,420) | 7,447 | |||||||
|
|
See accompanying notes
30
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 12.02% | ||||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | $ | 175 | $ | 176 | ||||
5.633%, Due 4/10/2049, 2007-2 A2 | 54 | 55 | ||||||
GNR Project Loans, | ||||||||
1.692%, Due 11/16/2035, 2010-148 A | 134 | 135 | ||||||
2.21%, Due 12/16/2035, 2011-31 A | 1,738 | 1,752 | ||||||
2.989%, Due 3/16/2039, 2010-71 AC | 174 | 176 | ||||||
2.17%, Due 4/16/2041, 2012 44 A | 2,910 | 2,922 | ||||||
2.70%, Due 4/16/2043, 2011-109 AB | 2,202 | 2,254 | ||||||
2.543%, Due 9/16/2044, 2011-96 AC | 1,715 | 1,747 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,900 | 3,014 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.849%, Due 12/10/2043, 2010-C2 A1B | 603 | 638 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2B | 750 | 789 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 78 | 78 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1B | 510 | 530 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3B | 650 | 709 | ||||||
5.706%, Due 2/12/2049, 2007-CB19 A4 | 400 | 448 | ||||||
5.629%, Due 2/12/2051, 2007-CB20 A2 | 36 | 36 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4 | 450 | 500 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.728%, Due 6/15/2049, 2007-C32 A2 | 68 | 70 | ||||||
|
| |||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $15,753) | 16,029 | |||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.90% | ||||||||
Federal Home Loan Mortgage Corporation - 4.68% | ||||||||
5.00%, Due 2/1/2021 | 160 | 170 | ||||||
4.50%, Due 4/1/2021 | 164 | 173 | ||||||
5.00%, Due 9/1/2035 | 414 | 447 | ||||||
5.50%, Due 4/1/2037 | 108 | 116 | ||||||
5.00%, Due 3/1/2038 | 194 | 209 | ||||||
5.50%, Due 5/1/2038 | 164 | 177 | ||||||
0.574%, Due 12/15/2040 D | 579 | 580 | ||||||
4.00%, Due 1/1/2041 | 1,006 | 1,056 | ||||||
4.50%, Due 2/1/2041 | 937 | 1,000 | ||||||
3.50%, Due 6/1/2042 | 2,267 | 2,320 | ||||||
|
| |||||||
6,248 | ||||||||
|
| |||||||
Federal National Mortgage Association - 3.46% | ||||||||
3.50%, Due 1/1/2026 | 233 | 247 | ||||||
6.50%, Due 7/1/2032 | 104 | 116 | ||||||
5.50%, Due 6/1/2033 | 164 | 180 | ||||||
4.50%, Due 9/1/2034 | 89 | 95 | ||||||
5.50%, Due 12/1/2035 | 175 | 191 | ||||||
5.00%, Due 2/1/2036 | 141 | 153 | ||||||
5.50%, Due 4/1/2036 | 243 | 265 | ||||||
5.50%, Due 2/1/2037 | 158 | 172 | ||||||
6.00%, Due 9/1/2037 | 97 | 106 | ||||||
6.00%, Due 1/1/2038 | 144 | 157 | ||||||
4.50%, Due 1/1/2040 | 637 | 682 | ||||||
4.00%, Due 9/1/2040 | 483 | 509 | ||||||
4.00%, Due 1/1/2041 | 1,649 | 1,737 | ||||||
|
| |||||||
4,610 | ||||||||
|
| |||||||
Government National Mortgage Association - 0.76% | ||||||||
6.00%, Due 2/15/2033 | 310 | 351 | ||||||
5.50%, Due 4/15/2033 | 357 | 394 | ||||||
5.00%, Due 5/15/2033 | 244 | 268 | ||||||
|
| |||||||
1,013 | ||||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $11,364) | 11,871 | |||||||
|
|
See accompanying notes
31
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
U.S. TREASURY OBLIGATIONS—13.61% | ||||||||
2.50%, Due 3/31/2015 | $ | 500 | $ | 516 | ||||
0.25%, Due 12/15/2015 | 1,000 | 998 | ||||||
1.50%, Due 6/30/2016 | 1,000 | 1,027 | ||||||
3.125%, Due 10/31/2016 | 1,000 | 1,075 | ||||||
0.875%, Due 1/31/2017 | 3,000 | 3,016 | ||||||
0.75%, Due 12/31/2017 | 1,000 | 988 | ||||||
1.50%, Due 8/31/2018 | 3,000 | 3,033 | ||||||
1.125%, Due 5/31/2019 | 3,000 | 2,936 | ||||||
1.25%, Due 2/29/2020 | 1,000 | 969 | ||||||
2.00%, Due 2/15/2022 | 1,000 | 980 | ||||||
6.25%, Due 8/15/2023 | 800 | 1,064 | ||||||
6.875%, Due 8/15/2025 | 250 | 354 | ||||||
5.25%, Due 11/15/2028 | 550 | 693 | ||||||
4.75%, Due 2/15/2037 | 420 | 506 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $17,866) | 18,155 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 1.10% (Cost $1,471) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 1,470,560 | 1,471 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.39% (Cost $124,484) | 132,571 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.61% |
| 819 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 133,390 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Non-income producing security. |
B | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $18,634 or 13.97% of net assets. The Fund has no right to demand registration of these securities. |
C | Non-voting participating shares. |
D | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
E | Limited Liability Company. |
F | Limited Partnership. |
G | REIT – Real Estate Investment Trust. |
See accompanying notes
32
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
CORPORATE OBLIGATIONS - 42.96% | ||||||||
Consumer - 1.02% | ||||||||
Altria Group, Inc., 4.75%, Due 5/5/2021 | $ | 390 | $ | 420 | ||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
5.00%, Due 4/15/2020 | 380 | 432 | ||||||
8.00%, Due 11/15/2039 | 175 | 258 | ||||||
ConAgra Foods, Inc., 3.20%, Due 1/25/2023 | 420 | 401 | ||||||
Diageo Capital PLC, 1.50%, Due 5/11/2017 | 1,075 | 1,080 | ||||||
Kellogg Co., 1.875%, Due 11/17/2016 | 200 | 205 | ||||||
Kraft Foods Group, Inc., 1.625%, Due 6/4/2015 | 275 | 279 | ||||||
SABMiller Holdings, Inc., 4.95%, Due 1/15/2042A | 400 | 409 | ||||||
|
| |||||||
3,484 | ||||||||
|
| |||||||
Energy - 3.89% | ||||||||
Apache Corp., 5.10%, Due 9/1/2040 | 200 | 204 | ||||||
BP Capital Markets PLC, | ||||||||
3.20%, Due 3/11/2016 | 400 | 421 | ||||||
4.50%, Due 10/1/2020 | 480 | 526 | ||||||
2.50%, Due 11/6/2022 | 665 | 615 | ||||||
Cameron International Corp., 6.375%, Due 7/15/2018 | 480 | 566 | ||||||
Canadian Natural Resources Ltd., | ||||||||
3.45%, Due 11/15/2021 | 550 | 553 | ||||||
6.25%, Due 3/15/2038 | 360 | 414 | ||||||
ConocoPhillips, 6.65%, Due 7/15/2018 | 825 | 996 | ||||||
Devon Energy Corp., 4.75%, Due 5/15/2042 | 400 | 378 | ||||||
Energy Transfer Partners LP, | ||||||||
8.50%, Due 4/15/2014B | 485 | 501 | ||||||
9.00%, Due 4/15/2019B | 410 | 525 | ||||||
Enterprise Products Operating LLC, 6.125%, Due 10/15/2039C | 390 | 437 | ||||||
EOG Resources, Inc., 2.50%, Due 2/1/2016 | 425 | 441 | ||||||
Halliburton Co., 3.25%, Due 11/15/2021 | 670 | 675 | ||||||
Husky Energy, Inc., 3.95%, Due 4/15/2022 | 690 | 703 | ||||||
Marathon Oil Corp., 6.00%, Due 10/1/2017 | 475 | 547 | ||||||
Phillips 66, | ||||||||
1.95%, Due 3/5/2015 | 355 | 361 | ||||||
4.30%, Due 4/1/2022 | 435 | 452 | ||||||
Pride International, Inc., 6.875%, Due 8/15/2020 | 295 | 354 | ||||||
Shell International Finance BV, 0.625%, Due 12/4/2015 | 730 | 730 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.668%, Due 8/15/2014C | 320 | 332 | ||||||
5.65%, Due 3/1/2020C | 595 | 652 | ||||||
Spectra Energy Partners LP, 4.60%, Due 6/15/2021B | 235 | 248 | ||||||
The Williams Cos., Inc., 3.70%, Due 1/15/2023 | 225 | 207 | ||||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 400 | 403 | ||||||
7.625%, Due 1/15/2039 | 395 | 535 | ||||||
6.10%, Due 6/1/2040 | 290 | 336 | ||||||
Valero Energy Corp., 9.375%, Due 3/15/2019 | 170 | 222 | ||||||
|
| |||||||
13,334 | ||||||||
|
| |||||||
Finance - 18.96% | ||||||||
AEGON Funding Co. LLC, 5.75%, Due 12/15/2020C | 400 | 456 | ||||||
American Express Co., 4.05%, Due 12/3/2042 | 438 | 392 | ||||||
American Express Credit Corp., | ||||||||
1.75%, Due 6/12/2015 | 640 | 651 | �� | |||||
1.30%, Due 7/29/2016 | 455 | 459 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 800 | 960 | ||||||
4.875%, Due 6/1/2022 | 1,000 | 1,095 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 700 | 811 | ||||||
2.60%, Due 1/15/2019 | 520 | 524 | ||||||
7.625%, Due 6/1/2019 | 1,695 | 2,113 | ||||||
5.70%, Due 1/24/2022 | 2,000 | 2,296 |
See accompanying notes
33
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Bank of New York Mellon Corp., 2.30%, Due 7/28/2016 | $ | 800 | $ | 830 | ||||
Bank of Nova Scotia, 0.75%, Due 10/9/2015 | 540 | 541 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 500 | 528 | ||||||
Barclays Bank PLC, | ||||||||
3.90%, Due 4/7/2015 | 380 | 397 | ||||||
6.75%, Due 5/22/2019 | 650 | 786 | ||||||
Bear Stearns Cos. LLC, 7.25%, Due 2/1/2018C | 2,845 | 3,430 | ||||||
Berkshire Hathaway Finance Corp., 0.95%, Due 8/15/2016 | 450 | 451 | ||||||
BNP Paribas S.A., 3.60%, Due 2/23/2016 | 400 | 423 | ||||||
Boston Properties LP, 3.125%, Due 9/1/2023B | 410 | 384 | ||||||
Branch Banking & Trust Co., 1.45%, Due 10/3/2016 | 675 | 683 | ||||||
Canadian Imperial Bank of Commerce, 2.35%, Due 12/11/2015 | 850 | 878 | ||||||
Capital One Financial Corp., 2.15%, Due 3/23/2015 | 635 | 646 | ||||||
Citigroup, Inc., | ||||||||
1.178%, Due 4/1/2014D | 8 | 8 | ||||||
0.546%, Due 11/5/2014D | 380 | 380 | ||||||
1.70%, Due 7/25/2016 | 465 | 470 | ||||||
4.45%, Due 1/10/2017 | 1,000 | 1,087 | ||||||
8.50%, Due 5/22/2019 | 2,475 | 3,202 | ||||||
5.875%, Due 1/30/2042 | 500 | 574 | ||||||
CNA Financial Corp., 7.35%, Due 11/15/2019 | 480 | 592 | ||||||
Deutsche Bank AG, 3.875%, Due 8/18/2014 | 400 | 411 | ||||||
ERP Operating LP, 3.00%, Due 4/15/2023B | 290 | 275 | ||||||
Fifth Third Bancorp, 3.625%, Due 1/25/2016 | 400 | 422 | ||||||
General Electric Capital Corp., | ||||||||
0.443%, Due 1/8/2016D | 1,300 | 1,297 | ||||||
5.625%, Due 5/1/2018 | 375 | 435 | ||||||
6.00%, Due 8/7/2019 | 350 | 414 | ||||||
5.50%, Due 1/8/2020 | 800 | 926 | ||||||
5.30%, Due 2/11/2021 | 250 | 278 | ||||||
3.15%, Due 9/7/2022 | 755 | 739 | ||||||
5.875%, Due 1/14/2038 | 365 | 412 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 800 | 874 | ||||||
6.25%, Due 9/1/2017 | 800 | 925 | ||||||
5.95%, Due 1/18/2018 | 665 | 763 | ||||||
6.00%, Due 6/15/2020 | 990 | 1,146 | ||||||
5.75%, Due 1/24/2022 | 500 | 567 | ||||||
HCP, Inc., 5.375%, Due 2/1/2021 | 500 | 553 | ||||||
Health Care REIT, Inc., | ||||||||
4.125%, Due 4/1/2019E | 350 | 372 | ||||||
5.25%, Due 1/15/2022E | 340 | 368 | ||||||
Humana, Inc., 3.15%, Due 12/1/2022 | 595 | 561 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015A | 250 | 259 | ||||||
3.75%, Due 3/7/2017A | 1,500 | 1,586 | ||||||
JPMorgan Chase & Co., | ||||||||
0.584%, Due 6/13/2016D | 480 | 475 | ||||||
3.15%, Due 7/5/2016 | 1,000 | 1,050 | ||||||
5.50%, Due 10/15/2040 | 425 | 463 | ||||||
KeyCorp, 5.10%, Due 3/24/2021 | 385 | 427 | ||||||
Liberty Mutual Group, Inc., 5.00%, Due 6/1/2021A | 390 | 421 | ||||||
Lincoln National Corp., 4.75%, Due 2/15/2014 | 50 | 51 | ||||||
Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015A | 375 | 390 | ||||||
Loews Corp., 5.25%, Due 3/15/2016 | 1,145 | 1,261 | ||||||
Merrill Lynch & Co. Inc., | ||||||||
6.40%, Due 8/28/2017 | 870 | 1,011 | ||||||
6.11%, Due 1/29/2037 | 360 | 385 | ||||||
MetLife, Inc., 6.375%, Due 6/15/2034 | 500 | 612 | ||||||
Morgan Stanley, | ||||||||
0.724%, Due 10/15/2015D | 1,180 | 1,175 | ||||||
1.75%, Due 2/25/2016 | 480 | 485 | ||||||
7.30%, Due 5/13/2019 | 1,120 | 1,368 |
See accompanying notes
34
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
5.625%, Due 9/23/2019 | $ | 600 | $ | 685 | ||||
3.75%, Due 2/25/2023 | 480 | 474 | ||||||
National Australia Bank Ltd., 4.375%, Due 12/10/2020A | 425 | 460 | ||||||
Nordea Bank AB, 4.875%, Due 1/27/2020A | 450 | 499 | ||||||
PNC Funding Corp., | ||||||||
4.25%, Due 9/21/2015 | 525 | 559 | ||||||
4.375%, Due 8/11/2020 | 410 | 445 | ||||||
3.30%, Due 3/8/2022 | 515 | 509 | ||||||
Prudential Financial, Inc., 7.375%, Due 6/15/2019 | 450 | 560 | ||||||
Rabobank Nederland, 2.125%, Due 10/13/2015 | 225 | 231 | ||||||
Royal Bank of Canada, | ||||||||
1.15%, Due 3/13/2015 | 295 | 298 | ||||||
0.625%, Due 12/5/2016 | 515 | 515 | ||||||
Simon Property Group LP, | ||||||||
6.125%, Due 5/30/2018B | 665 | 786 | ||||||
10.35%, Due 4/1/2019B | 375 | 515 | ||||||
State Street Corp., 2.875%, Due 3/7/2016 | 770 | 808 | ||||||
SunTrust Banks, Inc., 3.50%, Due 1/20/2017 | 525 | 557 | ||||||
Svenska Handelsbanken AB, 2.875%, Due 4/4/2017 | 800 | 836 | ||||||
Toronto Dominion Bank, 2.625%, Due 9/10/2018 | 230 | 238 | ||||||
Trinity Acquisition PLC, 4.625%, Due 8/15/2023 | 345 | 349 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 1,163 | 1,349 | ||||||
UnitedHealth Group, Inc., | ||||||||
1.625%, Due 3/15/2019 | 415 | 404 | ||||||
3.875%, Due 10/15/2020 | 425 | 451 | ||||||
3.95%, Due 10/15/2042 | 290 | 253 | ||||||
US Bancorp, 1.65%, Due 5/15/2017 | 595 | 600 | ||||||
Ventas Realty LP, 5.70%, Due 9/30/2043B | 220 | 231 | ||||||
Wachovia Corp., | ||||||||
0.614%, Due 10/15/2016D | 1,300 | 1,284 | ||||||
5.75%, Due 2/1/2018 | 640 | 747 | ||||||
WellPoint, Inc., 4.35%, Due 8/15/2020 | 710 | 763 | ||||||
Wells Fargo & Co., 2.15%, Due 1/15/2019 | 305 | 306 | ||||||
|
| |||||||
64,916 | ||||||||
|
| |||||||
Manufacturing - 7.21% | ||||||||
ABB Finance USA, Inc., 2.875%, Due 5/8/2022 | 320 | 312 | ||||||
Altera Corp., | ||||||||
1.75%, Due 5/15/2017 | 260 | 258 | ||||||
2.50%, Due 11/15/2018 | 230 | 229 | ||||||
American Honda Finance Corp., | ||||||||
2.125%, Due 2/28/2017A | 1,000 | 1,023 | ||||||
3.875%, Due 9/21/2020A | 500 | 528 | ||||||
Analog Devices, Inc., 3.00%, Due 4/15/2016 | 425 | 445 | ||||||
Apple, Inc., 2.40%, Due 5/3/2023 | 915 | 837 | ||||||
Applied Materials, Inc., 2.65%, Due 6/15/2016 | 545 | 567 | ||||||
BHP Billiton Finance USA Ltd., 1.625%, Due 2/24/2017 | 435 | 440 | ||||||
CA, Inc., 4.50%, Due 8/15/2023 | 480 | 482 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.10%, Due 5/29/2015 | 495 | 499 | ||||||
2.75%, Due 6/24/2015 | 380 | 393 | ||||||
1.625%, Due 6/1/2017 | 570 | 576 | ||||||
Cooper US, Inc., 3.875%, Due 12/15/2020 | 505 | 526 | ||||||
Cummins, Inc., 3.65%, Due 10/1/2023 | 540 | 550 | ||||||
Daimler Finance North America LLC, | ||||||||
3.00%, Due 3/28/2016A C | 190 | 198 | ||||||
2.95%, Due 1/11/2017A C | 2,400 | 2,494 | ||||||
Dow Chemical Co., | ||||||||
4.25%, Due 11/15/2020 | 255 | 272 | ||||||
4.125%, Due 11/15/2021 | 400 | 413 | ||||||
Eaton Corp., PLC, | ||||||||
5.60%, Due 5/15/2018 | 380 | 434 | ||||||
2.75%, Due 11/2/2022A | 255 | 239 | ||||||
EMC Corp., 1.875%, Due 6/1/2018 | 750 | 753 |
See accompanying notes
35
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017C | $ | 700 | $ | 756 | ||||
5.875%, Due 8/2/2021C | 600 | 687 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 425 | 433 | ||||||
4.05%, Due 9/15/2022 | 350 | 340 | ||||||
Intel Corp., | ||||||||
1.35%, Due 12/15/2017 | 745 | 741 | ||||||
3.30%, Due 10/1/2021 | 340 | 343 | ||||||
John Deere Capital Corp., | ||||||||
1.05%, Due 10/11/2016 | 450 | 452 | ||||||
1.30%, Due 3/12/2018 | 550 | 545 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 480 | 530 | ||||||
Koninklijke Philips Electronics N.V., 5.75%, Due 3/11/2018 | 535 | 621 | ||||||
LYB International Finance BV, 4.00%, Due 7/15/2023 | 250 | 252 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 200 | 226 | ||||||
Oracle Corp., 1.20%, Due 10/15/2017 | 550 | 543 | ||||||
PACCAR Financial Corp., 1.15%, Due 8/16/2016 | 480 | 482 | ||||||
Precision Castparts Corp., 0.70%, Due 12/20/2015 | 340 | 339 | ||||||
Rio Tinto Finance USA Ltd., 2.50%, Due 5/20/2016 | 505 | 522 | ||||||
Teck Resources Ltd., 6.00%, Due 8/15/2040 | 160 | 153 | ||||||
Toyota Motor Credit Corp., 2.05%, Due 1/12/2017 | 480 | 492 | ||||||
Tyco Electronics Group S.A., | ||||||||
1.60%, Due 2/3/2015 | 320 | 323 | ||||||
6.55%, Due 10/1/2017 | 365 | 423 | ||||||
United Technologies Corp., | ||||||||
1.80%, Due 6/1/2017 | 1,030 | 1,049 | ||||||
6.125%, Due 7/15/2038 | 600 | 733 | ||||||
Volkswagen International Finance N.V., 1.625%, Due 3/22/2015A | 850 | 860 | ||||||
Xerox Corp., | ||||||||
8.25%, Due 5/15/2014 | 190 | 197 | ||||||
2.95%, Due 3/15/2017 | 175 | 180 | ||||||
|
| |||||||
24,690 | ||||||||
|
| |||||||
Service - 5.18% | ||||||||
AbbVie, Inc., | ||||||||
1.20%, Due 11/6/2015 | 455 | 458 | ||||||
2.90%, Due 11/6/2022 | 815 | 777 | ||||||
Baxter International, Inc., 1.85%, Due 1/15/2017 | 375 | 385 | ||||||
Becton Dickinson and Co., 3.25%, Due 11/12/2020 | 480 | 491 | ||||||
Cardinal Health, Inc., 3.20%, Due 3/15/2023 | 590 | 560 | ||||||
CBS Corp., 3.375%, Due 3/1/2022 | 1,000 | 977 | ||||||
Celgene Corp., 5.25%, Due 8/15/2043 | 240 | 242 | ||||||
Comcast Corp., | ||||||||
5.875%, Due 2/15/2018 | 740 | 865 | ||||||
6.55%, Due 7/1/2039 | 800 | 987 | ||||||
Covidien International Finance S.A., 2.80%, Due 6/15/2015 | 340 | 351 | ||||||
CVS Caremark Corp., 3.25%, Due 5/18/2015 | 190 | 197 | ||||||
DIRECTV Holdings LLC, 6.35%, Due 3/15/2040C | 225 | 232 | ||||||
eBay, Inc., 1.35%, Due 7/15/2017 | 435 | 434 | ||||||
Genzyme Corp., 5.00%, Due 6/15/2020 | 235 | 263 | ||||||
Gilead Sciences, Inc., 2.40%, Due 12/1/2014 | 475 | 484 | ||||||
GlaxoSmithKline Capital PLC, 1.50%, Due 5/8/2017 | 710 | 717 | ||||||
Home Depot, Inc., 2.70%, Due 4/1/2023 | 225 | 213 | ||||||
Lowe’s Companies, Inc., 3.875%, Due 9/15/2023 | 990 | 1,020 | ||||||
McKesson Corp., 3.25%, Due 3/1/2016 | 200 | 210 | ||||||
Novartis Capital Corp., 2.90%, Due 4/24/2015 | 340 | 353 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 225 | 241 | ||||||
Sanofi, | ||||||||
1.25%, Due 4/10/2018 | 730 | 719 | ||||||
4.00%, Due 3/29/2021 | 320 | 343 | ||||||
St Jude Medical, Inc., 2.50%, Due 1/15/2016 | 595 | 611 | ||||||
Teva Pharmaceutical Finance II, 3.00%, Due 6/15/2015 | 550 | 569 |
See accompanying notes
36
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Thomson Reuters Corp., 4.70%, Due 10/15/2019 | $ | 225 | $ | 248 | ||||
Time Warner Cable, Inc., | ||||||||
5.85%, Due 5/1/2017 | 1,300 | 1,432 | ||||||
6.75%, Due 7/1/2018 | 125 | 141 | ||||||
4.50%, Due 9/15/2042 | 500 | 375 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 1,090 | 1,206 | ||||||
4.75%, Due 3/29/2021 | 350 | 380 | ||||||
Viacom, Inc., 4.50%, Due 2/27/2042 | 500 | 437 | ||||||
Walgreen Co., 3.10%, Due 9/15/2022 | 300 | 286 | ||||||
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 | 400 | 544 | ||||||
|
| |||||||
17,748 | ||||||||
|
| |||||||
Telecommunications - 3.07% | ||||||||
America Movil SAB de CV, 6.375%, Due 3/1/2035 | 375 | 410 | ||||||
AT&T, Inc., | ||||||||
0.80%, Due 12/1/2015 | 640 | 639 | ||||||
5.35%, Due 9/1/2040 | 338 | 329 | ||||||
5.55%, Due 8/15/2041 | 1,000 | 1,000 | ||||||
4.35%, Due 6/15/2045 | 448 | 370 | ||||||
Cellco Partnership, 8.50%, Due 11/15/2018 | 580 | 746 | ||||||
Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042A | 850 | 821 | ||||||
Orange S.A., | ||||||||
4.375%, Due 7/8/2014 | 385 | 394 | ||||||
2.125%, Due 9/16/2015 | 225 | 229 | ||||||
Verizon Communications, Inc., | ||||||||
5.50%, Due 4/1/2017 | 500 | 564 | ||||||
4.60%, Due 4/1/2021 | 780 | 838 | ||||||
3.50%, Due 11/1/2021 | 350 | 349 | ||||||
5.15%, Due 9/15/2023 | 240 | 260 | ||||||
6.40%, Due 9/15/2033 | 450 | 509 | ||||||
6.90%, Due 4/15/2038 | 500 | 592 | ||||||
6.55%, Due 9/15/2043 | 850 | 986 | ||||||
Vodafone Group PLC, | ||||||||
1.625%, Due 3/20/2017 | 640 | 641 | ||||||
6.15%, Due 2/27/2037 | 760 | 851 | ||||||
|
| |||||||
10,528 | ||||||||
|
| |||||||
Transportation - 0.98% | ||||||||
Burlington Northern Santa Fe LLC, | ||||||||
7.95%, Due 8/15/2030C | 320 | 424 | ||||||
5.75%, Due 5/1/2040C | 190 | 210 | ||||||
5.15%, Due 9/1/2043C | 500 | 515 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 400 | 463 | ||||||
CSX Corp., | ||||||||
3.70%, Due 11/1/2023 | 685 | 684 | ||||||
5.50%, Due 4/15/2041 | 425 | 455 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 300 | 347 | ||||||
United Parcel Service, Inc., 1.125%, Due 10/1/2017 | 265 | 263 | ||||||
|
| |||||||
3,361 | ||||||||
|
| |||||||
Utilities - 2.65% | ||||||||
Commonwealth Edison Co., 4.00%, Due 8/1/2020 | 190 | 205 | ||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 350 | 395 | ||||||
Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016 | 450 | 506 | ||||||
EDF S.A., 4.60%, Due 1/27/2020A | 580 | 640 | ||||||
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 | 1,000 | 1,133 | ||||||
National Rural Utilities Cooperative Finance Corp., 5.45%, Due 4/10/2017 | 505 | 573 | ||||||
Pacific Gas & Electric Co., 6.25%, Due 12/1/2013 | 150 | 151 | ||||||
Progress Energy, Inc., | ||||||||
4.875%, Due 12/1/2019 | 450 | 501 | ||||||
4.40%, Due 1/15/2021 | 1,000 | 1,072 | ||||||
Sempra Energy, 6.50%, Due 6/1/2016 | 340 | 385 | ||||||
Sierra Pacific Power Co., 3.375%, Due 8/15/2023 | 240 | 240 | ||||||
Southern Co., 1.95%, Due 9/1/2016 | 380 | 388 | ||||||
Southwestern Electric Power Co., 3.55%, Due 2/15/2022 | 800 | 785 |
See accompanying notes
37
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Union Electric Co., 6.70%, Due 2/1/2019 | $ | 510 | $ | 616 | ||||
Xcel Energy, Inc., 5.613%, Due 4/1/2017 | 1,321 | 1,474 | ||||||
|
| |||||||
9,064 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $141,472) | 147,125 | |||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS - 0.53% | ||||||||
Energy - 0.53% | ||||||||
Petrobras International Finance Co., | ||||||||
3.875%, Due 1/27/2016 | 300 | 310 | ||||||
3.50%, Due 2/6/2017 | 340 | 345 | ||||||
5.375%, Due 1/27/2021 | 500 | 509 | ||||||
6.875%, Due 1/20/2040 | 245 | 245 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 375 | 421 | ||||||
|
| |||||||
Total Foreign Government Obligations (Cost $1,807) | 1,830 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS - 4.63% | ||||||||
Ally Master Owner Trust, 1.21%, Due 6/15/2017, 2012 3 A2 | 3,500 | 3,523 | ||||||
Citibank Credit Card Issuance Trust, 1.11%, Due 7/23/2018, 2013 A3 A3 | 1,650 | 1,659 | ||||||
CNH Equipment Trust, | ||||||||
2.04%, Due 10/17/2016, 2011-A A4 | 470 | 477 | ||||||
0.94%, Due 5/15/2017, 2012 A A3 | 719 | 721 | ||||||
Ford Credit Auto Lease Trust, 0.60%, Due 3/15/2016, 2013-A A3 | 550 | 550 | ||||||
Ford Credit Floorplan Master Owner Trust, 1.50%, Due 9/15/2018, 2013-5 A1 | 1,700 | 1,718 | ||||||
National Credit Union Administration, | ||||||||
0.574%, Due 3/11/2020, 2011 R3 1AD | 2,519 | 2,520 | ||||||
0.624%, Due 10/7/2020, 2010 R1 1AD | 1,815 | 1,823 | ||||||
Nissan Auto Lease Trust, 0.58%, Due 11/16/2015, 2012 B A3 | 1,155 | 1,154 | ||||||
Nissan Master Owner Trust Receivables, 0.644%, Due 5/15/2017, 2012 A AD | 1,700 | 1,703 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $15,794) | 15,848 | |||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 8.58% | ||||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | 247 | 248 | ||||||
5.633%, Due 4/10/2049, 2007-2 A2 | 70 | 71 | ||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
5.201%, Due 12/11/2038, 2006-PW14 A4 | 790 | 870 | ||||||
5.54%, Due 9/11/2041, 2006-PW13 A4 | 1,285 | 1,407 | ||||||
GNR Project Loans, | ||||||||
2.012%, Due 7/16/2035, 2011-144 AB | 1,566 | 1,576 | ||||||
1.692%, Due 11/16/2035, 2010-148 A | 193 | 194 | ||||||
2.174%, Due 7/16/2038, 2011-147 A | 2,870 | 2,904 | ||||||
2.989%, Due 3/16/2039, 2010-71 AC | 250 | 252 | ||||||
2.17%, Due 4/16/2041, 2012 44 A | 5,819 | 5,844 | ||||||
1.732%, Due 5/16/2042, 2012 70 A | 3,396 | 3,369 | ||||||
2.70%, Due 4/16/2043, 2011-109 AB | 2,202 | 2,254 | ||||||
2.543%, Due 9/16/2044, 2011-96 AC | 1,397 | 1,423 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,700 | 2,807 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.679%, Due 8/10/2043, 2010-C1 A1A | 490 | 520 | ||||||
3.849%, Due 12/10/2043, 2010-C2 A1A | 742 | 785 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2A | 750 | 788 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 110 | 110 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1A | 696 | 722 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3A | 800 | 873 | ||||||
4.625%, Due 3/15/2046, 2005-LDP1 A2 | 40 | 40 | ||||||
5.706%, Due 2/12/2049, 2007-CB19 A4 | 550 | 616 | ||||||
5.629%, Due 2/12/2051, 2007-CB20 A2 | 50 | 50 |
See accompanying notes
38
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
JPMBB Commercial Mortgage Securities Trust 2013-C12, 3.157%, Due 7/15/2045, 2013 C12 ASB | $ | 935 | $ | 949 | ||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4 | 550 | 611 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.728%, Due 6/15/2049, 2007-C32 A2 | 108 | 111 | ||||||
|
| |||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $28,838) | 29,394 | |||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 19.29% | ||||||||
Federal Home Loan Mortgage Corporation - 4.26% | ||||||||
4.50%, Due 3/1/2019 | 98 | 103 | ||||||
5.00%, Due 10/1/2020 | 243 | 258 | ||||||
3.50%, Due 9/1/2028 | 3,156 | 3,334 | ||||||
5.00%, Due 8/1/2033 | 145 | 157 | ||||||
5.50%, Due 2/1/2034 | 197 | 215 | ||||||
6.00%, Due 8/1/2034 | 104 | 116 | ||||||
5.00%, Due 8/1/2035 | 82 | 89 | ||||||
5.00%, Due 9/1/2035 | 207 | 224 | ||||||
5.50%, Due 4/1/2037 | 108 | 116 | ||||||
5.00%, Due 3/1/2038 | 143 | 154 | ||||||
5.50%, Due 5/1/2038 | 205 | 222 | ||||||
5.50%, Due 6/1/2038 | 132 | 143 | ||||||
5.00%, Due 4/1/2040 | 2,069 | 2,239 | ||||||
0.574%, Due 12/15/2040 D | 772 | 773 | ||||||
4.00%, Due 1/1/2041 | 950 | 998 | ||||||
4.50%, Due 2/1/2041 | 702 | 750 | ||||||
3.50%, Due 3/1/2042 | 820 | 839 | ||||||
3.50%, Due 6/1/2042 | 3,778 | 3,863 | ||||||
|
| |||||||
14,593 | ||||||||
|
| |||||||
Federal National Mortgage Association - 13.63% | ||||||||
6.50%, Due 2/1/2017 | 38 | 40 | ||||||
5.00%, Due 12/1/2017 | 126 | 134 | ||||||
4.50%, Due 9/1/2018 | 278 | 296 | ||||||
4.00%, Due 8/1/2020 | 60 | 63 | ||||||
3.50%, Due 1/1/2026 | 280 | 296 | ||||||
4.00%, Due 5/1/2026 | 199 | 211 | ||||||
4.00%, Due 6/1/2026 | 2,271 | 2,431 | ||||||
3.00%, Due 8/1/2027 | 716 | 744 | ||||||
3.00%, Due 11/1/2027 | 1,397 | 1,453 | ||||||
3.50%, Due 1/1/2028 | 2,947 | 3,114 | ||||||
5.00%, Due 3/1/2034 | 193 | 211 | ||||||
5.50%, Due 6/1/2034 | 122 | 133 | ||||||
4.50%, Due 9/1/2034 | 59 | 63 | ||||||
5.50%, Due 2/1/2035 | 220 | 240 | ||||||
5.00%, Due 5/1/2035 | 2,750 | 2,988 | ||||||
5.00%, Due 11/1/2035 | 178 | 194 | ||||||
5.50%, Due 12/1/2035 | 134 | 147 | ||||||
5.00%, Due 2/1/2036 | 141 | 153 | ||||||
5.50%, Due 4/1/2036 | 303 | 331 | ||||||
6.00%, Due 9/1/2036 | 59 | 65 | ||||||
6.50%, Due 12/1/2036 | 144 | 161 | ||||||
5.50%, Due 2/1/2037 | 158 | 172 | ||||||
6.00%, Due 9/1/2037 | 146 | 160 | ||||||
6.00%, Due 1/1/2038 | 230 | 251 | ||||||
5.50%, Due 3/1/2038 | 332 | 362 | ||||||
5.00%, Due 4/1/2038 | 140 | 152 | ||||||
5.50%, Due 6/1/2038 | 103 | 112 | ||||||
4.50%, Due 1/1/2040 | 1,416 | 1,515 | ||||||
5.00%, Due 5/1/2040 | 1,948 | 2,125 | ||||||
4.00%, Due 9/1/2040 | 925 | 975 | ||||||
4.00%, Due 12/1/2040 | 4,139 | 4,364 | ||||||
4.00%, Due 1/1/2041 | 1,099 | 1,159 | ||||||
4.00%, Due 2/1/2041 | 3,063 | 3,234 | ||||||
5.00%, Due 3/1/2041 | 1,214 | 1,326 | ||||||
4.50%, Due 4/1/2041 | 4,659 | 4,998 | ||||||
4.50%, Due 5/1/2041 | 1,298 | 1,396 |
See accompanying notes
39
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
4.50%, Due 8/1/2041 | $ | 1,444 | $ | 1,550 | ||||
4.00%, Due 9/1/2041 | 2,442 | 2,574 | ||||||
4.00%, Due 10/1/2041 | 2,589 | 2,729 | ||||||
4.50%, Due 10/1/2041 | 1,047 | 1,124 | ||||||
4.00%, Due 11/1/2041 | 806 | 850 | ||||||
3.50%, Due 9/1/2042 | 972 | 999 | ||||||
4.00%, Due 11/1/2042 | 350 | 369 | ||||||
4.50%, Due 1/1/2043 | 681 | 729 | ||||||
|
| |||||||
46,693 | ||||||||
|
| |||||||
Government National Mortgage Association - 1.40% | ||||||||
6.50%, Due 3/15/2028 | 137 | 154 | ||||||
6.00%, Due 4/15/2031 | 159 | 177 | ||||||
6.00%, Due 10/15/2038 | 693 | 764 | ||||||
5.50%, Due 2/15/2040 | 531 | 581 | ||||||
3.50%, Due 3/15/2043 | 1,681 | 1,745 | ||||||
5.50%, Due 2/20/2034 | 170 | 190 | ||||||
4.50%, Due 10/20/2040 | 1,082 | 1,186 | ||||||
|
| |||||||
4,797 | ||||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $65,443) | 66,083 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS - 19.41% | ||||||||
0.25%, Due 12/15/2015 | 2,000 | 1,996 | ||||||
2.00%, Due 4/30/2016 | 3,945 | 4,098 | ||||||
1.50%, Due 6/30/2016 | 3,500 | 3,594 | ||||||
3.125%, Due 10/31/2016 | 4,400 | 4,729 | ||||||
0.875%, Due 1/31/2017 | 9,355 | 9,408 | ||||||
0.75%, Due 12/31/2017 | 5,600 | 5,532 | ||||||
1.50%, Due 8/31/2018 | 1,000 | 1,011 | ||||||
1.375%, Due 9/30/2018 | 4,000 | 4,016 | ||||||
1.125%, Due 5/31/2019 | 3,000 | 2,936 | ||||||
1.25%, Due 2/29/2020 | 600 | 581 | ||||||
2.00%, Due 11/15/2021 | 9,550 | 9,401 | ||||||
2.00%, Due 2/15/2022 | 10,465 | 10,250 | ||||||
6.25%, Due 8/15/2023 | 900 | 1,197 | ||||||
6.875%, Due 8/15/2025 | 770 | 1,091 | ||||||
5.25%, Due 11/15/2028 | 750 | 944 | ||||||
4.75%, Due 2/15/2037 | 800 | 966 | ||||||
3.125%, Due 11/15/2041 | 5,195 | 4,738 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $66,507) | 66,488 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS - 4.30% (Cost $14,727) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 14,726,742 | 14,727 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.70% (Cost $334,588) | 341,495 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.30% |
| 1,007 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 342,502 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $14,515 or 4.24% of net assets. The Fund has no right to demand registration of these securities. |
B | Limited Partnership. |
C | Limited Liability Company. |
D | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
E | REIT - Real Estate Investment Trust. |
See accompanying notes
40
American Beacon Short-Term Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
CORPORATE OBLIGATIONS - 45.37% | ||||||||
Consumer - 3.07% | ||||||||
Kellogg Co., 1.125%, Due 5/15/2015 | $ | 2,000 | $ | 2,016 | ||||
SABMiller Holdings, Inc., 1.85%, Due 1/15/2015A | 1,000 | 1,013 | ||||||
SABMiller PLC, 6.50%, Due 7/1/2016A | 1,725 | 1,959 | ||||||
|
| |||||||
4,988 | ||||||||
|
| |||||||
Energy - 0.63% | ||||||||
EOG Resources Canada, Inc., 4.75%, Due 3/15/2014 A | 1,000 | 1,016 | ||||||
|
| |||||||
Finance - 23.77% | ||||||||
ABN AMRO Bank N.V., | ||||||||
2.035%, Due 1/30/2014A B | 2,000 | 2,007 | ||||||
1.375%, Due 1/22/2016A | 1,000 | 1,007 | ||||||
American Express Co., 7.25%, Due 5/20/2014 | 1,000 | 1,037 | ||||||
American International Group, Inc., 4.25%, Due 9/15/2014 | 600 | 618 | ||||||
Bank of America Corp., 1.070%, Due 3/22/2016 | 2,000 | 2,010 | ||||||
Bear Stearns Cos. LLC, 0.653%, Due 11/21/2016C | 3,000 | 2,978 | ||||||
Citigroup, Inc., | ||||||||
1.178%, Due 4/1/2014B | 19 | 19 | ||||||
0.546%, Due 11/5/2014B | 2,573 | 2,570 | ||||||
1.198%, Due 7/25/2016 | 1,000 | 1,009 | ||||||
Danske Bank A/S, 1.294%, Due 4/14/2014A B | 3,000 | 3,009 | ||||||
General Electric Capital Corp., 1.50%, Due 7/12/2016 | 3,000 | 3,036 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.125%, Due 1/15/2015 | 1,000 | 1,051 | ||||||
5.35%, Due 1/15/2016 | 1,000 | 1,093 | ||||||
ING Bank N.V., 1.658%, Due 6/9/2014A D | 3,000 | 3,020 | ||||||
Lloyds TSB Bank PLC, 2.588%, Due 1/24/2014B | 2,000 | 2,010 | ||||||
Monumental Global Funding III, 0.444%, Due 1/15/2014A B | 1,000 | 1,001 | ||||||
Morgan Stanley, 3.45%, Due 11/2/2015 | 3,000 | 3,120 | ||||||
Societe Generale S.A., 1.296%, Due 4/11/2014A B | 2,000 | 2,008 | ||||||
Svenska Handelsbanken AB, 0.721%, Due 9/23/2016B | 3,000 | 3,006 | ||||||
Wachovia Corp., 0.614%, Due 10/15/2016B | 3,000 | 2,963 | ||||||
|
| |||||||
38,572 | ||||||||
|
| |||||||
Manufacturing - 9.33% | ||||||||
American Honda Finance Corp., | ||||||||
1.00%, Due 8/11/2015A | 2,000 | 2,011 | ||||||
0.744%, Due 10/7/2016 | 1,000 | 1,004 | ||||||
Daimler Finance North America LLC, | ||||||||
2.30%, Due 1/9/2015A C | 1,000 | 1,017 | ||||||
0.945%, Due 8/1/2016A C | 2,500 | 2,505 | ||||||
Ford Motor Credit Co. LLC, 4.25%, Due 2/3/2017C | 1,000 | 1,080 | ||||||
Hewlett-Packard Co., 0.661%, Due 5/30/2014B | 1,000 | 1,000 | ||||||
Johnson Controls, Inc., 1.75%, Due 3/1/2014 | 500 | 502 | ||||||
Nissan Motor Acceptance Corp., 0.950%, Due 9/26/2016A B | 3,000 | 3,005 | ||||||
Volkswagen International Finance N.V., 1.15%, Due 11/20/2015A | 3,000 | 3,018 | ||||||
|
| |||||||
15,142 | ||||||||
|
| |||||||
Service - 4.33% | ||||||||
AbbVie, Inc., 1.20%, Due 11/6/2015 | 3,000 | 3,021 | ||||||
McKesson Corp., 0.95%, Due 12/4/2015 | 1,000 | 1,000 | ||||||
Quest Diagnostics, Inc., 1.100%, Due 3/24/2014B | 1,000 | 1,003 | ||||||
Viacom, Inc., 1.25%, Due 2/27/2015 | 2,000 | 2,012 | ||||||
|
| |||||||
7,036 | ||||||||
|
| |||||||
Telecommunications - 2.52% | ||||||||
British Telecommunications PLC, 1.625%, Due 6/28/2016 | 1,000 | 1,013 | ||||||
Orange S.A., 4.375%, Due 7/8/2014 | 1,000 | 1,024 | ||||||
Verizon Communications, Inc., 1.782%, Due 9/15/2016 | 2,000 | 2,051 | ||||||
|
| |||||||
4,088 | ||||||||
|
| |||||||
Transportation - 0.65% | ||||||||
Burlington Northern Santa Fe Corp., 4.875%, Due 1/15/2015 | 1,000 | 1,051 | ||||||
|
|
See accompanying notes
41
American Beacon Short-Term Bond FundSM
Schedule of Investments
October 31, 2013
Par Amount | Fair Value | |||||||
(000’s) | (000’s) | |||||||
Utilities—1.07% | ||||||||
EDF S.A., 5.50%, Due 1/26/2014A | $ | 1,000 | $ | 1,011 | ||||
Pacific Gas & Electric Co., 6.25%, Due 12/1/2013 | 730 | 733 | ||||||
|
| |||||||
1,744 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $73,037) | 73,637 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS - 24.75% | ||||||||
Ally Master Owner Trust, 0.804%, Due 5/15/2016, 2011-3 A1B | 2,000 | 2,003 | ||||||
BMW Vehicle Lease Trust, 0.75%, Due 2/20/2015, 2012-1 A3 | 2,124 | 2,126 | ||||||
Capital Auto Receivables Asset Trust 2013-2, 0.92%, Due 9/20/2016, 2013-2 A2 | 3,500 | 3,506 | ||||||
Chrysler Capital Auto ReceivablesTrust, 0.91%, Due 4/16/2018, 2013-AA A3A | 2,000 | 2,002 | ||||||
Ford Credit Auto Owner Trust, 0.84%, Due 8/15/2016, 2012-1A A3 | 1,486 | 1,489 | ||||||
Ford Credit Floorplan Master Owner Trust, 0.85%, Due 1/15/2018, 2013-1 A1 | 3,000 | 2,998 | ||||||
GE Dealer Floorplan Master Note Trust, 0.773%, Due 7/20/2016, 2011-1 AB | 2,500 | 2,505 | ||||||
GE Equipment Small Ticket LLC, 1.45%, Due 1/21/2018, 2011-1A A3A C | 148 | 149 | ||||||
GE Equipment Transportation LLC, 0.62%, Due 7/25/2016, 2012-2 A3C | 2,500 | 2,499 | ||||||
Golden Credit Card Trust, 0.636%, Due 9/15/2018, 2013-2A AA B | 3,000 | 3,000 | ||||||
National Credit Union Administration, | ||||||||
0.624%, Due 1/8/2020, 2011 R1 1AB | 4,967 | 4,951 | ||||||
0.574%, Due 2/6/2020, 2011 R2 1AB | 1,326 | 1,332 | ||||||
0.574%, Due 3/11/2020, 2011 R3 1AB | 4,994 | 4,997 | ||||||
1.84%, Due 10/7/2020, 2010-R1 2A | 284 | 287 | ||||||
Nissan Master Owner Trust Receivables, 0.474%, Due 2/15/2018, 2013-A AB | 3,500 | 3,496 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
0.87%, Due 7/20/2015, 2012 A A3 | 1,000 | 1,003 | ||||||
0.85%, Due 8/22/2016, 2012-1 A3 | 1,826 | 1,832 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $40,187) | 40,175 | |||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 11.92% | ||||||||
Banc of America Commercial Mortgage Trust, 5.633%, Due 4/10/2049, 2007-2 A2 | 66 | 67 | ||||||
GNR Project Loans, | ||||||||
1.864%, Due 8/16/2031, 2010-141 A | 1,054 | 1,058 | ||||||
2.239%, Due 12/16/2031, 2011-1 A | 757 | 760 | ||||||
2.45%, Due 7/16/2032, 2011-109 A | 2,008 | 2,022 | ||||||
2.25%, Due 5/16/2033, 2011-92 A | 2,204 | 2,217 | ||||||
2.25%, Due 8/16/2034, 2011-78 A | 1,684 | 1,698 | ||||||
2.21%, Due 11/16/2034, 2011-16 A | 1,416 | 1,423 | ||||||
1.692%, Due 11/16/2035, 2010-148 A | 1,288 | 1,294 | ||||||
2.21%, Due 12/16/2035, 2011-31 A | 1,862 | 1,877 | ||||||
2.782%, Due 6/16/2036, 2010-13 AD | 974 | 995 | ||||||
3.069%, Due 6/16/2036, 2010-52 A | 611 | 620 | ||||||
2.161%, Due 11/16/2036, 2011-96 AB | 1,329 | 1,338 | ||||||
2.45%, Due 7/16/2038, 2011-49 A | 2,186 | 2,219 | ||||||
2.989%, Due 3/16/2039, 2010-71 AC | 434 | 439 | ||||||
3.210%, Due 10/16/2039, 2010-22 AB | 345 | 350 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., 3.853%, Due 6/15/2043, 2010-C1 A1A | 928 | 963 | ||||||
|
| |||||||
Total Non-Agency Mortgage-Backed Obligations (Cost $19,343) | 19,340 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS - 16.85% | ||||||||
2.125%, Due 11/30/2014 | 1,000 | 1,021 | ||||||
4.00%, Due 2/15/2015 | 2,000 | 2,097 | ||||||
0.25%, Due 3/31/2015 | 4,000 | 4,002 | ||||||
0.125%, Due 4/30/2015 | 4,000 | 3,994 | ||||||
0.25%, Due 7/15/2015 | 6,000 | 6,000 | ||||||
2.00%, Due 1/31/2016 | 2,000 | 2,073 | ||||||
1.75%, Due 5/31/2016 | 3,000 | 3,099 | ||||||
1.00%, Due 10/31/2016 | 5,000 | 5,058 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $27,308) | 27,344 | |||||||
|
|
See accompanying notes
42
American Beacon Short-Term Bond FundSM
Schedule of Investments
October 31, 2013
Shares | Fair Value | |||||||
(000’s) | ||||||||
SHORT-TERM INVESTMENTS - 0.88% (Cost $1,430) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 1,429,636 | $ | 1,430 | |||||
|
| |||||||
TOTAL INVESTMENTS - 99.77% (Cost $161,305) | 161,926 | |||||||
OTHER ASSETS, NET OF LIABILITIES - 0.23% |
| 387 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% | $ | 162,313 | ||||||
|
|
Percentages are stated as a percent of net assets.
A | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $34,721 or 21.39% of net assets. The Fund has no right to demand registration of these securities. |
B | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
C | Limited Liability Company. |
D | Variable rate. |
See accompanying notes
43
Statements of Assets and Liabilities
October 31, 2013 (in thousands except share and per share amounts)
High Yield Bond Fund | Retirement Income and Appreciation Fund | Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in unaffiliated securities, at fair value A | $ | 205,252 | $ | 132,571 | $ | 341,495 | $ | 161,926 | ||||||||
Cash | 3 | — | — | — | ||||||||||||
Receivable for investments sold | 1,966 | 589 | — | — | ||||||||||||
Dividends and interest receivable | 3,752 | 815 | 2,155 | 483 | ||||||||||||
Receivable for fund shares sold | 967 | 143 | 4,553 | 116 | ||||||||||||
Receivable for tax reclaims | 16 | 4 | 8 | 1 | ||||||||||||
Receivable for expense reimbursement (Note 2) | 4 | — | 1 | 2 | ||||||||||||
Prepaid expenses | 17 | 17 | 23 | 21 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 211,977 | 134,139 | 348,235 | 162,549 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Payable for investments purchased | 2,606 | 416 | 5,591 | — | ||||||||||||
Payable for fund shares redeemed | 239 | 107 | 7 | 142 | ||||||||||||
Dividends payable | 27 | 1 | — | 1 | ||||||||||||
Payable under excess expense reimbursement plan (Note 2) | — | 9 | — | — | ||||||||||||
Management and investment advisory fees payable | 240 | 125 | 51 | 27 | ||||||||||||
Administrative service and service fees payable | 27 | 49 | 14 | 13 | ||||||||||||
Transfer agent fees payable | 3 | 1 | 4 | 12 | ||||||||||||
Custody and fund accounting fees payable | 9 | 4 | 7 | 3 | ||||||||||||
Professional fees payable | 32 | 29 | 26 | 30 | ||||||||||||
Trustee fees payable | 2 | 1 | 9 | 4 | ||||||||||||
Payable for prospectus and shareholder reports | 1 | 6 | 23 | 4 | ||||||||||||
Other liabilities | 1 | 1 | 1 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 3,187 | 749 | 5,733 | 236 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 208,790 | $ | 133,390 | $ | 342,502 | $ | 162,313 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Analysis of Net Assets: | ||||||||||||||||
Paid-in-capital | 205,518 | 120,917 | 333,520 | 170,270 | ||||||||||||
Undistributed net investment income (loss) | 154 | 110 | 2,002 | (426 | ) | |||||||||||
Accumulated net realized gain (loss) | 550 | 4,276 | 73 | (8,152 | ) | |||||||||||
Unrealized appreciation of investments | 2,568 | 8,087 | 6,907 | 621 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets | $ | 208,790 | $ | 133,390 | $ | 342,502 | $ | 162,313 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||||||
Institutional Class | 6,750,666 | N/A | 31,629,003 | 17,296,377 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | 215,158 | 54,315 | 16,949 | 134,549 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | 816,976 | 11,616,544 | 163,307 | 861,316 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | 104,188 | 75,805 | 39,181 | 260,992 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | 199,781 | 170,572 | 68,547 | 99,115 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | 14,339,544 | N/A | N/A | N/A | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets (not in thousands): | ||||||||||||||||
Institutional Class | $ | 62,836,353 | $ | N/A | $ | 339,416,266 | $ | 150,508,693 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | $ | 2,005,216 | $ | 607,796 | $ | 182,514 | $ | 1,172,887 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | $ | 7,608,753 | $ | 130,012,890 | $ | 1,749,389 | $ | 7,497,575 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | $ | 971,277 | $ | 851,036 | $ | 419,576 | $ | 2,270,653 | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | $ | 1,858,323 | $ | 1,917,889 | $ | 734,309 | $ | 862,736 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | $ | 133,510,143 | $ | N/A | $ | N/A | $ | N/A | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes
44
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2013 (in thousands except share and per share amounts)
High Yield Bond Fund | Retirement Income and Appreciation Fund | Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||
Net asset value, offering and redemption price per share: | ||||||||||||||||
Institutional Class | $ | 9 .31 | N/A | $ | 10 .73 | $ | 8 .70 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | $ | 9 .32 | $ | 11 .19 | $ | 10 .77 | $ | 8 .72 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | $ | 9 .31 | $ | 11 .19 | $ | 10 .71 | $ | 8 .70 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | $ | 9 .32 | $ | 11 .23 | $ | 10 .71 | $ | 8 .70 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class (offering price) | $ | 9 .78 | $ | 11 .52 | $ | 11 .24 | $ | 8 .92 | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | $ | 9 .30 | $ | 11 .24 | $ | 10 .71 | $ | 8 .70 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | $ | 9 .31 | $ | N/A | $ | N/A | $ | N/A | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Cost of investments in unaffiliated securities | $ | 202,685 | $ | 124,484 | $ | 334,588 | $ | 161,305 |
See accompanying notes
45
American Beacon FundsSM
Statements of Operations
For the year ended October 31, 2013 (in thousands)
High Yield Bond Fund | Retirement Income and Appreciation Fund | Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||
Investment Income: | ||||||||||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 138 | $ | 451 | $ | 1 | $ | 1 | ||||||||
Interest income | 12,154 | 3,627 | 9,556 | 2,205 | ||||||||||||
Miscellaneous Income | 66 | — | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment income | 12,358 | 4,078 | 9,557 | 2,207 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Management and investment advisory fees (Note 2) | 735 | 478 | 727 | 347 | ||||||||||||
Administrative service fees (Note 2): | ||||||||||||||||
Institutional Class | 160 | — | 178 | 79 | ||||||||||||
Y Class | 4 | 4 | 5 | 4 | ||||||||||||
Investor Class | 24 | 435 | 12 | 32 | ||||||||||||
A Class | 4 | 8 | 2 | 9 | ||||||||||||
C Class | 9 | 8 | 4 | 2 | ||||||||||||
AMR Class | 53 | — | — | — | ||||||||||||
Transfer agent fees: | ||||||||||||||||
Institutional Class | 28 | — | 17 | 26 | ||||||||||||
Y Class | 1 | — | — | — | ||||||||||||
Investor Class | 3 | 8 | 2 | 4 | ||||||||||||
C Class | — | 1 | 1 | — | ||||||||||||
AMR Class | 4 | — | — | — | ||||||||||||
Custody and fund accounting fees | 48 | 26 | 49 | 25 | ||||||||||||
Professional fees | 54 | 48 | 49 | 52 | ||||||||||||
Registration fees and expenses | 62 | 61 | 66 | 71 | ||||||||||||
Service fees (Note 2): | ||||||||||||||||
Y Class | 1 | 1 | 2 | 1 | ||||||||||||
Investor Class | 20 | 543 | 10 | 27 | ||||||||||||
A Class | 1 | 3 | 1 | 4 | ||||||||||||
C Class | 3 | 3 | 2 | 1 | ||||||||||||
Distribution fees (Note 2): | ||||||||||||||||
A Class | 2 | 5 | 1 | 6 | ||||||||||||
C Class | 21 | 20 | 10 | 5 | ||||||||||||
Prospectus and shareholder report expenses | 35 | 9 | 49 | 26 | ||||||||||||
Trustee fees | 13 | 8 | 30 | 9 | ||||||||||||
Other expenses | 10 | 11 | 33 | 7 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 1,295 | 1,680 | 1,250 | 737 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fees waived and expenses (reimbursed)/recouped by Manager (Note 2) | (21 | ) | 6 | (6 | ) | (21 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net expenses | 1,274 | 1,686 | 1,244 | 716 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income | 11,084 | 2,392 | 8,313 | 1,491 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments | 3,233 | 5,348 | 1,150 | 727 | ||||||||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||||||||||
Investments | (16 | ) | (3,139 | ) | (14,948 | ) | (1,288 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net gain (loss) from investments | 3,217 | 2,209 | (13,798 | ) | (561 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 14,301 | $ | 4,601 | $ | (5,485 | ) | $ | 930 | |||||||
|
|
|
|
|
|
|
| |||||||||
A Foreign taxes | $ | — | $ | 1 | $ | — | $ | — |
See accompanying notes
46
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
High Yield Bond Fund | Retirement Income and Appreciation Fund | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 11,084 | $ | 10,389 | $ | 2,392 | $ | 3,095 | ||||||||
Net realized gain (loss) from investments | 3,233 | (160 | ) | 5,348 | 1,443 | |||||||||||
Change in net unrealized appreciation or (depreciation) from investments | (16 | ) | 5,699 | (3,139 | ) | 4,158 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 14,301 | 15,928 | 4,601 | 8,696 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (3,331 | ) | (3,258 | ) | — | — | ||||||||||
Y Class | (72 | ) | (5 | ) | (34 | ) | (35 | ) | ||||||||
Investor Class | (489 | ) | (611 | ) | (3,039 | ) | (3,447 | ) | ||||||||
A Class | (57 | ) | (26 | ) | (40 | ) | (24 | ) | ||||||||
C Class | (114 | ) | (91 | ) | (21 | ) | (22 | ) | ||||||||
AMR Class | (7,002 | ) | (6,414 | ) | — | — | ||||||||||
Net realized gain from investments: | ||||||||||||||||
Y Class | — | — | (14 | ) | (4 | ) | ||||||||||
Investor Class | — | — | (969 | ) | (745 | ) | ||||||||||
A Class | — | — | (8 | ) | (5 | ) | ||||||||||
C Class | — | — | (12 | ) | (9 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (11,065 | ) | (10,405 | ) | (4,137 | ) | (4,291 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | 65,191 | 12,358 | (36,304 | ) | 14,514 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | 68,427 | 17,881 | (35,840 | ) | 18,919 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 140,363 | 122,482 | 169,230 | 150,311 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 208,790 | $ | 140,363 | $ | 133,390 | $ | 169,230 | ||||||||
|
|
|
|
|
|
|
| |||||||||
* Includes undistributed net investment income (loss) of | $ | 154 | $ | 135 | $ | 110 | $ | (248 | ) | |||||||
|
|
|
|
|
|
|
|
See accompanying notes
47
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 8,313 | $ | 9,894 | $ | 1,491 | $ | 2,585 | ||||||||
Net realized gain from investments | 1,150 | 7,693 | 727 | 281 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from investments | (14,948 | ) | 8,819 | (1,288 | ) | 1,785 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | (5,485 | ) | 26,406 | 930 | 4,651 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (9,213 | ) | (10,971 | ) | (2,250 | ) | (2,943 | ) | ||||||||
Y Class | (40 | ) | (2 | ) | (14 | ) | (5 | ) | ||||||||
Investor Class | (83 | ) | (218 | ) | (116 | ) | (273 | ) | ||||||||
A Class | (11 | ) | (17 | ) | (21 | ) | (49 | ) | ||||||||
C Class | (11 | ) | (8 | ) | (1 | ) | (3 | ) | ||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | (4,740 | ) | (2,259 | ) | — | — | ||||||||||
Y Class | (55 | ) | — | — | — | |||||||||||
Investor Class | (75 | ) | (16 | ) | — | — | ||||||||||
A Class | (7 | ) | (3 | ) | — | — | ||||||||||
C Class | (14 | ) | (2 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (14,249 | ) | (13,496 | ) | (2,402 | ) | (3,273 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | (39,485 | ) | 108,918 | (71,563 | ) | 48,333 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | (59,219 | ) | 121,828 | (73,035 | ) | 49,711 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 401,721 | 279,893 | 235,348 | 185,637 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 342,502 | $ | 401,721 | $ | 162,313 | $ | 235,348 | ||||||||
|
|
|
|
|
|
|
| |||||||||
* Includes undistributed net investment income (loss) of | $ | 2,002 | $ | 478 | $ | (426 | ) | $ | (510 | ) | ||||||
|
|
|
|
|
|
|
|
See accompanying notes
48
American Beacon FundsSM
October 31, 2013
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of twenty-seven Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon High Yield Bond Fund, the American Beacon Retirement Income and Appreciation Fund, the American Beacon Intermediate Bond Fund, and the American Beacon Short-Term Bond Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.
American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative, and asset management consulting services to the Trust and other investors.
Class Disclosure
Each Fund has multiple classes of shares designed to meet the needs of different groups of investors; however, not all Funds offer all classes. The following table sets forth the differences amongst the classes:
Class: | Offered to: | |
Institutional Class | Investors making an initial investment of $250,000 | |
Y Class | Investors making an initial investment of $100,000 | |
Investor Class | General public and investors investing through an intermediary | |
A Class | General public and investors investing through an intermediary with applicable sales charges, which may include a front-end sales charge and a contingent deferred sales charge (“CDSC”) | |
C Class | General public and investors investing through an intermediary with applicable sales charges, which may include a CDSC | |
AMR Class | Investors in the tax-exempt retirement and benefit plans of the Manager, AMR Corporation, and its affiliates |
Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.
New Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in the ASU enhance disclosures about offsetting of financial assets and liabilities to enable investors to understand the effect of these arrangements on a fund’s financial position. In January 2013, FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. The amendments in ASU No. 2013-01 clarify the scope of disclosures required by ASU No. 2011-11. These ASUs are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Funds believe the adoption of these ASUs will not have a material impact on its financial statement disclosures.
49
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
2. Transactions with Affiliates
Management Agreement
The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all investment advisory and fund management. Investment assets of the High Yield Bond, Retirement Income and Appreciation, and Intermediate Bond Funds are managed by one or more investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the High Yield Bond and Retirement Income and Appreciation Funds an annualized fee equal to 0.05% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Funds. The Manager receives an annualized fee of 0.20% of the average daily net assets of the Intermediate Bond Fund and pays a portion of its fee to an investment advisor hired by the Manager to direct investment activities of a portion of the Fund. The Manager is one of the investment advisors of the Retirement Income and Appreciation Fund and receives an annualized fee of 0.15% on the portion of assets managed by the Manager. The Manager serves as the sole investment advisor to the Short-Term Bond Fund. Management fees paid during the year ended October 31, 2013 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Net Amounts Retained by Manager | |||||||||||||
High Yield Bond | 0.43 | % | 735 | 649 | 86 | |||||||||||
Retirement Income and Appreciation | 0.32 | % | 478 | 402 | 76 | |||||||||||
Intermediate Bond | 0.20 | % | 727 | 294 | 433 | |||||||||||
Short-Term Bond | 0.20 | % | 347 | — | 347 |
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes of each Fund, 0.40% of the average daily net assets of the A and C Classes of each Fund, and 0.05% of the average daily net assets of the AMR Class, except for the Institutional Class of the Intermediate and Short-Term Bond Funds from which the Manager receives a fee of 0.05% of average daily net assets.
Distribution Plans
The Funds, except for the A and C Classes of the Funds, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Funds do not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.
Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Funds. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of each A Class and 1.00% of the average daily net assets of each C Class. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.
Service Plans
The Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of each Fund.
50
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission (“SEC”), the Funds, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from or lend to other participating Funds. During the year ended October 31, 2013, the High Yield Bond Fund borrowed $2,173,597 for one day at 0.73% with interest charges of $43, the Retirement Income and Appreciation Fund borrowed on average $1,213,623 for nine days at an average rate of 0.80% with total interest charges of $238 and the Short-Term Bond Fund loaned on average $776,094 for 33 days at an average rate of 0.77% with interest charges of $530. These amounts are included as interest income on the Statements of Operations.
Expense Reimbursement Plan
The Manager voluntarily and contractually agreed to reimburse the following Funds to the extent that total operating expenses exceeded the Fund’s expense cap. For the period ended October 31, 2013, the Manager reimbursed expenses as follows:
Expense Caps | Reimbursed | |||||||||||||||
Fund | Class | 11/1/12 to 2/28/13 | 3/1/13 to 10/31/13 | (Recouped) Expenses | Expiration of Reimbursements | |||||||||||
High Yield Bond | Institutional1 | 0.93 | % | 0.93 | % | $ | 8,827 | 2016 | ||||||||
High Yield Bond | Y | 0.98 | % | 0.98 | % | 474 | 2016 | |||||||||
High Yield Bond | Investor | N/A | 1.09 | % | 3,592 | 2016 | ||||||||||
High Yield Bond | A | 1.12 | % | 1.12 | % | 2,477 | 2016 | |||||||||
High Yield Bond | C | 1.87 | % | 1.87 | % | 5,380 | 2016 | |||||||||
Retirement Income and Appreciation | Y | 0.80 | % | 0.80 | % | 401 | 2016 | |||||||||
Retirement Income and Appreciation | Investor2 | 1.12 | % | N/A | (8,500 | ) | 2016 | |||||||||
Retirement Income and Appreciation | A | 1.14 | % | 1.14 | % | 1,903 | 2016 | |||||||||
Retirement Income and Appreciation | C | 1.96 | % | 1.96 | % | 695 | 2016 | |||||||||
Intermediate Bond | Y | 0.65 | % | 0.65 | % | 367 | 2016 | |||||||||
Intermediate Bond | Investor | 0.79 | % | 0.79 | % | 3,110 | 2016 | |||||||||
Intermediate Bond | A | 0.99 | % | 0.99 | % | 639 | 2016 | |||||||||
Intermediate Bond | C | 1.74 | % | 1.74 | % | 2,032 | 2016 | |||||||||
Short-Term Bond | Y | 0.64 | % | 0.64 | % | 1,109 | 2016 | |||||||||
Short-Term Bond | Investor | 0.79 | % | 0.79 | % | 11,472 | 2016 | |||||||||
Short-Term Bond | A | 0.85 | % | 0.85 | % | 6,530 | 2016 | |||||||||
Short Term Bond | C | 1.60 | % | 1.60 | % | 1,576 | 2016 |
1 | Voluntary reimbursement. |
2 | Expense recoupment. |
Of these amounts, $3,546, $585, and $1,736 were a receivable from the Manager at October 31, 2013 for the High Yield Bond, Intermediate Bond, and Short-Term Bond Funds, respectively and $8,807 was payable to the Manager from the Retirement Income and Appreciation Fund. The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class’ average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The carryover of excess expenses potentially reimbursable to the Manager are as follows:
Fund | Recovered Expenses | Excess Expense Carryover | Expiration of Reimbursed Expenses | |||||||||
High Yield Bond | $ | — | $ | 5,574 | 2014 | |||||||
High Yield Bond | — | 7,197 | 2015 | |||||||||
Retirement Income and Appreciation | — | 9,426 | 2014 | |||||||||
Retirement Income and Appreciation | 8,500 | 3,661 | 2015 | |||||||||
Intermediate Bond | — | 3,532 | 2014 | |||||||||
Intermediate Bond | — | 7,592 | 2015 | |||||||||
Short-Term Bond | — | 47,110 | 2014 | |||||||||
Short-Term Bond | — | 29,140 | 2015 |
51
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
The Manager recouped $8,500 of excess carryover expenses expiring in 2015 from the Investor Class of the Retirement Income and Appreciation Fund during the year ended October 31, 2013. The Funds did not record a liability for potential reimbursement due to the current assessment that a reimbursement is unlikely.
Sales Commissions
The Funds’ distributor, Foreside Fund Services, LLC (“Foreside”), may receive a portion of A Class sales charges from broker dealers and it may be used to offset distribution related expenses. For the year ended October 31, 2013, Foreside has collected $1,811, $77, $1, and $181 for the High Yield Bond, Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds, respectively from the sale of Class A Shares.
A CDSC of 0.50% will be deducted with respect to Class A Shares of the Retirement Income and Appreciation and Short-Term Bond Funds on certain purchases of $250,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. A CDSC of 0.50% will be deducted with respect to Class A Shares of the High Yield Bond and Intermediate Bond Funds on certain purchases of $1,000,000 or more that are redeemed in whole or part within 18 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 0.50% of the lesser of the original purchase price or the value of the redemption of the Class A Shares redeemed. During the year ended October 31, 2013 there were no CDSC fees collected on Class A Shares.
A CDSC of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the year ended October 31, 2013, $188, $0, $295, and $813 in CDSC fees were collected for the High Yield Bond, Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds, respectively.
3. Security Valuation and Fair Value Measurements
Investments are valued at the close of the New York Stock Exchange (the “Exchange”), normally 4 p.m. ET, each day that the Exchange is open for business. Equity securities, including exchange-traded funds (“ETFs”) for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.
Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The prices of debt securities may be determined using quotes obtained from brokers.
Investments in open-end mutual funds are valued at the closing net asset value (“NAV”) per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates fair value.
Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).
Other investments, including restricted securities, and those financial instruments for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee, established by the Fund’s Board.
52
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Valuation Inputs
Various inputs may be used to determine the fair value of the Funds’ investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 2 securities include fixed-income securities that are valued using observable inputs as stated above.
Level 3 – Prices determined using other significant unobservable inputs. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available.
Level 1 and Level 2 trading assets and trading liabilities, at fair value
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities, and non-U.S. bonds are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.
Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows, and market-based yield spreads for each tranche, and incorporates deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.
Common stocks, exchange-traded funds and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the close of the Exchange. These securities are valued using pricing service providers that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.
Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.
53
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Level 3 trading assets and trading liabilities, at fair value
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and are categorized as Level 3 of the fair value hierarchy.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.
The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to guidelines established by the Board. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee, generally based upon recommendations provided by the Manager.
When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, the securities priced using this methodology are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Fund.
54
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
The Funds’ investments are summarized by level based on the inputs used to determine their values. U.S. GAAP also requires all transfers between any levels to be disclosed. The end of the period timing recognition has been adopted for the transfers between levels of each Fund’s assets and liabilities. As of October 31, 2013, the investments were classified as described below (in thousands):
High Yield Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 262 | $ | — | $ | 127 | $ | 389 | ||||||||
Rights | — | 182 | — | 182 | ||||||||||||
Convertible Preferred Stock | — | — | 45 | 45 | ||||||||||||
Preferred Stocks | 382 | — | — | 382 | ||||||||||||
Convertible Obligations | — | 1,165 | — | 1,165 | ||||||||||||
Corporate Obligations | — | 194,001 | — | 194,001 | ||||||||||||
Foreign Government Obligations | — | 148 | — | 148 | ||||||||||||
Short-Term Investments – Money Markets | 8,940 | — | — | 8,940 | ||||||||||||
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| |||||||||
Total Investments in Securities | $ | 9,584 | $ | 195,496 | $ | 172 | $ | 205,252 | ||||||||
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|
|
Retirement Income and Appreciation Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 4,443 | $ | — | $ | — | $ | 4,443 | ||||||||
Preferred Stock | 4,807 | 917 | — | 5,724 | ||||||||||||
Convertible Obligations | — | 22,086 | — | 22,086 | ||||||||||||
Corporate Obligations | — | 44,801 | — | 44,801 | ||||||||||||
Foreign Government Obligations | — | 544 | — | 544 | ||||||||||||
Asset-Backed Obligations | — | 7,447 | — | 7,447 | ||||||||||||
Non-Agency Mortgage-Backed Obligations | — | 16,029 | — | 16,029 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 11,871 | — | 11,871 | ||||||||||||
U.S. Treasury Obligations | — | 18,155 | — | 18,155 | ||||||||||||
Short-Term Investments – Money Markets | 1,471 | — | — | 1,471 | ||||||||||||
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| |||||||||
Total Investments in Securities | $ | 10,721 | $ | 121,850 | $ | — | $ | 132,571 | ||||||||
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Intermediate Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 147,125 | $ | — | $ | 147,125 | ||||||||
Foreign Government Obligations | — | 1,830 | — | 1,830 | ||||||||||||
Asset-Backed Obligations | — | 15,848 | — | 15,848 | ||||||||||||
Non-Agency Mortgage-Backed Obligations | — | 29,394 | — | 29,394 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 66,083 | — | 66,083 | ||||||||||||
U.S. Treasury Obligations | — | 66,488 | — | 66,488 | ||||||||||||
Short-Term Investments – Money Markets | 14,727 | — | — | 14,727 | ||||||||||||
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| |||||||||
Total Investments in Securities | $ | 14,727 | $ | 326,768 | $ | — | $ | 341,495 | ||||||||
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Short-Term Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 73,637 | $ | — | $ | 73,637 | ||||||||
Asset-Backed Obligations | — | 40,175 | — | 40,175 | ||||||||||||
Non-Agency Mortgage-Backed Obligations | — | 19,340 | — | 19,340 | ||||||||||||
U.S. Treasury Obligations | — | 27,344 | — | 27,344 | ||||||||||||
Short-Term Investments – Money Markets | 1,430 | — | — | 1,430 | ||||||||||||
|
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|
|
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|
| |||||||||
Total Investments in Securities | $ | 1,430 | $ | 160,496 | $ | — | $ | 161,926 | ||||||||
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* | Refer to the Schedules of Investments for Sector and Industry information. |
As of October 31, 2013, there were no transfers between levels for the Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds. The High Yield Bond Fund transferred $8 from Level 2 to Level 1 (in thousands).
55
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
The following is a reconciliation of Level 3 assets of the High Yield Bond Fund for which significant unobservable inputs were used to determine fair value. Transfers in or out of Level 3 represent the ending value of any security or instrument where a change in the level has occurred from the beginning to the end of the period (in thousands):
Common Stocks | Rights | Preferred Stocks | Convertible Preferred Stocks | Convertible Obligations | Corporate Obligations | Foreign Government Obligations | Short Term Investments | Totals | ||||||||||||||||||||||||||||
Balance as of October 31, 2012 | $ | — �� | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Realized gain (loss) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Change in unrealized appreciation or (depreciation) | (160 | ) | — | (23 | ) | — | — | — | — | — | (183 | ) | ||||||||||||||||||||||||
Purchases | 287 | — | 68 | — | — | — | — | — | 355 | |||||||||||||||||||||||||||
Sales | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Transfer into Level 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Transfer out of Level 3 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Balance as of October 31, 2013 | 127 | — | 45 | — | — | — | — | — | 172 | |||||||||||||||||||||||||||
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Change in unrealized at period end* | $ | (160 | ) | $ | — | $ | (23 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (183 | ) | |||||||||||||||
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Common Stocks | Common Stocks | Convertible Preferred Stock | ||||
Ending Balance as of 10/31/2013 | $ 106 | $ 21 | $ 45 | |||
Valuation Technique | Mean of bid/ask quote | Indicative bid quote | Indicative bid quote | |||
Unobservable Inputs | Broker Quote | Broker Quote | Broker Quote | |||
Input Value(s) | $88.50 | $925 | $925 |
* | Change in unrealized appreciation or (depreciation) attributable to Level 3 securities held at period end. This balance is included in the change in unrealized appreciation or (depreciation) on the Statements of Operations. |
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security purchase or sale. The Funds may purchase securities with delivery or payment to occur at a later date. At the time the Funds enter into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the NAV. The value of the security may vary with market fluctuations.
Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.
Dividends to Shareholders
Dividends from net investment income of the Funds generally will be declared daily and paid monthly. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. These amounts are reported with the net realized gains in the Fund’s Statement of Operations.
56
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Allocation of Income, Expenses, Gains, and Losses
Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated.
Redemption Fees
The High Yield Bond Fund imposes a 2% redemption fee on shares held for less than 90 days. The fee is deducted from the redemption proceeds and is intended to offset the trading costs, market impact, and other costs associated with short-term trading activity in the Fund. The “first-in, first-out” method is used to determine the holding period. The fee is allocated to all classes of the Fund pro-rata based on their respective net assets.
Other
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.
4. Securities and Other Investments
Payment In-Kind Securities
Certain Funds may invest in payment in-kind securities. Payment in-kind securities give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro-rata adjustment from the unrealized appreciation or depreciation on investment to interest receivable in the Statements of Assets and Liabilities.
Restricted Securities
Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities may be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities outstanding at the period ended October 31, 2013 are disclosed in the Notes to the Schedules of Investments.
57
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
High-Yield Securities
Non-investment-grade securities are rated below the four highest credit grades by at least one of the public rating agencies (or are unrated if not publicly rated). Participation in high-yielding securities transactions generally involves greater returns in the form of higher average yields. However, participation in such transactions involves greater risks, including sensitivity to economic changes, solvency, and relative liquidity in the secondary trading market. Lower ratings may reflect a greater possibility that the financial condition of the issuer, or adverse changes in general economic conditions, or both, may impair the ability of the issuer to make payments of interest and principal. The prices and yields of lower-rated securities generally fluctuate more than higher-quality securities, and such prices may decline significantly in periods of general economic difficulty or rising interest rates.
Other Investment Company Securities and Other Exchange Traded Products
The Funds may invest in shares of other investment companies, including open-end funds, closed-end funds, business development companies, ETFs, exchange-traded notes (“ETNs”), unit investment trusts, and other investment companies of the Trust. The Funds may invest in investment company securities advised by the Manager or a sub-advisor. Investments in the securities of other investment companies may involve duplication of advisory fees and certain other expenses. By investing in another investment company, a Fund becomes a shareholder of that investment company. As a result, Fund shareholders indirectly will bear a Fund’s proportionate share of the fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders directly bear in connection with the Fund’s own operations. These other fees and expenses are reflected as Acquired Fund Fees and Expenses and are included in the Fees and Expenses Table for the Fund in its Prospectus, if applicable. Investments in other investment companies may involve the payment of substantial premiums above the value of such issuer’s portfolio securities.
5. Federal Income and Excise Taxes
It is the policy of each Fund to qualify as a regulated investment company (“RIC”), by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.
The Funds do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended October 31, 2013 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in “Other expenses” on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.
A Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation or depreciation, as applicable, as the income is earned or capital gains are recorded.
58
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
The tax character of distributions paid were as follows (in thousands):
High Yield Bond | Retirement Income and Appreciation | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 3,331 | $ | 3,258 | $ | — | $ | — | ||||||||
Y Class | 72 | 5 | 34 | 35 | ||||||||||||
Investor Class | 489 | 611 | 3,039 | 3,447 | ||||||||||||
A Class | 57 | 26 | 40 | 24 | ||||||||||||
C Class | 114 | 91 | 21 | 22 | ||||||||||||
AMR Class | 7,002 | 6,414 | — | — | ||||||||||||
Long-Term Capital Gains | ||||||||||||||||
Institutional Class | — | — | — | — | ||||||||||||
Y Class | — | — | 14 | 4 | ||||||||||||
Investor Class | — | — | 969 | 745 | ||||||||||||
A Class | — | — | 8 | 5 | ||||||||||||
C Class | — | — | 12 | 9 | ||||||||||||
AMR Class | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 11,065 | $ | 10,405 | $ | 4,137 | $ | 4,291 | ||||||||
|
|
|
|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
Intermediate Bond | Short-Term Bond | |||||||||||||||
Year Ended October 31, 2013 | Year Ended October 31, 2012 | Year Ended October 31, 2013 | Year Ended October 31, 2012 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 11,487 | $ | 10,971 | $ | 2,250 | $ | 2,943 | ||||||||
Y Class | 66 | 2 | 14 | 5 | ||||||||||||
Investor Class | 119 | 218 | 116 | 273 | ||||||||||||
A Class | 14 | 17 | 21 | 49 | ||||||||||||
C Class | 18 | 8 | 1 | 3 | ||||||||||||
Long-Term Capital Gains | ||||||||||||||||
Institutional Class | 2,466 | 2,259 | — | — | ||||||||||||
Y Class | 29 | — | — | — | ||||||||||||
Investor Class | 39 | 16 | — | — | ||||||||||||
A Class | 4 | 3 | — | — | ||||||||||||
C Class | 7 | 2 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 14,249 | $ | 13,496 | $ | 2,402 | $ | 3,273 | ||||||||
|
|
|
|
|
|
|
|
* | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2013, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
High Yield Bond | Retirement Income and Appreciation | Intermediate Bond | Short-Term Bond | |||||||||||||
Cost basis of investments for federal income tax purposes | $ | 203,384 | $ | 125,832 | $ | 336,564 | $ | 162,177 | ||||||||
Unrealized appreciation | 7,158 | 8,188 | 9,388 | 602 | ||||||||||||
Unrealized depreciation | (5,290 | ) | (1,449 | ) | (4,457 | ) | (853 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net unrealized appreciation | 1,868 | 6,739 | 4,931 | (251 | ) | |||||||||||
Undistributed ordinary income | 702 | 2,702 | 3,599 | 447 | ||||||||||||
Accumulated long-term gain or (loss) | 728 | 3,033 | 451 | (8,152 | ) | |||||||||||
Other temporary differences | (26 | ) | (1 | ) | 1 | (1 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Distributable earnings or(deficits) | $ | 3,272 | $ | 12,473 | $ | 8,982 | $ | (7,957 | ) | |||||||
|
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|
|
|
|
|
|
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation or depreciation are attributable primarily to the tax deferral of losses from wash sales, book amortization for premiums and income adjustments associated with contingent payment debt instruments.
59
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, income adjustments associated with contingent payment debt instruments, and dividend reclasses as of October 31, 2013 (in thousands):
High Yield Bond | Retirement Income and Appreciation | Intermediate Bond | Short-Term Bond | |||||||||||||
Paid-in-capital | $ | (1 | ) | $ | (31 | ) | $ | — | $ | — | ||||||
Undistributed net investment income | — | 1,100 | 2,569 | 995 | ||||||||||||
Accumulated net realized gain (loss) | — | (1,068 | ) | (2,568 | ) | (995 | ) | |||||||||
Unrealized appreciation or (depreciation) of investments | 1 | (1 | ) | (1 | ) | — |
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the RIC MOD, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.
Finally, the RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the RIC MOD is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.
Capital losses incurred that will be carried forward under the provisions of the Act for the year October 31, 2013 were as follows (in thousands):
Loss Carryforward Character | ||||||||||||
Fund | Short-Term | Long Term | Total | |||||||||
Short-Term Bond | $ | 81 | $ | 392 | $ | 473 |
As of October 31, 2013 the capital loss carryforward positions prior to the provisions of the Act that may be applied against any realized net taxable gains in each succeeding year or until their expiration dates, whichever occurs first, were as follows (in thousands):
Fund | 2014 | 2015 | 2016 | 2017 | Total | |||||||||||||||
Short-Term Bond | $ | 2,015 | $ | 467 | $ | 5,198 | $ | — | $ | 7,680 |
The High Yield Bond Fund utilized $205 of long-term losses and the Short-Term Bond Fund utilized $19 of short term losses under the provisions of the Act. The High Yield Bond Fund utilized $1,970 of loss carryforward positions occurring prior to the provisions of the Act.
60
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
6. Investment Transactions
The aggregate cost of purchases and proceeds from sales and maturities of long-term investments, other than short-term obligations, for the year ended October 31, 2013 were as follows (in thousands):
High Yield Bond | Retirement Income and Appreciation | Intermediate Bond | Short-Term Bond | |||||||||||||
Purchases (excluding U.S. government securities) | $ | 197,501 | $ | 78,092 | $ | 177,718 | $ | 174,886 | ||||||||
Sales and maturities (excluding U.S. government securities) | 133,737 | 113,751 | 220,926 | 178,851 | ||||||||||||
Purchases of U.S. government securities | — | 31,651 | 99,577 | 107,517 | ||||||||||||
Sales and maturities of U.S. government securities | — | 35,774 | 86,961 | 87,975 |
7. Capital Share Transactions
The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):
For the Year Ended October 31, 2013
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 2,942 | $ | 27,146 | 259 | $ | 2,378 | 290 | $ | 2,667 | |||||||||||||||
Redemption Fees | — | 16 | — | 1 | — | 2 | ||||||||||||||||||
Reinvestment of dividends | 338 | 3,118 | 3 | 30 | 44 | 409 | ||||||||||||||||||
Shares redeemed | (1,149 | ) | (10,615 | ) | (95 | ) | (882 | ) | (498 | ) | (4,593 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 2,131 | $ | 19,665 | 167 | $ | 1,527 | (164 | ) | $ | (1,515 | ) | |||||||||||||
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|
|
|
|
|
|
|
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| |||||||||||||
A Class | C Class | AMR Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 75 | $ | 692 | 78 | $ | 719 | 10,040 | $ | 92,791 | |||||||||||||||
Redemption Fees | — | — | — | 1 | — | 32 | ||||||||||||||||||
Reinvestment of dividends | 5 | 46 | 7 | 68 | 758 | 7,002 | ||||||||||||||||||
Shares redeemed | (50 | ) | (463 | ) | (134 | ) | (1,237 | ) | (5,914 | ) | (54,137 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 30 | $ | 275 | (49 | ) | $ | (449 | ) | 4,884 | $ | 45,688 | |||||||||||||
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Total | ||||||||
High Yield Bond Fund | Shares | Amount | ||||||
Shares sold | 13,684 | $ | 126,393 | |||||
Redemption Fees | — | 52 | ||||||
Reinvestment of dividends | 1,155 | 10,673 | ||||||
Shares redeemed | (7,840 | ) | (71,927 | ) | ||||
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| |||||
Net increase (decrease) in shares outstanding | 6,999 | $ | 65,191 | |||||
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|
Y Class | Investor Class | A Class | ||||||||||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 43 | $ | 476 | 1,930 | $ | 21,371 | 590 | $ | 6,551 | |||||||||||||||
Reinvestment of dividends | 4 | 47 | 361 | 3,992 | 4 | 45 | ||||||||||||||||||
Shares redeemed | (198 | ) | (2,196 | ) | (5,373 | ) | (59,482 | ) | (630 | ) | (7,038 | ) | ||||||||||||
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| �� |
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|
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|
| |||||||||||||
Net (decrease) in shares outstanding | (151 | ) | $ | (1,673 | ) | (3,082 | ) | $ | (34,119 | ) | (36 | ) | $ | (442 | ) | |||||||||
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|
C Class | Total | |||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 20 | $ | 223 | 2,583 | $ | 28,621 | ||||||||||
Reinvestment of dividends | 3 | 27 | 372 | 4,111 | ||||||||||||
Shares redeemed | (29 | ) | (320 | ) | (6,230 | ) | (69,036 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (6 | ) | $ | (70 | ) | (3,275 | ) | $ | (36,304 | ) | ||||||
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|
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|
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|
61
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 11,814 | $ | 128,547 | 440 | $ | 4,951 | 100 | $ | 1,109 | |||||||||||||||
Reinvestment of dividends | 1,274 | 13,948 | — | 3 | 13 | 140 | ||||||||||||||||||
Shares redeemed | (15,949 | ) | (172,224 | ) | (433 | ) | (4,809 | ) | (929 | ) | (10,282 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | (2,861 | ) | $ | (29,729 | ) | 7 | $ | 145 | (816 | ) | $ | (9,033 | ) | |||||||||||
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|
|
|
|
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| |||||||||||||
A Class | C Class | Total | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 4 | $ | 40 | 4 | $ | 39 | 12,362 | $ | 134,686 | |||||||||||||||
Reinvestment of dividends | 1 | 9 | 2 | 19 | 1,290 | 14,119 | ||||||||||||||||||
Shares redeemed | (31 | ) | (336 | ) | (59 | ) | (639 | ) | (17,401 | ) | (188,290 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Net (decrease) in shares outstanding | (26 | ) | $ | (287 | ) | (53 | ) | $ | (581 | ) | (3,749 | ) | $ | (39,485 | ) | |||||||||
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|
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| |||||||||||||
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 10,396 | $ | 90,945 | 302 | $ | 2,652 | 264 | $ | 2,313 | |||||||||||||||
Reinvestment of dividends | 257 | 2,247 | 1 | 7 | 12 | 106 | ||||||||||||||||||
Shares redeemed | (18,129 | ) | (158,900 | ) | (199 | ) | (1,746 | ) | (1,030 | ) | (9,019 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | (7,476 | ) | $ | (65,708 | ) | 104 | $ | 913 | (754 | ) | $ | (6,600 | ) | |||||||||||
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| |||||||||||||
A Class | C Class | Total | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 133 | $ | 1,161 | 88 | $ | 770 | 11,183 | $ | 97,841 | |||||||||||||||
Reinvestment of dividends | 1 | 8 | — | 1 | 271 | 2,369 | ||||||||||||||||||
Shares redeemed | (209 | ) | (1,827 | ) | (32 | ) | (281 | ) | (19,599 | ) | (171,773 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | (75 | ) | $ | (658 | ) | 56 | $ | 490 | (8,145 | ) | $ | (71,563 | ) | |||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
For the Year Ended October 31, 2012
| ||||||||||||||||||||||||
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1,461 | $ | 12,916 | 50 | $ | 459 | 572 | $ | 5,059 | |||||||||||||||
Redemption Fees | — | 16 | — | — | — | 3 | ||||||||||||||||||
Reinvestment of dividends | 322 | 2,850 | 1 | 4 | 51 | 448 | ||||||||||||||||||
Shares redeemed | (1,898 | ) | (16,860 | ) | (4 | ) | (37 | ) | (512 | ) | (4,470 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | (115 | ) | $ | (1,078 | ) | 47 | $ | 426 | 111 | $ | 1,040 | |||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
A Class | C Class | AMR Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 63 | $ | 562 | 222 | $ | 1,945 | 4,952 | $ | 43,887 | |||||||||||||||
Redemption Fees | — | — | — | — | — | 28 | ||||||||||||||||||
Reinvestment of dividends | 2 | 18 | 4 | 37 | 725 | 6,414 | ||||||||||||||||||
Shares redeemed | (4 | ) | (37 | ) | (24 | ) | (205 | ) | (4,666 | ) | (40,679 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase in shares outstanding | 61 | $ | 543 | 202 | $ | 1,777 | 1,011 | $ | 9,650 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
Total | ||||||||
High Yield Bond Fund | Shares | Amount | ||||||
Shares sold | 7,320 | $ | 64,828 | |||||
Redemption Fees | — | 47 | ||||||
Reinvestment of dividends | 1,105 | 9,771 | ||||||
Shares redeemed | (7,108 | ) | (62,288 | ) | ||||
|
|
|
| |||||
Net increase in shares outstanding | 1,317 | $ | 12,358 | |||||
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|
|
|
62
American Beacon FundsSM
Notes to Financial Statements
October 31, 2013
Y Class | Investor Class | A Class | ||||||||||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 204 | $ | 2,217 | 3,449 | $ | 37,658 | 60 | $ | 648 | |||||||||||||||
Reinvestment of dividends | 4 | 38 | 385 | 4,169 | 2 | 26 | ||||||||||||||||||
Shares redeemed | (52 | ) | (571 | ) | (2,740 | ) | (29,774 | ) | (21 | ) | (232 | ) | ||||||||||||
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| |||||||||||||
Net increase in shares outstanding | 156 | $ | 1,684 | 1,094 | $ | 12,053 | 41 | $ | 442 | |||||||||||||||
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C Class | Total | |||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 40 | $ | 434 | 3,753 | $ | 40,957 | ||||||||||
Reinvestment of dividends | 3 | 27 | 394 | 4,260 | ||||||||||||
Shares redeemed | (12 | ) | (126 | ) | (2,825 | ) | (30,703 | ) | ||||||||
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| |||||||||
Net increase in shares outstanding | 31 | $ | 335 | 1,322 | $ | 14,514 | ||||||||||
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|
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 42,148 | $ | 463,192 | 7 | $ | 77 | 1,267 | $ | 13,949 | |||||||||||||||
Reinvestment of dividends | 1,196 | 13,226 | — | 2 | 15 | 165 | ||||||||||||||||||
Shares redeemed | (33,908 | ) | (375,696 | ) | (2 | ) | (27 | ) | (643 | ) | (7,161 | ) | ||||||||||||
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| |||||||||||||
Net increase in shares outstanding | 9,436 | $ | 100,722 | 5 | $ | 52 | 639 | $ | 6,953 | |||||||||||||||
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| |||||||||||||
A Class | C Class | Total | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 95 | $ | 1,037 | 97 | $ | 1,080 | 43,614 | $ | 479,335 | |||||||||||||||
Reinvestment of dividends | 1 | 8 | 1 | 6 | 1,213 | 13,407 | ||||||||||||||||||
Shares redeemed | (84 | ) | (917 | ) | (2 | ) | (23 | ) | (34,639 | ) | (383,824 | ) | ||||||||||||
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| |||||||||||||
Net increase in shares outstanding | 12 | $ | 128 | 96 | $ | 1,063 | 10,188 | $ | 108,918 | |||||||||||||||
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| |||||||||||||
Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 11,980 | $ | 104,985 | 7 | $ | 59 | 740 | $ | 6,452 | |||||||||||||||
Reinvestment of dividends | 336 | 2,936 | 1 | 5 | 29 | 250 | ||||||||||||||||||
Shares redeemed | (5,553 | ) | (48,539 | ) | (16 | ) | (137 | ) | (1,969 | ) | (17,178 | ) | ||||||||||||
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| |||||||||||||
Net increase (decrease) in shares outstanding | 6,763 | $ | 59,382 | (8 | ) | $ | (73 | ) | (1,200 | ) | $ | (10,476 | ) | |||||||||||
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| |||||||||||||
A Class | C Class | Total | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 102 | $ | 890 | 8 | $ | 72 | 12,837 | $ | 112,458 | |||||||||||||||
Reinvestment of dividends | 2 | 19 | — | 2 | 368 | 3,212 | ||||||||||||||||||
Shares redeemed | (161 | ) | (1,411 | ) | (8 | ) | (72 | ) | (7,707 | ) | (67,337 | ) | ||||||||||||
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| |||||||||||||
Net increase (decrease) in shares outstanding | (57 | ) | $ | (502 | ) | — | $ | 2 | 5,498 | $ | 48,333 | ) | ||||||||||||
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63
American Beacon High Yield Bond FundSM
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | March 1 to Oct. 31, 2010 | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | |||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.10 | $ | 8.68 | $ | 9.05 | $ | 8.42 | $ | 6.77 | $ | 9.12 | $ | 8.69 | $ | 9.06 | $ | 8.63 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income | 0.58 | 0.67 | 0.71 | 0.75 | 0.79 | 0.58 | 0.64 | 0.68 | 0.50 | |||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.21 | 0.42 | (0.37 | ) | 0.63 | 1.66 | 0.20 | 0.43 | (0.37 | ) | 0.43 | |||||||||||||||||||||||||
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Total income from investment operations | 0.79 | 1.09 | 0.34 | 1.38 | 2.45 | 0.78 | 1.07 | 0.31 | 0.93 | |||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.58 | ) | (0.67 | ) | (0.71 | ) | (0.75 | ) | (0.80 | ) | (0.58 | ) | (0.64 | ) | (0.68 | ) | (0.50 | ) | ||||||||||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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Total distributions | (0.58 | ) | (0.67 | ) | (0.71 | ) | (0.75 | ) | (0.80 | ) | (0.58 | ) | (0.64 | ) | (0.68 | ) | (0.50 | ) | ||||||||||||||||||
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Redemption fees added to beneficial interests | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | ||||||||||||||||||
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Net asset value, end of period | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.05 | $ | 8.42 | $ | 9.32 | $ | 9.12 | $ | 8.69 | $ | 9.06 | ||||||||||||||||||
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Total return C | 8.94 | % | 13.12 | % | 3.79 | % | 17.17 | % | 39.06 | % | 8.74 | % | 12.74 | % | 3.36 | % | 11.17 | %D | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 62,836 | $ | 42,026 | $ | 41,093 | $ | 41,459 | $ | 47,254 | $ | 2,005 | $ | 437 | $ | 11 | $ | 1 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.91 | % | 0.93 | % | 0.88 | % | 0.79 | % | 0.79 | % | 1.02 | % | 1.13 | % | 27.02 | % | 0.82 | %E | ||||||||||||||||||
Expenses, net of reimbursements | 0.89 | % | 0.93 | % | 0.88 | % | 0.79 | % | 0.79 | % | 0.98 | % | 1.01 | % | 1.61 | % | 0.82 | %E | ||||||||||||||||||
Net investment income (loss), before reimbursements | 6.25 | % | 7.61 | % | 7.90 | % | 8.69 | % | 11.46 | % | 6.06 | % | 7.08 | % | (18.29 | )% | 8.53 | %E | ||||||||||||||||||
Net investment income, net of reimbursements | 6.26 | % | 7.62 | % | 7.90 | % | 8.69 | % | 11.46 | % | 6.10 | % | 7.20 | % | 7.11 | % | 8.53 | %E | ||||||||||||||||||
Portfolio turnover rate | 82 | % | 100 | % | 149 | % | 176 | % | 212 | % | 82 | % | 100 | % | 149 | % | 176 | %F |
A | PENN Capital Management Company, Inc. was added as an investment manager to the High Yield Bond Fund on September 15, 2011. |
B | Amounts represent less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
64
American Beacon High Yield Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | 2013 | 2012 | 2011A | 2010 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | $ | 6.77 | $ | 9.11 | $ | 8.69 | $ | 9.08 | $ | 8.67 | $ | 9.09 | $ | 8.67 | $ | 9.05 | $ | 8.68 | |||||||||||||||||||||||||
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0.56 | 0.65 | 0.69 | 0.73 | 0.78 | 0.56 | 0.66 | 0.69 | 0.32 | 0.49 | 0.59 | 0.63 | 0.09 | ||||||||||||||||||||||||||||||||||||||
0.21 | 0.42 | (0.38 | ) | 0.64 | 1.65 | 0.21 | 0.42 | (0.39 | ) | 0.41 | 0.21 | 0.42 | (0.39 | ) | 0.37 | |||||||||||||||||||||||||||||||||||
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0.77 | 1.07 | 0.31 | 1.37 | 2.43 | 0.77 | 1.08 | 0.30 | 0.73 | 0.70 | 1.01 | 0.24 | 0.46 | ||||||||||||||||||||||||||||||||||||||
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(0.56 | ) | (0.65 | ) | (0.69 | ) | (0.73 | ) | (0.78 | ) | (0.56 | ) | (0.66 | ) | (0.69 | ) | (0.32 | ) | (0.49 | ) | (0.59 | ) | (0.62 | ) | (0.09 | ) | |||||||||||||||||||||||||
— | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
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(0.56 | ) | (0.65 | ) | (0.69 | ) | (0.73 | ) | (0.78 | ) | (0.56 | ) | (0.66 | ) | (0.69 | ) | (0.32 | ) | (0.49 | ) | (0.59 | ) | (0.62 | ) | (0.09 | ) | |||||||||||||||||||||||||
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0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | |||||||||||||||||||||||||
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$ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | $ | 9.32 | $ | 9.11 | $ | 8.69 | $ | 9.08 | $ | 9.30 | $ | 9.09 | $ | 8.67 | $ | 9.05 | |||||||||||||||||||||||||
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8.73 | % | 12.86 | % | 3.41 | % | 17.00 | % | 38.70 | % | 8.72 | % | 12.88 | % | 3.31 | % | 8.66 | %D | 7.90 | % | 12.06 | % | 2.67 | % | 5.31 | %D | |||||||||||||||||||||||||
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$ | 7,609 | $ | 8,930 | $ | 7,560 | $ | 54,142 | $ | 90,736 | $ | 972 | $ | 678 | $ | 117 | $ | 40 | $ | 1,858 | $ | 2,262 | $ | 403 | $ | 37 | |||||||||||||||||||||||||
1.13 | % | 1.16 | % | 1.09 | % | 1.04 | % | 1.01 | % | 1.38 | % | 1.46 | % | 3.93 | % | 1.30 | %E | 2.12 | % | 2.16 | % | 3.15 | % | 2.29 | %E | |||||||||||||||||||||||||
1.09 | % | 1.16 | % | 1.09 | % | 1.04 | % | 1.01 | % | 1.12 | % | 1.11 | % | 1.11 | % | 1.12 | %E | 1.87 | % | 1.86 | % | 1.85 | % | 1.87 | %E | |||||||||||||||||||||||||
6.08 | % | 7.37 | % | 7.75 | % | 8.48 | % | 9.36 | % | 5.78 | % | 6.97 | % | 4.74 | % | 6.93 | %E | 5.11 | % | 6.29 | % | 5.53 | % | 4.97 | %E | |||||||||||||||||||||||||
6.12 | % | 7.37 | % | 7.75 | % | 8.48 | % | 9.36 | % | 6.04 | % | 7.32 | % | 7.56 | % | 7.11 | %E | 5.36 | % | 6.60 | % | 6.82 | % | 5.40 | %E | |||||||||||||||||||||||||
82 | % | 100 | % | 149 | % | 176 | % | 212 | % | 82 | % | 100 | % | 149 | % | 176 | %F | 82 | % | 100 | % | 149 | % | 176 | %F |
65
American Beacon High Yield Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
AMR Class | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011A | 2010 | 2009 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | $ | 6.77 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.61 | 0.70 | 0.74 | 0.78 | 0.81 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.21 | 0.42 | (0.38 | ) | 0.63 | 1.65 | ||||||||||||||
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Total income from investment operations | 0.82 | 1.12 | 0.36 | 1.41 | 2.46 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.61 | ) | (0.70 | ) | (0.74 | ) | (0.77 | ) | (0.81 | ) | ||||||||||
Distributions from net realized gains on securities | — | — | — | — | ||||||||||||||||
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Total distributions | (0.61 | ) | (0.70 | ) | (0.74 | ) | (0.77 | ) | (0.81 | ) | ||||||||||
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Redemption fees added to beneficial interests | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | 0.00 | B | ||||||||||
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Net asset value, end of period | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | ||||||||||
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Total return C | 9.25 | % | 13.46 | % | 3.96 | % | 17.59 | % | 39.41 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 133,510 | $ | 86,030 | $ | 73,298 | $ | 89,992 | $ | 92,659 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.61 | % | 0.62 | % | 0.60 | % | 0.54 | % | 0.53 | % | ||||||||||
Expenses, net of reimbursements | 0.61 | % | 0.62 | % | 0.60 | % | 0.54 | % | 0.53 | % | ||||||||||
Net investment income (loss), before reimbursements | 6.55 | % | 7.91 | % | 8.18 | % | 8.91 | % | 10.34 | % | ||||||||||
Net investment income, net of reimbursements | 6.55 | % | 7.91 | % | 8.18 | % | 8.91 | % | 10.34 | % | ||||||||||
Portfolio turnover rate | 82 | % | 100 | % | 149 | % | 176 | % | 212 | % |
A | PENN Capital Management Company, Inc. was added as an investment manager to the High Yield Bond Fund on September 15, 2011. |
B | Amounts represent less than $0.01 per share. |
C | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
D | Not annualized. |
E | Annualized. |
F | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
66
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67
American Beacon Retirement Income and Appreciation FundSM
Financial Highlights
(For a share outstanding throughout the period)
Y Class | ||||||||||||||||
Year Ended October 31, | March 1 to Oct. 31, 2010 | |||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||
Net asset value, beginning of period | $ | 11.14 | $ | 10.83 | $ | 10.80 | $ | 10.31 | ||||||||
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Income from investment operations: | ||||||||||||||||
Net investment income | 0.06 | 0.28 | 0.26 | 0.20 | ||||||||||||
Net gains from investments (both realized and unrealized) | 0.32 | 0.37 | 0.05 | 0.49 | ||||||||||||
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Total income from investment operations | 0.38 | 0.65 | 0.31 | 0.69 | ||||||||||||
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Less distributions: | ||||||||||||||||
Dividends from net investment income | (0.26 | ) | (0.28 | ) | (0.28 | ) | (0.20 | ) | ||||||||
Distributions from net realized gains on securities | (0.07 | ) | (0.06 | ) | — | — | ||||||||||
Return of capital | — | — | — | — | ||||||||||||
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Total distributions | (0.33 | ) | (0.34 | ) | (0.28 | ) | (0.20 | ) | ||||||||
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Net asset value, end of period | $ | 11.19 | $ | 11.14 | $ | 10.83 | $ | 10.80 | ||||||||
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Total return A | 3.43 | % | 6.10 | % | 2.96 | % | 6.78 | %B | ||||||||
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Ratios and supplemental data: | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 608 | $ | 2,287 | $ | 539 | $ | 367 | ||||||||
Ratios to average net assets: | ||||||||||||||||
Expenses, before reimbursements | 0.83 | % | 0.87 | % | 1.80 | % | 0.80 | %C | ||||||||
Expenses, net of reimbursements | 0.80 | % | 0.81 | % | 0.84 | % | 0.80 | %C | ||||||||
Net investment income, before reimbursements | 1.95 | % | 2.20 | % | 1.45 | % | 2.74 | %C | ||||||||
Net investment income, net of reimbursements | 1.99 | % | 2.26 | % | 2.41 | % | 2.74 | %C | ||||||||
Portfolio turnover rate | 53 | % | 42 | % | 54 | % | 51 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
E | The tax return of capital is based upon shares at the time of this distribution. Amounts are less than $0.01 per share. |
68
American Beacon Retirement Income and Appreciation FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 11.14 | $ | 10.84 | $ | 10.81 | $ | 10.25 | $ | 8.80 | $ | 11.17 | $ | 10.85 | $ | 10.81 | $ | 10.37 | $ | 11.17 | $ | 10.85 | $ | 10.82 | $ | 10.61 | |||||||||||||||||||||||||
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0.10 | 0.24 | 0.27 | 0.36 | 0.32 | 0.12 | 0.22 | 0.23 | 0.13 | 0.08 | 0.13 | 0.15 | 0.03 | ||||||||||||||||||||||||||||||||||||||
0.25 | 0.37 | 0.02 | 0.51 | 1.53 | 0.23 | 0.39 | 0.05 | 0.44 | 0.18 | 0.39 | 0.04 | 0.20 | ||||||||||||||||||||||||||||||||||||||
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0.35 | 0.61 | 0.29 | 0.87 | 1.85 | 0.35 | 0.61 | 0.28 | 0.57 | 0.26 | 0.52 | 0.19 | 0.23 | ||||||||||||||||||||||||||||||||||||||
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(0.23 | ) | (0.25 | ) | (0.26 | ) | (0.31 | ) | (0.40 | ) | (0.22 | ) | (0.23 | ) | (0.24 | ) | (0.13 | ) | (0.12 | ) | (0.14 | ) | (0.16 | ) | (0.02 | ) | |||||||||||||||||||||||||
(0.07 | ) | (0.06 | ) | — | — | — | (0.07 | ) | (0.06 | ) | — | — | (0.07 | ) | (0.06 | ) | — | — | ||||||||||||||||||||||||||||||||
— | — | — | — | — | E | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
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(0.30 | ) | (0.31 | ) | (0.26 | ) | (0.31 | ) | (0.40 | ) | (0.29 | ) | (0.29 | ) | (0.24 | ) | (0.13 | ) | (0.19 | ) | (0.20 | ) | (0.16 | ) | (0.02 | ) | |||||||||||||||||||||||||
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$ | 11.19 | $ | 11.14 | $ | 10.84 | $ | 10.81 | $ | 10.25 | $ | 11.23 | $ | 11.17 | $ | 10.85 | $ | 10.81 | $ | 11.24 | $ | 11.17 | $ | 10.85 | $ | 10.82 | |||||||||||||||||||||||||
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3.14 | % | 5.75 | % | 2.71 | % | 8.60 | % | 21.50 | % | 3.18 | % | 5.78 | % | 2.61 | % | 5.52 | %B | 2.28 | % | 4.87 | % | 1.75 | % | 2.19 | %B | |||||||||||||||||||||||||
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$ | 130,013 | $ | 163,713 | $ | 147,415 | $ | 126,022 | $ | 93,727 | $ | 851 | $ | 1,253 | $ | 770 | $ | 166 | $ | 1,918 | $ | 1,977 | $ | 1,587 | $ | 1,035 | |||||||||||||||||||||||||
1.11 | % | 1.12 | % | 1.10 | % | 1.08 | % | 1.01 | % | 1.23 | % | 1.28 | % | 2.00 | % | 1.20 | %C | 1.99 | % | 2.04 | % | 1.99 | % | 2.33 | %C | |||||||||||||||||||||||||
1.11 | % | 1.12 | % | 1.10 | % | 1.08 | % | 1.01 | % | 1.14 | % | 1.14 | % | 1.15 | % | 1.14 | %C | 1.96 | % | 1.97 | % | 1.94 | % | 1.96 | %C | |||||||||||||||||||||||||
1.61 | % | 1.98 | % | 2.15 | % | 2.79 | % | 3.86 | % | 1.48 | % | 1.82 | % | 1.21 | % | 2.03 | %C | 0.71 | % | 1.06 | % | 1.25 | % | 1.40 | %C | |||||||||||||||||||||||||
1.60 | % | 1.98 | % | 2.15 | % | 2.79 | % | 3.86 | % | 1.57 | % | 1.95 | % | 2.06 | % | 2.10 | %C | 0.75 | % | 1.13 | % | 1.30 | % | 1.77 | %C | |||||||||||||||||||||||||
53 | % | 42 | % | 54 | % | 51 | % | 53 | % | 53 | % | 42 | % | 54 | % | 51 | %D | 53 | % | 42 | % | 54 | % | 51 | %D |
69
American Beacon Intermediate Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | March 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.26 | $ | 10.99 | $ | 11.10 | $ | 10.69 | $ | 9.61 | $ | 11.31 | $ | 11.03 | $ | 11.10 | $ | 10.69 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.24 | 0.27 | 0.33 | 0.39 | 0.46 | (0.04 | ) | 0.26 | 0.27 | 0.23 | ||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.36 | ) | 0.34 | 0.10 | 0.40 | 1.07 | (0.12 | ) | 0.32 | 0.17 | 0.41 | |||||||||||||||||||||||||
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Total income (loss) from investment operations | (0.12 | ) | 0.61 | 0.43 | 0.79 | 1.53 | (0.16 | ) | 0.58 | 0.44 | 0.64 | |||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.28 | ) | (0.29 | ) | (0.35 | ) | (0.38 | ) | (0.45 | ) | (0.25 | ) | (0.25 | ) | (0.32 | ) | (0.23 | ) | ||||||||||||||||||
Distributions from net realized gains on securities | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | — | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | |||||||||||||||||||||
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Total distributions | (0.41 | ) | (0.34 | ) | (0.54 | ) | (0.38 | ) | (0.45 | ) | (0.38 | ) | (0.30 | ) | (0.51 | ) | (0.23 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 10.73 | $ | 11.26 | $ | 10.99 | $ | 11.10 | $ | 10.69 | $ | 10.77 | $ | 11.31 | $ | 11.03 | $ | 11.10 | ||||||||||||||||||
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Total return A | (1.04 | )% | 5.59 | % | 4.11 | % | 7.56 | % | 16.17 | % | (1.42 | )% | 5.34 | % | 4.19 | % | 6.03 | %B | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 339,416 | $ | 388,491 | $ | 275,234 | $ | 290,734 | $ | 210,983 | $ | 183 | $ | 113 | $ | 60 | $ | 382 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.33 | % | 0.33 | % | 0.35 | % | 0.33 | % | 0.32 | % | 0.67 | % | 0.99 | % | 0.73 | % | 0.67 | %C | ||||||||||||||||||
Expenses, net of reimbursements | 0.33 | % | 0.33 | % | 0.35 | % | 0.33 | % | 0.32 | % | 0.65 | % | 0.64 | % | 0.65 | % | 0.64 | %C | ||||||||||||||||||
Net investment income, before reimbursements | 2.30 | % | 2.25 | % | 3.12 | % | 3.39 | % | 4.31 | % | 1.91 | % | 1.65 | % | 2.74 | % | 2.58 | %C | ||||||||||||||||||
Net investment income, net of reimbursements | 2.30 | % | 2.25 | % | 3.12 | % | 3.39 | % | 4.32 | % | 1.93 | % | 2.00 | % | 2.82 | % | 2.60 | %C | ||||||||||||||||||
Portfolio turnover rate | 50 | % | 144 | % | 75 | % | 96 | % | 157 | % | 50 | % | 144 | % | 75 | % | 96 | %D |
A | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
B | Not annualized. |
C | Annualized. |
D | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
E | Portfolio turnover rate is for the period from November 1, 2008 through October 31, 2009. |
70
American Beacon Intermediate Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | March 2 to Oct. 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | |||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 10.68 | $ | 10.14 | $ | 11.24 | $ | 10.96 | $ | 11.07 | $ | 10.74 | $ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 11.05 | |||||||||||||||||||||||||
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(0.04 | ) | 0.22 | 0.29 | 0.33 | 0.27 | 0.14 | 0.18 | 0.28 | 0.13 | 0.07 | 0.13 | 0.19 | 0.03 | |||||||||||||||||||||||||||||||||||||
(0.14 | ) | 0.35 | 0.10 | 0.41 | 0.54 | (0.33 | ) | 0.36 | 0.09 | 0.33 | (0.35 | ) | 0.33 | 0.10 | 0.03 | |||||||||||||||||||||||||||||||||||
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(0.18 | ) | 0.57 | 0.39 | 0.74 | 0.81 | (0.19 | ) | 0.54 | 0.37 | 0.46 | (0.28 | ) | 0.46 | 0.29 | 0.06 | |||||||||||||||||||||||||||||||||||
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(0.23 | ) | (0.24 | ) | (0.31 | ) | (0.34 | ) | (0.27 | ) | (0.21 | ) | (0.21 | ) | (0.29 | ) | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.21 | ) | (0.03 | ) | |||||||||||||||||||||||||
(0.13 | ) | (0.05 | ) | (0.19 | ) | — | — | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | |||||||||||||||||||||||||||||
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(0.36 | ) | (0.29 | ) | (0.50 | ) | (0.34 | ) | (0.27 | ) | (0.34 | ) | (0.26 | ) | (0.48 | ) | (0.13 | ) | (0.26 | ) | (0.18 | ) | (0.40 | ) | (0.03 | ) | |||||||||||||||||||||||||
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$ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 10.68 | $ | 10.71 | $ | 11.24 | $ | 10.96 | $ | 11.07 | $ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | |||||||||||||||||||||||||
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(1.58 | )% | 5.20 | % | 3.65 | % | 7.01 | % | 8.05 | %B | (1.69 | )% | 4.99 | % | 3.45 | % | 4.31 | %B | (2.51 | )% | 4.21 | % | 2.70 | % | 0.56 | %B | |||||||||||||||||||||||||
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$ | 1,749 | $ | 11,011 | $ | 3,729 | $ | 3,829 | $ | 2,213 | $ | 420 | $ | 734 | $ | 584 | $ | 46 | $ | 734 | $ | 1,372 | $ | 286 | $ | 325 | |||||||||||||||||||||||||
0.87 | % | 0.84 | % | 0.86 | % | 0.83 | % | 1.22 | %C | 1.11 | % | 1.12 | % | 1.13 | % | 1.05 | %C | 1.94 | % | 1.87 | % | 1.86 | % | 2.09 | %C | |||||||||||||||||||||||||
0.79 | % | 0.79 | % | 0.79 | % | 0.76 | % | 0.81 | %C | 0.99 | % | 0.99 | % | 0.99 | % | 0.95 | %C | 1.74 | % | 1.73 | % | 1.72 | % | 1.74 | %C | |||||||||||||||||||||||||
1.74 | % | 1.80 | % | 2.59 | % | 2.88 | % | 3.33 | %C | 1.52 | % | 1.48 | % | 2.31 | % | 2.15 | %C | 0.69 | % | 0.75 | % | 1.61 | % | 0.88 | %C | |||||||||||||||||||||||||
1.82 | % | 1.86 | % | 2.66 | % | 2.95 | % | 3.74 | %C | 1.64 | % | 1.61 | % | 2.46 | % | 2.25 | %C | 0.89 | % | 0.89 | % | 1.75 | % | 1.23 | %C | |||||||||||||||||||||||||
50 | % | 144 | % | 75 | % | 96 | % | 157 | %E | 50 | % | 144 | % | 75 | % | 96 | %D | 50 | % | 144 | % | 75 | % | 96 | %D |
71
American Beacon Short-Term Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | March 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.83 | $ | 8.58 | $ | 8.77 | $ | 8.73 | $ | 8.90 | $ | 8.84 | ||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.09 | ) | 0.28 | 0.26 | 0.23 | 0.22 | A | 0.13 | 0.10 | 0.15 | 0.15 | |||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.13 | (0.05 | ) | (0.25 | ) | 0.10 | 0.33 | (0.08 | ) | 0.11 | (0.15 | ) | 0.08 | |||||||||||||||||||||||
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Total income (loss) from investment operations | 0.04 | 0.23 | 0.01 | 0.33 | 0.55 | 0.05 | 0.21 | 0.00 | 0.23 | |||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.16 | ) | (0.19 | ) | (0.27 | ) | (0.30 | ) | (0.10 | ) | (0.17 | ) | (0.17 | ) | (0.17 | ) | ||||||||||||||||||
Distributions from net realized gains on securities | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Total distributions | (0.12 | ) | (0.16 | ) | (0.19 | ) | (0.27 | ) | (0.30 | ) | (0.10 | ) | (0.17 | ) | (0.17 | ) | (0.17 | ) | ||||||||||||||||||
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Net asset value, end of period | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.83 | $ | 8.72 | $ | 8.77 | $ | 8.73 | $ | 8.90 | ||||||||||||||||||
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Total return B | 0.47 | % | 2.72 | % | 0.17 | % | 3.78 | % | 6.56 | % | 0.56 | % | 2.77 | % | 0.04 | % | 2.55 | %C | ||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 150,509 | $ | 217,545 | $ | 156,937 | $ | 131,314 | $ | 124,791 | $ | 1,173 | $ | 272 | $ | 344 | $ | 51 | ||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.38 | % | 0.37 | % | 0.37 | % | 0.35 | % | 0.33 | % | 0.72 | % | 0.72 | % | 1.43 | % | 0.65 | %D | ||||||||||||||||||
Expenses, net of reimbursements | 0.38 | % | 0.37 | % | 0.37 | % | 0.35 | % | 0.33 | % | 0.64 | % | 0.64 | % | 0.60 | % | 0.64 | %D | ||||||||||||||||||
Net investment income (loss), before reimbursements | 0.90 | % | 1.50 | % | 1.73 | % | 2.27 | % | 2.61 | % | 0.58 | % | 1.16 | % | 0.57 | % | 1.45 | %D | ||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.90 | % | 1.50 | % | 1.73 | % | 2.27 | % | 2.62 | % | 0.66 | % | 1.24 | % | 1.40 | % | 1.47 | %D | ||||||||||||||||||
Portfolio turnover rate | 105 | % | 18 | % | 65 | % | 60 | % | 140 | % | 105 | % | 18 | % | 65 | % | 60 | %E |
A | For purposes of this calculation, the change in undistributed net investment income per share was derived by dividing the change in undistributed net investment income by average shares outstanding for the period. |
B | Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. |
C | Not annualized. |
D | Annualized. |
E | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
72
American Beacon Short-Term Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
Investor Class | A Class | C Class | ||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Year Ended October 31, | May 17 to Oct. 31, | Year Ended October 31, | Sept. 1 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | 2013 | 2012 | 2011 | 2010 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||
$ | 8.79 | $ | 8.72 | $ | 8.89 | $ | 8.84 | $ | 8.59 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.84 | $ | 8.79 | $ | 8.72 | $ | 8.90 | $ | 8.88 | |||||||||||||||||||||||||
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(0.58 | ) | (0.19 | ) | 0.14 | 0.08 | 0.20 | A | 0.02 | 0.08 | 0.15 | 0.09 | 0.03 | 0.02 | 0.12 | (0.04 | ) | ||||||||||||||||||||||||||||||||||
0.58 | 0.39 | (0.15 | ) | 0.21 | 0.34 | (0.02 | ) | 0.11 | (0.18 | ) | 0.07 | (0.10 | ) | 0.11 | (0.21 | ) | 0.08 | |||||||||||||||||||||||||||||||||
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0.00 | 0.20 | (0.01 | ) | 0.29 | 0.54 | 0.00 | 0.19 | (0.03 | ) | 0.16 | (0.07 | ) | 0.13 | (0.09 | ) | 0.04 | ||||||||||||||||||||||||||||||||||
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(0.09 | ) | (0.13 | ) | (0.16 | ) | (0.24 | ) | (0.29 | ) | (0.08 | ) | (0.12 | ) | (0.15 | ) | (0.11 | ) | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.02 | ) | |||||||||||||||||||||||||
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(0.09 | ) | (0.13 | ) | (0.16 | ) | (0.24 | ) | (0.29 | ) | (0.08 | ) | (0.12 | ) | (0.15 | ) | (0.11 | ) | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.02 | ) | |||||||||||||||||||||||||
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$ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.89 | $ | 8.84 | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.90 | |||||||||||||||||||||||||
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0.03 | % | 2.28 | % | (0.12 | )% | 3.33 | % | 6.34 | % | 0.00 | % | 2.22 | % | (0.33 | )% | 1.78 | %C | (0.85 | )% | 1.46 | % | (1.00 | )% | 0.48 | %C | |||||||||||||||||||||||||
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$ | 7,497 | $ | 14,203 | $ | 24,557 | $ | 23,175 | $ | 30,402 | $ | 2,271 | $ | 2,951 | $ | 3,428 | $ | 44 | $ | 863 | $ | 377 | $ | 371 | $ | 1 | |||||||||||||||||||||||||
0.90 | % | 0.89 | % | 0.90 | % | 0.86 | % | 0.85 | % | 1.13 | % | 1.12 | % | 1.38 | % | 1.02 | %D | 1.89 | % | 1.90 | % | 2.47 | % | 2.28 | %D | |||||||||||||||||||||||||
0.79 | % | 0.79 | % | 0.78 | % | 0.67 | % | 0.54 | % | 0.85 | % | 0.85 | % | 0.84 | % | 0.81 | %D | 1.60 | % | 1.59 | % | 1.55 | % | 1.60 | %D | |||||||||||||||||||||||||
0.39 | % | 0.99 | % | 1.18 | % | 1.75 | % | 1.89 | % | 0.15 | % | 0.75 | % | 0.49 | % | 0.49 | %D | (0.65 | )% | (0.03 | )% | (0.43 | )% | (3.57 | )%D | |||||||||||||||||||||||||
0.50 | % | 1.09 | % | 1.30 | % | 1.94 | % | 2.20 | % | 0.43 | % | 1.03 | % | 1.03 | % | 0.69 | %D | (0.36 | )% | 0.28 | % | 0.49 | % | (2.88 | )%D | |||||||||||||||||||||||||
105 | % | 18 | % | 65 | % | 60 | % | 140 | % | 105 | % | 18 | % | 65 | % | 60 | %E | 105 | % | 18 | % | 65 | % | 60 | %E |
73
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2013 (Unaudited)
Privacy Policy
The American Beacon Funds recognize and respect the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the following sources:
• | information we receive from you on applications or other forms; |
• | information about your transactions with us or our service providers; and |
• | information we receive from third parties. |
We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards.
Federal Tax Information
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distribution for the taxable year ended October 31, 2013. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2013.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2012. All designations are based on financial information available as of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code of 1986, as amended, and the regulations there under.
High Yield Bond | Retirement Income and Appreciation | |||||||
Corporate Dividends Received Deduction | 1.26 | % | 4.93 | % | ||||
Qualified Dividend Income | 1.36 | % | 8.41 | % |
Long-term capital gain distributions for the year ended October 31, 2013 were designated for the following Funds:
Retirement Income and Appreciation | $ | 1,003,533 | ||
Intermediate Bond | 2,543,250 |
The Intermediate Bond Fund made $3,847,081 in short-term capital gain distributions.
Shareholders will receive notification in January 2014 of the applicable tax information necessary to prepare their 2013 income tax returns.
74
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
At its May 29, 2013 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”) and Morningstar, Inc. (“Morningstar”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee, for the benefit of all Trustees, sponsored a separate meeting on May 10, 2013 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.
In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The information requested by the Board included, among other information, the following materials. For various reasons, a subadvisor may not have provided responses to each requested item. In these instances, the Board considered the materials that were received from such subadvisor. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
• | a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; |
• | a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC; |
• | a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; |
• | a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any actual or potential remedial measures if the firm’s longer-term performance was materially below that of the peer group; |
• | any actual or anticipated economies of scale in relation to the services the firm provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflect these economies of scale for the benefit of the Fund’s investors; |
• | an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee rate schedule, if applicable, and the effect of any fee waivers; |
• | a description of any payments made or to be made by the subadvisors to the Manager to support a Fund’s marketing efforts; |
• | a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third-party voting service used by the firm; |
• | an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
• | confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Funds; |
• | a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the firm’s involvement in other activities; |
• | a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; |
• | a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of a Fund from taking undue risks; |
• | a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation, including any fair value determinations; |
• | a description of the firm’s use of derivatives, short positions, leveraged trading strategies or other similar trading strategies for the Funds; |
• | a discussion regarding the firm’s participation in third-party and/or proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions; |
• | a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers; |
• | a description of any actual or potential conflicts of interest anticipated in managing Fund assets; |
• | a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets; |
75
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
• | a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on a Fund’s behalf; |
• | a description of trade allocation procedures among accounts managed by the firm; |
• | a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions; |
• | a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for electronic communication network liquidity rebates with respect to the Funds; |
• | a certification by the firm regarding the reasonable design of its compliance program; |
• | a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review; |
• | confirmation that the firm is prepared to provide to the Manager, directly or in summary form, any regulatory review comments that could have a material impact on services provided to the Funds; |
• | a discussion of whether, due to the firm’s trading activities on behalf of the Funds, the firm would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendments to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt; |
• | information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; |
• | a description of the firm’s affiliation with any broker-dealer; |
• | a discussion of any anticipated change in the firm’s controlling persons; and |
• | verification of the firm’s insurance coverage with regards to the services provided to the Funds. |
In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:
• | a comparison of the performance of a share class of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and each Fund versus the respective peer group average; |
• | a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; |
• | a comparison of advisory fee rates and expense ratios for comparable mutual funds; |
• | a profit/loss analysis of the Manager; |
• | an analysis of any material complaints received from Fund shareholders; |
• | a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Funds; |
• | a discussion of whether the Manager provides different types or levels of administrative and accounting related services to certain Funds; |
• | a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices; |
• | a description of arrangements pursuant to which certain firms may make any direct or indirect payments to partially reimburse the Manager for its marketing or other expenses on behalf of the Funds; |
• | a description of the Manager’s securities lending practices and the fees received from such practices; |
• | a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; |
• | a description of the portfolio turnover rate for each Fund and, as applicable, each subadvisor to a Fund; |
• | a description of how expenses that are not readily identifiable to a particular Fund are allocated; and |
• | confirmation that the Manager complies with applicable CFTC and National Futures Association rules and requirements for applicable Funds and a discussion regarding whether, due to the Manager’s trading activities on behalf of other Funds, the Manager would need to register, or qualify for exclusion from registration, as a commodity pool operator or commodity trading advisor pursuant to the recent amendment to Rule 4.5 under the Commodity Exchange Act with respect to the Funds and, if so, whether the firm would so register or be exempt. |
In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For certain Funds, the Board also considered information regarding the performance of the Manager and individual subadvisors with respect to their allocated portions of a Fund’s portfolio, net of management or subadvisory fees, as applicable, but not other Fund expenses. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. The Board also considered that the use of Institutional Class performance generally facilitates a meaningful comparison for expense and performance purposes.
76
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 10, 2013 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 29, 2013 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.
The Board did not identify any particular information that was most relevant to its consideration to renew or approve each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal and approval of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal and approval of each Agreement was in the best interests of the Funds and their shareholders.
Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement
In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 29, 2013 meeting, the Board considered each Fund’s investment management and subadvisory relationships separately.
In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (5) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s quality of services; the Manager’s active role in monitoring and, as appropriate, recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.
With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Funds by each subadvisor, and whether those resources were commensurate with the needs of the Funds and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and codes of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its Lipper performance universe, Lipper performance group, and/or benchmark index(es). The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all performance groups and universes. The Board also considered that the performance groups and universes selected by Lipper may not provide appropriate comparisons for each Fund. In addition, the Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Board also considered in each instance the Manager’s recommendation to continue to retain each subadvisor. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that with respect to each Fund, the Management Agreement provides for the Manager to receive a management fee comprised of an annualized fee that is retained by the Manager plus the amount payable by the Manager to a subadvisor. The Board also considered that the Manager receives service and administrative fees to
77
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the cost of services for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not request profitability data from the subadvisors because the Board did not view this data as imperative to its deliberations given the arm’s-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates. In addition, the Board noted that subadvisors may not account for their profits on an account-by-account basis and, those that do, likely employ different methodologies in connection with these calculations.
Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”
Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Funds grow and whether fee rate levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates.
In addition, the Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee rate schedules for each Fund provide for a reasonable sharing of benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors.
In addition, the Manager noted that the Funds also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2012.
Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to Each Fund
The performance comparisons below were made versus each Fund’s Lipper performance universe median, Lipper performance group median and/or benchmark index. References below to each Fund’s Lipper performance group and Lipper performance universe are to the respective group or universe of comparable mutual funds included in the analysis provided by Lipper. A Lipper performance group consists of the Fund and a representative sample of funds with similar investment classifications and objectives as the Fund, as selected by Lipper. A Lipper performance universe is an expansion of the performance group, providing a broader view of performance across the Fund’s investment classification/objective and allowing for a more extensive comparison. In reviewing the performance, the Trustees viewed longer-term performance over a full market cycle, typically five years or longer, as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.
The expense comparisons below were made versus each Fund’s Lipper expense universe median and Lipper expense group median. References below to each Fund’s expense group and expense universe are to the respective group or universe of comparable mutual funds included in the analysis by Lipper. A Lipper expense group consists of the Fund and a representative sample of funds with similar operating structures, as selected by Lipper. A Lipper expense universe includes all funds in the investment classification/objective with a similar load type to the share class of the Fund included in the Lipper comparative information and provides a broader view of expenses across the Fund’s investment classification/objective. The Trustees also considered a Fund’s Morningstar fee level category. In reviewing expenses, the Trustees considered the positive impact of fee waivers where applicable and the Manager’s agreement to continue the fee waivers. In addition, information regarding the use of soft dollars was requested from the Manager and all subadvisors and was considered by the Trustees.
78
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Additional Considerations and Conclusions with Respect to the American Beacon High Yield Bond Fund
In considering the renewal of the Management Agreement for the American Beacon High Yield Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon High Yield Bond Fund outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013, but underperformed for the five- and ten-year periods; (2) the Fund’s performance was equal to the Lipper performance group median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (3) the Manager’s explanation that the Fund’s longer-term performance, relative to the performance universe, was adversely impacted by overweighting in certain sectors; (4) the expense ratio of the Institutional Class of the Fund was higher than the median of its Lipper expense universe and Lipper expense group; (5) the Institutional Class of the Fund was categorized by Morningstar as having a high expense ratio; (6) PENN Capital Management Company, Inc. (“PENN”) is relatively new to the Fund; and (7) the level of the Fund’s expense ratio is likely to decrease as the Fund grows.
In considering the renewal of the Investment Advisory Agreement with Franklin Advisors, Inc. (“Franklin”), Logan Circle Partners, L.P. (“Logan Circle”) and PENN, the Trustees considered the following additional factors: (1) Franklin outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Logan Circle outperformed the Lipper performance universe median for the one- and three-year periods ended March 31, 2013; (3) PENN outperformed the Lipper performance universe median for the one-year period ended March 31, 2013; (4) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; and (5) the Manager’s recommendation to continue to retain each subadvisor.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) determined that the American Beacon High Yield Bond Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon High Yield Bond Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Retirement Income and Appreciation Fund
In considering the renewal of the Management Agreement for the American Beacon Retirement Income and Appreciation Fund, the Trustees considered the following additional factors: (1) the American Beacon Retirement Income and Appreciation Fund outperformed the Lipper performance universe median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (2) the Fund outperformed the Lipper performance group median for the one- and five-year periods ended March 31, 2013, but underperformed for the three-year period; (3) the Manager’s representation that, due to the diverse nature of the Lipper performance universe and group, the Fund’s performance relative to its benchmark index may be more appropriate than a comparison to the Fund’s performance universe or group; (4) the Fund outperformed its benchmark index for the one-year period ended March 31, 2013, but underperformed for the three- and five-year periods; (5) the Fund’s investment strategy includes a fixed allocation between investment grade bonds and a convertibles strategy and is appropriate for investors desiring this type of investment exposure; (6) the Manager outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (7) the Manager outperformed its applicable benchmark index for the one-, three- and five-year periods ended March 31, 2013; (8) the expense ratio of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (9) the Investor Class of the Fund was categorized by Morningstar as having a high expense ratio.
In considering the renewal of the Investment Advisory Agreement with Calamos Advisors LLC (“Calamos”), the Trustees considered the following additional factors: (1) Calamos outperformed the Lipper performance universe median for the one-, three- and five-year periods ended March 31, 2013; (2) Calamos underperformed its applicable benchmark index for the one-, three- and five-year periods ended March 31, 2013; (3) representations by Calamos that, for fee rate comparison purposes, it does not manage other accounts comparable to the Fund; and (4) the Manager’s recommendation to continue to retain Calamos.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and Calamos under the Agreements are fair and reasonable; (2) determined that the American Beacon Retirement Income and Appreciation Fund and its shareholders would benefit from the Manager’s and Calamos’ continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Retirement Income and Appreciation Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Intermediate Bond Fund
In considering the renewal of the Management Agreement for the American Beacon Intermediate Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon Intermediate Bond Fund outperformed the Lipper performance universe median for the ten-year period ended March 31, 2013, but underperformed for the one-, three- and five-year periods; (2) the Fund underperformed the Lipper performance group median for the one-, three- and five-year periods ended March 31, 2013; (3) the Manager’s representation that the Fund’s performance relative to its benchmark index may be more appropriate as compared to the Lipper performance universe or group because the Lipper performance universe and group include certain funds that invest a portion of their assets in high yield securities, whereas the American Beacon Intermediate Bond Fund invests only in investment-grade securities; (4) the Fund outperformed its benchmark index for the one- and ten-year periods ended March 31, 2013, but underperformed its benchmark index for the three- and five-year periods; (5) the Manager outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the ten-year period ended March 31, 2013, but underperformed for the one-, three- and five-year periods; (6) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (7) the Institutional Class of the Fund was categorized by Morningstar as having a low expense ratio.
79
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
In considering the renewal of the Investment Advisory Agreement with Barrow, Hanley, MeWhinney & Strauss, LLC (“Barrow”), the Trustees considered the following additional factors: (1) Barrow outperformed the Lipper performance universe median with respect to its allocated portion of the Fund’s assets for the five- and ten-year periods ended March 31, 2013, but underperformed for the one- and three-year periods; (2) representations by Barrow regarding the fee rates it charges other comparable clients; (3) the Manager’s recommendation to continue to retain Barrow.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager and Barrow under the Agreements are fair and reasonable; (2) determined that the American Beacon Intermediate Bond Fund and its shareholders would benefit from the Manager’s and the subadvisor’s continued management of the Fund; and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the American Beacon Intermediate Bond Fund.
Additional Considerations and Conclusions with Respect to the American Beacon Short-Term Bond Fund
In considering the renewal of the Management Agreement for the American Beacon Short-Term Bond Fund, the Trustees considered the following additional factors: (1) the American Beacon Short-Term Bond Fund underperformed the Lipper performance universe median for the one-, three-, and five-year periods ended March 31, 2013, but outperformed for the ten-year period; (2) the Fund outperformed the Lipper performance group median for the five-year period ended March 31, 2013, but underperformed for the one- and three-year periods; (3) the Manager’s representation that the Fund’s performance relative to its benchmark index may be more appropriate as compared to the Lipper performance universe or group because the Lipper performance universe and group include certain funds that invest a portion of their assets in high yield securities, whereas the American Beacon Short-Term Bond Fund may invest only in investment-grade securities; (4) the Fund outperformed its benchmark index for the one-, three-, five- and ten-year periods ended March 31, 2013; (5) the expense ratio of the Institutional Class of the Fund was lower than the median of its Lipper expense universe and Lipper expense group; and (6) the Institutional Class of the Fund was categorized by Morningstar as having a below average expense ratio.
Based on these and other considerations, the Trustees: (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable; (2) determined that the American Beacon Short-Term Bond Fund and its shareholders would benefit from the Manager’s continued management of the Fund; and (3) approved the renewal of the Management Agreement with respect to the American Beacon Short-Term Bond Fund.
80
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-six funds in the fund complex that includes the Trust and the American Beacon Select Funds. The Trust’s Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
INTERESTED TRUSTEES | ||||
Term | ||||
Lifetime of Trust until removal, resignation or retirement* | ||||
Gerard Arpey (55) | Trustee since 2012 | Partner, Emerald Creek Group (private equity firm) (2011-Present); Chairman and Chief Executive Officer, AMR Corp. and American Airlines; Inc. (2003-2011); Director, S. C. Johnson & Son, Inc. (privately held company) (2008-present); Trustee, American Beacon Select Funds (2012-Present). | ||
Alan D. Feld** (76) | 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); Trustee, American Beacon Mileage Funds (1996-2012); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-2012). | ||
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
W. Humphrey Bogart (69) | Trustee since 2004 | Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Brenda A. Cline (52) | Trustee since 2004 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Eugene J. Duffy (59) | Trustee since 2008 | Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Thomas M. Dunning (71) | Trustee since 2008 | Chairman Emeritus (2008-Present) and Chairman (1998-2008)), Lockton Dunning Benefits (consulting firm in employee benefits); Lead Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Richard A. Massman (70) | 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); Trustee, American Beacon Mileage Funds (2004-2012); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-2012). | ||
Barbara J. McKenna, CFA (50) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). |
81
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
NON-INTERESTED TRUSTEES | Term | |||
Lifetime of Trust until removal, resignation or retirement* | ||||
R. Gerald Turner (67) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas 75275 | Trustee since 2001 | President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Trustee, American Beacon Mileage Funds (2001-2012); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-2012). | ||
Paul J. Zucconi,CPA (73) | 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) (2002-2012); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-2011); Trustee, American Beacon Mileage Funds (2008-2012); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-2012). | ||
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
One Year | ||||
Gene L. Needles, Jr. (58) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008-2012), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
Rosemary K. Behan (54) | VP, Secretary and Chief Legal Officer since 2006 | Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006-Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008-Present), Lighthouse Holdings Parent, Inc. | ||
Brian E. Brett (53) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
Wyatt Crumpler (47) | VP since 2007 | Chief Investment Officer (2012-Present), Vice President, Asset Management (2009-2012), and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc. | ||
Erica Duncan (43) | VP Since 2011 | Vice President, Marketing and Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM. | ||
Michael W. Fields (59) | VP since 1989 | Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009). | ||
Melinda G. Heika (52) | Treasurer since 2010 | Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010-Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc. | ||
Terri L. McKinney (49) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. |
82
Trustees and Officers of the American Beacon FundsSM
(Unaudited)
Name, Age and Address | Position, Term of Office and Length of Time Served with the Trust | Principal Occupation(s) During Past 5 Years and Current Directorships | ||
OFFICERS | Term | |||
One Year | ||||
Jeffrey K. Ringdahl (38) | VP since 2010 | Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007). | ||
Samuel J. Silver (50) | VP Since 2011 | Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc. | ||
Christina E. Sears (42) | Chief Compliance Officer since 2004 and Asst. Secretary since1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
John J. Okray (39) | Asst. Secretary since 2010 | Deputy General Counsel (2012-Present) and Assistant General Counsel (2010-2012), American Beacon Advisors, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010-Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010). | ||
Sonia L. Bates (56) | Asst. Treasurer since 2011 | Director, Tax and Financial Reporting (2011—Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings Parent, 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. Arpey is deemed to be an “interested person” of the Trust, as defined by the 1940 Act. Mr. Arpey previously served as CEO of AMR Corp., which has a material relationship with the Manager. |
*** | Mr. Feld is deemed to be an “interested person” of the 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-advisors. |
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Delivery of Documents
eDelivery is NOW AVAILABLE – Stop traditional mail delivery and receive your
shareholder reports and summary prospectus on-line. Sign up at
www.americanbeaconfunds.com
If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution’s name or contact your financial institution directly.
To obtain more information about the Fund:
![]() | ![]() | |
By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
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By Telephone: Institutional, Y, and Investor Classes Call (800) 658-5811 AMR ClassSM Call (800) 345-2345 | By Mail: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 | |
Availability of Quarterly Portfolio Schedules
In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of each Fund’s portfolio holdings is also made available on the Funds’ website at www.americanbeaconfunds.com approximately twenty days after the end of each month. | Availability of Proxy Voting Policy and Records
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website www.americanbeaconfunds.com and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009. |
Fund Service Providers:
CUSTODIAN State Street Bank and Trust Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Dallas, Texas | DISTRIBUTOR Foreside Fund Services, LLC Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus or Summary Prospectus.
American Beacon Funds, American Beacon High Yield Bond Fund, American Beacon Enhanced Income Fund, American Beacon Intermediate Bond Fund and American Beacon Short-Term Bond Fund are service marks of American Beacon Advisors, Inc.
AR 10/13
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The Trust amended its code November 12, 2013 to disclose the removal of terminated Investment Companies. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE.ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust’s Board of Trustees has determined that Mr. Paul Zucconi, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Mr. Paul Zucconi is “independent” as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) |
Audit Fees | Fiscal Year Ended | |||
$27,203 | 6/30/2012 | * | ||
$203,016 | 8/31/2012 | * | ||
$372,284 | 10/31/2012 | * | ||
$54,406 | 11/30/2012 | * | ||
$163,393 | 12/31/2012 | * | ||
$209,783 | 8/31/2013 | |||
$384,699 | 10/31/2013 | |||
$168,847 | 12/31/2013 | |||
$105,556 | 1/31/2014 |
(b) |
Audit-Related Fees | Fiscal Year Ended | |||
$0 | 6/30/2012 | |||
$0 | 8/31/2012 | |||
$0 | 10/31/2012 | |||
$0 | 11/30/2012 | |||
$0 | 12/31/2012 | |||
$0 | 8/31/2013 | |||
$0 | 10/31/2013 | |||
$0 | 12/31/2013 |
* | Change from previous reporting. |
(c) |
Tax Fees | Fiscal Year Ended | |||
$8,250 | 6/30/2012 | * | ||
$34,250 | 8/31/2012 | * | ||
$69,963 | 10/31/2012 | * | ||
$15,000 | 11/30/2012 | * | ||
$22,250 | 12/31/2012 | * | ||
$36,250 | 8/31/2013 | |||
$70,713 | 10/31/2013 | |||
$20,000 | 12/31/2013 | |||
$10,500 | 1/31/2014 |
* | Change from previous reporting. |
(d) |
All Other Fees | Fiscal Year Ended | |||
$0 | 6/30/2012 | |||
$0 | 8/31/2012 | |||
$0 | 10/31/2012 | |||
$0 | 11/30/2012 | |||
$0 | 12/31/2012 | |||
$0 | 8/31/2013 | |||
$0 | 10/31/2013 | |||
$0 | 12/31/2013 |
(e) (1) Pursuant to its charter, the Trust’s Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust’s principal accountant:
• | to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts’ financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors; |
• | to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser (“adviser affiliate”) that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; |
• | to consider whether the non-audit services provided by a Trust’s auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor’s independence; |
• | to review the arrangements for and scope of the annual audit and any special audits; and |
• | to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service. |
The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting.
(e) (2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
Aggregate Non-Audit Fees for Services Rendered to the:
Registrant | Adviser | Adviser’s Affiliates Providing Ongoing Services to Registrant | Fiscal Year Ended | |||||
$8,250 | $0 | N/A | 6/30/2012 | * | ||||
$34,250 | $0 | N/A | 8/31/2012 | * | ||||
$69,963 | $0 | N/A | 10/31/2012 | * | ||||
$15,000 | $0 | N/A | 11/30/2012 | * | ||||
$22,500 | $0 | N/A | 12/31/2012 | * | ||||
$36,250 | $0 | N/A | 8/31/2013 | |||||
$70,713 | $0 | N/A | 10/31/2013 | |||||
$20,000 | $0 | N/A | 12/31/2013 | |||||
$10,500 | $0 | N/A | 1/31/2014 |
* Change from previous reporting.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) (1) Filed herewith as EX-99.CODE ETH.
(a) (2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.
(a) (3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
American Beacon Funds |
Date: January 9, 2014
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer | ||
American Beacon Funds |
Date: January 9, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /s/ Gene L. Needles, Jr. | |
Gene L. Needles, Jr. | ||
President | ||
American Beacon Funds |
Date: January 9, 2014
By | /s/ Melinda G. Heika | |
Melinda G. Heika | ||
Treasurer | ||
American Beacon Funds |
Date: January 9, 2014