UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
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, 2014
Date of reporting period: October 31, 2014
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 |
Investing in fixed income 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.
S&P credit ratings for long-term obligations (or issuers thereof) are AAA, AA, A, BBB, BB, B, CCC, CC, C and D in decreasing order. For example, obligations rated AAA are judged to be of the highest quality, BBB to be of medium grade, CCC are judged to be speculative and obligations rated D are in default. Obligations rated in one of the four highest categories are considered to be investment grade while all other ratings are considered non-investment grade.
This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s. Reproduction and distribution of third-party content in any form is prohibited except with the prior written permission of the related third party. Third-party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD-PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD-PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes and should not be relied on as investment advice.
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, 2014 |
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In November 2013, the decision by the Federal Reserve Bank (“the Fed”) to taper its quantitative easing asset purchase program helped push the 10-year Treasury yield higher. The trend continued with the definitive announcement in December that the FOMC would begin tapering its bond purchases in January 2014. The Fed also indicated that short-term interest rates would remain at near-zero levels.
The broad market rally began to slow down toward the end of the reporting period, although it still remained positive for the year. Slowing global growth and geopolitical concerns created a “flight to safety” as investors became more risk averse. Long-term Treasuries benefitted the most from this | |
| phenomenon while short-term Treasuries, investment-grade corporate bonds and asset-backed securities were flat or slightly negative. | ||
For the 12 months ended October 31, 2014:
| • | The American Beacon High Yield Bond Fund (Investor Class) returned 4.03%. |
| • | The American Beacon Retirement Income and Appreciation Fund (Investor Class) returned 4.86%. |
| • | The American Beacon Intermediate Bond Fund (Investor Class) returned 3.12%. |
| • | The American Beacon Short-Term Bond Fund (Investor Class) returned 0.53%. |
Thank you for your continued investment in the American Beacon Funds and we are grateful you have placed your confidence in us. 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
October 31, 2014 (Unaudited)
Fixed-income results were mixed during the 12-month reporting period ending October 31, 2014. In November 2013, the decision by the Federal Open Market Committee (FOMC) to taper its quantitative easing asset purchase program helped push the 10-year Treasury yield higher. The trend continued with the definitive announcement in December that the FOMC would begin tapering its bond purchases in January. The Fed also indicated that short-term interest rates would remain at near-zero levels until late 2015.
The start of 2014 brought investors a pleasant surprise as declining interest rates helped U.S. Treasuries and the broad fixed-income market realize positive gains in the quarter. Intermediate- and longer-dated issues returned over 5% and Treasuries were up over 1%. While economic growth in the quarter was not strong enough to cause interest rates to rise, the combination of soft economic numbers and weather-related challenges created a higher demand for high-yield and investment-grade corporate bonds.
In March, the markets responded to new Fed Chairwoman Janet Yellen’s comments that the Fed could take a more aggressive timeframe than initially intended to raise short-term interest rates at the conclusion of the tapering process. The 10-year Treasury yield, having dropped from its previous high at the end of 2013, began to rise in response. The swift investor reaction further indicated the Fed’s influence on the fixed-income markets.
The first quarter rally in the bond markets continued into the second quarter as a variety of factors contributed to the interest rate declines experienced in the first quarter. Weaker-than-expected gross domestic product (GDP) growth in the first quarter and a greater demand for safe-haven assets as geopolitical tensions increased, were key contributors to a lowering interest rate environment. Additionally, Yellen’s comments suggesting the Fed would continue to keep rates low despite stronger economic data further gave investors confidence, and intermediate- and long-term bonds helped spur the broad market rally.
The rally finally began to slow down toward the end of the reporting period although it still remained positive for the year. Slowing global growth and geopolitical concerns created a “flight to safety” as investors became more risk averse. Long-term Treasuries benefitted the most from this phenomenon while short-term Treasuries, investment-grade corporate bonds and asset-backed securities were flat or slightly negative.
The Barclays U.S. Aggregate Bond Index gained 4.14% for the reporting period while the BofA Merrill Lynch U.S. High Yield Master II Index increased 5.85%.
2
High Yield Bond Market Overview
October 31, 2014 (Unaudited)
The JPMorgan Global High Yield Index returned 5.85% over the last 12 months, outperforming its investment-grade peers while lagging emerging market bonds, which returned 4.14% and 7.20%, respectively.
Remarkably, interest rates declined steadily over the course of the year, ignoring widely-speculated predictions of an impending rise in accordance with the closure of the Federal Reserve’s Quantitative Easing program. For the 12-month period ending October 31, 2014, the 10-year U.S. Treasury rate decreased 28 basis points (bps) from 2.62% to 2.34%. The yield on the JPMorgan Global High Yield Index widened 0.36% to 6.37% while spreads widened 0.25% to 5.08%. Unlike 2013, BB-rated bonds outperformed the broader index by a substantial margin, returning 7.69% while enjoying the favorable interest rate environment. B-rated bonds performed roughly in-line, returning 5.40% while CCC-rated bonds lagged the index by more than 2.00%, returning only 3.65%.
The past 12 months contained multiple events and themes which dominated the search for yield. The U.S. Congress’s solution in October 2013 to raise the debt ceiling (at least temporarily) prompted a brief rally among stocks and bonds. This momentum waned as investors turned their eyes to the Federal Open Market Committee (FOMC) and the possibility of tapering asset purchases. Ultimately, the high yield market was able to fully absorb a rise in interest rates thanks to positive earnings from issuers and improving growth in the U.S. economy.
Geopolitical unrest drove asset prices during the first half of 2014 as weakness in emerging markets intensified, culminating with conflict in Eastern Europe and the Middle East. Notable events such as the largest high yield default on record (TXU Energy) and the largest singular high yield bond issuance on record (Altice and Numericable) introduced a re-energized focus on market technicals, and prompted a summer-long cycle of retail outflows and negative performance.
Positive earnings across industries and anticipation for a European quantitative easing program led to a mild August and early September, only to be replaced by selling pressure due to a number of interconnected factors such as a wave of new issue supply, investors holding low cash balances and a general aversion to risky assets. Ultimately, the market ended the year with a bid resurfacing for high yield assets as investors regained confidence thanks to positive economic developments, the conclusion of quantitative easing and low interest rates.
Primary issuance continued its rapid pace as high yield companies continued to take advantage of low interest rates. New issuance totaled more than $365 billion, with refinancing activity accounting for more than 50% of volume. While the default rate rose over the past 12 months, it remained below long-term averages. The par-weighted default rate for high yield bonds ended the year at 1.85% (up from 0.69%).
3
American Beacon High Yield Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the High Yield Bond Fund (the “Fund”) returned 4.03% for the twelve months ended October 31, 2014. The Fund trailed the JPMorgan Global High-Yield Index (the “Index”) return of 5.85% for the period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/2004 through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,7) | 4.30 | % | 9.35 | % | 6.63 | % | $ | 18,994 | ||||||||
Y Class (1,3,7) | 4.16 | % | 9.14 | % | 6.53 | % | 18,819 | |||||||||
Investor Class (1,7) | 4.03 | % | 9.08 | % | 6.36 | % | 18,523 | |||||||||
A Class with sales charge (1,4,7) | -0.86 | % | 8.06 | % | 5.86 | % | 17,675 | |||||||||
A Class without sales charge (1,4,7) | 4.04 | % | 9.12 | % | 6.38 | % | 18,553 | |||||||||
C Class with sales charge (1,5,7) | 2.28 | % | 8.39 | % | 6.02 | % | 17,942 | |||||||||
C Class without sales charge (1,5,7) | 3.28 | % | 8.39 | % | 6.02 | % | 17,942 | |||||||||
AMR Class (1,2,7) | 4.63 | % | 9.65 | % | 6.84 | % | 19,375 | |||||||||
JPMorgan Global High-Yield | 5.85 | % | 10.66 | % | 8.42 | % | 22,441 | |||||||||
| 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 and since 2013. Performance prior to waiving fees was lower than the actual returns shown for these periods. A portion of the fees charged to the Investor Class of the Fund has been waived since 2013. Performance prior to waiving fees was lower than the actual returns shown since 2013. |
| 2. | Fund performance for the ten-year period represents the total return achieved by the Institutional Class from 10/31/04 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 10/31/04. |
| 3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Institutional Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Y Class of the Fund was waived from 2011 to 2013 and recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2011 to 2013. |
| 4. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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. One cannot directly invest in an index. |
4
American Beacon High Yield Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
| 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 0.92%, 1.03%, 1.14%, 1.29%, 2.03%, and 0.62%, 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. |
For the period, the Fund’s returns relative to the Index were hampered by its positioning and issue selection across sectors and credit quality categories.
From a sector standpoint, issue selections in the Energy, Manufacturing and Service sectors detracted from returns. Positive issue selection within the Finance sector offset some of the weakness mentioned above as the holdings not only outperformed the Index, but also the overall high yield market.
From a sector allocation perspective, the Fund’s overweight to the Energy sector detracted from relative results. Additionally, a modest cash position detracted given the strong absolute returns generated by the high yield asset class.
From a credit quality perspective, the Fund’s holdings in the CCC- and B-rated categories trailed those of the Index and detracted from relative performance. Issue selections in the BB-rated category had a positive impact on the Fund’s relative returns.
From a credit quality allocation perspective, the Fund’s small allocation to securities outside of the traditional high yield credit rating categories such as cash and below C-rated securities detracted from returns. The Fund’s underweights and overweights to the remaining credit quality categories had a minimal impact on 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)
iHeartCommunications, Inc., 9.000%, Due 3/1/2021 | 0.7 | |||||||
VPI Escrow Corp., 6.375%, Due 10/15/2020, 144A | 0.7 | |||||||
E*Trade Financial Corp., 6.375%, Due 11/15/2019 | 0.7 | |||||||
CSC Holdings LLC, 6.750%, Due 11/15/2021 | 0.7 | |||||||
Radio One, Inc., 9.250%, Due 2/15/2020, 144A | 0.6 | |||||||
Tenet Healthcare Corp., 8.125%, Due 4/1/2022 | 0.6 | |||||||
Verso Paper Holdings LLC / Verso Paper, Inc., 11.750%, Due 1/15/2019 | 0.6 | |||||||
Cenveo Corp., 11.500%, Due 5/15/2017 | 0.5 | |||||||
Cumulus Media Holdings, Inc., 7.750%, Due 5/1/2019 | 0.5 | |||||||
Wind Acquisition Finance S.A., 7.375%, Due 4/23/2021, 144A | 0.5 | |||||||
Total Fund Holdings | 545 |
Sector Allocation (% Fixed Income)
Service | 27.2 | |||
Manufacturing | 22.4 | |||
Energy | 19.3 | |||
Telecommunications | 11.5 | |||
Finance | 9.9 | |||
Consumer | 3.7 | |||
Utilities | 2.7 | |||
Transportation | 2.1 | |||
Equity | 0.8 | |||
Convertible Obligations | 0.4 |
Investing in high yield securities involves additional risks when compared to investing in investment-grade securities. These include a greater risk of default or bankruptcy and an increased sensitivity to financial difficulties or changes in interest rates. The Fund invests in small and/or mid-sized companies, which involves additional risks such as limited liquidity and greater volatility than larger companies.
5
American Beacon Retirement Income and Appreciation FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Retirement Income and Appreciation Fund (the “Fund”) returned 4.86% for the twelve months ended October 31, 2014. Its benchmark, which is a blend of 75% of the Barclays Capital Aggregate Index (the “Aggregate Index”) and 25% of the BofA Merrill Lynch All U.S. Convertibles Index (the “ML Index”) (combined, the “Retirement Income and Appreciation Composite Index”), returned 6.45%.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/04 through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04 - 10/31/14 | |||||||||||||
Y Class (1,2,7) | 5.19 | % | 5.25 | % | 4.97 | % | $ | 16,241 | ||||||||
Investor Class (1,7) | 4.86 | % | 4.99 | % | 4.84 | % | 16,044 | |||||||||
A Class with sales Charge (1,3,7) | 1.71 | % | 3.97 | % | 4.33 | % | 15,271 | |||||||||
A Class without sales Charge (1,3,7) | 4.83 | % | 4.98 | % | 4.84 | % | 16,038 | |||||||||
C Class with sales Charge (1,4,7) | 3.01 | % | 4.25 | % | 4.47 | % | 15,489 | |||||||||
C Class without sales Charge (1,4,7) | 4.01 | % | 4.25 | % | 4.47 | % | 15,489 | |||||||||
Retirement Income and Appreciation Composite Index (6) | 6.45 | % | 6.56 | % | 5.46 | % | 17,011 | |||||||||
Barclays Capital Aggregate Index (5) | 4.14 | % | 4.22 | % | 4.64 | % | 15,732 | |||||||||
BofA Merrill Lynch All U.S. Convertibles Index (5) | 13.48 | % | 13.37 | % | 7.74 | % | 21,068 | |||||||||
Morningstar US OE Retirement Income (5) | 5.22 | % | 7.05 | % | 4.60 | % | 15,673 | |||||||||
| 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 10/31/04 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 10/31/04. A portion of the fees charged to the Y Class of the Fund has been waived since 2011. Performance prior to waiving fees was lower than the actual returns shown since 2011. |
| 3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 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 0.83%, 1.11%, 1.13%, and 1.89%, 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. |
Approximately 75% of the Fund’s assets are allocated to American Beacon Advisors, Inc. (the “Manager”) and invested in income-producing, short- and intermediate-term investment grade bonds. The
6
American Beacon Retirement Income and Appreciation FundSM
Performance Overview
October 31, 2014 (Unaudited)
remaining 25% of assets are managed by Calamos Advisors LLC (the “sub-advisor”) and invested in securities including convertible bonds, convertible preferred securities, high yield bonds, and equities in order to try to enhance the return of the overall Fund.
During the twelve-month period, the Manager’s portion of the Fund returned 4.3%, outperforming the 4.1% increase for the Aggregate Index. This segment of the Fund’s outperformance was primarily due to favorable allocation across sectors, duration and credit quality. The Manager’s portion of the Fund benefitted from a large overweight position in the Finance and commercial mortgage-backed securities (“CMBS”) sectors combined with a large underweight position in U.S. Treasury securities. Security selection lessened relative returns, as the Manager’s CMBS holdings trailed that of the Aggregate Index, although this was partially offset by better selection within the mortgage-backed securities sector. The Manager’s positioning among the various credit quality categories also aided returns relative to the Aggregate Index. The combination of underweighting AA-rated securities and overweighting BBB-rated securities was a key driver of that outperformance. This was offset somewhat by the Manager’s security selection within the AAA-rated bucket where Fund holdings underperformed those of the Aggregate Index and detracted from relative performance. From a duration perspective, both allocation and selection were positive for relative performance.
The portion of the Fund managed by the Fund’s sub-advisor returned 9.1%. These results trailed the 13.5% return of the ML Index. Much of the underperformance for this segment of the Fund can be attributed to unfavorable security selection in three particular economic sectors. The sub-advisor’s holdings in the Information Technology, Financials and Healthcare sectors lagged those in the ML Index, although this was partially offset by positive selection within the Energy sector. While the sub-advised portfolio generated strong absolute returns, 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)
Ginnie Mae REMIC Trust, 3.200%, Due 11/16/2044 | 2.9 | |||||||
Ginnie Mae REMIC Trust, 2.170%, Due 4/16/2041 | 2.3 | |||||||
Freddie Mac Gold Pool, 3.50%, Due 6/1/2042 | 2.1 | |||||||
Ginnie Mae REMIC Trust, 1.450%, Due 4/16/2039 | 1.8 | |||||||
Fannie Mae Pool, 5.00%, Due 1/1/2041 | 1.5 | |||||||
Fannie Mae Pool, 3.000%, Due 6/1/2043 | 1.4 | |||||||
National Credit Union Administration, 0.625%, Due 3/11/2020 | 1.3 | |||||||
ING Bank N.V., 3.750%, Due 3/7/2017, 144A | 1.1 | |||||||
Bank of America Corp., 4.125%, Due 1/22/2024 | 1.0 | |||||||
Freddie Mac Gold Pool, 4.00%, Due 1/1/2041 | 0.9 | |||||||
Total Fund Holdings | 236 |
Sector Weightings (% Equity)
Finance | 18.5 | |||
Manufacturing | 17.3 | |||
Energy | 15.5 | |||
Financials | 12.3 | |||
Utilities | 10.4 | |||
Consumer | 5.3 | |||
Information Technology | 4.4 | |||
Transportation | 4.2 | |||
Health Care | 4.2 | |||
Consumer Discretionary | 4.1 | |||
Industrials | 3.8 |
Sector Weightings (% Fixed Income)
U.S. Treasury Notes/Bonds | 21.5 | |||
Finance | 18.2 | |||
Manufacturing | 15.1 | |||
Mortgage Backed Obligations | 13.0 | |||
Commercial Mortgage-Backed Obligations | 11.0 | |||
Service | 9.0 | |||
Telecommunications | 3.1 | |||
Energy | 2.5 | |||
Utilities | 1.9 | |||
Transportation | 1.8 | |||
Consumer | 1.5 | |||
Asset-Backed Obligations | 1.4 |
7
American Beacon Intermediate Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Intermediate Bond Fund (the “Fund”) returned 3.12% for the twelve months ended October 31, 2014, trailing the Barclays Capital Aggregate Index (the “Index”) gain of 4.14% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/04 through 10/31/14
| Total Returns for the Period ended 10/31/14 | ||||||||||||||||
| Value of | ||||||||||||||||
| $10,000 | ||||||||||||||||
| 1 Year | 5 Years | 10 Years | 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,7) | 3.66 | % | 3.94 | % | 4.68 | % | $ | 15,805 | ||||||||
Y Class (1,3,7) | 3.26 | % | 3.71 | % | 4.57 | % | 15,635 | |||||||||
Investor Class (1,2,7) | 3.12 | % | 3.44 | % | 4.39 | % | 15,375 | |||||||||
A Class with sales Charge (1,4,7) | -1.93 | % | 2.27 | % | 3.80 | % | 14,520 | |||||||||
A Class without sales Charge (1,4,7) | 2.92 | % | 3.27 | % | 4.31 | % | 15,251 | |||||||||
C Class with sales Charge (1,5,7) | 1.24 | % | 2.66 | % | 4.00 | % | 14,801 | |||||||||
C Class without sales Charge (1,5,7) | 2.24 | % | 2.66 | % | 4.00 | % | 14,801 | |||||||||
Barclays Capital Agg. Index (6) | 4.14 | % | 4.22 | % | 4.64 | % | 15,732 | |||||||||
| 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 ten-year period represents the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 10/31/04. A portion of the fees charged to the Investor Class of the Fund has been waived since 2009. Performance prior to waiving fees was lower than the actual returns shown since 2009. |
| 3. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/04 |
| 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 10/31/04. A portion of the fees charged to the Y Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. |
| 4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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. One cannot directly invest in an index. |
| 7. | The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.33%, 0.67%, 0.87%, 1.01%, and 1.84%, 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 underperformance relative to the Index was driven largely by Fund expenses, as weak security selection within sectors and credit quality categories was mostly offset by positive positioning in various sectors and credit quality categories.
During the period, the Fund’s overweighting of the Financial sector was a positive as it outperformed the Index. In addition, maintaining an underweight allocation to U.S. Treasuries and an overweight allocation to CMBS also proved beneficial.
The performance of the Fund’s security holdings in the Manufacturing sector significantly trailed those in the Index and hindered relative returns. Additionally, individual security selection within the Finance and CMBS sectors offset some of the benefit realized from the overweight in the two areas.
8
American Beacon Intermediate Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Fund’s holdings across the various credit quality categories constrained returns. The Fund’s holdings in the A- and BBB-rated buckets trailed those of the Index, although selection within the AA-rated category offset some of this underperformance. Allocation across the ratings spectrum was a positive, as the combination of overweighting the A- and BBB-rated buckets while underweighting the AA-rated category proved beneficial to returns.
The Fund’s duration positioning during the period remained similar to the duration profile of the Index; however, security selection across the duration classes lowered returns. Notably, security selection within the 10-30 year bucket trailed that of the Index, although this was partially offset by securities with durations between 1-10 years held by the Fund.
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)
Ginnie Mae REMIC Trust, 2.17%, Due 4/16/2041 | 1.2 | |||||||
Fannie Mae Pool, 4.50%, Due 4/1/2041 | 1.1 | |||||||
Freddie Mac Gold Pool, 3.00%, Due 11/1/2028 | 1.0 | |||||||
Fannie Mae Pool, 4.00%, Due 12/1/2040 | 1.0 | |||||||
Fannie Mae Pool, 3.00%, Due 6/1/2043 | 1.0 | |||||||
Freddie Mac Gold Pool, 3.50%, Due 6/1/2042 | 0.9 | |||||||
Fannie Mae Pool, 3.00%, Due 8/1/2043 | 0.9 | |||||||
Ginnie Mae REMIC Trust, 1.732%, Due 5/16/2042 | 0.8 | |||||||
Fannie Mae Pool, 5.00%, Due 1/1/2041 | 0.8 | |||||||
Ally Master Owner Trust, 1.21%, Due 6/15/2017 | 0.8 | |||||||
Total Fund Holdings | 382 |
Sector Allocation (% Investments)
U.S. Treasury Notes/Bonds | 26.5 | |||
Mortgage Backed Obligations | 20.5 | |||
Finance | 17.2 | |||
Manufacturing | 7.8 | |||
CMBS | 7.7 | |||
Asset-Backed Obligations | 5.0 | |||
Service | 4.4 | |||
Energy | 4.1 | |||
Telecommunications | 2.9 | |||
Utilities | 2.3 | |||
Consumer | 1.1 | |||
Transportation | 0.6 |
Duration is a measure of price sensitivity relative to changes in interest rates.
9
American Beacon Short-Term Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Short-Term Bond Fund (the “Fund”) returned 0.53% for the twelve-month period ended October 31, 2014, which underperformed the BofA Merrill Lynch 1-3 Year Gov/Corp Index (the “Index”) return of 0.92%.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/04 through 10/31/14
| Total Returns for the Period ended 10/31/14 | ||||||||||||||||
| Value of | ||||||||||||||||
| $10,000 | ||||||||||||||||
| 1 Year | 5 Years | 10 Years | 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,6) | 0.83 | % | 1.58 | % | 2.77 | % | $ | 13,140 | ||||||||
Y Class (1,2,6) | 0.56 | % | 1.46 | % | 2.70 | % | 13,059 | |||||||||
Investor Class (1,6) | 0.53 | % | 1.20 | % | 2.33 | % | 12,584 | |||||||||
A Class with sales Charge (1,3,6) | -1.96 | % | 0.62 | % | 2.04 | % | 12,238 | |||||||||
A Class without sales Charge (1,3,6) | 0.52 | % | 1.14 | % | 2.30 | % | 12,548 | |||||||||
C Class with sales Charge (1,4,6) | -1.31 | % | 0.53 | % | 1.99 | % | 12,172 | |||||||||
C Class without sales Charge (1,4,6) | -0.31 | % | 0.53 | % | 1.99 | % | 12,172 | |||||||||
BofA Merrill Lynch 1-3 Yr. Gov./Corp Index (5) | 0.92 | % | 1.49 | % | 2.85 | % | 13,240 | |||||||||
| 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 since 2005. Performance prior to waiving fees was lower than the actual returns shown since 2005. |
| 2. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Institutional Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Y Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. |
| 3. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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. 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 0.38%, 0.72%, 0.90%, 1.03%, and 1.79%, 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 held overweight positions in the major credit sectors, including investment-grade Corporates and Asset-Backeds, which outperformed as the economy gradually improved. The Fund was also overweight Agency Mortgage-Backed securities which outperformed in response to investor demand for yield.
The Fund’s duration position, however, contributed to its underperformance as the portfolio earned less yield than the Index. Interest rates rose slightly at the short end of the yield curve, but the yield from longer-dated securities still outperformed. The Fund’s average duration was approximately 1.0 versus 1.9 for the Index duration.
10
American Beacon Short-Term Bond FundSM
Performance Overview
October 31, 2014 (Unaudited)
Given the unusually low levels of interest rates, we have maintained a short duration to protect the Fund from an ultimate rise in rates. Although a significant rate increase does not appear to be imminent, the absolute low level of yields warrants a more defensive approach toward duration overall.
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) | ||||||||
Citibank Credit Card Issuance Trust, 1.32%, Due 9/7/2018 | 1.7 | |||||||
Bank America Corp., 3.625%, Due 3/17/2016 | 1.5 | |||||||
Verizon Communications, Inc., 3.00%, Due 4/1/2016 | 1.4 | |||||||
National Credit Union Administration, 0.625%, Due 3/11/2020 | 1.4 | |||||||
National Credit Union Administration, 0.693%, Due 1/8/2020 | 1.4 | |||||||
Deutsche Bank AG/London, 3.25%, Due 1/11/2016 | 1.3 | |||||||
JPMorgan Chase & Co., 3.45%, Due 3/1/2016 | 1.2 | |||||||
Daimler Finance North America LLC, 3.00%, Due 3/28/2016, 144A | 1.2 | |||||||
Volkswagen Auto Lease Trust, 0.84%, Due 7/20/2016 | 1.2 | |||||||
Wells Fargo & Company, 3.676%, Due 6/15/2016 | 1.2 | |||||||
Total Fund Holdings | 76 | �� | ||||||
Sector Weightings (% Investments)
|
| |||
U.S. Treasury Notes/Bonds | 53.6 | |||
Asset-Backed Obligations | 15.1 | |||
Finance | 14.4 | |||
Manufacturing | 4.3 | |||
Telecommunications | 3.8 | |||
Commercial Mortgage-Backed Obligations | 3.3 | |||
Service | 2.3 | |||
Consumer | 1.6 | |||
Short-Term Investments | 1.2 | |||
Transportation | 0.4 | |||
Duration is a measure of price sensitivity relative to changes in interest rates.
11
American Beacon FundsSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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, 2014 (Unaudited)
High Yield Bond Fund
| Beginning Account Value 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 996.07 | $ | 4.28 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.92 | $ | 4.33 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 995.27 | $ | 4.83 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.37 | $ | 4.89 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 993.82 | $ | 5.48 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.71 | $ | 5.55 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 994.05 | $ | 5.33 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.86 | $ | 5.40 | ||||||
AMR Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 997.48 | $ | 2.87 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.33 | $ | 2.91 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 991.30 | $ | 9.08 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.08 | $ | 9.20 | ||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.85%, 0.96%, 1.09%, 1.06%, 1.81%, and 0.57% 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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | ||||||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.46 | $ | 4.08 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.45 | $ | 6.01 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.26 | $ | 6.01 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.76 | $ | 5.70 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.56 | $ | 5.70 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.58 | $ | 9.81 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.48 | $ | 9.80 | ||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.80%, 1.18%, 1.12%, and 1.93% 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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,020.67 | $ | 1.63 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.59 | $ | 1.63 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,018.96 | $ | 3.31 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.93 | $ | 3.31 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,017.33 | $ | 4.02 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.22 | $ | 4.02 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.65 | $ | 4.68 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,013.73 | $ | 8.63 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.64 | $ | 8.64 | ||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.32%, 0.65%, 0.79%, 0.92%, and 1.70% 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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | ||||||||||
Institutional Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.38 | $ | 1.82 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.39 | $ | 1.84 | ||||||
Y Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.12 | $ | 3.23 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.98 | $ | 3.26 | ||||||
Investor Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,000.38 | $ | 3.98 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.22 | $ | 4.02 | ||||||
A Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,000.41 | $ | 3.93 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.27 | $ | 3.97 | ||||||
C Class | ||||||||||||
Actual | $ | 1,000.00 | $ | 996.90 | $ | 7.40 | ||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.80 | $ | 7.48 | ||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.36%, 0.64%, 0.79%, 0.78%, and 1.47% 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, 2014, 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, 2014, 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, 2014, 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, 2014
14
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCKS—0.20% | ||||||||
CONSUMER DISCRETIONARY—0.10% | ||||||||
Automobiles—0.10% | ||||||||
General Motors Co. | 6,381 | $ | 200 | |||||
|
| |||||||
MANUFACTURING- 0.03% | ||||||||
Paper & Forest Products—0.03% | ||||||||
Catalyst Paper Corp.C | 8,426 | 21 | ||||||
Newpage Holdings, Inc., Acquired 2/16/2010 – 8/5/2010, Cost $125 A L | 600 | 56 | ||||||
|
| |||||||
Total Manufacturing | 77 | |||||||
|
| |||||||
SERVICE—0.06% | ||||||||
Communications—0.05% | ||||||||
Cengage Learning Holdings 11 Inc.C | 1,154 | 32 | ||||||
Cengage Learning Holdings II LPC D | 3,169 | 89 | ||||||
|
| |||||||
| 121 | ||||||||
|
| |||||||
Other Service—0.01% | ||||||||
Dex Media, Inc.C | 2,606 | 20 | ||||||
|
| |||||||
TRANSPORTATION—0.01% | ||||||||
Other Transportation—0.01% | ||||||||
CEVA Holding LLCA B C | 22 | 21 | ||||||
|
| |||||||
Total Common Stocks (Cost $1,943) | 439 | |||||||
|
| |||||||
RIGHTS—0.02% (Cost $541) | ||||||||
TRANSPORTATION—0.02% | ||||||||
Other Transportation—0.02% | ||||||||
Horizon Lines, Inc., Exercise price $0.051, Expires 9/27/2036, Acquired 5/27/2008 – 5/10/2012, | 3,581,642 | 45 | ||||||
|
| |||||||
PREFERRED STOCKS—0.50% | ||||||||
AGENCY—0.02% | ||||||||
Federal Home Loan Mortgage Corp., 1.00%, Due 12/31/2049C F | 10,000 | 43 | ||||||
|
| |||||||
ENERGY—0.08% | ||||||||
Oil & Gas—0.08% | ||||||||
Halcon Resources Corp., 5.75%, Due 12/31/2049 | 280 | 184 | ||||||
|
| |||||||
FINANCE—0.40% | ||||||||
Banks—0.40% | ||||||||
Ally Financial, Inc., 7.00%, Due 12/31/2049G | 185 | 185 | ||||||
Countrywide Capital V, 7.00%, Due 11/01/2036 | 15,000 | 384 | ||||||
GMAC Capital Trust I, 1.00%, Due 2/15/2040F | 11,600 | 310 | ||||||
|
| |||||||
Total Finance | 879 | |||||||
|
| |||||||
Total Preferred Stocks (Cost $1,353) | 1,106 | |||||||
|
| |||||||
CONVERTIBLE PREFERRED STOCKS—0.02% (Cost $68) | ||||||||
TRANSPORTATION—0.02% | ||||||||
Other Transportation—0.02% | ||||||||
CEVA Holding LLC, Series A-2A B C | 49 | 45 | ||||||
|
| |||||||
| Par Amount | ||||||||
| (000’s) | ||||||||
CONVERTIBLE OBLIGATIONS—0.42% | ||||||||
Energy—0.42% | ||||||||
American Energy—Utica LLC, 3.50%, Due 3/1/2021B G H | $ | 535 | 578 | |||||
Goodrich Petroleum Corp., 5.00%, Due 10/1/2032 | 435 | 355 | ||||||
|
| |||||||
Total Convertible Obligations (Cost $1,082) | 933 | |||||||
|
| |||||||
See accompanying notes
15
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
CORPORATE OBLIGATIONS—94.99% | ||||||||
Consumer—3.61% | ||||||||
American Achievement Corp., 10.875%, Due 4/15/2016G | $ | 355 | $ | 349 | ||||
Beverages & More, Inc., 10.00%, Due 11/15/2018G | 550 | 522 | ||||||
Big Heart Pet Brands, 7.625%, Due 2/15/2019 | 654 | 655 | ||||||
CEDC Finance Corp International, Inc., 9.00%, Due 4/30/2018I | 173 | 161 | ||||||
Constellation Brands, Inc., 4.75%, Due 11/15/2024 | 200 | 205 | ||||||
Diamond Foods, Inc., 7.00%, Due 3/15/2019G | 380 | 388 | ||||||
Dole Food Co., Inc., 7.25%, Due 5/1/2019G | 300 | 302 | ||||||
First Quality Finance Co. Inc., 4.625%, Due 5/15/2021G | 350 | 324 | ||||||
Innovation Ventures LLC, 9.50%, Due 8/15/2019B G | 350 | 345 | ||||||
JBS Investments GmbH, 7.75%, Due 10/28/2020G | 675 | 739 | ||||||
JBS USA LLC / JBS USA Finance, Inc., | ||||||||
8.25%, Due 2/1/2020B G | 400 | 428 | ||||||
7.25%, Due 6/1/2021B G | 200 | 213 | ||||||
5.875%, Due 7/15/2024B G | 100 | 101 | ||||||
Marfrig Overseas Ltd., 9.50%, Due 5/4/2020G | 350 | 370 | ||||||
Motors Liquidation Co., 8.375%, Due 7/15/2049A F M | 1,570 | — | ||||||
Pinnacle Operating Corp., 9.00%, Due 11/15/2020G | 295 | 318 | ||||||
Post Holdings, Inc., | ||||||||
6.75%, Due 12/1/2021G | 200 | 200 | ||||||
7.375%, Due 2/15/2022 | 400 | 410 | ||||||
6.00%, Due 12/15/2022G | 100 | 97 | ||||||
Prestige Brands, Inc., | ||||||||
8.125%, Due 2/1/2020 | 165 | 177 | ||||||
5.375%, Due 12/15/2021G | 475 | 460 | ||||||
Revlon Consumer Products Corp., 5.75%, Due 2/15/2021 | 340 | 340 | ||||||
Simmons Foods, Inc., 7.875%, Due 10/1/2021G | 415 | 420 | ||||||
Spectrum Brands, Inc., 6.625%, Due 11/15/2022 | 470 | 503 | ||||||
|
| |||||||
| 8,027 | ||||||||
|
| |||||||
Energy—18.52% | ||||||||
Access Midstream Partners LP / ACMP Finance Corp., 4.875%, Due 3/15/2024D | 520 | 543 | ||||||
American Eagle Energy Co., 11.00%, Due 9/1/2019G | 250 | 223 | ||||||
Antero Resources Finance Corp., 6.00%, Due 12/1/2020 | 430 | 447 | ||||||
Basic Energy Services, Inc., 7.75%, Due 10/15/2022 | 290 | 283 | ||||||
Bonanza Creek Energy, Inc., | ||||||||
6.75%, Due 4/15/2021 | 105 | 105 | ||||||
5.75%, Due 2/1/2023 | 300 | 287 | ||||||
BreitBurn Energy Partners LP / BreitBurn Finance Corp., 7.875%, Due 4/15/2022D | 600 | 576 | ||||||
Bristow Group, Inc., 6.25%, Due 10/15/2022 | 310 | 322 | ||||||
California Resources Corp., | ||||||||
5.00%, Due 1/15/2020G | 215 | 218 | ||||||
5.50%, Due 9/15/2021G | 200 | 204 | ||||||
6.00%, Due 11/15/2024G | 300 | 306 | ||||||
Carrizo Oil & Gas, Inc., | ||||||||
8.625%, Due 10/15/2018 | 300 | 312 | ||||||
7.50%, Due 9/15/2020 | 100 | 101 | ||||||
CGG S.A., 6.50%, Due 6/1/2021 | 600 | 480 | ||||||
Chaparral Energy, Inc., | ||||||||
9.875%, Due 10/1/2020 | 200 | 211 | ||||||
8.25%, Due 9/1/2021 | 235 | 236 | ||||||
7.625%, Due 11/15/2022 | 985 | 959 | ||||||
Chesapeake Energy Corp., | ||||||||
6.625%, Due 8/15/2020 | 400 | 451 | ||||||
6.875%, Due 11/15/2020 | 605 | 691 | ||||||
6.125%, Due 2/15/2021 | 350 | 389 | ||||||
5.75%, Due 3/15/2023 | 400 | 438 | ||||||
Clayton Williams Energy, Inc., 7.75%, Due 4/1/2019 | 500 | 496 | ||||||
Compressco Partners LP / Compressco Finance, Inc., 7.25%, Due 8/15/2022D G | 200 | 198 | ||||||
Comstock Resources, Inc., 9.50%, Due 6/15/2020 | 420 | 443 | ||||||
Drill Rigs Holdings, Inc., 6.50%, Due 10/1/2017G | 760 | 714 | ||||||
Energy Transfer Equity LP, 7.50%, Due 10/15/2020D | 700 | 805 | ||||||
Energy XXI Gulf Coast, Inc., | ||||||||
7.50%, Due 12/15/2021 | 545 | 452 | ||||||
6.875%, Due 3/15/2024G | 765 | 604 | ||||||
EnQuest PLC, 7.00%, Due 4/15/2022G J | 200 | 179 | ||||||
EPL Oil & Gas, Inc., 8.25%, Due 2/15/2018 | 400 | 388 | ||||||
See accompanying notes
16
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
EV Energy Partner LP, 8.00%, Due 4/15/2019D | $ | 430 | $ | 424 | ||||
EXCO Resources, Inc., 8.50%, Due 4/15/2022 | 350 | 305 | ||||||
Gastar Exploration, Inc., 8.625%, Due 5/15/2018 | 495 | 476 | ||||||
Genesis Energy LP / Genesis Energy Finance Corp., 5.75%, Due 2/15/2021D | 580 | 583 | ||||||
Goodrich Petroleum Corp., 8.875%, Due 3/15/2019 | 500 | 435 | ||||||
Gulfport Energy Corp., 7.75%, Due 11/1/2020G | 250 | 255 | ||||||
Halcon Resources Corp., | ||||||||
9.75%, Due 7/15/2020 | 100 | 83 | ||||||
8.875%, Due 5/15/2021 | 1,005 | 824 | ||||||
9.25%, Due 2/15/2022 | 100 | 81 | ||||||
Hercules Offshore, Inc., 7.50%, Due 10/1/2021G | 345 | 215 | ||||||
Key Energy Services, Inc., 6.75%, Due 3/1/2021 | 305 | 271 | ||||||
Kinder Morgan Finance Co. LLC, 6.00%, Due 1/15/2018B G | 500 | 548 | ||||||
Kinder Morgan, Inc., | ||||||||
5.00%, Due 2/15/2021G | 100 | 106 | ||||||
5.625%, Due 11/15/2023G | 200 | 220 | ||||||
Linn Energy LLC / Linn Energy Finance Corp., | ||||||||
6.50%, Due 5/15/2019B | 200 | 187 | ||||||
6.25%, Due 11/1/2019B | 100 | 92 | ||||||
8.625%, Due 4/15/2020B | 500 | 501 | ||||||
7.75%, Due 2/1/2021B K | 325 | 319 | ||||||
6.50%, Due 9/15/2021 | 100 | 92 | ||||||
Magnum Hunter Resources Corp., 9.75%, Due 5/15/2020 | 925 | 920 | ||||||
MarkWest Energy Partners LP / MarkWest Energy Finance Corp., 4.50%, Due 7/15/2023D | 510 | 523 | ||||||
Memorial Production Partners LP / Memorial Production Finance Corp., 7.625%, Due 5/1/2021D | 310 | 300 | ||||||
Memorial Resource Development Corp., 5.875%, Due 7/1/2022G | 200 | 195 | ||||||
Midstates Petroleum Co., Inc./Midstates Petroleum Co., LLC, 9.25%, Due 6/1/2021B | 765 | 650 | ||||||
NGL Energy Partners LP / NGL Energy Finance Corp., 5.125%, Due 7/15/2019 D G | 100 | 100 | ||||||
NGPL PipeCo LLC, | ||||||||
9.625%, Due 6/1/2019B G | 560 | 596 | ||||||
7.768%, Due 12/15/2037B G | 325 | 336 | ||||||
Oasis Petroleum, Inc., 6.875%, Due 3/15/2022 | 285 | 296 | ||||||
Ocean Rig UDW, Inc., 7.25%, Due 4/1/2019G | 400 | 342 | ||||||
Offshore Group Investment Ltd., | ||||||||
7.50%, Due 11/1/2019 | 720 | 614 | ||||||
7.125%, Due 4/1/2023 | 500 | 413 | ||||||
Pacific Drilling S.A., 5.375%, Due 6/1/2020G | 350 | 313 | ||||||
Paragon Offshore PLC, 7.25%, Due 8/15/2024G J | 375 | 287 | ||||||
PDC Energy, Inc., 7.75%, Due 10/15/2022 | 360 | 378 | ||||||
Penn Virginia Corp., 8.50%, Due 5/1/2020 | 405 | 396 | ||||||
Penn Virginia Resource Partners LP / Penn Virginia Resource Finance Corp., | ||||||||
8.375%, Due 6/1/2020D | 130 | 144 | ||||||
6.50%, Due 5/15/2021D | 300 | 320 | ||||||
PetroQuest Energy, Inc., 10.00%, Due 9/1/2017B | 215 | 214 | ||||||
Pioneer Energy Services Corp., 6.125%, Due 3/15/2022G | 330 | 307 | ||||||
QEP Resources, Inc., | ||||||||
5.375%, Due 10/1/2022 | 300 | 296 | ||||||
5.25%, Due 5/1/2023 | 400 | 389 | ||||||
QR Energy LP / QRE Finance Corp LLC, 9.25%, Due 8/1/2020B D | 400 | 451 | ||||||
Quicksilver Resources, Inc., | ||||||||
7.00%, Due 6/21/2019G | 200 | 181 | ||||||
9.125%, Due 8/15/2019 | 100 | 50 | ||||||
Range Resources Corp., 5.00%, Due 3/15/2023 | 355 | 371 | ||||||
Regency Energy Partners LP / Regency Energy Finance Corp., | ||||||||
8.375%, Due 6/1/2019D G | 500 | 533 | ||||||
5.875%, Due 3/1/2022D | 275 | 293 | ||||||
4.50%, Due 11/1/2023D | 95 | 94 | ||||||
Resolute Energy Corp., 8.50%, Due 5/1/2020 | 925 | 823 | ||||||
Rex Energy Corp., 8.875%, Due 12/1/2020 | 305 | 322 | ||||||
Rice Energy, Inc., 6.25%, Due 5/1/2022G | 445 | 430 | ||||||
Rockies Express Pipeline LLC, | ||||||||
6.85%, Due 7/15/2018B G | 105 | 112 | ||||||
6.00%, Due 1/15/2019B G | 180 | 191 | ||||||
5.625%, Due 4/15/2020B G | 555 | 580 | ||||||
See accompanying notes
17
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
6.875%, Due 4/15/2040B G | $ | 955 | $ | 1,059 | ||||
Sabine Pass Liquefaction LLC, | ||||||||
5.625%, Due 2/1/2021B | 1,005 | 1,053 | ||||||
6.25%, Due 3/15/2022B G | 320 | 345 | ||||||
5.625%, Due 4/15/2023B | 430 | 445 | ||||||
5.75%, Due 5/15/2024B G | 615 | 636 | ||||||
Sabine Pass LNG LP, 7.50%, Due 11/30/2016D | 295 | 316 | ||||||
Samson Investment Co., 9.75%, Due 2/15/2020 | 915 | 677 | ||||||
Sanchez Energy Corp., | ||||||||
7.75%, Due 6/15/2021 | 705 | 719 | ||||||
6.125%, Due 1/15/2023G | 605 | 576 | ||||||
SandRidge Energy, Inc., 8.125%, Due 10/15/2022 | 400 | 362 | ||||||
Seventy Seven Energy, Inc., 6.50%, Due 7/15/2022G | 405 | 381 | ||||||
Talos Production LLC, 9.75%, Due 2/15/2018B G | 490 | 494 | ||||||
Targa Resources Partners LP / Targa Resources Partners Finance Corp., | ||||||||
6.375%, Due 8/1/2022D | 190 | 204 | ||||||
5.25%, Due 5/1/2023D | 295 | 310 | ||||||
Triangle USA Petroleum Corp., 6.75%, Due 7/15/2022G | 790 | 691 | ||||||
Ultra Petroleum Corp., | ||||||||
5.75%, Due 12/15/2018G | 325 | 322 | ||||||
6.125%, Due 10/1/2024G | 500 | 473 | ||||||
W&T Offshore, Inc., 8.50%, Due 6/15/2019 | 730 | 712 | ||||||
WPX Energy, Inc., 6.00%, Due 1/15/2022 | 580 | 608 | ||||||
|
| |||||||
| 41,221 | ||||||||
|
| |||||||
Finance—9.47% | ||||||||
AerCap Ireland Capital Ltd / AerCap Global Aviation Trust, 5.00%, Due 10/1/2021G | 200 | 208 | ||||||
Aircastle Ltd., 6.25%, Due 12/1/2019 | 495 | 527 | ||||||
Ally Financial, Inc., | ||||||||
5.50%, Due 2/15/2017 | 120 | 128 | ||||||
8.00%, Due 12/31/2018 | 200 | 232 | ||||||
7.50%, Due 9/15/2020 | 908 | 1,080 | ||||||
8.00%, Due 11/1/2031 | 90 | 115 | ||||||
A-S Co-Issuer Subsidiary, Inc. / A-S Merger Sub LLC, 7.875%, Due 12/15/2020B G | 400 | 412 | ||||||
Banco do Brasil SA/Cayman, 9.00%, Due 6/29/2049G | 150 | 147 | ||||||
Bank of America Corp., 8.125%, Due 12/29/2049F | 900 | 976 | ||||||
Bank One Capital III, 8.75%, Due 9/1/2030 | 275 | 387 | ||||||
Cengage Learning Acquisitions, Inc., Escrow, 11.50%, Due 4/15/2020A M | 75 | — | ||||||
CIT Group, Inc., | ||||||||
5.50%, Due 2/15/2019G | 100 | 107 | ||||||
5.375%, Due 5/15/2020 | 200 | 214 | ||||||
5.00%, Due 8/15/2022 | 800 | 837 | ||||||
Citigroup, Inc., 6.30%, Due 12/29/2049 | 700 | 696 | ||||||
Cogent Communications Finance, Inc., 5.625%, Due 4/15/2021G | 530 | 518 | ||||||
Crown Castle International Corp., 5.25%, Due 1/15/2023 | 535 | 548 | ||||||
Denali Borrower LLC / Denali Finance Corp., 5.625%, Due 10/15/2020B G | 285 | 302 | ||||||
E*Trade Financial Corp., 6.375%, Due 11/15/2019 | 1,445 | 1,541 | ||||||
Fly Leasing Ltd., | ||||||||
6.75%, Due 12/15/2020 | 230 | 237 | ||||||
6.375%, Due 10/15/2021 | 225 | 224 | ||||||
Genworth Holdings, Inc., 6.15%, Due 11/15/2066F | 350 | 299 | ||||||
Geo Group, Inc., 5.125%, Due 4/1/2023 | 675 | 668 | ||||||
Hockey Merger Sub 2, Inc., 7.875%, Due 10/1/2021G | 255 | 266 | ||||||
Icahn Enterprises LP / Icahn Enterprises Finance Corp., 5.875%, Due 2/1/2022D | 750 | 771 | ||||||
International Lease Finance Corp., 8.625%, Due 1/15/2022 | 290 | 360 | ||||||
iStar Financial, Inc., | ||||||||
9.00%, Due 6/1/2017 | 270 | 303 | ||||||
5.00%, Due 7/1/2019 | 385 | 383 | ||||||
JPMorgan Chase & Co., 6.00%, Due 12/31/2049 | 800 | 793 | ||||||
Navient Corp., | ||||||||
8.45%, Due 6/15/2018B | 300 | 343 | ||||||
5.50%, Due 1/15/2019 | 600 | 622 | ||||||
Neuberger Berman Group LLC / Neuberger Berman Finance Corp., 5.875%, Due | 400 | 424 | ||||||
NRG Yield Operating LLC, 5.375%, Due 8/15/2024B G | 300 | 312 | ||||||
Nuveen Investments, Inc., 9.50%, Due 10/15/2020G | 410 | 500 | ||||||
Oppenheimer Holdings, Inc., 8.75%, Due 4/15/2018 | 220 | 234 | ||||||
See accompanying notes
18
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Popular, Inc., 7.00%, Due 7/1/2019 | $ | 350 | $ | 353 | ||||
Provident Funding Associates LP / PFG Finance Corp., | ||||||||
10.125%, Due 2/15/2019D G | 255 | 273 | ||||||
6.75%, Due 6/15/2021D G | 400 | 399 | ||||||
RHP Hotel Properties LP / RHP Finance Corp., 5.00%, Due 4/15/2021D | 370 | 368 | ||||||
ROC Finance LLC / ROC Finance 1 Corp., 12.125%, Due 9/1/2018B G | 650 | 692 | ||||||
Royal Bank of Scotland Group PLC, 6.125%, Due 12/15/2022J | 900 | 973 | ||||||
Stena AB, 7.00%, Due 2/1/2024G | 625 | 623 | ||||||
Stena International S.A., 5.75%, Due 3/1/2024G | 525 | 522 | ||||||
Synovus Financial Corp., 7.875%, Due 2/15/2019 | 540 | 608 | ||||||
TMX Finance LLC / TitleMax Finance Corp., 8.50%, Due 9/15/2018B G | 575 | 561 | ||||||
|
| |||||||
| 21,086 | ||||||||
|
| |||||||
Manufacturing—21.52% | ||||||||
Abengoa Finance SAU, | ||||||||
8.875%, Due 11/1/2017G | 400 | 437 | ||||||
7.75%, Due 2/1/2020G | 150 | 157 | ||||||
Advanced Micro Devices, Inc., 7.50%, Due 8/15/2022 | 950 | 869 | ||||||
AECOM Technology Corp., 5.75%, Due 10/15/2022G | 260 | 274 | ||||||
Ainsworth Lumber Co. Ltd, 7.50%, Due 12/15/2017G | 300 | 311 | ||||||
Alcoa, Inc., 5.125%, Due 10/1/2024 | 350 | 370 | ||||||
Aleris International, Inc., 7.875%, Due 11/1/2020 | 360 | 374 | ||||||
Allison Transmission, Inc., 7.125%, Due 5/15/2019G | 600 | 631 | ||||||
Alpha Natural Resources, Inc., 7.50%, Due 8/1/2020G | 480 | 384 | ||||||
ArcelorMittal, | ||||||||
4.25%, Due 8/5/2015 | 170 | 173 | ||||||
6.00%, Due 3/1/2021F | 1,000 | 1,072 | ||||||
6.75%, Due 2/25/2022F | 435 | 483 | ||||||
Arch Coal, Inc., 8.00%, Due 1/15/2019G | 370 | 241 | ||||||
Ardagh Finance Holdings S.A., 8.625%, Due 6/15/2019G H | 250 | 256 | ||||||
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc., | ||||||||
6.25%, Due 1/31/2019G J | 200 | 202 | ||||||
7.00%, Due 11/15/2020G J | 106 | 108 | ||||||
6.75%, Due 1/31/2021G J | 400 | 409 | ||||||
Axalta Coating Systems US Holdings Inc. / Axalta Coating Systems Dutch Holding B, 7.375%, Due 5/1/2021G | 300 | 325 | ||||||
Axiall Corp., 4.875%, Due 5/15/2023 | 380 | 369 | ||||||
Barminco Finance Property Ltd., 9.00%, Due 6/1/2018G | 400 | 344 | ||||||
Beverage Packaging Holdings Luxembourg II SA, 6.00%, Due 6/15/2017G | 345 | 344 | ||||||
Blackboard, Inc., 7.75%, Due 11/15/2019G | 400 | 404 | ||||||
BMC Software Finance, Inc., 8.125%, Due 7/15/2021G | 800 | 766 | ||||||
BMC Software, Inc., 7.25%, Due 6/1/2018 | 215 | 213 | ||||||
Boart Longyear Management Property Ltd., | ||||||||
10.00%, Due 10/1/2018G | 180 | 192 | ||||||
7.00%, Due 4/1/2021G | 230 | 186 | ||||||
Bombardier, Inc., 6.125%, Due 1/15/2023G | 215 | 221 | ||||||
Boxer Parent Company, Inc., 9.00%, Due 10/15/2019G H | 600 | 538 | ||||||
Catalyst Paper Corp., 11.00%, Due 10/30/2017H | 146 | 126 | ||||||
Cemex Finance LLC, | ||||||||
9.375%, Due 10/12/2022B G | 200 | 231 | ||||||
6.00%, Due 4/1/2024B G | 200 | 204 | ||||||
Cemex SAB de CV, | ||||||||
9.00%, Due 1/11/2018G | 200 | 211 | ||||||
5.875%, Due 3/25/2019G | 200 | 207 | ||||||
5.70%, Due 1/11/2025G | 200 | 196 | ||||||
Chrysler Group LLC / CG Co-Issuer, Inc., 8.00%, Due 6/15/2019B | 375 | 401 | ||||||
CNH Industrial Capital LLC, 3.375%, Due 7/15/2019B G | 185 | 180 | ||||||
Consol Energy, Inc., | ||||||||
8.25%, Due 4/1/2020 | 500 | 527 | ||||||
5.875%, Due 4/15/2022G | 100 | 102 | ||||||
Consolidated Container Co. LLC/Consolidated Container Capital, Inc., 10.125%, Due 7/15/2020B G | 475 | 447 | ||||||
Constellium N.V., 5.75%, Due 5/15/2024G | 250 | 250 | ||||||
CPG Merger Sub LLC, 8.00%, Due 10/1/2021B G | 365 | 375 | ||||||
See accompanying notes
19
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Dell, Inc., 5.40%, Due 9/10/2040 | $ | 320 | $ | 278 | ||||
Eagle Spinco, Inc., 4.625%, Due 2/15/2021 | 535 | 519 | ||||||
Eco Services Operations LLC / Eco Finance Corp., 8.50%, Due 11/1/2022B G | 345 | 355 | ||||||
Eldorado Gold Corp., 6.125%, Due 12/15/2020G | 600 | 593 | ||||||
First Data Corp., | ||||||||
8.25%, Due 1/15/2021G | 800 | 869 | ||||||
11.25%, Due 1/15/2021 | 65 | 75 | ||||||
11.75%, Due 8/15/2021 | 320 | 375 | ||||||
First Data Holdings, Inc.G H | — | — | ||||||
First Quantum Minerals Ltd., | ||||||||
6.75%, Due 2/15/2020G | 400 | 387 | ||||||
7.00%, Due 2/15/2021G | 400 | 393 | ||||||
7.25%, Due 5/15/2022G | 195 | 190 | ||||||
FMG Resources August 2006 Property Ltd., | ||||||||
6.875%, Due 2/1/2018G | 222 | 228 | ||||||
8.25%, Due 11/1/2019G | 520 | 539 | ||||||
6.875%, Due 4/1/2022G | 695 | 717 | ||||||
Gardner Denver, Inc., 6.875%, Due 8/15/2021G | 885 | 922 | ||||||
Gates Global LLC / Gates Global Co., 6.00%, Due 7/15/2022B G | 290 | 281 | ||||||
Gibraltar Industries, Inc., 6.25%, Due 2/1/2021 | 350 | 361 | ||||||
Goodyear Tire & Rubber Co., 6.50%, Due 3/1/2021 | 700 | 750 | ||||||
Horsehead Holding Corp., 10.50%, Due 6/1/2017G | 380 | 427 | ||||||
IHS, Inc., 5.00%, Due 11/1/2022G | 100 | 102 | ||||||
INEOS Group Holdings S.A., 5.875%, Due 2/15/2019G | 400 | 400 | ||||||
K Hovnanian Enterprises, Inc., | ||||||||
8.00%, Due 11/1/2019G | 195 | 196 | ||||||
7.25%, Due 10/15/2020G | 230 | 242 | ||||||
KB Home, | ||||||||
4.75%, Due 5/15/2019 | 100 | 99 | ||||||
7.00%, Due 12/15/2021 | 100 | 107 | ||||||
7.50%, Due 9/15/2022 | 500 | 539 | ||||||
Kratos Defense & Security Solutions, Inc., 7.00%, Due 5/15/2019 | 375 | 368 | ||||||
Liberty Tire Recycling LLC, 11.00%, Due 10/1/2016B G | 425 | 400 | ||||||
Magnachip Semiconductor Corp., 6.625%, Due 7/15/2021 | 305 | 278 | ||||||
Magnetation LLC / Mag Finance Corp., 11.00%, Due 5/15/2018B G | 335 | 301 | ||||||
Mcron Finance Sub LLC, 8.375%, Due 5/15/2019B G | 108 | 115 | ||||||
Midwest Vanadium Property Ltd., 11.50%, Due 2/15/2018G M | 200 | 28 | ||||||
Milacron LLC, 7.75%, Due 2/15/2021B G | 315 | 328 | ||||||
Momentive Performance Materials, Inc., 3.88%, Due 10/24/2021 | 305 | 264 | ||||||
Mueller Water Products, Inc., 7.375%, Due 6/1/2017 | 252 | 256 | ||||||
Navistar International Corp., 8.25%, Due 11/1/2021 | 375 | 386 | ||||||
NCR Corp., | ||||||||
5.875%, Due 12/15/2021 | 375 | 384 | ||||||
6.375%, Due 12/15/2023 | 345 | 364 | ||||||
New Gold, Inc., 6.25%, Due 11/15/2022G | 235 | 230 | ||||||
Norske Skogindustrier ASA, 6.125%, Due 10/15/2015G | 550 | 503 | ||||||
Nova Chemicals Corp., 5.00%, Due 5/1/2025G | 770 | 795 | ||||||
Nuance Communications, Inc., 5.375%, Due 8/15/2020G | 260 | 261 | ||||||
Nufarm Australia Ltd., 6.375%, Due 10/15/2019G | 290 | 291 | ||||||
Olin Corp., 5.50%, Due 8/15/2022 | 300 | 310 | ||||||
Park Ohio Industries, Inc., 8.125%, Due 4/1/2021 | 490 | 528 | ||||||
Peabody Energy Corp., | ||||||||
7.375%, Due 11/1/2016 | 500 | 515 | ||||||
6.25%, Due 11/15/2021 | 400 | 379 | ||||||
Pittsburgh Glass Works LLC, 8.00%, Due 11/15/2018B G | 266 | 279 | ||||||
Plastipak Holdings, Inc., 6.50%, Due 10/1/2021G | 230 | 237 | ||||||
Polymer Group, Inc., 6.875%, Due 6/1/2019G | 300 | 296 | ||||||
Quiksilver Inc. / QS Wholesale Inc., 7.875%, Due 8/1/2018G | 435 | 397 | ||||||
Rain CII Carbon LLC / CII Carbon Corp., 8.25%, Due 1/15/2021B G | 300 | 306 | ||||||
Reliance Intermediate Holdings LP, 9.50%, Due 12/15/2019D G | 760 | 789 | ||||||
Rentech Nitrogen Partners LP, 6.50%, Due 4/15/2021D G | 455 | 439 | ||||||
Reynolds Group Issuer Inc / Reynolds Group Issuer LLC, | ||||||||
8.50%, Due 5/15/2018B | 200 | 207 | ||||||
9.00%, Due 4/15/2019B | 685 | 715 | ||||||
9.875%, Due 8/15/2019B | 425 | 462 | ||||||
See accompanying notes
20
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
5.75%, Due 10/15/2020B | $ | 110 | $ | 114 | ||||
8.25%, Due 2/15/2021B | 300 | 323 | ||||||
Rockwood Specialties Group, Inc., 4.625%, Due 10/15/2020 | 500 | 522 | ||||||
Signode Industrial Group Lux SA/Signode Industrial Group US, Inc., 6.375%, Due 5/1/2022G | 575 | 557 | ||||||
Smurfit Kappa Treasury Funding Ltd., 7.50%, Due 11/20/2025 | 600 | 693 | ||||||
Springs Industries, Inc., 6.25%, Due 6/1/2021 | 325 | 319 | ||||||
SRA International, Inc., 11.00%, Due 10/1/2019 | 200 | 213 | ||||||
Stackpole International Intermediate Co., 7.75%, Due 10/15/2021G | 460 | 467 | ||||||
SunGard Availability Services Capital, Inc., 8.75%, Due 4/1/2022G | 425 | 312 | ||||||
SunGard Data Systems, Inc., 6.625%, Due 11/1/2019 | 450 | 466 | ||||||
Taylor Morrison Communities Inc / Monarch Communities, Inc., 5.625%, Due 3/1/2024G | 300 | 297 | ||||||
Taylor Morrison Communities, Inc., | ||||||||
7.75%, Due 4/15/2020G | 613 | 656 | ||||||
5.25%, Due 4/15/2021G | 445 | 448 | ||||||
Terex Corp., 6.00%, Due 5/15/2021 | 435 | 452 | ||||||
Toll Brothers Finance, Corp., 5.625%, Due 1/15/2024 | 300 | 318 | ||||||
TPC Group, Inc., 8.75%, Due 12/15/2020G | 800 | 836 | ||||||
TransDigm, Inc., | ||||||||
7.50%, Due 7/15/2021 | 385 | 416 | ||||||
6.00%, Due 7/15/2022 | 475 | 480 | ||||||
6.50%, Due 7/15/2024 | 100 | 103 | ||||||
Transfield Services Ltd., 8.375%, Due 5/15/2020G | 180 | 193 | ||||||
TRI Pointe Holdings, Inc., 4.375%, Due 6/15/2019G | 375 | 373 | ||||||
Tronox Finance LLC, 6.375%, Due 8/15/2020B | 320 | 329 | ||||||
US Concrete, Inc., 8.50%, Due 12/1/2018 | 295 | 316 | ||||||
Verso Paper Holdings LLC / Verso Paper, Inc., | ||||||||
11.75%, Due 1/15/2019B | 1,515 | 1,398 | ||||||
Viasystems, Inc., 7.875%, Due 5/1/2019G | 315 | 334 | ||||||
William Lyon Homes, Inc., 8.50%, Due 11/15/2020 | 345 | 377 | ||||||
Wolverine World Wide, Inc., 6.125%, Due 10/15/2020 | 360 | 379 | ||||||
Xerium Technologies, Inc., 8.875%, Due 6/15/2018 | 395 | 417 | ||||||
Zachry Holdings, Inc., 7.50%, Due 2/1/2020G | 330 | 335 | ||||||
|
| |||||||
| 47,908 | ||||||||
|
| |||||||
Service—26.15% | ||||||||
New Red Finance, Inc., 6.00%, Due 4/1/2022G | 400 | 406 | ||||||
24 Hour Holdings III LLC, 8.00%, Due 6/1/2022B G | 300 | 284 | ||||||
Acadia Healthcare Co., Inc., 5.125%, Due 7/1/2022 | 325 | 323 | ||||||
ADT Corp., 6.25%, Due 10/15/2021 | 65 | 68 | ||||||
Ahern Rentals, Inc., 9.50%, Due 6/15/2018G | 560 | 598 | ||||||
Alere, Inc., | ||||||||
7.25%, Due 7/1/2018 | 400 | 426 | ||||||
6.50%, Due 6/15/2020 | 485 | 500 | ||||||
Amsurg Corp., 5.625%, Due 7/15/2022G | 300 | 311 | ||||||
Anna Merger Sub, Inc., 7.75%, Due 10/1/2022G | 300 | 306 | ||||||
Arcos Dorados Holdings, Inc., 6.625%, Due 9/27/2023G | 90 | 89 | ||||||
Avis Budget Car Rental LLC / Avis Budget Finance, Inc., 2.984%, Due 12/1/2017B F | 775 | 775 | ||||||
Aviv Healthcare Properties LP / Aviv Healthcare Capital Corp., | ||||||||
7.75%, Due 2/15/2019D | 200 | 210 | ||||||
6.00%, Due 10/15/2021D | 100 | 103 | ||||||
Bon-Ton Department Stores, Inc., 8.00%, Due 6/15/2021 | 375 | 326 | ||||||
Boyd Gaming Corp., 9.00%, Due 7/1/2020 | 455 | 491 | ||||||
Caesars Entertainment Operating Co., Inc., | ||||||||
11.25%, Due 6/1/2017 | 1,100 | 824 | ||||||
12.75%, Due 4/15/2018 | 400 | 70 | ||||||
8.50%, Due 2/15/2020 | 100 | 75 | ||||||
9.00%, Due 2/15/2020 | 300 | 227 | ||||||
Carrols Restaurant Group, Inc., 11.25%, Due 5/15/2018 | 375 | 406 | ||||||
CB OnCure Holdings, Inc., Escrow, 11.75%, Due 5/15/2017A | 325 | — | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp., | ||||||||
6.50%, Due 4/30/2021B | 275 | 290 | ||||||
5.25%, Due 9/30/2022B | 700 | 704 | ||||||
CCOH Safari LLC, 5.50%, Due 12/1/2022 B | 250 | 253 | ||||||
Cenveo Corp., | ||||||||
11.50%, Due 5/15/2017 | 1,170 | 1,187 | ||||||
See accompanying notes
21
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
6.00%, Due 8/1/2019G | $ | 475 | $ | 457 | ||||
8.50%, Due 9/15/2022G | 500 | 460 | ||||||
Cequel Communications Holdings I LLC, 6.375%, Due 9/15/2020B G | 130 | 136 | ||||||
CHS/Community Health Systems, Inc., | ||||||||
5.125%, Due 8/15/2018 | 100 | 104 | ||||||
8.00%, Due 11/15/2019 | 200 | 216 | ||||||
7.125%, Due 7/15/2020 | 300 | 325 | ||||||
5.125%, Due 8/1/2021 | 300 | 314 | ||||||
6.875%, Due 2/1/2022 | 755 | 813 | ||||||
Clean Harbors, Inc., 5.125%, Due 6/1/2021 | 375 | 382 | ||||||
Clear Channel Worldwide Holdings, Inc., | ||||||||
7.625%, Due 3/15/2020 | 815 | 867 | ||||||
6.50%, Due 11/15/2022 | 875 | 902 | ||||||
Covanta Holding Corp., 5.875%, Due 3/1/2024 | 400 | 413 | ||||||
Crown Media Holdings, Inc., 10.50%, Due 7/15/2019 | 235 | 257 | ||||||
CSC Holdings LLC, | ||||||||
6.75%, Due 11/15/2021B | 1,360 | 1,512 | ||||||
5.25%, Due 6/1/2024B G | 275 | 276 | ||||||
CST Brands, Inc., 5.00%, Due 5/1/2023 | 335 | 332 | ||||||
Cumulus Media Holdings, Inc., 7.75%, Due 5/1/2019 | 1,135 | 1,163 | ||||||
CyrusOne LP / CyrusOne Finance Corp., 6.375%, Due 11/15/2022D | 350 | 368 | ||||||
DaVita Healthcare Partners, Inc., 5.75%, Due 8/15/2022 | 200 | 212 | ||||||
DaVita HealthCare Partners, Inc., 5.125%, Due 7/15/2024 | 200 | 204 | ||||||
DISH DBS Corp., | ||||||||
7.125%, Due 2/1/2016 | 200 | 213 | ||||||
7.875%, Due 9/1/2019 | 230 | 267 | ||||||
5.875%, Due 7/15/2022 | 975 | 1,034 | ||||||
5.00%, Due 3/15/2023 | 100 | 100 | ||||||
DreamWorks Animation SKG, Inc., 6.875%, Due 8/15/2020G | 450 | 470 | ||||||
Endo Finance LLC / Endo Finco, Inc., 5.375%, Due 1/15/2023B G | 600 | 587 | ||||||
Entercom Radio LLC, 10.50%, Due 12/1/2019B | 370 | 410 | ||||||
Envision Healthcare Corp., 5.125%, Due 7/1/2022G | 245 | 248 | ||||||
Equinix, Inc., 5.375%, Due 4/1/2023 | 875 | 903 | ||||||
Felcor Lodging LP, 5.625%, Due 3/1/2023D | 475 | 474 | ||||||
Fontainebleau Las Vegas Holdings LLC, 10.25%, Due 6/15/2015B F G K M | 800 | 6 | ||||||
Gannett Company, Inc., | ||||||||
5.125%, Due 7/15/2020 | 300 | 311 | ||||||
6.375%, Due 10/15/2023 | 200 | 215 | ||||||
Golden Nugget Escrow, Inc., 8.50%, Due 12/1/2021G | 505 | 502 | ||||||
Gray Television, Inc., 7.50%, Due 10/1/2020 | 950 | 994 | ||||||
Grifols Worldwide Operations Ltd., 5.25%, Due 4/1/2022G | 400 | 410 | ||||||
Guitar Center, Inc., 9.625%, Due 4/15/2020G | 475 | 349 | ||||||
Harron Communications LP/Harron Finance Corp., 9.125%, Due 4/1/2020D G | 310 | 338 | ||||||
HCA Holdings, Inc., 6.25%, Due 2/15/2021 | 100 | 108 | ||||||
HCA, Inc., | ||||||||
7.50%, Due 2/15/2022 | 400 | 465 | ||||||
5.875%, Due 3/15/2022 | 200 | 220 | ||||||
5.875%, Due 5/1/2023 | 500 | 537 | ||||||
5.00%, Due 3/15/2024 | 475 | 490 | ||||||
5.25%, Due 4/15/2025 | 100 | 104 | ||||||
Hertz Corp., | ||||||||
6.75%, Due 4/15/2019 | 400 | 417 | ||||||
6.25%, Due 10/15/2022 | 400 | 408 | ||||||
Hilton Worldwide Finance LLC, 5.625%, Due 10/15/2021B G | 320 | 337 | ||||||
iHeartCommunications, Inc., | ||||||||
10.00%, Due 1/15/2018 | 375 | 313 | ||||||
9.00%, Due 3/1/2021 | 1,470 | 1,469 | ||||||
9.00%, Due 9/15/2022G | 200 | 201 | ||||||
iPayment Holdings, Inc., 7.50%, Due 11/15/2018H | 295 | 100 | ||||||
iPayment, Inc., 10.25%, Due 5/15/2018 | 375 | 315 | ||||||
Isle of Capri Casinos, Inc., 8.875%, Due 6/15/2020 | 270 | 289 | ||||||
Jaguar Holding Co. I, 9.375%, Due 10/15/2017G H | 500 | 512 | ||||||
JC Penney Corp., Inc., | ||||||||
7.95%, Due 4/1/2017 | 585 | 599 | ||||||
8.125%, Due 10/1/2019 | 325 | 312 | ||||||
See accompanying notes
22
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Jo-Ann Stores Holdings, Inc., 9.75%, Due 10/15/2019G H | $ | 275 | $ | 253 | ||||
Kinetic Concepts, Inc. / KCI USA, Inc., 12.50%, Due 11/1/2019 | 305 | 336 | ||||||
L Brands, Inc., 5.625%, Due 10/15/2023 | 320 | 343 | ||||||
Landry’s, Inc., 9.375%, Due 5/1/2020G | 400 | 428 | ||||||
LBI Media, Inc., | ||||||||
10.00%, Due 4/15/2019G | 285 | 295 | ||||||
4.25%, Due 4/15/2020G H | 324 | 324 | ||||||
Lee Enterprises, Inc., 9.50%, Due 3/15/2022G | 350 | 363 | ||||||
Light Tower Rentals, Inc., 8.125%, Due 8/1/2019G | 175 | 172 | ||||||
Live Nation Entertainment, Inc., 7.00%, Due 9/1/2020G | 400 | 425 | ||||||
Marina District Finance Co. Inc, 9.875%, Due 8/15/2018 | 200 | 210 | ||||||
McGraw-Hill Global Education Holdings LLC, 9.75%, Due 4/1/2021B | 225 | 254 | ||||||
Media General Financing Sub, Inc., 5.875%, Due 11/15/2022G | 405 | 403 | ||||||
Men’s Wearhouse, Inc., 7.00%, Due 7/1/2022G | 490 | 508 | ||||||
MGM Resorts International, | ||||||||
6.625%, Due 7/15/2015 | 200 | 205 | ||||||
6.75%, Due 10/1/2020 | 335 | 368 | ||||||
6.625%, Due 12/15/2021 | 615 | 673 | ||||||
7.75%, Due 3/15/2022 | 375 | 432 | ||||||
Midcontinent Communications & Finance Corp., 6.25%, Due 8/1/2021G | 490 | 501 | ||||||
Monitronics International, Inc., 9.125%, Due 4/1/2020 | 485 | 500 | ||||||
MTR Gaming Group, Inc., 11.50%, Due 8/1/2019H | 295 | 324 | ||||||
New Look Bondco I PLC, 8.375%, Due 5/14/2018G J | 400 | 416 | ||||||
Nextstar Broadcasting, Inc., 6.875%, Due 11/15/2020 | 735 | 763 | ||||||
NPC International, Inc. / NPC Operating Co. A, Inc. / NPC Operating Co B, Inc., 10.50%, Due 1/15/2020 | 700 | 729 | ||||||
Par Pharmaceutical Cos., Inc., 7.375%, Due 10/15/2020 | 300 | 319 | ||||||
PF Chang’s China Bistro, Inc., 10.25%, Due 6/30/2020G | 500 | 498 | ||||||
PHH Corp., 6.375%, Due 8/15/2021 | 275 | 264 | ||||||
Pinnacle Entertainment, Inc., 7.75%, Due 4/1/2022 | 215 | 235 | ||||||
Quad/Graphics, Inc., 7.00%, Due 5/1/2022G | 375 | 360 | ||||||
Radio One, Inc., 9.25%, Due 2/15/2020G | 1,275 | 1,265 | ||||||
Radio Systems Corp., 8.375%, Due 11/1/2019G | 200 | 217 | ||||||
Ruby Tuesday, Inc., 7.625%, Due 5/15/2020 | 400 | 397 | ||||||
Safway Group Holding LLC, 7.00%, Due 5/15/2018B G | 300 | 310 | ||||||
Scientific Games International, Inc., 6.625%, Due 5/15/2021G | 270 | 215 | ||||||
Select Medical Corp., 6.375%, Due 6/1/2021 | 340 | 348 | ||||||
Serta Simmons Holdings LLC, 8.125%, Due 10/1/2020B G | 425 | 456 | ||||||
Service Corp International, 7.50%, Due 4/1/2027 | 475 | 523 | ||||||
Sirius XM Radio, Inc., | ||||||||
5.25%, Due 8/15/2022G | 155 | 163 | ||||||
6.00%, Due 7/15/2024G | 500 | 521 | ||||||
SiTV LLC / SiTV Finance, Inc., 10.375%, Due 7/1/2019B G | 810 | 782 | ||||||
Sugarhouse HSP Gaming Prop Mezz LP, 6.375%, Due 6/1/2021D G | 615 | 589 | ||||||
Tenet Healthcare Corp., | ||||||||
5.00%, Due 3/1/2019G | 300 | 300 | ||||||
8.125%, Due 4/1/2022 | 1,115 | 1,277 | ||||||
6.875%, Due 11/15/2031 | 250 | 245 | ||||||
United Rentals North America, Inc., | ||||||||
7.375%, Due 5/15/2020 | 125 | 136 | ||||||
7.625%, Due 4/15/2022 | 470 | 524 | ||||||
Unitymedia KabelBW GmbH, 6.125%, Due 1/15/2025G | 300 | 313 | ||||||
Universal Hospital Services, Inc., 7.625%, Due 8/15/2020 | 575 | 536 | ||||||
Univision Communications, Inc., 6.75%, Due 9/15/2022G | 300 | 333 | ||||||
Valeant Pharmaceuticals International, Inc., | ||||||||
7.50%, Due 7/15/2021G | 200 | 214 | ||||||
5.625%, Due 12/1/2021G | 100 | 99 | ||||||
Visant Corp., 10.00%, Due 10/1/2017 | 820 | 721 | ||||||
VPI Escrow Corp., 6.375%, Due 10/15/2020G | 1,520 | 1,559 | ||||||
WMG Acquisition Corp., | ||||||||
5.625%, Due 4/15/2022G | 600 | 603 | ||||||
6.75%, Due 4/15/2022G | 720 | 709 | ||||||
|
| |||||||
| 58,248 | ||||||||
|
| |||||||
See accompanying notes
23
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Telecommunications—11.07% | ||||||||
Alcatel-Lucent USA, Inc., 6.75%, Due 11/15/2020G | $ | 700 | $ | 721 | ||||
Altice S.A., 7.75%, Due 5/15/2022G | 575 | 604 | ||||||
Avanti Communications Group PLC, 10.00%, Due 10/1/2019G J | 575 | 555 | ||||||
Avaya, Inc., | ||||||||
9.00%, Due 4/1/2019G | 500 | 513 | ||||||
10.50%, Due 3/1/2021G | 400 | 351 | ||||||
Brightstar Corp., 9.50%, Due 12/1/2016G | 250 | 263 | ||||||
CenturyLink, Inc., | ||||||||
5.80%, Due 3/15/2022 | 300 | 318 | ||||||
6.75%, Due 12/1/2023 | 300 | 333 | ||||||
Cincinnati Bell, Inc., 8.75%, Due 3/15/2018 | 415 | 430 | ||||||
CommScope, Inc., | ||||||||
5.00%, Due 6/15/2021G | 175 | 175 | ||||||
5.50%, Due 6/15/2024G | 175 | 177 | ||||||
Consolidated Communications Finance Co., 10.875%, Due 6/1/2020 | 195 | 222 | ||||||
Digicel Group Ltd., | ||||||||
8.25%, Due 9/30/2020G | 300 | 314 | ||||||
7.125%, Due 4/1/2022G | 600 | 603 | ||||||
Digicel Ltd., 6.00%, Due 4/15/2021G | 200 | 202 | ||||||
EarthLink Holdings Corp., | ||||||||
8.875%, Due 5/15/2019 | 255 | 248 | ||||||
7.375%, Due 6/1/2020 | 360 | 367 | ||||||
Frontier Communications Corp., | ||||||||
8.50%, Due 4/15/2020 | 547 | 630 | ||||||
8.75%, Due 4/15/2022 | 200 | 231 | ||||||
7.875%, Due 1/15/2027 | 300 | 312 | ||||||
Hughes Satellite Systems Corp., 7.625%, Due 6/15/2021 | 300 | 334 | ||||||
Intelsat Jackson Holdings S.A., | ||||||||
7.25%, Due 10/15/2020 | 400 | 427 | ||||||
7.50%, Due 4/1/2021 | 300 | 325 | ||||||
6.625%, Due 12/15/2022 | 610 | 642 | ||||||
Intelsat Luxembourg S.A., | ||||||||
7.75%, Due 6/1/2021 | 785 | 819 | ||||||
8.125%, Due 6/1/2023 | 425 | 452 | ||||||
Level 3 Escrow II, Inc., 5.375%, Due 8/15/2022G | 280 | 285 | ||||||
Level 3 Financing, Inc., | ||||||||
3.823%, Due 1/15/2018G | 775 | 777 | ||||||
7.00%, Due 6/1/2020 | 550 | 587 | ||||||
8.625%, Due 7/15/2020 | 190 | 209 | ||||||
6.125%, Due 1/15/2021G | 215 | 225 | ||||||
Millicom International Cellular S.A., 6.625%, Due 10/15/2021G | 400 | 428 | ||||||
NII Capital Corp., | ||||||||
10.00%, Due 8/15/2016 M | 600 | 186 | ||||||
7.625%, Due 4/1/2021 M | 390 | 78 | ||||||
NII International Telecom SCA, 7.875%, Due 8/15/2019G M | 305 | 195 | ||||||
Nokia OYJ, 6.625%, Due 5/15/2039 | 790 | 854 | ||||||
Oi S.A., 5.75%, Due 2/10/2022G | 200 | 189 | ||||||
Sprint Capital Corp., 8.75%, Due 3/15/2032 | 735 | 820 | ||||||
Sprint Corp., | ||||||||
7.875%, Due 9/15/2023G | 760 | 822 | ||||||
7.125%, Due 6/15/2024G | 200 | 206 | ||||||
Sprint Nextel Corp., | ||||||||
8.375%, Due 8/15/2017 | 100 | 113 | ||||||
9.00%, Due 11/15/2018G | 500 | 588 | ||||||
7.00%, Due 3/1/2020G | 100 | 112 | ||||||
7.00%, Due 8/15/2020 | 640 | 678 | ||||||
11.50%, Due 11/15/2021 | 515 | 662 | ||||||
6.00%, Due 11/15/2022 | 600 | 599 | ||||||
Telecom Italia SpA, 5.303%, Due 5/30/2024G | 475 | 481 | ||||||
T-Mobile USA, Inc., | ||||||||
6.542%, Due 4/28/2020 | 300 | 317 | ||||||
6.633%, Due 4/28/2021 | 370 | 390 | ||||||
6.125%, Due 1/15/2022 | 300 | 311 | ||||||
6.50%, Due 1/15/2024 | 100 | 105 | ||||||
6.375%, Due 3/1/2025 | 100 | 103 | ||||||
See accompanying notes
24
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Virgin Media Finance PLC, 6.375%, Due 4/15/2023G J | $ | 255 | $ | 270 | ||||
Virgin Media Secured Finance PLC, | ||||||||
5.375%, Due 4/15/2021G J | 350 | 363 | ||||||
5.50%, Due 1/15/2025G J | 600 | 620 | ||||||
WaveDivision Escrow LLC / WaveDivision Escrow Corp., 8.125%, Due 9/1/2020B G | 295 | 321 | ||||||
Wind Acquisition Finance S.A., | ||||||||
4.75%, Due 7/15/2020G | 300 | 293 | ||||||
7.375%, Due 4/23/2021G | 1,170 | 1,143 | ||||||
Windstream Corp., 7.50%, Due 6/1/2022 | 405 | 430 | ||||||
Ymobile Corp., 8.25%, Due 4/1/2018G | 300 | 317 | ||||||
|
| |||||||
| 24,645 | ||||||||
|
| |||||||
Transportation—2.02% | ||||||||
CHC Helicopter S.A., | ||||||||
9.25%, Due 10/15/2020 | 585 | 626 | ||||||
9.375%, Due 6/1/2021 | 100 | 106 | ||||||
Eletson Holdings, 9.625%, Due 1/15/2022G | 265 | 264 | ||||||
Florida East Coast Holdings Corp., | ||||||||
6.75%, Due 5/1/2019G | 200 | 206 | ||||||
9.75%, Due 5/1/2020G | 100 | 102 | ||||||
Global Ship Lease, Inc., 10.00%, Due 4/1/2019G | 300 | 306 | ||||||
HD Supply, Inc., 7.50%, Due 7/15/2020 | 885 | 943 | ||||||
Horizon Lines LLC, | ||||||||
11.00%, Due 10/15/2016B | 74 | 74 | ||||||
13.00%, Due 10/15/2016B H | 267 | 227 | ||||||
Martin Midstream Partners LP / Martin Midstream Finance Corp., 7.25%, Due 2/15/2021D | 760 | 775 | ||||||
Syncreon Group BV, 8.625%, Due 11/1/2021G | 400 | 391 | ||||||
Watco Cos. LLC, 6.375%, Due 4/1/2023B G | 475 | 482 | ||||||
|
| |||||||
| 4,502 | ||||||||
|
| |||||||
Utilities—2.63% | ||||||||
AES Corp., | ||||||||
9.75%, Due 4/15/2016 | 119 | 131 | ||||||
3.234%, Due 6/1/2019F | 205 | 204 | ||||||
Calpine Corp., | ||||||||
6.00%, Due 1/15/2022G | 100 | 108 | ||||||
5.375%, Due 1/15/2023 | 190 | 192 | ||||||
5.875%, Due 1/15/2024G | 100 | 108 | ||||||
5.75%, Due 1/15/2025 | 790 | 799 | ||||||
Dynegy Finance I, Inc. / Dynegy Finance II, Inc., 7.625%, Due 11/1/2024G | 380 | 403 | ||||||
Elwood Energy LLC, 8.159%, Due 7/5/2026B | 245 | 274 | ||||||
Energy Future Intermediate Holding Co. LLC / EFIH Finance, Inc., 10.00%, Due 12/1/2020B M | 575 | 50 | ||||||
Genon Energy, Inc., 9.50%, Due 10/15/2018 | 390 | 407 | ||||||
Illinois Power Generating Co., 7.00%, Due 4/15/2018 | 345 | 328 | ||||||
InterGen N.V., 7.00%, Due 6/30/2023G | 600 | 575 | ||||||
MPM Escrow LLC, 8.875%, Due 10/15/2020 B M | 305 | — | ||||||
NRG Energy, Inc., | ||||||||
7.875%, Due 5/15/2021 | 635 | 688 | ||||||
6.25%, Due 7/15/2022 | 815 | 851 | ||||||
6.25%, Due 5/1/2024G | 170 | 176 | ||||||
Texas Competitive Electric Holdings Co. LLC / TCEH Finance, Inc., 11.50%, Due | 700 | 562 | ||||||
|
| |||||||
| 5,856 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $214,513) | 211,493 | |||||||
|
| |||||||
| Shares | ||||||||
SHORT-TERM INVESTMENTS—2.30% (Cost $5,123) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 5,123,139 | 5,123 | ||||||
|
| |||||||
TOTAL INVESTMENTS —98.45% (Cost $224,624) | 219,184 | |||||||
OTHER ASSETS, NET OF LIABILITIES—1.55% |
| 3,462 | ||||||
|
| |||||||
TOTAL NET ASSETS—100.00% | $ | 222,646 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets.
See accompanying notes
25
American Beacon High Yield Bond FundSM
Schedule of Investments
October 31, 2014
| A | Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of securities amounted to $166 or 0.07% of net assets. |
| B | LLC - Limited Liability Company. |
| C | Non-income producing security. |
| D | LP - Limited Partnership. |
| E | Call. |
| F | 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. |
| 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 $89,526 or 40.21% of net assets. The Fund has no right to demand registration of these securities. |
| H | PIK - Payment in Kind. |
| I | 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. |
| J | PLC - Public Limited Company. |
| K | Non-voting participating shares. |
| L | Illiquid. At period end, the value of these securities amounted to $101 or 0.05% of net assets. |
| M | In default. |
See accompanying notes
26
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCKS—2.09% | ||||||||
CONSUMER DISCRETIONARY—0.24% | ||||||||
Household Durables—0.24% | ||||||||
Lennar Corp., Class A | 5,780 | $ | 249 | |||||
|
| |||||||
ENERGY—0.39% | ||||||||
Energy Equipment & Services—0.21% | ||||||||
Schlumberger Ltd. | 2,220 | 219 | ||||||
|
| |||||||
Oil & Gas—0.18% | ||||||||
Continental Resources, Inc.A | 3,200 | 180 | ||||||
|
| |||||||
FINANCIALS—0.72% | ||||||||
Diversified Financials—0.72% | ||||||||
JPMorgan Chase & Co. | 4,655 | 282 | ||||||
T. Rowe Price Group, Inc. | 2,775 | 228 | ||||||
Wells Fargo & Co. | 4,475 | 238 | ||||||
|
| |||||||
Total Financials | 748 | |||||||
|
| |||||||
HEALTH CARE—0.25% | ||||||||
Pharmaceuticals—0.25% | ||||||||
Mylan, Inc.A | 4,725 | 253 | ||||||
|
| |||||||
INDUSTRIALS—0.23% | ||||||||
Diversified Manufacturing—0.23% | ||||||||
Eaton Corp., PLCB | 3,390 | 232 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY—0.26% | ||||||||
Computers & Peripherals—0.26% | ||||||||
Apple, Inc. | 2,485 | 268 | ||||||
|
| |||||||
Total Common Stocks (Cost $1,666) | 2,149 | |||||||
|
| |||||||
PREFERRED STOCKS—3.82% | ||||||||
CONSUMER—0.31% | ||||||||
Consumer Products—0.31% | ||||||||
Post Holdings, Inc., 5.25%, Due 6/1/2017 | 1,100 | 93 | ||||||
Tyson Foods, Inc., 4.75%, Due 7/15/2017 | 4,570 | 229 | ||||||
|
| |||||||
Total Consumer | 322 | |||||||
|
| |||||||
ENERGY—0.53% | ||||||||
Oil & Gas—0.53% | ||||||||
Chesapeake Energy Corp., 5.75%, Due 12/31/2049C D | 495 | 544 | ||||||
|
| |||||||
FINANCE—1.10% | ||||||||
Other Finance—0.50% | ||||||||
AMG Capital Trust II, 5.15%, Due 10/15/2037 | 8,300 | 518 | ||||||
|
| |||||||
Real Estate Investment Trusts—0.60% | ||||||||
American Tower Corp., 5.25%, Due 5/15/2017 | 3,360 | 366 | ||||||
Crown Castle International Corp., 4.50%, Due 11/01/2016 | 2,380 | 239 | ||||||
|
| |||||||
| 605 | ||||||||
|
| |||||||
MANUFACTURING—1.02% | ||||||||
Aerospace & Defense—0.46% | ||||||||
United Technologies Corp., 7.50%, Due 8/1/2015 | 8,135 | 475 | ||||||
|
| |||||||
Machinery—0.56% | ||||||||
Stanley Black & Decker, Inc., 4.75%, Due 11/17/2015 | 4,310 | 576 | ||||||
|
| |||||||
TRANSPORTATION—0.25% | ||||||||
Other Transportation—0.25% | ||||||||
Genesee & Wyoming, Inc., 5.00%, Due 10/01/2015 | 2,070 | 256 | ||||||
|
| |||||||
UTILITIES—0.61% | ||||||||
Electric—0.61% | ||||||||
Dominion Resources, Inc., 6.38%, Due 7/1/2017 | 2,320 | 117 | ||||||
See accompanying notes
27
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Exelon Corp., 6.50%, Due 6/1/2017 | 5,275 | $ | 278 | |||||
NextEra Energy, Inc., 5.60%, Due 6/1/2015 | 3,665 | 237 | ||||||
|
| |||||||
Total Utilities | 632 | |||||||
|
| |||||||
Total Preferred Stocks (Cost $3,768) | 3,928 | |||||||
|
| |||||||
| Par Amount | ||||||||
| (000’s) | ||||||||
CONVERTIBLE OBLIGATIONS—18.27% | ||||||||
Consumer—0.25% | ||||||||
Jarden Corp., | ||||||||
1.50%, Due 6/15/2019 | $ | 100 | 124 | |||||
1.125%, Due 3/15/2034D | 120 | 128 | ||||||
|
| |||||||
| 252 | ||||||||
|
| |||||||
Energy—0.32% | ||||||||
SEACOR Holdings, Inc., 2.50%, Due 12/15/2027 | 200 | 224 | ||||||
Stone Energy Corp., 1.75%, Due 3/1/2017 | 109 | 101 | ||||||
|
| |||||||
| 325 | ||||||||
|
| |||||||
Finance—2.12% | ||||||||
Ares Capital Corp., 4.75%, Due 1/15/2018 | 480 | 499 | ||||||
MGIC Investment Corp., 2.00%, Due 4/1/2020 | 81 | 116 | ||||||
Molina Healthcare, Inc., 1.125%, Due 1/15/2020 | 200 | 260 | ||||||
Portfolio Recovery Associates, Inc., 3.00%, Due 8/1/2020 | 210 | 252 | ||||||
Spirit Realty Capital, Inc., 2.875%, Due 5/15/2019 | 220 | 218 | ||||||
Starwood Waypoint Residential Trust, 3.00%, Due 7/1/2019D | 115 | 112 | ||||||
WellPoint, Inc., 2.75%, Due 10/15/2042 | 415 | 724 | ||||||
|
| |||||||
| 2,181 | ||||||||
|
| |||||||
Manufacturing—9.59% | ||||||||
Cemex SAB de CV, 3.25%, Due 3/15/2016 | 100 | 133 | ||||||
Citrix Systems, Inc., 0.50%, Due 4/15/2019D | 340 | 355 | ||||||
Danaher Corp., 0.01%, Due 1/22/2021 | 150 | 351 | ||||||
Electronic Arts, Inc., 0.75%, Due 7/15/2016 | 435 | 588 | ||||||
InvenSense, Inc., 1.75%, Due 11/1/2018D | 225 | 213 | ||||||
Lam Research Corp., 0.50%, Due 5/15/2016 | 425 | 565 | ||||||
Medidata Solutions, Inc., 1.00%, Due 8/1/2018 | 167 | 180 | ||||||
Mentor Graphics Corp., 4.00%, Due 4/1/2031 | 90 | 105 | ||||||
Microchip Technology, Inc., 2.125%, Due 12/15/2037 | 155 | 263 | ||||||
Micron Technology, Inc., 3.00%, Due 11/15/2043 | 415 | 534 | ||||||
NVIDIA Corp., 1.00%, Due 12/1/2018D | 505 | 572 | ||||||
ON Semiconductor Corp., 2.625%, Due 12/15/2026 | 220 | 242 | ||||||
Proofpoint, Inc., 1.25%, Due 12/15/2018D | 225 | 293 | ||||||
Red Hat, Inc., 0.25%, Due 10/1/2019D | 130 | 140 | ||||||
RTI International Metals, Inc., 3.00%, Due 12/1/2015 | 215 | 220 | ||||||
Salesforce.com, Inc., 0.25%, Due 4/1/2018 | 660 | 780 | ||||||
SanDisk Corp., 0.50%, Due 10/15/2020 | 745 | 878 | ||||||
ServiceNow, Inc., 0.01%, Due 11/1/2018D | 480 | 545 | ||||||
Standard Pacific Corp., 1.25%, Due 8/1/2032 | 215 | 243 | ||||||
SunEdison, Inc., 0.25%, Due 1/15/2020D | 151 | 150 | ||||||
SunPower Corp., 0.875%, Due 6/1/2021D | 77 | 78 | ||||||
Synchronoss Technologies, Inc., 0.75%, Due 8/15/2019 | 545 | 636 | ||||||
Take-Two Interactive Software, Inc., | ||||||||
1.75%, Due 12/1/2016 | 105 | 153 | ||||||
1.00%, Due 7/1/2018 | 195 | 262 | ||||||
Tesla Motors, Inc., | ||||||||
0.25%, Due 3/1/2019 | 120 | 115 | ||||||
1.25%, Due 3/1/2021 | 360 | 343 | ||||||
Toll Brothers Finance Corp., 0.50%, Due 9/15/2032 | 250 | 251 | ||||||
Trinity Industries, Inc., 3.875%, Due 6/1/2036 | 140 | 220 | ||||||
Verint Systems, Inc., 1.50%, Due 6/1/2021 | 230 | 257 | ||||||
Workday, Inc., 0.75%, Due 7/15/2018 | 150 | 198 | ||||||
|
| |||||||
| 9,863 | ||||||||
|
| |||||||
Service—5.53% | ||||||||
Acorda Therapeutics, Inc., 1.75%, Due 6/15/2021 | 120 | 127 | ||||||
AOL, Inc., 0.75%, Due 9/1/2019D | 155 | 160 | ||||||
See accompanying notes
28
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
BioMarin Pharmaceutical, Inc., | ||||||||
0.75%, Due 10/15/2018 | $ | 156 | �� | $ | 179 | |||
1.50%, Due 10/15/2020 | 155 | 182 | ||||||
Cepheid, Inc., 1.25%, Due 2/1/2021D | 110 | 120 | ||||||
Cubist Pharmaceuticals, Inc., | ||||||||
1.125%, Due 9/1/2018 | 255 | 292 | ||||||
1.875%, Due 9/1/2020 | 65 | 76 | ||||||
Emergent Biosolutions, Inc., 2.875%, Due 1/15/2021D | 110 | 113 | ||||||
Euronet Worldwide, Inc., 1.50%, Due 10/1/2044D | 115 | 115 | ||||||
Gilead Sciences, Inc., 1.625%, Due 5/1/2016 | 130 | 639 | ||||||
HealthSouth Corp., 2.00%, Due 12/1/2043 | 230 | 265 | ||||||
Hologic, Inc., 2.00%, Due 3/1/2042 | 215 | 234 | ||||||
Huron Consulting Group, Inc., 1.25%, Due 10/1/2019D | 130 | 134 | ||||||
Illumina, Inc., | ||||||||
0.25%, Due 3/15/2016 | 55 | 127 | ||||||
0.01%, Due 6/15/2019D | 125 | 138 | ||||||
0.50%, Due 6/15/2021D | 115 | 133 | ||||||
Insulet Corp., 2.00%, Due 6/15/2019 | 115 | 132 | ||||||
Integra LifeSciences Holdings Corp., 1.625%, Due 12/15/2016 | 440 | 471 | ||||||
Liberty Interactive LLC, 0.75%, Due 3/30/2043E | 200 | 275 | ||||||
Liberty Media Corp., 1.375%, Due 10/15/2023D | 250 | 249 | ||||||
MGM Resorts International, 4.25%, Due 4/15/2015 | 364 | 467 | ||||||
Priceline Group, Inc., 1.00%, Due 3/15/2018 | 501 | 694 | ||||||
Salix Pharmaceuticals Ltd., 1.50%, Due 3/15/2019 | 85 | 190 | ||||||
Twitter, Inc., | ||||||||
0.25%, Due 9/15/2019D | 100 | 91 | ||||||
1.00%, Due 9/15/2021D | 95 | 86 | ||||||
|
| |||||||
| 5,689 | ||||||||
|
| |||||||
Telecommunications—0.24% | ||||||||
Palo Alto Networks, Inc., 0.01%, Due 7/1/2019 D | 210 | 246 | ||||||
|
| |||||||
Transportation—0.22% | ||||||||
Hornbeck Offshore Services, Inc., 1.50%, Due 9/1/2019 | 240 | 229 | ||||||
|
| |||||||
Total Convertible Obligations (Cost $16,381) | 18,785 | |||||||
|
| |||||||
CORPORATE OBLIGATIONS—30.13% | ||||||||
Consumer—1.10% | ||||||||
Altria Group, Inc., 4.75%, Due 5/5/2021 | 300 | 330 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 8.00%, Due 11/15/2039 | 100 | 150 | ||||||
General Mills, Inc., 2.20%, Due 10/21/2019 | 550 | 547 | ||||||
SABMiller Holdings, Inc., 4.95%, Due 1/15/2042D | 100 | 108 | ||||||
|
| |||||||
| 1,135 | ||||||||
|
| |||||||
Energy—1.46% | ||||||||
Apache Corp., 5.10%, Due 9/1/2040 | 130 | 135 | ||||||
Canadian Natural Resources Ltd., 6.25%, Due 3/15/2038 | 275 | 333 | ||||||
Devon Energy Corp., 4.75%, Due 5/15/2042 | 300 | 305 | ||||||
EOG Resources, Inc., 2.50%, Due 2/1/2016 | 250 | 255 | ||||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 300 | 307 | ||||||
6.10%, Due 6/1/2040 | 140 | 169 | ||||||
|
| |||||||
| 1,504 | ||||||||
|
| |||||||
Finance—14.68% | ||||||||
AEGON Funding Co. LLC, 5.75%, Due 12/15/2020E | 250 | 289 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 107 | 128 | ||||||
4.875%, Due 6/1/2022 | 400 | 446 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 600 | 668 | ||||||
4.125%, Due 1/22/2024 | 1,000 | 1,040 | ||||||
6.11%, Due 1/29/2037 | 275 | 322 | ||||||
Bank One Corp., 4.90%, Due 4/30/2015 | 250 | 255 | ||||||
Barclays Bank PLC, 3.75%, Due 5/15/2024B | 700 | 709 | ||||||
BNP Paribas S.A., 3.60%, Due 2/23/2016 | 280 | 290 | ||||||
Citigroup, Inc., 8.50%, Due 5/22/2019 | 650 | 816 | ||||||
See accompanying notes
29
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
General Electric Capital Corp., | ||||||||
5.625%, Due 5/1/2018 | $ | 250 | $ | 283 | ||||
6.00%, Due 8/7/2019 | 300 | 352 | ||||||
5.50%, Due 1/8/2020 | 150 | 173 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 175 | 185 | ||||||
6.25%, Due 9/1/2017 | 350 | 392 | ||||||
6.00%, Due 6/15/2020 | 535 | 615 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015D | 300 | 306 | ||||||
3.75%, Due 3/7/2017D | 1,100 | 1,160 | ||||||
JPMorgan Chase & Co., | ||||||||
0.564%, Due 6/13/2016F | 375 | 374 | ||||||
3.625%, Due 5/13/2024 | 600 | 607 | ||||||
5.50%, Due 10/15/2040 | 350 | 408 | ||||||
Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015B D | 300 | 302 | ||||||
MetLife, Inc., 6.375%, Due 6/15/2034 | 400 | 521 | ||||||
Morgan Stanley, | ||||||||
0.711%, Due 10/15/2015F | 400 | 401 | ||||||
7.30%, Due 5/13/2019 | 530 | 633 | ||||||
5.625%, Due 9/23/2019 | 150 | 170 | ||||||
National Australia Bank Ltd., 4.375%, Due 12/10/2020D | 250 | 274 | ||||||
Nordea Bank AB, 4.875%, Due 1/27/2020D | 250 | 279 | ||||||
Prudential Financial, Inc., | ||||||||
7.375%, Due 6/15/2019 | 250 | 304 | ||||||
4.60%, Due 5/15/2044 | 350 | 355 | ||||||
Simon Property Group LP, 3.375%, Due 10/1/2024G H | 350 | 352 | ||||||
Svenska Handelsbanken AB, 2.875%, Due 4/4/2017 | 200 | 208 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 552 | 622 | ||||||
Wachovia Corp., 0.601%, Due 10/15/2016F | 850 | 849 | ||||||
|
| |||||||
| 15,088 | ||||||||
|
| |||||||
Manufacturing—4.38% | ||||||||
American Honda Finance Corp., 3.875%, Due 9/21/2020D | 250 | 268 | ||||||
BAE Systems Holdings, Inc., 3.80%, Due 10/7/2024D | 350 | 352 | ||||||
Daimler Finance North America LLC, 2.25%, Due 9/3/2019D E | 150 | 150 | ||||||
Dow Chemical Co., 4.125%, Due 11/15/2021 | 300 | 318 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017E | 300 | 318 | ||||||
5.875%, Due 8/2/2021E | 350 | 405 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 250 | 254 | ||||||
4.05%, Due 9/15/2022 | 350 | 358 | ||||||
Ingersoll-Rand Luxembourg Finance S.A., 2.625%, Due 5/1/2020 | 200 | 199 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 300 | 331 | ||||||
Nissan Motor Acceptance Corp., 2.35%, Due 3/4/2019D | 350 | 351 | ||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | 150 | 167 | ||||||
United Technologies Corp., 6.125%, Due 7/15/2038 | 150 | 195 | ||||||
Volkswagen International Finance N.V., 1.625%, Due 3/22/2015D | 650 | 652 | ||||||
Xerox Corp., 2.95%, Due 3/15/2017 | 175 | 181 | ||||||
|
| |||||||
| 4,499 | ||||||||
|
| |||||||
Service—2.76% | ||||||||
Bayer US Finance LLC, 2.375%, Due 10/8/2019D E | 200 | 200 | ||||||
CBS Corp., 3.375%, Due 3/1/2022 | 300 | 303 | ||||||
Comcast Corp., 6.55%, Due 7/1/2039 | 400 | 527 | ||||||
McKesson Corp., 3.25%, Due 3/1/2016 | 140 | 144 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 125 | 136 | ||||||
Thomson Reuters Corp., | ||||||||
4.70%, Due 10/15/2019 | 125 | 137 | ||||||
4.30%, Due 11/23/2023 | 300 | 318 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 150 | 165 | ||||||
4.75%, Due 3/29/2021 | 325 | 357 | ||||||
Viacom, Inc., 4.50%, Due 2/27/2042 | 350 | 333 | ||||||
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 | 150 | 215 | ||||||
|
| |||||||
| 2,835 | ||||||||
|
| |||||||
See accompanying notes
30
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Telecommunications—2.63% | ||||||||
America Movil SAB de CV, 6.375%, Due 3/1/2035 | $ | 275 | $ | 340 | ||||
AT&T, Inc., 4.35%, Due 6/15/2045 | 473 | 441 | ||||||
Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042D | 250 | 259 | ||||||
Orange S.A., 2.125%, Due 9/16/2015 | 125 | 126 | ||||||
Verizon Communications, Inc., | ||||||||
4.60%, Due 4/1/2021 | 340 | 369 | ||||||
6.90%, Due 4/15/2038 | 325 | 420 | ||||||
6.55%, Due 9/15/2043 | 250 | 315 | ||||||
Vodafone Group PLC, 6.15%, Due 2/27/2037B | 375 | 439 | ||||||
|
| |||||||
| 2,709 | ||||||||
|
| |||||||
Transportation—1.40% | ||||||||
Burlington Northern Santa Fe LLC, | ||||||||
5.75%, Due 5/1/2040E | 140 | 167 | ||||||
5.15%, Due 9/1/2043E | 300 | 334 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 250 | 283 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 250 | 293 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 325 | 367 | ||||||
|
| |||||||
| 1,444 | ||||||||
|
| |||||||
Utilities—1.72% | ||||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 300 | 359 | ||||||
Electricite de France S.A., 4.60%, Due 1/27/2020D | 300 | 333 | ||||||
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 | 300 | 377 | ||||||
Progress Energy, Inc., 4.875%, Due 12/1/2019 | 350 | 391 | ||||||
Southwestern Electric Power Co., 3.55%, Due 2/15/2022 | 300 | 311 | ||||||
|
| |||||||
| 1,771 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $28,484) | 30,985 | |||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS—0.53% | ||||||||
Energy—0.53% | ||||||||
Petrobras International Finance Co. SA, 3.875%, Due 1/27/2016 | 200 | 204 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 300 | 340 | ||||||
|
| |||||||
Total Foreign Government Obligations (Cost $498) | 544 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS—1.30% (Cost $1,338) | ||||||||
National Credit Union Administration, 0.552%, Due 3/11/2020, 2011 R3 1AF | 1,335 | 1,341 | ||||||
|
| |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS—0.40% (Cost $413) | ||||||||
Freddie Mac (REMIC), 0.553%, Due 12/15/2040, 3891 DFF | 413 | 414 | ||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS—10.16% | ||||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | 97 | 97 | ||||||
5.622%, Due 4/10/2049, 2007-2 A2 | 41 | 41 | ||||||
Ginnie Mae REMIC Trust, | ||||||||
1.45%, Due 4/16/2039, 2013-45 AB | 1,877 | 1,859 | ||||||
2.17%, Due 4/16/2041, 2012 44 A | 2,399 | 2,398 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,900 | 2,978 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.849%, Due 12/10/2043, 2010-C2 A1D | 584 | 605 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2D | 553 | 570 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 8 | 8 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1D | 240 | 242 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3D | 650 | 703 | ||||||
5.703%, Due 2/12/2049, 2007-CB19 A4 | 400 | 435 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4 | 443 | 478 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.711%, Due 6/15/2049, 2007-C32 A2 | 31 | 31 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Obligations (Cost $10,291) | 10,445 | |||||||
|
| |||||||
See accompanying notes
31
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS—11.64% | ||||||||
Federal Home Loan Mortgage Corporation—4.78% | ||||||||
5.00%, Due 2/1/2021 | $ | 115 | $ | 123 | ||||
4.50%, Due 4/1/2021 | 117 | 125 | ||||||
5.00%, Due 9/1/2035 | 307 | 340 | ||||||
5.50%, Due 4/1/2037 | 75 | 84 | ||||||
5.00%, Due 3/1/2038 | 143 | 159 | ||||||
5.50%, Due 5/1/2038 | 109 | 121 | ||||||
4.00%, Due 1/1/2041 | 894 | 950 | ||||||
4.50%, Due 2/1/2041 | 803 | 871 | ||||||
3.50%, Due 6/1/2042 | 2,070 | 2,140 | ||||||
|
| |||||||
| 4,913 | ||||||||
|
| |||||||
Federal National Mortgage Association—6.06% | ||||||||
3.50%, Due 1/1/2026 | 193 | 205 | ||||||
6.50%, Due 7/1/2032 | 82 | 95 | ||||||
5.50%, Due 6/1/2033 | 124 | 139 | ||||||
4.50%, Due 9/1/2034 | 71 | 78 | ||||||
5.50%, Due 12/1/2035 | 133 | 149 | ||||||
5.00%, Due 2/1/2036 | 107 | 119 | ||||||
5.50%, Due 4/1/2036 | 174 | 194 | ||||||
5.50%, Due 2/1/2037 | 110 | 123 | ||||||
6.00%, Due 9/1/2037 | 66 | 75 | ||||||
6.00%, Due 1/1/2038 | 87 | 98 | ||||||
4.50%, Due 1/1/2040 | 534 | 580 | ||||||
4.00%, Due 9/1/2040 | 428 | 455 | ||||||
4.00%, Due 1/1/2041 | 1,467 | 1,561 | ||||||
3.00%, Due 6/1/2043 | 1,405 | 1,408 | ||||||
3.00%, Due 8/1/2043 | 944 | 946 | ||||||
|
| |||||||
| 6,225 | ||||||||
|
| |||||||
Government National Mortgage Association—0.80% | ||||||||
6.00%, Due 2/15/2033 | 259 | 300 | ||||||
5.50%, Due 4/15/2033 | 276 | 310 | ||||||
5.00%, Due 5/15/2033 | 195 | 217 | ||||||
|
| |||||||
| 827 | ||||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $11,376) | 11,965 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS—20.01% | ||||||||
0.25%, Due 12/15/2015 | 1,000 | 1,001 | ||||||
1.50%, Due 6/30/2016 | 2,000 | 2,037 | ||||||
1.000%, Due 10/31/2016 | 1,000 | 1,010 | ||||||
0.875%, Due 1/31/2017 | 1,000 | 1,005 | ||||||
0.75%, Due 12/31/2017 | 600 | 594 | ||||||
1.375%, Due 9/30/2018 | 1,000 | 1,001 | ||||||
1.125%, Due 5/31/2019 | 1,000 | 981 | ||||||
1.25%, Due 2/29/2020 | 3,000 | 2,928 | ||||||
1.75%, Due 10/31/2020 | 2,000 | 1,983 | ||||||
2.00%, Due 2/15/2022 | 1,500 | 1,493 | ||||||
1.625%, Due 11/15/2022 | 3,000 | 2,879 | ||||||
2.50%, Due 8/15/2023 | 2,000 | 2,041 | ||||||
6.875%, Due 8/15/2025 | 250 | 357 | ||||||
5.25%, Due 11/15/2028 | 550 | 719 | ||||||
4.75%, Due 2/15/2037 | 420 | 550 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $20,195) | 20,579 | |||||||
|
| |||||||
| Shares | ||||||||
SHORT-TERM INVESTMENTS—1.33% (Cost $1,364) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 1,363,813 | 1,364 | ||||||
|
| |||||||
TOTAL INVESTMENTS—99.68% (Cost $95,773) | 102,499 | |||||||
OTHER ASSETS, NET OF LIABILITIES—0.32% |
| 326 | ||||||
|
| |||||||
TOTAL NET ASSETS—100.00% | $ | 102,825 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets.
See accompanying notes
32
American Beacon Retirement Income and Appreciation FundSM
Schedule of Investments
October 31, 2014
| A | Non-income producing security. |
| B | PLC - Public Limited Company. |
| C | Non-voting participating shares. |
| D | Security exempt from registration under the Securities Act of 1933. These securities may be resold to qualified institutional buyers pursuant to Rule 144A. At the period end, the value of these securities amounted to $11,829 or 11.51% of net assets. The Fund has no right to demand registration of these securities. |
| E | LLC - Limited Liability Company. |
| F | 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. |
| G | REIT - Real Estate Investment Trust. |
| H | LP - Limited Partnership. |
See accompanying notes
33
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
CORPORATE OBLIGATIONS—38.96% | ||||||||
Consumer—1.04% | ||||||||
Altria Group, Inc., | ||||||||
4.75%, Due 5/5/2021 | $ | 390 | $ | 430 | ||||
2.85%, Due 8/9/2022 | 650 | 629 | ||||||
Anheuser-Busch InBev Worldwide, Inc., 8.00%, Due 11/15/2039 | 175 | 264 | ||||||
Diageo Capital PLC, 1.50%, Due 5/11/2017A | 1,075 | 1,081 | ||||||
General Mills, Inc., 2.20%, Due 10/21/2019 | 1,500 | 1,490 | ||||||
SABMiller Holdings, Inc., 4.95%, Due 1/15/2042B | 400 | 431 | ||||||
|
| |||||||
| 4,325 | ||||||||
|
| |||||||
Energy—3.53% | ||||||||
Apache Corp., 5.10%, Due 9/1/2040 | 200 | 208 | ||||||
Canadian Natural Resources Ltd., | ||||||||
3.45%, Due 11/15/2021 | 550 | 563 | ||||||
6.25%, Due 3/15/2038 | 360 | 436 | ||||||
ConocoPhillips, 6.65%, Due 7/15/2018 | 825 | 965 | ||||||
DCP Midstream Operating LP, | ||||||||
2.70%, Due 4/1/2019C | 370 | 371 | ||||||
5.60%, Due 4/1/2044C | 370 | 408 | ||||||
Devon Energy Corp., 4.75%, Due 5/15/2042 | 400 | 407 | ||||||
Enable Midstream Partners LP, 3.90%, Due 5/15/2024B C | 520 | 520 | ||||||
Energy Transfer Partners LP, 4.15%, Due 10/1/2020C | 465 | 485 | ||||||
Enterprise Products Operating LLC, 6.125%, Due 10/15/2039D | 390 | 465 | ||||||
EOG Resources, Inc., 2.50%, Due 2/1/2016 | 425 | 434 | ||||||
Halliburton Co., 3.25%, Due 11/15/2021 | 895 | 926 | ||||||
Husky Energy, Inc., 3.95%, Due 4/15/2022 | 800 | 829 | ||||||
Marathon Petroleum Corp., 3.625%, Due 9/15/2024 | 335 | 334 | ||||||
Phillips 66, | ||||||||
2.95%, Due 5/1/2017 | 555 | 576 | ||||||
4.30%, Due 4/1/2022 | 535 | 574 | ||||||
Plains All American Pipeline LP / PAA Finance Corp., 4.70%, Due 6/15/2044C | 305 | 307 | ||||||
Schlumberger Investment S.A., 3.65%, Due 12/1/2023 | 1,115 | 1,167 | ||||||
Shell International Finance BV, 1.125%, Due 8/21/2017 | 1,335 | 1,334 | ||||||
Spectra Energy Capital LLC, 5.65%, Due 3/1/2020D | 695 | 778 | ||||||
Spectra Energy Partners LP, 4.60%, Due 6/15/2021C | 235 | 257 | ||||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 400 | 409 | ||||||
7.625%, Due 1/15/2039 | 650 | 909 | ||||||
6.10%, Due 6/1/2040 | 290 | 351 | ||||||
Williams Partners LP, 3.90%, Due 1/15/2025C | 685 | 680 | ||||||
|
| |||||||
| 14,693 | ||||||||
|
| |||||||
Finance—16.76% | ||||||||
AEGON Funding Co. LLC, 5.75%, Due 12/15/2020D | 400 | 462 | ||||||
Aetna, Inc., | ||||||||
2.75%, Due 11/15/2022 | 740 | 712 | ||||||
4.75%, Due 3/15/2044 | 515 | 539 | ||||||
American Express Co., 4.05%, Due 12/3/2042 | 528 | 509 | ||||||
American Express Credit Corp., | ||||||||
1.30%, Due 7/29/2016 | 620 | 624 | ||||||
2.125%, Due 3/18/2019 | 900 | 899 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 311 | 371 | ||||||
4.875%, Due 6/1/2022 | 1,000 | 1,115 | ||||||
4.50%, Due 7/16/2044 | 455 | 462 | ||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | 700 | 780 | ||||||
2.60%, Due 1/15/2019 | 635 | 641 | ||||||
7.625%, Due 6/1/2019 | 620 | 752 | ||||||
4.125%, Due 1/22/2024 | 2,500 | 2,600 | ||||||
4.00%, Due 4/1/2024 | 1,000 | 1,033 | ||||||
6.11%, Due 1/29/2037 | 360 | 421 | ||||||
5.00%, Due 1/21/2044 | 1,100 | 1,202 | ||||||
Bank of New York Mellon Corp., | ||||||||
1.30%, Due 1/25/2018 | 995 | 984 | ||||||
See accompanying notes
34
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
2.20%, Due 3/4/2019 | $ | 820 | $ | 822 | ||||
Bank One Corp., 4.90%, Due 4/30/2015 | 500 | 510 | ||||||
Barclays Bank PLC, | ||||||||
3.90%, Due 4/7/2015A | 380 | 385 | ||||||
3.75%, Due 5/15/2024A | 2,100 | 2,127 | ||||||
Bear Stearns Cos. LLC, 7.25%, Due 2/1/2018D | 1,035 | 1,203 | ||||||
Berkshire Hathaway Finance Corp., 0.95%, Due 8/15/2016 | 570 | 573 | ||||||
BNP Paribas S.A., 3.60%, Due 2/23/2016 | 400 | 414 | ||||||
Boston Properties LP, 3.125%, Due 9/1/2023C E | 410 | 398 | ||||||
Branch Banking & Trust Co., 1.45%, Due 10/3/2016 | 935 | 945 | ||||||
Capital One Financial Corp., 2.45%, Due 4/24/2019 | 670 | 672 | ||||||
Citigroup, Inc., | ||||||||
4.45%, Due 1/10/2017 | 1,000 | 1,065 | ||||||
8.50%, Due 5/22/2019 | 1,650 | 2,070 | ||||||
2.50%, Due 7/29/2019 | 1,785 | 1,791 | ||||||
5.875%, Due 1/30/2042 | 500 | 614 | ||||||
CNA Financial Corp., 7.35%, Due 11/15/2019 | 480 | 582 | ||||||
ERP Operating LP, 3.00%, Due 4/15/2023C | 290 | 282 | ||||||
General Electric Capital Corp., | ||||||||
0.433%, Due 1/8/2016F | 1,300 | 1,302 | ||||||
5.625%, Due 5/1/2018 | 375 | 424 | ||||||
6.00%, Due 8/7/2019 | 350 | 410 | ||||||
5.50%, Due 1/8/2020 | 800 | 923 | ||||||
5.30%, Due 2/11/2021 | 250 | 284 | ||||||
3.15%, Due 9/7/2022 | 1,100 | 1,113 | ||||||
5.875%, Due 1/14/2038 | 370 | 454 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 500 | 527 | ||||||
6.25%, Due 9/1/2017 | 1,100 | 1,233 | ||||||
5.95%, Due 1/18/2018 | 970 | 1,086 | ||||||
6.00%, Due 6/15/2020 | 990 | 1,139 | ||||||
5.75%, Due 1/24/2022 | 500 | 576 | ||||||
HCP, Inc., 5.375%, Due 2/1/2021 | 500 | 559 | ||||||
Health Care REIT, Inc., | ||||||||
4.125%, Due 4/1/2019E | 350 | 375 | ||||||
5.25%, Due 1/15/2022E | 500 | 554 | ||||||
Humana, Inc., 3.15%, Due 12/1/2022 | 595 | 585 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015B | 250 | 255 | ||||||
3.75%, Due 3/7/2017B | 1,500 | 1,580 | ||||||
JPMorgan Chase & Co., | ||||||||
0.564%, Due 6/13/2016F | 480 | 479 | ||||||
3.625%, Due 5/13/2024 | 1,900 | 1,924 | ||||||
3.875%, Due 9/10/2024 | 660 | 656 | ||||||
5.50%, Due 10/15/2040 | 1,000 | 1,166 | ||||||
KeyCorp, 5.10%, Due 3/24/2021 | 385 | 432 | ||||||
Liberty Mutual Group, Inc., 4.25%, Due 6/15/2023B | 480 | 496 | ||||||
Lloyds TSB Bank PLC, 4.375%, Due 1/12/2015A B | 375 | 378 | ||||||
Loews Corp., 5.25%, Due 3/15/2016 | 1,200 | 1,274 | ||||||
MetLife, Inc., | ||||||||
6.375%, Due 6/15/2034 | 500 | 652 | ||||||
4.721%, Due 12/15/2044 | 600 | 635 | ||||||
Morgan Stanley, | ||||||||
0.711%, Due 10/15/2015F | 1,180 | 1,184 | ||||||
1.75%, Due 2/25/2016F | 670 | 676 | ||||||
7.30%, Due 5/13/2019 | 1,120 | 1,337 | ||||||
5.625%, Due 9/23/2019 | 600 | 680 | ||||||
4.35%, Due 9/8/2026 | 665 | 667 | ||||||
National Australia Bank Ltd., 4.375%, Due 12/10/2020B | 425 | 467 | ||||||
Nordea Bank AB, 4.875%, Due 1/27/2020B | 450 | 503 | ||||||
PNC Funding Corp., 3.30%, Due 3/8/2022 | 620 | 630 | ||||||
Prudential Financial, Inc., | ||||||||
7.375%, Due 6/15/2019 | 450 | 548 | ||||||
4.60%, Due 5/15/2044 | 1,000 | 1,013 | ||||||
See accompanying notes
35
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Simon Property Group LP, | ||||||||
2.20%, Due 2/1/2019C E | $ | 1,100 | $ | 1,111 | ||||
3.375%, Due 10/1/2024C E | 1,000 | 1,005 | ||||||
SunTrust Banks, Inc., 3.50%, Due 1/20/2017 | 725 | 761 | ||||||
Svenska Handelsbanken AB, 2.875%, Due 4/4/2017 | 800 | 832 | ||||||
Toronto Dominion Bank, 2.625%, Due 9/10/2018 | 1,015 | 1,040 | ||||||
Trinity Acquisition PLC, 4.625%, Due 8/15/2023A | 320 | 335 | ||||||
UBS AG, 5.875%, Due 12/20/2017 | 1,163 | 1,310 | ||||||
UnitedHealth Group, Inc., | ||||||||
1.625%, Due 3/15/2019 | 460 | 453 | ||||||
3.95%, Due 10/15/2042 | 350 | 329 | ||||||
US Bancorp, 1.95%, Due 11/15/2018 | 1,660 | 1,665 | ||||||
Ventas Realty LP, 5.70%, Due 9/30/2043C E | 290 | 337 | ||||||
Wachovia Corp., | ||||||||
0.601%, Due 10/15/2016F | 1,300 | 1,299 | ||||||
5.75%, Due 2/1/2018 | 950 | 1,072 | ||||||
Wells Fargo & Co., 2.15%, Due 1/15/2019 | 465 | 467 | ||||||
|
| |||||||
| 69,751 | ||||||||
|
| |||||||
Manufacturing—7.66% | ||||||||
ABB Finance USA, Inc., 2.875%, Due 5/8/2022 | 365 | 364 | ||||||
Altera Corp., | ||||||||
1.75%, Due 5/15/2017 | 260 | 261 | ||||||
2.50%, Due 11/15/2018 | 255 | 258 | ||||||
American Honda Finance Corp., | ||||||||
2.125%, Due 2/28/2017B | 1,000 | 1,023 | ||||||
3.875%, Due 9/21/2020B | 500 | 536 | ||||||
Analog Devices, Inc., 3.00%, Due 4/15/2016 | 425 | 438 | ||||||
Apple, Inc., 2.40%, Due 5/3/2023 | 1,250 | 1,206 | ||||||
Applied Materials, Inc., 2.65%, Due 6/15/2016 | 545 | 561 | ||||||
BAE Systems Holdings, Inc., 3.80%, Due 10/7/2024B | 1,000 | 1,006 | ||||||
BHP Billiton Finance USA Ltd., 1.625%, Due 2/24/2017 | 435 | 440 | ||||||
Caterpillar Financial Services Corp., 1.625%, Due 6/1/2017 | 585 | 592 | ||||||
Caterpillar, Inc., 3.40%, Due 5/15/2024 | 660 | 674 | ||||||
Cooper US, Inc., 3.875%, Due 12/15/2020 | 665 | 706 | ||||||
Cummins, Inc., 3.65%, Due 10/1/2023 | 670 | 705 | ||||||
Daimler Finance North America LLC, 2.25%, Due 9/3/2019B D | 500 | 499 | ||||||
Delphi Corp., 4.15%, Due 3/15/2024 | 705 | 723 | ||||||
Dow Chemical Co., | ||||||||
4.25%, Due 11/15/2020 | 515 | 554 | ||||||
4.125%, Due 11/15/2021 | 400 | 424 | ||||||
3.00%, Due 11/15/2022 | 365 | 356 | ||||||
3.50%, Due 10/1/2024 | 600 | 591 | ||||||
Eaton Corp., PLC, | ||||||||
5.60%, Due 5/15/2018A B | 455 | 510 | ||||||
2.75%, Due 11/2/2022A B | 335 | 326 | ||||||
EMC Corp., 1.875%, Due 6/1/2018 | 930 | 924 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017D | 700 | 741 | ||||||
5.875%, Due 8/2/2021D | 600 | 693 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 425 | 431 | ||||||
4.05%, Due 9/15/2022 | 350 | 359 | ||||||
Ingersoll-Rand Luxembourg Finance S.A., 2.625%, Due 5/1/2020 | 500 | 498 | ||||||
Intel Corp., 3.30%, Due 10/1/2021 | 465 | 485 | ||||||
John Deere Capital Corp., | ||||||||
1.05%, Due 10/11/2016 | 655 | 657 | ||||||
1.30%, Due 3/12/2018 | 550 | 543 | ||||||
Johnson Controls, Inc., 5.00%, Due 3/30/2020 | 480 | 530 | ||||||
Koninklijke Philips Electronics N.V., 5.75%, Due 3/11/2018 | 535 | 600 | ||||||
L-3 Communications Corp., 3.95%, Due 5/28/2024 | 370 | 371 | ||||||
LYB International Finance BV, 4.00%, Due 7/15/2023 | 690 | 716 | ||||||
Monsanto Co., | ||||||||
1.15%, Due 6/30/2017 | 1,095 | 1,090 | ||||||
4.40%, Due 7/15/2044 | 725 | 731 | ||||||
Nissan Motor Acceptance Corp., 2.35%, Due 3/4/2019B | 900 | 903 | ||||||
See accompanying notes
36
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Northrop Grumman Corp., 5.05%, Due 8/1/2019 | $ | 200 | $ | 223 | ||||
Nucor Corp., | ||||||||
4.125%, Due 9/15/2022 | 325 | 346 | ||||||
4.00%, Due 8/1/2023 | 325 | 338 | ||||||
Oracle Corp., | ||||||||
2.25%, Due 10/8/2019 | 725 | 727 | ||||||
4.30%, Due 7/8/2034 | 725 | 746 | ||||||
PACCAR Financial Corp., | ||||||||
1.15%, Due 8/16/2016 | 595 | 601 | ||||||
1.10%, Due 6/6/2017 | 340 | 339 | ||||||
Pentair Finance S.A., 3.15%, Due 9/15/2022 | 485 | 477 | ||||||
Rio Tinto Finance USA Ltd., 2.50%, Due 5/20/2016 | 505 | 518 | ||||||
Toyota Motor Credit Corp., | ||||||||
2.05%, Due 1/12/2017 | 480 | 491 | ||||||
2.125%, Due 7/18/2019 | 650 | 651 | ||||||
Tyco Electronics Group S.A., 6.55%, Due 10/1/2017 | 365 | 415 | ||||||
United Technologies Corp., | ||||||||
1.80%, Due 6/1/2017 | 840 | 855 | ||||||
6.125%, Due 7/15/2038 | 600 | 778 | ||||||
Volkswagen International Finance N.V., 1.625%, Due 3/22/2015B | 850 | 854 | ||||||
Xerox Corp., 2.95%, Due 3/15/2017 | 175 | 181 | ||||||
Xilinx, Inc., 2.125%, Due 3/15/2019 | 300 | 300 | ||||||
|
| |||||||
| 31,865 | ||||||||
|
| |||||||
Service—4.27% | ||||||||
AbbVie, Inc., | ||||||||
1.75%, Due 11/6/2017 | 525 | 526 | ||||||
2.90%, Due 11/6/2022 | 380 | 370 | ||||||
Baxter International, Inc., 1.85%, Due 6/15/2018 | 605 | 605 | ||||||
Bayer US Finance LLC, 2.375%, Due 10/8/2019B D | 500 | 501 | ||||||
Becton Dickinson and Co., 3.25%, Due 11/12/2020 | 480 | 484 | ||||||
Cardinal Health, Inc., 3.20%, Due 3/15/2023 | 635 | 626 | ||||||
CareFusion Corp., 3.875%, Due 5/15/2024 | 535 | 545 | ||||||
CBS Corp., 3.375%, Due 3/1/2022 | 1,000 | 1,009 | ||||||
Celgene Corp., 5.25%, Due 8/15/2043 | 310 | 341 | ||||||
Comcast Corp., | ||||||||
5.875%, Due 2/15/2018 | 925 | 1,050 | ||||||
6.55%, Due 7/1/2039 | 800 | 1,053 | ||||||
DIRECTV Holdings LLC, 6.35%, Due 3/15/2040D | 225 | 264 | ||||||
eBay, Inc., 1.35%, Due 7/15/2017 | 600 | 596 | ||||||
Genzyme Corp., 5.00%, Due 6/15/2020 | 270 | 305 | ||||||
GlaxoSmithKline Capital PLC, 1.50%, Due 5/8/2017A | 1,090 | 1,100 | ||||||
Home Depot, Inc., 2.70%, Due 4/1/2023 | 330 | 324 | ||||||
Lowe’s Companies, Inc., | ||||||||
3.875%, Due 9/15/2023 | 340 | 361 | ||||||
4.25%, Due 9/15/2044 | 330 | 335 | ||||||
MasterCard, Inc., 3.375%, Due 4/1/2024 | 575 | 587 | ||||||
McKesson Corp., | ||||||||
3.25%, Due 3/1/2016 | 200 | 206 | ||||||
1.292%, Due 3/10/2017 | 370 | 369 | ||||||
3.796%, Due 3/15/2024 | 600 | 610 | ||||||
Quest Diagnostics, Inc., 4.75%, Due 1/30/2020 | 225 | 244 | ||||||
Sanofi, | ||||||||
1.25%, Due 4/10/2018 | 1,015 | 1,007 | ||||||
4.00%, Due 3/29/2021 | 395 | 428 | ||||||
Thomson Reuters Corp., | ||||||||
4.70%, Due 10/15/2019 | 225 | 246 | ||||||
4.30%, Due 11/23/2023 | 400 | 424 | ||||||
3.85%, Due 9/29/2024 | 600 | 601 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 1,090 | 1,202 | ||||||
4.75%, Due 3/29/2021 | 350 | 385 | ||||||
Viacom, Inc., 4.50%, Due 2/27/2042 | 500 | 476 | ||||||
Wal-Mart Stores, Inc., 7.55%, Due 2/15/2030 | 400 | 575 | ||||||
|
| |||||||
| 17,755 | ||||||||
|
| |||||||
See accompanying notes
37
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Telecommunications—2.81% | ||||||||
America Movil SAB de CV, 6.375%, Due 3/1/2035 | $ | 375 | $ | 464 | ||||
AT&T, Inc., | ||||||||
5.55%, Due 8/15/2041 | 1,000 | 1,099 | ||||||
4.35%, Due 6/15/2045 | 448 | 418 | ||||||
Cisco Systems, Inc., 2.125%, Due 3/1/2019 | 685 | 688 | ||||||
Deutsche Telekom International Finance BV, 4.875%, Due 3/6/2042B | 850 | 879 | ||||||
Orange S.A., 2.125%, Due 9/16/2015 | 225 | 227 | ||||||
Rogers Communications, Inc., 5.00%, Due 3/15/2044 | 790 | 824 | ||||||
Verizon Communications, Inc., | ||||||||
4.60%, Due 4/1/2021 | 780 | 846 | ||||||
5.15%, Due 9/15/2023 | 305 | 342 | ||||||
3.50%, Due 11/1/2024 | 350 | 344 | ||||||
6.40%, Due 9/15/2033 | 595 | 725 | ||||||
6.90%, Due 4/15/2038 | 900 | 1,163 | ||||||
6.55%, Due 9/15/2043 | 850 | 1,072 | ||||||
Vodafone Group PLC, | ||||||||
1.50%, Due 2/19/2018A | 1,060 | 1,045 | ||||||
6.15%, Due 2/27/2037A | 1,310 | 1,533 | ||||||
|
| |||||||
| 11,669 | ||||||||
|
| |||||||
Transportation—0.61% | ||||||||
Burlington Northern Santa Fe LLC, | ||||||||
7.95%, Due 8/15/2030D | 320 | 450 | ||||||
5.75%, Due 5/1/2040D | 190 | 226 | ||||||
5.15%, Due 9/1/2043D | 500 | 556 | ||||||
Canadian National Railway Co., 5.55%, Due 5/15/2018 | 400 | 453 | ||||||
CSX Corp., 5.50%, Due 4/15/2041 | 425 | 498 | ||||||
Norfolk Southern Corp., 5.75%, Due 4/1/2018 | 300 | 340 | ||||||
|
| |||||||
| 2,523 | ||||||||
|
| |||||||
Utilities—2.28% | ||||||||
Consolidated Edison Co. of New York, Inc., 5.50%, Due 12/1/2039 | 350 | 419 | ||||||
Delmarva Power & Light Co., 3.50%, Due 11/15/2023 | 510 | 529 | ||||||
Duke Energy Indiana, Inc., 6.05%, Due 6/15/2016 | 450 | 487 | ||||||
Electricite de France S.A., 4.60%, Due 1/27/2020B | 580 | 645 | ||||||
MidAmerican Energy Holdings Co., 6.125%, Due 4/1/2036 | 1,000 | 1,254 | ||||||
National Rural Utilities Cooperative Finance Corp., 5.45%, Due 4/10/2017 | 505 | 558 | ||||||
Progress Energy, Inc., | ||||||||
4.875%, Due 12/1/2019 | 450 | 502 | ||||||
4.40%, Due 1/15/2021 | 1,000 | 1,095 | ||||||
Sempra Energy, 6.50%, Due 6/1/2016 | 340 | 370 | ||||||
Sierra Pacific Power Co., 3.375%, Due 8/15/2023 | 295 | 303 | ||||||
Southern Co., 2.15%, Due 9/1/2019 | 450 | 448 | ||||||
Southwestern Electric Power Co., 3.55%, Due 2/15/2022 | 800 | 830 | ||||||
Union Electric Co., 6.70%, Due 2/1/2019 | 510 | 607 | ||||||
Xcel Energy, Inc., 5.613%, Due 4/1/2017 | 1,321 | 1,454 | ||||||
|
| |||||||
| 9,501 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $155,686) | 162,082 | |||||||
|
| |||||||
FOREIGN GOVERNMENT OBLIGATIONS—0.46% | ||||||||
Energy—0.46% | ||||||||
Petrobras International Finance Co. SA, | ||||||||
3.875%, Due 1/27/2016 | 300 | 306 | ||||||
3.50%, Due 2/6/2017 | 340 | 345 | ||||||
5.375%, Due 1/27/2021 | 500 | 512 | ||||||
6.875%, Due 1/20/2040 | 290 | 304 | ||||||
Petroleos Mexicanos, 6.00%, Due 3/5/2020 | 375 | 426 | ||||||
|
| |||||||
Total Foreign Government Obligations (Cost $1,851) | 1,893 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS—4.86% | ||||||||
Ally Master Owner Trust, 1.21%, Due 6/15/2017, 2012 3 A2 | 3,500 | 3,515 | ||||||
American Express Credit Account Master Trust, 1.26%, Due 1/15/2020, 2014 2 A | 850 | 851 | ||||||
AmeriCredit Automobile Receivables Trust, 1.15%, Due 6/10/2019, 2014 3 A3 | 960 | 960 | ||||||
Capital Auto Receivables Asset Trust, 1.09%, Due 3/20/2018, 2013-4 A3 | 980 | 984 | ||||||
Capital One Multi-Asset Execution Trust, 1.48%, Due 7/15/2020, 2014 A5 A | 1,400 | 1,405 | ||||||
Citibank Credit Card Issuance Trust, 1.11%, Due 7/23/2018, 2013 A3 A3 | 800 | 804 | ||||||
See accompanying notes
38
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Ford Credit Auto Lease Trust, 0.90%, Due 6/15/2017, 2014 A A4 | $ | 440 | $ | 440 | ||||
Ford Credit Floorplan Master Owner Trust, | ||||||||
1.50%, Due 9/15/2018, 2013-5 A1 | 1,700 | 1,720 | ||||||
1.40%, Due 8/15/2019, 2014 4 A1 | 1,790 | 1,791 | ||||||
Hyundai Auto Receivables Trust, 0.79%, Due 7/16/2018, 2014 A A3 | 550 | 550 | ||||||
Mercedes Benz Auto Lease Trust, | ||||||||
0.76%, Due 7/15/2019, 2013 B A4 | 410 | 410 | ||||||
0.90%, Due 12/16/2019, 2014 A A4 | 1,405 | 1,408 | ||||||
National Credit Union Administration, | ||||||||
0.552%, Due 3/11/2020, 2011 R3 1AF | 2,088 | 2,097 | ||||||
0.603%, Due 10/7/2020, 2010 R1 1AF | 1,551 | 1,560 | ||||||
Nissan Master Owner Trust Receivables, 0.623%, Due 5/15/2017, 2012 A AF | 1,700 | 1,702 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $20,129) | 20,197 | |||||||
|
| |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS—0.13% (Cost $551) | ||||||||
Freddie Mac (REMIC), 0.553%, Due 12/15/2040, 3891 DFF | 551 | 554 | ||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS—7.53% | ||||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | 137 | 137 | ||||||
5.622%, Due 4/10/2049, 2007-2 A2 | 53 | 53 | ||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
5.201%, Due 12/11/2038, 2006-PW14 A4 | 790 | 846 | ||||||
5.54%, Due 9/11/2041, 2006-PW13 A4 | 1,225 | 1,300 | ||||||
Ginnie Mae REMIC Trust, | ||||||||
2.012%, Due 7/16/2035, 2011-144 AB | 805 | 808 | ||||||
2.174%, Due 7/16/2038, 2011-147 A | 2,707 | 2,719 | ||||||
1.45%, Due 4/16/2039, 2013-45 AB | 2,815 | 2,788 | ||||||
2.586%, Due 9/16/2039, 2014-31 AB | 2,958 | 3,003 | ||||||
2.17%, Due 4/16/2041, 2012 44 A | 4,797 | 4,794 | ||||||
1.732%, Due 5/16/2042, 2012 70 A | 3,257 | 3,217 | ||||||
2.70%, Due 4/16/2043, 2011-109 AB | 2,030 | 2,063 | ||||||
2.543%, Due 9/16/2044, 2011-96 AC | 940 | 951 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,700 | 2,774 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.679%, Due 8/10/2043, 2010-C1 A1B | 354 | 368 | ||||||
3.849%, Due 12/10/2043, 2010-C2 A1B | 718 | 745 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2B | 553 | 570 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 12 | 12 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1B | 327 | 330 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3B | 800 | 865 | ||||||
5.703%, Due 2/12/2049, 2007-CB19 A4 | 550 | 598 | ||||||
JPMBB Commercial Mortgage Securities Trust, 3.157%, Due 7/15/2045, 2013 C12 ASB | 935 | 963 | ||||||
LB-UBS Commercial Mortgage Trust, 5.424%, Due 2/15/2040, 2007-C1 A4 | 542 | 584 | ||||||
Wachovia Bank Commercial Mortgage Trust, 5.711%, Due 6/15/2049, 2007-C32 A2 | 49 | 50 | ||||||
WF-RBS Commercial Mortgage Trust, 3.66%, Due 3/15/2047, 2014 C19 A3 | 770 | 805 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Obligations (Cost $31,048) | 31,343 | |||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS—19.86% | ||||||||
Federal Home Loan Mortgage Corporation—3.83% | ||||||||
4.50%, Due 3/1/2019 | 66 | 70 | ||||||
5.00%, Due 10/1/2020 | 172 | 184 | ||||||
3.50%, Due 9/1/2028 | 2,857 | 3,042 | ||||||
3.00%, Due 11/1/2028 | 3,898 | 4,037 | ||||||
5.00%, Due 8/1/2033 | 114 | 126 | ||||||
5.50%, Due 2/1/2034 | 151 | 169 | ||||||
6.00%, Due 8/1/2034 | 82 | 94 | ||||||
5.00%, Due 8/1/2035 | 62 | 69 | ||||||
See accompanying notes
39
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
5.00%, Due 9/1/2035 | $ | 153 | $ | 170 | ||||
5.50%, Due 4/1/2037 | 75 | 84 | ||||||
5.00%, Due 3/1/2038 | 105 | 117 | ||||||
5.50%, Due 5/1/2038 | 136 | 152 | ||||||
5.50%, Due 6/1/2038 | 98 | 109 | ||||||
4.00%, Due 1/1/2041 | 845 | 897 | ||||||
4.50%, Due 2/1/2041 | 603 | 653 | ||||||
3.50%, Due 3/1/2042 | 757 | 784 | ||||||
3.50%, Due 6/1/2042 | 3,450 | 3,568 | ||||||
3.50%, Due 2/1/2043 | 1,562 | 1,615 | ||||||
|
| |||||||
| 15,940 | ||||||||
|
| |||||||
Federal National Mortgage Association—14.32% | ||||||||
6.50%, Due 2/1/2017 | 20 | 21 | ||||||
5.00%, Due 12/1/2017 | 78 | 82 | ||||||
4.50%, Due 9/1/2018 | 184 | 194 | ||||||
4.00%, Due 8/1/2020 | 42 | 44 | ||||||
3.50%, Due 1/1/2026 | 232 | 246 | ||||||
4.00%, Due 5/1/2026 | 163 | 175 | ||||||
4.00%, Due 6/1/2026 | 1,878 | 2,016 | ||||||
3.00%, Due 8/1/2027 | 621 | 646 | ||||||
3.00%, Due 11/1/2027 | 1,200 | 1,250 | ||||||
3.50%, Due 1/1/2028 | 2,913 | 3,084 | ||||||
5.00%, Due 3/1/2034 | 149 | 166 | ||||||
4.50%, Due 4/1/2034 | 619 | 676 | ||||||
5.50%, Due 6/1/2034 | 94 | 105 | ||||||
4.50%, Due 9/1/2034 | 48 | 52 | ||||||
5.50%, Due 2/1/2035 | 164 | 184 | ||||||
5.00%, Due 5/1/2035 | 2,099 | 2,329 | ||||||
5.00%, Due 11/1/2035 | 129 | 143 | ||||||
5.50%, Due 12/1/2035 | 102 | 115 | ||||||
5.00%, Due 2/1/2036 | 107 | 119 | ||||||
5.50%, Due 4/1/2036 | 217 | 243 | ||||||
6.00%, Due 9/1/2036 | 41 | 46 | ||||||
6.50%, Due 12/1/2036 | 91 | 103 | ||||||
5.50%, Due 2/1/2037 | 110 | 123 | ||||||
6.00%, Due 9/1/2037 | 99 | 113 | ||||||
6.00%, Due 1/1/2038 | 139 | 158 | ||||||
5.50%, Due 3/1/2038 | 249 | 280 | ||||||
5.00%, Due 4/1/2038 | 102 | 113 | ||||||
5.50%, Due 6/1/2038 | 70 | 78 | ||||||
4.50%, Due 1/1/2040 | 1,187 | 1,289 | ||||||
5.00%, Due 5/1/2040 | 1,010 | 1,124 | ||||||
5.00%, Due 6/1/2040 | 1,347 | 1,500 | ||||||
4.00%, Due 9/1/2040 | 820 | 872 | ||||||
4.00%, Due 12/1/2040 | 3,798 | 4,039 | ||||||
4.00%, Due 1/1/2041 | 3,248 | 3,453 | ||||||
4.00%, Due 2/1/2041 | 2,787 | 2,977 | ||||||
5.00%, Due 3/1/2041 | 1,013 | 1,123 | ||||||
4.00%, Due 4/1/2041 | 884 | 948 | ||||||
4.50%, Due 4/1/2041 | 4,106 | 4,468 | ||||||
4.50%, Due 5/1/2041 | 621 | 675 | ||||||
4.50%, Due 8/1/2041 | 2,452 | 2,668 | ||||||
4.00%, Due 9/1/2041 | 2,128 | 2,262 | ||||||
4.50%, Due 10/1/2041 | 918 | 1,003 | ||||||
4.00%, Due 11/1/2041 | 730 | 776 | ||||||
5.00%, Due 3/1/2042 | 1,050 | 1,167 | ||||||
4.00%, Due 8/1/2042 | 2,690 | 2,860 | ||||||
3.50%, Due 9/1/2042 | 906 | 939 | ||||||
4.00%, Due 11/1/2042 | 315 | 335 | ||||||
3.50%, Due 1/1/2043 | 970 | 1,005 | ||||||
4.50%, Due 1/1/2043 | 691 | 751 | ||||||
3.00%, Due 6/1/2043 | 4,215 | 4,223 | ||||||
3.00%, Due 8/1/2043 | 3,789 | 3,796 | ||||||
3.50%, Due 8/1/2044 | 2,323 | 2,405 | ||||||
|
| |||||||
| 59,562 | ||||||||
|
| |||||||
See accompanying notes
40
American Beacon Intermediate Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Government National Mortgage Association—1.71% | ||||||||
6.50%, Due 3/15/2028 | $ | 108 | $ | 123 | ||||
6.00%, Due 4/15/2031 | 131 | 152 | ||||||
5.50%, Due 2/20/2034 | 135 | 153 | ||||||
4.50%, Due 5/15/2039 | 2,317 | 2,529 | ||||||
5.50%, Due 2/15/2040 | 424 | 473 | ||||||
4.50%, Due 6/15/2040 | 921 | 1,017 | ||||||
4.50%, Due 10/20/2040 | 917 | 1,014 | ||||||
3.50%, Due 3/15/2043 | 1,584 | 1,657 | ||||||
|
| |||||||
| 7,118 | ||||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $81,167) | 82,620 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS—25.83% | ||||||||
1.50%, Due 6/30/2016 | 7,500 | 7,637 | ||||||
3.125%, Due 10/31/2016 | 6,400 | 6,730 | ||||||
0.875%, Due 1/31/2017 | 11,570 | 11,633 | ||||||
0.75%, Due 12/31/2017 | 4,600 | 4,557 | ||||||
1.375%, Due 9/30/2018 | 4,450 | 4,456 | ||||||
1.125%, Due 5/31/2019 | 1,000 | 981 | ||||||
1.25%, Due 2/29/2020 | 6,600 | 6,439 | ||||||
1.75%, Due 10/31/2020 | 1,000 | 991 | ||||||
2.00%, Due 11/15/2021 | 15,985 | 15,941 | ||||||
2.00%, Due 2/15/2022 | 18,690 | 18,599 | ||||||
1.625%, Due 11/15/2022 | 9,100 | 8,734 | ||||||
2.50%, Due 8/15/2023 | 7,500 | 7,654 | ||||||
2.375%, Due 8/15/2024 | 2,795 | 2,806 | ||||||
6.875%, Due 8/15/2025 | 770 | 1,099 | ||||||
5.25%, Due 11/15/2028 | 750 | 981 | ||||||
4.75%, Due 2/15/2037 | 800 | 1,048 | ||||||
4.50%, Due 8/15/2039 | 1,700 | 2,160 | ||||||
3.125%, Due 11/15/2041 | 4,910 | 5,001 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $105,332) | 107,447 | |||||||
|
| |||||||
| Shares | ||||||||
SHORT-TERM INVESTMENTS—1.78% (Cost $7,414) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 7,413,943 | 7,414 | ||||||
|
| |||||||
TOTAL INVESTMENTS—99.41% (Cost $403,179) | 413,550 | |||||||
OTHER ASSETS, NET OF LIABILITIES—0.59% |
| 2,428 | ||||||
|
| |||||||
TOTAL NET ASSETS—100.00% | $ | 415,978 | ||||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | PLC - Public Limited Company. |
| 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 $15,190 or 3.65% of net assets. The Fund has no right to demand registration of these securities. |
| C | LP - Limited Partnership. |
| D | LLC - Limited Liability Company. |
| E | REIT - Real Estate Investment Trust. |
| F | The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. |
See accompanying notes
41
American Beacon Short-Term Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
CORPORATE OBLIGATIONS—26.31% | ||||||||
Consumer—1.61% | ||||||||
Kellogg Co., 1.125%, Due 5/15/2015 | $ | 2,000 | $ | 2,006 | ||||
SABMiller Holdings, Inc., 1.85%, Due 1/15/2015A | 1,000 | 1,002 | ||||||
SABMiller PLC, 6.50%, Due 7/1/2016A B | 1,725 | 1,882 | ||||||
|
| |||||||
| 4,890 | ||||||||
|
| |||||||
Finance—14.17% | ||||||||
ABN AMRO Bank N.V., 1.375%, Due 1/22/2016A | 3,000 | 3,021 | ||||||
Bank America Corp., 3.625%, Due 3/17/2016 | 4,420 | 4,576 | ||||||
Barclays Bank PLC, 5.00%, Due 9/22/2016B | 995 | 1,068 | ||||||
Citigroup, Inc., | ||||||||
1.194%, Due 7/25/2016 | 1,000 | 1,010 | ||||||
1.70%, Due 7/25/2016 | 2,000 | 2,020 | ||||||
0.914%, Due 11/15/2016 | 1,000 | 1,004 | ||||||
0.774%, Due 3/10/2017C | 1,000 | 1,000 | ||||||
Deutsche Bank AG/London, 3.25%, Due 1/11/2016 | 3,700 | 3,808 | ||||||
General Electric Capital Corp., 1.50%, Due 7/12/2016 | 3,000 | 3,038 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 1,000 | 1,054 | ||||||
3.625%, Due 2/7/2016 | 3,270 | 3,375 | ||||||
JPMorgan Chase & Co., | ||||||||
3.45%, Due 3/1/2016 | 3,500 | 3,616 | ||||||
3.15%, Due 7/5/2016 | 2,273 | 2,351 | ||||||
Morgan Stanley, | ||||||||
3.45%, Due 11/2/2015 | 3,000 | 3,078 | ||||||
3.80%, Due 4/29/2016 | 3,000 | 3,118 | ||||||
Sumitomo Mitsui Banking Corp., 1.45%, Due 7/19/2016 | 2,350 | 2,368 | ||||||
Wells Fargo & Company, 3.676%, Due 6/15/2016 | 3,500 | 3,658 | ||||||
|
| |||||||
| 43,163 | ||||||||
|
| |||||||
Manufacturing—4.18% | ||||||||
American Honda Finance Corp., 1.00%, Due 8/11/2015A | 2,000 | 2,010 | ||||||
Daimler Finance North America LLC, 3.00%, Due 3/28/2016A D | 3,500 | 3,604 | ||||||
Ford Motor Credit Co. LLC, 4.25%, Due 2/3/2017D | 1,000 | 1,059 | ||||||
Nissan Motor Acceptance Corp., 0.935%, Due 9/26/2016A C | 3,000 | 3,019 | ||||||
Volkswagen International Finance N.V., 1.15%, Due 11/20/2015A | 3,000 | 3,018 | ||||||
|
| |||||||
| 12,710 | ||||||||
|
| |||||||
Service—2.31% | ||||||||
AbbVie, Inc., 1.20%, Due 11/6/2015 | 3,000 | 3,017 | ||||||
McKesson Corp., 0.95%, Due 12/4/2015 | 1,000 | 1,002 | ||||||
Thomson Reuters Corp., 1.30%, Due 2/23/2017 | 1,000 | 1,000 | ||||||
Viacom, Inc., 1.25%, Due 2/27/2015 | 2,000 | 2,004 | ||||||
|
| |||||||
| 7,023 | ||||||||
|
| |||||||
Telecommunications—3.71% | ||||||||
AT&T, Inc., 1.148%, Due 11/27/2018 | 3,000 | 3,052 | ||||||
British Telecommunications PLC, 1.625%, Due 6/28/2016B | 3,000 | 3,032 | ||||||
Verizon Communications, Inc., | ||||||||
5.55%, Due 2/15/2016 | 1,000 | 1,060 | ||||||
3.00%, Due 4/1/2016 | 4,000 | 4,132 | ||||||
|
| |||||||
| 11,276 | ||||||||
|
| |||||||
Transportation—0.33% | ||||||||
Burlington Northern Santa Fe Corp., 4.875%, Due 1/15/2015 | 1,000 | 1,009 | ||||||
|
| |||||||
Total Corporate Obligations (Cost $79,786) | 80,071 | |||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS—14.88% | ||||||||
Capital Auto Receivables Asset Trust, | ||||||||
0.92%, Due 9/20/2016, 2013-2 A2 | 3,500 | 3,505 | ||||||
1.32%, Due 6/20/2018, 2014 1 A3 | 3,000 | 3,016 | ||||||
Chrysler Capital Auto Receivables Trust, 0.91%, Due 4/16/2018, 2013-AA A3A | 3,425 | 3,433 | ||||||
Citibank Credit Card Issuance Trust, 1.32%, Due 9/7/2018, 2013 A6 A6 | 5,000 | 5,044 | ||||||
Ford Credit Auto Owner Trust, 0.84%, Due 8/15/2016, 2012-1A A3 | 330 | 331 | ||||||
Ford Credit Floorplan Master Owner Trust, 0.85%, Due 1/15/2018, 2013-1 A1 | 3,000 | 3,007 | ||||||
GE Equipment Transportation LLC, 0.62%, Due 7/25/2016, 2012-2 A3D | 1,333 | 1,334 | ||||||
Golden Credit Card Trust, 0.583%, Due 9/15/2018, 2013-2A AA C | 3,000 | 3,007 | ||||||
See accompanying notes
42
American Beacon Short-Term Bond FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
MMCA Auto Owner Trust, 1.21%, Due 12/16/2019, 2014 A A3A | $ | 2,955 | $ | 2,956 | ||||
National Credit Union Administration, | ||||||||
0.603%, Due 1/8/2020, 2011 R1 1AC | 4,311 | 4,336 | ||||||
0.553%, Due 2/6/2020, 2011 R2 1AC | 1,172 | 1,176 | ||||||
0.552%, Due 3/11/2020, 2011 R3 1AC | 4,140 | 4,156 | ||||||
1.84%, Due 10/7/2020, 2010-R1 2A | 140 | 141 | ||||||
Nissan Master Owner Trust Receivables, 0.453%, Due 2/15/2018, 2013-A AC | 3,500 | 3,500 | ||||||
Toyota Auto Receivables Owner Trust, 0.93%, Due 7/16/2018, 2014 C A3 | 2,000 | 2,006 | ||||||
Volkswagen Auto Lease Trust, 0.84%, Due 7/20/2016, 2013 A A3 | 3,700 | 3,708 | ||||||
Volkswagen Auto Loan Enhanced Trust, 0.85%, Due 8/22/2016, 2012-1 A3 | 623 | 624 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $45,224) | 45,280 | |||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS—3.29% | ||||||||
Banc of America Commercial Mortgage Trust, 5.622%, Due 4/10/2049, 2007-2 A2 | 50 | 50 | ||||||
Ginnie Mae REMIC Trust, | ||||||||
1.864%, Due 8/16/2031, 2010-141 A | 855 | 858 | ||||||
2.45%, Due 7/16/2032, 2011-109 A | 1,580 | 1,587 | ||||||
2.25%, Due 5/16/2033, 2011-92 A | 1,608 | 1,615 | ||||||
2.25%, Due 8/16/2034, 2011-78 A | 678 | 679 | ||||||
2.21%, Due 11/16/2034, 2011-16 A | 712 | 712 | ||||||
2.21%, Due 12/16/2035, 2011-31 A | 1,066 | 1,071 | ||||||
2.782%, Due 6/16/2036, 2010-13 AD | 607 | 616 | ||||||
3.069%, Due 6/16/2036, 2010-52 A | 154 | 154 | ||||||
2.161%, Due 11/16/2036, 2011-96 AB | 377 | 378 | ||||||
2.45%, Due 7/16/2038, 2011-49 A | 1,804 | 1,841 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., 3.853%, Due 6/15/2043, 2010-C1 A1A | 436 | 440 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Obligations (Cost $10,037) | 10,001 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS—52.70% | ||||||||
2.00%, Due 1/31/2016 | 4,000 | 4,088 | ||||||
2.25%, Due 3/31/2016 | 6,500 | 6,679 | ||||||
2.00%, Due 4/30/2016 | 6,000 | 6,148 | ||||||
1.75%, Due 5/31/2016 | 5,000 | 5,109 | ||||||
0.50%, Due 6/15/2016 | 6,000 | 6,015 | ||||||
1.50%, Due 6/30/2016 | 16,000 | 16,292 | ||||||
1.50%, Due 7/31/2016 | 15,000 | 15,282 | ||||||
1.00%, Due 8/31/2016 | 20,000 | 20,200 | ||||||
1.00%, Due 9/30/2016 | 20,000 | 20,191 | ||||||
1.000%, Due 10/31/2016 | 20,000 | 20,191 | ||||||
0.875%, Due 11/30/2016 | 20,000 | 20,133 | ||||||
0.625%, Due 12/15/2016 | 20,000 | 20,022 | ||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $160,268) | 160,350 | |||||||
|
| |||||||
| �� | Shares | |||||||
SHORT-TERM INVESTMENTS—1.12% (Cost $3,396) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 3,395,570 | 3,396 | ||||||
|
| |||||||
TOTAL INVESTMENTS—98.30% (Cost $298,711) | 299,098 | |||||||
OTHER ASSETS, NET OF LIABILITIES—1.70% |
| 5,198 | ||||||
|
| |||||||
TOTAL NET ASSETS—100.00% | $ | 304,296 | ||||||
|
| |||||||
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 $27,392 or 9.00% of net assets. The Fund has no right to demand registration of these securities. |
| B | PLC - Public Limited Company. |
| C | 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. |
| D | LLC - Limited Liability Company. |
See accompanying notes
43
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2014 (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 | $ | 219,184 | $ | 102,499 | $ | 413,550 | $ | 299,098 | ||||||||
Dividends and interest receivable | 3,983 | 587 | 2,446 | 884 | ||||||||||||
Receivable for investments sold | 1,715 | — | — | 1,147 | ||||||||||||
Receivable for fund shares sold | 689 | 31 | 1,017 | 4,333 | ||||||||||||
Receivable for tax reclaims | 12 | 2 | 5 | 3 | ||||||||||||
Receivable for expense reimbursement (Note 2) | 2 | — | — | 1 | ||||||||||||
Prepaid expenses | 29 | 23 | 27 | 26 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets | 225,614 | 103,142 | 417,045 | 305,492 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities: | ||||||||||||||||
Payable for investments purchased | 1,864 | 117 | 565 | — | ||||||||||||
Cash overdraft | — | — | — | 1,076 | ||||||||||||
Payable for fund shares redeemed | 926 | 90 | 342 | 5 | ||||||||||||
Dividends payable | 9 | 1 | 1 | 1 | ||||||||||||
Management and investment advisory fees payable | 80 | 31 | 70 | 42 | ||||||||||||
Administrative service and service fees payable | 32 | 31 | 18 | 16 | ||||||||||||
Transfer agent fees payable | 5 | 1 | 4 | 13 | ||||||||||||
Custody and fund accounting fees payable | 6 | 3 | 8 | 3 | ||||||||||||
Professional fees payable | 37 | 34 | 32 | 32 | ||||||||||||
Trustee fees payable | 2 | 1 | 5 | 4 | ||||||||||||
Payable for prospectus and shareholder reports | 6 | 7 | 21 | 4 | ||||||||||||
Other liabilities | 1 | 1 | 1 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total liabilities | 2,968 | 317 | 1,067 | 1,196 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets | $ | 222,646 | $ | 102,825 | $ | 415,978 | $ | 304,296 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Analysis of Net Assets: | ||||||||||||||||
Paid-in-capital | 225,040 | 92,810 | 404,921 | 310,786 | ||||||||||||
Undistributed (or overdistribution of) net investment income | (433 | ) | (173 | ) | (23 | ) | (556 | ) | ||||||||
Accumulated net realized gain (loss) | 3,479 | 3,462 | 709 | (6,321 | ) | |||||||||||
Unrealized appreciation or (depreciation) of investments | (5,440 | ) | 6,726 | 10,371 | 387 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets | $ | 222,646 | $ | 102,825 | $ | 415,978 | $ | 304,296 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||||||
Institutional Class | 9,098,080 | N/A | 38,384,203 | 33,856,937 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | 126,882 | 66,358 | 22,251 | 130,002 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | 732,365 | 9,021,095 | 139,750 | 836,153 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | 165,021 | 40,271 | 39,566 | 152,443 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | 192,729 | 170,540 | 17,585 | 111,701 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | 14,135,860 | N/A | N/A | N/A | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net assets (not in thousands): | ||||||||||||||||
Institutional Class | $ | 82,845,437 | $ | N/A | $ | 413,618,076 | $ | 293,619,621 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | $ | 1,157,413 | $ | 733,284 | $ | 240,726 | $ | 1,129,669 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | $ | 6,674,228 | $ | 99,748,492 | $ | 1,504,074 | $ | 7,255,314 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | $ | 1,505,672 | $ | 446,931 | $ | 425,812 | $ | 1,322,521 | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | $ | 1,755,701 | $ | 1,896,693 | $ | 189,484 | $ | 969,294 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | $ | 128,707,273 | $ | N/A | $ | N/A | $ | N/A | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, offering and redemption price per share: |
| |||||||||||||||
Institutional Class | $ | 9.11 | N/A | $ | 10.78 | $ | 8.67 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Y Class | $ | 9.12 | $ | 11.05 | $ | 10.82 | $ | 8.69 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Investor Class | $ | 9.11 | $ | 11.06 | $ | 10.76 | $ | 8.68 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class | $ | 9.12 | $ | 11.10 | $ | 10.76 | $ | 8.68 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Class (offering price) | $ | 9.57 | $ | 11.38 | $ | 11.30 | $ | 8.90 | ||||||||
|
|
|
|
|
|
|
| |||||||||
C Class | $ | 9.11 | $ | 11.12 | $ | 10.78 | $ | 8.68 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AMR Class | $ | 9.11 | N/A | N/A | N/A | |||||||||||
|
|
|
|
|
|
|
| |||||||||
A Cost of investments in unaffiliated securities | $ | 224,624 | $ | 95,773 | $ | 403,179 | $ | 298,711 | ||||||||
See accompanying notes
44
American Beacon FundsSM
Statements of Operations
For the year ended October 31, 2014 (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 | $ | 91 | $ | 227 | $ | 1 | $ | — | ||||||||
Interest income | 14,237 | 2,458 | 10,212 | 1,507 | ||||||||||||
Other Income | 64 | — | — | 1 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total investment income | 14,392 | 2,685 | 10,213 | 1,508 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses: | ||||||||||||||||
Management and investment advisory fees (Note 2) | 893 | 353 | 778 | 309 | ||||||||||||
Administrative service fees (Note 2): | ||||||||||||||||
Institutional Class | 222 | — | 193 | 72 | ||||||||||||
Y Class | 6 | 2 | 1 | 3 | ||||||||||||
Investor Class | 23 | 304 | 5 | 21 | ||||||||||||
A Class | 5 | 2 | 2 | 5 | ||||||||||||
C Class | 7 | 7 | 1 | 3 | ||||||||||||
AMR Class | 65 | — | — | — | ||||||||||||
Transfer agent fees: | ||||||||||||||||
Institutional Class | 40 | — | 14 | 16 | ||||||||||||
Investor Class | 2 | 5 | 2 | 3 | ||||||||||||
AMR Class | 6 | — | — | — | ||||||||||||
Custody and fund accounting fees | 51 | 21 | 50 | 22 | ||||||||||||
Professional fees | 53 | 46 | 52 | 48 | ||||||||||||
Registration fees and expenses | 63 | 45 | 61 | 55 | ||||||||||||
Service fees (Note 2): | ||||||||||||||||
Y Class | 2 | 1 | — | 1 | ||||||||||||
Investor Class | 19 | 380 | 4 | 17 | ||||||||||||
A Class | 2 | 1 | 1 | 2 | ||||||||||||
C Class | 3 | 3 | 1 | 1 | ||||||||||||
Distribution fees (Note 2): | ||||||||||||||||
A Class | 4 | 1 | 1 | 4 | ||||||||||||
C Class | 19 | 19 | 3 | 9 | ||||||||||||
Prospectus and shareholder report expenses | 46 | 11 | 55 | 25 | ||||||||||||
Trustee fees | 11 | 6 | 16 | 8 | ||||||||||||
Other expenses | 13 | 13 | 34 | 11 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | 1,555 | 1,220 | 1,274 | 635 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fees waived and expenses reimbursed (Note 2) | (22 | ) | (3 | ) | (3 | ) | (16 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net expenses | 1,533 | 1,217 | 1,271 | 619 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income | 12,859 | 1,468 | 8,942 | 889 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments | 3,657 | 4,727 | 1,625 | 562 | ||||||||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||||||||||
Investments | (8,008 | ) | (1,361 | ) | 3,464 | (234 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net gain (loss) from investments | (4,351 | ) | 3,366 | 5,089 | 328 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | $ | 8,508 | $ | 4,834 | $ | 14,031 | $ | 1,217 | ||||||||
|
|
|
|
|
|
|
| |||||||||
A Foreign taxes | 12 | — | — | — | ||||||||||||
See accompanying notes
45
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
| High Yield Bond Fund | Retirement Income and Appreciation Fund | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 12,859 | $ | 11,084 | $ | 1,468 | $ | 2,392 | ||||||||
Net realized gain from investments | 3,657 | 3,233 | 4,727 | 5,348 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from investments | (8,008 | ) | (16 | ) | (1,361 | ) | (3,139 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets resulting from operations | 8,508 | 14,301 | 4,834 | 4,601 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (4,444 | ) | (3,331 | ) | — | — | ||||||||||
Y Class | (110 | ) | (72 | ) | (20 | ) | (34 | ) | ||||||||
Investor Class | (447 | ) | (489 | ) | (2,845 | ) | (3,039 | ) | ||||||||
A Class | (81 | ) | (57 | ) | (14 | ) | (40 | ) | ||||||||
C Class | (95 | ) | (114 | ) | (32 | ) | (21 | ) | ||||||||
AMR Class | (8,270 | ) | (7,002 | ) | — | — | ||||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | (219 | ) | — | — | — | |||||||||||
Y Class | (7 | ) | — | (20 | ) | (14 | ) | |||||||||
Investor Class | (26 | ) | — | (4,225 | ) | (969 | ) | |||||||||
A Class | (4 | ) | — | (18 | ) | (8 | ) | |||||||||
C Class | (7 | ) | — | (63 | ) | (12 | ) | |||||||||
AMR Class | (464 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (14,174 | ) | (11,065 | ) | (7,237 | ) | (4,137 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 85,739 | 126,393 | 17,150 | 28,621 | ||||||||||||
Reinvestment of dividends and distributions | 13,951 | 10,673 | 7,203 | 4,111 | ||||||||||||
Cost of shares redeemed | (80,199 | ) | (71,927 | ) | (52,515 | ) | (69,036 | ) | ||||||||
Redemption fees | 31 | 52 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | 19,522 | 65,191 | (28,162 | ) | (36,304 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | 13,856 | 68,427 | (30,565 | ) | (35,840 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 208,790 | 140,363 | 133,390 | 169,230 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 222,646 | $ | 208,790 | $ | 102,825 | $ | 133,390 | ||||||||
|
|
|
|
|
|
|
| |||||||||
*Includes undistributed (or overdistribution of) net investment income of | $ | (433 | ) | $ | 154 | $ | (173 | ) | $ | 110 | ||||||
|
|
|
|
|
|
|
| |||||||||
See accompanying notes
46
American Beacon FundsSM
Statements of Changes in Net Assets (in thousands)
| Intermediate Bond Fund | Short-Term Bond Fund | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 8,942 | $ | 8,313 | $ | 889 | $ | 1,491 | ||||||||
Net realized gain from investments | 1,625 | 1,150 | 562 | 727 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from investments | 3,464 | (14,948 | ) | (234 | ) | (1,288 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | 14,031 | (5,485 | ) | 1,217 | 930 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (11,444 | ) | (9,213 | ) | (1,692 | ) | (2,250 | ) | ||||||||
Y Class | (4 | ) | (40 | ) | (10 | ) | (14 | ) | ||||||||
Investor Class | (42 | ) | (83 | ) | (52 | ) | (116 | ) | ||||||||
A Class | (9 | ) | (11 | ) | (10 | ) | (21 | ) | ||||||||
C Class | (6 | ) | (11 | ) | — | (1 | ) | |||||||||
Net realized gain from investments: | ||||||||||||||||
Institutional Class | (447 | ) | (4,740 | ) | — | — | ||||||||||
Y Class | — | (55 | ) | — | — | |||||||||||
Investor Class | (2 | ) | (75 | ) | — | — | ||||||||||
A Class | (1 | ) | (7 | ) | — | — | ||||||||||
C Class | (1 | ) | (14 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net distributions to shareholders | (11,956 | ) | (14,249 | ) | (1,764 | ) | (2,402 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 125,929 | 134,686 | 197,178 | 97,841 | ||||||||||||
Reinvestment of dividends and distributions | 11,935 | 14,119 | 1,753 | 2,369 | ||||||||||||
Cost of shares redeemed | (66,463 | ) | (188,290 | ) | (56,401 | ) | (171,773 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | 71,401 | (39,485 | ) | 142,530 | (71,563 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets | 73,476 | (59,219 | ) | 141,983 | (73,035 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 342,502 | 401,721 | 162,313 | 235,348 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
End of Period * | $ | 415,978 | $ | 342,502 | $ | 304,296 | $ | 162,313 | ||||||||
|
|
|
|
|
|
|
| |||||||||
*Includes undistributed (or overdistribution of) net investment income of | $ | (23 | ) | $ | 2,002 | $ | (556 | ) | $ | (426 | ) | |||||
|
|
|
|
|
|
|
| |||||||||
See accompanying notes
47
American Beacon FundsSM
October 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of thirty-one 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.
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 and the Trust. 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. The Funds pay 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 and receives an annualized fee of 0.20% of the average daily net assets of the Fund. Management fees paid during the year ended October 31, 2014 were as follows (dollars in thousands):
48
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
| Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | |||||||||||||
High Yield Bond | 0.41 | % | $ | 893 | $ | 785 | $ | 108 | ||||||||
Retirement Income and Appreciation | 0.34 | % | 353 | 301 | 52 | |||||||||||
Intermediate Bond | 0.20 | % | 778 | 300 | 478 | |||||||||||
Short-Term Bond | 0.20 | % | 309 | — | 309 | |||||||||||
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administration 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 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. Prior to July 1, 2014, the Manager received 0.40% of the average daily net assets of the A and C Classes of each Fund. Beginning July 1, 2014, the Manager receives 0.30% of the average daily net asset assets of the A and C Classes of the Funds.
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.
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, 2014, the Short-Term Bond Fund loaned on average $891,476 for 36 days at an average rate of 0.70% with interest charges of $613. The amount is included as interest income on the Statements of Operations. The High Yield Bond, Retirement Income and Appreciation, and Intermediate Bond Funds did not participate in the Interfund Lending Program during the year ended October 31, 2014.
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American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014, the Manager reimbursed expenses as follows:
| Expense Caps | Reimbursed | |||||||||||||||||
Fund | Class | 11/1/13 to 6/30/14 | 7/1/14 to 10/31/14 | (Recovered) Expenses | Expiration of Reimbursements | |||||||||||||
High Yield Bond | Institutional1 | 0.93 | % | 0.93 | % | $ | 14,808 | 2017 | ||||||||||
High Yield Bond | Y | 0.98 | % | 0.98 | % | (451 | ) | 2017 | ||||||||||
High Yield Bond | Investor | N/A | 1.09 | % | 586 | 2017 | ||||||||||||
High Yield Bond | A | 1.12 | % | 1.02 | % | 3,064 | 2017 | |||||||||||
High Yield Bond | C | 1.87 | % | 1.77 | % | 4,227 | 2017 | |||||||||||
Retirement Income and Appreciation | Y | 0.80 | % | 0.80 | % | 696 | 2017 | |||||||||||
Retirement Income and Appreciation | A | 1.14 | % | 1.04 | % | 756 | 2017 | |||||||||||
Retirement Income and Appreciation | C | 1.96 | % | 1.86 | % | 1,333 | 2017 | |||||||||||
Intermediate Bond | Y | 0.65 | % | 0.65 | % | 74 | 2017 | |||||||||||
Intermediate Bond | Investor | 0.79 | % | 0.79 | % | 1,922 | 2017 | |||||||||||
Intermediate Bond | A | 0.99 | % | 0.89 | % | 429 | 2017 | |||||||||||
Intermediate Bond | C | 1.74 | % | 1.64 | % | 358 | 2017 | |||||||||||
Short-Term Bond | Y | 0.64 | % | 0.64 | % | 885 | 2017 | |||||||||||
Short-Term Bond | Investor | 0.79 | % | 0.79 | % | 7,859 | 2017 | |||||||||||
Short-Term Bond | A | 0.85 | % | 0.75 | % | 3,878 | 2017 | |||||||||||
Short Term Bond | C | 1.60 | % | 1.50 | % | 2,868 | 2017 | |||||||||||
| 1 | Voluntary reimbursement. |
Of these amounts, $1,617, $98, and $843 were disclosed as a receivable from the Manager to the High Yield Bond, Intermediate Bond, and Short-Term Bond Funds, respectively and $352 was payable by the Manager from the Retirement Income and Appreciation Fund to the Manager at October 31, 2014. 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 | $ | 77 | $ | 7,120 | 2015 | |||||||
High Yield Bond | 374 | 20,376 | 2016 | |||||||||
Retirement Income and Appreciation | — | 3,661 | 2015 | |||||||||
Retirement Income and Appreciation | — | 2,999 | 2016 | |||||||||
Intermediate Bond | — | 7,592 | 2015 | |||||||||
Intermediate Bond | — | 6,148 | 2016 | |||||||||
Short-Term Bond | — | 29,140 | 2015 | |||||||||
Short-Term Bond | — | 20,687 | 2016 | |||||||||
The Manager recovered $77 of excess carryover expenses expiring in 2015 and $374 expiring in 2016 from the Y Class of the High Yield Bond Fund. During the year ended October 31, 2014 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, 2014, Foreside has collected $2,954, $79, $385, and $62 for the High Yield Bond, Retirement Income and Appreciation, Intermediate Bond, and Short-Term Bond Funds, respectively from the sale of Class A Shares.
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American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014 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, 2014, $1,192, $658, $194, and $687 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.
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.
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Notes to Financial Statements
October 31, 2014
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, ETFs 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.
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 may be 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
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Notes to Financial Statements
October 31, 2014
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. Generally Accepted Accounting Principles (“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 below.
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, 2014, the investments were classified as described below (in thousands):
High Yield Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 362 | $ | — | $ | 77 | $ | 439 | ||||||||
Rights | — | 45 | — | 45 | ||||||||||||
Convertible Preferred Stock | — | — | 45 | 45 | ||||||||||||
Preferred Stocks | 1,106 | — | — | 1,106 | ||||||||||||
Convertible Obligations | — | 933 | — | 933 | ||||||||||||
Corporate Obligations | — | 211,493 | — | 211,493 | ||||||||||||
Short-Term Investments—Money Market Funds | 5,123 | — | — | 5,123 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 6,591 | $ | 212,471 | $ | 122 | $ | 219,184 | ||||||||
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|
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| |||||||||
Retirement Income and Appreciation Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 2,149 | $ | — | $ | — | $ | 2,149 | ||||||||
Preferred Stock | 3,928 | — | — | 3,928 | ||||||||||||
Convertible Obligations | — | 18,785 | — | 18,785 | ||||||||||||
Corporate Obligations | — | 30,985 | — | 30,985 | ||||||||||||
Foreign Government Obligations | — | 544 | — | 544 | ||||||||||||
Asset-Backed Obligations | — | 1,341 | — | 1,341 | ||||||||||||
Collateralized Mortgage Obligations | — | 414 | — | 414 | ||||||||||||
Commercial Mortgage-Backed Obligations | — | 10,445 | — | 10,445 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 11,965 | — | 11,965 | ||||||||||||
U.S. Treasury Obligations | — | 20,579 | — | 20,579 | ||||||||||||
Short-Term Investments—Money Market Funds | 1,364 | — | — | 1,364 | ||||||||||||
|
|
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|
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|
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| |||||||||
Total Investments in Securities | $ | 7,441 | $ | 95,058 | $ | — | $ | 102,499 | ||||||||
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Notes to Financial Statements
October 31, 2014
Intermediate Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 162,082 | $ | — | $ | 162,082 | ||||||||
Foreign Government Obligations | — | 1,893 | — | 1,893 | ||||||||||||
Asset-Backed Obligations | — | 20,197 | — | 20,197 | ||||||||||||
Collateralized Mortgage Obligations | — | 554 | — | 554 | ||||||||||||
Commercial Mortgage-Backed Obligations | — | 31,343 | — | 31,343 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 82,620 | — | 82,620 | ||||||||||||
U.S. Treasury Obligations | — | 107,447 | — | 107,447 | ||||||||||||
Short-Term Investments—Money Market Funds | 7,414 | — | — | 7,414 | ||||||||||||
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| |||||||||
Total Investments in Securities | $ | 7,414 | $ | 406,136 | $ | — | $ | 413,550 | ||||||||
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Short-Term Bond Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 80,071 | $ | — | $ | 80,071 | ||||||||
Asset-Backed Obligations | — | 45,280 | — | 45,280 | ||||||||||||
Commercial Mortgage-Backed Obligations | — | 10,001 | — | 10,001 | ||||||||||||
U.S. Treasury Obligations | — | 160,350 | — | 160,350 | ||||||||||||
Short-Term Investments—Money Market Funds | 3,396 | — | — | 3,396 | ||||||||||||
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Total Investments in Securities | $ | 3,396 | $ | 295,702 | $ | — | $ | 299,098 | ||||||||
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| * | Refer to the Schedules of Investments for Sector and Industry information. |
As of October 31, 2014, there were no transfers between levels for the High Yield Bond, Intermediate Bond, Retirement Income and Appreciation Fund, and Short-Term Bond Funds.
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):
| Convertible | ||||||||||||||||||||
| Common | Preferred | Corporate | ||||||||||||||||||
| Stocks | Rights | Stocks | Obligations | Totals | ||||||||||||||||
Balance as of 10/31/2013 | $ | 127 | $ | — | $ | 45 | $ | — | $ | 172 | ||||||||||
Net Purchases | — | — | — | — | — | |||||||||||||||
Net Sales | (71 | ) | — | — | — | (71 | ) | |||||||||||||
Realized gain (loss) | (59 | ) | — | — | — | (59 | ) | |||||||||||||
Change in unrealized appreciation or (depreciation) | 80 | — | — | — | 80 | |||||||||||||||
Transfer into Level 3 | — | — | — | — | — | |||||||||||||||
Transfer out of Level 3 | — | — | — | — | — | |||||||||||||||
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Balance as of 10/31/2014 | 77 | — | 45 | — | 122 | |||||||||||||||
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Change in unrealized at period end** | $ | 80 | $ | — | $ | — | $ | — | $ | 80 | ||||||||||
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The common stocks and convertible preferred stocks, classified as Level 3 were valued using single broker quotes of $22.43, $48.55, and $89.00, respectively. However, these securities are included in the Level 3 category due to limited market transparency and/or lack of corroboration to support the quoted prices.
| ** | 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.
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American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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.
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.
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American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
4. Securities and Other Investments
Pay-In-Kind Securities
Certain Funds may invest in payment in-kind securities (“PIKs”). PIKs 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 year ended October 31, 2014 are disclosed in the Notes to the Schedules of Investments.
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.
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.
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
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Notes to Financial Statements
October 31, 2014
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.
Mortgage-Related and Other Asset-Backed Securities
The Retirement Income and Appreciation, Intermediate Bond and Short-Term Bond Funds may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”). Specific types of instruments may include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of the Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
Mortgage-Backed Securities
MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the Fund’s portfolio at the time resulting in reinvestment risk.
Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.
MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities.
Agency Mortgage-Backed Securities
Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Although these instruments may be guaranteed by the U.S. government or a government sponsored entity, many such MBS are not backed by the full faith and credit of the United States and are still exposed to the risk of non-payment.
57
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Privately Issued Mortgage-Backed Securities
MBS held by a Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or SPVs) and other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-agency MBS may offer higher yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or non-conforming loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a level of risk exists for all loans.
Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans.
Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in the Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.
Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Fund’s ABS may be affected by, among other things, actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.
58
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.
Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans related to sub-prime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market.
ABS (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. ABS are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of ABS may be affected by legislative or regulatory developments. It is possible that such developments may require the Fund to dispose of any then existing holdings of such 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, 2014 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.
59
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
The tax character of distributions paid were as follows (in thousands):
| High Yield Bond | Retirement Income and Appreciation | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 4,444 | $ | 3,331 | $ | — | $ | — | ||||||||
Y Class | 110 | 72 | 26 | 34 | ||||||||||||
Investor Class | 447 | 489 | 4,107 | 3,039 | ||||||||||||
A Class | 81 | 57 | 19 | 40 | ||||||||||||
C Class | 95 | 114 | 51 | 21 | ||||||||||||
AMR Class | 8,270 | 7,002 | — | — | ||||||||||||
Long-Term Capital Gains | ||||||||||||||||
Institutional Class | 219 | — | — | — | ||||||||||||
Y Class | 7 | — | 14 | 14 | ||||||||||||
Investor Class | 26 | — | 2,963 | 969 | ||||||||||||
A Class | 4 | — | 13 | 8 | ||||||||||||
C Class | 7 | — | 44 | 12 | ||||||||||||
AMR Class | 464 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 14,174 | $ | 11,065 | $ | 7,237 | $ | 4,137 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
| Intermediate Bond | Short-Term Bond | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income* | ||||||||||||||||
Institutional Class | $ | 11,444 | $ | 11,487 | $ | 1,692 | $ | 2,250 | ||||||||
Y Class | 4 | 66 | 10 | 14 | ||||||||||||
Investor Class | 42 | 119 | 52 | 116 | ||||||||||||
A Class | 9 | 14 | 10 | 21 | ||||||||||||
C Class | 6 | 18 | — | 1 | ||||||||||||
Long-Term Capital Gains | ||||||||||||||||
Institutional Class | 447 | 2,466 | — | — | ||||||||||||
Y Class | — | 29 | — | — | ||||||||||||
Investor Class | 2 | 39 | — | — | ||||||||||||
A Class | 1 | 4 | — | — | ||||||||||||
C Class | 1 | 7 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 11,956 | $ | 14,249 | $ | 1,764 | $ | 2,402 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2014, 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 | $ | 225,649 | $ | 96,633 | $ | 405,725 | $ | 299,713 | ||||||||
Unrealized appreciation | 4,234 | 6,402 | 9,412 | 348 | ||||||||||||
Unrealized depreciation | (10,699 | ) | (536 | ) | (1,587 | ) | (963 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net unrealized appreciation | (6,465 | ) | 5,866 | 7,825 | (615 | ) | ||||||||||
Undistributed ordinary income | 1,057 | 1,722 | 1,940 | 447 | ||||||||||||
Accumulated long-term gain or (loss) | 3,022 | 2,427 | 1,293 | (6,321 | ) | |||||||||||
Other temporary differences | (8 | ) | — | (1 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Distributable earnings or (deficits) | $ | (2,394 | ) | $ | 10,015 | $ | 11,057 | $ | (6,490 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
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.
60
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014 (in thousands):
| High Yield Bond | Retirement Income and Appreciation | Intermediate Bond | Short-Term Bond | |||||||||||||
Paid-in-capital | $ | — | $ | 55 | $ | — | $ | (2,014 | ) | |||||||
Undistributed net investment income | 1 | 1,160 | 538 | 745 | ||||||||||||
Accumulated net realized gain (loss) | (1 | ) | (1,215 | ) | (538 | ) | 1,269 | |||||||||
Unrealized appreciation or (depreciation) of investments | — | — | — | — | ||||||||||||
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by the Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
Capital losses incurred that will be carried forward under the provisions of the Act for the year October 31, 2014 were as follows (in thousands):
| Loss Carryforward Character | ||||||||||||
Fund | Short-Term | Long Term | Total | |||||||||
Short-Term Bond | $ | 81 | $ | 576 | $ | 657 | ||||||
As of October 31, 2014 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 | 2015 | 2016 | 2017 | Total | ||||||||||||
Short-Term Bond | $ | 467 | $ | 5,198 | $ | — | $ | 5,665 | ||||||||
The Short-Term Bond Fund had $2,015 of expired loss carryforward positions occurring prior to the provisions of the Act (in thousands).
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, 2014 were as follows (in thousands):
| High Yield Bond | Retirement Income and Appreciation | Intermediate Bond | Short-Term Bond | |||||||||||||
Purchases (excluding U.S. government securities) | $ | 174,945 | $ | 51,671 | $ | 229,338 | $ | 220,063 | ||||||||
Sales and maturities (excluding U.S. government securities) | 152,306 | 84,515 | 153,536 | 84,133 | ||||||||||||
Purchases of U.S. government securities | — | 17,236 | 102,743 | 151,913 | ||||||||||||
Sales and maturities of U.S. government securities | — | 14,982 | 63,397 | 18,651 | ||||||||||||
61
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 3,639 | $ | 33,965 | 369 | $ | 3,453 | 191 | $ | 1,786 | |||||||||||||||
Redemption Fees | — | 11 | — | — | — | 1 | ||||||||||||||||||
Reinvestment of dividends | 490 | 4,563 | 8 | 71 | 47 | 441 | ||||||||||||||||||
Shares redeemed | (1,782 | ) | (16,624 | ) | (465 | ) | (4,315 | ) | (323 | ) | (3,008 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 2,347 | $ | 21,915 | (88 | ) | $ | (791 | ) | (85 | ) | $ | (780 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| A Class | C Class | AMR Class | ||||||||||||||||||||||
High Yield Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 127 | $ | 1,188 | 88 | $ | 821 | 4,757 | $ | 44,526 | |||||||||||||||
Redemption Fees | — | — | — | — | — | 19 | ||||||||||||||||||
Reinvestment of dividends | 8 | 78 | 7 | 64 | 938 | 8,734 | ||||||||||||||||||
Shares redeemed | (74 | ) | (687 | ) | (102 | ) | (950 | ) | (5,899 | ) | (54,615 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 61 | $ | 579 | (7 | ) | $ | (65 | ) | (204 | ) | $ | (1,336 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Y Class | Investor Class | A Class | ||||||||||||||||||||||
Retirement Income and Appreciation Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 24 | $ | 261 | 1,502 | $ | 16,482 | 1 | $ | 10 | |||||||||||||||
Reinvestment of dividends | 3 | 39 | 655 | 7,057 | 2 | 28 | ||||||||||||||||||
Shares redeemed | (15 | ) | (169 | ) | (4,752 | ) | (51,433 | ) | (39 | ) | (435 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 12 | $ | 131 | (2,595 | ) | $ | (27,894 | ) | (36 | ) | $ | (397 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| C Class | ||||||||
Retirement Income and Appreciation Fund | Shares | Amount | ||||||
Shares sold | 36 | $ | 397 | |||||
Reinvestment of dividends | 7 | 79 | ||||||
Shares redeemed | (43 | ) | (478 | ) | ||||
|
|
|
| |||||
Net (decrease) in shares outstanding | — | $ | (2 | ) | ||||
|
|
|
| |||||
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 11,706 | $ | 125,224 | 12 | $ | 134 | 48 | $ | 511 | |||||||||||||||
Reinvestment of dividends | 1,113 | 11,884 | — | 1 | 4 | 42 | ||||||||||||||||||
Shares redeemed | (6,064 | ) | (64,974 | ) | (7 | ) | (77 | ) | (75 | ) | (806 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 6,755 | $ | 72,134 | 5 | $ | 58 | (23 | ) | $ | (253 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| A Class | C Class | |||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 5 | $ | 51 | 1 | $ | 9 | ||||||||||
Reinvestment of dividends | — | 3 | — | 5 | ||||||||||||
Shares redeemed | (5 | ) | (50 | ) | (52 | ) | (556 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | — | $ | 4 | (51 | ) | $ | (542 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
62
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 22,267 | $ | 193,284 | 113 | $ | 982 | 234 | $ | 2,029 | |||||||||||||||
Reinvestment of dividends | 195 | 1,690 | — | 4 | 6 | 50 | ||||||||||||||||||
Shares redeemed | (5,901 | ) | (51,348 | ) | (118 | ) | (1,025 | ) | (265 | ) | (2,302 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 16,561 | $ | 143,626 | (5 | ) | $ | (39 | ) | (25 | ) | $ | (223 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| A Class | C Class | |||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 49 | $ | 428 | 53 | $ | 455 | ||||||||||
Reinvestment of dividends | 1 | 9 | — | — | ||||||||||||
Shares redeemed | (159 | ) | (1,380 | ) | (40 | ) | (346 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in shares outstanding | (109 | ) | $ | (943 | ) | 13 | $ | 109 | ||||||||
|
|
|
|
|
|
|
| |||||||||
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 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 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 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 30 | $ | 275 | (49 | ) | $ | (449 | ) | 4,884 | $ | 45,688 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 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 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net (decrease) in shares outstanding | (151 | ) | $ | (1,673 | ) | (3,082 | ) | $ | (34,119 | ) | (36 | ) | $ | (442 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| C Class | ||||||||
Retirement Income and Appreciation Fund | Shares | Amount | ||||||
Shares sold | 20 | $ | 223 | |||||
Reinvestment of dividends | 3 | 27 | ||||||
Shares redeemed | (29 | ) | (320 | ) | ||||
|
|
|
| |||||
Net (decrease) in shares outstanding | (6 | ) | $ | (70 | ) | |||
|
|
|
| |||||
| 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 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | (2,861 | ) | $ | (29,729 | ) | 7 | $ | 145 | (816 | ) | $ | (9,033 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
63
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
| A Class | C Class | |||||||||||||||
Intermediate Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 4 | $ | 40 | 4 | $ | 39 | ||||||||||
Reinvestment of dividends | 1 | 9 | 2 | 19 | ||||||||||||
Shares redeemed | (31 | ) | (336 | ) | (59 | ) | (639 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (decrease) in shares outstanding | (26 | ) | $ | (287 | ) | (53 | ) | $ | (581 | ) | ||||||
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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 | ) | ||||||||||||
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Net increase (decrease) in shares outstanding | (7,476 | ) | $ | (65,708 | ) | 104 | $ | 913 | (754 | ) | $ | (6,600 | ) | |||||||||||
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| A Class | C Class | |||||||||||||||
Short-Term Bond Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 133 | $ | 1,161 | 88 | $ | 770 | ||||||||||
Reinvestment of dividends | 1 | 8 | — | 1 | ||||||||||||
Shares redeemed | (209 | ) | (1,827 | ) | (32 | ) | (281 | ) | ||||||||
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Net increase (decrease) in shares outstanding | (75 | ) | $ | (658 | ) | 56 | $ | 490 | ||||||||
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64
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65
American Beacon High Yield Bond FundSM
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.05 | $ | 8.42 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.55 | 0.58 | 0.67 | 0.71 | 0.75 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.15 | ) | 0.21 | 0.42 | (0.37 | ) | 0.63 | |||||||||||||
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Total income from investment operations | 0.40 | 0.79 | 1.09 | 0.34 | 1.38 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.57 | ) | (0.58 | ) | (0.67 | ) | (0.71 | ) | (0.75 | ) | ||||||||||
Distributions from net realized gains | (0.03 | ) | — | — | — | — | ||||||||||||||
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Total distributions | (0.60 | ) | (0.58 | ) | (0.67 | ) | (0.71 | ) | (0.75 | ) | ||||||||||
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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 | $ | 9.11 | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.05 | ||||||||||
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Total return C | 4.30 | % | 8.94 | % | 13.12 | % | 3.79 | % | 17.17 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 82,846 | $ | 62,836 | $ | 42,026 | $ | 41,093 | $ | 41,459 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.87 | % | 0.91 | % | 0.93 | % | 0.88 | % | 0.79 | % | ||||||||||
Expenses, net of reimbursements | 0.85 | % | 0.89 | % | 0.93 | % | 0.88 | % | 0.79 | % | ||||||||||
Net investment income (loss), before reimbursements | 5.75 | % | 6.25 | % | 7.61 | % | 7.90 | % | 8.69 | % | ||||||||||
Net investment income, net of reimbursements | 5.77 | % | 6.26 | % | 7.62 | % | 7.90 | % | 8.69 | % | ||||||||||
Portfolio turnover rate | 74 | % | 82 | % | 100 | % | 149 | % | 176 | % | ||||||||||
| 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
American Beacon High Yield Bond 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, 2010 |
Year Ended October 31, |
Year Ended October 31, | May 17 to Oct. 31, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | ||||||||||||||||||||||||||||||||||||||||||||||
| $ | 9.32 | $ | 9.12 | $ | 8.69 | $ | 9.06 | $ | 8.63 | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | $ | 9.32 | $ | 9.11 | $ | 8.69 | $ | 9.08 | $ | 8.67 | |||||||||||||||||||||||||||||
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| 0.51 | 0.58 | 0.64 | 0.68 | 0.50 | 0.52 | 0.56 | 0.65 | 0.69 | 0.73 | 0.53 | 0.56 | 0.66 | 0.69 | 0.32 | ||||||||||||||||||||||||||||||||||||||||||||
| (0.13 | ) | 0.20 | 0.43 | (0.37 | ) | 0.43 | (0.15 | ) | 0.21 | 0.42 | (0.38 | ) | 0.64 | (0.16 | ) | 0.21 | 0.42 | (0.39 | ) | 0.41 | ||||||||||||||||||||||||||||||||||||||
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| 0.38 | 0.78 | 1.07 | 0.31 | 0.93 | 0.37 | 0.77 | 1.07 | 0.31 | 1.37 | 0.37 | 0.77 | 1.08 | 0.30 | 0.73 | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.55 | ) | (0.58 | ) | (0.64 | ) | (0.68 | ) | (0.50 | ) | (0.54 | ) | (0.56 | ) | (0.65 | ) | (0.69 | ) | (0.73 | ) | (0.54 | ) | (0.56 | ) | (0.66 | ) | (0.69 | ) | (0.32 | ) | |||||||||||||||||||||||||||||
| (0.03 | ) | — | — | — | — | (0.03 | ) | — | — | — | — | (0.03 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
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| (0.58 | ) | (0.58 | ) | (0.64 | ) | (0.68 | ) | (0.50 | ) | (0.57 | ) | (0.56 | ) | (0.65 | ) | (0.69 | ) | (0.73 | ) | (0.57 | ) | (0.56 | ) | (0.66 | ) | (0.69 | ) | (0.32 | ) | |||||||||||||||||||||||||||||
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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 | 0.00 | B | 0.00 | B | |||||||||||||||||||||||||||||
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| $ | 9.12 | $ | 9.32 | $ | 9.12 | $ | 8.69 | $ | 9.06 | $ | 9.11 | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 9.12 | $ | 9.32 | $ | 9.11 | $ | 8.69 | $ | 9.08 | |||||||||||||||||||||||||||||
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| 4.16 | % | 8.74 | % | 12.74 | % | 3.36 | % | 11.17 | %D | 4.03 | % | 8.73 | % | 12.86 | % | 3.41 | % | 17.00 | % | 4.04 | % | 8.72 | % | 12.88 | % | 3.31 | % | 8.66 | %D | |||||||||||||||||||||||||||||
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| $ | 1,157 | $ | 2,005 | $ | 437 | $ | 11 | $ | 1 | $ | 6,674 | $ | 7,609 | $ | 8,930 | $ | 7,560 | $ | 54,142 | $ | 1,506 | $ | 972 | $ | 678 | $ | 117 | $ | 40 | |||||||||||||||||||||||||||||
| 0.93 | % | 1.02 | % | 1.13 | % | 27.02 | % | 0.82 | %E | 1.10 | % | 1.13 | % | 1.16 | % | 1.09 | % | 1.04 | % | 1.30 | % | 1.38 | % | 1.46 | % | 3.93 | % | 1.30 | %E | |||||||||||||||||||||||||||||
| 0.95 | % | 0.98 | % | 1.01 | % | 1.61 | % | 0.82 | %E | 1.09 | % | 1.09 | % | 1.16 | % | 1.09 | % | 1.04 | % | 1.08 | % | 1.12 | % | 1.11 | % | 1.11 | % | 1.12 | %E | |||||||||||||||||||||||||||||
| 5.70 | % | 6.06 | % | 7.08 | % | (18.29 | )% | 8.53 | %E | 5.56 | % | 6.08 | % | 7.37 | % | 7.75 | % | 8.48 | % | 5.32 | % | 5.78 | % | 6.97 | % | 4.74 | % | 6.93 | %E | |||||||||||||||||||||||||||||
| 5.67 | % | 6.10 | % | 7.20 | % | 7.11 | % | 8.53 | %E | 5.57 | % | 6.12 | % | 7.37 | % | 7.75 | % | 8.48 | % | 5.54 | % | 6.04 | % | 7.32 | % | 7.56 | % | 7.11 | %E | |||||||||||||||||||||||||||||
| 74 | % | 82 | % | 100 | % | 149 | % | 176 | %F | 74 | % | 82 | % | 100 | % | 149 | % | 176 | % | 74 | % | 82 | % | 100 | % | 149 | % | 176 | %F | |||||||||||||||||||||||||||||
67
American Beacon High Yield Bond FundSM
Financial Highlights
(For a share outstanding throughout the period)
| C Class | AMR Class | |||||||||||||||||||||||||||||||||||||||
Year Ended October 31, | Sept. 1 to Oct. 31, 2010 |
Year Ended October 31, | ||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 9.30 | $ | 9.09 | $ | 8.67 | $ | 9.05 | $ | 8.68 | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | $ | 8.42 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income | 0.45 | 0.49 | 0.59 | 0.63 | 0.09 | 0.57 | 0.61 | 0.70 | 0.74 | 0.78 | ||||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.15 | ) | 0.21 | 0.42 | (0.39 | ) | 0.37 | (0.15 | ) | 0.21 | 0.42 | (0.38 | ) | 0.63 | ||||||||||||||||||||||||||
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Total income from investment operations | 0.30 | 0.70 | 1.01 | 0.24 | 0.46 | 0.42 | 0.82 | 1.12 | 0.36 | 1.41 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.46 | ) | (0.49 | ) | (0.59 | ) | (0.62 | ) | (0.09 | ) | (0.59 | ) | (0.61 | ) | (0.70 | ) | (0.74 | ) | (0.77 | ) | ||||||||||||||||||||
Distributions from net realized gains | (0.03 | ) | — | — | — | — | (0.03 | ) | — | — | — | — | ||||||||||||||||||||||||||||
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Total distributions | (0.49 | ) | (0.49 | ) | (0.59 | ) | (0.62 | ) | (0.09 | ) | (0.62 | ) | (0.61 | ) | (0.70 | ) | (0.74 | ) | (0.77 | ) | ||||||||||||||||||||
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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 | 0.00 | B | ||||||||||||||||||||
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Net asset value, end of period | $ | 9.11 | $ | 9.30 | $ | 9.09 | $ | 8.67 | $ | 9.05 | $ | 9.11 | $ | 9.31 | $ | 9.10 | $ | 8.68 | $ | 9.06 | ||||||||||||||||||||
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Total return C | 3.28 | % | 7.90 | % | 12.06 | % | 2.67 | % | 5.31 | %D | 4.63 | % | 9.25 | % | 13.46 | % | 3.96 | % | 17.59 | % | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 1,756 | $ | 1,858 | $ | 2,262 | $ | 403 | $ | 37 | $ | 128,707 | $ | 133,510 | $ | 86,030 | $ | 73,298 | $ | 89,992 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 2.06 | % | 2.12 | % | 2.16 | % | 3.15 | % | 2.29 | %E | 0.58 | % | 0.61 | % | 0.62 | % | 0.60 | % | 0.54 | % | ||||||||||||||||||||
Expenses, net of reimbursements | 1.84 | % | 1.87 | % | 1.86 | % | 1.85 | % | 1.87 | %E | 0.58 | % | 0.61 | % | 0.62 | % | 0.60 | % | 0.54 | % | ||||||||||||||||||||
Net investment income (loss), before reimbursements | 4.59 | % | 5.11 | % | 6.29 | % | 5.53 | % | 4.97 | %E | 6.07 | % | 6.55 | % | 7.91 | % | 8.18 | % | 8.91 | % | ||||||||||||||||||||
Net investment income, net of reimbursements | 4.81 | % | 5.36 | % | 6.60 | % | 6.82 | % | 5.40 | %E | 6.07 | % | 6.55 | % | 7.91 | % | 8.18 | % | 8.91 | % | ||||||||||||||||||||
Portfolio turnover rate | 74 | % | 82 | % | 100 | % | 149 | % | 176 | %F | 74 | % | 82 | % | 100 | % | 149 | % | 176 | % | ||||||||||||||||||||
| 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. |
68
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69
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, | |||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 11.19 | $ | 11.14 | $ | 10.83 | $ | 10.80 | $ | 10.31 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.26 | 0.06 | 0.28 | 0.26 | 0.20 | |||||||||||||||
Net gains from investments (both realized and unrealized) | 0.30 | 0.32 | 0.37 | 0.05 | 0.49 | |||||||||||||||
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Total income from investment operations | 0.56 | 0.38 | 0.65 | 0.31 | 0.69 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.33 | ) | (0.26 | ) | (0.28 | ) | (0.28 | ) | (0.20 | ) | ||||||||||
Distributions from net realized gains | (0.37 | ) | (0.07 | ) | (0.06 | ) | — | — | ||||||||||||
Return of capital | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.70 | ) | (0.33 | ) | (0.34 | ) | (0.28 | ) | (0.20 | ) | ||||||||||
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Net asset value, end of period | $ | 11.05 | $ | 11.19 | $ | 11.14 | $ | 10.83 | $ | 10.80 | ||||||||||
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Total return A | 5.19 | % | 3.43 | % | 6.10 | % | 2.96 | % | 6.78 | %B | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 733 | $ | 608 | $ | 2,287 | $ | 539 | $ | 367 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.90 | % | 0.83 | % | 0.87 | % | 1.80 | % | 0.80 | %C | ||||||||||
Expenses, net of reimbursements | 0.80 | % | 0.80 | % | 0.81 | % | 0.84 | % | 0.80 | %C | ||||||||||
Net investment income, before reimbursements | 1.71 | % | 1.95 | % | 2.20 | % | 1.45 | % | 2.74 | %C | ||||||||||
Net investment income, net of reimbursements | 1.81 | % | 1.99 | % | 2.26 | % | 2.41 | % | 2.74 | %C | ||||||||||
Portfolio turnover rate | 50 | % | 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. |
70
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, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 11.19 | $ | 11.14 | $ | 10.84 | $ | 10.81 | $ | 10.25 | $ | 11.23 | $ | 11.17 | $ | 10.85 | $ | 10.81 | $ | 10.37 | $ | 11.24 | $ | 11.17 | $ | 10.85 | $ | 10.82 | $ | 10.61 | |||||||||||||||||||||||||||||
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| 0.02 | 0.10 | 0.24 | 0.27 | 0.36 | 0.03 | 0.12 | 0.22 | 0.23 | 0.13 | 0.07 | 0.08 | 0.13 | 0.15 | 0.03 | ||||||||||||||||||||||||||||||||||||||||||||
| 0.50 | 0.25 | 0.37 | 0.02 | 0.51 | 0.49 | 0.23 | 0.39 | 0.05 | 0.44 | 0.36 | 0.18 | 0.39 | 0.04 | 0.20 | ||||||||||||||||||||||||||||||||||||||||||||
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| 0.52 | 0.35 | 0.61 | 0.29 | 0.87 | 0.52 | 0.35 | 0.61 | 0.28 | 0.57 | 0.43 | 0.26 | 0.52 | 19.00 | 0.23 | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.28 | ) | (0.23 | ) | (0.25 | ) | (0.26 | ) | (0.31 | ) | (0.28 | ) | (0.22 | ) | (0.23 | ) | (0.24 | ) | (0.13 | ) | (0.18 | ) | (0.12 | ) | (0.14 | ) | (0.16 | ) | (0.02 | ) | |||||||||||||||||||||||||||||
| (0.37 | ) | (0.07 | ) | (0.06 | ) | — | — | (0.37 | ) | (0.07 | ) | (0.06 | ) | — | — | (0.37 | ) | (0.07 | ) | (0.06 | ) | — | — | |||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.65 | ) | (0.30 | ) | (0.31 | ) | (0.26 | ) | (0.31 | ) | (0.65 | ) | (0.29 | ) | (0.29 | ) | (0.24 | ) | (0.13 | ) | (0.55 | ) | (0.19 | ) | (0.20 | ) | (0.16 | ) | (0.02 | ) | |||||||||||||||||||||||||||||
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| $ | 11.06 | $ | 11.19 | $ | 11.14 | $ | 10.84 | $ | 10.81 | $ | 11.10 | $ | 11.23 | $ | 11.17 | $ | 10.85 | $ | 10.81 | $ | 11.12 | $ | 11.24 | $ | 11.17 | $ | 10.85 | $ | 10.82 | |||||||||||||||||||||||||||||
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| 4.86 | % | 3.14 | % | 5.75 | % | 2.71 | % | 8.60 | % | 4.83 | % | 3.18 | % | 5.78 | % | 2.61 | % | 5.52 | %B | 4.01 | % | 2.28 | % | 4.87 | % | 1.75 | % | 2.19 | %B | |||||||||||||||||||||||||||||
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| $ | 99,748 | $ | 130,013 | $ | 163,713 | $ | 147,415 | $ | 126,022 | $ | 447 | $ | 851 | $ | 1,253 | $ | 770 | $ | 166 | $ | 1,897 | $ | 1,918 | $ | 1,977 | $ | 1,587 | $ | 1,035 | |||||||||||||||||||||||||||||
| 1.15 | % | 1.11 | % | 1.12 | % | 1.10 | % | 1.08 | % | 1.27 | % | 1.23 | % | 1.28 | % | 2.00 | % | 1.20 | %C | 2.01 | % | 1.99 | % | 2.04 | % | 1.99 | % | 2.33 | %C | |||||||||||||||||||||||||||||
| 1.15 | % | 1.11 | % | 1.12 | % | 1.10 | % | 1.08 | % | 1.13 | % | 1.14 | % | 1.14 | % | 1.15 | % | 1.14 | %C | 1.94 | % | 1.96 | % | 1.97 | % | 1.94 | % | 1.96 | %C | |||||||||||||||||||||||||||||
| 1.42 | % | 1.61 | % | 1.98 | % | 2.15 | % | 2.79 | % | 1.30 | % | 1.48 | % | 1.82 | % | 1.21 | % | 2.03 | %C | 0.58 | % | 0.71 | % | 1.06 | % | 1.25 | % | 1.40 | %C | |||||||||||||||||||||||||||||
| 1.42 | % | 1.60 | % | 1.98 | % | 2.15 | % | 2.79 | % | 1.44 | % | 1.57 | % | 1.95 | % | 2.06 | % | 2.10 | %C | 0.65 | % | 0.75 | % | 1.13 | % | 1.30 | % | 1.77 | %C | |||||||||||||||||||||||||||||
| 50 | % | 53 | % | 42 | % | 54 | % | 51 | % | 50 | % | 53 | % | 42 | % | 54 | % | 51 | %D | 50 | % | 53 | % | 42 | % | 54 | % | 51 | %D | |||||||||||||||||||||||||||||
71
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, | ||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.73 | $ | 11.26 | $ | 10.99 | $ | 11.10 | $ | 10.69 | $ | 10.77 | $ | 11.31 | $ | 11.03 | $ | 11.10 | $ | 10.69 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.28 | 0.24 | 0.27 | 0.33 | 0.39 | 0.32 | (0.04 | ) | 0.26 | 0.27 | 0.23 | |||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.10 | (0.36 | ) | 0.34 | 0.10 | 0.40 | 0.02 | (0.12 | ) | 0.32 | 0.17 | 0.41 | ||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 0.38 | (0.12 | ) | 0.61 | 0.43 | 0.79 | 0.34 | (0.16 | ) | 0.58 | 0.44 | 0.64 | ||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.28 | ) | (0.29 | ) | (0.35 | ) | (0.38 | ) | (0.28 | ) | (0.25 | ) | (0.25 | ) | (0.32 | ) | (0.23 | ) | ||||||||||||||||||||
Distributions from net realized gains | (0.01 | ) | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | (0.01 | ) | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | ||||||||||||||||||||||
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Total distributions | (0.33 | ) | (0.41 | ) | (0.34 | ) | (0.54 | ) | (0.38 | ) | (0.29 | ) | (0.38 | ) | (0.30 | ) | (0.51 | ) | (0.23 | ) | ||||||||||||||||||||
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Net asset value, end of period | $ | 10.78 | $ | 10.73 | $ | 11.26 | $ | 10.99 | $ | 11.10 | $ | 10.82 | $ | 10.77 | $ | 11.31 | $ | 11.03 | $ | 11.10 | ||||||||||||||||||||
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Total return A | 3.66 | % | (1.04 | )% | 5.59 | % | 4.11 | % | 7.56 | % | 3.26 | % | (1.42 | )% | 5.34 | % | 4.19 | % | 6.03 | %B | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 413,618 | $ | 339,416 | $ | 388,491 | $ | 275,234 | $ | 290,734 | $ | 241 | $ | 183 | $ | 113 | $ | 60 | $ | 382 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.32 | % | 0.33 | % | 0.33 | % | 0.35 | % | 0.33 | % | 0.70 | % | 0.67 | % | 0.99 | % | 0.73 | % | 0.67 | %C | ||||||||||||||||||||
Expenses, net of reimbursements | 0.32 | % | 0.33 | % | 0.33 | % | 0.35 | % | 0.33 | % | 0.65 | % | 0.65 | % | 0.64 | % | 0.65 | % | 0.64 | %C | ||||||||||||||||||||
Net investment income, before reimbursements | 2.30 | % | 2.30 | % | 2.25 | % | 3.12 | % | 3.39 | % | 1.93 | % | 1.91 | % | 1.65 | % | 2.74 | % | 2.58 | %C | ||||||||||||||||||||
Net investment income (loss), net of reimbursements | 2.30 | % | 2.30 | % | 2.25 | % | 3.12 | % | 3.39 | % | 1.98 | % | 1.93 | % | 2.00 | % | 2.82 | % | 2.60 | %C | ||||||||||||||||||||
Portfolio turnover rate | 41 | % | 50 | % | 144 | % | 75 | % | 96 | % | 41 | % | 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. |
72
American Beacon Intermediate 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, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 10.68 | $ | 10.71 | $ | 11.24 | $ | 10.96 | $ | 11.07 | $ | 10.74 | $ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 11.05 | |||||||||||||||||||||||||||||
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| 0.14 | (0.04 | ) | 0.22 | 0.29 | 0.33 | 0.18 | 0.14 | 0.18 | 0.28 | 0.13 | (0.25 | ) | 0.07 | 0.13 | 0.19 | 0.03 | ||||||||||||||||||||||||||||||||||||||||||
| 0.18 | (0.14 | ) | 0.35 | 0.10 | 0.41 | 0.12 | (0.33 | ) | 0.36 | 0.09 | 0.33 | 0.48 | (0.35 | ) | 0.33 | 0.10 | 0.03 | |||||||||||||||||||||||||||||||||||||||||
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| �� | ||||||||||||||||||||||||||||
| 0.32 | (0.18 | ) | 0.57 | 0.39 | 0.74 | 0.30 | (0.19 | ) | 0.54 | 0.37 | 0.46 | 0.23 | (0.28 | ) | 0.46 | 0.29 | 0.06 | |||||||||||||||||||||||||||||||||||||||||
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| (0.26 | ) | (0.23 | ) | (0.24 | ) | (0.31 | ) | (0.34 | ) | (0.24 | ) | (0.21 | ) | (0.21 | ) | (0.29 | ) | (0.13 | ) | (0.15 | ) | (0.13 | ) | (0.13 | ) | (0.21 | ) | (0.03 | ) | |||||||||||||||||||||||||||||
| (0.01 | ) | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | (0.01 | ) | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | (0.01 | ) | (0.13 | ) | (0.05 | ) | (0.19 | ) | — | ||||||||||||||||||||||||||||||||
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| (0.27 | ) | (0.36 | ) | (0.29 | ) | (0.50 | ) | (0.34 | ) | (0.25 | ) | (0.34 | ) | (0.26 | ) | (0.48 | ) | (0.13 | ) | (0.16 | ) | (0.26 | ) | (0.18 | ) | (0.40 | ) | (0.03 | ) | |||||||||||||||||||||||||||||
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| $ | 10.76 | $ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | $ | 10.76 | $ | 10.71 | $ | 11.24 | $ | 10.96 | $ | 11.07 | $ | 10.78 | $ | 10.71 | $ | 11.25 | $ | 10.97 | $ | 11.08 | |||||||||||||||||||||||||||||
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| 3.12 | % | (1.58 | )% | 5.20 | % | 3.65 | % | 7.01 | % | 2.92 | % | (1.69 | )% | 4.99 | % | 3.45 | % | 4.31 | %B | 2.24 | % | (2.51 | )% | 4.21 | % | 2.70 | % | 0.56 | %B | |||||||||||||||||||||||||||||
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| $ | 1,504 | $ | 1,749 | $ | 11,011 | $ | 3,729 | $ | 3,829 | $ | 426 | $ | 420 | $ | 734 | $ | 584 | $ | 46 | $ | 189 | $ | 734 | $ | 1,372 | $ | 286 | $ | 325 | |||||||||||||||||||||||||||||
| 0.90 | % | 0.87 | % | 0.84 | % | 0.86 | % | 0.83 | % | 1.06 | % | 1.11 | % | 1.12 | % | 1.13 | % | 1.05 | %C | 1.83 | % | 1.94 | % | 1.87 | % | 1.86 | % | 2.09 | %C | |||||||||||||||||||||||||||||
| 0.79 | % | 0.79 | % | 0.79 | % | 0.79 | % | 0.76 | % | 0.96 | % | 0.99 | % | 0.99 | % | 0.99 | % | 0.95 | %C | 1.73 | % | 1.74 | % | 1.73 | % | 1.72 | % | 1.74 | %C | |||||||||||||||||||||||||||||
| 1.72 | % | 1.74 | % | 1.80 | % | 2.59 | % | 2.88 | % | 1.56 | % | 1.52 | % | 1.48 | % | 2.31 | % | 2.15 | %C | 0.83 | % | 0.69 | % | 0.75 | % | 1.61 | % | 0.88 | %C | |||||||||||||||||||||||||||||
| 1.83 | % | 1.82 | % | 1.86 | % | 2.66 | % | 2.95 | % | 1.67 | % | 1.64 | % | 1.61 | % | 2.46 | % | 2.25 | %C | 0.93 | % | 0.89 | % | 0.89 | % | 1.75 | % | 1.23 | %C | |||||||||||||||||||||||||||||
| 41 | % | 50 | % | 144 | % | 75 | % | 96 | % | 41 | % | 50 | % | 144 | % | 75 | % | 96 | %D | 41 | % | 50 | % | 144 | % | 75 | % | 96 | %D | |||||||||||||||||||||||||||||
73
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, | ||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.83 | $ | 8.72 | $ | 8.77 | $ | 8.73 | $ | 8.90 | $ | 8.84 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.37 | (0.09 | ) | 0.28 | 0.26 | 0.23 | 0.03 | 0.13 | 0.10 | 0.15 | 0.15 | |||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.30 | ) | 0.13 | (0.05 | ) | (0.25 | ) | 0.10 | 0.02 | (0.08 | ) | 0.11 | (0.15 | ) | 0.08 | |||||||||||||||||||||||||
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Total income (loss) from investment operations | 0.07 | 0.04 | 0.23 | 0.01 | 0.33 | 0.05 | 0.05 | 0.21 | — | 0.23 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.12 | ) | (0.16 | ) | (0.19 | ) | (0.27 | ) | (0.08 | ) | (0.10 | ) | (0.17 | ) | (0.17 | ) | (0.17 | ) | ||||||||||||||||||||
Distributions from net realized gains | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
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Total distributions | (0.10 | ) | (0.12 | ) | (0.16 | ) | (0.19 | ) | (0.27 | ) | (0.08 | ) | (0.10 | ) | (0.17 | ) | (0.17 | ) | (0.17 | ) | ||||||||||||||||||||
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Net asset value, end of period | $ | 8.67 | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.69 | $ | 8.72 | $ | 8.77 | $ | 8.73 | $ | 8.90 | ||||||||||||||||||||
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Total return A | 0.83 | % | 0.47 | % | 2.72 | % | 0.17 | % | 3.78 | % | 0.56 | % | 0.56 | % | 2.77 | % | 0.04 | % | 2.55 | %B | ||||||||||||||||||||
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Net assets, end of period (in thousands) | $ | 293,620 | $ | 150,509 | $ | 217,545 | $ | 156,937 | $ | 131,314 | $ | 1,130 | $ | 1,173 | $ | 272 | $ | 344 | $ | 51 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 0.37 | % | 0.38 | % | 0.37 | % | 0.37 | % | 0.35 | % | 0.72 | % | 0.72 | % | 0.72 | % | 1.43 | % | 0.65 | %C | ||||||||||||||||||||
Expenses, net of reimbursements | 0.37 | % | 0.38 | % | 0.37 | % | 0.37 | % | 0.35 | % | 0.64 | % | 0.63 | % | 0.64 | % | 0.60 | % | 0.64 | %C | ||||||||||||||||||||
Net investment income (loss), before reimbursements | 0.60 | % | 0.90 | % | 1.50 | % | 1.73 | % | 2.27 | % | 0.26 | % | 0.58 | % | 1.16 | % | 0.57 | % | 1.45 | %C | ||||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.60 | % | 0.90 | % | 1.50 | % | 1.73 | % | 2.27 | % | 0.34 | % | 0.66 | % | 1.24 | % | 1.40 | % | 1.47 | %C | ||||||||||||||||||||
Portfolio turnover rate | 53 | % | 105 | % | 18 | % | 65 | % | 60 | % | 53 | % | 105 | % | 18 | % | 65 | % | 60 | %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. |
74
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, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.89 | $ | 8.84 | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.84 | $ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.90 | $ | 8.88 | |||||||||||||||||||||||||||||
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| (0.02 | ) | (0.58 | ) | (0.19 | ) | 0.14 | 0.08 | (0.07 | ) | 0.02 | 0.08 | 0.15 | 0.09 | (0.03 | ) | 0.03 | 0.02 | 0.12 | (0.04 | ) | ||||||||||||||||||||||||||||||||||||||
| 0.07 | 0.58 | 0.39 | (0.15 | ) | 0.21 | 0.11 | (0.02 | ) | 0.11 | (0.18 | ) | 0.07 | 0.01 | (0.10 | ) | 0.11 | (0.21 | ) | 0.08 | |||||||||||||||||||||||||||||||||||||||
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| 0.05 | 0.00 | 0.20 | (0.01 | ) | 0.29 | 0.04 | 0.00 | 0.19 | (0.03 | ) | 0.16 | (0.02 | ) | (0.07 | ) | 0.13 | (0.09 | ) | 0.04 | |||||||||||||||||||||||||||||||||||||||
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| (0.07 | ) | (0.09 | ) | (0.13 | ) | (0.16 | ) | (0.24 | ) | (0.06 | ) | (0.08 | ) | (0.12 | ) | (0.15 | ) | (0.11 | ) | 0.00 | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.02 | ) | ||||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.07 | ) | (0.09 | ) | (0.13 | ) | (0.16 | ) | (0.24 | ) | (0.06 | ) | (0.08 | ) | (0.12 | ) | (0.15 | ) | (0.11 | ) | 0.00 | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.02 | ) | ||||||||||||||||||||||||||||||
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| $ | 8.68 | $ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.89 | $ | 8.68 | $ | 8.70 | $ | 8.78 | $ | 8.71 | $ | 8.89 | $ | 8.68 | $ | 8.70 | $ | 8.79 | $ | 8.72 | $ | 8.90 | |||||||||||||||||||||||||||||
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| 0.53 | % | 0.03 | % | 2.28 | % | (0.12 | )% | 3.33 | % | 0.52 | % | 0.00 | % | 2.22 | % | (0.33 | )% | (1.78 | )%B | (0.19 | )% | (0.85 | )% | (1.46 | )% | 1.00 | % | 0.48 | %B | |||||||||||||||||||||||||||||
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| $ | 7,255 | $ | 7,497 | $ | 14,203 | $ | 24,557 | $ | 23,175 | $ | 1,322 | $ | 2,271 | $ | 2,951 | $ | 3,428 | $ | 44 | $ | 969 | $ | 863 | $ | 377 | $ | 371 | $ | 1 | |||||||||||||||||||||||||||||
| 0.90 | % | 0.90 | % | 0.89 | % | 0.90 | % | 0.86 | % | 1.10 | % | 1.13 | % | 1.12 | % | 1.38 | % | 1.02 | %C | 1.84 | % | 1.89 | % | 1.90 | % | 2.47 | % | 2.28 | %C | |||||||||||||||||||||||||||||
| 0.79 | % | 0.79 | % | 0.79 | % | 0.78 | % | 0.67 | % | 0.82 | % | 0.85 | % | 0.85 | % | 0.84 | % | 0.81 | %C | 1.50 | % | 1.60 | % | 1.59 | % | 1.55 | % | 1.60 | %C | |||||||||||||||||||||||||||||
| 0.07 | % | 0.39 | % | 0.99 | % | 1.18 | % | 1.75 | % | (0.10 | )% | 0.15 | % | 0.75 | % | 0.49 | % | 0.49 | %C | (0.85 | )% | (0.65 | )% | (0.03 | )% | (0.43 | )% | (3.57 | )%C | |||||||||||||||||||||||||||||
| 0.19 | % | 0.50 | % | 1.09 | % | 1.30 | % | 1.94 | % | 0.18 | % | 0.43 | % | 1.03 | % | 1.03 | % | 0.69 | %C | (0.52 | )% | (0.36 | )% | 0.28 | % | 0.49 | % | (2.88 | )%C | |||||||||||||||||||||||||||||
| 53 | % | 105 | % | 18 | % | 65 | % | 60 | % | 53 | % | 105 | % | 18 | % | 65 | % | 60 | %D | 53 | % | 105 | % | 18 | % | 65 | % | 60 | %D | |||||||||||||||||||||||||||||
75
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2014 (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, 2014. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2014.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2013. 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 | 0.83 | % | 6.24 | % | ||||
Qualified Dividend Income | 0.92 | % | 9.28 | % | ||||
Long-term capital gain distributions for the year ended October 31, 2014 were designated for the following Funds:
Retirement Income and Appreciation | $ | 3,033,030 | ||
Intermediate Bond | 450,866 | |||
High Yield Bond | 727,917 |
The Retirement Income and Appreciation Fund made $1,293,811 in short-term capital gain distributions.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
76
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Funds (Unaudited)
At in-person meetings held on May 15, 2014 and June 5, 2014 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 5 meeting, approved: (1) the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) and American Beacon Select Funds (“Select Trust”) on behalf of each of their series that had been operational for at least one year (collectively, the “Funds”); and (2) the renewal of the investment advisory agreements (each an “Investment Advisory Agreement”) among the Manager, each subadvisor and, as applicable, the Beacon Trust, other than the Investment Advisory Agreements with subadvisors with respect to which the Board approved a new Investment Advisory Agreement within the past year (each a “subadvisor”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board to consider the renewal of these Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”), Morningstar, Inc. (“Morningstar”), Bobroff Consulting, Inc. and Callan Associates, Inc. (“Callan”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee coordinated the production of information from Lipper and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, 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 on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
| • | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Lipper and Morningstar, and to the performance of any similar accounts managed by the firm; |
| • | for Funds having multiple firms managing assets, information regarding the performance of the individual firms with respect to their allocated portions of a Fund’s portfolio, and the performance of certain relevant benchmarks and other similar accounts managed by the firm; |
| • | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with those of comparable mutual funds, including peer group averages and fee and expense analyses provided by Lipper and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided; |
| • | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to the expense caps; |
| • | the Manager’s profitability with respect to the services that it provided to each Fund; |
| • | 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 evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
| • | information regarding the securities lending, cash management, administrative and accounting-related services that the Manager provides to certain Funds and the fees that the Manager receives for such services, including Callan’s review of the Funds’ securities lending program; and |
| • | information regarding a firm’s financial condition, the personnel who are or will be assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, disaster recovery plans, insurance coverage, material pending litigation, code of ethics, compliance matters, trading activities, and actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds. |
The Board considered that the Manager provides management and administrative services to the Funds pursuant to separate agreements. The Board noted, in this regard, that many mutual funds have a single contract governing both types of services, and observed that the actual management fee rates provided by Lipper for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
Certain firms may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of those firms based on information that was provided. For each Fund with more than one class of shares, the class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which, in most cases, was the Institutional Class. For the American Beacon Holland Large Cap Growth Fund, the comparison was made using the Investor Class of shares due to the short period of time that its Institutional Class of shares has been in existence. 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 certain factors the Board considered in connection with its renewal and approval 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.
77
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Funds (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 Meetings, 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) 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 clients); (5) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; 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 staffing 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) as well as the Fund’s Morningstar rating. 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 certain Funds. 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 Manager represented that 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 share 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 and, in some instances, 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 certain Funds. In considering the management fees for overseeing the securities lending program, the Board reviewed the analysis of the securities lending program prepared by Callan. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the fee rates charged by 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 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.
78
Disclosure Regarding the Board of Trustees’ Approval of the Management Agreement and Investment Advisory Agreements of the Funds (Unaudited)
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, certain subadvisors have agreed to take into account assets of American Airlines Group 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 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 Board noted that certain subadvisors benefit from soft dollar arrangements for third party and proprietary research.
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 subadvisors reimburse the Manager for certain costs relating to distribution activities for the Funds, as well as representations by all such subadvisors that they would not reduce their fee rates in lieu of providing such reimbursements. 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 and Lipper performance group, with the 1st Quintile representing the top twenty percent of the universe or group based on performance and the 5th Quintile representing the bottom twenty percent of the universe or group based on performance. 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 and Lipper expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. 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. For all Funds, other than for the American Beacon Money Market Select Fund and American Beacon U.S. Government Money Market Select Fund for which information was not available, 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.
79
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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
| Compared to Lipper Expense Universe | 4th Quintile | |
| Compared to Lipper Expense Group | 3rd Quintile | |
| Morningstar Fee Level Ranking—Institutional Class | Above Average Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
| Compared to Lipper Performance Universe | 3rd Quintile | |
| Compared to Lipper Performance Group | Not Available |
(1) The Fund’s assets are relatively small and are divided among three subadvisors; therefore, the Fund’s expense ratio is likely to decrease as the Fund grows.
In considering the renewal of the Investment Advisory Agreements with Franklin Advisors, Inc. (“Franklin”), Logan Circle Partners, L.P. (“Logan Circle”) and Penn Capital Management (“PENN”), the Trustees considered the following additional factors:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
| Franklin | 5 years | 2nd Quintile | ||
| Logan Circle | 5 years | 1st Quintile | ||
| PENN* | 1 year | 1st Quintile |
| * | PENN does not yet have a 5- year performance record. |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; and (2) 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
| Compared to Lipper Expense Universe | 1st Quintile* | |
| Compared to Lipper Expense Group | 1st Quintile | |
| Morningstar Fee Level Ranking—Y Class | High Expense Ratio* |
| * | Lipper uses its Core Plus category and Morningstar uses its Retirement Income category. |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
| Compared to Lipper Performance Universe | 3rd Quintile | |
| Compared to Lipper Performance Group | 2nd Quintile |
(1) The Fund was designed by the Manager for a particular client to provide a conservative retirement income option and the Fund’s investment strategy includes a fixed allocation between investment grade bonds, managed by the Manager, and a subadvised convertibles strategy and is appropriate for investors desiring this type of investment exposure; (2) the Manager’s representation that a comparison of its performance relative to its benchmark index rather than the Fund’s Lipper performance universe may be more appropriate because the Lipper performance universe includes funds that are managed pursuant to core plus strategies, whereas the Manager manages only a specific component of a core plus strategy; and (3) the Manager outperformed its applicable benchmark index for the five-year period ended March 31, 2014.
In considering the renewal of the Investment Advisory Agreement with Calamos Advisors LLC (“Calamos”), the Trustees considered the following additional factors:
(1) The Manager’s representation that a comparison of the subadvisor’s performance relative to its benchmark index rather than the Fund’s peer universe may be more appropriate because the peer universe includes funds that are managed pursuant to core plus strategies, whereas the subadvisor manages only a specific component of a core plus strategy; (2) representations by Calamos that it underperformed its applicable benchmark index for the five-year period ended March 31, 2014 primarily due to its more conservative higher quality investment focus; (3) representations by Calamos that, for fee rate comparison purposes, it does not manage other accounts in the same strategy as the subadvisor manages its allocation of 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.
80
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 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
| Compared to Lipper Expense Universe | 1st Quintile | |
| Compared to Lipper Expense Group | 1st Quintile | |
| Morningstar Fee Level Ranking—Institutional Class | Low Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
| Compared to Lipper Performance Universe | 5th Quintile | |
| Compared to Lipper Performance Group | 5th Quintile |
Manager Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
| Manager | 5 years | 4th Quintile |
(1) The Manager’s representation, and data provided to the Trustees, 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 may invest a portion of their assets in high yield securities or use derivatives, whereas the American Beacon Intermediate Bond Fund invests only in investment-grade securities; and (2) the Fund outperformed or performed in-line with its benchmark index for the three- and five-year periods; and (3) the Manager outperformed its applicable benchmark index for the five-year period ended March 31, 2014.
In considering the renewal of the Investment Advisory Agreement with Barrow, Hanley, Mewhinney & Strauss, Inc. (“Barrow”), the Trustees considered the following additional factors:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
| Barrow | 5 years | 4th Quintile |
(1) Information provided by Barrow regarding the fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; (2) Barrow outperformed its applicable benchmark index for the five-year period ended March 31, 2014; and (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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
| Compared to Lipper Expense Universe | 1st Quintile | |
| Compared to Lipper Expense Group | 1st Quintile | |
| Morningstar Fee Level Ranking—Institutional Class | Low Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
| Compared to Lipper Performance Universe | 4th Quintile | |
| Compared to Lipper Performance Group | 4th Quintile |
(1) The Manager’s representation, and data provided to the Trustees, that a comparison of the Fund’s performance relative to the Fund’s benchmark index rather than its Lipper performance universe and performance group may be more appropriate because the Lipper performance universe and performance group include certain funds that may invest a portion of their assets in high yield securities or use derivatives, whereas the American Beacon Short-Term Bond Fund may invest only in investment-grade securities; and (2) the Fund outperformed or performed in-line with its benchmark index for all relevant periods; and (3) the Manager outperformed its applicable benchmark index for the five-year period ended March 31, 2014.
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.
81
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 thirty-three 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 (56) | 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** (77) | 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). | ||
| Term | ||||
| NON-INTERESTED TRUSTEES | Lifetime of Trust until removal, resignation or retirement* | |||
| W. Humphrey Bogart (70) | 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 (53) | 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 (60) | 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 (72) | Trustee 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). | ||
| Richard A. Massman (71) | 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 (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 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). | ||
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 | ||||
| Gene L. Needles, Jr. (59) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 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 (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
| Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, 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 (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
| Wyatt Crumpler (48) | 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 (44) | 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 (60) | 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 (53) | 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 (50) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
| Jeffrey K. Ringdahl (39) | 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 (51) | 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 (43) | Chief Compliance Officer since 2004 and Asst. Secretary since1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
| Sonia L. Bates (57) | 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. | ||
| * | As of 11/12/2014, the Board 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 75. |
| ** | 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 | |||
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 Boston, Massachusetts | TRANSFER AGENT Boston Financial Data Services Kansas City, Missouri | INDEPENDENT REGISTERED PUBLIC ACCOUNTING Ernst & Young LLP Dallas, Texas
| DISTRIBUTOR Foreside Fund Services, Portland, Maine |
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current Prospectus 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 10/14
About American Beacon Advisors
Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management.
Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company.
Contents
| 1 | ||||
| 2 | ||||
| 13 | ||||
| 21 | ||||
| 24 | ||||
| 28 | ||||
| 32 | ||||
| 52 | ||||
| Back Cover |
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and each Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and, therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.
| American Beacon Funds | October 31, 2014 |
 |
The economic recovery that began in mid-2009 has continued, and the U.S. equity bull market entered into its fifth year during the reporting period. As a testament to the continuing strength of the stock market, both the S&P 500 Index and the Dow Jones Industrial Average ended the period under review with record highs on October 31.
Coinciding with the rise of the equity markets, the U.S. economy continues to produce more encouraging data for investors to digest. The positive trends include an improving gross domestic product, lower unemployment and steady job growth. Additionally, the Federal Open Markets Committee (FOMC) reiterated its objective to keep the Federal Funds Rate near zero as well as announcing in October the end of its asset purchase program. | |
Unlike previous years in the current bull market, the overall market rally was not broad-based. In particular, the Russell 2000 Index, which measures small-cap stocks, established record highs while also enduring periods of roughly double-digit losses. While all 14 sectors identified by Morningstar posted a positive return, three sectors (basic materials, consumer cyclical and energy) failed to meet the double-digit standard that we have become accustomed to over the past five years.
We believe it takes a qualified, active manager to navigate the wide variety of market conditions present. We are proud to provide you access to some of the world’s most respected asset managers and grateful you placed your confidence in us.
For the 12 months ended October 31, 2014:
| • | The American Beacon Balanced Fund (Investor Class) returned 10.75%. |
| • | The American Beacon Mid-Cap Value Fund (Investor Class) returned 9.99%. |
| • | The American Beacon Small Cap Value II Fund (Investor Class) returned 8.22%. |
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, 2014 (Unaudited)
Underlying economic growth in the U.S. gained momentum at the end of the 2013 calendar year. Household net worth rose sharply, spurred by rising house prices and a surging stock market. This increase in household net worth, along with a modest improvement in jobs growth, bolstered consumer confidence. U.S. equities moved higher due to the favorable economic data and as a result, became significantly less cheap (compared to a year earlier). Valuations reached historical norms but were not excessive with regard to earnings, profit margins and balance sheet strength. Around this time, Europe was stabilizing and the first signs of China’s slowing activity appeared.
The first few months of 2014 seemed relatively sedate compared to the market surge we saw in the prior year. A small market correction occurred in January but was followed by a number of months with positive performance. During the winter, extreme cold weather became a factor as it depressed economic activity for the country, leading to U.S. gross domestic product (GDP) growth becoming temporarily negative. However, overall economic data showed some positive signs with solid improvements in jobs growth, unemployment, auto sales, air and railroad traffic and loan growth. Very low inflation allowed the U.S. Federal Reserve to stay committed to its expansionary policy with interest rates near zero.
The second quarter benefited from catch-up demand. U.S. GDP growth was a stellar 4.6%, and jobs growth, auto sales, consumer confidence and railroad traffic were all positive for the period. These factors contributed to the positive performance of the market (S&P 500 earnings were up almost 10%). The move during this time pushed equity valuations to more attractive levels.
The S&P 500 Index was up 17.27% for the one-year period ended October 31, 2014, while the Dow Jones Industrial Average gained 14.48%. The Russell 1000 Index, a measure of the large-cap segment of U.S. equities, posted 16.78% return while the Russell 2000 Index, which measures the small-cap segment, was positive 8.06%.
The period closed with the U.S. economy continuing to strengthen. U.S. real GDP grew 3.3% in the third quarter. Solid jobs growth and diminishing new unemployment claims attested to the sustainability of the U.S. recovery. However, the positive outlook for the U.S. growth is tempered by the strong rise in the value of the dollar that could slow exports and make imports more competitive.
2
American Beacon Balanced FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Balanced Fund (the “Fund”) returned 10.75% for the twelve months ended October 31, 2014, underperforming the 60% Russell 1000® Value/40% Barclays Capital Aggregate Index benchmark return of 11.47% for the same period.
Comparison of Change in Value of a $10,000 Investment
For The Period from 10/31/04 through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,8) | 11.15 | % | 12.06 | % | 7.34 | % | $ | 20,304 | ||||||||
Y Class (1,3,8) | 10.98 | % | 11.93 | % | 7.28 | % | 20,186 | |||||||||
Investor Class (1,8) | 10.75 | % | 11.68 | % | 7.01 | % | 19,684 | |||||||||
Advisor Class (1,2,8) | 10.58 | % | 11.51 | % | 6.79 | % | 19,288 | |||||||||
A Class with sales charge (1,4,8) | 4.32 | % | 10.24 | % | 6.32 | % | 18,452 | |||||||||
A Class without sales charge (1,4,8) | 10.67 | % | 11.55 | % | 6.95 | % | 19,577 | |||||||||
C Class with sales charge (1,5,8) | 8.80 | % | 10.82 | % | 6.60 | % | 18,944 | |||||||||
C Class without sales charge (1,5,8) | 9.80 | % | 10.82 | % | 6.60 | % | 18,944 | |||||||||
AMR Class (1,8) | 11.40 | % | 12.35 | % | 7.60 | % | 20,805 | |||||||||
Balanced Composite Index (6) | 11.47 | % | 11.71 | % | 6.91 | % | 19,513 | |||||||||
Russell 1000 Value Index (7) | 16.46 | % | 16.49 | % | 7.90 | % | 21,393 | |||||||||
Barclays Capital Aggregate Index (7) | 4.14 | % | 4.22 | % | 4.64 | % | 15,735 | |||||||||
| 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 ten-year period represents the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. 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 10/31/04 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 10/31/04. A portion of the fees charged to the Y Class of the Fund was waived in 2011 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown in 2011. |
| 4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund was waived in 2011 and 2012 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown in 2011 and 2012. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund was waived from 2010 through 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown from 2010 through 2012. 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 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. One cannot directly invest in an index. |
| 8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, Advisor, A, C, and AMR Class shares was 0.61%, 0.69%, 0.93%, 1.08%, 1.01%, 1.75%, 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. |
3
American Beacon Balanced FundSM
Performance Overview
October 31, 2014 (Unaudited)
During the twelve-month period, the Fund’s assets on average were invested 65% in equities (including equitized cash) and 35% in fixed-income securities, ending the period with approximately the same allocations.
The equity portion of the Fund (excluding equitized cash) returned 15.79%, underperforming the Russell 1000® Value Index (the “Index”) return of 16.46%. The Fund’s equities trailed the Index due to stock selection as sector allocation added minimal value relative to the Index. Most of the Fund’s poor performance was attributed to holdings in the Energy and Consumer Discretionary sectors. In the Energy sector, Cobalt International Energy (down 43.3%), Seadrill (down 44.8%) and BP (down 1.9%) detracted the most relative value from the Fund’s returns. General Motors (down 12.2%), Target (down 1.2%) and Toyota Motor (down 4.9%) were the largest detractors in the Consumer Discretionary sector. Good stock selection in the Financials and Industrials sectors added value relative to the Index. Bank of America (up 23.7%) and JP Morgan Chase (up 21.0%) contributed most to performance in the Financials sector. Not owning AFLAC, which was down 5.9% in the Index, also positively impacted performance. In the Industrials sector, the Fund’s smaller allocation, versus the Index, to General Electric (up 1.7%) and positions in General Dynamics (up 64.3%) and Raytheon (up 28.6%), added relative value.
The Fund’s overweight position in Information Technology, the best performing sector in the Index, contributed to performance through sector allocation. The aforementioned good performance was mostly negated by an overweight position in the Consumer Discretionary and Telecommunication Services sectors, which detracted from the Fund’s returns.
The fixed-income portion of the Fund returned 4.97% for the twelve-month period, outperforming the Barclays Capital Aggregate Index (the “Barclays Index”) return of 4.14%. During the period, the Fund’s significant allocation in the finance sector within Corporate securities, added value relative to the Index. A larger exposure to CMBS securities, versus the Index, also contributed to performance. The Fund’s allocation to securities in the 10 to 30 year range benefited performance.
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 | |||||||
Citigroup, Inc. | 2.1 | |||||||
Bank of America Corp. | 1.6 | |||||||
Wells Fargo & Co. | 1.3 | |||||||
WellPoint, Inc. | 1.3 | |||||||
Verizon Communications, Inc. | 1.0 | |||||||
Oracle Corp. | 1.0 | |||||||
Microsoft Corp. | 1.0 | |||||||
General Motors Co. | 1.0 | |||||||
Pfizer, Inc. | 1.0 | |||||||
Total Fund Holdings | 524 | |||||||
Sector Allocation (% Equities)
Financials | 27.2 | |||
Health Care | 13.5 | |||
Consumer Discretionary | 12.8 | |||
Information Technology | 12.5 | |||
Energy | 10.8 | |||
Industrials | 8.5 | |||
Telecommunication Services | 5.4 | |||
Consumer Staples | 4.7 | |||
Utilities | 3.3 | |||
Materials | 1.1 | |||
Service | 0.2 |
Sector Allocation (% Fixed Income)
U.S. Treasury Notes/Bonds | 30.7 | |||
Finance | 15.3 | |||
Mortgage Backed Obligations | 14.9 | |||
U.S. Treasury Floating Rate Note | 8.3 | |||
CMBS | 5.6 | |||
Manufacturing | 5.3 | |||
Agency | 4.2 | |||
Service | 3.2 | |||
Asset-Backed Obligations | 3.2 | |||
Energy | 2.9 | |||
Telecommunications | 2.7 | |||
Utilities | 1.4 | |||
Municipal Obligations | 0.9 | |||
Consumer | 0.8 | |||
Transportation | 0.6 |
Investing in fixed-income 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
| 4 |
American Beacon Balanced FundSM
Performance Overview
October 31, 2014 (Unaudited)
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.
5
American Beacon Mid-Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Mid-Cap Value Fund (the “Fund”) returned 9.99% for the twelve months ended October 31, 2014 underperforming the Russell Midcap® Value Index (the “Index”) return of 16.18% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/04 through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional | 10.20 | % | 17.98 | % | 9.67 | % | $ | 25,180 | ||||||||
Y Class (1,4,9) | 10.15 | % | 17.90 | % | 9.64 | % | 25,092 | |||||||||
Investor | 9.99 | % | 17.85 | % | 9.50 | % | 24,777 | |||||||||
Advisor | 9.58 | % | 17.34 | % | 9.28 | % | 24,298 | |||||||||
A Class with sales | 3.37 | % | 16.02 | % | 8.64 | % | 22,907 | |||||||||
A Class without sales | 9.68 | % | 17.40 | % | 9.29 | % | 24,312 | |||||||||
C Class with sales | 7.88 | % | 16.69 | % | 8.96 | % | 23,584 | |||||||||
C Class without sales | 8.88 | % | 16.69 | % | 8.96 | % | 23,584 | |||||||||
AMR Class (1,9) | 10.53 | % | 18.20 | % | 9.85 | % | 25,587 | |||||||||
Russell Midcap | 16.18 | % | 19.19 | % | 10.29 | % | 26,628 | |||||||||
| 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 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 ten-year period represents the total returns achieved by the AMR Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Investor Class of the Fund has been waived from 2006 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than actual returns shown from 2006 through 2013. |
| 3. | Fund performance for the ten-year period represents the total returns achieved by the AMR Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Institutional Class of the Fund has been waived from 2007 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than actual returns shown from 2007 through 2013. |
| 4. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the AMR Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Fund has been waived from 2010 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns from 2010 through 2013. |
| 5. | Fund performance for the ten-year period represents the total returns achieved by the AMR Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Advisor Class of the Fund has been waived from 2007 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2007 through 2013. |
| 6. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the AMR Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund was waived from 2010 through 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns from 2010 through 2012. A Class shares have a maximum sales charge of 5.75%. |
6
American Beacon Mid-Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
| 7. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the AMR Class from 10/31/04 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 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 10/31/04. A portion of the fees charged to the C Class of the Fund was waived from 2010 through 2013 and partially recovered in 2014. Performance prior to waiving fees was lower than the actual returns shown from 2010 through 2013. 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, Russell Midcap Index, and Russell 1000 Index are registered trademarks of Frank Russell Company. 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 1.00%, 1.12%, 1.26%, 1.62%, 1.39%, 2.16%, and 0.74%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index as both stock selection and sector allocation detracted value relative to the Index.
Most of the Fund’s poor performance was attributed to holdings in the Industrials sector which detracted more than 215 basis points (2.15%) from performance. In the Industrials sector, KBR (down 45.4%), Owens Corning (down 11.9%) and Terex (down 18.9%) were the largest detractors. The Fund’s Health Care, Information Technology and Financials sectors detracted more than 60 basis points (0.60%) each from performance. In the Health Care sector, not owning Humana and HCA Holdings, which were up 52.1% and 48.6%, respectively, in the Index, negatively impacted performance. In the Information Technology sector, not owning Micron Technology, which was up 87.5% in the Index, detracted value relative to the Index. The Fund’s position in Microchip Technology (up 2.4%) also detracted from performance. Willis Group Holdings (down 8.2%) and First Niagara Financial (down 31.6%) hurt performance in the Financials sector. Good stock selection in the Energy sector added relative value. Not owning Noble Energy, Chesapeake Energy or Denbury Resources, which were down 22.3%, 14.9% and 34.0%, respectively, in the Index, contributed to the Fund’s performance.
Overweight positions in Energy, the worst performing sector in the Index, and the Industrials sector detracted relative value through sector allocation. A significant underweight in the Utilities sector, also detracted from the Fund’s returns.
The sub-advisors’ philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer term.
Top Ten Holdings (% Net Assets)
Cigna Corp. | 1.9 | |||||||
Parker Hannifin Corp. | 1.6 | |||||||
Willis Group Holdings PLC | 1.6 | |||||||
Stanley Black & Decker, Inc. | 1.6 | |||||||
Host Hotels & Resorts LP | 1.5 | |||||||
Murphy Oil Corp. | 1.5 | |||||||
KBR, Inc. | 1.4 | |||||||
Interpublic Group of Cos., Inc. | 1.3 | |||||||
Avnet, Inc. | 1.3 | |||||||
Owens Corning | 1.3 | |||||||
Total Fund Holdings | 149 | |||||||
Sector Allocation (% Equities)
Financials | 28.1 | |||
Consumer Discretionary | 17.4 | |||
Industrials | 13.3 | |||
Information Technology | 12.4 | |||
Health Care | 10.4 | |||
Energy | 6.2 | |||
Consumer Staples | 4.9 | |||
Utilities | 4.7 | |||
Materials | 2.6 |
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 assurance that the investment objectives of the Fund will be met.
7
American Beacon Small Cap Value II FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Small Cap Value II Fund (the “Fund”) returned 8.22% for the twelve months ended October 31, 2014, outperforming the Russell 2000® Value Index (the “Index”) return of 7.89% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 11/15/11* through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | Since Incep. (11/15/11) | Value of $10,000 11/15/11- 10/31/14 | ||||||||||
Y Class (1,3) | 8.54 | % | 16.12 | % | $ | 15,569 | ||||||
Investor Class (1,3) | 8.22 | % | 15.79 | % | 15,439 | |||||||
Russell 2000 Value Index (2) | 7.89 | % | 18.16 | % | 16,393 | |||||||
| 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 each Class of the Fund has been waived since inception. Performance prior to waiving fees was lower than the actual returns shown for the periods since inception. |
| 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. 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 2.83% and 3.12%, 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 due to stock selection as sector allocation detracted value relative to the Index.
The Fund’s excess performance was largely attributable to holdings in the Financials sector which contributed more than 205 basis points (2.05%) to performance. In the Financials sector, Federated National Holding (up 200.2%), Protective Life (up 54.8%) and ConnectOne Bancorp (up 29.2%) were the largest contributors. The Fund’s Information Technology, Consumer Staples and Energy companies also added relative value. ARRIS Group (up 73.4%), FormFactor (up 41.8%) and LTX Credence (up 56.3%) contributed most to the Fund’s returns in the Information Technology sector. In the Consumer Staples sector, Cal Maine Foods (up 86.5%) and National Beverage (up 38.8%) added relative value. VAALCO Energy (up 59.2%) was the largest contributor in the Energy sector. Not owning Alpha Natural Resources and PDC Energy, which were down 72.0% and 35.5%, respectively, in the Index, also positively impacted performance. The Fund’s Materials sector slightly detracted value relative to the Index. OM Group (down 22.3%) and Schweitzer-Mauduit International (down 25.7%) were the largest detractors in the Materials sector.
The Fund’s significant underweight in Financials, one of the better performing sectors in the Index, detracted relative value through sector allocation. Overweight positions in Energy, the worst performing sector in the Index, and the Industrials sector also hurt performance.
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. | 1.5 | |||||||
ConnectOne Bancorp, Inc. | 1.2 | |||||||
EMCOR Group, Inc. | 1.1 | |||||||
Prestige Brands Holdings, Inc. | 1.0 | |||||||
Federated National Holding Co. | 1.0 | |||||||
Core-Mark Holding Co., Inc. | 1.0 | |||||||
Saia, Inc. | 1.0 | |||||||
EnPro Industries, Inc. | 1.0 | |||||||
Gain Capital Holdings, Inc. | 0.9 | |||||||
Barnes Group, Inc. | 0.9 | |||||||
Total Fund Holdings | 163 | |||||||
8
American Beacon Small Cap Value II FundSM
Performance Overview
October 31, 2014 (Unaudited)
Sector Allocation (% Equities)
Financials | 28.2 | |||
Industrials | 19.5 | |||
Information Technology | 14.4 | |||
Consumer Discretionary | 12.9 | |||
Consumer Staples | 7.1 | |||
Materials | 5.7 | |||
Energy | 4.2 | |||
Utilities | 4.1 | |||
Health Care | 3.9 |
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.
9
American Beacon FundsSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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.
10
American Beacon FundsSM
Fund Expenses
October 31, 2014 (Unaudited)
Balanced Fund
| Beginning Account Value 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,038.14 | $ | 2.98 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,037.82 | $ | 3.49 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.78 | $ | 3.47 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.67 | $ | 4.72 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.57 | $ | 4.69 | |||||||||
Advisor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.70 | $ | 5.49 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.81 | $ | 5.45 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,036.36 | $ | 5.24 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.06 | $ | 5.19 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,039.42 | $ | 1.64 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.59 | $ | 1.63 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.91 | $ | 9.07 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.28 | $ | 9.00 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.68%, 0.92%, 1.07%, 1.02%, 1.77%, 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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,032.17 | $ | 4.76 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.67 | $ | 4.97 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.32 | $ | 4.94 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,031.16 | $ | 5.79 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.51 | $ | 5.75 | |||||||||
Advisor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,029.18 | $ | 7.42 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.90 | $ | 7.38 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,029.98 | $ | 6.65 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.65 | $ | 6.61 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.24 | $ | 3.13 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.13 | $ | 3.11 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.49 | $ | 10.77 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,014.57 | $ | 10.71 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.93%, 0.97%, 1.13%, 1.45%, 1.30%, 2.11%, and 0.61% 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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | |||||||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,016.13 | $ | 5.54 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.71 | $ | 5.55 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,014.84 | $ | 6.96 | |||||||||
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. |
11
American Beacon FundsSM
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, 2014, 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, 2014, 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, 2014, 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, 2014
12
American Beacon Balanced FundSM
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCK - 57.05% |
| |||||||
CONSUMER DISCRETIONARY - 7.33% |
| |||||||
Auto Components - 0.83% |
| |||||||
Johnson Controls, Inc. | 180,600 | $ | 8,533 | |||||
|
| |||||||
Automobiles - 2.62% | ||||||||
Ford Motor Co. | 355,300 | 5,006 | ||||||
General Motors Co. | 331,379 | 10,405 | ||||||
Honda Motor Co., Ltd., Sponsored ADRA | 55,900 | 1,796 | ||||||
Toyota Motor Corp., Sponsored ADRA | 81,100 | 9,841 | ||||||
|
| |||||||
| 27,048 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.25% |
| |||||||
Carnival Corp. | 27,300 | 1,096 | ||||||
McDonald’s Corp. | 15,400 | 1,444 | ||||||
|
| |||||||
| 2,540 | ||||||||
|
| |||||||
Household Durables - 0.21% |
| |||||||
Stanley Black & Decker, Inc. | 23,000 | 2,154 | ||||||
|
| |||||||
Media - 1.86% | ||||||||
Comcast Corp., Special Class A | 51,000 | 2,812 | ||||||
DIRECTVB | 35,100 | 3,046 | ||||||
Interpublic Group of Cos., Inc. | 125,000 | 2,424 | ||||||
Omnicom Group, Inc. | 13,700 | 984 | ||||||
Time Warner Cable, Inc. | 17,400 | 2,561 | ||||||
Tribune Media Co.B | 60,600 | 4,061 | ||||||
Viacom, Inc., Class B | 45,700 | 3,322 | ||||||
|
| |||||||
| 19,210 | ||||||||
|
| |||||||
Multiline Retail - 1.25% |
| |||||||
Dillard’s, Inc., Class A | 25,000 | 2,644 | ||||||
Nordstrom, Inc. | 14,600 | 1,060 | ||||||
Target Corp. | 149,200 | 9,224 | ||||||
|
| |||||||
| 12,928 | ||||||||
|
| |||||||
Specialty Retail - 0.31% |
| |||||||
Bed Bath & Beyond, Inc.B | 30,500 | 2,053 | ||||||
Lowe’s Cos., Inc. | 19,100 | 1,093 | ||||||
|
| |||||||
| 3,146 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 75,559 | ||||||
|
| |||||||
CONSUMER STAPLES - 2.71% |
| |||||||
Beverages - 0.36% | ||||||||
Diageo PLC, Sponsored ADRA C | 23,200 | 2,737 | ||||||
Molson Coors Brewing Co., Class B | 13,700 | 1,019 | ||||||
|
| |||||||
| 3,756 | ||||||||
|
| |||||||
Food & Drug Retailing - 0.53% |
| |||||||
Sysco Corp. | 30,400 | 1,172 | ||||||
Wal-Mart Stores, Inc. | 55,600 | 4,240 | ||||||
|
| |||||||
| 5,412 | ||||||||
|
| |||||||
Food Products - 0.42% | ||||||||
Bunge Ltd. | 12,000 | 1,064 | ||||||
Kellogg Co. | 22,400 | 1,433 | ||||||
Mondelez International, Inc., Class A | 51,500 | 1,815 | ||||||
|
| |||||||
| 4,312 | ||||||||
|
| |||||||
Tobacco - 1.40% | ||||||||
Altria Group, Inc. | 66,100 | 3,195 | ||||||
Imperial Tobacco Group PLC, ADRA C | 47,000 | 4,095 | ||||||
Philip Morris International, Inc. | 79,900 | 7,112 | ||||||
|
| |||||||
| 14,402 | ||||||||
|
| |||||||
Total Consumer Staples |
| 27,882 | ||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
ENERGY - 6.22% | ||||||||
Energy Equipment & Services - 0.81% |
| |||||||
Cobalt International Energy, Inc.B | 386,000 | $ | 4,520 | |||||
Halliburton Co. | 70,100 | 3,865 | ||||||
|
| |||||||
| 8,385 | ||||||||
|
| |||||||
Oil & Gas - 5.41% | ||||||||
Apache Corp. | 34,100 | 2,633 | ||||||
BP PLC, Sponsored ADRA C | 220,104 | 9,565 | ||||||
Canadian Natural Resources Ltd. | 129,500 | 4,517 | ||||||
Chevron Corp. | 27,228 | 3,266 | ||||||
ConocoPhillips | 64,090 | 4,624 | ||||||
Hess Corp. | 24,300 | 2,061 | ||||||
Kosmos Energy Ltd.B | 105,800 | 987 | ||||||
Marathon Oil Corp. | 86,300 | 3,055 | ||||||
Marathon Petroleum Corp. | 24,850 | 2,259 | ||||||
Murphy Oil Corp. | 52,000 | 2,776 | ||||||
Occidental Petroleum Corp. | 82,100 | 7,301 | ||||||
Phillips 66 | 58,595 | 4,600 | ||||||
Royal Dutch Shell PLC, Class A, ADRA C | 78,854 | 5,661 | ||||||
Seadrill Ltd. | 104,600 | 2,406 | ||||||
|
| |||||||
| 55,711 | ||||||||
|
| |||||||
Total Energy |
| 64,096 | ||||||
|
| |||||||
FINANCIALS - 15.33% | ||||||||
Banks - 1.29% | ||||||||
Bank of New York Mellon Corp. | 49,800 | 1,928 | ||||||
Citizens Financial Group | 142,900 | 3,375 | ||||||
PNC Financial Services Group, Inc. | 63,825 | 5,515 | ||||||
SunTrust Banks, Inc. | 62,300 | 2,438 | ||||||
|
| |||||||
| 13,256 | ||||||||
|
| |||||||
Diversified Financials - 9.90% |
| |||||||
American Express Co. | 52,800 | 4,749 | ||||||
Bank of America Corp. | 930,580 | 15,969 | ||||||
Blackstone Group, LPD | 112,700 | 3,395 | ||||||
Capital One Financial Corp. | 93,400 | 7,731 | ||||||
Citigroup, Inc. | 399,070 | 21,362 | ||||||
Generac Holdings, Inc. | 33,500 | 1,519 | ||||||
Goldman Sachs Group, Inc. | 5,800 | 1,102 | ||||||
JPMorgan Chase & Co. | 388,434 | 23,491 | ||||||
KKR & Co., LPE | 150,100 | 3,236 | ||||||
Morgan Stanley | 45,200 | 1,580 | ||||||
Santander Consumer USA Holdings, Inc. | 153,000 | 2,831 | ||||||
SLM Corp. | 196,400 | 1,876 | ||||||
Wells Fargo & Co. | 247,098 | 13,118 | ||||||
|
| |||||||
| 101,959 | ||||||||
|
| |||||||
Insurance - 3.90% | ||||||||
Allstate Corp. | 57,500 | 3,729 | ||||||
American International Group, Inc. | 154,900 | 8,298 | ||||||
Berkshire Hathaway, Inc., Class BB | 53,937 | 7,560 | ||||||
Hartford Financial Services Group, Inc. | 74,400 | 2,945 | ||||||
Lincoln National Corp. | 57,400 | 3,143 | ||||||
MetLife, Inc. | 168,000 | 9,112 | ||||||
Unum Group | 89,000 | 2,978 | ||||||
XL Group PLCC | 70,100 | 2,375 | ||||||
|
| |||||||
| 40,140 | ||||||||
|
| |||||||
Real Estate - 0.24% | ||||||||
Hatteras Financial Corp.F | 74,800 | 1,424 | ||||||
Two Harbors Investment Corp.F | 104,100 | 1,055 | ||||||
|
| |||||||
| 2,479 | ||||||||
|
| |||||||
Total Financials |
| 157,834 | ||||||
|
| |||||||
See accompanying notes
13
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
HEALTH CARE - 7.76% |
| |||||||
Health Care Equipment & Supplies - 1.05% |
| |||||||
Covidien PLCC | 13,000 | $ | 1,202 | |||||
Medtronic, Inc. | 124,700 | 8,499 | ||||||
Zimmer Holdings, Inc. | 9,700 | 1,079 | ||||||
|
| |||||||
| 10,780 | ||||||||
|
| |||||||
Health Care Providers & Services - 2.42% |
| |||||||
Aetna, Inc. | 13,400 | 1,106 | ||||||
Express Scripts Holding Co.B | 29,800 | 2,289 | ||||||
Humana, Inc. | 18,600 | 2,583 | ||||||
Quest Diagnostics, Inc. | 16,500 | 1,047 | ||||||
UnitedHealth Group, Inc. | 48,600 | 4,617 | ||||||
WellPoint, Inc. | 104,900 | 13,290 | ||||||
|
| |||||||
| 24,932 | ||||||||
|
| |||||||
Pharmaceuticals - 4.29% | ||||||||
AbbVie, Inc. | 31,300 | 1,986 | ||||||
Eli Lilly & Co. | 38,800 | 2,574 | ||||||
GlaxoSmithKline PLC, Sponsored ADRA C | 98,300 | 4,472 | ||||||
Jazz Pharmaceuticals PLCB C | 5,275 | 891 | ||||||
Johnson & Johnson | 48,400 | 5,217 | ||||||
Merck & Co., Inc. | 118,900 | 6,889 | ||||||
Mylan, Inc.B | 36,100 | 1,933 | ||||||
NPS Pharmaceuticals, Inc.B | 46,200 | 1,266 | ||||||
Pfizer, Inc. | 333,854 | 9,998 | ||||||
Sanofi, ADRA | 195,200 | 9,026 | ||||||
|
| |||||||
| 44,252 | ||||||||
|
| |||||||
Total Health Care |
| 79,964 | ||||||
|
| |||||||
INDUSTRIALS - 4.86% |
| |||||||
Aerospace & Defense - 1.47% |
| |||||||
Boeing Co. | 19,100 | 2,386 | ||||||
General Dynamics Corp. | 42,400 | 5,926 | ||||||
Northrop Grumman Corp. | 7,800 | 1,076 | ||||||
Raytheon Co. | 44,700 | 4,643 | ||||||
Rockwell Collins, Inc. | 12,700 | 1,069 | ||||||
|
| |||||||
| 15,100 | ||||||||
|
| |||||||
Electrical Equipment - 0.35% |
| |||||||
Emerson Electric Co. | 56,500 | 3,619 | ||||||
|
| |||||||
Industrial Conglomerates - 0.93% |
| |||||||
General Electric Co. | 222,400 | 5,740 | ||||||
Honeywell International, Inc. | 40,200 | 3,864 | ||||||
|
| |||||||
| 9,604 | ||||||||
|
| |||||||
Machinery - 2.11% | ||||||||
Caterpillar, Inc. | 22,400 | 2,272 | ||||||
CNH Industrial N.V. | 107,200 | 874 | ||||||
Cummins, Inc. | 35,400 | 5,174 | ||||||
Joy Global, Inc. | 54,500 | 2,868 | ||||||
Oshkosh Corp. | 55,000 | 2,462 | ||||||
PACCAR, Inc. | 31,000 | 2,025 | ||||||
Reliance Steel & Aluminum Co. | 61,200 | 4,130 | ||||||
Xylem, Inc. | 53,700 | 1,953 | ||||||
|
| |||||||
| 21,758 | ||||||||
|
| |||||||
Total Industrials |
| 50,081 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 7.20% |
| |||||||
Communications Equipment - 1.34% |
| |||||||
Cisco Systems, Inc. | 299,900 | 7,339 | ||||||
Corning, Inc. | 317,400 | 6,484 | ||||||
|
| |||||||
| 13,823 | ||||||||
|
| |||||||
Computers & Peripherals - 1.30% |
| |||||||
Hewlett-Packard Co. | 124,000 | 4,449 | ||||||
International Business Machines Corp. | 13,000 | 2,137 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Seagate Technology PLCC | 52,925 | $ | 3,325 | |||||
Teradata Corp.B | 23,300 | 986 | ||||||
Western Digital Corp. | 25,300 | 2,489 | ||||||
|
| |||||||
| 13,386 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.09% |
| |||||||
TE Connectivity Ltd. | 15,225 | 931 | ||||||
|
| |||||||
Semiconductor Equipment & Products - 1.67% |
| |||||||
Applied Materials, Inc. | 123,700 | 2,733 | ||||||
Intel Corp. | 171,800 | 5,843 | ||||||
Lam Research Corp. | 32,100 | 2,499 | ||||||
Micron Technology, Inc.B | 114,500 | 3,789 | ||||||
Texas Instruments, Inc. | 46,200 | 2,294 | ||||||
|
| |||||||
| 17,158 | ||||||||
|
| |||||||
Software - 2.80% | ||||||||
Activision Blizzard, Inc. | 189,700 | 3,785 | ||||||
Check Point Software Technologies Ltd.B | 33,400 | 2,480 | ||||||
Microsoft Corp. | 226,000 | 10,610 | ||||||
Navient Corp. | 96,400 | 1,907 | ||||||
Oracle Corp. | 259,800 | 10,145 | ||||||
|
| |||||||
| 28,927 | ||||||||
|
| |||||||
Total Information Technology |
| 74,225 | ||||||
|
| |||||||
MATERIALS - 0.64% | ||||||||
Chemicals - 0.21% | ||||||||
Dow Chemical Co. | 43,000 | 2,124 | ||||||
|
| |||||||
Metals & Mining - 0.22% | ||||||||
Rio Tinto PLC, ADRA | 48,400 | 2,322 | ||||||
|
| |||||||
Paper & Forest Products - 0.21% |
| |||||||
Louisiana-Pacific Corp.B | 147,200 | 2,149 | ||||||
|
| |||||||
Total Materials |
| 6,595 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 3.12% |
| |||||||
Diversified Telecommunication Services - 1.83% |
| |||||||
AT&T, Inc. | 172,877 | 6,023 | ||||||
Telefonaktiebolaget LM Ericsson | 168,200 | 1,991 | ||||||
Verizon Communications, Inc. | 214,508 | 10,779 | ||||||
|
| |||||||
| 18,793 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 1.29% |
| |||||||
China Mobile Ltd., Sponsored ADRA | 129,100 | 8,016 | ||||||
Vodafone Group PLC, Sponsored ADRA C | 159,745 | 5,307 | ||||||
|
| |||||||
| 13,323 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 32,116 | ||||||
|
| |||||||
UTILITIES - 1.88% | ||||||||
CenterPoint Energy, Inc. | 138,400 | 3,398 | ||||||
Entergy Corp. | 49,400 | 4,151 | ||||||
NRG Energy, Inc. | 75,800 | 2,272 | ||||||
PPL Corp. | 28,900 | 1,011 | ||||||
Public Service Enterprise Group, Inc. | 207,400 | 8,568 | ||||||
|
| |||||||
Total Utilities |
| 19,400 | ||||||
|
| |||||||
Total Common Stock (Cost $442,251) |
| 587,752 | ||||||
|
| |||||||
PREFERRED STOCK - 0.46% |
| |||||||
FINANCIALS - 0.33% | ||||||||
Insurance - 0.16% | ||||||||
Allstate Corp., 1.00%, Due 1/15/2053 | 68,300 | 1,679 | ||||||
|
| |||||||
See accompanying notes
14
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Real Estate - 0.17% |
| |||||||
Public Storage, Inc., 5.75%, Due 12/31/2049 | 68,900 | $ | 1,719 | |||||
|
| |||||||
Total Financials |
| 3,398 | ||||||
|
| |||||||
SERVICE - 0.13% | ||||||||
Comcast Corp., 5.00%, Due 12/15/2061 | 52,500 | 1,335 | ||||||
|
| |||||||
Total Preferred Stock (Cost $4,943) |
| 4,733 | ||||||
|
| |||||||
| Par Amount | ||||||||
| (000’s) | ||||||||
CORPORATE OBLIGATIONS 11.13% |
| |||||||
MANUFACTURING - 1.85% |
| |||||||
ABB Finance USA, Inc., | ||||||||
2.875%, Due 5/8/2022 | $ | 175 | 175 | |||||
Altera Corp., | ||||||||
1.75%, Due 5/15/2017 | 165 | 166 | ||||||
2.50%, Due 11/15/2018 | 165 | 167 | ||||||
American Honda Finance Corp., | ||||||||
3.875%, Due 9/21/2020G | 250 | 268 | ||||||
Analog Devices, Inc., | ||||||||
3.00%, Due 4/15/2016 | 225 | 232 | ||||||
Apple, Inc., | ||||||||
2.40%, Due 5/3/2023 | 740 | 714 | ||||||
Applied Materials, Inc., | ||||||||
2.65%, Due 6/15/2016 | 310 | 319 | ||||||
BAE Systems Holdings, Inc., | ||||||||
3.80%, Due 10/7/2024G | 650 | 654 | ||||||
BHP Billiton Finance USA Ltd., | ||||||||
1.625%, Due 2/24/2017 | 285 | 289 | ||||||
Caterpillar Financial Services Corp., | ||||||||
1.625%, Due 6/1/2017 | 480 | 486 | ||||||
Caterpillar, Inc., | ||||||||
3.40%, Due 5/15/2024 | 360 | 368 | ||||||
Cooper US, Inc., | ||||||||
3.875%, Due 12/15/2020 | 385 | 408 | ||||||
Cummins, Inc., | ||||||||
3.65%, Due 10/1/2023 | 425 | 447 | ||||||
Daimler Finance North America LLC, | ||||||||
2.25%, Due 9/3/2019G H | 350 | 349 | ||||||
Delphi Corp., | ||||||||
4.15%, Due 3/15/2024 | 410 | 421 | ||||||
Dow Chemical Co., | ||||||||
4.25%, Due 11/15/2020 | 370 | 398 | ||||||
4.125%, Due 11/15/2021 | 300 | 318 | ||||||
3.00%, Due 11/15/2022 | 210 | 205 | ||||||
3.50%, Due 10/1/2024 | 400 | 394 | ||||||
Eaton Corp., PLC, | ||||||||
5.60%, Due 5/15/2018C | 205 | 230 | ||||||
2.75%, Due 11/2/2022C | 200 | 194 | ||||||
EMC Corp., | ||||||||
1.875%, Due 6/1/2018 | 560 | 557 | ||||||
Ford Motor Credit Co. LLC, | ||||||||
4.25%, Due 2/3/2017H | 300 | 318 | ||||||
5.875%, Due 8/2/2021H | 400 | 462 | ||||||
Hewlett-Packard Co., | ||||||||
2.20%, Due 12/1/2015 | 325 | 330 | ||||||
4.05%, Due 9/15/2022 | 300 | 307 | ||||||
Ingersoll-Rand Luxembourg Finance S.A., | ||||||||
2.625%, Due 5/1/2020 | 300 | 299 | ||||||
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Intel Corp., | ||||||||
3.30%, Due 10/1/2021 | $ | 315 | $ | 328 | ||||
John Deere Capital Corp., | ||||||||
1.05%, Due 10/11/2016 | 380 | 381 | ||||||
1.30%, Due 3/12/2018 | 465 | 459 | ||||||
Johnson Controls, Inc., | ||||||||
5.00%, Due 3/30/2020 | 320 | 353 | ||||||
Koninklijke Philips Electronics N.V., | ||||||||
5.75%, Due 3/11/2018 | 270 | 303 | ||||||
L-3 Communications Corp., | ||||||||
3.95%, Due 5/28/2024 | 215 | 216 | ||||||
LYB International Finance BV, | ||||||||
4.00%, Due 7/15/2023 | 400 | 415 | ||||||
Monsanto Co., | ||||||||
1.15%, Due 6/30/2017 | 645 | 643 | ||||||
4.40%, Due 7/15/2044 | 425 | 428 | ||||||
Nissan Motor Acceptance Corp., | ||||||||
2.35%, Due 3/4/2019G | 600 | 602 | ||||||
Northrop Grumman Corp., | ||||||||
5.05%, Due 8/1/2019 | 150 | 167 | ||||||
Nucor Corp., | ||||||||
4.125%, Due 9/15/2022 | 205 | 218 | ||||||
4.00%, Due 8/1/2023 | 210 | 219 | ||||||
Oracle Corp., | ||||||||
2.25%, Due 10/8/2019 | 425 | 426 | ||||||
4.30%, Due 7/8/2034 | 425 | 437 | ||||||
PACCAR Financial Corp., | ||||||||
1.15%, Due 8/16/2016 | 290 | 293 | ||||||
1.10%, Due 6/6/2017 | 195 | 195 | ||||||
Pentair Finance S.A., | ||||||||
3.15%, Due 9/15/2022 | 265 | 261 | ||||||
Rio Tinto Finance USA Ltd., | ||||||||
2.50%, Due 5/20/2016 | 405 | 414 | ||||||
Toyota Motor Credit Corp., | ||||||||
2.05%, Due 1/12/2017 | 265 | 271 | ||||||
2.125%, Due 7/18/2019 | 400 | 400 | ||||||
Tyco Electronics Group S.A., | ||||||||
6.55%, Due 10/1/2017 | 175 | 199 | ||||||
United Technologies Corp., | ||||||||
1.80%, Due 6/1/2017 | 535 | 544 | ||||||
6.125%, Due 7/15/2038 | 450 | 584 | ||||||
Volkswagen International Finance N.V., | ||||||||
1.625%, Due 3/22/2015G | 500 | 502 | ||||||
Xerox Corp., | ||||||||
2.95%, Due 3/15/2017 | 150 | 155 | ||||||
Xilinx, Inc., | ||||||||
2.125%, Due 3/15/2019 | 180 | 180 | ||||||
|
| |||||||
| 19,068 | ||||||||
|
| |||||||
FINANCE - 5.34% | ||||||||
AEGON Funding Co. LLC, | ||||||||
5.75%, Due 12/15/2020H | 350 | 404 | ||||||
Aetna, Inc., | ||||||||
2.75%, Due 11/15/2022 | 400 | 385 | ||||||
4.75%, Due 3/15/2044 | 295 | 309 | ||||||
American Express Co., | ||||||||
4.05%, Due 12/3/2042 | 390 | 376 | ||||||
American Express Credit Corp., | ||||||||
1.30%, Due 7/29/2016 | 360 | 362 | ||||||
2.125%, Due 3/18/2019 | 485 | 485 | ||||||
American International Group, Inc., | ||||||||
6.40%, Due 12/15/2020 | 243 | 290 | ||||||
4.875%, Due 6/1/2022 | 600 | 669 | ||||||
4.50%, Due 7/16/2044 | 280 | 284 | ||||||
See accompanying notes
15
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Bank of America Corp., | ||||||||
7.80%, Due 9/15/2016 | $ | 700 | $ | 780 | ||||
2.60%, Due 1/15/2019 | 395 | 399 | ||||||
7.625%, Due 6/1/2019 | 370 | 449 | ||||||
4.125%, Due 1/22/2024 | 1,500 | 1,560 | ||||||
4.00%, Due 4/1/2024 | 500 | 517 | ||||||
6.11%, Due 1/29/2037 | 365 | 427 | ||||||
5.00%, Due 1/21/2044 | 645 | 705 | ||||||
Bank of New York Mellon Corp., | ||||||||
1.30%, Due 1/25/2018 | 640 | 633 | ||||||
2.20%, Due 3/4/2019 | 480 | 481 | ||||||
Bank One Corp., | ||||||||
4.90%, Due 4/30/2015 | 250 | 255 | ||||||
Barclays Bank PLC, | ||||||||
3.90%, Due 4/7/2015C | 330 | 335 | ||||||
0.772%, Due 12/9/2016C I | 895 | 897 | ||||||
3.75%, Due 5/15/2024C | 1,200 | 1,215 | ||||||
Bear Stearns Cos. LLC, | ||||||||
7.25%, Due 2/1/2018H | 945 | 1,099 | ||||||
Berkshire Hathaway Finance Corp., | ||||||||
0.95%, Due 8/15/2016 | 315 | 317 | ||||||
BNP Paribas S.A., | ||||||||
3.60%, Due 2/23/2016 | 320 | 331 | ||||||
Boston Properties LP, | ||||||||
3.125%, Due 9/1/2023E F | 255 | 248 | ||||||
Branch Banking & Trust Co., | ||||||||
1.45%, Due 10/3/2016 | 540 | 546 | ||||||
Capital One Financial Corp., | ||||||||
2.45%, Due 4/24/2019 | 360 | 361 | ||||||
Citigroup, Inc., | ||||||||
0.774%, Due 3/10/2017I | 310 | 310 | ||||||
8.50%, Due 5/22/2019 | 1,300 | 1,631 | ||||||
2.50%, Due 7/29/2019 | 1,155 | 1,159 | ||||||
5.875%, Due 1/30/2042 | 300 | 369 | ||||||
CNA Financial Corp., | – | – | ||||||
7.35%, Due 11/15/2019 | 385 | 466 | ||||||
ERP Operating LP, | – | – | ||||||
3.00%, Due 4/15/2023E | 205 | 199 | ||||||
Fifth Third Bancorp, | – | – | ||||||
0.653%, Due 12/20/2016I | 1,000 | 996 | ||||||
General Electric Capital Corp., | ||||||||
5.625%, Due 5/1/2018 | 375 | 424 | ||||||
6.00%, Due 8/7/2019 | 350 | 410 | ||||||
5.50%, Due 1/8/2020 | 250 | 289 | ||||||
5.30%, Due 2/11/2021 | 205 | 233 | ||||||
3.15%, Due 9/7/2022 | 635 | 643 | ||||||
5.875%, Due 1/14/2038 | 240 | 294 | ||||||
Goldman Sachs Group, Inc., | ||||||||
5.35%, Due 1/15/2016 | 325 | 343 | ||||||
6.25%, Due 9/1/2017 | 650 | 729 | ||||||
5.95%, Due 1/18/2018 | 590 | 661 | ||||||
1.334%, Due 11/15/2018I | 3,045 | 3,075 | ||||||
6.00%, Due 6/15/2020 | 175 | 201 | ||||||
5.75%, Due 1/24/2022 | 800 | 922 | ||||||
HCP, Inc., | ||||||||
5.375%, Due 2/1/2021 | 425 | 475 | ||||||
Health Care REIT, Inc., | ||||||||
4.125%, Due 4/1/2019F | 240 | 257 | ||||||
5.25%, Due 1/15/2022F | 285 | 316 | ||||||
Humana, Inc., | ||||||||
3.15%, Due 12/1/2022 | 480 | 472 | ||||||
ING Bank N.V., | ||||||||
5.125%, Due 5/1/2015G | 450 | 459 | ||||||
3.75%, Due 3/7/2017G | 400 | 421 | ||||||
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
JPMorgan Chase & Co., | ||||||||
0.564%, Due 6/13/2016I | $ | 415 | $ | 414 | ||||
3.625%, Due 5/13/2024 | 1,200 | 1,215 | ||||||
3.875%, Due 9/10/2024 | 430 | 427 | ||||||
5.50%, Due 10/15/2040 | 650 | 758 | ||||||
KeyCorp, | ||||||||
5.10%, Due 3/24/2021 | 255 | 286 | ||||||
Liberty Mutual Group, Inc., | ||||||||
4.25%, Due 6/15/2023G | 310 | 321 | ||||||
Liberty Mutual Insurance Co., | ||||||||
7.875%, Due 10/15/2026G | 1,500 | 1,869 | ||||||
Lloyds TSB Bank PLC, | ||||||||
4.375%, Due 1/12/2015C G | 325 | 327 | ||||||
Loews Corp., | ||||||||
5.25%, Due 3/15/2016 | 650 | 690 | ||||||
Macquarie Bank Ltd., | ||||||||
0.864%, Due 10/27/2017G | 820 | 820 | ||||||
Macquarie Group Ltd., | ||||||||
1.233%, Due 1/31/2017G I | 1,060 | 1,071 | ||||||
MetLife, Inc., | ||||||||
6.375%, Due 6/15/2034 | 350 | 457 | ||||||
4.721%, Due 12/15/2044 | 400 | 423 | ||||||
Morgan Stanley, | ||||||||
0.711%, Due 10/15/2015I | 920 | 923 | ||||||
1.75%, Due 2/25/2016I | 405 | 409 | ||||||
1.514%, Due 4/25/2018I | 2,975 | 3,041 | ||||||
7.30%, Due 5/13/2019 | 750 | 895 | ||||||
5.625%, Due 9/23/2019 | 350 | 396 | ||||||
4.35%, Due 9/8/2026 | 435 | 436 | ||||||
National Australia Bank Ltd., | ||||||||
4.375%, Due 12/10/2020G | 325 | 357 | ||||||
Nordea Bank AB, | ||||||||
4.875%, Due 1/27/2020G | 300 | 335 | ||||||
PNC Funding Corp., | ||||||||
3.30%, Due 3/8/2022 | 425 | 432 | ||||||
Prudential Financial, Inc., | ||||||||
7.375%, Due 6/15/2019 | 300 | 365 | ||||||
4.60%, Due 5/15/2044 | 650 | 658 | ||||||
Simon Property Group LP, | ||||||||
2.20%, Due 2/1/2019E F | 635 | 641 | ||||||
3.375%, Due 10/1/2024E F | 650 | 654 | ||||||
SunTrust Banks, Inc., | ||||||||
3.50%, Due 1/20/2017 | 420 | 441 | ||||||
Toronto Dominion Bank, | ||||||||
2.625%, Due 9/10/2018 | 585 | 599 | ||||||
Trinity Acquisition PLC, | ||||||||
4.625%, Due 8/15/2023C | 205 | 215 | ||||||
UBS AG, | ||||||||
5.875%, Due 12/20/2017 | 611 | 688 | ||||||
UnitedHealth Group, Inc., | ||||||||
1.625%, Due 3/15/2019 | 330 | 325 | ||||||
3.95%, Due 10/15/2042 | 215 | 202 | ||||||
US Bancorp, | ||||||||
1.95%, Due 11/15/2018 | 950 | 953 | ||||||
Ventas Realty LP, | ||||||||
5.70%, Due 9/30/2043E F | 175 | 203 | ||||||
Wachovia Corp., | ||||||||
0.601%, Due 10/15/2016I | 910 | 909 | ||||||
5.75%, Due 2/1/2018 | 695 | 784 | ||||||
Wells Fargo & Co., | ||||||||
2.15%, Due 1/15/2019 | 265 | 266 | ||||||
|
| |||||||
| 55,078 | ||||||||
|
| |||||||
CONSUMER - 0.29% | ||||||||
Altria Group, Inc., | ||||||||
See accompanying notes
16
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
4.75%, Due 5/5/2021 | $ | 310 | $ | 342 | ||||
2.85%, Due 8/9/2022 | 350 | 339 | ||||||
Anheuser-Busch InBev Worldwide, Inc., | ||||||||
8.00%, Due 11/15/2039 | 125 | 188 | ||||||
Diageo Capital PLC, | ||||||||
1.50%, Due 5/11/2017C | 880 | 885 | ||||||
General Mills, Inc., | ||||||||
2.20%, Due 10/21/2019 | 950 | 944 | ||||||
SABMiller Holdings, Inc., | ||||||||
4.95%, Due 1/15/2042G | 300 | 323 | ||||||
|
| |||||||
| 3,021 | ||||||||
|
| |||||||
SERVICE - 1.11% | ||||||||
AbbVie, Inc., | ||||||||
1.75%, Due 11/6/2017 | 305 | 306 | ||||||
2.90%, Due 11/6/2022 | 220 | 214 | ||||||
Baxter International, Inc., | ||||||||
1.85%, Due 6/15/2018 | 355 | 355 | ||||||
Bayer US Finance LLC, | ||||||||
2.375%, Due 10/8/2019G H | 300 | 301 | ||||||
Becton Dickinson and Co., | ||||||||
3.25%, Due 11/12/2020 | 290 | 292 | ||||||
Cardinal Health, Inc., | ||||||||
3.20%, Due 3/15/2023 | 445 | 439 | ||||||
CareFusion Corp., | ||||||||
3.875%, Due 5/15/2024 | 310 | 316 | ||||||
CBS Corp., | ||||||||
3.375%, Due 3/1/2022 | 700 | 707 | ||||||
Celgene Corp., | ||||||||
5.25%, Due 8/15/2043 | 185 | 204 | ||||||
Comcast Corp., | ||||||||
5.875%, Due 2/15/2018 | 535 | 607 | ||||||
6.55%, Due 7/1/2039 | 450 | 592 | ||||||
DIRECTV Holdings LLC, | ||||||||
6.35%, Due 3/15/2040H | 155 | 182 | ||||||
eBay, Inc., | ||||||||
1.35%, Due 7/15/2017 | 350 | 347 | ||||||
Genzyme Corp., | ||||||||
5.00%, Due 6/15/2020 | 275 | 311 | ||||||
GlaxoSmithKline Capital PLC, | ||||||||
1.50%, Due 5/8/2017C | 725 | 730 | ||||||
Home Depot, Inc., | ||||||||
2.70%, Due 4/1/2023 | 190 | 187 | ||||||
Lowe’s Companies, Inc., | ||||||||
3.875%, Due 9/15/2023 | 195 | 207 | ||||||
4.25%, Due 9/15/2044 | 215 | 218 | ||||||
MasterCard, Inc., | ||||||||
3.375%, Due 4/1/2024 | 330 | 337 | ||||||
McKesson Corp., | ||||||||
3.25%, Due 3/1/2016 | 160 | 165 | ||||||
1.292%, Due 3/10/2017 | 215 | 215 | ||||||
3.796%, Due 3/15/2024 | 400 | 407 | ||||||
Quest Diagnostics, Inc., | ||||||||
4.75%, Due 1/30/2020 | 150 | 163 | ||||||
Sanofi, | ||||||||
1.25%, Due 4/10/2018 | 585 | 579 | ||||||
4.00%, Due 3/29/2021 | 355 | 385 | ||||||
Thomson Reuters Corp., | ||||||||
4.70%, Due 10/15/2019 | 150 | 164 | ||||||
4.30%, Due 11/23/2023 | 300 | 318 | ||||||
3.85%, Due 9/29/2024 | 400 | 401 | ||||||
Time Warner, Inc., | ||||||||
4.875%, Due 3/15/2020 | 460 | 507 | ||||||
4.75%, Due 3/29/2021 | 325 | 357 | ||||||
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
Viacom, Inc., | ||||||||
4.50%, Due 2/27/2042 | $ | 450 | $ | 428 | ||||
Wal-Mart Stores, Inc., | ||||||||
7.55%, Due 2/15/2030 | 350 | 503 | ||||||
|
| |||||||
| 11,444 | ||||||||
|
| |||||||
UTILITIES - 0.48% | ||||||||
Consolidated Edison Co. of New York, Inc., | ||||||||
5.50%, Due 12/1/2039 | 350 | 419 | ||||||
Delmarva Power & Light Co., | ||||||||
3.50%, Due 11/15/2023 | 290 | 301 | ||||||
Duke Energy Indiana, Inc., | ||||||||
6.05%, Due 6/15/2016 | 330 | 357 | ||||||
Electricite de France S.A., | ||||||||
4.60%, Due 1/27/2020G | 320 | 356 | ||||||
MidAmerican Energy Holdings Co., | ||||||||
6.125%, Due 4/1/2036 | 500 | 627 | ||||||
National Rural Utilities Cooperative Finance Corp., | ||||||||
5.45%, Due 4/10/2017 | 315 | 348 | ||||||
Progress Energy, Inc., | ||||||||
4.875%, Due 12/1/2019 | 350 | 391 | ||||||
Sempra Energy, | ||||||||
6.50%, Due 6/1/2016 | 210 | 228 | ||||||
Sierra Pacific Power Co., | ||||||||
3.375%, Due 8/15/2023 | 205 | 210 | ||||||
Southern Co., | ||||||||
2.15%, Due 9/1/2019 | 290 | 289 | ||||||
Southwestern Electric Power Co., | ||||||||
3.55%, Due 2/15/2022 | 600 | 621 | ||||||
Union Electric Co., | ||||||||
6.70%, Due 2/1/2019 | 260 | 310 | ||||||
Xcel Energy, Inc., | ||||||||
5.613%, Due 4/1/2017 | 434 | 478 | ||||||
|
| |||||||
| 4,935 | ||||||||
|
| |||||||
ENERGY - 0.92% | ||||||||
Apache Corp., | ||||||||
5.10%, Due 9/1/2040 | 170 | 177 | ||||||
Canadian Natural Resources Ltd., | ||||||||
3.45%, Due 11/15/2021 | 430 | 440 | ||||||
6.25%, Due 3/15/2038 | 365 | 442 | ||||||
ConocoPhillips, | ||||||||
6.65%, Due 7/15/2018 | 460 | 538 | ||||||
DCP Midstream Operating LP, | ||||||||
2.70%, Due 4/1/2019E | 215 | 216 | ||||||
5.60%, Due 4/1/2044E | 215 | 237 | ||||||
Devon Energy Corp., | ||||||||
4.75%, Due 5/15/2042 | 300 | 305 | ||||||
Enable Midstream Partners LP, | ||||||||
3.90%, Due 5/15/2024E G | 300 | 300 | ||||||
Energy Transfer Partners LP, | ||||||||
4.15%, Due 10/1/2020E | 275 | 287 | ||||||
Enterprise Products Operating LLC, | ||||||||
6.125%, Due 10/15/2039H | 450 | 536 | ||||||
EOG Resources, Inc., | ||||||||
2.50%, Due 2/1/2016 | 325 | 332 | ||||||
Halliburton Co., | ||||||||
3.25%, Due 11/15/2021 | 525 | 543 | ||||||
Husky Energy, Inc., | ||||||||
3.95%, Due 4/15/2022 | 480 | 497 | ||||||
Marathon Petroleum Corp., | ||||||||
3.625%, Due 9/15/2024 | 215 | 214 | ||||||
Phillips 66, | ||||||||
See accompanying notes
17
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
2.95%, Due 5/1/2017 | $ | 300 | $ | 312 | ||||
4.30%, Due 4/1/2022 | 385 | 413 | ||||||
Plains All American Pipeline LP / PAA Finance Corp., | ||||||||
4.70%, Due 6/15/2044E | 180 | 181 | ||||||
Schlumberger Investment S.A., | ||||||||
3.65%, Due 12/1/2023 | 645 | 675 | ||||||
Shell International Finance BV, | ||||||||
1.125%, Due 8/21/2017 | 725 | 725 | ||||||
Spectra Energy Capital LLC, | ||||||||
5.65%, Due 3/1/2020H | 455 | 510 | ||||||
Spectra Energy Partners LP, | ||||||||
4.60%, Due 6/15/2021E | 175 | 191 | ||||||
TransCanada PipeLines Ltd., | ||||||||
3.75%, Due 10/16/2023 | 300 | 306 | ||||||
7.625%, Due 1/15/2039 | 375 | 525 | ||||||
6.10%, Due 6/1/2040 | 170 | 206 | ||||||
Williams Partners LP, | ||||||||
3.90%, Due 1/15/2025E | 405 | 402 | ||||||
|
| |||||||
| 9,510 | ||||||||
|
| |||||||
TRANSPORTATION - 0.20% | ||||||||
Burlington Northern Santa Fe LLC, | ||||||||
7.95%, Due 8/15/2030H | 235 | 330 | ||||||
5.75%, Due 5/1/2040H | 170 | 202 | ||||||
5.15%, Due 9/1/2043H | 200 | 222 | ||||||
Canadian National Railway Co., | ||||||||
5.55%, Due 5/15/2018 | 350 | 397 | ||||||
CSX Corp., | ||||||||
5.50%, Due 4/15/2041 | 325 | 381 | ||||||
Norfolk Southern Corp., | ||||||||
5.75%, Due 4/1/2018 | 425 | 482 | ||||||
|
| |||||||
| 2,014 | ||||||||
|
| |||||||
TELECOMMUNICATIONS - 0.94% |
| |||||||
America Movil SAB de CV, | ||||||||
6.375%, Due 3/1/2035 | 350 | 433 | ||||||
AT&T, Inc., | ||||||||
4.35%, Due 6/15/2045 | 841 | 785 | ||||||
Cisco Systems, Inc., | ||||||||
2.125%, Due 3/1/2019 | 405 | 407 | ||||||
Deutsche Telekom International Finance BV, | ||||||||
4.875%, Due 3/6/2042G | 300 | 310 | ||||||
Oi S.A., | ||||||||
5.75%, Due 2/10/2022G | 3,085 | 2,916 | ||||||
Orange S.A., | ||||||||
2.125%, Due 9/16/2015 | 150 | 152 | ||||||
Rogers Communications, Inc., | ||||||||
5.00%, Due 3/15/2044 | 455 | 474 | ||||||
Verizon Communications, Inc., | ||||||||
4.60%, Due 4/1/2021 | 380 | 412 | ||||||
5.15%, Due 9/15/2023 | 175 | 196 | ||||||
3.50%, Due 11/1/2024 | 200 | 197 | ||||||
6.40%, Due 9/15/2033 | 350 | 426 | ||||||
6.90%, Due 4/15/2038 | 475 | 614 | ||||||
6.55%, Due 9/15/2043 | 600 | 756 | ||||||
Vodafone Group PLC, | ||||||||
1.50%, Due 2/19/2018C | 615 | 607 | ||||||
6.15%, Due 2/27/2037C | 815 | 953 | ||||||
|
| |||||||
| 9,638 | ||||||||
|
| |||||||
Total Corporate Obligations (Cost $109,233) |
| 114,708 | ||||||
|
| |||||||
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
FOREIGN GOVERNMENT OBLIGATIONS 0.09% |
| |||||||
Oil & Gas - 0.09% | ||||||||
Petrobras International Finance Co. SA, | ||||||||
3.875%, Due 1/27/2016 | $ | 200 | $ | 204 | ||||
3.50%, Due 2/6/2017 | 175 | 178 | ||||||
6.875%, Due 1/20/2040 | 165 | 173 | ||||||
Petroleos Mexicanos, | ||||||||
6.00%, Due 3/5/2020 | 325 | 368 | ||||||
|
| |||||||
Total Foreign Government Obligations (Cost $861) |
| 923 | ||||||
|
| |||||||
ASSET-BACKED OBLIGATIONS - 1.11% |
| |||||||
American Express Credit Account Master Trust, | ||||||||
1.26%, Due 1/15/2020, 2014 2 A | 455 | 455 | ||||||
AmeriCredit Automobile Receivables Trust, | ||||||||
1.15%, Due 6/10/2019, 2014 3 A3 | 625 | 625 | ||||||
Capital Auto Receivables Asset Trust, | ||||||||
0.92%, Due 9/20/2016, 2013-2 A2 | 1,500 | 1,503 | ||||||
1.09%, Due 3/20/2018, 2013-4 A3 | 580 | 582 | ||||||
Capital One Multi-Asset Execution Trust, | ||||||||
1.48%, Due 7/15/2020, 2014 A5 A | 905 | 909 | ||||||
Citibank Credit Card Issuance Trust, | ||||||||
1.11%, Due 7/23/2018, 2013 A3 A3 | 425 | 427 | ||||||
Ford Credit Auto Lease Trust, | ||||||||
0.90%, Due 6/15/2017, 2014 A A4 | 260 | 260 | ||||||
Ford Credit Floorplan Master Owner Trust, | ||||||||
1.50%, Due 9/15/2018, 2013-5 A1 | 1,100 | 1,113 | ||||||
1.40%, Due 8/15/2019, 2014 4 A1 | 1,155 | 1,156 | ||||||
Hyundai Auto Receivables Trust, | ||||||||
0.79%, Due 7/16/2018, 2014 A A3 | 320 | 320 | ||||||
Mercedes Benz Auto Lease Trust, | ||||||||
0.76%, Due 7/15/2019, 2013 B A4 | 245 | 245 | ||||||
0.90%, Due 12/16/2019, 2014 A A4 | 820 | 822 | ||||||
National Credit Union Administration, | ||||||||
0.552%, Due 3/11/2020, 2011 R3 1AI | 1,489 | 1,495 | ||||||
Nissan Master Owner Trust Receivables, | ||||||||
0.453%, Due 2/15/2018, 2013-A AI | 1,500 | 1,500 | ||||||
|
| |||||||
Total Asset-Backed Obligations (Cost $11,380) |
| 11,412 | ||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED OBLIGATIONS - 1.94% |
| |||||||
Banc of America Commercial Mortgage Trust, | ||||||||
5.317%, Due 9/10/2047, 2006-5 A2 | 126 | 126 | ||||||
5.622%, Due 4/10/2049, 2007-2 A2 | 44 | 44 | ||||||
Bear Stearns Commercial Mortgage Securities, | ||||||||
5.201%, Due 12/11/2038, 2006-PW14 A4 | 665 | 712 | ||||||
5.54%, Due 9/11/2041, 2006-PW13 A4 | 401 | 425 | ||||||
Ginnie Mae REMIC Trust, | ||||||||
2.174%, Due 7/16/2038, 2011-147 A | 1,804 | 1,812 | ||||||
1.147%, Due 12/16/2038, 2013-139 A | 1,885 | 1,868 | ||||||
1.45%, Due 4/16/2039, 2013-45 AB | 1,877 | 1,859 | ||||||
1.624%, Due 7/16/2039, 2013-78 AB | 1,924 | 1,896 | ||||||
See accompanying notes
18
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
2.586%, Due 9/16/2039, 2014-31 AB | $ | 1,972 | $ | 2,002 | ||||
1.367%, Due 11/16/2041, 2013 125 AB | 1,941 | 1,919 | ||||||
2.543%, Due 9/16/2044, 2011-96 AC | 470 | 476 | ||||||
3.20%, Due 11/16/2044, 2011-92 B | 2,400 | 2,466 | ||||||
GS Mortgage Securities Corp II, | ||||||||
3.679%, Due 8/10/2043, 2010-C1 A1G | 236 | 245 | ||||||
3.849%, Due 12/10/2043, 2010-C2 A1G | 494 | 512 | ||||||
3.645%, Due 3/10/2044, 2011-GC3 A2G | 369 | 380 | ||||||
JP Morgan Chase Commercial Mortgage Securities Corp., | ||||||||
4.678%, Due 7/15/2042, 2005-LDP2 A3A | 11 | 11 | ||||||
3.853%, Due 6/15/2043, 2010-C1 A1G | 305 | 308 | ||||||
4.388%, Due 2/15/2046, 2011-C3 A3G | 550 | 595 | ||||||
5.703%, Due 2/12/2049, 2007-CB19 A4 | 550 | 598 | ||||||
JPMBB Commercial Mortgage Securities Trust, | ||||||||
3.157%, Due 7/15/2045, 2013 C12 ASB | 665 | 685 | ||||||
LB-UBS Commercial Mortgage Trust, | ||||||||
5.424%, Due 2/15/2040, 2007-C1 A4 | 492 | 531 | ||||||
Wachovia Bank Commercial Mortgage Trust, | ||||||||
5.711%, Due 6/15/2049, 2007-C32 A2 | 40 | 40 | ||||||
WF-RBS Commercial Mortgage Trust, | ||||||||
3.66%, Due 3/15/2047, 2014 C19 A3 | 455 | 475 | ||||||
|
| |||||||
Total Commercial Mortgage-Backed Obligations (Cost $19,704) | 19,985 | |||||||
|
| |||||||
COLLATERALIZED MORTGAGE OBLIGATIONS 0.04% (Cost $413) |
| |||||||
Freddie Mac (REMIC), | ||||||||
0.553%, Due 12/15/2040, 3891 DFI | 413 | 415 | ||||||
|
| |||||||
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 5.17% |
| |||||||
Federal Home Loan Mortgage Corporation | ||||||||
4.50%, Due 3/1/2019 | 99 | 105 | ||||||
5.00%, Due 10/1/2020 | 43 | 46 | ||||||
3.50%, Due 9/1/2028 | 2,021 | 2,149 | ||||||
5.00%, Due 8/1/2033 | 250 | 277 | ||||||
5.50%, Due 2/1/2034 | 226 | 254 | ||||||
5.00%, Due 3/1/2034 | 181 | 201 | ||||||
6.00%, Due 6/1/2034 | 169 | 194 | ||||||
6.00%, Due 8/1/2034 | 139 | 159 | ||||||
5.00%, Due 8/1/2035 | 145 | 161 | ||||||
5.00%, Due 9/1/2035 | 102 | 113 | ||||||
5.50%, Due 4/1/2037 | 151 | 168 | ||||||
5.50%, Due 5/1/2038 | 76 | 85 | ||||||
4.00%, Due 1/1/2041 | 745 | 791 | ||||||
4.50%, Due 2/1/2041 | 603 | 653 | ||||||
3.50%, Due 3/1/2042 | 414 | 428 | ||||||
3.50%, Due 6/1/2042 | 2,070 | 2,141 | ||||||
3.50%, Due 7/1/2042 | 537 | 556 | ||||||
3.00%, Due 8/1/2042 | 855 | 857 | ||||||
3.50%, Due 2/1/2043 | 2,189 | 2,263 | ||||||
|
| |||||||
| 11,601 | ||||||||
|
| |||||||
Federal National Mortgage Association | ||||||||
6.00%, Due 4/1/2016 | 16 | 17 | ||||||
5.00%, Due 12/1/2017 | 78 | 82 | ||||||
4.50%, Due 9/1/2018 | 61 | 65 | ||||||
4.00%, Due 8/1/2020 | 97 | 103 | ||||||
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
3.50%, Due 1/1/2026 | $ | 155 | $ | 164 | ||||
4.00%, Due 5/1/2026 | 802 | 861 | ||||||
4.00%, Due 6/1/2026 | 1,021 | 1,096 | ||||||
3.50%, Due 1/1/2028 | 245 | 260 | ||||||
3.00%, Due 7/1/2029 | 1,654 | 1,719 | ||||||
5.00%, Due 3/1/2034 | 271 | 300 | ||||||
4.50%, Due 4/1/2034 | 359 | 391 | ||||||
4.50%, Due 9/1/2034 | 119 | 130 | ||||||
5.50%, Due 12/1/2035 | 71 | 80 | ||||||
5.00%, Due 2/1/2036 | 107 | 119 | ||||||
5.50%, Due 4/1/2036 | 130 | 146 | ||||||
6.00%, Due 9/1/2036 | 95 | 108 | ||||||
5.50%, Due 2/1/2037 | 147 | 164 | ||||||
5.50%, Due 6/1/2038 | 46 | 51 | ||||||
4.50%, Due 1/1/2040 | 653 | 709 | ||||||
5.00%, Due 5/1/2040 | 1,971 | 2,194 | ||||||
5.00%, Due 6/1/2040 | 831 | 926 | ||||||
4.00%, Due 9/1/2040 | 535 | 569 | ||||||
4.00%, Due 1/1/2041 | 1,586 | 1,687 | ||||||
4.00%, Due 2/1/2041 | 2,575 | 2,752 | ||||||
5.00%, Due 3/1/2041 | 791 | 877 | ||||||
4.00%, Due 4/1/2041 | 759 | 813 | ||||||
4.50%, Due 4/1/2041 | 1,619 | 1,762 | ||||||
4.50%, Due 6/1/2041 | 1,073 | 1,166 | ||||||
4.50%, Due 8/1/2041 | 1,024 | 1,114 | ||||||
4.50%, Due 10/1/2041 | 616 | 673 | ||||||
5.00%, Due 3/1/2042 | 567 | 630 | ||||||
4.00%, Due 8/1/2042 | 1,755 | 1,866 | ||||||
3.50%, Due 9/1/2042 | 741 | 768 | ||||||
3.50%, Due 1/1/2043 | 1,238 | 1,283 | ||||||
4.50%, Due 1/1/2043 | 1,807 | 1,964 | ||||||
3.00%, Due 6/1/2043 | 2,810 | 2,815 | ||||||
3.00%, Due 8/1/2043 | 2,368 | 2,372 | ||||||
3.50%, Due 8/1/2044 | 2,541 | 2,630 | ||||||
|
| |||||||
| 35,426 | ||||||||
|
| |||||||
Government National Mortgage Association | ||||||||
7.00%, Due 12/15/2025 | 99 | 116 | ||||||
6.50%, Due 8/15/2027 | 99 | 114 | ||||||
6.50%, Due 11/15/2027 | 102 | 117 | ||||||
7.50%, Due 12/15/2028 | 96 | 116 | ||||||
5.50%, Due 7/15/2033 | 218 | 245 | ||||||
6.00%, Due 12/15/2033 | 251 | 291 | ||||||
5.50%, Due 2/20/2034 | 315 | 358 | ||||||
4.50%, Due 5/15/2039 | 1,154 | 1,260 | ||||||
5.00%, Due 10/15/2039 | 407 | 454 | ||||||
5.50%, Due 2/15/2040 | 465 | 518 | ||||||
4.00%, Due 5/15/2040 | 470 | 503 | ||||||
4.50%, Due 6/15/2040 | 499 | 550 | ||||||
4.50%, Due 10/20/2040 | 744 | 823 | ||||||
3.50%, Due 3/15/2043 | 687 | 718 | ||||||
|
| |||||||
| 6,183 | ||||||||
|
| |||||||
Total U.S. Agency Mortgage-Backed Obligations (Cost $51,952) | 53,210 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS - 13.63% |
| |||||||
U.S. Treasury Floating Rate Notes | ||||||||
0.065%, Due 1/31/2016I | 20,445 | 20,444 | ||||||
0.090%, Due 7/31/2016I | 9,500 | 9,503 | ||||||
|
| |||||||
| 29,947 | ||||||||
|
| |||||||
U.S. Treasury Notes/Bonds | ||||||||
0.25%, Due 12/15/2015 | 1,050 | 1,051 | ||||||
1.50%, Due 6/30/2016 | 3,000 | 3,055 | ||||||
3.125%, Due 10/31/2016 | 3,000 | 3,155 | ||||||
See accompanying notes
19
American Beacon Balanced FundSM
Schedule of Investments
October 31, 2014
| Par Amount | Fair Value | |||||||
| (000’s) | (000’s) | |||||||
0.875%, Due 1/31/2017 | 10,495 | 10,552 | ||||||
0.75%, Due 12/31/2017 | 2,800 | 2,774 | ||||||
1.375%, Due 9/30/2018 | 1,550 | 1,552 | ||||||
1.125%, Due 5/31/2019 | 4,000 | 3,926 | ||||||
1.25%, Due 2/29/2020 | 5,300 | 5,171 | ||||||
1.75%, Due 10/31/2020 | 3,000 | 2,974 | ||||||
2.00%, Due 11/15/2021 | 9,230 | 9,205 | ||||||
2.00%, Due 2/15/2022 | 15,245 | 15,170 | ||||||
1.625%, Due 11/15/2022 | 5,000 | 4,799 | ||||||
2.50%, Due 8/15/2023 | 5,600 | 5,715 | ||||||
2.375%, Due 8/15/2024 | 1,820 | 1,827 | ||||||
6.875%, Due 8/15/2025 | 580 | 828 | ||||||
5.25%, Due 11/15/2028 | 450 | 589 | ||||||
4.75%, Due 2/15/2037 | 130 | 170 | ||||||
4.50%, Due 8/15/2039 | 730 | 927 | ||||||
3.125%, Due 11/15/2041 | 2,615 | 2,663 | ||||||
2.875%, Due 5/15/2043 | 35,720 | 34,387 | ||||||
|
| |||||||
| 110,490 | ||||||||
|
| |||||||
Total U.S. Treasury Obligations (Cost $137,157) | 140,437 | |||||||
|
| |||||||
U.S. AGENCY OBLIGATIONS - 1.48% (Cost $15,120) |
| |||||||
Freddie Mac Notes, | ||||||||
4.50%, Due 1/15/2015 | 15,140 | 15,273 | ||||||
|
| |||||||
MUNICIPAL OBLIGATIONS - 0.32% (Cost $2,728) |
| |||||||
Municipal Electric Authority of Georgia, | ||||||||
6.655%, Due 4/1/2057, | 2,630 | 3,305 | ||||||
|
| |||||||
| Shares | ||||||||
SHORT-TERM INVESTMENTS - 6.65% (Cost $68,509) |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 68,509,056 | 68,509 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.07% (Cost $864,251) |
| 1,020,662 | ||||||
OTHER ASSETS, NET OF LIABILITIES -0.93% |
| 9,539 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 1,030,201 | |||||
|
| |||||||
| A | ADR - American Depositary Receipt. |
| B | Non-income producing security. |
| C | PLC - Public Limited Company. |
| D | MLP - Master Limited Partnership. |
| E | LP - Limited Partnership. |
| F | REIT - Real Estate Investment Trust. |
| 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 $14,901 or 1.45% of net assets. The Fund has no right to demand registration of these securities. |
| H | LLC - Limited Liability Company. |
| I | 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, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||
S&P 500 Mini E Index December Futures | Long | 664 | December, 2014 | $ | 66,778,480 | $ | 1,771,591 | |||||||
|
|
|
| |||||||||||
| $ | 66,778,480 | $ | 1,771,591 | |||||||||||
|
|
|
| |||||||||||
See accompanying notes
20
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCK - 94.83% |
| |||||||
CONSUMER DISCRETIONARY - 16.49% |
| |||||||
Auto Components - 2.88% |
| |||||||
Dana Holding Corp. | 304,300 | $ | 6,226 | |||||
Delphi Automotive PLCA | 93,200 | 6,429 | ||||||
TRW Automotive Holdings Corp.B | 52,525 | 5,323 | ||||||
|
| |||||||
| 17,978 | ||||||||
|
| |||||||
Automobiles - 0.32% |
| |||||||
Harley-Davidson, Inc. | 30,684 | 2,016 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 1.22% |
| |||||||
Royal Caribbean Cruises Ltd. | 67,800 | 4,608 | ||||||
SeaWorld Entertainment, Inc. | 156,600 | 3,013 | ||||||
|
| |||||||
| 7,621 | ||||||||
|
| |||||||
Household Durables - 1.98% |
| |||||||
Newell Rubbermaid, Inc. | 79,982 | 2,666 | ||||||
Stanley Black & Decker, Inc. | 103,498 | 9,691 | ||||||
|
| |||||||
| 12,357 | ||||||||
|
| |||||||
Leisure Equipment & Products - 0.35% |
| |||||||
Hasbro, Inc. | 37,988 | 2,185 | ||||||
|
| |||||||
Media - 4.62% |
| |||||||
Interpublic Group of Cos., Inc. | 432,251 | 8,382 | ||||||
Lamar Advertising Co., Class A | 124,500 | 6,430 | ||||||
Meredith Corp. | 42,600 | 2,221 | ||||||
News Corp, Class BB | 76,075 | 1,145 | ||||||
News Corp., Class AB | 345,125 | 5,343 | ||||||
Omnicom Group, Inc. | 74,125 | 5,327 | ||||||
|
| |||||||
| 28,848 | ||||||||
|
| |||||||
Multiline Retail - 0.33% |
| |||||||
Dollar General Corp.B | 32,616 | 2,044 | ||||||
|
| |||||||
Specialty Retail - 4.79% |
| |||||||
American Eagle Outfitters, Inc. | 152,059 | 1,957 | ||||||
Bed Bath & Beyond, Inc.B | 38,313 | 2,580 | ||||||
Cabela’s, Inc.B C | 50,361 | 2,418 | ||||||
Hanesbrands, Inc. | 63,800 | 6,739 | ||||||
L Brands, Inc. | 87,900 | 6,340 | ||||||
Murphy USA, Inc.B | 4,200 | 241 | ||||||
PetSmart, Inc. | 35,224 | 2,548 | ||||||
Sally Beauty Holdings, Inc.B | 100,894 | 2,957 | ||||||
Staples, Inc. | 319,100 | 4,046 | ||||||
|
| |||||||
| 29,826 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 102,875 | ||||||
|
| |||||||
CONSUMER STAPLES - 4.65% |
| |||||||
Beverages - 0.78% |
| |||||||
Coca-Cola Enterprises, Inc. | 43,102 | 1,868 | ||||||
Molson Coors Brewing Co., Class B | 40,319 | 2,999 | ||||||
|
| |||||||
| 4,867 | ||||||||
|
| |||||||
Food & Drug Retailing - 0.97% |
| |||||||
Kroger Co. | 61,698 | 3,438 | ||||||
Sysco Corp. | 67,994 | 2,620 | ||||||
|
| |||||||
| 6,058 | ||||||||
|
| |||||||
Food Products - 1.10% |
| |||||||
Darling Ingredients, Inc.B | 95,082 | 1,673 | ||||||
Ingredion, Inc. | 20,125 | 1,555 | ||||||
JM Smucker Co. | 34,925 | 3,632 | ||||||
|
| |||||||
| 6,860 | ||||||||
|
| |||||||
Tobacco - 1.80% | ||||||||
Lorillard, Inc. | 103,300 | 6,354 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Reynolds American, Inc. | 77,100 | $ | 4,850 | |||||
|
| |||||||
| 11,204 | ||||||||
|
| |||||||
Total Consumer Staples |
| 28,989 | ||||||
|
| |||||||
ENERGY - 5.86% |
| |||||||
Energy Equipment & Services - 2.22% |
| |||||||
Baker Hughes, Inc. | 94,500 | 5,005 | ||||||
Helmerich & Payne, Inc. | 28,300 | 2,457 | ||||||
Nabors Industries Ltd. | 39,912 | 712 | ||||||
Superior Energy Services, Inc. | 226,100 | 5,687 | ||||||
|
| |||||||
| 13,861 | ||||||||
|
| |||||||
Gas - Pipelines - 0.31% |
| |||||||
Spectra Energy Corp. | 50,184 | 1,964 | ||||||
|
| |||||||
Oil & Gas - 3.33% |
| |||||||
EQT Corp. | 31,862 | 2,996 | ||||||
Murphy Oil Corp. | 173,950 | 9,286 | ||||||
Newfield Exploration Co.B | 48,942 | 1,596 | ||||||
Oasis Petroleum, Inc.B | 54,483 | 1,632 | ||||||
Pioneer Natural Resources Co. | 14,285 | 2,701 | ||||||
Range Resources Corp. | 11,470 | 785 | ||||||
Seadrill Ltd.C | 76,500 | 1,760 | ||||||
|
| |||||||
| 20,756 | ||||||||
|
| |||||||
Total Energy |
| 36,581 | ||||||
|
| |||||||
FINANCIALS - 26.80% |
| |||||||
Banks - 8.28% | ||||||||
CIT Group, Inc. | 128,500 | 6,288 | ||||||
Comerica, Inc. | 100,400 | 4,793 | ||||||
Fifth Third Bancorp | 385,672 | 7,711 | ||||||
First Niagara Financial Group, Inc. | 321,400 | 2,407 | ||||||
Hancock Holding Co. | 66,736 | 2,348 | ||||||
Investors Bancorp, Inc. | 249,143 | 2,678 | ||||||
KeyCorp | 374,875 | 4,948 | ||||||
New York Community Bancorp, Inc.C | 255,800 | 4,080 | ||||||
People’s United Financial, Inc. | 293,100 | 4,285 | ||||||
Regions Financial Corp. | 401,550 | 3,987 | ||||||
SunTrust Banks, Inc. | 83,428 | 3,265 | ||||||
TCF Financial Corp. | 166,824 | 2,577 | ||||||
Zions Bancorporation | 80,205 | 2,324 | ||||||
|
| |||||||
| 51,691 | ||||||||
|
| |||||||
Diversified Financials - 4.40% |
| |||||||
Ameriprise Financial, Inc. | 59,214 | 7,472 | ||||||
Capital One Financial Corp. | 34,400 | 2,847 | ||||||
Discover Financial Services | 92,700 | 5,912 | ||||||
Invesco Ltd. | 101,500 | 4,108 | ||||||
Legg Mason, Inc. | 82,175 | 4,273 | ||||||
SLM Corp. | 297,100 | 2,837 | ||||||
|
| |||||||
| 27,449 | ||||||||
|
| |||||||
Insurance - 10.06% |
| |||||||
Allstate Corp. | 34,288 | 2,224 | ||||||
Assurant, Inc. | 63,025 | 4,300 | ||||||
Axis Capital Holdings Ltd. | 106,475 | 5,126 | ||||||
Endurance Specialty Holdings Ltd. | 35,811 | 2,075 | ||||||
Genworth Financial, Inc., Class AB | 259,300 | 3,628 | ||||||
Hanover Insurance Group, Inc. | 42,383 | 2,837 | ||||||
Hartford Financial Services Group, Inc. | 85,580 | 3,387 | ||||||
Primerica, Inc. | 85,950 | 4,396 | ||||||
Progressive Corp. | 241,925 | 6,389 | ||||||
Reinsurance Group of America, Inc. | 24,920 | 2,100 | ||||||
Torchmark Corp. | 77,680 | 4,114 | ||||||
Unum Group | 86,026 | 2,878 | ||||||
See accompanying notes
21
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Validus Holdings Ltd. | 107,793 | $ | 4,288 | |||||
Voya Financial, Inc. | 132,125 | 5,186 | ||||||
Willis Group Holdings PLCA | 242,317 | 9,820 | ||||||
|
| |||||||
| 62,748 | ||||||||
|
| |||||||
Real Estate - 4.06% |
| |||||||
Alexandria Real Estate Equities, Inc.D | 40,784 | 3,385 | ||||||
American Campus Communities, Inc.D | 83,568 | 3,282 | ||||||
Brixmor Property Group, Inc.D | 112,512 | 2,741 | ||||||
Corporate Office Properties TrustD | 85,100 | 2,327 | ||||||
Hospitality Properties TrustD | 133,850 | 3,963 | ||||||
Host Hotels & Resorts LPD E | 413,358 | 9,635 | ||||||
|
| |||||||
| 25,333 | ||||||||
|
| |||||||
Total Financials |
| 167,221 | ||||||
|
| |||||||
HEALTH CARE - 9.82% |
| |||||||
Biotechnology - 0.44% |
| |||||||
Charles River Laboratories International, Inc.B | 43,819 | 2,768 | ||||||
|
| |||||||
Health Care Equipment & Supplies - 3.94% |
| |||||||
Becton Dickinson and Co. | 39,875 | 5,132 | ||||||
CareFusion Corp.B | 72,811 | 4,177 | ||||||
Dentsply International, Inc. | 53,496 | 2,716 | ||||||
Patterson Cos., Inc. | 84,523 | 3,644 | ||||||
St. Jude Medical, Inc. | 87,200 | 5,596 | ||||||
The Cooper Companies, Inc. | 20,252 | 3,319 | ||||||
|
| |||||||
| 24,584 | ||||||||
|
| |||||||
Health Care Providers & Services - 5.44% |
| |||||||
AmerisourceBergen Corp. | 25,212 | 2,153 | ||||||
Cardinal Health, Inc. | 75,700 | 5,941 | ||||||
Cigna Corp. | 121,925 | 12,141 | ||||||
Omnicare, Inc. | 95,500 | 6,359 | ||||||
Quest Diagnostics, Inc. | 45,153 | 2,865 | ||||||
WellCare Health Plans, Inc.B | 65,600 | 4,452 | ||||||
|
| |||||||
| 33,911 | ||||||||
|
| |||||||
Total Health Care |
| 61,263 | ||||||
|
| |||||||
INDUSTRIALS - 12.61% |
| |||||||
Aerospace & Defense - 0.50% |
| |||||||
Spirit Aerosystems Holdings, Inc., Class AB | 78,900 | 3,104 | ||||||
|
| |||||||
Building Products - 1.84% |
| |||||||
Masco Corp. | 161,850 | 3,572 | ||||||
Owens Corning | 248,300 | 7,961 | ||||||
|
| |||||||
| 11,533 | ||||||||
|
| |||||||
Commercial Services & Supplies - 0.87% |
| |||||||
Cintas Corp. | 41,991 | 3,075 | ||||||
Clean Harbors, Inc.B | 47,063 | 2,336 | ||||||
|
| |||||||
| 5,411 | ||||||||
|
| |||||||
Construction & Engineering - 1.08% |
| |||||||
AECOM Technology Corp.B C | 142,065 | 4,624 | ||||||
Fluor Corp. | 31,945 | 2,119 | ||||||
|
| |||||||
| 6,743 | ||||||||
|
| |||||||
Diversified Manufacturing - 0.47% |
| |||||||
Eaton Corp., PLCA | 42,700 | 2,920 | ||||||
|
| |||||||
Electrical Equipment - 0.69% |
| |||||||
Brady Corp., Class A | 73,925 | 1,762 | ||||||
Regal-Beloit Corp. | 35,676 | 2,532 | ||||||
|
| |||||||
| 4,294 | ||||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Industrial Conglomerates - 1.41% |
| |||||||
KBR, Inc. | 460,600 | $ | 8,788 | |||||
|
| |||||||
Machinery - 5.17% |
| |||||||
Dover Corp. | 32,683 | 2,596 | ||||||
Joy Global, Inc. | 97,900 | 5,152 | ||||||
Parker Hannifin Corp. | 78,563 | 9,981 | ||||||
SPX Corp. | 61,100 | 5,792 | ||||||
Terex Corp. | 189,950 | 5,465 | ||||||
Xylem, Inc. | 91,451 | 3,325 | ||||||
|
| |||||||
| 32,311 | ||||||||
|
| |||||||
Marine - 0.58% |
| |||||||
Golar LNG Ltd. | 64,100 | 3,597 | ||||||
|
| |||||||
Total Industrials |
| 78,701 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 11.72% |
| |||||||
Communications Equipment - 0.31% |
| |||||||
Juniper Networks, Inc. | 92,216 | 1,943 | ||||||
|
| |||||||
Electronic Equipment & Instruments - 3.39% |
| |||||||
Arrow Electronics, Inc. | 70,175 | 3,990 | ||||||
Avnet, Inc. | 191,750 | 8,294 | ||||||
Diebold, Inc. | 47,286 | 1,675 | ||||||
Flextronics International Ltd.B | 456,450 | 4,893 | ||||||
Ingram Micro, Inc., Class AB | 85,325 | 2,290 | ||||||
|
| |||||||
| 21,142 | ||||||||
|
| |||||||
Internet Software & Services - 0.41% |
| |||||||
IAC/InterActiveCorp | 37,886 | 2,565 | ||||||
|
| |||||||
IT Consulting & Services - 1.60% |
| |||||||
Fidelity National Information Services, Inc. | 58,718 | 3,429 | ||||||
Total System Services, Inc. | 193,600 | 6,541 | ||||||
|
| |||||||
| 9,970 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 1.96% |
| |||||||
Microchip Technology, Inc.C | 168,569 | 7,267 | ||||||
ON Semiconductor Corp.B | 602,025 | 4,991 | ||||||
|
| |||||||
| 12,258 | ||||||||
|
| |||||||
Software - 4.05% |
| |||||||
CA, Inc. | 207,100 | 6,018 | ||||||
Cadence Design Systems, Inc.B | 186,827 | 3,354 | ||||||
Citrix Systems, Inc.B | 45,110 | 2,897 | ||||||
Navient Corp. | 344,400 | 6,812 | ||||||
Solera Holdings, Inc. | 46,397 | 2,410 | ||||||
Synopsys, Inc.B | 91,802 | 3,762 | ||||||
|
| |||||||
| 25,253 | ||||||||
|
| |||||||
Total Information Technology |
| 73,131 | ||||||
|
| |||||||
MATERIALS - 2.44% |
| |||||||
Chemicals - 1.21% |
| |||||||
Air Products & Chemicals, Inc. | 17,997 | 2,423 | ||||||
Albemarle Corp. | 49,675 | 2,900 | ||||||
Rockwood Holdings, Inc. | 29,600 | 2,277 | ||||||
|
| |||||||
| 7,600 | ||||||||
|
| |||||||
Construction Materials - 0.33% |
| |||||||
CRH PLC, ADRA F | 92,600 | 2,075 | ||||||
|
| |||||||
Containers & Packaging - 0.44% |
| |||||||
Greif, Inc., Class A | 17,595 | 775 | ||||||
Silgan Holdings, Inc. | 39,663 | 1,950 | ||||||
|
| |||||||
| 2,725 | ||||||||
|
| |||||||
See accompanying notes
22
American Beacon Mid-Cap Value FundSM
Schedule of Investments
October 31, 2014
Shares | Fair Value | |||||||
| (000’s) | ||||||||
Metals & Mining - 0.46% |
| |||||||
Allegheny Technologies, Inc. | 68,213 | $ | 2,241 | |||||
Nucor Corp. | 11,374 | 615 | ||||||
|
| |||||||
| 2,856 | ||||||||
|
| |||||||
Total Materials |
| 15,256 | ||||||
|
| |||||||
UTILITIES - 4.44% |
| |||||||
Electric - 2.42% |
| |||||||
CenterPoint Energy, Inc. | 76,100 | 1,868 | ||||||
Edison International | 42,720 | 2,673 | ||||||
Great Plains Energy, Inc. | 114,876 | 3,094 | ||||||
Pinnacle West Capital Corp. | 68,000 | 4,180 | ||||||
Portland General Electric Co. | 91,968 | 3,349 | ||||||
|
| |||||||
| 15,164 | ||||||||
|
| |||||||
Gas - 0.47% |
| |||||||
AGL Resources, Inc. | 53,903 | 2,906 | ||||||
|
| |||||||
Multi-Utilities - 1.55% |
| |||||||
SCANA Corp. | 47,261 | 2,594 | ||||||
Xcel Energy, Inc. | 211,182 | 7,068 | ||||||
|
| |||||||
| 9,662 | ||||||||
|
| |||||||
Total Utilities |
| 27,732 | ||||||
|
| |||||||
Total Common Stock (Cost $548,885) |
| 591,749 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 4.98% |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 31,094,798 | 31,095 | ||||||
|
| |||||||
SECURITIES LENDING COLLATERAL - 2.38% |
| |||||||
DWS Government and Agency Securities Portfolio, Institutional Class | 3,103,368 | 3,103 | ||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassG | 11,719,397 | 11,720 | ||||||
|
| |||||||
Total Securities Lending Collateral (Cost $14,823) |
| 14,823 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 102.19% (Cost $594,803) |
| 637,667 | ||||||
LIABILITIES, NET OF OTHER |
| (13,662 | ) | |||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 624,005 | |||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | PLC - Public Limited Company. |
| B | Non-income producing security. |
| C | All or a portion of this security is on loan at October 31, 2014. |
| D | REIT - Real Estate Investment Trust. |
| E | LP - Limited Partnership. |
| F | ADR - American Depositary Receipt. |
| G | The Fund is affiliated by having the same investment advisor. |
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
S&P 400 Midcap E Index December Futures | Long | 207 | December, 2014 | $ | 29,298,780 | $ | 866,914 | |||||||||
|
|
|
| |||||||||||||
| $ | 29,298,780 | $ | 866,914 | |||||||||||||
|
|
|
| |||||||||||||
See accompanying notes
23
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCK - 82.13% |
| |||||||
CONSUMER DISCRETIONARY - 10.57% |
| |||||||
Auto Components - 1.27% |
| |||||||
Dana Holding Corp. | 2,164 | $ | 44 | |||||
Fuel Systems Solutions, Inc.A | 3,232 | 30 | ||||||
|
| |||||||
| 74 | ||||||||
|
| |||||||
Distributors - 1.38% |
| |||||||
Core-Mark Holding Co., Inc. | 1,020 | 60 | ||||||
Lincoln Educational Services Corp. | 7,721 | 20 | ||||||
|
| |||||||
| 80 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 1.48% |
| |||||||
Bloomin’ Brands, Inc.A | 1,730 | 33 | ||||||
Cracker Barrel Old Country Store, Inc. | 75 | 9 | ||||||
Ruby Tuesday, Inc.A | 5,770 | 44 | ||||||
|
| |||||||
| 86 | ||||||||
|
| |||||||
Household Durables - 0.31% |
| |||||||
Helen of Troy Ltd.A | 295 | 18 | ||||||
|
| |||||||
Internet & Catalog Retail - 0.81% |
| |||||||
FTD Cos., Inc.A | 1,345 | 47 | ||||||
|
| |||||||
Media - 0.36% |
| |||||||
John Wiley & Sons, Inc., Class A | 360 | 21 | ||||||
|
| |||||||
Specialty Retail - 3.29% |
| |||||||
Citi Trends, Inc.A | 1,531 | 35 | ||||||
Genesco, Inc.A | 370 | 28 | ||||||
Liberty Tax, Inc.A | 315 | 12 | ||||||
Pep Boys, Inc.A | 4,704 | 45 | ||||||
Stage Stores, Inc. | 1,949 | 33 | ||||||
West Marine, Inc.A | 2,854 | 28 | ||||||
Winmark Corp. | 120 | 10 | ||||||
|
| |||||||
| 191 | ||||||||
|
| |||||||
Textiles & Apparel - 1.67% |
| |||||||
Perry Ellis International, Inc. | 1,880 | 38 | ||||||
Rocky Brands, Inc. | 1,838 | 24 | ||||||
Steven Madden Ltd. | 820 | 26 | ||||||
Unifirst Corp. | 80 | 9 | ||||||
|
| |||||||
| 97 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 614 | ||||||
|
| |||||||
CONSUMER STAPLES - 5.85% |
| |||||||
Beverages - 0.55% |
| |||||||
National Beverage Corp. | 1,275 | 32 | ||||||
|
| |||||||
Food & Drug Retailing - 1.60% |
| |||||||
Andersons, Inc. | 560 | 36 | ||||||
Casey’s General Stores, Inc. | 250 | 20 | ||||||
CST Brands, Inc. | 961 | 37 | ||||||
|
| |||||||
| 93 | ||||||||
|
| |||||||
Food Products - 2.06% |
| |||||||
Calavo Growers, Inc. | 495 | 24 | ||||||
Cal-Maine Foods, Inc. | 330 | 29 | ||||||
Darling Ingredients, Inc.A | 1,111 | 20 | ||||||
Inventure Foods, Inc.A | 3,542 | 47 | ||||||
|
| |||||||
| 120 | ||||||||
|
| |||||||
Household Durables - 0.62% |
| |||||||
Orchids Paper Products Co. | 1,244 | 36 | ||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Household Products - 1.02% |
| |||||||
Prestige Brands Holdings, Inc.A | 1,678 | $ | 59 | |||||
|
| |||||||
Total Consumer Staples |
| 340 | ||||||
|
| |||||||
ENERGY - 3.43% |
| |||||||
Energy Equipment & Services - 2.21% |
| |||||||
Dril-Quip, Inc.A | 230 | 21 | ||||||
Patterson-UTI Energy, Inc. | 763 | 18 | ||||||
SEACOR Holdings, Inc. | 250 | 21 | ||||||
Superior Energy Services, Inc. | 1,226 | 30 | ||||||
Unit Corp.A | 803 | 38 | ||||||
|
| |||||||
| 128 | ||||||||
|
| |||||||
Oil & Gas - 1.22% |
| |||||||
Advantage Oil & Gas Ltd.A | 6,417 | 27 | ||||||
Oasis Petroleum, Inc.A | 355 | 11 | ||||||
Stone Energy Corp.A | 1,341 | 33 | ||||||
|
| |||||||
| 71 | ||||||||
|
| |||||||
Total Energy |
| 199 | ||||||
|
| |||||||
FINANCIALS - 23.11% |
| |||||||
Banks - 10.08% |
| |||||||
1st Source Corp. | 515 | 16 | ||||||
Ameris Bancorp | 1,260 | 31 | ||||||
BancFirst Corp. | 210 | 14 | ||||||
Bancorp, Inc.A | 3,445 | 33 | ||||||
BBCN Bancorp, Inc. | 2,660 | 38 | ||||||
Boston Private Financial Holdings, Inc. | 1,265 | 17 | ||||||
Bridge Capital HoldingsA | 310 | 7 | ||||||
Bryn Mawr Bank Corp. | 800 | 25 | ||||||
ConnectOne Bancorp, Inc. | 3,697 | 67 | ||||||
Eagle Bancorp, Inc.A | 1,081 | 39 | ||||||
Federated National Holding Co. | 1,773 | 58 | ||||||
First Business Financial Services, Inc. | 757 | 36 | ||||||
First NBC Bank Holding Co.A | 530 | 19 | ||||||
German American Bancorp, Inc. | 621 | 19 | ||||||
Hanmi Financial Corp. | 795 | 17 | ||||||
Horizon Bancorp | 1,183 | 30 | ||||||
Lakeland Financial Corp. | 450 | 19 | ||||||
Peoples Bancorp, Inc. | 670 | 17 | ||||||
South State Corp. | 228 | 14 | ||||||
Southside Bancshares, Inc. | 1,005 | 34 | ||||||
United Financial Bancorp, Inc. | 1,171 | 16 | ||||||
Washington Federal, Inc. | 898 | 20 | ||||||
|
| |||||||
| 586 | ||||||||
|
| |||||||
Diversified Financials - 3.10% |
| |||||||
Gain Capital Holdings, Inc. | 6,304 | 54 | ||||||
GFI Group, Inc. | 4,561 | 25 | ||||||
Pacific Continental Corp. | 1,159 | 17 | ||||||
Piper Jaffray Cos.A | 751 | 42 | ||||||
Texas Capital Bancshares, Inc.A | 303 | 19 | ||||||
Walker & Dunlop, Inc.A | 1,417 | 23 | ||||||
|
| |||||||
| 180 | ||||||||
|
| |||||||
Insurance - 1.86% |
| |||||||
American Equity Investment Life Holding Co. | 1,120 | 29 | ||||||
Enstar Group Ltd.A | 80 | 12 | ||||||
Primerica, Inc. | 655 | 34 | ||||||
ProAssurance Corp. | 720 | 33 | ||||||
|
| |||||||
| 108 | ||||||||
|
| |||||||
Real Estate - 8.07% |
| |||||||
Alexander & Baldwin, Inc. | 589 | 24 | ||||||
See accompanying notes
24
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
BioMed Realty Trust, Inc.B | 1,772 | $ | 38 | |||||
Chatham Lodging TrustB | 1,580 | 40 | ||||||
Colony Financial, Inc.B | 1,499 | 33 | ||||||
DiamondRock Hospitality Co.B | 2,927 | 42 | ||||||
Forestar Group, Inc.A | 1,419 | 25 | ||||||
Franklin Street Properties Corp.B | 3,313 | 40 | ||||||
LaSalle Hotel PropertiesB | 834 | 33 | ||||||
LTC Properties, Inc.B | 1,040 | 44 | ||||||
Pebblebrook Hotel TrustB | 988 | 42 | ||||||
PS Business Parks, Inc.B | 369 | 31 | ||||||
Ryman Hospitality Properties, Inc.B | 570 | 28 | ||||||
Sovran Self Storage Inc.B | 220 | 19 | ||||||
Summit Hotel Properties, Inc.B | 2,620 | 30 | ||||||
|
| |||||||
| 469 | ||||||||
|
| |||||||
Total Financials |
| 1,343 | ||||||
|
| |||||||
HEALTH CARE - 3.24% |
| |||||||
Biotechnology - 0.62% |
| |||||||
RTI Biologics, Inc.A | 6,977 | 36 | ||||||
|
| |||||||
Health Care Equipment & Supplies - 2.00% |
| |||||||
Exactech, Inc.A | 1,835 | 39 | ||||||
Haemonetics Corp.A | 515 | 19 | ||||||
Hillenbrand, Inc. | 1,085 | 36 | ||||||
Thoratec Corp.A | 800 | 22 | ||||||
|
| |||||||
| 116 | ||||||||
|
| |||||||
Health Care Providers & Services - 0.62% |
| |||||||
Ensign Group, Inc. | 360 | 14 | ||||||
U.S. Physical Therapy, Inc. | 520 | 22 | ||||||
|
| |||||||
| 36 | ||||||||
|
| |||||||
Total Health Care |
| 188 | ||||||
|
| |||||||
INDUSTRIALS - 16.00% |
| |||||||
Aerospace & Defense - 1.51% |
| |||||||
Cubic Corp. | 535 | 26 | ||||||
Ducommun, Inc.A | 1,298 | 34 | ||||||
World Fuel Services Corp. | 685 | 28 | ||||||
|
| |||||||
| 88 | ||||||||
|
| |||||||
Airlines - 0.65% |
| |||||||
Skywest, Inc. | 3,318 | 38 | ||||||
|
| |||||||
Building Products - 0.96% |
| |||||||
Crane Co. | 643 | 40 | ||||||
Universal Forest Products, Inc. | 326 | 16 | ||||||
|
| |||||||
| 56 | ||||||||
|
| |||||||
Commercial Services & Supplies - 2.44% |
| |||||||
Clean Harbors, Inc.A | 490 | 24 | ||||||
Convergys Corp. | 845 | 17 | ||||||
Iconix Brand Group, Inc.A | 1,237 | 50 | ||||||
Multi-Color Corp. | 495 | 24 | ||||||
United Stationers Supply Co. | 630 | 27 | ||||||
|
| |||||||
| 142 | ||||||||
|
| |||||||
Construction & Engineering - 2.76% |
| |||||||
AECOM Technology Corp.A | 240 | 8 | ||||||
EMCOR Group, Inc. | 1,394 | 62 | ||||||
Granite Construction, Inc. | 1,012 | 37 | ||||||
MasTec, Inc.A | 1,534 | 44 | ||||||
Sterling Construction Co., Inc.A | 995 | 9 | ||||||
|
| |||||||
| 160 | ||||||||
|
| |||||||
Diversified Manufacturing - 0.91% |
| |||||||
Barnes Group, Inc. | 1,445 | 53 | ||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Electrical Equipment - 1.45% |
| |||||||
AZZ, Inc. | 830 | $ | 39 | |||||
GrafTech International Ltd.A | 3,912 | 17 | ||||||
Powell Industries, Inc. | 417 | 19 | ||||||
Woodward, Inc. | 175 | 9 | ||||||
|
| |||||||
| 84 | ||||||||
|
| |||||||
Industrial Conglomerates - 0.29% |
| |||||||
Teleflex, Inc. | 151 | 17 | ||||||
|
| |||||||
Machinery - 2.73% |
| |||||||
Applied Industrial Technologies, Inc. | 150 | 7 | ||||||
Astec Industries, Inc. | 608 | 23 | ||||||
Badger Meter, Inc. | 295 | 17 | ||||||
Blount International, Inc.A | 1,175 | 18 | ||||||
EnPro Industries, Inc.A | 888 | 58 | ||||||
John Bean Technologies Corp. | 615 | 18 | ||||||
Kadant, Inc. | 215 | 9 | ||||||
L.B. Foster Co., Class A | 150 | 8 | ||||||
|
| |||||||
| 158 | ||||||||
|
| |||||||
Marine - 0.46% |
| |||||||
Ardmore Shipping Corp. | 2,705 | 27 | ||||||
|
| |||||||
Road & Rail - 1.84% |
| |||||||
Baltic Trading Ltd. | 1,352 | 5 | ||||||
Saia, Inc.A | 1,195 | 59 | ||||||
TravelCenters of America LLCA C | 4,453 | 43 | ||||||
|
| |||||||
| 107 | ||||||||
|
| |||||||
Total Industrials |
| 930 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 11.84% |
| |||||||
Communications Equipment - 1.82% |
| |||||||
Anixter International, Inc. | 215 | 18 | ||||||
ARRIS Group, Inc.A | 471 | 14 | ||||||
NICE Systems Ltd., Sponsored ADRD | 756 | 31 | ||||||
Oplink Communications, Inc.A | 1,232 | 26 | ||||||
Polycom, Inc.A | 1,271 | 17 | ||||||
|
| |||||||
| 106 | ||||||||
|
| |||||||
Computers & Peripherals - 1.10% |
| |||||||
Mercury Systems, Inc.A | 1,467 | 21 | ||||||
Synaptics, Inc.A | 634 | 43 | ||||||
|
| |||||||
| 64 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 3.18% |
| |||||||
Analogic Corp. | 575 | 42 | ||||||
Electro Scientific Industries, Inc. | 3,759 | 27 | ||||||
Littelfuse, Inc. | 330 | 32 | ||||||
MTS Systems Corp. | 450 | 30 | ||||||
Tech Data Corp.A | 560 | 33 | ||||||
Vishay Intertechnology, Inc. | 1,574 | 21 | ||||||
|
| |||||||
| 185 | ||||||||
|
| |||||||
IT Consulting & Services - 0.15% |
| |||||||
Exponent, Inc. | 115 | 9 | ||||||
|
| |||||||
Semiconductor Equipment & Products - 5.28% |
| |||||||
Entegris, Inc.A | 2,942 | 40 | ||||||
FormFactor, Inc.A | 5,746 | 46 | ||||||
Kulicke & Soffa Industries, Inc.A | 3,523 | 51 | ||||||
Photronics, Inc.A | 9,650 | 86 | ||||||
Silicon Motion Technology Corp., ADRD | 2,177 | 51 | ||||||
Xcerra Corp.A | 3,721 | 32 | ||||||
|
| |||||||
| 306 | ||||||||
|
| |||||||
See accompanying notes
25
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Software - 0.31% |
| |||||||
VASCO Data Security International, Inc.A | 695 | $ | 18 | |||||
|
| |||||||
Total Information Technology |
| 688 | ||||||
|
| |||||||
MATERIALS - 4.72% |
| |||||||
Chemicals - 2.21% |
| |||||||
Balchem Corp. | 155 | 10 | ||||||
Cabot Corp. | 458 | 21 | ||||||
Hawkins, Inc. | 490 | 19 | ||||||
Innophos Holdings, Inc. | 795 | 46 | ||||||
Olin Corp. | 185 | 4 | ||||||
OM Group, Inc. | 1,073 | 28 | ||||||
|
| |||||||
| 128 | ||||||||
|
| |||||||
Metals & Mining - 1.24% |
| |||||||
Royal Gold, Inc. | 520 | 29 | ||||||
RTI International Metals, Inc.A | 961 | 23 | ||||||
Schnitzer Steel Industries, Inc., Class A | 835 | 20 | ||||||
|
| |||||||
| 72 | ||||||||
|
| |||||||
Paper & Forest Products - 1.27% |
| |||||||
Domtar Corp. | 855 | 35 | ||||||
Resolute Forest Products, Inc.A | 2,093 | 39 | ||||||
|
| |||||||
| 74 | ||||||||
|
| |||||||
Total Materials |
| 274 | ||||||
|
| |||||||
UTILITIES - 3.37% |
| |||||||
Electric - 1.58% |
| |||||||
Empire District Electric Co. | 1,055 | 30 | ||||||
NorthWestern Corp. | 670 | 35 | ||||||
Portland General Electric Co. | 744 | 27 | ||||||
|
| |||||||
| 92 | ||||||||
|
| |||||||
Gas - 1.43% |
| |||||||
Laclede Group, Inc. | 475 | 24 | ||||||
New Jersey Resources Corp. | 800 | 47 | ||||||
WGL Holdings, Inc. | 259 | 12 | ||||||
|
| |||||||
| 83 | ||||||||
|
| |||||||
Multi-Utilities - 0.36% |
| |||||||
Avista Corp. | 580 | 21 | ||||||
|
| |||||||
Total Utilities |
| 196 | ||||||
|
| |||||||
Total Common Stock (Cost $4,333) |
| 4,772 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 17.04% |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 990,270 | 990 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.17% |
| 5,762 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.83% |
| 48 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 5,810 | |||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | Non-income producing security. |
| B | REIT - Real Estate Investment Trust. |
| C | LLC - Limited Liability Company. |
| D | ADR - American Depositary Receipt. |
See accompanying notes
26
American Beacon Small Cap Value II FundSM
Schedule of Investments
October 31, 2014
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||
Russell 2000 Mini Index December Futures | Long | 8 | December, 2014 | $ | 936,800 | $ | 9,420 | |||||||||
|
|
|
| |||||||||||||
| $ | 936,800 | $ | 9,420 | |||||||||||||
|
|
|
| |||||||||||||
See accompanying notes
27
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2014 (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 C | $ | 1,020,662 | $ | 625,947 | $ | 5,762 | ||||||
Investments in affiliated securities, at fair value B | — | 11,720 | — | |||||||||
Cash | 1,902 | — | — | |||||||||
Deposit with brokers for futures contracts | 3,054 | 1,414 | 41 | |||||||||
Dividends and interest receivable | 2,912 | 312 | 3 | |||||||||
Receivable for investments sold | — | 3,119 | 14 | |||||||||
Receivable for fund shares sold | 1,799 | 541 | 1 | |||||||||
Receivable for tax reclaims | 4 | — | — | |||||||||
Receivable for expense reimbursement (Note 2) | — | — | 8 | |||||||||
Receivable for variation margin on open futures contracts | 757 | 339 | 14 | |||||||||
Prepaid expenses | 51 | 33 | 12 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 1,031,141 | 643,425 | 5,855 | |||||||||
|
|
|
|
|
| |||||||
Liabilities: | ||||||||||||
Payable for investments purchased | — | 2,799 | 12 | |||||||||
Payable for fund shares redeemed | 420 | 1,235 | 1 | |||||||||
Payable under excess expense reimbursement plan | 5 | 60 | — | |||||||||
Payable upon return of securities loaned | — | 14,823 | — | |||||||||
Management and investment advisory fees payable | 200 | 262 | 3 | |||||||||
Administrative service and service fees payable | 187 | 186 | 3 | |||||||||
Transfer agent fees payable | 12 | 5 | 1 | |||||||||
Custody and fund accounting fees payable | 14 | 7 | 1 | |||||||||
Professional fees payable | 37 | 27 | 24 | |||||||||
Trustee fees payable | 12 | — | — | |||||||||
Payable for prospectus and shareholder reports | 51 | 14 | — | |||||||||
Other liabilities | 2 | 2 | — | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 940 | 19,420 | 45 | |||||||||
|
|
|
|
|
| |||||||
Net Assets | $ | 1,030,201 | $ | 624,005 | $ | 5,810 | ||||||
|
|
|
|
|
| |||||||
Analysis of Net Assets: | ||||||||||||
Paid-in-capital | 839,245 | 560,495 | 4,346 | |||||||||
Undistributed (or overdistribution of) net investment income | (455 | ) | 2,593 | 2 | ||||||||
Accumulated net realized gain | 33,229 | 17,186 | 1,014 | |||||||||
Unrealized appreciation of investments | 156,411 | 42,864 | 439 | |||||||||
Unrealized appreciation of futures contracts | 1,771 | 867 | 9 | |||||||||
|
|
|
|
|
| |||||||
Net assets | $ | 1,030,201 | $ | 624,005 | $ | 5,810 | ||||||
|
|
|
|
|
| |||||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||||||
Institutional Class | 4,432,782 | 13,121,739 | N/A | |||||||||
|
|
|
|
|
| |||||||
Y Class | 2,145,230 | 2,118,991 | 225,892 | |||||||||
|
|
|
|
|
| |||||||
Investor Class | 10,830,447 | 16,547,819 | 176,521 | |||||||||
|
|
|
|
|
| |||||||
Advisor Class | 916,956 | 494,263 | N/A | |||||||||
|
|
|
|
|
| |||||||
A Class | 1,673,386 | 1,270,906 | N/A | |||||||||
|
|
|
|
|
| |||||||
C Class | 2,071,079 | 362,432 | N/A | |||||||||
|
|
|
|
|
| |||||||
AMR Class | 43,123,312 | 8,264,984 | N/A | |||||||||
|
|
|
|
|
| |||||||
Net assets (not in thousands): | ||||||||||||
Institutional Class | $ | 74,422,347 | $ | 193,634,639 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
Y Class | $ | 36,113,608 | $ | 31,074,584 | $ | 3,274,221 | ||||||
|
|
|
|
|
| |||||||
Investor Class | $ | 165,808,020 | $ | 246,404,670 | $ | 2,535,684 | ||||||
|
|
|
|
|
| |||||||
Advisor Class | $ | 14,705,747 | $ | 7,149,083 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
A Class | $ | 25,578,944 | $ | 18,345,497 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
C Class | $ | 32,045,404 | $ | 5,104,394 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
AMR Class | $ | 681,526,746 | $ | 122,291,790 | $ | N/A | ||||||
|
|
|
|
|
| |||||||
See accompanying notes
28
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2014 (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 | $ | 16.79 | $ | 14.76 | N/A | |||||||
|
|
|
|
|
| |||||||
Y Class | $ | 16.83 | $ | 14.66 | $ | 14.49 | ||||||
|
|
|
|
|
| |||||||
Investor Class | $ | 15.31 | $ | 14.89 | $ | 14.36 | ||||||
|
|
|
|
|
| |||||||
Advisor Class | $ | 16.04 | $ | 14.46 | N/A | |||||||
|
|
|
|
|
| |||||||
A Class | $ | 15.29 | $ | 14.43 | N/A | |||||||
|
|
|
|
|
| |||||||
A Class (offering price) | $ | 16.22 | $ | 15.31 | N/A | |||||||
|
|
|
|
|
| |||||||
C Class | $ | 15.47 | $ | 14.08 | N/A | |||||||
|
|
|
|
|
| |||||||
AMR Class | $ | 15.80 | $ | 14.80 | N/A | |||||||
|
|
|
|
|
| |||||||
A Cost of investments in unaffiliated securities | $ | 864,251 | $ | 583,083 | $ | 5,323 | ||||||
B Cost of investments in affiliated securities | $ | — | $ | 11,720 | $ | — | ||||||
C Fair value of securities on loan | $ | — | $ | 14,469 | $ | — | ||||||
See accompanying notes
29
American Beacon Funds
Statements of Operations
For the year ended October 31, 2014 (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 | $ | 16,337 | $ | 6,679 | $ | 93 | ||||||
Dividend income from affiliated securities | 8 | — | — | |||||||||
Interest income | 9,540 | — | — | |||||||||
Income derived from securities lending, net | — | 24 | — | |||||||||
|
|
|
|
|
| |||||||
Total investment income | 25,885 | 6,703 | 93 | |||||||||
|
|
|
|
|
| |||||||
Expenses: | ||||||||||||
Management and investment advisory fees (Note 2) | 2,033 | 1,923 | 47 | |||||||||
Administrative service fees (Note 2): | ||||||||||||
Institutional Class | 210 | 365 | — | |||||||||
Y Class | 66 | 44 | 15 | |||||||||
Investor Class | 393 | 281 | 7 | |||||||||
Advisor Class | 33 | 10 | — | |||||||||
A Class | 54 | 37 | — | |||||||||
C Class | 78 | 11 | — | |||||||||
AMR Class | 332 | 62 | — | |||||||||
Transfer agent fees: | ||||||||||||
Institutional Class | 14 | 16 | — | |||||||||
Y Class | 1 | 1 | — | |||||||||
Investor Class | 13 | 6 | 2 | |||||||||
Advisor Class | 1 | 1 | — | |||||||||
A Class | 2 | 2 | — | |||||||||
C Class | 4 | 2 | — | |||||||||
AMR Class | 22 | 5 | — | |||||||||
Custody and fund accounting fees | 116 | 48 | 10 | |||||||||
Professional fees | 62 | 39 | 29 | |||||||||
Registration fees and expenses | 78 | 72 | 28 | |||||||||
Service fees (Note 2): | ||||||||||||
Y Class | 22 | 14 | 5 | |||||||||
Investor Class | 448 | 234 | 6 | |||||||||
Advisor Class | 27 | 8 | — | |||||||||
A Class | 23 | 16 | — | |||||||||
C Class | 33 | 5 | — | |||||||||
Distribution fees (Note 2): | ||||||||||||
Advisor Class | 27 | 8 | — | |||||||||
A Class | 39 | 27 | — | |||||||||
C Class | 219 | 31 | — | |||||||||
Prospectus and shareholder report expenses | 72 | 37 | 2 | |||||||||
Trustee fees | 49 | 18 | — | |||||||||
Other expenses | 63 | 27 | 7 | |||||||||
|
|
|
|
|
| |||||||
Total expenses | 4,534 | 3,350 | 158 | |||||||||
|
|
|
|
|
| |||||||
Net fees waived and expenses reimbursed/recouped by Manager (Note 2) | 5 | 60 | (69 | ) | ||||||||
|
|
|
|
|
| |||||||
Net expenses | 4,539 | 3,410 | 89 | |||||||||
|
|
|
|
|
| |||||||
Net investment income | 21,346 | 3,293 | 4 | |||||||||
|
|
|
|
|
| |||||||
Realized and unrealized gain (loss) from investments: | ||||||||||||
Net realized gain (loss) from: | ||||||||||||
Investments | 52,631 | 17,601 | 1,017 | |||||||||
Commission recapture (Note 3) | 13 | 66 | — | |||||||||
Futures contracts | 6,578 | 502 | 6 | |||||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||||||
Investments | 16,523 | 6,703 | (419 | ) | ||||||||
Futures contracts | 476 | 601 | 2 | |||||||||
|
|
|
|
|
| |||||||
Net gain from investments | 76,221 | 25,473 | 606 | |||||||||
|
|
|
|
|
| |||||||
Net increase in net assets resulting from operations | $ | 97,567 | $ | 28,766 | $ | 610 | ||||||
|
|
|
|
|
| |||||||
A Foreign taxes | 148 | (1 | ) | — | ||||||||
See accompanying notes
30
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, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income | $ | 21,346 | $ | 17,433 | $ | 3,293 | $ | 1,821 | $ | 4 | $ | 8 | ||||||||||||
Net realized gain from investments, commission recapture, and futures contracts | 59,222 | 58,170 | 18,169 | 13,990 | 1,023 | 425 | ||||||||||||||||||
Change in net unrealized appreciation or (depreciation) from investments and futures contracts | 16,999 | 60,147 | 7,304 | 33,202 | (417 | ) | 710 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase in net assets resulting from operations | 97,567 | 135,750 | 28,766 | 49,013 | 610 | 1,143 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
Net investment income: | ||||||||||||||||||||||||
Institutional Class | (1,818 | ) | (1,020 | ) | (587 | ) | (657 | ) | — | — | ||||||||||||||
Y Class | (648 | ) | (72 | ) | (23 | ) | (13 | ) | — | (7 | ) | |||||||||||||
Investor Class | (3,347 | ) | (1,894 | ) | (182 | ) | (35 | ) | — | (7 | ) | |||||||||||||
Advisor Class | (259 | ) | (93 | ) | (3 | ) | (8 | ) | — | — | ||||||||||||||
A Class | (447 | ) | (84 | ) | (26 | ) | (4 | ) | — | — | ||||||||||||||
C Class | (383 | ) | (77 | ) | (5 | ) | (5 | ) | — | — | ||||||||||||||
AMR Class | (20,425 | ) | (14,207 | ) | (1,182 | ) | (1,435 | ) | — | — | ||||||||||||||
Net realized gain from investments: | ||||||||||||||||||||||||
Institutional Class | (3,141 | ) | (909 | ) | (4,653 | ) | (1,547 | ) | — | — | ||||||||||||||
Y Class | (717 | ) | (61 | ) | (177 | ) | (29 | ) | (305 | ) | (24 | ) | ||||||||||||
Investor Class | (6,218 | ) | (2,087 | ) | (1,505 | ) | (182 | ) | (128 | ) | (24 | ) | ||||||||||||
Advisor Class | (315 | ) | (56 | ) | (49 | ) | (19 | ) | — | — | ||||||||||||||
A Class | (397 | ) | (85 | ) | (211 | ) | (11 | ) | — | — | ||||||||||||||
C Class | (784 | ) | (94 | ) | (85 | ) | (11 | ) | — | — | ||||||||||||||
AMR Class | (34,009 | ) | (12,494 | ) | (7,608 | ) | (3,149 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net distributions to shareholders | (72,908 | ) | (33,233 | ) | (16,296 | ) | (7,105 | ) | (433 | ) | (62 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Capital Share Transactions: | ||||||||||||||||||||||||
Proceeds from sales of shares | 228,070 | 276,353 | 492,087 | 121,861 | 5,023 | 161 | ||||||||||||||||||
Reinvestment of dividends and distributions | 72,234 | 33,033 | 16,084 | 7,070 | 433 | 63 | ||||||||||||||||||
Cost of shares redeemed | (137,068 | ) | (422,318 | ) | (118,637 | ) | (65,103 | ) | (4,455 | ) | (6 | ) | ||||||||||||
Redemption fees | — | — | 65 | 64 | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in net assets from capital share transactions | 163,236 | (112,932 | ) | 389,599 | 63,892 | 1,001 | 218 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in net assets | 187,895 | (10,415 | ) | 402,069 | 105,800 | 1,178 | 1,299 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Assets: | ||||||||||||||||||||||||
Beginning of period | 842,306 | 852,721 | 221,936 | 116,136 | 4,632 | 3,333 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
End of Period * | $ | 1,030,201 | $ | 842,306 | $ | 624,005 | $ | 221,936 | $ | 5,810 | $ | 4,632 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
* Includes undistributed (or overdistributed) net investment income (loss) of | $ | (455 | ) | $ | 121 | $ | 2,593 | $ | 1,330 | $ | 2 | $ | 6 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
See accompanying notes
31
American Beacon FundsSM
October 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of thirty-one 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.
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 and the Trust. 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. The Funds pay the unaffiliated investment advisors hired to direct investment activities of the Funds. Management fees paid by the Funds during the year ended October 31, 2014 were as follows (dollars in thousands):
Fund | Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | ||||||||||||
Balanced | 0.22 | % | $ | 2,033 | $ | 1,566 | $ | 467 | ||||||||
Mid-Cap Value | 0.52 | % | 1,923 | 1,735 | 188 | |||||||||||
Small Cap Value II | 0.62 | % | 47 | 43 | 4 | |||||||||||
32
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
As compensation for services provided by the Manager in connection with securities lending activities conducted by the Mid-Cap Value Fund, 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 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 Statements of Operations. During the year ended October 31, 2014, securities lending fees paid to the Manager were $2,903.
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, and Advisor Classes and 0.05% of the average daily net assets of the AMR Class of each of the Funds. Prior to July 1, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes of each Fund. Beginning July 1, 2014 the Manager received 0.30% of the average daily net assets of the A and C Classes of each Fund.
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 Administration fees totaling 0.10% of the average daily net assets of the Select Fund. During the year ended October 31, 2014, the Manager earned $3,812 from the Balanced and $7,908 from the Mid-Cap Value Fund’s investment in the Select Funds.
33
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014, the Small Cap Value II Fund borrowed on average $63,050 for two days at 0.70% with interest charges of $2 and the Balanced Fund loaned on average $2,213,105 for 3 days at an average rate of 0.70% with interest charges of $127. During the year ended October 31, 2014, the Mid-Cap Value Fund 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, 2014, the Manager waived or reimbursed expenses as follows:
| Expense Cap | ||||||||||||||||||
Fund | Class | 11/1/13 to 6/30/14 | 7/1/14 to 10/31/14 | Reimbursed or (Recovered) Expenses | Expiration | |||||||||||||
Balanced | Y | 0.69 | % | 0.69 | % | $ | (1,786 | ) | 2017 | |||||||||
Balanced | A | N/A | N/A | (2,247 | ) | 2017 | ||||||||||||
Balanced | C | 1.85 | % | 1.75 | % | (1,385 | ) | 2017 | ||||||||||
Mid-Cap Value | Institutional | 0.98 | % | 0.98 | % | (45,566 | ) | 2017 | ||||||||||
Mid-Cap Value | Y | 1.08 | % | 1.08 | % | (663 | ) | 2017 | ||||||||||
Mid-Cap Value | Investor | 1.23 | % | 1.23 | % | (11,332 | ) | 2017 | ||||||||||
Mid-Cap Value | Advisor | 1.49 | % | 1.49 | % | (1,833 | ) | 2017 | ||||||||||
Mid-Cap Value | A | 1.49 | % | 1.39 | % | (330 | ) | 2017 | ||||||||||
Mid-Cap Value | C | 2.24 | % | 2.14 | % | (243 | ) | 2017 | ||||||||||
Small Cap Value II | Y | 1.09 | % | 1.09 | % | 46,513 | 2017 | |||||||||||
Small Cap Value II | Investor | 1.37 | % | 1.37 | % | 22,393 | 2017 | |||||||||||
Of these amounts, $8,151 was receivable from the Manager at October 31, 2014 for the Small Cap Value II Fund and $5,418 and $59,966 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 | Expired Carryover Expenses | Expiration of Reimbursed Expenses | ||||||||||||
Balanced | $ | 4,186 | $ | — | $ | — | 2014 | |||||||||
Balanced | 1,232 | — | — | 2015 | ||||||||||||
Mid-Cap Value | 17,778 | — | 39,197 | 2014 | ||||||||||||
Mid-Cap Value | 36,006 | — | — | 2015 | ||||||||||||
Mid-Cap Value | 6,183 | — | — | 2016 | ||||||||||||
Small Cap Value II | — | 118,169 | — | 2015 | ||||||||||||
Small Cap Value II | — | 69,350 | — | 2016 | ||||||||||||
The Manager fully recovered excess carryover expenses from the Y, A and C Classes of the Balanced Fund, expiring in 2014 and 2015, and from all Classes of the Mid-Cap Value Fund, expiring in 2014, 2015, and 2016.
34
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014, Foreside collected $46,830 and $6,903 for the Balanced and Mid-Cap Value 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, 2014, 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, 2014, $6,341 and $504 in CDSC fees were collected for the Balanced and Mid-Cap Value 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. 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.
35
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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 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, 2014, there were no transfers between levels. As of October 31, 2014, the investments were classified as described below (in thousands):
36
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Balanced Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 587,752 | $ | — | $ | — | $ | 587,752 | ||||||||
Preferred Stock | 4,733 | — | — | 4,733 | ||||||||||||
Corporate Obligations | — | 114,708 | — | 114,708 | ||||||||||||
Foreign Government Obligations | — | 923 | — | 923 | ||||||||||||
Commercial Mortgage-Backed Obligations | — | 19,985 | — | 19,985 | ||||||||||||
Collateralized Mortgage Obligations | — | 415 | — | 415 | ||||||||||||
Asset-Backed Obligations | — | 11,412 | — | 11,412 | ||||||||||||
U.S. Agency Mortgage-Backed Obligations | — | 53,210 | — | 53,210 | ||||||||||||
U.S. Treasury Obligations | — | 140,437 | — | 140,437 | ||||||||||||
U.S. Agency Obligations | — | 15,273 | — | 15,273 | ||||||||||||
Municipal Obligations | — | 3,305 | — | 3,305 | ||||||||||||
Short-Term Investments - Money Market Funds | 68,509 | — | — | 68,509 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 660,994 | $ | 359,668 | $ | — | $ | 1,020,662 | ||||||||
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|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments-Assets | ||||||||||||||||
Futures Contracts | $ | 1,772 | $ | — | $ | — | $ | 1,772 | ||||||||
Mid-Cap Value Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 591,749 | $ | — | $ | — | $ | 591,749 | ||||||||
Short-Term Investments - Money Market Funds | 31,095 | — | — | 31,095 | ||||||||||||
Securities Lending Collateral Invested in Money Market Funds | 14,823 | 14,823 | ||||||||||||||
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|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 637,667 | $ | — | $ | — | $ | 637,667 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments-Assets | ||||||||||||||||
Futures Contracts | $ | 867 | $ | — | $ | — | $ | 867 | ||||||||
Small Cap Value II Fund* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stock | $ | 4,772 | $ | — | $ | — | $ | 4,772 | ||||||||
Short-Term Investments - Money Market Funds | 990 | — | — | 990 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 5,762 | $ | — | $ | — | $ | 5,762 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments-Assets | ||||||||||||||||
Futures Contracts | $ | 9 | $ | — | $ | — | $ | 9 | ||||||||
| * | 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.
37
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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
American Depositary Receipts (“ADRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Fund’s possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Fund may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
38
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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.
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, 2014 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.
Mortgage-Related and Other Asset-Backed Securities
The Balanced Fund may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”). Specific types of instruments may include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real property. The value of the Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
39
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Mortgage-Backed Securities
MBS often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of the Fund’s portfolio at the time resulting in reinvestment risk.
Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS, making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.
MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a price above par. In such an environment, this risk limits the potential price appreciation of these securities.
Agency Mortgage-Backed Securities
Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Although these instruments may be guaranteed by the U.S. government or a government sponsored entity, many such MBS are not backed by the full faith and credit of the United States and are still exposed to the risk of non-payment.
Privately Issued Mortgage-Backed Securities
MBS held by a Fund may be issued by private issuers including commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or SPVs) and other entities that acquire and package mortgage loans for resale as MBS. These privately issued non-agency MBS may offer higher yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or non-conforming loans have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime, Alt-A and non-conforming loans, but a level of risk exists for all loans.
Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the
40
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment on the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans.
Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in the Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.
Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Fund’s ABS may be affected by, among other things, actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.
Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.
Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans related to sub-prime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market.
ABS (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. ABS are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets.
41
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of ABS may be affected by legislative or regulatory developments. It is possible that such developments may require the Fund to dispose of any then existing holdings of such securities.
5. Financial Derivative Instruments
The Funds may utilize derivative instruments to enhance return, hedge risk, gain efficient exposure to an asset class or to manage liquidity. When considering the Fund’s use of derivatives, it is important to note that the Fund does not use derivatives for the purpose of creating financial leverage.
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 year ended October 31, 2014, the Funds entered into future contracts primarily for 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 average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||||
Fund | Year ended October 31, 2014 | |||
Balanced | 518 | |||
Mid-Cap Value | 141 | |||
Small Cap Value II | 4 | |||
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1)(2):
Fair Values of financial derivative instruments not accounted for as hedging instruments as of October 31, 2014: | |||||||||||||||||||||||||
| Balanced | Mid-Cap Value | Small Cap Value II | |||||||||||||||||||||||
Statements of Assets and Liabilities | Derivative | ||||||||||||||||||||||||
Receivable for variation margin from open futures contracts (2) | Equity Contracts | $ | 757 | $ | 339 | $ | 14 | ||||||||||||||||||
42
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
The effect of financial derivative instruments not accounted for as hedging instruments during the year ended October 31, 2014:
| Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||||||
Statements of Operations | Derivative | |||||||||||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 6,578 | $ | 502 | $ | 6 | |||||||||
Change in net unrealized appreciation or (depreciation) of futures contracts | Equity Contracts | 476 | 601 | 2 | ||||||||||||
| (1) | See Note 3 in the Notes to Financial Statements for additional information. |
| (2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
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. 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.
43
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Fund and additional required collateral is delivered to/pledged by the Fund on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties, which provide for the right to offset under certain circumstances. The Funds employ multiple money managers and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements such as repurchase agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of October 31, 2014 (in thousands).
Balanced
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Futures Contracts (1) | $ | 757 | $ | — | $ | 757 | ||||||
44
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014:
| Net amount of Assets Presented in the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||
Goldman Sachs & Co.(1) | $ | 757 | $ | — | $ | — | $ | 757 | ||||||||
Mid-Cap Value
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statements of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statements of Assets and Liabilities | |||||||||
Futures Contracts (1) | $ | 339 | $ | — | $ | 339 | ||||||
Securities on Loan | 14,469 | — | 14,469 | |||||||||
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| $ | 14,808 | $ | 14,808 | |||||||||
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| |||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014:
| Net amount of Assets Presented in the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received(2) | Net Amount | |||||||||||||
Goldman Sachs & Co. (1) | $ | 339 | $ | — | $ | — | $ | 339 | ||||||||
Barclays Capital, Inc. | 2,322 | — | (2,322 | ) | — | |||||||||||
BNP Paraibas Prime Brokerage | 3,653 | (3,653 | ) | — | ||||||||||||
Credit Suisse Securities LLC | 5,851 | (5,851 | ) | — | ||||||||||||
Scotia Capital USA Inc. | 2,548 | (2,548 | ) | — | ||||||||||||
UBS Securities, LLC | 95 | (95 | ) | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 14,808 | $ | (14,469 | ) | $ | 339 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Small Cap Value II
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts (1) | $ | 14 | $ | — | $ | 14 | ||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014
| Net amount of Assets Presented in the Statements of Assets and Liabilities | Gross Amounts Not Offset in the Statements of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||
Goldman Sachs & Co. (1) | $ | 14 | $ | — | $ | — | $ | 14 | ||||||||
| (1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
| (2) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $14,823 has been received in connection with securities lending transactions. |
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.
45
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014 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):
| Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||||||||
Distributions paid from: | ||||||||||||||||||||||||
Ordinary income* | ||||||||||||||||||||||||
Institutional Class | $ | 2,590 | $ | 1,020 | $ | 2,004 | $ | 657 | $ | — | $ | — | ||||||||||||
Y Class | 824 | 72 | 77 | 13 | 103 | 28 | ||||||||||||||||||
Investor Class | 4,877 | 1,894 | 640 | 35 | 43 | 28 | ||||||||||||||||||
Advisor Class | 337 | 93 | 17 | 8 | — | — | ||||||||||||||||||
A Class | 545 | 84 | 90 | 4 | — | — | ||||||||||||||||||
C Class | 576 | 77 | 31 | 5 | — | — | ||||||||||||||||||
AMR Class | 28,795 | 14,207 | 3,498 | 1,435 | — | — | ||||||||||||||||||
Long-Term Capital Gains | ||||||||||||||||||||||||
Institutional Class | 2,368 | 909 | 3,237 | 1,547 | — | — | ||||||||||||||||||
Y Class | 541 | 61 | 123 | 29 | 202 | 3 | ||||||||||||||||||
Investor Class | 4,688 | 2,087 | 1,047 | 182 | 85 | 3 | ||||||||||||||||||
Advisor Class | 238 | 56 | 34 | 19 | — | — | ||||||||||||||||||
A Class | 299 | 85 | 147 | 11 | — | — | ||||||||||||||||||
C Class | 591 | 94 | 59 | 11 | — | — | ||||||||||||||||||
AMR Class | 25,639 | 12,494 | 5,292 | 3,149 | — | — | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Total distributions paid | $ | 72,908 | $ | 33,233 | $ | 16,296 | $ | 7,105 | $ | 433 | $ | 62 | ||||||||||||
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| |||||||||||||
| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2014, 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 | $ | 880,617 | $ | 595,790 | $ | 5,341 | ||||||
Unrealized appreciation | 155,931 | 57,824 | 580 | |||||||||
Unrealized depreciation | (15,887 | ) | (15,947 | ) | (159 | ) | ||||||
|
|
|
|
|
| |||||||
Net unrealized appreciation or (depreciation) | 140,044 | 41,877 | 421 | |||||||||
Undistributed ordinary income | 5,142 | 5,764 | 113 | |||||||||
Accumulated long-term gain or (loss) | 43,996 | 15,002 | 921 | |||||||||
Other temporary differences | 1,774 | 867 | 9 | |||||||||
|
|
|
|
|
| |||||||
Distributable earnings or (deficits) | $ | 190,956 | $ | 63,510 | $ | 1,464 | ||||||
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|
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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
46
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains or losses on certain derivative instruments, reclassifications of income from real estate investment securities and publicly traded partnerships, 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.
Accordingly, the following amounts represent current year permanent differences derived from book amortization of premium, pay down reclasses, Section 732 basis adjustments, reclassifications of income from real estate investment securities and publicly traded partnerships, and dividends that have been reclassified as of October 31, 2014 (in thousands):
| Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Paid-in-capital | $ | — | $ | (7 | ) | $ | — | |||||
Undistributed net investment income | 5,405 | (22 | ) | (8 | ) | |||||||
Accumulated net realized gain (loss) | (5,405 | ) | 28 | 8 | ||||||||
Unrealized appreciation or (depreciation) of investments and futures contracts | — | 1 | — | |||||||||
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
For the year ended October 31, 2014, 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, 2014 were as follows (in thousands):
| Balanced | Mid-Cap Value | Small Cap Value II | ||||||||||
Purchases (excluding U.S. government securities) | $ | 362,748 | $ | 448,231 | $ | 7,409 | ||||||
Sales and maturities (excluding U.S. government securities) | 294,281 | 86,503 | 7,650 | |||||||||
Purchases of U.S. government securities | 83,004 | — | — | |||||||||
Sales and maturities of U.S. government securities | 72,611 | — | — | |||||||||
A summary of the Funds’ direct transactions in Select Funds for the year ended October 31, 2014 is set forth below (in thousands):
| Affiliate | October 31, 2013 Shares/Fair Value | Purchases | Sales | October 31, 2014 Shares/Fair Value | Dividend | |||||||||||||||||||
Mid-Cap Value | USG Select Fund | $ | — | $ | 76,586 | $ | 64,866 | $ | 11,720 | $ | — | |||||||||||||
9. Securities Lending
The Mid-Cap Value 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.
47
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, as designated by the Manager.
Securities lending income is generated from the demand premium (if any) paid by the borrower to borrow a specific security and from the return on investment of cash collateral, reduced by negotiated rebate fees paid to the borrower and transaction costs. To the extent that a loan is secured by non-cash collateral, securities lending income is generated as a demand premium reduced by transaction costs. The Fund, the Agent, and the Manager retain 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, 2014, 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 | ||
| $ 14,469 | $ — | $ 14,823 |
Cash collateral is listed on the Mid-Cap Value Fund’s Schedule of Investments and is shown on the Statements of Assets and Liabilities. Income earned on these investments, grossed up by the securities lending fees paid to the Manager, is included in Income derived from securities lending on 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 Schedule 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 Funds (shares and dollars in thousands):
48
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
For the Year Ended October 31, 2014
| Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 1,324 | $ | 21,700 | 1,870 | $ | 30,865 | 6,066 | $ | 91,828 | 708 | $ | 10,930 | ||||||||||||||||||||
Reinvestment of dividends | 305 | 4,907 | 80 | 1,290 | 630 | 9,233 | 37 | 574 | ||||||||||||||||||||||||
Shares redeemed | (931 | ) | (15,382 | ) | (248 | ) | (4,136 | ) | (3,165 | ) | (47,590 | ) | (234 | ) | (3,696 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net increase in shares outstanding | 698 | $ | 11,225 | 1,702 | $ | 28,019 | 3,531 | $ | 53,471 | 511 | $ | 7,808 | ||||||||||||||||||||
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|
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|
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| |||||||||||||||||
| A Class | C Class | AMR Class | ||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1,403 | $ | 20,947 | 1,419 | $ | 21,522 | 1,946 | $ | 30,278 | |||||||||||||||
Reinvestment of dividends | 51 | 749 | 71 | 1,047 | 3,595 | 54,434 | ||||||||||||||||||
Shares redeemed | (200 | ) | (3,016 | ) | (184 | ) | (2,787 | ) | (3,905 | ) | (60,461 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase in shares outstanding | 1,254 | $ | 18,680 | 1,306 | $ | 19,782 | 1,636 | $ | 24,251 | |||||||||||||||
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|
|
|
|
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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 | 9,719 | $ | 141,013 | 2,278 | $ | 32,808 | 17,353 | $ | 254,014 | 533 | $ | 7,626 | ||||||||||||||||||||
Redemption Fees | — | 22 | — | 2 | — | 14 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 371 | 5,095 | 13 | 178 | 121 | 1,684 | 4 | 52 | ||||||||||||||||||||||||
Shares redeemed | (2,008 | ) | (28,892 | ) | (369 | ) | (5,306 | ) | (2,161 | ) | (31,317 | ) | (94 | ) | (1,309 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net increase in shares outstanding | 8,082 | $ | 117,238 | 1,922 | $ | 27,682 | 15,313 | $ | 224,395 | 443 | $ | 6,369 | ||||||||||||||||||||
|
|
|
|
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|
|
|
|
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|
|
| |||||||||||||||||
| A Class | C Class | AMR Class | ||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 1,224 | $ | 17,349 | 296 | $ | 4,083 | 2,431 | $ | 35,194 | |||||||||||||||
Redemption Fees | — | 2 | — | — | — | 25 | ||||||||||||||||||
Reinvestment of dividends | 16 | 214 | 5 | 71 | 640 | 8,790 | ||||||||||||||||||
Shares redeemed | (87 | ) | (1,245 | ) | (4 | ) | (60 | ) | (3,570 | ) | (50,508 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 1,153 | $ | 16,320 | 297 | $ | 4,094 | (499 | ) | $ | (6,499 | ) | |||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
| Y Class | Investor Class | |||||||||||||||
Small Cap Value II Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 344 | $ | 4,899 | 9 | $ | 124 | ||||||||||
Reinvestment of dividends | 22 | 305 | 9 | 128 | ||||||||||||
Shares redeemed | (301 | ) | (4,307 | ) | (10 | ) | (148 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in shares outstanding | 65 | $ | 897 | 8 | $ | 104 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
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 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 | ||||||||||||||||||||||
Balanced Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 251 | $ | 3,543 | 526 | $ | 7,634 | 10,401 | $ | 153,598 | |||||||||||||||
Reinvestment of dividends | 11 | 147 | 11 | 158 | 1,897 | 26,701 | ||||||||||||||||||
Shares redeemed | (80 | ) | (1,133 | ) | (41 | ) | (596 | ) | (23,319 | ) | (330,824 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net increase (decrease) in shares outstanding | 182 | $ | 2,557 | 496 | $ | 7,196 | (11,021 | ) | $ | (150,525 | ) | |||||||||||||
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| |||||||||||||
49
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
| 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 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
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 | ||||||||||||||||||||||
Mid-Cap Value Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||
Shares sold | 115 | $ | 1,525 | 41 | $ | 529 | 5,497 | $ | 69,734 | |||||||||||||||
Redemption Fees | — | — | — | — | — | 41 | ||||||||||||||||||
Reinvestment of dividends | 1 | 10 | 1 | 12 | 425 | 4,584 | ||||||||||||||||||
Shares redeemed | (22 | ) | (296 | ) | – | (1 | ) | (4,118 | ) | (50,994 | ) | |||||||||||||
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|
|
|
|
|
|
|
| |||||||||||||
Net increase in shares outstanding | 94 | $ | 1,239 | 42 | $ | 540 | 1,804 | $ | 23,365 | |||||||||||||||
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| |||||||||||||
| Y Class | Investor Class | |||||||||||||||
Small Cap Value II Fund | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | — | $ | — | 13 | $ | 161 | ||||||||||
Reinvestment of dividends | 3 | 32 | 3 | 31 | ||||||||||||
Shares redeemed | — | — | (1 | ) | (6 | ) | ||||||||||
|
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|
|
|
|
| |||||||||
Net increase in shares outstanding | 3 | $ | 32 | 15 | $ | 186 | ||||||||||
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| |||||||||
50
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51
American Beacon Balanced FundSM
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 16.31 | $ | 14.27 | $ | 12.89 | $ | 12.62 | $ | 11.83 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.38 | 0.30 | 0.32 | 0.32 | 0.35 | |||||||||||||||
Net gains from investments (both realized and unrealized) | 1.35 | 2.35 | 1.38 | 0.29 | 1.10 | |||||||||||||||
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| |||||||||||
Total income from investment operations | 1.73 | 2.65 | 1.70 | 0.61 | 1.45 | |||||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.42 | ) | (0.30 | ) | (0.32 | ) | (0.34 | ) | (0.66 | ) | ||||||||||
Distributions from net realized gains | (0.83 | ) | (0.31 | ) | — | — | — | |||||||||||||
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| |||||||||||
Total distributions | (1.25 | ) | (0.61 | ) | (0.32 | ) | (0.34 | ) | (0.66 | ) | ||||||||||
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| |||||||||||
Net asset value, end of period | $ | 16.79 | $ | 16.31 | $ | 14.27 | $ | 12.89 | $ | 12.62 | ||||||||||
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| |||||||||||
Total return A | 11.15 | % | 19.04 | % | 13.23 | % | 4.87 | % | 12.47 | % | ||||||||||
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| |||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 74,422 | $ | 60,916 | $ | 40,938 | $ | 30,962 | $ | 33,405 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.58 | % | 0.60 | % | 0.59 | % | 0.58 | % | 0.58 | % | ||||||||||
Expenses, net of reimbursements | 0.58 | % | 0.60 | % | 0.59 | % | 0.58 | % | 0.58 | % | ||||||||||
Net investment income, before reimbursements or recoupments | 2.24 | % | 1.86 | % | 2.27 | % | 2.49 | % | 2.67 | % | ||||||||||
Net investment income, net of reimbursements or recoupments | 2.24 | % | 1.86 | % | 2.27 | % | 2.49 | % | 2.67 | % | ||||||||||
Portfolio turnover rate | 34 | % | 56 | % | 58 | % | 47 | % | 40 | % | ||||||||||
| 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. |
52
American Beacon Balanced 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, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 16.37 | $ | 14.32 | $ | 12.93 | $ | 12.78 | $ | 12.20 | $ | 14.98 | $ | 13.16 | $ | 11.93 | $ | 11.66 | $ | 10.96 | $ | 15.65 | $ | 13.73 | $ | 12.36 | $ | 12.11 | $ | 11.35 | |||||||||||||||||||||||||||||
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| 0.40 | 0.39 | 0.17 | 0.36 | 0.16 | 0.42 | 0.26 | 0.23 | 0.25 | 0.25 | 0.18 | (0.12 | ) | 0.42 | 0.41 | 0.32 | |||||||||||||||||||||||||||||||||||||||||||
| 1.31 | 2.26 | 1.51 | 0.24 | 0.57 | 1.11 | 2.13 | 1.30 | 0.28 | 1.04 | 1.39 | 2.60 | 1.14 | 0.11 | 1.01 | ||||||||||||||||||||||||||||||||||||||||||||
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| 1.71 | 2.65 | 1.68 | 0.60 | 0.73 | 1.53 | 2.39 | 1.53 | 0.53 | 1.29 | 1.57 | 2.48 | 1.56 | 0.52 | 1.33 | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.42 | ) | (0.29 | ) | (0.29 | ) | (0.45 | ) | (0.15 | ) | (0.37 | ) | (0.26 | ) | (0.30 | ) | (0.26 | ) | (0.59 | ) | (0.35 | ) | (0.25 | ) | (0.19 | ) | (0.27 | ) | (0.57 | ) | |||||||||||||||||||||||||||||
| (0.83 | ) | (0.31 | ) | — | — | — | (0.83 | ) | (0.31 | ) | — | — | — | (0.83 | ) | (0.31 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||
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| (1.25 | ) | (0.60 | ) | (0.29 | ) | (0.45 | ) | (0.15 | ) | (1.20 | ) | (0.57 | ) | (0.30 | ) | (0.26 | ) | (0.59 | ) | (1.18 | ) | (0.56 | ) | (0.19 | ) | (0.27 | ) | (0.57 | ) | |||||||||||||||||||||||||||||
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| $ | 16.83 | $ | 16.37 | $ | 14.32 | $ | 12.93 | $ | 12.78 | $ | 15.31 | $ | 14.98 | $ | 13.16 | $ | 11.93 | $ | 11.66 | $ | 16.04 | $ | 15.65 | $ | 13.73 | $ | 12.36 | $ | 12.11 | |||||||||||||||||||||||||||||
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| 10.98 | % | 18.97 | % | 13.04 | % | 4.73 | % | 5.99 | %B | 10.75 | % | 18.65 | % | 12.86 | % | 4.52 | % | 12.06 | % | 10.58 | % | 18.52 | % | 12.62 | % | 4.33 | % | 11.96 | % | |||||||||||||||||||||||||||||
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| $ | 36,114 | $ | 7,263 | $ | 2,482 | $ | 401 | $ | 46 | $ | 165,808 | $ | 109,337 | $ | 89,272 | $ | 83,657 | $ | 84,500 | $ | 14,706 | $ | 6,353 | $ | 2,507 | $ | 3,536 | $ | 6,127 | |||||||||||||||||||||||||||||
| 0.67 | % | 0.68 | % | 0.69 | % | 1.48 | % | 0.68 | %C | 0.92 | % | 0.92 | % | 0.92 | % | 0.92 | % | 0.93 | % | 1.07 | % | 1.07 | % | 1.09 | % | 1.09 | % | 1.09 | % | |||||||||||||||||||||||||||||
| 0.68 | % | 0.70 | % | 0.69 | % | 0.70 | % | 0.68 | %C | 0.92 | % | 0.92 | % | 0.92 | % | 0.92 | % | 0.93 | % | 1.07 | % | 1.07 | % | 1.09 | % | 1.09 | % | 1.09 | % | |||||||||||||||||||||||||||||
| 2.01 | % | 1.71 | % | 2.08 | % | 1.55 | % | 2.54 | %C | 1.84 | % | 1.62 | % | 1.95 | % | 2.16 | % | 2.34 | % | 1.75 | % | 1.32 | % | 1.82 | % | 2.01 | % | 2.18 | % | |||||||||||||||||||||||||||||
| 2.01 | % | 1.69 | % | 2.08 | % | 2.34 | % | 2.54 | %C | 1.84 | % | 1.62 | % | 1.95 | % | 2.16 | % | 2.34 | % | 1.75 | % | 1.32 | % | 1.82 | % | 2.01 | % | 2.18 | % | |||||||||||||||||||||||||||||
| 34 | % | 56 | % | 58 | % | 47 | % | 40 | %D | 34 | % | 56 | % | 58 | % | 47 | % | 40 | % | 34 | % | 56 | % | 58 | % | 47 | % | 40 | % | |||||||||||||||||||||||||||||
53
American Beacon Balanced FundSM
Financial Highlights
(For a share outstanding throughout the period)
| A Class | ||||||||||||||||||||
| Year Ended October 31, | May 17 to Oct. 31, | |||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 14.97 | $ | 13.16 | $ | 12.06 | $ | 11.94 | $ | 11.50 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.33 | 0.22 | 0.33 | 0.38 | 0.02 | |||||||||||||||
Net gains from investments (both realized and unrealized) | 1.18 | 2.14 | 1.17 | 0.14 | 0.43 | |||||||||||||||
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Total income from investment operations | 1.51 | 2.36 | 1.50 | 0.52 | 0.45 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.36 | ) | (0.24 | ) | (0.40 | ) | (0.40 | ) | (0.01 | ) | ||||||||||
Distributions from net realized gains | (0.83 | ) | (0.31 | ) | — | — | — | |||||||||||||
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Total distributions | (1.19 | ) | (0.55 | ) | (0.40 | ) | (0.40 | ) | (0.01 | ) | ||||||||||
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Net asset value, end of period | $ | 15.29 | $ | 14.97 | $ | 13.16 | $ | 12.06 | $ | 11.94 | ||||||||||
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Total return A | 10.67 | % | 18.45 | % | 12.65 | % | 4.37 | % | 3.90 | %B | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 25,579 | $ | 6,284 | $ | 3,127 | $ | 588 | $ | 47 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.02 | % | 1.10 | % | 1.13 | % | 1.59 | % | 1.08 | %C | ||||||||||
Expenses, net of reimbursements | 1.04 | % | 1.10 | % | 1.09 | % | 1.10 | % | 1.08 | %C | ||||||||||
Net investment income, before reimbursements or recoupments | 1.68 | % | 1.31 | % | 1.62 | % | 1.47 | % | 1.51 | %C | ||||||||||
Net investment income, net of reimbursements or recoupments | 1.67 | % | 1.30 | % | 1.66 | % | 1.95 | % | 1.51 | %C | ||||||||||
Portfolio turnover rate | 34 | % | 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. |
54
American Beacon Balanced 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, | ||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011 | 2010 | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||||||||||||||||
| $ | 15.13 | $ | 13.33 | $ | 12.13 | $ | 11.92 | $ | 11.32 | $ | 15.44 | $ | 13.54 | $ | 12.27 | $ | 12.02 | $ | 11.31 | |||||||||||||||||||
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| 0.21 | 0.17 | 0.15 | 0.20 | 0.01 | 0.39 | 0.27 | 0.31 | 0.34 | 0.35 | |||||||||||||||||||||||||||||
| 1.20 | 2.11 | 1.29 | 0.22 | 0.59 | 1.28 | 2.27 | 1.34 | 0.27 | 1.07 | |||||||||||||||||||||||||||||
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| 1.41 | 2.28 | 1.44 | 0.42 | 0.60 | 1.67 | 2.54 | 1.65 | 0.61 | 1.42 | |||||||||||||||||||||||||||||
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| (0.24 | ) | (0.17 | ) | (0.24 | ) | (0.21 | ) | — | (0.48 | ) | (0.33 | ) | (0.38 | ) | (0.36 | ) | (0.71 | ) | ||||||||||||||||||||
| (0.83 | ) | (0.31 | ) | — | — | — | (0.83 | ) | (0.31 | ) | — | — | — | |||||||||||||||||||||||||
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| (1.07 | ) | (0.48 | ) | (0.24 | ) | (0.21 | ) | — | (1.31 | ) | (0.64 | ) | (0.38 | ) | (0.36 | ) | (0.71 | ) | ||||||||||||||||||||
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| $ | 15.47 | $ | 15.13 | $ | 13.33 | $ | 12.13 | $ | 11.92 | $ | 15.80 | $ | 15.44 | $ | 13.54 | $ | 12.27 | $ | 12.02 | |||||||||||||||||||
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| 9.80 | % | 17.50 | % | 11.86 | % | 3.56 | % | 5.33 | %B | 11.40 | % | 19.32 | % | 13.55 | % | 5.09 | % | 12.84 | % | |||||||||||||||||||
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| $ | 32,045 | $ | 11,574 | $ | 3,579 | $ | 922 | $ | 1 | $ | 681,527 | $ | 640,579 | $ | 710,816 | $ | 734,927 | $ | 748,422 | |||||||||||||||||||
| 1.78 | % | 1.84 | % | 1.85 | % | 2.34 | % | 2.14 | %C | 0.32 | % | 0.33 | % | 0.32 | % | 0.33 | % | 0.33 | % | |||||||||||||||||||
| 1.79 | % | 1.85 | % | 1.83 | % | 1.82 | % | 1.86 | %C | 0.32 | % | 0.33 | % | 0.32 | % | 0.33 | % | 0.33 | % | |||||||||||||||||||
| 0.94 | % | 0.51 | % | 0.88 | % | 0.66 | % | 0.20 | %C | 2.45 | % | 2.29 | % | 2.57 | % | 2.75 | % | 2.92 | % | |||||||||||||||||||
| 0.93 | % | 0.50 | % | 0.90 | % | 1.18 | % | 0.48 | %C | 2.45 | % | 2.29 | % | 2.57 | % | 2.75 | % | 2.92 | % | |||||||||||||||||||
| 34 | % | 56 | % | 58 | % | 47 | % | 40 | %D | 34 | % | 56 | % | 58 | % | 47 | % | 40 | % | |||||||||||||||||||
55
American Beacon Mid-Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 14.33 | $ | 10.95 | $ | 9.73 | $ | 9.27 | $ | 7.57 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.12 | 0.13 | 0.14 | 0.09 | 0.08 | |||||||||||||||
Net gains from investments (both realized and unrealized) | 1.27 | 3.93 | 1.21 | 0.48 | 1.67 | |||||||||||||||
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Total income from investment operations | 1.39 | 4.06 | 1.35 | 0.57 | 1.75 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.20 | ) | (0.13 | ) | (0.11 | ) | (0.05 | ) | ||||||||||
Distributions from net realized gains | (0.85 | ) | (0.48 | ) | — | — | — | |||||||||||||
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Total distributions | (0.96 | ) | (0.68 | ) | (0.13 | ) | (0.11 | ) | (0.05 | ) | ||||||||||
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Redemption fees added to beneficial interestsB | — | — | — | — | — | |||||||||||||||
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Net asset value, end of period | $ | 14.76 | $ | 14.33 | $ | 10.95 | $ | 9.73 | $ | 9.27 | ||||||||||
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Total return C | 10.20 | % | 39.18 | % | 14.07 | % | 6.08 | % | 23.19 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 193,635 | $ | 72,207 | $ | 34,208 | $ | 33,441 | $ | 2,778 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.89 | % | 0.99 | % | 1.06 | % | 1.10 | % | 1.06 | % | ||||||||||
Expenses, net of reimbursements | 0.93 | % | 0.98 | % | 0.98 | % | 0.97 | % | 0.98 | % | ||||||||||
Net investment income (loss), before reimbursements or recoupments | 0.92 | % | 1.05 | % | 1.17 | % | 0.91 | % | 0.90 | % | ||||||||||
Net investment income, net of reimbursements or recoupments | 0.88 | % | 1.06 | % | 1.25 | % | 1.04 | % | 0.99 | % | ||||||||||
Portfolio turnover rate | 24 | % | 48 | % | 87 | % | 107 | % | 40 | % | ||||||||||
| A | Lee Munder Capital Group, LLC was added as an investment manager to the Mid-Cap Value Fund on July 1, 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 | Based on average shares outstanding. |
| E | Not annualized. |
| F | Annualized. |
| G | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
56
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, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 14.25 | $ | 10.92 | $ | 9.72 | $ | 9.27 | $ | 8.48 | $ | 14.47 | $ | 10.98 | $ | 9.71 | $ | 9.20 | $ | 7.54 | $ | 14.07 | $ | 10.81 | $ | 9.56 | $ | 9.12 | $ | 7.49 | |||||||||||||||||||||||||||||
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| 0.18 | 0.17 | 0.13 | 0.08 | 0.06 | 0.16 | 0.23 | 0.34 | (0.03 | )D | 0.06 | 0.11 | 0.11 | 0.05 | 0.07 | 0.07 | |||||||||||||||||||||||||||||||||||||||||||
| 1.19 | 3.86 | 1.21 | 0.48 | 0.73 | 1.21 | 3.83 | 1.00 | 0.63 | 1.65 | 1.17 | 3.83 | 1.23 | 0.45 | 1.61 | ||||||||||||||||||||||||||||||||||||||||||||
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| 1.37 | 4.03 | 1.34 | 0.56 | 0.79 | 1.37 | 4.06 | 1.34 | 0.60 | 1.71 | 1.28 | 3.94 | 1.28 | 0.52 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.11 | ) | (0.22 | ) | (0.14 | ) | (0.11 | ) | — | (0.10 | ) | (0.09 | ) | (0.07 | ) | (0.09 | ) | (0.05 | ) | (0.04 | ) | (0.20 | ) | (0.03 | ) | (0.08 | ) | (0.05 | ) | ||||||||||||||||||||||||||||||
| (0.85 | ) | (0.48 | ) | — | — | — | (0.85 | ) | (0.48 | ) | — | — | — | (0.85 | ) | (0.48 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||
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| (0.96 | ) | (0.70 | ) | (0.14 | ) | (0.11 | ) | — | (0.95 | ) | (0.57 | ) | (0.07 | ) | (0.09 | ) | (0.05 | ) | (0.89 | ) | (0.68 | ) | (0.03 | ) | (0.08 | ) | (0.05 | ) | ||||||||||||||||||||||||||||||
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| — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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| $ | 14.66 | $ | 14.25 | $ | 10.92 | $ | 9.72 | $ | 9.27 | $ | 14.89 | $ | 14.47 | $ | 10.98 | $ | 9.71 | $ | 9.20 | $ | 14.46 | $ | 14.07 | $ | 10.81 | $ | 9.56 | $ | 9.12 | |||||||||||||||||||||||||||||
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| 10.15 | % | 38.99 | % | 13.97 | % | 5.98 | % | 9.32 | %E | 9.99 | % | 38.69 | % | 13.84 | % | 6.49 | % | 22.77 | % | 9.58 | % | 38.43 | % | 13.44 | % | 5.65 | % | 22.53 | % | |||||||||||||||||||||||||||||
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| $ | 31,075 | $ | 2,814 | $ | 516 | $ | 52 | $ | 1 | $ | 246,405 | $ | 17,871 | $ | 4,157 | $ | 1,812 | $ | 35,223 | $ | 7,149 | $ | 728 | $ | 465 | $ | 37 | $ | 78 | |||||||||||||||||||||||||||||
| 0.98 | % | 1.11 | % | 1.28 | % | 11.62 | % | 1.05 | %F | 1.13 | % | 1.25 | % | 1.44 | % | 1.32 | % | 1.27 | % | 1.40 | % | 1.61 | % | 1.99 | % | 1.98 | % | 1.55 | % | |||||||||||||||||||||||||||||
| 0.98 | % | 1.08 | % | 1.06 | % | 1.06 | % | 1.01 | %F | 1.14 | % | 1.23 | % | 1.23 | % | 1.23 | % | 1.23 | % | 1.46 | % | 1.49 | % | 1.48 | % | 1.49 | % | 1.44 | % | |||||||||||||||||||||||||||||
| 0.80 | % | 0.79 | % | 0.82 | % | (9.44 | )% | 0.93 | %F | 0.61 | % | 0.68 | % | 0.75 | % | 1.33 | % | 0.70 | % | 0.35 | % | 0.46 | % | 0.10 | % | 0.21 | % | 0.36 | % | |||||||||||||||||||||||||||||
| 0.80 | % | 0.82 | % | 1.03 | % | 1.12 | % | 0.97 | %F | 0.60 | % | 0.70 | % | 0.96 | % | 1.42 | % | 0.75 | % | 0.30 | % | 0.58 | % | 0.61 | % | 0.69 | % | 0.47 | % | |||||||||||||||||||||||||||||
| 24 | % | 48 | % | 87 | % | 107 | % | 40 | %G | 24 | % | 48 | % | 87 | % | 107 | % | 40 | % | 24 | % | 48 | % | 87 | % | 107 | % | 40 | % | |||||||||||||||||||||||||||||
57
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, | |||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 14.09 | $ | 10.82 | $ | 9.61 | $ | 9.18 | $ | 9.00 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.14 | 0.09 | 0.11 | 0.01 | |||||||||||||||
Net gains from investments (both realized and unrealized) | 1.16 | 3.80 | 1.20 | 0.40 | 0.17 | |||||||||||||||
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Total income from investment operations | 1.29 | 3.94 | 1.29 | 0.51 | 0.18 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.19 | ) | (0.08 | ) | (0.08 | ) | — | |||||||||||
Distributions from net realized gains | (0.85 | ) | (0.48 | ) | — | — | — | |||||||||||||
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Total distributions | (0.95 | ) | (0.67 | ) | (0.08 | ) | (0.08 | ) | — | |||||||||||
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Redemption fees added to beneficial interestsB | — | — | — | — | — | |||||||||||||||
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Net asset value, end of period | $ | 14.43 | $ | 14.09 | $ | 10.82 | $ | 9.61 | $ | 9.18 | ||||||||||
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Total returnC | 9.68 | % | 38.39 | % | 13.56 | % | 5.49 | % | 2.00 | %E | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 18,345 | $ | 1,667 | $ | 264 | $ | 101 | $ | 18 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.33 | % | 1.48 | % | 1.61 | % | 3.44 | % | 1.51 | %F | ||||||||||
Expenses, net of reimbursements | 1.33 | % | 1.49 | % | 1.49 | % | 1.48 | % | 1.48 | %F | ||||||||||
Net investment income (loss), before reimbursements or recoupments | 0.42 | % | 0.44 | % | 0.56 | % | (1.36 | )% | 0.44 | %F | ||||||||||
Net investment income (loss), net of reimbursements or recoupments | 0.42 | % | 0.43 | % | 0.68 | % | 0.60 | % | 0.47 | %F | ||||||||||
Portfolio turnover rate | 24 | % | 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 | 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 | Based on average shares outstanding. |
| E | Not annualized. |
| F | Annualized. |
| G | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
58
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, | ||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||
| $ | 13.81 | $ | 10.70 | $ | 9.56 | $ | 9.18 | $ | 8.30 | $ | 14.35 | $ | 10.96 | $ | 9.73 | $ | 9.27 | $ | 7.59 | |||||||||||||||||||
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| 0.08 | 0.11 | 0.06 | 0.05 | (0.01 | ) | 0.18 | 0.15 | 0.24 | 0.15 | 0.10 | ||||||||||||||||||||||||||||
| 1.09 | 3.67 | 1.15 | 0.38 | 0.89 | 1.25 | 3.94 | 1.14 | 0.43 | 1.66 | |||||||||||||||||||||||||||||
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| 1.17 | 3.78 | 1.21 | 0.43 | 0.88 | 1.43 | 4.09 | 1.38 | 0.58 | 1.76 | |||||||||||||||||||||||||||||
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| (0.05 | ) | (0.19 | ) | (0.07 | ) | (0.05 | ) | — | (0.13 | ) | (0.22 | ) | (0.15 | ) | (0.12 | ) | (0.08 | ) | ||||||||||||||||||||
| (0.85 | ) | (0.48 | ) | — | — | — | (0.85 | ) | (0.48 | ) | — | — | — | |||||||||||||||||||||||||
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| (0.90 | ) | (0.67 | ) | (0.07 | ) | (0.05 | ) | — | (0.98 | ) | (0.70 | ) | (0.15 | ) | (0.12 | ) | (0.08 | ) | ||||||||||||||||||||
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| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| $ | 14.08 | $ | 13.81 | $ | 10.70 | $ | 9.56 | $ | 9.18 | $ | 14.80 | $ | 14.35 | $ | 10.96 | $ | 9.73 | $ | 9.27 | |||||||||||||||||||
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| 8.88 | % | 37.32 | % | 12.75 | % | 4.64 | % | 10.60 | %E | 10.53 | % | 39.43 | % | 14.34 | % | 6.20 | % | 23.28 | % | |||||||||||||||||||
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| $ | 5,104 | $ | 905 | $ | 254 | $ | 22 | $ | 1 | $ | 122,292 | $ | 125,744 | $ | 76,273 | $ | 56,963 | $ | 64,012 | |||||||||||||||||||
| 2.12 | % | 2.25 | % | 2.46 | % | 19.14 | % | 3.20 | %F | 0.65 | % | 0.73 | % | 0.78 | % | 0.83 | % | 0.77 | % | |||||||||||||||||||
| 2.13 | % | 2.24 | % | 2.22 | % | 2.24 | % | 2.24 | %F | 0.65 | % | 0.73 | % | 0.78 | % | 0.83 | % | 0.77 | % | |||||||||||||||||||
| (0.33 | )% | (0.27 | )% | (0.40 | )% | (16.96 | )% | (1.32 | )%F | 1.21 | % | 1.32 | % | 1.46 | % | 1.34 | % | 1.19 | % | |||||||||||||||||||
| (0.34 | )% | (0.26 | )% | (0.15 | )% | (0.06 | )% | (0.36 | )%F | 1.21 | % | 1.32 | % | 1.46 | % | 1.34 | % | 1.19 | % | |||||||||||||||||||
| 24 | % | 48 | % | 87 | % | 107 | % | 40 | %G | 24 | % | 48 | % | 87 | % | 107 | % | 40 | % | |||||||||||||||||||
59
American Beacon Small Cap Value II FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Y Class | Investor Class | |||||||||||||||||||||||
| Year Ended October 31, | Nov. 15 to Oct. 31, | Year Ended October 31, | Nov. 15 to Oct. 31, | |||||||||||||||||||||
| 2014 | 2013 | 2012A | 2014 | 2013 | 2012A | |||||||||||||||||||
Net asset value, beginning of period | $ | 14.08 | $ | 10.70 | $ | 10.00 | $ | 14.00 | $ | 10.67 | $ | 10.00 | ||||||||||||
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| |||||||||||||
Income from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) | 0.02 | 0.04 | 0.04 | (0.01 | ) | 0.01 | 0.01 | |||||||||||||||||
Net gains on investments (both realized and unrealized) | 1.15 | 3.54 | 0.67 | 1.13 | 3.52 | 0.67 | ||||||||||||||||||
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Total income from investment operations | 1.17 | 3.58 | 0.71 | 1.12 | 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 | (0.76 | ) | (0.15 | ) | — | (0.76 | ) | (0.15 | ) | — | ||||||||||||||
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| |||||||||||||
Total distributions | (0.76 | ) | (0.20 | ) | (0.01 | ) | (0.76 | ) | (0.20 | ) | (0.01 | ) | ||||||||||||
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Net asset value, end of period | $ | 14.49 | $ | 14.08 | $ | 10.70 | $ | 14.36 | $ | 14.00 | $ | 10.67 | ||||||||||||
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| |||||||||||||
Total return B | 8.54 | % | 33.93 | % | 7.10 | %C | 8.22 | % | 33.55 | % | 6.82 | %C | ||||||||||||
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| |||||||||||||
Ratios and supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,274 | $ | 2,268 | $ | 1,693 | $ | 2,536 | $ | 2,364 | $ | 1,640 | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Expenses, before reimbursements | 2.00 | % | 2.82 | % | 4.44 | %D | 2.28 | % | 3.11 | % | 4.80 | %D | ||||||||||||
Expenses, net of reimbursements | 1.09 | % | 1.09 | % | 1.06 | %D | 1.37 | % | 1.37 | % | 1.33 | %D | ||||||||||||
Net investment (loss), before reimbursements | (0.78 | )% | (1.38 | )% | (3.03 | )%D | (1.01 | )% | (1.68 | )% | (3.39 | )%D | ||||||||||||
Net investment income (loss), net of reimbursements | 0.13 | % | 0.35 | % | 0.35 | %D | (0.10 | )% | 0.06 | % | 0.08 | %D | ||||||||||||
Portfolio turnover rate | 107 | % | 71 | % | 82 | %C,E | 107 | % | 71 | % | 82 | %C,E | ||||||||||||
| A | November 15, 2011 is the inception date of the Small Cap Value II 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 | Not annualized. |
| D | Annualized. |
| E | Portfolio turnover rate is for the period from November 15, 2011 through October 31, 2012. |
60
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2014 (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, 2014. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2014.
The Funds designated the following items with regard to distributions paid during the year ended December 31, 2013. 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 | 44.63 | % | 78.28 | % | 74.38 | % | ||||||
Qualified Dividend Income | 68.34 | % | 100.00 | % | 0.00 | % | ||||||
The Balanced Fund designated $34,363,414 as long-term capital gains distributions and $15,651,363 as short-term capital gain distributions for the year ended October 31, 2014.
The Mid-Cap Value Fund designated $9,938,976 as long-term capital gains distributions and $4,349,349 as short-term capital gain distributions for the year ended October 31, 2014.
The Small Cap Value II Fund designated $287,285 as long-term capital gains and $145,830 as short term capital gains distributions for the year ended October 31, 2014.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
61
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
At in-person meetings held on May 15, 2014 and June 5, 2014 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 5 meeting, approved: (1) the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) and American Beacon Select Funds (“Select Trust”) on behalf of each of their series that had been operational for at least one year (collectively, the “Funds”); and (2) the renewal of the investment advisory agreements (each an “Investment Advisory Agreement”) among the Manager, each subadvisor and, as applicable, the Beacon Trust, other than the Investment Advisory Agreements with subadvisors with respect to which the Board approved a new Investment Advisory Agreement within the past year (each a “subadvisor”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board to consider the renewal of these Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”), Morningstar, Inc. (“Morningstar”), Bobroff Consulting, Inc. and Callan Associates, Inc. (“Callan”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee coordinated the production of information from Lipper and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, 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 on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
| • | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Lipper and Morningstar, and to the performance of any similar accounts managed by the firm; |
| • | for Funds having multiple firms managing assets, information regarding the performance of the individual firms with respect to their allocated portions of a Fund’s portfolio, and the performance of certain relevant benchmarks and other similar accounts managed by the firm; |
| • | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with those of comparable mutual funds, including peer group averages and fee and expense analyses provided by Lipper and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided; |
| • | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to the expense caps; |
| • | the Manager’s profitability with respect to the services that it provided to each Fund; |
| • | 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 evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
| • | information regarding the securities lending, cash management, administrative and accounting-related services that the Manager provides to certain Funds and the fees that the Manager receives for such services, including Callan’s review of the Funds’ securities lending program; and |
| • | information regarding a firm’s financial condition, the personnel who are or will be assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, disaster recovery plans, insurance coverage, material pending litigation, code of ethics, compliance matters, trading activities, and actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds. |
The Board considered that the Manager provides management and administrative services to the Funds pursuant to separate agreements. The Board noted, in this regard, that many mutual funds have a single contract governing both types of services, and observed that the actual management fee rates provided by Lipper for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
Certain firms may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of those firms based on information that was provided. For each Fund with more than one class of shares, the class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which, in most cases, was the Institutional Class. For the American Beacon Holland Large Cap Growth Fund, the comparison was made using the Investor Class of shares due to the short period of time that its Institutional Class of shares has been in existence. 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 certain factors the Board considered in connection with its renewal and approval 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.
62
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (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 Meetings, 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) 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 clients); (5) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; 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 staffing 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) as well as the Fund’s Morningstar rating. 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 certain Funds. 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 Manager represented that 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 share 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 and, in some instances, 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 certain Funds. In considering the management fees for overseeing the securities lending program, the Board reviewed the analysis of the securities lending program prepared by Callan. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the fee rates charged by 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 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.
63
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
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, certain subadvisors have agreed to take into account assets of American Airlines Group 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 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 Board noted that certain subadvisors benefit from soft dollar arrangements for third party and proprietary research.
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 subadvisors reimburse the Manager for certain costs relating to distribution activities for the Funds, as well as representations by all such subadvisors that they would not reduce their fee rates in lieu of providing such reimbursements. 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 and Lipper performance group, with the 1st Quintile representing the top twenty percent of the universe or group based on performance and the 5th Quintile representing the bottom twenty percent of the universe or group based on performance. 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 and Lipper expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. 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. For all Funds, other than for the American Beacon Money Market Select Fund and American Beacon U.S. Government Money Market Select Fund for which information was not available, 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 Balanced Fund
In considering the renewal of the Management Agreement for the American Beacon Balanced Fund, the Trustees considered the following additional factors:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
Compared to Lipper Expense Universe | 1st Quintile | |
Compared to Lipper Expense Group | 1st Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Low Expense Ratio |
64
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 2nd Quintile | |
Compared to Lipper Performance Group | 2nd Quintile |
(1) The Fund was designed by the Manager to be benchmarked against a blend of 60% Russell Large Cap Value Index and 40% Barclays Capital Aggregate Index, whereas the Lipper universe is the institutional Mixed-Asset Target Allocation growth funds universe which is defined by Lipper as “A fund that, by portfolio practice, maintains a mix of between 60%-80% equity securities, with the remainder invested in bonds, cash, and cash equivalents” and thus peer performance comparisons are not as meaningful; (2) the Manager’s representation that a comparison of its performance relative to the Manager’s benchmark index rather than its Lipper performance universe may be more appropriate because the Manager only manages an investment grade fixed income portion of the Fund; and (3) the Manager outperformed its applicable benchmark index for the five-year period ended March 31, 2014.
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:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Barrow | 5 years | 4th Quintile | ||
Brandywine | 5 years | 2nd Quintile | ||
Hotchkis* | 5 years | 1st Quintile | ||
* Hotchkis equity only return compared to the Lipper large cap value performance universe | ||||
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; and (2) the Manager’s recommendation to continue to retain each subadvisor, based upon, among other factors, the relative performance impact of the investment restrictions the Manager places on the subadvisors.
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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
Compared to Lipper Expense Universe | 3rd Quintile | |
Compared to Lipper Expense Group | 3rd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Average Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 1st Quintile | |
Compared to Lipper Performance Group | 1st Quintile |
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:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Barrow | 5 years | 2nd Quintile | ||
Lee Munder* | 1 year | 4th Quintile | ||
Pzena | 5 years | 1st Quintile | ||
* Lee Munder does not yet have a 5-year performance record. | ||||
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; and (2) 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
65
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Funds (Unaudited)
Compared to Lipper Expense Universe | 3rd Quintile | |
Compared to Lipper Expense Group | 2nd Quintile | |
Morningstar Fee Level Ranking – Y Class | Average Expense Ratio |
Lipper Fund Performance Analysis (one-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 3rd Quintile | |
Compared to Lipper Performance Group | 3rd Quintile |
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:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Dean | 1 Year | 3rd Quintile | ||||
Fox | 1 Year | 4th Quintile | ||||
Signia | 1 Year | 1st Quintile |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; (2) 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.
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.
66
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 thirty-three 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** (56) | 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*** (77) | 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 (70) | 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 (53) | 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 (60) | 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 (72) | 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 (71) | 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 (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 | 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). | ||
67
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 | |||
| Gene L. Needles, Jr. (59) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 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 (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
| Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, 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 (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
| Wyatt L. Crumpler (48) | 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 (44) | 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 (60) | 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 (53) | 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 (50) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
| Jeffrey K. Ringdahl (39) | 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 (51) | 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 (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
| Sonia L. Bates (57) | 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. | ||
| * | As of 11/12/2014, the Board 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 75. |
| ** | 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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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 | |
 |  | |
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, 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 10/14
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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| Additional Information | 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, 2014 |
 |
In the U.S., economic data continues to outpace the global recovery efforts. In response, fiscal policymakers abroad began to act amid underwhelming economic data and forecasts. For example, officials at the European Central Bank, Bank of Japan and the People’s Bank of China all took definitive steps to head off their particular challenges with accommodative economic policy and business-friendly reforms.
At the same time, geopolitical tensions, particularly in the Middle East and in Russia, continue to provide an uneasy backdrop as both developed and emerging economies continue to find their foothold in the global economic recovery. Global growth is increasingly uneven as the U.S. and the United Kingdom lead the global recovery. | |
| The decisions made in Washington will likely have an impact on the world’s economies as the Federal Reserve Bank issued reassurances that U.S. monetary policy would remain accommodative in spite of the end of the quantitative easing program in October. | ||
We have worked diligently to identify asset managers with the expertise to understand the changes in the global marketplace and decipher the ever-changing international news in the best interest of our shareholders. For the 12 months ended October 31, 2014:
| • | The American Beacon Emerging Markets Fund (Investor Class) returned 2.70%. |
| • | The American Beacon International Equity Fund (Investor Class) returned -1.54%. |
Thank you for your continued investment and confidence 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
October 31, 2014 (Unaudited)
Equities rallied in late 2013, as evidence of a strengthening global economy continued to mount. Despite a government shutdown that threatened to dampen confidence, U.S. stocks pushed higher behind a persistent flow of positive economic data. Meanwhile, central banks across Europe cut rates in an attempt to boost struggling economies amid low inflation. The MSCI Emerging Markets Index returned 0.64% for the trailing 12-month period ending October 31, 2014, while the developed market MSCI World Index returned 8.67% during the same period.
In emerging markets, India’s newly-installed central bank governor continued to fight accelerating inflation aggressively, while further easing emergency liquidity curbs that were imposed earlier in the year to support the rupee. Meanwhile, China’s manufacturing activity picked up, implying that the sector’s recovery was still on track. Investors became unnerved before year end, however, when the People’s Bank of China injected cash into the country’s financial system. The move was aimed at easing a seasonal liquidity squeeze that caused borrowing costs to surge to their highest level since the summer’s unprecedented cash crunch. Brazil continued to struggle through the end of 2013 amid speculation that government deficits may lead to a lower credit rating.
Equities edged up during the opening months of 2014, as policymakers around the world acted to support a strengthening global economy despite mounting geopolitical risks. Among emerging markets, disappointing economic data and corporate news from China weighed on stocks, commodities and the country’s currency, the yuan. Meanwhile, Russian equities dropped precipitously as political tensions surrounding the country’s gradual control of the Crimean peninsula escalated.
By April, volatility subsided, interest rates remained low and investors’ appetite for risk began to increase. Emerging-market stocks led global equity returns at the beginning of the summer. Reports that China’s manufacturing activity expanded in June added to signs that the government’s efforts to curtail a slowdown were helping to stabilize the world’s second-biggest economy. India’s manufacturing activity was also positive, with more support coming from parliamentary results that boosted investor confidence about policy efficacy and business-friendly reforms.
By the end of the summer, global equities were mostly subdued amid growing geopolitical risks and underwhelming economic data. Emerging-market stocks struggled at the end of the period, despite providing a bright spot for many investors in the first half of the year. Pro-democracy demonstrations and worse-than-expected data tempered Chinese markets. Stocks in Russia extended their decline amid speculation that the country’s central bank could introduce capital controls to stem the flow of money out of the country and the European Union could introduce more sanctions due to growing clashes in Ukraine. Brazil’s market also dropped at the end of the period after President Dilma Rousseff’s re-election dashed investors’ hopes for significant policy changes over the near term.
2
American Beacon Emerging Markets FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Emerging Markets Fund (the “Fund”) returned 2.70% for the twelve months ended October 31, 2014. The Fund outperformed the MSCI Emerging Markets Index (the “Index”) return of 0.64%.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/04 Through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional | 3.13 | % | 4.53 | % | 9.62 | % | $ | 25,045 | ||||||||
Y Class (1,2,8) | 2.94 | % | 4.38 | % | 9.54 | % | 24,871 | |||||||||
Investor | 2.70 | % | 4.08 | % | 9.23 | % | 24,176 | |||||||||
A Class with sales | -3.20 | % | 2.84 | % | 8.58 | % | 22,780 | |||||||||
A Class without sales | 2.74 | % | 4.07 | % | 9.22 | % | 24,162 | |||||||||
C Class with sales | 1.00 | % | 3.43 | % | 8.88 | % | 23,425 | |||||||||
C Class without sales | 2.00 | % | 3.43 | % | 8.88 | % | 23,425 | |||||||||
AMR Class (1,8) | 3.16 | % | 4.56 | % | 9.77 | % | 25,397 | |||||||||
MSCI Emg Mkts Index (7) | 0.64 | % | 4.64 | % | 10.54 | % | 27,251 | |||||||||
| 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 10/31/04 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 10/31/04. A portion of the fees charged to the Y Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. |
| 3. | Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase. |
| 5. | A portion of the fees charged to the Institutional Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. |
| 6. | A portion of the fees charged to the Investor Class of the Fund has been waived since 2010. Performance prior to waiving fees was lower than the actual returns shown since 2010. |
| 7. | 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. One cannot directly invest in an index. |
| 8. | The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, C, and AMR Class shares was 1.65%, 1.76%, 1.96%, 2.10%, 3.17%, and 1.40%, 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 primarily due to stock selection, though country allocation also added value during the period.
Stock selections in India and Brazil added value during the period, offsetting the impact of lagging selections in Russia and the Czech Republic. Positive contributors in India included Reliance Infrastructure Ltd. (up 58.1%) and UPL Ltd (up 132.2%), while in Brazil, Embraer SA and Marfrig
3
American Beacon Emerging Markets FundSM
Performance Overview
October 31, 2014 (Unaudited)
Global Foods SA (up 32.7% and 18.6%, respectively) added value. Poorly performing securities, including Gazprom OAO and Lukoil OAO (down 24.8% and 31.4%, respectively) in Russia, and O2 Czech Republic AS (down 27.6%) in the Czech Republic, hurt relative performance during the period.
Relative contribution from country allocation was positive for the twelve-month period, benefiting from overweighting India (up 29.5%) and underweighting Chile (down 15.4%). Underweighting Taiwan (up 10.1%) and overweighting Brazil (down 9.9%) detracted from 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) | ||||||||
Samsung Electronics Co. Ltd. | 2.7 | |||||||
China Mobile Ltd. | 2.0 | |||||||
KB Financial Group, Inc. | 1.8 | |||||||
Petroleo Brasileiro S.A., Sponsored ADR | 1.8 | |||||||
Gazprom OAO, Sponsored ADR | 1.7 | |||||||
Shinhan Financial Group Co. Ltd. | 1.4 | |||||||
POSCO | 1.3 | |||||||
China Construction Bank H | 1.3 | |||||||
Cemex, S.A.B. de C.V., Sponsored ADR | 1.2 | |||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 1.2 | |||||||
Total Fund Holdings | 317 | |||||||
Sector Allocation (% Equities)
Financials | 29.2 | |||
Consumer Discretionary | 12.0 | |||
Industrials | 9.8 | |||
Information Technology | 9.7 | |||
Telecommunication Services | 9.6 | |||
Materials | 9.1 | |||
Energy | 8.3 | |||
Consumer Staples | 5.9 | |||
Utilities | 4.3 | |||
Health Care | 2.1 |
Country Allocation (% Equities)
Hong Kong/China | 20.3 | |||
South Korea | 18.0 | |||
Brazil | 13.6 | |||
India | 9.1 | |||
Taiwan | 6.1 | |||
Mexico | 5.4 | |||
Russia | 4.8 | |||
Thailand | 2.7 | |||
Turkey | 2.4 | |||
South Africa | 2.3 | |||
Poland | 1.6 | |||
Austria | 1.6 | |||
Hungary | 1.5 | |||
Malaysia | 1.4 | |||
Philippines | 1.3 | |||
Colombia | 1.1 | |||
Czech Republic | 1.0 | |||
Singapore | 0.8 | |||
Indonesia | 0.7 | |||
Chile | 0.7 | |||
Luxembourg | 0.6 | |||
United Kingdom | 0.5 | |||
Peru | 0.5 | |||
Switzerland | 0.4 | |||
Qatar | 0.4 | |||
Argentina | 0.3 | |||
Netherlands | 0.2 | |||
Spain | 0.2 | |||
United States | 0.2 | |||
United Arab Emirates | 0.1 | |||
Greece | 0.1 | |||
Japan | 0.1 |
4
American Beacon Emerging Markets FundSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.09 | $ | 6.87 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.45 | $ | 6.82 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,034.05 | $ | 7.43 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.90 | $ | 7.38 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,033.11 | $ | 9.17 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.18 | $ | 9.10 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,033.11 | $ | 8.71 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.64 | $ | 8.64 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,035.63 | $ | 6.77 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.55 | $ | 6.72 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,029.06 | $ | 12.53 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,012.85 | $ | 12.43 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.34%, 1.45%, 1.79%, 1.70%, 2.45%, and 1.32% 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, 2014 (Unaudited)
After a liquidity-fueled ascent in the first half of 2014, international equities reached a plateau during the third quarter of the calendar year and continued to decline slightly during October 2014. Every major currency depreciated versus the U.S. dollar during the fiscal year, thus diminishing returns on overseas assets from the perspective of a U.S. dollar-denominated investor. The two worst performing sectors in the MSCI EAFE Index were Materials and Energy while the two best performing sectors were Health Care and Utilities. The MSCI EAFE Index posted a -0.60% return for the trailing 12-month period ending October 31, 2014, but rose 6.8% in local currency.
Equities edged up during the opening months of 2014, as policymakers around the world acted to support a strengthening global economy despite mounting geopolitical risks. In spite of an unseasonably harsh winter that dampened consumer sentiment, U.S. stocks rallied behind encouraging economic data. In Europe, the European Central Bank (ECB) maintained record-low interest rates despite below-target inflation growth in the eurozone, while business sentiment in Japan remained weak ahead of the country’s April 1 sales-tax increase.
The United Kingdom and U.S. economies appeared further ahead in the monetary policy cycle than their peers in the G-7 (International Monetary Fund’s “Group of Seven” major advanced economies) during the period. The ECB continued to keep interest rates low as officials tried to revive the region’s economy with a new round of emergency measures. ECB president, Mario Draghi, announced details surrounding lending to banks under the condition they supply the money to households and companies. U.S. stocks rallied in the early summer months as investors largely shrugged off reports that the economy shrank in the first quarter. Consumer sentiment in Japan rebounded despite April’s sales-tax increase, which provided evidence of the country’s economic resilience. In the eurozone, low inflation and shrinking private-sector lending persisted, causing the ECB to take the extraordinary step of setting a negative deposit rate.
By the end of the summer, global equities were mostly subdued and continued to decline through the end of the fiscal year. Negative sentiment surfaced amid growing geopolitical risks including escalating tensions in the Middle East, Ukraine and Hong Kong, and underwhelming economic data from major developed and emerging markets. Despite improvements in consumer spending and manufacturing in the U.S., the Federal Reserve renewed its pledge to keep interest rates near zero for a “considerable time.” The Fed also repeated concerns about the unemployment rate and significant underutilization of labor resources.
6
American Beacon International Equity FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the International Equity Fund (the “Fund”) returned -1.54% for the twelve months ended October 31, 2014. The Fund underperformed the MSCI EAFE Index (the “Index”) return of -0.60%.
Comparison of Change in Value of a $10,000 Investment
For The Period From 10/31/04 Through 10/31/14
Total Returns for the Period ended 10/31/14
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,8) | -1.18 | % | 7.61 | % | 6.10 | % | $ | 18,086 | ||||||||
Y Class (1,2,8) | -1.31 | % | 7.49 | % | 6.05 | % | 17,992 | |||||||||
Investor Class (1,8) | -1.54 | % | 7.22 | % | 5.78 | % | 17,533 | |||||||||
Advisor Class (1,3,8) | -1.64 | % | 7.03 | % | 5.53 | % | 17,129 | |||||||||
Retirement Class (1,4,8) | -1.93 | % | 6.86 | % | 5.44 | % | 16,990 | |||||||||
A Class with sales charge (1,5,8) | -7.32 | % | 5.82 | % | 5.08 | % | 16,413 | |||||||||
A Class without sales charge (1,5,8) | -1.65 | % | 7.08 | % | 5.71 | % | 17,416 | |||||||||
C Class with sales charge (1,6,8) | -3.36 | % | 6.39 | % | 5.37 | % | 16,865 | |||||||||
C Class without sales charge (1,6,8) | -2.36 | % | 6.39 | % | 5.37 | % | 16,865 | |||||||||
AMR Class (1,8) | -0.88 | % | 7.89 | % | 6.39 | % | 18,572 | |||||||||
MSCI EAFE Index (7) | -0.60 | % | 6.52 | % | 5.81 | % | 17,586 | |||||||||
| 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 ten-year period represents the total returns achieved by the Institutional Class from 10/31/04 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 10/31/04. |
| 3. | A portion of the fees charged to the Advisor Class of the Fund was waived from 2006 through 2007 and in 2009. Performance prior to waiving fees was lower than the actual returns shown for those periods. |
| 4. | Fund performance for the ten-year period represents the total returns achieved by Advisor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Retirement Class of the Fund was waived from 2010 through 2012 and partially recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns show from 2010 through 2012. |
| 5. | Fund performance for the five-year and ten-year periods represents the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund was waived from 2010 through 2012 and partially recovered in 2013. Performance prior to waiving fees was lower than the actual returns show from 2010 through 2012. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund was waived from 2010 through 2012 and partially recovered in 2013. Performance prior to waiving fees was lower than the actual returns show from 2010 through 2012. 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 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%,0.86%,1.05%, 1.21%, 1.47%,1.12%, 1.86%, and 0.44%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
7
American Beacon International Equity FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Fund underperformed the Index over the twelve-month period due to stock selection, as country allocation contributed positively to the Fund’s relative performance.
Stock selections within the United Kingdom and the Netherlands contributed to the Fund’s relative underperformance, despite value added from stock selections in Japan. Lagging securities in the United Kingdom included Tesco PLC (down 51.2%) and Balfour Beatty PLC (down 41.9%), while in the Netherlands, SBM Offshore NV (down 40.2%) and TNT Express NV (down 35.7%) detracted value. The Fund’s investments in Japan, including KDDI Corp (up 18.4%) and Konica Minolta Inc. (up 38.8%) added value during the prior twelve months.
From a country allocation perspective, the Fund benefited from underweighting Japan (down 0.4%) and overweighting Israel (up 28.0%). Underweighting Denmark (up 23.4%) detracted from relative performance during 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 | 2.9 | |||||||
Bayer AG Reg | 2.2 | |||||||
Lloyds Banking Group PLC | 2.2 | |||||||
British American Tobacco PLC | 2.0 | |||||||
KDDI Corp. | 1.9 | |||||||
Sanofi | 1.8 | |||||||
Royal Dutch Shell PLC | 1.8 | |||||||
BNP Paribas | 1.7 | |||||||
Teva Pharmaceutical Industries Ltd., Sponsored ADR | 1.7 | |||||||
Akzo Nobel | 1.6 | |||||||
Total Fund Holdings | 170 |
Sector Allocation (% Equities)
Financials | 23.1 | |||
Consumer Discretionary | 14.0 | |||
Health Care | 13.1 | |||
Industrials | 11.7 | |||
Energy | 8.9 | |||
Telecommunication Services | 8.1 | |||
Materials | 8.1 | |||
Consumer Staples | 7.4 | |||
Information Technology | 4.7 | |||
Utilities | 0.9 |
Country Allocation (% Equities)
United Kingdom | 23.0 | |||
Japan | 16.1 | |||
France | 11.0 | |||
Switzerland | 9.2 | |||
Germany | 7.5 | |||
Netherlands | 6.5 | |||
South Korea | 5.1 | |||
Hong Kong/China | 2.4 | |||
Italy | 2.4 | |||
Canada | 2.3 | |||
Singapore | 2.2 | |||
Sweden | 2.2 | |||
Spain | 1.9 | |||
Israel | 1.7 | |||
Belgium | 1.4 | |||
Australia | 1.1 | |||
Norway | 0.9 | |||
Finland | 0.8 | |||
Ireland | 0.6 | |||
Jersey | 0.5 | |||
Portugal | 0.3 | |||
Denmark | 0.3 | |||
Austria | 0.3 | |||
Luxembourg | 0.2 | |||
Greece | 0.1 |
8
American Beacon International Equity FundSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14-10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 949.84 | $ | 3.49 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.63 | $ | 3.62 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 949.26 | $ | 4.03 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.07 | $ | 4.18 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 947.99 | $ | 5.16 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.91 | $ | 5.35 | |||||||||
Advisor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 947.27 | $ | 5.84 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.21 | $ | 6.06 | |||||||||
Retirement Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 946.07 | $ | 7.41 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.59 | $ | 7.68 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 947.52 | $ | 5.55 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.51 | $ | 5.75 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 951.41 | $ | 2.12 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.04 | $ | 2.19 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 944.32 | $ | 9.21 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.73 | $ | 9.55 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.71%, 0.82%, 1.05%, 1.19%, 1.51%, 1.13%, 1.88%, and 0.43% 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, 2014, 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, 2014, 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, 2014, 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, 2014
10
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Argentina - 0.25% |
| |||||||
Common Stocks - (Cost $158) |
| |||||||
YPF S.A., Sponsored ADRA | 6,401 | $ | 225 | |||||
|
| |||||||
Preferred Stocks - (Cost $131) | ||||||||
Nortel Inversora S.A., B Shares, ADRA | 4,450 | 101 | ||||||
|
| |||||||
Total Argentina |
| $ | 326 | |||||
|
| |||||||
Austria - 1.51% | ||||||||
Common Stocks - (Cost $2,739) |
| |||||||
Erste Group Bank AGB | 57,741 | 1,474 | ||||||
Raiffeisen Bank International AGB | 5,397 | 116 | ||||||
Vienna Insurance Group AGB | 8,353 | 402 | ||||||
|
| |||||||
Total Austria |
| 1,992 | ||||||
|
| |||||||
Brazil - 13.14% | ||||||||
Common Stocks - (Cost $16,895) |
| |||||||
Banco Bradesco S.A. | 33,650 | 495 | ||||||
Banco do Brasil S.A. | 42,500 | 476 | ||||||
BM&FBovespa S.A. | 73,200 | 322 | ||||||
Brasil Insurance Participacoes e Administracao S.A. | 47,900 | 144 | ||||||
BRF - Brasil Foods S.A.C | 40,455 | 1,053 | ||||||
CCR S.A. | 35,270 | 263 | ||||||
Centrais Eletricas Brasileiras S.A., Sponsored ADRA C | 174,020 | 440 | ||||||
Cia de Saneamento Basico do Estado de Sao Paulo, ADRA C | 37,410 | 290 | ||||||
Cia de Saneamento Basico do Estado de Sao PauloC | 148,900 | 1,165 | ||||||
Cia Hering | 23,300 | 235 | ||||||
Duratex S.A.C D | 17,000 | 61 | ||||||
EDP - Energias do Brasil S.A. | 63,500 | 248 | ||||||
Embraer S.A., ADRA | 35,170 | 1,359 | ||||||
Fibria Celulose S.A., ADRA | 10,590 | 130 | ||||||
Gerdau S.A., Sponsored ADRA | 50,370 | 228 | ||||||
Grupo BTG PactualE | 18,200 | 230 | ||||||
JBS S.A. | 33,100 | 148 | ||||||
Magnesita Refratarios S.A. | 154,000 | 183 | ||||||
Marfrig Alimentos S.A. | 420,800 | 1,027 | ||||||
Oi S.A., ADRA | 198,020 | 105 | ||||||
Petroleo Brasileiro S.A.C | 34,248 | 202 | ||||||
Petroleo Brasileiro S.A., Sponsored ADRA C | 95,790 | 1,172 | ||||||
Petroleo Brasileiro S.A., A Shares, Sponsored ADRA C | 100,307 | 1,174 | ||||||
Raia Drogasil S.A.C | 20,910 | 190 | ||||||
Telefonica Brasil S.A., ADRA | 60,995 | 1,247 | ||||||
TIM Participacoes S.A. | 144,300 | 784 | ||||||
Ultrapar Participacoes S.A. | 11,012 | 240 | ||||||
Viver Incorporadora e Construtora S.A.B C | 431,588 | 19 | ||||||
|
| |||||||
Total Common Stocks |
| 13,630 | ||||||
|
| |||||||
Convertible Bonds - (Cost $116) |
| |||||||
Viver Incorporadora e Construtora S.A., 2.00%, Due 8/6/2016B C F | 270,118 | 48 | ||||||
|
| |||||||
Preferred Stocks - (Cost $4,077) |
| |||||||
Banco Bradesco S.A. | 48,796 | 735 | ||||||
Banco Estado Rio GranC | 52,400 | 313 | ||||||
Gerdau S.A. | 62,100 | 278 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Itau Unibanco Holding S.A. | 40,926 | $ | 607 | |||||
Itau Unibanco Holding S.A., Sponsored ADRA | 37,560 | 554 | ||||||
Itausa - Investimentos Itau S.A. | 55,700 | 222 | ||||||
Metalurgica Gerdau S.A. | 7,400 | 40 | ||||||
Petroleo Brasileiro S.A.C | 61,394 | 379 | ||||||
Randon Participacoes S.A.C | 20,100 | 51 | ||||||
Vale S.A., ADRA | 55,440 | 486 | ||||||
|
| |||||||
Total Preferred Stocks |
| 3,665 | ||||||
|
| |||||||
Total Brazil |
| 17,343 | ||||||
|
| |||||||
Chile - 0.71% | ||||||||
Common Stocks - (Cost $1,109) |
| |||||||
Cencosud S.A.B | 88,950 | 264 | ||||||
Empresa Nacional de TelecomB | 32,240 | 348 | ||||||
S.A.C.I. FalabellaB | 43,570 | 330 | ||||||
|
| |||||||
Total Chile |
| 942 | ||||||
|
| |||||||
Colombia - 1.09% | ||||||||
Common Stocks - (Cost $1,154) |
| |||||||
Bancolombia S.A., Sponsored ADRA | 657 | 37 | ||||||
Cementos Argos S.A. | 23,456 | 120 | ||||||
Grupo Aval Acciones y Valores | 56,180 | 757 | ||||||
Grupo de Inversiones Suramericana S.A. | 11,844 | 246 | ||||||
|
| |||||||
Total Common Stocks |
| 1,160 | ||||||
|
| |||||||
Preferred Stocks - (Cost $280) |
| |||||||
Bancolombia S.A. | 13,964 | 196 | ||||||
Grupo de Inversiones Suramericana S.A. | 4,000 | 81 | ||||||
|
| |||||||
Total Preferred Stocks |
| 277 | ||||||
|
| |||||||
Total Colombia |
| 1,437 | ||||||
|
| |||||||
Czech Republic - 0.94% | ||||||||
Common Stocks - (Cost $1,645) |
| |||||||
Komercni Banka A.S.B | 1,909 | 409 | ||||||
Telefonica Czech Republic A.S.B | 74,550 | 833 | ||||||
|
| |||||||
Total Czech Republic |
| 1,242 | ||||||
|
| |||||||
Greece - 0.12% | ||||||||
Common Stocks - (Cost $193) |
| |||||||
National Bank of Greece S.A. B C | 67,070 | 162 | ||||||
|
| |||||||
Hong Kong/China - 19.65% | ||||||||
Common Stocks - (Cost $27,059) |
| |||||||
Ajisen China Holdings Ltd.B | 154,000 | 107 | ||||||
Anhui Conch Cement Co., Ltd. HB | 206,500 | 675 | ||||||
Apt. Satellite Holdings Ltd.B | 457,000 | 669 | ||||||
Bank of China Ltd. HB | 2,137,000 | 1,021 | ||||||
Baoxin Auto Group Ltd.B | 172,500 | 132 | ||||||
Beijing Capital International Airport Co. Ltd. HB | 540,000 | 396 | ||||||
Beijing Enterprises Holdings Ltd.B | 12,000 | 98 | ||||||
Bosideng International Holdings Ltd.B | 5,942,000 | 879 | ||||||
Chaoda Modern Agriculture Holdings Ltd., Acquired 12/20/2010-1/13/2011, Cost $1,710 B G | 2,200,000 | 64 | ||||||
China Communications Services Corp. Ltd. HB | 958,000 | 453 | ||||||
China Construction Bank HB | 2,222,415 | 1,655 | ||||||
China Life Insurance Co., Ltd. HB | 227,000 | 678 | ||||||
See accompanying notes
11
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
China Machinery Engineering Corp. HB | 275,000 | $ | 156 | |||||
China Mengniu Dairy Co., Ltd.B | 65,000 | 285 | ||||||
China Mobile Ltd.B | 211,500 | 2,637 | ||||||
China Oilfield Services Ltd. HB | 168,000 | 351 | ||||||
China Overseas Land & Investment Ltd.B | 66,000 | 192 | ||||||
China Railway Construction Corp Ltd. HB | 178,000 | 188 | ||||||
China Resources Power Holdings Co., Ltd.B | 108,000 | 319 | ||||||
China Yuchai International Ltd.B | 17,000 | 309 | ||||||
China ZhengTong Auto Services Holdings Ltd.B | 241,500 | 137 | ||||||
Chongqing Changan Automobile Co., Ltd.B | 30,500 | 67 | ||||||
CNOOC Ltd.B | 369,000 | 577 | ||||||
Cosco International Holdings Ltd.B | 1,502,000 | 658 | ||||||
COSCO Pacific Ltd.B | 422,495 | 556 | ||||||
CSPC Pharmaceutical Group Ltd.B | 114,000 | 105 | ||||||
Dickson Concepts International Ltd.B | 280,445 | 147 | ||||||
Dongfang Electric Corp. HB | 129,200 | 219 | ||||||
Dongfeng Motor Group Co., Ltd. HB | 570,000 | 881 | ||||||
First Pacific Co., Ltd.B | 1,161,874 | 1,250 | ||||||
Global Bio-chem Technology Group Co., Ltd.B C | 982,520 | 37 | ||||||
Guangzhou Automobile Group Co., Ltd. HB | 307,370 | 273 | ||||||
Huandian Power International Corp. HB | 152,000 | 116 | ||||||
Industrial & Commercial Bank of China Ltd. HB | 1,295,555 | 855 | ||||||
Lianhua Supermarket Holdings Co., Ltd. HB C | 658,000 | 326 | ||||||
Lifestyle International Holdings Ltd., Acquired 5/30/2014 - 8/28/2014, Cost $903 B G | 475,000 | 899 | ||||||
Luk Fook Holdings International Ltd.B | 338,000 | 1,019 | ||||||
NWS Holdings Ltd.B | 90,571 | 171 | ||||||
Parkson Retail Group Ltd.B | 2,021,000 | 596 | ||||||
Phoenix Healthcare Group Co. LtdB | 12,500 | 25 | ||||||
Ping An Insurance Group Co., HB | 93,000 | 761 | ||||||
Qihoo 360 Technology Co., Ltd., ADRA C | 1,320 | 96 | ||||||
Samsonite International S.A.B | 164,700 | 550 | ||||||
Shanghai Industrial Holdings Ltd.B | 210,000 | 646 | ||||||
Shenzhen International Holdings, Ltd. | 12,000 | 19 | ||||||
Sihuan Pharmaceutical Holdings Group Ltd.B | 273,000 | 218 | ||||||
Sinotrans Shipping Ltd.B C | 2,512,000 | 687 | ||||||
TAL Education Group ADRA | 4,241 | 135 | ||||||
Tencent Holdings Ltd.B | 71,500 | 1,139 | ||||||
Tsingtao Brewery Co., Ltd. HB | 22,000 | 162 | ||||||
Uni-President China Holdings Ltd.B | 167,400 | 155 | ||||||
Weichai Power Co., Ltd. HB | 89,000 | 342 | ||||||
Weiqiao Textile Co., Ltd. HB | 834,600 | 420 | ||||||
West China Cement Ltd.B | 1,358,000 | 135 | ||||||
Wumart Stores, Inc.B | 384,000 | 335 | ||||||
|
| |||||||
Total Hong Kong/China |
| 25,978 | ||||||
|
| |||||||
Hungary - 1.49% | ||||||||
Common Stocks - (Cost $2,444) |
| |||||||
Magyar Telekom Telecommunications PLCB H | 316,533 | 438 | ||||||
OTP Bank PLCB H | 20,980 | 348 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Richter Gedeon NyrtB | 77,400 | $ | 1,181 | |||||
|
| |||||||
Total Hungary |
| 1,967 | ||||||
|
| |||||||
India - 8.81% | ||||||||
Common Stocks - (Cost $9,899) |
| |||||||
Ashok Leyland Ltd.B C | 482,645 | 365 | ||||||
Bank of IndiaB | 62,080 | 287 | ||||||
Bharat Heavy Electricals Ltd.B | 56,240 | 234 | ||||||
Bharat Petroleum Corp. Ltd.B | 27,514 | 329 | ||||||
Glenmark Pharmaceuticals Ltd.B | 20,968 | 246 | ||||||
HDFC Bank Ltd.B | 28,456 | 423 | ||||||
Hero Honda Motors Ltd.B | 6,554 | 329 | ||||||
Hindustan Petroleum Corp., Ltd.B | 6,600 | 58 | ||||||
ICICI Bank Ltd.B | 26,938 | 715 | ||||||
Idea Cellular Ltd.B C | 68,543 | 183 | ||||||
India Cements Ltd.B | 320,120 | 581 | ||||||
Indian Oil Corp Ltd.B | 72,700 | 434 | ||||||
IndusInd Bank Ltd.B | 31,731 | 372 | ||||||
Infrastructure Development Finance Co., Ltd.B | 77,880 | 199 | ||||||
ITC Ltd.B | 55,576 | 322 | ||||||
Jubilant Life Sciences Ltd.B | 8,580 | 20 | ||||||
NMDC Ltd.B | 133,140 | 373 | ||||||
NTPC Ltd.B | 112,310 | 275 | ||||||
Oil & Natural Gas Corp. Ltd.B | 61,259 | 409 | ||||||
Oriental Bank of CommerceB | 21,490 | 100 | ||||||
Power Grid Corp. of India Ltd.B | 117,250 | 278 | ||||||
Punjab National Bank Ltd.B | 17,520 | 265 | ||||||
Reliance Industries Ltd.B | 58,560 | 953 | ||||||
Reliance Infrastructure Ltd.B | 88,825 | 918 | ||||||
Rolta India Ltd.B | 106,430 | 191 | ||||||
Sesa Sterlite Ltd., ADRA B | 4,332 | 73 | ||||||
Sesa Sterlite Ltd. | 46,534 | 195 | ||||||
Shree Cement Ltd.B | 1,939 | 288 | ||||||
South Indian Bank Ltd.B | 98,700 | 45 | ||||||
State Bank of IndiaB | 13,230 | 583 | ||||||
Steel Authority of India Ltd.B | 186,140 | 252 | ||||||
Tata Chemicals Ltd.B | 144,820 | 962 | ||||||
Tata Consultancy Services Ltd.B | 8,841 | 380 | ||||||
|
| |||||||
Total India |
| 11,637 | ||||||
|
| |||||||
Indonesia - 0.69% | ||||||||
Common Stocks - (Cost $854) |
| |||||||
Aneka Tambang Persero Tbk PTB | 407,500 | 33 | ||||||
Indosat Tbk PTB | 140,900 | 43 | ||||||
Kalbe Farma Tbk PTB | 1,567,200 | 221 | ||||||
Link Net Tbk PTB C | 297,400 | 147 | ||||||
Matahari Department Store Tbk PTB | 177,200 | 217 | ||||||
XL Axiata Tbk PTB | 533,903 | 245 | ||||||
|
| |||||||
Total Indonesia |
| 906 | ||||||
|
| |||||||
Japan - 0.09% | ||||||||
Common Stocks - (Cost $198) |
| |||||||
Nexon Co., Ltd., B | 13,500 | 119 | ||||||
|
| |||||||
Malaysia - 1.33% | ||||||||
Common Stocks - (Cost $1,908) |
| |||||||
Astro Malaysia Holdings BhdB | 204,800 | 206 | ||||||
CIMB Group Holdings BhdB | 340,827 | 674 | ||||||
Genting BhdB | 100 | 0 | ||||||
Genting Malaysia BhdB | 337,700 | 444 | ||||||
IHH Healthcare BhdB | 121,700 | 183 | ||||||
See accompanying notes
12
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Sapurakencana Petroleum BhdB | 241,600 | $ | 252 | |||||
|
| |||||||
Total Malaysia |
| 1,759 | ||||||
|
| |||||||
Mexico - 5.16% | ||||||||
Common Stocks - (Cost $7,556) |
| |||||||
ALFA S.A.B. | 193,948 | 619 | ||||||
Alpek S.A. de C.V. | 92,000 | 162 | ||||||
Alsea S.A.B. de C.V. | 106,751 | 335 | ||||||
America Movil, S.A.B. de C.V., Series L, ADR A | 45,890 | 1,120 | ||||||
Cemex, S.A.B. de C.V., Series L, Sponsored ADR A | 126,218 | 1,552 | ||||||
Consorcio ARA, S.A.B. de C.V.C | 288,600 | 132 | ||||||
Desarrolladora Homex, S.A.B. de C.V., Acquired 1/2/2013 – 5/2/2013, Cost $733 B C G | 456,630 | 76 | ||||||
Fomento Economico Mexicano, S.A.B. de C.V., Series B, ADR A | 4,935 | 475 | ||||||
Grupo Financiero Banorte, S.A.B. de C.V. | 77,455 | 496 | ||||||
Grupo Financiero Inbursa | 74,568 | 225 | ||||||
Grupo Financiero Santander Mexico, S.A.B. de C.V., ADRA | 16,219 | 216 | ||||||
Macquarie Mexico Real Estate NPVI J | 471,370 | 859 | ||||||
TF Administradora IndustrialI | 204,423 | 473 | ||||||
Urbi Desarrollos Urbanos, S.A.B. de C.V., Acquired 1/14/2013 – 3/25/2013, Cost $643 B C G | 1,452,850 | 76 | ||||||
|
| |||||||
Total Mexico |
| 6,816 | ||||||
|
| |||||||
Netherlands - 0.15% | ||||||||
Common Stocks - (Cost $180) |
| |||||||
Yandex N.V. C | 7,014 | 201 | ||||||
|
| |||||||
Peru - 0.50% | ||||||||
Common Stocks - (Cost $562) |
| |||||||
Credicorp Ltd. | 4,069 | 655 | ||||||
|
| |||||||
Philippines - 1.25% | ||||||||
Common Stocks - (Cost $1,405) |
| |||||||
BDO Unibank, Inc.B | 110,350 | 241 | ||||||
DMCI Holdings, Inc.B | 502,300 | 181 | ||||||
International Container Terminal Services, Inc.B | 71,310 | 187 | ||||||
Lt Group, Inc.B | 370,600 | 118 | ||||||
Metro Pacific Investments Corp.B | 2,664,600 | 302 | ||||||
Metropolitan Bank & Trust Co.B | 159,650 | 292 | ||||||
SM Investments Corp.B | 19,070 | 333 | ||||||
|
| |||||||
Total Philippines |
| 1,654 | ||||||
|
| |||||||
Poland - 1.52% | ||||||||
Common Stocks - (Cost $2,103) |
| |||||||
Asseco Poland S.A.B | 2,351 | 35 | ||||||
Bank Pekao S.A.B | 10,451 | 547 | ||||||
Bank Zachodni WBK S.A.B | 4,841 | 548 | ||||||
Orange Polska S.A.B | 61,026 | 183 | ||||||
PKO Bank Polski S.A.B | 42,160 | 469 | ||||||
PKP Cargo S.A.B | 9,412 | 223 | ||||||
|
| |||||||
Total Poland |
| 2,005 | ||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Qatar - 0.34% | ||||||||
Common Stocks - (Cost $452) |
| |||||||
Commercial Bank of Qatar QSCB | 12,915 | $ | 264 | |||||
Ooredoo QSCB | 5,583 | 190 | ||||||
|
| |||||||
Total Qatar |
| 454 | ||||||
|
| |||||||
Russia - 4.64% | ||||||||
Common Stocks - (Cost $7,814) |
| |||||||
Gazprom OAO, Sponsored ADRA | 333,250 | 2,199 | ||||||
Lukoil OAO, Sponsored ADRA | 26,480 | 1,299 | ||||||
Mail.ru Group Ltd., Reg S, GDRB C K L | 5,196 | 126 | ||||||
Mobile TeleSystems OJSC, Sponsored ADRA M | 16,800 | 240 | ||||||
NovaTek OAO, Reg S, Sponsored GDRB K L | 3,180 | 342 | ||||||
Rosneft Oil Co., Reg S, GDRB K L | 68,670 | 383 | ||||||
RusHydro JSC, ADRA | 127,370 | 214 | ||||||
Sberbank, Sponsored ADRA B C | 176,570 | 1,332 | ||||||
|
| |||||||
Total Russia |
| 6,135 | ||||||
|
| |||||||
Singapore - 0.74% | ||||||||
Common Stocks - (Cost $753) |
| |||||||
Flextronics International Ltd.C | 46,210 | 495 | ||||||
Haw Par Corp., Ltd.B | 72,957 | 485 | ||||||
|
| |||||||
Total Singapore |
| 980 | ||||||
|
| |||||||
South Africa - 2.22% | ||||||||
Common Stocks - (Cost $2,460) |
| |||||||
Aveng Ltd.B C | 75,050 | 138 | ||||||
Barclays Africa Group Ltd.B | 12,660 | 200 | ||||||
Life Healthcare Group Holdings Ltd.B | 40,692 | 154 | ||||||
MTN Group Ltd.B | 28,454 | 629 | ||||||
Murray & Roberts Holdings Ltd.B | 11,200 | 23 | ||||||
Naspers Ltd., N SharesB | 5,293 | 658 | ||||||
Pick n Pay Stores Ltd.B | 37,546 | 182 | ||||||
Standard Bank Group Ltd.B | 28,690 | 361 | ||||||
Truworths International Ltd.B | 31,920 | 218 | ||||||
Vodacom Group Pty Ltd.B | 30,299 | 368 | ||||||
|
| |||||||
Total South Africa |
| 2,931 | ||||||
|
| |||||||
South Korea - 17.35% | ||||||||
Common Stocks - (Cost $22,470) |
| |||||||
Cosmax Inc.B C | 1,222 | 124 | ||||||
Coway Co., Ltd.B | 4,841 | 368 | ||||||
E-Mart Co., Ltd.B | 892 | 166 | ||||||
Hana Financial Group, Inc.B | 34,641 | 1,196 | ||||||
Hite Jinro Ltd.B | 11,977 | 297 | ||||||
Hotel Shilla Co., Ltd.B | 2,525 | 243 | ||||||
Hyundai Department Store Co., Ltd.B | 916 | 116 | ||||||
Hyundai Engineering & Construction Co., Ltd.B | 10,292 | 468 | ||||||
Hyundai Glovis Co., LtdB | 742 | 185 | ||||||
Hyundai Mobis Co. Ltd.B | 4,830 | 1,151 | ||||||
Hyundai Motor Co.B | 5,917 | 944 | ||||||
KB Financial Group, Inc.B | 59,864 | 2,345 | ||||||
Kia Motors Corp.B | 24,728 | 1,206 | ||||||
Kolao HoldingsB C | 5,400 | 84 | ||||||
Korea Electric Power Corp.B | 14,837 | 647 | ||||||
Korea Electric Power Corp., Sponsored ADRA | 3,970 | 87 | ||||||
Korea Gas CorporationB | 448 | 21 | ||||||
See accompanying notes
13
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Korean Reinsurance Co.B | 8,623 | $ | 92 | |||||
KT Corp.B | 3,800 | 117 | ||||||
KT Corp., Sponsored ADRA | 16,320 | 250 | ||||||
LG Chem Ltd.B | 2,055 | 382 | ||||||
LG Electronics, Inc.B | 6,708 | 410 | ||||||
Lotte Confectionery Co., Ltd.B | 198 | 356 | ||||||
Lotte Shopping Co., Ltd.B | 945 | 262 | ||||||
Mirae Asset Securities Co., Ltd.B | 5,158 | 221 | ||||||
NCSoft Corp.B | 1,021 | 141 | ||||||
NHN Corp.B | 570 | 400 | ||||||
NongShim Co., Ltd.B | 1,204 | 301 | ||||||
Orion Corp.B | 160 | 124 | ||||||
Paradise Co., Ltd.B | 4,833 | 151 | ||||||
POSCOB | 5,988 | 1,721 | ||||||
Samsung Electronics Co., Ltd.B | 3,022 | 3,501 | ||||||
Samsung Life Insurance Co., Ltd.B | 2,631 | 287 | ||||||
Seoul Semiconductor Co., Ltd.B C | 7,876 | 135 | ||||||
Shinhan Financial Group Co., Ltd.B | 38,345 | 1,806 | ||||||
Shinsegae Co., Ltd.B | 2,549 | 474 | ||||||
SK Hynix, Inc.B C | 15,216 | 701 | ||||||
SK Telecom Co., Ltd.B | 794 | 199 | ||||||
Tong Yang Life InsuranceB | 28,270 | 307 | ||||||
|
| |||||||
Total Common Stocks |
| 21,986 | ||||||
|
| |||||||
Preferred Stocks - (Cost $520) |
| |||||||
Hyundai Motor Co., Ltd.B | 7,542 | 872 | ||||||
Samsung Electronics Co., Ltd.B | 75 | 71 | ||||||
|
| |||||||
Total Preferred Stocks |
| 943 | ||||||
|
| |||||||
Total South Korea |
| 22,929 | ||||||
|
| |||||||
Spain - 0.17% | ||||||||
Common Stocks - (Cost $206) |
| |||||||
Cemex Latam Holdings S.A. C | 25,925 | 231 | ||||||
|
| |||||||
Switzerland - 0.43% | ||||||||
Common Stocks - (Cost $642) |
| |||||||
Coca-Cola HBC AGB | 16,589 | 361 | ||||||
DKSH Holding Ltd., AGB | 2,844 | 210 | ||||||
|
| |||||||
Total Switzerland |
| 571 | ||||||
|
| |||||||
Taiwan - 5.86% | ||||||||
Common Stocks - (Cost $6,922) |
| |||||||
Advanced Semiconductor Engineering, Inc.B | 281,570 | 338 | ||||||
Cathay Financial Holding Co. Ltd.B | 81,000 | 134 | ||||||
Chailease Holding Co., Ltd.B | 117,975 | 291 | ||||||
Compal Electronics, Inc.B | 599,000 | 445 | ||||||
CTBC Financial Holding Co., Ltd.B | 121,546 | 85 | ||||||
Delta Electronics, Inc.B | 31,000 | 190 | ||||||
Eclat Textile Co., Ltd.B | 16,931 | 161 | ||||||
Epistar Corp.B | 38,000 | 69 | ||||||
Far EasTone Telecommunication Co., Ltd.B | 23,000 | 51 | ||||||
First Financial Holding Co., Ltd.B | 472,752 | 291 | ||||||
Fubon Financial Holding Co., Ltd.B | 155,000 | 263 | ||||||
Ginko International Co., Ltd.B | 11,000 | 148 | ||||||
Hermes Microvision, Inc.B | 4,525 | 219 | ||||||
HON HAI Precision Industry Co., Ltd.B | 355,014 | 1,123 | ||||||
Largan Precision Co., Ltd.B | 4,000 | 282 | ||||||
MediaTek, Inc.B | 25,000 | 366 | ||||||
Nan Ya Printed Circuit Board Corp.B C | 148,139 | 206 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Radiant Opto-Electronics Corp.B | 89,970 | $ | 315 | |||||
Shin Kong Financial Holding Co., Ltd.B | 1,428,486 | 434 | ||||||
Simplo Technology Co., Ltd.B | 30,000 | 147 | ||||||
Taiwan Mobile Co., Ltd.B | 27,000 | 88 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd.B | 364,385 | 1,574 | ||||||
Uni-President Enterprises Corp.B | 122,949 | 212 | ||||||
United Microelectronics Corp.B | 701,226 | 310 | ||||||
|
| |||||||
Total Taiwan |
| 7,742 | ||||||
|
| |||||||
Thailand - 2.58% | ||||||||
Common Stocks - (Cost $3,469) |
| |||||||
Advanced Info Service PCLB N | 53,900 | 374 | ||||||
Bangkok Bank PCLB N | 95,690 | 593 | ||||||
Bangkok Bank PCL, NVDRB N O | 54,700 | 334 | ||||||
Indorama Ventures PCLB N | 303,400 | 223 | ||||||
Kasikornbank PCL, NVDRB N O | 30,700 | 223 | ||||||
Land and Houses PCLB N | 659,100 | 204 | ||||||
Land and Houses PCL, NVDRB N O | 215,300 | 68 | ||||||
Minor International PCL, NVDRB N O | 18,900 | 20 | ||||||
Minor International PCLN | 131,900 | 141 | ||||||
Mint-W5B F | 6,595 | — | ||||||
PTT Global Chemical PCL | 229,700 | 437 | ||||||
PTT PCLN | 29,800 | 308 | ||||||
Robinson Department Store PCLN | 61,600 | 97 | ||||||
Robinson Department Store PCL, NVDRB N O | 2,400 | 4 | ||||||
Thai Co., Ltd., NVDRF O | 945 | — | ||||||
Thai Oil PCLN | 148,300 | 182 | ||||||
Total Access Communication PCL N | 40,400 | 128 | ||||||
Total Access Communication PCL, NVDR B N O | 21,400 | 68 | ||||||
|
| |||||||
Total Thailand |
| 3,404 | ||||||
|
| |||||||
Turkey - 2.30% | ||||||||
Common Stocks - (Cost $2,833) |
| |||||||
Aygaz A.S.B | 175,940 | 742 | ||||||
Emlak Konut Gayrimenkul Yatirim Ortakligi A.S. I | 241,050 | 271 | ||||||
Turkiye Garanti Bankasi A.S.B | 234,420 | 915 | ||||||
Turkiye Halk Bankasi A.S.B | 42,060 | 281 | ||||||
Turkiye Vakiflar Bankasi TaoB | 387,547 | 833 | ||||||
|
| |||||||
Total Turkey |
| 3,042 | ||||||
|
| |||||||
United Arab Emirates - 0.13% | ||||||||
Common Stocks - (Cost $122) |
| |||||||
Emaar Properties PJSC B P | 61,806 | 172 | ||||||
|
| |||||||
United Kingdom –1.04% | ||||||||
Common Stocks - (Cost $1,633) |
| |||||||
APR Energy PLCB H | 37,620 | 219 | ||||||
JKX Oil & Gas PLCB C H | 76,470 | 47 | ||||||
Mondi PLCB H | 23,169 | 392 | ||||||
Ternium S.A., ADR, A | 32,200 | 709 | ||||||
|
| |||||||
Total United Kingdom |
| 1,367 | ||||||
|
| |||||||
United States - 0.20% | ||||||||
Common Stocks - (Cost $271) |
| |||||||
First Cash Financial Services, Inc.C | 2,474 | 146 | ||||||
See accompanying notes
14
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
JD.com, Inc., ADRA C | 4,986 | $ | 119 | |||||
|
| |||||||
Total United States |
| 265 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 3.30% (Cost $4,354) | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 4,354,486 | 4,354 | ||||||
|
| |||||||
TOTAL INVESTMENTS - 99.70% |
| 131,718 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.30% |
| 396 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 132,114 | |||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | ADR - American Depositary Receipt. |
| B | Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $91,776 or 69.5% of net assets. |
| C | Non-income producing security. |
| D | 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. |
| E | Par value represents units rather than shares. |
| F | Variable rate. |
| G | Illiquid. At period end, the value of these securities amounted to $1,115 or 0.84% of net assets. |
| H | PLC - Public Limited Company. |
| I | REIT - Real Estate Investment Trust. |
| J | 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 $859 or 0.65% of net assets. The Fund has no right to demand registration of these securities. |
| K | Reg S - Security purchased under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. |
| L | GDR - Global Depositary Receipt. |
| M | OJSC - Open Joint Stock Company. |
| N | PCL - Public Company Limited (Thailand). |
| O | NVDR - Non Voting Depositary Receipt. |
| P | PJSC – Private Joint Stock Company. |
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||
Mini MSCI EAFE Emerging Markets December Futures | Long | 86 | December, 2014 | $ | 4,358,480 | $ | 38,043 | |||||||
|
|
|
| |||||||||||
| $ | 4,358,480 | $ | 38,043 | |||||||||||
|
|
|
| |||||||||||
See accompanying notes
15
American Beacon Emerging Markets FundSM
Schedule of Investments
October 31, 2014
Foreign Currency Contracts Open on October 31, 2014:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Buy | EUR | 33,837 | 11/13/2014 | GST | $ | — | $ | (754 | ) | $ | (754 | ) | ||||||||||||||
Buy | EUR | 32,531 | 11/13/2014 | UAG | — | (702 | ) | (702 | ) | |||||||||||||||||
Sell | EUR | 464,604 | 11/13/2014 | GST | 5,088 | — | 5,088 | |||||||||||||||||||
Sell | EUR | 464,595 | 11/13/2014 | UAG | 5,026 | — | 5,026 | |||||||||||||||||||
Sell | JPY | 12,845 | 11/13/2014 | SSB | 98 | — | 98 | |||||||||||||||||||
Sell | JPY | 38,958 | 11/13/2014 | BOA | 1,906 | — | 1,906 | |||||||||||||||||||
Sell | JPY | 38,958 | 11/13/2014 | SSB | 1,895 | — | 1,895 | |||||||||||||||||||
Sell | JPY | 12,845 | 11/13/2014 | BOA | 95 | — | 95 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | 14,108 | $ | (1,456 | ) | $ | 12,652 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
Glossary:
| Counterparty Abbreviations: | ||||||
BOA | Bank of America, N.A. | SSB | State Street Bank | |||
GST | Goldman Sachs International | UAG | UBS AG | |||
| Currency Abbreviations: | ||||||
EUR | Euro | |||||
JPY | Japanese Yen | |||||
See accompanying notes
16
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Australia - 1.03% |
| |||||||
Common Stocks - (Cost $19,777) |
| |||||||
Ansell Ltd.E. | 413,619 | $ | 7,267 | |||||
Caltex Australia Ltd. E | 353,527 | 9,695 | ||||||
James Hardie Industries PLC, CDIA B E | 606,958 | 6,666 | ||||||
|
| |||||||
Total Australia |
| 23,628 | ||||||
|
| |||||||
Austria - 0.29% | ||||||||
Common Stocks - (Cost $6,680) | ||||||||
Uniqa Insurance Group AG E | 601,864 | 6,714 | ||||||
|
| |||||||
Belgium - 1.33% | ||||||||
Common Stocks - (Cost $20,256) |
| |||||||
Anheuser-Busch InBev N.V. E | 207,360 | 22,980 | ||||||
KBC Groep N.V.C E | 141,863 | 7,619 | ||||||
|
| |||||||
Total Belgium |
| 30,599 | ||||||
|
| |||||||
Canada - 2.18% | ||||||||
Common Stocks - (Cost $53,926) |
| |||||||
Bombardier, Inc. | 2,610,300 | 8,593 | ||||||
Imperial Oil Ltd. | 161,100 | 7,751 | ||||||
MDA Corp.D | 137,700 | 10,500 | ||||||
Rogers Communications, Inc., Class B | 304,500 | 11,450 | ||||||
Suncor Energy, Inc.D | 170,600 | 6,058 | ||||||
Talisman Energy, Inc. | 892,900 | 5,696 | ||||||
|
| |||||||
Total Canada |
| 50,048 | ||||||
|
| |||||||
Denmark - 0.31% | ||||||||
Common Stocks - (Cost $8,418) |
| |||||||
Carlsberg A.S., Class B E | 79,610 | 7,011 | ||||||
|
| |||||||
Finland - 0.72% | ||||||||
Common Stocks - (Cost $10,606) | ||||||||
Sampo OYJ, Class A E | 346,004 | 16,576 | ||||||
|
| |||||||
France - 10.44% | ||||||||
Common Stocks - (Cost $212,528) |
| |||||||
AXA S.A. E | 720,007 | 16,636 | ||||||
BNP Paribas E | 626,509 | 39,507 | ||||||
Cap Gemini S.A. E | 175,533 | 11,562 | ||||||
Cie de St-Gobain E | 213,040 | 9,162 | ||||||
Cie Generale des Etablissements Michelin E | 90,840 | 7,900 | ||||||
GDF Suez E | 486,653 | 11,814 | ||||||
Legrand S.A. E | 290,866 | 15,669 | ||||||
Orange S.A. E | 438,720 | 6,982 | ||||||
Sanofi E | 443,993 | 41,125 | ||||||
Schneider Electric S.A. E | 186,065 | 14,730 | ||||||
Technip S.A. E | 230,948 | 16,751 | ||||||
Total S.A. E | 404,247 | 24,123 | ||||||
Valeo S.A. E | 101,573 | 11,416 | ||||||
Vivendi S.A. E | 497,353 | 12,168 | ||||||
|
| |||||||
Total France |
| 239,545 | ||||||
|
| |||||||
Germany - 7.61% |
| |||||||
Common Stocks - (Cost $131,632) |
| |||||||
Bayer AG Reg E | 355,999 | 50,636 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Bayerische Motoren Werke AG E | 67,393 | $ | 7,210 | |||||
Commerzbank AGC E | 586,300 | 8,833 | ||||||
Daimler AG E | 126,066 | 9,800 | ||||||
Deutsche Boerse AG E | 158,220 | 10,802 | ||||||
HeidelbergCement AG E | 160,610 | 10,939 | ||||||
Infineon Technologies AG E | 779,560 | 7,563 | ||||||
Linde AG E | 78,667 | 14,509 | ||||||
Merck KGaA E | 145,820 | 13,174 | ||||||
METRO AGC E | 219,610 | 7,001 | ||||||
Muenchener Rueckversicherungs AG Reg E | 33,507 | 6,587 | ||||||
SAP AG E | 160,434 | 10,908 | ||||||
Siemens AG Reg E | 147,297 | 16,604 | ||||||
|
| |||||||
Total Germany |
| 174,566 | ||||||
|
| |||||||
Greece - 0.11% | ||||||||
Common Stocks - (Cost $3,952) |
| |||||||
Piraeus Bank S.A. C E | 1,707,621 | 2,486 | ||||||
|
| |||||||
Hong Kong/China - 2.31% | ||||||||
Common Stocks - (Cost $41,647) |
| |||||||
AIA Group Ltd. E | 1,662,800 | 9,278 | ||||||
China Merchants Holdings Intl. E | 1,998,000 | 6,308 | ||||||
China Mobile Ltd. | 1,876,807 | 23,395 | ||||||
CNOOC Ltd.E | 4,584,000 | 7,164 | ||||||
Hutchison Whampoa Ltd. E | 238,000 | 3,024 | ||||||
Link REIT E F | 670,659 | 3,947 | ||||||
|
| |||||||
Total Hong Kong/China |
| 53,116 | ||||||
|
| |||||||
Ireland - 0.59% | ||||||||
Common Stocks - (Cost $11,664) |
| |||||||
CRH PLC B E | 608,660 | 13,513 | ||||||
|
| |||||||
Israel - 1.66% | ||||||||
Common Stocks - (Cost $31,727) |
| |||||||
Teva Pharmaceutical Industries Ltd., Sponsored ADR G | 673,940 | 38,057 | ||||||
|
| |||||||
Italy - 2.26% | ||||||||
Common Stocks - (Cost $48,097) |
| |||||||
Atlantia SpA E | 533,531 | 12,560 | ||||||
ENI SpA E | 941,020 | 20,041 | ||||||
Intesa Sanpaolo SpA E | 2,847,656 | 8,359 | ||||||
Saipem SpAC E | 439,109 | 6,889 | ||||||
UniCredit SpA E | 563,187 | 4,073 | ||||||
|
| |||||||
Total Italy |
| 51,922 | ||||||
|
| |||||||
Japan - 15.32% | ||||||||
Common Stocks - (Cost $312,372) |
| |||||||
AEON Financial Service Co., Ltd.D E | 233,700 | 5,004 | ||||||
Asics Corp. E | 246,680 | 5,690 | ||||||
Canon, Inc. E | 289,700 | 8,922 | ||||||
Daikin Industries Ltd. E | 255,000 | 16,055 | ||||||
Daiwa House Industry Co. Ltd. E | 906,800 | 17,475 | ||||||
Don Quijote Co., Ltd. E | 260,500 | 15,728 | ||||||
East Japan Railway Co. E | 95,600 | 7,560 | ||||||
Hitachi Ltd. E | 1,969,000 | 15,810 | ||||||
ITOCHU Corp. E | 523,400 | 6,408 | ||||||
Japan Tobacco, Inc. E | 494,800 | 17,143 | ||||||
See accompanying notes
17
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
JGC Corp. E | 306,000 | $ | 8,049 | |||||
KDDI Corp. E | 684,100 | 44,073 | ||||||
Komatsu Ltd. E | 378,200 | 9,088 | ||||||
Konica Minolta, Inc. E | 1,253,500 | 14,186 | ||||||
LIXIL Group Corp. E | 333,400 | 7,359 | ||||||
Nikon Corp.D E | 1,679,400 | 23,035 | ||||||
Nissan Motor Co., Ltd. E | 1,382,900 | 12,800 | ||||||
Seven & I Holdings Co., Ltd. E | 340,000 | 13,425 | ||||||
Shin-Etsu Chemical Co., Ltd. E | 203,000 | 13,205 | ||||||
Softbank Corp. E | 219,000 | 16,228 | ||||||
Sumitomo Mitsui Financial Group, Inc.E | 783,200 | 31,837 | ||||||
Suntory Beverage & Food Ltd. E | 281,500 | 10,145 | ||||||
Toyota Motor Corp. E | 406,200 | 24,435 | ||||||
United Arrows Ltd. E | 209,900 | 7,956 | ||||||
|
| |||||||
Total Japan |
| 351,616 | ||||||
|
| |||||||
Jersey - 0.52% | ||||||||
Common Stocks - (Cost $10,994) |
| |||||||
Shire PLCB E | 177,528 | 11,818 | ||||||
|
| |||||||
Netherlands - 6.16% | ||||||||
Common Stocks - (Cost $127,749) |
| |||||||
Airbus Group N.V. E | 194,157 | 11,623 | ||||||
Akzo Nobel E | 549,529 | 36,581 | ||||||
ING Groep N.V., CVAC H E | 1,037,920 | 14,915 | ||||||
Koninklijke Philips Electronics N.V. E | 240,627 | 6,731 | ||||||
NXP Semiconductor N.V.C E | 139,320 | 9,580 | ||||||
PostNL N.V.C E | 1,325,527 | 5,629 | ||||||
QIAGEN N.V.C E | 253,180 | 5,944 | ||||||
Reed Elsevier N.V. E | 1,168,680 | 26,929 | ||||||
SBM Offshore N.V.C E | 692,530 | 8,682 | ||||||
TNT Express N.V. E | 1,205,200 | 7,005 | ||||||
Unilever N.V., CVA, GDRH I E | 197,265 | 7,659 | ||||||
|
| |||||||
Total Netherlands |
| 141,278 | ||||||
|
| |||||||
Norway - 0.82% | ||||||||
Common Stocks - (Cost $17,792) |
| |||||||
Petroleum Geo-Services ASA E | 519,349 | 2,574 | ||||||
Statoil ASA E | 246,430 | 5,633 | ||||||
Telenor ASA E | 472,140 | 10,610 | ||||||
|
| |||||||
Total Norway |
| 18,817 | ||||||
|
| |||||||
Portugal - 0.31% | ||||||||
Common Stocks - (Cost $7,949) |
| |||||||
Galp Energia SGPS S.A. E | 492,800 | 7,163 | ||||||
|
| |||||||
Singapore - 2.09% | ||||||||
Common Stocks - (Cost $35,420) |
| |||||||
DBS Group Holdings Ltd. E | 1,156,342 | 16,710 | ||||||
Flextronics International Ltd.C | 288,090 | 3,088 | ||||||
Noble Group Ltd. E | 8,077,000 | 7,536 | ||||||
Sembcorp Industries Ltd. E | 1,227,000 | 4,660 | ||||||
Sembcorp Marine Ltd. E | 1,938,000 | 5,494 | ||||||
Singapore Telecommunications Ltd. E | 3,526,000 | 10,377 | ||||||
|
| |||||||
Total Singapore |
| 47,865 | ||||||
|
| |||||||
South Korea - 4.89% |
| |||||||
Common Stocks - (Cost $114,123) |
| |||||||
Hana Financial Group, Inc.E | 288,234 | 9,955 | ||||||
Hyundai Mobis Co. Ltd.E | 18,049 | 4,302 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Hyundai Motor Co.E | 124,449 | $ | 19,849 | |||||
KB Financial Group, Inc., ADRG | 182,978 | 7,081 | ||||||
KT&G Corp. E | 172,063 | 15,293 | ||||||
LG Electronics, Inc.E | 151,363 | 9,256 | ||||||
POSCOE | 41,106 | 11,815 | ||||||
Samsung Electronics Co., Ltd.E | 13,197 | 15,288 | ||||||
SK Telecom Co., Ltd.E | 77,544 | 19,449 | ||||||
|
| |||||||
Total South Korea |
| 112,288 | ||||||
|
| |||||||
Spain - 1.77% | ||||||||
Common Stocks - (Cost $31,877) |
| |||||||
Mediaset Espana Comunicacion S.A.C E | 740,888 | 9,295 | ||||||
Red Electrica Corporation S.A. E | 95,477 | 8,345 | ||||||
Repsol S.A. E | 171,652 | 3,839 | ||||||
Tecnicas Reunidas S.A. E | 121,964 | 6,014 | ||||||
Telefonica S.A. E | 872,501 | 13,120 | ||||||
|
| |||||||
Total Spain |
| 40,613 | ||||||
|
| |||||||
Sweden - 2.13% | ||||||||
Common Stocks - (Cost $42,004) |
| |||||||
Assa Abloy AB, Class B E | 266,270 | 14,161 | ||||||
Ericsson LM, Class B E | 536,790 | 6,347 | ||||||
Getinge AB, Class B E | 455,180 | 10,556 | ||||||
Swedbank AB, Class A E | 676,853 | 17,901 | ||||||
|
| |||||||
Total Sweden |
| 48,965 | ||||||
|
| |||||||
Switzerland - 8.81% | ||||||||
Common Stocks - (Cost $158,135) |
| |||||||
ABB Ltd. E | 482,560 | 10,582 | ||||||
Clariant AG E | 439,719 | 7,671 | ||||||
Credit Suisse Group AG Reg E | 556,545 | 14,825 | ||||||
GAM Holding AG E | 324,375 | 5,536 | ||||||
Givaudan S.A. Reg E | 6,813 | 11,368 | ||||||
Novartis AG Reg E | 723,393 | 67,091 | ||||||
Roche Holding AG Genusschein E | 100,903 | 29,803 | ||||||
Swatch Groug AG E | 18,387 | 8,717 | ||||||
Swiss Re AG E | 104,450 | 8,447 | ||||||
UBS AG Reg E | 1,388,548 | 24,133 | ||||||
Zurich Insurance Group AG E | 46,290 | 14,009 | ||||||
|
| |||||||
Total Switzerland |
| 202,182 | ||||||
|
| |||||||
United Kingdom - 22.09% | ||||||||
Common Stocks - (Cost $462,643) |
| |||||||
Anglo American PLCB E | 257,895 | 5,441 | ||||||
Aviva PLCB E | 2,921,124 | 24,374 | ||||||
BAE Systems PLCB E | 1,564,304 | 11,494 | ||||||
Balfour Beatty PLCB E | 1,069,852 | 2,639 | ||||||
Barclays PLCB E | 7,702,567 | 29,525 | ||||||
BG Group PLCB E | 657,843 | 10,963 | ||||||
BP PLCB E | 1,197,900 | 8,630 | ||||||
British American Tobacco PLCB E | 794,531 | 45,127 | ||||||
British Sky Broadcasting Group PLCB E | 180,820 | 2,564 | ||||||
Carnival PLCB E | 308,349 | 12,295 | ||||||
Direct Line Insurance Group E | 1,986,873 | 8,783 | ||||||
GlaxoSmithKline PLCB E | 504,900 | 11,446 | ||||||
Glencore Xstrata PLCB E | 2,647,354 | 13,573 | ||||||
HSBC Holdings PLCB E | 2,943,406 | 30,006 | ||||||
Informa PLCB E | 1,600,698 | 12,334 | ||||||
Kingfisher PLCB E | 3,065,061 | 14,854 | ||||||
Lloyds Banking Group PLCB C E | 40,412,540 | 49,938 | ||||||
Marks & Spencer Group PLCB E | 1,472,810 | 9,596 | ||||||
Michael Page International PLCB E | 928,226 | 5,782 | ||||||
See accompanying notes
18
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Petrofac Ltd. E | 242,183 | $ | 4,115 | |||||
Provident Financial Holdings PLCB E | 162,141 | 5,513 | ||||||
Prudential PLCB E | 1,018,973 | 23,547 | ||||||
Reed Elsevier PLCB E | 944,000 | 15,527 | ||||||
Rexam PLCB E | 3,007,442 | 22,919 | ||||||
Rio Tinto PLCB E | 200,898 | 9,595 | ||||||
Rolls-Royce Holdings | 476,815 | 6,442 | ||||||
Royal Dutch Shell PLC, Class AB E | 862,860 | 30,899 | ||||||
Royal Dutch Shell PLC, Class BB E | 256,246 | 9,506 | ||||||
RTL Group S.A. E | 51,296 | 4,795 | ||||||
Standard Chartered PLCB E | 250,260 | 3,767 | ||||||
Taylor Wimpey PLCB E | 6,468,110 | 12,267 | ||||||
Tesco PLCB E | 2,964,880 | 8,246 | ||||||
Unilever PLCB E | 228,874 | 9,210 | ||||||
Vodafone Group PLCB E | 6,965,386 | 23,145 | ||||||
William Hill PLCB E | 1,354,606 | 7,820 | ||||||
|
| |||||||
Total Common Stock |
| 506,677 | ||||||
|
| |||||||
Preferred Stocks - (Cost $69) |
| |||||||
Rolls-Royce Holdings PLC, C SharesB C E | 42,913,350 | 69 | ||||||
|
| |||||||
Total United Kingdom |
| 506,746 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 3.72% (Cost $85,302) |
| |||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 85,301,977 | 85,302 | ||||||
|
| |||||||
SECURITIES LENDING COLLATERAL - 0.70%(Cost $16,136) |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassJ | 12,816,829 | 12,817 | ||||||
DWS Government and Agency Securities Portfolio, Institutional Class | 3,318,902 | 3,319 | ||||||
|
| |||||||
Total Securities Lending Collateral | 16,136 | |||||||
|
| |||||||
TOTAL INVESTMENTS - 100.17% (Cost $2,023,475) |
| 2,298,570 | ||||||
LIABILITIES, NET OF OTHER ASSETS - (0.17)% |
| (3,832 | ) | |||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 2,294,738 | |||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | CDI - Chess Depository Interest. |
| B | PLC - Public Limited Company. |
| C | Non-income producing security. |
| D | All or a portion of this security is on loan at October 31, 2014. |
| E | Fair valued pursuant to procedures approved by the Board of Trustees. At period end, the value of these securities amounted to $2,098,858 or 91.3% of net assets. |
| F | REIT - Real Estate Investment Trust. |
| G | ADR - American Depositary Receipt. |
| H | CVA - Commanditzire Vennootschap op Aandelen (Dutch Certificate). |
| I | GDR - Global Depositary Receipt. |
| J | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
19
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2014
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
AEX Index November Futures | Long | 24 | November, 2014 | $ | 2,466,500 | $ | 137,385 | |||||||||||||
CAC 40 November Futures | Long | 166 | November, 2014 | 8,800,410 | 302,145 | |||||||||||||||
DAX Index December Futures | Long | 27 | December, 2014 | 7,874,263 | (187,197 | ) | ||||||||||||||
FTSE 100 Index December Futures | Long | 184 | December, 2014 | 19,148,607 | (433,753 | ) | ||||||||||||||
FTSE MIB Index December Futures | Long | 18 | December, 2014 | 2,223,189 | (61,116 | ) | ||||||||||||||
Hang Seng Index November Futures | Long | 19 | November, 2014 | 2,932,999 | 83,241 | |||||||||||||||
IBEX 35 Index November Futures | Long | 25 | November, 2014 | 3,267,589 | 93,690 | |||||||||||||||
OMXS 30 Index November Futures | Long | 146 | November, 2014 | 2,790,829 | 187,768 | |||||||||||||||
S&P TSX 60 Index December Futures | Long | 60 | December, 2014 | 9,026,751 | (228,491 | ) | ||||||||||||||
SPI 200 December Futures | Long | 61 | December, 2014 | 7,405,154 | 160,049 | |||||||||||||||
TOPIX Index December Futures | Long | 161 | December, 2014 | 19,163,766 | 611,146 | |||||||||||||||
|
|
|
| |||||||||||||||||
| $ | 85,100,057 | $ | 664,867 | |||||||||||||||||
|
|
|
| |||||||||||||||||
Foreign Currency Contracts Open on October 31, 2014:
Type | Currency | Principal Amount Covered by Contract | Settlement Date | Counterparty | Unrealized Appreciation | Unrealized (Depreciation) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||||||
Buy | AUD | 818,985 | 12/10/2014 | GSC | $ | 6,501 | $ | — | $ | 6,501 | ||||||||||||||
Buy | AUD | 5,428,180 | 12/10/2014 | RBS | — | (326,429 | ) | (326,429 | ) | |||||||||||||||
Buy | AUD | 1,027,901 | 12/10/2014 | BNP | 68 | — | 68 | |||||||||||||||||
Sell | AUD | 563,546 | 12/10/2014 | SCB | 11,301 | — | 11,301 | |||||||||||||||||
Sell | AUD | 656,593 | 12/10/2014 | UAG | — | (3,619 | ) | (3,619 | ) | |||||||||||||||
Sell | AUD | 796,163 | 12/10/2014 | UAG | 5,009 | — | 5,009 | |||||||||||||||||
Buy | CAD | 1,181,657 | 12/10/2014 | GSC | — | (6,051 | ) | (6,051 | ) | |||||||||||||||
Buy | CAD | 7,786,519 | 12/10/2014 | GSC | — | (295,662 | ) | (295,662 | ) | |||||||||||||||
Buy | CAD | 1,413,024 | 12/10/2014 | BNP | — | (12,933 | ) | (12,933 | ) | |||||||||||||||
Sell | CAD | 819,093 | 12/10/2014 | BOM | 21,725 | — | 21,725 | |||||||||||||||||
Sell | CAD | 882,032 | 12/10/2014 | UAG | 710 | — | 710 | |||||||||||||||||
Sell | CAD | 1,114,285 | 12/10/2014 | UAG | 9,089 | — | 9,089 | |||||||||||||||||
Buy | CHF | 936,728 | 12/10/2014 | BOA | — | (7,958 | ) | (7,958 | ) | |||||||||||||||
Buy | CHF | 7,230,261 | 12/10/2014 | CBK | — | (257,750 | ) | (257,750 | ) | |||||||||||||||
Buy | CHF | 1,159,214 | 12/10/2014 | BOA | — | (7,116 | ) | (7,116 | ) | |||||||||||||||
Sell | CHF | 584,285 | 12/10/2014 | UAG | 15,450 | — | 15,450 | |||||||||||||||||
Sell | CHF | 1,358,827 | 12/10/2014 | UAG | 27,807 | — | 27,807 | |||||||||||||||||
Sell | CHF | 532,303 | 12/10/2014 | FBF | 8,605 | — | 8,605 | |||||||||||||||||
Buy | EUR | 2,934,300 | 12/10/2014 | BOA | — | (24,389 | ) | (24,389 | ) | |||||||||||||||
Buy | EUR | 19,365,467 | 12/10/2014 | CBK | — | (689,082 | ) | (689,082 | ) | |||||||||||||||
Buy | EUR | 3,690,124 | 12/10/2014 | BOA | — | (42,097 | ) | (42,097 | ) | |||||||||||||||
Sell | EUR | 2,602,139 | 12/10/2014 | FBF | 42,853 | — | 42,853 | |||||||||||||||||
Sell | EUR | 1,982,940 | 12/10/2014 | SOG | 63,582 | — | 63,582 | |||||||||||||||||
Sell | EUR | 2,201,039 | 12/10/2014 | UAG | 48,433 | — | 48,433 | |||||||||||||||||
Buy | GBP | 15,756,539 | 12/10/2014 | BRC | — | (380,826 | ) | (380,826 | ) | |||||||||||||||
Buy | GBP | 2,301,303 | 12/10/2014 | BOA | — | (29,696 | ) | (29,696 | ) | |||||||||||||||
Buy | GBP | 2,838,646 | 12/10/2014 | BOA | — | (17,776 | ) | (17,776 | ) | |||||||||||||||
Sell | GBP | 2,056,619 | 12/10/2014 | FBF | 17,529 | — | 17,529 | |||||||||||||||||
Sell | GBP | 1,576,848 | 12/10/2014 | CBK | 29,661 | — | 29,661 | |||||||||||||||||
Sell | GBP | 1,864,711 | 12/10/2014 | UAG | 7,384 | — | 7,384 | |||||||||||||||||
Buy | HKD | 2,842,996 | 12/10/2014 | JPM | — | (2,138 | ) | (2,138 | ) | |||||||||||||||
Buy | JPY | 14,444,469 | 12/10/2014 | UAG | — | (991,144 | ) | (991,144 | ) | |||||||||||||||
Buy | JPY | 2,074,188 | 12/10/2014 | GSC | — | (51,185 | ) | (51,185 | ) | |||||||||||||||
Buy | JPY | 2,671,092 | 12/10/2014 | BNP | — | (107,421 | ) | (107,421 | ) | |||||||||||||||
Sell | JPY | 1,442,996 | 12/10/2014 | BOA | 59,159 | — | 59,159 | |||||||||||||||||
Sell | JPY | 1,631,777 | 12/10/2014 | UAG | 94,505 | — | 94,505 | |||||||||||||||||
Sell | JPY | 1,947,898 | 12/10/2014 | UAG | 76,275 | — | 76,275 | |||||||||||||||||
Buy | SEK | 308,657 | 12/10/2014 | BOA | — | (7,214 | ) | (7,214 | ) | |||||||||||||||
Buy | SEK | 2,027,182 | 12/10/2014 | CBK | — | (94,419 | ) | (94,419 | ) | |||||||||||||||
Buy | SEK | 395,878 | 12/10/2014 | BOA | — | (10,717 | ) | (10,717 | ) | |||||||||||||||
Sell | SEK | 219,270 | 12/10/2014 | SOG | 7,681 | — | 7,681 | |||||||||||||||||
Sell | SEK | 245,003 | 12/10/2014 | UAG | 7,681 | — | 7,681 | |||||||||||||||||
Sell | SEK | 282,112 | 12/10/2014 | FBF | 1,954 | — | 1,954 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
| $ | 562,962 | $ | (3,365,622 | ) | $ | (2,802,660 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
See accompanying notes
20
American Beacon International Equity FundSM
Schedule of Investments
October 31, 2014
Glossary: |
| Counterparty Abbreviations: | ||||||||||
| BNP | BNP Paribas, N.A. | CBK | Citibank, N.A. | RBS | Royal Bank of Scotland | |||||
| BOA | Bank of America, N.A. | FBF | Credit Suisse International | SCB | Standard Charter Bank | |||||
| BOM | Bank of Montreal | GSC | Goldman Sachs & Co. | SOG | Societe Generale | |||||
| BRC | Barclays Bank PLC | JPM | JPMorgan Chase Bank, N.A. | UAG | UBS AG | |||||
| Currency Abbreviations: | ||||||||||
| AUD | Australian Dollar | EUR | Euro | JPY | Japanese Yen | |||||
| CAD | Canadian Dollar | GBP | British Pound | SEK | Swedish Krona | |||||
| CHF | Swiss Franc | HKD | Hong Kong Dollar | |||||||
See accompanying notes
21
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
| Emerging Markets Fund | International Equity Fund | |||||||
Assets: | ||||||||
Investments in unaffiliated securities, at fair value A D | $ | 131,718 | $ | 2,285,753 | ||||
Investments in affiliated securities, at fair value B | — | 12,817 | ||||||
Foreign currency, at fair valueC | 192 | — | ||||||
Foreign currency deposits with brokers, at fair valueE | — | 9,864 | ||||||
Deposit with brokers for futures contracts | 191 | 326 | ||||||
Dividends and interest receivable | 142 | 4,239 | ||||||
Receivable for investments sold | 731 | 8,774 | ||||||
Receivable for fund shares sold | 152 | 3,792 | ||||||
Receivable for tax reclaims | 8 | 1,064 | ||||||
Receivable for expense reimbursement (Note 2) | — | 16 | ||||||
Receivable for variation margin on open futures contracts | 17 | 1,328 | ||||||
Unrealized appreciation from foreign currency contracts | 14 | 563 | ||||||
Prepaid expenses | 23 | 86 | ||||||
|
|
|
| |||||
Total assets | 133,188 | 2,328,622 | ||||||
|
|
|
| |||||
Liabilities: | ||||||||
Payable for investments purchased | 614 | 10,154 | ||||||
Payable for fund shares redeemed | 162 | 1,862 | ||||||
Payable for variation margin from open futures contracts | — | 662 | ||||||
Payable upon return of securities loaned | — | 16,136 | ||||||
Payable under excess reimbursement plan | 30 | — | ||||||
Management and investment advisory fees payable | 112 | 656 | ||||||
Administrative service and service fees payable | 11 | 663 | ||||||
Transfer agent fees payable | 2 | 124 | ||||||
Custody and fund accounting fees payable | 41 | 84 | ||||||
Professional fees payable | 61 | 41 | ||||||
Trustee fees payable | 3 | 24 | ||||||
Payable for prospectus and shareholder reports | 10 | 77 | ||||||
Unrealized depreciation from foreign currency contracts | 1 | 3,366 | ||||||
Payable for capital gains tax | 104 | — | ||||||
Other liabilities | 21 | 35 | ||||||
|
|
|
| |||||
Total liabilities | 1,172 | 33,884 | ||||||
|
|
|
| |||||
Net Assets | $ | 132,016 | $ | 2,294,738 | ||||
|
|
|
| |||||
Analysis of Net Assets: | ||||||||
Paid-in-capital | 131,615 | 2,008,118 | ||||||
Undistributed (or overdistribution of) net investment income | (343 | ) | 60,882 | |||||
Accumulated net realized gain (loss) | 6,670 | (46,626 | ) | |||||
Unrealized appreciation or (depreciation) of investments | (1,747 | ) | 357,082 | |||||
Unrealized (depreciation) of currency transactions | (4,217 | ) | (85,384 | ) | ||||
Unrealized appreciation of futures contracts | 38 | 666 | ||||||
|
|
|
| |||||
Net assets | $ | 132,016 | $ | 2,294,738 | ||||
|
|
|
| |||||
Shares outstanding at no par value (unlimited shares authorized): | ||||||||
Institutional Class | 855,656 | 49,048,835 | ||||||
|
|
|
| |||||
Y Class | 148,525 | 26,264,924 | ||||||
|
|
|
| |||||
Investor Class | 684,290 | 18,042,383 | ||||||
|
|
|
| |||||
Advisor Class | N/A | 388,554 | ||||||
|
|
|
| |||||
Retirement Class | N/A | 58,541 | ||||||
|
|
|
| |||||
A Class | 85,046 | 442,044 | ||||||
|
|
|
| |||||
C Class | 17,721 | 160,867 | ||||||
|
|
|
| |||||
AMR Class | 8,807,255 | 22,371,181 | ||||||
|
|
|
| |||||
Net assets (not in thousands): | ||||||||
Institutional Class | $ | 10,596,611 | $ | 956,960,452 | ||||
|
|
|
| |||||
Y Class | $ | 1,848,107 | $ | 530,836,707 | ||||
|
|
|
| |||||
Investor Class | $ | 8,321,213 | $ | 348,541,811 | ||||
|
|
|
| |||||
Advisor Class | $ | N/A | $ | 7,677,201 | ||||
|
|
|
| |||||
Retirement Class | $ | N/A | $ | 1,211,668 | ||||
|
|
|
| |||||
A Class | $ | 1,034,396 | $ | 8,540,234 | ||||
|
|
|
| |||||
C Class | $ | 213,318 | $ | 3,028,934 | ||||
|
|
|
| |||||
AMR Class | $ | 110,002,190 | $ | 437,941,309 | ||||
|
|
|
| |||||
See accompanying notes
22
American Beacon FundsSM
Statements of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
| Emerging Markets Fund | International Equity Fund | |||||||
Net asset value, offering and redemption price per share: | ||||||||
Institutional Class | $ | 12.38 | $ | 19.51 | ||||
|
|
|
| |||||
Y Class | $ | 12.44 | $ | 20.21 | ||||
|
|
|
| |||||
Investor Class | $ | 12.16 | $ | 19.32 | ||||
|
|
|
| |||||
Advisor Class | N/A | $ | 19.76 | |||||
|
|
|
| |||||
Retirement Class | N/A | $ | 20.70 | |||||
|
|
|
| |||||
A Class | $ | 12.16 | $ | 19.32 | ||||
|
|
|
| |||||
A Class (offering price) | $ | 12.90 | $ | 20.50 | ||||
|
|
|
| |||||
C Class | $ | 12.04 | $ | 18.83 | ||||
|
|
|
| |||||
AMR Class | $ | 12.49 | $ | 19.58 | ||||
|
|
|
| |||||
A Cost of investments in unaffiliated securities | $ | 137,586 | $ | 2,010,658 | ||||
B Cost of investments in affiliated securities | $ | — | $ | 12,817 | ||||
C Cost of foreign currency | $ | 192 | $ | — | ||||
D Fair value of securities on loan | $ | — | $ | 15,363 | ||||
E Cost of foreign currency deposits with brokers | $ | — | $ | 10,294 | ||||
See accompanying notes
23
American Beacon FundsSM
Statements of Operations
For the year ended October 31, 2014 (in thousands)
| Emerging Markets Fund | International Equity Fund | |||||||
Investment Income: | ||||||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 3,081 | $ | 76,685 | ||||
Dividend income from affiliated securities | — | 1 | ||||||
Interest income | — | 19 | ||||||
Income derived from securities lending, net | — | 1,633 | ||||||
|
|
|
| |||||
Total investment income | 3,081 | 78,338 | ||||||
|
|
|
| |||||
Expenses: | ||||||||
Management and investment advisory fees (Note 2) | 949 | 6,916 | ||||||
Administrative service fees (Note 2): | ||||||||
Institutional Class | 29 | 2,870 | ||||||
Y Class | 5 | 1,484 | ||||||
Investor Class | 22 | 1,043 | ||||||
Advisor Class | — | 19 | ||||||
Retirement Class | — | 3 | ||||||
A Class | 2 | 27 | ||||||
C Class | 1 | 8 | ||||||
AMR Class | 55 | 231 | ||||||
Transfer agent fees: | ||||||||
Institutional Class | 1 | 484 | ||||||
Y Class | — | 244 | ||||||
Investor Class | 3 | 24 | ||||||
Advisor Class | — | 1 | ||||||
A Class | — | 2 | ||||||
C Class | — | 1 | ||||||
AMR Class | 4 | 16 | ||||||
Custody and fund accounting fees | 397 | 655 | ||||||
Professional fees | 114 | 110 | ||||||
Registration fees and expenses | 53 | 103 | ||||||
Service fees (Note 2): | ||||||||
Y Class | 2 | 495 | ||||||
Investor Class | 18 | 1,304 | ||||||
Advisor Class | — | 16 | ||||||
Retirement Class | — | 2 | ||||||
A Class | 1 | 11 | ||||||
C Class | — | 4 | ||||||
Distribution fees (Note 2): | ||||||||
Advisor Class | — | 16 | ||||||
Retirement Class | — | 5 | ||||||
A Class | 1 | 18 | ||||||
C Class | 1 | 24 | ||||||
Prospectus and shareholder report expenses | 17 | 234 | ||||||
Trustee fees | 7 | 119 | ||||||
Other expenses | 23 | 253 | ||||||
|
|
|
| |||||
Total expenses | 1,705 | 16,742 | ||||||
|
|
|
| |||||
Net fees waived and expenses reimbursed (Note 2) | — | (152 | ) | |||||
|
|
|
| |||||
Net expenses | 1,705 | 16,590 | ||||||
|
|
|
| |||||
Net investment income | 1,376 | 61,748 | ||||||
|
|
|
| |||||
Realized and unrealized gain (loss) from investments: | ||||||||
Net realized gain (loss) from: B | ||||||||
Investments | 10,238 | 96,967 | ||||||
Commission recapture (Note 3) | 2 | �� | 93 | |||||
Foreign currency transactions | (1,389 | ) | 2,138 | |||||
Futures contracts | 64 | 7,919 | ||||||
Change in net unrealized appreciation or (depreciation) of: | ||||||||
InvestmentsC | (4,844 | ) | (80,907 | ) | ||||
Foreign currency transactions | (2,081 | ) | (119,345 | ) | ||||
Futures contracts | (18 | ) | (2,094 | ) | ||||
|
|
|
| |||||
Net gain (loss) from investments | 1,972 | (95,229 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | $ | 3,348 | $ | (33,481 | ) | |||
|
|
|
| |||||
A Foreign taxes | 316 | 6,338 | ||||||
B Net of foreign withholding taxes on capital gains | 78 | — | ||||||
C Net of taxes on capital gains | (104 | ) | — | |||||
See accompanying notes
24
American Beacon FundsSM
Statements of Changes of Net Assets (in thousands)
| Emerging Markets Fund | International Equity Fund | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Increase (Decrease) in Net Assets: | ||||||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 1,376 | $ | 1,011 | $ | 61,748 | $ | 38,592 | ||||||||
Net realized gain from investments, futures contracts, and foreign currency transactions | 8,915 | 2,980 | 107,117 | 74,936 | ||||||||||||
Change in net unrealized appreciation or (depreciation) from investments, futures contracts, and foreign currency transactions | (6,943 | ) | 5,327 | (202,346 | ) | 329,508 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets resulting from operations | 3,348 | 9,318 | (33,481 | ) | 443,036 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Distributions to Shareholders: | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional Class | (100 | ) | (92 | ) | (14,406 | ) | (16,101 | ) | ||||||||
Y Class | (22 | ) | (21 | ) | (7,149 | ) | (55 | ) | ||||||||
Investor Class | (43 | ) | (55 | ) | (4,093 | ) | (10,473 | ) | ||||||||
Advisor Class | — | — | (73 | ) | (106 | ) | ||||||||||
Retirement Class | — | — | (7 | ) | — | |||||||||||
A Class | (2 | ) | (5 | ) | (79 | ) | (40 | ) | ||||||||
C Class | — | — | (15 | ) | (5 | ) | ||||||||||
AMR Class | (1,154 | ) | (1,078 | ) | (8,617 | ) | (10,213 | ) | ||||||||
|
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|
| |||||||||
Net distributions to shareholders | (1,321 | ) | (1,251 | ) | (34,439 | ) | (36,993 | ) | ||||||||
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|
|
|
|
| |||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from sales of shares | 29,751 | 39,656 | 637,106 | 1,003,459 | ||||||||||||
Reinvestment of dividends and distributions | 1,317 | 1,246 | 29,476 | 34,358 | ||||||||||||
Cost of shares redeemed | (28,746 | ) | (43,915 | ) | (432,543 | ) | (768,379 | ) | ||||||||
Redemption fees | 22 | 18 | 44 | 168 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase (decrease) in net assets from capital share transactions | 2,344 | (2,995 | ) | 234,083 | 269,606 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase in net assets | 4,371 | 5,072 | 166,163 | 675,649 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 127,645 | 122,573 | 2,128,575 | 1,452,926 | ||||||||||||
|
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| |||||||||
End of Period* | $ | 132,016 | $ | 127,645 | $ | 2,294,738 | $ | 2,128,575 | ||||||||
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| |||||||||
* Includes undistributed (or overdistribution of ) net investment income | $ | (343 | ) | $ | 903 | $ | 60,882 | $ | 31,437 | |||||||
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|
|
|
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| |||||||||
See accompanying notes
25
American Beacon FundsSM
October 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”),which is comprised of thirty-one 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.
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 and the Trust. 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.The Funds pay the unaffiliated investment advisors hired by the Manager to direct investment activities of the Funds. Management fees paid during the year ended October 31, 2014 were as follows (dollars in thousands):
| Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | |||||||||||||
Emerging Markets | 0.74 | % | $ | 949 | $ | 885 | $ | 64 | ||||||||
International Equity | 0.30 | % | 6,916 | 5,596 | 1,320 | |||||||||||
26
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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 Statements of Operations. During the year ended October 31, 2014, securities lending fees paid to the Manager on behalf of the International Equity Fund was $177,977.
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Funds. As compensation for performing the duties required under the Administration 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 and 0.05% of the average daily net assets of the AMR Class of the Funds. Prior to July 1, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes. Beginning July 1, 2014, the Manager received an annualized fee of 0.30% of the average daily net assets of the A and C Classes 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 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 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.
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 $1,452 for the year ended October 31, 2014.
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
27
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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 Administration fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2014, 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 | $ | 8,700 | $ | 42,648 | $ | 51,348 | ||||||
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, 2014, 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, 2014, the Manager reimbursed expenses as follows:
| Expense Caps | Reimbursed | |||||||||||||||||
Fund | Class | 11/1/13 to 2/28/14 | 3/1/14 to 10/31/14 | (Recovered) Expenses | Expiration of Reimbursements | |||||||||||||
International Equity | Institutional* | 0.71 | %* | 0.70 | %* | 151,730 | 2017 | |||||||||||
International Equity | Retirement | 1.47 | % | N/A | (149 | ) | 2017 | |||||||||||
| * | Voluntary Reimbursement |
Of these amounts, $11,755 was receivable from the Manager to the International Equity Fund, at October 31, 2014. $30,231 was payable to the Manager from the Emerging Markets Fund at October 31, 2014. 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 | |||||||||
Emerging Markets | $ | — | $ | 28,833 | 2015 | |||||||
Emerging Markets | — | 45,693 | 2016 | |||||||||
International Equity | 149 | 19,335 | 2015 | |||||||||
International Equity | — | 88,916 | 2016 | |||||||||
The Manager recovered excess carryover expenses of $149 from the Retirement Class expiring in 2015 from the International Equity Fund for the period ended October 31, 2014. 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, 2014, Foreside collected $786 and $3,444 for Emerging Markets and International Equity Funds, respectively from the sale of Class A Shares.
28
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014, 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, 2014, $264 and $713 in CDSC fees were collected for the Emerging Markets and International Equity 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.
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.
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. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Funds’ pricing time of 4:00 p.m. Eastern Standard Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. These securities are fair valued using a pricing service and are categorized as Level 2 in the fair value hierarchy. The pricing service, using methods approved by the Board, considers the correlation of the trading patterns of the foreign security to intraday trading in the U.S. markets, based on indices of domestic securities and other appropriate indicators such as prices of relevant ADRs and futures contracts.
29
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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 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. As of October 31, 2014, the investments were classified as described below (in thousands):
30
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Emerging Markets* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Preferred Stocks | $ | 4,043 | $ | 943 | $ | — | $ | 4,986 | ||||||||
Foreign Common Stocks | 31,280 | 90,785 | — | 122,065 | ||||||||||||
Foreign Convertible Bonds | — | 48 | — | 48 | ||||||||||||
Domestic Common Stocks | 265 | — | — | 265 | ||||||||||||
Short-Term Investments - Money Market Funds | 4,354 | — | — | 4,354 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 39,942 | $ | 91,776 | $ | — | $ | 131,718 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 38 | $ | — | $ | — | $ | 38 | ||||||||
Forward Currency Contracts | 14 | — | — | 14 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Assets | $ | 52 | $ | — | $ | — | $ | 52 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||
Forward Currency Contracts | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Liabilities | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
|
|
|
|
|
|
|
| |||||||||
International Equity* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Foreign Preferred Stocks | $ | — | $ | 69 | $ | — | $ | 69 | ||||||||
Foreign Common Stocks | 98,274 | 2,098,789 | — | 2,197,063 | ||||||||||||
Short-Term Investments - Money Market Funds | 85,302 | — | — | 85,302 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds | 16,136 | — | — | 16,136 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 199,712 | $ | 2,098,858 | $ | — | $ | 2,298,570 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Assets | ||||||||||||||||
Futures Contracts | $ | 1,575 | $ | — | $ | — | $ | 1,575 | ||||||||
Foreign Currency Contracts | 563 | — | — | 563 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Assets | $ | 2,138 | $ | — | $ | — | $ | 2,138 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments - Liabilities | ||||||||||||||||
Futures Contracts | $ | 910 | $ | — | $ | — | $ | 910 | ||||||||
Foreign Currency Contracts | 3,366 | — | — | 3,366 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Financial Derivative Instruments - Liabilities | $ | 4,276 | $ | — | $ | — | $ | 4,276 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | Refer to the Schedules of Investments for country information. |
During the year ended October 31, 2014, the Emerging Markets Fund transferred securities with a value of $71,819 from Level 1 to Level 2 and the International Equity Fund transferred securities with a value of $1,757,141 from Level 1 to Level 2 as of the end of period in accordance with fair value procedures established by the Board (in thousands). These transfers were the result of determinations made by the Valuation Committee as significant unobservable inputs were used to determine the value of the securities because of a halt in trading as a result of news from the company of a plan of restructuring.
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.
31
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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.
32
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
4. Securities and Other Investments
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), and Non-Voting Depositary Receipts (“NVDRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. GDRs are in bearer form and traded in both the U.S. and European securities markets. NVDRs represent financial interests in an issuer but the holder is not entitled to any voting rights. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Fund’s possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Fund may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
Chess Depository Instruments (“CDIs”)
CDIs are financial products in which a unit of beneficial ownership is the underlying financial interests of the issuer. The financial interests of the issuer can be foreign equities, debt or other securities through one or more nominee companies, known as depository nominees. These underlying financial interests are quoted on the Australian Stock Exchange (“ASX”) market. With the exception of voting arrangements and some corporate actions of foreign issuers domiciled in certain jurisdictions, the CDI holder has the same rights as holders of financial interests of the issuer that are legally registered in the holder’s name. All of the economic benefits such as dividends, bonus issues, rights issues, interest payments, and maturity payments or similar corporate actions flow through to the CDI holder as if you were the legal owner of the corresponding financial product. The difference between holding CDIs and holding the foreign shares of the issuer is that the holder has beneficial ownership of the equivalent number of foreign shares of the issuer instead of legal title. Legal title to the foreign shares of the issuer is held by a nominee company on behalf of CDI holders.
Restricted Securities
The 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. Reg S securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. 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, 2014 are disclosed in the Notes to the Schedules of 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
33
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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.
Master Agreements
The Fund is a party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter derivative and foreign exchange contracts entered into by the Fund and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty organization, each type of transaction may be covered by a different Master Agreement, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single agreement with a counterparty.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed delivery or sale-Buyback financing transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.
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.
34
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
For the year ended October 31, 2014, the Funds entered into foreign currency exchange contracts primarily for 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 average 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).
| Average Forward Foreign Currency Notional Amount Outstanding at October 31, 2014 | ||||||||
Fund | Purchased Contracts | Sold Contracts | ||||||
Emerging Markets | $ | 38 | $ | 395 | ||||
International Equity | 105,003 | 25,900 | ||||||
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 year ended October 31, 2014, the Funds entered into future contracts primarily for 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 average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||
Fund | Year ended October 31, 2014 | |
Emerging Markets | 113 | |
International Equity | 920 | |
The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of financial derivative instruments on the Statements of Assets and Liabilities not accounted for as hedging instruments as of October 31, 2014:
Assets | Derivative | Emerging Markets | International Equity | |||||||
Unrealized appreciation of foreign currency contracts | Foreign Exchange Contracts | $ | 14 | $ | 563 | |||||
Receivable for variation margin from open futures contracts(2) | Equity Contracts | 17 | 1,328 | |||||||
|
|
|
| |||||||
| $ | 31 | $ | 1,891 | |||||||
|
|
|
| |||||||
35
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Liabilities | Derivative | Emerging Markets | International Equity | |||||||
Unrealized depreciation of foreign currency contracts | Foreign Exchange Contracts | $ | 1 | $ | 3,366 | |||||
Payable for variation margin from open futures contracts(2) | Equity Contracts | — | 662 | |||||||
|
|
|
| |||||||
| $ | 1 | $ | 4,028 | |||||||
|
|
|
| |||||||
The effect of financial derivative instruments not accounted for as hedging instruments on the Statements of Operations for the year ended October 31, 2014:
Statements of Operations: | Derivative | Emerging Markets | International Equity | |||||||
Net realized gain (loss) from foreign currency contracts | Foreign Exchange Contracts | $ | (3 | ) | $ | (1,336 | ) | |||
Net realized gain (loss) from futures contracts | Equity Contracts | 64 | 7,919 | |||||||
|
|
|
| |||||||
| $ | 61 | $ | 6,583 | |||||||
|
|
|
| |||||||
Statements of Operations: | Derivative | Emerging Markets | International Equity | |||||||
Change in net unrealized appreciation or (depreciation) of foreign currency contracts | Foreign Exchange Contracts | $ | 11 | $ | (4,540 | ) | ||||
Change in net unrealized appreciation or (depreciation) of futures contracts | Equity Contracts | (18 | ) | (2,095 | ) | |||||
|
|
|
| |||||||
| $ | (7 | ) | $ | (6,635 | ) | |||||
|
|
|
| |||||||
| (1) | See Note 3 in the Notes to Financial Statements for additional information. |
| (2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investment footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
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 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 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
A 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 a 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 a 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
36
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, a 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.
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the Buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Funds and additional required collateral is delivered to/pledged by the Funds on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds’ investment advisors attempt to mitigate counterparty risk by only entering into agreements with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Offsetting Assets and Liabilities
The Funds are parties to enforceable master netting agreements between brokers and counterparties, such as International Swaps and Derivatives Association (“ISDA”) agreements which provide for the right to offset under certain circumstances. The Funds employ multiple investment advisors and counterparties and have elected not to offset qualifying financial and derivative instruments on the Statements of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net
37
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, October 31, 2014 (in thousands).
Emerging Markets Fund
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts(1) | $ | 17 | $ | — | $ | 17 | ||||||
Foreign Currency Contracts | 14 | — | 14 | |||||||||
|
|
|
|
|
| |||||||
| $ | 31 | $ | — | $ | 31 | |||||||
|
|
|
|
|
| |||||||
Offsetting of Financial Liabilities and Derivative Liabilities as of October 31, 2014:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts(1) | $ | — | $ | — | $ | — | ||||||
Foreign Currency Contracts | 1 | — | 1 | |||||||||
|
|
|
|
|
| |||||||
| $ | 1 | $ | — | $ | 1 | |||||||
|
|
|
|
|
| |||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014:
| Net amount of Assets Presented in the Statement of Assets and Liabilities | Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||
Bank of America, N.A. | $ | 2 | $ | — | $ | — | $ | 2 | ||||||||
Goldman Sachs Bank USA(1) | 22 | — | — | 22 | ||||||||||||
UBS AG | 4 | — | — | 4 | ||||||||||||
State Street Bank and Trust Co. HK | 2 | — | — | 2 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 30 | $ | — | $ | — | $ | 30 | |||||||||
|
|
|
|
|
|
|
| |||||||||
International Equity Fund
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts(1) | $ | 1,328 | $ | — | $ | 1,328 | ||||||
Foreign Currency Contracts | 563 | — | 563 | |||||||||
Securities Lending | 15,363 | — | 15,363 | |||||||||
|
|
|
|
|
| |||||||
| $ | 17,254 | $ | — | $ | 17,254 | |||||||
|
|
|
|
|
| |||||||
38
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
Offsetting of Financial Liabilities and Derivative Liabilities as of October 31, 2014:
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts(1) | $ | 662 | $ | — | $ | 662 | ||||||
Foreign Currency Contracts | 3,366 | — | 3,366 | |||||||||
|
|
|
|
|
| |||||||
| $ | 4,028 | $ | — | $ | 4,028 | |||||||
|
|
|
|
|
| |||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014:
| Net amount of Assets Presented in the Statement of Assets and Liabilities | Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received(2) | Net Amount | |||||||||||||
Bank of America, N.A. | $ | (88 | ) | $ | — | $ | — | $ | (88 | ) | ||||||
Bank of Montreal | 22 | — | — | 22 | ||||||||||||
Barclays Bank DLC Wholesale | (381 | ) | — | — | (381 | ) | ||||||||||
BNP Paribas S.A. | (120 | ) | — | — | (120 | ) | ||||||||||
CitiBank, N.A | (1,012 | ) | — | — | (1,012 | ) | ||||||||||
Credit Suisse Securities (USA) | 10,962 | — | 10,962 | — | ||||||||||||
Credit Suisse London Branch (GFX) | 71 | — | — | 71 | ||||||||||||
Goldman Sachs Bank USA(1) | 666 | — | — | 666 | ||||||||||||
Goldman Sachs Capital Markets LP | (347 | ) | — | — | (347 | ) | ||||||||||
Goldman Sachs & Co. | 267 | — | 267 | — | ||||||||||||
JPMorgan Clearing Corp | 2,247 | — | 2,247 | — | ||||||||||||
JPMorgan Chase Bank N.A. | (2 | ) | — | — | (2 | ) | ||||||||||
Merrill Lynch, Pierce, Fenner | 1,887 | — | 1,887 | — | ||||||||||||
Royal Bank of Scotland | (326 | ) | — | — | (326 | ) | ||||||||||
Standard Chartered Bank | 11 | — | — | 11 | ||||||||||||
Societe Generale PLC | 71 | — | — | 71 | ||||||||||||
UBS AG | (702 | ) | — | — | (702 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 13,226 | $ | — | $ | 15,363 | $ | (2,137 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
| (2) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $16,136 has been received in connection with securities lending transactions. |
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, 2014 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.
The Funds 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 Statements
October 31, 2014
The tax character of distributions paid were as follows (in thousands):
| Emerging Markets | International Equity | |||||||||||||||
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||||||||
Distributions paid from: Ordinary income* | ||||||||||||||||
Institutional Class | $ | 100 | $ | 92 | $ | 14,406 | $ | 16,101 | ||||||||
Y Class | 22 | 21 | 7,149 | 55 | ||||||||||||
Investor Class | 43 | 55 | 4,093 | 10,473 | ||||||||||||
Advisor Class | — | — | 73 | 106 | ||||||||||||
Retirement Class | — | 7 | ||||||||||||||
A Class | 2 | 5 | 79 | 40 | ||||||||||||
C Class | — | — | 15 | 5 | ||||||||||||
AMR Class | 1,154 | 1,078 | 8,617 | 10,213 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total distributions paid | $ | 1,321 | $ | 1,251 | $ | 34,439 | $ | 36,993 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2014, the components of distributable earnings or (deficit) on a tax basis were as follows (in thousands):
| Emerging Markets | International Equity | |||||||
Cost basis of investments for federal income tax purposes | $ | 140,452 | $ | 2,035,849 | ||||
Unrealized appreciation | 10,979 | 366,940 | ||||||
Unrealized depreciation | (19,712 | ) | (104,219 | ) | ||||
|
|
|
| |||||
Net unrealized appreciation or (depreciation) | (8,733 | ) | 262,721 | |||||
Undistributed ordinary income | 1,706 | 58,083 | ||||||
Accumulated long-term gain or (loss) | 7,396 | (35,532 | ) | |||||
Other temporary differences | 32 | 1,350 | ||||||
|
|
|
| |||||
Distributable earnings or (deficits) | $ | 401 | $ | 286,622 | ||||
|
|
|
| |||||
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, 2014 (in thousands):
| Emerging Markets | International Equity | |||||||
Paid-in-capital | $ | — | $ | 309 | ||||
Undistributed net investment income (loss) | (1,301 | ) | 2,136 | |||||
Accumulated net realized gain (loss) | 1,301 | (2,445 | ) | |||||
Unrealized appreciation or depreciation of investments, futures contracts, and foreign currency contracts | — | — | ||||||
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
40
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
As of October 31, 2014 the capital loss carryforward position 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 | $ | 35,965 | ||
The Emerging Markets Fund utilized $22 of long-term losses under the provisions of the Act. The International Equity Fund utilized $98,596 of loss carryforwards positions occurring prior to the provisions 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, 2014 were as follows (in thousands):
| Emerging Markets | International Equity | |||||||
Purchases | $ | 66,907 | $ | 793,735 | ||||
Sales and Maturities | 61,810 | 496,763 | ||||||
A summary of the International Equity Fund’s transactions in the USG Select Fund for the year ended October 31, 2014 is set forth below (in thousands):
Type of Transaction | Affiliated Fund | October 31, 2013 Shares/Fair Value | Purchases | Sales | October 31, 2014 Shares/Fair Value | Dividend Income | ||||||||||||||||
Direct | USG Select Fund | $ | 10,000 | $ | 29,000 | $ | 39,000 | $ | — | $ | 1 | |||||||||||
Securities Lending | USG Select Fund | 19,596 | 957,003 | 963,782 | 12,187 | N/A | ||||||||||||||||
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.
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.
41
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
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, 2014, 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 | ||
$15,363 | $— | $16,136 |
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, 2014
| Institutional Class | Y Class | Investor Class | A Class | |||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
Shares sold | 99 | $ | 1,222 | 170 | $ | 2,112 | 362 | $ | 4,513 | 55 | $ | 690 | ||||||||||||||||||||
Redemption Fees | — | 2 | — | — | — | 1 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 9 | 100 | 2 | 21 | 4 | 42 | — | 1 | ||||||||||||||||||||||||
Shares redeemed | (72 | ) | (855 | ) | (184 | ) | (2,131 | ) | (241 | ) | (2,915 | ) | (12 | ) | (144 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 36 | $ | 469 | (12 | ) | $ | 2 | 125 | $ | 1,641 | 43 | $ | 547 | |||||||||||||||||||
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| C Class | AMR Class | |||||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||
Shares sold | 16 | $ | 195 | 1,719 | $ | 21,019 | ||||||||||||||||||||||||||
Redemption Fees | — | — | — | 19 | ||||||||||||||||||||||||||||
Reinvestment of dividends | — | — | 99 | 1,153 | ||||||||||||||||||||||||||||
Shares redeemed | (4 | ) | (47 | ) | (1,869 | ) | (22,654 | ) | ||||||||||||||||||||||||
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Net increase (decrease) in shares outstanding | 12 | $ | 148 | (51 | ) | $ | (463 | ) | ||||||||||||||||||||||||
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42
American Beacon FundsSM
Notes to Financial Statements
October 31, 2014
| Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
International Equity Fund | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||
| Shares sold | 13,787 | $279,279 | 8,027 | $167,803 | 5,651 | $113,559 | 205 | $4,180 | ||||||||||||||||||||||||
Redemption Fees | — | 18 | — | 10 | — | 7 | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 627 | 12,437 | 204 | 4,201 | 207 | 4,066 | 4 | 73 | ||||||||||||||||||||||||
Shares redeemed | (8,749 | ) | (177,074 | ) | (3,206 | ) | (66,954 | ) | (4,810 | ) | (96,602 | ) | (77 | ) | (1,562 | ) | ||||||||||||||||
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Net increase in shares outstanding | 5,665 | $ | 114,660 | 5,025 | $ | 105,060 | 1,048 | $ | 21,030 | 132 | $ | 2,691 | ||||||||||||||||||||
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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 | 36 | $ | 777 | 285 | $ | 5,687 | 103 | $ | 2,040 | 3,134 | $ | 63,781 | ||||||||||||||||||||
Redemption Fees | — | — | — | — | — | — | — | 9 | ||||||||||||||||||||||||
Reinvestment of dividends | — | 7 | 3 | 63 | 1 | 12 | 434 | 8,617 | ||||||||||||||||||||||||
Shares redeemed | (13 | ) | (285 | ) | (52 | ) | (1,038 | ) | (6 | ) | (111 | ) | (4,414 | ) | (88,917 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 23 | $ | 499 | 236 | $ | 4,712 | 98 | $ | 1,941 | (846 | ) | $ | (16,510 | ) | ||||||||||||||||||
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For the Year Ended October 31, 2013
| Institutional Class | Y Class | Investor Class | ||||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Shares sold | 167 | $ | 2,009 | 81 | $ | 933 | 117 | $ | 1,351 | |||||||||||||||||||||||
Redemption Fees | — | 1 | — | — | — | 1 | ||||||||||||||||||||||||||
Reinvestment of dividends | 8 | 92 | 2 | 20 | 5 | 54 | ||||||||||||||||||||||||||
Shares redeemed | (84 | ) | (1,000 | ) | (83 | ) | (978 | ) | (320 | ) | (3,650 | ) | ||||||||||||||||||||
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Net increase (decrease) in shares outstanding | 91 | $ | 1,102 | — | $ | (25 | ) | (198 | ) | $ | (2,244 | ) | ||||||||||||||||||||
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| A Class | C Class | AMR Class | ||||||||||||||||||||||||||||||
Emerging Markets Fund | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Shares sold | 7 | $ | 75 | 9 | $ | 100 | �� | 3,016 | $ | 35,188 | ||||||||||||||||||||||
Redemption Fees | — | — | — | — | — | 16 | ||||||||||||||||||||||||||
Reinvestment of dividends | — | 2 | — | — | 90 | 1,078 | ||||||||||||||||||||||||||
Shares redeemed | (27 | ) | (292 | ) | (4 | ) | (43 | ) | (3,285 | ) | (37,952 | ) | ||||||||||||||||||||
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Net increase (decrease) in shares outstanding | (20 | ) | $ | (215 | ) | 5 | $ | 57 | (179 | ) | $ | (1,670 | ) | |||||||||||||||||||
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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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43
American Beacon Emerging Markets FundSM
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 12.15 | $ | 11.33 | $ | 12.67 | $ | 14.55 | $ | 11.95 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.13 | 0.09 | 0.12 | 0.16 | 0.13 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.23 | 0.86 | 0.11 | (1.91 | ) | 2.63 | ||||||||||||||
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Total income (loss) from investment operations | 0.36 | 0.95 | 0.23 | (1.75 | ) | 2.76 | ||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.13 | ) | (0.16 | ) | (0.13 | ) | (0.16 | ) | ||||||||||
Distributions from net realized gains | — | — | (1.41 | ) | — | — | ||||||||||||||
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Total distributions | (0.13 | ) | (0.13 | ) | (1.57 | ) | (0.13 | ) | (0.16 | ) | ||||||||||
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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 | $ | 12.38 | $ | 12.15 | $ | 11.33 | $ | 12.67 | $ | 14.55 | ||||||||||
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Total returnC | 3.05 | % | 8.39 | % | 3.05 | % | (12.18 | )% | 23.36 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 10,597 | $ | 9,962 | $ | 8,256 | $ | 8,523 | $ | 9,023 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.34 | % | 1.64 | % | 1.50 | % | 1.55 | % | 1.58 | % | ||||||||||
Expenses, net of reimbursements | 1.34 | % | 1.35 | % | 1.33 | % | 1.24 | % | 1.39 | % | ||||||||||
Net investment income (loss), before reimbursements | 1.05 | % | 0.58 | % | 0.87 | % | 0.99 | % | 0.58 | % | ||||||||||
Net investment income (loss), net of reimbursements | 1.05 | % | 0.87 | % | 1.04 | % | 1.30 | % | 0.77 | % | ||||||||||
Portfolio turnover rate | 51 | % | 55 | % | 44 | % | 101 | % | 64 | % | ||||||||||
| 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. |
44
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, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||||||||||||||||||||||||||||||
| $ | 12.22 | $ | 11.41 | $ | 12.75 | $ | 14.53 | $ | 12.29 | $ | 11.93 | $ | 11.13 | $ | 12.44 | $ | 14.29 | $ | 11.77 | $ | 11.91 | $ | 11.11 | $ | 12.47 | $ | 14.27 | $ | 12.10 | |||||||||||||||||||||||||||||
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| 0.06 | 0.11 | 0.06 | 0.13 | 0.04 | 0.08 | 0.04 | 0.08 | 0.13 | 0.04 | 0.07 | 0.06 | 0.10 | 0.06 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||
| 0.28 | 0.83 | 0.16 | (1.91 | ) | 2.20 | 0.23 | 0.84 | 0.12 | (1.93 | ) | 2.63 | 0.24 | 0.82 | 0.09 | (1.85 | ) | 2.15 | |||||||||||||||||||||||||||||||||||||||||
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| 0.34 | 0.94 | 0.22 | (1.78 | ) | 2.24 | 0.31 | 0.88 | 0.20 | (1.80 | ) | 2.67 | 0.31 | 0.88 | 0.19 | (1.79 | ) | 2.17 | |||||||||||||||||||||||||||||||||||||||||
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| (0.12 | ) | (0.13 | ) | (0.15 | ) | — | — | (0.08 | ) | (0.08 | ) | (0.10 | ) | (0.05 | ) | (0.15 | ) | (0.06 | ) | (0.08 | ) | (0.14 | ) | (0.01 | ) | — | ||||||||||||||||||||||||||||||||
| — | — | (1.41 | ) | — | — | — | — | (1.41 | ) | — | — | — | — | (1.41 | ) | — | — | |||||||||||||||||||||||||||||||||||||||||
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| (0.12 | ) | (0.13 | ) | (1.56 | ) | — | — | (0.08 | ) | (0.08 | ) | (1.51 | ) | (0.05 | ) | (0.15 | ) | (0.06 | ) | (0.08 | ) | (1.55 | ) | (0.01 | ) | — | ||||||||||||||||||||||||||||||||
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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 | 0.00 | B | 0.00 | B | |||||||||||||||||||||||||||||
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| $ | 12.44 | $ | 12.22 | $ | 11.41 | $ | 12.75 | $ | 14.53 | $ | 12.16 | $ | 11.93 | $ | 11.13 | $ | 12.44 | $ | 14.29 | $ | 12.16 | $ | 11.91 | $ | 11.11 | $ | 12.47 | $ | 14.27 | |||||||||||||||||||||||||||||
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| 2.85 | % | 8.22 | % | 2.91 | % | (12.25 | )% | 18.23 | %D | 2.61 | % | 7.89 | % | 2.72 | % | (12.65 | )% | 22.85 | % | 2.65 | % | 7.94 | % | 2.64 | % | (12.58 | )% | 17.93 | %D | |||||||||||||||||||||||||||||
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| $ | 1,848 | $ | 1,962 | $ | 1,837 | $ | 5,296 | $ | 13 | $ | 8,321 | $ | 6,675 | $ | 8,427 | $ | 9,030 | $ | 12,478 | $ | 1,035 | $ | 491 | $ | 685 | $ | 433 | $ | 2 | |||||||||||||||||||||||||||||
| 1.45 | % | 1.75 | % | 1.72 | % | 1.68 | % | 1.82 | %E | 1.79 | % | 1.95 | % | 1.84 | % | 1.84 | % | 1.86 | % | 1.73 | % | 2.19 | % | 2.01 | % | 2.97 | % | 2.26 | %E | |||||||||||||||||||||||||||||
| 1.45 | % | 1.45 | % | 1.44 | % | 1.33 | % | 1.42 | %E | 1.79 | % | 1.79 | % | 1.75 | % | 1.70 | % | 1.77 | % | 1.73 | % | 1.79 | % | 1.78 | % | 1.46 | % | 1.78 | %E | |||||||||||||||||||||||||||||
| 0.76 | % | 0.56 | % | (0.05 | )% | 0.99 | % | 0.40 | %E | 0.61 | % | 0.26 | % | 0.56 | % | 0.77 | % | 0.29 | % | 0.54 | % | 0.11 | % | 0.46 | % | (0.10 | )% | (0.10 | )%E | |||||||||||||||||||||||||||||
| 0.76 | % | 0.86 | % | 0.23 | % | 1.35 | % | 0.79 | %E | 0.61 | % | 0.42 | % | 0.65 | % | 0.91 | % | 0.37 | % | 0.54 | % | 0.52 | % | 0.69 | % | 1.41 | % | 0.39 | %E | |||||||||||||||||||||||||||||
| 51 | % | 55 | % | 44 | % | 101 | % | 64 | %F | 51 | % | 55 | % | 44 | % | 101 | % | 64 | % | 51 | % | 55 | % | 44 | % | 101 | % | 64 | %F | |||||||||||||||||||||||||||||
45
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, | ||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.83 | $ | 11.05 | $ | 12.38 | $ | 14.26 | $ | 12.89 | $ | 12.25 | $ | 11.44 | $ | 12.74 | $ | 14.62 | $ | 12.02 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.00 | (0.05 | ) | 0.03 | 0.09 | (0.02 | ) | 0.14 | 0.12 | 0.14 | 0.18 | 0.11 | ||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 0.24 | 0.83 | 0.07 | (1.97 | ) | 1.39 | 0.23 | 0.83 | 0.12 | (1.97 | ) | 2.68 | ||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 0.24 | 0.78 | 0.10 | (1.88 | ) | 1.37 | 0.37 | 0.95 | 0.26 | (1.79 | ) | 2.79 | ||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.03 | ) | — | (0.02 | ) | — | — | (0.13 | ) | (0.14 | ) | (0.15 | ) | (0.09 | ) | (0.19 | ) | |||||||||||||||||||||||
Distributions from net realized gains | — | — | (1.41 | ) | — | — | — | — | (1.41 | ) | — | — | ||||||||||||||||||||||||||||
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Total distributions | (0.03 | ) | — | (1.43 | ) | — | — | (0.13 | ) | (0.14 | ) | (1.56 | ) | (0.09 | ) | (0.19 | ) | |||||||||||||||||||||||
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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 | 0.00 | B | ||||||||||||||||||||
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Net asset value, end of period | $ | 12.04 | $ | 11.83 | $ | 11.05 | $ | 12.38 | $ | 14.26 | $ | 12.49 | $ | 12.25 | $ | 11.44 | $ | 12.74 | $ | 14.62 | ||||||||||||||||||||
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| |||||||||||||||||||||
Total return | 2.00 | % | 7.06 | % | 1.83 | % | (13.18 | )% | 10.63 | %D | 3.08 | % | 8.34 | % | 3.26 | % | (12.30 | )% | 23.47 | % | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 213 | $ | 62 | $ | 5 | $ | 8 | $ | 1 | $ | 110,002 | $ | 108,493 | $ | 103,363 | $ | 113,894 | $ | 128,841 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses, before reimbursements | 2.47 | % | 3.26 | % | 3.74 | % | 26.96 | % | 4.49 | %E | 1.29 | % | 1.39 | % | 1.24 | % | 1.31 | % | 1.34 | % | ||||||||||||||||||||
Expenses, net of reimbursements | 2.47 | % | 2.54 | % | 2.52 | % | 2.41 | % | 2.54 | %E | 1.29 | % | 1.39 | % | 1.24 | % | 1.31 | % | 1.34 | % | ||||||||||||||||||||
Net investment income (loss), before reimbursements | 0.00 | % | (0.55 | )% | (1.19 | )% | (23.86 | )% | (2.91 | )%E | 1.11 | % | 0.90 | % | 1.15 | % | 1.29 | % | 0.79 | % | ||||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.00 | % | 0.18 | % | 0.03 | % | 0.69 | % | (0.96 | )%E | 1.11 | % | 0.90 | % | 1.15 | % | 1.29 | % | 0.79 | % | ||||||||||||||||||||
Portfolio turnover rate | 51 | % | 55 | % | 44 | % | 101 | % | 64 | %F | 51 | % | 55 | % | 44 | % | 101 | % | 64 | % | ||||||||||||||||||||
| 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. |
46
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47
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 20.07 | $ | 16.05 | $ | 15.27 | $ | 16.67 | $ | 15.51 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.54 | 0.36 | 0.41 | 0.46 | 0.35 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.77 | ) | 4.07 | 0.92 | (1.41 | ) | 1.30 | |||||||||||||
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Total income (loss) from investment operations | (0.23 | ) | 4.43 | 1.33 | (0.95 | ) | 1.65 | |||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.33 | ) | (0.41 | ) | (0.55 | ) | (0.45 | ) | (0.49 | ) | ||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.33 | ) | (0.41 | ) | (0.55 | ) | (0.45 | ) | (0.49 | ) | ||||||||||
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Redemption fees added to beneficial interest C | — | — | — | — | — | |||||||||||||||
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Net asset value, end of period | $ | 19.51 | $ | 20.07 | $ | 16.05 | $ | 15.27 | $ | 16.67 | ||||||||||
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Total return B | (1.18 | )% | 28.14 | % | 9.25 | % | (5.89 | )% | 10.81 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 956,960 | $ | 870,729 | $ | 608,256 | $ | 512,093 | $ | 527,718 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 0.72 | % | 0.72 | % | 0.72 | % | 0.70 | % | 0.71 | % | ||||||||||
Expenses, net of reimbursements | 0.70 | % | 0.71 | % | 0.72 | % | 0.70 | % | 0.71 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.74 | % | 2.16 | % | 2.85 | % | 2.90 | % | 2.21 | % | ||||||||||
Net investment income, net of reimbursements | 2.76 | % | 2.17 | % | 2.85 | % | 2.90 | % | 2.21 | % | ||||||||||
Portfolio turnover rate | 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | ||||||||||
| A | The Boston Company Asset Management, LLC was terminated as an investment advisor to the International Equity Fund on December 31, 2011. |
| 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 | Amount represents less than $0.01 per share. |
48
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Y Class | Investor Class | |||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | 2010 | 2014 | 2013 | 2012A | 2011 | 2010 | |||||||||||||||||||||||||||||
| $ | 20.81 | $ | 16.65 | $ | 15.82 | $ | 17.17 | $ | 15.52 | $ | 19.86 | $ | 15.88 | $ | 15.11 | $ | 16.42 | $ | 15.30 | |||||||||||||||||||
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| 0.50 | 0.62 | 0.41 | 0.49 | 0.04 | 0.46 | 0.25 | 0.38 | 0.44 | 0.29 | |||||||||||||||||||||||||||||
| (0.77 | ) | 3.97 | 0.95 | (1.50 | ) | 1.61 | (0.76 | ) | 4.09 | 0.87 | (1.44 | ) | 1.27 | |||||||||||||||||||||||||
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| (0.27 | ) | 4.59 | 1.36 | (1.01 | ) | 1.65 | (0.30 | ) | 4.34 | 1.25 | (1.00 | ) | 1.56 | |||||||||||||||||||||||||
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| (0.33 | ) | (0.43 | ) | (0.53 | ) | (0.34 | ) | — | (0.24 | ) | (0.36 | ) | (0.48 | ) | (0.31 | ) | (0.44 | ) | ||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| (0.33 | ) | (0.43 | ) | (0.53 | ) | (0.34 | ) | — | (0.24 | ) | (0.36 | ) | (0.48 | ) | (0.31 | ) | (0.44 | ) | ||||||||||||||||||||
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| |||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| $ | 20.21 | $ | 20.81 | $ | 16.65 | $ | 15.82 | $ | 17.17 | $ | 19.32 | $ | 19.86 | $ | 15.88 | $ | 15.11 | $ | 16.42 | |||||||||||||||||||
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| |||||||||||||||||||
| (1.31 | )% | 28.04 | % | 9.15 | % | (6.00 | )% | 10.63 | % | (1.54 | )% | 27.81 | % | 8.77 | % | (6.21 | )% | 10.36 | % | |||||||||||||||||||
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| |||||||||||||||||||
| $ | 530,837 | $ | 441,946 | $ | 1,512 | $ | 720 | $ | 245 | $ | 348,542 | $ | 337,424 | $ | 453,142 | $ | 386,560 | $ | 463,704 | |||||||||||||||||||
| 0.82 | % | 0.85 | % | 0.80 | % | 0.81 | % | 0.81 | % | 1.05 | % | 1.04 | % | 1.09 | % | 1.07 | % | 1.07 | % | |||||||||||||||||||
| 0.82 | % | 0.85 | % | 0.80 | % | 0.81 | % | 0.81 | % | 1.05 | % | 1.04 | % | 1.09 | % | 1.07 | % | 1.07 | % | |||||||||||||||||||
| 2.62 | % | 2.55 | % | 2.74 | % | 3.00 | % | 1.44 | % | 2.36 | % | 1.67 | % | 2.50 | % | 2.55 | % | 1.83 | % | |||||||||||||||||||
| 2.62 | % | 2.55 | % | 2.74 | % | 3.00 | % | 1.44 | % | 2.36 | % | 1.67 | % | 2.50 | % | 2.55 | % | 1.83 | % | |||||||||||||||||||
| 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | |||||||||||||||||||
49
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 20.36 | $ | 16.36 | $ | 15.52 | $ | 16.74 | $ | 15.20 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.44 | (0.41 | ) | 0.09 | 0.07 | 0.89 | ||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.77 | ) | 4.83 | 1.18 | (1.12 | ) | 0.65 | |||||||||||||
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| |||||||||||
Total income (loss) from investment operations | (0.33 | ) | 4.42 | 1.27 | (1.05 | ) | 1.54 | |||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.27 | ) | (0.42 | ) | (0.43 | ) | (0.17 | ) | — | |||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.27 | ) | (0.42 | ) | (0.43 | ) | (0.17 | ) | — | |||||||||||
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Redemption fees added to beneficial interestF | — | — | — | — | — | |||||||||||||||
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Net asset value, end of period | $ | 19.76 | $ | 20.36 | $ | 16.36 | $ | 15.52 | $ | 16.74 | ||||||||||
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Total returnB | (1.64 | )% | 27.51 | % | 8.59 | % | (6.35 | )% | 10.13 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 7,677 | $ | 5,232 | $ | 1,397 | $ | 1,015 | $ | 746 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.19 | % | 1.20 | % | 1.31 | % | 1.24 | % | 1.26 | % | ||||||||||
Expenses, net of reimbursements | 1.19 | % | 1.20 | % | 1.31 | % | 1.24 | % | 1.26 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.21 | % | 1.39 | % | 2.18 | % | 2.52 | % | 1.64 | % | ||||||||||
Net investment income, net of reimbursements | 2.21 | % | 1.39 | % | 2.18 | % | 2.52 | % | 1.64 | % | ||||||||||
Portfolio turnover rate | 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | ||||||||||
| A | The Boston Company Asset Management, LLC was terminated as an investment advisor to the International Equity Fund on December 31, 2011. |
| 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. |
| F | Amount represents less than $0.01 per share. |
50
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Retirement Class | A Class | |||||||||||||||||||||||||||||||||||||
May 17 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | 2010 | 2014 | 2013 | 2012A | 2011 | 2010 | |||||||||||||||||||||||||||||
| $ | 21.31 | $ | 16.75 | $ | 15.44 | $ | 16.71 | $ | 15.20 | $ | 19.92 | $ | 16.02 | $ | 15.33 | $ | 16.40 | $ | 14.14 | |||||||||||||||||||
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| 0.30 | 0.19 | (0.45 | ) | 0.39 | 0.22 | 0.46 | 0.43 | 0.48 | 0.12 | 0.03 | ||||||||||||||||||||||||||||
| (0.71 | ) | 4.37 | 1.76 | (1.44 | ) | 1.29 | (0.78 | ) | 3.89 | 0.76 | (1.14 | ) | 2.23 | |||||||||||||||||||||||||
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| (0.41 | ) | 4.56 | 1.31 | (1.05 | ) | 1.51 | (0.32 | ) | 4.32 | 1.24 | (1.02 | ) | 2.26 | |||||||||||||||||||||||||
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| (0.20 | ) | — | — | (0.22 | ) | — | (0.28 | ) | (0.42 | ) | (0.55 | ) | (0.05 | ) | — | |||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| (0.20 | ) | — | — | (0.22 | ) | — | (0.28 | ) | (0.42 | ) | (0.55 | ) | (0.05 | ) | — | |||||||||||||||||||||||
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| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| $ | 20.70 | $ | 21.31 | $ | 16.75 | $ | 15.44 | $ | 16.71 | $ | 19.32 | $ | 19.92 | $ | 16.02 | $ | 15.33 | $ | 16.40 | |||||||||||||||||||
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| (1.93 | )% | 27.22 | % | 8.48 | % | (6.37 | )% | 9.93 | % | (1.65 | )% | 27.51 | % | 8.62 | % | (6.26 | )% | 15.98 | %C | |||||||||||||||||||
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| |||||||||||||||||||
| $ | 1,212 | $ | 755 | $ | 52 | $ | 1 | $ | 1 | $ | 8,540 | $ | 4,113 | $ | 1,255 | $ | 461 | $ | 4 | |||||||||||||||||||
| 1.46 | % | 1.46 | % | 6.40 | % | 3.43 | % | 1.66 | % | 1.15 | % | 1.21 | % | 1.29 | % | 2.24 | % | 1.26 | %D | |||||||||||||||||||
| 1.47 | % | 1.47 | % | 1.24 | % | 1.30 | % | 1.47 | % | 1.15 | % | 1.25 | % | 1.26 | % | 1.22 | % | 1.25 | %D | |||||||||||||||||||
| 1.97 | % | 1.78 | % | (3.06 | )% | 0.17 | % | 1.25 | % | 2.31 | % | 1.73 | % | 2.03 | % | 1.03 | % | 0.96 | %D | |||||||||||||||||||
| 1.95 | % | 1.78 | % | 2.10 | % | 2.30 | % | 1.44 | % | 2.31 | % | 1.69 | % | 2.07 | % | 2.05 | % | 0.98 | %D | |||||||||||||||||||
| 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | 23 | % | 27 | % | 60 | % | 33 | % | 38 | %E | |||||||||||||||||||
51
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| C Class | ||||||||||||||||||||
| Year Ended October 31, | Sept. 1 to Oct. 31, 2010 | |||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | |||||||||||||||||
Net asset value, beginning of period | $ | 19.47 | $ | 15.70 | $ | 15.21 | $ | 16.39 | $ | 14.82 | ||||||||||
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| |||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.30 | 0.52 | 0.40 | 0.07 | (0.01 | ) | ||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | (0.75 | ) | 3.59 | 0.71 | (1.25 | ) | 1.58 | |||||||||||||
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Total income (loss) from investment operations | (0.45 | ) | 4.11 | 1.11 | (1.18 | ) | 1.57 | |||||||||||||
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| |||||||||||
Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.19 | ) | (0.34 | ) | (0.62 | ) | — | — | ||||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.19 | ) | (0.34 | ) | (0.62 | ) | — | — | ||||||||||||
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Redemption fees added to beneficial interestF | — | — | — | — | — | |||||||||||||||
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| |||||||||||
Net asset value, end of period | $ | 18.83 | $ | 19.47 | $ | 15.70 | $ | 15.21 | $ | 16.39 | ||||||||||
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Total return B | (2.36 | )% | 26.56 | % | 7.89 | % | (7.20 | )% | 10.59 | %C | ||||||||||
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| |||||||||||
Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 3,029 | $ | 1,220 | $ | 115 | $ | 76 | $ | 1 | ||||||||||
Ratios to average net assets: | ||||||||||||||||||||
Expenses, before reimbursements | 1.90 | % | 1.95 | % | 2.12 | % | 7.39 | % | 2.60 | %D | ||||||||||
Expenses, net of reimbursements | 1.90 | % | 1.99 | % | 1.98 | % | 1.95 | % | 1.99 | %D | ||||||||||
Net investment income (loss), before reimbursements | 1.53 | % | 1.13 | % | 1.56 | % | (4.32 | )% | (0.81 | )%D | ||||||||||
Net investment income, net of reimbursements | 1.53 | % | 1.09 | % | 1.70 | % | 1.11 | % | (0.20 | )%D | ||||||||||
Portfolio turnover rate | 23 | % | 27 | % | 60 | % | 33 | % | 38 | %E | ||||||||||
| A | The Boston Company Asset Management, LLC was terminated as an investment advisor to the International Equity Fund on December 31, 2011. |
| 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. |
| F | Amount represents less than $0.01 per share. |
52
American Beacon International Equity FundSM
Financial Highlights
(For a share outstanding throughout the period)
| AMR Class | ||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||
| 2014 | 2013 | 2012A | 2011 | 2010 | ||||||||||||||
| $ | 20.12 | $ | 16.08 | $ | 15.31 | $ | 16.78 | $ | 15.61 | |||||||||
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|
|
|
| |||||||||
| 0.60 | 0.46 | 0.49 | 0.53 | 0.39 | ||||||||||||||
| (0.77 | ) | 4.04 | 0.87 | (1.44 | ) | 1.30 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| (0.17 | ) | 4.50 | 1.36 | (0.91 | ) | 1.69 | ||||||||||||
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|
|
|
|
|
|
|
| |||||||||
| (0.37 | ) | (0.46 | ) | (0.59 | ) | (0.56 | ) | (0.52 | ) | |||||||||
| — | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| (0.37 | ) | (0.46 | ) | (0.59 | ) | (0.56 | ) | (0.52 | ) | |||||||||
| — | — | — | — | — | ||||||||||||||
|
|
|
|
|
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|
|
|
| |||||||||
| $ | 19.58 | $ | 20.12 | $ | 16.08 | $ | 15.31 | $ | 16.78 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| (0.88 | )% | 28.56 | % | 9.47 | % | (5.62 | )% | 11.05 | % | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||
| $ | 437,941 | $ | 467,156 | $ | 387,197 | $ | 388,185 | $ | 469,414 | |||||||||
| 0.42 | % | 0.43 | % | 0.45 | % | 0.45 | % | 0.46 | % | |||||||||
| 0.42 | % | 0.43 | % | 0.45 | % | 0.45 | % | 0.46 | % | |||||||||
| 2.99 | % | 2.47 | % | 3.16 | % | 3.15 | % | 2.45 | % | |||||||||
| 2.99 | % | 2.47 | % | 3.16 | % | 3.15 | % | 2.45 | % | |||||||||
| 23 | % | 27 | % | 60 | % | 33 | % | 38 | % | |||||||||
53
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2014 (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, 2014. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ended December 31, 2014.
The Funds designated the following items with regard to distributions paid during the fiscal year ended October 31, 2013. 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 $6,142,243.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
54
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisor Agreements of the Funds (Unaudited)
At in-person meetings held on May 15, 2014 and June 5, 2014 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 5 meeting, approved: (1) the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) and American Beacon Select Funds (“Select Trust”) on behalf of each of their series that had been operational for at least one year (collectively, the “Funds”); and (2) the renewal of the investment advisory agreements (each an “Investment Advisory Agreement”) among the Manager, each subadvisor and, as applicable, the Beacon Trust, other than the Investment Advisory Agreements with subadvisors with respect to which the Board approved a new Investment Advisory Agreement within the past year (each a “subadvisor”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board to consider the renewal of these Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”), Morningstar, Inc. (“Morningstar”), Bobroff Consulting, Inc. and Callan Associates, Inc. (“Callan”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee coordinated the production of information from Lipper and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, 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 on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
| • | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Lipper and Morningstar, and to the performance of any similar accounts managed by the firm; |
| • | for Funds having multiple firms managing assets, information regarding the performance of the individual firms with respect to their allocated portions of a Fund’s portfolio, and the performance of certain relevant benchmarks and other similar accounts managed by the firm; |
| • | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with those of comparable mutual funds, including peer group averages and fee and expense analyses provided by Lipper and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided; |
| • | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to the expense caps; |
| • | the Manager’s profitability with respect to the services that it provided to each Fund; |
| • | 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 evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
| • | information regarding the securities lending, cash management, administrative and accounting-related services that the Manager provides to certain Funds and the fees that the Manager receives for such services, including Callan’s review of the Funds’ securities lending program; and |
| • | information regarding a firm’s financial condition, the personnel who are or will be assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, disaster recovery plans, insurance coverage, material pending litigation, code of ethics, compliance matters, trading activities, and actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds. |
The Board considered that the Manager provides management and administrative services to the Funds pursuant to separate agreements. The Board noted, in this regard, that many mutual funds have a single contract governing both types of services, and observed that the actual management fee rates provided by Lipper for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
Certain firms may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of those firms based on information that was provided. For each Fund with more than one class of shares, the class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which, in most cases, was the Institutional Class. For the American Beacon Holland Large Cap Growth Fund, the comparison was made using the Investor Class of shares due to the short period of time that its Institutional Class of shares has been in existence. 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 certain factors the Board considered in connection with its renewal and approval 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.
55
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisor Agreements of the Funds (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 Meetings, 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) 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 clients); (5) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; 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 staffing 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) as well as the Fund’s Morningstar rating. 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 certain Funds. 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 Manager represented that 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 share 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 and, in some instances, 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 certain Funds. In considering the management fees for overseeing the securities lending program, the Board reviewed the analysis of the securities lending program prepared by Callan. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the fee rates charged by 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 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.
56
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisor Agreements of the Funds (Unaudited)
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, certain subadvisors have agreed to take into account assets of American Airlines Group 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 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 Board noted that certain subadvisors benefit from soft dollar arrangements for third party and proprietary research.
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 subadvisors reimburse the Manager for certain costs relating to distribution activities for the Funds, as well as representations by all such subadvisors that they would not reduce their fee rates in lieu of providing such reimbursements. 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 and Lipper performance group, with the 1st Quintile representing the top twenty percent of the universe or group based on performance and the 5th Quintile representing the bottom twenty percent of the universe or group based on performance. 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 and Lipper expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. 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. For all Funds, other than for the American Beacon Money Market Select Fund and American Beacon U.S. Government Money Market Select Fund for which information was not available, 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
57
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisor Agreements of the Funds (Unaudited)
Compared to Lipper Expense Universe | 3rd Quintile | |
Compared to Lipper Expense Group | 2nd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Average Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 3rd Quintile | |
Compared to Lipper Performance Group | 1st Quintile |
In considering the renewal of the Investment Advisory Agreements with The Boston Company Asset Management, LLC (“TBC”), Morgan Stanley Investment Management Inc., (“Morgan Stanley”) including the Morgan Stanley subadvisors Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company, and Brandes Investment Partners, L.P. (“Brandes”), the Trustees considered the following additional factors:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Morgan Stanley | 5 years | 2nd Quintile | ||
TBC | 5 years | 5th Quintile | ||
Brandes* | 3 years | 2nd Quintile |
| * | Brandes does not yet have a 5-year performance record. |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; (2) the Manager’s explanation that, until August 2013, market conditions were not favorable for TBC’s value approach to investing; (3) certain fee waivers to be made by TBC; 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 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
Compared to Lipper Expense Universe | 1st Quintile | |
Compared to Lipper Expense Group | 1st Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Low Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 2nd Quintile | |
Compared to Lipper Performance Group | 1st Quintile |
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:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Causeway | 5 years | 1st Quintile | ||
Lazard | 5 years | 2nd Quintile | ||
Templeton | 5 years | 1st Quintile |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; and (2) 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.
58
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 thirty-three 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** (56) | 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*** (77) | 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 (70) | 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 (53) | 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 (60) | 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 (72) | 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 (71) | 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 (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 | 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). | ||
59
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 | |||
| Gene L. Needles, Jr. (59) | One Year President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 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 (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
| Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, 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 (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
| Wyatt L. Crumpler (48) | 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 (44) | 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 (60) | 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 (53) | 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 (50) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
| Jeffrey K. Ringdahl (39) | 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 (51) | 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 (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
| Sonia L. Bates (57) | 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. | ||
| * | As of 11/12/2014, the Board 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 75. |
| ** | 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. |
60
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:
 |  | |
By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
 |  | |
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 10/14
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, 2014 |
 |
The economic recovery that began in mid-2009 has continued, and the U.S. equity bull market entered into its fifth year during the reporting period. As a testament to the continuing strength of the stock market, both the S&P 500 Index and the Dow Jones Industrial Average ended the period under review with record highs on October 31.
Coinciding with the rise of the equity markets, the U.S. economy continues to produce more encouraging data for investors. The positive trends include an improving gross domestic product, lower unemployment and steady job growth. Additionally, the Federal Open Market Committee (FOMC) reiterated its objective to keep the Federal Funds Rate near zero as well as announcing in October the end of its asset purchase program. | |
| Challenges to both the economy and stock markets, however, still exist. Many of the world’s economies, especially in Europe and Asia, are experiencing increasingly uneven growth rates despite favorable monetary policies. Geopolitical uncertainty continues to test the global economy. | ||
We believe it takes a skillful, active manager to navigate the wide variety of market conditions present. We are proud to provide you access to some of the world’s most respected asset managers and grateful you placed your confidence in us.
For the 12 months ended October 31, 2014, the American Beacon Large Cap Value Fund (Investor Class) returned 14.50%.
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, 2014 (Unaudited)
Underlying economic growth in the U.S. gained momentum at the end of the 2013 calendar year. Household net worth rose sharply, spurred by rising house prices and a surging stock market. This increase in household net worth, along with a modest improvement in jobs growth, bolstered consumer confidence. U.S. equities moved higher due to the favorable economic data and as a result, became significantly less cheap (compared to a year earlier). Valuations reached historical norms but were not excessive with regard to earnings, profit margins and balance sheet strength. Around this time, Europe was stabilizing and the first signs of China’s slowing activity appeared.
The first few months of 2014 seemed relatively sedate compared to the market surge we saw in the prior year. A small market correction occurred in January but was followed by a number of months with positive performance. During the winter, extreme cold weather became a factor as it depressed economic activity for the country, leading to U.S. gross domestic product (GDP) growth becoming temporarily negative. However, overall economic data showed some positive signs with solid improvements in jobs growth, unemployment, auto sales, air and railroad traffic and loan growth. Very low inflation allowed the U.S. Federal Reserve to stay committed to its expansionary policy with interest rates near zero.
The second quarter benefited from catch-up demand. U.S. GDP growth was a stellar 4.6%, and jobs growth, auto sales, consumer confidence and railroad traffic were all positive for the period. These factors contributed to the positive performance of the market (S&P 500 earnings were up almost 10%). The move during this time pushed equity valuations to more attractive levels.
The S&P 500 Index was up 17.27% for the one-year period ended October 31, 2014, while the Dow Jones Industrial Average gained 14.48%. The Russell 1000 Index, a measure of the large-cap segment of U.S. equities, posted 16.78% return while the Russell 2000 Index, which measures the small-cap segment, was positive 8.06%.
The period closed with the U.S. economy continuing to strengthen. U.S. real GDP grew 3.3% in the third quarter. Solid jobs growth and diminishing new unemployment claims attested to the sustainability of the U.S. recovery. However, the positive outlook for the U.S. growth is tempered by the strong rise in the value of the dollar that could slow exports and make imports more competitive.
2
American Beacon Large Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Large Cap Value Fund (the “Fund”) returned 14.50% for the twelve months ended October 31, 2014. The Fund underperformed the Russell 1000® Value Index (the “Index”) return of 16.46% for the same period.
Comparison of Change in Value of a $10,000 Investment
for the Period from 10/31/04 through 10/31/14
Total Returns for the Period ended 10/31 /2014
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,8) | 14.89 | % | 15.97 | % | 8.42 | % | $ | 22,437 | ||||||||
Y Class (1, 2, 8) | 14.78 | % | 15.86 | % | 8.36 | % | 22,326 | |||||||||
Investor Class (1,8) | 14.50 | % | 15.56 | % | 8.08 | % | 21,750 | |||||||||
Advisor Class (1,3,8) | 14.35 | % | 15.41 | % | 7.90 | % | 21,381 | |||||||||
Retirement Class (1,4,8) | 14.04 | % | 15.07 | % | 7.72 | % | 21,031 | |||||||||
A Class with sales charge (1,5,8) | 7.79 | % | 14.06 | % | 7.38 | % | 20,378 | |||||||||
A Class without sales charge (1,5,8) | 14.37 | % | 15.43 | % | 8.02 | % | 21,621 | |||||||||
C Class with sales charge (1,6,8) | 12.48 | % | 14.67 | % | 7.66 | % | 20,920 | |||||||||
C Class without sales charge (1,6,8) | 13.48 | % | 14.67 | % | 7.66 | % | 20,920 | |||||||||
AMR Class (1,8) | 15.20 | % | 16.28 | % | 8.70 | % | 23,025 | |||||||||
Russell 1000 Value Index (7) | 16.46 | % | 16.49 | % | 7.90 | % | 21,393 | |||||||||
| 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, 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 ten-year period represents the total returns achieved by the Institutional Class from 10/31/04 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 10/31/04. |
| 3. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the Advisor Class of the Fund was waived in 2005 and 2009. Performance prior to waiving fees was lower than the actual returns shown for these periods. |
| 4. | Fund performance for the ten-year period represents the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. |
| 5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class was waived from 2010 through 2012 and recovered in 2013 and 2014. Performance prior to waiving fees was lower than the actual returns shown from 2010 through 2012. 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. 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 |
3
American Beacon Large Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
| Institutional, Y, Investor, Advisor, Retirement, A, C, and AMR Class shares was 0.59%, 0.67%, 0.94%, 1.08%, 1.34%, 0.99%, 1.75%, and 0.33%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. |
The Fund underperformed the Index due to stock selection as sector allocation added minimal value relative to the Index. From a stock selection standpoint, the Fund’s Energy, Consumer Discretionary and Health Care holdings detracted most from performance. In the Energy sector, Cobalt International Energy (down 47.5%), Seadrill (down 44.9%) and BP (down 1.9%) had the largest negative impact to the Fund’s returns. General Motors (down 12.1%), Target (down 1.2%) and Toyota Motor (down 4.8%) detracted the most relative value in the Consumer Discretionary sector. In the Health Care sector, Sanofi (down 10.6%) and GlaxoSmithKline (down 14.6%) hurt performance.
The aforementioned poor performance was somewhat offset by good stock selection in the Industrials and Information Technology sectors. A smaller allocation, versus the Index, to General Electric (up 1.9%) positively impacted the Fund’s returns in the Industrials sector. The Fund’s position in General Dynamics (up 64.4%) and Lockheed Martin (up 49.1%) also contributed to performance. Microsoft (up 36.0%), Hewlett Packard (up 51.6%) and Cisco Systems (up 16.4%) were the largest contributors in the Information Technology sector.
The Fund’s overweight position in Information Technology, the best performing sector in the Index, added relative value through sector allocation. This good performance was mostly negated by an overweight in Consumer Discretionary, which detracted from 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. | 3.8 | |||||||
Citigroup | 3.0 | |||||||
Wells Fargo & Co. | 2.5 | |||||||
Bank of America Corp. | 2.3 | |||||||
WellPoint, Inc. | 1.9 | |||||||
Oracle Corp. | 1.8 | |||||||
Pfizer, Inc. | 1.8 | |||||||
Verizon Communications, Inc. | 1.8 | |||||||
Microsoft Corp. | 1.7 | |||||||
Target Corp. | 1.6 | |||||||
Total Fund Holdings | 195 | |||||||
Sector Allocation (% Equities)
Financials | 26.6 | |||
Health Care | 13.8 | |||
Consumer Discretionary | 12.5 | |||
Information Technology | 12.2 | |||
Energy | 10.3 | |||
Industrials | 9.3 | |||
Consumer Staples | 6.1 | |||
Telecommunication Services | 5.1 | |||
Utilities | 3.1 | |||
Materials | 1.0 |
4
American Beacon Large Cap Value FundSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 - 10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,047.66 | $ | 2.99 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.28 | $ | 2.96 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,046.89 | $ | 3.46 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.83 | $ | 3.41 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.72 | $ | 4.80 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.52 | $ | 4.74 | |||||||||
Advisor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.01 | $ | 5.52 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.81 | $ | 5.45 | |||||||||
Retirement Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,043.58 | $ | 6.85 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.50 | $ | 6.77 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,045.55 | $ | 5.21 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.11 | $ | 5.14 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,048.87 | $ | 1.65 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,023.59 | $ | 1.63 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,040.87 | $ | 9.26 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,016.13 | $ | 9.15 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.58%, 0.67%, 0.93%, 1.07%, 1.33%, 1.01%, 1.80%, and 0.32% 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, 2014, 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, 2014, 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, 2014, 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, 2014
6
American Beacon Large Cap Value FundSM
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCK - 95.77% |
| |||||||
CONSUMER DISCRETIONARY - 11.97% |
| |||||||
Auto Components - 1.47% |
| |||||||
Delphi Automotive PLCA | 141,967 | $ | 9,793 | |||||
Johnson Controls, Inc. | 3,351,526 | 158,359 | ||||||
|
| |||||||
| 168,152 | ||||||||
|
| |||||||
Automobiles - 3.72% | ||||||||
Ford Motor Co. | 5,869,300 | 82,698 | ||||||
General Motors Co. | 5,250,598 | 164,870 | ||||||
Honda Motor Co., Ltd., Sponsored ADRB | 978,400 | 31,426 | ||||||
Toyota Motor Corp., Sponsored ADRB | 1,200,100 | 145,632 | ||||||
|
| |||||||
| 424,626 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure - 0.44% |
| |||||||
Carnival Corp. | 417,300 | 16,755 | ||||||
McDonald’s Corp. | 359,666 | 33,711 | ||||||
|
| |||||||
| 50,466 | ||||||||
|
| |||||||
Household Durables - 0.37% |
| |||||||
Stanley Black & Decker, Inc. | 453,589 | 42,474 | ||||||
|
| |||||||
Leisure Equipment & Products - 0.07% |
| |||||||
Hasbro, Inc. | 101,188 | 5,821 | ||||||
Mattel, Inc. | 55,840 | 1,735 | ||||||
|
| |||||||
| 7,556 | ||||||||
|
| |||||||
Media - 3.23% | ||||||||
Comcast Corp., Special, Class A | 1,111,848 | 61,308 | ||||||
DIRECTVC | 516,400 | 44,818 | ||||||
Interpublic Group of Cos., Inc. | 2,314,300 | 44,874 | ||||||
McGraw-Hill Cos., Inc. | 60,438 | 5,468 | ||||||
Omnicom Group, Inc. | 431,323 | 30,995 | ||||||
Time Warner Cable, Inc. | 294,800 | 43,398 | ||||||
Time Warner, Inc. | 125,261 | 9,954 | ||||||
Time, Inc. | 13,428 | 303 | ||||||
Tribune Media Co., Class AC | 878,459 | 58,858 | ||||||
Viacom, Inc., Class B | 787,224 | 57,215 | ||||||
Walt Disney Co. | 132,906 | 12,145 | ||||||
|
| |||||||
| 369,336 | ||||||||
|
| |||||||
Multiline Retail - 2.06% |
| |||||||
Dillard’s, Inc., Class A | 359,800 | 38,052 | ||||||
Kohl’s Corp. | 50,568 | 2,742 | ||||||
Nordstrom, Inc. | 246,500 | 17,898 | ||||||
Target Corp. | 2,867,653 | 177,279 | ||||||
|
| |||||||
| 235,971 | ||||||||
|
| |||||||
Specialty Retail - 0.61% |
| |||||||
Advance Auto Parts, Inc. | 52,819 | 7,762 | ||||||
Bed Bath & Beyond, Inc.C | 578,196 | 38,937 | ||||||
Lowe’s Cos., Inc. | 316,300 | 18,092 | ||||||
Staples, Inc. | 379,924 | 4,817 | ||||||
|
| |||||||
| 69,608 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 1,368,189 | ||||||
|
| |||||||
CONSUMER STAPLES - 5.81% |
| |||||||
Beverages - 0.76% | ||||||||
Diageo PLC, Sponsored ADRA B | 559,506 | 66,005 | ||||||
Dr Pepper Snapple Group, Inc. | 63,513 | 4,398 | ||||||
Molson Coors Brewing Co., Class B | 222,300 | 16,535 | ||||||
|
| |||||||
| 86,938 | ||||||||
|
| |||||||
Food & Drug Retailing - 0.99% |
| |||||||
CVS Caremark Corp. | 252,510 | 21,668 | ||||||
Sysco Corp. | 539,196 | 20,781 | ||||||
Wal-Mart Stores, Inc. | 922,200 | 70,336 | ||||||
|
| |||||||
| 112,785 | ||||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Food Products - 1.10% |
| |||||||
Bunge Ltd. | 199,200 | $ | 17,659 | |||||
Danone S.A., Sponsored ADRB | 655,687 | 8,963 | ||||||
General Mills, Inc. | 340,626 | 17,699 | ||||||
Kellogg Co. | 443,376 | 28,358 | ||||||
Mondelez International, Inc., Class A | 939,700 | 33,134 | ||||||
Nestle S.A., Sponsored ADRB | 272,454 | 19,979 | ||||||
|
| |||||||
| 125,792 | ||||||||
|
| |||||||
Household Products - 0.06% |
| |||||||
Procter & Gamble Co. | 74,520 | 6,503 | ||||||
|
| |||||||
Tobacco - 2.90% | ||||||||
Altria Group, Inc. | 1,404,205 | 67,879 | ||||||
Imperial Tobacco Group PLC, ADRA B | 927,911 | 80,840 | ||||||
Lorillard, Inc. | 203,103 | 12,491 | ||||||
Philip Morris International, Inc. | 1,920,942 | 170,983 | ||||||
|
| |||||||
| 332,193 | ||||||||
|
| |||||||
Total Consumer Staples |
| 664,211 | ||||||
|
| |||||||
ENERGY - 9.87% | ||||||||
Energy Equipment & Services - 1.02% |
| |||||||
Cobalt International Energy, Inc.C | 4,124,700 | 48,300 | ||||||
Halliburton Co. | 1,104,600 | 60,907 | ||||||
Schlumberger Ltd. | 72,325 | 7,136 | ||||||
|
| |||||||
| 116,343 | ||||||||
|
| |||||||
Oil & Gas - 8.85% |
| |||||||
Apache Corp. | 625,647 | 48,300 | ||||||
BP PLC, Sponsored ADRA B | 3,604,959 | 156,671 | ||||||
Canadian Natural Resources Ltd. | 2,037,600 | 71,071 | ||||||
Chevron Corp. | 588,884 | 70,637 | ||||||
ConocoPhillips | 1,189,240 | 85,804 | ||||||
EOG Resources, Inc. | 62,560 | 5,946 | ||||||
Exxon Mobil Corp. | 267,984 | 25,917 | ||||||
Hess Corp. | 368,600 | 31,261 | ||||||
Kosmos Energy Ltd.C | 1,751,200 | 16,339 | ||||||
Marathon Oil Corp. | 1,532,500 | 54,251 | ||||||
Marathon Petroleum Corp. | 446,350 | 40,573 | ||||||
Murphy Oil Corp. | 862,800 | 46,065 | ||||||
Occidental Petroleum Corp. | 1,574,339 | 140,006 | ||||||
Phillips 66 | 1,051,720 | 82,560 | ||||||
Royal Dutch Shell PLC, Class A, ADRA B | 1,298,502 | 93,219 | ||||||
Seadrill Ltd. | 1,861,500 | 42,815 | ||||||
|
| |||||||
| 1,011,435 | ||||||||
|
| |||||||
Total Energy |
| 1,127,778 | ||||||
|
| |||||||
FINANCIALS - 25.52% |
| |||||||
Banks - 2.46% | ||||||||
Bank of New York Mellon Corp. | 1,240,366 | 48,027 | ||||||
Citizens Financial Group | 2,448,600 | 57,836 | ||||||
PNC Financial Services Group, Inc. | 1,334,071 | 115,251 | ||||||
SunTrust Banks, Inc. | 1,026,300 | 40,169 | ||||||
U.S. Bancorp | 469,372 | 19,995 | ||||||
|
| |||||||
| 281,278 | ||||||||
|
| |||||||
Diversified Financials - 16.26% |
| |||||||
American Express Co. | 943,100 | 84,832 | ||||||
Bank of America Corp. | 15,470,190 | 265,468 | ||||||
BlackRock, Inc., Class A | 33,935 | 11,576 | ||||||
Blackstone Group, LPD | 1,682,700 | 50,683 | ||||||
Capital One Financial Corp. | 1,672,500 | 138,433 | ||||||
Citigroup, Inc. | 6,411,462 | 343,206 | ||||||
Franklin Resources, Inc. | 280,041 | 15,573 | ||||||
Generac Holdings, Inc. | 520,400 | 23,595 | ||||||
See accompanying notes
7
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Goldman Sachs Group, Inc. | 215,115 | $ | 40,870 | |||||
JPMorgan Chase & Co. | 7,232,476 | 437,419 | ||||||
KKR & Co., LPD | 2,319,400 | 50,006 | ||||||
Morgan Stanley | 714,900 | 24,986 | ||||||
Nasdaq OMX Group | 174,972 | 7,569 | ||||||
Santander Consumer USA Holdings, Inc. | 1,814,900 | 33,576 | ||||||
SLM Corp. | 3,919,000 | 37,426 | ||||||
State Street Corp. | 150,779 | 11,378 | ||||||
Wells Fargo & Co. | 5,272,030 | 279,892 | ||||||
|
| |||||||
| 1,856,488 | ||||||||
|
| |||||||
Insurance - 6.34% | ||||||||
ACE Ltd. | 121,471 | 13,277 | ||||||
Allstate Corp. | 957,000 | 62,061 | ||||||
American International Group, Inc. | 2,566,700 | 137,499 | ||||||
Aon PLCA | 139,607 | 12,006 | ||||||
Berkshire Hathaway, Inc., Class BC | 880,675 | 123,435 | ||||||
Chubb Corp. | 92,995 | 9,240 | ||||||
Hartford Financial Services Group, Inc. | 1,266,350 | 50,122 | ||||||
Lincoln National Corp. | 662,600 | 36,284 | ||||||
MetLife, Inc. | 2,838,115 | 153,940 | ||||||
Prudential Financial, Inc. | 139,640 | 12,364 | ||||||
Travelers Cos., Inc. | 219,573 | 22,133 | ||||||
Unum Group | 1,474,900 | 49,350 | ||||||
XL Group PLCA | 1,266,100 | 42,895 | ||||||
|
| |||||||
| 724,606 | ||||||||
|
| |||||||
Real Estate - 0.46% | ||||||||
Hatteras Financial Corp.E | 888,200 | 16,911 | ||||||
Two Harbors Investment Corp.E | 3,546,659 | 35,928 | ||||||
|
| |||||||
| 52,839 | ||||||||
|
| |||||||
Total Financials |
| 2,915,211 | ||||||
|
| |||||||
HEALTH CARE - 13.19% |
| |||||||
Health Care Equipment & Supplies - 2.02% |
| |||||||
Covidien PLCA | 291,912 | 26,984 | ||||||
Medtronic, Inc. | 2,438,651 | 166,219 | ||||||
St. Jude Medical, Inc. | 129,851 | 8,333 | ||||||
Thermo Fisher Scientific, Inc. | 92,433 | 10,867 | ||||||
Zimmer Holdings, Inc. | 164,000 | 18,243 | ||||||
|
| |||||||
| 230,646 | ||||||||
|
| |||||||
Health Care Providers & Services - 3.68% |
| |||||||
Aetna, Inc. | 203,800 | 16,816 | ||||||
Express Scripts Holding Co.C | 620,939 | 47,701 | ||||||
Humana, Inc. | 313,900 | 43,585 | ||||||
Quest Diagnostics, Inc. | 270,900 | 17,191 | ||||||
UnitedHealth Group, Inc. | 806,500 | 76,626 | ||||||
WellPoint, Inc. | 1,727,600 | 218,869 | ||||||
|
| |||||||
| 420,788 | ||||||||
|
| |||||||
Pharmaceuticals - 7.49% | ||||||||
Abbott Laboratories | 334,392 | 14,576 | ||||||
AbbVie, Inc. | 462,600 | 29,357 | ||||||
Eli Lilly & Co. | 638,300 | 42,338 | ||||||
GlaxoSmithKline PLC, Sponsored ADRA B | 1,622,400 | 73,803 | ||||||
Jazz Pharmaceuticals PLCA C | 76,450 | 12,908 | ||||||
Johnson & Johnson | 1,256,496 | 135,425 | ||||||
Merck & Co., Inc. | 2,223,528 | 128,831 | ||||||
Mylan, Inc.C | 533,200 | 28,553 | ||||||
Novartis AG, ADRB | 42,308 | 3,922 | ||||||
NPS Pharmaceuticals, Inc.C | 681,700 | 18,679 | ||||||
Pfizer, Inc. | 6,955,796 | 208,325 | ||||||
Roche Holding AG, Sponsored ADRB | 96,731 | 3,561 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Sanofi, ADRB | 3,359,500 | $ | 155,343 | |||||
|
| |||||||
| 855,621 | ||||||||
|
| |||||||
Total Health Care |
| 1,507,055 | ||||||
|
| |||||||
INDUSTRIALS - 8.89% | ||||||||
Aerospace & Defense - 2.90% |
| |||||||
Boeing Co. | 330,700 | 41,308 | ||||||
General Dynamics Corp. | 760,900 | 106,343 | ||||||
Lockheed Martin Corp. | 143,074 | 27,266 | ||||||
Northrop Grumman Corp. | 208,871 | 28,816 | ||||||
Raytheon Co. | 802,600 | 83,374 | ||||||
Rockwell Collins, Inc. | 214,700 | 18,067 | ||||||
United Technologies Corp. | 243,862 | 26,093 | ||||||
|
| |||||||
| 331,267 | ||||||||
|
| |||||||
Air Freight & Couriers - 0.17% |
| |||||||
United Parcel Service, Inc., Class B | 180,776 | 18,965 | ||||||
|
| |||||||
Diversified Manufacturing - 0.09% |
| |||||||
Eaton Corp., PLCA | 154,245 | 10,549 | ||||||
|
| |||||||
Electrical Equipment - 0.57% |
| |||||||
Emerson Electric Co. | 1,011,300 | 64,784 | ||||||
|
| |||||||
Industrial Conglomerates - 1.91% |
| |||||||
3M Co. | 156,931 | 24,131 | ||||||
General Electric Co. | 3,503,400 | 90,423 | ||||||
Honeywell International, Inc. | 951,914 | 91,498 | ||||||
Tyco International Ltd. | 271,793 | 11,668 | ||||||
|
| |||||||
| 217,720 | ||||||||
|
| |||||||
Machinery - 3.18% | ||||||||
Caterpillar, Inc. | 357,400 | 36,244 | ||||||
CNH Industrial N.V. | 1,934,900 | 15,769 | ||||||
Cummins, Inc. | 550,200 | 80,428 | ||||||
Danaher Corp. | 195,363 | 15,707 | ||||||
Illinois Tool Works, Inc. | 59,464 | 5,414 | ||||||
Joy Global, Inc. | 863,300 | 45,435 | ||||||
Oshkosh Corp. | 801,900 | 35,893 | ||||||
PACCAR, Inc. | 516,100 | 33,712 | ||||||
Pentair PLCA | 72,904 | 4,888 | ||||||
Reliance Steel & Aluminum Co. | 749,000 | 50,543 | ||||||
Xylem, Inc. | 1,120,421 | 40,739 | ||||||
|
| |||||||
| 364,772 | ||||||||
|
| |||||||
Road & Rail - 0.07% | ||||||||
Canadian National Railway Co. | 110,285 | 7,784 | ||||||
|
| |||||||
Total Industrials |
| 1,015,841 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 11.65% |
| |||||||
Communications Equipment - 1.87% |
| |||||||
Cisco Systems, Inc. | 4,342,000 | 106,249 | ||||||
Corning, Inc. | 5,258,100 | 107,423 | ||||||
|
| |||||||
| 213,672 | ||||||||
|
| |||||||
Computers & Peripherals - 2.07% |
| |||||||
Hewlett-Packard Co. | 2,097,900 | 75,273 | ||||||
International Business Machines Corp. | 351,358 | 57,763 | ||||||
Seagate Technology PLCA | 792,125 | 49,769 | ||||||
Teradata Corp.C | 393,100 | 16,636 | ||||||
Western Digital Corp. | 373,100 | 36,702 | ||||||
|
| |||||||
| 236,143 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 0.15% |
| |||||||
TE Connectivity Ltd. | 278,200 | 17,006 | ||||||
|
| |||||||
See accompanying notes
8
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
IT Consulting & Services - 0.37% |
| |||||||
Accenture, PLC, Class AA | 311,887 | $ | 25,301 | |||||
Fidelity National Information Services, Inc. | 99,334 | 5,800 | ||||||
Fiserv, Inc.C | 121,114 | 8,415 | ||||||
Western Union Co. | 191,401 | 3,246 | ||||||
|
| |||||||
| 42,762 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 2.49% |
| |||||||
Applied Materials, Inc. | 1,809,500 | 39,972 | ||||||
Intel Corp. | 2,979,100 | 101,319 | ||||||
Lam Research Corp. | 469,200 | 36,532 | ||||||
Micron Technology, Inc.C | 1,674,000 | 55,393 | ||||||
Texas Instruments, Inc. | 1,039,296 | 51,611 | ||||||
|
| |||||||
| 284,827 | ||||||||
|
| |||||||
Software - 4.70% |
| |||||||
Activision Blizzard, Inc. | 2,834,100 | 56,540 | ||||||
Check Point Software Technologies Ltd.C | 548,200 | 40,704 | ||||||
Microsoft Corp. | 4,056,000 | 190,429 | ||||||
Navient Corp. | 1,949,000 | 38,551 | ||||||
Oracle Corp. | 5,385,059 | 210,287 | ||||||
|
| |||||||
| 536,511 | ||||||||
|
| |||||||
Total Information Technology |
| 1,330,921 | ||||||
|
| |||||||
MATERIALS - 0.97% |
| |||||||
Chemicals - 0.45% |
| |||||||
Dow Chemical Co. | 639,100 | 31,571 | ||||||
EI du Pont de Nemours & Co. | 41,338 | 2,859 | ||||||
PPG Industries, Inc. | 79,013 | 16,094 | ||||||
Valspar Corp. | 14,691 | 1,207 | ||||||
|
| |||||||
| 51,731 | ||||||||
|
| |||||||
Containers & Packaging - 0.05% |
| |||||||
Crown Holdings, Inc.C | 121,576 | 5,827 | ||||||
|
| |||||||
Metals & Mining - 0.31% |
| |||||||
Rio Tinto PLC, ADR A B | 729,100 | 34,975 | ||||||
|
| |||||||
Paper & Forest Products - 0.16% |
| |||||||
Louisiana-Pacific Corp.C | 1,278,300 | 18,663 | ||||||
|
| |||||||
Total Materials |
| 111,196 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 4.89% |
| |||||||
Diversified Telecommunication Services - 2.98% |
| |||||||
AT&T, Inc. | 3,046,229 | 106,131 | ||||||
Telefonaktiebolaget LM Ericsson, ADRB | 2,788,500 | 33,016 | ||||||
Verizon Communications, Inc. | 4,018,482 | 201,928 | ||||||
|
| |||||||
| 341,075 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 1.91% |
| |||||||
China Mobile Ltd., Sponsored ADRB | 1,986,400 | 123,336 | ||||||
Vodafone Group PLC, Sponsored ADRA B | 2,847,420 | 94,591 | ||||||
|
| |||||||
| 217,927 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 559,002 | ||||||
|
| |||||||
UTILITIES - 3.01% |
| |||||||
Electric - 3.01% |
| |||||||
CenterPoint Energy, Inc. | 2,664,100 | 65,404 | ||||||
Duke Energy Corp. | 36,328 | 2,984 | ||||||
Entergy Corp. | 907,200 | 76,223 | ||||||
NRG Energy, Inc. | 1,311,900 | 39,331 | ||||||
PPL Corp. | 506,600 | 17,726 | ||||||
Public Service Enterprise Group, Inc. | 3,441,900 | 142,185 | ||||||
|
| |||||||
Total Utilities |
| 343,853 | ||||||
|
| |||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Total Common Stock (Cost $8,534,455) |
| 10,943,257 | ||||||
|
| |||||||
PREFERRED STOCK - 0.09% |
| |||||||
FINANCIALS - 0.08% |
| |||||||
Real Estate - 0.08% |
| |||||||
Public Storage, Inc., 5.75%, Due 12/31/2049 | 381,684 | $ | 9,523 | |||||
|
| |||||||
MANUFACTURING - 0.01% |
| |||||||
Aerospace & Defense - 0.01% |
| |||||||
United Technologies Corp., 7.50%, Due 8/1/2015 | 14,770 | 862 | ||||||
|
| |||||||
Total Preferred Stock (Cost $9,302) |
| 10,385 | ||||||
|
| |||||||
SHORT-TERM INVESTMENTS - 3.83% |
| |||||||
American Beacon U.S. Government Money Market Select Fund, Select Class F | 30,000,000 | 30,000 | ||||||
JPMorgan U.S. Government Money Market Fund, Capital Class | 407,843,157 | 407,843 | ||||||
|
| |||||||
Total Short-Term Investments (Cost $437,843) | 437,843 | |||||||
|
| |||||||
TOTAL INVESTMENTS - 99.69% (Cost $8,981,600) |
| 11,391,485 | ||||||
OTHER ASSETS, NET OF LIABILITIES - 0.31% |
| 35,868 | ||||||
|
| |||||||
TOTAL NET ASSETS - 100.00% |
| $ | 11,427,353 | |||||
|
| |||||||
Percentages are stated as a percent of net assets.
| A | PLC - Public Limited Company. |
| B | ADR - American Depositary Receipt. |
| C | Non-income producing security. |
| D | MLP - Master Limited Partnership. |
| E | REIT - Real Estate Investment Trust. |
| F | The Fund is affiliated by having the same investment advisor. |
See accompanying notes
9
American Beacon Large Cap Value FundSM
Schedule of Investments
October 31, 2014
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
S&P 500 Mini E Index December Futures | Long | 4,139 | December, 2014 | $ | 416,259,230 | $ | 15,219,761 | |||||||||||||
|
|
|
| |||||||||||||||||
| $ | 416,259,230 | $ | 15,219,761 | |||||||||||||||||
|
|
|
| |||||||||||||||||
See accompanying notes
10
American Beacon Large Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
Assets: |
| |||
Investments in unaffiliated securities, at fair valueA | $ | 11,361,485 | ||
Investments in affiliated securities, at fair valueB | 30,000 | |||
Deposit with brokers for futures contracts | 19,300 | |||
Receivable for fund shares sold | 17,069 | |||
Dividends and interest receivable | 11,305 | |||
Receivable for tax reclaims | 390 | |||
Receivable for variation margin from open futures contracts | 4,766 | |||
Prepaid expenses | 231 | |||
|
| |||
Total assets | 11,444,546 | |||
|
| |||
Liabilities: | ||||
Payable for fund shares redeemed | 10,548 | |||
Payable under excess expense reimbursement plan | 1 | |||
Management and investment advisory fees payable | 2,335 | |||
Administrative service and service fees payable | 3,443 | |||
Transfer agent fees payable | 161 | |||
Custody and fund accounting fees payable | 188 | |||
Professional fees payable | 68 | |||
Prospectus and shareholder reports fees payable | 187 | |||
Trustee fees payable | 160 | |||
Other liabilities | 102 | |||
|
| |||
Total liabilities | 17,193 | |||
|
| |||
Net assets | $ | 11,427,353 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | 8,187,878 | |||
Undistributed net investment income | 222,712 | |||
Accumulated net realized gain | 591,658 | |||
Unrealized appreciation of investments | 2,409,885 | |||
Unrealized appreciation of futures contracts | 15,220 | |||
|
| |||
Net assets | $ | 11,427,353 | ||
|
| |||
See accompanying notes
11
American Beacon Large Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
Shares outstanding at no par value (unlimited shares authorized): |
| |||
Institutional Class | 186,371,599 | |||
|
| |||
Y Class | 14,009,843 | |||
|
| |||
Investor Class | 140,924,468 | |||
|
| |||
Advisor Class | 5,109,351 | |||
|
| |||
Retirement Class | 440,769 | |||
|
| |||
A Class | 775,524 | |||
|
| |||
C Class | 343,189 | |||
|
| |||
AMR Class | 26,640,887 | |||
|
| |||
Net assets (not in thousands): | ||||
Institutional Class | $ | 5,816,013,064 | ||
|
| |||
Y Class | $ | 434,880,702 | ||
|
| |||
Investor Class | $ | 4,158,361,296 | ||
|
| |||
Advisor Class | $ | 149,422,940 | ||
|
| |||
Retirement Class | $ | 12,668,120 | ||
|
| |||
A Class | $ | 22,781,918 | ||
|
| |||
C Class | $ | 9,964,292 | ||
|
| |||
AMR Class | $ | 823,261,052 | ||
|
| |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 31.21 | ||
|
| |||
Y Class | $ | 31.04 | ||
|
| |||
Investor Class | $ | 29.51 | ||
|
| |||
Advisor Class | $ | 29.24 | ||
|
| |||
Retirement Class | $ | 28.74 | ||
|
| |||
A Class | $ | 29.38 | ||
|
| |||
A Class (offering price) | $ | 31.17 | ||
|
| |||
C Class | $ | 29.03 | ||
|
| |||
AMR Class | $ | 30.90 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 8,951,600 | ||
B Cost of investments in affiliated securities | $ | 30,000 | ||
See accompanying notes
12
American Beacon Large Cap Value Fund
Statement of Operations
For the year ended October 31, 2014 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 333,735 | ||
Dividend income from affiliated securities | 3 | |||
Interest income | 7 | |||
|
| |||
Total investment income | 333,745 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 26,712 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 17,831 | |||
Y Class | 1,132 | |||
Investor Class | 12,347 | |||
Advisor Class | 384 | |||
Retirement Class | 28 | |||
A Class | 63 | |||
C Class | 27 | |||
AMR Class | 387 | |||
Transfer agent fees: | ||||
Institutional Class | 1,112 | |||
Y Class | 15 | |||
Investor Class | 178 | |||
Advisor Class | 6 | |||
Retirement Class | 1 | |||
A Class | 3 | |||
C Class | 1 | |||
AMR Class | 25 | |||
Custody and fund accounting fees | 1,115 | |||
Professional fees | 287 | |||
Registration fees and expenses | 189 | |||
Service fees (Note 2): | ||||
Y Class | 377 | |||
Investor Class | 14,882 | |||
Advisor Class | 320 | |||
Retirement Class | 23 | |||
A Class | 26 | |||
C Class | 11 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 320 | |||
Retirement Class | 46 | |||
A Class | 44 | |||
C Class | 76 | |||
Prospectus and shareholder report expenses | 554 | |||
Trustee fees | 597 | |||
Other expenses | 425 | |||
|
| |||
Total expenses | 79,544 | |||
|
| |||
Net recouped by Manager (Note 2) | 2 | |||
|
| |||
Net expenses | 79,546 | |||
|
| |||
Net investment income | 254,199 | |||
|
| |||
Realized and unrealized gain (loss) from investments: | ||||
Net realized gain (loss) from: | ||||
Investments | 1,162,086 | |||
Commission recapture (Note 3) | 178 | |||
Foreign currency transactions | (2 | ) | ||
Futures contracts | 53,888 | |||
Change in net unrealized appreciation or (depreciation) of: | ||||
Investments | 69,797 | |||
Futures contracts | 6,368 | |||
|
| |||
Net gain from investments | 1,292,315 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 1,546,514 | ||
|
| |||
A Foreign taxes | $ | 2,783 |
See accompanying notes
13
American Beacon Large Cap Value Fund
Statement of Changes in Net Assets (in thousands)
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 254,199 | $ | 175,351 | ||||
Net realized gain from investments, commission recapture, foreign currency, and futures contracts | 1,216,150 | 613,532 | ||||||
Change in net unrealized appreciation or (depreciation) from investments, foreign currency, and futures contracts | 76,165 | 1,660,829 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 1,546,514 | 2,449,712 | ||||||
|
|
|
| |||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (87,830 | ) | (88,612 | ) | ||||
Y Class | (5,267 | ) | (2,997 | ) | ||||
Investor Class | (51,957 | ) | (64,236 | ) | ||||
Advisor Class | (1,591 | ) | (1,759 | ) | ||||
Retirement Class | (52 | ) | (57 | ) | ||||
A Class | (170 | ) | (126 | ) | ||||
C Class | (54 | ) | (35 | ) | ||||
AMR Class | (13,053 | ) | (14,045 | ) | ||||
|
|
|
| |||||
Net distributions to shareholders | (159,974 | ) | (171,867 | ) | ||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 2,945,941 | 2,072,964 | ||||||
Reinvestment of dividends and distributions | 153,366 | 164,722 | ||||||
Cost of shares redeemed | (3,593,139 | ) | (2,336,117 | ) | ||||
|
|
|
| |||||
Net (decrease) in net assets from capital share transactions | (493,832 | ) | (98,431 | ) | ||||
|
|
|
| |||||
Net increase in net assets | 892,708 | 2,179,414 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 10,534,645 | 8,355,231 | ||||||
|
|
|
| |||||
End of Period * | $ | 11,427,353 | $ | 10,534,645 | ||||
|
|
|
| |||||
* Includes undistributed net investment income (loss) of | $ | 222,712 | $ | 128,250 | ||||
|
|
|
| |||||
See accompanying notes
14
American Beacon Large Cap Value FundSM
October 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of thirty-one 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.
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 and the Trust. 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. The Funds pay the unaffiliated investment advisors hired to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2014 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to | Amounts Paid to Manager | |||
0.23% | $26,712 | $21,026 | $5,686 |
15
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund and 0.05% of the average daily net assets of the AMR Class of the Fund. Prior to July 1, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes of the Fund. Beginning July 1, 2014, the Manager received an annualized fee of 0.30% of the average daily net assets of the A and C Classes 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 separate 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 Administration fees totaling 0.10% of its average daily net assets of the Select Funds. During the year ended October 31, 2014, the Manager earned fees from the Select Funds totaling $32,528 on the Fund’s direct investment in the Select Funds.
Interfund Lending Program
Pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the year ended October 31, 2014, the Fund participated as a lender by loaning, $2,012,315 for 1 day at a rate of 0.69% with interest charges of $38. This amount is included as interest income on the Statement of Operations.
16
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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, 2014, the Manager fully recovered $1,535 of excess carryover expenses expiring in 2014 and 2015 from the C Class. There are no additional carryover of expenses.
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, 2014, Foreside collected $21,901 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, 2014, 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, 2014, $1,366 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.
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.
17
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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 the Fund’s assets and liabilities. During the year ended October 31, 2014, there were no transfers between levels. As of October 31, 2014, the investments were classified as described below (in thousands):
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock* | $ | 10,943,257 | $ | — | $ | — | $ | 10,943,257 | ||||||||
Preferred Stock* | 10,385 | — | — | 10,385 | ||||||||||||
Short-Term Investments – Money Market Funds | 437,843 | — | — | 437,843 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 11,391,485 | $ | — | $ | — | $ | 11,391,485 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments-Assets | ||||||||||||||||
Futures Contracts | $ | 15,220 | $ | — | $ | — | $ | 15,220 | ||||||||
| * | 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.
18
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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.
4. Securities and Other Investments
American Depositary Receipts (“ADRs”)
ADRs are depositary receipts for foreign issuers in registered form traded in U.S. securities markets. Depositary receipts may not be denominated in the same currency as the securities into which they may be converted. Investing in depositary receipts entails substantially the same risks as direct investment in foreign securities. There is generally less publicly available information about foreign companies and there may be less governmental regulation and supervision of foreign stock exchanges, brokers and listed companies. In addition, such companies may use different accounting and financial standards (and certain currencies may become unavailable for transfer from a foreign currency), resulting in the Fund’s possible inability to convert immediately into U.S. currency proceeds realized upon the sale of portfolio securities of the affected foreign companies. In addition, the Fund may invest in unsponsored depositary receipts, the issuers of which are not obligated to disclose material information about the underlying securities to investors in the United States. Ownership of unsponsored depositary receipts may not entitle the Fund to the same benefits and rights as ownership of a sponsored depositary receipt or the underlying security.
19
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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 year ended October 31, 2014, the Fund entered into future contracts primarily for return enhancement and exposing cash to markets.
20
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
The Fund’s futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||
Fund | Year ended October 31, 2014 | |
Large Cap Value Fund | 4,071 | |
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of financial derivative instruments not accounted for as hedging instruments as of October 31, 2014:
Statement of Assets and Liabilities | Derivatives | Fair Value | ||||||
Receivable for variation margin from open future contracts | Equity Contracts | $ | 4,766 | |||||
The effect of financial derivative instruments not accounted for as hedging instruments during the year ended October 31, 2014:
Statement of Operations | Derivatives | Total | ||||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 53,888 | |||||
Change in net unrealized appreciation or (depreciation) from futures contracts | Equity Contracts | 6,368 | ||||||
| (1) | See Note 3 in the Notes to Financial Statements for additional information. |
| (2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
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, 2014
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.
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Fund and additional required collateral is delivered to/pledged by the Fund on the next business day. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Offsetting Assets and Liabilities
The Fund is a party to enforceable master netting agreements between brokers and counterparties such as International Swaps and Derivatives Association (“ISDA”) agreements which provide for the right to offset under certain circumstances. The Fund employs multiple money managers and counterparties and has elected not to offset qualifying financial and derivative instruments on the Statement of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, October 31, 2014:
22
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts (1) | $ | 4,766 | $ | — | $ | 4,766 | ||||||
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014:
| Net amount of Assets Presented in the Statement of Assets and Liabilities | Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received | Net Amount | |||||||||||||
Goldman Sachs & Co.(1) | $ | 4,766 | $ | — | $ | — | $ | 4,766 | ||||||||
| (1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
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, 2014 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, 2014 | Year Ended October 31, 2013 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 87,830 | $ | 88,612 | ||||
Y Class | 5,267 | 2,997 | ||||||
Investor Class | 51,957 | 64,236 | ||||||
Advisor Class | 1,591 | 1,759 | ||||||
Retirement Class | 52 | 57 | ||||||
A Class | 170 | 126 | ||||||
C Class | 54 | 35 | ||||||
AMR Class | 13,053 | 14,045 | ||||||
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Total distributions paid | $ | 159,974 | $ | 171,867 | ||||
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| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2014, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):
23
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Cost basis of investments for federal income tax purposes | $ | 9,114,285 | ||
Unrealized appreciation | 2,640,178 | |||
Unrealized depreciation | (362,978) | |||
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| |||
Net unrealized appreciation or (depreciation) | 2,277,200 | |||
Undistributed ordinary income | 211,386 | |||
Accumulated long-term gain or (loss) | 735,653 | |||
Other temporary differences | 15,236 | |||
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| |||
Distributable earnings or (deficits) | $ | 3,239,475 | ||
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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 and publicly traded partnerships.
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 reclassifications of income from real estate investment securities and publicly traded partnerships and Section 732 basis adjustments that have been reclassified as of October 31, 2014 (in thousands):
Paid-in-capital | $ | (3 | ) | |
Undistributed net investment income (loss) | 237 | |||
Accumulated net realized gain (loss) | (234 | ) | ||
Unrealized appreciation or (depreciation) of investments and futures contracts | — |
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
At October 31, 2014, the Fund did not have any capital loss carryforwards. The Fund utilized $426,230 of net capital loss carryovers for the year ended October 31, 2014 (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, 2014, were $3,185,041 and $3,513,967, respectively (in thousands).
A summary of the Fund’s transactions in the Select Funds for the year ended October 31, 2014 is set forth below (in thousands):
| October 31, 2013 Shares/Fair Value | Purchases | Sales | October 31, 2014 Shares/Fair Value | Dividend Income | ||||||||||||||||
Direct | $ | 45,000 | $ | — | $ | 15,000 | $ | 30,000 | $ | 3 | ||||||||||
24
American Beacon Large Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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, 2014
| Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 60,578 | $ | 1,808,998 | 5,016 | $ | 149,908 | 28,208 | $ | 787,684 | 2,431 | $ | 68,583 | ||||||||||||||||||||
Reinvestment of dividends | 2,973 | 83,881 | 182 | 5,105 | 1,853 | 49,552 | 58 | 1,534 | ||||||||||||||||||||||||
Shares redeemed | (73,952 | ) | (2,231,408 | ) | (3,130 | ) | (92,555 | ) | (38,454 | ) | (1,080,676 | ) | (2,344 | ) | (65,255 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | (10,401 | ) | $ | (338,529 | ) | 2,068 | $ | 62,458 | (8,393 | ) | $ | (243,440 | ) | 145 | $ | 4,862 | ||||||||||||||||
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| Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 333 | $ | 9,025 | 391 | $ | 10,942 | 175 | $ | 4,839 | 3,592 | $ | 105,962 | ||||||||||||||||||||
Reinvestment of dividends | 2 | 52 | 6 | 146 | 2 | 43 | 468 | 13,053 | ||||||||||||||||||||||||
Shares redeemed | (56 | ) | (1,545 | ) | (79 | ) | (2,197 | ) | (35 | ) | (969 | ) | (4,114 | ) | (118,534 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 279 | $ | 7,532 | 318 | $ | 8,891 | 142 | $ | 3,913 | (54 | ) | $ | 481 | |||||||||||||||||||
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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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25
American Beacon Large Cap Value FundSM
(For a share outstanding throughout the period)
| Institutional Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 27.59 | $ | 21.58 | $ | 18.99 | $ | 18.56 | $ | 16.32 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.73 | 0.50 | 0.45 | 0.39 | 0.32 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 3.33 | 6.00 | 2.60 | 0.30 | 2.22 | |||||||||||||||
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Total income (loss) from investment operations | 4.06 | 6.50 | 3.05 | 0.69 | 2.54 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.44 | ) | (0.49 | ) | (0.46 | ) | (0.26 | ) | (0.30 | ) | ||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.44 | ) | (0.49 | ) | (0.46 | ) | (0.26 | ) | (0.30 | ) | ||||||||||
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Net asset value, end of period | $ | 31.21 | $ | 27.59 | $ | 21.58 | $ | 18.99 | $ | 18.56 | ||||||||||
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Total return B | 14.89 | % | 30.70 | % | 16.48 | % | 3.69 | % | 15.68 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 5,816,013 | $ | 5,428,755 | $ | 3,914,173 | $ | 3,380,918 | $ | 3,366,011 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before reimbursements | 0.58 | % | 0.58 | % | 0.59 | % | 0.58 | % | 0.59 | % | ||||||||||
Expenses, net of reimbursements | 0.58 | % | 0.58 | % | 0.59 | % | 0.58 | % | 0.59 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.35 | % | 1.99 | % | 2.23 | % | 1.96 | % | 1.73 | % | ||||||||||
Net investment income, net of reimbursements | 2.35 | % | 1.99 | % | 2.23 | % | 1.96 | % | 1.73 | % | ||||||||||
Portfolio turnover rate | 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | ||||||||||
| A | On December 1, 2010, Massachusetts Financial Services Company 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. |
26
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Y Class | Investor Class | |||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||
| $ | 27.46 | $ | 21.47 | $ | 18.92 | $ | 18.49 | $ | 16.32 | $ | 26.11 | $ | 20.43 | $ | 17.99 | $ | 17.61 | $ | 15.51 | |||||||||||||||||||
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| 0.64 | 0.40 | 0.53 | 0.37 | 0.29 | 0.57 | 0.39 | 0.36 | 0.30 | 0.23 | |||||||||||||||||||||||||||||
| 3.37 | 6.05 | 2.50 | 0.30 | 2.22 | 3.18 | 5.69 | 2.47 | 0.29 | 2.12 | |||||||||||||||||||||||||||||
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| 4.01 | 6.45 | 3.03 | 0.67 | 2.51 | 3.75 | 6.08 | 2.83 | 0.59 | 2.35 | |||||||||||||||||||||||||||||
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| (0.43 | ) | (0.46 | ) | (0.48 | ) | (0.24 | ) | (0.34 | ) | (0.35 | ) | (0.40 | ) | (0.39 | ) | (0.21 | ) | (0.25 | ) | |||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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| (0.43 | ) | (0.46 | ) | (0.48 | ) | (0.24 | ) | (0.34 | ) | (0.35 | ) | (0.40 | ) | (0.39 | ) | (0.21 | ) | (0.25 | ) | |||||||||||||||||||
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| $ | 31.04 | $ | 27.46 | $ | 21.47 | $ | 18.92 | $ | 18.49 | $ | 29.51 | $ | 26.11 | $ | 20.43 | $ | 17.99 | $ | 17.61 | |||||||||||||||||||
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| 14.78 | % | 30.59 | % | 16.43 | % | 3.58 | % | 15.50 | % | 14.50 | % | 30.26 | % | 16.05 | % | 3.30 | % | 15.27 | % | |||||||||||||||||||
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| $ | 434,881 | $ | 327,939 | $ | 88,509 | $ | 134,968 | $ | 2,123 | $ | 4,158,361 | $ | 3,899,011 | $ | 3,635,333 | $ | 3,761,691 | $ | 4,140,584 | |||||||||||||||||||
| 0.67 | % | 0.66 | % | 0.69 | % | 0.69 | % | 0.70 | % | 0.93 | % | 0.93 | % | 0.96 | % | 0.95 | % | 0.96 | % | |||||||||||||||||||
| 0.67 | % | 0.66 | % | 0.69 | % | 0.69 | % | 0.70 | % | 0.93 | % | 0.93 | % | 0.96 | % | 0.95 | % | 0.96 | % | |||||||||||||||||||
| 2.24 | % | 1.78 | % | 2.12 | % | 1.88 | % | 1.51 | % | 2.01 | % | 1.67 | % | 1.89 | % | 1.59 | % | 1.36 | % | |||||||||||||||||||
| 2.24 | % | 1.78 | % | 2.12 | % | 1.88 | % | 1.51 | % | 2.01 | % | 1.67 | % | 1.89 | % | 1.59 | % | 1.36 | % | |||||||||||||||||||
| 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | |||||||||||||||||||
27
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 25.89 | $ | 20.25 | $ | 17.83 | $ | 17.47 | $ | 15.39 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income (loss) | 0.47 | 0.35 | 0.31 | 0.27 | 0.21 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 3.20 | 5.65 | 2.48 | 0.28 | 2.10 | |||||||||||||||
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Total income (loss) from investment operations | 3.67 | 6.00 | 2.79 | 0.55 | 2.31 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.32 | ) | (0.36 | ) | (0.37 | ) | (0.19 | ) | (0.23 | ) | ||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.32 | ) | (0.36 | ) | (0.37 | ) | (0.19 | ) | (0.23 | ) | ||||||||||
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Net asset value, end of period | $ | 29.24 | $ | 25.89 | $ | 20.25 | $ | 17.83 | $ | 17.47 | ||||||||||
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Total return B | 14.31 | % | 30.05 | % | 15.96 | % | 3.11 | % | 15.14 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 149,423 | $ | 128,528 | $ | 103,629 | $ | 129,739 | $ | 128,080 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before reimbursements or recoupments | 1.07 | % | 1.07 | % | 1.08 | % | 1.08 | % | 1.10 | % | ||||||||||
Expenses, net of reimbursements or recoupments | 1.07 | % | 1.07 | % | 1.08 | % | 1.08 | % | 1.10 | % | ||||||||||
Net investment income (loss), before reimbursements or recoupments | 1.83 | % | 1.52 | % | 1.78 | % | 1.46 | % | 1.23 | % | ||||||||||
Net investment income, net of reimbursements or recoupments | 1.83 | % | 1.52 | % | 1.78 | % | 1.46 | % | 1.23 | % | ||||||||||
Portfolio turnover rate | 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | ||||||||||
| A | On December 1, 2010, Massachusetts Financial Services Company 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, 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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| May 17 to Oct. 31, 2010 | Sept. 1 to Oct. 31, 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | Year Ended October 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | 2014 | 2013 | 2012 | 2011A | 2014 | 2013 | 2012 | 2011A | ||||||||||||||||||||||||||||||||||||||||||||||
| $ | 25.48 | $ | 20.07 | $ | 17.74 | $ | 17.32 | $ | 15.36 | $ | 26.03 | $ | 20.41 | $ | 18.01 | $ | 17.61 | $ | 16.93 | $ | 25.81 | $ | 20.29 | $ | 17.95 | $ | 17.58 | $ | 16.17 | |||||||||||||||||||||||||||||
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| 0.57 | 0.35 | 0.28 | 0.20 | 0.18 | 0.54 | 0.38 | 0.36 | 0.24 | 0.03 | 0.35 | 0.23 | 0.22 | 0.10 | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||
| 2.98 | 5.50 | 2.42 | 0.30 | 2.07 | 3.16 | 5.65 | 2.44 | 0.31 | 0.65 | 3.11 | 5.58 | 2.42 | 0.32 | 1.42 | ||||||||||||||||||||||||||||||||||||||||||||
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| 3.55 | 5.85 | 2.70 | 0.50 | 2.25 | 3.70 | 6.03 | 2.80 | 0.55 | 0.68 | 3.46 | 5.81 | 2.64 | 0.42 | 1.41 | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.29 | ) | (0.44 | ) | (0.37 | ) | (0.08 | ) | (0.29 | ) | (0.35 | ) | (0.41 | ) | (0.40 | ) | (0.15 | ) | — | (0.24 | ) | (0.29 | ) | (0.30 | ) | (0.05 | ) | — | |||||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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| (0.29 | ) | (0.44 | ) | (0.37 | ) | (0.08 | ) | (0.29 | ) | (0.35 | ) | (0.41 | ) | (0.40 | ) | (0.15 | ) | — | (0.24 | ) | (0.29 | ) | (0.30 | ) | (0.05 | ) | — | |||||||||||||||||||||||||||||||
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| $ | 28.74 | $ | 25.48 | $ | 20.07 | $ | 17.74 | $ | 17.32 | $ | 29.38 | $ | 26.03 | $ | 20.41 | $ | 18.01 | $ | 17.61 | $ | 29.03 | $ | 25.81 | $ | 20.29 | $ | 17.95 | $ | 17.58 | |||||||||||||||||||||||||||||
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| 14.04 | % | 29.68 | % | 15.57 | % | 2.86 | % | 14.78 | % | 14.37 | % | 30.03 | % | 15.91 | % | 3.12 | % | 4.02 | %C | 13.48 | % | 29.00 | % | 14.97 | % | 2.36 | % | 8.72 | %C | |||||||||||||||||||||||||||||
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| $ | 12,668 | $ | 4,132 | $ | 2,230 | $ | 1,019 | $ | 2 | $ | 22,782 | $ | 11,905 | $ | 6,222 | $ | 3,942 | $ | 814 | $ | 9,964 | $ | 5,200 | $ | 2,468 | $ | 1,329 | $ | 38 | |||||||||||||||||||||||||||||
| 1.32 | % | 1.33 | % | 1.42 | % | 1.39 | % | 1.37 | % | 1.04 | % | 1.08 | % | 1.12 | % | 1.16 | % | 1.06 | %D | 1.79 | % | 1.84 | % | 1.88 | % | 2.54 | % | 2.14 | %D | |||||||||||||||||||||||||||||
| 1.32 | % | 1.33 | % | 1.42 | % | 1.39 | % | 1.37 | % | 1.04 | % | 1.08 | % | 1.12 | % | 1.16 | % | 1.06 | %D | 1.81 | % | 1.92 | % | 1.87 | % | 1.84 | % | 1.87 | %D | |||||||||||||||||||||||||||||
| 1.58 | % | 1.18 | % | 1.19 | % | 1.06 | % | 0.95 | % | 1.83 | % | 1.44 | % | 1.66 | % | 1.37 | % | 1.09 | %D | 1.09 | % | 0.68 | % | 0.89 | % | (0.01 | )% | (0.76 | )%D | |||||||||||||||||||||||||||||
| 1.58 | % | 1.18 | % | 1.19 | % | 1.06 | % | 0.95 | % | 1.83 | % | 1.44 | % | 1.66 | % | 1.37 | % | 1.09 | %D | 1.07 | % | 0.60 | % | 0.89 | % | 0.68 | % | (0.50 | )%D | |||||||||||||||||||||||||||||
| 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | 29 | % | 34 | % | 30 | % | 90 | % | 28 | %E | 29 | % | 34 | % | 30 | % | 90 | % | 28 | %E | |||||||||||||||||||||||||||||
29
American Beacon Large Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| AMR Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2014 | 2013 | 2012 | 2011A | 2010 | ||||||||||||||||
Net asset value, beginning of period | $ | 27.31 | $ | 21.36 | $ | 18.81 | $ | 18.37 | $ | 16.14 | ||||||||||
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Income from investment operations: | ||||||||||||||||||||
Net investment income | 0.77 | 0.57 | 0.52 | 0.41 | 0.34 | |||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 3.33 | 5.92 | 2.54 | 0.32 | 2.22 | |||||||||||||||
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Total income (loss) from investment operations | 4.10 | 6.49 | 3.06 | 0.73 | 2.56 | |||||||||||||||
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Less distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.51 | ) | (0.54 | ) | (0.51 | ) | (0.29 | ) | (0.33 | ) | ||||||||||
Distributions from net realized gains | — | — | — | — | — | |||||||||||||||
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Total distributions | (0.51 | ) | (0.54 | ) | (0.51 | ) | (0.29 | ) | (0.33 | ) | ||||||||||
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Net asset value, end of period | $ | 30.90 | $ | 27.31 | $ | 21.36 | $ | 18.81 | $ | 18.37 | ||||||||||
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Total return B | 15.20 | % | 31.05 | % | 16.75 | % | 3.94 | % | 16.04 | % | ||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 823,261 | $ | 729,175 | $ | 602,667 | $ | 568,768 | $ | 558,089 | ||||||||||
Ratios to average net assets (annualized): | ||||||||||||||||||||
Expenses, before reimbursements | 0.32 | % | 0.32 | % | 0.33 | % | 0.33 | % | 0.34 | % | ||||||||||
Expenses, net of reimbursements | 0.32 | % | 0.32 | % | 0.33 | % | 0.33 | % | 0.34 | % | ||||||||||
Net investment income (loss), before reimbursements | 2.59 | % | 2.26 | % | 2.51 | % | 2.21 | % | 1.98 | % | ||||||||||
Net investment income, net of reimbursements | 2.59 | % | 2.26 | % | 2.51 | % | 2.21 | % | 1.98 | % | ||||||||||
Portfolio turnover rate | 29 | % | 34 | % | 30 | % | 90 | % | 28 | % | ||||||||||
| A | On December 1, 2010, Massachusetts Financial Services Company 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 and Federal Tax Information
October 31, 2014 (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, 2014. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2014.
The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2013. 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 | 77.32 | % | ||
Qualified Dividend Income | 100.00 | % |
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 income tax returns.
31
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
At in-person meetings held on May 15, 2014 and June 5, 2014 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 5 meeting, approved: (1) the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) and American Beacon Select Funds (“Select Trust”) on behalf of each of their series that had been operational for at least one year (collectively, the “Funds”); and (2) the renewal of the investment advisory agreements (each an “Investment Advisory Agreement”) among the Manager, each subadvisor and, as applicable, the Beacon Trust, other than the Investment Advisory Agreements with subadvisors with respect to which the Board approved a new Investment Advisory Agreement within the past year (each a “subadvisor”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board to consider the renewal of these Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”), Morningstar, Inc. (“Morningstar”), Bobroff Consulting, Inc. and Callan Associates, Inc. (“Callan”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee coordinated the production of information from Lipper and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, 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 on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
| • | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Lipper and Morningstar, and to the performance of any similar accounts managed by the firm; |
| • | for Funds having multiple firms managing assets, information regarding the performance of the individual firms with respect to their allocated portions of a Fund’s portfolio, and the performance of certain relevant benchmarks and other similar accounts managed by the firm; |
| • | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with those of comparable mutual funds, including peer group averages and fee and expense analyses provided by Lipper and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided; |
| • | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to the expense caps; |
| • | the Manager’s profitability with respect to the services that it provided to each Fund; |
| • | 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 evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
| • | information regarding the securities lending, cash management, administrative and accounting-related services that the Manager provides to certain Funds and the fees that the Manager receives for such services, including Callan’s review of the Funds’ securities lending program; and |
| • | information regarding a firm’s financial condition, the personnel who are or will be assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, disaster recovery plans, insurance coverage, material pending litigation, code of ethics, compliance matters, trading activities, and actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds. |
The Board considered that the Manager provides management and administrative services to the Funds pursuant to separate agreements. The Board noted, in this regard, that many mutual funds have a single contract governing both types of services, and observed that the actual management fee rates provided by Lipper for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
Certain firms may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of those firms based on information that was provided. For each Fund with more than one class of shares, the class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which, in most cases, was the Institutional Class. For the American Beacon Holland Large Cap Growth Fund, the comparison was made using the Investor Class of shares due to the short period of time that its Institutional Class of shares has been in existence. 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 certain factors the Board considered in connection with its renewal and approval 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.
32
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 Meetings, 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) 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 clients); (5) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; 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 staffing 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) as well as the Fund’s Morningstar rating. 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 certain Funds. 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 Manager represented that 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 share 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 and, in some instances, 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 certain Funds. In considering the management fees for overseeing the securities lending program, the Board reviewed the analysis of the securities lending program prepared by Callan. The Board also noted that certain share classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.
In analyzing the fee rates charged by 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 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.
33
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
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, certain subadvisors have agreed to take into account assets of American Airlines Group 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 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 Board noted that certain subadvisors benefit from soft dollar arrangements for third party and proprietary research.
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 subadvisors reimburse the Manager for certain costs relating to distribution activities for the Funds, as well as representations by all such subadvisors that they would not reduce their fee rates in lieu of providing such reimbursements. 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 and Lipper performance group, with the 1st Quintile representing the top twenty percent of the universe or group based on performance and the 5th Quintile representing the bottom twenty percent of the universe or group based on performance. 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 and Lipper expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. 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. For all Funds, other than for the American Beacon Money Market Select Fund and American Beacon U.S. Government Money Market Select Fund for which information was not available, 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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
Compared to Lipper Expense Universe | 1st Quintile | |
Compared to Lipper Expense Group | 2nd Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Low Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 1st Quintile | |
Compared to Lipper Performance Group | 1st Quintile |
34
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”), Hotchkis and Wiley Capital Management, LLC (“Hotchkis”), and Massachusetts Financial Services Company (“MFS”), the Trustees considered the following additional factors:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Barrow | 5 years | 2nd Quintile | ||
Brandywine | 5 years | 1st Quintile | ||
Hotchkis | 5 years | 1st Quintile | ||
MFS* | 3 years | 1st Quintile |
| * | MFS does not yet have a 5-year performance record. |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; and (2) 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 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.
35
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 thirty-three 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** (56) | 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*** (77) | 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 (70) | 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 (53) | 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 (60) | 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 (72) | 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 (71) | 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 (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 | 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). | ||
36
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 | ||||
| Gene L. Needles, Jr. (59) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 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 (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
| Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, 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 (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
| Wyatt L. Crumpler (48) | 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 (44) | 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 (60) | 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 (53) | 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 (50) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
| Jeffrey K. Ringdahl (39) | 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 (51) | 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 (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
| Sonia L. Bates (57) | 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. | ||
| * |
| * | As of 11/12/2014, the Board 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 75. |
| ** | 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. |
37
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:
 |  | |
By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
 |  | |
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 Beacon Funds and American Beacon Large Cap Value Fund are service marks of American Beacon Advisors, Inc.
AR-10/14
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, 2014 |
 |
With the bull market entering its fifth year and both the S&P 500 Index and Dow Jones Industrial Average finishing this reporting period at all-time highs, the recent 12-month journey for small-cap investors has been quite a different story. One only needs to look at the performance of the Russell 2000 Index, which represents small-cap companies, to get an idea of how volatile the markets were for the period under review.
On the heels of a broader market rally, the Russell 2000 Index reached its all-time high of 1208 on March 4 and then promptly dropped approximately 9% in the 12 weeks that followed. By the start of the third quarter, the Index was again near that March high. However, volatility struck again with a 13% correction by mid-October before ending the | |
| month with a 12% increase. Despite the volatility, the Russell 2000 Index managed to post an 8.06% return for the one-year period. | ||
It is no secret that smaller cap stocks tend to be more volatile than the rest of the market. The American Beacon Small Cap Value Fund hopes to help navigate through these markets through our multi-manager approach. The Fund boasts six highly regarded sub-advisors, chosen to complement each other’s strategies. We believe this approach can help mitigate the inherent volatility of the small-cap space.
For the 12 months ended October 31, 2014, the American Beacon Small Cap Value Fund (Investor Class) returned 8.40%.
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, 2014 (Unaudited)
Underlying economic growth in the U.S. gained momentum at the end of the 2013 calendar year. Household net worth rose sharply, spurred by rising house prices and a surging stock market. This increase in household net worth, along with a modest improvement in jobs growth, bolstered consumer confidence. U.S. equities moved higher due to the favorable economic data and as a result, became significantly less cheap (compared to a year earlier). Valuations reached historical norms but were not excessive with regard to earnings, profit margins and balance sheet strength. Around this time, Europe was stabilizing and the first signs of China’s slowing activity appeared.
The first few months of 2014 seemed relatively sedate compared to the market surge we saw in the prior year. A small market correction occurred in January but was followed by a number of months with positive performance. During the winter, extreme cold weather became a factor as it depressed economic activity for the country, leading to U.S. gross domestic product (GDP) growth becoming temporarily negative. However, overall economic data showed some positive signs with solid improvements in jobs growth, unemployment, auto sales, air and railroad traffic and loan growth. Very low inflation allowed the U.S. Federal Reserve to stay committed to its expansionary policy with interest rates near zero.
The second quarter benefited from catch-up demand. U.S. GDP growth was a stellar 4.6%, and jobs growth, auto sales, consumer confidence and railroad traffic were all positive for the period. These factors contributed to the positive performance of the market (S&P 500 earnings were up almost 10%). The move during this time pushed equity valuations to more attractive levels.
The S&P 500 Index was up 17.27% for the one-year period ended October 31, 2014, while the Dow Jones Industrial Average gained 14.48%. The Russell 1000 Index, a measure of the large-cap segment of U.S. equities, posted 16.78% return while the Russell 2000 Index, which measures the small-cap segment, was positive 8.06%.
The period closed with the U.S. economy continuing to strengthen. U.S. real GDP grew 3.3% in the third quarter. Solid jobs growth and diminishing new unemployment claims attested to the sustainability of the U.S. recovery. However, the positive outlook for the U.S. growth is tempered by the strong rise in the value of the dollar that could slow exports and make imports more competitive.
2
American Beacon Small Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
The Investor Class of the Small Cap Value Fund (the “Fund”) returned 8.40% for the twelve months ended October 31, 2014, outperforming the Russell 2000® Value Index (the “Index”) return of 7.89% for the same period.
Comparison of Change in Value of a $10,000 Investment
For the Period from 10/31/04 through 10/31/14
Total Returns for the Period ended 10/31/2014
| 1 Year | 5 Years | 10 Years | Value of $10,000 10/31/04- 10/31/14 | |||||||||||||
Institutional Class (1,8) | 8.78 | % | 17.47 | % | 8.99 | % | $ | 23,651 | ||||||||
Y Class (1,2,8) | 8.67 | % | 17.33 | % | 8.91 | % | 23,476 | |||||||||
Investor Class (1,8) | 8.40 | % | 17.05 | % | 8.65 | % | 22,925 | |||||||||
Advisor Class (1,3,8) | 8.22 | % | 16.88 | % | 8.44 | % | 22,484 | |||||||||
Retirement Class (1,4,8) | 7.99 | % | 16.57 | % | 8.28 | % | 22,159 | |||||||||
A Class with sales | 2.07 | % | 15.50 | % | 7.93 | % | 21,447 | |||||||||
A Class without sales | 8.30 | % | 16.88 | % | 8.57 | % | 22,755 | |||||||||
C Class with sales | 6.46 | % | 16.12 | % | 8.22 | % | 22,028 | |||||||||
C Class without sales | 7.46 | % | 16.12 | % | 8.22 | % | 22,028 | |||||||||
AMR Class (1,8) | 9.06 | % | 17.76 | % | 9.27 | % | 24,267 | |||||||||
Russell 2000 Value | 7.89 | % | 16.15 | % | 7.81 | % | 21,221 | |||||||||
| 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, 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. | Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 10/31/04 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 10/31/04. |
| 3. | A portion of the fees charged to the Advisor Class of the Fund was waived through 2004 and in 2009. Performance prior to waiving fees was lower than the actual returns shown for these periods. |
| 4. | Fund performance for the ten-year period represents the total returns achieved by the Advisor Class from 10/31/04 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 10/31/04. |
| 5. | Fund performance for the five-year and ten-year periods represent the total returns achieved by the Investor Class from 10/31/04 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 10/31/04. A portion of the fees charged to the A Class of the Fund was waived in 2010 and since 2012. Performance prior to waiving fees was lower than the actual returns shown. 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 10/31/04 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 10/31/04. A portion of the fees charged to the C Class of the Fund was waived in 2010 and since 2012. Performance prior to waiving fees was lower than the actual returns shown. 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. 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 0.84%, 0.93%, 1.20%, 1.33%, 1.62%, 1.27%, 2.01%, and 0.58%, 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 through stock selection as sector allocation detracted value relative to the Index.
3
American Beacon Small Cap Value FundSM
Performance Overview
October 31, 2014 (Unaudited)
Most of the Fund’s excess performance was attributed to holdings in the Information Technology and Industrials sectors which contributed approximately 120 (1.20%) and 100 (1.00%) basis points, respectively, to performance. In the Information Technology sector, ARRIS Group (up 68.0%) and Methode Electronics (up 55.6%) contributed most to the Fund’s returns. Not owning Acxiom, which was down 43.3% in the Index, also added relative value. In the Industrials sector, Trinity Industries (up 81.6%), Huntington Ingalls Industries (up 47.8%) and owning a much smaller position in Energy XXI Bermuda (down 71.7%) than the Index, contributed to performance. The Fund’s Consumer Staples and Financials sectors also added value relative to the Index. Pilgrim’s Pride (up 69.5%) and USANA Health Sciences (up 66.2%) were the largest contributors in the Consumer Staples sector. Not owning Darling Ingredients, which was down 24.4% in the Index, also positively impacted performance. Protective Life (up 51.7%) and Avis Budget Group (up 69.9%) added the most relative value in the Financials sector.
Poor stock selection in the Consumer Discretionary sector detracted from the Fund’s returns. Express (down 36.7%), Guess? (down 20.3%) and Quicksilver (down 78.7%) were the largest detractors in the Consumer Discretionary sector.
A significant overweight in Industrials, one of the poorer performing sectors in the Index, detracted relative value through sector allocation. The Fund’s underweight in the Financials sector also hurt performance.
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)
First Horizon National Corp. | 1.1 | |||||||
Vishay Intertechnology, Inc. | 0.8 | |||||||
Synovus Financial Corp. | 0.8 | |||||||
American Axle & Manufacturing Holdings, Inc. | 0.7 | |||||||
WellCare Health Plans, Inc. | 0.7 | |||||||
HealthSouth Corp. | 0.6 | |||||||
Portland General Electric Co. | 0.6 | |||||||
Webster Financial Corp. | 0.6 | |||||||
Hancock Holding Co. | 0.6 | |||||||
Oshkosh Corp. | 0.6 | |||||||
Total Fund Holdings | 596 |
Sector Allocation (% Equities)
Financials | 30.0 | |||
Industrials | 20.6 | |||
Consumer Discretionary | 14.8 | |||
Information Technology | 12.6 | |||
Health Care | 5.9 | |||
Energy | 4.9 | |||
Materials | 4.6 | |||
Utilities | 4.0 | |||
Consumer Staples | 2.1 | |||
Telecommunication Services | 0.5 |
4
American Beacon Small Cap Value FundSM
Fund Expenses
October 31, 2014 (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, 2014 through October 31, 2014.
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 5/1/14 | Ending Account Value 10/31/14 | Expenses Paid During Period* 5/1/14 -10/31/14 | |||||||||||||
Institutional Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.88 | $ | 4.09 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | |||||||||
Y Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,028.39 | $ | 4.55 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,020.72 | $ | 4.53 | |||||||||
Investor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,027.04 | $ | 5.88 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,019.41 | $ | 5.85 | |||||||||
Advisor Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.14 | $ | 6.59 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.70 | $ | 6.56 | |||||||||
Retirement Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,025.05 | $ | 7.96 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,017.34 | $ | 7.93 | |||||||||
A Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,026.61 | $ | 6.39 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,018.90 | $ | 6.36 | |||||||||
AMR Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,030.08 | $ | 2.71 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,022.53 | $ | 2.70 | |||||||||
C Class | |||||||||||||||
Actual | $ | 1,000.00 | $ | 1,022.78 | $ | 10.20 | |||||||||
Hypothetical ** | $ | 1,000.00 | $ | 1,015.12 | $ | 10.16 | |||||||||
| * | Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.80%, 0.89%, 1.15%, 1.29%, 1.56%, 1.25%, 2.00% and 0.53% 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 “Fund”), as of October 31, 2014, 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, 2014, 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, 2014, 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, 2014
6
American Beacon Small Cap Value FundSM
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
COMMON STOCK - 96.40% |
| |||||||
CONSUMER DISCRETIONARY - 14.29% |
| |||||||
Auto Components - 1.83% |
| |||||||
American Axle & Manufacturing Holdings, Inc.A | 2,117,488 | $ | 40,932 | |||||
Biglari Holdings, Inc.B | 9,669 | 3,376 | ||||||
Cooper Tire & Rubber Co. | 145,925 | 4,700 | ||||||
Dana Holding Corp. | 558,820 | 11,433 | ||||||
Federal Signal Corp. | 516,400 | 7,333 | ||||||
Modine Manufacturing Co.A | 42,987 | 552 | ||||||
Remy International, Inc. | 104,220 | 1,926 | ||||||
Standard Motor Products, Inc. | 138,064 | 5,456 | ||||||
Tenneco, Inc.A | 509,532 | 26,679 | ||||||
|
| |||||||
| 102,387 | ||||||||
|
| |||||||
Automobiles - 0.32% |
| |||||||
Hyster-Yale Materials Handling, Inc. | 83,122 | 6,524 | ||||||
Thor Industries, Inc. | 191,630 | 10,135 | ||||||
Winnebago Industries, Inc.A | 47,364 | 1,005 | ||||||
|
| |||||||
| 17,664 | ||||||||
|
| |||||||
Consumer Electronics - 0.01% |
| |||||||
VOXX International Corp.A | 46,254 | 395 | ||||||
|
| |||||||
Hotels, Restaurants & Leisure - 1.28% |
| |||||||
Belmond Ltd., Class AA | 800,030 | 9,168 | ||||||
Brinker International, Inc. | 250,025 | 13,411 | ||||||
Cheesecake Factory, Inc. | 359,171 | 16,501 | ||||||
Cracker Barrel Old Country Store, Inc. | 101,788 | 11,741 | ||||||
International Speedway Corp., Class A | 99,374 | 3,113 | ||||||
Interval Leisure Group, Inc. | 127,474 | 2,682 | ||||||
Lakes Entertainment, Inc.A | 75,400 | 645 | ||||||
Life Time Fitness, Inc.A | 111,500 | 6,218 | ||||||
Penn National Gaming, Inc.A | 58,900 | 771 | ||||||
Ruby Tuesday, Inc.A | 817,000 | 6,275 | ||||||
Speedway Motorsports, Inc. | 66,260 | 1,297 | ||||||
|
| |||||||
| 71,822 | ||||||||
|
| |||||||
Household Durables - 3.45% |
| |||||||
ACCO Brands Corp.A | 623,653 | 5,133 | ||||||
Cavco Industries, Inc.A | 89,639 | 6,532 | ||||||
Ethan Allen Interiors, Inc. | 476,865 | 13,495 | ||||||
Haverty Furniture Companies, Inc. | 103,239 | 2,272 | ||||||
Helen of Troy Ltd.A | 542,930 | 33,579 | ||||||
HNI Corp. | 89,327 | 4,167 | ||||||
KB HomeB | 372,350 | 5,861 | ||||||
Kimball International, Inc., Class B | 73,843 | 1,328 | ||||||
Knoll, Inc. | 482,290 | 9,593 | ||||||
La-Z-Boy, Inc. | 129,566 | 2,962 | ||||||
Lifetime Brands, Inc. | 24,253 | 415 | ||||||
M/I Homes, Inc.A | 359,000 | 7,733 | ||||||
Matthews International Corp., Class A | 45,370 | 2,091 | ||||||
MDC Holdings, Inc. | 103,800 | 2,535 | ||||||
Meritage Homes Corp. | 82,200 | 3,024 | ||||||
Ryland Group, Inc. | 104,400 | 3,739 | ||||||
Standard Pacific Corp.A | 1,885,760 | 13,955 | ||||||
Taylor Morrison Home Corp.A | 432,380 | 7,454 | ||||||
Tempur Sealy International, Inc.A | 454,300 | 23,914 | ||||||
TRI Pointe Homes, Inc.A | 345,400 | 4,729 | ||||||
Universal Electronics, Inc.A | 118,090 | 6,718 | ||||||
Whirlpool Corp. | 159,955 | 27,519 | ||||||
William Lyon Homes, Class AA | 177,200 | 4,193 | ||||||
|
| |||||||
| 192,941 | ||||||||
|
| |||||||
Internet & Catalog Retail - 0.16% |
| |||||||
HSN, Inc. | 51,935 | 3,431 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Insight Enterprises, Inc.A | 248,551 | $ | 5,655 | |||||
|
| |||||||
| 9,086 | ||||||||
|
| |||||||
Leisure Equipment & Products - 0.47% |
| |||||||
Brunswick Corp. | 529,700 | 24,790 | ||||||
Johnson Outdoors, Inc., Class A | 6,446 | 194 | ||||||
LeapFrog Enterprises, Inc.A B | 241,347 | 1,284 | ||||||
|
| |||||||
| 26,268 | ||||||||
|
| |||||||
Media - 1.79% |
| |||||||
AH Belo Corp., Class A | 109,255 | 1,258 | ||||||
Banner Corp. | 37,090 | 1,603 | ||||||
CTC Media, Inc. | 290,450 | 1,847 | ||||||
DreamWorks Animation SKG, Inc., Class AA | 358,500 | 7,987 | ||||||
Entercom Communications Corp., Class AA | 170,480 | 1,753 | ||||||
EW Scripps Co., Class AA | 782,118 | 15,017 | ||||||
John Wiley & Sons, Inc., Class A | 311,509 | 18,188 | ||||||
Journal Communications, Inc., Class AA | 122,362 | 1,200 | ||||||
Meredith Corp. | 307,780 | 16,048 | ||||||
New York Times Co., Class A | 1,119,148 | 14,370 | ||||||
Saga Communications, Inc., Class A | 3,787 | 152 | ||||||
Scholastic Corp. | 123,500 | 4,299 | ||||||
Starz-Liberty CapitalA | 330,800 | 10,222 | ||||||
Time, Inc. | 277,430 | 6,267 | ||||||
|
| |||||||
| 100,211 | ||||||||
|
| |||||||
Multiline Retail - 0.45% | ||||||||
Big Lots, Inc. | 186,180 | 8,499 | ||||||
Bon-Ton Stores, Inc.B | 46,587 | 410 | ||||||
Dillard’s, Inc., Class A | 140,090 | 14,816 | ||||||
Stein Mart, Inc. | 106,638 | 1,427 | ||||||
|
| |||||||
| 25,152 | ||||||||
|
| |||||||
Specialty Retail - 4.00% |
| |||||||
Aaron’s, Inc. | 207,405 | 5,135 | ||||||
American Eagle Outfitters, Inc. | 1,122,537 | 14,447 | ||||||
ANN, Inc.A | 224,111 | 8,604 | ||||||
Asbury Automotive Group, Inc.A | 152,116 | 10,654 | ||||||
Big 5 Sporting Goods Corp. | 104,489 | 1,286 | ||||||
Buckle, Inc.B | 126,519 | 6,241 | ||||||
Cato Corp., Class A | 110,966 | 3,958 | ||||||
Children’s Place Retail Stores, Inc. | 270,960 | 13,345 | ||||||
Destination Maternity Corp. | 159,920 | 2,396 | ||||||
Express, Inc. | 796,421 | 11,922 | ||||||
Finish Line, Inc., Class A | 122,963 | 3,255 | ||||||
Francesca’s Holdings Corp.A | 52,414 | 624 | ||||||
GameStop Corp., Class AB | 78,800 | 3,369 | ||||||
Genesco, Inc.A | 145,430 | 11,153 | ||||||
Group 1 Automotive, Inc. | 80,100 | 6,843 | ||||||
Kirkland’s, Inc.A | 56,539 | 1,006 | ||||||
MarineMax, Inc.A | 67,505 | 1,294 | ||||||
Men’s Wearhouse, Inc. | 425,723 | 20,023 | ||||||
Office Depot, Inc.A | 1,852,927 | 9,672 | ||||||
PC Connection, Inc. | 71,410 | 1,703 | ||||||
Penske Automotive Group, Inc. | 249,118 | 11,270 | ||||||
Pep Boys, Inc.A | 812,640 | 7,744 | ||||||
Pier 1 Imports, Inc. | 252,270 | 3,254 | ||||||
Rent-A-Center, Inc. | 101,400 | 3,140 | ||||||
Rush Enterprises, Inc., Class AA | 423,200 | 16,124 | ||||||
Select Comfort Corp.A | 109,658 | 2,817 | ||||||
Sonic Automotive, Inc., Class A | 1,216,016 | 30,268 | ||||||
Zumiez, Inc.A | 370,470 | 12,366 | ||||||
|
| |||||||
| 223,913 | ||||||||
|
| |||||||
Textiles & Apparel - 0.53% |
| |||||||
Brown Shoe Company, Inc. | 55,131 | 1,466 | ||||||
See accompanying notes
7
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
G-III Apparel Group Ltd.A | 21,348 | $ | 1,694 | |||||
Guess?, Inc. | 136,563 | 3,028 | ||||||
Oxford Industries, Inc. | 153,350 | 9,393 | ||||||
Quiksilver, Inc.A B | 707,300 | 1,238 | ||||||
Unifi, Inc.A | 70,475 | 1,971 | ||||||
Unifirst Corp. | 11,395 | 1,271 | ||||||
Vera Bradley, Inc.A | 429,131 | 9,784 | ||||||
|
| |||||||
| 29,845 | ||||||||
|
| |||||||
Total Consumer Discretionary |
| 799,684 | ||||||
|
| |||||||
CONSUMER STAPLES - 2.04% |
| |||||||
Food & Drug Retailing - 1.13% |
| |||||||
Andersons, Inc. | 95,100 | 6,061 | ||||||
Casey’s General Stores, Inc. | 229,606 | 18,798 | ||||||
CST Brands, Inc. | 97,720 | 3,738 | ||||||
Fresh Market, Inc.A B | 172,820 | 6,344 | ||||||
Petmed Express, Inc.B | 64,198 | 848 | ||||||
SpartanNash Co. | 129,175 | 2,895 | ||||||
SUPERVALU, Inc.A | 554,300 | 4,784 | ||||||
Vitamin Shoppe, Inc.A | 422,972 | 19,849 | ||||||
|
| |||||||
| 63,317 | ||||||||
|
| |||||||
Food Products - 0.78% |
| |||||||
Dean Foods Co. | 976,051 | 14,357 | ||||||
Fresh Del Monte Produce, Inc. | 391,930 | 12,585 | ||||||
Omega Protein Corp.A | 92,857 | 1,342 | ||||||
Sanderson Farms, Inc.B | 94,460 | 7,933 | ||||||
USANA Health Sciences, Inc.A B | 66,722 | 7,605 | ||||||
|
| |||||||
| 43,822 | ||||||||
|
| |||||||
Personal Products - 0.02% |
| |||||||
Medifast, Inc.A | 38,820 | 1,232 | ||||||
|
| |||||||
Tobacco - 0.11% |
| |||||||
Universal Corp. | 133,595 | 5,945 | ||||||
|
| |||||||
Total Consumer Staples | 114,316 | |||||||
|
| |||||||
ENERGY - 4.74% |
| |||||||
Energy Equipment & Services - 2.31% |
| |||||||
Atwood Oceanics, Inc.A | 130,397 | 5,301 | ||||||
Bristow Group, Inc. | 114,710 | 8,477 | ||||||
Dril-Quip, Inc.A | 113,170 | 10,180 | ||||||
Dynegy, Inc.A | 129,600 | 3,953 | ||||||
Exterran Holdings, Inc. | 246,730 | 9,704 | ||||||
Gulf Island Fabrication, Inc. | 193,530 | 4,091 | ||||||
Key Energy Services, Inc.A | 2,236,620 | 6,799 | ||||||
McDermott International, Inc.A B | 857,100 | 3,291 | ||||||
Nabors Industries Ltd. | 217,300 | 3,879 | ||||||
Newpark Resources, Inc.A | 355,500 | 4,063 | ||||||
Oil States International, Inc.A | 147,190 | 8,793 | ||||||
Patterson-UTI Energy, Inc. | 552,510 | 12,724 | ||||||
PDC Energy, Inc.A | 175,940 | 7,692 | ||||||
Rowan Cos PLC | 406,700 | 9,871 | ||||||
Superior Energy Services, Inc. | 598,290 | 15,047 | ||||||
Tesco Corp. | 74,070 | 1,410 | ||||||
Unit Corp.A | 293,406 | 14,207 | ||||||
|
| |||||||
| 129,482 | ||||||||
|
| |||||||
Oil & Gas - 2.43% |
| |||||||
Abraxas Petroleum Corp.A | 1,024,600 | 4,232 | ||||||
Bellatrix Exploration Ltd.A | 546,890 | 2,543 | ||||||
Bill Barrett Corp.A B | 540,570 | 8,217 | ||||||
Callon Petroleum Co.A | 456,200 | 2,993 | ||||||
Carrizo Oil & Gas, Inc.A | 96,000 | 4,986 | ||||||
Cloud Peak Energy, Inc.A | 374,320 | 4,481 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Comstock Resources, Inc. | 195,410 | $ | 2,314 | |||||
Denbury Resources, Inc. | 440,300 | 5,460 | ||||||
Gran Tierra Energy, Inc.A | 650,390 | 2,966 | ||||||
Green Plains Renewable Energy, Inc. | 60,200 | 2,059 | ||||||
Helix Energy Solutions Group, Inc.A | 234,800 | 6,255 | ||||||
Kosmos Energy Ltd.A | 344,500 | 3,214 | ||||||
LinnCo LLCB C | 223,711 | 5,362 | ||||||
Natural Gas Services Group, Inc.A | 182,890 | 4,706 | ||||||
Newfield Exploration Co.A | 378,900 | 12,356 | ||||||
PBF Energy, Inc. | 184,300 | 4,805 | ||||||
Rosetta Resources, Inc.A | 30,800 | 1,171 | ||||||
Synergy Resources Corp.A | 770,820 | 9,396 | ||||||
Triangle Petroleum Corp.A | 474,700 | 3,679 | ||||||
Ultra Petroleum Corp.A B | 694,830 | 15,842 | ||||||
Warren Resources, Inc.A | 310,995 | 1,076 | ||||||
Western Refining, Inc. | 381,595 | 17,396 | ||||||
WPX Energy, Inc.A | 545,400 | 10,428 | ||||||
|
| |||||||
| 135,937 | ||||||||
|
| |||||||
Total Energy | 265,419 | |||||||
|
| |||||||
FINANCIALS - 29.18% |
| |||||||
Banks - 13.38% |
| |||||||
1st Source Corp. | 76,030 | 2,379 | ||||||
Associated Banc-Corp. | 1,427,475 | 26,837 | ||||||
Astoria Financial Corp. | 404,880 | 5,324 | ||||||
BancorpSouth, Inc. | 516,417 | 11,893 | ||||||
Bank of Hawaii Corp. | 65,260 | 3,821 | ||||||
BankUnited, Inc. | 324,850 | 9,713 | ||||||
BBCN Bancorp, Inc. | 350,881 | 4,961 | ||||||
Berkshire Hills Bancorp, Inc. | 64,938 | 1,674 | ||||||
Blue Hills Bancorp, Inc.A | 264,166 | 3,521 | ||||||
BOK Financial Corp. | 147,130 | 10,087 | ||||||
Boston Private Financial Holdings, Inc. | 1,346,778 | 17,710 | ||||||
Brookline Bancorp, Inc. | 948,280 | 9,094 | ||||||
Cardinal Financial Corp. | 413,550 | 7,940 | ||||||
Cathay General Bancorp | 287,502 | 7,593 | ||||||
Central Pacific Financial Corp. | 95,710 | 1,809 | ||||||
Chemical Financial Corp. | 279,096 | 8,311 | ||||||
City Holding Co. | 54,230 | 2,440 | ||||||
City National Corp. | 310,079 | 24,406 | ||||||
Clifton Bancorp, Inc. | 235,370 | 3,065 | ||||||
CoBiz Financial, Inc. | 559,567 | 6,726 | ||||||
Columbia Banking System, Inc. | 482,210 | 13,396 | ||||||
Community Bank System, Inc. | 32,760 | 1,250 | ||||||
Community Trust Bancorp, Inc. | 13,225 | 475 | ||||||
CVB Financial Corp. | 819,553 | 12,933 | ||||||
Dime Community Bancshares, Inc. | 107,895 | 1,699 | ||||||
East West Bancorp, Inc. | 290,900 | 10,693 | ||||||
Enterprise Financial Services Corp. | 62,575 | 1,180 | ||||||
First Commonwealth Financial Corp. | 354,770 | 3,317 | ||||||
First Financial Bancorp | 124,000 | 2,175 | ||||||
First Financial Corp. | 74,282 | 2,576 | ||||||
First Horizon National Corp. | 4,604,068 | 59,209 | ||||||
First Interstate Bancsystem, Inc. | 289,670 | 8,499 | ||||||
First Merchants Corp. | 70,600 | 1,599 | ||||||
First Midwest Bancorp, Inc. | 1,056,267 | 17,735 | ||||||
First Niagara Financial Group, Inc. | 1,815,137 | 13,595 | ||||||
FirstMerit Corp. | 297,695 | 5,463 | ||||||
Flushing Financial Corp. | 38,640 | 778 | ||||||
FNB Corp. | 399,660 | 5,112 | ||||||
Fulton Financial Corp. | 1,062,335 | 12,621 | ||||||
German American Bancorp, Inc. | 22,322 | 667 | ||||||
Hancock Holding Co. | 945,998 | 33,290 | ||||||
See accompanying notes
8
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Hanmi Financial Corp. | 513,700 | $ | 11,019 | |||||
Iberiabank Corp. | 90,240 | 6,214 | ||||||
Independent Bank Corp. | 106,500 | 4,345 | ||||||
International Bancshares Corp. | 346,240 | 9,823 | ||||||
Investors Bancorp, Inc. | 1,035,300 | 11,129 | ||||||
Lakeland Financial Corp. | 40,565 | 1,681 | ||||||
MainSource Financial Group, Inc. | 121,840 | 2,216 | ||||||
MB Financial, Inc. | 190,549 | 6,012 | ||||||
National Bank Holdings Corp. | 85,200 | 1,669 | ||||||
National Penn Bancshares, Inc. | 690,475 | 7,105 | ||||||
NBT Bancorp, Inc. | 187,728 | 4,821 | ||||||
Northwest Bancshares, Inc. | 386,000 | 4,952 | ||||||
Old National Bancorp | 416,007 | 6,053 | ||||||
People’s United Financial, Inc. | 817,000 | 11,945 | ||||||
Popular, Inc.A | 491,300 | 15,663 | ||||||
PrivateBancorp, Inc. | 499,023 | 16,128 | ||||||
Prosperity Bancshares, Inc. | 471,674 | 28,484 | ||||||
Provident Financial Services, Inc. | 288,919 | 5,267 | ||||||
Renasant Corp. | 91,830 | 2,769 | ||||||
S&T Bancorp, Inc. | 204,754 | 5,649 | ||||||
Sandy Spring Bancorp, Inc. | 73,330 | 1,892 | ||||||
Simmons First National Corp., Class A | 129,900 | 5,455 | ||||||
South State Corp. | 87,500 | 5,277 | ||||||
Square 1 Financial Inc.A | 65,733 | 1,307 | ||||||
Sterling Bancorp | 342,000 | 4,809 | ||||||
Stock Yards Bancorp, Inc. | 39,326 | 1,309 | ||||||
TCF Financial Corp. | 182,861 | 2,825 | ||||||
Tompkins Financial Corp. | 9,570 | 480 | ||||||
Trustmark Corp. | 138,578 | 3,372 | ||||||
UMB Financial Corp. | 209,130 | 12,460 | ||||||
Umpqua Holdings Corp. | 797,754 | 14,040 | ||||||
Union Bankshares Corp. | 98,100 | 2,205 | ||||||
United Bankshares, Inc. | 148,700 | 5,097 | ||||||
United Community Banks, Inc. | 793,420 | 14,305 | ||||||
United Financial Bancorp, Inc. | 58,500 | 821 | ||||||
Valley National BancorpB | 1,850,690 | 18,470 | ||||||
Washington Federal, Inc. | 950,480 | 20,749 | ||||||
Washington Trust Bancorp, Inc. | 130,620 | 5,012 | ||||||
Webster Financial Corp. | 1,085,853 | 34,031 | ||||||
WesBanco, Inc. | 316,573 | 10,909 | ||||||
Wilshire Bancorp, Inc. | 273,810 | 2,711 | ||||||
Wintrust Financial Corp. | 620,302 | 28,732 | ||||||
Zions Bancorporation | 393,500 | 11,400 | ||||||
|
| |||||||
| 748,178 | ||||||||
|
| |||||||
Diversified Financials - 3.63% |
| |||||||
Advent Software, Inc. | 226,150 | 7,816 | ||||||
Calamos Asset Management, Inc., Class A | 267,705 | 3,668 | ||||||
Capitol Federal Financial, Inc. | 514,750 | 6,594 | ||||||
Cash America International, Inc. | 76,000 | 3,735 | ||||||
CoreLogic, Inc.A | 647,570 | 20,314 | ||||||
Credit Acceptance Corp.A B | 86,668 | 12,789 | ||||||
Customers Bancorp, Inc.A | 261,900 | 5,002 | ||||||
Encore Capital Group, Inc.A | 219,650 | 9,996 | ||||||
Federated Investors, Inc., Class BB | 86,287 | 2,698 | ||||||
First BanCorp Puerto RicoA | 598,300 | 3,117 | ||||||
GAMCO Investors, Inc., Class A | 12,243 | 1,012 | ||||||
Greenhill & Co., Inc. | 17,465 | 786 | ||||||
Home Loan Servicing Solutions Ltd. | 247,620 | 4,757 | ||||||
Janus Capital Group, Inc.B | 175,140 | 2,625 | ||||||
Nelnet, Inc., Class A | 224,197 | 10,670 | ||||||
Northfield Bancorp, Inc. | 214,520 | 3,055 | ||||||
Oppenheimer Holdings, Inc., Class A | 104,660 | 2,569 | ||||||
Oritani Financial Corp. | 139,840 | 2,065 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Outerwall, Inc.A B | 71,300 | $ | 4,511 | |||||
Pacific Continental Corp. | 188,100 | 2,712 | ||||||
Piper Jaffray Cos.A | 212,937 | 12,022 | ||||||
PRA Group, Inc. | 54,960 | 3,476 | ||||||
Prospect Capital Corp.B | 127,092 | 1,218 | ||||||
Stifel Financial Corp.A | 244,385 | 11,611 | ||||||
Synovus Financial Corp. | 1,660,637 | 42,114 | ||||||
Texas Capital Bancshares, Inc.A | 364,000 | 22,259 | ||||||
|
| |||||||
| 203,191 | ||||||||
|
| |||||||
Insurance - 8.04% | ||||||||
Allied World Assurance Co. Holdings AG | 493,725 | 18,762 | ||||||
American Equity Investment Life Holding Co. | 421,790 | 10,886 | ||||||
American Financial Group, Inc. | 239,435 | 14,325 | ||||||
AMERISAFE, Inc. | 24,800 | 1,034 | ||||||
Amtrust Financial Services, Inc.B | 254,631 | 11,425 | ||||||
Argo Group International Holdings Ltd. | 72,940 | 4,070 | ||||||
Aspen Insurance Holdings Ltd. | 497,980 | 21,727 | ||||||
Assurant, Inc. | 151,600 | 10,342 | ||||||
Assured Guaranty Ltd. | 377,640 | 8,716 | ||||||
Axis Capital Holdings Ltd. | 226,400 | 10,899 | ||||||
CNO Financial Group, Inc. | 892,181 | 16,175 | ||||||
Employers Holdings, Inc. | 150,700 | 3,073 | ||||||
Endurance Specialty Holdings Ltd. | 304,935 | 17,671 | ||||||
Enstar Group Ltd.A | 43,243 | 6,403 | ||||||
FBL Financial Group, Inc., Class A | 140,300 | 6,956 | ||||||
First American Financial Corp. | 227,520 | 6,898 | ||||||
Global Indemnity PLCA D | 424,623 | 12,306 | ||||||
Hanover Insurance Group, Inc. | 294,040 | 19,683 | ||||||
HCC Insurance Holdings, Inc. | 221,060 | 11,537 | ||||||
Hilltop Holdings, Inc.A | 287,460 | 6,333 | ||||||
Horace Mann Educators Corp. | 957,496 | 29,118 | ||||||
Infinity Property & Casualty Corp. | 54,738 | 3,996 | ||||||
Kemper Corp. | 191,520 | 7,058 | ||||||
Maiden Capital Financing Trust | 207,850 | 2,484 | ||||||
Mercury General Corp. | 118,200 | 6,279 | ||||||
Montpelier Re Holdings Ltd. | 291,238 | 9,652 | ||||||
National Western Life Insurance Co., Class A | 14,383 | 3,898 | ||||||
Navigators Group, Inc.A | 49,613 | 3,378 | ||||||
Old Republic International Corp. | 912,960 | 13,484 | ||||||
PartnerRe Ltd. | 50,600 | 5,854 | ||||||
Platinum Underwriters Holdings Ltd. | 417,987 | 26,179 | ||||||
Primerica, Inc. | 176,430 | 9,024 | ||||||
ProAssurance Corp. | 125,400 | 5,866 | ||||||
Protective Life Corp. | 127,640 | 8,894 | ||||||
Reinsurance Group of America, Inc. | 68,800 | 5,796 | ||||||
Renaissancere Holdings Ltd. | 87,100 | 9,000 | ||||||
Safety Insurance Group, Inc. | 168,270 | 10,497 | ||||||
Selective Insurance Group, Inc. | 206,138 | 5,322 | ||||||
StanCorp Financial Group, Inc. | 154,440 | 10,743 | ||||||
State Auto Financial Corp. | 77,539 | 1,623 | ||||||
Stewart Information Services Corp. | 123,711 | 4,369 | ||||||
Symetra Financial Corp. | 676,450 | 16,032 | ||||||
Third Point Reinsurance Ltd.A | 260,059 | 3,979 | ||||||
United Fire Group, Inc. | 50,860 | 1,652 | ||||||
Validus Holdings Ltd. | 311,510 | 12,392 | ||||||
White Mountains Insurance Group Ltd. | 21,454 | 13,407 | ||||||
|
| |||||||
| 449,197 | ||||||||
|
| |||||||
Real Estate - 4.13% |
| |||||||
Acadia Realty TrustE | 392,650 | 12,251 | ||||||
Amerco, Inc. | 78,050 | 21,161 | ||||||
American Assets Trust, Inc.E | 259,430 | 9,947 | ||||||
See accompanying notes
9
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Apollo Residential Mortgage, Inc.E | 167,040 | $ | 2,786 | |||||
Ashford Hospitality Prime, Inc.E | 91,314 | 1,582 | ||||||
Ashford Hospitality Trust, Inc.E | 330,433 | 3,734 | ||||||
Associated Estates Realty Corp.E | 418,535 | 8,174 | ||||||
Brandywine Realty TrustE | 371,425 | 5,731 | ||||||
CBL & Associates Properties, Inc.E | 237,280 | 4,539 | ||||||
Corporate Office Properties TrustE | 341,020 | 9,323 | ||||||
EPR PropertiesE | 271,250 | 15,217 | ||||||
Geo Group, Inc.E | 803,096 | 32,076 | ||||||
Getty Realty Corp.E | 297,190 | 5,531 | ||||||
Granite Real Estate Investment TrustE | 267,400 | 9,642 | ||||||
Healthcare Trust of America, Inc., Class AE | 944,280 | 12,125 | ||||||
Hospitality Properties TrustE | 139,733 | 4,137 | ||||||
LTC Properties, Inc.E | 124,000 | 5,201 | ||||||
Mack-Cali Realty Corp.E | 214,031 | 4,009 | ||||||
Medical Properties Trust, Inc.E | 367,900 | 4,963 | ||||||
New Residential Investment Corp.E | 408,200 | 5,054 | ||||||
Omega Healthcare Investors, Inc.B E | 128,935 | 4,920 | ||||||
Pebblebrook Hotel TrustE | 254,614 | 10,847 | ||||||
Pennsylvania Real Estate Investment TrustE | 238,985 | 5,121 | ||||||
RAIT Financial TrustE | 627,760 | 4,601 | ||||||
Ramco-Gershenson Properties TrustE | 315,300 | 5,511 | ||||||
RLJ Lodging TrustE | 212,000 | 6,831 | ||||||
St. Joe Co.A | 165,165 | 3,163 | ||||||
Summit Hotel Properties, Inc.E | 631,480 | 7,350 | ||||||
Urstadt Biddle Properties, Inc., Class AE | 268,060 | 5,798 | ||||||
|
| |||||||
| 231,325 | ||||||||
|
| |||||||
Total Financials |
| 1,631,891 | ||||||
|
| |||||||
HEALTH CARE - 5.67% |
| |||||||
Biotechnology - 0.23% |
| |||||||
Charles River Laboratories International, Inc.A | 68,394 | 4,320 | ||||||
Myriad Genetics, Inc.A B | 159,200 | 6,287 | ||||||
PDL BioPharma, Inc.B | 260,199 | 2,219 | ||||||
|
| |||||||
| 12,826 | ||||||||
|
| |||||||
Health Care Equipment & Supplies - 1.53% |
| |||||||
Computer Programs and Systems, Inc. | 137,080 | 8,633 | ||||||
Fabrinet | 112,676 | 2,052 | ||||||
Globus Medical, Inc., Class AA | 299,880 | 6,648 | ||||||
Haemonetics Corp.A | 656,028 | 24,746 | ||||||
Hillenbrand, Inc. | 90,190 | 3,002 | ||||||
Hill-Rom Holdings, Inc. | 142,079 | 6,320 | ||||||
Integra LifeSciences Holdings Corp.A | 73,685 | 3,766 | ||||||
Invacare Corp. | 621,300 | 9,761 | ||||||
Natus Medical, Inc.A | 224,770 | 7,642 | ||||||
Sirona Dental Systems, Inc. | 78,500 | 6,166 | ||||||
STERIS Corp. | 111,800 | 6,909 | ||||||
|
| |||||||
| 85,645 | ||||||||
|
| |||||||
Health Care Providers & Services - 3.91% |
| |||||||
Air Methods Corp.B | 291,010 | 13,744 | ||||||
Centene Corp.A | 101,410 | 9,398 | ||||||
Covance, Inc.A | 182,300 | 14,566 | ||||||
Ensign Group, Inc. | 54,400 | 2,106 | ||||||
Hanger Orthopedic Group, Inc.A | 1,045,450 | 25,018 | ||||||
HealthSouth Corp. | 895,430 | 36,113 | ||||||
LifePoint Hospitals, Inc.A | 429,910 | 30,094 | ||||||
Magellan Health Services, Inc.A | 95,820 | 5,799 | ||||||
Omnicell, Inc.A | 317,450 | 10,257 | ||||||
Owens & Minor, Inc. | 281,811 | 9,390 | ||||||
Select Medical Holdings Corp. | 1,281,455 | 18,479 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Triple-S Management Corp., Class BA | 135,857 | $ | 3,008 | |||||
Universal American Corp. | 181,900 | 1,695 | ||||||
WellCare Health Plans, Inc.A | 579,150 | 39,306 | ||||||
|
| |||||||
| 218,973 | ||||||||
|
| |||||||
Total Health Care |
| 317,444 | ||||||
|
| |||||||
INDUSTRIALS - 19.49% |
| |||||||
Aerospace & Defense - 1.69% |
| |||||||
AAR Corp. | 360,407 | 9,551 | ||||||
Aerovironment, Inc.A | 350,150 | 10,732 | ||||||
Aircastle Ltd. | 701,581 | 13,386 | ||||||
Alliant Techsystems, Inc. | 178,755 | 20,908 | ||||||
Curtiss-Wright Corp. | 91,900 | 6,360 | ||||||
Exelis, Inc. | 718,330 | 12,822 | ||||||
Moog, Inc., Class AA | 15,191 | 1,163 | ||||||
Orbital Sciences Corp.A | 57,223 | 1,505 | ||||||
Triumph Group, Inc. | 122,457 | 8,527 | ||||||
World Fuel Services Corp. | 237,450 | 9,792 | ||||||
|
| |||||||
| 94,746 | ||||||||
|
| |||||||
Building Products - 2.12% | ||||||||
American Woodmark Corp.A | 203,130 | 8,310 | ||||||
Apogee Enterprises, Inc. | 240,787 | 10,571 | ||||||
Crane Co. | 241,829 | 15,078 | ||||||
Drew Industries, Inc. | 48,169 | 2,315 | ||||||
Masonite International Corp.B | 584,300 | 31,587 | ||||||
Owens Corning | 337,140 | 10,809 | ||||||
Simpson Manufacturing Co., Inc. | 381,325 | 12,614 | ||||||
Trex Co., Inc.A | 560,400 | 24,097 | ||||||
Universal Forest Products, Inc. | 67,474 | 3,372 | ||||||
|
| |||||||
| 118,753 | ||||||||
|
| |||||||
Commercial Services & Supplies - 7.05% |
| |||||||
ABM Industries, Inc. | 413,168 | 11,420 | ||||||
Aceto Corp. | 255,600 | 5,812 | ||||||
Apollo Group, Inc., Class AA | 459,580 | 13,172 | ||||||
Avery Dennison Corp. | 92,678 | 4,342 | ||||||
Brink’s Co. | 450,000 | 9,450 | ||||||
Capella Education Co. | 93,018 | 6,580 | ||||||
CDI Corp. | 90,869 | 1,562 | ||||||
Ceco Environmental Corp. | 357,100 | 5,114 | ||||||
Convergys Corp. | 593,211 | 11,965 | ||||||
Con-way, Inc. | 728,586 | 31,598 | ||||||
CSG Systems International, Inc. | 615,620 | 16,320 | ||||||
CyrusOne, Inc.E | 330,330 | 9,021 | ||||||
Deluxe Corp. | 226,764 | 13,787 | ||||||
DeVry, Inc. | 259,450 | 12,560 | ||||||
Dun & Bradstreet Corp. | 133,720 | 16,422 | ||||||
Ennis, Inc. | 119,836 | 1,777 | ||||||
G&K Services, Inc., Class A | 62,130 | 3,919 | ||||||
Heidrick & Struggles International, Inc. | 161,500 | 3,362 | ||||||
Herman Miller, Inc. | 668,080 | 21,379 | ||||||
Hudson Global, Inc.A | 630,300 | 2,149 | ||||||
Iconix Brand Group, Inc.A | 107,000 | 4,281 | ||||||
Interface, Inc. | 653,134 | 10,470 | ||||||
Kelly Services, Inc., Class A | 205,051 | 3,615 | ||||||
Kforce, Inc. | 45,674 | 1,057 | ||||||
Koppers Holdings, Inc. | 92,244 | 3,642 | ||||||
Korn/Ferry InternationalA | 600,534 | 16,773 | ||||||
McGrath Rentcorp | 231,298 | 8,449 | ||||||
Mobile Mini, Inc. | 567,829 | 24,888 | ||||||
Monotype Imaging Holdings, Inc. | 421,330 | 12,054 | ||||||
Navigant Consulting, Inc.A | 289,689 | 4,458 | ||||||
PHH Corp.A | 947,260 | 22,441 | ||||||
PHI, Inc.A F | 38,950 | 1,743 | ||||||
See accompanying notes
10
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Pitney Bowes, Inc. | 732,190 | $ | 18,114 | |||||
Resources Connection, Inc. | 155,633 | 2,408 | ||||||
RR Donnelley & Sons Co. | 560,700 | 9,784 | ||||||
Steelcase, Inc., Class A | 612,212 | 10,848 | ||||||
Strayer Education, Inc.A | 20,815 | 1,523 | ||||||
TAL International Group, Inc.B | 126,970 | 5,476 | ||||||
Tetra Tech, Inc. | 46,500 | 1,247 | ||||||
TrueBlue, Inc.A | 293,152 | 7,247 | ||||||
United Stationers Supply Co. | 271,164 | 11,327 | ||||||
Viad Corp. | 175,442 | 4,476 | ||||||
West Corp. | 204,000 | 6,528 | ||||||
|
| |||||||
| 394,560 | ||||||||
|
| |||||||
Construction & Engineering - 1.36% |
| |||||||
AECOM Technology Corp.A | 194,500 | 6,331 | ||||||
Aegion Corp.A | 726,932 | 13,317 | ||||||
Comfort Systems USA, Inc. | 1,165,287 | 17,899 | ||||||
EMCOR Group, Inc. | 71,915 | 3,174 | ||||||
Engility Holdings, Inc.A | 47,900 | 2,069 | ||||||
Granite Construction, Inc. | 224,060 | 8,270 | ||||||
MasTec, Inc.A | 174,200 | 4,989 | ||||||
MYR Group, Inc.A | 314,270 | 8,152 | ||||||
Tutor Perini Corp. | 419,012 | 11,737 | ||||||
|
| |||||||
| 75,938 | ||||||||
|
| |||||||
Diversified Manufacturing - 0.40% |
| |||||||
Barnes Group, Inc. | 610,232 | 22,310 | ||||||
|
| |||||||
Electrical Equipment - 1.18% |
| |||||||
Babcock & Wilcox Co. | 407,700 | 11,660 | ||||||
Brady Corp., Class A | 91,514 | 2,182 | ||||||
Energy XXI Bermuda Ltd.B | 283,786 | 2,182 | ||||||
EnerSys, Inc. | 80,669 | 5,066 | ||||||
Geospace Technologies Corp.A | 262,431 | 8,080 | ||||||
Global Power Equipment Group, Inc. | 167,160 | 2,278 | ||||||
II-VI, Inc. | 1,251,000 | 16,876 | ||||||
Powell Industries, Inc. | 109,970 | 5,007 | ||||||
Regal-Beloit Corp. | 177,590 | 12,604 | ||||||
|
| |||||||
| 65,935 | ||||||||
|
| |||||||
Industrial Conglomerates - 0.26% |
| |||||||
GATX Corp. | 110,000 | 6,974 | ||||||
ICF International, Inc.A | 24,988 | 908 | ||||||
KBR, Inc. | 161,800 | 3,087 | ||||||
Park-Ohio Industries, Inc. | 28,762 | 1,528 | ||||||
Trimas Corp.A | 57,646 | 1,825 | ||||||
|
| |||||||
| 14,322 | ||||||||
|
| |||||||
Machinery - 3.23% |
| |||||||
Actuant Corp., Class A | 67,817 | 2,149 | ||||||
American Railcar Industries, Inc.B | 75,982 | 5,000 | ||||||
Ampco-Pittsburgh Corp. | 61,569 | 1,342 | ||||||
Applied Industrial Technologies, Inc. | 75,129 | 3,667 | ||||||
Astec Industries, Inc. | 184,960 | 7,012 | ||||||
Briggs & Stratton Corp. | 103,000 | 2,082 | ||||||
Chart Industries, Inc.A | 124,440 | 5,793 | ||||||
CIRCOR International, Inc. | 72,800 | 5,471 | ||||||
Columbus McKinnon Corp. | 104,718 | 2,979 | ||||||
EnPro Industries, Inc.A | 98,100 | 6,330 | ||||||
Esterline Technologies Corp.A | 37,084 | 4,343 | ||||||
FreightCar America, Inc. | 226,650 | 7,473 | ||||||
John Bean Technologies Corp. | 70,724 | 2,120 | ||||||
L.B. Foster Co., Class A | 55,551 | 3,005 | ||||||
Lindsay Corp.B | 112,440 | 9,861 | ||||||
Meritor, Inc.A | 1,492,300 | 17,147 | ||||||
Miller Industries, Inc. | 231,100 | 4,569 | ||||||
Mueller Industries, Inc. | 283,950 | 9,217 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
NACCO Industries, Inc., Class A | 28,952 | $ | 1,696 | |||||
Oshkosh Corp. | 737,780 | 33,022 | ||||||
Tennant Co. | 21,710 | 1,601 | ||||||
Terex Corp. | 708,900 | 20,394 | ||||||
TimkenSteel Corp. | 211,880 | 8,598 | ||||||
Trinity Industries, Inc. | 113,100 | 4,039 | ||||||
Valmont Industries, Inc.B | 68,800 | 9,368 | ||||||
Watts Water Technologies, Inc., Class A | 36,489 | 2,212 | ||||||
|
| |||||||
| 180,490 | ||||||||
|
| |||||||
Marine - 0.55% |
| |||||||
Great Lakes Dredge & Dock Corp. | 973,520 | 6,805 | ||||||
Matson, Inc. | 850,400 | 24,228 | ||||||
|
| |||||||
| 31,033 | ||||||||
|
| |||||||
Road & Rail - 1.22% | ||||||||
Forward Air Corp. | 380,009 | 18,191 | ||||||
Heartland Express, Inc. | 404,800 | 10,177 | ||||||
Landstar System, Inc. | 150,160 | 11,113 | ||||||
Marten Transport Ltd. | 223,880 | 4,393 | ||||||
Ryder System, Inc. | 272,515 | 24,109 | ||||||
|
| |||||||
| 67,983 | ||||||||
|
| |||||||
Trading Companies & Distributors - 0.43% |
| |||||||
Air Lease Corp. | 374,660 | 13,709 | ||||||
WESCO International, Inc.A B | 123,210 | 10,154 | ||||||
|
| |||||||
| 23,863 | ||||||||
|
| |||||||
Total Industrials |
| 1,089,933 | ||||||
|
| |||||||
INFORMATION TECHNOLOGY - 12.07% |
| |||||||
Communications Equipment - 1.38% |
| |||||||
Anixter International, Inc. | 160,747 | 13,691 | ||||||
ARRIS Group, Inc.A | 778,848 | 23,381 | ||||||
Bel Fuse, Inc., Class B | 63,523 | 1,797 | ||||||
Brocade Communications Systems, Inc. | 2,205,272 | 23,663 | ||||||
Extreme NetworksA | 634,400 | 2,277 | ||||||
Finisar Corp.A | 133,582 | 2,233 | ||||||
Plantronics, Inc. | 200,597 | 10,405 | ||||||
|
| |||||||
| 77,447 | ||||||||
|
| |||||||
Computers & Peripherals - 0.56% |
| |||||||
Lexmark International, Inc., Class A | 509,500 | 21,990 | ||||||
Mercury Systems, Inc.A | 665,137 | 9,299 | ||||||
|
| |||||||
| 31,289 | ||||||||
|
| |||||||
Electronic Equipment & Instruments - 4.01% |
| |||||||
Arrow Electronics, Inc. | 71,600 | 4,071 | ||||||
Avnet, Inc. | 100,200 | 4,334 | ||||||
AVX Corp. | 363,110 | 5,243 | ||||||
Benchmark Electronics, Inc.A | 611,655 | 14,508 | ||||||
Celestica, Inc.A | 199,340 | 2,189 | ||||||
Coherent, Inc. | 41,207 | 2,685 | ||||||
Ingram Micro, Inc., Class AA | 768,111 | 20,616 | ||||||
Intersil Corp., Class A | 208,706 | 2,774 | ||||||
Itron, Inc.A | 77,746 | 3,027 | ||||||
Littelfuse, Inc. | 157,300 | 15,343 | ||||||
Methode Electronics, Inc. | 774,500 | 30,500 | ||||||
Nanometrics, Inc.A | 260,167 | 3,523 | ||||||
Newport Corp.A | 57,746 | 1,033 | ||||||
Plexus Corp.A | 437,556 | 18,093 | ||||||
Sanmina Corp.A | 619,484 | 15,530 | ||||||
Scansource, Inc.A | 217,723 | 8,313 | ||||||
Taser International, Inc.A | 442,680 | 8,340 | ||||||
Tech Data Corp.A | 158,929 | 9,491 | ||||||
Tronox Ltd., Class A | 99,790 | 2,413 | ||||||
Universal Display Corp.A B | 214,700 | 6,716 | ||||||
See accompanying notes
11
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Vishay Intertechnology, Inc. | 3,388,025 | $ | 45,771 | |||||
|
| |||||||
| 224,513 | ||||||||
|
| |||||||
Internet Software & Services - 0.29% |
| |||||||
Constant Contact, Inc.A | 163,890 | 5,795 | ||||||
Ebix, Inc.B | 102,012 | 1,505 | ||||||
Netgear, Inc.A | 109,394 | 3,724 | ||||||
Perficient, Inc.A | 297,600 | 4,934 | ||||||
|
| |||||||
| 15,958 | ||||||||
|
| |||||||
IT Consulting & Services - 1.28% |
| |||||||
Acxiom Corp.A | 280,570 | 5,286 | ||||||
Booz Allen Hamilton Holding Corp. | 542,580 | 14,297 | ||||||
CACI International, Inc., Class AA | 96,070 | 7,906 | ||||||
Mantech International Corp., Class A | 77,070 | 2,170 | ||||||
Science Applications International Corp. | 76,190 | 3,726 | ||||||
Sykes Enterprises, Inc.A | 286,574 | 6,173 | ||||||
SYNNEX Corp. | 258,362 | 17,874 | ||||||
Syntel, Inc.A | 91,900 | 7,959 | ||||||
Virtusa Corp.A | 145,700 | 5,971 | ||||||
|
| |||||||
| 71,362 | ||||||||
|
| |||||||
Semiconductor Equipment & Products - 3.34% |
| |||||||
Amkor Technology, Inc.A B | 398,559 | 2,702 | ||||||
Brooks Automation, Inc. | 2,589,627 | 31,929 | ||||||
Cirrus Logic, Inc.A | 165,000 | 3,185 | ||||||
Diodes, Inc.A | 1,188,999 | 30,711 | ||||||
Fairchild Semiconductor International, Inc.A | 1,689,574 | 25,935 | ||||||
Integrated Device Technology, Inc.A | 133,797 | 2,196 | ||||||
Integrated Silicon Solution, Inc. | 24,489 | 333 | ||||||
IXYS Corp. | 16,530 | 188 | ||||||
Kulicke & Soffa Industries, Inc.A | 453,264 | 6,536 | ||||||
Microsemi Corp. | 285,405 | 7,441 | ||||||
MKS Instruments, Inc. | 220,890 | 8,040 | ||||||
Omnivision Technologies, Inc.A | 186,204 | 4,987 | ||||||
ON Semiconductor Corp.A | 1,821,900 | 15,104 | ||||||
Photronics, Inc.A | 1,055,675 | 9,491 | ||||||
QLogic Corp.A | 1,335,901 | 15,777 | ||||||
Teradyne, Inc. | 762,280 | 14,026 | ||||||
Ultra Clean Holdings, Inc.A | 38,210 | 335 | ||||||
Xcerra Corp.A | 966,100 | 8,202 | ||||||
|
| |||||||
| 187,118 | ||||||||
|
| |||||||
Software - 1.21% |
| |||||||
Comverse, Inc.A | 295,980 | 6,452 | ||||||
DST Systems, Inc. | 57,940 | 5,583 | ||||||
FARO Technologies, Inc.A | 347,650 | 19,468 | ||||||
Mentor Graphics Corp. | 1,712,620 | 36,291 | ||||||
|
| |||||||
| 67,794 | ||||||||
|
| |||||||
Total Information Technology |
| 675,481 | ||||||
|
| |||||||
MATERIALS - 4.42% |
| |||||||
Chemicals - 1.86% |
| |||||||
A. Schulman, Inc. | 80,310 | 2,844 | ||||||
Axiall Corp. | 148,800 | 5,997 | ||||||
Cabot Corp. | 242,838 | 11,275 | ||||||
Cytec Industries, Inc. | 230,130 | 10,731 | ||||||
FutureFuel Corp. | 159,200 | 2,121 | ||||||
Huntsman Corp. | 170,700 | 4,165 | ||||||
Innospec, Inc. | 80,890 | 3,266 | ||||||
Intrepid Potash, Inc.B | 581,520 | 7,821 | ||||||
Olin Corp. | 409,880 | 9,935 | ||||||
PolyOne Corp. | 588,000 | 21,761 | ||||||
Quaker Chemical Corp. | 96,918 | 7,955 | ||||||
Rayonier Advanced Materials, Inc.B | 171,947 | 4,906 | ||||||
| Shares | Fair Value | |||||||
| (000’s) | ||||||||
Scotts Miracle-Gro Co., Class A | 187,477 | $ | 11,106 | |||||
|
| |||||||
| 103,883 | ||||||||
|
| |||||||
Construction Materials - 0.03% |
| |||||||
Boise Cascade Co.A | 51,509 | 1,857 | ||||||
|
| |||||||
Containers & Packaging - 0.18% |
| |||||||
Graphic Packaging Holding Co.A | 249,631 | 3,028 | ||||||
Owens-Illinois, Inc.A | 265,200 | 6,835 | ||||||
UFP Technologies, Inc.A | 7,644 | 168 | ||||||
|
| |||||||
| 10,031 | ||||||||
|
| |||||||
Metals & Mining - 1.88% |
| |||||||
Allegheny Technologies, Inc. | 303,500 | 9,970 | ||||||
Allied Nevada Gold Corp.A B | 639,691 | 889 | ||||||
Carpenter Technology Corp. | 246,800 | 12,353 | ||||||
Coeur d’Alene Mines Corp. | 359,969 | 1,332 | ||||||
Commercial Metals Co. | 66,700 | 1,153 | ||||||
Gibraltar Industries, Inc.A | 468,139 | 7,139 | ||||||
Global Brass & Copper Holdings, Inc. | 125,150 | 1,752 | ||||||
Haynes International, Inc. | 128,940 | 5,994 | ||||||
Hecla Mining Co. | 859,000 | 1,873 | ||||||
Horsehead Holding Corp.A | 589,500 | 9,261 | ||||||
Kaiser Aluminum Corp. | 372,300 | 25,894 | ||||||
Materion Corp. | 71,567 | 2,823 | ||||||
Noranda Aluminum Holding Corp. | 1,357,600 | 5,987 | ||||||
Pan American Silver Corp. | 180,963 | 1,670 | ||||||
Schnitzer Steel Industries, Inc., Class A | 92,300 | 2,174 | ||||||
Stillwater Mining Co.A | 511,340 | 6,714 | ||||||
United States Steel Corp. | 60,000 | 2,402 | ||||||
Worthington Industries, Inc. | 159,834 | 6,178 | ||||||
|
| |||||||
| 105,558 | ||||||||
|
| |||||||
Paper & Forest Products - 0.47% |
| |||||||
Domtar Corp. | 190,860 | 7,839 | ||||||
Louisiana-Pacific Corp.A | 474,536 | 6,928 | ||||||
Neenah Paper, Inc. | 76,891 | 4,691 | ||||||
Resolute Forest Products, Inc.A | 359,270 | 6,668 | ||||||
|
| |||||||
| 26,126 | ||||||||
|
| |||||||
Total Materials |
| 247,455 | ||||||
|
| |||||||
TELECOMMUNICATION SERVICES - 0.49% |
| |||||||
Diversified Telecommunication Services - 0.28% |
| |||||||
Atlantic Tele-Network, Inc. | 51,710 | 3,474 | ||||||
EchoStar Corp., Class AA | 161,440 | 7,544 | ||||||
IDT Corp., Class B | 77,726 | 1,281 | ||||||
magicJack VocalTec Ltd.A B | 87,409 | 813 | ||||||
Vonage Holdings Corp.A | 763,940 | 2,659 | ||||||
|
| |||||||
| 15,771 | ||||||||
|
| |||||||
Wireless Telecommunication Services - 0.21% |
| |||||||
Iridium Communications, Inc.A B | 226,000 | 2,147 | ||||||
Telephone & Data Systems, Inc. | 379,183 | 9,722 | ||||||
|
| |||||||
| 11,869 | ||||||||
|
| |||||||
Total Telecommunication Services |
| 27,640 | ||||||
|
| |||||||
UTILITIES - 4.01% |
| |||||||
Electric - 3.00% |
| |||||||
El Paso Electric Co. | 359,020 | 13,585 | ||||||
Empire District Electric Co.B | 121,000 | 3,441 | ||||||
Great Plains Energy, Inc. | 1,212,390 | 32,650 | ||||||
Hawaiian Electric Industries, Inc.B | 1,151,960 | 32,439 | ||||||
IDACORP, Inc. | 291,895 | 18,457 | ||||||
NorthWestern Corp. | 362,170 | 19,137 | ||||||
Ormat Technologies, Inc.B | 141,910 | 4,108 | ||||||
PNM Resources, Inc. | 273,780 | 7,899 | ||||||
See accompanying notes
12
American Beacon Small Cap Value FundSM
Schedule of Investments
October 31, 2014
| Shares | Fair Value | |||||||||
| (000’s) | ||||||||||
Portland General Electric Co. | 980,634 | $ | 35,704 | |||||||
TECO Energy, Inc. | 20,935 | 411 | ||||||||
|
| |||||||||
| 167,831 | ||||||||||
|
| |||||||||
Gas - 0.41% | ||||||||||
Chesapeake Utilities Corp. | 208,185 | 10,083 | ||||||||
Laclede Group, Inc. | 122,440 | 6,216 | ||||||||
New Jersey Resources Corp. | 111,800 | 6,538 | ||||||||
|
| |||||||||
| 22,837 | ||||||||||
|
| |||||||||
Multi-Utilities - 0.60% | ||||||||||
Avista Corp. | 415,540 | 14,731 | ||||||||
Westar Energy, Inc. | 503,070 | 19,021 | ||||||||
|
| |||||||||
| 33,752 | ||||||||||
|
| |||||||||
Total Utilities | 224,420 | |||||||||
|
| |||||||||
Total Common Stock (Cost $4,463,004) | 5,393,683 | |||||||||
|
| |||||||||
SHORT-TERM INVESTMENTS -3.42% | ||||||||||
American Beacon U.S. Government Money Market Select Fund, Select Class G | 20,000,000 | 20,000 | ||||||||
JPMorgan U.S. Government Money Market Fund, Capital Class G | 171,404,176 | 171,404 | ||||||||
|
| |||||||||
Total Short-Term Investments (Cost $191,404) | 191,404 | |||||||||
|
| |||||||||
SECURITIES LENDING COLLATERAL - 3.99% | ||||||||||
American Beacon U.S. Government Money Market Select Fund, Select ClassG | 180,835,638 | 180,835 | ||||||||
DWS Government and Agency Securities Portfolio, Institutional Class | 42,361,572 | 42,362 | ||||||||
|
| |||||||||
Total Securities Lending Collateral (Cost $223,197) | 223,197 | |||||||||
|
| |||||||||
TOTAL INVESTMENTS - 103.81% (Cost $4,877,605) | 5,808,284 | |||||||||
LIABILITIES, NET OF OTHER ASSETS - (3.81%) | (213,064 | ) | ||||||||
|
| |||||||||
TOTAL NET | $ | 5,595,220 | ||||||||
|
| |||||||||
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, 2014. |
| C | LLC - Limited Liability Company. |
| D | PLC - Public Limited Company. |
| E | REIT - Real Estate Investment Trust. |
| F | Non-voting participating shares. |
| G | The Fund is affiliated by having the same investment advisor. |
Futures Contracts Open on October 31, 2014:
Description | Type | Number of Contracts | Expiration Date | Contract Value | Unrealized Appreciation (Depreciation) | |||||||||||||||
Russell 2000 Mini Index December Futures | Long | 1,562 | December, 2014 | $ | 182,910,200 | $ | 3,648,966 | |||||||||||||
|
|
|
| |||||||||||||||||
| $ | 182,910,200 | $ | 3,648,966 | |||||||||||||||||
|
|
|
| |||||||||||||||||
See accompanying notes
13
American Beacon Small Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
Assets: |
| |||
Investments in unaffiliated securities, at fair valueA,D | $ | 5,607,449 | ||
Investments in affiliated securities, at fair valueB | 200,835 | |||
Deposit with brokers for futures contracts | 7,946 | |||
Receivable for investments sold | 5,618 | |||
Receivable for fund shares sold | 3,265 | |||
Dividends and interest receivable | 1,832 | |||
Receivable for variation margin from open futures contracts | 2,680 | |||
Prepaid expenses | 124 | |||
|
| |||
Total assets | 5,829,749 | |||
|
| |||
Liabilities: | ||||
Payable for investments purchased | 2,906 | |||
Payable for fund shares redeemed | 4,358 | |||
Payable upon return of securities loaned | 223,197 | |||
Foreign currency, at fair valueC | 12 | |||
Management and investment advisory fees payable | 2,143 | |||
Administrative service and service fees payable | 1,426 | |||
Transfer agent fees payable | 75 | |||
Custody and fund accounting fees payable | 62 | |||
Professional fees payable | 36 | |||
Prospectus and shareholder reports fees payable | 211 | |||
Trustee fees payable | 40 | |||
Other liabilities | 63 | |||
|
| |||
Total liabilities | 234,529 | |||
|
| |||
Net assets | $ | 5,595,220 | ||
|
| |||
Analysis of Net Assets: | ||||
Paid-in-capital | 4,025,439 | |||
Undistributed net investment income | 24,379 | |||
Accumulated net realized gain | 611,076 | |||
Unrealized appreciation of investments | 930,678 | |||
Unrealized depreciation of foreign currency contracts | (1 | ) | ||
Unrealized appreciation of futures contracts | 3,649 | |||
|
| |||
Net assets | $ | 5,595,220 | ||
|
| |||
See accompanying notes
14
American Beacon Small Cap Value FundSM
Statement of Assets and Liabilities
October 31, 2014 (in thousands, except share and per share amounts)
Shares outstanding at no par value (unlimited shares authorized): | ||||
Institutional Class | 143,997,512 | |||
|
| |||
Y Class | 6,918,839 | |||
|
| |||
Investor Class | 31,597,493 | |||
|
| |||
Advisor Class | 3,846,809 | |||
|
| |||
Retirement Class | 457,273 | |||
|
| |||
A Class | 1,110,531 | |||
|
| |||
C Class | 371,477 | |||
|
| |||
AMR Class | 14,283,677 | |||
|
| |||
Net assets (not in thousands): | ||||
Institutional Class | $ | 4,002,884,144 | ||
|
| |||
Y Class | $ | 190,416,114 | ||
|
| |||
Investor Class | $ | 851,731,763 | ||
|
| |||
Advisor Class | $ | 102,681,998 | ||
|
| |||
Retirement Class | $ | 11,974,230 | ||
|
| |||
A Class | $ | 29,569,753 | ||
|
| |||
C Class | $ | 9,676,368 | ||
|
| |||
AMR Class | $ | 396,285,700 | ||
|
| |||
Net asset value, offering and redemption price per share: | ||||
Institutional Class | $ | 27.80 | ||
|
| |||
Y Class | $ | 27.52 | ||
|
| |||
Investor Class | $ | 26.96 | ||
|
| |||
Advisor Class | $ | 26.69 | ||
|
| |||
Retirement Class | $ | 26.19 | ||
|
| |||
A Class | $ | 26.63 | ||
|
| |||
A Class (offering price) | $ | 28.25 | ||
|
| |||
C Class | $ | 26.05 | ||
|
| |||
AMR Class | $ | 27.74 | ||
|
| |||
A Cost of investments in unaffiliated securities | $ | 4,676,770 | ||
B Cost of investments in affiliated securities | $ | 200,835 | ||
C Cost of foreign currency | $ | (12 | ) | |
D Fair value of securities on loan | $ | 217,835 |
See accompanying notes
15
American Beacon Small Cap Value FundSM
Statement of Operations
For the year ended October 31, 2014 (in thousands)
Investment Income: | ||||
Dividend income from unaffiliated securities (net of foreign taxes) A | $ | 78,009 | ||
Dividend income from affiliated securities | 2 | |||
Interest income | 5 | |||
Income derived from securities lending, net | 2,849 | |||
|
| |||
Total investment income | 80,865 | |||
|
| |||
Expenses: | ||||
Management and investment advisory fees (Note 2) | 24,793 | |||
Administrative service fees (Note 2): | ||||
Institutional Class | 11,336 | |||
Y Class | 499 | |||
Investor Class | 2,745 | |||
Advisor Class | 320 | |||
Retirement Class | 36 | |||
A Class | 112 | |||
C Class | 30 | |||
AMR Class | 227 | |||
Transfer agent fees: | ||||
Institutional Class | 556 | |||
Y Class | 10 | |||
Investor Class | 48 | |||
Advisor Class | 7 | |||
Retirement Class | 4 | |||
A Class | 6 | |||
C Class | 3 | |||
AMR Class | 10 | |||
Custody and fund accounting fees | 547 | |||
Professional fees | 190 | |||
Registration fees and expenses | 149 | |||
Service fees (Note 2): | ||||
Y Class | 166 | |||
Investor Class | 3,334 | |||
Advisor Class | 266 | |||
Retirement Class | 30 | |||
A Class | 46 | |||
C Class | 12 | |||
Distribution fees (Note 2): | ||||
Advisor Class | 266 | |||
Retirement Class | 60 | |||
A Class | 76 | |||
C Class | 83 | |||
Prospectus and shareholder report expenses | 387 | |||
Trustee fees | 285 | |||
Other expenses | 304 | |||
|
| |||
Total expenses | 46,943 | |||
|
| |||
Net expenses | 46,943 | |||
|
| |||
Net investment income | 33,922 | |||
|
| |||
Realized and unrealized gain (loss) from investments: | ||||
Net realized gain (loss) from: | ||||
Investments | 633,452 | |||
Commission recapture (Note 3) | 201 | |||
Foreign currency transactions | (4 | ) | ||
Futures contracts | 21,320 | |||
Change in net unrealized appreciation or (depreciation) of: | ||||
Investments | (239,731 | ) | ||
Foreign currency transactions | (1 | ) | ||
Futures contracts | (4,432 | ) | ||
|
| |||
Net gain from investments | 410,805 | |||
|
| |||
Net increase in net assets resulting from operations | $ | 444,727 | ||
|
| |||
A Foreign taxes | $ | 124 | ||
See accompanying notes
16
American Beacon Small Cap Value FundSM
Statement of Changes of Net Assets (in thousands)
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 33,922 | $ | 40,139 | ||||
Net realized gain from investments, commission recapture, foreign currency, and futures contracts | 654,969 | 450,287 | ||||||
Change in net unrealized appreciation or (depreciation) from investments, foreign currency, and futures contracts | (244,164 | ) | 842,058 | |||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 444,727 | 1,332,484 | ||||||
|
|
|
| |||||
Distributions to Shareholders: | ||||||||
Net investment income: | ||||||||
Institutional Class | (17,234 | ) | (28,357 | ) | ||||
Y Class | (643 | ) | (583 | ) | ||||
Investor Class | (1,678 | ) | (6,427 | ) | ||||
Advisor Class | (160 | ) | (423 | ) | ||||
Retirement Class | (6 | ) | (46 | ) | ||||
A Class | (58 | ) | (41 | ) | ||||
C Class | (1 | ) | (11 | ) | ||||
AMR Class | (3,813 | ) | (4,619 | ) | ||||
Net realized gain from investments: | ||||||||
Institutional Class | (306,261 | ) | (61,004 | ) | ||||
Y Class | (11,351 | ) | (1,275 | ) | ||||
Investor Class | (85,372 | ) | (20,484 | ) | ||||
Advisor Class | (8,358 | ) | (1,302 | ) | ||||
Retirement Class | (978 | ) | (190 | ) | ||||
A Class | (1,549 | ) | (120 | ) | ||||
C Class | (645 | ) | (71 | ) | ||||
AMR Class | (46,178 | ) | (8,358 | ) | ||||
|
|
|
| |||||
Net distributions to shareholders | (484,285 | ) | (133,311 | ) | ||||
|
|
|
| |||||
Capital Share Transactions: | ||||||||
Proceeds from sales of shares | 1,604,292 | 1,408,645 | ||||||
Reinvestment of dividends and distributions | 472,992 | 130,635 | ||||||
Cost of shares redeemed | (1,549,920 | ) | (972,369 | ) | ||||
Redemption fees | 1 | — | ||||||
|
|
|
| |||||
Net increase in net assets from capital share transactions | 527,365 | 566,911 | ||||||
|
|
|
| |||||
Net increase in net assets | 487,807 | 1,766,084 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of period | 5,107,413 | 3,341,329 | ||||||
|
|
|
| |||||
End of Period * | $ | 5,595,220 | $ | 5,107,413 | ||||
|
|
|
| |||||
* Includes undistributed net investment income (loss) of | $ | 24,379 | $ | 17,740 | ||||
|
|
|
| |||||
See accompanying notes
17
American Beacon Small Cap Value FundSM
October 31, 2014
1. Organization and Significant Accounting Policies
American Beacon Funds (the “Trust”), which is comprised of thirty-one 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.
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 and the Trust. 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. The Fund pays the unaffiliated investment advisors hired to direct investment activities of the Fund. Management fees paid during the year ended October 31, 2014 were as follows (dollars in thousands):
Management Fee Rate | Management Fee | Amounts paid to Investment Advisors | Amounts Paid to Manager | |||
0.45% | $24,793 | $21,742 | $3,051 |
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, 2014, securities lending fees paid to the Manager were $347,430.
18
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Administration Agreement
The Manager and the Trust entered into an Administration Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administration Agreement, the Manager receives an annualized fee of 0.30% of the average daily net assets of the Institutional, Y, Investor, Advisor, and Retirement Classes of the Fund, and 0.05% of the average daily net assets of the AMR Class of the Fund. Prior to July 1, 2014, the Manager received an annualized fee of 0.40% of the average daily net assets of the A and C Classes of the Fund. Beginning July 1, 2014, the Manager received an annualized fee of 0.30% of the average daily net assets of the A and C Classes 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 separate 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 $9,436 for the year ended October 31, 2014.
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 Administration fees totaling 0.10% of the average daily net assets of the Select Funds. During the year ended October 31, 2014, the Manager earned fees from the Select Funds totaling $19,991 on the Fund’s direct investment in the Select Funds and $245,884 from the Fund’s securities lending collateral invested in the Select Funds.
19
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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, 2014, 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, 2014, the Manager contractually reimbursed $324 for the A Class and $170 for the C Class. Of these amounts $147 was receivable from the Manager at October 31, 2014. The reimbursed expenses will expire in 2017. The carryover of excess expenses potentially reimbursable to the Manager but not recorded as a liability is $5,000 expiring in 2015 and $3,221 expiring in 2016. 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, 2014, Foreside collected $11,986 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, 2014, 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, 2014, $2,359 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.
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
20
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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, 2014, there were no transfers between levels. As of October 31, 2014, the investments were classified as described below (in thousands):
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stock* | $ | 5,393,683 | $ | — | $ | — | $ | 5,393,683 | ||||||||
Short-Term Investments - Money Markets | 191,404 | — | — | 191,404 | ||||||||||||
Securities Lending Collateral invested in Money Market Funds | 223,197 | — | — | 223,197 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | $ | 5,808,284 | $ | — | $ | — | $ | 5,808,284 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Financial Derivative Instruments | ||||||||||||||||
Futures Contracts | $ | 3,649 | $ | — | $ | — | $ | 3,649 | ||||||||
| * | 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.
21
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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.
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.
22
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
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 year ended October 31, 2014, the Fund entered into future contracts primarily for return enhancement, hedging and exposing cash to markets.
The Fund’s futures contracts outstanding fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the average quarterly volume of futures contracts. For purpose of this disclosure, volume is measured by contracts outstanding at period end.
Average Futures Contracts Outstanding | ||
Fund | Year ended October 31, 2014 | |
Small Cap Value Fund | 1,791 | |
The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure (in thousands) (1) (2):
Fair Values of financial derivative instruments not accounted for as hedging instruments as of October 31, 2014:
Statement of Assets and Liabilities | Derivatives | Fair Value | ||||||
Receivable for variation margin from open futures contracts(2) | Equity Contracts | $ | 2,680 | |||||
23
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
The effect of financial derivative instruments not accounted for as hedging instruments during the year ended October 31, 2014:
Statement of Operations | Derivatives | Balance | ||||
Net realized gain (loss) from futures contracts | Equity Contracts | $ | 21,320 | |||
Change in net unrealized appreciation or (depreciation) from futures contracts | Equity Contracts | (4,432 | ) | |||
| (1) | See Note 3 in the Notes to Financial Statements for additional information. |
| (2) | Includes cumulative appreciation or (depreciation) of futures contracts as reported in the Schedule of Investments footnotes. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
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 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.
24
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Counterparty Credit Risk
A derivative contract may suffer a mark to market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange traded futures, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as Deposits with brokers for futures contracts and Payable to brokers for futures contracts, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party is determined at the close of business of the Fund and additional required collateral is delivered to/pledged by the Fund on the next business day. To the extent amounts due to the Funds from its counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. The Funds attempt to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Offsetting Assets and Liabilities
The Fund is a party to enforceable master netting agreements between brokers and counterparties such as International Swaps and Derivatives Association (“ISDA”) agreements which provide for the right to offset under certain circumstances. The Fund employs multiple money managers and counterparties and has elected not to offset qualifying financial and derivative instruments on the Statement of Assets and Liabilities, as such all financial and derivative instruments are presented on a gross basis. The impacts of netting arrangements that provide the right to offset are detailed below. The net amount represents the net receivable or payable that would be due from or to the counterparty in the event of default. Exposure from borrowings and other financing agreements can only be netted across transactions governed by the same Master Agreement with the same legal entity. All amounts reported below represent the balance as of the report date, October 31, 2014 (in thousands):
Offsetting of Financial Assets and Derivative Assets as of October 31, 2014
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | |||||||||
Futures Contracts(1) | $ | 2,680 | $ | — | $ | 2,680 | ||||||
Securities on Loan | 217,835 | — | 217,835 | |||||||||
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| |||||||
| $ | 220,515 | $ | — | $ | 220,515 | |||||||
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25
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
Financial Assets, Derivative Assets, and Collateral Pledged by Counterparty as of October 31, 2014
| Net amount of Assets Presented in the Statement of Assets and Liabilities | Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Counterparty | Financial Instruments | Cash Collateral Received(2) | Net Amount | |||||||||||||
Barclays Capital, Inc. | $ | 29,738 | $ | — | $ | (29,738 | ) | $ | — | |||||||
BNP Paribas Prime Brokerage | 2,916 | — | (2,916 | ) | — | |||||||||||
Citigroup Global Markets, Inc. | 17,818 | — | (17,818 | ) | — | |||||||||||
Credit Suisse Securities LLC | 17,410 | — | (17,410 | ) | — | |||||||||||
Deutsche Bank Securities, Inc. | 55,517 | — | (55,517 | ) | — | |||||||||||
Goldman Sachs & Co. | 42,225 | — | (42,225 | ) | — | |||||||||||
Goldman Sachs & Co. (1) | 2,680 | — | — | 2,680 | ||||||||||||
SG Anerucas Securities, LLC | 804 | — | (804 | ) | — | |||||||||||
JPMorgan Clearing Corp. | 34,790 | — | (34,790 | ) | — | |||||||||||
Merrill Lynch, Pierce, Fenner & Smith, Inc. | 3,240 | — | (3,240 | ) | — | |||||||||||
Scotia Capital USA Inc. | 8,341 | — | (8,341 | ) | — | |||||||||||
UBS Securities LLC | 5,036 | — | (5,036 | ) | — | |||||||||||
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Total: | $ | 220,515 | $ | — | $ | (217,835 | ) | $ | 2,680 | |||||||
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| (1) | The securities presented here within are not subject to Master Netting Agreements. As such, this is disclosed for informational purposes only. |
| (2) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $223,197 has been received in connection with securities lending transactions. |
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, 2014 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.
26
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
The tax character of distributions paid were as follows (in thousands):
| Year Ended October 31, 2014 | Year Ended October 31, 2013 | |||||||
Distributions paid from: | ||||||||
Ordinary income* | ||||||||
Institutional Class | $ | 99,903 | $ | 28,357 | ||||
Y Class | 3,707 | 583 | ||||||
Investor Class | 24,722 | 6,427 | ||||||
Advisor Class | 2,416 | 423 | ||||||
Retirement Class | 270 | 46 | ||||||
A Class | 476 | 41 | ||||||
C Class | 174 | 11 | ||||||
AMR Class | 16,278 | 4,619 | ||||||
Long-Term Capital gain | ||||||||
Institutional Class | 223,593 | 61,004 | ||||||
Y Class | 8,287 | 1,275 | ||||||
Investor Class | 62,328 | 20,484 | ||||||
Advisor Class | 6,102 | 1,302 | ||||||
Retirement Class | 714 | 190 | ||||||
A Class | 1,131 | 120 | ||||||
C Class | 471 | 71 | ||||||
AMR Class | 33,713 | 8,358 | ||||||
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Total distributions paid | $ | 484,285 | $ | 133,311 | ||||
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| * | For tax purposes, short-term capital gains are considered ordinary income distributions. |
As of October 31, 2014, 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 | $ | 4,910,081 | ||
Unrealized appreciation | 1,076,682 | |||
Unrealized depreciation | (178,479 | ) | ||
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| |||
Net unrealized appreciation or (depreciation) | 898,203 | |||
Undistributed ordinary income | 127,528 | |||
Accumulated long-term gain or (loss) | 540,404 | |||
Other temporary differences | 3,646 | |||
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| |||
Distributable earnings or (deficits) | $ | 1,569,781 | ||
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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 (losses) on certain derivative instruments and reclassifications of income from real estate investment securities and publicly traded partnerships.
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, reclassifications of dividends, and reclassifications of income from real estate investment securities and publicly traded partnerships as of October 31, 2014 (in thousands):
Paid-in-capital | $ | (25 | ) | |
Undistributed net investment income (loss) | (3,690 | ) | ||
Accumulated net realized gain (loss) | 3,715 | |||
Unrealized appreciation or (depreciation) of investments and futures contracts | — |
Under the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”), net capital losses recognized by Funds in taxable years beginning after December 22, 2010 are carried forward indefinitely and retain
27
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
their character as short-term and/or long-term losses. Prior to RIC MOD, net capital losses incurred by the Funds were carried forward for eight years and treated as short-term losses. RIC MOD requires that post-enactment net capital losses be used before pre-enactment net capital losses.
For the year ended October 31, 2014 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, 2014 were $4,017,967 and $3,764,864, respectively (in thousands).
A summary of the Fund’s transactions in the Select Funds for the year ended October 31, 2014 is set forth below (in thousands):
Type of Investment | Affiliate | October 31, 2013 Shares/Fair Value | Purchases | Sales | October 31, 2014 Shares/Fair Value | Dividend Income | ||||||||||||||||||
Direct | USG Select Fund | $ | 20,000 | $ | — | $ | — | $ | 20,000 | $ | 2 | |||||||||||||
Securities Lending | USG Select Fund | 267,629 | 786,643 | 873,437 | 180,835 | N/A | ||||||||||||||||||
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.
28
American Beacon Small Cap Value FundSM
Notes to Financial Statements
October 31, 2014
As of October 31, 2014, 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 | ||||||||
| $ | 217,835 | $ | — | $ | 223,197 | |||||
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, 2014
| Institutional Class | Y Class | Investor Class | Advisor Class | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 39,356 | $ | 1,080,664 | 4,630 | $ | 125,758 | 8,267 | $ | 219,191 | 1,929 | $ | 50,599 | ||||||||||||||||||||
Redeption fees | — | 1 | — | — | — | — | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 11,848 | 315,751 | 397 | 10,475 | 3,287 | 85,208 | 331 | 8,518 | ||||||||||||||||||||||||
Shares redeemed | (29,530 | ) | (805,468 | ) | (2,525 | ) | (68,692 | ) | (14,208 | ) | (376,828 | ) | (1,667 | ) | (43,450 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 21,674 | $ | 590,948 | 2,502 | $ | 67,541 | (2,654 | ) | $ | (72,429 | ) | 593 | $ | 15,667 | ||||||||||||||||||
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| Retirement Class | A Class | C Class | AMR Class | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Shares sold | 224 | $ | 5,786 | 1,516 | $ | 39,512 | 166 | $ | 4,278 | 2,830 | $ | 78,504 | ||||||||||||||||||||
Redeption fees | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Reinvestment of dividends | 39 | 984 | 58 | 1,480 | 23 | 585 | 1,883 | 49,991 | ||||||||||||||||||||||||
Shares redeemed | (198 | ) | (5,071 | ) | (960 | ) | (25,887 | ) | (58 | ) | (1,497 | ) | (8,372 | ) | (223,027 | ) | ||||||||||||||||
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Net increase (decrease) in shares outstanding | 65 | $ | 1,699 | 614 | $ | 15,105 | 131 | $ | 3,366 | (3,659 | ) | $ | (94,532 | ) | ||||||||||||||||||
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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 | ||||||||||||||||||||
Redeption fees | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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 | ||||||||||||||||||||
Redeption fees | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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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29
American Beacon Small Cap Value FundSM
(For a share outstanding throughout the period)
| Institutional Class | Y Class | |||||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||||
| 2014F | 2013 | 2012 | 2011A | 2010 | 2014F | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||||
Net asset value, beginning 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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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | 0.17 | 0.25 | 0.17 | 0.08 | 0.08 | 0.18 | 0.22 | 0.15 | 0.06 | 0.14 | ||||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 2.18 | 7.60 | 2.20 | 0.92 | 3.46 | 2.12 | 7.55 | 2.19 | 0.92 | 3.36 | ||||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 2.35 | 7.85 | 2.37 | 1.00 | 3.54 | 2.30 | 7.77 | 2.34 | 0.98 | 3.50 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.14 | ) | (0.27 | ) | (0.08 | ) | (0.09 | ) | (0.09 | ) | (0.14 | ) | (0.27 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | ||||||||||||||||||||
Distributions from net realized gains | (2.45 | ) | (0.58 | ) | — | — | — | (2.45 | ) | (0.58 | ) | — | — | — | ||||||||||||||||||||||||||
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Total distributions | (2.59 | ) | (0.85 | ) | (0.08 | ) | (0.09 | ) | (0.09 | ) | (2.59 | ) | (0.85 | ) | (0.11 | ) | (0.08 | ) | (0.11 | ) | ||||||||||||||||||||
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Net asset value, end of period | $ | 27.80 | $ | 28.04 | $ | 21.04 | $ | 18.75 | $ | 17.84 | $ | 27.52 | $ | 27.81 | $ | 20.89 | $ | 18.66 | $ | 17.76 | ||||||||||||||||||||
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Total return B | 8.78 | % | 38.59 | % | 12.71 | % | 5.57 | % | 24.71 | % | 8.67 | % | 38.45 | % | 12.58 | % | 5.49 | % | 24.44 | % | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 4,002,884 | $ | 3,430,107 | $ | 2,189,761 | $ | 1,843,285 | $ | 1,470,084 | $ | 190,416 | $ | 122,850 | $ | 38,982 | $ | 29,234 | $ | 931 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses before reimbursements | 0.80 | % | 0.82 | % | 0.82 | % | 0.82 | % | 0.81 | % | 0.89 | % | 0.91 | % | 0.91 | % | 0.94 | % | 0.91 | % | ||||||||||||||||||||
Expenses, net of reimbursements | 0.80 | % | 0.82 | % | 0.82 | % | 0.82 | % | 0.81 | % | 0.89 | % | 0.91 | % | 0.91 | % | 0.94 | % | 0.91 | % | ||||||||||||||||||||
Net investment income (loss), before reimbursements | 0.67 | % | 1.01 | % | 0.87 | % | 0.47 | % | 0.52 | % | 0.58 | % | 0.74 | % | 0.77 | % | 0.30 | % | 0.39 | % | ||||||||||||||||||||
Net investment income (loss), net of reimbursements | 0.67 | % | 1.01 | % | 0.87 | % | 0.47 | % | 0.52 | % | 0.58 | % | 0.74 | % | 0.77 | % | 0.30 | % | 0.39 | % | ||||||||||||||||||||
Portfolio turnover rate | 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | ||||||||||||||||||||
| 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 | Not annualized. |
| D | Annualized. |
| E | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
| F | On August 18, 2014, Opus Capital Group, LLC was terminated and ceased managing assets of the Small Cap Value Fund. On March 17, 2014, Barrow, Hanley, Mewhinney & Strauss, LLC began managing additional assets of the Small Cap Value Fund. On September 19, 2014, Hillcrest Asset Management, LLC began managing assets of the Small Cap Value Fund. |
30
American Beacon Small Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Investor Class | Advisor Class | |||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | |||||||||||||||||||||||||||||||||||||
| 2014F | 2013 | 2012 | 2011A | 2010 | 2014F | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||
| $ | 27.27 | $ | 20.47 | $ | 18.23 | $ | 17.40 | $ | 14.05 | $ | 27.06 | $ | 20.35 | $ | 18.15 | $ | 17.33 | $ | 13.97 | |||||||||||||||||||
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| 0.10 | 0.18 | 0.11 | 0.02 | 0.03 | 0.06 | 0.14 | 0.06 | (0.01 | ) | 0.01 | ||||||||||||||||||||||||||||
|
2.09 |
| 7.38 | 2.13 | 0.88 | 3.37 | 2.07 | 7.34 | 2.14 | 0.89 | 3.35 | |||||||||||||||||||||||||||
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2.19 |
| 7.56 | 2.24 | 0.90 | 3.40 | 2.13 | 7.48 | 2.20 | 0.88 | 3.36 | |||||||||||||||||||||||||||
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(0.05 |
) | (0.18 | ) | — | (0.07 | ) | (0.05 | ) | (0.05 | ) | (0.19 | ) | — | (0.06 | ) | — | |||||||||||||||||||||
|
(2.45 |
) | (0.58 | ) | — | — | — | (2.45 | ) | (0.58 | ) | — | — | — | ||||||||||||||||||||||||
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| (2.50 | ) | (0.76 | ) | — | (0.07 | ) | (0.05 | ) | (2.50 | ) | (0.77 | ) | — | (0.06 | ) | — | ||||||||||||||||||||||
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| $ | 26.96 | $ | 27.27 | $ | 20.47 | $ | 18.23 | $ | 17.40 | $ | 26.69 | $ | 27.06 | $ | 20.35 | $ | 18.15 | $ | 17.33 | |||||||||||||||||||
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8.40 |
% | 38.11 | % | 12.31 | % | 5.20 | % | 24.21 | % | 8.22 | % | 37.93 | % | 12.12 | % | 5.07 | % | 24.05 | % | ||||||||||||||||||
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| $ | 851,732 | $ | 934,041 | $ | 748,550 | $ | 843,400 | $ | 911,737 | $ | 102,682 | $ | 88,033 | $ | 44,731 | $ | 33,032 | $ | 32,295 | |||||||||||||||||||
|
1.16 |
% | 1.18 | % | 1.18 | % | 1.17 | % | 1.18 | % | 1.29 | % | 1.31 | % | 1.32 | % | 1.32 | % | 1.32 | % | ||||||||||||||||||
|
1.16 |
% | 1.18 | % | 1.18 | % | 1.17 | % | 1.18 | % | 1.29 | % | 1.31 | % | 1.32 | % | 1.32 | % | 1.32 | % | ||||||||||||||||||
|
0.33 |
% | 0.73 | % | 0.51 | % | 0.12 | % | 0.17 | % | 0.18 | % | 0.46 | % | 0.35 | % | (0.02 | )% | 0.03 | % | ||||||||||||||||||
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0.33 |
% | 0.73 | % | 0.51 | % | 0.12 | % | 0.17 | % | 0.18 | % | 0.46 | % | 0.35 | % | (0.02 | )% | 0.03 | % | ||||||||||||||||||
| 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | |||||||||||||||||||
31
American Beacon Small Cap Value FundSM
Financial Highlights
(For a share outstanding throughout the period)
| Retirement Class | A Class | |||||||||||||||||||||||||||||||||||||||
| Year Ended October 31, | Year Ended October 31, | May 17 to Oct. 31, | ||||||||||||||||||||||||||||||||||||||
| 2014F | 2013 | 2012 | 2011A | 2010 | 2014F | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 26.63 | $ | 20.05 | $ | 18.01 | $ | 17.23 | $ | 13.95 | $ | 27.03 | $ | 20.35 | $ | 18.19 | $ | 17.39 | $ | 17.33 | ||||||||||||||||||||
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Income from investment operations: | ||||||||||||||||||||||||||||||||||||||||
Net investment income (loss) | (0.01 | ) | 0.09 | 0.06 | 0.02 | 0.04 | 0.11 | 0.16 | 0.08 | 0.03 | — | |||||||||||||||||||||||||||||
Net gains (losses) from investments (both realized and unrealized) | 2.03 | 7.21 | 2.05 | 0.81 | 3.28 | 2.03 | 7.30 | 2.12 | 0.83 | 0.06 | ||||||||||||||||||||||||||||||
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Total income (loss) from investment operations | 2.02 | 7.30 | 2.11 | 0.83 | 3.32 | 2.14 | 7.46 | 2.20 | 0.86 | 0.06 | ||||||||||||||||||||||||||||||
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Less distributions: | ||||||||||||||||||||||||||||||||||||||||
Dividends from net investment income | (0.01 | ) | (0.14 | ) | (0.07 | ) | (0.05 | ) | (0.04 | ) | (0.09 | ) | (0.20 | ) | (0.04 | ) | (0.06 | ) | — | |||||||||||||||||||||
Distributions from net realized gains | (2.45 | ) | (0.58 | ) | — | — | — | (2.45 | ) | (0.58 | ) | — | — | — | ||||||||||||||||||||||||||
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Total distributions | (2.46 | ) | (0.72 | ) | (0.07 | ) | (0.05 | ) | (0.04 | ) | (2.54 | ) | (0.78 | ) | (0.04 | ) | (0.06 | ) | — | |||||||||||||||||||||
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Net asset value, end of period | $ | 26.19 | $ | 26.63 | $ | 20.05 | $ | 18.01 | $ | 17.23 | $ | 26.63 | $ | 27.03 | $ | 20.35 | $ | 18.19 | $ | 17.39 | ||||||||||||||||||||
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Total return B | 7.95 | % | 37.52 | % | 11.77 | % | 4.79 | % | 23.82 | % | 8.30 | % | 37.83 | % | 12.11 | % | 4.92 | % | 0.35 | %C | ||||||||||||||||||||
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Ratios and supplemental data: | ||||||||||||||||||||||||||||||||||||||||
Net assets, end of period (in thousands) | $ | 11,974 | $ | 10,446 | $ | 6,366 | $ | 1,817 | $ | 360 | $ | 29,570 | $ | 13,418 | $ | 4,064 | $ | 1,822 | $ | 18 | ||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||||||||||||||||||
Expenses before reimbursements | 1.57 | % | 1.60 | % | 1.63 | % | 1.62 | % | 1.54 | % | 1.27 | % | 1.35 | % | 1.44 | % | 1.57 | % | 1.28 | %D | ||||||||||||||||||||
Expenses, net of reimbursements | 1.57 | % | 1.60 | % | 1.63 | % | 1.62 | % | 1.54 | % | 1.27 | % | 1.32 | % | 1.34 | % | 1.57 | % | 1.28 | %D | ||||||||||||||||||||
Net investment income (loss), before reimbursements | (0.09 | )% | 0.29 | % | 0.02 | % | (0.35 | )% | (0.20 | )% | 0.19 | % | 0.30 | % | 0.21 | % | (0.32 | )% | 0.01 | %D | ||||||||||||||||||||
Net investment income (loss), net of reimbursements | (0.09 | )% | 0.29 | % | 0.02 | % | (0.35 | )% | (0.20 | )% | 0.20 | % | 0.34 | % | 0.32 | % | (0.32 | )% | 0.01 | %D | ||||||||||||||||||||
Portfolio turnover rate | 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | 73 | % | 48 | % | 51 | % | 59 | % | 59 | %E | ||||||||||||||||||||
| 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 | Not annualized. |
| D | Annualized. |
| E | Portfolio turnover rate is for the period from November 1, 2009 through October 31, 2010. |
| F | On August 18, 2014, Opus Capital Group, LLC was terminated and ceased managing assets of the Small Cap Value Fund. On March 17, 2014, Barrow, Hanley, Mewhinney & Strauss, LLC began managing additional assets of the Small Cap Value Fund. On September 19, 2014, Hillcrest Asset Management, LLC began managing assets of the Small Cap Value Fund. |
32
American Beacon Small 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, | ||||||||||||||||||||||||||||||||||||
| 2014F | 2013 | 2012 | 2011A | 2010 | 2014F | 2013 | 2012 | 2011A | 2010 | |||||||||||||||||||||||||||||
| $ | 26.60 | $ | 20.07 | $ | 18.04 | $ | 17.37 | $ | 15.62 | $ | 27.99 | $ | 21.00 | $ | 18.71 | $ | 17.76 | $ | 14.32 | |||||||||||||||||||
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| (0.07 | ) | 0.03 | (0.03 | ) | (0.04 | ) | (0.01 | ) | 0.37 | 0.23 | 0.34 | 0.13 | 0.18 | |||||||||||||||||||||||||
|
1.97 |
| 7.17 | 2.06 | 0.74 | 1.76 | 2.04 | 7.66 | 2.08 | 0.92 | 3.38 | |||||||||||||||||||||||||||
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|
1.90 |
| 7.20 | 2.03 | 0.70 | 1.75 | 2.41 | 7.89 | 2.42 | 1.05 | 3.56 | |||||||||||||||||||||||||||
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| 0.00 | (0.09 | ) | — | (0.03 | ) | — | (0.20 | ) | (0.32 | ) | (0.13 | ) | (0.10 | ) | (0.12 | ) | ||||||||||||||||||||||
| (2.45 | ) | (0.58 | ) | — | — | — | (2.45 | ) | (0.58 | ) | — | — | — | |||||||||||||||||||||||||
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| (2.45 | ) | (0.67 | ) | — | (0.03 | ) | — | (2.65 | ) | (0.90 | ) | (0.13 | ) | (0.10 | ) | (0.12 | ) | |||||||||||||||||||||
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| $ | 26.05 | $ | 26.60 | $ | 20.07 | $ | 18.04 | $ | 17.37 | $ | 27.74 | $ | 27.99 | $ | 21.00 | $ | 18.71 | $ | 17.76 | |||||||||||||||||||
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| 7.46 | % | 36.88 | % | 11.25 | % | 4.06 | % | 11.20 | %C | 9.02 | % | 38.95 | % | 13.00 | % | 5.85 | % | 25.00 | % | |||||||||||||||||||
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| $ | 9,676 | $ | 6,396 | $ | 2,330 | $ | 1,106 | $ | 6 | $ | 396,286 | $ | 502,122 | $ | 306,545 | $ | 338,723 | $ | 320,715 | |||||||||||||||||||
| 2.03 | % | 2.09 | % | 2.21 | % | 2.60 | % | 2.69 | %D | 0.54 | % | 0.56 | % | 0.56 | % | 0.56 | % | 0.57 | % | |||||||||||||||||||
| 2.03 | % | 2.07 | % | 2.10 | % | 2.60 | % | 2.10 | %D | 0.54 | % | 0.56 | % | 0.56 | % | 0.56 | % | 0.57 | % | |||||||||||||||||||
|
(0.56 |
)% | (0.41 | )% | (0.54 | )% | (1.36 | )% | (1.86 | )%D | 0.94 | % | 1.26 | % | 1.14 | % | 0.72 | % | 0.76 | % | ||||||||||||||||||
|
(0.56 |
)% | (0.39 | )% | (0.43 | )% | (1.36 | )% | (1.28 | )%D | 0.94 | % | 1.26 | % | 1.14 | % | 0.72 | % | 0.76 | % | ||||||||||||||||||
| 73 | % | 48 | % | 51 | % | 59 | % | 59 | %E | 73 | % | 48 | % | 51 | % | 59 | % | 59 | % | |||||||||||||||||||
33
American Beacon FundsSM
Privacy Policy and Federal Tax Information
October 31, 2014 (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, 2014. The information and distributions reported herein may differ from information and distribution taxable to the shareholders for the calendar year ended December 31, 2014.
The Fund designated the following items with regard to distributions paid during the fiscal year ended October 31, 2013. 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 | 72.57 | % | ||
Qualified Dividend Income | 100.00 | % |
The Small Cap Value Fund designated $336,339,215 as long term capital gains distributions and $124,354,253 as short-term capital gain distributions for the year ended October 31, 2014.
Shareholders will receive notification in January 2015 of the applicable tax information necessary to prepare their 2014 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 meetings on November 11-12, 2013, the Board considered a proposed amendment to the Investment Advisory Agreement between the Manager and Barrow, Hanley, Mewhinney & Strauss LLC (“Barrow”) with respect to the Small Cap Value Fund (“Barrow Agreement”) to add the advisory fee rate schedule for Barrow’s Diversified Small Cap Value (“DSCV”) strategy, which would be used by Barrow to manage a new allocation of the Small Cap Value Fund. The Board reviewed information provided by the Manager regarding the DSCV strategy and the related advisory fee rate schedule, and the Investment Committee met with representatives of Barrow. The Board considered information that had been provided by Barrow to the Board at the May 2013 meeting in connection with the renewal of the Barrow Agreement, and Barrow’s representation that there had been no material changes to the information that Barrow previously had provided to the Board.
Provided below is an overview of the primary factors the Board considered at its November 11-12, 2013 meetings at which the Board considered the approval of the amended Barrow Agreement. In determining whether to approve the amended Barrow Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services to be provided by Barrow with respect to the DSCV strategy; (2) the investment performance of Barrow with respect to the DSCV strategy; (3) the costs to be incurred by Barrow in rendering its services with respect to the DSCV strategy and the resulting profits or losses; (4) the extent to which economies of scale, if any, have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale, if any, for the benefit of investors; (6) comparisons of services and fees with contracts entered into by Barrow with other clients; and (7) any other benefits anticipated to be derived by Barrow from its relationship with the Small Cap Value Fund.
Board did not identify any particular information that was most relevant to its consideration of the amended Barrow Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of Barrow regarding the new approval. Based on its evaluation, the Board unanimously concluded that the terms of the amended Barrow Agreement were reasonable and fair and that the approval of the amended Barrow Agreement was in the best interests of the Small Cap Value Fund.
Nature, extent and quality of the services to be provided by Barrow. The Board noted that it had considered the renewal of the Barrow Agreement at the May 2013 meeting. At that meeting, the Board considered information about Barrow, including the background and experience of the Barrow’s portfolio management personnel, Barrow’s investment resources, infrastructure, financial condition and the adequacy of its compliance program. The Board considered the description of the DSCV strategy and the information provided regarding the development and implementation of the DSCV strategy included in the briefing materials. In addition, the Board considered that the same portfolio management personnel who manage Barrow’s current allocation of the Small Cap Value Fund would manage Barrow’s new allocation of the Small Cap Value Fund pursuant to the DSCV strategy. The Board also took into consideration the Manager’s recommendation of the DSCV strategy. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Barrow were appropriate for the Small Cap Value Fund in light of its investment objective, and, thus, supported a decision to approve the Barrow Agreement.
Performance of Barrow. The Board evaluated the information provided by the Manager regarding the performance of the DSCV strategy relative to the performance of Barrow’s fundamental small cap value strategy (“Fundamental strategy”) and the Russell 2000 Value Index (“Index”) as of September 30, 2013. The Board considered that the DSCV strategy outperformed the Fundamental strategy for the year-to-date, one-, three- and five-year periods, but underperformed the Fundamental strategy for the since-inception period. The Board also considered that the DSCV strategy outperformed the Index for all relevant periods. The Board noted, in this regard, that performance information for the three- and five-year and since-inception periods had been annualized. Based on the foregoing information, the Board concluded that the Barrow’s historical investment performance record with respect to the DSCV strategy supported approval of the amended Barrow Agreement.
Comparisons of the amounts to be paid under the Barrow Agreement with those under contracts between Barrow and its other clients. In evaluating the amended Barrow Agreement, the Board reviewed the proposed advisory fee rate schedule for the DSCV strategy. The Board considered that the proposed advisory fee rate schedule is lower than Barrow’s advisory fee rate schedule for the management of its current allocation of the Small Cap Value Fund pursuant to the Fundamental strategy. In this regard, the Board noted that, at the May 2013 meeting, it had considered Barrow’s advisory fee rate schedule for the Fundamental strategy relative to the fee rates that Barrow charges other clients. The Board also considered that the proposed advisory fee rate schedule for the DSCV strategy was lower than the advisory fee rate schedules charged by the Small Cap Value Fund’s other subadvisers. After evaluating this information, the Board concluded that the proposed advisory fee rate schedule was reasonable in light of the services to be provided to the Small Cap Value Fund.
Costs of the services to be provided and profits to be realized by Barrow and its affiliates from its relationship with the Small Cap Value Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Barrow from its relationship with the Small Cap Value Fund, noting instead the arm’s-length nature of the relationship between the Manager and Barrow with respect to the negotiation of the advisory fee rate schedule for the DSCV strategy on behalf of the Small Cap Value Fund.
Economies of Scale. The Board noted that it had considered the economies of scale associated with Barrow’s advisory fee rate schedule for the management of Barrow’s current allocation of the Small Cap Value Fund pursuant to the Fundamental strategy. The Board also noted that the proposed advisory fee rate schedule for the DSCV strategy is lower than Barrow’s current advisory fee rate schedule and the advisory fee rate schedules charged by the Small Cap Value Fund’s other subadvisers. Based on the foregoing information, the Board concluded that the breakpoints under the proposed advisory fee rate schedule was likely to reflect economies of scale associated with the additional services to be provided to the Small Cap Value Fund by Barrow.
35
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
Benefits to be derived by Barrow from the relationship with the Small Cap Value Fund. The Board noted that, at the May 2013 meeting, it had considered the “fall-out” or ancillary benefits that might accrue to Barrow as a result of its relationship with the Small Cap Value Fund.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Small Cap Value Fund, the Manager or Barrow, as that term is defined in the 1940 Act, concluded that the proposed fee schedule for the DSCV strategy is fair and reasonable and that the approval of the amended Barrow Agreement is in the best interests of the Small Cap Value Fund and approved the amended Barrow Agreement.
At in-person meetings held on May 15, 2014 and June 5, 2014 (collectively, the “Meetings”), the Board of Trustees (“Board”) considered and then, at its June 5 meeting, approved: (1) the renewal of the Management Agreement between American Beacon Advisors, Inc. (“Manager”) and the American Beacon Funds (“Beacon Trust”) and American Beacon Select Funds (“Select Trust”) on behalf of each of their series that had been operational for at least one year (collectively, the “Funds”); and (2) the renewal of the investment advisory agreements (each an “Investment Advisory Agreement”) among the Manager, each subadvisor and, as applicable, the Beacon Trust, other than the Investment Advisory Agreements with subadvisors with respect to which the Board approved a new Investment Advisory Agreement within the past year (each a “subadvisor”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board to consider the renewal of these Agreements, the Board undertook steps to gather and consider information furnished by the Manager, the subadvisors, Lipper, Inc. (“Lipper”), Morningstar, Inc. (“Morningstar”), Bobroff Consulting, Inc. and Callan Associates, Inc. (“Callan”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.
In advance of the Meetings, the Board’s Investment Committee coordinated the production of information from Lipper and Morningstar regarding the performance, fees and expenses of the Funds as well as information from the Manager and the subadvisors. At the Meetings, the Board considered the information provided. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular meetings of the Board and its committees, 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 on behalf of the Board included, among other information, the following materials. References herein to the “firm” refer to the Manager and/or each applicable subadvisor.
| • | comparisons of the performance of an appropriate share class of each Fund to comparable investment companies and appropriate benchmark indices, including peer group averages and performance analyses provided by Lipper and Morningstar, and to the performance of any similar accounts managed by the firm; |
| • | for Funds having multiple firms managing assets, information regarding the performance of the individual firms with respect to their allocated portions of a Fund’s portfolio, and the performance of certain relevant benchmarks and other similar accounts managed by the firm; |
| • | comparisons of each Fund’s management and subadvisory fee rates and expense ratio with those of comparable mutual funds, including peer group averages and fee and expense analyses provided by Lipper and Morningstar, and the advisory fee rates charged to other clients for which similar services are provided; |
| • | a description of any applicable fee waivers and/or expense reimbursements in place for each Fund during the past year, and any proposed changes to the expense caps; |
| • | the Manager’s profitability with respect to the services that it provided to each Fund; |
| • | 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 evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; |
| • | information regarding the securities lending, cash management, administrative and accounting-related services that the Manager provides to certain Funds and the fees that the Manager receives for such services, including Callan’s review of the Funds’ securities lending program; and |
| • | information regarding a firm’s financial condition, the personnel who are or will be assigned primary responsibility for managing the Funds, staffing levels, portfolio managers’ compensation, disaster recovery plans, insurance coverage, material pending litigation, code of ethics, compliance matters, trading activities, and actual or potential conflicts of interest that the firm experiences, or anticipates that it will experience, in providing services to the Funds. |
The Board considered that the Manager provides management and administrative services to the Funds pursuant to separate agreements. The Board noted, in this regard, that many mutual funds have a single contract governing both types of services, and observed that the actual management fee rates provided by Lipper for peer group funds reflect the combined advisory and administrative expenses, reduced by any fee waivers and/or reimbursements.
Certain firms may not have been able to, or opted not to, provide information in response to certain information requests, in which case the Board conducted its evaluation of those firms based on information that was provided. For each Fund with more than one class of shares, the class of shares used for comparative performance purposes was the share class with the lowest expenses available for purchase by the general public, which, in most cases, was the Institutional Class. For the American Beacon Holland Large Cap Growth Fund, the comparison was made using the Investor Class of shares due to the short period of time that its Institutional Class of shares has been in existence. 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 certain factors the Board considered in connection with its renewal and approval 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 Meetings, 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) 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 clients); (5) the extent to which economies of scale have been taken into account in setting each fee rate schedule; (6) whether fee rate levels reflect these economies of scale for the benefit of Fund investors; 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 staffing 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) as well as the Fund’s Morningstar rating. 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 certain Funds. 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 Manager represented that 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 share 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 and, in some instances, 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 certain Funds. In considering the management fees for overseeing the securities lending program, the Board reviewed the analysis of the securities lending program prepared by Callan. The Board also noted that certain share 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 fee rates charged by 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 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, certain subadvisors have agreed to take into account assets of American Airlines Group 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 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 Board noted that certain subadvisors benefit from soft dollar arrangements for third party and proprietary research.
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 subadvisors reimburse the Manager for certain costs relating to distribution activities for the Funds, as well as representations by all such subadvisors that they would not reduce their fee rates in lieu of providing such reimbursements. 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 and Lipper performance group, with the 1st Quintile representing the top twenty percent of the universe or group based on performance and the 5th Quintile representing the bottom twenty percent of the universe or group based on performance. 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 and Lipper expense group, with the 1st Quintile representing the top twenty percent of the universe or group based on lowest total expense and the 5th Quintile representing the bottom twenty percent of the universe or group based on highest total expense. 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. For all Funds, other than for the American Beacon Money Market Select Fund and American Beacon U.S. Government Money Market Select Fund for which information was not available, 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.
38
Disclosure Regarding the Board of Trustees’ Approval of the Management
Agreement and Investment Advisory Agreements of the Fund (Unaudited)
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:
Lipper Total Expense Analysis and Morningstar Fee Level Ranking
Compared to Lipper Expense Universe | 1st Quintile | |
Compared to Lipper Expense Group | 1st Quintile | |
Morningstar Fee Level Ranking – Institutional Class | Low Expense Ratio |
Lipper Fund Performance Analysis (five-year period ended March 31, 2014)
Compared to Lipper Performance Universe | 2nd Quintile | |
Compared to Lipper Performance Group | 1st Quintile |
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:
Subadvisor Performance (compared to Lipper Performance Universe for period indicated, ending March 31, 2014)
Barrow | 5 Years | 1st Quintile | ||
Brandywine | 5 Years | 3rd Quintile | ||
Dreman* | 3 Years | 4th Quintile | ||
Hotchkis | 5 Years | 1st Quintile | ||
Opus | 5 Years | 5th Quintile | ||
TBC | 5 Years | 4th Quintile |
| * | Dreman does not yet have a 5-year performance record. |
(1) Information provided by each subadvisor regarding fee rates charged for managing accounts in the same strategy as the subadvisor manages its allocation of the Fund; (2) the Manager’s intention to recommend a firm to replace Opus at a subsequent Board meeting; (3) the Manager’s recommendation to continue to retain each subadvisor at the present time.
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.
On June 4, 2014 and August 8, 2014, the Board of Trustees (“Board”) considered the appointment of Hillcrest Asset Management, LLC (“Hillcrest”) as an investment advisor to the American Beacon Small Cap Value Fund (“Fund”). The Board reviewed the information provided by Hillcrest in connection with its consideration of Hillcrest and the approval of a new investment advisory agreement among American Beacon Advisors, Inc. (“Manager”), Hillcrest and the American Beacon Funds (“Trust”) with respect to the Fund (“Agreement”).
The Board considered, among other materials, responses by Hillcrest to inquiries requesting: a description of the advisory and related services proposed to be provided to the Fund, including whether such services will differ from the services provided to other clients; identification of the professional personnel to perform services for the Fund and their education, experience and responsibilities; a comparison of the performance of accounts managed by Hillcrest in the same strategy as the Fund with the performance of applicable peer groups and indices; a description of the proposed advisory fee rate, a comparison to the fee rates charged to other clients in the same strategy as the Fund for which Hillcrest provides comparable services and an explanation of any differences between the fee rate schedules, and any anticipated economies of scale; information regarding Hillcrest’s financial condition; a description of Hillcrest’s compliance program and any material compliance issues, as well as its trading processes; and any other information Hillcrest believed would be material to the Board’s consideration of the Agreement.
The Board considered multiple factors when evaluating Hillcrest and in approving the Agreement, including that the Manager had screened a number of small cap value advisors to identify Hillcrest. The Board also considered Hillcrest’s experience in managing small cap value assets, its reputation and financial condition, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the Fund.
The Board did not identify any particular information that was most relevant to its consideration of the Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the approval. The Board also noted that the Board’s Investment Committee met with management personnel in advance of the Board meeting on June 4, 2014 and discussed Hillcrest’s small cap value strategy and investment management capabilities at that time. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Agreement. Based on its evaluation, the Board unanimously concluded that the terms of the Agreement were reasonable and fair and that the approval of the Agreement was in the best interests of the Fund.
39
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 considered by the Board at its August 8, 2014 meeting at which the Board considered the approval of the Agreement. In determining whether to approve the Agreement, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of Hillcrest; (3) the extent to which economies of scale have been taken into account in setting the fee schedule and whether fee levels reflect these economies of scale, if any; (4) costs of the services to be provided by Hillcrest; (5) comparisons of services and fees with contracts entered into by Hillcrest with other clients; and (6) any other benefits derived or anticipated to be derived by Hillcrest from its relationship with the Fund.
Nature, extent and quality of the services to be provided by Hillcrest. The Board considered information regarding Hillcrest’s principal business activities, its reputation, financial condition and overall capabilities to perform the services under the Agreement. In addition, the Board considered Hillcrest’s investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board considered the background and experience of the personnel who will be assigned responsibility for managing the portion of the Fund’s assets allocated to Hillcrest. In this respect, the Board noted that Hillcrest personnel had significant experience working at larger asset management firms. The Board considered Hillcrest’s representation that its financial condition is adequate to support the provision by Hillcrest of high quality advisory services to the Fund and that current and projected staffing levels were adequate to service the Fund. The Board also factored in Hillcrest’s representations regarding the capacity it would reserve for the Fund in its small cap value strategy. In addition, the Board took into consideration the Manager’s recommendation of Hillcrest. Based on this information, the Board concluded that the nature, extent and quality of the advisory services to be provided by Hillcrest were appropriate for the Fund in light of its investment objective, and, thus, supported a decision to approve the Agreement.
Performance of Hillcrest. The Board evaluated the performance information provided by Hillcrest regarding the performance of Hillcrest’s Small Cap Composite, which is comprised of accounts that Hillcrest manages pursuant to its small cap value mandate (“Composite”), gross of management fees, as compared to the Russell 2000 Value Index (“Index”) and the eVestment Small Cap Value Universe (“Peer Group”). The Board noted that the Composite outperformed the annualized performance of the Index and the Peer Group for each of the one-, three- and five-year periods ended June 30, 2014. Based on this information, the Board concluded that the historical investment performance record of Hillcrest supported the approval of the Agreement.
Comparisons of the amounts to be paid under the Agreement with those under contracts between Hillcrest and its other clients. In evaluating the Agreement, the Board reviewed Hillcrest’s proposed advisory fee schedule for services to be performed by Hillcrest on behalf of and to be paid by the Fund. The Board considered comparisons of the advisory fee rate to be charged by Hillcrest under the Agreement to the fee rates charged by Hillcrest to other clients with a similar investment mandate. The Board considered Hillcrest’s representation that the proposed fee rate is lower than its fee rate schedules for comparable clients. After evaluating this information, the Board concluded that the advisory fee rate under the Agreement was reasonable in light of the services to be provided to the Fund.
Extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund investors. The Board considered Hillcrest’s representation that the proposed fee rate schedule includes “breakpoints” that anticipate economies of scale in connection with the services that it will provide to the Fund. Thus, the Board concluded that the Fund is receiving economies of scale due to the breakpoints incorporated into the fee schedule.
Costs of the services to be provided and profits to be realized by Hillcrest and its affiliates from the relationship with the Fund. The Board did not consider the costs of the services to be provided and any potential profits to be realized by Hillcrest from its relationship with the Fund, noting instead the arm’s length nature of the relationship between the Manager and Hillcrest with respect to the negotiation of the advisory fee rate on behalf of the Fund.
Benefits to be derived by Hillcrest from the relationship with the Fund. The Board considered the “fall-out” or ancillary benefits that may accrue to Hillcrest as a result of its relationship with the Fund, including greater exposure in the marketplace with respect to Hillcrest’s investment process and expanding the level of assets under management by Hillcrest. The Board also noted Hillcrest’s relatively small amount of assets under management and its representation to the effect that greater assets under management will allow Hillcrest to be considered as a manager by larger financial institutions that require the firms they hire to have a minimum level of assets under management. The Board also considered Hillcrest’s representation that Hillcrest does not have any soft dollar arrangements for services and does not plan on having any in the future. Based on the foregoing information, the Board concluded that the potential benefits accruing to Hillcrest by virtue of its relationship with the Fund appear to be fair and reasonable.
Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Trust, the Manager or Hillcrest, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee is reasonable and that the approval of the Agreement is in the best interests of the Fund and its shareholders and, as a result, approved the Agreement.
40
Trustees and Officers of the American Beacon Funds SM
(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 thirty-three 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** (56) | 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*** (77) | 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 (70) | 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 (53) | 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 (60) | 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 (72) | 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 (71) | 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 (51) | Trustee since 2012 | Managing Principal, Longfellow Investment Management Company (2005-Present); Trustee, American Beacon Select Funds (2012-Present). | ||
R. Gerald Turner (68) 225 Perkins Admin. Bldg. Southern Methodist Univ. Dallas, Texas75275 | 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). | ||
41
Trustees and Officers of the American Beacon Funds
(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 | ||||
| Gene L. Needles, Jr. (59) | President since 2009 Executive Vice President since 2009 | President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 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 (2009-2012), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors. | ||
| Rosemary K. Behan (55) | VP, Secretary and Chief Legal Officer since 2006 | General Counsel, 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 (54) | VP since 2004 | Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present). | ||
| Wyatt L. Crumpler (48) | 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 (44) | 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 (60) | 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 (53) | 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 (50) | VP since 2010 | Vice President, Enterprise Services (2009-Present) and Managing Director (2003-2009), American Beacon Advisors, Inc. | ||
| Jeffrey K. Ringdahl (39) | 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 (51) | 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 (43) | Chief Compliance Officer since 2004 and Asst. Secretary since 1999 | Chief Compliance Officer (2004-Present) and Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. | ||
| Sonia L. Bates (57) | 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. | ||
| * | As of 11/12/2014, the Board 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 75. |
| ** | 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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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:
 |  | |
By E-mail: american_beacon.funds@ambeacon.com | On the Internet: Visit our website at www.americanbeaconfunds.com | |
 |  | |
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 10/14
| ITEM 1. | REPORTS TO STOCKHOLDERS. |
| 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 Ms. Brenda A Cline, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Ms. Cline is “independent” as defined in Form N-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
| (a) |
Audit Fees | Fiscal Year | |||||
| $ | 209,783 | 8/31/2013 | ||||
| $ | 384,699 | 10/31/2013 | ||||
| $ | 168,847 | 12/31/2013 | ||||
| $ | 105,556 | 1/31/2014 | ||||
| $ | 403,681 | 8/31/2014 | ||||
| $ | 396,969 | 10/31/2014 | ||||
| $ | 236,768 | 12/31/2014 | ||||
| $ | 197,167 | 1/31/2015 | ||||
| (b) |
Audit-Related Fees | Fiscal Year | |||
| $0 | 8/31/2013 | |||
| $0 | 10/31/2013 | |||
| $0 | 12/31/2013 | |||
| $0 | 1/31/2014 | |||
| $0 | 8/31/2014 | |||
| $0 | 10/31/2014 | |||
| $0 | 12/31/2014 | |||
| $0 | 1/31/2015 | |||
| (c) |
Tax Fees | Fiscal Year | |||||
| $ | 36,250 | 8/31/2013 | ||||
| $ | 70,713 | 10/31/2013 | ||||
| $ | 20,000 | 12/31/2013 | ||||
| $ | 10,500 | 1/31/2014 | ||||
| $ | 36,250 | 8/31/2014 | �� | |||
| $ | 63,017 | 10/31/2014 | ||||
| $ | 44,750 | 12/31/2014 | ||||
| $ | 42,330 | 1/31/2015 | ||||
| (d) |
All Other Fees | Fiscal Year | |||
| $0 | 8/31/2013 | |||
| $0 | 10/31/2013 | |||
| $0 | 12/31/2013 | |||
| $0 | 1/31/2014 | |||
| $0 | 8/31/2014 | |||
| $0 | 10/31/2014 | |||
| $0 | 12/31/2014 | |||
| $0 | 1/31/2015 | |||
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 | |||||||||
| $ | 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 | |||||||
| $ | 36,250 | $ | 0 | N/A | 8/31/2014 | |||||||
| $ | 63,017 | $ | 0 | N/A | 10/31/2014 | |||||||
| $ | 44,750 | $ | 0 | N/A | 12/31/2014 | |||||||
| $ | 42,330 | $ | 0 | N/A | 1/31/2015 | |||||||
(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 8, 2015 | ||
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 8, 2015 |
| By | /s/ Melinda G. Heika | |
Melinda G. Heika Treasurer | ||
| American Beacon Funds | ||
| Date: January 8, 2015 |